ITO WD 2(4), THANE V. PARTH TRADERS, THANE

ITA 4735/MUM/2015

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 9717 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 7 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-03-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 20-08-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: POOJA SWAROP
• Assessee Lawyers: G P MEHTA
• Keywords: Bogus purchase; Reasonable cause; Accommodation entries
• Section: 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA, AM AND SHRI PAWAN SINGH, JM ./ I.T.A. NO. 4735/MUM/2015 ( / ASSESSMENT YEAR: 2011 - 12 ) ITO, WARD 2(4) R OOM NO. 12, 6 TH FLOOR, ASHAR IT PARK, WAGLE INDL. ESTATE, ROAD NO.16Z, THANE - 400 604 / VS. M/S. PARTH TRADERS 63, MIRA CO - OP. HSG. SOCIETY, NEAR ASMITA SUPER MARKET, NAYA NAGAR, MIRA ROAD (E), THANE - 401 107 ./ ./ PAN/GIR NO. AABF P 4130 F ( REVENUE ) : ( ASSESSEE ) ./ I.T.A. NO. 5211/MUM/2016 ( / ASSESSMENT YEAR: 2011 - 12 ) AND . / CO NO. 157/MUM/2017 (ARISING OUT OF ITA NO. 4735/MUM/2015) ( / ASSESSMENT YEAR: 2011 - 12 ) M/S. PARTH TRADERS THANE - 401 107 / VS. ITO, WARD 2(4) THANE - 400 604 ( ASSESSEE ) : ( REVENUE ) / APPELLANT BY : MS. POOJA SWAROP / RESPONDENT BY : SHRI G. P. MEHTA / DATE OF HEARING : 20.03.2018 / DATE OF PRONOUNCEMENT : 22.03 .2018 / O R D E R PER BENCH : THESE ARE CROSS APPEALS BY THE R EVENUE AND ASSESSEE AND CROSS OBJECTION BY THE ASSESSEE ARISING OUT OF THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) DATED 11.06.20 15 AND PERTAIN TO ASSESSMENT YEAR 2011 - 12. 2 ITA NO. 4735/MUM/2015 M/S. PARTH TRADERS 2. I N THE R EVENUES APPEAL , THE ISSUE RAISED IS THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN NOT SUSTAINING 100% DISALLOWANCE OF BOGUS PURCHASE BY THE ASSESSING OFFICER. 3. IN THE ASSESSEE'S APPEAL , THE ISSUE RAISED IS THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) E RRED IN SUSTAINING 25% DISALLOWANCE OF THE BOGUS PURCHASE. 4. IN THE CROSS OBJECTION , THE ISSUE RAISED IS THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HA S NOT APPRECIATED THAT AS SESSEE HAS NOT BEEN ALLOWED THE OPPORTUNITY TO CROSS EXAMINE HAWALA DEALERS. IT HAS FURTHER BEEN STATED THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS OBTAINED BEHIND THE BACK OF THE ASSESSEE CONSENT FROM THE CONSULTANT FOR 25% DISALLOWANCE OF THE B OGUS PURCHASE. 5. AT THE OUTSET , WE NOTE THAT THERE IS A DELAY OF 368 DAYS IN FILING THE APPEAL BY THE ASSESSEE . T HE REASONABLE CAUSE FOR THE SAME HAS BEEN ATTRIBUTED TO BE THE AILMENT OF ONE OF THE SENIOR PARTNERS W HO HAPPE NS TO BE THE FATHER OF OTHER P ARTNERS. IT WAS THE PREOCCUPATION OF THE PARTNER DEALING WITH THE TAX MATTERS WITH THE ILLNESS OF HIS FATHER THAT HAS BEEN ATTRIBUTED TO BE THE REASONABLE CAUSE FOR THE DELAY IN FILING THE APPEAL BY THE ASSESSEE. 6 . UPON HEARING BOTH THE COUNSEL AND PERUS ING THE RECORDS , WE CONDONE THE DELAY IN FILING THE AFORESAID APPEAL BY THE ASSESSEE. 7 . BRIEF FACTS OF THE CASE ARE AS UNDER : 3 ITA NO. 4735/MUM/2015 M/S. PARTH TRADERS THE ASSESSEE IS A PARTNERSHIP FIRM AND DEALS IN THE BUSINESS OF TRADING IN IRON AND STEEL. IN THIS CASE, THE INFORMATION WAS REC EIVED THAT FEW OF THE PARTIES, FROM WHOM THE ASSESSEE HAD PURCHASED THE MATERIAL/GOODS, WERE SUSPICIOUS. THIS INFORMATION WAS RECEIVED FROM THE SALES TAX DEPARTMENT. SALES TAX DEPARTMENT CLAIMED THAT THESE PARTIES HAD STATED, ON OATH, BEFORE THEM THAT THEY HAVE MERELY PROVIDED ENTRIES TO THE BENEFICIARIES AND NO GOODS WERE ACTUALLY DELIVERED BY THEM. THE DETAILS OF SUCH BOGUS PURCHASES, CLAIMED TO HAD BEEN MADE, FROM THE HAWALA PARTIES, ARE AS UNDER: S . NO . NAME OF THE ENTRY PROVIDER AMOUNT OF BILL 1 SHUBH ENTERPRISES 14,49,573/ , 2 DARSHAN SALES CORPORATION 38,56,462 / - 3 RIDDHI SIDDHI CORPORATION 8,16,177 / - 4 SHRILABH IMPEX 25,48,451 / - 5 MERCURY ENTERPRISES 22,41,661 / - 6 N.R. TRADERS 9,12,184 / - 7 AMBIKA SALES CORPORATION 42,96,323 / - 8 RUSHABH ENTERPRI SES 7,18,523 / - 9 H.R. SALES PVT. LTD. 10,17,117 / - TOTAL 1,78,56,471 / - 8 . DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IN ORDER TO JUSTIFY THE GENUINENESS OF PURCHASES, THE NOTICES U/S. 133(6) OF THE I.T. ACT, 1961, WERE ISSUED TO THE ABOVE PARTNERS , O N GIVEN ADDRESSES, BUT RETURNED BACK UNSERVED WITH A REMARK 'NOT KNOW . THE ASSESSING OFFICER DID NOT ACCEPT THE EXPLANATION OF THE ASSESSEE FOR THE REASON THAT THE ASSESSEE NEITHER COULD FURNISH THE CONFIRMATION / CURRENT MAILING ADDRESS, CORROBORATIVE EV IDENCES, DATE - WISE STOCK INWARD / OUTWARD REGISTER ETC. NOR COULD PRODUCE THESE HAWALA PARTIES, FOR EXAMINATION. IN VIEW OF THESE FACTS, THE ASSESSING OFFICER DISALLOWED ENTIRE HAWALA 4 ITA NO. 4735/MUM/2015 M/S. PARTH TRADERS PURCHASES, AMOUNTING TO RS.1,78,56,471 / - AND ADDED BACK TO TH E TOTAL INC OME OF THE ASSESSEE. 9 . UPON THE ASSESSEE'S APPEAL , THE LD. COMMISSIONER OF INCOME TAX (APPEALS) RESTRICTED THE ADDITION TO 25% OF THE BOGUS PURCHASE. 10 . WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. W E FIND THAT CREDIBLE AND COGENT INFOR MATION WAS RECEIVED IN THIS CASE BY THE ASSESSING OFFICER THAT CERTAIN ACCOMMODATION ENTRY PROVIDER/BOGUS SUPPLIERS WERE BEING USED BY CERTAIN PARTIES TO OBTAINED BOGUS BILLS, ASSESSEE WAS FOUND TO HAVE TAKEN ACCOMMODATION ENTRY/BOGUS PURCHASE BILLS DURING THE CONCERNED ASSESSMENT YEAR FROM DIFFERENT PARTIES. FURTHERMORE IT IS NOTED THAT IN SUCH FACTUAL SCENARIO ASSESSING OFFICER HAS MADE THE NECESSARY ENQUIRY.THE ISSUE OF NOTICE TO ALL THE PARTIES HAVE RETURNED UNSERVED. ASSESSEE HAS NOT BEEN ABLE TO PROVI DE ANY CONFIRMATION FROM ANY OF THE PARTY. ASSESSEE HAS ALSO NOT BEEN ABLE TO PRODUCE ANY OF THE PARTIES. THE NECESSARY EVIDENCE FOR TRANSPORTATION OF GOODS HAVE NOT BEEN PROVIDED BY THE ASSESSEE. IN THIS FACTUAL SCENARIO IT IS AMPLY THAT ASSESSEE HAS OBT AINED BOGUS PURCHASE BILLS. MERE PREPARATION OF DOCUMENTS FOR PURCHASES CANNOT CONTROVERT OVERWHELMING EVIDENCE THAT THE PROVIDER OF THESE BILLS ARE BOGUS AND NON - EXISTENT AND THERE IS NO COGENT EVIDENCE OF TRANSPORTATION OF GOODS. THE SALES TAX DEPARTMENT IN ITS ENQUIRY HAVE FOUND THE PARTIES TO BE PROVIDING BOGUS ACCOMMODATION ENTRIES. THE ASSESSING OFFICER ALSO ISSUED NOTICES TO THESE PARTIES AT THE ADDRESSES PROVIDED BY THE ASSESSEE. ALL THESE NOTICES HAVE RETURNED UNSERVED. ASSESSEE HAS NOT BEEN ABLE T O PRODUCE ANY OF THE PARTIES. THE ASSESSING OFFICER HAS NOTED THAT THERE IS NO COGENT 5 ITA NO. 4735/MUM/2015 M/S. PARTH TRADERS EVIDENCE OF THE PROVISION OF GOODS. NEITHER THE ASSESSEE HAS BEEN ABLE TO PRODUCE ANY CONFIRMATION FROM THESE PARTIES. IN SUCH CIRCUMSTANCES, THERE IS NO DOUBT THAT THESE PARTIES ARE NON - EXISTENT. 1 1 . HENCE PURCHASE BILLS FROM THESE NON - EXISTENT THE/BOGUS PARTIES CANNOT BE TAKEN AS COGENT EVIDENCE OF PURCHASES, IN LIGHT OF THE OVERWHELMING EVIDENCE THE REVENUE AUTHORITIES CANNOT PUT UPON BLINKERS AND ACCEPT THESE PURCHASE S AS GENUINE. THIS PROPOSITION IS DULY SUPPORTED BY HONBLE APEX COURT DECISION IN THE CASE OF SUMATI DAYAL 214 ITR 801 AND DURGA PRASAD MORE 82 ITR 540. IN THE PRESENT CASE THE ASSESSEE WANTS THAT THE UNASSAILABLE FACT THAT THE SUPPLIERS ARE NON - EXISTENT AND THUS BOGUS SHOULD BE IGNORED AND ONLY THE DOCUMENTS BEING PRODUCED SHOULD BE CONSIDERED. THIS PROPOSITION IS TOTALLY UNSUSTAINABLE IN LIGHT OF ABOVE APEX COURT DECISIONS. IN THIS FACTUAL BACKGROUND, THE ASSESSEES PLEA FOR OPPORTUNITY TO CROSS EXAMINE THE PERSON FROM WHOM HE HAS OBTAINED BOGUS BILLS IS TOTALLY UNSUSTAINABLE. 1 2 . IN THESE CIRCUMSTANCES LEARNED DEPARTMENTAL REPRESENTATIVE HAS REFERRED TO HONBLE GUJARAT HIGH COURT DECISION IN THE CASE OF APEX APPEAL NO. 240 OF 2003 IN THE CASE OF N K I NDUSTRIES VS DY CIT, ORDER DATED 20.06.2016, WHEREIN HUNDRED PERCENT OF THE BOGUS PURCHASES WAS HELD TO BE ADDED IN THE HANDS OF THE ASSESSEE AND TRIBUNALS RESTRICTION OF THE ADDITION TO 25% OF THE BOGUS PURCHASES WAS SET ASIDE. IT WAS EXPOUNDED THAT WHE N PURCHASE BILLS HAVE BEEN FOUND TO BE BOGUS 100% DISALLOWANCE WAS REQUIRED. THE SPECIAL LEAVE PETITION AGAINST THIS ORDER ALONG WITH OTHERS HAS BEEN DISMISSED BY THE HONBLE APEX COURT VIDE ORDER DATED 16.1.2017. 6 ITA NO. 4735/MUM/2015 M/S. PARTH TRADERS 1 3 . WE FURTHER NOTE THAT HONBLE RAJASTHAN HIGH COURT HAS SIMILARLY TAKEN NOTE OF DECISIONS OF THE APEX COURT ON THE ISSUE OF BOGUS PURCHASES IN THE CASE OF CIT JAIPUR VS SHRUTI GEMS IN ITA NO. 658 OF 2009. THE HONBLE HIGH COURT HAS REFERRED TO THE DECISION OF CIT JAIPUR VS. ADITYA GEMS, D. B. I N ITA NO. 234 OF 2008 DATED 02.11.2016, WHEREIN THE HONBLE COURT HAD INTER ALIA HELD AS UNDER: 'CONSIDERING THE LAW DECLARED BY THE SUPREME COURT IN THE CASE OF VIJAY PROTEINS LTD. VS. COMMISSIONER OF INCOME TAX, SPECIAL LEAVE TO APPEAL (C) NO.8956/2015 DECIDED ON 06.04.2015 WHEREBY THE SUPREME COURT HAS DISMISSED THE SLP CONFIRMED THE ORDER DATED 09.12.2014 PASSED BY THE GUJARAT HIGH COURT AND OTHER DECISIONS OF THE HIGH COURT OF GUJARAT IN THE CASE OF SANJAY OILCAKE INDUSTRIES VS. COMMISSIONER OF INCOME TAX (2009) 316 ITR 274 (GUJ) AND N.K. INDUSTRIES LTD. VS. DY. C.I.T., TAX APPEAL NO.240/2003 DECIDED ON 20.06.2016, THE PARTIES ARE BOUND BY THE PRINCIPLE OF LAW PRONOUNCED IN THE AFORESAID THREE JUDGMENTS. 1 4 . UPON CAREFUL CONSIDERATION WE FIND THAT S ALES IN THIS CASE HAVE NOT BEEN DOUBTED. AS HELD BY THE HON'BLE JURISDICTIONAL HIGH COURT NIKUNJ EXIMP ENTERPRISES (IN WRIT PETITION NO 2860, ORDER DT. 18.6.2014) THAT WHEN SALES ARE NOT DOUBTED, HUNDRED PERCENT DISALLOWANCE OF PURCHASERS AS BOGUS IS NOT P ERMISSIBLE. HOWEVER THE FACTS OF THAT CASE WERE A LITTLE DIFFERENT INASMUCH AS THE SALES - WAS TO THE GOVERNMENT DEPARTMENTS. BE AS IT MAY , WE FIND THAT IN THIS CASE , THE FACTS OF THE CASE INDICATE THAT ASSESSEE HAS ENGAGED INTO THE GREY MARKET FOR MAKING PU RCHASES. MAKING S UCH PURCHASES GIVES THE ASSESSEE VARIOUS BENEFITS IN THE FORM OF TAX SAVING ETC AT THE EXPENSE OF EXCHEQUER. IN SIMILAR FACTS AND CIRCUMSTANCES FOLLOWING THE DECISION OF HONBLE E GUJARAT HIGH COURT IN THE CASE OF CIT VS SIMIT P. SHETH [201 3] 356 ITR 451 (GUJ) A DISALLOWANCE OF 12.5% HAS BEEN HELD TO BE MEETING THE END'S OF JUSTICE IN VARIOUS DECISIONS OF THE ITAT MUMBAI IN SUCH CASES. ACCORDINGLY , WE HOLD THAT IN THE PRESENT CASE THE DISALLOWANCE SHOULD BE RESTRICTED TO 7 ITA NO. 4735/MUM/2015 M/S. PARTH TRADERS 12.5% OF THE BOGUS P URCHASE. THE COUNSEL OF THE ASSESSEE FAIRLY AGREED TO THE ABOVE PROPOSITION . 1 5 . IN THE RESULT , THE REV ENUE S APPEAL AND ASSESSEE'S CROSS OBJECTION ARE DISMISSED AND THE ASSESSEE'S APPEAL IS PARTLY ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 22.03.2018 SD/ - SD/ - ( PAWAN SINGH ) (S HAMIM YAHYA) / J UDICIAL MEMBER / A CCOUNTANT MEMBER MUMBAI ; DATED : 22.03.2018 . . ./ ROSHANI , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F ILE / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI