INCOME TAX OFFICER-9(2)(3), MUMBAI V. SHRI MANISH P. SHAH, MUMBAI

ITA 2397/MUM/2018

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 0347 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-12-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2009-2010
• Appeal Filed On: 18-04-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRS JOTHILAKSHMI NAYAK SR AR
• Keywords: Reopening of assessment; Bogus purchase; Principle of natural justice; Question of law; Accommodation entries; Onus to prove; Reason to believe
• Section: 143(3); 133(6); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D, BENCH MUM BAI BEFORE SHRI G. MANJUNATHA, ACCOUNTANT MEMBER & SHRI RAVISH SOOD, JUDICIAL MEMBER ITA NO.2397/MUM/2018 ( ASSESSMENT YEAR: 2009-10 ) ITO-19(2)(3) ROOM NO.218, 2 ND FLOOR, MATRU MANDIR TARDEO ROAD MUMBAI-400 007 VS. MANISH P.SHAH C/O M/S. MICROLINK TECHNOLOGIES, OFFICE NO.3, 3 RD FLOOR, 14 TH MEHTA MANSION, TRIBUVAN ROAD, OFF. LAMINGTON ROAD MUMBAI-400 004 PAN/GIR NO. AAEPS4599J ( APPELLANT ) .. RESPONDENT ) REVENUE BY MRS.JOTHILAKSHMI NAYAK, SR.AR (ADDL. CIT) ASSESSEE BY NONE DATE OF HEARING 10/12 /2019 DATE OF PRONOUNCEME NT 10 /12 /201 9 / O R D E R PER G.MANJUNATHA (A.M) : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST, THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS)30, MUMBAI, DATED 12/03/2018 AND IT PERTAINS TO ASSESSMENT YEAR 2009-10. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. 'WHETHER ON THE/ACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW, THE LD. CTT(A) IS JUSTIFIED IN NOT CONFIRMING THE A DDITION OF RS. 80,51,702/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF NON-GEN UINE PURCHASES- MADE BY THE ASSESSEE, IN VIEW OF THE DECISION OF TH E HON'BLE SUPREME COURT DATED 10.01.2017 IN THE CASE OF N. K. PROTEIN S LTD. WHEREIN THE HON'BLE SUPREME COURT CONFIRMED THE ENTIRE ADDITION ON ACCOUNT OF BOGUS PURCHASE?' 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD, CIT(A) IS JUSTIFIED IN CONFIRMING THE ADDIT ION @6.5% OF TOTAL PURCHASES OF RS. 80,51,702/ MADE BY THE' ASSESSEE FROM SEVEN PARTIES ITA NO.2397/MUM/2018 MANISH P.SHAH 2 WHEN DURING THE INVESTIGATION MADE BY SALES TAX DEP ARTMENT OF MAHARASHTRA GOVERNMENT, IT WAS CONCLUSIVELY PROVED - BEYOND DOUBT THAT THESE PARTIES ARE ONLY INTO PROVIDING ACCOMMODATION ENTRIES AND DO NOT DO ANY REAL BUSINESS. ?' 3. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW, THE LD. CTT(A) IS JUSTIFIED IN NOT APPRECIATING THE FACT THAT DURING THE INVESTIGATION MADE BY SALES TAX DEPARTMENT OF MAHA RASHTRA GOVERNMENT, DIRECTORS/PROP./PARTNERS OF SUCH PARTIES HAVE ACCEP TED ON OATH THAT THEY ARE PROVIDING ONLY ACCOMMODATION ENTRIES AND NOT DO ING ANY REAL BUSINESS, THE TREATMENT OF SUCH PURCHASES AS BEING GENUINE DOES NOT HOLD GROUND?' 4. THE APPELLANT PRAYS THAT THE ORDER OF THE LD. C IT(A) ON THE ABOVE GROUNDS BE SET-ASIDE AND THAT OF THE AO BE RESTORED 5. THE APPELLANT CRAVES LEAVE, TO AMEND OR ALTER A NY GROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A TRADER ENGAGED IN THE BUSINESS OF RESALE OF COMPUTER HARDW ARE PARTS, COMPONENTS AND ACCESSORIES IN THE NAME AND STYLE OF M/S MICROLINK TECHNOLOGIES. THE ASSESSEE HAS FILED HIS RETURN OF INCOME FOR AY 2009-10 ON 30/09/2009 DECLARING TOTAL INCOME OF RS .5,72,828/-. THEREAFTER, THE CASE HAS BEEN REOPENED U/S 147 OF T HE ACT, ON THE BASIS OF INFORMATION RECEIVED FROM DGIT, INVESTIGAT ION, MUMBAI, AS PER WHICH, SALES TAX AUTHORITIES OF GOVERNMENT OF M AHARASHTRA HAD TAKEN ACTIONS AGAINST NUMBER OF HAWALA DEALERS, WH O HAD ISSUED BOGUS PURCHASE BILLS TO VARIOUS PARTIES IN MUMBAI A ND OTHER PLACES. AS PER LIST OF BENEFICIARIES, THE ASSESSEE IS ONE O F THE BENEFICIARY, WHO HAD TAKEN ACCOMMODATION BILLS OF BOGUS PURCHASE S FROM VARIOUS PARTIES AS LISTED BY THE AO IN PARA 2 OF HI S ASSESSMENT ORDER AMOUNTING TO RS. 80,51,702/-. THE CASE WAS SELECTED FOR SCRUTINY AND THE ASSESSMENT HAS BEEN COMPLETED U/S. 143(3).R .W.S. 147 OF THE I.T.ACT, 1961 ON 18/03/2015 AND DETERMINED TOTA L INCOME OF RS. 86,24,530/-, AFTER MAKING 100% ADDITIONS TOWARDS AL LEGED BOGUS PURCHASE FROM THOSE PARTIES AND MADE ADDITIONS OF R S. 80,51,702/-. ITA NO.2397/MUM/2018 MANISH P.SHAH 3 4. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESEE P REFERRED AN APPEAL BEFORE THE LD.CIT(A). BEFORE THE LD.CIT(A), THE ASSESSE HAS FILED ELABORATE WRITTEN SUBMISSIONS, ON THE ISSUE, WHICH HAS BEEN REPRODUCED AT PARA 4 ON PAGES 4 TO 9 OF LD.CIT(A) O RDER. THE SUM AND SUBSTANCE OF ARGUMENTS OF THE ASSESSEE BEFORE T HE LD.CIT(A) ARE THAT PURCHASE FROM THE ABOVE PARTY IS GENUINE, WHICH IS SUPPORTED BY NECESSARY EVIDENCES. THEREFORE, NO ADD ITIONS COULD BE MADE ON THE BASIS OF INFORMATION RECEIVED FROM THIR D PARTY. THE LD.CIT(A), AFTER CONSIDERING RELEVANT SUBMISSION OF THE ASSESSEE AND ALSO, BY FOLLOWING THE DECISION OF HONBLE GUJA RAT HIGH COURT, IN THE CASE OF CIT VS. SIMITH P. SHETH (356 ITR 451) S CALED DOWN ADDITION MADE BY THE AO TOWARDS ALLEGED BOGUS PURCH ASES TO 6.5% GROSS PROFIT ON TOTAL PURCHASES FROM THOSE PARTIES. THE LD. CIT(A) HAD ALSO REJECTED LEGAL GROUND TAKEN BY THE ASSESSEE CH ALLENGING REOPENING ASSESSMENT U/S 147 OF THE INCOME TAX ACT, 1961. THE RELEVANT FINDINGS OF THE LD.CIT(A) ARE AS UNDER:- 5. CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS, PERU SED THE MATERIAL ON RECORD AND DULY CONSIDERED THE FACTUAL MATRIX OF TH E CASE AS WELL AS THE APPLICABLE LEGAL POSITION BEFORE ARRIVING THE FOLLO WING CONCLUSION/DECISION. 6. GROUND 'A' OF THE APPEAL WHICH IS SUB-DIVIDED IN PARTS (I) TO (VI) IS AGAINST REOPENING THE ASSESSMENT U/S 147 OF THE ACT , IT IS STATED IN THE GROUNDS OF APPEAL THAT THE REASSESSMENT PROCEEDING WAS INITIATED BASED ON MERE INFORMATION FROM .ANOTHER WING OF THE DEPAR TMENT. IT IS STATED THAT APPROVAL U/S 147 OF THE ACT IS WITHOUT APPLICA TION OF MIND AND A.O. HAS NOT PASSED A PROPER AND SPEAKING ORDER U/S 148 OF THE ACT DISPOSING OF ASSESSEE'S OBJECTIONS. FURTHER IT IS STATED THAT THE ORDER WAS PASSED BACK DATED ON 18-03-2015. 6.1 THE SUBMISSIONS MADE IN THE GROUND AND THE S TATEMENT OF FACTS BY THE APPELLANT ARE CAREFULLY EXAMINED WITH REFERENCE TO THE FACTS OF THE CASE AND MATERIAL PLACED ON RECORD. IN THE PRESENT CASE R THERE IS 'TANGIBLE' NEW MATERIAL HAS BEEN RECEIVED BY THE A SSESSING OFFICER AND WAS AVAILABLE TO THE AO AT THE TIME OF RECORDING RE ASONS. IN VIEW OF THE SAME IT IS NOT A CASE WHERE THE ADDL. CIT WITHOUT A PPLICATION OF MIND HAS GIVEN APPROVAL FOR RE-OPENING THE CASE. THE A.O. ISSUED NOTICE U/S 143 AFTER RECORDING REASONS FOR ESCAPEMENT OF INCOME AS CONTENDED BY THE APPELLANT. THERE ARE EVIDENCES ON RECORD WHICH ITA NO.2397/MUM/2018 MANISH P.SHAH 4 SUGGESTS THAT THE MATERIAL FILED BY THE APPELLANT A LONG WITH THE RETURN AND AVAILABLE ON RECORD INDICATE SUPPRESSION OF MATERIA L FACTS OR PRIMARY FACTS NECESSARY FOR REOPENING THE ASSESSMENT. IT IS A CAS E WHERE THE PRIMARY FACTS DISCLOSED .BY THE APPELLANT WERE INCORRECT OR THAT THERE WERE OTHER FACTS WHICH WERE MATERIAL FOR THE ASSESSMENT WHICH HAD NOT BEEN DISCLOSED BY THE APPELLANT. IN THE CIRCUMSTANCES, T HE DEEMING PROVISION IN EXPLANATION 2 TO SECTION -147 HAD CLEARLY APPLIC ABLE TO THE FACTS OF THE INSTANT CASE. 6.2 THE CONTENTION OF THE APPELLANT IS THAT THE REO PENING OF THE ASSESSMENT U/S 147 WAS ON THE BASIS OF INFORMATION RECEIVED FROM DGIT(INV), MUNIBAL. THIS ARGUMENT OF THE APPELLANT IS DEVOID OF ANY MERIT. IN THE PRESENT CASE, ON SPECIFIC INFORMATION RECEIV ED FROM THE INVESTIGATION WING OF THE DEPARTMENT THAT THE PURCH ASES DEBITED TO P& L A/C WERE BOGUS, THE AO AFTER RECORDING THE REASONS AS STIPULATED BY THE ACT, ISSUED NOTICE U/S 148 OF THE ACT. IN THIS CASE , BEFORE ISSUING THE NOTICE U/S 148 OF THE ACT, THERE IS NO ASSESSMENT O R REASSESSMENT PASSED U/S 143(3) OF THE ACT. IT IS A SETTLED LEGAL POSITION THAT IN A CASE WHERE THERE WAS AN ASSESSMENT IS NOT MADE U/S 143(3 ) OF THE ACT PRIOR TO THE REOPENING OF ASSESSMENT, EVEN IF ALL THE MATERI AL FACTS ARE DISCLOSED IN THE RETURN OF INCOME ALREADY FILED, REOPENING CA N BE INITIATED IF THE ASSESSING OFFICER HAS REASON TO BELIEVE' THAT THE I NCOME HAS ESCAPED ASSESSMENT. THE ASSESSEE IN SUCH CASES CANNOT ASSAI L THE REOPENING ON THE GROUND THAT THE FACTS WERE ALREADY PLACED ON RE CORD AND THAT THE ASSESSING OFFICER OUGHT TO HAVE CONSIDERED THE FACT S. THE HON'BLE SUPREME COURT IN THE CASE OF ACIT VS, RAJESH JHAVER I STOCK BROKERS (P) LTD. (291 ITR 500) OBSERVED THAT THE WORD 'REASON' IN THE EXPRESSION 'REASON TO BELIEVE' WOULD MEAN CAUSE OR JUSTIFICATI ON AND IF THE ASSESSING OFFICER HAS CAUSE OR JUSTIFICATION TO KNOW OR SUPPO SE THAT INCOME HAD ESCAPED ASSESSMENT, IT CAN BE SAID TO HAVE REASONS TO BELIEVE THAT INCOME HAD ESCAPED ASSESSMENT. IT IS FURTHER OBSERV ED BY THE SUPREME COURT THAT THE EXPRESSION CANNOT BE READ TO MEAN TH AT THE ASSESSING OFFICER SHOULD HAVE FINALLY ASCERTAINED THE FACT BY LEGAL EVIDENCE OR CONCLUSION. AT THE INITIATION STAGE, WHAT IS REQUIR ED IS 'REASON TO BELIEVE', BUT NOT THE ESTABLISHED FACT OF ESCAPEMENT OF INCOM E. AT THE STAGE OF ISSUE OF NOTICE, THE ONLY QUESTION IS WHETHER THERE WAS RELEVANT MATERIAL ON WHICH A REASONABLE PERSON COULD HAVE FORMED A RE QUISITE BELIEF THAT INCOME HAS ESCAPED ASSESSMENT. IN THE PRESENT CASE, IT IS EVIDENT FROM THE REASONS RECORDED THAT THE ASSESSING OFFICER REC EIVED SPECIFIC AND CREDIBLE INFORMATION FROM MAHARASHTRA SALES TAX DEP ARTMENT THAT THE APPELLANT IS ONE OF THE BENEFICIARIES OF THE HAWALA BILLS AND BY AVAILING THESE ACCOMMODATION ENTRIES FROM HAWALA OPERATORS, EXPENDITURE WAS INFLATED IN THE BOOKS OF ACCOUNT, ON ACCOUNT OF PUR CHASES. BASED ON THIS PRECISE INFORMATION, THE AO ISSUED NOTICE U/S, 148 OF THE L.T. ACT AS HE HAD PRIMA-FACIE REASONS TO BELIEVE THAT INCOME CHAR GEABLE TO TAX HAD ESCAPED ASSESSMENT WITHIN THE MEANING OF SEC. 147 O F THE L.T, ACT. THUS, THERE WAS CAUSE OR JUSTIFICATION FOR THE AO TO INVO KE PROVISIONS OF SEC. 147 AND ISSUE NOTICE U/S. 148. AS ALREADY MENTIONED , AT THE INITIATION STAGE, WHAT IS REQUIRED TO BE SEEN IS WHETHER THERE ARE PRIMA-FADE 'REASONS TO BELIEVE' BUT NOT THE ESTABLISHED FACT O F ESCAPEMENT OF INCOME. THE AO ALSO RECORDED PROPER REASONS FOR FOR MATION OF THE BELIEF ITA NO.2397/MUM/2018 MANISH P.SHAH 5 THAT INCOME HAS ESCAPED ASSESSMENT. IT IS SEEN THAT A.O. HAS PROVIDED A COPY OF THE REASONS RECORDED VIDE LETTER DATED 11-0 4-2014, TO THE ASSESSEE'S OBJECTION FOR INITIATING REASSESSMENT PR OCEEDINGS, A.O. REPLIED ON 21-03-2014 REJECTING THE OBJECTIONS. IT IS ALSO IMPORTANT TO NOTE THAT THE INFORMATION RELATING TO HAWALA OPERATORS W AS ALSO MADE AVAILABLE IN PUBLIC DOMAIN LE, IN THE OFFICIAL WEBSITE OF THE MAHARASHTRA SALES TAX DEPARTMENT AND THEREFORE THE REASONS FOR REOPENING THE ASSESSMENT ARE NOT BASED ON MERE SUSPICION. THUS, ALL THE CONDITIO NS NECESSARY FOR REOPENING OF THE ASSESSMENT UNDER THE PROVISIONS OF SEC. 147 AND FOR ISSUE OF NOTICE U/S, 148 OF THE ACT ARE SATISFIED. FOR THE FOREGOING REASONS, IT IS HELD THAT REOPENING OF THE ASSESSMEN T UNDER SECTION 147 OF THE ACT WAS DONE PROPERLY FALLOWING THE DUE PROCEDU RE OF LAW AND THERE IS NO INFIRMITY OR ILLEGALITY IN REOPENING THE ASSE SSMENT AND THE NOTICE ISSUED U/S. 148 FOR THE YEAR UNDER CONSIDERATION IS PERFECTLY LEGAL AND VALID. HENCE GROUND NO. 'A' IS TREATED AS 'DISMISSED'. 6.3 THE APPELLANT CLAIMS THAT THE ORDER WAS PAS SED BACK DATED ON 18- 03-2015 PURPORTED TO THWART THE SUBMISSION OF APPEL LANT PRODUCED ON 19- 03-2015. IN THIS RESPECT, IT MAY BE NOTED A.O. IS T IME BOUND BY THE LIMITATION OF PASSING THE ORDER AS SPECIFIED IN THE ACT, APPELLANT HAS NOT PRODUCED ANY EVIDENCE IN SUPPORT OF HIS CLAIM. HENC E THIS GROUND OF APPEAL IS DEVOID ON MERITS. ACCORDINGLY, SAME IS 'DISMISSED'. 7. GROUND NO. 'B' WHICH IS AGAIN SUB-DIVIDED IN 2 PARTS- PART HO, 1 IS SUBDIVIDED IN (I) TO (VI) PARTS AND PART NO.2 IS SU B-DIVIDED IN (I) TO (IX) PARTS ARE AGAINST THE ADDITION OF IN RESPECT OF PUR CHASES FROM 7 PARTIES BY TREATING THEM AS BOGUS PURCHASES AMOUNTING TO RS, 8 0,51,703;-. SINCE BOTH THE PARTS ARE CO-RELATED, DECIDED AT ONE PLACE . IN THE GROUNDS OF APPEAL IT IS STATED THAT THE COPIES OF INFORMATION AND OTHER MATERIAL RELIED UPON WERE NOT PROVIDED BY A.O, THUS NATURAL JUSTICE WAS DENIED. THE ADDITION IS MADE RELYING ON THE LIST OF SUSPICIOUS DEALERS PLACED ON THE WEBSITE OF SALES TAX DEPARTMENT WITHOUT PROVIDING C OPIES OF THE MATERIAL TO THE APPELLANT. THE MATERIAL OF THE SALES TAX DEP ARTMENT RELIED UPON WAS NOT OFFERED FOR CROSS EXAMINATION. A.O, HAS ERRED I N REJECTING BOOKS OF ACCOUNT BY WRONGLY INVOKING PROVISIONS OF SECTION 1 45(3) OF THE ACT. IT IS STATED THAT A,O. HAS DISALLOWED THE PURCHASES EVEN THOUGH CORRESPONDING SALES HAVE BEEN FULLY TAXED. 7.1 IN MAKING THE ADDITION, LD, AO RELIED ON THE D EPOSITION AND AFFIDAVIT BY THE SOME OF THE ENTITIES BEFORE THE SALES TAX A UTHORITIES, AS PER WHICH THEY HAVE ONLY GIVEN BOGUS BILLS WITHOUT SUPPLYING ANY GOODS. APART FROM THAT INDEPENDENT INQUIRIES WERE ALSO CONDUCTED BY T HE AO BY SENDING NOTICES U/S 133(6) OF THE ACT. THESE FACTS WERE BRO UGHT TO THE NOTICE OF THE APPELLANT'S AR AND HE WAS ASKED TO PRODUCE THE SAID ENTITIES FROM WHOM GOODS WERE ALLEGEDLY PURCHASED. AS THE APPELLA NT WAS UNABLE TO PRODUCE THE SAID PARTIES, LD, AO HELD THAT AS THE A SSESSEE HAS NOT PROVIDED THE NECESSARY DETAILS, ADDITION WAS MADE A T 100% OF UNPROVED PURCHASES OF RS. 80,51,702/-. 7.2 PER CONTRA, LD. AR HAS SUBMITTED THAT THE COPIE S OF INFORMATION AND OTHER MATERIAL RELIED UPON WERE NOT PROVIDE BY AO T HUS NATURAL JUSTICE WAS DENIED TO THE APPELLANT. THE ADDITION IS BASED ON THE INFORMATION RECEIVED FROM THE DGIT (INV.) BASED ON INQUIRIES CA RRIED OUT BY THE SALES ITA NO.2397/MUM/2018 MANISH P.SHAH 6 TAX DEPARTMENT. IT IS STATED THAT OPPORTUNITY OF CR OSS EXAMINATION OF THE ALLEGED PARTIES WAS NOT PROVIDED TO THE ASSESSEE. I T IS STATED THAT WITHOUT ANY TENABLE GROUND, A.O, REJECTED BOOKS OF ACCOUNTS U/S 145(3) OF THE ACT. THE RELEVANT EVIDENCES WERE SUBMITTED TO AO SU CH AS PURCHASE INVOICES, DETAILS' OF PAYMENTS MADE THROUGH BANKING CHANNEL ETC, WHICH WAS NOT ACCEPTED BY THE A.O. IT IS FURTHER SUBMITTE D THAT THE APPELLANT HAS OFFERED G.P, RATIO @ 14.71%, IT IS FURTHER STATED T HAT WITHOUT GIVING PROPER OPPORTUNITY TO PRESENT THE CASE. RELYING ON CERTAIN CASE LAWS, APPELLANT REQUESTED TO DELETE THE ADDITION OF THE TOTAL AMOUN T OF PURCHASES, 7.3 ON PERUSAL OF THE MATERIAL ON RECORD IT IS NO TICED THAT, IN THE APPELLANT'S CASE, LD, AO, HAS NOT SOLELY RELIED ON THE SALES TAX DEPARTMENT INFORMATION BUT ALSO MADE INDEPENDENT VE RIFICATIONS BY ISSUING NOTICES U/S. 133(6) OF THE ACT AFTER WEIGHI NG THE EVIDENCE PROS AND CONS, I FIND THAT THE APPELLANT HAS NOT RECONCI LED THE PURCHASES WITH THE ITEMS SOLD AND FAILED TO RECONCILE ONE TO ONE O F THE ITEMS PURCHASED AND SOLD. BEFORE A.O. ASSESSEE HAS STATED THAT HE I S NOT MAINTAINING THE STOCK REGISTER. ONUS WAS ALWAYS ON THE APPELLANT TO PROVE AS TO HOW THE MATERIAL PURCHASED WAS FIRSTLY OBTAINED. I RECORD A FINDING OF FACT HERE THAT NO PROOF OF DELIVERY OF PURCHASES, STOCK REGISTER H AS BEEN FILED EITHER BEFORE THE LD. AO OR BEFORE ME. THUS, IT CAN BE SAFELY PRESUMED THAT EITHER THEY ARE NON-EXISTENT OR EVEN IF THEY DID EXIST, THEY WERE NOT BACKED BY SUFFICIENT EVIDENCE TO UNDERGO THE TEST O F SCRUTINY. 7.4 A THE SUPPLIER WAS IN FACT THE APPELLANT'S W ITNESS AND THE LD. AO WAS NOT REQUIRED TO FORCE THEIR ATTENDANCE, FT WAS FOR THE APPELLANT TO PRODUCE IT AS PER CIVIL PROCEDURE CODE, WHICH APPLI ES ON ALL FOURS TO THE INCOME-TAX PROCEEDINGS. IT IS TRITE THAT ONCE A TRA NSACTION IS SHOWN TO BE OF THE NATURE OF INCOME, THE ONUS SHIFTS TO THE ASS ESSEE TO SHOW THAT THE SAME WAS NOT TAXABLE. IT CAN THUS BE SAFELY ASSUMED THAT THE APPELLANT HAS GROSSLY FAILED IN ITS DUTY TO MITIGATE THE BURD EN CAST UPON IT IN SO FAR AS PROVING THE GENUINENESS OF THE TRANSACTION FROM THE SAID PARTY IS CONCERNED. 7.5 IN THIS REGARD IT IS ALSO PERTINENT TO MENTI ON THAT WHILE DEALING WITH THE CONCEPT OF BURDEN OF PROOF, ONUS OF PROVING IS ALWAYS ON THE PERSON WHO MAKES THE CLAIM AND NOT ON THE REVENUE. WHILE D EALING WITH THE ISSUE OF DECIDING THE BURDEN OF PROOF, HON'BLE SUPR EME COURT IN THE CASES OF CIT VS. DURGAPRASAD MORE 82 ITR 540 AND SUMATI DAYA L VS. CIT 214 ITR 801 HAS HELD THAT THE APPARENT MUST BE CONSIDERED REAL UNTIL IT IS SHOWN THAT THERE ARE REASONS TO BELIEVE THAT THE APPARENT IS NOT REAL AND THAT TAXING AUTHORITIES ARE ENTITLED TO LOOK IN TO SURROUNDING CIRCUMSTANCES TO FIND OUT THE REALITY AND THE MATTE R HAS TO BE CONSIDERED BY APPLYING THE TEST OF HUMAN PROBABILITIES. THE H ON'BLE COURT ALSO HELD THAT, IT IS NO DOUBT, TRUE THAT IN ALL CASES IN WHI CH A RECEIPT IS SOUGHT TO BE TAXED AS INCOME, THE BURDEN LIES ON THE DEPARTMENT TO PROVE THAT IT IS WITHIN THE TAXING PROVISION AND IF A RECEIPT IS IN THE NATURE OF INCOME, THE BURDEN TO PROVE THAT IT IS NOT TAXABLE BECAUSE IT F ALLS WITHIN EXEMPTION PROVIDED BY THE ACT, LIES UPON THE ASSESSEE. IN T HE CASE OF DURGAPRASAD MORE (SUPRA), THE HONBLE COURT WENT ON TO ADD THAT A PARTY WHO RELIES ON A RECITAL IN A DEED HAS TO ESTABLISH THE TRUTH OF T HIS RECITAL IN A DEED HAS TO ESTABLISH THE TRUTH OF THIS RECITAL, OTHERWISE I T WILL BE VERY EASY TO MAKE ITA NO.2397/MUM/2018 MANISH P.SHAH 7 SELF SERVING STATEMENTS IN DOCUMENTS EITHER EXECUTE D OR TAKEN BY A PARTY WHO RELIED ON THOSE RECITALS. IF ALL THAT AN ASSESS ES WHO WANTS TO EVADE TAX HAS TO HAVE SOME RECITALS MADE IN A DOCUMENT EI THER EXECUTED BY HIM OR EXECUTED IN HIS FAVOUR THEN THE DOOR WILL BE LEFT WIDE OPEN TO EVADE TAX. THE HON'BLE COURT FURTHER HELD THAT THE TAXI NG AUTHORITIES WERE NOT REQUIRED TO PUT ON BLINKERS WHILE LOOKING AT THE DO CUMENTS PRODUCED BEFORE THEM. THEY WERE ENTITLED TO LOOK IN TO THE S URROUNDING CIRCUMSTANCES TO FIND OUT THE REALITY OF THE RECITA LS MADE IN THOSE DOCUMENTS. 7.6 THE ONUS TO PROVE THAT APPARENT, IS NOT THE REAL ONE, IS ON THE PARTY WHO CLAIMS IT TO BE SO, AS HELD BY THE HON'BLE SUPR EME COURT IN THE CASE OF CIT V. DAUTAT RAM RAWATMULL [1973] 87 ITR 349 AND C IT V. DURGA PRASAD MORE SUPRA). IN THE LATTER CASE, IT HAS BEEN HELD BY THE APEX COURT THAT THOUGH AN APPARENT STATEMENT MUST BE CON SIDERED REAL UNTIL IT WAS SHOWN THAT THERE WERE REASONS TO BELIEVE THAT A PPARENT WAS NOT THE REAL IN A CASE WHERE AN AUTHORITY RELIED ON SELF SE RVING RECITALS IN DOCUMENTS, IT WAS FOR THE PARTY TO ESTABLISH THE PR OOF OF THOSE RECITALS; THE TAXING AUTHORITIES WERE ENTITLED TO LOOK INTO THE S URROUNDING CIRCUMSTANCES TO FIND OUT REALITY OF SUCH RECITALS. 7.7 IT IS ALSO A SETTLED LEGAL PROPOSITION THAT IF NO EVIDENCE IS GIVEN BY THE PARTY ON WHOM THE BURDEN IS CAST, THE ISSUE MUS T BE FOUND AGAINST HIM. THEREFORE, ONUS IS ALWAYS ON A PERSON WHO ASSE RTS A PROPOSITION OR FACT, WHICH IS NOT SELF EVIDENT. THE ONUS, AS A DET ERMINING FACTOR OF THE WHOLE CASE CAN ONLY ARISE IF THE TRIBUNAL, WHICH IS VESTED WITH THE AUTHORITY TO DETERMINE, FINALLY ALL QUESTIONS OF FA CT, FINDS THE EVIDENCE PRO & CON, SO EVENLY BALANCED THAT IT CAN COME TO NO CO NCLUSION, THEN, THAT ONUS AS A DETERMINING FACTOR COMES INTO PLAY WHERE, EITHER THERE IS NO EVIDENCE ON EITHER SIDE, OR WHERE IT IS EQUALLY WOR THLESS OR WHERE IT IS EQUALLY BALANCED. IT IS IMPERATIVE TO MENTION HERE THAT WHERE SUCH IS NOT THE CASE AND ALL AVAILABLE EVIDENCE IS CONSIDERED, WITHOUT REFERENCE TO THE ONUS AND WITHOUT RELYING ON THE CIRCUMSTANCES T HAT ONUS LIES ON A PARTICULAR PARTY R THE ISSUE IS DETERMINED ON FACTS AND THE ONUS CANN OT BE SAID TO HAVE INFLUENCED THE DECISIONS. HOWEVER, IN THE INSTANT CASE, THE APPELLANT HAS MISERABLY FAILED TO LEAD EVIDENCE AND HENCE, ONUS IS A DETERMINING FACTOR. 7.8 HAVING GONE THROUGH THE CASE LAWS CITED IN SUPPORT OF THE APPELLANT IN HIS SUBMISSIONS, IT IS SEEN THAT IN NONE OF THOS E CASES SO MUCH OF INVESTIGATION WAS DONE INCLUDING THOSE BY ANOTHER G OVERNMENT AUTHORITY, VIZ,, MAHARASHTRA SALES TAX AUTHORITY BEFORE WHOM A FFIDAVIT WAS FILED STATING THAT ONLY BOGUS BILLS WERE SUPPLIED WITHOUT DELIVERY OF GOODS. 7.9 HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. SIMIT SHETH (2013) 38 TAXMANN.COM 385 (GUJ), HONBLE COURT (WHICH WAS RELIED BY THE AO FOR MAKING THE ADDITION) WAS SEIZED WITH A S IMILAR ISSUE WHERE THE A.O. HAD FOUND THAT SOME OF THE ALLEGED SUPPLIERS O F STEEL TO THE ASSESSEE HAD NOT SUPPLIED ANY GOODS BUT HAD ONLY PR OVIDED SALE BILLS AND HENCE, PURCHASES FROM THE SAID PARTIES WERE HEL D TO BE BOGUS- THE A,O. IN THAT CASE ADDED THE ENTIRE AMOUNT OF PURCHA SES TO GROSS PROFIT OF THE ASSESSEE. LD. CIT(A) HAVING FOUND THAT THE ASSE SSEE HAD INDEED PURCHASED THOUGH NOT FROM NAMED PARTIES BUT OTHER P ARTIES FROM GREY ITA NO.2397/MUM/2018 MANISH P.SHAH 8 MARKET, PARTIALLY SUSTAINED THE ADDITION AS PROBABL E PROFIT OF THE ASSESSEE. THE TRIBUNAL HOWEVER, SUSTAINED THE ADDIT ION TO THE EXTENT OF 12.5%. TAKING INTO ACCOUNT THE ABOVE FACTS, THE HON 'BLE GUJARAT HIGH COURT HELD THAT SINCE THE PURCHASES WERE NOT BOGUS, BUT WERE MADE FROM PARTIES OTHER THAN THOSE MENTIONED IN BOOKS OF ACCO UNTS, ONLY THE PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES COULD BE ADDED T O THE ASSESSEE'S INCOME AND AS SUCH NO QUESTION OF LAW AROSE IN SUCH ESTIMATION. WHILE ARRIVING AT THE ABOVE CONCLUSION, THE HON'BLE COURT ALSO RELIED ON THE DECISION IN THE CASE OF VIJAY M. MISTRY CONSTRUCTIO N LTD. 355 ITR 498 (GUJ) AND FURTHER APPROVED THE DECISION OF AHMEDABA D BENCH, ITAT IN THE CASE OF VIJAY PROTEINS 58 ITD 428. 7.10 IN THE DECISION OF HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS.SIMIT SHETH 356 ITR 451 (GUJ) WHEREIN ALSO IT IS FOUND THAT SOME OF THE ALLEGED SUPPLIERS OF STEEL TO THE ASSESSES HAD NOT SUPPLIED ANY GOODS BUT HAD ONLY PROVIDED SALE BILLS AND HENCE, PURCHASES F ROM THE SAID PARTIES WERE HELD TO BE BOGUS. THE AO IN THAT CASE ADDED TH E ENTIRE AMOUNT OF PURCHASES TO GROSS PROFIT OF THE ASSESSEE. LD. CIT( A) HAVING FOUND THAT THE ASSESSEE HAD INDEED PURCHASED THOUGH NOT FROM N AMED PARTIES BUT OTHER PARTIES FROM GREY MARKET, PARTIALLY SUSTAINED THE ADDITION '.; AS PROBABLE PROFIT OF THE ASSESSEE. THE TRIBUNAL HOWEV ER, SUSTAINED THE ADDITION TO THE EXTENT OF 12.5%. TAKING INTO ACCOUN T THE ABOVE FACTS, THE HON'BLE GUJARAT HIGH COURT HELD THAT SINCE THE PURC HASES WERE NOT BOGUS, BUT WERE MADE FROM PARTIES ' OTHER THAN THOS E MENTIONED IN BOOKS OF ACCOUNTS, ONLY THE PROFIT ELEMENT EMBEDDED IN SU CH PURCHASES COULD BE ADDED TO THE ASSESSEE'S INCOME AND AS SUCH NO QU ESTION OF LAW AROSE IN SUCH ESTIMATION. THE TRIBUNAL FOR ARRIVING THE P ROFIT EMBEDDED IN THE TRANSACTIONS @ 12.5% HELD AS UNDER: 'HAVING HEARD THE SUBMISSIONS OF BOTH SIDES, WE HAV E BEEN INFORMED THAT THE MALPRACTICE OF BOGUS PURCHASE IS MAINLY TO SAVE 10% SALES TAX ETC, IT HAS ALSO BEEN INFORMED THAT I N THIS INDUSTRY ABOUT 2-5% IS THE PROFIT MARGIN. THEREFORE, RESPECT FULLY FOLLOWING THE DECSONS OF THE CO-ORDINATE BNECH PRONOUNCED ON IDENTICAL CIRCUMSTANCES, WE HEREBY DIRECT THAT THE DISALLOWAN CE IS REQUIRED TO BE SUSTAINED AT 12.5% OF THE PURCHASE FROM THOSE PARTIES. WITH THESE DIRECTIONS, WE HEREBY DECIDE THE GROUNDS OF T HE RIVAL PARTIES WHICH ARE PARTLY ALLOWED.' 7.11 THE APPELLANT MADE PURCHASES FROM 7 PARTIES WH O ARE SAID TO BE HAWALA OPERATORS, WHO IS INDULGED IN PROVIDING BOGU S BILLS WITHOUT SUPPLY OF ANY MATERIAL. INDEPENDENT INQUIRIES CONDUCTED RE VEALED THAT NO SUCH PARTIES ARE EXISTING IN THE GIVEN ADDRESS. WHEN ASK ED TO PRODUCE THE PARTIES DURING THE ASSESSMENT PROCEEDINGS BY THE AO , APPELLANT EXPRESSED HIS INABILITY TO DO SO. IN THE PRESENT CA SE, A.O. ADDED ENTIRE PURCHASES OF RS, 80,51,702/-, THE SIMPLE ISSUE TO B E DECIDED IS WHAT PERCENTAGE TO BE ADOPTED IN THE LINE OF BUSINESS LE . DEALER IN FERROUS AND NON-FERROUS METALS. AS NOTICED ABOVE, IN THE SIMILA R CIRCUMSTANCES OF BOGUS PURCHASES, HON'BLE GUJARAT HIGH COURT ESTIMAT ED THE ADDITIONAL ADVANTAGE TOWARDS TAX BENEFIT (10% AND THE PROFIT M ARGIN (2.5%) TOTALING TO 12.5%. IN THE PRESENT CASE ON PERUSAL OF COPIES OF THE INVOICES FURNISHED BY THE APPELLANT IN THE BILL THE PERCENTA GE OF VAT LEVIED IS @ ITA NO.2397/MUM/2018 MANISH P.SHAH 9 4%, APPLYING THE SAME LOGIC, THE PROFIT MARGIN SHOU LD BE ADOPTED @ 2.5%. IN VIEW OF THE ABOVE, IN MY CONSIDERED OPINIO N, APPLYING THE LOGIC OF THE ABOVE SAID CASE THE PROFIT PERCENTAGE EMBEDD ED ON SUCH PURCHASES IS RESTRICTED TO 6,5% (I.E. 4% OF VAT LEV IED + 2.5% TOWARDS PROFIT MARGIN), THAT WILL MEET THE ENDS OF THE JUST ICE. TAKING ALL THE FACTS INTO CONSIDERATION AND APPLYING THE LOGIC OF SIMIT P. SHETH CASE, THE A,O. IS DIRECTED TO SUSTAIN THE ADDITION @ 6,5% AS PERCE NTAGE EMBEDDED IN NON-GENUINE PURCHASES OF RS..80,51,702/-. APPEAL ON PART 'B' OF GROUNDS IS TREATED AS 'PARTLY ALLOWED 1 . 5. NONE APPEARED FOR THE ASSESSEE. WE HAVE HEARD TH E LD. DR, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE T HROUGH ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT THE LD. AO HAS MADE 100% ADDITIONS TOWARDS ALLEGED BOGUS PURCHASES ON THE GR OUND THAT THE ASSESSEE IS ONE OF THE BENEFICIARY OF ACCOMMODATION ENTRIES OF BOGUS PURCHASE BILLS ISSUED BY HAWALA DEALERS. ACCO RDING TO THE LD. AO, ALTHOUGH ASSESEE HAS FILED CERTAIN BASIC EVIDEN CES, BUT FAILED TO FILE FURTHER EVIDENCE IN THE BACKDROP OF CLEAR FIND ING BY THE SALES TAX DEPARTMENT, MAHARASHTRA THAT THOSE PARTIES ARE INVO LVED IN PROVIDING ACCOMMODATION ENTRIES WITHOUT ACTUAL DELIVERY OF GO ODS. THE LD. AO HAD ALSO TAKEN SUPPORT FROM THE INVESTIGATION CONDU CTED DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AS PER WHICH NOTI CE ISSUED U/S 133(6) TO THE PARTIES WERE RETURNED UN-SERVED BY TH E POSTAL AUTHORITIES. THEREFORE, HE CAME TO THE CONCLUSION T HAT PURCHASES FROM THE SAID PARTIES ARE BOGUS IN NATURE. IT IS TH E CONTENTIONS OF THE ASSESSEE BEFORE THE LOWER AUTHORITIES THAT PURCHASE S FROM THE ABOVE PARTY ARE SUPPORTED BY NECESSARY EVIDENCES. IT HAS FURNISHED ALL POSSIBLE EVIDENCES, INCLUDING BOOKS OF ACCOUNTS; ST OCK DETAILS AND BANK STATEMENT TO PROVE THAT PAYMENT AGAINST SAID P URCHASES HAVE BEEN MADE THROUGH PROPER BANKING CHANNELS. 6 HAVING CONSIDERED ARGUMENTS OF THE LD. DR AND ALS O, MATERIAL AVAILABLE ON RECORD, WE FIND THAT BOTH THE SIDES HA VE FAILED TO PROVE ITA NO.2397/MUM/2018 MANISH P.SHAH 10 THE CASE IN THEIR FAVOUR WITH NECESSARY EVIDENCES. ALTHOUGH, ASSESSEE HAS FILED CERTAIN BASIC EVIDENCES, BUT FAI LED TO FILE FURTHER EVIDENCES TO CONCLUSIVELY PROVE PURCHASES TO THE SA TISFACTIONS OF THE LD.AO. AT THE SAME TIME, THE LD. AO HAD ALSO FAILE D TO TAKE THE INVESTIGATION TO A LOGICAL CONCLUSION BY CARRYING O UT NECESSARY ENQUIRES, BUT HE SOLELY RELIED UPON INFORMATION RE CEIVED FROM INVESTIGATION WING, WHICH WAS FURTHER SUPPORTED BY INFORMATION RECEIVED FROM MAHARASHTRA SALES TAX DEPARTMENT. UN DER THESE CIRCUMSTANCES, IT IS DIFFICULT TO ACCEPT ARGUMENTS OF BOTH THE SIDES. FURTHER, IN A CASE WHERE PURCHASES ARE CONSIDERED T O BE PURCHASED FROM SUSPICIOUS/HAWALA DEALERS, VARIOUS HIGH COURTS AND TRIBUNALS HAD CONSIDERED AN IDENTICAL ISSUE IN LIGHT OF INVES TIGATION CARRIED OUT BY THE SALES TAX DEPARTMENT AND HELD THAT IN CASE O F PURCHASES CLAIMS TO HAVE MADE FROM ALLEGED HAWALA DEALERS, ON LY PROFIT ELEMENT EMBEDDED IN THOSE PURCHASES NEEDS TO BE TAX ED, BUT NOT TOTAL PURCHASE FROM THOSE PARTIES. THE HONBLE GUJA RAT HIGH COURT, IN THE CASE OF CIT VS SIMITH P.SHETH 356 ITR 451 HAD C ONSIDERED A SIMILAR ISSUE AND HELD THAT AT THE TIME OF ESTIMATI ON OF PROFIT FROM ALLEGED BOGUS PURCHASES NO UNIFORM YARDSTICKS COULD BE ADOPTED, BUT IT DEPENDS UPON FACTS OF EACH CASE. THE ITAT, M UMBAI, IN NUMBER OF CASES HAD CONSIDERED AN IDENTICAL ISSUE A ND DEPENDING UPON FACTS OF EACH CASE, DIRECTED THE LD.AO TO ESTI MATE GROSS PROFIT OF 10% TO 15% ON TOTAL ALLEGED BOGUS PURCHASES. IN THIS CASE, CONSIDERING THE NATURE OF BUSINESS OF THE ASSESSEE THE LD. AO HAS MADE 100% ADDITIONS, WHEREAS THE LD.CIT(A) HAS SCAL ED DOWN ADDITION TO 6.5% GROSS PROFIT ON TOTAL ALLEGED BOGU S PURCHASE. ALTHOUGH, BOTH AUTHORITIES HAVE TAKEN DIFFERENT RAT E OF PROFIT FOR ESTIMATION OF INCOME FROM ALLEGED BOGUS PURCHASE, B UT NO ONE COULD SUPPORT SAID RATE OF GROSS PROFIT WITH NECESSARY EV IDENCES OR ANY ITA NO.2397/MUM/2018 MANISH P.SHAH 11 COMPARABLE CASES. THEREFORE, CONSIDERING FACTS AND CIRCUMSTANCES OF THIS CASE AND CONSISTENT WITH VIEW TAKEN BY THE CO-ORDINATE BENCH IN NUMBER OF CASES, WE ARE OF THE CONSIDERED OPINIO N THAT THE LD. CIT(A) HAS TAKEN ONE OF THE POSSIBLE METHOD AND EST IMATED 6.5% GROSS PROFIT ON ALLEGED BOGUS PURCHASES TO SETTLE DISPUTE BETWEEN THE PARTIES AND HENCE, WE ARE INCLINED TO UPHOLD OR DER OF THE LD. CIT(A) AND DISMISS APPEAL FILED BY THE REVENUE.. 7. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DI SMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 10 /12/ 2019 SD/- (RAVISH SOOD) SD/- (G. MANJUNATHA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 10/12/2019 THIRUMALESH SR.PS COPY OF THE ORDER FORWARDED TO : BY ORDER, (ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//