ITO 7(3)(4), MUMBAI V. PROMPT TOYS P.LTD, MUMBAI

ITA 3022/MUM/2017

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 8826 (ITAT-MUMBAI)
• Duration Of Justice: 6 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2017
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2009-2010
• Appeal Filed On: 27-04-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: M V RAJGURU
• Assessee Lawyers: BHAVESH P SHAH
• Keywords: Bogus purchase; Additional evidence; Accommodation entries; Onus to prove
• Section: 69C; 133(6); 147; 148

Judgement Text

1 ITA NO.3022/MUM/2017 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH E, MUMBAI BEFORE SHRI C.N. PRASAD (JUDICIAL MEMBER) AND SHRI G MANJUNATHA (ACCOUNTANT MEMBER) I.T.A NO.3022/MUM/2017 (ASSESSMENT YEAR: 2009-10) ITO-7(3)(4), MUMBAI VS PROMPT TOYS P LTDG-10/B, LA XMI MILL COMPOUND, SHAKTI MILL LANE, MAHALAXMI, MUMBAI-11 PAN : AABCP4767D APPELLANT RESPONDEDNT APPELLANT BY SHRI M.V. RAJGURU RESPONDENT BY SHRI BHAVESH P SHAH DATE OF HEARING 12-10-2017 DATE OF PRONOUNCEMENT 31-10-2017 O R D E R PER G MANJUNATHA, AM : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAI NST THE ORDER OF CIT(A)-13, MUMBAI DATED 08-02-2017 AND IT PERTAINS TO AY 2009- 10. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) ERRED IN DELETING ADDITION OF R S. 73,96,790/- MADE ON ACCOUNT OF BOGUS PURCHASES WITHOUT APPRECIA TING THE FACT THAT NOTICES U/S 133(6) ISSUED TO THE PURCHASE PARTIES RETURNED UNSERVED AND THAT THE ASSESSEE FAILED TO P RODUCE THESE PARTIES FOR VERIFICATION EVEN AFTER PROVIDING SUFFI CIENT OPPORTUNITIES THEREBY FAILING TO PROVE THE IDENTITY AND 2 ITA NO.3022/MUM/2017 GENUINENESS OF THE PURCHASE TRANSACTIONS. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, WHETHER THE LD. CIT(A) IS RIGHT IN DELETING ADDITION OF RS. 73,96,790/- MADE ON ACCOUNT OF BOGUS PURCHAS ES WITHOUT APPRECIATING THAT THE PURCHASE TRANSACTIONS ARE WITHIN PRIVILEGED KNOWLEDGE OF THE ASSESSEE AND THUS, ONUS TO PROVE THE PURCHASE WERE GENUINE IS ON THE ASSESSEE WHO FAILED TO DISCHARGE THE ONUS EVEN I REMAND PROCEEDINGS. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE C OMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING TOYS FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2009-10 ON 24-09-2009 DECLARING TOT AL INCOME OF RS.8,33,416. IN THIS CASE, THE ASSESSMENT WAS COMPLETED U/S 143( 3) ON 29-12-2011 DETERMINING THE TOTAL INCOME AT RS.15,82,091. SUBS EQUENTLY, ON THE BASIS OF INFORMATION RECEIVED FROM THE SALES-TAX DEPARTMENT & DGIT (INV), ASSESSMENT WAS REOPENED U/S 147 ON THE GROUND THAT INCOME CHAR GEABLE TO TAX HAD BEEN ESCAPED ASSESSMENT ON ACCOUNT OF BOGUS PURCHASES MA