ITO 28(2)(1), MUMBAI V. SHRI KRUTARTH ATUL SHAH, MUMBAI

ITA 5278/MUM/2018

• Counselvise Citation: [2019] 114 COUNSELVISE.COM (IT) 6131 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-10-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 12-09-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AKHTAR HANSARI
• Assessee Lawyers: N R AGGARWAL
• Keywords: Bogus purchase; Accommodation entries
• Section: 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC, BENCH MUMBAI BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ITA NO.5278 & 5499/MUM/2018 ( ASSESSMENT YEARS :2010-11 ) ITO-28(2)(1) ROOM NO.326, 3 RD FLOOR TOWER NO.6 VASHI RAILWAY STATION COMPLEX, VASHI NAVI MUMBAI-400 703 VS. KRUTARTH ATUL SHAH A-1203 BALAJI GARDEN SECTOR-11, KOPERKHAIRANE NAVI MUMBAI-400 703 PAN/GIR NO. A RPPS3525G APPELLANT ) .. RESPONDENT ) KRUTARTH ATUL SHAH A-1203 BALAJI GARDEN SECTOR-11, KOPERKHAIRANE NAVI MUMBAI-400 703 VS. ITO-28(2)(1) ROOM NO.326, 3 RD FLOOR TOWER NO.6 VASHI RAILWAY STATION COMPLEX, VASHI NAVI MUMBAI-400 703 PAN/GIR NO. ARPPS3525G APPELLANT ) .. RESPONDENT ) ASSESSEE BY N.R.AGGARWAL REVENUE BY AKHTAR H.ANSARI DATE OF HEARING 16/10/2019 DATE OF PRONOUNCEME NT 16 /10 /201 9 / O R D E R PER G.MANJUNATHA (A.M) : THESE CROSS APPEALS FILED BY THE REVENUE AS WELL AS THE ASSESSEE ARE DIRECTED AGAINST ORDER OF THE LD. COMM ISSIONER OF INCOME TAX (APPEALS) -26, MUMBAI, DATED 25/06/2018 FOR THE ASSESSMENT YEARS (AY) 2010-11. SINCE, THE FACTS ARE IDENTICAL AND ITA NOS.5278 & 5499/MUM/2018 KRUTARTH ATUL SHAH 2 ISSUES ARE COMMON, FOR THE SAKE OF CONVENIENCE, THE SE APPEALS WERE HEARD TOGETHER AND ARE DISPOSED-OFF BY THIS CO NSOLIDATED ORDER. 2. THE BRIEF FACTS OF THE CASE ARE THAT, THE ASSESS EE IS ENGAGED IN THE BUSINESS OF WHOLE SELLER AND DEALER OF SOLVENTS & CHEMICALS, FILED ITS RETURN OF INCOME ON 13/09/2010 FOR AY 2010-11, DECLARING TOTAL INCOME OF RS.16,39,390/-/-. THEREAFTER, THE CASE HA S BEEN REOPENED U/S 147, ON THE BASIS OF INFORMATION RECEIVED FROM DGIT, INVESTIGATION, MUMBAI, AS PER WHICH, SALES TAX AUTH ORITIES OF GOVERNMENT OF MAHARASHTRA HAD TAKEN ACTIONS AGAINST NUMBER OF HAWALA DEALERS, WHO HAD ISSUED BOGUS PURCHASE BILLS TO VARIOUS PARTIES IN MUMBAI TO REDUCE OR SUPPRESS PROFITS. A S PER LIST OF BENEFICIARIES, THE ASSESSEE IS ONE OF THE BENEFICIA RY, WHO HAD TAKEN ACCOMMODATION BILLS OF BOGUS PURCHASES FROM VARIOUS PARTIES AS LISTED BY THE AO IN HIS ASSESSMENT ORDER AMOUNTING TO RS. 3,04,013/-. THE CASE WAS SELECTED FOR SCRUTINY AND THE ASSESSMENT HAS BEEN COMPLETED U/S. 143(3).R.W.S. 147 OF THE I. T.ACT, 1961 ON 30/12/2015 AND DETERMINED TOTAL INCOME OF RS. 19,43 ,400/-, AFTER MAKING ADDITIONS TOWARDS ALLEGED BOGUS PURCHASE @ 1 00% OF TOTAL PURCHASES FROM THOSE PARTIES AND MADE ADDITIONS OF RS. 3,04,013/-. 3. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESEE P REFERRED AN APPEAL BEFORE THE LD.CIT(A). BEFORE THE LD.CIT(A), THE ASSESSE HAS FILED ELABORATED WRITTEN SUBMISSIONS, ON THE ISSUE , WHICH HAS BEEN REPRODUCED AT PARA 4.4 ON PAGES 3 TO 5 OF LD.CIT(A) ORDER. THE SUM AND SUBSTANCE OF THE ARGUMENTS OF THE ASSESSEE BEFO RE THE LD.CIT(A) ARE THAT PURCHASE FROM THE ABOVE PARTY IS GENUINE, WHICH IS SUPPORTED BY NECESSARY EVIDENCES. THEREFORE, NO ADDITIONS COULD BE MADE ON THE BASIS OF INFORMATION RECEIVED FROM T HIRD PARTY. THE LD.CIT(A), AFTER CONSIDERING RELEVANT SUBMISSION OF THE ASSESSEE ITA NOS.5278 & 5499/MUM/2018 KRUTARTH ATUL SHAH 3 AND ALSO, ON ANALYSIS OF INFORMATION COLLECTED DURI NG THE COURSE OF SEARCH AND ALSO BY FOLLOWING THE DECISION OF HONBL E GUJARAT HIGH COURT, IN THE CASE OF CIT VS. SIMITH P. SHETH (356 ITR 451) SCALED DOWN ADDITION TO 15% PROFIT ON ALLEGED BOGUS PURCHA SES. THE RELEVANT FINDINGS OF THE LD.CIT(A) ARE AS UNDER:- 4.5 I HAVE CONSIDERED THE FACTS OF THE CASE AND THE APPELLANT'S SUBMISSIONS. AS PER THE INVESTIGATIONS CARRIED OUT BY THE SALES TAX AUTHORITIES, THE ABOVE MENTIONED TWO PARTIES WERE F OUND TO BE INVOLVED IN GIVING ACCOMMODATION ENTRIES ONLY WITHOUT ACTUALLY SUPPLYING THE GOODS THE LOGICAL INFERENCE IS THAT THE PURCHASES MADE BY THE APPELLANT FROM THEM WOULD ALSO BE IN THE NATURE OF ACCOMMODATION E NTRIES ONLY. TO VERIFY THE SAME, THE AO HAD ISSUED NOTICES U/S 133( 6) TO THE PARTIES WHICH WAS RETURNED UN-SERVED BY THE POSTAL AUTHORIT IES WITH THE REMARKS 'LEFT 1 THIS FACT WAS COMMUNICATED TO THE APPELLANT WHO WA S ASKED TO PRODUCE THE PARTIES WHICH THE APPELLANT FAILED TO D O. THE APPELLANT SUBMITTED PURCHASE INVOICES, DELIVERY CHALLAN AND D ETAILS OF CHEQUE PAYMENTS IN SUPPORT OF ITS CLAIM THAT THE PURCHASES WERE GENUINE. THE APPELLANT ALSO SUBMITTED THAT THE GOODS PURCHASED F ROM THESE PARTIES WERE FURTHER SOLD TO OTHER PARTIES. AS FAR AS THE G ENUINENESS OF PURCHASES MADE FROM THESE PARTIES IS CONCERNED, IT HAS TO BE KEPT IN MIND THAT THESE PARTIES HAD ADMITTED ON OATH BEFORE THE SALES TAX A UTHORITIES THAT THEY HAD GIVEN ACCOMMODATION ENTRIES ONLY WITHOUT ACTUAL LY SUPPLYING THE GOODS THE DOCUMENTATION SUBMITTED BY THE APPELLANT IN SUPPORT OF ITS CLAIM WOULD , THEREFORE, HAVE BEEN ORCHESTRATED TO PRESENT A FACADE OF GENUINENESS AND DOES NOT NECESSARILY MEAN THAT THE PURCHASES FROM THESE PARTIES ARE GENUINE THE COURTS HAVE HELD (HAT PAYMENT BY CHEQUE ITSELF IS NOT SACROSANCT SO AS TO PROVE GENUINENESS OF PURCHASES WHEN THE SURROUNDING CIRCUMSTANCES ARE SUSPECT. HOWEVER, THE APPELLANT HAS SHOWN ONWARD SALES OF THE GOODS PURCHASED WHICH HAS NOT BEEN DOUBTED BY THE ASSESSING OFFICER. SINCE THERE CAN BE NO SAL ES WITHOUT CORRESPONDING PURCHASES, THE ONLY LOGICAL EXPLANATI ON IS THAT THE APPELLANT WOULD HAVE MADE PURCHASES FROM UNDISCLOSE D PATTIES IN THE GREY MARKET AT LOWER RATES AND PURCHASES WERE SHOWN AS BEING MADE FROM THE IMPUGNED PARTIES TO SUPPRESS ITS PROFITS. IN SUCH A SITUATION, THE VARIOUS COURTS INCLUDING THE HON'BLE GUJARAT HIGH C OURT IN THE CASE OF CIT VS SIMIT P. SHETH. 356 ITR 451 HAVE HELD THAT N OT THE ENTIRE PURCHASES BUT ONLY THE PROFIT ELEMENT EMBEDDED IN T HESE PURCHASES WAS TO BE DISALLOWED. THE ESTIMATION WOULD VARY WITH TH E NATURE OF BUSINESS AND NO UNIFORM YARDSTICK COULD BE ADOPTED THE APPEL LANT'S GP RATIO FOR THE LAST THREE YEARS RANGED FROM 8.47% LO 14.36% IN VIEW OF THIS DECISION OF THE HONBLE GUJARAT HIGH COURT (SUPRA), THE ADDI TION OF THE ENTIRE PURCHASE AMOUNT OF RS. 3,04,013/- MADE BY THE AO IS RESTRICTED TO 15% OF THE SAME WHICH SHOULD SUFFICIENTLY COVER THE PRO FIT ELEMENT EMBEDDED IN THE IMPUGNED PURCHASES. THE APPELLANT'S GROUNDS OF APPEAL ARE PARTLY ALLOWED. ITA NOS.5278 & 5499/MUM/2018 KRUTARTH ATUL SHAH 4 4. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATE RIAL AVAILABLE ON RECORD AND GONE THROUGH ORDERS OF THE AUTHORITIE S BELOW. WE FIND THAT THE LD. AO HAS MADE ADDITIONS TOWARDS ALLEGED BOGUS PURCHASES @ 100% OF SUCH PURCHASES, ON THE GROUND THAT THE ASSESSEE ONE OF THE BENEFICIARY OF ACCOMMODATION EN TRIES OF BOGUS PURCHASE BILLS ISSUED BY HAWALA DEALERS. ACCORDING TO THE LD. AO, ALTHOUGH ASSESEE HAS FILED CERTAIN BASIC EVIDENCES, BUT FAILED TO FILE FURTHER EVIDENCE IN THE BACKDROP OF CLEAR FINDING B Y THE SALES TAX DEPARTMENT, MAHARASHTRA THAT THOSE PARTIES ARE INVO LVED IN PROVIDING ACCOMMODATION ENTRIES WITHOUT ACTUAL DELIVERY OF GO ODS. THE LD. AO HAD ALSO TAKEN SUPPORT FROM THE INVESTIGATION CONDU CTED DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AS PER WHICH NOTI CE ISSUED U/S 133(6) TO THE PARTY WERE RETURNED UN-SERVED BY THE POSTAL AUTHORITIES. THEREFORE, HE CAME TO THE CONCLUSION THAT PURCHASE FROM THE SAID PARTY IS BOGUS IN NATURE. IT IS THE CONTENTIONS OF THE ASSESSEE BEFORE THE LOWER AUTHORITIES THAT PURCHASES FROM THE ABOVE PARTY ARE SUPPORTED BY NECESSARY EVIDENCES. IT HAS FURNISHED ALL POSSIBLE EVIDENCES, INCLUDING BOOKS OF ACCOUNTS, STOCK DETAI LS AND BANK STATEMENT TO PROVE THAT PAYMENT AGAINST SAID PURCHA SES HAVE BEEN MADE THROUGH PROPER BANKING CHANNELS. 5 HAVING CONSIDERED ARGUMENTS OF THE LD. DR AND ALS O, MATERIAL AVAILABLE ON RECORD, WE FIND THAT BOTH THE SIDES FA ILED TO PROVE THE CASE IN THEIR FAVOUR WITH NECESSARY EVIDENCES. ALTH OUGH, ASSESSEE HAS FILED CERTAIN BASIC EVIDENCES, BUT FAILED TO FI LE FURTHER EVIDENCES TO CONCLUSIVELY PROVE PURCHASES TO SATISFACTIONS OF THE LD.AO. AT THE SAME TIME, THE LD. AO HAD ALSO FAILED TO TAKE THE I NVESTIGATION TO A LOGICAL CONCLUSION BY CARRY OUT NECESSARY ENQUIRES, BUT HE SOLELY RELIED UPON INFORMATION RECEIVED FROM INVESTIGATIO N WING, WHICH WAS FURTHER SUPPORTED BY INFORMATION RECEIVED FROM MAHA RASHTRA SALES ITA NOS.5278 & 5499/MUM/2018 KRUTARTH ATUL SHAH 5 TAX DEPARTMENT. UNDER THESE CIRCUMSTANCES, IT IS D IFFICULT TO ACCEPT ARGUMENTS OF BOTH THE SIDES. FURTHER, VARIOUS HIGH COURTS AND TRIBUNALS HAD CONSIDERED AN IDENTICAL ISSUE IN LIGH T OF INVESTIGATION CARRIED OUT BY THE SALES TAX DEPARTMENT AND HELD TH AT IN CASE PURCHASES CLAIMS TO HAVE MADE FROM ALLEGED HAWALA D EALERS , ONLY PROFIT ELEMENT EMBEDDED IN THOSE PURCHASES NEEDS TO BE TAXED, BUT NOT TOTAL PURCHASE FROM THOSE PARTIES. THE HONBLE GUJARAT HIGH COURT, IN THE CASE OF CIT VS SIMITH P.SHETH 356 ITR 451 HAD CONSIDERED A SIMILAR ISSUE AND HELD THAT AT THE TIM E OF ESTIMATION OF PROFIT FROM ALLEGED BOGUS PURCHASES NO UNIFORM YARD STICKS COULD BE ADOPTED, BUT IT DEPENDS UPON FACTS OF EACH CASE. TH E ITAT, MUMBAI, IN NUMBER OF CASES HAD CONSIDERED AN IDENTICAL ISSU E AND DEPENDING UPON FACTS OF EACH CASE, DIRECTED THE LD.AO TO ESTI MATE PROFIT OF 10 TO 15% ON TOTAL ALLEGED BOGUS PURCHASES. IN THIS CA SE, CONSIDERING THE NATURE OF BUSINESS OF THE ASSESSEE THE LD. AO H AS MADE 100% ADDITIONS TO BOGUS PURCHASES, WHEREAS THE LD.CIT(A) HAS SCALED DOWN ESTIMATION OF PROFIT TO 15% ON TOTAL ALLEGED B OGUS PURCHASE. ALTHOUGH, BOTH AUTHORITIES HAVE TAKEN DIFFERENT RAT E OF PROFIT FOR ESTIMATION OF INCOME FROM ALLEGED BOGUS PURCHASE, B UT NO ONE COULD SUPPORT SAID RATE OF GROSS PROFIT WITH NECESSARY EV IDENCES OR ANY COMPARABLE CASES. THEREFORE, CONSIDERING FACTS AND CIRCUMSTANCES OF THIS CASE AND CONSISTENT WITH VIEW TAKEN BY THE CO-ORDINATE BENCH IN NUMBER OF CASES, WE DIRECT THE AO TO ESTIMATE 12 .50% PROFIT ON ALLEGED BOGUS PURCHASES. 6. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DI SMISSED AND APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ITA NOS.5278 & 5499/MUM/2018 KRUTARTH ATUL SHAH 6 ORDER PRONOUNCED IN THE OPEN COURT ON THIS 16 /1 0/2019 SD/- (MAHAVIR SINGH) SD/- (G. MANJUNATHA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 16/10/2019 THIRUMALESH SR.PS COPY OF THE ORDER FORWARDED TO : BY ORDER, (ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//