ACIT CIRCLE 15 (1)(2), Mumbai V. M/S GENERAL COMPOSITES PVT LTD, Mumbai

ITA 3769/MUM/2019

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 3677 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2011-2012
• Appeal Filed On: 29-05-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T S KHALSA
• Keywords: Bogus purchase; Accommodation entries; Set aside
• Section: 69C; 143(3); 143(1)

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL G BENCH MUMB AI BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER AND SHRI RAMLAL NEGI, JUDICIAL MEMBER ITA NO.3769/MUM/2019 (ASSESSMENT YEAR 2011-12) ACIT, CIRCLE- 15(1)(2), ROOM NO.483A, 4 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI-400020. VS. M/S GENERAL COMPOSITES PVT. LTD., 107, RUNWAL COMMERCIAL COMPLEX, LBS MARG, MULUND (W), MUMBAI- 400080. P AN: AAACG2752J APPELLANT RESPONDENT APPELLANT BY : SHRI T.S. KHALSA (CIT-DR) RESPONDENT BY : NONE DATE OF HEARING : 10.03.2021 DATE OF PRONOUNCEMEN T : 31.05.2021 ORDER PER RAM LAL NEGI, JM; THE REVENUE HAS FILED THE PRESENT APPEAL AGAINST TH E IMPUGNED ORDER DATED 01.03.2019, PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS)- 24, MUMBAI [FOR SHORT THE LD. CIT(A)] PERTAINING TO THE ASSESSMENT YEAR (AY) 2011-12 WHEREBY THE CIT(A) HAS PARTLY ALLOWED THE APPEAL FILED BY THE ASSESSEE AGAINST THE ASSESSMENT ORDER PASSED UNDER SECTION 143(3) R.W.S. 147 OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT). 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE AY UNDER CONSIDERATION DECLARING TOTAL INCOME O F RS. 52,06,690/- WHICH WAS PROCESSED U/S 143(1) OF THE ACT. SUBSEQUENTLY, ON THE BASIS OF INFORMATION RECEIVED FROM THE INVESTIGATION WING OF THE DEPARTM ENT THAT DURING THE YEAR ITA NO. 3769 MUM 2019-M/S GENERAL COMPOSITES PVT. L TD. 2 RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION THE ASSESSEE HAD OBTAINED ACCOMMODATION PURCHASE BILLS AMOUNTING TO RS. 25,12 ,243/- FROM SIX BOGUS PARTIES WITHOUT PURCHASING ANY MATERIAL, THE CASE W AS REOPENED AND THE ASSESSMENT WAS COMPLETED 143(3) R.W.S. 147OF THE AC T OF THE ACT AND DETERMINED THE TOTAL INCOME OF THE ASSESSEE AT RS. 58,35,500/- AFTER MAKING ADDITION OF RS. 6,28,810/- UNDER SECTION 69C OF THE ACT I.E., 25% OF THE TOTAL AMOUNT OF DISPUTED PURCHASES. IN THE FIRST APPEAL, THE LD. CIT(A) RESTRICTED THE ADDITION TO 12.5% OF THE DISPUTED PURCHASE. 3. AGGRIEVED BY THE ORDER OF PASSED BY LD. CIT(A), THE REVENUE IS IN APPEAL BEFORE THIS TRIBUNAL. THE REVENUE HAS CHALLENGED TH E IMPUGNED ORDER BY RAISING THE FOLLOWING GROUNDS OF APPEAL: L. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, LD. CIT(A), ERRED IN DIRECTING THE ASSESSING OFFICE R TO RESTRICT THE DISALLOWANCE TO 12.5% AS AGAINST 25% OF THE TOTAL A LLEGED BOGUS PURCHASES DISALLOWED BY THE AO, WITHOUT APPRECIATIN G THE FACT THAT THE SAID SELLER PARTIES WERE FOUND TO BE HAWALA OPERATO RS/ BOGUS BILLERS AS PER FINDINGS GIVEN BY THE SALES TAX DEPARTMENT, GOV T. OF MAHARASHTRA AND THE INVESTIGATION WING, INCOME TAX DEPARTMENT, MUMBAI AND THE AO HAD MADE A REASONABLE DISALLOWANCE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) ERRED IN RESTRICTING THE ADDITION OF RS.25,15,243/- MADE BY THE AO @ 25% ON ACCOUNT OF BOGUS PURCHASES TO ONLY 12.5% OF SUCH BOGUS PURCHASES, WITHOUT GIVING ANY FINDINGS AS TO HOW 12.5% HAS BEEN WORKED OUT AND ALSO IGNORING THAT THE ASSESSEE FAIL ED TO DISCHARGE THE ONUS ON IT TO ESTABLISH DURING THE ASSESSMENT PROCE EDINGS, THE GENUINENESS OF PURCHASES WHICH WERE MADE THROUGH BO GUS PARTIES. ITA NO. 3769 MUM 2019-M/S GENERAL COMPOSITES PVT. L TD. 3 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) ERRED IN RESTRICTING THE ADDITION ON ACCOUNT OF BOGUS PURCHASES TO ONLY 12.5% OF THE BOGUS PURCHASES, WIT HOUT APPRECIATING THE RATIO OF THE DECISION OF THE HONBLE GUJARAT HI GH COURT IN THE CASE OF N K PROTIENS LTD., WHEREIN IT HAS BEEN HELD THAT IN THE EVENT OF BOGUS PURCHASES, THE ADDITION OF WHOLE OF SUCH PURCHASES IS REQUIRED TO BE MADE AND THIS DECISION HAS BEEN CONFIRMED BY THE HO NBLE SUPREME COURT IN SLP NO.CC NO.769 OF 2017 BY DISMISSING THE SLP OF THAT ASSESSEE. 4. 'THE APPELLANT PRAYS THAT THE ORDER OF THE LD. C IT(A) ON THE ABOVE DIRECTIONS BE SET-ASIDE AND THAT OF THE ASSES SING OFFICER BE RESTORED. 5. 'THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER AN Y OF THE AFORESAID GROUNDS OR ADD A NEW GROUND OF APPEAL, WH ICH MAY BE NECESSARY AT ANY TIME BEFORE OR AT THE TIME OF HEAR ING OF APPEAL. 4. THIS APPEAL WAS FIXED FOR HEARING ON 10.03.2021. HO WEVER, ON THE SAID DATE NONE APPEARED ON BEHALF OF THE ASSESSEE. SINCE THE ASSESSEE DID NOT APPEAR DESPITE SERVICE OF NOTICE, WE DECIDED TO DISPOSE OF THE SAID APPEAL ON THE BASIS OF MATERIAL ON RECORD AFTER HEARING THE LD. DEPARTM ENTAL REPRESENTATIVE (DR). ACCORDINGLY, WE ASKED THE LD DR TO PRESENT THE APPE AL OF THE REVENUE. 6. THE LD. DR SUBMITTED BEFORE US THAT THE LD. CIT( A) HAS RESTRICTED THE ADDITION TO 12.5% OF THE TOTAL AMOUNT OF BOGUS PUR CHASES SHOWN BY THE ASSESSEE IGNORING THAT THE ASSESSEE HAD FAILED TO D ISCHARGE THE ONUS OF ESTABLISHING THE GENUINENESS OF THE TRANSACTION. TH E LD. COUNSEL FURTHER SUBMITTED THAT SINCE THE FINDINGS OF THE LD. CIT(A) ARE NOT IN ACCORDANCE WITH THE LAW LAID DOWN BY THE HONBLE GUJARAT HIGH COURT IN THE CASE OF N K PROTIENS LTD., THE SAME IS LIABLE TO BE SET ASIDE. ITA NO. 3769 MUM 2019-M/S GENERAL COMPOSITES PVT. L TD. 4 7. WE HAVE PERUSED THE MATERIAL ON RECORD. THE ONLY GRIEVANCE OF THE REVENUE IS THAT THE LD. CIT(A) HAS RESTRICTED THE A DDITION TO 12.5% OF THE TOTAL AMOUNT OF BOGUS PURCHASES SHOWN BY THE ASSESSEE AS AGAINST 25% ADDITION MADE BY THE AO. THE LD. CIT(A) HAS RESTRICTED THE A DDITION TO 12.5% OF THE TOTAL AMOUNT OF BOGUS PURCHASES HOLDING AS UNDER: BASED ON THE EVIDENCE IN HAND IN THE FORM OF A REP ORT FROM DIT (INV), MUMBAI THE AO HAS ASKED THE ASSESSEE TO PRODUCE THE PARTIES ALONG WITH EVIDENCE IN ORDER TO VERIFY THE GENUINENESS OF THE PURCHASE TRANSACTIONS. THE ASSESSEE INSTEAD SUBMITTED THE LEDGER ACCOUNTS OF THE ABOVE PARTIES AND BANK STATEMENTS EXTRACTS EVIDENCING THE PAYMENT S THROUGH BANK CHEQUE. IN THIS CASE, THE ONUS LIES ON THE ASSESSEE TO PROVE THE GENUINENESS OF THE PURCHASES AND THE ASSESSEE HAD T O PROVE THAT THE SUPPLIERS WERE GENUINELY EXISTING. THE ASSESSEE HAS NOT MADE ANY EFFORTS TO DISCHARGE THE ONUS AND FAILED TO PRODUCE ANY OF THE PARTIES, IN SPITE OF THE OPPORTUNITIES GIVEN BY THE LD.AO. THE ASSESSEE COULD NOT SATISFACTORILY SUBSTANTIATE AND ESTABLISH THE FACT THAT THERE WERE GENUINE PURCHASES FROM THESE PARTIES. THERE WAS A REPORT FR OM SIT(INV) STATING THAT ALL THE SELLER PARTIES AS PER THE LIST SUPPLIE D BY THEM ARE BOGUS INCLUDING THE PARTIES APPEARING IN THE BOOKS OF THE APPELLANT COMPANY AND AS STATED ABOVE, THE ASSESSEE HAS NOT MADE COUN TER SUBMISSION TO SHOW THAT THOSE PARTIES ARE REALLY EXISTING. THE AO HAS BROUGHT TO TAX THE BOGUS PURCHASES BY ADOPTING THE METHOD @ 100% OF SU CH PURCHASES KEEPING IN VIEW THE GAIN MADE BY THE APPELLANT DUE TO PURCHASES OF MATERIAL IN GREY MARKET WITHOUT BILLS AND ADJUSTING THE PURCHASES WITH THE INVOICES TAKEN FROM THE HAWALA TRADERS UNDER DI SCUSSIONS. UNDER THESE CIRCUMSTANCES THE AO CANNOT BE FOUND FAULT ON THIS COUNT. EVEN THOUGH THE AO COULD NOT PROVE SUBSTANTIVELY THAT TH E AMOUNTS GIVEN TO THE SELLERS IN CHEQUE FROM HAVE CAME BACK TO THE AP PELLANT, THE ACTIVITIES OF ACCOMMODATION ENTRIES IN THE TRADING COMMUNITY I S NOT UNHEARED OF. FURTHER, THE INVESTIGATIONS CARRIED OUT BY THE SALE S TAX DEPARTMENT, ANOTHER GOVERNMENT AGENCY, WITH REGARD TO VAT VIOLA TION CANNOT BE LOST SIGHT OF. FURTHER, AS SOME OF THE NAMES OF THE SO-C ALLED BOGUS SELLERS OUT OF THE LIST SUPPLIED BY THE SALES TAX DEPARTMENT AR E APPEARING IN THE BOOKS OF THE APPELLANT COMPANY, THE LINK OF INVOLVE MENT OF APPELLANT COMPANY GETTING BOGUS BILLS IS ESTABLISHED. EVEN TH OUGH THERE ARE CATENA OF CASES DECIDED THE ISSUE IN FAVOUR OF THE ASSESSE E, THEY ARE NOT UNIFORM IN ALL THE CASES AS THEY WERE DECIDED AS PER FACTS AND CIRCUMSTANCES OF THAT PARTICULAR CASE BEFORE THEM. ITA NO. 3769 MUM 2019-M/S GENERAL COMPOSITES PVT. L TD. 5 I AM OF THE OPINION THAT THE FACTS AND CIRCUMSTANCE S OF THE PRESENT CASE ARE MORE AKIN TO THE CASE DECIDED BY THE HON'BLE GU JARAT HIGH COURT IN THE CASE OF SIMIT P SETH (SUPRA). THEREFORE, | HERE BY CONFIRM THE DISALLOWANCE TO THE EXTENT 12.5% AMOUNTING TO RS.3, 14,405/- OF THE SO- CALLED BOGUS PURCHASES MADE BY THE LD AO. THIS GROUND IS PARTLY ALLOWED. 8. THE LD. CIT(A) HAS RESTRICTED THE ADDITION BY FO LLOWING THE RATIO LAID DOWN BY THE HONBLE GUJARAT HIGH COURT IN THE CASE OF SIMIT P. SETH (SUPRA) IN WHICH THE HONBLE COURT HAS HELD THAT IN THE CASES OF BOGUS PURCHASES, ONLY PROFIT ELEMENT EMBEDDED IN THE TRAN SACTION IS TO BE TAKEN INTO CONSIDERATION WHILE DETERMINING THE ADDITION O N ESTIMATE BASIS. IN OUR CONSIDERED VIEW, THE FINDINGS OF THE LD. CIT(A) ARE WELL REASONED AND IN ACCORDANCE WITH THE SETTLED PRINCIPLES OF LAW. WE F URTHER NOTICE THAT THE FACTS OF THE CASE RELIED UPON BY THE REVENUE ARE DI FFERENT FROM THE FACTS OF THE PRESENT CASE. HENCE, WE DO NOT FIND MERIT IN TH E CONTENTION OF THE REVENUE. WE ACCORDINGLY DISMISSED THE APPEAL FILED BY THE REVENUE AND UPHOLD THE FINDINGS OF THE LD. CIT(A). IN THE RESULT, APPEAL FILED BY THE REVENUE FOR THE A.Y. 2011-12 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 31 .05.2021 UNDER RULE 34 OF THE ITAT RULES. SD/- SD/- SHAMIM YAHYA RAMLAL NEGI ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATE: 31.05.2021 SK ITA NO. 3769 MUM 2019-M/S GENERAL COMPOSITES PVT. L TD. 6 COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. DR G BENCH, ITAT, MUMBAI 6. GUARD FILE BY ORDER, DY./ASST . REGISTRAR ITAT , MUMBAI