ASST CIT 31(3), MUMBAI V. VNC INFRAPROJECTS, MUMBAI

ITA 4537/MUM/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 9857 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-07-2017
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: F
• Assessment Year: 2009-2010
• Appeal Filed On: 05-08-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: POOJA SWAROOP
• Keywords: Bogus purchase
• Section: 133A; 133(6)

Judgement Text

, F , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES F, MUMBAI BEFORE SHRI SHAMIM YAHYA, AM & SHRI AMARJIT SINGH, JM ITA NO.4537/MUM/2015 : ASST.YEAR 2009-2010 ASST.COMMISSIONER OF INCOME - TAX CIRCLE 31(3) MUMBAI. / VS. M/S.VNC INFRAPROJECTS 29B PANCHRATNA, 1 ST FLOOR C-10 B.K.C. MUMBAI 400 051. PAN : AAPFM1184L. ( / APPELLANT) ( / RESPONDENT) /APPELLANT BY : MS.POOJA SWAROOP /RESPONDENT BY : SHRI HITESH SHAH / DATE OF HEARING : 31.05.2017 / DATE OF PRONOUNCEMENT : 12.07.2017 / O R D E R PER SHAMIM YAHYA, AM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LEARNED CIT(A) DATED 12.05.2015 AND PERTAINS TO ASSESSMENT YEAR 2009-2010. 2. THE GROUNDS OF APPEAL READ AS UNDER:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD,CIT(A) ERRED IN RESTRICTING THE ADDITION OF RS 83.83717/- TO RS 6.70.697/- MADE ON ACCOUNT OF BOGUS PURCHASES MADE FROM HAWALA PARTIES BEING 8% OF THE TOTAL SUSPECTED PURCHASES IGNORING THE FACT THAT THE ADDITION WAS MADE ON THE BASIS OF INFORMATION RECEIVED FROM SALES TAX DEPARTMENT THAT THE HAWALA PARTIES ARE NOT DOING ANY GENUINE BUSINESS. ITA NO.4537/MUM/2015. M/S.VNC INFRAPROJECTS. 2 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) ERRED IN DELETING THE TOTAL ADDITION OF RS 83,83,717/- TO RS 6,70,697/- IGNORING THE FACTS THAT DURING THE COURSE OF SURVEY U/S 133A OF THE ACT ON 07/12/2011 CONDUCTED BY THE INVESTIGATION WING OF DGIT(LNV.), MUMBAI, THE ASSESSEE IN HIS STATEMENT UNDER OATH ADMITTED THAT HE HAD MADE PURCHASE FROM FICTITIOUS CONCERNS CONTROLLED BY ONE SHRI MAFATLAL SHAH AND OTHER CONCERNS. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) ERRED IN NOT APPRECIATING THE FACT THAT ON THE SIMILAR GROUND THE ASSESSEE HAD MADE DISCLOSURE OF INCOME IN SUBSEQUENT ASSESSMENT YEAR ON ACCOUNT OF UNVERIFIABLE/BOGUS PURCHASE EXPENSES AND THROUGH THE SAME CONCERNS THE ASSESSEE HAD MAD PURCHASE IN THE CURRENT YEAR AS WELL. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) ERRED IN IGNORING THE FACT THAT HAWALA PARTIES ARE NON-EXISTENT AT THE GIVEN ADDRESS, AND FURTHER THEY HAVE GIVEN AFFIDAVITS BEFORE THE SALE TAX AUTHORITIES ABOUT THEIR BOGUS ACTIVITIES OF ISSUING PURCHASE BILLS WITHOUT SUPPLYING ANY GOODS. 5. THE APPELLANT CRAVES LEAVES TO AMEND OR ALTER ANY GROUND OR ADD A NEW GROUND. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) ON THE GROUNDS BE SET ASIDE AND MATTER MAY BE DECIDED ACCORDING TO LAW. THE APPELLANT CRAVES TO AMEND OR ALTER ANY GROUND OR ADD NEW GROUND WHICH MAY BE NECESSARY. 3. THE BRIEF FACTS OF THE CASE ARE AS UNDER:- 3.1 IN THIS CASE THE A.O. MADE ADDITION FOR THE BOGUS PURCHASE DONE BY THE ASSESSEE. IN MAKING THE ADDITION ASSESSING OFFICER OBSERVED THAT INFORMATION WAS RECEIVED FROM THE SALES TAX DEPARTMENT, MAHARASHTRA THAT SIXTEEN OF THE PERSONS FROM WHOM THE ASSESSEE HAS SHOWN PURCHASES WERE ITA NO.4537/MUM/2015. M/S.VNC INFRAPROJECTS. 3 SAID TO BE BOGUS, INDULGING IN ISSUANCE WITHOUT DELIVERY OF ANY GOODS. THE FOLLOWING 11 PARTIES ARE SR. NO. NAME OF THE PARTIES TIN AMOUNT (RS.) 1 AJAY STONE 5,63,604 2 NEELAM ENTERPRISES 9,37,930 3 JINAL:ENTERPRISES 5,73,342 4 RAJGURU CORPORATION 5,53,133 5 KRISHENTERP'RISES , 2,11,859 6. CARBON ENTERPRISES- 10,92,771 7 SAM ENTERPRISES 8,07,556 8 V.S.K. ENTERPRISES 10,92,771 9 MAKEWELL TRADERS 9,32,443 10. FORAM TRADERS 8,11,467 : 11. JAIN TRADING CORPORATION 8,06,841 TOTAL 83,83,717 3.2 THE SALES TAX DEPARTMENT HAD TAKEN STATEMENT, DEPOSITION AND AFFIDAVIT OF HUNDREDS OF PERSONS WHO WERE BEHIND RUNNING THE RACKET OF ISSUING BILLS FOR A COMMISSION. NOTICES WERE ALSO ISSUED U/S. 133(6) TO ALL THE1 PARTIES. HOWEVER THE NOTICES WERE RETURNED UNSERVED WITH THE REMARK 'LEFT' OR 'NOT' KNOWN'. IN REPLY TO THE SHOW CAUSE ISSUED TO THE ASSESSEE/THE ASSESSEE REPLIED THAT : ITA NO.4537/MUM/2015. M/S.VNC INFRAPROJECTS. 4 .ALL THE PURCHASES ARE DULY RECORDED IN REGULAR BOOKS OF ACCOUNTS AND, PAYMENTS WERE MADE-THROUGH .ACCOUNT PAYEE CHEQUES. HOWEVER; THE GOODS ARE DELIVERED AT SITE.-THERE WERE NO TRANSPORTATION BILLS AND THERE WAS. 'NO QUESTION OF DELIVERY CHALLANS FOR PURCHASE. THE ALLEGATION OF THE DEPARTMENT THAT THE PARTIES MENTIONED IN THE LIST ARE BILL PROVIDERS IS NOT CORRECT BECAUSE HAS THE ASSESSEE NOT PURCHASED THE GOODS THEY WOULD NOT HAVE BEEN ABLE TO COMPLETE THE WORK ASSIGNED TO THEM BY A GOVT. AGENCY. FURTHER THERE MAY BE CASE WHERE THE BROKER / SUPPLIER HAS GIVEN US THE BILLS OF THE PURCHASE AND THEY DO NOT HAVE CONTROL OVER THE BROKER / SUPPLIER THROUGH WHOM THEY HAVE GENUINELY PURCHASED THE GOODS. NO DISCREPANCY HAS BEEN NOTICED BY THE GOVT. AGENCY WHILE TESTING THE MATERIAL DURING EXECUTION OF THE PROJECT EXECUTED WITH RESPECT TO QUALITY AND QUANTITY OF THE GOODS USED IN EXECUTION OF THE PROJECT. ALL THE BOOKS OF ACCOUNTS ARE AUDITED AND THEY HAVE NOT REPORTED ANY DISCREPANCY IN THE BOOKS OF ACCOUNTS MAINTAINED. 3.3 THE A.O. HOWEVER HAS NOT ACCEPTED THE CONTENTION OF THE ASSESSEE ON THE GROUNDS THAT JUST BECAUSE ACCOUNT PAYEE CHEQUES HAVE BEEN USED TO MAKE THE PAYMENT IS NOT A FALL SAFE METHOD OF SUBSTANTIATING THE CLAIM. THE ASSESSEE COULD-NOT PRODUCE! THE PARTIES AND THE NOTICES U/S, 133(6) WERE ISSUED HAVE BEEN RETUNED UNSERVED / UNCLAIMED. THE ASSESSEE HAS NOT BEEN ABLE TO REBUT THE EVIDENCES, DEPOSITIONS AND STATEMENTS OF HAWALA OPERATORS, THE PERSONS THE GIVEN ADDRESS. THE A.O. ALSO NOTED THAT IN SURVEY PROCEEDINGS ASSESSEE HAS HIMSELF ACCEPTED THAT THESE PURCHASE BILLS ARE BOGUS. THEREFORE, THE A.O. HELD THAT THESE PURCHASES OF THE ASSESSEE ARE BOGUS. ITA NO.4537/MUM/2015. M/S.VNC INFRAPROJECTS. 5 3.4 ON THIS GROUND THE PURCHASES MADE FROM 11 PARTIES FOR RS.83,83,717/- HAVE BEEN ADDED BY AS NON-GENUINE / BOGUS PURCHASES. 4. UPON ASSESSEES APPEAL, THE LEARNED CIT(A) REDUCED THE ADDITION TO 8% OF BOGUS PURCHASES BY HOLDING AS UNDER:- I HAVE GONE THROUGH THE FINDINGS OF THE A.O., THE SUBMISSIONS OF THE APPELLANT 3 THE VARIOUS JUDICIAL DECISIONS IN THIS REGARD. THE APPELLANT IS ENGAGED IN THE BUSINESS OF CIVIL CONTRACTORS FOR MCGM AND OTHER GOVERNMENT AGENCIES. THE.AO HAS GONE INTO THE ISSUE OF SUSPECTED BOGUS PURCHASES 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 NOT BEEN ABLE TO QUESTION THE AVAILABILITY OF THE INVENTORY THAT HAS BEEN SUBSEQUENTLY USED. TO THAT EXTENT, THE EXAMINATION OF THAT ' ASPECT HAS HOT 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, 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 HAVE HAD A CLINCHING PROOF BUT THE PRIMARY RESPONSIBILITY WHICH IS ENSURED 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 ITA NO.4537/MUM/2015. M/S.VNC INFRAPROJECTS. 6 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 OF THE . SITUATION WHERE; THE AO HAS HERSELF 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 HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. SIMIT P.SHETH PRONOUNCED ON 16.1.2013 IN TAX APPEAL NO5531 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 ASSESSEE. 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, THE APPELLANT BEING IN THE BUSINESS OF CIVIL CONTRACTS OF GOVERNMENT AGENCIES (SUB CONTRACTS ALSO) ARID LOOKING AT THE PAST TRACK RECORDS OF THE GROSS PROFIT MARGIN CONSISTENTLY DECLARED, 8% OF THE PURCHASES I.E. 8% OF RS.83,83,717/- WHICH WORKS OUT TO OF RS. 6,70,697/- IS UPHELD FOR LACK OF CREDIBLE, EVIDENCE BEING PROVIDED BY THE APPELLANT TO SUBSTANTIATE THE PURCHASE?. THE DISALLOWANCE IS RESTRICTED TO RS. 6,70,697/-. THE APPELLANT THEREFORE GETS A RELIEF OF RS. 77,13,020/-. 5. AGAINST THE ABOVE ORDER, REVENUE IS IN APPEAL BEFORE THE ITAT. 6. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. 6.1 WE FIND THAT IN THIS CASE OVERWHELMING EVIDENCE HAVE BEEN BROUGHT ON RECORD THAT THE CONCERNED PURCHASE ARE BOGUS. COGENT INFORMATION HAS BEEN RECEIVED FROM THE MAHARASHTRA SALES TAX DEPARTMENT THAT THE SUPPLIERS HAVE ADMITTED THAT THEY WERE SUPPLYING BOGUS BILLS. THE ASSESSING OFFICER ALSO HAS ALSO MADE ENQUIRIES. NO RESPONSE TO HIS NOTICES CAME FROM THE SUPPLIERS. IN ITA NO.4537/MUM/2015. M/S.VNC INFRAPROJECTS. 7 THE SURVEY PROCEEDING ASSESSEE HIMSELF ACCEPTED THAT HE HAS OBTAINED BOGUS BILLS FROM THESE PARTIES. LEARNED CIT-A IN HIS APPELLATE ORDER HAS ALSO FOUND THAT THE PURCHASES ARE BOGUS. 6.2 UP ON CAREFUL CONSIDERATION OF THE FACTS OF THE CASE, WE FIND THAT OVERWHELMING EVIDENCE HAVE BEEN REFERRED BY THE AUTHORITIES BELOW THAT THE IMPUGNED PURCHASES ARE BOGUS. THERE IS NO EVIDENCE OF THE ACTUAL MOVEMENT OF THE GOODS UNDER DISPUTE. IN THESE CIRCUMSTANCES LEARNED DEPARTMENTAL REPRESENTATIVE HAS REFERRED TO HONBLE GUJARAT HIGH COURT DECISION IN THE CASE OF TAX APPEAL NO 240 OF 2003 IN THE CASE OF N K INDUSTRIES VS DY CIT, ORDER DT 20/06.2016, WHEREIN HUNDRED PERCENT 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. THE SPECIAL LEAVE PETITION AGAINST THIS ORDER ALONG WITH OTHERS HAS BEEN DISMISSED BY THE HONBLE APEX COURT VIDE ORDER DT 16 .1 2017 . 6.3 HOWEVER WE NOTE THAT DISMISSAL OF A SPECIAL LEAVE PETITION SIMPLY WITHOUT ANY SPEAKING ORDER, DOES NOT MERGE THE ORDER OF THE HONBLE HIGH COURT WITH THAT OF THE HONBLE APEX COURT. FURTHERMORE WHEN SALES ARE NOT DOUBTED HUNDRED PERCENT DISALLOWANCE FOR BOGUS PURCHASE IS NOT POSSIBLE. THIS HAS BEEN SO HELD BY HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF NIKUNJ EXIMP ENTERPRISES. HOWEVER WE ALSO NOTE THAT FACTS OF THE CASE BEFORE THE JURISDICTIONAL HIGH COURT WERE DIFFERENT FROM THAT IN THE PRESENT CASE. FACTS OF THE PRESENT CASE CLEARLY INDICATE THAT ASSESSEE HAS ENGAGED IN TRANSACTION IN THE GREY MARKET. MAKING TRANSACTIONS IN THE GREY MARKET GIVES THE ASSESSEE SAVINGS OF TAXES ETC AT THE EXPENSE OF EXCHEQUER. IN SIMILAR ITA NO.4537/MUM/2015. M/S.VNC INFRAPROJECTS. 8 SITUATION FOLLOWING THE HONBLE GUJARAT HIGH COURT DECISION IN THE CASE OF SIMIT P SETH DISALLOWANCE OF 12.5% OF THE BOGUS PURCHASE HAS BEEN FOUND TO BE MEETING THE END OF JUSTICE IN A NUMBER OF CASES AT THE MUMBAI TRIBUNAL. IN THIS CASE DESPITE REFERRING TO THE HONBLE GUJARAT HIGH COURT DECISION AS ABOVE LEARNED CIT(A) HAS NOT FOLLOWED THE SAME. ACCORDINGLY WE MODIFY THE ORDER OF LEARNED CIT(A) AND HOLD THAT THE DISALLOWANCE IN THIS CASE SHOULD BE MADE AT THE RATE OF 12.5% OF THE BOGUS PURCHASE. 6.4 LEARNED COUNSEL OF THE ASSESSEE HAS FAIRLY AGREED TO THE ABOVE PROPOSITION. 7. IN THE RESULT THIS APPEAL FILED BY THE REVENUE STANDS PARTLY ALLOWED ORDER PRONOUNCED ON THIS 12 TH DAY OF JULY, 2017. SD/- SD/- ( AMARJIT SINGH ) ( SHAMIM YAHYA ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI; DATED : 12 TH JULY, 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.