MOHD RIZWAN MOHD KALLAN KHAN, MUMBAI V. INCOME TAX OFFICER 26(3)(4), MUMBAI

ITA 1141/MUM/2018

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 7064 (ITAT-MUMBAI)
• Duration Of Justice: 3 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 27-02-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAJESH KUMAR YADAV
• Keywords: Bogus purchase; Principle of natural justice; Tangible material; Difference of opinion; Reason to believe; Change of opinion
• Section: 143(3); 234B; 148

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL A BENCH MUMB AI BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO.1141/MUM/2018 (ASSESSMENT YEAR 200 9-10 ) MD. RIZWAN MOHD KALLAN KHAN, PLOT NO. 603, FLAT NO.13, BLDG NO. 7 D, BOMBAY TAXI MENS CO-OPERATIVE SOCIETY, LBS MARG, KURLA (WEST), MUMBAI-400070 PAN: AGJPK2270K VS. ITO 26(3)(4) ROOM NO. 711, 7 TH FLOOR, C-11, PRATYAKSHAKAR BHAVAN, BANDRA (EAST), MUMBAI-51. APPELLANT RESPONDENT APPELLANT BY : SHRI VIMAL PUNMIYA (AR) RESPONDENT BY : SHRI RAJESH KUMAR YADAV (AR) DATE OF HEARING :25.04.2018 DATE OF PRONOUNCEMEN T : 31.05.2018 ORDER PER PAWAN SINGH, JUDICIAL MEMBER; 1. THE INSTANT APPEAL BY ASSESSEE UNDER SECTION 253 OF THE INCOME-TAX ACT (THE ACT) IS DIRECTED AGAINST THE ORDER OF LD. COMMISSIO NER OF INCOME-TAX (APPEALS)-38 [LD. CIT(A)], MUMBAI DATED 10.10.2017 FOR ASSESSMENT YEAR 2009-10. THE APPEAL BEFORE THE LD. CIT(A) ARISE FRO M THE ASSESSMENT ORDER PASSED UNDER SECTION 143(3) R.W.S. 147 OF THE ACT D ATED 25.03.2015. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PROPRIETOR OF M/S FAHAID ENTERPRISES, ENGAGED IN THE BUSINESS OF LUBRICANT O ILS, FILED ITS RETURN OF INCOME FOR RELEVANT ASSESSMENT YEAR ON 30.09.2009 D ECLARING TOTAL INCOME AT RS. 7,56,296/-. THE RETURN WAS PROCESSED UNDER S ECTION 143(1) OF THE ACT. SUBSEQUENTLY, ON THE BASIS OF INFORMATION RECEIVED FROM THE SALE TAX DEPARTMENT THROUGH DGIT (INVESTIGATION), MUMBAI THA T ASSESSEE WAS ITA NO.1141/M/18- MD. RIZWAN MOHD KALLAN KHAN 2 INVOLVED IN NON-GENUINE PURCHASES/HAWALA TRANSACTIO N, THE ASSESSMENT WAS REOPENED. THEREFORE, NOTICE UNDER SECTION 148 DATED 19.03.2014 WAS SERVED UPON THE ASSESSEE. IN RESPONSE TO THE NOTICE UNDER SECTION 148, THE ASSESSEE FILED HIS REPLY DATED 16.04.2014 REQUESTED TO TREAT THE ORIGINAL RETURN OF INCOME IN RESPONSE TO THE NOTICE UNDER SECTION 148. THE ASSESSING OFFICER PROCEEDED FOR RE-ASSESSMENT. THE ASSESSMENT WAS COM PLETED UNDER SECTION 143(3) R.W.S. 147 ON 25.03.2015. THE ASSESSING OFFI CER WHILE PASSING THE RE-ASSESSMENT ORDER TREATED THE PURCHASES FROM 12 P ARTIES OF RS. 2,91,36,808/- AS NON-GENUINE. THE ASSESSING OFFICER MADE THE ADDITION OF RS. 36,42,101/-, BEING 12.50% OF THE ALLEGED BOGUS PURC HASES. AGGRIEVED BY THE ORDER OF AO, THE ASSESSEE FILED APPEAL BEFORE THE L D. CIT(A). THE LD. CIT(A) UPHELD THE RE-OPENING AND ENHANCE THE ADDITION FROM 12.5% TO 100% OF THE ALLEGED BOGUS PURCHASES. THUS, FURTHER AGGRIEVED BY THE ORDER OF LD. CIT(A), THE ASSESSEE HAS FILED THE PRESENT APPEAL BEFORE US . THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL. 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE LD CIT(A) ERRED IN CONFIRMING THE INITIATION OF THE REASSESSMENT PROCE EDING UNDER SECTION 147. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE LD CIT(A) FAILED TO CONSIDER THAT REASSESSMENT PROCEEDING CANNOT BE INI TIATED. A) NO REASSESSMENT CAN BE MADE JUST TO MAKE AN ENQU IRY OR VERIFICATION. B) REASSESSMENT PROCEEDING CANNOT BE INITIATE MEREL Y ON THE INFORMATION RECEIVED FROM INVESTIGATION WING. C) REASSESSMENT PROCEEDING CANNOT BE INITIATED WHEN THE LD. CIT(A) HAVE REASON TO SUSPECT AND NOT REASON TO BELIEVE. 3. ON THE FACTS AND CIRCUMSTANCES OF CASE AND LAW THE LD CIT(A) ERRED IN CONFIRMING THE ASSESSMENT ORDER UNDER SECTION 143 S UB SECTION 3 R W S 147 OF INCOME TAX ACT WHICH IS PASSED AGAINST THE PRINCIPA L OF NATURAL JUSTICE. ITA NO.1141/M/18- MD. RIZWAN MOHD KALLAN KHAN 3 4. THE LD CIT(A) ERRED IN CONFIRMING AND REJECTING THE BOOKS OF ACCOUNTS UNDER SECTION 145(3) OF THE INCOME TAX ACT. 5. THE LD CIT(A) ERRED ENHANCING THE ADDITION AND A DDED THE ENTIRE GENUINE PURCHASES OF RS.2,91,36,808 AS UNACCOUNTED PURCHASE S/INVESTMENTS IN VIEW OF SECTION 69/69A AND THEREBY ERRED IN ADDING THE SAME TO THE TOTAL INCOME OF THE ASSESSEE AS AGAINST MADE BY THE LD AO AT RS.36.42.1 01/- BEING 12.5 PERCENT OF THE TOTAL PURCHASES OF RS.2,91,36,808/ - AS BOGUS N ON-GENUINE EXPENDITURE. 6. THE LD. CIT(A) ERRED IN CONFIRMING THE CHARGING OF INTEREST UNDER SECTION 234A, 234B AND 234C OF THE INCOME TAX ACT 1961. 7. THE LD. CIT(A) ERRED IN CONFIRMING THE INITIATIO N OF THE PENALTY PROCEEDING UNDER SECTION 274 R.W.S. 271(1)(C) OF THE INCOME TA X ACT 1961. 3. WE HAVE HEARD LD. AUTHORIZED REPRESENTATIVE (AR) OF THE ASSESSEE AND LD. DEPARTMENTAL REPRESENTATIVE (DR) FOR THE REVENUE AN D PERUSED THE MATERIAL AVAILABLE ON RECORD. GROUND NO.1 TO 3 RELATES TO VA LIDITY OF RE-OPENING UNDER SECTION 147 OF THE ACT. THE LD. AR OF THE ASSESSEE SUBMITS THAT IN ABSENCE OF FRESH MATERIAL AVAILABLE ON RECORD THE REOPENING IS INVALID. THE AO HAS NO FRESH AND TANGIBLE MATERIAL ON RECORD TO RE-OPEN TH E ASSESSMENT. THE ALLEGATION THAT PURCHASES WERE MADE BY ASSESSEE ARE BOGUS, IS MERELY ON THE BASIS OF LIST AVAILABLE AT WEBSITE OF VAT/SALES TAX DEPARTMENT, GOVERNMENT OF MAHARASHTRA. THE LIST OF SUSPICIOUS DEALER APP EARED ON THE WEBSITE OF THE SALES TAX DEPARTMENT, GOVERNMENT OF MAHARASHTRA IS NOT SUFFICIENT FOR MAKING BELIEF ABOUT THE NON-GENUINE PURCHASES OF TH E ASSESSEE. THE RE- OPENING OF THE ASSESSMENT CANNOT BE MADE WITH AN IN TENTION TO REVIEW THE ORDER. THE ASSESSEE HAS DISCLOSED ALL INFORMATION R ELATED WITH THE EXPENSES FOR RELEVANT FINANCIAL YEAR. THERE IS NO ALLEGATION IN THE REASONS RECORDED THAT THERE WAS ANY FAILURE ON THE PART OF ASSESSEE TO DISCLOSE THE PRIMARY MATERIAL FACT. THE AO MUST HAVE PERSONAL INFORMATIO N IN HIS POSSESSION. THE ITA NO.1141/M/18- MD. RIZWAN MOHD KALLAN KHAN 4 AO MUST FORM THE BELIEF AND MUST TOO IN THE CONSEQU ENCE OF INFORMATION. THE RELIANCE WAS MADE ON THE DECISION OF HONBLE SU PREME COURT IN THE CASE OF CIT VS. KELVINATOR OF INDIA [256 ITR 1] AND THE DECISION OF HONBLE DELHI HIGH COURT IN CIT VS. SFIL STOCK BROKING LTD. [325 ITR 285]. THE LD. AR OF THE ASSESSEE ALSO SUBMITS THAT NO PROPER OPPO RTUNITY WAS GIVEN BY AO. NO OPPORTUNITY OF CROSS-EXAMINATION WAS GIVEN D ESPITE MAKING REQUEST BEFORE THE AO. ON THE OTHER HAND, THE LD. DR FOR TH E REVENUE SUPPORTED THE ORDER OF AUTHORITIES BELOW. THE LD. DR FOR THE REVE NUE SUBMITS THAT THE AO WAS HAVING SUFFICIENT INFORMATION FOR THE REASON TO BELIEVE THAT INCOME IS ESCAPED ASSESSMENT. THE DGIT (INVESTIGATION) CAN IN FORM THE AO ABOUT THE BENEFICIARY, WHO WERE INVOLVED IN THE HAWALA TRANSA CTION. THE ASSESSEE WAS ONE OF THE BENEFICIARIES WHO HAVE AVAILED BENEFIT F ROM THE HAWALA DEALER. THE PURCHASES SHOWN BY ASSESSEE ARE NON-GENUINE PUR CHASES. IN SUPPORT OF HIS SUBMISSION, THE LD. DR FOR THE REVENUE RELIED U PON THE DECISION OF HONBLE SUPREME COURT IN CASE OF CIT V. RAJESH JHAV ERI STOCK BROKER (P.) LTD. [(2007) 161 TAXMAN 316/291 ITR 500)]. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF THE PAR TIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE AO MADE THE REOPE NING ON THE BASIS OF INFORMATION RECEIVED FROM DGIT (INVESTIGATION), MUM BAI THROUGH CIT(A)- 21, FORWARDING THE LIST OF PARTIES RECEIVED FROM TH E SALES TAX AUTHORITIES, GOVERNMENT OF MAHARASHTRA INVESTIGATED ABOUT THE PA RTIES WHO WERE INDULGED IN ISSUING BOGUS BILL WITHOUT MAKING ANY S ALES AND PURCHASE AND ITA NO.1141/M/18- MD. RIZWAN MOHD KALLAN KHAN 5 DELIVERY OF GOODS. THE ASSESSMENT WAS RE-OPENED WI THIN FOUR YEAR FROM THE END OF RELEVANT ASSESSMENT YEAR. ADMITTEDLY, THE AS SESSMENT WAS PROCESSED UNDER SECTION 143(1) OF THE ACT AND NO SCRUTINY ASS ESSMENT WAS UNDERTAKEN. HENCE, THERE IS NO OCCASION FOR REVIEW OF THE ASSES SMENT. THEREFORE, THERE IS NO OCCASION FOR CHANGE OF OPINION. IN OUR VIEW, THE CASE LAW RELIED BY LD. AR IN KELVINATOR OF INDIA LTD. (SUPRA) IS NOT APPLICAB LE. THE HONBLE APEX COURT IN CASE CIT VS. RAJESH JHAVERI (SUPRA) HELD T HAT INTIMATION UNDER SECTION 143(1) IS NOT ASSESSMENT AND THERE IS NO QU ESTION OF TREATING RE- ASSESSMENT IN SUCH A CASE AS BASED ON CHANGE OF OPI NION. IN THE CASE IN HAND, THE INFORMATION WAS RECEIVED FROM DGIT (INVES TIGATION) ABOUT THE HAWALA TRADER ENGAGED IN PROVIDING ACCOMMODATION BI LL OF SALES OR PURCHASE WITHOUT DELIVERY OF GOODS. THE INFORMATION IS SUFFI CIENT FOR REASON TO BELIEVE THAT INCOME ESCAPED FROM ASSESSMENT. THE HONBLE SUPREME COURT IN RAJESH JHAVERI STOCK BROKER (SUPRA) HELD THAT S ECTION 147 AUTHORIZED AND PERMITS THE ASSESSING OFFICER TO ASSESS OR REASSESS INCOME CHARGEABLE TO TAX IF HE HAS REASON TO BELIEVE THAT INCOME FOR ANY ASS ESSMENT YEAR HAS ESCAPED ASSESSMENT. THE WORD 'REASON' IN THE PHRASE 'REASON TO BELIEVE' WILL MEAN CAUSE OR JUSTIFICATION. IF THE ASSESSING OFFICER HA S CAUSE OR JUSTIFICATION TO KNOW OR SUPPOSE THAT INCOME HAS ESCAPED ASSESSMENT, IT CAN BE SAID TO HAVE 'REASON TO BELIEVE' THAT AN INCOME HAS ESCAPED ASSE SSMENT. THE SAID EXPRESSION CANNOT BE READ TO MEAN THAT THE ASSESSIN G OFFICER SHOULD HAVE FINALLY ASCERTAINED THE FACT BY LEGAL EVIDENCE OR C ONCLUSION. THE FUNCTION OF ITA NO.1141/M/18- MD. RIZWAN MOHD KALLAN KHAN 6 THE ASSESSING OFFICER IS TO ADMINISTER THE STATUTE WITH SOLICITUDE FOR THE PUBLIC EXCHEQUER WITH AN IN-BUILT IDEA OF FAIRNESS TO TAXPAYERS. THUS, IN OUR VIEW, THE RE-OPENING MADE BY ASSESSING OFFICER WAS BASED ON INFORMATION RECEIVED FROM DGIT (INVESTIGATION), WHICH IS SUFFIC IENT TO MAKE A REASON BELIEF THAT INCOME ESCAPED ASSESSMENT. HENCE, THE G ROUND OF APPEAL RAISED BY ASSESSEE HAS NO FORCE AND THE SAME ARE DISMISSED . 5. GROUND NO.4 RELATES TO REJECTING THE BOOKS OF ACCOU NT. THE LD. AR OF THE ASSESSEE HAS NOT ARGUED ANYTHING AGAINST THIS GROUN D OF APPEAL. THUS, THIS GROUND OF APPEAL IS TREATED AS NOT PRESSED AND DISM ISSED. 6. GROUND NO.5 RELATES TO ENHANCING THE ADDITION TO TH E EXTENT OF ENTIRE ALLEGED BOGUS PURCHASES. THE LD. AR OF THE ASSESSEE SUBMITS THAT ASSESSING OFFICER ADDED RS. 36,42,101/-, WHICH IS 12.5% OF TOTAL PURC HASES OF RS. 2,91,36,808/-, TO THE INCOME OF ASSESSEE. HOWEVER, THE LD. CIT(A) ADDED 100% OF THE ALLEGED BOGUS PURCHASES. DURING THE REL EVANT PERIOD, THE ASSESSEE MADE PURCHASES FROM 12 PARTIES AGGREGATING TO RS. 2,91,36,808/-. THE ASSESSEE FURNISHED ALL BILLS OF PURCHASES. ALL PAYMENTS WERE MADE THROUGH ACCOUNT PAYEE CHEQUE. ALL THE SUPPLIERS PRO VIDED ALL IDENTITY TO THEIR BANKERS FOLLOWING KNOW YOUR CLIENT (KYC) NO RMS. THE ASSESSEE HAS SHOWN STOCK REGISTER SHOWING THE QUANTITY IN THE ST OCK REGISTER. ALL THE SALES WERE ACCEPTED. WITHOUT PURCHASES SALES CANNOT BE TA KEN. ASSESSEES ACCOUNT IS DULY AUDITED. ALL PURCHASES BILL HAS SHOWN VAT A CCOUNT, WHICH IS DULY PAID BY ASSESSEE TO THE SUPPLIER. THERE IS NO EVIDE NCE OR ALLEGATION THAT CASH ITA NO.1141/M/18- MD. RIZWAN MOHD KALLAN KHAN 7 WAS RECEIVED BY ASSESSEE. THE ALLEGATION THAT ASSES SEE INFLATED THE PROFIT THROUGH PURCHASES. IF THE ALLEGATION OF ASSESSING O FFICER THAT ASSESSEE INFLATED THE PURCHASES, THE GROSS PROFIT (GP) WILL LEAD TO UNEXPECTED GP WHICH IS UNPRACTICAL. THE ASSESSING OFFICER MERELY RELIED UPON THE INFORMATION OF SALES TAX DEPARTMENT. THE ASSESSEE P URCHASES GOODS AND NON- COMPLIANCE BY SUPPLIER CANNOT IMPOSE HARDSHIP ON TH E ASSESSEE. THE LD. AR OF THE ASSESSEE SUBMITS THE ENTIRE ADDITIONS ARE LI ABLE TO BE DELETED. IN SUPPORT OF HIS SUBMISSION, THE LD. AR OF THE ASSESS EE MADE THE FOLLOWING RELIANCE ON VARIOUS POINTS: SR. NO. OBSERVATION CASE DETAILS 1 SUSPICIOUS CANNOT TAKE PLACE THE EVIDENCE DCIT V. SHRI RAJEEV G. KALATHIL, (MUM) (TRIB) (ITA NO. 6727/M/2012 DT.20/8/2014 K.P. VARGHESE V. ITO, (1981) 131 ITR 579 (SC); CIT V. ROMAN & CO., (1968) : 67 ITR 11 (SC); CIT V. CALCUTTA DISCOUNT CO. LTD.', (1973) 91 ITR 8 (SC); UMACHARAN SHAW & BROS V. CIT', (1959) 37 ITR 271 (SC) 2 OBSERVATION OF THIRD PARTY CANNOT BE BASIS OF ADDITION. SATISFACTION OF AO IS MUST: ITO V/S PERMANAND [2008 25 SOT 11] ITO V. VINOD KUMAR, PROP., VINOD BROTHERS, SRIGANGANAGAR, [ITA NO. 623/JODH. OF 2005 ITO V/S ARORA ALLOYS LTD. [2012] [12 ITR (TRIB) 263] 3 TERM SUSPICIOUS AS M-VAT WAS NOT PAID, BY COLLECTING THE M-VAT SALES TAX DEPARTMENT ACKNOWLEDGE THAT PURCHASES ARE GENUINE: BALAJI TEXTILE INDUSTRIES P LTD. V/S ITO 49 ITD( 177 (BORN) 4 WHEN QUANTITY TALLIED, NO BALAJI TEXTILE INDUSTRIES (P) LTD V. ITA NO.1141/M/18- MD. RIZWAN MOHD KALLAN KHAN 8 ADDITION CAN BE MADE: ITO (1994) 49 ITD 177 (BOM) DCIT V. ADINATH INDUSTIRES (2001) : 252 ITR 476 (GUJ) CIT V. M K BROTHERS (1987) : 163 ITR 249 (GUJ) DCIT V. ADINATH INDUSTRIES (2001) : 247 ITR 35 DY.CIT V. BRAHMAPUTRA STEELS (P) LTD. [2002] 122 TAXMAN 32 (ITAT GAUHATI)]- 5 PURCHASE PARTY NOT FOUND BUT THE SALES AGAINST THE PURCHASE IS ACCEPTED. THEN THE ADDITION CANNOT BE MADE:- RAJESH P SONI V/S ACIT 100 ITJ 892 (AHD) CIT V/S NIKUNJ EXIMP ENTERPRISES (P.) LTD. * [2013] 35 TAXMANN.COM 384 (BOMBAY HC) 6 ADDITION CANNOT BE MADE WITHOUT EVIDENCE: ITO V / S PERMANAND [2008 25 SOT 11] CIT V /S M K BROS. [163 ITR 249] CIT V. KASHIRAM TEXTILE MILLS P LTD. [2006] 284 ITR 61 (GUJ) SARASWATHI OIL TRADERS V. CIT [2000] 254 ITR 259 (SC)174 CTR 108 (SC) 7 AO RELIED ON THIRD PARTY INFORMATION WITHOUT CROSS- EXAMINATION. HENCE, CAN'T BE RELIED: KISHAN CHAND CHELLA RAM V. CIT [1980] 125 ITR 713 (SC) MARNEEDI SATYAM V/S MASIMUKKULA VENKATASWAMI [AIR 1949 MAD 689] ITO V/S PERMANAND [2008 25 SOT 11] 8 AO FAILED TO DISCHARGE HIS DUTY TO PROVE THE TRANSACTION AS BOGUS: ITO V/S PERMANAND [2008 25 SOT 11] DCIT V. SHRI RAJEEV G. KALATHIL, (MUM) (TRIB) (ITA NO. 6727/M/2012 DT.20/8/2014. 9 PAYMENTS WERE MADE BY ACCOUNT PAYEE CHEQUES. THIS FACT WOULD OVER SHADOW ALL OTHER SHORT COMING. MATHER & PLATT (INDIA) LTD. VS CIT 168 ITR 493 CAL ITO V / S KASHMIR IND. PALACE 99 TAXMANN (CHD) (MAG) RAMANANDSAGAR V/S DCIT 256 ITR 134 (BOM) CIT-I V. NANGALIA FABRICS (P.) LTD. [2013] 40 TAXMANN.COM 206(GUJARAT) CIT V. KORLAY TRADING CO. LTD. [1998] 232 ITR 820 (CAL) CIT V /S BASANT INVESTMENT CORPORATION (1999) 238 ITR 680 ITA NO.1141/M/18- MD. RIZWAN MOHD KALLAN KHAN 9 (CAL). 10 TRANSACTION DULY SUPPORTED BY THE EVIDENCE, NO EVIDENCE THAT CASH RECEIVED BACK. ADDITION CANNOT BE MADE: CIT V/S M K BROS. [163 ITR 249] ITO V/S KANCHANWALA GEMS 122 TTJ 854 11 NO DEFECTS IN BOOKS OF ACCOUNT FOUND BY THE AO. HENCE, THE ADDITION CANNOT BE MADE ON MERE STATEMENT BASIS: R K SYNTHETICS V/S ITO 81 TTJ 909 12 IDENTITY, SOURCE OF PAYMENT EXPLAINED, BANK PAYMENT, BOOKS OF ACCOUNT ACCEPTED, THEN ADDITION OF BOOK ENTRIES CANNOT BE TAKE PLACE: BABULAL C BORANA V /S ITO [282 ITR 251] 13 ISSUE IS ALSO DECIDED BY THE HON'BLE JURISDICTIONAL TRIBUNAL IN CASE OF GANPATRAJ SANGHI : SHRI GANPATRAJ A SANGHAVI V/S ACIT I.T.A. NO.2826/MUM/2013 14 WITHOUT PREJUDICE TO ABOVE: CREDIT OF BOGUS PURCHASE WILL BE ALLOWED IF THE SAME IS SOLD OR LYING IN STOCK: FREE INDIA ASSURANCE SERVICES LTD. V/S DCIT [2011) 12 TAXMANN.COM 424 (MUM) 15 BOGUS PURCHASES: FACT THAT LIST OF HAWALA DEALERS OF THE SALES- TAX DEPT AND THAT ASSESSEE IS UNABLE TO PRODUCE THEM DOES NOT MEAN THAT THE PURCHASES ARE BOGUS IF THE PAYMENT IS THROUGH BANKING CHANNELS & GP RATIO BECOME ABNORMALLY HIGH. ASSTT. CIT V/S SHRI RAMILAPRAVIN SHAH SUPPLIERS NAMES APPEAR IN THE ITA NO.5246/MUM/2013 7. ON THE OTHER HAND, THE LD. DR FOR THE REVENUE SUPPO RTED THE ORDERS OF AUTHORITIES BELOW. THE LD. DR FOR THE REVENUE ARGUE D THAT THE INVESTIGATION WING OF THE INCOME-TAX DEPARTMENT MADE FULL-FLEDGED ENQUIRY. THE PARTIES FROM WHOM THE ASSESSEE HAS SHOWN THE PURCHASES ARE BOGUS HAWALA DEALERS. THE HAWALA DEALERS ARE INDULGED IN ISSUING BOGUS BI LLS WITHOUT DELIVERY OF ANY MATERIAL OR GOODS. THE ASSESSEE OBTAINED ACCOMM ODATION BILLS ONLY IN ITA NO.1141/M/18- MD. RIZWAN MOHD KALLAN KHAN 10 ORDER TO INFLATE THE EXPENSES AND TO BRING DOWN THE PROFITABILITY IN ORDER TO AVOID THE TAX. THE LD. DR FOR THE REVENUE PRAYED FO R DISMISSAL OF THE APPEAL. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSION OF THE PART IES AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THE ASSESS ING OFFICER WHILE MAKING RE-OPENING NOTED THAT ASSESSEE IS ONE OF THE PERSON WHO HAS OBTAINED BOGUS BILL OF RS. 35,34,415/- DURING THE YEAR UNDER CONSI DERATION. DURING THE RE- ASSESSMENT PROCEEDING, THE ASSESSEE FURNISHED DETAI LS OF PURCHASES MADE FROM 12 PARTIES. THE ASSESSEE HAS SHOWN THE PURCHAS ES OF RS.2,91,36,808/-. THE ASSESSEE WAS ASKED TO SHOW CAUSE AS TO WHY THE AMOUNT OF RS. 2,91,36,808/- BE DISALLOWED FOR THE WANT OF VERIFIC ATION. THE ASSESSEE SUBMITS THE COPY OF BILLS, LEDGER AND BANK STATEMEN T. THE ASSESSING OFFICER EXAMINED THE DETAILS FURNISHED BY ASSESSEE AND OBSE RVED THAT THE PURCHASED QUANTITY OF MATERIAL IS SHOWN IN THE CORRESPONDING SALE. THE ASSESSEE COULD NOT PROVE THE GENUINENESS OF BILL. THE ASSESSING OF FICER FURTHER RECORDED THAT ASSESSEE FAILED TO PRODUCE THE PARTIES, RECEIP T OF MATERIAL IS NOT IN DOUBT. HOWEVER, THE SOURCE OF MATERIAL RECEIVED BY ASSESSE E IS IN DOUBT. ON THE BASIS OF HIS OBSERVATION, THE ASSESSING OFFICER CON CLUDED THAT THE ASSESSEE HAS INFLATED THE PURCHASES BY BOOKING THE ABOVE PUR CHASED BILL AND ON THE BASIS OF DECISION OF HONBLE GUJARAT HIGH COURT IN CASE OF BHOLANATH POLY FAB P. LTD. VS ITO, THE ASSESSING OFFICER DISALLOWE D 12.5% OF THE ALLEGED BOGUS PURCHASES. BEING AGGRIEVED, THE ASSESSEE FILE D APPEAL BEFORE THE LD. CIT(A), THE LD. CIT(A) UPHELD THE VALIDITY OF THE R E-OPENING, HOWEVER, WHILE ITA NO.1141/M/18- MD. RIZWAN MOHD KALLAN KHAN 11 CONSIDERING THE MERIT OF THE ADDITION/DISALLOWANCE MADE BY ASSESSING OFFICER ON ACCOUNT OF BOGUS PURCHASES. THE LD. CIT( A) OBSERVED THAT LEDGER ACCOUNT AND THE BANK ACCOUNT, STATEMENT MAINTAINED BY THE ASSESSEE AT BMC BANK DOES NOT MATCH WITH THE NAME OF THE PARTIES ME NTIONED IN THE STATEMENT OF BANK ACCOUNT. FURTHER, PRIOR TO THE PA YMENT MADE THERE HAS BEEN DEPOSIT OF CASH IN THE BANK, THE VERACITY AND AUTHENTICITY OF WHICH COULD NOT BE PROVED BY THE ASSESSEE DESPITE OFFERIN G OPPORTUNITY, THEREFORE, A NOTICE OF ENHANCEMENT DATED 23.08.2017 WAS ISSUED T O THE ASSESSEE AS TO WHY ENTIRE ALLEGED PURCHASES MAY NOT BE CONSIDERED AS A BOGUS. THE LD. CIT(A) RECORDED THAT THE ASSESSEE FAILED TO REPRESE NT HIS CASE AND NOT MADE THE COMPLIANCE OF STATUTORY NOTICE. THE LD. CIT(A) ON HIS OBSERVATION THAT NO CONCRETE EVIDENCE IS PRODUCED BY THE ASSESSEE TO PR OVE THE DELIVERY OF GOODS THROUGH INDEPENDENT AGENCY OF THE PURCHASES AND THA T THE CASH DEPOSIT, BANK ACCOUNT OF THE ASSESSEE PRIOR TO THE PAYMENT. THE L D. CIT(A) DISALLOWED THE ENTIRE CLAIM OF PURCHASES. WE HAVE NOTED THAT THE A SSESSING OFFICER AS WELL AS THE LD. CIT(A) HAS NOT DISPUTED THE SALE OF THE MATERIAL. THE OBSERVATION OF LD. CIT(A) THAT THERE IS CASH DEPOSIT IN THE BAN K OF ASSESSEE. IN OUR VIEW, THE DEPOSIT OF CASH IS A NORMAL ROUTINE IN THE COUR SE OF BUSINESS. UNLESS THERE IS ALLEGATION OR MATERIAL ON RECORD TO PROVE THAT M ONEY WAS CAME BACK TO THE ASSESSEE. THE TRANSACTION THROUGH BANKING CHANNEL C ANNOT BE DISCARDED. THE LD. CIT(A) HAS NOT BRING ANYTHING ON RECORD TO PROV E THAT CASH WAS RETURNED BACK TO THE ASSESSEE. THE SALES ARE NOT POSSIBLE IN ABSENCE OF PURCHASES. THE ITA NO.1141/M/18- MD. RIZWAN MOHD KALLAN KHAN 12 LD. AR OF THE ASSESSEE HAS RELIED ON A NUMBER OF DE CISIONS WITH REGARD TO HIS CONTENTIONS THAT SUSPICIOUS CANNOT TAKE PLACE THE E VIDENCE OR SUBSTITUTES THE EVIDENCE WHEN QUALITY TALLIED NO ADDITION CAN BE MA DE, ADDITION CANNOT BE MADE WITHOUT EVIDENCE, INFORMATION OF THIRD PARTY C ANNOT BE THE BASIS OF ADMISSION OR ADDITION CANNOT BE WITHOUT ANY EVIDENC E ETC. IN OUR VIEW, IN CASE RELATED TO THE BOGUS PURCHASES, THE PRINCIPLE ENUNCIATED IN VARIOUS LAW RELIED BY LD. AR CANNOT BE RELY IN A STRAIGHT JACKE T FORMULA. EACH AND EVERY CASE DEPENDS UPON PARTICULAR SET OF FACTS. 9. AS WE HAVE ALREADY NOTED THAT WHILE MAKING RE-OPENI NG, THE ASSESSING OFFICER HAS NOTED THAT THE ASSESSEE OBTAINED A BOGU S BILL OF RS.35,34,415/-. HOWEVER, THE ADDITION WAS MADE TO THE EXTENT OF 12. 50% OF THE ALLEGED BOGUS PURCHASES SHOWN BY ASSESSEE. THE LD. CIT(A) I SSUED THE NOTICE OF ENHANCEMENT ON THE BASIS OF HIS OBSERVATION THAT TH E AMOUNT PAID TO THE DEALERS AS MENTIONED IN THE LEDGER ACCOUNT DOES NOT MATCH WITH THE PARTIES MENTIONED IN THE STATEMENT OF THE BANK ACCOUNT AND THAT THERE IS CASH DEPOSIT IN THE BANK. THE LD. CIT(A) HAS NOT SPECIFIED AS TO WHICH NAME IS NOT MATCH WITH THE LEDGER ACCOUNT OR THAT HOW MUCH CASH DEPOS IT WAS MADE BEFORE THE PAYMENT THROUGH BANKING TRANSACTION. THE LD. CIT(A) HAS NOT BROUGHT ON RECORD ANY SPECIFIC INFORMATION OR NAME OF THE PART IES WHICH IS NOT TALLY WITH THE LEDGER ACCOUNT AND THE BANK STATEMENT. IN OUR V IEW, THE OBSERVATION OF LD. CIT(A) WITHOUT BRINGING ANY MATERIAL ON RECORD IS NOT SUSTAINABLE. HOWEVER, WE ARE OF THE CONSIDERED VIEW THAT UNDER T HE INCOME-TAX ACT ONLY ITA NO.1141/M/18- MD. RIZWAN MOHD KALLAN KHAN 13 REAL INCOME CAN BE TAXED BY THE REVENUE. EVEN IF TH E TRANSACTION IS NOT VERIFIABLE, DUE TO ANY REASON, THE ONLY TAXABLE IS THE TAXABLE INCOME COMPONENT AND NOT THE ENTIRE TRANSACTION. AFTER CON SIDERING THE SUBMISSION OF THE PARTIES AND PECULIARITY OF THE FACT, WE ARE OF THE OPINION THAT IN ORDER TO FULFILL THE GAP OF REVENUE LEAKAGE, THE DISALLOW ANCE OF REASONABLE PERCENTAGE OF THE ALLEGED BOGUS PURCHASES WOULD MEE T THE END OF JUSTICE. CONSIDERING THE TOTALITY OF THE FACT ON ACCOUNT OF BOGUS PURCHASES IS RESTRICTED TO 12.5% OF ALLEGED PURCHASES OF RS. 2,9 1,36,808/-. SIMILAR VIEW WAS TAKEN BY THE HONBLE BOMBAY HIGH COURT IN CASE OF CIT VS. HARIRAM BHAMBHANI IN ITA NO. 313 OF 2013 DATED 04.02.2015. IN VIEW OF THE ABOVE DISCUSSION, THE GROUND OF APPEAL RAISED BY ASSESSEE IS PARTLY ALLOWED. 10. GROUND NO. 6 & 7 IS CONSEQUENTIAL; GROUND NO.8 IS G ENERAL, WHICH NEEDS NO SPECIFIC ADJUDICATION. 11. IN THE RESULT, APPEAL FILED BY ASSESSEE IS PARTLY A LLOWED. ORDER PRONOUNCED IN THE O PEN COURT ON 31.05.2018. SD/- SD/- G.S. PANNU PAWAN SINGH ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATE: 31.05.2018 SK COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. DR A BENCH, ITAT, MUMBAI 6. GUARD FILE BY ORDER, DY./ASST. REGISTRAR ITAT, MUMBAI