ITO 24(1)(1), MUMBAI V. AMIT BABULAL HARSORA, MUMBAI

ITA 3914/MUM/2016

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 7841 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-12-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 09-06-2016
• Court: TRIBUNAL

Judgement Text

P A G E | 1 ITA NO. 3914/MUM/2016 A.Y. 2011 - 12 THE ITO - 24(1)(1) VS. SHRI AMIT BABULAL HARSORA IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER AND SHRI RAVISH SOOD, JUDICIAL MEMBER ITA NO. 3914/MUM/2016 (ASSESSMENT YEAR: 2011 - 12 ) THE ITO - 24(1)(1) 702, PIRAMAL CHAMERS, LALGAUG, MUMBAI - 400 012 VS. SHRI AMIT BAB ULAL HARSORA 10, NEW INDIA INDL. ESTATE, 33, MAHAKALI CAVES RD., ANDHERI (E), MUMBAI - 93 PAN AAAPH1395R ( APPELLANT ) ( RESPONDENT ) APPELLANT BY: SHRI SATISH CHANDRA RAJORE, D.R RESPONDENT BY: SHRI S.D. CHHEDA, A.R DATE OF HEARING: 24 .12.2018 DATE OF PRONOUNCEMENT: 2 8 .12.2018 O R D E R PER RAVISH SOOD, JM THE PRESENT APPEAL FILED BY REVENUE IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A) - 36, MUMBAI DATED 17.03.2016 , WHICH IN TURN ARISES FROM THE ORDER PASSED BY THE A.O. UNDER SEC.143(3) OF THE INCOME TAX ACT, 1961 (FOR SHORT I.T. ACT), DATED 24.03.2014 FOR A.Y. 2011 - 12. THE ASSESSEE ASSAILING THE ORDER OF THE CIT(A) HAS RAISED BEFORE US THE FOLLOWING GROUNDS OF APP EAL: 1. THE LEARNED CIT (A) HAS ERRED IN LAW AND IN CIRCUMSTANCES OF THE CASE IN RESTRICTING THE ADDITION TO THE EXTENT OF 15% OF TOTAL ALLEGED BOGUS PURCHASES FROM HAWALA DEALERS INSTEAD OF UNEXPLAINED EXPENDITURE U/ S69C OF THE I.T. ACT 1961 O F RS.60,01,972/ - ADDED BY THE AO . BY IGNORING THE FACTS BROUGHT ON RECORD AND DULY CONCEDED BY HIM THAT GOODS ARE PROCURED FROM GREY MARKET IN CASH AND BOGUS BILLS ARE PRODUCED FROM HAWALA OPERATORS TO WHOM CHEQUES ISSUED ARE FOUND TO BE IMMEDIATELY WITHDRAW N IN CASH, THEREBY ADDITION MADE TO THE EXTENT OF INVESTMENT MADE IN UNACCOUNTED PURCHASES MADE IN CASH TO THE EXTENT OF POSITIVE PEAK (IN RESPECT OF ALL SUCH PARTIES) AND UNACCOUNTED COMMISSION PAID IN CASH FOR PROCURING SUCH BOGUS BILLS SHOULD P A G E | 2 ITA NO. 3914/MUM/2016 A.Y. 2011 - 12 THE ITO - 24(1)(1) VS. SHRI AMIT BABULAL HARSORA HAVE BEEN ADDED/CONFIRMED IN ADDITION TO THE AD - HOC PERCENTAGE OF SUCH PURCHASES AS HELD BY HIM. 2. THE LEARNED CIT (A) ERRED IN LAW AND IN CIRCUMSTANCES OF THE CASE IN NOT CONSIDERING THAT THE ADDITION WAS MADE ON THE BASIS OF INFORMATION RECEIVED FRO M THE DIT(I NV . ) AND SALES TAX DEPARTMENT, MAHARASHTRA WITH REGARD TO BOGUS PURCHASES MADE BY THE ASSESSEE FROM DEALERS WITHOUT SUPPLY OF ACTUAL GOODS. 3. T HE LEARNED CIT (A) ERRED IN LAW AND IN CIRCUMSTANCES OF THE CASE IN NOT CONSID E RING THAT THE HAWALA DEALERS HAVE A DMITTED ON OATH BEFORE THE SALES TAX AUTHORITIES THAT THEY HAVE NO T SOLD ANY MATERIAL TO ANYBODY. 4. T HE LEARNED CIT (A) ERRED IN LAW AND IN CIRCUMSTANCES OF THE CASE IN NOT CONSID E RING THAT THE ASSESSEE COULD NOT PROVE THE GENUINENESS AND CREDITWORTHINESS OF THE PURCHASE TRANSACTIONS DURING THE COURSE OF ASSESSMENT PROCEEDINGS. 5. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT (APPEALS) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE AO BE RESTORED. 6. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR TO SUBMIT ADDITIONAL NEW GROUND WHICH MAY BE NECESSARY. 2. BRIEFLY STATED, THE ASSESSEE WHO IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF PARTS OF MILD STEEL HAD FILED HIS RETURN OF INCOME FOR A.Y. 2011 - 12 ON 15.02.2012, DECLARING TOTAL INCOME OF RS.5,09,810/ - . THE RETURN OF INCOME FILED BY THE ASSESSEE WAS PROCESSED AS SUCH UNDER SEC. 143(1) OF THE I.T. ACT. SUBSEQUENTLY, THE CASE OF THE ASSESSEE WAS TAKEN UP FOR SCRUTI NY ASSESSMENT UNDER SEC. 143(2) . 3. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS THE A.O WAS IN RECEIPT OF INFORMATION FROM THE DGIT (INV.), MUMBAI, VIDE HIS LETTER DATED 20.01.2014 THAT AS PER THE INFORMATION SHARED BY THE S ALES TAX D EPARTMENT , THE ASS ESSEE HAD TAKEN BOGUS PURCHASE BILLS FROM THE FOLLOWING PARTIES: SR. NO. NAME OF THE PARTY AMOUNT 1. SWASTIC ENTERPRISES 1448325 2. VARUN ENTERPRISES 54003 3. S.M. TRADING CO. 495660 4. CHOKSI BROTHERS 607661 5. SHREE TRADING CORPORATION 51618 6. ALANKAR STEELS 119849 7. COMEX TRADING CO. 228826 8. OM TRADERS 381683 P A G E | 3 ITA NO. 3914/MUM/2016 A.Y. 2011 - 12 THE ITO - 24(1)(1) VS. SHRI AMIT BABULAL HARSORA 9. RIDDHI SIDDHI CORPORATION 849189 10. RUSHABH ENTERPRISES 1765158 60,01,972 THE A.O IN ORDER TO VERIFY THE GENUINENESS OF THE PURCHASES CLAIMED BY THE ASSESSEE TO HAVE BEEN MADE FROM THE AFOREMENTIONED PARTIES , DIRECTED THE ASSESSEE TO PRODUCE THE PARTIES ALONG WITH OTHER SPECIFIC DETAILS. HOWEVER, THE ASSESSEE NOT ONLY FAILED TO PRODUCE THE AFOREMENTIONED PARTIES, BUT ALSO DID NOT PRODUCE ITS BOOKS OF ACCOUNT. APART THEREFRO M , THE NOTICES ISSUED BY THE A.O UNDER SEC.133(6) TO THE AFOREMENTIONED PARTIES ALSO COULD NOT BE SERVED AS IT WAS REPORTED THAT THE SAID PARTIES WERE NOT EXISTING AT THE ABOVEMENTIONED ADDRESSES . THE ASSESSEE IN ORDER TO SUBSTANTIATE THE GENUINENESS OF THE PURCHASES CLAIMED TO HAVE BEEN MADE FROM THE AFOREMENTIONED PARTIES SUBMITTED , THAT THE GOODS PURCHASE D FROM THE SAID PARTIES WERE THE RAW MATERIAL THAT WAS USED IN THE MANUFACTURING OF PARTS OF MILD STEEL. IT WAS THE CONTENTION OF THE ASSESSEE THAT T HE MANUFACTURING AND SALES OF THE MILD STEEL ITEMS COULD NOT HAVE BEEN CARRIED OUT WITHOUT PURCHASE OF RAW MATERIAL. IN ORDER TO FORTIFY THE AUTHENTICITY OF THE PURCHASE TRANSACTIONS THAT WERE CLAIMED TO HAVE BEEN MADE FROM THE AFOREMENTIONED PARTIES, THE ASSESSEE PLACED ON RECORD THE COPIES OF THE PURCHASE BILLS/DELIVERY CHALLANS, COPY OF THE STOCK REGISTER EVIDENCING SUBSEQUENT SALE OF THE MANUFACTURED GOODS ALONG WITH THE QUANTITATIVE DETAILS OF OPENING STOCK, CONSUMPTION, PRODUCTION, PURCHASE, SALES AND CLOSING STOCK. FURTHER, THE ASSESSEE ALSO TOOK SUPPORT OF THE FACT THAT THE PAYMENT OF PURCHASE CONSIDERATION TO THE AFOREMENTIONED PARTIES WAS MADE BY ACCOUNT PAYEE CHEQUES . I N ORDER TO FORTIFY HIS AFORESAID CLAIM , THE ASSESSEE PLACED ON RECORD THE COPY OF THE BANK STATEMENTS. HOWEVER, THE A.O WAS NOT PERSUADED TO SUBSCRIBE TO THE CLAIM OF THE ASSESSEE THAT HE HAD MADE GENUINE PURCHASES FROM THE AFOREMENTIONED PARTIES. ON THE BASIS OF THE AFORESAID DELIBERATIONS THE A.O DISALLOWED THE BOGUS PURCHASES AS U NEXPLAINED EXPENDITURE UNDER SEC.69C OF THE I.T. ACT AND MADE AN ADDITION/DISALLOWANCE OF RS. 60,01,972/ - TO THE RETURNED INCOME OF THE ASSESSEE. P A G E | 4 ITA NO. 3914/MUM/2016 A.Y. 2011 - 12 THE ITO - 24(1)(1) VS. SHRI AMIT BABULAL HARSORA 4. AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). THE CIT(A) AFTER DELIBERATING ON T HE CONTENTIONS ADVANCED BY THE ASSESSEE WAS HOWEVER NOT PERSUADED TO SUBSCRIBE TO HIS CLAIM THAT HE HAD MADE GENUINE PURCHASES FROM THE AFOREMENTIONED PARTIES. HOWEVER, THE CIT(A) WAS OF THE VIEW THAT WITHOUT MAKING PURCHASES OF THE GOODS UNDER CONSIDERATI ON IT WOULD NOT HAVE BEEN POSSIBLE FOR THE ASSESSEE TO HAVE CARRIED OUT THE SALES OF MANUFACTURED GOODS AS WAS DISCERNIBLE FROM HIS RETURN OF INCOME. THE CIT(A) BEING OF THE VIEW THAT AS THE SALES REFLECTED BY THE ASSESSEE HAD NOT BEEN DISLODGED BY THE A.O , THEREFORE, IT COULD SAFELY BE CONCLUDED THAT THE ASSESSEE HAD MADE PURCHASES OF THE GOODS , THOUGH NOT FROM THE AFOREMENTIONED HAWALA PARTIES, BUT FROM THE OPEN/GREY MARKET. RATHER, THE CIT( A) HELD A STRONG CONVICTION THAT THE FACTS REVEALED THAT IT WAS NOT A CASE OF BOOKING OF BOGUS PURCHASES BY THE ASSESSEE , BUT RATHER A CASE OF PURCHASES MADE FROM BOGUS PARTIES. THE CIT(A) WAS OF THE VIEW THAT THE ASSESSEE BY MAKING THE PURCHASES FROM OPEN /GREY MARKET WOULD HAVE BENEFITED BY PROCURING THE GOODS AT A DISCOUNTED RATE. IN THE BACKDROP OF HIS AFORESAID OBSERVATIONS , THE CIT(A) BEING OF THE VIEW THAT THE GROSS PROFIT DISCLOSED BY THE ASSESSEE COULD NOT BE RELIED UPON, THUS IN ALL FAIRNESS RESTRI CTED THE ADDITION TO 15% OF THE VALUE OF BOGUS PURCHASES OF RS.60,01,972/ - AND RESULTANTLY SUSTAIN ED THE ADDITION TO THE EXTENT OF RS.9,00,296/ - . 5. THE REVENUE BEING AGGRIEVED WITH THE ORDER OF THE CIT(A) HAS CARRIED THE MATTER IN APPEAL BEFORE US. THE APPEAL FILED BY THE REVENUE INVOLVES A DELAY OF 24 DAYS. THE LD. D.R SUBMITTED THAT AS THE DELAY IN FILING OF THE APPEAL HAD INADVERTENTLY CREPT, THUS THE SAME MAY BE CONDONED. THE LD. AUTHORIZED REPRESENTATIVE (FOR SHORT A .R) FOR THE ASSESSEE SUBMITTED THAT HE HAD NO OBJECTION IN CASE IF THE DELAY INVOLVED IN THE FILING OF THE APPEAL BY THE REVENUE WAS CONDONED. WE THUS BEING OF THE CONSIDERED VIEW THAT AS THE DELAY IN FILING OF THE PRESENT APPEAL HAD OCCASIONED NOT ON ACCOUNT OF ANY INTENTIONAL LAPSE OR CALLOUS APPROACH ON THE PART OF THE REVENUE, BUT RATHER ON ACCOUNT OF AN INADVERTENT MISTAKE, THUS CONDONE THE SAME. P A G E | 5 ITA NO. 3914/MUM/2016 A.Y. 2011 - 12 THE ITO - 24(1)(1) VS. SHRI AMIT BABULAL HARSORA 6. WE SHALL NOW ADVERT TO THE MERITS OF THE CASE . ON A PERUSAL OF THE ORDERS OF THE LOWER AUTHORITIES , IT STANDS REVEALED THAT THE PURC HASES CLAIMED BY THE ASSESSEE TO HAVE BEEN MADE FROM THE AFOREMENTIONED PARTIES COULD NOT BE SUBSTANTIATED BY HIM ON THE BASIS OF IRREFUTABLE DOCUMENTARY EVIDENCE BEFORE THE LOWER AUTHORITIES. ADMITTEDLY, KEEPING IN VIEW THE FACT THAT THERE WAS SPECIFIC IN FORMATION WITH THE A.O THAT THE ASSESSEE HAD MADE BOGUS PURCHASES FROM THE AFOREMENTIONED PARTIES, THEREFORE, A VERY HEAVY ONUS WAS CAST UPON THE ASSESSEE TO PROVE THE GENUINENESS AND VERACITY OF THE SAID PU RCHASE TRANSACTIONS UNDER CONSIDERATION TO THE HI LT , WHICH WE FIND HE HAD FAILED TO DO. IT IS A MATTER OF RECORD THAT AS THE ASSESSEE HAD FAILED TO EVIDENCE THE GENUINENESS OF THE PURCHASES WHICH WERE CLAIMED BY HIM TO HAVE BEEN MADE FROM THE AFOREMENTIONED PARTIES, THUS THE A.O HAD HELD THE SAME AS BOGU S PURCHASES. INSOFAR , THE CHARACTERISING OF THE PURCHASES UNDER CONSIDERATION IS CONCERNED, WE FIND OURSELVES TO BE IN AGREEMENT WITH THE VIEW TAKEN BY THE CIT(A) THAT IN THE TOTALITY OF THE FACTS , IT WAS A CASE WHERE THE ASSESSEE HAD MADE PURCHASES FROM BOGUS PAR TIES RATHER THAN A CASE OF PURCHASES BEING BOGUS ITSELF . IN OUR CONSIDERED VIEW , THE AFORESAID OBSERVATION OF THE CIT(A) IS WELL FOUNDED FOR THE VERY REASON THAT IN CASE IF THE ASSESSEE WOULD NOT HAVE PURCHASE D THE RAW MATERIAL UND ER CONSIDERATION FOR MANUFACTURING OF PART S OF MILD STEEL , THEN NO MANUFACTURING AND THE CORRESPONDING SALES ALSO COULD HAVE BEEN EFFECTED. IN SUM AND SUBSTANCE, IT CAN SAFELY BE CONCLUDED THAT THE ASSESSEE HAD PURCHASED GOODS UNDER CONSIDERATION, THOUGH N OT FROM THE AFOREMENTIONED PARTIES, BUT FROM THE OPEN/GREY MARKET. WE ARE OF A STRONG CONVICTION THAT IN THE BACKDROP OF THE FACTS INVOLVED IN THE CASE BEFORE US, NOW WHEN THE SALES OF THE GOODS MANUFACTURED BY THE ASSESSEE HAD BEEN ACCEPTED BY THE A.O, TH EREFORE, IT WOULD BE HIGHLY IMPROBABLE TO PRESUME THAT SUCH MANUFACTURING AND CORRESPONDING SALES OF THE GOODS WOULD HAVE BEEN POSSIBLE WITHOUT PURCHASE OF THE RAW MATERIAL UNDER CONSIDERATION. WE THUS ARE OF THE CONSIDERED VIEW THAT KEEPING IN VIEW THE DO CUMENTARY EVIDENCE THAT WAS PRODUCED BEFORE THE LOWER AUTHORITIES AND IN THE TOTALITY OF THE FACTS OF THE CASE , IT CAN SAFELY OR RATHER INESCAPABLY BE CONCLUDED THAT THE P A G E | 6 ITA NO. 3914/MUM/2016 A.Y. 2011 - 12 THE ITO - 24(1)(1) VS. SHRI AMIT BABULAL HARSORA ASSESSEE HAD MADE PURCHASES OF THE GOODS UNDER CONSIDERATION, THOUGH NOT FROM THE AFOR EMENTIONED PARTIES BUT FROM THE OPEN/GREY MARKET. 7. INSOFAR, THE DEEMING OF THE EXPENDITURE INCURRED BY THE ASSESSEE TOWARDS PURCHASE OF THE GOODS UNDER CONSIDERATION AS AN UNEXPLAINED EXPENDITURE BY THE A.O UNDER SEC. 69C, LEADING TO A CONSEQUENTIAL ADD ITION OF RS.60,01,972/ - , THE SAME DOES NOT FIND FAVOUR WITH US. WE FIND THAT THE SOURCE OF PURCHASE OF THE GOODS UNDER CONSIDERATION IS DULY RECORDED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE. AS OBSERVED BY US HEREINABOVE, THOUGH THE CLAIM OF THE ASSESSE E THAT IT HAD MADE PURCHASES OF THE GOODS UNDER CONSIDERATION FROM THE AFOREMENTIONED PARTIES HAD REMAINED UNPROVED, HOWEVER, WE ALSO CANNOT REMAIN OBLIVIOUS OF THE FACT THAT THE GENUINENESS OF SUCH CLAIM HAD NOT BEEN CONCLUSIVELY DISPROVED BY THE REVENUE TILL DATE. W E ARE OF A STRONG CONVICTION THAT AS LONG AS THE CLAIM OF THE ASSESSEE OF HAVING MADE PURCHASES FROM THE AFOREMENTIONED PARTIES IS DISPROVED TO THE HILT BY THE REVENUE ON THE BASIS OF IRREFUTABLE AND CLINCHING EVIDENCE, TILL THEN NO ADVERSE INF ERENCES AS REGARDS THE DULY RECORDED SOURCE OF PAYMENT OF THE PURCHASE CONSIDERATION COULD BE DRAWN IN THE HANDS OF THE ASSESSEE. WE THUS IN THE BACKDROP OF OUR AFORESAID OBSERVATIONS ARE OF A STRONG CONVICTION THAT NOW WHEN THE PURCHASE S OF THE GOODS AND THE PAYMENTS OF THE PURCHASE CONSIDERATION ARE FOUND RECORDED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE, THEREFORE, IT WOULD BE INCORRECT IN TREATING THE SOURCE OF SUCH PURCHASES AS UNEXPLAINED BY INVOKING THE PROVISIONS OF SEC. 69C. RATHER, THE REVENUE PRIOR TO INVOKING THE PROVISIONS OF SEC. 69C HAD FAILED TO PLACE ON RECORD THE DETAILS OF THE EXPENDITURE THE SOURCE OF WHICH IS CONCLUSIVELY PROVED TO HAVE REMAINED UNEXPLAINED , OR IS BACKED BY AN EXPLANATION WHICH IS NOT TO THE SATISFACTION OF THE A.O. IN OUR CONSIDERED VIEW , THE A.O WHILE FRAMING THE ASSESSMENT HAD HUSHED THROUGH THE MATTER AND HAD IN A WHIMSICAL MANNER CONCLUDED THAT THE EXPENDITURE INCURRED BY THE ASSESSEE TOWARDS MAKING OF T HE PURCHASES FROM THE AFOREMENTIONED PARTIES WAS TO BE HELD AS UNEXPLAINED UNDER SEC.69C . WE ARE UNABLE TO PERSUADE OURSELVES T O SUBSCRIBE TO THE AFORESAID VIEW OF THE A.O AND ARE OF THE CONSIDERED VIEW THAT THE SAME DOES NOT MERIT ACCEPTANCE . P A G E | 7 ITA NO. 3914/MUM/2016 A.Y. 2011 - 12 THE ITO - 24(1)(1) VS. SHRI AMIT BABULAL HARSORA 8. WE FIND OURSELVES TO BE IN AGREEMENT WITH THE OBSERVATIONS OF THE CIT(A) AND ARE OF THE CONSIDERED VIEW THAT THOUGH IT IS A CASE WHERE THE SOURCE OF THE PURCHASES AS CLAIMED BY THE ASSESSEE HAD REMAINED UNPROVED, AND THUS IT CAN SAFELY BE INFERRED THAT THE ASSESSE E HAD MADE PURCHASES FROM BOGUS /UNIDENTIFIED PARTIES , BUT IN NO WAY IT IS A CASE OF BOOKING OF BOGUS PURCHASES BY THE ASSESSEE. FURTHER, WE ARE ALSO PERSUADED TO SUBSCRIBE TO THE VIEW OF THE CIT(A) THAT AS IT COULD SAFELY BE CONCLUDED THAT THE ASSESSEE HAD PURCHASED THE GOODS FROM THE OPEN/GREY MARKET, THEREFORE, KEEPING IN VIEW THE FACT THAT HE WOULD HAVE BEEN BENEFITTED FROM MAKING OF SUCH PURCHASES AT A DISCOUNTED RATE, THUS IN ALL FAIRNESS HE HAD RESTRICTED THE ADDITION TO THE EXTENT OF 15% OF THE VALUE OF SUCH UNPROVED PURCHASES. WE THUS FIND ING OURSELVES TO BE IN AGREEMENT WITH THE VIEW TAKEN BY THE CIT(A) AND FINDING NO INFIRMITY IN HIS ORDER , UPHOLD THE SAME. 9. THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN CO URT ON 2 8 . 12.2018 S D / - S D / ( SHAMIM YAHYA) (RAVISH SOOD) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; 28.12.2018 PS. ROHIT / 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