PANKAJ SABHARWAL, Mumbai V. INCOME TAX OFFICER 22(3)(3), Mumbai

ITA 1761/MUM/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 5388 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-05-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 19-03-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ABHI RAMA KARTIKEYANLD
• Assessee Lawyers: RITIKA AGARWAL LD
• Keywords: Bogus purchase; Unexplained cash credit; Additional evidence; Question of law; Tangible material; Accommodation entries; Onus to prove; Reassessment proceedings
• Section: 143(3); 142(1); 133(6); 250; 148; 68

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI , , BEFORE SHRI SAKTIJIT DEY, JM AND SHRI MANOJ KUMAR AGGARWAL, AM ./ I.T.A. NO.1761/MUM/2018 ( / ASSESSMENT YEAR: 2010-11) & ./ I.T.A. NO.1762/MUM/2018 ( / ASSESSMENT YEAR: 2011-12) PANKAJ SABHARWAL M/S. ARMSTRONG SAFETY SHOP NO.07, THE EASTERN GALLERIA PALM BEACH ROAD SECTOR-4, NERUL, NAVI MUMBAI-400 706. / VS. INCOME TAX OFFICER - 22(3)(3) , ROOM NO. 401, 4 TH FLOOR TOWER NO.-6, VASHI STATION COMPLEX, VASHI NAVI MUMBAI. ! ./ ./PAN/GIR NO. AQPPS-3284-R ( /APPELLANT ) : ( / RESPONDENT ) ASSESSEE BY : MS. RITIKA AGARWAL-LD. AR DEPARTMENT BY : SHRI ABHI RAMA KARTIKEYAN-LD.DR / DATE OF HEARING : 08/05/2019 / DATE OF PRONOUNCEMENT : 16/05/2019 / O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER):- 1. AFORESAID APPEALS BY ASSESSEE FOR ASSESSMENT YE ARS [AY] 2010-11 AND 2011-12 CONTEST THE ORDERS OF FIRST APPELLATE A UTHORITY ON CERTAIN COMMON GROUNDS OF APPEAL. SINCE COMMON ISSUES ARE I NVOLVED, WE 2 PROCEED TO DISPOSE-OFF THE SAME BY WAY OF THIS COMM ON ORDER FOR THE SAKE OF CONVENIENCE & BREVITY. ITA NO. 1761/MUM/2018: AY 2010-11 2. AGGRIEVED BY THE ORDER OF LD. COMMISSIONER OF IN COME-TAX (APPEALS)- 26, MUMBAI [CIT(A)], APPEAL NO. CIT(A)-26/IT-07/2014-15 DATED 23/01/2018, THE ASSESSEE HAS RAISED FOLLOWING GROUN DS OF APPEAL: - THE APPELLANT INDIVIDUAL IS AGGRIEVED BY THE ORDER DATED 23.1.2018 PASSED BY ID. CIT(A)-26, MUMBAI U/S 250 OF THE INCOME TAX ACT, 1961 AND IS I N APPEAL: 1 (I) BECAUSE, THE ID. CIT(A) HAS ERRED IN LAW AND ON FACTS IN UPHOLDING 100% OF THE DISALLOWANCE IN RESPECT OF ALLEGED BOGUS PURCHASES AMOUNTING TO RS.592,042/- BASED ON INFORMATION FROM SALES TAX DEPARTMENT. (II) BECAUSE, THE ID. CIT(A) HAS ERRED IN LAW AN D ON FACTS IN UPHOLDING THE DISALLOWANCE OF RS.592,042/- IN SPITE OF VARIOUS DETAILS REGARDI NG LEDGER ACCOUNTS, BANK STATEMENTS AND BILLS BEING AVAILABLE ON RECORD. 2.BECAUSE, THE ID. CIT(A) HAS ERRED IN LAW AND ON F ACTS IN UPHOLDING THE ADDITION OF RS.2,80,000/- U/S 68 AS UNEXPLAINED CASH CREDIT ALT HOUGH THE SAME WAS RECEIVED FROM THE APPELLANT'S WIFE AND STOOD SUPPORTED BY BONAFIDE DE POSITS IN HER BANK ACCOUNT. 3.1 FACTS IN BRIEF ARE THAT THE ASSESSEE BEING RESIDENT INDIVIDUAL STATED TO BE ENGAGED AS DEALER OF SAFETY AND INDUSTRIAL ITEMS UNDER PROPRIETORSHIP CONCERN NAMELY M/S ARMSTRONG SAFETY WAS ASSESSED FOR IMPUGNED AY U/S 143(3) R.W.S 147 ON 28/02/2014 WHEREIN THE INCOME O F THE ASSESSEE WAS DETERMINED AT RS.57.35 LACS AFTER CERTAIN ADDITIONS /DISALLOWANCES AS AGAINST RETURNED INCOME OF RS.2.07 LACS E-FILED BY THE ASSESSEE ON 14/10/2010 WHICH WAS PROCESSED U/S 143(1). 3.2 THE ASSESSEE WAS SUBJECTED TO REASSESSMENT PROC EEDINGS PURSUANT TO RECEIPT OF CERTAIN INFORMATION FROM SALES TAX DEPARTMENT, MAHARASHTRA THAT THE ASSESSEE STOOD BENEFICIARY OF CERTAIN ACCO MMODATION PURCHASES AGGREGATING TO RS.5.92 LACS STATED TO BE MADE FROM 5 SUSPICIOUS DEALERS, THE DETAILS OF WHICH HAVE ALREADY BEEN EXTRACTED IN PARA 3.4 OF THE QUANTUM 3 ASSESSMENT ORDER. ACCORDINGLY, THE CASE WAS REOPENE D BY ISSUANCE OF NOTICE U/S 148 ON 15/03/2013 WHICH WAS FOLLOWED BY NOTICE U/S 142(1) WHEREIN THE ASSESSEE WAS DIRECTED TO SUBSTANTIATE T HE PURCHASE TRANSACTIONS. 3.3 TO CONFIRM THE TRANSACTIONS, NOTICES SENT U/S 1 33(6) TO THE SUPPLIERS WERE RETURNED BACK UNSERVED BY POSTAL AUTHORITIES I N FEW CASES WHEREAS SOME PARTIES DID NOT REPLY TO THE SAID NOTICE. THE SAME WAS CONFRONTED TO THE ASSESSEE AND THE ASSESSEE WAS DIRECTED TO PRODU CE THE SUPPLIERS TO ESTABLISH THE GENUINENESS OF THE TRANSACTIONS. HOWE VER, THE ASSESSEE FAILED TO DO SO. THE FAILURE ON THE PART OF THE ASS ESSEE TO SUBSTANTIATE THE PURCHASES WITH CONCLUSIVE DOCUMENTARY EVIDENCES LED THE LD. AO TO TREAT THESE PURCHASES AS ACCOMMODATION ENTRIES OBTAINED O NLY FOR THE SAKE OF REDUCING THE INCOME AND THEREFORE, THE SAME WAS DIS ALLOWED AND ADDED BACK TO THE INCOME OF THE ASSESSEE. 3.4 THE SECOND ADDITION, WHICH IS SUBJECT MATTER OF PRESENT APPEAL, IS ADDITION OF UNEXPLAINED CASH CREDIT U/S 68 FOR RS.2 .80 LACS. THE SAID AMOUNT REPRESENT LOAN TAKEN BY THE ASSESSEE FROM HI S WIFE SMT. TEENA SABHARWAL. SINCE THE ASSESSEE DID NOT FILE ANY DETAILS, THE SA ME WAS ADDED TO THE INCOME OF THE ASSESSEE U/S 68. 4.1 AGGRIEVED, THE ASSESSEE CONTESTED THE REASSESSM ENT PROCEEDINGS ON LEGAL GROUNDS WHICH WAS DISMISSED BY LD. FIRST APPE LLATE AUTHORITY. IN SUPPORT OF THE PURCHASE TRANSACTIONS, THE ATTENTION WAS DRAWN TO THE FACT THAT THE COPIES OF INVOICES, LEDGER EXTRACTS REFLEC TING PURCHASE TRANSACTIONS AND THE BANK STATEMENTS HIGHLIGHTING THE PAYMENTS M ADE BY THE ASSESSEE TO THE AFORESAID SUPPLIERS WERE SUBMITTED DURING AS SESSMENT PROCEEDINGS 4 TO LD. AO AND THEREFORE, THE PRIMARY ONUS TO PROVE THE GENUINENESS OF THE TRANSACTIONS WAS DULY DISCHARGED BY THE ASSESSEE. H OWEVER, OBSERVING THAT THE ASSESSEE DID NOT PRODUCE ANY TRANSPORT DETAILS, DELIVERY CHALLANS OR QUANTITATIVE TALLY OF STOCK, LD. CIT(A) CONFIRMED T HE ADDITIONS. 4.2 REGARDING ADDITION U/S 68, THE ASSESSEE SUBMITT ED ADDITIONAL EVIDENCES IN SUPPORT OF THE TRANSACTION WHICH WERE SUBJECTED TO REMAND PROCEEDINGS BEFORE LD. AO WHEREIN LD. AO DISPUTED T HE SAME. FINALLY, AFTER CONSIDERING ASSESSEES SUBMISSIONS AND REMAND REPOR T, LD. CIT(A) CONFIRMED THE ADDITION IN VIEW OF THE FACT THAT NO COMMISSION INCOME WAS REFLECTED BY THE ASSESSEES WIFE IN HER RETURN OF I NCOME WHICH WAS STATED TO BE SOURCE OF THE AFORESAID LOAN. AGGRIEVED, THE ASSESSEE IN IN FURTHER APPEAL BEFORE US. 5. THE LD. AUTHORISED REPRESENTATIVE FOR ASSESSEE [ AR], DRAWING OUR ATTENTION TO THE DOCUMENTS PLACED IN THE PAPER-BOOK AGITATED BOTH THE ADDITIONS WHEREAS LD. DR SUBMITTED THAT THE ADDITIO NS WERE JUSTIFIED. 6.1 WE HAVE CAREFULLY HEARD THE RIVAL SUBMISSIONS A ND PERUSED RELEVANT MATERIAL ON RECORD AND DELIBERATED ON JUDICIAL ANNO UNCEMENTS CITED BEFORE US. SO FAR AS THE VALIDITY OF REASSESSMENT PROCEEDI NGS IS CONCERNED, WE FIND THAT THE ORIGINAL RETURN WAS PROCESSED U/S 143 (1). THE CASE WAS REOPENED PURSUANT TO RECEIPT OF INFORMATION FROM EX TERNAL AGENCY THAT THE ASSESSEE INDULGED IN OBTAINING ACCOMMODATION PURCHA SE BILLS. NO INFIRMITY COULD BE FOUND IN REASSESSMENT PROCEEDINGS SINCE LD . AO WAS IN POSSESSION OF TANGIBLE MATERIAL WHICH SUGGESTED POS SIBLE ESCAPEMENT OF INCOME IN THE HANDS OF THE ASSESSEE. FINDING NO SUB STANCE IN LEGAL SUBMISSIONS, WE REJECT THE SAME. 5 6.2 SO FAR AS THE ADDITION OF ALLEGED BOGUS PURCHASES IS CONCERNED, WE FIND THAT ASSESSEE WAS IN POSSESSION OF PRIMARY PUR CHASE DOCUMENTS AND THE PAYMENTS TO THE SUPPLIERS WAS THROUGH BANKING C HANNELS. WE ARE OF THE CONSIDERED OPINION THAT THERE COULD BE NO SALE WITH OUT ACTUAL PURCHASE OF MATERIAL KEEPING IN VIEW THE ASSESSEES NATURE OF B USINESS ACTIVITIES. AT THE SAME TIME, NOTICES U/S 133(6) DID NO ELICIT ANY SAT ISFACTORY RESPONSE AND THE ASSESSEE FAILED TO PRODUCE EVEN A SINGLE SUPPLI ER TO CONFIRM THE PURCHASE TRANSACTIONS. THEREFORE, IN SUCH A SITUATI ON, THE ADDITION, WHICH COULD BE MADE, WAS TO ACCOUNT FOR PROFIT ELEMENT EM BEDDED IN THESE PURCHASE TRANSACTIONS TO FACTORIZE FOR PROFIT EARNE D BY ASSESSEE AGAINST POSSIBLE PURCHASE OF MATERIAL IN THE GREY MARKET AN D UNDUE BENEFIT OF VAT AGAINST SUCH BOGUS PURCHASES. KEEPING IN VIEW THE S AME, WE RESTRICT THE IMPUGNED ADDITIONS TO 12.5% OF ALLEGED BOGUS PURCHASES OF RS.5,92,042/- WHICH COMES TO RS.74,005/-. THE BALANCE ADDITIONS S TAND DELETED. 6.3 OUR AFORESAID VIEW IS IN LINE WITH THE RECENT D ECISION OF HONBLE BOMBAY HIGH COURT RENDERED IN BUNCH OF APPEALS TITL ED AS PR.CIT VS. M/S MOHOMMAD HAJI ADAM & CO. [ITA NO.1004 & OTHERS OF 2 016, DATED 11/02/2019] WHEREIN HONBLE COURT DISTINGUISHING THE CITED CASE LAW OF HONBLE GUJARAT HIGH COURT RENDERED IN N.K. INDUSTRIES LTD. VS DY. C.I.T. IN TAX APPEAL NO. 240 OF 2003 AND CONNECTED APPEALS DECIDED ON 20TH JUNE, 2016 OBSERVED AS UNDER: - 8. IN THE PRESENT CASE, AS NOTED ABOVE, THE ASSESSE E WAS A TRADER OF FABRICS. THE A.O. FOUND THREE ENTITIES WHO WERE INDULGING IN BOGUS BI LLING ACTIVITIES. A.O. FOUND THAT THE PURCHASES MADE BY THE ASSESSEE FROM THESE ENTITIES WERE BOGUS. THIS BEING A FINDING OF FACT, WE HAVE PROCEEDED ON SUCH BASIS. DESPITE THIS, THE QUESTION ARISES WHETHER THE REVENUE IS CORRECT IN CONTENDING THAT THE ENTIRE PU RCHASE AMOUNT SHOULD BE ADDED BY WAY OF ASSESSEE'S ADDITIONAL INCOME OR THE ASSESSEE IS CORRECT IN CONTENDING THAT SUCH LOGIC CANNOT BE APPLIED. THE FINDING OF THE CIT(A) AND THE TRIBUNAL WOULD SUGGEST THAT 6 THE DEPARTMENT HAD NOT DISPUTED THE ASSESSEE'S SALE S. THERE WAS NO DISCREPANCY BETWEEN THE PURCHASES SHOWN BY THE ASSESSEE AND THE SALES DECLARED. THAT BEING THE POSITION, THE TRIBUNAL WAS CORRECT IN COMING TO THE CONCLUSION THAT THE PURCHASES CANNOT BE REJECTED WITHOUT DISTURBING THE SALES IN CASE OF A TRADER. THE TRIBUNAL, THEREFORE, CORRECTLY RESTRICTED THE ADDITIONS LIMITED TO THE E XTENT OF BRINGING THE G.P. RATE ON PURCHASES AT THE SAME RATE OF OTHER GENUINE PURCHAS ES. THE DECISION OF THE GUJARAT HIGH COURT IN THE CASE OF N.K. INDUSTRIES LTD. (SUPRA) CANNOT BE APPLIED WITHOUT REFERENCE TO THE FACTS. IN FACT IN PARAGRAPH 8 OF THE SAME JUDGMENT THE COURT HELD AND OBSERVED AS UNDER- SO FAR AS THE QUESTION REGARDING ADDITION OF RS.3 ,70,78,125/- AS GROSS PROFIT ON SALES OF RS.37.08 CRORES MADE BY THE ASSESSING OFFICER DESPI TE THE FACT THAT THE SAID SALES HAD ADMITTEDLY BEEN RECORDED IN THE REGULAR BOOKS DURIN G FINANCIAL YEAR 1997-98 IS CONCERNED, WE ARE OF THE VIEW THAT THE ASSESSEE CANNOT BE PUNISHE D SINCE SALE PRICE IS ACCEPTED BY THE REVENUE. THEREFORE, EVEN IF 6 % GROSS PROFIT IS TAK EN INTO ACCOUNT, THE CORRESPONDING COST PRICE IS REQUIRED TO BE DEDUCTED AND TAX CANNOT BE LEVIED ON THE SAME PRICE. WE HAVE TO REDUCE THE SELLING PRICE ACCORDINGLY AS A RESULT OF WHICH PROF IT COMES TO 5.66%. THEREFORE, CONSIDERING 5.66% OF RS.3,70,78,125/- WHICH COMES TO RS.20,98,621.88 WE THINK IT FIT TO DIRECT THE REVENUE TO ADD RS.20,98,621.88 AS GROSS PROFIT AND MAKE NECESSARY DEDUCTIONS ACCORDINGLY. ACCORDINGLY, THE SAID QUESTION IS ANSWERED PARTIALLY IN FAVOR OF THE ASSESSEE AND PARTIALLY IN FAVOR OF THE REVENUE. 9 IN THESE CIRCUMSTANCES, NO QUESTION OF LAW, THERE FORE, ARISES. ALL INCOME TAX APPEALS ARE DISMISSED, ACCORDINGLY. NO ORDER AS TO COSTS. GROUND NO. 1 STAND PARTLY ALLOWED. 7. SO FAR AS THE ADDITION U/S 68 FOR RS.2.80 LACS I S CONCERNED, WE FIND THAT THE LOAN WAS TAKEN BY THE ASSESSEE FROM HIS WI FE. IN SUPPORT, LOAN CONFIRMATION, INCOME TAX RETURN OF THE LENDER WAS P LACED ON RECORD. THE AMOUNT OF UNSECURED LOAN WAS DULY REFLECTED IN THE BALANCE SHEET OF THE LENDER FOR THE IMPUGNED AY. ANOTHER PERTINENT OBSER VATION TO BE MADE IS THAT THE AFORE-SAID LOAN HAS BEEN SQUARED-OFF BY TH E ASSESSEE DURING FINANCIAL YEARS 2012-13 & 2013-14. THE PERUSAL OF B ANK STATEMENT OF THE LENDER WOULD REVEAL THAT THERE ARE NO IMMEDIATE CAS H DEPOSITS PRIOR TO ADVANCING OF LOANS TO THE ASSESSEE. KEEPING IN VIEW THE TOTALITY OF FACT, THE IMPUGNED ADDITION OF RS.2.80 LACS COULD NOT BE SUST AINED. BY DELETING THE SAME, WE ALLOW GROUND NO.2. 8. THE APPEAL STANDS PARTLY ALLOWED. 7 ITA NO. 1762/MUM/2018: AY 2012-13 9. IN THIS AY, THE ASSESSEE HAS BEEN SIMILARLY ASS ESSED U/S 143(3) R.W.S. 147 ON 28/02/2014 AND INTER-ALIA, SADDLED WITH ADDITION ON ACCOUNT OF ALLEGED BOGUS PURCHASES FOR RS.11.80 LACS STATED TO BE MADE FROM 7 SUSPICIOUS SUPPLIERS WHICH HAS BEEN CONFIRMED BY LD . FIRST APPELLATE AUTHORITY. ANOTHER ADDITION OF RS.4,59,650/- HAS BE EN CONFIRMED BY LD. FIRST APPELLATE AUTHORITY, BEING LOAN TAKEN BY THE ASSESS EE FROM HIS WIFE SMT. TEENA SABHARWAL. AGGRIEVED, THE ASSESSEE IS IN FURTHER APPEAL BEFORE US WITH IDENTICAL GROUNDS OF APPEAL. 10. AFTER CAREFUL CONSIDERATION, WE FIND THAT THE F ACTS ARE PARI-MATERIA THE SAME IN THIS AY. THEREFORE, TAKING THE SAME VIEW, W E RESTRICT THE ADDITION ON ACCOUNT OF ALLEGED BOGUS PURCHASES TO 12.5% OF RS.11,80,166/- WHICH COMES TO RS.1,47,521/-. THE BALANCE ADDITION STANDS DELETED. GROUND NO.1 STAND PARTLY ALLOWED. THE ADDITION OF RS.4.59 LACS U/S 68, BEING LOAN TAKEN BY THE ASSESSEE FROM HIS WIFE STANDS DELETED ON THE SAME LOGIC. GROUND NO. 2 STAND ALLOWED. 11. IN GROUND NO. 3, THE ASSESSEE IS AGGRIEVED BY D ISALLOWANCE OF INTEREST PAID ON HOUSING LOAN FOR RS.65,651/- UNDER THE HEAD INCOME FROM HOUSE PROPERTY. NO DETAILS WERE FURNISHED BY THE ASSESSEE DURING A SSESSMENT PROCEEDINGS. NO REQUEST FOR ADMISSION OF ADDITIONAL EVIDENCE, IN THIS REGARD, WAS MADE DURING APPELLATE PROCEEDINGS. THE LD. AR PLEADED FOR ANOTHER OPPORTUNITY IN VIEW OF THAT FACT THAT THE A SSESSEE WAS IN POSSESSION OF THE REQUISITE INTEREST CERTIFICATE TO ESTABLISH HIS CLAIM IN THIS REGARD. KEEPING IN VIEW THE SUBMISSIONS MADE BY LD. AR, LD. AO IS DIRECTED TO VERIFY THE ASSESSEES CLAIM, IN THIS REGARD AND ALL OW THE DEDUCTION, IF FOUND 8 ADMISSIBLE UNDER LAW. THIS GROUND STAND ALLOWED FOR STATISTICAL PURPOSES. THE APPEAL STANDS PARTLY ALLOWED. CONCLUSION 12. BOTH THE APPEALS STAND PARTLY ALLOWED IN TERMS OF OUR ABOVE ORDER. ORDER PRONOUNCED IN THE OPEN COURT ON16/05/2019. SD/- SD/- (SAKTIJIT DEY) (MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 16/05/2019 SR.PS:-JAISY VARGHESE ! / COPY OF THE ORDER FORWARDED TO : 1. !% / THE APPELLANT 2. &'!% / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT CONCERNED 5. ( )&* , * , / DR, ITAT, MUMBAI 6. ) ,-. / GUARD FILE / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI SR. NO. DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATION SHEETS ARE ATTACHED DIRECTLY TYPE D ON COMPUTER / LAPTOP SR.PS/PS 2 DRAFT DICTATED ON NOT APPLICABLE SR.PS/PS 3 DRAFT PLACED BEFORE AUTHOR NOT APPLICABLE SR.PS/PS 4 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 5 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 6 APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 7 ORDER PRONOUNCEMENT ON SR.PS/PS 8 FILE SENT TO THE BENCH CLERK SR.PS/PS 9 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 10 DATE ON WHICH FILE GOES TO THE AR 11 DATE OF DISPATCH OF ORDER