ITO , WARD- 3 (5), KALYAN V. LABCO FINE CHEMICALS, MUMBAI

ITA 5423/MUM/2018

• Counselvise Citation: [2019] 114 COUNSELVISE.COM (IT) 6148 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-10-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 21-09-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AKHTAR HANSARI
• Keywords: Bogus purchase; Wrong claim; Accommodation entries
• Section: 69C; 133(6); 274

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC, BENC H MUMBAI BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBE R & SHRI G. MANJUNATHA, ACCOUNTANT MEMBE R ITA NO.5423/MUM/2018 ( ASSESSMENT YEAR :2009-10 ) ITO, WARD-3(5) 2 ND FLOOR, RANI MANSION MURBAD ROAD KALYAN(W)-421 301 VS. LABCO FINE CHEMICALS MAHVIR PRABHU CHOWK BAZAR PETH, KALYAN THANE PAN/GIR NO. AAAFL5677Q APPELLANT ) .. RESPONDENT ) REVENUE BY AKHTAR H. ANSARI ASSESSEE BY NONE 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)3 NASIK , DATED 05/07/2018 AND IT PERTAINS TO ASSESSMENT YEAR 2009- 10. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. 'WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD, CIT (A) WAS JUSTIFIED HI NOT APPRECIATING T HE LAW CORRECTLY THAT ONCE THE PURCHASES ARE UNVERIFIABLE/NOT GENUINE/BOG US, THE SAME SHOULD HAVE BEEN DISALLOWED IN ENTIRETY?'. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) HAS ERRED IN LAW BY NOT APPREC IATING THE FACT THAT THE ASSESSEE COULD NOT ESTABLISH THE GENUINENESS OF THE PURCHASES FROM THE NON-EXISTENT VENDORS? ITA NO.5423/MUM/2018 LABCO FINE CHEMICALS 2 3. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) HAS ERRED, IN LAW BY NOT APPRECIATI NG 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 OF THE CASE AND IN LAW, THE LD. CIT (A) HAS ERRED IN LAW BY IGNORING, THE F ACT THAT THE ASSESSEE COULD NOT SUBSTANTIATE ITS CLAIM OF PURCHASES FROM NON-EXISTENT VENDORS BY MEANS OF RELEVANT SUPPORTING DOCUMENTS RELATED T O MOVEMENT AND DELIVERY OF GOODS, TO ARRIVE AT DISALLOWANCE AT 25% OF THE PURCHASES FROM 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 NOT APPRECIATING T HE LAW CORRECTLY THAT ONCE THE PURCHASES ARE UNVERIFIABLE / NOT GENUINE / BOGUS, THE SAME SHOULD HAVE DISALLOWED IN. ENTIRETY, PARTICULARLY I N VIEW OF THE RATIO OF THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN TAX A PPEAL NO. 242 OF 2003 DATED 20/06/2016 IN THE CASE OF N,K, PROTEINS LTD. AGAINST WHICH THE SLP WAS DISMISSED 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 THA T OF THE ASSESSING OFFICER MAY BE RESTORED. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS ENGAGED IN THE BUSINESS OF TRADING IN CHEMICALS, FILED ITS RET URN OF INCOME FOR AY 2009-10 ON 29/09/2009, DECLARING TOTAL INCOME AT N IL. THEREAFTER, THE CASE HAS BEEN REOPENED U/S 147, ON THE BASIS OF INFORMATION RECEIVED FROM DGIT, INVESTIGATION, MUMBAI, AS PER W HICH, SALES TAX AUTHORITIES OF GOVERNMENT OF MAHARASHTRA HAD TAKEN ACTIONS AGAINST NUMBER OF HAWALA DEALERS, WHO HAD ISSUED BOGUS PURC HASE BILLS TO VARIOUS PARTIES IN MUMBAI TO REDUCE OR SUPPRES PROF ITS. AS PER LIST OF BENEFICIARIES, THE ASSESSEE IS ONE OF THE BENEFICIA RY, WHO HAD TAKEN ACCOMMODATION BILLS OF BOGUS PURCHASES FROM VARIOUS PARTIES AS LISTED BY THE AO IN HIS ASSESSMENT ORDER AMOUNTING TO RS. 3,06,779/-. THE CASE WAS SELECTED FOR SCRUTINY AND THE ASSESSMENT HAS BEEN COMPLETED U/S. 144.R.W.S. 147 OF THE I.T.A CT, 1961 ON ITA NO.5423/MUM/2018 LABCO FINE CHEMICALS 3 10/02/2015 AND DETERMINED TOTAL INCOME OF RS. 3,06, 779/-, AFTER MAKING 100% ADDITIONS TOWARDS ALLEGED BOGUS PURCHAS E FROM THOSE PARTIES AND MADE ADDITIONS OF RS. 3,06,779/-. 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 REITRATED ITS SUBMISSION MADE BEFORE THE AO. THE SU M AND SUBSTANCE OF THE ARGUMENTS OF THE ASSESSEE BEFORE T HE LD.CIT(A) ARE THAT PURCHASE FROM THE ABOVE PARTY IS GENUINE, WHICH IS SUPPORTED BY NECESSARY EVIDENCES. THEREFORE, NO ADD ITIONS COULD BE MADE ON THE BASIS OF INFORMATION RECEIVED FROM THIR D 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 25% PROFIT ON ALLEGED BOGUS PURCHA SES. THE RELEVANT FINDINGS OF THE LD.CIT(A) ARE AS UNDER:- 7. I HAVE CAREFULLY CONSIDERED THE APPELLANT'S SU BMISSIONS, OBSERVATIONS OF THE AO IN THE ASSESSMENT ORDER AND THE FACTS OF THE CASE. THE APPELLANT HAD SHOWN PURCHASES AMOUNTING TO RS 3,06. 779 FROM SANDESH SALES PVT. LTD WHICH APPEARED IN THE LIST OF SALES- TAX DEPARTMENT WHO HAD INDULGED IN HAWALA TRANSACTIONS I.E. PROVIDING ONLY BILLS WITHOUT THERE IS BEING ANY ACTUAL PURCHASE OR SALE TRANSACTION. 7.1 BEFORE THE CASE IS DISCUSSED, IT IS IMPORTANT T O KNOW THE BACKGROUND IN WHICH THE CASE OF THE APPELLANT WAS SELECTED FOR SCRUTINY. AS PER SECTION 3 OF THE MVAT ACT, 2002, EVERY REGISTERED D EALER, IS LIABLE TO PAY TAX ON A SALE TRANSACTION WITH A PURCHASING DEALER WHOSE TURNOVER OF SALES OR PURCHASES HAS EXCEEDED RUPEES FIVE LAKH. T HE SELLING DEALER ISSUES A TAX INVOICE, WHICH SHOWS THE AMOUNT OF TAX RECOVERED FROM THE PURCHASING DEALER THE SALE MADE BY THE SELLING DEAL ER NEEDS TO BE ACCOUNTED IN HIS TURNOVER OF SALES WHILE FILING THE TAX RETURN AND PAY THE DUE TAXES. FURTHER, THE PURCHASING DEALER IS ALSO E NTITLED TO CLAIM BY WAY OF A SET OFF UNDER SECTION 48 THE TAX PAID ON HIS P URCHASES AS ITC (INPUT TAX CREDIT). THE SALE TAX AUTHORITIES FOUND THAT A LARGE NUMBER OF SELLING DEALERS HAD_ NEITHER FILED THEIR RETURNS N OR PAID THE TAXES ITA NO.5423/MUM/2018 LABCO FINE CHEMICALS 4 COLLECTED BY THEM FRONT PURCHASING DEALERS . THE SALES TAX AUTHORITIES DENIED THE BENEFIT OF SET-OFF OF INPUT TAX CREDIT T O PURCHASING DEALERS, WHO WENT INTO APPEAL BEFORE HON'BLE BOMBAY HIGH COU RT AGAINST THE SAID ORDERS. THE SAME WAS REJECTED BY THE BOMBAY HIGH CO URT IN WRIT PETITION 2012 IN CASE OF M/S. MAHALAXMI COTTON GINN ING VS. THE STATE OF MAHARASHTRA & ORS ON 11 MAY, 2012 AND OTHER SIMI LAR CASES IN THE SAID APPEALS, THE PURCHASING DEALERS TOOK A PLEA BE FORE THE HIGH COURT THAT AS HE HAS PAID THE TAX-TO THE SELLING DEALER, HE SHOULD NOT BE DENIED THE BENEFIT OF A SET OFF OF TAXES PAID, WHICH IS AR BITRARY. HOWEVER THE STATE GOVERNMENT IN AN AFFIDAVIT BEFORE THE COURT SUBMITT ED THAT INVESTIGATIONS REVEALED THAT THERE WAS A EXISTENCE OF LARGE-SCALE HAWALA RACKET, WHEREIN THE SELLING DEALERS MERELY ISSUED TAX INVOI CES TO THE PURCHASING DEAFER WITHOUT ANY SALE OF GOODS. THE COURT DID NOT ACCEPT THE PLEA OF THE PURCHASING DEALER AND HELD THAT IF THE SET OFF IS A LLOWED TO THE PURCHASING DEALER THOUGH THE TAX HAS NOT BEEN PAID ACTUALLY, I T WOULD DEFEAT THE LEGITIMATE INTERESTS OF THE REVENUE. THE SALES TAX DEPARTMENT RECOVERED THE TAX FROM SUCH PURCHASING DEALERS THE SALES TAX DEPARTMENT ACCORDINGLY PASSED ON THE INFORMATION OF SUCH PURCHASING DEALERS TO THE INCOME TAX DEPARTMENT TO VERIFY THE PURCHASES MADE BY THEM 7.2. IN THIS BACKGROUND, THE CASE OF THE ASSESSEE NEEDS TO BE EXAMINED. THE AO WAS REQUIRED TO EXAMINE THE VERACI TY OF SUCH PURCHASES AND TO SEE A) WHETHER THE PURCHASES HAVE ACTUALLY BEEN MADE OR NOT, B) THE END USE OF SUCH PURCHASES AND C) THE GENUINENESS OF THE PARTIES FROM WHOM THE PURCHASES ARE MADE. THE ASSES SEE SUBMITTED COPIES OF THE PURCHASE BILLS AND COPY OF THE BANK S TATEMENT SHOWING THAT HE HAD MADE THE PURCHASES AND PAYMENTS ARE MADE BY CHEQUES. THE ASSESSEE HAS ALSO SUBMITTED THAT THE ITEMS WERE CON SUMED IN MANUFACTURING. IT IS SEEN THAT THE ONLY GROUND FOR MAKING THE ADDITION IS THAT THE PARTIES WHO HAVE MADE THE SALES ARE NOT TR ACEABLE AND ASSESSEE COULD NOT PRODUCE THE PARTIES, WHO HAVE ISSUED BILL S. HENCE, THIS IS NOT A CASE OF BOGUS PURCHASES BUT PURCHASES FROM BOGUS PA RTIES, WHEREIN THE BILLS ARE TAKEN FROM HAWALA DEALERS AND PURCHASES F ROM OTHER PARTIES. THE FACTS OF THE CASE ARE ALSO DIFFERENTIABLE FROM NK PROTEINS AS STATED BY THE ASSESSEE. IN N K PROTEINS, IT WAS ESTABLISHE D THAT THE ASSESSEE HAD INFLATED THE PURCHASES AS DURING SEARCH AT THE OFFICE PREMISES, BLANK SIGNED CHEQUE BOOKS, VOUCHERS, BLANK BILL BOOKS, LE TTER HEADS OF VARIOUS CONCERNS WERE FOUND AND IT WAS ESTABLISHED THAT THE SE CONCERNS WERE FLOATED BY THE ASSESSEE. RELYING UPON THE JUDGMENT OF VIJAY PROTEINS 53 ITD 428 AHMADABAD, THE ITAT RESTRICTED THE ADDITION TO 25%, WHEREAS HON'BLE GUJARAT HIGH COURT HELD THAT ONCE THE PURCH ASES ARE BOGUS AND SUPPLIERS ARE FICTITIOUS HAVING GIVEN ONLY BILL ENT RIES, THE ENTIRE PURCHASES SHOULD BE ADDED, WHICH BY CONFIRMED BY THE HON'BLE SUPREME COURT BY DISMISSING THE SLP OF NKPL ON 16 01.2017. ON GOING THROUGH THE REMAND REPORT, IT IS SEEN THAT THE AO HAS NOT EXAMI NED VARIOUS ASPECTS PERTAINING TO SUCH PURCHASES WHEN THE AO HAS ACCEPT ED THE SALES, HE HAS NOT GIVEN ANY COMMENT OF HOW THE MATERIAL WHICH WAS USED IN SUCH SALES CAME FROM THESE ISSUES NEED TO BE TAKEN INTO ACCOUNT BEFORE DECIDING THE ISSUE IN THE LIGHT OF VARIOUS CASE LAW S. ITA NO.5423/MUM/2018 LABCO FINE CHEMICALS 5 7.3 FROM ABOVE IT IS APPARENT THAT THE RATIO OF DEC ISION OF N.K. PROTEIN CANNOT BE IN APPELLANT'S CASE AS IT IS DISTINGUISHA BLE ON FACTS. IT IS HELD BY HONBLE SUPREME COURT THAT THE APPELLATE AUTHOR ITIES WHILE APPLYING THE DECISION OF THE HIGHER COURT SHOULD EXAMINE TH E FACTS OF EACH CASE. I. THE DECISION OF THE HON'BLE SUPREME COURT IN PADMASUNDARA RAO (DECD.) AND ORS V. STATE OF TAMIL NADU, CIVIL APPEAL NO. 2226 OF 1997 R ORDER DATED 13.03.2002. II. THE HON'BLE SUPREME COURT IN THE CASE OF GIT VS . SUN ENGINEERING WORKS (P) LTD. REPORTED IN 198 ITR 297. III. THE HON'BLE ITAT, MUMBAI BENCH 'G [THIRD MEMBER] IN THE CASE OF M/S. GRINDWELL NORTON LTD. VS. DCIT [2004] 91 ITD 4 12 [MUM] [TM]. IV.. HON'BLE ITAT MUMBAI IN THE CASE OF KANCHAN FERROMET ITA NO. 1552/MUM/2017 ORDER DATED 05.06.2017 HAS DISCUSSED JUDGMENT OF HONBLE SUPREME COURT IN NK PROTEIN S AND HELD AS UNDER 6. THE LEARNED COUNSEL OF THE ASSESSEE PLEADED THAT ADDITION IN THIS CASE BE RESTRICTED TO 12.6% OF THE BOGUS PURC HASES AS HELD BY THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF CI T V SIMIT P SHETH [(2013] 36 TAXMANN 385 (GUJ.)] 7. PER CONTRA, LEARNED DEPARTMENTAL REPRESENTATIVE REFERRED TO THE DECISION OF THE HON'BLE GUJARAT HIGH COURT DECI SION IN THE CASE OF N.K.INDUSTRIES V DCIT VIDE ORDER DATED 26.0 6.2016 WHEREIN ADDITION ON ACCOUNT OF BOGUS PURCHASES WERE RESTRICTED TO 25% BY THE ITAT THE HON'BLE HIGH COURT HAS UPHELD T HE ADDITION OF ENTIRE BOGUS PURCHASES ON THE REASONING THAT SUC H RESTRICTION OF BOGUS CLAIM GOES AGAINST THE PRINCIPLES OF SECTIONS 66 AND 69C OF THE INCOME-TAX ACT, 1961. SLP AGAINST THE DECISION WAS DISMISSED BY HON'BLE APEX COURT VIDE ORDER DATED 16.01.2017. 8. UPON CAREFUL CONSIDERATION, I FIND THAT THE REVE NUE HAS NOT DISPUTED THE SALES. IT IS SETTLED LAW THAT WHEN THE SALES ARE NOT DISPUTED, THE ENTIRE PURCHASES TO MAKE THE SALES CA NNOT BE DISALLOWED IT IS TRUE THAT ASSESSEE HAS NOT AT ALL BEEN ABLE TO PROVE THAT THE PURCHASES FROM THE PARTIES BOOKED ON THE A CCOUNTS ARE GENUINE. NO BOOK AND RECORDS HAVE BEEN SHOWN. HOWEV ER, IN THE ABSENCE OF ANY FINDING THAT SATES ARE ALSO BOGUS, T HE PURCHASES TO MAKE THE CORRESPONDING SALES CANNOT BE HELD TO BE C OMPLETELY BOGUS THIS POINTS OUT TO THE PRACTICE THAT ASSESSEE HAD MADE PURCHASES FROM GREY MARKET. OPERATING IN THE GREY M ARKET LEADS TO VARIOUS SAVINGS ON ACCOUNT OF NON-PAYMENT OF VARIOU S TAXES BY USE OF UNACCOUNTED MONEY TO THE ASSESSEE. ON A SIMI LAR SITUATION, HON'BLE GUJARAT HIGH COURT IN THE CASE OF SIMIT P.S HETH (SUPRA) HAS UPHELD THE DISALLOWANCE OF 12.5% OF THE BOGUS P URCHASES SINCE THE PROPOSITION THAT WHEN SALES ARE NOT DISPU TED, ENTIRE PURCHASES CANNOT BE HELD TO BE BOGUS IS SUPPORTED B Y HONBLE JURISDICTIONS! HIGH COURT DECISION IN NIKUNJ EXIM E NTERPRISES, IN MY CONSIDERED OPINION, THE INTEREST OF JUSTICE WILL BE SERVED I! THE ADDITION IN THIS CASE IS RESTRICTED TO 12.5% OF THE BOGUS PURCHASES 9. IT IS TO BORNE IN MIND THAT THE DECISION OF HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF NIKUNJ EXIM ENTERPRISES,W HERE NO ADDITION OUT OF THE BOGUS PURCHASES WAS CONFIRMED, IS NOT FULLY ITA NO.5423/MUM/2018 LABCO FINE CHEMICALS 6 APPLICABLE ON THE FACTS OF THE PRESENT CASE. IN TH E FACTS OF NIKUNJ EXIM ENTERPRISES, THE SUBSTANTIAL SALES WERE MADE T O GOVERNMENT AGENCIES, BOOKS WERE NOT REJECTED AND STOCK RECONCI LIATION WAS GIVEN. IN THE PRESENT CASE TEAMED COUNSEL OF THE AS SESSEE HAS HIMSELF AGREED FOR 12 5% DISALLOWANCE OUT OF THE B OGUS PURCHASES. IT IS FURTHER NOTED THAT DISMISSAL OF SL P BY A NON- SPEAKING ORDER DOES NOT MERGE THE DECISION OF HON'B LE GUJARAT HIGH COURT IN THE CASE OF N.K. INDUSTRIES WITH THA T OF HON'BLE APEX COURT. 7.4. WITH REGARD TO THE APPELLANT'S RELIANCE ON VAR IOUS DECISIONS, THERE ARE LARGE NUMBERS OF CASES, WHEREIN THE APPELLATE A UTHORITIES HAVE HELD THAT IT WOULD NOT BE APPROPRIATE TO CONSIDER THAT PURCHASES WERE GENUINE ONLY BECAUSE THE ASSESSES MADE THE PAYMENT BY CHEQU E AND THE ASSESSEE RECEIVED BILLS. IT IS HELD BY VARIOUS COUR TS THAT WHERE THE ASSESSEE COULD SHOW THAT HE HAS MADE THE PURCHASES AND THERE ARE CORRESPONDING SAFES AGAINST THESE PURCHASES, IT WOU LD BE APPROPRIATE TO TAX THE POSSIBLE PROFIT OUT OF PURCHASES MADE THROU GH NON-GENUINE PARTIES. IN VIEW OF FACTS SLATED ABOVE, I AM OF THE CONSIDERED OPINION THAT THE APPELLANT HAS MADE PURCHASES OF RS. 3,06.779/- IN THE OPEN MARKET WHICH WERE USED IN MANUFACTURING AND THE BILL WAS T AKEN FROM THE HAWALA OPERATORS. FURTHER THE VERIFICATION IN RESPE CT OF THESE PARTIES COULD NOT BE MADE AND ASSESSEE HAS ALSO PAID SALES TAX IN RESPECT OF THESE TAINTED PURCHASES. IT IS NOT KNOWN AT WHAT PR ICE THE APPELLANT ACTUALLY MADE THE PURCHASES FROM THIRD PARTIES UNDE R SUCH CIRCUMSTANCES THE LIKELIHOOD OF THE PURCHASES BEING INFLATED CANN OT BE RULED OUT AND THERE IS NO MATERIAL TO DISLODGE SUCH FINDINGS. IN THIS PROCESS THE APPELLANT SAVED ON THE SAFES-TAX / VAT AND ENHANCED HIS PROFIT BY MANIPULATING THE PURCHASES. ON SIMILAR FACTS HON'BL E GUJARAT HIGH COURT IN THE CASE OF CIT VS. SANJAY OIL CAKE (2009) 316 I TR 274 AND BHOLE NATH 355 ITR 290 (GUJ) WHO WERE MANUFACTURER UPHELD DISALLOWANCE OF 25%. AS THE FACTS OF THE ASSESSEES CASE ARE SIMILA R THEREFORE IT WOULD BE APPROPRIATE IF 25% OF THE AMOUNT OF UNPROVED PURCHA SES OF RS 306779/-. AMOUNTING TO RS. 76,695/- IS DISALLOWED. THIS ADDIT ION WILL BE OVER AND ABOVE THE PROFITS SHOWN BY THE APPELLANT IN HIS RET URN OF INCOME. 5. NONE APPEARED FOR THE ASSESSEE. WE HAVE HEARD TH E LD. DR, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE T HROUGH ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT THE LD. AO HAS MADE 100% ADDITIONS TOWARDS ALLEGED BOGUS PURCHASES, ON THE G ROUND THAT 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 FURTHER EVIDENCE IN THE BACKDROP OF CLEAR FINDING B Y THE SALES TAX DEPARTMENT, MAHARASHTRA THAT THOSE PARTIES ARE INVO LVED IN PROVIDING ITA NO.5423/MUM/2018 LABCO FINE CHEMICALS 7 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 A PURCHASE FROM THE ABOV E PARTY IS 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 HAS FILED CERTAIN BASIC EVIDENCES, BUT FAILED TO FI LE FURTHER EVIDENCES TO CONCLUSIVELY PROVE PURCHASES TO SATISFACTIONS OF THE LD.AO. AT THE 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 ITA NO.5423/MUM/2018 LABCO FINE CHEMICALS 8 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 25% ON TOTAL ALLEGED BOGUS PURCHASE. ALTH OUGH, 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 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 /2019 SD/- (MAHAVIR SINGH) SD/- (G. MANJUNATHA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 14/10/2019 THIRUMALESH SR.PS ITA NO.5423/MUM/2018 LABCO FINE CHEMICALS 9 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//