MR. SANJAT DEVRAJ DHANRESHA, MUMBAI V. ITO 18(3)(2), MUMBAI

ITA 321/MUM/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 7645 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-01-2020
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 24-01-2019
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: R BHOOPATHIL
• Keywords: Bogus purchase; Accommodation entries
• Section: 40A(3); 143(3); 142(1); 133(6); 143(2); 145(3); 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH SMC MUMBAI BEFORE SHRI VIKAS AWASTHY (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NOS. 321/MUM/2019 ASSESSMENT YEAR: 2011 - 12 M/S SANJAY DEVRAJ DHANRESHA, M/S J.K. BHAGERIA & ASSOCIATES, CHARTERED ACCOUNTANTS, 106, 1 ST FLOOR, CLASSIC HERITAGE, AAREY ROAD, NEAR UDIPI HOTEL, GOREGAON (EAST), MUMBAI - 400063. VS. ITO - 18(3)(2), MUMBAI. PAN NO. ADOPD3923G APPELLANT RESPONDENT ASSESSEE BY : NONE REVENUE BY : MR. R. BHOOPATHIL, DR DATE OF HEARING : 21/01/2020 DATE OF PRONOUNCEMENT : 29/01/2020 ORDER PER N.K. PRADHAN, A.M. THE APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) - 53 [IN SHORT CIT(A)], MUMBAI AND ARISES OUT OF THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER (AO) U/S 143(3) R.W.S. 147 OF THE INCOME TAX ACT 1961, (THE ACT). THOUGH THE CASE WAS FIXED FOR HEARING ON 21.01.2020, NEITHER THE ASSESSEE NOR HIS AUTHORIZED REPRESENTATIVE APPEARED BEFORE THE TRIBUNAL ON THE ABOVE DATE. AS THERE IS NON - COMPLIANCE BY THE ASSESSEE, WE ARE PROCEEDING TO DISPOSE OF THIS APPEAL AFTER EXAMI NING THE MATERIALS AVAILABLE O N RECORD AND AFTER HEARING THE LD. DEPARTMENTAL REPRESENTATIVE (DR). M/S SANJAY DEVRAJ DHANRESHA ITA NO. 321/MUM/2019 2 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE FILED HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR (AY) 2011 - 12 ON 30.09.2011 DECLARING TOTAL INCOME OF RS.8,28,658/ - . ON RECEIPT OF INFORMATION FROM THE SALES TAX DEPARTMENT, GOVERNMENT OF MAHARASHTRA THAT THE ASSESSEE HAS OBTAINED ACCOMMODATION ENTRIES FROM TWO ENTRY PROVIDERS I.E. NIDDHISH IMPEX P. LTD. OF RS.64,57,346/ - AND MOKSHA IMPEX OF RS. 83,02,604/ - , THE ASSESSING OFFICER (AO) RE - OPENED THE ASSESSMENT BY ISSUING NOTICE U/S 148 DATED 17.04.2014. IN RESPONSE TO IT, THE ASSESSEE FILED A REPLY STATING THAT THE RETURN FILED ON 30.09.2011 BE TREATED AS FILED IN RESPONSE TO NOTICE U/S 148 OF THE ACT. THEREAFTER, THE AO ISSUED NOTICE U/S 142(1) AND 143(2) OF THE ACT. DURING THE COURSE OF RE - ASSESSMENT PROCEEDINGS, THE AO ISSUED NOTICE U/S 133(6) DATED 24.11.2015 TO THE PARTIES MENTIONED ABOVE SEEKING CONFIRMATIONS OF HAVING TRANSACTIONS WITH THE AS SESSEE DURING THE YEAR UNDER CONSIDERATION. HOWEVER, THOSE NOTICES WERE RETURNED UN - SERVED BY THE POSTAL AUTHORITIES WITH THE REMARK LEFT. THE AO OBSERVED THAT THE ASSESSEE HAS MADE BOGUS PURCHASES FROM THE SAID TWO PARTIES IN CASH IN VIOLATION OF SECTIO N 40A(3) OF THE ACT. ON THE BASIS OF THE ABOVE REASONS, THE AO ASKED THE ASSESSEE TO SHOW CAUSE AS TO WHY ADDITION SHOULD NOT BE MADE ON THE BASIS OF EVIDENCE COLLECTED BY THE SALES TAX DEPART MENT, GOVERNMENT OF MAHARASHTRA. THE AO FURTHER REJECTED THE BOO KS OF ACCOUNT U/S 145(3) OF THE ACT. TO BRING TO TAX THE PROFIT EMBEDDED IN SUCH DISPUTED PURCHASES, THE AO ESTIMATED THE PROFIT @ 12.5% ON RS.1,47,59,950/ - WHICH COMES TO RS.18,44,993/ - . 3. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE FILED AN APPEAL B EFORE THE LD. CIT(A). WE FIND THAT VIDE ORDER DATED 07.12.2018, THE LD. CIT(A) CONFIRMED THE DISALLOWANCE MADE BY THE AO BY OBSERVING THAT : M/S SANJAY DEVRAJ DHANRESHA ITA NO. 321/MUM/2019 3 5.6 I AM GUIDED BY THE RATIO OF DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT V. SIMIT P. SHETH P RONOUNCED ON 16.01.2013 IN TAX APPEAL NO. 5531 OF 2012 WHEREIN THE HONBLE COURT HAVE HELD THAT WHEN THE TOTAL SALE IS ACCEPTED BY THE AO, THEN THE ENTIRE PURCHASES CANNOT BE ADDED TO THE INCOME OF THE APPELLANT. THE HONBLE COURT HAVE, THEREFORE, HELD THA T FAIR PROFIT RATIO WOULD BE NEEDED TO BE ADDED BACK TO THE INCOME OF THE ASSESSEE. 5.7 EVEN IF MATERIALS HAVE BEEN PURCHASED, THEY ARE NOT PURCHASED FROM THESE PARTIES AND MAY BE IN CASH FROM UNDISCLOSED PARTIES. BY PURCHASING FROM THE GREY MARKET, THE AP PELLANT WOULD HAVE BENEFITTED BY THE SAVINGS OF TAXES. THEREFORE, IN FACT AND CIRCUMSTANCES OF THE CASE, IN THIS PARTICULAR CASE, IT IS CONSIDERED MOST APPROPRIATE TO ADOPT 12.5% PROFIT WHICH CAN TAKE CARE OF THE ROTATION OF CAPITAL UTILIZED FOR SUCH TRANS ACTION. HENCE IN THE LIGHT OF FINDING OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT V. SIMIT P. SHETH, 12.5% PROFIT IS FOUND TO BE APPROPRIATE FOR ASCERTAINMENT OF TAXABLE INCOME RELATED TO SUCH TRANSACTION. THE ASSESSING OFFICER HAS MADE DISALLOWAN CE @ 12.5%. THE SAME IS REASONABLE AND IS SUSTAINED. 4. BEFORE US, THE LD. DR SUPPORTS THE ORDER PASSED BY THE CIT(A). 5. WE HAVE HEARD THE LD. DR AND PERUSED THE RELEVANT MATERIALS ON RECORD. IN THE INSTANT CASE THE NOTICES ISSUED BY THE AO U/S 133(6) OF THE ACT TO THE PARTIES WERE RETURNED UN - SERVED BY THE POSTAL AUTHORITIES WITH THE REMARK LEFT. THE AO SENT THOSE NOTICES U/S 133(6) CALLING FOR CONFIRMATIONS FROM THE PARTIES. THERE WAS SPECIFIC INFORMATION FROM THE SALES TAX DEPARTMENT, GOVERNMENT O F MAHARASHTRA THAT THE ASSESSEE HAD OBTAINED ACCOMMODATION ENTRIES FROM THE TWO ENTRY PROVIDERS I.E. NIDDHISH IMPEX P. LTD. OF RS.64,57,346/ - AND MOKSHA IMPEX OF RS.83,02,604/ - . THE AO ESTIMATED THE PROFIT @ 12.5% OF THE DISPUTED PURCHASES OF RS.1,47,59,95 0/ - WHICH COMES TO RS.18,44,993/ - . IN APPEAL, THE LD. CIT(A) BY FOLLOWING THE JUDGMENT OF THE HONBLE GUJARAT HIGH COURT IN SIMIT P. M/S SANJAY DEVRAJ DHANRESHA ITA NO. 321/MUM/2019 4 SHETH (SUPRA) HAS RIGHTLY CONFIRMED THE DISALLOWANCE OF RS.18,44,993/ - . WE AFFIRM THE ORDER OF THE LD. CIT(A). 6. IN THE RESULT, THE APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 29/01/2020. SD/ - SD/ - ( VIKAS AWASTHY ) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED: 29/01/2020 RAHUL SHARMA, SR. P.S. 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 . BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI