SALIM EBRAHIM PETIWALA, MUMBAI V. INCOME TAX OFFICER -17(3)(2) , MUMBAI

ITA 4772/MUM/2017

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 7929 (ITAT-MUMBAI)
• Duration Of Justice: 5 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-12-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 06-07-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: N HEMALATHA
• Keywords: Bogus purchase; Accommodation entries
• Section: 69C; 133(6); 144

Judgement Text

- IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI , BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER ./ I.T.A. NO. 4772/MUM/2017 ( / ASSESSMENT YEAR: 2011 - 12 ) SALIM EBRAHIM PETIWALA MOHANLAL JAIN & CO. CHARTERED ACCOUNTANTS, 10, CHARTERED HOUSE, GR. FLOOR, DR. C. H. STREET, MARINE LINES, MUMBAI - 400 002 / VS. ITO - 17(3)(2), AAYAKAR BHAVAN, M. K. ROAD, MUMBAI - 400 020 ./ ./ PAN/GIR NO. AABPB 2749 L ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI NAVEEN KUMAR / RESPONDENT BY : MS. N. HEMALATHA / DATE OF HEARING : 11.10.201 7 / DATE OF PRONOUNCEMENT : 13.12 .2017 / O R D E R PER SHAMIM YAHYA , A. M.: T HIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS) DATED 15.05.2017 AND PERTAINS TO ASSESSMENT YEAR 2011 - 12. 2. T HE GROUNDS OF APPEAL READ AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN PASSING AN EX - PARTE ORDER U/S. 144 WITHOUT GIVING PROPER OPPORTUNITY AND THE REASONS ASSIGNED FOR DOING SO ARE WRONG AND CONTRARY TO THE PROVISION OF THE INCOME TAX ACT AND RULES MADE THERE UNDER. 2 ITA NO. 4772/MUM/2017 (A.Y. 2011 - 12) SALIM EBRAHIM P ETIWALA VS. ITO 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN UPHOLDING THE ADDITION OF RS.28,47,360/ - TO THE RETURNED INCOME BY TREATING GENUINE PURCHAS ES AS INGENUINE U/S. 69C OF THE I. T. ACT AND THE REASON ASSIGNED FOR DOING SO ARE WRONG AND CONTRARY TO THE PROVISION OF THE INCOME TAX ACT AND RULES MADE THEREUNDER. 3. I N THIS CASE , FOR THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD CLAIMED PURCHASES AT RS.86.74 LACS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IN ORDER TO VERIFY THE GENUINENESS OF PURCHASES, NOTICES U/S. 133(6) OF THE INCOME - TAX ACT, 1961 WERE ISSUED TO SEVERAL PARTIES AT THE ADDRESS PROVIDED BY THE ASSESSEE BY REGISTERED POST. IN RE SPECT OF THE FOLLOWING PARTIES, THE NOTICES COULD NOT BE SERVED AND WERE RETURNED BACK UNSERVED BY THE POSTAL AUTHORITIES WITH THE REMARKS NOT KNOWN, LEFT, ETC SR. NO. NAME OF THE PARTY TIN AMOUNT (RS.) 1 REAL TRADERS 27170626911V 10,69,814/ - 2 SU N RISE ENTERPRISES 27370565400V 5,74,914/ - 3 SARAOGI SYNDICATE 27140326567V 16,10,673/ - 4 AMAR ENTERPRISES 27030265566V 28,06,414/ - TOTAL 60,61,815/ - HOLDING THE ABOVE TO BE BOGUS PURCHASE, THE ASSESSING OFFICER MA D E ADDITION OF RS.28,47,360/ - BEING THE PEAK C REDIT INVOLVED. 4. A GAINST THE ABOVE ORDER , THE ASSESSEE APPEALED BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEALS). THE LD. COMMISSIONER OF INCOME TAX (APPEALS) CONF I RMED THE ACTION OF THE ASSESSING OFFICER. 5 . AGAINST THE ABOVE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS), THE ASSESSEE IS IN APPEAL BEFORE THE ITAT. 3 ITA NO. 4772/MUM/2017 (A.Y. 2011 - 12) SALIM EBRAHIM P ETIWALA VS. ITO 6. I HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. I FIND THAT CREDIBLE AND COGENT INFORMATION WAS RECEIVED IN THIS CASE BY THE ASSESSING OFFICER THAT CERTAIN ACCOMMO DATION ENTRY PROVIDER/BOGUS SUPPLIERS WERE BEING USED BY CERTAIN PARTIES TO OBTAINED BOGUS BILLS. THE ASSESSEE WAS FOUND TO HAVE TAKEN ACCOMMODATION ENTRY/BOGUS PURCHASE BILLS DURING THE CONCERNED ASSESSMENT YEAR FROM DIFFERENT PARTIES. BASED UPON THIS INF ORMATION ASSESSMENT WAS REOPENED. THE CREDIBILITY OF INFORMATION RELATING TO REOPENING REMAINS UN - ASSAILED. IN SUCH FACTUAL SCENARIO, THE ASSESSING OFFICER HAS MADE THE NECESSARY ENQUIRY. THE ISSUE OF NOTICE TO ALL THE PARTIES HAVE RETURNED UNSERVED. ASSES SEE HAS NOT BEEN ABLE TO PROVIDE ANY CONFIRMATION FROM ANY OF THE PARTY. ASSESSEE HAS ALSO NOT BEEN ABLE TO PRODUCE ANY OF THE PARTIES. NECESSARY EVIDENCE RELATING TO TRANSPORTATION OF THE GOODS WAS ALSO NOT ON RECORD. IN THIS FACTUAL SCENARIO, IT IS AMPLY CLEAR THAT THE ASSESSEE HAS OBTAINED BOGUS PURCHASE BILLS. MERE PREPARATION OF DOCUMENTS FOR PURCHASES CANNOT CONTROVERT OVERWHELMING EVIDENCE THAT THE PROVIDER OF THESE BILLS IS BOGUS AND NON - EXISTENT. 7. THE SALES TAX DEPARTMENT IN ITS ENQUIRY HAS FOU ND 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 TO PRODUCE ANY OF THE PAR TIES. 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. WE FIND IT FURTHER STRANGE THAT ASSESSEE WANTS THE REVENUE TO PRODUCE ASSESSEES OWN VEND ORS, WHOM 4 ITA NO. 4772/MUM/2017 (A.Y. 2011 - 12) SALIM EBRAHIM P ETIWALA VS. ITO THE ASSESSEE COULD NOT PRODUCE. THE PURCHASE BILLS FROM THESE NON - EXISTENT/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 PU RCHASES AS GENUINE. THIS PROPOSITION IS DULY SUPPORTED BY HONBLE APEX COURT DECISION IN THE CASE OF SUMATI DAYAL VS. CIT [1995] 214 ITR 801 (SC) AND CIT VS. DURGA PRASAD MORE [1971] 82 ITR 540 (SC). IN THE PRESENT CASE, THE ASSESSEE WANTS THAT THE UNASSAI LABLE 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 HONBLE APEX COURT DECISIONS. 8. HOWEVER, I FIND THAT IN TH IS CASE, THE SALES HAVE NOT BEEN DOUBTED , IT IS SETTLED LAW THAT WHEN SALES ARE NOT DOUBTED, 100% DISALLOWANCE FOR BOGUS PURCHASE CANNOT BE DONE. THE RATIONALE BEING NO SALES IS POSSIBLE WITHOUT ACTUAL PURCHASES. THIS PROPOSITION IS SUPPORTED FROM THE HON' BLE JURISDICTIONAL HIGH COURT DE CISION IN THE CASE OF NIKUNJ EXIMP ENTERPRISES (IN WRIT PETITION NO 2860 , ORDER DT . 18.6.2014). IN THIS CASE THE HONBLE HIGH COURT HAS UPHELD 100% ALLOWANCE FOR THE PURCHASES SAID TO BE BOGUS WH EN SALES ARE NOT DOUBTED , ALT HOUGH FACTS OF THAT CASE WAS A LITTLE DIF FERENT INASMUCH AS ALL SALES WAS TO GOVERNMENT DEPARTMENT. HOWEVER , THE FACTS OF THE PRESENT CASE INDICATE THAT ASSESSEE HAS MADE PURCHASE FROM THE GREY MARKET. MAKING PURCHASES THROUGH THE GREY MARKET GIVES THE ASS ESSEE SAVINGS ON ACCOUNT OF NON - PAYMENT OF TAX AND OTHERS AT THE EXPENSE OF THE EXCHEQUER. IN SUCH SITUATION , IN MY CONSIDERED OPINION , ON THE FACTS AND I N CIRCUMSTANCES OF THE CASE , 12.5% DISALLOWANCE 5 ITA NO. 4772/MUM/2017 (A.Y. 2011 - 12) SALIM EBRAHIM P ETIWALA VS. ITO OUT OF THE BOGUS PURCHASES MEETS THE END OF JUSTICE. THIS PROPOSITION DRAWS SUPPORT FROM THE HONBLE GUJARAT HIGH COURT DECISION IN THE CASE OF CIT VS SIMIT P . SHETH [2013] 356 ITR 451 (GUJ.) . ACCORDINGLY , I DIRECT THAT DISALLOWANCE BE LIMITED TO 12.5% OF BOGUS PURCHASE. THE LD. COUNSEL OF THE ASSESSEE FAIRL Y AGREED TO THIS PROPOSITION. 9 . IN THE RESULT , THIS APPEAL FILED BY THE ASSESSEE STANDS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 13.12.2017 SD/ - (S HAMIM YAHYA ) / A CCOUNTAN T MEMBER MUMBAI ; DATED : 13.12.2017 . . ./ ROSHANI , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERN ED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F ILE / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI