ITO WD 3(2), THANE V. RAMMANGAL S. GUPTA, THANE

ITA 2504/MUM/2017

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 9477 (ITAT-MUMBAI)
• Duration Of Justice: 5 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-09-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2009-2010
• Appeal Filed On: 07-04-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T A KHAN
• Keywords: Bogus purchase
• Section: 143(3); 147; 68; 148; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES L , MUMBAI BEFORE S HRI B.R. BASKARAN (AM) AND SHRI RAM LAL NEGI (JM) ITA NO. 2504 /MUM/20 1 7 ASSESSMENT YEAR: 2009 - 2010 THE INCOME TAX OFFICER, WD - 3(2), ROOM NO. 4, B - WING, 6 TH FLOOR, ASHAR IT PARK, WAG LE ESTATE, THANE (W) - 400604 VS. SHRI RAMMANGAL S. GUPTA, 9, KEDAR BUNGLOW, SHIVAJI NAGAR, WAGLE ESTATE, THANE 400604 PAN: AAVPG3060H (APPELLANT) (RESPONDENT) REVENUE BY : SHRI T.A. KHAN ( SR. DR) ) ASSESSEE BY : SHRI MEHUL SHAH (A R) DATE OF HEARING: 27/09 /201 7 DATE OF PRONOUNCEMENT: 29 / 0 9 /201 7 O R D E R PER RAM LAL NEGI, JM THIS APPEAL HAS BEEN PREFERRED BY THE REVENUE AGAINST ORDER DATED 10/01/2017 PASSED BY LD. CIT (APPEAL S ) - 2 , NASHIK FOR THE A S S ESSMENT YEAR 2009 - 2010 , WHEREBY THE LD. CIT(A) HAS PARTLY ALLOWED THE APPEAL FILED BY THE ASSESSEE AGAINST ASSESSMENT ORDER PASSED UNDER SECTION 143(3) READ WITH SECTION 147 OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT). 2. B RIEF FACTS OF THE CASE ARE THAT THE ASSESSEE ENGAGED IN TRADING OF IRON AND STEEL GOODS, FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION DECLARING THE TOTAL INCOME OF RS.2,55,220/ - . THE ASSESSMENT WAS ACCORDINGLY COMPLETED UNDER SECT ION 143 (3) OF THE ACT, AFTER MAKING ADDITION OF 2 ITA NO. 2504/MUM/2017 ASSESSMENT YEAR: 2009 - 2010 RS. 62,940/ - UNDER SECTION 68 OF THE A CT AND RS. 3,00,000/ AS AGRICULTURAL INCOME . 3. THE ASSESSMENT WAS REOPENED UNDER SECTION 147 OF THE ACT ON THE BASIS OF INFORMATION RECEIVED FROM S ALES T AX DEPARTMENT, GOVERNMENT OF MAHARASHTRA TO THE EFFECT THAT CERTAIN PARTIES HAVE ISSUED BOGUS BILLS WITHOUT SELLING GOODS AND T HE ASSESSEE WAS ONE OF THE BENEFICIARIES WHO OBTAINED BOGUS BILLS FOR RS . 61,90,074/ - FROM SIX PARTIES. ACCORDINGLY , THE ASSESSEE WAS ASKED TO F ILE RETURN OF INCOME IN RESPONSE TO NOTICE UNDER SECTION 148 WITHIN 30 DAYS FROM THE DATE OF RECEIPT OF NOTICE. FURTHER N OTICES UNDER SECTION 143 (2) AND 142 (2) WERE ISSUED ASKING THE ASSESSEE TO SUBMIT DETAILS OF PURCHASE AND THE PARTIES FROM WHOM THE P URCHASES WERE MADE DURING THE YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION. THE ASSESSEE SUBMITTED THE DETAILS OF PURCHASERS AND ASKED TO TREAT THE SUBMISSION FILED DURING SCRUTINY ASSESSMENT AS THE SUBMISSION IN RESPONSE TO NOTICE UNDER SECTIO N 142 (1) OF THE ACT. 4. IN ORDER TO VERIFY THE GENUINENESS OF THE TRANSACTIONS, INFORMATION WAS SOUGHT UNDER SECTION 133 (6) FROM THE CONCERNED PARTIES, HOWEVER THE NOTICES WERE RETURN BACK UN - SERVED . THE ASSESSEE ALSO FAILED TO PRODUCE THE PARTIES BEFOR E THE AO. ACCORDINGLY , THE AO ISSUED SHOW CAUSE NOTICE TO THE ASSESSEE AS TO WHY THE PURCHASES SO MADE DURING THE RELEVANT PERIOD SHOULD NOT BE TREATED AS BOGUS. IN RESPONSE THEREOF THE ASSESSEE FIL E D WRITTEN REPLY AND SUBMITTED THAT THE GOODS PURCHASED FR OM THE SAID PARTIES WERE SOLD TO DIFFERENT CUSTOMERS. ALL PAYMENTS TO THE PARTIES WERE MADE THROUGH ACCOUNT PAYEE CHEQUES. SINCE, THE ENTIRE DETAILS HAVE BEEN FURNISHED ALONG WITH THE DOCUMENTARY EVIDENCE TO PROVE THE GENUINENESS OF THE TRANSACTION, THERE IS NO REASON FOR TREATING THE PURCHASES IN QUESTION AS BOGUS. THE AO REJECTED THE CONTENTION OF THE ASSESSEE AND A DDED THE ENTIRE AMOUNT OF BOGUS PURCHASE TO THE INCOME OF THE ASSESSEE. 5. IN THE FIRST APPEAL , THE LD. CIT(A) PARTLY ALLOWED THE APPEAL OF TH E ASSESSEE AND RESTRICTED THE ADDITION TO 10% OF THE TOTAL BOGUS PURCHASES MADE 3 ITA NO. 2504/MUM/2017 ASSESSMENT YEAR: 2009 - 2010 BY THE ASSESSEE DURING THE RELEVANT YEAR. THE REVENUE IS IN APPEAL AGAINST THE IMPUGNED ORDER PASSED BY THE LD. CIT(A) BY RAISING THE FOLLOWING EFFECTIVE GROUNDS OF APPEAL : - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT (A) HAS ERRED IN RELYING ON THE DECISION OF SUPREME COURT IN CASE OF KANCHWALA GEMS VS. JCIT 288 ITR 10(SC) AND HONBLE COURTS DECISION IN THE CASE OF VIJAY PROTEIN, SANJAY OIL CAKE INDUS TRIES, ETC. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, AND IN LAW, THE HONBLE CIT (A) ERRED IN NOT FOLLOWING THE ORDER OF ITAT, PUNE IN ITA NO. 1411 - 1415 DATED 20.02.2015 IN THE CASE OF M/S KOLTE PATIL DEVELOPERS LTD. WHEREIN 100% ADDITION O F BOGUS PURCHASES WAS CONFIRMED. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT (A) HAS ERRED IN GIVING RELIEF TO THE ASSESSEE TO THE EXTENT OF SUPPRESSED G.P. OUT OF TOTAL BOGUS PURCHASES EVEN THOUGH - (I) THE ASSESSEE COULD NOT PRODUCE PRIMARY EVIDENCES LIKE OCTROI RECEIPTS, DELIVERY CHALLAN ETC. EVIDENCE TO PROVE THE GENUINENESS OF THE PURCHASES BEFORE THE AO AND BEFORE CIT (A). (II) THE AFFIDAVITS FILED BY THE ENTRY PROVIDERS BEFORE SALES TAX AUTHORITIES CANNOT BE IGNORED HAVING EVIDENTIA RY VALUE. 4. THE ORDER OF THE CIT (A) MAY BE VACATED AND THAT OF THE ASSESSING OFFICER MAY BE RESTORED. 6. BEFORE US, THE LD. DEPARTMENTAL REPRESENTATIVE (DR) RELYING ON THE ASSESSMENT ORDER PASSED BY THE AO SUBMITTED THAT THE LD. CIT(A) HAS ERRED I N RESTRICTING THE ADDITION TO 10% OF THE BOGUS PURCHASES. THE LD. DR FURTHER SUBMITTED THAT ACTION OF THE LD. CIT(A) IS NOT IN ACCORDANCE WITH THE PRINCIPL ES OF LAW LAID DOWN BY THE HON BLE SUPREME COURT, THE HIGH C OURTS AND THE VARIOUS B ENCHES OF THE I NCO ME T AX T RIBUNAL. SINCE , THE ASSESSEE HAS FAILED TO PRODUCE O CTROI RECEIPTS, D ELIVERY CHALLAN AND OTHER RELEVANT DOCUMENTS, THE LEARNED CIT(A) OUGHT TO HAVE CONFIRMED THE ADDITION MADE BY THE AO. 4 ITA NO. 2504/MUM/2017 ASSESSMENT YEAR: 2009 - 2010 7. ON THE OTHER HAND THE L D. COUNSEL FOR THE ASSESSEE RELYI NG ON THE FINDINGS OF THE LEARNED CIT(A) SUBMITTED THAT SINCE THE AO HAS ACCEPTED THE SALES HUNDRED PERCENT ADDITION CANNOT BE MADE . THE LD. COUNSEL FURTHER SUBMITTED THAT IN ORDER TO PROVE THE GENUINENESS OF PURCHASES IN QUESTION, THE ASSESSEE HAS SUBMITT ED COPIES OF PURCHASE BILLS AND ADDRESSES OF THE PARTIES AND DETAILS OF QUANTITY PURCHASED, CONSUMED AND SOLD. THE ASSESSEE HAS ALSO PLACED ON RECORD THE BANK STATEMENT TO PROVE THAT THE PAYMENTS WERE MADE THROUGH BANKING CHANNELS. THE LD. COUNSEL FURTHER SUBMITTED THAT IN VIEW OF THE JUDGMENT OF THE HONBLE HIGH COURT CIT VS. NIKUNJ EXIMP ENTERPRISES PVT. LTD. 372 ITR 619 (BOM), THE LD. CIT(A) RIGHTLY RESTRICTED THE ADDITION TO 10 % OF THE TOTAL BOGUS PURCHASES MADE BY THE ASSESSEE DURING THE RELEVANT FI NANCIAL YEAR. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND ALSO PERUSED THE MATERIAL PLACED BEFORE US. THE ONLY GRIEVANCE OF THE REVENUE IS THAT THE LD. CIT (A) HAS WRONGLY RESTRICTED THE ADDITION TO 10% OF THE AMOUNT OF BOGUS PURCHASES . WE NOTICE THAT THE LD. CIT(A) HAS UPHELD THE ACTION OF THE AO HOLDING AS UNDER: ` 7.3 IN THIS REGARD IT HAS BEEN NOTICED THAT THE ISSUE UNDER APPEAL HAS BEEN RECENTLY DECIDED BY HONBLE ITAT, PUNE, IN THE CASE OF M/S. CHETAN ENTERPRISES, NASHIK VS. ACIT CIRCLE - 2, NASHI K, ITA NO. 365 & 366/PN/2016 AND M/S PATCO PRECISION COMPONENTS PVT. LTD., NASHIK VS. ACIT CIRCLE - 2, NASHIK, ITA NO. 695/PN/2016. IN THIS CASES THE ABOVE APPELLANTS HAVE FILED APPEALS AGAINST THE ORDERS OF THE UNDERSIGNED, WHEREIN THE BENEFIT ON ACCOUNT OF PURCHASES IN GRAY MARKET WAS ESTIMATED AT 10% AND ACCORDINGLY ADDITION ON ACCOUNT OF HAWALA PURCHASES WAS CONFIRMED TO THE EXTENT OF 10% OF THE IMPUGNED HAWALA PURCHASES. THE HONBLE ITAT HAD HELD IN CONCLUDING PARA 13 OF THE ORDER, WHILE DECIDING THE CA SE OF M/S CHETAN ENTERPRISES AS UNDER: - IN PARAS HEREINABOVE, THE ADDITION TO THE EXTENT OF 10% THE QUANTUM OF HAWALA PURCHASES HAS BEEN ADDED IN THE HANDS OF ASSESSEE AND THE SAID ADDITION WOULD MEET THE ENDS OF JUSTICE, AS THE PURCHASES ARE ADMITTEDLY MADE FROM HAWALA PARTIES. THE ASSESSING OFFICER IS DIRECTED TO COMPUTE THE QUANTUM IN RESPECT OF 5 ITA NO. 2504/MUM/2017 ASSESSMENT YEAR: 2009 - 2010 EVIDENCES FURNISHED BY HIM TO THE ASSESSEE IN THE FORM OF STATEMENTS RECORDED OF OTHER PERSONS. W HERE NO SUCH STATEMENTS OR ANY OTHER EVIDENCES IN RESPECT OF ANY PERSON IS MADE AVAILABLE TO THE ASSESSEE, IN RESPECT OF ANY PERSON IS MADE AVAILABLE TO THE ASSESSEE, THEN SUCH QUANTUM IS NOT TO BE INCLUDED IN THIS HANDS OF ASSESSEE FOR RAISED BY ASSESSEE IN BOTH THE APPEALS ARE ALLOWED AS INDICATED ABOVE. SIMILAR LY, WHILE DECIDING THE APPEAL IN THE CASE OF M/S PATCO PRECISION COMPONENTS PVT. LTD., THE HONBLE ITAT HAS DIRECTED THE A.O. IN CONCLUDING PARA 14, AS UNDER: - THE ASSESSEE HAD ASKED FOR COPIES OF STATEMENTS RECORDED BY SALES TAX DEPARTMENT OF THE SUPPLI ERS AND TO ALLOW CROSS EXAMINATION. THE ASSESSING OFFICER IN THE PRESENT CASE ALSO HAS NOT SUPPLIED THE SAID STATEMENTS TO THE ASSESSEE AND THE CASE OF THE ASSESSEE, THOUGH WAS THAT, THE FIRST ASPECT IN THE PRESENT CASE IS THE AVAILABILITY OF STATEMENTS RE CORDED BY SALES TAX DEPARTMENT AND IN THE CASE, NO SUCH EVIDENCE IS AVAILABLE THEN THERE IS NO BASIS FOR MAKING THE AFORESAID ADDITION. AS DIRECTED IN THE ABOVE APPEALS, THE MATTER IS SET ASIDE TO THE FILE OF ASSESSING OFFICER TO VERIFY THE CONTENTION OF A SSESSEE IN THIS REGARD. IN CASE NO DOCUMENT IS AVAILABLE WITH ASSESSING OFFICER, THEN NO ADDITION IS WARRANTED ON ACCOUNT OF HAWALA PURCHASES. OTHERWISE, THE ADDITION HAS TO BE RESTRICTED TO 10% OF QUANTUM OF PURCHASES AS DIRECTED IN EARLIER APPEALS. FRO M THE ABOVE DECISIONS OF HONBLE ITAT, PUNE, IT IS EVIDENT THAT THE HONBLE ITAT HAS HELD THAT WHERE THE STATEMENTS RECORDED BY SALES TAX DEPARTMENT IN SUPPORT OF THE IMPUGNED HAWALA PURCHASES IS AVAILABLE ON THE RECORD OF THE A.O, THEN THE ADDITION IS TO BE RESTRICTED TO 10% OF THE HAWALA PURCHASES AND WHERE THE ABOVE MENTIONED STATEMENTS ARE NOT AVAILABLE ON THE RECORD OF THE A.O., THEN THE ADDITION IS TO BE FULLY DELETED. THEREFORE, RESPECTFULLY FOLLOWING THE ABOVE MENTIONED DECISION OF HONBLE ITAT, P UNE, THE A.O. IS DIRECTED, IN THE CASE UNDER APPEAL, TO DELETE THE TOTAL ADDITION ON ACCOUNT OF HAWALA PURCHASES IF THE STATEMENTS RECORDED BY SALES TAX DEPARTMENT IN SUPPORT OF THE IMPUGNED HAWALA PURCHASES IS NOT AVAILABLE ON THE RECORD OF THE A.O. AND I F THE ABOVE MENTIONED 6 ITA NO. 2504/MUM/2017 ASSESSMENT YEAR: 2009 - 2010 STATEMENTS ARE AVAILABLE ON THE RECORD OF THE A.O. THEN THE ADDITION IS TO BE RESTRICTED TO 10% OF THE HAWALA PURCHASES OF RS. 61,90,074/ - 9. IN OUR CONSIDERED THE FINDINGS OF THE LD. CIT(A) ARE BASED ON THE EVIDENCE ON RECORD AND I N ACCORDANCE WITH THE PRINCIPLES OF LAW LAID DOWN BY THE COURTS OF LAW AND THE VARIOUS BENCHES OF THE INCOME TAX TRIBUNALS. THE HONBLE BOMBAY HIGH COURT IN CIT VS. NIKUNJ EXIMP ENTERPRISES PVT. LTD. 372 ITR 619 (BOM) HAS HELD THAT MERELY BECAUSE THE SUPPL IERS HAD NOT APPEARED BEFORE THE ASSESSING OFFICER OR THE CIT (A) ONE COULD NOT CONCLUDE THAT THE PURCHASES WERE NOT MADE BY THE RESPONDENT/ASSESSEE. THE HONBLE GUJRAT HIGH COURT IN CIT VS. SIMIT P. SETH 356 ITR 451(GUJ) UPHELD THE DECISION OF THE TRIBUNA L AND SUSTAINED THE ADDITION 12.5% OF THE TOTAL BOGUS PURCHASES HOLDING THAT ONLY PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES CAN BE ADDED TO INCOME OF THE ASSESSEE. 10. SO , IN THE LIGHT OF THE LAW LAID DOWN BY THE HONBLE HIGH COURTS IN THE CASES REFERRED A BOVE, WE UPHOLD THE DECISION OF THE LD. CIT(A) AND IN THE INTEREST OF JUSTICE, RESTRICT THE ADDITION TO 10% OF THE TOTAL AMOUNT OF BOGUS PURCHASES MADE BY THE ASSESSEE DURING THE YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION . WE ACCORDINGLY DISM ISS ALL THE GROUNDS OF THE APPEAL OF THE REVENUE AND DIRECT THE AO TO COMPUTE THE ADDITION IN TERMS OF THIS ORDER. IN THE RESULT, APPEAL FILED BY THE REVENUE FOR THE ASSESSMENT YEAR 2009 - 2010 IS DISMISSED ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH . SEPT. , 2017 . SD/ - SD/ - ( B.R. BASKARAN ) ( RAM LAL NEGI ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; DATED: 29 / 0 9 / 2017 ALINDRA PS 7 ITA NO. 2504/MUM/2017 ASSESSMENT YEAR: 2009 - 2010 / 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) , / ITAT, MUMBAI