SANJAYKUMAR MEHTA, MUMBAI V. ACIT 19(3), MUMBAI

ITA 2898/MUM/2017

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 5393 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-10-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: J
• Assessment Year: 2009-2010
• Appeal Filed On: 21-04-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: CHAUDHARY ARUN KUMAR SINGH
• Keywords: Bogus purchase; Rejection of books of accounts; Tangible material; Reason to believe
• Section: 143(3); 133(6); 147; 148

Judgement Text

G IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI BEFORE SHRI JOGINDER SINGH, VICE PRESIDENT AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER ./ I.T.A. NO.2898/ MUM/2017 ( / ASSESSMENT YEAR : 2009 - 10) SHRI SANJAY KUMAR MEHTA ROOM NO. 8, 1 ST FLOOR MARDIA BHAVAN, 6 KHETWADI L ANE, MUMBAI - 400004 / V. ACIT 19(3) MUMBAI ./ PAN :AFVPM4916M ( / APPELLANT ) .. ( / RESPONDENT ) ASSESSEE BY: SHRI. MAYANK JAIN ON BEHALF OF ASSESSEE PRESENT WITH ADJOURNMENT LETTER REVENUE BY : SHRI. CHAUDHARY ARUN KUMAR SINGH / DATE OF HEARING : 17.10.2018 / DATE OF PRONOUNCEMENT : 22 .10.2018 / O R D E R PER RAMIT KOCHAR, ACCOUNTANT MEMBER: THIS APPEAL, FILED BY ASSESSEE, BEING ITA NO. 2898/MUM/2017, IS DIRECTED AGAINST APPELLATE ORDER DATED 17.02.2017 PASSED BY LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - 30, MUMBAI (HEREINAFTER CALLED THE CIT(A)), FOR ASSESSMENT YEAR (AY) 2009 - 10 , THE APPELLATE PROCEEDINGS HAD ARISEN BEFORE LEARNED CIT(A) FROM ASSESSMENT ORDER DATED 27.03.2015 PASSED BY LEARNED ASSESSING OFFICER (HEREINAFTER I.T.A. NO.2898/MUM/2017 2 CALLED THE AO) U/S 143(3) READ WITH SECTION 147 OF THE INCOME - TAX ACT, 1961 (HEREINAFTER CALLED THE ACT) FOR AY 2009 - 10 . 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE IN THE MEMO OF APPEAL FILED WITH THE INCOME - TAX APPELLATE TRIBUNAL, MUMBAI (HEREIN AFTER CALLED THE TRIBUNAL) READ AS UNDER: - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL) ERRED IN ( A ) CON FIRMING ADDITION OF RS. 8349395/ - WHICH IS MADE ON ACCOUNT OF ESTIMATION OF P ROFIT @ 12.50% ON ALLEGED BOGUS PURCHASES OF RS.66795161/ - TO THE TOTAL INCOME OF THE APPELLANT. ( B ) ESTIMATING RATE OF PROFIT AT 12.50% ON ALLEGED BOGUS PURCHASES OVER AND ABOVE GROSS PROFIT DECLARED OF 4.10% BY THE APPELLANT ON SUCH PURCHASES. REASONS ASS IGNED BY HIM ARE WRONG AND INSUFFICIENT TO JUSTIFY ESTIMATING RATE OF PROFIT @ 12.50% ON ALLEGED BOGUS PURCHASES AND MAKING ADDITION OF RS. 8349395/ - OVER AND ABOVE PROFIT DECLARED B Y APPELLANT ON SUCH PURCHASES. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL) ERRED IN CONFIRMING REJECTION OF BOOKS OF ACCOUNTS OF THE APPELLANT BY INVOKING PROVISIONS OF SECTION 145(3) OF THE ACT. 3. ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) FAILED TO APPRECIATE THAT ( A ) PROCEEDI NG INITIATED UNDER SECTION 147/ 148 OF THE ACT IS ON THE BASIS OF REASON TO SUSPECT AND NOT ON REASON TO BELIEVE. ( B ) THERE IS NO NEW TANGIBLE MATERIAL IN POSSESSION OF THE ASSESSING OFFICER WHICH JUSTIFY ISSUANCE OF NOTICE U/S 148 OF THE ACT . (C) THE INITIATION OF PROCEEDING UNDER SECTION 147 OF THE ACT AND ISSUANCE OF NOTICE UNDER SECTION 148 IS BAD IN I.T.A. NO.2898/MUM/2017 3 LAW AND CONTRARY TO THE PROVISIONS OF THE ACT AND LIABLE TO BE CANCELLED / ANNULLED . 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING ORDER MADE UNDER SECTION 143(3) RWS 147 OF THE ACT BY THE LEARNED ASSESSING OFFICE R WHICH IS ILLEGAL, BAD - IN - LAW, ULTRA VIRES AND WITHOUT ALLOWING REASONABLE OPPORTUNITY OF THE HEARING, WITHOUT APPRECIATING THE FACTS, SUBMISSION AND EVIDENCES IN THEIR PROPER PERSPECTIVE, WITHOUT PROVIDING COPIES OF MATERIAL USED AGAINST THE APPELLANT AN D WITHOUT PROVIDING CROSS EXAMINATION OF PARTIES WHOSE STATEMENT ARE RELIED UPON IS LIABLE TO BE ANNULLED. 5. THE LEARNED ASSESSING OFFICER ERRED IN CHARGING INTEREST UNDER SECTION 234A, 234B, 234C AND 234D OF THE ACT. 6. THE APPELLANT CRAV E LEAVE TO ADD, AMEND, ALTER AND / OR VARY ANY OF THE GROUNDS OF APPEAL BEFORE OR AT THE TIME OF HEARING. 3. THE ASSESSEE IS TRADER IN FERROUS AND NON - FERROUS METALS. THE INFORMATION WAS RECEIVED BY LEARNED ASSESSING OFFICER( HEREINAFTER CALLED THE AO ) FROM THE DGIT(INV . ) , MUMBAI WHEREIN IT WAS STATED THAT THE INFORMATION WAS RECEIVED FROM THE SALES TAX DEPARTMENT , GOVT . OF MAHARASHTRA THAT THE ASSESSEE IS APPEARING IN THE LIST OF BENEFICIARIES OF BOGUS PURCHASE/HAWALA TRANSACTIONS OF OBTAINING BOG US BILLS WITHOUT TAKING DELIVERY OF GOODS FROM THE FOLLOWING PARTIES , AS DETAILED HERE UNDER: - ,SR:NO. NAME OF THE PARTIES AMOUNT INVOLVED (IN RS.) 1 KIRAN SALES CORPORATION/ NIDHI IMPEX INDIA 20660024 2 SURAJ STEEL INDIA 506480 3 JINESH METAL CORPORATION 2365254 4 JACOB INDUSTRIES 5099874 5 ANIKET STEEL PVT. LTD. 6274186 I.T.A. NO.2898/MUM/2017 4 THE AO OBSERVED FROM THE INFORMATION RECEIVED THAT THE ABOVE PARTIES WERE IN THE BUSINESS OF ISSUING BOGUS SALES BILLS WITHOUT DELIVERY OF GOODS. THE ASSESSEE CASE FOR AY 2009 - 10 WAS REOPENED U/S. 147 OF THE 1961 ACT AND NOTICE U/S 148 OF THE 1961 ACT WAS ISSUED ON 18.03.2014 WHICH WAS STATED TO BE DULY SERVED ON THE ASSESSEE. THE REOPENING OF THE ASSESSMENT U/S 147 OF THE 1961 ACT WAS DONE WITHIN FOUR YEARS FROM THE END OF THE ASSESS MENT YEAR. THE NOTICES WERE ISSUED BY THE AO U/S. 133(6) OF THE 1961 ACT TO THESE ELEVEN PARTIES WHICH RETURNED UN - SERVED IN ALL CASES EXCEPT IN ONLY ONE CASE I.E. M/S ANUPAM METAL , WHILE THE NOTICES IN THE REST OF THE TEN CASES RETURNED UNSERVED BY POSTAL AUTHORITIES WITH REMARK LEFT. THE INSPECTOR WAS DEPUTED BY THE AO TO MAKE ENQUIRIES WHO VIDE HIS REPORT DATED 12.11.2014 ALSO STATED THAT THESE PARTIES DID NOT EXISTED ON THE GIVEN ADDRESSES. I T WAS OBSERVED BY THE AO THAT THESE PARTIES DID NOT SUPPL IED MATERIAL TO THE ASSESSEE BUT THE AMOUNTS WERE DEBITED TO PURCHASES ACCOUNT IN THE BOOKS OF ACCOUNTS TO REDUCE TAXABLE PROFIT OR AS COVER FOR GREY MARKET PURCHASES FOR WHICH BILLS WERE NOT AVAILABLE. THIS LED TO THE AD DITION TO THE INCOME OF THE ASSESSEE BY THE AO TO THE TUNE OF 12.5% OF THE ALLEGED BOGUS PURCHASES TO THE TUNE OF RS. 6,67,95,161/ - BEING ESTIMATED PROFIT EMBEDDED IN THESE BOGUS PURCHASES WHICH AS PER THE AO REMAINED UNVERIFIABLE , PROFIT EMBEDDED ON WHI CH AS PER THE AO WAS NOT DISCLOSED BY THE ASSESSEE 6 VIGNESHWAR IMPEX 8966532 1 TYSON STEEL & TUBES 12096797 8 ANTRISH METALS 1630703 9 ANUPAM METAL 861519 10 NAYAN STEEL CENTRE 2213769 11 NATIONAL STEEL 5120023 TOTAL 66795161 I.T.A. NO.2898/MUM/2017 5 IN RETURN OF INCOME FILED WITH THE REVENUE LEADING TO ADDITIONS TO THE INCOME OF THE ASSESSEE BY THE AO , VIDE ASSESSMENT ORDER DATED 27.03.2015 PASSED U/S 143(3) R.W.S. 147 OF THE 1961 ACT. T HE AO WHILE E STIMATING AFORESAID PROFITS EMBEDDED IN THESE ALLEGED BOGUS PURCHASES RELIED UPON FOLLOWING CASE LAWS : - A) 12.5% DISALLOWANCE OUT OF BOGUS/UNVERIFIABLE PURCHASES: 1. SMT. SAJJANDEVI B JAIN V. ITO IN ITA NO .609/AHD/2009 (ITAT - AHMEDABAD BENCH) 2. SH. SIMIT P SHETH V. ITO WD - 2(2), BRD IN ITA NO.3238 & 3293/AHD/2009 (ITAT - AHMEDABAD BENCH) B) 25% DISALLOWANCE OUT OF BOGUS/UNVERIFIABLE PURCHASES: 1. SANJAY OIL CAKE INDUSTRIES V. . CIT (2008) 316 ITR 274 (GUJ) 2. VIJAY PROTEINS LTD. V. A CIT 58 ITD 428 (ABAD). 3. M/S NAND KISHORE MEGHRAJ JEWELLERS, JAIPUR CO NO. 105/JP/2009 ARISING OUT OF ITA NO. 433/JP/2009 BY ITAT JAIPUR. 4. M/S TRIDENT JEWELLERS ITAT JAIPUR ITA NO. 552/JP/2013. 5. DEVANG SHAH V . ITO, WARD - 5(3), BARODA, ITA NO.L96/A HD/2013, ITAT AHMEDABAD BENCH C) 100% DISALLOWANCE OUT OF BOGUS/UNVERIFLABLE PURCHASES: 1. CIT V . LA MEDICA (2001) 250 ITR 575 (DEL.) 2. SN GANESH RICE MILLS V. CIT (2007) 294 ITR 316 (ALL) 3. KHANDELWAL TRADING CO. V . ACIT (1996) 55 TTJ (JP) 261. 4. M/ S KOLTE PATIL DEVELOPERS LTD. V . DCIT (ITA NOS.1411 TO 1415/PN/2013) 4. THE ASSESSEE BEING AGGRIEVED BY ASSESSMENT FRAMED BY THE AO U/S 143(3) R.W.S. 147 OF THE 1961 ACT FILED FIRST APPEAL WITH LEARNED CIT(A) WHICH STOOD DISMISSED BY LEARNED CIT(A) AND ASSESSMENT ORDER PASSED BY THE AO WAS CONFIRMED BY LEARNED I.T.A. NO.2898/MUM/2017 6 CIT(A).THE LEARNED CIT(A) OBSERVED THAT THE ASSESSEE HAS NOT FURNISHED PROOF OF DELIVERY , TRANSPORT CHALLANS AND GOODS INWARD REGISTER AT GODOWN ETC EITHER BEF ORE THE AO NOR BEFORE HIM, WHICH IN THE OPINION OF LEARNED CIT(A) IS FATAL FOR THE ASSESSEE AND IT CAN BE PRESUMED THAT EITHER THESE PURCHASES ARE NON - EXISTENT OR EVEN IF THEY DID EXIST, THEY WERE NOT BACKED BY SUFFICIENT EVIDENCE TO UNDERGO TEST OF SCRUT INY. THE ASSESSEE COULD NOT PRODUCE THESE PARTIES BEFORE BOTH THE AO AS WELL BEFORE LEARNED CIT(A) . NOTICES SENT BY THE AO U/S 133(6) TO TEN OUT OF ELEVEN PARTIES RET URNED UNSERVED AND INSPECTOR HAD ALSO GIVEN A REPORT THAT THESE PARTIES DO NOT EXIST AT T HE GIVEN ADDRESSES. THE LEARNED CIT(A) ALSO RELIED UPON DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT V. DAULAT RAM RAWATMULL (1973) 87 ITR 349(SC) AND CIT V. DURGA PRASAD MORE 82 ITR 540(SC), SUMATI DAYAL V. CIT 214 IT 801(SC). THE LEARNED CIT( A) ALSO RELIED UPON DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT V.SIMIT SHETH 356 ITR 451(GUJ), TO CONFIRM /AFFIRM THE ADDITIONS AS WERE MADE BY THE AO VIDE APPELLATE ORDER DATED 17.02.2017 PASSED BY LEARNED CIT(A). 5. AGGRIEVED BY THE APPELLA TE ORDER DATED 17 - 02 - 107 PASSED BY LEARNED CIT(A), THE ASSESSEE HAS COME IN APPEAL BEFORE THE TRIBUNAL . T HE ASSESSEE HAS MOVED A N APPLICATION FOR ADJOURNMENT THROUGH ONE MR MAYANK JAIN WHEN THE APPEAL CAME UP FOR HEARING BEFORE THE BENCH ON 17.10.2018 AND NO VALID REASON S/JUSTIFICATION ARE PROVIDED IN THE APPLICATION FOR SEEKING AN ADJOURNMENT. SIMILAR ADJOURNMENT APPLICATION WAS MOVED ON EARLIER OCCASION WHEN ON THAT OCCASION THE BENCH WAS PLEASED TO GRANT AN ADJOURNMENT FIXING THE DATE OF HEARING ON 17.10 .2018 WHICH WAS DULY NOTED BY THE SAME SHRI MAYANK JAIN WHO APPEARED BEFORE THE BENCH ON 17.10.2018 WHEN THE APPEAL WAS HEARD . THE ADJOURNMENT APPLICATION AS MOVED BY THE ASSESSEE WITHOUT VALID REASONS AND JUSTIFICATIONS STOOD REJECTED BY THE B ENCH. THE L D. DR SUPPORTED THE ORDER OF THE AUTHORITIES BELOW . I.T.A. NO.2898/MUM/2017 7 6.W E HAVE GONE THROUGH THE ORDER OF AUTHORITIES BELOW AND PERUSED THE MATERIAL ON RECORD INCLUDING CASE LAWS REFERRED IN THE ORDERS OF AUTHORITIES. WE HAVE ALSO CONSIDERED THE CONTENTIONS ADVANCED BEFORE US. W E HAVE OBSERVED THAT THE ASSESSEE IS A TRADER IN FERROUS AND NON - FERROUS METALS. THE CASE OF THE ASSESSEE WAS REOPENED BY REVENUE BY INVOKING PROVISIONS OF SECTION 147 OF THE 1961 ACT WHICH WAS BASED ON INFORMATION RECEIVED BY THE AO FROM DGIT(INV.) , MUMBAI WHICH WAS IN - TURN BASED ON INCRIMINATING INFORMATION RECEIVED FROM SALES TAX DEPARTMENT, GOVERNMENT OF MAHARASHTRA THAT THE ASSESSEE IS BENEFICIARY OF BOGUS PURCHASES FROM THE FOLLOWING ELEVEN PARTIES WHO WERE ENGAGED IN ISSUING BOGUS BILLS WITHOUT DELIVERY OF MATERIAL , DETAILED AS UNDER: - ,SR:NO. NAME OF THE PARTIES AMOUNT INVOLVED (IN RS.) 1 KIRAN SALES CORPORATION/ NIDHI IMPEX INDIA 20660024 2 SURAJ STEEL INDIA 506480 3 JINESH METAL CORPORATION 2365254 4 JACOB INDUSTRIES 5099874 5 ANIKET STEEL PVT. LTD. 6274186 6 VIGNESHWAR IMPEX 8966532 1 TYSON STEEL & TUBES 12096797 8 ANTRISH METALS 1630703 9 ANUPAM METAL 861519 10 NAYAN STEEL CENTRE 2213769 11 NATIONAL STEEL 5120023 TOTAL 66795161 I.T.A. NO.2898/MUM/2017 8 THE NOTICES U/S 148 OF THE 1961 ACT WAS ISSUED WITHIN FOUR YEARS FROM THE END OF ASSESSMENT YEAR. NOTICES U/S. 133(6) WERE ISSUED BY THE AO TO THESE ELEVEN PARTIES BUT TEN OUT OF ELEVEN NOTICES RETURN UN - SERVED BY POSTAL AUTHORITIES WITH REMARKS LEFT . THE AO DEPUTED INSPECTOR TO MAKE ENQUIRIES WHO ALSO REPORTED THAT THESE PARTIES DO NOT EXIST AT THEIR GIVEN ADDRESSES. THE ASSES SEE COULD NOT PRODUCE THESE PARTIES BEFORE THE AUTHORITIES BELOW. THE ASSESSEE COULD NOT FURNISH THE PROOF OF DELIVERY, TRANSPORT CHALLANS AND GOODS INWARD REGISTER AT GODOWN ETC WITH RESPECT TO THE ALLEGED GOODS PURCHASED BY THE ASSESSEE FROM THESE PARTI ES. THE INCRIMINATING INFORMATION WAS RECEIVED FROM MAHARASHTRA SALES TAX DEPARTMENT THAT THESE ELEVEN PARTIES FROM WHOM THE ASSESSEE ALLEGEDLY PURCHASED MATERIAL WERE ACCOMMODATION ENTRY PROVIDERS WHO WERE MERELY ISSUING BOGUS BILLS WITHOUT SUPPLYING/DELI VERING ANY MATERIAL. THE GENUINENESS OF THE PURCHASES MADE FROM THESE ELEVEN PARTIES COULD NOT BE PROVED BY THE ASSESSEE AND THE INCRIMINATING INFORMATION RECEIVED BY REVENUE FROM MAHARASHTRA VAT DEPARTMENT REMAINED UN - CONTROVERTED. THE AUTHORITIES BELOW H AVE ESTIMATED EMBEDDED PROFITS @12.5% OF ALLEGED BOGUS PURCHASES TO THE TUNE OF RS. 6,67,95,161/ - MADE BY THE ASSESSEE FROM THESE ACCOMMODATION ENTRY PROVIDERS WHO WERE ISSUING BOGUS BILLS WITHOUT SUPPLYING MATERIAL. IN SUCH CASES , ESTIMATION OF THE PROF ITS HAVE TO BE UNDERTAKEN WHICH REQUIRES SOME GUESS WORK TO ASSESS INCOME UNDERLYING THESE BOGUS BILLS WHICH ARE ALLEGEDLY OBTAINED TO REDUCE PROFITS. THE HIGHER APPELLATE AUTHORITIES IN SUCH CASES WILL NOT NORMALLY INTERFERE UNLESS ITS SHOWN THAT THE GUES S WORK UNDERTAKEN BY REVENUE AUTHORITIES IS PALPABLY PERVERSE WHICH IN OUR CONSIDERED VIEW IN THE INSTANCE CASE AS ASSESSED BY BOTH THE AUTHORITIES BELOW IS VERY REASONABLE AND FAIR AND DO NOT CALL FOR OUR INTERFERE NCE .OUR VIEW IS SUPPORTED BY THE DECISIO N OF HONBLE SUPREME COURT IN THE CASE OF KACHWALA GEMS V. JCIT REPORTED IN (2007) 158 TAXMAN 71 (SC). IN OUR CONSIDERED VIEW , THE LD. CIT(A) HAS PASSED WELL REAS ONED APPELLATE ORDER WHICH DOES NOT CALL FOR OUR INTERFERENCE AND THEREFORE WE HAVE NO HESITATION IN I.T.A. NO.2898/MUM/2017 9 CONFIRM ING/AFFIRMING WELL REASONED APPELLATE ORDER PASSED BY LD. CIT(A) . THE ASSESSEE FAILS IN THIS APPEAL WHICH STOOD DISMISSED . WE ORDER ACCORDINGLY. 7. IN THE RESULT , APPEAL OF THE ASSESSEE IN ITA NO. 2898/MUM/2017 STOOD DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON 2 2 .10.2018. 2 2 .10.2018 SD/ - SD/ - (JOGINDER SINGH) (RAMIT KOCHAR) VICE PR ESIDENT ACCOUNTANT MEMBER MUMBAI, DATED: 2 2 .10.2018 NISHANT VERMA SR. PRIVATE SECRETARY COPY TO 1 . THE APPELLANT 2 . THE RESPONDENT 3 . THE CIT(A) CONCERNED, MUMBAI 4 . THE CIT - CONCERNED, MUMBAI 5 . THE DR BENCH, 6 . MASTER FILE // TUE COPY// BY ORDER DY/ASSTT. REGISTRAR ITAT, MUMBAI