INCOME TAX OFFICER 19(3)(1), MUMBAI V. RAJESH M. CHAUHAN, MUMBAI

ITA 531/MUM/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 5742 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-02-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 01-02-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SOURABH DESHPANDE
• Keywords: Bogus purchase; Accommodation entries; Set aside
• Section: 133(6); 143(1); 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ITA NO.531/MUM/2019 ( ASSESSMENT YEARS: 2009-10 ) ITO 19(3)(1 ) MATRU MANDIR, ROOM NO. 202, TARDEO ROAD, MUMBAI. PIN 400 007. / VS. SHRI. RAJESH M. CHAUHAN C/O DODHIA INDUSTRIES, 403, DHARAM PALACE, NATIONAL PARK, SHANTIVAN, BORIVALI (EAST), MUMBAI 400 066. ./ ./ PAN/GIR NO. : AAEPC3596K ( / // / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI SOURABH DESHPANDE , DR / RESPONDENT BY : NONE / / / / DATE OF HEARING 03 /02 /20 20 / DATE OF PRONOUNCEMENT 14/ 02 /20 20 / O R D E R PER SHRI G. MANJUNATHA- AM: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST ORDER OF THE LD. CIT (A)-30, MUMBAI, DATED 12/10/2018 AND IT PER TAINS TO THE A.Y 2009-10. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 531/MUM/2019. RAJESH M. CHAUHAN. - 2 - (I) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCE OF THE CASE AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN RESTRIC TING THE ADDITION TO @ 12.5% OF THE TOTAL NON-GENUINE PURCHA SES MADE BY THE ASSESSEE. (II) THE APPELLANT PRAYS THAT THE ORDER OF THE LD. CIT(A ) ON THE ABOVE GROUND BE SET ASIDE AND THAT OF THE AO BE RES TORED. (III) THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER OR ADD A NEW GROUND WHICH MAY BE NECESSARY. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS ENGAGED IN THE BUSINESS OF MANUFACTURERS OF LIGHTING POLES AND HIGH MASS ACCESSORIES IN THE NAME AND STYLE OF M/S KRISHNA EN TERPRISES, FILED HIS RETURN OF INCOME FOR AY 2009-10 ON 26/09/2009, DECLARING THE TOTAL INCOME AT RS. 3,49,198/- AND SAID RETURN WAS PROCESSED U/S 143(1) OF THE I.T.ACT, 1961. THE CASE HAS BEEN SUBS EQUENTLY REOPENED U/S 147 OF THE ACT, ON THE BASIS OF INFORMATION REC EIVED 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 AND OTHER PLACES. AS PER LIST OF BENEFICIARIES, THE ASSESSEE IS ONE OF THE BENEFICIARY, WHO HAD TAKEN A CCOMMODATION BILLS OF BOGUS PURCHASES FROM VARIOUS PARTIES AS LISTED B Y THE AO IN PARA 2 OF HIS ASSESSMENT ORDER AMOUNTING TO RS. 30,22,473/ -. THE CASE WAS SELECTED FOR SCRUTINY AND THE ASSESSMENT HAS BEEN C OMPLETED U/S. 143(3).R.W.S. 147 OF THE I.T.ACT, 1961 ON 23/03/201 5 AND ETERMINED TOTAL INCOME OF RS. 33,71,670/-, AFTER MAKING 100% ADDITIONS TOWARDS ALLEGED BOGUS PURCHASE FROM THOSE PARTIES AND MADE ADDITIONS OF RS. 30,22,473/-. 531/MUM/2019. RAJESH M. CHAUHAN. - 3 - 4. 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 ELOBARATE WRITTEN SUBMISSION ON THE ISSUE WHI CH HAS BEEN REPRODUCED AT PARA 4 ON PAGES 3 TO 8 OF THE LD. CIT (A) ORDER. THE SUM AND SUBSTANCE OF ARGUMENTS OF THE ASSESSEE BEFORE T HE LD.CIT (A) ARE THAT PURCHASE FROM THE ABOVE PARTY IS GENUINE, WHIC H IS SUPPORTED BY NECESSARY EVIDENCES. THEREFORE, NO ADDITIONS COULD BE MADE ON THE BASIS OF INFORMATION RECEIVED FROM THIRD PARTY. THE LD.CIT(A), AFTER CONSIDERING RELEVANT SUBMISSION OF THE ASSESSEE AND ALSO, BY FOLLOWING THE DECISION OF HONBLE GUJARAT HIGH COURT, IN THE CASE OF CIT VS. SIMITH P. SHETH (356 ITR 451) HAS SCALED DOWN ADDIT ION MADE BY THE AO TOWARDS ALLEGED BOGUS PURCHASES TO 12.50% GROSS PROFIT ON TOTAL PURCHASES FROM THOSE PARTIES. 5. NONE APPEARED FOR THE ASSESSEE. WE HAVE HEARD TH E LD. DR, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE T HROUGH ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT THE LD. AO HAS MADE 100% ADDITION ON ALLEGED BOGUS PURCHASES ON THE GROUND T HAT THE ASSESSEE IS ONE OF THE BENEFICIARY OF ACCOMMODATION ENTRIES OF BOGUS PURCHASE BILLS ISSUED BY HAWALA DEALERS. ACCORDING TO THE LD . AO, ALTHOUGH ASSESEE HAS FILED CERTAIN BASIC EVIDENCES, BUT FAIL ED TO FILE FURTHER EVIDENCE IN THE BACKDROP OF CLEAR FINDING BY THE SA LES 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 531/MUM/2019. RAJESH M. CHAUHAN. - 4 - 133(6) TO THE PARTIES WERE RETURNED UN-SERVED BY TH E POSTAL AUTHORITIES. THEREFORE, HE CAME TO THE CONCLUSION T HAT PURCHASES FROM THE SAID PARTIES ARE BOGUS IN NATURE. IT IS THE CON TENTIONS OF THE ASSESSEE BEFORE THE LOWER AUTHORITIES THAT PURCHASE S FROM THE ABOVE PARTY ARE SUPPORTED BY NECESSARY EVIDENCES. IT HAS FURNISHED ALL POSSIBLE EVIDENCES, INCLUDING BOOKS OF ACCOUNTS; ST OCK DETAILS AND BANK STATEMENT TO PROVE THAT PAYMENT AGAINST SAID P URCHASES HAVE BEEN MADE THROUGH PROPER BANKING CHANNELS. 6 HAVING CONSIDERED ARGUMENTS OF THE LD. DR AND ALS O, MATERIAL AVAILABLE ON RECORD, WE FIND THAT BOTH THE SIDES HA VE FAILED TO PROVE THE CASE IN THEIR FAVOUR WITH NECESSARY EVIDENCES. ALTHOUGH, ASSESSEE HAS FILED CERTAIN BASIC EVIDENCES, BUT FAILED TO FI LE FURTHER EVIDENCES TO CONCLUSIVELY PROVE PURCHASES TO THE SATISFACTIONS O F THE LD.AO. FURTHER, MERE PAYMENT BY CHEQUE DOES NOT PROVE THE GENUINENESS OF PURCHASE, MORE PARTICULARLY WHEN OTHER CIRCUMSTANTI AL EVIDENCE SAYS OTHERWISE. AT THE SAME TIME, THE LD. AO HAD ALSO FA ILED TO TAKE THE INVESTIGATION TO A LOGICAL CONCLUSION BY CARRYING O UT NECESSARY ENQUIRES, BUT HE SOLELY RELIED UPON INFORMATION RE CEIVED FROM INVESTIGATION WING, WHICH WAS FURTHER SUPPORTED BY INFORMATION RECEIVED FROM MAHARASHTRA SALES TAX DEPARTMENT. THE AO NEITHER POINTED OUT ANY DESCREPANICES IN BOOKS OF ACCOUNTS NOR MADE OUT A CASE OF SALES OUTSIDE BOOKS OF ACCOUNTS. IN FACT, T HE AO DID NOT DISPUTED SALES DECLARED FOR THE YEAR. UNDER THESE C IRCUMSTANCES, IT IS DIFFICULT TO ACCEPT ARGUMENTS OF BOTH THE SIDES. FU RTHER, IN A CASE WHERE PURCHASES ARE CONSIDERED TO BE PURCHASED FROM 531/MUM/2019. RAJESH M. CHAUHAN. - 5 - SUSPICIOUS/HAWALA DEALERS, VARIOUS HIGH COURTS AND TRIBUNALS HAD CONSIDERED AN IDENTICAL ISSUE IN LIGHT OF INVESTIGA TION CARRIED OUT BY THE SALES TAX DEPARTMENT AND HELD THAT IN CASE OF P URCHASES CLAIMS TO HAVE MADE FROM ALLEGED HAWALA DEALERS, ONLY PROF IT ELEMENT EMBEDDED IN THOSE PURCHASES NEEDS TO BE TAXED, BUT NOT TOTAL PURCHASE FROM THOSE PARTIES. THE HONBLE GUJARAT HI GH COURT, IN THE CASE OF CIT VS SIMITH P.SHETH 356 ITR 451 HAD CONSI DERED A SIMILAR ISSUE AND HELD THAT AT THE TIME OF ESTIMATION OF PR OFIT FROM ALLEGED BOGUS PURCHASES NO UNIFORM YARDSTICKS COULD BE ADOP TED, BUT IT DEPENDS UPON FACTS OF EACH CASE. THE ITAT, MUMBAI, IN NUMBER OF CASES HAD CONSIDERED AN IDENTICAL ISSUE AND DEPENDI NG UPON FACTS OF EACH CASE, DIRECTED THE LD.AO TO ESTIMATE GROSS PRO FIT OF 10% TO 15% ON TOTAL ALLEGED BOGUS PURCHASES. IN THIS CASE, CON SIDERING THE NATURE OF BUSINESS OF THE ASSESSEE THE LD. AO HAS MADE 100 % ADDITIONS, WHEREAS THE LD.CIT(A) HAS SCALED DOWN ADDITION TO 1 2.50% GROSS PROFIT ON TOTAL ALLEGED BOGUS PURCHASE. ALTHOUGH, B OTH AUTHORITIES HAVE TAKEN DIFFERENT RATE OF PROFIT FOR ESTIMATION OF INCOME FROM ALLEGED BOGUS PURCHASE, BUT NO ONE COULD SUPPORT SA ID RATE OF GROSS PROFIT WITH NECESSARY EVIDENCES OR ANY COMPARABLE C ASES. THEREFORE, CONSIDERING FACTS AND CIRCUMSTANCES OF THIS CASE AN D CONSISTENT WITH VIEW TAKEN BY THE CO-ORDINATE BENCH IN NUMBER OF CA SES, WE ARE OF THE CONSIDERED OPINION THAT THE LD. CIT(A) HAS TAKE N A FAIR VIEW AND ESTIMATED 12.50% GROSS PROFIT ON ALLEGED BOGUS PURC HASES TO SETTLE DISPUTE BETWEEN THE PARTIES AND HENCE, WE ARE INCLI NED TO UPHOLD ORDER OF THE LD. CIT(A) AND DISMISS APPEAL FILED BY THE REVENUE. 531/MUM/2019. RAJESH M. CHAUHAN. - 6 - 7. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DI SMISSED. THIS ORDER PRONOUNCED IN OPEN COURT ON: 14/02/2 020 SD/- SD/- (SAKTIJIT DEY) ( G. MANJUNATHA ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 14 /02/2020 KRK, PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. !!' / THE CIT(A) 4. !!' ( ) / CONCERNED CIT 5. #$ , , / DR, ITAT, MUMBAI 6. $%&' / GUARD FILE. / BY ORDER, //TRUE COPY// 1. / // / ( ASST. REGISTRAR) , , , , / ITAT, MUMBAI