ACIT CIR 2, KALYAN V. SHYAM K. GYANCHANDANI, ULHASNAGAR

ITA 4130/MUM/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 0433 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-08-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 16-06-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJESH KUMAR YADAV
• Assessee Lawyers: RAHUL SHADIJA
• Keywords: Bogus purchase; Accommodation entries
• Section: 69C; 142(1); 133(6)

Judgement Text

1 ITA 4130/MUM/2016 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A, MUMBAI BEFORE SHRI D.T. GARASIA (JUDICIAL MEMBER) AND SHRI G MANJUNATHA (ACCOUNTANT MEMBER) I.T.A.NO.4130/MUM/2016 (ASSESSMENT YEAR : 2011-12) ACIT, CIR.2, KALYAN VS SHRI SHYAM K GYANCHANDANI 4 TH FLOOR, FLAT NO.402 SHREE GANPATI PLAZA, ULHASNAGAR 421 003 PAN : AAZPG6917H APPELLANT RESPONDENT APPELLANT BY SHRI RAJESH KUMAR YADAV RESPONDENT BY SHRI RAHUL SHADIJA DATE OF HEARING 03 -08-2017 DATE OF PRONOUNCEMENT 11- 08-2017 O R D E R PER G MANJUNATHA, AM : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAI NST THE ORDER OF THE CIT(A- 3, THANE DATED 09-03-2016 AND IT PERTAINS TO ASSESS MENT YEAR 2011-12. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE, AN INDIVIDUAL ENGAGED IN THE BUSINESS OF TRADING IN LDO AND FURNACE OIL, FIL ED HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2011-12 ON 27-09-2011 DECLARING TOT AL INCOME OF RS.15,28,744. THE CASE HAS BEEN SELECTED FOR SCRUT INY AND NOTICES U/S 143(2) AND 142(1) OF THE ACT WERE ISSUED. IN RESPONSE TO NOTICES, THE AUTHORIZED 2 ITA 4130/MUM/2016 REPRESENTATIVE OF THE ASSESSEE APPEARED FROM TIME T O TIME AND PRODUCED RELEVANT PARTICULARS, AS CALLED FOR. DURING THE CO URSE OF ASSESSMENT PROCEEDINGS, THE AO NOTICED THAT THE ASSESSEE HAS C LAIMED PURCHASES FROM M/S RUMIT ENTERPRISES AND M/S MUMBAI TRADING CO FOR RS. 1,99,87,304. THE AO FURTHER OBSERVED THAT THE ABOVE TWO PARTIES ARE LIS TED IN THE LIST PREPARED BY MAHARASHTRA SALES-TAX DEPARTMENT AS HAWALA OPERATOR S, WHO WERE INVOLVED IN ISSUING BOGUS BILLS WITHOUT ACTUAL DELIVERY OF GOOD S. THEREFORE, THE AO ISSUED A SHOW CAUSE NOTICE AND ASKED TO FURNISH NECESSARY DE TAILS TO JUSTIFY PURCHASES FROM THE ABOVE TWO PARTIES. IN RESPONSE, THE ASSES SEE FILED NECESSARY PURCHASE BILLS AND ALSO PRODUCED BOOKS OF ACCOUNT F OR HAVING CONSIDERED SAID PURCHASES IN HIS BOOKS OF ACCOUNT. THE AO, TO VERI FY THE GENUINENESS OF PURCHASES FROM THE ABOVE TWO PARTIES, ISSUED LETTER S U/S 133(6) ON THE ADDRESSES GIVEN BY THE ASSESSEE; HOWEVER, NOTICES W ERE RETURNED BY THE POSTAL AUTHORITIES WITH THE REMARK NOT KNOWN / UNCLAIMED / REFUSED. SINCE THE NOTICES ISSUED TO THE PARTIES HAVE BEEN RETURNED, T HE AO HAS DEPUTED HIS INSPECTOR TO CONDUCT NECESSARY ENQUIRIES. THE INSP ECTOR, AFTER CONDUCTING NECESSARY ENQUIRIES FOUND THAT THE PARTIES ARE NOT AVAILABLE AT THE GIVEN ADDRESSES AND NO BUSINESS WAS BEING CONDUCTED BY TH E AFORESAID PARTIES. THEREFORE, BASED ON THE INFORMATION RECEIVED FROM M AHARASHTRA SALES-TAX DEPARTMENT AND FURTHER SUPPORTED BY INDEPENDENT ENQ UIRIES, THE AO CAME TO 3 ITA 4130/MUM/2016 THE CONCLUSION THAT PURCHASES FROM THE ABOVE PARTIE S ARE NOT GENUINE AND HENCE, MADE ADDITION U/S 69C OF THE ACT. 3. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE PRE FERRED APPEAL BEFORE CIT(A). BEFORE THE CIT(A), THE ASSESSEE HAS REITER ATED THE SUBMISSIONS MADE BEFORE THE AO. THE ASSESSEE FURTHER SUBMITTED THAT THE AO MADE ADDITION TOWARDS PURCHASES FROM THE ABOVE TWO PARTIES MERELY ON THE BASIS OF INFORMATION RECEIVED FROM THIRD PARTY WITHOUT CONSI DERING THE NECESSARY EVIDENCES FILED TO JUSTIFY THE PURCHASES. THE AO H AS NOT APPRECIATED THE FACT THAT THE ASSESSEE IS A TRADER AND HAS SOLD THE ABOV E GOODS PURCHASED FROM THE PARTIES. THE AO NEVER DISPUTED SALES DECLARED FOR THE RELEVANT FINANCIAL YEAR. NO ADVERSE COMMENTS HAS BEEN MADE ON THE BOOKS OF A CCOUNT OR STOCK REGISTERS. WHEN THERE IS NO FINDING AS TO THE INCO RRECTNESS OF BOOKS OF ACCOUNT OR STOCK REGISTERS, PURCHASES FROM THE PARTIES CANN OT BE DISPUTED MERELY ON NON SERVICE OF NOTICE AND ALSO RELYING UPON INFORMA TION RECEIVED FROM SALES-TAX AUTHORITIES. THE CIT(A), AFTER CONSIDERING RELEVAN T SUBMISSIONS OF THE ASSESSEE AND ALSO RELYING UPON CERTAIN JUDICIAL PRECEDENTS I NCLUDING THE DECISION OF ITAT, AHMEDABAD BENCH IN THE CASE OF VIJAY PROTEINS LTD V S ACIT 58 ITD 428 (AHD) DIRECTED THE AO TO ESTIMATE NET PROFIT AT 25% OF TO TAL PURCHASES SHOWN TO HAVE BEEN MADE FROM THE ABOVE TWO PARTIES. AGGRIEVED BY THE CIT(A)S ORDER, THE REVENUE IS IN APPEAL BEFORE US. 4 ITA 4130/MUM/2016 4. NONE APPEARED FOR THE ASSESSEE. WE HAVE HEARD THE LD.DR AND PERUSED MATERIALS AVAILABLE ON RECORD. THE AO MADE ADDITIO N TOWARDS PURCHASES FROM M/S RUMIT ENTERPRISES FOR RS. 173,26,679 AND M/S MU MBAI TRADING CO FOR RS.26,60,625 ON THE GROUND THAT THE ABOVE TWO PARTI ES ARE INVOLVED IN PROVIDING ACCOMMODATION ENTRIES WITHOUT ACTUAL DELI VERY OF GOODS. ACCORDING TO THE AO, THE INFORMATION RECEIVED FROM MAHARASHTR A SALES-TAX DEPARTMENT AND FURTHER ENQUIRIES CONDUCTED DURING THE COURSE O F ASSESSMENT PROCEEDINGS CLEARLY PROVES THAT THE SAID PARTIES ARE HAWALA OPE RATORS NOT CARRYING ON ANY BUSINESS. THE AO FURTHER OBSERVED THAT NOTICES ISS UED U/S 133(6) ARE RETURNED UNANSWERED BY THE POSTAL AUTHORITIES WITH REMARK NO SUCH PERSONS EXISTED IN THE GIVEN ADDRESS. IT IS THE CLAIM OF THE ASSESSEE THAT PURCHASES ARE SUPPORTED BY PROPER BILLS AND VOUCHERS AND THE PAYMENT HAS BE EN MADE THROUGH PROPER BANKING CHANNEL. THE ASSESSEE FURTHER CONTENDED TH AT THE AO HAS NOT DISPUTED SALES DECLARED FOR THE RELEVANT FINANCIAL YEAR AND NO ADVERSE COMMENTS HAS BEEN MADE ON THE BOOKS OF ACCOUNT OR S TOCK REGISTERS. IN THE ABSENCE OF ANY ADVERSE COMMENTS ON BOOKS OF ACCOUNT OR STOCK REGISTERS, PURCHASES CANNOT BE DISPUTED MERELY ON THE GROUND T HAT THE NOTICES ISSUED TO THE PARTIES ARE RETURNED UNSERVED. 5. IT IS AN ADMITTED FACT THAT THE ABOVE TWO PARTIES A RE LISTED AS HAWALA OPERATORS IN THE LIST PREPARED BY MAHARASHTRA SALES -TAX DEPARTMENT. THE 5 ITA 4130/MUM/2016 PARTIES HAVE FILED AFFIDAVIT BEFORE MAHARASHTRA SAL ES-TAX AUTHORITIES WHEREIN THEY HAVE ADMITTED THAT THEY HAVE NOT DONE ANY BUSI NESS, BUT ONLY ISSUED BOGUS PURCHASE BILLS. ALL THESE FACTS CLEARLY PROV E THE FACT THAT THE ABOVE TWO PARTIES ARE INVOLVED IN PROVIDING ACCOMMODATION ENT RIES WITHOUT ACTUAL DELIVERY OF GOODS. UNDER THESE CIRCUMSTANCES, PURC HASES FROM THESE PARTIES CANNOT BE CONSIDERED AS GENUINE. AT THE SAME TIME, THE ASSESSEE HAS FILED NECESSARY EVIDENCES IN THE FORM OF PURCHASE BILLS A ND PAYMENT PROOF TO JUSTIFY THAT THE PURCHASES FROM ABOVE PARTIES ARE GENUINE. THE AO HAS NOT DISPUTED SALES DECLARED BY THE ASSESSEE. THE AO, NEITHER MA DE ANY ADVERSE COMMENTS ON BOOKS OF ACCOUNT NOR FOUND ANY INCONSISTENCY IN STOCK REGISTER. IN THE ABSENCE OF ANY FINDING AS TO INCORRECTNESS OF BOOKS OF ACCOUNT AND STOCK REGISTERS, PURCHASES FROM THE ABOVE PARTIES CANNOT BE DISALLOWED IN TOTO. THEREFORE, CONSIDERING THE OVERALL FACTS AND CIRCUM STANCES OF THE CASE AND ALSO RELYING UPON THE DECISIONS OF HONBLE GUJARAT HIGH COURT IN THE CASE OF VIJAY PROTEINS LTD VS CIT (2015) 58 TAXMAN.COM 414 (GUJ) AND ALSO IN THE CASE OF SMIT P SHETH VS CIT 351 ITE 451 (GUJ), WE ARE OF TH E CONSIDERED VIEW THAT UNDER THESE FACTUAL CIRCUMSTANCES WHAT NEEDS TO BE TAXED IS ONLY THE PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES AND NOT THE TOTAL PURCHA SES FROM THE ABOVE PARTIES. THE MUMBAI BENCH OF THE TRIBUNAL IN SEVER AL CASES HAS TAKEN A CONSIDERED VIEW THAT ESTIMATION OF PROFIT AT 12.5% ON BOGUS PURCHASES WOULD 6 ITA 4130/MUM/2016 MEET ENDS OF JUSTICE. THEREFORE, WE DIRECT THE AO TO ESTIMATE NET PROFIT AT 12.5% ON TOTAL BOGUS PURCHASES FROM THOSE TWO PARTI ES. 6. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DISMI SSED. ORDER PRONOUNCED IN THE OPEN COURT ON 11 TH AUG, 2017. SD/- SD/- (D.T. GARASIA) (G MANJUNATHA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DT : 11 TH AUGUST, 2017 PK/- COPY TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR /TRUE COPY/ BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI