VIRAL SANJIV SHAH, MUMBAI V. ACIT- 22(2), MUMBAI

ITA 3609/MUM/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 3466 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-04-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 25-05-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: CHAITNYA ANJARIA
• Section: 143(3)

Judgement Text

P A G E | 1 ITA NO.3609/MUM/2018 AY. 2009 - 10 VIRAL SANJIV SHAH VS. ACIT 22(2) IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER AND SHRI RAVISH SOOD, JUDICIAL MEMBER ITA NO.3609 /MUM/2018 (ASSESSMENT YEAR: 2009 - 10 ) VIRAL SANJIV SHAH B/2/38, ARVASU CHS LIMITED, TPS - VI, FIRST ROAD, SANTACRUZ WEST, MUMBAI - 400 054 VS. ACIT 22(2) ROOM NO.315, PIRAMAL CHAMBERS, LALBAUG, MUMBAI - 400012 PAN BFPPS4192J (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI VIMAL PUNMIYA, A.R RESPONDENT BY: SHRI CHAITNYA ANJARIA , D.R DATE OF HEARING: 22 .04.2019 DATE OF PRONOUNCEMENT: 3 0 .04.2019 O R D E R PER RAVISH SOOD, JM THE PRESENT APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A) - 34, MUMBAI, DATED 12.02.2018 FOR A.Y. 2009 - 10, WHICH IN TURN ARISES FROM THE ORDER PASSED BY THE A.O UNDER SEC. 143(3) R.W.S 147 OF THE INCOME - TAX ACT, 1961 (FOR SH ORT I.T ACT), DATED 20.02.2015. 2. BRIEFLY STATED, THE ASSESSEE HAD FILED HIS RETURN OF INCOME FOR A.Y. 2009 - 10 ON 30.09.2009, DECLARING TOTAL INCOME OF RS.15,51,260/ - . THE RETURN OF INCOME FILED BY THE ASSESSEE WAS PROCESSED AS SUCH UNDER SEC.143(1) OF THE I.T ACT. SUBSEQUENTLY, ON THE BASIS OF INFORMATION RECEIVED FROM THE SALES TAX/VAT DEPARTMENT, GOVERNMENT P A G E | 2 ITA NO.3609/MUM/2018 AY. 2009 - 10 VIRAL SANJIV SHAH VS. ACIT 22(2) OF MAHARASHTRA, THAT THE ASSESSEE HAD TAKEN BOGUS BILLS FROM CERTAIN HAWALA PARTIES WITHOUT ACTUALLY PURCHASING AND TAKING DELIVERY OF GOODS, ITS CASE WAS REOPENED UNDER SEC.147 OF THE I.T ACT. 3. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS IT WAS OBSERVED BY THE A.O THAT THE ASSESSEE AS PER THE INFORMATION RECEIVED FROM THE OFFICE OF THE DGIT(INV.), MUMBAI HAD CLAIMED TO HAVE MADE PURCHASES A GGREGATING TO RS.31,11,669/ - FROM THE FOL LOWING THREE HAWALA PARTIES: SR. NO. NAME OF THE PARTY WHO HAS ISSUED BOGUS BILLS TO THE ASSESSEE AMOUNT OF SUCH BOGUS BILL (IN RS.) 1. PIONEER TRADING CORPORATION 11,98,321 2. GOPIKRISHNA TRADING CO/BLUE SKY TRADE IMPEX 1,80,000 3. TARA ENTERPRISES 17,33,348 THE ASSESSEE IN ORDER TO SUBSTANTIATE THE VERACITY OF THE AFORESAID PURCHASE TRANSACTIONS FILED WITH THE A.O CERTAIN DOCUMENTARY EVIDENCE VIZ. (I) DETAILS OF DATE WISE PURCHASE S ; (I I) COPIES OF THE LEDGER ACCOUNTS OF THE AFOREMENTIONED PARTIES (III) COPIES OF THE STOCK REGISTER; AND (IV) COPY OF THE BANK STATEMENTS. THE A.O IN ORDER TO VERIFY THE AUTHENTICITY OF THE PURCHASE TRANSACTIONS CLAIMED BY THE ASSESSEE TO HAVE BEEN MADE FROM THE AFOREMENTIONED PARTIES ISSUED LETTERS UNDER SEC.133(6), WHICH HOWEVER WERE RETURNED UNSERVED WITH THE REMARKS NOT KNOWN. IN THE BACKDROP OF THE AFORESAID FACTS THE A.O DIRECTED THE ASSESSEE TO PRODUCE THE AFORESAID PARTIES SO THAT THE GENUINENESS OF THE PURCHASE TRANSACTIONS COULD BE VERIFIED . HOWEVER, THE ASSESSEE DESPITE SPECIFIC DIRECTIONS FAILED TO PRODUCE THE AFOREMENTIONED PARTIES BEFORE THE A.O. THE A.O BEING OF THE VIEW THAT THE ASSESSEE HAD FAILED TO SUBSTA NTIATE THE GENUINENESS AND VERACITY OF THE PURCHASES CLAIMED TO HAVE BEEN MADE FROM THE AFOREMENTIONED PARTIES, THEREIN CONCLUDED THAT THE ASSESSEE HAD NOT MADE ANY GENUINE PURCHASES AND HAD ONLY OBTAINED FICTITIOUS BILLS FROM THEM. ON THE BASIS OF HIS AF ORESAID DELIBERATIONS THE A.O REJECTED THE BOOK RESULTS OF THE ASSESSEE UNDER P A G E | 3 ITA NO.3609/MUM/2018 AY. 2009 - 10 VIRAL SANJIV SHAH VS. ACIT 22(2) SEC.145(3) AND MADE AN ADDITION OF RS.7,77,917/ - I.E 25% OF THE AGGREGATE VALUE OF PURCHASES BY ATTRIBUTING THE SAME TO THE PROFIT ELEMENT EMBEDDED IN THE SAID PURCHASE TRANSACTI ONS. 4. AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A) . HOWEVER, THE CIT(A) NOT BEING PERSUADED TO SUBSCRIBE TO THE CONTENTION S ADVANCED BY THE ASSESSEE DISMISS ED THE APPEAL. 5. THE ASSESSEE BEING AGGRIEVED WITH THE ORDER OF THE CIT(A) HAS CARRIED THE MATTER IN APPEAL BEFORE US. THE LD. AUTHORIZED REPRESENTATIVE (FOR SHORT A.R) FOR THE ASSESSEE AT THE VERY OUTSET OF THE HEARING OF THE APPEAL SUBMITTED THAT THE LOWER AUTHORITIES HAD ERRED IN MAKING AN EXORBITANT ADDITION OF 25% O F THE AGGREGATE VALUE OF THE PURCHASES UNDER CONSIDERATION. IN ORDER TO BUTTRESS HIS AFORESAID CONTENTION, IT WAS SUBMITTED BY THE LD. A.R THAT THE G.P. RATE OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION WORKED OUT AT 16.89% WHICH WAS PROGRESSIVE AS IN COMPARISON TO ITS LAST YEAR G.P. RATE OF 16.71%. APART THERE FROM, IT WAS AVERRED BY THE LD. A.R THAT THE A.O WHILE DRAWING ADVERSE INFERENCES AS REGARDS THE PURCHASES MADE BY THE ASSESSEE FROM THE AFOREMENTIONED PARTIES , HAD MERELY ACTED ON THE INFORMATIO N RECEIVED FROM THE SALES TAX DEPARTMENT [THROUGH THE OFFICE OF THE DGIT(INV.)] AND DID NOT MAKE ANY INDEPENDENT INQUIRY ON HIS PART WHICH WOULD PROVE THAT NO GENUINE PURCHASES WERE MADE BY THE ASSESSEE FROM THE AFOREMENTIONED PARTIES . IT WAS FURTHER SUBMI TTED BY THE LD. A.R THAT THE ASSESSEE WAS IN POSSESSION OF THE SUPPORTING DOCUMENTARY EVIDENCE WHICH SUBSTANTIATED THE GENUINENESS OF THE PURCHASES MADE FROM THE AFOREMENTIONED PARTIES. IN FACT, IT WAS THE CLAIM OF THE LD. A.R THAT THE FACT THAT THE ASSESSEE HAD NOT MADE ANY GENUINE PURCHASES FROM THE AFOREMENTIONED PARTIES AND HAD ONLY OBTAINED FICTITIOUS BILL S FROM THEM HAD NOT BEEN CONCLUSIVELY PROVED BY THE LOWER AUTHORITIES. IT WAS SUBMITTED BY HIM P A G E | 4 ITA NO.3609/MUM/2018 AY. 2009 - 10 VIRAL SANJIV SHAH VS. ACIT 22(2) THAT THE GENUINENESS OF THE PURCHASES MADE FROM THE AFOREMENTIONED PARTIES HAD ONLY BEEN REJECTED ON THE GROUND THAT THE SAME COULD NOT BE PROVED TO THE HILT ON THE BAS IS OF IRREFUTABLE DOCUMENTARY EVIDENCE TO THE SATISFACTION OF THE A.O. ALTERNATIVELY , IT WAS SUBMITTED BY THE LD. A.R THAT AS THE GENUINENESS OF THE PURCHASES HAD NOT BEEN DISPROVED, THEREFORE, KEEPING IN VIEW THE PROGRESSIVE G.P. RATE OF 16.89% OF THE ASS ESSEE DURING THE YEAR UNDER CONSIDERATION THE AFORESAID EXORBITANT ADDITION @ 25% OF THE VALUE OF THE PURCHASES WAS NOT JUSTIFIED. IN THE BACKDROP OF THE AFORESAID FACTS, IT WAS AVERRED BY THE LD. A.R THAT THE ADDITION IN ALL FAIRNESS MAY BE RESTRICTED TO THE EXTENT OF 5% OF THE AGGREGATE VALUE OF THE PURCHASES UNDER CONSIDERATION. 6. PER CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE (FOR SHORT D.R) SUBMITTED THAT THE ASSESSEE HAD FAILED TO SUBSTANTIATE THE GENUINENESS OF THE PURCHASE TRANSACTIONS TO THE S ATISFACTION OF THE LOWER AUTHORITIES. INSOFAR THE ESTIMATION OF THE PROFIT ELEMENT @ 5% OF THE AGGREGATE VALUE OF THE PURCHASES CLAIMED BY THE ASSESSEE TO HAVE BEEN MADE FROM THE AFOREMENTIONED PARTIES WAS CONCERNED, THE LD. D.R DID NOT OBJECT TO THE SAME. 7. WE HAVE HEARD THE AUTHORIZED REPRESENTATIVES FOR BOTH THE PARTIES , PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL AVAILABLE ON RECORD AND THE JUDICIAL PRONOUNCEMENTS RELIED UPON BY THEM. ADMITTEDLY, THE ASSESSEE HAD FAILED TO SUBSTANTIAT E THE GENUINENESS AND VERACITY OF THE PURCHASES AGGREGATING TO RS. 31,11,669/ - CLAIMED TO HAVE BEEN MADE FROM THE AFOREMENTIONED THREE PARTIES VIZ. (I). PIONEER TRADING CORPORATION (RS. 11,98,321/ - ); (II). GOPIKRISHNA TRADING CO./BLUE SKY TRADE IMPEX (RS. 1,80,000/ - ; AND (III). TARA ENTERPRISES (RS. 17,33,348/ - ). IN FACT, THE A.O HAD DOUBTED THE AUTHENTICITY OF THE PURCHASE TRANSACTIONS IN THE BACKDROP OF THE INFORMATION RECEIVED FROM THE OFFICE OF THE DGIT (INV.), FOR THE P A G E | 5 ITA NO.3609/MUM/2018 AY. 2009 - 10 VIRAL SANJIV SHAH VS. ACIT 22(2) REASON THAT THE DOCUMENTARY EVIDEN CE PRODUCED BY THE ASSESSEE TO SUBSTANTIATE THE GENUINENESS OF THE PURCHASE TRANSACTIONS WERE NOT FOUND TO HIS SATISFACTION. APART THERE FROM , THE FACT THAT THE ASSESSEE HAD DESPITE SPECIFIC DIRECTIONS FAILED TO PRODUCE THE AFOREMENTIONED PARTIES FOR NECES SARY VERIFICATION HAD ALSO WEIGHED IN THE MIND OF THE A.O WHILE DRAWING ADVERSE INFERENCES AS REGARDS THE VERACITY OF THE PURCHASE TRANSACTIONS UNDER CONSIDERATION. BE THAT AS IT MAY, IN OUR CONSIDERED VIEW THOUGH THE ASSESSEE COULD NOT SUBSTANTIATE THE GE NUINENESS OF THE PURCHASE TRANSACTIONS UNDER CONSIDERATION TO THE SATISFACTION OF THE A.O, HOWEVER , WE ALSO CANNOT REMAIN OBLIVIOUS OF THE FACT THAT TO THE EXTENT THE DOCUMENTARY EVIDENCE IN SUPPORT OF THE AUTHENTICITY OF THE ABOVEMENTIONED TRANSACTIONS WERE PRODUCED BY THE ASSESSEE , THE SAME HAD ALSO NOT BEEN DISLODGED OR DISPROVED IN THE COURSE OF THE ASSESSMENT PROCEEDINGS. WE ARE OF A STRONG CONVICTION THAT IN THE BACKDROP OF THE INFORMATION RECEIVED BY THE A.O FROM THE SALES TAX AUTHORITIES , COUPLED WITH THE FACT THAT THE LETTER S ISSUED BY HIM UNDER SEC.133(6) TO THE AFOREMENTIONED PARTIES HAD REMAINED UNSERVED AND THE ASSESSEE DESPITE SPECIFIC DIRECTIONS FAILED TO PRODUCE THE PARTIES , THEREFORE, THE A.O HAD SUFFICIENT REASON TO DOUBT THE AUTHENTICITY OF THE PURCHASES CLAIMED BY THE ASSESSEE TO HAVE BEEN MADE FROM THE AFOREMENTIONED PARTIES. INSOFAR THE OBSERVATIONS OF THE LOWER AUTHORITIES THAT THE ASSESSEE HAD FAILED TO DISCHARGE THE ONUS AS REGARDS PROVING THE GENUINENESS OF THE PURCHASE TRANSACTION UNDER CONSIDERATION ARE CONCERNED , WE ARE PERSUADED TO SUBSCRIBE TO THE SAME. HOWEVER, AT THE SAME TIME WE ARE UNABLE TO FIND OURSELVES TO BE IN AGREEMENT AS REGARDS THE ADHOC DISALLOWANCE OF 25% OF AGGREGATE VALUE OF THE PURCHASES CLAIMED BY THE ASSESSEE TO HAVE BEEN MADE FROM THE AFOREMENTIONED PARTIES. IN THE TOTALITY OF THE FACTS OF THE CASE, WE ARE OF THE CONSIDERED VIEW THAT A DISALLOWANCE OF 5% OF THE AGGREGATE VALUE OF THE PURCHASES UNDER CONSIDERATION WOULD BE P A G E | 6 ITA NO.3609/MUM/2018 AY. 2009 - 10 VIRAL SANJIV SHAH VS. ACIT 22(2) JUSTIFIED IN RESPECT OF THE UNPROVED PURCHASE TRANSACTIONS CARRIED OUT BY THE ASSESSEE. WE THUS NOT BEING ABLE TO PERSUADE OURSELVES TO ENDORSE THE EXORBITANT DISALLOWANCE OF 25% OF THE AGGREGATE VALUE OF THE PURCHASES CLAIMED BY THE ASSESSEE TO HAVE BEEN MADE FROM THE AFOREMENTIONED PARTIES, THUS RESTRICT THE SAME TO THE EXTENT OF 5% OF THE AGGREGATE VALUE OF SUCH PURCHASES . RESULTANTLY, THE ADDITION IN THE HANDS OF THE ASSESSEE IS RESTRICTED TO AN AMOUNT OF RS.1,55,584/ - . 8. THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED IN TERMS OF OUR AFORES AID OBSERVATIONS. ORDER PRO NOUNCED IN THE OPEN COURT ON 3 0 . 04.2019 S D / - S D / - ( SHAMIM YAHYA ) (RAVISH SOOD) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; 30 .04.2019 PS. ROHIT / 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