ITO 14(3)(2), MUMBAI V. J. PATEL & CO, MUMBAI

ITA 3206/MUM/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 93242 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-07-2015
• Appeal Filed By: Department
• Bench Allotted: SMC
• Assessment Year: 2002-2003
• Appeal Filed On: 06-05-2014
• Court: TRIBUNAL
• Department Lawyers: NEELIMA V NADKARNI
• Assessee Lawyers: MAYUR A SHAH
• Keywords: Bogus purchase; Unexplained investment; Accommodation entries; Reason to believe
• Section: 133A; 147; 69; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER I.T.A. NO.3206/M/2014 (AY:2002 - 2003) I.T.A. NO.3207/M/2014 (AY:2003 - 2004) I.T.A. NO.3208/M/2014 (AY:2004 - 2005) I.T.A. NO.3209/M/2014 (AY:2005 - 2006) I.T.A. NO.3210/M/2014 (AY:2006 - 2007) INCOME TAX OFFICER - 14(3)(2), 6 TH FLOOR, EARNEST HOUSE, NARIMAN POINT, MUMBAI - 21. / VS. M/S. J. PATEL & CO., 164, DADAR GALLI, M.J. MARKET, MUMBAI - 400002. ./ PAN : AAAFJ4331R ( / APPELLANT) .. ( / RESPONDENT ) CROSS OBJECTION NO.90/M/2015 (AY 2002 - 03) CROSS OBJECTION NO.91/M/2015 (AY 2003 - 04) CROSS OBJECTION NO.92/M/2015 (AY 2004 - 05) CROSS OBJECTION NO.93/M/2015 (AY 2005 - 06) CROSS OBJECTION NO.94/M/2015 (AY 2006 - 07) M/S. J. PATEL & CO., 164, DADAR GALLI, M.J. MARKET, MUMBAI - 400002. / VS. INCOME TAX OFFICER - 14(3)(2), 6 TH FLOOR, EARNEST HOUSE, NARIMAN POINT, MUMBAI - 21. ./ PAN : AAAFJ4331R ( / APPELLANT) .. ( / RESPONDENT ) / ASSESSEE BY : SHRI MAYUR A. SHAH / REVENUE BY : MS. NEELIMA V. NADKARNI, DR / DATE OF HEARING : 08.07 .2015 / DATE OF PRONOUNCEMENT :22 .07.2015 / O R D E R PER D. KARUNAKARA RAO, AM: THERE ARE 10 APPEALS UNDER CONSIDERATION, OF WHICH, THE MAIN APPEALS ARE FILED BY THE REVENUE AND THE CROSS OBJECTIONS ARE FILED BY THE ASSESSEE INVOLVING THE AYS 2002 - 2003 TO 2006 - 2007. SINCE, THE ISSUES RAISED BY THE REVENUE AS WELL AS THE ASSESSEE IN T HEIR RESPECTIVE APPEALS ARE IDENTICAL, THEREFORE, FOR THE SAKE OF CONVENIENCE, THEY ARE CLUBBED, HEARD TOGETHER AND DISPOSED OF IN HIS CONSOLIDATED ORDER. 2 2. FOR THE SAKE OF CONVENIENCE, I SHALL TAKE - UP THE CROSS APPEALS FOR THE AY 2002 - 03 AS A LEAD APPEAL AND THE RELEVANT ADJUDICATION GIVEN ON THESE APPEALS IS EQUALLY APPLICABLE TO THE REST OF THE APPEALS INVOLVING OTHER ASSESSMENT YEARS. (CROSS APPEALS FOR THE AY 2002 - 2003) CROSS OBJECTIO N NO.90/M/2015 (BY ASSESSEE) 3. THIS CROSS OBJECTION FILED BY THE ASSESSEE ON 26.6.2015 IS A GAINST THE ORDER OF THE CIT (A) - 25, MUMBAI DATED 28.2.2014 FOR THE ASSESSMENT YEARS 2002 - 03 TO 2006 - 07. IN THI S APPEAL, ASSESSEE RAISED THREE CROSS OBJECTIONS AND OUT OF THEM CROSS OBJECTION NO.2 IS EFFECTIVE ONE AND THE SAME READS AS UNDER: - 2. THE LD CIT (A) ERRED IN HOLDING THAT THE ASSESSING OFFICER HAVING NOT TAXED THE ALLEGED INFLATED PURCHASES BEING THE GROUND ON WHICH THE ASSESSMENT WA S RE - OPENED, WAS JUSTIFIED IN BRINGING TO TAX ALLEGED UNEXPLAINED INVES TMENT U/S 69 OF THE ACT EVEN TH OUGH THE GROUNDS FOR RE - OPENING THE ASSESSMENT DO NOT MENTION THAT INCOME FROM UNEXPLAINED INVESTMENTS U/S 69 OF THE ACT HAS ESCAPED ASSESSMENT. IT IS PR AYED THAT THE HONBLE MEMBERS OF THE ITAT BE PLEASED TO HOLD THAT THE ASSESSING OFFICER HAVING NOT BROUGHT TO TAX INCOME WHICH HE INITIALLY HAD A REASON TO BELIEVE HAS ESCAPED ASSESSMENT IT IS NOT OPEN TO HIM TO INDEPENDENTLY ASSESS OTHER INCOME UNDER AN I NDEPENDENT HEAD. 3. BRIEFLY STATED RELEVANT FACTS OF THE CASE ARE THAT THE ASSESSEE IS A DEALER IN TEXTILES AND FILED THE RETURN OF INCOME DECLARING THE TOTAL INCOME OF RS. 90,650/ - . THE SAID RETURN OF INCOME WAS PROCESSED U/S 143(1) OF THE ACT. CONSEQ UENT TO ACTION OF SURVEY U/S 133A OF THE ACT IN THE CASE OF SHRI RAKESHKUMAR M. GUPTA; SMT. HEMA R. GUPTA, WHO ARE ENGAGED IN PROVIDING THE ACCOMM ODATION BILLS FOR COMMISSION, O N FINDING THE ASSESSEE IS ONE OF THE BENEFICIARIES OF SUCH ACCOMMODATION ENTRI ES, THE ASSESSMENTS OF THE ASSESSEE WERE REOPENED U/SS 147 AND 148 OF THE ACT AND THE RE - ASSESSMENT WAS COMPLETED BY MAKING ADDITIONS U/S 69 OF THE ACT ON ACCOUNTS OF UNEXPLAINED / UNPROVED PURCHASES / INVESTMENTS IN PURCHASES AND AN AMOUNT OF RS. 10,85,21 5/ - WAS ADDED FOR THE AY 2002 - 2003. PARA 13 OF THE ASSESSMENT ORDER IS RELEVANT IN THIS REGARD AND THE SAME READS AS UNDER: 13. CONSIDERING THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE, IT IS HELD THAT THE ASSESSEES PURCHASES TO THE EXTENT CLAIMED TO HAVE MADE FROM, THE SAID GROUP CONCERNS ARE NOT REAL PURCHASES BUT THE CLAIMS OF ASSESSEE OF QUANTITATIVE TALLY LEAD TO THE CONCLUS ION THAT PURCHASES ARE OUT OF THE BOOKS, SOURCES FOR WHICH IS NOT EXPLAINED BY THE ASSESSEE. THE INVESTMENT MADE FOR THESE PURCHASES ARE NOT REFLECTED IN THE BOOKS OF ACCOUNTS / BANK STATEMENT OF THE ASSESSEE. ACCORDINGLY, THE TOTAL ACCOMMODATION BILL AM OUNT OF RS. 10,85,215/ - AVAILED BY THE ASSESSEE IS TREATED AS HAWALA PURCHASES / OR TO ACCOMMODATE THE PURCHASES MADE OUT OF THE BOOKS, SOURCES FOR WHICH IS NOT EXPLAINED. HENCE, THE ENTIRE AMOUNT OF RS. 10,85,215/ - IS ADDED BACK TO THE TOTAL INCOME OF TH E ASSESSEE ON ACCOUNT OF EXPLAINED AND UNPROVED PURCHASE / INVESTMENT AS PER SECTION 69 OF THE IT ACT FOR THE REASONS DISCUSSED ABOVE. PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) FOR 3 FURNISHING INACCURATE PARTICULARS OF INCOME ARE INITIATED. NOTICE U/S 2 74 READ WITH SECTION 271(1)(C) ARE SEPARATELY ISSUED. 4. SIMILAR ADDITIONS WERE MADE IN ALL THE ASSESSMENT YEARS UNDER CONSIDERATION AND THE MATTER TRAVELLED TO THE FIRST APPELLATE AUTHORITY. 5. DURING THE PROCEEDINGS BEFORE THE FIRST APPELLATE AUTHORIT Y, ASSESSEE SUBMITTED THAT THE ACCOMMODATION BILLS WERE PURCHASES FROM THE SAID PARTIES BY PAYING COMMISSION, OTHERWISE, THERE ARE NO ACTUAL PURCHASES. THE ENTRIES ARE MERELY OF ACCOMMODATION IN NATURE AND THE ADDITIONS SHOULD BE RESTRICTED TO ONLY THE GRO SS PROFIT (GP) OF THE SAID BOGUS PURCHASES. O N HEARING THE ASSESSEE AND ON CONSIDERING THE VARIOUS DECISIONS AVAILABLE ON THE ISSUE, CIT (A) RESTRICTED THE ADDITION TO 10% OF THE ALLEGED PURCHASES, EQUIVALENT OF THE GP DIFFERENCE. PARA 6.11 OF THE CIT (A )S ORDER IS RELEVANT IN THIS REGARD AND THE SAME IS EXTRACTED AS UNDER: 6.11. KEEPING IN VIEW THE TOTALITY OF FACTS AND CIRCUMSTANCES OF THE CASE, I AM OF THE OPINION THAT THE CAUSE OF JUSTICE WOULD BE MET BY MAKING ADDITION AT 10% OF SUCH ALLEGED PURCHA SES IN ORDER TO FILL IN THE GAP DIFFERENCE OF GP AND AS WELL AS TO PLUG FOR POSSIBLE LEAKAGE OF REVENUE. HENCE, THE ADDITIONS ARE RESTRICTED TO 10% OF THE ALLEGED PURCHASES OF RS. 10,85,215/ - ; RS. 12,84,189/ - ; RS. 9,41,385/ - ; RS. 5,92,396/ - AND RS. 12,01, 946 FOR VARIOUS ASSESSMENT YEARS UNDER APPEAL. THE 10% OF THE ALLEGED PURCHASES CONFIRMED FOR VARIOUS ASSESSMENT YEARS ARE RS. 1,08,521/ - ; RS. 1,28,841/ - ; RS. 94,413/ - ; RS. 59,239/ - AND RS. 1,00,194/ - RESPECTIVELY AND THE BALANCE AMOUNT OF ADDITIONS OF RS . 9,76,694/ - ; RS. 11,55,348; RS. 8,46,971/ - ; RS. 5,33,157/ - AND RS. 9,01,752/ - ARE DELETED ACCORDINGLY. 5.1. AGGRIEVED WITH THE ABOVE ORDER OF THE CIT (A), ASSESSEE AS WELL AS REVENUE ARE IN APPEAL BEFORE THE TRIBUNAL. 6. DURING THE PROCEEDINGS BEFORE THE TRIBUNAL, IN RESPECT TO THE CROSS OBJECTION RAISED BY THE ASSESSEE, LD COUNSEL FOR THE ASSESSEE ARGUED THAT THE ADDITION MADE U/S 69 OF THE ACT IS UNSUSTAINABLE IN LAW. THE REASONING, AS GIVEN BY THE ASSESSEE VIDE CROSS OBJECTION NO.2, IS THAT TH E ASS ESSING OFFICER REOPENED THE ASSESSMENT FOR BRINGING THE INFLATED PURCHASE AND HOWEVER, THE ADDITION MADE WAS ON ACCOUNT OF UNEXPLAINED INVESTMENT U/S 69 OF THE ACT. TO THAT EXTENT, IN VIEW OF THE JUDGMENT IN THE CASE OF CIT VS. JET AIRWAYS (I) LTD [331 IT R 236 (BOM)] AND OTHERS, THE ADDITIONS MADE IN THE REASSESSMENT SHOULD NOT BE SUSTAINED. HOWEVER, THERE IS NO GROUND QUESTIONING THE VALIDITY OF THE REASSESSMENT AND THE NOTICES U/SS 147 / 148 OF THE ACT. 7. ON THE OTHER HAND, LD DR RELIED ON THE ORDER OF THE AO. 8. ON HEARING BOTH THE PARTIES AND ON PERUSAL OF THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS THE RELEVANT MATERIAL PLACED ON TO THE RECORD, I FIND THE 4 ADDITION MADE BY THE AO IS NOT ONLY ON ACCOUNT OF UNEXPLAINED INVESTMENT BUT ALSO ON THE FO LLOWING ACCOUNTS : - UNEXPLAINED / UNPROVED PURCHASE / INVESTMENT IN PURCHASE - AS PER SECTION 69 OF THE ACT AS DISCUSSED ABOVE 9. I HAVE ALSO NOTICED THE NOMENCLATURE, UNDER WHICH THE ADDITION WAS MADE APART, WHAT IS ADDED IS THE TOTAL ACCOMMODATION BILL AMOUNT, WHICH WAS ALSO THE SUBJECT MATTER OF REASONS GIVEN BY THE ASSESSING OFFICER IN REOPENING THE ASSESSMENT. AFTER GOING THROUGH THE ABOVE FACTS, I AM OF THE OPINION THE CROSS OBJECTION RAISED BY THE ASSESSEE SHOULD BE DISMISSED. ACCORDINGLY, TH E GROUNDS OF CROSS OBJECTIONS RAISED BY THE ASSESSEE ARE DISMISSED. 10. IN THE RESULT, CROSS OBJECTION RAISED BY THE ASSESSEE IS DISMISSED. ITA NO.3206/M/2014 (REVENUES APPEAL) 11. THIS APPEAL FILED BY THE REVENUE ON 6.5.2014 IS AGAINST THE COMMON ORDE R OF THE CIT (A) - 25, MUMBAI DATED 28.2.2014 FOR THE ASSESSMENT YEARS 2002 - 03 TO 2006 - 07. IN THIS APPEAL, REVENUE RAISED THE FOLLOWING GROUNDS WHICH READ AS UNDER: 1. THE LD CIT (A) HAS ERRED IN LAW AS WELL AS ON FACT BY NOT SUSTAINING ADDITION U/S 69 AFTER HAVING ACCEPTED THE FINDING IN PRINCIPLE THAT THE PURCHASES WERE MADE FROM UNDISCLOSED / UNVERIFIABLE / UNIDENTIFIABLE PARTIES IN THE GREY MARKET BY INVESTING IN CASH AND THE PURCHASES FROM THE GROUP CONCERNS OF SHRI RAKESH GUPTA & FAMILY WERE ONLY ACCOMMODATION ENTRIES AND NOT ACTUAL PURCHASES. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD CIT (A) AFTER HAVING ACCEPTED THE FACT THAT THE PURCHASES MADE FROM OR THOUGH SHRI RAKESHKUMAR GUPTA AND HIS FAMILY MEMBERS ARE BOGUS, ERRED IN LAW IN NOT CONFIRMING THE ADDITION AT LEAST TO THE EXTENT OF PEAK OF THE PURCHASES MADE FROM SUCH PARTIES ON ACCOUNT OF BOGUS PURCHASES MADE IN CASH FROM THE OPEN MARKET OUT OF UNACCOUNTED CASH, IN VIEW OF THE DECISION HELD BY THE HONBLE ITATS C - BENCH, AHMA DABAD, IN THE CASE OF VIJAY PROTEINS LTD VS. ACIT (58 ITD 428). 12. THE ABOVE GROUNDS RAISED BY THE REVENUE SUGGEST THAT THEY ARE ESSENTIALLY QUESTIONING THE RELIEF GRANTED BY THE CIT (A) TO THE ASSESSEE. AS EXTRACTED ABOVE , FROM THE PARA 6.11 OF THE IMPUGNED ORDER, I FIND THE CIT (A) RESTRICTED THE ADDITION TO GP DIFFERENCE INSTEAD OF CONFIRMING THE TOTAL ACCOMMODATION BILL AMOUNT. FOR REACHING THE SAID DECISION, CIT (A) HAS GIVEN DETAILED REASONS AND RELIED ON VARIOUS BINDING JUDGMENTS ON THE SUBJEC T. CONSIDERING THE SAME, I AM OF THE OPINION THE ORDER OF THE CIT (A) IS FAIR AND REASONABLE AND IT DOES NOT CALL FOR ANY INTERFERENCE. FURTHER, IN MY VIEW THE PURCHASE ADDITION CANNOT BE APPLIED IN THIS CASE WHERE THE ISSUE REVOLVES AROUND INFLATED PURC HASES BY WAY OF ACCOMMODATION BILLS FOR PURCHASES. THIS IS AN UNDISPUTED FACT BETWEEN THE PARTIES. THEREFORE, I AM OF THE 5 OPINION THAT THE JUDGMENT IN THE CASE OF VIJAY PROTEINS LTD VS. ACIT (58 ITD 428) HAS NO APPLICATION. ACCORDINGLY, GROUND NOS. 1 AN D 2 RAISED BY THE REVENUES APPEAL ARE DISMISSED. 13. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ITA NO.3207 /M/2014 (AY 2003 - 04) (REVENUES APPEAL) ITA NO.3208 /M/2014 (AY 2004 - 05) (REVENUES APPEAL) ITA NO.3209 /M/2014 (AY 2005 - 06) (REVENUES APPEAL) ITA NO.3210 /M/2014 (AY 2006 - 07) (REVENUES APPEAL) 14. T HE ISSUES RAISED IN ALL THE ABOVE APPEALS ARE IDENTICAL TO THAT OF THE REVENUES APPEAL ITA NO.3206/M/2014 FOR THE AY 2002 - 2003, WHICH IS ADJUDICATED IN THE ABOVE PARAGRAPHS OF THIS ORDER. SINCE THE ISSUES RAISED IN THE PRESENT APPEALS ARE IDENTICAL, THEREFORE, THE ADJUDICATION GIVEN THEREOF SQUARELY APPLIES TO THESE APPEALS TOO. CONSIDERING THE SAME, THE REVENUES APPEALS FOR THE AYS 2003 - 04 TO 2006 - 07 ARE DISMISSED. 15. IN THE RESULT, FO UR APPEALS FILED BY THE REVENUE ARE DISMISSED. CROSS OBJECTION NO.91/M/2015(AY 2003 - 04) (BY ASSESSEE) CROSS OBJECTION NO.92/M/2015 (AY 2004 - 05) (BY ASSESSEE) CROSS OBJECTION NO.93/M/2015 (AY 2005 - 06) (BY ASSESSEE) CROSS OBJECTION NO.94/M/2015(AY 2006 - 07) (BY ASSESSEE) 16. T HE ISSUES RAISED IN ALL THE ABOVE CROSS OBJECTIONS ARE IDENTICAL TO THAT OF THE ASSESSEES CROSS OBJECTION NO. 90 /M/2014 FOR THE AY 2002 - 2003 , WHICH IS ADJUDICATED IN THE ABOVE PARAGRAPHS OF THIS ORDER. SINCE THE ISSUES RAISED IN THE P RESENT APPEALS ARE IDENTICAL, THEREFORE, THE ADJUDICATION GIVEN THEREOF SQUARELY APPLIES TO THESE APPEALS TOO. CONSIDERING THE SAME, THE ASSESSEES CROSS OBJECTIONS FOR THE AYS 2003 - 04 TO 2006 - 07 ARE DISMISSED. 17. IN THE RESULT, FOUR CROSS OBJECTIONS RAISED BY THE ASSESSEE ARE DISMISSED . 18. CONCLUSIVELY, ALL THE FIVE APPEALS OF THE REVENUE AS WELL AS THE FIVE CROSS OBJECTIONS OF THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCE D IN THE OPEN COURT ON 22 ND JULY, 2015. SD/ - (D. KARUNAKARA RAO) ACCOUNTANT MEMBER MUMBAI ; 22 .7 .2015 . . ./ OKK , SR. PS 6 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI