ITO 20(1)(4), MUMBAI V. DILIP SINGH, MUMBAI

ITA 1884/MUM/2017

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 9975 (ITAT-MUMBAI)
• Duration Of Justice: 5 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-09-2017
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2009-2010
• Appeal Filed On: 17-03-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: V JENARDHANAN
• Keywords: Bogus purchase; Opportunity of being heard; Principle of natural justice; Accommodation entries
• Section: 143(3); 133(6); 148

Judgement Text

K IN THE INCOME TAX APPELLATE TRIBUNAL K BENCH, MUMBAI BEFORE SHRI C.N. PRASAD, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER ./ I.T.A. NO. 1884/ MUM/2017 ( / ASSESSMENT YEAR : 2009-10) INCOME TAX OFFICER 20(1)(4), ROOM NO. 112, PIRAMAL CHAMBERS, 1ST FLOOR, PAREL, MUMBAI 400 012. / V. SHRI DILIP SINGH, PLOT NO. 231, QUAY STREET, BEHIND ABHYUDHAYA CO.- OP. BANK, DARUKHANA, REAY ROAD, MUMBAI 400010. ./ PAN : AAJPS1145F ( / APPELLANT ) .. ( / RESPONDENT ) REVENUE BY : SHRI V. JENARDHANAN , DR ASSESSEE BY : SHRI KIRIT SANGHVI / DATE OF HEARING : 24.08.2017 / DATE OF PRONOUNCEMENT : 01-09-2017 / O R D E R PER RAMIT KOCHAR, ACCOUNTANT MEMBER THIS APPEAL, FILED BY THE REVENUE, BEING ITA NO. 1 884/MUM/2017, IS DIRECTED AGAINST THE APPELLATE ORDER DATED 28.12.20 16 PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)- 32, MUMBAI (H EREINAFTER CALLED THE CIT(A)), FOR ASSESSMENT YEAR 2009-10, APPELLATE PR OCEEDINGS BEFORE LEARNED CIT(A) HAD ARISEN FROM THE ASSESSMENT ORDER DATED 1 6.03.2015 PASSED BY THE LEARNED ASSESSING OFFICER (HEREINAFTER CALLED THE AO) U/S 143(3) R.W.S. 147 OF THE INCOME-TAX ACT, 1961 (HEREINAFTER CALLED TH E ACT) . ITA 1884/MUM/2017 2 2. THE GROUNDS OF APPEAL RAISED BY THE REVENUE IN T HE MEMO OF APPEAL FILED WITH THE INCOME-TAX APPELLATE TRIBUNAL, MUMBA I (HEREINAFTER CALLED THE TRIBUNAL) READ AS UNDER:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE ID. CIT(A) HAS ERRED IN GRANTING RELIEF OF RS.91,39,560/- BY RESTRICTING THE ADDITION TO 14.80% OF TOTAL BOGU S PURCHASES FROM HAWALA PARTIES.' 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE ID. CIT(A) HAS FAILED TO APPRECIATE THE FA CT THAT THE ASSESSING OFFICER DISALLOWED 100% OF THE TOTAL BOGU S PURCHASES RELYING ON VARIOUS CASE LAWS. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE ID. CIT(A) HAS FAILED TO APPRECIATE THE FA CT THAT THE ONUS IS ON THE ASSESSEE TO EXPLAIN AND SUBSTANTIATE THE GENUINENESS AND TRUE NATURE OF THE PURCHASE TRANSACTION. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE ID. CIT(A) FAILED TO APPRECIATE THAT THE H AWALA DEALERS HAVE ADMITTED IN OATH BEFORE THE SALES TAX AUTHORIT IES THAT THEY HAVE NOT SOLD ANY MATERIAL TO ANYBODY. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE ID. CIT(A) ERRED IN CONCLUDING THAT ASSESS EE HAD MADE CASH PURCHASES FROM OTHER PARTIES WHICH WERE NOT RE CORDED IN THE BOOKS WITHOUT MENTIONING HOW THIS AND WITH WHAT EVI DENCE BEFORE HIM SUCH FINDING WAS ARRIVED AT. IF SUCH EVI DENCE OF CASH PURCHASES WAS GIVEN, THE SAME SHOULD HAVE BEEN REMA NDED TO THE A. O. FOR HIS EXAMINATION AND COMMENTS.' 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS PROPRIETOR OF M/S GAUTAM ENGINEERING WORKS , ENGAGED IN THE BUSINESS OF TRADING IN STEELS. THE ASSESSEE HAD FILED RETURN OF INCOME FOR IMPUGNED AS SESSMENT YEAR U/S 139(1) ON 24.09.2009 . IT IS PERTINENT TO MENTION HERE TH AT NO SCRUTINY ASSESSMENT WAS FRAMED BY REVENUE ORIGINALLY U/S 143(3). THERE AFTER, INFORMATION WAS RECEIVED BY THE AO FROM DGIT (INV.), MUMBAI WHICH WAS IN-TURN BASED ON THE ITA 1884/MUM/2017 3 INFORMATION RECEIVED FROM THE SALES TAX DEPARTMENT THAT THE ASSESSEE HAS INDULGED IN MAKING BOGUS PURCHASES FROM ALLEGED HAW ALA DEALERS WHO HAVE DEPOSED BEFORE MAHARASHTRA VAT DEPARTMENT THAT THEY HAVE ISSUED BOGUS BILLS WITHOUT SUPPLYING ANY MATERIAL AND THE ASSESS EE IS ONE OF THE BENEFICIARY OF THESE BOGUS BILLS, THE CASE OF THE ASSESSEE WAS REOPENED BY THE AO U/S 147 AND NOTICE DATED 28-03-2014 WAS ISSUED BY THE AO TO THE ASSESSEE U/S 148 OF THE ACT , WHICH IS WITHIN FOUR YEARS FROM THE END O F THE ASSESSMENT YEAR. THE ASSESSEE SUBMITTED COPIES OF PURCHASE BILLS AND BAN K STATEMENTS BUT REST OF THE INFORMATION AS SOUGHT BY THE AO VIDE QUESTIONNA IRE DATED 11-02-2015 WERE NOT FURNISHED BY THE ASSESSEE BEFORE THE AO. T HE A.O. CALLED FOR THE INFORMATION FROM THE FOLLOWING PURCHASE PARTIES BY ISSUING NOTICES U/S 133(6) OF THE 1961 ACT:- 1 SIDHIVINAYAK STEEL 3,233,119 2 CHANCHAL TUBE CORPORATION 1,506,673 3 ASIAN STEEL 466,923 4 SURAT TUBE CORPORATION 1,965,225 5 SHIV INDUSTRIES 1,317,454 6 MARUTI STEEL TRADERS 2,237,789 TOTAL FOR FINANCIAL YEAR 2008-09 1,07,27,183 THE AFORESAID NOTICES U/S 133(6) WERE RETURNED UNSE RVED .THE ASSESSEE WAS ASKED TO EXPLAIN AS TO WHY THE PURCHASES MADE FROM THE AFORESAID PARTIES SHOULD NOT BE TREATED AS BOGUS. THE ASSESSEE DID NO T SUBMIT ANY REPLY, HENCE, THE A.O. MADE 100% DISALLOWANCE W.R.T. BOGUS PURCHASES I.E. RS. 1,07,27,183/- BY TREATING THE SAME AS BOGUS WHICH W ERE ADDED TO THE INCOME OF THE ASSESSEE, VIDE ASSESSMENT ORDER DATED 16 TH MARCH., 2015 PASSED BY THE AO U/S 143(3) R.W.S. 147 OF THE 1961 ACT. 4. AGGRIEVED BY THE ASSESSMENT ORDER DATED 16-03-20 15 PASSED BY THE A.O. U/S 143(3) R.W.S. 147, THE ASSESSEE CARRIED THE MAT TER IN APPEAL BEFORE THE LD. ITA 1884/MUM/2017 4 CIT(A) . BEFORE THE LD. CIT(A), THE ASSESSEE SUBMI TTED FOLLOWING DETAILS OF SALE AND PURCHASES DURING PREVIOUS YEAR RELEVANT TO THE IMPUGNED ASSESSMENT YEAR :- SALES RS. 1,61,67,098.00 PURCHASES RS. 1,44,05,183.00 G.P 14.91% N.P. 3.32% THE ASSESSEE SUBMITTED BEFORE LEARNED CIT(A) THAT T HE ASSESSE IS A WHOLESALER AND HENCE THE PROFIT DECLARED BY THE ASSESSEE AT TH E RATE OF 3.32% IS QUITE REASONABLE. THE ASSESSEE ALSO PRODUCED BEFORE LEAR NED CIT(A) , COPIES OF P&L ACCOUNT WITH COMPUTATION OF INCOME. IT WAS SUBMITTE D THAT THE ASSESSEE HAD PURCHASED GOODS FROM THE SO CALLED HAWALA DEALERS A ND THE GOODS WERE DELIVERED AT THE DOOR STEP OF THE ASSESSEE AND THE CHEQUES WERE ISSUED TO THE BROKERS. IT WAS SUBMITTED THAT THE PURCHASES WERE GENUINE PURCHASES AND AT THE TIME OF PURCHASES THESE ALLEGED HAWALA DEALERS REGISTRATION WAS SHOWING AS AN ACTIVE DEALERS AND THERE WAS NO REASON FOR TH E ASSESSEE TO SUSPECT THE SO CALLED BOGUS HAWALA DEALERS. THE ASSESSEE SUBMIT TED THAT IT IS ONLY IN FINANCIAL YEAR 2012-13 , THE ASSESSEE CAME TO KNOW THAT THE SAID DEALERS WERE ALLEGED BOGUS HAWALA DEALERS.IT WAS SUBMITTED THAT THEREAFTER NO GOODS WERE PURCHASED BY THE ASSESSEE FROM THE SAID ALLEGED HAW ALA BOGUS DEALERS. THE ASESSEE PRODUCED COPIES OF VAT RETURNS AND SUBMITTE D THAT SALES TAX WAS PAID AFTER CLAIMING OF SET OFF OF VAT IT WAS SUBMI TTED THAT THE DISALLOWANCES OF PURCHASES COULD NOT BE MADE MERELY BECAUSE SUPPL IERS AND OTHER RELEVANT EVIDENCES WERE NOT PRODUCED. IT WAS SUBMITTED THAT BOOKS OF ACCOUNTS OF THE ASSESSEE WAS NOT REJECTED BY THE AO. IT WAS SUBMITT ED THAT SALES WERE NOT DOUBTED BY THE AO AND ALSO PAYMENTS WERE MADE TO TH ESE ALLEGED BOGUS DEALERS FOR THE PURCHASES MADE BY THE ASSESSEE BY C ROSSED ACCOUNT PAYEE CHEQUES. IT WAS SUBMITTED THAT THE DISALLOWANCE WA S MADE ON THE BASIS OF ITA 1884/MUM/2017 5 SUSPICION AND MERELY ON THE GROUNDS THAT THE SELLIN G PARTIES AND BROKERS WERE NOT PRODUCED BY THE ASSESSEE BEFORE THE AO. T HE ASSESSEE PRODUCED THE SUMMARY OF FINAL ACCOUNTS FOR THE FY 2005-06, 2006- 07,2007-08 AND ALSO FOR 2008-09 AND STATEMENT SHOWING COMPARATIVE SALES, GP AND NP RATIO .THE ASSESSEE ALSO PRODUCED THE COPIES OF SALES REGISTER , PURCHASE REGISTER, LEDGER ACCOUNTS OF THE SAID ALLEGED HAWALA DEALERS, COPIES OF BANK STATEMENTS SHOWING THAT PAYMENTS WERE ALL MADE THRO UGH ACCOUNT PAYEE CROSSED CHEQUES AND SAMPLE BILLS OF THE ALLEGED HAW ALA BILLS WERE PRODUCED TO PROVE THAT THE PURCHASES WERE GENUINE. THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE OBSERVED THAT THE ASSESSEE WAS ASKED BY THE AO TO PRODUCE THESE P ARTIES BUT THE ASSESSEE HAD PRODUCED THE PURCHASE BILLS, DETAILS OF PAYMENT AND BANK STATEMENT AND NOT THE SAID BOGUS HAWALA DEALERS. THE LEARNED CIT (A) OBSERVED THAT NOTICE U/S 133(6) OF THE ACT WERE ISSUED BY THE AO TO THE ALLEGED BOGUS HAWALA DEALERS BUT THE SAME WERE RETURNED BACK UN-SERVED. IT WAS OBSERVED BY LEARNED CIT(A) THAT SIMPLY PRODUCING THE COPIES O F THE INVOICES / LEDGER ACCOUNTS OF HAWALA DEALERS AND CONTENDING THAT PAYM ENTS WERE MADE BY CROSSED ACCOUNT PAYEE CHEQUES IS NOT SUFFICIENT TO DISCHARGE THE ONUS CAST ON THE ASSESSEE. THE LEARNED CIT(A) OBSERVED THAT THE ASSESSEE COULD NOT PRODUCE THE SAID ALLEGED HAWALA DEALERS BEFORE THE A.O. FOR VERIFICATION. THE LD. CIT(A) ACCORDINGLY BASED UPON THE AVERAGE GP R ECORDED BY THE ASSESSEE FOR THE LAST THREE YEARS RESTRICTED THE PROFIT ON T HE TOTAL BOGUS PURCHASES FROM THESE SIX PARTIES, TO 14.80% OF THE ALLEGED BOGUS PURCHASES TO THE TUNE OF RS.1,07,27,183/- WHICH ADDITION WAS WORKED OUT TO B E RS. 15,87,623/- , WHICH WAS SUSTAINED BY LEARNED CIT(A). THE ASESSEE GOT A RELIEF OF RS. 91,39,560/-, VIDE APPELLATE ORDER DATED 28-12-2016 PASSED BY LEARNED CIT(A). 5. AGGRIEVED BY THE APPELLATE ORDER DATED 28-12-201 6 PASSED BY THE LD. CIT(A), THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. ITA 1884/MUM/2017 6 6. THE LD. D.R. SUBMITTED THAT THE ASSESSEE HAS NOT FILED ANY APPEAL AGAINST THE APPELLATE ORDER PASSED BY THE LD. CIT(A ). THE LD. D.R. CONTENDED THAT THE ASSESSEE HAS NOT FILED THE QUANTITATIVE RE CONCILIATION OF STOCK BEFORE THE AUTHORITIES BELOW AND LEARNED CIT(A) ERRED IN G RANTING RELIEF TO THE ASSESSEE WITHOUT ANY MATERIAL ON RECORD. THE LEARN ED DR SUBMITTED THAT THE ASSESSEE IS IN THE BUSINESS OF TRADING IN STEEL. I T WAS SUBMITTED THAT THE INFORMATION WAS RECEIVED FROM MAHARASHTRA SALES DEP ARTMENT THAT THE CERTAIN DEALERS HAVE ADMITTED THAT THEY HAVE NOT SU PPLIED ANY MATERIAL AGAINST THE BOGUS BILLS ISSUED BY THEM AND THE ASSE SSEE WAS STATED TO BE BENEFICIARY OF THE SAID ACCOMMODATION ENTRIES. IT W AS SUBMITTED THAT THE ASSESSEE COULD NOT PRODUCE THE SAID PARTIES BEFORE THE A.O. . IT WAS SUBMITTED THAT NOTICES ISSUED BY THE AO U/S 133(6) OF THE AC T ALSO RETURNED BACK UN- SERVED. THE LEARNED DR SUPPORTED THE ASSESSMENT OR DER PASSED BY THE A.O. WHEREIN ENTIRE PURCHASES TO THE TUNE OF RS.1,07,27, 183/- WAS DISALLOWED BY THE AO .IT WAS SUBMITTED THAT GENUINENESS OF THE PU RCHASES COULD NOT BE SUBSTANTIATED BY THE ASSESSEE. 7. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE COULD NOT PRODUCE THE QUANTITATIVE RECONCILIATION OF STOCK ET C. BEFORE THE AO AND IF AN OPPORTUNITY IS GIVEN TO THE ASSESSEE, THE ASSESSEE WILL PRODUCE THE QUANTITATIVE RECONCILIATION OF STOCK BEFORE THE REV ENUE AUTHORITIES. 8. WE HAVE CONSIDERED RIVAL CONTENTIONS AND ALSO PE RUSED THE MATERIAL AVAILABLE ON RECORD. WE HAVE OBSERVED THAT THE ASSE SSEE IS ENGAGED IN THE BUSINESS OF TRADING IN STEELS. THE ASSESSEE HAD FIL ED RETURN OF INCOME ON 24 TH SEPTEMBER, 2009 , WHICH WAS NOT PROCESSED ORIGINALL Y U/S 143(3) OF THE ACT. INFORMATION WAS RECEIVED BY THE AO FROM DGIT (INV. ) WHICH IN TURN WAS BASED ON THE INFORMATION RECEIVED FROM MAHARASHTRA SALES TAX DEPARTMENT THAT CERTAIN PARTIES WERE ENGAGED IN THE PROVIDING BOGUS ACCOMMODATION BILLS WHO ITA 1884/MUM/2017 7 HAD GIVEN AFFIDAVIT/STATEMENT BEFORE THE MAHARASHT RA VAT AUTHORITIES THAT THEY ARE ONLY ISSUING BOGUS BILLS WITHOUT SUPPLYING ANY MATERIAL. NOTICE DATED 28-03-2014 U/S 148 OF THE ACT WAS ISSUED BY THE AO TO THE SAID. THE SAID NOTICE U/S 148 WAS ISSUED WITHIN A PERIOD OF F OUR YEARS FROM THE END OF THE ASSESSMENT YEAR. THE ASSESSEE HAD MADE PURCHAS ES FROM THE FOLLOWING PARTIES, WHO WERE CATEGORIZED AS HAWALA DEALERS ENG AGED IN ISSUING BOGUS BILLS WITHOUT SUPPLYING MATERIAL:- 1 SIDHIVINAYAK STEEL 3,233,119 2 CHANCHAL TUBE CORPORATION 1,506,673 3 ASIAN STEEL 466,923 4 SURAT TUBE CORPORATION 1,965,225 5 SHIV INDUSTRIES 1,317,454 6 MARUTI STEEL TRADERS 2,237,789 TOTAL FOR FINANCIAL YEAR 2008 - 09 1,07,27,183 NOTICE U/S 133(6) OF THE ACT WERE ISSUED BY THE AO TO ALL THE AFORESAID ALLEGED HAWALA PARTIES BUT THESE NOTICES WERE RETURNED BACK UN-SERVED. THE ASSESSEE SUBMITTED THE COPIES OF PURCHASE BILLS, SALE BILLS AND BANK STATEMENT BUT THE ASSESSEE COULD NOT PRODUCE THE PARTIES BEFORE THE A .O. FOR VERIFICATION. THE ASSESSEE ALSO DID NOT PRODUCED THE QUANTITATIVE REC ONCILIATION OF STOCK NOR ANY STOCK STATEMENT/REGISTER WERE PRODUCED BEFORE THE AUTHORITIES BELOW. THE ASSESSEES COUNSEL HAS SUBMITTED BEFORE THE TRI BUNAL THAT IF AN OPPORTUNITY IS GIVEN TO THE ASSESSEE, THE ASSESSEE CAN PRODUCE THE QUANTITATIVE RECONCILIATION STATEMENTS, STOCK RECOR DS AND ALSO CAN PROVE THE GENUINENESS OF THESE PURCHASE TRANSACTION. THE ONU S IS ON THE ASSESSEE TO RECONCILE THE STOCK AND ITS RESALE/UTILIZATION ETC, ALSO TO PROVE THE GENUINENESS OF THE PURCHASES BY PRODUCING THE COGEN T MATERIAL/EVIDENCES AS THESE PURCHASES ARE MADE BY THE ASSESSEE AND ARE RE FLECTED IN HIS BOOKS OF ACCOUNTS . THUS, KEEPING IN VIEW OF THE FACTUAL MA TRIX OF THE CASE, WE ARE INCLINED TO SET ASIDE AND RESTORE THIS MATTER BACK TO THE FILE OF THE A.O. FOR DENOVO DETERMINATION OF THE ISSUE AFRESH ON MERITS IN ACCORDANCE WITH LAW. ITA 1884/MUM/2017 8 THE ASSESSEE IS DIRECTED TO PRODUCE THE QUANTITATIV E RECONCILIATION STOCK STATEMENTS, STOCK RECORDS AND OTHER RELATED DOCUMEN TS BEFORE THE A.O. TO PROVE THE GENUINENESS OF THE PURCHASES FOR VERIFICA TION BY THE A.O. ON MERITS IN DENOVO PROCEEDINGS. NEEDLESS TO SAY, THE AO SHAL L GIVE AN ASSESSEE PROPER AND ADEQUATE OPPORTUNITY OF BEING HEARD IN DE-NOVO PROCEEDINGS IN ACCORDANCE WITH PRINCIPLES OF NATURAL JUSTICE IN AC CORDANCE WITH LAW AND EVIDENCES/EXPLANATIONS SUBMITTED BY THE ASSESSEE IN DENOVO PROCEEDINGS SHALL BE ADMITTED BY THE AO FOR ADJUDICATION ON MER ITS AS PER LAW. THIS IS AN OPEN SET ASIDE AND THE AO CAN LOOK INTO ALL ASPECTS CONNECTED WITH THESE PURCHASES BEFORE ARRIVING AT THE DECISION. WE ORDER ACCORDINGLY. 9. IN THE RESULT, APPEAL OF THE REVENUE IN ITA NO. 1884/MUM/2017 FOR ASSESSMENT YEAR 2009-10 IS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON IST SEPTEMBE R, 2017. # $% &' 01-09-2017 ( ) SD/- SD/- (C.N. PRASAD) (RAMIT KOCHAR) JUDICIAL MEMBER ACCOUNTANT MEMBER $ MUMBAI ; & DATED 01-09-2017 [ .9../ R.K. R.K. R.K. R.K. , EX. SR. PS !'#$%&%# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. : ( ) / THE CIT(A)- CONCERNED, MUMBAI 4. : / CIT- CONCERNED, MUMBAI 5. =>( 99?@ , ?@ , $ / DR, ITAT, MUMBAI K BENCH 6. (BC D / GUARD FILE. / BY ORDER, = 9 //TRUE COPY// / ( DY./ASSTT. REGISTRAR) , $ / ITAT, MUMBAI