ITO, 28(1)(5), MUMBAI V. M/S HI-TECH INTERNATIONAL, MUMBAI

ITA 1422/MUM/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 8213 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-07-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 08-03-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DHARAM VEER SING H
• Keywords: Bogus purchase; Unexplained expenditure; Accommodation entries
• Section: 69C; 133(6); 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'SMC' BENCH, MUMBAI BEFORE SHRI R.C. SHARMA, ACCOUNTANT MEMBER ITA NO. 1422/MUM/2019 (ASSESSMENT YEAR: 2009-10) INCOME TAX OFFICER - 28(1)(5) ROOM NO. 325, 3RD FLOOR TOWER NO. 6, VASHI RAILWAY STATION COMPLEX, VASHI NAVI MUMBAI 400703 VS. M/S. HI - TECH INTERNATIONAL 402, THE GREAT EASTERN GALLERIA PLOT NO. 20, SECTOR -04 NERUL, NAVI MUMBAI PAN AACFH6972N APPELLANT RESPONDENT APPELLANT BY: SHRI DHARAMVEER SINGH RESPONDENT BY: NONE DATE OF HEARING: 12.03.2020 DATE OF PRONOUNCEMENT: 13.07.2020 O R D E R PER R.C. SHARMA, AM THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE CIT(A) FOR A.Y. 2009-10 IN THE MATTER OF ORDER PASSED UNDE R SECTIONS 143(3)/147 OF THE INCOME TAX ACT, 1961 (HEREINAFTER 'THE ACT') . 2. IN THIS APPEAL REVENUE IS AGGRIEVED BY THE ORDER OF THE CIT(A) FOR UPHOLDING THE ADDITION TO THE EXTENT OF 12.5% IN RE SPECT OF ALLEGED BOGUS PURCHASES, WHICH WAS MADE BY THE AO AT 100%. 3. I HAVE GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND FOUND FROM RECORD THAT THE ASSESSEE IS ENGAGED IN THE BUS INESS OF MANUFACTURING THE TRADING OF THERMAL INSULATION AND ALLIED PRODUC TS. THE AO GOT INFORMATION TO THE EFFECT THAT THE ASSESSEE HAS TAK EN ACCOMMODATION BILLS FOR PURCHASES. ACCORDINGLY HE REOPENED THE ASSESSME NT AND ADDED THE ENTIRE PURCHASES IN ASSESSEES INCOME. BY THE IMPUG NED ORDER THE CIT(A) RESTRICTED THE ADDITION TO THE EXTENT OF 12.5% AFTE R OBSERVING AS UNDER: - ITA NO. 1422/MUM/2019 M/S. HI-TECH INTERNATIONAL 2 6.1. GROUNDS NO. 1 & 2 OF THE APPEAL ARE AGAINST AD DITION OF RS. 22,25,542/- AS UNEXPLAINED EXPENDITURE U/S. 69C OF THE ACT. AS PER THE INVESTIGATIONS CARRIED OUT BY THE SALES TAX AUT HORITIES, THE AFOREMENTIONED PARTIES WERE FOUND TO BE INVOLVED IN GIVING ACCOMMODATION ENTRIES ONLY WITHOUT ACTUALLY SUPPLYI NG THE GOODS. THE LOGICAL INFERENCE IS THAT THE PURCHASES MADE BY THE APPELLANT WOULD ALSO BE IN THE NATURE OF ACCOMMODATION ENTRIE S ONLY. TO VERIFY THE SAME, THE AO HAD MADE ENQUIRIES BY ISSUING NOTI CES U/S 133(6) WHICH WERE RETURNED UNSERVED BY THE POSTAL AUTHORIT IES, THIS PARTY WAS FOUND TO BE NONEXISTENT AT THE ADDRESS GIVEN BY THE APPELLANT. THE APPELLANT ALSO FAILED TO PROVIDE THE LATEST ADD RESS OF THE PARTY. DURING THE SCRUTINY ASSESSMENT THE APPELLANT FURNIS HED DETAILS OF PURCHASES AND CORRESPONDING SALES. HOWEVER, THE APP ELLANT COULD NOT PRODUCE THE PARTY BEFORE THE AO INSPITE OF OPPORTUN ITY BEING GIVEN. THE APPELLANT ALSO FAILED TO PRODUCE DELIVERY CHALL ANS OR TRANSPORTATION DETAILS. THE ONUS OF PROVING THE GEN UINENESS OF SUCH PURCHASES IS ON THE APPELLANT WHICH THE APPELLANT H AD NOT BEEN ABLE TO DISCHARGE FULLY. WHEN THE HAWALA PARTY HAD ADMIT TED ON OATH THAT IT HAD GIVEN ACCOMMODATION ENTRIES ONLY WITHOUT ACT UALLY SUPPLYING THE GOODS, THE GENUINENESS OF PURCHASES MADE FROM T HESE PARTIES WILL HAVE TO BE CONSIDERED TAKING THIS INTO CONSIDERATIO N WHILE EXAMINING THE DOCUMENTATION SUBMITTED BY THE APPELLANT IN SUP PORT OF ITS CLAIM. THE DOCUMENTARY EVIDENCES SUCH AS PURCHASE BILLS, P AYMENTS BY CHEQUES, ETC. WOULD ALL HAVE BEEN ORCHESTRATED TO P RESENT A FACADE OF GENUINENESS AND DOES NOT NECESSARILY MEAN THAT THE PURCHASES FROM THESE PARTIES ARE GENUINE. THE COURTS HAVE HELD THA T PAYMENT BY CHEQUE BY ITSELF IS NOT SACROSANCT SO AS TO PROVE G ENUINENESS OF PURCHASES WHEN THE SURROUNDING CIRCUMSTANCES ARE SU SPECT. HOWEVER, THE APPELLANT HAS SHOWN ONWARD SALES WHICH HAS NOT BEEN DOUBTED BY THE ASSESSING OFFICER. SINCE THERE CAN B E NO SALES WITHOUT CORRESPONDING PURCHASES, THE ONLY LOGICAL EXPLANATI ON IS THAT THE APPELLANT WOULD HAVE MADE PURCHASES FROM UNDISCLOSE D PARTIES IN THE GREY MARKET AT LOWER RATES AND PURCHASES WERE S HOWN AS BEING MADE FROM THE IMPUGNED PARTIES TO SUPPRESS ITS PROF ITS. IN SUCH A SITUATION, THE VARIOUS COURTS INCLUDING THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS SIMIT P. SHETH, 356 ITR 451 H AVE HELD THAT NOT THE ENTIRE PURCHASES BUT ONLY THE PROFIT ELEMENT EM BEDDED IN THESE PURCHASES WAS TO BE DISALLOWED. THE HON'BLE GUJARAT HIGH COURT IN THIS CASE HAS HELD THAT PROFIT MARGIN OF 12.5% OF T HE BOGUS PURCHASES WILL BE REASONABLE. RESPECTFULLY FOLLOWING THE ORDE R IN THE CASE OF SIMIT P. SHETH THE ADDITION IS RESTRICTED TO 12.5% OF THE BOGUS PURCHASES OF RS. 22,25,542/-. THIS GROUND OF APPEAL IS 'PARTLY ALLOWED'. 7. GROUND NO. 3 IS REGARDING AD-HOC DISALLOWANCE AN D EXPENSES OF RS.1,72,445/-. DURING THE APPELLATE PROCEEDINGS, IT WAS STATED THAT APPELLANT HAS ALREADY ADDED BACK RS. 1,50,000/- ON ACCOUNT OF PERSONAL EXPENSES WHICH IS 17.40% OF THE EXPENSES A S AGAINST FURTHER DISALLOWANCE OF 20% BY A.O. IN VIEW OF THE FACTS OF THE CASE, NO FURTHER DISALLOWANCE IS WARRANTED AND THE DISALL OWANCE OF RS. ITA NO. 1422/MUM/2019 M/S. HI-TECH INTERNATIONAL 3 1,72,445/- MADE BY A.O IS DELETED AND THE GROUNDS O F APPEAL IS 'ALLOWED'. AGAINST THE ABOVE ORDER OF THE CIT(A) THE REVENUE I S IN FURTHER APPEAL BEFORE THE TRIBUNAL. 4. I HAVE CONSIDERED THE CONTENTIONS OF THE LEARNED D .R. AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. I FOUN D THAT THE ASSESSEE IS IN THE BUSINESS OF MANUFACTURING THE TRADING OF THERMA L INSULATION AND ALLIED PRODUCTS. DURING THE COURSE OF REASSESSMENT THE AO ADDED THE ENTIRE PURCHASES IN ASSESSEES INCOME. BY THE IMPUGNED ORD ER THE CIT(A) AFTER RECORDING DETAILED FINDINGS, DIRECTED THE AO TO RES TRICT THE ADDITION TO THE EXTENT OF 12.5% AFTER APPLYING THE PROPOSITION LAID DOWN BY THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. SIMIT P. SHETH, 356 ITR 451. THE DETAILED FINDING RECORDED BY THE CIT(A) HAS NOT BEE N CONTROVERTED BY THE LEARNED D.R. BY BRINGING ANY POSITIVE MATERIAL ON R ECORD. ACCORDINGLY I DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE CIT(A). 5. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 13 TH JULY, 2020. SD/ - (R.C. SHARMA) ACCOUNTANT MEMBER MUMBAI, DATED: 13 TH JULY, 2020 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) -26, MUMBAI 4. THE PR.CIT - 28, MUMBAI 5. THE DR, SMC BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.