ITO WARD 6(3)(3), Mumbai V. M/S JEPI CHEMO-PACK PVT. LTD., Mumbai

ITA 454/MUM/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 5703 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-02-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Appeal Filed On: 30-01-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bogus purchase; Corroborative evidences; Accommodation entries
• Section: 69C; 133(6); 143(1); 264; 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC, BENCH M UMBAI BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBE R ITA NO.454/MUM/2019 ( ASSESSMENT YEAR: 2012-13 ) ITO, WARD-6(3)(3) ROOM NO.524, 5 TH FLOOR M.K.ROAD NEW MARINE LINES MUMBAI-400 020 VS. JEPI CHEMO-PACK PVT.LTD. 120, BLUE ROSE INDUSTRIAL ESTATE, WESTERN EXPRESS HIGHWAY, BORIVALI (EAST) MUMBAI-400 066 PAN/GIR NO. AAACJ0864G ( APPELLANT ) .. RESPON DENT ) REVENUE BY SHRI ASHISH KUMAR, DR ASSESSEE BY NONE DATE OF HEARING 27/01/2020 DATE OF PRONOUNCEME NT 12 / 0 2 /20 20 / O R D E R PER G.MANJUNATHA (A.M) : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST, THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS)12, MUMBAI, DATED 30/11/2018 AND IT PERTAINS TO ASSESSMENT YEAR 2012-13. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. 'ON THE FACTS AND IN VIEW OF THE CIRCUMSTANC ES OF THE CASE AID IN LAW, THE ID,CIT(A) ERRED IN DELETING THE QUANTUM AD DITION TO THE EXTENT OF RS.3,06,606/- MADE BY THE AO ON ACCOUNT OF BOGUS PU RCHASES FROM ONE OF THE CONCERN VIZ., M/S. KINGSTAR BELONGING TO SHR I GAUTAM JAIN GROUP BY NOT APPRECIATING THE FACT THAT ASSESSES HAD FAILED TO BRING THE CONFIRMATION OF TRANSACTION WITH THE PURCHASE PARTI ES, AS ALSO, THE PROOF OF TRANSPORTATION IS ALSO NOT BROUGHT ON RECORD . ' 2. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, THE LD.CIT(A) ERRED IN. DELETING THE QUANTUM ADDITION I GNORING THAT THE INFORMATION ON ACCOUNT OF BOGUS PURCHASES IS RECEIVED FROM THE INVESTIGATION WING OF INCOME TAX DEPT, MUMBAI WHERE IN IT IS ESTABLISHED ITA NO.454/MUM/2019 JEPI CHEMO-PACK PVT.LTD. 2 THAT THE SAID PURCHASE PARTY - M/S. KINGSTAR BELONGING TO SHRI GAUTAM JAIN GROUP WAS ENGAGED IN THE BUSINESS OF PROVIDING ACCOMMODATION ENTRIES ONLY.' 3. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN IAW, LD,CIT(A} HAS SIRED IN DELETING THE QUANTUM ADDITIO N TO THE EXTENT OF RS. 3,06,606/- MADE BY THE AO ON ACCOUNT OF BOGUS BILL PURCHASES FROM M/S. KINGSTAR BY NOT APPRECIATING THAT THE ASSESSES HAD FAILED TO FURNISH THE CONFIRMATION OF TRANSACTION WITH THE PURCHASE PARTY , AS ALSO, THE PROOF OF DELIVERY '.' 4. 'THOUGH THE THIS EFFECT IN THIS CASE IS RS.2,02,710/-, HOWEVER THIS APPEAL HAS BEEN FILED BECAUSE IT IS COVERED BY EXCE PTION MENTIONED IN PARA 10{E) OF THE CBDT CIRCULAR NO 3/2018 DT 11-7-2018 WHICH IS SUBSEQUENTLY CLARIFIED BY BOARD LETTER DTD 20/08/20 18 VIDE NO. 279/MIS./142/2007-ITJ)PT.)' 5. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT (APPEALS) ON THE ABOVE GROUNDS BE SET-ASIDE AND THAT OF THE AO BE RESTORED. 6. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER TINY G ROUND OR TO SUBMIT ADDITIONAL NEW GROUND, WHICH MAY BE NECESSARY. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF SELF-A DHESIVE STICKER AND DIAMOND JEWELRY, FILED ITS RETURN OF INCOME FOR AY 2012-13 ON 20/12/2012, DECLARING TOTAL INCOME AT RS. 2,92,850/ - AND SAID RETURN WAS PROCESSED U/S 143(1) OF THE I.T.ACT, 1961. THE CASE HAS BEEN SUBSEQUENTLY REOPENED U/S 147 OF THE ACT, ON THE BA SIS OF INFORMATION RECEIVED FROM DGIT, INVESTIGATION, MUMB AI, AS PER WHICH, SALES TAX AUTHORITIES OF GOVERNMENT OF MAHAR ASHTRA HAD TAKEN ACTIONS AGAINST NUMBER OF HAWALA DEALERS, WH O HAD ISSUED BOGUS PURCHASE BILLS TO VARIOUS PARTIES IN MUMBAI A ND OTHER PLACES. AS PER LIST OF BENEFICIARIES, THE ASSESSEE IS ONE O F THE BENEFICIARY, WHO HAD TAKEN ACCOMMODATION BILLS OF BOGUS PURCHASE S FROM VARIOUS PARTIES AS LISTED BY THE AO IN PARA 4 OF H IS ASSESSMENT ORDER AMOUNTING TO RS. 3,50,406/-. THE CASE WAS SEL ECTED FOR SCRUTINY AND THE ASSESSMENT HAS BEEN COMPLETED U/S. 143(3).R.W.S. ITA NO.454/MUM/2019 JEPI CHEMO-PACK PVT.LTD. 3 147 OF THE I.T.ACT, 1961 ON 15/12/2016 AND DETERMIN ED TOTAL INCOME OF RS. 6,46,760/-, AFTER MAKING 100% ADDITIONS TOWA RDS ALLEGED BOGUS PURCHASE FROM THOSE PARTIES AND MADE ADDITION S OF RS. 3,50,910/-. 4. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESEE P REFERRED AN APPEAL BEFORE THE LD.CIT(A). BEFORE THE LD.CIT(A), THE ASSESSE HAS REITRATED ITS SUBMISSIONS MADE BEFORE THE AO. THE S UM AND SUBSTANCE OF ARGUMENTS OF THE ASSESSEE BEFORE THE L D.CIT(A) ARE THAT PURCHASE FROM THE ABOVE PARTY IS GENUINE, WHIC H IS SUPPORTED BY NECESSARY EVIDENCES. THEREFORE, NO ADDITIONS COU LD BE MADE ON THE BASIS OF INFORMATION RECEIVED FROM THIRD PARTY. THE LD.CIT(A), AFTER CONSIDERING RELEVANT SUBMISSION OF THE ASSESS EE AND ALSO, BY FOLLOWING THE DECISION OF HONBLE GUJARAT HIGH COUR T, IN THE CASE OF CIT VS. SIMITH P. SHETH (356 ITR 451) SCALED DOWN A DDITION MADE BY THE AO TOWARDS ALLEGED BOGUS PURCHASES TO 12.50% GROSS PROFIT ON TOTAL PURCHASES FROM THOSE PARTIES. THE RELEVANT FINDINGS OF THE LD.CIT(A) ARE AS UNDER:- 4 .2 1 HAVE CONSIDERED THE ASSESSMENT ORDER AND THE S UBMISSIONS OF THE APPELLANT INCLUDING THE CASE LAWS CITED. THE AO HEL D IN THE ASSESSMENT ORDER THAT THE APPELLANT PRODUCED THE DETAILS WITH REGARD TO PURCHASES MADE FROM THE PARTIES AND COPY OF BANK STATEMENT IN DICATING THE PAYMENT MADE TO THE SELLER PARTIES. IT IS NOTICED THAT ON A CCOUNT OF NON-AVAILABILITY OF THE SUPPLIER AT THE GIVEN ADDRESS THE AO ADDED E NTIRE BOGUS PURCHASES AS UNEXPLAINED PURCHASES U/S 69C OF THE A CT. SECTION 69C READS. 'WHERE IN ANY FINANCIAL YEAR AN ASSESSES HAS INCURR ED ANY EXPENDITURE AND HE OFFERS NO EXPLANATION ABOUT THE SOURCE OF SUCH EXPENDITURE OR PART THEREOF, OR THE EXPLANATIO N, IF ANY,, OFFERED BY HIM IS NOT, IN THE OPINION OF THE AO, SATISFACTO RY THE AMOUNT COVERED BY SUCH, EXPENDITURE OR PART THEREOF, AS TH E CASE MAY BE, MAY BE DEEMED TO BE THE INCOME OF THE ASSESSE FOR S UCH FINANCIAL YEAR. THIS CAN BE SEEN FROM THE PROVISION, FOR APPLYING T HE SECTION 69C, WHAT IS IMPORTANT IS THAT THERE SHOULD BE NO EXPLANATION AB OUT THE SOURCE OF ITA NO.454/MUM/2019 JEPI CHEMO-PACK PVT.LTD. 4 EXPENDITURE OR THAT THE EXPLANATION OFFERED IS NOT FOUND SATISFACTORY. HERE IN THIS CASE, THE APPELLANT FURNISHED AN EXPLANATIO N OF SOURCE FROM HIS BANK ACCOUNT ALONG WITH SUPPORTING EVIDENCE OF PURC HASE INVOICES. THEREFORE, IN THIS CASE, THE SOURCE OF EXPENDITURE FOR PURCHASES STANDS EXPLAINED THROUGH THE BANK ACCOUNT. THEREFORE IN IN VOKING OF SECTION 69C IN THE PRESENT CASE IS NOT PROPER. 4.3 IT IS SEEN THAT MANY BENCHES OF 1TAT AND HONBL E HIGH COURTS HAVE HELD THAT WHEN PURCHASES ARE SUPPORTED BY SUFFICIEN T DOCUMENTARY EVIDENCES, THEN MERELY BECAUSE OF NON-APPEARANCE BE FORE THE AO, ONE CANNOT CONCLUDE THAT THE PURCHASES WERE NOT MADE BY THE ASSESSEE. RELIANCE IS PLACED ON NLKUNJ EXIMP ENTERPRISES (P.) LTD. V. CIT 216 TAXMAN 171 (BOM.), CIT V, NANGALIA FABRICS (P,)LTD. 220 TAXMANN 17 (GUJ.), CIT V, MK, BROS, 163 1TR 249 (GUJ.), ASSTT. CIT V. AKRUTI DYEING & PRINTING MILLS (?,)UA. DY. CIT V. ADINAT INDUSTRIES [2001] 2521TR 476 (GUJ.), CIT V. PRECIOUS JEWELS CORPNL7 TAXMANN.COM 264 (RAJ.), CIT V. RAJESH P. SONI [TAX APPEAL NO,1107 OF 2006, DATED 2 7-2-2012.]. 4.4 IN THIS CASE THE APPELLANT PRODUCED BANK ACCOUN T STATEMENT TO PROVE PAYMENT, PURCHASE BILLS, STOCK REGISTER, MANUFACTUR E JEWELRY DETAILS USING THE PURCHASED CUT AND POLISHED DIAMONDS AND CORRESP ONDING SALE BILLS TO PROVE THE GENUINENESS OF THE PURCHASES. IT IS ALSO A FACT ON RECORD THAT THE ASSESSING OFFICER HAS NOT DOUBTED THE SALES AFF ECTED BY THE APPELLANT. THUS, IT IS LOGICAL TO CONCLUDE THAT WIT HOUT CORRESPONDING PURCHASES BEING AFFECTED, THE APPELLANT COULD NOT H AVE MADE THE SALES. MERELY RELYING UPON THE INFORMATION FROM THE PCIT(L NV,)-L, MUMBAI THE ASSESSING OFFICER COULD NOT HAVE TREATED THE PURCHA SES AS BOGUS. THE APPELLANT HAS BROUGHT DOCUMENTARY EVIDENCES ON RECO RD TO PROVE GENUINENESS OF SUCH TRANSACTIONS, THE ACTION OF THE ASSESSING OFFICER IN IGNORING THEM CANNOT BE U WHEN THE PAYMENT TO THE C ONCERNED PARTIES ARE THROUGH PROPER BANKING AND THERE IS NO EVIDENCE BEFORE THE AO THAT THE PAYMENTS MADE WERE AGAIN BACK TO THE APPELLANT, THE ADDITION OF BOGUS PURCHASES IS NOT SUSTAINABLE IN AND FACTS. ON LY COROLLARY THAT FOLLOWS IN SUCH SITUATION IS THAT THE APPELLANT COU LD HAVE OBTAINED THE ACCOMMODATION BILLS FOR THE MATERIAL PURCHASED LOCA LLY. IN OTHER WORDS THE ENTITIES MAY NOT BE THE ACTUAL SUPPLIER BUT MAY HAV E PROVIDED THE BILLS FOR THE MATERIAL PURCHASED LOCALLY. THIS IS NOT CASE IN WHICH THE SIGNED BLANK CHEQUE BOOKS ETC, FOUND WITH THE BUYER TO SAY THAT THE PURCHASES OF MATERIAL WERE NOT AT ALL MADE BUT PURCHASES WERE IN FLATED. THEREFORE THE DECISION OF THE SUPREME COURT IN THE CASE OF N K PR OTEINS LTD 2OC TAXMAN 0022(SC) WOULD NOT APPLY TO THE CASE. THEREF ORE THE SAVING ON ACCOUNT OF VAT AND OTHER INCIDENTAL CHARGES MADE BY THE APPELLANT ON THE SAID BOGUS PURCHASES CAN BE BROUGHT TO TAX AS A DDITIONAL PROFIT. KEEPING IN VIEW THE TOTALITY OF FACTS AND CIRCUMSTA NCES OF THE CASE, THE DISALLOWANCE MADE BY THE AO IS RESTRICTED TO 12.5% OF SUCH PURCHASES. THEREFORE THE AO IS DIRECTED TO ESTIMATE THE 12,5% OF RS.3,50,406 AND MODIFY THE ADDITION ACCORDINGLY. APPELLANT GETS PAR T RELIEF. THIS GROUND IS PARTLY ALLOWED. ITA NO.454/MUM/2019 JEPI CHEMO-PACK PVT.LTD. 5 5. NONE APPEARED FOR THE ASSESSEE. WE HAVE HEARD TH E LD. DR, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE T HROUGH ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT THE LD. AO HAS MADE 100% ADDITION ON ALLEGED BOGUS PURCHASES ON THE GROUND T HAT THE ASSESSEE IS ONE OF THE BENEFICIARY OF ACCOMMODATION ENTRIES OF BOGUS PURCHASE BILLS ISSUED BY HAWALA DEALERS. ACCO RDING TO THE LD. AO, ALTHOUGH ASSESEE HAS FILED CERTAIN BASIC EVIDEN CES, BUT FAILED TO FILE FURTHER EVIDENCE IN THE BACKDROP OF CLEAR FIND ING BY THE SALES TAX DEPARTMENT, MAHARASHTRA THAT THOSE PARTIES ARE INVO LVED IN PROVIDING ACCOMMODATION ENTRIES WITHOUT ACTUAL DELIVERY OF GO ODS. THE LD. AO HAD ALSO TAKEN SUPPORT FROM THE INVESTIGATION CONDU CTED DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AS PER WHICH NOTI CE ISSUED U/S 133(6) TO THE PARTIES WERE RETURNED UN-SERVED BY TH E POSTAL AUTHORITIES. THEREFORE, HE CAME TO THE CONCLUSION T HAT PURCHASES FROM THE SAID PARTIES ARE BOGUS IN NATURE. IT IS TH E CONTENTIONS OF THE ASSESSEE BEFORE THE LOWER AUTHORITIES THAT PURCHASE S FROM THE ABOVE PARTY ARE SUPPORTED BY NECESSARY EVIDENCES. IT HAS FURNISHED ALL POSSIBLE EVIDENCES, INCLUDING BOOKS OF ACCOUNTS; ST OCK DETAILS AND BANK STATEMENT TO PROVE THAT PAYMENT AGAINST SAID P URCHASES HAVE BEEN MADE THROUGH PROPER BANKING CHANNELS. 6 HAVING CONSIDERED ARGUMENTS OF THE LD. DR AND ALS O, MATERIAL AVAILABLE ON RECORD, WE FIND THAT BOTH THE SIDES HA VE FAILED TO PROVE THE CASE IN THEIR FAVOUR WITH NECESSARY EVIDENCES. ALTHOUGH, ASSESSEE HAS FILED CERTAIN BASIC EVIDENCES, BUT FAI LED TO FILE FURTHER EVIDENCES TO CONCLUSIVELY PROVE PURCHASES TO THE SA TISFACTIONS OF THE LD.AO. AT THE SAME TIME, THE LD. AO HAD ALSO FAILE D TO TAKE THE INVESTIGATION TO A LOGICAL CONCLUSION BY CARRYING O UT NECESSARY ENQUIRES, BUT HE SOLELY RELIED UPON INFORMATION RE CEIVED FROM ITA NO.454/MUM/2019 JEPI CHEMO-PACK PVT.LTD. 6 INVESTIGATION WING, WHICH WAS FURTHER SUPPORTED BY INFORMATION RECEIVED FROM MAHARASHTRA SALES TAX DEPARTMENT. UN DER THESE CIRCUMSTANCES, IT IS DIFFICULT TO ACCEPT ARGUMENTS OF BOTH THE SIDES. FURTHER, IN A CASE WHERE PURCHASES ARE CONSIDERED T O BE PURCHASED FROM SUSPICIOUS/HAWALA DEALERS, VARIOUS HIGH COURTS AND TRIBUNALS HAD CONSIDERED AN IDENTICAL ISSUE IN LIGHT OF INVES TIGATION CARRIED OUT BY THE SALES TAX DEPARTMENT AND HELD THAT IN CASE O F PURCHASES CLAIMS TO HAVE MADE FROM ALLEGED HAWALA DEALERS, ON LY PROFIT ELEMENT EMBEDDED IN THOSE PURCHASES NEEDS TO BE TAX ED, BUT NOT TOTAL PURCHASE FROM THOSE PARTIES. THE HONBLE GUJA RAT HIGH COURT, IN THE CASE OF CIT VS SIMITH P.SHETH 356 ITR 451 HAD C ONSIDERED A SIMILAR ISSUE AND HELD THAT AT THE TIME OF ESTIMATI ON OF PROFIT FROM ALLEGED BOGUS PURCHASES NO UNIFORM YARDSTICKS COULD BE ADOPTED, BUT IT DEPENDS UPON FACTS OF EACH CASE. THE ITAT, M UMBAI, IN NUMBER OF CASES HAD CONSIDERED AN IDENTICAL ISSUE A ND DEPENDING UPON FACTS OF EACH CASE, DIRECTED THE LD.AO TO ESTI MATE GROSS PROFIT OF 10% TO 15% ON TOTAL ALLEGED BOGUS PURCHASES. IN THIS CASE, CONSIDERING THE NATURE OF BUSINESS OF THE ASSESSEE THE LD. AO HAS MADE 100% ADDITIONS, WHEREAS THE LD.CIT(A) HAS SCAL ED DOWN ADDITION TO 12.50% GROSS PROFIT ON TOTAL ALLEGED BO GUS PURCHASE. ALTHOUGH, BOTH AUTHORITIES HAVE TAKEN DIFFERENT RAT E OF PROFIT FOR ESTIMATION OF INCOME FROM ALLEGED BOGUS PURCHASE, B UT NO ONE COULD SUPPORT SAID RATE OF GROSS PROFIT WITH NECESSARY EV IDENCES OR ANY COMPARABLE CASES. THEREFORE, CONSIDERING FACTS AND CIRCUMSTANCES OF THIS CASE AND CONSISTENT WITH VIEW TAKEN BY THE CO-ORDINATE BENCH IN NUMBER OF CASES, WE ARE OF THE CONSIDERED OPINIO N THAT THE LD. CIT(A) HAS TAKEN FAIR VEIW AND ESTIMATED 12.50% GRO SS PROFIT ON ALLEGED BOGUS PURCHASES TO SETTLE DISPUTE BETWEEN T HE PARTIES AND ITA NO.454/MUM/2019 JEPI CHEMO-PACK PVT.LTD. 7 HENCE, WE ARE INCLINED TO UPHOLD ORDER OF THE LD. C IT(A) AND DISMISS APPEAL FILED BY THE REVENUE. 7. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DI SMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 12/02/2 020 SD/- (SAKTIJIT DEY) SD/- (G. MANJUNATHA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 12/02/2020 THIRUMALESH SR.PS COPY OF THE ORDER FORWARDED TO : BY ORDER, (ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//