ITO-22(2)(4), Mumbai V. NEELIMA MARTIN , Mumbai

ITA 180/MUM/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 8491 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-01-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 14-01-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AKHTAR HANSARI
• Keywords: Bogus purchase; Search and seizure; Accommodation entries
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC, BENCH MUMBAI BEFORE SHRI R.C.SHARMA, ACCOUNTANT MEMBER ITA NO. 179 & 180/MUM/2019 ( ASSESSMENT YEAR: 2010-11 & 2011-12) I.T.O.-22(2)(4), 310, 3 RD FLOOR, PIRAMAL CHAMBERS, LAL BAUG, PAREL, MUMBAI-400012. VS. SMT. NEELIMA MARTIN, 503, GOKUL SUSHMA, DADABHAI ROAD, SANTACRUZ EAST, MUMBAI-400054. PAN/GIR NO. AFZPM 5434 J (APPELLANT ) .. (RESPONDENT ) REVENUE BY SHRI AKHTAR H ANSARI (DR) ASSESSEE BY NONE DATE OF HEARING 15/01/2020 DATE OF PRONOUNCEMENT 20/01/2020 / O R D E R PER: R.C. SHARMA, A.M. THESE ARE THE APPEALS FILED BY THE REVENUE AGAINST THE COMMON ORDER OF THE LD. CIT(A)-34, MUMBAI DATED 11/10/2018 FOR THE A.Y. 2010-11 & 2011-12 IN THE MATTER OF ORDER PASSED U/S 143(3) R.W.S. 147 OF THE INCOME TAX ACT, 1961 (IN SHORT, THE ACT) . 2. IN BOTH THESE APPEALS, THE REVENUE IS AGGRIEVED BY THE ORDER OF THE LD. CIT(A) FOR RESTRICTING THE ADDITION ON ACCO UNT OF BOGUS PURCHASES TO THE EXTENT OF 12.5%. 3. I HAVE GONE THROUGH THE ORDERS OF THE AUTHORITIE S BELOW AND FOUND THAT THE A.O. GOT INFORMATION FROM THE SALES TAX DEPARTMENT REGARDING BOGUS PURCHASES BY THE ASSESSEE. AFTER CO NSIDERING FACTS OF ITA NO. 179 & 180/MUM/2019 ITO VS SMT. NEELIMA MARTIN 2 THE CASE, THE A.O. MADE ADDITION BY ESTIMATING THE G.P. OF 25% ON SUCH BOGUS PURCHASES. 4. BY THE IMPUGNED ORDER, THE LD. CIT(A) AFTER CONS IDERING VARIOUS JUDICIAL PRONOUNCEMENTS AND THE FACTS OF THE CASE, DIRECTED THE A.O. TO RESTRICT ADDITION TO THE EXTENT OF 12.5%. THE PR ECISE OBSERVATION OF THE LD. CIT(A) WAS AS UNDER: 4.5. CONCLUSION ON CASE LAWS: THE NET CONCLUSION THAT CAN BE ARRIVED AT FROM THE ABOVE DISCUSSION IS THAT WHERE THE SALES AND PURCHASES AR E VERIFIABLE AND PROVEN E.G. TO OR FROM GOVERNMENT BODIES OR AGE NCIES ETC NO ADDITION MAY BE MADE. IF HOWEVER, THE PURCHASES ARE BOGUS BUT THE DIRECT SALES ARE PROVED, THE ASSUMPTI ONS ARE THAT THE PURCHASES WERE MADE FROM UNKNOWN PARTIES A ND THE AO CAN APPLY A PROFIT RATE TO DETERMINE THE LIABILI TY OF THE APPELLANT. IT IS ALSO SEEN THAT PUTTING AN ONUS ON THE AO TO TRACE THE MONEY TRAIL OR VERIFY THE WITHDRAWALS FRO M THE BANKS ETC MAY GIVE MORE POINTERS BUT IT IS NOT SUFFICIENT BY ITSELF AND THE ITAT HAS NOT ACCEPTED SUCH AN ARGUMENT IN THE C ASE OF SHRI GANPATRAJ A.SANGHAVI (SUPRA). IF THE BOGUS PUR CHASES ARE UNPROVED AND ARE DECLARED CONSUMED B Y APPELLANT ITSELF IN ITS TRADING, MANUFACTURING OR NON-TRADING ACTIVITIES, T HE ENTIRE ADDITION CAN BE MADE AS IT ONLY GOES TO INFLATE THE EXPENSES OF THE APPELLANT. (REFER M/S. SHORELINE HOTEL PVT. LTD VS. CIT CENTRAL-1 IN ITA NO.964/M/2015 DATED 19.06.2015). 4.6. IN VIEW OF THE ABOVE, IT IS AN ADMITTED FACT THAT SALES TAX DEPARTMENT HAS CONDUCTED SEARCH AND SEIZURE OPERATION AND HAS ESTABLISHED LARGE NUMBER OF COMPANIES/FIRMS/PARTNERSHIP CONCERNS AS HAWALA 1 P ITA NO. 179 & 180/MUM/2019 ITO VS SMT. NEELIMA MARTIN 3 DEALERS WHO ARE ENGAGED IN ACCOMMODATION ENTRIES WITHOUT ACTUALLY SUPPLYING THE GOODS. THE APPELLANT IS ONE OF THE BENEFICIARY AND HAS RECEIVED SUCH ACCOMMODATION BIL LS FROM FIVE OF THE HAWALA OPERATORS TOTALING TO RS. 5,26,6 70/-. THE A.O. ATTEMPTED TO VERIFY SUCH PARTIES BY MAKING INDEPEND ENT ENQUIRIES U/S.133(6) OF THE I.T.ACT, 1961. ALL THES E VERIFICATION LETTERS CAME BACK 'UNSERVED'. THE APPE LLANT FILED CERTAIN DETAILS SUCH AS PURCHASE BILLS, LEDGE R ACCOUNT, BANK STATEMENT ETC. HOWEVER, SOME OF THE SPECIFIC DETAIL S REQUIRED TO ESTABLISH THE GENUINENESS OF PURCHASE SUCH AS EV IDENCE OF TRANSPORTATION OF GOODS, ENTRY OF GOODS IN THE STOC K REGISTER, ONE TO ONE CONSUMPTION PATTERN OF ALLEGED PURCHASE ITEMS, CONFIRMATION FROM THE PARTIES CONCERNED ETC COULD NOT BE SUBMITTED BEFORE THE A.O. NOR THE PRINCIPLE OFFICER OF THESE CONCERNS WERE PRODUCED BEFORE THE A.O. FOR EXAMINAT ION. HOWEVER, IT IS ALSO A FACT THAT THE A.O. HAS NOT QU ESTIONED THE TOTAL SALE COMPONENT AND IF THERE IS A SALE, THERE SHOULD BE PURCHASE. THE APPELLANT BEING A TRADING CONCERN, HA S INDULGED IN USING SUCH 'ACCOMMODATION ENTRY. AS EVIDENT FROM CA TENA OF JUDGMENTS ON BOGUS PURCHASES, ONLY THE BENEFIT DERI VED BY USING SUCH ACCOMMODATION ENTRIES HAS TO BE BROUGHT TO TAX. THE ADVANTAGES FROM USING SUCH BOGUS BILLS ARE IN THE FORM OF SAVING VAT, SAVING OF TRANSPORTATION CH ARGES AND VARIOUS TAXES ETC. THE AO HAS RIGHTLY DISALLOWE D PART OF THE PURCHASES CLAIMED SUCH HAWALA DEALERS. HOWEVER, THE RATIO OF THE JUDGEMENT OF HON'BLE GUJARAT HIGH COURT IN THE CASE OF SIMIT P. SETH 356 ITR 461 (GUJ.) IS APPLICABLE TO THE FAC TS AND CIRCUMSTANCES OF THE APPELLANT'S CASE SINCE THE APP ELLANT IS A TRADING CONCERN. HERE, THE HON'BLE COURT HAS HELD T HAT DISALLOWANCE OF 12.5% OF THE PURCHASES FROM SUCH HA WALA DEALERS WILL BE JUSTIFIED. THUS, THE DISALLOWANCE MADE BY T HE A.O. IS UPHELD IN PRINCIPLE. HOWEVER, THE PERCENTAGE IS RES TRICTED FROM ITA NO. 179 & 180/MUM/2019 ITO VS SMT. NEELIMA MARTIN 4 25% TO 12.5%. THE GROUND OF APPEAL FILED BY THE APP ELLANT ON THIS ISSUE IS THEREFORE, PARTLY ALLOWED. DEPT. IS BEFORE US AGAINST THE ABOVE ORDER OF CIT(A ). 5. I HAVE GONE THROUGH THE ORDERS OF THE AUTHORITIE S BELOW AND FOUND THAT AFTER CONSIDERING VARIOUS JUDICIAL PRONO UNCEMENTS AND SPECIALLY THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS SIMIT P SHETH 365 ITR 0451 WHEREIN IT HAS BE EN HELD THAT ONCE THE SALE IS ACCEPTED BY THE A.O., THE VERY BASIS OF PURCHASES COULD NOT BE QUESTIONED. NOT THE ENTIRE PURCHASE PRICE COULD BE DISALLOWED BUT ONLY THE PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES COULD BE ADDED TO THE INCOME OF THE ASSESSEE. ACCORDINGLY, THE LD. CIT(A) HAS RESTRICTED THE ADDITION TO THE EXTENT OF 12.5% IN S O FAR AS CORRESPONDING SALES WERE NOT DOUBTED NOR THE BOOKS OF ACCOUNT WERE REJECTED. THE DETAILED FINDINGS SO RECORDED BY THE LD. CIT(A) HAS NOT BEEN CONTROVERTED BY THE LD DR BY BRINGING ANY POSI TIVE MATERIAL ON RECORD, ACCORDINGLY, I DO NOT FIND ANY REASON TO IN TERFERE IN THE ORDER OF THE LD. CIT(A) IN RESTRICTING THE ADDITION TO TH E EXTENT OF 12.5% OF ALLEGED BOGUS PURCHASES, BEING PROFIT ELEMENT IN SU CH BOGUS PURCHASES. 6. SINCE THE FACTS AND CIRCUMSTANCES OF BOTH THE YE ARS ARE SAME, THEREFORE, BY FOLLOWING THE REASONING GIVING IN THE APPEAL FOR THE A.Y. ITA NO. 179 & 180/MUM/2019 ITO VS SMT. NEELIMA MARTIN 5 2010-11, I ALSO UPHOLD THE ACTION OF THE LD. CIT(A) FOR THE A.Y.2011- 12. 7. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE A RE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 20 TH JANUARY, 2020. SD/- (R.C.SHARMA) ACCOUNTANT MEMBER MUMBAI; DATED 20/01/2020 *RANJAN COPY OF THE ORDER FORWARDED TO : BY ORDER, (ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//