SOHANLAL BOHRA, MUMBAI V. ITO 19(3)(4), MUMBAI

ITA 3743/MUM/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 9892 (ITAT-MUMBAI)
• Duration Of Justice: 9 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-03-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2007-2008
• Appeal Filed On: 29-05-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R KAVITA
• Keywords: Bogus purchase; Accommodation entries; Bogus loan; Reason to believe; TDS
• Section: 143(3); 68; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC , BENCH MUMBAI BEFORE SHRI M. BALAGANESH , AM & SHRI RAVISH SOOD , JM ITA NO. 3743 / MUM/20 1 8 ( ASSESSMENT YEAR : 2007 - 08 ) ITA NO 3744/MUM/2018 ( ASSESSMENT YEAR : 2010 - 11 ) ITA NO 3745/MUM/2018 ( ASSESSMENT YEA R : 2011 - 12 ) SHRI. SOHANLAL BOHRA ROOM NO.21, 1 ST FLOOR, 273 MAPLA MAHAL, JSS ROAD THAKURDWAR, MUMBAI VS. ITO 19(3)(4) MATRU MANDIR, TARDEO MUMBAI PAN/GIR NO. AABPB6560B ( APPELLANT ) .. ( RESPONDENT ) ASSESSEE BY SHRI SUCHEK ANCHALIYA REVENUE BY MS . R. KAVITA DATE OF HEARING 14 / 03 /201 9 DATE OF PRONOUNCEMENT 27 / 03 /201 9 / O R D E R PER M. BALAGANESH (A.M) : THESE APPEALS FILED BY ASSESSEE ARE DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) - 2 , MUMBAI [HER EINAFTER REFERRED TO AS THE LD CIT ( A ) ] DATED 01/02/2018 FOR A.Y. 2007,08, 2010 - 11 & 2011 - 12 IN THE MATTER OF ORDER S PASSED U/S. 143(3) R.W.S. 147 OF THE INCOME ITA NOS.3743 TO 3745/MUM/2018 SHRI SOHANLAL B BOHRA 2 TAX ACT, 1961. THESE APPEALS ARE TAKEN UP TOGETHER AND DISPOSED OFF BY THIS COMMON ORDER FOR THE S AKE OF CONVENIENCE. 2. LET US TAKE UP THE APPEAL FOR THE A.Y.2007 - 08 IN ITA NO.3743/MUM/2018. THE ASSESSEE HAS RAISED A PRELIMINARY GROUND O N VALIDITY OF REOPENING OF THE ASSESSMENT VIDE GROUND NO.1 FOR THE A.Y.2007 - 08. 3. THE BRIEF FACTS OF THIS ISSUE ARE THAT THE ASSESSEE FOR THE A.Y.2007 - 08 FILED HIS ORIGINAL RETURN OF INCOME ON 23/07/2007 DECLARING TOTAL INCOME OF RS.8,38,050/ - WHICH WAS DULY PROCESSED U/S.143(1) OF THE ACT. LATER THE ASSESSMENT WAS SOUGHT TO BE REOPENED BY ISSUE OF NOTICE U/S.148 OF TH E ACT DATED 26/03/2014. THE REASONS RECORDED BY THE LD. AO FOR REOPENING THE ASSESSMENT ARE AS UNDER: - THE REASON RECORDED FOR ISSUE OF NOTICE U/S. 1 48 OF THE IT. ACT, 1961 IS AS UNDER: ' INFORMATION HAS BEEN RECEIVED FROM THE DG IT (INV.) WING, MUMBAI BOG US UNSECURED LOANS AND ADVANCES ENTRIES BY BHAVARLAL JAIN GROUP. DETAILS OF THE PARTIES WHO HAVE ISSUED ACCOMMODATION BILLS TO THE ASSESSEE ARE AS UNDER: S.NO. NAME OF THE HAWALA PARTIES PAN BILL AMOUNT 1 1 MOHIT ENTERPRISES ACRPK1211G 5 ,00.000 / - TOTAL 5,00,000/ - ON THE BASIS OF THE AFORESAID INFORMATION, I HAVE REASON TO BELIEVE THAT INCOME ASSESSABLE TO TAX AS INDICATED ABOVE TO THE TUNE OF RS.5, 00,000/ - , HAS ESCAPED ASSESSMENT WITHIN THE MEANING OF SECTION 147 OF THE I. T. ACT , 1961. ACCORDINGLY, THE CASE IS BEING RE - OPENED U/S. 147 OF THE I.T. ACT, TOR A.Y 2009 - 10. ITA NOS.3743 TO 3745/MUM/2018 SHRI SOHANLAL B BOHRA 3 THE ABOVE EXTRACTION REPRESENTS THE REASONS COMMUNICATED TO THE ASSESSEE VIDE PROCEEDINGS DATED 23/06/2014. 3.1. THE REASONS RECORDED FOR REOPENING THE ASSESSMENT AS REPRODUCED IN THE ASSESSMENT ORDER ARE AS UNDER: - 3.1. FACTS OF THE CASE AND REASONS RECORDED BY THE A.O.: - 'A SEARCH & SEIZURE ACTION WAS CONDUCTED ON BHANWARLAL JAIN AND HIS GROUP CONCERNS ON 3.10.2013 BY THE DOIT (INV), MUMBAI. DURING THE COURSE OF SEARCH PROCEEDINGS, II WAS ESTABLISHED THAT THE GROUP CONCERNS ARC ALL PAPER COMPANIES / FIRMS /PROPRIETORSHIP CONCERN WITH NO REAL BUSINESS ACTIVITIES, OPERATING SOLELY WITH THE PURPOSE OF FACILITATION OF FRAUDULENT FINANCIAL TRANSACTIONS WHICH INCLUDES, AMONG OTHERS, PROVIDING OF ACCOMMODATION ENTRIES IN THE FORM OF UNSECURED LOANS & BOGUS SATES BILLS TO INTERESTED PARTIES. ON GOING THROUGH THE DOCUMENTS FORWARDED BY THE DCHT (INV.) MUMBAI, IT WAS FOUND THAT, THE ABOVE MENTIONED ASSESSEE HAS OBTAINED A CC OMMODATION ENTRIES FOR UNSECURED LOANS FROM VARIOUS CONCERNS OF BHANWARLAL JAIN, DURING THE FINANCIAL YEAR 2006 - 07 RELEVANT TO A.Y. 2007 - 08, THE DETAILS OF WHICH IS GIVEN AS UNDER : - SR.NO. NAME OF THE ENTRY ISSUER AMOUNT 2. MOHIT ENTERPRISES 5,00,0 00 TOTAL 5,00,000 THE ABOVE CHART SHOWS THAT THE ASSESSEE HAD TAKEN ACCOMMODATION ENTRIES TO THE TUNE OF RS. 5 LACS FROM THE ABOVE PARTIES IN F.Y. 2006 - 07 RELEVANT TO A.Y. 2007 - 08. IT HAS THUS UNDERSTATED ITS INCOME BY RS.5,00,000/ - BY INTRODUCING UNA CCOUNTED CASH THROUGH BOGUS LOANS IN ITS BOOKS OF ACCOUNTS. 3.2. FROM THE ABOVE, IT COULD BE NOTICED THAT IN THE REASONS COMMUNICATED TO THE ASSESSEE BY THE LD. AO, IT APPEARS THAT M/S. MOHIT ENTERPRISES HAD ISSUED CERTAIN ACCOMMODATION BILLS TO THE ASS ESSEE FOR A ITA NOS.3743 TO 3745/MUM/2018 SHRI SOHANLAL B BOHRA 4 SUM OF RS.5 LAKHS. WHEREAS FROM THE REASONS RECORDED IN THE ASSESSMENT ORDER BY THE LD. AO, IT APPEARS THAT ASSESSEE HAD OBTAINED ACCOMMODATION ENTRIES FOR UNSECURED LOANS FROM VARIOUS CONCERNS OF SHRI BANWARLAL JAIN WHICH INCLUDES M/S. MOHIT E NTERPRISES FROM WHOM THE ASSESSEE HAD RECEIVED LOAN OF RS.5 LAKHS DURING THE YEAR UNDER CONSIDERATION. 3.3. WE FIND IN VIEW OF THE ABOVE , VARIOUS ARGUMENTS ADVANCED BY THE ASSESSEE WITH REGARD TO THE VALIDITY OF THE REOPENING ON THE GROUND THAT REASONS REC ORDED [AS COMMUNICATED TO THE ASSESSEE] WAS WITH REGARD TO OBTAINING ACCOMMODATION BILLS FROM M/S. MOHIT ENTERPRISES BY THE ASSESSEE , WHEREAS , ULTIMATELY THE ADDITION MADE IN THE RE - ASSESSMENT PROCEEDINGS WAS TOWARDS UNSECURED LOAN TO THE TUNE OF RS.5 LAKH S FROM M/S. MOHIT ENTERPRISES U/S.68 OF THE ACT. IN VIEW OF THIS DIVERGENT STAND TAKEN BY THE REVENUE ACCORDING TO THE ASSESSEE, IT WAS ARGUED BY THE LD.AR BEFORE US THAT THE ADDITION FINALLY MADE U/S.68 OF THE ACT TOWARDS UNSECURED LOAN DID NOT FLOW / EMA NATE FROM THE REASONS REC ORDED FOR REOPENING THE ASSESSMENT AS COMMUNICATED TO THE ASSESSEE. ACCORDINGLY, THE LD. AR PRAYED THAT THE RE - ASSESSMENT FRAMED U/S.143(3) R.W.S. 147 OF THE ACT DATED 25/03/2015 WHEREIN THE LOAN AMOUNT OF RS.5 LAKHS WAS ADDED U/S. 68 OF THE ACT DESERVES TO BE QUASHED BY PLACING RELIANCE ON THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. JET AIRWAYS (I NDIA ) LTD, REPORTED IN 331 ITR 236 (BOM) . ITA NOS.3743 TO 3745/MUM/2018 SHRI SOHANLAL B BOHRA 5 4. WE HAVE HEARD RIVAL SUBMISSIONS. WE FIND THAT THE ADDITION HAS BEEN MADE BASED ON THE REASONS RECORDED IN THE ASSESSMENT AND ACCORDINGLY, RELIANCE PLACED ON THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF JET AIRWAYS (INDIA) LTD., DOES NOT SUPPORT THE CASE OF THE ASSESSEE IN THE FACTS OF THE INSTA NT CASE. I N VIEW OF THIS , ALL OTHER ARGUMENTS ADVANCED BY THE ASSESSEE WITH REGARD TO THE VALIDITY OF REOPENING NEED NOT BE LOOKED INTO. ACCORDINGLY, THE GROUND NOS. 1 & 2 RAISED BY THE ASSESSEE ARE DISMISSED. 5 . THE GROUND NO.3 RAISED BY THE ASSESSEE IS A S TO WHETHER THE LD. CIT(A) WAS JUSTIFIED IN CONFIRMING THE ADDITION OF RS.5 LAKHS TOWARDS UNSECURED LOANS RECEIVED FROM M/S MOHIT ENTERPRISES IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 5.1. WE HAVE HEARD THE RIVAL SUBMISSIONS. IT IS NOT IN DISPUTE THAT ASSESSEE HAD BORROWED LOAN OF RS. 5 LAKHS DURING THE YEAR UNDER CONSIDERATION FROM M/S. MOHIT ENTERPRISES. THE ASSESSEE IN SUPPORT OF THIS LOAN , HAD FURNISHED COPIES OF ITR ACKNOWLEDGEMENT OF LOAN CREDITOR , CONFIRMATION OF BALANCE FROM LOAN CREDITOR , AUDIT ED BALANCE SHEET AND BANK STATEMENTS OF THE LOAN CREDITOR TOGETHER WITH AN AFFIDAVIT OF THE SAID LOAN CREDITOR . THE ASSESSEE ALSO FURNISHED HIS BANK STATEMENTS FOR THE RELEVANT PERIOD. THE ASSESSEE STATED THAT THE SUBJECT MENTIONED LOAN RECEIVED BY THE ASS ESSEE FROM M/S. MOHIT ENTERPRISES HAD BEEN DULY REPAID TO THE SAID PARTY ON 18/05/2007 AND THE SAID LOAN WAS ALSO SUBJECTED TO PAYMENT OF INTEREST AFTER DUE DEDUCTION OF TAX AT SOURCE AT ITA NOS.3743 TO 3745/MUM/2018 SHRI SOHANLAL B BOHRA 6 THE APPLICABLE RATES. THE EVIDENCES IN THIS REGARD ARE ENCLOSED IN PA GE S 53 TO 63 OF THE PAPER BOOK FILED BEFORE US. THESE FACTS ARE NOT IN DISPUTE BEFORE US. WE FIND THAT IN THE INSTANT CASE, THE ASSESSEE HAD FURNISHED BASIC DETAILS REGARDING LOAN CREDITOR PROVING THE IDENTITY, CREDITWORTHINESS OF THE CREDITOR AND GENUINE NESS OF THE LOAN TRANSACTION. AFTER THIS, THE ONUS SHIFTS TO THE LD. AO FOR MAKING FURTHER ENQUIRIES , IF HE SO DESIRES . I N THE INSTANT CASE, NO NOTICE U/S.133(6) OF THE ACT OR SUMMONS U/S.131 OF THE ACT WAS ISSUED BY THE LD. AO TO THE CONCERNED LOAN CREDIT OR TO EXAMINE THE VERACITY OF THE DOCUMENTS SUBMITTED BY THE ASSESSEE. IN VIEW OF THIS, THE ASSESSEE VOLUNTARILY FILED AN AFFIDAVIT FROM THE CONCERNED LOAN CREDITOR WHICH ARE ENCLOSED IN PAGES 60 & 61 OF THE PAPER BOOK WHEREIN THE SAID LOAN CREDITOR HAD DU LY CONFIRMED THE ENTIRE TRANSACTION BEING CARRIED OUT BY ACCOUNT PAYEE CHEQUES, LOANS GIVEN TO THE ASSESSEE, LOANS RECEIVED BACK FROM THE ASSESSEE, THE INTEREST PAID BY THE ASSESSEE AND TDS THEREO N . THE SAID LOAN CREDITOR HAD ALSO DULY AFFIRMED IN HIS AFFI DAVIT THAT LOAN WAS ADVANCED BY HIM TO THE ASSESSEE OUT OF SUFFICIENT BALANCES AVAILABLE WITH HIM FROM THE DISCLOSED BANK ACCOUNT. ALL THESE FACTS CLEARLY GO TO PROVE THAT THE SAID LOAN IS GENUINE TRANSACTION AND DOES NOT DESERVE TO BE VIEWED WITH A JAUNDI CED EYE. WE ALSO FIND THAT SIMILAR LOAN RECEIVED FROM M/S. MOHIT ENTERPRISES TOGETHER WITH OTHER PARTIES HAD BEEN ACCEPTED AS GENUINE BY THE CO - ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF DCIT (CC) - (1)(3) VS. JAINAM INVESTMENTS IN ITA NO.6099/MUM/2016 F OR A.Y.2012 - 13 DATED 10/08/2018 WHEREIN THE ITA NOS.3743 TO 3745/MUM/2018 SHRI SOHANLAL B BOHRA 7 ADDITION MADE U/S.68 ON SIMILAR GROUNDS HAD BEEN DELETED BY THIS TRIBUNAL. RESPECTFULLY FOLLOWING THE SAME, WE ALSO DELETE THE ADDITION MADE U/S.68 OF THE ACT IN THE FACTS OF THE INSTANT CASE. ACCORDINGLY, WE HA VE NO HESITATION IN DIRECTING THE LD. AO TO DELETE THE ADDITION MADE U/S.68 OF THE ACT IN THE SUM OF RS.5 LAKHS ON MERITS . A CCORDINGLY, THE APPEAL OF THE ASSESSEE FOR A.Y.2007 - 08 IS PARTLY ALLOWED. 6. NOW, LET US COME TO APPEALS OF THE ASSESSEE FOR A.Y.201 0 - 11 AND 2011 - 12 WHEREIN THE LD. AO HAD MADE DISALLOWANCE OF BOGUS PURCHASES OF RS.3 , 00 , 249/ - AND RS.18 , 57 , 473/ - FOR A.YRS 2010 - 11 AND 2011 - 12 RESPECTIVELY. ADMITTEDLY, BOTH THESE ADDITIONS WERE MADE BY APPLYING 12.5% PROFIT ON THE TOTAL VALUE OF PURCHASES . IT IS THE CONTENTION OF THE REVENUE AUTHORITIES THAT BASED ON THE INVESTIGATION CARRIED OUT BY THE SALES TAX DEPARTMENT OF MAHARASHTRA AND THEREAFTER, INFORMATION RECEIVED FROM DGIT (INVESTIGATION), MUMBAI IN THIS REGARD, CERTAIN ENTITIES WERE INVOLVED I N PROVIDING ACCOMMODATION ENTRIES IN THE FORM OF ISSUING BOGUS PURCHASE BILLS TO VARIOUS ASSESSEES. THE ASSESSEE WAS FOUND TO BE ONE OF THE PARTIES, WHO HAD RECEIVED BOGUS PURCHASE BILL FROM THE SAID TAINTED ENTITIES AS DETAILED IN THE ASSESSMENT ORDERS FO R THE RESPECTIVE YEARS. 6.1 . WE HAVE HEARD RIVAL SUBMISSIONS. WE FIND THAT SIMILAR ISSUE OF BOGUS PURCHASES HAS BEEN THE SUBJECT MATTER OF ADJUDICATION BY THIS TRIBUNAL IN VARIOUS CASES. HOWEVER, IN THE INSTANT CASE, THE ASSESSEE HAD ONLY PURCHASED THE MAT ERIALS FROM THE GREY MARKET IN ORDER TO AVOID VAT ITA NOS.3743 TO 3745/MUM/2018 SHRI SOHANLAL B BOHRA 8 AND HAD SUBSTITUTED THE SAME BY OBTAINING ACCOMMODATION BILL CONTAINING VAT. THE ASSESSEE HAD DULY MADE PAYMENTS FOR THE SAID BILL AND ALSO TO THE CONCERNED SUPPLIERS WHO HAD ALLEGEDLY SUPPLIED BOGUS BILLS , AND THAT ONLY THE VAT PORTION IS THE PROFIT WHICH THE ASSESSEE HAD ACTUALLY MADE IN THE INSTANT CASE. THE SAID MATERIALS WHICH WERE PURCHASED WERE DULY SOLD BY THE ASSESSEE WHICH HAS BEEN ACCEPTED BY THE LD. AO. IN OTHER WORDS, SALES REFLECTED BY THE AS SESSEE HAVE NOT BEEN DISPUTED BY THE LD. AO. OUT OF THE ALLEGED BOGUS PURCHASES ON THE SAID SALE, PROFIT ELEMENT IS ALSO EMBEDDED AND THAT HAS BEEN DULY DISCLOSED BY THE ASSESSEE IN HIS REGULAR RETURNS OF THE INCOME. HENCE, THERE IS NO NEED TO MAKE SEPARAT E ADDITION TOWARDS PROFIT. WE HAVE ALREADY HELD THAT THE ASSESSEE HAD MADE PROFIT IN THE FORM OF VAT PORTION BY PURCHASING THE GOODS FROM GREY MARKET. HENCE, WHAT IS TO BE ADDED IS ONLY THE VAT PORTION. THE LD. AR SUBMITTED THAT THE VAT RATE FOR A.Y.2010 - 1 1 WAS 4% AND FOR A.Y.2011 - 12 IT WAS 5%. HENCE, WE HOLD THAT THE PROFIT MARGIN TO BE ADDED IS ONLY THE RATE OF VAT APPLICABLE IN THE RELEVANT YEARS. 6.2. NOW, THE NEXT ASPECT WHICH IS TO BE CONSIDERED IN THIS ISSUE IS WHETHER THE PROFIT MARGIN OF 4% OR 5 % , AS THE CASE MAY BE , SUBJECT TO FACTUAL VERIFICATION OF THE LD. AO , ARE TO BE APPLIED ON THE VALUE OF PURCHASES INCLUDING VAT OR VALUE OF PURCHASES EXCLUDING VAT. IN THIS REGARD, WE HOLD THAT THE APPLICABLE PROFIT MARGIN SHOULD BE APPLIED ON TOTAL VALUE OF PURCHASES NET OF VAT I.E., EXCLUDING THE VAT PORTION. IN ITA NOS.3743 TO 3745/MUM/2018 SHRI SOHANLAL B BOHRA 9 VIEW OF THE AFORESAID FINDINGS, WE DIRECT THE LD. AO TO APPLY THE APPLICABLE PROFIT PERCENTAGE, BEING THE VAT RATE , DURING THE RELEVANT ASSESSMENT YEARS, ON THE VALUE OF PURCHASES EXCLUDING VAT. 6 .3. SINCE THE ISSUE IS ADJUDICATED ON MERITS OF THE CASE, THE GROUNDS RAISED BY THE ASSESSEE ON THE VALIDITY OF REOPENING ARE LEFT UPON AND NO OPINION IS GIVEN HEREUNDER. ACCORDINGLY, THE GROUNDS RAISED BY THE ASSESSEE FOR THE A.Y.2010 - 11 AND 2011 - 12 ARE PARTLY ALLOWED. 7 . IN THE RESULT, ALL THE APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 27 / 03 /201 9 SD/ - ( RAVISH SOOD ) SD/ - ( M.BALAGANESH ) JUDICIAL MEMBER ACCOUNTA NT MEMBER MUMBAI; DATED 27 / 03 /201 9 KARUNA SR. 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//