HITEN YOGESH THAKKAR, MUMBAI V. ITO 26 (1)(5), MUMBAI

ITA 2283/MUM/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 4079 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-11-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Assessment Year: 2009-2010
• Appeal Filed On: 11-04-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R BHOOPATHI
• Keywords: Bogus purchase; Business income; Business expenditure; Difference of opinion; Accommodation entries
• Section: 271(1)(c); 274; 44AB; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH H MUMBAI BEFORE SHRI MAHAVIR SINGH (VICE PRESIDENT) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 2283/MUM/2019 ASSESSMENT YEAR: 2009-10 HITEN YOGESH THAKKAR, 236/11, KEWAL ANAND SOCIETY, KOLIWADA STATION ROAD, SION (EAST), MUMBAI-400022. VS. INCOME TAX OFFICER 26(1)(5), PRATYAKSHA KAR BHAVAN, BANDRA KURLA COMPLEX,MUMBAI-400020. PAN NO. ACUPT2899J APPELLANT RESPONDENT ASSESSEE BY : MR. MEHUL SHAH, AR REVENUE BY : MR. R. BHOOPATHI, DR DATE OF HEARING : 22/10/2020 DATE OF PRONOUNCEMENT : 02/11/2020 ORDER PER N.K. PRADHAN, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE. THE RELEVA NT ASSESSMENT YEAR IS 2009-10. THE APPEAL IS DIRECTED AGAINST THE ORDER O F THE COMMISSIONER OF INCOME TAX (APPEALS)-38, MUMBAI [IN SHORT CIT(A)] AND ARISES OUT OF PENALTY LEVIED U/S 271(1)(C) OF THE INCOME TAX ACT 1961, (T HE ACT). 2. THE GROUNDS OF APPEAL FILED BY THE ASSESSEE READ AS UNDER : 1. ON THE FACTS, AND IN CIRCUMSTANCES OF THE CASE, AND IN LAW, THE ASSESSING OFFICER ERRED IN IMPOSING PENALTY UNDER SECTION 271(1)(C) O F THE INCOME-TAX ACT 1961 WITHOUT APPRECIATING THAT THE NOTICE INITIATING PEN ALTY UNDER SECTION 274 READ WITH SECTION 271(1)(C) WAS BAD IN LAW. HITEN YOGESH THAKKAR ITA NO. 2283/MUM/2019 2 2. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE, AND IN LAW, LEARNED COMMISSIONER OF INCOME-TAX (APPEAL) ERRED IN UPHOLDING ACTION OF THE ASSESSING OFFICER IN LEVYING PENALTY UNDER SECTION 271(1)(C) OF THE INCO ME-TAX ACT 1961 AMOUNTING TO RS.120,000/- WITHOUT APPRECIATING THAT THE ADDIT ION OF ALLEGED NON-GENUINE PURCHASES WAS MADE ON A DIFFERENCE OF OPINION; AND THERE WAS NEITHER CONCEALMENT OF INCOME NOR FILING OF INACCURATE OF I NCOME, AS THE APPELLANT HAD FURNISHED ALL MATERIAL PARTICULARS IN SUPPORT OF IT S CLAIM OF PURCHASES FURTHER SUPPORTED BY THE ORDER OF MAVT DEPARTMENT ACCEPTING THE SAME PURCHASES WHICH THE ASSESSING OFFICER TREATED AS NON-GENUINE. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE FILED HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR (AY) 2009-10 ON 2 5.09.2009 DECLARING INCOME OF RS.5,63,960/-. ON RECEIPT OF INFORMATION FROM THE SALES TAX DEPARTMENT, GOVERNMENT OF MAHARASHTRA THAT THE ASSE SSEE HAD OBTAINED ACCOMMODATION ENTRIES THROUGH BOGUS PURCHASE BILLS FROM HAWALA PARTIES, THE AO MADE AN ADDITION OF RS.21,17,152/-. IN APPEAL FILED BY THE ASSESSEE, THE LD. CIT(A) RE STRICTED THE DISALLOWANCE TO 17.67% OF THE ALLEGED BOGUS PURCHAS ES OF RS.21,17,152/- WHICH COMES TO RS.3,74,100/-. THE REASONS GIVEN BY THE LD. CIT(A) VIDE ORDER DATED 29.01.2016 ARE AS UNDER : TO SUM UP, IT IS HELD THAT IN MANY SUCH BOGUS BILL ING CASES, IT IS PRESUMED THAT ASSESSEE MIGHT HAVE PROCURED BILLS FROM GREY MARKET AND TO COVER SUCH PURCHASES HE WOULD HAVE TAKEN BOGUS BILLS. IN VIEW OF THE ABO VE FACTS, THE PURCHASES ARE HELD TO BE NOT BOGUS BUT HAVE BEEN MADE FROM THE PARTIES OT HER THAN THOSE MENTIONED IN THE BOOKS OF ACCOUNT OF THE APPELLANT. THIS BEING T HE CASE, NOT THE ENTIRE PURCHASE PRICE BUT ONLY THE PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES SHOULD BE ADDED TO THE TOTAL INCOME OF THE APPELLANT. IN SUCH A CASE, THE BEST COURSE OF ACTION WOULD BE TO APPLY GP RATIO AND CONFIRM CERTAIN PERCENTAGE OF ALLEGED PURCHASES TO COVER ANY HITEN YOGESH THAKKAR ITA NO. 2283/MUM/2019 3 LEAKAGE OF REVENUE. THE APPELLANT SHOWS IN THE PAPE R BOOK THAT HIS GP RATIO IN THE A.Y. 2009-10 UNDER CONSIDERATION IS 17.67% AS AGAIN ST 26.07% AND 18.43% IN A.Y. 2008-09 AND A.Y. 2007-08 RESPECTIVELY. IT SHOWS THA T THE GP RATIO OF THE APPELLANT HAS THOUGH DECREASED DURING THE YEAR BUT IT IS TO B E NOTED THAT THE SALES TURNOVER HAS INCREASED SUBSTANTIALLY. IN THE GIVEN CIRCUMSTA NCES, I PROPOSE TO APPLY 17.67% GP ON THE ALLEGED PURCHASES OF RS.21,17,152/- SINCE GP OF 17.67% HAS BEEN DECLARED BY THE APPELLANT DURING THE YEAR UNDER CONSIDERATIO N. THEREFORE, I DIRECT THE AO TO ESTIMATE PROFIT OF 17.67% ON THE TOTAL ALLEGED BOGU S PURCHASES WHICH WORKS OUT TO RS.3,74,100/- (17.67% OF RS.21,17,152/-). THE APPEL LANT THEREFORE GETS A RELIEF OF RS. 17,43,052/-. 4. THEREAFTER, THE AO VIDE ORDER DATED 24.03.2017 LEVIED A MINIMUM PENALTY OF RS.1,20,000/- U/S 271(1)(C) ON THE CONCE ALED INCOME OF RS.3,74,100/- HOLDING THAT THE ASSESSEE HAD FURNISH ED INACCURATE PARTICULARS OF HIS INCOME. IN APPEAL, THE LD. CIT(A) UPHELD THE PENALTY OF RS .1,20,000/- LEVIED ON THE GROUND THAT :- 5 IN MY CONSIDERED OPINION ESTIMATION IS MADE ONLY TO ASCERTAIN THE EMBEDDED PROFIT IN SUCH TRANSACTIONS EXECUTED BY THE APPELLA NT INVOLVING RECORDING OF ACCOMMODATION ENTRIES IN THE BOOKS OF THE APPELLANT . ADOPTING CERTAIN PERCENTAGE TO WORK OUT THE PROFIT DOES NOT WIPE AWAY THE FACT THAT APPELLANT HAS OBTAINED BOGUS BILLS AND MADE FALSE ENTRIES IN THE BOOKS OF ACCOUN T OF THE APPELLANT AT HIGHER PRICES MENTIONED IN THE ALLEGED BOGUS PURCHASE BILLS WITH THE SOLE MOTIVE OF INFLATING BUSINESS EXPENSES IN THE GUISE OF PURCHASES AND LOW ERING TAXABLE BUSINESS INCOME WHILE THE PURCHASES ARE MADE FROM OTHER SOURCES AT LOWER PRICES. THE VERY FACT THAT THE APPELLANT RECORDED IN THE BOOKS PURCHASES BASED ON BOGUS PURCHASE BILLS OBTAINED FROM THE PARTIES IDENTIFIED AS HAWALA DEAL ERS AS PER THE ENQUIRY REPORTS OF THE MAHARASHTRA SALES TAX DEPARTMENT AND ADMITTED B Y THE MAIN PERSONS OF THE ALLEGED SUPPLIERS IN THEIR DEPOSITION, DECLARATION IN THE AFFIDAVITS ESTABLISHES IN HITEN YOGESH THAKKAR ITA NO. 2283/MUM/2019 4 UNEQUIVOCAL MANNER THE FACT THAT THE ACCOUNTS OF TH E APPELLANT ARE NOT CORRECT AND BASED ON THESE INACCURATE AND FALSIFIED ACCOUNTS TH E INCOME FROM BUSINESS HAS BEEN COMPUTED AND DECLARED IN THE RETURN FILED FOR THE I NSTANT ASSESSMENT YEAR. THE ABOVE FACTS AND CIRCUMSTANCES AFFIRM THAT THE APPEL LANT HAS FURNISHED INACCURATE PARTICULARS OF INCOME AND HAS CONCEALED ITS INCOME THEREBY LIABLE TO BE PENALIZED WITHIN THE PROVISIONS OF SECTION 271(1)(C). THE AO HAS RIGHTLY LEVIED THE PENALTY U/S. 271(1)(C) OF THE INCOME TAX, ACT, 1961. 5. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE RELI ES ON THE ORDER OF THE TRIBUNAL IN THE CASE OF RELIABLE METAL INDUSTRIES V. ACIT (ITA NO. 758/MUM/2018) FOR THE AY 2010-11 AND SUBMITS THAT O N SIMILAR FACTS, THE TRIBUNAL HAS ALLOWED THE APPEAL FILED BY THE ASSESS EE. ON THE OTHER HAND, THE LD. DR, RELYING ON THE ORDER OF THE LD. CIT(A) SUBM ITS THAT THE PENALTY OF RS.1,20,000/- LEVIED BY THE AO BE CONFIRMED. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIALS ON RECORD. THE REASONS FOR OUR DECISIONS ARE GIVEN BELOW. AT THIS MOMENT, WE REFER TO THE DETAILS FILED BY T HE ASSESSEE BEFORE THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AS RECORDED AT PARA 3 OF THE ASSESSMENT ORDER DATED 14.03.2014 :- 3. IN RESPONSE TO THE NOTICES ISSUED, SHRI VIJAY S HAH, CA & AUTHORIZED REPRESENTATIVE OF THE ASSESSEE, APPEARED AND FILED DETAILS FROM TIME TO T IME. THE ASSESSEE IS IMPORTER TRADING IN PLASTIC GOODS. THE ASSESSEE HAS SHOWN NET PROFIT OF RS.6,68,028/-. APART FROM THE DETAILS ASKED TO SUBMIT AS PER NOTIC E 142(1), VIDE ORDER SHEET DATED 31.01.2014 & 17.02.2014, ASSESSEE WAS ASKED TO SUB MIT THE DETAILS OF SALES BILLS, PURCHASE BILLS AND PROVE THE GENUINENESS OF THE TRANSACTION OF M/S. JIGAR ENTERPRISES & M/S. NIDDISH IMPEX PVT. LTD. HE IS ALSO REQUESTED TO PRODUCE THE PROOF PAYMENT OF TRANSPORT BILLS ETC. HITEN YOGESH THAKKAR ITA NO. 2283/MUM/2019 5 IN RESPONSE AR VIDE SUBMISSIONS DATED 31.01.2014 & 17.02.2014 FILED THE DETAILS OF PURCHASES MADE FROM M/S. JIGAR ENTERPRISES & M/S. N IDDISH IMPEX. HE IS ALSO SUBMITTED THE DETAILS OF PAYMENTS MADE THOSE PARTIES REPRODUCED A S UNDER :- WITH REFERENCE TO THE ABOVE, UNDER INSTRUCTIONS OF OUR ABOVE CLIENT AND IN CONTINUATION OF THE INTERVIEW THE UNDER SIGNED HAD ON 31.01.2014, WE HAVE TO WRITE TO YOU AS UNDER :- 1. THAT AS REQUIRED BY YOU WE ARE ENCLOSING HEREWITH T HE FOLLOWING DETAILS : A. LETTER OF AUTHORITY B. EXPENSES DETAILS (VOUCHERS) C. SAMPLE BILLS OF SALES AND PURCHASES D. CONFIRMATION OF HIMA BYE CHEM CORPORATION E. STOCK STATEMENT F. AUDIT REPORT UNDER M-VAT, 2002 IN FORM 704- FULL SE T 2. THAT AS PER THE BOOKS OF ACCOUNT SALE /PURCHASE REG ISTER : A. WE HAVE PURCHASED GOODS FROM A. JIGNA ENTERPRISES : BILL NO. DATE AMT 1 5 8 04/08/2008 2,56,941/ - 220 1 1/08/2008 1, 17,916/ - 283 19/08/2008 1, 13 , 712/ - 402 02/09/2008 2,35,507 / - 463 08/09/2008 1,21,462 / - 485 01/10/2008 2,35,507 / - 491 03/10/2008 4,03, 934/ - 515 05/10/2008 3,2 1 ,9 55/ - TOTAL 18,05,1 52/ - B. NIDDHISH IMPEX : BILL NO. DATE AMT 25/NIPL 06/01/2009 3, 12 , 00/ - B. THE SAID PURCHASES OF GOODS ARE MAINLY SOLD TO M/S. VARDHAMAN ENTERPRISES AND OTHER PARTIES HITEN YOGESH THAKKAR ITA NO. 2283/MUM/2019 6 C. WE HAVE MADE THE PAYMENT FOR THE PURCHASES MADE FRO M THE ABOVE PARTY AS FOLLOWS BY PAYEE'S A/C CHEQUE ONLY : A. JIGNA ENTERPRISES : BANK NAME CHEQUE NO. DATE AMT PUNJAB AND MAHARASHTRA CO - OP BANK LTD. 261392 27/08/2008 1, 17,916/ - PUNJAB AND MAHARASHTRA CO - OP BANK LTD. 261396 01/09/2008 2,00,000 / - PUNJAB AND MAHARASHTRA CO - OP BANK LTD. 2,61,397 01/09/2008 2,56 ,94 1/ - PUNJAB AND MAHARASHTRA CO - OP BANK LTD. 2,61,390 13/09/2008 4,00,000 / - PUNJAB AND MAHARASHTRA CO - OP BANK LTD. 2,61,391 16/ 09 / 2008 1 ,33,890 / - PUNJAB AND MAHARASHTRA CO - OP BANK LTD. 065104 08/10/2008 4,03,934/ - PUNJAB AND MAHARASHTRA CO - OP BANK LTD. 065105 13/10/2008 2,92,471/ - TOTAL 18,05,152/ - (PHOTOCOPY OF BANK A/C IS FILED VIDE LETTER NO. 003 , DATED 09/01/2014 DULY ACKNOWLEDGED BY YOU ON 13/01/2014) D. THE ABOVE MATERIAL IS SOLD TO M/S. VARDHAMAN ENTERP RISES, ADDRESS AT 125, KIKA STREET, GULALWADI, MUMBAI- 400004, THE PA YMENT OF THE SAME IS RECEIVED BY CHEQUE. (PHOTOCOPY OF BANK A/C IS FILED VIDE LETTER NO. 003, DATED 09.01.2014, DULY ACKNOWLEDGED BY YOU ON 13/01 /2014) E. THAT WE ARE IN THE POSITION TO IDENTIFY THE PURCHAS E WITH SALES. F. THAT AS THE INFORMATION IS RECEIVED BY YOU FROM THE SALES TAX DEPARTMENT, THAT THE PURCHASE IS BOGUS, THE PARTIES HAVE BEEN DECLARED AS HAWALA DEALERS BY THE SALES TAX DEPARTMENT. WE W OULD LIKE TO CROSS EXAMINE THE PARTIES FOR THE SALES MADE BY THEM TO U S AS WE HAVE ALL THE EVIDENCE TO PROVE THAT WE HAVE MADE GENUINE PURCHAS E OF GOODS, AS THERE IS CORRESPONDING SALES. G. OUR BOOKS OF ACCOUNTS ARE DULY AUDITED U/S 44AB OF THE INCOME TAX ACT, 1961. WE ALSO HAVE THE LEDGER CONFIRMATION OF THE P ARTY DULY SIGNED BY THEM ALONG WITH THEIR PAN NOS. HITEN YOGESH THAKKAR ITA NO. 2283/MUM/2019 7 H. THERE ARE DIFFERENT TYPES OF HAWALA DEALERS UNDER T HE M-VAT ACT, 2002 AND OTHER HIGH COURT DECISIONS IN OUR FAVOUR : AS PER ANNEXURE I & II IN OUR CASE AS THE SALE IS IDENTIFIABLE, THE QUESTI ON OF DISALLOWANCE DOES INTO ARISE AS IF THERE IS A SALE, THERE MUST BE A CORRESPONDING PURCHASE OF GOODS. THE ABOVE CONDITION IS FULFILLED IN OUR CASE THEREFORE, THE Q UESTION OF DISALLOWANCE DOES NOT ARISE. 6.1 WE OBSERVE THAT THOUGH THE ASSESSEE HAD FILED T HE DETAILS AS MENTIONED ABOVE CONTAINING HIS FULL EXPLANATION, THE AO MADE AN ADDITION OF RS.21,17,152/-, WITHOUT MAKING ANY INQUIRY/VERIFICA TION. IN SUCH A SITUATION LIKE THE PRESENT ONE WHEREIN THE LD. CIT(A) HAS EST IMATED THE PROFIT @ 17.67% OF THE TOTAL ALLEGED BOGUS PURCHASES WHICH C OMES TO RS.3,74,100/-, WE ARE OF THE CONSIDERED VIEW THAT PENALTY U/S 271( 1)(C) IS NOT LEVIABLE. THE LAW THAT PENALTY WOULD NOT BE EXIGIBLE MERELY BECAU SE AN ADDITION IS MADE ON ESTIMATE BASIS WAS REITERATED IN CIT V. RAJ BANS SINGH (2005) 276 ITR 351 (ALL) AND CIT V. AJAIB SINGH & CO . (2002) 253 ITR 630 (P&H). IN VIEW OF THE ABOVE FACTUAL MATRIX AND POSITION O F LAW WE DELETE THE PENALTY OF RS.1,20,000/- LEVIED BY THE AO U/S 271(1 )(C) OF THE ACT. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED THROUGH NOTICE BOARD UNDER RULE 34 (4) OF THE INCOME TAX (APPELLATE TRIBUNAL) RULES, 1963. SD/- SD/- (MAHAVIR SINGH) (N.K. PRADHAN) VICE PRESIDENT ACCOUNTANT MEMBER MUMBAI; DATED: 02/11/2020 RAHUL SHARMA, SR. P.S. HITEN YOGESH THAKKAR ITA NO. 2283/MUM/2019 8 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI