INCOME TAX OFFICER-19(2)(3), MUMBAI V. SHRI MADHUBEN PRAKASH PAREKH, MUMBAI

ITA 2079/MUM/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 1708 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-06-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2010-2011
• Appeal Filed On: 05-04-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AGAINST DATED PASSED
• Keywords: Bogus purchase; Accommodation entries; Onus to prove; Set aside
• Section: 133(6); 147; 148; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA , AM AND SHRI AMARJIT SINGH, JM / I .T.A. NO S . 2079 & 2080 /MUM/201 8 ( / ASSESSMENT YEAR S : 2010 - 11 & 2009 - 10 ) THE INCOME TAX OFFICER - 19(2)(3), ROOM NO.218, 2 ND FLOOR, MATRU MANDIR, TARDEO ROAD, MUMBAI - 400007. / VS. SHRI MADHUBEN PRAKASH PAREKH C/O M/S. PRAKASH TRADERS 51, C.P. TANK ROAD, MUMBAI - 400004 . ./ ./ PAN/GIR NO. : AAEPP6219N ( / APPELLANT ) .. ( / RESPONDENT ) / DATE OF HEARING : 16/ 0 5/ 201 9 / DATE OF PRONOUNCEMENT : 07 / 0 6 / 2019 / O R D E R PER AMARJIT SINGH, J M: THE ABOVE MENTIONED APPEALS HAVE BEEN FILED BY THE REVENUE AGAINST THE ORDER DATED 10.01.2018 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) - 30 , MUMBAI [HEREI NAFTE R REFERRED TO AS THE CIT(A)] RELEVANT TO THE A.Y S . 2009 - 10 & 2010 - 11 . ITA. NO.2080/M/2018:- 2 . THE REVENUE HAS FILED THE PRESENT A PPEAL AGAINST THE ORDER DATED 10 . 0 1 .201 8 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) - 30 , REVENUE BY: SHRI R. SINDHU (SR. AR) ASSESSEE BY : SHRI RUSHABH MEHTA ITA. NOS.2080 & 2079 / M/201 8 A.Y. 2009 - 10 & 2010 - 11 2 MUMBAI [HEREINAFTE R REF ERRED TO AS THE CIT(A)] RELEVANT TO THE A.Y. 20 09 - 1 0 . 3. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS: - 1) 'WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) IS JUSTIFIED IN NOT CONFIRMING THE ADDITION OF RS.81,74,123/ - MADE BY THE ASSESSING OFFICER ON ACCOUNT OF NON - GENUINE PURCHASES MADE BY THE ASSESSEE, WITHOUT EVEN CALLING FOR THE REMAND REPORT FROM THE ASSESSING OFFICER AND ALSO IN VIEW OF THE DECISION OF THE HON 'BLE SUPREME COURT DATED 10.01.201 7 IN THE CASE OF N. K. PROTEINS LTD. WHEREIN THE HON'BLE SUPREME COURT CONFIRMED THE ENTIRE ADDITION ON ACCOUNT OF BOGUS PURCHASE?' 2) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE 14. CJT(A) IS JUSTIFIED IN CONFIRMING THE ADDITION @6.5% OF TOTA L PURCHASES OF RS.81,74,123/ - MADE BY THE ASSESSEE FROM THREE PARTIES WHEN DURING THE INVESTIGATION MADE BY SALES TAX DEPARTMENT OF MAHARASHTRA GOVERNMENT, IT WAS CONCLUSIVELY PROVED BEYOND DOUBT THAT THESE PARTIES ARE ONLY INTO PROVIDING ACCOMMODATION ENT RIES AND DO NOT DO ANY REAL BUSINESS.?' 3) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) IS JUSTIFIED IN NOT APPRECIATING THE FACT THAT DURING THE INVESTIGATION MADE BY SALES TAX DEPARTMENT OF MAHARASHTRA GOVERNMENT, DIRECTOR/PRO./PARTNERS OF SUCH PARTIES HAVE ACCEPTED ON OATH THAT THEY ARE PROVIDING ONLY ACCOMMODATION ENTRIES AND NOT DOING ANY REAL BUSINESS, THE TREATMENT OF SUCH PURCHASES AS BEING GENUINE DOES NOT HOLD GROUND?' 4) THE APPELLANT PRAYS THAT THE ORDER O F THE ED. CIT(A) ON THE ABOVE GROUNDS BE SET - ASIDE AND THAT OF THE AO BE RESTORED. 5) THE APPELLANT CRAVES LEAVE, TO AMEND OR ALTER ANY GROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY. 4 . THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED HIS RE TURN OF INCOME ON 22 .0 7 .20 09 DECLARING TOTAL INCOME TO TH E TUNE OF RS.1,45,870 / - . THE CASE WAS REOPENED U/S 147 BY ISSUANCE OF NOTICE U/S 148 OF THE ACT DATED 03.03.2014 ON THE BASIS OF INFORMATION RECEIVED FROM THE DGIT(INV.) ITA. NOS.2080 & 2079 / M/201 8 A.Y. 2009 - 10 & 2010 - 11 3 WING, MUMBAI THAT THERE WAS A SCAM UNEARTHED BY THE SALES TAX DEPARTMENT REGARDING ISSUE OF HAWALA BILLS OR ACCOMMODATION ENTRIES BY SEVERAL PARTIES IN MUMBAI WHICH WERE AVAILED OF BY SEVERAL ASSESSEES IN ORDER TO INFLATE THE PURCHASE OR EXPENSES AND THEREBY REDUCE D THE TAX LIABILITY. THE INFORMATION WAS CONVEYED BY CIT - 16, MUMBAI VIDE LETTER DATED 27.12.2013. THE ASSESSEE WAS ALSO BENEFICIARIES WHO HAD TAKEN THE ACCOMMODATION ENTRIES FROM 5 PARTIES IN SUM OF RS.81,74,123/ - . THE DETAILS ARE HEREBY MENTIONED BELOW.: - SR. NO NAME OF THE HAWALA PARTIES BILL AMOUNT 1 VARDHAMAN TRADING CO. 23,35,518 2 RAJESHWARI TRADING P. LTD. 9,44,912 3 MANAV METAL 13,34,250 4 NAKODA TUBES P. LTD. 17,19,195 5 NAVKAR METAL P. LTD. 18,40,248 TOTAL 81,74,123 5. THEREAFTER, THE NOTICE WAS GIVEN U/S 14 8 AND IN PURSUANCE TO THE SAID NOTICE, THE ASSESSEE FILED THE RETURN WHICH HE HAD FILED EARLIER. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF DEALING IN FERROUS & NON - FERROUS METALS. THE ASSESSEE HAS DERIVED INCOME FROM BUSINESS. IN ORDER TO VERIFY THE CLAIM OF GENUINENESS OF THE PURCHASES, T HE AO ISSUED THE NOTICE U/S 133(6) OF THE ACT TO THE RELEVANT PARTIES . THE NOTICE REMAINED UN - SERVED. THE ASSESSEE WAS ALSO GIVEN AN OPPORTUNITY ESTABLISHI NG THE GENUINENESS OF THE CLAIM. T HE AO WAS NOT SATISFIED WITH THE REPLY OF THE ASSESSEE, THEREFORE, THE PURCHASES IN SUM OF RS. 81,74,123/ - WAS ADDED TO THE INCOME OF THE ASSESSEE. THE TOTAL INCOME OF THE ASSESSEE WAS ASSESSED TO THE TUNE OF ITA. NOS.2080 & 2079 / M/201 8 A.Y. 2009 - 10 & 2010 - 11 4 RS. 83,19,993/ - . FEELING AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A ) WHO RESTRICTED THE SAID ADDITION TO THE EXTENT OF 6.5% OF THE PURCHASE, THE REVENUE WAS NOT SATISFIED , THEREFORE, THE REVENUE HAS FILED THE PRESENT APPEAL BEFORE US. ISSUE NO S . 1 TO 3 : - 6 . ALL THE ISSUES ARE IN CONNECTION WITH THE RESTRICTING THE ADDITIO N TO THE EXTENT OF 6.5% OF THE TOTAL BOGUS PURCHASE BY THE CIT(A). THE LD. REPRESENTATIVE OF THE REVENUE HAS ARGUED THAT THE TOTAL BOGUS PURCHASE IS REQUIRED TO BE ADDED TO THE INCOME OF THE ASSESSEE AND THE AO HAS ALSO FAILED TO FIND THE PARTIES, THEREFOR E, IN THE SAID CIRCUMSTANCES, THE FINDING OF THE CIT(A) IS NOT JUSTIFIABLE AND IS LIABLE TO BE SET ASIDE. HOWEVER, ON THE OTHER HAND , THE LD. REPRESENTATIVE OF THE ASSESSEE HAS STRONGLY RELIED UPON THE ORDER PASSED BY THE CIT(A) IN QUESTION. BEFORE GOING F URTHER, WE DEEMED IT NECESSARY TO ADVERT THE FINDING OF THE CIT(A) ON RECORD.: - 7.3 1 HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS ON THE ISSUE 01) HAND. ON PERUSAL OF THE MATERIAL ON RECORD IT IS NOTICED THAT, IN THE APPELLANT'S CASE, LD. AO, MADE IN DEPENDENT VERIFICATIONS BY ISSUING NOTICES U/S. 133(6) OF THE I.T. ACT, WHICH COULD NOT BE SERVED AS THE PARTIES WERE NOT AVAILABLE AT THE GIVEN ADDRESS, AND THERE WAS AN OVERWHELMING EVIDENCE IN THE FORM OF STATEMENTS OF SOME OF THE SUPPLIERS GIVEN BEFORE THE SALES TAX AUTHORITIES THAT IT WAS ENGAGED ONLY IN ISSUING HAWALA BILLS AND NO GOODS WERE EVER SUPPLIED BY THEM. 7.4 AFTER WEIGHING THE EVIDENCE PROS AND CONS, I FIND THAT THE APPELLANT HAS NOT RECONCILED THE PURCHASES WITH THE ITEMS SOLD AND FAILED TO RECONCILE ONE TO ONE OF THE ITEMS PURCHASED AND SOLD. ONUS WAS ALWAYS ON THE APPELLANT TO PROVE AS TO HOW THE MATERIAL PURCHASED WAS FIRSTLY OBTAINED. THUS, IT CAN BE 'SAFELY PRESUMED THAT EITHER THEY ARE NON - EXISTENT OR EVEN IF THEY DO EXIST, THEY WERE N OT BACKED BY SUFFICIENT EVIDENCE TO UNDERGO THE TEST OF SCRUTINY. ITA. NOS.2080 & 2079 / M/201 8 A.Y. 2009 - 10 & 2010 - 11 5 7.5 THE SUPPLIERS WERE IN FACT THE APPELLANT'S WITNESS AND THE LD. A.0 WAS NOT REQUIRED TO FORCE THEIR ATTENDANCE. IT WAS FOR THE APPELLANT TO PRODUCE THEM AS PER CIVIL PROCEDURE CODE WHICH APPLIES ON ALL FOURS TO THE INCOME - TAX PROCEEDINGS. IT IS TRITE THAT ONCE A TRANSACTION IS SHOWN TO BE OF THE NATURE OF INCOME, THE ONUS SHIFTS TO THE ASSESSEE TO SHOW THAT THE SAME WAS NOT TAXABLE. IT CAN THUS BE SAFELY ASSUMED THAT THE APPELLANT HAS GROS SLY FAILED IN ITS DUTY TO MITIGATE THE BURDEN CAST UPON IT IN SO FAR AS PROVING THE GENUINENESS OF THE TRANSACTION FROM THE SAID PARTY IS CONCERNED. 7.6 IN THIS REGARD IT IS ALSO PERTINENT TO MENTION THAT WHILE DEALING WITH THE CONCEPT OF BURDEN OF PROOF, ONUS OF PROVING IS ALWAYS ON THE PERSON WHO MAKES THE CLAIM AND NOT ON THE REVENUE. WHILE DEALING WITH THE ISSUE OF DECIDING THE BURDEN OF PROOF, HONBLE SUPREME COURT IN THE CASES OF CIT VS. DURGAPRASAD MORE 82 ITR 540 AND SUMATI DAYAL VS. CIT 214 ITR 801 HAS HELD THAT THE APPARENT MUST BE CONSIDERED REAL UNTIL IT IS SHOWN THAT THERE ARE REASONS TO BELIEVE THAT THE APPARENT IS NOT REAL AND THAT TAXING AUTHORITIES ARE ENTITLED TO LOOK INTO SURROUNDING CIRCUMSTANCES TO FIND OUT THE REALITY AND THE MATTER HAS TO BE CONSIDERED BY APPLYING THE TEST OF HUMAN PROBABILITIES. THE HONBLE COURT ALSO HELD THAT, IT IS NO DOUBT, TRUE THAT IN ALL CASES IN WHICH A RECEIPT IS SOUGHT TO BE TAXED AS INCOME, THE BURDEN LIES ON THE DEPARTMENT TO PROVE THAT IT IS WITHIN THE TAX ING PROVISION AND IF A RECEIPT IS IN THE NATURE OF INCOME, THE BURDEN TO PROVE THAT IT IS NOT TAXABLE BECAUSE IT FALLS WITHIN EXEMPTION PROVIDED BY THE, LIES UPON THE ASSESSEE. IN THE CASE OF DURGAPRASAD MORE (SUPRA), THE HONBLE COURT WENT ON TO ADD THAT A PARTY WHO RELIES ON A RECITAL IN A DEED HAS TO ESTABLISH THE TRUTH OF THIS RECITAL, OTHERWISE IT WILL BE VERY EASY TO MAKE SELF - SERVING STATEMENTS IN DOCUMENTS EITHER EXECUTED OR TAKEN BY A PARTY WHO RELIED ON THOSE RECITALS. IF ALL THAT AN ASSESSEE WHO WANTS TO EVADE TAX HAS TO HAVE SOME RECITALS MADE IN A DOCUMENT EITHER EXECUTED BY HIM OR EXECUTED IN HIS FAVOUR THEN THE DOOR WILL BE LEFT WIDE OPEN TO EVADE TAX. THE HONBLE COURT FURTHER HELD THAT THE TAXING AUTHORITIES WERE NOT REQUIRED TO PUT ON BLINK ERS LOOKING AT THE DOCUMENTS PRODUCED BEFORE THEM. THEY WERE ENTITLED TO LOOK THE SURROUNDING CIRCUMSTANCES TO FIND OUT THE REALITY OF THE RECITALS MADE IN THOSE DOCUMENTS. 7.7. THE ONUS TO PROVE THAT APPARENT, IS NOT THE REAL ONE, IS ON THE PARTY WHO CLAI MS IT TO BE SO, AS HELD BY THE HON'BLE SUPREME COURT IN THE CASE OF CIT V. DAULAT RAM RAWATMULL [1973] 87 ITR 349 AND CIT V. DURGA PRASAD MORE (SUPRA). IN THE LATTER CASE, IT HAS BEEN HELD BY THE APEX COURT THAT THOUGH AN APPARENT STATEMENT MUST BE CONSIDE RED REAL UNTIL IT WAS SHOWN THAT THERE WERE REASONS TO BELIEVE THAT APPARENT WAS NOT ITA. NOS.2080 & 2079 / M/201 8 A.Y. 2009 - 10 & 2010 - 11 6 THE REAL, IN A CASE WHERE AN AUTHORITY RELIED ON SELF - SERVING RECITALS IN DOCUMENTS, IT WAS FOR THE PARTY TO ESTABLISH THE PROOF OF THOSE RECITALS. 7.8 IT IS ALSO A SETTL ED LEGAL PROPOSITION THAT IF NO EVIDENCE IS GIVEN BY THE PARTY ON WHOM THE BURDEN IS CAST, THE ISSUE MUST BE FOUND AGAINST HIM. THEREFORE, ONUS IS ALWAYS ON A PERSON WHO ASSERTS A PROPOSITION OR FACT, WHICH IS NOT SELF - EVIDENT. THE ONUS, AS A DETERMINING F ACTOR OF THE WHOLE CASE CAN ONLY ARISE IF THE TRIBUNAL, WHICH IS VESTED WITH THE AUTHORITY TO DETERMINE, FINALLY ALL QUESTIONS OF FACT, FINDS THE EVIDENCE PRO & CON, SO EVENLY BALANCED THAT IT CAN COME TO NO CONCLUSION, THEN, THE ONUS WILL DETERMINE THE MA TTES, THERE CANNOT BE ANY DOUBT THAT ONUS AS A DETERMINING FACTOR COMES INTO PLAY WHERE, EITHER THERE IS NO EVIDENCE ON EITHER SIDE, OR WHERE IT IS EQUALLY WORTHLESS OR WHERE IT IS EQUALLY BALANCED. IT IS IMPERATIVE TO MENTION HERE THAT WHERE SUCH IS NOT T HE CASE AND ALL AVAILABLE EVIDENCE IS CONSIDERED, WITHOUT REFERENCE TO THE ONUS AND WITHOUT RELYING ON THE CIRCUMSTANCES THAT ONUS LIES ON A PARTICULAR PARTY, THE ISSUE IS DETERMINED ON FACTS AND THE ONUS CANNOT BE SAID TO HAVE INFLUENCED THE DECISIONS. HO WEVER, IN THE INSTANT CASE, THE APPELLANT HAS MISERABLY FAILED TO LEAD EVIDENCE . 7 . ON APPRAISAL OF THE ABOVE SA ID FINDING, WE NOTICED THAT THE CIT(A) HAS DECIDED THE MATTER OF CONTROVERSY ON THE BASIS OF THE DECISION OF GUJARAT HIGH COURT IN THE CASE OF CIT VS. SIMIT P. SHETH (356 ITR 451) (GUJ) . P ROFIT EMBEDDED TO THE BOGUS PURCHASE HAS BEEN CONSIDERED AND ACCORDINGLY CIT(A) HAS DECIDED THE MATTER OF CONTROVERSY . THE CIT(A) HAS CONSIDERED THE COPIES OF THE INVOICES FURNIS HED BY THE APPELLANT AND ALSO CO NSIDERED THE VAT LEVIABLE UPON THE GOODS WHICH WAS @ 4% AND ACCORDINGLY , THE PROFIT RATIO WAS CONSIDERED @ 2.5% OF THE PROFIT MARGIN. THE CIT(A) HAS RESTRICTED THE ADDITION TO THE EXTENT OF 6.5% OF THE TOTAL BOGUS PURCHASE. THE CIT(A) HAS RIGHTLY CONSIDERE D THE PROFIT EMBEDDED TO THE BOGUS PURCHASE SPECIFICALLY IN THE SAID CIRCUMSTANCES, WHEN THE BOOKS OF ACCOUNT HAS NOT BEEN REJECTED AND THE SALE IS NOT DISPUTED. THE LAW RELIED BY THE LD. REPRESENTATIVE OF THE REVENUE IS DISTINGUISHABLE ON THE FACTS AND CI RCUMSTANCES OF THE PRESENT CASE. TAKING INTO ACCOUNT ALL THE FACTS AND ITA. NOS.2080 & 2079 / M/201 8 A.Y. 2009 - 10 & 2010 - 11 7 CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE CIT(A) HAS DECIDED THE MATTER OF CONTROVERSY JUDICIOUSLY AND COR RECTLY WHICH IS NOT LIABLE TO BE INTERFERE WITH AT THIS APPELLATE STAGE. ACCOR DINGLY, THESE ISSUES ARE DECIDED IN FAVOUR OF THE ASSESSEE AGAINST THE REVENUE. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS HEREBY DISMISSED. ITA. NO. 2079 /M/201 8 :- 8 . THE FACTS OF THE PRESENT CASE ARE QUITE SIMILAR TO THE FACT OF THE CASE AS NARRATE D ABOVE WHILE DECIDING THE ITA. NO.2080 /M/201 8 , THEREFORE, THERE IS NO NEED TO REPEAT THE SAME. HOWEVER, THE FIGURE IS DIFFERENT. THE MATTER OF CONTROVERSY IS ALSO THE SAME . THE CIT(A) HAS RIGHTLY RESTRICTED THE ADDITION TO THE EXTENT OF 6.5% OF THE TOTAL BOGUS PURCHASE. THE FINDING GIVEN ABOV E WHILE DECIDING THE APPEAL OF THE ASSESSEE BEARING ITA. NO.2080 /M/201 8 IS QUITE APPLICABLE TO THE FACTS OF THE PRESENT CASE AS MUTATIS MUTANDIS. ACCORDINGLY, WE CONFIRM THE FINDING OF THE CIT(A ) ON THESE ISSUES. 9 . I N THE RESULT, APPEAL S FILED BY THE REVENUE ARE HEREBY ORDERED TO BE DISMISSED. ORDER PRONOUNCE D IN THE OPEN COURT ON 07 /0 6 / 2019 SD/ - SD/ - ( SHAMIM YAHYA ) (AMARJIT SINGH) / ACCOUNTANT MEMBER /JUDICIAL MEMBER MUMBA I DATED : 07 /06 /2019 VIJAY ITA. NOS.2080 & 2079 / M/201 8 A.Y. 2009 - 10 & 2010 - 11 8 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RE SPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. / BY ORDER, //TRUE COPY// / / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI