ACIT 2(2)(2), NASHIK V. METRO SHOES LTD, MUMBAI

ITA 4646/MUM/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 0440 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-08-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2010-2011
• Appeal Filed On: 07-07-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SAURABH DESHPANDE
• Assessee Lawyers: DINESH WAGH
• Keywords: Bogus purchase; Unexplained expenditure; Peak credit
• Section: 143(3); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES C, MUMBAI BEFORE SHRI P K BANSAL, VICE PRESIDENT & SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO. 4646/MUM/2016 ASSESSMENT YEAR : 2010 2011 ACIT 2 ( 2 )( 2 ) MUMBAI VS. METRO SHOES LTD METRO HOUSE, 3 RD FLOOR, COLABA CAUSEWAY, MUMBAI 400 001 PAN : AAACM4754E (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SAURABH DESHPANDE RESPONDENT BY : SHRI DINESH WAGH DATE OF HEARING : 07. 08 .2017 DATE OF PRONOUNCEMENT : 07 .0 8 .2017 O R D E R PER PAWAN SINGH, JUDICIAL MEMBER: THIS APPEAL BY THE REVENUE U/S. 253 OF THE I T AC T, IS DIRECTED AGAINST THE ORDER OF THE CIT(A)-5, MUMBAI, DATED 05.04.2016 FOR A Y 2010-11. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THE ORDER OF THE CIT(A) IS OPPOSED TO LAW AND F ACTS OF THE CASE 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD CIT(A) HAS ERRED IN RESTRICTING THE ADD ITION ON ACCOUNT OF BOGUS PURCHASES TO THE ELEMENT OF PROFIT EMBEDDE D IN THE PURCHASE, WITHOUT APPRECIATING HTAT THESE HAWALA DE ALERS HAVE DECLARED ON OATH THAT THEY HAVE NOT CONDUCTED ANY G ENUINE BUSINESS AND HAVE NOT GIVEN ANY DELIVERY OF GOODS A ND EVEN AFTER ITA NO.4646/MUM/2016 M/S METRO SHOES LTD 2 REPEATED OPPORTUNITIES BEING GIVEN THE ASSESSEE COU LD NOT PROVE THAT THE PURCHASES WERE GENUINE 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS ENGAGED IN THE BUSINESS OF RETAILING OF SHOES. IT FILED ITS RETUR N OF INCOME ON 27.09.2010, DECLARING TOTAL INCOME AT ` 40,99,01,206/-. THE RETURN WAS PROCESSED U/S. 143(1) ON 05.05.2011. SUBSEQUENTLY, THE ASSESSMENT WAS RE-OPENED U/S. 147 AND NOTICE U/S. 148 WAS ISSUED ON 15.12.2013 FO R THE FOLLOWING REASONS: 'INFORMATION RECEIVED FROM DGIT (LNV) THAT THE ASSE SSEE IS INVOLVED IN BOOKING OF BOGUS PURCHASE FOR FY 2010-11 FROM THE FOLLOWING HAWALA OPERATORS. THE LIST OF HAWALA OPERATORS (BOGUS BILLS ISSUERS) WAS IDENTIFIED BY SALES TAX DEPARTMENT, STATEMENTS OF THE HAWALA OPERATORS HAVE ALSO BEEN RECORDED BY THE SALES TAX DEPARTMENT AND THE INFORMATION HAS BEEN SHARED WITH THE OFFICE OF THE DGIT(LNV.) MUMBAI. THE HAWALA BILLERS ARE MAINLY IDENTIFIED ON THE REGISTRATION OF VAT NO. RECEIVED BY THEM. THE OFFICE OF DGIT (LNV.) HAS INTIMATED THAT THE ASSESSEE METRO SHOES LTD. HA S INDEED BOOKED BOGUS PURCHASE (I.E. WITHOUT DELIVERY OF GOO DS) FROM FOLLOWING HAWALA OPERATORS. VAT NO NAME OF THE HAWALA OPERATOR PERIO D (FY) BILL AMOUNT (RS.) 27440688212V TULSIANI TRADING PVT. LTD. 2009 - 10 54,91,212/ - 27870165388V BIG STEP INTERNATIONAL 2009 - 10 5,81,597/ - 60,72,809/ - IN VIEW OF THE ABOVE, I HAVE REASONS TO BELIEVE THA T THE INCOME OF RS. 60,72,809/-FOR THE A.Y. 2010-11 HAS ESCAPED ASS ESSMENT WITHIN THE MEANING OF SECTION 147 OF THE I.T. ACT. 3. IN RESPONSE TO THE NOTICE U/S. 148, THE ASSESSEE ATTENDED THE PROCEEDINGS AND FILED VARIOUS DETAILS AS REQUIRED B Y THE ASSESSING OFFICER. ITA NO.4646/MUM/2016 M/S METRO SHOES LTD 3 THE ASSESSMENT WAS COMPLETED U/S. 143(3) R W S 147. THE ASSESSING OFFICER WHILE FRAMING ASSESSMENT MADE ADDITION OF ` 50,33,651/- ON ACCOUNT OF PEAK CREDIT FOR THE PURCHASES FROM TULSIANI TRADING PVT. LTD AND BIG STEP INTERNATIONAL. THE PEAK PURCHASES AMOUNTING TO ` 50,33,651/- WAS TREATED AS UNEXPLAINED EXPENDITURE U/S. 69C. ON APPEAL, BE FORE THE CIT(A), THE CIT(A) RESTRICTED THE ADDITION TO 12.5% OF THE TOTA L PURCHASES FROM THE IMPUGNED/BOGUS PURCHASES. AGGRIEVED, THE REVENUE I S IN APPEAL BEFORE US. 4. WE HAVE HEARD THE LEARNED DR FOR THE REVENUE AND THE LEARNED AR FOR THE ASSESSEE. WE HAVE ALSO PERUSED THE MATERIAL AV AILABLE ON RECORD. THE LEARNED DR ARGUED THAT THE ASSESSING OFFICER MADE T HE ADDITION AFTER MAKING FULL INQUIRY WITH REGARD TO THE GENUINENESS OF PURC HASES. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSEE COULD NOT SUBS TANTIATE ABOUT THE GENUINENESS OF THE PURCHASES MADE FROM THE PARTIES, WHOSE NAMES WERE LISTED IN THE LIST OF HAWALA TRADERS ON THE WEBSITE OF SALES TAX DEPARTMENT OF GOVERNMENT OF MAHARASHTRA. THE ASSESSEE WAS ASKED TO PRODUCE THE PARTIES FOR VERIFICATION AND TO FILE DOCUMENTARY EVIDENCES WITH REGARD TO THE GENUINENESS OF PURCHASES. THE DR FURTHER CONTENDED THAT THE ASSESSEE COULD NOT PROVE THE DELIVERY OF GOODS. THE ASSESSE E HAS MERELY OBTAINED ACCOMMODATION BILLS. IN FACT, NO PURCHASES WERE MA DE BY THE ASSESSEE. THE INVESTIGATION WING OF THE DEPARTMENT HAS ALSO MADE FULL FLEDGE INQUIRY ABOUT ITA NO.4646/MUM/2016 M/S METRO SHOES LTD 4 THE GENUINENESS OF THE PARTIES, WHO WERE LISTED AS HAWALA DEALERS BY THE SALES TAX DEPARTMENT OF GOVERNMENT OF MAHARASHTRA. 5. ON THE OTHER HAND, THE LEARNED AR OF THE ASSESSE E ARGUED THAT ENTIRE PURCHASES MADE BY THE ASSESSEE DURING THE RELEVANT ASSESSMENT YEAR WERE GENUINE. THE ASSESSEE HAD RECEIVED DELIVERY OF GOO DS ALONG WITH BILLS AND ALL PURCHASES WERE RECORDED IN THE REGULAR BOOKS OF ACC OUNT. THE ASSESSEE HAD PAID EXCISE DUTY ON THE PURCHASES. ALL THE GOODS W ERE RECEIVED AT THE CENTRAL WAREHOUSE DEPOT OF THE ASSESSEE. THE ASSESSEE SOLD THE GOODS THROUGH ITS RETAILER AND ALL THE DETAILS RELATING TO QUANTITY O F PURCHASE AND SALES WERE FURNISHED TO THE ASSESSING OFFICER. HOWEVER, THE A SSESSING OFFICER WITHOUT CONSIDERING THE EVIDENCES FURNISHED BY THE ASSESSEE , MADE THE ADDITION ON THE BASIS OF SURMISES AND CONJECTURES. THE ASSESSI NG OFFICER RELIED ON THE OPINION OF THE THIRD PARTY. 6. WE FIND THAT THE ASSESSING OFFICER REOPENED THE ASSESSMENT ON THE BASIS OF INFORMATION RECEIVED FROM DGIT (INV), MUMB AI, THAT THE ASSESSEE HAS TAKEN ACCOMMODATION BILLS FROM HAWALA DEALERS, WHO ARE DECLARED SO, BY THE SALES TAX DEPARTMENT, GOVERNMENT OF MAHARASHTRA. T HESE DEALERS WERE ISSUING BOGUS BILLS WITHOUT ACTUALLY DELIVERING ANY GOODS. THE ASSESSING OFFICER ASKED THE ASSESSEE TO PRODUCE DOCUMENTS SUC H AS BILLS, VOUCHERS/INVOICES, BANK STATEMENT, STOCK REGISTER S HOWING RECEIPT OF GOODS, LORRY RECORDS ETC., TO ESTABLISH THE GENUINENESS OF THE TRANSACTIONS. THE ITA NO.4646/MUM/2016 M/S METRO SHOES LTD 5 ASSESSING OFFICER ALSO DIRECTED THE ASSESSEE TO PRO DUCE BOTH THE PARTIES FOR VERIFICATION. HOWEVER, THE ASSESSEE COULD NOT PROD UCE THEM. THE ASSESSEE FILED DETAILS OF INVOICES, EXCISE PAID, COPY OF BAN K STATEMENT, DETAILS OF PURCHASE AND DISPATCH TO SHOWROOMS, SAMPLE CHALLANS ETC. THE ASSESSEE FURTHER CONTENDED THAT THE PURCHASES WERE MADE THRO UGH BROKERS, WHO IN TURN SUPPLIED THE MATERIAL AFTER SOURCING THEM FROM VARIOUS SUPPLIERS. THEREFORE, THE BILLS AND OTHER SUPPORTING DOCUMENTS ARE OF THIRD PARTIES AND THE PAYMENT WAS MADE TO THE PARTY, WHOSE BILLS WERE SUBMITTED BY THE BROKERS. HENCE, THE ASSESSEE WAS NOT AWARE OF THE GENUINENESS OF THE BILL ISSUING PARTIES. THESE CONTENTIONS OF THE ASSESSEE WERE NOT ACCEPTED BY THE ASSESSING OFFICER AS THE HAWALA DEALERS THEMSELVES HAD ADMITTED BEFORE THE SALES TAX DEPARTMENT THAT THEY HAVE NOT SUPPLIED AN Y MATERIAL AND PROVIDED ONLY ACCOMMODATION BILLS WITHOUT DELIVERY OF GOODS. THE ASSESSING OFFICER THEREFORE, CONCLUDED THAT THE ASSESSEE HAS NEITHER PROVIDED THE DETAILS OF BROKERS, THEIR NAMES OR ADDRESS NOR COULD HE PRODUC E THEM DURING THE COURSE OF ASSESSMENT. HENCE, THE ASSESSING OFFICER ON THE BASIS OF PEAK CREDIT DISALLOWED THE AMOUNT OF ` 50,33,651/-. 7. THE CIT(A) WHILE CONSIDERING THE CASE OF THE ASS ESSEE OBSERVED THAT THE ASSESSEE HAS PAID EXCISE PAID AND EXCISE DUTY I S PAID ONLY AFTER RECEIPT OF GOODS. THIS SHOWS THAT THE SUPPLIERS HAD SUPPLIED GOODS BECAUSE WITHOUT GOODS THERE IS NO POSSIBILITY OF PAYING EXCISE DUTY . IT WAS ALSO OBSERVED THAT ITA NO.4646/MUM/2016 M/S METRO SHOES LTD 6 BECAUSE SOME OF THE SUPPLIERS HAVE NOT PAID SALES T AX THEY HAVE BEEN CONSIDERED AS HAWALA DEALERS, BUT FOR INCOME TAX PU RPOSE IT CANNOT BE TREATED AS BOGUS PURCHASES. THE LEARNED CIT(A) HAS FURTHER RELYING ON THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. SIMIT P SHETH 256 ITR 451, WHEREIN IT HAS HELD THAT 12.5% OF TOTA L PURCHASES CAN BE CONSIDERED AS BOGUS PURCHASES, RESTRICTED THE ADDIT ION TO 12.5% OF THE IMPUGNED PURCHASES. UNDER THE FACTS AND CIRCUMSTAN CES OF THE CASE, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE CIT(A). IT IS ACCORDINGLY, UPHELD. 8. IN THE RESULT, THE APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 7 TH DAY OF AUGUST, 2017. SD/- SD/- (P K BANSAL) (PAWAN SINGH ) VICE-PRESIDENT JUDICIAL MEMBER MUMBAI; DATED: 7 TH AUGUST, 2017 SA COPY OF THE ORDER FORWARDED TO : 1. THE APP ELL ANT. 2. THE RESPONDENT. 3. T HE CIT(A), MUMBAI 4. THE CIT 5. DR, C BENCH, ITAT, MUMBAI BY ORDER, #TRUE COPY # ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI