DCIT 11(2)(1), MUMBAI V. SHREE GANESH RETAILS P.LTD, MUMBAI

ITA 3905/MUM/2017

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 8696 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-10-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2009-2010
• Appeal Filed On: 29-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V JENARDHANAN
• Keywords: Bogus purchase; Corroborative evidences; Accommodation entries
• Section: 133(6)

Judgement Text

P A G E | 1 ITA NO. 3905/MUM/2017 AY: 2009 - 10 DCIT VS. M/S SHREE GANESH RETAILS IN THE INCOME TAX APPELLATE TRIBUNAL K BENCH, M UMBAI BEFORE SHRI RAJENDRA , AM AND SHRI RAVISH SOOD, JM ITA NO. 3905/MUM/2017 ( / ASSESSMENT YEAR:2009 - 10) DCIT - 11(2)(1), ROOM NO. 477 , AAYKAR BHAVAN, M.K. ROAD, MUMBAI - 400 020 / VS. M/S SHREE GANESH RETAILS PVT. LTD., 27, HILL ROAD, NEAR PARSI AGIYARI, BANDRA (W), MUMBAI - 400 050 ./ ./ PAN NO. AAJCS6073R ( / REVENUE) : ( / ASSESSEE ) / REVENUE BY : SHRI V. JENARDHANAN, D.R / ASSESSEE BY : NONE / DATE OF HEARING : 11 .10.2017 / DATE OF PRONOUNCEMENT : 25. 10.2017 / O R D E R PER RAVISH SOOD, JUDICIAL MEMBER: THE PRESENT APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST T HE ORDER PASSED BY THE CIT(A) - 18, MUMBAI, DATED 03.02 .201 7 , WHICH IN ITSELF ARISES FROM THE ORDER PASSED BY THE A.O U/S 1 43(3) R.W.S 147 OF THE ACT,1961, DATED 2 7.03 .2015. THE REVENUE ASSAILING THE ORDER P A G E | 2 ITA NO. 3905/MUM/2017 AY: 2009 - 10 DCIT VS. M/S SHREE GANESH RETAILS PASSED BY THE CIT(A) HAD RAISED BEFORE US THE FOLLOWING GROUNDS OF AP PEAL: - 1. ON THE FACTS AND CIRCUMSTAN CES OF THE CASE, THE LEARNED CIT(A) ERRED IN RESTRICTING THE DISALLOWANCE TO 12.5% OF RS.64,11,801/ - IN RESPECT OF BOGUS PURCHASES WITHOUT APPRECIATING THE FACT THAT THE HONBLE APEX COURT IN THE RECENT JUDGMENT IN THE CASE OF N.K. PROTEINS LTD (2017 - TIOL - 23 - SC - IT) HAS DECIDED THE ISSUE IN FAVOUR OF THE REVENUE WHEREIN THE ASSESSE E WAS ENGAGED IN THE TRADING AC TIVITY. 2. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE A.O BE RESTORED. 3. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUNDS OR ADD A NEW GROUND WHICH MAY BE NECESSARY. 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY WHICH IS ENGAGED IN THE BUSINESS OF TRADING IN READYMADE GARMENTS, HOSIERY, FABRICS, SHOES AND A LLIED ITEMS HAD FILED ITS RETURN OF INCOME ON 30.09.2009, DECLARING TOTAL LOSS OF RS. 1,79,18,756. THE RETURN OF INCOME FILED BY THE ASSESSEE WAS PROCESSED AS SUCH U/S 143(1) OF THE ACT. THAT INFORMATION WAS RECEIVED BY THE A.O, THAT THE ASSESSEE COMPANY HAD DURING THE YEAR UNDER CONSIDERATION OBTAINED ACCOMMODATION ENTRIES FROM CERTAIN ENTITIES WHICH HAD BEEN PROCLAIMED BY THE SALES TAX DEPARTMENT AS PROVIDER OF ACCOMMODATION BILLS , AS UNDER : - SR. NO. PARTICULARS AMOUNT 1. M/S SHEETAL TRADING CO. RS. 31,25,964/ - 2. M/S PAYAL ENTERPRISES RS. 32,85,837/ - TOTAL RS. 64,11,801/ - THE CASE OF THE ASSESSEE ON THE BASIS OF THE AFORESAID INFORMATION WAS REOPENED BY THE A.O U/S 147 OF THE ACT. THE A.O IN THE COURSE OF THE ASSESSMENT PROCEEDINGS IN ORDER TO VERIFY THE GENUINENESS OF THE AFORESAID PURCHASE TRANSACTIONS ISSUED NOTICES U/S 133(6) TO THE RESPECTIVE PARTIES, THEREIN CALLING UPON THEM TO FURNISH THE REQUISITE P A G E | 3 ITA NO. 3905/MUM/2017 AY: 2009 - 10 DCIT VS. M/S SHREE GANESH RETAILS DETAIL IN RESPECT OF THE PURCHASES CLAIMED BY THE ASSESSEE TO HAVE BEEN MADE FROM THEM. THE AFORESAID NOTICES U/S 133(6) WERE HOWEVER RETURNED BY THE POSTAL AUTHORITIES WITH THE REMARK LEFT. THE A.O IN THE BACKDROP OF THE AFORESAID FACTS THUS CALLED UPON THE ASSESSEE TO FURNISH THE REQUISITE SUPPORTING EVIDENCE WHICH COULD GO TO SUBSTANTIATE THE GENUINENESS AND VERACITY OF THE PURCHASE TRANSACTIONS WHICH WERE CLAIMED BY THE ASSESSEE TO HAVE BEEN MADE FROM THE AFOREMENTIONED PARTIES. THE ASSESSEE IN COMPLIANCE TO THE DIRECTIONS O F THE A.O PLACED ON RECORD THE COPIES OF PURCHASE BILLS, LEDGER ACCOUNTS, BANK STATEMENTS ETC. THE A.O IN THE BACKDROP OF THE IMPECCABLE INFORMATION RECEI VED FROM THE SALES TAX DEPARTMENT THAT THE ASSESSEE HAD TAKEN ACCOMMODATION ENTRIES FROM THE AFOREMENT IONED HAWALA DEALERS , THEREFORE , DIRECTED THE ASSESSEE TO PRODUCE THE RESPECTIVE PARTIES FOR NECESSARY EXAMINATION. HOWEVER, THE ASSESSEE FAILED TO COMPLY WITH THE DIRECTION OF THE A.O AND FAILED TO PRODUCE THE AFOREMENTIONED PARTIES BEFORE THE A.O. THE A. O NOT BEING SATISFIED WITH THE DOCUMENTARY EVIDENCE WHICH WERE PLACED ON RECORD BY THE ASSESSEE IN ITS ATTEMPT TO FORTIFY THE GENUINENESS AND VERACITY OF THE PURCHASE TRANSACTIONS , AND RATHER HOLDING A STRONG CONVICTION THAT MERELY MAKING OF THE PAYMENTS V IDE BANKING CHANNELS WOULD NOT CONCLUSIVELY EVIDENCE THE GENUINENESS OF THE PURCHASE TRANSACTIONS , THEREFORE , CHARACTERIZED THE PURCHASE TRANSACTIONS AS BOGUS TRANSACTIONS AND DISALLOWED THE PURCHASE EXPENSES AGGREGATING TO RS. 64,11,801/ - CLAIMED BY THE A SSESSEE TO HAVE BEEN MADE FROM THE AFOREMENTIONED PARTIES. 3. AGGRIEVED, THE ASSESSEE ASSAILING THE ORDER PASSED BY THE A.O CARRIED THE MATTER BEFORE THE CIT(A). THE CIT(A) AFTER DELIBERATING ON THE CONTENTION S OF THE ASSESSEE IN THE BACKDROP OF THE FACTS OF THE CASE , THEREIN CONCLUDED THAT THE ASSESSEE HAD FAILED TO DISLODGE AND P A G E | 4 ITA NO. 3905/MUM/2017 AY: 2009 - 10 DCIT VS. M/S SHREE GANESH RETAILS DISPROVE THE AUTHENTICITY OF THE INFORMATION RECEIVED FROM MVAT AUTHORITIES THAT THE ASSESSEE HAD MERELY TAKEN ACCOMMODATION ENTRIES FROM THE AFOREMEN TIONED HAWALA DEALERS AND NO GENUINE PURCHASE TRANSACTIONS HAD EVER TAKEN PLACE . THE CIT(A) HOWEVER NOT PERSUADED TO BE IN AGREEMENT WITH THE A.O THAT THE ENTIRE PURCHASE CONSIDERATION OF RS. 64,11,801/ - WAS LIABLE TO BE DISALLOWED, THEREIN WAS OF THE VIEW THAT AS THE SALE TRANSACTIONS CORRELATING TO THE AFOREMENTIONED PURCHASES HAD NOT BEEN DOUBTED AND DISLODGED BY THE A.O, THEREFORE, IT COULD SAFELY BE CONCLUDED THAT THE ASSESSEE HAD PURCHASED THE GOODS UNDER CONSIDERATION, THOUGH NOT FROM THE AFOREMENTIO NED HAWALA PARTIES, BUT FROM THE OPEN/GREY MARKET . THE CIT(A) ON THE BASIS OF HIS AFORESAID CONVICTION RESTRICTED THE ADDITION ONLY TO THE EXTENT OF THE PROFIT ELEMENT EMBEDDED IN MAKING OF SUCH PURCHASES FROM THE OPEN/GREY MARKET . THUS, IN THE BACKDROP OF THE AFORESAID OBSERVATIONS THE CIT(A) PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. 4. THE REVENUE BEING AGGRIEVED WITH THE ORDER OF THE CIT(A) HAD CARRIED THE MATTER IN APPEAL BEFORE US. WE FIND THAT THE RESPONDENT ASSESSEE DESPITE BEING INTIMATED ABOUT TH E HEARING OF THE APPEAL HAD NEITHER PUT UP AN APPEARANCE, NOR FILED ANY APPLICATION SEEKING ADJOURNMENT BEFORE US. WE THUS IN THE BACKDROP OF THE AFORESAID FACTS , BEING LEFT WITH NO OTHER ALTERNATIVE , THEREFORE , PROCEED WITH IN TERMS OF RULE 25 OF THE APPE LLATE TRIBUNAL R ULES, 1963, AND THEREIN DISPOSE OF THE APPEAL AFTER HEARING THE APPELLANT REVENUE. THE LEARNED DEPARTMENTAL REPRESENTATIVE (FOR SHORT D.R.) SUBMITTED THAT THE A.O HAD RIGHTLY DISALLOWED THE ENTIRE PURCHASES AGGREGATING TO RS. 64,11,801/ - WHICH WERE CLAIMED BY THE ASSESSEE TO HAVE BEEN MADE FROM THE AFOREMENTIONED BOGUS PARTIES, VIZ. M/S SHEETAL TRADING CO. AND M/S PAYAL ENTERPRISES. IT WAS FURTHER SUBMITTED BY THE LD. D.R. THAT THE CIT(A) HAD ERRED IN RESTRICTING THE DISALLOWANCE TO THE EX TENT P A G E | 5 ITA NO. 3905/MUM/2017 AY: 2009 - 10 DCIT VS. M/S SHREE GANESH RETAILS OF 12.5% OF THE TOTAL PURCHASES OF RS. 64,11,801/ - . THE LD. D.R IN ORDER TO DRIVE HOME HIS AFORESAID CONTENTION RELIED UPON THE ORDER PASSED BY THE HONBLE SUPREME COURT WHILE DISMISSING THE SPECIAL LEAVE PETITION (SLP) OF THE ASSESSEE IN THE CASE OF N.K PROTEINS LTD. VS. DCIT [SLP(C)CC NO(S).769 OF 2017] , AND SUBMITTED THAT THE ADDITION OF THE ENTIRE AMOUNT OF THE BOGUS PURCHASES OF RS. 64,11,801/ - WAS CALLED FOR IN THE HANDS OF THE ASSESSEE. IT WAS SUBMITTED BY THE LD. D.R THAT THE CIT(A) HAD ERRED IN RESTRICTING THE ADDITION IN THE HANDS OF THE ASSESSEE ONLY UPTO 12.5% OF THE VALUE OF THE PURCHASES UNDER CONSIDERATION. IT WAS THUS SUBMITTED BY THE LD. D.R. THAT THE ORDER OF THE CIT(A) MAY BE SET ASIDE AND THAT OF THE A.O BE RESTORED. 5 . WE HAVE HEARD THE LD. D.R., PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL AVAILABLE ON RECORD. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE FACTS OF THE CASE AND ARE OF THE CONSIDERED VIEW THAT IN THE BACKDROP OF THE FACT THAT THE NOTICES IS SUED BY THE A.O TO BOTH OF THE AFOREMENTIONED PARTIES WERE RETURNED BY THE POSTAL AUTHORITIES WITH THE REMARKS LEFT, THE VERY EXISTENCE OF THE SAID PARTIES CAME UNDER SERIOUS DOUBT. WE FIND THAT IT REMAINS AS A MATTER OF FACT THAT THE ASSESSEE EVEN OTHER WISE HAD FAILED TO SUBSTANTIATE THE GENUINENESS AND VERACITY OF THE AFOREMENTIONED PURCHASE TRANSACTIONS ON THE BASIS OF IRREFUTABLE DOCUMENTARY EVIDENCES . WE FURTHER FIND THAT DESPITE SPECIFIC DIRECTIONS OF THE A.O , THE ASSESSEE HAD FAILED TO PRODUCE THE AFOREMENTIONED PARTIES FOR EXAMINATION BY T HE A.O . WE FIND OURSELVES TO BE IN AGREEMENT WITH THE A.O THAT THE ASSERTION OF THE ASSESSEE THAT IT HAD MADE THE PAYMENTS TO THE AFOREMENTIONED PARTIES TOWARDS THE PURCHASE CONSIDERATION THROUGH BANKING CHANNEL W OULD NOT CONCLUSIVELY PROVE THE AUTHENTICITY OF THE AFOREMENTIONED PURCHASE TRANSACTIONS. WE FURTHER P A G E | 6 ITA NO. 3905/MUM/2017 AY: 2009 - 10 DCIT VS. M/S SHREE GANESH RETAILS ARE IN AGREEMENT WITH THE VIEW TAKEN BY THE CIT(A) THAT AS THE CONSUMPTION/SALE OF THE GOODS UNDER CONSIDERATION HAD NOT BEEN DOUBTED BY THE A.O, THEREFORE, IT COULD SAFELY BE CONCLUDED THAT THE ASSESSEE HAD MADE PURCHASES OF THE GOODS UNDER CONSIDERATION, THOUGH NOT FROM THE AFOREMENTIONED PARTIES, BUT FROM THE OPEN/GREY MARKET, AS A RESULT WHEREOF THE ADDITION IN THE HANDS OF THE ASSESSEE WAS LIABLE TO BE RESTRICTED TO THE EXTENT OF THE PROFIT ELEMENT THAT WOULD BE INVOLVED IN MAKING OF THE PURCHASES FROM THE OPEN/GREY MARKET. WE HAVE GIVEN A THOUGHTFUL CONSIDER ATION TO THE RELIANCE PLACED BY THE LD. D.R ON THE ORDER PASSED BY THE HONBLE SUPREME COURT WHILE DISMISSING THE SPECIAL LEAVE PETITION (SLP) OF THE ASSESSEE IN THE CASE OF N.K PROTEINS LTD. VS. DCIT [SLP(C)CC NO(S).769 OF 2017] , AND ARE OF THE CONS IDERED VIEW THAT THE SAME IS DISTINGUISHABLE AS AGAINST THE FACTS INVOLVED IN THE CASE OF THE PRESENT ASSESSEE. WE FIND THAT THE RELIANCE PLACED BY THE LD. D.R ON THE ORDER OF THE HONBLE SUPREME COURT WHILE DISMISSING THE SLP OF THE ASSESSEE IN THE CASE OF N.K PROTEINS LTD. (SUPRA) IS DISTINGUISHABLE ON FACTS. WE ARE OF THE CONSIDERED VIEW THAT IN THE CASE OF N.K PROTEINS LTD. (SUPRA) SEARCH PROCEEDINGS WERE CONDUCTED ON THE ASSESSEE, IN THE COURSE OF WHICH CERTAIN SIGNED BLANK CHEQUES AND VOUCHERS OF TH E PARTIES FROM WHOM THE ASSESSEE CLAIMED TO HAVE BEEN MAKING PURCHASES WERE FOUND. IT WAS THUS IN THE BACKDROP OF THE AFORESAID FACTUAL MATRIX, THAT THE REVENUE HELD THAT THE CASH DEPOSITED IN THE BANK ACCOUNTS OF THE SAID RESPECTIVE SUPPLIER PARTIES WAS T HE UNDISCLOSED INCOME OF THE ASSESSEE, AND THE PURCHASES MADE THERE FROM, AS BOGUS. WE ARE OF THE CONSIDERED VIEW THAT AS OBSERVED BY US HEREINABOVE, THE FACTS INVOLVED IN THE CASE OF THE PRESENT ASSESSEE ARE ABSOLUTELY DISTINGUISHABLE AS AGAINST THE PECUL IAR AND IRREBUTABLE FACTS AS HAD EMERGED IN THE CASE OF N.K PROTEINS LTD. (SUPRA). WE ARE THUS OF THE CONSIDERED VIEW THAT THE JUDICIAL PRONOUNCEMENT RELIED P A G E | 7 ITA NO. 3905/MUM/2017 AY: 2009 - 10 DCIT VS. M/S SHREE GANESH RETAILS UPON BY THE LD. D.R. BEING DISTINGUISHABLE ON FACTS AS AGAINST THOSE INVOLVED IN THE CASE BEFORE US , THEREFORE, THE SAME WOULD NOT SUPPORT HIS CONTENTIONS . WE ARE FURTHER OF THE CONSIDERED VIEW THAT THE CIT(A) TAKING COGNIZANCE OF THE FACTS INVOLVED IN THE CASE OF THE ASSESSEE, HAD IN ALL FAIRNESS BY RELYING ON THE JUDGMENT OF THE HONBLE HIGH COURT OF GUJARAT IN THE CASE OF CIT VS. SIMIT P . SHETH (2013) 38 TAXMANN. COM, 385 (GUJ) HAD RIGHTLY ESTIMATED THE SUPPRESSED PROFIT INVOLVED IN MAKING OF THE AFORESAID BOGUS PURCHASES TO THE EXTENT OF 12.5% OF THE AGGREGATE OF THE PURCHASES W HICH WERE CLAIMED BY THE ASSESSEE TO HAVE BEEN MADE FROM THE AFOREMENTIONED PARTIES. WE FIND NO INFIRMITY IN THE AFORESAID WELL REASONED ORDER OF THE CIT(A) AND FINDING OURSELVES AS BEING IN AGREEMENT WITH THE VIEW TAKEN BY HIM, THUS UPHOLD HIS ORDER . 6 . THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED TO THE OPEN COURT ON 25 /10/2017 SD/ - SD/ - (RAJENDRA ) (RAVISH SOOD) ACC OUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; 25 . 10 .2017 P A G E | 8 ITA NO. 3905/MUM/2017 AY: 2009 - 10 DCIT VS. M/S SHREE GANESH RETAILS / 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 . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI