NIMISH S. JOSHI, MUMBAI V. ACIT 15(3), MUMBAI

ITA 3293/MUM/2016

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 9164 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-10-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 10-05-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: RANJIT SINGH ARNEJA
• Keywords: Bogus purchase; Peak credit; Rule of consistency; Accommodation entries
• Section: 69C; 143(3); 133(6); 147; 69; 148; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH B, MU MBAI BEFORE SHRI P.K. BANSAL, VICE-PRESIDENT AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO.3291/MUM/2016 (ASSESSMENT YEAR- 2009-10) MR. NIMISH S. JOSHI, GROUND FLOOR, 8 GARIBDAS STREET, VADGADI, MUMBAI-400003 PAN: AABPJ2784M VS. DCIT-15(3), MUMBAI (NOW ASSESSED WITH ACIT 17(2),) AAYAKAR BHAVAN, MUMBAI-400020. (APPELLANT) (RESPONDENT) ITA NO.3292/MUM/2016 (ASSESSMENT YEAR- 2010-11) MR. NIMISH S. JOSHI, GROUND FLOOR, 8 GARIBDAS STREET, VADGADI, MUMBAI-400003 PAN: AABPJ2784M VS. DCIT-15(3), MUMBAI (NOW ASSESSED WITH ACIT 17(2),) AAYAKAR BHAVAN, MUMBAI-400020. (APPELLANT) (RESPONDENT) ITA NO.3293/MUM/2016 (ASSESSMENT YEAR- 2011-12) MR. NIMISH S. JOSHI, GROUND FLOOR, 8 GARIBDAS STREET, VADGADI, MUMBAI-400003 PAN: AABPJ2784M VS. DCIT-15(3), MUMBAI (NOW ASSESSED WITH ACIT 17(2),) AAYAKAR BHAVAN, MUMBAI-400020. (APPELLANT) (RESPONDENT) ASSESSEE BY : NONE REVENUE BY : SH. RANJIT SINGH ARNEJA (DR) DATE OF HEARING : 14.09.2017 DATE OF PRONOUNCEMENT : 14.09.2017 ORDER UNDER SECTION 254(1) OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER: ITA NO.3291 TO 3293/M/2016- MR. NIMESH S. JOSHI 2 1. THIS SET OF THREE APPEALS UNDER SECTION 253 OF THE INCOME-TAX ACT (THE ACT) ARE DIRECTED AGAINST THE DIFFERENT ORDER OF LD. CIT (A)-28, MUMBAI DATED 03.03.2016 FOR THE ASSESSMENT YEAR (AY) 2009-10, 20 10-11 & 2011-12. IN ALL THE APPEAL, THE ASSESSEE HAS RAISED COMMON GROU NDS OF APPEAL . THE FACTS OF APPEALS FOR ALL AY UNDER CONSIDERATION ARE ALMOS T SIMILAR EXCEPT VARIATION OF FIGURES OF ADDITION. THUS, ALL THE APPEALS WERE CLUBBED TOGETHER AND ARE DECIDED BY COMMON ORDER. FOR APPRECIATION OF FACT, WE ARE REFERRING THE FACT FOR AY 2009-10. 2. IN ITA NO. 3291/MUM/2016 THE ASSESSEE HAS RAISED FO LLOWING GROUNDS OF APPEAL: BEING AGGRIEVED BY THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEAL)-28 MUMBAI, THIS APPEAL PETITION IS SUBMITTED ON THE FO LLOWING GROUNDS, WHICH IT IS PRAYED MAY BE CONSIDERED INDEPENDENTLY WITHOUT PREJ UDICE TO ONE ANOTHER. 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LD CIT(A) ERRED IN CONFIRMING THAT PURCHASES OF RS. 12,65,08,460/- FOR A.Y. 2009-10 ARE ACCOMMODATION ENTRIES EVEN THOUGH ACCEPTING THE FAC T THAT THERE IS QUANTITATIVE TALLY AND SALES ARE ACTUALLY MADE. ALLEGATION MADE, WITHOUT APPRECIATING THE FACT THAT THERE WERE GENUINE SALES BASED ON PURCHAS ES MADE, IS BAD IN LAW AND NEEDS TO BE DELETED. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LD CIT(A) ERRED IN CONFIRMING THE ADDITION OF INCREMENTAL PEAK CRED IT TO THE EXTENT OF RS. 5,71,35,258/- OUT OF TOTAL ADDITION OF RS.7,58,23,8 4F3/- U/S. 69C AS UNACCOUNTED CASH CIRCULATING IN THE BUSINESS OF THE APPELLANT. CONFIRMATION OF ADDITION ON SURMISES AND PRESUMPTIONS AND WITHOUT CONSIDERING T HE STATEMENT RECORDED OF THE APPELLANT IN TOTALITY AND EXPLANATIONS SUBMITTE D WHEREIN SOURCE OF CASH RECEIVED IS EXPLAINED, IS BAD IN LAW AND NEEDS TO B E DELETED. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PROPRIETOR OF M/S JOSHI CHEMICALS, ENGAGED IN THE BUSINESS OF CHEMICALS AND SOLVENTS. THE ASSESSEE FILED HIS RETURN OF INCOME FOR RELEVANT AY ON 29.0 9.2009 DECLARING TOTAL INCOME OF RS. 16,17,159/-. THEREAFTER, THE ASSESSIN G OFFICER RECEIVED ITA NO.3291 TO 3293/M/2016- MR. NIMESH S. JOSHI 3 INFORMATION FROM THE OFFICE OF DGIT (INVESTIGATION) THAT THE ASSESSEE HAS AVAILED ACCOMMODATION ENTRIES FOR PURCHASES FROM VA RIOUS PARTIES WHO WERE INVOLVED IN PROVIDING THE ACCOMMODATION ENTRIES. TH EREFORE, THE ASSESSING OFFICER (AO) RECORDED THE REASON THAT INCOME HAS ES CAPED ASSESSMENT. THE AO RE-OPENED THE ASSESSMENT BY ISSUING NOTICE U/S 148 OF THE ACT ON 28.03.2013. IN RESPONSE TO THE NOTICE U/S 148, TH E ASSESSEE VIDE HIS REPLY DATED 22.04.2013 SUBMITTED THAT ORIGINAL RETURN FIL ED ON 29.09.2009 MAY BE TREATED AS RETURN FILED IN RESPONSE TO THE NOTICE U /S 148 OF THE ACT. THE AO PROCEEDED TO MAKE THE RE-ASSESSMENT U/S 143(3) R.W. S. 147 OF THE ACT. THE AO WHILE FRAMING THE ASSESSMENT PROCEEDING NOTICED THAT THE ASSESSEE HAS PRODUCED THE MATERIAL FROM THE FOLLOWING EIGHT PART IES: SR. NO. NAME OF THE PURCHASE PARTY TIN AMOUNT OF ALLEGED PURCHASES 1 DHRUV SALES CORPORATION 27760622173V 1,17,19,373 2 OM CORPORATION 27310540795V 1,53,89,415 3 JAIN TRADING CORPORATION 27210156439V 39,64,746 4 BLUE NILE ENTERPRISES 27340548975V 6,67,680 5 RAJVEE ENTERPRISES 27820613022V 13,82,680 6 BHUMI ENTERPRISE 27860587392V 73,02,532 7 NAVDEEP TRADING CORPN. 27540616280V 2,51,44,573 8 U.V.DISTRIBUTORS PVT. LTD. 2745061`1043V 5,33,87, 887 9 GRIFTON INDIA RIDDHI ENTERPRISE 27810355056V 1,17,19,373 TOTAL RS. 13,06,78,259/- THE AO FURTHER OBSERVED THAT THE PARTIES FROM WHOM THE ASSESSEE HAD MADE THE PURCHASES ARE SHOWN IN THE LIST OF HAWALA DEALE RS. THE AO ISSUED NOTICE TO THE PARTIES APPEARING IN THE PURCHASE INVOICES. HOWEVER, NO NOTICE WAS SERVED AND THE SAME WAS RETURNED UNSERVED WITH THE REMARK LEFT OR NOT KNOWN. THE AO THE ASSESSEE WAS ASKED TO SUBSTANT IATE AND PROVE THE ITA NO.3291 TO 3293/M/2016- MR. NIMESH S. JOSHI 4 GENUINENESS OF PURCHASES. IN RESPONSE TO THE SHOW-C AUSE NOTICE THE ASSESSEE CONTENDED THAT THE SALES AND PURCHASES ARE DULY REC ORDED IN THE BOOKS OF ACCOUNT. THE ASSESSEE IS A TRADER AND MAINTAINING Q UANTITATIVE DETAILS OF THE GOODS TREADED. THE ACCOUNTS HAVE BEEN AUDITED AND N O ADVERSE COMMENT HAS BEEN GIVEN BY THE AUDITOR. ALL PAYMENTS HAVE BEEN M ADE THROUGH ACCOUNT PAYEE CHEQUES; THE GOODS PURCHASED FROM THE PARTIES ARE INCLUDED IN THE STOCK-REGISTER. THE ASSESSEE IS NOT IN A POSITION T O PRODUCE THE PARTIES AS THE MATERIAL WERE PURCHASED THROUGH BROKERS AND GOODS H AVE BEEN SOLD TO VARIOUS PARTIES AFTER RECEIVING PAYMENT IN VIEW OF SUCH SALE. THE PURCHASES SHOULD NOT BE TREATED AS BOGUS PURCHASES. THE CONTE NTION OF THE ASSESSEE WAS NOT ACCEPTED BY THE AO THAT NONE OF THE PARTIES IS AVAILABLE AT THEIR GIVEN ADDRESS, AS THE NOTICE SENT U/S 133(6) HAVE BEEN RE TURNED UNSERVED AND THE ASSESSEE HAS CHOSEN NOT TO PRODUCE THESE PARTIES. T HE AO ON THE BASIS OF PEAK CREDIT MADE THE ADDITION OF RS. 7,51,39,528/- U/S 69C OF THE ACT. ON APPEAL BEFORE THE LD. CIT(A), THE ADDITION WAS SUST AINED AT RS. 5,71,35,258/- ON THE BASIS OF INCREMENTAL CREDIT. THUS, LD CIT(A) GRANTED PARTIAL RELIEF TO THE ASSESSEE. FURTHER, AGGRIEVED BY THE ORDER OF LD . CIT(A), THE ASSESSEE HAS FILED THE PRESENT APPEAL BEFORE US. 4. NONE, APPEARED ON BEHALF OF ASSESSEE WHEN THE MATTE R WAS CALLED FOR HEARING DESPITE REPEATED CALLS AND PASS OVER. WE LEFT WITH NO OPTION EXCEPT TO HEAR THE LD. DR FOR THE REVENUE AND TO PROCEED WITH ON T HE BASIS OF MATERIAL ITA NO.3291 TO 3293/M/2016- MR. NIMESH S. JOSHI 5 AVAILABLE ON RECORD. THE LD. DR FOR THE REVENUE SUP PORTED THE ORDER OF AUTHORITIES BELOW. THE LD. DR FOR THE REVENUE ARGUE D THAT INVESTIGATION WING OF THE INCOME-TAX DEPARTMENT MADE A FULL-FLEDG ED ENQUIRY, WHEREIN THE RACKETS OF HAWALA DEALERS HAVE UNEARTHED. THE A SSESSEE HAS SHOWN THE PURCHASES FROM BOGUS HAWALA DEALERS. THE HAWALA DEA LERS WERE INDULGED IN ISSUING BOGUS BILL WITHOUT DELIVERY OF ANY MATERIAL OR GOODS. THE ASSESSEE WAS CONFRONTED WITH THE INFORMATION AVAILABLE WITH THE AO. THE ASSESSEE FAILED TO PRODUCE ANY EVIDENCE WITH REGARD TO DELIV ERY AND TRANSPORTATION OF GOODS. THE AO MADE THE ADDITION ON THE BASIS OF PEA K CREDIT, HOWEVER, THE LD. CIT(A) GIVEN PARTIAL RELIEF TO THE ASSESSEE. IT WAS ARGUED THAT THE ASSESSEE IS NOT ENTITLED FOR FURTHER RELIEF AND THE APPEAL O F THE ASSESSEE MAY BE DISMISSED. 5. WE HAVE CONSIDERED THE SUBMISSION OF LD. DR FOR THE REVENUE AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE HAVE SEEN THAT THE ASSESSMENT WAS RE- OPENED ON THE BASIS OF INFORMATION RECEIVED FROM TH E OFFICE OF DGIT (INVESTIGATION) THAT ASSESSEE HAS AVAILED ACCOMMODA TION ENTRIES FROM THE CERTAIN PARTIES TO INFLATE ITS PURCHASES. THE ASSES SEE WAS SERVED WITH THE NOTICE U/S 148 OF THE ACT. THE NOTICE WAS DULY REPL IED BY THE ASSESSEE. REASONS OF RE-OPENING WAS ALSO PROVIDED TO THE ASSE SSEE VIDE LETTER DATED 26.04.2013. DURING THE RE-ASSESSMENT PROCEEDING, TH E ASSESSEE WAS ASKED TO SUBSTANTIATE THE EXPENSES INCURRED ON ACCOUNT OF CE RTAIN PURCHASES. THE ITA NO.3291 TO 3293/M/2016- MR. NIMESH S. JOSHI 6 ASSESSEE IN THE QUERIES OF AO SUBMITTED THE DETAILS OF PURCHASES, DETAILS OF QUANTITATIVE TALLY OF GOODS, PAYMENTS AGAINST THE P URCHASES THROUGH BANKING CHANNEL. WE HAVE NOTED THAT THE ASSESSEE HAS NOT FU RNISHED ANY EVIDENCE WITH REGARD TO TRANSPORTATION AND DELIVERY OF THE G OODS. THE ASSESSEE HAS SHOWN THE PURCHASES OF RS. 13,06,78,259/-. THE AO M ADE THE DISALLOWANCE OF RS. 7,51,39,528/-. THE DISALLOWANCE MADE BY THE AO IS ABOUT 57% OF THE AGGREGATE OF THE ALLEGED BOGUS PURCHASES. THE LD. C IT(A) RESTRICTED THE DISALLOWANCE TO RS. 5,71,35,258/- ON THE BASIS OF I NCREMENTAL CREDIT. THE DISALLOWANCE RESTRICTED BY LD. CIT(A) IS ABOUT 43.7 % OF THE AGGREGATE OF TOTAL ALLEGED BOGUS PURCHASES. WE HAVE NOTED THAT T HE AO AS WELL AS LD. CIT(A) HAS NOT CONSIDERED THE GROSS PROFIT RATIO O F ASSESSEE FOR EARLIER AND SUBSEQUENT YEARS. THE STATEMENT OF ACCOUNT WAS NOT REJECTED. THE SALE/CONSUMPTION OF MATERIAL WAS NOT DISPUTED. THE AO MADE THE DISALLOWANCE ON THE BASIS OF THIRD PARTY INFORMATIO N. THE AO MADE THE DISALLOWANCE @ 57% OF THE TOTAL PURCHASES FROM THE SAID HAWALA DEALERS. HOWEVER, THE LD. CIT(A) RESTRICTED THE SAME TO 43.7 %. THE DISALLOWANCE IS AT THE HIGHER SIDE. WE ARE OF THE CONSIDERED VIEW THAT UNDER THE INCOME-TAX ACT ONLY THE REAL INCOME CAN BE TAXED BY THE REVENU E. WE MAY FURTHER NOTE THAT IN ANY CASE WHERE THE WHOLE TRANSACTION IS NOT VERIFIABLE DUE TO VARIOUS REASONS, THE ONLY TAXABLE IS THE TAXABLE COMPONENT AND NOT THE TRANSACTION AS A WHOLE OR SUBSTANTIAL PART OF THE SAID TRANSACTION . THE HONBLE BOMBAY ITA NO.3291 TO 3293/M/2016- MR. NIMESH S. JOSHI 7 HIGH COURT IN CIT VS. HARIRAM BHAMBHANI (ITA NO. 31 3/2013 DATED 04.02.2015) HELD THAT THE REVENUE IS NOT ENTITLED T O BRING THE ENTIRE SALE CONSIDERATION, BUT ONLY THE PROFIT ATTRIBUTABLE ON THE UNRECORDED SALE CONSIDERATION ALONE. AFTER CONSIDERING THE FACT OF THE CASE AND THE SUBMISSION OF LD. DR FOR THE REVENUE, WE ARE OF THE OPINION THAT IN ORDER TO FULFILL THE GAP OF REVENUE LEAKAGE, THE DISALLOWANC E ON REASONABLE PERCENTAGE OF ALLEGED BOGUS PURCHASES WOULD MEET TH E END OF JUSTICE. THUS CONSIDERING THE NATURE OF BUSINESS OF ASSESSEE (DEA LING IN CHEMICALS AND SOLVENTS), IN OUR CONSIDERED VIEW, THE DISALLOWANC E OF 12.5% OF THE ALLEGED BOGUS PURCHASE WOULD MEET THE REQUIREMENT OF REVENU E LEAKAGE. THUS, WE DIRECT THE AO TO RESTRICT THE DISALLOWANCE ON ACCOU NT OF ALLEGED BOGUS PURCHASES U/S 69 TO 12.5% (OF RS. 13,06,78,259/-). HENCE, GROUNDS OF APPEAL RAISED BY ASSESSEE ARE PARTLY ALLOWED. ITA NO. 3292/MUM/2016 (AY-2010-11) 6. THE ASSESSEE HAS RAISED THE IDENTICAL GROUNDS OF AP PEAL. THE ASSESSMENT FOR THE YEAR UNDER CONSIDERATION WAS COMPLETED U/S 143( 3) OF THE ACT ON 25.03.2013. THE AO WHILE FRAMING THE ASSESSMENT ORD ER NOTICED THAT THE ASSESSEE FURNISHED A LIST OF 37 PARTIES FROM WHOM T HE PURCHASE WERE MADE. ALL THE PARTIES WERE LISTED IN THE LIST OF HAWALA O PERATORS. THE AO FURTHER NOTICED THAT THE ASSESSEE HAS MADE THE PURCHASES FR OM 26 PARTIES FOR THE YEAR UNDER CONSIDERATION AND THE ASSESSEE HAS SHOWN THE PURCHASES OF RS. ITA NO.3291 TO 3293/M/2016- MR. NIMESH S. JOSHI 8 19,21,71,920/-. THE AO ON THE BASIS OF INCREMENTAL CREDIT ADDED RS.2,89,19,549/- IN THE INCOME OF ASSESSEE U/S 69C. ON APPEAL BEFORE THE LD. CIT(A), THE ACTION OF AO WAS CONFIRMED. FURTHER, AG GRIEVED BY THE ORDER OF LD. CIT(A), THE ASSESSEE HAS FILED THE PRESENT APPE AL BEFORE US. 7. THE LD. DR FOR THE REVENUE ARGUED ON THE SIMILAR LI NE AS ARGUED IN ITA NO. 3291/MUM/2016 FOR AY 2009-10. WE HAVE NOTED THAT TH E ASSESSEE HAS MADE THE PURCHASE OF RS. 19,21,71,920/-, THE DISALLOWANC E MADE BY AO IS ABOUT 15%. CONSIDERING THE FACT THAT WE HAVE RESTRICTED T HE DISALLOWANCE @ 12.5% OF THE BOGUS PURCHASES FOR AY 2009-10. THUS, CONSID ERING THE PRINCIPLE OF CONSISTENCY, THE DISALLOWANCE FOR THE YEAR UNDER CO NSIDERATION IS ALSO RESTRICTED TO 12.5% OF THE TOTAL BOGUS PURCHASES OF RS. 19,21,71,920/-. HENCE, THE GROUNDS OF APPEAL RAISED BY ASSESSEE ARE PARTLY ALLOWED. ITA NO. 3293/MUM/2016 (AY-2011-12) 8. THE ASSESSEE HAS RAISED THE IDENTICAL GROUNDS OF AP PEAL AS RAISED FOR AY 2009-10 AND 2010-11. WE HAVE SEEN THAT THE AO HAS O BSERVED THAT THE ASSESSEE HAS MADE THE PURCHASES OF RS. 4,89,92,490/ -. HOWEVER, WHILE MAKING ASSESSMENT NO ADDITION WAS MADE ON ACCOUNT O F THE ALLEGED BOGUS PURCHASES. THE AO ACCEPTED THE RETURN INCOME WITHOU T ANY ADDITIONS. STEEL THE ASSESSEE FILED APPEAL BEFORE THE LD. CIT(A). TH E LD. CIT(A) DISMISSED THE APPEAL OF THE ASSESSEE HOLDING THAT THE GROUNDS OF APPEAL DO NOT EMERGES FROM THE ASSESSMENT ORDER. THE LD. DR FOR THE REVEN UE ARGUED THAT THE ITA NO.3291 TO 3293/M/2016- MR. NIMESH S. JOSHI 9 APPEAL OF THE ASSESSEE IS WITHOUT ANY SUBSTANCE WHE N NO ADDITION WAS MADE ON ACCOUNT OF BOGUS PURCHASES, THE ASSESSEE HAS NO CAUSE OF ACTION TO FILE THE APPEAL. 9. WE HAVE CONSIDERED THE SUBMISSION OF LD. DR FOR THE REVENUE AND HAVE GONE THROUGH THE ORDER OF AUTHORITIES BELOW. WE HAV E SEEN THAT NO ADDITION ON ACCOUNT OF BOGUS PURCHASE BY AO WHILE PASSING TH E ASSESSMENT ORDER U/S 143(3) R.W.S. 147 OF THE ACT. THE AO ACCEPTED THE R ETURN OF INCOME FILED BY ASSESSEE. THE LD. CIT(A) DISMISSED THE APPEAL OF TH E ASSESSEE HOLDING THAT THE GROUNDS OF APPEAL RAISED BY ASSESSEE DO NOT EME RGES FROM THE ASSESSMENT ORDER. HENCE, WE DO NOT FIND ANY ILLEGAL ITY OR INFIRMITY IN THE ORDER PASSED BY LD. CIT(A). HENCE, THE GROUNDS OF A PPEAL RAISED BY ASSESSEE ARE DISMISSED. 10. IN THE RESULT, APPEAL FILED BY ASSESSEE FOR AYS 200 9-10, 2010-11 IS PARTLY ALLOWED AND APPEAL FOR AY 2011-12 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 14 TH DAY OF SEPTEMBE R 2017. SD/- SD/- (P.K. BANSAL) (PAWAN SINGH) VICE-PRESIDENT JUDICIAL MEMBER MUMBAI; DATED 14/09/2017 S.K.PS COPY OF THE ORDER FORWARDED TO : BY ORDER, (ASSTT.REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY/