ACIT 20(2), MUMBAI V. PRITI BIPIN MODI, MUMBAI

ITA 4106/MUM/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 0240 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-08-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2010-2011
• Appeal Filed On: 15-06-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJESH KUMAR YADAV
• Keywords: Bogus purchase; Corroborative evidences
• Section: 133(6)

Judgement Text

ITA NO. 4106/M/2016 PRITI MODI 1 IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBA I BEFORE SHRI D.T. GARASIA, JM AND G. MANJUNATHA, AM ITA NO. 4106/MUM/2016& CO. NO. 147 A.Y.2010-11 ACIT 20(2), R. NO. 217, 2 ND FLOOR, PIRAMAL CHAMBERS, LALBAUG, PAREL, MUMBAI 400 012. VS. PRITI BIPIN MODI ROYAL CORPORATION 13/14, NAVJIVAN SOCIETY, BLDG NO. 3, LAMINGTON RD, MUMBAI 400 008. PAN NO. AEYPM0002J (APPELLANT) : (RESPONDENT) ASSESSEE BY : MR. RAJESH KUMAR YADAV (DR) RESPONDENT BY : MR. BHUPENDRA SHAH (AR) DATE OF HEARING : 03.08.2017 DATE OF PRONOUNCEMENT : 18 .0 8 .2017 O R D E R PER D.T. GARASIA, JUDICIAL MEMBER : THE ABOVE APPEAL RELATE TO ASSESSMENT YEAR 2010-11. THE APPEAL ARISE OUT OF THE ORDER DATED 04.10.2013 OF THE COMMISSION ER OF INCOME TAX (APPEALS) 32 [HEREINAFTER REFERRED TO AS THE CIT( A)] RELEVANT TO ASSESSMENT YEAR 2010-11. IN DEPARTMENTAL APPEAL, THE ONLY EFFECTIVE GROUND IS GROUND NO. 1: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN GRANTING RELIEF OF RS. 5,93,67, 68/- BY RESTRICTING THE ADDITION @ 4.92% OF TOTAL PURCHASES FROM HAWALA PAR TIES. 2. THE SHORT FACTS OF THE CASE IS: BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT TH E APPELLANT IS A PROPRIETOR OF M/S. ROYALS CORPORATION AND SUPPLIER OF ELECTRICAL HARDWARE & GENERAL ITEMS. THE RETURN OF INCOME WAS FILED ON 15.10.2010 DECLARING TOTAL INCOME AT RS. 26,05,809/ -. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, TO ASCERTAIN THE GENUINE NESS OF PURCHASES, ITA NO. 4106/M/2016 PRITI MODI 2 NOTICES U/S. 133(6) WERE ISSUED TO 14 PARTIES. SOM E OF THESE NOTICES HAVE BEEN RETURNED BACK BY THE POSTAL AUTHORITIES W ITH REMARK NON KNOWN, NO SUCH ADDRESS OR NO COMPLIANCE HAS BEEN MADE. THE APPELLANT WAS GIVEN AN OPPORTUNITY FOR ESTABLISHING THE GENUINENESS OF THESE PARTIES AND THAT OF THE PURCHASES MADE FROM T HEM WITH ADEQUATE SUPPORTING EVIDENCES AND ALSO TO PRODUCE PARTIES BE FORE THE AO. ON 08.02.2013 THE AR SUBMITTED THE COPIES OF THE PURCH ASE BILLS FROM THESE PARTIES AND UNSIGNED COPIES OF THEIR LEDGER ACCOUNT S. AFTER EXAMINING THE PURCHASE BILLS PRODUCED BY THE AR, THE AO OBSER VED THAT THEY WERE MADE VERY RECENTLY AND THAT THE HAND WRITING ON THE BODY OF BILLS AND CHALLANS IN MOST OF THE CASES WAS SIMILAR. HENCE T HE AO IMPOUNDED THE SAME ON 14.02.2013. IT WAS ALSO OBSERVED BY THE AO THAT THERE IS A HUGE TIME GAP BETWEEN THE PURCHASE MADE AND THE PAYMENTS DONE BY THE ASSESSEE ON PERUSAL OF FORM NO. 3CD FILED BY THE AP PELLANT. IT WAS NOTICED THAT THE APPELLANT IS NOT MAINTAINING ANY S TOCK REGISTER AND THUS NO CONTEMPORANEOUS RECORDS ESTABLISHING RECEIPT OF SO CALLED PURCHASED GOODS WAS AVAILABLE. THE AO ALSO NOTED T HAT THE MAHARASHTRA SALES TAX DEPT. HAD UNDERTAKEN ENQUIRIE S INTO THE AFFAIRS OF SEVERAL SUCH THESE PARTIES AND HAD FOUND THAT TH EY WERE MERELY ISSUING BOGUS SALE BILLS WITHOUT DELIVERY OF MATERI AL ON THE BASIS OF THEIR AFFIDAVITS AND THEIR STATEMENTS RECORDED. THE AO T HEN RELIED ON THE FOLLOWING DECISIONS TO HOLD THAT THAT ONUS OF PROOF TO PROVE HIS PURCHASES WAS ON THE APPELLANT, PAYMENT THROUGH CHE QUES MERELY DO NOT ESTABLISH THAT PURCHASE IS GENUINE AND THE DEPT WAS NOT LIABLE TO LEAD CLINCHING EVIDENCE TO PROVE THAT PURCHASES ARE BOGUS. THE AO ALSO CITED THE CASE OF THE HONBLE SUPREME COURT IN KACH WALA GEMS 288 ITR 10(SC) THAT EVEN PAYMENT BY ACCOUNT PAYEE CHEQUES I S NOT SUFFICIENT TO ESTABLISH THAT PURCHASES ARE GENUINE. THE AO DISAL LOWED ON ACCOUNT OF BOGUS PURCHASES AT RS. 6,80,72,143/-. ITA NO. 4106/M/2016 PRITI MODI 3 3. THE MATTER CARRIED TO CIT(A) AND CIT(A) HAS PAR TLY ALLOW THE APPEAL AS UNDER: 5.10 IN THE INSTANT CASE, THE APPELLANT IS NOT I N A POSITION TO PROVE THE EXISTENCE OF THE SUPPLIERS. THERE IS ENOUGH CIRCUM STANTIAL EVIDENCE CASTING A DOUBT ON THE NATURE OF THE TRANSACTION. I AM OF THE FIRM BELIEF THAT THE APPELLANT HAD MADE CASH PURCHASES FROM OTH ER PARTIES WHICH WERE NOT RECORDED IN THE BOOKS. THE APPELLANT TOOK ONLY BILLS FROM THESE 11 PARTIES AS ACCOMMODATION TO EXPLAIN THE PU RCHASES. HOWEVER, THE ENTIRE PURCHASE FROM THESE 11 PARTIES CANNOT BE ADDED AS BOGUS AND WHAT NEEDS TO BE TAXED IS THE PROFIT ELEMENT EMBEDD ED IN SUCH TRANSACTION. THE AO HAS DISALLOWED 100% OF THESE B OGUS PURCHASES. THIS CANNOT BE ALLOWED TO STAND. I AM OF THE OPINI ON THAT THE DISALLOWANCE MADE BY THE AO SHOULD BE REASONABLY RE STRICTED TO 12.5% OF THE BOGUS PURCHASES. AS THE APPELLANT HAS ALREA DY RECORDED THESE PURCHASES IN HIS BOOKS AND RECORDED A GP OF 7.58%, IT WOULD BE IN THE FITNESS OF THINGS TO GIVE CREDIT TO THE RECORDED GP . IN EFFECT, THE DISALLOWANCE MADE BY THE AO IS TO BE RESTRICTED TO THE DIFFERENCE BETWEEN 12.5% AND THE RECORDED GP OF 7.58% WHICH IS 4.92%. I THEREFORE, DIRECT THE AO TO ESTIMATE OF THE DISALLO WANCE BY ADOPTING 4.92% OF RS. 6,24,39,723/-. THE DISALLOWANCE MADE BY THE AO IS RESTRICTED TO A SUM OF RS. 30,72,034/-. THE APPELL ANT GETS A RELIEF OF RS. 5,93,67,689/-. 4. DURING THE COURSE OF HEARING, THE LD. DR RELIE D UPON THE FOLLOWING DECISIONS: (I) VISP(P) VS. CIT INDORE (2004) 186 CTR 218(MP); (II) CIT VS. PRASHANT (P) 1994 121 CTR(CAL) 20; (III) CIT VS. LA MEDICA, 117 TAXMAN 628 (2001). 5. THE LD. AR RELIED UPON THE ORDER OF CIT(A) AND T HE DECISION OF GUJARAT HIGH COURT IN CASE OF COMMISSIONER OF INCOME TAX VS . SIMIT P. SHETH 356 ITR 451(GUJ). THE LD. AR HAS ALSO SUBMITTED THAT, IF T HE DEPARTMENTAL APPEAL IS DISMISSED ASSESSEE DOES NOT PRESS FOR CO. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. WE ARE CONVINCED WITH THE ARGUMENTS OF THE REVENUE THAT THE ITA NO. 4106/M/2016 PRITI MODI 4 ASSESSEE HAS FAILED TO DISCHARGE THE PRIMARY ONUS O F PROVING THE PURCHASES AND IT COULD NOT PRODUCE EVIDENCES TO SHOW ACTUAL D ELIVERY OF MATERIAL AND ALSO COULD NOT PRODUCE CONFIRMATORY LETTERS FROM TH E ALLEGED BOGUS SUPPLIERS. HOWEVER, WE ALSO FIND THAT THE ASSESSEE IS IN POSSE SSION OF PURCHASES INVOICES AND THE PAYMENTS ARE THROUGH BANKING CHANNELS. THE REFORE, EVEN IF ALL THE PURCHASES ARE FOUND TO BE BOGUS, WE NOTE THAT SALES TURNOVER HAS NOT BEEN DISPUTED BY THE REVENUE. THEREFORE, IN SUCH A SITU ATION, THE ADDITION, WHICH COULD BE MADE, WAS TO ACCOUNT FOR PROFIT ELEMENT EM BEDDED IN THESE PURCHASE TRANSACTIONS TO FACTORIZE PROFIT EARNED BY ASSESSEE AGAINST PURCHASE OF MATERIAL IN THE GREY MARKET AND UNDUE BENEFIT OF VA T AGAINST BOGUS PURCHASES WHICH CIT(A) HAS RIGHTLY DONE. THEREFORE, WE CONFI RMED THE ORDER OF CIT(A). IN THE RESULT, DEPARTMENTAL APPEAL AND CO ARE DISM ISSED. JUDGEMENT PRONOUNCED IN THE OPEN COURT ON 18 TH AUGUST, 2017. SD/- SD/- G. MANGUNATHA (ACCOUNTANT MEMBER) D.T. GARASIA (JUDICIAL MEMBER) MUMBAI, DATED: 18.08.2017 RAHUL DHOKE/P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH BY ORDER DY /ASSTT.REGISTRAR, ITAT, MUMBAI.