ACIT,CIR--1, THANE V. DEVILAL B.JAIN, THANE

ITA 4230/MUM/2017

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 9647 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-06-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2010-2011
• Appeal Filed On: 08-06-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D G PANSARI
• Keywords: Bogus purchase; Unexplained cash credit; Additional evidence; Accommodation entries
• Section: 133(6); 131; 68

Judgement Text

IN THE INC OME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE HONBLE SH. SANDEEP GOSAIN , JM & HONBLE SH. M. BALAGANESH , A M ./ I.T.A. NO . 4230/MUM/2017 ( / ASSESSMENT YEAR: 2010 - 11 ) IN THE MATTER OF: - A CIT CIR - 1, R. NO. 22, B - WIONG, 6 TH FLOOR, ASHAR IT PARK, WAGLE INDUSTRIAL ESTATE, THANE (W) - 400 604 / VS. SHRI DEVILAL B. JAIN, PROP. OF M/S NEW MARBLE HOUSE, 19 - C, BIHARI CHAMBERS, AMBEDKAR ROAD, THANE (W) - 400 601 ./ ./ PAN NO. AA ACD2920M ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI D. G. PANSARI, DR / RESPONDENTBY : SHR I NILESH JOSHI , AR / DATE OF HEARING : 25.04 .201 9 / DATE OF PRONOUNCEMENT : 17.06.2019 / O R D E R SANDEEP GOSAIN, J UDICIAL MEMBER : THE PRESENT APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE ORDER OF COMMIS S IONER OF INCOME TAX (APPEALS) - 3 , NASIK 2 I.T.A. NO. 4230 /MUM/201 7 SHRI DEVILAL B. JAIN (CAMP OFFICE THANE), DATED 07.03.17 FOR AY 2010 - 11 ON THE GROUNDS MENTIONED HEREIN BELOW: - 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 ON ACCOUNT OF BOGUS PURCHASES OF RS. 2,64,07,574/ - TO RS. 26,40,757/ - BY SUSTAINING THE DISALLOWANCE @ 10% 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 WITHOUT APPRECIATING THE FINDING OF THE A.O. IN THE REMAND REPORT ON THIS ISSUE. 1.2 WHETHER ON THE FACTS AND IN THE CI RCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN RESTRICTING THE DISALLOWANCE MADE ON ACCOUNT BOGUS CREDITORS OF RS. 73,30,003/ - TO RS. 5,93,451/ - BY SUSTAINING THE DISALLOWANCE @ 10% OF THE TOTAL UNPROVED PURCHASES AND. 1.3 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 WITHOUT APPRECIATING THE FINDING OF THE A.O. IN THE REMAND REPORT ON THIS ISSUE. 1.4 WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) ERRED IN GRANTING 3 I.T.A. NO. 4230 /MUM/201 7 SHRI DEVILAL B. JAIN THE ABOVE RELIEF TO THE ASSESSEE WITHOUT APPRECIATING THE DECISION OF HON'BLE GUJARAT HIGH COURT AND APPROVED BY HON'BLE SUPREME COURT IN THE CASE OF N. K. PROTEINS LTD VS DCIT, IN SPECIAL LEAVE APPEAL (CC NO. 76 9 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 MAYBE RESTORED. 3. THE ASSESSEE CRAVES LEAVE TO ADD, AMEND, ALTER OR DELETE ANY GROUND OF APPEAL. 2 . AS PER THE FACTS OF THE PRESENT CASE, THE ASSESSEE IS PROPRIETOR OF M/S NEW MARBLE HOUSE AND IS ENGAGED IN THE BUSINESS OF MARBEL. ON THE BASIS OF INFORMATION RECEIVED FROM THE INVESTIGATION WING, AO NOTICED THAT ASSESSEE WAS A BENEFICIARY OF HAWALA ENTRY OPERATORS. THUS AFTER CARRYING OUT NECESSARY VERIFICATIONS, ASSESSMENT ORDER U/ S. 143( 3) WAS PASSED BY THE AO THEREBY MAKING ADDITIONS AND DETERMINING THE INCOME OF THE ASSESSEE AT RS. 3,48,00,800/ - 4 I.T.A. NO. 4230 /MUM/201 7 SHRI DEVILAL B. JAIN 3. AGGRIEVED BY THE ORDER OF AO, ASSESSEE PREFERRED APPEAL BEFORE LD. CIT(A) AND LD. CIT(A) AFTER CONSIDERING THE CASE OF BOTH THE PARTIES PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. 4. AGGR IEVED BY THE ORDER OF LD. CIT(A), REVENUE HAS FILED THE PRESENT APPEAL BEFORE US ON THE GROUNDS MENTIONED HEREIN ABOVE. 5. ALL THE GROUND S RAISED BY THE REVENUE ARE INTER RELATED AND INTER RELATED AND RELATES TO CHAL LENGING THE ORDER OF LD. CIT(A) IN RESTRICTING THE DISALLOWANCE MADE ON ACCOUNT OF BOGUS PURCHASES BY SU STAINING THE DISALLOWANCE @ 10% OF THE TOTAL UNPROVED PURCHASES, THEREFORE WE THOUGHT IT FIT TO DISPOSE OF THE SAME BY THIS COMMON ORDER. 6 . WE HAVE HEARD THE COUNSELS FOR BOTH THE PAR TIES AT LENGTH AND WE HAVE ALSO PERUSED THE MATERIAL PLACED ON RECORD, JUDGMENT CITED BY THE PARTIES AS WELL AS THE ORDERS PASSED BY REVENUE AUTHORITIES. 5 I.T.A. NO. 4230 /MUM/201 7 SHRI DEVILAL B. JAIN BEFORE WE DECIDE THE MERITS OF THE CASE, IT IS NECESSARY TO EVALUATE THE ORDERS PASSED BY LD. CIT( A). THE LD. CIT(A) HAS DEALT WITH THE ABOVE GROUNDS RAI SED BY THE REVENUE IN PARA NO. 5 .4 TO 5.6 & 6.3 TO 6.7 OF ITS ORDER AND THE SAME IS REPRODUCED BELOW: - 5.4 . I HAVE CAREFULLY CONSIDERED THE APPELLANT'S SUBMISSIONS, OBSERVATIONS OF THE AO IN THE ASSESSMENT ORDER AND THE REMAND REPORT. THE APPELLANT HAD SHOWN PURCHASES AMOUNTING TO RS. 2,64,07,574/ - FROM VARIOUS PARTIES WHICH APPEARED IN THE LIST OF SALES - TAX DEPARTMENT WHO HAD INDULGED IN HAWALA TRANSACTIONS I.E. PROVIDING ONLY BILLS WITHOUT THERE IS BEING ANY ACTUAL PURCHASE OR SALE TRANSACTION. 5.5. BEFORE THE CASE IS DISCUSSED, IT IS IMPORTANT TO KNOW THE BACKGROUND IN WHICH THE CASE OF THE APPELLANT WAS SE LECTED FOR SCRUTINY. I. AS PER SECTION 3 OF THE MVAT ACT, 2002, EVERY REGISTERED DEALER, IS LIABLE TO PAY TAX ON A SALE TRANSACTION WITH A PURCHASING DEALER WHOSE TURNOVER OF SALES OR PURCHASES HAS EXCEEDED RUPEES FIVE LAKH. UNDER THE SCHEME OF THE ACT, T HE PURCHASING DEALER IS ALSO ENTITLED TO CLAIM BY WAY OF A SET OFF UNDER SECTION 48 THE TAX PAID ON HIS PURCHASES AS ITC (INPUT TAX 6 I.T.A. NO. 4230 /MUM/201 7 SHRI DEVILAL B. JAIN CREDIT). THE SELLING DEALER ISSUES A TAX INVOICE, WHICH SHOWS THE AMOUNT OF TAX RECOVERED FROM THE PURCHASING DEALER. THE SA LE MADE BY THE SELLING DEALER NEEDS TO BE ACCOUNTED IN HIS TURNOVER OF SALES WHILE FILING THE TAX RETURN AND PAY THE DUE TAXES. THE SALES TAX AUTHORITIES FOUND THAT A LARGE NUMBER OF SELLING DEALERS HAD NEITHER FILED THEIR RETURNS NOR PAID THE TAXES COLLEC TED BY THEM FROM PURCHASING DEALERS. THE SALES TAX AUTHORITIES DENIED THE BENEFIT OF SET - OFF OF INPUT TAX CREDIT TO PURCHASING DEALERS, WHO WENT INTO APPEAL BEFORE HON'BLE BOMBAY HIGH COURT AGAINST THE SAID ORDERS. DURING THE COURSE OF HEARING IN WRIT PETITION NO.33 OF 2012 IN CASE OF M/S.MAHALAXMI COTTON GINNING VS THE STATE OF MAHARASHTRA & ORS ON 11 MAY, 2012 AND OTHER SIMILAR CASES, BEFORE BOMBAY HIGH COURT, STATE GOVERNMENT FILED AFFIDAVITS SUBMITTING THAT INVESTIGATION REVEALED THE EXISTENCE OF LA RGE - SCALE HAWALA TRANSACTIONS WHERE THERE WAS NO SALE OF GOODS AND THE SELLING DEALER HAD MERELY ISSUED TAX INVOICES TO THE PURCHASING DEALER IN ORDER TO DEFRAUD THE REVENUE AND TO ALLOW THE BENEFIT OF A SET OFF. THE MODUS OPERANDI DISCUSSED IN THE SAID JU DGEMENT IS REPRODUCED IN THE FOLLOWING PARAS. 7 I.T.A. NO. 4230 /MUM/201 7 SHRI DEVILAL B. JAIN 13. AFTER THE ENFORCEMENT OF THE MVAT ACT, 2002, WITH EFFECT FROM 1 APRIL 2005, THE STATE GOVERNMENT INTRODUCED E - FILING OF RETURNS. WITH THE INTRODUCTION OF ELECTRONIC RETURNS, THE OPERATING SYSTEM HAS BEEN S O DESIGNED SO THAT IT CAN DETECT MISMATCHES BETWEEN THE CLAIMS OF INPUT CREDIT WHERE THESE DO NOT MATCH WITH A DEPOSIT OF TAX IN THE GOVERNMENT TREASURY. THIS WOULD HAVE BEEN AN INSUPERABLE TASK IN THE CONVENTIONAL MANUAL PROCESSES BUT IS MADE POSSIBLE WIT H THE INTRODUCTION OF E - FILING. NEARLY 35000 NOTICES HAVE BEEN ISSUED TO HAWALA BENEFICIARIES INVOLVING A QUANTUM OF NEARLY RS. 1,000 CRORES. --------- THE STATE HAS EXPLAINED THAT IT DOES NOT AT AN ADMINISTRATIVE LEVEL REJECT CLAIMS FOR SET OFF MERELY ON THE GROUND OF A MISMATCH. WHERE INVESTIGATIONS REVEAL HAWALA TRANSACTIONS OR ACTS OF FRAUD, COLLUSION OR CONNIVANCE, STEPS ARE TAKEN TO ISSUE SUMMONS TE THE SELLING DEALERS AND TO PROCEED AGAINST THEM BY RECOURSE TO DUE PROCESS OF LAW. ALSO, IN THOSE CASES , WHERE NO ELEMENT OF FRAUD, COLLUSION OR CONNIVANCE ON THE PART OF THE PURCHASING DEALER IS SHOWN THE AUTHORITIES WOULD TAKE STEPS TO PURSUE THE SELLING DEALER. IF THE STEPS 8 I.T.A. NO. 4230 /MUM/201 7 SHRI DEVILAL B. JAIN ADOPTED AGAINST THE SELLING DEALER RESULT IN A RECOVERY OF THE TAX, A SET OFF OR REFUND, AS THE CASE MAY BE, WOULD BE GRANTED TO THE PURCHASING DEALER. 10. -------- DURING THE COURSE OF THE HEARING OF SEVERAL COMPANION PETITIONS, THE STATE GOVERNMENT HAD FILED AFFIDAVITS IN REPLY POINTING OUT THAT INVESTIGATION REVEALED THE EXISTENCE OF HAVALA TRANSACTIONS WHERE THERE WAS NO SALE OF GOODS AND THE SELLING DEALER HAD MERELY ISSUED TAX INVOICES TO THE PURCHASING DEALER IN ORDER TO DEFRAUD THE REVENUE AND TO A LLOW THE BENEFIT OF A SET OFF. IN THE PRESENT CASE IT HAS BEEN STATED ON AFFIDAVIT BY THE STATE THAT A NUMBER OF DEALERS FROM WHOM THE PETITIONER PURCHASED GOODS ARE UNTRACEABLE. (ONLY RELEVANT PARAS REPRODUCED) II. IN THE SAID APPEALS, THE PURCHASING DEALERS TOOK A PLEA BEFORE THE HIGH COURT THAT AS HE HAS PAID THE TAX TO THE SELLING DEALER, HE SHOULD NOT BE DENIED THE BENEFIT OF A SET OFF OF TAXES PAID, WHICH IS ARBITRARY. HOWEVER THE STATE GOVERNMENT IN AN AFFIDAVIT BEFORE THE COURT SUBMITTED THAT INVESTIGATIONS REVEALED THAT THERE WAS A ,EXISTENCE OF LARGE - SCALE HAWALA RACKET, 9 I.T.A. NO. 4230 /MUM/201 7 SHRI DEVILAL B. JAIN WHER EIN THE SELLING DEALERS M ERELY ISSUED TAX INVOICES TO THE PURCHASING DEALER WITHOUT ANY SALE OF GOODS. AS PER THE INFORMATION ON THE WEBSITE OF SALES TAX DEPARTMENT, WWW.MAHAVAT.GOV, THE INVESTIGATIONS REVEALED 2162 ALLEGED NON - GENUINE DEALERS WHO HAD ISSU ED FALSE BILLS WITHOUT DELIVERY OF GOODS AS ON APRIL 2014. THERE WERE ABOUT 35,000 SUCH HAWALA BENEFICIARIES WHO TOOK THE BILLS FROM SUCH SELLING DEALERS WITHOUT ANY PURCHASE OF GOODS. THE COURT DID NOT ACCEPT THE PLEA OF THE PURCHASING DEALER AND HELD THA T IF THE SET OFF IS ALLOWED TO THE PURCHASING DEALER THOUGH THE TAX HAS NOT BEEN PAID ACTUALLY, IT WOULD DEFEAT THE LEGITIMATE INTERESTS OF THE REVENUE. III. FROM THE DISCUSSION ABOVE, IT CAN BE MADE OUT THAT THE PURCHASING DEALERS ALLEGEDLY PURCHASED TH E GOODS FROM NON - GENUINE DEALERS, WHO DID NOT SUPPLY ANY GOODS BUT ISSUED ONLY BILLS TO PURCHASING DEALERS. THE SALES TAX DEPARTMENT MADE FURTHER ENQUIRIES AND FOUND THAT THE SELLING DEALERS WERE NOT AVAILABLE AT THE GIVEN ADDRESSES. FURTHER THE SELLING DE ALERS HAVE NOT FILED ANY RETURNS SHOWING THE SALES MADE TO THE PURCHASING DEALERS. THE SALES TAX DEPARTMENT COULD TRACE AND RECORD OF STATEMENTS OF SUCH SELLING DEALERS, WHO CATEGORICALLY STATED THAT THERE WAS NO SUPPLY OF GOODS, ONLY THE BILLS WERE ISSUED . FURTHER THE CHEQUES RECEIVED FROM THE 10 I.T.A. NO. 4230 /MUM/201 7 SHRI DEVILAL B. JAIN PURCHASING DEALERS AGAINST SUCH BILLS, WERE DEPOSITED IN THEIR BANK ACCOUNTS AND THE CASH WAS WITHDRAWN AND PAID BACK TO THE PURCHASING DEALER AFTER DEDUCTION OF FIXE* AMOUNT OF COMMISSION, WHICH WAS ROUGHLY AT THE R ATE OF 1%. THE REFUNDED AMOUNT ALSO INCLUDED THE SALE TAX COLLECTED FROM THE PURCHASING DEALER. IN THIS WAY, THERE WAS A COLLUSIVE TRANSACTION BETWEEN THE PURCHASING DEALER AND THE SELLING DEALER, WHO DEFRAUDED THE REVENUE BY CLAIMING SET OFF OF TAXES, WHI CH WERE ACTUALLY NOT PAID. AS THE SELLING DEALER HAD REFUNDED THE VAT AMOUNT ALONG WITH THE AMOUNT RECEIVED FOR ALLEGED PURCHASES, IT WAS NATURAL THAT THE SELLING DEALER DID NOT FILE ANY RETURNS AND SUBSEQUENTLY DID NOT DEPOSIT TAX INTO THE GOVERNMENT ACCO UNT. THE SALES TAX DEPARTMENT RECOVERED THE TAX FROM SUCH PURCHASING DEALERS. 5.6. ON GOING THROUGH THE FACTS OF THE CASE DISCUSSED ABOVE, IT IS SEEN THAT DURING ASSESSMENT, THE APPELLANT HAD SUBMITTED THE PURCHASE AND SALES BILLS, QUANTITATIVE TALLY OF TH E STOCK. HOWEVER, THE ASSESSEE WAS NOT ABLE TO PRODUCE THE CONFIRMATIONS FROM THE SAID SUPPLIERS OR PRODUCE THEM FOR PROVING THE GENUINENESS OF THE PURCHASES. ON THE OTHER HAND, THE AO HAD THE AFFIDAVITS OF THE SUPPLIERS AND HAD ALSO MADE ENQUIRIES UNDER 133(6) AND FOUND THESE SUPPLIERS NOT AVAILABLE FOR VERIFICATION. UNDER THESE 11 I.T.A. NO. 4230 /MUM/201 7 SHRI DEVILAL B. JAIN CIRCUMSTANCES THE AO ADDED THE PURCHASES BEING NON GENUINE. DURING APPELLATE PROCEEDINGS, THE ASSESSEE HAS PRODUCED AFFIDAVITS FROM THESE SUPPLIERS IN WHICH THEY HAVE STATED THAT THEY HAD GIVEN AFFIDAVITS TO MVAT AUTHORITIES UNDER PRESSURE. THEY HAVE ALSO GIVEN CONFIRMATION OF ACCOUNTS SHOWING THAT THEY HAVE RECEIVED THE PAYMENTS AND HAVE SUPPLIED THE GOODS. THE AO IN THE REMAND REPORT IS NOT SATISFIED WITH THE EXPLANATION OF THE A SSESSEE BECAUSE HE WANTED TO EXAMINE THESE SUPPLIERS TO ASCERTAIN THE TRUTH. HOWEVER, NEITHER THE ASSESSEE COULD PRODUCE THEM NOR THE AO COULD LOCATE THEM. AS PER THE INSPECTORS REPORT THESE PARTIES ARE STILL NOT AVAILABLE. S R. NO. NAME OF THE PARTY REMARKS D. NO. TRANSPORT RECEIPTS, STATEMENT OF BANK ACCOUNTS. 3. LALIT KUMAR KISHORMAL MEHTA PROP OF SHRI. ADINATH ENTERPRISES FILED AFFIDAVIT, CONFIRMATION OF ACCOUNT FOR F.Y. 2009 - 10 AND LEDGER ACCOUNT FOR FY. 2008 - 09, AND 12 - 13, BILLS, TRANSPORT RECEIPTS, STATEMENT OF BANK ACCOUNTS. 376 - 394 4. HARESH RUPAREL PROP. OF SHREE JALARAM ENTERPRISES FILED AFFIDAVIT, CONFIRMATION OF ACCOUNT FOR F.Y. 2009 - 10, BILLS, TRANSPORT RECEIPTS AND SATEMENT OF BANK ACCOUNTS. 395 - 411 IT WAS SUBMITTED BY THE ASSESSEE THAT IN VIEW OF SUBMISSIONS ABOVE, THE ADDITION FOR THE REASON THAT PAYMENT WAS NOT MADE TO THE SUNDRY CREDITORS DURING THE YEAR IS UNCALLED FOR. 12 I.T.A. NO. 4230 /MUM/201 7 SHRI DEVILAL B. JAIN 6.3. THE ADDITIONAL EVIDENCE SUBMITTED BY THE ASSESSEE WAS FORWARDED TO THE AO VIDE LETTER DATED 20.1 0.2014. VIDE LETTER DATED 23 - 01 - 2017, 2. UNPROVED SUNDRY CREDITORS: 2.1. DURING THE COURSE OF ASSESSMENT PROCEEDINGS FROM THE DETAILS PLACED ON RECORD IT WAS SEEN THAT THE ASSESSEE HAD SHOWN FOLLOWING NAMES IN LIST OF SUNDRY CREDITORS: SR. NO. NAME OF THE SUPPLIERS AMOUNT (RS.) 1. M/S MEHTA ENTERPRISES 10,00,827 2. M/S SATYAM TRADING CO. 13,91,900 3 SH. ADINATH ENTERPRISES 19,91,130 4 SHREE JALARAM ENTERPRISES 15,50,656 5 M/S SHUBHAM ENTERPRISES 13,95,490 TOTAL 73,30,003 2.2. DURING THE ASSESSMENT PROCEEDINGS THE INSPECTOR WAS ASKED TO VISIT ALL THESE ADDRESSES. THE INSPECTOR HAS REPORTED NON - EXISTENCE OF THESE PARTIES OR THE ADDRESSES ON THE GIVEN ADDRESS. THEREFORE THE AMOUNT OF RS. 73,30,003/ - WERE TREATED AS UNEXPLAINED CASH CREDIT U/S 68 OF THE IT ACT AND ADDED TO TOTAL INCOME BY THE AO. 13 I.T.A. NO. 4230 /MUM/201 7 SHRI DEVILAL B. JAIN 2.3. DURING THE REMAND PROCEEDINGS A LETTER