NILESH LAXMAN GORE, Thane V. INCOME TAX OFFICER WARD 3(1), Thane

ITA 376/MUM/2018

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 7458 (ITAT-MUMBAI)
• Duration Of Justice: 3 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-04-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 17-01-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: N HEMALATHA
• Keywords: Bogus purchase; Principle of natural justice; Tangible material; Reason to believe
• Section: 69C; 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES SMC , MUMBAI BEFORE S HRI G.S. PANNU (AM) AND SHRI RAM LAL NEGI (JM) ITA NO. 376/MUM/2018 ASSESSMENT Y EAR: 2009 - 10 SHRI NILESH LAXMAN GORE, S/O LAXMAN GORE, A/601, TULIP GARDENS, POKHRAN ROAD - 2, NEXT T O OSWAL PARK, THANE (WEST) - 400601 PAN: AFPPG5715A VS. THE ITO WARD 3(1), ROOM NO. 3, B WING, 6 TH FLOOR, ASHAR IT PARK, ROAD NO. 16Z, WAGLE ESTATE, THANE (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI PIYUSH CHHAJED (AR ) REVENUE BY : MS. N. HEMALA THA (SR. DR) DATE OF HEARING: 12 /04 /201 8 DATE OF PRONOUNCEMENT: 25 / 04 /201 8 O R D E R PER RAM LAL NEGI, JM T HE ASSESSEE HAS PREFERRED THE PRESENT APPEAL AGAINST THE ORDER DATED 27/01/2015 P ASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) - 2 , PUNE , FOR THE A S S ESSMENT YEAR 2009 - 10 , WHEREBY THE LD. CIT (A) HAS PARTLY ALLOWED THE APPEAL FILED BY THE ASSESSEE AGAINST ASSESSMENT ORDER PASSED U/S 143 (3) READ WITH SECTION 147 OF THE INCOME TAX ACT, 1961 (FOR SHORT THE A CT) AND CONFIRMED THE ADDITION OF RS. 6,18,801/ - MADE BY THE AO ON ACCOUNT OF UNVERIFIABLE PURCHASES . 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION DECLARING THE TOTAL INCOME OF RS. 7,39,420/ - AND THE SAME WAS PROCESSED U/S 143 (1) OF THE ACT. SUBSEQUENTLY, ON THE BASIS OF INFORMATION RECEIVED FROM THE SALES TAX DEPARTMENT , GOVT. OF MAHARASHTRA THAT CERTAIN BOGUS ENTITIES ISSUED ACCOMMODATION BILLS TO A LARGE NUMBER OF TAX PAYERS INCLUDING THE ASSESSEE DURING THE YEAR RELEVANT TO THE 2 ITA NO. 3 76 / MUM/2018 ASSESSMENT YEAR: 2009 - 10 ASSESSMENT YEAR UNDER CONSIDERATION, THE ASSESS MENT WAS RE - OPENED AFTER ISSUING NOTICE U/S 148 OF THE ACT. AS PER THE INFORMATION, THE ASSESSEE HAD OBTAINED BOGUS BILLS FROM TWO B OGUS ENTITIES NAMELY M/S SHARDHA TRADING COMPANY AND M/S SOMNATH INTERNATIONAL TO THE TUNE OF RS. 6,18,801/ - . IN RESPONSE TO THE NOTICE U/S 148 OF THE ACT, THE ASSESSEE FILED OBJECTION AND SUBMITTED THAT THE DEPARTMENT HAS NOT EXAMINED THE PARTIES TO VERIF Y THE ALLEGATIONS THAT THE PURCHASES MADE FROM THE SAID PARTIES WERE BOGUS . ACCORDINGLY, THE AO ISSUED NOTICE U/S 142 (1) AND ASKED THE ASSESSEE TO FURNISH THE DETAILS TO SUBSTANTIATE ITS CLAIM. IN RESPONSE THEREOF THE ASSESSEE FILED COPIES OF PURCHASE BIL LS, DETAILS OF ACCOUNT PAYEE CHEQUES AND NAME AND ADDRESSES OF THE PARTIES. THE AO ISSUED NOTICES U/S 133 (6) OF THE ACT, HOWEVER, THE SAME WERE RETURNED BACK BY THE POSTAL AUTHORITIES. THE AO ALSO DEPUTED ONE OF THE INSPECTOR S WORKING UNDER HIM TO FIND OU T THE WHEREABOUTS OF THE ASSESSEE BUT THE PARTIES WERE NOT FOUND AT THEIR RESPECTIVE ADDRESSES. THE AO ASKED THE ASSESSEE TO PRODUCE THE PARTIES AND FURTHER ASKED TO SHOW CAUSE AS TO WHY THE PURCHASES CLAIMED TO HAVE BEEN MADE FROM THE SAID PARTIES SHOULD NOT BE TREATED AS BOGUS. HOWEVER, T HE ASSESSEE FAILED TO PRODUCE THE PARTIES, AND CONTENDED THAT THE PURCHASES WERE GENUINELY MADE . THE AO REJECTING THE CONTENTION OF THE ASSESSEE HELD THE PURCHASES AS BOGUS AND ADDED THE TOTAL AMOUNT OF BOGUS PURCHASES T O THE INCOME OF THE ASSESSEE. 3. IN THE FIRST APPEAL, THE LD. CIT(A) AFTER HEARING THE ASSESSEE CONFIRMED THE ADDITION MADE BY THE AO ON ACCOUNT OF BOGUS PURCHASES MADE BY THE ASSESSEE. THE ASSES SEE IS IN APPEAL AGAINST THE SAID FINDINGS OF THE LD. CIT( A) 4. T HE ASSESSEE HAS CHALLENGED THE IMPUGNED ORDER PASSED BY THE LD. CIT(A) ON THE FOLLOWING EFFECTIVE GROUND S : - 1. THE LEARNED ASSESSING OFFICER ERRED IN ASSUMING JURISDICTION U/S 148, WITHOUT BRINGING OUT ANY TANGIBLE MATERIAL BASED 3 ITA NO. 3 76 / MUM/2018 ASSESSMENT YEAR: 2009 - 10 ON WHICH THE REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT WAS FORMED. 2. THE LEARNED ASSESSING OFFICER ERRED IN PASSING ASSESSMENT ORDER U/S 143 (3) R.W.S. 147 WITHOUT ISSUING VALID NOTICE U/S 143 (20 AND THEREFORE THE ASSESSMENT ORDER PASSED IN CONSEQUENT TO THE SAME IS BAD IN LAW. 3. THE LEARNED COMMISSIONER OF INCOME TAX - APPEALS ERRED IN CONFIRMING THE ADDITION BASED ON THE STATEMENT RECORDED BY THE SALES TAX DEPARTMENT OF SO CALLED HAWALA DEALERS WITHOUT EVEN PROVIDING THE COPY OF STATEMENT TO THE APPELLANT AND OPPORT UNITY TO CROSS EXAMINE, AND THEREFORE THE SAME IS AGAINST THE PRINCIPLES OF NATURAL JUSTICE AND DESERVES TO BE ANNULLED. 4. THE LEARNED COMMISSIONER OF INCOME TAX APPEALS ERRED IN CONFIRMING THE ADDITION UNDER SECTION 69C, WITHOUT APPRECIATING THAT THE PUR CHASED WERE FULLY RECORDED IN BOOKS OF ACCOUNTS AND THE SOURCE THEREOF WAS EXPLAINED AND RECORDED IN THE BOOKS ITSELF AND THEREFORE RIGOURS OF SECTION 69C IS NOT APPLICABLE ITSELF. 5. ON THE FACTS OF THE CASE AND IN THE CIRCUMSTANCES PRESENT & IN LAW, THE LE ARNED COMMISSIONER OF INCOME - TAX - APPEALS ERRED IN CONFIRMING THE ADDITION OF RS. 6,18,801/ - TOWARDS UNVERIFIABLE PURCHASES. 5. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT HE DOES NOT WANT TO PRESS GROUND NO 1 & 2 OF THE APPEAL. HENCE, WE DISMISS BOTH THE GROUNDS AS NOT PRESSED. VIDE GROUND NO 3 TO 5, THE ASSESSEE HAS CHALLENGED THE ACTION OF THE LD. CIT(A) IN CONFIRMING THE ADDITION MADE BY THE AO ON ACCOUNT OF BOGUS PURCHASES MADE BY THE ASSESSEE DURING THE YEAR RELEVANT TO THE ASSESSMEN T YEAR UNDER CONSIDERATION. THE LD. COUNSEL SUBMITTED THAT SINCE THE ASSESSEE HAS SUBMITTED THE LEDGER ACCOUNT OF THE PARTIES, CONFIRMATION OF AMOUNT RECEIVED COPIES OF INVOICE ALONG WITH DELIVERY CHALLAN, 4 ITA NO. 3 76 / MUM/2018 ASSESSMENT YEAR: 2009 - 10 RELEVANT ABSTRACT OF BANK STATEMENT THE ASSESSEE H AS DISCHARGED THE ONUS OF PROVING THE GENUINENESS OF THE TRANSACTION. THE LD. COUNSEL FURTHER SUBMITTED THAT SINCE, THE AO HAS NOT REJECTED THE SALE THE LD CIT(A) OUGHT TO HAVE DELETED THE ADDITION. RELYING ON THE JUDGMENT OF THE HONBLE BOMBAY HIGH COURT DELIVERED IN CIT VS. NIKUNJ EXIMP ENTERPRISES LTD., 372 ITR 619 (BOM) , THE LD. COUNSEL FURTHER SUBMITTED THAT THE LD. CIT(A) HAS WRONGLY CONFIRMED THE ADDITION MERELY BECAUSE THE SUPPLIERS HAD NOT APPEARED BEFORE THE ASSESSING OFFICER. MOREOVER, THERE CANN OT BE A SALE WITHOUT ANY PURCHASE AND SINCE THE AO HAS NOT REJECTED THE SALE, THE PURCHASES CANNOT BE TREATED AS BOGUS. 6. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESENTATIVE (DR) SUBMITTED THAT SINCE, THE ASSESSEE HAS FAILED TO SUBMIT THE DETAILS OF V EHICLE EXPENSE, VEHICLE NUMBER, TYPE OF VEHICLE AND TRANSPORT RECEIPT FOR VERIFICATION, THE ASSESSEE HAS FAILED TO DISCHARGE THE ONUS OF PROVING GENUINENESS OF THE PURCHASES. MOREOVER, THE INDEPENDENT VERIFICATION MADE BY THE INSPECTOR HAS ESTABLISHED THAT THE PURCHASES IN QUESTION ARE NOT GENUINE. HENCE, THE LD. CIT (A) HAS RIGHTLY CONFIRMED THE ADDITION MADE BY THE AO AND THERE IS NO MERIT IN THE CONTENTION OF THE ASSESSEE. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND ALSO PER USED THE MATERIAL ON RECOR D. IN LIGHT OF THE EVIDENCE ON RECORD WE ARE OF THE CONSIDERED VIEW THAT THE EVIDENCE ON RECORD IS NOT SUFFICIENT TO HOLD THAT THE PURCHASES IN QUESTION ARE GENUINE. HOWEVER, SINCE THE AO HAS NOT DISPUTED/REJECTED THE SALE, THE ENTIRE AMOUNT OF THE BOGUS P URCHASES CANNOT BE ADDED TO THE INCOME OF THE ASSESSEE IN VIEW OF THE RATIO LAID DOWN BY THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. SIMIT P. SHETH 356 ITR 451 (GUJ). IN THE SAID CASE, THE HONBLE GUJARAT HIGH COURT HAS HELD THAT IN THE CASE OF BOGUS PURCHASES IT IS NECESSARY TO ASCERTAIN THE FACT AS TO WHETHER PURCHASES WERE NOT MADE AT ALL OR PURCHASES WERE MADE BUT FROM GREY MARKET. ONCE IT IS ESTABLISHED THAT THE PURCHASES 5 ITA NO. 3 76 / MUM/2018 ASSESSMENT YEAR: 2009 - 10 WERE ACTUALLY MADE THEN ONLY PROFIT EMBEDDED IN THE SAME COULD BE ADDE D IN THE INCOME OF THE ASSESSEE. THE HONBLE HIGH COURT ACCORDINGLY UPHELD THE DECISION OF THE TRIBUNAL AND SUSTAINED THE ADDITION 12.5% OF THE TOTAL BOGUS PURCHASES. IN THE PRESENT CASE SINCE, THE AO HAS NOT REJECTED THE SALES MADE BY THE ASSESSEE DURING THE PREVIOUS YEAR, THERE IS NO REASON TO MAKE ADDITION OF THE ENTIRE AMOUNT OF BOGUS PURCHASES. HENCE, FOLLOWING THE RATIO LAID DOWN BY THE HONBLE GUJRAT HIGH COURT IN CIT VS. SIMIT P. SETH (SUPRA) WE PARTLY ALLOW THIS GROUND OF APPEAL OF THE ASSESSEE AND ACCORDINGLY MODIFY THE ORDER OF THE LD. CIT (A) AND RESTRICT THE ADDITION TO 12.5% OF THE TOTAL AMOUNT OF BOGUS PURCHASES. WE, THEREFORE, DIRECT THE AO TO MAKE ADDITION OF 12.5% OF THE TOTAL AMOUNT OF BOGUS PURCHASES MADE BY THE ASSESSEE DURING THE PREVIO US YEAR. IN THE RESULT, APPEAL FILED BY THE ASSESSEE FOR A SSESSMENT YEAR 2009 - 20 10 PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 25 TH APRIL , 2018 . SD/ - SD/ - ( G.S. PANNU ) ( RAM LAL NEGI ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; DATED: 25 / 04 / 201 8 ALINDRA, PS / 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 . 6 ITA NO. 3 76 / MUM/2018 ASSESSMENT YEAR: 2009 - 10 / BY ORDER, //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI