PRAKASHCHAND JAWANMAL SANGHVI, MUMBAI V. ITO 18(2)(5), MUMBAI

CO 47/MUM/2015

• Counselvise Citation: [2015] 123 COUNSELVISE.COM (IT) 1516 (ITAT-MUMBAI)
• Duration Of Justice: 7 month(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 05-10-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2003-2004
• Appeal Filed On: 05-03-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: PREMANAND J
• Keywords: Bogus purchase; Accommodation entries
• Section: 143(3); 147; 69; 148

Judgement Text

MR. PRAKASHCHAND J SANGHAVI ITA 666 /M UM / 2014 CO 47/MUM/2015 1 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH C , MUMBAI , , BEFORE SHRI G S PANNU , ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA , JUDICIAL MEMBER ITA NO. : 666 /MUM/20 1 4 (ASSESSMENT YEAR :200 3 - 0 4 ) ITO - 14(3)(3), 606, 6 TH FLOOR, EARNEST HOUSE, NARIMAN POINT, MUMBAI - 400 021 VS MR. PRAKASHCHAND J SANGHAVI , 583, NARAYAN CHOWK, M J MARKET, MUMBAI - 400 021 .: PAN: A N AP S 3388 J (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI PREMANAND J RESPONDENT BY : SHRI M B SANGHVI CO NO. : 47 /MUM/20 15 ARISING OUT OF ITA NO. : 666/MUM/2014 , AY 2003 - 04 MR. PRAKASHCHAND J SANGHAVI , 583, NARAYAN CHOWK, M J MARKET, MUMBAI - 400 021 .: PAN: A N AP S 3388 J VS ITO - 18(2)(5), OLD WD. ITO 14(3)(3), ROOM NO. 303, 3 RD FLOOR, EARNEST HOUSE, NARIMAN POINT, MUMBAI - 400 021 (APPELLANT) (RESPONDENT) APPLICANT - CROSS OBJECTOR BY : SHRI M B SANGHVI RESPONDENT BY : SHRI PREMANAND J /DATE OF HEARING : 0 7 - 0 7 - 201 5 / DATE OF PRONOUNCEMENT : 05 - 10 - 201 5 ORDER , . . : PER AMIT SHUKLA, J M : THE A FORESAID APPEAL HAS BEEN FILED BY THE REVENUE AND CROSS OBJECTION BY THE ASSESSEE AGAINST THE IMPUGNED ORDER DATED 19.11.2013 PASSED BY CIT(A) - 25, MUMBAI FOR THE QUANTUM OF MR. PRAKASHCHAND J SANGHAVI ITA 666 /M UM / 2014 CO 47/MUM/2015 2 ASSESSMENT PASSED U/S 143(3) FOR THE ASSESSMENT YEAR 2003 - 04. IN THE GROUNDS OF APPEAL , THE REVENUE HAS RAISED FOLLOWING GROUNDS: 1. THE LD. CIT(A) HAS ERRED IN LAW AS WELL AS ON FACT BY NOT SUSTAINING ADDITION U/S 69 AFTER HAVING ACCEPTED THE FINDING IN PRINCIPLE THAT THE PURCHASES WERE MADE FROM UNDISCLOSED/UNVERIFIABLE/UNIDENTIFIABLE PARTIES IN THE GREY MARKET BY INVESTING IN CASH AND THE PURCHASES FROM THE GROUP CONCERNS OF SHRI RAKESHKUMAR GUPTA & FAMILY WERE ONLY ACCOMMODATION ENTRIES AND NOT ACTUAL PURCHASES. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) AFTER HAVING ACCEPTED THE FACT THAT THE PURCHASE MADE FROM OR THROUGH SHRI RAKESHKUMAR GUPTA AND HIS FAMILY MEMBERS ARE BOGUS, ERRED IN LAW IN NOT CONFIRMING THE ADDITION AT LEAST TO THE EXTENT OF PEAK OF THE PURCHASES MADE FORM SUCH PARTIES ON ACCOUNT OF BOGUS PURCHASE MADE IN CASH FROM THE OPEN MARKET OUT OF UNACCOUNTED CASH, IN VIEW OF THE DECISION HELD BY THE HONBLE ITATS C BENCH, IN THE CASE OF VIJAY PROTEINS LTD VS ACIT (58 ITD 428). 3. FOR THE ABOV E MENTIONED REASON AND ANY OTHER REASONS THAT MAY BE URGED AT THE TIME OF HEARING, IT IS REQUIRED THAT THE ORDER OF THE CIT(A) BE QUASHED AND THAT OF THE AO BE RESTORED. 2. BRIEF FACTS OF THE CASE ARE THAT, THE ASSES SE E IS ENGAGED IN THE BUSINESS OF TRADING IN UNBRANDED CLOTH. RETURN OF INCOME FOR THE AY 2003 - 04 WAS FILED ON 30.10.2003 DECLARING TOTAL INCOME OF RS. 3,78,775/ - , WHICH WAS DULY ACCEPTED AND PROCESSED U/S 143(1). IN THE WAKE OF SURVEY OPERATIONS IN THE CASE OF ANOTHER PERSON , SHRI RAKESHKUMAR M GUPTA AND HIS GROUP CONCERNS ON MR. PRAKASHCHAND J SANGHAVI ITA 666 /M UM / 2014 CO 47/MUM/2015 3 13.02.2009 , I T WAS GATHERED THAT SHRI RAKESHKUMAR M GUPTA AND HIS CONCERNS WERE ENGAGED IN THE ACTIVITY OF ISSUING ACCOMMODATION BILLS. THE ASSESSEE WAS ALSO ONE OF THE PERSON WHO W A S TAKING ACCOMMODATION BILLS FROM THE CONCERNS OF SHRI RAKESHKUMAR GUPTA. ACCORDINGLY, REASONS WERE RECORDED U/S 148 AND CASE WAS REOPENED U/S 147 VIDE NOTICE DATED 22.03.2010 ISSUED U/S 148. THE RELEVANT CONTENT OF REASONS RECORDED HAVE BEEN INCORPORATED BY THE AO IN PARA 3. SINCE VALIDITY OF REOPENING U/S 147 HAS NOT BEEN CHALLENGED, THEREFORE, THE FACTS AND ISSUES RELATING TO REOPENING IS NOT BEING DISCUSSED. IN RESPONSE TO THE SHOW CAUSE NOTICE BY THE AO ON MERITS, THE ASSESSEE SUBMITTED AND STATED AS UNDER : - (I) THE GOODS PURCHASED FROM THESE PARTIES WERE HAND DELIVERED BY THEM AS PER THE PRACTICE PREVAILING IN THE MARKET. (II) THE PAYMENTS ARE MADE THROUGH ACCOUNT PAYEE CHEQUES. (III) IT IS PRACTICALLY NOT POSSIBLE TO COLLECT SUCH AN OLD INFORMATION PRECISELY IN A SHORT S PAN OF TIME. HOWEVER, THE QUANTITATIVE DETAILS OF PURCHASES AND SALES SUBMITTED PROVE THE GENUINENESS OF PURCHASES. THE QUANTITATIVE DETAILS IN METERS CAN BE TALLIED FROM THE LIST OF OPENING STOCK, PURCHASES AND SALES MADE DURING THE YEAR AND CLOSING STOCK . (IV) SALES AND PURCHASE ARE FULLY VOUCHED. (V) THE RE - OPENING IS BAD, ILLEGAL, VOID AND AGAINST THE PROVISIONS OF LAW. HOWEVER, THE LD. AO REJECTED THE ASSESSEES CONTENTION AND OBSERVED THAT ASSESSEE HAS NOT MAINTAINED DAY - TO - DAY STOCK REGISTER AND EVEN THE AUDITORS HAVE POINTED OUT THAT THE QUANTITATIVE DETAILS HAVE NOT BEEN MAINTAINED. THE ASSES SE E ALSO COULD NOT PRODUC E ANY EVIDENCE TO SHOW THAT THE ALLEGED CALLED PURCHASES FROM THE SUCH PARTIES HAVE BEEN SOLD ON NO PROFIT AND MR. PRAKASHCHAND J SANGHAVI ITA 666 /M UM / 2014 CO 47/MUM/2015 4 NO LOSS BASIS . A CCORDINGLY, HE ADDED THE ENTIRE PURCHASES OF RS. 14,63,952/ - AS BOGUS PURCHASE U/S 69 , A FTER DISCUSSING THE ISSUE IN DETAIL F ROM PAGES 3 TO 7 OF THE ASSESSMENT ORDER. 3. BEFORE THE CIT(A), IT WAS SUBMITTED THAT, THE STATEMENT OF SHRI RAKESHKUMAR GUPTA RECORDED AT THE TIME OF SURVEY WAS LATER ON RETRACTED BY HIM , THEREFORE, NO ADVERSE INFERENCE OR COGNIZANCE SHOULD BE TAKEN FRO M HIS SURVEY STATEMENT. FURTHER, IT WAS SUBMITTED THAT, ASSESSEE HAS GIVEN MONTH - WISE QUANTITATIVE DETAILS OF PURCHASES , SALES, OPENING STOCK, CLOSING STOCK, PHOTOCOPIES OF RELEVANT BANK STATEMENTS, DETAILS OF BILL - WISE PURCHASES MADE FROM THE PARTIES AND COPY OF LEDGER ACCOUNT TO PROVE THE GENUINENESS OF THE BOOK RESULTS . THE PURCHASE FROM ALL THE PARTIES WERE DULY RECORDED IN THE BOOKS OF ACCOUNT AND ALSO THE SALES MADE, THEREFORE, EITHER THE PURCHASES OR THE GROSS PROFIT CANNOT BE DOUBTED. THE LD. CIT(A) NOTED DOWN THE FOLLOWING MONTH - WISE QUANTITATIVE DETAILS OF OPENING STOCK, PURCHASES, SALES AND CLOSING STOCK : - (IN METERS) OPENING STOCK AS ON 01.04.2012 31,410 PURCHASES MADE DURING THE YEAR 7,36,982 SALES RETURN 55,672 8,24,064 LESS: SALES 7,70,841 LESS : SAMPLING & WASTAGE 4,034 CLOSING STOCK AS ON 31.03.2002 49,189 AND CAME TO THE CONCLUSION THAT , THERE IS NO SALES WITHOUT CORRESPONDING PURCHASES AND IF THE SALES HAVE NOT BEEN DISPUTED, THEN , THE ENTIRE ALLEGED PURCHASES ALSO CANNOT BE ADDED AND THEREFORE, ADDITION MADE BY THE AO IS NOT JUSTIFIED. HOWEVER, HE HELD THAT 10% OF SUCH PURCHASES CAN BE ADDED IN ORDER TO FILL THE GAP OF DIFFERENCE ON GROSS PROFIT FOR THE SAID PURCHASES TO PLUG ANY LEAKAGE OF REVENUE AND ACCORDINGLY, THE ADDITION OF RS. 1,15,668/ - WAS MADE IN THE FOLLOWING MANNER : - 6.1 LOOKING AT THE FACTS AND CIRCUMSTANCES OF THE CASE AS A WHOLE, I AM OF THE CONSIDERED VIEW THAT THE C ASE OF JUSTICE MR. PRAKASHCHAND J SANGHAVI ITA 666 /M UM / 2014 CO 47/MUM/2015 5 WOULD BE MET BY MAKING ADDITION AT 10% OF SUCH PURCHASES IN ORDER TO FILL THE GAP DIFFERENCE OF GP FOR THE SAID PURCHASE AS WELL TO PLUG ANY LEA KAGE OF REVENUE. THE APPELLANT HAS SUBMITTED THAT THE TOTAL PURCHASES FROM ABOVE PARTIES WERE AT RS. 11,56,684/ - AS RECORDED IN HIS BOOKS, HENCE ANY IMPOUNDED BILL EXCEEDING THAT AMOUNT WAS EVEN OTHERWISE WAS NOT ACCOUNTED FOR BY TH E APPELLANT, HENCE CANNOT BE THE BASIS OF ADDITION TO APPELLANTS INCOME. THE AO HAS MADE ADDITIONS OF ALLEGED PURCHASES FROM GUPTA PARTIES AT RS. 14,63,952/ - , HOWEVER, IN VIEW OF THE AFORESAID, THE ADDITIONS IS RESTRICTED TO 10% OF PURCHASES RECORDED BY T HE APPELLANT I.E. 10% OF RS. 11,56,684/ - RS. 1,15,668/ - AND THE APPELLANT GETS RELIEF OF BALANCE RS. 14,63,952 1,15,668 RS. 13,48,284/ - ACCORDINGLY. 4. THE LD. DR STRONGLY RELYING UPON THE ORDER OF THE AO, SUBMITTED THAT IN THE AUDIT REPORT ITSE LF, IT WAS MENTIONED THAT DAY - TO - DAY STOCK RECORD HAVE NOT BEEN MAINTAINED AND QUANTITATIVE DETAILS CANNOT BE VERIFIED. THEREFORE, ADDITION OF PURCHASES HAS RIGHTLY BEEN MADE SPECIFICALLY WHEN IT HAS BEEN FOUND THAT ASSESSEE WAS INVOLVED IN GETTING THE ACC OMMODATION BILLS FROM THE CONCERNS OF SHRI RAKESHKUMAR GUPTA. 5. ON THE OTHER HAND, LD. COUNSEL SUBMITTED THAT QUANTITY OF SALES HAS NOT BEEN DISPUTED AND ENTIRE MONTH - WISE STOCK WAS FURNISHED ALONG WITH THE COPIES OF ENTIRE PURCHASE AND SALE BILLS. THUS, NO ADDITION WHATSOEVER COULD HAVE BEEN MADE. EVEN THE ASSESSEES GP RATIO RIGHT FROM ASSESSMENT YEAR 2001 - 02 TO 2007 - 08 WAS AROUND 10.5%. THUS, WHEN GP RATE IS ACCEPTED AND ALSO SALES THEN, THERE IS NO QUESTION OF DISTURBING THE PURCHASES, HENCE NO ADDITI ON WHATSOEVER SHOULD HAVE BEEN MADE. FURTHER, AS REGARDS THE INFORMATION GATHERED DURING THE COURSE OF SURVEY IN THE CASE OF RAKESHKUMAR GUPTA, LD. COUNSEL SUBMITTED THAT THE ENTIRE INFORMATION WAS BASED ON STATEMENT OF SHRI RAKESHKUMAR MR. PRAKASHCHAND J SANGHAVI ITA 666 /M UM / 2014 CO 47/MUM/2015 6 GUPTA WHICH ITSELF HAS BEEN RETRACTED BY HIM , THEREFORE, IT HAS NO EVIDENTIARY VALUE, W HEN ENTIRE EVIDENCE FOR THE PURCHASES HAVE BEEN GIVEN BY THE ASSESSEE. T H US NO ADDITION WHATSOEVER COULD HAVE BEEN MADE ON ACCOUNT OF PURCHASES OR ON ACCOUNT OF ANY GP RATE. 6. AFTER CONS IDERING THE RIVAL SUBMISSIONS AND ON PERUSAL OF THE FINDING GIVEN IN THE IMPUGNED ORDERS AND MATERIALS ON RECORD, WE FIND THAT THE ASSESSEE BEFORE THE AO VIDE LETTER DATED 26 TH AUGUST, 2010 HAVE SUBMITTED THE ENTIRE QUANTITATIVE DETAILS OF OPENING STOCK, P URCHASES, SALES MADE DURING THE YEAR AND CLOSING STOCK, THE DETAILS OF WHICH HA VE ALREADY BEEN NOTED ABOVE. THE ASSESSEE IN SUPPORT OF THE ENTRIES OF PURCHASES AND SALES HA S PRODUCED, PURCHASE BILLS SALES BILLS AND QUANT IT ATIVE TALLY IN WHICH NO DEFECT HAS B EEN POINTED OUT. O N THESE FACTS AND ALSO O NCE THE VERY BASIS OF INFORMATION THAT ASSESSEE WAS ENGAGED IN GETTING ACCOMMODATION BILL FROM RAKESHKUMAR GUPTA HAS BEEN DENIED BY THE RAKESHKUMAR GUPTA AND ITS CONCERNS THEN, THERE REMAIN S NO BASIS FOR MAKING ANY ADDITION ON ACCOUNT OF BOGUS PURCHASES. IF THE OPENING STOCK, CLOSING STOCK , SALES, GROSS PROFIT HAVE NOT BEEN DISTURBED AND QUANTITATIVE DETAILS OF PURCHASES ARE FULLY VERIFIABLE , THEN NO ADDITION ON ACCOUNT OF PURCHASES CAN BE MADE. TH US, THE FINDING OF THE CIT(A) TO THIS EXTENT IS UPHELD. HOWEVER, THE LD. CIT(A) HAS WENT STEP FURTHER AND MADE AN ADDITION OF 10% ON ACCOUNT OF GROSS PROFIT O N SUCH ALLEGED PURCHASE S ON THE GROUND THAT S UCH AN ADDITION WILL COVER WHATEVER LITTLE DISCREPANCY IS THERE IN THE TRADING ACCOUNT. THUS, WE DO NOT FIND ANY REASON TO DEVIATE FROM SUCH CONCLUSION OF LD. CIT(A) ACCORDINGLY, GROUND RAISED BY THE REVENUE IS DISMISSED. 7 . BEFORE US, THE LD. COUNSEL HAD ALSO FILED A SERIES OF DECISION OF TRIBUNAL, WHEREIN SIMILAR NATURE O F ADDITION MADE ON ACCOUNT OF PURCHASES IN THE WAKE OF SURVEY OPERATION IN THE CASE OF RAKESHKUMAR GUPTA AND HIS GROUP CONCERNS, HAVE BEEN DELETED. MR. PRAKASHCHAND J SANGHAVI ITA 666 /M UM / 2014 CO 47/MUM/2015 7 SINCE WE HAVE ALREADY UPHELD THE ORDER OF THE CIT(A), RELIANCE ON SUCH DECISIONS MAY NOT BE REQUIRED AT THIS JUNCTURE . 8 . IN THE CROSS OBJECTION, THE ASSESSEE HAS RAISED THE GROUND WITH REGARDS TO DISALLOWANCE OF RS. 1,15,668/ - MADE BY THE LD. CIT(A) AFTER APPLYING GP RATE OF 10%. 9 . AT THE TIME OF HEARING, THIS GROUND HAS NOT BEEN PRESSED BY THE LD. COUNSEL, THEREFORE, CROSS OBJECTION IS TREATED AS DISMISSED. 10 . IN THE RESULT, BOTH APPEAL OF THE REVENUE AND ASSESSEES CROSS OBJECTIONS ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 5 TH OCTOBER , 2015. SD/ - SD/ - ( ) ( ) ( G S PANNU ) ( AMIT SHUKLA ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATE: 5 TH OCTOBER , 2015 / COPY TO: - 1 ) / THE APPELLANT. 2 ) / THE RESPONDENT. 3) THE CIT (A) - 25 , MUMBAI. 4 ) THE CIT 14 , MUMBAI. 5 ) , , / THE D.R. C BENCH, MUMBAI. 6 ) \ COPY TO GUARD FILE. / BY ORDER / / TRUE COPY / / / , DY. / ASSTT. REGISTRAR I.T.A.T., MUMBAI * . . *CHAVAN, SR.PS