ACIT 33(1)(2), MUMBAI V. BADRIPRASAD B MISTRY, MUMBAI

ITA 218/MUM/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 2074 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-11-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 03-11-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 09-01-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J P JANGID
• Keywords: Bogus purchase; Unexplained expenditure
• Section: 44AD; 69C; 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY , JM AND SHRI M. K. AGARWAL , AM ./ I.T.A. NO. 218/MUM/2015 ( / ASSESSMENT YEAR: 2010 - 11 ) ITO - 33(1)(2), C - 11, R. NO. 306, PRATYAKSH KAR BHAVAN, BANDRA - KURLA COMPLEX, BANDRA (E), MUMBAI - 400 051 / VS. BADRIPRASAD B. MISTY A - 401, PANCHSHEEL RESIDENCY, SECTOR NO. 6, MAHAVIR NAGAR, KANDIVALI (W), MUMBAI - 400 067 ./ ./ PAN/GIR NO. ACSPM 58 97 R ( / APPELLANT ) : ( / RESPONDENT ) ./ C.O. NO. 121 /MUM/201 6 (ARISING OUT OF ITA NO. 218/MUM/2015) ( / ASSESSMENT YEAR: 2010 - 11 ) BADRIPRASAD B. MISTY A - 401, PANCHSHEEL RESIDENCY, SECTOR NO. 6, MAHAV IR NAGAR, KANDIVALI (W), MUMBAI - 400 067 / VS. ITO - 33(1)(2), C - 11, R. NO. 306, PRATYAKSH KAR BHAVAN, BANDRA - KURLA COMPLEX, BANDRA (E), MUMBAI - 400 051 ( / CROSS OBJECTOR ) : ( / RESPONDENT ) REVENUE BY : SHRI J. P. JANGID ASSESSE E BY : SHRI BHUPENDRA SHAH / DATE OF HEARING : 0 3.11.2016 / DATE OF PRONOUNCEMENT : 11 .11.2016 / O R D E R PER SA KTIJIT DEY , J . M.: AFORESAID APPEAL A ND CROSS OBJECTION BY THE D EPARTMENT AND THE ASSESSEE RES PECTIVELY ARE AGAINST THE COMMON ORDER DATED 17.10.2014 OF LD. CIT(A) - 35 , 2 ITA NO. 218/MUM/2015 & CO NO. 121 /MUM/201 6 (A.Y. 2010 - 11) BADRIPRASAD B. MISTY MUMBAI (CIT(A) FOR SHORT), FOR THE ASSESSMENT YEAR (A.Y.) 2010 - 11. THE ONLY ISSUE IN DISPUTE I N THE APPEAL AND THE CROSS OBJECTION IS IN RELATION TO ESTIMATION OF PROFIT @ 8% ON TH E ALLEGED BOG U S PURCHASES. WHILE THE DEPARTMENT IS CHALLENGING THE ESTIMATION OF PROFIT AT 8% AS AGAINST THE ADDITION OF ENTIRE BOGUS PURCHASE BY THE ASSESSING OFFICER (A.O.) U/S. 69C OF THE ACT, THE ASSESSEE HAS PLEADED DELETION OF THE ENTIRE ADDITION. 2. BRIEFLY THE FACTS ARE THAT , THE ASSESSEE AN INDIVIDUAL IS PRIMARILY ENGAGED IN EXECUTING CIVIL CONTRACT WORK . F OR THE ASSE SSMENT YEAR UNDER CONSIDERATION ASSESSEE HAD FILED HIS RETURN OF INCOME ON 8.10.2010 DECLARING TOTAL INCOME OF RS.11,52,310/ - . IN T HE COURSE OF ASSESSMENT PROCEEDINGS, THE AO ON THE BASIS OF INFORMATION AVAILABLE FROM THE S ALES TAX DEPARTMENT FOUND THAT CERTAIN PURCHASES MADE BY THE ASSESSEE ARE BOGUS. THE DETAILS OF SUCH TRANSACTIONS ARE AS UNDER: S. NO. NAME OF PARTIES AMOUNT (RS.) TIN NO. 1 DHARMESH TRADING COMPANY 4,16,000 27040154641V 2 JAINAM TRADE CORPORATION 40,73,432 27070656939V 3 M R CORPORATION 36,137 27710551730V 4 DONEAR TRADING PRIVATE LIMITED 27,50,827 27910623885V TOTAL 72,76,393 3. HE FURTHER NOTED THAT AS PE R THE INVESTIGATION CONDUCTED BY THE SALES TAX AUTHORITIES, THESE PARTIES WERE ISSUING BOGUS BILLS ON COMMISSION BASIS WITHOUT SELLING ANY GOODS OR MATERIALS. HE, THEREFORE, CALLED UPON THE ASSESSEE TO FURNISH NECESSARY DETAILS OF THE PURCHASES. ON T HE BAS IS OF THE INFORMATION S SUBMITTED BY THE ASSESSEE, THE A.O. TO ASCERTAIN THE GENUINENESS OF THE TRANSACTIONS ISSUED NOTICES U/S.133(6) TO THE CONCERNED PARTIES, WHICH RETURNED UNSERVED WITH THE POSTAL REMARK NOT KNOWN OR NOT CLAIMED. AS NOTED BY THE A. O., HE ALSO CONDUCTED ENQUIRY THROUGH THE WARD INSPECTOR ON THE BASIS OF THE DETAILS PROVIDED BY THE ASSESSEE, HOWEVER, THE ENQUIRY DID NOT YIELD ANY RESULT AS THE PARTIES WERE NOT FOUND IN THEIR RESPECTIVE ADDRESSES. HE, THEREFORE, CALLED UPON THE ASSESSE E TO SHOW CAUSE WHY THE PURCHASES FROM THE 3 ITA NO. 218/MUM/2015 & CO NO. 121 /MUM/201 6 (A.Y. 2010 - 11) BADRIPRASAD B. MISTY CONCERNED PARTIES SHOULD NOT BE TREATED AS BOGUS. IN RESPONSE TO THE SHOW CAUSE NOTICE, THE ASSESSEE CLAIMING THE PURCHASES TO BE GENUINE SUBMITTED THAT THE MATERIALS WERE USED IN CONSTRUCTION WORK WHICH IS EVIDEN T FROM THE CERTIFICATE ISSUED BY THE BUILDER AND ARCHITECT AS WELL AS PAYMENT OF LABOUR CHARGES. HE SUBMITTED THAT SINCE THE ENTIRE PAYMENTS WERE MADE THROUGH ACCOUNT PAYEE CHEQUES, THE TRANSACTION SHOULD BE TREATED AS GENUINE. WITHOUT P REJUDICE TO THE AFO RE - SAID CONTENTIONS, THE ASSESSEE PLEADED TO ESTIMATE HIS INCOME IN TERMS OF SECTION 44AD AT 8%. THE AO, HOWEVER, DID NOT FIND ANY MERIT IN THE SUBMISSIONS OF THE ASSESSEE AND ULTIMATELY TREATED THE PURCHASES MADE FROM THE CONCERNED PARTIES AGGREGATING TO RS.72,76,396/ - AS UNEXPLAINED EXPENDITURE IN TERMS OF SECTION 69C AND ADDED BACK TO THE INCOME OF THE ASSESSEE. B EING AG GRIEVED OF THE ADDITION SO MADE, THE ASSESSEE PREFERRED APPEAL BEFORE THE LD. CIT(A). 4. THE LD. C IT(A) AFTER CONSIDERING THE SUBMISS IONS OF THE ASSESSEE IN THE CONTEXT OF FACTS AND MATERIALS ON RECORD OBSERVED THAT THE A.O. MAY NOT HAVE A CLINCHING PROOF, BUT IN VIEW OF THE INFORMATION OBTAINED AS A RESULT OF THE ENQUIRIES CONDUCT ED BY THE SALES TAX DEPARTMENT , THE ONUS IS ON THE ASSES SEE TO ESTABLISH THE GENUINENESS OF THE TRANSACTIONS. SHE OBSERVED , MERE LY FIL ING COPIES OF HIS OWN LEDGER ACCOUNTS AND BANK STATEMENT C AN NOT ESTABLISH THE EXISTENCE OF THE CONCERNED PARTIES. THOUGH , LD. CIT(A) AGREED WITH THE OBSERVATIONS OF THE A.O. THAT THE ASSESSEE HAS FAILED TO PROVE THE PURCHASES TO BE GENUINE, HOWEVER, CONSIDERING THE FACT THAT THE A.O. HAS NOT DISPUTED THE SALES TURNOVER OF THE ASSESSEE , F OLLOWING THE DECISION OF THE HONBLE GUJARAT HIGH COURT , S HE HELD THAT THE ENTIRE PURCHASES CAN NOT BE ADDED TO THE INCOME OF THE ASSESSEE, BUT ONLY THE PROFIT ELEMENT OF SUCH PURCHASE TURNOVER HAS TO BE TREATED AS HIS INCOME. A CCORDINGLY, SHE PROCEEDED TO ESTIMATE THE PROFIT AT 8% OF THE ALLEGED BOGUS PURCHASES OF RS.72,76,396/ - , WHICH WORKS OUT TO RS.5,82,100/ - . 5. THE LD. DR RELYING UPON THE OBSERVATIONS OF THE A.O. SUBMITTED THAT APART FROM THE INFORMATION AVAILABLE ON RECORD , HE HAD INDEPENDENTLY CONDUCTED ENQUIRY TO FIND 4 ITA NO. 218/MUM/2015 & CO NO. 121 /MUM/201 6 (A.Y. 2010 - 11) BADRIPRASAD B. MISTY OUT THE GENUINENESS OF THE TRANSACTION. HOWEVER, ON SUCH ENQUIRY THE CONC ERNED PARTIES FROM WH OM THE ASSESSEE CLAIMED TO HAVE MADE THE PURCHASES WERE FOUND TO BE NON - EXISTANT . HE SUBMITTED , THE ASSESSEE HAVING FAILED TO ESTABLISH THE GENUINENESS OF THE PURCHASES, THE ENTIRE PURCHASES E FFECTED BY THE ASSESSEE HAS TO BE TREATED A S BOGUS. THEREFORE THE A.O . WAS JUSTIFIED IN MAKING THE ADDITION U/S.69C OF THE ACT. THE LD. AR, ON THE OTHER HAND, SUBMITTED THAT THE A.O. MERELY RELYING UPON THE INFORMATION OBTAINED FROM THE SALES TAX DEPARTMENT HAS MADE THE ADDITION WHICH HAS NO BASIS. HE SUBMITTED DURING THE ASSESSMENT PROCEEDINGS THE ASSESSEE HAD PRODUCED DOCUMENTARY EVIDENCE TO PROVE THE GENUINENESS OF THE PURCHASES. THEREFORE, THERE IS NO REASON TO TREAT THE PURCHASES AS BOGUS AND EVEN ESTIMATE THE PROFIT @ 8%. HE, THEREFORE, PLEADE D FOR DELETION OF ADDITION SUSTAINED BY THE LD. CIT(A). IN SUPPORT OF HIS CONTENTION, THE LD. AR RELIED UPON THE FOLLOWING DECISIONS: SR. NO. CASE LAW ITA NO. 1 RAJEEV M KALATHIL 6727/MUM/2012 2 PARESH GANDHI 5706/MUM/2013 3 HIRALAL CHUNILAL JAIN 4547/ MUM/2014 4 GANPATRAJ A SANGHAVI 2826/MUM/2013 5 DEEPAK POPATLAL GALA 5920/MUM/2013 6 RAMILA P SHAH 5246/MUM/2013 7 TARLA SHAH 5295/MUM/2013 8 RAMESH KUMAR & CO. 2959/MUM/2014 9 M/S. IMPERIAL IMP. & EXP. 5427/MUM/2015 6 . WE HAVE CONSIDERED THE SUBMI SSIONS OF THE PARTIES AND PERUSED THE MATERIAL ON RECORD AS WELL AS THE DECISIONS RELIED UPON. IT IS A FACT ON RECORD THAT THE A.O. HAD CERTAIN INFORMATION AVAILABLE WITH HIM , AS A RESULT OF ENQUIRY CONDUCTED BY THE SALES TAX DEPARTMENT WHICH INDICATED THA T THE PURCHASES MADE BY THE ASSESSEE FROM CERTAIN PARTIES WERE NOT GENUINE AS THE CONCERNED PARTIES WERE NOT ACTUALLY INVOLVED IN ANY PURCHASE AND SALES TRANSACTIONS BUT ARE ONLY ISSUING FALSE BILLS. WE HAVE NOTED , TO ASCERTAIN THE GENUINENESS OF THE PURCH ASES CLAIMED TO HAVE BEEN MADE BY THE ASSESSEE, THE A.O. CONDUCTED ENQUIRY INDEPENDENTLY BY ISSUING NOTICE S U/S. 133(6) TO THE 5 ITA NO. 218/MUM/2015 & CO NO. 121 /MUM/201 6 (A.Y. 2010 - 11) BADRIPRASAD B. MISTY CONCERNED PARTIES. HOWEVER, NONE OF THE NOTICES COULD BE SERVED ON ANY OF THE PARTIES. WHEN THIS FACT WAS CONFRONTED TO THE ASSES SEE BY THE A.O. AND HE REQUESTED THE ASSESSEE TO PRODUCE THE CONCERNED PARTIES BEFORE HIM, THE ASSESSEE TOOK A PLEA THAT THEY HAVE CHANGED THEIR ADDRESSES THAT IS WHY THE NOTICES U/S. 133(6) COULD NOT BE SERVED. HOWEVER, WHEN THE A.O. CALLED UPON THE ASSES SEE TO P RODUCE THE CONCERNED PARTIES OR PROVIDE THEIR NEW ADDRESSES, THE ASSESSEE FAILED TO COMPLY WITH THE REQUEST OF THE A .O. IT IS FURTHER NOTED , EXCEPT STATING THAT CERTAIN PARTIES ARE PREPARED TO BE PRESENT BEFORE THE A.O., THE ASSESSEE HAD NOT MADE A NY GENUINE EFFORT TO PRODUCE THE CONCERNED PARTIES. W E FAIL TO UNDERSTAND IF TH E PARTIES WERE WILLING TO APPEAR BEFORE THE A.O., WHAT PREVENTED THE ASSESSEE IN PRODUCING THEM BEFORE THE A .O. MERELY BECAUSE THE PAYMENTS WERE MADE IN CHEQUE, IT CANNOT BE SAI D THAT THE TRANSACTIONS ARE GENUINE. IT IS ALSO PERTINENT TO MENTION HERE THAT THE ASSESSEE HAD NOT PRODUCED ANY CONCLUSIVE PROOF TO EST ABLISH THE FACT THAT THE SO CALLED G OO D S/MATERIALS P URCHASED FROM THE CONCERNED PARTIES WERE ACTUALLY DELIVERED AT THE S ITES . T HEREFORE, IN ABSENCE OF ANY EVIDENCE TO PROVE THE FACT THAT THE ASSESSEE HAD ACTUALLY TAKEN DELIVERY OF GOODS, ASSESSEES CLAIM THAT PURCHASES WERE GENUINE CANNOT BE ACCEPTED. THEREFORE, THE ASSESSEES CLAIM THAT THE ENTIRE ADDITION SHOULD HAVE BEEN DELETED IS NOT ACCEPTABLE. AT THE SAME TIME, IT IS A FACT ON RECORD, THAT THE A.O. HAS NOT DISPUTED THE SALES E FFECTED BY THE ASSESSEE. HENCE , IT IS QUITE POSSIBLE THAT THE ASSESSEE MIGHT HAVE PURCHASED THE GOODS FROM SOME OTHER SOURCE. TAKING THIS INTO C ONSIDERATION AND ALSO THE FACT THAT THE ASSESSEE HAS FAILED TO PROVE BEYOND DOUBT THAT THE PURCHASES MADE FROM THE CONCERNED PARTIES ARE GENUINE, THERE IS NO OTHER OPTION BUT TO ESTIMATE THE PROFIT ELEMENT EMBEDDED IN THE BOGUS PURCHASES. MOREOVER, WE HAVE ALSO NOTED THAT THE ASSESSEE HIMS ELF BEFORE THE A.O. AS WELL AS LD. C IT(A) HAD TAKEN AN ALTERNATE CONTENTION TO ESTIMATE THE PROFIT AT 8%. THEREFORE, ON AN OVERALL CONSIDERATION OF FACTS AND MATERIALS ON RECORD, WE ARE OF THE CONSIDERED VIEW THAT THE LD. CIT(A) WAS JUSTIFIED IN ESTIMATING THE PROFIT AT 8% OF THE BOGUS PURCHASES. IN VIEW OF OUR AFORE - SAID DECISION, WE DO NOT INTEND TO DISCUSS MUCH ON THE DECISIONS RELIED UPON BY THE LD. 6 ITA NO. 218/MUM/2015 & CO NO. 121 /MUM/201 6 (A.Y. 2010 - 11) BADRIPRASAD B. MISTY AR. SUFFICE TO SAY , ON A CAREFUL READING OF THE DECISIONS RELIED UPON, WE HAVE OBSERVED THAT THE FINDING THEREIN W ERE ON THE BASIS OF SPECIFIC FACT INVOLVED IN THOSE CASES. HENCE, T HEY CANNOT BE APPLIED TO EVERY CASE , DE HORS , THE FACTUAL POSITION. THEREFORE, WE DO NOT FIND THESE DECISIONS APPLICABLE TO THE FACTS OF THE PRESE NT CASE. 6. IN THE RESULT, THE R EVENUE S APPEAL AND ASSESSEES CROSS OBJECTION ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON NOVEMBER 11 TH , 201 6 SD/ - SD/ - ( M. K. AGARWAL ) (S A KTIJIT DEY) / A CCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI ; DATED : 11 . 11 .201 6 . . ./ ROSHANI , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F ILE / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI