ITO-30(3)(1), MUMBAI V. RAKESH INDER BACHANI, MUMBAI

ITA 1907/MUM/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 8164 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-06-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 02-04-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AKHTAR HUSSAIN ANSARI
• Keywords: Bogus purchase; Accommodation entries; Set aside
• Section: 133(6); 143(1); 147

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.1907/MUM/2019 AND ITA NO. 1908/MUM/2019 ( ASSESSMENT YEAR: 2010-11 AND 2011-12 ) INCOME TAX O FFICER, 30(3)(1) MUMBAI-400 051 VS. MR. RAKESH INDER BACHANI B-603, HIMACHAL BUILDING, S V ROAD, MALAD, MUMBAI-400 064 PAN/GIR NO. AEYPB3889C ( APPELLANT ) .. RESPONDENT ) ASSESSEE BY NONE REVENUE BY SHRI. AKHTAR HUSSAIN ANSARI JCIT, SR. DR DAT E OF HEARING 17 /0 6 /2020 DATE OF PRONOUNCEMENT 17/06/2020 / O R D E R PER BENCH : THESE ARE TWO APPEALS FILED BY THE REVENUE ARE DIR ECTED AGAINST, COMMON ORDER PASSED BY THE LD. COMMISSIONE R OF INCOME TAX (APPEALS)-41, MUMBAI, DATED 31/01/2019 AND THEY PERTAINS TO AY 2010-11 AND 2011-12. SINCE, FACTS ARE IDENTICAL AND ISSUES ARE COMMON, FOR THE SAKE OF CONVENIENCE, THESE APPEALS WERE HEARD TOGETHER AND ARE DISPOSED-OFF BY THIS CONSOLIDATED ORDER. 2. THE REVENUE HAS, MORE OR LESS RAISED COMMON GROU NDS OF APPEAL FOR BOTH ASSESSMENT YEARS. THEREFORE, FOR TH E SAKE OF CONVENIENCE, GROUNDS OF APPEALS FILED FOR THE ASST. YEAR 2010-11 ARE REPRODUCED AS UNDER: 1. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN RESTRICTING THE ADDITION FROM R S. 5,97,061/- BEING 6% RAKESH INDER BACHANI 2 TO RS. 1,99,020/- BEING 2% OF THE BOGUS PURCHASES O F RS. 99,51,030/- WITHOUT ANY BASIS' 2. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN RESTRICTING THE ADDITION FROM R S. 5,97,061/- BEING 6% TO RS. 1,99,020/- BEING 2% OF THE AFORESAID BOGUS PURCHASE S FROM HAWALA PARTIES WITHOUT APPRECIATING THE FACT THAT T HE ASSESSEE FAILED TO PRODUCE THE PARTIES.' 3. 'THE APPELLANT PRAYS THAT THE ORDER OF LD. CIT(A) O N THE ABOVE GROUNDS BE SET ASIDE AND THAT ORDER OF THE ASSESSING OFFICE R BE RESTORED.' 3. THE BRIEF FACTS OF THE CASE AS CULLED OUT FROM A SST. YEAR 2010- 11 ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF TRADING IN FERROUS AND NON- FERROUS METALS FILED HIS RETURN OF INCOME FOR AY 2010-11 ON 28/09/2011, DECLARING TOTAL INCOME AT RS . 7,57250/- AND SAID RETURN WAS PROCESSED U/S 143(1) OF THE INCOME TAX ACT, 1961. THE CASE HAS BEEN, SUBSEQUENTLY REOPENED U/S 147 OF THE ACT, ON THE BASIS OF INFORMATION RECEIVED FROM DGIT, INVEST IGATION, MUMBAI, AS PER WHICH, SALES TAX AUTHORITIES OF GOVERNMENT O F MAHARASHTRA HAD TAKEN ACTIONS AGAINST NUMBER OF HAWALA DEALERS , WHO HAD ISSUED BOGUS PURCHASE BILLS TO VARIOUS PARTIES IN M UMBAI AND OTHER PLACES. AS PER LIST OF BENEFICIARIES, THE ASSESSEE IS ONE OF THE BENEFICIARY, WHO HAD TAKEN ACCOMMODATION BILLS OF B OGUS PURCHASES FROM VARIOUS PARTIES AS LISTED BY THE AO IN PARA. 2 OF HIS ASSESSMENT ORDER AMOUNTING TO RS. 99,51,308/-. THE CASE WAS SE LECTED FOR SCRUTINY AND THE ASSESSMENT HAS BEEN COMPLETED U/S. 143(3).R.W.S. 147 OF THE I.T.ACT, 1961 ON 04/03/2016 AND DETERMIN ED TOTAL INCOME OF RS. 13,54,310/-, AFTER MAKING 6% GROSS PROFIT AD DITION ON ALLEGED BOGUS PURCHASE FROM THOSE PARTIES AND MADE ADDITION S OF RS. 5,97,061/- TO THE RETURNED INCOME. 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 RAKESH INDER BACHANI 3 ASSESSEE HAS FILED ELABORATE WRITTEN SUBMISSIONS WH ICH HAS BEEN REPRODUCED AT PARA 3 ON PAGES 3 TO 7 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 SCALED DOWN ADDITION MADE BY THE LD. AO TO 2% PROFIT ON ALLEGED TOTAL PURCHASES FROM THOSE PARTIES. 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. AS REGARDS, ADDITION MADE BY THE LD. AO TOWARDS ALLEGE D BOGUS PURCHASES, WE FIND THAT THE LD. AO HAS MADE ADDITIO N OF 6% PROFIT ON ALLEGED BOGUS PURCHASES ON THE GROUND THAT THE A SSESSEE IS ONE OF THE BENEFICIARY OF ACCOMMODATION ENTRIES OF BOGU S PURCHASE BILLS ISSUED BY HAWALA DEALERS. ACCORDING TO THE LD. AO, ALTHOUGH ASSESEE HAS FILED CERTAIN BASIC EVIDENCES, BUT FAIL ED TO FILE FURTHER EVIDENCE IN THE BACKDROP OF CLEAR FINDING BY THE SA LES TAX DEPARTMENT, MAHARASHTRA THAT THOSE PARTIES ARE INVO LVED IN PROVIDING ACCOMMODATION ENTRIES WITHOUT ACTUAL DELIVERY OF GO ODS. THE LD. AO HAD ALSO TAKEN SUPPORT FROM THE INVESTIGATION CONDU CTED DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AS PER WHICH NOTI CE ISSUED U/S 133(6) TO THE PARTIES WERE RETURNED UN-SERVED BY TH E POSTAL AUTHORITIES. THEREFORE, HE CAME TO THE CONCLUSION T HAT PURCHASES FROM THE SAID PARTIES ARE BOGUS IN NATURE. IT IS TH E CONTENTIONS OF THE ASSESSEE BEFORE THE LOWER AUTHORITIES THAT PURCHASE S FROM THE ABOVE RAKESH INDER BACHANI 4 PARTY ARE SUPPORTED BY NECESSARY EVIDENCES. IT HAS FURNISHED ALL POSSIBLE EVIDENCES, INCLUDING BOOKS OF ACCOUNTS; ST OCK DETAILS AND BANK STATEMENT TO PROVE THAT PAYMENT AGAINST SAID P URCHASES 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 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 RAKESH INDER BACHANI 5 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 ADDITION OF 6% PROFIT, WHEREAS THE LD. CIT(A) HAS SCALED DOWN ADDITION TO 2% PROFIT ON ALLEGED BOGUS PURCHASES. A LTHOUGH, BOTH AUTHORITIES HAVE TAKEN DIFFERENT RATE OF PROFIT FOR ESTIMATION OF INCOME FROM ALLEGED BOGUS PURCHASE, BUT NO ONE COULD SUPPO RT SAID RATE OF GROSS PROFIT WITH NECESSARY EVIDENCES OR ANY COMPAR ABLE CASES. IN THIS CASE, THE ASSESSEE IS INVOLVED IN THE BUSINESS OF TRADING IN FERROUS AND NON-FERROUS METALS. THE RATE OF VAT IS 4% ON FERROUS AND NON-FERROUS METALS IN THE STATE OF MAHARASHTRA. FURTHER, THE ASSESSEE HAS DECLARED APPROXIMATELY 4% GROSS PROFIT IN REGULAR BOOKS OF ACCOUNTS. THEREFORE, CONSIDERING FACTS AND CIRCUMSTANCES OF THIS CASE AND CONSISTENT WITH VIEW TAKEN BY THE CO-ORDINATE BENCH IN NUMBER OF CASES, WE ARE OF THE CONSIDERED OPINIO N THAT RATE OF PROFIT ADOPTED BY THE LD. CIT(A) APPEARS TO BE REAS ONABLE AND ACCORDINGLY, WE ARE INCLINED TO UPHOLD ORDER OF THE LD. CIT(A) AND DISMISS APPEAL FILED BY THE REVENUE. 7. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DI SMISSED. ITA NO. 1908/MUM/2019 8. THE FACTS AND ISSUE INVOLVED IN THIS APPEAL FIL ED BY THE REVENUE ARE IDENTICAL TO FACTS AND ISSUES WHICH WE HAD CONSIDERED IN ITA NO. 1907/MUM/2019 FOR ASST. YEAR 2010-11. TH E REASONS GIVEN BY US IN PRECEDING PARAGRAPHS SHALL MUTATIS A ND MUTANDIS RAKESH INDER BACHANI 6 APPLY TO THESE APPEALS, AS WELL. WE, THEREFORE, FOR DETAILED REASONS GIVEN IN PREVIOUS PARAGRAPHS, IN ITA NO. 1907/MUM/2 019, INCLINED TO UPHOLD LD. CIT(A) ORDER AND DISMISS APPEAL FILED BY THE REVENUE. 9. IN THE RESULT, APPEAL FILED BY THE REVENUE FOR A SST. YEAR 2011- 12 IS DISMISSED. 10. AS A RESULT, APPEALS FILED BY THE REVENUE FOR A SST. YEARS 2010- 11 AND 2011-12 ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS: 17/06/2 020 SD/- (MAHAVIR SINGH) SD/- (G. MANJUNATHA) VICE PRESIDENT ACCOUNTANT MEMBER MUMBAI ; DATED:17/06/2020 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//