INCOME TAX OFFICER 17(2)(1), MUMBAI V. SHRI JATIN SHANKARLAL DOSHI , MUMBAI

ITA 5091/MUM/2019

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 0378 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-03-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 05-08-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANJAY J SETHI
• Keywords: Bogus purchase; Accommodation entries
• Section: 143(3); 133(6); 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH SMC MUMBAI BEFORE SHRI SAKTIJIT DEY (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 5091/MUM/2019 ASSESSMENT YEAR: 2009-10 & ITA NO. 5092/MUM/2019 ASSESSMENT YEAR: 2010-11 & ITA NO. 5095/MUM/2019 ASSESSMENT YEAR: 2011-12 INCOME TAX OFFICER 17(2)(1), ROOM NO. 123B, 1 ST FLOOR, AAYAKAR BHAVAN, CHURCHGATE MUMBAI-400020. VS. SHRI JATIN SHANKARLAL DOSHI ROOM NO. 44, BIBIJAAN STREET, NAGDEVI, MUMBAI-400 003 PAN NO. AACPD 4714 E APPELLANT RESPONDENT REVENUE BY : MR. SANJAY J. SETHI, DR ASSESSEE BY : NONE DATE OF HEARING : 24/02/2021 DATE OF PRONOUNCEMENT : 16/03/2021 ORDER PER N.K. PRADHAN, A.M. THE CAPTIONED APPEALS FILED BY THE REVENUE ARE DIRE CTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-5 6, MUMBAI [IN SHORT CIT(A)] AND ARISE OUT OF ORDER U/S 143(3) R.W.S. 147 OF THE INCOME TAX ACT, 1961 (THE ACT). SHRI JATIN SHANKARLAL DOSHI ITA NOS. 5091, 5092 & 5095/M/2019 2 THOUGH THE CASE WAS FIXED FOR HEARING ON 24.02.2021 , NEITHER THE ASSESSEE NOR HIS AUTHORIZED REPRESENTATIVE APPEARED BEFORE THE BENCH ON THE ABOVE DATE. AS THERE IS NON-COMPLIANCE BY THE ASSES SEE, WE ARE PROCEEDING TO DISPOSE OFF THESE APPEALS AFTER EXAMINING THE MATER IALS AVAILABLE ON RECORD AND AFTER HEARING THE LD. DEPARTMENTAL REPRESENTATIVE ( DR). AS COMMON ISSUES ARE INVOLVED, WE ARE DECIDING THESE APPEALS BY A CONSOL IDATED ORDER FOR THE SAKE OF CONVENIENCE. WE BEGIN WITH THE AY 2009-10. 2. THE GROUNDS OF APPEAL READ AS UNDER : 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE ID. CIT(A) JUSTIFIED IN RESTRICTING THE ADDITION MADE BY THE A O TO 6.75% OF BOGUS PURCHASE AS AGAINST THE ADDITION MADE AT 7.28% OF THE BOGUS PURCHASES, IGNORING THAT THE ASSESSES WAS UNABLE TO PROVE THE GENUINENESS OF THE PURCHASES EITHER BY PRODUCING THE SUPPLIERS FOR EXAMINATION OR BY FURNI SHING OTHER SUBSTANTIATING DOCUMENTS WHICH WERE REQUIRED BY THE ASSESSING OFFI CER? 2. WHETHER ON THE FACTS AND CIRCUMSTANCE OF THE CASE A ND IN LAW, THE ID. CIT(A) ERRED IN OVERLOOKING THE FACT THAT THE ADDITION MAD E BY THE AO WAS BASED ON CREDIBLE INFORMATION RECEIVED FROM THE SALES TAX DE PARTMENT, WHEREIN IT WAS ESTABLISHED THAT THE ASSESSEE HAS TAKEN MERE ACCOMM ODATION ENTRIES/BOGUS BILLS FROM THE SUPPLIERS WITHOUT ACTUALLY MAKING PU RCHASES FROM THEM? 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE FILED HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR (AY) 2009-10 ON 26.0 9.2009 DECLARING TOTAL INCOME OF RS.2,26,170/-. THE NATURE OF BUSINESS OF THE ASSESSEE IS TRADING IN MS ROUND BAR, MS PATTA, MS SHEETS. ON RECEIPT OF INFOR MATION FROM THE SALES TAX DEPARTMENT, GOVERNMENT OF MAHARASHTRA THAT THE ASSE SSEE HAD OBTAINED BOGUS PURCHASE BILLS AMOUNTING TO RS.58,24,569/- FROM 11 PARTIES, THE ASSESSING SHRI JATIN SHANKARLAL DOSHI ITA NOS. 5091, 5092 & 5095/M/2019 3 OFFICER (AO) ISSUED NOTICE U/S 148 DATED 19.03.2014 FOR REOPENING THE ASSESSMENT. DURING THE COURSE OF RE-ASSESSMENT PROC EEDINGS, THE ASSESSEE FILED BEFORE THE AO, COPIES OF (A) LEDGER ACCOUNTS OF THE PURCHASE PARTY ; (B) PURCHASE BILL ; AND (C) PAYMENT DETAILS TO PURCHASE PARTIES. HOWEVER, THE AO NOTED THAT TILL THE DATE OF ASSESS MENT ON 05.03.2015, THE ASSESSEE COULD NOT PRODUCE BEFORE HIM THE DETAILS O F THE BROKER/AGENT OR THE SUPPLIERS AND ALSO THE MONTHLY CASH FLOW STATEMENT. FURTHER, THE AO NOTED THAT THE ASSESSEE FAILED TO PRODUCE BEFORE HIM THE DETAI LS OF TRANSPORTATION OF THE MATERIALS SUPPOSED TO HAVE BEEN PURCHASED FROM THE SAID HAWALA DEALERS. THUS CONSIDERING THE FACTS OF THE CASE AND TAKING INTO A CCOUNT THE AVERAGE GP FOR THE YEAR 2006-07, 2007-08 AND 2008-09 WHICH COMES TO 7. 28%, THE AO ESTIMATED THE PROFIT @ 7.28% ON THE DISPUTED PURCHASES OF RS. 58,24,569/- WHICH COMES TO RS.4,24,029/-. ACCORDINGLY, HE MADE AN ADDITION OF RS.4,24,029/-. 4. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE F ILED AN APPEAL BEFORE THE LD. CIT(A). WE FIND THAT VIDE ORDER DATED 22.05.2019, THE LD. CIT(A) RESTRICTED THE DISALLOWANCE TO 6.75% OF THE TRANSACTIONS COVER ED BY ACCOMMODATION ENTRIES BY HOLDING THAT : 9. ORDINARILY ONCE PURCHASE IS HELD BOGUS, ENTIRE PURCHASE IS TO BE DISALLOWED AS A BOOK ENTRY HAVING EFFECT OF REDUCING PROFIT IS CR EATED SOLELY FOR REDUCING NORMAL PROFIT. HOWEVER JUDICIAL DECISIONS NEED TO BE FOLLO WED BY WHICH A FIXED PER CENT OF SAME I.E. BOGUS ENTRY/ACCOMMODATION ENTRY IS ADDED TO INCOME [EG: DCIT, 14(1)(2), MUMBAI VS. M/S FAGIOLI INDIA PVT. LTD. (ITA NO. 455 7 & 4558/MUM/2015 DATED 28.07.2017, WHICH INTER ALIA CONSIDERED DECISION OF HON. SUPREME COURT IN N K PROTIENS VS. DCIT (SLP 759 TO 2017) DATED 16.01.201 7]. IN THE CITED CASE OF M/S FAGIOLI INDIA PVT. LTD. GROSS PROFIT WAS 37% AND HO N. ITAT DECIDED THAT ESTIMATE OF SHRI JATIN SHANKARLAL DOSHI ITA NOS. 5091, 5092 & 5095/M/2019 4 PROFIT BE 12.5% ON THE FIGURE OF ACCOMMODATION ENTR Y OR BOGUS PURCHASE. FURTHER IN SHRI MEHUL K. MEHTA PROP. VAISHNAVI ENTERPRISES VS. INCOME TAX OFFICER 15(1)(3) MUMBAI IN I.T.A. NO. 3227/MUM/2016 DATED 14.03.2017 IN THE CONTEXT OF THE CASE THE HON. ITAT ORDERED AS UNDER: WE DO NOT FIND ANY INFIRMITY IN THE WELL REASONED A PPELLATE ORDER OF LEARNED CIT(A) WHICH WE ARE INCLINED TO AFFIRM/SUSTAIN EXCE PT THAT, IN OUR CONSIDERED VIEW, THE END OF JUSTICE WILL BE MET IN THE INSTANT CASE IF GP IS ESTIMATED TO TUNE OF 12.5% OF THE PURCHASES FROM THESE ALLEGED H AWALA OPERATORS WHICH WILL COVER ANY LEAKAGE OF REVENUE BY WAY OF VAT, CO MMISSION ETC. . THUS, AS COMPARED TO THE GP RATIO AT 7.11% DECLARED BY THE A SSESSEE, WE ARE ESTIMATING GP RATIO AT THE RATE OF 12.5% ON THE SAI D BOGUS PURCHASES WHEREIN THE ASSESSEE WILL BE ALLOWED CREDIT OF DECLARED GP RATIO OF 7.11% AND NET ADDITION TO GP RATIO SHALL BE TO THE TUNE OF 5.39% ON BOGUS PURCHASES, HENCE, WE ALLOW PARTIAL RELIEF TO THE ASSESSEE. WE ORDER A CCORDINGLY. IT CAN BE SEEN THAT IN THE ABOVE THE HON. ITAT HAS REDUCED ADDITION FURTHER VIS-A-VIS THE ORIGINALLY ACCEPTED FIGURE OF 12.5%. FURTHER IN CASE OF M/S GEOLIFE ORGANICS VS. ACIT ITA NOS. 3699, 4276, 4917, 4760/MUM/2016 OF HO N. ITAT, MUMBAI DATED 05.05.2017, DESPITE ALL DEFICIENCIES IN ASSESSMENT PROCEDURE, AS AGAINST 12.5% DISALLOWANCE MADE BY ASSESSING OFFICER, THE HON. IT AT FIXED THE RATE OF DISALLOWANCE AT A LOWER LEVEL. 10. ALL SUBMISSIONS OF THE APPELLANT IS DULY CONSID ERED. THE BUSINESS IS IN TRADING MS SHEETS, MS ROUND BAR AND MS PATTA. THE ASSESSING OFFICER DISALLOWED 7.28% OF THE ALLEGED AMOUNT OF ACCOMMODATION ENTRIES. ON FAC TS AND CIRCUMSTANCES OF THE CASE, I, AFTER CONSIDERING ALL ASPECTS, INCLUDING S TRENGTH OF EVIDENCE BROUGHT TO RECORD (THE FACT THAT NO NOTICE UNDER SECTION 133(6 ) WAS ISSUED TO ALLEGED ACCOMMODATION ENTRY PROVIDERS, POINTING TO INADEQUA TE ENQUIRY AND NOT BRINGING ADEQUATE MATERIAL ON RECORD WHICH ACT NEGATIVELY ON ASSESSING OFFICER), HOLD THAT DISALLOWANCE BE KEPT AT 6.75% (BEING GROSS PROFIT R ATE) OF TRANSACTIONS COVERED BY SHRI JATIN SHANKARLAL DOSHI ITA NOS. 5091, 5092 & 5095/M/2019 5 ACCOMMODATION ENTRIES. THIS IS IN CONSONANCE WITH A LTERNATE GROUND (GROUND 3.4) OF THE APPELLANT BEFORE ME. 5. BEFORE US, THE LD. DR SUBMITS THAT THE ESTIMATIO N MADE BY THE AO @ 7.28% ON THE DISPUTED PURCHASES OF RS.58,24,569/- W HICH COMES TO RS.4,24,029/- BE RESTORED. WE HAVE HEARD THE LD. DR AND PERUSED THE RELEVANT MATERIALS ON RECORD. WE FIND MERIT IN THE ORDER OF THE LD. CIT(A), WHERE IN HE HAS CONSIDERED THE NATURE OF BUSINESS OF THE ASSESSEE AND THE NATURE O F INVESTIGATION DONE BY THE AO AND THEREAFTER, HELD THAT DISALLOWANCE BE KEPT A T 6.75% (BEING GROSS PROFIT RATE) OF TRANSACTIONS COVERED BY ACCOMMODATION ENTR IES. THE LD. CIT(A) HAS TAKEN NOTE OF THE FACT THAT THE AO HAS NOT ISSUED N OTICE U/S 133(6) TO THE SAID PARTIES TO VERIFY THE GENUINENESS OF PURCHASES. WE AGREE WITH THE ABOVE FINDINGS OF THE LD. CIT(A) AND AFFIRM HIS ORDER. AGAIN CONSIDERING THE FACTS AND CIRCUMSTANCES OF T HE CASE FOR AY 2010- 11, THE LD. CIT(A) HAS RESTRICTED THE DISALLOWANCE TO 8.25% (BEING A RATE HIGHER THAN GROSS PROFIT RATE ON ACCOUNT OF FACT THAT DEFI CIENCY IS REASONABLY PROVED BY THE ASSESSING OFFICER) OF TRANSACTIONS COVERED BY A CCOMMODATION ENTRIES. FOR AY 2011-12, THE LD. CIT(A) HAS FOLLOWED THE RA TE APPLIED FOR AY 2009-10 I.E. 6.75% OF VALUE OF ACCOMMODATION ENTRIE S FOUND TO BE BOGUS ON THE GROUND THAT THE FACTS FOR AY 2011-12 ARE SIMILAR TO AY 2009-10. SHRI JATIN SHANKARLAL DOSHI ITA NOS. 5091, 5092 & 5095/M/2019 6 6. CONSIDERING THE ABOVE, WE AFFIRM THE ORDER OF TH E LD. CIT(A) FOR THE AFOREMENTIONED YEARS AND DISMISS THE APPEALS FILED BY THE REVENUE. ORDER PRONOUNCED IN THE OPEN COURT ON 16/03/2021. SD/- SD/- (SAKTIJIT DEY) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI; DATED: 16/03/2021 RAHUL SHARMA, SR. P.S. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSISTANT REGISTRAR) ITAT, MUMBAI