ASSISTANT COMMISSIONER OF INCOME TAX-20(1), MUMBAI V. BURJIS K DARUWALA, MUMBAI

ITA 4753/MUM/2017

• Counselvise Citation: [2018] 112 COUNSELVISE.COM (IT) 5616 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-11-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 05-07-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ABDUL HAKEEM M
• Assessee Lawyers: RUTUJA MEHTA
• Keywords: Bogus purchase; Set aside
• Section: 142(1); 133(6); 201; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI BEFORE S/ SHRI B.R. BASKARAN (AM) & SANDEEP GOSAIN (JM) I.T.A. NO. 4753 /MUM/20 1 7 (ASSESSMENT YEAR 20 11 - 12 ) ACIT 20(1) ROOM NO. 113 1 ST FLOOR, PIRAMAL CHAMBERS, LALBAUG MUMBAI - 400 012. VS. BURJIS K. DARUWALA DARUWALA CONTRACTORS 691, ALBLESS BUILDING DINSHAW MASTER ROAD MUMBAI - 400 014. ( APPELLANT ) ( RESPONDENT ) C.O. NO. 161 /MUM/201 8 (ASSESSMENT YEAR 2011 - 12) BURJIS K. DARUWALA DARUWALA CONTRACTORS 691, ALBLESS BUILDING DINSHAW MASTER ROAD MUMB AI - 400 014. VS. ACIT 20(1) ROOM NO. 113 1 ST FLOOR, PIRAMAL CHAMBERS, LALBAUG MUMBAI - 400 012. ( APPELLANT ) ( RESPONDENT ) PAN : ACFPD8168B ASSESSEE BY SHRI VIJAY MEHTA & MS. RUTUJA MEHTA DEPARTMENT BY SHRI ABDUL HAKEEM M. DATE OF HEARING 06 . 1 1 . 201 8 DATE OF PRONOUNCEMENT 16 . 1 1 . 201 8 O R D E R PER B.R. BASKARAN (AM) : - THE APPEAL FILED BY THE REVENUE AND CROSS OBJECTION FILED BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER DATED 27.3.2017 PASSED BY THE LEARNED CIT(A) - 32, MUMBAI AND I T RELATE TO A.Y. 2011 - 12. THE ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT OF BOGUS PURCHASE S WAS PARTIALL Y DELETED BY THE LEARNED CIT(A). THE REVENUE IS CONTESTING RELIEF GRANTED BY THE LEARNED CIT(A) AND ASSESSEE IS CONTESTING ADDITION SUSTAINED BY THE LEARNED CIT(A). 2. WE HAVE HEARD THE PARTIES AND PERUSED THE RECORD. THE ASSESSEE IS A CONTRACTOR UNDERTAKING INTERIOR DECORATION WORK FOR VARIOUS BUILDERS. HE FILED BURJIS K . DARUWALA 2 ITS RETURN OF INCOME FOR THE UNDER CONSIDERATION DECLARING A TOTAL INCOME OF RS 259.5 1 LAKHS. DURING THE COURSE OF SCRUTINY PROCEEDINGS, THE ASSESSING OFFICER EXAMINED THE PURCHASE BILLS PRODUCED BY THE ASSESSEE. HE NOTICED THAT MOST OF THE PURCHASE BILLS WERE HAV ING DELIVERY CHALLANS. HOWEVER, IN RESPECT OF FOLLOWING PARTIES, DELIVERY CHA LLANS WERE NOT AVAILABLE AND FURTHER PURCHASE BILLS DID NOT BEAR STAMP OF THE SECURITY. I) NEDA ENTERPRISE II) V.R. ELECTRIC CORP. III) SHAH ASSOCIATES IV) RIM ASSOCIATES V) HINDUSTAN CORP VI) BHATIYA AGENCIES VII) PARASNATH ENT VIII) ALFA SALES CORP IX) VASUNDHARA ENT X) HANS TRADING CO. 3. THE ASSESSING OFFICER ALSO RECEIVED INFORMATION FROM DGIT RELATING TO ACCOMMODATION BILLS PROVIDED BY CERTAIN DEALERS WITHOUT ACTUALLY SUPPLYING MATERIAL (CALLED AS HAWALA PARTIES) . THE DGIT HAD FORWARDED THE INFORMAT ION RECEIVED FROM THE SALES TAX AUTH ORITIES OF GOVERNMENT OF MAHARASHTRA TO THE ASSESSING OFFICER . IT WAS NOTICED THAT PARTIES MENTIONED ABOVE IN SERIAL NO. (IV) TO (X) HAVE BEEN IDENTIFIED AS HAWALA PARTIES AND THE ASSESSEE HAS MADE PURCHASES FROM THEM TO THE TUNE OF RS 77.31 LAKHS. THE ASS ESSEE HAD MADE PURCHASES FROM THREE PARTIES MENTIONED IN SERIAL NO. (I) TO (III) TO THE TUNE OF RS 11.36 LAKHS. 4. THE ASSESSEE SUBMITTED THAT MATERIALS WERE DIRECTLY DELIVERED BY THE SUPPLIERS TO THE PLACE S OF WORK AND THE ASSESSEE IS USUALLY NOT PRESENT AT SITE , WHEN THE MATERIALS WERE DELIVERED. IT WAS SUBMITTED THAT MATERIAL S WERE USUALLY RECEIVED BY THE SUPERVISOR AVAILABLE AT SITE AFTER VERIFYING THE SAME WITH BILL. IT WAS SUBMITTED THAT PAYMENTS HAVE BEEN MADE THROUGH ACCOUNT PAYEE CHEQUES. THE ASSE SSEE ALSO FURNISHED COPIES OF AGREEMENT ENTERED WITH SOME OF ITS CLIENTS. THE ASSESSING OFFICER WAS NOT CONVINCED WITH THE EXPLANATION GIVEN BY THE ASSESSEE . IN VIEW OF THE NON - AVAILABILITY OF THE STAMP BURJIS K . DARUWALA 3 OF SECURITY ON THE DELIVERY CHALLANS AND ALSO IN VIEW OF THE INFORMATION RECEIVED FROM THE SALES TAX DEPARTMENT, THE ASSESSING OFFICER HELD THAT THE ASSESSEE HAS FAILED TO PROVE THE GENUINENESS OF PURCHASES MADE FROM THE ABOVE SAID TEN PARTIES. ACCORDINGLY, HE DISALLOW ED THE ENTIRE PURCHASE AMOUNT AGGREGATIN G TO RS 88.74 LAKHS AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. 5. IN THE APPELLATE PROCEEDINGS, THE LEARNED CIT(A) ALSO HELD THAT THE ASSESSEE HAS FAILED TO PROVE THE PURCHASE S, AS T HE ASSESSEE WAS NOT ABLE TO PROVE THE EXISTENCE OF SUPPLIER S . THE LEARNED CIT(A) TOOK THE VIEW THAT THE PROFIT ELEMENT EMBEDDED IN PURCHASES SHOULD BE ASSESSED. ACCORDINGLY , BY TAKING SUPPORT FROM THE DECISION RENDERED BY HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. SIMIT P. SHETH (356 ITR 451), HE HELD THAT GP RATE OF 21.55% DECLARED BY THE ASSESSEE MAY BE ADOPTED FOR DETERMINING PROFIT ELEMENT INVOLVED IN THE IMPUGNED PURCHASE S . ACC ORDINGLY, HE ESTIMATED PROFIT ELEMENT EMBEDDED IN THE ABOVE SAID PURCHASE S @ 21.55% , WHICH WORKED OUT TO RS 19.12 LAKHS. ACCOR DINGLY, T HE LEARNED CIT(A) SUSTAINED THE ADDITION TO THE EXTENT OF RS 19.12 LAKHS AND DELETED THE BALANCE AMOUNT OF RS 69.61 LAKHS. AGGRIEVED, BOTH THE PARTIES HAVE FILED THESE APPEALS BEFORE US. 6. THE LEARNED DR PLACED RELIANCE ON THE DECISION RENDERED BY HON'BLE BOMBAY HIGH COURT IN THE CASE OF SHORE L INE HOTEL PVT. LTD. VS. CIT (2018) 98 TAXMANN.COM 234 AND SUBMITTED THAT HON'BLE HIGH COURT HAS HELD THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN LIMITING THE ADDITION RELATING TO BOGUS PURCHASES TO ES TIMATED PROFIT EMBEDDED THEREIN. THE LEARNED DR SUBMITTED THAT THE ASSESSING OFFICER , IN THE CASE BEFORE HONBLE BOMBAY HIGH COURT, ALSO RECEIVED INFORMATION FROM THE SALES TAX DEPARTMENT THAT CERTAIN DEALERS ARE PROVIDING ONLY ACCOMMODATION BILLS, WITHO UT ACTUALLY SUPPLYING THE MATERIAL S , AND FURTHER THE ASSESSEE WAS FOUND TO HAVE PURCHASED GOODS FROM SOME OF SUCH DEALERS. DURING THE COURSE OF ASSESSMENT PROCEEDI NGS, THE ASSESSING OFFICER ASSESSED 15% OF THE AMOUNT OF PURCHASES MADE FROM HAWALA DEA LERS. THE LEARNED CIT(A) SET ASIDE THE ASSESSMENT ORDER U/S 263 OF THE ACT AND DIRECTED THE ASSESSING OFFICER TO FOR DOING ASSESSMENT AFRESH AFTER MAKING BURJIS K . DARUWALA 4 NECESSARY ENQUIRY WITH REGARD TO SUCH PURCHASES. THE ASSESSEE CHALLENGED THE REVISIONS ORDER BEFORE THE TRI BUNAL BUT COULD NOT SUCCEED. HENCE, THE ASSESSEE CHALLENGED THE ORDER PASSED BY THE TRIBUNAL BY FILING APPEAL BEFORE THE HIGH COURT OF BOMBAY. HOWEVER, BOMBAY HIGH COURT HAS CONFIRMED THE ORDER PASSED BY THE ITAT. ACCORDINGLY, LEARNED DR SUBMITTED THAT DEC ISION RENDERED BY HON'BLE BOMBAY HIGH COURT WOULD SQUARELY APPLY TO THE FACTS OF THE PRESENT CASE AND ACCORDINGLY SUBMITTED THAT THE ASSESSING OFFICER WAS JUSTIFIED IN DISALLOWING ENTIRE AMOUNT OF BOGUS PURCHASES. 7. THE LEARNED AR , ON THE CONTRARY, SUBM ITTED THAT DECISION RENDERED BY HON'BLE BOMBAY HIGH COURT IN THE CASE OF S HORELINE HOTEL PVT. LTD. (SUPRA) IS NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. THE LEARNED AR SUBMITTED THAT THE ASSESSING OFFICER HAS NOT ACCEPTED THE GENUINENESS OF PURCHASE S ONLY ON THE REASONING THAT PURCHASE INVOICES WERE NOT ACCOMPANIED BY DELIVERY CHALLANS AND SOME OF THEM DO NOT BEAR STAMP OF THE SECURITY. THE LEARNED AR SUBMITTED THAT , IN SOME OF THE BILLS , THE STAMP OF SECURITY HAS BEEN PLACED ON THE BACK SIDE OF THE INVOICE AND THE SAME HAS ESCAPED THE ATTENTION OF THE ASSESSING OFFICER. HE SUBMITTED THAT THE ASSESSING OFFICER HAS RECEIVED INFORMATION FROM THE SALES TAX DEPARTMENT IN RESPECT OF PARTIES MENTIONED AT SERIAL NO. 4 TO 10 ONLY. THE ASSESSING OFFICER DID NO T MAKE ANY INDEPENDENT INQUIRY TO FIND OUT VERACITY OF INFORMATION SO RECEIVED FROM THE SALES TAX DEPARTMENT. THE LEARNED AR SUBMITTED THAT THE ASSESSEE HAS MADE DETAILED SUBMISSION S BEFORE THE LEARNED CIT(A) AND HENCE THE LEARNED CIT(A) HAS CALLED FOR TH E REMAND REPORT FROM THE ASSESSING OFFICER. HOWEVER, IN THE REMAND REPORT, THE ASSESSING OFFICER DID NOT VERIFY THE VARIOUS CONTENTION S URGED BY THE ASSESSEE AGAINST THE ADDITION MADE BY THE ASSESSING OFFICER . THE LEARNED AR SUBMITTED THAT THE ASSESSING OF FICER WAS NOT JUSTIFIED IN MAKING ADDITION WITHOUT ACTUALLY CARRYING ON INDEPENDENT INQUIRY. ACCORDINGLY, HE SUBMITTED THAT THE ASSESSING OFFICER H AS DISALLOW ED PURCHASES ON LY ON SURMISES AND CONJECTURE S. ACCORDINGLY THE LD A.R SUBMITTED THAT THE LEARNED CIT(A) WAS NOT JUSTIFIED IN RESTRICTING THE ADDITION TO 21.55% OF THE ALLEGED BOGUS PURCHASES. THE LEARNED AR, BY PLACING RELIANCE ON THE ORDER DATED 23.8.2017 PASSED IN BURJIS K . DARUWALA 5 THE CASE OF M/S. ARCH PHARMALABS LTD. IN ITA NO. 1248 & 3114/MUM/2016, SUBMITTED THAT THE LEARNED CIT(A) HAS RESTRICTED THE ADDITION TO 4% OF THE ALLEGED BOGUS PURCHASES. ACCORDINGLY, LEARNED AR SUBMITTED THAT, IN THE ALTERNATIVE, ADDITION MAY BE RESTRICTED TO 4%. 8 . THE LEARNED DR, IN THE REJOINDER, SUBMITTED THAT THE ASSESSEE WAS ASKED T HROUGH NOTICE ISSUED U/S. 142(1) OF THE ACT TO PRODUCE THE PARTIES BEFORE THE ASSESSING OFFICER IN ORDER TO PROVE THE GENUINENESS OF THE PURCHASES, BUT THE ASSESSEE HAS FAILED TO COMPLY WITH THE SAME. HE SUBMITTED THAT THE LEAR NED CIT(A) HAS TAKEN NOTE OF THIS FACT IN PARAGRAPH 5.1 OF THE ORDER. ACCORDINGLY, THE LEARNED DR SUBMITTED THAT THE ASSESSEE HAS FAILED TO PROVE THE GENUINENESS OF PURCHASES BY FURNISHING CONFIRMATION LETTER FROM THE SUPPLIERS OR BY PRODUCING THEM BEFORE THE ASSESSING OFFICER. ACCORD INGLY, HE SUBMITTED THAT DISALLOWANCE MADE BY THE ASSESSING OFFICER SHOULD BE SUSTAINED. 9. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE RECORD. WE NOTICE THAT THE PURCHASES LISTED OUT IN SERIAL NO.(I) TO (III) ARE NOT RELATED TO SALES TAX INFORMATION AND THEY HAVE BEEN DISALLOWED ONLY FOR THE REASON THAT THE CONCERNED BILLS EITHER DID NOT HAVE DELIVERY CHALLAN S OR DID NOT BEAR SEAL OF SECURITY. OTHERWISE, THERE IS NO DISPUTE WITH REGARD TO THE FACT THAT THE PURCHASES WERE SUP PORTED BY PROPER INVOICES AND THE PAYMENTS HAVE BEEN MADE THROUGH BANKING CHANNELS. WE NOTICE THAT THE AO DID NOT MAKE ANY INDEPENDENT INQUIRY TO PROVE THAT THE PURCHASES MADE FROM SUPPLIES LISTED IN SERIAL NO.(I) TO (III) WERE BOGUS. BEFORE US, THE LD A .R SUBMITTED THAT THE SEAL OF SECURITY IS AVAILABLE ON THE BACK SIDE OF THE INVOICES. HENCE THE REASONING GIVEN BY THE AO TO DISALLOW THE ABOVE SAID PURCHASES, IN OUR VIEW, DOES NOT WARRANT DISALLOWANCE OF PURCHASES. WE NOTICE THAT THE LD CIT(A) HAS APPL IED THE G.P RATE ON ALL THE DISALLOWANCES, WITHOUT NOTICING THAT THE REASONING GIVEN FOR DISALLOWING PURCHASES LISTED IN (I) TO (III) IS DIFFERENT FROM THOSE LISTED IN (IV) TO (X). ACCORDINGLY WE ARE OF THE VIEW THAT THERE IS NO JUSTIFICATION FOR DISBELIE VING GENUINENESS OF PURCHASES LISTED IN (I) TO (III) SUPRA, WHICH AGGREGATES TO RS.11.36 LAKHS. ACCORDINGLY, WE SET ASIDE THE ORDER PASSED BY LD BURJIS K . DARUWALA 6 CIT(A) ON THESE PURCHASES AND DIRECT THE AO TO DELETE THE ADDITION SUSTAINED BY LD CIT(A) IN RESPECT OF ABOVE SAID PURCHASES. 10. THE PURCHASES LISTED OUT IN (IV) TO (X) ARE COVERED BY THE INFORMATION RECEIVED FROM SALES TAX DEPARTMENT. WE NOTICE THAT THE AO DID NOT MAKE ANY INDEPENDENT ENQUIRIES IN ORDER TO ASCERTAIN THE GENUINENESS OF PURCHASES, I.E., HE DID NOT ISSUE NOTICES U/S 133(6) OF THE ACT AND ALSO DID NOT MAKE ANY FIELD ENQUIRY. THUS, WE NOTICE THAT THE AO HAS CONSIDERED THE PURCHASES TO BE NON - GENUINE BY FULLY PLACING RELIANCE ON THE INFORMATION RECEIVED FROM SALES TAX DEPARTMENT, WHICH IS NOT JUST IFIED. IT IS NOT THE CASE OF THE AO THAT THE SUPPLIERS HAVE SPECIFICALLY IDENTIFIED THE SUPPLIES MADE BY THEM TO THE ASSESSEE AS BOGUS. WE NOTICE THAT THE AO HAS ASKED THE ASSESSEE TO PRODUCE THE SUPPLIES, BUT THE ASSESSEE HAS ALSO FAILED IN THIS ASPECT. THERE IS NO DISPUTE WITH REGARD TO THE FACT THAT THE PURCHASES ARE SUPPORTED BY INVOICES AND THE PAYMENTS HAVE BEEN MADE THROUGH BANKING CHANNELS. UNDER THESE SET OF FACTS, IN THE ABSENCE OF INDEPENDENT ENQUIRY CONDUCTED BY THE AO, THE DISALLOWANCE MADE BY THE AO SHOULD NOT BE SUSTAINED. WE NOTICE THAT THE HONBLE BOMBAY HIGH COURT HAS UPHELD THE REVISION ORDER PASSED U/S 263 OF THE ACT IN THE CASE OF M/S SHORELINE HOTEL P LTD (SUPRA) AND NO DECISION HAS BEEN RENDERED ON MERITS. HENCE, WE AGREE WITH THE CONTENTIONS OF LD A.R THAT THE REVENUE CANNOT TAKE SUPPORT OF THE ABOVE SAID DECISION. 11. WE NOTICE THAT THERE WAS ALSO FAILURE ON THE PART OF THE ASSESSEE TO PRODUCE THE SUPPLIERS BEFORE THE AO, EVEN THOUGH THE AO HAS SPECIFICALLY ASKED THE ASSESSEE TO PRODUCE THEM. HENCE, IN OUR VIEW, SOME DISALLOWANCE IS CALLED FOR TO TAKE CARE OF REVENUE LEAKAGES, IF ANY. ACCORDINGLY WE ARE OF THE VIEW THAT THE DISALLOWANCE OUT OF PURCHASES MADE FROM SUPPLIERS LISTED IN (IV) TO (X) MAY BE RESTRICTED TO 5% OF THE VALUE OF PURCHASES MADE FROM THEM, IN ORDER TO TAKE CARE OF REVENUE LEAKAGES . IN OUR VIEW, THIS ESTIMATION WILL PUT THIS ISSUE AT REST. ACCORDINGLY WE SET ASIDE THE ORDER PASSED BY LD CIT(A) ON THESE PURCHASES AND DIRECT THE AO TO RESTRICT THE ADDITION T O 5% OF THE VALUE OF PURCHASES MADE FROM PARTIES LISTED IN (IV) TO (X) REFERRED SUPRA. BURJIS K . DARUWALA 7 12. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED AND THE CROSS OBJECTION FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER HAS BE E N PRONOUNCED IN THE COURT ON 16. 1 1 .201 8 . SD/ - SD/ - (SANDEEP GOSAIN ) (B.R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 16 / 1 1 / 20 1 8 COPY OF THE O RDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// ( SENIOR PRIVATE SECRETARY ) PS ITAT, MUMBAI