CHHAGNARAM GOMAJI PARMAR, MUMBAI V. ITO 19 (1)(3), MUMBAI

ITA 5381/MUM/2018

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 4660 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-10-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 18-09-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AKHTAR H ANSARI SR
• Keywords: Bogus purchase; Principle of natural justice; Tangible material; Onus to prove; Reason to believe
• Section: 143(3); 133(6); 143(2); 139(1); 148

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL SMC BENCH MU MBAI BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH JUDICIAL MEMBER ITA NO. 5381/MUM/2018 (ASSESSMENT YEAR 2010-11 ) SHRI CHHAGNARAM GOMAJI PARMAR, ROOM NO. 39, 3 RD FLOOR, KESURI HOUSE 68/74, SANT SENA MAHARAJ MARG, MUMBAI- 400004. PAN: AOWPP2668B VS. ITO - 19(1)(3) R.NO. 223, MATRU MANDIR, TARDEO, MUMBAI-400007. APPELLANT RESPONDE NT APPELLANT BY : NONE RESPONDENT BY : SHRI AKHTAR H. ANSARI (SR. AR) DATE OF HEARING : 09.10.2019 DATE OF PRONOUNCEMEN T : 14.10.2019 ORDERUNDER SECTION 254(1)OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER ; 1. THIS APPEAL BY ASSESSEE IS DIRECTED AGAINST THE ORD ER OF LD. CIT(A)-30, MUMBAI DATED 11.06.2018 FOR ASSESSMENT YEAR 2010-11 . THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: FOLLOWING GROUNDS OF APPEAL ARE SUBMITTED WITHOUT P REJUDICE TO ONE ANOTHER: 1) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LD. FIRST APPELLATE AUTHORITY (CIT(A)-30) HAS ERRED IN SUSTAI NING THE ADDITION MADE BY THE INCOME TAX OFFICER, WARD 19(1)(3), MUMBAI, T REATING PART OF OUR GENUINE BONA FIDE PURCHASES AS BOGUS PURCHASES WITH OUT APPRECIATING THAT ALL OF OUR PURCHASES ARE GENUINE AND BONA FIDE REAL PUR CHASES AND THAT THE APPELLANT HAS ADDUCED VARIOUS EVIDENCES, NONE OF WH ICH HAVE BEEN BELIED OR DISPROVED BY THE AO. THE SAID ADDITION MADE BY THE AO AND SUSTAINED BY THE CIT(A) MAY THEREFORE KINDLY BE DELETED. ITA NO. 5381 MUM 18-S HRI CHHAGNARAM GOMAJI PARMAR. 2 2) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW; THE HON'BLE CIT(A)-30 HAS ERRED IN SUSTAINING THE ASSESSMENT OR DER PASSED BY THE AO, WITHOUT APPRECIATING THAT THE AO HAS ERRED IN INVOK ING THE PROVISIONS OF SEE 147 AND REOPENING OUR ASSESSMENT FOR THE YEAR UNDER CONSIDERATION. THE IMPUGNED ORDER IS THEREFORE LIABLE TO BE QUASHED. 3) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE HON'BLE CIT(A)-30 HAS ERRED IN SUSTAINING THE ADDITION MADE BY THE AO, ON THE BASIS OF MATERIALS / INFORMATION, IF ANY, COLLECTED BEHIN D OUR BACK, WITHOUT GIVING US COPIES THEREOF AND OPPORTUNITY TO CROSS EXAMINE THE WITNESS AND TO REBUT THE SAME. THEREFORE, SUCH EVIDENCE IS NO EVIDENCE I N THE EYES OF LAW. THE IMPUGNED ORDER IS THEREFORE AGAINST THE PRINCIPLES OF NATURAL JUSTICE AND HENCE ILLEGAL AND VOID ON THIS SCORE ALONE. 4) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE HON'BLE CIT(A)-30 HAS ERRED IN SUSTAINING THE ADDITION MADE BY THE AO, IGNORING THE FACT THAT THE APPELLANT HAS PRODUCED ALL AND EVERY DETAILS, DOCUMENTS AND RECORDS PROVING GENUINENESS OF HIS IMPUGNED PURCHAS ES AND THAT TOO WITHOUT POINTING OUT ANY INFIRMITY IN THE DETAILS, DOCUMENT S AND RECORDS PRODUCED BY THE APPELLANT. SUCH ORDER CANNOT BE SUSTAINED IN TH E EYES OF LAW. IT MAY PLEASE BE QUASHED. 5) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE HON'BLE CIT(A)-30 HAS ERRED IN SUSTAINING THE ADDITION MADE BY THE AO, WITHOUT APPRECIATING THAT THE APPELLANT IS A RESELLER ONLY. HE SOLD WHAT HE HAS PURCHASED. NONE OF HIS SALES ARE SUSPECTED. HIS BOO KS OF ACCOUNTS ARE NOT REJECTED. HIS BOOKS OF ACCOUNTS ARE AUDITED. QUANTI TY DETAILS ARE SUBMITTED WHICH HAS NOT BEEN DISPROVED BY THE AO. HENCE, NO P ART OF PURCHASES CAN BE TERMED AS BOGUS AND DISALLOWED. THE HON'BLE CIT(A)- 30 HAS ERRED IN SUSTAINING THE DISALLOWANCE. 6) ALTERNATIVELY AND WITHOUT PREJUDICE TO THE FOREG OING AND ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE HO N'BLE CIT(A)-30 HAS ERRED IN SUSTAINING THE ADDITION MADE BY THE AO BY ESTIMA TING ADDITION AT 12.5% WITHOUT REJECTING THE BOOKS OF ACCOUNTS AND WITHOUT GIVING CREDIT FOR THE GP ALREADY DECLARED B THE APPELLANT. THE IMPUGNED ORDE R MAY, THEREFORE, PLEASE BE QUASHED. ITA NO. 5381 MUM 18-S HRI CHHAGNARAM GOMAJI PARMAR. 3 7) YOUR APPELLANT THEREFORE HUMBLY PRAYS THAT THE I MPUGNED ASSESSMENT ORDER MAY KINDLY BE QUASHED, ADDITION SUSTAINED BY THE CIT(A) MAY KINDLY BE DELETED AND SUCH OTHER AND FURTHER RELIEFS, AS M AY BE FAVOURABLE TO THE APPELLANT, MAY KINDLY BE GRANTED AS MAY BE THOUGHT FIT TO MEET THE ENDS OF JUSTICE. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS AN INDIVIDUAL, FILED HIS RETURN OF INCOME ON 25.09.2010 DECLARING TOTAL INCO ME OF RS. 2,22,067/- FOR ASSESSMENT YEAR 2010-11. THE RETURN OF INCOME W AS PROCESSED UNDER SECTION 143(1). THE ASSESSMENT WAS RE-OPENED UNDER SECTION 147 ON THE BASIS OF INFORMATION RECEIVED FROM SALE TAX DEPARTMENT, GOVERNMENT OF MAHARASHTRA THAT CERTAIN HAWALA OPERA TORS ARE INDULGING IN PROVIDING ACCOMMODATION BILLS WITHOUT ACTUAL DEL IVERY OF GOODS. THE SALE TAX DEPARTMENT, GOVERNMENT OF MAHARASHTRA REFE RRED THE LIST OF SUCH HAWALA DEALERS AND THE BENEFICIARY TO THE DGIT (INVESTIGATION), MUMBAI. THE NAME OF ASSESSEE APPEARED IN THE LIST O F BENEFICIARY. THE ASSESSEE ALLEGEDLY MADE THE PURCHASES OF RS. 51,11, 890/- FROM SUCH HAWALA DEALERS. ON THE BASIS OF INFORMATION, THE AS SESSING OFFICER MADE A BELIEF THAT THE INCOME OF THE ASSESSEE ESCAPED AS SESSMENT, THEREFORE, RE-OPENED THE ASSESSMENT UNDER SECTION 147. NOTICE UNDER SECTION 148 WAS ISSUED ON 28.10.2014 TO THE ASSESSEE. THE ASSES SEE IN RESPONSE TO THE NOTICE UNDER SECTION 148 FILED ITS REPLY DATED 28.10.2014 AND STATED THAT ORIGINAL RETURN FILED ON 25.09.2010 UNDER SECT ION 139(1) BY ASSESSEE BE TREATED AS RETURN IN RESPONSE TO THE SAID NOTICE . THE ASSESSING OFFICER AFTER SERVING NOTICE UNDER SECTION 143(2) DATED 13. 07.2015 PROCEEDED ITA NO. 5381 MUM 18-S HRI CHHAGNARAM GOMAJI PARMAR. 4 FOR RE-ASSESSMENT. DURING THE ASSESSMENT, THE ASSES SING OFFICER NOTED THAT THE ASSESSEE HAS SHOWN PURCHASES FROM THE FOLL OWING PARTIES, WHICH WAS DECLARED AS HAWALA DEALERS BY THE SALE TAX DEPA RTMENT, GOVERNMENT OF MAHARASHTRA. NAME OF THE PARTIES BILL AMOUNT (RS.) SIDDHIVINAYAK STEEL 2,20,979/- ASIAN STEEL 16,39,924/ - SURAT TUBE CORPORATION 19,03,534/ - ATUL TRADERS 9,108/- KAMAL TRADERS 9,518/- SHREE GURURAJ METAL CORP. 71,685/- DINESH STEEL (INDIA) 77,917/- PIONEER METALS & ALLOYS 2,17,074/- HEENA METALS 2,57,421/ - SIDDHIVINAYAK PIPE & FITTIN GS 3,49,440/ - SHANTI PIPES & TUBES 3,55,290/- TOTAL 51,11,890/- 3. THE ASSESSEE WAS ASKED TO SUBSTANTIATE THE PURCHASE S AND TO FURNISH THE NAME OF DEALERS, BILLS &, VOUCHERS, DESCRIPTION OF GOODS PURCHASED, QUANTITY, RATE AND AMOUNT, THE DATE OF DISPATCH OF GOODS AND THE NAME OF PLACE ALONG WITH MODE OF TRANSPORTATION BY ROAD OR OTHER MODE, VEHICLE NUMBER, AND PAYMENT DETAILS. THE ASSESSEE WAS ALSO ASKED TO FURNISH THE CORRESPONDING SALES OF GOODS. THE ASSESSING OF FICER NOTED THAT ASSESSEE COULD NOT PRODUCE ANY EVIDENCE DURING THE COURSE OF HEARING NOR ACCEPTED THE REPORT OF SALE TAX DEPARTMENT. THE ASSESSING OFFICER IN ORDER TO VERIFY THE TRANSACTION ISSUED NOTICE UN DER SECTION 133(6) OF THE ACT. THE NOTICE WAS RETURNED BACK UNSERVED BY T HE POSTAL DEPARTMENT WITH THE REMARK NOT KNOWN OR LEFT. THE ONUS TO PROVE THE ITA NO. 5381 MUM 18-S HRI CHHAGNARAM GOMAJI PARMAR. 5 GENUINENESS OF PURCHASES WAS ON ASSESSEE, THE ASSES SEE FAILED TO DISCHARGE HIS ONUS. THE ASSESSEE WAS ASKED VIDE NOT ICE DATED 08.02.2016 TO PRODUCE THE PARTIES FOR EXAMINATION B EFORE ASSESSING OFFICER ON 28.02.2016. THE ASSESSEE FAILED TO BRING THE SAID PARTIES. THE ASSESSING OFFICER CONCLUDED THAT THE PURCHASES SHOW N FROM THE ALLEGED BOGUS PARTIES REMAINED UNVERIFIABLE AND THAT THE AS SESSEE OBTAINED BOGUS BILLS TO INFLATE THE EXPENSES. THE ASSESSING OFFICER REJECTED THE BOOKS OF ACCOUNT BY INVOKING THE PROVISION OF SECTI ON 145(3). THE ASSESSING OFFICER AFTER CONSIDERING THE MATERIAL BE FORE HIM AND CONTENTION OF ASSESSEE DISALLOWED 12.5% OF THE AGGR EGATE OF TOTAL OF NON-GENUINE/ALLEGED HAWALA PURCHASES BY TAKING VIEW THAT IT WOULD BE JUST FAIR AND PROPER TO MAKE ADDITION OF PROFIT ELE MENT EMBEDDED IN SUCH BOGUS PURCHASE, IN THE ASSESSMENT ORDER DATED 29.02 .2016 PASSED UNDER SECTION 143(3) R.W.S 147. 4. ON APPEAL BEFORE THE LD. CIT(A), THE ACTION OF ASSE SSING OFFICER AND DISALLOWANCES MADE ON ACCOUNT OF BOGUS PURCHASES WA S SUSTAINED. FURTHER, AGGRIEVED BY THE ORDER OF LD. CIT(A), THE ASSESSEE HAS FILED THE PRESENT APPEAL BEFORE US. 5. NONE APPEARED ON BEHALF OF ASSESSEE DESPITE THE SER VICE OF NOTICE OF HEARING OF APPEAL THROUGH REGISTERED POST. THE ACKN OWLEDGMENT CARD OF THE NOTICE DULY RECEIVED ON BEHALF OF ASSESSEE ON 2 1.08.2019 BY THE PERSON, WHOSE SIGNATURE IS LEGIBLE AS ASHOK, IS O N RECORD. THEREFORE, ITA NO. 5381 MUM 18-S HRI CHHAGNARAM GOMAJI PARMAR. 6 WE LEFT NO OPTION EXCEPT TO HEAR THE LD. DR FOR THE REVENUE AND TO DECIDE THE APPEAL ON THE BASIS OF MATERIAL AVAILABLE ON RE CORD. 6. WE HAVE HEARD THE SUBMISSION OF LD. DEPARTMENTAL RE PRESENTATIVE (DR) FOR THE REVENUE AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE LD. DEPARTMENTAL REPRESENTATIVE (DR) FOR THE REVENUE SU PPORTED THE ORDER OF LOWER AUTHORITIES. THE LD. DR FURTHER SUBMITS TH AT INVESTIGATION WING OF INCOME-TAX DEPARTMENT HAS MADE FULL-FLEDGED INVE STIGATION IN RESPECT OF HAWALA TRADERS. THE HAWALA TRADERS WERE/ARE ENGA GED IN PROVIDING BOGUS BILL WITHOUT ACTUAL DELIVERY OF GOODS. THE AS SESSEE HAS SHOWN BOGUS PURCHASES ONLY TO INFLATE THE PROFIT. THE LD. DR FOR THE REVENUE SUBMITS THAT THE ASSESSING OFFICER HAS GIVEN SUFFIC IENT RELIEF. THE ASSESSING OFFICER HAS REASONABLY ESTIMATED THE DISA LLOWANCES. THE ASSESSEE IS NOT ENTITLED FOR ANY FURTHER RELIEF. ON RE-OPENING THE LD. DR SUBMITS THAT THERE WAS SUFFICIENT TANGIBLE MATERIAL /INFORMATION IN THE FORM OF INFORMATION FROM DGIT (INVESTIGATION) THAT SALE TAX DEPARTMENT, GOVERNMENT OF MAHARASHTRA HAS UNEARTHED THE SCHEME ABOUT THE HAWALA ENTRY PROVIDER, WHO WERE ENGAGED I N PROVIDING BOGUS BILLS, THEREFORE, THE ASSESSING OFFICER HAS SUFFICI ENT REASON FOR MAKING BELIEF THAT THE INCOME OF THE ASSESSEE HAS ESCAPED ASSESSMENT. 7. WE HAVE CONSIDERED THE SUBMISSIONS OF LD. DR FOR TH E REVENUE AND PERUSED THE RECORD. GROUND NO.1 & 3 TO 6 RELATES TO DISALLOWANCE OF 12.5% OF THE BOGUS PURCHASES. THE ASSESSING OFFICER DURING THE ITA NO. 5381 MUM 18-S HRI CHHAGNARAM GOMAJI PARMAR. 7 ASSESSMENT ISSUED SHOW-CAUSE NOTICE TO THE ASSESSEE TO PROVE THE GENUINENESS OF THE PURCHASES AND TO PRODUCE THE PAR TIES FOR VERIFICATION. THE ASSESSING OFFICER NOTED THAT THE ASSESSEE FAILE D TO PRODUCE THE PARTIES. THE ASSESSING OFFICER ALSO MADE INVESTIGAT ION BY ISSUING NOTICE UNDER SECTION 133(6) TO ALL THE DEALERS. THE NOTICE S SENT TO DEALERS WERE RETURNED BACK WITH THE REMARK OF POSTAL AUTHORITIES NOT KNOWN OR LEFT. THE ASSESSING OFFICER ALSO NOTED THAT THE AS SESSEE COULD NOT PRODUCE THE PROOF OF DELIVERY, TRANSPORT OF GOODS A ND INWARD REGISTER MAINTAINED AT THE GODOWN. THE ASSESSING OFFICER HAS NOT DISPUTED THE SALE OF THE ASSESSEE. THE ASSESSING OFFICER AFTER R EJECTING THE BOOKS OF ACCOUNT MADE ADDITION TO THE EXTENT OF PROFIT ELEME NT EMBEDDED IN SUCH TRANSACTIONS AND RESTRICTED THE DISALLOWANCE TO THE EXTENT OF 12.5% OF THE ALLEGED NON-GENUINE PURCHASES. THE LD. CIT(A) CONFI RMED THE ACTION OF ASSESSING OFFICER BY FOLLOWING THE DECISION OF HON BLE GUJARAT HIGH COURT IN CIT VS. SIMITH P. SETH [356 ITR 451 (GUJ.) ]. 8. WE HAVE NOTED THAT THE ASSESSEE IS ENGAGED IN THE B USINESS OF DEALING IN MS PIPE, MS ROUND AND MS SHEETS ETC. THE LOWER AUTH ORITY HAS NOT EXAMINED THE GROSS PROFIT (GP) OR PROFITABILITY ALR EADY DECLARED BY THE ASSESSEE ON SUCH NON-GENUINE AND OTHER GENUINE PURC HASES. THEREFORE, CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE , WE DIRECT THE ASSESSING OFFICER THAT DISALLOWANCE BE RESTRICTED T O 12.5% - (MINUS) THE ITA NO. 5381 MUM 18-S HRI CHHAGNARAM GOMAJI PARMAR. 8 GP DECLARED BY ASSESSEE ON SUCH BOGUS PURCHASES. IN THE RESULT, THE GROUNDS OF APPEAL RAISED BY ASSESSEE ARE PARTLY ALL OWED. 9. GROUND NO.2 RELATES TO VALIDITY OF RE-OPENING UNDER SECTION 147 OF THE ACT. THE LD. DR FOR THE REVENUE VEHEMENTLY SUBMITTE D THAT THERE WAS SUFFICIENT TANGIBLE MATERIAL/INFORMATION BEFORE THE ASSESSING OFFICER IN THE FORM OF INFORMATION FROM DGIT (INVESTIGATION) T HAT SALE TAX DEPARTMENT, GOVERNMENT OF MAHARASHTRA HAS UNEARTHED THE SCHEME ABOUT THE HAWALA ENTRY PROVIDERS, WHO WERE ENGAGED IN PROVIDING BOGUS BILLS. WE HAVE ALSO NOTED THAT AT THE TIME OF REOPE NING MERE REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED A SSESSMENT FOR THAT YEAR IS SUFFICIENT. IN OUR VIEW, AT THE TIME OF ISS UANCE OF NOTICE OF RE- OPENING THERE IS NO NEED TO GO BEHIND THE SUFFICIEN CY OF SUCH REASONS WHEN THERE WAS A LIVE LINK BETWEEN THE MATERIAL AT THE HANDS OF THE ASSESSING OFFICER AND HIS FORMATION OF BELIEF THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT IS SUFFICIENT. THUS, WE DO NOT FIND ANY MERIT IN THE GROUND NO.2 RAISED AGAINST THE VALIDITY OF R E-OPENING. IN THE RESULT, GROUND NO.2 OF THE APPEAL IS DISMISSED. 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 14/10/2019. SD/- SD/- SHAMIM YAHYA PAWAN SINGH ACCOUNTANT MEMBER J UDICIAL MEMBER MUMBAI, DATE: 14.10.2019 SK ITA NO. 5381 MUM 18-S HRI CHHAGNARAM GOMAJI PARMAR. 9 COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. DR SMC BENCH, ITAT, MUMBAI 6. GUARD FILE BY ORDER, DY./ASST. REGISTRAR ITAT, MUMBAI