ITO 18(3)(5), MUMBAI V. VIPUL N SHAH, MUMBAI

ITA 1944/MUM/2016

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 7877 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-12-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2009-2010
• Appeal Filed On: 29-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUMAN KUMAR
• Keywords: Bogus purchase

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH B, MUMBAI BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER AND SHRI MANOJ KUMAR AGGARWAL, ACCOUNTANT MEMBER ITA NO.1944/M/2016 ASSESSMENT YEAR: 2009-10 INCOME TAX OFFICER- 18(3)(5), 6 TH FLOOR, EARNEST HOUSE, NARIMAN POINT, MUMBAI 400 021 VS. SHRI VIPUL N SHAH, 133, PRINCESS STREET, 13/14, GOPAL NIWAS, MUMBAI-400 002 PAN: AAFPS 6793M (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI DHAVAL SHAH, A.R. REVENUE BY : SHRI SUMAN KUMAR, D.R. DATE OF HEARING : 22.12.2017 DATE OF PRONOUNCEMENT : 27.12.2017 O R D E R PER D.T. GARASIA , JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE REVEN UE AGAINST THE ORDER DATED 15.01.2016 OF THE COMMISSIONER OF I NCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS THE CIT(A)] R ELEVANT TO ASSESSMENT YEAR 2009-10. 2. THE BRIEF FACTS OF THE CASE ARE THAT DURING THE ASS ESSMENT THE ASSESSING OFFICER (HEREINAFTER REFERRED TO AS THE A O) OBSERVED THAT SALES TAX DEPARTMENT HAS EXERCISED DUE DILIGENCE W HICH REVEALED THAT THE ASSESSEE IS INVOLVED IN TAKING ACCOMMODATI ON ENTRIES OF ITA NO.1944/M/2016 SHRI VIPUL N SHAH 2 BOGUS PURCHASES. THE FOLLOWING IS THE LIST OF HAWA LA DEALERS FROM EACH OF WHOM THE ASSESSEE HAD OBTAINED BOGUS PURCHA SE BILLS: SR. NO. NAME OF THE PARTY AMOUNT OF PURCHASE (RS) 1. SAGAR ENTERPRISES 2,57,877 2. KRISH CORPORATION 12,19,669 3. ARIHANT TRADERS 8,56,671 4. JASMINE ENTERPRISES 4,95,221 5. PALAK ENTERPRISES 2,55,493 6. REPUTE ENTERPRISES 3,43,271 7. V.S. ENTERPRISES 3,53,374 8. SKAND INDUSTRIES 3,74,527 9. MAHAVIR ENTERPRISES 6,62,108 TOTAL 48,18,211 3. THE ASSESSEE WAS ASKED TO PRODUCE THE ABOVE PART IES FOR VERIFICATION. THERE WAS NO COMPLIANCE OF NOTICE UND ER SECTION 133(6). THEREFORE, THE AO HAS MADE THE ADDITION ON ACCOUNT OF BOGUS PURCHASES OF RS.48,18,211/-. 4. MATTER CARRIED TO THE LD. CIT(A) AND THE LD. CIT (A) HAS PARTLY ALLOWED THE CLAIM BY OBSERVING AS UNDER: 5.2.3 THE DISALLOWANCE OF ENTIRE PURCHASES AMOUNTI NG TO RS.48,18,211/- IS NOT CORRECT. WHAT CAN BE TAXED I S THE PROFIT ON THE SALES AND NOT THE ENTIRE PURCHASES. IF THE ENTIRE PURCHASES ARE DISALLOWED IT WILL GIVE RISE TO AN UNNATURAL AND AB NORMAL PROFIT. CONSIDERING THE FACTS IN TOTALITY AND ALSO THE DECI SION OF ITAT, AHMEDABAD IN THE CASE OF VIJAY PROTEINS LTD. VS. AC IT 58 ITD 428 AND ALSO GUJRAT HIGH COURT IN THE CASE OF SIMIT P. SHET H, 356 ITR 451, THE DISALLOWANCE MADE BY THE AO IS DIRECTED TO BE LIMIT ED TO 7.5% OF THE TOTAL PURCHASES MADE. AO IS DIRECTED TO REDUCE THE G.P. ALREADY DECLARED BY THE APPELLANT ON THE SAME. THIS GROUND OF APPEAL IS PARTLY ALLOWED. 5. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE P ARTIES. LD. D.R. RELIED UPON THE DECISION OF THE TRIBUNAL, AHME DABAD BENCH IN THE CASES OF SHWETAMBAR STEELS VS. ITO AHMEDABAD AN D GANESH ITA NO.1944/M/2016 SHRI VIPUL N SHAH 3 RICE MILLS VS. CIT (294 ITR 316). THE FACTS IN THE PRESENT CASE SHOW THAT ASSESSEE COULD NOT PRODUCE THE PARTIES FR OM WHOM GOODS ARE STATED TO HAVE BEEN PURCHASED. THE SUPPLIERS WE RE FOUND TO BE ENGAGED IN PROVIDING BOGUS BILL WITHOUT ACTUAL DEAL ING OF GOODS. IN THIS REGARD, THE ASSESSEE HAS STATED THAT THEY HAD SUBMITTED QUANTITATIVE DETAILS OF STOCK WITH RESPECT OF THE S ALES WITH PURCHASES FROM THE PARTIES DURING THE ASSESSMENT PROCEEDINGS. THE ASSESSEE HAS SUBMITTED THE DETAIL OF CORRESPONDING SALES IN RESP ECT OF THE PURCHASE FROM THE SAID PARTIES. AS MENTIONED ABOVE THE AO HA S NEVER DISPUTED OR EXAMINED THE ASPECT OF SALES RECEIPTS. SINCE THE SALES MADE BY THE ASSESSEE WAS NOT DOUBTED OR DISPUTED BY THE AO AND HE HAS ACCEPTED THE SALES RECEIPTS OF THE ASSESSEE AS IT IS, THEREF ORE, THE AO CANNOT DENY THAT PURCHASES WERE NOT MADE BY THE ASSESSEE A ND THE MATERIAL WAS NOT USED FOR ITS SALES. WHAT IS UNDER DISPUTE I S THE PURCHASES FROM THE PARTIES FROM WHOM BILLS HAVE BEEN TAKEN AN D CHEQUES HAVE BEEN ISSUED TO THEM. PURCHASES ARE NOT IN DISPUTE B UT THE PARTIES FROM WHOM PURCHASE ARE SHOWN TO HAVE BEEN MADE ARE DISPU TED AND SUSPICIOUS. THE AO HAD MADE THE ADDITION AS SOME O F THE SUPPLIERS WERE DECLARED HAWALA DEALERS BY THE VAT DEPARTMENT. THIS MAY BE A GOOD REASON FOR MAKING FURTHER INVESTIGATION BUT THE AO DID NOT MAKE ANY FURTHER INVESTIGATION AND MERELY COMPLETED THE ASSESSMENT ON SUSPICION. ONCE THE ASSESSEE HAS BROUGHT ON RECO RD THE DETAILS OF PAYMENTS BY ACCOUNT PAYEE CHEQUE, IT WAS INCUMBENT ON THE AO TO HAVE VERIFIED THE PAYMENT DETAILS FROM THE BANK OF THE ASSESSEE AND ALSO FROM THE BANK OF THE SUPPLIERS TO VERIFY WHETH ER THERE WAS ANY IMMEDIATE CASH WITHDRAWAL FROM THEIR ACCOUNT. NO SU CH EXERCISE HAS ITA NO.1944/M/2016 SHRI VIPUL N SHAH 4 BEEN DONE OR FINDINGS RECORDED. THERE WAS NO DETAIL ED INVESTIGATION MADE BY THE AO HIMSELF. IT IS ALSO FOUND THAT THE P AYMENTS HAVE BEEN MADE BY ACCOUNT PAYEE CHEQUE WHICH ARE DULY RE FLECTED IN THE BANK STATEMENT OF THE ASSESSEE. THERE IS NO EVIDENC E TO SHOW THAT THE ASSESSEE HAS RECEIVED CASH BACK FROM THE SUPPLIERS. MERELY BECAUSE THE SUPPLIERS DID NOT APPEAR BEFORE THE AO OR SOME CONFIRMATION LETTERS WERE NOT FURNISHED, ONE CANNOT CONCLUDE THA T THE PURCHASES WERE NOT MADE BY THE ASSESSEE. THIS VIEW IS SUPPORT ED BY THE DECISION OF NIKUNJ EXIMP ENTERPRISES VS. CIT 216 TA XMAN 171 (BOM). TO THIS EXTENT, WE ARE OF THE VIEW THAT IF T HE ASSESSEE HAS FULFILLED ITS ONUS OF MAKING THE PAYMENT BY CHEQUE AND HAS SUPPLIED THE ADDRESSES OF THE SELLERS THEN IT CANNOT BE PRES UMED THAT SUPPLIER WERE BOGUS SIMPLY BECAUSE THE SELLERS WERE NOT FOUN D AT THE GIVEN ADDRESS. THERE IS A CONSIDERABLE TIME GAP BETWEEN T HE PERIOD OF PURCHASE TRANSACTION AND PERIOD OF SCRUTINY PROCEED INGS. THE AO HAS NOT BROUGHT ANY MATERIAL ON RECORD TO SHOW THAT THE RE IS SUPPRESSION OF SALES. IT IS BASIC RULE OF ACCOUNTANCY AS WELL A S OF TAXATION LAWS THAT PROFIT FROM BUSINESS CANNOT BE ASCERTAINED WIT HOUT DEDUCTING COST OF PURCHASE FROM SALES. ESTIMATION OF PROFIT R ANGING FROM 12.5% TO 15% HAS BEEN UPHELD BY THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS SIMIT P SHETH 356 ITR 451 (GUJ.). R ESPECTFULLY FOLLOWING THE DECISION OF HONBLE GUJARAT HIGH COUR T IN THE CASE OF CIT VS. SIMIT P. SHETH 38 TAXMAN 385 (GUJ), WE DISM ISS THE DEPARTMENTAL APPEAL. ITA NO.1944/M/2016 SHRI VIPUL N SHAH 5 6. IN THE RESULT, DEPARTMENTAL APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 27.12.2017. SD/- SD/- (MANOJ KUMAR AGGARWAL) (D.T. GARASIA) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 27.12.2017. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.