VIJAY BHOGILAL SHAH, MUMBAI V. ACIT 32(3), MUMBAI

ITA 2918/MUM/2017

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 9926 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-09-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 24-04-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: V JANARDHANAN
• Assessee Lawyers: RATAN KUMAR SAMAL
• Keywords: Bogus purchase; Accommodation entries; Onus to prove; Reason to believe
• Section: 133(6)

Judgement Text

- IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI , BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER ./ I.T.A. NO. 2918/MUM/2017 ( / ASSESSMENT YEAR: 2009 - 10 ) SHRI VIJAY BOGILAL SHAH PROP. OF M/S. VIJAY STEELS, B - 1203, PRATAP HERITAGE, L. T. ROAD, BORIVALI (IST), MUMBAI - 400 092 / VS. ACIT - 32(3), ROOM NO. 108, C - 11, 1 ST FLOOR, B.K.C., MUMBAI ./ ./ PAN/GIR NO. AKGPS 8870 Q ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI RATAN KUMAR SAMAL / RESPONDENT BY : SHRI V. JANARDHANAN / DATE OF HEARING : 28.06.2017 / DATE OF PRONOUNCEMENT : 01.09 .2017 / O R D E R PER SHAMIM YAHYA , A. M.: THIS IS AN A PPEAL BY THE ASSESSEE DIRECTED AGAINST THE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS) - 44 , MUMBAI (CIT(A) FOR SHORT) DATED 22.02.2017 , FOR THE ASSES SMENT YEAR (A.Y.) 2009 - 10 . 2. THE ASSESSEE IS AGGRIEVED BY THE ORDER OF THE LD. CIT(A), WHEREIN 12.57% DISALLOWANCE ON ACCOUNT OF BOGUS PURCHASE AMOUNTING TO RS.23,52,124/ - . 2 ITA NO. 2918/MUM/2017 (A.Y. 2009 - 10) SHRI VIJAY BOGILAL SHAH VS. ACIT 3. IN THIS CASE , THE AO HAD MADE A DISALLOWANCE OF RS.23,52,124/ - BEING 12.5% OF THE BOGUS PURCHASES AMOUNTING TO RS.1,88,16,994/ - . 4. THE FINDINGS OF THE ASSESSING OFFICER (A.O.) ON THE ISSUE OF BOG US P URCHASES READ AS UNDER: 5.4 THE SUBMISSIONS OF THE ASSESSEE HAVE BEEN CONSIDERED AT LENGTH AND I AM NOT INCLINED TO ACCEPT THE SAME FOR THE FOLLOWING REASONS: THE ASSESSEE FAILED TO FURNISH THE FOLLOWING DETAILS OR DOCUMENTARY EVIDENCES 1) ANY DOCUMENTARY EVIDENCE, SUBSTANTIATING RECEIPT OF MATERIAL CLAIMED TO BE PURCHASED FROM THE PARTY, 2) HE FAILED TO LINK THE PURCHASES OF THESE MATERIALS WITH SALES MADE BY HIM. 3) HE FAILED TO PRODUCE THE PARTY FROM WHOM PURCHASES WERE MADE FOR VERIFICATION. 6. HERE, IT IS PERTINENT TO NOTE THAT, THE AFOREMENTIONED PARTY FROM WHOM THE ASSESSEE RECORDED PURCHASE IS APPEARING IN THE LIST OF H AWALA DEALER AS PER THE LIST PROVIDED BY THE SALES TAX DEPARTMENT, GOVERNMENT OF MAHARASHTRA. THE DETAILS (LIKE DEPOSITION, AFFIDAVIT, ENQUIRY REPORT, STATEMENT ETC) WERE RECEIVED BY THIS OFFICE FROM SALES TAX DEPARTMENT THROUGH DGIT (INV.), MUMBAI. THESE DETAILS CLEARLY ESTABLISH THAT THIS CONCERN IS INTO PROVIDING BOGUS BILLS AFTER CHARGING SMALL AMOUNT OF COMMISSION WITHOUT ANY ACTUAL DELIVERY OF GOODS. 6.1 THUS DETAILS FURNISHED BY THE ASSESSEE IN THIS REGARD ARE COUNTERFEIT/AND IS COLOURABLE DEVICE. IT WAS CLAIMED BY THE ASSESSEE THAT THE PURCHASES FROM AFORE MENTIONED PARTIES WERE GENUINE, HOWEVER HE FAILED TO PRODUCE THE PARTY OR FURNISH ANY ADDRESS WHERE A NOTICE COULD BE SERVED ON THE SAID PARTY. THE PRODUCTION OF INVOICE IS OF NO HELP TO THE ASS ESSEE, SINCE IN THE ACTIVITY OF ACCOMMODATION ENTRY; SUCH DOCUMENTS ARE METICULOUSLY MAINTAINED BOTH BY THE ENTRY PROVIDER AND THE ENTRY SEEKER. 6.2 ON THE OTHER HAND THERE WAS SUFFICIENT REASON TO BELIEVE THAT THIS CONCERN IS ONLY A PAPER CONCERN WHIC H DOES NOT EXIST IN REALITY. THE ONLY WORK 3 ITA NO. 2918/MUM/2017 (A.Y. 2009 - 10) SHRI VIJAY BOGILAL SHAH VS. ACIT IT DOES IS TO ISSUE ACCOMMODATION ENTRIES AFTER CHARGING SMALL AMOUNT OF COMMISSION. IN ORDER TO SETTLE THIS ISSUE AND CONSIDERING THE ASSESSEE'S FAILURE TO PRODUCE THE PARTY, WARD INSPECTOR WAS DEPUTED TO SERVE T HE NOTICE U/S 133(6) AND MAKE ENQUIRY IN RESPECT OF EXISTENCE OF THIS CONCERN. . 6.3 THE NOTICES ISSUED WERE NOT DELIVERED AND INQUIRIES CONDUCTED BY THE WARD INSPECTOR ESTABLISHED THAT THE PARTY DOES NOT EXIST ON THE ADDRESS MENTIONED IN THE BILLS FURN ISHED BY THE ASSESSEE. FURTHER INQUIRIES ALSO REVEALED THAT THESE PARTIES HAD NOT EXISTED AT ANY PREVIOUS DATE IN THE PREMISE. 7. MOREOVER, CONTENTION OF THE ASSESSEE THAT THE PURCHASES ARE GENUINE IS NOT ACCEPTABLE FOR THE FOLLOWING REASONS: - I . THE ASSESSEE SUBMITTED INVOICES FROM THE ALLEGED BOGUS PARTIES BUT FAILED TO PRODUCE DELIVERY CHALLANS AND IT WAS CLAIMED BY THE ASSESSEE THAT IN THEIR LINE OF BUSINESS THERE IS NO SYSTEM OF ISSUING DELIVERY CHALLAN. ON PERUSING THE SAME, IT WAS FOUND THAT THE RE WAS NO SIGNATURE OF RECEIVING. NO SUPPORTING DOCUMENT FOR ACKN OWLEDGEMENT OF RECEIPT OF GOODS WAS PRODUCED BY THE ASSESSEE TO CONFIRM THAT THE GOODS PURCHASED WERE ACTUALLY DELIVERED TO HIM. IN THE CASE OF CREDIT PURCHASES, LIKE IN THIS CASE, A CKNO WLEDG EMENT OF RECEIPT OF MATERIAL IS A MUST TO SETTLE THE CLAIM IN THE FUTURE. II. MERE MENTION OF THE PURCHASE IN A HAND - WRITTEN NOTEBOOK MAINTAINED AS STOCK REGISTER DOES NOT TRANSPIRE MUCH CONFIDENCE IN THE CLAIM OF THE ASSESSEE THAT THE PURCHASE WAS GENUIN E. III. THE PRODUCTION OF INVOICE IS OF NO HELP TO THE ASSESSEE, SINCE IN THE ACTIVITY OF ACCOMMODATION ENTRY; SUCH DOCUMENTS ARE METICULOUSLY MAINTAINED BOTH BY THE ENTRY PROVIDER AND THE ENTRY SEEKER. IV. THE CONTENTION THAT THE PAYMENT WAS MADE BY ACC OUNT PAYEE CHECK IS NOT A FULL - PROOF METHOD OF SUBSTANTIATING ASSESSEE'S CLAIM AS IT WAS ALREADY ACCEPTED BY PERSONS ON WHOM ENQUIRY WAS DONE BY SALES TAX DEPARTMENT THAT CASH IS GIVEN BACK AFTER DEDUCTION OF COMMISSION ONCE THE CHEQUE IS REALIZED. V. ASS ESSEE DID NOT PRODUCE THE PURCHASE PARTY FOR VERIFICATION. THE ONUS TO PROVE THE GENUINENESS OF EXISTENCE OF THE PARTY LIES ON THE ASSESSEE. THE ASSESSEE FAILED TO DISCHARGE THIS RESPONSIBILITY. 8. IN VIEW OF THE ABOVE FACTS, IT IS CLEAR THAT EVEN IF TH E MATERIAL IN QUESTION SHOWN AS PURCHASE FROM THE ABOVEMENTIONED PARTIES THROUGH FICTITIOUS INVOICE WAS ACTUALLY PURCHASED BY THE ASSESSEE, IT WAS PURCHASED FROM A SOURCE BEST KNOWN TO THE ASSESSEE, AND NOT FROM THE ABOVE MENTIONED BOGUS PARTIES 4 ITA NO. 2918/MUM/2017 (A.Y. 2009 - 10) SHRI VIJAY BOGILAL SHAH VS. ACIT BECAUSE TH E PARTIES SIMPLY DO NOT EXIST. THE RECEIPT OF MATERIAL IS NOT IN MUCH DOUBT BECAUSE THE ASSESSEE IS A TRADER AND WITHOUT RECEIVING SUCH MATERIAL THE CORRESPONDING SALES WOULD NOT HAVE BEEN POSSIBLE. HOWEVER, IT IS AMPLY CLEAR THAT BILL FROM THE SAID PARTY HAS BEEN PROCURED FOR ACCOMMODATING PURCHASE FROM THE GRAY MARK ET. 5. UPON ASSESSEES APPEAL, THE LD. CIT(A) CONFIRMED THE ORDER OF THE A.O. AND HE LD AS UNDER: I HAVE CAREFULLY GONE THROUGH THE ASSESSMENT ORDER AS WELL AS THE WRITTEN SUBMISSION OF THE AR . I HAVE ALSO PERUSE, J THE DETAILS FILED BY THE AR . SOME 5 - 6 YEARS AGO, THE SALES TAX DEP ARTMENT OF THE GOVERNMENT OF MAHARASHTRA HAD CONDUCTED EXTENSIVE ENQUIRIES A G AINST SUCH DEALERS WHO USED TO PROVIDE BILLS FACILITATI N G BOGUS PURCHASES/SALES. AS A RESU LT OF THIS INQUIRY, INFORMATION ABOUT MANY ASSESSEES WERE F ORWARDED TO THE INC O ME TAX DEPARTMENT. THE A.O. HA S STATED IN THE ASSESSMENT ORDER THAT THE APPELLANT IS ONE SUCH PERSON WHO HAS INFLATED HIS PURCHASES BY SHOWIN G PURCHASES FROM MANY SUCH PERSON WH O APPEAR IN THE LIST OF BOGUS ENT RIES PROVIDERS AS PREPARED BY THE SALE TAX DEPARTM ENT. DURING THE COUR S E OF ASSESSMENT PROCEEDINGS, THE A.O. F OUND THAT THE ASSESSEE HAD NOT BEEN ABLE TO ESTABLISH THE GENUINENESS OF PURCHASES IN DISPUTE. THE MAIN AR GUMENTS OF THE AO ON THE BASIS OF W HICH HE HAD FORMED HIS OPINION WERE: (1) THE ASSESSEE WAS NOT ABLE TO SUBMIT ANY LORRY RECEIPTS OR ANY DETAILS REGARD ING TRANSPORTATION OF GOODS . (2) THE SUPPLIERS FR OM WHOM THE DISPUTED PURCHASES H AVE BEEN MADE ARE IN CLU D E D IN THE LIST OF H AWALA OPERATORS PREPARED BY THE S ALES TAX D EPARTMENT. (3) THE SUPPLIERS FROM WHOM THE DISPUTED PURCHASES HAVE BEEN MADE WERE NOT ROUND AT THE GIVEN A DDRESSES . (4) THE SUPPL I ERS FR OM WHOM THE DISPUTED PURCHASES HA VE BEEN MADE WERE NOT PRO DUCED BEFORE THE AO. (5) EVEN IF THE PU R CHASES A RE NOT TREATED AS BOGUS, THE EXPENDITURE ON SUCH PURCHASES REMAIN UNEXPLAINED. 3.4 IT IS SEEN FROM RECORD THAT THE A.O. HAS NOT MECHANICALLY DISALLOWED THE ENTIRE DISPUTED PURCHASES AMOUNTING TO RS.1, 88,16,994/ - , RATHER HE HAS DISALLOWED 12.5% OF THE AMOUNT OF PURCHASE IN DISPUTE. IT IS NOT IN DISPUTE THAT 5 ITA NO. 2918/MUM/2017 (A.Y. 2009 - 10) SHRI VIJAY BOGILAL SHAH VS. ACIT THE NOTICES U/S. 133(6) ISSUED TO THE SUPPLIERS MENTIONED ABOVE COULD NOT BE SERVED BECAUSE PARTIES WERE NOT FOUND AT THE GIVEN ADDRESS. WHEN THE BA SIC DETAILS LIKE PURCHASES REMAIN UNVERIFIABLE , IT IS OPEN FOR THE A.O. TO REJECT THE BOOK RESULTS OF THE ASSESSEE. THUS, IT IS HELD THAT THE A.O. WAS RIGHT IN REJECTING THE BOOK RESULTS OF THE ASSESSEE. FURTHERMORE, AS STATED ABOVE THE A.O. HAS HIMSELF ES TIMATED THE ADDI TIONAL PROFIT WHICH SHOULD HAVE ARISEN BECAUSE OF THE ALLEGED BOGUS PUR C HASE R ATHER THAN D I SALLOWIN G THE ENTIRE DISPUTED PURCHASES. THE A.O. ALSO FAIRLY CONCEDED IN PARA 8 OF HIS ORDER THAT TH E APPELLANT HAD INCURR ED EXPENDITURE ON SUCH PU RCHASES, BUT SUCH EXPENDITURES REMAIN UNEXPLA INED . FURTHER THE R ATE OF PROFIT TAKEN BY THE A O ON THE DISPUTED PURCHASE S SEEMS REASONABLE CONSIDERING NATU R E AND S CALE OF BUSINESS OF THE APPELLANT. SINCE THE A.O. HAS HIMSEL F GIVEN SU BSTANTIAL RELIEF TO THE A SSESSEE BY A SPEAKIN G ORDER I DO NOT SEE A N Y REAS ON TO INTERFERE IN THE ORDER OF THE A O . THE GROUNDS OF APPEAL NO. 1 IS DISMI SSED AND ACCORDINGLY ADDITION OF RS . 23,52,124/ - IS CONFIRME D. 6. AGAINST THIS ORDER , THE ASSESSEE HAS FILED APPEAL BEFORE THE ITAT . 7. I HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. UPON CAREFUL CONSIDERATION OF THE FACTS OF THE CASE, I FIND THAT OVERWHELMING EVIDENCE HAVE BEEN REFERRED BY THE AUTHORITIES BELOW THAT THE IMPUGNED PURCHASES ARE BOGUS. THERE IS NO EVIDENCE OF THE ACTUAL MOVEMENT OF THE GOODS UNDER DISPUTE. IN THESE CIRCUMSTANCES LEARNED DEPARTMENTAL RE PRESENTATIVE HAS REFERRED TO HONBLE GUJARAT HIGH COURT DECISION IN THE CASE OF TAX APPEAL NO 240 OF 2003 IN THE C ASE OF N K INDUSTRIES V/S. DY. CIT , ORDER DT 20/ 06.2016, WHEREIN 100% 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. THE SPECIAL LEAVE PETITION AGAINST THIS ORDER ALONG WITH OTHERS HAS BEEN D ISMISSED BY THE HONBLE APEX COURT VIDE ORDER DT . 16 .12017 6 ITA NO. 2918/MUM/2017 (A.Y. 2009 - 10) SHRI VIJAY BOGILAL SHAH VS. ACIT 8. HOWEVER , I FIND THAT THIS IS NOT AN APPEAL BY THE R EVENUE. IN SUCH CIRCUMSTANCES , IT WILL NOT BE APPROPRIATE TO TAKE AWAY THE RELIEF ALREADY GRANTED BY THE LEARNED CIT ( A ) . ACCORDINGLY , I UPHO LD THE ORDER OF LEARNED CIT ( A ) WHEREIN HE HAS SUSTAINED 12.5% AS DISALLOWANCE OUT OF THE BOGUS PURCHASE. 9. IN THE RESULT THIS APPEAL FILED BY THE ASSESSEE STANDS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON 01/09/2017 SD/ - (S HAMIM YAHYA ) / A CCOUNTANT MEMBER MUMBAI ; DATED : 01/09/2017 . . ./ ROSHANI , SR. PS / COPY OF THE ORDER FORWARDE D TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F ILE / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI