ITO -25(3)(4), MUMBAI V. SURESH MANEKLAL SHETH, MUMBAI

ITA 3507/MUM/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 3746 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2008-2009
• Appeal Filed On: 23-05-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: CHAUDHARY ARUN KUMAR SINGH
• Keywords: Bogus purchase; Tangible material; Corroborative evidences; Accommodation entries
• Section: 133(6); 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY , JUDICIAL MEMBER AND SHR I N.K. PRADHAN, ACCOUNTANT MEMBER ITA NO. 3507 & 3508 / MUM . /201 8 ( ASSESSMENT YEAR : 2008 09 & 2009 10 ) INCOME TAX OFFICER WARD 25(3)(4), MUMBAI . APPELLANT V/S SHRI SURESH MANEKLAL SHETH 1, KUSUM NIWAS, S.V. ROAD, IRLA VILE PARLE (W), MUMBAI 400 056 PAN AJMPS0119H . RESPONDENT ITA NO. 3581 & 3582 /MUM. /2018 ( ASSESSMENT YEAR : 2008 09 & 2009 10 ) SHRI SURESH MANEKLAL SHETH 1, KUSUM NIWAS, S.V. ROAD, IRLA VILE PARLE (W), MUMBAI 400 056 PAN AJMPS0119H . APPELLANT V/S INCOME TAX OFFICER WARD 25(3)(4), MUMBAI . RESPONDENT REVENUE BY : SHRI CHAUDHARY ARUNKUMAR SINGH ASSESSEE BY : SHRI PRATEEK JAIN DATE OF HEARING 08.08.2019 DATE OF ORDER 30.08.2019 O R D E R PER BENCH THESE ARE TWO SETS OF CROSS APPEALS ARISING OUT OF TWO SEPARATE ORDERS , BOTH DATED 21 ST APRIL 2015, PASSED BY THE LEARNED 2 SHRI SURESH MANEKLAL SHETH COMMISSIONER OF INCOME TAX (APPEALS) 37, MUMBAI, PERTAINING TO THE ASSESSMENT YEAR S 2008 09 AND 2009 10. 2 . SINCE ALL THESE APPEALS PERTAIN TO THE SAME ASSESSEE INVOLVING COMMON ISSUES ARISING OUT OF IDENTICAL SET OF FACTS AND CIRCUMSTANCES, THEREFORE, AS A MATTER OF CONVENIENCE, THESE APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OFF BY WAY OF THIS CONSOLI DATED ORDER. 3 . BRIEF FACTS ARE, THE ASSESSEE , AN INDIVIDUAL , IS CARRYING ON BUSINESS OF TRADING IN PAPER THROUGH HIS PROPRIETORSHIP CONCERN NAMRATA PAPER AGENCIES. FOR THE ASSESSMENT YEAR UNDER DISPUTE, THE ASSESSEE HAD FILED HIS RETURN OF INCOME IN REGULA R COURSE DECLARING INCOME OF ` 8,41,990, AND ` 6,72,160, FOR THE ASSESSMENT YEAR S 2008 09 AND 2009 10 RESPECTIVELY. ON THE BASIS OF INFORMATION RECEIVED FROM THE SALES TAX DEPARTMENT, GOVERNMENT OF MAHARASHTRA AND THE DGIT (INV.), MUMBAI, THAT CERTAIN PURC HASES SHOWN BY THE ASSESSEE IN THESE YEARS ARE NOT GENUINE AS THEY ARE MERE ACCOMMODATION ENTRI ES THROUGH BOGUS PURCHASE BILLS, T HE ASSESSING OFFICER RE OPENED THE ASSESSMENT UNDER SECTION 147 OF THE INCOME TAX ACT, 1961 (FOR SHORT 'THE ACT' ). IN COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER CALLED UPON THE ASSESSEE TO PROVE THE GENUINENESS OF PURCHASES MADE OF ` 75,82,917, IN THE ASSESSMENT YEAR 2008 09 AND ` 85,97,910, IN THE ASSESSMENT YEAR 2009 10. AS OBSERVED BY THE ASSESSING OFFICER , EXCEPT FURNISHING THE PURCHASE BILLS, BANK ACCOUNT COPY, ETC., THE 3 SHRI SURESH MANEKLAL SHETH ASSESSEE COULD NOT FURNISH ANY SUPPORTING EVIDENCES TO PROVE ACTUAL DELIVERY OF GOODS AND FURTHER , SINCE , THE NOTICES ISSUED UNDER SECTION 133(6) OF THE ACT, RETURNED BACK UNSERVED BY THE POSTAL A UTHORITY, THE ASSESSING OFFICER HELD THAT THE PURCHASES CLAIMED TO HAVE BEEN MADE ARE MERE ACCOMMODATION ENTRIES AND ACCORDINGLY DISALLOWED THEM. HAVING DONE SO, THE ASSESSING OFFICER ADDED BACK THE ENTIRE NON GENUINE PURCHASES TO THE INCOME OF THE ASSESSE E IN BOTH THE ASSESSMENT YEARS. THE ADDITION MADE IN DIFFERENT ASSESSMENT YEARS ARE AS UNDER: A.Y. 2008 09 ` 75,82,917 A.Y. 2009 10 ` 85,97,910 4 . BEING AGGRIEVED WITH THE AFORESAID ADDITION S , ASSESSEE PREFERRED APPEALS BEFORE THE FIRST APPELLATE AUTHORITY. 5 . AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE IN THE LIGHT OF CERTAIN JUDICIAL PRECEDENTS, LEARNED COMMISSIONER (APPEALS) OBSERVED THAT THE ASSESSING OFFICER HAS NOT DISPUTED THE SALES EFFECTED BY THE ASSESSEE. FURTHER, HE OBSERVED , THERE IS NO DISPU TE THAT THE ASSESSEE HAS MADE PAYMENT THROUGH CHEQUE S AND THERE IS NOTHING ON RECORD TO SHOW THAT THE ASSESSEE HAS RECEIVED BACK THE AMOUNT IN CASH FROM THE SUPPLIERS. THUS, APPLYING THE RATIO LAID DOWN BY THE HON'BLE JURISDICTIONAL HIGH COURT IN NIKUNJ EX IM P ENTERPRISES V/S CIT , AND THE DECISION OF HONBLE GUJARAT HIGH COURT IN CIT V/S SIMIT P. SHETH, 356 4 SHRI SURESH MANEKLAL SHETH ITR 451 (GUJ.), LEARNED COMMISSIONER (APPEALS) ULTIMATE LY RESTRICTED THE ADDITION TO 12.5% OF NON GENUINE PURCHASES IN BOTH THE YEARS. BEING AGGRIEVED WI TH THE AFORESAID DECISION OF LEARNED COMMISSIONER (APPEALS), BOTH THE PARTIES ARE IN APPEAL BEFORE US. 6 . THE LEARNED AUTH ORISED REPRESENTATIVE REITERATING THE STAND TAKEN BEFORE THE DEPARTMENTAL AUTHORITIES SUBMITTED , SINCE THE PURCHASES MADE BY THE ASSESSE E ARE GENUINE, NO ADDITION SHOULD BE MADE. WITHOUT PREJUDICE, THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED , ESTIMATION OF PROFIT @ 12.5% BY LEARNED COMMISSIONER (APPEALS) IS HIGH AND EXCESSIVE CONSIDERING THE PROFIT MARGIN IN PAPER BUSINESS. HE SUBMITTE D , ASSESSEE HAS SHOWN GROSS PROFIT OF 8.34% IN ASSESSMENT YEAR 2008 09 AND 4.54% IN THE ASSESSMENT YEAR 2009 10. HE SUBMITTED , LET THE ADDITION BE RESTRICTED TO THE DIFFERENCE BETWEEN THE RATE OF PROFIT ESTIMATED BY LEARNED COMMISSIONER (APPEALS) AND GROSS PROFIT MARGIN SHOWN BY THE ASSESSEE. 7 . THE LEARNED DEPARTMENTAL REPRESENTATIVE STRONGLY RELYING UPON THE OBSERVATIONS OF THE ASSESSING OFFICER SUBMITTED , SINCE THE ASSESSEE HAS FAILED TO PROVE THE GENUINENESS OF PURCHASES AND IT IS PROVED THAT THE ASSESSE E HAS AVAILED ACCOMMODATION ENTRIES FROM HAWALA OPERATORS, THE ASSESSING OFFICER WAS JUSTIFIED IN ADDING THE ENTIRE NON GENUINE PURCHASES. HE SUBMITTED , LEARNED COMMISSIONER (APPEALS) HAS COMMITTED ERR OR IN RESTRICTING THE ADDITION TO 12.5%. 5 SHRI SURESH MANEKLAL SHETH 8 . WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. AT THE OUTSET, WE PROPOSE TO ADDRESS THE GROUNDS RAISED BY THE ASSESSEE CHALLENGING THE VALIDITY OF RE OPENING OF ASSESSMENT UNDER SECTION 147 OF THE ACT. ON A PERUSAL OF THE MATERIAL ON RECO RD, IT IS EVIDENT THAT AFTER COMPLETION OF THE ORIGINAL ASSESSMENT, THE ASSESSING OFFICER RECEIVED INFORMATION FROM THE PERCENTAGE OF DGIT (INV.), MUMBAI, AS WELL AS SALES TAX DEPARTMENT, GOVERNMENT OF MAHARASHTRA , INDICATING THAT THE ASSESSEE IS A BENEFIC IARY OF ACCOMMODATION ENTRIES PROVIDED BY CERTAIN HAWALA OPERATORS BY WAY OF BOGUS PURCHASE BILLS. ON THE BASIS OF SUCH INFORMATION AVAILABLE ON RECORD, THE ASSESSING OFFICER HAS RE OPENED THE ASSESSMENT S UNDER SECTION 147 OF THE ACT. THUS, IT IS EVIDENT , ON THE BASIS OF TANGIBLE MATERIAL AVAILABLE ON RECORD, THE ASSESSING OFFICER HAS FORMED BELIEF THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT REQUIRING RE OPENING OF ASSESSMENT UNDER SECTION 147 OF THE ACT. IN VIEW OF THE AFORESAID, WE HOLD THAT RE O PENING OF ASSESSMENT UNDER SECTION 147 OF THE ACT IN THE FACTS OF THE PRESENT CASE ARE VALID. 9 . HAVING HELD SO, NOW WE PROPOSE TO DEAL WITH THE MERITS OF THE ADDITIONS MADE BY THE ASSESSING OFFICER AND PARTLY SUSTAINED BY LEARNED COMMISSIONER (APPEALS). AS COULD BE SEEN FROM THE FACTS ON RECORD, IN C OURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE HAD FAILED TO PROVE THE GENUINENESS OF PURCHASES FROM THE DECLARED SOURCE BY 6 SHRI SURESH MANEKLAL SHETH FURNISHING ANY COGENT EVIDENCE TO SHOW ACTUAL DELIVERY OF GOODS. FURTHER, NOTICES ISSUED U NDER SECTION 133(6) OF THE ACT BY THE ASSESSING OFFICER TO VERIFY THE GENUINENESS OF PURCHASES ALSO RETURNED BACK UN SE R VED , HENCE, T HE IDENTITY OF THE SELLING DEALERS COULD NOT BE ESTABLISHED. HOWEVER, IT IS A FACT ON RECORD THAT SALES EFFECTED BY THE ASS ESSEE HAVE NOT BEEN DISPUTED BY THE ASSESSING OFFICER . THAT BEING THE CASE, IT HAS TO BE CONCLUDED THAT IN ABSENCE OF PURCHASES, THE ASSESSEE COULD NOT HAVE EFFECTE D CORRESPONDING SALES. THUS , DISPUTE REMAINS ONLY WITH REGARD TO THE SOURCE FROM WHICH THE A SSESSEE PURCHASED THE GOODS. IN THE AFORESAID FACTUAL POSITION, THE ADDITION OF THE ENTIRE PURCHASE IS NOT JUSTIFIED. THEREFORE, TO THAT EXTENT, LEARNED COMMISSIONER (APPEALS) WAS CORRECT IN ESTIMATING THE PROFIT ON THE NON GENUINE PURCHASES FOR THE PURPOS E OF ADDITION. 10 . NOW REVERTING BACK TO THE REASONABLENESS OF ESTIMATING PROFIT @ 12.5%, AFTER OVER ALL CONSIDERATION OF FACTS AND MATERIAL ON RECORD , THE NATURE OF BUSINESS CARRIED ON BY THE ASSESSEE AS WELL AS THE GROSS PROFIT MARGIN EARNED, WE ARE OF THE VI EW THAT ESTIMATION OF PROFIT @ 6 % OF THE NON GENUINE PURCHASES WOULD BE REASONABLE. ACCORDINGLY, WE DIRECT THE ASSESSING OFFICER TO RESTRICT THE ADDITION IN BOTH THE ASSESSMENT YEARS UNDER APPEA L TO 6 % OF THE NON GENUINE PURCHASES. GROUNDS RAISED BY THE REVENUE ARE DISMISSED AND GROUNDS RAISED BY THE ASSESSEE ARE PARTLY ALLOWED. 7 SHRI SURESH MANEKLAL SHETH 11 . IN THE RESULT, REVENUES APPEAL S ARE DISMISSED AND ASSESSEES APPEAL S ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN C OURT ON 30.08.2019 SD/ - N.K. PRADHAN ACCOUNTANT MEMBER SD/ - SAKTIJIT DEY JUDICIAL MEMBER MUMBAI, DATED: 30.08.2019 COPY OF THE ORDER FORWARDED TO : ( 1 ) THE ASSESSEE; ( 2 ) THE REVENUE; ( 3 ) THE CIT(A); ( 4 ) THE CIT, MUMBAI CITY CONCERNED; ( 5 ) THE DR, ITAT, MUMBAI; ( 6 ) GUARD FILE . TRUE COPY BY ORDER PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY ASSISTANT REGISTRAR ITAT, MUMBAI