ITO 20(3)(1), MUMBAI V. REHAN SHAIKH, MUMBAI

ITA 2500/MUM/2017

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 9317 (ITAT-MUMBAI)
• Duration Of Justice: 5 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-09-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2010-2011
• Appeal Filed On: 07-04-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M C OMI NINGSHEN
• Assessee Lawyers: IN PERSON
• Keywords: Bogus purchase; Rule of consistency; Accommodation entries
• Section: 147; 148; 144

Judgement Text

ITA NO. 2500,2502/M/2017 REHAN SHAIKH 1 IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH F, MU MBAI BEFORE SHRI SHAMIM YAHAYA, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO.2500/MUM/2017 (ASSESSMENT YEAR- 2010-11) ITA NO.2502/MUM/2017 (ASSESSMENT YEAR- 2011-12) I.T.O.20(3)(1), 6 TH FLOOR , ROOM NO. 622, PIRAMAL CHAMBERS, LALBAUG, PAREL, MUMBAI VS. SH. REHAN SHAIKH, 308,F WING, 3 RD FLOOR, K.C. MARG, J.J. COLONY, NEAR TELEPHONE CITY, MUMBAI-400008. PAN: ACFPS6897J (APPELLANT) (RESPONDENT) ASSESSEE BY : IN PERSON REVENUE BY : SH. M.C. OMI NINGSHEN (DR) DATE OF HEARING : 20.09.2017 DATE OF PRONOUNCEMENT : 20.09.2017 ORDER UNDER SECTION 254(1) OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER: 1. THESE TWO APPEALS BY REVENUE UNDER SECTION 253 OF T HE INCOME-TAX ACT (THE ACT) ARE DIRECTED AGAINST THE ORDERS OF LD.COM MISSIONER OF INCOME-TAX (APPEALS)-32[CIT(A)], MUMBAI DATED 27.01.2017 FOR THE ASSESSMENT YEAR (AY) 2010-11 AND 2011-12. THE FACTS OF BOTH TH E APPEALS ARE ALMOST IDENTICAL EXCEPT VARIATION OF FIGURE OF ADDITIONS, THE REVENUE HAS RAISED IDENTICAL GROUNDS OF APPEAL AND BOTH THE APPEAL WAS HEARD TOGETHER AND IS DECIDED BY COMMON ORDER. FOR APPRECIATING THE FACTS WE ARE REFERRING THE ITA NO. 2500,2502/M/2017 REHAN SHAIKH 2 FACTS FOR AY 2010-11, THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: (I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED CIT (A) ERRED IN GRANTING RELIEF OF RS. 68,74,464 / -BY RESTRICTING THE ADDITION TO 6.65% OF THE ALLEGED BOGUS PURCHASES FR OM HAWALA PARTIES. (II) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD CIT(A) HAS FAILED TO APPRECIATE THE FACT THAT THE ONUS IS ON THE ASSESSEE TO EXPLAIN AND SUBSTANTIATE THE GENUINENESS AND TRUE NATURE OF PURCHASES TRANSACTION. (III)ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW THE LEARNED COMMISSIONER (APPEAL) HAS FAILED TO APPRECIATE THAT THE HAWALA DEALERS HAVE ADMITTED ON OATH BEFORE THE SALE TAX AUTHORITI ES THAT THEY HAVE NOT SOLD ANY MATERIAL TO ANYBODY. (IV) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD CIT(A) ERRED IN CONCLUDING THAT ASSESSEE HAD MADE CASH PUR CHASES FROM OTHER PARTIES WHICH WERE NOT RECORDED IN THE BOOKS WITHOU T MENTIONING HOW THIS AND WHAT EVIDENCE BEFORE HIM SUCH FINDING WAS ARRIV ED AT. IF SUCH EVIDENCE OF SUCH PURCHASES WAS GIVEN THE SAME SHOULD HAVE BE EN REMANDED TO THE ASSESSING OFFICER FOR HIS EXAMINATION AND COMMENTS. (V) THE APPELLANT PRAYS THAT THE ORDER OF CIT(A) ON THE ABOVE GROUNDS BE REVERSE AND THE ORDER OF ASSESSING OFFICER BE REST ORED. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED HIS RETURN OF INCOME FOR RELEVANT ASSESSMENT YEAR ON 22 SEPTEMBER 2010 DECLA RING TOTAL INCOME OF RS. 3,48,730 /-. THE RETURN WAS PROCESSED UNDER SEC TION 143 (1) OF THE ACT. SUBSEQUENTLY, ON THE BASIS OF INFORMATION RECEIVED FROM DIRECTOR-GENERAL OF INCOME TAX (INVESTIGATION) MUMBAI, THAT ASSESSEE IS ONE OF THE BENEFICIARIES WHO HAS AVAILED ACCOMMODATION ENTRIES OF BOGUS PURCHASES. THE ASSESSMENT WAS REOPENED UNDER SECTION 147 OF T HE ACT. THE ASSESSING OFFICER AFTER RECORDING THE REASONS OF REOPENING OF THE ASSESSMENT ISSUED ITA NO. 2500,2502/M/2017 REHAN SHAIKH 3 NOTICE UNDER SECTION 148 OF THE ACT. THE ASSESSING OFFICER RECORDED THAT DESPITE THE SERVICE OF NOTICE UNDER SECTION 148 THE ASSESSEE NEITHER RESPONDED NOT FILE ANY RETURN OF INCOME IN RESPONSE TO THE SAID NOTICE. DURING THE COURSE OF RE-ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER HAS OBSERVED THAT ASSESSEE HAS AVAILED SHOWN PURCHASES FORM 10 PARTIES. ALL THOSE PARTIES WITH THE COST OF THE PURCHASES, HAS B EEN REFERRED BY THE ASSESSING OFFICER IN PARA 3 OF HIS ORDER. AS PER TH E INFORMATION RECEIVED BY ASSESSING OFFICER THAT ALL THOSE PARTIES WERE INVOL VED IN PROVIDING ACCOMMODATION ENTRIES WITHOUT DELIVERY OF GOODS. TH E ASSESSING OFFICER ISSUED SHOW CAUSE NOTICE TO THE ASSESSEE AS TO WHY THE TRANSACTION MADE FROM THE SAID HAWALA PARTIES SHOULD NOT BE TREATED AS NON-GENUINE PURCHASES. NO REPLY WAS GIVEN BY THE ASSESSEE, NOR DID THE ASSESSEE ATTEND THE ASSESSMENT PROCEEDINGS. THE ASSESSING OFFICER O N THE BASIS OF INFORMATION RECEIVED FROM THE INVESTIGATION WING OF THE DEPARTMENT TREATED THE ENTIRE PURCHASES AS BOGUS/NON-GENUINE AND MADE ADDITION OF AGGREGATE AMOUNT OF ALL PURCHASES FROM THE SAID 10 PARTIES. O N APPEAL BEFORE COMMISSIONER (APPEALS) THE ADDITION WAS RESTRICTED TO 6.65% OF THE TOTAL OF THE ALLEGED BOGUS PURCHASES. THUS, AGGRIEVED BY THE ORDER OF COMMISSIONER (APPEALS) THE REVENUE /ASSESSING OFFIC ER HAS FILED THE PRESENT APPEAL BEFORE US. 3. WE HAVE HEARD LD DR FOR THE REVENUE AND THE ASSESSE E WHO WAS PRESENT IN PERCENT. THE LD. DR FOR THE REVENUE SUPPORTED THE O RDERS OF ASSESSING ITA NO. 2500,2502/M/2017 REHAN SHAIKH 4 OFFICER AND ARGUED THAT THE INVESTIGATION WING OF T HE INCOME-TAX DEPARTMENT MADE FULL-FLEDGED ENQUIRY. THE PARTIES F ROM WHOM THE ASSESSEE HAS SHOWN THE PURCHASES ARE BOGUS HAWALA D EALERS. THE HAWALA DEALERS ARE INDULGED IN ISSUING BOGUS BILLS WITHOUT DELIVERY OF ANY MATERIAL OR GOODS. THE ASSESSEE OBTAINED ACCOMMODATION BILLS ONLY IN ORDER TO INFLATE THE EXPENSES AND TO BRING DOWN THE PROFITAB ILITY IN ORDER TO AVOID THE TAX. THE LD. DR FURTHER ARGUED THAT THE ASSESSE E HAS NOT APPEARED BEFORE THE ASSESSING OFFICER DESPITE GIVING SUFFICIENT OPP ORTUNITY DURING THE ASSESSMENT PROCEEDINGS. THE LD COMMISSIONER (APPEAL S) RESTRICTED THE ADDITION AT THE RATE OF 6.65% WHICH IS AT A VERY LO WER SIDE. THE LD DR PRAYED THAT THE DISALLOWANCE MAY BE RAISED TO ON R EASONABLE BASIS. IN ALTERNATIVE LD DR ARGUED THAT MATTER MAY BE REMANDE D FOR VERIFICATION OF FACT OF THE FILE OF ASSESSING OFFICER AS LD COMMISS IONER (APPEALS) RESTRICTED THE DISALLOWANCE WITHOUT GIVING ANY OPPORTUNITY TO THE ASSESSING OFFICER. ON THE OTHER HAND THE ASSESSEE WHO IS PRESENT IN PE RSON PRAYED THAT HE LEFT THE DECISION ON THE DISCRETION OF THE TRIBUNAL. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSION OF THE PART IES AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. WE HAVE NO TED THAT THE ASSESSING OFFICER MADE THE ADDITION ON THE BASIS OF INFORMATI ON RECEIVED FROM THE INVESTIGATION WING OF THE INCOME TAX DEPARTMENT. TH E ASSESSING OFFICER HAS NOT CARRIED OUT AN INVESTIGATION OR ENQUIRY BEFORE MAKING DISALLOWANCE OF THE ENTIRE PURCHASES FROM THE ALLEGED BOGUS DEALERS . THE ASSESSING OFFICER ITA NO. 2500,2502/M/2017 REHAN SHAIKH 5 HAS NO WHERE RECORDED THAT AS TO HOW, UNDER WHICH M ANNER, OR MODE OF SERVICE, NOTICE SENT BY HIM TO THE ASSESSEE DURING THE REASSESSMENT PROCEEDING WAS SERVED . THE ASSESSING OFFICER COMPLETED THE ASSESSMENT UNDER SECTION 144 OF THE ACT. THE ASSESSING OFFICER HAS NOT BROUGHT ANY MATERIAL ON RECORD BEFORE MAKING THE DISALLOWANCE O F THE ENTIRE PURCHASES FROM THE SAID BOGUS PARTIES. THE LD COMMISSIONER ( APPEALS) WHILE CONSIDERING THE CONTENTION OF THE ASSESSEE OBSERVED THAT THE ASSESSING OFFICER DISALLOWED THE ENTIRE PURCHASES FROM THE AL L 10 BOGUS SUPPLIER. IT WAS FURTHER OBSERVED THAT THE ASSESSING OFFICER HAS LOST HIS SIGHT OF THE FACT THAT GROSS PROFIT (GP) ALREADY RECORDED IN THE BOOK S OF THE ASSESSEE FOR THE ASSESSMENT YEAR UNDER CONSIDERATION WAS 6.65%. IT W AS FURTHER OBSERVED THAT BY ADDING 100% OF THE PURCHASES THE RESULT OF GP WOULD BE 106.65%. AFTER EXAMINING THE ENTIRE FACTS OF THE CASE AND TH E SUBMISSIONS MADE BY ASSESSEE, THE LD. CIT(A) SUSTAINED THE ADDITION TO 6.65% ON THE BASIS OF DECISION OF HONBLE GUJARAT HIGH COURT IN CIT VS. S IMIT P. SHETH [2013] 356 ITR 451 (GUJ.). 5. WE ARE ALSO OF THE CONSIDERED OPINION THAT UNDER I NCOME TAX ACT ONLY REAL INCOME CAN BE TAXED BY THE REVENUE. WE MAY FUR THER CONCLUDE THAT EVEN IF THE TRANSACTION IS NOT VERIFIABLE, THE ONLY TAXABLE IS THE TAXABLE INCOME COMPONENT AND NOT THE ENTIRE TRANSACTION. AN D AFTER CONSIDERING THE FACTS OF THE CASE AND THE RIVAL CONTENTIONS OF THE PARTIES WE ARE OF THE OPINION THAT IN ORDER TO FULFILL THE GAP OF REVENUE LEAKAGE THE DISALLOWANCE ITA NO. 2500,2502/M/2017 REHAN SHAIKH 6 OF REASONABLE PERCENTAGE OF SUCH PURCHASES WOULD ME ET THE END OF JUSTICE. THE HONBLE BOMBAY HIGH COURT IN CIT VS HARIRAM BHA MBHANI IN ITA NO. 313 OF 2013 DECIDED ON 04.2.2015 ALSO HELD THAT REVENUE IS NOT ENTITLED TO BRING THE ENTIRE SALES CONSIDERATION TO TAX, BUT ONLY THE PROFIT ATTRIBUTABLE ON THE TOTAL UNRECORDED SALES CONSIDERATION ALONE C AN BE SUBJECT TO INCOME TAX. WE HAVE SEEN THAT THE LEARNED COMMISSIONER (AP PEALS) PASSED THE ORDER AFTER CONSIDERING THE ALL FACTS OF AVAILABLE BEFORE HIM, THUS WE DO NOT FIND ANY ILLEGALITY OR INFIRMITY IN THE ORDER IMPUG NED BEFORE US. IN THE RESULT THE GROUNDS OF APPEAL RAISED BY REVENUE IS D ISMISSED. 6. WITH THESE OBSERVATIONS, APPEAL FILED BY THE REVENU E IS DISMISSED. 7. IN ITA NO.2502/M/2017, AN APPEAL FOR ASSESSMENT YEA R 2011-12 THE REVENUE HAS RAISED IDENTICAL GROUNDS OF APPEAL, FA CTS OF THE YEAR UNDER CONSIDERATION IS ALMOST SIMILAR EXCEPT VARIATION OF DISALLOWANCE MADE BY ASSESSING OFFICER AND RESTRICTED BY LD COMMISSIONER (APPEALS). CONSIDERING THE FACT THAT WE HAVE ALREADY DISMISSED THE APPEAL OF REVENUE FOR ASSESSMENT YEAR 2010-11 ON IDENTICAL FACTS, HEN CE, KEEPING IN VIEW THE PRINCIPLE OF CONSISTENCY, THIS APPEAL IS ALSO DISMI SSED WITH SIMILAR OBSERVATION. IN THE RESULT APPEAL OF THE REVENUE IS DISMISSED. 8. IN THE RESULT APPEAL FOR BOTH THE ASSESSMENT YEAR A RE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 20TH DAY OF SEPTEMBER 2017. SD/- SD/- (SHAMIM YAHAYA) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER ITA NO. 2500,2502/M/2017 REHAN SHAIKH 7 MUMBAI; DATED 20/09/2017 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/