RAJENDRA CHANDULAL SHAH, MUMBAI V. ITO 33(3)(1), MUMBAI

ITA 2937/MUM/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 0044 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-09-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Next Hearing Date: 03-07-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 25-04-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: V JANARDHANAN
• Assessee Lawyers: V H JARIWALA
• Keywords: Bogus purchase; Accommodation entries; Onus to prove
• Section: 147; 148

Judgement Text

, SMC , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES SMC, MUMBAI BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER ITA NO.2937/MUM/2017 : ASST.YEAR 2009-2010 SHRI RAJENDRA CHANDULAL SHAH 101 RAJ VAIBHAV II, MAHAVIR NAGAR DAHANUKAR WADI, KANDIVALI (WEST) MUMBAI 400 067. PAN : AAJPS4317F. / VS. INCOME TAX OFFICER WARD 33(3)(1) MUMBAI ( / APPELLANT) ( / RESPONDENT) /APPELLANT BY : SHRI V.H.JARIWALA /RESPONDENT BY : SHRI V.JANARDHANAN / DATE OF HEARING : 03.07.2017 / DATE OF PRONOUNCEMENT : 07.09.2017 / O R D E R THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST ORDER OF LEARNED CIT(A) DATED 11.01.2017 AND PERTAINS TO ASSESSMENT YEAR 2009-2010. 2. THE ISSUE RAISED IS THAT CIT(A) ERRED IN SUSTAINING DISALLOWANCE OF 12.5% OF BOGUS PURCHASE AMOUNTING TO RS.3,06,013. 3. THE GROUNDS OF APPEAL READ AS UNDER:- LEARNED CIT (A) ERRED IN UPHOLDING THE ADDITION OF RS 306013/- MADE BY LEARNED A.O. AS THE SAME IS ARBITRARY AND BASED ONLY ON SURMISES AND CONJECTURES. ON FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW LEARNED CIT (A) ERRED IN IGNORING OR REJECTING THE EVIDENCE LIKE INVOICES, LEDGER ACCOUNTS AND BANK STATEMENTS PRODUCED BY APPELLANT IN THE COURSE OF PROCEEDINGS U/S 147 ALTHOUGH LEARNED A.O. HAS NEITHER BROUGHT THE STATEMENTS OF CONCERNED VENDORS ITA NO.2937/MUM/2017. SHRI RAJENDRA CHANDULAL SHAH. 2 ON RECORD NOR BROUGHT ANY OTHER COUNTER EVIDENCE ON RECORD TO SHOW THAT THE PURCHASES WERE BOGUS. LEARNED A.O. ERRED IN MAKING AND LEARNED CIT (A) ERRED IN UPHOLDING ADDITION AT 12.5% OF 2448106 OVER AND ABOVE THE DECLARED G.P. OF 10.8% THUS MAKING A TOTAL G.P. OF 23.3% WHICH IS VERY HIGH IN A BUSINESS OF METAL TRADING AND ALSO WHEN LEARNED A.O. HAS NOT BROUGHT ANY COMPARABLE CASE ON RECORD TO JUSTIFY 12.5% ADDITION THAT MAKES A TOTAL G.P. OF 23.3% . ALTERNATIVELY LEARNED A.O. AND LEARNED CIT (A) OUGHT TO HAVE ADOPTED A TOTAL G.P. OF 12.5% ON PURCHASES OF RS. 2448106/- AND ACCORDINGLY OUGHT TO HAVE RESTRICTED THE ADDITION TO 1.7% OF RS 2448106/- (1.7% = 12.5% G.P. AS ESTIMATED LESS 10.80% G.P. ALREADY DECLARED BY APPELLANT) WHICH COMES TO RS 41618/- IN VIEW OF THE FACT THAT G.P. IN PRECEDING YEAR WAS 9.65%. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND OR DELETE ANY OF THE GROUNDS OF APPEAL. 4. THE FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER HAD RECEIVED INFORMATION THAT THE ASSESSEE HAS OBTAINED ACCOMMODATION ENTRIES TOWARDS PURCHASES TO THE TUNE OF RS.24,48,106/- FROM THE DEALERS WHICH APPEARED IN THE LIST OF SUSPICIOUS/HAWALA DEALERS OF THE SALES TAX DEPARTMENT OF THE GOVT. OF MAHARASHTRA. THEREAFTER THE CASE WAS REOPENED U/S 147 AND NOTICE U/S 148 WAS ISSUED AND DULY SERVED ON THE ASSESSEE. IN RESPONSE TO THE SAID NOTICE, THE ASSESSEE SUBMITTED LEDGER ACCOUNTS/ COPY OF PURCHASE BILLS AND BANK STATEMENTS OF THE ALLEGED PARTIES AND ALSO STATED THAT THE PAYMENTS HAS BEEN MADE THROUGH ACCOUNT PAYEE CHEQUES TO THE SAID PARTIES. THE AO ASKED THE ASSESSEE TO PRODUCE THE ALLEGED PURCHASE PARTIES TO VERIFY THE GENUINENESS OF THE SAID PURCHASES. HOWEVER, THE ASSESSEE FAILED TO DO SO. THE ASSESSEE COULD NOT DISCHARGE HIS ONUS TO PROVE THE TRANSACTIONS AS GENUINE AND PRODUCE THE ALLEGED PURCHASERS. THE ASSESSEE ALSO DID NOT FILE ANY DELIVERY ITA NO.2937/MUM/2017. SHRI RAJENDRA CHANDULAL SHAH. 3 CHALLANS, TRANSPORT RECEIPTS / OCTROI DUTY, RECEIPT FOR WEIGHTMENT OF GOODS, EXCISE GATE PASS, GOODS INWARD REGISTER MAINTAINED AT GODOWN / WAREHOUSE ETC. SINCE THE ASSESSEE FAILED TO BRING ON RECORD ANY EVIDENCE OR MATERIAL TO SUBSTANTIATE HIS CLAIM, THE AO TREATED THE SAID PURCHASES AS BOGUS AND MADE ADDITION OF RS.3,06,013/- BEING 12.5% OF UNVERIFIABLE PURCHASES OF RS.24,48,106/-. 5. AGAINST THE ABOVE ORDER, ASSESSEE APPEALED BEFORE THE LEARNED CIT(A). THE LEARNED CIT(A) CONFIRMED THE ACTION OF THE ASSESSING OFFICER IN MAKING ADDITION OF 12.5% OF THE BOGUS PURCHASE. THE LEARNED CIT(A) HELD AS UNDER:- ENQUIRY WAS CONDUCTED BY AO WHICH SUGGESTED THAT THE ASSESSEE HAD TAKEN ACCOMMODATION ENTRIES FOR PURCHASES WITHOUT ANY PHYSICAL DELIVERY OF GOODS. THE AO HAD NOTED THAT THE PARTIES FROM WHOM THE ASSESSEE CLAIMED THE PURCHASES TO BE MADE, WERE NOT AVAILABLE AT THE GIVEN ADDRESS. THE AO ALSO AFFORDED ANOTHER OPPORTUNITY TO THE ASSESSEE EITHER TO PRODUCE THE PARTIES OR TO PROVIDE THE NEW ADDRESSES OF THE PURCHASERS WHICH HE FAILED TO DO. IN VIEW OF THIS, IT IS NOTED THAT THE CLAIM OF THE ASSESSEE CANNOT BE ACCEPTED IN ENTIRETY AND ALSO THE DETAILS FILED INDICATE THAT THE PURCHASES WERE MADE WITHOUT WHICH THE ASSESSEE COULD NOT HAVE DECLARED THE SALES MADE. IT IS NOTED THAT ONLY PROFIT ELEMENT IS LIABLE TO TAX IN SUCH CASES AS WAS HELD IN THE CASE OF 1. CIT VS BHOLANATH POLY FAB LTD. (2013) 355ITR 290 (GUJ) (HC) 2. CIT VS SIMIT P. SHETH (2013) 356 ITR 451 (GUJ) (HC) 3. CIT VS SANJAY OIL CAKE INDUSTRIES (2009) 316 ITR 274 (GUJ) (HC) 4. ITO VS PERMANAND (2007) 107 TTJ 395 QD) (TRIB.) 5. SHRI MADHUKANT B. GANDHI VS ITOITA NO. 1950/M/2009 BENCH 'B' DT. 23-02-2010 (AY 2005-06) (MUM.) (TRIB.) 6. SANJEEV WOOLEN MILLS VS CIT (2005) 279ITR 434 (SC) ITA NO.2937/MUM/2017. SHRI RAJENDRA CHANDULAL SHAH. 4 IN VIEW OF THE ABOVE DISCUSSION, IT IS SEEN THAT THE ADDITION MADE BY THE AO ON ACCOUNT OF ALLEGED BOGUS PURCHASE IS FAIR AND REASONABLE. HAVING REGARD TO FACTS OF THE CASE AND SUBMISSIONS MADE AND JUDICIAL PRECEDENTS AS DISCUSSED, IT IS SEEN THAT THE ADDITION MADE BY THE AO OF RS.3,06,013/- @ 12.5% ON THE ALLEGED BOGUS PURCHASES OF RS.24,48,106/-, IS FAIR AND REASONABLE AND IS SUSTAINED IN APPEAL. 6. AGAINST THE ABOVE ORDER OF LEARNED CIT(A), THE ASSESSEE IS IN APPEAL BEFORE THE ITAT. 7. I HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. I FIND THAT CREDIBLE AND COGENT INFORMATION WAS RECEIVED IN THIS CASE BY THE ASSESSING OFFICER THAT CERTAIN ACCOMMODATION 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 INFORMATION ASSESSMENT WAS REOPENED. FURTHERMORE, IT IS NOTED THAT IN SUCH FACTUAL SCENARIO ASSESSING OFFICER HAS MADE THE NECESSARY ENQUIRY. THE ISSUE OF NOTICE TO ALL THE PARTIES HAVE RETURNED UNSERVED. INSPECTOR FROM THE DEPARTMENT HAS ALSO CONFIRMED THE NONEXISTENCE OF THESE PARTIES HAD THE SAID ACTRESSES. 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. IN THIS FACTUAL SCENARIO IT IS AMPLY THAT ASSESSEE HAS OBTAINED BOGUS PURCHASE BILLS. MERE PREPARATION OF DOCUMENTS FOR PURCHASES CANNOT CONTROVERT OVERWHELMING EVIDENCE THAT THE PROVIDER OF THESE BILLS ARE BOGUS AND NON- EXISTENT. ITA NO.2937/MUM/2017. SHRI RAJENDRA CHANDULAL SHAH. 5 8. THE SALES TAX DEPARTMENT IN ITS ENQUIRY HAVE FOUND THAT PARTIES TO BE PROVIDING BOGUS ACCOMMODATION ENTRIES. THE ASSESSING OFFICER ALSO ISSUED NOTICES TO THESE PARTIES AT THE ADDRESSES PROVIDED BY THE ASSESSEE. ALL THESE NOTICES HAVE RETURNED UNSERVED. ASSESSEE HAS NOT BEEN ABLE TO PRODUCE ANY OF THE PARTIES. THE ASSESSING OFFICER HAS NOTED THAT THERE IS NO COGENT EVIDENCE OF THE PROVISION OF GOODS. NEITHER THE ASSESSEE HAS BEEN ABLE TO PRODUCE ANY CONFIRMATION FROM THESE PARTIES. IN SUCH CIRCUMSTANCES, THERE IS NO DOUBT THAT THESE PARTIES ARE NON-EXISTENT. I FIND IT FURTHER STRANGE THAT ASSESSEE WANTS THE REVENUE TO PRODUCE ASSESSEES OWN VENDERS, WHOM THE ASSESSEE COULD NOT PRODUCE. THE PURCHASE BILLS FROM THESE NON-EXISTENT / BOGUS PARTIES CANNOT BE TAKEN AS COGENT 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 MORE 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 TOTALLY UNSUSTAINABLE IN LIGHT OF ABOVE APEX COURT DECISIONS. 9. I FURTHER FIND THAT HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF NIKUNJ ENTERPRISES HAS UPHELD 100% ALLOWANCE FOR THE PURCHASES 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 APPLICABLE ON THE FACTS OF THE CASE. ITA NO.2937/MUM/2017. SHRI RAJENDRA CHANDULAL SHAH. 6 10. IN THESE CIRCUMSTANCES LEARNED DEPARTMENTAL REPRESENTATIVE HAS REFERRED TO HONBLE GUJARAT HIGH COURT DECISION IN THE CASE OF APEX APPEAL NO. 240 OF 2003 IN THE CASE OF N K INDUSTRIES VS DY CIT, ORDER DATED 20.06.2016, WHEREIN HUNDRED PERCENT 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 WAS REQUIRED. THE SPECIAL LEAVE PETITION AGAINST THIS ORDER ALONG WITH OTHERS HAS BEEN DISMISSED BY THE HONBLE APEX COURT VIDE ORDER DATED 16.1.2017. 11. I FURTHER NOTE THAT HONBLE RAJASTHAN HIGH COURT IN THE CASE OF CIT JAIPUR V. M/S.SHRUTI GEMS IN ITA NO.658/2009 VIDE ORDER DATED 23.05.2017 HAS INTER ALIA REFERRED TO THE DECISION OF HONBLE RAJASTHAN HIGH COURT IN ITA NO.234/2008 IN CASE OF CIT JAIPUR V. ADITYA GEMS FOR THE FOLLOWING DECISION:- 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 BY THE SUPREME COURT HAS DISMISSED THE SLP CONFINED 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. 12. HOWEVER I NOTE THAT THIS IS NOT AN APPEAL BY THE REVENUE. HENCE IT WILL NOT BE APPROPRIATE TO TAKE AWAY THE RELIEF ALREADY GRANTED BY THE REVENUE TO THE ASSESSEE, HENCE I CONFORMED THE ORDER OF LEARNED CIT(A). ITA NO.2937/MUM/2017. SHRI RAJENDRA CHANDULAL SHAH. 7 13. IN THE RESULT, THIS APPEAL FILED BY THE ASSESSEE STANDS DISMISSED. ORDER PRONOUNCED ON THIS 07 TH DAY OF SEPTEMBER, 2017. SD/- ( SHAMIM YAHYA ) ACCOUNTANT MEMBER MUMBAI; DATED : 07 TH SEPTEMBER, 2017. DEVDAS* / COPY OF THE ORDER FORWARDED TO : / BY ORDER, //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT, MUMBAI. 4. / CIT(A), MUMBAI 5. , , / DR, ITAT, MUMBAI 6. [ / GUARD FILE.