ACIT - 22 (3), MUMBAI V. WALPHA ENGINEERING, MUMBAI

ITA 4644/MUM/2019

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 6308 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-01-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 09-07-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANJAY S SETHI
• Keywords: Bogus purchase; Search and seizure; Accommodation entries; Reassessment proceedings
• Section: 133(6); 143(1); 201; 13; 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (VIRTUAL COURT) SMC BENCH, MUMBAI BEFORE SHRI C.N. PRASAD, HON'BLE JUDICIAL MEMBER AND SHRI N.K. PRADHAN, HON'BLE ACCOUNTANT MEMBER ITA NO S . 4643 & 4644 /MUM/201 9 ( A.Y. 2009 - 10 & A.Y. 2010 - 11 ) ACIT - 22(3) ROOM NO. 305, 3 RD FLOOR PIRAMAL CHAMBERS, LALBAUG MUMBAI 400 012 V. M/S. WALPHA ENGINEERING 202, ANAND HOUSE, PLOT NO. 359 13 TH ROAD, KHAR (W) MUMBAI - 400052 PAN: AAAFW0435F ( A PPELLANT) (RESPONDENT) ASSESSEE BY : NONE DEPARTMENT BY SHRI SANJAY S. SETHI DATE OF HEARING : 19 .01.2021 DATE OF PRONOUNCEMENT : 19 .01.2021 O R D E R PER C.N. PRASAD (JM) 1. THESE APPEALS ARE FILED BY THE REVENUE AGAINST COMMON ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) 34 , MUMBAI [HEREINAFTER IN SHORT LD.CIT(A)] DATED 25.04.2019 FOR THE A.Y S . 2009 - 10 & 2010 - 11 IN RESTRICTING THE ADDITION @25% OF PURCHASES AS AGAINST THE DISALLOWANCE OF 100 % OF PURCHASES AS NON - GENUINE/BOGUS BY THE ASSESSING OFFICER. 2 ITA NOS. 4643 & 4644/MUM/2019 (A.Y. 2009 - 10 & A.Y. 2010 - 11) M/S. WALPHA ENGINEERING 2. BRIEFLY STATED THE FACTS ARE THAT, ASSESSEE ENGAGED IN TH E BUSINESS OF MANUFACTURING OF E LECTROMAGNETIC C LUTCH AND CLUTCH B REAKS FILED RETURN OF INCOME ON 28.09.2010 AND 29.09.2010 DECLARING INCOME OF . 24,47,749 / - AND . 24,39,165 / - FOR THE A.Y S: 2009 - 10 AND A.Y. 2010 - 11 RESPECTIVELY, AND THE RETURNS WERE PROCESSED U/S. 143(1) OF THE ACT. SUBSEQUENTLY, ASSESSING OFFICER RECEIVED INFORMATION FROM THE DGIT (INV.,), MUMBAI ABOUT THE ACCOMMODATION ENTRIES PROVIDED BY VARIOUS DEALERS A ND ASSESSEE WAS ALSO ONE OF THE BENEFICIARY FROM THOSE DEALERS. THE ASSESSMENTS WERE REOPENED U/S. 147 OF THE ACT BASED ON THE INFORMATION RECEIVED FROM DGIT(INV.), MUMBAI, THAT THE ASSESSEE HAS AVAILED ACCOMMODATION ENTRIES FROM M/S. HARIOM TRADERS WHO I S SAID TO BE PROVIDING ACCOMMODATION ENTRIES WITHOUT THERE BEING TRANSPORTATION OF ANY GOODS. IN THE REASSESSMENT PROCEEDINGS, THE ASSESSEE WAS REQUIRED TO PROVE THE GENUINENESS OF THE PURCHASES MADE FROM M/S. HARIOM TRADERS AS REFERRED IN ASSESSMENT ORDE R. IN RESPONSE A SSESSEE FURNISHED AUDIT REPORT, MONTH WISE SALES AND PURCHASES, INVOICE AND DELIVERY CHALLAN, LEDGER ACCOUNT OF THE PARTY AND B ANK STATEMENT AND SUBMITTED THAT THE PURCHASES MADE ARE GENUINE . ASSESSEE FURTHER SUBMITTED THAT THE PAYMENTS ARE MADE THROUGH ACCOUNT PAYEE CHEQUES AS SUCH CONTENDED THAT ALL THE PURCHASES ARE GENUINE. IT WAS ALSO CONTENDED THAT WITHOUT PURCHASING MATERIALS THE ASSESSEE WOULD NOT HAVE 3 ITA NOS. 4643 & 4644/MUM/2019 (A.Y. 2009 - 10 & A.Y. 2010 - 11) M/S. WALPHA ENGINEERING MADE THE SALES . HOWEVER, PARTIES WERE NOT PRODUCED BEFORE THE ASSESSING OFFICER . 3. NOT CONVINCED WITH THE SUBMISSIONS OF THE ASSESSEE THE ASSESSING OFFIC ER TREATED THE PURCHASES AS NON - GENUINE AND HE WAS OF THE OPINION THAT ASSESSEE HAD OBTAINED ONLY ACCOMMODATION ENTRIES WITHOUT THERE BEING ANY TRANSPORTATION OF MATERIALS AND THE ASSESSEE MIGHT HAVE MADE PURCHASES IN THE GRAY MARKET. IT IS THE FINDING OF THE ASSESSING OFFICER THAT ASSESSEE FALED TO PRODUCE THE PARTY ALONG WITH RELEVANT EVIDENCES TO SUBSTANTIATE THE GENUINENESS OF THE TRANSACTIONS. ASSESSING OFFICER OBSERVED THAT THE NOTICES ISSUED U/S. 133(6) OF THE ACT TO THE PAR TY RETURNED UNSERVED WITH A REMARK UNSERVED/UNCLAIMED AND THE ASSESSEE HAS NOT PRODUCED THE PARTIES BEFORE THE ASSESSING OFFICER. THEREFORE, ASSESSING OFFICER TREATED 100 % OF THE ALLEGED BOGUS PURCHASES OF . 2,94,138 / - AND . 5,56,463 / - FOR THE A.Y. 2009 - 10 AND A.Y. 201 0 - 11 RESPECTIVELY AS NON - GENUINE AND ADDED TO THE INCOME OF THE ASSESSEE. ON APPEAL THE LD.CIT(A) CONSIDERING THE EVIDENCES AND VARIOUS SUBMISSIONS OF THE ASSESSEE RESTRICTED THE DISALLOWANCE TO AN EXTENT OF 25 % OF THE NON - GENUINE PURCHASES. 4 ITA NOS. 4643 & 4644/MUM/2019 (A.Y. 2009 - 10 & A.Y. 2010 - 11) M/S. WALPHA ENGINEERING 4. INSPITE OF ISSUE OF NOTICE NONE APPEARED ON BEHALF OF THE ASSESSEE NOR ANY ADJOURNMENT WAS SOUGHT BY THE ASSESSEE. THEREFORE, I PROCEED TO DISPOSE OFF THIS APPEAL ON HEARING THE LD. DR ON MERITS 5. LD. DR VEHEMENTLY SUPPORTED THE O RDERS OF THE ASSESSING OFFICER. ON A PERUSAL OF THE ORDER OF THE LD.CIT(A), I FIND THAT THE LD.CIT(A) CONSIDERED THIS ASPECT OF THE MATTER ELABORATELY WITH REFERENCE TO THE SUBMISSIONS OF THE ASSESSEE AND THE AVERMENTS IN THE ASSESSMENT ORDER AND FOLLOWING VARIOUS JUDICIAL PRONOUNCEMENTS THE RESTRICTED THE DISALLOWANCE TO 2 5 % OF THE NON - GENUINE PURCHASES. WHILE HOLDING SO, THE LD.CIT(A) OBSERVED AS UNDER: - 4.5. CONCLUSION ON CASE LAWS: THE NET CONCLUSION THAT CAN BE ARRIVED AT FROM THE ABOVE DISCUSSION IS THAT WHERE THE SALES AND PURCHASES ARE VERIFIABLE AND PROVEN E.G. TO OR FROM GOVERNMENT BODIES OR AGENCIES ETC NO ADDITION MAY BE MADE. IF HOWEVER, THE PURCHASES ARE BOGUS BUT THE DIREC T SALES ARE PROVED, THE ASSUMPTIONS ARE THAT THE PURCHASES WERE MADE FROM UNKNOWN PARTIES AND THE AO CAN APPLY A PROFIT RATE TO DETERMINE THE LIABILITY OF THE APPELLANT. IT IS ALSO SEEN THAT PUTTING AN ONUS ON THE AO TO TRACE THE MONEY TRAIL OR VERIFY THE WITHDRAWALS FROM THE BANKS ETC MAY GIVE MORE POINTERS BUT IT IS NOT SUFFICIENT BY ITSELF AND THE ITAT HAS NOT ACCEPTED SUCH AN ARGUMENT IN THE CASE OF SHRI GANPATRAJ A.SANGHAVI (SUPRA). IF THE BOGUS PURCHASES ARE UNPROVED AND ARE DECLARED CONSUMED BY APPEL LANT ITSELF IN ITS TRADING, MANUFACTURING OR NON - TRADING ACTIVITIES, THE ENTIRE ADDITION CAN BE MADE AS IT ONLY GOES TO INFLATE THE EXPENSES OF THE APPELLANT, (REFER M/S. SHORELINE HOTEL PVT. LTD VS. CIT CENTRAL - 1 IN ITA N0.964/M/2015 DATED 19.06.2015). 4. 6. IN VIEW OF THE ABOVE, IT IS AN ADMITTED FACT THAT SALES TAX DEPARTMENT HAS CONDUCTED SEARCH AND SEIZURE OPERATION AND HAS 5 ITA NOS. 4643 & 4644/MUM/2019 (A.Y. 2009 - 10 & A.Y. 2010 - 11) M/S. WALPHA ENGINEERING ESTABLISHED LARGE NUMBER OF COMPANIES/FIRMS/PARTNERSHIP CONCERNS AS HAWALA DEALERS WHO ARE ENGAGED IN ACCOMMODATION ENTRIES WITHOUT AC TUALLY SUPPLYING THE GOODS. THE APPELLANT IS ONE OF THE BENEFICIARY AND HAS RECEIVED SUCH ACCOMMODATION BILLS FROM FOUR OF THE HAWALA OPERATORS TOTALING TO RS. 2,94,138/ - . THE A.O. ATTEMPTED TO VERIFY THE PARTY BY MAKING INDEPENDENT ENQUIRY U/S.133(6) OF T HE I.T.ACT, 1961. HOWEVER, THE NOTICE CAME BACK UNSERVED. THE ONUS SHIFTED ON THE APPELLANT PARTICULARLY IN THE BACKGROUND OF FINDING OF OF SALES TAX DEPARTMENT , MUMBAI. THE APPELLANT FILED CERTAIN DETAILS SUCH AS PURCHASE BILLS, LEDGER ACCOUNT, BANK STATE MENT ETC. HOWEVER, SOME OF THE SPECIFIC DETAILS REQU IRED TO ESTABLISH THE GENUINENESS OF PURCHASE SUCH AS EVIDENCE OF TRANSPORTATION OF GOODS, ENTRY OF GOODS IN THE STOCK REGISTER, ONE TO ONE CONSUMPTION PATTERN OF ALLEGED PURCHASE ITEMS, CONFIRMATION FROM THE PARTIES CONCERNED ETC COULD NOT BE SUBMITTED BEFORE THE AO NOR THE PRINCIPLE OFFICER OF THESE CONCERNS WAS PRODUCED BEFORE THE AO FOR EXAMINATION. HOWEVER, IT IS ALSO A FACT THAT THE AO HAS NOT QUESTIONED THE TOTAL SALE COMPONENT AND IF THERE IS A SAL E, THERE SHOULD BE PURCHASE. THE APPELLANT BEING A MANUFACTURING CONCERN, HAS INDULGED IN USING SUCH ACCOMMODATION ENTRY. AS EVIDENT FROM CATENA OF JUDGMENTS ON BOGUS PURCHASES, ONLY THE BENEFIT DERIVED BY USING SU CH ACCOMMODATION ENTRIES HAS TO BE BROUGHT TO TAX. THE ADVANTAGES FROM USING SUCH BOGUS BILLS ARE IN THE FORM OF SAVING VAT, SAVING OF TRANSPORTATION CHARGES AND VARIOUS TAXES ETC. THE AO HAS RIGHTLY DISALLOWED PART OF THE PURCHASES CLAIMED SUCH HAWALA DEALERS. IN THE PRESENT CASE, THE RATIO OF TH E JUDGMENT OF HON'BLE GUJARAT HIGH COURT IN THE CASE OF M/S VIJAY PROTEINS LTD. (996 58 ITD 428 AHD) IS APPLICABLE TO THE FACTS AND CIRCUMSTANCES OF THE APPELLANT'S CASE. THE JUDGMENT OF VIJAY PROTEIN (SUPRA) IS A JUDGMENT RELATED TO MANUFACTURING CONCERN WHERE ALL THE DOCUMENTS WERE THREADBARE ANALYZED AND 25% DISALLOWANCE ON PURCHASE WAS UPHELD. HERE, THE HON BLE COURT HAS HELD THAT DISALLOWANCE OF 25% OF THE PURCHASES FROM SUCH HAWALA DEALERS WILL BE JUSTIFIED BASED ON THE PREMISE THAT THE APPELLANT HAVE DERIVED BENEFIT TO THIS EXTENT BASED ON HIS NATURE OF BUSINESS. THUS, THE DISALLOWANCE OF PURCHASE IS UPHELD IN PRINCIPLE. HOWEVER, THE DISALLOWANCE MADE BY THE AO IS RESTRICTED TO 25% OF THE PURCHASES CLAIMED TO HAVE BEEN MADE. THUS THE GROUND OF APPEAL RAISED BY THE APPELLANT IS PARTLY ALLOWED. 4.7. IN THE RESULT, THE APPEAL FOR A.Y.2009 - 10 IS PARTLY ALLOWED. B. A.Y.2010 - 11 (I. T.NO.272): 1.1. THE FACTS AND CIRCUMSTANCES OF THIS CASE ARE ABSOLUTELY IDENTICAL TO THAT OF A.Y.2009 - 10 EXCEPT THAT THE BILLS FOR BOGUS PURCHASES IN THIS YEAR ARE AS UNDER: 6 ITA NOS. 4643 & 4644/MUM/2019 (A.Y. 2009 - 10 & A.Y. 2010 - 11) M/S. WALPHA ENGINEERING ST. NO NAME OF THE ENTITY AMOUNT (RS.) 1. HARIOM TRADERS 5,56,463/ - TOTAL 5,56,463/ - 1.2. ON THE BASIS OF ARGUMENTS, DISCUSSION AND RELIANCE OF CASE LAWS, 100% DISALLOWANCE OF PURCHASES MADE BY THE A.O. IS UPHELD IN PRINCIPLE BUT RESTRICTED TO 25%. THE GROUND OF APPEAL FILED BY THE APPELLANT ON THIS ISSUE IS THEREFORE, PARTLY ALLOWED. 1.3. IN THE RESULT, THE APPEAL FOR AY 2010 - 11 IS PARTLY ALLOWED. 6. ON A CAREFUL PERUSAL OF THE ORDER OF THE LD.CIT(A) AND THE REASONS GIVEN THEREIN, I DO NOT FIND ANY INFIRMITY IN THE ORDER PASSED BY THE LD.CIT(A) IN RESTRICTING THE ADDITION/DISALLOWANCE TO THE EXTENT OF 25 % OF THE PURCHASES FOR THE A SSESSMENT Y EAR S 200 - 10 AND 2010 - 11 . GROUNDS RAISED BY THE REVENU E ARE DISMISSED FOR BOTH THESE A SSESSMENT Y EAR S . 7. IN THE RESULT, BOTH APPEALS OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN VIRTUAL COURT ON 19.01.2021. SD/ - (C.N. PRASAD) JUDICIAL MEMBER MUMBAI / DATED 19/01/ 2021 GIRIDHAR, SR.PS 7 ITA NOS. 4643 & 4644/MUM/2019 (A.Y. 2009 - 10 & A.Y. 2010 - 11) M/S. WALPHA ENGINEERING COPY OF THE ORDER FORWARDED TO : 1. THE ASSESSEE 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY// BY ORDER (ASSTT. REGISTRAR) ITAT, MUM