DHIRAJ RAMESH DAMA, MUMBAI V. DCIT 12(1), MUMBAI

ITA 2674/MUM/2017

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 9244 (ITAT-MUMBAI)
• Duration Of Justice: 5 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-10-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 13-04-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: POOJA SWAROOP LD
• Assessee Lawyers: RITIKA AGARWAL LD
• Keywords: Bogus purchase; Accommodation entries
• Section: 143(3)

Judgement Text

ITA NO.2674/MUM/2017 DHIRAJ RAMESH DAMA ASSESSMENT YEAR 2011-12 IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUMBAI , , BEFORE SHRI SAKTIJIT DEY, JM AND SHRI MANOJ KUMAR AGGARWAL, AM ./I.T.A. NO.2674/MUM/2017 ( / ASSESSMENT YEAR: 2011-12) DHIRAJ RAMESH DAMA C-1001, GOLDEN WILLOWS VASANT GARDEN SWAPNA NAGARI MULUND (WEST) MUMBAI-400 080 / VS. DEPUTY COMMISSIONER OF INCOME TAX 12(1) (NOW ASSESSED WITH DCIT 17(1) MUMBAI '# ./ ./ PAN/GIR NO.AACPD-6233-C ( #% /APPELLANT ) : ( &'#% / RESPONDENT ) REVENUE BY : POOJA SWAROOP, LD. DR ASSESSEE BY : RITIKA AGARWAL,LD.AR / DATE OF HEARING : 28/09/2017 / DATE OF PRONOUNCEMENT : 04/10/2017 2 ITA NO.2674/MUM/2017 DHIRAJ RAMESH DAMA ASSESSMENT YEAR 2011-12 / O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. THE CAPTIONED APPEAL BY ASSESSEE FOR ASSESSMENT YEAR [AY] 2011-12 ASSAILS THE ORDER OF THE LD. COMMISSIONER OF INCOME -TAX (APPEALS)-28 [CIT(A)], MUMBAI, APPEAL NO. CIT(A)-28/IT-137/DCIT-12(1)/2014-15 DATED 17/01/2017 QUA CONFIRMATION OF CERTAIN ADDITIONS TO THE EXTENT OF 25% ON ACCOUNT OF BOGUS PURCHASES. THE ASSESSMENT WAS FRAMED BY LD. DEPUTY COMMISSIONER OF INCOME TAX-12(1) U/S 143(3) ON 10/03/2013. 2.1 FACTS LEADING TO THE SAME ARE THAT THE ASSESSEE BEING RESIDENT INDIVIDUAL ENGAGED AS RESELLER OF FOOD STUFF AND HOTEL SUPPLIER UNDER PROPRIETORSHIP CONCERN NAMELY J.K.TRADING WAS ASSESSED U/S 143(3) FOR IMPUGNED AY ON 10/03/2013 AT RS.2,22,17,790/- INTER-ALIA, AFTER ADDITION OF CERTAIN BOGUS PURCHASES FOR RS.1,94,68,007/- AS AGAINST RETURNED INCOME OF RS.27,23,949/- FILED BY THE ASSESSEE ON 28/09/2012. THE ASSESSEE REFLECTED TURNOVER OF RS.10.78 CRORES WITH NET PROFIT RATE OF 2.37%. THE PURCHASES STOOD AT RS.9.07 CRORES. THE SOLITARY ISS UE INVOLVED IN THE PRESENT APPEAL IS ALLEGED BOGUS PURCHASES OF RS.1,94,68,007/-. 2.2 PURSUANT TO RECEIPT OF CERTAIN INFORMATION FROM SALES TAX DEPARTMENT, MAHARASHTRA REGARDING DEALERS INDULGING IN BOGUS PURCHASE BILLS, IT WAS NOTED THAT THE ASSESSEE STOOD BENEFICIARY OF SUCH BOGUS PURCHASE BILLS TO THE TUNE OF RS.1,94,68,007/- FROM SIX SUCH PARTIES. THE LD. AO NOTED THAT THE SALES TAX DEPARTMENT CONDUCTED INDEPENDENT INQUIRIES AND CONCLUDED 3 ITA NO.2674/MUM/2017 DHIRAJ RAMESH DAMA ASSESSMENT YEAR 2011-12 THAT THESE DEALERS WERE ENGAGED IN PROVIDING ACCOMM ODATION ENTRIES ONLY. THE COPIES OF DOCUMENTS RECEIVED FROM SALES TAX DEPARTMENT WITH RESPECT TO SIX PARTIES WERE PROVIDED TO THE ASSESSEE. THE A SSESSEE WAS ASKED TO FURNISH DOCUMENTARY EVIDENCES TO SUBSTANTIATE THE P URCHASE TRANSACTIONS. THE ASSESSEE, IN TURN, PROVIDED LEDGER EXTRACTS, PURCHASE BILLS, PAYMENTS DETAILS ETC. TO SUPPORT THE TRANSACTIONS. HOWEVER, NOT CONVINCED , THE LD. AO NOTED THAT THE ASSESSEE FAILED TO PROVIDE TRANSPORT ATION DETAILS AND FURTHER NO LEDGER CONFIRMATION WAS FILED FROM THE SUPPLIER AND MERE PAYMENT THROUGH BANKING CHANNELS WAS NOT SUFFICIENT TO PROV E THE GENUINENESS OF THE TRANSACTIONS PARTICULARLY WHEN INDEPENDENT INQU IRIES IN THAT REGARD WAS ALREADY BEEN CONDUCTED BY THE SALES TAX DEPARTMENT. FINALLY, LD. AO CONCLUDED THAT THE ASSESSEE FAILED TO DISCHARGE THE ONUS CASTED UPON HIM TO PROVE THESE TRANSACTIONS AND THEREFORE, TREATING THE IMPUGNED PURCHASES AS NON-GENUINE, THE SAME WERE ADDED TO THE INCOME O F THE ASSESSEE. 3. AGGRIEVED, THE ASSESSEE CONTESTED THE SAME WITH PARTIAL SUCCESS BEFORE LD. CIT(A) VIDE IMPUGNED ORDER DATED 17/01/2 017. THE LD. CIT(A) NOTED THAT THIS WAS THE FIRST YEAR OF ASSESSEES BU SINESS AND NET PROFIT RATE REFLECTED BY ASSESSEE WAS 2.73% AS AGAINST 3.21% SH OWN AGAINST APPROX. DOUBLE TURNOVER IN IMMEDIATELY SUCCEEDING YEAR. FUR THER, LD. CIT(A) NOTED THAT THE ASSESSEE FAILED TO DISCHARGE THE ONUS CAST ED ON HIM TO SUBSTANTIATE THE PURCHASE TRANSACTIONS AND THEREFOR E, RESTRICTED THE IMPUGNED ADDITIONS TO THE EXTENT OF 25% OF ALLEGED BOGUS PURCHASES . AGGRIEVED, THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 4 ITA NO.2674/MUM/2017 DHIRAJ RAMESH DAMA ASSESSMENT YEAR 2011-12 4. THE LD. COUNSEL FOR ASSESSEE [AR], DREW OUR AT TENTION TO THE FACT THAT THE ASSESSEE WAS INTO SUPPLIES OF FOOD STUFF / EXOTIC FRUITS TO REPUTED HOTEL CHAINS AGAINST SALES INVOICES, THE DELIVERIES OF WHICH WAS DULY ACCEPTED BY THE CUSTOMERS. FURTHER, THE MATERIAL WA S PURCHASED FROM VARIOUS SUPPLIERS AND THE SAME WAS DULY SUPPORTED B Y INVOICES AND CORRESPONDING SALES WERE MADE AGAINST THE SAME. FUR THER, THE RESPECTIVE PAYMENTS WERE MADE THROUGH BANKING CHANNELS AND THE MATERIAL WAS SOLD AT SUBSTANTIAL PROFIT MARGIN AND THEREFORE, IMPUGNE D ADDITIONS WERE NOT JUSTIFIED. THE LD. AR ALSO CONTENDED THAT LD. AO, W ITHOUT MAKING ANY INDEPENDENT INQUIRIES, MADE THE IMPUGNED ADDITIONS, WHICH WAS NOT JUSTIFIED AT ALL. IN THE ALTERNATIVE, THE LD. AR PL EADED THAT IMPUGNED ADDITIONS WERE ON THE HIGHER SIDE AND THEREFORE, TH E SAME MAY BE ESTIMATED AT REASONABLE FIGURES. 5. PER CONTRA, THE LD. DR VEHEMENTLY OPPOSED ANY FURTHER RELIEF T O THE ASSESSEE ON THE PREMISE THAT THAT SALES TAX DEPARTMENT , AFTER EXTENSIVE INQUIRIES, CAME TO CONCLUSION THAT THE SUPPLIERS IN QUESTION WERE ENGAGED IN PROVIDING ACCOMMODATION ENTRIES ONLY WITHOUT DOI NG ANY ACTUAL BUSINESS. THE SAID INQUIRIES, BY ITSELF, WERE QUITE SUFFICIEN T TO DISALLOW THE PURCHASES IN FULL. SINCE, ADEQUATE RELIEF HAD ALREADY BEEN GR ANTED BY LD. CIT(A), NO FURTHER RELIEF COULD BE GRANTED TO THE ASSESSEE ON THE FACTS OF THE CASE. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED RELEVANT MATERIAL ON RECORD. THE ASSESSEE, IN THE PAPER-BOOK , HAS PLACED FINANCIAL STATEMENTS AND VARIOUS DOCUMENTS SO AS TO ESTABLISH THE GENUIN ENESS OF THE PURCHASE 5 ITA NO.2674/MUM/2017 DHIRAJ RAMESH DAMA ASSESSMENT YEAR 2011-12 TRANSACTIONS. FIRST OF ALL, A PERUSAL OF THE LEDGER EXTRACTS OF THE ALLEGED BOGUS SUPPLIERS REVEALS A COMMON PATTERN THAT THE ASSESSEE HAS MADE CONTINUOUS PURCHASES FROM THE SUPPLIERS WITHOUT MAK ING ANY SIGNIFICANT PAYMENT THEREOF IN THE IMPUGNED AY. RATHER, THE PAY MENTS HAVE BEEN STRETCHED AS FAR AS TOWARDS THE CLOSE OF SUCCEEDING AY. FURTHER, NO STOCK DETAILS ARE PROVIDED BY THE ASSESSEE IN THE TAX AUDIT REPORT PLACED ON RECORD. THE ASSESSEE HAS SUBMITTED PURCHASES INVOIC ES ALONG WITH CORRESPONDING SALES INVOICES FOR THE CONTENTION THA T THE MATERIAL PURCHASED BY HIM HAS SUBSEQUENTLY BEEN SOLD BY HIM AND THEREF ORE, THE PURCHASES WERE GENUINE. IT IS ADMITTED FACT THAT THE ASSESSEE HAS NOT BEEN ABLE TO PRODUCE ANY LEDGER CONFIRMATION FROM ANY OF THE SIX SUPPLIERS AND ALSO COULD NOT PRODUCE ANY OF THE PARTY FOR CONFIRMATION OF TRANSACTIONS DESPITE ENJOYING HIGH CREDIT PERIOD FROM THE SAID PARTIES A ND DESPITE HAVING CONTINUOUS BUSINESS DEALING WITH THEM. PER CONTRA , IT IS ALSO NOTICED THAT LD. AO HAS HEAVILY RELIED ON THE INQUIRIES OF SALES TAX DEPARTMENT AND CAME TO A CONCLUSION THAT THE IMPUGNED PURCHASES WE RE BOGUS PURCHASES WITHOUT CORROBORATING THE SAME WITH COGENT EVIDENCE S. 7. WE ARE OF THE CONSIDERED OPINION THAT THERE COUL D BE NO SALE WITHOUT PURCHASE OF MATERIAL KEEPING IN VIEW THE ASSESSEES NATURE OF BUSINESS WHICH WAS TRADING OF FOOD STUFF. THE SALES TURNOVER ACHIEVED BY THE ASSESSEE HAS NOT BEEN DISPUTED OR DISTURBED BY THE REVENUE AND THE PAYMENTS OF ALLEGED BOGUS SUPPLIES WERE THROUGH BANKING CHANNELS. THE PURCHASES WERE BACKED BY INVOICES. AT THE SAME TIME , THE ASSESSEE COULD 6 ITA NO.2674/MUM/2017 DHIRAJ RAMESH DAMA ASSESSMENT YEAR 2011-12 NOT PRODUCE TRANSPORTATION DETAILS OR ANY LEDGER CONFIRMATION FROM ANY OF THE SIX PARTIES. NOT EVEN A SINGLE PARTY COULD BE P RODUCED BY HIM TO SUBSTANTIATE THE PURCHASE TRANSACTIONS, WHICH CAST SERIOUS DOUBT ON ASSESSEES CLAIM. THE ONUS TO SUBSTANTIATE THE PURC HASE TRANSACTIONS SQUARELY LIED ON THE ASSESSEE BUT THE SAME COULD NO T BE DISCHARGED FULLY. THEREFORE, IN SUCH A SITUATION, THE ADDITION, WHICH COULD BE MADE, WAS TO ACCOUNT FOR PROFIT ELEMENT EMBEDDED IN THESE PURCHA SE TRANSACTIONS TO FACTORIZE FOR PROFIT ELEMENT EARNED BY ASSESSEE AGA INST POSSIBLE PURCHASE OF MATERIAL IN THE GREY MARKET AND UNDUE BENEFIT OF VAT AGAINST BOGUS PURCHASES, WHICH LD. CIT(A) HAS RIGHTLY DONE. HOWEV ER, KEEPING IN VIEW THE OVERALL CIRCUMSTANCES INCLUDING THE EXTENT OF E VIDENCES PRODUCED BEFORE US AND NATURE OF ASSESSEES BUSINESS, WE FIN D THE SAME TO BE ON HIGHER SIDE. THEREFORE, WE RESTRICT THE SAME TO 8% OF ALLEGED BOGUS PURCHASES OF RS.1,94,68,007/- WHICH COMES TO RS.15, 57,440/-. THE LD. AO IS DIRECTED TO RE-COMPUTE THE TOTAL INCOME OF THE A SSESSEE IN THE LIGHT OF THE SAME. 8. RESULTANTLY, THE ASSESSEES APPEAL STANDS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 04 TH OCTOBER, 2017. SD/- SD/- (SAKTIJIT DEY) (MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 04.10.2017 SR.PS:- THIRUMALESH 7 ITA NO.2674/MUM/2017 DHIRAJ RAMESH DAMA ASSESSMENT YEAR 2011-12 ! / COPY OF THE ORDER FORWARDED TO : 1. #% / THE APPELLANT 2. &'#% / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT CONCERNED 5. &0 , 0 , / DR, ITAT, MUMBAI 6. 12 / GUARD FILE / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI