AMAR TIMBER & PLYWOOD, MUMBAI V. I.T.O. WARD - 27(1)(1), MUMBAI

ITA 1113/MUM/2018

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 9037 (ITAT-MUMBAI)
• Duration Of Justice: 9 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-12-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 26-02-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S K BEPARI
• Assessee Lawyers: SHREYA DOSHI; D R SHAH
• Keywords: Bogus purchase; Accommodation entries
• Section: 133(6); 148; 12; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA, AM AND SHRI PAWAN SINGH, JM ITA NO. 1113/ MUM/ 2018 (ASSESSMENT YEAR: 2010 - 11 ) M/S. AMAR TIMBER & PLYWOOD SHOP NO.3, PRABHU KRUPA BLDG., 103, LBS MARG, GHATKOPAR (W), MUMBAI - 400 000086 VS. INCOME TAX OFFICER, WARD NO. 27(1)(1), TOWER NO. 6, 4 TH FLOOR, VASHI RLY. STATION BLDG., VASHI, MUMBAI - 400 703 PAN/GIR NO. AAFFA 0020 K ( APPELLANT ) : ( RESPONDENT ) APPELLANT BY : SHRI SHREYA DOSHI & SHRI D. R. SHAH RESPONDENT BY : SHRI S. K. BEPARI DATE OF HEARING : 03.10.2018 DATE OF PRONOUNCEMENT : 07.12 .2018 O R D E R PER SHAMIM YAHYA, A. M.: THIS IS AN APPEAL BY THE ASSESSEE WHEREIN THE ASSESSEE HAS RAISED MANY GROUNDS HAVE BUT BASICALLY THE ASSESSEE IS AGGRIEVED THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - 25, MUMBAI (LD.CIT(A) FOR SHORT) VIDE ORDER DATED 112.01.2018 HAS ERRED IN SUSTAINING 12.5% DISALLOWANCE ON ACCOUNT OF BOGUS PURCHASE, RESULTING IN AN ADDITION OF RS.1,37,557/ - . 2. THE ASSE SSING OFFICER (A.O. FOR SHORT) IN THIS CASE HAS MADE 12.5% ADDITION ON ACCOUNT OF BOGUS PURCHASE AMOUNTING TO RS.1,37,557/ - . 3. UPON THE ASSESSEES APPEAL, THE LD. CIT(A) CONFIRMED THE SAME. 4. AGAINST THE ABOVE ORDER , THE ASSESSEE IS IN APPEAL BEFORE THE ITAT. 5. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A FIRM WHICH IS ENGAGED IN THE BUSINESS OF TRADING IN TIMBER. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS 2 ITA NO.1113/MUM/2018 FILED BY THE ASSESSEE DECLARING A TOTAL IN COME OF RS.28,760/ - . SUBSEQUENTLY, ON THE BASIS OF THE INFORMATION RECEIVED FROM THE INVESTIGATION WING, MUMBAI, WITH REGARD TO THE ASSESSEE HAD TAKEN ACCOMMODATION BILL FOR PURCHASE THROUGH PARTIES DECLARED AS HAWALA OPERATORS BY MAHARASHTRA SALES TAX DEP ARTMENT . T HE CASE WAS REOPENED BY ISSUING NOTICE U/S. 118 ON 09.03.2015. IN RESPONSE TO THE NOTICE U/S. 148, THE ASSESSEE SUBMITTED THAT THE RETURN FILED U/S. 139 MAY BE CONSIDERED AS RETURN FILED IN RESPONSE TO NOTICE U/S. 148 OF THE ACT. AN ORDER U/S. 14 3(3) R.W.S. 147 OF THE ACT WAS PASSED ON 05.11.2015 DETERMIN IN G THE TOTAL INCOME OF THE ASSESSEE AT RS.1,66,321/ - AFTER MAKING ADDITION OF RS.1,37,557/ - BEING ESTIMATED THE PROFIT ELEMENT CALCULATED @ 12.5% EMBEDDED IN IMPUGNED PURCHASES OF RS.11,00,457/ - , TREATED AS BOGUS PURCHASE. 6. THE BASIS OF THE A.O.S ORDER IS AS UNDER: THE AO HAD RECEIVED INFORMATION FROM THE INVESTIGATIO N WING OF THE DEPARTMENT THAT THE ASSESSEE HAD TAKEN ACCOMMODATION BILLS FOR PURCHASES FROM THE PARTIES DECLARED AS HAWALA OPERATORS BY MAHARASHTRA SALES TAX DEPARTMENT. DURING THE COURSE OF RE - ASSESSMENT PROCEEDINGS T HE AO FOUND THAT THE ASSESSEE HAD MADE PURCHASES FROM VARIOUS PARTIES OUT OF WHICH RS. 11,00,457/ - EFFECTED FROM THE PARTIES AS MENTIONED BELOW: SR. NO. PARTY WHO HAVE ISSUED BOGUS BILLS TO THE ASSESSEE AMOUNT OF SUCH BOGUS BILL (RS.) 1 SHUBHAM ENTERPRISES 2,65,228 2 OM ENTERPRISES 1,60,482 3 SUYASH SALES CORPORATION 6,74,747 TOTAL 11,00,457 7. THE NAME OF THE ABOVE PARTIES FIGURED IN LIST OF SUSPICIOUS DEALERS ON THE MAHARASHTRA SALES TAX DEPARTMENT, WHO HAD ISSUED ACCOMMODATION ENTRIES WITHOUT ACTUAL DELIVERY OF GOODS. THE TIN NUMBER AS APPEARING IN THE COPY OF INVOICES SUBMITTED 3 ITA NO.1113/MUM/2018 BY THE ASSESSE E IN SUPPORT OF PURCHASES MADE FROM THE ABOVE PARTIES IS SAME AS THAT MADE AVAILABLE BY THE SALES TAX DEPARTMENT TO THE INCOME TAX DEPARTMENT. 8. THE AO IN HIS AFORESAID ASSESSMENT ORDER HAS FURTHER MENTIONED THAT THE SALE TAX DEPARTMENT HAD CONDUCTED IN DEPENDENT INQUIRIES IN THE CASE OF EACH HAWALA OPERATOR, INCLUDING IN THE CASE OF ABOVE STATED HAWALA OPERATOR AND IT WAS CONCLUSIVELY PROVED THAT THESE PARTIES/OPERATORS WERE ENGAGED IN THE BUSINESS OF PROVIDING ACCOMMODATION ENTRIES ONLY. TH ESE PARTIES MOSTLY INDULGED IN F OLLOWING ACTIVITIES: 'A) ISSUING ONLY BILLS AND DOING NON - GENUINE BUSINESS (HAWALA BUSINESS); B) NOT MAINTAINING STOCK AND NOT KEEPING STOCK REGISTER : C) NOT EFFECTING ANY PURCHASE; AND D) THERE WAS NO TRANSACTION OF GOODS. , E) ENTRI ES WERE BEING PROVIDED BY THE PARTIES FOR COMMISSION.' 9. DURING THE COURSE OF RE - ASSESSMENT PROCEEDINGS, IN ORDER TO ASCERTAIN THE GENUINENESS OF PURCHASES MADE BY THE ASSESSEE, THE AO CONDUCTED INDEPENDENT INQUIRIES BY ISSUING NOTICE U/S. 133(6) OF THE ACT TO THE PARTIES WHICH WERE RETURNED UNSERVED BY THE POSTAL AUTHORITIES WITH A REMARK 'LEFT'. SUBSEQUENTLY, A LOCAL INQUIRY CONDUCTED BY AN INCOME TAX INSPECTOR DEPUTED BY THE AO ALSO FAILED TO THROW ANY LIGHT ON THE WHERE ABOUT OF THE SAID PARTY. THEREA FTER, THE AO BROUGHT THIS FACT TO THE NOTICE OF THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND THE ASSESSEE WAS ASKED TO PRODUCE THE PARTY FOR VERIFICATION AND ALSO SHOW CAUSE AS TO WHY THE PURCHASES MADE FROM THE AFORESAID PARTIES SHOULD NOT BE DISALLOWED. IN RESPONSE TO THE AO'S ABOVE QUERY, THE AR OF THE ASSESSEE MADE WRITTEN SUBMISSIONS WHEREIN IT WAS SUBMITTED THAT THE PURCHASES SHOWN BY THE ASSESSEE FROM THE SAID PARTIES ARE GENUINE PURCHASES AND PAYMENTS TO THESE PARTIES WERE ALSO MADE THROUGH ACCOUNT PAYEE CHEQUE. FURTHER, THE ASSESSEE ALSO EXPRESSED HIS INABILITY TO PRODUCE THE PARTY. FURTHER, THE ASSESSEE ALSO FAILED TO FURNISH 4 ITA NO.1113/MUM/2018 E VIDENCES, SUCH AS, DELIVERY CHALLAN TRANSPORTATION DETAILS ETC. TO SUBSTANTIATE HIS CLAIM OF PURCHASES FROM THE A FORE - SAID PARTIES . THE ASSESSEE COULD ONLY FURNISH COPIES OF BANK STATEMENTS CLAIMING THAT THE PURCHASES MADE WERE GENUINE AS THE PAYMEN TS HAVE BEEN MADE THROUGH BANKING CHANNELS. 10. THE AO DID NOT ACCEPT ASSESSEE'S CONTENTION THAT THE PAYMENT WAS MADE THROUGH BANKING CHANNEL AND THEREFORE, THE PURCHASES WERE GENUINE. SINCE, THE ASSESSEE COULD NOT PRODUCE THE ABOVEMENTIONED PARTIES BEFORE THE AO, IT COULD NOT PROVIDE THE EVIDENCES OF THE PURCHASE LIKE DELIVERY CHALLANS, TRANSPORT BILLS ETC., AND THE ASSESSEE HAS NOT GIVEN ANY EVIDENCE WHICH LEADS TO THE CONCLUSION THAT THE PURCHASES WERE ACTUALLY MADE BY THE ASSESSEE FROM THE ABOVEMENTIONED PARTIES AND THE SAID PARTY ACTUALLY EXISTED. THE AO HAS HELD THAT SINCE PURCHASES SHOWN BY THE ASSESSEE DURING THE YEAR REMAINS UNVERIFIABLE, THEREFORE IS A POSSIBILITY OF LEAKAGE OF REVENUE. THE AO RELYING ON VARIOUS CASE LAWS MENTIONED IN HIS ORDER, HELD THAT PURCHASES SHOWN TO HAVE BEEN EFFECTED FROM THE ABOVE MENTIONED PARTIES WERE NOT GENUINE TRANSACTIONS AND DISALLOWED AN AMOUNT OF RS.1,37,557/ - BEING 12.5% OF THE TOTAL PURCHASE OF RS.11,00,457/ - AND ADDED TO T HE TOTAL INCOME OF THE ASSESSEE. 11. U PON CAREFUL CONSIDERATION W E FIND THAT APART FROM INFORMATION FROM SALES TAX DEPARTMENT, THE A.O. HAS ALSO MADE HIS ENQUIRY. THE A SSESSEE HAS NOT PROVIDED THE COMPLETE DOCUMENTARY EVIDENCE FOR THE PURCHASE INASMUCH AS THE EVIDENCE IN THE FORM OF TRANSPORTATION BILLS ARE NOT ON RECORD . THE NOTICES ISSUED TO THE SAID SUPPLIERS HAVE RETURNED UNSERVED. THE LOCAL ENQUIRY BY THE I. T. INSPECTOR H AS ALSO REPORTED NON E XISTENCE OF PARTIES. HENCE, THE VERACITY OF THE PURCHASE EVIDENCE GIVEN IS CLEARLY UNPROVED. 5 ITA NO.1113/MUM/2018 12. HOWEVER, W E FIND THAT IN THIS CASE THE SALES HAVE NOT BEEN DOUBTED. IT IS SETTLED LAW THAT WHEN SALES ARE NOT DOUBTED, 100% DISALLOWANCE FOR BOGUS PURCHASE CANNOT BE DONE. THE RATIONALE BEING NO SALES IS POSSIBLE WITHOUT ACTUAL PURCHASES. THIS PROPOSITION IS SUPPORT ED FROM HON'BLE JURISDICTIONAL HIGH COURT DECISION IN THE CASE OF NIKUNJ EXIMP ENTERPRISES (IN WRIT PETITION NO 2860, ORDER DT. 18.6.2014). IN THIS CASE THE HONBLE HIGH COURT HAS UPHELD 100% ALLOWANCE FOR THE PURCHASES SAID TO BE BOGUS WHEN SALES ARE NOT DOUBTED. HOWEVER IN THAT CASE ALL THE SUPPLIES WERE TO GOVERNMENT AGENCY. IN THE PRESENT CASE , THE FACTS OF THE CASE INDICATE THAT ASSESSEE HAS MADE PURCHASE FROM THE GREY MARKET. MAKING PURCHASES THROUGH THE GREY MARKET GIVES THE ASSESSEE SAVINGS ON ACCOU NT OF NON - PAYMENT OF TAX AND OTHERS AT THE EXPENSE OF THE EXCHEQUER. IN SUCH SITUATION , IN O U R CONSIDERED OPINION , ON THE FACTS AND CIRCUMSTANCES OF THE CASE , 12.5 % DISALLOWANCE OUT OF THE BOGUS PURCHASES FOR THE PROFIT MADE THEREUPON MEETS THE END OF JUST ICE. HENCE, THE GROSS PROFIT ALREADY SHOWN BY THE ASSESSEE AND OFFERED TO TAX SHOULD BE REDUCED FROM THE STANDARD 12.5% BEING DIRECTED TO BE DISALLOWED ON ACCOUNT OF B OGUS PURCHASE. THIS IS TO EXCLUDE DOUBLE JEOPARDY TO THE ASSESSEE. HENCE, W E MODIFY THE OR DER OF THE AUTHORITIES BELOW ACCORDINGLY. 1 3 . IN THE RESULT, THIS APPEAL BY THE ASSESSEE STANDS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 0 7 . 1 2 . 2 0 1 8 S D / - S D / - ( PAWAN SINGH ) (SHAMIM YAHYA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 0 7 . 1 2 . 2 0 1 8 ROSHANI , SR. PS 6 ITA NO.1113/MUM/2018 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT - CONCERNED 5. DR, ITAT, MUMBAI 6. GUARD FILE BY ORDER, (DY./ASSTT. REGISTRAR) ITAT, MUMBAI