Dharmendra Nanalal Agara, Bhuj V. The Income Tax Officer, Ward-1, Bhuj

ITA 451/RJT/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 6683 (ITAT-RAJKOT)
• Duration Of Justice: 2 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-03-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 09-02-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 27-12-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P P BHATIA
• Assessee Lawyers: DM RINDANI
• Keywords: Bogus purchase
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, RAJKOT BENCH, RAJKOT [CONDUCTED THROUGH E-COURT AT AHMEDABAD] BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER ./ ITA NO. 451/RJT/2016 ASSESSMENT YEAR : 2010-11 DHARMENDRA NANALAL AGARA, VIJAY CONSTRUCTION, SHOP NO.3, ODHAVRAM APARTMENT, BHUJ-KUTCH PAN : AEJPA 9679 J VS THE INCOME-TAX OFFICER, WARD-1, BHUJ-KUTCH / (APPELLANT) / (RESPONDENT) ASSESSEE BY : SHRI D.M. RINDANI, AR REVENUE BY : SHRI P.P. BHATIA, SR DR / DATE OF HEARING : 09/02/2017 / DATE OF PRONOUNCEMENT: 14/03/2017 / O R D E R PER PRADIP KUMAR KEDIA, AM: THE CAPTIONED APPEAL BY THE ASSESSEE IS DIRECTED AG AINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-2, RAJK OT DATED 23.11.2016 PASSED FOR ASSESSMENT YEAR 2010-11. 2. THE SUBSTANTIVE GRIEVANCE OF THE ASSESSEE IS AGA INST THE ORDER OF THE CIT(A) IN CONFIRMING ADDITION OF RS.16,84,112/- ON ACCOUNT OF BOGUS PURCHASES. 3. BRIEFLY STATED, THE ASSESSEE IS ENGAGED IN THE C ONSTRUCTION ACTIVITIES. THE RETURN OF INCOME FOR THE RELEVANT ASSESSMENT YE AR 2010-11 WAS FILED DECLARING TOTAL INCOME OF RS.21,23,320/-. THE CASE WAS SELECTED FOR SCRUTINY ASSESSMENT UNDER SECTION 148/147 OF THE AC T ON THE BASIS OF INFORMATION ABOUT ALLEGED BOGUS PURCHASES OF RS.16, 84,112/- RECEIVED ITA NO. 451/RJT/2016 DHARMENDRA NANALAL AGARA VS. ITO AY: 2010-11 2 FROM VAT DEPARTMENT. BASED ON THE INFORMATION RECE IVED FROM THE VAT (VALUE ADDED TAX) DEPARTMENT, THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS ALLEGEDLY PURCHASED GOODS OF RS.15,28, 569/- FROM M/S. SUYOG TRADELINK, PUNE AND RS.1,55,543/- FROM M/S. S IDDHIVINAYAK ENTERPRISES, PUNE. IT WAS OBSERVED THAT BOTH THESE PARTIES WERE NOTIFIED AS HAWALA FIRMS/COMPANIES BY THE VAT DEPARTMENT. I N SUPPORT OF THE PURCHASES MADE, THE ASSESSEE SUBMITTED COPIES OF BI LL OF BOTH THE PARTIES AND PROOF TOWARDS PAYMENT MADE THROUGH BANK. THE A SSESSEE ALSO SUBMITTED THAT THE PURCHASES ARE NOT BOGUS PER SE , BUT THE ISSUE RAISED BY THE VAT DEPARTMENT IS LIMITED TO NON-PAYMENT OF VAT COLLECTED BY THE RECIPIENTS FROM THE ASSESSEE AND NOT PAYING THE SAM E TO THE EXCHEQUER. IT WAS SUBMITTED THAT THE ASSESSEE HAS PAID THE AMOUNT OF VAT PAYABLE BY THE SELLERS WITH INTEREST AND PENALTY AND THEREFORE , THE DEFAULT COMMITTED BY THE SELLERS HAVE BEEN CURED. 4. THE CIT(A) DISMISSED THE APPEAL OF THE ASSESSEE ON THE GROUND THAT THE IMPUGNED PURCHASES WERE FOUND TO BE HAWALA CONC ERNS OR ENTRY PROVIDERS BY THE VAT DEPARTMENT. THE VAT PAYMENT ET C. BY THE ASSESSEE IS AN ACTION TO CREATE FAADE OF GENUINENE SS OF THE PURCHASES. 5. AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSESS EE IS IN APPEAL BEFORE THE TRIBUNAL. 6. THE LD. AR FOR THE ASSESSEE, SHRI D.M. RINDANI, RELIED UPON THE SUBMISSIONS MADE BEFORE THE CIT(A) AND SUBMITTED IN FURTHERANCE THAT GP HAS BEEN DECLARED AT 13% FOR THE RELEVANT ASSESS MENT YEAR. THEREFORE, THE BOOK RESULTS ARE REASONABLE. THE LD. AR ALSO R EFERRED TO THE ASSESSMENT ORDER U/S 143(3) MADE IN THE CASE OF HUF OF THE SAME ASSESSEE, WHERE, ON IDENTICAL FACTS, THE ASSESSING OFFICER ESTIMATED GROSS ITA NO. 451/RJT/2016 DHARMENDRA NANALAL AGARA VS. ITO AY: 2010-11 3 PROFIT PERCENTAGE @ 11% FOR THE SIMILAR HAWALA PURC HASES ALLEGED. THE LD. AR NEXT RELIED UPON THE DECISION OF THE BOMBAY BENCH OF THE TRIBUNAL IN THE CASE OF IMPERIAL IMP & EXP. VS. ITO IN ITA N O.5427/MUM/2015, ORDER DATED 18.03.2016 AND SUBMITTED THAT ON SIMILA R FACTS THE BOMBAY TRIBUNAL HAS ALLOWED THE APPEAL OF THE ASSESSEE AND SET ASIDE THE ADDITION MADE TOWARDS BOGUS PURCHASES. 7. LD. DR, ON THE OTHER HAND, RELIED UPON THE ORDER OF THE CIT(A). 8. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS. THE SHORT QUESTION THAT ARISES IN THE INSTANT CASE IS WHETHER PURCHASES WORTH RS.16,84,112/- CAN BE TREATED AS BOGUS PURCHASE ON THE BASIS OF MERE ALLEGATION MADE BY THE VAT DEPARTMENT THAT THE SUPP LIERS ARE HAWALA OPERATORS. THIS ISSUE IS ESSENTIALLY A QUESTION OF FACT. WE NOTE THAT THE ASSESSEE HAS PRODUCED THE BILLS AND BANK STATEMENT SHOWING PAYMENT AGAINST THE SUPPLIES RECEIVED. THE AMOUNT OF VAT C OLLECTED BY THE SUPPLIERS FROM THE ASSESSEE WAS NOT PAID TO VAT DEP ARTMENT. THIS HAS PROBABLY PROVOKED THE VAT DEPARTMENT TO DUB THE IMP UGNED SUPPLIERS AS HAWALA OPERATORS. THE VAT DEPARTMENT HAS FINALL Y COLLECTED THE TAXES FROM THE PURCHASER OF THE GOODS, I.E. THE ASS ESSEE. THEREFORE, IT IS OSTENSIBLE THAT THE PURCHASES ARE NOT FOUND TO BE B OGUS PER SE BY VAT DEPARTMENT . IN THE CASE OF NON-EXISTING PURCHASES, AS UNDERSTO OD BY THE IT DEPARTMENT BASED ON THE REFERENCE MADE BY THE VA T AUTHORITIES, THERE WAS NO OCCASION FOR THE VAT AUTHORITIES TO CO LLECT VAT THEREON. THE COLLECTION OF VAT TANTAMOUNT TO EXISTENCE OF TR ANSACTION OF PURCHASES. THE GRIEVANCE OF THE VAT AUTHORITIES WA S ON NON-PAYMENT OF VAT ON PURCHASES HAPPENED. THUS, PURCHASES MADE CA NNOT BE DENIED ON THE BASIS OF AFORESAID ALLEGATION. THE ASSESSIN G OFFICER HAS NOT RECORDED ANY OTHER INDEPENDENT FINDING TO IMPUGN TH E CORRECTNESS OF THE ITA NO. 451/RJT/2016 DHARMENDRA NANALAL AGARA VS. ITO AY: 2010-11 4 PURCHASES MADE. NEITHER HAS THE ASSESSING OFFICER CHALLENGED THE BOOK RESULTS CLAIMED TO BE REASONABLE BY THE ASSESSEE. NO RESULT OF ANY OTHER ENQUIRY, IF ANY, IS RECORDED. THERE IS NO FINDING O N FACTS ADVERSE TO THE ASSESSEE EXCEPT NON-DESCRIPT REFERENCE MADE BY THE VAT DEPARTMENT WHICH, IN OUR VIEW, IS NOT ADEQUATE TO IMPLICATE TH E ASSESSEE WITH THE CHARGE OF BOGUS PURCHASE. IT IS PERTINENT HEREIN T O NOTE THAT THAT, IN THE CASE OF ASSESSEE-HUF (ASSESSMENT ORDER IN FILE), TH E GROSS PROFIT HAS BEEN ESTIMATED BY TAX AUTHORITIES AT 11% OF THE HAWALA P URCHASES. IN THE INSTANT CASE, THE ASSESSEE HAS ALREADY DECLARED 13% GROSS PROFIT. THUS, SEMBLANCE OF REASONABLENESS IN BOOK RESULTS ALSO CA NNOT BE DENIED. THEREFORE, LOOKING FROM ANY ANGLE, WE DO NOT FIND A NY VALID BASIS TO CONTROVERT THE PURCHASES FROM PURCHASER FROM ALLEGE D HAWALA OPERATORS. CONSEQUENTLY, WE FIND MERIT IN THE APPEAL OF THE AS SESSEE. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE COURT ON 14 TH MARCH, 2017 AT AHMEDABAD SD/- SD/- (RAJPAL YADAV) (PRADIP KUMAR KEDIA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD, DATED 14/03/2017 *BT / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ! / CONCERNED CIT 4. ! ( ) / THE CIT(A) 5. , / DR, ITAT, RAJKOT 6. & / GUARD FILE . / BY ORDER, TRUE COPY / ( DY./ASSTT.REGISTRAR) ' #, / ITAT, RAJKOT