DE FROM CERTAIN PARTIES LISTED BY SALES-TAX DEPARTMENT AS HAWALA OPERATORS INVOLVED IN PROVIDING ACCOMMODATION ENTRIES. IN RESPONSE TO NOTICE U/S 1 48, ASSESSEE VIDE LETTER DATE 16-08-2013 REQUESTED TO TREAT THE RETURN OF IN COME FILED ON 24-09-2009 AS BEING FILED IN RESPONSE TO NOTICE ISSUED U/S 148 OF I.T. ACT, 1961. IN RESPONSE TO NOTICES ISSUED U/S 143(2) AND 142(1), THE AUTHORIZE D REPRESENTATIVE OF THE ASSESSEE APPEARED FROM TIME TO TIME AND FURNISHED T HE DETAILS, AS CALLED FOR. DURING THE ASSESSMENT PROCEEDINGS, THE AO NOTICED T HAT THE ASSESSEE IS THE BENEFICIARY OF BOGUS BILLS ISSUED BY M/AS JUPITER M ULTITRADE PVT LTD & OPTION 3 ITA NO.3022/MUM/2017 MERCANTILE PVT LTD FOR RS.73,96,790 AS BOTH THE PAR TIES ARE CATEGORIZED AS HAWALA OPERATORS INDULGING IN THE ACTIVITY OF PROVI DING ACCOMMODATION ENTRIES. THEREFORE, THE AO CALLED UPON THE ASSESSEE TO FURNI SH NECESSARY EVIDENCES TO JUSTIFY PURCHASES FROM THE ABOVE TWO PARTIES AND AL SO TO PRODUCE THE PARTIES IN PERSON. IN RESPONSE TO NOTICES, THE ASSESSEE, VIDE LETTER DATED 06-01-2014 AND 19-03-2014 SUBMITTED PURCHASE BILLS AND PAYMENT PRO OF TO PROVE PURCHASES FROM THE ABOVE PARTIES AS GENUINE. DURING THE COUR SE OF ASSESSMENT PROCEEDINGS, TO ASCERTAIN THE CORRECTNESS OF PURCHA SES, THE AO ISSUED NOTICES U/S 133(6) TO THE PARTIES TO FILE NECESSARY EVIDENC E. THE NOTICES ISSUED U/S 133(6) WERE RETURNED UNANSWERED WITH REMARK NO SUC H PARTIES ARE AVAILABLE AT THE GIVEN ADDRESS. THE AO, BASED ON THE INFORM ATION RECEIVED FROM DGIT(INV), COUPLED WITH FURTHER ENQUIRIES CONDUCTED DURING THE COURSE OF ASSESSMENT PROCEEDINGS, CAME TO THE CONCLUSION THAT PURCHASES FROM THE ABOVE TWO PARTIES ARE BOGUS IN NATURE AND HENCE, MA DE ADDITION OF R.73,96,70 U/S 69C OF THE INCOME-TAX ACT, 1961. AGGRIEVED BY THE ASSESSMENT ORDER, ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A). 3. BEFORE THE CIT(A), THE ASSESSEE HAS REITERATED ITS STAND TAKEN BEFORE THE AO. THE ASSESSEE ALSO FILED CERTAIN ADDITIONAL EVI DENCE TO JUSTIFY PURCHASES. DURING THE COURSE OF APPELLATE PROCEEDINGS, THE AO FORWARDED ADDITIONAL EVIDENCES FILED BY THE ASSESSEE TO THE AO FOR HIS C OMMENTS. THE AO, VIDE HIS 4 ITA NO.3022/MUM/2017 REMAND REPORT DATED 02-11-2016 OPPOSED ADMISSION OF ADDITIONAL EVIDENCE AND ALSO REITERATED HIS FINDINGS IN THE ASSESSMENT ORDER. THE CIT(A), AFTER CONSIDERING RELEVANT SUBMISSIONS OF THE ASSESSEE AN D ALSO RELYING UPON CERTAIN JUDICIAL PRECEDENTS OBSERVED THAT THE AO HAD NOT CA RRIED OUT ANY ENQUIRIES WITH REGARD TO ACTUAL SUPPLIES MADE BY THE ASSESSEE AS T HE ASSESSEE HAS FURNISHED COMPLETE DETAILS OF PURCHASES AND SALES. THE CIT(A ), FURTHER OBSERVED THAT THE AO HAS NOT MADE ANY ATTEMPT TO LOCATE THE ALLEGED H AWALA PARTIES, LEAVE ALONE, VERIFIED THEIR BANK ACCOUNTS TO CHECK IF CASH WITHD RAWALS HAD FOLLOWED THE DEPOSIT OF ASSESSEES CHEQUES. THE ASSESSEE HAS FI LED ENTIRE DOCUMENTATION IN TERMS OF COPIES OF LEDGER ACCOUNT, VOUCHERS, PRODUC TION REGISTER, REGISTERED BILLS FOR TRANSPORT AND THE BANK STATEMENT. ALL TH ESE EVIDENCES LEAD TO AN UNDOUBTED INFERENCE THAT THE PURCHASES FROM THE ABO VE PARTIES ARE GENUINE, THEREFORE, THERE IS NO REASON FOR THE AO TO DISALLO W TOTAL PURCHASES ON THE BASIS OF INFORMATION RECEIVED FROM DGIT (INV). WITH THES E OBSERVATIONS, THE LD.CIT(A) DELETED ADDITIONS MADE BY THE AO TOWARDS BOGUS PURC HASES U/S 69C OF THE ACT. AGGRIEVED BY ORDER OF CIT(A), THE REVENUE IS IN APP EAL BEFORE US. 4. WE HAVE HEARD THE LD.DR AND PERUSED MATERIAL AVAILA BLE ON RECORD. THE AO MADE ADDITION TOWARDS PURCHASES ON THE BASIS OF INFORMATION RECEIVED FROM MAHARASHTRA SALES-TAX DEPARTMENT WHICH INFORME D THAT THE PARTIES ARE INVOLVED IN PROVIDING ACCOMMODATION ENTRIES WITHOUT ANY BUSINESS ACTIVITY. 5 ITA NO.3022/MUM/2017 ACCORDING TO THE AO, NOTICES ISSUED U/AS 133(6) WER E RETURNED UNSERVED WITH REMARK NOT KNOWN OR UNCLAIMED. THEREFORE, THE AO OPINED THAT THOUGH THE ASSESSEE HAS FURNISHED CERTAIN EVIDENCES TO JUS TIFY PURCHASES FROM ABOVE PARTIES, FAILED TO PROVE THE GENUINENESS OF PURCHAS ES IN THE BACKDROP OF CLEAR FINDINGS OF MAHARASHTRA SALES-TAX DEPARTMENT THAT T HE PARTIES ARE INVOLVED IN PROVIDING ACCOMMODATION ENTRIES. IT IS THE CONTENT ION OF THE ASSESSEE THAT PURCHASES FROM ABOVE PARTIES ARE GENUINE IN NATURE AS ITS PURCHASES ARE SUPPORTED BY VALID PURCHASE BILLS, DELIVERY CHALLAN S AND PAYMENT FOR SUCH PURCHASES HAS BEEN MADE THROUGH PROPER BANKING CHAN NELS. THE ASSESSEE FURTHER CONTENDED THAT ADDITIONS CANNOT BE MADE TOW ARDS PURCHASES MERELY ON THE BASIS OF THIRD PARTY INFORMATION IGNORING TH E EVIDENCES FILED TO JUSTIFY PURCHASES. THE ASSESSEE FURTHER CONTENDED BEFORE T HE LOWER AUTHORITIES THAT THE AO NEITHER POINTED OUT ANY ERROR OR DISCREPANCY IN THE BOOKS OF ACCOUNT NOR DID MAKE OUT ANY CASE OF SALES MADE OUTSIDE THE BOOKS OF ACCOUNT. IN THE ABSENCE OF ANY FINDING AS TO INCORRECTNESS OF BOOKS OF ACCOUNT, ADDITION CANNOT BE MADE TOWARDS BOGUS PURCHASES. 5. HAVING HEARD, WE FIND FORCE IN THE CONTENTION OF TH E ASSESSEE FOR THE REASONS THAT THE AO HAS MADE ADDITIONS ONLY ON THE BASIS OF INFORMATION RECEIVED FROM MAHARASHTRA SALES-TAX DEPARTMENT, IGN ORING THE EVIDENCES FILED BY THE ASSESSEE IN THE FORM OF PURCHASE BILLS, DELI VERY CHALLANS AND PAYMENT 6 ITA NO.3022/MUM/2017 PROOF. THE ASSESSEE, ON THE OTHER HAND, FILED CERT AIN EVIDENCES IN THE FORM OF PURCHASE BILLS AND PAYMENT PROOF TO PROVE THE GENUI NENESS OF PURCHASES. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT ADDIT ION CANNOT BE MADE TOWARDS ALLEGED BOGUS PURCHASES ONLY ON THE BASIS O F INFORMATION RECEIVED FROM MAHARASHTRA SALES-TAX DEPARTMENT. AT THE SAME TIME, IT IS ALSO AN UNDISPUTED FACT THAT THE NOTICES ISSUED U/S 133(6) WERE RETURNED UNSERVED WITH REMARK, NOT KNOWN OR UNCLAIMED. THE ASSES SEE HAS FAILED TO FURNISH CORRECT ADDRESSES OF THE PARTIES. UNDER THESE CIRC UMSTANCES, IT IS VERY DIFFICULT TO ACCEPT THAT THE PURCHASES FROM THOSE PARTIES ARE EXPLAINED TO THE SATISFACTION OF THE AO. UNDER THESE FACTS AND CIRC UMSTANCES WHAT NEEDS TO BE TAXED IS ONLY THE PROFIT ELEMENT IN SUCH PURCHASES BUT NOT THE TOTAL PURCHASES MADE FROM ALLEGED BOGUS PARTIES. THIS VIEW HAS BEE N FURTHER SUPPORTED BY THE DECISION OF AHMEDABAD TRIBUNAL IN THE CASE OF VIJAY PROTIENS LTD (SUPRA) WHEREIN IT WAS HELD THAT ONLY PROFIT ELEMENT EMBEDD ED IN BOGUS PURCHASES NEEDS TO BE TAXED. WE FURTHER NOTICE THAT THE HON BLE GUJARAT HIGH COURT IN THE CASE OF BHOLANATH POLY FAB PVT LTD 355 ITR 290 (GUJ) OBSERVED THAT WHETHER PURCHASES THEMSELVES WERE TO BE TAXED OR WH ETHER PARTIES FROM WHOM SUCH PURCHASES MADE WERE BOGUS IS ESSENTIALLY A QUESTION OF FACT AND THE TRIBUNAL HAVING EXAMINED THE EVIDENCE ON RECORD CONCLUDED THAT THE ASSESSEE DID PURCHASE CLOTH AND SOLD GOODS, THE ENT IRE PURCHASE WOULD NOT BE 7 ITA NO.3022/MUM/2017 SUBJECTED TO TAX. IN YET ANOTHER CASE, THE HONBLE GUJARAT HIGH COURT IN THE CASE OF SIMIT P SHETH (SUPRA) HAS HELD THAT NO UNIF ORM YARDSTICK CAN BE APPLIED FOR ESTIMATION OF NET PROFIT WHICH IS DEPENDENT UPO N FACTS AND CIRCUMSTANCES OF EACH CASE. THE CO-ORDINATE BENCH OF ITAT, MUMBA I IN SEVERAL CASES HAS TAKEN A VIEW THAT ONLY THE PROFIT ELEMENT EMBEDDED IN BOGUS PURCHASES NEEDS TO BE TAXED. ACCORDINGLY, ESTIMATED NET PROFIT OF 12.5% ON BOGUS PURCHASES. THEREFORE, CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE AND ALSO BEING CONSISTENT WITH THE VIEW TAKEN BY THE CO-ORDINATE B ENCH, WE ARE OF THE VIEW THAT ONLY PROFIT ELEMENT EMBEDDED IN PURCHASES NEED S TO BE TAXED. HENCE, WE DIRECT THE AO TO ESTIMATE NET PROFIT OF 12.5% ON TO TAL PURCHASES MADE FROM THE ABOVE PARTIES. 6. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS PART LY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST OCTOBER, 2017. SD/- SD/- (C.N. PRASAD) (G MANJUNATHA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DT : 31 ST OCTOBER, 2017 PK/- COPY TO : 1. APPELLANT 8 ITA NO.3022/MUM/2017 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR /TRUE COPY/ BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI