ACIT 11(1)(1), MUMBAI V. RAKSHIT INFRASTUCTURE P.LTD, MUMBAI

ITA 2135/MUM/2017

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 2800 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-11-2018
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2009-2010
• Appeal Filed On: 27-03-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: CHAITANYA ANJARIA
• Keywords: Bogus purchase; Accommodation entries
• Section: 131

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA , ACCOUNTANT MEMBER AND SHRI RAVISH SOOD , JUDICIAL MEMBER ITA NO. 2135/MUM/2017 (ASSESSMENT YEAR: 2009 - 10 ) ITA NO. 2136 /MUM/2017 (ASSESSMENT YEAR: 20 11 - 1 2 ) ITA NO. 4040 /MUM/2017 (ASSESSMENT YEAR: 2010 - 1 1 ) THE DY. COMMISSIONER OF INCOME TAX 11(1)(1), MUMBAI, ROOM NO.204, AAYAKAR BHAVAN, M.K. MARG, MUMBAI 400 020 . APPELLANT V/S M/S. RAKSHIT INFRASTRUCTURE PVT. LTD., 2 ND FLOOR, RAMKUTIR 58, HANUMAN ROAD, VILE PARLE (W), MUMBAI 400 057 PAN NO.AAECR1398F . RESPONDENT CO NO.307/MUM/2018 (ARISING OUT OF ITA NO.2135/MUM/2017 ) (ASSESSMENT YEAR: 2009 - 10) CO NO.308 /MUM/2018 (ARISING OUT OF ITA NO. 2136 /MUM/2017 ) (ASSESSMENT YEAR: 20 11 - 1 2 ) CO NO.145/MUM/2018 (ARISING OUT OF ITA NO. 4040 /MUM/2017 ) (ASSESSMENT YEAR: 2010 - 1 1 ) M/S. RAKSHIT INFRASTRUCTURE PVT. LTD., 2 ND FLOOR, RAMKUTIR 58, HANUMAN ROAD, VILE PARLE (W), MUMBAI 400 057 PAN NO.AAECR1398F . APPELLANT ITA NO.2135/MUM/2017 AND OTHER APPEALS M/S. RAKSHIT INFRASTRUCTURE PVT. LTD., 2 V/S THE ACIT - 11(1)(1), MUMBAI, ROOM NO.204, AAYAKAR BHAVAN, M.K. MARG, MUMBAI 400 020 . RESPONDENT APPELLANT BY : SHRI. CHAITANYA ANJARIA RESPONDENT BY : MS. DINKLE HARIYA DATE OF HEARING 29/10/2018 DATE OF ORDER - 0 6 / 1 1 /2018 O R D E R PER BENCH: THESE ARE APPEALS BY THE REVENUE AND CO BY ASSESSEE ARISING OUT OF RESPECTIVE ORDERS OF LEARNED CIT(A) FOR THE CONCERNED ASSESSMENT YEARS. SINCE ISSUES ARE COMMON AND THE APPEALS WERE HEARD TOGETHER, THESE HAVE BEEN DISPOSED OF BY THIS COMMON ORDER. 2. THE ISSUE RAISED IN REVENUES APPEAL IS THAT THE LEARNED CIT(A) ERRED IN RESTRICTING THE DISALLOWANCE ON ACCOUNT OF BOGUS PURCHASES TO 12.5% OF THE BOGUS PURCHASES. 3. THE ISSUE RAISED IN ASSESSEES APPEAL WAS THAT LEARNED CIT(A) ERRED IN UPHOLDING THE REASSESSMENT AND SUSTAINING 12.5% OF THE DISALLOWANCE ON THE PART OF BOGUS PURCHASES. SINCE THE FACTS ARE IDENTICAL, WE ARE REFERRING TO THE FA CTS AND FIGURES FROM A.Y. 2009 - 10. ITA NO.2135/MUM/2017 AND OTHER APPEALS M/S. RAKSHIT INFRASTRUCTURE PVT. LTD., 3 4. BRIEF FACTS OF THE CASE ARE THAT ASSESSEE - COMPANY IS IN THE BUSINESS OF CONSTRUCTION, REPAIRS, INTERIORS, INFRASTRUCTURE AND ENGINEERING. ASSESSMENT ORDER IN THIS CASE WAS REOPENED UPON INFORMATION THAT ASSESSEE WAS A BENEFICIARY OF ACCOMMODATION ENTRIES FROM HAWALA DEALERS. A.Y. AMOUNT (RS.) 2009 - 10 1,35,73,451/ - 2010 - 11 3,25,19,322/ - 2011 - 12 2,31,96,059/ - 5. BASED UPON THIS INFORMATION FROM SALES TAX DEPARTMENT , ASSESSMENT ORDER WAS REOPENED. THE ASSESSING OFFICER NOTED THAT DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS ASKED TO SUBMIT, INTER ALIA, PARTYWISE DETAILS OF PURCHASES, CREDITORS, COPIES OF BILLS/INVOICES RAISED, PROOF OF DELIVERY OF GOODS WITH COMPLETE TRANSPORTATION DETAILS/RENDERING OF SERVICES, COMPLETE BANK STATEMENT AND OTHER DOCUMENTARY EVIDENCES TO SUBSTANTIATE THE GENUINENESS OF TRANSACTIONS. THAT I N RESPONSE TO THE SAME, THE ASSESSEE HAS, VIDE WRITTEN SUBMISSIONS DATED 10.09 . 2014, FURNISHED BILLS, CREDIT PURCHASE VOUCHERS, GOODS RECEIPT NOTE, STOCK REGISTER, COPY OF LEDGER ACCOUNT ETC. THAT T HE ASSESS E E HAS CONTENDED THAT MERE APPEARANCE OF THE NAME OF THE DEALERS ON THE WEBSITE OF SALES TAX AUTHORITIES CANNOT BE SUFFICIENT T O TREAT THE PURCHASES MADE AS BOGUS AND THAT THE CORRESPONDING SALES CAN BE PROVED BEYOND ANY DOUBTS AND WITH PRECISION HAVING REGARD TO ITA NO.2135/MUM/2017 AND OTHER APPEALS M/S. RAKSHIT INFRASTRUCTURE PVT. LTD., 4 THE CONTEMPORANEOUS RECORDS. THAT I T HAS FURTHER SUBMITTED THAT PURCHASES WERE MADE ONLY FROM THE DEALERS WHO WERE HOLD ING VALID TIN NO. AND SALES TAX REGISTRATION NUMBER ON THE DATE OF PURCHASE. 6. CONSIDERING THE ABOVE, AO NOTED THAT TO VERIFY THE GENUINENESS OF THE IMPUGNED PURCHASES, NOTICES U/S.133(6) WERE ISSUED. HE NOTED THAT THERE WAS NO RESPONSE AND ASSESSEE WAS R EQUESTED TO PRODUCE THE PARTIES WHICH ASSESSEE FAILED TO DO SO. IN THESE CIRCUMSTANCES REFERRING TO CERTAIN CASE LAWS, AO MADE DISALLOWANCE BY CONCLUDING AS UNDER: - IN VIEW OF THE INCRIMINATING EVIDENCES GATHERED BY THE SALES - TAX DEPARTMENT, AS DISCUSSED ABOVE, THE FACT THAT THERE WAS NO REPLY TO THE NOTICE ISSUED UNDER SECTION 133(6), AND THE FACT THAT THE ASSESSEE COULD NOT PRODUCE THIS PARTY FOR EXAMINATION DESPITE SPECIFIC REQUEST, IT IS CLEAR THAT THE PURCHASE ALLEGEDLY MADE FROM THIS PARTY IS BOGUS. THUS, THE ENTIRE PURCHASES AGGREGATING TO RS.1,35,73,451/ - IS BEING ADDED BACK AS BOGUS PURCHASES 7. AGAINST THE ABOVE ADDITION, ASSESSEE APPEALED BEFORE THE LEARNED C IT(A). LEARNED CIT(A) REFERRED TO CASE LAWS, HE NOTED THAT SINCE CONSUMPTION / SALES ARE NOT DOUBTED , IN HIS OPINION, DISALLOWANCE OF PROFIT ELEMENT OF 12.5% OF PURCHASES MADE FROM BOGUS ENTITIES WILL SERVE THE PURPOSE. LEARNED CIT(A) IN THIS REGARD HAS CONCLUDED AS UNDER: - AS NARRATED EARLIER, THE LD. A.O. IN THIS CASE HAS HELD TH AT THE PARTIES FROM WHICH THE PURCHASES WERE MADE BY THE APPELLANT WERE FOUND TO BE BOGUS AND THAT IS THE REASON FOR WHICH IT WAS NOT PRODUCED DURING THE ASSESSMENT PROCEEDINGS. NOT HAVING DOUBTED THE CONSUMPTION/ SALES, THE MOTIVE BEHIND OBTAINING BOGUS B ILLS THUS, APPEARS TO BE INFLATION OF PURCHASE PRICE SO AS TO SUPPRESS TRUE PROFITS. CONSIDERING THE FACTS OF THE CASE AS WELL AS THE VARIOUS CASE LAWS CITED (SUPRA), I ESTIMATE THE SUPPRESSED PROFIT TO THE EXTENT OF 12.5% OF THE PURCHASES MADE FROM THE BO GUS ENTITIES, AS THE SUPPRESSED ITA NO.2135/MUM/2017 AND OTHER APPEALS M/S. RAKSHIT INFRASTRUCTURE PVT. LTD., 5 PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES. THIS ESTIMATION IS IN ADDITION TO THE GP SHOWN BY THE APPELLANT . 8. AGAINST THE ABOVE ORDER, REVENUE HAS FILED APPEAL AND ASSESSEE HAS FILED CROSS OBJECTION BEFORE US. WE HAVE HEAR D BOTH THE COUNSEL AND PERUSED THE RECORDS. IN SUPPORT OF THE CASE , LEARNED COUNSEL OF THE ASSESSEE HAS INTERALIA PLACED RELIANCE UPON THE DECISION OF HONOURABLE GUJARAT HIGH COURT IN THE CASE OF PR CITVS T R KAPADIA IN TAX APPEAL NO 691 OF 2017 9. IN THIS CASE THE HONOURABLE HIGH COURT HAS CONFIRMED THE DELETION OF DISALLOWANCE ON ACCOUNT OF ALLEGED BOGUS PURCHASE AS NECESSARY DOCUMENTARY EVIDENCE FOR THE PURCHASE WERE ON RECORD . 10. THE SPECIAL LEAVE PETITION AGAINST THIS ORDER HAS BEEN DISMISSED BY THE HONOURABLE SUPREME COURT IN ITS DECISION DATED 4/ 5/ 2018 S L P CIVIL DIARY NO 12670/2018 BY FOLLOWING ORDER: HEARD DELAY CONDONED THE SPECIAL LEAVE PETITION IS DISMISSED. PENDING APPLICATIONS, IF ANY, SHALL STAND DISPOSED OF. THE LD. AUTHORIZED REPRESENTATIVE CONTENDS THAT THIS IS NOT A DISMISSAL OF SLP SIMPLICITOR. 1 1 . UPO N CAREFU L CONSIDERATION WE FIND THAT ASSESSEE HAS PROVIDED THE DOCUMENTARY EVIDENCE FOR THE PURCHASE INCLUDING THE TRANSPORTATION DETAILS . NO SHORTCOMING WHATSOEVER HAS BEEN NOTED BY THE AO IN THIS REGARD. ADVERSE INFERENCE HAS BEEN DRAWN DUE TO THE INABILITY OF THE ASSE SSEE TO PRODUCE THE ITA NO.2135/MUM/2017 AND OTHER APPEALS M/S. RAKSHIT INFRASTRUCTURE PVT. LTD., 6 SUPPLIERS. THE A.O. HAS NOT ISSUED SUMMONS U/S. 131 TO THE PARTIES. WE FIND THAT IN THIS CASE TH E SALES / C ONSUMPTION HAVE NOT BEEN DOUBTED, I T IS SETTLED LAW THAT WHEN SALES ARE NOT DOUBTED, HUNDRED PERCENT DISALLOWANCE FOR BOGUS PURCHASE CANNOT BE DONE. THE RATIONALE BEING NO SALES IS POSSIBLE WITHOUT ACTUAL PURCHASES /CONSUMPTION . THIS PROPOSITION IS SUPPORTE D FROM HONOURABLE JURISDICTIONAL HIGH COURT DECISION IN THE CASE OF NIKUNJ EXIMP ENTERPRISES (IN WRIT PETITION NO 2860, ORDER DT 18.6.2014). IN THIS CASE THE HONOURABLE HIGH COURT HAS UPHELD HUNDRED PERCENT ALLOWANCE FOR THE PURCHASES SAID TO BE BOGUS WHEN SALES ARE NOT DOUBTED. HOWEVER IN THAT CASE ALL THE SUPPLIES WERE TO GOVERNMENT AGENCY. IN THE PRESENT CASE THE FACTS OF THE CASE INDICATE THAT ASSESSEE HAS MADE PURCHASE FROM THE GREY MARKET. MAKING PURCHASES THROUGH THE GREY MARKET GIVES THE ASSESSEE S AVINGS ON ACCOUNT OF NON - PAYMENT OF TAX AND OTHERS AT THE EXPENSE OF THE EXCHEQUER. IN SUCH SITUATION IN OUR CONSIDERED OPINION ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE 12.5 % DISALLOWANCE OUT OF THE BOGUS PURCHASES MEETS THE END OF JUSTICE. HOWEVER IN THIS REGARD LEARNED COUNSEL OF THE ASSESSEE HAS PRAYED THAT WHEN ONLY THE PROFITS EARNED BY THE ASSESSEE ON THESE BOGUS PURCHASE TRANSACTION IS TO BE TAXED THE GROSS PROFIT ALREADY SHOWN BY THE ASSESSEE AND OFFERED TO TAX SHOULD BE REDUCED FROM THE STANDARD 12.5% BEING DIRECTED TO BE DISALLOWED ON ACCOUNT OF BOGUS PURCHASE. ITA NO.2135/MUM/2017 AND OTHER APPEALS M/S. RAKSHIT INFRASTRUCTURE PVT. LTD., 7 12. UPON CAREFUL CONSIDERATION WE F IND CONSIDERABLE COGENCY IN THE SUBMISSION OF THE LEARNED COUNSEL OF THE ASSESSEE AS OTHERWISE IT WILL BE DOUBLE JEOPARDY TO THE ASSESSEE. ACCORDINGLY WE MODIFY THE ORDER OF LEARNED CIT - A AND DIRECT THAT THE DISALLOWANCE IN THIS CASE BE RESTRICTED TO 12.5 % OF THE BOGUS PURCHASES AS REDUCED BY THE GROSS PROFIT RATE ALREADY DECLARED BY THE ASSESSEE ON THESE TRANSACTIONS. LD COUNSEL OF THE ASSESSEE FAIRLY ACCEPTED THIS PROPOSITION. 13. IN THE RESULT APPEAL S FILED BY THE REVENUE STAND DISMISSED AND THE C ROSS OBJECTIONS FILED BY ASSESSEE STAND PARTLY ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 0 6 / 1 1 /2018 S D / - S D / - RAVISH SOOD SHAMIM YAHYA JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 0 6 / 1 1 /2018 COPY OF THE ORDER FORWARDED TO : (1) THE ASSESSEE; (2) THE REVENUE; (3) THE CIT(A); (4) THE CIT, MUMBAI CITY CONCERNED; (5) THE DR, ITAT, MUMBAI; (6) GUARD FILE. BY ORDER KARUNA SR. PRIVATE SECRETARY (DY./ASSTT.REGISTRAR) ITAT, MUMBAI