VINOD H. SANGHVI, MUMBAI V. DCIT 15(2)(OLD), MUMBAI

ITA 125/MUM/2016

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 8939 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-10-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2009-2010
• Appeal Filed On: 08-01-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Bogus purchase; Peak credit; Accommodation entries
• Section: 69C; 143(3); 133(6); 147

Judgement Text

VINOD H SANGHVI VS. ACIT - ITA NO. 125 TO 127/MUM/2016 ACIT VS. VINOD H. SANGHVI ITA NO. 121 - 123/MUM/2016 1 A.YS. 2009 - 10 TO 2011 - 12 IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUMBAI BEFORE SHRI B.R. BASKARAN , AM AND SHRI RAVISH SOOD, JM ./ I.T.A. NO S. 125 TO 127/MUM/2016 ( / ASSESSMENT YEARS : 20 09 - 10, 2010 - 11 & 2011 - 12 ) VINOD H. SANGHVI, 297, TARDEO, 1 ST FLOOR, WILLIE MANSION; OPP. BANK OF INDIA MUMBAI - 400 007 / VS. DCIT - 15(2) (OLD), ACIT 19(3) (PRESENT) 2 ND FLOOR, MATRU MANDIR, TARDEO ROAD, MUMBAI - 400 007 ./ ./ PAN/GIR NO. AFMPS3101F ( / APPELLANT ) : ( / RESPONDENT ) ./ I.T.A. NO S.121 TO 12 3 /MUM/2016 ( / ASSESSMENT YEAR S: 2009 - 10, 2010 - 11 & 2011 - 12 ) DCIT - 15(2) (OLD), ACIT 19(3) (PRESENT) 2 ND FLOOR, MATRU MANDIR, TARDEO ROAD, MUMBAI - 400 007. / VS. VINOD H. SANGHVI, 297, TARDEO, 1 ST FLOOR, WILLIE MANSION; OPP. BANK OF INDIA MUMBAI - 400 007 ./ ./ PAN/GIR NO. AFMPS3101F ( / APPELLANT ) : ( / RESPONDENT ) / ASSESSEE BY : SHRI. RAJ KUMAR SINGH / REVENUE BY : MS. POOJA SWAROOP VINOD H SANGHVI VS. ACIT - ITA NO. 125 TO 127/MUM/2016 ACIT VS. VINOD H. SANGHVI ITA NO. 121 - 123/MUM/2016 2 A.YS. 2009 - 10 TO 2011 - 12 / DATE OF HEARING : 25.10 .2017 / DATE OF PRONOUNCEMENT : 27 .10.2017 / O R D E R PER RAVISH SOOD, JUDICIAL MEMBER : THE PRESENT SET OF CROSS APPEALS FILED BY THE ASSESSEE AND THE REVENUE ARE DIRECTED AGAINST THE CONSOLIDATE ORDER PASSED BY THE CIT(A) - 30, MUMBAI, IN THE CASE OF THE AFOREMENTIONED ASSESSEE, VIZ. VINOD H. SANGHVI FOR A.Y. 2009 - 10, 2010 - 11 AND A.Y. 2011 - 12, EACH DATED. 15.10.2015, WHICH IN ITSELF ARISES FROM THE RESPECTIVE ASSESSMENT ORDERS PASSED UNDER SEC.143(3) R.W.S 147, DATED. 21.03.2014 FOR A.Y. 2009 - 10 ; UNDER SEC. 143(3), DATED. 15.03.2013 FOR A.Y. 2010 - 11 AND U NDER SEC. 143(3) R.W.S 147, DATED 21.03.2014 FOR A.Y. 2011 - 12. THAT AS COMMON ISSUES ARE INVOLVED, THEREFORE, THE SAID RESPECTIVE APPEALS ARE TAKEN UP TOGETHER AND DISPOSED OF BY WAY OF A CONSOLIDATE ORDER. THAT AS THE CIT(A) HAD TAKEN THE CASE OF THE ASSE SSEE FOR A.Y. 2010 - 11 AS THE LEAD CASE, THEREFORE, WE SHALL FIRST TAKE UP THE CROSS APPEALS OF THE ASSESSEE AND THE REVENUE FOR A.Y. 20 10 - 1 1 . THE ASSESSEE VIDE HIS APPEAL MARKED AS ITA NO. 12 6 /MUM/201 6 HAD ASSAILED THE ORDER OF THE CIT(A) BY RAISING THE FO LLOWING GROUNDS OF APPEAL BEFORE US: 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. ASSESSING OFFICER HAS ERRED IN MAKING AN ADDITION U/S 69C OF RS. 3,66,65,814/ - IN RESPECT OF PEAK AMOUNT OF ALLEGED BOGUS PURCHASES FROM VARIOUS PARTIES WITHOUT GIVING REASONABLE & A DEQUATE OPPORTUNITY AND ALSO W ITHOUT PROPERLY APPRECIATING THE FACTS OF THE CASE & APPLICABLE TAX LAW PROVISIONS. THUS APPELLANT PRAYS THAT ALLEGED ADDITION MADE AT RS. 3,66,65,814/ - U/S 69C BEING WRONG ON FACTS & BAD I N LAW REQUIRED TO BE DELETED. VINOD H SANGHVI VS. ACIT - ITA NO. 125 TO 127/MUM/2016 ACIT VS. VINOD H. SANGHVI ITA NO. 121 - 123/MUM/2016 3 A.YS. 2009 - 10 TO 2011 - 12 2. THAT THE APPELLANT CRAVES THE LEAVE TO ADD, ALTER , AMEND AND SUBSTITUTE AND TO RAISE NEW OR ADDITIONAL GROUNDS OF APPEAL AT THE TIME OF HEARING. THE REVENUE ON THE OTHER HAND HAD CHALLENGED THE ORDER OF THE CIT(A) ON THE FOLLOWING GROUNDS: 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN CONFIRMING ADDITION @ 17.5% OF TOTAL PURCHASES HELD AS BOGUS. 2. THE APPELLANT PRAYS THAT THE ORDER OF THE LEARNED CIT(A) ON THE ABOVE GROUND BE SET ASIDE AND THAT OF THE A.O BE RESTORED. 3. THE APPELLANT CRAVES LEAVE TO AMEND OR TAKE ANY GROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY. 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE W HO IS ENGAGED IN THE BUSINESS OF DEALING IN FERROUS AND NON - FERROUS METALS HAD FILED HIS RETURN OF INCOME FOR A.Y. 2010 - 11 ON 30.09.2010, DECLARING TOTAL INCOME OF RS. 14,37,324/ - . THE RETURN OF INCOME OF THE ASSESSEE WAS PROCESSED AS SUCH UNDER SEC. 143(1) OF THE ACT. THE CASE OF THE ASSESS E E WAS THEREAFTER TAKEN UP FOR SCRUTINY ASSESSMENT UNDER SEC. 143(2). 3. THAT DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS IT WAS OBSERVED BY THE A.O THAT THE ASSESSEE HAD CLAIMED TO HAVE MADE PURCHASES FROM 12 PARTIE S WHOSE NAMES FIGURED IN THE LIST OF PERSONS/DEALERS WHO AFTER DETAILED INVESTIGATION WERE BLACKLISTED BY THE SALES TAX AUTHORITIES OF THE GOVERNMENT OF MAHARASHTRA FOR BEING ENGAGED IN THE BUSINESS OF PROVIDING ACCOMMODATION ENTRIES . THE A.O IN THE BACKDROP OF THE AFORESAID FACTS, IN ORDER TO VERIFY THE GENUINENESS AND VERACITY OF THE PURCHASES CLAIMED BY THE ASSESSEE TO HAVE BEEN MADE FROM THE SAID PARTIES ISSUED NOTICES UNDER 133(6) TO THEM, WHICH HOWEVER WERE RETURNED BY THE POSTA L AUTHORITIES EITHER WITH THE REMARKS NOT KNOWN , LEFT OR NO SUCH ADDRESS , OR IN CERTAIN VINOD H SANGHVI VS. ACIT - ITA NO. 125 TO 127/MUM/2016 ACIT VS. VINOD H. SANGHVI ITA NO. 121 - 123/MUM/2016 4 A.YS. 2009 - 10 TO 2011 - 12 CASES THE SAME WERE SERVED BUT WERE NOT COMPLIED WITH BY THE PARTIES . THE DETAILS OF THE SAID PARTIES ALONGWITH THE FATE OF THE NOTICES FORWARDED TO THEM UNDER SE C. 133(6), IS AS UNDER: S. NO. NAME OF THE PARTY AMOUNT REMARKS [AS REGARDS NOTICES SENT U/S 133(6)] 1. M/S AMAN IM P EX 16,63,457 NOT KNOWN 2. M/S CHAIR IMPEX TRADING PVT. LTD. 19,87,336 NOT CLAIMED 3. M/S CHIRAG STEEL CENTRE 10,41,003 NOT KNOWN 4. M/S DEVANG METALS 10,32,140 LEFT 5. M/S KANAK STEEL (INDIA) 17,64,703 NOT KNOWN 6. M/S KANAK GURU TUBES & METALS PVT. LTD. 3,25,47,465 NOT KNOWN 7. M/S KWALITY ENTERPRISES 11,62,512 NO REPLY 8. M/S MANBHADRA METAL INDUSTRIES 24,55,947 NOT KNOWN 9. M/S RAMANI METAL CORPORATION 43,73,564 NO REPLY 10. M/S SK ENGG. CO. 20,52,484 NO REPLY 11. M/S SUNNY INTERNATIONAL 11,73,182 NO REPLY 12. M/S VALIANT STEEL ENGG CO. 35,40,680 NOT KNOWN TOTAL 5,47,94,473 4. THE A.O DIRECTED THE ASSESSEE TO PRODUCE THE AFOREMENTIONED PARTIES , AS WELL AS PLACE ON RECORD DOCUMENTARY EVIDENCE TO SUBSTANTIATE THE GENUINENESS AND VERACITY OF THE PURCHASES CLAIMED TO HAVE BEEN MADE FROM THEM , VIZ. (I) COPY OF LEDGER ACCOUNTS; (II) PURCHASE BILLS ; (I II) COPY OF DELIVERY CHALLANS; (IV) EVIDENCE IN RESPECT OF TRANSPORTATION OF GOODS; (V) COPY OF THE BANK STATEMENT; AND (V) NAME OF THE TRANSPORTER. THE A.O FURTHER DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS ONCE AGAIN DIRECTED THE ASSESSEE TO PRODUCE THE AFORESAID PARTIES FOR EXAMINATION SO THAT THE AUTHENTICITY OF THE PURCHASE TRANSACTIONS COULD BE VERIFIED TO THE HILT. THE ASSESSEE IN COMPLIANCE TO THE DIRECTIONS OF THE A.O THOUGH PLACED ON HIS RECORD THE COPIES OF THE LEDGER ACCOUNTS AND THE BANK S TATEMENTS REFLECTING VINOD H SANGHVI VS. ACIT - ITA NO. 125 TO 127/MUM/2016 ACIT VS. VINOD H. SANGHVI ITA NO. 121 - 123/MUM/2016 5 A.YS. 2009 - 10 TO 2011 - 12 THE PAYMENTS MADE TO THE AFOREMENTIONED PARTIES FOR THE PURCHASES CLAIMED TO HAVE BEEN MADE FROM THEM, BUT HOWEVER , FAILED TO PRODUCE EITHER OF THE AFORESAID PARTIES FOR EXAMINATION BEFORE HIM . THE A.O AFTER DELIBERATING ON THE INCOMPL ETE INFORMATION THAT WAS PLACED ON RECORD BY THE ASSESSEE , THEREIN CONCLUDED THAT THE SAME DID NOT INSPIRE ANY CONFIDENCE AS REGARDS THE GENUINENESS AND VERACITY OF THE PURCHASE TRANSACTIONS. THE A.O SPECIFICALLY OBSERVED THAT THE ASSESSEE HAD ABSOLUTELY F AILED TO DIVULGE THE DETAILS AS REGARDS PAYMENT OF THE TRANSPORT CHARGES PERTAINING TO DELIVERY OF THE GOODS UNDER CONSIDERATION. THE A.O FURTHER OBSERVED THAT THE ASSESSEE HAD BEEN WOEFULLY SILENT ABOUT THE SPECIFIC FINDING OF THE POSTAL AUTHORITIES THAT THE AFOREMENTIONED PARTIES WERE NOT AVAILABLE AT THE ADDRESSES GIVEN BY THE ASSESSEE. THAT IN THE BACKDROP OF THE AFORESAID FACTS THE A.O CONCLUDED THAT THE ASSESSEE BY NEITHER PRODUCING THE AFORESAID PARTIES FOR EXAMINATION BEFORE HIM, NOR PLACING ON RECO RD THE DOCUMENTARY EVIDENCE TO SUBSTANTIATE THE GENUINENESS AND VERACITY OF THE PURCHASE TRANSACTIONS, HAD THUS , FAILED TO PROVE THE VERACITY OF THE PURCHASE TRANSACTIONS. HOWEVER, THE A.O OBSERVED THAT AS THE ASSESSEE HAD BEEN ABLE TO CORRELATE THE QUANTI TATIVE DETAILS, THEREFORE, IT COULD SAFELY BE CONCLUDED THAT THE ASSESSEE HAD MADE THE PURCHASES OF T HE GOODS UNDER CONSIDERATION, THOUGH NOT FROM THE AFOREMENTIONED PARTIES, BUT FROM CERTAIN UNIDENTIFIED PARTIES IN CASH. THE A.O HELD A CONVICTION THAT THE ASSESSEE AFTER MAKING CASH PURCHASES OF THE GOODS UNDER CONSIDERATION, HAD THUS, WITH THE INTENT TO ROUTE THE PURCHASE AND SALE OF THE SAID GOODS THROUGH ITS BOOKS OF ACCOUNT HAD TAKEN ACCOMMODATION ENTRIES FROM THE AFOREMENTIONED PARTIES. THE A.O OBSERVED THAT DESPITE SUFFICIENT OPPORTUNITY THE ASSESSEE HAD FAILED TO PLACE ON RECORD THE SOURCE FROM WHERE THE GOODS UNDER CONSIDERATION WERE PURCHASED BY HIM. TH US , IN THE BACKDROP OF THE AFORESAID FACTS THE A.O TAKING SUPPORT OF THE ORDER OF THE ITAT , AHMEDABAD BENCH IN VINOD H SANGHVI VS. ACIT - ITA NO. 125 TO 127/MUM/2016 ACIT VS. VINOD H. SANGHVI ITA NO. 121 - 123/MUM/2016 6 A.YS. 2009 - 10 TO 2011 - 12 THE CASE OF M/S VIJAY PROTEINS LTD . VS. ACIT (1996) 58 ITD 428, THEREIN HELD A CONVICTION THAT AN A DDITION IN RESPECT OF PEAK AMOUNT OF INVESTMENT MADE BY THE ASSESSEE FOR MAKING OF PURCHASES OF THE AFOREMENTIONED GOODS FROM UNIDENTIFI ED PARTIES, WOULD BE JUSTIFIED. THE A.O CALCULATED THE PEAK ADDITION IN THE HANDS OF THE ASSESSEE, ON THE FOLLOWING BASIS : A ). CASH WAS PAID BY THE ASSESSEE ON THE DATE ON WHICH BOGUS PURCHASE BILLS HAD BEEN ENTERED IN THE BOOKS OF ACCOUNT; B) . CASH WAS RECEIVED BACK BY THE ASSESSEE ON THE DATE ON WHICH CHEQUE WAS ISSUED BY IT TO THE BOGUS PARTIES; AND C) . LEDGER ACCOUNTS OF ALL THE ABOVEMENTIONED HAWALA PARTIES WERE MERGED IN ORDER T O WORK OUT THE ACTUAL CASH RECEIPT S AND PAYMENT S MADE BY THE ASSESSEE ON DAY TO DAY BASIS. 5. THE A.O ISSUED A SHOW CAUSE NOTICE (FOR SHORT SCN) TO THE ASSESSEE TO EXPLAIN THAT NOW WHEN HE HAD FAILED TO ESTABLISH THE AUTHENTICITY OF THE PURCHASE TRANSACTIONS, THEREFORE, WHY AN ADDITION OF THE PEAK CREDIT ADDITION OF RS . 3,66,65,814/ - MAY NOT BE MADE IN ITS HANDS UNDER SEC. 69C OF THE ACT. THE A.O AFTER DELIBERATING ON THE EXPLANATION OF THE ASSESSEE, HOWEVER, DID NOT FIND FAVOR WITH THE SAME , AND THUS TAKING COGNIZANCE OF THE FACT THAT THE ASSESSEE HAD FAILED TO DISCH ARGE THE ONUS AS STOOD CAST UPON HIM TO SUBSTANTIATE THE GENUINENESS AND VERACITY OF THE PURCHASES WHICH WERE CLAIMED TO HAVE BEEN MADE FROM THE AFOREMENTIONED PARTIES, THEREFORE , ON THE BASIS OF HIS SAID CONVICTION MADE AN ADDITION OF RS. 3,66,65,814/ - IN THE HANDS OF THE ASSESSEE. 6. AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). THE CIT(A) AFTER DELIBERATING ON THE CONTENTIONS OF THE ASSESSEE VINOD H SANGHVI VS. ACIT - ITA NO. 125 TO 127/MUM/2016 ACIT VS. VINOD H. SANGHVI ITA NO. 121 - 123/MUM/2016 7 A.YS. 2009 - 10 TO 2011 - 12 AS REGARDS THE AUTHENTICITY OF THE PURCHASE TRANSACTIONS, HOWEVER, WAS NOT PERSUADED TO ACCEPT THE SAME . THE CIT(A) TAKING COGNIZANCE OF THE FACT THAT THE NOTICES ISSUED UNDER SEC. 133(6) TO THE AFOREMENTIONED PARTIES FROM WHOM THE ASSESSEE HAD PURPORTEDLY MADE PURCHASES WERE RETURNED BY THE POSTAL AUTHORITIES WITH THE REMARKS NOT KNOWN, LEFT AND UNCLAIMED. THE CIT(A) OBSERVED THAT THE ASSESSEE DESPITE BEING AFFORDED SUFFICIENT OPPORTUNITY HAD FAILED TO PRODUCE THE AFOREMENTIONED PARTIES FOR EXAMINATION BEFORE THE A.O. THE CIT(A) FURTHER TOOK COGNIZANCE OF THE FACT THAT THE ASSESSEE H AD FAILED TO PLACE ON RECORD THE PURCHASE ORDERS, TRANSPORTATION BILLS, OCTROI RECEIPTS, WEIGHING BILLS, GOODS RECEIPT NOTES (GRN), SUBSEQUENT SALE/MANUFACTURING DETAILS, DESPITE SUFFICIENT OPPORTUNITY HAVING BEEN AFFORDED TO HIM DURING THE COURSE OF THE A SSESSMENT PROCEEDINGS. THE CIT(A) OBSERVED THAT NOW WHEN THE SALES TAX DEPARTMENT HAD CLASSIFIED THE AFOREMENTIONED PARTIES AS HAWALA DEALERS AND INTIMATED TO THE INCOME - TAX DEPARTMENT THAT THE ASSESSEE WAS ONE OF THE BENEFICIARY, THEREFORE, A VERY HEAVY O NUS WAS CAST UPON THE ASSESSEE TO DISLODGE THE SAID OBSERVATIONS AND PROVE ON THE BASIS OF INFALLIBLE EVIDENCE THAT HE HAD MADE GENUINE PURCHASES FROM THE SAID PARTIES. THE CIT(A) OBSERVED THAT THE ASSESSEE HAD FAILED TO DISCHARGE THE ONUS AS STOOD CAST U PON HIM AND COULD NOT PROVE THE GENUINENESS AND VERACITY OF THE PURCHASE TRANSACTIONS UNDER CONSIDERATION TO THE HILT. THE CIT(A) TOOK STRONG COGNIZANCE OF THE FACT THAT THE ASSESSEE HAD FAILED TO PRODUCE THE COPIES OF CONSIGNMENTS, IF ANY, RECEIVED FROM T HE TRANSPORT CONTRACTOR SHO WING THAT THE MATERIAL PURCHASED FROM THE CONSIGNORS WAS ACTUALLY DELIV E RED TO HIM AND FREIGHT WAS PAID ON THE SAME. THE CIT(A) FURTHER DELIBERATED ON THE FACT TH AT THE ASSESSEE HAD FAIL ED TO PLACE ON RECORD DOCUMENTARY EVIDENCE WHICH COULD GO TO PROVE THE GENUINENESS AND VERACITY OF THE AFORESAID PURCHASE TRANSACTIONS, VIZ. GOODS CONSIGNMENT NOTES; TRANSPORT BILLS AND THE VINOD H SANGHVI VS. ACIT - ITA NO. 125 TO 127/MUM/2016 ACIT VS. VINOD H. SANGHVI ITA NO. 121 - 123/MUM/2016 8 A.YS. 2009 - 10 TO 2011 - 12 DELIVERY CHALLANS ISSUED BY THE AFOREMENTIONED PARTIES OR OCTROI RECEIPTS ISSUED TO SUBSTANTIATE DELIVERY OF GOODS TO THE ASSESSEE. THUS, IN THE BACKDROP OF HIS AFORESAID OBSERVATIONS THE CIT(A) CONCLUDED THAT THE ASSESSEE HAD FAILE D TO PLACE ON RECORD INDEPENDENT AND RELIABLE EVIDENCE TO PROVE COMPLETE TRAIL AS REGARDS MOVEMENT OF CONSIGNMENT FROM THE AFOREMENTI ONED PARTIES TO THE PLACE OF THE ASSESSEE. THE CIT(A) BEING OF THE VIEW THAT THE FACT THAT THE PAYMENTS WERE MADE BY THE ASSESSEE TO THE AFOREMENTIONED PARTIES VIDE BANKING CHANNELS WOULD NOT CONCLUSIVELY PROVE THE GENUINENESS AND VERACITY OF THE SAID PUR CHASE TRANSACTIONS. THE CIT(A) FURTHER TOOK NOTE OF THE FACT THAT THE PERUSAL OF THE BILLS/INVOICES REVEALED THAT THE COLUMN FOR VEHICLE NUMBER WAS LEFT BLANK IN EACH OF THE DELIVERY CHALLAN/INVOICE. THE CIT(A) TAKING SUPPORT OF HOST OF JUDICIAL PRONOUNCEM ENTS CONCLUDED THAT NOW WHEN THE ASSESSEE HAD CLAIMED TO HAVE MADE PURCHASES FROM THE AFOREMENTIONED PARTIES, THEREFORE, THE ONUS WAS CAST UPON HIM TO SUBSTANTIATE THE VERACITY OF THE SAID PURCHASES TRANSACTIONS. THE CIT(A) BEING OF THE VIEW THAT THE QUEST ION OF REJECTION OF THE BOOKS OF ACCOUNT OF THE ASSESSEE UNDER SEC. 145(3) WOULD NORMALLY ARISE ONLY WHEN THE PROFITABILITY RATIO SHOWN BY THE ASSESSEE WAS NOT ACCEPTED BY THE A.O HAVING REGARD TO THE PROFITS DECLARED BY THE ASSESSEE IN THE PRECEDING YEARS AND THE PROFITS SHOWN BY OTHER ASSESSES IN THE SAME LINE OF BUSINESS OR CERTAIN MAJOR DISCREPANCIES/DEFECTS WERE NOTICED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE, THEREFORE, ON THE BASIS OF HIS SAID OBSERVATIONS CONCLUDED THAT IT WAS NOT OBLIGATORY ON THE PART OF THE A.O TO HAVE REJECTED THE BOOKS OF ACCOUNT OF THE ASSESSEE BEFORE CHARACTERIZING THE PURCHASES AS INGENUINE AND DISALLOWING THE SAME IN THE HANDS OF THE ASSESSEE. THE CIT(A) FURTHER BEING OF THE VIEW THAT AS THE ASSESSEE HAD NOT DISCHARGED THE P RIMARY ONUS AS STOOD CAST UPON HIM TO PROVE THE GENUINENESS AND VERACITY OF THE PURCHASE TRANSACTIONS UNDER VINOD H SANGHVI VS. ACIT - ITA NO. 125 TO 127/MUM/2016 ACIT VS. VINOD H. SANGHVI ITA NO. 121 - 123/MUM/2016 9 A.YS. 2009 - 10 TO 2011 - 12 CONSIDERATION, THEREFORE, HE COULD NOT ASSAIL THE VALIDITY OF THE ASSESSMENT FOR THE REASON THAT NO CROSS - EXAMINATION OF THE AFOREMENTIONED PARTIES WAS ALLOWED TO HIM. 7. THE CIT(A) FOUND HIMSELF AS BEING IN AGREEMENT WITH THE VIEW OF THE A.O THAT THE ASSESSEE HAD FAILED TO SUBSTANTIATE THE GENUINENESS AND VERACITY OF THE PURCHASE TRANSACTIONS AND COULD NOT DISPROVE THE FINDINGS OF THE A.O REGARDING THE NON - EXISTENCE OF THE PARTIES. HOWEVER, THE CIT(A) OBSERVED THAT NOW WHEN THE A.O HAD NOT DOUBTED THE GENUINENESS OF THE SALES, THEREFORE, HE COULD NOT HAVE GONE AHEAD AND MADE ADDITION OF THE PEAK INVESTMENT IN MAKING OF THE SAID PURCHASES BY THE ASSESSEE. THE CIT(A) THUS CONCLUDED THAT NOW WHEN IT REMAINED AS A MATTER OF A CONCEDED FACT THAT THE ASSESSEE HAD MADE PURCHASES OF THE GOODS UNDER CONSIDERATION, THOUGH NOT FROM THE AFOREMENTIONED BOGUS PARTIES, BUT FROM CERTAIN UNIDENTIFIED SOURCE, THEREFORE, THE ADDITION IN THE HANDS OF THE ASSESSEE WAS LIABLE TO BE RESTRICTED ONLY TO THE EXTENT OF THE PROFIT ELEMENT THAT WOULD BE INVOLVED IN MAKING OF SUCH PURCHASES. THE CIT(A) IN SUPPORT OF HIS AFORESAID CONVICTI ON RELIED ON THE JUDGMENT OF THE HONBLE HIGH COURT OF GUJARAT IN THE CASE OF BHOLANATH POLYFAB PVT. LTD. 355 ITR 290 (GUJ). THE CIT(A) IN THE BACKDROP OF HIS AFORESAID OBSERVATIONS DELIBERATED ON THE ASPECT OF QUANTIFICATION OF THE ESTIMATED PROFIT ELEM ENT IN RESPECT OF T HE SAID BOGUS PURCHASE TRANSACTIONS. THE CIT(A) TAKING COGNIZANCE OF T H E OBSERVATIONS OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. SIMIT P. SHETH (2013) 38 TAXMANN.COM 385 (GUJ), THEREIN OBSERVED THAT THE HONBLE HIGH COUR T HAD CONCLUDED THAT NO UNIFORM YARDSTICKS COULD BE APPLIED TO ESTIMATE THE RATE OF PROFIT , AS THE SAME VARIED WITH THE NATURE OF BUSINESS. THE CIT(A) IN THE BACKDROP OF HIS AFORESAID DELIBERATIONS ESTIMATED THE PROFIT ELEMENT IN THE HANDS OF THE ASSESSEE @17.5%. THE CIT(A) FURTHER TAKING COGNIZANCE OF THE ORDER OF THE ITAT, MUMBAI, IN VINOD H SANGHVI VS. ACIT - ITA NO. 125 TO 127/MUM/2016 ACIT VS. VINOD H. SANGHVI ITA NO. 121 - 123/MUM/2016 10 A.YS. 2009 - 10 TO 2011 - 12 THE CASE OF MADUKANT B GANDHI VS. ITO IN ITA NO. 1950/MUM/2009; DATED 23/02/2010, THEREIN FURTHER DIRECTED THE A.O TO REDUCE THE PROFIT THAT WAS ALREADY DECLARED BY THE ASSES SEE ON THE AFORESAID PURCHASES AND REDUCE THE SAME FROM THE ESTIMATED NET PROFIT OF 17.5% ON THE PURCHASES MADE FROM THE SAID TWELVE PARTIES. THUS, THE CIT(A) ON THE BASIS OF HIS AFORESAID OBSERVATIONS PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. 8. BOTH TH E ASSESSEE AND REVENUE BEING AGGRIEVED WITH THE ORDER OF THE CIT(A) HAD CARRIED THE MATTER IN APPEAL BEFORE US. THE LD. DEPARTMENTAL REPRESENTATIVE (FOR SHORT D.R) TAKING US THROUGH THE FACTS OF THE CASE SUBMITTED THAT THE A.O A FTER CONCLUDING THAT THE ASSESSEE HAD NOT MADE ANY PURCHASES FROM THE AFOREMENTIONED BOGUS PARTIES HAD THUS IN ALL FAIRNESS MADE AN ADDITION OF THE PEAK CREDIT OF THE INVESTMENT OF THE ASSESSEE TOWARDS MAKING OF PURCHASES FROM CERTAIN UNIDENTIFIED SOURCES. IT W AS SUBMITTED BY THE LD. D.R THAT THOUGH THE CIT(A) HAD ACCEPTED THAT NO PURCHASES WERE MADE BY THE ASSESSEE FROM THE ABOVEMENTIONED BOGUS PARTIES, BUT HOWEVER, HE HAD ERRED IN SETTING ASIDE THE ADDITION OF PEAK INVESTMENT OF RS. 3,66,65,814/ - AND HAD WRONG LY RESTRICTED THE SAME TO 17.5% OF THE SAID BOGUS PURCHASES, SUBJECT TO A FURTHER RELIEF OF THE PROFIT THAT HAD ALREADY BEEN DISCLOSED BY THE ASSESSEE ON THE SAID PURCHASES. THE LD. D.R SUBMITTED THAT AS THE CIT(A) HAD FAILED TO APPRECIATE THE FACTS OF TH E CASE IN THE RIGHT PERSPECTIVE, THEREFORE, HIS ORDER MAY BE SET ASIDE AND THAT OF THE A.O BE RESTORED. PER CONTRA, THE LD. AUTHORIZED REPRESENTATIVE AT THE VERY OUTSET SUBMITTED THAT AS THE ASSESSEE HAD DULY SUBSTANTIATED THE GENUINENESS OF THE PURCHASE T RANSACTIONS ON THE BASIS OF DOCUMENTARY EVIDENCES, VIZ. STOCK REGISTER, DELIVERY CHALLANS, CONFIRMATIONS ETC. OF THE SUPPLIER PARTIES, THEREFORE, NO DISALLOWANCE OF ANY PART OF T HE SAID PURCHASES WAS CALLED FOR IN THE VINOD H SANGHVI VS. ACIT - ITA NO. 125 TO 127/MUM/2016 ACIT VS. VINOD H. SANGHVI ITA NO. 121 - 123/MUM/2016 11 A.YS. 2009 - 10 TO 2011 - 12 HANDS OF THE ASSESSEE. HOWEVER, ON A SPECIFIC QUERY BY THE BENCH THE LD. A.R ACCEPTED THAT THERE WAS NO COMPLIANCE BY EITHER OF THE PARTIES TO NOTICES ISSUED UNDER SEC. 133(6). ALTERNATIVELY, THE LD. A.R SUBMITTED THAT AS DURING THE YEAR UNDER CONSIDERATION THE RATE OF VAT ON FERROUS AND NON - FERROUS ITEMS IN WHICH THE ASSESSEE WAS TRADING WAS 4%, THEREFORE, EVEN IF THE GENUINENESS OF THE PURCHASE TRANSACTIONS WAS TO BE DISBELIEVED, THE ADDITION WAS LIABLE TO BE RESTRICTED TO THE EXTENT OF VAT OF 4% OF THE VALUE OF THE PURCHASES UNDER CONSIDERA TION . THE LD. A.R TO SUPPORT HIS AFORESAID CONTENTION AS REGARDS THE RATE OF VAT AS WAS APPLICABLE DURING THE YEAR UNDER CONSIDERATION, THEREIN DREW OUR ATTENTION TO THE PURCHASE INVOICES ( PAGE 38 - 39 ) OF HIS PAPER BOOK - 1 (FOR SHORT APB - 1 ) WHEREIN THE VAT RATES WERE REFLECTED AT 4%. 9. WE HAVE HEARD THE AUTHORIZED REPRESENTATIVES FOR BOTH THE PARTIES, PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL AVAILABLE ON RECORD. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE FACTS OF THE CASE AND ARE OF THE CONSIDERED VIEW THAT FROM A PERUSAL OF THE RECORDS IT CAN SAFELY BE GATHERED THAT THE ASSESSEE HAD FAILED TO SUBSTANTIATE THE GENUINENESS AND VERACITY OF THE PURCHASE TRANSACTIONS UNDER CONSIDERATION. WE ARE OF THE CONSIDERED VIE W THAT THE INFORMATION RECEIVED BY THE A.O FROM THE SALES TAX AUTHORITIES, GOVERNMENT OF MAHARASHTRA THAT THE PARTIES UNDER CONSIDERATION WERE ENGAGED IN PROVIDING ACCOMMODATION ENTRIES WITHOUT ANY ACTUAL SALE OF THE GOODS, AS ACCEPTED BY THEM IN THEIR RES PECTIVE STATEMENTS AND AFFIDAVITS FILED WITH THE SALES TAX AUTHORITIES, THUS, DID CAST A VERY HEAVY ONUS ON THE ASSESSEE TO SUBSTANTIATE THE AUTHENTICITY OF PURCHASES WHICH WERE CLAIMED BY THE ASSESSEE TO HAVE BEEN MADE FROM THEM. WE ARE FURTHER OF THE VIE W THAT THE RETURNING BY THE POSTAL AUTHORITIES OF THE NOTICES ISSUED U/S 133(6) TO THE AFOREMENTIONED PARTIES BY THE A.O, WITH THE REMARKS NOT KNOWN, LEFT AND VINOD H SANGHVI VS. ACIT - ITA NO. 125 TO 127/MUM/2016 ACIT VS. VINOD H. SANGHVI ITA NO. 121 - 123/MUM/2016 12 A.YS. 2009 - 10 TO 2011 - 12 UNCLAIMED, FURTHER FORTIFIED THE FACT THAT THEY WERE NON - EXISTENT AND BOGUS PARTIES. WE FI ND OURSELVES TO BE IN AGREEMENT WITH THE OBSERVATIONS OF THE LOWER AUTHORITIES THAT EVEN OTHERWISE THE ASSESSEE HAD FAILED TO SUBSTANTIATE THE GENUINE NE SS AND VERACITY OF THE PURCHASE TRANSACTIONS BY NOT ONLY FAILING TO PRODUCE THE PARTIES FOR EXAMINATION BEFORE THE A.O , BUT EVEN BY FAILING TO PLACE ON RECORD IRREFUTABLE DOCUMENTARY EVIDENCE TO SUBSTANTIATE THE AUTHENTICITY OF THE PURCHASE TRANSACTIONS. WE FURTHER FIND THAT AS OBSERVED BY THE A.O, THOUGH THE ASSESSEE HAD DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS PLACED ON RECORD THE COPIES OF THE LEDGER ACCOUNTS OF THE AFOREMENTIONED PARTIES , COPIES OF THE PURCHASE BILLS AND THE BANK STATEMENTS IND ICATING PAYMENTS MADE TO THEM, BUT HOWEVER, DESPITE SPECIFIC DIRECTIONS THE ASSESSEE HAD FAILED TO PLACE ON RECORD MATERIAL AS WAS CALLED FOR BY THE A.O TO PROVE THE GENUINENESS OF PURCHASE TRANSACTIONS TO THE HILT AND DISPEL THE DOUBTS RAISED AS REGARDS T HE VERACITY OF THE SAME, VIZ. TRANSPORTATION DETAILS , DOCUMENTS EVIDENCING DELIVERY OF GOODS AT ASSESSES PLACE, DETAILS OF THE TRANSPORT CONTRACTOR WHO HAD DELIVERED THE GOODS ETC. WE ARE IN AGREEMENT WITH THE VIEW OF THE CIT(A) THAT NOW WHEN THE ASSESSEE HAD CLAIMED TO HAVE MADE PURCHASES FROM THE AFOREMENTIONED SUPPLIER PARTIES AND HAD DEBITED ITS PROFIT AND LOSS ACCOUNT TO THE SAID EXTENT, THEN , THE ONUS WAS CAST UPON THE ASSESSEE TO PLACE ON RECORD DOCUMENTS WHICH COULD GO TO EVIDENCE THE GENUINENESS AN D VERACITY OF THE PURCHASE TRANSACTIONS. WE ARE FURTHER OF THE VIEW THAT NOW WHEN THERE WERE SERIOUS ALLEGATIONS IN RESPECT OF THE PURCHASE TRANSACTIONS CLAIMED BY THE ASSESSEE TO HAVE BEEN MADE FROM THE AFOREMENTIONED PARTIES, THEREFORE , A MUCH MORE HEAV Y ONUS WAS LIABLE TO BE DISCHARGED BY THE ASSESSEE IN ORDER TO IRREBUTABLY EVIDENCE THE GENUINENESS AND VERACITY OF THE PURCHASE TRANSACTIONS UNDER CONSIDERATION. WE FIND THAT THE ASSESSEE HAD FAILED TO SUBSTANTIATE THE AUTHENTICITY OF THE PURCHASE VINOD H SANGHVI VS. ACIT - ITA NO. 125 TO 127/MUM/2016 ACIT VS. VINOD H. SANGHVI ITA NO. 121 - 123/MUM/2016 13 A.YS. 2009 - 10 TO 2011 - 12 TRANSAC TIONS, AND TO THE EXTENT THE MATERIAL WAS PLACED ON RECORD BY HIM, THE SAME TO OUR CONSIDERED VIEW WAS SERIOUSLY FALLING SHORT OF THE QUALITY OF ONUS WHICH WAS REQUIRED TO BE DISCHARGED BY HIM. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE FACTS OF THE C ASE AND ARE OF THE CONSIDERED VIEW THAT NOW WHEN THE ASSESSEE HAD FAILED TO DISCHARGE THE ONUS AS STOOD CAST UPON HIM AS REGARDS PROVING THE AUTHENTICITY OF THE PURCHASE TRANSACTIONS UNDER CONSIDERATION, THEREFORE, THE SAME WITHOUT ANY CHOICE HAD BEEN HELD AS INGENUINE TRANSACTIONS BY THE CIT(A). WE ARE FURTHER OF THE CONSIDERED VIEW THAT THE CIT(A) HAD FAIRLY CONCLUDED THAT NOW WHEN THE SALES OF THE ASSESSEE HAD BEEN ACCEPTED BY THE A.O, THEREFORE, IT COULD SAFELY BE CONCLUDED THAT THE ASSESSEE HAD PURCHAS ED THE GOODS, THOUGH NOT FROM THE AFOREMENTIONED BOGUS PARTIES, BUT FROM UNIDENTIFIED SOURCES. WE ARE PERSUADED TO BE IN AGREEMENT WITH THE CIT(A) THAT AS THE SALES OF THE ASSESSEE HAD NOT BEEN DOUBTED, THEREFORE, THE A.O COULD NOT HAVE MADE AN ADDITION TO WARDS PEAK INVESTMENT IN THE HANDS OF THE ASSESSEE. WE AGREE WITH THE VIEW OF THE CIT(A) THAT THE ADDITION IN THE HANDS OF THE ASSESSEE WAS LIABLE TO BE RESTRICTED ONLY TO THE EXTENT OF THE PROFIT ELEMENT INVOLVED IN MAKING OF SUCH PURCHASES BY THE ASSESSE E FROM THE UNORGANIZED SECTOR. WE HAVE FURTHER GIVEN A THOUGHTFUL CONSIDERATION TO THE ESTIMATION OF THE PROFIT ELEMENT INVOLVED IN MAKING OF SUCH PURCHASES BY THE ASSESSEE FROM THE UNIDENTIFIED SUPPLIERS OPERATING IN THE OPEN/GREY MARKET. WE ARE OF THE CO NSIDERED VIEW THAT THE ASSESSEE BY MAKING THE PURCHASES FROM THE OPEN/GREY MARKET WOULD HAD PROCURED THE GOODS AT A LOWER RATE, I.E BY SAVING ON THE VAT LIABILITY, CASH DISCOUNTS AND CERTAIN OTHER FACTORS, AS IN COMPARISON TO THE PRICE AT WHICH THE SAME WO ULD BE AVAILABLE IN THE ORGANIZED SECTOR. WE FIND THAT AS THE VAT INVOLVED ON FERROUS AND NON - FERROUS ITEMS DURING THE YEAR UNDER CONSIDERATION WAS 4%, THEREFORE, KEEPING IN VIEW THE OTHER MONETARY BENEFITS WHICH THE ASSESSEE AS OBSERVED BY US HEREINABOVE VINOD H SANGHVI VS. ACIT - ITA NO. 125 TO 127/MUM/2016 ACIT VS. VINOD H. SANGHVI ITA NO. 121 - 123/MUM/2016 14 A.YS. 2009 - 10 TO 2011 - 12 WOULD HAD BENEFITED FROM BY PROCURING THE GOODS FROM THE OPEN/GREY MARKET, THE SAME COULD SAFELY BE TAKEN AT AN AGGREGA TE FIGURE OF 8%. WE THUS, IN THE BACKDROP OF OUR AFORESAID OBSERVATIONS DIRECT THE A.O TO RESTRICT THE ADDITION IN THE HANDS OF THE ASSES SEE TO 8% OF THE AGGREGATE VALUE OF THE PURCHASES OF 5,47,94,473/ - (AS TABULATED HEREINABOVE) CLAIMED BY THE ASSESSEE TO HAVE BEEN MADE FROM THE AFOREMENTIONED PARTIES. WE THUS MODIFY THE ORDER OF THE CIT(A) TO THE EXTENT OF ESTIMATION OF THE PROFIT ELEME NT INVOLVED IN MAKING OF THE PURCHASES UNDER CONSIDERATION. 10. THAT THE APPEAL OF THE ASSESSEE FOR A.Y 2010 - 11 , MARKED AS ITA NO. 126 /MUM/201 6 IS PARTLY ALLOWED A ND THE APPEAL OF THE REVENUE, MARKED AS ITA NO. 122 /MUM/201 6 IS DISMISSED. ITA NO. 125/MUM/2016 (ASSESSES APPEAL) & ITA NO. 121/MUM/2016 ( R EVENUES APPEAL) A.Y. 2009 - 10 11. WE SHALL NOW TAKE UP THE CROSS APPEALS OF THE ASSESSEE AND THE REVENUE FOR A.Y. 20 09 - 1 0 . THE ASSESSEE VIDE HIS APPEAL MARKED AS ITA NO. 125 /MUM/201 6 , HAD ASSAILED THE ORDER OF THE CIT(A) BY RAISING THE FOLLOWING GROUNDS OF APPEAL BEFORE US: 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. ASSESSING OFFICER HAS ERRED IN MAKING DISALLOWANCE U/S 69C OF RS. 1,86,43,641/ - ON ACCOUN T OF PURCHASES FROM UNGENUINE PARTIES AND THE LD. CIT(A) HAS ERRED IN NOT DELETING THE SAID ENTIRE ADDITION BUT HAS ESTIMATED DISALLOWANCE ON ACCOUNT OF ALLEGED BOGUS PURCHASES @ 17.5% OF SUCH PURCHASES, NET OF GROSS PROFIT DECLARED BY THE ASSESSEE APPELLA NT IN ACCOUNTS. IN VIEW OF THE SAME APPELLANT PRAYS THAT THE ALLEGED ESTIMATED DISALLOWANCE CONFIRMED BY THE LD. CIT(APPEALS) AT RS. 30,67,611/ - BEING WRONG ON FACTS AND BAD IN LAW, THEREFORE THE SAME MAY KINDLY BE DELETED. VINOD H SANGHVI VS. ACIT - ITA NO. 125 TO 127/MUM/2016 ACIT VS. VINOD H. SANGHVI ITA NO. 121 - 123/MUM/2016 15 A.YS. 2009 - 10 TO 2011 - 12 2. THAT THE APPELLANT CRAVES THE LEAVE TO AMEND , ALTER, SUBSTITUTE AND OR TO RAISE NEW OR ADDITIONAL GROUNDS OF APPEAL AT THE TIME OF HEARING. THE REVENUE ON THE OTHER HAND HAD VIDE ITS APPEAL, MARKED AS ITA NO. 121/MUM/2016 HAD CHALLENGED THE ORDER OF THE CIT(A) ON THE FOLLOWING GROUNDS: 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN CONFIRMING ADDITION @ 17.5% OF TOTAL PURCHASES HELD AS BOGUS. 2. THE APPELLANT PRAYS THAT THE ORDER OF THE LEARNED CIT(A) ON THE ABOVE GROUND BE SET ASIDE AND THAT OF THE A.O BE RESTORED. 3. THE APPELLANT CRAVES LEAVE TO AMEND OR TAKE ANY GROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY. 12. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESS MENT UNDER SEC. 143(3) WAS FR AMED IN THE HANDS OF THE ASSESSEE ON 12.12.2011 , DETERMINING HIS T OTAL INCOME AT RS. 11,80,720/ - . THE CASE OF THE ASSESSEE WAS REOPENED UNDER SEC. 147, ON THE BASIS OF THE INFORMATION RECEIVED FROM THE SALES TAX AUTHORITIES, GOVERNMENT OF MAHARASHTRA THAT THE ASSESSEE WAS ONE OF THE BENEFICIARIES OF THE ACCOMMODATION ENTRIES PROVIDED BY SOME OF THE MVAT DEALERS WHO WERE INDULGING IN PROVIDING ACCOMMODATION ENTRIES . 13. THAT DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS THE A.O ON THE BASIS OF THE AFORESAID INFORMATION OBSERVED THAT THE ASSESSEE HAD TAKEN ACCOMMODATION ENTRIES FOR PURCHASES AGGREGATING TO RS. 68,97,619/ - FROM THE FOLLOWING PARTIES: - S. NO. NAME OF THE PARTY AMOUNT REMARKS [AS REGARDS NOTICES SENT U/S 133(6)] 1. G.K INDUSTRIAL CORPORATION 1027709 NO REPLY TO NOTICE U/S 133(6) RECEIVED TILL DATE 2. P M STE E L ALLOYS 48672 NO REPLY TO NOTICE U/S 133(6) RECEIVED TILL DATE 3. VIJAY INDUSTRIES 630433 NO REPLY TO NOTICE U/S 133(6) RECEIVED TILL DATE 4. MANIBHADRA METAL INDUSTRIES 1438140 NO REPLY TO NOTICE U/S 133(6) RECEIVED TILL VINOD H SANGHVI VS. ACIT - ITA NO. 125 TO 127/MUM/2016 ACIT VS. VINOD H. SANGHVI ITA NO. 121 - 123/MUM/2016 16 A.YS. 2009 - 10 TO 2011 - 12 DATE 5. R K METAL 1146704 NO REPLY TO NOTICE U/S 133(6) RECEIVED TILL DATE 6. RELIABLE METAL (INDIA) 245775 NO REPLY TO NOTICE U/S 133(6) RECEIVED TILL DATE 7. NEROLAC METAL (INDIA) 555241 NO REPLY TO NOTICE U/S 133(6) RECEIVED TILL DATE 8. AMAN IMPEX 3065093 NO REPLY TO NOTICE U/S 133(6) RECEIVED TILL DATE 9. S K ENGINEERING CO. 9356940 NO REPLY TO NOTICE U/S 133(6) RECEIVED TILL DATE 10. MOKSHA METALS PVT. LTD. 803563 NO REPLY TO NOTICE U/S 133(6) RECEIVED TILL DATE 11. MALWA METAL CORPN. 829243 NO REPLY TO NOTICE U/S 133(6) RECEIVED TILL DATE 12. SHREE KESHAR IMPEX METALS PRIVATE LTD. 2454905 NO REPLY TO NOTICE U/S 133(6) RECEIVED TILL DATE TOTAL 2,16,02,418 14. THE A.O AFTER DELIBERATING ON THE FACTS OF THE CASE, BEING OF TE VIEW THAT AS THE ASSESSEE HAD FAILED TO SUBSTANTIATE THE GENUINENESS AND VERACITY OF THE AFORESAID PURCHASE TRANSACTIONS BY EITHER PRODUCING THE AFOREMENTIONED PARTIES OR BY PLACING ON RECORD IRRE F UTABLE DOCUMENTARY EVIDENCES FORTIFYING THE VERACITY OF THE SAI D PURCHASE TRANSACTIONS, THEREFORE, MADE AN ADDITION OF THE PEAK INVESTMENT OF RS. 1,86,43,641/ - , WHICH AS PER THE A.O WAS MADE BY THE ASSESSEE TOWARDS MAKING OF PURCHASES FROM THE UNIDENTIFIED SUPPLIERS FROM THE SOURCES WHICH WERE ONLY TO THE KNOWLEDGE OF THE ASSESSEE. THAT ON APPEAL THE CIT(A) THOUGH AGREED WITH THE A.O THAT THE ASSESSEE HAD FAILED TO PROVE THE GENUINENESS OF THE PURCHASE TRANSACTIONS, BUT HOWEVER, BEING OF THE VIEW THAT AS THE ASSESSEE HAD PURCHASED THE GOODS, THOUGH NOT FROM THE AFOREME NTIONED BOGUS PARTIES, BUT FROM THE UNIDENTIFIED PARTIES, THEREFORE, CONCLUDED THAT THE ADDITION IN THE HANDS OF THE ASSESSEE WAS LIABLE TO BE RESTRICTED TO THE EXTENT THE ASSESSEE HAD INFLATED THE PURCHASES. THE CIT(A) ON THE BASIS OF HIS AFORESAID CONVIC TION RESTRICTED THE ADDITION IN THE HANDS OF THE ASSESSEE TO THE EXTENT OF THE PROFIT ELEMENT THAT WAS INVOLVED IN VINOD H SANGHVI VS. ACIT - ITA NO. 125 TO 127/MUM/2016 ACIT VS. VINOD H. SANGHVI ITA NO. 121 - 123/MUM/2016 17 A.YS. 2009 - 10 TO 2011 - 12 MAKING OF THE PURCHASES UNDER CONSIDERATION FROM THE UNIDENTIFIED PARTIES OPERATING IN THE OPEN/GREY MARKET . TE CIT(A) IN THE BACKDROP OF HIS AFORESAID OBSERVATIONS ESTIMATED THE PROFIT ELEMENT @ 17.5 % OF THE AGGREGATE VALUE OF THE PURCHASES CLAIMED BY THE ASSESSEE TO HAVE BEEN MADE FROM THE AFORESAID PARTIES, SUBJECT TO A FURTHER RELIEF OF THE PROFIT THAT HAD ALREADY BEEN DISCLOSED BY THE ASSESSEE ON THE SAID PURCHASES. THAT BOTH THE ASSESSEE AND THE REVENUE BEING AGGRIEVED WITH THE ORDER OF THE CIT(A) HAD CARRIED THE MATTER IN APPEAL BEFORE US BY WAY OF FILIN G THE PRESENT CROSS - APPEALS. 15. WE FIND THAT AS THE FACTS AND THE ISSUE INVOLVED IN THE PRESENT CROSS APPEALS BEFORE US ARE THE SAME AS WERE INVOLVED IN THE CROSS APPEALS OF THE ASSESSEE AND THE REVENUE FOR A.Y. 2010 - 11, WHICH HAD BEEN ADJUDICATED BY US H EREINABOVE, THEREFORE, OUR ORDER PASSED WHILE DISPOSING OF THE APPEAL OF THE ASSESSEE, MARKED AS ITA NO. 126 /MUM/201 6 AND APPEAL OF THE REVENUE, MARKED AS ITA NO. 122 /MUM/201 6 , FOR A.Y. 2010 - 11, SHALL APPLY MUTATIS MUTANDIS FOR DISPOSING OF THE PRESENT CRO SS - APPEALS OF THE ASSESSEE AND THE REVENUE BEFORE US. WE THUS , IN TERMS OF OUR OBSERVATIONS RECORDED WHILE DISPOSING OF THE APPEALS OF THE ASSESSEE AND THE REVENUE FOR A.Y. 2010 - 11, THEREFORE, DIRECT THE A.O TO RESTRICT THE ADDITION IN THE HANDS OF THE ASS ESSEE TO 8% OF THE AGGREGATE VALUE OF THE PURCHASES OF 2,16,02,418/ - (AS TABULATED HEREINABOVE) CLAIMED BY THE ASSESSEE TO HAVE BEEN MADE FROM THE AFOREMENTIONED PARTIES. WE THEREFORE IN LIGHT OF OUR AFORESAID OBSERVATIONS MODIFY THE ORDER OF THE CIT(A) TO THE EXTENT OF ESTIMATION OF THE PROFIT ELEMENT INVOLVED IN MAKING OF THE PURCHASES UNDER CONSIDERATION. 1 6 . THAT THE APPEAL OF THE ASSESSEE FOR A.Y 2009 - 10 , MARKED AS ITA NO. 12 5 /MUM/201 6 IS PARTLY ALLOWED A ND THE APPEAL OF THE REVENUE, MARKED AS ITA NO. 12 1 /MUM/201 6 IS DISMISSED. VINOD H SANGHVI VS. ACIT - ITA NO. 125 TO 127/MUM/2016 ACIT VS. VINOD H. SANGHVI ITA NO. 121 - 123/MUM/2016 18 A.YS. 2009 - 10 TO 2011 - 12 ITA NO. 127/MUM/2016 (ASSESSES APPEAL) & ITA NO. 123/MUM/2016 ( R EVENUES APPEAL) A.Y. 2011 - 12 1 7 . WE SHALL NOW TAKE UP THE CROSS APPEALS OF THE ASSESSEE AND THE REVENUE FOR A.Y. 20 11 - 1 2 . THE ASSESSEE VIDE HIS APPEAL MARKED AS ITA NO. 127 /MUM/201 6 , HAD ASSAILED THE ORDER OF THE CIT(A) BY RAISING THE FOLLOWING GROUNDS OF APPEAL BEFORE US: 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. ASSESSING OFFICER HAS ERRED IN MAKING DISALLOWANCE U/S 69C OF RS. 76,92,768/ - ON ACCOUNT OF PURCHASES FROM UNGENUINE PARTIES AND THE LD. CIT(A) HAS ERRED IN NOT DELETING THE SAID ENTIRE ADDITION BUT HAS ESTIMATED DISALLOWANCE ON ACCOUNT OF ALLEGED BOGUS PURCHASES @ 17.5% OF SUCH PURCHASES, NET OF GROSS PROFIT DECLARED BY THE ASSESSEE APPELLANT IN ACCOUNTS. IN VIEW OF THE SAME APPELLANT PRAYS THAT THE ALLEGED ESTIMATED DISALLOWANCE CONFIRMED BY THE LD. CIT(APPEALS) AT RS. 12,20,251/ - BEING WRONG ON FACTS AND BAD IN LAW, THEREFORE THE SAME MAY KINDLY BE DELETED. 2. THAT THE APPELLANT CRAVES THE LEAVE TO AMEND , ALTER, SUBSTITUTE AND OR TO RAISE NEW OR ADDITIONAL GROUNDS OF APPEAL AT THE TIME OF HEARING. THE REVENUE ON THE OTHER HAND HAD VIDE ITS ITA NO. 123/MUM/2016 CHALLENGED THE ORDER OF THE CIT(A) ON THE FOLLOWING GROUNDS: 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN CONFIRMING ADDITION @ 17.5% OF TOTAL PURCHASES HELD AS BOGUS. 2. THE APPELLANT PRAYS THAT THE ORDER OF THE LEARNED CIT(A) ON THE ABOVE GROUND BE SET ASI DE AND THAT OF THE A.O BE RESTORED. 3. THE APPELLANT CRAVES LEAVE TO AMEND OR TAKE ANY GROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY. 1 8 . BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE HAD FILED HIS RETURN OF INCOME FOR A.Y. 2011 - 12 ON 29.09.2011, DECLARING TOTAL INCOME OF RS. 18,33,754/ - . THE RETURN OF INCOME FILED BY THE VINOD H SANGHVI VS. ACIT - ITA NO. 125 TO 127/MUM/2016 ACIT VS. VINOD H. SANGHVI ITA NO. 121 - 123/MUM/2016 19 A.YS. 2009 - 10 TO 2011 - 12 ASSESSEE WAS PROCESSED AS SUCH UNDER SEC. 143(1) OF THE ACT. THE CASE OF THE ASSESSEE WAS REOPENED UNDER SEC. 147 ON THE BASIS OF INFORMATION RECEIVED FROM THE SAL ES TAX AUTHORITIES, GOVERNMENT OF MAHARASHTRA THAT THE ASSESSEE WAS ONE OF THE BENEFICIARIES OF THE ACCOMMODATION ENTRIES PROVIDED BY SOME OF THE MVAT DEALERS WHO WERE INDULGING IN PROVIDING ACCOMMODATION ENTRIES . 1 9 . THAT DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS THE A.O ON THE BASIS OF THE AFORESAID INFORMATION OBSERVED THAT THE ASSESSEE HAD TAKEN ACCOMMODATION ENTRIES FOR PURCHASES AGGREGATING TO RS. 93,88,570/ - FROM THE FOLLOWING PARTIES: - S. NO. NAME OF THE PARTY AMOUNT REMARKS [AS REGARDS NOTICES SENT U/S 133(6)] 1. VEER INDUSTRIES 154856 RETURN UNDELIVERED BY THE POSTAL AUTHORITIES. 2. RATANDEEP TUBES 182769 RETURN UNDELIVERED BY THE POSTAL AUTHORITIES. 3. SUNSHINE ENTERPRISES 298799 RETURN UNDELIVERED BY THE POSTAL AUTHORITIES. 4. SUNIDHI METAL 729961 RETURN UNDELIVERED BY THE POSTAL AUTHORITIES. 5. CHAMPION STEEL (INDIA) 300425 RETURN UNDELIVERED BY THE POSTAL AUTHORITIES. 6. CHIRAG STEEL CENTRE 752180 RETURN UNDELIVERED BY THE POSTAL AUTHORITIES. 7. DARSHAT TRADING PVT. LTD. 291329 RETURN UNDELIVERED BY THE POSTAL AUTHORITIES. 8. S K ENGINEERING CO. 1213542 RETURN UNDELIVERED BY THE POSTAL AUTHORITIES. 9. GOOD LUCK METAL MPEX 312000 RETURN UNDELIVERED BY THE POSTAL AUTHORITIES. 10. BRIGHT STEEL INDIA 473170 RETURN UNDELIVERED BY THE POSTAL AUTHORITIES. 11. RAJENDRA IMPEX 607116 RETURN UNDELIVERED BY THE POSTAL AUTHORITIES. 12. NAVKAR IMPEX 1371299 RETURN UNDELIVERED BY THE POSTAL AUTHORITIES. 13. PIONEER ENTERPRISES 2701124 RETURN UNDELIVERED BY THE POSTAL AUTHORITIES. TOTAL RS. 93,88,570 VINOD H SANGHVI VS. ACIT - ITA NO. 125 TO 127/MUM/2016 ACIT VS. VINOD H. SANGHVI ITA NO. 121 - 123/MUM/2016 20 A.YS. 2009 - 10 TO 2011 - 12 20 . THE A.O AFTER DELIBERATING ON THE FACTS OF THE CASE, THEREIN BEING OF THE VIEW THAT AS THE ASSESSEE HAD FAILED TO SUBSTANTIATE THE GENUINENESS AND VERACITY OF THE A FORESAID PURCHASE TRANSACTIONS BY EITHER PRODUCING THE AFOREMENTIONED PARTIES OR BY PLACING ON RECORD IRRE F UTABLE DOCUMENTARY EVIDENCES FORTIFYING THE VERACITY OF THE SAID PURCHASE TRANSACTIONS, THEREFORE, MADE AN ADDITION OF THE PEAK INVESTMENT OF RS. 76, 92,768/ - WHICH AS PER THE A.O WAS MADE BY THE ASSESSEE TOWARDS MAKING OF PURCHASES FROM THE UNIDENTIFIED SUPPLIERS . THAT ON APPEAL THE CIT(A) THOUGH AGREED WITH THE A.O THAT THE ASSESSEE HAD FAILED TO PROVE THE GENUINENESS OF THE PURCHASE TRANSACTIONS, BUT HOWEVER, BEING OF THE VIEW THAT AS THE ASSESSEE HAD PURCHASED THE GOODS, THOUGH NOT FROM THE AFOREMENTIONED BOGUS PARTIES, BUT FROM THE UNIDENTIFIED PARTIES, THEREFORE, CONCLUDED THAT THE ADDITION IN THE HANDS OF THE ASSESSEE WAS LIABLE TO BE RESTRICTED T O THE EXTENT THE ASSESSEE HAD INFLATED THE PURCHASES. THE CIT(A) ON THE BASIS OF HIS AFORESAID CONVICTION RESTRICTED THE ADDITION IN THE HANDS OF THE ASSESSEE TO THE EXTENT OF THE PROFIT ELEMENT THAT WAS INVOLVED IN MAKING OF THE PURCHASES UNDER CONSIDERAT ION FROM THE UNIDENTIFIED PARTIES OPERATING IN THE OPEN/GREY MARKET . THE CIT(A) ESTIMATED THE PROFIT ELEMENT INVOLVED IN MAKING OF SUCH PURCHASES @ 17.5 % OF THE AGGREGATE VALUE OF THE PURCHASES CLAIMED BY THE ASSESSEE TO HAVE BEEN MADE FROM THE AFORESAID PA RTIES, SUBJECT TO A FURTHER RELIEF OF THE PROFIT THAT HAD ALREADY BEEN DISCLOSED BY THE ASSESSEE ON THE SAID PURCHASES. THAT BOTH THE ASSESSEE AND THE REVENUE BEING AGGRIEVED WITH THE ORDER OF THE CIT(A) HAD CARRIED THE MATTER IN APPEAL BEFORE US BY WAY OF FILING THE PRESENT CROSS - APPEALS. 21 . WE FIND THAT AS THE FACTS AND THE ISSUE INVOLVED IN THE PRESENT CROSS APPEALS BEFORE US ARE THE SAME AS WERE INVOLVED IN THE CROSS APPEALS OF THE ASSESSEE AND THE REVENUE FOR A.Y. 201 0 - 11, WHICH HAD BEEN ADJUDICATED BY US HEREINABOVE, THEREFORE, OUR ORDER PASSED WHILE VINOD H SANGHVI VS. ACIT - ITA NO. 125 TO 127/MUM/2016 ACIT VS. VINOD H. SANGHVI ITA NO. 121 - 123/MUM/2016 21 A.YS. 2009 - 10 TO 2011 - 12 DISPOSING OF THE APPEAL OF THE ASSESSEE, MARKED AS ITA NO. 126 /MUM/201 6 AND APPEAL OF THE REVENUE, MARKED AS ITA NO. 122 /MUM/201 6 , FOR A.Y. 2010 - 11, SHALL APPLY MUTATIS MU TANDIS FOR DISPOSING OF THE PRESENT CROSS - APPEALS OF THE ASSESSEE AND THE REVENUE BEFORE US. WE THUS , IN TERMS OF OUR OBSERVATIONS RECORDED WHILE DISPOSING OF THE APPEALS OF THE ASSESSEE AND THE REVENUE FOR A.Y. 2010 - 11, THEREFORE, DIRECT THE A.O TO RESTRI CT THE ADDITION IN THE HANDS OF THE ASSESSEE TO 8% OF THE AGGREGATE VALUE OF THE PURCHASES OF RS. 93,88,570/ - (AS TABULATED HEREINABOVE) CLAIMED BY THE ASSESSEE TO HAVE BEEN MADE FROM THE AFOREMENTIONED PARTIES. WE THUS MODIFY THE ORDER OF THE CIT(A) TO TH E EXTENT OF ESTIMATION OF THE PROFIT ELEMENT INVOLVED IN MAKING OF THE PURCHASES UNDER CONSIDERATION. 22 . THAT THE APPEAL OF THE ASSESSEE FOR A.Y 20 11 - 1 2 , MARKED AS ITA NO. 12 7 /MUM/201 6 IS PARTLY ALLOWED A ND THE APPEAL OF THE REVENUE, MARKED AS ITA NO. 12 3 /MUM/201 6 IS DISMISSED. 23. THAT ALL THE THREE APPEALS OF THE ASSESSEE , MARKED AS ITA NO. 125 /MUM/201 6, 126/MUM/2016 AND 127/MUM/2016 FOR A.Y. 2009 - 10, A.Y. 2010 - 11 AND A.Y. 2011 - 12 ARE PARTLY ALLOWED, WHILE FOR ALL THE THREE APPEALS OF THE REVENUE, M ARKED AS ITA NO. 121 /MUM/201 6, 122/MUM/2016 AND 123/MUM/2016 FOR A.Y. 2009 - 10, A.Y. 2010 - 11 AND A.Y. 2011 - 12 A R E DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 27 /10/2017. SD/ - SD/ ( B.R BASKARAN ) ( RAVISH SOOD) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; 27 / 10 / 2017 VINOD H SANGHVI VS. ACIT - ITA NO. 125 TO 127/MUM/2016 ACIT VS. VINOD H. SANGHVI ITA NO. 121 - 123/MUM/2016 22 A.YS. 2009 - 10 TO 2011 - 12 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI .