AAS MOHAMMED KHAN, MUMBAI V. ITO 26(1)(1), MUMBAI

ITA 1758/MUM/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 0599 (ITAT-MUMBAI)
• Duration Of Justice: 10 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-02-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 14-03-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: HEMALATHA
• Assessee Lawyers: RAMKUMAR PRAJAPATI
• Keywords: Bogus purchase; Accommodation entries; Onus to prove
• Section: 133(6); 147; 148

Judgement Text

- IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI , BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER ./ I.T.A. NO. 1758/MUM/2017 ( / ASSESSMENT YEAR: 2009 - 10 ) AAS MOHAMMED KHAN (PROP. PERFECT STEEL CORPORATION) GALA NO. 503, GULAB SHAH ESTATE, 2 ND GALI, NEAR KURLA BUS DEPOT LBS MARG, KURLA (W), MUMBAI - 400 070 / VS. INCOME TAX OFFICER 26(1)(1), MUMBAI ./ ./ P AN/GIR NO. AAAPM 7494 C ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI RAMKUMAR PRAJAPATI / RESPONDENT BY : MS. HEMALATHA / DATE OF HEARING : 27.11.2017 / DATE OF PRONOUNCEMENT : 06.02 .2018 / O R D E R PER S HAMIM YAHYA , A. M.: T HIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS) DATED 26.12.2016 AND PERTAINS TO ASSESSMENT YEAR 2009 - 10. 2 ITA NO. 1758/MUM/2017 (A.Y. 2009 - 10) AAS MOHAMMED KHAN VS. ITO 2. T H E ISSUE RAISED IS THAT LD. COMMISSIONER OF INCOME TAX (APPEALS) ERR ED IN SUSTAINING DISALLOWANCE OF 12.5 %PERCENT OF BOGUS PURCHASE AMOUNTING TO RS.12,94,464/ - . 3. THE BRIEF FACTS OF THE CASE ARE THAT THE PROCEEDINGS U/S.147/148 WERE INITIATED IN THIS CA SE AFTER RECORDING THE REASONS ON THE BASIS OF THE INFORMATION RECEIVED IN TH E CASE OF THE ASSESSEE BY CIT - 2 1, MUMBAI FROM SALES TAX DEPARTMENT THROUGH OFFICE OF DGIT( I NV.), MUMBAI THAT THE ASSESSE E HAD TAKEN ENTRIES OF BOGUS PURCHASE THROUGH THE HAVALA PA RTIES. THE CASE WAS REOPENED U/S. 147 OF THE IT ACT. NOTICE U/S. 148 OF THE I T ACT, 1961 WAS ISSUED TO THE ASSESS E E ON 21.03.2014 AND SERVED UPON THE ASSESSE. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE WAS ONE OF THE BENEFICIARY OF THE ACCOMMODATION ENTRIES FOR BOGUS PURCHASES. THE SALES TAX DEPARTMENT HAD IDENTIFIED ENTITIES WHICH WERE INDULGING IN PROVIDING ACCOMMODATION BILLS WITHOUT DOING ANY GENUINE BUSINESS. AS PER INFORMATION RECEIVED FROM THE SALES TAX DEPARTMENT, ASSESSEE HAD OBTAINED ACCOMMO DATION BILLS DURING THE A.YS.2009 - 10 FROM THE VERY ENTITIES WHICH WERE LISTED ON THE WEBSITE OF SALES TAX DEPARTMENT AND DECLARED AS HAWALA DEALERS. THE ASSESSING OFFICER FURTHER OBSERVED THAT THE ASSESSEE OBTAINED BOGUS PURCHASE BILLS TO THE TUNE OF RS.1, 03,71,712/ - FROM THE FOLLOWING PARTIES DURING THE F.Y.2008 - 09 WHICH REFLECTED IN THE LIST OF HAWALA DEALERS MAHARASHTRA SALES TAX DEPARTMENT. 3 ITA NO. 1758/MUM/2017 (A.Y. 2009 - 10) AAS MOHAMMED KHAN VS. ITO SR. NO. NAME OF HAWALA DEALER BOGUS PURCHASES (RS.) 1 M/S.PADMALAXMI STEEL & ALLOYS PVT LTD. 9, 09,089 / - 2 ISK T RADING COMPANY PVT LTD. 22,83,916/ - 3 KRC TRADING CO. PVT LTD. 7 1, 7 8,707/ - TOTAL RS.103,71,712/ - 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS VARIOUS DETAILS IN RELATION TO THE INCOME DERIVED BY THE ASSESSEE HAVE BEEN CALLED FOR. THE ASSESSEE PRODUC ED THE BOOKS OF ACCOUNTS, BILLS/VOUCHERS ETC . AT THE TIME OF HEARING. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, NOTICES U/S. 133(6) OF THE I.T. ACT WERE ISSUED TO THE ABOVE MENTIONED PARTIES, AS PER BILLS PRODUCED BY THE ASSESSEE TO VERIFY THE GENUINENE SS OF PURCHASES MADE BY THE ASSESSEE FROM THESE PARTIES, THROUGH THE SPEED POST. HOWEVER , THE NOTICES HAD RETURNED UN - SERVED WITH THE REMARK 'NOT FOUND' OR 'LEFT'. THEREAFTER, THE LD. COUNSEL OF THE ASSESSEE WAS ASKED TO PRODUCE THE SAID PARTIES FOR VERIFI CATION OF PURCHASES OF RS. 103,71,712/ - MADE BY THE ASSESSEE . HOWEVER, THE ASSESSEE FAILED TO PRODUCE THE AFORESAID PARTIES FOR VERIFICATION. 5. THE ASSESSING OFFICER AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE OBSERVED THAT THE ASSESSEE HAD MERELY F URNISHED LEDGER ACCOUNT AND INVOICES AND HAS CLAIMED THE RELEVANT PURCHASES AS GENUINE ONLY BECAUSE THE PAYMENT HAS BEEN MADE BY CHEQUE. THE ASSESSING OFFICER FURTHER CONTENDED THAT INVOICES PRODUCED BY THE ASSESSEE CANNOT BE TREATED AS GENUINE IN VIEW OF THE FACT THAT THE CONCERNED PARTIES HAVE CONFESSED BEFORE THE SALES - TAX AUTHORITIES THAT THEY ARE IN THE BUSINESS OF ISSUING BILLS WITHOUT ACTUALLY SELLING ANY MATERIAL AND THAT THE LEDGER ACCOUNT IS ONLY SELF MADE 4 ITA NO. 1758/MUM/2017 (A.Y. 2009 - 10) AAS MOHAMMED KHAN VS. ITO EVIDENCE. THE ASSESSING OFFICER ALSO OBSE RVED THAT MOST OF THESE PURCHASES ARE MADE THROUGH BROKERS AND THE ASSESSEE HAS NOT BEEN ABLE TO FURNISH ANY EVIDENCE TO PROVE THE GENUINENESS OF THE PURCHASES. IT WAS CONTENDED THAT THE ASSESSEE HAD ALSO FAILED TO PRODUCE THE SUPPLIERS AND BROKERS/3 RD PAR TY EVIDENCE IN SPITE OF SEVERAL OPPORTUNITIES GRANTED TO THE ASSESSEE . IN FACT , NO TRANSPORT RECEIPT OR LORRY RECEIPTS OR OCTROI RECEIPTS FOR THE SAID PURCHASES COULD BE SUBMITTED BY THE ASSESSEE. THE ASSESSING OFFICER CONTENDED THAT THE ASSESSEE FAILED TO DISCHARGE THE BURDEN OF PROOF OF ESTABLISHING THE AFORESAID PURCHASES, AND THEREFORE HE PASSED ORDER U/S.143(3) R.W.S,147 OF THE IT ACT BY MAKING AN ADDITION OF RS.12,96,464/ - @ 12.5% OF THE ALLEGED BOGUS PURCHASES AMOUNTING TO RS,103,71,712/ - BY HOLDING THAT AS PER THE LIST OF SALES TAX DEPARTMENT, THE ASSESSEE HAS RECEIVED ACCOMMODATION/BOGUS PURCHASE BILLS FROM THE ABOVE PARTIES AND THAT IT IS EVIDENT THAT THE ASSESSEE HAS NOT PURCHASED THE GOODS FROM THESE ALLEGED SUPPLIERS AND ADDED THE PROFIT ELEMENT OUT OF THE ALLEGED BOGUS PURCHASES. 6 . A GAINST THE ABOVE ORDER , THE ASSESSEE APPEALED BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEALS). THE LD. COMMISSIONER OF INCOME TAX (APPEALS) CONF I RMED THE ACTION OF THE ASSESSING OFFICER IN MAKING ADDITION OF 12 .5% OF THE BOGUS PURCHASE. 7 . AGAINST THE ABOVE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS), THE ASSESSEE IS IN APPEAL BEFORE THE ITAT. 5 ITA NO. 1758/MUM/2017 (A.Y. 2009 - 10) AAS MOHAMMED KHAN VS. ITO 8 . I HAVE HEARD THE LD. DEPARTMENTAL REPRESENTATIVE AND PERUSED THE RECORDS. THE ACCOUNTANT OF THE ASSESSEE APP EARED ON BEHALF OF THE ASSESSEE. I FIND THAT CREDIBLE AND COGENT INFORMATION WAS RECEIVED IN THIS CASE BY THE ASSESSING OFFICER THAT CERTAIN ACCOMMODATION ENTRY PROVIDER/BOGUS SUPPLIERS WERE BEING USED BY CERTAIN PARTIES TO OBTAINED BOGUS BILLS. THE ASSESS EE WAS FOUND TO HAVE TAKEN ACCOMMODATION ENTRY/BOGUS PURCHASE BILLS DURING THE CONCERNED ASSESSMENT YEAR FROM DIFFERENT PARTIES. BASED UPON THIS INFORMATION ASSESSMENT WAS REOPENED. THE CREDIBILITY OF INFORMATION RELATING TO REOPENING REMAINS UN - ASSAILED. IN SUCH FACTUAL SCENARIO, THE ASSESSING OFFICER HAS MADE THE NECESSARY ENQUIRY. THE ISSUE OF NOTICE TO ALL THE PARTIES HAVE RETURNED UNSERVED. ASSESSEE HAS NOT BEEN ABLE TO PROVIDE ANY CONFIRMATION FROM ANY OF THE PARTY. ASSESSEE HAS ALSO NOT BEEN ABLE TO PRODUCE ANY OF THE PARTIES. NECESSARY EVIDENCE RELATING TO TRANSPORTATION OF THE GOODS WAS ALSO NOT ON RECORD. IN THIS FACTUAL SCENARIO, IT IS AMPLY CLEAR THAT THE ASSESSEE HAS OBTAINED BOGUS PURCHASE BILLS. MERE PREPARATION OF DOCUMENTS FOR PURCHASES CANN OT CONTROVERT OVERWHELMING EVIDENCE THAT THE PROVIDER OF THESE BILLS IS BOGUS AND NON - EXISTENT. 9 . THE SALES TAX DEPARTMENT IN ITS ENQUIRY HAS FOUND THE PARTIES TO BE PROVIDING BOGUS ACCOMMODATION ENTRIES. THE ASSESSING OFFICER ALSO ISSUED NOTICES TO THE SE PARTIES AT THE ADDRESSES PROVIDED BY THE ASSESSEE. ALL THESE NOTICES HAVE RETURNED UNSERVED. ASSESSEE HAS NOT BEEN ABLE TO PRODUCE ANY OF THE PARTIES. NEITHER THE ASSESSEE HAS BEEN ABLE TO PRODUCE ANY CONFIRMATION FROM THESE PARTIES. IN SUCH 6 ITA NO. 1758/MUM/2017 (A.Y. 2009 - 10) AAS MOHAMMED KHAN VS. ITO CIRCUMSTANC ES, THERE IS NO DOUBT THAT THESE PARTIES ARE NON - EXISTENT. I FIND IT FURTHER STRANGE THAT ASSESSEE WANTS THE REVENUE TO PRODUCE ASSESSEES OWN VENDORS, WHOM THE ASSESSEE COULD NOT PRODUCE. THE PURCHASE BILLS FROM THESE NON - EXISTENT/BOGUS PARTIES CANNOT BE TAKEN AS COGENT EVIDENCE OF PURCHASES. IN LIGHT OF THE OVERWHELMING EVIDENCE, THE REVENUE AUTHORITIES CANNOT PUT UPON BLINKERS AND ACCEPT THESE PURCHASES AS GENUINE. THIS PROPOSITION IS DULY SUPPORTED BY HONBLE APEX COURT DECISION IN THE CASE OF SUMATI D AYAL VS. CIT [1995] 214 ITR 801 (SC) AND CIT VS. DURGA PRASAD MORE [1971] 82 ITR 540 (SC). IN THE PRESENT CASE, THE ASSESSEE WANTS THAT THE UNASSAILABLE FACT THAT THE SUPPLIERS ARE NON - EXISTENT AND, THUS, BOGUS SHOULD BE IGNORED AND ONLY THE DOCUMENTS BEIN G PRODUCED SHOULD BE CONSIDERED. THIS PROPOSITION IS TOTALLY UNSUSTAINABLE IN LIGHT OF HONBLE APEX COURT DECISIONS. 10 . I FURTHER FIND THAT HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF NIKUNJ EXIMP ENTERPRISES (IN WRIT PETITION NO 2860, ORDER DT. 18. 6.2014) HAS UPHELD 100% ALLOWANCE FOR THE PURCHASES SAID TO BE BOGUS WHEN THE SALES HAVE NOT BEEN DOUBTED. HOWEVER, THE FACTS OF THAT CASE WERE DIFFERENT. FURTHERMORE, THE SALES IN THAT CASE WERE BASICALLY TO GOVERNMENT DEPARTMENTS. HENCE, THE RATIO FROM THIS DECISION IS NOT FULLY APPLICABLE ON THE FACTS OF THE CASE. 11 . IN THESE CIRCUMSTANCES, THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS REFERRED TO HONBLE GUJARAT HIGH COURT DECISION IN THE CASE OF TAX APPEAL NO. 240 OF 2003 IN THE CASE OF N K INDUSTRIE S VS. DY. CIT VIDE ORDER DATED 20.06.2016, WHEREIN 100% OF 7 ITA NO. 1758/MUM/2017 (A.Y. 2009 - 10) AAS MOHAMMED KHAN VS. ITO THE BOGUS PURCHASES WAS HELD TO BE ADDED IN THE HANDS OF THE ASSESSEE AND TRIBUNALS RESTRICTION OF THE ADDITION TO 25% OF THE BOGUS PURCHASES WAS SET ASIDE. IT WAS EXPOUNDED THAT WHEN PURCHASE BILL S HAVE BEEN FOUND TO BE BOGUS, 100% DISALLOWANCE WAS REQUIRED. THE SPECIAL LEAVE PETITION AGAINST THIS ORDER ALONG WITH OTHERS HAS BEEN DISMISSED BY THE HONBLE APEX COURT VIDE ORDER DATED 16.1.2017. 1 2 . I FURTHER NOTE THAT HONBLE RAJASTHAN HIGH COURT H AS SIMILARLY TAKEN NOTE OF DECISIONS OF THE APEX COURT ON THE ISSUE OF BOGUS PURCHASES IN THE CASE OF CIT JAIPUR VS SHRUTI GEMS IN ITA NO. 658 OF 2009. THE HONBLE HIGH COURT HAS REFERRED TO THE DECISION OF CIT JAIPUR VS. ADITYA GEMS, D. B. IN ITA NO. 234 OF 2008 DATED 02.11.2016, WHEREIN THE HONBLE COURT HAD INTER ALIA HELD AS UNDER: 'CONSIDERING THE LAW DECLARED BY THE SUPREME COURT IN THE CASE OF VIJAY PROTEINS LTD. VS. COMMISSIONER OF INCOME TAX, SPECIAL LEAVE TO APPEAL (C) NO.8956/2015 DECIDED ON 06 .04.2015 WHEREBY THE SUPREME COURT HAS DISMISSED THE SLP CONFIRMED THE ORDER DATED 09.12.2014 PASSED BY THE GUJARAT HIGH COURT AND OTHER DECISIONS OF THE HIGH COURT OF GUJARAT IN THE CASE OF SANJAY OILCAKE INDUSTRIES VS. COMMISSIONER OF INCOME TAX (2009) 3 16 ITR 274 (GUJ) AND N.K. INDUSTRIES LTD. VS. DY. C.I.T., TAX APPEAL NO.240/2003 DECIDED ON 20.06.2016, THE PARTIES ARE BOUND BY THE PRINCIPLE OF LAW PRONOUNCED IN THE AFORESAID THREE JUDGMENTS. 1 3 . HOWEVER, I NOTE THAT THIS IS NOT AN APPEAL BY THE REVE NUE. HENCE, IT WILL NOT B E APPROPRIATE TO CONSIDER AND TAKE AWAY THE RELIEF ALREADY GRANTED BY THE REVENUE TO THE ASSESSEE. HENCE, I CONFIRM THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS). 1 4 . I FURTHER NOTE THAT SINCE I AM CONFIRMING THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ON THE BASIS OF THE HONBLE SUPREME COURT AND HONBLE HIGH 8 ITA NO. 1758/MUM/2017 (A.Y. 2009 - 10) AAS MOHAMMED KHAN VS. ITO COURT DECISIONS, THE CASES FROM TRIBUNAL REFERRED BY THE ASSESSEE DO NOT HOLD PRECEDENCE OVER THEM. 1 5 . IN THE RESULT , THIS APPEAL FILED BY THE ASSESSE E STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 06.02.2018 SD/ - (S HAMIM YAHYA ) / A CCOUNTANT MEMBER MUMBAI ; DATED : 06.02.2018 . . ./ ROSHANI , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE AP PELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F ILE / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI