ANANT PLASTIC INDUSTRIES, MUMBAI V. INCOME TAX OFFICER WARD-30(1)(1), MUMBAI

ITA 4782/MUM/2017

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 8103 (ITAT-MUMBAI)
• Duration Of Justice: 5 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-12-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 06-07-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: N HEMALATHA
• Keywords: Bogus purchase; Tangible material; Accommodation entries; Reason to believe
• Section: 133(6); 147

Judgement Text

- IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI , BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER ./ I.T.A. NO. 4782/MUM/2017 ( / ASSESSMENT YEAR: 2009 - 10 ) ANANT PLASTIC INDUSTRIES GROUND FLOOR, SEKSARIA IND. ESTATE, NEW COMPLEX, CHINCHOLI, BUNDER ROAD, MALA (W), MUMBAI - 400 064 / VS. INCOME TAX OFFICER, WARD 30(1)(1), C - 13, 6 TH FLOOR, PRATYAKSHKAR BHAVAN, BANDRA (E), MUMBAI - 4 00 051 ./ ./ PAN/GIR NO. AAHFA 6976 E ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : NONE / RESPONDENT BY : MS. N. HEMALATHA / DATE OF HEARING : 10.10.2017 / DATE OF PRONOUNCEMENT : 18.12 .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) - 41, MUMBAI DATED 05.04.2017 A ND PERTAINS TO ASSESSMENT YEAR 2009 - 10. 2 ITA NO. 4782/MUM/2017 (A.Y. 2009 - 10) ANANT PLASTIC INDUSTRIES VS. ITO 2. T HE ISSUE RAISED IS THAT LD. COMMISSIONER OF INCOME TAX (APPEALS) ERR ED IN UPHOLDING THE VALIDITY OF REOPENING AND SUS TAINING DISALLOWANCE OF 6 % OF BOGUS PURCHASES. 3. I N THIS CASE , AS PER THE DETAILS FURNISHED BY THE ASSESSEE , THE ASSESSEE, A PARTNERSHIP FIRM, IS ENGAGED IN THE BUSINESS OF TRADING OF PLASTIC POWDER. THE ASSESSEE DERIVES INCOMES UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION ONLY. AS PER THE INFORMATION RECEIVED FROM SALES TAX DEPARTMENT, THE ASSE SSEE HAS SHOWN PURCHASES OF RS.99,63,200/ - FROM THE ABOVE MENTIONED PARTIES DURING THE FINANCIAL YEAR RELEVANT TO ASSESSMENT YEAR 2009 - 10. DURING THE COURSE OF INVESTIGATION, THE SALES TAX DEPARTMENT HAS FOUND THAT THE SAID CONCERN WERE NOT DOING GENUINE B USINESS OF PURCHASE AND SALES AND MERELY INDULGED IN PROVIDING ACCOMMODATION BILLS. TO ASCERTAIN THE GENUINENESS OF THE SAID PURCHASE TRANSACTIONS, THE NOTICES U/S. 133(6) OF THE I. T. ACT, WERE ISSUED TO THE ABOVE MENTIONED PURCHASE PARTIES AS SUBMITTED B Y THE ASSESSEE IN HIS SUBMISSIONS. A;; THE NOTICES ISSUED U/S. 133(6) WERE RETRUNED UNSERVED BY THE POSTAL AUTHORITIES. HENCE, A SHOW CAUSE NOTICE DATED 06.2.2015 WAS ISSUED AND DULY SERVED TO THE ASSESSEE AND REQUESTED TO PRODUCE THESE PARTIES. BUT THE AS SESSEE FAILED TO PRODUCE THE SAID PARTIES OR SUBMIT DOCUMENTARY EVIDENCES TO PROVE THE GENUINENESS OF THESE PURCHASES. THE ASSESSEE SUBMITTED CERTAIN DETAILS SUCH AS A COPY OF AUDIT REPORT, BALANCE SHEET, P & L ACCOUNT FOR THE ASSESSMENT YEAR 2009 - 10, PURC HASE STATEMENT OF PARTIES INCLUDING BOGUS PARTIES, STATEMENT OF SALES & PURCHASES 3 ITA NO. 4782/MUM/2017 (A.Y. 2009 - 10) ANANT PLASTIC INDUSTRIES VS. ITO AS PER SALES TAX RETURNS FILED WITH COPIES OF MVAT & CST PAID CHALLANS, BANK STATEMENT SHOWING PAYMENTS TO BOGUS PARTIES, LEDGER ACCOUN TS ETC. IN SUPPORT OF ITS CLAIM, B UT FA ILED TO PRODUCE THE PARTIES OR SUCH DOCUMENTS WHICH WOULD PROVE GENUINENESS OF THE SAID PURCHASES. THE ASSESSING OFFICER PROCEEDED TO ADD 6% OF THE BOGUS PURCHASE AS UNDISCLOSED INCOME. 4. AGAINST THE ABOVE ORDER, THE ASSESSEE APPEALED BEFORE THE LD. COMM ISSIONER OF INCOME TAX (APPEALS). THE LD. COMMISSIONER OF INCOME TAX (APPEALS) CONFIRMED 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. 6. I HAVE HE ARD LD. DEPARTMENTAL REPRESENTATIVE. NONE APPEARED ON BEHALF OF HE ASSESSEE DESPITE NOTICE. 7 . AS REGARDS THE REOPENING OF THE CASE , ON A CAREFUL CONSIDERATION, I NOTE THAT IN THIS CASE INFORMATION WAS RECEIVED BY THE ASSESSING OFFICER FROM DGIT INVESTIG ATION (MUMBAI) THERE ARE SOME PARTIES WHO ARE ENGAGED IN THE HAWALA TRANSACTIONS AND ARE ALSO INVOLVED IN ISSUING BOGUS PURCHASE BILLS FOR SALE OF MATERIAL WITHOUT DELIVERY OF GOODS, WHICH INFORMATION WAS BASED ON INFORMATION RECEIVED BY REVENUE FROM MAHAR ASHTRA SALES TAX AUTHORITY. INFORMATION WAS RECEIVED THAT THE ASSESSEE WAS BENEFICIARY OF HAWALA ACCOMMODATION ENTRIES FROM ENTRY PROVIDERS BY WAY OF BOGUS 4 ITA NO. 4782/MUM/2017 (A.Y. 2009 - 10) ANANT PLASTIC INDUSTRIES VS. ITO PURCHASE. THE ACCOMMODATION ENTRY PROVIDER HAS DEPOSED AND ADMITTED BEFORE THE MAHARASHTRA SALES TAX AUTHORITY VIDE STATEMENT/ AFFIDAVIT THAT THEY WERE ENGAGED IN PROVIDING BOGUS ACCOMMODATION ENTRIES WHEREIN BOGUS SALE BILLS WERE ISSUED WITHOUT DELIVERY OF GOODS, IN CONSIDERATION FOR COMMISSION. THESE, ACCOMMODATION ENTRY PROVIDERS, ON RECEIPT OF CHEQUE S FROM PARTIES AGAINST BOGUS BILLS FOR SALE OF MATERIAL, LATER ON WITHDREW CASH FROM THEIR BANK ACCOUNTS, WHICH WAS RETURNED TO BENEFICIARIES OF BOGUS BILLS AFTER DEDUCTION OF THEIR AGREED COMMISSION. THE ASSESSEE WAS STATED TO BE ONE OF THE BENEFICIARIES OF THESE BOGUS ENTRIES OF SALE OF MATERIAL FROM HAWALA ENTRY OPERATORS IN FAVOUR OF THE ASSESSEE WHEREIN THE ASSESSEE MADE ALLEGED BOGUS PURCHASES THROUGH THESE BOGUS BILLS ISSUED BY HAWALA ENTRY PROVIDERS IN FAVOUR OF THE ASSESSEE. THESE DEALERS WERE SURV EYED BY THE SALES TAX INVESTIGATION DEPARTMENT WHEREBY THE DIRECTORS OF THESE DEALERS HAVE ADMITTED IN A DEPOSITION VIDE STATEMENTS/AFFIDAVIT MADE BEFORE THE SALES TAX DEPARTMENT THAT THEY WERE INVOLVED IN. ISSUING BOGUS PURCHASE BILLS WI THOUT DELIVERY OF ANY MATERIAL. THERE IS A LIST OF SUCH PARTIES WHEREIN THE ASSESSEE IS STATED TO BE BENEFICIARY OF BOGUS PURCHASE BILLS. 8 . FROM THE ABOVE, I FIND THAT TANGIBLE AND COGENT INCRIMINATING MATERIAL WERE RECEIVED BY THE AO WHICH CLEARLY SHOWED THAT THE ASSESS EE WAS BENEFICIARY OF BOGUS PURCHASE ENTRIES FROM BOGUS ENTRY PROVIDERS WHICH FORMED THE REASON TO BELIEVE BY THE AO THAT INCOME HAS ESCAPED ASSESSMENT. THE INFORMATION SO RECEIVED BY THE AO HAS LIVE LINK WITH REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSE SSMENT. ON THESE 5 ITA NO. 4782/MUM/2017 (A.Y. 2009 - 10) ANANT PLASTIC INDUSTRIES VS. ITO INCRIMINATING TANGIBLE MATERIAL INFORMATION, ASSESSMENT WAS REOPENED. AT THIS STAGE THERE HAS TO BE PRIMA FACIE BELIEF BASED ON SOME TANGIBLE AND MATERIAL INFORMATION ABOUT ESCAPEMENT OF INCOME AND THE SAME IS NOT REQUIRED TO BE PROVED TO THE GUILT. IN THIS REGARD, I REFER TO THE DECISION OF THE HON'BLE APEX COURT IN THE CASE OF CIT(A) VS. RAJESH JHAVERI STOCK BROKERS P. LTD , 291 ITR 500: - 'SECTION 147 AUTHORISES AND PERMITS THE ASSESSING OFFICER TO ASSESS OR REASSESS INCOME CHARGEABLE TO L AX IF HE HAS REASON TO BELIEVE THAT INCOME FOR ANY ASSESSMENT YEAR HAS ESCAPED ASSESSMENT. THE WORD 'REASON' IN THE PHRASE 'REASON TO BELIEVE' WOULD MEAN CAUSE OR JUSTIFICATION. IF THE AO HAS CAUSE OR JUSTIFICATION TO KNOW OR SUPPOSE (HAT INCOME HAD ESCAPE D ASSESSMENT, IT CAN BE SAID TO HAVE REASON TO BELIEVE THAT AN INCOME HAD ESCAPED ASSESSMENT. THE EXPRESSION CANNOT BE READ TO MEAN THAT THE AO SHOULD HAVE FINALLY ASCERTAINED THE FACT BY LEGAL STATUTE WITH SOLICITUDE FOR THE PUBLIC EXCHEQUER WITH AN INBUI LT IDEA OF FAIRNESS TO TAXPAYERS. AS OBSERVED BY THE SUPREME COURT IN CENTRAL PROVINCES MANAGNESE ORE CO, LTD. V. ITO(1991) 191 ITR 662, FOR INITIATION OF ACTION UNDER SECTION 147(A) (AS THE PROVISION STOOD AT THE RELEVANT TIME) FULFILLMENT OF THE TWO REQU ISITE CONDITIONS IN THAT REGARD IS ESSENTIAL. AT THAT STAGE, THE FINAL OUTCOME OF THE PROCEEDING IS NOT RELEVANT. IN OTHER WORDS, AT THE INITIATION STAGE, WHAT IS REQUIRED IS 'REASON TO BELIEVE', BUT NOT THE ESTABLISHED FACT OF ESCAPEMENT OF INCOME. AT THE STAGE OF ISSUE OF NOTICE, THE ONLY QUESTION IS WHETHER THERE WAS RELEVANT MATERIAL ON WHICH A REASONABLE PERSON COULD HAVE FORMED A REQUISITE BELIEF WHETHER THE MATERIALS WOULD CONCLUSIVELY PROVE THE ESCAPEMENT IS NOT THE CONCERN AT THAT STAGE. THIS IS SO BECAUSE THE FORMATION OF BELIEF BY THE AO IS WITHIN THE REALM OF SUBJECTIVE SATISFACTION ITO V. SELECTED DALURBAND COAL CO, (P.) LTD. (1996) 217 ITR 597 (SUPREME COURT): RAYMOND WOOLLEN MILLS LTD. V. ITO (1999) 236 ITR 34 (SUPREME COURT). 9 . THE ABOVE D ISCUSSION AND PRECEDENT FROM APEX COURT FULLY JUSTIFY THE VALIDITY OF REOPENING IN THIS CASE. FURTHER I FIND THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS CAREFULLY EXAMINED THE ISSUE AND HAS PROPERLY APPRECIATED THE ISSUE. HENCE, I DO NOT FIND ANY INFIRMITY IN THE SAME. ACCORDINGLY, I UPHOLD THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ON THE ISSUE OF REOPENING. SINCE, THE ISSUE 6 ITA NO. 4782/MUM/2017 (A.Y. 2009 - 10) ANANT PLASTIC INDUSTRIES VS. ITO HAS BEEN DECIDED ON THE BASIS OF THE HONBLE APEX COURT DECISION, THE OTHER CASE LAWS REFERRED BY ASSESSEE A RE NOT SUPPORTING THE ASSESSEES CASE. 10. AS REGARDS THE MERITS, I FIND THAT CREDIBLE AND COGENT INFORMATION 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. THE ASSESSEE WAS FOUND TO HAVE TAKEN ACCOMMODATION ENTRY/BOGUS PURCHASE BILLS DURING THE CONCERNED ASSESSMENT YEAR FROM DIFFERENT PARTIES. BASED UPON THIS INFORMATION 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. ASSESSEE 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 PREPARAT ION OF DOCUMENTS FOR PURCHASES CANNOT CONTROVERT OVERWHELMING EVIDENCE THAT THE PROVIDER OF THESE BILLS IS BOGUS AND NON - EXISTENT. 11 . THE SALES TAX DEPARTMENT IN ITS ENQUIRY HAS FOUND THE PARTIES TO BE PROVIDING BOGUS ACCOMMODATION ENTRIES. THE ASSESSIN G 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 PARTIES. NEITHER THE 7 ITA NO. 4782/MUM/2017 (A.Y. 2009 - 10) ANANT PLASTIC INDUSTRIES VS. ITO ASSESSEE HAS BEEN ABLE TO PRODUCE ANY CONFIRMATION FRO M THESE PARTIES. IN SUCH CIRCUMSTANCES, THERE IS NO DOUBT THAT THESE PARTIES ARE NON - EXISTENT. I FIND IT FURTHER STRANGE THAT ASSESSEE WANTS THE REVENUE TO PRODUCE ASSESSEES OWN VENDORS, WHOM THE ASSESSEE COULD NOT PRODUCE. THE PURCHASE BILLS FROM THESE N ON - 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 PURCHASES AS GENUINE. THIS PROPOSITION IS DULY SUPPORTED BY HONBLE APEX CO URT 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 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 HONBLE APEX COURT DECISIONS. 12 . I FURTHER FIND THAT HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF NIKUNJ EXIMP ENTERPRISES (IN WRIT PETITION NO 2860, ORDER DT. 18.6.2014) HAS UPHELD 100% ALLOWANCE FOR THE PURCHASES SAID TO BE BOGUS WHEN THE SALES HAVE NOT BEEN DOUBTED. HOWEVER, THE FACTS OF THAT CASE WERE DIFFERENT. FURTHERMORE, THE SALES IN THAT CASE WERE BASICALLY TO GOVERNMENT DEPARTMENTS. HENCE, THE RATIO FROM THIS DECISION IS NOT FULLY APPLICABLE ON THE FACTS OF THE CASE. 13 . IN THESE CIRCUMSTANCES, THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS REFERRED TO HONBLE GUJARAT HIGH COURT DECISION IN THE CASE OF TAX APPEAL NO. 240 OF 2003 IN 8 ITA NO. 4782/MUM/2017 (A.Y. 2009 - 10) ANANT PLASTIC INDUSTRIES VS. ITO THE CASE OF N K INDUSTRIES VS. DY. CIT VIDE ORDER DATED 20.06.2016, WHEREIN 100% 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 W AS EXPOUNDED THAT WHEN 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. 14. I 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. IN 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 A PPEAL (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. 15. HOWEVER, I NOTE TH AT THIS IS NOT AN APPEAL BY THE REVENUE. HENCE, IT WILL NOT BE APPROPRIATE TO TAKE AWAY THE RELIEF ALREADY GRANTED BY THE REVENUE TO THE ASSESSEE. HENCE, I CONFIRM THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS). 9 ITA NO. 4782/MUM/2017 (A.Y. 2009 - 10) ANANT PLASTIC INDUSTRIES VS. ITO 1 6 . IN THE RESULT , THIS APPEAL FILED BY THE ASSESSEE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 18.12.2017 SD/ - (S HAMIM YAHYA ) / A CCOUNTANT MEMBER MUMBAI ; DATED : 18.12.2017 . . ./ ROSHANI , SR. PS / COPY OF THE ORD ER 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