INCOME TAX OFFICER WARD 1(4), Thane V. LUKE MARTIN FERNANDES, MUMBAI

ITA 5336/MUM/2018

• Counselvise Citation: [2019] 114 COUNSELVISE.COM (IT) 6134 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-10-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 17-09-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R BHOOPATI
• Keywords: Bogus purchase; Wrong claim; Accommodation entries
• Section: 69C; 133(6); 274; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC, BENC H MUMBAI BEFORE G. MANJUNATHA, ACCOUNTANT MEMBER & SHRI RAM LAL NEGI, JUDICIAL MEMBER ITA NO.5336/MUM/2018 ( ASSESSMENT YEAR :2010-11 ) ITO,WARD-1(4) ROOM NO.11 6 TH FLOOR, ASHAR IT PARK B-WING, WAGLE INDUSTRIAL ESTATE, THANE(W)-400 604 VS. LUKE MARTIN FERNANDES B-2/104, RAUNAK PARK CHS LTD., KOKANI PADA POKHARAN ROAD NO.2 THANE WEST-400 606 PAN/GIR NO. A AFPF7705G ( APPELLANT ) .. ( RESPONDENT ) REVENUE BY R.BHOOPATI ASSESSEE BY NONE DATE OF HEARING 03/10/2019 DATE OF PRONOUNCEME NT 15 /10/2019 / O R D E R PER G.MANJUNATHA (A.M) : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST, THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)3, NASH IK, DATED 20/06/2018 AND IT PERTAINS TO ASSESSMENT YEAR 2010- 11. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1, ''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 LAW CORRECTLY THAT ONCE THE PURCHASES ARE UNVERIFIABLE/NOT GENUINE/BOGUS, T HE SAME SHOULD HAVE BEEN DISALLOWED IN ENTIRETY? . 2. WHETHER ON THE FEELS 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? ITA NO.5336/MUM/2018 LUKE MARTIN FERNANDES 2 3. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN LAW BY NOT APPRECIATING THE FACT THAT THE ONUS TO JUSTIFY THE CLAIM OF EXPENSES IS ON THE ASSESSEE AND THE SAME HAS FOILED 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 FEET THAT THE ASSESSES 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, ETC . TO ARRIVE AT DISALLOWANCE AT 25% OF THE PURCHASES FROM THE NON-E XISTENT 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 LAW CORRECTLY THAT ONCE THE PURCHASES ARE UNVERIFIABLE / NOT GENUINE / BOGU S, THE SAME SHOULD HAVE BEEN DISALLOWED IN ENTIRETY, PARTICULARLY IN V IEW OF THE RATIO OF THE DECISION OF THE HON'BLE GUJARAT HIGH COURT IN TAX A PPEAL 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 THAT OF THE ASSESSING OFFICER MAY BE RESORTED. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS AN INDIVIDUAL ENGAGED IN THE BUSINESS OF MANUFACTURIN G MACHINERY SPARE PARTS AND LABOUR JOB WORKS, FILED ITS RETURN OF INCOME FOR AY 2010-11 ON 15/10/2010, DECLARING TOTAL INCOME OF RS . 4,07,045/-. SUBSEQUENTLY, THE CASE HAS BEEN REOPENED U/S 147, O N 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 SUPPRES PROFITS. AS PER LIST OF BENEFICIARIES, THE ASSESSEE IS ONE OF THE BENEFICIARY, WHO HAD TAKEN ACCOMMODATION BILLS OF BOGUS PURCHASES FROM VARIOUS PARTIES AS LISTED BY THE AO IN HIS ITA NO.5336/MUM/2018 LUKE MARTIN FERNANDES 3 ASSESSMENT ORDER AMOUNTING TO RS. 5,17,512/-. 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 24/12/201 3 AND DETERMINED TOTAL INCOME OF RS. 9,24,557/-, AFTER MAKING 100% A DDITIONS TOWARDS ALLEGED BOGUS PURCHASE FROM THOSE PARTIES AND MADE ADDITIONS OF RS. 5,17,512/-. 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 REITRATED ITS SUBMISSIONS MADE BEFORE THE AO. THE S UM AND SUBSTANCE OF THE ARGUMENTS OF THE ASSESSEE BEFORE T HE LD.CIT(A) ARE THAT PURCHASE FROM THE ABOVE PARTY IS GENUINE, WHICH IS SUPPORTED BY NECESSARY EVIDENCES. THEREFORE, NO ADD ITIONS COULD BE MADE ON THE BASIS OF INFORMATION RECEIVED FROM THIR D PARTY. THE LD.CIT(A), AFTER CONSIDERING RELEVANT SUBMISSION OF THE ASSESSEE 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 25% PROFIT ON ALLEGED BOGUS PURCHA SES. THE RELEVANT FINDINGS OF THE LD.CIT(A) ARE AS UNDER:- 7. I HAVE CAREFULLY CONSIDERED THE APPELLANT'S SUB MISSIONS, OBSERVATIONS OF THE AO IN THE ASSESSMENT ORDER AND THE FACTS OF THE CASE THE APPELLANT HAD SHOWN PURCHASES AMOUNTING TO RS. 5,17 ,512 FROM VARIOUS PARTIES WHICH APPEARED IN THE LIST OF SALES-TAX DEP ARTMENT WHO HAD INDULGED IN HAWALA TRANSACTIONS I.E. PROVIDING ONLY BILLS WITHOUT THERE IS BEING ANY ACTUAL PURCHASE OR SALE TRANSACTION. 7.1. BEFORE THE CASE IS DISCUSSED, IT IS IMPORTANT TO KNOW THE BACKGROUND IN WHICH THE CASE OF THE APPELLANT WAS SELECTED FOR SCRUTINY. AS PER SECTION 3 OF THE MVAT ACT, 2002, EVERY REGISTERED D EALER, IS LIABLE TO PAY TAX ON A SALE TRANSACTION WITH A PURCHASING DEALER WHOSE TURNOVER OF SALES OR PURCHASES HAS EXCEEDED RUPEES FIVE LAKH. T HE SELLING DEALER ITA NO.5336/MUM/2018 LUKE MARTIN FERNANDES 4 ISSUES A TAX INVOICE, WHICH SHOWS THE AMOUNT OF TAX RECOVERED FROM THE PURCHASING DEALER. THE SALE MADE BY THE SELLING DEA LER NEEDS TO BE ACCOUNTED M HIS TURNOVER OF SALES WHILE FILING THE LAX RETURN AND PAY THE DUE TAXES. FURTHER, THE PURCHASING DEAFER IS ALSO E NTITLED TO CLAIM BY WAY OF A SET OFF UNDER SECTION 48 THE TAX PAID ON HIS P URCHASES AS ITC (INPUT TAX CREDIT). THE SALES TAX AUTHORITIES FOUND THAT A LARGE NUMBER OF SELLING DEALERS HAD NEITHER FILED THEIR RETURNS NOR PAID THE TAXES COLLECTED BY THEM FROM PURCHASING DEALERS THE SALES TAX AUTHORITIES DENIED THE BENEFIT OF SET-OFF OF INPUT TAX CREDIT TO PURCHASIN G DEALERS, WHO WENT INTO APPEAL BEFORE HONBLE BOMBAY HIGH COURT AGAINST THE SAID ORDERS THE SAME WAS REJECTED BY THE BOMBAY HIGH COURT IN WRIT PETITION N0.33 OF 2012 IN CASE OF M/S MAHALAXMI COTTON GINNING VS THE STATE 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 HE HAS PAID THE TAX TO THE SELLING DEALER, HE SH OULD NOT BE DENIED THE BENEFIT OF A SET OFF OF TAXES PAID, WHICH IS ARBITR ARY. HOWEVER THE STATE 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 INVOI CES TO THE PURCHASING DEALER WITHOUT ANY SALE OF GOODS. THE COURT DID NOT ACCEPT THE PLEA OF THE PURCHASING DEALER AND HELD THAT IF THE SET OFF IS A LLOWED TO THE PURCHASING DEALER THOUGH THE TAX HAS NOT BEEN PAID ACTUALLY, I T WOULD DEFEAT THE LEGITIMATE INTERESTS OF THE REVENUE THE SALES TAX D EPARTMENT RECOVERED THE TAX FROM SUCH PURCHASING DEALERS. THE SALES TAX DEPARTMENT ACCORDINGLY PASSED ON THE INFORMATION OF SUCH PURCHASING DEALERS TO THE INCOME TAX DEPARTMENT TO VERIFY THE PURCHASES MADE BY THEM. 7.2. IN THIS BACKGROUND, THE CASE OF THE ASSESSEE N EEDS TO BE EXAMINED. THE AO WAS REQUIRED TO EXAMINE THE VERACITY OF SUCH PURCHASES AND TO SEE A) WHETHER THE PURCHASES HAVE ACTUALLY BEEN MAD E OR NOT, B) THE END USE OF SUCH PURCHASES AND C) THE GENUINENESS OF THE PARTIES FROM WHOM THE PURCHASES ARE MADE THE ASSESSES SUBMITTED COPIES OF THE PURCHASE BILLS AND COPY OF THE BANK STATEMENT SHOWI NG THAT HE HAD MADE THE PURCHASES AND PAYMENTS ARE MADE BY CHEQUES THE ASSESSEE HAS ALSO SUBMITTED DETAILS OF HOW THE MATERIAL WAS CONS UMED IN MANUFACTURING. IT IS SEEN (HAT THE ONLY GROUND FOR MAKING THE ADDITION IS THAT THE PARTIES WHO HAVE MADE THE SALES ARE NOT TR ACEABLE AND ASSESSEE COULD NOT PRODUCE THE PARTIES, WHO HAVE ISSUED BILL S HENCE, THIS IS NOT A CASE OF BOGUS PURCHASES BUT PURCHASES FROM BOGUS PA RTIES, WHEREIN THE BILLS ARE TAKEN FROM HAWALA DEALERS AND PURCHASES F ROM OTHER PARTIES. THE FACTS OF THE CASE ARE ALSO DIFFERENTIABLE FROM NK PROTEINS AS STATED BY THE ASSESSEE. IN N K PROTEINS, FT WAS ESTABLISHE D THAT THE ASSESSEE HAD INFLATED THE PURCHASES AS DURING SEARCH AT THE OFFICE PREMISES, BLANK SIGNED CHEQUE BOOKS, VOUCHERS, BLANK BILL BOOKS, LE TTER HEADS OF VARIOUS CONCERNS WERE FOUND AND IT WAS ESTABLISHED THAT THE SE CONCERNS WERE FLOATED BY THE ASSESSEE. RELYING UPON (HE JUDGMENT OF VIJAY PROTEINS 58 ITD 428 AHMADABAD, THE ITAT RESTRICTED THE ADDITION TO 25%, WHEREAS HON'BLE GUJARAT HIGH COURT HELD THAT ONCE THE PURCH ASES ARE BOGUS AND ITA NO.5336/MUM/2018 LUKE MARTIN FERNANDES 5 SUPPLIERS ARE FICTITIOUS HAVING GIVEN ONLY BILL ENT RIES, THE ENTIRE PURCHASES SHOULD BE ADDED, WHICH BY CONFIRMED BY THE HON'BLE SUPREME COURT BY DISMISSING THE SLP OF NKPL ON 16.01 2017. 7.3. FROM ABOVE IT IS APPARENT THAT THE RATIO O F DECISION OF N.K PROTEIN CANNOT BE APPLIED IN APPELLANT'S CASE AS IT IS DIST INGUISHABLE ON FACTS IT IS HELD BY HON'BLE SUPREME COURT THAT THE APPELLATE AUTHORITIES WHILE APPLYING THE DECISION OF THE HIGHER COURT SHOULD EX AMINE THE FACTS OF EACH CASE. I. THE DECISION OF THE HON'BLE SUPREME COURT I N PADMASUNDARA RAO (DEED.) AND ORS. V. STATE OF TAMIL NADU, CIVIL APPE AL NO. 2226 OF 1997, ORDER DATED 13.03.2002 II. THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS SUN ENGINEERING WORKS (P) LTD. REPORTED IN 198 ITR 297. III. THE HON'BLE ITAT, MUMBAI BENCH 'G' [THIRD M EMBER] IN THE CASE OF M/S. GRINDWELL NORTON LTD. VS. DCIT [2G04] 91 ITD 412 [MUM ][TM] IV HON'BLE ITAT MUMBAI IN THE CASE OF KANCHAN FERROMET ITA NO. 1552/MUM/2017 ORDER DATED 05 06.2017 HAS DISCUSSED JUDGMENT OF HONBLE SUPREME COURT IN NK PROTEINS AND HELD AS UN DER 6. THE LEARNED COUNSEL OF THE ASSESSEE PLEADED THAT ADDITION IN THIS CASE BE RESTRICTED TO 12.5% OF THE BOGUS PURCH ASES AS HERD BY THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT V . SIMIT P.SHETH [(2013) 38TAXMANN385[GUJ.} ]. 7 PER CONTRA, LEARNED DEPARTMENTAL REPRESENTATIVE R EFERRED TO THE DECISION OF THE HON'BLE GUJARAT HIGH COURT DECISION IN THE CASE OF N.K INDUSTRIES V. DCIT VIDE ORDER DATED 26.06.2016 WHEREIN ADDITION ON ACCOUNT OF BOGUS PURCHASES WERE RESTRIC TED TO 25% BY THE ITAT, THE HON'BLE HIGH COURT HAS UPHELD THE ADD ITION OF ENTIRE BOGUS PURCHASES ON THE REASONING THAT SUCH RESTRICT ION OF BOGUS CLAIM GOES AGAINST THE PRINCIPLES OF SECTIONS 68 AN D 69C OF THE INCOME-TAX ACT, 1961 SLP AGAINST THE DECISION WAS D ISMISSED 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 CA NNOT BE DISALLOWED IT IS TRUE THAT ASSESSEE HAS NOT AT ALL BEEN ABLE TO PROVE THAT THE PURCHASES FROM THE PARTIES BOOKED ON THE A CCOUNTS ARE GENUINE. NO BOOK AND RECORDS HAVE BEEN SHOWN HOWEVE R IN THE ABSENCE OF ANY FINDING THAT SALES ARE ALSO BOGUS, T HE PURCHASES TO MAKE THE CORRESPONDING SAFES CANNOT BE HELD TO BE C OMPLETELY BOGUS THIS POINTS OUT TO THE PRACTICE THAT ASSESSEE HAD MADE PURCHASES FROM GREY MARKET. OPERATING IN THE GREY M ARKET LEADS TO VARIOUS SAVINGS ON ACCOUNT OF NON-PAYMENT OF VARIOU S TAXES BY USE OF UNACCOUNTED MONEY TO THE ASSESSEE. ON A SIMI LAR SITUATION, HONBLE GUJARAT HIGH COURT IN THE CASE OF SIMIT P S HETH (SUPRA) HAS UPHELD THE DISALLOWANCE OF 12.5% OF THE BOGUS P URCHASES SINCE THE PROPOSITION THAT WHEN SALES ARE NOT DISPU TED, ENTIRE PURCHASES CANNOT BE HELD TO BE BOGUS IS SUPPORTED B Y HON'BLE ITA NO.5336/MUM/2018 LUKE MARTIN FERNANDES 6 JURISDICTIONAL HIGH COURT DECISION IN NIKUNJ EXIM E NTERPRISES, IN MY CONSIDERED OPINION, THE INTEREST OF JUSTICE WILL BE SERVED IF THE ADDITION IN THIS CASE IS RESTRICTED TO 12.5% OF THE BOGUS PURCHASES. 9. IT IS TO BE BORNE IN MIND THAT THE DECISION OF H ON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF NIKUNJ EXI M ENTERPRISES WHERE NO ADDITION OUT OF THE BOGUS PURCHASES WAS CO NFIRMED, IS NOT FULLY APPLICABLE ON THE FACTS OF THE PRESENT CA SE. IN THE FACTS OF NIKUNJ EXRM ENTERPRISES, THE SUBSTANTIAL SALES WERE MADE TO GOVERNMENT AGENCIES, BOOKS WERE NOT REJECTED AND ST OCK RECONCILIATION WAS GIVEN. IN THE PRESENT CASE LEARN ED COUNSEL OF THE ASSESSEE HAS HIMSELF AGREED FOR 125% DISALLOWAN CE OUT OF THE BOGUS PURCHASES. IE IS FURTHER NOTED THAT DISMISSAL OF SLP BY A NON-SPEAKING ORDER DOES NOT MERGE THE DECISION OF H ON'BLE GUJARAT HIGH COURT IN THE CASE OF N.K. INDUSTRIES W ITH THAT OF HON'BLE APEX COURT 7.4. WITH REGARD TO THE APPELLANT'S RELIANCE ON VAR IOUS DECISIONS, THERE ARE LARGE NUMBERS OF CASES, WHEREIN THE APPELLATE A UTHORITIES HAVE HELD THAT IT WOULD NOT BE APPROPRIATE TO CONSIDER THAT P URCHASES WERE GENUINE ONLY BECAUSE THE ASSESSEE MADE THE PAYMENT BY CHEQU E AND THE ASSESSEE RECEIVED BILLS. IT IS HELD BY VARIOUS COUR TS 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 FACTS SLATED ABOVE, I AM OF THE CONSIDERED OPINION THAT THE APPELLANT HAS MADE PURCHASES OF RS 5,17,512/- M THE OPEN MARKET WHICH WERE USED IN MANUFACTURING AND THE BILLS WERE TAKEN FROM THE HAWALA OPERATORS. FURTHER THE VERIFICATION IN RESPE CT OF THESE PARTIES COULD NOT BE MADE AND ASSESSEE HAS ALSO PAID SALES TAX IN RESPECT OF E TAINTED PURCHASES. IT IS NOT KNOWN AT WHAT PRICE TH E APPELLANT ACTUALLY MADE THE PURCHASES FROM THIRD PARTIES. UNDER SUCH C IRCUMSTANCES THE LIKELIHOOD OF THE PURCHASES BEING INFLATED CANNOT B E RULED OUT AND THERE IS NO MATERIAL TO DISLODGE SUCH FINDINGS. IN THIS PROC ESS THE APPELLANT SAVED ON THE SALES-TAX / VAT AND ENHANCED HIS PROFIT BY M ANIPULATING THE PURCHASES ON SIMILAR FACTS HONBLE GUJARAT HIGH COU RT IN THE CASE OF CIT VS SANJAY OIL CAKE (2009) 316 ITR 274 AND BHOLE NAT H 355 ITR 290 (GUJ) WHO WERE MANUFACTURER UPHELD DISALLOWANCE OF 25%. AS THE FACTS OF THE ASSESSEE'S CASE ARE SIMILAR THEREFORE IT WOULD BE APPROPRIATE IF 25% OF THE AMOUNT OF UNPROVED PURCHASES OF RS 5,17,512 /-, AMOUNTING TO RS 1,29,376/- IS DISALLOWED. THIS ADDITION WILL BE OVE R AND ABOVE THE PROFITS SHOWN BY THE APPELLANT IN HIS RETURN OF INCOME, 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 ALONG WITH CERTAIN CASE LAWS. WE FIND THAT THE ITA NO.5336/MUM/2018 LUKE MARTIN FERNANDES 7 LD. AO HAS MADE 100% ADDITIONS TOWARDS ALLEGED BOGU S PURCHASES, ON THE GROUND THAT THE ASSESSEE ONE OF THE BENEFICI ARY OF ACCOMMODATION ENTRIES OF BOGUS PURCHASE BILLS ISSUE D BY HAWALA DEALERS. ACCORDING TO THE LD. AO, ALTHOUGH ASSESEE HAS FILED CERTAIN BASIC EVIDENCES, BUT FAILED TO FILE FURTHER EVIDENC E IN THE BACKDROP OF CLEAR FINDING BY THE SALES TAX DEPARTMENT, MAHARASH TRA THAT THOSE PARTIES ARE INVOLVED IN PROVIDING ACCOMMODATION ENT RIES WITHOUT ACTUAL DELIVERY OF GOODS. THE LD. AO HAD ALSO TAKEN SUPPORT FROM THE INVESTIGATION CONDUCTED DURING THE COURSE OF AS SESSMENT PROCEEDINGS, AS PER WHICH NOTICE ISSUED U/S 133(6) TO THE PARTY WERE RETURNED UN-SERVED BY THE POSTAL AUTHORITIES. THERE FORE, HE CAME TO THE CONCLUSION THAT PURCHASE FROM THE SAID PARTY IS BOGUS IN NATURE. IT IS THE CONTENTIONS OF THE ASSESSEE BEFORE THE LO WER AUTHORITIES THAT PURCHASES FROM THE ABOVE PARTY ARE SUPPORTED BY NEC ESSARY EVIDENCES. IT HAS FURNISHED ALL POSSIBLE EVIDENCES, INCLUDING BOOKS OF ACCOUNTS, STOCK DETAILS AND BANK STATEMENT TO PROVE THAT PAYMENT AGAINST SAID PURCHASES HAVE BEEN MADE THROUGH PROPE R BANKING CHANNELS. 6 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 TAX DEPARTMENT. UNDER THESE CIRCUMSTANCES, IT IS D IFFICULT TO ACCEPT ITA NO.5336/MUM/2018 LUKE MARTIN FERNANDES 8 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 ESTIMATED 100% PROFIT, WHEREAS THE LD.CIT(A) HAS SCALED DOWN ESTIMATION OF PROFIT TO 25% ON TOTAL ALLEGED BOGUS PURCHASE. ALTH OUGH, BOTH AUTHORITIES HAVE TAKEN DIFFERENT RATE OF PROFIT FOR ESTIMATION OF INCOME FROM ALLEGED BOGUS PURCHASE, BUT NO ONE COULD SUPPO RT SAID RATE OF GROSS PROFIT WITH NECESSARY EVIDENCES OR ANY COMPAR ABLE CASES. THEREFORE, CONSIDERING FACTS AND CIRCUMSTANCES OF T HIS 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 POSSIBLE METHOD FOR ESTIMATION OF PROFIT TO SETTLE DISPUTE BETWEEN THE PARTIES AND HENCE, WE ARE INCLINED TO U PHOLD ORDER OF THE LD. CIT(A) AND DISMISS APPEAL FILED BY THE REVE UNE.. ITA NO.5336/MUM/2018 LUKE MARTIN FERNANDES 9 7. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DI SMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 15 /10/ 2019 SD/- ( RAM LAL NEGI) SD/- (G. MANJUNATHA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 15/10/2019 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//