ITO 20(2)(5), MUMBAI V. PARUL L SHAH, MUMBAI

ITA 1252/MUM/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 9823 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-07-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2009-2010
• Appeal Filed On: 10-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUMAR KUMAR
• Assessee Lawyers: JITENDRA SINGH
• Keywords: Bogus purchase; Corroborative evidences
• Section: 143(3); 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH B MUMBAI BEFORE SHRI MAHAVIR SINGH (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 1252/MUM/2016 ASSESSMENT YEAR: 2009 - 10 ITO - 20(2)(5) R.NO. 208, PIRAMAL CHAMBERS, LALBAUG MUMBAI - 400012 VS. PARUL L. SHAH B - 15 ROAYAL INDL. ESTATE, 5B, NAIGAON CROSS ROAD, WADALA MUMBAI - 400031. PAN NO. AAFPS3767D (APPELLANT) (RESPONDENT) REVENUE BY : SHRI SUMAR KUMAR, DR ASSESSEE BY: SHRI JITENDRA SINGH, AR DATE OF HEARING : 05/07/2017 DATE OF PRONOUNCEMENT : 26/07/2017 ORDER PER N.K. PRADHAN, A.M . THIS IS AN APPEAL FILED BY THE REVENUE. THE RELEVANT ASSESSMENT YEAR IS 2009 - 10. THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) - 32, MUMBAI AND ARISES OUT OF THE ASSESSMENT COMPLETED U/S 143(3) R.W.S 147 OF THE INCOME TAX ACT 1961, (THE ACT). ITA NO. 1252/MUM/2016 2 2. THE GROUNDS OF APPEAL FILED BY THE REVENUE READ AS UNDER: - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS FAILED TO APPRECIATE THE FACT THAT THE ONUS IS ON THE ASSESSEE TO EXPLAIN AND SUBSTANTIATE THE GENUINENESS AND TRUE NATUR E OF THE PURCHASES TRANSACTION. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CI T(A) WAS IN ERROR IN ASSUMING THAT SINCE SALES HAVE NOT BEEN CHALLENGED, PURCHASES CANNOT BE NON - GENUINE WITHOUT CONSIDERING THAT IT IS FOR THE ASSESSEE TO MAKE THE CLAIM REGARDING BOGUS SALES ALONG WITH THE DETAILS OF SUCH SALES TRANSACTIONS, WITHOUT WHIC H NO CONCESS ION COULD BE MADE BY THE AO. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) FAILED TO APPRECIATE THAT IN SUCH CASES THE ONUS IS ON THE ASSESSEE TO SHOW THAT THERE WERE BOGUS PURCHASES AS WELL AS BOGUS SALES WITHOUT DETAILS OF SUCH SALES & PURCHASES, WITHOUT WHICH IT CANNOT BE ASSUMED THAT SUCH WAS THE CASE AND ONLY PROFIT EARNE D ON SUCH EXERCISE WAS TAXABLE. 4. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) ON THE ABOVE GROUNDS BE REVERSED AND THAT OF THE ASSESSING O FFICER BE RESTORED. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER (AO) ON THE BASIS OF INFORMATION RECEIVED FROM THE SALES TAX DEPARTMENT , MAHARASHTRA FOUND THAT THE NAME OF THE ASSESSEE APPEARED IN THE LIST OF PERSONS WHO HAD OB TAINED BOGUS PURCHASE BILLS FROM THE ENTRY PROVIDERS. AS PER THE AO, THE BOGUS PURCHASE BILLS TAKEN BY THE ASSESSEE AMOUNTED TO RS.1,20,91,0 6 3 / - . THE BREAK UP IS AS UNDER: NO. NAME OF THE ENTRY PROVIDER PAN AMOUNT IN THE BILLS TAKEN BY THE ASSESSEE (RS.) 1. M/S STHAPNA TRADE IMPEX AAKCS6555K 22,82,779/ - ITA NO. 1252/MUM/2016 3 PVT. LTD. 2. MAULIK ENTERPRISES BMCPS0 117D 6,99,764/ - 3. SAI LEELA TRADING PVT. LTD. AAKCS4578C 17,74,245/ - 4. NAGESHWAR ENTERPRISES ANMPP97 7 3E 2,88,002/ - 5. MOTION TRADERS, PVT. LTD. AAFCM6409D 15,88,862/ - 6. K.C. ENTERPRISES AJWPD9140R 6,95,386/ - 7. MEET TRADE IMPEX AUTPK5554G 26,85,665/ - 8. SNEHAL ENTERPRISES ALOPR3012J 20,76,360/ - DURING THE COURSE OF VERIFICATION, THE AO ISSUED NOTICES TO THE CONCERNED SUPPLIERS. HOWEVER, THE LETTERS ISSUED TO THE CONCERNED PARTIES WERE RETURNED BACK BY THE POSTAL AUTHORITIES WITH THE REMARK LEFT, NOT KNOWN, INCOMPLETE ADDRESS ETC. THE AO DEPUTE D THE WARD INSPECTOR TO SERVE THE NOTICE U/S 133(6) ON M/S SNEHAL ENTERPRISES AT THE ADDRESS GIVEN BY THE ASSESSEE. HOWEVER, THE WARD INSPECTOR REPORTED TO THE AO THAT THE SAID PARTY WAS NOT AVAILABLE AT THE GIVEN ADDRESS. THE ASSESSEE SUBMITTED BEFORE THE AO VIDE LETTER DATED 24.03.2014 THAT THE PURCHASES MADE WERE GENUINE, THE PAYMENTS WERE MADE BY ACCOUNT PAYEE CHEQUES, THE SAID SUPPLIERS WERE DULY REGISTERED WITH THE SALES TAX AUTHORITIES, THE GOODS PURCHASED WERE SOLD TO VARIOUS PARTIES, THE SALES WERE INCLUDED IN THE SALES TURNOVER AND THEREFORE, THE PURCHASES BEING GENUINE, NOT DISALLOWANCE IS CALLED FOR. HOWEVER, THE AO WAS NOT CONVINCED WITH THE ABOVE EXPLANATION AS THE ASSESSEE FAILED TO PRODUCE ANY SUPPORTING EVIDENCE VIZ. CHALLANS, TRANSPORT/LORR Y RECEIPT OF THE ALLEGED GOODS. AS THE ASSESSEE FAILED TO PROVE THE GENUINENESS OF SUCH PURCHASES, THE AO MADE DISALLOWANCE OF RS.1,20,91,0 6 3/ - . ITA NO. 1252/MUM/2016 4 4. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) OBSERVE D THAT (I) THE ONLY EVIDENCE THE ASSESSEE HAD IS THE PURCHASE INVOICE AND THE PROOF OF PAYMENTS THROUGH CHEQUES, (II) THE ASSESSEE COULD NOT PRODUCE TRANSPORT RECEIPTS, DELIVERY CHALLANS, STOCK REGISTER OR ANY OTHER SORT OF EVIDENCE TO SHO W THE ACTUAL MOVE MENTS OF GOODS. HOWEVER, THE LD. CIT(A) OBSERVED THE AO DID NOT DOUBT THE SALES MADE. OBVIOUSLY SALES COULD NOT HAVE BEEN MADE WITHOUT PURCHASE OF THOSE GOODS THE LD. CIT(A) RELIED INTER - ALIA ON THE DECISION IN THE CASE OF SANJAY OIL CAKE INDUSTRIAL VS. CIT (2008) 316 ITR 274 (GUJ.), CIT VS. SIMIT P. SHETH (2013) 38 TAXMANN.COM (GUJ) . CONSIDERING THE TOTALITY OF FAC TS, THE LD. CIT(A) ESTIMATED THE DISALLOWANCE @ 12.5% OF THE PURCHASES MADE FROM HAWALA DEALERS. THE AMOUNTS COMES TO RS. 15,11,383 / - . 5. BEF ORE US, THE LD. DR SUBMITS THAT THE LD. CIT(A) SHOULD NOT HAVE RESTRICTED THE DISALLOWANCE TO 12.5% OF THE TOTAL PURCHASES BECAUSE THE ASSESSEE FAILED TO DISCHARGE THE ONUS OF PROVING THE GENUINENESS OF SUCH TRANSACTIONS. THE LD. DR THUS SUPPORTS THE ORDER PASSED BY THE AO. 6. ON THE OTHER HAND, THE LD. COUNSEL OF THE ASSESSEE SUPPORTS THE ORDER OF THE LD. CIT(A) RESTRICTING THE DISALLOWANCE TO 12.5% OF THE PURCHASES FROM HAWALA DEALERS WHICH COMES TO RS.15,11,383/ - . 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. IN THE CASE OF SIMIT P. SHETH (SUPRA) , THE HONBLE GUJARAT HIGH COURT HAS HELD THAT WHERE PURCHASES WERE NOT BOGUS BUT WERE MADE FROM PARTIES OTHER THAN THOSE MENTIONED IN THE BOOKS OF ACCOUNT, NOT ENTIRE PURCHA SE PRICE BUT ONLY PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES CAN BE ADDED TO INCOME ITA NO. 1252/MUM/2016 5 OF THE ASSESSEE. THAT BEING THE POSITION, NOT THE ENTIRE PURCHASE PRICE BUT ONLY THE PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES CAN BE ADDED TO THE INCOME OF THE ASSESSEE. TH E HONBLE HIGH COURT REFER RED TO A SIMILAR VIEW TAKEN IN THE CASE OF CIT VS. VIJAY M. MISTRY CONSTRUCTION LTD. [2013] 355 ITR 498 (GUJ) AND CIT VS. BHOLANATH POLY FAB (P) LTD. [2013] 355 ITR 290 (GUJ). WE FIND THAT THE LD. CIT(A) HAS RIGHTLY ESTIMATED THE PROFIT ELEMENT @ 12.5 % ON THE TOTAL PURCHASES OF RS. 1,20,91,063 / - MADE FROM HAWALA DEALERS. WE UPHOLD THE ORDER OF THE LD. CIT(A) RESTRICTING THE DISALLOWANCE TO RS. 15,11,383 / - . 8. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 26/07/2017. SD/ - SD/ - (MAHAVIR SINGH) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED: 26/07/2017 RAHUL SHARMA, SR. P.S. 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 . BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI