ITO 28 (3)(5), Mumbai V. UMESH MANOHARLAL CHAWLA, Mumbai

ITA 1327/MUM/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 2801 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-03-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 07-03-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MOHAMMED RIZWAN
• Keywords: Bogus purchase
• Section: 143(3); 133(6); 143(2); 147; 148

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL SMC BENCH MU MBAI BEFORE SHRI R.C. SHARMA, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH JUDICIAL MEMBER ITA NO. 1327/MUM/2019 (ASSESSMENT YEAR 2009-10 ) ITO 28(3)(5) ROOM NO. 323, 3 RD FLOOR, TOWER NO.6, VASHI RAILWAY STATION COMPLEX, VASHI, NAVI MUMBAI-400705. VS. UMESH MANOHARLAL CHAWLA PROP M/S. J.M. AGENCIES (INDIA), SHOP NO.2, PLOT NO. 72, SECTOR 19, VASHI, NAVI MUMBAI- 400705. PAN: AAAPC9614N APPELLANT RESPONDE NT APPELLANT BY : MOHAMMED RIZWAN (ADDL. CIT) RESPONDENT BY : NONE DATE OF HEARING : 05.03.2020 DATE OF PRONOUNCEMEN T : 05.03.2020 ORDERUNDER SECTION 254(1)OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER; 1. THIS APPEAL BY REVENUE IS DIRECTED AGAINST THE ORDE R OF LD. CIT(A)-26, MUMBAI DATED 17.12.2018 FOR ASSESSMENT YEAR 2009-10 THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1) 'WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DIRECTING THE A.O. TO RESTR ICT THE ADDITION OR BOGUS PURCHASES TO 12.5% AS AGAINST 100% ADDITION OF RS. 1,66,370/ - MADE BY THE ASSESSING OFFICER ON ACCOUNT OF BOGUS PURCHASES WIT HOUT APPRECIATING THE FACT THAT PARTIES FROM WHOM THESE PURCHASES WERE MA DE PROVEN ACCOMMODATION ENTRY PROVIDERS, AS CONCLUDED BY SALE S TAX AUTHORITIES PURSUANT TO THE INVESTIGATION CARRIED OUT BY THEM? (2) 'WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT(A) HAS ERRED IN NOT CONSIDERING THE LATE ST APEX COURT DECISION IN THE CASE OF N.K. PROTEINS LTD VS D CIT (769 OF 2017 ), WHEREIN THE HON 'BLE ITA NO. 5296 MUM 2018-ANIL NARAYAN LOKRE 2 SUPREME COURT HAS CONFIRMED 100% ADDITION MADE ON A CCOUNT OF BOGUS PURCHASES? (3) THE APPELLANT PRAYS THAT THE ORDER OF LD. CIT(A ) ON THE ABOVE GROUNDS BE REVERSED AND THAT OF THE ASSESSING OFFICER BE RE STORED. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS EN GAGED IN THE BUSINESS OF WHOLESELLER/DEALER IN TRACTORS PARTS AND ALLIED ITE MS, FILED HIS RETURN OF INCOME FOR ASSESSMENT YEAR 2009-10 ON 29.09.2009 DE CLARING TOTAL INCOME OF RS. 2,82,944/-. THE RETURN OF INCOME WAS PROCESSED UNDER SECTION 143(1). THE ASSESSMENT WAS RE-OPENED UNDER SECTION 147 ON THE BASIS OF INFORMATION RECEIVED FROM SALE TAX DEPARTM ENT, GOVERNMENT OF MAHARASHTRA THAT CERTAIN HAWALA OPERATORS ARE IN DULGING IN PROVIDING ACCOMMODATION BILLS WITHOUT ACTUAL DELIVERY OF GOOD S. THE SALE TAX DEPARTMENT, GOVERNMENT OF MAHARASHTRA REFERRED THE LIST OF SUCH HAWALA DEALERS AND THE BENEFICIARY TO THE DGIT (INV ESTIGATION), MUMBAI. THE NAME OF ASSESSEE APPEARED IN THE LIST O F BENEFICIARY. ON THE BASIS OF INFORMATION, THE ASSESSING OFFICER MAD E A BELIEF THAT THE INCOME OF THE ASSESSEE ESCAPED ASSESSMENT, THEREFOR E, RE-OPENED THE ASSESSMENT UNDER SECTION 147. THE NOTICE UNDER SECT ION 148 DATED 25.03.2014 WAS SERVED UPON THE ASSESSEE. THE ASSES SEE IN RESPONSE TO THE NOTICE UNDER SECTION 148 FILED ITS REPLY DATED 18.04.2014 STATING THEREIN THAT RETURN FILED ON 29.09.2009 BE TREATED AS RETURN IN RESPONSE TO THE SAID NOTICE. THE ASSESSING OFFICER AFTER SER VING NOTICE UNDER SECTION 143(2) PROCEEDED FOR RE-ASSESSMENT. DURING THE ASSESSMENT, THE ITA NO. 5296 MUM 2018-ANIL NARAYAN LOKRE 3 ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS SHOWN PURCHASES OF RS. 1,66,370/- FROM THE FOLLOWING PARTIES, WHICH WERE D ECLARED AS HAWALA DEALERS BY THE SALE TAX DEPARTMENT, GOVERNMENT OF M AHARASHTRA. NAME OF THE PARTY BILL AMOUNT (RS.) 1 PALAK ENTERPRISES 26,287/- 2 REPUTE ENTERPRISES 66,603/- 3 V.S. ENTERPRISES 73,480/- TOTAL 1,66,370/- 3. THE ASSESSING OFFICER IN ORDER TO VERIFY THE TRANSA CTION ISSUED NOTICE UNDER SECTION 133(6) TO ALL THE PARTIES. THE NOTICE SENT THROUGH REGISTERED POST WAS RETURNED BACK UNSERVED. THE ASS ESSEE WAS ASKED TO SHOW-CAUSE AS TO WHY THE PURCHASES SHOWN FROM ALL T HE PARTIES SHOULD NOT BE TREATED AS NON-GENUINE. THE ASSESSEE IN ORDE R TO SUBSTANTIATE THE PURCHASES STATED THAT THE GOODS WERE DELIVERED BY T HE SAID PARTIES AND ARE REFLECTED IN THE BOOKS OF ACCOUNT. THE PAYMENTS WERE MADE THROUGH CHEQUES ONLY. AFTER CONSIDERING THE SUBMISSION OF A SSESSEE, THE ASSESSING OFFICER CONCLUDED THAT THE ASSESSEE NOT B EEN ABLE TO FURNISH EVIDENCE OF TRANSPORTATION DETAILS AND DELIVERY CHA LLANS. THE ASSESSEE FURNISHED THE BOOKS OF ACCOUNT, PURCHASES BILLS. T HE ASSESSING OFFICER AFTER CONSIDERING THE REPLY OF ASSESSEE, COPIES OF BILLS AND ON THE BASIS OF REPORT OF INVESTIGATION WING OF SALE TAX DEPARTM ENT DISALLOWED 100% OF AGGREGATE OF PURCHASES SHOWN FROM THE SAID HAWALA PARTIES IN ITA NO. 5296 MUM 2018-ANIL NARAYAN LOKRE 4 THE ASSESSMENT ORDER DATED 27.02.2015 PASSED UNDER SECTION 143(3) R.W.S 147. 4. ON APPEAL BEFORE THE ADDITION WAS RESTRICTED TO THE EXTENT OF 12.5%. THE LD. CIT(A) WHILE RESTRICTING THE DISALLOWANCES RELIED UPON THE DECISION OF HONBLE GUJARAT HIGH COURT IN CASE OF S IMITH P. SETH (356 ITR 451). THE LD. CIT(A) HELD THAT ONLY PROFIT ELEM ENT IN THE IMPUGNED PURCHASES IS LIABLE TO BE DISALLOWED. THUS, AGGRIEV ED BY THE ORDER OF LD. CIT(A), THE REVENUE HAS FILED THE PRESENT APPEAL BE FORE US. 5. NONE APPEARED ON BEHALF OF ASSESSEE. THE NOTICE OF HEARING SENT THROUGH REGISTERED AD IS RETURNED BACK WITH THE REM ARK OF POSTAL AUTHORITIES LEFT. HENCE, WE LEFT NO OPTION TO DEC IDE THE APPEAL AFTER HEARING THE SUBMISSION OF LD. DR FOR THE REVENUE AN D MATERIAL AVAILABLE ON RECORD. THE LD. DR FOR THE REVENUE SUPPORTED THE ORDER OF ASSESSING OFFICER. THE LD. DR FURTHER SUBMITS THAT INVESTIGAT ION WING OF INCOME- TAX DEPARTMENT HAS MADE FULL-FLEDGED INVESTIGATION IN RESPECT OF HAWALA TRADERS. THE HAWALA TRADERS WERE/ARE ENGAGED IN PROVIDING BOGUS BILL WITHOUT ACTUAL DELIVERY OF GOODS. THE AS SESSEE HAS SHOWN BOGUS PURCHASES ONLY TO INFLATE THE PROFIT. THE LD. DR FOR THE REVENUE SUBMITS THAT THE ASSESSING OFFICER HAS BROUGHT SUFF ICIENT MATERIAL ON RECORD TO PROVE THAT THE PURCHASES SHOWN BY ASSESSE E WERE BOGUS. THE ASSESSEE IS NOT ENTITLED FOR ANY RELIEF. THE LD. DR FOR THE REVENUE ITA NO. 5296 MUM 2018-ANIL NARAYAN LOKRE 5 PRAYED FOR SETTING-ASIDE THE ORDER OF LD. CIT(A) AN D TO RESTORE THE ORDER OF ASSESSING OFFICER. 6. WE HAVE CONSIDERED THE SUBMISSIONS LD. DR FOR THE R EVENUE AND PERUSED THE RECORD. THE ASSESSING OFFICER MADE THE DISALLOWANCE OF 100% OF THE ALLEGED BOGUS PURCHASES. THE ASSESSING OFFICER HAS NOT DISPUTED THE SALES OF THE ASSESSEE NOR REJECTED THE BOOKS OF ASSESSEE. THE ASSESSING OFFICER SOLELY RELIED UPON THE REPORT OF INVESTIGATION WING OF SALE TAX DEPARTMENT. BEFORE THE LD. CIT(A), THE ASSESSEE URGED THAT THE PURCHASES SHOWN BY ASSESSEE ARE GENU INE. THE PAYMENTS OF PURCHASES WERE MADE THROUGH ACCOUNT PAYEE CHEQUE S. THE GOODS WERE RECEIVED BY ASSESSEE AND QUANTITATIVE DETAILS AND CORRESPONDING SALES OF SHOWN. THE ASSESSEE ALSO URGED THAT ASSESS ING OFFICER HAS NOT CONSIDERED THE VARIOUS DOCUMENTARY EVIDENCES FURNIS HED BY ASSESSEE. THE ASSESSEE RELIED UPON THE DECISION OF HONBLE GU JARAT HIGH COURT IN SIMITH P. SETH (SUPRA). THE LD. CIT(A) AFTER CONSID ERING THE MATERIAL PLACED BEFORE HIM AND THE RATIO OF THE DECISIONS IN CLUDING THE DECISION OF SIMITH P. SETH CONCLUDED THAT ONLY PROFIT ELEMEN T EMBEDDED IN THE BOGUS PURCHASE ARE LIABLE TO BE DISALLOWED AND NOT THE ENTIRE PURCHASES. THE LD. CIT(A) ACCORDINGLY RESTRICTED THE DISALLOWA NCE TO 12.5% OF ALLEGED BOGUS PURCHASES. NO CONTRARY FACT OR MATERI AL IS BROUGHT TO OUR NOTICE TO TAKE OTHER VIEW. WE ARE ALSO OF THE VIEW THAT UNDER INCOME ITA NO. 5296 MUM 2018-ANIL NARAYAN LOKRE 6 TAX ACT, THE REVENUE IS ENTITLED TO TAX THE PROFIT ELEMENT ONLY AND NOT THE ENTIRE TRANSACTION, THEREFORE, WE AFFIRM THE OR DER OF LD. CIT(A). 7. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 05/03/2020. SD/- SD/- R.C. SHARMA PAWAN SINGH ACCOUNTANT MEMBER J UDICIAL MEMBER MUMBAI, DATE: 05.03.2020 SK COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. DR SMC BENCH, ITAT, MUMBAI 6. GUARD FILE BY ORDER, DY./ASST. REGISTRAR ITAT, MUMBAI