M/S.AQUAPURE AGENCIES, MUMBAI V. ITO 28(1)(1), MUMBAI

ITA 5408/MUM/2018

• Counselvise Citation: [2019] 114 COUNSELVISE.COM (IT) 6150 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 25 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: 2009-2010
• Appeal Filed On: 19-09-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AKHTAR HANSARI
• Assessee Lawyers: A N SHAH
• Keywords: Bogus purchase; Accommodation entries
• Section: 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC, BENCH MUMBAI BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ITA NO.5408 & 5409/MUM/2018 ( ASSESSMENT YEARS :2009-10 & 2011-12 ) AQUAPURE AGENCIES A-15, CENTRAL FACILITY BUILDING- 2 APMC MARKET-II, PHASE-II SECTOR 19 VASHI, NAVI MUMBAI-400 703 VS. ITO WARD-28(1)(1) ROOM NO.329, 3 RD FLOOR TOWER NO.6, VASHI STATION COMPLEX VASHI NAVI MUMBAI-400 703 PAN/GIR NO. AA KFA3441R APPELLANT ) .. RESPONDENT ) ASSESSEE BY A.N.SHAH REVENUE BY AKHTAR H.ANSARI DATE OF HEARING 14/10/2019 DATE OF PRONOUNCEME NT 14 /10 /201 9 / O R D E R PER G.MANJUNATHA (A.M) : THESE TWO APPEALS FILED BY THE ASSESSEE ARE DIRECTE D AGAINST SEPARATE, BUT IDENTICAL ORDERS OF THE COMMISSIONER OF INCOME TAX (APPEALS) -26, MUMBAI, BOTH DATED 25/06/2018 FOR TH E ASSESSMENT YEARS (AY) 2009-10 & 2011-12. SINCE, THE FACTS ARE IDENTICAL AND ISSUES ARE COMMON, FOR THE SAKE OF CONVENIENCE, THE SE APPEALS WERE HEARD TOGETHER AND ARE DISPOSED-OFF BY THIS CO NSOLIDATED ORDER. 2. THE ASSESSEE HAS, MORE OR LESS FILED COMMON GROU NDS OF APPEAL FOR BOTH ASSESSMENT YEARS. THEREFORE, FOR T HE SAKE OF BREVITY, GROUNDS OF APPEAL FILED FOR AY 2009-10 ARE REPRODUCED AS UNDER:- ITA NOS.5408 & 5409/MUM/2018 AQUAPURE AGENCIES 2 1.) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED CIT (APPEAL) ERRED IN NOT CONSIDERING THE APPEAL ON MERITS IN RESPECT OF FOLLOWING ISSUES:- A) THE RE-OPENING OF ASSESSMENT WAS BAD IN LAW AND WAS NOT IN ACCORDANCE WITH ANY RIGHT CONFERRED ON THE ASSESSIN G OFFICER TO RE- OPEN THE ASSESSMENT UNDER THE INCOME TAX ACT. 2) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED CIT(A) ERRED IN DIRECTING THAT THE DISALLOW ANCE OF THE PURCHASES BE RETAINED TO THE EXTENT OF 20% OF THE PURCHASES FROM VALIANT STEEL ENGINEERING COMPANY OF RS. 4,74,367/- 3) YOUR APPELLANT CRAVES LEAVE TO ADD TO, AMEND, ALTER OR DELETE ANY OF THE ABOVE GROUNDS MAY BE ADVISED, ITA.NO.5408/MUM/2018:- 3. THE BRIEF FACTS OF THE CASE ARE THAT, THE ASSESS EE IS ENGAGED IN THE BUSINESS OF DEALING IN ERECTION AND INSTALLATIO N SERVICES, FILED ITS RETURN OF INCOME FOR AY 2009-10 ON 30/09/2009, DECL ARING TOTAL INCOME OF RS.29,372/-. THEREAFTER, THE CASE HAS BEE N REOPENED U/S 147, ON THE BASIS OF INFORMATION RECEIVED FROM DGIT , INVESTIGATION, MUMBAI, AS PER WHICH, SALES TAX AUTHORITIES OF GOVE RNMENT OF MAHARASHTRA HAD TAKEN ACTIONS AGAINST NUMBER OF HA WALA DEALERS, WHO HAD ISSUED BOGUS PURCHASE BILLS TO VARIOUS PART IES IN MUMBAI TO REDUCE OR SUPPRESS PROFITS. AS PER LIST OF BENEFIC IARIES, THE ASSESSEE IS ONE OF THE BENEFICIARY, WHO HAD TAKEN ACCOMMODA TION BILLS OF BOGUS PURCHASES FROM VARIOUS PARTIES AS LISTED BY T HE AO IN HIS ASSESSMENT ORDER AMOUNTING TO RS. 4,74,367/-. 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 25/03/201 5 AND DETERMINED TOTAL INCOME OF RS. 1,47,960/-, AFTER MAKING ADDITI ONS TOWARDS ALLEGED BOGUS PURCHASE @ 25% OF TOTAL PURCHASES FRO M THOSE PARTIES AND MADE ADDITIONS OF RS. 1,18,592/-. ITA NOS.5408 & 5409/MUM/2018 AQUAPURE AGENCIES 3 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 REPRODUCED AT PARA 5.2 ON PAGES 6 TO 11 OF LD.CIT(A ) ORDER. THE SUM AND SUBSTANCE OF THE ARGUMENTS OF THE ASSESSEE BEFORE 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 ESTIMATION OF PROFIT FROM 25% TO 20%. THE RELE VANT FINDINGS OF THE LD.CIT(A) ARE AS UNDER:- 5.3 I HAVE CONSIDERED THE FACTS OF THE CASE AND THE APPELLANT'S SUBMISSIONS AS PER THE INVESTIGATIONS CARRIED OUT B Y THE SALES TAX AUTHORITIES, THE ABOVE MENTIONED PARTY WAS FOUND TO BE INVOLVED IN GIVING ACCOMMODATION ENTRIES ONLY WITHOUT ACTUALLY SUPPLYI NG THE GOODS. THE LOGICAL INFERENCE IS THAT THE PURCHASES MADE BY THE APPELLANT WOULD ALSO BE IN THE NATURE OF ACCOMMODATION ENTRIES ONLY. TO VERIFY THE SAME, THE AO HAD ISSUED NOTICE U/S 133(6) TO THE PARTY WHICH WAS RETURNED UN- SERVED BY THE POSTAL AUTHORITIES. THIS WAS COMMUNIC ATED TO THE APPELLANT ARID THE AO HAD REQUIRED THE APPELLANT TO PRODUCE T HE PARTY WHICH THE APPELLANT COULD NOT DO. THE AO WAS OF THE VIEW THAT HELD THAT THE APPELLANT HAD NOT DISCHARGED ITS ONUS OF PROVING TH E GENUINENESS OF FIRE TRANSACTIONS AND ADDED 25% OF THE IMPUGNED PURCHASE S TO THE TOTAL INCOME OF THE APPELLANT. THE APPELLANT, ON THE OTHE R HAND, HAS CONTENDED THAT EXCEPT FOR NON-PRODUCING OF THE PARTY, IT HAD SUBMITTED ALL RELEVANT EVIDENCES IN SUPPORT OF ITS CLAIM OF GENUINENESS OF PURCHASES AS UNDER: 1. COPY OF OUR LEDGER ACCOUNT AS APPEARING IN OUR BOOKS IN RESPECT OF SAID SUPPLIER. 2. COPIES OF INVOICES OF THE SAID SUPPLIER. 3. COPIES OF BANK STATEMENT HIGHLIGHTING THE RELEVA NT PAYMENTS MADE TO THE SUPPLIER. 4. COPIES OF DELIVERY CHALLANS FOR PURCHASES MADE FROM THE SUPPLIER. ITA NOS.5408 & 5409/MUM/2018 AQUAPURE AGENCIES 4 5. COPY OF CONSUMPTION REPORT FOR PURCHASES MADE F ROM THE SUPPLIER. 6. DETAILS OF PROCESSING & MANUFACTURING ACTIVITIE S OF THE FIRM, 7. COPIES OF CORRESPONDING SALES INVOICES, 8. COPY OF CERTIFICATE FROM PUNJAB NATIONAL BANK CE RTIFYING PAYMENTS MADE TO THE SUPPLIER. 5.4 AS FAR AS THE GENUINENESS OF PURCHASES MADE FROM THE PARTY IS CONCERNED, IT HAS TO BE KEPT IN MIND THAT THIS PART Y HAD ADMITTED ON OATH BEFORE THE SALES TAX AUTHORITIES THAT IT HAD GIVEN ACCOMMODATION ENTRIES ONLY WITHOUT ACTUALLY SUPPLYING THE GOODS. THE DOCU MENTATION SUBMITTED BY THE APPELLANT IN SUPPORT OF ITS CLAIM WOULD , TH EREFORE, HAVE BEEN ORCHESTRATED TO PRESENT A FACADE OF GENUINENESS AND DOES NOT NECESSARILY MEAN THAT THE PURCHASES FROM THIS PARTY IS GENUINE. THE COURTS HAVE HELD THAT PAYMENT BY CHEQUE BY ITSELF I S NOT SACROSANCT SO AS TO PROVE GENUINENESS OF PURCHASES WHEN THE SURRO UNDING CIRCUMSTANCES ARE SUSPECT. HOWEVER, THE APPELLANT H AS SHOWN ONWARD SALES OF THE GOODS PURCHASED WHICH HAS NOT BEEN DOU BTED BY THE ASSESSING OFFICER. SINCE THERE CAN BE NO SALES WITH OUT CORRESPONDING PURCHASES, THE ONLY LOGICAL EXPLANATION IS THAT THE APPELLANT WOULD HAVE MADE PURCHASES FROM UNDISCLOSED PARTIES IN THE GREY MARKET AL LOWER RATES AND PURCHASES WERE SHOWN AS BEING MADE FROM T HE IMPUGNED PARTIES TO SUPPRESS ITS PROFITS. IN SUCH A SITUATIO N, THE VARIOUS COURTS INCLUDING THE HON'BLE GUJARAT HIGH COURT IN THE CAS E OF CIT VS SIMIT P. SHETH, 356 ITR 451 HAVE HELD THAT NOT THE ENTIRE PU RCHASES BUT ONLY THE PROFIT ELEMENT EMBEDDED IN THESE PURCHASES WAS TO B E DISALLOWED. THE ESTIMATION WOULD VARY WITH THE NATURE OF BUSINESS A ND NO UNIFORM YARDSTICK COULD BE ADOPTED. THE AQ HAD MADE DISALLO WANCE BY ADOPTING GP RATIO OF 25% . THE APPELLANT HAS MADE A WITHOUT PREJUDICE SUBMISSION THAT 2% TO 3% MAY BE DISALLOWED BY CONSIDERING THE CASE LAW OF ACIT 19(3) VS M/S STEEL LINE (INDIA) ITA NO. 1321/MUM/20 16. THIS CONTENTION IS NOT TENABLE AS IT IS SEEN THAT THE APPELLANT'S G P RATIO DURING THE YEAR UNDER CONSIDERATION WAS 16.39% . HOWEVER, CONSIDERI NG THIS FACT, THE GP RATIO OF 25% ADOPTED BY THE AO APPEARS TO BE ON THE HIGHER SIDE. THE DISALLOWANCE MADE BY THE AO IS , THEREFORE, SCALED DOWN TO 20% WHICH SHOULD SUFFICIENTLY COVER THE PROFIT ELEMENT EMBEDD ED IN THE IMPUGNED PURCHASES. THE APPELLANTS GROUNDS OF APPEAL ARE PA RTLY ALLOWED 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 ADDITIONS TOWARDS ALLEGED BOGUS PURCHASES @ 25% OF SUCH PURCHASES, ON THE GROUND T HAT THE ASSESSEE ONE OF THE BENEFICIARY OF ACCOMMODATION EN TRIES OF BOGUS PURCHASE BILLS ISSUED BY HAWALA DEALERS. ACCORDING TO THE LD. AO, ALTHOUGH ASSESEE HAS FILED CERTAIN BASIC EVIDENCES, BUT FAILED TO FILE ITA NOS.5408 & 5409/MUM/2018 AQUAPURE AGENCIES 5 FURTHER EVIDENCE IN THE BACKDROP OF CLEAR FINDING B Y THE SALES TAX DEPARTMENT, MAHARASHTRA THAT THOSE PARTIES ARE INVO LVED IN PROVIDING ACCOMMODATION ENTRIES WITHOUT ACTUAL DELIVERY OF GO ODS. THE LD. AO HAD ALSO TAKEN SUPPORT FROM THE INVESTIGATION CONDU CTED DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AS PER WHICH NOTI CE ISSUED U/S 133(6) TO THE PARTY WERE RETURNED UN-SERVED BY THE POSTAL AUTHORITIES. THEREFORE, HE CAME TO THE CONCLUSION THAT PURCHASE FROM THE SAID PARTY IS BOGUS IN NATURE. IT IS THE CONTENTIONS OF THE ASSESSEE BEFORE THE LOWER AUTHORITIES THAT PURCHASES FROM THE ABOVE PARTY ARE SUPPORTED BY NECESSARY EVIDENCES. IT HAS FURNISHED ALL POSSIBLE EVIDENCES, INCLUDING BOOKS OF ACCOUNTS, STOCK DETAI LS AND BANK STATEMENT TO PROVE THAT PAYMENT AGAINST SAID PURCHA SES HAVE BEEN MADE THROUGH PROPER 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 HAD FILED CERTAIN BASIC EVIDENCES, BUT FAILED TO FI LE FURTHER EVIDENCES TO CONCLUSIVELY PROVE PURCHASES TO THE SATISFACTION S OF THE LD.AO. AT THE SAME TIME, THE LD. AO HAD ALSO FAILED TO TAKE T HE INVESTIGATION TO A LOGICAL CONCLUSION BY CARRYING OUT NECESSARY ENQU IRES, BUT HE SOLELY RELIED UPON INFORMATION RECEIVED FROM INVES TIGATION WING, WHICH WAS FURTHER SUPPORTED BY INFORMATION RECEIVED FROM MAHARASHTRA SALES TAX DEPARTMENT. UNDER THESE CIRC UMSTANCES, IT IS DIFFICULT TO ACCEPT THE ARGUMENTS OF BOTH THE SI DES. FURTHER, VARIOUS HIGH COURTS AND TRIBUNALS HAD CONSIDERED AN IDENTIC AL ISSUE IN LIGHT OF INVESTIGATION CARRIED OUT BY THE SALES TAX DEPA RTMENT AND HELD THAT IN CASE PURCHASES CLAIMS TO HAVE MADE FROM ALL EGED HAWALA DEALERS , ONLY PROFIT ELEMENT EMBEDDED IN THOSE PUR CHASES NEEDS TO ITA NOS.5408 & 5409/MUM/2018 AQUAPURE AGENCIES 6 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 TIME OF ESTIMATION OF PROFIT FROM ALLEGED BOGUS PURCHASES N O UNIFORM YARDSTICKS COULD BE ADOPTED, BUT IT DEPENDS UPON FA CTS OF EACH CASE. THE ITAT, MUMBAI, IN NUMBER OF CASES HAD CONSIDERED AN IDENTICAL ISSUE AND DEPENDING UPON FACTS OF EACH CASE, DIRECT ED THE LD.AO TO ESTIMATE PROFIT OF 10 TO 15% ON TOTAL ALLEGED BOGUS PURCHASES. IN THIS CASE, CONSIDERING THE NATURE OF BUSINESS OF THE ASS ESSEE THE LD. AO HAS ESTIMATED 25% PROFIT, WHEREAS THE LD.CIT(A) HAS SCALED DOWN ESTIMATION OF PROFIT TO 20% ON TOTAL ALLEGED BOGUS PURCHASE. ALTHOUGH, BOTH AUTHORITIES HAVE TAKEN DIFFERENT RAT E OF PROFIT FOR ESTIMATION OF INCOME FOR ALLEGED BOGUS PURCHASE, BU T NO ONE COULD SUPPORT SAID RATE OF GROSS PROFIT WITH NECESSARY EV IDENCES OR ANY COMPARABLE CASES. THEREFORE, CONSIDERING FACTS AND CIRCUMSTANCES OF THIS CASE AND CONSISTENT WITH VIEW TAKEN BY THE CO-ORDINATE BENCH IN NUMBER OF CASES, WE DEEM IT APPROPRIATE TO DIREC T THE LD.AO TO ESTIMATE PROFIT OF 12.5% ON ALLEGED BOGUS PURCHASES . ACCORDINGLY, WE DIRECT THE AO TO REDUCE ADDITIONS MADE TOWARDS A LLEGED BOGUS PURCHASES TO 12.5% OF SUCH PURCHASES. 7. IN THE RESULT, APPEAL FILED BY THE ASSESEE IS PA RTLY ALLOWED. ITA.NO.5409/MUM/2018:- 8. THE FACTS AND ISSUES ARE INVOLVED IN THIS APPEAL ARE IDENTICAL TO FACTS AND ISSUES, WHICH WE HAD ALREADY CONSIDERED I N ITA.NO.5408/MUM/2018. THE REASONS GIVEN BY US IN PR ECEDING PARAGRAPH IN ITA NO. 5408/MUM/2018 SHALL MUTATIS MU TANDIS APPLY TO THIS APPEAL ALSO, THEREFORE FOR SIMILAR REASONS, WE DIRECT THE AO TO ESTIMATE 12.5% PROFIT ON ALLEGED BOGUS PURCHASES. ITA NOS.5408 & 5409/MUM/2018 AQUAPURE AGENCIES 7 9. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS P ARTLY ALLOWED. 10. AS A RESULT, BOTH APPEALS FILED BY THE ASSESSEE FOR AYS 2009- 10 & 2011-12 ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 14 /1 0/2019 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//