ITO 32(1)(5), MUMBAI V. SMT. HINA ARVIND SHAH, MUMBAI

ITA 134/MUM/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 8492 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-01-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 10-01-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AKHTAR HANSARI
• Keywords: Bogus purchase; Question of law
• Section: 143(3); 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC, BENCH MUMBAI BEFORE SHRI R.C.SHARMA, ACCOUNTANT MEMBER ITA NO. 134/MUM/2019 ( ASSESSMENT YEAR: 2011-12) I.T.O.-32(1)(5), ROOM NO. 203, 2 ND FLOOR, C-11, PRATYAKSHKAR BHAVAN, BANDRA KURLA COMPLEX, BANDRA (E), MUMBAI-400051. VS. SMT. HINA ARVIND SHAH, B-14, RAJDEEP CO-OP HSG SOCIETY, CARTER ROAD NO. 01, BORIWALI (E), MUMBAI- 400066. PAN/GIR NO. BFDPS 6261 J (APPELLANT ) .. (RESPONDENT ) REVENUE BY SHRI AKHTAR H ANSARI (DR) ASSESSEE BY SHRI DHAVAL SHAH (AR) DATE OF HEARING 14/01/2020 DATE OF PRONOUNCEMENT 20/01/2020 / O R D E R PER: R.C. SHARMA, A.M. THIS IS THE APPEAL FILED BY THE REVENUE AGAINST TH E ORDER OF THE LD. CIT(A)-44, MUMBAI DATED 29/10/2018 FOR THE A.Y. 2011-12 IN THE MATTER OF ORDER PASSED U/S 143(3) R.W.S. 147 OF THE INCOME TAX ACT, 1961 (IN SHORT, THE ACT). 2. IN THIS APPEAL, THE REVENUE IS AGGRIEVED FOR RES TRICTING ADDITION ON ACCOUNT OF BOGUS PURCHASES TO THE EXTENT OF 12.5%. 3. I HAVE CONSIDERED THE RIVAL CONTENTIONS AND CARE FULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND FOU ND THAT ON GETTING ITA NO. 134/MUM/2019 ITO VS SMT. HINA ARVIND SHAH 2 INFORMATION FROM SALES TAX DEPARTMENT, THE A.O. REO PENED THE ASSESSMENT BY ISSUANCE OF NOTICE U/S 148 OF THE ACT . THEREAFTER, THE A.O. ADDED ENTIRE AMOUNT OF ALLEGED BOGUS PURCHASES IN ASSESSEES INCOME. BY THE IMPUGNED ORDER, THE LD. CIT(A) AFTER CONSIDERING VARIOUS JUDICIAL PRONOUNCEMENTS, RESTRICTED THE ADDITION TO THE EXTENT OF 12.5% OF ALLEGED BOGUS PURCHASES. THE PRECISE OBSERVATION OF THE LD. CIT(A) WAS AS UNDER: 6.1.29 THE FACTS IN THE PRESENT CASE ARE SIMILAR TO THE FACTS IN THE ABOVE MENTIONED CASE. IN THE PRESENT CASE, THE LD. AO HAS SHOWN THAT THE PARTY IN QUESTION WAS NONEXISTENT. THE APP ELLANT HAS NOT BEEN ABLE TO DISPROVE THE FINDINGS OF THE L D. AO REGARDING THE NON-EXISTENCE OF THE PARTY. HOWEVER, LD. AO AFTER EXAMINING THE EVIDENCES DID NOT GIVE ANY ADVE RSE FINDING THAT THE APPELLANT HAD NOT SHOWN CONSUMPTIO N/ SALES OF THE GOODS AND THAT IT HAD NOT OFFERED THE INCOME ON SUCH SALE OF GOODS. IN THIS CASE, LD. A.O. NOT HAVING DOUBTED TH E GENUINENESS OF SALES COULD NOT HAVE GONE AHEAD AND MADE ADDITION I N RESPECT OF THE ENTIRE PURCHASES AS IT WOULD LEAD TO ABSURD PROFITS . THUS, THE ISSUE WOULD BOIL DOWN TO FINDING OUT THE ELEMENT OF SUPPR ESSED PROFIT EMBEDDED IN PURCHASES WHICH THE APPELLANT WOULD HAV E MADE FROM SOME UNKNOWN OR BOGUS ENTITIES. HENCE, FOLLOWI NG THE DECISION OF THE HON'BLE GUJARAT HIGH COURT IN BHOLA NATH POLYFAB PVT. LTD. (SUPRA), THE ESTIMATED SUPPRESSED PROFIT MARGI N EMBEDDED IN SUCH AMOUNTS OF PURCHASES COULD ONLY BE DISALLOWED AND SUBJECTED TO TAX. 6.1.30 SIMILARLY, IN YET ANOTHER DECISION OF HON' BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. SIMIT SHETH (2013) 38 TAXMANN.COM 385 (GUJ), HON'BLE COURT WAS SEIZED WITH A SIMILAR ISSUE WHERE THE A.O. HAD ITA NO. 134/MUM/2019 ITO VS SMT. HINA ARVIND SHAH 3 FOUND THAT SOME OF THE ALLEGED SUPPLIERS OF STEEL T O THE ASSESSEE HAD NOT SUPPLIED ANY GOODS BUT HAD ONLY PROVIDED SALE B ILLS AND HENCE, PURCHASES FROM THE SAID PARTIES WERE HELD TO BE BOG US. THE A.O. IN THAT CASE ADDED THE ENTIRE AMOUNT OF PURCHASES TO G ROSS PROFIT OF THE ASSESSEE. LD. CIT(A) HAVING FOUND THAT THE ASSESSEE HAD INDEED PURCHASED THOUGH NOT FROM NAMED PARTIES BUT OTHER P ARTIES FROM GREY MARKET, PARTIALLY SUSTAINED THE ADDITION AS PR OBABLE PROFIT OF THE ASSESSEE. THE TRIBUNAL HOWEVER, PARTLY SUSTAINED TH E ADDITION. TAKING INTO ACCOUNT THE ABOVE FACTS, THE HON'BLE GUJARAT H IGH COURT HELD THAT SINCE THE PURCHASES WERE NOT BOGUS, BUT WERE M ADE FROM PARTIES OTHER THAN THOSE MENTIONED IN BOOKS OF ACCO UNTS, ONLY THE PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES COULD BE ADDED TO THE ASSESSEE'S INCOME AND AS SUCH NO QUESTION OF LAW AR OSE IN SUCH ESTIMATION. WHILE ARRIVING AT THE ABOVE CONCLUSION, THE HON'BLE COURT ALSO RELIED ON THE DECISION IN THE CASE OF VI JAY M. MISTRY CONSTRUCTION LTD. 355 ITR 498 GUJ.) AND FURT HER APPROVED THE DECISION OF AHMEDABAD BENCH, ITAT IN THE CASE OF VI JAY PROTEINS 58 ITD 428. 6.1.31 IN THE CASE OF VIJAY PROTEINS (SUPRA), THE HON'BLE ITAT WAS SEIZED WITH A CASE OF BOGUS SUPPLIERS OF OIL CAKES WHERE 33 PARTIES WERE FOUND TO BE BOGUS BY THE DEPARTMENTAL AUTHORIT IES EVEN THOUGH PAYMENTS WERE MADE TO THE SAID PARTIES BY CR OSS CHEQUES AND IN FACT THE A.O. IN THAT CASE HAD BROUGHT ADEQU ATE MATERIAL ON RECORD TO PROVE THAT THE CROSS CHEQUES HAD NOT BEEN GIVEN TO PARTIES FROM WHOM SUPPLIES WERE ALLEGEDLY PROCURED BUT THES E WERE ENCASHED FROM A BANK ACCOUNT IN THE NAME OF ANOTHER ENTITY, POSSIBLY HAWALA DEALER. SUBSEQUENTLY, THE MONEY DEPOSITED IN THAT ACCOUNT WAS WITHDRAWN IN CASH ALMOST ON THE SAME DAY. THE T RIBUNAL HOWEVER, HELD THAT IF THE PURCHASES WERE MADE FROM OPEN MARKET WITHOUT INSISTING FOR GENUINE BILLS, THE SUPPLIERS MAY BE WILLING TO SELL THE PRODUCT AT A MUCH LESS RATE AS COMPARED TO A RA TE WHICH THEY ITA NO. 134/MUM/2019 ITO VS SMT. HINA ARVIND SHAH 4 MAY CHARGE IN WHICH THE DEALER HAS TO GIVE GENUINE SALE INVOICE IN RESPECT OF THAT SALE. KEEPING ALL SUCH FACTORS IN M IND, THE TRIBUNAL ESTIMATED AN ELEMENT OF PROFIT PERCENTAGE OF THE OV ERALL PURCHASE PRICE ACCOUNTED FOR IN THE BOOKS OF ACCOUNTS THROUG H FICTITIOUS INVOICES. 6.1.32 AS NARRATED EARLIER, THE A.O. IN THIS CASE HAS HELD THAT THE PARTIES FROM WHICH THE PURCHASES WERE MADE BY THE APPELLANT WERE FOUND TO BE BOGUS AND THAT IS THE REASON FOR WHICH IT WAS NOT PRODUCED DURING THE ASSESSMENT PROCEEDINGS. NOT HAVING DOUBT ED THE CONSUMPTION/SALES, THE MOTIVE BEHIND OBTAINING BOGU S BILLS THUS, APPEARS TO BE INFLATION OF PURCHASE PRICE SO AS TO SUPPRESS TRUE PROFITS. CONSIDERING THE FACTS OF THE CASE AS WELL AS THE VARIOUS CASE LAWS CITED (SUPRA), I ESTIMATE THE SUPPRESSED PROFIT TO THE EXTENT OF 12.5% OF THE PURCHASES MADE FROM THE BOGU S ENTITIES, AS THE SUPPRESSED PROFIT ELEMENT EMBEDDED IN SUCH PURC HASES. THIS ESTIMATION IS IN ADDITION TO THE GP SHOWN BY THE AP PELLANT. THUS, ADDITION OF RS.3,37,963/- (BEING 12.5% OF RS. 27,03,706/-) IS CONFIRMED AND THE BALANCE IS DELETED. ACCORDINGLY, THE GROUND RAISED BY THE APPELLANT IS PARTLY ALLOWED. 4. I HAVE CONSIDERED THE RIVAL CONTENTIONS AND FOUN D THAT THE LD. CIT(A) HAS GONE THROUGH THE ISSUE THREADBARE AND AF TER CONSIDERING VARIOUS JUDICIAL PRONOUNCEMENTS AND SPECIALLY THE D ECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS SI MIT P SHETH 365 ITR 0451 WHEREIN IT HAS BEEN HELD THAT ONCE THE SALE IS ACCEPTED BY THE A.O., THE VERY BASIS OF PURCHASES COULD NOT BE QUES TIONED. NOT THE ENTIRE PURCHASE PRICE COULD BE DISALLOWED BUT ONLY THE PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES COULD BE ADDED TO THE IN COME OF THE ITA NO. 134/MUM/2019 ITO VS SMT. HINA ARVIND SHAH 5 ASSESSEE. ACCORDINGLY, THE LD. CIT(A) HAS RESTRICTE D THE ADDITION TO THE EXTENT OF 12.5% IN SO FAR AS CORRESPONDING SALES WE RE NOT DOUBTED NOR THE BOOKS OF ACCOUNT WERE REJECTED. THE DETAILED FI NDINGS SO RECORDED BY THE LD. CIT(A) HAS NOT BEEN CONTROVERTED BY THE LD DR BY BRINGING ANY POSITIVE MATERIAL ON RECORD, ACCORDINGLY, I DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF THE LD. CIT(A) IN RESTRIC TING THE ADDITION TO THE EXTENT OF 12.5% OF ALLEGED BOGUS PURCHASES, BEING P ROFIT ELEMENT IN SUCH BOGUS PURCHASES. 5. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 20 TH JANUARY, 2020. SD/- (R.C.SHARMA) ACCOUNTANT MEMBER MUMBAI; DATED 20/01/2020 *RANJAN COPY OF THE ORDER FORWARDED TO : BY ORDER, (ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//