DCIT 6 (2)(1), Mumbai V. M/S DELLA TECHNICA INTERIOR DESIGN PVT. LTD , Mumbai

ITA 1217/MUM/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 8395 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-06-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2010-2011
• Appeal Filed On: 05-03-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SAMATHA MULLAMUDI
• Assessee Lawyers: FORUM MEHTA
• Keywords: Bogus purchase; Accommodation entries; Tax effect; Set aside
• Section: 143(3); 133(6); 22; 147; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D, BENCH MUM BAI BEFORE HONBLE SHRI MAHAVIR SINGH, VICE PRESIDENT & HON BLE SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ITA NO.1217/MUM/2019 ( ASSESSMENT YEAR: 2010-11 ) DCIT-6(2)(1) ROOM NO.504 AAYKAR BHAWAN M.K.ROAD MUMBAI-400 020 VS. M/S DELLA TECHNICA INTERIOR DESIGN PVT.LTD RATI VILLA, GROUND FLOOR MOTIBAL STREET OPP. BHATIA HOSPITAL TARDEO, SION(W) MUMBAI-400 007 PAN/GIR NO. AA BCD2765K ( APPELLANT ) .. RESPONDENT ) ASSESSEE BY SHRI FORUM MEHTA, AR REVENUE BY MS. SAMATHA MULLAMUDI, CIT-DR DATE OF HEARING 22/06 /2020 DATE OF PRONOUNCEME NT 22 / 0 6 /20 20 / O R D E R PER G. MANJUNATHA (A.M.) : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEAL S)- 12, MUMBAI, DATED 31/12/2018 AND IT PERTAINS TO AY 2010-11. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT (A) HAS ERRED IN DIRECTING THE ASSESSING OFFICER TO DISALLOW 8% OF THE BOGUS PURCHASES RATHER THAN THE WHOLE OF SUCH PURCH ASES AMOUNTING TO RS.12,10,033/-'. 2. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, LD.CIT(A) HAS ERRED IN DIRECTING THE ASSESSING OFFICER TO DIS ALLOW 8% OF THE BOGUS PURCHASES RATHER THAN THE WHOLE OF SUCH PURCHASES W ITHOUT APPRECIATING THAT SUCH ALLOWANCE OF 92% OF EXPENDITURE IMPLY ALL OWANCE OF PURCHASES MADE IN CASH FROM THE 'GREY' MARKET, THEREBY RENDER ING THE PROVISIONS OF ITA.NO.1217/MUM/2019 DELLA TECHNICA INTRIOR DESIGN PVT.LTD. 2 SECTION 40(A)(3) OF THE INCOME TAX ACT, 1961 TOTALL Y REDUNDANT WHICH COULD NOT HAVE BEEN THE INTENTION OF THE STATUTE,' 3. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, LD.CIT(A) HAS ERRED IN FAILING TO ABIDE BY THE LANDMARK DECIS ION OF HON'BLE SUPREME COURT IN THE CASE OF N.K.PROTEINS LTD DID 16/01/201 7 WHEREIN THE HON'BLE SUPREME COURT HAS CONFIRMED THE ADDITION OF 100% OF THE BOGUS PURCHASES'. 4. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, LD.CIT(A) HAS ERRED IN DELETING THE QUANTUM ADDITION TO THE E XTENT OF RS.11,13,230/- MADE BY THE AO ON ACCOUNT OF BOGUS BILL PURCHASES F ROM ONE PARTY VIZ., AMAR ENTERPRISES BY NOT APPRECIATING THAT THE ASSES SES HAS NOT ESTABLISHED THE GENUINENESS OF TRANSACTION WITH THE PARTY AS IT FAILED TO PRODUCE THE PARTY AND TO FURNISH THE CONFIRMATION OF TRANSACTION WITH SAID PARTY/TRANSPORTATION DETAILS.' 5. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, LD.CIT(A) HAS ERRED IN RESTRICTING THE QUANTUM ADDITION IGNOR ING THAT THE INFORMATION ON ACCOUNT OF BOGUS PURCHASES IS RECEIVED FROM THE EXT ERNAL AGENCY THAT THE ASSESSEE HAD RECEIVED ACCOMMODATION ENTRY FROM SUCH PARTY.' 6. THOUGH THE TAX EFFECT IN THIS CASE IS RS.3,78 ,386/-, HOWEVER THIS APPEAL HAS BEEN FILED BECAUSE IT IS COVERED BY EXCEPTION M ENTIONED IN PARA 10{E) OF THE CBDT CIRCULAR NO. 3/2018 DT 11-7-2018 AS SUBSEQ UENTLY CLARIFIED BY BOARD LETTER DID 20/08/2018 VIDE NO. 279/MISC./142/ 2007-ITJ(PT.). 7. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT (APPEALS) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE AO BE RESTORED . 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS ENGAGED IN THE BUSINESS OF INTERIOR DECORATORS AND REAL ESTATE DEVELOPERS, FILED ITS RETURN OF INCOME FOR AY 2010-11 ON 14/11/2010, DECLARING TOTAL INCOME AT RS. 2,95,68,020/-. THE ASSESSMENT HAS BEE N COMPLETED U/S 143(3) OF THE ACT, ON 15/03/2013 AND ACCEPTED R ETURNED INCOME. THE CASE HAS BEEN, SUBSEQUENTLY REOPENED U/S 147 OF THE ACT, ON THE BASIS OF INFORMATION RECEIVED FROM DGIT, INVEST IGATION, MUMBAI, AS PER WHICH, SALES TAX AUTHORITIES OF GOVERNMENT O F MAHARASHTRA HAD TAKEN ACTIONS AGAINST NUMBER OF HAWALA DEALERS , WHO HAD ISSUED BOGUS PURCHASE BILLS TO VARIOUS PARTIES IN M UMBAI AND OTHER PLACES. AS PER LIST OF BENEFICIARIES, THE ASSESSEE IS ONE OF THE BENEFICIARY, WHO HAD TAKEN ACCOMMODATION BILLS OF B OGUS PURCHASES ITA.NO.1217/MUM/2019 DELLA TECHNICA INTRIOR DESIGN PVT.LTD. 3 FROM VARIOUS PARTIES AS LISTED BY THE AO IN PARA. 5.1 OF HIS ASSESSMENT ORDER AMOUNTING TO RS. 12,10,033/-. THE CASE WAS SELECTED FOR SCRUTINY AND THE ASSESSMENT HAS BEEN C OMPLETED U/S. 143(3).R.W.S. 147 OF THE I.T.ACT, 1961 ON 08/03/201 6 AND DETERMINED TOTAL INCOME OF RS. 3,07,78,053/-, AFTER MAKING 100 % ADDITION ON ALLEGED BOGUS PURCHASE FROM THOSE PARTIES AMOUNTING TO RS. 12,10,033/-. 4. BEING AGGRIEVED BY THE ASSESSMENT ORDER, THE ASS ESEE PREFERRED AN APPEAL BEFORE THE LD.CIT(A). BEFORE TH E LD.CIT(A), THE ASSESSEE HAS REITRATED ITS SUBMISSION MADE BEFORE T HE LD. AO. THE SUM AND SUBSTANCE OF ARGUMENTS OF THE ASSESSEE BEFO RE THE LD.CIT(A) ARE THAT PURCHASE FROM THE ABOVE PARTY IS GENUINE, WHICH IS SUPPORTED BY NECESSARY EVIDENCES. THEREFORE, NO ADDITIONS COULD BE MADE ON THE BASIS OF INFORMATION RECEIVED FROM T HIRD PARTY. THE LD.CIT(A), AFTER CONSIDERING RELEVANT SUBMISSION OF THE ASSESSEE AND ALSO, BY FOLLOWING THE DECISION OF HONBLE GUJA RAT HIGH COURT, IN THE CASE OF CIT VS. SIMITH P. SHETH (356 ITR 451) A ND ITAT, MUMBAI ORDER IN CASE OF ASSESSEE FOR AY 2009-10, HAS SCAL ED DOWN ADDITION MADE BY THE LD. AO TO 8% PROFIT ON ALLEGED TOTAL BO GUS PURCHASES FROM THOSE PARTIES. 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH ORDERS OF THE AUTHORITIES BELOW ALONG WITH CASE LAWS CITED BY BOTH PARTIES. AS REGA RDS, ADDITION MADE BY THE LD. AO TOWARDS ALLEGED BOGUS PURCHASES, WE FIND THAT THE LD. AO HAS MADE 100% ADDITION ON ALLEGED BOGUS PURCHASES ON THE GROUND THAT THE ASSESSEE IS ONE OF THE BENEFICI ARY OF ACCOMMODATION ENTRIES OF BOGUS PURCHASE BILLS ISSUE D BY HAWALA ITA.NO.1217/MUM/2019 DELLA TECHNICA INTRIOR DESIGN PVT.LTD. 4 DEALERS. ACCORDING TO THE LD. AO, ALTHOUGH ASSESEE HAS FILED CERTAIN BASIC EVIDENCES, BUT FAILED TO FILE FURTHER EVIDENC E IN THE BACKDROP OF CLEAR FINDING BY THE SALES TAX DEPARTMENT, MAHARASH TRA THAT THOSE PARTIES ARE INVOLVED IN PROVIDING ACCOMMODATION ENT RIES WITHOUT ACTUAL DELIVERY OF GOODS. THE LD. AO HAD ALSO TAKEN SUPPORT FROM THE INVESTIGATION CONDUCTED DURING THE COURSE OF AS SESSMENT PROCEEDINGS, AS PER WHICH NOTICE ISSUED U/S 133(6) TO THE PARTIES WERE RETURNED UN-SERVED BY THE POSTAL AUTHORITIES. THEREFORE, HE CAME TO THE CONCLUSION THAT PURCHASES FROM THE SAID PARTIES ARE BOGUS IN NATURE. IT IS THE CONTENTIONS OF THE ASSES SEE BEFORE THE LOWER AUTHORITIES THAT PURCHASES FROM THE ABOVE PAR TY ARE SUPPORTED BY NECESSARY EVIDENCES. IT HAS FURNISHED ALL POSSIB LE EVIDENCES, INCLUDING BOOKS OF ACCOUNTS; STOCK DETAILS AND BANK STATEMENT TO PROVE THAT PAYMENT AGAINST SAID PURCHASES HAVE BEEN MADE THROUGH PROPER BANKING CHANNELS. 6. HAVING CONSIDERED ARGUMENTS OF BOTH PARTIES AND ALSO, CONSIDERING MATERIAL AVAILABLE ON RECORD, WE FIND T HAT BOTH THE SIDES HAVE FAILED TO PROVE THE CASE IN THEIR FAVOUR WITH NECESSARY EVIDENCES. ALTHOUGH, ASSESSEE HAS FILED CERTAIN BAS IC EVIDENCES, BUT FAILED TO FILE FURTHER EVIDENCES TO CONCLUSIVELY PR OVE PURCHASES TO THE SATISFACTIONS OF THE LD.AO. FURTHER, MERE PAYMENT B Y CHEQUE DOES NOT PROVE THE GENUINENESS OF PURCHASE, MORE PARTICU LARLY WHEN OTHER CIRCUMSTANTIAL EVIDENCE SAYS OTHERWISE. AT THE SAME TIME, THE LD. AO HAD ALSO FAILED TO TAKE THE INVESTIGATION TO A L OGICAL CONCLUSION BY CARRYING OUT NECESSARY ENQUIRES, BUT HE SOLELY RELI ED UPON INFORMATION RECEIVED FROM INVESTIGATION WING, WHICH WAS FURTHER SUPPORTED BY INFORMATION RECEIVED FROM MAHARASHTRA SALES TAX DEPARTMENT. THE AO NEITHER POINTED OUT ANY DISCREPA NCIES IN BOOKS ITA.NO.1217/MUM/2019 DELLA TECHNICA INTRIOR DESIGN PVT.LTD. 5 OF ACCOUNTS NOR MADE OUT A CASE OF SALES OUTSIDE BO OKS OF ACCOUNTS. IN FACT, THE AO DID NOT DISPUTED SALES DECLARED FOR THE YEAR. UNDER THESE CIRCUMSTANCES, IT IS DIFFICULT FOR US TO ACCE PT ARGUMENTS OF BOTH THE SIDES. FURTHER, IN A CASE WHERE PURCHASES ARE C ONSIDERED TO BE PURCHASED FROM SUSPICIOUS/HAWALA DEALERS, VARIOUS H IGH COURTS AND TRIBUNALS HAD CONSIDERED AN IDENTICAL ISSUE IN LIGH T OF INVESTIGATION CARRIED OUT BY THE SALES TAX DEPARTMENT AND HELD TH AT IN CASE OF PURCHASES CLAIMS TO HAVE MADE FROM ALLEGED HAWALA D EALERS, ONLY PROFIT ELEMENT EMBEDDED IN THOSE PURCHASES NEEDS TO BE TAXED, BUT NOT TOTAL PURCHASE FROM THOSE PARTIES. THE HONBLE GUJARAT HIGH COURT, IN THE CASE OF CIT VS SIMITH P.SHETH 356 ITR 451 HAD CONSIDERED A SIMILAR ISSUE AND HELD THAT AT THE TIM E OF ESTIMATION OF PROFIT FROM ALLEGED BOGUS PURCHASES NO UNIFORM YARD STICKS COULD BE ADOPTED, BUT IT DEPENDS UPON FACTS OF EACH CASE. TH E ITAT, MUMBAI, IN NUMBER OF CASES HAD CONSIDERED AN IDENTICAL ISSU E AND DEPENDING UPON FACTS OF EACH CASE, DIRECTED THE LD.AO TO ESTI MATE GROSS PROFIT OF 10% TO 15% ON TOTAL ALLEGED BOGUS PURCHASES. IN THIS CASE, CONSIDERING THE NATURE OF BUSINESS OF THE ASSESSEE THE LD. AO HAS MADE 100% ADDITION, WHEREAS THE LD. CIT(A) HAS SCAL ED DOWN ADDITION TO 8% PROFIT ON ALLEGED BOGUS PURCHASES. A LTHOUGH, BOTH AUTHORITIES HAVE TAKEN DIFFERENT RATE OF PROFIT FOR ESTIMATION OF INCOME FROM ALLEGED BOGUS PURCHASE, BUT NO ONE COULD SUPPO RT SAID RATE OF GROSS PROFIT WITH NECESSARY EVIDENCES OR ANY COMPAR ABLE CASES. THEREFORE, CONSIDERING THE FACTS AND CIRCUMSTANCES OF THIS CASE AND CONSISTENT WITH VIEW TAKEN BY THE CO-ORDINATE BENCH IN NUMBER OF CASES, INCLUDING IN ASSESSEE OWN CASE FOR AY 2009-1 0, WE ARE OF THE CONSIDERED OPINION THAT 8% RATE OF PROFIT ADOPT ED BY THE LD. CIT(A) APPEARS TO BE REASONABLE AND ACCORDINGLY, WE ARE INCLINED TO ITA.NO.1217/MUM/2019 DELLA TECHNICA INTRIOR DESIGN PVT.LTD. 6 UPHOLD THE FINDINGS OF THE LD. CIT(A) AND DISMISS A PPEAL FILED BY THE REVENUE. 7. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DI SMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS: 22 / 06/2020 SD/- (MAHAVIR SINGH) SD/- (G. MANJUNATHA) VICE PRESIDENT ACCOUNTANT MEMBER MUMBAI ; DATED: 22/06/2020 COPY OF THE ORDER FORWARDED TO : BY ORDER, (ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//