M/S. BHANSALI METAL & ALLOYS, MUMBAI V. INCOME TAX OFFICER WARD 19(1)(2), MUMBAI

ITA 4408/MUM/2018

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 8922 (ITAT-MUMBAI)
• Duration Of Justice: 3 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-10-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 05-07-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AJAY KUMAR KESHRI
• Keywords: Bogus purchase; Tangible material; Accommodation entries; Reason to believe
• Section: 147; 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA, AM AND SHRI PAWAN SINGH, JM I.T.A. NO S . 4408, 4337 & 4409/MUM/2018 ( ASSESSMENT YEAR S : 2009 - 10, 2010 - 11 & 2011 - 12 ) M/S. BHANSALI METAL & ALLOYS SHOP NO.1 & 2, GR. FLOOR , 78 - 82, 1 ST PATHAN STREET, 4 TH KUMBHARWADA, MUMBAI - 400 004 VS. ITO - 19(1)(2), ROOM NO. 203, MATRU MANDIR, TARDEO ROAD, MUMBAI - 400 004 PAN/GIR NO. AAGFB 9241 G ( APPELLANT ) : ( RESPONDENT ) APPELLANT BY : SHRI VIMAL PUNAMIYA RESPONDENT BY : SHR I AJAY KUMAR KESHRI DATE OF HEARING : 04.10.2018 DATE OF PRONOUNCEMENT : 05.10 .2018 O R D E R PER S HAMIM YAHYA, A. M.: THESE APPEALS BY THE ASSESSEE ARE DIRECTED AGAINST THE RESPECTIVE ORDER S OF LD. COMMISSIONER OF INCOME TAX (APPEALS) (LD. CIT( A) FOR SHORT) AND PERTAIN TO ASSESSMENT YEARS (A.Y. FOR SHORT) 2009 - 10, 2010 - 11 & 2011 - 12. 2. T HE COMMON ISSUE RAISED IS THAT LD. CIT(A) ERR ED IN UPHOLDING THE VALIDITY OF REOPENING AND SUSTAINING DISALLOWANCE OF FOLLOWING PERCENT OF BOGUS PURCHASE : A.Y. PERCENTAGE AMOUNT (IN RS.) 2009 - 10 12.5% 7,78,550/ - 2010 - 11 6.5% 21,38,703/ - 2011 - 12 12.5% 8,47,724/ - 2 ITA NO S . 4408, 4337 & 4409/MUM/2018 3. SINCE THE FACTS ARE IDENTICAL, WE ARE REFERRING TO FACTS AND FIGURES FROM A.Y. 2011 - 12. 4. I N THIS CASE T HE ASSESSING OFFICER (A.O. FOR SHORT) H AD RECEIVED INFORMATION FROM THE INVESTIGATION WING OF THE DEPARTMENT THAT THE ASSESSEE HAD TAKEN ACCOMMODATION BILLS FOR PURCHASES FROM THE PARTIES DECLARED AS HAWALA OPERATORS BY MAHARASHTRA SALES TAX DEPARTMENT. DURING THE COURSE OF RE ASSESSMENT PROCEE DINGS, IT WAS SEEN BY THE AO THAT DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD CLAIMED TO HAVE MADE PURCHASES FROM VARIOUS PARTIES AND OUT OF WHICH, PURCHASES AMOUNTING TO RS.67,81,789/ - HAD BEEN EFFECTED FROM THE FOLLOWING PARTIES: SR. NO. NAMEOF THE PARTY AMOUNT IN RS. 1 VIRAI STEEL & ALLOYS 9,05,892/ - 2 MONTEX INDUSTRIES 23,15,821 / - 3 MANIBHADRA METAL INDUSTRIES 4,75,020 / - 4 KEY STONE TUBES P. LTD. 30,85,056 / - TOTAL 67,81,789 / - THE NAMES OF THE ABOVE PARTIES FIGURED IN LIST OF SUSPICIOUS DEALERS ON THE MAHARASHTRA SALES TAX DEPARTMENT, WHO HAD ISSUED ACCOMMODATION ENTRIES WITHOUT ACTUAL DELIVERY OF GOODS. THE AO, IN HIS AFORESAID ASSESSMENT ORDER HAS FURTHER MENTIONED THAT THE SALES TAX DEPARTMENT HAD CONDUCTED INDEPENDENT INQUIRIES IN TH E CASE OF EACH HAWALA OPERATOR, INCLUDING IN THE CASE OF ABOVE STATED HAWALA OPERATOR AND IT WAS CONCLUSIVELY PROVED THAT THESE PARTIES/OPERATORS WERE ENGAGED IN THE BUSINESS OF PROVIDING ACCOMMODATION ENTRIES ONLY. THESE PARTIES MOSTLY INDULGED IN FOLLOWI NG ACTIVITIES: 3 ITA NO S . 4408, 4337 & 4409/MUM/2018 'A) ISSUING ONLY BILLS AND DOING NON - GENUI NE BUSINESS (HAWALA BUSINESS); B) NOT MAINTAINING STOCK AND NOT KEEPING STOCK REGISTER C) NOT EFFECTING ANY PURCHASE; AND D) THERE WAS NO TRANSACTION OF GOODS. E) ENTRIES WERE BEING PROVIDED BY THE PARTIES FOR COMMISSION.'. 5. DURING THE COURSE OF RE - ASSESSMENT PROCEEDINGS, IN ORDER TO ASCERTAIN THE GENUINENESS OF PURCHASES MADE BY THE ASSESSEE, THE AO CONDUCTED INDEPENDENT INQUIRIES AND THE ASSESSEE WAS ASKED TO PRODUCE THE PARTY FOR VERIFICATI ON AND ALSO SHOW CAUSE AS TO WHY THE PURCHASES MADE FROM THE AFORESAID PARTIES SHOULD NOT BE DISALLOWED. IN RESPONSE TO THE AO'S ABOVE QUERY, THE AR OF THE ASSESSEE MADE WRITTEN SUBMISSIONS WHEREIN IT WAS SUBMITTED THAT THE PURCHASES SHOWN BY THE ASSESSEE FROM THE SAID PARTIES ARE GENUINE PURCHASES AND PAYMENTS TO THESE PARTIES WERE ALSO MADE THROUGH ACCOUNT PAYEE CHEQUE. FURTHER, THE ASSESSEE ALSO EXPRESSED HIS INABILITY TO PRODUCE THE PARTY. FURTHER, THE ASSESSEE ALSO FAILED TO FURNISH EVIDENCES, SUCH AS, DELIVERY CHALLANS, TRANSPORTATION DETAILS ETC. TO SUBSTANTIATE HIS CLAIM OF PURCHASES FROM THE AFRORESAID PARTIES. THE ASSESSEE COULD ONLY FURNISH COPIES OF BANK STATEMENTS CLAIMING THAT THE PURCHASES MADE WERE GENINE AS THE PAYMENTS HAVE BEEN MADE THROUG H BANKING CHANNELS. 6. A GAINST THE ABOVE ORDER , THE ASSESSEE APPEALED BEFORE THE LD. CIT(A). 7. THE LD. CIT(A) CONF I RMED THE ACTION OF THE ASSESSING OFFICER IN MAKING ADDITION OF 12.5% OF THE BOGUS PURCHASE FOR A.Y. 2009 - 10 AND 2011 - 12 BUT RESTRICTED I T TO 6.5% FOR A.Y. 2010 - 11. 4 ITA NO S . 4408, 4337 & 4409/MUM/2018 8 . AGAINST THE ABOVE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS), THE ASSESSEE IS IN APPEAL BEFORE THE ITAT. 6. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. WE FIND THAT CREDIBLE AND COGENT INFORMATION WAS R ECEIVED IN THIS CASE BY THE ASSESSING OFFICER THAT CERTAIN ACCOMMODATION ENTRY PROVIDER/BOGUS SUPPLIERS WERE BEING USED BY CERTAIN PARTIES TO OBTAINED BOGUS BILLS. THE ASSESSEE WAS FOUND TO HAVE TAKEN ACCOMMODATION ENTRY/BOGUS PURCHASE BILLS DURING THE CON CERNED ASSESSMENT YEAR FROM DIFFERENT PARTIES. BASED UPON THIS INFORMATION ASSESSMENT WAS REOPENED. 7. AS REGARDS THE REOPENING OF THE ASSESSEE, ON A CAREFUL CONSIDERATION, WE NOTE THAT IN THIS CASE INFORMATION WAS RECEIVED BY THE ASSESSING OFFICER FROM DGIT INVESTIGATION (MUMBAI) THERE ARE SOME PARTIES WHO ARE ENGAGED IN THE HAWALA TRANSACTIONS AND ARE ALSO INVOLVED IN ISSUING BOGUS PURCHASE BILLS FOR SALE OF MATERIAL WITHOUT DELIVERY OF GOODS, WHICH INFORMATION WAS BASED ON INFORMATION RECEIVED BY REVEN UE FROM MAHARASHTRA SALES TAX AUTHORITY. INFORMATION WAS RECEIVED THAT THE ASSESSEE WAS BENEFICIARY OF HAWALA ACCOMMODATION ENTRIES FROM ENTRY PROVIDERS BY WAY OF BOGUS PURCHASE. THE ACCOMMODATION ENTRY PROVIDER HAS DEPOSED AND ADMITTED BEFORE THE MAHARASH TRA SALES TAX AUTHORITY VIDE STATEMENT/ AFFIDAVIT THAT THEY WERE ENGAGED IN PROVIDING BOGUS ACCOMMODATION ENTRIES WHEREIN BOGUS SALE BILLS WERE ISSUED WITHOUT DELIVERY OF GOODS, IN CONSIDERATION FOR COMMISSION. THESE, ACCOMMODATION ENTRY PROVIDERS, ON RECE IPT OF CHEQUES FROM PARTIES AGAINST BOGUS BILLS FOR SALE OF MATERIAL, LATER ON WITHDREW CASH FROM 5 ITA NO S . 4408, 4337 & 4409/MUM/2018 THEIR BANK ACCOUNTS, WHICH WAS RETURNED TO BENEFICIARIES OF BOGUS BILLS AFTER DEDUCTION OF THEIR AGREED COMMISSION. THE ASSESSEE WAS STATED TO BE ONE OF THE B ENEFICIARIES OF THESE BOGUS ENTRIES OF SALE OF MATERIAL FROM HAWALA ENTRY OPERATORS IN FAVOUR OF THE ASSESSEE WHEREIN THE ASSESSEE MADE ALLEGED BOGUS PURCHASES THROUGH THESE BOGUS BILLS ISSUED BY HAWALA ENTRY PROVIDERS IN FAVOUR OF THE ASSESSEE. THESE DEAL ERS WERE SURVEYED BY THE SALES TAX INVESTIGATION DEPARTMENT WHEREBY THE DIRECTORS OF THESE DEALERS HAVE ADMITTED IN A DEPOSITION VIDE STATEMENTS/AFFIDAVIT MADE BEFORE THE SALES TAX DEPARTMENT THAT THEY WERE INVOLVED IN. ISSUING BOGUS PURCHASE BILLS WITHOUT DELIVERY OF ANY MATERIAL. THERE IS A LIST OF SUCH PARTIES WHEREIN THE ASSESSEE IS STATED TO BE BENEFICIARY OF BOGUS PURCHASE BILLS. 8. FROM THE ABOVE, WE FIND THAT TANGIBLE AND COGENT INCRIMINATING MATERIAL WERE RECEIVED BY THE AO WHICH CLEARLY SHOWED THAT THE ASSESSEE WAS BENEFICIARY OF BOGUS PURCHASE ENTRIES FROM BOGUS ENTRY PROVIDERS WHICH FORMED THE REASON TO BELIEVE BY THE AO THAT INCOME HAS ESCAPED ASSESSMENT. THE INFORMATION SO RECEIVED BY THE AO HAS LIVE LINK WITH REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT. ON THESE INCRIMINATING TANGIBLE MATERIAL INFORMATION, ASSESSMENT WAS REOPENED. AT THIS STAGE THERE HAS TO BE PRIMA FACIE BELIEF BASED ON SOME TANGIBLE AND MATERIAL INFORMATION ABOUT ESCAPEMENT OF INCOME AND THE SAME IS NOT REQUIRED TO BE PROVED TO THE GUILT. IN THIS REGARD, WE REFER TO THE DECISION OF THE HON'BLE APEX COURT IN THE CASE OF CIT(A) VS. RAJESH JHAVERI STOCK BROKERS P. LTD, 291 ITR 500: - 'SECTION 147 AUTHORISES AND PERMITS THE ASSESSING OFFICER TO ASSESS OR REASSESS INCOM E CHARGEABLE TO LAX IF HE HAS REASON TO BELIEVE THAT INCOME FOR ANY 6 ITA NO S . 4408, 4337 & 4409/MUM/2018 ASSESSMENT YEAR HAS ESCAPED ASSESSMENT. THE WORD 'REASON' IN THE PHRASE 'REASON TO BELIEVE' WOULD MEAN CAUSE OR JUSTIFICATION. IF THE AO HAS CAUSE OR JUSTIFICATION TO KNOW OR SUPPOSE (HAT INCOME HAD ESCAPED ASSESSMENT, IT CAN BE SAID TO HAVE REASON TO BELIEVE THAT AN INCOME HAD ESCAPED ASSESSMENT. THE EXPRESSION CANNOT BE READ TO MEAN THAT THE AO SHOULD HAVE FINALLY ASCERTAINED THE FACT BY LEGAL STATUTE WITH SOLICITUDE FOR THE PUBLIC EXCHEQ UER WITH AN INBUILT IDEA OF FAIRNESS TO TAXPAYERS. AS OBSERVED BY THE SUPREME COURT IN CENTRAL PROVINCES MANAGNESE ORE CO, LTD. V. ITO(1991) 191 ITR 662, FOR INITIATION OF ACTION UNDER SECTION 147(A) (AS THE PROVISION STOOD AT THE RELEVANT TIME) FULFILLMEN T OF THE TWO REQUISITE CONDITIONS IN THAT REGARD IS ESSENTIAL. AT THAT STAGE, THE FINAL OUTCOME OF THE PROCEEDING IS NOT RELEVANT. IN OTHER WORDS, AT THE INITIATION STAGE, WHAT IS REQUIRED IS 'REASON TO BELIEVE', BUT NOT THE ESTABLISHED FACT OF ESCAPEMENT OF INCOME. AT THE STAGE OF ISSUE OF NOTICE, THE ONLY QUESTION IS WHETHER THERE WAS RELEVANT MATERIAL ON WHICH A REASONABLE PERSON COULD HAVE FORMED A REQUISITE BELIEF WHETHER THE MATERIALS WOULD CONCLUSIVELY PROVE THE ESCAPEMENT IS NOT THE CONCERN AT THAT STAGE. THIS IS SO BECAUSE THE FORMATION OF BELIEF BY THE AO IS WITHIN THE REALM OF SUBJECTIVE SATISFACTION ITO V. SELECTED DALURBAND COAL CO, (P.) LTD. (1996) 217 ITR 597 (SUPREME COURT): RAYMOND WOOLLEN MILLS LTD. V. ITO (1999) 236 ITR 34 (SUPREME COURT). 9. THE ABOVE DISCUSSION AND PRECEDENT FROM APEX COURT FULLY JUSTIFY THE VALIDITY OF REOPENING IN THIS CASE. SINCE, THE ISSUE HAS BEEN DECIDED ON THE BASIS OF THE HONBLE APEX COURT DECISION, THE OTHER CASE LAWS REFERRED BY ASSESSEE ARE NOT SUPPORTING TH E ASSESSEES CASE. 10. IN SUCH FACTUAL SCENARIO, THE ASSESSING OFFICER HAS MADE THE NECESSARY ENQUIRY. THE ISSUE OF NOTICE TO ALL THE PARTIES HAVE RETURNED UNSERVED. ASSESSEE HAS NOT BEEN ABLE TO PROVIDE ANY CONFIRMATION FROM ANY OF THE PARTY. ASSESSEE H AS ALSO NOT BEEN ABLE TO PRODUCE ANY OF THE PARTIES. NECESSARY EVIDENCE RELATING TO TRANSPORTATION OF THE GOODS WAS ALSO NOT ON RECORD. IN THIS FACTUAL SCENARIO, IT IS AMPLY CLEAR THAT THE ASSESSEE HAS OBTAINED BOGUS PURCHASE BILLS. MERE PREPARATION OF DOC UMENTS FOR 7 ITA NO S . 4408, 4337 & 4409/MUM/2018 PURCHASES CANNOT CONTROVERT OVERWHELMING EVIDENCE THAT THE PROVIDER OF THESE BILLS IS BOGUS AND NON - EXISTENT. 11 . THE SALES TAX DEPARTMENT IN ITS ENQUIRY HAS FOUND THE PARTIES TO BE PROVIDING BOGUS ACCOMMODATION ENTRIES. THE ASSESSING OFFICER ALSO ISSUED NOTICES TO THESE PARTIES AT THE ADDRESSES PROVIDED BY THE ASSESSEE. ALL THESE NOTICES HAVE RETURNED UNSERVED. ASSESSEE HAS NOT BEEN ABLE TO PRODUCE ANY OF THE PARTIES. NEITHER THE ASSESSEE HAS BEEN ABLE TO PRODUCE ANY CONFIRMATION FROM THESE PA RTIES. IN SUCH CIRCUMSTANCES, THERE IS NO DOUBT THAT THESE PARTIES ARE NON - EXISTENT. WE FIND IT FURTHER STRANGE THAT ASSESSEE WANTS THE REVENUE TO PRODUCE ASSESSEES OWN VENDORS, WHOM THE ASSESSEE COULD NOT PRODUCE. THE PURCHASE BILLS FROM THESE NON - EXISTE NT/BOGUS PARTIES CANNOT BE TAKEN AS COGENT EVIDENCE OF PURCHASES. IN LIGHT OF THE OVERWHELMING EVIDENCE, THE REVENUE AUTHORITIES CANNOT PUT UPON BLINKERS AND ACCEPT THESE PURCHASES AS GENUINE. THIS PROPOSITION IS DULY SUPPORTED BY HONBLE APEX COURT DECIS ION IN THE CASE OF SUMATI DAYAL VS. CIT [1995] 214 ITR 801 (SC) AND CIT VS. DURGA PRASAD MORE [1971] 82 ITR 540 (SC). IN THE PRESENT CASE, THE ASSESSEE WANTS THAT THE UNASSAILABLE FACT THAT THE SUPPLIERS ARE NON - EXISTENT AND, THUS, BOGUS SHOULD BE IGNORED AND ONLY THE DOCUMENTS BEING PRODUCED SHOULD BE CONSIDERED. THIS PROPOSITION IS TOTALLY UNSUSTAINABLE IN LIGHT OF HONBLE APEX COURT DECISIONS. 12 . WE FURTHER FIND THAT HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF NIKUNJ EXIMP ENTERPRISES (IN WRIT PET ITION NO 2860, ORDER DT. 18.6.2014) HAS UPHELD 100% 8 ITA NO S . 4408, 4337 & 4409/MUM/2018 ALLOWANCE FOR THE PURCHASES SAID TO BE BOGUS WHEN THE SALES HAVE NOT BEEN DOUBTED. HOWEVER, THE FACTS OF THAT CASE WERE DIFFERENT. FURTHERMORE, THE SALES IN THAT CASE WERE BASICALLY TO GOVERNMENT DEPARTM ENTS. HENCE, THE RATIO FROM THIS DECISION IS NOT FULLY APPLICABLE ON THE FACTS OF THE CASE. 13. IN THESE CIRCUMSTANCES, THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS REFERRED TO HONBLE GUJARAT HIGH COURT DECISION IN THE CASE OF TAX APPEAL NO. 240 OF 2003 I N THE CASE OF N K INDUSTRIES VS. DY. CIT VIDE ORDER DATED 20.06.2016, WHEREIN 100% OF THE BOGUS PURCHASES WAS HELD TO BE ADDED IN THE HANDS OF THE ASSESSEE AND TRIBUNALS RESTRICTION OF THE ADDITION TO 25% OF THE BOGUS PURCHASES WAS SET ASIDE. IT WAS EXPOUN DED THAT WHEN PURCHASE BILLS HAVE BEEN FOUND TO BE BOGUS, 100% DISALLOWANCE WAS REQUIRED. THE SPECIAL LEAVE PETITION AGAINST THIS ORDER ALONG WITH OTHERS HAS BEEN DISMISSED BY THE HONBLE APEX COURT VIDE ORDER DATED 16.1.2017. 14. HOWEVER, WE NOTE THAT T HIS IS NOT AN APPEAL BY THE REVENUE. HENCE, IT WILL NOT BE APPROPRIATE TO CONSIDER AND TAKE AWAY THE RELIEF ALREADY GRANTED BY THE L D. CIT(A) TO THE ASSESSEE. FURTHER, WE ALSO NOTE THAT THE REVENUE CANNOT TAKE DIFFERENT VIEW FOR SAME ASSESSEE ON SAME FACTS FOR DIFFERENT YEAR. MOREOVER, IT IS SETTLED LAW THAT IF TWO VIEWS ARE POSSIBLE, ONE IN FAVOUR OF THE ASSESSEE HAS TO BE ADOPTED. HENCE, WE UPHOLD THE VIEW OF THE LD. CIT(A) FOR A.Y. 2010 - 11 TO BE APPLICABLE IN ASSESSEES CASE FOR OTHER YEAR ALSO. HENCE , W E DIRECT THAT ADDITION BE MADE @ 6.5% OF BOGUS PURCHASE FOR ALL THE YEARS. WE FURTHER NOTE THAT THE ASSESSEE HAS REFERRED TO VARIOUS CASE LAWS, 9 ITA NO S . 4408, 4337 & 4409/MUM/2018 HOWEVER, IN VIEW OF THE HONBLE APEX COURT AND HONBLE HIGH COURT DECISION REFERRED BY US, THESE ARE NOT DISCUSS ED HERE. MOREOVER, THE LD. LD. COUNSEL OF THE ASSESSEE FAIRLY ADMITTED THAT 6.5% DISALLOWANCE WOULD MEET THE END OF JUSTICE. 15. IN THE RESULT, TH E S E APPEAL S FILED BY THE ASSESSEE FOR A.Y. 2010 - 11 IS DISMISSED AND FOR A.Y S . 2009 - 10 AND 2011 - 12 IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 05.10.2018 SD/ - SD/ - ( PAWAN SINGH ) (S HAMIM YAHYA) J UDICIAL MEMBER A CCOUNTANT MEMBER MUMBAI ; DATED : 05.10.2018 ROSHANI , SR . PS 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 ILE BY ORDER, (DY./ASSTT. REGISTRAR) ITAT, MUMBAI