CHINTAMANI'S NX (FIRM), MUMBAI V. ACIT , CIRCLE 18 (2), MUMBAI

ITA 1894/MUM/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 8166 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-06-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 01-04-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AKHTAR HUSSAIN ANSARI
• Keywords: Bogus purchase; Accommodation entries
• Section: 143(3); 133(6); 143(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC, BENCH M UMBAI BEFORE HONBLE SHRI MAHAVIR SINGH, VICE PRESIDENT & HON BLE SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ITA NO.1894/MUM/2019 ( ASSESSMENT YEAR: 2011-12 ) CHINTAMANIS NX (FIRM) 2 & 3, RADHE GOPAL INDL. ESTATE SENAPATI BAPAT MARG DADAR(W) MUMBAI-400 028 VS. ACIT,CIRCLE-18(2) PIRAMAL CHAMBERS LALBAUG MUMBAI-400 012 PAN/GIR NO. AA DFC1379B ( APPELLANT ) .. ( RESPONDENT ) ASSESSEE BY NONE REVENUE BY SHRI. AKHTAR HUSSAIN ANSARI JCIT, SR. DR DATE OF HEAR ING 1 8 /0 6 /2020 DATE OF PRONOUNCEME NT 18 / 0 6 /20 20 / O R D E R PER G. MANJUNATHA (A.M.) : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEAL S)- 48, MUMBAI, DATED 29/01/2019 AND IT PERTAINS TO AY 2011-12. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. THE HON. COMMISSIONER (APPEALS) ERRED IN CONFIRM ING ARBITRARY PART DISALLOWANCES OF RS.331,250/- COMPUTED @ 25% OF PUR CHASES OF RS.13,25,001/- ALLEGED AS DOUBTFUL FROM TWO VENDORS DECLARED AS SUSPICIOUS BY SALES TAX DEPT. OF MAHARASHTRA, IGNOR ING THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS THE STAND TAKE N BY HER ON THE SIMILAR FACTS IN THE CASE OF APPELLANT FOR AY 2009- 10 VIDE HER ORDER DTD. 14.08.2018, WHEREIN THE DISALLOWANCE HAS BEEN RESTRICTED TO 12.5% DONE BY THE ASSESSING OFFICER. ITA NO.1894/MUM/2019 CHINTAMANIS NX (FIRM) 2 3. THE BRIEF FACTS OF THE CASE AS CULLED OUT FROM A SST. YEAR 2011- 12 ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF TRADING AND WHOLESALERS, FILED ITS RETURN OF INCOME FOR AY 2011 -12 ON 28/09/2011, DECLARING TOTAL INCOME AT RS. 23,42,480/- AND SAID RETURN WAS PROCESSED U/S 143(1) OF THE INCOME TAX ACT, 1961. T HE CASE HAS BEEN SELECTED FOR SCRUTINY AND THE ASSESSMENT HAS B EEN COMPLETED U/S. 143(3) OF THE I.T.ACT, 1961 ON 27/03/2014 AND DETERMINED TOTAL INCOME OF RS. 27,44,710/-, AFTER MAKING ADDITIONS O F 25% GROSS PROFIT ON ALLEGED BOGUS PURCHASE FROM THOSE PARTIES AND MA DE ADDITIONS OF RS. 3,31,250/-. 4. BEING AGGRIEVED BY THE ASSESSMENT ORDER, THE ASS ESEE PREFERRED AN APPEAL BEFORE THE LD.CIT(A). BEFORE TH E LD.CIT(A), THE ASSESSEE HAS FILED ELABORATE WRITTEN SUBMISSIONS WH ICH HAS BEEN REPRODUCED AT PARA 4 ON PAGES 3 TO 6 OF THE LD. CIT (A) ORDER. THE SUM AND SUBSTANCE OF ARGUMENTS OF THE ASSESSEE BEFO RE THE LD.CIT(A) ARE THAT PURCHASE FROM THE ABOVE PARTY IS GENUINE, WHICH IS SUPPORTED BY NECESSARY EVIDENCES. THEREFORE, NO ADDITIONS COULD BE MADE ON THE BASIS OF INFORMATION RECEIVED FROM T HIRD PARTY. THE LD.CIT(A), AFTER CONSIDERING RELEVANT SUBMISSION OF THE ASSESSEE AND ALSO, BY FOLLOWING THE DECISION OF HONBLE GUJA RAT HIGH COURT, IN THE CASE OF CIT VS. SIMITH P. SHETH (356 ITR 451) H AS UPHELD ADDITION MADE BY THE LD. AO TOWARDS ALLEGED BOGUS P URCHASES TO 25% GROSS PROFIT ON TOTAL PURCHASES FROM THOSE PART IES. 5. NONE APPEARED FOR THE ASSESSEE. WE HAVE HEARD TH E LD. DR, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE T HROUGH ORDERS OF THE AUTHORITIES BELOW ALONG WITH CASE LAWS CITED BY BOTH PARTIES. WE FIND THAT THE LD. AO HAS MADE ADDITION OF 25% PROFI T ON ALLEGED ITA NO.1894/MUM/2019 CHINTAMANIS NX (FIRM) 3 BOGUS PURCHASES ON THE GROUND THAT THE ASSESSEE IS ONE OF THE BENEFICIARY OF ACCOMMODATION ENTRIES OF BOGUS PURCH ASE BILLS ISSUED BY HAWALA DEALERS. ACCORDING TO THE LD. AO, ALTHOUG H ASSESEE HAS FILED CERTAIN BASIC EVIDENCES, BUT FAILED TO FILE F URTHER EVIDENCE IN THE BACKDROP OF CLEAR FINDING BY THE SALES TAX DEPARTME NT, MAHARASHTRA THAT THOSE PARTIES ARE INVOLVED IN PROVIDING ACCOMM ODATION ENTRIES WITHOUT ACTUAL DELIVERY OF GOODS. THE LD. AO HAD AL SO TAKEN SUPPORT FROM THE INVESTIGATION CONDUCTED DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AS PER WHICH NOTICE ISSUED U/S 133(6) TO THE PARTIES WERE RETURNED UN-SERVED BY THE POSTAL AUTHORITIES. THEREFORE, HE CAME TO THE CONCLUSION THAT PURCHASES FROM THE SAID PARTIES ARE BOGUS IN NATURE. IT IS THE CONTENTIONS OF THE ASSES SEE BEFORE THE LOWER AUTHORITIES THAT PURCHASES FROM THE ABOVE PAR TY ARE SUPPORTED BY NECESSARY EVIDENCES. IT HAS FURNISHED ALL POSSIB LE EVIDENCES, INCLUDING BOOKS OF ACCOUNTS; STOCK DETAILS AND BANK STATEMENT TO PROVE THAT PAYMENT AGAINST SAID PURCHASES HAVE BEEN MADE THROUGH PROPER BANKING CHANNELS. 6. HAVING CONSIDERED ARGUMENTS OF LD. DR AND ALSO, CONSIDERING MATERIAL AVAILABLE ON RECORD, WE FIND THAT BOTH THE SIDES HAVE FAILED TO PROVE THE CASE IN THEIR FAVOUR WITH NECESSARY EV IDENCES. ALTHOUGH, ASSESSEE HAS FILED CERTAIN BASIC EVIDENCES, BUT FAI LED TO FILE FURTHER EVIDENCES TO CONCLUSIVELY PROVE PURCHASES TO THE SA TISFACTIONS OF THE LD.AO. FURTHER, MERE PAYMENT BY CHEQUE DOES NOT PRO VE THE GENUINENESS OF PURCHASE, MORE PARTICULARLY WHEN OTH ER CIRCUMSTANTIAL EVIDENCE SAYS OTHERWISE. AT THE SAME TIME, THE LD. AO HAD ALSO FAILED TO TAKE THE INVESTIGATION TO A L OGICAL CONCLUSION BY CARRYING OUT NECESSARY ENQUIRES, BUT HE SOLELY RELI ED UPON INFORMATION RECEIVED FROM INVESTIGATION WING, WHICH WAS FURTHER ITA NO.1894/MUM/2019 CHINTAMANIS NX (FIRM) 4 SUPPORTED BY INFORMATION RECEIVED FROM MAHARASHTRA SALES TAX DEPARTMENT. THE AO NEITHER POINTED OUT ANY DISCREPA NCIES IN BOOKS OF ACCOUNTS NOR MADE OUT A CASE OF SALES OUTSIDE BO OKS OF ACCOUNTS. IN FACT, THE AO DID NOT DISPUTED SALES DECLARED FOR THE YEAR. UNDER THESE CIRCUMSTANCES, IT IS DIFFICULT FOR US TO ACCE PT ARGUMENTS OF BOTH THE SIDES. FURTHER, IN A CASE WHERE PURCHASES ARE C ONSIDERED TO BE PURCHASED FROM SUSPICIOUS/HAWALA DEALERS, VARIOUS H IGH COURTS AND TRIBUNALS HAD CONSIDERED AN IDENTICAL ISSUE IN LIGH T OF INVESTIGATION CARRIED OUT BY THE SALES TAX DEPARTMENT AND HELD TH AT IN CASE OF PURCHASES CLAIMS TO HAVE MADE FROM ALLEGED HAWALA D EALERS, ONLY PROFIT ELEMENT EMBEDDED IN THOSE PURCHASES NEEDS TO BE TAXED, BUT NOT TOTAL PURCHASE FROM THOSE PARTIES. THE HONBLE GUJARAT HIGH COURT, IN THE CASE OF CIT VS SIMITH P.SHETH 356 ITR 451 HAD CONSIDERED A SIMILAR ISSUE AND HELD THAT AT THE TIM E OF ESTIMATION OF PROFIT FROM ALLEGED BOGUS PURCHASES NO UNIFORM YARD STICKS COULD BE ADOPTED, BUT IT DEPENDS UPON FACTS OF EACH CASE. TH E ITAT, MUMBAI, IN NUMBER OF CASES HAD CONSIDERED AN IDENTICAL ISSU E AND DEPENDING UPON FACTS OF EACH CASE, DIRECTED THE LD.AO TO ESTI MATE GROSS PROFIT OF 10% TO 15% ON TOTAL ALLEGED BOGUS PURCHASES. IN THIS CASE, CONSIDERING THE NATURE OF BUSINESS OF THE ASSESSEE THE LD. AO HAS MADE 25% PROFIT ADDITIONS, WHICH HAS BEEN UPHELD BY THE LD. LD.CIT(A). ALTHOUGH, BOTH AUTHORITIES HAVE TAKEN 25 % RATE OF PROFIT FOR ESTIMATION OF INCOME FROM ALLEGED BOGUS PURCHAS E, BUT NO ONE COULD SUPPORT SAID RATE OF GROSS PROFIT WITH NECESS ARY EVIDENCES OR ANY COMPARABLE CASES. IN THIS CASE, THE ASSESSEE IS INVOLVED IN THE BUSINESS OF WHOLE SALE TRADING AND FROM THE NATURE OF BUSINESS IT APPEARS THAT PROFIT RATE ADOPTED BY BOTH AUTHORITIE S IS ON HIGHER SIDE. THEREFORE, CONSIDERING FACTS AND CIRCUMSTANCES OF T HIS CASE AND CONSISTENT WITH VIEW TAKEN BY THE CO-ORDINATE BENCH IN NUMBER OF ITA NO.1894/MUM/2019 CHINTAMANIS NX (FIRM) 5 CASES, WE ARE OF THE CONSIDERED OPINION THAT PROFIT RATE ADOPTED BY BOTH AUTHORITIES APPEARS TO BE ON HIGHER SIDE AND A CCORDINGLY, WE DIRECT THE LD. AO TO ESTIMATE 12.50% GROSS PROFIT O N TOTAL ALLEGED BOGUS PURCHASES. 7. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS P ARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS: 18/06 /2020 SD/- (MAHAVIR SINGH) SD/- (G. MANJUNATHA) VICE PRESIDENT ACCOUNTANT MEMBER MUMBAI ; DATED: 18/06/2020 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//