SHRI FARID ABOOBAKAR DARVESH, MUMBAI V. INCOME TAX OFFICER 20(1)(4), MUMBAI

ITA 2454/MUM/2018

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 4288 (ITAT-MUMBAI)
• Duration Of Justice: 10 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-03-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 23-04-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ASHUTOSH RAJHANS
• Keywords: Bogus purchase; Accommodation entries
• Section: 133(6)

Judgement Text

P A G E | 1 ITA NO.2454/MUM/2018 A.Y. 2009 - 10 SHRI FARID ABOOBAKAR DARVESH VS. INCOME TAX OFFICER - 20(1)(4) IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI M.BALAGANESH, ACCOUNTANT MEMBER AND SHRI RAVISH SOOD, JUDICIAL MEMBER ITA NO.2454/MUM/2018 (ASSESSMENT YEAR: 2009 - 10 ) SHRI FARID ABOOBAKAR DARVESH 83, SANT SAWTA MARG, VICTORIA ROAD, MUMBAI 400 010 VS. INCOME TAX OFFICER - 20(1)(4) R. NO. 112, PIRAMAL CHAMBERS, LALBAUG, PAREL, MUMBAI 400 012 PAN AAIPD5615Q (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI HARI RAHEJA , A.R RESPONDENT BY: SHRI ASHUTOSH RAJHANS, D.R DATE OF HEARING: 11 .03.2019 DATE OF PRONOUNCEMENT: 1 3 .03.2019 O R D E R PER RAVISH SOOD, JM THE PRESENT APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A) - 32, MUMBAI, DATED 22.02.2018 F OR AY. 2009 - 10, WHICH IN TURN ARISES FROM THE ORDER PASSED BY THE A.O UNDER SEC.143(3) R.W.S 147 OF THE INCOME TAX ACT, 1961 (FOR SHORT IT ACT), DATED 09.03.2015. THE ASSESSEE ASSAILING THE ORDER OF THE CIT(A) HAS RAISED BEFORE US THE FOLLOWING GROUNDS O F APPEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN UPHOLDING THE ACTION OF THE ASSESSING OFFICER IN REOPENING THE ASSESSMENT U/S.147 OF THE INCOME TAX ACT, 1961. THE APPELLANT SUBMITS THAT THE ASSESSMENT WAS NOT VALIDLY REOPENED UNDER SECTION 147. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE ADDITION OF RS.1,64,544/ - MADE BY THE ASSESSING OFFICER BEING P A G E | 2 ITA NO.2454/MUM/2018 A.Y. 2009 - 10 SHRI FARID ABOOBAKAR DARVESH VS. INCOME TAX OFFICER - 20(1)(4) 12 .5% OF TOTAL PURCHASES HELD TO BE BOGUS AMOUNTING TO RS. 13,16,357/ - MADE FROM VARIOUS PARTIES. 3. WITHOUT PREJUDICE TO GROUND NO.2 AND ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN INCLUDING THE NAME OF AJANTA ASSOCIATES WITH AN AMOUNT OF RS.3,55,257/ - IN THE TOTAL PURCHASES OF RS.13,16,357/ - HELD TO BE BOGUS AND THEREBY CONFIRMING AN ADDITION OF RS.44.407 BEING 12.5% OF RS.3,55,357/ - . 4. WITHOUT PREJUDICE TO GROUND NO.3 AND ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN ADDING THE VAT AMOUNT OF RS.1,06,194/ - IN THE TOTAL PURCHASE OF RS. 13,16,357/ - HELD TO BE BOGUS AND THEREBY C ONFIRMING AN ADDITION OF RS.13,274/ - BEING 12.5% OF RS.1 06,194/ - . 5. WITHOUT PREJUDICE TO GROUND NO.4 AND ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN NOT ALLOWING CREDIT OF G.P. @ 9.85% DECLARED BY THE APPELLANT IN ITS BOOKS OF ACCOUNTS IN DETERMINING THE PROFIT @ 12.5% ON TOTAL PURCHASES HELD TO BE BOGUS AND THEREBY CONFIRMING AN ADDITION OF RS.84,208/ - I.E. 9.85% OF RS.8,54,906/ - . 6. YOUR APPELLANT CRAVES LEAVE TO ADD TO, AMEND, ALTER, DELETE AND/OR MODIFY THE ABOVE GROUND OF APPEAL ON OR BEFORE THE FINAL DATE OF HEARING OF THIS APPEAL PETITION. 2. BRIEFLY STATED, THE ASSESSEE WHO IS ENGAGED IN THE BUSINESS OF TRADING IN BEARINGS AND HARDWARE ITEMS O F AUTOMOBILES PARTS HAD FILE D HI S RETURN OF INCOME FOR A.Y. 2009 - 10 ON 29.09.2009, DECLARING TOTAL INCOME OF RS. 4,57,100/ - . SUBSEQUENTLY, THE CASE OF THE ASSESSEE WAS REOPENED UNDER SEC.1 47 OF THE I . T ACT. IN COMPLIANCE TO THE NOTICE ISSUED UNDER SEC.148, DATED 18.03.2014, IT WAS SUB M ITTED BY THE ASSESSEE THAT HI S ORIGINAL RETURN OF INCOME MAY BE TREATED AS THE RETURN OF INCOME FILED IN RESPONSE TO THE SAID NOTICE . 3. ON THE BASIS OF INFORMATION RECEIVED BY THE A.O THAT THE ASSESSEE HAD TAKEN ACCOMMODATION ENTRIES TO THE TUNE OF RS.25 ,61,912/ - IN THE NATURE OF BOGUS PURCHASES, THE A.O ISSUED NOTICES UNDER SEC. 133(6) TO THE FOLLOWING PARTIES: P A G E | 3 ITA NO.2454/MUM/2018 A.Y. 2009 - 10 SHRI FARID ABOOBAKAR DARVESH VS. INCOME TAX OFFICER - 20(1)(4) SR. NO. NAME OF THE PARTY AMOUNT (RS.) 1. MILAN ASSOCIATES 22,782 2. REAL ASSOCIATES 26,709 3. PERFECT ENTERPRISE 1,11,273 4. AJANTA ASSOCIATES 3,55,257 5. SUPREME SALES 8,00,336 TOTAL 13,16,357 HOWEVER, ALL OF THE AFORESAID NOTICES ISSUED UNDER SEC.133(6) WERE RETURNED UNSERVED BY THE POSTAL AUTHORITIE S WITH THE REMARKS NOT KNOWN/ LEFT. IN THE BACKDROP OF THE AFORESAID FACTS THE A.O CALLED UPON THE ASSESSEE TO EXPLAIN AS TO WHY THE PURCHASES CLAIMED TO HAVE BEEN MADE FROM THE AFOREMENTIONED PARTIES MAY NOT BE ASSESSED AS H IS UNDISCLOSED INCOME. THE SUBMISSIONS FILED BY THE ASSESSE E IN ORDER TO IMPRESS UPON THE A .O THAT HE HAD MADE GENUINE PURCHASES FROM THE AFOREMENTIONED PARTIES DID NOT FI ND FAVOUR WITH HIM. THE A.O HOLDING A CONVICTION THAT THE ASSESSEE HAD OBTAINED BOGUS PURCHASE BILLS FROM THE AFOREMENTIONED PARTIES IN ORDER TO SUPPRESS HIS TRUE PROFITS, THEREIN MADE AN ADDITION @ 12.5% OF THE AGGREGATE VALUE OF THE SAID UNVERIFIAB LE PURCHASES OF RS. 13,16,357/ - , RESULTING TO A CONSEQUENTIAL ADDITION/DISALLOWANCE OF RS.1,64,544/ - IN THE HANDS OF THE ASSESSEE. 4. AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). HOWEVER, THE CIT(A) AFTER DELIBERATING ON THE CONTENTIONS ADVANCED BY THE ASSESSEE WAS NOT PERSUADED TO SUBSCRIBE TO THE SAME AND UPHELD THE ADDITION OF 12.5% OF THE VALUE OF THE ALLEG ED BOGUS PURCHASES MADE BY THE A.O. 5. THE ASSESSEE BEING AGGRIEVED WITH THE ORDER OF THE CIT(A) HAS CARRIED THE MATTER IN APPEAL BEFORE US. THE LD. AUTHORIZED REPRESENTATIVE (FOR SHORT A.R) FOR THE ASSESSEE AT THE VERY OUTSET OF THE HEARING OF THE APPE AL SUBMITTED THAT THE ASSESSEE HAD NOT CLAIMED P A G E | 4 ITA NO.2454/MUM/2018 A.Y. 2009 - 10 SHRI FARID ABOOBAKAR DARVESH VS. INCOME TAX OFFICER - 20(1)(4) OF HAVING MADE ANY PURCHASE S FROM M/S AJANTA ASSOCIATES. IT WAS SUBMITTED BY THE LD. A.R THAT THE FACT THAT NO PURCHASES WERE MADE FROM THE AFOREMENTIONED PARTY VIZ. M/S AJANTA ASSOCIATES WAS DULY BROUGHT TO T HE NOTICE OF THE A.O IN THE COURSE OF THE ASSESSMENT PROCEEDINGS. IN ORDER TO BUTTRESS HIS AFORESAID CONTENTION THE LD. A.R TOOK US THROUGH THE RELEVANT EXTRACTS OF TWO LETTERS WHICH WERE FILED WITH THE A.O IN THE COURSE OF THE ASSESSMENT PROCEEDINGS VIZ. (I) LETTER DATED 12.06.2015 ( PAGE 98 OF APB); AND (II) LETTER DATED 12.06.2015 ( PAGE 105 OF APB). IT WAS FURTHER SUBMITTED BY THE LD. A.R THAT THOUGH THE A.O HAD IN THE NOTICE ISSUED UNDER SEC.142(1), DATED 06.02.2015 ADMITTED THAT VERIFICATION OF THE PURCHASE DETAILS FILED BY THE ASSESSEE REVEALED THAT HE HAD NOT MADE ANY PURCHASES FROM M/S AJANTA ASSOCIATES, BUT THEREAFTER WHILE FRAMING THE ASSESSMENT THE A.O HAD IN CONTRADICTION OF HIS SAID OBSERVATIONS HAD PROCEEDED WITH THE MISCONCEIVED FACTS AND WRONGLY INCLUDED THE AMOUNT OF PURCHASES WHICH WERE ALLEGED TO HAVE BEEN MADE BY THE ASSESSEE FROM THE SAID CONCERN. APART THERE FROM, IT WAS SUBMITTED BY THE LD. A.R THAT THE ASSESSEE HAD DULY CORRELATED THE PURCHASES MADE FROM THE REMAINING 4 PARTIES VIZ . (I) MILAN ASSOCIATES; (II) REAL ASSOCIATES; (III) PERFECT ENTERPRISES; AND (IV) SUPREME SALES, AS AGAIN ST THE DULY RECORDED SALES IN HI S BOOKS OF ACCOUNTS. IN ORDER TO FORTIFY HI S AFORESAID CONTENTION THE LD. A.R DREW OUR ATTENTION TO THE TRADING ACCOUNT O F THE ASSESSEE SUBSTANTIATING HI S AFORESAID CLAIM ( PAGE 100 OF APB). IT WAS AVERRED BY THE LD. A.R THAT AS THE ASSESSEE HAD ACCOUNTED FOR A GROSS PROFIT IN EXCESS OF THE AVERAGE GP RATE FOR THE YEAR UNDER CONSIDERATION IN RESPECT OF THE SALE TRANSACTIO NS PERTAINING TO THE PURCHASES MADE FROM THE AFOREMENTIONED PARTIES, THEREFORE, NO ADDITION/D ISALLOWANCE WAS CALLED FOR IN HI S HANDS. ALTERNATIVELY, IT WAS SUBMITTED BY THE LD. A.R THAT AS THE VAT RATE ON THE GOODS TRAD ED BY THE ASSESSEE WAS 12.5%, THEREFOR E, EVEN IF IT WAS TO BE ASSUMED (NOT ADMITTED) THAT THE P A G E | 5 ITA NO.2454/MUM/2018 A.Y. 2009 - 10 SHRI FARID ABOOBAKAR DARVESH VS. INCOME TAX OFFICER - 20(1)(4) ASSESSEE HAD PURCHASED THE SAID GOODS FROM THE OPEN/GREY MARKET, THE ENTIRE ADDITION OF 12.5% COULD NOT HAVE BEEN MADE IN THE HANDS OF THE ASSESSEE. FURT H ER, IT WAS SUBMITTED BY THE LD. A.R TH AT AS THE PURCHASES MADE FROM THE AFOREMENTIONED PARTIES WERE BOOKED AT AN AMOUNT AGGREGATING TO RS.8,54,906/ - (I.E EXCLUDING VAT OF RS.1,06,194/ - ), THEREFORE, ADDITION , IF ANY, WAS LIABLE TO BE WORKED OUT ONLY ON THE BA SIS OF THE AFORESAID AMOUNT . 6. PER CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE (FOR SHORT D.R) ADMITTED THAT THE ASSESSEE HAD NOT MADE ANY PURCHASES FROM M/S AJANTA ASSOCIATES. IT WAS FURTHER SUBMITTED BY THE LD. D.R THAT THE ADDITION IN RESPECT OF THE PURCHASES CLAIMED BY THE ASSESSEE TO HAVE BEEN MADE FROM THE REMAINING 4 PARTIES MAY BE WORKED OUT @ 12.5% OF THE AGGREGATE VALUE OF PURCHASES OF RS.8,54,906/ - (SUPRA). 7. WE HAVE HEARD THE AUTHORIZED REPRESENTATIVES FOR BOTH THE PARTIES, PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL AVAILABLE ON RECORD. ADMITTEDLY, AS THE ASSESSEE HAD NOT MADE ANY PURCHASES FROM M/S AJANTA ASSOCIATES, THERE FORE, THERE REMAINS NO OCCASION FOR ESTIMATING THE PROFIT ELEMENT IN RESPECT OF THE PURCHASES WHICH HAD WRONGLY BEEN HEL D BY THE LOWER AUTHORITIES TO HAVE BEEN MADE BY THE ASSESSEE FROM THE SAID CONCERN. INSOFAR THE PURCHASES CLAIMED BY THE ASSESSEE FROM THE REMAINING 4 PARTIES IS CONCERNED, WE ARE OF THE CONSIDERED VIEW THAT THE ASSESSEE HAD FAILED TO SUBSTANTIATE THE AUTHENTICITY OF THE PURCHASE S CLAIMED BY THE ASSESSEE TO HAVE BEEN MADE FROM THE SAID CONCERN S. IN FACT, WE ARE PERSUADED TO SUBSCRIBE TO THE VIEW TAKEN BY THE LOWER AUTHORITIES THAT THE ASSESSEE AFTER PROCURING THE GOO DS FROM THE OPEN/GREY MARKET HAD MERELY OBTAINED T HE PURCHASE BILLS FROM THE AFOREMENTIONED HAWALA PARTIES IN ORDER T O FACILITATE ROUTING OF THE PURCHASES THROUGH HI S BOOKS OF ACCOUNTS. IN OUR CONSIDERED VIEW THE ASSESSEE WOULD HAD PROCURED T HE P A G E | 6 ITA NO.2454/MUM/2018 A.Y. 2009 - 10 SHRI FARID ABOOBAKAR DARVESH VS. INCOME TAX OFFICER - 20(1)(4) GOODS UNDER CONSIDERATION AT A DISCOUNTED VALUE , AS AGAINST THAT SHOWN IN HI S BOOKS OF ACCOUNTS. WE ARE OF THE CONSIDERED VIEW THAT THE PROFIT MADE BY THE ASSESSEE BY PURCHASING THE GOODS FROM THE OPEN/GREY MARKET CAN SAFELY BE ESTIMATED @ 12.5% OF THE AGGREGATE VALUE OF THE PURCHASES OF RS.8,54,906/ - C LAIMED TO HAVE BEEN MADE FROM THE AFOREMENTIONED PARTIES. IN TERMS OF OUR AFORESAID OBSERVATIONS , WE DIRECT THE A . O TO RESTRICT THE ADDITION IN THE HANDS OF THE ASSESSEE TO RS.1,06,863/ - I.E 12.5% OF 8,54,906/ - (AS DEBITED IN THE BOOKS OF ACCOUNTS ) . ORDER PASSED BY THE CIT(A) IS MODIFIED IN TERMS OF OUR AFORESAID OBSERVATIONS. 8. THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED IN TERMS OF OUR AFORESAID OBSERVATIONS. ORDER PRO NOUNCED IN THE OPEN COURT ON 1 3 . 03.2019 S D / - S D / - ( M.BALAGANESH ) (RAVISH SOOD) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; 13 .03 .2019 PS. ROHIT / 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 . //TRUE COPY// P A G E | 7 ITA NO.2454/MUM/2018 A.Y. 2009 - 10 SHRI FARID ABOOBAKAR DARVESH VS. INCOME TAX OFFICER - 20(1)(4) / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI