VARDHSINGH B. PARMAR, MUMBAI V. ITO 19(3)(5), MUMBAI

ITA 2978/MUM/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 0043 (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: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 03-07-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 25-04-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: V JANARDHANAN
• Keywords: Bogus purchase; Unexplained expenditure; Corroborative evidences; Accommodation entries

Judgement Text

, SMC , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES SMC, MUMBAI BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER ITA NO.2978/MUM/2017 : ASST.YEAR 2009-2010 SHRI VARDHSINGH B.PARMAR 116/118, GALA NO.16, COOPER COMOUND, T.P.STREET, 6 TH KUMBHARWADA, MUMBAI 400 004. PAN : AOLPP7164H. / VS. INCOME TAX OFFICER WARD 19(3)(5) MUMBAI ( / APPELLANT) ( / RESPONDENT) /APPELLANT BY : --- NONE --- /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 20.01.2017 AND PERTAINS TO ASSESSMENT YEAR 2009-2010. 2. THE ISSUE RAISED IS THAT CIT(A) ERRED IN SUSTAINING DISALLOWANCE OF 100% OF BOGUS PURCHASE AMOUNTING TO RS.21,01,300. 3. IN THIS CASE THE ASSESSING OFFICER MADE 100% DISALLOWANCE FOR BOGUS PURCHASE AMOUNTING TO RS.21,01,300. 4. AGAINST THE ABOVE ORDER, ASSESSEE APPEALED BEFORE THE LEARNED CIT(A). BEFORE THE LEARNED CIT(A) IT WAS INTER ALIA CONTENDED THAT IN THE PRECEDING YEAR IN SIMILAR FACTS DISALLOWANCE OF ONLY 12.5% WAS DONE. HOWEVER, CIT(A) WAS NOT SATISFIED. HE HELD THAT SINCE NO DETAIL WAS PRODUCED, HE WOULD CONFIRM 100% OF THE DISALLOWANCE. ITA NO.2978/MUM/2017. SHRI VARDHSINGH B PARMAR. 2 5. AGAINST THE ABOVE ORDER OF LEARNED CIT(A), THE ASSESSEE IS IN APPEAL BEFORE THE ITAT. 6. I HAVE HEARD THE LEARNED DEPARTMENTAL REPRESENTATIVE AND PERUSED THE RECORDS. NONE APPEARED ON BEHALF OF THE ASSESSEE. THE SERVICE OF NOTICE HAS RETURNED UNSERVED. SINCE THE ISSUE OF BOGUS PURCHASE HAS BEEN DEALT BY THE ITAT MUMBAI IN SEVERAL CASES, I PROCEED TO ADJUDICATE THE ISSUE BY HEARING THE LEARNED DEPARTMENTAL REPRESENTATIVE AND PERUSING THE RECORDS. 7. IN THIS REGARD, I CAN GAINFULLY REFER TO THE ORDER OF LEARNED CIT(A) AS UNDER:- 6.3 I HAVE CAREFULLY CONSIDERED THE MATERIAL FACTS AND THE RIVAL CONTENTIONS. THE ASSESSING OFFICER TREATED PURCHASES FROM THE THREE PARTIES AS UNEXPLAINED EXPENDITURE STATING THAT THE APPELLANT HAS FAILED TO PRODUCE ANY SUPPORTING EVIDENCE TO PROVE THAT THE PURCHASES MADE FROM THEM ARE GENUINE.LT IS NOTICED THAT DESPITE PROVIDING ADEQUATE OPPORTUNITIES BY THE AO, THE APPELLANT FAILED TO PRODUCE ANY DETAILS NOT EVEN THE INVOICE COPIES, IN SUPPORT OF THE PURCHASES SAID TO BE MADE FROM THE PARTIES. WHEN THE SALES TAX DEPARTMENT HAS CLASSIFIED THE THREE PARTIES AS HAWALA DEALERS AND HAS SUBSEQUENTLY FORWARDED THE INFORMATION TO THE INCOME TAX DEPARTMENT, THAT THE APPELLANT IS ONE OF THE BENEFICIARIES, ONUS OF VERY HIGH DEGREE IS ON THE APPELLANT TO PROVE WITH INFALLIBLE EVIDENCE THAT THE PURCHASES ARE GENUINE AND THE MATERIAL WAS RECEIVED BY THE APPELLANT FROM THESE PARTIES. BUT, THE APPELLANT IS NOT ABLE TO PRODUCE ANY EVIDENCE WHATSOEVER EITHER BEFORE THE AO OR EVEN IN THE PRESENT PROCEEDINGS TO PROVE THAT THE GOODS IN TERMS OF QUANTITY AND QUALITY FROM THE ABOVE SAID PARTIES WERE ACTUALLY RECEIVED BY THE APPELLANT. THE APPELLANT HAS NOT PRODUCED COPIES OF THE CONSIGNMENTS, IF ANY, RECEIVED FROM THE TRANSPORT CONTRACTOR SHOWING THAT THE MATERIAL PURCHASED FROM THE CONSIGNORS WAS ACTUALLY DELIVERED TO THE APPELLANT AND FREIGHT HAS BEEN PAID THEREON. THE APPELLANT COULD NOT PROVIDE THE COPIES OF THE GRN ITA NO.2978/MUM/2017. SHRI VARDHSINGH B PARMAR. 3 EVIDENCING THE RECEIPT/DELIVERY OF THE GOODS ALONG WITH THE RELEVANT PURCHASE ORDERS IN RESPECT OF IMPUGNED PURCHASES. THE APPELLANT ALSO NOT ABLE TO PRODUCE GOODS CONSIGNMENT NOTE, TRANSPORT BILLS AND THE DELIVERY CHALLANS ISSUED BY THE PARTIES OR OCTROI RECEIPTS ISSUED TO SUBSTANTIATE DELIVERY OF GOODS TO THE APPELLANT. THE APPELLANT HAS NOT BROUGHT ON RECORD ANY INDEPENDENT AND RELIABLE EVIDENCE TO PROVE COMPLETE TRAIL IN SO FAR AS MOVEMENT OF CONSIGNMENT FROM THE SAID PARTIES TO THE PLACE OF THE APPELLANT IS CONCERNED. THE APPELLANT IS NOT ABLE TO PROVE THE MOVEMENT OF CONSIGNMENT FROM THE CONSIGNORS AND DELIVERY OF GOODS TO THE APPELLANT IN CASE OF ALLEGED PURCHASES FROM THE ABOVE PARTIES. 6.4 IN THE APPELLANT'S CASE, THERE WAS OVERWHELMING EVIDENCE IN THE FORM OF STATEMENT OF SUPPLIERS GIVEN BEFORE THE SALES TAX AUTHORITIES THAT THEY WERE ENGAGED ONLY IN ISSUING HAWALA BILLS AND NO GOODS WERE EVER SUPPLIED BY THEM. AFTER WEIGHING THE EVIDENCES PROS AND CON, I FIND THAT THE APPELLANT FAILED TO FURNISH THE DETAILS AND TO RECONCILE THE PURCHASES WITH THE ITEMS SOLD AND 1:1 RECONCILIATION COULD NOT BE MADE. ONUS IS ALWAYS ON THE APPELLANT TO PROVE AS TO HOW THE MATERIAL PURCHASED WAS FIRSTLY OBTAINED. I RECORD A FINDING OF FACT HERE THAT NO PROOF OF DELIVERY OF PURCHASES HAS BEEN FILED EITHER BEFORE THE LD. AO OR BEFORE ME. 6.5 DURING THE PRESENT PROCEEDINGS, THE CASE WAS FIRST POSTED FOR HEARING ON 05-07-2016, VIDE THE ITNS-37 DATED 14-06-2016. IN RESPONSE TO THE SAID NOTICE THE APPELLANT'S AR FILED A LETTER ALONG WITH THE LETTER OF AUTHORITY, STATING THAT THE DETAILS REGARDING THE CASE IS STILL NOT GATHERED SO FAR AND REQUESTED TO ADJOURN THE CASE. AT THE REQUEST OF THE AR, THE CASE WAS POSTED FOR HEARING ON 21-07-2016. ONCE AGAIN THE AR REQUESTED FOR ADJOURNMENT ON THE SAID DATE AND THE CASE WAS ADJOURNED FOR HEARING ON 09-08-2016. AGAIN NO ONE APPEARED ON THE SAID DATE AND NO ADJOURNMENT REQUEST WAS ALSO MADE. IN VIEW OF THE SAME A FRESH NOTICE WAS ISSUED ON 02-01-2017 POSTING THE CASE ROR HEARING ON 16-01-2017. THE AR ONCE AGAIN FILED AN ADJOURNMENT LETTER STATING THAT THE DETAILS REGARDING THE CASE IS STILL NOT GATHERED SO FAR AND SOUGHT FOR ADJOURNMENT. FINALLY THE ITA NO.2978/MUM/2017. SHRI VARDHSINGH B PARMAR. 4 LD. AR APPEARED BEFORE THE UNDERSIGNED ON 19-01-2017 AND MERELY FILED A COPY OF ACKNOWLEDGEMENT FOR THE RETURN OF INCOME FILED FOR THE YEAR AND B/S AND P&L ACCOUNT AND THE COPY OF THE ASSESSMENT ORDER PASSED FOR THE A.Y. 2011-12. HOWEVER NO DETAILS LIKE BILLS/ INVOICE COPIES WITH REGARD TO THE PURCHASES CONSIDERED FOR ADDITION, WERE FURNISHED. FROM ALL THESE THINGS IT IS CLEAR THAT THE APPELLANT AND THE AR IS NOT HAVING ANY DETAILS IN SUPPORT OF THE SAID PURCHASES AND ALSO NOT INTERESTED IN FILING THE DETAILS TO DECIDE THE APPEAL. THUS, IT CAN BE SAFELY PRESUMED THAT PURCHASES CLAIMED ARE BOGUS AND THE PARTIES ARE EITHER NON-EXISTENT OR EVEN IF THEY DO EXIST, THEY WERE NOT BACKED BY SUFFICIENT EVIDENCE TO UNDERGO THE TEST OF SCRUTINY. 6.6 DURING THE COURSE OF HEARING HELD ON 19-01-2017, AR FILED THE COPY OF THE ASSESSMENT ORDER PASSED FOR THE A.Y. 2011-12, WHEREIN THE BOGUS PURCHASES ISSUE WAS DEALT BY THE AO AND ESTIMATED THE PROFIT PERCENTAGE @12.5% OF SUCH BOGUS PURCHASES AND ADDED TO THE TOTAL INCOME OF THE APPELLANT. AR REQUESTED TO CONSIDER THE SAME PERCENTAGE FOR THE CURRENT YEAR. I HAVE CAREFULLY CONSIDERED THE REQUEST OF THE AR AND THE ASSESSMENT ORDER AND ALSO THE REASONS GIVEN BY THE AO FOR ADOPTING SUCH PERCENTAGE. IN THAT ASSESSMENT YEAR THERE IS ONLY ONE PARTY, WHICH IS CONSIDERED AS HAWALA ENTRY PROVIDER AND THE AR APPEARED BEFORE THE AO AND FURNISHED THE DETAILS CALLED FOR FROM TIME TO TIME AND ALSO REQUESTED THE AO TO MA.KE A REASONABLE ADDITION ON ACCOUNT OF SUCH BOGUS PURCHASES CLAIMED. AFTER THE FACTS AND THE EVIDENCES FURNISHED AO FOLLOWING THE DECISION OF SIMIT P. SHETH CASE REPORTED IN 356 ITR 451 OF GUJARAT HIGH COURT, ADOPTED 12.5% OF SUCH PURCHASE AMOUNT. WHEREAS IN THE PRESENT CASE DESPITE GIVING SEVERAL OPPORTUNITIES, APPELLANT/AR COULD NOT FURNISH A SINGLE DETAIL RELEVANT TO THE CONCERNED PURCHASES, TO CONSIDER THE SAME WERE REALLY MADE. IN VIEW OF THE SAME I AM NOT IN A POSITION TO CONCEDE THE REQUEST OF THE AR TO ADOPT THE PERCENTAGE AS IN THE A.Y. 2011-12. MOREOVER, PROCEEDINGS UNDER THE INCOME TAX ACT ARE DIFFERENT AND SEPARATE FOR EACH ASSESSMENT YEAR. AS THE APPELLANT FAILED TO FURNISH THE DETAILS IN SUPPORT OF THE PURCHASES MADE FROM THE THREE PARTIES TO THE TUNE OF RS.21,01,300/-, THE ITA NO.2978/MUM/2017. SHRI VARDHSINGH B PARMAR. 5 ADDITION CONSIDERED BY THE AO ON ACCOUNT OF NON-GENUINE PURCHASES IS CONFIRMED. 8. 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. 9. 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 ITA NO.2978/MUM/2017. SHRI VARDHSINGH B PARMAR. 6 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. 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 FIND THAT DISMISSAL OF SLP BY A NON-SPEAKING ORDER DOES NOT MERGE THE ORDER OF HONBLE APEX COURT WITH THAT OF HONBLE HIGH COURT. 12. I FIND THAT IN THIS CASE THE SALES HAVE NOT BEEN DOUBTED IT IS SETTLED LAW THAT WHEN SALES ARE NOT DOUBTED, 100% DISALLOWANCE FOR BOGUS PURCHASE ITA NO.2978/MUM/2017. SHRI VARDHSINGH B PARMAR. 7 CANNOT BE DONE. THIS PROPOSITION IS SUPPORTED FROM HONBLE JURISDICTIONAL HIGH COURT DECISION IN THE CASE OF NIKUNJ EXIMP ENTERPRISES. HOWEVER, THE FACTS OF THE PRESENT CASE INDICATE THAT ASSESSEE HAS MADE PURCHASE FROM THE GREY MARKET. MAKING PURCHASES THROUGH THE GREY MARKET GIVES THE ASSESSEE SELLING ON ACCOUNT OF NON-PAYMENT OF TAX AND OTHERS AT THE EXPENSE OF THE EXCHEQUER. IN SUCH SITUATION, IN MY CONSIDERED OPINION, ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE 12.5% DISALLOWANCE OUT OF THE BOGUS PURCHASES MEETS THE ENDS OF JUSTICE. THIS IS FOLLOWING THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF SIMIT P. SHETH (2013) 356 ITR 451, FOLLOWED BY THE ITAT MUMBAI BENCHES IN A NUMBER OF CASES. 13. ACCORDINGLY, I MODIFY THE ORDER OF LEARNED CIT(A) AND DIRECT THAT THE DISALLOWANCE BE LIMITED TO 12.5% OF THE BOGUS PURCHASE. 14. IN THE RESULT, THIS APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. 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 : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT, MUMBAI. 4. / CIT(A), MUMBAI 5. , , / DR, ITAT, MUMBAI ITA NO.2978/MUM/2017. SHRI VARDHSINGH B PARMAR. 8 / BY ORDER, //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI 6. [ / GUARD FILE.