ITO 11 (2)(4), Mumbai V. M/S SUPERFLO FILTERS PVT. LTD, Mumbai

ITA 3816/MUM/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 3891 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-10-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 30-05-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JEETENDRA KUMAR
• Assessee Lawyers: JITENDRA SINGH
• Keywords: Bogus purchase; Accommodation entries; Set aside
• Section: 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES SMC , MUMBAI BEFORE S HRI SHAMIM YAHYA (AM ) AND SHRI RAM LAL NEGI (JM) ITA NO. 3816 /MUM/2019 ASSESSMENT Y EAR: 2010 - 11 THE INCOME TAX OFFICER 11(2)(4 ), ROOM NO. 349 , 3 RD FLOOR, AAYAKAR BHAVAN, M.K. ROA D, MARINE LINES, MUMBAI - 400020 VS. M/S SUPERFLOW FILTERS PVT. LTD., B - 5/103 - 104, GREENLAND CO - OP SOCIETY, SHRINIVAS BAGARKA ROAD, J.B. NAGAR, ANDHERI (EAST), MUMBAI - 400059 PAN: AADCS4955N (APPELLANT) (RESPONDENT) REVENUE BY : SHRI JEETENDRA KUMAR (DR) ASSESSEE BY : SHRI JITENDRA SINGH (AR) DATE OF HEARING: 21 /10 /2020 DATE OF PRONOUNCEMENT: 28 / 10 /2020 O R D E R PER RAM LAL NEGI, JM THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAI NST THE ORDER DATED 14.03.2019 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) - 18 (FOR SHORT THE CIT(A) , MUMBAI, FOR THE ASSESSMENT YEAR 2010 - 11 , WHEREBY THE LD. CIT(A) HAS PARTLY ALLOWED T HE APPEAL FILED BY THE ASSESSEE AGAINST THE ASSESSMENT ORDER PA SSED U/S 143 (3) R.W.S. 147 OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT). 2. IN THIS CASE, ASSESSMENT WAS REOPENED ON THE BASIS OF INFORMATION RECEIVED FROM THE SALES TAX DEPARTMENT THROUGH DIRECTORATE GENERAL OF INCOME TAX (DGIT) ( INVESTIGATION ), M UMBAI TO THE EFFECT THAT DURING THE PREVIOUS YEAR THE ASSESSEE HAD OBTAINED BOGUS ENTRIES FOR RS. 12,40,195/ - FROM THREE BOGUS ENTITIES WHICH USED TO PROVIDE ACCOMMODATION ENTRIES WITHOUT SUPPLYING GOODS. ACCORDINGLY, THE AO MADE ADDITION OF THE SAID AMOUN T TO THE INCOME OF THE 2 ITA NO. 3816 / MUM/2019 ASSESSMENT YEAR: 2010 - 1 1 ASSESSEE AND PASSED ASSESSMENT ORDER U/S 143 (3) R.W.S. 147 OF THE ACT. THE ASSESSEE CHALLENGED THE ASSESSMENT ORDER BEFORE THE LD. CIT (A). LD. CIT (A) AFTER HEARING THE ASSESSEE RESTRICTED THE ADDITION TO 12.5% OF THE ALLEGED BOGUS PURCHASES OF RS. 12,40,195/ - . AGGRIEVED BY THE IMPUGNED ORDER PASSED BY THE LD. CIT (A), THE REVENUE IS IN APPEAL. 3. THE REVENUE HAS CHALLENGED THE IMPUGNED ORDER BY RAISING THE FOLLOWING EFFECTIVE GROUNDS: 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) ERRED IN RESTRICTING THE DISALLOWANCE OF BOGUS PURCHASES TO THE EXTENT OF 12.5% WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE FAILED TO PROVE THE GENUINENESS OF THE PARTIES BY NO PRODUCING THE CONFIRMATION LETTERS DURING THE COURSE OF ASSESSMENT PROCEEDINGS AS WELL AS DURING THE COURSE OF APPELLATE PROCEEDINGS.? 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) ERRED IN RESTRICTING THE DISALLOWANCE OF BOGUS PURCHASES TO THE EXTENT OF 12.5% IN SPITE OF THE LD. CITS (A) HIMSELF CONCLUDED DURING THE COURSE OF APPELLATE PROCEEDINGS THAT THE DOCUMENTARY EVIDENCES FURNISHED BY THE APPELLANT DID NOT ADEQUATELY PROVE THAT THE PURCHASES WERE GENUINE. 3. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) ERRED IN NOT CONSIDERING THAT THE HAWALA OPERATORS HAVE ADMITTED ON OATH BEFORE THE SALES TAX AUTHORITIES THAT THEY HAVE NOT SOLD ANY MATERIAL TO ANYBODY? 4. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) ERRED IN LAW BY NOT APPRECIATING THE FACT THAT THE ONUS TO JUSTIFY THE CLAIM OF EXPENSES IS ON THE ASSESSEE AND THE SAME HAS FAILED TO DISCHARGE IT IN RELATION TO THE PURCHASES MADE FROM THE NON - EXISTENT VENDORS? 5. WHETHER ON THE FA CTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) ERRED IN RESTRICTING THE DISALLOWANCE OF PURCHASES TO THE EXTENT OF 12.5% WITHOUT APPRECIATING THE DECISION OF HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF J.R. SOLVENTS INDUSTRIES (PVT) L TD (2012) (22 TAXMANN.COM 115) WHEREIN IT WAS HELD THAT WHERE 3 ITA NO. 3816 / MUM/2019 ASSESSMENT YEAR: 2010 - 1 1 PURCHASES WERE MADE FROM A NON - EXISTING SELLER, SAME WOULD BE HELD TO BE BOGUS EVEN IF COMPLETE QUANTITATIVE DETAILS OF THE PURCHASES WERE AVAILABLE IN THE ASSESSEES BOOKS OF ACCOUNT? 6. WHETH ER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, HAS THE LD. CIT (A) FAILED TO UPHOLD THE DECISION OF HONBLE APEX COURT IN THE CASE OF NK PROTEINS LTD VS. DCIT IN SLP (CIVIL) NO. 769/2017 DATED 16.01.2017 WHERE 100% OF ADDITION WAS CONFIRM ED BY THE HONBLE APEX COURT.? 4. THE LD. DEPARTMENTAL REPRESENTATIVE (DR) SUBMITTED BEFORE US THAT THE LD. CIT (A) HAS WRONGLY RESTRICTED THE ADDITION TO 12.5% WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE COULD NOT ESTABLISH THE GENUINENESS OF THE PU RCHASES. THE LD. DR FURTHER POINTED OUT THAT THE LD. CIT (A) HAS RESTRICTED THE ADDITION IGNORING THE FACT THE HAWALA OPERATORS HAVE ADMITTED ON OATH BEFORE THE SALES TAX AUTHORITIES THAT THEY DID NOT SELL ANY MATERIAL TO ANYBODY. THE LD. DR FURTHER SUBM ITTED THAT SINCE THE FINDINGS OF THE LD. CIT ( A) ARE CONTRARY TO THE RATIO LAID DOWN BY THE HONBLE APEX COURT IN THE CASE OF N.K. PROTEIN LTD. VS. DCIT IN SLP (CIVIL) NO. 769/2017 AND THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF J.R. SOLVENT IN DUSTR IES PVT. LTD. 22 TAXMAN.COM 115, THE SAME IS LIABLE TO BE SET ASIDE. 5. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE FACTS OF THE CASES RELIED UPON BY THE REVENUE ARE DIFFERENT FROM THE FACTS OF THE PRESENT CASE. THE LD. COU NSEL FURTHER POINTED OUT THAT THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. SIMIT P. SHETH 35 6 ITR 451 , HAS UPHELD THE ADDITION OF 12.5% OF BOGUS PURCHASES SHOWN BY THE ASSESSEE HOLDING THAT IN SUCH CASES ONLY PROFIT ELEMENT EMBEDDED IN SUCH PURCHA SES COULD BE ADDED TO THE INCOME OF THE ASSESSEE. THE LD. COUNSEL FURTHER SUBMITTED THAT SINCE THE FINDINGS OF THE LD. CIT (A) ARE BASED ON THE RATIO LAID DOWN BY THE HONBLE GUJARAT HIGH COURT AND THE DECISIONS OF THE MUMBAI BENCHES OF THE TRIBUNAL , T HERE IS NO INFIRMITY IN THE ORDER PASSED BY THE LD. CIT (A) TO INTERFERE WITH. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE PARTIES AND PERUSED THE MATERIAL ON RECORD INCLUDING THE CASES RELIED UPON BY THE PARTIES AND THE 4 ITA NO. 3816 / MUM/2019 ASSESSMENT YEAR: 2010 - 1 1 AUTHORITIES BELOW . AS POINTED OUT BY THE LD. COUNSEL, THE LD. CIT (A) HAS RESTRICTED THE ADDITION TO 12.5% OF THE ALLEGED BOGUS PURCHASES BY FOLLOWING THE RATIO LAID DOWN BY THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. SIMIT P. SHETH (SUPRA). THE CONCLUDING PARAS OF THE LD. CIT (A) READ AS UNDER: - 7.9 IN THE LIGHT OF THE FOREGOING DISCUSSION, IT CAN BE CONCLUDED THAT THE APPELLANT HAS FAILED IN PROVING THE GENUINENESS OF PURCHASES FROM THE AFORESAID PARTIES. THEREFORE, NECESSARY DISALLOWANCE HAS TO BE MADE. HOWEVER, THE QUESTION TO BE ANSWERED IS WHAT THE QUANTUM OF DISALLOWANCE SHOULD BE. THE ASSESSING OFFICER HAS MADE DISALLOWANCE OF 100% OF ALLEGED BOGUS PURCHASES AMOUNTING TO RS.12,40,195/ - . 7.10 I FIND THAT THE ISSUE IS COVERED IN THE FOLLOWING DECISIONS WHEREIN THE ITAT, M UMBAI, HAS UPHELD ESTIMATION OUT OF ALLEGED BOGUS PURCHASES. 1. SALIM EBRAHIM PETIWALA V/S. ITO 17(3)(2) ITA NO 4772/MUM/2017 2. TUBES INDIA V/ S. ASST CIT CIRCLE 19(3) ITA NO 2230 TO 2232/MUM/2016 3. THE ACIT 19(2) V/S. M/S. NOCIL STEELS ITA NO 4505/MUM/ 2015 4. SATISH R. RATHOD V/S. ITO 15(3)(1) ITA NO 567/MUM/2016 5. VINOD H. SANGHVI V/S. DCIT 15(2)(OLD) ITA NO 125 TO 127/MUM/2016 6. M/S. PENTAGON SYSTEM AND SERVICES P. LTD V/S. DCIT (OSD) CIR 2(3) ITA NO 4804/MUM/2015 7. TURNKEY ELECTRICAL ENGINEERS P. LTD V/S. DCIT 7(3) ITA NO 1936,1937,1938 86 1939/MUM/2015 8. MONTEX GLASS FIBRE V/S. DCIT 2(2) ITA NO 1520/MUM/2017 9.R.A. INDUSTRIAL METALS V/S. ITO 14(1)(1) 1TA NO 1850/MUM/2015 10. MEHUL K. MEHTA V/S. ITO 15(1)(3) ITA NO 3227/MUM/2016 7.11 FURTHER, IN THE CASE OF CIT VS. SIMIT P SHETH, 356 ITR 451, HON'BLE GUJARAT HIGH COURT HAS UPHELD ESTIMATION @ 12.5% OF ALLEGED BOGUS PURCHASES BY HOLDING AS UNDER: 'IF THE PAYMENTS TO THE ABOVEMENTIONED PARTIES ARE MADE THROUGH CHEQUE AND THE SUBSEQUENT SALES MADE H AVE BEEN ACCEPTED IN TOTAL BY 5 ITA NO. 3816 / MUM/2019 ASSESSMENT YEAR: 2010 - 1 1 THE ASSESSING OFFICER, THEN IT CAN BE CONCLUDED THAT PURCHASES HAVE BEEN MADE FROM PERSONS IN THE OPEN MARKET. THAT BEING THE POSITION, NOT THE ENTIRE PURCHASE PRICE BUT ONLY PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES CAN BE A DDED TO THE INCOME OF THE ASSESSEE.' 7.12 IT MAY ALSO BE NOTED THAT I HAVE ALSO CONFIRMED THE SAME ISSUE INAPPELLANT'S OWN CASE FOR A.Y. 2011 - 12 VIDE ORDER DATED 28.01.2019 ON ESTIMATED BASIS @ 12.5% OF ALLEGED BOGUS PURCHASES. FURTHER, RELYING ON THE DEC ISION OF HONBLE GUJARAT HIGH COURT AND OTHER JUDICIAL PRONOUNCEMENTS, I HEREBY CONFIRM ESTIMATION @ 12.5% OF ALLEGED BOGUS PURCHASES OF RS. 12,40,195/ - . THEREFORE, ADDITION OF RS. 1,55,025/ - IS SUTAINED. THE BALANCE ADDITION RS. 10,85,170/ - IS HEREBY DELE TED. 7. ADMITTEDLY, IN THE PRESENT CASE THE AO HAS NOT DOUBTED THE SALES. AS PER THE SETTLED LAW, WHEN SALES ARE NOT DOUBTED 100% DISALLOWANCE CANNOT BE MADE . FURTHER, THERE CANNOT BE ANY SALE WITHOUT ACTUAL PURCHASES. IN THE PRESENT CASE, T HE ASSESSEE COULD NOT ESTABLISH THE GENUINENESS OF THE TRANSACTION TO THE SATISFACTION OF THE AO. THIS DOES NOT MEAN THAT THE ASSESSEE HAD NOT MADE ANY PURCHASE. HOWEVER, IT CAN BE CONCLUDED FROM THE FACTS OF THE CASE THAT ASSESSEE HAD MADE PURCHASES FROM GREY MARKET. AS PER RATIO LAID DOWN BY THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. SIMIT P. SHETH (SUPRA), WHEN THE TOTAL SALE IS ACCEPTED BY THE ASSESSING OFFICER THEN ENTIRE PURCHASES CANNOT BE ADDED TO THE INCOME OF THE ASSESSEE. THEREFORE, ONLY THE P ROFI T ELEMENT EMBEDDED IN SUCH P URCHASES COULD BE ADDED TO THE INCOME OF THE ASSESSEE. SINCE, THE LD. CIT (A) HAS RESTRICTED THE ADDITION TO 12.5% BY FOLLOWING THE RATIO LAID DOWN BY THE HONBLE GUJARAT HIGH COURT AND VARIOUS DECISIONS RENDERED BY THE COORDI NATE BENCH IN THE CASES HAVING SIMILAR SET OF FACTS , WE DO NOT FIND ANY REASON TO INTERFERE WITH THE FINDINGS OF THE LD. CIT (A). HENCE, I N OUR CONSIDERED VIEW, THE ADDITION OF 12.5% IS REASONABLE TO MEET THE ENDS OF JUSTICE. FURTHER, A S POINTED OUT BY THE LD. COUNSEL, THE FACTS OF THE PRESENT CASE ARE DIFFERENT FROM THE FACTS OF THE CASES RELIED UPON BY THE LD. DR. WE THEREFO R E , UPHOLD THE FINDINGS OF THE LD. CIT (A) AND THE DISMISSED THE REVENUES APPEAL. 6 ITA NO. 3816 / MUM/2019 ASSESSMENT YEAR: 2010 - 1 1 IN THE RESULT, APPEAL FILED BY THE REVENUE FOR ASS ESSMENT YEAR 2010 - 2011 IS DISMISSED. ORDER PRONOUNCED ON 28 TH OCTOBER, 2020 UNDER RULE 34 (4) OF THE INCOME TAX APPELLATE TRIBUNAL RULES, 1963. SD/ - SD/ - ( SHAMIM YAHYA ) ( RAM LAL NEGI ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; DATED: 28 / 10 /2020 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 . / BY ORDER, //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI