ITO-27(1)(3), MUMBAI V. SHRI. HASMUKHLAL T. MEHTA, MUMBAI

ITA 438/MUM/2019

• Counselvise Citation: [2019] 111 COUNSELVISE.COM (IT) 1589 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-01-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 30-01-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bogus purchase; Unexplained expenditure; Accommodation entries
• Section: 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH SMC , MUMBAI BEFORE SHRI R. C. SHARMA, ACCOUNTANT MEMBER ITA NO. 438 /MUM/ 2019 : A.Y : 2009 - 10 ITO 27(1)(3) ROOM NO.409, 4 TH FLOOR TOWER NO.6, VASHI RAILWAY STATION COMPLEX, VASHI NAVI MUMBAI 400 7 03 VS. SHRI HASMUKHLAL T MEHTA 602, 6 TH FLOOR, GOKUL BUILDING 60 FEET ROAD GHATKOPAR (E) MUMBAI 400 077 PAN NO.AGBPM7532Q REVENUE BY : SHRI ANOOP HIWASE REVENUE BY : NONE DATE OF HEARING : 27/01/2020 DATE OF PRONOUNCEMENT : 28/01 /2020 O R D E R PER R.C. SHARMA , ACCOUNTANT MEMBER THIS APPEAL FILED BY THE REVENUE IS AGAINST THE ORDER OF CIT(A) FOR THE A.Y.2009 - 10 IN THE MATTER OF ADDITION UPHELD ON ACCOUNT OF BOGUS PURCHASES, ORDER PASSED U/S.143(3) R.W.S. 147 OF THE INCOME TAX ACT, 1961. 2. I HAVE GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND FOUND THAT AO HAS MADE 100% ADDITION IN RESPECT OF ALLEGED BOGUS PURCHASES. AFTER CONTROVERTING THE FINDINGS OF AO, THE CIT(A) HAS UPHELD THE ADDITION TO THE EXTENT OF 12.5% AFTER OBSERVING AS UNDER: - 6.1. GROUND NO. 1, 2 & 3 OF THE APPEAL ARE AGAINST ADDITION OF RS. 13.23.400/ - AS UNEXPLAINED EXPENDITURE U/S.69C OF THE ACT. AS PER THE INVESTIGATIONS CARRIED OUT BY THE SALES TAX AUTHORITIES, THE AFOREMENTIONED PARTY WAS FOUND TO BE INVOLV ED IN GIVING ACCOMMODATION ITA NO. 438/MUM/2019 SHRI HASMUKHLAL T MEHTA 2 ENTRIES ONLY WITHOUT ACTUALLY SUPPLYING THE GOODS. THE LOGICAL INFERENCE IS THAT THE PURCHASES MADE BY THE APPELLANT WOULD ALSO BE IN THE NATURE OF ACCOMMODATION ENTRIES ONLY. TO VERIFY THE SAME, THE AO HAD MADE ENQUIRIES BY ISSU ING NOTICES U/S 133(6) WHICH WERE RETURNED UNSERVED BY THE POSTAL AUTHORITIES. THIS PARTY WAS FOUND TO BE NON EXISTENT AT THE ADDRESS GIVEN BY THE APPELLANT. THE APPELLANT ALSO FAILED TO PROVIDE THE JATEST ADDRESS OF THE PARTY. DURING THE SCRUTINY ASSESSME NT THE APPELLANT FURNISHED DETAILS OF PURCHASES AND CORRESPONDING SALES. HOWEVER, THE APPELLANT COULD NOT PRODUCE THE PARTY BEFORE THE AO INSPITE OF OPPORTUNITY BEING GIVEN. THE APPELLANT ALSO FAILED TO PRODUCE DELIVERY CHALLANS OR TRANSPORTATION DETAILS. THE ONUS - 'OF PROVING THE GENUINENESS OF SUCH PURCHASES IS ON THE APPELLANT WHICH THE APPELLANT HAD NOT BEEN ABLE TO DISCHARGE FULLY. WHEN THE HAWALA PARTY HAD ADMITTED ON OATH THAT IT HAD GIVEN ACCOMMODATION ENTRIES ONLY WITHOUT ACTUALLY SUPPLYING THE GOOD S, THE GENUINENESS OF PURCHASES MADE FROM THESE PARTIES WILL HAVE TO BE CONSIDERED TAKING THIS INTO CONSIDERATION WHILE EXAMINING THE DOCUMENTATION SUBMITTED BY THE APPELLANT IN SUPPORT OF ITS CLAIM. THE DOCUMENTARY EVIDENCES SUCH AS PURCHASE BILLS, PAYMEN TS BY CHEQUES, ETC. WOULD ALL HAVE BEEN ORCHESTRATED TO PRESENT A FACADE OF GENUINENESS AND DOES NOT NECESSARILY MEAN THAT THE PURCHASES FROM THESE PARTIES ARE GENUINE. THE COURTS HAVE HELD THAT PAYMENT BY CHEQUE BY ITSELF IS NOT SACROSANCT SO AS TO PROVE GENUINENESS OF PURCHASES WHEN THE SURROUNDING CIRCUMSTANCES ARE SUSPECT. HOWEVER, THE APPELLANT HAS SHOWN ONWARD SALES WHICH HAS NOT BEEN DOUBTED BY THE ASSESSING OFFICER. SINCE THERE CAN BE NO SALES WITHOUT CORRESPONDING PURCHASES, THE ONLY LOGICAL EXPLAN ATION IS THAT THE APPELLANT WOULD HAVE MADE PURCHASES FROM UNDISCLOSED PARTIES IN THE GREY MARKET AT LOWER RATES AND PURCHASES WERE SHOWN AS BEING MADE FROM THE IMPUGNED PARTIES TO SUPPRESS ITS PROFITS. IN SUCH A SITUATION, THE VARIOUS COURTS INCLUDING THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS SIMIT P. SHETH, 356 ITR 451 HAVE HELD THAT NOT THE ENTIRE PURCHASES BUT ONLY THE PROFIT ELEMENT EMBEDDED IN THESE PURCHASES WAS TO BE DISALLOWED AND ACCORDINGLY HELD THAT 12.5% OF THE PURCHASES WILL BE REAS ONABLE AS PROFIT ON MARGIN AGAINST THE BOGUS PURCHASES. IN VIEW OF THIS DECISION OF HON'BLE GUJARAT HIGH COURT (SUPRA), THE ADDITION MADE BY THE AO IS RESTRICTED TO 12.5% OF THE TOTAL ALLEGED BOGUS PURCHASES AMOUNTING TO RS, 13.23.400/ - WHICH SHOULD SUFFIC IENTLY COVER THE PROFIT ELEMENT EMBEDDED IN THE IMPUGNED PURCHASES. THE APPELLANT'S GROUND OF APPEAL IS 'PARTLY ALLOWED'. 3. IT IS CLEAR FROM THE ORDER OF CIT(A) THAT AFTER CONTROVERTING THE FINDINGS OF THE AO AND AFTER APPLYING JUDICIAL PRONOUNCEMENTS IN CASE OF SIMIT P SHETH, HE HAS UPHELD THE ADDITION IN RESPECT OF PROFIT ELEMENT OF 12.5%. NOTHING WAS PLACED BEFORE ME SO AS TO PERSUADE ME TO DEVIATE FROM THE FINDINGS OF CIT(A), ACCORDINGLY, I UPHOLD THE ORDER OF CIT(A). ITA NO. 438/MUM/2019 SHRI HASMUKHLAL T MEHTA 3 5. IN THE RESULT, APPEAL OF TH E REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 28 / 01 /20 20 SD/ - (R.C.SHARMA) ACCOUNTANT MEMBER MUMBAI; DATED 28 / 01 /20 20 KARUNA SR. PS COPY OF THE ORDER FORWARDED TO : BY ORDER, (ASSTT. REGISTR AR) ITAT, MUMBAI 1 . THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//