ITO 28 (2)(1), MUMBAI V. KETAN PRATAP CHANDAN, MUMBAI

ITA 2014/MUM/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 5209 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Assessment Year: 2010-2011
• Appeal Filed On: 05-04-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R BHOOPATHI
• Keywords: Bogus purchase; Accommodation entries
• Section: 133(6); 143(1); 147; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH H , MUMBAI BEFORE SHRI C.N. PRAS AD, HON'BLE JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, HON'BLE ACCOUNTANT MEMBER ITA NO S . 2013 & 2014 / MUM/201 9 ( A. Y S : 2009 - 10 & 2010 - 11) INCOME TAX OFFICER 28(2 )(1 ) ROOM NO. 326, 3 RD FLOOR , T OWER NO - 6 VASHI RAILWAY STATION COMPLEX VASHI, NAVI MUMBAI 400 703 V. SHRI KETAN PRATAP CHANDAN 702, LO KSHILP CHSL PLOT NO . 59, SECTOR - 17, VASHI NAVI MUMBAI 400 706 PAN: ACXPC3839L ( A PPELLANT) (RESPONDENT) ASSESSEE BY : NONE DEPARTMENT BY : SHRI R. BHOOPATHI DATE OF HEARING : 30 .09.2020 DATE OF PRONOUNCEMENT : 30 .09.2020 O R D E R PER BENCH 1. THESE APPEAL S ARE FILED BY THE R EVENUE AGAINST DIFFERENT ORDER S OF THE LEARNED COMMI SSIONER OF INCOME TAX (APPEALS) 26 , MUMBAI [HEREINAFTER IN SHORT LD.CIT(A)] DATED 28.01.2019 IN RESTRICTING THE DISALLOWANCE TO 12.5 % OF PURCHASES OF . 2,38,51,717 / - AND . 1,07,12,273 / - FOR THE A.YS. 2009 - 10 & 2010 - 1 1 RESPECTIVELY, AS AGAINST 2 ITA NOS. 1686 & 1687/MUM/2019 (A.YS: 2010 - 11 & 2011 - 12) M /S. AEROFLEX FITTINGS PVT. LTD., 25% OF PURCHASES DISALLOWED AS NON - GENUINE/BOGUS BY THE ASSESSING OFFICER . 2. BRIEFLY STATED THE FACTS ARE THAT, THE ASSESSEE , AN INDIVIDUAL ENGAGED IN THE BUSINESS OF GENERAL TRADERS & SUPPLIERS , FILED RETURN OF INCOME ON 17.09.2009 AND 1 0 .07.2010 DECLARING INCOME OF . 3,58,460 / - AND . 3,32,780 / - FOR. A.Y: 2009 - 10 AND A.Y 2010 - 11 RESPECTIVELY AND THE RETURN S WERE PROCESSED U/S. 143(1) OF THE ACT. SUBSEQUENTLY, ASSESSING OFFICER RECEIVED INFORMATIO N FROM THE DGIT (INV. ,) , MUMBAI ABOUT THE ACCOMMODATION ENTRIES PROVIDED BY VARIOUS DEALERS AND ASSESSEE WAS ALSO ONE OF THE BENEFICIARY FROM THOSE DEALERS. THE ASSESSMENT S WERE REOPENED U/S. 147 OF THE ACT BASED ON THE INFORMATION RECEIVED FROM DGIT(INV.) MUMBAI, THAT THE ASSESSEE HAS AVAILED ACCOMMODATION ENTRIES FROM VARIOUS DEALERS WHO ARE SAID TO BE PROVIDING ACCOMMODATION ENTRIES WITHOUT THERE BEING TRANS PORTATION OF ANY GOODS. IN THE RE - ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS REQUIRED TO PROVE THE GENUINENESS OF THE PURCHASES MADE FROM THE PARTIES WHICH ARE REFERRED IN THE ASSESSMENT ORDER S . IN RESPONSE TO THE NOTICE, ASSESSEE FURNISHED COPIES OF INVOICES, DELIVERY CHALLANS AND PROOF OF PAYMENTS BY CHEQUES AND SUBMITTED THAT THE PURCHASES MADE ARE GENUINE. ASSESSEE FURTHER SUBMITTED THAT THE PAYMENTS ARE MADE THROUGH ACCOUNT PAYEE CHEQUES AS SUCH CONTENDED 3 ITA NOS. 1686 & 1687/MUM/2019 (A.YS: 2010 - 11 & 2011 - 12) M /S. AEROFLEX FITTINGS PVT. LTD., THAT ALL THE PURCHASES ARE GENUINE. HOWEVER, PARTIES WERE NOT PRODUCED BEFORE THE ASSESSING OFFICER AND N O EXPLANATION WAS OFFERED. 3. NOT CONVINCED WITH THE SUBMISSIONS OF THE ASSESSEE THE ASSESSING OFFICER TREATED THE PURCHASES AS NON - GENUINE AND HE WAS OF THE OPINION THAT ASSESSEE HAD OBTAINED ONLY ACCOMMODATION ENTRIES WITHOUT THERE BEING ANY TRANSPORTATION OF MATERIALS AND THE ASSESSEE MIGHT HAVE MADE PURCHASES IN THE GRAY MARKET. ASSESSING OFFICER OBSERVED THAT THE NOTICE ISSUED U/S.133(6) OF THE ACT TO THE PARTIES WERE RETURN ED UNSERVED WITH A REMARK NOT KNOWN AND THE ASSESSEE DID NOT PRODUCED THE PARTI ES BEFORE HIM. THE ASSESSING OFFICER TREATED PURCHASES OF . 2,38,51,717 / - AND . 1,07,12,273 / - FOR THE A.YS. 2009 - 10 & 2010 - 1 1 RESPECTIVELY , AS NON - GENUINE. HOWEVER, T HE ASSESSING OFFICER ESTIMATED THE PROFIT ELEMENT FROM SUCH PURCHASES AT 25% AND DISALLO WED . 59,62,929/ - AND .26,78,068 / - FOR THE A.YS. 2009 - 10 & 2010 - 1 1 RESPECTIVELY , WHILE COMPUTING THE INCOME . O N APPEAL THE LD.CIT(A) CONSIDERING THE EVIDENCES AND VARIOUS SUBMISSIONS OF THE ASSESSEE RESTRICTED THE DISALLOWANCE TO AN EXTENT OF 12.5 % OF THE NON - GENUINE PURCHASES. 4 ITA NOS. 1686 & 1687/MUM/2019 (A.YS: 2010 - 11 & 2011 - 12) M /S. AEROFLEX FITTINGS PVT. LTD., 4. INSPITE OF NOTICE NONE APPEARED ON BEHALF OF THE ASSESSEE NOR ANY ADJOURNMENT WAS SOUGHT BY THE ASSESSEE. THEREFORE, WE PROCEED TO DISPOSE OFF THESE APPEALS ON HEARING THE LD. DR ON MERITS. 5. HEARD LD. DR , PERUSED THE ORDERS OF THE AUTHORITIES BELOW. ON A PERUSAL OF THE ORDER OF THE LD.CIT(A), WE FIND THAT THE LD.CIT(A) CONSIDERED THIS ASPECT OF THE MATTER ELABORATELY WITH REFERENCE TO THE SUBMISSIONS OF THE ASSESSEE AND THE AVERMENTS IN THE A SSESSMENT ORDER AND FOLLOWING THE DECISION OF THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF SIMIT P. SHETH [356 ITR 451] RESTRICTED THE DISALLOWANCE TO 12.5% OF THE NON - GENUINE PURCHASES. WHILE HOLDING SO, THE LD.CIT(A) FOR A.Y. 2009 - 10 OBSERVED AS UNDER: - 6.1. GROUND NO. 1 OF THE APPEAL IS AGAINST ADDITION BEING 25% OF T HE PURCHASES OF RS. 2,38,51,717/ - . AS PER THE INVESTIGATIONS CARRIED OUT BY THE SALES TAX AUTHORITIES, THE AFOREMENTIONED PARTIES WERE FOUND TO BE INVOLVED IN GIVING ACCOMMODATION ENTRIES ONLY WITHOUT ACTUALLY SUPPLYING THE GOODS. THE LOGICAL INFERENCE IS THAT THE PURCHASES MADE BY THE A PPELLANT WOULD ALSO BE IN THE NATURE OF ACCOMMODATION ENTRIES ONLY. TO VERIFY THE SAME, THE AO HAD MADE ENQUIRIES BY ISSUING NOTICES U/S 133(6) WHICH WERE RETURNED UNSERVED BY THE POSTAL AUTHORITIES. THIS PARTY WAS FOUND TO BE NON EXISTENT AT THE ADDRESS G IVEN BY THE APPELLANT. THE APPELLANT ALSO FAILED TO PROVIDE THE LATEST ADDRESS OF THE PARTY. DURING THE SCRUTINY ASSESSMENT THE APPELLANT FURNISHED DETAILS OF PURCHASES AND CORRESPONDING SALES. HOWEVER, THE APPELLANT COULD NOT PRODUCE THE PARTY BEFORE THE AO INSPITE OF OPPORTUNITY BEING GIVEN. THE APPELLANT ALSO FAILED TO PRODUCE DELIVERY CHALLANS OR TRANSPORTATION DETAILS . THE ONUS OF PROVING THE GENUINENESS OF SUCH PURCHASES IS ON THE APPELLANT WHICH THE APPELLANT HAD NOT BEEN ABLE TO DISCHARGE FULLY. WH EN THE HAWALA PARTY HAD ADMITTED ON OATH THAT IT HAD GIVEN ACCOMMODATION ENTRIES ONLY WITHOUT ACTUALLY SUPPLYING THE GOODS, THE GENUINENESS OF PURCHASES MADE FROM THESE PARTIES WILL HAVE TO BE CONSIDERED TAKING THIS INTO CONSIDERATION WHILE EXAMINING THE D OCUMENTATION SUBMITTED BY THE APPELLANT IN 5 ITA NOS. 1686 & 1687/MUM/2019 (A.YS: 2010 - 11 & 2011 - 12) M /S. AEROFLEX FITTINGS PVT. LTD., SUPPORT OF ITS CLAIM. THE DOCUMENTARY EVIDENCES SUCH AS PURCHASE BILLS, PAYMENTS BY CHEQUES, ETC. WOULD ALL HAVE BEEN ORCHESTRATED TO PRESENT A FACADE OF GENUINENESS AND DOES NOT NECESSARILY MEAN THAT THE PURCHASE S FROM THESE PARTIES ARE GENUINE. THE COURTS HAVE HELD THAT PAYMENT BY CHEQUE BY ITSELF IS NOT SACROSANCT SO AS TO PROVE GENUINENESS OF PURCHASES WHEN THE SURROUNDING CIRCUMSTANCES ARE SUSPECT. HOWEVER, THE APPELLANT HAS SHOWN ONWARD SALES WHICH HAS NOT BE EN DOUBTED BY THE ASSESSING OFFICER. SINCE THERE CAN BE NO SALES WITHOUT CORRESPONDING PURCHASES, THE ONLY LOGICAL EXPLANATION IS THAT THE APPELLANT WOULD HAVE MADE PURCHASES FROM UNDISCLOSED PARTIES IN THE GREY MARKET AT LOWER RATES AND PURCHASES WERE SHO WN AS BEING MADE FROM THE IMPUGNED PARTIES TO SUPPRESS ITS PROFITS. IN SUCH A SITUATION, THE VARIOUS COURTS INCLUDING THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS SIMIT P. SHETH, 356 ITR 451 HAVE HELD THAT NOT THE ENTIRE PURCHASES BUT ONLY THE PROF IT ELEMENT EMBEDDED IN THESE PURCHASES WAS TO BE DISALLOWED. THE HON'BLE GUJRAT HIGH COURT IN THIS CASE HAS HELD THAT PROFIT MARGIN OF 12.5% OF THE BOGUS PURCHASES WILL BE REASONABLE. RESPECTFULLY FOLLOWING THE ORDER IN THE CASE OF SIMIT P. SHETH THE ADDIT ION IS RESTRICTED TO 12.5% OF THE BOG US PURCHASES OF RS. 2,38,51,717/ - . THIS GROUN D OF APPEAL IS 'PARTLY ALLOWED'. 6. ON A CAREFUL PERUSAL OF THE ORDER OF THE LD.CIT(A) AND THE REASONS GIVEN THEREIN, WE DO NOT FIND ANY INFIRMITY IN THE ORDER PASSED BY THE LD .CIT(A) IN RESTRICTING THE ADDITION/DISALLOWANCE TO THE EXTENT OF 12.5% OF THE PURCHASES. GROUNDS RAISED BY THE REVENUE ARE DISMISSED 7. IN THE RESULT, APPEAL S OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED ON 30 . 09.2020 AS PER RULE 34(4) OF ITAT RULES BY PLACING THE PRONOUNCEMENT LIST IN THE NOTICE BOARD SD/ - SD/ - ( S. RIFAUR RAHMAN ) (C.N. PRASAD) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI / DATED 30 / 09 / 2020 GIRIDHAR , S R. PS 6 ITA NOS. 1686 & 1687/MUM/2019 (A.YS: 2010 - 11 & 2011 - 12) M /S. AEROFLEX FITTINGS PVT. LTD., COPY OF THE ORDER FORWARDED TO : 1. THE ASSESSEE 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY// BY ORDER (ASSTT. REGISTRAR) ITAT, MUM