SANJAY H. SHAH, MUMBAI V. INCOME TAX OFFICER-13(2)(4), MUMBAI

ITA 5063/MUM/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 0302 (ITAT-MUMBAI)
• Duration Of Justice: 6 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-02-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Assessment Year: 2009-2010
• Appeal Filed On: 26-07-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Bogus purchase; Rule of consistency; Onus to prove
• Section: 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL E, BENCH MUMBAI, BEFORE SHRI R.C.SHARMA, ACCOUTANT MEMBER & SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO.5063/MUM/2017 FOR (ASSESSMENT YEAR :2009-10) ITA NO.5064/MUM/2017 FOR (ASSESSMENT YEAR :2010-11) ITA NO.5065/MUM/2017 FOR(ASSESSMENT YEAR :2011-12) SHRI SANJAY H SHAH 8, K.M.MEHTA BUILDING AHMEDABAD STREET CARNAC BUNDER MUMBAI- 400 009 VS. ITO 13(2)(4) MUMBAI PAN/GIR NO.AADPS7258P APPELLANT ) .. RESPONDENT ) ASSESSEE BY SHRI NEELKANTH KHANDELWAL ADVOCATE REVENUE BY SHRI RAJESH KUMAR YADAV DATE OF HEARING 09/02/2018 DATE OF PRONOUNCEMENT 16/02/2018 ORDER UNDER SECTION 254(1) OF INCOME-TAX ACT PER PAWAN SINGH JUDICIAL MEMBER: 1. THESE ARE THE APPEALS FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT(A)-28, MUMBAI DATED 4 TH APRIL 2017 FOR A.Y.2009-10, 2010-11 AND 2011-12 IN THE MATTER OF ORDER PASSED U/S.143(3 ) R.W.S. 147 OF THE IT ACT. IN ALL APPEALS THE ASSESSEE HAS RAISED IDENTICAL GROUNDS OF APPEAL EXCEPT VARIATION OF FIGURE OF ADDITIONS OF 2 5% OF BOGUS PURCHASES AND 1% COMMISSION ON SUCH PURCHASES. ALL APPEALS WERE HEARD TOGETHER AND ARE DECIDED BY CONSOLIDATED ORDE R FOR THE SAKE OF ITA NO.5063/MUM/2017 TO 5065/MUM/2017 SHRI SANJAY H SHAH 2 CONVENIENCE. FOR APPRECIATIONS OF THE FACTS WE ARE REFERRING THE FACTS FOR ASSESSMENT YEAR 2009-10 IN ITA NO 5063/M/2017. 2. FACTS IN BRIEF ARE THAT THE ASSESSEE IS CARRYING HI S BUSINESS IN THE NAME AND STYLE AS M/S HITESH STEEL SYNDICATE. THE A SSESSEE IS IN BUSINESS TRADING IN IRON AND STEEL. THE ASSESSEE HA S FILED RETURN OF INCOME FOR A.Y.2009-10, ON 29.09.2011 DECLARING T OTAL INCOME OF RS, 6,01,930/-. THE CASE WAS RE-OPENED U/S 147 ON A CCOUNT OF INFORMATION RECEIVED BY THE SALES TAX DEPARTMENT, S TATE OF MAHARASHTRA THAT CERTAIN PERSONS HAVE PROVIDED ENTR IES OF BOGUS PURCHASE BILLS TO TAX PAYERS. THE NAME OF THE ASSE SSEE ALSO APPEARED IN THE LIST OF BENEFICIARY WHO HAVE OBTAINED BOGUS BILLS. THUS THE ASSESSING OFFICER ON THE BASIS OF SUCH INFORMATION REOPENED THE ASSESSMENT. THEREFORE, NOTICE U/S 148 DATED 28.03,2 013 WAS ISSUED. THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3)/1 45(3)/147 ON 21.03.2014. DURING THE REASSESSMENT PROCEEDING, THE AO NOTED THAT ASSESSEE HAS SHOWN THE PURCHASES OF IRON & STEEL FR OM 11 PARTIES FOR RS. 3,53,13,219/-. THE ASSESSEE WAS ASKED TO SUBSTA NTIATE THE GENUINENESS OF THE PURCHASES. THE ASSESSEE FURNISHE D THE DETAIL ABOUT THE PURCHASES. THE ASSESSEE ALSO EXPLAINED TH AT PURCHASES WERE MADE THROUGH BROKERS AND NOT DIRECTLY FROM THE PARTIES. THE ASSESSEE FURNISHED STOCK REGISTER AND CORRESPONDING SALE OF THE MATERIAL. FURTHER, ASSESSEE SUBMITTED LEDGER ALONG WITH TAX INVOICES ITA NO.5063/MUM/2017 TO 5065/MUM/2017 SHRI SANJAY H SHAH 3 FOR PURCHASES, STATEMENT OF CORRESPONDING SALES AGA INST THE PURCHASES, BANK STATEMENT HIGHLIGHTING PROOF, DETAI LS OF VENDORS ETC. ALL THE NECESSARY DETAILS AND EVIDENCES REQUIRED IN COURSE OF ASSESSMENT PROCEEDINGS WERE SUBMITTED . THE ASSESSING OFFICER NOT ACCEPTED THE SUBMISSIONS OF THE ASSESSEE. THE ASSES SING OFFICER CONCLUDED THAT NO PROOF OF TRANSPORTATION AND LORRY RECEIPT WAS FILED. THE ASSESSING OFFICER DISALLOWED 25% OF THE TOTAL P URCHASES SHOWN THROUGH 11 PARTIES. THE ASSESSING OFFICER FURTHER O BSERVED THAT THE ASSESSEES PURCHASES ARE THROUGH BROKERS. THE ASSES SEE HAS DEBITED COMMISSION PAYMENT OF RS.36,638/-. THUS, THE ASSES SING OFFICER TOOK HIS VIEW THAT THE BROKERAGE CLAIM IS ALSO PERT AINS TO ALL PURCHASES AND THEREBY FURTHER DISALLOWED 1% OF TOTA L PURCHASES I.E DISALLOWED RS. 3,52,132/- ON APPEAL BEFORE THE LD . CIT(A), THE ACTION OF ASSESSING OFFICER IN REOPENING AS WELL AS ADDITIONS WERE SUSTAINED. THUS, FURTHER AGGRIEVED BY THE ORDER OF LD. CIT(A), THE ASSESSEE HAS FILED THE PRESENT APPEAL BEFORE US. 3. WE HAVE HEARD THE LEARNED AR OF THE ASSESSEE AND TH E LD. DR FOR THE REVENUE AND PERUSED THE MATERIAL AVAILABLE ON RECOR D. THE LD. AR OF THE ASSESSEE SUBMITS THAT ALL THE TRANSACTIONS A RE GENUINE AND INCONSONANCE WITH THE SALES TAX ACT, INCOME-TAX ACT AND OTHER LAWS APPLICABLE. THE ASSESSEE HAD ALREADY BROUGHT ON REC ORD LEDGER ACCOUNTS OF ALL THE PARTIES, COPIES OF THE BILLS AN D THE BANK ITA NO.5063/MUM/2017 TO 5065/MUM/2017 SHRI SANJAY H SHAH 4 STATEMENTS SHOWING PAYMENTS MADE TO THOSE PARTIES A GAINST THE CONSIDERATION, ETC. THE ASSESSING OFFICER HAS RELIE D SOLELY ON THE REPORT OF THE SALES TAX DEPARTMENT AND THE REPORT O F INVESTIGATION TEAM OF REVENUE. THESE VENDORS COLLECTED TAX FROM T HE PURCHASER (I.E. ASSESSEE) BUT NOT DEPOSITED INTO THE TREASURY AND NOT CO- OPERATED WITH THE VAT DEPARTMENT. HENCE, LIST OF SU SPICIOUS DEALER WAS PUBLISHED AND THOSE BUYERS HAVE TAKEN INPUT TAX CREDIT ON THE PURCHASES EFFECTED FROM THOSE VENDORS HAVE BEEN DIS ALLOWED. THE ASSESSING OFFICER RELIED UPON THE SAME AND HAD IGNO RED THE MATERIALS AND DETAILS BROUGHT BEFORE HIM. SIMILARLY , THE LD. CIT (A) HAS NOT GIVEN ANY FINDING ON THE VARIOUS DOCUMENTAR Y EVIDENCES FURNISHED BY ASSESSEE. IT WAS SUBMITTED THAT THE DI SALLOWANCE @ 25% OF THE PURCHASES IS TOO HIGH. THE ASSESSEE HAS DECLARED GP AT 1.03% OF HIS BUSINESS BASED ON SUCH PURCHASES. THE VAT APPLICABLE ON STEEL & IRON IS ONLY 4%. THE DISALLOWANCE OF CO MMISSION PAYMENT IS BASED ON ASSUMPTION AND PRESUMPTIONS AND WITHOUT ANY SUBSTANCE OR MATERIAL IN POSSESSION OF ASSESSING OF FICER. THE LD AR FOR THE ASSESSEE PRAYED FOR DELETING THE ENTIRE DIS ALLOWANCES. IN SUPPORT OF HIS SUBMISSION, THE LEARNED AR RELIED U PON THE FOLLOWING JUDGMENTS: GEOLIFE ORGANICE V/S ACIT (3699/MUM/2016) DATED 05. 05.2017 ITA NO.5063/MUM/2017 TO 5065/MUM/2017 SHRI SANJAY H SHAH 5 DY. CIT 5(3)(1) V/S M/S ALLIED BLENDER AND DISTILLE RS P LTD (ITA NO. 2447/MUM/2015) DATED 21.02.2017 ACIT V/S TARLA SHAH (ITA NO. 5295/MUM/2013) DATED 02.02.2016 ITO - 25(2)(2) V/S SHRI PARESH ARVIND GANDH I (ITA NO. 5706/MUM/2013 DATED 13.05.2015) ASSTT. COMMISSIONER OF INCOME TAX - 25(2) V/S S HRI RAMILA PRAVIN SHAH (ITA NO.5246/MUM/2013) DATED 5.03.201 5 SHRI GANPATRAJ A SANGHAVI V/S ACIT (ITA NO2826/MUM/ 2013) ITO VS. DEEPAK POPATLAL GALA (ITAT MUMBAI) RAMESH KUMAR & CO VS. AC1T (ITAT MUMBAI) DCIT 25(3) V/S SHRI RAJEEV G. KALATHIL (ITA NO.6727/MUM/2012 DATED 20.08.2014) THE COMMISSIONER OF INCOME TAXI, MUMBAI VS M/S. NIK UNJ EXIMP ENTERPRISES PVT. LTD. 4. ON THE OTHER HAND, THE LD. DR FOR THE REVENUE SUPPO RTED THE ORDERS OF AUTHORITIES BELOW. THE LD. DR FOR THE REVENUE AR GUED THAT THE INVESTIGATION WING OF THE INCOME-TAX DEPARTMENT MAD E FULL-FLEDGED ENQUIRY. THE PARTIES FROM WHOM THE ASSESSEE HAS SHO WN THE PURCHASES ARE BOGUS HAWALA DEALERS. THE HAWALA DEAL ERS ARE INDULGED IN ISSUING BOGUS BILLS WITHOUT DELIVERY OF ANY MATERIAL OR GOODS. THE ASSESSEE OBTAINED ACCOMMODATION BILLS ON LY IN ORDER TO INFLATE THE EXPENSES AND TO BRING DOWN THE PROFITAB ILITY IN ORDER TO AVOID THE TAX. THE LD. DR FOR THE REVENUE PRAYED FO R DISMISSAL OF THE APPEAL. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF THE PAR TIES AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. DURIN G THE RE- ITA NO.5063/MUM/2017 TO 5065/MUM/2017 SHRI SANJAY H SHAH 6 ASSESSMENT PROCEEDING, THE AO NOTED THAT THE ASSESS EE HAS SHOWN THE PURCHASES FROM THE FOLLOWING11 PARTIES: SL.NO. NAME OF THE PARTY AMOUNT 1 REKHA TRADING CO. 18,04,466/- 2 SIDDHIVINAYAK TRADING CO. 65,20,468/- 3 M.R. CORPORATION 43,27,696/- 4 BALAJI TRADING 24,71,051/- 5 SUN ENTERPRISES 32,68,835/- 6 RENUKA SALES 13,76,709/- 7 R.J. CORPORATION 31,66,866/- 8 NATIONAL TRADING CO. 15,23,205/- 9 DEEPALI ENTERPRISES 80,80,068/- 10 MAHAVIR ENTERPRISES 16,13,313/- 11 SAMARTH TRADING CO. 11,54,542/- TOTAL RS. 3,53,13,219/- 6. THE ASSESSEE WAS ASKED TO SUBSTANTIATE THE GENUINEN ESS OF THE PURCHASES. THE ASSESSEE SUBMITTED THAT THE PURCHASE S WERE MADE THROUGH BROKERS AND NOT DIRECTLY WITH THE PARTIES. THE ASSESSEE FURNISHED THE COPY OF BILLS OF CORRESPONDING PURCHA SES, LEDGER ACCOUNT OF THE PARTIES AND PROOF OF PAYMENT THROUGH BANKING CHANNEL. THE ASSESSEE ALSO FURNISHED THE CORRESPOND ING SALE AND DETAILS OF VENDORS. THE SUBMISSION OF ASSESSEE WAS NOT ACCEPTED BY AO HOLDING THAT NO LORRY RECEIPT, TRANSPORTATION DE TAILS, WEIGHT RECEIPT, EXCISE AND GATE PASS WAS PRODUCED BY THE A SSESSEE. THE AO FURTHER OBSERVED THAT THE ASSESSEE FAILED TO PRODUC E THE SUPPLIER. THE AO CONCLUDED THAT THERE WAS NO ACTUAL DELIVERY OF G OODS AND THAT ASSESSEE OBTAINED ACCOMMODATION BILL. THE PURCHASES WERE MADE BY CASH PAYMENT. THUS, THE AO REJECTED THE BOOKS OF AC COUNT OF THE ITA NO.5063/MUM/2017 TO 5065/MUM/2017 SHRI SANJAY H SHAH 7 ASSESSEE. THE AO DISALLOWED THE 25% OF THE TOTAL PU RCHASES FROM 11 PARTIES. THE AO WORKED OUT THE DISALLOWANCE OF RS. 88,28,305/-. THE AO FURTHER DISALLOWED 1% ON ACCOUNT OF BROKERAG E AND COMMISSION PAYMENT AND WORKED OUT THE COMMISSION AN D BROKERAGE OF RS. 3,53,132/-. NO INQUIRY WAS MADE FROM THE PER SONS WHO HAVE MADE PURCHASES FROM ASSESSEE. THE ASSESSING OFFICER HAS NOT IDENTIFIED, WHICH WERE HAWALA DEALERS, FROM WHOM TH E ASSESSEE HAS PURCHASED THE MATERIAL. THE ASSESSEE HAS NOT PRODUC ED THE PARTIES AND TRANSPORT CHALLAN. WE HAVE NOTED THAT DURING TH E ASSESSMENT PROCEEDING, THE AO HAS RELIED UPON THE INFORMATION RECEIVED FROM SALES TAX DEPARTMENT ABOUT THE VARIOUS ENTRY PROVID ERS. THE AO HAS NOT MADE ANY INDEPENDENT ENQUIRY. THE AO HAS NO T BROUGHT ANY INCRIMINATING EVIDENCE AGAINST THE ASSESSEE EXCEPT RELYING UPON THE REPORT/INFORMATION OF SALE TAX DEPARTMENT AND SURVE Y ACTION CONDUCTED BY INCOME-TAX DEPARTMENT ON THE ALLEGED H AWALA DEALERS. THE AO HAS NOT SPECIFIED AS TO WHICH OF TH E HAWALA DEALERS DISCLOSED THE NAME OF ASSESSEE AS BENEFICIARY OF AC COMMODATION BILL. THE AO DISALLOWED THE 25% OF TOTAL COST OF PU RCHASES IN ABSENCE OF PROOF OF DELIVERY. THE LD. CIT(A) CONFI RMED THE ACTION OF AO ON HIS OBSERVATION THAT ONUS TO PROVE WAS UPO N THE ASSESSEE AND THAT ASSESSEE FAILED TO DISCHARGE HIS ONUS. BE FORE LD. CIT(A), THE ASSESSEE SPECIFICALLY CONTENDED THAT THE TMT BA RS WERE ITA NO.5063/MUM/2017 TO 5065/MUM/2017 SHRI SANJAY H SHAH 8 PURCHASED AND PROVIDED TO THE THIRD PARTIES (PURCHA SERS). NO INVESTIGATION AGAINST SUCH STATEMENT WAS CONDUCTED BY LD CIT(A). THE SUBMISSION OF ASSESSEE WAS DISCARDED BY LD CIT( A) HOLDING AS ASTONISHING AND HIGHLY UNIQUE. THE LOWER AUTHORITIE S HAVE NOT EXAMINED THE TRADE PRACTICE. THE LOWER AUTHORITY HA S NOT DISPUTED THE CORRESPONDING SALE AGAINST THE PURCHASES. NO EV IDENCE WAS BROUGHT ON RECORD ABOUT THE OBSERVATION OF AO ABOUT THE CASH PURCHASES. 7. THE LD. AR OF THE ASSESSEE IN HIS SUBMISSION CLAIME D THAT VAT RATE IS ONLY 4%. THE RATE OF VAT IS NOT DISPUTED BY REVE NUE. IN OUR VIEW CONSIDERING THE NATURE OF TRADE OF ASSESSEE AN D THE FACTS OF THE PRESENT CASE, THE DISALLOWANCE MADE BY AO AND SUSTA INED BY LD. CIT(A) IS EXCESSIVE AND UNREASONABLE. IN OUR VIEW T HE ASSESSEE HAS GIVEN SUFFICIENT EVIDENCES TO SUBSTANTIATE ITS PURC HASES, ON WHICH NO FINDING WAS GIVEN BY THE LOWER AUTHORITIES. MOREOVE R, NO INCRIMINATING MATERIAL IS BROUGHT ON RECORD EXCEPT ASSUMPTION AND PRESUMPTION OF AO THAT ASSESSEE HAS AVAILED ACCOMMO DATION BILLS. THE ADDITION OF ALLEGED BOGUS PURCHASED ARE BASED O N THIRD PARTY INFORMATION. WE ARE OF THE CONSIDERED OPINION THAT UNDER INCOME TAX ACT ONLY REAL INCOME CAN BE TAXED BY THE REVENU E. WE MAY FURTHER NOTE THAT EVEN IN CASES WHERE THE WHOLE TRA NSACTION IS NOT VERIFIABLE DUE TO VARIOUS REASONS, THE ONLY TAXABLE IS THE TAXABLE ITA NO.5063/MUM/2017 TO 5065/MUM/2017 SHRI SANJAY H SHAH 9 INCOME COMPONENT AND NOT THE SUBSTANTIAL PART OF TH E TRANSACTION. THUS, KEEPING IN VIEW THE ASSESSEE HAS PAID THE VAT AT THE APPLICABLE RATE ON ALL THE PURCHASES. FURTHER, IN OUR VIEW NO YARDSTICK FORMULA CAN BE APPLIED WHILE ASSESSING TH E AMOUNT OF REVENUE LEAKAGE. MOREOVER, THE REVENUE HAS NOT DISP UTED THE CONSUMPTION OF STEEL. HENCE, KEEPING IN VIEW OF ANY POSSIBILITY OF THE REVENUE LEAKAGE IN THE PRESENT CASE, THE DISALL OWANCE OF PURCHASES OF STEEL AT 5% OF THE PURCHASES WOULD MEE T THE END OF JUSTICE. SIMILAR VIEW WAS TAKEN BY HONBLE GUJARAT HIGH COURT IN CIT VS SIMITH P SETH [2013(356 ITR 451)] AND BY HON BLE BOMBAY HIGH COURT IN HARIRAM BHAMBANI ITA NO 313 OF 2013. 8. THUS, RESPECTFULLY FOLLOWING THE DECISION OF HONBL E GUJARAT HIGH COURT IN CIT VS SIMIT P SETH SUPRA AND BY HONBLE B OMBAY HIGH COURT IN HARIRAM BHAMBANI (SUPRA), THE DISALLOWANCE OF COST OF PURCHASES OF STEEL IS RESTRICTED TO 5% OF THE PURCH ASES. THE ASSESSING OFFICER IS DIRECTED ACCORDINGLY. IN THE RESULT THE GROUND NO.1 OF THE APPEAL IS PARTLY ALLOWED . 9. GROUND NO.2 RELATES TO DISALLOWANCE/ADDITION ON ACC OUNT OF COMMISSION. WE HAVE NOTED THAT THE DISALLOWANCE OF COMMISSION IS BASED ON ASSUMPTION AND PRESUMPTIONS OF ASSESSING O FFICER. THE ASSESSING OFFICER HAS NOT BROUGHT ANY MATERIAL ON R ECORD TO ITA NO.5063/MUM/2017 TO 5065/MUM/2017 SHRI SANJAY H SHAH 10 SUBSTANTIATE HIS ACTION. THUS, THE ADDITION ON ACCO UNT OF 1% OF TOTAL PURCHASES ADDED BY AO IS DELETED. 10. GROUND NO.3 RELATES TO LEVY OF INTEREST. THIS GROUN D OF APPEAL IS CONSEQUENTIAL AND NEED NOT ADJUDICATION. 11. GROUND NO. 4 RELATES TO REJECTION OF BOOKS OF ACCO UNT. WE HAVE PARTLY SUSTAINED THE ADDITION. THUS, IN OUR VIEW, T HE DISCUSSIONS ON THIS GROUND OF APPEAL HAVE BECOME ACADEMIC. 12. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY AL LOWED. ITA NO. 5064/MUM/2017 FOR AY 2010-11 13. THE ASSESSEE HAS RAISED IDENTICAL GROUNDS OF APPEA L AS RAISED IN APPEAL FOR AY 2009-10, THE FACTS OF THE APPEAL UNDE R CONSIDERATION IS ALMOST IDENTICAL EXCEPT VARIATION OF FIGURES OF ADDITIONS. SINCE WE HAVE PARTLY ALLOWED THE APPEAL FOR EARLIER YEAR. TH US, FOLLOWING THE PRINCIPLE OF CONSISTENCY, THE APPEAL FOR THIS YEAR IS ALSO PARTLY ALLOWED WITH SIMILAR OBSERVATIONS. ITA NO. 5065/MUM/2017 FOR AY 2011-12 14. THE ASSESSEE HAS RAISED IDENTICAL GROUNDS OF APPEAL AS RAISED IN APPEAL FOR AY 2009-10 & 2011-12, THE FACTS OF THE A PPEAL UNDER CONSIDERATION IS ALMOST IDENTICAL EXCEPT VARIATION OF FIGURES OF ADDITIONS. SINCE WE HAVE PARTLY ALLOWED THE APPEAL FOR EARLIER YEARS. THUS, FOLLOWING THE PRINCIPLE OF CONSISTENCY, THE A PPEAL FOR THIS YEAR IS ALSO PARTLY ALLOWED WITH SIMILAR OBSERVATIONS. ITA NO.5063/MUM/2017 TO 5065/MUM/2017 SHRI SANJAY H SHAH 11 15. IN THE RESULT, ALL APPEALS ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 16/02/20 18 SD/- (R.C.SHARMA) SD/- (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI; DATED 16/02/2018 S.K.,PS COPY OF THE ORDER FORWARDED TO : BY ORDER, (ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE.