HASMUKH JAGSHI VISARAIA, THANE V. ITO WD 1(1), KALYAN

CO 98/MUM/2016

• Counselvise Citation: [2017] 123 COUNSELVISE.COM (IT) 2709 (ITAT-MUMBAI)
• Duration Of Justice: 5 month(s) 29 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 03-01-2017
• Appeal Filed By: Assessee
• Bench Allotted: Not Allotted
• Assessment Year: 2010-2011
• Appeal Filed On: 05-07-2016
• Court: TRIBUNAL
• Department Lawyers: M C OMI NINGSEN
• Assessee Lawyers: HARI S RAHEJA
• Keywords: Bogus purchase; Onus to prove
• Section: 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI BEFORE SHRI B.R. BASKARAN (AM) & SHRI AMIT SHUKLA (JM) I.T.A. NO. 7138 /MUM/ 2014 (ASSESSMENT YEAR 20 1 0 - 11 ) ITO, WARD 1(1) 1 ST FLOOR MOHAN PLAZA WAYALE NAGAR KHADAKPADA KALYAN VS. SHRI HASMUKH JAG DISH VISARIA A - 15, 16 & 17 RAGHUNATH COMPOUND ITADKAR ROAD PURNA VILLAGE BHIWANDI - 421 302. ( APPELLANT ) ( RESPONDENT ) C.O. NO. 98/MUM/2016 (ASSESSMENT YEAR 2010 - 11) SHRI HASMUKH JAGDISH VISARIA A - 15, 16 & 17 RAGHUNATH COMPOUND ITADKAR ROAD PURNA VIL LAGE BHIWANDI - 421 302. VS. ITO, WARD 1(1) 1 ST FLOOR MOHAN PLAZA WAYALE NAGAR KHADAKPADA KALYAN ( APPELLANT ) ( RESPONDENT ) PAN NO . AAAPV90591 ASSESSEE BY SHRI HARI S. RAHEJA DEPARTMENT BY SHRI M.C. OMI NINGSEN DATE OF HEARING 6 .1 2 . 201 6 DAT E OF PRONOUNCEMENT 4 . 1 . 201 7 O R D E R PER B.R. BASKARAN (AM) : - THE APPEAL FILED BY THE REVENUE AND THE CROSS OBJECTION FILED BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER DATED 26.9.2014 PASSED BY THE LEARNED CIT(A) - 27, MUMBAI AND THEY RELATE TO A.Y. 2010 - 11. THE REVENUE IS IN APPEAL ON THE FOLLOWING ISSUES: - SHRI HASMUKH JAGDISH VISARIA 2 A) PARTIAL RELIEF GRANTED ON THE ADDITION MADE ON ACCOUNT OF BOGUS PURCHASES B) RELIEF GRANTED IN RESPECT OF ADDITION MADE TOWARDS OUTSTANDING PACKAGING CHARGES 2. THE ASSESSEE HAS FILED THE CROSS OBJECTION CHALLENGING THE ADDITION PARTIALLY CONFIRMED BY THE LEARNED CIT(A) ON BOGUS PURCHASES. 3. THE ASSESSEE IS A TRADER IN PAPER AND PAPER BOARD S . BESIDES THE ABOVE, THE ASSESSEE IS UNDERTAKING JOB WORKS FOR CUTTING PAPER BOARDS. THE ASSES SEE IS CARRYING ON BUSINESS UNDER THE NAME AND STYLE OF M/S. MAHAVIR PAPER CUTTING. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER ISSUED NOTICES U/S. 133(6) OF THE ACT TO VARIOUS SUPPLIERS OF PAPER & BOARDS IN ORDER TO VERIFY THE GENUI NENESS OF PURCHASES. NOTICES ISSUED TO THE FOLLOWING PERSONS WERE RETURNED BACK BY THE POSTAL AUTHORITY. FURTHER ONE PERSON DID NOT RESPOND TO THE NOTICE ISSUED BY THE ASSESSING OFFICER. DETAILS THEREOF HAVE BEEN TABULATED BY THE ASSESSING OFFICER AS UNDER : - SR.NO. NAME OF THE PARTY AMOUNT INVOLVED (RS) REMARKS 1. HERMITAGE TRADING CO. PVT. LTD. 17,70,116 RETURNED 2. HARSH CORPORATION 17,84,983 DO 3. KOTSONS IMPLEX PVT. LTD. 5,27,800 DO 4. URVIN GENERAL TRADING PVT. LTD. 37,73,484 DO 5. SIDDHI ENTERPR ISES 5,09,600 NO REPLY 83,65,983 4. HENCE THE ASSESSING OFFICER ASKED THE ASSESSEE TO PRODUCE THE ABOVE SAID PARTIES BEFORE HIM. THE ASSESSING OFFICER ALSO NOTICED THAT THE NAME OF THE ABOVE PARTIES HAVE BEEN PLACED IN THE LIST OF HAWALA DEALERS RELE ASED BY THE SALES TAX DEPARTMENT OF MAHARASHTRA. 5. THE ASSESSEE DID NOT PRODUCE THE PARTIES BUT ONLY FILED CONFIRMATION LETTERS OBTAINED FROM THEM. THE ASSESSEE FURNISHED COPIES OF PURCHASE BILLS, LEDGER ACCOUNT COPIES, BANK PAYMENT DETAILS AND FEW DELI VERY CHALLANS. THE ASSESSING OFFICER WAS NOT SATISFIED WITH THE DETAILS FURNISHED BY THE ASSESSEE , SHRI HASMUKH JAGDISH VISARIA 3 SINCE HE FAILED TO FURNISH COPIES OF ALL DELIVERY CHALLANS, TRANSPORT RECEIPT, O CTROI RECEIPTS ETC. HENCE HE TOOK THE VIEW THAT THE ASSESSEE HAS INFLATED PUR CHASES BY OBTAINING ACCOMMODATION BILLS FROM THE ABOVE SAID PARTIES. ACCORDINGLY, THE ASSESSING OFFICER REJECTED THE BOOKS OF ACCOUNT AND ADDED THE ENTIRE PURCHASE AMOUNT OF ` 83,65,983/ - AS INCOME OF THE ASSESSEE. 6. THE LEARNED CIT(A) NOTICED THAT THE ASSESSING OFFICER HAS ACCEPTED THE SALES, MEANING THEREBY THE ASSESSEE COULD NOT HAVE SOLD THE GOODS WITHOUT PURCHASING THEM. HOWEVER , SINCE THE ASSESSEE HAS FAILED TO PRODUCE THE SUPPLIERS AND FURTHER SINCE THE ASSESSEE HAS FAILED TO FURNISH TRANSPORT R ECEIPT, DELIVERY CHALLANS ETC., THE LEARNED CIT(A) TOOK THE VIEW THAT THE MOTIVE OF THE ASSESSEE BEHIND OBTAINING THE BOGUS ACCOMMODATION BILLS WOULD BE TO INFLATE THE PURCHASE PRICE SO AS TO SUPPRESS TRUE PROFIT. ACCORDINGLY, BY PLACING RELIANCE ON THE DE CISION RENDERED BY HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. S I MIT P. SHETH (2013) 38 TAXMAN.COM 385 (GUJARAT) , T HE LEARNED CIT(A) TOOK THE VIEW THAT PROFIT ELEMENT EMBEDDED IN THE PURCHASE S SHOULD BE ADDED TO THE TOTAL INCOME. THE LEARNED CIT(A) ESTIMATED THE PROFIT ELEMENT AT 12%. SINCE THE ASSESSEE HAS ALREADY DECLARED GP @ 7%, THE LEARNED CIT(A) DIRECTED THE ASSESSING OFFICER TO MAKE ADDITION AT 5% OF THE ALLEGED BOGUS PURCHASES. ACCORDINGLY, HE GRANTED PARTIAL RELIEF TO THE ASSESSEE ON THIS IS SUE. 7. THE LD D.R CONTENDED THAT THE ASSESSEE HAS FAILED TO DISCHARGE THE ONUS PLACED UPON HIM TO PROVE THE PURCHASES. HE SUBMITTED THAT THE DELIVERY CHALLANS AND TRANSPORT RECEIPTS ARE IMPORTANT DOCUMENTS TO PROVE THE MOVEMENT OF GO ODS. HE SUBMITTED THAT THE ASSESSEE HAS FAILED TO FURNISH THOSE DOCUMENTS AND HENCE THE AO WAS JUSTIFIED IN DISALLOWING ENTIRE AMOUNT OF PURCHASES. 8. THE LD A.R, ON THE CONTRARY, SUBMITTED THAT THE ASSESSEE HAS SOLD THE GOODS PURCHASED FROM THE ABOVE SAID PARTIES AND THE SALES HAS BEEN ACCEPTED BY THE AO. HE SUBMITTED THAT THE ASSESSEE HAS FURNISHED THE DETAILS OF STOCK REGISTER RELATING TO THE ABOVE SAID PURCHASES. HE SUBMITTED THAT THE DELIVERY SHRI HASMUKH JAGDISH VISARIA 4 CHALLANS OF CERTAIN PURCHASES WERE ALSO PRODUCED BEFO RE THE AO. ACCORDINGLY HE CONTENDED THAT THE LD CIT(A) SHOULD HAVE DELETED THE ENTIRE ADDITION. 9. WE HAVE HEARD RIVAL CONTENTIONS ON THIS ISSUE AND PERUSED THE RECORD. IN THE PAPER BOOK, THE ASSESSEE HAS FURNISHED TWO STATEMENTS SHOWING THAT THE PU RCHASES MADE FROM M/S HERMITAGE TRADING CO P LTD AND M/S HARSH CORPORATION HAVE BEEN SOLD IN ENTIRETY TO M/S . MANN PAPERS. THE DETAILS OF RECONCILIATION OF PURCHASES MADE FROM OTHER THREE PARTIES WITH CORRESPONDING SALES HAVE BEEN FURNISHED. EVEN THOUGH THE ASSESSEE HAS SUBMITTED THAT THE DELIVERY CHALLANS OF CERTAIN PURCHASES WERE PRODUCED BEFORE THE AO, YET THE DETAILS OF TRANSPORT RECEIPTS/OCTROI PAYMENTS HAVE NOT BEEN BROUGHT ON RECORD. THERE SHOULD NOT BE ANY DISPUTE THAT THE ONUS TO PROVE THE EXPEN DITURE CLAIMED IS PLACED UPON THE ASSESSEE AND HENCE THE ASSESSEE IS REQUIRED TO FURNISH THE DETAILS TO THE SATISFACTION OF THE AO. 10. AT THE SAME TIME, THE VIEW TAKEN BY THE LD CIT(A) THAT THE ASSESSEE COULD NOT HAVE SOLD THE GOODS WITHOUT PURCHASING IT, CANNOT BE FOUND FAULT WITH. SINCE THE AO HAS ACCEPTED THE SALES, THE CORRESPONDING EXPENDITURE INCURRED ON PURCHASES SHOULD BE ALLOWED AS DEDUCTION. IN OUR VIEW THE SAID VIEW TAKEN BY LD CIT(A) IS JUSTIFIABLE. WE ALSO NOTICE THAT THE LD CIT(A) HAS TAKEN THE VIEW THAT THE ASSESSEE, AT THE MOST, COULD HAVE MADE SOME PROFIT ON THE PURCHASES MADE FROM THE ABOVE SAID PARTIES BY WAY OF INFLATION. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE OPINION THAT THE VIEW TAKEN BY THE LD CIT(A) IS JU STIFIABLE. ACCORDINGLY WE UPHOLD THE ORDER PASSED BY LD CIT(A) ON THIS ISSUE. 11. THE NEXT ISSUE CONTESTED BY THE REVENUE RELATES TO THE RELIEF GRANTED IN RESPECT OF ADDITION RELATING TO OUTSTANDING EXPENSES. THE ASSESSEE HAD CLAIMED PACKING CHARGES OF RS.30,68,125/ - AND THE AO NOTICED THAT A SUM OF RS.27,93,860/ - WAS SHOWN AS OUTSTANDING, WHICH WORKED OUT TO ABOUT 91% OF TOTAL PACKING CHARGES. THE AO NOTICED THAT THE OUTSTANDING AMOUNT PERTAINING TWO PARTIES AGGREGATING TO RS.25,50,912/ - HAS ALREAD Y BEEN DISALLOWED BY HIM SHRI HASMUKH JAGDISH VISARIA 5 AS BOGUS PURCHASES. ACCORDINGLY THE AO DISALLOWED THE REMAINING AMOUNT OF OUTSTANDING AMOUNT, I.E., RS.2,42,954/ - . THE LD CIT(A) DELETED THE SAME BY OBSERVING THAT THE ABOVE SAID ADDITION HAS BEEN MADE ONLY ON SURMISES AND CONJEC TURES. 12. WE HEARD THE PARTIES ON THIS ISSUE AND PERUSED THE RECORD. AS OBSERVED BY LD CIT(A), WE NOTICE THAT THE AO HAS MADE THIS ADDITION ONLY ON SURMISES AND CONJECTURES. THE ASSESSEE HAS SUBMITTED BEFORE LD CIT(A) THAT THE ADDITION OF RS.2,42,9 54/ - WAS CLAIMED TO BE RELATED TO A CONCERN NAMED M/S . BHAVI MATERIALS, BUT THE PAYMENT HAS ALREADY BEEN MADE BY THE ASSESSEE ON 20 - 08 - 2009, MEANING THEREBY, THERE WAS NO OUTSTANDING IN THE NAME OF M/S . BHAVI MATERIALS. HENCE THE LD CIT(A) HAS HELD THAT T HE AO HAS MADE THIS ADDITION ON INCORRECT APPRECIATION OF FACTS, SURMISES AND CONJECTURES. AT THE TIME OF HEARING, THE LD D.R DID NOT FURNISH ANY MATERIAL TO CONTRADICT THE ABOVE SAID OBSERVATIONS MADE BY LD CIT(A). UNDER THESE SET OF FACTS, WE HAVE NO O THER OPTION BUT TO CONFIRM THE ORDER PASSED BY LD CIT(A) ON THIS ISSUE. 13. IN THE RESULT, THE APPEAL FILED BY THE REVENUE AND THE CROSS OBJECTION FILED BY THE ASSESSEE ARE DISMISSED . ORDER HAS BE EN PRONOUNCED IN THE COURT ON 4 .1 .201 7 SD/ - SD/ - (AMIT SHUKLA ) (B.R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 4 / 1 / 20 1 7 COPY OF THE ORDER FORWARDED TO : 1. THE APPE LLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// ( DY./ASSTT. REGISTRAR) ITAT, MUMBAI PS