INCOME TAX OFFICER, WARD-3(3), MUMBAI V. SHRI MAHENDRA B GANDHI, MUMBAI

ITA 5310/MUM/2018

• Counselvise Citation: [2019] 114 COUNSELVISE.COM (IT) 6117 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-10-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 14-09-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R BHOOPATHI
• Assessee Lawyers: MAHENDRA B GANDHI
• Keywords: Bogus purchase; Wrong claim; Accommodation entries; Non passing of speaking order
• Section: 69C; 133(6); 201; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC, BENCH MUMBAI BEFORE SHRI G. MANJUNATHA, ACCOUNTANT MEMBE R & SHRI RAM LAL NEGI, JUDICIAL MEM BER ITA NO.5310, 5311 & 5312/MUM/2018 ( ASSESSMENT YEARS :2009-10,2010-11 & 2011-12 ) ITO,WARD-3(3) 2 ND FLOOR, RANI MANSION MURBAD ROAD KALYAN(W) MUMBAI-421 301 VS. MAHENDRA B GANDHI B-205, HARIDWAR CO-OP SOCIETY, 2 ND FLOOR MANPADA ROAD DOMBIVLI (EAST)-421 201 PAN/GIR NO. A BHPG6116B ( APPELLANT ) .. ( RESPONDENT ) ASSESSEE BY MAHENDRA B. GANDHI REVENUE BY R. BHOOPATHI DATE OF HEARING 01/10/2019 DATE OF PRONOUNCEME NT 01 /10/ 201 9 / O R D E R PER G.MANJUNATHA (A.M) : THESE THREE APPEALS FILED BY THE REVENUE ARE DIRECT ED AGAINST COMMON ORDER OF THE COMMISSIONER OF INCOME TAX (APP EALS) -3, NASIK, DATED 29/062018 AND THEY PERTAINS TO ASSESSM ENT YEARS (AY) 2009-10, 2010 -11 AND 2011-12. SINCE, THE FACT S ARE IDENTICAL AND ISSUES ARE COMMON, FOR THE SAKE OF CONVENIENCE, THESE APPEALS WERE HEARD TOGETHER AND ARE DISPOSED-OFF BY THIS CO NSOLIDATED ORDER. ITA NO.5310, 5311, 5312/MUM/2018 MAHENDRA B. GANDHI 2 ITA NO. 5310/MUM/2018:- 2. THE REVENUE HAS MORE OR LESS FILED COMMON GROUND S OF APPEAL FOR ALL ASSESSMENT YEARS. THEREFORE, FOR THE SAKE O F BREVITY, GROUNDS OF APPEAL FILED FOR AY 2009-10 ARE REPRODUCED AS UN DER:- 1. 'WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW : THE LD. CIT(A) WAS JUSTIFIED IN NOT APPRECIATING TH E LAW CORRECTLY THAT ONCE THE PURCHASES ARE UNVERIFIABLE/NOT GENUINE/BOGUS, T HE SAME SHOULD HAW BEEN DISALLOWED IN ENTIRETY?. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD, CIT(A) HAS ERRED IN LAW BY NOT APPRECI ATING THE FACT THAT THE ASSESSEE COULD NOT ESTABLISH THE GENUINENESS OF THE PURCHASES FROM THE NON-EXISTENT VENDORS? 3. WHETHER ON THE (ACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN LAW BY NOT APPRECIATING THE FACT THAT THE ONUS LO JUSTIFY THE CLAIM OF EXPENSES IS ON THE ASSESSEE AND THE SAME HAS TAILED TO DISCHARGE IT IN RELATION TO THE PURCHASES MADE FROM THE NON- EXISTENT VENDORS? 4. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN LAW BY IGNORING, T HE FACT THAT THE ASSESSEE COULD NOT SUBSTANTIATE ITS CLAIM OF PURCHA SES FROM NON-EXISTENT VENDORS BY MEANS OF RELEVANT SUPPORTING DOCUMENTS R ELATED TO MOVEMENT AND DELIVERY OF GOODS, STOCK, REGISTER, ET C. TO ARRIVE AT DISALLOWANCE AT 12.5% OF THE PURCHASES FROM THE NON -EXISTENT VENDORS? 5. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN NOT APPRECIATING TH E 1A\V CORRECTLY THAT ONCE THE PURCHASES ARE UNVERIFIABLE / NOT GENUINE / BOGUS, THE SAME SHOULD HAVE BEEN DISALLOWED IN ENTIRETY, PARTICULAR LY IN VIEW OF THE RATIO OF THE DECISION OF THE HON'BLE GUJARAT HIGH COURT IN T AX APPEAL NO.242 OF 2003 DATED 20/06/2016 IN THE CASE OF N. K. PROTEINS LTD. AGAINST WHICH THE SLP WAS DISMISSED BY THE HON'BLE APEX COURT?. 6. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER OR DELETE ANY GROUND OF APPEAL. 7. THE ORDER OF THE CIT(A) MAY BE VACATED AND THA T OF THE ASSESSING OFFICER MAY HE RESTORED. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS ENGAGED IN THE BUSINESS OF DEALING IN INDUSTRIAL ITEMS, HARDWA RE, PIPE FITTINGS AND ELECTRICAL/RUBBER GOODS, FILED HIS RETURN OF IN COME FOR AY 2009- 10 ON 29/09/2009, DECLARING TOTAL INCOME OF RS. 3,0 3,449/-. ITA NO.5310, 5311, 5312/MUM/2018 MAHENDRA B. GANDHI 3 THEREAFTER, THE CASE HAS BEEN REOPENED U/S 147, ON THE BASIS OF INFORMATION RECEIVED FROM DGIT, INVESTIGATION, MUMB AI, AS PER WHICH, SALES TAX AUTHORITIES OF GOVERNMENT OF MAHAR ASHTRA HAD TAKEN ACTIONS AGAINST NUMBER OF HAWALA DEALERS, WH O HAD ISSUED BOGUS PURCHASE BILLS TO VARIOUS PARTIES IN MUMBAI T O REDUCE OR SUPPRESS PROFITS. AS PER LIST OF BENEFICIARIES, TH E ASSESSEE IS ONE OF THE BENEFICIARY, WHO HAD TAKEN ACCOMMODATION BILLS OF BOGUS PURCHASES FROM VARIOUS PARTIES AS LISTED BY THE AO IN HIS ASSESSMENT ORDER AMOUNTING TO RS. 6,34,503/-. THE C ASE 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 19/02/201 5 AND DETERMINED TOTAL INCOME OF RS. 9,37,950/-, AFTER MAKING 100% A DDITIONS TOWARDS ALLEGED BOGUS PURCHASE AND MADE ADDITIONS OF RS. 6, 34,503/-. 4. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD.CIT(A). BEFORE THE LD.CIT(A), THE ASSESSEE HAS REITERATED HIS SUBMISSIONS MADE BEFORE THE LD. AO TO ARGUE THAT PURCHASES FROM ABOVE PARTIES ARE GENUINE, WHICH AR E SUPPORTED BY NECESSARY EVIDENCES. THE ASSESSEE HAS FILED ALL DET AILS, INCLUDING BOOKS OF ACCOUNTS, BUT THE LD. AO HAS MADE ADDITION S, ONLY ON THE GROUND THAT PARTIES DID NOT RESPOND, IN RESPONSE TO 133(6) NOTICES. THE LD. CIT(A) AFTER CONSIDERING RELEVANT SUBMISSIO NS OF THE ASSESSEE AND ALSO BY RELIED UPON VARIOUS JUDICIAL P RECEDENTS, INCLUDING THE DECISION OF HONBLE GUJARATH HIGH COU RT, IN THE CASE OF SIMITH P. SHETH VS CIT 356 ITR 451 SCALED DOWN ADDI TIONS MADE BY THE LD. AO TO 12.5% OF ALLEGED BOGUS PURCHASES. THE RELEVANT FINDINGS OF THE LD.CIT(A) ARE REPRODUCED AS UNDER: - ITA NO.5310, 5311, 5312/MUM/2018 MAHENDRA B. GANDHI 4 7. I HAVE CAREFULLY CONSIDERED THE APPELLANT'S SUBM ISSIONS, OBSERVATIONS OF THE AO IN THE ASSESSMENT ORDER AND THE FACTS OF THE CASE THE APPELLANT HAD SHOWN PURCHASES AMOUNTING TO RS. 6,34,503/- FROM VARIOUS PARTIES, WHICH APPEARED IN THE LIST OF SATES TAX DE PARTMENT WHO HAD INDULGED IN HAWALA TRANSACTIONS I.E PROVIDING ONLY BIDS WITHOUT THERE IS BEING ANY ACTUAL PURCHASE OR SALE TRANSACTION. 7.1. BEFORE THE CASE IS DISCUSSED, IT IS IMP ORTANT TO KNOW THE BACKGROUND IN WHICH THE CASE OF THE APPELLANT WAS S ELECTED FOR SCRUTINY AS PER SECTION 3 OF THE MVAT ACT,2002, EVERY REGIST ERED DEALER, IS LIABLE TO PAY TAX ON A SALE TRANSACTION WITH A PURCHASING DEALER WHOSE TURNOVER OF SALES OR PURCHASES HAS EXCEEDED RUPEES FIVE LAKH . THE SELLING DEALER ISSUES A TAX INVOICE, WHICH SHOWS THE AMOUNT OF LAX RECOVERED FROM THE PURCHASING DEALER. THE SALE MADE BY THE SELLING DEA LER NEEDS TO BE ACCOUNTED IN TURNOVER OF SALES WHILE FILING THE TAX RETURN AND PAY THE DUE TAXES. FURTHER, THE PURCHASING DEALER IS ALSO ENTIT LED TO CLAIM BY WAY OF A SET OFF UNDER SECTION 48 THE TAX PAID ON HIS PURCHA SES AS ITC (INPUT TAX CREDIT). THE SALES TAX AUTHORITIES FOUND THAT A L ARGE NUMBER OF SELLING DEALERS HAD NEITHER FILED THEIR RETURNS NOR PAID TH E TAXES COLLECTED BY THEM FROM PURCHASING DEALERS. THE SALES TAX AUTHORITIES DENIED THE BENEFIT OF SET-OFF OF INPUT TAN CREDIT TO PURCHASING DEALERS, WHO WENT INTO APPEAL BEFORE HON'BLE BOMBAY HIGH COURT AGAINST THE SAID O RDERS THE SAME WAS REJECTED BY THE BOMBAY HIGH COURT IN WRIT PETI TION NO 33 OF 2012 IN CASE OF M/S MAHALAXMI COTTON GINNING VS THE SLATE OF MAHARASHTRA & ORS ON 11 MAY, 2012 AND OTHER SIMILAR CASES IN THE SAID APPEALS, THE PURCHASING DEALERS TOOK A PLEA BEFORE THE HIGH COURT THAT AS TIE HAS PAID THE LAX TO !HE SELLING DEALER HE SHOUL D NOT BE DENIED THE BENEFIT OF A SET OFF OF LAVES PAID, WHICH IS ARBITR ARY. HOWEVER THE SLATE GOVERNMENT IN AN AFFIDAVIT BEFORE THE COURT SUBMITT ED THAT INVESTIGATIONS REVEALED THAT THERE WAS A EXISTENCE OF LARGE-SCALE HAWALA RACKET WHEREIN THE SELLING DEALERS MERELY ISSUED TAX INVOICES TO THE PURCHASING DEALER WITHOUT ANY SALE OF GOODS THE C OURT DID NOT ACCEPT THE PLEA OF THE PURCHASING DEALER AND HELD THAT IF THE SET OFF IS ALLOWED TO THE PURCHASING DEALER THOUGH THE LAX HAS NOT BEEN P AID ACTUALLY IT WOULD DEFEAT THE LEGITIMATE INTERESTS OF THE REVENUE TH E SALES TAX DEPARTMENT RECOVERED THE TAX FROM SUCH PURCHASING DEALERS. THE SALES TAX DEPARTMENT ACCORDINGLY PASSED ON TH E INFORMATION O! SUCH PURCHASING DEALERS TO THE INCOME TAX DEPARTMENT TO VERITY THE PURCHASES MADE BY THEM. 7.2. IN THIS BACKGROUND, THE CASE OF THE ASSESS ES NEEDS TO BE EXAMINED. THE AO WAS REQUIRED TO EXAMINE THE VERA CITY OF SUCH PURCHASES AND TO SEE A) WHETHER THE PURCHASES HAVE ACTUALLY BEEN MADE OR NOT. B) THE END USE OF SUCH PURCHASES AND C) THE GENUINENESS OF THE PARTIES FROM WHOM THE PURCHASES ARE MADE. THE ASSES SEE SUBMITTED COPIES OF THE PURCHASE AND SALE BILLS AND COPY OF T HE BANK STATEMENT SHOWING THAT HE HAD MADE THE PURCHASES AND PAYMENTS ARE MADE BY CHEQUE THE ASSESSEE HAS ALSO SUBMITTED DETAILS OF C ORRESPONDING SATES AGAINST THE PURCHASES. IT IS SEEN THAT THE ONLY GRO UND FOR MAKING THE ADDITION IS THAT THE PARTIES WHO HAVE MADE THE SALE S ARE NOT TRACEABLE AND ASSESSEE COULD NOT PRODUCE THE PARTIES WHO HAVE ISSUED BILLS. ITA NO.5310, 5311, 5312/MUM/2018 MAHENDRA B. GANDHI 5 HENCE, THIS IS NOT A CASE OF BOGUS PURCHASES BUT PU RCHASES FROM BOGUS PARTIES, WHEREIN THE BILLS ARE TAKEN FROM HAWALA DE ALERS AND PURCHASES FROM OTHER PARTIES. THE FACTS OF THE CASE ARE ALSO DIFFERENTIATE FROM NK PROTEINS AS STATED BY THE ASSESSES. IN N K PROTIENS , IT WAS ESTABLISHED MAT THE ASSESSEE HAD INFLATED SHE PURCHASES AS DURI NG SEARCH AT THE OFFICE PREMISES, BLANK SIGNED CHEQUE BOOKS, VOUCHER S, BLANK BILL BOOKS, LETTER HEADS OF VARIOUS CONCERNS WERE FOUND AND IT WAS ESTABLISHED THAT THESE CONCERNS WERE FLOATED BY THE ASSESSES. RELYIN G UPON THE OF VIJAY PROTEINS 58 ITD 428 AHMADABAD, THE ITAT RESTRICTED THE ADDITION TO 25%, WHEREAS HON'BLE GUJARAT HIGH COURT HELD MAT ONCE TH E PURCHASES ARE BOGUS AND FICTITIOUS HAVING GIVEN ONLY BILL ENTRIES , THE ENTIRE PURCHASES SHOULD BE ADDED, WHICH BY CONFIRMED BY THE HON'BLE SUPREME COURT BY DISMISSING NU SLP OF NKPL ON 16.01 .2017. 7 3. FROM ABOVE IT IS APPARENT THAT THE RATIO OF DECISION OF N K, PROTEIN CANNOT BE APPLIED IN APPELLANT'S CASE AS IT IS DIST INGUISHABLE ON FADS IT IS DISTINGUISHABLE ON FACTS. IT IS HELD BY HONBLE SUP REME COURT THAT THE APPELLATE AUTHORITIES WHILE APPLYING THE DECISION O F THE HIGHER COURT SHOULD EXAMINE THE FACTS OF EACH CASE I. THE DECISION OF THE HON'BLE SUPREME COURT IN PAD MASUNDARA RAO (DECD.) AND ORS. V STATE OF TAMIL NADU. CIVIL APPEA L NO 2226 OF 1997, ORDER DATED 13 03.2002 II. THE HONBLE SUPREME COURT IN THE CASE OF CL T VS SUN ENGINEERING WORKS (P) LTD REPORTED IN 198 ITR 297. III. THE HONBLE I TAT. MUMBAI BENCH G [TIR D MEMBER], IN THE CASE OF M/S. GRINDWELL NORTON LTD. VS. DCIT [2004] 91 IT D 412 [MUM] [TM] IV. HONBLE ITAT MUMBAI IN THE CASE OF KANCHAN FERR OMET ITA NO.1552/MUM/2017 ORDER DATED 05.06.2017 HAS DISCUSS ED JUDGMENT OF HON'BLE SUPREME COURT IN NK PROTEINS AND HELD AS U NDER. 6 THE LEARNED COUNSEL OF THE ASSESSEE PLEADED THA T ADDITION IN THIS CASE BE RESTRICTED TO 12 5% OF THE BOGUS PURCHASES AS