RAMESH KANNAIYALAL LODHA, MUMBAI V. ITO 18(3)(1), MUMBAI

ITA 254/MUM/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 0169 (ITAT-MUMBAI)
• Duration Of Justice: 7 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-09-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 12-01-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: V JANARDHANAN
• Assessee Lawyers: KETAN L VAJANI
• Keywords: Bogus purchase; Accommodation entries
• Section: 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER ITA NO.254/MUM./2017 ( ASSESSMENT YEAR : 2009 - 10 ) RAMESH KANNAIYALAL LODHA R.NO.7, 1 ST FLOOR, GODJI BLDG, NO.2, 203/205, KIKA STREET, MUMBAI 400002 PAN AABPL1374R . APPELLANT V/S ITO 18(3)(1) EARNEST HOUSE, NARIMAN POINT MUMBAI 400021 . RESPONDENT ASSESSEE BY : SHRI KETAN. L. VAJANI REVENUE BY : SHRI V. JANARDHANAN DATE OF HEARING 03.07.2017 DATE OF ORDER 04 .09.2017 O R D E R PER:SHAMIM YAHYA THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAI NST ORDER OF LD. CIT - A DATED 25 .10.2016 AND PERTAIN TO ASSESSMENT YEAR 2009 - 10. 2. T HE ISSUE RAISED IS THAT CIT - A ERRED IN SUSTAINING DISALLOWANCE OF 100% OF BOGUS PURCHASE AMOUNTING TO RS. 13,06,200/ - 3. THE GROUNDS OF APPEAL READ AS UNDER; 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE COMMISSIONER OF INCOME - TAX (APPEALS), HEREINAFTER REFERRED TO AS 'CIT (A)', HAS ERRED IN CONFIRMING THE ADDITION 1 DISALLOWANCE OF RS. 13,06,2001 - MADE ON ACCOUNT OF ALLEGED BOGUS PURCHASES. ITA NO.2 54 /MUM./2017 RAMESH KANNAIYALAL LODHA 2 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT (A) HAS ERRED IN NOT APPRECIATING THE FOLLOWING RELEVANT FACTS OF THE CASE WHILE CONFIRMING THE IMPUGNED DISALLOWANCE OF RS. 13,06,200/ - : THE IMPUGNED DISALLOWANCE IS BASED MERELY ON CONJECTURES, SURMISES AND SUSPICIONS AND THE SAME IS NOT SUPPORTED BY ANY EVIDENCE. THE ASSESSING OFFICER HAS MADE THE DISALLOWANCE MERELY ON THE BASIS OF THE LIST OF 'SUSPICIOUS DEALERS' PUBLISHED ON THE WE BSITE OF THE SALES - TAX DEPARTMENT WITHOUT MAKING ANY INDEPENDENT INQUIRIES IN THE MATTER. THE STATEMENTS/AFFIDAVITS FILED BY THE ALLEGED SUSPICIOUS DEALERS BEFORE THE SALES - TAX AUTHORITIES ARE PURELY GENERAL IN NATURE AND DO NOT ESTABLISH THAT THE AFOR ESAID PARTIES HAVE NOT SOLD GOODS TO THE APPELLANT. THE APPELLANT HAS MAINTAINED COMPLETE STOCK RECORDS, WHICH HAS BEEN DULY AUDITED BY AN INDEPENDENT CHARTERED ACCOUNT U/S. 44AB OF THE ACT AND THERE ARE NO ADVERSE OBSERVATIONS OF THE AUDITOR ON THIS AC COUNT IN THE TAX AUDIT REPORT. THE APPELLANT DID NOT ACCEPT THE ORDER OF THE SALES - TAX DEPARTMENT DENYING THE' INPUT CREDIT AND HAD PREFERRED AN APPEAL TO THE DEPARTMENT AGAINST THE SAID ORDER. THE APPELLANT HAD FILED AN ORDER FROM THE ASST. COMMISSI ONER OF SALES - TAX CONFIRMING THAT ALL THE SUPPLIERS TREATED AS BOGUS SUPPLIERS HAVE FILED THEIR VAT RETURNS. THE APPELLANT HAD ALSO FILED A STATEMENT GIVING THE DETAILS OF SALES CORRESPONDING TO THE GOODS PURCHASED FROM THE SUPPLIERS AND THE SALES OF TH E APPELLANT HAD BEEN ACCEPTED TO BE CORRECT. THE PAYMENT TO THE SUPPLIERS HAS BEEN MADE BY WAY OF ACCOUNT PAYEE CHEQUES AND THE SAME HAS BEEN DULY REFLECTED IN THE BANK STATEMENTS OF THE APPELLANT. THE APPELLANT HAS NEITHER BEEN PROVIDED WITH THE COPI ES OF THE AFFIDAVITS/ STATEMENTS OF THE SUPPLIERS ALLEGED TO BE SUSPICIOUS DEALERS NOR BEEN ALLOWED ANY OPPORTUNITY TO CROSS EXAMINE THE SAID PARTY AND ACCORDINGLY THE DISALLOWANCE IS IN GROSS VIOLATION OF PROVISIONS OF SECTION 142(3) AND THE PRINCIPAL OF N ATURAL JUSTICE. ITA NO.2 54 /MUM./2017 RAMESH KANNAIYALAL LODHA 3 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, CIT (A) HAS ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN REJECTING THE BOOKS OF ACCOUNTS U/S. 145(3) OF THE ACT WITHOUT ANY SPECIFIC DEFECT POINTED FOR THE REJECTION . 4 . TH E APPELLANT CRAVES TO ADD/ALTER/ DELETE ANY OF THE GROUND S OF APPEAL AT THE TIME OF THE HEARING. 5. IN VIEW OF THE ABOVE, THE APPELLANT PRAYS THAT HIS BOOKS OF ACCOUNTS SHALL NOT BE ALLOWED TO BE REJECTED AND TH E DISALLOWANCE OF RS. 13,06,200/ - SHALL PLEA SE BE DELETED OR ANY OTHER REMEDY AS MAY BE DEEMED FIT IN THE CIRCUMSTANCES MAY PLEASE BE ALLOWED TO THE APPELLANT. 4. IN THIS CASE INCRIMINATING INFORMATION RELATED TO ASSESSEE HAS BEEN RECEIVED FROM THE MUMBAI INVESTIGATION WING OF THE DEPARTMENT. IT WAS REPORTED THAT THE INVESTIGATION WING OF SALES TAX DEPARTMENT, MUMBAI, HAS IDENTIFIED CERTAIN ACCOMMODATION ENTRY PROVIDERS/BOGUS SUPPLIES AND THE BENEFICIARIES WHO HAS UTILIZED THE SERVICES OF THESE BOGUS BILLERS. AS PER THIS INFORMATION RECEIVED, DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS TAKEN ACCOMMODATION ENTRIES/BOGUS PURCHASES FROM THE FOLLOWING PURCHASE ACCOMMODATION ENTRY PROVIDERS. SL.NO. NAME OF THE PARTY HAWALA PAN FY AMT. OF BILL TAKEN BY YOU 1. PADAMALAZMI STEEL & ALLOYS P. LTD AAECP4310M 2008 - 09 3,32,134 2. K.R.C. TRADING CO. P. LTD. AACCK6801C 2008 - 09 4,06,000 3. TARA ENTERPRISES AWTPS0269A 2008 - 09 22,24,788 4. SHANTINATH CORPORATION ABFPW4096G 2008 - 09 3,32,914 5. HITEN ENTERPRISES AABPP2740H 2008 - 09 1,59,735 6. SHIVAM METAL INDUSTRIES BOHPS0089B 2008 - 09 11,80,455 7. ROHAN STEEL IMPEX AISPC5681R 2008 - 09 17,30,755 8. MURPHY METALS P.LTD AAFCM1029F 2008 - 09 13,35,812 ITA NO.2 54 /MUM./2017 RAMESH KANNAIYALAL LODHA 4 9. BHAVIK STEELS P.LTD AADCB1554G 2008 - 09 21,70,498 10. SIMANDHAR TRADING CORPORATION AOXPD8558F 2008 - 09 1,91,152 11. ADIGIN ENTERPRISES AAGPS5286C 2008 - 09 3,95,317 TOTAL 1,04,59,560 BASED ON THE INFORMATION RECEIVED, THE A.O. FOUND THAT ASSESSEE HAS OBTAINED BOGUS BILLS TO THE TUNE OF RS.1,04,59,560/ - FROM THE ABOVE MENTIONED BOGUS SUPPLIERS. FROM THESE INCRIMINATING FACT, PRIMA - FACIE HE FOUND THAT INCOME OF THE ASSESSEE HAS ESCAPED ASSESSMENT FOR THE AY 2009 - 10 AND ACCORDINGL Y, ASSESSMENT IS RE - OPENED U/S. 147 BY ISSUING NOTICE U/S. 148 ON 07.03.2014. 5. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER REQUESTED THE ASS ESSEE TO PROVE THE GENUINENESS O F THE PURCHASES WHICH WERE CLAIMED TO HAVE BEEN MADE FROM T HE ABOVE - MENTIONED PARTIES. HE WAS ALSO ASKED TO SUBMIT CONFIRMATIONS FROM THEM AND ALSO PRODUCE THEM FOR EXAMINATION UNDER OATH. THE ASSESSEE NEITHER FILED CONFIRMATIONS NOR PRODUCED THEM FOR E XAMINAT ION. THE NOTICES UNDER SECTION 1 33 (6) OF THE INCOME TA X ACT, ISSU ED TO ALL THOSE PARTIES WERE RETURNED BY THE P OSTAL AUTHORITIES UNSERVED. IN THIS SCENARIO, THE ASSESSING OFFICER TREATED THE PURCHASES MADE FROM THESE PARTIES AS BOGUS AND HELD THAT AS THE CORRESPONDING SALES HAVE BEEN DECLARED BY THE APPELLANT , THE PURCHASES MUST HAVE BEEN MADE FROM SOME OTHER PARTIES IN THE GREY MARKET. HE, THEREFORE, MADE AN ADDITION OF 12.5% OF THE ALLEGED BOGUS PURCHASES WH ICH IS TO THE TUNE OF RS. 13,06, 200/ - . ITA NO.2 54 /MUM./2017 RAMESH KANNAIYALAL LODHA 5 6. A GAINST THE ABOVE ORDER ASSESSEE APPEALE D BEFORE THE LEARNED CIT - A CHALLENGING BOTH THE VALIDITY OF REOPENING AS WELL AS THE MERITS OF ADDITION. LEARNED CIT - A DISMISSED THE ISSUE RAISED BY THE ASSESSEE CHALLENGING THE VALIDITY OF REOPENING AND ALSO CONFIRMED THE ACTION OF THE ASSESSING OFFICER IN MAKING ADDITION OF 12.5% OF THE BOGUS PURCHASE. 7. AGAINST ABOVE ORDER OF LEARNED CIT - A ASSESSEE IS IN APPEAL BEFORE THE ITAT. ASSESSEE HAS NOT CHALLENGE D THE VALIDITY OF REOPENING BEFORE THE ITAT. HE HAS ONLY CHALLENGE THE MERITS OF THE ADDITION CLAIMING THAT DOCUMENTARY E VIDENCE WAS PRODUCED BEFORE THE ASSESSING OFFICER IN SUPPORT OF THE PROPOSITION THAT THE PURCHASES WERE GENUINE . 8. I HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. 9. I FIND THAT CREDIBLE AND COGENT INFORMATION WAS RECEIVED IN THIS CASE BY THE ASSESSING OFFICER THAT CERTAIN ACCOMMODATION ENTRY PROVIDER/BOGUS SUPPLIERS WERE BEING USED BY CERTAIN PARTIES TO OBTAINED BOGUS BILLS. A SSESSEE WAS FOUND TO HAVE TAKEN ACCOMMODATION ENTRY/BOGUS PURCHASE BILLS DURING THE CONCERNED ASSESSMENT YEAR FROM 11 D IFFERENT PARTIES. BASED UPON THIS INFORMATION ASSESSMENT WAS REOPENED. THE CREDIBILITY OF INFORMATION RELA TING TO REOPENING HAS BEEN CONFI RMED BY THE LEARNED CIT - A AND THE ASSESSEE HAS NOT CHALLENGED THE SAME BEFORE THE ITAT. FURTHERMORE IT IS NOTED THAT I N SUCH FACTUAL SCENARIO ASSESSING OFFICER HAS MADE THE NECESSARY ENQUIRY. THE ISSUE OF NOTICE TO ALL THE 11 PARTIES HAVE RETURNED UNSERVED. ASSESSEE HAS NOT BEEN ABLE TO PROVIDE ANY CONFIRMATION FROM ANY OF THE PARTY. ASSESSEE HAS ALSO NOT BEEN ABLE TO ITA NO.2 54 /MUM./2017 RAMESH KANNAIYALAL LODHA 6 PRO DUCE ANY OF THE PARTIES. IN THIS FACTUAL SCENARIO IT IS AMPLY CLEAR THAT ASSESSEE HAS OBTAINED BOGUS PURCHASE BILLS. MERE PREPARATION OF DOCUMENTS FOR PURCHASES CANNOT CONTROVERT OVERWHELMING EVIDENCE THAT THE PROVIDER OF THESE BILLS ARE BOGUS AND NON - EXIS TENT. 1 0 . HENCE PURCHASE BILLS FROM THESE NON - EXISTENT THE/BOGUS PARTIES CANNOT BE TAKEN AS COGENT EVIDENCE OF PURCHASES. I N LIGHT OF THE OVERWHELMING EVIDENCE THE REVENUE AUTHORITIES CANNOT PUT UPON BLINKERS AND ACCEPT THESE PURCHASES AS GENUINE. THIS PROPOSITION IS DULY SUPPORTED BY HONOURABLE APEX C OURT DECISION IN THE CASE OF SUMATI DAYAL AND DURGA PRASAD MORE . IN THESE CI RCUMSTANCES LD. DR HAS REFERRED TO HONOURABLE GUJARAT HIGH COURT DECISION IN THE CASE OF TAX APPEAL NO 240 OF 2003 IN THE CASE OF N K INDUSTRIES VS. DCIT ORDER DT. 20. 06.2016, WHEREIN HUNDRED PERCENT OF THE BOGUS PURCHASES WAS HELD TO BE ADDED IN THE HANDS OF THE ASSESSEE AND TRIBUNALS RESTRICTION OF THE ADDITION TO 25% OF THE BOGUS PURCHASES WAS SET ASIDE. IT WAS EXPOUNDED THAT WHEN PURCHASE BILLS HAVE BEEN FOUND TO BE BOGUS 100% DISALLOWANCE OF THE SAME WAS TO BE DONE. THE SPECIAL LEAVE PETITION AGAINST T HIS ORDER ALONGWITH OTHERS HAS BEEN DISMISSED BY THE HONOURABLE APEX COURT VIDE ORDER DT 16 . 0 1 . 2017 11. HOWEVER, I NOTE THAT THIS IS NOT AN APPEAL BY THE REVENUE. HENCE IT WILL NOT BE APPROPRIATE TO T AKE AWAY THE RELIEF ALREADY GRANTED BY THE REVENUE TO T HE ASSESSEE. HENCE I CONFIRMED THE ORDER OF LD. CIT - A. ITA NO.2 54 /MUM./2017 RAMESH KANNAIYALAL LODHA 7 IN THE RESULT THIS APPEAL FILED BY THE ASSESSEE IS STANDS DISMISSED. ORDER PRONOU N CED IN THE OPEN COURT ON 04 .09 .2017 SD/ - SHAMIM YAHIYA ACCOUNTANT MEMBER MUMBAI, DATED: 04 .09 .2017 COPY OF THE ORDER FORWARDED TO : ( 1 ) THE ASSESSEE; ( 2 ) THE REVENUE; ( 3 ) THE CIT(A); ( 4 ) THE CIT, MUMBAI CITY CONCERNED; ( 5 ) THE DR, ITAT, MUMBAI; ( 6 ) GUARD FILE. TRUE COPY BY ORDER NISHANT VERMA SR. PRIVATE SECRETARY (DY./ASSTT.REGISTRAR) ITAT, MUMBAI ITA NO.2 54 /MUM./2017 RAMESH KANNAIYALAL LODHA 8