Dilawar R Shaikh, Pune V. Deputy Commissioner of Income-tax, Circle - 8, Pune

ITA 1832/PUN/2017

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 7483 (ITAT-PUNE)
• Duration Of Justice: 1 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-08-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 28-07-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: S D PATHAK
• Keywords: Bogus purchase; Initiation of penalty proceedings; Accommodation entries; Reassessment proceedings
• Section: 143(3); 6; 144; 10; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, PUNE . , , , BEFORE SHRI D. KARUNAKARA RAO, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO S. 1832, 1833 & 1834 /P U N/201 7 / ASSESSMENT YEAR S : 20 09 - 10 , 2010 - 11 & 2011 - 12 DILAWAR R. SHAIKH, ASHIANA, PLOT NO. 45, SECTOR NO. 1, INDRAYANI NAGAR, BHOSARI, PUNE 411026 PAN : ALJPS3300F ....... / APPELLANT / V/S. DY. COMMISSIONER OF INCOME TAX, CIRCLE 8 , PUNE / RESPONDENT ASSESSEE BY : S HRI S.D. PATHAK REVENUE BY : SHRI AJAY MODI / DATE OF HEARING : 29 - 0 8 - 2017 / DATE OF PRONOUNCEMENT : 31 - 0 8 - 2017 / ORDER PER VIKAS AWASTHY, JM : TH ESE THREE APPEALS FOR THE ASSESSMENT YEARS 2009 - 10, 2010 - 11 AND 2011 - 12 BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) - 9, PUNE DATED 13 - 04 - 2015 , COMMON FOR ALL THE AFORESAID THREE ASSESSM ENT YEARS. SINCE, ISSUE INVOLVED IN ALL THE THREE APPEALS ARE EMANATING FROM SAME SET OF FACTS AND SIMILAR GROUNDS HAVE 2 ITA NO S. 1832, 1833 & 1834/PUN/2017, A.YS. 2009 - 10, 2010 - 11 & 2011 - 12 BEEN RAISED BY THE ASSESSEE IN ALL THE THREE APPEALS ASSAILING THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS), THESE APPEALS ARE TAK EN UP TOGETHER FOR ADJUDICATION AND ARE DISPOSED OF VIDE THIS COMMON ORDER. 2. THE ASSESSEE IS AN INDIVIDUAL AND IS ENGAGED IN TRADING OF STEEL. ON THE BASIS OF INFORMATION RECEIVED FROM SALES TAX DEPARTMENT , REASSESSMENT PROCEEDINGS WERE INITIATED AGAI NST THE ASSESSEE IN THE IMPUGNED ASSESSMENT YEARS . DURING THE COURSE OF REASSESSMENT PROCEEDINGS THE ASSESSEE DID NOT CO - OPERATE WITH THE ASSESSING OFFICER AND FAILED TO FURNISH THE REQUISITE DETAILS AND INFORMATION , THEREFORE, THE ASSESSING OFFICER WAS C ONSTRAINED TO INVOKE THE PROVISIONS OF SECTION 144 O F THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT ). DURING THE PERIOD RELEVANT TO ASSESSMENT YEARS UNDER APPEAL THE ASSESSEE HAD PURCHASED S TEEL FROM VARIOUS PARTIES INCLUDING THE PARTIES WHICH HAVE BEEN NOTIFIED AS HAWALA DEALERS. THE PURCHASES MADE BY ASSESSEE FROM SUCH DUBIOUS DEALERS IS AS UNDER : ASSESSMENT YEAR 2009 - 10 SR. NO. NAME OF THE FIRM AMOUNT 1 K R C TRADING CO. PVT. LTD. RS.4,50,050/ - 2 RASHMI ENTERPRISES RS.2,01,73,877/ - 3 GRIFTON INDIA RIDDHI ENTERPRISES RS.35,84,670/ - 4 PARAS SALES CORPORATION RS.60,76,593/ - TOTAL RS.3,02,85,190/ - 3 ITA NO S. 1832, 1833 & 1834/PUN/2017, A.YS. 2009 - 10, 2010 - 11 & 2011 - 12 ASSESSMENT YEAR 20 10 - 11 SR. NO. NAME OF THE FIRM AMOUNT 1 RASHMI ENTERPRISES RS.31,13,277/ - 2 K R C TRADING CO. PVT. LTD. RS.15 , 48,027/ - TOTAL RS. 46,61,304/ - ASSESSMENT YEAR 20 11 - 12 SR. NO. NAME OF THE FIRM AMOUNT 1 PARAS SALES CORPORATION RS.1,01,86,027/ - 2 SHRADHHA TRADING CO. RS.29,19,394/ - 3 TUBE INDIA RS.6,34,783/ - 4 VARDHMAN TRADERS RS.97,96,690/ - TOTAL RS.2,35,36,894/ - 2.1 THE ASSESSING OFFICER MADE ADDITION OF THE ENTIRE BOGUS PURCHASES MADE BY ASSESSEE FROM NOTIFIED HAWALA DEALERS IN THE IMPUGNED ASSESSMENT YEARS. AGGRIEVED BY THE ASSESSMENT ORDERS PASSED U/S. 143(3) R.W.S. 147 R.W.S. 144 OF THE ACT, THE ASSESSEE FILED APPEALS BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS). THE COMMISSIONER OF INCOME TAX (APPEALS) REJECTED THE CONTENTIONS OF ASSESSEE AND DISMISSED THE APPEALS FOR ASSESSMENT YEARS 2009 - 10, 2010 - 11 AND 2011 - 12. NOW, THE ASSESSEE IS IN SECOND APPEAL BEFORE THE TRIBUNAL ASSAILING THE FINDINGS OF FIRST APPELLATE AUTHORITY. 4 ITA NO S. 1832, 1833 & 1834/PUN/2017, A.YS. 2009 - 10, 2010 - 11 & 2011 - 12 3. SHRI S.D. PATHAK APPEARING ON BEHALF OF THE ASSESSEE SUBMITTED THAT THE ASSESSING OFFICER MADE ADDITION OF THE ENTIRE PURCHASES MADE BY ASSESSEE FROM THE ALLEGED HAWALA DEALERS. THE COMMISSIONER OF INCOME TAX (APPEALS) HAS CONFIRMED THE FINDINGS OF ASSESSING OFFICER IN TOTO. EVEN IF IT IS PRESUMED THAT THE ASSESSEE HAS MADE PURCHASES FROM HAWALA DEALERS THERE CANNOT BE ADDITION OF ENTIR E BOGUS PURCHASES. THE ADDITION , IF ANY CAN BE MADE ON THE BASIS OF GP RATIO. THE ASSESSEE IN ASSESSMENT YEARS 2009 - 10, 2010 - 11 AND 2011 - 12 HAS DECLARED GP RATIO OF 2.92%, 3.27% AND 4.92%, RESPECTIVELY. THERE HAS BEEN CONSISTENT INCREASE IN THE GP RATIO DECLARED BY THE ASSESSEE. THE LD. AR ALSO FURNISHED WRITTEN SUBMISSIONS WHICH ARE AS UNDER : 1. (A) ALL THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE ID. CIT(A) ERRED IN UPHOLDING THE ACTION OF THE AO IN RE - OPENING OF THE ASSESSMENT U/S. 147 OF THE INCOME TAX ACT, 1961. 2.A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN CONFIRMING THE ADDITION OF R S.3,02,85,190/ - IN THE A.Y. 2009 - 10, RS .46,61,304/ - IN THE A.Y. 20 10 - 11 & RS .2,35,36,894/ - MADE BY THE A O TO THE INCOME OF THE APPELLANT ON ACCOUNT OF BOGUS PURCHASES & HE HAS ADDED 100% PURCHASES @ 100% EMBEDDED IN PURCHASES MADE THROUGH ALLEGED NON - GENUINE PARTIES ON THE BASIS OF INFORMATION OF THE SALES TAX DEPARTMENT ABOUT SUSPICIOUS DEALERS WITH OUT REJECTING THE ACCOUNTS U/S. 145. B) THE ID. CIT(A) FAILED TO APPRECIATE THAT : - I) ALL THE PURCHASES ARE GENUINE BEYOND DOUBT AND SUPPORTED BY SUFFICIENT MATERIALS; II) ALL THE GOODS PURCHASED FROM THESE PARTIES HAVE BEEN BACKED BY CORRESPONDING SALES WHICH ARE ACCEPTED TO BE GENUINE; III) THE GROSS PROFIT RATIO SHOWN BY THE APPELLANT IS QUITE REASONABLE; IV) NOTHING HAS BEEN BROUGHT ON RECORD BY THE A O THAT MONEY HA S BEEN EXCHANGED IN THE HANDS IN LIEU OF PAYMENT MADE FOR THESE PURCHASES BY ACCOUNT PAYEE CHEQUE; AND V) THE A O HAD NEITHER PROVIDED COPY OF MATERIALS AND STATEMENTS RELIED UPON BY HIM NOR ALLOWED ANY OPPORTUNITY TO THE APPELLANT TO CROSS EXAMINE THOSE P ARTIES WHO HAVE BEEN ALLEGED TO HAVE PROVIDED THE ACCOMMODATION ENTRIES OF SUCH PURCHASES. 5 ITA NO S. 1832, 1833 & 1834/PUN/2017, A.YS. 2009 - 10, 2010 - 11 & 2011 - 12 C) IN REACHING TO THE CONCLUSION AND CONFIRMING SUCH ADDITION MADE BY THE A O , THE ID. CIT(A) OMITTED TO CONSIDER RELEVANT FACTORS, CONSIDERATIONS, PRINCIPLES AND EV IDENCES WHILE HE WAS OVERWHELMED, INFLUENCED AND PREJUDICED BY IRRELEVANT CONSIDERATIONS AND FACTORS. D) WITHOUT PREJUDICE, THE RATE OR PERCENTAGE OF PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES AS FIXED BY THE A O AND CONFIRMED BY THE CIT(A) IS EXCESSIVE AND UNREASONABLE ON THE FACTS OF THE CASE. 3 . THE ID. CIT(A) ERRED IN HOLDING THAT LEVY OF INTEREST U/S.234B OF THE INCOME TAX ACT, 1961 IS MANDATORY. THE APPELLANT DENIES ITS LIABILITY FOR SUCH INTEREST. 4. THE ID. CIT(A) ERRED IN HOLDING THAT THE GROUND RAI SED DISPUTING INITIATION OF PENALTY PROCEEDINGS U/S.271 (1 )(C) IS PREMATURE. THE APPELLANT DENIES ITS LIABILITY FOR SUCH PENALTY. 5. WE REQUEST YOU TO DELETE THE ALLEGED ADDITIONS @100% OF THE PURCHASES MADE BY THE LD. A . O. AND CONFIRMED BY THE LD. C.I.T . - A. 6. YOUR APPELLANT IS SHOWING GROSS PROFIT RATIO CONSISTENTLY AND REQUEST YOU TO DELETE THE ALLEGED ADDITIONS. 7. YOUR APPELLANT RELIED ON VARIOUS CASES DECIDED BY THE HON'BLE BOMBAY HIGH COURT IN THE MATTER OF NIKUNJ EXIM ENTERPRISES PVT. LTD . 372 ITR 619 AND GOOLAMALLY HASANJEE (IT A13740 - 411MUM/2012 - A.Y.06 - 07 AND 08 - 09 DT. 10,06.2014), ASHOK TALREJA - HUF (ITA / 4629/MUM/2014 & ORS. A.Y.S07 - 08 TO 09 - 10 DATED 17/03/2016)' AND M/S GEOLIFE ORGANICS ITA NO.3699/MUM/2016 DATED 05/05/2017. IN VIEW OF ABOVE WE REQUEST YOU TO DELETE THE ALLEGED ADDITIONS MADE BY LD. A.O. IN ALL THE ASSESSMENT YEARS . THE LD. AR HAS NOT SUBSTANTIATED AS TO HOW REASSESSMENT U/S. 147 IS NOT VALID. EXCEPT FOR BRIEF REFERENCE IN WRITTEN SUBMISSIONS NO FURTHER SUBMISSI ONS WERE MADE BY LD. AR IMPUGNING RE - OPENING OF ASSESSMENT U/S. 147. THEREFORE, THE WRITTEN SUBMISSIONS MADE BY ASSESSEE IN THIS REGARD ARE REJECTED. 4. ON THE OTHER HAND SHRI AJAY MODI REPRESENTING THE DEPARTMENT VEHEMENTLY DEFENDED THE FINDINGS OF CO MMISSIONER OF INCOME TAX (APPEALS). THE LD. DR SUBMITTED THAT THE ASSESSEE WAS NON - COOPERATIVE 6 ITA NO S. 1832, 1833 & 1834/PUN/2017, A.YS. 2009 - 10, 2010 - 11 & 2011 - 12 BEFORE THE ASSESSING OFFICER. NO DETAILS OF PURCHASES MADE, DETAILS OF TRANSPORTATION, DELIVERY CHALLAN, WEIGHTMENT SLIPS, OCTROI RECEIPTS AND GOODS RECEIPT NO TE SHOWING MOVEMENT OF THE GOODS WERE PRODUCED BY ASSESSEE EITHER BEFORE THE ASSESSING OFFICER OR THE COMMISSIONER OF INCOME TAX (APPEALS). AMPLE OPPORTUNITY WAS GRANTED BY ASSESSING OFFICER TO FURNISH STOCK REGISTER AND CONFIRMATION S FROM THE PARTIES. T HE SAME WERE ALSO NOT FILED BY THE ASSESSEE. IN THE ABSENCE OF ANY INFORMATION THE AUTHORITIES BELOW HAVE RIGHTLY MADE ADDITION OF THE ENTIRE BOGUS PURCHASES. 5. W E HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESENTATIVES OF RIVAL SIDES AND HAVE PERUSED THE ORDERS OF THE AUTHORITIES BELOW . IT IS AN UNDISPUTED FACT THAT THE ASSESSEE HAS MADE PURCHASES FROM CERTAIN FIRMS WHICH HAVE BEEN DECLARED AS HAWALA DEALERS. SUCH FIRMS ONLY PROVIDE BOOKS ENTRIES WITHOUT CARRYING OUT ANY ACTUAL BUSINESS. THE ASSESSE E HAS FAILED TO PROVIDE TRAIL TO GOODS PURCHASED. WHERE ON THE ONE SIDE THE DEPARTMENT HAS RAISED SERIOUS DOUBT OVER THE PURCHASE OF GOODS , T HE SALE OF GOODS HAVE NOT BEEN DISPUTED. THERE CANNOT BE SALE UNLESS THERE HAS BEEN IN FLOW OF GOODS IN THE FORM OF PURCHASES. THEREFORE, THE ENTIRE AMOUNT OF BOGUS PURCHASES CANNOT BE ADDED. THERE HAS TO BE SOME ESTIMATION OF GP. THE ASSESSEE HAS FURNISHED A CHART GIVING THE DETAILS OF SALE , PURCHASE , GROSS PROFIT, GP RATIO AND NP RATIO FOR ASSESSMENT YEARS 2007 - 08 TO 2011 - 12. RELIANCE CANNOT BE PLACED ON THE FIGURES FURNISHED BY THE ASSESSEE AS THE PURCHASES IN THE THREE ASSESSMENT YEARS ARE UNDER THE SHADOW OF DOUBT. 6. THE PUNE BENCH OF THE TRIBUNAL IN BUNCH OF CASES , LEAD CASE BEING M/S. CHHABI ELECTRICALS PVT. LTD. VS. DEPUTY COMMISSIONER OF INCOME TAX 7 ITA NO S. 1832, 1833 & 1834/PUN/2017, A.YS. 2009 - 10, 2010 - 11 & 2011 - 12 IN ITA NO. 795/PUN/2014 FOR ASSESSMENT YEAR 2010 - 11 DECIDED ON 28 - 04 - 2017 ESTIMATED ADDITION @ 10% OF THE ALLEGED HAWALA PURCHASES. IN THE AFORESAID BUNCH OF APPEALS THE ADDITIONS WERE MADE ON THE BASIS OF INFORMATION RECEIVED FROM SALES TAX DEPARTMENT. THE PURCHASES MADE BY ASSESSEE FROM HAWALA DEALERS WERE HELD TO BE BOGUS AND ASSESSING OFFICER MADE ADDITION OF THE ENTIRE SUCH PURCHASES . IN FIRST APPEAL, THE COMMISSIONER OF INCOME TAX (APPEALS) GRANTED PARTIAL RELIEF TO THE ASSESSEE. THEREAFTER, THE ASSESSEE CARRIED THE MATTER IN SECOND APPEAL BEFORE THE TRIBUNAL. THE TRIBUNAL CATEGORIZED THE APPEALS ON THE BASIS OF FACTS AND THEREAFTER ESTIMATED THE ADDITION @ 10%. 7. TAKING INTO CONSIDERATION ENTI RETY OF FACTS AND THE DECISION OF TRIBUNAL IN THE CASE OF M/S. CHHABI ELECTRICALS PVT. LTD. VS. DEPUTY COMMISSIONER OF INCOME TAX (SUPRA), WE ARE OF CONSIDERED VIEW THAT ADDITION ON ACCOUNT OF BOGUS PURCHASES IF ESTIMATED @ 10% OF SUCH PURCHASES, WOULD MEE T THE ENDS OF JUSTICE. WE HOLD AND DIRECT ACCORDINGLY. THUS, ALL THE THREE APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED IN AFORESAID TERMS. 8. IN THE RESULT, ALL THE THREE APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED . ORDER PRONOUNCED ON THURSDAY, THE 31 ST DAY OF AUGUST, 2017 . SD/ - SD/ - ( . /D. KARUNAKARA RAO ) ( / VIKAS AWASTHY) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE; / DATED : 31 ST AUGUST, 2017 RK 8 ITA NO S. 1832, 1833 & 1834/PUN/2017, A.YS. 2009 - 10, 2010 - 11 & 2011 - 12 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 9, PUNE 4. THE PR. COMMISSIONER OF INCOME TAX - 5, PUNE 5. , , , / DR, ITAT, B BENCH, PUNE. 6. / GUARD FILE. / / // TRUE COPY// / BY ORDER, / PRIVATE SECRETARY, , / ITAT, PUNE