ANAND GOVIND VYAS, MUMBAI V. INCOME TAX OFFICER-19(1)(1), MUMBAI

ITA 5072/MUM/2018

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 3421 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-11-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 04-09-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AKHTAR HANSARI
• Keywords: Bogus purchase; Tangible material; Competent authority
• Section: 143(3); 142(1); 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. 5072/MUM/2018(A.Y : 2009-10) ANAND GOVIND VYAS 27, VRUNDAVAN BUILDING 12 TH KHETWADI, NEAR HARKISANDAS HOSPITAL, KHETWADI, MUMBAI-400 004 PAN : ABVPV2601C VS ITO 19(1)(1), MUMBAI APPELLANT RESPONDEDNT APPELLANT BY SHRI PAVAN VED AR RESPONDENT BY SHRI AKHTAR H ANSARI SR DR DATE OF HEARING 19-11-2019 DATE OF PRONOUNCEMENT 25-11-2019 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)-53, MUMBAI DATED 24-07-2018 FOR THE ASSESSME NT YEAR 2009- 10. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL 1.) THE ID. CIT (A) ERRED IN CONFIRMING VALIDITY O F REOPENING FOR VARIOUS REASONS. 2.) THE ID. CIT(A) ERRED IN CONFIRMING PARTIAL ADDI TION FOR SO CALLED UNVERIFIABLE PURCHASES DESPITE SUBMISSION OF AFFIDA VIT OF SUPPLIERS, PAYMENT BY ACCOUNT PAYEE CHEQUES TO SUPPLIERS, PROO F OF TRANSPORTATION OF GOODS, CORRESPONDING SALE, ADMISSION OF FACTUM O F PURCHASE BY LAO IN ASSESSMENT ETC REASONS. 3.) WITHOUT PREJUDICE TO ABOVE, THE ID. CIT (A) WAS NOT JUSTIFIED IN CONFIRMING THE QUANTUM OF ADDITION FOR SO CALLED UN VERIFIED PURCHASES. 4.) BOTH THE LOWER AUTHORITIES WERE POSSIBLY WILLFU LLY PERVERSE IN PASSING THE ORDER THE LAO POSSIBLY BACKDATED THE ORDER AS T HE ORDER WAS PASSED BEFORE THE DATE OF HEARING. HENCE COST BE AWARDED T O THE INNOCENT APPELLANT. 2 ITA 5072/MUM/2018 ANAND GOVIND VYAS 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE, AN INDIVIDUAL, FILED HIS RETURN OF INCOME ON 22-09-2009 DECLARING INCOME AT RS.8,05,640/-. THE RETURN WAS PROCESSED U/S 143(1) OF THE I.T. ACT , 1961 ACCEPTING THE RETURNED INCOME. SUBSEQUENTLY, T HE CASE WAS RE-OPENED UNDER SECTION 147 ON THE BASIS OF INFORMATION RECEIVED FROM SALE TAX DEPARTMENT, GOVERNMENT OF MAHARASHTRA INFORMING THAT CERTAIN HA WALA OPERATORS WERE INDULGING IN PROVIDING ACCOMMODATION BILLS WITHOUT ACTUAL DELIVERY OF GOODS. THE SALE TAX DEPARTMENT, GOVERNMENT OF MAHAR ASHTRA REFERRED THE LIST OF SUCH HAWALA DEALERS AND THE BENEFICIARY TO THE DGIT (INVESTIGATION), MUMBAI. THE NAME OF ASSESSEE APPEA RED IN THE LIST OF BENEFICIARIES. THE ASSESSEE ALLEGEDLY MADE THE PUR CHASES OF RS.1,31,09,897 /- FROM SUCH HAWALA DEALERS. ON THE BASIS OF INFORMATION, THE ASSESSING OFFICER MADE A BELIEF THAT THE INCOME OF THE ASSESSEE ESCAPED ASSESSMENT, THEREFORE, RE-OPENED THE ASSESS MENT UNDER SECTION 147. NOTICE UNDER SECTION 148 DATED 11-02-2014 WAS ISSUED TO THE ASSESSEE. SUBSEQUENTLY, THE ASSESSING OFFICER ISSU ED NOTICE U/S 142(1) ON 16-05-2015 AND THE ASSESSEE WAS ALSO SUPPLIED WITH RECORDED REASONS FOR RE-OPENING. THE ASSESSING OFFICER THEREAFTER ISSUE D NOTICES U/S 143(2) AND U/S 142(1) WERE ISSUED ON 27-11-2014. DURING THE ASSESSMENT, THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS SHOWN PURCHASES FROM THE 3 ITA 5072/MUM/2018 ANAND GOVIND VYAS FOLLOWING PARTY, WHO WAS DECLARED AS HAWALA DEALERS BY THE SALE TAX DEPARTMENT, GOVERNMENT OF MAHARASHTRA: 1 K R C TRADING CO. PVT LTD RS.1,31,09,897/- TOTAL RS.1,31,09,897/- 3. DURING THE ASSESSMENT THE ASSESSEE WAS ASKED TO FUR NISH NAME OF SELLER WITH ADDRESS, BILLS AND VOUCHER, DESCRIPTION OF GOO DS, QUANTITY, RATE AND AMOUNT, MODE OF TRANSPORTATION WITH VEHICLE NUMBER AND PAYMENT DETAILS. THE DETAILS OF CORRESPONDING SALES WERE A LSO REQUIRED BY ASSESSING OFFICER. THE ASSESSING OFFICER RECORDED T HAT THE ASSESSEE COULD NOT PRODUCE ANY EVIDENCE. THE ASSESSING OFFICER ISS UED NOTICE UNDER SECTION 133(6), WHICH WAS RETURN BACK WITH THE REMA RK LEFT / NOT TRACEABLE. AFTER ANALYSING THE BOOKS OF THE ASSESSE E AND THE EVIDENCES FURNISHED BY ASSESSEE, THE AO CONCLUDED THAT THE PU RCHASES MADE BY ASSESSEE FROM THAT PARTY WERE NOT GENUINE AS CLAIME D AND DEBITED IN HIS P&L ACCOUNT. THE AO REJECTED THE BOOKS OF ACCOUNT OF THE ASSESSEE. THE AO CONCLUDED THAT BY SHOWING THE PURCHASES FROM HAWALA PARTIES, THE ASSESSEE SUPPRESSED THE PROFIT TO REDUCE THE TA X LIABILITY. THE AO ACCORDINGLY DISALLOWED 12.5% OF THE AGGREGATE OF NO N GENUINE PURCHASES. ON APPEAL, ACTION OF THE ASSESSING OFFI CER WAS CONFIRMED. FURTHER AGGRIEVED, ASSESSEE HAS FILED FURTHER APPEA L BEFORE US. 4 ITA 5072/MUM/2018 ANAND GOVIND VYAS 4. WE HAVE HEARD THE SUBMISSIONS OF THE LD.AR FOR THE ASSESSEE AND THE LD. DR OF THE REVENUE. THE LD.AR OF THE ASSESSEE SU BMITS THAT THE PURCHASES SHOWN BY THE ASSESSEE ARE GENUINE. GROUN D 1 RELATES TO VALIDITY OF REOPENING. THE LD.AR OF THE ASSESSEE S UBMITS THAT THERE WAS NO VERIFICATION OF THE OPINION BY AO IN THE REA SONS RECORDED. THE APPROVAL OF JOINT COMMISSIONER WAS WITHOUT APPLICAT ION OF MIND. THE AO NOT SUPPLIED THIS INFORMATION DESPITE MAKING REQ UEST. THE AO NOT SUPPLIED COPY OF MATERIAL ON THE BASIS OF WHICH REA SONS OF REOPENING WAS RECORDED. THE LD.AR OF THE ASSESSEE SUBMITS TH AT IN ABSENCE OF SUFFICIENT MATERIAL FOR REOPENING, THE REOPENING WA S INVALID. THE LD.AR OF THE ASSESSEE RELIED UPON THE DECISION OF H ON BLE APEX COURT IN CIT VS ODEON BUILDERS PVT LTD IN REVIEW PE TITION IN CIVIL APPEAL NO.9604-9605 OF 2018 ORDER DATED 21-08-2019. 5. ON THE OTHER HAND, THE LD. DR FOR THE REVENUE SUPPO RTED THE ORDER OF LOWER AUTHORITIES. THE LD. DR FURTHER SUBMITS THAT IN THE PRESENT CASE, NO SCRUTINY ASSESSMENT U/S 143(3) WAS PASSED. THE ASSESSMENT WAS REOPENED BY ISSUE OF NOTICE U/S 148 DATED 11-02-201 4 WHICH WAS WITHIN FOUR YEARS FROM THE END OF RELEVANT ASSESSME NT YEAR. NO OBJECTION WAS FILED BY THE AO AGAINST THE REOPENING OF THE ASSESSMENT. THEREFORE, NO APPROVAL FROM THE COMPETENT AUTHORITY WAS REQUIRED. 5 ITA 5072/MUM/2018 ANAND GOVIND VYAS 6. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PART IES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE HAVE NOTED THA T CASE WAS REOPENED U/S 147 AND ACCORDINGLY NOTICE U/S 148 WAS ISSUED O N 11-02-2014, WHICH WAS DULY SERVED UPON THE ASSESSEE ON 19-02-20 14. THE ASSESSMENT INVOLVED IN THE PRESENT APPEAL IS AY 200 9-10. ADMITTEDLY, NOTICE U/S 148 WAS ISSUED WITHIN FOUR YEARS FROM TH E END OF RELEVANT ASSESSMENT YEAR. ACCORDINGLY, NO APPROVAL WAS REQU IRED U/S 151. SO FAR AS OTHER OBJECTION OF LD.AR OF THE ASSESSEE ARE CONCERNED THAT THE AO HAS NOT SUPPLIED THE INFORMATION. WE HAVE NOTED THAT THE ASSESSEE CONTESTED THE PRECEDING / REOPENING AND NO SUCH OBJ ECTION WAS RAISED NOR ANY OTHER OBJECTION FOR NON SUPPLY OF OTHER MAT ERIAL WAS RAISED WITHIN ONE MONTH FROM RECEIPT OF NOTICE U/S 142(1) OR 143(2). 7. WE HAVE NOTED THAT THE ASSESSEE NEITHER BEFORE TRI BUNAL NOR BEFORE THE LD CIT(A) RAISED ANY GROUNDS THAT THE FINDING OF FA CTS RECORDED BY ASSESSING OFFICER ARE PERVERSE OR THE ASSESSEE FURN ISHED COMPLETE DETAILS TO SUBSTANTIATE HIS PURCHASE. WE HAVE ALSO PERUSED THE STATEMENT OF FACTS FILED BY THE ASSESSEE BEFORE LD CIT (A) AND NO SUCH FACTS THAT ANY MATERIAL ON THE BASIS OF WHICH THE A SSESSING OFFICER MADE BELIEF TO REOPEN THE ASSESSMENT WAS MADE, WAS DEMAN DED DURING ASSESSMENT OR ANY OBJECTION WAS RAISED. THE ASSESSE E HAS NOT SHOWN 6 ITA 5072/MUM/2018 ANAND GOVIND VYAS ANY EVIDENCE TO US THAT HE DEMANDED CROSS EXAMINATI ON OF THE HAWALA DEALERS. THE HON BLE GUJARAT HIGH COURT IN PEASS INDUSTRIAL ENGINEERS (P) LTD (2016) 76 TAXMANN.COM 106 (GUJARA T) HELD THAT W HERE ASSESSING AUTHORITY HAD TANGIBLE MATERIAL IN F ORM OF SPECIFIC INFORMATION RECEIVED BY INVESTIGATION WING THAT ASS ESSEE HAD BEEN BENEFICIARY OF BOGUS TRANSACTIONS, IT WAS THOROUGHL Y JUSTIFIED IN ISSUING NOTICE FOR REASSESSMENT. THEREFORE, CONSIDERING THE DECISION OF HON BLE GUJARAT HIGH COURT IN PEASS INDUSTRIAL ENGINEER S (P) LTD (SUPRA) WE DO NOT FIND ANY MERIT IN THE GROUND OF A PPEAL RAISED BY THE ASSESSEE. 8. THE CASE LAW RELIED UPON BY THE LD.AR OF THE ASSESS EE IS NOT HELPFUL TO THE ASSESSEE AS THE FACTS OF THAT CASE ARE DIFFEREN T. IN THE SAID THERE IS CLEAR FINDING OF THE LOWER THAT THE ASSESSEE SUBSTA NTIATED ITS PURCHASES BY FURNISHING SUFFICIENT DOCUMENTARY EVIDENCES. HOW EVER, IN THE PRESENT CASE THE ASSESSING OFFICER HAS CLEARLY RECO RDED THAT THE ASSESSEE FAILED TO SUBSTANTIATE THE PURCHASES. AT THE COST O F REPETITION WE MAY MENTIONED THAT THE ASSESSEE HAS NO WHERE PLEASES TH AT THE FINDING OF THE ASSESSING OFFICER ARE PERVERSE. IN VIEW OF THE AFO RESAID DISCUSSIONS, WE DO NOT FIND ANY MERIT IN GROUND NO. 1 OF THE APPEAL AND THE SAME IS DISMISSED. 7 ITA 5072/MUM/2018 ANAND GOVIND VYAS 9. GROUNDS 2 & 3 RELATE TO 12.5% OF DISALLOWANCE OF PU RCHASES. THE LD.AR OF THE ASSESSEE SUBMITS THAT THE ADDITION IS BASED ONLY ON THE INFORMATION OF THIRD PARTIES. THE AO HAS NOT VERIF IED THE INFORMATION. THE ASSESSEE WAS NOT PROVIDED CROSS EXAMINATION OF THE PARTIES. THE ASSESSEE FURNISHED ALL THE PURCHASE BILLS ALONG WIT H THE PROOF OF PAYMENTS THROUGH CHEQUES. THE ASSESSEE ALSO FURNIS HED THE PROOF OF TRANSPORTATION. THE TRANSPORTER WAS PAID THROUGH C HEQUE. THE ASSESSEE ALSO FURNISHED THE PROOF OF SALE OF THE MATERIAL. THE ASSESSEE ALSO FILED THE AFFIDAVIT OF SELLER CONFIRMING THE SALE. THE L D.AR SUBMITS THAT THE ASSESSEE HAS PROPERLY RECONCILED THE PURCHASE AND S ALES. THEREFORE, NO ADDITION WAS WARRANTED. THE LD. AR FOR THE ASSESSEE ALSO FILED CERTAIN BULLET POINTS ON HIS SUBMISSIONS. 10. ON THE OTHER HAND, THE LD. DR FOR THE REVENUE SUPPO RTED THE ORDERS OF LOWER AUTHORITIES. THE LD. DR SUBMITS THAT THE INV ESTIGATION WING OF INCOME-TAX DEPARTMENT MADE FULL-FLEDGED ENQUIRY TO UNEARTH THE MODUS OPERANDI OF THE HAWALA TRADERS, WHO WERE INDULGED I N PROVIDING THE BOGUS BILLS WITHOUT ACTUAL DELIVERY OF THE GOODS. THE ASS ESSEE IS ONE OF THE BENEFICIARIES OF THE PURCHASES FROM THE HAWALA DEAL ERS. THE ASSESSING OFFICER HAS ALREADY GRANTED SUFFICIENT RELIEF TO TH E ASSESSEE AND THE ASSESSEE IS NOT ENTITLED FOR FURTHER RELIEF AND THE APPEAL OF THE ASSESSEE IS 8 ITA 5072/MUM/2018 ANAND GOVIND VYAS LIABLE TO BE DISMISSED. THE ASSESSEE NEVER ASKED F OR CROSS EXAMINATION OF THE PARTIES. THE NOTICE SENT TO THE SUPPLIER WAS RE TURN BACK AS UNSERVED. 11. WE HAVE CONSIDERED THE SUBMISSIONS OF THE LD. A.R O F THE ASSESSEE AND D.R FOR THE REVENUE AND ALSO GONE THROUGH THE ORDER S OF THE LOWER AUTHORITIES. DURING THE REASSESSMENT THE ASSESSING OFFICER ASKED THE ASSESSEE TO FURNISH SALES BILLS, TRANSPORTATION DOC UMENTS, DELIVERY CHALLAN, BILLS, LORRY RECEIPTS, COPY OF LEDGER ACCOUNT AND D ATE WISE PAYMENT DETAILS, BANK STATEMENTS, STOCK REGISTER, AND SALES TAX RETU RN. THE ASSESSING OFFICER RECORDED THAT THE ASSESSEE COULD NOT FILE V ITAL DOCUMENTS LIKE DELIVERY CHALLAN, GOODS INWARDS REGISTER AND NO DO CUMENTS THAT GOODS WERE DELIVERED WAS FILED BY THE ASSESSEE. MERE FIL ING OF EVIDENCE THAT PAYMENTS WAS MADE THROUGH CHEQUE ID NOT SUFFICIENT. ON THE BASIS OF HIS OBSERVATION THE ASSESSEE OFFICER CONCLUDED THAT MER E MAKING PAYMENT THROUGH CHEQUES IS NOT SUFFICIENT. THE PARTIES FROM WHOM THE ASSESSEE MADE PURCHASES WERE IDENTIFIED AS HAWALA DEALERS. W E HAVE SEEN THAT THE ASSESSING OFFICER WHILE PASSING ASSESSMENT ORDER MA DE ADDITION ON ACCOUNT OF BOGUS PURCHASES @ 12.5% OF THE AGGREGATE OF PURCHASES SHOWN FROM THE ALLEGED HAWALA TRADERS. THE LD CIT(A ) CONFIRMED THE ACTION OF THE ASSESSING OFFICER ON THE SIMILAR LINE S. THE ASSESSING OFFICER HAS NOT MADE ANY INDEPENDENT INQUIRY. 9 ITA 5072/MUM/2018 ANAND GOVIND VYAS 12. FROM THE RECORD, WE NOTED THAT THE ASSESSEE IS MAN UFACTURER, STOCKIST AND DEALERS IN M.S / EN&D BRIGHT BARS/ROUNDS/ HEX/ SQUA RE/ CARBON STEEL AND ALLOY STEEL. THE ASSESSEE HAS ALREADY SHOWN A G P @ 3.75%. IN OUR VIEW IF 12.5% OF THE ADDITION IS SUSTAINED, THE GP OF ASSESSEE WOULD INCREASE WHICH IS UNREASONABLE IN THE BUSINESS OF A SSESSEE. WE ARE OF THE CONSIDERED OPINION THAT UNDER INCOME TAX ACT ONLY R EAL INCOME CAN BE TAXED BY THE REVENUE. WE MAY FURTHER CONCLUDE THAT EVEN IF THE TRANSACTION IS NOT VERIFIABLE, THE ONLY TAXABLE IS THE TAXABLE INCOME COMPONENT AND NOT THE ENTIRE TRANSACTION. AND AFTER CONSIDERING THE FACTS OF THE CASE AND THE RIVAL CONTENTIONS OF THE PARTIE S WE ARE OF THE OPINION THAT IN ORDER TO FULFIL THE GAP OF REVENUE LEAKAGE THE DISALLOWANCE OF REASONABLE PERCENTAGE OF SUCH PURCHASES WOULD MEET THE END OF JUSTICE . CONSIDERING THE FACTS THAT THE ASSESSEE HAS ALREADY DECLARED GP @ 3.75%, THEREFORE, WE DIRECT THE ASSESSING OFFICER TO RES TRICT THE DISALLOWANCE ON ACCOUNT OF BOGUS PURCHASE TO THE EXTENT OF 12.5% MI NUS GP DECLARED BY ASSESSEE. 13. WE HAVE FURTHER NOTED THAT THE LD AR FOR THE ASSES SEE HAS FILED COPY OF DECISION OF BOMBAY HIGH COURT IN CIT VS NIKUNJ EXIM P (P) LTD (2013) 35 TAXMANN.COM 384(BOM) AND CHHUGAMAL RAJPAL VS S.P . CHALIHA (79 ITR 603SC) , HOWEVER, NO RELIANCE WAS MADE ON THESE DECISIONS, DURING THE SUBMISSIONS MADE BY LD AR FOR THE ASSESSEE. THE OTHER CASE LAW 10 ITA 5072/MUM/2018 ANAND GOVIND VYAS RELIED BY LD AR FOR ASSESSEE IN CIT VS ODEON BUILDERS PVT LTD (SUPRA) IS NOT HELPFUL TO THE ASSESSEE AS THE FACTS OF THAT CASE ARE DIFFERENT. IN THE SAID THERE IS CLEAR FINDING OF THE LOWER THAT T HE ASSESSEE SUBSTANTIATED ITS PURCHASES BY FURNISHING SUFFICIEN T DOCUMENTARY EVIDENCES. IN THE RESULT, GROUND NOS. 2 & 3OF THE APPEAL ARE P ARTLY ALLOWED. 14. GROUND NO. 4 RELATES TO PASSING OF ASSESSMENT ORDE R ON BACK DATE. THE LD AR FOR THE ASSESSEE NOT MADE ANY SUBMISSIONS, TH EREFORE, THIS GROUND OF APPEAL IS TREATED AS NOT PRESSED AND DISMISSED A CCORDINGLY. 15. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS PART LY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 25-11-2019. SD/- SD/- (SHAMIM YAHYA) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIALMEMBER MUMBAI, DT : 25 TH NOVEMBER, 2019 PK/- COPY TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR /TRUE COPY/ BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI