SHUBHAM ELECTRIC AND HARDWARE STORES, MUMBAI V. ITO 29(3)(4), MUMBAI

ITA 2292/MUM/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 0201 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-08-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 31-03-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: N HEMALATHA
• Keywords: Bogus purchase; Accommodation entries

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH SMC, MUMBAI BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER ITA NO.2292/M/2017 ASSESSMENT YEAR: 2009-10 M/S. SHUBHAM ELECTRIC AND HARDWARE STORES, SHOP NO.01, DINESH MILL COMPOUND, L.B.S. MARG, BHANDUP (WEST), MUMBAI-400 078 PAN: AABFL 3842Q VS. THE INCOME TAX OFFICER, WARD 29(3)(4), C-10, 4 TH FLOOR, ROOM NO.405, PRATYAKSHAKAR BHAVAN, BANDRA-KURLA COMPLEX, BANDRA (EAST), MUMBAI 400 051 (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : NONE REVENUE BY : MISS N. HEMALATHA, D.R. DATE OF HEARING : 31.07.2017 DATE OF PRONOUNCEMENT : 24.08.2017 O R D E R PER D.T. GARASIA, JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSES SEE AGAINST THE ORDER DATED 03.03.2017 OF THE COMMISSIONER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS THE CIT(A)] RELEVANT TO ASSESSMENT Y EAR 2009-10. 2. THE SHORT FACTS OF THE CASE ARE THAT ASSESSEE HA S MADE BOGUS PURCHASES OF RS.11,79,675/- FROM CERTAIN PARTIES. THE ASSESSING OFFICER (HEREINAFTER REFERRED TO AS THE AO) RECEIVED THE INFORMATION FRO M SALES TAX DEPARTMENT, GOVT. OF MAHARASHTRA REGARDING PARTIES WHO ARE ONLY PROVIDING ACCOMMODATION ENTRIES WITHOUT DOING ANY ACTUAL BUSI NESS. THEREFORE, ASSESSEE WAS ASKED TO SUBMIT THE DETAILS OF PURPORTED PURCHA SES MADE FROM THESE PARTIES AND PROVE THAT THE PURCHASES ARE GENUINE. THE ASSE SSEE PRODUCED LEDGER ACCOUNT, COPIES OF BILLS, BANK STATEMENT BUT THE AS SESSEE DID NOT PRODUCE THE PARTIES FOR VERIFICATION. THEREFORE, THE AO MADE T HE ADDITION ON THE BASIS OF ITA NO.2292/M/2017 M/S. SHUBHAM ELECTRIC AND HARDWARE STORES 2 INFORMATION RECEIVED FROM THE INVESTIGATION WING OF THE INCOME TAX DEPARTMENT, MUMBAI THAT THE SALES TAX DEPARTMENT HA D RECORDED THE STATEMENT OF CERTAIN HAWALA OPERATORS WHO HAVE CONF IRMED TO HAVE GIVEN BOGUS BILLS TO CERTAIN ASSESSEES INCLUDING THE ASSESSEE. THE BOGUS BILLS WERE IN RESPECT OF A NUMBER OF PARTIES. THE ASSESSEE WAS ASKED TO S UBMIT THE DETAILS OF PURPORTED PURCHASES MADE AND TO SHOW CAUSE WHY THE SAME SHOULD NOT BE DISALLOWED AS BOGUS PURCHASES. THE ASSESSEE HAD FIL ED THEIR REPLY STATING THAT PURCHASES WERE MADE FROM REGULAR PARTIES SUPPORTED BY PROPER HILLS AND THE ACCOUNTING ENTRIES AND THE PAYMENTS WERE MADE BY AC COUNT PAYEE CHEQUES. THE AO WAS NOT IN AGREEMENT WITH THE SUBMISSIONS OF THE ASSESSEE AND OBSERVED THAT THE ASSESSEE FAILED TO FURNISH THE SU PPORTING DOCUMENTARY EVIDENCE TO SUPPORT THAT THE PURCHASES WERE ACTUALL Y MADE BY THEM FROM THESE PARTIES SUCH AS TRANSPORTATION DOCUMENTS, INWARD RE GISTER ETC. THE ASSESSEE HAS NOT BEEN ABLE TO DISCHARGE THE PRIMARY ONUS OF PROV ING THE IDENTITY OF THE PARTIES AND THE GENUINENESS OF THE PURCHASES. THE I NVESTIGATION WING OF MUMBAI HAD PROVIDED A LIST OF HAWALA BILL RACKETEER S WHO WERE INVOLVED IN ISSUING BILLS AND ALSO THE LIST OF BENEFICIARIES. T HE SALES TAX DEPARTMENT OF MUMBAI HAD INVESTIGATED ALL THESE CASES THOROUGHLY AND PREPARED A LIST OF SUCH HAWALA OPERATORS AND THEIR BENEFICIARIES WHICH HAVE BEEN UPLOADED IN THEIR WEBSITE. THE AO OBSERVED THAT THESE HAWALA OPERATOR S WERE PROVIDING ONLY ACCOMMODATION ENTRIES AND THE ASSESSEE WAS ALSO IN THE LIST OF BENEFICIARIES. ACCORDINGLY, THE AO TREATED THE AMOUNT OF RS.11,79, 679/- AS BOGUS PURCHASES AND ADDED BACK RS.1,47,459/- BEING 12.5% OF IT ON A CCOUNT OF THE PROFIT CLEMENT THEREIN, TO THE TOTAL INCOME OF THE ASSESSE E. 3. MATTER CARRIED TO THE LD. CIT(A) AND THE LD. CIT (A) HAS DECIDED THE APPEAL AS UNDER: 5.21 THE LD. A.O. IN THIS CASE HAS HELD THAT THE P ARTIES FROM WHOM THE PURCHASES WERE MADE BY THE APPELLANT WERE FOUND TO BE BOGUS. NOT HAVING DOUBTED THE CONSUMPTION/SALES, THE MOTIVE BEHIND OBTAINING BOGU S BILLS THUS, APPEARS TO BE INFLATION OF PURCHASE PRICE SO AS TO SUPPRESS TRUE PROFITS. AS MENTIONED ABOVE, THE AO HAD NEVER DISPUTED THE SALES. ONCE SALES ARE ACCEPT ED, CORRESPONDING PURCHASES HAVE TO BE CONSIDERED AND CANNOT BE DISREGARDED IN TOTALITY . LOOKING THE MARKET TREND, THE ITA NO.2292/M/2017 M/S. SHUBHAM ELECTRIC AND HARDWARE STORES 3 APPELLANT MAY HAVE MADE PURCHASES FROM OTHER PARTIE S WHICH WERE NOT RECORDED IN THE BOOKS, AND TOOK ONLY BILLS FROM THESE PARTIES A S ACCOMMODATION, TO EXPLAIN THE PURCHASES. THE PURCHASES THEMSELVES ARE NOT BOGUS B UT THE PURCHASE PARTIES SHOWN IN BOOKS ARE. THEREFORE, THE ENTIRE PURCHASE FROM THES E PARTIES CANNOT BE ADDED AS BOGUS AND WHAT NEEDS TO BE TAXED IS THE PROFIT ELEMENT EM BEDDED IN SUCH TRANSACTIONS. ESTIMATIONS RANGING FROM 12.5% TO 25% HAVE BEEN UPH ELD BY THE HON'BLE GUJARAT HIGH COURT, DEPENDING UPON THE NATURE OF THE BUSINESS. I T HAS BEEN HELD IN THE CASE OF SIMIT P. SHETH THAT NO UNIFORM YARDSTICK COULD BE A PPLIED TO ESTIMATE THE RATE OF PROFIT AND IT VARIES WITH THE NATURE OF BUSINESS. IN THE F ACTS AND CIRCUMSTANCES OF THE CASE, I AM OF THE CONSIDERED OPINION THAT ESTIMATION OF 12.5% AS PROFIT EMBEDDED IN IMPUGNED PURCHASES SHOWN FROM THE SAID PARTIES AND ADDING TH E SAME TO THE TOTAL INCOME RETURNED, WOULD MEET THE ENDS OF JUSTICE. THEREFORE, THE ADDI TION MADE BY THE LD. AO OF RS.1,47,459/- BEING 12.5% OF THE ALLEGED BOGUS PURC HASES OF RS.11,79,675/ - IS JUSTIFIED. HENCE, THE GROUND NOS 1 T 4 OF APPEAL FILED BY THE APPELLANT ARE HEREBY DISMISSED. 4. NONE APPEARED ON BEHALF OF THE ASSESSEE. THE AS SESSEE DID NOT PRODUCE ANY EVIDENCE BEFORE US. THEREFORE, WE HAVE NO ALTE RNATIVE EXCEPT TO ENDORSE THE ACTION OF LD. CIT(A). 5. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON 24.08.2017. SD/- (D.T. GARASIA) JUDICIAL MEMB ER MUMBAI, DATED: 24.08.2017. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.