DINESH S DHOKAR, Mumbai V. ITO 19(1)(4), Mumbai

ITA 4546/MUM/2019

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 6792 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-01-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 04-07-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MUM; SANJAY SETHI DR ITA NO
• Keywords: Bogus purchase; Accommodation entries; Onus to prove
• Section: 143(3); 143(1); 147

Judgement Text

IN THE INC OME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI VIKAS AWASTHY , JM & SHRI S. RIFAUR RAHMAN, AM ./ I.T.A. NO . 4546 /MUM/2019 ( / ASSESSMENT YEAR: 20 10 - 11 ) SHRI DINESH S. DHOKAR, R. NO. 6, BLDG NO. 1, DADARKAR COMPOUND, VAIBHAV, C - WING, 1 ST FLOOR, TARDEO ROAD, MUMBAI - 400 034 / VS. ITO - 1 9(1)(4 ), 2 ND FLOOR, ROOM NO. 222 , MATRU MANDIR, TARDEO RAOD, MUMBAI - 400 007 ./ ./ PAN NO. A AA PD8605N ( / APPELLANT ) : ( / RESPONDENT ) & ./ I.T.A. NO . 4545/MUM/2019 ( / ASSESSMENT YEAR: 2011 - 12) SMT. ANITA DINESH DHOKAR, R. NO. 6, BLDG NO. 1, DADARKAR COMPOUND, VAIBHAV, C - WING, 1 ST FLOOR, TARDEO ROAD, MUMBAI - 400 034 / VS. ITO - 19(1)(4), 2 ND FLOOR, ROOM NO. 222, MATRU MANDIR, TARDEO RAOD, MUMBAI - 400 007 ./ ./ PAN NO. AACPD9237E ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : NONE / RESPONDENTBY : SHRI SANJAY SETHI, DR 2 I.T.A. NO. 4545 & 4546 /MUM/201 9 SHRI DINESH S. DHOKAR & SMT. ANITA DINESH DHOKAR / DATE OF HEARING : 11.01 .202 1 / DATE OF PRONOUNCEMENT : 25.01.2021 / O R D E R PER S. RIFAUR RAHMAN, ACCOUNTANT MEMBER : THE PRESENT TWO APPEAL S HAS BEEN FILED BY THE TWO ASSESSEE S WHO ARE RELATED PARTIES AGAINST THE ORDER OF LD. COMMIS S IONER OF INCOME TAX (APPEALS) 29 & 4 IN SHORT REFERRED AS LD. CIT(A) , MUMBAI, DATED 15.05.2019 & 20.05.2019 FOR A SSESSMENT YEAR (IN SHORT A Y ) 20 10 - 11 AND 2011 - 12 RESPECTIVELY. 2. AT THE OUTSET, IT IS NOTICED THAT NO NE HAS APPEARED ON BEHALF OF ASSESSEE S IN SPITE OF CALLS AND EVEN NO APPLICATION FOR ADJOURNMENT WAS MOVED. ON THE OTHER HAND, L D. DR IS PRESENT IN THE COURT AND IS READY WITH ARGUMENTS. THEREFORE , WE HAVE DECIDED TO PROCEED WITH THE HEARING OF THE CASE EX - PA RTE WITH THE ASSISTANCE OF THE L D. DR AND THE MATERIAL PLACED ON RECORD. 3. SINCE THE ISSUES RAISED IN BOTH THE APPEALS ARE IDENTICAL, THEREFORE, FOR THE SAKE OF CONVENIENCE, BOTH APPEALS ARE CLUBBED, HEARD AND DISPOSED OFF BY THIS CONSOLIDATED ORDER. FIRST OF ALL, WE 3 I.T.A. NO. 4545 & 4546 /MUM/201 9 SHRI DINESH S. DHOKAR & SMT. ANITA DINESH DHOKAR ARE TAKING IT A NO. 4545/MUM/2019 FOR ASSESSMENT YEAR 2011 - 12. 4. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE FILED ITS RETURN OF INCOME ON 21.09.2011 DECLARING TOTAL INCOME OF RS. 3,53,706/ - . THE RETURN WAS PROCESSED U/S 143(1) OF THE ACT. SUBSEQUENTLY, I NFORMATION WAS RECEIVED FROM THE SALES TAX D EPARTMENT THAT ASSESSEE HAS IN DULGED IN BOGUS PURCHASES. ON VERIFICATION, THE DETAILS OF ACCOMMODATION ENTRIES AVAILED BY THE ASSESSEE IS GIVEN BELOW: - TIN HAWALA PARTIES PAN F.Y. AMOUNT IN RS. 27960603730V PRAKASH STEEL & ALLIES AAAPC4405F 2010 - 11 20,53,399 / - 27860664216V SHANKESHWAR SALES CORPORATION AACPD5521F 2010 - 11 25,94,554 / - TOTAL 46,47,953 / - ACCORDINGLY, TH E ASSESSMENT WAS REOPENED U/S 147 OF THE ACT AND THE ASSESSMENT WAS COMPLETED U/S 143(3) R.W.S. 147 OF THE ACT DETERMINING THE TOTAL INCOME AT RS. 9,34,700/ - AFTER MAKING ADDITION OF RS. 5,80,994/ - BEING 12.5% ON ACCOUNT OF TOTAL NON - GENUINE PURCHASES OF RS. 46,47953/ - . 4 I.T.A. NO. 4545 & 4546 /MUM/201 9 SHRI DINESH S. DHOKAR & SMT. ANITA DINESH DHOKAR 5. AGGRIEV ED BY THE ABOVE ORDER OF AO, ASSESSEE PREFERRED APPEAL BEFORE LD. CIT(A) AND LD. CIT(A) AFTER CONSIDERING THE SUBMISSION OF ASSESSEE AND BY RELYING ON THE JUDICIAL PRONOUNCEMENTS, SUSTAINED THE ADDITION @ 12.5% MADE BY AO AND DISMISSED THE APPEAL OF THE AS SESSEE. 6. AGGRIEVED WITH THE ABOVE ORDER, ASSESSEE IS PREFERRED THE APPEAL BEFORE US. 7. CONSIDERED THE SUBMISSION OF LD. DR AND MATERIAL PLACED ON RECORD, WE NOTICE THAT ITAT MUMBAI BENCH IN THE CASE OF HEERAMANECK & SON VRS. ACIT PASSED IN ITA NO. 1862/MUM/2017, WHEREIN IT WAS HELD AS UNDER: - 5. SO FAR AS THE QUANTUM OF ADDITIONS ARE CONCERNED, WE ARE OF THE CONSIDERED OPINION THAT THE ASSESSEE WAS ENGAGED IN TRADING ACTIVITIES, WHICH COULD NOT BE CARRIED OUT WITHOUT ACTUAL PURCHA SE OF MATERIAL. THE TURNOVER ACHIEVED BY THE ASSESSEE HAS NOT BEEN DISPUTED OR DISTURBED BY THE REVENUE AND THE PAYMENTS WERE THROUGH BANKING CHANNELS. THE ASSESSEE WAS IN POSSESSION OF PRIMARY PURCHASE DOCUMENTS AND WAS ABLE TO RECONCILE THE QUANTITATIVE DETAILS. HOWEVER, AT THE SAME TIME, THE STATED PURCHASES WERE UNDER GRAVE DOUBT SINCE THE ASSESSEE COULD NOT PRODUCE ANY OF THE PARTY TO CONFIRM 5 I.T.A. NO. 4545 & 4546 /MUM/201 9 SHRI DINESH S. DHOKAR & SMT. ANITA DINESH DHOKAR THE TRANSACTIONS AND THE INFORMATION RECEIVED FROM INVESTIGATION WING REVEALED THAT ALL THE SUPPLIERS WERE ENGA GED IN CARRYING OUT ONLY PAPER TRANSACTIONS WITHOUT ACTUAL DELIVERY OF MATERIAL. THE COMPLETE ONUS TO PROVE THE PURCHASES CONCLUSIVELY WAS ON ASSESSEE, WHICH HAS REMAINED UN - DISCHARGED. IN SUCH A SCENARIO, THE ADDITION, WHICH COULD BE MADE, WAS TO ACCOUNT FOR PROFIT ELEMENT EMBEDDED IN THESE PURCHASE TRANSACTIONS TO FACTORIZE FOR PROFIT ELEMENT EARNED BY ASSESSEE AGAINST POSSIBLE PURCHASE OF MATERIAL IN THE GREY MARKET AND UNDUE BENEFIT OF VAT AGAINST ALLEGED BOGUS PURCHASES, WHICH LOWER AUTHORITIES HAVE RI GHTLY DONE. HOWEVER, CONSIDERING GP RATE OF 10.59% ALREADY REFLECTED BY THE ASSESSEE AS WELL AS VAT RATE APPLICABLE TO THE GOODS BEING DEALT WITH BY THE ASSESSEE, WE FIND THE ESTIMATION TO BE ON THE HIGHER SIDE AND THEREFORE, WE RESTRICT THE SAME TO 3% OF ALLEGED BOGUS PURCHASES OF RS.1,87,08,961/ - . THE SAME COMES TO RS.5,61,269/ - . THE ORDER OF LD. AO STANDS MODIFIED TO THAT EXTENT. THE LD. AO IS DIRECTED TO RE - COMPUTE THE INCOME OF THE ASSESSEE IN TERMS OF OUR ABOVE ORDER. 8. THEREFORE, RESPECTFULLY FOLLO WING THE AFORESAID DECISION, WE NOTICE THAT ASSESSEE HAS ALREADY DECLARED GP RATIO @ 2.11% FROM THE PURCHASES MADE FROM PRAKASH STEEL & ALLIES AND OTHERS 6 I.T.A. NO. 4545 & 4546 /MUM/201 9 SHRI DINESH S. DHOKAR & SMT. ANITA DINESH DHOKAR RESPECTIVELY DURING THIS YEAR. WE NOTICE FROM THE RECORD THAT LD. CIT(A) HAS SUSTAINED THE ADDITION MA DE BY THE AO BY ESTIMATING @ 12.5% OF THE ALLEGED BOGUS PURCHASES , IN OUR VIEW, WHICH IS TOO HIGH CONSIDERING THE FACT THAT ASSESSEE IS DEALING IN TRADING ACTIVITIES. ASSESSEE HAS DECLARED MARGIN THIS ASSESSMENT YEAR @ 2.11% AND IN PREVIOUS ASSESSMENT YEAR @ 1 .42%. ON AN AVERAGE, ASSESSEE HAS DECLARED MARGIN OF 2% ( APPROX ) . IN THE TRADING ACTIVITIES, IT IS EXPECTED TO EARN AROUND 3 - 5%. TAKING THE HIGHER MARGIN THAT ASSESSEE MIGHT HAVE EARNED IN THE ALLEGED TRANSACTION AND AS PER THE DECISION OF COORDINATE B ENCH OF ITAT AND THE DECISION OF HONBLE GUJRAT HIGH COURT IN THE CASE OF CIT VRS. SMITH P. SETH (2013) 356 ITR 451 (GUJ) , WE ARE INCLINED TO DIRECT THE AO TO ESTIMATE THE INCOME @ 3% (5% - 2 %) OF THE ALLEGED PURCHASES. ACCORDINGLY, THE GROUNDS RAISED BY T HE ASSESSEE ARE PARTLY ALLOWED . 9 . SINCE, THE OTHER APPEAL BY SHRI DINESH S. DHOKAR IN ITA NO. 4546/MUM/2019 FOR ASSESSMENT YEAR 2010 - 11 ARE SIMILAR TO THE FACTS IN ABOVE SAID APPEAL FOR ASSESSMENT YEAR 2011 - 12 . THEREFORE, FOR PARITY OF REASON, WE ALSO PARTLY ALLOW THE GROUNDS OF APPEAL RAISED BY ASSESSEE . 7 I.T.A. NO. 4545 & 4546 /MUM/201 9 SHRI DINESH S. DHOKAR & SMT. ANITA DINESH DHOKAR 10. IN THE NET RESULT, BOTH THE APPEAL S FILED BY THE ASSESSEE ARE PARTLY ALLOWED. ORDER S PRONOUNCED IN THE OPEN COURT ON 25.01 . 2021. SD/ - SD/ - ( VIKAS AWASTHY ) (S. RIFAUR RAHMAN ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED : 25.01 . 2021 SR.PS . DHANANJAY / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F I LE / BY ORDER, . / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI