BHAVIK KAMLESH SHAH, MUMBAI V. ITO WD 15(2)(3), MUMBAI

ITA 1768/MUM/2017

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 9147 (ITAT-MUMBAI)
• Duration Of Justice: 6 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-10-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2010-2011
• Appeal Filed On: 14-03-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PURSHOTTAM KUMAR
• Assessee Lawyers: N M PORWAL
• Keywords: Bogus purchase; Accommodation entries
• Section: 234B; 133(6)

Judgement Text

, D , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES D, MUMBAI BEFORE SHRI SHAMIM YAHYA, AM & SHRI SHAKTIJIT DEY, JM ITA NO.1768/MUM/2017 : ASST.YEAR 2010-2011 SHRI BHAVIK KAMLESH SHAH B-402 PLOT NO.140, ROAD NO.9 NAVKAR CHS, JAWAHAR NAGAR GOREGAON (WEST) MUMBAI 400 062. PAN : AWPPS4116G. / VS. THE INCOME TAX OFFICER WARD 15(2)(3) MUMBAI. ( / APPELLANT) ( / RESPONDENT) APPELLANT BY : SHRI N.M.PORWAL RESPONDENT BY : SHRI PURSHOTTAM KUMAR / DATE OF HEARING : 24.08.2017 / DATE OF PRONOUNCEMENT : 03.10.2017 / O R D E R PER SHAMIM YAHYA, AM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST ORDER OF LEARNED CIT(A) DATED 01.06.2016 AND PERTAINS TO ASSESSMENT YEAR 2010-2011. 2. THE ISSUE RAISED IS THAT CIT(A) ERRED IN SUSTAINING DISALLOWANCE OF 100% OF BOGUS PURCHASE. 3. THE GROUNDS OF APPEAL READ AS UNDER:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED ASSESSING OFFICER ERRED IN ASSESSING APPELLANT ON THE TOTAL INCOME OF RS.8811475/- AS AGAINST THE INCOME RETURNED BY THE APPELLANT OF RS. 1893963/-. THE APPELLANT DISPUTES ALL WRONGFUL ADDITIONS, VARIATIONS, OBSERVATIONS AND SUBMIT THAT ITS RETURN OF INCOME BE ACCEPTED AS CORRECT INCOME. PROVISIONS OF THE ACT OUT TO HAVE BEEN PROPERLY CONSTRUED AND REGARD BEING HAD TO FACTS OF THE CASE NO SUCH ADDITION SHOULD HAVE BEEN MADE TO THE INCOME RETURNED BY THE APPELLANT. ITA NO.1768/MUM/2017. SHRI BHAVIK KAMLESH SHAH 2 2. (A) THE LEARNED ASSESSING OFFICER ERRED IN MAKING ADDITION OF RS. 6917512/-ON ACCOUNT OF ALLEGED NON GENUINE PURCHASES FROM VARIOUS PANICS. PROVISIONS OF THE ACT OUGHT TO HAVE BEEN PROPERLY CONSTRUED AND REGARD BEING HAD TO FACTS OF THE CASE THE SAID AMOUNT OF RS. 6917512/- SHOULD NOT HAVE BEEN ADDED TO TOTAL INCOME OF THE APPELLANT. REASONS ASSIGNED BY HIM ARE WRONG AND INSUFFICIENT TO JUSTIFY ADDITION OF RS. 6917512/- ON ACCOUNT OF ALLEGED NON GENUINE PURCHASES BY THE APPELLANT. (B) THE LEARNED ASSESSING OFFICER ERRED IN NOT PROVIDING SUFFICIENT OPPORTUNITY AND FAILED TO ALLOW CROSS EXAMINATION TO PARTIES WHOSE STATEMENT RELIED UPON AND FAILED TO CONSIDER THE RELEVANT MATERIALS, SUBMISSIONS AND DOCUMENTS SUBMITTED BEFORE MAKING ADDITION OF RS. 6917512/- ON ACCOUNT OF ALLEGED NON GENUINE PURCHASES BY THE APPELLANT. (C) WHILE MAKING ADDITION OF RS. 6911512/- ON ACCOUNT OF ALLEGED NON GENUINE PURCHASES THE LEARNED ASSESSING OFFICER OMITTED TO CONSIDER RELEVANT FACTS, CONSIDERATION, PRINCIPALS AND EVIDENCES WHILE HE WAS OVERWHELMED, INFLUENCED AND PREJUDICED BY IRRELEVANT CONSIDERATION AND FACTORS. 3. THE LEARNED ASSESSING OFFICER ERRED IN CHARGING INTEREST UNDER SECTION 234A, 234B AND 234C OF THE ACT. 4. THE APPELLANT THEREFORE PRAYS THAT THE ADDITION OF RS.6917512/- MADE ON ACCOUNT OF BOGUS PURCHASES BE DELETED OR ANY OTHER ORDER YOUR HONOR MAY DEED FIT BE PASSED. 5. THE APPELLANT CRAVE LEAVE TO ADD, AMEND, ALTER AND / OR VARY ANY OF THE GROUNDS OF APPEAL BEFORE OR AT THE TIME OF HEARING. 4. IN THIS CASE THE ASSESSEE IS AN INDIVIDUAL AND IS ENGAGED IN THE BUSINESS OF SUPPLYING PARCEL PAPERS, TOOLS & MACHINERIES AND OTHER CONSUMABLES WHICH ARE USED IN THE DIAMOND INDUSTRY. THE ASSESSEE CARRIES OUT HIS BUSINESS IN THE NAME & STYLE OF M/S SHAH BROTHERS. THE ASSESSEE HAD FILED HIS RETURN OF INCOME FOR A.Y. 2010-11 ON 21.07.2010 DECLARING A TOTAL INCOME OF RS. 18,93,963/-. DURING THE COURSE OF SCRUTINY PROCEEDINGS THE ASSESSING OFFICER SOUGHT TO VERIFY THE PURCHASES CLAIMED BY THE ASSESSEE AT RS. 1.97 CRORES. THE AO ISSUED NOTICES U/S 133(6) TO SEVERAL SUPPLIERS OF ITA NO.1768/MUM/2017. SHRI BHAVIK KAMLESH SHAH 3 THE ASSESSEE ON THE ADDRESS PROVIDED BY THE ASSESSEE. HOWEVER IT WAS NOTED THAT SEVENTEEN NOTICES WERE RETURNED BACK BY THE DEPARTMENT OF POST WITH A COMMENT 'NOT KNOWN'. THE AO CONFRONTED THE ASSESSEE TO SUBSTANTIATE AND PROVE THE GENUINENESS OF THE EXPENSES CLAIMED. THE ASSESSEE WAS DIRECTED TO PRODUCE THE PARTIES ALONG WITH THEIR BOOKS OF ACCOUNTS VIDE A SHOW CAUSE DATED 28.02.2013 WHICH IS REPRODUCED ON PAGE 3 AND 4 OF THE ASSESSMENT ORDER. THE AO SPECIFICALLY SOUGHT PROOF OF DELIVERY OF GOODS, DETAILS OF THE TRANSPORTERS AND OTHER EVIDENCES IN THIS REGARD. THE ASSESSEE FILED CERTAIN DETAILS BUT THE AO NOTED THAT THERE ARE NO CONFIRMATIONS AND THERE IS NO INDICATION OF FREIGHT DETAILS AND NO DELIVERY CHALLANS WERE PRODUCED. THE ASSESSEE COULD NOT GIVE THE CURRENT ADDRESSES OF THE SUPPLIERS AND ALSO DID NOT PRODUCE THE SAME BEFORE THE AO. THE AO FURTHER NOTED THAT A FEW OF THE SUPPLIERS ARE ALSO LISTED BY THE SALES TAX DEPARTMENT IN ITS WEBSITE AS BOGUS HAWALA DEALERS. THIS INFORMATION WAS ALSO CONFRONTED TO THE ASSESSEE BUT THE ASSESSEE WAS NOT ABLE TO REBUT THE SAME WITH EVIDENCE. THE AO ALSO NOTED THAT THE ASSESSEE HAS NOT BEEN ABLE TO MATCH THE PURCHASES MADE FROM THE ABOVE PARTIES WITH THE SALES EFFECTED BY HIM. THE AO NOTED THAT IN THE STOCK LEDGER PRODUCED BY THE ASSESSEE THERE IS NO QUANTITY AND QUALITY DETAILS/DESCRIPTIONS AND HENCE IT WAS NOT RELIABLE. THE AO CONCLUDED THAT THE PURCHASES FROM THESE PARTIES ARE NOT PROVED. THE AO ALSO ELABORATED UPON THE ENQUIRIES CONDUCTED BY THE SALES TAX AUTHORITIES IN THE ORDER AND HAS HELD AL PAGE 9 TO 13 THAT THE PURCHASES OF RS. 69,17,512/- ARE BOGUS. ITA NO.1768/MUM/2017. SHRI BHAVIK KAMLESH SHAH 4 5. AGAINST THE ABOVE ORDER ASSESSEE APPEALED BEFORE THE LEARNED CIT(A). THE LD CIT(A) CONFIRMED THE ACTION OF THE ASSESSING OFFICER IN MAKING ADDITION OF 100% OF THE BOGUS PURCHASE. 6. AGAINST ABOVE ORDER OF LEARNED CIT-A ASSESSEE IS IN APPEAL BEFORE THE ITAT. 7. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. WE 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, ASSESSEE 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 ASSESSEE HAS OBTAINED BOGUS PURCHASE BILLS. MERE PREPARATION OF DOCUMENTS FOR PURCHASES CANNOT CONTROVERT OVERWHELMING EVIDENCE THAT THE PROVIDER OF THESE BILLS ARE BOGUS AND NON-EXISTENT. 8. THE SALES TAX DEPARTMENT IN ITS ENQUIRY HAVE FOUND THE PARTIES TO BE PROVIDING BOGUS ACCOMMODATION ENTRIES. THE ASSESSING OFFICER ALSO ISSUED NOTICES TO THESE PARTIES AT THE ADDRESSES PROVIDED BY THE ASSESSEE. ALL THESE ITA NO.1768/MUM/2017. SHRI BHAVIK KAMLESH SHAH 5 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 CIRCUMSTANCES THERE IS NO DOUBT THAT THESE PARTIES ARE NON-EXISTENT. I FIND IT FURTHER STRANGE THAT ASSESSEE WANTS THE REVENUE TO PRODUCE ASSESSEE'S OWN VENDORS, WHOM THE ASSESSEE COULD NOT PRODUCE. THE PURCHASE BILLS FROM THESE NON-EXISTENT THE/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 DAYAL 214 ITR801 AND DURGA PRASAD MORE 82 ITR 540. 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 BEING PRODUCED SHOULD BE CONSIDERED. THIS PROPOSITION IS TOTALLY UNSUSTAINABLE IN LIGHT OF ABOVE APEX COURT DECISIONS. 9. HOWEVER WE NOTE THAT WHEN SALES ARE NOT DOUBTED HUNDRED PERCENT DISALLOWANCE OF BOGUS PURCHASES IS NOT SUSTAINABIE. THIS POSITION IS SUPPORTED BY THE DECISION OF HONBLE JURISDICTIONAL HC IN THE CASE OF NIKUNJ EXIMP ENTERPRISES (IN WRIT PETITION NO. 2860, ORDER DATED 18.6.2014). 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. 10. HOWEVER THE PROPOSITION REMAINS THAT WHEN THE AUTHORITIES BELOW HAVE NOT DOUBTED THE SALES, THERE CANNOT BE ANY JUSTIFICATION FOR HUNDRED PERCENT DISALLOWANCE OF PURCHASES. IN SIMILAR FACTS HONBLE GUJARAT HIGH COURT IN THE ITA NO.1768/MUM/2017. SHRI BHAVIK KAMLESH SHAH 6 CASE OF SIMIT P.SHETH [(2013) 356 ITR 451 (GUJ.)] HAS UPHELD DISALLOWANCE OF 12.5% OUT OF THE BOGUS PURCHASES. AS OPERATING IN THE GREY MARKET GIVES THE ASSESSEE SAVINGS / BENEFITS ON ACCOUNT OF NON-PAYMENT OF TAXES AND OTHERS AT THE EXPENSE OF EXCHEQUER. THIS PROPOSITION HAS BEEN UPHELD AT ITAT MUMBAI BENCHES IN SEVERAL CASES. ACCORDINGLY IN THE BACKGROUND OF AFORESAID DISCUSSION AND PRECEDENT'S WE MODIFY THE ORDER OF LEARNED CIT(A) AND DIRECT THAT DISALLOWANCE IN THIS CASE SHOULD BE LIMITED TO 12.5% OF THE BOGUS PURCHASE. 11. IN THE RESULT THIS APPEAL FILED BY THE ASSESSEE STANDS PARTLY ALLOWED. ORDER PRONOUNCED ON THIS 3 RD DAY OF OCTOBER, 2017. SD/- SD/- ( SHAKTIJIT DEY ) ( SHAMIM YAHYA ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI; DATED : 03.10.2017. DEVDAS* / COPY OF THE ORDER FORWARDED TO : / BY ORDER, //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT, MUMBAI. 4. / CIT(A), MUMBAI 5. , , / DR, ITAT, MUMBAI 6. [ / GUARD FILE.