FIELD BY THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT V SIM IT P.SHETH [{2013) 38 TAXMANN 385 (GUJ.)] 7. PER CONTRA, LEARNED DEPARTMENTAL REPRESENTATIVE REFERRED TO THE DECISION OF THE HONBLE GUJARAT HIGH COURT DECISION IN THE CASE OF N.K. INDUSTRIES V DCIT VIDE ORDER DATED 26.06.2016 WHERE IN ADDITION ON ACCOUNT OF BOGUS PURCHASE WERE RESTRICTED TO 25% BY HE ITAT. THE HONBLE HIGH COURT HAS UPHELD THE ADDITION OF ENTIR E BOGUS PURCHASE ON THE REASONING THAT SUCH RESTRICTION OF BOGUS CLAIM GOES AGAINST THE PRINCIPLES OF SECTIONS 68 AND 69C OF THE INCOME-TAX ACT, 1961, SLP AGAINST THE DECISION WAS DISMISSED BY HONBLE APEX COURT VIDE ORDER DATED 16.01.2017. 8. UPON CAREFUL CONSIDERATION, I FIND THAT THE REVE NUE HAS NOT DISPUTED THE SALES IT IS SETTLED LAW THAT WHEN THE SALES ARE NOT DISPUTED, THE ENTIRE PURCHASES TO MAKE THE SALES CANNOT BE DISALLOWED. I T IS TRUE THAT ASSESSES HAS NOT AT ALL BEEN ABLE TO PROVE THAT TH E PURCHASE FROM THE ITA NO.5310, 5311, 5312/MUM/2018 MAHENDRA B. GANDHI 6 PARTIES BOOKED ON THE ACCOUNTS ARE GENUINE. NO BOOK AND RECORDS HAVE BEEN SHOWN. HOWEVER IN THE ABSENCE OF ANY FIDNING T HAT TSALES ARE ALSO BOGUS, THE PURCHASES TO MAEK THE CORRESPONDING SALE S CANNOT BE HELD TO BE COMPLETELY BOGUS. THIS POINTS OUT TO THE PRACTIC E THT ASSESSEE AHD MADE PURCHASES FROM GREY MARKET. OPERATING IN THE G REY MARKET LEADS TO VARIOUS SAVINGS ON ACCOUNT OF NON-PAYMENT OF VARIOU S TAXES BY USE OF UNACCOUNTED MONEY TO THE ASSESSEE. ON A SIMILAR SIT UATION, HONBLE GUJARAT HIGH COURT IN THE CASE OF SIMIT P. SHETH (S UPRA) HAS UPHELD THE DISALLOWANCE OF 12.5% OF THE BOGUS PURCHASES. SINCE THE PROPOSITION THAT WHEN SALES ARE NOT DISPUTED, ENTIRE PURCHASES CANNO T BE HELD TO BE BOGUS SUPPORTED BY HONBLE JURISDICTIONAL HIGH COUR T DECISION IN NIKUNJ EXIM ENTERPRISES, IN MY CONSIDERED OPINION, THE INT EREST OF JUSTICE WILL BE SERVED IF THE ADDITION IN THE CASE IS RESTRICTED TO 12.5% OF THE BOGUS PURCHASES. 9.IT IS TO BE BORNE IN MIND THAT THE DECISION OF HO NBLE JURISDICTIONAL HIGH COURT IN THE CASE NIKUNJ EXIM ENTERPRISES WHERE NO ADDITION OUT OF THE BOGUS PURCHASES WAS CONFIRMED, IS NOT FULLY APPLICA BLE ON THE FACTS OF THE PRESENT CASE. IN THE FACTS OF NIKUNJ EXIM ENTERPRIS ES, THE SUBSTANTIAL SALES WERE MADE TO GOVERNMENT AGENCIES, BOOKS WERE NOT REJECTED AND STOCK RECONCILIATION WAS GIVEN. IN THE PRESENT CASE LEARNED COUNSEL OF THE ASSESSEE HAS HIMSELF AGREED FOR 12.5% DISALLOWANCE OUT OF THE BOGUS PURCHASES. IT IS FURTHER NOTED THAT DISMISSAL OF SL P BY A NON SPEAKING ORDER DOES NOT MERGE THE DECISION OF HONBLE GUJARA T HIGH COURT IN THE CASE OF N.K. INDUSTRIES WITH THAT OF HONBLE APEX C OURT. 7.4. WITH REGARD TO THE APPELLANT'S RELIANCE ON VAR IOUS DECISIONS, THERE ARE LARGE NUMBERS OF CASES WHEREIN THE APPELLATE AU THORITIES HAVE HELD THAT IT WOULD NOT BE APPROPRIATE TO CONSIDER THAT P URCHASES WERE GENUINE ONLY BECAUSE THE ASSESSE MADE THE PAYMENT BY CHEQU E AND THE ASSESEE RECEIVED BILLS IT IS HELD BY VARIOUS COURTS THAT WHERE THE ASSESSEE COULD SHOW THAT HE HAS MADE THE PURCHASES AND THERE ARE CORRESPONDING SALES AGAINST THESE PURCHASES, IT WOU LD BE APPROPRIATE TO TAX THE POSSIBLE PROFIT OUT OF PURCHASES MADE THROU GH NON-GENUINE PARTIES. IN VIEW OF THE FACTS STATED ABOVE. I AM O F THE CONSIDERED OPINION THAT THE APPELLANT HAS MADE PURCHASES OF RS 6,34,50 3/- IN THE OPEN MARKET WHICH WERE SOLD LO VARIOUS PARTIES AND ME BI LLS WERE TAKEN FROM THE HAWALA OPERATORS. FURTHER THE VERIFICATION IN R ESPECT OF THESE PARTIES COULD NOT BE MADE AND ASSESSES HAS ALSO PAID SALES IT IS NOT KNOWN AT PRICE THE APPELLANT ACTUALLY MADE THE PURCHASES FRO M THIRD PARTIES. UNDER SUCH CIRCUMSTANCES THE LIKELIHOOD OF THE PURCHASES BEING INFLATED CANNOT BE RULED OUT AND THERE IS NO MATERIAL LO DISLODGE SUCH FINDINGS IN THIS PROCESS THE APPELLANT SAVED ON THE SALES-TAX / VAT AND ENHANCED HIS PROFIT BY MANIPULATING THE PURCHASES ON SIMILAR FAC TS SMITH P. SHETH 356 ITR 451. GUJARAT, THE COURTS HAVE RESTRICTED ADDITI ON OF PERCENTAGE BASIS THE APPELLATE AUTHORITIES HAVE ALSO STRESSED UPON T HE REASONABILITY OF THE PROFIT SHOWN BY THE PURCHASER WHITE MAKING ANY SUCH DISALLOWANCE. KEEPING THE GP OF THE ASSESSES CONCERN IN MIND AND THE FACTS OF THE CASE, IT WOULD BE APPROPRIATE IF THE ADDITION IS RE STRICTED TO 12.5% OF BOGUS PURCHASES OF RS 6,34,503, AMOUNTING TO RS 79, 312/- IS DISALLOWED ITA NO.5310, 5311, 5312/MUM/2018 MAHENDRA B. GANDHI 7 THIS ADDITION WILL BE OVER ARID ABOVE THE PROFITS S HOWN BY THE APPELLANT IN HIS RETURN OF INCOME. 5. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATE RIALS AVAILABLE ON RECORD AND GONE THROUGH ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT THE LD. AO HAS MADE 100% ADDIT IONS TOWARDS ALLEGED BOGUS PURCHASES, ON THE GROUND THAT THE ASS ESSEE ONE OF THE BENEFICIARY OF ACCOMMODATION ENTRIES OF BOGUS P URCHASE 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 133(6) TO THE PARTIES WERE RETURNED UN-SERVED BY TH E POSTAL AUTHORITIES. THEREFORE, HE CAME TO THE CONCLUSION T HAT PURCHASE FROM THE SAID PARTIES IS BOGUS IN NATURE. IT IS THE CONT ENTIONS OF THE ASSESSEE BEFORE THE LOWER AUTHORITIES THAT PURCHASE S FROM THE ABOVE PARTIES ARE SUPPORTED BY NECESSARY EVIDENCES. IT HA S 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 BOTH SIDES 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 FAI LED TO FILE FURTHER EVIDENCES TO CONCLUSIVELY PROVE PURCHASES TO THE SA TISFACTIONS OF THE ITA NO.5310, 5311, 5312/MUM/2018 MAHENDRA B. GANDHI 8 LD.AO. AT THE SAME TIME, THE LD. AO HAD ALSO FAILE D 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. UN DER THESE CIRCUMSTANCES, IT IS DIFFICULT TO ACCEPT ARGUMENTS OF BOTH THE SIDES. FURTHER, VARIOUS HIGH COURTS AND TRIBUNALS HAD CONS IDERED AN IDENTICAL ISSUE IN LIGHT OF INVESTIGATION CARRIED OUT BY THE SALES TAX DEPARTMENT AND HELD THAT IN CASE PURCHASES CLAIMS T O HAVE MADE FROM ALLEGED HAWALA DEALERS , ONLY PROFIT ELEMENT E MBEDDED IN THOSE PURCHASES NEEDS TO BE TAXED, BUT NOT TOTAL PURCHASE FROM THOSE PARTIES. THE HONBLE GUJARAT HIGH COURT, IN THE CAS E OF CIT VS SIMITH P.SHETH 356 ITR 451 HAD CONSIDERED A SIMILAR ISSUE AND HELD THAT AT THE TIME OF ESTIMATION OF PROFIT FROM ALLEGED BOGUS PURCHASES NO UNIFORM YARDSTICKS COULD BE ADOPTED, BUT IT DEPENDS UPON FACTS OF EACH CASE. THE ITAT, MUMBAI, IN NUMBER OF CASES HAD CONSIDERED AN IDENTICAL ISSUE AND DEPENDING UPON FACTS OF EACH CASE, DIRECTED THE LD.AO TO ESTIMATE PROFIT OF 10 TO 15% ON TOTAL ALLEGED BOGUS PURCHASES. IN THIS CASE, CONSIDERING THE NATURE OF BUSINESS OF THE ASSESSEE THE LD. AO HAS ESTIMATED 100%, WHEREAS THE LD.CIT(A) HAS SCALED DOWN ESTIMATION OF PROFIT TO 12.50% ON T OTAL ALLEGED BOGUS PURCHASE. ALTHOUGH, BOTH AUTHORITIES HAVE TAK EN DIFFERENT RATE OF PROFIT FOR ESTIMATION OF INCOME FROM ALLEGED BOG US PURCHASE, BUT NO ONE COULD SUPPORT SAID RATE OF GROSS PROFIT WITH NECESSARY EVIDENCES OR ANY COMPARABLE CASES. THEREFORE, CONSI DERING FACTS AND CIRCUMSTANCES OF THIS CASE AND CONSISTENT WITH VIEW TAKEN BY THE CO-ORDINATE BENCH IN NUMBER OF CASES, WE ARE OF THE CONSIDERED OPINION THAT THE LD. CIT(A) HAS TAKEN ONE OF THE PO SSIBLE METHOD FOR ESTIMATION OF PROFIT TO SETTLE DISPUTE BETWEEN THE PARTIES AND HENCE, ITA NO.5310, 5311, 5312/MUM/2018 MAHENDRA B. GANDHI 9 WE ARE INCLINED TO UPHOLD ORDER OF THE LD. CIT(A) A ND DISMISSED APPEAL FILED BY THE REVENUE. 7. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DI SMISSED. ITA.NO.5311 & 5312/MUM/2018: 8. THE FACTS AND ISSUES INVOLVED IN THESE TWO APPEA LS ARE IDENTICAL TO THE FACTS AND ISSUES, WHICH WE HAD ALR EADY CONSIDERED IN ITA.NO.5310/MUM/2018. THE REASONS GIVEN BY US IN PR ECEDING PARAGRAPH SHALL MUTATIS MUTANDIS APPLY TO THESE APP EALS ALSO. THEREFORE, FOR DETAILED REASONS GIVEN IN PRECEDING PARAGRAPHS, IN ITA.NO 5310/MUM/2018, WE DISMISSED APPEALS FILED BY THE REVENUE. 9. AS A RESULT, ALL APPEALS FILED BY THE REVENUE AR E DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 01 /10/ 2019 SD/- (RAM LAL NEGI) SD/- (G. MANJUNATHA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 01 /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//