ITO 27(2)(3), Mumbai V. MR. MUMTAZ ALI NASRUDDIN KAPOOR , Mumbai

ITA 4748/MUM/2019

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 3674 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 15-07-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BHARAT ANGHLE
• Keywords: Bogus purchase; Corroborative evidences; Accommodation entries; Condonation of delay; Set aside
• Section: 143(3); 142(1); 133(6); 143(1); 143(2); 13; 148

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL D BENCH MUMB AI BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER AND SHRI RAM LAL NEGI, JUDICIAL MEMBER ITA NO. 4748/MUM/2019 (ASSESSMENT YEAR 2010-11 ) ITO 27(2)(3) ROOM NO. 417, 4 TH FLOOR, 6 TH TOWER, INCOME TAX OFFICE, VASHI STATION COMPLEX, VASHI-400703. VS. MR. MUMTAZ ALI NASRUDDIN KAPOOR, PLOT NO. 174, HILL NO. 04, AZAD NAGAR, LBS MARG, GHATKOPAR (W), MUMBAI- 400086 PAN: AKCPK4335N APPELLANT RESPONDE NT C.O. NO. 282/MUM/2019 (ASSESSMENT YEAR 2010-11 ) MR. MUMTAZ ALI NASRUDDIN KAPOOR, PLOT NO. 174, HILL NO. 04, AZAD NAGAR, LBS MARG, GHATKOPAR (W), MUMBAI- 400086 PAN: AKCPK4335N VS. ITO 27(2)(3) ROOM NO. 417, 4 TH FLOOR, 6 TH TOWER, INCOME TAX OFFICE, VASHI STATION COMPLEX, VASHI-400703. APPELLANT RESPONDE NT APPELLANT BY : SHRI BHARAT ANGHLE (CIT-DR) RESPONDENT BY : NONE DATE OF HEARING : 09.03.2021 DATE OF PRONOUNCEMEN T : 31.05.2021 ORDER PER RAM LAL NEGI, JUDICIAL MEMBER; THESE ARE THE APPEAL AND CROSS OBJECTION FILED BY T HE REVENUE AND ASSESSEE RESPECTIVELY AGAINST THE ORDER DATED 27.05 .2019 PASSED BY THE LD. CIT(A)-25, VASHI FOR ASSESSMENT YEAR 2010-11, WHERE BY THE LD. CIT(A) HAS PARTLY ALLOWED THE APPEAL FILED BY THE ASSESSEE AGAINST THE ASSESSMENT ORDER PASSED UNDER SECTION 143(3) R.W.S. 147 OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT). ITA NO. 4748 M 19 & CO 282 M 19-MR. MUMTAZ ALI NASRUDDIN KA POOR 2 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FI LED ITS RETURN OF INCOME FOR THE A.Y. UNDER CONSIDERATION DECLARING THE TOTA L INCOME OF RS. 2,72,430/-. THE SAID RETURN WAS PROCESSED UNDER S ECTION 143(1) OF THE ACT. SUBSEQUENTLY ON THE BASIS OF INFORMATION RECEI VED FROM INVESTIGATION WING OF THE DEPARTMENT THROUGH MAHARASHTRA SALES TA X DEPARTMENT TO THE EFFECT THAT THE ASSESSEE HAD OBTAINED ACCOMMODATION BILLS SHOWING PURCHASES FROM BOGUS PARTIES, THE CASE WAS RE-OPENE D BY ISSUING NOTICE UNDER SECTION 148 OF THE ACT. THE AO ALSO ISSUED NO TICE UNDER SECTION 143(2) AND 142(1) OF THE ACT. IN RESPONSE THEREOF, THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE APPEARED BEFORE THE AO AND SUBMITTED THE RELEVANT DETAILS. 3. IT WAS NOTICED THAT DURING THE PREVIOUS YEAR THE ASSESSEE HAD CLAIMED TO HAVE MADE TOTAL PURCHASES OF RS. 42,88,0 96/- AND OUT OF THE SAID AMOUNT THE ASSESSEE HAD SHOWN PURCHASES AMOUNT ING TO RS. 11,51,558/- FROM FOUR BOGUS PARTIES WHOSE NAMES EXI ST IN THE LIST OF SUSPICIOUS DEALERS PREPARED BY THE SALES TAX DEPART MENT, MAHARASHTRA. SINCE THE ASSESSEE FAILED TO PROVE THE GENUINENESS OF THE TRANSACTION WITH REGARD TO THE PURCHASES FROM THE SAID PARTIES TO TH E SATISFACTION OF THE AO, AO MADE ADDITION OF RS. 2,87,890/- BEING 25% OF THE TOTAL AMOUNT OF BOGUS PURCHASES AND DETERMINED THE TOTAL INCOME AT RS. 5,60,320/-. 4. AGGRIEVED BY THE ACTION OF THE AO, THE ASSESSEE FILED APPEAL AGAINST THE ASSESSMENT ORDER BEFORE THE LD. CIT(A). THE LD. CIT(A) AFTER HEARING ITA NO. 4748 M 19 & CO 282 M 19-MR. MUMTAZ ALI NASRUDDIN KA POOR 3 THE ASSESSEE RESTRICTED THE ADDITION TO 12.5% OF TH E TOTAL AMOUNT OF BOGUS PURCHASES. AGAINST THE SAID FINDINGS OF THE LD. CIT (A), THE REVENUE HAS PREFERRED THE PRESENT APPEAL. 5. THE REVENUE HAS CHALLENGED THE IMPUGNED ORDER PA SSED BY THE LD. CIT(A) BY RAISING THE FOLLOWING EFFECTIVE GROUNDS: (I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) ERRED IN DIRECTING THE AO TO RESTRICT THE AD DITION TO 12.5% OF RS. 11,51,558/- AS AGAINST ADDITION @25% OF RS. 11,51,558/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF BOGUS P URCHASE, WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAD FAILED TO DISCHARGE THE ONUS TO ESTABLISH THE GENUINENESS OF THE TRANSACTIONS AND ALSO FAILED TO FURNISH CORROBORATIVE EVIDENCES IN SUPPORT OF THE CLAIM. (II) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN ESTIMATING THE PROFIT FROM HAWA LA PURCHASES BY DISALLOWING ONLY RS. 1,43,945/- BEING 12.5% OF THE BOGUS PURCHASES AS EVEN THE BASIS ONUS OF PRODUCING DELIV ERY CHALLANS, TRANSPORTATION DETAILS ETC. WERE NOT FULFILLED BY T HE ASSESSEE. 6. THIS CASE WAS FIXED FOR HEARING ON 09, 03.2021. HOWEVER, ON THE SAID DARE NONE APPEARED ON BEHALF OF THE ASSESSEE. ACCORDINGLY, WE DECIDED TO DISPOSE OF THESE CASES ON THE BASIS OF M ATERIAL ON RECORD AFTER HEARING THE LD. DEPARTMENTAL REPRESENTATIVE (DR). A CCORDINGLY, WE ASKED THE LD DR TO ARGUE THE CASE OF THE REVENUE. 7. BEFORE US, THE LD. DR SUPPORTING THE ACTION OF AO SUBMITTED THAT THE LD. CIT(A) HAS WRONGLY RESTRICTED THE ADDITION FROM 25% TO 12.5% OF THE TOTAL AMOUNT OF BOGUS PURCHASES AS THE ASSESSEE HAD FAILED TO ESTABLISH ITA NO. 4748 M 19 & CO 282 M 19-MR. MUMTAZ ALI NASRUDDIN KA POOR 4 THE GENUINENESS OF THE PURCHASES IN QUESTION TO THE SATISFACTION OF THE AO. ACCORDINGLY, THE LD. DR SUBMITTED THAT THE IMPUGNED ORDER MAY BE SET- ASIDE AND THE ASSESSMENT ORDER PASSED BY THE AO MAY BE RESTORED. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND ALSO PER USED THE MATERIAL ON RECORD. THE ONLY GRIEVANCE OF THE REVENUE IS THA T THE LD. CIT(A) HAS WRONGLY RESTRICTED THE ADDITION TO 12.5% OF THE TOT AL AMOUNT OF BOGUS PURCHASES DETERMINED BY THE AO AS AGAINST ADDITION OF 25% MADE BY THE AO. THE LD. CIT(A) HAS RESTRICTED THE ADDITION TO 1 2.5% HOLDING AS UNDER: 6. THE GROUNDS OF APPEAL NO 1.1, 1.2, 1.3, 1.4 AND 2 RELATE TO THE ADDITION OF RS. 2,87,890/- ON ACCOUNT OF EXTRA PROF IT EMBEDDED IN PURCHASES OSTENSIBLY MADE FROM HAWALA DEALERS. THES E ARE DECIDED TOGETHER. IT IS NOTED THAT THE ASSESSEE HAD MADE PU RCHASES OF RS. 11,51,558/- FROM 4 HAWALA DEALERS AS MENTIONED ABOV E. THE AO HAS RELIED UPON THE INQUIRIES CONDUCTED BY THE SALE S TAX DEPARTMENT TO HOLD THAT THESE PARTIES WERE ONLY ISS UING BILLS AND WERE NOT ENGAGED IN ANY GENUINE BUSINESS ACTIVITY. THE AO ALSO MADE INQUIRIES AT HIS LEVEL BUT THE NOTICES ISSUED U/S 133(6) WERE RETURNED BACK THE POSTAL AUTHORITIES AND THE LOCAL INQUIRY BY THE INSPECTOR ATTACHED TO HIS OFFICE COULD NOT TRACE TH E HAWALA DEALERS. THE ASSESSEE WAS ALSO NOT ABLE TO GIVE THE LATEST A DDRESS OF THE HAWALA DEALERS AND COULD NOT PRODUCE THEM ALSO. IN THE APPELLATE PROCEEDINGS ALSO, THE ASSESSEE HAS NOT BEEN ABLE TO SUBSTANTIATE HIS CLAIM. IT HAS HOWEVER BEEN POINTED OUT BY THE ASSES SEE THAT A SIMILAR ADDITION HAD BEEN MADE IN HIS CASE IN A.Y. 2009-10 AND THE MATTER HAD TRAVELLED UPTO ITAT. IN ITA NO. 1171/M/2 018 DATED 25.09.2018 THE ITAT IN THE CASE OF THE ASSESSEE FOR A.Y. 2009-10 HAS GIVEN THE FOLLOWING FINDING: 3. THE FACTS IN BRIEF ARE THAT THE CASE OF THE ASS ESSEE WAS REOPENED BY ISSUE OF NOTICE DATED 26.03.2014 AFTER RECEIVING INFORMATION FROM THE DGIT (INV.), MUMBAI WHO IN TURN GOT INFORM ATION FROM SALES TAX DEPARTMENT, GOVERNMENT OF MAHARASHTRA THA T ASSESSEE IS A BENEFICIARY OF ACCOMMODATION ENTRIES TO THE TU NE OF RS.11,41,661/- FROM FIVE PARTIES AS STATED IN PARA 3 OF THE ASSESSMENT ORDER. THEREAFTER, THE ASSESSEE VIDE LET TER DATED 05.05.2014 SUBMITTED THAT THE RETURN FILED ORIGINAL LY MAY KINDLY BE TREATED AS RETURN FILED IN RESPONSE TO NOTICE UNDER SECTION 148 OF THE ACT. THE REASONS RECORDED U/S 148(2) OF THE ACT FORMING A BELIEF ON THE ISSUE OF REOPENING WAS ALSO SUPPLIED TO THE ASSESSEE. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE SUPPLIED THE ITA NO. 4748 M 19 & CO 282 M 19-MR. MUMTAZ ALI NASRUDDIN KA POOR 5 INFORMATION AS DESIRED BY THE AO IN THE FORM OF PUR CHASE INVOICE, BANK STATEMENTS EVIDENCING THE PAYMENT BY ACCOUNT P AYEE CHEQUES ETC. HOWEVER, THE NOTICE ISSUED UNDER SECTION 133(6 ) BY THE AO IN ORDER TO VERIFY ALL THESE PARTIES WERE RETURNED UNS ERVED. FINALLY, THE AO NOT BEING SATISFIED WITH THE EXPLANATION OF THE ASSESSEE CAME TO THE CONCLUSION THAT THE ASSESSEE HAS TAKEN ACCOMMODATION ENTRIES FROM THE HAWALA PARTIES AS ARE BROUGHT OUT BY THE SALES TAX DEPARTMENT AS STATED IN PARA 3 OF THE ASSESSMENT OR DER AND ADDED THE ENTIRE PURCHASES TO THE TUNE OF RS.11,41,661/BY FRAMING THE ASSESSMENT UNDER SECTION 143(3) R.W.S. 147 OF THE A CT VIDE ORDER DATED 25.03.2015. 4. THE LD. CIT(A) ALSO AFFIRMED THE ADDITION AS MAD E BY THE AO BY OBSERVING THAT THE ASSESSEE IS A BENEFICIARY OF HAW ALA ENTRY OPERATOR AND THE NECESSARY VERIFICATION BY THE AO C OULD NOT BE CARRIED OUT DUE TO NON SERVICE OF NOTICES UNDER SEC TION 133(6) OF THE ACT AS THE PARTIES WERE NOT AVAILABLE AT ADDRES SES SUPPLIED BY THE ASSESSEE. THE LD. CIT(A) FURTHER OBSERVED THAT IT IS NOT ENOUGH THAT COPIES OF PURCHASE BILLS AND BANK STATEMENTS T O SUBSTANTIATE THE SAID PURCHASES AND THUS THE ASSESSEE HAS NOT DI SCHARGED THE ONUS CAST UPON HIM TO PROVE THE GENUINENESS OF THE PURCHASES. FURTHER, THE ASSESSEE HAS ALSO NOT MAINTAINED THE S TOCK REGISTER. FINALLY, THE ADDITION OF RS.11,41,661/- WAS AFFIRME D ON ACCOUNT OF NON GENUINE PURCHASES. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THE UNDISPUTED FACT S ARE THAT THE ASSESSEE IS A BENEFICIARY OF HAWALA ENTRIES AND COU LD NOT PRODUCE THE NECESSARY EVIDENCES AS REQUIRED BY THE AO FOR T HE PURPOSE OF CARRYING OUT THE VERIFICATION AS TO GENUINENESS OF THE SAID PURCHASES. THOUGH THE ASSESSEE PRODUCED THE PURCHAS E BILLS, INVOICES AND COPIES OF BANK STATEMENT BUT IN ABSENC E OF ANY STOCK REGISTER BY THE ASSESSEE, THE VERIFICATION COULD NO T BE CARRIED OUT. THE LD. CIT, (A) AFFIRMED THE ORDER OF AO TREATING THE ENTIRE PURCHASES AS NON GENUINE. NORMALLY IN THE BUSINESS OF HAWALA PURCHASES THE MODUS OPERANDI OF THE BENEFICIARY IS THAT THE ACCOMMODATION BILLS ARE OBTAINED FROM THE HAWALA OP ERATOR WHEREAS THE MATERIAL IS PROCURED FROM THE GREY MARK ET AND THUS THE ASSESSEE MAKES SAVINGS OF VAT AND OTHER INCIDENTAL CHARGES THEREON. IN SUCH A SCENARIO THE COORDINATE BENCHES OF THE TRIBUNAL HAVE TAKEN A CONSISTENT VIEW THAT ENTIRE PURCHASES CANNOT BE ADDED TO THE INCOME OF THE ASSESSEE AND IT IS ONLY THE PR OFIT ELEMENT EMBEDDED IN THE SAID ALLEGED BOGUS PURCHASES WHICH HAS TO BE BROUGHT TO TAX. DURING THE YEAR THE ASSESSEE HAS SH OWN A GROSS PROFIT OF 14.93% VIS-A-VIS THE GP IN THE PRECEDING YEAR OF 10.34%. THEREFORE, WE ARE OF THE OPINION THAT ADDING 100% P URCHASES TO THE INCOME OF THE ASSESSEE IS NOT JUSTIFIED AND HAS TO BE DELETED. HOWEVER, AT THE SAME TIME, WE ARE OF THE VIEW THAT SOME REASONABLE PROFIT HAS TO BE ADDED TO THE INCOME OF THE ASSESSEE, IN VIEW OF THE DECISIONS OF THE CO-ORDINATE BENCHES OF THE TRIBUNAL, WE ITA NO. 4748 M 19 & CO 282 M 19-MR. MUMTAZ ALI NASRUDDIN KA POOR 6 ARE OF THE VIEW THAT IT WOULD BE REASONABLE IF THES E PURCHASES ARE BROUGHT TO TAX @ 12.5%. ACCORDINGLY, WE SET ASIDE T HE ORDER OF LD. CIT(A) AND DIRECT THE AO TO ADD 12.5% OF THE PURCHA SE INSTEAD OF 100%. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED'. 6.1 THE FACTS OF THE CASE IN THE PRESENT AY. 2010- 11 ARE SIMILAR TO THE FACTS OBTAINING IN A.Y.2009-10. THE GP RATE DEC LARED BY THE ASSESSEE IN A.Y. 2009-10 WAS 14.93% AND THE GP RATE IN THE PRESENT AY 2010-11 IS 14.75% WHICH IS NEARLY THE SA ME. IN VIEW OF THE ABOVE, IT IS HELD THAT THE ASSESSEE IS A BENEFI CIARY OF HAWALA ENTITIES AND THE EXTRA PROFIT ELEMENT EMBEDDED IN S UCH HAWALA PURCHASES IS REQUIRED TO BE BROUGHT TO TAX. KEEPING THE APPELLATE HISTORY OF THE CASE IN MIND, THIS EXTRA PROFIT IS T AKEN AS 12.5% OF THE BOGUS PURCHASES OF RS. 11,51,558/-. ACCORDINGLY THE ADDITION OF RS. 1,43,945/- IS CONFIRMED AND THE BALANCE IS DELETED. THE GROUNDS OF APPEAL ARE PART ALLOWED. 9. THE LD. CIT(A) HAS RESTRICTED THE ADDITION TO 12.5% OF THE TOTAL AMOUNT OF BOGUS PURCHASES DETERMINED BY THE AO BY FOLLOWIN G THE DECISION OF THE CO-ORDINATE BENCH OF THE ITAT IN ASSESSEES OWN CAS E ITA NO. 1171/MUM/2018 FOR THE AY 2009-10. THE LD. CIT(A) HA S FURTHER MENTIONED IN ITS ORDER THAT THE FACTS OF THE PRESEN T CASE ARE SIMILAR TO THE FACTS OF THE CASE OF THE ASSESSEE PERTAINING TO THE AY 2009-10. THE LD. CIT(A) HAS FURTHER POINTED OUT THAT GP RATE DECLARE D BY THE ASSESSEE IN THE AY 2009-10 WAS 14.93% AND THE GP RATE IN THE PRESEN T CASE IS 14.75% WHICH IS NEARLY THE SAME. SINCE, THE LD. CIT(A) HAS PASSED THE IMPUGNED ORDER BY FOLLOWING THE DECISION OF THE CO-ORDINATE BENCH, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE FINDINGS OF THE LD . CIT(A). HENCE, WE UPHOLD THE DECISION OF THE LD. CIT(A) AND DISMISSED THE APPEAL OF THE REVENUE. ITA NO. 4748 M 19 & CO 282 M 19-MR. MUMTAZ ALI NASRUDDIN KA POOR 7 10. SO FAR AS THE C.O. FILED BY THE ASSESSEE IS CON CERNED, THERE IS A DELAY OF 13 DAYS IN FILING THE SAME AND THE ASSESSEE HAS FILED AN APPLICATION FOR CONDONATION OF DELAY SUPPORTED BY AN AFFIDAVIT. WE FURTHER NOTICE THAT THE ASSESSEE HAS SUPPORTED THE ORDER OF THE LD. CIT(A) IN ITS C.O. SINCE, WE HAVE UPHELD THE ORDER PASSED BY THE LD. CIT(A), THE C.O. FILED BY THE ASSEDSSEE HAS BECOME ACADEMIC. HENCE, WE DO NOT CON SIDER IT NECESSARY TO ADJUDICATE THE GROUNDS OF THE PRESENT C.O. ACCORDIN GLY, WE DISMISSED THE C.O. FILED BY THE ASSESSEE. IN THE RESULT, THE APPEAL FILED BY THE REVENUE AND THE C.O. FILED BY THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED ON 31.05. 2021 UNDER RULE 34 OF THE ITAT RULES. SD/- SD/- SHAMIM YAHYA RAMLAL NEGI ACCOUNTANT MEMBER J UDICIAL MEMBER MUMBAI, DATE: 31.05 .2021 SK COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. DR D BENCH, ITAT, MUMBAI 6. GUARD FILE BY ORDER, DY./ASST. REGISTRAR ITAT, MUMBAI