Vishnu Vitthaldas gujarathi, Nashik V. Joint Commissioner of Income-tax,

ITA 533/PUN/2015

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 7737 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 3 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-08-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 01-06-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 24-04-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MAZHAR AKRAM
• Assessee Lawyers: P S SHINGTE
• Keywords: Bogus purchase

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, PUNE . , , , BEFORE SHRI D. KARUNAKARA RAO, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO . 533 /P U N/201 5 / ASSESSMENT YEAR : 20 10 - 11 MR. VISHNU VITTHALDAS GUJARATHI, UNIQUE ENTERPRISES, SHOP NO. 3, DATTA BHAVAN, N.D. PATEL ROAD, NASHIK 422002 PAN : AAUPG2987Q ....... / APPELLANT / V/S. JOINT COMMISSIONER OF INCOME TAX, RANGE 1, NASHIK / RESPONDENT ASSESSEE BY : S HRI P.S. SHINGTE REVENUE BY : SHRI MAZHAR AKRAM / DATE OF HEARING : 0 1 - 06 - 2017 / DATE OF PRONOUNCEMENT : 18 - 0 8 - 2017 / ORDER PER VIKAS AWASTHY, JM : TH IS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) - I, NASHIK DATED 12 - 03 - 2015 FOR THE ASSESSMENT YEAR 2010 - 11. 2 ITA NO . 533/PUN/2015, A.Y. 2010 - 11 2. IN APPEAL, THE ASSESSEE HAS ASSAILED THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) IN CONFIRMING DISALLOWANCE ON ACCOUNT OF BOGUS PURCHASES @ 30% OF SUCH PURCHASES . 3. THE BRIEF FACTS OF THE CASE AS EMANATING FROM RECORD S ARE : THE ASSESSEE IS A SUPPLIER OF ELECTRICAL GOODS, CABLES, STEEL, ETC. THE ASSESSEE FILED HIS RETURN OF INCOME FOR THE IMPUGNED ASSESSMENT YEAR ON 24 - 09 - 2010 DECLARING TOTAL INCOME OF RS.49,13,215/ - . DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICE R FOUND THAT THE ASSESSEE HAS CLAIMED TO HAVE MADE PURCHASES TO THE TUNE OF RS.25,49,609/ - FROM M/S. PIONEER TRADING COMPANY. THE ASSESSING OFFICER RECEIVED INFORMATION FROM SALES TAX DEPARTMENT, MUMBAI THAT SHRI JAYESH M. MASHRU, PROPRIETOR OF M/S. PIONE ER TRADING COMPANY HAS ADMITTED THAT NO BUSINESS IN THE SAID FIRM WAS CARRIED OUT. NO ACTUAL SALE - PURCHASE TRANSACTIONS WERE CARRIED BY THE SAID FIRM, O NLY BOGUS SALE BILLS WERE ISSUED BY THE SAID FIRM ON COMMISSION BASIS. THUS, THE SAID FIRM IS A HAWAL A DEALERS. THE ASSESSING OFFICER INTER ALIA MADE ADDITION OF RS.25,49,609/ - ON ACCOUNT OF BOGUS PURCHASES IN THE INCOME RETURNED BY THE ASSESSEE. AGGRIEVED BY THE ASSESSMENT ORDER DATED 21 - 03 - 2013, THE ASSESSEE FILED APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS) CHALLENGING THE ADDITIONS MADE BY THE ASSESSING OFFICER. THE COMMISSIONER OF INCOME TAX (APPEALS) ESTIMATED 30% OF THE TOTAL PURCHASES AS BOGUS , THEREBY GRANTING PART RELIEF OF RS.17,84,726/ - TO THE ASSESSEE. AGAINST THE ADDITIONS CO NFIRMED , THE ASSESSEE IS IN SECOND APPEAL BEFORE THE TRIBUNAL. 3 ITA NO . 533/PUN/2015, A.Y. 2010 - 11 4. SHRI P.S. SHINGTE APPEARING ON BEHALF OF THE ASSESSEE SUBMITTED THAT THE ADDITION HAS BEEN MADE ON THE BASIS OF STATEMENT OF SHRI JAYESH M. MASHRU, PROPRIETOR M/S. PIONEER TRADING COMPAN Y. THE STATEMENT OF SHRI MASHRU WAS RECORDED AT THE BACK OF ASSESSEE. THE ASSESSEE DURING THE COURSE OF SCRUTINY ASSESSMENT VIDE LETTER DATED 18 - 03 - 2013 HAD MADE REQUEST FOR ALLOWING HIS CROSS - EXAMINATION. THE ASSESSEE WAS NOT GRANTED OPPORTUNITY TO CRO SS - EXAMINE SHRI JAYESH M. MASHRU. THE LD. AR CONTENDED THAT SINCE CROSS - EXAMINATION WAS NOT ALLOWED TO THE ASSESSEE NO ADDITION CAN BE MADE MERELY ON THE BASIS OF SUCH STATEMENT. TO SUPPORT HIS SUBMISSIONS , THE LD. AR PLACED RELIANCE ON THE FOLLOWING DEC ISIONS : I . M/S. ANDAMAN TIMBER INDUSTRIES VS. CCE IN CIVIL APPEAL NO. 4428 OF 2006 DECIDED ON 02 - 09 - 2015 BY HONBLE SUPREME COURT OF INDIA ; II . COMMISSIONER OF INCOME TAX VS. M/S. ASHISH INTERNATIONAL IN INCOME TAX APPEAL NO. 4299 OF 2009 DECIDED ON 22 - 02 - 2011 BY HONBLE BOMBAY HIGH COURT ; III . H.R. MEHTA VS. ASSISTANT COMMISSIONER OF INCOME TAX, 72 TAXMANN.COM 110 (B O MBAY). 4.1 THE LD. AR FURTHER SUBMITTED THAT THE ENTIRE SALES ARISING OUT OF ALLEGED BOGUS PURCHASES WERE MADE BY THE ASSESSEE TO MAHARASHTRA STATE ELECTRIC ALS TRANSMISSION CO. LTD. (MSETCL). THE ENTIRE SALES WERE SUPPORTED BY PROPER EVIDENCE OF DELIVERY OF GOODS TO GOVT. DEPOTS. THE ASSESSING OFFICER HAS NOT REJECTED ASSESSEES BOOK OF ACCOUNTS. ALL THE PAYMENTS HAVE BEEN MADE THROUGH BANKING CHAN NEL AND THE ASSESSEE HAS ALSO DEMONSTRATED COMPLETE TRAIL OF TRANSACTIONS ALLEGED TO BE BOGUS PURCHASES. THE LD. AR SUBMITTED THAT THE HONBLE BOMBAY HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. NIKUNJ EXIMP ENTERPRISES PVT. 4 ITA NO . 533/PUN/2015, A.Y. 2010 - 11 LTD . REPORTED AS 3 5 TAXMANN.COM 384 HAS HELD THAT IF THE SALE IS MADE TO GOVERNMENT AGENCIES AND PAYMENTS ARE RECEIVED THROUGH ACCOUNT PAYEE CHEQUE, THE SAID PURCHASE CANNOT BE HELD TO BE BOGUS. 4.2 THE LD. AR FURTHER PLACED RELIANCE ON THE DECISION RENDERED BY PUNE BENCH OF THE TRIBUNAL IN BUNCH OF APPEALS LEAD CASE BEING M/S. CHHABI ELECTRICALS PVT. LTD. VS. D EPUTY COMMISSIONER OF INCOME TAX IN ITA NO. 795/PUN/2014 DECIDED ON 28 - 04 - 20 1 7 , WHEREIN , IT WAS HELD THAT WHEN ASSESSEE ESTABLISHES COMPLETE TRAIL OF TRANSACTION , A MOUNT IS RECEIVED THROUGH BANKING CHANNEL AND VAT IS PAID BY THE ASSESSEE, NO ADDITION SHALL BE MADE. 5. ON THE OTHER HAND SHRI MAZHAR AKRAM REPRESENTING THE DEPARTMENT VEHEMENTLY DEFENDED THE IMPUGNED ORDER. THE LD. DR SUBMITTED THAT COPY OF STATEMENT OF SHRI JAYESH M. MASHRU WAS PROVIDED TO ASSESSEE DURING ASSESSMENT PROCEEDINGS. SHRI JAYESH M. MASHRU IN HIS STATEMENT HAD ADMITTED IN UNEQUIVOCAL TERMS THAT HE HAS NOT DONE ANY GENUINE BUSINESS IN M/S. PIONEER TRADING CO. ONLY BOGUS SALE BILL S WERE ISSUED WITHOUT THERE BEING ANY CORRESPONDING PURCHASES THE SALES BILLS WERE ISSUED ON COMMISSION BASIS. THE CHEQUES RECEIVED FROM THE PARTIES WERE CREDITED TO BANK ACCOUNTS. THE CASH WAS WITHDRAWN FROM THE BANK AND RETURNED TO PARTIES AFTER DEDUCT ING COMMISSION. M/S. PIONEER TRADING CO. IS A NOTIFIED HAWALA DEALER. DURING ASSESSMENT PROCEEDINGS THE ASSESSEE WAS ASKED TO FILE CONFIRMATION LETTER FROM M/S. PIONEER TRADING CO. , AS WELL AS TRANSPORTER OF GOODS. HOWEVER, NO VALID CONFIRMATION LETTERS WERE FILED BY THE ASSESSEE FROM EITHER OF THE PARTIES. THE ASSESSEE FAILED TO SHOW COMPLETE TRAIL OF PURCHASE OF GOODS. SINCE, THE GOODS WERE SOLD TO GOVT. 5 ITA NO . 533/PUN/2015, A.Y. 2010 - 11 DEPARTMENT THE ASSESSEE MIGHT HAVE PURCHASE D THE SAME FROM GREY MARKET. THE LD. DR SUBMITTED THA T MERELY BECAUSE THE PAYMENTS WERE MADE THROUGH BANKING CHANNEL IT CANNOT BE SAID THAT THE TRANSACTION IS GENUINE. 6. W E HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESENTATIVES OF RIVAL SIDES AND HAVE PERUSED THE ORDERS OF THE AUTHORITIES BELOW . THE ONL Y ISSUE RAISED BY THE ASSESSEE IN APPEAL IS AGAINST CONFIRMING OF ADDITION OF RS.7,54,883/ - I.E. TO THE EXTENT OF 30% OF ALLEGED BOGUS PURCHASE S . THE ASSESSING OFFICER HAD MADE ADDITION OF RS.25,49,609/ - ON ACCOUNT OF BOGUS PURCHASES. THE ASSESSEE HAD AL LEGEDLY PURCHASE D GOODS FROM SHRI JAYESH M. MASHRU, PROPRIETOR M/S. PIONEER TRADING COMPANY TO BE SUPPLIED TO MSETCL. SHRI JAYESH M. MASHRU IN HIS STATEMENT RECORDED U/S. 14 OF THE MAHARASHTRA VALUE ADDED TAX ACT, 2002 DURING INVESTIGATION CONDUCTED BY SALES TAX DEPARTMENT ADMITTED THAT HE HAS NOT DONE ANY BUSINESS OF SALES AND PURCHASE OF GOODS IN THE SAID FIRM AND HAD ISSUED BOGUS SALES BILLS ON COMMISSION BASIS. AS PER THE CONTENTION S OF ASSESSEE , THE GOODS WERE TRA NSPORTED BY M/S. SWASTIK TRANSPORT CO. THE ASSESSEE WAS ASKED TO FURNISH PROOF OF TRANSPORTATION OF GOODS. THE ASSESSEE FILED COPIES OF LORRY RECEIPTS ISSUED BY THE TRANSPORTER. HOWEVER, TO FURTHER SUBSTANTIATE HIS CLAIM AND TO REBUT THE ALLEGATIONS LEV ELED BY THE DEPARTMENT NO CONFIRMATION LETTERS EITHER FROM SHRI JAYESH M. MASHRU OR M/S. SWASTIK TRANSPORT CO. WERE FILED BY THE ASSESSEE . 7. IT IS AN UNDISPUTED FACT THAT M/S. PIONEER TRADING COMPANY IS A NOTIFIED HAWALA DEALER. A PERUSAL OF THE IMPUG NED ORDER SHOWS THAT SUPPLY OF GOODS TO MSETCL HAS NOT BEEN DISPUTED. AT THE SAME TIME THE 6 ITA NO . 533/PUN/2015, A.Y. 2010 - 11 ASSESSEE HAS NOT FURNISHED COGENT EVIDENCE TO SHOW TRAIL OF GOODS PURCHASED FROM M/S. PIONEER TRADING COMPANY. THE COMMISSIONER OF INCOME TAX (APPEALS) HAS OPINED THAT ASSESSEE MIGHT HAVE PURCHASED GOODS FROM GREY MARKET AND THEREAFTER SUPPLIED THE SAME TO MSETCL. WE FIND MERIT IN THE REASONING GIVEN BY COMMISSIONER OF INCOME TAX (APPEALS). SO FAR AS THE OBJECTION RAISED BY THE ASSESSEE THAT ADDITION HAS BEEN MADE ON THE BASIS OF STATEMENT OF SHRI JAYESH M. MASHRU RECORDED AT THE BACK OF ASSESSEE AND NO OPPORTUNITY TO CROSS - EXAMIN E WAS AFFORDED , WE FIND THAT COPY OF STATEMENT OF SHRI JAYESH M. MASHRU WAS PROVIDED TO THE ASSESSEE ON 13 - 03 - 2013. TO REBUT THE SAID ST ATEMENT, ASSESSEE HAS FAILED TO FILE ANY CONFIRMATION LETTER FROM SHRI JAYESH M. MASHRU. 8. THE PUNE BENCH OF TRIBUNAL IN THE CASE OF M/S. CHHABI ELECTRICALS PVT. LTD. VS. DEPUTY COMMISSIONER OF INCOME TAX (SUPRA) HAD OCCASION TO DEAL WITH VARIOUS SET OF HAWALA PURCHASE CASES. THE TRIBUNAL WHILE DEALING WITH THE CASES WHERE STATEMENTS RECORDED BY THE SALES TAX DEPARTMENT WERE PROVIDED TO THE ASSESSEE AND THE ASSESSEE HAS BEEN ABLE TO ESTABLISH THAT THE GOODS WERE SUPPLIED , THE ADDITION WAS MADE BY ESTIMAT ING GP @ 10% OF THE ALLEGED HAWALA PURCHASE S . THE RELEVANT EXTRACT OF THE FINDINGS OF TRIBUNAL ON THIS ISSUE ARE AS UNDER : V. ANOTHER SET OF CASES WHERE THE STATEMENTS RECORDED BY THE SALES TAX DEPARTMENT HAVE BEEN HANDED OVER TO THE ASSESSEE AND THE CO PIES OF SAME HAVE BEEN SUPPLIED TO THE ASSESSEE, THEN WHERE THE ASSESSEE ESTABLISHED THE CASE OF RECEIPT OF GOODS AND ITS ONWARD TRANSMISSION, THEN THE FACTUM OF PURCHASES BY THE ASSESSEE STANDS ESTABLISHED IN SUCH CIRCUMSTANCES. HOWEVER, ESTIMATION IS TO BE MADE IN THE HANDS OF ASSESSEE BECAUSE OF PURCHASES FROM THE GREY MARKET AND FOLLOWING THE ABOVE SAID RATIO, ADDITION IS TO BE MADE BY ESTIMATING THE SAME @ 7 ITA NO . 533/PUN/2015, A.Y. 2010 - 11 10% OF THE ALLEGED HAWALA PURCHASES, OVER AND ABOVE THE NET PROFIT SHOWN BY THE ASSESSEE. TAKING INTO CONSIDERATION THE TOTALITY OF FACTS, WE ARE OF CONSIDERED OPINION THAT DISALLOWANCE @ 10% OF THE TOTAL BOGUS PURCHASES WOULD MEET THE ENDS OF JUSTICE. WE DIRECT AND HOLD, ACCORDINGLY. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY A LLOWED IN THE AFORESAID TERMS. ORDER PRONOUNCED ON FRIDAY, THE 18 TH DAY OF AUGUST, 2017 . SD/ - SD/ - ( . /D. KARUNAKARA RAO ) ( / VIKAS AWASTHY) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE; / DATED : 18 TH AUGUST, 2017 RK / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - I, NASHIK 4. THE PR. COMMISSIONER OF INCOME TAX - 1, NASHIK 5. , , , / DR, ITAT, B BENCH, PUNE. 6. / GUARD FILE. / / // TRUE COPY// / BY ORDER, / PRIVATE SECRETARY, , / ITAT, PUNE