JAGDISH B PISHARODY, NAVI MUMBAI V. ASST CIT 28(1), MUMBAI

ITA 1304/MUM/2020

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 6215 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-03-2022
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: misc
• Appeal Filed On: 25-02-2020
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Bogus purchase; Unexplained expenditure; Accommodation entries
• Section: 69C; 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “F” MUMBAI BEFORE SHRI OM PRAKASH KANT (ACCOUNTANT MEMBER) AND SHRI RAHUL CHAUDHARY (JUDICIAL MEMBER) ITA No. 1304/MUM/2020 Assessment Year: 2011-12 Jagdish B. Pisharody, 303, Radhe Krishna CHS Ltd., Sector 16A, Plot No. 15, Palm Beach Road, Sanpada, Navi Mumbai-400705. Vs. Asst. Commissioner of Income Tax- 28(1), 306, 3 rd floor, Tower No. 6, Vashi Railway Station, Commercial Complex, Vashi, Navi Mumbai-400703 PAN No. AMLPP 9429 P AppellantRespondent Assessee by:None Revenue by:Mr. S.N. Kabra, DR D a t e o f H e a r i n g:23/03/2022 D a t e o f p r o n o u n c e m e n t:23/03/2022 ORDER PER OM PRAKASH KANT, AM This appeal by the assessee is directed against order dated 23/08/2019 passed by the Ld. Commissioner of Income-Tax(Appeals)-26, Mumbai [in short the Ld. CIT(A)] for assessment year 2011-12, raising following grounds: 1.The Ld. CIT(Appeals), 26 has erred in affirming with the Ld. Assessing Officer and adding₹28,36,462/- at 12.5% of total purchases (₹.2,26,91,701/-) alleged as bogus purchases without appreciating Jagdish B. Pisharody ITA No. 1304/M/2020 2 the fact that the purchase of goods was made from the genuine buyers to whom payment was made through cross account payee cheque. 2.The Ld. CIT(Appeals), 26 has erred in dismissing our alternative ground of appeal of restricting, the disallowance, if any, to the net margin earned by the assessee i.e. 4.93% of purchases deemed bogus by the Ld. AO, 3.The appellant further reserves the right to add, amend or alter the aforesaid grounds of appeal as they may think fit by themselves or by their representatives. 2.Briefly stated facts of the case are that in view of the information received from sales tax authority of Government of Maharashtra, duly forwarded by Director General of Income-Tax (Investigation) Mumbai, stating that assessee has obtained accommodation entries of purchase amounting to ₹2,26,91,701/- from two parties. The Assessing Officer reopened the assessment and issued notice under section 133(6) of the Income-Tax Act, 1961 (in short ‘the Act’), but same were returned un-served by the postal authorities. The Assessing Officer asked the assessee to provide new address and also asked to produce those parties but the assessee failed into so. The assessee also failed to produce delivery challan or transportation details in respect of the purchases. The Assessing Officer was of the view that the assessee must have made purchases from undisclosed parties in the open market in cash and only bills were obtained from those two parties. Accordingly, he in the reassessment order Jagdish B. Pisharody ITA No. 1304/M/2020 3 dated 08/03/2016, added back 12.5% of the bogus purchases of ₹2,26,91,701 as unexplained expenditure under section 69C of the Act, which was worked out to ₹28,36,462/-. On further appeal, the Ld. CIT(A) upheld the addition of observing as under: “7.Grounds No. 1 & 2 of the appeal are against addition of₹28,36,462/- as unexplained expenditure u/s 69C of the Act. As per the investigations carried out by the Sales Tax Authorities, the aforementioned parties were found to be involved in giving accommodation entries only without actually supplying the goods. The logical inference is that the purchases made by the appellant would also be in the nature of accommodation entries only. To verify the same, the AO had made enquiries by issuing notices u/s 133(6) which were returned unserved by the postal authorities. This party was found to be non-existent at the address given by the appellant. The appellant also failed to provide the latest address of the party. During the scrutiny assessment the appellant furnished details of purchases and corresponding sales. However, the appellant could not produce the party before the AO inspite of opportunity being given. The appellant also failed to produce delivery challans or transportation details, The onus of proving the genuineness of such purchases is on the appellant which the appellant had not been able to discharge fully. When the hawala party had admitted on oath that it had given accommodation entries only without actually supplying the goods, the genuineness of purchases made from one party will have to be considered taking this into consideration while examining the documentation submitted by the appellant in support of its claim. The documentary evidences such as purchase bills, payments by cheques, etc. would all have been orchestrated to present a facade of genuineness’s and does not necessarily mean that the purchases from these parties are genuine. The Courts have held that payment by cheque by itself is not sacrosanct so as to prove genuineness of purchases when the surrounding circumstances are Jagdish B. Pisharody ITA No. 1304/M/2020 4 suspect. However, the appellant has shown onward sales which has not been doubted by the Assessing Officer. Since there can be no sales without corresponding purchases, the only logical explanation is that the appellant would have made purchases from undisclosed parties in the grey market at lower rates and purchases were shown as being made from the impugned parties to suppress its profits In such a situation, the various Courts including the Hon'ble Gujarat High Court in the case of CIT vs Simit P. Sheth, 356 TR 451 have held that not the entire purchases but only the profit element embedded in these purchases was to be disallowed. The Hon ble Gujrat High Court in this case has held that profit margin of 12.5% of the bogus purchases will be reasonable. Respectfully following the Order in the case of Simit P Sheth the addition made by the AO is confirmed. Therefore, these grounds of appeal are Dismissed'.” 3.Before us, despite notifying for the hearing dated 23/03/2022, neither anyone attended on behalf of the assessee not any adjournment was sought. On the last two occasions i.e. 08/12/2021 and 12/01/2022 also non-attended on behalf of the assessee despite notifying though registered post. In the circumstances, we were of the opinion that assessee was not interested in pursuing its appeal and therefore same was heardex-parte qua, the assessee, after hearing arguments of the Ld. Departmental Representative. 4.On perusal of the order of the lower authorities, we find following observations have been made in the case of the assessee: (i)Notice under section 133(6) of the Act issued to concerned to parties were returned un-served by the postal authorities. Jagdish B. Pisharody ITA No. 1304/M/2020 5 (ii)The assessee failed to provide their new addresses. (iii)The summons issued at their addresses were also returned unserved. (iv)The assessee failed to substantiate transport of those goods from seller and also failed to substantiate delivery of the goods. 4.1In view of the above observation, we concur with the lower authorities, that assessee has failed to justify the genuineness of the purchases. The Ld. CIT(A) has relied on the decision of the Hon’ble High Court in the case ofCIT Vs Smith P Sheth (supra)while upholding the margin of 12.5% of the bogus purchase as reasonable addition. In view of the above facts and circumstances, we do not find any error in the order of the Ld. CIT(A) on the issue in dispute. Accordingly, the order of the Ld. CIT(A) is upheld. The grounds raised by the assessee are accordingly dismissed. 5.In the result, the appeal filed by the assessee is dismissed. Order pronounced in the open Court. Sd/-Sd/- (RAHUL CHAUDHARY)(OM PRAKASH KANT) JUDICIAL MEMBERACCOUNTANT MEMBER Mumbai; Dated:23/03/2022 Dragon Legal Software/Rahul Sharma, Sr. P.S. Copy of the Order forwarded to : 1.The Appellant 2.The Respondent. 3.The CIT(A)- Jagdish B. Pisharody ITA No. 1304/M/2020 6 4.CIT 5.DR, ITAT, Mumbai 6.Guard file. BY ORDER, //True Copy// (Sr. Private Secretary) ITAT, Mumbai