ITO-32(1)(5), Mumbai V. SHRI. HARISH KANTILAL JAIN, Mumbai

ITA 471/MUM/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 5803 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-02-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 31-01-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bogus purchase; Unexplained expenditure; Corroborative evidences; Accommodation entries; Set aside
• Section: 69C; 133(6); 143(1); 250; 264; 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC, BENCH M UMBAI BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBE R ITA NO.471/MUM/2019 ( ASSESSMENT YEAR: 2009-10 ) ITO-32(1)(5) ROOM NO.203, 2 ND FLOOR C-11, BANDRA KURLA COMPLEX BANDRA(E) MUMBAI-400 051 VS. HARISH KANTILAL JAIN 404, BHAKTI APARTMENT OPP. JAIN TEMPLE JAMBLI GALLI BORIVALI (WEST) MUMBAI-400 092 PAN/GIR NO. AAHPJ0490Q ( APPELLANT ) .. RESPOND ENT ) REVENUE BY SHRI ASHISH KUMAR, DR ASSESSEE BY NONE DATE OF HEARING 27 / 01/2020 DATE OF PRONOUNCEME NT 07 / 0 2 /20 20 / O R D E R PER G.MANJUNATHA (A.M) : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST, THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS)45, MUMBAI, DATED 05/10/2018 AND IT PERTAINS TO ASSESSMENT YEAR 2009-10. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: I. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD, CIT(A) ERRED IN RESTRICTING THE ADDITION TO RS. 38,180/- (@ 1 2.5% OF RS.3,05,438/-) ON ACCOUNT OF BOGUS PURCHASES, WITHO UT APPRECIATING THAT THE FACT THAT THE SALES TAX DEPARTMENT HAS PROVED B EYOND DOUBT THAT THE PARTIES DECLARED AS HAWALA TRADERS WERE INVOLVED IN PROVIDING ACCOMMODATION ENTRY OF PURCHASES AND THE ASSESSE WA S ONE OF THE BENEFICIARY OF ACCEPTING ACCOMMODATION FOR THE PURC HASE ' II. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A) ERRED IN NOT APPRECIATING THE RATIO OF THE D ECISION OF GUJARAT HIGH ITA NO.471/MUM/2019 HARISH KANTILAL JAIN 2 COURT IN THE CASE OF N.K PROTEINS LTD. WHEREIN IT W AS CONFIRMED THAT IN THE EVENT OF BOGUS PURCHASES , THE ADDITION ON THE WHOLE OF SUCH PURCHASES WAS REQUIRED TO BE MADE AND THIS PARTICUL AR RATIO WAS CONFIRMED BY THE HON'BLE SUPREME COURT IN SLP NO. C C NO. 769 OF 2017 DATED 16.01.2017, BY DISMISSING THE SUP OF THAT ASS ESSE.' III. 'THE APPELLANT PRAYS THAT THE ORDER OF THE LD. CLT(A) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE AO BE RESTORED ' 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS AN INDIVIDUAL AND CARRYING ON THE BUSINESS OF TRADING IN CERAMIC TILES, DECORATIVE TILES, STONES, MARBLE & GRANITE, UNDER T WO PROPRIETARY CONCERNS IN THE NAME OF M/S ADINATH IMPEX AND M/S S HAILESH ENTERPRISE. THE ASSESSEE HAS FILED HIS RETURN OF IN COME FOR AY 2009- 10 ON 29/09/2009, DECLARING TOTAL INCOME OF RS. 3,7 1,220/- AND SAID RETURN WAS PROCESSED U/S 143(1) OF THE I.T.ACT, 196 1. THE CASE HAS BEEN SUBSEQUENTLY REOPENED U/S 147 OF THE ACT, ON T HE BASIS OF INFORMATION RECEIVED FROM DGIT, INVESTIGATION, MUMB AI, AS PER WHICH, SALES TAX AUTHORITIES OF GOVERNMENT OF MAHAR ASHTRA HAD TAKEN ACTIONS AGAINST NUMBER OF HAWALA DEALERS, WH O HAD ISSUED BOGUS PURCHASE BILLS TO VARIOUS PARTIES IN MUMBAI A ND OTHER PLACES. AS PER LIST OF BENEFICIARIES, THE ASSESSEE IS ONE O F THE BENEFICIARY, WHO HAD TAKEN ACCOMMODATION BILLS OF BOGUS PURCHASE S FROM M/S SAMARTH ENTERPRISES AMOUNTING TO RS. 3,05,438/-. TH E CASE WAS SELECTED FOR SCRUTINY AND THE ASSESSMENT HAS BEEN C OMPLETED U/S. 143(3).R.W.S. 147 OF THE I.T.ACT, 1961 ON 18/03/201 5 AND DETERMINED TOTAL INCOME OF RS. 6,76,660/-, AFTER MAKING 100% A DDITIONS TOWARDS ALLEGED BOGUS PURCHASE FROM THOSE PARTIES AND MADE ADDITIONS OF RS. 3,05,438/-. 4. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESEE P REFERRED AN APPEAL BEFORE THE LD.CIT(A). BEFORE THE LD.CIT(A), THE ASSESSE HAS REITRATED HIS ARGUMENTS MADE BEFORE THE LD. AO. THE SUM AND ITA NO.471/MUM/2019 HARISH KANTILAL JAIN 3 SUBSTANCE OF ARGUMENTS OF THE ASSESSEE BEFORE THE L D.CIT(A) ARE THAT PURCHASE FROM THE ABOVE PARTY IS GENUINE, WHIC H IS SUPPORTED BY NECESSARY EVIDENCES. THEREFORE, NO ADDITIONS COU LD BE MADE ON THE BASIS OF INFORMATION RECEIVED FROM THIRD PARTY. THE LD.CIT(A), AFTER CONSIDERING RELEVANT SUBMISSION OF THE ASSESS EE AND ALSO, BY FOLLOWING THE DECISION OF HONBLE GUJARAT HIGH COUR T, IN THE CASE OF CIT VS. SIMITH P. SHETH (356 ITR 451) SCALED DOWN A DDITION MADE BY THE AO TOWARDS ALLEGED BOGUS PURCHASES TO 12.50% GROSS PROFIT ON TOTAL PURCHASES FROM THOSE PARTIES. THE RELEVANT FINDINGS OF THE LD.CIT(A) ARE AS UNDER:- 4.1 I HAVE CONSIDERED THE ASSESSMENT ORDER AND T HE SUBMISSIONS OF THE APPELLANT. THE AO HE'D THAT THE APPELLANT PRODUCED THE DETAILS WITH REGARD TO PURCHA.SES MADE FROM THE PARTIES INCLUDIN G COPY OF BANK STATEMENT INDICATING THE PAYMENT MADE TO THE SELLER PARTIES. IT IS NOTICED THAT ON ACCOUNT OF NON AVAILABILITY OF THE SUPPLIER S AT THE GIVEN ADDRESS AND NON PRODUCTION OF TRANSPORTATION BILLS, THE A O ADDED 100% BOGUS PURCHASES AS UNEXPLAINED EXPENDITURE UNDER SECTION 69C OF THE ACT, SECTION 69C READS. 'WHERE IN ANY FINANCIAL YEAR AN ASSESSES HAS INCURRED ANY EXPENDITURE AND HE OFFER, NO EXPLANATION ABOUT THE SOURCE OF SUCH EXPENDITURE OR PART THEREOF, OR THE EXPLANATION, IF ANY, OFFERED BY HIM IS NOT, IN THE OPINION OF THE AO, SATISFACTORY, THE AMOUNT COVERED BY SUCH EXPENDITURE OR PART THEREOF, OFF THE CASE MAY BE, MAY BE DEEMED TO BE THE INCOME OF THE ASSESSEE FOR SUCH FINANCIAL YEAR. AS CAN BE SEEN FROM THE PROVISION, FOR APPLYING THE SECTION 69C, WHAT IS IMPORTANT IS THAT THERE SHOULD BE NO EXPLANATION AB OUT THE SOURCE OF EXPENDITURE OR THAT THE EXPLANATION OFFERED IS NOT FOUND SATISFACTORY. IN OTHER WORDS, THE SOURCE OF EXPENDITURE INCURRED FOR THE EXPENDITURE IN QUESTION IS THE HEART OF SECTION 69C HERE IN THIS C ASE, THE APPELLANT FURNISHED AN EXPLANATION OF SOURCE FOR PURCHASES FR OM HIS BANK ACCOUNT ALONG WITH SUPPORTING EVIDENCE OF PURCHASE INVOICES AND PAYMENT MADE FOR THE SAID PURCHASES BY CHEQUES. THEREFORE, IN TH IS CASE, THE SOURCE OF EXPENDITURE FOR PURCHASES STANDS EXPLAINED THROUGH THE BANK ACCOUNT. THEREFORE INVOKING OF SECTION 69C IN THE PRESENT CA SE IS NOT PROPER. 4.2 IN SUCH CIRCUMSTANCES MANY BENCHES OF ITAT AND HON'BLE HIGH COURTS HAVE HELD THAT WHEN PURCHASES ARE SUPPORTED BY SUFFICIENT ITA NO.471/MUM/2019 HARISH KANTILAL JAIN 4 DOCUMENTARY EVIDENCES, THEN MERELY BECAUSE OF NON-A PPEARANCE BEFORE THE AO, ONE CANNOT CONCLUDE THAT THE PURCHASES WERE NOT MADE BY THE ASSESSEE. RELIANCE IS PLACED ON NIKUNJ EXIMP ENTERP RISES (P.)LTD. V. CIT 216 TAXMAN 171 (BOM.), CJT V. NANGALIA FABRICS (P.) LTD. 220 TAXMANN 17 (GUJ.), CIT V. M.K. BROS. 163 ITR 249 (GUJ.) F ASSTT.CIT V. AKRUTI DYEING & PRINTING MILLS (R)LTD, DY. CIT V. ADINATH INDUSTR IES [2001] 252 ITR 476 (GUJ,), CIT V- PRECIOUS JEWELS CORPN.17 TAXMANN.COM 264 (RAJ.), CTT V. RAJESH P, SONI [TAX APPEAL NO. 1107 OF 2006, DATED 27-2-2012.]. 4.3 THOUGH, THE APPELLANT WAS NOT ABLE TO PRODUCE T HE CONCERNED PARTIES BEFORE THE ASSESSING OFFICER, FACT REMAINS THAT THE APPELLANT PRODUCED BANK ACCOUNT STATEMENT, PURCHASE BILLS, ETC., TO PR OVE THE GENUINENESS OF THE PURCHASES. IT IS ALSO A FACT ON RECORD THAT THE ASSESSING OFFICER HAS NOT DOUBTED THE SALES AFFECTED BY THE APPELLANT. TH US, IT RS LOGICAL TO CONCLUDE THAT WITHOUT CORRESPONDING PURCHASES BEING AFFECTED, THE APPELLANT COULD NOT HAVE MADE THE SALES. RELYING ON LY ON THE INFORMATION RECEIVED FROM THE SALES TAX DEPARTMENT THE ASSESSIN G OFFICER COULD NOT HAVE TREATED THE PURCHASES AS BOGUS. THE APPELLANT HAS BROUGHT DOCUMENTARY EVIDENCES ON RECORD TO PROVE GENUINENES S OF SUCH TRANSACTIONS, THE ACTION OF THE ASSESSING OFFICER I N IGNORING THEM CANNOT BE ACCEPTED. WHEN THE PAYMENT TO THE CONCERNED PART IES ARE THROUGH PROPER BANKING CHANNEL AND THERE IS NO EVIDENCE BEF ORE THE AO THAT THE PAYMENTS MADE WERE AGAIN ROUTED BACK TO THE APPELLA NT, THE ADDITION OF BOGUS PURCHASES IS NOT SUSTAINABLE IN LAW AND FACTS . ONLY COROLLARY THAT FOLLOWS IN SUCH SITUATION IS THAT THE APPELLANT COU LD HAVE OBTAINED THE ACCOMMODATION BILLS FOR THE MATERIAL PURCHASED LOCA LLY. IN OTHER WORDS THE ENTITIES MAY NOT BE THE ACTUAL SUPPLIER BUT MAY HAV E PROVIDED THE BILLS FOR THE MATERIAL PURCHASED LOCALLY. THIS IS NOT CASE IN WHICH THE SIGNED BLANK CHEQUE BOOKS ETC. FOUND WITH THE BUYER TO SAY THAT THE PURCHASE OF MATERIAL WERE NOT AT ALL MADE BUT ENTERED IN THE ST OCK TO INFLATE ME RAW MATERIAL. THEREFORE THE DECISION OF THE SUPREME COU RT IN THE CASE OF M K PROTEINS LTD 250 TAXMAN 0022(SC) WOULD NOT APPLY TO THE CASE. THEREFORE THE SAVING ON ACCOUNT OF VAT AND OTHER IN CIDENTAL CHARGES MADE BY THE APPELLANT ON THE SAID BOGUS PURCHASES C AN BE BROUGHT TO TAX AS ADDITIONAL PROFIT KEEPING IN VIEW THE TOTALITY O F FACTS AND CIRCUMSTANCES OF THE CASE, THE DISALLOWANCE MADE BY THE AO IS RES TRICTED TO 12,5% OF SUCH PURCHASES. THEREFORE THE AO IS DIRECTED TO EST IMATE THE 12.5% ON THE ACTUAL PURCHASES RS.3,05,438 WHICH WORKS OUT !O RS.38,180. THE AO IS DIRECTED TO MODIFY THE ADDITION ACCORDINGLY AND THE APPELLANT GETS PART RELIEF. THIS GROUND IS PARTLY ALLOWED. 5. NONE APPEARED FOR THE ASSESSEE. WE HAVE HEARD TH E LD. DR, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE T HROUGH ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT THE LD. AO HAS MADE 100% ADDITION ON ALLEGED BOGUS PURCHASES ON THE GROUND T HAT THE ASSESSEE IS ONE OF THE BENEFICIARY OF ACCOMMODATION ENTRIES OF BOGUS PURCHASE BILLS ISSUED BY HAWALA DEALERS. ACCO RDING TO THE LD. ITA NO.471/MUM/2019 HARISH KANTILAL JAIN 5 AO, ALTHOUGH ASSESEE HAS FILED CERTAIN BASIC EVIDEN CES, BUT FAILED TO FILE FURTHER EVIDENCE IN THE BACKDROP OF CLEAR FIND ING BY THE SALES TAX DEPARTMENT, MAHARASHTRA THAT THOSE PARTIES ARE INVO LVED IN PROVIDING ACCOMMODATION ENTRIES WITHOUT ACTUAL DELIVERY OF GO ODS. THE LD. AO HAD ALSO TAKEN SUPPORT FROM THE INVESTIGATION CONDU CTED DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AS PER WHICH NOTI CE ISSUED U/S 133(6) TO THE PARTIES WERE RETURNED UN-SERVED BY TH E POSTAL AUTHORITIES. THEREFORE, HE CAME TO THE CONCLUSION T HAT PURCHASES FROM THE SAID PARTIES ARE BOGUS IN NATURE. IT IS TH E CONTENTIONS OF THE ASSESSEE BEFORE THE LOWER AUTHORITIES THAT PURCHASE S FROM THE ABOVE PARTY ARE SUPPORTED BY NECESSARY EVIDENCES. IT HAS FURNISHED ALL POSSIBLE EVIDENCES, INCLUDING BOOKS OF ACCOUNTS; ST OCK DETAILS AND BANK STATEMENT TO PROVE THAT PAYMENT AGAINST SAID P URCHASES HAVE BEEN MADE THROUGH PROPER BANKING CHANNELS. 6 HAVING CONSIDERED ARGUMENTS OF THE LD. DR AND ALS O, MATERIAL AVAILABLE ON RECORD, WE FIND THAT BOTH THE SIDES HA VE FAILED TO PROVE THE CASE IN THEIR FAVOUR WITH NECESSARY EVIDENCES. ALTHOUGH, ASSESSEE HAS FILED CERTAIN BASIC EVIDENCES, BUT FAI LED TO FILE FURTHER EVIDENCES TO CONCLUSIVELY PROVE PURCHASES TO THE SA TISFACTIONS OF THE LD.AO. AT THE SAME TIME, THE LD. AO HAD ALSO FAILE D TO TAKE THE INVESTIGATION TO A LOGICAL CONCLUSION BY CARRYING O UT NECESSARY ENQUIRES, BUT HE SOLELY RELIED UPON INFORMATION RE CEIVED FROM INVESTIGATION WING, WHICH WAS FURTHER SUPPORTED BY INFORMATION RECEIVED FROM MAHARASHTRA SALES TAX DEPARTMENT. UN DER THESE CIRCUMSTANCES, IT IS DIFFICULT TO ACCEPT ARGUMENTS OF BOTH THE SIDES. FURTHER, IN A CASE WHERE PURCHASES ARE CONSIDERED T O BE PURCHASED FROM SUSPICIOUS/HAWALA DEALERS, VARIOUS HIGH COURTS AND TRIBUNALS HAD CONSIDERED AN IDENTICAL ISSUE IN LIGHT OF INVES TIGATION CARRIED OUT ITA NO.471/MUM/2019 HARISH KANTILAL JAIN 6 BY THE SALES TAX DEPARTMENT AND HELD THAT IN CASE O F PURCHASES CLAIMS TO HAVE MADE FROM ALLEGED HAWALA DEALERS, ON LY PROFIT ELEMENT EMBEDDED IN THOSE PURCHASES NEEDS TO BE TAX ED, BUT NOT TOTAL PURCHASE FROM THOSE PARTIES. THE HONBLE GUJA RAT HIGH COURT, IN THE CASE OF CIT VS SIMITH P.SHETH 356 ITR 451 HAD C ONSIDERED A SIMILAR ISSUE AND HELD THAT AT THE TIME OF ESTIMATI ON OF PROFIT FROM ALLEGED BOGUS PURCHASES NO UNIFORM YARDSTICKS COULD BE ADOPTED, BUT IT DEPENDS UPON FACTS OF EACH CASE. THE ITAT, M UMBAI, IN NUMBER OF CASES HAD CONSIDERED AN IDENTICAL ISSUE A ND DEPENDING UPON FACTS OF EACH CASE, DIRECTED THE LD.AO TO ESTI MATE GROSS PROFIT OF 10% TO 15% ON TOTAL ALLEGED BOGUS PURCHASES. IN THIS CASE, CONSIDERING THE NATURE OF BUSINESS OF THE ASSESSEE THE LD. AO HAS MADE 100% ADDITIONS TOWARDS ALLEGED BOGUS PURCHASES , WHEREAS THE LD.CIT(A) HAS SCALED DOWN ADDITION TO 12.50% GR OSS PROFIT ON TOTAL ALLEGED BOGUS PURCHASE. ALTHOUGH, BOTH AUTHOR ITIES HAVE TAKEN DIFFERENT RATE OF PROFIT FOR ESTIMATION OF INCOME F ROM ALLEGED BOGUS PURCHASE, BUT NO ONE COULD SUPPORT SAID RATE OF GRO SS PROFIT WITH NECESSARY EVIDENCES OR ANY COMPARABLE CASES. IN THI S CASE, THE ASSESSEE IS INTO THE BUSINESS OF TRADING IN CERAMIC TILES AND OTHER PRODUCTS. THEREFORE, CONSIDERING FACTS AND CIRCUMST ANCES OF THIS CASE AND CONSISTENT WITH VIEW TAKEN BY THE CO-ORDIN ATE BENCH IN NUMBER OF CASES, WE ARE OF THE CONSIDERED VIEW THAT THE LD. CIT(A) HAS TAKEN A FAIR VIEW AND ESTIMATED 12.50% GROSS PR OFIT ON ALLEGED BOGUS PURCHASES TO SETTLE DISPUTE BETWEEN THE PARTI ES AND HENCE, WE ARE INCLINED TO UPHOLD ORDER OF THE LD. CIT(A) A ND DISMISS APPEAL FILED BY THE REVENUE.. 7. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DI SMISSED. ITA NO.471/MUM/2019 HARISH KANTILAL JAIN 7 ORDER PRONOUNCED IN THE OPEN COURT ON THIS 07/02/2 020 SD/- (SAKTIJIT DEY) SD/- (G. MANJUNATHA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 07/02/2020 THIRUMALESH SR.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//