VIJAYKUMAR SHIVLAL JAIN, MUMBAI V. INCOME TAX OFFICER 19(3)(5), MUMBAI

ITA 1850/MUM/2018

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 4505 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-08-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 22-03-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S K BEPAIR
• Keywords: Reopening of assessment; Bogus purchase; Initiation of penalty proceedings; Accommodation entries
• Section: 80C; 142(1); 234B; 133(6); 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI G.S . PANNU , AM AND SHRI PAWAN SINGH , JM ITA NO. 1850 /MUM/201 8 ASSESSMENT YEAR 20 10 - 11 MR. VIJAYKUMAR SHIVLAL JAIN ROOM NO.101, 2 ND FLOOR BADRIKA ASHRAM BUILDING 1 ST KHETWADI LANE MUMBAI - 400 0 0 4 . / VS. INCOME TAX OFFICER - 19(3)(5 ) MUMBAI. ./ PAN : A DXPJ 8872 B ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY NONE / RESPONDENT BY SHRI S.K. BEPAIR - DR DATE OF HEARI NG 31 /07 /2018 DATE OF PRONOUNCEMENT 02 /0 8 /2018 / O R D E R PER PAWAN SINGH , JUDICIAL MEMBER : 1 . THIS APPEAL BY ASSESSEE IS DIRECTED AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME - TAX(APPEALS) - 53 , MUMBAI [LD. CIT(A)] DATED 0 1/ 0 1/201 8 F OR ASSESSMENT YEAR 20 10 - 11 . THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL. (1) ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED COMMISSIONER OF INCOME TAX HAS ERRED IN LAW IN CONFIRMING THE ADDITION OF RS. 10,39,090/ - BEING OF 25% OF TOTAL OBJE CTED PURCHASES OF RS. 75,56,361/ - WHICH IS MOST UNJUSTIFIED AND ARBITRARY. (2) ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN LAW IN CONFIRMING THE REOPENING OF ASSESSMENT, WHICH IS BASE HAS AND UNJ USTIFIED. (3) THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN LAW IN DISALLOWING THE CLAIM AND DEDUCTION UNDER SECTION 80C OF UNDER CHAPTER VIA OF RS. 1,00,000/ - WHICH IS MOST UNJUSTIFIED AND ARBITRARY. (4) THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN LAW IN CONFIRMING THE INITIATION OF PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961 WHICH IS MOST UNJUSTIFIED AND ARBITRARY. (5) THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN LAW IN CONFIRM ING THE CHARGE OF INTEREST UNDER SECTION 234A, 234B AND 234C OF THE INCOME TAX ACT, 1961 WHICH IS MOST UNJUSTIFIED AND ARBITRARY. (6) THE APPELLANT CRAVES TO LEAVE, ADD, AMEND ANY OF THE GROUNDS OF APPEAL AS ABOVE. 2 . BRIEF FACTS OF THE CASE ARE THAT THE A SSESSEE IS ENGAGED IN THE BUSINESS OF TRADING IN STEEL PIPES AND PIPE FITTINGS . IT FILED ITS ASSESSMENT FOR ASSESSMENT YEAR 2010 - 11 ON ITA NO. 1 850 /MUM/201 8 MR. VIJAYKUMAR SHIVL AL JAIN 2 17/09/2010 DECLARING INCOME OF RS.69,928/ - . THE ASSESSMENT WAS PROCESSED U/S.143(1) OF THE INCOME TAX ACT. THE ASSESSMENT WAS RE - OPENED ON THE BASIS OF INFORMATION RECEIVED FROM S ALES TAX DEPARTMENT , OF GOVERNMENT OF MAHARASHTRA , THAT DURING THE FINANCIAL YEAR 2009 - 10 , THE ASSESSEE MADE PURCHASES OF RS. 73,56,361/ - , FROM THE PARTIES, WHICH HAD BEEN DECLARED AS HAWALA DEALERS BY SALES TAX DEPARTMENT, GOVERNMENT OF MAHARASHTRA. THOSE HAWALA DEALERS WERE NOT DOING GENUINE BUSINESS ACTIVITIES RATHER WERE INVOLVED IN PROVIDING ACCOMMODATION ENTRIES. THE ASSESSEE HAS SHOWN PURCHASES FROM NINE (9) SUCH PARTIES AGGREGATING TO RS.73,56 ,361/ - . THE AO ON THE BASIS OF SUCH INFORMATION RE - OPENED THE ASSESSMENT ON 27/10/ 2014. NOTICE U/S. 148 WAS ISSUED TO THE ASSESSEE ON 27/10/2010. THE AO ISSUED NOTICE U/S. 142(1) ON 23/1 1 / 2015 WHICH FOLLOWED NOTICE U/S. 143(2). THE ASSESSEE WAS ASKED TO S UBMIT BOOKS OF ACCOUNT, COPY OF BANK STATEMENTS, PRODUCT OF BANK REGISTER, CASH BOOK, AUDITED BOOKS OF ACCOUNT AND PURCHASE AND SALE REGISTER ETC. IN RESPONSE TO THE SAID QUESTIONNAIRE THE ASSESSEE FILED HIS SUBMISSION ALONGWITH BANK STATEMENT, COPY OF BIL LS AND COPY OF LEDGER OF THOSE PARTIES . ON THE BASIS OF INFORMATION FURNISHED BY THE ASSESSEE, THE AO ISSUED NOTICE U/S. 133(6) TO THE SAID PARTIES . NOTICE SENT TO SUCH PARTIES WAS RETURNED BACK UNSERVED WITH THE REMARKS NOT KNOWN OR NO SUCH ADDRESS OR LEFT: ETC. THE AO ON THE BASIS OF INFORMATION RECEIVED FROM SALES TAX DEPARTMENT AND THE SUBMISSION MADE BY THE ASSESSEE ALONG WITH DOCUMENTARY EVIDENCE CONCLUDED MADE THE ADDITION OF 25% OF AGGREGATING PURCHASE OF RS.73,56,361/ - , WHICH WORKS OUT TO RS. 18,39,090/ - AS NON GENUINE PURCHASES. THE AO ALSO NOTED THAT THE ASSESSEE CLAIMED DEDUCTION OF RS.45,451/ - UNDER CHAPTER VI - A. HOWEVER, THE ASSESSEE HAS NOT FURNISHED ANY SUCH DOCUMENTARY EVIDENCE TO SUPPORT THE DEDUCTION. HENCE, THE DEDUCTION CLAIMED BY T HE ASSESSEE OF RS.45,451/ - WAS DISALLOWED. ITA NO. 1 850 /MUM/201 8 MR. VIJAYKUMAR SHIVL AL JAIN 3 3 . ON APPEAL, BEFORE THE LD. CIT(A) THE ADDITION / DISALLOWANCE ON ACCOUNT OF BOGUS/NON - GENUINE PURCHASES WAS RESTRICTED TO 12.5% ON HIS OBSERVATION THAT THE ASSESSEE IS A TRADER AND QUANTITY ACCOUNTS ARE MAINTAINE D. HOWEVER, WITH REGARD TO DISALLOWANCE OF DEDUCTION UNDER CHAPTER VI - A , NO RELIEF WAS GRANTED. THEREFORE, FURTHER AGGRIEVED THE ASSESSEE HAS FILED PRESENT APPEAL BEFOR E US. 4 . NONE APPEARED BEFORE US, ON BEHALF OF THE ASSESSEE DESPITE THE SERVICE OF NOTICE THROUGH RPAD. A PERUSAL OF RECORDS REVEALS THAT THE LD AR FOR THE ASSESSEE HAS FILED AN APPLICATION FOR ADJOURNMENT, AS NONE APPEARED THEREFORE THE ADJOURNMENT WAS DECLINED. WE HAVE NOTED THAT THE ASSESSEE HAS ALREADY FILED WRITTEN SUBMISSIONS IN SUPPORT OF HIS GROUNDS OF APPEAL. CONSIDERING THE FACT WE ARE LEFT WITH NO OPTION BUT TO HEAR THE LD. DR FOR THE REVENUE AND TO DECIDE THE CASE ON THE BASIS OF MATERIAL AVAILABLE ON RECORD. THE DR FOR THE R EVENUE SUPPORTED THE ORDER OF CIT (A). THE DR FURTHER SUBMI TS THAT THE SALES TAX DEPARTMENT, GOVT. OF MAHARASHTRA AND THE INVESTIGATION WING OF INCOME TAX DEPARTMENT MADE A FULL - FLEDGED ENQUIRY WITH REGARD TO HAWALA DEALERS WHO WERE INDULGING IN PROVIDING ACCOMMODATION ENTRIES WITHOUT DELIVERY OF GOODS. THE ASSESS EE HAS SHOWN PURCHASE S FROM SUCH PARTIES WHOSE NAMES APPEAR IN THE LIST OF HAWALA DEALERS. THE ASSESSEE MERELY OBTAINED ACCOMMODATION BILLS ONLY TO INFLATE EXPENSES AND BRING OUT THE PROFITABILITY IN ORDER TO AVOID TAX. THE LD. DR FURTHER SUBMITS THAT CIT( A) HAS ALREADY GIVEN SUFFICIENT RELIEF TO THE ASSESSEE . 5 . W E HAVE CONSIDERED THE SUBMISSION OF LD. DR AND WRITTEN SUBMISSION OF THE LD. AR ALONG WITH PAPER BOOK FURNISHED . THE ASSESSING OFFICER MADE THE ADDITION TO THE EXTENT OF 25% OF AGGREGATE OF THE P URCHASES FROM NINE PARTIES . WE HAVE NOTED THAT THE AO HAS NOT REJECTED THE BOOKS OF ACCOUNT. THE AO HAS NOT GIVEN ANY FINDING ON ITA NO. 1 850 /MUM/201 8 MR. VIJAYKUMAR SHIVL AL JAIN 4 THE DOCU MENTARY EVIDENCE FURNISHED BY THE ASSESSEE. THE SALES OF THE ASSESSEE ARE NOT DISPUTED BY THE AO. THE LD. CIT(A) OBSERV ED THAT THE ONUS OF PROVING THE TRANSACTION TO BE GENUINE IS ON THE ASSESSEE, WHEN IT WAS MAKING CLAIM ON PURCHASES AND ESPECIALLY IN THE LIGHT OF DOUBT WHICH HAS BEEN RAISED BY ENQUIRIES CONDUCTED BY THE SALES TAX DEPARTMENT, THE ONUS IS MORE ON THE ASSES SEE TO SHOW THAT AS FAR AS HE IS CONCERNED HE HAS DISCHARGED HIS TAX RELATED LIABILITY IN AN ACCURATE MANNER. THE AO MAY NOT HAVE A CLINCHING PROOF BUT THE PRIMARY RESPONSIBILITY IS ON THE ASSESSEE FOR ESTABLISHING THE GENUINENESS OF THE TRANSACTION. THE C IT(A) FURTHER OBSERVED THAT MERELY FILING OF LEDGER ACCOUNT AND BANK ACCOUNT DOES NOT ESTABLISH THAT PARTY ACTUALLY EXISTED AND GENUINELY SUPPLIED THE MATERIAL. THE AO HAS NOT DISPUTED THE BOOKS OF ACCOUNT, THOUGH THE PURCHASES HAVE NOT BEEN PROVED AS BOG US AND NEITHER CHEQUES HAVE BEEN SHOWN TO BE RECEIVED BACK AS CASH BY THE ASSESSEE, LD. CIT(A) CONCLUDED THAT IN SUCH A SITUATION CAUSE OF JUSTICE MAY BE SERVED BY LOOKING AT GROSS PROFIT MARGIN DECLARED BY THE ASSESSEE . ASSESSEE ON THE BASIS OF DECISION OF HON'BLE GUJARAT HIGH COURT IN THE CASE OF SIMIT P. SHETH (219 TAXMAN 85)(GUJ.) HELD THAT WHEN THE TOTAL SALE IS ACCEPTED BY AO ENTIRE PURCHASES CANNOT BE ADDED TO THE INCOME OF THE ASSESSEE . THE HON'BLE GUJARAT HIGH COURT HELD THAT FAIR PROFIT RATIO W OULD BE NEEDED TO B E ADDED BACK TO THE INCOME OF THE ASSESSEE. THEREFORE, LD. CIT(A) RESTRICTED THE ADDITION TO 12.5% OF THE IMPUGNED/BOGUS PURCHASES. WE HAVE CAREFULLY GONE THROUGH THE SUBMISSION OF THE ASSESSEE PLACED ON RECORD WHEREIN LD. AR OF THE ASSE SSEE HAS RELIED UPON VARIOUS DECISIONS OF THE TRIBUNAL WHEREIN THE ADDITIONS WERE DELETED ON ACCOUNT OF UNVERIFIABLE PURCHASES. WE HAVE ALSO GONE THROUGH THE PAPER BOOK (PB) FURNISHED BY THE ASSESSEE CONSISTING OF 334 PAGES. AFTER CONSIDERING THE ORDER OF LOWER AUTHORITIES, MATERIAL PLACED ON RECORD INCLUDING WRITTEN SUBMISSION OF THE ASSESSEE WE ARE OF THE CONSIDERED VIEW THAT UNDER INCOME TAX ACT, ONLY REAL ITA NO. 1 850 /MUM/201 8 MR. VIJAYKUMAR SHIVL AL JAIN 5 INCOME CAN BE TAXED BY THE REVENUE. EVEN IF THE TRANSACTION IS NOT VERIFIABLE THE ONLY TAXABLE IS T HE TAXABLE INCOME COMPONENT AND NOT THE ENTIRE TRANSACTION. IN OUR VIEW IN ORDER TO FULFILL THE GAP OF REVENUE LEAKAGE THE DISALLOWANCE OF REASONABLE PERCENTAGE ON SUCH PURCHASES WOULD MEET THE ENDS OF JUSTICE. AS WE HAVE NOTED ABOVE THE LD. CIT(A) WITHOUT EXAMINING THE GP RATIO OF THE ASSESSEE SUSTAINED THE ADDITION @ 12.5%, WHICH IS QUITE REASONABLE QUA THE BUSINESS ACTIVITIES OF THE ASSESSEE , THEREFORE, WE DO NOT FIND ANY REASON TO DISTURB THE FINDING OF LD. CIT(A). GROUND IS DISMISSED. 6 . GROUND 2 RELATES TO RE - OPENING OF THE ASSESSMENT. WE HAVE NOTED THAT ASSESSEE HAS NOT SUBMITTED ANYTHING IN HIS WRITTEN SUBMISSION AGAINST THE RE - OPENING. THEREFORE, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE FINDING OF THE LOWER AUTHORITIES. GROUND N.2 OF THE APPEAL IS DISMISSED. 7 . FOR GROUND NO.3, WHICH RELATES TO DEDUCTION U/S. 80C UNDER CHAPTER VI - A FOR RS.1,00,000/ - . THE DR SUBMITS THAT THE MATTER MAY BE RESTORED TO THE FILE OF ASSESSING OFFICER FOR VERIFICATION OF FACTS AND FOR GRANTING RELIEF TO THE ASSESSEE IN C ASE THE ASSESSEE SUBSTANTIATE THE DEDUCTION CLAIMED UNDER CHAPTER VI - A. AS THE ASSESSEE HAS NOT FILED DOCUMENTARY EVIDENCE EITHER BEFORE THE AO OR BEFORE CIT(A). 8 . WE HAVE CONSIDERED THE SUBMISSION OF THE LD. DR AND PERUSED THE ORDERS OF AUTHORITIES BELOW. W E HAVE NOTED THAT LOWER AUTHORITIES HAVE MADE DISALLOWANCE HOLDING THAT NO DOCUMENTARY EVIDENCE HAVE BEEN FURNISHED IN SUPPORT OF THE CLAIM. NOW THE ASSESSEE HAD FILED SIX RECEIPTS OF LIC PREMIUM OF DIFFERENT DATES AND AMOUNTS . WE HAVE FURTHER NOTED THAT T HESE RECEIPTS WERE NOT FURNISHED BEFORE LOWER AUTHORITIES AT THE TIME OF ASSESSMENT OR FIRST APPELLATE STAGE. THEREFORE , CONSIDERING THE RELEVANCY OF DOCUMENTARY EVIDENCE FURNISHED BY THE ASSESSEE AND SUBMISSION OF LD. DR THIS GROUND OF APPEAL IS RESTORED BACK TO FILE OF THE AO TO VERIFY THE RECEIPT ITA NO. 1 850 /MUM/201 8 MR. VIJAYKUMAR SHIVL AL JAIN 6 AND ALLOW APPROPRIATE RELIEF TO THE ASSESSEE IN ACCORDANCE WITH LAW. HENCE, THIS GROUND OF APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. 9 . GROUND NO.4 RELATES TO INITIATION OF PENALTY. THIS GROUND OF APPEAL IS PRE - M ATURE AND NEEDS ADJUDICATION AT THIS STAGE. 10 . GROUND NO.5 RELATES TO INTEREST U/S. 234A, 234B AND 234C . THESE GROUNDS NEED NOT BE ADJUDICATED AS THEY ARE CONSEQUENTIAL IN NATURE. IN THE RESULT, APPEAL OF ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 02 .0 8 .2018. SD/ - SD/ - ( G.S. PANNU ) (PAWAN SINGH) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI ; DATED: 02 /0 8 /2018 JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCER NED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR D BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ / B Y ORDER, / DY./ASST. REGISTRAR , / ITAT, MUMBAI.