GHISULAL HAMERMAL AND COMPANY, MUMBAI V. INCOME TAX OFFICER, 19(2)(3), MUMBAI

ITA 4276/MUM/2017

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 7850 (ITAT-MUMBAI)
• Duration Of Justice: 6 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-12-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 09-06-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: RAM TIWARI
• Keywords: Bogus purchase; Principle of natural justice; Corroborative evidences; Accommodation entries

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC , BENCH MUMBAI BEFORE SHRI R.C.SHARMA, AM ITA NO. 4276 / MUM/20 17 ( ASSESSMENT YEAR : 2010 - 11 ) M/S. GHISULAL HAMERMAL & CO., 14, 1 ST FLOOR, CARPENTER STREET NULL BAZAR MUMBAI 400 004 VS. ITO 19(1)(3),MUMBAI P AN/GIR NO. AAAFG0686J APPELLANT ) .. RESPONDENT ) ASSESSEE BY SHRI PIYUSH CHHAJED REVENUE BY SHRI RAM TIWARI DATE OF HEARING 21 / 11 /2017 DATE OF PRONOUNCEMENT 26 / 12 /201 7 / O R D E R PER R.C.SHARMA (A.M) : THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) - 29, MUMBAI FOR A.Y.2010 - 11 IN THE MATTER OF ORDER PASSED U/S.143(3) R.W.S. 147 OF THE ACT. 2. THE FOLLOWING GROUNDS HAVE BEEN TAKEN BY THE ASSESS EE: - THE GROUNDS MENTIONED HEREUNDER ARE WITHOUT PREJUDICE TO ONE ANOTHER: - 1) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ID. COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN UPHOLDING THE RE - OPENING OF ASSESSMENT U/S.147 OF THE INCOME TAX ACT FOR A.Y. 2010 - 11 ON THE BASIS OF LIST UPLOADED ON THE WEBSITE OF THE MVAT DEPARTMENT WITHOUT ANY CORROBORATIVE EVIDENCES AS REQUIRED FOR FORMATION OF BELIEF FOR ESCAPEMENT OF INCOME U/S.147 OF THE INCOME TAX ACT. 2) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ID. COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN NOT PROVIDING ADEQUATE OPPORTUNITY TO VERIFY THE DOCUMENTS AND STATEMENTS BASED ON EVIDENCES IF ANY ITA NO. 4276/MUM/2017 M/S. GHISULAL HAMERMAL AND COMPANY 2 AVAILABLE WITH THE ID. ASSESSING OFFICER AND THEREBY THE PROCESS OF NATURAL JUSTICE WAS DENIED AND IN VIEW OF THE SAME THE REOPENING IS BAD IN LAW. 3) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ID. COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN UPHOLDING THE DISALLOWANCE OF RS. 17,63,472/ - CONSIDERING THE SAME TO BE INFLATED WITHOUT APPRECIATING THE FACT T HAT THE PURCHASES WERE GENUINE PURCHASES BEYOND DOUBT AND SUPPORTED BY SUFFICIENT MATERIALS, FULL QUANTITATIVE STOCK RECORDS HAVE .BEEN MAINTAINED, ALL THE GOODS PURCHASED FROM THESE PARTIES HAVE BEEN BACKED BY CORRESPONDING SALES WHICH ARE ACCEPTED TO BE GENUINE, NOTHING HAS BEEN BROUGHT ON RECORD BY THE AO THAT MONEY HAS BEEN EXCHANGED IN THE HANDS IN LIEU OF PAYMENT MADE FOR THESE PURCHASES BY ACCOUNT PAYEE CHEQUE BY THE APPELLANT FIRM. THE APPELLANT CRAVES THE LEAVE TO ADD, AMEND, ALTER AND/OR DELETE A NY OF THE ABOVE GROUNDS OF APPEAL AT/OR BEFORE THE TIME OF HEARING. 3. BRIEFLY THE FACTS ARE THAT THE AO HAD RECEIVED INFORMATION FROM THE DGIT(LNV.), MUMBAI ON THE BASIS OF WHICH THE CASE WAS REOPENED U/S.147. THE INFORMATION WAS THAT THE SALES TAX DEPA RTMENT HAS EXERCISED DUE DILIGENCE WHICH REVEALED THAT THE ASSESSEE IS INVOLVED IN TAKING ACCOMMODATION ENTRIES OF BOGUS PURCHASES FROM 3 PARTIES AMOUNTING TO RS.2,81,70,477/ - . THE AO IN ORDER TO VERIFY THE GENUINENESS OF PURCHASES MADE INDEPENDENT ENQUIRY AND THE ASSESSEE WAS ASKED TO PRODUCE CERTAIN DETAILS LIKE NAME OF THE SELLER WITH CURRENT FULL ADDRESS AND PAN. BILL AND VOUCHER NO, WITH DATE AND DESCRIPTION OF GOODS PURCHASED, QUANTITY, RATE AND AMOUNT, GOODS DISPATCHED, MODE OF TR ANSPORTATION ETC. THE ASSESSEE COULD NOT PRODUCE ANY OF THE EVIDENCES DURING THE COURSE OF ASSESSMENT PROCEEDINGS THAT HE DID NOT ACCEPT THE FINDINGS OF THE SALES TAX DEPARTMENT. EVEN THE NOTICES ISSUED U/S.133(6) TO PURCHASE PARTIES RETURNED BACK UNSE RVED WITH THE REMARKS 'NOT KNOWN' OR 'LEFT'. THE AO HELD THAT MERE FILING OF EVIDENCES IN SUPPORT OF ITA NO. 4276/MUM/2017 M/S. GHISULAL HAMERMAL AND COMPANY 3 PURCHASES AND PAYMENTS MADE THROUGH ACCOUNT PAYEE CHEQUES CANNOT BE CONCLUSIVE IN A CASE WHERE GENUINENESS OF DELIVERY/TRANSACTION FS IN DOUBT AND HEL D THAT THE PAYMENTS MADE THROUGH ACCOUNT PAYEE CHEQUES ARE NOT SACROSANCT AND BY REJECTING THE BOOKS OF ACCOUNT U/S. 145(3) PROCEEDED TO MAKE AN ADDITION OF RS. 35,21,310/ - BEING 12,5% OF THE TOTAL NON GENUINE PURCHASES OF RS.2,81,70,477/ - . 4. BY THE IMP UGNED ORDER, CIT(A) CONFIRMED THE REOPENING, HOWEVER HE HAS CONFIRMED THE ADDITION TO THE EXTENT OF 12.5% AFTER GIVING FURTHER CREDIT OF THE PROFIT ALREADY DECLARED BY THE ASSESSEE. THE PRECISE OBSERVATION OF THE CIT(A) WAS AS UNDER: - THE SUBMISSIONS HAVE BEEN CAREFULLY CONSIDERED. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT ALL THE PURCHASES ARE SUPPORTED BY CORRESPONDING SALES WHICH HAS BEEN ACCEPTED BY THE LD. AO AND THEREFORE THE STOCK IS RECONCILED. ALL THE PAYMENTS HAVE BEEN MADE BY ACCOUNT PAY EE CHEQUES. THE AO HAS NOT POINTED OUT ANY DEFECT IN THE STOCK RECORDS. THE ASSESSEE FIRM PURCHASED MATERIALS FROM PARTIES BASED IN MUMBAI AND THE MATERIALS WERE DIRECTLY DELIVERED FROM THE ABOVE PARTIES TO ASSESSEE'S GODOWN. THEREFORE, THERE IS NO QUESTION OF OCTROI RECEIPTS WHEN THE GOODS ARE PURCHASED LOCALLY I.E. WITHIN MUMBAI MUNICIPAL LIMITS. IN THE CASES RELIED UPON BY THE LD, COUNSEL, THE AO HAS TREATED THE PURCHASES AS BOGUS AND MADE ADDITION OF 100%; WHEREAS IN THE PRESENT CASE, THE AO HAS ACCEPTED THE PURCHASES BUT HE ONLY DOUBTED THE PARTIES FROM WHOM THE PURCHASES WERE SUPPOSED TO HAVE BEEN MADE. THE PURCHASES FROM THE ALLEGED PARTIES HAVE NOT BEEN PROVED IN VIEW OF THE FACT THAT THE PARTIES ARE NOT TRACEABLE. THE AO PRESUMED THAT THE PU RCHASES MUST HAVE BEEN MADE FROM SOME OTHER PARTIES IN THE GREY MARKET AT A LESSER RATE. HE THEREFORE MADE AN ESTIMATE OF THE ADDITIONAL PROFIT WHICH THE ASSESSEE WOULD HAVE BEEN MADE WHICH WAS 12.5% OF THE ALLEGED BOGUS PURCHASES. THE PURCHASES MADE FROM THE ALLEGED PARTIES HAVE NOT BEEN ESTABLISHED BEYOND DOUBT BY THE ASSESSEE. COMING TO THE ADDITION MADE, THE ITAT, AHMEDABAD ( C' BENCH IN THE CASE OF VIJAY PROTEINS LTD. VS. ACIT 58 ITD 0428 HELD THAT IN SIMILAR CIRCUMSTANCES, 25% OF THE PURCHASE PRICE A CCOUNTED THROUGH FICTITIOUS INVOICES HAS TO BE DISALLOWED. THE HON'BLE HIGH COURT OF GUJARAT IN THE CASE OF SANJAY OIL CAKES V/S CIT 316 ITR 0274 DEALT WITH SIMILAR CASE WHERE SOME OF THE ALLEGED SUPPLIERS WHO HAD ISSUED BILLS ITA NO. 4276/MUM/2017 M/S. GHISULAL HAMERMAL AND COMPANY 4 TO THE ASSESSEE WERE NOT GENU INE AS THEY WERE NOT TRACEABLE. THE GOODS MUST HAVE BEEN RECEIVED FROM OTHER PARTIES. THE LIKELIHOOD OF THE PURCHASE PRICE OF THESE ALLEGED PURCHASES BEING INFLATED COULD NOT BE RULED OUT AND THEREFORE THE HON'BLE HIGH COURT HAS UPHELD THE DECISION OF CIT( A) AND THE ITAT DISALLOWING 25% OF THE PAYMENTS MADE TO SUCH PARTIES. THE HON'BLE HIGH COURT OF GUJARAT IN THE CASE OF CIT VS. SIMIT P. SHETH 356 ITR 0451 HELD THAT ONCE THE SALE IS ACCEPTED BY THE AO, THE VERY BASIS OF PURCHASES COULD NOT BE QUESTIONED. N OT THE ENTIRE PURCHASE PRICE COULD BE DISALLOWED BUT ONLY THE PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES COULD BE ADDED TO THE INCOME OF THE ASSESSEE. THE ESTIMATION VARIES WITH THE NATURE OF BUSINESS AND NO UNIFORM YARDSTICK COULD BE ADOPTED. GIVEN THE FAC TS AND CIRCUMSTANCES OF THE INSTANT CASE, I FIND IT REASONABLE TO ESTIMATE THE GROSS PROFIT ON THE ALLEGED BOGUS PURCHASES AT 12.5%. THE ADDITION MADE BY THE AO @12.5% ON THE ALLEGED BOGUS PURCHASES IS UPHELD. HOWEVER, THE AO IS DIRECTED REDUCE THE PROFIT ALREADY DECLARED BY THE ASSESSEE ON THESE PURCHASES. 5. IT WAS ARGUED BY LEARNED AR THAT THE ASSESSEE HAS FILED MONTH TO MONTH QUANTITATIVE DETAILS OF THE GOODS SO PURCHASED AND SOLD, THEREFORE, CIT(A) WAS NOT JUSTIFIED IN RESTRICTING THE ADDITION TO TH E EXTENT OF 6.25%. 6. ON THE OTHER HAND, IT WAS CONTENDED BY LEARNED DR THAT NO TRANSACTION DETAILS WERE FURNISHED BY THE ASSESSEE. EVEN THE AO HAS MADE INDEPENDENT ENQUIRY, WHEREIN SUPPLIERS WERE NOT TRACEABLE NOR PRODUCED BY THE ASSESSEE BEFORE THE AO. 7. I HAVE CONSIDERED RIVAL CONTENTIONS AND CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND FOUND FROM RECORD THAT FACTUM OF PURCHASES FROM BOGUS SUPPLIERS HAVE BEEN ESTABLISHED. UNDER THESE FACTS AND CIRCUMSTANCES, THE CIT(A) HAS VERY REAS ONABLY RESTRICTED THE ADDITION TO THE EXTENT OF 12.5% AND HAD GIVEN FURTHER RELIEF TO THE EXTENT OF PROFIT ALREADY DECLARED BY THE ASSESSEE @6.5%. THUS, NET ADDITION SO SUSTAINED BY THE CIT(A) IS TO THE EXTENT OF 6.25% OF THE ALLEGED BOGUS PURCHASES. ITA NO. 4276/MUM/2017 M/S. GHISULAL HAMERMAL AND COMPANY 5 8. NOTHING WAS PLACED ON RECORD BY LEARNED AR SO AS TO PERSUADE ME TO DEVIATE FROM THE FINDINGS REC ORDED BY CIT(A). ACCORDINGLY, I DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF CIT(A). 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMISSED. ORDER PRONOUN CED IN THE OPEN COURT ON THIS 26 / 12 /2017 SD/ - (R.C.SHARMA) ACCOUNTANT MEMBER MUMBAI ; DATED 26 / 12 /201 7 KARUNA SR. PS COPY OF THE ORDER FORWARDED TO : BY ORDER, ( ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPO NDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//