ASST CIT CIR 2, KALYAN V. PRABHAKAR PAYARELAL MAHAJAN, BADLAPUR

ITA 5236/MUM/2015

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 9594 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-09-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2009-2010
• Appeal Filed On: 05-11-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RANJEET MITTAL
• Keywords: Bogus purchase; Unexplained expenditure
• Section: 69C; 143(3); 133(6); 147

Judgement Text

P A G E | 1 ITA NO. 5236 & 5238/MUM/2015 ACIT VS. SHRI PRABHAKAR PYARELAL IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI BEFORE SHRI R.C. SHARMA , AM AND SHRI RAVISH SOOD, JM ./ I.T.A. NO. 5236 & 5238/MUM/2015 ( / ASSESSMENT YEAR: 2009 - 10 & 2010 - 11) THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE - 2, KALYAN 2 ND FLOOR, MOHAN PLAZA, WAYLE NAGAR, KHADAKPADA, KALYAN (W), 421301. / VS. SHRI PRABHAKAR PYARELAL MAHAJAN, PROPRIETOR OF M/S. ANUKUL CONSTRUCTION CO., SAVITA SADAN, GANESH NAGAR, R AMESHADI,BADLAPUR (W). ./ ./ PAN/GIR NO. AFPPP7431L ( /REVENUE ) : ( / ASSESSEE) / REVENUE BY : SHRI RANJEET MITTAL, D .R. / ASSESSEE BY : NONE / DATE OF HEARING : 11/09 /2017 / DATE OF PRONOUNCEMENT : 13 /09 /2017 / O R D E R PER RAVISH SOOD, JUDICIAL MEMBER T HE PRESENT APPEAL S FILED BY THE REVENUE ARE DIRECTED AGAINST T HE RESPECTIVE ORDER S PASSED BY THE CIT(A) - 3 , MUMBAI, EACH DATED 20.08.2015 , WHICH IN ITSELF ARE DIRECTED AGAINST THE ASSESSMENT ORDER S PASSED BY THE A.O U/S 143(3) R.W.S. 147 AND U/S. 143(3) OF THE INCOME P A G E | 2 ITA NO. 5236 & 5238/MUM/2015 ACIT VS. SHRI PRABHAKAR PYARELAL TAX ACT , 196 1 (IN SHORT THE ACT), DATED 15.10.2013 AND 25.03.2013, RESPECTIVELY. THAT AS COMMONS ISSUES ARE INVOLVED IN THE AFOREMENTIONED APPEALS, THEREFORE , THE SAME ARE BEING TAKEN UP AND DISPOSED OF TOGETHER BY WAY OF A CONSOLIDATE ORDER. WE FIRST TAKE UP T HE APPEAL FOR AY: 2009.10, WHEREIN THE REVENUE ASSAILING THE ORDER OF THE CIT(A) HAD RAISED BEFORE US THE FOLLOWING GROUNDS OF APPEAL: - 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) - 3, THANE HAS ERRED IN DELETING THE ADDITION O F RS. 47,90,443/ - OUT OF TOTAL ADDITION OF RS. 63,87,257/ - MADE ON ACCOUNT OF BOGUS PURCHASES, DESPITE HOLDING THAT THE PURCHASES WERE NOT GENUINE AND THE ASSESSEE FAILED TO PROVE THE GENUINENESS OF THE TRANSACTIONS. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) - 3, THANE ERRED IN DELETING THE ABOVE ADDITION DESPITE THE FACT THAT THE ASSESSEE FAILED TO DISCHARGE HIS ONUS OF PROVING THE PURCHASES. 3. THE APPELLANT PRAYS THAT THE ORDER OF THE LD. CIT(A) . - 3, THANE, MAY BE SET - ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 4. THE APPELLANT CRAVES LEAVE TO ADD, AMEND OR ALTER ANY GROUND/GROUNDS, WHICH MAY BE NECESSARY. 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS A CIVIL CONTRACTOR ENGAGED IN THE BUSINESS OF EXECUTING WORKS OBTAINED FROM VARIOUS GOVERNMENT AGENCIES. THE ASSESSEE HAD E - FILED HIS RETURN OF INCOME FOR A . Y 2009 - 10 ON 29.09.2009, DECLARING TOTAL INCOME AT RS.29,33,490/ - . 3. THAT INFORMATION WAS RECEIV ED BY THE A.O FROM THE SALES TAX DEPARTMENT, MAHARASHTRA, WHICH REVEALED THAT THE ASSESSEE HAD DURING THE YEAR UNDER CONSIDERATION TAKEN BOGUS PURCHASE BILLS FROM THE FOLLOWING PARTIES: - SR. NO. NAME OF THE ENTRY PROVIDER TIN AMOUNT IN THE BILLS TAKEN BY THE ASSESSEE IN RS. 1. NATIONAL TRADING 27210561220V 852573 P A G E | 3 ITA NO. 5236 & 5238/MUM/2015 ACIT VS. SHRI PRABHAKAR PYARELAL CO 2. LEO IMPEX 27230614753V 492271 3. S. M. TRADING CO. 27490547195V 974530 4. ALANKAR STEELS 2 7500551312V 1297941 5. PAWAN ENTERPRISES 27630606579V 1481095 6. SACHI MERCANTILE PVT. 27770610285V 787838 7. S.S. ENTERPRISES 27950562074V 501009 TOTAL 63,87,257/ - THAT ON THE BASIS OF THE AFORESAID INFORMATION THE A.O REOPENED THE CASE OF THE ASSESSEE U/S. 147 OF THE ACT . 4. THAT DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS THE A.O ISSUED NOTICES U/S 133(6) TO THE AFORESAID PARTIES, HOWEVER , IN CASE OF THREE OF THE PARTIES THE SAID NOTICES WERE RETURNED BACK BY THE POSTAL AUTHORITIES WITH THE REMARKS NOT KNOWN/ UNCLAIMED / REFUSED , WHILE FOR IN TH E CASE OF THE REMAINING FOUR PARTIES NO REPLY WAS RECEIVED. THE A.O BROUGHT THE AFORESAID FACTS TO THE NOTICE OF THE ASSESSEE AND DIRECTED HIM TO SUBSTANTIATE THE GENUINENESS AND VERACITY OF THE PURCHASE TRANSACTION S WHICH WERE CLAIMED TO HAVE BEEN MADE WI TH THE AFORESAID PARTIES. HOWEVER, DESPITE SPECIFIC DIRECTIONS OF THE A.O , THE ASSESSEE FAILED TO PRODUCE DOCUMENTARY EVIDENCE , VIZ. PURCHASE BILLS, CONFIRMATION OF THE CONCERNED PARTIES, COPY OF TRANSPORT RECEIPTS, COPY OF STOCK REGISTER ETC. IN ORDER TO SUPPORT THE GENUINENESS OF THE AFOREMENTIONED PURCHASE TRANSACTIONS, AND COULD ONLY PLACE ON RECORD THE COPIES OF THE LEDGER ACCOUNT S OF THE AFORE SAID PARTIES AS APPEARING IN HIS BOOKS OF ACCOUNTS. THE ASSESSEE FURTHER IN HIS ATTEMPT TO FORTIFY THE GE NUINENESS OF THE PURCHASES THEREIN SUBMITTED BEFORE THE A.O THAT THE PAYMENTS OF THE PURCHASE CONSIDERATION TO THE AFOREMENTIONED PARTIES WERE MADE THROUGH BANKING CHANNELS, P A G E | 4 ITA NO. 5236 & 5238/MUM/2015 ACIT VS. SHRI PRABHAKAR PYARELAL THEREFORE , IN THE BACKDROP OF THE SAD FACTUAL POSITION THE VERACITY OF THE PURCHAS ES COULD NOT BE DOUBTED. THE ASSESSEE FURTHER IN ORDER TO DRIVE HOME HIS CONTENTION THAT HE HAD MADE GENUINE PURCHASES FROM THE AFOREMENTIONED PARTIES, THUS SUBMITTED THAT THE VERY FACT THAT HIS GROSS PROFIT RATE FOR THE YEAR UNDER CONSIDERATION WAS IN CON FORMITY WITH THAT OF THE SUBSEQUENT YEAR IRREBUTABLY PROVED THE CONSUMPTION OF THE GOODS UNDER CONSIDERATION IN ITS BUSINESS . IT WAS IN THE BACKDROP OF T H E AFORESAID FACTS THUS AVERRED BY THE ASSESSEE THAT THE GENUINENESS OF THE PURCHASES MADE FROM THE AFO REMENTIONED PARTIES COULD NOT BE DOUBTED. THE A.O HOWEVER HOLDING A STRONG CONVICTION THAT NOT ONLY IT REMAIN ED AS A MATTER OF FACT THAT CONCRETE INFORMATION WAS RECEIVED FROM THE SALES TAX AUTHORITIES THAT THE ASSESSEE HAD TAKEN BOGUS PURCHASES BILLS FROM THE AFORESAID HAWALA PARTIES , WHO HAD IN THEIR RESPECTIVE STATEMENTS AND AFFIDAVITS RECORDED/F ILED DURING THE COURSE OF THE SALES TAX PROCEEDINGS ACCEPTED THAT THEY WERE ONLY PROVIDING BOGUS SALE BILLS AND NOT CARRYING OUT ANY GENUINE PURCHASE/SALE TRANSA CTIONS, BUT RATHER , THE ASSESSEE DESPITE BEING AFFORDED SUFFICIENT OPPORTUNITY , HAD EVEN OTHERWISE FAILED TO DISCHARGE THE ONUS AS STOOD CAST UPON HIM TO PROVE THE GENUINENESS AND VERACITY OF THE PURCHASE TRANSACTIONS UNDER CONSIDERATION. THE A.O AFTER DELIBERATING ON THE AFORESAID FACTS TH OUGH CONCLUDED THAT THE ASSESSEE HAD NOT MADE ANY GENUINE PURCHASES FROM THE AFOREMENTIONED PARTIES , BUT OBSERVED THAT THE CONSUMPTION OF THE GOODS UNDER CONSIDERATION IN THE BUSINESS OF THE ASSESSEE WAS NOT DOUBTED . T HE A.O AFTER DELIBERATING ON THE AFORESAID FACTUAL POSITION AND THEREIN CONCLUDING THAT THE ASSESSEE HAD NOT MADE ANY GENUINE PURCHASES FROM THE AFORESAID PARTIES, THUS, HELD A CONVICTION THAT THE ASSESSEE IN THE GUISE OF BOGUS PURCHASE TRANSACTIONS HAD BR OUGHT IN HIS BOOKS OF ACCOUNTS UNACCOUNTED STOCK . THE A.O THUS BEING OF THE VIEW THAT THE ASSESSEE HAD INCURRED AN UNEXPLAINED EXPENDITURE FOR P A G E | 5 ITA NO. 5236 & 5238/MUM/2015 ACIT VS. SHRI PRABHAKAR PYARELAL MAKING THE AFORESAID PURCHASES, THUS ADDED THE AGGREGATE VALUE OF THE AFORESAID BOGUS PURCHASES OF RS.63,87,257/ - IN THE HANDS OF THE ASSESSEE UNDER SEC. 69C OF THE ACT. 5. THE ASSESSEE BEING AGGRIEVED WITH THE ORDER OF THE A.O CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). THE CIT(A) AFTER DELIBERATING ON THE CONTENTIONS OF THE ASSESSEE OBSERVED THAT NOW WHEN TH E S ALES AND THE C LOSING STOCK CORRESPONDING TO THE PURCHASE TRANSACTIONS CLAIMED BY THE ASSESSEE TO HAVE BEEN MADE FROM THE AFORESAID PARTIES, HAD BEEN ACCEPTED BY THE A.O, AS WELL AS THE RATE OF GROSS PROFIT AND NET PROFIT OF THE BUSINESS OF THE ASS ESSEE WAS ALSO FOUND TO BE IN CONFORMITY WITH THAT OF THE IMMEDIATE PRECEDING YEAR, THEREFORE, THE ENTIRE PURCHASES COULD NOT BE DISALLOWED. T HE CIT(A) HOWEVER BEING OF THE CONSIDERED VIEW THAT THE FACT THAT THE ASSESSEE MUST HAVE INFLATED HIS PURCHASES COULD NOT BE RULED OUT AND THUS BEING OF THE VIEW THAT AS PER VARIOUS JUDICIAL DECISIONS THE PROFIT MARGIN INVOLVED IN BOOKING OF BOGUS PURCHASES AS ADOPTED BY THE COURTS, VARIED FROM 12% TO 30%, THEREFORE , ADOPTED 25% OF THE AGGREGATE OF THE BOGUS PURCHASES AS THE PROFIT/MARGIN GENERATED BY THE ASSESSEE FROM MAKING SUCH PURCHASES. THE CIT(A) THUS ON THE BASIS OF HIS AFORESAID OBSERVATIONS RESTRICTED THE ADDITION ON ACCOUNT OF BOOKING OF THE PURCHASES BY THE ASSESSEE IN HIS BOOKS OF ACCOUNTS AT AN INFLATED VALUE AT RS.15,96,814/ - (I.E. 25% OF RS.63,87,257/ - ) , AND AS SUCH ALLOWED A RELIEF OF RS.47,90,443/ - (I.E. RS.63,87,257/ - ( - ) RS.15,96,814/ - ) TO THE ASSESSEE. 6. THE REVENUE BEING AGGRIEVED WITH THE O RDER OF THE CIT(A) HAD CARRIED THE MATTER IN APPEAL BEFORE US. THAT AS THE RESPONDENT DESPITE BEING INTIMATED OF THE DATE OF HEARING OF THE APPEAL HAD FAILED TO PUT UP AN APPEARANCE, THER EFORE, WE PROCEED WITH AS PER RULE 25 OF THE APPELLATE TRIBUNAL RULES , 1963, AND DISPOSE OF THIS APPEAL AFTER P A G E | 6 ITA NO. 5236 & 5238/MUM/2015 ACIT VS. SHRI PRABHAKAR PYARELAL HEARING THE APPELLANT REVENUE. THE LD. DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDER OF THE A.O AND THEREIN AVERRED THAT NOW WHEN THERE WAS NO EVIDENCE THAT THE GOODS UNDER CONSIDERATION HAD ACTUALLY BEEN CONSUMED IN THE BUSINESS OF THE ASSESSEE, THEREFORE, THE CIT(A) HAD ERRED IN RESTRICTING THE ADDITION TO 25% OF THE AGGREGATE VALUE OF THE AFORESAID BOGUS PURCHASES. 7. WE HAVE HEARD THE LD. DEPARTMENTAL REPRESENTATIVE, PERUSED THE ORDERS OF THE L OWER AUTHORITIES AN D THE MATERIAL AVAILABLE ON RECORD. WE ARE OF THE CONSIDERED VIEW THAT IN THE BACKDROP OF THE FACTS OF THE PRESENT CASE THERE REMAINS NO DOUBT THAT THE ASSESSEE HAD NOT MADE ANY GENUINE PURCHASES FROM THE AFOREMENTIONED PARTIES , BUT AS A MATTER OF FACT HAD MERELY TAKEN BOGUS BILLS FROM THE M. WE HOWEVER FIND THAT THE A.O WHILE FRAMING THE ASSESSMENT HAD CATEGORICALLY OBSERVED THAT THE CONSUMPTION OF THE GOODS/MATERIAL UNDER CONSIDERATION WAS NOT DOUBTED. THUS IN THE BACKDROP OF THE AFORESA ID OBSERVATIONS OF THE A.O, WE ARE UNABLE TO PERSUADE OURSELVES TO ACCEPT THE CONTENTION OF THE LD. D.R. THAT THE CIT(A) HAD WRONGLY PROCEEDED WITH ON THE PREMISES THAT THE GOODS/ MATERIAL CORRESPONDING TO THE BOGUS PURCHASES WERE CONSUMED IN THE BUSINESS O F THE ASSESSEE. WE FIND THAT THE SAID MATERIAL OBSERVATION OF THE CIT(A) IS NOT IN THE THIN AIR, BUT RATHER IS B ASED ON THE FINDINGS OF THE A.O RECORDED AT PAGE 8 - PARA 4.3 (III ) OF THE ASSESSMENT ORDER. 8. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE FACTS OF THE CASE , AND ARE OF THE CONSIDERED VIEW THAT THE CIT(A) AFTER OBSERVING THAT THE A.O HAD CONCLUDED THAT THE CONSUMPTION OF THE GOODS/MATERIAL CLAIMED BY THE ASSESSEE TO HAVE BEEN PURCHASED FROM THE AFOREMENTIONED PARTIES , WAS NOT BEING DOUBTE D , COUPLED WITH THE FACT THAT THE RATE OF GROSS PROFIT AND NET PROFIT FOR THE YEAR UNDER CONSIDERATION WAS ALSO FOUND TO BE IN CONFORMITY WITH THAT OF THE P A G E | 7 ITA NO. 5236 & 5238/MUM/2015 ACIT VS. SHRI PRABHAKAR PYARELAL IMMEDIATELY PRECEDING YEAR, WHICH FURTHER FORTIFIED THE FACT THAT THE GOODS UNDER CONSIDERATION WERE CONSUMED IN THE BUSINESS OF THE ASSESSEE, THEREFORE, THE ADDITION OF THE AGGREGATE VALUE OF SUCH BOGUS PURCHASES WAS NOT WARRANTED IN THE HANDS OF THE ASSESSEE. WE ARE OF THE CONSIDERED VIEW THAT THE CIT(A) HAD RIGHTLY OBSERV ED THAT THE ADDITION IN THE HAN DS OF THE ASSESSEE WAS LIABLE TO BE RESTRICTED ONLY TO THE EXTENT OF PROFIT ELEMENT WHICH THE ASSESSEE WOULD HAD MADE FROM MAKING OF SUCH BOGUS PURCHASES . WE HAVE DELIBERATED ON THE OBSERVATIONS OF THE CIT(A) AND ARE OF THE CONSIDERED VIEW THAT HE HAD IN A LL FAIRNESS RESTRICTED THE ADDITION IN THE HANDS OF THE ASSESSEE TO 25% OF THE AGGREGATE VALUE OF THE BOGUS PURCHASES. WE ARE PERSUADED TO BE IN AGREEMENT WITH THE VIEW ARRIVED AT BY THE CIT(A), AND THUS FINDING NO INFIRMITY IN HIS WELL REASONED ORDER, UPH OLD THE SAME. THE G ROUND S OF APPEAL 1 TO 3 ARE DISMISSED. THAT AS THE G ROUND OF THE APPEAL NO. 4 IS GENERAL , THEREFORE, THE SAME IS DISMISSED AS NOT PRESSED. 9. THE APPEAL FILED BY THE REVENUE IS DISMISSED. ITA NO. 5238/MUM/2015 AY:2010 - 11 1 0 . WE NOW TAKE UP THE APPEAL FILED BY THE REVENUE FOR AY: 2010 - 11. THE REVENUE ASSAILING THE ORDER OF THE CIT(A) HAD RAISED BEFORE US THE FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) - 3, THANE HAS ERRED IN DELETING THE ADDITION OF RS.63,3 6,486I - OUT OF TOTAL ADDITION OF RS 84,48,648/ - MADE ON ACCOUNT OF BOGUS PURCHASES, DESPITE HOLDING THAT THE PURCHASES WERE NOT GENUINE AND THE ASSESSEE FAILED TO PROVE THE GENUINENESS OF THE TRANSACTIONS. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) - 3, THANE ERRED IN DELETING THE ABOVE ADDITION DESPITE THE P A G E | 8 ITA NO. 5236 & 5238/MUM/2015 ACIT VS. SHRI PRABHAKAR PYARELAL FACT THAT THE ASSESS EE FAILED TO DISCHARGE HIS ONUS PROVING THE PURCHASES. 3. THE APPELLANT PRAYS THA T THE ORDER OF THE LD. CIT(A) - 3, THANE, MAY BE SET - ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 4. THE APPELLANT CRAVES LEAVE TO ADD AMEND OR ALTER ANY GROUNDS/GROUNDS, WHICH MAY BE NECESSARY . 11. WE FIND THAT AS THE FACTS AND THE ISSUE INVOLVED IN THE PRESENT APPEAL OF THE REVENUE FOR A.Y. 2010 - 11 ARE THE SAME AS WERE INVOLVED IN ITS APPEAL FOR A.Y. 2009 - 10, MARKED AS ITA NO. 5236/MUM/2015, THEREFORE, OUR ORDER PASSED WHILE DISPOSING OF THE APPEAL OF THE REVENUE F OR A.Y. 2009 - 10, MARKED AS ITA NO. 5236/MUM/2015 SHALL APPLY MUTATIS MUTANDIS FOR DISPOSING OF THE PRESENT APPEAL OF THE REVENUE FOR A.Y. 2010 - 11, MARKED AS ITA NO. 5238/MUM/2015. THUS , IN THE BACKDROP OF OUR AFORESAID OBSERVATIONS AND REASONING RECORDED W HILE DISPOSING OF THE GROUNDS OF APPEAL NO. 1 TO 3 IN THE APPEAL OF THE REVENUE FOR AY: 2009 - 10, THE G ROUND S OF APPEAL NO. 1 TO 3 RAISED BY THE REVENUE BEFORE US IN THE PRESENT APPEAL, VIZ. ITA NO. 5238/MUM/2011, ARE DISMISSED . THAT AS THE G ROUND OF APPEAL NO. 4 IS GENERAL, THE SAME IS DISMISSED AS NOT PRESSED. 1 2 . THE APPEAL OF THE REVENUE IS DISMISSED. 13. THE APPEAL OF THE REVENUE FOR A . Y 2009 - 10, MARKED AS ITA NO. 5236/MUM/2015, AND A . Y 2010 - 11, MARKED AS ITA NO. 5238/MUM/2015, ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 13 .09.2017 SD/ - SD/ - ( R.C. SHARMA ) (RAVISH SOOD) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; 13 .09.2017 PS. ROHIT KUMAR P A G E | 9 ITA NO. 5236 & 5238/MUM/2015 ACIT VS. SHRI PRABHAKAR PYARELAL / 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 . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI