ITO 16(3)(1), MUMBAI V. GHAVERCHAND B JAIN, MUMBAI

ITA 4567/MUM/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 2633 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 3 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-10-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 07-09-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 03-07-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K BEPARI
• Assessee Lawyers: SANJEEV M SHAH
• Keywords: Peak credit; Accommodation entries
• Section: 69C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH G ,MUMBAI BEFORE SHRI R.C.SHARMA, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO.4567/MUM/2014 (ASSESSMENT YEAR : 2010-2011) ITO, CENTRAL CIRCLE- 16(3)(1), 1 ST FLOOR, MATRUMANDIR ROAD, TARDEO, MUMBAI-400020. VS. SH. GHAVERCHAND B JAIN (PROP M/S CHAMPAK STEEL HOUSE) 59/14, NANUBHAI DESAI ROAD, OPP. ISLAMPURA STREET, MUMBAI-400004 PAN: AABPJ5830C (APPELLANT) (RESPONDENT) ITA NO4855/MUM/2014 (ASSESSMENT YEAR : 2010-2011) SH. GHAVERCHAND B JAIN (PROP M/S CHAMPAK STEEL HOUSE) MULJI THACKERSEY BUILDING, 52/52A, NANUBHAI DESAI ROAD, OPP. ISLAMPURA STREET, MUMBAI-400004 PAN: AABPJ5830C VS. INCOME TAX OFFICER, CENTRAL CIRCLE- 16(3)(1), IST FLOOR, MATRUMANDIR ROAD, TARDEO,MUMBAI-400020. (APPELLANT) (RESPONDENT) R EVENUE BY : SH. S.K. BEPARI (DR) ASSESSEE BY : SH. SANJEEV M. SHAH (AR) DATE OF HEARING : 05.10.2016 DATE OF PRONOUNCEMENT : 07.10.2016 O R D E R PER PAWAN SINGH,JM 1. THESE TWO CROSS APPEALS U/S. 253 OF INCOME TAX ACT (,ACT) ARE DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-38, M UMBAI DATED 18.09.2014 FOR ASSESSMENT YEARS (AY) 2010-11. ITA NO. 4567&4855/M/20 14 GHAVERCHAND B JAIN 2 2. THE BRIEF FACT OF THE CASE ARE THAT ASSESSEE WHO IS ENGAGED IN THE BUSINESS OF TRADING OF FERROUS AND NONFERROUS METALS, IRON AND STEEL AL LOYS FILED RETURN OF INCOME FOR THE RELEVANT ASSESSMENT YEAR ON 13 OCTOBER 2010 DECLARI NG TOTAL INCOME OF RS. 9,75,993/-. THE RETURN OF INCOME WAS SELECTED FOR S CRUTINY. DURING THE ASSESSMENT PROCEEDING THE AO OBSERVED THAT ASSESSEE HAS PURCH ASED GOODS FROM THE FOLLOWING NINE ENTITIES BESIDES OTHERS . SERIAL NO. NAME OF THE PARTY 1 M/S. HARISH METAL AND TUBES 2 M/S RAJ LAXMI CORPORATION 3 M/S DEEP ENTERPRISES 4 M/S NIDDISH ENTERPRISES PRIVATE LTD 5 M/S MAHAVIR SALES CORPORATION 6 M/S RELIABLE METAL INDIA 7 M/S ROHIT ENTERPRISES 8 M/S RONAK INDUSTRIES 9 M/S TULSIYAN TRADING THE AO FURTHER OBSERVED THAT THE NAME OF ALL NINE ENTITIES APPEARED ON THE WEBSITE OF SALE TAX DEPARTMENT OF MAHARASHTRA AS A HAWALA T RADERS WHO WERE ENGAGED IN PROVIDING ENTRIES WITHOUT SALE AND SUPPLY OF GOODS . THE ASSESSEE WAS ASKED TO PRODUCE THE PERSONS RESPONSIBLE FOR SALE OF THE ABO VE NINE ENTITIES FROM WHOM THE ASSESSEE PURPORTEDLY PURCHASED THE GOODS. THE ASSES SEE FAILED TO PRODUCE ANY OF THE PARTIES THROUGH WHOM THE PURCHASES WERE MADE. AND ON THE BASIS OF PEAK CREDIT IN THE ACCOUNT OF ASSESSEE THE OF RS.40,20,181/- WA S MADE UNDER SECTION 69C OF THE ACT, HOLDING THAT EXPENSES INCURRED BY THE ASSESSEE ON PURCHASES THROUGH AN UNDISCLOSED SOURCE OF INCOME FROM UNDISCLOSED IDENT ITY. AGGRIEVED BY THE ORDER OF AO THE ASSESSEE FILED APPEAL BEFORE THE COMMISSIONE R OF INCOME TAX (APPEALS), IN APPEAL THE ADDITION WAS SUSTAINED TO THE EXTENT OF 12.5% OF THE IMPUGNED PURCHASES ON THE BASIS OF PROFIT ELEMENT EMBEDDED IN THE SAID PURCHASES. THUS, BEING AGGRIEVED BY THE REVENUE AS WELL AS THE ASSESSEE BOTH HAVE A SSAILED THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) BEFORE US IN THEIR CROSS APPEALS. ITA NO. 4567&4855/M/20 14 GHAVERCHAND B JAIN 3 3. WE HAVE HEARD THE LD DR FOR THE REVENUE AND THE LEA RNED AR FOR ASSESSEE AND PERUSED THE MATERIAL AVAILABLE ON RECORD . THE LD DR FOR THE REVENUE ARGUED THAT ASSESSEE COULD NOT PROVE THE GENUINENESS OF PURCHAS ES BEFORE THE LOWER AUTHORITIES. THE ASSESSEE WAS ASKED TO PRODUCE THE PERSONS FROM WHOM THE ASSESSEE MADE THE PURCHASES DURING THE RELEVANT ASSESSMENT YEAR. THE ASSESSEE WAS GIVEN SUFFICIENT OPPORTUNITY TO PROVE THE GENUINENESS OF PURCHASES. THE ASSESSEE AVAILED ACCOMMODATION ENTRIES FROM THE PERSONS WHO WERE INV OLVED ONLY ON SUPPLY OF BOGUS BILLS AND NEVER SUPPLIED THE GOODS. IT WAS PRAYED T HAT THE ORDER OF LD CIT(A) MAY BE SET ASIDE AND THE ENTIRE ADDITION MADE BY ASSESSING OFFICER IN THE ASSESSMENT MAY BE UPHELD. ON THE OTHER HAND THE LD AR OF THE ASSESSEE ARGUED THAT THE ASSESSEE PRODUCE SUFFICIENT EVIDENCE BEFORE THE ASSESSING OFFICER CO NSISTING OF PURCHASE INVOICES, DELIVERY CHALLAN, BANK STATEMENT SHOWING PAYMENTS M ADE IN THE NAME OF PARTIES, CHART OF CORRESPONDING SALES AND THE SALE INVOICES TO PROVE THE GENUINENESS OF PURCHASE. BEING TRADER SALES WAS NOT POSSIBLE WITHO UT CORRESPONDING PURCHASES. THE PARTIES COULD NOT BE PRODUCED BEFORE THE ASSESSING OFFICER DUE TO LAPSE OF TIME AS AND NO DIRECT CONTACT WITH THEM. ALL THE PARTIES ARE I N EXISTENCE AND DOING THEIR BUSINESS ACTIVITIES IN THE NAME OF THEIR FIRM. THE ASSESS EE WAS NOT PROVIDED THE COPY OF THE INVESTIGATION CONDUCTED BY THE SALES TAX DEPARTMEN T AND THE COPY OF AFFIDAVITS FILED BEFORE THE AUTHORITIES CONCERNED. IT WAS FURT HER ARGUED THAT THE THEORY OF PEAK CREDIT SHOULD NOT BE APPLIED AS THERE WAS NO EVIDEN CE TO SHOW THAT THE PURCHASES FROM THE ALLEGED PARTIES WERE NOT GENUINE. IT WAS A RGUED BY LD AR OF THE ASSESSEE THAT THE ENTIRE ADDITION MAY BE DELETED. 4. WE HAVE CONSIDERED THE RIVAL CONTENTION OF THE PART IES AND GONE THROUGH THE ORDER OF AUTHORITIES BELOW. WE HAVE ALSO GONE THROUGH THE PA PER BOOK FILED BY LD AR OF THE ASSESSEE ON RECORD. WE HAVE SEEN THAT IN THE ASSESS MENT ORDER AO HAS NOT RECORDED THAT THE SALES RECORDED BY ASSESSEE WAS WRONG OR TH AT ASSESSEE HAS NOT MADE SALES OF THE ITEM SO PURCHASED FROM THE ALLEGED HAWALA/ BOGU S TRADERS. THE AO BASED HIS ENTIRE ADDITION ON THE BASIS OF THE RECORD AND THE NAME OF THE DEALERS APPEARED IN THE WEBSITE OF SALE STRUCK DEPARTMENT OF STATE OF MAHAR ASHTRA. THE AO HAS NOT MADE ANY INDEPENDENT EQUERRY NOR THE STATEMENT OR AFFID AVIT OF SUCH HAWALA DEALER WAS SUPPLIED TO THE ASSESSEE. THE LEARNED CIT(A) WHILE CONSIDERING THE CASE OF THE ITA NO. 4567&4855/M/20 14 GHAVERCHAND B JAIN 4 ASSESSEE AND AFTER DISCUSSING THE FACTUAL METRIX IN CLUDING THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN NIKUNJ ENTERPRISES PR IVATE LIMITED VS CIT 216 TAXMAN 171(BOM) HELD AS UNDER: 2.4.32 AS NARRATED EARLIER, THE LD AO IN THIS CASE HAS HIMSELF HELD THAT THE PURCHASES THEMSELVES WERE NOT BOGUS THOUGH THE PART IES FROM WHOM THE PURCHASES WERE MADE BY THE APPELLANT WERE FOUND TO BE BOGUS AND THAT IS THE REASON FOR WHICH THESE PARTIES WERE NOT PRODUCED DU RING THE ASSESSMENT PROCEEDINGS. THE MOTIVE BEHIND OBTAINING BOGUS BILL S THUS, APPEARS TO BE INFLATION OF PURCHASE PRICE SO AS TO SUPPRESS TRUE PROFITS. I ALSO FIND THAT THE APPELLANT HAD HIMSELF ADMITTED BEFORE THE LD AO VID E HIS LETTER DATED15.02.2013 THAT IT HAD MADE A GP OF 5.92% ON T HE SALE OF GOODS ALLEGEDLY PROCURED FROM THESE BOGUS ENTITIES AS AG AINST OVERALL GP RATIO FOR THE YEAR AT THE RATE 8.55%. THUS, THE APPELLANT HAS HIMSELF ADMITTED A LOWER PERCENTAGE OF PROFIT IN SUCH BOGUS TRANSACTIONS. CO NSIDERING THE FACTS OF THE CASE AS WELL AS THE VARIOUS CASE LAWS CITED (SUPRA) ESPECIALLY IN CASE OF CIT VERSUS SMITH P SHETH (SUPRA). I SUSTAINED AN ADDITI ON TO THE EXTENT OF 12.5% OF THE PURCHASES MADE AS THE PROFIT ELEMENT EMBEDDE D IN SUCH PURCHASES. ACCORDINGLY GROUND NO.1&2 ARE PARTLY ALLOWED. DURING THE COURSE OF HEARING NEITHER THE LD DR FOR THE REVENUE NOR THE LD AR FOR THE ASSESSEE COULD SUBSTANTIATE AS TO HOW THE ORDER OF LD CIT (A) IS ERRONEOUS. THE ORDER OF THE LD CIT (A) IS BASED ON COGENT REASONING AND WE DO NOT FIND ANY INFIRMITY FOR OUR INTERFERENCE. THUS BOTH THE APPEAL BEING ITA N O. 4567/M/2014 FILED BY REVENUE AND APPEAL ITA NO. 4855/MUM/2014 FILED BY A SSESSEE FOR ASSESSMENT YEAR (AY) 20010-11 ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 7 TH OCTOBER, 2016. SD/- SD/- (R.C.SHARMA) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI; DATED 07/10/2016 S.K.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/