ASST CIT 32(3), MUMBAI V. SAHAKAR ENTERPRISES, MUMBAI

ITA 4530/MUM/2015

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 8823 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-10-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 04-08-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bogus purchase; Unexplained expenditure; Accommodation entries; Onus to prove
• Section: 143(3); 133(6); 131; 69

Judgement Text

ITA NO. 4530/M/201 5 SAHAKAR ENTERPRIS ES 1 IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH E, MU MBAI BEFORE SHRI R. C. SHARMA, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO.4530/MUM/2015 (ASSESSMENT YEAR- 2011-12) ASSISTANT COMMISSIONER OF INCOME-TAX -32(3) MUMBAI, ROOM NO.,108, 1 ST FLOOR, BUILDING NO.C-11, PRATYASKSHKAR BHAVAN, BANDRA KURLA COMPLEX , BANDRA(E) MUMBAI-400051 VS. M/S SAHA KAR ENTERPRISES , 201, ASHIRWAD, 10 TH ROAD , DAULAT NAGAR, BORIVALI (E), MUMBAI PAN:ABKFS1799M (APPELLANT) (RESPONDENT) ASSESSEE REPRESENTED BY ANUJ KISHANDWALA-AR REVENUE REPRESENTED BY -- SH. V. JUSTINE DR DATE OF HEARING: 18.10.2017 DATE OF ORDER: 18.10.2017 ORDER UNDER SECTION 254(1) OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER: 1. THIS APPEAL BY REVENUE UNDER SECTION 253 OF INCOME TAX ACT IS DIRECTED AGAINST THE ORDER OF COMMISSIONER (APPEALS) - 44, M UMBAI DATED 15.05.2015 FOR ASSESSMENT YEAR 2011-12. THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPEAL; (I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD COMMISSIONER (APPEALS) ERRED IN RESTRICTING THE ADD ITION OF UNEXPLAINED EXPENDITURE TO RS. 25,91,829/- @ 12.5% OF RS.2,15,98,572/- UNDER SECTION 69 OF THE INCOME TAX ACT ON ACCOUNT OF BOGUS PURCHASES AS AGAINST THE ADDITION OF RS.2, 15,98,572/- MADE BY THE AO WITHOUT APPRECIATING THAT THE ASSESSEE HA S NOT PRODUCED ANY COGENT EVIDENCE TO SUBSTANTIATE THE FACT THAT I T HAD TAKEN ACTUAL DELIVERY OF GOODS PURCHASED FROM THESE PARTIES AND THAT THE NOTICES UNDER SECTION 133(6) ISSUED TO THE PARTIES FROM WHO M ALLEGED BILLS ITA NO. 4530/M/201 5 SAHAKAR ENTERPRIS ES 2 WERE RECEIVED WERE RETURNED UNDELIVERED BY THE POST AL AUTHORITIES WITH THE REMARK NOT AVAILABLE AT THE ADDRESS AND THE ASSESSEE HAS ALSO FAILED TO PRODUCE THE PARTIES BEFORE THE AO. (II) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED COMMISSIONER (APPEALS) ERRED IN DELETING TH E DISALLOWANCE MADE BY AO OVERLOOKING THE STATEMENT GIVEN BY THE P ARTIES ON EXPLICIT FINDING ON THE INVESTIGATION CARRIED OUT B Y THE SALES TAX DEPARTMENT AND CORROBORATED BY THE ENQUIRIES OF THE AO. (III) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE LEARNED COMMISSIONER (APPEAL) HAS ERRED IN DELETING THE ADDITION OF RS.12,49,701/- MADE ON ACCOUNT OF DIFFERENCE IN THE PROVISION OF TDR FROM PREMLEELA INVESTMENT. (IV) THE APPELLANT PRAYS THAT THE ORDER OF LD COMMISSION ER (APPEALS) ON THE ABOVE GROUNDS BE SET ASIDE AND THA T OF THE AO BE RESTORED. 2. BRIEF FACTS OF THE CASE ARE THAT ASSESSEE COMPANY I S ENGAGED IN THE BUSINESS OF BUILDERS AND DEVELOPERS, FILED ITS RETURN OF INC OME FOR RELEVANT ASSESSMENT YEAR DECLARING TOTAL INCOME AT RS. 38,48 ,680/-. THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) ON 28 MARCH 2014 . THE ASSESSING OFFICER WHILE PASSING ASSESSMENT ORDER MADE THE ADD ITIONS OF RS.2,15,98,572/- ON ACCOUNT OF BOGUS PURCHASES AND RS. 12,49,701/- ON ACCOUNT OF DIFFERENCE IN THE PROVISIONS OF TRANSFER OF DEVELOPMENT RIGHT (TDR) FROM PREMLEELA INVESTMENT. ON APPEAL BEFORE COMMISSIONER (APPEALS) THE ADDITIONS ON ACCOUNT OF BOGUS PURCHAS ES UNDER SECTION 69 WAS RESTRICTED TO 12% OF THE IMPUGNED PURCHASES AND THE ADDITION ON ACCOUNT OF DIFFERENCE IN TDR OF RS. 12,49,701/- WA S DELETED. THUS, BEING AGGRIEVED BY THE ORDER OF COMMISSIONER (APPEALS) TH E REVENUE HAS FILED PRESENT APPEAL BEFORE US. ITA NO. 4530/M/201 5 SAHAKAR ENTERPRIS ES 3 3. WE HAVE HEARD THE LD. DR FOR THE REVENUE AND THE LD AR OF THE ASSESSEE AND PERUSED THE MATERIAL AVAILABLE ON RECORD. GROUN D NUMBER 1 RELATES TO RESTRICTING THE ADDITION AT THE RATE OF 12% OF THE ALLEGED BOGUS PURCHASES. THE LEARNED AR FOR THE REVENUE ARGUED THAT DURING T HE ASSESSMENT PROCEEDING THE ASSESSING OFFICER NOTICED THAT THE A SSESSEE HAS SHOWN PURCHASES FROM 10 OF PARTIES, WHICH WERE PROVIDING ACCOMMODATION ENTRIES WITHOUT SALES OF MATERIAL AND DELIVERY OF G OODS. THE NAMES OF ALL THOSE PARTIES ARE LISTED IN THE LIST OF HAWALA DEAL ERS. THE LIST OF HAWALA DEALERS WAS PROVIDED BY THE SALE TAX DEPARTMENT OF GOVERNMENT OF MAHARASHTRA. THE INVESTIGATION WING OF THE INCOME TAX DEPARTMENT ALSO INVESTIGATED ABOUT THE HAWALA DEALERS, WHICH WERE E NGAGED IN PROVIDING ACCOMMODATION ENTRIES WITHOUT DELIVERY OF GOODS. DU RING THE ASSESSMENT THE ASSESSEE WAS ASKED TO PRODUCE THE DOCUMENTARY E VIDENCES LIKE LORRY RECEIPT, MODE OF TRANSPORT AND PAYMENT OF OCTORAI F OR MOVEMENT OF STOCK TO PROVE THE GENUINENESS OF THE PURCHASES THE ASSES SEE FAILED TO PROVIDE SUCH EVIDENCES. FURTHER, THE ASSESSEE FAILED TO PRO DUCE THE STOCK REGISTER ABOUT THE CONSUMPTION OF MATERIAL AT DIFFERENT SITE S. THE ASSESSEE FAILED TO PRODUCE THE PARTIES FOR VERIFICATION AND CROSS-EXAM INATION TO VERIFY THE FACTS. THE CONTENTION OF THE ASSESSEE THAT THE PAYM ENTS WERE MADE THROUGH ACCOUNT PAYEE CHEQUE IS NOT SUBSISTENT TO SUBSTANTI ATE THE GENUINITY OF PURCHASES. THE LEARNED COMMISSIONER (APPEALS) WRONG LY RESTRICTED THE ITA NO. 4530/M/201 5 SAHAKAR ENTERPRIS ES 4 ADDITION AT THE RATE OF 12% WITHOUT GIVING COGENT R EASONS. ON THE OTHER HAND THE LEARNED AR FOR ASSESSEE ARGUED THAT DURING THE ASSESSMENT PROCEEDINGS THE ASSESSEE FILED THE REPLY OF SHOW CA USE NOTICE AND FILED THE COPY OF BILLS, VOUCHERS, ACCOUNTS OF PARTIES, DELIV ERY CHALLANS, BANK STATEMENT REFLECTING THE PAYMENTS MADE TO THE DEALE RS. THE ASSESSING OFFICER HAS NOT MADE ANY INDEPENDENT ENQUIRY. THE A SSESSING OFFICER RELIED UPON THE STATEMENT OF THIRD PARTY WITHOUT SUPPLY OF SUCH A STATEMENT TO THE ASSESSEE. THE ASSESSING OFFICER HAS NOT ISSUED ANY NOTICE UNDER SECTION 133(6) OR SUMMON UNDER SECTION 131 OF THE ACT. THE MATERIAL PURCHASED BY ASSESSEE HAVE BEEN UTILISED FOR THE CONSTRUCTION WERE CARRIED OUT BY THE ASSESSEE AT VARIOUS SITE. THE CONSTRUCTION WORK COU LD NOT BE RAISED UNLESS MATERIAL HAVE BEEN UTILISED. THE ASSESSEE HAS PROVI DED ALL DETAILS CONSISTING TIN NO., PAN NO. AND PARTY WISE ALL DETA ILS. THE ASSESSING OFFICER HAS NOT REJECTED THE STATEMENT ACCOUNT OF T HE ASSESSEE NOT DISPUTED ABOUT THE CONSUMPTION OF MATERIAL IN VARIOUS PROJEC T OF THE ASSESSEE. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSION OF THE PART IES AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. DURING THE ASSESSMENT PROCEEDING THE ASSESSING OFFICER NOTICED THAT IN THE PROFIT & LOSS ACCOUNT THE ASSESSEE DEBITED AN AMOUNT OF RS. 5,89,49,666/- ON ACCOUNT O F PURCHASES. THE ASSESSEE FILED PARTY WISE DETAILS OF THE PURCHASES ALONG WITH VAT NUMBERS, PAN NUMBERS AND THE DETAILS OF THE PURCHASES. THE ASSESSING OFFICER ITA NO. 4530/M/201 5 SAHAKAR ENTERPRIS ES 5 NOTICED THAT THE CERTAIN PURCHASES SHOWN BY THE AS SESSEE ARE FROM THE DEALERS, THE NAMES OF WHICH ARE APPEARING IN THE L IST OF HAWALA DEALERS, PROVIDED BY THE SALE TAX DEPARTMENT. THE ASSESSING OFFICER IN PARAGRAPH 5 OF ITS ORDER RECORDED THE NAMES OF SUCH DEALERS AND THE AMOUNTS OF PURCHASES SHOWN BY ASSESSEE. THE ASSESSING OFFICER NOTED THAT ASSESSEE HAS MADE A PURCHASE OF RS.2,15,98,572/- FROM SUCH PART IES. THE ASSESSEE WAS ASKED TO SUBSTANTIATE THE PURCHASES FROM SUCH PARTI ES. THE ASSESSEE VIDE ITS REPLY DATED 28 TH FEB 2014 CONTENDED THAT THE PURCHASES FROM THE SAI D PARTIES ARE GENUINE PURCHASES. THE ASSESSEE FILED C OPY OF BILLS, DELIVERY CHALLANS ALONG WITH THE STATEMENT OF ACCOUNT AND TH E LEDGER ACCOUNT OF THE PARTIES SHOWING THE PAYMENT. THE ASSESSEE SPECIFICA LLY DEMANDED THE COPY OF STATEMENT OF HAWALA DEALERS WHICH WERE ALLEGEDLY RECORDED BY THE SALE TAX DEPARTMENT. THE CONTENTION OF THE ASSESSEE WAS NOT ACCEPTED BY THE ASSESSING OFFICER HOLDING THAT THE ASSESSEE FAILED TO PRODUCE THE DOCUMENTARY EVIDENCE ABOUT TRANSPORT, MOVEMENT OF S TOCK AND DELIVERY OF GOODS. THE ASSESSEE ALSO FAILED TO PRODUCE THE STOC K REGISTER TO SHOW THAT THE STOCK HAS BEEN RECEIVED AND CONSUMED AT THE DIF FERENT SITE. THE ASSESSING OFFICER DISALLOWED THE AGGREGATE AMOUNT O F PURCHASES FROM ALL 10 PARTIES OF RS. 2,15,98,572/-. DURING FIRST APPEAL T HE ASSESSEE URGED THE SIMILAR CONTENTION BEFORE COMMISSIONER (APPEALS). T HE LD. COMMISSIONER (APPEALS) OBSERVED THAT THE ASSESSING OFFICER HAS N OT BEEN ABLE TO QUESTION ITA NO. 4530/M/201 5 SAHAKAR ENTERPRIS ES 6 THE AVAILABILITY OF INVENTORY AND THE CONSUMPTION O F MATERIAL TO THE EXTENT OF PURCHASES. THE ASSESSEE FILED ITS BOOKS OF ACCOU NT, PURCHASE BILLS, CHALLANS, LEDGER ACCOUNTS AND THE BANK STATEMENT TO PROVE THE GENUINITY OF PURCHASES. THE ASSESSING OFFICER HAS NOT DOUBTED TH E PAYMENTS MADE THROUGH BANKING CHANNELS. THE ONUS TO PROVE THE THA T THE ENTIRE TRANSACTION ARE GENUINE IS PRIMARILY ON THE ASSESSEE, WHEN THEY ARE MAKING THE CLAIM OF PURCHASE AND ESPECIALLY IN THE LIGHT OF THE DOUB T THAT HAS BEEN RAISED BY THE ENQUIRIES CONDUCTED BY SALES TAX DEPARTMENT. TH E ASSESSEE HAS PRIMARILY DISCHARGE HIS ONUS. THE ASSESSING OFFICER HAS NOT DISPUTED THE BOOKS OF ACCOUNT OF THE ASSESSEE AND THE SALE. THE AO HAS NOT BROUGHT THE EVIDENCE THAT AMOUNT PAID THROUGH CHEQUES HAVE BEEN RECEIVED BACK IN CASH BY THE ASSESSEE. THE LEARNED COMMISSIONER (APP EALS) ON THE BASIS OF HER OBSERVATION AND RELYING ON THE DECISION OF GUJA RAT HIGH COURT IN CASE OF CIT VS SMITH P SETH (ITA NO. 5531 OF 2013 DATED 16.01.2013) RESTRICTED THE ADDITION @ 12% OF THE ALLEGED BOGUS PURCHASES. THE ADDITION WAS RESTRICTED ON THE BASIS OF PROFIT RATIO OF THE IMPUGNED PURCHASED (RS.2159 8572/-). WE HAVE NOTICED THAT LD. COMMISSI ONER (APPEALS) HAS RESTRICTED THE ADDITION ON THE BASIS OF PROFIT ELEM ENT EMBEDDED IN THE BOGUS PURCHASES. WE ARE OF THE CONSIDERED OPINION THAT U NDER INCOME TAX ACT ONLY REAL INCOME CAN BE TAXED BY THE REVENUE. WE MA Y FURTHER CONCLUDE THAT EVEN IF THE TRANSACTION IS NOT VERIFIABLE, THE ONLY TAXABLE IS THE TAXABLE ITA NO. 4530/M/201 5 SAHAKAR ENTERPRIS ES 7 INCOME COMPONENT AND NOT THE ENTIRE TRANSACTION. AN D AFTER CONSIDERING THE FACTS OF THE CASE AND THE RIVAL CONTENTIONS OF THE PARTIES WE ARE OF THE OPINION THAT IN ORDER TO FULFIL THE GAP OF REVENUE LEAKAGE THE DISALLOWANCE OF REASONABLE PERCENTAGE OF SUCH PURCHASES WOULD ME ET THE END OF JUSTICE. THE HONBLE BOMBAY HIGH COURT IN CIT VS HARIRAM BHAMBHANI IN ITA NO. 313 OF 2013 DECIDED ON 04.2.2015 HELD THAT REVENUE IS NOT ENTITLED TO BRING THE ENTIRE SALES CONSIDERATION TO TAX, BUT ONLY THE PROFIT ATTRIBUTABLE ON THE TOTAL UNRECORDED SALES CONSIDER ATION ALONE CAN BE SUBJECT TO INCOME TAX. IN THE RESULT THIS GROUND OF APPEAL RAISED BY REVENUE IS DISMISSED. 5. GROUND NO,2 RELATES TO DELETING THE ADDITION ON ACC OUNT OF DIFFERENCE IN TDR FOR RS.12,49,701/-. THE LD DR FOR THE REVENUE S UPPORTED THE ORDER OF ASSESSING OFFICER AND ARGUED THAT LD CIT(A) GRANTED RELIEF TO THE ASSESSEE WITHOUT APPRECIATING THE FACT. THE ASSESSEE HAS NOT PROVIDED THE DETAILS OF PURCHASE OF TDR DURING THE ASSESSMENT PROCEEDINGS. THE LD DR PRAYED THAT THIS GROUND OF APPEAL MAY BE RESTORED TO THE F ILE OF ASSESSING OFFICER. ON THE OTHER HAND THE LD AR FOR THE ASSESSEE SUPPOR TED THE ORDER OF LD CIT(A). THE LD AR FOR THE ASSESSEE SUBMITS THAT ALL THE DETAILS ALONG WITH THE EVIDENCES WAS FURNISHED TO THE ASSESSING OFFICE R AND EXPLAINED THE FACTS BEFORE ASSESSING OFFICER. THE LD CIT(A) GRANTED THE RELIEF TO THE ASSESSEE AFTER APPRECIATING THE FACTS EXPLAINED BEFORE HER. IT WAS SUBMITTED THAT BY ITA NO. 4530/M/201 5 SAHAKAR ENTERPRIS ES 8 VIRTUE OF SLUM REHABILITATION SCHEME SHRI RAMESH A PARTNER OF M/S SUMER CORPORATION WAS HAVING DEVELOPMENT RIGHT CERTIFICAT E (DRC) FOR 13700 SQ METER. M/S SUMER CORPORATION AGREED TO SELL TDR OF 1460 SQ METER TO M/S SUNIL MAITRY REALTY VIDE AGREEMENT DATED 15/05/ 2010. M/S SUNIL MAITRY REALTY VIDE AGREEMENT DATED 18.05.2010 SOLD THE SAID TDR TO M/S SHREE BHOOMI REALTOR. THEREAFTER, M/S SHREE BHOOMI REALTOR VIDE AGREEMENT DATED 02.06.2010 SOLD TDR ADMEASURING 860 TO M/S PREMLEEELA INVESTMENTS. DURING THE YEAR THE ASSESSEE PURCHASED THE AREA OF TDR OF 860 FROM M/S PREMLEEELA INVESTMENTS ON A CONSIDERAT ION OF RS.1,99,02,636/-. OUT OF TOTAL CONSIDERATION THE AS SESSEE PAID RS.1,38,00,000/- AND REST OF RS. 61,02,636/ - WAS P AYABLE. ALL THE FACTS WERE VERIFIED BY THE LD COMMISSIONER (APPEALS) BEFO RE GRANTING THE RELIEF TO THE ASSESSEE. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSION OF THE PAR TIES AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THE ASSESS ING OFFICER MADE THE DISALLOWANCE ON ACCOUNT OF DIFFERENCE ON PURCHASES OF TDR FROM PREMLEELA INVESTMENTS HOLDING THAT NO TANGIBLE EXPL ANATION WAS GIVEN BY THE ASSESSEE. THE LEARNED COMMISSIONER (APPEALS) WH ILE CONSIDERING THE SUBMISSION ON THIS GROUND OF APPEAL OBSERVED THAT T HE ASSESSEE PURCHASED TDR FROM PREMLEELA INVESTMENT, WHO, IN TURN, MADE P URCHASES FROM SHREE BHUMI REALTORS. THE ORIGINAL OWNER OF TDR WAS ONE SHRI RAMESH SHAH ITA NO. 4530/M/201 5 SAHAKAR ENTERPRIS ES 9 PARTNER OF M/S SUMER CORPORATION WHO HAD OBTAINED D RC FROM BOMBAY MUNICIPAL CORPORATION (BMC). THE ASSESSEE FILED COP Y OF AGREEMENTS, LEDGER ACCOUNTS OF THE ASSESSEE IN THE BOOKS OF PRE MLEELA INVESTMENT AND THE CONFIRMATION OF THE OPENING BALANCE WITH PREMLE ELA INVESTMENTS TO SUBSTANTIATE THEIR CONTENTION. THE ACTUAL TRANSACTI ON FOR PURCHASE OF TDR WAS EXAMINED BY THE LEARNED COMMISSIONER (APPEALS) AND ALSO EXAMINED THE VALUE OF TRANSACTION ENTERED BY THE ASSESSEE AS WELL AS THE VALUE OF AGREEMENT BETWEEN SELLER PREMLEELA INVESTMENTS AN D COME TO THE CONCLUSION THAT THE VALUE OF AGREEMENT IS RS.1,99,0 2,636/- AND DELETED THE ADDITION. WE HAVE SEEN THAT THE LEARNED COMMISSIONE R (APPEALS) VERIFIED THE FACTS AND THE CONSIDERATION PAID BY THE ASSESSE E FOR PURCHASE OF TDR FROM PREMLEELA INVESTMENTS. THE LEARNED DR HAS NOT BEEN ABLE TO BRING ANY INCRIMINATING FACT OR EVIDENCE TO DISCARD THE F INDING OF LEARNED COMMISSIONER (APPEALS). THUS, WE DO NOT FIND ANY ME RIT IN THE GROUNDS OF APPEAL RAISED BY THE REVENUE. IN THE RESULT THIS GR OUND OF APPEAL RAISED BY REVENUE IS DISMISSED. 7. IN THE RESULT THE APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN C OURT ON 18.10.2017 SD/- SD/- R.C.SHARMA PAWAN SIN GH ACCOUNTANT MEMBER JUD ICIAL MEMBER MUMBAI, DATED: 18.10.2017 ITA NO. 4530/M/201 5 SAHAKAR ENTERPRIS ES 10 COPY OF THE ORDER FORWARDED TO : 1. THE ASSESSEE; 2. THE REVENUE; 3. THE CIT(A); 4. THE CIT, MUMBAI CITY CONCERNED; 5. THE DR, ITAT, MUMBAI; 6. GUARD FILE. BY ORDER SK PRIVATE SECRETARY (DY. ASSTT. REGISTRAR) ITAT, MUMBAI