MOHAN P. GOKULKAR, BHIWANDI V. ITO WD 1(2), KALYAN

ITA 380/MUM/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 8951 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-01-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2006-2007
• Appeal Filed On: 25-01-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: B S BIST
• Assessee Lawyers: VRI NDA AGRAWAL; BHUPENDRA AGRAWAL
• Keywords: Bogus purchase; Accommodation entries
• Section: 143(3); 131; 148

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE SHRI MAHAVIR SINGH , JM AND SHRI RAJESH KUMAR, AM ./ I .T.A. NO. 380 /MUM/201 6 ( / ASSESSMENT YEAR : 2 009 - 10 ) SHRI MOHAN P GOKULKAR, SHREEJI APARTMENT BLOCK NO.3, SHREE COMPLEX, 1 ST FLOOR, AJIT PETROL PUMP, KON VILLAGE, BHIVANDI - 421 3 11 / VS. INCOME TAX OFFICER - WARD 1(2), KALYAN, ./ PAN : AA ZPG8856B / APPELLANT BY MS.VRI NDA AGRAWAL AND SHRI BHUPENDRA AGRAWAL / RESPONDENT BY SHRI B .S BIST / DATE OF HEARING : 9. 11. 2016 / DATE OF PRONOUNCEMENT : 11. 1.2017 / O R D E R PER R AJESH KUMAR , A M THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 22.12.2015 , PASSED BY THE COMMISSIONER OF INCOME TAX (A) - 2, THANE, MUMBAI U/S 143(3) R.W.S.147 OF THE INCOME TAX ACT FOR THE ASSESSMENT YEAR 2 009 - 10 CONFIRMING THE ADDITI ON OF RS.26,34,520/ - AS MADE BY THE AO ON ACCOUNT OF UNPROVED PURCHASES AND NOT GENUINENESS PURCHASES ON THE 2 ITA NO. 380 / MUM/ 201 6 BASIS OF INFORMATION RECEIVED FROM THE SALES TAX DEPARTMENT, GOVERNMENT OF MAHARASHTRA. 2. FACTS RELATING TO THE ISSUE ARE THAT THE ASSESSEE FILED RETURN OF INCOME ON 30.9.2009 DECLARING TOTAL INCOME OF RS.7,34,460 / - . THE ASSESSEE IS ENGAGED IN THE BUSINESS OF SUPPLY AND ERECTION OF INDUSTRIAL ELECTRICAL EQUIPMENTS IN THE NAME AND STYLE OF M/S ASHIRWAD ENGINEERING CORPORATION AT BHIWANDI. THE A O RECEIVED INFORMATION FROM THE SALES TAX DEPARTMENT , GOVERNMENT OF MAHARASHTRA THAT DURING THE YEAR THE ASSESSEE OBTAINED BOGUS BILLS FROM THE ENTRY PROVIDERS /HAWALA TRADERS VIZ M/S KAVISH INTERNATIONAL, M/S VIDHI AND VRUSHTI TRADE P LT D AND M/S A P E NTERPRISES AMOUNTING TO RS.12,26,025/ - , RS.12,31,799/ - AND RS.15,21,455/ - RESPECTIVELY AGGREGATING TO RS. 39,79,279/ - . THEREAFTER, THE AO ISSUED NOTICE UNDER SECTION 148 ON 20.3.2013 WHICH WAS SERVED UPON THE ASSESSEE WHICH WAS COMPLIED BY THE ASSESSEE B Y FILING REPLY DATED 9.5.2013, REQUESTING THE AO THAT THE RETURN OF INCOME FILED ON 30.9.2009 BE TREATED AS RETURN OF INCOME FILED IN RESPONSE TO NOTICE U/S 148 OF THE ACT. DURING HE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE CALLED UPON BY THE AO TO PRODUCE LEDGER ACCOUNTS, PURCHASE BILLS, TRANSPORTATION BILLS, CHALLANS IN RESPECTS OF PURCHASES MADE FROM THE ABOVE THREE PARTIES WHICH WAS NOT FILED BY THE ASSESSEE DESPITE GRANTING SEVERAL OPPORTUNITIES . THEREFORE, THE 3 ITA NO. 380 / MUM/ 201 6 AO ISSUED SUMMONS U/S 131 TO THE ASSESSEE AND HIS STATEMENT WAS RECORDED ON 3.2.2014 AND HE WAS ASKED TO PRODUCE THE CONFIRMATION S FROM THE SUPPLIE R S AND ALSO PRODUCE THEM IN PERSON BEFORE THE AO. THE ASSESSEE WAS ALSO CONFRONTED WITH THE STATEMENT S /AFFIDAVIT S OF THE ABOVE PARTIES RELE VANT QUESTION AND ANSWERS WERE REPRODUCED BY THE AO AT PAGES 1 TO 4 OF THE ASSESSMENT ORDERS. WHEN THE ASSESSEE FAILED TO PRODUCE CONFIRMATION S FROM THE SUPPLIERS AND TO PRODUCE SUPPLIERS IN PERSON THE AO HAD TO FRAME THE ASSESSMENT ON THE BASIS OF INFORM ATION AVAILABLE WITH HIM . HOWEVER, THE ASSESSEE CONTENDED BEFORE THE AO THAT THE ASSESSEE MADE PURCHASES THROUGH ACCOUNT PAYEE CHEQUES. THE AO DID NOT BELIEVE THE STORY OF THE ASSESSEE AND FRAMED THE ASSESSMENT UNDER SECTION 143(3) R.W.S 147 OF THE ACT VI DE ORDER DATED 14.3.2014 BY MAKING ADDITION OF RS.39,79,279/ - AND ASSESSING THE TOTAL INCOME AT RS.47,13,740/ - ON THE GROUND THAT THE ASSESSEE FAILED TO PROVE THE GENUINENESS OF THE PURCHASES MADE FROM THESE PARTIES AND BILLS WERE OBTAINED TO REDUCE AND SUPPRESS THE PROFITS. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD.CIT(A) WHO PARTLY ALLOWED THE APPEAL OF THE ASSESSEE BY OBSERVING AND HOLDING AS UNDER : 5.6 KEEPING IN VIEW THE FACTS IN ENTIRELY, AS DISCUSSED ABOVE AND APPELLANT'S FAILURE TO FURNISH QUANTITATIVE AND QUALITATIVE DETAILS OF OP STOCK, PURCHASES, SALES AND CLOSING STOCK, DATE - WISE, ITEM - WISE AND PARTY - WISE, IN THE MANNER IN WHICH IT WAS CALLED FOR, THE BOOKS OF THE APPELLANT ARE NOT TENABLE AS PER PROVI SIONS OF SECTION 145(3) OF THE 4 ITA NO. 380 / MUM/ 201 6 ACT. ACCORDINGLY, IT IS HELD THAT THE BOOKS OF THE APPELLANT ARE NOT COMPLETE IN EVERY RESPECT AND NOT POSSIBLE TO DEDUCE THE CORRECT AMOUNT OF PROFIT, AS PRESCRIBED IN THE PROVISIONS OF SECTION 145(3) OF THE IT ACT, 1961, TH EREFORE, REJECTED. SINCE THE AO HAD ACCEPTED THE SALES, THEREFORE, IT CAN'T BE SAID THAT SALES HAVE BEEN MADE WITHOUT PURCHASES. AT THE MOST IN THIS CASE, THE PROFIT MIGHT HAD BEEN SUPPRESSED, BY DEBITING INFLATED PURCHASES. 5.7 DURING THE APPELLATE PROC EEDINGS, THE LD AR HAS FURNISHED COMPARATIVE CHART OF GP FOR THE YEAR, EARLIER YEAR AND SUBSEQUENT YEARS. THE SAME ARE REPRODUCED, HERE AS UNDER: AYR TURNOVER GROSS PROFIT EXCLUDING RENTAL INCOME GP RATIO NET PROFIT NP RATI O 2008 - 09 1,93,71,804/ - 15,54,144/ - 8.48% 7,41,609/ - 3,83% 2009 - 10 2,67,36,103/ - 14,69,471/ - 5.75% 7,41,609/ - 2.77% 2010 - 11 3,86,52,123 16,73,210 4.47% 13,44,991/ - 3.48% 2011 - 12 1,33,72,642 19,41,291 15.35% 11,93,609/ - 8.93% 2012 - 13 2, 62,09,182/ - 19,63,094 7.87% 15,75,695/ - 6.01% 5.8 FROM THE ABOVE DETAILS IT IS SEEN THAT THE GP RATE, IN THE YEAR UNDER APPEAL, HAS GONE DOWN SUBSTANTI ALLY I. E.5. 75% AS AGAINST 8.48% SH OWN A. Y . 2008 - 09, 15.35% IN A YR 2011 - 12 AND 7.87% IN A YR 201 2 - 13. IN COMPLIANCE, THE LD. AR, COULD NOT SUBSTANTIATE THE FALL IN GP WITH SUPPORTING DOCUMENTS. FROM THE ABOVE CHART, IT IS CRYSTAL CLEAR THAT THE APPELLANT HAS SUPPRESSED GROSS PROFIT BY 9.60% ( 1 5.35% LESS 5.75%). THUS THE SUPPRESSED GROSS PROFIT WORKS OUT TO RS. 26,34,521 / - (RS. 2,67,36,103/ - X 1 5.35/100 = RS 41,03,992/- L ESS GP DECLARED - 14,69,471/ - ), BY BOOKING HAWALA PURCHASES, FOR WHICH THE LD.AR COULD NOT OFFER ANY SATISFACTORY EXPLANATION. IN THIS REGARD, THE RELIANCE IS PLACED ON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF MLS KANCHWALA GEMS VS JCIT, 288 ITR 10 (SC), WHICH THE ESTIMATION OF GP WAS HELD, AS JUSTIFIED. 5. 9 IN VIEW OF THESE FACTS, THE APPELLANT WAS REQUESTED TO FURNISH PRESENT MAILING ADDRESSES, CONFIRMATION OF THESE H AWALA PARTIES AND WAS ALSO REQUESTED TO PRODUCE THEM BEFORE THE DEPARTM E NT, FOR EXAMINATION IN PERSON. THE APPELLANT, HOWEVER, HAD SHOWN HIS INABILITY TO COMPL Y WITH THE ABOVE AND HENCE IT IS NOT POSSIBLE FOR THE DEPARTMENT TO DEDUCE CORRECT AMOUNT OF PROF IT, AS PER PROVISIONS OF SEC 145(3) OF THE ACT. IN VIEW OF THESE FACTS THE LD AR, VIDE WRITTEN SUBMISSION DATED 10.12.2015, REQUESTED TO ADOPT THE GP OF A YR 5 ITA NO. 380 / MUM/ 201 6 2011 - 12, TO DETERMINE THE CORRECT PROFIT, INSTEAD OF DISALLOWING THE 100% BOGUS PURCHASES, AS THE AO HAS ACCEPTED THE SALES. THE CONTENTION OF THE LD AR APPEARS TO BE REASONABLE, THEREFORE, LIABLE TO BE ACCEPTED. GP @ 15.35% (AS SHOWN IN A YR 2011 - 12) IS ADOPTED FOR DETERMINING THE CORRECT PROFIT. SINCE THE SUPPRESSED GP I.E. RS.26,34,520 / - IS MORE THA N 25% OF BOGUS PURCHASES, I.E. RS 9,94,8201 - , THEREFORE, THE SAME IS TAKEN UP FOR DISALLOWANCE. ACCORDINGLY, THE DISALLOWANCE OF RS . 26,34,520/ - , OUT OF HAWALA PURCHASES OF RS 39,79,279/ - , IS SUSTAINED AND REMAINING AMOUNT OF RS.13,44,759/ - (RS.39,79,279/ - LESS RS.26,34,520/ - ) IS HEREBY DELETED. BOTH THE GROUNDS OF APPEAL ARE DECIDED ACCORDINGLY 3 . THE LD. AR SUBMITTED BEFORE US THAT HE ASSESSEE HAS DULY ACCOUNTED FOR THE PURCHASE FROM THESE THREE PARTIES AGGREGATING TO RS.39,79,279 / - AND DULY ENTERED IN TO BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE AND THE PAYMENTS WERE MADE THROUGH BANKING CHANNELS AND ALSO THE AO HAS NOT DISPUTED THE SALES OF THE ASSESSEE AND THEREFORE, THE LD.AR STATED THAT WHEN THE ASSESSEE HAS ACCEPTED THE SALES ACCOUNTS OF THE AS SESSEE TO DISALLOW THE TOTAL PURCHASE ON THE BASIS OF INFORMATION RECEIVED FROM THE SALES TAX DEPARTMENT, GOVERNMENT OF MAHARASHTRA WAS NOT JUSTIFIED IN THE EYES OF LAW. THE LD. AR REQUESTED THE BENCH THAT IN VIEW OF THE FACTS THE ADDITION MADE BY THE AO AND SUSTAINED BY THE LD. CIT(A) WAS NOT CORRECT AND REQUIRED TO BE DELETED . IN THE ALTERNATIVE , THE LD.AR SUBMITTED BEFORE THE BENCH AT THE MOST THE GP RATE SHOULD BE APPLIED TO THE TOTAL AMOUNT OF PURCHASE S WHICH WOULD BE FAIR AND REASON AB LE WHICH THE FAA HAS FAILED DO TO SO BY UPHOLDING THAT THE DIFFERENCE OF SUPPRESSION OF GP IN THE CURRENT YEAR AS COMPARED TO THE PREVIOUS YEAR WAS RS.26,34,520/ - AND ALLOWED 6 ITA NO. 380 / MUM/ 201 6 DIFFERENCE OF RS.13,44,759/ - WHEREAS THE FAA SHOULD HAVE APPLIED THE GP ON THE DISPUTED PURCH ASES ONLY. 4 . ON THE OTHER HAND, THE LD.DR, RELIED ON THE ORDERS OF AUTHORITIES BELOW AND PRAYED THAT THE AO ACTED ON SPECIFIC INFORMATION RECEIVED FROM THE SALES TAX DEPARTMENT, GOVERNMENT OF MAHARASHTRA THAT THE ASSESSEE AVAILED ACCOMMODATION ENTRIE S FROM THREE DEALERS WHO WERE ENGAGED IN SUPPLYING ACCOMMODATION ENTRIES WITHOUT DOING ANY ACTUAL BUSINESS AND THEREFORE, THE ADDITION AS SUSTAINED BY THE LD.CIT(A) SHOULD BE UPHELD. 5. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS, PERUSED THE MATER IAL PLACED BEFORE US DURING THE COURSE OF HEARING INCLUDING THE DECISION OF AUTHORITIES BELOW AS ALSO THE DECISIONS RELIED UPON BY THE PARTIES. WE FIND THAT THE CASE OF THE ASSESSEE HAS BEEN REOPENED ON THE BASIS OF INFORMATION RECEIVED FROM THE SALES TAX DEPARTMENT, GOVERNMENT OF MAHARASHTRA AND THE ASSESSEE WAS ASKED TO PROVE GENUINENESS OF PURCHASES BY PRODUCING THE BILLS, CONFIRMATION FROM THE PARTIES AND BY PRODUCING THE SUPPLIERS IN PERSON WHICH THE ASSESSEE FAILED TO DO AND DESPITE ALLOWING VARIOU S OPPORTUNITIES OF BEING HEARD TO THE ASSESSEE TO PROVE THE GENUINENESS OF TRANSACTIONS AND ASSESSEE ONLY SUBMITTED THAT THE PURCHASES WERE MADE THROUGH BANKING CHANNELS AS WELL AS THE AO ALSO DID NOT DISPUTE THE SALES MADE BY THE ASSESSEE. THE LD. CIT(A) IN PARA 5.7 OF IS ORDER (SUPRA) HAS 7 ITA NO. 380 / MUM/ 201 6 MADE PROPER ANALYSIS OF THE TOTAL TURNOVER, GP RATE AND PROFIT RATE FROM THE ASSESSMENT YEARS 2008 - 09 TO 2012 - 013 . IT IS FOUND THAT EVEN THE GP RATE RANGING FROM 8.4% IN THE ASSENT YEAR 2008 - 09 TO 7.87% IN THE ASSES SMENT YEAR 2012 - 13 AND IN AY 2001 - 12 THE GP OF THE ASSESSEE WAS 15.35% ON SALE OF RS.1,33,72,642/ - . WHEREAS THE GP DURING THE CURRENT YEAR HAS FELLED TO 7.87% ON A TURNOVER OF RS.2,62,09,182/ - AND THUS WORKED OUT SUPPRESSION OF GP ON RS.26,34,520/ - AND ALLOWED THE RELIEF EQUIVALENT TO RS.13,34,759/ - BEING THE DIFFERENCE BETWEEN HAWALA PURCHASES LESS SUPPRESSED PROFITS. NOW, THE ISSUE BEFORE US WHETHER THE ADDITION FOR THE HAWALA PURCHASE S WAS MADE CORRECTLY BY REFERENCE TO THE TOTAL GROSS PROFIT AT THE RATE WHICH WAS IN THE IMMEDIATELY PREVIOUSLY YEARS WHICH WAS AT 15.35% DURING THE CURRENT YEAR AGAIN THE SALES GONE UP FROM RS.1,33,72,642/ - (AY - 2011 - 12) TO RS.2,62,09,181/ - IN THE CURRENT ASSESSMENT YEAR . IN OUR OPINION THE CONCEPT OF GROSS PRO FIT CAN NOT BE APPLIED IN THE PRESENT CASE AS THE ASSESSEE HAS NOT PROVED THE RECEIPT OF MATERIALS AND ITS SALE BUT IT WOULD BE FAIR AND REASONABLE LUMP SUM ADDITION IS MADE TO THE INCOME OF THE ASSESSEE TO COVER THE LEAKAGES OF REVENE AND SUPPRESSION OF PROFITS BY THE ASSESSEE . UNDER THE FACTS AND CIRCUMSTANCES BEFORE US IT WOULD REASONABLE TO ADD RS. 10,00,000/ - SO FAR AS THE HAWALA PURCHASES ARE CONCERNED. ACCORDINGLY IN VIEW OF OUR OBSERVATION ABOVE WE SET ASIDE THE ORDER OF CIT(A) AND DIRECT THE AO TO 8 ITA NO. 380 / MUM/ 201 6 CALCULATE THE INCOME BY MAKING AN ADDITIONS OF RS. 10,00,000/ - IN PLACE OF RS. 39,79,279/ - . 6 . IN THE RESULT, APPEAL OF ASSESSEE IS PARTLY ALLOWED BY SUSTAINING THE ADDITION TO THE EXTENT OF RS. 10,00,000/ - ORDER HAS BEEN PRONOUNCED IN THE OPEN COUR T ON 1. 201 7 . ( MAHAVIR SINGH ) ( RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 1.2017. SR.PS:SRL: / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CI T(A) 4. / CIT CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F ILE / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI 9 ITA NO. 380 / MUM/ 201 6 DATE INITIALS 1. DRAFT DICTATED ON 3.1.2017 SPS 2. DRAFT PLA CED BEFORE AUTHOR 4.1.2017 SPS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM 5. APPROVED DRAFT COMES TO THE SR. PS SPS 6. KEPT FOR PRONOUNCEMENT ON SPS 7. FILE SENT TO THE BENCH CLERK SPS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE ON WHICH FILE GOES TO A.R. 10. DATE OF DISPATCH OF ORDER