ITO 27(1)(3), NAVI MUMBAI V. HARISH K CHANDAK, MUMBAI

ITA 3659/MUM/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 9869 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-07-2017
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 05-07-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 15-06-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: T A KHAN
• Keywords: Bogus purchase; Peak credit
• Section: 69C; 133(6); 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'F' BENCH, MUMBAI BEFORE SHRI P K BANSAL, VICE PRESIDENT AND SHRI D.T. GARASIA, JUDICIAL MEMBER ITA NOS.3659, 3578 & 3579 /MUM/2015 (ASSESSMENT YEARS: 2010-11, 2009-10 & 2011-12) INCOME TAX OFFICER - 27(1)(3) VS. SHRI HARISH K. CHANDAK ROOM NO. 406, 4TH FLOOR TOWER NO.6, VASHI RLY. STN. COMPLEX, VASHI NAVI MUMBAI 400703 1001, D WING, BLDG. NO. 27 ANNIRUDHA BLDG, ABOVE ICICI BANK TILAK NAGAR, CHEMBUR (W) MUMBAI 400089 PAN AABPC6410H APPELLANT RESPONDENT APPELLANT BY: SHRI T.A. KHAN RESPONDENT BY: NONE DATE OF HEARING: 05.07.2017 DATE OF PRONOUNCEMENT: 11.07.2017 O R D E R PER BENCH THESE APPEAL HAVE BEEN FILED BY THE REVENUE AGAINST THE ORDERS OF THE CIT(A)-42, MUMBAI DATED 12.03.2015 FOR ASSESSMENT Y EARS 2009-10 TO 201-12. SINCE COMMON ISSUES ARE INVOLVED IN ALL THE SE APPEALS, THEY ARE DISPOSED OFF BY THIS COMMON ORDER FOR THE SAKE OF C ONVENIENCE. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS FOR A SSESSMENT YEARS 2009-10 AND 2011-12:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LD. CIT(A) ERRED IN ALLOWING THE BOGUS PURCHASES MADE BY THE A SSESSEE WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE FAI LED TO FURNISH DOCUMENTARY EVIDENCE TO PROVE THAT PURCHASE MADE WE RE GENUINE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A) FAILED TO APPRECIATE THE PROVISIONS OF SECTIONS OF SECTION 69C OF THE ACT WHICH CATEGORICALLY STATES THAT WHERE THE A SSESSEE OFFERS NO EXPLANATION ABOUT THE SOURCE OF SUCH EXPENDITURE OR PART THEREOF. 2 ITA NOS. 3659,3578&3579/MUM/2015 SHRI HARISH K. CHANDAK FOR A.Y. 2010-11 ASSESSEE HAS RAISED ONE MORE GROU ND WHICH READS AS UNDER: - 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD. CIT(A) FAILED TO APPRECIATE THE PROVISIONS OF SECTION 145 WHERE THERE IS A GROSS DEVIATION IN MAINTENANCE OF ACCOUNTS OF THE ASSESSEE AND THE SAME IS NOT IN CONFORMITY WITH THE PRESCRIB ED NORMS THE ASSESSEE HAS FAILED TO MAINTAIN AND PRODUCE THE BOO KS. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE I S AN INDIVIDUAL AND IS THE PROPRIETOR OF M/S. GIRIRAJ ENTERPRISES, ENGA GED IN THE BUSINESS OF TRADING IN RUBBER & RUBBER CHEMICALS. THE ASSESSEE MADE PURCHASES FROM THE FOLLOWING PARTIES WHO WERE FOUND TO BE HAWALA P ARTIES BY THE SALES TAX DEPARTMENT OF THE GOVERNMENT OF MAHARASHTRA: - S.NO. NAME OF THE PARTY AMOUNT 1 M/S. BALAJI TRADERS 1,89,32,986/ - 2 M/S. MAHAVEER ENTERPRISES 1,54,90,497/ - 3 M/S. NEETA SALES CORPORATION 54,69,269/ - 4 M/S. KRSNA ENTERPRISES 1,89,16,208/ - 5 M/S. JAIN CORPORATION 20,61,330/ - TOTAL 6,08,70,272/ - THE AO ISSUED NOTICE UNDER SECTION 133(6) TO THE A BOVE MENTIONED PARTIES. HOWEVER, THE SAME WAS RETURNED BACK. THERE FORE THE AO HAS ADDED THE PEAK BALANCE OF ` 1,02,57,284/- (FOR A.Y. 2010-11) AND MADE ADDITION UNDER SECTION 69C OF THE I.T. ACT. THE AO HAS ALSO ADDED THE GP @8% ON THE TOTAL BOGUS PURCHASES. 4. THE MATTER WAS CARRIED TO THE CIT(A) AND THE CIT(A) HAS APPLIED GP MARGIN AT 5.07% AND RESTRICTED THE ADDITION TO ` 30,86,720/-. 5. NONE APPEARED ON BEHALF OF THE ASSESSEE. THE LEARNE D D.R. SUBMITTED BEFORE THAT IN THE CASE OF NK PROTEINS LT D. VS. DCIT THE HON'BLE SUPREME COURT HAS CONFIRMED THE ADDITION ON ACCOUNT OF BOGUS PURCHASES AT 100% AND SIMILAR VIEW HAS BEEN TAKEN BY THE HON' BLE GUJARAT HIGH COURT AND APPLIED GP @6%. 3 ITA NOS. 3659,3578&3579/MUM/2015 SHRI HARISH K. CHANDAK 6. HAVING HEARD THE LEARNED D.R. WE FIND THAT IT IS TH E CASE OF REVENUE THAT THE ASSESSEE FAILED TO DISCHARGE THE ONUS OF P ROVING THE PURCHASES AND COULD NOT PRODUCE EVIDENCE TO SHOW THE ACTUAL D ELIVERY OF MATERIAL AND COULD NOT PRODUCE CONFIRMATION LETTERS FROM THE ALL EGED SUPPLIERS. HOWEVER, WE FIND THAT THE ASSESSEE IS IN POSSESSION OF PURCHASE INVOICES AND PAYMENTS ARE THROUGH BANKING CHANNELS. THEREFOR E, IF AT ALL THE PURCHASES ARE FOUND TO BE BOGUS WE NOTE THAT THE SA LES TURNOVER HAS NOT BEEN DISPUTED BY THE REVENUE. THEREFORE, IN SUCH A CASE THE ADDITION CAN BE MADE ONLY ON THE PROFIT ELEMENT EMBEDDED IN THES E PURCHASE TRANSACTIONS TO FACTORISE THE PROFIT EARNED BY THE ASSESSEE AGAINST THE PURCHASE OF MATERIAL IN GRAY MARKET. WE FIND THAT T HERE ARE DIVERGENT VIEWS OF VARIOUS HIGH COURTS ON WHAT AMOUNT OF GP SHOULD BE APPLIED IN SUCH BOGUS PURCHASES. WE FIND THAT IN THE CASE OF SMITH AND SHETH THE HON'BLE GUJARAT HIGH COURT HAS HELD THAT A TRADER SOLD SOME GOODS AND HE WOULD PURCHASE THE SAME FROM OTHER SOURCES. WHEN THE TOTA L SALE IS ACCEPTED BY THE AO HE COULD NOT HAVE QUESTIONED THE VERY BASIS OF PURCHASE. THEREFORE PURCHASES ARE NOT BOGUS BUT THEY ARE MADE FROM PART IES OTHER THAN THOSE WHO ARE MENTIONED IN THE BOOKS OF ACCOUNT. THIS BEI NG THE DECISION NOT THE ENTIRE PURCHASE PRICE BUT ONLY THE PROFIT ELEMENT I N SUCH PURCHASES CAN BE ADDED TO THE INCOME OF THE ASSESSEE. WE FIND THAT W E ARE TAKING A CONSISTENT VIEW THAT THE DISALLOWANCE TO THE EXTENT OF 12.5% OF SUCH BOGUS PURCHASE WILL BE JUSTIFIED IN THE FACTS OF THIS CAS E ALSO. THEREFORE, WE MODIFY THE ORDER OF THE CIT(A) AND DIRECT THE AO TO RESTRICT THE DISALLOWANCE THE EXTENT OF 12.5% OF SUCH BOGUS PURC HASES. 7. IN THE RESULT, APPEALS FILED BY THE REVENUE ARE ALL OWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 11 TH JULY, 2017. SD/ - SD/ - (P.K. BANSAL) (D.T. GARASIA) VICE PRESIDENT JUDICIAL MEMBER MUMBAI, DATED: 11 TH JULY, 2017 4 ITA NOS. 3659,3578&3579/MUM/2015 SHRI HARISH K. CHANDAK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) -42, MUMBAI 4. THE CIT - 24/31, MUMBAI 5. THE DR, F BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.