M/S.A.V.GEMS, MUMBAI V. INCOME TAX OFFICER 30(1)(1), MUMBAI

ITA 1298/MUM/2018

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 5220 (ITAT-MUMBAI)
• Duration Of Justice: 7 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-10-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2007-2008
• Appeal Filed On: 05-03-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S K BEPARI
• Keywords: Bogus purchase; Accommodation entries
• Section: 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA, AM I.T.A. NO. 1298/MUM/2018 ( ASSESSMENT YEAR: 2007 - 08 ) M/S. A. V. GEMS C - 3, DWARKADEVI CO - OP. HSG. SOC., JAI JAWAN MARG, DAFTARY ROAD, MALAD (E), MUMBAI - 400 097 VS. I NCOME TAX OFFICER, - 30(1)(1) C - 13, R. NO. 501, 5 TH FLOOR, BKC, BANDRA (E), MUMBAI PAN/GIR NO. AAAF 3917 G ( APPELLANT ) : ( RESPONDENT ) APPELLANT BY : NONE RESPONDENT BY : SHRI S. K. BEPARI DATE OF HEARING : 15.10.2018 DATE OF PRONOUNCEMENT : 16.10. 2018 O R D E R PER S HAMIM YAHYA, A. M.: T HIS IS AN APPEAL BY THE ASSESSEE IS DIRECTED AGAINST ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS) - 41, MUMBAI DATED 15.12.2017 AND PERTAINS TO ASSESSMENT YEAR 2007 - 08. 2. T HE ISSUE RAISED IS THAT LD. C IT(A) ERR ED IN SUSTAINING DISALLOWANCE OF 100 % OF BOGUS PURCHASE AMOUNTING TO RS.5,11,512/ - . 3. I N THIS CASE , INFORMATION HAS BEEN RECEIVED IN THIS CASE OF ABOVE MENTIONED ASSESSEE FROM DIRECTOR GENERAL OF INCOME TAX (INV.), MUMBAI VIDE LETTER NO. DGIT(INV.)/INFORMATION/DIAMOND/2013 - 14 DATED 14.03.2014 THAT THE ABOVE ASSESSEE HAS 2 I.T.A. NO.1298/MUM/2018 BEEN FOUND TO HAVE TAKEN ENTRIES DURING THE F.Y.2006 - 07 RELEVANT TO A.Y.2007 - 08 FROM ONE SHRI RAJENDRA JAIN, SHIR SANJAY CHOUDHARY AND SHRI DHARMICHAND JAIN AND ITS ALLIED GROUP IN WHOSE CASE SEARCH WAS CONDUCTED U/S.132 OF I.T. ACT, 1961 ON 03.10.2013. DURING THE COURSE OF SEARCH, IT WAS REVEALED THAT SHRI RAJENDRA JAIN, SHIR SANJAY CHOUDHARY AND SHRI DHARMICHAND JAIN AND ITS ALLIED GROUP ARE ONE OF THE LEADING ENTRY PROVID ERS PROVIDING ACCOMMODATIONS ENTRIES IN THE NATURE OF SALES AND UNSECURED LOANS. MS. A.V. GEMS - AAAFA3917G, WHO IS ASSESSED IN THIS CHARGE IS ONE OF THE BENEFICIARY, WHO HAS RECEIVED ENTRIES BY WAY OF SALES/ LOAN FROM SHRI RAJENDRA JAIN, SHIR SANJAY CHOUD HARY AND SHRI DHARMICHAND JAIN AND ITS ALLIED GROUP RESPECTIVELY DURING THE P.Y.2006 - 07 RELEVANT TO A.Y.2007 - 08 OF RS. 5,11,512 / - . M/S. A.V. GEMS IS ONE OF THE BENEFICIARIES WHO HAS TAKEN ACCOMMODATION ENTRIES DURING THE F.Y.2006 - 07 IN THE NATURE OF BOGUS PURCHASES FROM M/S. VITRAG AMOUNTING TO RS.5,11,512 / - . 4. A NOTICE U/S. 1 33(6) DATED 03 - 02 - 2015 WAS ISSUED TO M/S. VITRAG JEWELS WHICH WAS RECEIVED BACK UNSERVED. THE ASSESSEE WAS ASKED TO PRODUCE THE SAID PARTY IN THIS OFFICE FOR CRO SS EXAMINATION ON 27 - 0 2 - 2015. B UT THE ASSESEEE FAILED TO PRODUCE - THE SAID PARTY OR SUBMIT - DOCUMENTARY EVIDENCES TO PROVE THE GENUINENESS OF THESE PURCHASES. THE ASSESSEE SUBMITTED CERTAIN DETAILS SUCH AS COPY O F PURCHASE BILLS, LEDGER ACCOUNTS, CORRESPONDANCE SALES, COPY OF BAN K STATEMENT ONLY IN SUPPORT OF HIS CLAIM VIDE HI S LETTER DATED 04 - 0 3 - 2 0 15. B UT FAILED TO PRODUCE THE PARTY OR SUCH DOCUMENTS WHICH WOULD PROVE GENUINENESS OF THE SAID PURCHASES. 5. HENCE, THE A.O. MADE THE DISALLOWANCE OF BOGUS PURCHASES. 3 I.T.A. NO.1298/MUM/2018 6. A GAINST THE A BOVE ORDER OF THE LD. CIT(A), THE ASSESSEE IS IN APPEAL BEFORE THE ITAT. 7. THE LD. CIT(A) CONFIRMED THE ACTION OF THE A.O. IN THIS REGARD BY HOLDING AS UNDER: 10. HOWEVER, I DO NOT AGREE WITH THE ABOVE SUBMISSION OF THE APPELLANT, IT IS ON RECORD THAT DURING THE COURSE OF SEARCH PROCEEDINGS IN THE CASE OF MR. RAJENDRA JAIN GROUP, COMPLETE MODUS OPERAND! OF EXTENDING THE FACILITY OF ACCOMMODATION ENTRIES IN THE NATURE OF SALES AND UNSECURED LOANS WAS UNEARTHED. M'S A.V GEMS WAS FOUND TO BE ONE OF THE BE NEFICIARIES, WHO HAD RECEIVED ACCOMMODATION ENTRIES IN THE NATURE OF BOGUS PURCHASES FROM M/S VITRAG AMOUNTING TO RS.5,11,512/ - . SINCE NOTICE U/S 133(6) OF THE IT. ACT COULD NOT BE SERVED AT THE ADDRESS OF M/S VITRAG, THE APPELLANT WAS GIVEN THE OPPORTUNIT Y TO PRODUCE THE AFORESAID PARTY IN ORDER TO VERIFY THE GENUINENESS OF THE TRANSACTION. FROM THE ASSESSMENT ORDER, IT IS OBSERVED THAT THE APPELLANT HAD CHALLENGED THE RE - OPENING OF THE PROCEEDINGS, WHICH WAS DULY REPLIED VIDE THIS LETTER DATED 03/02/2015. THE AO HAS REPORTED THAT THE APPELLANT COULD FURNISH ONLY THE COPY OF THE PURCHASE BILL OF M/S VITRAG JEWELS OF RS.5,16,627/ - , SALES BILLS, BANK ACCOUNTS AND FINANCIAL RESULTS FROM HIS BOOKS OF ACCOUNTS FOR THE RELEVANT YEAR. IN THIS REGARD, I AGREE WITH THE AO THAT THE APPELLANT HAS FAILED TO PRODUCE THE PARTY OR SUCH THIRD PART EVIDENCES, WHICH WOULD PROVE THE GENUINENESS OF THE SAID PURCHASES. IT IS ALSO FOUND THAT EITHER BEFORE THE AO OR THE UNDERSIGNED, VITAL DOCUMENTS VIZ., STOCK MOVEMENT REGISTERS E TC. ARE ALSO NOT PRODUCED. 11 LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE ISSUE INVOLVED, IN MY CONSID ERED OPINION, THE DISALLOWANCE OF RS.5,11,512/ - MADE BY THE AO AS BOGUS PURC HASES DESERVED TO BE CONFIRMED. 8 . AGAINST THE ABOVE ORDER, THE ASSESSEE IS IN APPEAL BEFORE THE ITAT. 9. I HAVE HEARD THE LD. DEPARTMENTAL REPRESENTATIVE (LD. DR FOR SHORT) . AN ADJOURNMENT PETITION WAS MOVED ON BEHALF OF THE ASSESSEE SEEKING TIME FOR NO COGENT REASON. THE SAME HAS BEEN REJECTED. 10 . I FIND THAT CREDIBLE AND COGENT INFORMATION WAS RECEIVED IN THIS CASE BY THE ASSESSING OFFICER THAT CERTAIN ACCOMMODATION ENTRY PROVIDER/BOGUS SUPPLIERS WERE 4 I.T.A. NO.1298/MUM/2018 BEING USED BY CERTAIN PARTIES TO OBTAINED BOGUS BILLS. THE ASSESSEE WAS FOUND TO HAVE TAKEN ACCOMMODATION ENTRY/BOGUS PURCH ASE BILLS DURING THE CONCERNED ASSESSMENT YEAR FROM DIFFERENT PARTIES. BASED UPON THIS INFORMATION ASSESSMENT WAS REOPENED. THE CREDIBILITY OF INFORMATION RELATING TO REOPENING REMAINS UN - ASSAILED. IN SUCH FACTUAL SCENARIO, THE ASSESSING OFFICER HAS MADE T HE NECESSARY ENQU IRY. THE ISSUE OF NOTICE TO THE PART Y HA S RETURNED UNSERVED. ASSESSEE HAS NOT BEEN ABLE TO PROVIDE ANY CONFIRMATION FROM ANY OF THE PARTY. ASSESSEE HAS ALSO NOT BEEN ABLE TO PRODUCE ANY OF THE PART Y . NECESSARY EVIDENCE RELATING TO TRANSPOR TATION OF THE GOODS WAS ALSO NOT ON RECORD. IN THIS FACTUAL SCENARIO, IT IS AMPLY CLEAR THAT THE ASSESSEE HAS OBTAINED BOGUS PURCHASE BILLS. MERE PREPARATION OF DOCUMENTS FOR PURCHASES CANNOT CONTROVERT OVERWHELMING EVIDENCE THAT THE PROVIDER OF THESE BILL S IS BOGUS AND NON - EXISTENT. 11 . I FIND IT FURTHER STRANGE THAT ASSESSEE WANTS THE REVENUE TO PRODUCE ASSESSEES OWN VENDORS, WHOM THE ASSESSEE COULD NOT PRODUCE. THE PURCHASE BILLS FROM THESE NON - EXISTENT/BOGUS PARTIES CANNOT BE TAKEN AS COGENT EVIDENCE OF PURCHASES. IN LIGHT OF THE OVERWHELMING EVIDENCE, THE REVENUE AUTHORITIES CANNOT PUT UPON BLINKERS AND ACCEPT THESE PURCHASES AS GENUINE. THIS PROPOSITION IS DULY SUPPORTED BY HONBLE APEX COURT DECISION IN THE CASE OF SUMATI DAYAL VS. CIT [1995] 214 ITR 801 (SC) AND CIT VS. DURGA PRASAD MORE [1971] 82 ITR 540 (SC). IN THE PRESENT CASE, THE ASSESSEE WANTS THAT THE UNASSAILABLE FACT THAT THE SUPPLIERS ARE NON - EXISTENT AND, THUS, BOGUS SHOULD BE IGNORED AND ONLY THE DOCUMENTS BEING PRODUCED SHOULD BE 5 I.T.A. NO.1298/MUM/2018 CON SIDERED. THIS PROPOSITION IS TOTALLY UNSUSTAINABLE IN LIGHT OF HONBLE APEX COURT DECISIONS. 1 2 . HOWEVER, I FIND THAT IN THIS CASE THE SALES HAVE NOT BEEN DOUBTED . I T IS SETTLED LAW THAT WHEN SALES ARE NOT DOUBTED, 100% DI SALLOWANCE FOR BOGUS PURCHASE CAN NOT BE DONE. THE RATIONALE BEING NO SALES IS POSSIBLE WITHOUT ACTUAL PURCHASES. THIS PROPOSITION IS SUPPORTED FROM THE HON'BLE JURISDICTIONAL HIGH COURT DECISION IN THE CASE OF NIKUNJ EXIMP ENTERPRISES (IN WRIT PETITION NO 2860, ORDER DT. 18.6.2014). IN TH IS CASE , THE HONOURABLE HIGH COURT HAS UPHELD 100% ALLOWANCE FOR THE PURCHASES SAID TO BE BOGUS WHEN SALES ARE NOT DOUBTED. HOWEVER THE FACTS OF THE PRESENT CASE INDICATE THAT THE ASSESSEE HAS MADE PURCHASE FROM THE GREY MARKET. MAKING PURCHASES THROUGH TH E GREY MARKET GIVES THE ASSESSEE SAVINGS ON ACCOUNT OF NON - PAYMENT OF TAX AND OTHERS AT THE EXPENSE OF THE EXCHEQUER. IN S U CH SITUATION , IN MY C ONSIDERED OPINION , ON THE FACTS AND CIRCUMSTANCES OF THE CASE , 12.5 % DISALLOWANCE OUT OF THE BOGUS PURCHASES MEE TS THE END OF JUSTICE. ACCORDINGLY , I MODIFY THE ORDER OF THE LD. CIT(A) AND DIRECT DISALLOWANCE OF 12. 5 % OF THE BOGUS PURCHASE . 1 3 . I N THE RESULT , THIS APPEAL FILED BY THE ASSESSEE STANDS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 16.10.2018 SD/ - ( S HAMIM YAHYA) A CCOUNTANT MEMBER MUMBAI ; DATED : 16.10.2018 ROSHANI , SR. PS 6 I.T.A. NO.1298/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 F ILE BY ORDER, (DY./ASSTT. REGISTRAR) ITAT, MUMBAI