DATED 11.11.2016 WAS ISSUED TO THE ASSESSEE TO PRODUCE THE ABOVE MENTIONED PARTIES BEFORE THE UNDERSIGNED FOR VERIFICATION. HOWEVE R, IN RESPONSE TO THIS LETTER ASSESSEE HAS EXPRESSED INABILITY TO PRODUCE THE ABOVE PARTIES BEFORE THE UNDERSIGNED TO VERIFY THE GENUINENESS OF THE TRANSACTIONS. THEREFORE, STATEMENT OF ASSESSEE SH. DEVILAL JAIN WAS RECORDED ON 12.01.2017. IN HIS SWORN STA TEMENT, ASSESSEE IN REPLY TO Q. NO. 9, STATED THAT HE HAD MADE PURCHASES FROM THESE PARTIES DURING THE FY. 2008 - 09. FURTHER, HE STATED THAT HE HAS CLEARED ENTIRE DUES FROM THE ABOVE SAID PARTIES EXCEPT ONE PARTY SH. JALARAM ENTERPRISES OF RS. 15,50,656/ - . IN SUPPORT OF HIS CLAIM HE HAS SUBMITTED BANK STATEMENTS REFLECTING PAYMENTS AND LEDGER ACCOUNT OF THESE PARTIES. 5.4. FROM THE ABOVE FACTS AND STATEMENTS RECORDED U/S 131 OF THE ACT, IT IS CRYSTAL CLEAR THAT: I. AS PER INSPECTOR'S REPORT THES E PARTIES ARE NON - EXISTENCE. II. ASSESSEE IS REPEATEDLY FAILS TO PRODUCE THESE PARTIES FOR THE VERIFICATION. III. THE PROVED BOGUS PARTY M/S. SHUBHAM 'ENTERPRISES ALSO SHOW CREDIT OF RS.13.95.490/ - . 14 I.T.A. NO. 4230 /MUM/201 7 SHRI DEVILAL B. JAIN IV. ASSESSEE IS ONLY SUBMITTING BANK STATEMENTS AND LEDGER ACCOUNT OF THESE PARTIES. PAYMENTS IS MADE THROUGH THE BANKING CHANNELS ITSELF IS NOT A CONCLUSIVE PROVES FOR THE GENUINENESS OF THE TRANSACTIONS. IN THIS REGARDS RELIANCE MAY BE PLACED ON THE HON'BLE SUPREME COURT JUDGMENTS IN THE C ASE OF CIT VS. MAOHANKALA (2007) 291 ITR 278 (SC). 6.4 IN RESPONSE TO THE REMAND REPORT , IT WAS STATED BY THE ASSESSEE BY SUBMISSION DATED 23.02.2017 AND 06.03.2017 THAT IN MARBLE BUSINESS, THE PURCHASES ARE MADE THROUGH THE AGENT AND ASSESSEE WAS ABLE TO DISCHARGE ITS ONUS BY PROVIDING CONFIRMATIONS FROM THE CREDITORS AND ALSO AFFIDAVITS FROM THEM HAVING THE MATERIAL SUPPLIED. AS THE ASSESSEE NEVER CAME IN DIRECT CONTACT WITH THE| SUPPLIERS, THEREFORE IT IS NOT POSSIBLE TO THE ASSESSEE TO PRODUCE THEM. F URTHER THE ASSESSEE HAS PROVIDED COPIES OF THE INVOICES, LEDGER ACCOUNTS, BANK STATEMENTS, STOCK STATEMENTS AND COPY OF THE VAT RETURN TO PROVE THAT THE ASSESSEE MADE THE PURCHASES FROM THE CREDITORS. HE ALSO SUBMITTED QUANTITATIVE DETAILS IN RESPECT OF TH ESE FOUR CREDITORS TO SHOW THAT THERE ARE SALES AGAINST THE PURCHASES MADE FROM THESE SUPPLIERS. HE ALSO SUBMITTED THAT THE AO IS NOT JUSTIFIED IN MAKING THE ADDITION ONLY BECAUSE THERE ARE CREDIT BALANCES AT THE END OF THE ASSESSMENT YEAR. HE SUBMITTED TH AT HE' HAD SUBMITTED LEDGER ACCOUNTS OF 15 I.T.A. NO. 4230 /MUM/201 7 SHRI DEVILAL B. JAIN THESE PARTIES OF SUBSEQUENT YEARS TO SHOW THAT ASSESSEE HAS PURCHASED MATERIAL FROM THESE PARTIES IN SUBSEQUENT YEARS AND WAS ALSO MAKING PAYMENTS BY CHEQUE. THE ACCOUNTS STATEMENT SHOWS THE GENUINENESS OF THESE PERSONS AND THERE ARE NO CREDIT BALANCES IN SUBSEQUENT YEARS AS THE ENTIRE PAYMENTS HAVE BEEN MADE. HE SUBMITTED THAT THE AO HAS NOT EXAMINED THE LEDGER ACCOUNTS OF SHUBHAM ENTERPRISES A/ID JALARAM ENT ERPRISES, WHERE ALSO THE PAYMENTS HAVE BEEN MADE IN SUBSEQUENT YEARS. 6.5 ON GOING THROUGH THE AFFIDAVITS OF THESE FOUR CREDITORS, IT IS NOTICED THAT THE WORDING OF THE AFFIDAVIT IS SAME AS THAT OF HAWALA DEALERS, DISCUSSED IN PARA 5.1 ABOVE. IN THEIR AFFI DAVITS, THESE SUPPLIERS HAVE ALSO MENTIONED THAT THERE WAS VAT SURVEY AND VAT AUTHORITIES TAKEN DECLARATIONS UNDER PRESSURE THAT THEY HAVE NOT SUPPLIED GOODS TO DEVILAL JAIN. WHEN THESE FACTS WERE CONFRONTED TO SHRI JOSHI VIDE ORDER SHEET DATED 06.02.2017, HE STATED THAT NONE OF THESE PARTIES HAVE BEEN LISTED AS HAWALA DEALERS BY SALES TAX AUTHORITIES. HE ALSO STATED THAT NEITHER THE AO HAS DOUBTED THE PURCHASES FROM THESE 4 SUPPLIERS NOR THE SALE TAX AUTHORITIES TREATED 4HEM AS HAWALA DEALERS. HE REITERATE D THAT IN MARBLE BUSINESS, THE PURCHASES ARE RS0E THROUGH THE BROKER ONLY AND THE ASSESSEE HARDLY COMES IN DIRECT CONTACT WITH HE PLEADED THAT IN 16 I.T.A. NO. 4230 /MUM/201 7 SHRI DEVILAL B. JAIN ORDER TO PROVE THE GENUINENESS OF THESE PURCHASES, THE ASSESSEE HAD ASKED THE BROKER TO GET THEIR CONFIRMATIO NS AND AFFIDAVITS FROM THESE PARTIES. HE FURTHER STATED THAT IT IS BY MISTAKE THE SAME WORDINGS WHICH WAS APPLICABLE IN THE CASE OF HAWALA DEALERS HAS BEEN COPIED IN CASE OF THESE SUPPLIERS ALSO. HE ADDED THAT THE AO HAD NOT DISALLOWED THE PURCHASES BUT HA D ADDED THESE CREDITS U/S 68 6.6 I HAVE GONE THROUGH THE ASSESSMENT ORDER, THE 'ADDITIONAL EVIDENCE SUBMITTED BY THE ASSESSEE DURING REMAND PROCEEDINGS, THE REMAND REPORT AND SUBMISSIONS OF THE ASSESSEE FROM TIME TO TIME. AS FAR AS THE ADDITION IN RESPECT OF THESE 5 CREDITORS IS CONCERNED, THE AO HAD ADDED AMOUNT OF RS. 77,30,003/ - U/S 68, WHICH INCLUDED AMOUNT OF RS. 13,95,490 / - , THE CREDIT BALANCE IN CASE OF SHUBHAM ENTERPRISE WHICH WAS ALSO A HAWALA DEALER. THERE WAS NO INFORMATION OR ALLEGATION AGAINST REMAINING 4 PARTIES BEING INVOLVED IN ANY SALE TAX VIOLATION. THE ASSESSEE ON HIS PART DISCHARGED ITS ONUS BY SUBMITTING COPIES OF THE BILLS, BANK STATEMENTS, QUANTITATIVE TALLY OF THE STOCK TO SHOW THAT THE PURCHASES HAVE BEEN MADE AND THERE ARE CORRESPON DING SALES AGAINST THESE PURCHASES. THE ASSESSEE ALSO SHOWED THAT IN SUBSEQUENT YEARS, PAYMENTS HAVE BEEN MADE TO ALL THE 5 PARTIES INCLUDING SHUBHAM ENTERPRISES ARID JALARARH 17 I.T.A. NO. 4230 /MUM/201 7 SHRI DEVILAL B. JAIN ENTERPRISES. THEREFORE IT WO ULD NOT BE APPROPRIATE TO MAKING ADDITION U/S 68 IN RESPECT OF THESE CREDITORS. IN THE CASE OF CIT VS. VARDHMAN OVERSEAS LTD. HON'BLE DELHI HIGH COURT HAS HELD THAT NO ADDITION CAN BE MADE UNDER SECTION 41(1) UNLESS IT IS SHOWN THAT LIABILITY HAD CEASED TO EXIST.. IN CIT VS. SUGAULI SUGAR WORKS LTD, HON'BLE SUPREME COURT HAS HELD THAT THE LIABILITY CEASED TO EXIST OR NOT WAS NOT A MATTER TO BE DECIDED BY CONSIDERING THE ASSESSEE'S CONDUCT ALONE, BUT WAS A MATTER TO BE DECIDED ONLY IF THE CREDITOR WAS ALSO BEFORE THE CONCERNED AUTHORITY AND THAT IN THE ABSENC E OF THE CREDITOR IT IS NOT POSSIBLE FOR THE CONCERNED AUTHORITY TO COME TO THE CONCLUSION THAT THE DEBT WAS BARRED BY LIMITATION AND HAD BECOME UNENFORCEABLE. THERE ARE MANY CIRCUMSTANCES WHICH MAY ENABLE THE CREDITOR TO COME WITH A PROCEEDING FOR ENFORCE MENT OF THE DEBT EV EN AFTER EXPIRY OF THE NORMAL PE RIOD OF LIMITATION AS PROVIDED IN THE LIMITATION ACT. IN CIT VS. BHOGILAL RAMJIBHAI ATARA 222TAXMAN 0313, HON'BLE GUJRAT HIGH COURT HELD THAT THERE WAS NOTHING ON RECORD TO SUGGEST THAT THERE WAS REMISSION OR CESSATION OF LIABILITY. THE AO HAS NOT BROUGHT OUT ANY FACTS ON RECORD THAT THE LIABILITY'HAS CEASED TO EXIST. ON THE OTHER HAND, THE LEDGER ACCOUNTS SUBMITTED BY THE ASSESSEE SHOW THAT PAYMENTS HAVE BEEN MADE IN SUBSEQUENT YEARS. THE VERY FACT THAT LI ABILITY HAS BEEN 18 I.T.A. NO. 4230 /MUM/201 7 SHRI DEVILAL B. JAIN SETTLED SHOWS THAT THERE WAS NO CESSATION OR REMISSION OF LIABILITY AS PER PROVISIONS OF SECTION 41(1) ALSO. AT THE SAME TIME, IT IS SEEN THAT THE SAID 4 CREDITORS COULD NOT BE PRODUCED FOR VERIFICATION. THE AFFIDAVITS HAVE ALSO BEEN GIVEN BY THEM IN A VERY CAUSAL AND ROUTINE MANNER WITHOUT APPLICATION OF MIND. IN THIS BACKGROUND, THE SAID SUPPLIERS WERE REQUIRED TO BE EXAMINED AS HELD BY HON'BLE SUPREME COURT IN THE CASE OF MEHAT PARIKH & CO V. CIT (1956) 30 ITR 181. FURTHER THE ASSESSEE H AS ALSO SUBMITTED THAT HE WAS MAKING THE PURCHASES THROUGH THE BROKER AND HARDLY CAME IN CONTACT THESE PARTIES. THE BROKER IN HIS STATEMENT HAS ALSO STATED THAT IN CASE THE SUPPLIERS WERE NOT ABLE TO PROVIDES THE BILL FOR THE SUPPLY MADE BY THEM, HE ARRAN GED BILLS FOR THE MATERIAL FROM THE OTHER CONTACTS IN THE MARKET. THE SALE TAX AUTHORITIES CONDUCTED ENQUIRIES IN RESPECT OF THOSE DEALERS WHO DID NOT PAY SALE - TAX. (1'HERE WERE OTHER PARTIES WHO DID NOT DEFAULT ON THE SALE - TAX BUT THEY ALSO ENGAGED IN THE SAME BUSINESS OF ACCOMMODATION ENTRIES, THAT IS SUPPLY OF THE BILLS WITHOUT SUPPLY OF THE MATERIAL, WHICH WAS PROCURED FROM OTHER PARTIES. THESE 4 CREDITORS APPEAR TO BE SIMILAR IN NATURE THAT THEY ONLY PROVIDED BILLS, J IHS' NOT KNOWN AT WHAT PRICE THE A PPELLANT ACTUALLY MADE THE PURCHASES FROM THIRD PARTIES. UNDER SUCH CIRCUMSTANCES THE LIKELIHOOD OF THE PURCHASES 19 I.T.A. NO. 4230 /MUM/201 7 SHRI DEVILAL B. JAIN BEING INFLATED CANNOT BE RULED OUT. THEREFORE IT WOULD BE APPROPRIATE IF 10% OF THE AMOUNT OF PURCHASES OF RS. 59,34,513/ - (73,30,003 - 13,95,4 90) AMOUNTING TO RS. 5,93,451/ - IS DISALLOWED TO THE APPELLANT. AS ADDITION IN CASE OF SHUBHAM ENTERPRISES HAS ALREADY BEEN MADE, THEREFORE AMOUNT OF RS. 13,95,490/ - PERTAINING TO SHUBHAM HAS BEEN EXCLUDED WHILE MAKING THIS DISALLOWANCE. THIS ADDITION WILL BE OVER AND ABOVE THE INCOME SHOWN BY THE APPELLANT IN HIS RETURN OF INCOME. IN THE RESULT, THE ADDITION RESTRICTED TO RS. 5,93,451/ - . 6.7. GROUND OF APPEAL IS PARTLY ALLOWED. 7 . AFTER HAVING GONE THROUGH THE FACTS OF THE PRESENT CASE AND HEARING THE PARTIES AT LENGTH, WE FIND THAT AS PER RECORDS, THE ASSESSEE IS PROPRIETOR OF M/S NEW MARBAL HOUSE AND IS ENGAGED IN THE BUSINESS OF TRADING OF MARBAL. THE AO MADE ADDITIONS IN THE CASE OF ASSESSEE ON THE BASIS OF INFORMATION RECEIVED FROM INVESTIGATION W ING ON WHICH, IT WAS NOTICED THAT ASSESSEE WAS A BENEFICIARY OF HAWALA ENTRY OPERATORS AS HE HAD SHOWN PURCHASES AMOUNTING TO RS. 2,64,07,574/ - FROM VARIOUS PARTIES, WHO WERE LISTED BY THE SALES TAX AUTHORITIES AS HAWALA OPERATORS. HOWEVER 20 I.T.A. NO. 4230 /MUM/201 7 SHRI DEVILAL B. JAIN DURING THE COURS E OF FIRST APPELLATE PROCEEDINGS, THE ASSESSEE HAD SUBMITTED THE REQUIRED DOCUMENTS INCLUDING COPIES OF INVOICES, STATEMENT OF ACCOUNT, COMPARATIVE CHART OF GROSS PROFIT AND NET PROFIT FOR THE YEAR UNDER CONSIDERATION AND TWO PRECEDING YEARS. IT WAS SUBMIT TED BY LD. AR THAT GP OF THE ASSESSEE IS AROUND 10% TO 13% IN DIFFERENT YEARS. THEREFORE, IF THE ENTIRE PURCHASES, WHICH WERE DISALLOWED BY THE AO ARE TO BE ADDED THEN IN THAT EVENTUALITY, THE GP WOULD RISE TO 94%, WHICH ARE VERY ABNORMAL. 8. APART FROM T HIS, THE ASSESSEE HAD ALSO SUBMITTED BILL WISE, QUANTITATIVE DETAILS TO SHOW HOW THE MATERIAL PURCHASED FROM THE HAWALA PARTIES, HAD BEEN SOLD TO VARIOUS PARTIES. IN THIS RESPECT, THE ASSESSEE HAD ALSO SUBMITTED, COPY OF STOCK REGISTER TO DEMONSTRATE THAT HE HAD MAINTAINED ITEM WISE, QUANTITY WISE DETAILS OF PURCHASES AND SALES. WE ALSO NOTICED THAT ALL THE DETAILS FURNISHED BY THE ASSESSEE WERE FORWARDED TO THE AO FOR SEEKING REMAND REPORT. 9. THE LD. CIT( A) HAD DISCUSSED THE ENTIRE BACKGROUND OF THE CASE IN PARA NO. 5.4 TO 6.7. IT WAS ALSO APPRECIATED THAT DURING THE APPELLATE PROCEEDINGS, THE ASSESSEE HAD PRODUCED AFFIDAVITS FROM THESE SUPPLIERS IN WHICH THEY HAVE STATED THAT THEY HAD GIVEN 21 I.T.A. NO. 4230 /MUM/201 7 SHRI DEVILAL B. JAIN AFFIDAVITS TO MVAT AUTHORITIES UNDER PRESSURE AND AT THE SAME TIME, CONFIRMED THE ACCOUNTS SHOWING THAT THEY HAD RECEIVED THE PAYMENTS AND HAD SUPPLIED THE GOODS. 10. AFTER APPRECIATING THE FACTS, WE FIND THAT AO HAD NOT DISALLOWED THE PURCHASES, HOWEVER HAD ADDED THE SE CREDITS U/S 68 OF THE ACT. LD. CIT(A) AFTER CONSIDERING THE FACTS OF THE CASE AND ALSO KEEPING IN VIEW THE REMAND REPORT, HAD CORRECTLY APPRECIATED THAT A S FAR AS THE ADDITION IN RESPECT OF 5 CREDITORS ARE CONCERNED, THE AO HAD ADDED AMOUNT OF RS. 77,30,003/ - U/S 68, WHICH INCLUDED AMOUNT OF RS. 13,95,490/ - , THE CREDIT BALANCE IN CASE OF SHUBHAM ENTERPRISE WHICH WAS ALSO A HAWALA DEALER. HOWEVER, T HERE WAS NO INFORMATION OR ALLEGATION AGAINST REMAINING 4 PA RTIES BEING INVOLVED IN ANY SALE TAX VIOLATION. IN THIS RESPECT, T HE ASSESSEE HAD DISCHARGED ITS ONUS BY SUBMITTING COPIES OF THE BILLS, BANK STATEMENTS, QUANTITATIVE TALLY OF THE STOCK TO SHOW THAT THE PURCHASES HAVE BEEN MADE AND THERE ARE CORRESPONDING SALES AGAINST THESE PURCHASES. APART FROM THAT, IT WAS ALSO SHOWN THAT IN THE SUBSEQUENT YEARS, PAYMENTS HAD BEEN MADE TO ALL THE 5 PARTIES INCLUDING SHUBHAM ENTERPRISES ARID JALARARH ENTERPRISES. THEREFORE IN THESE CIRCUMSTANCES, WE ARE 22 I.T.A. NO. 4230 /MUM/201 7 SHRI DEVILAL B. JAIN ALSO OF THE SAME VIEW THAT WHEN ONCE AGAINST THE PURCHASES AND PAYMENTS HAD BEEN MADE, THEREFORE NO ADDITIONS U/S 68 OF THE ACT ARE SUSTAINABLE IN RESPECT OF THOSE CREDITORS. 11. AS FAR AS 4 CREDITORS ARE CONCERNED, COULD NOT BE PRODUCED FOR VERIFICATION. THEREFORE WHILE T AKING INTO CONSIDERING, THE JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF MEHAT PARIKH & CO. VRS. CIT(1956) ITR 181 (SC), IT WAS RIGHTLY CONCLUDED THAT SINCE THE PURCHASES WERE MADE THROUGH BROKER AND THE BROKER IN HIS STATEMENT HA D ALSO STATED THAT IN CASE THE SUPPLIERS WERE NOT ABLE TO PROVIDES THE BILL FOR THE SUPPLY MADE BY THEM, THEN THEY MADE ARRANGEMENTS OF BILLS FOR THE MATERIAL FROM THE OTHER CONTACTS IN THE MARKET. THUS IT IS NOT KNOWN AT WHAT PRICE THE ASSESSEE ACTUALLY MADE THE PURCHASES FRO M THIRD PARTIES. THEREFORE, WE ARE ALSO OF THE VIEW, THAT U NDER SUCH CIRCUMSTANCES , THE LIKELIHOOD OF THE PURCHASES BEING INFLATED CANNOT BE RULED OUT. THUS, 10% OF THE AMOUNT OF PURCHASES WAS RIGHTLY DISALLOWED AND IN THIS WAY, ADDITIONS SUSTAINED WERE OV ER AND ABOVE THE INCOME SHOWN BY THE ASSESSEE IN HIS RETURN. 23 I.T.A. NO. 4230 /MUM/201 7 SHRI DEVILAL B. JAIN 12 . MOREOVER, N O NEW FACTS OR CONTRARY JUDGMENTS HAVE BEEN BROUGHT ON RECORD BEFORE US I N ORDER TO CONTROVERT OR REBUT THE FINDINGS SO RECORDED BY LD CIT (A) . THEREFORE, THERE ARE NO REASON S FOR US TO INTERFERE INTO OR DEVIATE FROM THE FINDINGS RECORDED BY THE LD. CIT (A). HENCE , WE ARE OF THE CONSIDERED VIEW THAT THE FINDINGS SO RECORDED BY THE LD. CIT (A) ARE JUDICIOUS AND ARE WE LL REASONED. RESULTANTLY, THESE GROUND S RAISED BY THE REVENUE STANDS DISMISSED . 13 . IN THE NET RESULT, THE APPEAL FILED BY THE REVENUE STA NDS DISMISSED WITH NO ORDER AS TO COST. ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH JUNE , 20 19 . SD/ - SD/ - ( M. BALAGANESH ) (SANDEEP GOSAIN) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI ; DATED : 17 . 0 6 .201 9 SR.PS . DHANANJAY 24 I.T.A. NO. 4230 /MUM/201 7 SHRI DEVILAL B. JAIN / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F I LE / BY ORDER, . / (DY./ ASSTT.REGISTRAR) , / ITAT, MUMBAI