INCOME TAX OFFICER 19(2)(5), MUMBAI V. PARASMAL AMSARJI SHAH, MUMBAI

ITA 5274/MUM/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 3336 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-02-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2009-2010
• Appeal Filed On: 11-08-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ABI RAMA KARTIKEYAN
• Assessee Lawyers: SUMIT MISHRA
• Keywords: Bogus purchase; Rejection of books of accounts; Question of law; Onus to prove
• Section: 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH C , MUMBAI BEFORE SHRI C.N. PRASAD, HON'BLE JUDICIAL MEMBER AND SHRI G. MANJUNATHA , HON'BLE ACCOUNTANT MEMBER ITA NO. 5274 /MUM/201 7 (A.Y: 2009 - 10) INCOME TAX OFFICER , CIRCLE 19(2)(5 ) 2 ND FLOOR, MATRU MANDIR, TARDEO ROAD, M UMBAI - 400 0 0 7 V. PARASMAL AMSARJI SHAH 103, 1 ST FLOOR , SA DASHIV LANE, 12 TH NENE BUILDING, V.R. ROAD, MUMBAI 400 004 PAN: AADPS 9266 R (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI SUMIT MISHRA DEPARTMENT BY : SHRI ABI RAMA KARTIK E YAN DATE OF HEARING : 1 5 .11.2018 DATE OF PRONOUNCEMENT : 13 .02 .2019 O R D E R PER C. N. PRASAD (JM) 1. THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - 30, MUMBAI [HEREINAFTER IN SHORT LD.CIT(A)] DATED 28.06.2017 FOR THE ASSESSMENT YEAR 2009 - 10. 2. THE ONLY ISSUE IN APPEAL OF THE REVENUE IS IN RESPECT OF THE ACTION OF THE LD. CIT(A) IN SUSTAINING THE ADDITION TO THE EXTENT OF 12.5% OF PURCHASES AS AGAINST 100% MADE BY THE ASSESSING OFFICER. 2 ITA NO. 5274/MUM/2017 (A.Y: 2009 - 10) PARASMAL AMSARJI SHAH 3. BRIEFLY STATED THE FACTS ARE THAT, THE ASSESSING OFFICER WHILE COMPLETING THE ASSESSMENT BASED ON THE INFORMATION RECEIVED FROM THE SALE TAX DEPARTMENT NOTICED THAT ASSESSEE MADE PURCHASES FROM SOME OF THE ENTITIES WHICH WERE DECLARED AS HAWALA DEALERS AND ONLY AN ENTRY PROVIDERS. ASSESSEE WAS REQUIRED TO PROVE THE GENUINENESS OF THE PURCHASES. ASSESSEE SUBMITTED SOME OF THE DETAILS CALLED FOR BY THE ASSESSING OFFICER . HOWEVER, THE ASSESSING OFFICER OBSERVING THAT THE ASSESSEE FAILED TO PRODUCE ACCOUNTS AND STOCK REGIST ERS AND ALSO SINCE THE NOTICES ISSUED U/S. 133(6) OF THE ACT WAS RESPONDED BY ONE OF THE DEALERS STAT ING THAT NO TRANSACTIONS HAVE BEEN MADE AFTER 17.04.20 0 7 DUE TO CLOSURE OF BUSINESS , HE REJECTED THE BOOKS OF ACCOUNTS OF THE ASSESSEE AND TR EATED THE ENTIRE PURCHASES AS NON - GENUINE. ON APPEAL THE LD. CIT(A) SUSTAINED THE ADDITION ESTIMATING THE PROFIT ELEMENT ON SUCH PURCHASES AT 12.5% FOLLOWING THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT V. SIMIT P. SHETH [356 ITR 451] . 4. LD. DR VEHEMENTLY SUPPORTED THE ORDER OF THE ASSESSING OFFICER. LD. COUNSEL FOR THE ASSESSEE STRONGLY SUPPORTED THE ORDER OF THE LD. CIT(A). 5. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE ORDERS OF THE AUTHORITIES BELOW. ON A PERUSAL OF THE ORDERS OF THE AUTHORITIES BELOW, WE 3 ITA NO. 5274/MUM/2017 (A.Y: 2009 - 10) PARASMAL AMSARJI SHAH FIND THAT THE ASSESSEE PRODUCED ONLY PART OF THE INFORMATION TO PROVE THE GENUINENESS OF THE TRANSACTIONS OF PURCHASES. ASSESSING OFFICER REJECTED THE BOOKS OF ACCOUNTS AND TREATED THE ENTIRE PURCHASES AS NON - GENUINE . HOWEVER, T HE LD. CIT(A) CONSIDERING THE SUBMISSION OF THE ASSESSEE, THAT THERE CANNOT BE SALES WITHOUT ANY PURCHASES AND THE ENTIRE PURCHASES CANNOT BE TREATED AS NON - GENUINE AND TAKING VARIOUS DECISIONS INTO CONSIDERATION, ESTIMATE D PROFIT ELEMENT ON SUCH PURCHASES @12.5% OBSERVING AS UNDER: - 7.4. I HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS ON THE ISSUE ON HAND. ON PERUSAL OF THE MATERIAL ON RECORD IT IS NOTICED THAT, IN THE APPELLANT'S CASE, LD. AO, MADE INDEPENDENT VERIFICATIONS BY ISSUING NOTICES U/S. 133(6) OF THE ACT, WHICH WERE RETURNED UNSERVED, AND THERE WAS AN OVERWHELMING EVIDENCE IN THE FORM OF STATEMENTS OF SOME OF THE SUPPLIERS GIVEN BEFORE THE SALES TAX AUTHORITIES THAT IT WAS ENGAGED ONLY IN ISSUING HAWALA BILLS AND NO GOODS WERE EVER SUPPLIED BY THEM. 7.5. AFTER WEIGHING THE EV IDENCE PROS AND CON, I FIND THAT THE APPELLANT HAS NOT RECONCILED THE PURCHASES WITH THE ITEMS SOLD AND FAILED TO RECONCILE 1:1 OF THE ITEMS PURCHASED AND SOLD. ONUS WAS ALWAYS ON THE APPELLANT TO PROVE AS TO HOW THE MATERIAL PURCHASED WAS FIRSTLY OBTAINED . I RECORD A FINDING OF FACT HERE THAT NO PROOF OF DELIVERY OF PURCHASES HAS BEEN FILED EITHER BEFORE THE LD. AO OR BEFORE ME. THUS, IT CAN BE SAFELY PRESUMED THAT EITHER THEY ARE NON - EXISTENT OR EVEN IF THEY DO EXIST, THEY WERE NOT BACKED BY SUFFICIENT EV IDENCE TO UNDERGO THE TEST OF SCRUTINY. 7.6. THE SUPPLIERS WERE IN FACT THE APPELLANT'S WITNESS AND THE LD. AO WAS NOT REQUIRED TO FORCE THEIR ATTENDANCE. IT WAS FOR THE APPELLANT TO PRODUCE THEM AS PER CIVIL PROCEDURE CODE WHICH APPLIES ON ALL FOURS TO TH E INCOME - TAX PROCEEDINGS. IT IS TRITE THAT ONCE A TRANSACTION IS SHOWN TO BE OF THE NATURE OF INCOME, THE ONUS SHIFTS TO THE ASSESSEE TO SHOW THAT THE SAME WAS NOT TAXABLE. IT CAN THUS BE SAFELY ASSUMED THAT THE APPELLANT HAS GROSSLY FAILED IN ITS DUTY TO MITIGATE THE BURDEN CAST UPON IT IN SO FAR AS PROVING THE GENUINENESS OF THE TRANSACTION FROM THE SAID PARTY IS CONCERNED. 7.7. IN THIS REGARD IT IS ALSO PERTINENT TO MENTION THAT WHILE DEALING WITH THE CONCEPT OF BURDEN OF PROOF, ONUS OF PROVING IS ALWAYS ON THE PERSON WHO MAKES THE CLAIM AND NOT ON THE REVENUE. WHILE DEALING WITH THE ISSUE OF DECIDING THE BURDEN OF PROOF, HON'BLE SUPREME COURT IN THE CASES OF CIT VS. DURGAPRASAD MORE 82 ITR 540 AND SUMATI DAYAL VS. CIT 214 ITR 801 HAS HELD THAT THE APPARE NT MUST BE CONSIDERED REAL UNTIL IT IS SHOWN THAT THERE ARE REASONS TO BELIEVE THAT THE APPARENT IS NOT REAL AND THAT TAXING AUTHORITIES ARE ENTITLED TO LOOK INTO SURROUNDING CIRCUMSTANCES TO FIND OUT THE REALITY AND THE MATTER HAS TO BE CONSIDERED BY APPL YING THE TEST OF HUMAN PROBABILITIES. THE HON'BLE COURT ALSO HELD THAT, IT IS NO DOUBT, TRUE THAT IN ALL CASES IN WHICH A RECEIPT IS SOUGHT TO BE TAXED AS INCOME, THE BURDEN LIES ON THE DEPARTMENT TO PROVE THAT IT IS WITHIN THE TAXING PROVISION AND IF A RE CEIPT IS IN THE NATURE OF INCOME, THE BURDEN TO PROVE THAT IT IS NOT TAXABLE BECAUSE 4 ITA NO. 5274/MUM/2017 (A.Y: 2009 - 10) PARASMAL AMSARJI SHAH IT FALLS WITHIN EXEMPTION PROVIDED BY THE ACT, LIES UPON THE ASSESSEE. IN THE CASE OF DURGAPRASAD MORE (SUPRA), THE HON'BLE COURT WENT ON TO ADD THAT A PARTY WHO RELIES ON A RECITAL IN A DEED HAS TO ESTABLISH THE TRUTH OF THIS RECITAL, OTHERWISE IT WILL BE VERY EASY TO MAKE SELF SERVING STATEMENTS IN DOCUMENTS EITHER EXECUTED OR TAKEN BY A PARTY WHO RELIED ON THOSE RECITALS. IF ALL THAT AN ASSESSEE WHO WANTS TO EVADE TAX HA S TO HAVE SOME RECITALS MADE IN A DOCUMENT EITHER EXECUTED BY HIM OR EXECUTED IN HIS FAVOUR THEN THE DOOR WILL BE LEFT WIDE OPEN TO EVADE TAX. THE HON'BLE COURT FURTHER HELD THAT THE TAXING AUTHORITIES WERE NOT REQUIRED TO PUT ON BLINKERS WHILE LOOKING AT THE DOCUMENTS PRODUCED BEFORE THEM. THEY WERE ENTITLED TO LOOK IN TO THE SURROUNDING CIRCUMSTANCES TO FIND OUT THE REALITY OF THE RECITALS MADE IN THOSE DOCUMENTS. 7.8. THE ONUS TO APPARENT, IS NOT THE REAL ONE, IS ON THE PARTY CLAIMS IT TO BE SO, AS HELD BY THE HON'BLE SUPREME COURT IN THE CASE OF CIT V. DAULAT RAM RAWATMULL [1973] 87 ITR 349 AND CIT V. DURGA PRASAD MORE (SUPRA). IT IS ALSO A SETTLED LEGAL PROPOSITION THAT IF NO EVIDENCE IS GIVEN BY THE PARTY ON WHOM THE BURDEN IS CAST, THE ISSUE MUST BE F OUND AGAINST HIM. THEREFORE; ONUS IS ALWAYS ON A PERSON WHO ASSERTS A PROPOSITION OR FACT, WHICH IS NOT SELF EVIDENT. THE ONUS, AS A DETERMINING FACTOR OF THE WHOLE CASE CAN ONLY ARISE IF THE TRIBUNAL, WHICH IS VESTED WITH THE AUTHORITY TO DETERMINE, FINAL LY ALL QUESTIONS OF FACT, FINDS THE EVIDENCE PRO & CON, SO EVENLY BALANCED THAT IT CAN COME TO NO CONCLUSION, THEN, THE ONUS WILL DETERMINE THE MATTER. THERE CANNOT BE ANY DOUBT THAT ONUS AS A DETERMINING FACTOR COMES INTO PLAY WHERE, EITHER THERE IS NO EV IDENCE ON EITHER SIDE, OR WHERE IT IS EQUALLY WORTHLESS OR WHERE IT IS EQUALLY BALANCED. IT IS IMPERATIVE TO MENTION HERE THAT WHERE SUCH IS NOT THE CASE AND ALL AVAILABLE EVIDENCE IS CONSIDERED, WITHOUT REFERENCE TO THE ONUS AND WITHOUT RELYING ON THE CIR CUMSTANCES THAT ONUS LIES ON A PARTICULAR PARTY, THE ISSUE IS DETERMINED ON FACTS AND THE ONUS CANNOT BE SAID TO HAVE INFLUENCED THE DECISIONS, HOWEVER, IN THE INSTANT CASE, THE APPELLANT HAS MISERABLY FAILED TO LEAD EVIDENCE AND HENCE, ONUS IS A DETERMINI NG FACTOR. 7.9 COMING TO THE ISSUE OF ESTIMATED ADDITION ON THE SAID BOGUS PURCHASES, IT IS PERTINENT TO MENTION THE DECISION OF THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF C1T V. SIMIT SHETH (2013) 38 TAXMANN.COM. 385 (GUJ), IN THE CASE, HON'BLE GUJARAT HIGH COURT WAS SEIZED WITH A SIMILAR ISSUE WHERE THE AO HAD FOUND THAT SOME OF THE ALLEGED SUPPLIERS OF STEEL TO THE ASSESSEE HAD NOT SUPPLIED ANY GOODS BUT HAD ONLY PROVIDED SALE BILLS AND HENCE, PURCHASES FROM THE SAID PARTIES WERE HELD TO BE BOGUS. THE AO, IN THAT CASE ADDED THE ENTIRE AMOUNT OF PURCHASES TO GROSS PROFIT OF THE ASSESSEE. LD. CU(A) HAVING FOUND THAT THE ASSESSEE HAD INDEED PURCHASED THOUGH NOT FROM NAMED PARTIES BUT OTHER PATTIES FROM GREY MARKET, PARTIALLY SUSTAINED THE ADDITION AS PROB ABLE PROFIT OF THE ASSESSEE. THE TRIBUNAL HOWEVER, SUSTAINED THE ADDITION TO THE EXTENT OF 12.5%. TAKING INTO ACCOUNT THE ABOVE FACTS, THE HON'BLE GUJARAT HIGH COURT HELD THAT SINCE THE PURCHASES WERE NOT BOGUS, BUT WERE MADE FROM PARTIES OTHER THAN THOSE MENTIONED IN BOOKS OF ACCOUNTS, ONLY THE PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES COULD BE ADDED TO THE ASSESSEE'S INCOME AND AS SUCH NO QUESTION OF LAW AROSE IN SUCH ESTIMATION. WHILE ARRIVING AT THE ABOVE CONCLUSION, THE HON'BLE COURT ALSO RELIED ON THE DECISION IN THE CASE OF VIJAY M. MISTRY CONSTRUCTION LTD. 355 UR 498 (GUJ) AND FURTHER APPROVED THE DECISION OF AHMEDABAD BENCH, ITAT IN THE CASE OF VIJAY PROTEINS 58 ITD 428. 7.10 IN THE PRESENT CASE, AO CONCLUDED THAT THE ASSESSEE INDULGED IN NON - GENUIN E TRANSACTION AND INTENTION OF INDULGING IN SUCH ACTIVITY IS TO SUPPRESS THE TRUE PROFITS AND TO REDUCE THE TAX LIABILITY. THEREFORE, IN SUCH CIRCUMSTANCES, ADDITION ON ACCOUNT OF A HIGHER MARGIN OF PROFIT WOULD BE FAIR AND EQUITABLE WHICH IS SUPPORTED BY THE ABOVE DECISION OF HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. SIMIT SHETH 356 ITR 451 (GUJ). THE FACTS OF THE PRESENT CASE ARE EXACTLY SIMILAR TO THE CITED CASE. THE APPELLANT MADE PURCHASES FROM ELEVEN PARTIES WHO ARE SAID TO BE HAWALA OPERATORS , WHO ARE INDULGED IN PROVIDING BOGUS BILLS WITHOUT SUPPLY OF ANY MATERIAL. INDEPENDENT INQUIRIES CONDUCTED REVEALED THAT NO PARTIES EXISTED IN THE GIVEN ADDRESSES. WHEN ASKED TO PRODUCE THE PARTIES DURING THE 5 ITA NO. 5274/MUM/2017 (A.Y: 2009 - 10) PARASMAL AMSARJI SHAH ASSESSMENT PROCEEDINGS BY THE AO AS WELL AS IN THE PRESENT PROCEEDINGS BY THE UNDERSIGNED, APPELLANT EXPENDITURE XPRESSED HIS INABILITY TO DO SO. UNDER THESE CIRCUMSTANCES, AS THE APPELLANT COULD NOT PROVE THE GENUINENESS OF THE CLAIM OF PURCHASES DEBITED TO THE PROFIT & LOSS ACCOUNT, THERE IS NO OTHE R WAY TO THE AO, BUT TO ESTIMATE THE PROFIT ELEMENT EMBEDDED ON SUCH PURCHASES. AS STATED EARLIER, THE FACTS OF THE CASE ARE EXACTLY SIMILAR TO THE CITED CASE, THEREFORE RESPECTFULLY FOLLOWING THE ABOVE CITED DECISION IN THE CASE OF SIMITH P. SHETH, THE AC TION OF THE AO IN ESTIMATING THE ADDITION @12.5% ON THE TOTAL NON - GENUINE PURCHASES FROM THE 22 PARTIES IS CONFIRMED, HOWEVER, THE AO IS DIRECTED TO REDUCE THE GP ALREADY SHOWN BY THE APPELLANT ON SUCH PURCHASES. THIS GROUND OF APPEAL IS PARTLY ALLOWED. 6. ON A PERUSAL OF THE ORDER OF THE LD. CIT(A), WE DO NOT FIND ANY VALID REASON TO INTERFERE WITH THE FINDING OF THE LD.CIT(A) IN ESTIMATING PROFIT ELEMENT ON SUCH PURCHASES. THUS WE SUSTAIN THE ORDER OF THE LD. CIT(A) IN REJECTING THE GROUNDS RAISED BY THE REVENUE. 7. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 13 TH FEBRUARY , 2019 SD/ - SD/ - ( G. MANJUNATHA ) (C.N. PRASAD) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI / DATED 13 / 0 2 / 2019 GIRIDHAR , S R. PS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY// BY ORDER (ASSTT. REGISTRAR) ITAT, MUM