ITO 27(1)(3), MUMBAI V. HARISH KHUSHALCHAND CHANDAK, MUMBAI

ITA 2736/MUM/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 3438 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-05-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Assessment Year: 2012-2013
• Appeal Filed On: 03-05-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bogus purchase; Unexplained expenditure; Accommodation entries
• Section: 133(6); 69

Judgement Text

T HE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA ( A M) & SHRI RAVISH SOOD ( J M) I.T.A. NO. 2736 /MUM/ 2018 (ASSESSMENT YEAR 20 12 - 13 ) ITO - 27(1)(3) ROOM NO. 408 4 TH FLOOR TOWER NO. 6 VASHI RAILWAY STATION COMPLEX VASHI NAVI MU MBAI PIN CODE - 400 703 V S . SHRI HARISH KHUSHALCHAND CHANDAK D - 1001, BUILDING NO. 27 ANIRUDDHA BUILDING ABOVE ICICI BANK TILAK NAGAR, CHEMBUR MUMBAI - 400 089. PAN : AABPC6410H ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY NONE DEPARTMENT BY SHRI MANOJ KU MAR SINGH DATE OF HEARING 1.5 . 201 9 DATE OF PRONOUNCEMENT 3 . 5 . 201 9 O R D E R PER SHAMIM YAHYA (AM) : THIS IS AN APPEAL BY THE REVENUE WHEREIN THE REVENUE IS AGGRIEVED THAT LEARNED CIT(A) HAS NOT SUSTAINED 100% DISALLOWANCE ON ACCOUNT OF BOG US PURCHASES. 2. THE GROUNDS OF APPEAL READ AS UNDER: - 1. 'ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS 1,11,90,923 / - MADE BY THE ASSESSING OFFICER ON ACCOUNT OF UNEXPLAINED EXPENDITURE U/S 69 - C OF THE I . T. ACT ON PURCHASES MADE FROM HAWALA PARTIES, WITHOUT APPRE CIATING THE FACT THAT THE ASSESSEE HAD FAILED TO PRODUCE BILLS, VOUCHERS AND OTHER DOCUMENTARY EVIDENCES IN SUPPORT OF HIS CLAIM AND WITHOUT CONSIDERING THE LATEST APEX COURT JUDGEMENT IN THE CASE OF N.K. PROTIEN LTD., WHEREIN IT IS HELD THAT ONCE IT IS PROVED THAT THE PURCHASES ARE BOGUS THEN ADDITION SHOULD BE MADE ON ENTIRE PURCHASES AND NOT ON PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES.' 2. 'ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN ESTIMATING THE PROFIT FROM HAWALA PURCHASES BY SHRI HARISH KHUSHALCHAND CHANDAK 2 DISALLOWING ONLY 15,98,703 / - BEING 12.5% OF THE BOGUS PURCHASES AS EVEN THE BASIC ONUS OF PRODUCING TRANSPORT BILLS , DELIVERY CHALLANS ETC., WERE NOT FULFILLED BY THE ASSES SEE.' 3. 'THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) ON THE ABOVE GROUNDS BE REVERSED AND THAT OF THE ASSESSING OFFICER BE RESTORED.' 3. THE ASSESSING OFFICER IN THIS CASE HAS MADE HUNDRED PERCENT ADDITION ON ACCOUNT OF BOGUS PURCHASE AMOUNTING TO RS. 1,27,89,626/ - . BRIEF FACTS OF THE CASE ARE AS UNDER : - THE AO HAD RECEIVED INFORMATION FROM THE INVESTIGATION WING OF THE DEPARTMENT THAT THE ASSESSEE HAD TAKEN ACCOMMODATION BILLS FOR PURCHASES FROM THE PARTIES DECLARED AS HAWALA OPERATORS BY MAHARAS HTRA SALES TAX DEPARTMENT FOR A.Y. 2011 - 12. DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR A.Y. 2011 - 12, IT WAS SEEN BY THE AO THAT DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD CLAIMED TO HAVE MADE BOGUS PURCHASES FOR A.Y. 2011 - 12 AND ACCORDINGLY THE AO ISSUED NOTICES U/S. 133(6) OF THE ACT TO THE PARTIES FROM WHOM THE ASSESSEE CLAIMED TO HAVE MADE BOGUS PURCHASES. HOWEVER, THE NOTICES WERE UNSERVED BY THE POSTAL AUTHORITIES WITH THE REMARK 'NOT - KNOWN/UNCLAIMED'. 4. DURING THE COURSE OF ASSESSME NT PROCEEDINGS FOR A.Y. 2012 - 13, THE AO NOTICED THAT THE ASSESSEE HAS MADE PURCHASES FROM THE SAME FOLLOWING PARTIES : - SR. NO PARTY WHO HAVE ISSUED BOGUS BILLS TO THE ASSESSEE AMOUNT (IN RS.) 1 M/S. ROYAL ENTERPRISES 48,00,044 / - 2 M/S. FAMOUS TRADER S 41,59,287/ - 3 M/S. VIJAY ENTERPRISES 38,30,295/ - TOTA L 1,27,89,626 / - THE NAME OF THE ABOVE PARTIES FIGURED IN LIST OF SUSPICIOUS DEALERS ON THE MAHARASHTRA SALES TAX DEPARTMENT, WHO HAD ISSUED ACCOMMODATION ENTRIES WITHOUT ACTUAL DELI VERY OF GOODS. SHRI HARISH KHUSHALCHAND CHANDAK 3 5. THE AO IN HIS AFORESAID ASSESSMENT ORDER HAS FURTHER MENTIONED THAT THE SALES TAX DEPARTMENT HAD CONDUCTED INDEPENDENT INQUIRIES IN THE CASE OF EACH HAWALA OPERATOR, INCLUDING IN THE CASE OF ABOVE STATED HAWALA OPERATOR AND IT WAS CONCLUSIVELY PROVED T HAT THESE PARTIES/OPERATORS WERE ENGAGED IN THE BUSINESS OF PROVIDING ACCOMMODATION ENTRIES ONLY. THESE PARTIES MOSTLY INDULGED IN FOLLOWING ACTIVITIES: A) ISSUING ONLY BILLS AND DOING NON - GENUINE BUSINESS (HAWALA BUSINESS); B) NOT MAINTAINING STOCK AN D NOT KEEPING STOCK REGISTER C) NOT EFFECTING ANY PURCHASE; AND D) THERE WAS NO TRANSACTION OF GOODS. E) ENTRIES WERE BEING PROVIDED BY THE PARTIES FOR COMMISSION. 6. D URING THE COURSE OF ASSESSMENT PROCEEDINGS FOR A.Y. 2011 - 12, IN ORDER TO ASCERTAIN THE GENUINENESS OF PURCHASES MADE BY THE ASSESSEE , THE AO CONDUCTED INDEPENDENT INQUIRIES BY ISSUING NOTICES U/S. 133(6) OF THE ACT TO THE WHICH WERE RETURNED UNSERVED BY THE POSTAL AUTHORITIES WITH A REMARK NOT KNOWN/UNCLAIMED. SINCE THE ASSESSEE FAILED TO ATTEND IN RESPONSE TO THE NOTICES ISSUED AND ALSO TO PRODUCE ANY DOCUMENTARY EVIDENCE IN SUPPORT OF HIS CLAIM, THE AO MADE 100% ADDITION OF THESE PURCHASES. 7. UP ON ASSESSEE'S APPEAL LEARNED CIT - A HAS NOTED THAT THE SALES HA VE NOT BEEN DOUBTED. ACCORDING LY PLACING RELIANCE UPON SEVERAL CASE LAWS AND UP ON THE FACT S OF THE CASE HE SUSTAINED 12.5 % DISALLOW ANCE OUT OF THE BOGUS PURCHASES . 8. AGAINST ABOVE ORDER REVENUE IS IN APPEAL BEFORE THE ITAT. WE HAVE HEARD THE LD DR. NONE APPEARED ON BE HALF OF ASSESSE E DESPITE NOTICE . 9. W E HAV E CAREFULLY PERUSED THE RECORDS. W E FIND THAT IN THIS CASE THE SALES HAVE NOT BEEN DOUBTED IT IS SETTLED LAW THAT WHEN SALES ARE NOT DOUBTED, HUNDRED PERCENT DISALLOWANCE FOR BOGUS PURCHASE CANNOT BE DONE. THE RATIONALE BEING N O SALES IS POSSIBLE WITHOUT ACTUAL PURCHASES. THIS PROPOSITION IS SUPPORTED FROM HON'BLE JURISDICTIONAL HIGH COURT DECISION IN THE CASE OF SHRI HARISH KHUSHALCHAND CHANDAK 4 NIKUNJ E XIMP ENTERPRISES (IN WRIT PETITION NO 2860, ORDER D A T ED 18.6.2014). IN THIS CASE THE HON'BLE HIGH COURT HAS UPHELD HUNDRED PERCENT ALLOWANCE FOR THE PURCHASES SAID TO BE BOGUS WHEN SALES ARE NOT DOUBTED. HOWEVER THE FACTS OF THE PRESENT CASE INDICATE THAT ASSESSEE HAS MADE PURCHASE FROM THE GREY MARKET. MAKING PURCHASES THROUGH THE GREY MARKET GIVES THE ASSESSEE SAVINGS ON ACCOUNT OF NON - PAYMENT OF TAX AND OTHERS AT THE EXPENSE OF THE EXCHEQUER. IN SUCH SITUATION IN OUR CONSIDERED OPINION ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE 12.5 % DISALLOWANCE OUT OF THE BOGUS PURCHASES DONE BY THE LEARNED CIT - A MEETS THE END OF JUSTICE. ACCORDINGLY WE UPHOLD THE ORDER OF LEARNED CIT - A. 10. THE DECISION OF N.K. PROTIEN LTD. (SUPRA) REFERRED BY R EVENUE IN GROUNDS OF APPEAL HAS ALREADY BEEN DISTINGUISHED BY HON'BLE BOMBAY HC IN THE CASE OF PCIT VS. M OHOMMAD HAJI A DAM (INCOME TAX APPEAL NO. 1004 OF 2016 VIDE JUDGEMENT DATED 23.4.2019. 11. IN THE RESULT THIS APPEAL FILED BY THE REVENUE STANDS DISMISSED ORDER HAS BE EN PRONOUNCED IN THE COURT ON 3 . 5 . 201 9 . SD/ - SD/ - (RAVISH SOOD ) (SH A MIM YAHYA ) J U DICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 3 / 5 / 20 1 9 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// ( ASSISTANT REGISTRAR ) PS ITAT, MUMBAI