SANDEEP N GOPANNI, MUMBAI V. ITO 9(3)(1), MUMBAI

ITA 3869/MUM/2015

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 9973 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-09-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2010-2011
• Appeal Filed On: 22-06-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ALOK JOHRI
• Assessee Lawyers: SUBHASH SHETTY
• Keywords: Bogus purchase
• Section: 69C; 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL J BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA , A M AND SHRI RAVISH SOOD, JM ./ I.T.A. NO. 3869/MUM/2015 ( / ASSESSMENT YEAR: 2010 - 11 ) SANDEEP N. GOPANI M/4, GOKUL BLDG., 2 ND FLOOR, IRON MARKET, MASJID BUNDER (E), MUMBAI - 400 009 / VS. ITO 9(3)(1), AAYKAR BHAVAN, MUMBAI ./ ./ PAN/GIR NO. AABPG 4106 E ( ASSESSEE ) : ( RE VENUE ) & ./ I.T.A. NO. 3782/MUM/2015 ( / ASSESSMENT YEAR: 2010 - 11 ) ITO, WARD 13(2)(1), 1 ST FLOOR, ROOM NO. 147, AAYAKAR BHAVAN, M. K. ROAD, MUMBAI - 400 020 / VS. SANDEEP N. GOPANI M/4, GOKUL BLDG., 2 ND FLOOR, IRON MARKET, MASJID BUNDER (E), MUMBAI - 400 009 ( RE VENUE ) : ( ASSESSE E ) ASSESSEE BY : SHRI SUBHASH SHETTY RE VENUE BY : SHRI ALOK JOHRI / DATE OF HEARING : 22.06.2017 / DATE OF PRONOUNCEMENT : 01.09 .2017 / O R D E R PER SHAMIM YAHYA , A. M.: THESE ARE CROSS - APPEALS BY THE R EVENU E A N D ASSESSEE EMERGI NG OUT OF ORDER OF LEARNED CIT(A) - 21, MUMBAI DATED 04.03.2015 PERTAINING TO THE ASSESSMENT YEAR 2010 - 11. 2 ITA NO S . 3869 & 782/MUM/2015 (A.Y. 2010 11) SANDEEP N. GOPANI 2. T HE GROUNDS OF APPEAL RAISED IN ASSESSEES APPEAL READ AS UNDER: 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) COMMITT ED A GROSS ERROR OF LAW AND FACT IN SUSTAINING TH E ADDITION TO THE EXTENT OF RS. 91,25,145/ OUT OF RS. 11,40,64,307/ MADE BY THE ASSESSING OFFICER. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) GROSSLY ERRED IN UPHOLDING TH E ADDITION TO THE EXTENT OF RS. 91,25,145/ BY TAKING THE GROSS PROFIT AT THE RATE OF 8% ON THE PURCHASES MADE BY THE APPELLANT. 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) COMMITTED A GROSS ERROR OF LAW AND FACT IN NOT APPRECIATING THAT THE APPELLANTS GROSS PROFIT IN TH ESE TRANSACTIONS IS ONLY 0.95% AND THERE IS NO GROUND OR JUSTIFICATION FOR MAKING ANY ADDITION MORE THAN THE ABOVE PERCENTAGE. 4. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) GROSSLY ERRED IN UPHOLDING THE IMPUGNED ADDITION ON THE ALLEGED GROUND OF B OGUS PURCHASE MADE BY THE APPELLANT AND EARNING A GROSS PROFIT OF 8% THEREON WITHOUT ANY BASIS WHATSOEVER. 5. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) GROSSLY ERRED IN MAKING THE IMPUGNED ADDITION OF RS. 91.25.154/ BY TAKING THE GROSS PROFIT AT THE RATE OF 8% ON THE PURCHASES MADE BY MERELY FOLLOWING THE DECISION OF THE GUJRAT HIGH COURT IN THE CASE OF CIT VS. SIMIT P. SHETH, FACTS OF WHICH ARE NOT AT ALL APPLICABLE TO THE CASE IN HAND AND ARE CLEARLY DISTINGUISHABLE FROM THAT OF THE APPELLANT. 3. T HE GROUNDS OF APPEAL RAISED IN THE R EVENUES APPEAL READ AS UNDER: 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING ADDITION OF RS. 11,40,64,307/ ON ACCOUNT OF NON GENUINE PURCHASE AND RESTRICTING THE SAME TO RS. 91,25,145/ WHICH IS 8 % OF SUCH NON GENUINE PURCHASES, WITHOUT APPRECIATING THE FACT THAT IN SIMILAR CASES DISALLOWANCE AT 12.5% OF NON GENUINE PURCHASE IS A REASONABLY ACCEPTABLE PROPOSITION? 2. THE APPELLANT PRAYS THAT THE ORDER OF CIT( A) ON THE ABOVE GROUNDS BE SET ASIDE TO THE FILE OF AO OR CONFIRM THE ORDER OF THE AO . 4. B RIEF FACTS OF THE CASE ARE AS UNDER : 3 ITA NO S . 3869 & 782/MUM/2015 (A.Y. 2010 11) SANDEEP N. GOPANI ASSESSING OFFICER HAS NOTICED THAT ASSESSEE HAS SHOWN PURCHASES IN THE NAME OF ASIAN STEEL OF RS.74 , 27 , 184/ - , SURAT TUBE CORPO RATION OF RS. 15,66,185/ - , SIDDHIVINAYAK STEELS OF RS. 9,84,26,201/ - , CHANCHAL TUBE CORPORATION OF RS. 56 , 33 , 222/ - AND FROM NAVIYOTI METAL INDUSTRY OF RS. 10 , 11 , 515/ - , TOTALING TO RS. 11,40,64,307/ - , BUT THESE PARTIES ARE INVOLVED IN HAWALA ENTRY OPERATION. THE Y MERELY PROVIDES SALES BILLS TO SUCH ASSESSEE LIKE APPELLANT. ACCORDING TO THE ASSESSING OFFICER, DEPARTMENT HAS RECEIVED INFORMATION FROM SALES TAX DEPARTMENT THAT CERTAIN PARTIES ARE INVOLVED IN BOGUS BILLS PROVIDING ACTIVITIES AND APPELLANT IS ONE OF T HE RECIPIENTS OF SUCH BILLS. THE PROPRIETOR OF SIDDHIVINAYAK STEEL, SHRI PRAMOD KUMAR SINGH HAD GIVEN AN AFFIDAVIT BEFORE THE SALES TAX DEPARTMENT THAT HE WAS MERELY ISSUING BOGUS SALES BILLS IN THE NAME OF ASIAN STEELS, SURAT TUBE CORPORATION, CHANCHAL TU BE CORPORATION AND SIDDHIVINAYAK STEELS. DURING THE COURSE OF RECORDING OF STATEMENT U/S.131, SHRI PROMOD KUMAR SINGH HAD ADMITTED THAT HE WAS ISSUING ONLY PURCHASE BILLS WITHOUT ACTUAL GOODS. FURTHER, ASSESSING OFFICER HAS MENTIONED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, APPELLANT HAS STATED THAT PURCHASES WERE MADE THROUGH A BROKER MAINLY DURGESH MEHTA WHO HAD ALSO FILED AN AFFIDAVIT STATING THAT HE WAS PROCURING GOODS AND SUPPLYING IT TO THE ASSESSEE. HOWEVER, ASSESSEE HAS NOT FURNISHED ANY TR ANSPORT RECEIPTS AND DELIVERY CHALIANS. NO STOCK MOVEMENT REGISTER WAS' PROVIDED. SHRI DURGESH MEHTA WAS PRODUCED BEFORE THE ASSESSING OFFICER ON 8.3.2013 WHO HAS CATEGORICALLY STATED THAT HE HAD PROCURED GOODS FROM SHRI PRAMOD KUMAR SINGH AND SUPPLY TO TH E ASSESSEE. HE HAS ALSO STATED THAT HE DID NOT 4 ITA NO S . 3869 & 782/MUM/2015 (A.Y. 2010 11) SANDEEP N. GOPANI RECEIVE ANY CASH FROM PRAMOD KUMAR SINGH. THE COPY OF THE STATEMENT OF SHRI PRAMODKUMAR SINGH WAS GIVEN TO THE ASSESSEE. FURTHER, OPPORTUNITY WAS ALSO GIVEN TO CROSS EXAMINATION BUT ACCORDING TO THE ASSESSING OFFICER, APPELLANT HAS NOT PROVED PURCHASES FROM SHRI PRAMOD KUMAR SINGH. ASSESSING OFFICER HAS SUMMARIZED HIS REASONING AND FINDING IN PARA 16 OF THE ASSESSMENT ORDER. ACCORDING TO THE ASSESSING OFFICER, THERE IS INFORMATION FROM THE SALES TAX DEPARTMENT THAT ABOVE PARTIES ARE INVOLVED IN GIVING BOGUS PURCHASE BILLS. THE STATEMENT OF DURGESH MEHTA HAS NO FORCE AS HE HAS NOT PROVIDED SUBSTANTIAL EVIDENCE. ASSESSEE HAS NOT FURNISHED STOCK MOVEMENT REGISTER NOR HAS PROVIDED ANY TRANSPORT BILLS OR DELIVERY CHA LLANS. ASSESSEE HAS NOT EXPLAINED THE PURCHASES, HENCE BY USING CASH, ASSESSEE MIGHT HAVE PURCHASED FROM THE OPEN MARKET, HENCE IN SUCH FACTS AND CIRCUMSTANCES THE PROVISION OF LAW U/S.40A(3), 69C OR 68 APPLY. FURTHER, ASSESSING OFFICER HAS MENTIONED THAT ASSESSEE HAS SHOWN COMMISSION OF RS. 35,346/ - WHICH IS NOT IN COMMENSURATE WITH THE TOTAL PURCHASE OF RS.2 4,49,75,175/ - . FURTHER, ASSESSING OFFICER HAS MENTIONED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ASSESSEE HAS REQUESTED FOR DETERMINING INCOME ON G.P. BASIS. THIS SUBMISSION OF THE ASSESSEE IS NOT ACCEPTABLE AS ASSESSEE HAS PURCHASED GOODS IN CASH AND HAS SOLD OUT THEM TO VA RI OUS CUSTOMERS. THE ROTATION CYCLE OF CASH FOR PURCHASES TO SELL IS NOT EXPLAINED BY THE ASSESSEE, HENCE ACCORDING TO THE ASSESSING OFFICER, G.P. RATIO IS NOT PROPER SOLUTION TO DETERMINE THE EXTENT OF TAX EVASION DONE BY THE ASSESSEE, HENCE ON ALL THESE ARGUMENTS AND REASONING, ASSESSING OFFICER HAS DISALLOWED ENTIRE PURCHASE SHOWN FROM FIVE PARTIES, AS ABOVE, AND HAS 5 ITA NO S . 3869 & 782/MUM/2015 (A.Y. 2010 11) SANDEEP N. GOPANI ADDED TO THE TOTAL INCOME OF THE APPELLANT BY REFERRING PROVISION OF LAW U/S.40A(3), 69C AND 68 OF THE I.T. ACT. 5. UP ON ASSESSEE'S APPEAL LEARNED CIT - A CONSIDERED THE ISSUE . HE GAVE F INDING THAT THE IMPUGNED PURCHASES ARE BOGUS AND THE OPERATIONS HAVE BEEN DO NE THROUGH GREY MARKET. HE PROCEEDED TO HOLD THAT DISALLOWANCE OF THE GROSS PROFIT EMBEDDED IN THE BOGUS PURCHASE BY 8% THER EOF WILL BE SUFFICIENT. AGAINST THIS ORDER R EVENUE AND ASSESSEE ARE IN CROSS APPEAL BEFORE US. 6. WE HAVE HEARD THE PARTIES, AND P ERUSED THE MATERIAL ON RECORD. WE FIND THAT OVERWHELMING EVIDENCE HAVE BEEN REFERRED BY THE AUTHORITIES BELOW THAT THE IMPUGNED PURCHASES ARE BOGUS. ASSESSEE HAS FAILED TO FURNISH THE EVIDENCE OF MOVEMENT OF GOODS UNDER THE INVOICE. NO TRANSPORT RECEIPT OR DELIVERY CHALLAN WAS FURNISHED. THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS REFERRED TO HONBLE GUJARAT HIGH COURT DECISION IN THE CASE OF TAX APPEAL NO. 240 OF 2003 IN THE CASE OF N. K. INDUSTRIES VS. DY. CIT, ORDER DATED 20.06.2016, WHEREIN HUNDRED PERC ENT OF THE BOGUS PURCHASES WAS HELD TO BE ADDED IN THE HANDS OF THE ASSESSEE AND TRIBUNALS RESTRICTION OF THE ADDITION TO 25% OF THE BOGUS PURCHASES WAS SET ASIDE. THE SPECIAL LEAVE PETITION AGAINST THIS ORDER ALONGWITH OTHERS HAS BEEN DISMISSED BY THE HON OURABLE APEX COURT VIDE ORDER DT. 16.1.2017. HOWEVER, WE FIND THAT DISMISSAL OF A SPECIAL LEAVE PETITION WITHOUT ANY SPEAKING ORDER DOES NOT MERGE THE ORDER OF THE HONOURABLE APEX COURT WITH THAT OF THE HONOURABLE HIGH COURT. 6 ITA NO S . 3869 & 782/MUM/2015 (A.Y. 2010 11) SANDEEP N. GOPANI 7. WE FIND THAT IN THIS CASE THE SALES HAVE NOT BEEN DOUBTED . I T IS SETTLED LAW THAT WHEN SALES ARE NOT DOUBTED, HUNDRED PERCENT DISALLOWANCE FOR BOGUS PURCHASE CANNOT BE DONE. THIS PROPOSITION IS SUPPORTED FROM HONOURABLE JURISDICTIONAL HIGH COURT DECISION IN THE CASE OF NIKUNJ EXIMP ENTERPRISES. HOWEVER THE FACTS OF THE PRESENT CASE INDICATE THAT ASSESSEE HAS MADE PURCHASE FROM THE GREY MARKET. MAKING PURCHASES THROUGH THE GREY MARKET GIVES THE ASSESSEE SAVINGS ON ACCOUNT OF NON - PAYMENT OF TAX AND OTHERS AT THE EXPENSES OF THE EXCHEQ UER. IN SUCH SITUATION IN OUR CONSIDERED OPINION ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE 12.5% OF THE DISALLOWANCE OUT OF THE BOGUS PURCHASES WOULD MEET THE END OF JUSTICE AS PER THE DECISION OF THE HONBLE GUJARAT HIGH COURT I N THE CASE OF SIMIT P. SETH. T HIS HAS BEEN FOLLOWED AT ITAT, MUMBA I IN SEVERAL CASES. ACCORDINGLY, W E MODIFY THE ORDER OF LD. CIT(A) AND HOLD THAT THE DISALLOWANCE SHOULD BE MADE @ 12.5% OF THE BOGUS PURCHASES. 7. IN THE RESULT, THE ASSESSEES APPEAL IS DISMISSED AND THE R EVE NUE S APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 01/09/2017 SD/ - SD/ - ( RAVISH SOOD ) (S HAMIM YAHYA ) / J UDICIAL MEMBER / A CCOUNTANT MEMBER MUMBAI ; DATED : 01/09/2017 . . ./ ROSHANI , SR. PS 7 ITA NO S . 3869 & 782/MUM/2015 (A.Y. 2010 11) SANDEEP N. GOPANI / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F ILE / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI