MADHU BANWARILAL AGARWAL, MUMBAI V. ITO WD 32(2)(3), MUMBAI

ITA 2935/MUM/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 0334 (ITAT-MUMBAI)
• Duration Of Justice: 9 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-02-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 25-04-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Bogus purchase
• Section: 133(6)

Judgement Text

- IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI , BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER ./ I.T.A. NO. 2935/MUM/2017 ( / ASSESSMENT YEAR: 2009 - 10 ) SMT. MADHU BANWARILAL AGARWAL PROP. M/S. HINDUSTAN METAL FORGE, 502, 5 TH FLOOR, B - WING, SHEETAL CHS, SAPTARSHI SANKAL, DAHISAR (E), MUMBAI - 400 068 / VS. ITO, WARD - 32(2)(3), MUMBAI ./ ./ PAN/GIR NO. ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : NONE / RESPONDENT BY : SHRI HARESH P. SHAH / DATE OF HEARING : 30.11.2017 / DATE OF PRONOUNCEMENT : 05.02 .2018 / O R D E R PER S HAMIM YAHYA , A. M.: THIS A PPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE O RDER BY THE COMMISSIONER OF INCOME TAX (APPEALS) DATED 08.02.2017 AND PERTAINS TO THE A SSESSMENT YEAR 2009 - 10. 2. THE GROUNDS OF APPEAL READ AS UNDE R: 2 ITA NO. 2935/MUM/2017 (A.Y.2009 - 10) SMT. MADHU BANWARILAL AGARWAL VS. ITO (I) CONCISE GROUNDS OF APPEAL (1) ON THE FACTS & CIRCUMSTANCES AND IN LAW THE LEARNED CIT(A) - 44, MUMBAI [CIT(A)] ERRED IN CONFIRMING THE ADDITION OF RS.19,31,745 / - , BEING DIFFERENTIAL AMOUNT OF G.P., ADOPTING G.P. @10.16%, ON AD - HOC BASIS, ON THE TOTAL TURNOVER OF RS.2,50,33,667 / - AFTER REJECTING THE BOOKS U/S. 145(3) OF THE ACT MERELY ON THE BASIS OF SUSPICION, SURMISES OR CONJECTURE. (2) ON THE FACTS AND CIRCUMSTANCES THE LEARNED CIT(A) FAILED TO APPRECIATE THAT THE BASIS OF ALLEGED ADDITIO N WAS PURELY UPON THE UNDISCLOSED INFORMATION FROM THE OFFICE OF DGIT (INV), MUMBAI. (3) ON THE FACTS AND CIRCUMSTANCES YOUR APPELLANT PRAYS THAT THE ALLEGED ADDITION OF RS. 19,31,7457 - MAY BE DELETED & OBLIGE. (II) INCIDENTAL GROUNDS OF APPEAL (1) ON THE FACTS AND CIRCUMSTANCES THE LEARNED CIT(A) FAILED TO APPRECIATE THAT THE ALLEGED PURCHASES HAD COMPLETE CORRELATION WITH THE SALES AFFECTED DURING THE YEAR. (2) THE LEARNED CIT(A) FAILED TO APPRECIATE THAT THERE WAS NO INDEPENDENT ENQUIRY/FINDING BY THE LEARNED ITO IN RESPECT OF THE ALLEGED SUSPICIOUS DEALERS WITH REGARD TO THE PURCHASE TRANSACTIONS AND CORRESPONDING PAYMENTS THROUGH BANK WHICH WAS MATERIALLY IMPORTANT BEFORE MAKING SUCH ADDITION. (3) ON THE FACTS AND CIRCUMSTANCES AND IN LAW, TH E LEARNED CIT(A) FAILED TO APPRECIATE THAT THE ITO OUGHT TO HAVE CALLED FOR THE RELEVANT MATERIAL FROM THE CONCERNED AUTHORITY AND APPLIED MIND AND THEN, IN THE INTEREST OF JUSTICE, HE OUGHT TO HAVE AFFORDED AN OPPORTUNITY TO CONFRONT THE FINDING BEFORE CO MING TO SUCH A SERIOUS ALLEGATION. (4) ON THE FACTS AND CIRCUMSTANCES, YOUR APPELLANT PRAYS THAT THE ALLEGED ADDITION OF RS. 19,31,745 / - MAY BE DELETED & OBLIGE. 3. BRIEF FACTS OF THE CASE THAT THE ASSESSING OFFICER HAS R ECEIVED INFORMATION FROM THE SAL ES TAX DEPARTMENT THAT THE ASSESSEE HAS SHOWN PURCHASES FROM 12 BOGUS CONCERNS. THE NAMES OF THESE CONCERNS ARE MENTIONED IN PARA 4 OF THE ASSESSMENT 3 ITA NO. 2935/MUM/2017 (A.Y.2009 - 10) SMT. MADHU BANWARILAL AGARWAL VS. ITO ORDER. THE TOTAL PURCHASES FROM THESE 12 PARTIES COMES TO RS.1,54,55,180 / - . DURING THE COURSE OF ASSESSMEN T, THE ASSESSING OFFICER ISSUED NOTICES U/S. 133(6) TO THE SAID PARTIES. ALL THE NOTICES WERE RETURNED UNSERVED BY THE POSTAL AUTHORITIES. IT IS THE CONTENTION OF THE ASSESSING OFFICER THAT THE ASSESSEE FAILED TO ESTABLISH THE GENUINENESS OF PURCHASES. SIN CE THE ASSESSEE HAD SHOWN A GROSS PROFIT RATE OF 2.44% THE ASSESSING OFFICER QUESTIONED THE CORRECTNESS OF BOOK RESULT OF THE ASSESSEE IN THE LIGHT OF UNVERIFIED PURCHASES. AFTER CONSIDERI NG THE TOTALITY OF FACTS, THE ASSESSING OFFICER STATED THAT THE ASSE SSEE HAS ARRANGED BILLS WORTH RS. 1,54,55,1807 - TO SUPPRESS HER TRUE PROFIT. THE ASSESSING OFFICER THEREAFTER ESTIMATED HER TRUE PROFIT BY ESTIMATING GROSS PROFIT @ 10.16%. THE ASSESSING OFFICER ACCORDINGLY MADE AN ADDITION OF RS. 19,31,745/ - . 4. UPON THE ASSESSEES APPEAL, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) CONFIRMED THE ACTION OF THE ASSESSING OFFICER BY HOLDING AS UNDER: I HAVE CAREFULLY GONE THROUGH THE ASSESSMENT ORDER AS WEL L AS THE WRITTEN SUBMISSION FILED BY THE APPELLANT. SOME 5 - 6 YEARS A GO, THE SALES TAX DEPARTMENT OF THE GOVERNMENT OF MAHARASHTRA HAD CONDUCTED EXTENSIVE ENQUIRIES AGAINST SUCH DEALERS WHO USED TO PROVIDE BILLS FACILITATING BOGUS PURCHASES/SALES. AS A RESULT OF THIS INQUIRY, INFORMATION ABOUT MANY ASSESSEES WERE FORWARDED TO THE INCOME TAX DEPARTMENT. THE A.O. HAS STATED IN THE ASSESSMENT ORDER THAT THE APPELLANT IS ONE SUCH PERSON WHO .HAS INFLATED HER PURCHASES BY SHOWING PURCHASES FROM MANY SUCH PERSONS WHO APPEAR IN THE LIST OF BOGUS ENTRIES PROVIDERS AS PREPARED BY THE SALES T AX DEPARTMENT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE A.O. FOUND THAT THE ASSESSEE HAD NOT BEEN ABLE TO ESTABLISH THE GENUINENESS OF PURCHASES IN DISPUTE. THE MAIN ARGUMENTS OF THE AO ON THE BASIS OF WHICH HE HAD FORMED HIS OPINION WERE - 4 ITA NO. 2935/MUM/2017 (A.Y.2009 - 10) SMT. MADHU BANWARILAL AGARWAL VS. ITO (1) THE ASSESSEE WAS NOT ABLE TO SUBMIT ANY LORRY RECEIPTS OR ANY DETAILS REGARDING TRANSPORTATION OF GOODS. (2) THE SUPPLIERS FROM WHOM THE DISPUTED PURCHASES HAVE BEEN MADE ARE INCLUDED IN THE LIST OF HAWALA OPERATORS PREPARED BY THE SALES TAX D EPARTMENT. (3) THE SUPPLIERS FROM WHOM THE DISPUTED PURCHASES HAVE BEEN MADE, DID NOT COMPLY TO NOTICE U/S 133(6). (4) THE SUPPLIERS FROM WHOM THE DISPUTED PURCHASES HAVE BEEN MADE, WERE NOT PRODUCED BEFORE THE AO. 3.4 IT IS S EEN FROM RECORD THAT THE A.O. HAS NOT MECHANICALLY DISALLOWED T HE ENTIRE DISPUTED PURCHASES A MOUNTING TO RS.1,54,55, 180/ - , RATHER HE HAS ESTIMATED THE GROSS PROFIT BECAUSE OF THE FACT THAT THE PURCHASES OF THE APPELLANT REMAINED UNVERIFIABLE. IT IS AN UNDI SPUTED FACT THAT THE NOTICES U/S 133(6) ISSUED TO THE SUPPLIERS MENTIONED ABOVE CAME BACK UNDELIVERED. WHEN THE BASIC 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. IT IS ALSO SEEN FROM THE ASSESSMENT ORDER THAT THE APPELLANT HAS SHOWN A GP OF 2.44%. THE A.O. HAS THEREFORE RECOMPUTED THE GP OF THE APPELLANT @ 10.16% AS AGAINST 2.44% DISCLOSED BY THE APPELLA NT. THE HIGHER RATE OF PROFIT TAKEN BY THE AO IS BASED ON THE FACT THAT PURCHASES AMOUNTING TO RS . 1,54,55, 180 / - COULD NOT BE ESTABLISHED TO BE GENUINE BY THE APPELLANT. AS STATED ABOVE INSTEAD OF DISALLOWING THE ENTIRE DISPUTED PURCHASES THE AO HAS COMPUTE D THE GROSS PROFIT WHICH SHOULD HAVE ARISEN TO THE APPELLANT. SINCE THE A.O. HAS HIMSELF GIVEN SUBSTANTIAL RELIEF TO THE ASSESSEE BY A SPEAKING ORDER I DO NOT SEE ANY REASON TO INTERFERE IN THE ORDER OF THE A.O. 5. AGAINST THE ABOVE ORDER, THE ASSESSEE IS IN APPEAL BEFORE THE ITAT. 6. I HAVE HEARD THE LD. DEPARTMENTAL REPRESENTATIVE. NONE APPEARED ON BEHALF OF THE ASSESSEE, DESPITE NOTICE. I FIND THAT CREDIBLE AND COGENT INFORMATION WAS RECEIVED IN THIS CASE BY THE ASSESSING OFFICER THAT CERTAIN ACCOMMOD ATION ENTRY PROVIDER/BOGUS SUPPLIERS WERE BEING USED BY CERTAIN PARTIES TO OBTAINED BOGUS BILLS. ASSESSEE WAS FOUND TO HAVE TAKEN ACCOMMODATION ENTRY/BOGUS PURCHASE BILLS DURING THE CONCERNED ASSESSMENT YEAR FROM DIFFERENT PARTIES. BASED UPON THIS INFORMAT ION ASSESSMENT WAS 5 ITA NO. 2935/MUM/2017 (A.Y.2009 - 10) SMT. MADHU BANWARILAL AGARWAL VS. ITO REOPENED. THE CREDIBILITY OF INFORMATION RELATING TO REOPENING REMAINS UN - ASSAILED. IN SUCH FACTUAL SCENARIO THE ASSESSING OFFICER HAS MADE THE NECESSARY ENQUIRY. THE ASSESSING OFFICER HAS ISSUED NOTICES TO PARTIES WHICH HAS REMAINED UNR ESPONDED. ASSESSEE HAS NOT BEEN ABLE TO PROVIDE ANY CONFIRMATION FROM ANY OF THE PARTY. ASSESSEE HAS ALSO NOT BEEN ABLE TO PRODUCE ANY OF THE PARTIES. NECESSARY EVIDENCE RELATING TO TRANSPORTATION OF THE GOODS WAS ALSO NOT ON RECORD. IN THIS FACTUAL SCENA RIO IT IS AMPLY CLEAR THAT ASSESSEE HAS OBTAINED BOGUS PURCHASE BILLS. MERE PREPARATION OF DOCUMENTS FOR PURCHASES CANNOT CONTROVERT OVERWHELMING EVIDENCE THAT THE PROVIDERS OF THESE BILLS ARE BOGUS AND NON - EXISTENT. 7 . IN SUCH CIRCUMSTANCE , THERE IS NO DOUBT THAT THESE PARTIES ARE NON - EXISTENT. I FIND IT FURTHER STRANGE THAT ASSESSEE WANTS THE REVENUE TO PRODUCE ASSESSEES OWN VENDORS, W HOM THE ASSESSEE COULD NOT PRODUCE. TH E PURCHASE BILLS FROM THESE NON - EXISTENT THE/BOGUS PARTIES CANNOT BE TAKEN AS COG ENT EVIDENCE OF PURCHASES. IN LIGHT OF THE OVERWHELMING EVIDENCE THE REVENUE AUTHORITIES CANNOT PUT UPON BLINKERS AND ACCEPT THESE PURCHASES AS GENUINE. THIS PROPOSITION IS DULY SUPPORTED BY HONBLE APEX COURT DECISION IN THE CASE OF SUMATI DAYAL 214 ITR 801 AND DURGA PRASAD M ORE 82 ITR 540. IN THE PRESENT CASE , THE ASSESSEE WANTS THAT THE UNASSAILABLE FACT THAT THE SUPPLIERS ARE NON EXISTENT AND THUS BOGUS SHOULD BE IGNORED AND ONLY THE DOCUMENTS BEING PRODUCED SHOULD BE CONSIDERED. THIS PROPOSITION IS TO TALLY UNSUSTAINABLE IN LIGHT OF ABOVE APEX COURT DECISIONS. 6 ITA NO. 2935/MUM/2017 (A.Y.2009 - 10) SMT. MADHU BANWARILAL AGARWAL VS. ITO 8 . I FURTHER FIND THAT HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF NIKUNJ EXIMP E NTERPRISES (IN WRIT PETITION NO 2860, ORDER DT 18.6.2014) HAS UPHELD HUNDRED PERCENT ALLOWANCE FOR THE PURCHA SES SAID TO BE BOGUS WHEN THE SALES HAVE NOT BEEN DOUBTED. HOWEVER THE FACTS OF THAT CASE WERE DIFFERENT. FURTHERMORE THE SALES IN THAT CASE WERE BASICALLY TO GOVERNMENT DEPARTMENTS. HENCE THE RATIO FROM THIS DECISION IS NOT FULLY APPLICABLE ON THE FACTS OF THE CASE. 9 . IN THESE CIRCUMSTANCES , THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS REFERRED TO HONBLE G UJARAT HIGH COURT DECISION IN THE CASE OF TAX APPEAL NO 240 OF 2003 IN THE CASE OF N K INDUSTRIES VS DY CIT, ORDER DT 20/06.2016, WHEREIN HUNDRED PE RCENT 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. IT WAS EXPOUNDED THAT WHEN PURCHASE BILLS HAVE BEEN FOUND TO BE BOGUS 100% DISALLOWANCE W AS REQUIRED. THE SPECIAL LEAVE PETITION AGAINST THIS ORDER ALONG WITH OTHERS HAS BEEN DISMISSED BY THE HONBLE APEX COURT VIDE ORDER DT 16 .1 2017. 1 0 . I FURTHER NOTE THAT HONBLE RAJASTHAN HIGH COURT HAS SIMILARLY TAKEN NOTE OF DECISIONS OF THE APEX COUR T ON THE ISSUE OF BOGUS PURCHASES IN THE CASE OF CIT JAIPUR VS SHRUTI GEMS IN ITA NO. 658 OF 2009. THE HONBLE HIGH COURT HAS REFERRED TO THE DECISION OF CIT JAIPUR VS. ADITYA GEMS, D. B. IN ITA NO. 234 OF 2008 DATED 02.11.2016, WHEREIN THE HONBLE COURT HAD INTER ALIA HELD AS UNDER: 7 ITA NO. 2935/MUM/2017 (A.Y.2009 - 10) SMT. MADHU BANWARILAL AGARWAL VS. ITO 'CONSIDERING THE LAW DECLARED BY THE SUPREME COURT IN THE CASE OF VIJAY PROTEINS LTD. VS. COMMISSIONER OF INCOME TAX, SPECIAL LEAVE TO APPEAL (C) NO.8956/2015 DECIDED ON 06.04.2015 WHEREBY THE SUPREME COURT HAS DISMISSED THE SLP CONFIRMED THE ORDER DATED 09.12.2014 PASSED BY THE GUJARAT HIGH COURT AND OTHER DECISIONS OF THE HIGH COURT OF GUJARAT IN THE CASE OF SANJAY OILCAKE INDUSTRIES VS. COMMISSIONER OF INCOME TAX (2009) 316 ITR 274 (GUJ) AND N.K. INDUSTRIES LTD. VS. DY. C.I .T., TAX APPEAL NO.240/2003 DECIDED ON 20.06.2016, THE PARTIES ARE BOUND BY THE PRINCIPLE OF LAW PRONOUNCED IN THE AFORESAID THREE JUDGMENTS. 1 1 . UPON CAREFUL CONSIDERATION I NOTE THA T THIS IS NOT AN APPEAL BY THE R EVENUE. HENCE , IT WILL NOT BE APPROPR IATE TO CONSIDER AND TAKE AWAY THE RELIEF ALREADY GRANTED BY THE LD. CIT(A) TO THE ASSESSEE. AS HELD BY THE HON'BLE JURISDICTIONAL HIGH COURT WHEN SALES ARE NOT DOUBTED 100% DISALLOWANCE FOR BOGUS PURCHASE IS NOT DISALLOWABLE. HENCE , I CONFIRM THE ORDER OF LD. CIT(A). 1 2 . IN LIGHT OF THE ABOVE HIGH COURT AND HONBLE APEX COURT DECISION, THE DECISIONS OF TRIBUNAL REFERRED BY THE LD. LD. COUNSEL OF THE ASSESSEE ARE NOT BEING DEALT WITH. 1 3 . IN THE RESULT , THIS APPEAL FILED BY THE ASSESSEE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 05.02.2018 SD/ - (S HAMIM YAHYA ) / A CCOUNTANT MEMBER MUMBAI ; DATED : 05.02.2018 . . ./ ROSHANI , SR. PS 8 ITA NO. 2935/MUM/2017 (A.Y.2009 - 10) SMT. MADHU BANWARILAL AGARWAL VS. ITO / COPY OF THE ORDER FORWARDED 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