Poonmaram Sonaramji Bishnoi, Vapi V. Income Tax Officer, Wd. 7, Vapi, Vapi

ITA 218/SRT/2021

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 1803 (ITAT-SURAT)
• Duration Of Justice: 8 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-07-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: DB
• Next Hearing Date: 26-07-2022
• Assessment Year: 2011-2012
• Appeal Filed On: 17-11-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bogus purchase; Accommodation entries; Condonation of delay
• Section: 147; 148; 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND DR. ARJUN LAL SAINI, ACCOUNTANT MEMBER ITA No. 123 & 218/Srt/2021 (Assessment Year: 2010-11 and 2011-12) (Hearing in Virtual Court) Poonamaram Sonaramji Bishnoi, 18, Raghuvanshi Complex, Opp. Ajit Paper Mill, Silvassa Road, GIDC, Vapi. PAN No. AAHPB 7339 J Vs. I.T.O. Ward-7, Vapi. Appellant/ assessee Respondent/ revenue Appellant represented by Shri Hardik Vora, Advocate Respondent represented by Shri Shaurya Shashwat Shukla, Sr. DR Date of hearing 27/07/2022 Date of pronouncement 28/07/2022 Order under section 254(1) of Income Tax Act PER: PAWAN SINGH, JUDICIAL MEMBER: 1. These two appeals by the assessee are directed against the separate orders of the National Faceless Appeal Centre, Delhi (NFAC) dated 22/06/2021 and 27/07/2021 for the Assessment year (AY) 2010-11 and 2011-12 respectively. 2. In both these appeals, the assessee has raised common grounds of appeals, except variation of figure of disallowance of purchases, certain facts are common in both the appeals, thus, both the appeals were clubbed, heard together and are decided by this consolidate order to avoid ITA No.123 & 218/Srt/2021 Poonamaram Sonaramji Bishnoi Vs ITO 2 the conflicting decision. For appreciation of fact, the appeal for A.Y. 2011- 12 in ITA No. 218/Srt/2021 is treated as ‘lead’ case, wherein the assessee has raised following grounds of appeal: “1. On the facts and circumstances of the case as well as law on the subject, the learned Assessing Officer has erred in reopening the assessment u/s 147 of the Act. 2. On the facts and circumstances of the case as well as law on the subject, the learned CIT (Appeals) has erred in confirming addition of Rs. 13,63,791/- on account of bogus purchase made by Assessing Officer. 3. On the facts and circumstances of the case as well as law on the subject, the learned CIT(Appeals) has erred in confirming entire addition of Rs. 13,63,791/- on account of bogus purchase instead of profit percentage. 4. It is, therefore, prayed that the above addition/disallowance made by the assessing officer may please be deleted.” 3. On perusal of record, we find that the impugned order was passed by the NFAC on 27/7/2021 and the present appeal is filed before the Tribunal on 18/11/2021. The Registry of this Tribunal reported that the appeal is delayed by 54 days of period of limitation. The assessee has filed an application for condonation of delay on the ground that the time period of filing appeal was 60 days, however, the assessee could not file the appeal due to nationwide severe pandemic of Covid-19. Such delay in filing the appeal has already been condoned by the Hon’ble Apex Court in suo moto ITA No.123 & 218/Srt/2021 Poonamaram Sonaramji Bishnoi Vs ITO 3 Writ Petition No. 3/2020 vide order dated 20/03/2020 which was modified from time to time and ultimately the time period for filing appeals (legal recourse) was extended up to February, 2022. The ld. AR for the assessee made his submission on similar line and prayed that the delay may be condoned. The ld AR for the assessee submits that the assessee has good case on merit and is likely to succeed of the appeal is considered on merit. 4. On the other hand, the ld. Sr. DR for the revenue not opposed the plea of condonation of delay raised by the assessee. 5. Considering the submission of both the parties and in view of the decision of Hon’ble Apex Court in suo moto writ petition No. 3/2020, wherein the delay in filing the appeal before all the authorities and courts were condoned till February, 2022, therefore, the delay in filing the appeal is condoned and the appeal is admitted for hearing on merit. 6. Brief facts of the case are that the assessee is proprietor of ‘Prakash Steel’, filed his return of income for the A.Y. 2011-12 on 12/08/2010 declaring income of Rs. 5,29,510/-. The case of assessee was reopened on the basis of information received from Sales Tax Department-Maharashtra, that certain dealers were identified as Hawala dealers who are indulging in providing accommodation entries without actual and physical delivery of goods. The name and address of such hawala parties was provided to the income-tax department alongwith the list of beneficiary. The hawala ITA No.123 & 218/Srt/2021 Poonamaram Sonaramji Bishnoi Vs ITO 4 dealers also filed affidavit before Sales Tax / Value added Tax (VAT) authorities that they have only provided bills and no goods mentioned in the bills were supplied. The name of assessee was shown as one of the beneficiary. The assessee have made purchases during the assessment year, from Advance Metal Corporation Pvt. Ltd. who is one of the hawala dealers. On the basis of such information, the case of assessee was reopened after recording the reasons of reopening. The assessee was served with the notice under Section 148 of the Income Tax Act, 1961 (in short, the Act) dated 28/03/2017. The Assessing Officer noted that no response to the notice under Section 148 was made by the assessee. However, vide reply dated 28/07/2017, the assessee contended that return filed originally may be treated as return in response to the notice under Section 148 of the Act. The assessee was issued show cause notice as to why the purchases shown during the period under consideration from Advance Metal Corporation Pvt. Ltd. of Rs. 13,63,971/- should not be treated as bogus purchases. Notice under Section 133(6) of the Act was also issued to Advance Metal Corporation Pvt. Ltd. to provide ledger of the assessee, copy of ITR, computation of income, audited balance sheet and Profit & Loss Account (P&L Account) and details of vehicle which transported the goods and source and place of destination of various bills. No details were furnished by Advance Metal Corporation Pvt. Ltd. in ITA No.123 & 218/Srt/2021 Poonamaram Sonaramji Bishnoi Vs ITO 5 response to notice u/s 133(6) of the Act. The assessee in response to the show cause notice, furnished certain details and sought time to furnish remaining details about the purchases shown from Advance Metal Corporation Pvt. Ltd. The Assessing officer recorded that the assessee has failed to provide the details of vehicle used in the transportation and copy of bills/lorry receipts showing the vehicle number. The Assessing officer noted that neither the assessee nor the Advance Metal Corporation Pvt. Ltd. provided details of vehicle for transportation of goods. Thus, the Assessing Officer disallowed the entire purchases from Advance Metal Corporation Pvt. Ltd. 7. On appeal before the ld. CIT(A), the assessee challenged the validity of reopening as well as addition on merit. The assessee filed detailed written submissions before ld CIT(A). The assessee in it’s his written submission submitted that the assessee has made total purchases of Rs. 3.415 crores from various parties. Out of which the assessee made purchases of Rs. 13,63,791/- from Advance Metal Corporation Pvt. Ltd. All purchases were recorded in the books of account. All details were included in the audited financial statement. The amount is also reflected in the sales tax return. Copy of sales tax return, VAT audit report alongwith ledger copy of Advance Metal Corporation Pvt. Ltd. and invoices were furnished. The assessee further contended that the payments were made through ITA No.123 & 218/Srt/2021 Poonamaram Sonaramji Bishnoi Vs ITO 6 banking channel, copy of bank statements were also furnished. The assessee further stated that no sale is possible without purchases. The Assessing Officer has accepted the sale and return of income. The assessee also relied on certain case laws. 8. The ld. CIT(A) after considering the submission of assessee held that the Assessing Officer made it very clear to assessee to provide complete details of vehicle used in transportation and copy of lorry receipt showing the vehicle number. Though, the assessee provided receipt but no vehicle number is mentioned. The assessee is trying to evade or conceal something by not providing desired information. Notice under Section 133(6) remained un-complied by the transporter. Thus, the assesse failed to prove the genuineness of transaction. The Investigation carried out by the Investigating Officer is crystal clear that the company in whose name, the transaction is carried out i.e. Advance Metal Corporation Pvt. Ltd. is non-existent party and upheld the addition. Further aggrieved, the assessee has filed the present appeal before the Tribunal. 9. We have heard the submissions of ld. Authorised Representative (AR) of the assessee and the ld. Sr. Departmental Representative (DR) for the Revenue and perused the material available on record. Ground No. 1 of the appeal raised by the assessee relates to validity of reopening under Section 147 of the Act. The ld. AR of the assessee submits that he is not ITA No.123 & 218/Srt/2021 Poonamaram Sonaramji Bishnoi Vs ITO 7 pressing ground No. 1. The ld. Sr. DR has raised no objection on not pressing the ground No. 1, therefore, considering the submission of ld. AR of assessee, we dismiss ground No. 1 of appeal being not pressed. 10. Ground No. 2 relates to the addition of Rs. 13,63,791/- on account of bogus purchases. The ld. AR of the assessee submits that the Assessing Officer as well as the ld. CIT(A) upheld the disallowance of 100% purchases shown from Advance Metal Corporation Pvt. Ltd. The assessee has made genuine purchases. Material was included in the stock of assessee and was further sold in the market. The payment was made through banking channel. The goods were transported and delivered at the godown of the assessee. Merely the transporter has not responded to the notice of assessing officer, for such default, the assessee cannot be held responsible. The Assessing Officer neither rejected the books of account nor disputed the sale of assessee. The ld. AR further submits that the addition of 100% of purchases are not justified even assuming and without admitting that the assessee could not prove the genuineness of purchases only profit element embedded therein may be added to avoid the possibility of revenue leakage, as has been held by the various benches of the Tribunal as well as by different High Courts. In alternative and without prejudice submission, the ld. AR of the assessee submits that ITA No.123 & 218/Srt/2021 Poonamaram Sonaramji Bishnoi Vs ITO 8 to avoid the protracted litigation, a reasonable disallowance in between 5 to 10% may be upheld. 11. On the other hand, the ld. Sr. DR for the revenue supported the orders of lower authorities. The ld Sr DR for the revenue further submits that the assessee could not prove the transportation of goods. If the physical movement of goods is not proved then 100% disallowance of such purchases to be made. In some other cases wherein the assessees have purchases from grey market and the bills and vouchers is obtained from the Hawala trader/entry provider, in such cases only the rate of VAT or sales tax is not paid by the parties and profit element embedded in such transactions can only be considered. However, the assessee in the present case is claiming purchase to be genuine without substantiating the actual and physical delivery of goods. 12. We have considered the rival submissions of both the parties and have gone through the orders of the lower authorities carefully. We find that the Assessing Officer made the addition of 100% of purchases shown from by taking a view that the assessee has failed to prove the transportation of goods and that notice under Section 133(6) was not responded by the transporter. The ld. CIT(A) confirmed the action of Assessing Officer with similar observation. Before us, the ld. AR of the assessee vehemently submitted that even if the purchases is not proved, only profit element ITA No.123 & 218/Srt/2021 Poonamaram Sonaramji Bishnoi Vs ITO 9 embedded is such transactions may be disallowed. The ld. AR of the assessee also vehemently argued that neither the books of account were rejected nor the sales of assessee was disputed. We find merit in the submission of ld. AR of the assessee that in absence of purchase no sale is possible as the sale of assessee is not doubted by the lower authorities. Considering the facts of the case in hand and the submissions of the parties, we are of the view that in case the purchases are doubtful and neither the assessee could fully prove the purchases nor the assessing officer has brought any adverse evidence on record, except on relying on the report of investigation in cases of third parties, the revenue authorities is not entitled to tax the entire transaction, rather the profit element embedded in such transaction can be added to the income of the assesse. are not We find that the Hon’ble Gujarat High Court in a number of decision including in case of Samit P. Seth (2013) 356 ITR 451 (Guj) and Bholanath Poly Fab (2013) 355 ITR 290(Guj) held that only the profit embedded in the disputed purchase is to be disallowed and not the substantially portion of the purchases. The profit element in such disputed purchase is to be disallowed to avoid the possibility of revenue leakage. We find that Assessing Officer identified the disputed purchase to the extent of Rs, 13,63,791/- and disallowance of 100% of such purchases. In our view, 100% of disallowance of such purchases without disputing the ITA No.123 & 218/Srt/2021 Poonamaram Sonaramji Bishnoi Vs ITO 10 sales is not justified. Similarly, disallowance was upheld by ld. CIT(A) by concurring the view of the assessing officer. Considering over all facts and circumstances of the case, we are of the view that disallowance of 10% of the disputed purchases of Rs. 13,63,791/-, would meet possibility of revenue leakage. Hence, the Assessing officer is directed to disallow/restrict the addition of bogus purchases to the extent of 10% of such purchases. In the result, ground No. 2 of the appeal is partly allowed. 13. In the result, the appeal of the assessee is partly allowed. ITA No. 123/Srt/2021 for AY 2010-11 14. As noted above the assessee has raised similar ground of appeal in AY 2010-11, as raised in AY 2011-12, which we have partly allowed, therefore considering the principal of consistency this appeal is also partly allowed. 15. In the result, both the appeals of the assessee is partly allowed. Order pronounced in the open court on 28 July, 2022 at the time of hearing of this appeal. Sd/- Sd/- (Dr. ARJUN LAL SAINI) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Surat, Dated: 28/07/2022 *Ranjan ITA No.123 & 218/Srt/2021 Poonamaram Sonaramji Bishnoi Vs ITO 11 Copy to: 1. Assessee – 2. Revenue - 3. CIT(A) 4. CIT 5. DR 6. Guard File By order // True Copy // Sr.Private Secretary, ITAT, Surat