HITESH TILOKCHAND BOHRA, MUMBAI V. INCOME TAX OFFICER-19(1)(5), MUMBAI

ITA 4945/MUM/2017

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 8615 (ITAT-MUMBAI)
• Duration Of Justice: 3 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-11-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 17-07-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: N HEMALATHA
• Keywords: Reopening of assessment; Bogus purchase; Accommodation entries
• Section: 143(3); 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL ' SMC ' BENCH, MUMBAI BEFORE SHRI R.C. SHARMA, ACCOUNTANT MEMBER ITA NO S . 4945 & 4946 /MUM/ 2017 (ASSESSMENT YEAR S : 2010 - 11 & 2011 - 1 2 ) SHRI HITESH TILOKCHAND BOHRA VS. INCOME TAX OFFICER - 19(1)(5) SHREE CHANDRA BHAWAN 11/13, PARSIWADA LANE MUMBAI 400004 ROOM NO. 215 MATRUMANDIR, TARDO ROAD MUMBAI 400007 PAN AERPB7638E APPELLANT RESPONDENT APPELLANT BY: NONE RESPONDENT BY: SMT. N. HEMALATHA DATE OF HEARING: 24 .10.2017 DATE OF PRONOUNCEMENT: 0 9 . 1 1 .2017 O R D E R PER R.C. SHARMA, A.M. THESE ARE APPEAL S FILED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT(A) - 29 , MUMBAI FOR ASSESSMENT YEARS 2010 - 11 & 2011 - 12 IN THE MATTER OF ORDER PASSED UNDER SECTION 143(3) R.W.S. 147 OF THE INCOME TAX ACT . 2. IN THESE APPEALS THE ASSESSEE IS AGGRIEVED FOR REOPENING OF ASSESSMENT AS WELL AS FOR UPHOLDING THE ADDITION OF 6% OF THE BOGUS PURCHASES. 3. NOBODY APPEARED ON BEHALF OF THE ASSESSEE IN SPITE OF GIVING OPPORTUNITY . THE BENCH THEREFORE DECIDED TO DISPOSED OF THE APPEA L S AFTER CONSIDERING THE MATERIAL PLACED ON RECORD AND HEARING THE CONTENTIONS OF THE LEARNED D.R. 4. IN THIS CASE, THE RETURN OF INCOME FOR THE A.Y. 2010 - 11 WAS FILED ON 16.09.2010 DECLARING TOTAL INCOME OF RS.3,00,912/ - . THE RETURN WAS PROCESSED U/S. 143(1 ) OF THE INCOME - TAX ACT, 1961. SUBSEQUENTLY, THE AO RECEIVED INFORMATION FROM THE DGIT (INV.), MUMBAI WHO IN TURN RECEIVED INFORMATION FROM THE SALES TAX D EPARTMENT, MUMBAI ABOUT SOME HAWALA ENTRY PROVIDERS . THE INFORMATION WAS THAT THE SALES TAX D EPARTMEN T HAS ITA NO. 4945/MUM/2017 & 4946/MUM/2017 SHRI HITESH TILOKCHAND BOHRA 2 EXERCISED DUE DILIGENCE WHICH REVEALED THAT THE ASSESSEE IS INVOLVED IN TAKING ACCOMMODATION ENTRIES OF BOGUS PURCHASES FR OM FOUR PARTIES AMOUNTING TO ` L,62,20,028 / - . ON THE BASIS OF THIS INFORMATION, THE AO HAS ISSUED NOTICE U/S.143 AND COMPLETED THE ASSESSMENT PROCEEDINGS UNDER SECTION 143(3 ) R.W.S.147 ON 29.01.2016. THE AO OBSERVED THAT THE SALES TAX D EPA RTMENT HAS CLASSIFIED THESE PAR TIES AS HAWALA DEALERS. IT WAS EVID ENT FROM THE REPORT OF THE SALES TAX DEPARTMENT AND STATEMENTS RECORDED BY THEM THAT PURCHASES SHOWN BY THE ASSESSEE FROM THESE PARTIES ARE BOGUS AND NOTHING BUT ACCOMMODATION ENTRIES TO INFLATE PURCHASES TO REDUCE TAXABLE PROFITS/INCOME. THE AO IN ORDER T O VERIFY THE GENU INENESS OF PURCHASES, ASKED THE ASSESSEE TO PRODUCE CERTAIN DETAILS LIKE NAME OF THE SELLER WITH CURRENT FULL ADDRESS, PAN, BILL AND VOUCHER NO. WITH DATE, DESCRIPTION OF GOODS PURCHASED, QUANTITY, RATE AND AMOUNT, MODE OF TRANSPORTATION ETC. SIMILARLY, DETAILS OF CORRESPONDING SALES WE RE ALSO CALLED FOR TO LINK THE PURCHASES WITH SALES. THE ASSESSEE WAS ALSO ASKED TO PRODUCE THE BOOKS OF ACCOUNTS. THE AO HELD THAT THOUGH FEW DETAILS WERE FURNISHED, IT CO ULD NOT LINK THE PURCHASES WITH CORRESPONDING SALE AND BOOKS OF ACCOUNTS WERE ALSO N OT PRODUCED FOR VERIFICATION AND HENCE NO VERIFICATION COULD BE MADE AND FURTHER PROCEEDED TO MAKE AN ADDITION OF 12.5% ON THE ALLEGED BOGUS PURCHASES OF ` 1,62,20,028/ - . 5. BY THE IMPUGNED ORDER THE CIT(A) REDUCED THE ADDITION FROM 12.5% TO 6% AFTER OBSERVING AS UNDER: - 4.3. THE SUBMISSIONS HAVE BEEN CAREFULLY CONSIDERED. THE LD. COUNSEL HAS CONTENDED THAT HE HAD SUBMITTED ALL THE NECESSARY DETAILS LIKE DAY TO DAY STOCK REGISTER, COPIES OF PURCHASE BILLS, DELIVERY CHALLANS, BANK STATEMENTS ETC AND THEREFORE THE PURCHASES CANNOT BE TREATED AS BOGUS. HOWEVER, THE FACT REMAINS THAT THE PARTIES FROM WHOM THE APPELLANT WAS SUPPOSED TO HAVE MADE THE PURCHASES WERE NOT EXISTING AT THE ADDRESSES GIVEN. THEREFORE, IT COULD NOT BE ESTABLISHED BEYOND DOUBT THAT THE PUR CHASES HAVE BEEN MADE FROM THE ABOVE MENTIONED PATTIES. IN SUCH A SCENARIO, AS THE PURCHASES HAVE NOT BEEN ESTABLISHED AS GENUINE, THE AO HAD TO ESTIMATE SOME PROFIT WHICH THE ASSESSEE HAD FAILED TO OFFER TO TAX. THE LD. COUNSEL ALSO ARGUED THAT THE AO CAN NOT HOLD 87.5% AS GENUINE AND 12.5% AS BOGUS. THE AO HAS NO WHERE CERTIFIED THAT 87.5% OF THE ALLEGED PURCHASES ARE GENUINE AND 12.5% ARE BOGUS. WHAT THE AO HAD DONE ITA NO. 4945/MUM/2017 & 4946/MUM/2017 SHRI HITESH TILOKCHAND BOHRA 3 IS TO ESTIMATE THE ADDITIONAL PROFIT WHICH THE ASSESSEE WOULD HAVE EARNED BY WAY OF PURCHA SING FR OM THE GREY MARKET INSTEAD OF TH E PARTIES RECORDED IN THE BOOKS OF ACCOUNT AND THEREFORE HE MADE AN ESTIMATE OF 12.5% OF THE ALLEGED BOGUS PURCHASES. 4.3.1. COMING TO THE ADDITION MADE, THE HON'BLE ITAT, AHMEDABAD 'C' BENCH IN THE CASE OF VIJAY PROT EINS LTD. VS. ACIT 58 ITD 0428 HELD THAT IN SIMILAR CIRCUMSTANCES, 25% OF THE PURCHASE PRICE ACCOUNTED THROUGH FICTITIOUS INVOICES HAS TO BE DISALLOWED. THE HON'BLE HIGH COURT OF GUJARAT IN THE LEASE OF SANJAY OIL CAKES V/S CIT 316 ITR 0274 DEALT WITH SIMI LAR CASE WHERE SOME OF THE ALLEGED SUPPLIERS WHO HAD ISSUED BILLS TO THE ASSESSEE WERE NOT GENUINE AS THEY WERE NOT TRACEABLE. THE GOODS MUST HAVE BEEN RECEIVED FROM OTHER PARTIES. THE LIKELIHOOD OF THE PURCHASE PRICE OF THESE ALLEGED PURCHASES BEING INFLA TED COULD NOT BE RULED OUT AND THEREFORE THE HON'BLE HIGH COURT HAS UPHELD THE DECISION OF CIT(A) AND THE ITAT DISALLOWING 25% OF THE PAYMENTS MADE TO SUCH PARTIES. THE HON'BLE HIGH COURT OF GUJARAT IN THE CASE OF CIT VS. SIMIT P. SHETH 356 IT R 0451 HELD T HAT ONCE THE SALE I S ACCEPTED BY THE AO, THE VERY BASIS OF PURCHASES COULD NOT BE QUESTIONED. NOT THE ENTIRE PURCHASE PRICE COULD BE DISALLOWED BUT ONLY THE PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES COULD BE ADDED TO THE INCOME OF THE ASSESSEE. THE ESTIMAT ION VARIES WITH THE NATURE OF BUSINESS AND NO UNIFORM YARDSTICK COULD BE ADOPTED. 4.3.2. IN THE CASE OF SIMIT P. SHETH, THE ESTIMATED PROFIT OF 12.5% HAS BEEN DECIDED BY THE COURT, AS THE VAT RATE THERE IS 10% AND 2.5% HAS BEEN TAKEN AS THE ADDITIONAL MARGIN MAKING IT 12.5%. IN THE INSTANT CASE, THE VAT RATE IS 4 % AND TO COVER UP ANY DEFECT, AN ADDITIONAL MARGIN OF 2% SHOULD BE ADDED TO 4% THEREBY TAKING IT TO 6%. THUS, THE TOTAL ADDITION MADE SHOULD BE RESTRICTED TO 6% INSTEAD OF 12.5%. THE AO IS DIREC TED TO RESTRICT THE ADDITION TO 6% INSTEAD OF 12.5% OF THE ALLEGED BOGUS PURCHASES MADE. THESE GROUNDS OF APPEAL ARE PARTLY ALLOWED. 6. AGAINST THE ABOVE ORDER OF THE CIT(A) ASSESSEE IS IN FURTHER APPEAL BEFORE US. I HAVE CONSIDERED THE CONTENTIONS OF THE LE ARNED D.R. AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW AND OTHER MATERIALS PLACED BEFORE ME. I FOUND THAT AFTER MAKING DETAILED ENQUIRIES THE AO REACHED TO THE CONCLUSION THAT OUT OF THE TOTAL PURCHASES 87.5% OF THE ALLEGED PURCHASES ARE GENUINE WHER E AS PURCHASE TO THE TUNE OF 12.5 % WAS BOGUS. ACCORDINGLY HE ADDED ONLY 12.5% OF SUCH ALLEGED BOGUS PURCHASES. AFTER CONSIDERING VARIOUS JUDICIAL PRONOUNCEMENTS THE CIT(A) HAS FURTHER RESTRICTED THE ADDITION TO THE EXTENT OF 6%. THE CIT(A) HAS RELIED ON VARI OUS JUDICIAL PRONOUNCEMENTS AS WELL HAS TAKEN INTO ACCOUNT THE MARGIN EARNED BY THE ASSESSEE, VAT RATE OF 4%, ETC. I DO NOT FIND ANY INFIRMITY IN THE ORDER ITA NO. 4945/MUM/2017 & 4946/MUM/2017 SHRI HITESH TILOKCHAND BOHRA 4 OF THE CIT(A) IN SO FAR AS HE HAS CONSIDERED ALL ASPECTS AND ACCORDINGLY FURTHER REDUCED THE ADDITIO N TO 6%. 7. IN THE RESULT, APPEAL FOR A.Y. 2010 - 11 IS DISMISSED. 8. FACTS AND CIRCUMSTANCES IN A.Y. 2011 - 12 ARE OF PARA - MATERIA, FOLLOWING THE REASONING GIVEN FOR A.Y. 2010 - 11, I CONFIRM THE FINDINGS GIVEN BY THE CIT(A) AT PARA S 4.3 TO 4.3.1. 9. IN THE RESULT, BOTH THE APPEALS ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 9 TH NOVEMBER , 2017. SD/ - ( R.C. SHARMA ) ACCOUNTANT MEMBER MUMBAI, DATED: 9 TH NOVEMB ER, 2017 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) - 29 , MUMBAI 4. THE CIT - 1 9 , MUMBAI 5. THE DR, SMC BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.