JAYESH J FIFADRA, MUMBAI V. ITO, WARD-2(3), THANE, MUMBAI

ITA 4207/MUM/2017

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 4279 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-10-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2009-2010
• Appeal Filed On: 07-06-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Bogus purchase; Unexplained expenditure; Reassessment proceedings
• Section: 69C; 133(6); 147; 68; 148; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH F MUMBAI BEFORE SHRI C.N. PRASAD (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 4207/MUM/2017 ASSESSMENT YEAR: 2009 - 10 SHRI JAYESH J FIFADRA , A - 406 VINIT APARTMENT, CAPTION SAMEER ROAD, DHANUKARWADIKANDIWALI (WEST) - PIN CODE - 400067 VS. INCOME TAX OFFICER - 2(3), THANE. ROOM NO. 13, B - WING, 6 TH FLOOR, ASHAR IT PARK WAGLE INDUSTRIAL ESTATE ROAD NO. 16 - Z, THANE (W) - 400604 PAN NO. AAGPF9872R APPELLANT RESPONDENT ITA NO. 4215/MUM/2017 ASSESSMENT YEAR: 20 09 - 10 INCOME TAX OFFICER - 2(3), THANE. ROOM NO. 13, B - WING, 6 TH FLOOR, ASHAR IT PARK WAGLE INDUSTRIAL ESTATE ROAD NO. 16 - Z, THANE (W) - 400604 VS. SHRI JAYESH J FIFADRA A - 406 VINIT APARTMENT, CAPTION SAMEER ROAD, DHANUKAR WADIKANDIWALI (WEST) - PIN CODE - 400067 PAN NO. AAGPF9872R APPELLANT RESPONDENT ASSESSEE BY : NONE REVENUE BY : MR. RAJEE V GUB E GOTR A , DR DATE OF HEARING : 22/10/2018 DATE OF PRONOUNCEMENT: 26/10/2018 SHRI JAYESH J. FIFADRA ITA NOS 4207 & 4215/MUM/2017 2 ORDER PER N.K. PRADHAN, AM THE CAPTIONED CROSS APPEALS - ONE BY THE ASSESSEE AND THE ONE BY THE REVENUE ARE DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) - 3 , NASHIK [ IN SHORT CIT(A)] AND ARISE OUT OF THE ASSESSMENT COMPLETED U/S 144 R.W.S. 147 OF THE INCOME TAX ACT 1961 (THE ACT). AS COMMON ISSUES ARE INVOLVED, WE ARE PROCEEDING TO DISPOSE THEM OFF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 2. THOUGH THE CASE WAS FIXED FOR HEARING ON 14.06.2018 AND 22.10.2018, NEITHER THE ASSESSEE NOR HIS AUTHORIZED REPRESENTATIVE APPEARED ON THE ABOVE DATES. AS THERE IS NON - COMPLIANCE BY THE ASSESSEE, WE PROCEED TO DISPOSE OF THIS PRESENT APPEAL BY HEARING THE LD. DR AND EXAMINING THE R ELEVANT MATERIAL ON RECORD. 3 . THE GROUND OF APPEAL FILED BY THE REVENUE READ AS FOLLOWS : 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN RESTRICTING THE DISALLOWANCE MADE U/S 69C FROM RS.2,15,55,520/ - TO RS.26,94,440/ - BY SUSTAINING THE DISALLOWANCE @ 12.5% OF THE TOTAL UNPROVED PURCHASES. 1.1 WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN GRANTING ABOVE RELIEF TO THE ASSESSEE ESPECIALLY WHEN THE CIT(A), IN PA RA 15 OF THE ORDER DATED 29.03.2017, HAS HELD THAT THE PURCHASES OF RS.2,15,55,520/ - MADE BY THE ASSESSEE ARE FROM HAWALA DEALER AND THESE DEALERS ONLY GAVE THE BILLS AND THERE WAS NO ACTUAL SALE AND PURCHASE TRANSACTIONS AND NO TRANSFER OF GOODS. 1.2 WHET HER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN GRANTING THE ABOVE RELIEF TO THE ASSESSEE SHRI JAYESH J. FIFADRA ITA NOS 4207 & 4215/MUM/2017 3 WITHOUT APPRECIATING THE DECISION OF HONBLE GUJARAT HIGH COURT AND APPROVED BY HONBLE SUPREME COURT IN THE CASE OF N.K. PR OTEINS LTD VS DCIT, IN SPECIAL LEAVE APPEAL (CC NO. 769 OF 2017) WHEREIN IT WAS HELD THAT WHEN THE ENTIRE PURCHASES HAVE BEEN FOUND TO BE BOGUS THEN CONFIRMING DISALLOWANCE ON PERCENTAGE BASIS GOES AGAINST THE PRINCIPLE OF SECTION 68 & 69C. 2. THE ORDER OF THE CIT(A) MAY BE VACATED AND THAT OF THE ASSESSING OFFICER MAY BE RESTORED. 4 . THE GROUND OF APPEALS FILED BY THE ASSESSEE READ S AS UNDER: THE LEARNED CIT(A) HAS ERRED IN FACTS AND IN LAW BY PASSING THE APPELLATE ORDER DATED 29.03.2017 CONFIRMING ADDITIONS AMOUNTING TO RS.26,94,440/ - BEING 12.5% OF THE PURCHASES ALLEGED TO BE BOGUS BY THE AO. 5 . BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE HAD FILED RETURN OF INCOME FOR THE IMPUGNED ASSESSMENT YEAR ON 29.09.2009 DECLARING TOTAL INCOME OF RS.5,12,474/ - . THE SAME WAS PROCESSED U/S 143(1) OF THE ACT. THEREAFTER, THE ASSESSING OFFICER (AO) RECEIVED INFORMATION FROM THE SALES TAX DE PARTMENT, GOVERNMENT OF MAHARASHTRA THAT THE ASSESSEE HAD OBTAINED BOGUS PURCHASE BILLS FROM ENTRY PROVIDERS. AS PER THE INFORMATION RECEIVED, THE ASSESSEE HAD OBTAINED BOGUS PURCHASE BILLS AMOUNTING TO RS.2,15,55,520/ - FROM 11 ENTRY PROVIDERS. ON THE BASI S OF THE ABOVE INFORMATION, THE AO REOPENED THE ASSESSMENT BY ISSUING NOTICE U/S 148 OF THE ACT . DURING THE COURSE OF REASSESSMENT PROCEEDINGS, THE AO ISSUED NOTICE U/S 133(6) DATED 16.10.2014 TO THE SAID ENTRY PROVIDERS TO ASCERTAIN THE GENUINENESS OF THE TRANSACTIONS. HOWEVER, THE NOTICES WERE RETURNED UNSERVED BY THE POS TAL DEPARTMENT WITH THE REMARK LEFT AND NOT KNOWN. THEREFORE, SHRI JAYESH J. FIFADRA ITA NOS 4207 & 4215/MUM/2017 4 THE AO ISSUED A SHOW CAUSE NOTICE DATED 10.11.2014 TO THE ASSESSEE TO EXPLAIN AS TO WHY THE PURCHASE OF RS.2,15,55,520/ - SHOULD NOT BE ADDED TO HIS TOTAL INCOME AS UNEXPLAINED EXPENDITURE U/S 69C OF THE ACT. IN RESPONSE TO IT, THE ASSESSEE DID NOT FILE ANY EXPLANATION BEFORE THE AO. IN VIEW OF THE ABOVE, THE AO ON APPRECIATION OF THE CONTENTS IN THE AFFIDAVITS FILED BY THE H AWALA PARTIES BEFORE THE SALES TAX DEPARTMENT; THE IDENTITY OF THE SAID PARTIES BEING NOT PROVED AND THE LACK OF RESPONSE ON THE PART OF THE ASSESSEE TO REPLY TO THE SHOW CAUSE NOTICE ISSUED BY THE AO, CAME TO A CONCLUSION THAT THE SAID PURCHASES FROM THE HAWALA PARTIES WERE BOGUS AND THEREFORE, MADE AN ADDITION OF RS.2,15,55,520/ - U/S 69C OF THE ACT. 6 . AGGRIEVED BY THE ORDER OF THE AO THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT(A). HAVING GONE THROUGH THE SUBMISSIONS OF THE ASSESSEE AND THE ASSESSMENT ORDER PASSED BY THE AO, THE LD. CIT(A) VIDE ORDER DATED 29.03.2017 HELD AS UNDER: ON GOING THROUGH THE FACT S OF THE CASE DISCUSSED ABOVE, I AM OF THE CONSIDERED OPINION THAT THE PURCH ASES OF RS.2,15,55,520/ - MADE BY THE APPELLANT ARE FROM HAWALA DEALER. THESE DEALERS ONLY GAVE THE BILLS AND THERE WAS NO ACTUAL SALE AND PURCHASE TRANSACTIONS AND NO TRANSFER OF GOODS. THEREFORE, IT CAN BE INFERRED THAT THE APPELLANT HAD MADE PURCHASES IN THE OPEN MARKET AND HAD OBTAINED BILLS FROM THE HAWALA OPERATORS. IT IS NOT KNOWN AT WHAT PRICE THE APPELLANT ACTUALLY MADE THE PURCHASES FROM THIRD PARTIES. UNDER SUCH CIRCUMSTANCES THE LIKELIHOOD OF THE PURCHASES BEING INFLATED CANNOT BE RULED OUT AND T HERE IS NO MATERIAL TO DISLODGE SUCH FINDINGS. IN THIS PROCESS THE APPELLANT SAVED ON THE SALES - TAX/VAT AND ENHANCED HIS PROFIT MANIPULATING THE PURCHASES. THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE CIT - 1 VS. SIMIT P. SHETH IS APPLICABLE TO SHRI JAYESH J. FIFADRA ITA NOS 4207 & 4215/MUM/2017 5 APP ELLANT CASE. THEREFORE, IT WOULD BE APPROPRIATE IF 12.5% OF THE AMOUNT OF UNPROVED PURCHASES OF RS.2,15,55,520/ - AMOUNTING TO RS.26,94,440/ - IS DISALLOWED TO THE APPELLANT, WHICH WILL BE OVER AND ABOVE THE PROFITS SHOWN BY THE APPELLANT IN HIS RETURN OF IN COME. 7. BEFORE US, THE LD. DR SUBMITS THAT FROM THE AFFIDAVITS FILED BY THE HAWALA PARTIES WITH THE SALES TAX DEPARTMENT, GOVERNMENT OF MAHARASHTRA, IT IS EVIDENT THAT THE ASSESSEE HAD INDULGED IN BOGUS PURCHASES FROM THEM. ALSO THE NOTICES U/S 133(6) IS SUED BY THE AO TO THE HAWALA PARTIES WERE RETURNED BY THE POSTAL AUTHORITIES WITH THE REMARK LEFT AND NOT KNOWN. FURTHER, THE ASSESSEE FAILED TO REPLY THE SHOW CAUSE NOTICE ISSUED BY THE AO TO EXPLAIN AS TO WHY THE PURCHASES FROM THE SAID PARTIES SHOUL D NOT BE TREATED AS BOGUS. THEREFORE, THE LD. DR MAKES A STRONG PLEA THAT THE ADDITION OF RS.2,15,55,520/ - MADE BY THE AO U/S 69C BE CONFIRMED. 8. WE HAVE HEARD THE LD. DR AND PERUSED THE RELEVANT MATERIALS ON RECORD. IN THE CASE OF CIT VS. SIMIT P. SHETH (2013) 38 TAXMANN.COM (GUJ), THE HONBLE GUJARAT HIGH COURT HAS HELD THAT WHERE PURCHASES WERE NOT BOGUS BUT WERE MADE FROM PARTIES OTHER THAN THOSE MENTIONED IN THE BOOKS OF ACCOUNT, NOT ENTIRE PURCHASE PRICE BUT ONLY PROFIT ELEMENT EMBEDDED IN SUCH PURC HASES CAN BE ADDED TO INCOME OF THE ASSESSEE. THAT BEING THE POSITION, NOT THE ENTIRE PURCHASE PRICE BUT ONLY THE PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES CAN BE ADDED TO THE INCOME OF THE ASSESSEE. THE HONBLE HIGH COURT REFERRED TO A SIMILAR VIEW TAKEN IN THE CASE OF CIT VS. VIJAY M. MISTRY CONSTRUCTION LTD. [2013] 355 ITR 498 (GUJ) AND CIT VS. BHOLANATH POLY FAB (P) LTD. [2013] 355 ITR 290 (GUJ). SHRI JAYESH J. FIFADRA ITA NOS 4207 & 4215/MUM/2017 6 IN THE INSTANT CASE, THE LD. CIT(A) HAS RIGHTLY FOLLOWED THE ABOVE DECISION IN SIMIT P. SHETH (SUPRA) AND RESTRICTED THE DISALLOWANCE TO 12.5% OF THE UNPROVED PURCHASES OF RS.2,15,55,520/ - WHICH AMOUNTS TO RS.26,94,440/ - . WE UPHOLD THE ABOVE ORDER OF THE LD. CIT(A). 9. IN THE RESULT, BOTH THE APPEALS ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 26/10/ 2018. SD/ - SD/ - ( C.N. PRASAD ) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED: 26/10/2018 RAHUL SHARMA, SR. P.S. 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 . BY ORDER, //TRUE COPY// ( SR. PRIVATE SECRETARY ) ITAT, MUMBAI