ACIT CIRCLE 22(1), MUMBAI V. BHAROOMAL & CO, MUMBAI

ITA 5356/MUM/2018

• Counselvise Citation: [2019] 114 COUNSELVISE.COM (IT) 6146 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-10-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2007-2008
• Appeal Filed On: 17-09-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AKHTAR HANSARI
• Keywords: Bogus purchase; Search and seizure; Accommodation entries
• Section: 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC, BENCH MUMBAI BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBE R & SHRI G. MANJUNATHA, ACCOUNTANT MEMBE R ITA NO.5356/MUM/2018 ( ASSESSMENT YEAR :2007-08 ) ACIT,CIRCLE-22(1) ROOM NO.322, 3 RD FLOOR INCOME TAX OFFICE PIRAMAL CHAMBERS,LALBAUG PAREL, MUMBAI-400 012 VS. BHAROOMAL & CO. 1 & 2, NARSING CO-OP. SOC. 4 TH ROAD, KHAR (WEST) MUMBAI-400 052 PAN/GIR NO. AADFB0780H APPELLAN T ) .. RESPONDENT ) REVENUE BY AKHTAR H. ANSARI ASSESSEE BY ANIL SATHE DATE OF HEARING 14/10/2019 DATE OF PRONOUNCEME NT 14 /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)34, MUM BAI, DATED 26/06/2018 AND IT PERTAINS TO ASSESSMENT YEAR 2007- 08. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. 'WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN /AW THE LD. CIT(A) IS CORRECT IN RESTRICTING THE DISALL OWANCE @ 12.5% ON ACCOUNT OF BOGUS PURCHASES AGAINST 100% MADE BY AO IGNORING THE LATEST DECISION OF THE SUPREME COURT IN THE CASE OF M/S N.K.PROTIENS LTD VS CIT NO. 769 OF 2017 DATED 16.01. 2017(SC) WHEREI N THE HON'BLE SUPREME COURT HAS DECIDED THE ISSUE OF BOGUS PURCHA SES WITH A DIRECTION OF MAKING ADDITION AMOUNTING TO ENTIRE BO GUS PURCHASE AS ASSESSEE'S INCOME. ' ITA NO.5356/MUM/2018 BHAROOMAL & CO. 2 2. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LOW, THE LD. CIT(A) FAILED TO APPRECIATE THE FACT THAT ONUS IS ON THE ASSESSEE TO EXPLAIN AND SUBSTANTIATE THE GENUINENESS AND TRUE N ATURE PURCHASES TRANSACTION. ' 3. THE APPELLANT PRAYS THAT APPEAL IS BEING FILED BECAUSE IT IS COVERED UNDER THE EXCEPTION PROVIDED IN PARA 10(E) OF THE A MENDED INSTRUCTION NO,3 OF 2018 DATED 20.08.2018. 4. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT( A) ON THE ABOVE GROUND BE REVERSED AND THAT OF THE ASSESSING OFFICER BE RE STORED. 5. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER A NY GROUND 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 WHOLE-SELLER, INDENTERS, EXPORTERS OF PLYWOOD LAMINATES VENEERS, TIMBERS ETC., FILED ITS RETURN O F INCOME FOR AY 2007-08 ON 28/07/2007, DECLARING TOTAL INCOME OF RS . 16,93,150/-. 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 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 ASSESSMENT ORDER AMOUNTING TO RS. 14,06,514/-. 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 28/03/201 5 AND DETERMINED TOTAL INCOME OF RS. 31,98,660/-, AFTER MAKING 100% ADDITIONS TOWARDS ALLEGED BOGUS PURCHASE FROM THOSE PARTIES A ND MADE ADDITIONS OF RS. 14,06,514/-. 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 ELABORATED WRITTEN SUBMISSIONS, ON THE ISSUE , WHICH HAS BEEN ITA NO.5356/MUM/2018 BHAROOMAL & CO. 3 REPRODUCED AT PARA 4 ON PAGES 5 TO 6 OF LD.CIT(A) O RDER. 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 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 12.50% PROFIT ON ALLEGED BOGUS PUR CHASES. THE RELEVANT FINDINGS OF THE LD.CIT(A) ARE AS UNDER:- 5.6. IN VIEW OF THE ABOVE, IT IS AN ADMITTED FACT THAT SALES TAX DEPARTMENT HAS CONDUCTED SEARCH AND SEIZURE OPERATION AND HAS ESTABLISHED LARGE NUMBER OF COMPANIES/F IRMS/PARTNERSHIP CONCERNS AS HAWALA DEALERS WHO ARE EN GAGED IN ACCOMMODATION ENTRIES WITHOUT ACTUALLY SUPPLYING TH E GOODS. THE APPELLANT IS ONE OF THE BENEFICIARY AND HAS RECEIVE D SUCH ACCOMMODATION BILLS FROM TWO OF THE HAWALA OPERATORS TOTALING TO RS.14,06,514/-. THE A.O. ATTEMPTED TO VERILY SUCH PARTIES B Y MAKING INDEPENDENT ENQUIRIES U/-S, 133(6) OF THE I.T.ACT, 1961. AL L THESE VERIFICATION LETTERS CARNE BACK UNSERVED. THE APPELLANT FILED CERTAIN DETAILS SUCH AS PURCHASE BILLS, LEDGER ACCOUNT, BANK STATEM ENT ETC. HOWEVER, SOME OF THE SPECIFIC DETAILS REQUIRED TO ESTABLISH THE GENUINENESS OF PURCHASE SUCH AS EVIDENCE OF TRANSPORTATION OF GOOD S, ENTRY OF GOODS IN. THE STOCK REGISTER, ONE TO ONE CONSUMPT ION PATTERN OF ALLEGED PURCHASE ITEMS; CONFIRMATION FROM THE PARTIES CONC ERNED ETC COULD NOT BE SUBMITTED BEFORE THE A.O.. NOR THE PRINCIPLE O FFICER OF THESE CONCERNS WERE PRODUCED BEFORE THE A,O. FOR EXAMINAT ION. HOWEVER, IT IS ALSO A FACT THAT THE A.O. HAS NOT QUESTIONED THE TO TAL SALE COMPONENT AND IF THERE IS A SALE, THERE SHOULD BE' PURCHASE. THE APPELLANT BEING A TRADING CONCERN, HAS INDULGED IN USING SUCH ACCOM MODATION ENTITY AS EVIDENT FROM CATENA OF JUDGMENTS ON BOGUS PURCHASES , ONLY THE BENEFIT DERIVED BY USING SUCH ACCOMMODATION ENTRIES HAS TO BE BROUGHT TO TAX. THE ADVANTAGES FROM USING SUCH BOGUS BILLS ARE IN T HE FORM OF SAVING VAT, SAVING OF TRANSPORTATION CHARGES AND VARIOUS TAXES ETC. THE A.O. HAS RIGHTLY DISALLOWED PART OF THE PURCHASES CLAI MED SUCH HAWALA DEALERS. HOWEVER, THE RATIO OF THE JUDGMENT OF HONBLE GUJARAT HIGH COURT IN THE CASE OF SIMIT P. SETH 356 1TR 461 (GUJ .) IS APPLICABLE TO THE FACTS AND CIRCUMSTANCES OF THE APPELLANT'S CASE SIN CE THE APPELLANT IS A TRADING CONCERN. HERE THE HONBLE COURT HAS HELD TH AT DISALLOWANCE OF 12.5% OF THE PURCHASE FROM SUCH HAWALA DEALERS WILL BE JUSTIFIED. THUS ITA NO.5356/MUM/2018 BHAROOMAL & CO. 4 THE DISALLOWANCE MADE BY THE A.O. IS UPHELD IN PRIN CIPLE. HOWEVER, THE PERCENTAGE IS RESTRICTED FROM 100% TO 12.5%. THE GR OUND OF APPEAL FILED BY THE APPELLANT ON THIS ISSUE. 5. 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 100% ADDITIONS TOWARDS ALL EGED BOGUS PURCHASES, ON THE GROUND THAT THE ASSESSEE ONE OF T HE BENEFICIARY 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 ITA NO.5356/MUM/2018 BHAROOMAL & CO. 5 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 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 12.50% ON TOTAL ALLEGED BOGUS PURCHASE. A LTHOUGH, 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 ITA NO.5356/MUM/2018 BHAROOMAL & CO. 6 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.. 7. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DI SMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 14/10/2 019 SD/- ( MAHAVIR SINGH ) SD/- ( G. MANJUNATHA ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 14/10/2019 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//