ITO - 31(2)(3), MUMBAI V. M/S MOAZAM K. SHAIKH, MUMBAI

ITA 1720/MUM/2020

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 3739 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-10-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 07-08-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SAJAY J SHETHI
• Keywords: Bogus purchase; Accommodation entries
• Section: 133(6); 143(1); 22; 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (VIRTUAL COURT) SMC BENCH, MUMBAI BEFORE SHRI C.N. PRAS AD, HON'BLE JUDICIAL MEMBER ITA NO. 1720 /MUM/2020 ( A.Y. 20 1 0 - 11) INCOME TAX OFFICER 31 ( 2 )( 3 ) ROOM NO. 613 , 6 TH FLOOR KAUTILYA BHAVAN BANDRA KURLA COMPLEX BANDRA(E), MUMBAI - 400051 V. M/S. MOAZAM KHWAJA SHAIK 12 - A, TAHIRA COMPUND PREMSONS SHOPPING CENTRE CAVES ROAD, JOGESHWARI(E) MUMBAI - 400060 PAN: BESPS5656B ( A PPELLANT) (RESPONDENT) ASSESSEE BY : NONE DEPARTMENT BY SHRI SAJAY J. SHETHI DATE OF HEARING : 22 .09.2021 DATE OF PRONOUNCEMENT : 01 .10 .2021 O R D E R PER C. N. PRASAD (JM) 1. TH IS APPEAL IS FILED BY THE R EVENUE AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) 42 , MUMBAI [HEREINAFTER IN SHORT LD.CIT(A)] DATED 24.01.2020 FOR THE A.Y. 20 1 0 - 11 IN RESTRICTING THE DISALLOWANCE TO 12.5 % OF PURCHASES AS AGAINST THE ENTIRE PURCHASES DISALLOWED AS NON - GENUINE/BOGUS BY THE ASSESSING OFFICER. 2 ITA NO. 1720/MUM/2020 (A.Y. 2010 - 11) M/S. MOAZAM KHWAJA SHAIK 2. BRIEFLY STATED THE FACTS ARE THAT, THE ASSESSEE ENGAGED IN THE BUSINESS OF BUYING AND SELLING OF SEWING MACHINES, FILED RETURN OF INCOME ON 04.08.2010 FOR THE A.Y. 20 1 0 - 11 DECLARING INCOME OF . 3,48,620 / - AND THE RETURN WAS PROCESSED U/S. 143(1) OF THE ACT. SUBSEQUENTLY, ASSESSING OFFICER RECEIVED INFORMATION FROM THE DGIT (INVESTIGATION) , MUMBAI ABOUT THE ACCOMMODATION ENTRIES PROVIDED BY VARIOUS DEALERS AND ASSESSEE WAS ALSO ONE OF THE BENEFICIARY FROM THOSE DEALERS. THE ASSESSMENT WAS REOPENED U/S. 147 OF THE ACT BASED ON THE INFORMATION RECEIVED FROM DGIT (INVESTIGATION) , MUMBAI, THAT THE ASSESSEE HAS AVAILED ACCOMMODATION ENTRIES FROM VARIOUS DEALERS WHO ARE SAID TO BE PROVIDING ACCOMMODATION ENTRIES WITHOUT THERE BEING TRANS PORTATION OF ANY GOODS. IN THE RE ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS REQUIRED TO PROVE THE GENUINENESS OF THE PURCHASES MADE FROM THE PARTIES AS REFERRED IN ASSESSMENT ORDER. ASSESSEE FURNISHED BOOKS OF ACCOUNTS AND SUBMITTED THAT THE PURCHASES MADE ARE GENUINE . ASSESSEE FURTHER SUBMITTED THAT THE PAYMENTS ARE MADE THROUGH ACCOUNT PAYEE CHEQUES AS SUCH CONTENDED THAT AL L THE PURCHASES ARE GENUINE. 3. NOT CONVINCED WITH THE SUBMISSIONS OF THE ASSESSEE THE ASSESSING OFFICER TREATED THE PURCHASES AS NON - G ENUINE AND HE WAS OF THE OPINION THAT ASSESSEE HAD OBTAINED ONLY ACCOMMODATION ENTRIES WITHOUT THERE 3 ITA NO. 1720/MUM/2020 (A.Y. 2010 - 11) M/S. MOAZAM KHWAJA SHAIK BEING ANY TRANSPORTATION OF MATERIALS AND THE ASSESSEE MIGHT HAVE MADE PURCHASES IN THE GRAY MARKET. ASSESSING OFFICER OBSERVED THAT THE NOTICES ISSUED U/ S. 133(6) OF THE ACT TO THE PARTIES ARE RETURNED UNSERVED WITH A REMARK NOT KNOWN /UNCLAIMED AND THE ASSESSEE HAS NOT PRODUCED THE PARTIES BEFORE THE ASSESSING OFFICER . IT IS THE FINDING OF THE ASSESSING OFFICER THAT THE ASSESSEE FAILED TO PRODUCE THE PA RTIES IN SUPPORT OF ITS CLAIM THAT PURCHASES ARE GENUINELY MADE FROM THE PARTIES. THEREFORE, ASSESSING OFFICER TREATED ENTIRE PURCHASES OF . 29,62,440 / - AS NON - GENUINE AND ADDED TO THE INCOME OF THE ASSESSEE. ON APPEAL THE LD.CIT(A) CONSIDERING THE EVIDE NCES AND VARIOUS SUBMISSIONS OF THE ASSESSEE RESTRICTED THE DISALLOWANCE TO AN EXTENT OF 12.5% OF THE NON - GENUINE PURCHASES. 4. INSPITE OF ISSUE OF NOTICE NONE APPEARED NOR ANY ADJOURNMENT WAS SOUGHT. THEREFORE, I PROCEED TO DISPOSE OF THIS APPEAL ON HEARIN G LD.DR ON MERITS. 5. LD. DR VEHEMENTLY SUPPORTED THE O RDERS OF THE ASSESSING OFFICER. 6. HEARD LD.DR, PERUSED THE ORDERS OF THE AUTHORITIES BELOW. ON A PERUSAL OF THE ORDER OF THE LD.CIT(A), I FIND THAT THE LD.CIT(A) CONSIDERED THIS ASPECT OF THE MATTER ELABORATELY WITH REFERENCE TO THE SUBMISSIONS OF 4 ITA NO. 1720/MUM/2020 (A.Y. 2010 - 11) M/S. MOAZAM KHWAJA SHAIK THE ASSESSEE AND THE AVERM ENTS IN THE ASSESSMENT ORDER AND FOLLOWING DECISION OF THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT V. SIMIT P. SH ETH [356 ITR 451] RESTRICTED THE ADDITION TO 12.5% OF THE NON - GENUINE PURCHASES. WHILE HOLDING SO, THE LD.CIT(A) OBSERVED AS UNDER: - 7.3.1 I HAVE CONSIDERED THE SUBMISSION OF THE APPELLANT, CAREFULLY GONE THROUGH THE ORDER OF THE AO, PERUSED THE MATERIAL ON RECORD, AND REFERRED TO THE CASE LAWS RELIED UPON BY THE APPELLANT AND THE AO. 7.3.2 REVISED GROUND NO. 3 AND 10 OF THE APPEAL IS AGAINST ADDITION OF RS. 29,62,440/ - BEING 100% OF NON - GENUINE PURCHASES. 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 ACC OMMODATION ENTRIES ONLY. TO VERIFY THE SAME, THE AO HAD MADE ENQUIRIES BY ISSUING NOTICES U/S 133(6) WHICH WERE RETURNED UN - SERVED 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 IN SPITE OF OPPORTUNITY BEING GIVEN. TH E 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 T HAT IT HAD GIVEN ACCOMMODATION ENTRIES ONLY WITHOUT ACTUALLY SUPPLYING THE GOODS, THE GENUINENESS OF PURCHASES MADE FROM THESE PARTIES 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 AND DOES NOT NECESSARILY MEAN THAT THE PURCHASES FROM THESE PARTIES ARE GENUINE. THE COUR TS HAVE HELD THAT PA YMENT BY CHEQUE BY ITSELF IS NOT SACROSANCT S O AS TO PROVE GENUINENESS OF PURCHASES WHEN THE SURROUNDING CIRCUMSTANCES ARE 5 ITA NO. 1720/MUM/2020 (A.Y. 2010 - 11) M/S. MOAZAM KHWAJA SHAIK SUSPECT. HOWEVER, THE APPELLANT HAS SHOWN ONWARD SALES WHICH HAS NOT BEEN DOUBTED BY THE ASSESSING OFFICER. SINCE THERE C AN 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 W ERE 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 ITR 451 HAVE HELD THAT NOT THE ENTIRE PURCHASES BUT ONLY THE PROFIT ELEMENT EMBEDDED IN THESE PURCHASES W AS TO BE DISALLOWED. THE HON'BLE GUJRAT HIGH C OURT 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 12.5% OF THE BOGUS PURCHASES IS CONF IRMED. THEREFORE THE APPELLANT GETS RELIEF OF RS. 25,92,135/ - (RS. 29,62,440/ - MINUS 3,70,305/ - ). THE GROUNDS OF APPEAL ARE PARTLY ALLOWED. 7. ON A CAREFUL PERUSAL OF THE ORDER OF THE LD.CIT(A) AND THE REASONS GIVEN THEREIN, I DO NOT FIND ANY INFIRMITY IN TH E ORDER PASSED BY THE LD.CIT(A) IN RESTRICTING THE ADDITION/DISALLOWANCE TO THE EXTENT OF 12.5% OF THE PURCHASES. GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 8. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED ON 01 .10.2021 AS PER RULE 34(4) OF ITAT RULES BY PLACING THE PRONOUNCEMENT LIST IN THE NOTICE BOARD. SD/ - (C.N. PRASAD) JUDICIAL MEMBER MUMBAI / DATED 01 / 10 / 2021 GIRIDHAR , S R. PS 6 ITA NO. 1720/MUM/2020 (A.Y. 2010 - 11) M/S. MOAZAM KHWAJA SHAIK COPY OF THE ORDER FORWARDED TO : 1. THE ASSESSEE 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY// BY ORDER (ASSTT. REGISTRAR) ITAT, MUM