ITO 32(1)(1), MUMBAI V. ALKA N MADHANI, MUMBAI

ITA 2397/MUM/2017

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0365 (ITAT-MUMBAI)
• Duration Of Justice: 2 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-06-2017
• Appeal Filed By: Department
• Bench Allotted: SMC
• Next Hearing Date: 07-06-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 05-04-2017
• Court: TRIBUNAL
• Department Lawyers: KUMAR SANJAY
• Assessee Lawyers: JITENDRA SINGH
• Keywords: Bogus purchase
• Section: 69C; 133(6)

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI B.R. BASKARAN (AM) I.T.A. NO. 2397 /MUM/ 201 7 (ASSESSMENT YEAR 20 11 - 1 2 ) ITO 32(1)(1) ROOM NO. 201, C - 11 2 ND FLOOR PRATYAKSHAKAR BHAVAN BANDRA KURLA COMPLEX BANDRA EAST MUMBAI - 400 051. VS. SMT. ALKA N. MADHANI 403, TULSI TOWER TPS III, 51 ST ROAD BORIVALI WEST MUMBAI - 400 092. ( APPELLANT ) ( RESPONDENT ) PAN NO . AJIPM9454B ASSESSEE BY SHRI JITENDRA SINGH DEPARTMENT BY SHRI KUMAR SANJAY DATE OF HEARING 7.6 . 201 7 DATE OF PRONOUNCEM ENT 7.6 . 201 7 O R D E R THE APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 25.01.2017 PASSED BY LD CIT(A) - 44, MUMBAI AND IT RELATES TO THE ASSESSMENT YEAR 2011 - 12. THE REVENUE IS AGGRIEVED BY THE DECISION OF LD CIT(A) IN GRANTING P ARTIAL RELIEF TO THE ASSESSEE IN RESPECT OF ADDITION RELATING TO ALLEGED BOGUS PURCHASES. 2. I HEARD THE PARTIES AND PERUSED THE RECORD. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF SUPPLYING BUILDING MATERIALS. THE AO RECEIVED INFORMATION FROM THE SA LES TAX DEPARTMENT THAT SOME OF THE DEALERS WERE PROVIDING ACCOMMODATION BILLS WITHOUT ACTUALLY SUPPLYING THE MATERIALS. THE AO NOTICED THAT THE ASSESSEE HAS PURCHASED MATERIALS TO THE TUNE OF RS.39,61,591/ - FROM THE PARTIES SO IDENTIFIED BY THE SALES TAX DEPARTMENT. THE AO DISALLOWED THE ENTIRE AMOUNT OF PURCHASES AND ADDED THE SAME TO THE INCOME OF THE ASSESSEE SMT. ALKA N. MADHANI 2 U/S 69C OF THE ACT. THE LD CIT(A) RESTRICTED THE ADDITION TO 8% OF THE ABOVE SAID AMOUNT AND HENCE THE REVENUE HAS FILED THIS APPEAL BEFORE THE TRIBUNAL. 3. I NOTICE THAT THE LD CIT(A) HAS GRANTED PARTIAL RELIEF TO THE ASSESSEE WITH THE FOLLOWING OBSERVATIONS: - 4.3 I HAVE CAREFULLY GONE THROUGH THE ASSESSMENT ORDER AS WELL AS THE D ETAILS FILED BY THE APPELLANT. SOME 5 - 6 YEARS AGO THE SAL ES TAX DEPARTMENT OF THE GOVERNMENT OF MAHARASHTRA HAD CONDUCTED EXTENSIVE ENQUIRIES AGAINST SUCH DEALERS WHO USED TO PROVIDE BILLS FACILITATING BOGUS PURCHASES/SALES. AS A RESULT OF THIS INQUIRY, INFORMATION ABOUT MANY ASSESSEES WERE FORWARDED TO THE INCO ME TAX DEPARTMENT, THE AC. HAS STATED IN THE ASSESSMENT ORDER THAT THE APPELLANT IS ONE SUCH PERSON WHO HAS INFLATED HIS PURCHASES BY SHOWING BOGUS PURCHASES FROM SUCH PERSONS WHO APPEAR IN THE LIST OF BOGUS ENTRIES PROVIDERS AS PREPARED BY THE SALES TAX D EPARTMENT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE A.O. ALSO FOUND THAT THE ASSESSEE HAD NOT BEEN ABLE TO ESTABLISH THE GENUINENESS OF PURCHASES IN DISPUTE. THE MAIN ARGUMENTS OF THE AO ON THE BASIS OF WHICH HE HAD FORMED HIS OPINION WERE - 1. THE AS SESSEE WAS NOT ABLE TO SUBMIT ANY LORRY RECEIPTS OR ANY DETAILS REGARDING TRANSPORTATION OF GOODS. 2. THE SUPPLIERS FROM WHOM THE DISPUTED PURCHASES HAVE BEEN MADE ARE INCLUDED IN THE LIST OF HAVVALA OPERATORS PREPARED BY THE SALES TAX DEPARTMENT. 3. THE SUPPLIE RS FROM WHOM THE DISPUTED PURCHASES HAVE BEEN MADE, WERE NOT PRODUCED BEFORE THE AO. 4. THE SUPPLIERS FROM WHOM THE DISPUTED PURCHASES HAVE BEEN MADE, DID NOT COMPLY TO NOTICE U/S 133(6) OF THE ACT. 4.4 THE APPELLANT IS A SUPPLIER. THE AO IN HIS ORDER HA S DEALT EXCLUSIVELY WITH THE PURCHASES OF THE APPELLANT. HOWEVER, IN THE CASE OF A SUPPLIER, IF THERE ARE NO PURCHASES OF MATERIALS THERE CANNOT BE ANY SALES ALSO. THE AO HAD DISALLOWED PART OF PURCHASES WITHOUT AT THE SAME TIME QUESTIONING THE SALES FIGUR E OF THE ASSESSEE. THE AO HAS NOT BROUGHT ANY MATERIAL ON RECORD TO SHOW THAT THERE IS SUPPRESSION OF SALES ALSO BY THE APPELLANT. FURTHER, THE AO HAS NOT REBUTTED THE ARGUMENTS OF THE APPELLANT THAT THE PAYMENTS HAVE BEEN MADE THROUGH BANKING CHANNELS. TH E FACT REMAINS THAT THE APPELLANT HAS TAKEN CARE TO MAKE HIS PURCHASES SMT. ALKA N. MADHANI 3 THROUGH BANKING CHANNEL AND SINCE THE BANKS ARE REQUIRED TO FOLLOW KYC NORMS THE IDENTITY OF THE SUPPLIER CANNOT BE DOUBTED. AS FAR AS THE ISSUE OF PRODUCING THE SUPPLIER BEFORE THE AO IS CONCERNED, THE ASSESSEE CANNOT BE REASONABLY EXPECTED TO FORCE THE SUPPLIER TO REPLY TO THE AO OR TO APPEAR BEFORE THE AO. 4.5 IN A JUDGMENT GIVEN BY THE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS J AGDISH PRASAD TEWARI 220 TAXMANN 0141 (2014), IT HAS B EEN HELD THAT IF THE PAYMENTS HAVE BEEN MADE BY CHEQUES AND ARE REFLECTED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE, NO ADVERSE INFERENCE CAN BE DRAWN. 4.6 IT HAS BEEN HELD IN THE CASE OF M/S. NIKUNJ ENTERPRISES 372 ITR 619 (BOM) BY THE HON'BLE BOMBAY HIGH COURT THAT MERELY BECAUSE THE SUPPLIERS HAVE NOT APPEARED BEFORE THE ASSESSING OFFICER OR THE CIT(A), ONE CANNOT CONCLUDE THAT THE PURCHASES WERE NOT MADE BY THE RESPONDENT ASSESSEE. FURTHER IT HAS BEEN HELD IN THE CASE OF SARASWATHI OIL TRADERS VS. CIT 2 54 ITR 259 (SUPREME COURT) THAT WHEN THE SALES HAVE NOT BEEN DOUBTED THEN THERE WAS NO QUESTION TO DOUBT THE PURCHASES AND THE ADDITION SHOULD HAVE BEEN MADE ONLY TO THE EXTENT OF GROSS PROFIT. TO THIS EXTENT I AM IN AGREEMENT WITH THE APPELLANT THAT IF TH E APPELLANT HAS FULFILLED HIS ONUS OF MAKING THE PAYMENTS BY BANKING CHANNELS AND HAS SUPPLIED THE ADDRESS OF THE SELLERS, THEN IT CANNOT BE PRESUMED THAT THE SELLERS WERE BOGUS SIMPLY BECAUSE THE SELLERS WERE NOT FOUND AT THE GIVEN ADDRESSES. HOWEVER, AT THE SAME TIME IT CANNOT BE SAID THAT THE INFORMATION PROVIDED BY THE SALES TAX DEPARTMENT SHOULD NOT BE TAKEN COGNIZANCE OF BY THE A.O. THEREFORE, AFTER CONSIDERING THE TOTALITY OF FACTS AND AFTER FOLLOWING THE RATIO OF SARASWATHI OIL TRADERS VS. CIT(SC) C ITED SUPRA, I AM OF AN OPINION THAT IT IS THE PROFIT ELEMENT ON THE TOTAL COMPONENT IN DISPUTE WHICH NEEDS TO BE ADDED TO THE INCOME OF THE APPELLANT. IT IS SEEN FROM RECORD THAT ON SIMILAR FACTS & ISSUE, MY ID. PREDECESSOR HAD DECIDED THE CASE OF THE APPE LLANT FOR THE IMMEDIATELY PRECEDING A.Y. 2009 - 10 WHEREIN SHE HAD TAKEN 8% OF THE DISPUTED PURCHASES AS FAIR PROFIT ELEMENT WHICH IS REQUIRED TO BE ADDED. THE TOTAL AMOUNT WHICH IS BEING TREATED AS BOGUS BY THE AO IS RS 39,61,591/ - . THUS 8% OF RS. 39,61,591 / - WHICH IS RS. 3,16,928/ - IS TAKEN AS PROFIT OF THE APPELLANT ON PURCHASES THAT ARE NOT FULLY AND PROPERLY EXPLAINED. ADDITION OF RS 3,16,928/ - IS ACCORDINGLY CONFIRMED OUT OF AN ADDITION OF RS. 39,61,591/ - AND THE BALANCE IS DELETED. GROUNDS OF APPEAL NO S.1 & 3 IS THEREFORE PARTLY ALLOWED. SMT. ALKA N. MADHANI 4 4. THE LD D.R STRONGLY DEFENDED THE ORDER PASSED BY THE AO BY SUBMITTING THAT THE ASSESSEE HAS FAILED TO PROVE THE GENUINENESS OF PURCHASES. ON THE CONTRARY, THE LD A.R SUBMITTED THAT THE ASSESSEE COULD NOT HAVE S OLD THE MATERIALS WITHOUT PURCHASING THE SAME AND SINCE THE AO HAS NOT DOUBTED THE PURCHASES, HE COULD NOT HAVE DISBELIEVED ENTIRE PURCHASES. 5. HAVING HEARD RIVAL CONTENTIONS, I AM OF THE VIEW THAT THE DECISION TAKEN BY LD CIT(A) DOES NOT CALL FOR AN Y INTERFERENCE. IN THE INSTANT CASE, THE AO HAS NOT PROVED THAT THE IMPUGNED PURCHASES HAVE NOT BEEN SOLD. AS SUBMITTED BY LD A.R, AN ITEM CANNOT BE SOLD WITHOUT PURCHASING THE SAME. HENCE I AM OF THE VIEW THAT THERE IS NO REASON TO DISALLOW ENTIRE AMOU NT OF PURCHASES. ACCORDINGLY, IN THE FACTS AND CIRCUMSTANCES OF THE CASE, I AM OF THE VIEW THAT THE LD CIT(A) WAS JUSTIFIED IN RESTRICTING THE DISALLOWANCE TO 8% OF THE ALLEGED BOGUS PURCHASES. ACCORDINGLY I UPHOLD THE ORDER PASSED BY LD CIT(A) ON THIS I SSUE. 6. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER HAS BE EN PRONOUNCED IN THE COURT ON 7.6 . 201 7. SD/ - (B.R.BASKARAN) ACCOUNTANT MEMBER MUMBAI ; DATED : 7 / 6 / 20 1 7 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) PS ITAT, MUMBAI