PRATAP N. RAJGOR, MUMBAI V. ITO 19(2)(5), MUMBAI

ITA 5272/MUM/2018

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 6063 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-10-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 12-09-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AKHTAR HANSARI
• Keywords: Bogus purchase; Corroborative evidences; Accommodation entries; Set aside
• Section: 133(6); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH SMC, MUMBAI BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND SHRI G MANJUNATHA, ACCOUNTANT MEMBER ITA NOS. 5272 & 5273/MUM/2018 (AYS : 2010-11 & 2011 -12) SHRI PRATAP N RAJGOR 2 ND FLOOR, ROOM NO.94 BADRIKA ASHRAM BLDG 1 ST KHETWADI LANE, MUMBAI-4 PAN: AAAPR7926C VS ITO, WARD.19(2)(5), MATRUMANDIR, MUMBAI APPELLANT RESPONDEDNT APPELLANT BY SHRI PRAKASH PANDIT RESPONDENT BY SHRI AKHTAR H ANSARI DATE OF HEARING 26-09-2019 DATE OF PRONOUNCEMENT 01-10-2019 O R D E R PER PAWAN SINGH, JUDICIAL MEMBER: 1. THESE ARE TWO APPEALS BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-2 HEREINAFTER CALLED LD CIT(A)DATED 14.05.2018 FOR THE ASSESSMENT YEARS 2 010-11 & 2011- 12. IN BOTH THE APPEALS THE ASSESSEE HAS CHALLENGE D THE CONFIRMATION OF DISALLOWANCE OF ALLEGED BOGUS PURCHASES @ 12.5% ON THE IMPUGNED/ BOGUS PURCHASES MADE FROM SO-CALLED HAWALA DEALERS. IN BOTH THE APPEALS THE ASSESSEE HAS RAISED IDENTICAL GROUNDS O F APPEALS; HENCE, BOTH THE APPEALS WERE TAKEN UP HEARING TOGETHER AND ARE DECIDED BY COMMON ORDER. FOR APPRECIATION OF FACT THE APPEALS FOR AY 2011-12 IS TREATED AS LEAD CASE. 2 ITA 5272 & 5273/MUM/2018 PRATAP N. RAJGOR 2. THE BRIEF FACTS OF THE CASE AS TAKEN FROM APPEAL FO R AY 2011-12 ARE THAT THE CASE OF THE ASSESSEE WAS REOPENED U/S 147 BY ISSUE OF NOTICE U/S 148 ON THE BASIS OF INFORMATION RECEIVED FROM D GIT INV) WHEREIN IT WAS INFORMED THAT SALES-TAX DEPARTMENT, MAHARASHTRA HAS IDENTIFIED CERTAIN DEALERS, WHO WERE INDULGING IN PROVIDING AC COMMODATION ENTRIES IN THE FORM OF BOGUS BILLS WITHOUT ACTUAL S UPPLY OF ANY GOODS. A LIST OF BENEFICIARIES WAS ALSO FORWARDED BY THE D GIT(INV). THE ASSESSEE WAS ONE OF THE BENEFICIARIES OF SUCH BOGUS BILLS. AFTER SUPPLYING THE REASONS FOR REOPENING, THE AO PROCEED ED FOR RE- ASSESSMENT. DURING THE RE-ASSESSMENT, THE ASSESSIN G OFFICER NOTED THAT ASSESSEE HAS SHOWN PURCHASES FROM THE FOLLOWING 8 P ARTIES:- SR.NO NAME OF HAWALA PARTY AMOUNT RS. 1 CHAMPION STEEL (INDIA) 33,154 2 SHUBHAM METAL CORP 18,80,817 3 CHIRAG STEEL CENTRE 32,69,098 4 HANS ENTERPRISES 11,26,917 5 RELIABLE METAL (INDIA) 37,63,500 6 PUSHPAK METAL INDS 5,86,768 7 NEELAM INDUSTRIES 9,66,318 8 HIRANI METAL INDS 1 4,86,800 TOTAL 1,31,13,372 3. IN ORDER TO VERIFY THE GENUINENESS OF PURCHASES, TH E AO ISSUED NOTICE U/S 133(6) TO ALL THE PARTIES, THROUGH REGISTERED P OST AT THE ADDRESS PROVIDED BY THE ASSESSEE. NOTICES COULD NOT BE SER VED ON ALL THE PARTIES AND WERE RETURNED BACK BY THE POSTAL AUTHORITIES WI TH THE REMARK, NOT KNOWN/ NO SUCH ADDRESS/ LEFT. THE ASSESSEE WA S GIVEN OPPORTUNITY TO ESTABLISH THE GENUINENESS OF PURCHAS ES BY FURNISHING 3 ITA 5272 & 5273/MUM/2018 PRATAP N. RAJGOR SUPPORTING EVIDENCES AND TO PRODUCE THE PARTIES. T HE ASSESSEE FAILED TO PRODUCE THE PARTIES. HOWEVER, THE ASSESSEE FURNISH ED COPY OF LEDGER ACCOUNT, PURCHASE BILLS, BANK STATEMENT SHOWING THA T PAYMENTS WERE MADE THROUGH BANKING CHANNEL. THEREAFTER, THE ASSE SSING OFFICER ASKED THE ASSESSEE TO FURNISH THE DETAILS OF INVOICES, BI LLS, LEDGER ACCOUNT AND TRANSPORTATION OF GOODS / LORRY RECEIPTS. THE ASSE SSEE FILED THE QUANTITATIVE DETAILS OF PURCHASES AND CORRESPONDING SALES. AFTER EXAMINING THE EVIDENCES FURNISHED BY ASSESSEE, THE AO TOOK HIS VIEW THAT THE ASSESSEE HAS PROVIDED THE STOCK STATEMENT AND THE ENTRIES OF THE ALLEGED PURCHASES, THUS, THE INEVITABLE CONCLUSION ARE THAT THE ASSESSEE MAY HAVE PURCHASES FROM THE OPEN MARKET. THE AO AFT ER TAKING IN ACCOUNT ALL THE FACTS AND THE COMPARATIVE POSITION OF TRADE CONCLUDED THAT THE ASSESSEE OBTAINED ACCOMMODATION BILLS FOR INTRODUCING UNACCOUNTED GOODS IN THE ACCOUNTED STREAM. THE AO A LSO REJECTED THE BOOKS OF ACCOUNT OF THE ASSESSEE. THE AO, BY MAKIN G RELIANCE ON THE DECISION OF GUJARAT HIGH COURT IN CASE OF CIT VS SI MIT P SHETH ITA NO.553 OF 2012 ORDER DATED16-01-2013 AND CIT VS BHO LANATH POLY FAB (P) LTD 355 ITR 290 (GUJ) TOOK THE VIEW THAT ONLY P ROFIT ELEMENT EMBEDDED IN SUCH PURCHASES IS TO BE TAKEN FROM THE SAID PURCHASES SHOWN BY THE HAWALA / NONEXISTENT PARTIES. THE ASS ESSEE HAS OBTAINED ACCOMMODATION ENTRIES OF RS.131.13 LAKHS. THEREFOR E, THE AO, CONSIDERING THE MARGIN OF PROFIT ON SUCH PURCHASES DISALLOWED 12.5% 4 ITA 5272 & 5273/MUM/2018 PRATAP N. RAJGOR OF THE AGGREGATE OF PURCHASES WHICH CAME TO RS.16,3 9,171/-. ON APPEAL BEFORE CIT(A), THE ACTION OF AO IN MAKING AD DITION OF 12.5% OF THE TOTAL ALLEGED BOGUS PURCHASES WAS CONFIRMED. THUS, FURTHER AGGRIEVED BY THE ORDER OF CIT(A), THE ASSESSEE HAS FILED PRESENT APPEAL BEFORE US. 3. WE HAVE HEARD THE SUBMISSIONS OF THE LEARNED AUT HORISED RESPERENTATIVE (AR) FOR THE ASSESSEE AND THE LEARNED DEPARTMENTAL REPRESENTATIVE (DR FOR THE REVENUE AND ALSO GONE THROUGH THE RECORD CA REFULLY. THE LD.AR OF THE ASSESSEE SUBMITTED THAT THE LOWER AUTHORITIE S WERE NOT JUSTIFIED IN MAKING ADDITION @12.5% OF THE ALLEGED HAWALA PURCHA SES. THE LD. AR FOR THE ASSESSEE SUBMITS THAT THE ASSESSEE HAS ESTA BLISHED THAT THE PURCHASES ARE GENUINE. THE LOWER AUTHORITIES HAVE N OT DISPUTED THE SALE OF THE ASSESSEE. THE BOOKS OF ACCOUNT WERE REJECTED IN A MECHANICAL WAY. IF THE SALE OF THE ASSESSEE WAS NOT DOUBTED TH E PURCHASES CANNOT BE TREATED AS BOGUS. THE LD AR FOR THE ASSESSEE SUB MITS THAT THE MARGIN PROFIT IN THE BOSSINESS OF TRADE OF FERROUS AND NON FERROUS TRADE IS 2 TO 2.5% ONLY. THE ASSESSEE HAS ALREADY DECLARED GROSS PROFIT @ 3.66%. THE LD. AR FOR THE ASSESSEE SUBMITS THAT ENTIRE DIS ALLOWANCE IS LIABLE TO BE DELETED. THE LD AR FOR THE ASSESSEE RELIED ON THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF PRINCIPAL CIT V. TEJUA ROHITKUMAR KAPADIA 94 TAXMAN.COM 324 (GUJ). HE FUR THER SUBMITTED THAT THE SLP FILED AGAINST THIS JUDGEMENT WAS DIS MISSED BY THE 5 ITA 5272 & 5273/MUM/2018 PRATAP N. RAJGOR HONBLE APEX COURT REPORTED IN PCIT VS TEJUA ROHIT KUMAR KAPADIA (2018) 94 TAXMAN.COM 325 (SC). THE LD.AR ALSO RELIED UPON THE JUDGEMENT OF HONBLE JURISDICTIONAL HIGH C OURT IN THE CASE OF BABULAL C BORANA VS THIRD INCOME TAX OFFICER [(282 ITR 251) (BOM)]. IN ALTERNATIVE SUBMISSIONS THE LEARNED AR F OR THE ASSESSEE SUBMITS THAT IN THE RECENT DECISION THE HONBLE BOM BAY HIGH COURT IN CIT VERSUS M HAJI ADAM & CO IN ITA NO. 1004 OF 2016 DATED 11 TH FEBRUARY 2019 HELD THAT ADDITION IN RESPECT OF BOGU S PURCHASES IS TO BE LIMITED TO THE EXTENT OF BRINGING THE GROSS PROFIT RATE ON SUCH PURCHASES AT THE SAME RATE AS OF OTHER GENUINE PURCHASES. 4. THE LD. DR, ON THE OTHER HAND, SUBMITTED THAT IN VESTIGATION WING OF INCOME-TAX DEPARTMENT MADE A FULL-FLEDGED ENQUIRY. THE PARTIES FROM WHOM THE ASSESSEE HAS SHOWN PURCHASES ARE BOGUS HAW ALA DEALERS. THE HAWALA DEALERS WERE INDULGING IN ISSUING BOGUS BILLS WITHOUT DELIVERY OF ANY MATERIAL OR GOODS. THE ASSESSEE OB TAINED ACCOMMODATION BILLS IN ORDER TO INFLATE THE EXPENSE S TO BRING DOWN THE PROFIT IN ORDER TO AVOID THE PAYMENT OF GENUINE TAX . THE LOWER AUTHORITIES HAVE ALREADY GIVEN SUBSTANTIAL RELIEF T O THE ASSESSEE. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF THE PARTIES AND HAVE GONE THROUGH THE ORDERS OF THE LOWER AUTHORITIES CAREFUL LY. PERUSAL OF RECORDS REVEALS THAT THE ASSESSEE HAS NOT CHALLENGED THE VA LIDITY OF RE-OPENING 6 ITA 5272 & 5273/MUM/2018 PRATAP N. RAJGOR BEFORE THE LD. CIT(A) HENCE, THE ISSUE OF REOPENIN G ATTAINED FINALITY. THE ASSESSEE HAS ONLY CHALLENGED THE QUANTUM OF ADD ITION MADE BY THE AO. WE HAVE FURTHER NOTED THAT ON THE BASIS OF INF ORMATION AND EXAMINING THE LIST OF BENEFICIARIES, THE AO IDENTIF IED THAT ASSESSEE HAS SHOWN PURCHASES FROM 10 PARTIES MENTIONED ABOVE. I N ORDER TO VERIFY THE GENUINENESS OF PURCHASES, THE AO ISSUED NOTICES TO THE PARTIES. HOWEVER, NONE OF THE PARTIES COULD BE SERVED WITH T HE NOTICE AND THE NOTICES WERE RETURNED BY THE POSTAL AUTHORITIES. TH E ASSESSEE WAS GIVEN OPPORTUNITY TO ESTABLISH THE GENUINENESS OF PURCHAS ES BY FURNISHING SUPPORTING EVIDENCES AND TO PRODUCE THE PARTIES. T HE ASSESSEE FAILED TO PRODUCE THE PARTIES. HOWEVER, THE ASSESSEE FURNISH ED COPY OF LEDGER ACCOUNT, PURCHASE BILLS, BANK STATEMENT SHOWING THA T PAYMENTS WERE MADE THROUGH BANKING CHANNEL. THE ASSESSING OFFICE R ASKED THE ASSESSEE TO FURNISH THE DETAILS OF INVOICES, BILLS, LEDGER ACCOUNT AND TRANSPORTATION OF GOODS / LORRY RECEIPTS. THE ASSE SSEE FILED THE QUANTITATIVE DETAILS OF PURCHASES AND CORRESPONDING SALES ONLY NO RECEIPT OF TRANSPORTATION OR DELIVERY OF GOODS WAS FURNISHED. AFTER EXAMINING THE EVIDENCES FURNISHED BY ASSESSEE, THE AO TOOK HIS VIEW THAT THE ASSESSEE HAS PROVIDED THE STOCK STATEMENT AND THE ENTRIES OF THE ALLEGED PURCHASES, THUS, THE INEVITABLE CONCLUSION ARE THAT THE ASSESSEE MAY HAVE PURCHASES FROM THE OPEN MARKET. THE AO AFT ER TAKING IN ACCOUNT ALL THE FACTS AND THE COMPARATIVE POSITION OF TRADE CONCLUDED 7 ITA 5272 & 5273/MUM/2018 PRATAP N. RAJGOR THAT THE ASSESSEE OBTAINED ACCOMMODATION BILLS FOR INTRODUCING UNACCOUNTED GOODS IN THE ACCOUNTED STREAM. THE AO A LSO REJECTED THE BOOKS OF ACCOUNT OF THE ASSESSEE. THE AO, BY MAKIN G RELIANCE ON THE DECISION OF GUJARAT HIGH COURT IN CASE OF CIT VS SI MIT P SHETH ITA NO.553 OF 2012 ORDER DATED16-01-2013 AND CIT VS BHO LANATH POLY FAB (P) LTD 355 ITR 290 (GUJ) TOOK THE VIEW THAT ONLY P ROFIT ELEMENT EMBEDDED IN SUCH PURCHASES IS TO BE TAKEN FROM THE SAID PURCHASES SHOWN BY THE HAWALA / NONEXISTENT PARTIES. THE ASS ESSEE HAS OBTAINED ACCOMMODATION ENTRIES OF RS.131.13 LAKHS. THEREFOR E, THE AO, CONSIDERING THE MARGIN OF PROFIT ON SUCH PURCHASES DISALLOWED 12.5% OF THE AGGREGATE OF PURCHASES WHICH CAME TO RS.16,3 9,171/-. ON APPEAL BEFORE CIT(A), THE ACTION OF AO IN MAKING AD DITION OF 12.5% OF THE TOTAL ALLEGED BOGUS PURCHASES WAS CONFIRMED BY HOLDING THE AO HAS DONE FAIR AND JUST ESTIMATION ON THE ALLEGED BO GUS PURCHASES. 6. RECENTLY THE HIGH HONBLE BOMBAY HIGH COURT IN C IT VERSUS MOHD. HAJI ADAM & CO. (SUPRA) HELD THE ADDITION IN RESPEC T OF BOGUS PURCHASES TO BE LIMITED TO THE EXTENT OF BRINGING T HE GROSS PROFIT RATE ON SUCH PURCHASES AT THE SAME RATE AS OF OTHER GENUINE PURCHASE. RESPECTFULLY FOLLOWING THE DECISION OF THE HONBLE BOMBAY HIGH COURT AS REFEREED ABOVE, WE SET ASIDE THE MATTER TO THE FILE OF ASSESSING OFFICER WITH THE DIRECTION TO RESTRICT THE ADDITION WITH REGARD TO THE BOGUS PURCHASES BY BRINGING THE GROSS PROFIT RATE O N SUCH BOGUS 8 ITA 5272 & 5273/MUM/2018 PRATAP N. RAJGOR PURCHASES AS THE SAME RATE AS THAT OF OTHER GENUINE PURCHASES. NEEDLESS TO ORDER THAT BEFORE PASSING ORDER ON OUR DIRECTION THE ASSESSING OFFICER SAID GRANT OPPORTUNITY OF HEARING TO THE ASSESSEE A ND WOULD PASS THE ORDER IN ACCORDANCE WITH LAW. IN THE RESULT THE APP EAL OF THE ASSESSEE IS PARTLY ALLOWED. ITA NO. 5273/MUM/2018 FOR AY 2010-11 7. THE FACTS AND CIRCUMSTANCES BEING PARI MATERIAL , THE DECISION ARRIVED AT AGAINST APPEAL IN ITA NO.5272/MUM/2018 APPLIES MUTA TIS MUTANDIS TO THIS APPEAL ALSO. 8. IN THE RESULT, BOTH THE APPEALS OF THE ASSESS EE ARE PARTLY ALLOWED ORDER PRONOUNCED IN THE OPEN COURT ON 01-10.2019. SD/- SD/- (G.MANJUNATHA) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIALMEMBER MUMBAI, DT : 1 ST OCTOBER, 2019 PK/- SCOPY TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI