ITO - WD- 2 (4), PUNE V. PARTH TRADERS, THANE

ITA 5400/MUM/2018

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 1858 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-11-2020
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 19-09-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Bogus purchase
• Section: 271(1)(c); 143(3); 142(1); 133(6); 250; 143(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI BEFORE SHRI PRAMOD KUMAR, VICE PRESIDENT & SHRI PAVAN KUMAR GADALE, JUDICIAL MEMBER ITA NOS. 5400 & 5410/MUM/2018 ( ASSESSMENT YEARS: 2010-11 & 2011-12 ) ITO, WARD -2(4) RM NO. 12, B WING, ASHR IT PARK, WAGLE IND, ESTATE, ROAD NO. 16Z, AMBIKA NAGAR, THANE 400604. / VS. PARTH TRADERS 63, MIRA CO.OP. HSG. SOC, NEAR ASMITA SUPER MARKET, MAYA NAGAR, MIRA ROAD (E), MIRA-BAYANDAR - 401107 ./ ./ PAN/GIR NO. : AABFP4130F ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : MS. SHREEKALA PARDESHI, DR / RESPONDENT BY : NONE / DATE OF HEARING 09/11/2020 !'# / DATE OF PRONOUNCEMENT 20/11/2020 / O R D E R PER PAVAN KUMAR GADALE - JM: THESE ARE THE APPEALS FILED BY THE REVENUE AGAINST THE SEPARATE ORDERS OF THE COMMISSIONER OF INCOME TAX (APPEALS) PASSED U/S 143(3) R.W.S 147 AN D 250 OF THE ACT AND (II) U/SEC 271(1)(C) AND 250 OF THE ACT. SINCE THE APPEALS PERTAINS TO THE SAME ASSESS EE, ITA NO .5400 & 5410 /MUM/2018 PARTH TRADERS, MUMBAI. - 2 - AND THE ISSUES ARE INTERLINKED,HENCE THEY ARE CLUBB ED, HEARD AND CONSOLIDATED ORDER IS PASSED. ITA NO. 5400/MUM/2018. AY 2010-11 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN NO T APPRECIATING THE LAW CORRECTLY THAT ONCE THE PURCHA SES ARE UNVERIFIABLE/NOT GENUINE/BOGUS, THE SAME SHOULD HAV E BEEN DISALLOWED IN ENTIRETY. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN LAW BY NOT APPRECIATING THE FACT THAT THE ASSESSEE COULD NOT E STABLISH THE GENUINENESS OF THE PURCHASES FROM THE NON-EXIST ENT VENDORS? 3. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F 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 FAILED TO DISCHARGE IT IN RELATION TO THE PURCHASES MADE FROM THE NON-EXISTENT VENDORS. 4. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN LAW BY IGNORING THE FACT THAT THE ASSESSEE COULD NOT SUBST ANTIATE ITS CLAIM OF PURCHASES FROM NON-EXISTENT VENDORS BY MEANS OF RELEVANT SUPPORTING DOCUMENTS RELATED TO MOVEMENT AND DELIVERY OF GOODS, STOCK REGISTER, ETC ., TO ITA NO .5400 & 5410 /MUM/2018 PARTH TRADERS, MUMBAI. - 3 - ARRIVE AT DISALLOWANCE AT 12.5% OF THE PURCHASES FR OM THE NON-EXISTENT VENDORS. 5. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN NO T APPRECIATING THE LAW CORRECTLY THAT ONCE THE PURCHA SES ARE UNVERIFIABLE / NOT GENUINE / BOGUS, THE SAME SHOULD HAVE BEEN DISALLOWED IN ENTIRETY, PARTICULARLY IN VIEW O F THE RATIO OF THE DECISION OF THE HONBLE GUJARAT HIGH C OURT IN TAX APPEAL NO. 242 OF 2003 DATED 20.06.2016 IN THE CASE OF N.K PROTEINS LTD., AGAINST WHICH THE SLP WAS DIS MISSED BY THE HONBLE 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 A.O MAY BE RESTORED. 3. THE BRIEF FACTS OF THE CASE ARE THAT, THE ASSESS EE IS A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF TRADING IN IRON AND STEEL AND FILED THE RETURN OF INCOME ON 07.09.2010 WITH TOTAL INCOME OF RS. 4,78,130/-AND THE ASSESSMENT PROCEEDINGS ARE COMPLETED ON 27.11.2012 WITH THE TOTAL INCOME OFRS.6,38,280/-. SUBSEQUENTLY, THE A.O HAD REASON T O BELIEVE THAT THE INCOME HAS ESCAPED ASSESSMENT AND ISSUED NOTICE U/SEC148 OF THE ACT BECAUSE THE ASSESSEEFIRM HAS OBTAINED BOGUS PURCHASE BILLS FROM ENTRY OPERATORS AS PER THE INFORMATION RECEIVED FRO M ITA NO .5400 & 5410 /MUM/2018 PARTH TRADERS, MUMBAI. - 4 - THE SALES TAX AUTHORITIES. SUBSEQUENTLY, THE A.O. H AS ISSUED NOTICE U/S 143(2) AND 142(1) OF THE ACT ALON G WITH THE QUESTIONER TO THE ASSESSEE. IN COMPLIANCE, THE LD. AR OF THE ASSESSEE APPEARED FROM TIME TO TI ME AND FILED THE DETAILS. THE A.O ON PERUSAL OF AUDIT ORS REPORT AND BALANCE SHEET FURNISHED DURING IN THE ASSESSMENT PROCEEDINGS, FOUND THAT THE ASSESSEE HAS OBTAINED BOGUS PURCHASE BILLS FROM 7 ENTITIES AGGREGATING TO RS. 1,56,26,544/- AS PER THE INFORMATION RECEIVED FROM THE MAHARASHTRA SALES TA X DEPARTMENT. THE A.O. HAS CALLED FOR INFORMATION U/S 133(6) OF THE ACT FROM THE PARTIES AS PER LETTER DA TED 26.11.2014.THE A.O FOUND THAT THE NOTICES U/S 133(6 ) OF THE ACT WERE RETURNED UNSERVED WITH THE POSTAL AUTHORITIES AND THE ASSESSEE WAS INFORMED.FURTHER A.O WANTED THE ASSESSEE TO PRODUCE THE PARTIES BUT THE ASSESSEE HAS FAILED TO COMPLY WITH DIRECTIONS, THEREFORE A.O. MADE 100% ADDITION OF BOGUS PURCHASESAND DETERMINED TOTAL INCOME OF RS1,62,64,820/- AND PASSED THE ORDER U/S 143(3) R.W.S 147 OF THE ACT ON 25.03.2015. 4. AGGRIEVED BY THE ORDER, THE ASSESSEE HAS FILED A N APPEAL WITH THE CIT(A). THE CIT(A) CONSIDERED THE ITA NO .5400 & 5410 /MUM/2018 PARTH TRADERS, MUMBAI. - 5 - GROUNDS OF APPEAL AND SUBMISSIONS OF THE ASSESSEE AND FINDING OF THE A.O AND RELIED ON THE JUDICIAL DECISIONS REFERRED AT PARA 7.1 TO 7.3 OF THE ORDER AND RESTRICTED THE DISALLOWANCE @12.5% OF BOGUS PURCHASES RELYING ON THE ASSESSEES OWN CASE FOR T HE A.Y 2011-12 REFERRED AT PARA 7.4 TO 7.5 OF THE ORD ER WHICH IS READ AS UNDER AND PARTLY ALLOWED THE ASSESSEES APPEAL: 7.4 WITH REGARD TO THE APPELLANTS RELIANCE ON VAR IOUS DECISIONS, THERE ARE LARGE NUMBER OF CASES, WHEREIN THE APPELLATE AUTHORITIES HAVE HELD THAT IT WOULD NOT B E APPROPRIATE TO CONSIDER THAT PURCHASES WERE GENUINE ONLY BECAUSE THE ASSESSEE MADE THE PAYMENT BY CHEQUE AND THE ASSESSEE RECEIVED BILLS. IT IS HELD BY VARIOUS COURTS THAT WHERE THE ASSESSEE COULD SHOW THAT HE HAS MADE THE PURCHASES AND THERE ARE CORRESPONDING SALES AGAINST THESE PURCHASES, IT WOULD BE APPROPRIATE TO TAX THE POSSIBLE PROFIT OUT OF PURCHASES MADE THROUGH NON-G ENUINE PARTIES. IN APPELLANTS OWN CASE HONBLE ITAT VIDE ORDER DATED 20.03.2018 ITA NO. 4735/MUM/2015 FOR A.Y 2011 - 12 HAS HELD AS UNDER: 14. UPON CAREFUL CONSIDERATION WE FIND THAT SALES IN THIS CASE HAVE NOT BEEN DOUBTED. AS HELD BY THE HON'BLE JURISDICTIONAL HIGH COURT NIKUNJ EXIMP ENTERPRISES (IN WRIT PETITION NO 2860, ORDER DT. 18.6.2014) THAT WHEN SALES ARE NOT DOUBTED, HUNDRED PERCENT DISALLOWANCE OF PURCHASERS AS BOGUS IS NOT PERMISSIBLE. HOWEVER THE FACTS OF THAT CASE WERE A LITTLE DIFFERENT INASMUCH AS THE SALES- WAS TO THE GOVERNMENT DEPARTMENTS. BE AS IT MAY, ITA NO .5400 & 5410 /MUM/2018 PARTH TRADERS, MUMBAI. - 6 - WE FIND THAT IN THIS CASE, THE FACTS OF THE CASE INDICATE THAT ASSESSEE HAS ENGAGED INTO THE GREY MARKET FOR MAKING PURCHASES. MAKING SUCH PURCHASES GIVES THE ASSESSEE VARIOUS BENEFITS IN TH E FORM OF TAX SAVING ETC AT THE EXPENSE OF EXCHEQUER. IN SIMILAR FACTS AND CIRCUMSTANCES FOLLOWING THE DECISION OF HONBLEE GUJARAT HIGH COURT IN THE CASE OF CIT VS SIMIT P. SHETH [2013] 356 ITR 451 (GUJ) A DISALLOWANCE OF 12.5% HAS BEEN HELD TO BE MEETING THE END'S OF JUSTICE IN VARIOUS DECISIONS OF THE IT AT MUMBAI IN SUCH CASES. ACCORDINGLY, WE HOLD THAT IN THE PRESENT CASE THE DISALLOWANCE SHOULD BE RESTRICTED TO 12.5% OF THE BOGUS PURCHASE. THE COUNSEL OF THE ASSESSEE FAIRLY AGREED TO THE ABOVE PROPOSITION. 7.5 IN VIEW OF FACTS STATED ABOVE, I AM OF THE CONS IDERED OPINION THAT THE APPELLANT HAS MADE PURCHASES OF RS . 40,70,920/- IN THE OPEN MARKET WHICH WERE SUBSEQUEN TLY SOLD AND HAS OBTAINED BILLS FROM THE HAWALA OPERATO RS. IT IS NOT KNOWN AT WHAT PRICE THE APPELLANT ACTUALLY M ADE THE PURCHASES FROM THIRD PARTIES. FURTHER THE ASSE SSEE COULD NOT PRODUCE PARTIES DURING THE ASSESSMENT AND APPELLATE PROCEEDINGS AND HAS PAID SALES TAX ON BEH ALF OF DEFAULTER SUPPLIERS. UNDER SUCH CIRCUMSTANCES THE LIKELIHOOD OF THE PURCHASES BEING INFLATED CANNOT B E RULED OUT AND THERE IS NO MATERIAL TO DISLODGE SUCH FINDI NGS. HONBLE ITAT MUMBAI IN APPELLANT OWN CASE UPHELD DISALLOWANCE OF 12.5%. AS THE FACTS OF THE ASSESSE ES CASE ARE SIMILAR, THEREFORE RESPECTFULLY FOLLOWING THE JUDGMENT OF HONBLE ITAT IN CASE OF ASSESSEE 12.5% OF THE AMOUNT OF UNPROVED PURCHASES OF RS. 40,70,920/-, AMOUNTING TO RS. 5,08,865/- IS DISALLOWED. THIS AD DITION WILL BE OVER AND ABOVE THE PROFITS SHOWN BY THE APP ELLANT IN HIS RETURN OF INCOME. ITA NO .5400 & 5410 /MUM/2018 PARTH TRADERS, MUMBAI. - 7 - 5. AGGRIEVED BY THE CIT(A) ORDER, THE REVENUE HAS FILED AN APPEAL WITH THE TRIBUNAL. 6. AT THE TIME OF HEARING NONE APPEARED ON BEHALF O F THE ASSESSEE. WE HEARD THE LD.DR AND CONSIDERED THE MATERIAL ON RECORD. THE LD. DR SUBMITTED THAT THE CIT(A) HAS ERRED IN RESTRICTING THE DISALLOWANCE TO 12.5% OF BOGUS PURCHASE BILLS, IRRESPECTIVE OF THE FACT THAT THE NOTICES U/S 133(6) OF THE ACT WERE NOT SE RVED ON THE PARTIES AND THE ASSESSEE HAS FAILED TO PRODU CE PARTIES IN THE ASSESSMENT PROCEEDINGS AND SUPPORTED THE ORDERS OF THE A.O. 6. WE HEARD THE SUBMISSIONS OF THE LD. DR AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND T HE SOLE CRUX OF THE DISPUTED ISSUE ENVISAGED BY THE LD DR WITH RESPECT TO RESTRICTION OF ADDITION TO 12.5% OF BOGUS PURCHASE BILLS BY THE LD CIT(A). THE LD CIT( A) CONSIDERED THE FACTUAL ASPECTS AND DEALT ON THE PROVISIONS OF THE SALES TAX ACT AND RELIED ON THE DECISION OF HONBLE TRIBUNAL IN ASSESSEES OWN CA SE AND PARTLY ALLOWED THE APPEAL. THE LD. DR COULD NOT CONTROVERT THE FINDINGS OF THE CIT(A) WITH ANY COGE NT MATERIAL OR NEW INFORMATION AND RELIED ON THE ORDE R ITA NO .5400 & 5410 /MUM/2018 PARTH TRADERS, MUMBAI. - 8 - OF THE ASSESSING OFFICER.WE DO NOT FIND INFIRMITY I N THE ORDER OF THE CIT(A) AND UPHELD THE SAME AND DISMIS S THE GROUNDS OF APPEAL OF THE REVENUE. 7. IN THE RESULT THE APPEAL FILED BY THE REVENUE IS DISMISSED. ITA NO. 5410/MUM/2018, A.Y 2011-12 8. THE A.O HAS LEVIED PENALTY U/S 271(1)(C) OF THE ACT, AND THE FACTS IN BRIEF WERE DISCUSSED IN ABOVE PARAGRAPHS AND EXPLANATIONS WERE FURNISHED. BUT, THE PENALTY WAS LEVIED AND ORDER WAS PASSED ON 31.03.2017.IN THE QUANTUM APPEAL AGAINST THE ADDITION MADE BY THE A.O, THE CIT(A) HAS ESTIMATED THE INCOME AT 12.5% OF THE BOGUS PURCHASES AND THE ADDITION WAS ACCEPTED BY THE ASSESSEE. IN THE PENA LTY APPEAL, THE CONTENTION OF THE LD.DR THAT THE CIT(A) HAS ERRED IN DELETING THE PENALTY LEVIED BY THE A.O WITHOUT APPRECIATING THE FINDINGS. WE FIND THAT THE CIT(A) HAS DEALT ON THE PROVISIONS OF LAW AND THE DECISIONS OF THE COORDINATE BENCH OF THE HONBLE TRIBUNAL AT PARA 6 TO 7.3 OF THE ORDER AND JUDICIAL DECISIONS. WE ARE OF THE OPINION THAT, WHEN THE ADDITION IS SUSTAINED ON ESTIMATION/ ADHOC BASIS, N O ITA NO .5400 & 5410 /MUM/2018 PARTH TRADERS, MUMBAI. - 9 - PENALTY U/S 271(1)(C) OF THE ACT CAN BE LEVIED. WE FIND THAT THE LDCIT(A) RELIED ON THE COORDINATE BENCH O F HONBLE TRIBUNAL DECISIONS AND PASSED A REASONED ORDER IN DIRECTING THE ASSESSING OFFICER TO DELETE THE PENALTY. ACCORDINGLY, WE ARE NOT INCLINED TO INTERF ERE WITH THE ORDER OF THE LD CIT(A) AND UPHELD THE SAME AND DISMISS THE GROUNDS OF APPEAL OF THE REVENUE. 9. IN THE RESULT BOTH THE APPEALS FILED BY THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 20/11/2020 SD/- SD/- (PRAMOD KUMAR) (PAVAN KUMAR GADALE ) VICE PRESIDENT JUDICIAL MEMBER MUMBAI, DATED 20/11/2020 KRK, PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. & '( ) / THE CIT(A) 4. ) ( ) / CONCERNED CIT 5. ,-. //'( , '(# , & / DR, ITAT, MUMBAI 6. .34 5 / GUARD FILE. / BY ORDER,