ACIT CIRCLE-22(1), Mumbai V. CHANDRAPRAKASH SHARMA HUF, Mumbai

ITA 4965/MUM/2019

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 3472 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-03-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: misc
• Appeal Filed On: 30-07-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bogus purchase; Corroborative evidences; Validity of assessment; Accommodation entries
• Section: 143(1); 147; 148; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI BEFORE SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER AND SHRI RAVISH SOOD , JUDICIAL MEMBER ITA NO. 4965 /MUM. /201 9 ( ASSESSMENT YEAR : 20 11 12 ) ASSTT. COMMISSIONER OF INCOME TAX CIRCLE 22(1), MUMBAI . APPELLANT V/S CHANDRAPRAKASH SHARMA (HUF) 21 ST 2 ND FLOOR, ASIYA MANZIL K.K. ROAD, OPP. ROYAL HOTEL SANTACRUZ (W), MUMBAI 400054 PAN AAAHS6863B . RESPONDENT REVENUE BY : MS. SHREEKALA PARDESHI ASSESSEE BY : NONE DATE OF HEARING 20 . 0 1.202 1 DATE OF ORDER 8.03.2021 O R D E R PER S. RIFAUR RAHMAN, A.M. THE AFORESAID APPEAL HA S BEEN FILED BY THE REVENUE CHALLENGING THE ORDER DATED 2 ND MAY 2019 PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) 32 , MUMBAI, FOR THE ASSESSMENT YEAR 2011 12. 2. WHEN THE APPEAL W AS CALLED FOR HEARING, NO ONE WAS PRESENT ON BEHALF OF THE ASSESSEE TO REPRESENT THE CASE. THERE IS NO APPLICATION SEEKING ADJOURNMENT EITHER. CONSIDERING THE NATURE OF DISPUTE, WE 2 CHANDRAPRAKASH SHARMA (HUF) PROCEED TO DISPOSE OFF THE A PPEAL EX PARTE QUA THE RESPONDENT ASSESSEE AFTER HEARING THE LEARNED DEPARTMENTAL REPRESENTATIVE AND ON THE BASIS OF MATERIAL AVAILABLE ON RECORD. 3. THE ONLY DISPUTE IN TH I S APPEAL IS, THE LEARNED COMMISSIONER (APPEALS) ERRED IN RESTRICTING THE ADDITION TO ` 7 LAKH ON ACCOUNT OF BOGUS PURCHASE AS AGAINST 20% OF BOGUS PURCHASE MADE BY THE ASSESSING OFFICER. 4. BRIEF FACTS ARE, THE ASSESSEE A HINDU UNDIVIDED FAMILY (HUF) IS A PROPRIETOR OF M/S. SANKESHWAR ENTERPRISES AND ENGAGED IN THE BUSINESS OF CIVIL AND LAB OUR CONTRACTOR. FOR THE ASSESSMENT YEAR 20 11 12 , THE ASSESSEE FILED ITS RETURN OF INCOME ON 25 TH SEPTEMBER 2011, DECLARING TOTAL INCOME OF ` 69,01,582 . THE RETURN S OF INCOME FILED BY THE ASSESSEE WERE INITIALLY PROCESSED UNDER SECTION 143(1) OF THE INCOME TAX ACT, 1961 (FOR SHORT 'THE ACT' ). SUBSEQUENTLY, ON THE BASIS OF INFORMATION RECEIVED FROM THE SALES TAX DEPARTMENT THROUGH DGIT (INV.), MUMBAI, THE ASSESSING OF FICER RE OPENED THE ASSESSMENT S UNDER SECTION 147 OF THE ACT. IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER CALLED UPON THE ASSESSEE TO PROVE THE GENUINENESS OF THE AFORESAID PURCHASES THROUGH SUPPORTING EVIDENCES. IN RESPONSE, THE ASSESSE E SUBMITTED THAT THE RETURN OF INCOME FILED DATED 25 TH SEPTEMBER 2011 MAY BE TREATED AS RETURN OF 3 CHANDRAPRAKASH SHARMA (HUF) INCOME FILED IN RESPONSE TO THE NOTICE UNDER SECTION 148 OF THE ACT. THE ASSESSING OFFICER IN THE COURSE OF ASSESSMENT PROCEEDINGS RECEIVED INFORMATION FROM T HE DGIT (INV.), MUMBAI, THAT THE ASSESSEE HAD ENTERED INTO HAWALA TRANSACTIONS AGGREGATING TO ` 84,46,199, IN THE FINANCIAL YEAR 2010 11 FROM THE FOLLOWING PARTIES: SR. NO. NAME OF PARTY AMOUNT ( ` ) 1. RAJ TRADERS 10,13,513 2. AJAY STONE 28,84,266 3. SPICE TRADING CO. 10,44,450 4. DEEP TRADERS 2,72,953 5. MARUDHAR MARBLE AND GRANITES 5,99,079 6. SHAH ASSOCIATES 26,45,405 TOTAL: 84,59,666 5. THE ASSESSING OFFICER OBSERVED THAT THE AFORESAID SELLERS HAD ADMITTED ON OATH IN THE STATEMENT RECORDED BY THE SALES TAX DEPARTMENT THAT THEY HAD NOT CARRIED OUT ACTUAL TRADING ACTIVITY AND ONLY ISSUED BOGUS BILLS / ACCOMMODATION ENTRIES. THE SUBMISSIONS OF THE ASSESSEE THAT THE ASSESSING OFFICER HAS RECORDED THE FIGURES OF GROSS PURCHASE WHICH ARE INCLUSIVE OF VAT IN THE REASONS RECORDED AND THAT WILL RENDER THE REASONS RECORDED AND THE NOTICE UNDER SECTION 148 AS INVALID, IS FOUND TO BE WITHOUT MERIT. AC CORDINGLY, THE ASSESSING OFFICER RELYING UPON CERTAIN JUDICIAL PRECEDENTS , PROCEEDED TO ESTIMATE THE PROFIT ON THE ALLEGED NON GENUINE PURCHASES BY APPLYING THE RATE 4 CHANDRAPRAKASH SHARMA (HUF) OF 2 0 % OF ` 84,59,666 I.E., ` 16,91,933 . THOUGH , THE ASSESSEE CONTESTED THE AFORESAID ADDI TION S BEFORE THE FIRST APPELLATE AUTHORITY, HOWEVER, THE LEARNED COMMISSIONER (APPEALS) WHILE GRANTING PARTIAL RELIEF TO THE ASSESSEE RESTRICTED IT TO ` 7 LAKH, BY OBSERVING AS FOLLOWS: CONSIDERING THAT THE SAID PARTIES HAD NOT BEEN PRODUCED BY THE APPELLANT AND THAT THERE WERE SALES BY THE APPELLANT CORRESPONDING TO PURCHASES FROM THOSE PARTIES, THE AO HAS CORRECTLY HELD THAT THE APPELLANT MUST HAVE PURCHASED THE MATERIAL FROM GREY MARK ET AND THE ACTUAL PURCHASE BILLS WOULD HAVE BEEN INFLATED, SINCE THE APPELLANT WOULD HAVE HAD SAVINGS FROM SUCH PURCHASES ON ACCOUNT OF VAT, CASH DISCOUNT AND LOWER RATES. ON THIS GROUND THE REJECTION OF THE BOOKS OF ACCOUNTS, SINCE PART OF THE PURCHASES W ERE FOUND UNVERIFIABLE, IS UPHELD. HOWEVER, THE AO HAS MADE AN ADDITION IN RESPECT OF PROFIT ELEMENT ON SUCH PURCHASES @ 20%, WHICH APPEARS TO BE ON THE HIGHER SIDE, IN THE PRESENT FACTS AND CIRCUMSTANCES OF THE CASE WHEN THE GROSS PROFIT RATE OF 18.36 0 % H AS BEEN DECLARED BY THE APPELLANT. FROM ITS BUSINESS OF CIVIL AND FURNITURE CONTRACT WORK. IN THIS REGARD, I FIND THAT THE VAT HAS BEEN CHARGED AT THE RATE OF 5% AND 12.5% AND TOTAL AMOUNT OF VAT ON SUCH PURCHASES FROM THE 6 PARTIES IS RS.698,478/ - . CONSID ERING THE SAVINGS ON ACCOUNT OF PURCHASE IN THE GREY MARKET ON ACCOUNT OF VAT, CASH DISCOUNT AND LOWER RATES ETC, HE ADDITION TO BE MADE IS FAIRLY ESTIMATED AT RS.700,000/ - . ACCORDINGLY, THE AO IS DIRECTED TO RESTRICT THE ADDITION ON ACCOUNT OF PROFIT ELEM ENT ON BOGUS PURCHASES TO RS.700,000/ - AND ALLOW RELIEF TO THE APPELLANT. IN VIEW OF ABOVE DISCUSSION, THE GROUNDS RELATING TO QUANTUM OF ADDITION ARE PARTLY ALLOWED AND GROUNDS CHALLENGING THE VALIDITY OF ASSESSMENT ARC DISMISSED. 6. STILL AGGRIEVED, THE ASSESSEE IS IN FURTHER APPEAL BEFORE THE TRIBUNAL. 7. BEFORE US, THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED UPON THE ORDER OF THE ASSESSING OFFICER WHEREAS THE LEANED COUNSEL FOR THE 5 CHANDRAPRAKASH SHARMA (HUF) ASSESSEE ON THE OTHER HAND RELIED UPON THE OBSERVA TIONS OF THE LEARNED COMMISSIONER (APPEALS). 8. CONSIDERING THE RIVAL SUBMISSIONS AND ON A PERUSAL OF THE PERUSED THE MATERIAL ON RECORD, WE FIND THAT THE SALES MADE BY THE ASSESSEE CORRESPONDING TO THE PURCHASE FROM THE ABOVE SIX PARTIES THE ASSESSING OFFIC ER WAS OF THE VIEW THAT THE ASSESSEE MUST HAVE PURCHASED THE MATERIAL FROM GREY MARKET AND THE ACTUAL PURCHASE BILLS WOULD HAVE BEEN INFLATED AS THE ASSESSEE WOULD HAVE OTHERWISE SAVED MONEY FROM PURCHASE ON ACCOUNT OF NOT PAYMENT VAT, CASH DISCOUNT AND LO WER RATES AND CONSEQUENTLY REJECTION OF BOOKS OF ACCOUNT BY THE ASSESSING OFFICER WAS CONFIRMED BY THE LEARNED COMMISSIONER (APPEALS). THE LEARNED COMMISSIONER (APPEALS), HOWEVER, OBSERVED THAT SINCE THE ADDITION MADE IN RESPECT OF PROFIT ELEMENT ON THE AL LEGED PURCHASES FROM THE ABOVE PARTIES @ 20% WAS ON HIGHER SIDE, THEREFORE, HE RESTRICTED IT TO ` 7 LAKH CONSIDERING THE SAVINGS ON ACCOUNT OF PURCHASE IN THE GREY MARKET ON ACCOUNT OF ACTUAL VAT SAVED BY THE ASSESSEE. IN VIEW OF THESE OBSERVATIONS, WE ARE OF THE CONSIDERED OPINION THAT THE LEARNED COMMISSIONER (APPEALS) HAS RIGHTLY RESTRICTED THE ADDITION TO ` 7 LAKH WHICH IS BASED ON THE ACTUAL VAT PAYABLE TO THE SALES TAX DEPARTMENT. THE ASSESSEE INDULGED IN THIS TRAN SACTION TO SAVE THE TAX ONLY. THUS, WE DECLINE TO INTERFERENCE IN THE ORDER OF THE LEARNED COMMISSIONER (APPEALS) ON THIS ISSUE WHICH 6 CHANDRAPRAKASH SHARMA (HUF) IS HEREBY UPHELD. CONSEQUENTLY, THE GROUNDS OF APPEAL RAISED BY THE REVENUE ARE DISMISSED. 9. IN THE RESULT, APPEAL BY THE R EVENUE IS DISMISSED. ORDER PRONOUNCED OPEN COURT ON 8.03.2021 SD/ - RAVISH SOOD JUDICIAL MEMBER SD/ - S. RIFAUR RAHMAN, ACCOUNTANT MEMBER MUMBAI, DATED: 8.03.2021 COPY OF THE ORDER FORWARDED TO : (1) THE ASSESSEE; (2) THE REVENUE; (3) THE CIT(A); (4) THE CIT, MUMBAI CITY CONCERNED; (5) THE DR, ITAT, MUMBAI; (6) GUARD FILE . TRUE COPY BY ORDER PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY ASSISTANT REGISTRAR ITAT, MUMBAI