NARSI DEVJI PATEL, MUMBAI V. ASST CIT 19(1), MUMBAI

ITA 540/MUM/2017

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 8964 (ITAT-MUMBAI)
• Duration Of Justice: 9 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-10-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 24-01-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SAURABH DESH
• Keywords: Bogus purchase; Additional evidence
• Section: 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH A, MUMBAI BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER AND SHRI MANOJ KUMAR AGGARWAL, ACCOUNTANT MEMBER ITA NO.1149/M/2017 ASSESSMENT YEAR: 2011-12 ACIT-22(2), 315, PIRAMAL CHAMBERS, LALBAUG, MUMBAI 400 012 VS. SHRI NARSI DEVJI PATEL, FLAT NO.308, MANGAL GYAN, 12 TH ROAD, NEAR RAM MANDIR, KHAR (W) MUMBAI -52 PAN: AACPP 3084H (APPELLANT) (RESPONDENT) & ITA NO.540/M/2017 ASSESSMENT YEAR: 2011-12 SHRI NARSI DEVJI PATEL, FLAT NO.301, MANGAL GYAN, 12 TH ROAD, NEAR RAM MANDIR, KHAR (W) MUMBAI -400052 PAN: AACPP 3084H VS. OFFICE OF THE ACIT-22(2), 315, 3 RD FLOOR, PIRAMAL CHAMBERS, LALBAUG, MUMBAI 400 012 (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI RAJNIKANT CHOKSHI, A.R. SHRI M.K. PATEL, A.R. REVENUE BY : SHRI SAURABH DESHPANDE, D.R. DATE OF HEARING : 23.08.2017 DATE OF PRONOUNCEMENT : 30.10.2017 O R D E R PER D.T. GARASIA , JUDICIAL MEMBER: THE ABOVE TITLED APPEALS-ONE BY THE DEPARTMENT AND THE OTHER BY THE ASSESSEE HAVE BEEN PREFERRED AGAINST THE ORD ER DATED SHRI NARSI DEVJI PATEL ITA NO.1149/M/2017 & ITA NO.540/M/2017 2 08.11.2016 OF THE COMMISSIONER OF INCOME TAX (APPEA LS) [HEREINAFTER REFERRED TO AS THE CIT(A)] RELEVANT TO ASSESSMENT YEAR 2011-12. ITA NO.540/M/2017 (ASSESSEES APPEAL) 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS AN INDIVIDUAL ENGAGED IN BUSINESS OF TRADING IN READYMADE GARMENT S. DURING THE YEAR THE ASSESSING OFFICER (HEREINAFTER REFERRED TO AS THE AO) FOUND THAT ASSESSEE HAD MADE BOGUS PURCHASES FROM FOLLOWI NG PARTIES: SR. NO. NAME OF THE PARTY AMOUNT OF PURCHASE (RS) 1. BOARDWAY INCLAVE 723514 2. FAIRO ENTERPRISES (CHEMBUR) 2308791 3. GAMI ENTERPRISES (JOGESHWARI) 3536493 4. JAI MATA JI (SANTACRUZ) 1860245 5. KRUPA CREATIONS (MALAD) 3078392 6. MAYANK APPARELS (SANTACRUZ) 1041656 7. MUPDUCH CLOTHING (JOGESHWARI) 4572978 8. PATEL GARMENTS (GOREGAON) 11565255 9. PRINTOL ENTERPRISES PVT. LTD. 1682637 10. RAJDEEP INTERNATIONAL (GOREGAON) 3763850 11. RITHIK CREATIONS (MUMBAI) 1636781 12. SHREE KASHI ENTERPRISES (SANTACRUZ) 2812101 13. SWASTIK CREATION (SANTACRUZ) 1778666 14. TILIYAS GARMENTS (SANTACRUZ) 1487932 15. VEER CREATION (GHATKOPAR) 9455720 16. YOUNG FASHION (SANTACRUZ) 2194478 TOTAL 5,34,99,489 3. THE ASSESSEE WAS ASKED TO PRODUCE THE ABOVE PART IES FOR VERIFICATION. THERE WAS NO COMPLIANCE OF NOTICE UND ER SECTION 133(6). THEREFORE, THE AO HAS MADE THE ADDITION ON ACCOUNT OF BOGUS PURCHASES @ 25% OF RS.5,34,99,489/- WHICH COM ES TO RS.1,33,74,872/-. SHRI NARSI DEVJI PATEL ITA NO.1149/M/2017 & ITA NO.540/M/2017 3 4. MATTER CARRIED TO THE LD. CIT(A) AND THE LD. CIT (A) HAS PARTLY ALLOWED THE APPEAL BY OBSERVING AS UNDER: 4.8 I HAVE CONSIDERED THE FACTS OF THE CASE, THE A PPELLANT'S SUBMISSIONS, AOS REMAND REPORT AND APPELLANTS REJ OINDER THEREON. THERE IS NO DISPUTE THAT THE APPELLANT DID NOT PROD UCE THE PARTIES BEFORE THE ASSESSING OFFICER. WHAT IS PERTINENT TO EXAMINE HERE WILL BE WHETHER THE APPELLANT HAD SUFFICIENTLY DISCHARGE D ITS ONUS OF PROVING THE GENUINENESS OF THE TRANSACTIONS EVEN TH OUGH THE PARTIES WERE NOT PRODUCED. PERUSAL OF THE DETAILS ON RECOR D SUBMITTED BEFORE THE ASSESSING OFFICER SHOWS THAT THE APPELLANT HAD SUBMITTED COPIES OF INCOME TAX RETURNS, CONFIRMED LEDGER ACCOUNTS AN D BANK ACCOUNT STATEMENTS OF THE FOLLOWING PARTIES. SR. NO. NAME OF THE PARTY AMOUNT OF PURCHASES (RS) 1. BOARDWAY INCLAVE 723514 5 . KRUPA CREATIONS (MALAD) 3078392 7 . MUPDUCH CLOTHING (JOGESHWARI) 4572978 8. PATEL GARMENTS (GOREGAON) 11565255 9 . PRINTOL ENTERPRISES PVT. LTD. 1682637 10 . R AJDEEP INTERNATIONAL (GOREGAON) 3763850 11. RITHIK CREATIONS (MUMBAI) 1636781 12 . SHREE KASHI ENTERPRISES (SANTACRUZ) 2812101 AS THE APPELLANT HAD SUFFICIENTLY DISCHARGED THE ON US OF PROVING THE GENUINENESS OF THE TRANSACTIONS WITH RELEVANT EVIDE NCES, THE ADDITION MADE BY THE ASSESSING OFFICER IN RESPECT OF THE ABO VE MENTIONED PARTIES ARE DELETED. 4.9 IN RESPECT OF THE FOLLOWING PARTIES, I FIND THA T THE APPELLANT HAD EITHER NOT SUBMITTED ANY DETAILS OR FURNISHED ONLY COPIES OF ITR WITH LEDGER ACCOUNTS AND NO BANK STATEMENTS. SR. NO. NAME OF THE PARTY AMOUNT OF PURCHASES (RS) 3 GAMI ENTERPRISES (JOGESHWARI) 3536493/- 4 JAI MATA JI (SANTACRUZ) 1860245/- 6 MA YANK APPARELS (SANTACRUZ) 1041656/ - 13 SWASTIK CREATION (SANTACRUZ) 1778666/- 14 TILIYA S GARMENTS (SANTACRUZ) 1487932/ - 15 VEER CREATION(GHATKOPAR) 9455720/ - 16 YOUNQ FASHION (SANTACRUZ) 2194478/- THE ASSESSING OFFICER HAD SPECIFICALLY CALLED FOR C OPIES OF ITR ALONG WITH BANK STATEMENTS WHICH ARE CRUCIAL REQUIREMENTS TO ESTABLISH THE SHRI NARSI DEVJI PATEL ITA NO.1149/M/2017 & ITA NO.540/M/2017 4 GENUINENESS OF THE TRANSACTIONS WHICH THE APPELLANT HAS NOT COMPLIED WITH. THESE COMPLETE DETAILS WERE NOT SUBMITTED NEI THER AT THE TIME OF ASSESSMENT PROCEEDINGS NOR DURING APPELLATE PROC EEDINGS. THE APPELLANT, THEREFORE, HAS NOT FULLY DISCHARGED THE ONUS OF PROVING THE GENUINESS OF TRANSACTIONS WITH THESE PARTIES. CONSI DERING THIS AND THE FACT OF THE NOTICES U/S 133(6) BEING RETURNED UNSER VED/UNCLAIMED AND THE NON PRODUCING OF THE PARTIES BEFORE THE ASSESSI NG OFFICER, THE DISALLOWANCE MADE BY THE ASSESSING OFFICER IN RESPE CT OF THE PURCHASES MADE FROM THE ABOVE MENTIONED PARTIES IS UPHELD. 4.10 REGARDING THE DISALLOWANCE MADE IN RESPECT OF PURCHASES MADE FROM FAIRO ENTERPRISES (CHEMBUR) OF RS.23,08,791/-, I FIND THAT REPLY WAS RECEIVED IN RESPONSE TO NOTICE U/S 133(6) ISSUE D BY THE ASSESSING OFFICER. THE A.O. HAS SIMPLY STATED THAT THERE WAS DISCREPANCY IN THE REPLY SUBMITTED AND DISALLOWED PART OF THE PURCHASE S MADE FROM THE PARTY BY HOLDING IT TO BE NON-GENUINE. DURING APPEL LATE PROCEEDINGS, THE APPELLANT HAS CONTENDED THAT IT WAS NO ASKED TO EXPLAIN / CLARIFY THE SAME. IN SUPPORT OF ITS CLAIM REGARDING THE GEN UINENESS OF TRANSACTIONS WITH THE SAID PARTY, THE APPELLANT HAD SUBMITTED ADDITIONAL EVIDENCES CONSISTING OF INCOME TAX RETUR N ACKNOWLEDGEMENT, LEDGER ACCOUNT, INVOICES AND BANK STATEMENT WHICH WAS REMANDED TO THE ASSESSING OFFICER FOR NEC ESSARY VERIFICATION AND REPORT. THE REMAND REPORT SUBMITTE D BY AO IS SILENT ON THIS ISSUE. AS THE GENUINENESS OF PURCHASES MADE FROM THIS PARTY STANDS SUBSTANTIATED BY THE SAID ADDITIONAL EVIDENC ES, THE DISALLOWANCE MADE BY THE ASSESSING OFFICER IN RESPE CT OF THE PURCHASES MADE FROM THIS PARTY IS DELETED. 5. THE DEPARTMENT IS IN APPEAL AGAINST DELETION OF PURCHASES MADE FROM 9 PARTIES AND ASSESSEE IS IN APPEAL IN RESPECT OF THE ADDITION AS CONFIRMED BY THE LD. CIT(A) AGAINST 7 PARTIES. 6. LD. D.R. RELIED UPON THE DECISION OF THE AHMED ABAD BENCH, ITAT IN THE CASES OF SHWETAMBAR STEELS VS. ITO AHME DABAD AND GANESH RICE MILLS VS. CIT (294 ITR 316). 7. THE ASSESSEE RELIED UPON THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. SIMIT P. SHETH 38 TAXM AN 385 (GUJ). THE LD. A.R. SUBMITTED THAT THE ASSESSEE HAD SUBMIT TED ALL THE EVIDENCES TO SHOW THAT THERE WAS A GENUINE TRANSACT ION WITH SOME OF THE PARTIES AND IN RESPECT OF THOSE PARTIES ASSESSE E HAS FILED THE SHRI NARSI DEVJI PATEL ITA NO.1149/M/2017 & ITA NO.540/M/2017 5 INCOME TAX RETURN, LEDGER ACCOUNT, INVOICES AND BAN K STATEMENT. THE LD. CIT(A) HAS CALLED FOR THE REMAND REPORT AND AFT ER GOING THROUGH THE REMAND REPORT THE LD. CIT(A) HAS DELETED THE AD DITIONS AND CONFIRMED ADDITION AGAINST THOSE PARTIES AGAINST W HICH EVIDENCES COULD NOT BE SUBMITTED BY ASSESSEE. THE LD. AR PLEA DED FOR MORE RELIEF ON THE GROUND THAT IMPUGNED ADDITIONS WERE O N HIGHER SIDE. 8. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE P ARTIES. THE FACTS OF THE CASE SHOW THAT ASSESSEE COULD NOT PROD UCE THE PARTIES FROM WHOM THE GOODS ARE STATED TO HAVE BEEN PURCHAS ED FROM THE PARTIES FOR WHICH THE LD. CIT(A) HAS CONFIRMED THE ADDITION OF RS.53,38,797/- BEING 25% OF RS.2,13,55,190/- ON ACC OUNT OF BOGUS PURCHASES MADE FROM 7 PARTIES. THE SUPPLIERS WERE FOUND TO BE ENGAGED IN PROVIDING BOGUS BILL WITHOUT ACTUAL DEAL ING OF GOODS. IN THIS REGARD, THE ASSESSEE HAS STATED THAT THEY HAD SUBMITTED QUANTITATIVE DETAILS OF STOCK WITH RESPECT OF THE S ALES WITH PURCHASES FROM THE PARTIES DURING THE ASSESSMENT PROCEEDINGS. THE ASSESSEE HAS SUBMITTED THE DETAIL OF CORRESPONDING SALES IN RESP ECT OF THE PURCHASE FROM THE SAID PARTIES. AS MENTIONED ABOVE THE AO HA S NEVER DISPUTED OR EXAMINED THE ASPECT OF SALES RECEIPTS. SINCE THE SALES MADE BY THE ASSESSEE WAS NOT DOUBTED OR DISPUTED BY THE AO AND HE HAS ACCEPTED THE SALES RECEIPTS OF THE ASSESSEE AS IT IS, THEREF ORE, THE AO CANNOT DENY THAT PURCHASES WERE NOT MADE BY THE ASSESSEE A ND THE MATERIAL WAS NOT USED FOR ITS SALES. WHAT IS UNDER DISPUTE I S THE PURCHASES FROM THE PARTIES FROM WHOM BILLS HAVE BEEN TAKEN AN D CHEQUES HAVE BEEN ISSUED TO THEM. PURCHASES ARE NOT IN DISPUTE B UT THE PARTIES FROM WHOM PURCHASE ARE SHOWN TO HAVE BEEN MADE ARE DISPU TED AND SHRI NARSI DEVJI PATEL ITA NO.1149/M/2017 & ITA NO.540/M/2017 6 SUSPICIOUS. THE AO HAD MADE THE ADDITION AS SOME O F THE SUPPLIERS WERE DECLARED HAWALA DEALERS BY THE VAT DEPARTMENT. THIS MAY BE A GOOD REASON FOR MAKING FURTHER INVESTIGATION BUT THE AO DID NOT MAKE ANY FURTHER INVESTIGATION AND MERELY COMPLETED THE ASSESSMENT ON SUSPICION. ONCE THE ASSESSEE HAS BROUGHT ON RECO RD THE DETAILS OF PAYMENTS BY ACCOUNT PAYEE CHEQUE, IT WAS INCUMBENT ON THE AO TO HAVE VERIFIED THE PAYMENT DETAILS FROM THE BANK OF THE ASSESSEE AND ALSO FROM THE BANK OF THE SUPPLIERS TO VERIFY WHETH ER THERE WAS ANY IMMEDIATE CASH WITHDRAWAL FROM THEIR ACCOUNT. NO SU CH EXERCISE HAS BEEN DONE OR FINDINGS RECORDED. THERE WAS NO DETAIL ED INVESTIGATION MADE BY THE AO HIMSELF. IT IS ALSO FOUND THAT THE P AYMENTS HAVE BEEN MADE BY ACCOUNT PAYEE CHEQUE WHICH ARE DULY RE FLECTED IN THE BANK STATEMENT OF THE ASSESSEE. THERE IS NO EVIDENC E TO SHOW THAT THE ASSESSEE HAS RECEIVED CASH BACK FROM THE SUPPLIERS. MERELY BECAUSE THE SUPPLIERS DID NOT APPEAR BEFORE THE AO OR SOME CONFIRMATION LETTERS WERE NOT FURNISHED, ONE CANNOT CONCLUDE THA T THE PURCHASES WERE NOT MADE BY THE ASSESSEE. THIS VIEW IS SUPPORT ED BY THE DECISION OF NIKUNJ EXIMP ENTERPRISES VS. CIT 216 TA XMAN 171 (BOM). TO THIS EXTENT, WE ARE OF THE VIEW THAT IF THE ASSESSEE HAS FULFILLED ITS ONUS OF MAKING THE PAYMENT BY CHEQUE AND HAS SUPPLIED THE ADDRESSES OF THE SELLERS THEN IT CANNOT BE PRES UMED THAT SUPPLIER WERE BOGUS SIMPLY BECAUSE THE SELLERS WERE NOT FOUN D AT THE GIVEN ADDRESS. THERE IS A CONSIDERABLE TIME GAP BETWEEN T HE PERIOD OF PURCHASE TRANSACTION AND PERIOD OF SCRUTINY PROCEED INGS. THE AO HAS NOT BROUGHT ANY MATERIAL ON RECORD TO SHOW THAT THE RE IS SUPPRESSION OF SALES. IT IS BASIC RULE OF ACCOUNTANCY AS WELL A S OF TAXATION LAWS SHRI NARSI DEVJI PATEL ITA NO.1149/M/2017 & ITA NO.540/M/2017 7 THAT PROFIT FROM BUSINESS CANNOT BE ASCERTAINED WIT HOUT DEDUCTING COST OF PURCHASE FROM SALES. ESTIMATION OF PROFIT R ANGING FROM 12.5% TO 15% HAS BEEN UPHELD BY THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS SIMIT P SHETH 356 ITR 451 (GUJ.). R ESPECTFULLY FOLLOWING THE DECISION OF HONBLE GUJARAT HIGH COUR T IN THE CASE OF CIT VS. SIMIT P. SHETH 38 TAXMAN 385 (GUJ), WE ESTI MATE THE NET ADDITIONS AT 12.5% INSTEAD OF 25% MADE BY THE LD. C IT(A). THEREFORE, THE ADDITION SUSTAINED BY US @ 12.5% OF RS.2,13,55,190/- COMES TO RS.26,69,399/-. THEREFORE, WE PARTLY ALLO W THE ASSESSEES APPEAL. ITA NO.1149/M/2017 (REVENUES APPEAL) 9. IN RESPECT OF DEPARTMENTAL APPEAL, WE FIND THAT LD. CIT(A), AFTER DUE CONSIDERATION OF REMAND REPORT AND EVIDEN CES SUBMITTED BY THE ASSESSEE CONCLUDED THAT THE TRANSACTIONS WERE G ENUINE AND SUBSTANTIATE WITH EVIDENCES AND HENCE, DELETED THE SAME WITH DUE APPLICATION OF MIND. THEREFORE, WE ARE OF THE VIEW THAT OUR INTERFERENCE IS NOT REQUIRED. RESULTANTLY, THE REVE NUES APPEAL STANDS DISMISSED. 10. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLO WED AND DEPARTMENTAL APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30.10.2017. SD/- SD/- (MANOJ KUMAR AGGARWAL) (D.T. GARASIA) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 30.10.2017. * KISHORE, SR. P.S. SHRI NARSI DEVJI PATEL ITA NO.1149/M/2017 & ITA NO.540/M/2017 8 COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.