ITO 19(3)(2), Mumbai V. SHRI SADARAM H. PATEL , Mumbai

ITA 4701/MUM/2019

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 1266 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-02-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 12-07-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANJAY J SETHI
• Keywords: Bogus purchase; Principle of natural justice; Accommodation entries; Onus to prove; Reassessment proceedings
• Section: 133(6); 143(1); 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (VIRTUAL COURT) SMC BENCH, MUMBAI BEFORE SHRI C.N. PRASAD, HON'BLE JUDICIAL MEMBER ITA NO. 4701 /MUM/201 9 ( A.Y. 2009 - 10) INCOME TAX OFFICER 19 ( 3 )( 2 ) ROOM NO. 2 24 , 2 ND FLOOR MATRU MANDIR, TARDEV ROAD MUMBAI 400 007 V. SHRI SADARAM H. PATEL 42/44, MATRU ASHISH BUILDING R.NO. 16, 1 ST FLOOR 4 KUMBHARWADA MUMBAI - 400004 PAN: AAVPT4119Q ( A PPELLANT) (RESPONDENT) ASSESSEE BY : NONE DEPARTMENT BY SHRI SANJAY J. SETHI DATE OF HEARING : 20 .01.2021 DATE OF PRONOUNCEMENT : 03 .02 .2021 O R D E R PER C.N. PRASAD (JM) 1. THIS APPEAL IS FILED BY THE REVENUE AGAINST ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) 52 , MUMBAI [HEREINAFTER IN SHORT LD.CIT(A)] DATED 30.04.2019 FOR THE A.Y. 2009 - 10 IN RESTRICTING THE ADDITION @9% AS AGAINST @12.5% MADE BY THE ASSESSING OFFICER. 2 ITA NO. 4701/MUM/2019 (A.Y. 2009 - 10) SHRI SADARAM H. PATEL 2. BRIEFLY STATED THE FACTS ARE THAT, ASSESSEE ENGAGED IN THE BUSINESS OF TRADING IN FERROUS AND NON - FERROUS METALS, FILED RETURN OF INCOME ON 17.06.2009 DECLARING INCOME OF .2,32,580 / - FOR THE A.Y . 2009 - 10 AND THE RETURN WAS 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 AND ASSESSEE WAS ALSO ONE OF THE BENEFICIARY FROM THOSE DEALERS. THE ASSESSMENT WAS REOPENED U/S. 147 OF THE ACT BASED ON THE INFORMATION RECEIVED FROM DGIT(INV.), MUMBAI, THAT THE ASSESSEE HAS AVAILED ACCOMMODATION ENTRIES FROM VARIOUS DEALERS WHO ARE 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 VARIOUS PARTIES REFERRED IN ASSESSMENT ORDER. IN RESPONSE A SSESSEE VIDE LETTER DATED 27.12.2014 FURNISHED COPY OF STOCK REGISTRE, COPY OF PURCHASES VIS - - VIS SALES AND BANK STATEMENT AND SUBMITTED THAT THE PURCHASES MADE ARE GENUINE. ASSESSEE FURTHER SUB MITTED THAT THE PAYMENTS ARE MADE THROUGH ACCOUNT PAYEE CHEQUES AS SUCH CONTENDED THAT ALL THE PURCHASES ARE GENUINE. HOWEVER, PARTIES WERE NOT PRODUCED BEFORE THE ASSESSING OFFICER . 3 ITA NO. 4701/MUM/2019 (A.Y. 2009 - 10) SHRI SADARAM H. PATEL 3. NOT CONVINCED WITH THE SUBMISSIONS OF THE ASSESSEE THE ASSESSING OFFICER 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 T HE ASSESSING OFFICER THAT THE ASSESSEE FAILED TO PRODUCE THE PARTIES IN SUPPORT OF ITS CLAIM THAT PURCHASES ARE GENUINELY MADE FROM THE PARTIES. ASSESSING OFFICER OBSERVED THAT THE NOTICES ISSUED U/S. 133(6) OF THE ACT TO THE PARTIES ARE RETURNED UNSERVED WITH A REMARK NOT KNOWN /LEFT AND THE ASSESSEE HAS NOT PRODUCED THE PARTIES BEFORE THE ASSESSING OFFICER. ASSESSING OFFICER FURTHER OBSERVED THAT M/S. RAJKAMAL STEEL CENTRE AND M/S. B.P. SHAH & CO. HAD SUBMITTED THAT THEY HAVE NOT SOLD ANY GOODS TO THE ASSESSEE. THEREFORE, ASSESSING OFFICER TREATED 1 2 . 5% OF THE ALLEGED BOGUS PURCHASES OF . 63,57,577 / - FOR THE A.Y . 2009 - 10 AS NON - GENUINE . ON APPEAL THE LD.CIT( A) CONSIDERING THE EVIDENCES AND VARIOUS SUBMISSIONS OF THE ASSESSEE RESTRICTED THE ADDITION @9% AS AGAINST @12.5% MADE BY THE ASSESSING OFFICER. 4. IN SPITE OF ISSUE OF NOTICE NONE APPEARED ON BEHALF OF THE ASSESSEE NOR ANY ADJOURNMENT WAS SOUGHT . THEREFORE, I PROCEED TO DISPOSE OFF THIS APPEAL ON MERITS ON HEARING THE LD.DR. 4 ITA NO. 4701/MUM/2019 (A.Y. 2009 - 10) SHRI SADARAM H. PATEL 5. LD. DR VEHEMENTLY SUPPORTED THE ORDERS 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 EL ABORATELY WITH REFERENCE TO THE SUBMISSIONS OF THE ASSESSEE AND THE AVERMENTS IN THE ASSESSMENT ORDER AND FOLLOWING VARIOUS JUDICIAL PRONOUNCEMENTS RESTRICTED THE ADDITION @9% AS AGAINST @12.5% MADE BY THE ASSESSING OFFICER . WHILE HOLDING SO, THE LD.CIT(A) OBSERVED AS UNDER: - 6. GROUND NO. 2 OF THE APPEAL RELATES TO ADDITION OF RS 7,94,697/ - @ 12.5% OF THE ALLEGED HAWALA PURCHASES OF RS 6357,577/ - WHEREIN CERTAIN 16 SUPPLIERS WERE NOT FOUND AT THEIR STATED ADDRESSES AND TH E NOTICES U/S 133(6) COULD NOT BE SERVED. FURTHER, GROUND NO 3 OF THE APPEAL RELATES TO THE ADDITION MADE BY THE AO OF RS 8,75,362/ - IN RESPECT OF THE PURCHASES CLAIMED FROM M/S RAJKAMAL STEEL CENTRE AND M/S B P SHAH & CO WHO IN RESPONSE TO NOTICES U/S 133 (6) DENIED HAVING ENTERED INTO ANY TRANSACTION OF PURCHASE I SALE WITH OUR ASSESSEE. SINCE, BOTH THESE GROUNDS OF APPEAL ARE RELATED TO THE ADDITIONS MADE ON ACCOUNT OF NON - GENUINE PURCHASES, THEY ARE ADJUDICATED TOGETHER FOR THE SAKE OF CONVENIENCE. 6.1. I HAVE DULY CONSIDERED THE CONTENTIONS OF THE ASSESSEE AS WELL AS THE ASSESSMENT ORDER OF THE AO. IT IS OBSERVED THAT THE AO RECEIVED INFORMATION FROM THE SALES TAX DEPARTMENT OF MAHARASHTRA THROUGH THE DGIT (INV.), MUMBAI, ABOUT A NUMBER OF DEALERS INDULG ING IN PROVIDING ACCOMMODATION ENTRIES IN THE FORM BOGUS SALES, PURCHASES WITHOUT ACTUAL SUPPLY OF GOODS. THE SALES TAX AUTHORITIES HAD CARRIED OUT A DETAILED INVESTIGATION AND HAD RECORDED STATEMENTS AND/OR OBTAINED AFFIDAVITS/DEPOSITIONS FROM THE SAID HA WALA DEALERS CONFIRMING THAT THEY HAD NOT CARRIED OUT ANY REAL BUSINESS TRANSACTIONS BUT HAD SOLELY PROVIDED ACCOMMODATION ENTRIES OF PURCHASES, SALES, ETC. SINCE, OUR ASSESSEE WAS ALSO ONE OF THE BENEFICIARIES OF THE ACCOMMODATION ENTRIES PROVIDED BY 18 O F THE HAWALA DEALERS. M/S RANAKPUR SALES QORPORATION (RS 21,502/ - ), M/S ASIAN METALINDUSTRIES (RS 9,32,213/ - ), MIS P.M. STEEL ALLOYS (RS 9,91,947/ - ), M/S HARDIK METAL CORPORATION (RS 67,480/ - ), M/S NIRMA TRADING CO (RS 86.491/ - ), M/S MANOHAR METAL LNDIA(RS 3,64,334/ - ), M/S KAILASH METAL P LTD (RS 4,53,103/ - ), M/S KRISHNA STEEL INDUSTRIES (RS 1,87,427/ - ), M/S 5 ITA NO. 4701/MUM/2019 (A.Y. 2009 - 10) SHRI SADARAM H. PATEL BHAGYALAXMI STEEL INDUSTRIES (RS 6,17,834/ - ), M/S KUSHAL STEEL CORPORATION (RS 8,83.974/ - ), M/S DIPESH METAL P LTD (RS 7,72,389/ - ), M/S SHANTI METAL (R S 1,27,926/ - ), MIS PRIME STEEL LMPEX (RS 3,19,491/ - ), M/S VIDHI METAL INDUSTRIES (RS 55,488/ - ), M/S RAJKAMAL STEEL CENTRE (RS 2,69,555/ - ), M/S RIDDHI SIDDHI IMPEX (INDIA) (RS 4,06,245/ - ), M/S JAI MATA DI TRADING CO (RS 69,733/ - ) AND M/S B P SHAH & CO (RS 6 ,05,807/ - ), TOTALLY AGGREGATING TO RS. 72,32,939/ - , THE ASSESSMENT OF THE ASSESSEE WAS REOPENED BY ISSUE OF NOTICE U/S. 148. 6.2 TO ASCERTAIN THE GENUINENESS OF THE SAID PURCHASES, THE AO ISSUED NOTICES U/S. 133(6) WHICH COULD NOT BE SERVED EXCEPT FOR 2 OF THE PARTIES M/S RAJKAMAL STEEL CENTRE AND M/S B P SHAH & CO. FURTHER, IT WAS INFORMED BY M/S RAJKAMAL STEEL CENTRE AND M/S B P SHAH & CO THAT THEY HAVE NOT UNDERTAKEN ANY TRANSACTIONS OF SALE / PURCHASE WITH OUR ASSESSEE. THE AO, THEREFORE, ASKED THE ASSE SSEE TO PRODUCE THE PARTIES ALONGWITH THEIR BOOKS OF ACCOUNTS AND ALSO FURNISH EVIDENCES TO ESTABLISH THE GENUINENESS OF THE SAID TRANSACTION. THE ASSESSEE WAS UNABLE TO PRODUCE THE SAID 16 PARTIES. THEREAFTER, THE AO PROCEEDED TO ADD THE ENTIRE AMOUNT OF PURCHASES MADE FROM THE SAID 2 PARTIES VIZ M/S RAJKAMAL STEEL CENTRE (RS 2,69,555/ - ) AND M/S B P SHAH & CO. (RS 6,05,807/ - ) TOTALLY AGGREGATING TO RS 8,75,362/ - WHERE THERE WAS A COMPLIANCE TO NOTICES U/S 133(6) BUT THE TRANSACTION WITH THE ASSESSEE WAS DE NIED. MOREOVER, THE AO ADDED AN AMOUNT OF RS. 7,94,697/ - BEING 12.5% OF THE BALANCE HAWALA PURCHASES OF RS 63,57,577/ - IN RESPECT OF THE BALANCE 16 PARTIES SINCE THE PURCHASES COULD BE TALLIED WITH THE SALES. 6.3 IN COURSE OF THE APPELLATE PROCEEDINGS, THE ASSESSEE SUBMITTED THAT THE INCOME TAX DEPA RTMENT HAS RELIED UPON THE AFFIDA VITS SUBMITTED BY THE ALLEGED, HAWALA/BOGUS SUPPLIERS. THE ASSESSEE FURTHER SUBMITTED THAT THE EVIDENCES RELIED UPON HAVE NOT BEEN MADE AVAILABLE TO IT AND AN OPPORTUNITY TO CROSS - EXAMINE THE SAID ALLEGED HAWALA/BOGUS SUPPLIERS WAS ALSO NOT PROVIDED. THEREFORE IT WAS CONTENDED BY THE, ASSESSEE THAT THE PRINCIPLES OF NATURAL JUSTICE HAVE BEEN VIO LATED AND ACCORDINGLY THE ASSESS MENT ORDER IS VITIATED. IT IS OBSERVED THAT THERE IS NO DISPUTE THAT THE SAID ALLEGED HAWALA/BOGUS SUPPLIERS WERE NOT FOUND AT THE STATED ADDRESSES AND THEY DID NOT RESPOND TO NOTICES U/S 133(6). IT IS ALSO A FACT THAT THE ASSESSEE WAS NOT ABLE TO PRODUCE THE ALLEGED HAWALA/BOGUS SUPPLIERS AS ITS WITNESS. AN O PPORTUNITY TO CROSS - EXAMINE IS NOT AN ABSOLUTE RIGHT. IT IS TO BE PROVIDED ONLY ONCE THE BASIC ONUS CAST UPON THE ASSESSEE IS DISCHARGED. IN THE INSTANT CASE, THE BASIC ONUS TO PROVE THE GENUINENESS OF THE TRANSACTION BY PRODUCING THE ALLEGED HAWALA/ BOGUS SUPPLIERS OR BY 6 ITA NO. 4701/MUM/2019 (A.Y. 2009 - 10) SHRI SADARAM H. PATEL SUBMITTING THEIR CONFIRMATIONS OR ATLEAST PROVIDING THEIR LATEST ADDRESSES HAS CLEARLY NOT BEEN DISCHARGED BY THE ASSESSEE. IN VIEW OF THE FACTUAL SCENARIO, THE ASSESSEE CANNOT INSIST ON BEING GRANTED AN OPPORTUNITY TO CROSS EXAMINE THE AL LEGED HAWALA/BOGUS SUPPLIERS AND ON BEING PROVIDED THE EVIDENCES RELIED UPON BY THE AO. 6.4 IN THE APPELLATE PROCEEDINGS: THE ASSESSEE SUBMITTED THAT ALL THE DETAILS OF SALES AND PURCHASES OF GOODS INCLUDING NAMES AND ADDRESSES OF THE SUPPLIERS ETC. WERE FURNISHED TO. THE AO AND ALL THE PAYMENTS HAD BEEN MADE BY CHEQUE. MOREOVER, A CHART GIVING D ETAILS OF PURCHASES AND A CORRESPONDING SALES WAS ALSO SUBMITTED. THEREFORE, IT WAS CONTENDED BY THE ASSESSEE THAT THE ACTION. OF THE AO OF MAKING THE. SAID AGGREGATE ADDITION OF RS 16,70,059/ - IS NOT CORRECT. FURTHER, THE ASSESSEE ALSO CONTENDED' THAT SIN CE HE WAS ABLE TO TALL Y THE ALLEGED BOGUS PURCHASES WITH CORRESPONDING SALES, THE ACTION OF THE AO OF MAKING AN ADDITION OF THE ENTIRE AMOUNT OF RS 8,75,362/ - IN RESPECT OF 2 OF THE PARTIES WHO IN RESPONSE TO NOTICES U/S 133(6) DENIED HAVING UNDERTAKEN ANY PURCHASE / SALE TRANSACTION WITH THE ASSESSEE, IS NOT CORRECT. MOREOVER, IT WAS EXPLAINED BY THE ASSESSEE IN COURSE OF THE APPELLATE PROCEEDINGS THAT THE AO HAS ADOPTED THE RATE OF 12.5% BY RELYING UPON THE DECISION ITAT, AHMEDABAD IN THE CASE OF SI MIT P SHETH (ITA NO 3238 & 3293/AHD/ 2009) AND WHICH HAS ALSO BEEN APPROVED BY THE HON'BLE GUJARAT HIGH COURT. IT WAS POINTED OUT BY THE ASSESSEE THAT IN PARA 7 OF THE SAID ORDER OF THE HON'BLE ITAT, IT HAS BEEN NOTED THAT THE MALPRACTICE OF BOGUS PURCHASES IS MAINLY TO SAVE 10% SALES TAX. AFTER CONSIDERING THIS, THE HON'BLE (TAT ESTIMATED THE ADDITION AL PROFIT ON THE ALLEGED BOGUS PURCHASES @ 12.5%. IT WAS THEREFORE SUBMITTED BY THE ASSESSEE THAT SINCE AS AGAINST 10% SALES TAX THEN APPLICABLE IN GUJARAT, THE RA TE OF SALES TAX IN MAH ARASHTRA WAS OF ONLY 4%, THEREFORE THE RATE APPLIED BY THE AO OF 12.5% IS ON THE HIGHER SIDE. 6.5 THE CONTENTIONS OF THE ASSESSEE HAVE BEEN DULY CONSIDERED. IT IS A FACT THAT 16 OF THE ALLEGED 18 HAWALA SUPPLIERS WERE FOUND TO BE NON - EXISTENT AT THEIR STATED ADDRESSES. MOREOVER, THE ASSESSEE COULD NEITHER PROVIDE THE LATEST ADDRESSES NOR PRODUCE THE SAID 16 SUPPLIERS BEFORE THE AO. IT IS ALSO A FACT THAT THE BALANCE 2 ALLEGED HAWALA SUPPLIERS DENIED HAVING UNDERTAKEN ANY TRANSACTION OF PURCHASE / SALE WITH OUR ASSESSEE. IT IS NOTED THAT THE ACCOUNTS OF THE ASSESSEE HAVE BEEN DULY AUDITED AND NO DIS CREPANCIES HAVE BEEN NOTED BY THE AUDITORS IN THE QUANTITATIVE DETAILS. THEREFORE, THERE IS SOME MERIT IN THE CONTENTION OF THE ASSESSEE THA T THE AO SHOULD NOT HAVE ADDED THE ENTIRE AMOUNT OF RS 8,75,362/ - RELATED TO 2 OF THE ALLEGED HAWALA SUPPLIERS WHO DENIED HAVING UNDERTAKEN ANY 7 ITA NO. 4701/MUM/2019 (A.Y. 2009 - 10) SHRI SADARAM H. PATEL PURCHASE / SALE TRANSACTION WITH THE ASSESSEE. SINCE THE ASSESSEE WAS IN A POSITION TO RECONCILE THE ALLEGED HAW ALA PURCHASES WITH THE CORRESPONDING SALES BOOKED BY IT, THE AO SHOULD HAVE MADE ADDITION OF ONLY THE REASONABLE PROFIT WHICH COULD BE ESTIMATED ON THE TOTAL AMOUNT OF ALLEGED HAWALA PURCHASES. IT IS OBSERVED THAT THE HON'BLE ITAT AHMEDABAD IN THE CASE OF SIMIT P SHETH (SUPRA) AFTER CONSIDERING THAT THE SALES TAX RATE THEN PREVALENT AT GUJARAT WAS OF 10%, HAD HELD THAT THE REASONABLE ADDITIONAL PROFIT FROM THE AMOUNT OF ALLEGED HAWALA PURCHASES CAN BE DETERMINED BY AD OPTING A RATE OF 12.5%. HOWEVER, THE RAT IO OF THIS DECISION OF HON'BLE ITAT AHMEDABAD CANNOT BE SQUARELY APPLIED TO THE FACTS OF OUR ASSESSEE SINCE THE SALES TAX THEN PREVALENT IN MAHARASHTRA WAS OF ONLY 4% AS AGAINST 10% APPLICABLE IN GUJARAT. AFTER CONSIDERING THE FACTUAL POSITION IN THE CASE OF THE ASSESSEE INCLUDING THE NATURE OF BUSINESS AND THE SALES TAX RATE PREVALENT DURING THE YEAR, IT WILL BE APPROPRIATE IF THE ADDITIONAL PROFITS ON THE SAID ALLEGED HAWALA PURCHASES ARE COMPUTED BY ADOPTING A RATE OF 9%. ACCORDINGLY, GROUND NOS. 2 & 3 O F THE APPEAL ARE 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 IN RESTRICTING THE ADDITION @9% AS AGAINST @12.5% MADE BY THE ASSESSING OFFICER . GROUNDS RAISED BY THE REVENUE ARE DISMISSED . 7. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED ON 03 .02.2021 AS PER RULE 34(4) OF ITAT RULES BY PLACING THE PRONOUNCEMENT LIST IN THE NOTICE BOARD. SD/ - (C.N. PRASAD) JUDICIAL MEMBER MUMBAI / DATED 03/ 02 / 2021 GIRIDHAR, SR.PS 8 ITA NO. 4701/MUM/2019 (A.Y. 2009 - 10) SHRI SADARAM H. PATEL 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