HITESH MODI HUF, NAVI MUMBAI V. ITO 32(1)(5), MUMBAI

ITA 4296/MUM/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0569 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-05-2017
• Appeal Filed By: Assessee
• Bench Allotted: H
• Next Hearing Date: 17-05-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 10-07-2015
• Court: TRIBUNAL
• Department Lawyers: M C OMI NINGSHEN
• Assessee Lawyers: MANDIR VAIDYA
• Keywords: Bogus purchase; Unexplained expenditure; Accommodation entries
• Section: 69C; 143(3); 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL H , BENCH MUMBAI BEFORE SHRI R.C.SHARMA, AM & SHRI RAVISH SOOD , JM ITA NO. 4296/MUM/2015 ( ASSESSMENT YEAR : 2011 - 12 ) HITESH MODI HUF 305, MAHAVIDEH, NR. MUNICIPAL GARDEN BORIVALI (W) MUMBAI 400 092 VS. ITO 32(1)(5), MUMBAI - 400051 PAN/GIR NO. AABHH3508K APPELLANT ) .. RESPONDENT ) ITA NO. 4687/MUM/2015 ( ASSESSMENT YEAR : 2011 - 12 ) ITO 32(1)(5), MUMBAI 400051 VS. HITESH J MODY HUF 305, NR. MUNICIPAL GARDEN BORIVALI (W) MUMBAI 400 09 2 PAN/GIR NO. AABHH3508K APPELLANT ) .. RESPONDENT ) ASSESSEE BY SHRI MANDIR VAIDYA REVENUE BY SHRI M.C.OMI NINGSHEN DATE OF HEARING 17 / 05 /201 7 DATE OF PRONOUNCEME NT 24 / 05 /201 7 / O R D E R PER R.C.SHARMA (A.M) : THESE ARE THE CROSS APPEALS FILED BY ASSESSEE AND REVENUE AGAINST THE ORDER OF CIT(A) - 44, MUMBAI DATED 04/06/2015 FOR THE A.Y.2011 - 12 IN THE MATTER OF ORDER PASSED U/S. 143(3) OF THE IT ACT. 2. THE FOLLOWING GROUNDS HAVE BEEN TAKEN BY THE ASSESSE E: - 1.01 THE LEA RN ED COMMISSIONER OF INCOME TAX APPEAL FAILED TO APPRECIATE THE FACT THAT PURCHASES ALLEGED TO BE BOGUS HAVE ITA NO. 4296/MUM/2015 & 4687/MUM/2015 SHRI HITESH MODI HUF 2 BEEN SOLD BY THE APPELLANT AT PROFIT AND THE SAME WAS DULY OFFERED TO TAX. 1.02 THE LEARNED COMMISSIONER OF INCOME TAX APPEAL ERR ED IN HOLDING THAT THE PRIMARY RESPONSIBILITY WHICH IS ENSUED ON THE TAX PAYER HAS NOT BEEN DISCHARGED IN TERMS OF ESTABLISHING GENUINENESS OF TRANSACTION. 3. THE FOLLOWING GROUNDS HAVE BEEN TAKEN BY THE REVENUE: - 1) 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) ERRED IN RESTRICTING ADDITION OF UNEXPLAINED EXPENDITURE TO RS.10,83,7001 - (@ 8% OF RS.1,35,46,250) U/S. 69C OF THE LT. ACT ON ACCOUNT OF BOGUS PURCHASES AS AGAINST THE ADDITION OF RS.1,35,46,2501 - MADE BY THE A O WITH OUT APPRECIATING THAT THE ASSESSEE HAS NOT PRODUCED ANY COGENT EVIDENCE TO SUBSTANTIATE THE FACT THAT IT HAD TAKEN ACTUAL DELIVERY OF GOODS PURCHASED FROM THIS PARTIES AND THAT THE NOTICES UNDER 133(6) ISSUED TO THE PARTIES FROM WHOM ALLEGED BILLS WERE REC EIVED WERE RETURNED UNDELIVERED BY THE POSTAL AUTHORITIES WITH THE REMARK 'NOT AVAILABLE AT THIS ADDRESS' AND THE ASSESSEE HAS ALSO FAILED TO PRODUCE THE PURCHASE PARTIES BEFORE THE AO .' 2) 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, T HE LD CIT(A) ERRED IN DELETING THE DISALLOWANCE MADE BY THE A O OVERLOOKING THE STATEMENT GIVEN BY THE PARTY AND EXPLICIT FINDING OF THE INVESTIGATION CARRIED OUT BY THE SALES TAX DEPARTMENT AND CORROBORATED BY THE ENQUIRIES OF THE A O .' 3) 'THE APPELLANT PRAYS THAT THE ORDER OF THE ID.CIT(A) ON THE ABOVE GROUND BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED.' 4) 'THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD A NEW GROUND.' 2. THE ONLY GRIEVANCE OF ASSESSEE RELATES TO CONFIR MING ADDITION OF 8% OF THE ALLEGED BOGUS PURCHASES. 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. 4. FROM THE RECORD, WE FOUND THAT AO HAS ADDED THE ENTIRE AMOUNT OF PURCHASES IN ASSESSEES INCOME U/S.69C ON THE PLEA THAT ASSESSEE HAS ITA NO. 4296/MUM/2015 & 4687/MUM/2015 SHRI HITESH MODI HUF 3 PURCHASED GOODS FROM BOGUS SUPPLIERS WHO ONLY ISSUES THE BILL AND DO NOT AFFECT ANY REAL TRANSACTION. 5. BY THE IMPUGNED ORDER CIT(A) RESTRICTED THE ADDITION TO THE EXTENT OF 8% OF ALLEGED BOGUS PURCHASE AFTER HAVING THE FOLLOWING OBSERVATION: - I HAVE GONE THROUGH T HE FACTS OF THE CASE, CONTENTION OF THE AO AND SUBMISSIONS OF THE APPELLANT. IT IS AN UNDISPUTED FACT THAT SALES TAX DEPARTMENT DID MAKE ENQUIRIES REGARDING GENUINENESS OF THE PARTIES ACTUALLY MAKING THE SALE AND IT IS ALSO A FACT THAT THE SALES TAX DEPART MENT GOT THE STATEMENTS OF THOSE PERSONS STATING THAT THEY WERE ACTUALLY ENGAGED ONLY IN PROVIDING ACCOMMODATION ENTRIES FOR A CERTAIN COMMISSION FEE. ON HIS PART, THE AO HAS GONE INTO THE ISSUE BY SENDING 133(6) NOTICES AND MAKING FIELD ENQUIRIES, BUT HA S NOT FOUND ANY CONCRETE EVIDENCE TO DOUBT THE GENUINENESS OF THE PAYMENTS BEING SHOWN BY THE APPELLANT THROUGH THE BANK ACCOUNT. THE A O HAS ALSO DEFINITELY NOT BEEN ABLE TO QUESTION THE AVAILABILITY OF THE INVENTORY THAT HAS BEEN SUBSEQUENTLY SOLD. TO THA T EXTENT, THE EXAMINATION OF THAT ASPECT HAS NOT CREATED ANY DOUBT IN TERMS OF THE PURCHASES. HOWEVER, AS FAR AS THE EVIDENCE SUBMITTED BY THE APPELLANT IS ALSO CONCERNED, THE APPELLANT HAS FILED HIS OWN BOOKS, PURCHASE BILLS/CHALLANS, LEDGER ACCOUNTS AND ITS OWN BANK STATEMENT TO FURTHER HIS ARGUMENT. THE FACT THAT THE PAYMENTS ARE BEING MADE THROUGH CHEQUES IS NOT SOMETHING THAT IS BEING DOUBTED. IN FACT, THAT IS THE CONTENTIOUS ISSUE ; THAT THESE PARTIES WHICH ARE INDICATED BY THE SALES TAX DEPARTMENT TH ROUGH A PROCEDURE WHICH APPEARS TO BE TECHNICALLY CORRECT ON PAPER, ARE IN FACT ENGAGED IN FALSE BILLING FOR A FEE/COMMISSION. THE ONUS OF PROVING THE ENTIRE TRANSACTIONS TO BE GENUINE IS DEFINITELY ON THE TAX PAYER, WHEN HE IS MAKING THE CLAIM OF PURCHASE AND ESPECIALLY IN LIGHT OF THE DOUBT THAT HAS BEEN RAISED BY THE ENQUIRIES CONDUCTED BY THE SALES TAX DEPARTMENT, THE ONUS IS EVEN MORE ON THE TAX PAYER TO SHOW THAT AS FAR AS HE IS CONCERNED, HE HAS DISCHARGED HIS TAX RELATED LIABILITIES IN AN ACC URATE MANNER. SO THEREFORE, WHILE ON ONE HAND THE A O MAY NOT HAD A CLINCHING PROOF BUT THE PRIMARY RESPONSIBILITY WHICH IS ENSUED ON THE TAX PAYER HAS ALSO NOT BEEN DISCHARGED IN TERMS OF ESTABLISHING THE GENUINENESS OF THE TRANSACTION . MERELY FILING COPIE S OF HIS OWN LEDGER ACCOUNTS AND BANK ACCOUNTS DOES IN NO WAY ESTABLISH TH AT THE PARTIES ACTUALLY EXISTED, BUT THEN CONSIDERING THAT THE BOOKS OF ACCOUNTS HAVE NOT BEEN DISPUTED, SALES HAVE NOT BEEN DISPUTED AND NEITHER CHEQUES HAVE BEEN SHOWN TO BE RECEIV ED BACK AS CASH BY THE APPELLANT, I AM OF THE CONSIDERED VIEW THAT IN THE CONTEXT OF THE SITUATION WHERE THE AA ITA NO. 4296/MUM/2015 & 4687/MUM/2015 SHRI HITESH MODI HUF 4 HAS HIMSELF SAID THAT WHAT IS BEING DOUBTED IS NOT THE QUANTITY OF PURCHASES PER SE, WHICH HAS ENTERED INTO THE BOOKS OF THE APPELLANT, BUT THAT THE PURCHASES WERE BILLED THROUGH BOGUS PARTIES, THEN THE CAUSE OF JUSTICE WOULD BE SERVED BY LOOKING AT THE GROSS PROFIT MARG INS BEING DECLARED BY THE APPELLANT. I AM GUIDED BY THE RATIO OF DECISION OF THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS SIMIT P. SHETH PRONOUNCED ON 16.1.2013 IN TAX APPEAL NO.5531 OF 2012 WHEREIN THE HON'BLE COURT HAVE HELD THAT WHEN THE TOTAL SALE IS ACCEPTED BY THE AO , THEN THE ENTIRE PURCHASES CANNOT BE ADDED TO THE INCOME OF THE APPELLANT. THE HON'BLE COURT HAVE, THE REFORE, HELD THAT FAIR PROFIT RATIO WOULD BE NEEDED TO BE ADDED BACK TO THE INCOME OF THE ASSESSEE. THEREFORE, 8% OF THE PURCHASES I.E. RS. 1,35,46,250/ - WHICH WORKS OUT TO OF RS.10,83, 700/ - IS UPHELD FOR LACK OF CREDIBLE EVIDENCE BEING PROVIDED BY THE AP PELLANT TO SUBSTANTIATE THE PURCHASES. THE APPELLANT GETS RELIEF OF RS.1 ,24,62,550/ - . 6. AGAINST THE ORDER OF CIT(A) ASSESSEE AND REVENUE ARE IN FURTHER APPEAL BEFORE US. 7. WE HAVE CONSIDERED RIVAL CONTENTIONS AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. CIT(A) HAS RECORDED DETAILED FINDING FOR RESTRICTING ADDITION TO 8% OF BOGUS PURCHASES WHICH ARE AS PER MATERIAL ON RECORD. THE FINDING RECORDED BY CIT(A) HAS NOT BEEN CONTROVERTED BY LEARNED DR OR AR BY BRINGING ANY POSITIVE MATERIAL ON RECORD. ACC ORDINGLY, WE DO NOT FIND ANY REASON TO INTERFERE IN THE FINDING SO RECORDED BY CIT(A). 8. IN THE RESULT APPE A LS OF ASSESSEE AND REVENUE ARE DISMISSED. O RDER PRONOUNCED IN THE OPEN COURT ON THIS 24 / 05 /2017 S D/ - ( RAVISH SOOD ) S D/ - ( R.C.SHARMA ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 24 / 05 /201 7 KARUNA SR. PS ITA NO. 4296/MUM/2015 & 4687/MUM/2015 SHRI HITESH MODI HUF 5 COPY OF THE ORDER FORWARDED TO : BY ORDER, ( ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBA I. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//