SHRI SAMIR H PADIA, MUMBAI V. ITO 30(3)(2), MUMBAI

ITA 4909/MUM/2018

• Counselvise Citation: [2019] 111 COUNSELVISE.COM (IT) 9896 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-12-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 21-08-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AKHTAR HANSARI
• Keywords: Bogus purchase; Unexplained expenditure; Bonafide belief; Tangible material; Accommodation entries
• Section: 69C; 133(6); 143(1); 143(2); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH SMC, MUMBAI BEFORE SHRI SHAMIM YAHYA (AM) & SHRI PAWAN SINGH (JM) ITA NO. 4909/MUM/2018(ASSESSMENT YEAR : 2010-11) SHRI SAMIR H PADIA 2A/83A, SHARDA ESTATE VAZIRA NAKA, L.T. ROAD, BORIVALI (W), MUMBAI-400 092 PAN : AGPPP8362F VS ITO 30(3)(2), C-13, , 6 TH FLOOR, PRATYAKSH KAR BHAWAN , ROAD NO. 610, BKC BANDRA, (E), MUMBAI -400051 APPELLANT RESPONDEDNT APPELLANT BY NONE RESPONDENT BY SHRI AKHTAR H ANSARI SR DR DATE OF HEARING 19-11-2019 DATE OF PRONOUNCEMENT 04-12-2019 O R D E R PER PAWAN SINGH, JM : 1. THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF CIT(A)-41, MUMBAI DATED 09-05-2018 FOR THE ASSESSME NT YEAR 2010-11. THE ASSESSEE HAS RAISED THE FOLLOWING GRO UNDS OF APPEAL:- (1) THAT THE APPELLANT UNDER HIS BONAFIDE BELIEF I S OF THE OPINION THAT THE PROCEEDING INITIATED WAS WITHOUT ISSUE OF REQUI SITE NOTICE OR RECORDING THE REASONS U/S. 148(2) OF THE ACT, ID. C IT(A) OUGHT TO HAVE VERIFIED JURISDICTION OF THE AO TO ASSESS THE INCOM E U/S.!47,BEFORE CONFIRMING THE ORDER OF THE AO. (2) THAT THE REOPENING INVOKED U/S. 147 IS CONTRARY TO THE LAW AS MERELY ON HEAR SAY VERSION OF AUTHORITIES UNDER THE PROVIS IONS OF DIFFERENT ACT AND VIOLATION OF THE PROVISION MADE THERE UNDER WHI CH COULD CREATE CASE OF SUSPICION ONLY. THERE IS NO APPLICATION OF MIND TO THE INFORMATION RECEIVED BY THE AO TO ACCORD THE JURISDICTION TO IN VOKE THIS PROCEEDING AND THEREFORE, THE PROCEEDING MAY BE HELD AS BAD IN LAW AS BEING VOID AB INITIO. 2 ITA 4909/MUM/2018 SAMIR H PADIA (3) WITHOUT PREJUDICE TO THE AFORESAID, ON MERIT, I D. AO IS ERRED TO INVOKE S.69C OF THE ACT PARTICULARLY WHEN THE PAYME NTS HAVING MADE FROM THE REGULAR BOOKS/BANK ACCOUNT OF THE BUSINESS , SOURCE OF EXPENDITURE PAYMENT U/S.69C IS DEEMED TO HAVE EXPLA INED AND HENCE, THE ADDITION MADE IS CONTRARY TO THE FICTION LAID T HEREIN. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE I S AN INDIVIDUAL AND PROPRIETOR OF M/S JYOTI TRADERS, ENGAGED IN THE BUS INESS OF MANUFACTURING AND RESELLING OF MEDICAL AND SURGICAL PRODUCTS, CLOTH, SHEETS, ETC. THE RETURN OF INCOME WAS FILED ON 30- 09-2010 DECLARING TOTAL INCOME AT RS.5,57,428/- WHICH WAS PROCESSED U /S 143(1) OF THE I.T. ACT, 1961. THE ASSESSMENT WAS RE-OPENED UNDER SECTION 147 ON THE BASIS OF INFORMATION RECEIVED FROM SALE TAX DEP ARTMENT, GOVERNMENT OF MAHARASHTRA INFORMING THAT CERTAIN HA WALA OPERATORS WERE INDULGING IN PROVIDING ACCOMMODATION BILLS WIT HOUT ACTUAL DELIVERY OF GOODS. THE SALE TAX DEPARTMENT, GOVERNM ENT OF MAHARASHTRA REFERRED THE LIST OF SUCH HAWALA DEALER S AND THE BENEFICIARY TO THE DGIT (INVESTIGATION), MUMBAI. TH E NAME OF ASSESSEE APPEARED IN THE LIST OF BENEFICIARIES. TH E ASSESSEE ALLEGEDLY MADE THE PURCHASES OF RS.9,09,988/- FROM SUCH HAWAL A DEALERS. ON THE BASIS OF INFORMATION, THE ASSESSING OFFICER MADE A BELIEF THAT THE INCOME OF THE ASSESSEE ESCAPED ASSESSMENT, THEREFOR E, RE-OPENED THE ASSESSMENT UNDER SECTION 147. NOTICE UNDER SECTION 148 DATED 19-03- 3 ITA 4909/MUM/2018 SAMIR H PADIA 2014 WAS ISSUED TO THE ASSESSEE. SUBSEQUENTLY, TH E ASSESSING OFFICER ISSUED NOTICE U/S 143(2) ON 02-07-2015 FIXING APPOI NTMENT ON 21-07- 2015; HOWEVER, THERE WAS NO COMPLIANCE FROM THE ASS ESSEE. THE ASSESSING OFFICER THEREAFTER ISSUED A NOTICE U/S 14 2(1) ALONG WITH A QUESTIONNAIRE. DURING THE ASSESSMENT, THE ASSESSIN G OFFICER NOTED THAT THE ASSESSEE HAS SHOWN PURCHASES FROM THE FOLL OWING PARTIES, WHO WERE DECLARED AS HAWALA DEALERS BY THE SALE TAX DEP ARTMENT, GOVERNMENT OF MAHARASHTRA: NAME OF THE PARTIES BILL AMOUNT (RS.) 1 TARA ENTERPRISES 4,16,000 2 PRATIK TRADING COMPANY 4,93,988 TOTAL AMOUNT 9,09,988 3. IN ORDER TO ASCERTAIN THE GENUINENESS OF PURCHASES, THE AO ISSUED NOTICES U/S 133(6) TO BOTH THE PARTIES CALLING UPON FOR QUANTITATIVE DETAILS OF SALES, COPY OF LEDGER ACCOUNT OF ASSESSE E REFLECTING THE SALES, COPY OF BANK STATEMENT HIGHLIGHTING THE ENTR Y PERTAINING TO THE TRANSACTION WITH THE ASSESSEE. THE NOTICES SEN T BY THE AO WERE RETURNED BY THE POSTAL AUTHORITIES WITH THE REMARK, UNCLAIMED. THE ASSESSING OFFICER ISSUED SHOW CAUSE NOTICE TO THE A SSESSEE TO PROVE THE PURCHASES AND TO FILE THE DOCUMENTARY EVIDENCES OF STOCK REGISTER, LORRY RECEIPT, EVIDENCE OF CONSUMPTION O F MATERIAL ETC. 4 ITA 4909/MUM/2018 SAMIR H PADIA THE AO NOTED THAT THE ASSESSEE FAILED TO FURNISH NE CESSARY EVIDENCE TO SUBSTANTIATE THE PURCHASES. THE AO FURTHER RECO RDED THAT DURING THE ASSESSMENT, THE ASSESSEE WAS ASKED TO SEGREGATE THE TRADING AND MANUFACTURING COMPONENT FROM THE PURCHASES AND ALSO TO CO-RELATE THE MATERIAL PURCHASED FOR MANUFACTURING AND SALES. THE AO RECORDED THAT ASSESSEE WAS GIVEN SUFFICIENT TIME BU T ASSESSEE FAILED TO PRODUCE SUCH DETAILS. THE AO, IN ABSENCE OF ANY EXPLANATION, TREATED THE ENTIRE PURCHASES AS UNEXPLAINED EXPENDI TURE AND MADE ADDITION OF 100% OF THE ALLEGED BOGUS PURCHASES. O N APPEAL BEFORE CIT(A), THE ACTION OF ASSESSING OFFICER WAS UPHELD. FURTHER AGGRIEVED BY THE ORDER OF LD.CIT(A), THE ASSESSEE H AS FILED THE PRESENT APPEAL BEFORE US. 4. NONE APPEARED ON BEHALF OF ASSESSEE, DESPITE SERVIC E OF NOTICE OF HEARING THROUGH RPAD, COPY OF ACKNOWLEDGEMENT DUE CARD (AD) IS PLACED ON RECORD. THEREFORE, WE ARE LEFT WITH N O OPTION EXCEPT TO HEAR THE SUBMISSION OF LEARNED DEPARTMENTAL REPRESE NTATIVE (LD. DR) FOR THE REVENUE AND TO DECIDE THE APPEAL ON THE BAS IS OF MATERIAL AVAILABLE ON RECORD. 5. WE HAVE HEARD THE SUBMISSIONS OF THE LEARNED DEPAR TMENTAL REPRESENTATIVE DR FOR THE REVENUE AND PERUSED THE R ECORD. THE LD. 5 ITA 4909/MUM/2018 SAMIR H PADIA DR FOR THE REVENUE SUBMITS THAT DURING THE ASSESSME NT ASSESSEE FAILED TO FURNISH NECESSARY EVIDENCE AND SEGREGATE AND CO-RELATE THE PURCHASES WITH ITS MANUFACTURING AND TRADING ACTIVI TIES. BEFORE THE LD .CIT(A), THE ASSESSEE AGAIN FAILED TO FURNISH AN Y EVIDENCE. THE ASSESSEE IS NOT ENTITLED FOR ANY RELIEF. ON THE IS SUE OF REOPENING, THE LD. DR FOR THE REVENUE SUBMITS THAT THE AO HAS SUFF ICIENT INFORMATION FOR MAKING HIS BELIEF TO REOPEN THE ASS ESSMENT. THE ASSESSMENT WAS REOPENED ON THE BASIS OF CREDIBLE IN FORMATION RECEIVED FROM DGIT (INV), MUMBAI THAT CERTAIN PARTI ES WERE INDULGING IN PROVIDING BOGUS BILL WITHOUT ACTUAL DE LIVERY OF GOODS. THE ASSESSEE WAS ONE OF THE BENEFICIARIES FROM THE PARTIES SHOWN IN THE LIST OF HAWALA DEALERS, COPY OF WHICH WAS FORWA RDED TO THE AO. THUS, THE AO REOPENED THE ASSESSMENT ON THE BASIS O F CREDIBLE INFORMATION. 6. WE HAVE CONSIDERED THE SUBMISSIONS OF THE LD. DR FO R THE REVENUE AND PERUSED THE MATERIAL AVAILABLE ON RECORD. GROU NDS 1& 2 RELATE TO REOPENING AND RECORDING OF REASONS. WE HAVE NOT ED THAT THE AO IN PARA 2 OF THE ASSESSMENT ORDER HAS RECORDED THAT CASE WAS REOPENED ON THE BASIS OF INFORMATION RECEIVED FROM OFFICE OF DGIT(INV), MUMBAI ABOUT THE ASSESSEE BEING INVOLVED IN TAKING 6 ITA 4909/MUM/2018 SAMIR H PADIA ACCOMMODATION ENTRY FROM HAWALA TRADERS. ON THE BA SIS OF SUCH INFORMATION, THE AO IDENTIFIED THAT THE ASSESSEE HA S SHOWN PURCHASES FROM TWO PARTIES, WHO WERE INDULGING IN P ROVIDING ACCOMMODATION ENTRIES. NAMES OF THOSE TWO PARTIES WERE FORWARDED TO THE AO. IN OUR CONSIDERED VIEW, THE A O WAS HAVING SUFFICIENT CREDIBLE INFORMATION TO MAKE HIS BELIEF FOR REOPENING. THE HONBLE GUJARAT HIGH COURT IN PEASS INDUSTRIAL ENGINEERS (P) LTD (2016) 76 TAXMANN.COM 106 (GUJARAT) HELD THAT W HERE ASSESSING AUTHORITY HAD TANGIBLE MATERIAL IN FORM OF SPECIFIC INFORMATION RECEIVED BY INVESTIGATION WING THAT ASSESSEE HAD BE EN BENEFICIARY OF BOGUS TRANSACTIONS, IT WAS THOROUGHLY JUSTIFIED IN ISSUING NOTICE FOR REASSESSMENT. THEREFORE, CONSIDERING THE DECISION OF HONBLE GUJARAT HIGH COURT IN PEASS INDUSTRIAL ENGINEERS ( P) LTD (SUPRA) WE DO NOT FIND ANY MERIT IN THE GROUND OF APPEAL RA ISED BY THE ASSESSEE. IN THE RESULT, GROUNDS 1 & 2 ARE DISMISS ED. 7. GROUND 3 RELATES TO MAKING ADDITION U/S 69C ON ACCO UNT OF UNEXPLAINED EXPENDITURE. WE HAVE NOTED THAT DURING THE ASSESSMENT THE ASSESSEE WAS ASKED TO FURNISH THE EVIDENCE RELA TING TO STOCK REGISTER, LORRY RECEIPT ALONG WITH CHALLAN COPY, AN D EVIDENCE FOR UTILISATION OF MATERIALS, MODE OF PAYMENT FOR PURCH ASE AND BANK 7 ITA 4909/MUM/2018 SAMIR H PADIA STATEMENT. THE AO RECORDED THAT THE ASSESSEE FAILE D TO PRODUCE ANY EVIDENCE. THE AO DISALLOWED THE ENTIRE PURCHASES O F RS.9,09,988/- AND ADDED TO THE INCOME OF ASSESSEE AS UNEXPLAINED EXPENDITURE. WE HAVE NOTED THAT THE AO HAS NOT REJECTED THE BOOK S OF ACCOUNT OF THE ASSESSEE. THE SALE OF ASSESSEE IS ALSO NOT DIS PUTED BY THE AO. THE SALE OF ASSESSEE IS ALSO NOT DISPUTED BY THE AO . THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND RESALE OF MEDICAL AND SURGICAL PRODUCTS, CLOTH AND SHEETS. THE AO HAS NO T MENTIONED THE TURNOVER OF THE ASSESSEE. THE ASSESSEE HAS DECLARE D INCOME OF RS.5.57 LAKHS FROM ITS BUSINESS ACTIVITY. IN OUR V IEW, THE ENTIRE PURCHASES, IN ABSENCE OF BRINGING ANY MATERIAL ON R ECORD THAT ASSESSEE HAS SHOWN ANY OTHER PURCHASES IN ITS MANUF ACTURING AND TRADING ACTIVITY, THE 100% OF DISALLOWANCE IS NOT J USTIFIED. WE ARE OF THE FURTHER VIEW THAT UNDER THE INCOME-TAX, ONLY REAL INCOME CAN BE TAXED BY THE REVENUE, EVEN IF THE ENTIRE TRANSAC TION IS NOT VERIFIABLE, THE AMOUNT TAXABLE IS THE TAXABLE INCOM E COMPONENT AND NOT THE ENTIRE TRANSACTION. AFTER CONSIDERING THE FACTS OF THE PRESENT CASE AND THE SUBMISSION OF LD. DR FOR THE REVENUE, WE ARE OF THE VIEW THAT IN ORDER TO FULFIL THE GAP OF REVENUE LEA KAGE, DISALLOWANCE OF A REASONABLE PERCENTAGE OF THE ALLEGED BOGUS PUR CHASES WOULD 8 ITA 4909/MUM/2018 SAMIR H PADIA MEET THE ENDS OF JUSTICE. THEREFORE, IN OUR VIEW, IF DISALLOWANCE IS RESTRICTED TO 12.5% OF THE IMPUGNED BOGUS PURCHASES THAT WOULD MEET THE ENDS OF JUSTICE. SIMILAR VIEW WAS TAKEN B Y HONBLE BOMBAY HIGH COURT IN C IT VS HARI RAM BAMBANI IN IT A NO.313 OF 2013 DECIDED ON 04-02-2015 WHEREIN IT WAS HELD T HAT REVENUE IS NOT ENTITLED TO BRING THE ENTIRE SALE CONSIDERATION TO TAX BUT ONLY THE PROFIT ATTRIBUTABLE ON SUCH UNRECORDED SALE CONSIDE RATION. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 04-12-2019. SD/- SD/- (SHAMIM YAHYA) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIALMEMBER MUMBAI, DT : 4 TH DECEMBER, 2019 PK/- COPY TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR /TRUE COPY/ BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI