ITO 27(2)(5), Mumbai V. PARESH P SANGHAVI, Mumbai

ITA 4494/MUM/2019

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 7366 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-01-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 03-07-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANJAY J SETHI
• Assessee Lawyers: MAKRAND PALKAR
• Keywords: Bogus purchase; Unexplained expenditure; Peak credit; Accommodation entries
• Section: 69C; 133(6); 143(1); 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (VIRTUAL COURT) SMC BENCH, MUMBAI BEFORE SHRI C.N. PRAS AD, HON'BLE JUDICIAL MEMBER ITA NO. 4494 /MUM/201 9 ( A. Y : 2011 - 12 ) INCOME TAX OFFICER 27 (2)(5) ROOM NO. 421 , 4 TH FLOOR 6 TH TOWER , VASHI RAILWAY STATION COMPLEX VASHI, NAVI MUMBAI 400 703 V. PARESH P. SANGHAVI 22, VAIKUNTH , SINDH I SOCIETY CHEMBUR, MUMBAI - 400071 PAN: AAHPS4872K ( A PPELLANT) (RESPONDENT) ASSESSEE BY : SHRI MAKRAND PALKAR DEPARTMENT BY SHRI SANJAY J. SETHI DATE OF HEARING : 18.01.2021 DATE OF PRONOUNCEMENT : 18.01.2021 O R D E R PER C. N. PRASAD (JM) 1. THIS APPEAL IS FILED BY THE R EVENUE AGAINST ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) 26 , MUMBAI [HEREINAFTER IN SHORT LD.CIT(A)] DATED 30.04.2019 FOR THE A.Y . 2011 - 12 IN RESTRICTING THE DISALLOWANCE TO 12.5 % OF PURCHASES AS AGAINST ADDITION OF PEAK CREDIT OF .17,15,788/ - OUT OF TOTAL BOGUS PURCHASES OF .19,60,396/ - AS UNEXPLAINED EXPENDITURE U/S. 69C OF THE ACT. 2 ITA NO. 4494/MUM/2019 (A.Y: 2011 - 12) PARESH P. SANGHAVI 2. BRIEFLY STATED THE FACTS ARE THAT, THE ASSESSEE ENGAGED IN THE BUSINESS OF RESELLER IN IRON & STEEL, BALL BEARINGS, TOOLS & HARDWARE FILED RETURN OF INCOME ON 28.09.2011 DECLARING INCOME OF . 2,92,940/ - FOR THE A.Y.2011 - 1 2 AND THE RETURN WAS PROCESSED U/S. 143(1) OF THE ACT. SUBSEQUENTLY, ASSESSING OFFICER RECEIVED INFORMATION FROM THE DGIT (INV. ,) , MUMBAI ABOUT THE ACCOMMODATION ENTRIES PROVIDED BY VARIOUS DEALERS AND ASSESSEE WAS ALSO ONE OF THE BENEFICIARY FROM THOSE DEALERS. THE ASSESSMENT S WERE REOPENED U/S. 147 OF THE ACT BASED ON THE INFORMATION RECEIVED FROM DGIT(INV.) MUMBAI, THAT THE ASSESSEE HAS AVAILED ACCOMMODATION ENTRIES FROM VARIOUS DEALERS WHO ARE SAID TO BE PROVIDING ACCOMMODATION ENTRIES WITHOUT THERE BEING TRANS PORTATION OF ANY GOODS. IN THE RE ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS REQUIRED TO PROVE THE GENUINENESS OF THE PURCHASES MADE FROM VARIOUS PARTIES REFERRED IN ASSESSMENT ORDER. ASSESSEE VIDE LETTER DATED 27.01.2015 FURNISHED COPIES OF BILL S AND RECONCILIATION STATEMENT OF SALES CORRESPONDING TO PURCHASES AND SUBMITTED THAT THE PURCHASES MADE ARE GENUINE . ASSESSEE FURTHER SUBMITTED THAT THE PAYMENTS ARE MADE THROUGH ACCOUNT PAYEE CHEQUES A S SUCH CONTENDED THAT ALL THE PURCHASES ARE GENUINE. HOWEVER, PARTIES WERE NOT PRODUCED BEFORE THE ASSESSING OFFICER AND NO EXPLANATION WAS OFFERED. 3 ITA NO. 4494/MUM/2019 (A.Y: 2011 - 12) PARESH P. SANGHAVI 3. NOT CONVINCED WITH THE SUBMISSIONS OF THE ASSESSEE THE ASSESSING OFFICER TREATED THE PURCHASES AS NON - GENU INE AND HE WAS OF THE OPINION THAT ASSESSEE HAD OBTAINED ONLY ACCOMMODATION ENTRIES WITHOUT THERE BEING ANY TRANSPORTATION OF MATERIALS AND THE ASSESSEE MIGHT HAVE MADE PURCHASES IN THE GRAY MARKET. IT IS THE FINDING OF THE ASSESSING OFFICER THAT THE ASSE SSEE DID NOT SUBMIT THE EVIDENCES LIKE DELIVERY CHALLANS, TRANSPORT BILLS ETC., AND FAILED TO PRODUCE THE PARTY TO PROVE TH AT THE TRANSACTIONS ARE GENUINE. ASSESSING OFFICER OBSERVED THAT THE NOTICE ISSUED U/S. 133(6) OF THE ACT TO THE PARTIES WERE RETURN ED UNSERVED WITH A REMARK UNKNOWN/LEFT AND THE INSPECTOR DEPUTED TO VISIT THE PARTIES REPORTED THAT THE PARTIES DO NOT EXIST AT THEIR GIVEN ADDRESSES AND THE ASSESSEE DID NOT PRODUCED THE PARTIES BEFORE THE ASSESSING OFFICER. THEREFORE, ASSESSING OFFICER TREATED MAXIMUM PEAK CREDIT OF .17,15,788/ - OUT OF TOTAL BOGUS PURCHASES OF .19,60,396/ - AS UNEXPLAINED EXPENDITURE U/S. 69C OF THE ACT AS NON - GENUINE A ND ADDED TO THE INCOME OF THE ASSESSEE. ON APPEAL THE LD.CIT(A) CONSIDERING THE EVIDENCES AND VARIOUS SUBMISSIONS OF THE ASSESSEE RESTRICTED THE DISALLOWANCE TO AN EXTENT OF 12.5 % OF THE NON - GENUINE PURCHASES. 4. LD. COUNSEL FOR THE ASSESSEE REITERATED THE S UBMISSIONS MADE BEFORE THE LD.CIT(A). LD. COUNSEL FURTHER SUBMITTED THAT THE HON'BLE ITAT 4 ITA NO. 4494/MUM/2019 (A.Y: 2011 - 12) PARESH P. SANGHAVI SUSTAINED THE ORDERS OF THE LD.CIT(A) IN RESTRICTING THE DISALLOWANCE FOR THE A.Y: 2009 - 10 AND A.Y. 2010 - 11. 5. LD. DR VEHEMENTLY SUPPORTED THE ORDERS OF THE ASSESSING OFFICER. 6. HEARD BOTH SIDES , PERUSED THE ORDERS OF THE AUTHORITIES BELOW. ON A PERUSAL OF THE ORDER OF THE LD.CIT(A), I FIND THAT THE LD.CIT(A) CONSIDERED THIS ASPECT OF THE MATTER ELABORATELY WITH REFERENCE TO THE SUBMISSIONS OF THE ASSESSEE AND THE AVERM ENTS IN THE ASSESSMENT ORDER AND FOLLOWING THE DECISION OF HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT V . SIMIT P. SHETH [356 ITR 451] RESTRICTED THE DISALLOWANCE TO 12.5% OF THE NON - GENUINE PURCHASES. WHILE HOLDING SO, THE LD.CIT(A) OBSERVED AS UNDER: - 6. I HAVE CONSIDERED THE FACTS OF THE CASE AND THE APPELLANT'S SUBMISSIONS . 7. GROUNDS NO, 1 TO 4 OF THE APPEAL ARE AGAINST TH E ADDITION OF PEAK CREDIT OF RS. 17,15,788 OUT OF TOTAL B OGUS PURCHASES OF RS. 19,60,396/ - AS UNEXPLAINED EXPENDITURE U/S 69C O F THE ACT. AS PER THE INVESTIGATIONS CARRIED OUT BY THE SALES TAX AUTHORITIES, THE AFOREMENTIONED PARTIES WERE FOUND TO BE INVOLVED IN GIVING ACCOMMODATION 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 ISSUING NOTICES U/S 133(6) WHICH WERE RETURNED UNSERVED BY THE POSTAL AUTHORITIES. THIS PARTY WAS FOUND TO BE NON EXISTENT AT THE A DDRESS GIVEN BY THE APPELLANT. THE APPELLANT ALSO FAILED TO PROVIDE THE LATEST ADDRESS OF THE PARTY. DURING THE SCRUTINY ASSESSMENT THE APPELLANT FURNISHED DETAILS OF PURCHASES AND CORRESPONDING SALES. HOWEVER, THE APPELLANT COULD NOT PRODUCE THE PARTY BEF ORE 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 FU LLY. WHEN THE HAWALA PARTY HAD ADMITTED ON OATH THAT IT HAD GIVEN ACCOMMODATION ENTRIES ONLY WITHOUT ACTUALLY SUPPLYING THE GOODS, THE GENUINENESS OF PURCHASES MADE FROM THESE PARTIES WILL HAVE TO BE CONSIDERED TAKING THIS INTO CONSIDERATION WHILE EXAMININ G THE DOCUMENTATION 5 ITA NO. 4494/MUM/2019 (A.Y: 2011 - 12) PARESH P. SANGHAVI SUBMITTED BY THE APPELLANT IN SUPPORT OF ITS CLAIM. THE DOCUMENTARY EVIDENCES SUCH AS PURCHASE BILLS, PAYMENTS BY CHEQUES, ETC. WOULD ALL HAVE BEEN ORCHESTRATED TO PRESENT A FACADE OF GENUINENESS AND DOES NOT NECESSARILY MEAN THAT THE P URCHASES 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 EXPLANATION IS THAT THE APPELLANT WOULD HAVE MADE PURCHASES FROM UNDISCLOSED PARTIES IN THE GREY MARKET AT LOWER RATES AND PURCHASES W ERE 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. THE HON'BLE GUJRAT HIGH COURT IN THIS CASE HAS HELD THAT PROFIT MARGIN OF 12.5% OF THE BOGUS PURCHASES WILL BE REASONABLE. RESPECTFULLY FOLLOWI NG THE ORDER IN THE CASE OF SIM IT P. SHETH T HE ADDITION IS RESTRICTED TO 12.5% OF THE BOGUS PURCHASES OF RS. 19,60,39 6/ - . THIS GROUND OF APPEAL IS 'PARTLY ALLOWED'. 7. ON A CAREFUL PERUSAL OF THE ORDER OF THE LD.CIT(A) AND THE REASONS GIVEN THEREIN, I DO NOT FIND ANY INFIRMITY IN THE ORDER PASSED BY THE LD.CIT(A) IN RESTRICTING THE ADDITION/DISALLOWANCE TO THE EXTENT OF 12.5% OF THE PURCHASES. GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 8. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUN CED IN THE VIRTUAL COURT ON 18.01.2021. SD/ - (C.N. PRASAD) JUDICIAL MEMBER MUMBAI / DATED 18/01/2021 GIRIDHAR , S R. PS 6 ITA NO. 4494/MUM/2019 (A.Y: 2011 - 12) PARESH P. SANGHAVI COPY OF THE ORDER FORWARDED TO : 1. THE ASSESSEE 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY// BY ORDER (ASSTT. REGISTRAR) ITAT, MUM