AKSHAR ENTERPRISES (PROP.HARESH M VALIA), DOMBIVALI V. ITO WD 3(4), THANE

ITA 4904/MUM/2018

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 6155 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-04-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 21-08-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MICHAEL JERALD
• Assessee Lawyers: HARESH R JOSHI
• Keywords: Bogus purchase; Accommodation entries
• Section: 143(1); 147; 145; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES A , MUMBAI BEFORE S HRI RAJESH KUMAR (AM ) AND SHRI RAM LAL NEGI (JM) ITA NO. 4904/MUM/2018 ASSESSMENT Y EAR: 2010 - 11 AKSHAR ENTERPRISES (PROP. HARESH M. VALIA), FLAT NO. 104, KARTKEY C.H.S. LTD., PLOT NO. 05, MIDC, PIERI ZONE, DOMBIVALI (E) - 421201 PAN: AFBPV5151P VS. THE COMMISSIONER OF INCOME TAX (APPEAL) 1, OFFICE OF CIT (APPEALS) I, ROOM NO. 29, A - WING, 6 TH FLOOR, ASHAR I.T. PARK, ROAD NO. 16 - Z, WAGLE INDL. ESTATE, THANE - 400604 (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI HARESH R. JOSHI ( A R ) REVENUE BY : SHRI MICHAEL JERALD ( D R ) DATE OF HEARING: 26/02 /2020 DATE OF PRONOUNCEMENT: 21 / 04 /2020 O R D E R PER RAM LAL NEGI, JM THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER DATED 20.02.2017 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) - 1 (FOR SHORT THE CIT(A) , THANE , FOR THE ASSESSMENT YEAR 2010 - 11 , WHEREBY THE LD. CIT(A) HAS PARTLY ALLOWED T HE APPEAL FILED BY THE ASSESSEE AGAINST THE ASSESSMENT ORDER PASSED U/S 144 R.W.S. 147 OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT). 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE ENGAGED IN THE BUSINESS OF TRADING IN ELECTRICAL GOODS IN HIS PROPRIETARY CONCERN M/S AKSHAR ENTERPRISES, FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION DECLARING TOTAL INCOME OF RS. 2,84,000/ - . THE RETURN WAS PROC ESSED UNDER SECTION 143(1) OF THE ACT. SUBSEQUENTLY, THE AO REOPENED THE ASSESSMENT ON THE BASIS OF INFORMATION RECEIVED FROM THE DGST(INV.) PUNE, THROUGH SALES TAX DEPARTMENT OF MUMBAI , TO THE EFFECT THAT THE ASSESSEE DURING THE PREVIOUS YEAR HAD 2 ITA NO. 4904 / MUM/2018 ASSESSMENT YEAR: 2010 - 1 1 OBTAINED ACCOMMODATION ENTRIES FROM VARIOUS BOGUS ENTITIES WITHOUT PURCHASING ANY MATERIAL . IN PURSUANCE TO THE NOTICE U/ 148 , THE ASSESSEE REQUESTED TO TREAT THE RETURN FILED EARLIER AS THE RETURN FILED IN RESPONSE TO THE NOTICE. THE ASSESSEE FURTHER CONTENDED TH AT IT HAD NOT TAKEN ANY ACCOMMODATION ENTRY AND ALL TRANSACTIONS ARE GENUINE. DURING THE ASSESSMENT PROCEEDINGS, T HE ASSESSEE FAILED TO FILE THE DETAILS CALLED FOR. HENCE, THE AO PASSED ASSESSMENT ORDER ON THE BASIS OF MATERIAL AVAILABLE ON RECORD AND COM PLETED THE ASSESSMENT UNDER SECTION 147 READ WITH SECTION 144 OF THE ACT . THE AO DETERMINED THE TOTAL INCOME OF THE ASSESSEE AT RS. 56,20,900/ - , AFTER MAKING ADDITION OF RS. 30,25,627/ - ON ACCOUNT OF BOGUS PURCHASES SHOWN BY THE ASSESSEE AN D RS. 23,11,276 ON ACCOUNT OF UNVERIFIABLE EXPENDITURE. THE ASSESSEE CHALLENGED THE ASSESSMENT ORDER BEFORE THE LD. CIT(A). THE LD. CIT(A) AFTER HEARING THE ASSESSEE PARTLY ALLOWED THE APPEAL AND APPLYING PROFIT RATE OF 8% ON THE TURNOVER OF THE ASSESSEE COMPUTED THE NET PROFIT OF RS. 11,89,411. SINCE THE ASSESSEE HAD ALREADY SHOWN NET PROFIT OF RS. 2,85,640/ - , THE LD CIT(A) DIRECTED THE AO TO MAKE ADDITION OF REMAINING AMOUNT OF RS. 9,03, 771/ - TO THE INCOME OF THE ASSESSEE. STILL AGGRIEVED BY THE IMPUGNED ORDER, THE ASSE SSEE IS IN APPEAL BEFORE THIS TRIBUNAL. 3. THE ASSESSEE HAS CHALLENGED THE IMPUGNED ORDER PASSED BY THE LD. CIT (A) ON THE FOLLOWING EFFECTIVE GROUND S : - 1. THE HONBLE CIT - (A) ERRED IN HOLDING 8% NET PROFIT ON TURNOVER OF RS. 1,48,67,648 WITHOUT ANY BASE AND CONTRARY TO THE PROVISIONS INCOME TAX ACT, 1961. 2. THE HONBLE CIT (A) ERRED IN REJECTING THE BOOKS OF ACCOUNTS U/S 145 (3) WITHOUT CONSIDERING THE FACTS AND CONTRARY TO THE PROVISIONS OF THE INCOME TAX ACT, 1961. 3. THE ASSESSING OFFICER ERRED IN DISALLOWING WHOLE UNPROVED PURCHASES OF RS. 30,25,627/ - WITHOUT CONSIDERING THE FACTS AND CONTRARY TO THE PROVISIONS OF THE INCOME TAX ACT, 1961. 4. THE ASSESSING OFFICER ERRED IN MAKING ADDITION OF RS. 23,11,276/ - ON ADHOC BASIS, BEING 20% OF ALL THE EXPE NSES ON LOG STOCK BARREL WITHOUT ANY BASE AND CONTRARY TO THE PROVISIONS OF THE INCOME TAX ACT, 1961. 3 ITA NO. 4904 / MUM/2018 ASSESSMENT YEAR: 2010 - 1 1 4. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE LD. CIT(A) HAS WRONGLY COMPUTED THE NET PROFIT OF RS. 11,89,411/ - BY APPLYING PROFIT @ 8% ON THE TOTAL TURNOVER OF THE ASSESSEE AND DIRECTED THE AO TO MAKE ADDITION OF THE NET PROFIT AFTER DEDUCTING THE PROFIT OF RS. 2,85,640/ - ALREADY SHOWN BY THE ASSESSEE. THE LD. COUN SEL FURTHER CONTENDED THAT THE LD. CIT ( A) HAS REJECTED THE BOOKS OF ACCOUNT OF THE ASSESSEE WITHOUT ANY BASIS. THE LD. COUNSEL FURTHER CONTENDED THAT THE ASSESSEE HAS FURNISHED DOCUMENTARY EVIDENCE TO ESTABLISH THE GENUINENESS OF THE TRANSACTION OF PURCHA SES. WITHOUT PREJUDICE, T HE LD. COUNSEL SUBMITTED THAT IN ANY CASE, THE ADDITION OF COMPUTED @ 8% NET PROFIT ON THE TOTAL TURNOVER IS BAD IN LAW. PLACING RELIANCE ON THE JUDGMENT OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. SIMIT P. SETH 356 IT R 451(GUJ) THE LD. COUNSEL SUBMITTED THAT ONLY PROFIT EMBEDDED IN SUCH TRANSACTION CAN BE ADDED TO THE INCOME OF THE ASSESSEE. 5. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESENTATIVE DR SUPPORTING THE ORDER PASSED BY THE LD. CIT(A) SUBMITTED THAT ADDITIO N OF 8% NET PROFIT ON THE TURNOVER OF THE ASSESSEE SUSTAINED IS REASONABLE AND DOES NOT WARRANT ANY MODIFICATION. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD INCLUDING THE CASES RELIED UPON BY THE AUTHORITIES BELOW AND THE LD. COUNSEL FOR THE ASSESSEE. WE NOTICE THAT THE AO HAS DETERMINED THE AMOUNT OF BOGUS PURCHASES ON THE BASIS OF DOCUMENTS ON RECORD . AS PER THE FINDINGS OF THE AO, THE ASSESSEE HAD OBTAINED BOGUS BILLS AMOUNTING TO RS. 30,25,627/ - FROM 17 BOGUS ENTITIES WIT HOUT PURCHASING ANY MATERIAL FROM THEM IN ORDER TO INFLATE PURCHASES. SINCE THE ASSESSEE HAS FAILED TO ESTABLISH THE GENUINENESS OF THE TRANSACTION DURING THE ASSESSMENT PROCEEDINGS AND EVEN DURING THE APPELLATE PROCEEDINGS , IN OUR CONSIDERED OPINION THERE IS NO SUBSTANCE IN THE CONTENTION OF THE ASSESSEE THAT THE PURCHASES IN QUESTION ARE GENUINE . 7. SO FAR AS THE ADDITION ON ACCOUNT OF BOGUS PURCHASES IS CONCERNED, WE NOTICE THAT THE LD. CIT(A) HAS COMPUTED THE ADDITION AFTER APPLYING 8% NET PROFIT ON TH E TOTAL TURNOVER OF THE ASSESSEE. IN OUR CONSIDERED VIEW, SINCE THE 4 ITA NO. 4904 / MUM/2018 ASSESSMENT YEAR: 2010 - 1 1 AO HAD DETERMINED THE TOTAL AMOUNT OF BOGUS PURCHASES MADE BY THE ASSESSEE ON THE BASIS OF MATERIAL ON RECORD, THE LD. CIT(A) OUGHT TO HAVE MADE A REASONABLE ADDITION KEEPING IN VIEW THE P ROFIT ELEMENT EMBEDDED IN THE SAID TRANSACTION. AS POINTED OUT BY THE LD. COUNSEL THE HONBLE GUJRAT HIGH COURT IN CIT VS. SIMIT P. SETH (SUPRA) HAS UPHELD THE DECISION OF THE TRIBUNAL AND SUSTAINED THE ADDITION 12.5% OF THE TOTAL AMOUNT OF BOGUS PURCHASES HOLDING THAT ONLY PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES CAN BE ADDED TO INCOME OF THE ASSESSEE. HENCE, IN OUR CONSIDERED VIEW, THE FINDINGS OF T HE LD. CIT(A) ARE NOT IN ACCORDANCE WITH THE RATIO LAID DOWN BY THE HONBLE GUJARAT HIGH COURT. IN OUR CONSIDERED VIEW, ADDITION OF 8% OF THE TOTAL AMOUNT OF BOGUS PURCHASES IS REASONABLE. HENCE, RESPECTFULLY FOLLOWING THE RATIO LAID DOWN BY THE HONBLE GU JARAT HIGH COURT , WE MODIFY THE ORDER PASSED BY THE LD. CIT(A) AND SUSTAIN ADDITION OF 8% OF THE TOTAL AMOUNT OF BOGUS PURCHASES DETERMINED BY THE AO. ACCORDINGLY, WE DIRECT THE AO TO MAKE ADDITION OF 8% OF THE TOTAL AMOUNT OF BOGUS PURCHASES. IN THE RESUL T, APPEAL FILED BY THE ASSESSEE FOR ASSESSMENT YEAR 2010 - 2011 IS PARTLY ALLOWED. ORDER PRONOUNCED ON 21 ST . APRIL , 2020 UNDER RULE 34 (4) OF THE INCOME TAX APPELLATE TRIBUNAL RULES, 1963 . SD/ - SD/ - ( RAJESH KUMAR ) ( RAM LAL NEGI ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; DATED: 21 / 0 4 / 2020 ALINDRA, PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5 ITA NO. 4904 / MUM/2018 ASSESSMENT YEAR: 2010 - 1 1 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . / BY ORDER, //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI