ITO(1)(4), MUMBAI V. ELECTRO COATS, MUMBAI

ITA 1911/MUM/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 8158 (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: 2009-2010
• Appeal Filed On: 02-04-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AKHTAR HUSSAIN ANSARI
• Keywords: Bogus purchase; Corroborative evidences; Accommodation entries
• Section: 69C; 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.1911/MUM/2019 AND ITA NO. 1912/MUM/2019 ( ASSESSMENT YEAR: 2010-11 AND 2011-12 ) INCOME TAX O FFICER, 28(1)(4) MUMBAI-400 703 VS. M/S ELECTRO COATS W/2-7, TTC INDUSTRIAL AREA, MIDC, BEHIND RELIANCE SILICON KOPARKHAIRANE, NAVI MUMBAI-400 709. PAN/GIR NO. AABFE6534G ( APPELLANT ) .. RESPONDENT ) ASSESSEE BY NONE REVENUE BY SHRI. AKHTAR HUSSAIN ANSARI JCIT, SR. DR DATE OF HEARING 17/06/2020 DATE OF PRONOUNCEME NT 17 / 0 6 /20 20 / O R D E R PER BENCH : THESE ARE TWO APPEALS FILED BY THE REVENUE ARE DIR ECTED AGAINST SEPARATE, BUT IDENTICAL ORDERS OF THE LD. C OMMISSIONER OF INCOME TAX (APPEALS)- 26, MUMBAI, BOTH DATED 28/01/ 2019 AND THEY PERTAINS TO AY 2009-10 AND 2010-11. SINCE, FACTS AR E IDENTICAL AND ISSUES ARE COMMON, FOR THE SAKE OF CONVENIENCE, THE SE APPEALS WERE HEARD TOGETHER AND ARE DISPOSED-OFF BY THIS CO NSOLIDATED 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 2009-10 ARE REPRODUCED AS UNDER: 1. ' ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DIRECTING THE A.O. IN RESTRICTING T HE ADDITION TO 12.5% OF RS ELECTRO COATS 2 3,41,032/- AS AGAINST 100% ADDITION MADE BY THE AO ON ACCOUNT OF BOGUS PURCHASES, WITHOUT APPRECIATING THE FACT THAT ASSESSEE HAD FAILED TO DISCHARGE THE ONUS TO ESTABLISH THE GENUINE OF T HE TRANSACTIONS AND ALSO FAILED TO FURNISH CORROBORATIVE EVIDENCES IN S UPPORT OF HIS CLAIM. 2. 'ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) ERRED IN DIRECTING THE A.O. AND HAD DELETED THE AD- HOC ADDITION OF RS.30,000/- U/S 69C CLAIMED BY THE ASSESEE ON SELF MADE VOUCHERS .HENCE, THE SAME IS NOT ACCEPTABLE (RELIEF OF RS.30 ,000/-), WITHOUT APPRECIATING THE FACT THAT ASSESSEE HAD FAILED TO D ISCHARGE THE ONUS TO ESTABLISH THE GENUINE OF THE TRANSACTIONS AND ALSO FAILED TO FURNISH CORROBORATIVE EVIDENCES IN SUPPORT OF HIS CLAIM. 3. THE APPELLANT PRAYS THAT THE ORDER OF LD.CIT(A) ON THE ABOVE GROUNDS BE REVERSED AND THAT OF THE AO BE RESTORED. 3. THE BRIEF FACTS OF THE CASE AS CULLED OUT FROM A SST. YEAR 2009- 10 ARE THAT THE ASSESSEE IS A PARTNERSHIP FIRM, WHI CH IS ENGAGED IN THE BUSINESS OF MANUFACTURING ENGINEERING GOODS AND LABOUR JOB WORK HAS FILED ITS RETURN OF INCOME FOR AY 2009-10 ON 29/09/2009, DECLARING TOTAL INCOME AT RS. 4,44,359/- AND SAID R ETURN WAS PROCESSED U/S 143(1) OF THE INCOME TAX ACT, 1961. T HE CASE HAS BEEN, SUBSEQUENTLY REOPENED U/S 147 OF THE ACT, ON THE BASIS OF INFORMATION RECEIVED FROM DGIT, INVESTIGATION, MUMB AI, AS PER WHICH, SALES TAX AUTHORITIES OF GOVERNMENT OF MAHAR ASHTRA HAD TAKEN ACTIONS AGAINST NUMBER OF HAWALA DEALERS, WH O HAD ISSUED BOGUS PURCHASE BILLS TO VARIOUS PARTIES IN MUMBAI A ND OTHER PLACES. AS PER LIST OF BENEFICIARIES, THE ASSESSEE IS ONE O F THE BENEFICIARY, WHO HAD TAKEN ACCOMMODATION BILLS OF BOGUS PURCHASE S FROM VARIOUS PARTIES AS LISTED BY THE AO IN PARA. 3 OF HIS ASSESSMENT ORDER AMOUNTING TO RS. 3,41, 032/-. 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 30/09/2014 AND DETERMIN ED TOTAL INCOME OF RS. 8,52,390/-, AFTER MAKING 100% ADDITION ON AL LEGED BOGUS PURCHASE FROM THOSE PARTIES AMOUNTING TO RS. 3,41,0 32/-, PENALTY PAID TO BMC OF RS. 37,000/- AND ADHOC DISALLOWANCE OF VARIOUS EXPENSES OF RS. 30,000/-. ELECTRO COATS 3 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 DETAILS OF PURCHASES AND OTHER E XPENSES. 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 12.50% PROFIT ON ALL EGED TOTAL BOGUS PURCHASES FROM THOSE PARTIES. THE LD. CIT(A) HAS AL SO DELETED ADHOC ADDITION OF VARIOUS EXPENSES OF RS. 30,000/- ON THE GROUND THAT THE AO HAS NOT GIVEN ANY SPECIFIC REASON FOR MAKING SUC H DISALLOWANCES. 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 100% AD DITION ON ALLEGED BOGUS PURCHASES ON THE GROUND THAT THE ASSE SSEE IS ONE OF THE BENEFICIARY OF ACCOMMODATION ENTRIES OF BOGUS P URCHASE 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 ELECTRO COATS 4 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 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 ELECTRO COATS 5 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 100% ADDITION, WHEREAS THE LD. CIT(A) HAS SCAL ED DOWN ADDITION TO 12.50% PROFIT ON ALLEGED BOGUS PURCHASE S. ALTHOUGH, BOTH AUTHORITIES HAVE TAKEN DIFFERENT RATE OF PROFI T FOR ESTIMATION OF INCOME FROM ALLEGED BOGUS PURCHASE, BUT NO ONE COUL D SUPPORT SAID RATE OF GROSS PROFIT WITH NECESSARY EVIDENCES OR AN Y COMPARABLE CASES. THEREFORE, CONSIDERING THE FACTS AND CIRCUMS TANCES OF THIS CASE AND CONSISTENT WITH VIEW TAKEN BY THE CO-ORDIN ATE BENCH IN NUMBER OF CASES, WE ARE OF THE CONSIDERED OPINION T HAT 12.50% RATE OF PROFIT ADOPTED BY THE LD. CIT(A) APPEARS TO BE R EASONABLE AND ACCORDINGLY, WE ARE INCLINED TO UPHOLD THE FINDINGS OF THE LD. CIT(A) AND REJECT GROUNDS TAKEN BY THE REVENUE. 7. THE NEXT ISSUE THAT CAME UP FOR OUR CONSIDERATIO N FROM GROUND NO. 2 OF REVENUE IS DELETION OF ADHOC DISALLOWANCES OF VARIOUS EXPENSES OF RS. 30,000/-. THE LD. CIT(A) HAS RECORD ED CATEGORICAL FINDINGS THAT THE AO HAS NOT GIVEN ANY SPECIFIC REA SON FOR MAKING ADHOC DISALLOWANCES OF EXPENSES. ON THE OTHER HAND, THE ASSESSEE HAS FILED ALL DETAILS BEFORE THE AO. THE FACTS REMA IN UNCHANGED. THE REVENUE FAILS TO BRING ON RECORD ANY EVIDENCES TO P ROVE THE FINDINGS ELECTRO COATS 6 OF FACTS RECORDED BY THE LD. CIT(A) IS INCORRECT. T HEREFORE, WE ARE OF THE CONSIDERED VIEW THAT THERE IS NO ERROR IN THE F INDINGS OF THE LD. CIT(A) AND HENCE, WE ARE INCLINED TO UPHOLD ORDER O F THE LD. CIT(A) AND REJECT GROUND TAKEN BY THE REVENUE. 8. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DI SMISSED. ITA NO. 1912/MUM/2019 9. 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. 1911/MUM/2019 FOR ASST. YEAR 2009-10. TH E REASONS GIVEN BY US IN PRECEDING PARAGRAPHS SHALL MUTATIS A ND MUTANDIS APPLY TO THESE APPEALS, AS WELL. WE, THEREFORE, FOR DETAILED REASONS GIVEN IN PREVIOUS PARAGRAPHS, IN ITA NO. 1911/MUM/2 019, INCLINED TO UPHOLD ORDER OF THE LD. CIT(A) AND DISMISS APPEAL F ILED BY THE REVENUE. 10. IN THE RESULT, APPEAL FILED BY THE REVENUE FOR ASST. YEAR 2010- 11 IS DISMISSED. 11. AS A RESULT, APPEALS FILED BY THE REVENUE FOR ASST. YEARS 2009-10 AND 2010-11 ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS: 17/06/2 020 SD/- (MAHAVIR SINGH) SD/- (G. MANJUNATHA) VICE PRESIDENT ACCOUNTANT MEMBER ELECTRO COATS 7 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//