ITO 27(1)(2), MUMBAI V. BHAGWANDAS P. BHANUSHALI, MUMBAI

ITA 375/MUM/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 7574 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-01-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 28-01-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AKHTAR HANSARI
• Keywords: Bogus purchase; Cost of acquisition; Accommodation entries
• Section: 143(3); 147; 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC , BENCH MUMBAI BEFORE SHRI R.C.SHARMA, A CCOUNTANT M EMBER ITA NO. 375 /MUM/201 9 ( ASSESSMENT YEAR: 2011 - 12 ) I.T.O. - 27 ( 1 )( 2 ), ROOM NO. 407, 4 TH FLOOR, TOWER NO. 6, VASHI RAILWAY STATION COMPLEX, VASHI, NAVI MUMBAI - 4 00703. VS. SHRI BHAGWANDAS P. BHANUSHALI, D - 36, HIMALAYA SOCIETY, N.P. ROAD, GHATKOPAR (W), MUMBAI - 400084. PAN/GIR NO. ACCPB 7658 K (APPELLANT ) .. (RESPONDENT ) REVENUE BY SHRI AKHTAR H ANSARI ( DR) ASSESSEE BY NONE DATE OF HEARING 2 3 /01/2020 DATE OF PRONOUNCEMENT 27 / 01 /20 20 / O R D E R PER: R.C. SHARMA, A.M. THIS IS THE APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE LD. CIT(A) - 24 , MUMBAI DATED 10 /10 /2018 FOR THE A.Y. 2011 - 12 IN THE MATTER OF ORDER PASSED U/S 143(3) R.W. S. 147 OF THE INCOME TAX ACT, 1961 (IN SHORT, THE ACT). 2. IN THIS APPEAL, THE REVENUE IS AGGRIEVED BY THE ACTION OF THE LD. CIT(A) FOR RESTRICTING THE ADDITION ON ACCOUNT OF BOGUS PURCHASES TO THE EXTENT OF 12.5% WHICH WAS MADE BY THE A.O. AT 100% OF ALLE GED BOGUS PURCHASES. WHILE REDUCING THE ADDITION TO THE EXTENT OF 12.5%, THE PRECISE OBSERVATION OF THE LD. CIT(A) WAS AS UNDER: ITA NO. 375 /MUM/2019 ITO VS SHRI BHAGWANDAS P BHANUSHALI 2 2.4 I HAVE GIVEN MY CAREFUL CONSIDERATION TO THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED THE FA CTUAL MATRIX OF THE CASE AS ALSO THE APPLICABLE LEGAL POSITION. 2.4.1 THE ONLY EFFECTIVE GROUND IS IN RESPECT OF THE ACTION OF THE LD. AO IN NOT ACCEPTING THE PURCHASES OF RS.14,44,406/ - AS GENUINE PURCHASES BASED ON THE INFORMATION RECEIVED FROM INCOME T AX AUTHORITIES. BRIEFLY STATED, THE APPELLANT IS A COMPANY ENGAGED IN THE BUSINESS OF TRADING. LD. AO MADE THE ADDITION ON THE BASIS OF INFORMATION RECEIVED FROM THE INVESTIGATION WING OF INCOME TAX DEPARTMENT, MUMBAI THAT THE SALES TAX DEPARTMENT HAD RECO RDED THE STATEMENTS OF CERTAIN HAWALA OPERATORS WHO HAD CONFIRMED TO HAVE GIVEN BOGUS BILL TO CERTAIN ASSESSEE INCLUDING THE APPELLANT. THE BOGUS BILL WAS IN RESPECT OF I PARTY. THE APPELLANT COMPANY WAS ASKED TO SUBMIT THE DETAILS OF PURPORTED PURCHASES M ADE AND TO SHOW CAUSE WHY THE SAME SHOULD NOT BE DISALLOWED AS BOGUS PURCHASES. THE APPELLANT FILED REPLY STATING THAT PURCHASES WERE MADE FROM REGULAR PARTIES SUPPORTED BY PROPER BILLS AND THE ACCOUNTING ENTRIES AND THE PAYMENTS WERE MADE BY ACCOUNT PAYEE CHEQUES. THE LD. AO WAS NOT IN AGREEMENT WITH THE SUBMISSIONS OF THE APPELLANT AND OBSERVED THAT THE APPELLANT FAILED TO FURNISH THE SUPPORTING DOCUMENTARY EVIDENCE TO ESTABLISH THAT THE PURCHASE WAS ACTUALLY MADE BY THEM FROM THIS PARTY SUCH AS TRANSPORT ATION DOCUMENTS, INWARD REGISTER ETC. THE INVESTIGATION WING OF MUMBAI HAD PROVIDED A LIST OF HAWALA BILL RACKETEERS WHO WERE INVOLVED IN ISSUING BILLS AND ALSO THE LIST OF BENEFICIARIES. THE SALES TAX DEPARTMENT OF MUMBAI HAD INVESTIGATED ALL THESE CASES THOROUGHLY AND PREPARED A LIST OF SUCH HAWALA OPERATORS AND THEIR BENEFICIARIES WHICH HAVE BEEN UPLOADED IN THEIR WEBSITE. THE LD.AO OBSERVED THAT THESE HAWALA OPERATORS WERE PROVIDING ONLY ACCOMMODATION ENTRIES AND THE APPELLANT WAS ALSO IN THE LIST BENEF ICIARIES. ACCORDINGLY, THE LD. AO TREATED THE AMOUNT OF RS.14,44,406/ - AS BOGUS PURCHASE AND ADDED THE SAME TO THE TOTAL INCOME OF THE APPELLANT. ITA NO. 375 /MUM/2019 ITO VS SHRI BHAGWANDAS P BHANUSHALI 3 UNDER SIMILAR CIRCUMSTANCES THE HONBLE HIGH COURT OF GUJARAT IN THE CASE OF SIMIP P SETH, 2013 (356 ITR 451) HAD ON OCCASION TO DELIVER ITS JUDGMENT BY CONFIRMING THE DECISION O THE ITAT WHICH HAS ESTIMATED THE DISALLOWANCE AT 12.5% OF THE DISPUTED BOGUS PURCHASES TO MEET THE END OF JUSTICE. THE HEADNOTE OF THE DECISION IS REPRODUCED AS UNDER: 'SECTION 145 OF THE INCOME - TAX ACT, 1961 - METHOD OF ACCOUNTING - ESTIMATION OF PROFITS [ BOGUS PURCHASES] - ASSESSMENT YEAR 2006 - 17 ASSESSEE WAS ENGAGED IN BUSINESS OF TRADING IN STEEL ON WHOLESALE BASIS - ASSESSING OFFICER HAVING FOUND THAT SOME ALLEGED SUPPLIERS OF STEEL TO A SSESSEE HAD NOT SUPPLIED STEEL TO ASSESSEE BUT HAD ONLY PROVIDED SALE BILLS, HELD THAT PURCHASES MADE FROM SAID PARTIES WERE BOGUS HE ACCORDINGLY, ADDED ENTIRE AMOUNT PURCHASES TO GROSS PROFIT OF ASSESSEE COMMISSIONER (APPEALS) HAVING FOUND THAT ASSESSEE HAD INDEED MADE PURCHASES THOUGH NOT FROM NAMED PARTIES BUT OTHER PARTIES FROM GREY MARKET, SUSTAINED ADDITION TO EXTENT OF 30% OF PURCHASE COST AS PROBABLE PROFIT OF ASSESSEE - TRIBUNAL HOWEVER, SUSTAINED ADDITION TO EXTENT OF 12.5% - WHETHER SINCE PURCHASE S WERE NOT BOGUS BUT WERE MADE FROM PARTIES OTHER THAN THOSE MENTIONED IN BOOKS OF ACCOUNT, ONLY PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES COULD BE ADDED TO ASSESSEE'S INCOME - HELD, YES WHETHER HENCE, ORDER OF TRIBUNAL NEEDED NO INTERFERENCE - HELD, YES [PA RAS 6, 7&9][IN FAVOUR OF A S SESSEE]' [EMPHASIS SUPPLIED]' BASED ON THE EVIDENCE IN HAND IN THE FORM OF A REPORT FROM DIT(INV.), MUMBAI THE AO HAS ASKED THE ASSESSEE TO PRODUCE THE PARTIES ALONGWITH EVIDENCE IN ORDER TO VERITY THE GENUINENESS O F THE PURCHAS E TRANSACTIONS. TH E ASSESSEE INSTEAD SUBMITTED THE LEDGER ACCOUNTS OF THE ABOVE PARTY AND BANK STATEMENTS EXTRACTS EVIDENCING THE PAYMENTS THROUGH BANK CHEQUE. IN THIS CASE, THE ONUS LIES ON THE ASSESSEE TO PROVE THE GENUINENESS OF THE PURCHASES AND THE AS SESSEE HAD TO PROVE THAT THE SUPPLIERS WERE GENUINELY EXISTING. THE ASSESSEE HAS NOT MADE ANY EFFORTS TO DISCHARGE THE ONUS AND FAILED TO PRODUCE THE PARTY, IN SPITE OF THE OPPORTUNITIES ITA NO. 375 /MUM/2019 ITO VS SHRI BHAGWANDAS P BHANUSHALI 4 GIVEN BY THE LD.AO. THE ASSESSEE COULD NOT SATISFACTORILY SUBSTANTIAT E AND ESTABLISH THE FACT THAT THERE WERE GENUINE PURCHASES FROM THIS PARTY. THERE WAS A REPORT FROM SIT(INV) STATING, THAT ALL THE SELLER PARTIES AS PER THE LIST SUPPLIED BY THEM ARE BOGUS INCLUDING THE PARTIES APPEARING IN THE BOOKS OF THE APPELLANT COMPA NY AND AS STATED ABOVE, THE ASSESSEE HAS NOT MADE COUNTER SUBMISSION TO SHOW THAT THIS PARTY IS REALLY EXISTING. THE AO HAS BROUGHT TO TAX THE BOGUS PURCHASES BY ADOPTING THE METHOD @ 100% OF SUCH PURCHASES KEEPING IN VIEW THE GAIN MADE BY THE APPELLANT DU E TO PURCHASES OF MATERIAL IN GREY MARKET WITHOUT BILLS AND ADJUSTING THE PURCHASES WITH THE INVOICES TAKEN FROM THE HAWALA TRADERS UNDER DISCUSSIONS. UNDER THESE CIRCUMSTANCES THE AO CANNOT BE FOUND FAULT ON THIS COUNT. EVEN THOUGH THE AO COULD NOT PROVE SUBSTANTIVELY THAT THE AMOUNTS GIVEN TO THE SELLERS IN CHEQUE FROM HAVE CAME BACK TO THE APPELLANT, THE ACTIVITIES OF ACCOMMODATION ENTRIES IN THE TRADING COMMUNITY IS NOT UNHEARED OF. FURTHER, THE INVESTIGATIONS CARRIED OUT BY THE SALES TAX DEPARTMENT, AN OTHER GOVERNMENT AGENCY, WITH REGARD TO VAT VIOLATION CANNOT BE LOST SIGHT OF. FURTHER, AS SOME OF THE NAMES OF THE SO - CALLED BOGUS SELLERS OUT OF THE LIST SUPPLIED BY THE SALES TAX DEPARTMENT ARE APPEARING IN THE BOOKS OF THE APPELLANT COMPANY, THE LINK OF INVOLVE MEN T OF APPELLANT COMPANY GETTING BOGUS BILLS IS ESTABLISHED. EVEN THOUGH THERE ARE CATENA OF CASES DECIDED BY THE JURISDICTIONAL ITAT WHICH HAVE DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE, THEY ARE NOT UNIFORM IN ALL THE CASES AS THEY WERE DECI DED AS PER FACTS AND CIRCUMSTANCES OF THAT PARTICULAR CASE BEFORE THEM. I AM OF THE OPINION THAT THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE ARE MORE AKIN TO THE CASE DECIDED BY THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF SIMIT P SETH (SUPRA). THERE FORE, I HEREBY CONFIRM THE DISALLOWANCE TO THE EXTENT 12.5% AMOUNTING TO RS.1,80,550/ - OF THE SO - CALLED BOGUS PURCHASES MADE BY THE LD AO. THIS GROUND IS PARTLY ALLOWED. ITA NO. 375 /MUM/2019 ITO VS SHRI BHAGWANDAS P BHANUSHALI 5 3. AGAINST THE ABOVE ORDER OF THE LD. CIT(A), THE REVENUE IS IN APPEAL BEFORE THE ITA T. 4. I HAVE HEARD THE LD DR AND PERUSED THE MATERIAL PLACED ON RECORD. FROM PERUSAL OF RECORD, I FOUND THAT AFTER CONSIDERING THE ENTIRE FACTS AND CIRCUMSTANCES AND APPLYING JUDICIAL PRONOUNCEMENTS LAID DOWN BY THE HONBLE GUJARAT HIGH COURT IN THE CASE O F SIMIT P SETH (SUPRA) TO THE FACTS OF THE CASE, THE LD. CIT(A) HAS REDUCED THE ADDITION TO THE EXTENT OF 12.5%. NOTHING WAS BROUGHT ON RECORD SO AS TO PERSUADE ME TO DEVIATE FROM THE FINDINGS OF THE LD. CIT(A) . ACCORDINGLY, I DO NOT FIND ANY REASON TO INT ERFERE IN THE ORDER OF THE LD. CIT(A) AND UPHOLD THE SAME. 5 . IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON 27 TH JANUARY, 2020 . SD/ - (R.C.SHARMA) ACCOUNTANT MEMBER MUMBAI; DATED 27 / 0 1 /20 20 *RANJAN 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//