MANISH M SHAH, BHIWANDI V. ACIT CIR 1, KALYAN

ITA 2975/MUM/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 8103 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-03-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Next Hearing Date: 12-01-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 18-05-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: H M WANARE
• Assessee Lawyers: DEVENDRA H JAIN
• Keywords: Bogus purchase; Accommodation entries
• Section: 142(1); 148

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI . . , , BEFORE SHRI C.N. PRASAD , JM AND SHRI RAJESH KUMAR , AM ITA NO . 2975 / MUM/ 20 1 5 ( / ASSESSMENT YEA R : 20 09 - 10 ) MANISH M SHAH PROP MAHIPATRAI AND CO., 346, KANERI, KALYAN ROAD, OPP. SHANTI NAGAR POLICE STATION, BHIWANDI - 421302 / VS. ASSTT. COMMISSIONER OF INCOME TAX CIRCLE - 1, KALYAN, DIST THA NE ./ PAN : ACKPS4464Q ( / APPELLANT) : ( / RESPONDENT ) / ASSESSEE BY : SHRI DEVENDRA H JAIN / REVENUE BY : SHRI H M WANARE / DATE OF HEARING : 10 .12017 / DATE OF PRONOUNCEMENT : 14. 3 . 201 7 / O R D E R PER RAJESH KUMAR, A. M: TH IS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER DATED 16.3.2015 PASSED BY THE LD.CIT(A) - 2, THANE FOR THE ASSESSMENT YEAR 2009 - 10. 2. ONLY GROUND TAKEN BY T HE ASSESSEE PERTAINS TO THE LD. CIT(A) UPHOLD ING THE ADHOC ADDITION OF RS.10,03,196 BEING 40% OF ALLEGED BOGUS PURCHASE S OF RS.25,07,989/ - MERELY ON THE BASIS OF SURMISES AND CONJECTURES. 2 3. FACTS RELATING TO THE ISSUE ARE THAT THE ASSESSEE FILED RETUR N OF INCOME ON 14. 9.2009 DECLARING TOTAL INCOME OF RS. 30 , 01 , 620 / - . THE ASSESSEE IS ENGAGED IN THE BUSINESS OF SELLING OF STEEL BARS, ROADS AND ANGLES ON WHOLESALE BASIS. THE RETURN OF THE ASSESSEE WAS PROCESSED UNDER SECTION 143(1) OF THE ACT ON 25.5.2011 . THE AO RECEIVED INFORMATION FROM THE SALES TAX DEPARTMENT, GOVERNMENT OF MAHARASHTRA THAT DURING THE YEAR THAT DURING THE YEAR SOME PERSONS HA VE PROVIDED BOGUS BILLS TO THE SOME TAX PAYERS WITHOUT DOING ANY ACTUAL BUSINESS AND ALSO FILED AFFIDAVITS BEFORE THE SALES TAX DEPARTMENT CONFIRMING THE ACTS COMMITTED BY THESE PARTIES IN RESPECT OF BOGUS BILLS PROVIDED TO THE BENEFICIARY OF SUCH BOGUS BILLS. THE NAME OF THE ASSESSEE ALSO APPEARED IN THE LIST OF SUCH PERSONS WHO RECEIVED BOGUS BILLS FROM THE HAWALA OPERATORS AND THE NAMES OF THESE BILLS SUPPLIERS ARE (A) PRAYAN TRADING CO. (B) M/S VITRAG TRADING CO. AND (C) SAMPARK STEELS. THE AMOUNTS OF BOGUS BILLS TAKEN FROM THESE PARTIES IN ALL WERE RS.25,07,989/ - . THEREAFTER, THE AO ISSUED NOTICE UNDER SECT ION 148 ON 20.3.2013 WHICH WAS SERVED UPON THE ASSESSEE AND COMPILED WITH BY THE ASSESSEE BY FILING REPLY DATED 22.8.2013 REQUESTING THE AO FOR SUPPLYING COPY OF REASONS FOR REOPENING OF THE ASSESSMENT . THEREAFTER A NOTICES U/S 143(2) AND 142(1) WERE ISSUED TO THE ASSESSEE TO ATTEND BEFORE THE AO ON 3.10.2013 ALONGWITH QUESTIONNAIRE CALLING FOR CERTAIN INFORMATION . IN RESPONSE TO IT, THE ASSESSEE SUBMITTED THAT THE RETURN OF INCOME FILED ON 3 14. 9.2009 BE TREATED AS RETURN OF INCOME FILED IN RESPONSE TO NOTICE U/S 148 OF THE ACT. THE COPY OF THE REASONS FOR REOPENING OF THE ASSESSMENT WAS ALSO SUPPLIED TO THE ASSESSEE . DURING THE YEAR, THE AO OBSERVED THAT THE ASSESSEE HAS SHOWN PURCHASES OF RS.25,07,989/ - FROM (A) PRAYAN TRADING CO. (B) M/S VITRAG TRAD ING CO. AND (C) SAMPARK STEELS. THE SUBMISSIONS SUBMITTED BY THE ASSESSEE DID NOT SATISFY THE AO AS HE WAS OF THE OPINION AFTER CONSIDERING THE REPLY AND CONTENTIONS , THE ASSESSEE COULD NOT ESTABLISH THE GENUINENESS OF PURCHASES OF THE COMMODITIES FROM THE ABOVE CITED ENTITIES . THEREFORE, THE AO WAS OF THE VIEW THAT ACTUAL TRANSACTION S HA VE NOT BEEN TAKEN PLACE AND ORDERS WERE PLACED VERBALLY AND BILLS WERE PROVIDED TO THE ASSESSEE AS ACCOMMODATION ENTRIES AND ACCORDINGLY THE AO TREATED THE AMOUNT OF RS .25,07,989 / - AS BOGUS PURCHASES TO SUPPRESS THE PROFITS. ACCORDINGLY, THE ASSESSING OFFICER ADDED AN AMOUNT OF RS.25,07,989 / - TO THE TOTAL INCOME OF THE ASSESSEE BEING UNSUBSTANTIATED PURCHASES. AGGRIEVED BY THE ORDER OF THE AO THE ASSESSEE PREFERRED A N APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. 4. IN THE APPELLATE PROCEEDINGS, THE ASSESSEE SUBMITTED DETAILS OF PURCHASE S AND SALES INCLUDING YEAR WISE SALES, G . P . , GP%, NP AND NP% WHICH IS INCORPORATED IN THE APPELLATE ORDER . O N THE BASIS OF DETAIL ED CONTENTIONS AND SUBMISSIONS SUPPLIED BY THE ASSESSEE DURING APPELLATE PROCEEDINGS, THE LD. CIT(A) GAVE RELIEF TO THE ASSESSEE TO THE EXTENT OF 6 0% OF RS.25,07,989/ - 4 I.E. THE LD.CIT(A) SUSTAINED THE ADDITION OF RS.1 0 , 03,196 / - . NOW, THE ASSESSEE HAS FIL ED APPEAL BEFORE THIS TRIBUNAL. 5 . THE LD. AR VEHEMENTLY SUBMITTED BEFORE US THAT THE FAA HAS GROSSLY ERRED IN SUSTAINING THE ADDITION TO THE EXTENT OF 40 % OF THE DEEMED BOGUS PURCHASES BY IGNORING THE FACTS ON RECORD AND VARIOUS JUDICIAL PRONOUNCEMENTS . THE LD. AR SUBMITTED THAT THE ASSESSEE HAS RECEIVED GOODS PURCHASED FROM THESE DEALERS AND HAWALA DEALERS WERE ACTUALLY SOLD THE GOODS TO THE ASSESSEE. THE LD. AR POINTED OUT THAT THE MATERIAL WAS RECEIVED THROUGH DELIVERY CHALLANS AND PAYMENT THEREOF MADE THROUGH CHEQUES AND BANKING CHANNELS. THE LD. AR TRIED TO EXPLAIN BY HIS ARGUMENTS BY REFERRING TO THE STOCK TALLY REGISTER AND DETAILS OF MATERIAL RECEIVED FROM THE ALLEGED HAWALA OPERATORS WHICH WERE DULY ENTERED IN THE STOCK REGISTER AND ALSO REC ORDED IN THE ISSUE COLUMNS UPON SALE AND CONSIDERATION PURCHASES AND RECEIVED FORM SALE S THEREOF . I N SUPPORT OF HIS CONTENTION THE LD. AR RELIEF ON THE FOLLOWING CASE LAW: A) CIT V.NIKUNJ EXIMP ENTERPRISES (P.) LTD. [2013] 35 TAXMANN.COM 38 4 (BOMBAY) B) BABULAL C. BORANAV/S ITO [2005] 144 TAXMAN 674 (BOM.) C) ITO V/S VAMAN INTERNATIONAL P LTD IN ITA NO.794/MUM/2015 (AY - 2010 - 11) ORDER DATED 16.11.2016 D) M/S IMPERIAL IMP AND EXP V/S ITO IN ITA NO.5427/MUM/2015 (AY - 2009 - 10 ) DATED 18.3.2016; E) ITO V/S DEEPAK POPATLAL GALA IN ITA NO.5920/MUM/2013 (AY - 2010 - 2011) ORDER DATED 27.3.2015; F) ACIT V/S SHRI RAMILA PRAVIN SHAH IN ITA NO.5246/MUM/2013 (AY - 2010 - 11) DATED 5.3.2015 AND D) ITO V/S PARESH ARVIND GANDHI I N ITA NO.5706/MUM/2013 5 (AY - 2010 - 11) DATED 13.5.2015 E) ACIT V/S TARLA R SHAH IN ITA NO.5295/MUM/2013 (AY - 2010 - 11) ORDER DATED 2.2.2016 6 . ON THE OTHER HAND, THE LD. DR, RELIED HEAVILY ON THE ORDERS OF AUTHORITIES BELOW BY SUBMITTING THAT THE ASSESSEE WAS ONE OF THE BENEFICIARY WHO TOOK BILLS PROVIDED BY THE HAWALA WHICH WAS AFFIRMED ON OATH IN THE STATEMENT MADE BEFORE THE SALES TAX AUTHORITIES, GOM THAT THEY WERE ENGAGED IN THE SUPPLY OF BILLS WITHOUT ACTUALLY SUPPLYING ANY MATERIAL AND THERE FORE THE AO HAS RIGHTLY MADE THE ADDITION AND UPHELD BY THE FAA. 7 . WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS, PERUSED THE MATERIAL PLACED BEFORE US INCLUDING THE ORDERS OF AUTHORITIES BELOW AND CASE LAW RELIED UPON BY THE ASSESSEE. WE FIND THAT T HE ASSESSEE RECEIVED MATERIAL THROUGH PROPER BILLS SUPPORTED WITH DELIVERY CHALLANS. THE PAYMENTS WERE MADE TO THE SUPPLIERS THROUGH CHEQUES AND BANKING CHANNALS. THE STOCK TALLY REGISTER WAS DULY MAINTAINED. THE ASSESSEE ALSO MAINTAINED THE RECORD OF MA TERIAL RECEIVED ON PURCHASES AND SALES THEREOF. ALL THE FACTS BEFORE US ADEQUATELY SUBSTANTIATED THE FACT THAT THE MATERIALS WERE RECEIVED AND SOLD AND DULY ACCOUNTED FOR AND THEREFORE IT IS NOT THE CASE WHERE THE ACCOMMODATION ENTRIES WERE TAKEN TO SUPP RESS THE INCOME OF THE ASSESSEE. THEREFORE, WE ARE OF THE VIEW THAT THE PURCHASES MADE BY THE ASSESSEE STAND PROVED . HOWEVER THE DISALLOWANCE AS SUSTAINED BY T HE FAA APPEARS TO BE UNREASONABLE AND EXCESSIVE AND THEREFORE CANNOT BE SUSTAINED. ON THE 6 OTH ER HAND, IN ORDER TO PLUG THE LEAKAGES OF REVENUE DUE TO THE POSSIBILITY OF PURCHAS ING GOODS FROM THE GRAY MARKET AS GENERALLY THE CASE IS AND THUS SAVINGS MADE ON ACCOUNT OF SALES TAX, OCTROI AND OTHER CHARGES , SOME REASONABLE ADDITION SHOULD BE MA DE. UNDER THE GIVEN CIRCUMSTANCES AND FACTS WE ARE OF THE VIEW THAT IT WOULD BE REASONABLE TO SUSTAIN THE ADDITION @5% OF THE TOTAL PURCHASES TO COVER AND COMPENSATE FOR THE SAVING MADE BY THE ASSESSEE BY MAKING PURCHASES FROM GREY MARKET. ACCORDINGLY, WE SET ASIDE THE ORDER OF THE LD.CIT(A) AND DIRECT THE AO TO MADE THE ADDITION @ 5% IN PLACE OF 40% BY THE LD CIT OF BOGUS PURCHASES. 8 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 14TH MAR , 2017. SD SD (C.N. PRASAD) (RAJESH KUMAR) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED : 14. 3.2017 SRL,SR.PS / 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 FILE / BY ORDER, TRUE COPY / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI 7