HITEN M. MEHTA, MUMBAI V. ITO WD 20(1)(5), MUMBAI

ITA 268/MUM/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 0381 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-08-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2009-2010
• Appeal Filed On: 18-01-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SAURABH DESH
• Keywords: Bogus purchase; Onus to prove
• Section: 143(3); 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH K MUMBAI BEFORE SHRI MAHAVIR SINGH (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 268/MUM/2016 ASSESSMENT YEAR: 2009 - 10 HITEN M. MEHTA BUILDING NO. 15, NAVJIVAN SOCIETY BLOCK NO.11, 3 RD FLOOR, LAMINGTON ROAD, MUMBAI - 400008 VS. ITO - 20(1)(5) MUMBAI, PIRAMAL CHAMBERS, PAREL, MUMBAI - 400012. PAN NO. AABPM5305R APPELLANT RESPONDENT ASSESSEE BY : SHRI ASHWIN KASHINATH, A R REVENUE BY: SHRI SAURABH DESHPANDE, D R DATE OF HEARING : 0 8 /08 /2017 DATE OF PRONOUNCEMENT : 10/08/2017 ORDER PER N.K. PRADHAN, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE . THE RELEVANT ASSESSMENT YEAR IS 2009 - 10 . THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE COMMISS IONER OF INCOME TAX (APPEALS) - 32 , MUMBAI AND ARISES OUT OF THE ASSESSMENT COMPLETED U/S 143(3) R.W.S. 147 OF THE INCOME TAX ACT 1961, (THE ACT). ITA NO. 268/MUM/2016 2 2. THE GROUND OF APPEAL FILED BY THE ASSESSEE READ S AS UNDER: - 1. THE LD. CIT(A) - 32 HAS ERRED IN CONFIRMING THE ADDITION TO THE EXTENT OF 8.44% INSTEAD OF DELETING THE ENTIRE ADDITION OF RS.4,25,950/ - BASED ON 12.5% OF SO - CALLED HAWALA PURCHASES OF RS.34,07,603/ - . 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER (AO) ON THE BASIS OF INFORMATION RECEIVED FROM THE SALES TAX DEPARTMENT, MAHARASHTRA FOUND THAT THE NAME OF THE ASSESSEE APPEARED IN THE LIST OF PERSONS WHO HAD OBTAINED BOGUS PURCHASE BILLS FROM THE ENTRY PROVIDERS. AS PER THE AO, THE BO GUS PURCHASE BILLS TAKEN BY THE ASSESSEE AMOUNTED TO RS. 34,07,603 / - . THE BREAK UP IS AS UNDER: NO. NAME OF THE CONCERNS AMOUNT IN RS. 1. DHRUV SALES CORPORATION 1,65,516 2. R.K. ISPAT 4,52,162 3. CENTURIAN SALES CORPORATION 9,38, 25 9 4. DEEP ENTERPRISES 54,021 5. SHREE SAI TRADING CO. 3,44,807 6. S.M. TRADING CO. 10,32,342 7. VARAH LAXMI SALES AGENCY 1,51,060 8. ALNKAR STEELS 2,69,436 TOTAL 34,07,603 DURING THE COURSE OF VERIFICATION, THE AO ISSUED NOTICES U/S 133(6) TO THE CONCERNED SUPPLIERS. HOWEVER, THE LETTERS ISSUED TO THEM WERE RETURNED BACK BY THE POSTAL AUTHORITIES WITH THE REMARK NOT KNOWN, NO SUCH ADDRESS, LEFT ETC. THEREAFTER, THE AO ISSUED NOTICES U/S ITA NO. 268/MUM/2016 3 142(2) TO THE ASSESSEE REQUESTING TO FURNISH THE FOLLOWING DOCUMENTS RELATED TO THE ABOVE PARTIES : 1. COPY OF LEDGER ACCOUNT 2. COPY OF INVOICE 3. COPY OF DELIVERY CHALLAN 4. COPY OF LORRY RECEIPTS 5. COPY OF BANK STATEMENT 6. COPY OF OCTROI RECEIPTS 7. COPY OF GOODS RECEIPTS, GOODS INWARD OUTWARD DETAILS. IN RESPONSE TO THE ABOVE, THE AR OF THE ASSESSEE FILED (I) COPY OF THE LEDGER ACCOUNT ALONG WITH COPIES OF PURCHASE INVOICES AND (II) COPIES OF BANK STATEMENT. THE AO THEN ASKED THE ASSESSEE TO PRODUCE THE CONCERNED SUPPLIERS TO ASCERTAIN THE GENUINENESS OF PURCHASES MADE FROM THEM. HOWEVER, THE ASSESSEE FAILED TO DO SO. THE AO THEN CAME TO A FINDING THAT NO EFFORT WAS MADE BY THE ASSESSEE EITHER TO PRODUCE THE CONCERNED SUPPLIERS OR TO FURNISH THEIR WHEREABOUTS SO THAT VERIFICATION COULD BE MADE. AS THE ONUS TO PROVE THE GENUINENESS AND CORRECTNESS OF THESE PURCHASES WAS WITH THE ASSESSEE AND THE ASSESSEE FAILED TO DISCHARGE THE BURDEN, THE AO AFTER TAKING INTO ACCOUNT THE SALES TAX AND PROFIT MARGIN IN THIS TYPE OF BUSINESS, ESTIMATED THE PROFIT @ 12.5% ON THE ABOVE AMOUNT OF RS.34,07,603/ - WHICH COMES TO RS.4,25,950/ - . ITA NO. 268/MUM/2016 4 4. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT(A). TH E LD. CIT(A) HELD AS UNDER: IN THE INSTANT CASE, THE APPELL ANT IS NOT IN A POSITION TO PRO VE THE EXISTENCE OF THE SUPPLIERS. AS REPRODUCED IN PARA 5.1 ABOVE, THE ADMISSION OF THE APPELLANT BEFORE THE AO IS CIRCUMSTANTIAL EVIDENCE CASTING A STRONG DOUBT O N THE NATURE OF THE TRANSACTION. I AM OF THE FIRM BELIEF THAT THE APPELLANT HAD MADE CASH PURCHASES FROM OTHER PARTIES WHICH WERE NOT RECORDED IN THE BOOKS. THE APPELLANT TOOK ONLY BILLS FROM THESE 8 PARTIES AS ACCOMMODATION TO EX PL A IN THE PURCHASES. THERE FORE, THE ENTIRE PURCHASE FROM THESE 8 PARTIES CANNOT BE ADDED AS BOGUS AND WHAT NEEDS TO BE TAXED IS THE PROFIT ELEMENT EMBEDDED IN SUCH TRANSACTION. I AM OF THE OPINION THAT THE DISALLOWANCE ON THE ISSUE OF BOGUS PURCHASE BE RESTRICTED TO THE GP RECORDED BY THE APPELLANT IN HIS BOOKS FOR THE YEAR WHICH IS 8.44%. THEREFORE, I DIRECT THE AO TO E STIMATE PROFIT OF 8.44% ON THE TOTAL ALLE GED BOGUS PURCHASE OF RS.34,07,603/ - WHICH WORKS OUT TO RS.2,87,601/ - . THE AMOUNT OF RS.2,87,601 / - IS SUSTAINED OUT OF THE A DDITION OF RS.4,25,950/ - MADE BY THE AO. THE APPELLANT GETS A RELIEF OF THE BALANCE RS.1,38,349/ - . THE SINGLE GROUND OF APPEAL IS PARTLY ALLOWED. 5. BEFORE US, THE LD. COUNSEL OF THE ASSESSEE SUBMITS THAT THE LD. CIT(A) SHOULD NOT HAVE RESTRICTED THE DIS ALLOWANCE TO RS.2,87,601/ - . INSTEAD HE SHOULD HAVE DELETED THE ENTIRE ADDITION OF RS.4,25,950/ - . 6. ON THE OTHER HAND, THE LD. DR SUPPORTS THE ORDER PASSED BY THE LD. CIT(A). 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIALS ON RE CORD. WE AGREE WITH THE FINDING OF THE LD. CIT(A) THAT WHAT NEEDS TO BE TAXED IS THE PROFIT ELEMENT EMBEDDED IN SUCH TRANSACTION AND THE DISALLOWANCE BE RESTRICTED TO THE GP RECORDED BY THE ITA NO. 268/MUM/2016 5 ASSESSEE IN HIS BOOKS OF ACCOUNTS FOR THE IMPUGNED ASSESSMENT YEAR S WHICH IS 8.44%. AS THE ONUS TO PROVE THE GENUINENESS AND CORRECTNESS OF THESE PURCHASES WAS WITH THE ASSESSEE AND THE ASSESSEE FAILED TO DISCHARGE THE BURDEN, THE LD. CIT(A) HAS RIGHTLY ESTIMATED THE PROFIT @ 8.44%. WE UPHOLD THE SAME. 8. IN THE RESULT, THE APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 10/08/2017 . SD/ - SD/ - (MAHAVIR SINGH) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED: 10/08/2017 RAHUL SHARMA, SR. P.S. 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