ACIT 33(1), MUMBAI V. GANESH R. YADAV, MUMBAI

ITA 4493/MUM/2015

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 9133 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-10-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 29-06-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 31-07-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V VIDHYADHAR
• Keywords: Bogus purchase; Unexplained expenditure; Accommodation entries; Onus to prove
• Section: 133(6)

Judgement Text

, G , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES G, MUMBAI BEFORE SHRI SHAMIM YAHYA, AM & SHRI SHAKTIJIT DEY, JM ITA NO.4493/MUM/2015 : ASST.YEAR 2009-2010 ASST.COMMISSIONER OF INCOME - TAX CIRCLE 33(1) MUMBAI. / VS. SHRI GANESH R YADAV 716, D-WING, RAJ GARDEN MAHAVIR NAGAR, KANDIVALI (WEST) MUMBAI 400 067. PAN : AAQPY1103N. ( / APPELLANT) ( / RESPONDENT) APPELLANT BY : SHRI V.VIDHYADHAR RESPONDENT BY : SHRI DEVENDRA JAIN / DATE OF HEARING : 24.08.2017 / DATE OF PRONOUNCEMENT : 03.10.2017 / O R D E R PER SHAMIM YAHYA, AM THIS IS AN APPEAL BY THE REVENUE, WHEREIN THE REVENUE IS AGGRIEVED THAT THE LEARNED CIT(A) HAS NOT SUSTAINED 100% DISALLOWANCE ON ACCOUNT OF BOGUS PURCHASES. 2. THE GROUNDS OF APPEAL READ AS UNDER:- (I) 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT(A) ERRED IN RESTRICTING THE ADDITION OF RS.1,04,21,578/- ON ACCOUNT OF BOGUS PURCHASES FROM BOGUS PARTIES WHO WERE MERELY SUPPLYING THE BILLS TO 8% OF RS.1,04,21,578/- I.E. RS.8,33,726/- WITHOUT APPRECIATING THE FACT THAT THERE WAS NO EVIDENCE TO SHOW FOR TAKING POSSESSION OF GOODS FROM BOGUS SALES PARTIES LIKE DELIVERY CHALLAN ISSUED BY THIS PARTIES AND LORRY RECEIPTS WHICH IS PRIMARY EVIDENCE TO ESTABLISH GENUINESS OF PURCHASES. ITA NO.4493/MUM/2015. SHRI GANESH R YADAV. 2 (II) 'ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN APPRECIATING THE FACT THAT MERE PAYMENT BY CROSSED ACCOUNT PAYEE CHEQUE IS NOT A SAFE METHOD OF SUBSTANTIATING THE ASSESSEE'S CLAIM AS THE AMOUNTS CREDITED IN THE ALLEGED SELLERS BANK ACCOUNT WERE WITHDRAWN IN CASH. (III) 'THE APPELLANT PRAYS THAT THE ORDER OF THE LD.CIT(A) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE AO BE RESTORED.' (IV) 'THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD A NEW GROUND. 3. THE ASSESSING OFFICER IN THIS CASE HAS MADE 100% ADDITION ON ACCOUNT OF BOGUS PURCHASES AMOUNTING TO RS.1,04,21,578. 4. BRIEF FACTS OF THE CASE ARE AS UNDER:- 4.1 RETURN OF INCOME DECLARING THE TOTAL INCOME OF RS.59,18,345/- WAS E- FILED ON 27.09.2009. DURING THE YEAR, AN ADDITION OF RS. 1,04,21,578/- HAS BEEN MADE ON ACCOUNT OF UNEXPLAINED EXPENDITURE ON PURCHASES FROM 12 DIFFERENT PARTIES. THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS AN INDIVIDUAL AND IS ENGAGED IN THE BUSINESS OF INTERIOR DESIGNING AND DECORATORS. DURING THE YEAR, THE ASSESSEE HAS DEBITED A TOTAL PURCHASES OF RS.1,04,21,578/-. DURING THE YEAR, THE AO HAD INFORMATION FROM THE SALES TAX DEPARTMENT, MUMBAI THAT THERE WERE CERTAIN DEALERS WHO WERE ONLY PROVIDING ACCOMMODATION ENTRIES AND WERE NOT GENUINE SELLERS IN THE MARKET. OUT OF THE LIST OF PARTIES FROM WHOM THE APPELLANT HAD MADE THE PURCHASES, 12 NAMES WERE FOUND IN THE LIST PROVIDED BY THE SALES TAX DEPARTMENT. THESE ARE - ITA NO.4493/MUM/2015. SHRI GANESH R YADAV. 3 SR.NO. NAME AMOUNT - IN(RS.) 1, SAMIR TRADING CORPN, 18,12,576 2. DEEPALI ENTERPRISES 6,24,938 3. SIDDIVINAYAK TRADING CO., 4,11,750 4. M R CORPORATION 4,12,200 5, SUN ENTERPRISES 5,85,000 6. CAROLIN ENTERPRISES 7 , 498 7. RAJ TRADERS 24,67,328 8. RENUKA SALES CORPORATION 7,60,959 9. REKHA TRADING CO. 11,79,450 10. S S ENTERPRISES 2,84,063 11 POOJA TRADING COMPANY 12,35,250 12 AMOL INDUSTRIES 6,40,575 TOTAL 1,04,21,578 4.2 THE AO ISSUED NOTICES U/S 133(6) TO THESE PARTIES AND THE ASSESSEE WAS ASKED TO DISCHARGE ITS ONUS TO PROVE THAT THE SAID TRANSACTIONS WERE GENUINE. THE NOTICES U/S 133(6) WERE RETURNED EITHER UNSERVED WITH THE REMARK 'NOT KNOWN' AND 'UNCLAIMED' AND HEFT'. IN REPLY TO THE SHOW-CAUSE ISSUED TO THE ASSESSEE, THE ASSESSEE FURNISHED COPIES OF PURCHASE BILLS FROM ITA NO.4493/MUM/2015. SHRI GANESH R YADAV. 4 THESE PARTIES, COPIES OF DELIVERY CHALLANS, STOCK REGISTER AND STATEMENT OF BANK ACCOUNTS. THE ASSESSEE ALSO REITERATED THAT ALT THE PAYMENTS WERE MADE BY ACCOUNT PAYEE CHEQUES FROM THE ACCOUNT THAT WAS DECLARED BY IT. IT IS THE CASE OF THE ASSESSEE THAT JUST BECAUSE THE NAMES OF THESE DEALERS WERE PUBLISHED BY THE SALES TAX DEPARTMENT AS THEIR BEING SUSPICIOUS, DOES NOT MEAN THAT ALL THE TRANSACTIONS DONE BY THESE PARTIES WOULD NOT BE GENUINE AND IN ANY CASE IT IS THE CASE OF THE APPELLANT THAT AS FAR AS IT IS CONCERNED, IT HAS SUBMITTED ALL THE RELEVANT DOCUMENTS TO PROVE THAT THE TRANSACTIONS ARE GENUINE. 4.3 THE ASSESSEE COULD NOT PRODUCE-DELIVERY CHALLAN, LORRY RECEIPT, MODE OF TRANSPORT OF GOODS, EVIDENCE OF PAYMENT OF FREIGHT (IF ANY), STOCK REGISTER ETC., FOR ALL THE PURCHASES FROM THE ALLEGED SUPPLIERS. THE ASSESSEE HAS NOT BEEN ABLE TO REBUT THE EVIDENCES, DEPOSITIONS AND STATEMENTS OF HAWALA OPERAT6RS, THE PERSONS HAS NOT BEEN FOUND ON THE GIVEN ADDRESS. THE AO HAS HELD THAT THE ASSESSEE HAS NOT BEEN ABLE TO PRODUCE THE PARTIES FROM WHOM THE SAID-PURCHASES HAVE BEEN MADE AND THEREFORE, IT CANNOT BE HELD THAT THE PARTIES ARE GENUINE. IN THE LIGHT OF THE ABOVE, PURCHASES OF RS.L,04,21,578/- HAS BEEN HELD AS UNEXPLAINED EXPENDITURE U/S 69C. THE ASSESSEE IS IN APPEAL AGAINST THE SAID ADDITION. 5. UPON ASSESSEES APPEAL, LEARNED CIT(A) HAS NOTED THAT THE SALES HAS NOT BEEN DOUBTED. ACCORDINGLY PLACING RELIANCE UPON SEVERAL CASE LAWS AND UPON THE FACTS OF THE CASE, HE SUSTAINED 8% DISALLOWANCE OUT OF THE BOGUS PURCHASES. THE LEARNED CIT(A) HELD AS UNDER:- ITA NO.4493/MUM/2015. SHRI GANESH R YADAV. 5 I HAVE GONE THROUGH THE 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 JS ALSO A FACT, THAT THE SALES TAX DEPARTMENT 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 HAS NOT FOUND ANY CONCRETE EVIDENCE TO DOUBT THE GENUINENESS OF THE PAYMENTS BEING SHOWN BY THE APPELLANT THROUGH THE BANK ACCOUNT. THE AO HAS ALSO DEFINITELY NOT BEEN ABLE TO QUESTION THE AVAILABILITY OF THE INVENTORY THAT HAS BEEN SUBSEQUENTLY SOLD. TO THAT 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 THROUGH 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 ACCURATE MANNER. SO THEREFORE, WHILE ON ONE HAND THE AO 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 COPIES OF HIS OWN LEDGER ACCOUNTS AND BANK ACCOUNTS DOES IN NO WAY ESTABLISH THAT 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 RECEIVED BACK AS CASH BY THE APPELLANT, I AM OF THE CONSIDERED VIEW THAT IN THE CONTEXT ITA NO.4493/MUM/2015. SHRI GANESH R YADAV. 6 OF THE SITUATION WHERE THE AO 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 MARGINS 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, THEREFORE, 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. 8% OF RS.1,04,21,578/- WHICH WORKS OUT TO OF RS.8,33,726/- IS UPHELD FOR LACK OF CREDIBLE EVIDENCE BEING PROVIDED BY THE APPELLANT TO SUBSTANTIATE THE PURCHASES. THE APPELLANT GETS RELIEF OF RS.95,817,852/-. 6. AGAINST THE ABOVE ORDER, REVENUE IS IN APPEAL BEFORE THE ITAT. 7. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. WE FIND THAT IN THIS CASE SALES HAVE NOT BEEN DOUBTED. IT IS SETTLED LAW THAT WHEN SALES ARE NOT DOUBTED, 100% DISALLOWANCE FOR BOGUS PURCHASE CANNOT BE DONE. THE RATIONALE BEING NO SALES IS POSSIBLE WITHOUT PURCHASE. THIS PROPOSITION IS SUPPORTED FROM HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF NIKUNJ EXIMP ENTERPRISES (IN WRITE PETITION NO.2860, ORDER DATED 18.06.2014). IN THIS CASE THE HONBLE COURT HAS UPHELD 100% ALLOWANCE FOR THE PURCHASES SAID TO BE BOGUS WHEN SALES ARE NOT DOUBTED. HOWEVER, THE FACTS OF THE PRESENT CASE INDICATE THAT ASSESSEE HAS MADE PURCHASES FROM THE GREY MARKET. MAKING PURCHASES THROUGH THE GREY MARKET GIVES THE ASSESSEE SAVING ON ACCOUNT OF NON-PAYMENT OF TAX AND OTHERS AT THE EXPENSE OF THE EXCHEQUER. IN SUCH SITUATION, IN OUR CONSIDERED OPINION, ON ITA NO.4493/MUM/2015. SHRI GANESH R YADAV. 7 THE FACTS AND CIRCUMSTANCES OF THE CASE THE 8% DISALLOWANCE OUT OF THE BOGUS PURCHASES DONE BY THE LEARNED CIT(A) MEETS THE ENDS OF JUSTICE. ACCORDINGLY WE UPHOLD THE ORDER OF LEARNED CIT(A). 8. IN THE RESULT, THIS APPEAL FILED BY THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED ON THIS 3 RD DAY OF OCTOBER, 2017. SD/- SD/- ( SHAKTIJIT DEY ) ( SHAMIM YAHYA ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI; DATED : 03.10.2017. DEVDAS* / COPY OF THE ORDER FORWARDED TO : / BY ORDER, //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT, MUMBAI. 4. / CIT(A), MUMBAI 5. , , / DR, ITAT, MUMBAI 6. [ / GUARD FILE.