ASST CIT 19(3), MUMBAI V. YOGESH CONSTRUCTION, MUMBAI

ITA 324/MUM/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 0050 (ITAT-MUMBAI)
• Duration Of Justice: 7 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-08-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2009-2010
• Appeal Filed On: 13-01-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAM TIWARI
• Assessee Lawyers: RAHUL K HAKANI ADVICATE
• Keywords: Bogus purchase; Accommodation entries; Onus to prove
• Section: 133(6); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH E, MU MBAI BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO.324/MUM/2017 (ASSESSMENT YEAR- 2009-10) DCIT-19(3), MATRU MANDIR, 2 ND FLOOR, ROOM NO. 206, TARDEO ROAD, MUMBAI-400007 VS. M/S YOGESH CONSTRUCTION, 10/11, 1 ST FLOOR, 25, HARHARWALA BUILDING, MUMBAI-400004 PAN: AAAFY6766D (APPELLANT) (RESPONDENT) CROSS OBJECTION NO.195/MUM/2017 (ASSESSMENT YEAR- 2 009-10) M/S YOGESH CONSTRUCTION, 10/11, 1 ST FLOOR, 25, HARHARWALA BUILDING, MUMBAI-400004 PAN: AAAFY6766D VS. DCIT-19(3), MATRU MANDIR, 2 ND FLOOR, ROOM NO. 206, TARDEO ROAD, MUMBAI-400007 (APPELLANT) (RESPONDENT) REVENUE BY : SHRI RAM TIWARI -SR.DR ASSESSEE BY : SHRI RAHUL K. HAKANI ADVICATE DATE OF HEARING : 22.08.2017 DATE OF PRONOUNCEMENT : 22.08.2017 ORDER UNDER SECTION 254(1) OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER: 1. THIS APPEAL BY REVENUE UNDER SECTION 253 OF THE INC OME-TAX ACT (ACT) IS DIRECTED AGAINST THE ORDER OF LD. COMMISSIONER OF I NCOME TAX (APPEALS)- 30 [CIT(A)], MUMBAI DATED 17.10.2016 FOR THE ASSESS MENT YEAR (AY) 2009-10. THE REVENUE HAS RAISED THE FOLLOWING GROUN DS OF APPEAL: 1. 'WHETHER ON THE FACTS AND IN CIRCUMSTANCES OF TH E CASE AND IN LAW, THE LD. CIT(A)-30, MUMBAI, ERRED IN REDUCING THE ADDITION M ADE AT 100% OF THE UNPROVED/SUSPICIOUS PURCHASES OF RS. 80,41,854/- TO 15% OF THE SAID PURCHASES WHEN THE AFORESAID ADDITION WAS MADE AT 1 00% FOR THE REASON THAT THE ASSESSEE HAD NOT PRODUCED ITS BOOKS OF ACCOUNTS FOR VERIFICATION; NOT ITA NO. 324/M/2017 & C.O. 195/M/17- M/S YOGESH CONSTRUCTION 2 EXPLAINED THE PRODUCTION PROCESS; NOT DEMONSTRATED THE COMPUTATION RATIO OF THE BOGUS PURCHASES AND ALSO NOT RECONCILED THE PUR CHASES TO THE FINISHED PRODUCTS.' 2. THE ASSESSEE IN ITS CROSS OBJECTION (C.O) HAS RAISE D THE FOLLOWING GROUNDS OF OBJECTION/APPEAL: 1. THE LEARNED CIT(A) ERRED IN RESTRICTING ADDITION OF ALLEGED BOGUS PURCHASE TO THE EXTENT OF 15% OF ALLEGED BOGUS PURCHASE OF R S 80,41,840/- WITHOUT APPRECIATING THAT ASSESSEE HAD DISCHARGED ITS ONUS TO PROVE THE PURCHASES AS GENUINE AS PAYMENT WAS MADE THROUGH ACCOUNT PAYEE C HEQUES, PURCHASES WERE UTILIZED IN EXECUTING GOVERNMENT CONTRACTS AND PURCHASES WERE DULY SUPPORTED BY INVOICES ETC AND ASSESSEE HAS SHOWN RE ASONABLE GROSS PROFIT AND HENCE THE ENTIRE ADDITION OF RS 80,41,840/- OUGHT T O BE DELETED. 2. WITHOUT PREJUDICE TO ABOVE, LEARNED CIT(A) FAILE D TO APPRECIATE THAT ADDITION OF ALLEGED BOGUS PURCHASE TO THE EXTENT OF 15% OF ALLEGED BOGUS PURCHASE OF RS 80,41,840/- IS ON A VERY HIGH SIDE A ND SAME MAY BE REDUCED. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE F ILED RETURN OF INCOME FOR RELEVANT AY ON 09.09.2009 DECLARING INCOME AT RS. 6 1,33,105/-. THE RETURN OF INCOME WAS PROCESSED U/S 143(1) OF THE AC T. SUBSEQUENTLY, THE ASSESSMENT WAS RE-OPENED ON THE BASIS OF INFORMATIO N RECEIVED FROM THE OFFICE OF DGIT(INVESTIGATION). THE DGIT (INV.) INFO RMED THAT SALES TAX DEPARTMENT; GOVERNMENT OF MAHARASHTRA UNEARTHED THE RACKET OF HAWALA DEALERS, WHO WERE ENGAGED IN TRANSACTION INVOLVING BOGUS PURCHASES/HAWALA TRANSACTION. THE DGIT(INV.) HAS PA SSED THE LIST OF BENEFICIARY WHO HAVE TAKEN THE BOGUS/HAWALA ENTRIES FROM SUCH DEALERS. THE ASSESSEE WAS SHOWN AS ONE OF THE BENEFICIARIES FOR TAKING BOGUS BILLS. THE ASSESSMENT WAS RE-OPENED UNDER SECTION 147 OF T HE ACT. NOTICE U/S 148 DATED 20.02.2014 WAS SERVED UPON THE ASSESSEE; THE ASSESSEE FILED ITS REPLY ON 19.03.2014 AND REQUESTED TO TREAT THE ORIG INAL RETURN OF INCOME IN COMPLIANCE OF NOTICE U/S 148 OF THE ACT. THE AO PRO CEEDED TO COMPLETE ITA NO. 324/M/2017 & C.O. 195/M/17- M/S YOGESH CONSTRUCTION 3 THE RE-ASSESSMENT. DURING THE RE-ASSESSMENT PROCEED ING, THE AO NOTICED THAT THE ASSESSEE HAS SHOWN THE FOLLOWING PURCHASES FROM THE DEALERS/PARTIES WHOSE NAME APPEARED IN THE LIST OF HAWALA DEALERS: SR.NO. NAME OF THE ASSESSEE AMOUNT 1 KESAR ENTERPRISES 1321947 2 DEEPALI ENTERPRISES 251956 3 SIDDHIVINAYAK TRADING CO. 255441 4 PARAS SALES CORP. 629720 5 RENUKA SALES CORP. 510854 6 K R C TRADING CO. P. LTD. 5101136 7 HITNESH TRADE LINKS 1765193 8 DIMPLE ENTERPRISES 1805607 TOTAL 80,41,854 4. THE AO ISSUED NOTICE U/S 133(6) DATED 17.10.2014 TO THE PARTIES CONCERNED. THE NOTICES WERE RETURNED UNSERVED. THE INSPECTOR VIDE HIS REPORT DATED 03.12.2014 ALSO REPORTED THAT NO SUCH CONCERN/PARTIES/DEALERS WERE EXISTING AT THE GIVEN ADDRESS. THE ASSESSEE WA S ALSO ASKED TO SUBMIT THE BOOKS OF ACCOUNT, STOCK REGISTER, DETAILS OF PU RCHASE AND SALES ALONG WITH THE DOCUMENTARY EVIDENCE. THE ASSESSEE FAILED TO FILE BOOKS OF ACCOUNT, STOCK REGISTER, PURCHASE AND SALE BILLS AN D DELIVERY CHALLANS. THE AO CONCLUDED THAT THE ASSESSEE IS A TRADER, THE MAT ERIAL IS CLAIMED TO HAVE BEEN PURCHASED FROM THE SUSPICIOUS DEALER BUT THE A SSESSEE IS NOT ABLE TO ESTABLISH THE GENUINENESS OF THE PURCHASES. THE AO MADE ADDITION OF 100% OF UNAPPROVED/SUSPICIOUS PURCHASES OF RS. 80, 41,854/-. ON APPEAL BEFORE THE LD. CIT(A), THE DISALLOWANCE WAS RESTRIC TED TO 15% OF THE TOTAL PURCHASED FROM THE ALLEGED HAWALA DEALERS. THUS, FU RTHER AGGRIEVED, BY THE ORDER OF LD CIT(A) THE REVENUE HAS FILED THE PRESEN T APPEAL AGAINST ITA NO. 324/M/2017 & C.O. 195/M/17- M/S YOGESH CONSTRUCTION 4 SUSTAINING ONLY 15% OF THE BOGUS PURCHASES. SIMILAR LY, ON SERVICE OF NOTICE OF APPEAL BY REVENUE, THE ASSESSEE HAS ALSO FILED C.O. AGAINST SUSTAINING 15% OF THE ALLEGED BOGUS PURCHASES. 5. WE HAVE HEARD THE LD. DEPARTMENTAL REPRESENTATIVE ( DR) FOR THE REVENUE LD. AUTHORIZED REPRESENTATIVE (AR) OF THE ASSESSEE AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE LD. DR OF THE REV ENUE ARGUED THAT THE INVESTMENT WING OF INCOME-TAX DEPARTMENT MADE FULL- FLEDGED ENQUIRY. IN THE INVESTIGATION OF THE INCOME-TAX DEPARTMENT, IT WAS REVEALED THAT THE ASSESSEE IS ONE OF THE BENEFICIARIES WHO HAS AVAILE D THE ACCOMMODATION ENTRIES FROM THE HAWALA DEALERS. THE HAWALA DEALERS WERE INDULGED IN ISSUING BOGUS BILL WITHOUT DELIVERY OF ANY MATERIAL OF GOODS, THE ASSESSEE OBTAINED ACCOMMODATION BILL ONLY IN ORDER TO INFLAT E THE EXPENSES AND TO BRING DOWN THE PROFITABILITY IN ORDER TO AVOID THE TAX. THE LD. DR FOR THE REVENUE PRAYED THAT ENTIRE PURCHASES MAY BE DISALLO WED. ON THE OTHER HAND, THE LD. AR OF THE ASSESSEE ARGUED THAT ASSESS EE MADE THE PURCHASES FROM GENUINE PARTIES. THE PAYMENTS WERE MADE THROUG H ACCOUNT PAYEE CHEQUES. THE ASSESSEE HAS PROVIDED THE NECESSARY IN FORMATION DURING THE ASSESSMENT PROCEEDING. THE AO RELIED UPON THE INFOR MATION OF THIRD PARTY WITHOUT PROVIDING ANY DETAILS OF INVESTIGATION EITH ER BY SALES-TAX DEPARTMENT OR BY THE INVESTIGATION WING OF THE INCO ME-TAX DEPARTMENT. IT WAS ARGUED THAT NO ADVERSE INFERENCE CAN BE DRAWN A GAINST THE ASSESSEE MERELY ON THE REASON THAT SOME OF THE DEALERS HAVE NOT PAID MVAT WHICH ITA NO. 324/M/2017 & C.O. 195/M/17- M/S YOGESH CONSTRUCTION 5 WERE COLLECTED FROM THE ASSESSEE. THE ONLY REASON T HAT DEALERS HAVE NOT PAID MVAT TO THE GOVERNMENT, WILL NOT TANTAMOUNT TH AT THE PURCHASES MADE BY ASSESSEE ARE SUSPICIOUS OR BOGUS. THE MATER IAL PURCHASED BY THE ASSESSEE HAS BEEN CONSUMED AT VARIOUS SITES IN THE EXECUTION OF CIVIL CONTRACT AWARDED BY MUNICIPAL CORPORATION OF GREAT ER BOMBAY (MCGM). THE ENGINEERS OF MCGM CERTIFIED THE CONSUMP TION OF MATERIAL. THE PURCHASE AND CONSUMPTION WAS VERIFIABLE FROM TH E RECORD OF MCGM. WHEN THE CONSUMPTION WAS NOT DISPUTED BY THE AO WHI CH IS DULY SUPPORTED BY THE EVIDENCE, PURCHASE CANNOT BE CALLE D AS BOGUS. THE LD. CIT(A) SUSTAINED THE DISALLOWANCE @ 15% WHICH IS AT THE HIGHER SIDE. THE LD AR PRAYED THAT SOME REASONABLE DISALLOWANCE MAY BE SUSTAINED. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF THE LE REPRESENTATIVES OF THE PARTIES AND HAVE GONE THROUGH THE ORDERS OF AUTHORI TIES BELOW. WE HAVE SEEN THAT THE AO HAS NOT REJECTED THE BOOKS OF ACCO UNT OF THE ASSESSEE. FURTHER, THE EXECUTION OF WORK AND CLEARANCE OF BIL L FROM MCGM ON THE CONTRACT AWARDED TO THE ASSESSEE IS ALSO NOT DISPUT ED. THE TRANSACTIONS OF PURCHASES WERE THROUGH BANKING CHANNEL. THE CONSUMP TION OF MATERIAL NOT DISPUTED. THE AO HAS NOT BROUGHT ANY MATERIAL O N RECORD THAT THE AMOUNT OF THE SAID PURCHASES HAVE COME BACK TO TH E ASSESSEE EXCEPT DISPUTING THE PURCHASES AS NOT GENUINE. WE HAVE NOT ED THAT LD. CIT(A) HAS ALSO OBSERVED THAT THE AO IS SILENT ABOUT THE EXECU TION OF WORK AND CLEARANCE OF THE BILLS AGAINST THE EXECUTION OF CON TRACT. THE LD. CIT(A) ON ITA NO. 324/M/2017 & C.O. 195/M/17- M/S YOGESH CONSTRUCTION 6 THE BASIS OF DECISION OF CIT VS. SIMITH P. SHETH [( 2013) TAXMANN.COM 385 (GUJ.) SUSTAINED THE DISALLOWANCE @ 15%. THE LD. CI T(A) WHILE SUSTAINING THE DISALLOWANCE OBSERVED THAT THE ASSESSEE IS ALSO DOING SUB-CONTRACT WORK WHERE THE PROFIT PERCENTAGE IS MORE. WE HAVE S EEN THAT NEITHER THE AO NOR THE LD. CIT(A) EXAMINED THE GROSS PROFIT AND NET PROFIT RATIO FOR THE YEAR UNDER CONSIDERATION AS WELL AS FOR EARLI ER AND SUBSEQUENT YEARS. 7. WE ARE OF THE CONSIDERED OPINION THAT UNDER INCOME- TAX ACT ONLY REAL INCOME CAN BE TAXED BY THE REVENUE. WE MAY FURTHER NOTE THAT EVEN IN CASES WHERE ENTIRE TRANSACTION IS NOT VERIFIABLE D UE TO VARIOUS REASONS, THE ONLY TAXABLE IS THE TAXABLE INCOME COMPONENT. AFTER CONSIDERING THE FACT AND RIVAL SUBMISSION OF THE PARTIES, WE ARE OF THE OPINION THAT IN ORDER TO FULFILL THE GAP OF REVENUE LEAKAGE, THE DISALLOWANC E OF REASONABLE PERCENTAGE OF AMOUNT, PURCHASES WOULD MEET THE END OF JUSTICE. CONSIDERING THE BUSINESS OF THE ASSESSEE THE DISALL OWANCE OF 15% IS ON HIGHER SIDE. IN OUR OPINION THE DISALLOWANCE ON A CCOUNT OF BOGUS PURCHASES IN THE PRESENT CASE @12.5%, OF THE TOTAL IMPUGNED PURCHASES MEET THE END OF JUSTICE. THE AO IS DIRECTED ACCORDI NGLY. 8. IN THE RESULT THE C.O. FILED BY ASSESSEE IS PARTLY ALLOWED AND THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 22 DAY OF AUGUST 2017. SD/- SD/- G. S. PANNU) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI; DATED 22/8/2017 ITA NO. 324/M/2017 & C.O. 195/M/17- M/S YOGESH CONSTRUCTION 7 S.K.PS COPY OF THE ORDER FORWARDED TO : BY ORDER, (ASSTT.REGI STRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY/