ACIT 27(3), NAVI MUMBAI V. VIKRANT VIKAS RAIKAR, MUMBAI

ITA 3617/MUM/2016

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 9680 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-09-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 25-05-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ARJU GARODIA
• Keywords: Bogus purchase; Rejection of books of accounts
• Section: 133(6)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL J , BENCH, MUMBAI , , , BEFORE SHRI RAJENDRA, AM AND SHRI RAM LAL NEGI, JM ./ ITA NO. 3617 / MUM/ 201 6 ( / ASSESSMENT YEAR: 2011 - 12 ) THE A.C.I.T. - 27(3), 4 TH FLOOR, TOWER NO. 6, VASHI RLY. STATION COMPLEX, VASHI, NAVI MUMBAI - 400071 VS. SHRI VIKRANT VIKAS RAIKAR, PROP. M/S ELEGANT CONSTRUCTION, PLOT NO. 8, HOTEL PEARL, D.K. SANDU MARG, CHEMBUR, MUMBAI - 400071 ./ ./ PAN/GIR NO. : AABPR 2711 C ( / APPELLANT ) .. ( / RESPONDENT ) /REVENUE BY : MS. ARJU GARODIA (DR) /ASSESSEE BY : NONE / DATE OF HEARING : 02/08 /2017 / DATE OF PRONOUNCEMENT : 08 /09 /2017 / O R D E R PER RAM LAL NEGI, JM TH IS APPEA L HAS BEEN FILED BY THE REVENUE AGAINST ORDER DATED 29 /02/2016 PASSED BY THE LD. CIT (A) - 2 5 , MUMBAI PERTAI NING TO THE ASSESSMENT YEAR 2011 - 12 , WHEREBY THE LD. CIT (A) HAS PARTLY ALLOWED THE APPEAL FILED BY THE ASSESSEE AGAINST ASSESSMENT ORDER PASS ED U/S 143 (3) OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT) . 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE ENGAGED IN THE BUSINESS OF REAL ESTATE DEVELOPMENT INCLUDING CONSTRUCTION OF RESIDENTIAL FLATS, FILED ITS RETURN OF INCOME FOR THE A.Y. 201 1 - 12 DECLARING TOTAL INCOME OF RS. 1,53,10,997/ - . DURING ASSESSMENT PROCEEDINGS, THE AO RECEIVED INFORMATION FROM THE SALES TAX DEPARTMENT THROUGH THE O/O THE DGIT (INV.), MUMBAI THAT THE ASSESSEE HAS OBTAINED ACCOMMODATION/BOGUS BILLS TO THE EXTENT OF RS. 2 ITA NO S . 3617/MUM/2016 ASSESSMENT YEAR: 2011 - 12 68,29,508/ - FROM THE HAWALA OPERATORS. ACCORDINGLY, THE AO VERIFIED THE SAID FACTS AND AFTER HEARING THE ASSESSEE MADE AN ADDITION OF THE SAID AMOUNT TO THE INCOME OF THE ASSESSEE . 3. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE PREFERRED APPEAL AGA INST THE ORDER OF THE AO BEFORE THE LD. CIT (A). THE LD. CIT (A) AFTER HEARING THE ASSESSEE RESTRICTED THE ADDITION TO THE EXTENT OF 10% OF THE TOTAL BOGUS PURCHASES MADE BY THE ASSESSEE DURING THE FINANCIAL YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSI DERATION. THE REVENUE IS IN APPEAL AGAINST THE IMPUGNED ORDER PASSED BY THE LD. CIT(A). 4. THE REVENUE HAS PREFERRED THE PRESENT APPEAL AGAINST THE IMPUGNED ORDER PASSED BY THE LD. CIT (A) ON THE FOLLOWING EFFECTIVE GROUNDS OF APPEAL: - 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT (A) ERRED IN DIRECTING TO RESTRICT THE ADDITION TO THE EXTENT OF 10% OF THE PURCHASES INSTEAD OF ENTIRE PURCHASES WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAD NOT DISCHARGED HIS ONUS OF SUBSTANTIATING HIS CLAIM THE PURCHASE WERE GENUINE. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT (A) ERRED IN DIRECTING TO RESTRICT THE ADDITION TO THE EXTENT OF 10% OF THE PURCHASES INSTEAD OF ENTIRE PURCHASES BY ACCEPTING ASSESSEES CLAIM THAT THE ENTIRE QUANTITY OF ALLEGED PURCHASES WAS CONSUMED IN THE CONSTRUCTION ACTIVITY ON THE BASIS OF ARCHITECTS CERTIFICATE WITHOUT APPRECIATING THE FACT THIS EVIDENCE WAS PRODUCED FOR THE FIRST TIME BEFORE HIM AND THUS NO OPPORTUNITY WAS PROVIDED TO THE A.O. TO VERIFY THE ASSESS EE CLAIM UNDER RULE 46A OF THE I.T. RULES, 1962. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT (A) ERRED IN DIRECTING TO RESTRICT THE ADDITION TO THE EXTENT OF 10% OF THE PURCHASES INSTEAD OF ENTIRE PURCHASES WITHOUT ASCRIBING REASONS FOR SUCH QU ANTIFICATION OF ELEMENT OF PROFIT EMBEDDED IN THE ALLEGED PURCHASES . 5. THIS CASE WAS FIXED FOR HEARING FOR 02/08/2017 . H OWEVER, WHEN THE CASE WAS CALLED FOR HEARING, NEITHER THE ASSESSEE NOR ANY AUTHORIZED REPRESENTATIVE APPEARED ON BEHALF OF THE ASSES SEE. WE ACCORDINGLY DECIDED TO DISPOSE OF THE 3 ITA NO S . 3617/MUM/2016 ASSESSMENT YEAR: 2011 - 12 CASE ON THE BASIS OF MATERIAL ON RECORD AFTER HEARING THE LD. DEPARTMENTAL REPRESENTATIVE (DR). 6. BEFORE US, THE LD. DR SUBMITTED THAT SINCE THE ASSESSEE HAS FAILED TO DISCHARGE THE ONUS OF PROVING THE GENUI NENESS OF PURCHASES IN QUESTION, THE LD. CIT (A) HAS WRONGLY RESTRICTED THE ADDITION MADE BY AO TO 10% OF THE TOTAL AMOUNT OF BOGUS PURCHASES MADE DURING THE RELEVANT YEAR. THE LD. DR RELYING ON THE VARIOUS JUDGMENTS OF HONBLE SUPR E ME COURT, HIGH COURTS A ND TRIBUNALS INCLUDING THE JUDGMENT PASSED IN KACHWALA GEMS 288 ITR 10 (SC) , SREELEKHA BANERJEE 49 ITR 112 (SC), SUMATI DAYAL 214 ITR 801 (SC) AND THE JUDGMENT DELIVERED BY THE HONBLE GUJARAT HIGH COURT PASSED IN N.K. PROTEIN LTD. VS. DCIT IN TAX APPEAL NO. 240, 241, 261, 242, 260 OF 2003 , SUBMITTED THAT THE IMPUGNED ORDER PASSED BY THE LD. CIT (A) IS NOT IN ACCORDANCE WITH THE PRINCIPLES OF LAW LAID DOWN IN THE AFORESAID JUDGMENTS , THEREFORE, THE SAME IS LIABLE TO BE DISMISSED. 7. WE HAVE HEARD THE LD. DR AND CAREFULLY PERUSED THE MATERIAL ON RECORD. THE ONLY GRIEVANCE OF THE REVENUE IS THAT THE LD. CIT(A) HAS WRONGLY RESTRICTED THE ADDITION TO 10% OF THE TOTAL AMOUNT OF BOGUS PURCHASES. THE LD. CIT (A) HAS RESTRICTED THE ADDITION HOLDING AS UNDER: 2.3 I HAVE CAREFULLY CONSIDERED THE SUBMISSION OF THE APPELLANT AND ALSO THE DETAILS WHICH HAVE BEEN PROVIDED. THE ONLY GROUND ON ACCOUNT OF WHICH THE ADDITION HAS BEEN MADE IS THAT THE APPELLANT HAD FAILED TO PRODUCE THE PARTIES FOR VERIFICATION. IT HAS BEEN HELD BY THE HONBLE BOMBAY HIGH COURT IN CIT VS. NIKUNJ EXIMP ENTERPRISES LTD. (372 ITR 619) THAT IN THE ABSENCE OF REJECTION OF BOOKS OF ACCOUNTS AND ONLY ON THE BASIS THAT THE SUPPLIERS HAD NOT APPEARED BEFORE THE ASSESSING OFFICER OR THE COMMISSIONER ( APPEALS), IT CANNOT BE CONCLUDED THAT THE PURCHASES WERE NOT MADE BY THE ASSESSEE. THE APPELLANT HAD STATED THAT BASED ON THE CERTIFICATE ISSUED BY THE STRUCTURAL ENGINEERS IT HAD CONSUMED APPROXIMATELY 525 TONS, WHEREAS, THE TOTAL PURCHASES FROM ALL THE P ARTIES IS 524 TONS. THEREFORE, AS INDICATED BY THE HONBLE HIGH COURT IN THE ABSENCE OF OTHER EVIDENCES, DISALLOWANCE COULD NOT BE MADE ONLY ON 4 ITA NO S . 3617/MUM/2016 ASSESSMENT YEAR: 2011 - 12 ACCOUNT OF THE INABILITY OF ASSESSEE TO PRODUCE THE PARTIES FOR VERIFICATION. THE ASSESSING OFFICER THAN ISSUING NOTICE U/S 133(6) OF THE ACT AND DEPUTING THE INSPECTOR TO VERIFY THE ADDRESSES PROVIDED BY THE APPELLANT, HAS NOT TAKEN ANY OTHER STEPS TO VERIFY THE GENUINENESS OF THE PURCHASES. THE ITAT, D BENCH, MUMBAI, IN THE CASE OF RAJIV G. KALATHIL (ITA NO. 762 7/MUM/2012) HAS STATED THAT THE ASSESSING OFFICER COULD HAVE CALLED FOR THE DETAILS OF THE BANK ACCOUNT OF THE SUPPLIERS TO FIND OUT WHETHER THERE WAS ANY IMMEDIATE CASH WITHDRAWAL FROM THEIR ACCOUNT. MOREOVER, IT HAS NOT BEEN INDICATED WHETHER THE DETAILS OF TRANSPORTATION OR THE VERIFICATION OF THE CONSUMPTION OF STEEL OR ANY OTHER STEPS HAD BEEN TAKEN TO VERIFY THE CLAIM OF THE APPELLANT. IN THE ABSENCE OF ANY OTHER MEANINGFUL STEP, IT BECOMES DIFFICULT TO SUSTAIN THE ADDITION MADE BY THE ASSESSING OFFIC ER. AT THE SAME TIME, IT IS ALSO TO BE NOTED THAT, THE APPELLANT COULD HAVE MADE THE PURCHASES FROM ENTITIES WHO ARE NOT MENTIONED IN THE BOOKS OF ACCOUNTS. AS THESE WERE MADE FROM ENTITIES WHO ARE NOT REGULAR SUPPLIERS, THE APPELLANT WOULD HAVE MADE PURCH ASES AT VALUES WHICH ARE LESS THAN THE MARKET RATES. IT HAS BEEN HELD BY THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. BHOLANATH POLYFAB P. LTD. (355 ITR 290 CIT VS. SMITH B. SHETH (356 ITR 451) THAT WHEN T PURCHASES WERE NOT BOGUS, BUT HAD BEEN MADE FROM THE PARTIES OTHER THAN THOSE MENTIONED IN THE BOOKS OF ACCOUNTS, THE PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES COULD BE ADDED TO THE ASSESSEES INCOME. IN THE CASE UNDER CONSIDERATION, THE PURCHASES HAVE BEEN MADE NOT FOR TRADE BUT FOR CONSUMPTI ON IN THE BUILDING ACTIVITIES OF THE APPELLANT. IT IS ESTIMATED THAT 10% OF THE PURCHASES WOULD BE THE PROFIT EMBEDDED IN THE PURCHASES MADE BY THE APPELLANT FROM THE PARTIES WHOSE NAMES HAD APPEARED IN THE LIST OF HAWALA OPERATORS PROVIDED BY THE SALES TA X DEPARTMENT. THE TOTAL OF THE PURCHASE FROM THESE PARTIES WAS RS. 68,29,508/ - AND THEREFORE, THE PROFIT ELEMENT WOULD BE RS. 6,82,950/ - ONLY. 2.4 IN VIEW OF THE ABOVE DISCUSSION, THE ADDITION MADE BY THE ASSESSING OFFICER IS RESTRICTED TO THE AMOUNT OF RS . 6,82,950/ - AND THE BALANCE AMOUNT OF RS. 61,46,558/ - IS DELETED. 8. WE NOTICE THAT THE AO HAS MADE ADDITION OF THE ENTIRE AMOUNT OF PURCHASES IN QUESTION MAINLY ON THE GROUND THAT DESPITE A REASONABLE OPPORTUNITY AFFORDED TO THE ASSESSEE, THE ASSESSEE COULD NOT PRODUCE THE PARTIES FROM WHOM THE PURCHASE WERE SHOWN MADE. ON THE OTHER HAND, THE 5 ITA NO S . 3617/MUM/2016 ASSESSMENT YEAR: 2011 - 12 LD.CIT (A) HAS RESTRICTED THE ADDITION TO 10% OF THE TOTAL AMOUNT OF PURCHASES, FOLLOWING THE RATIO LAID DOWN BY THE HONBLE JURISDICTIONAL HIGH COURT, BOMBAI IN CIT VS. NIKUNJ EXIMP ENTERPRISES LTD. AND HONBLE GUJARAT HIGH COURT IN CIT VS. BHOLA NATH PLOYFAB PVT. LTD. (SUPRA) 9. THE HONBLE BOMBAY HIGH COURT IN CIT VS. NIKUNJ EXIMP ENTERPRISES PVT. LTD. (SUPRA) HAS HELD THAT MERELY BECAUSE THE SUPPLIERS HAD NOT APPEARED BEFORE THE ASSESSING OFFICER OR THE CIT (A) ONE COULD NOT CONCLUDE THAT THE PURCHASES WERE NOT MADE BY THE RESPONDENT/ASSESSEE. THE HONBLE GUJRAT HIGH COURT IN CIT VS. SIMIT P. SETH (GUJ) UPHELD THE DECISION OF THE TRIBUNAL AND SUSTAINED THE ADDI TION 12.5% OF THE TOTAL BOGUS PURCHASES HOLDING THAT ONLY PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES CAN BE ADDED TO INCOME OF THE ASSESSEE. 10 . HENCE, IN OUR CONSIDERED OPINION, THE FINDING OF LD. CIT (A) IS BASED ON THE PRINCIPLES OF LAW LAID DOWN BY THE HONBLE HIGH COURT OF BOMBAY AND GUJARAT. IN OUR OPINION THE FACTS OF THE CASES RELIED UPON BY THE REVENUE ARE DIFFERENT FROM THE FACTS OF THE PRESENT CASE. HENCE, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER PASSED BY THE LD. CIT (A). WE THEREFOR E, UPHOLD THE ORDER PASSED BY THE LD. CIT (A) AND DISMISS THE APPEAL OF THE REVENUE. [[[ IN THE RESULT, APPEAL FILED BY THE REVENUE FOR ASSESSMENT YEAR 2011 - 12 IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON 8 TH . SEPT. , 2017 . SD/ - SD/ - ( RAJENDRA ) ( RAM LAL NEGI ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; DATED: 8 / 9 / 2017 ALINDRA, PS 6 ITA NO S . 3617/MUM/2016 ASSESSMENT YEAR: 2011 - 12 / 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, MU MBAI