BHARMAL H. BISHNOI, MUMBAI V. INCOME TAX OFFICER WARD 19(1)(2), MUMBAI

ITA 5022/MUM/2017

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 8160 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-12-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 24-07-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: N HEMALATHA
• Keywords: Bogus purchase; Accommodation entries; Onus to prove

Judgement Text

- IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI , BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER ./ I.T.A. NO. 5022/MUM/2017 ( / ASSESSMENT YEAR: 2009 - 10 ) SHRI BHARMAL H. BISHNOI R. NO. 7, 1 ST FLOOR, 62, ARJUN NURSEE BHAVAN, 4 TH KUMBHARWADA LANE, MUMBAI - 400 004 / VS. INCOME TAX OFFICER - WARD 19(1)(2), MATRU MANDIR, TARDEO, MUMBAI - 400 007 ./ ./ PAN/GIR NO. A AGPB 8810 M ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI SATISH MODI / RESPONDENT BY : MS. N. HEMALATHA / DATE OF HEARING : 12.10.2017 / DATE O F PRONOUNCEMENT : 12.12 .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) DATED 25.04.2017 AND PERTAINS TO ASSESSMENT YEAR 2009 - 10. 2. T HE ISSUE RAISED IS THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) E RRED IN RETAINING AND CONFIRMING AN AMOUNT OF RS.23,84,847/ - BEING 12.5% OF THE TOTAL PURCHASES AMOUNTING TO RS.2,00,48,911/ - AS REDUCED BY AN AMOUNT OF RS.1,21,267/ - 2 ITA NO. 5022/MUM/2017 (A.Y. 2009 - 10) SHRI BHARMAL H. BISHNOI VS. ITO BEING THE GROSS PROFIT ON ALLEGED B OGUS PURCHASES ALREADY DISCLOSED IN THE ACCOUNTS BY THE PETITIONER IN ACCOUNTS AND RETURN OF INCOME FILED BY PETITIONER. 3. I N THIS CASE , T HE ASSESSEE E - FILED HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2009 - 10 ON 30.09.2009 DECLARING A TOTAL INCOME OF R S.6,47,234/ - . THE RETURN WAS P ROCESSED U/S. 143(1). SUBSEQUENTLY, THE ASSESSING OFFICER R ECEIVED INFORMATION FROM THE DGIT(INV.), MUMBAI WHO IN TURN RECEIVED INFORMATION FROM THE SALES TAX DEPARTMENT ABOUT HAWALA ENTRY PROVIDERS ON THE BASIS OF WHICH THE C ASE WAS REOPENED U/S/. 147. THE INFORMATION WAS THAT THE SALES TAX DEPARTMENT HAS EXERCISED DUE D ILIGENCE WHICH REVEALED THAT THE ASSESSEE WAS INVOLVED IN TAKING A CCOMMODATION ENTRIES OF BOGUS PURCHASES FROM 9 PARTIES AMOUNTING TO RS.2,00,48,911/ - . THE DE TAILS OF THE PARTIES ARE AS UNDER: - SR.NO. NAME OF THE HAWALA DEALER AMOUNT (RS.) 1. MARUTI IMPEX 15,39,521 / - 2. ASIAN METAL INDUSTRIES 7,58,148 / - 3. PRIME STEEL IMPEX 2,12,009 / - 4. SUN STAR STEEL 99,92,236 / - 5. ROOPAM IMPEX 24,03, 520/ - 6. CHIRAG STEEL CENTRE 4,37,845/ - 7. RAHUL STEELS 1,46,239 / - 8. LUCKY STEEL (INDIA) 41,17,015/ - 9. SHUBHAM METAL CORPORATION 4,42,378/ - TOTAL 2,00,48,911 / - 4. THE SALES TAX DEPARTMENT HAS CLASSIFIED THESE PARTIES AS HAWALA DEALERS. IT WAS EVIDENT FROM THE REP ORT OF THE SALES TAX DEPARTMENT AND STATEMENT RECORDED THAT PURCHASES SHOWN BY THE ASSESSEE FROM THESE PARTIES ARE BOGUS AND NOTHING BUT 3 ITA NO. 5022/MUM/2017 (A.Y. 2009 - 10) SHRI BHARMAL H. BISHNOI VS. ITO ACCOMMODATION ENTRIES TO INFLATE PURCHASES TO REDUCE TAXABLE PROFITS/INCOME. ON THE BASIS OF T HIS INFORMATION, THE AO I SSUED NOTICE U/S.148 AND COMPLETED THE ASSESSMENT U/S.143(3) R.W.S.147 OF THE I.T. ACT ON 24.3.2015. 5. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER ASKED THE ASSESSEE TO FURNISH DETAILS OF THE PURCHASES ALONG WITH THE NAME, ADDRESS , BILL AND VOUCHER NO. WITH DATE, DESCRIPTION OF GOODS PURCHASED, QUANTITY, RATE, AMOUNT, GOODS DISPATCHED, MODE OF TRANSPORTATION ETC. NOTICES U/S.133(6) WERE ISSUED TO THE PARTIES MENTIONED SUPRA BUT THE SAME HAVE BEEN RETURNED BY THE POSTAL AUTHORITIES WITH THE REMARKS 'LEFT' OR 'NOT KNOWN'. THE ASSESSING OFFICER HELD THAT THE BURDEN TO PROVE THE EXISTENCE OF THE PARTIES AND THE GENUINENESS OF THE PURCHASES LIES ON THE ASSESSEE AND ASSESSEE HAS FAILED TO DISCHARGE THE ONUS CAST ON IT AND HE TREATED THE P URCHASES AS NON GENUINE. THEREFORE THE AO CONCLUDED THAT THE PURCHA SES MADE ARE BOGUS/NON GENUINE AND MADE AN ADDITION OF RS.30, 07, 337/ - BEING 15% OF THE TOTAL NON GENUINE PURCHASES O F RS. 2,00,48,911/ - . 6. A GAINST THE ABOVE ORDER , THE ASSESSEE APPEALED BE FORE THE LD. COMMISSIONER OF INCOME TAX (APPEALS). THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HELD AS UNDER: THE HON'BLE ITAT, AHMEDABAD 'C' BENCH IN THE CASE OF VIJAY PROTEINS LTD. VS. ACIT 58 ITD 0428 HELD THAT IN SIMILAR CIRCUMSTANCES, 25% OF THE PURC HASE PRICE ACCOUNTED THROUGH FICTITIOUS INVOICES HAS TO BE DISALLOWED. THE HON'BLE HIGH COURT OF GUJARAT IN THE CASE OF SANJAY OIL CAKES V/S CIT 316 ITR 0274 DEALT WITH SIMILAR CASE WHERE SOME OF THE ALLEGED SUPPLIERS WHO HAD ISSUED BILLS TO THE ASSESSEE W ERE 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 INFLATED COULD NOT BE RULED OUT AND THEREFORE THE 4 ITA NO. 5022/MUM/2017 (A.Y. 2009 - 10) SHRI BHARMAL H. BISHNOI VS. ITO HON'BLE HIGH COURT HAS UPHELD THE DECI SION 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 ITR 0451 HELD THAT ONCE THE SALE IS ACCEPTED BY THE AO, THE VERY BASIS OF PURCHASES COULD NOT BE Q UESTIONED. 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 ESTIMATION VARIES WITH THE NATURE OF BUSINESS AND NO UNIFORM YARDSTICK COULD BE ADOPTED. G IVEN THE FACTS AND CIRCUMSTANCES OF THE INSTANT CASE, I FIND IT REASONABLE TO ESTIMATE THE GROSS PROFIT ON THE ALLEGED BOGUS PURCHASES AT 12.5%. THE AO IS DIRECTED TO EST IMATE THE GP AT 12.5% OF THE ALLEGED BOGUS PURCHASES AND FURTHER REDUCE THE T ALREADY DECLARED BY THE APPELLANT ON THESE PURCHASES FROM SUCH ESTIMATED OF 12.5% . 7 . AGAINST THE ABOVE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS), THE ASSESSEE IS IN APPEAL BEFORE THE ITAT. 8 . I HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. I FIN D 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 ACCOMMODATI ON 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 ASSESSIN G 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 5 ITA NO. 5022/MUM/2017 (A.Y. 2009 - 10) SHRI BHARMAL H. BISHNOI VS. ITO BILLS. MERE PREPARATION OF DOCUMENTS FOR PURCHASES CANNOT CONTROVERT OVERWHELMING EVIDENCE TH AT THE PROVIDER OF THESE BILLS IS BOGUS AND NON - EXISTENT. 9 . THE SALES TAX DEPARTMENT IN ITS ENQUIRY HAS FOUND THE PARTIES TO BE PROVIDING BOGUS ACCOMMODATION ENTRIES. THE ASSESSING OFFICER ALSO ISSUED NOTICES TO THESE PARTIES AT THE ADDRESSES PROVIDED B Y THE ASSESSEE. ALL THESE NOTICES HAVE RETURNED UNSERVED. ASSESSEE HAS NOT BEEN ABLE TO PRODUCE ANY OF THE PARTIES. NEITHER THE ASSESSEE HAS BEEN ABLE TO PRODUCE ANY CONFIRMATION FROM THESE PARTIES. IN SUCH CIRCUMSTANCES, THERE IS NO DOUBT THAT THESE PARTI ES 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 NON - 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 COURT DECISION IN THE CASE OF SUMATI DAYAL VS. CIT [1995] 214 ITR 801 (SC) A ND 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. 10 . 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% 6 ITA NO. 5022/MUM/2017 (A.Y. 2009 - 10) SHRI BHARMAL H. BISHNOI VS. ITO 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 APPLICABLE ON THE FACTS OF THE CASE. 11 . 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 THE CASE OF N K INDUSTRIES VS. DY. CIT VIDE ORDER DATED 20.06.2016, W HEREIN 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 WAS EXPOUNDED THAT WHEN PURCHASE BILLS HAVE BEEN FOUND TO BE BOGUS, 100% DISALLOW ANCE 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. 12. 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 HONB LE 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 APPEAL (C) NO.8956/2015 DECIDED ON 06.04.2015 WHEREBY THE SUPREME COURT HAS DISMI SSED 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 7 ITA NO. 5022/MUM/2017 (A.Y. 2009 - 10) SHRI BHARMAL H. BISHNOI VS. ITO 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. 13. HOWEVER, I NOTE THAT THIS IS NOT AN APPEAL BY THE REVENUE. HENCE, IT WILL NOT BE APPROPRIATE TO TA KE AWAY THE RELIEF ALREADY GRANTED BY THE REVENUE TO THE ASSESSEE. HENCE, I CONFIRM THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS). 1 4 . IN THE RESULT , THIS APPEAL FILED BY THE ASSESSEE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 12.12. 20 17 SD/ - (S HAMIM YAHYA ) / A CCOUNTANT MEMBER MUMBAI ; DATED : 12.12.2017 . . ./ ROSHANI , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APP ELLANT 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