DCIT 2(3), MUMBAI V. TATA CHEMICALS LTD, MUMBAI

ITA 5446/MUM/2014

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 9586 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-09-2017
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: G
• Next Hearing Date: 05-06-2017
• Assessment Year: 2000-2001
• Appeal Filed On: 28-08-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DR M C OMI NINGSHEN
• Keywords: Bogus purchase; Accommodation entries; Revised return
• Section: 142(1); 133(6); 147; 148

Judgement Text

1 ITA NO.5446/MUM/2016 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH H, MUMBAI BEFORE SHRI C.N. PRASAD (JUDICIAL MEMBER) AND SHRI G MANJUNATHA (ACCOUNTANT MEMBER) I.T.A NO.5446/MUM/2014 (ASSESSMENT YEAR 2010-11) DY.CIT, CIR.2, KALYAN VS SHRI SHYAM K GYANCHANDANI F-212, UDYOG VIHAR, NEAR VITHALWADI, ULHASNAGAR 421 003 PAN : AAZPG6971H APPELLANT RESPONDENT ASSESSEE BY NONE REVENUE BY DR. M.C. OMI NINGSHEN DATE OF HEARING 09-08-2017 DATE OF PRONOUNCEMENT 13-09-2017 O R D E R PER G MANJUNATHA, AM : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAI NST THE ORDER OF CIT(A)-3, THANE DATED 23-06-2016 AND PERTAINS TO AY 2010-11. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE I S AN INDIVIDUAL ENGAGED IN THE BUSINESS OF TRADING IN CHEMICALS AND FUELS FILE D HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2010-11 DECLARING TOTAL INCOME OF R S.7,34,196. SUBSEQUENTLY, BASED ON THE INFORMATION RECEIVED FROM SALES-TAX DE PARTMENT OF MAHARASHTRA, THE AO OBSERVED THAT THE ASSESSEE IS ONE OF THE BEN EFICIARY OF ACCOMMODATION ENTRIES PROVIDED BY CERTAIN PERSONS, WHO WERE LISTE D AS HAWALA OPERATORS. 2 ITA NO.5446/MUM/2016 THEREFORE, HE OPINED THAT INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT WITHIN THE MEANING OF SECTION 147 OF THE ACT, AND H ENCE ISSUED NOTICE U/S 148 ON 02-05-2013. IN RESPONSE TO THE NOTICE, THE ASSE SSEE FILED A REVISED RETURN DECLARING TOTAL INCOME AS DECLARED IN THE ORIGINAL RETURN OF INCOME FILED U/S 139(1). SUBSEQUENTLY, THE CASE HAS BEEN SELECTED F OR SCRUTINY AND NOTICES U/S 143(2) AND 142(1) OF THE ACT WERE ISSUED. IN RESPO NSE TO NOTICES, THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE APPEARED AND FURNISHED THE INFORMATION, AS CALLED FOR. DURING THE COURSE OF A SSESSMENT PROCEEDINGS, THE AO NOTICED THAT THE ASSESSEE IS ONE OF THE BENEFICI ARIES OF ACCOMMODATION ENTRIES PROVIDED BY M/S RUMIT ENTERPRISES. THEREFO RE, ASKED THE ASSESSEE TO FILE NECESSARY EVIDENCES TO PROVE THE PURCHASES MAD E FROM THE SAID PARTY. TO VERIFY THE GENUINENESS OF PURCHASE, NOTICES U/S 133 (6) WAS ISSUED TO M/S RUMIT ENTERPRISES AND THE INSPECTOR OF THE WARD WAS ALSO DEPUTED FOR GATHERING INFORMATION. HOWEVER, THE INSPECTOR HAS REPORTED T HAT NEITHER SUCH PARTIES / SUPPLIERS WERE PRESENT AT THE GIVEN ADDRESS NOR THE Y WERE EVER PRESENT IN THE VICINITY. BASED ON THE INFORMATION RECEIVED FROM M AHARASHTRA SALES-TAX DEPARTMENT COUPLED WITH FURTHER ENQUIRIES CONDUCTED DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO CAME TO THE CONCLUSI ON THAT PURCHASES MADE FROM M/S RUMIT ENTERPRISES IS BOGUS IN NATURE AND A CCORDINGLY MADE ADDITIONS TOWARDS PURCHASES TO THE RETURNED INCOME. 3 ITA NO.5446/MUM/2016 3. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE PRE FERRED APPEAL BEFORE CIT(A) AND REITERATED ITS SUBMISSIONS MADE BEFORE A O. THE CIT(A), AFTER CONSIDERING THE RELEVANT SUBMISSIONS OF THE ASSESSE E OBSERVED THAT THE ASSESSEE FAILED TO PRODUCE NECESSARY EVIDENCES TO J USTIFY THE PURCHASES MADE FROM M/S RUMIT ENTERPRISES AND ALSO FAILED TO PRODU CE THE PARTY IN PERSON. THE CIT(A) FURTHER OBSERVED THAT THOUGH THE ASSESSE E HAS PRODUCED CERTAIN DETAILS TO PROVE PURCHASES, FAILED TO SUBSTANTIATE THE PURCHASES WITH FURTHER EVIDENCES IN THE BACKDROP OF CLEAR FINDINGS OF THE INSPECTOR OF THE WARD THAT THE SAID PARTIES WERE NOT AVAILABLE AT THE GIVEN AD DRESSES. HOWEVER, THE ASSESSEE HAS PRODUCED PURCHASE BILLS AND ALSO PROOF OF PAYMENT AGAINST SUCH PURCHASES BY ACCOUNT PAYEE CHEQUES, WHICH FACT WAS NOT DISPUTED BY AO. THEREFORE, CONSIDERING THE OVERALL FACTS AND CIRCUM STANCES OF THE CASE DIRECTED THE AO TO ESTIMATE NET PROFIT AT 25% ON TOTAL ALLEG ED BOGUS PURCHASES. AGGRIEVED BY THE CIT(A)S ORDER, THE REVENUE IS IN APPEAL BEFORE US. 4. NONE APPEARED FOR THE ASSESSEE. WE HAVE HEARD THE LD.DR AND PERUSED THE MATERIALS AVAILABLE ON RECORD. DURING THE COUR SE OF HEARING, WE FIND THAT THE ASSESSEES APPEAL FOR THE AY 2011-12 HAS COME U P FOR HEARING BEFORE THE TRIBUNAL, A-BENCH IN ITA NO.4130/MUM/2016, WHEREIN THE CO-ORDINATE BENCH HAS TAKEN A DECISION THAT THE ASSESSEE HAS FAILED T O PROVE PURCHASES WITH NECESSARY EVIDENCES IN THE BACKDROP OF CLEAR FINDIN GS RECORDED BY THE AO THAT 4 ITA NO.5446/MUM/2016 THE MAHARASHTRA SALES-TAX DEPARTMENT HAS LISTED THE SAID PARTIES AS HAWALA OPERATORS AND ALSO FURTHER ENQUIRIES CONDUCTED DURI NG THE COURSE OF ASSESSMENT PROVED THAT THEY WERE NOT AVAILABLE AT T HE GIVEN ADDRESS. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE , THE CO-ORDINATE BENCH, BY RELYING UPON CERTAIN JUDICIAL PRECEDENTS INCLUDING THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF VIJAY PROTEINS LT D VS CIT 58 TAXMAN.COM 414 (GUJ) AND ALSO IN THE CASE OF SMITH P SHETH VS CIT 351 ITR 451 (GUJ) HAS DIRECTED THE AO TO ESTIMATE NET PROFIT OF 12.5% ON ALLEGED B OGUS PURCHASES. THE RELEVANT PORTION OF THE ORDER IS EXTRACTED BELOW:- 4. NONE APPEARED FOR THE ASSESSEE. WE HAVE HEARD THE LD.DR AND PERUSED MATERIALS AVAILABLE ON RECORD. THE AO MADE ADDITION TOWARDS PURCHASES FROM M/S RUMIT ENTERPRISES FOR RS . 173,26,679 AND M/S MUMBAI TRADING CO FOR RS.26,60,625 ON THE G ROUND THAT THE ABOVE TWO PARTIES ARE INVOLVED IN PROVIDING ACCOMMO DATION ENTRIES WITHOUT ACTUAL DELIVERY OF GOODS. ACCORDING TO THE AO, THE INFORMATION RECEIVED FROM MAHARASHTRA SALES-TAX DEP ARTMENT AND FURTHER ENQUIRIES CONDUCTED DURING THE COURSE OF AS SESSMENT PROCEEDINGS CLEARLY PROVES THAT THE SAID PARTIES AR E HAWALA OPERATORS NOT CARRYING ON ANY BUSINESS. THE AO FURTHER OBSER VED THAT NOTICES ISSUED U/S 133(6) ARE RETURNED UNANSWERED BY THE PO STAL AUTHORITIES WITH REMARK NO SUCH PERSONS EXISTED IN THE GIVEN AD DRESS. IT IS THE CLAIM OF THE ASSESSEE THAT PURCHASES ARE SUPPORTED BY PROPER BILLS AND VOUCHERS AND THE PAYMENT HAS BEEN MADE THROUGH PROP ER BANKING CHANNEL. THE ASSESSEE FURTHER CONTENDED THAT THE A O HAS NOT DISPUTED SALES DECLARED FOR THE RELEVANT FINANCIAL YEAR AND NO ADVERSE COMMENTS HAS BEEN MADE ON THE BOOKS OF ACCOUNT OR S TOCK REGISTERS. IN THE ABSENCE OF ANY ADVERSE COMMENTS ON BOOKS OF ACCOUNT OR STOCK REGISTERS, PURCHASES CANNOT BE DISPUTED MERELY ON T HE GROUND THAT THE NOTICES ISSUED TO THE PARTIES ARE RETURNED UNSE RVED. 5. IT IS AN ADMITTED FACT THAT THE ABOVE TWO PARTIES A RE LISTED HAWALA 5 ITA NO.5446/MUM/2016 OPERATORS IN THE LIST PREPARED BY MAHARASHTRA SALES -TAX DEPARTMENT. THE PARTIES HAVE FILED AFFIDAVIT BEFORE MAHARASHTRA SAL ES-TAX AUTHORITIES WHEREIN THEY HAVE ADMITTED THAT THEY HAVE NOT DONE ANY BUSINESS, BUT ONLY ISSUED BOGUS PURCHASE BILLS. ALL THESE FACTS CLEARLY PROVE THE FACT THAT THE ABOVE TWO PARTIES ARE INVOLVED IN PROVIDING ACC OMMODATION ENTRIES WITHOUT ACTUAL DELIVERY OF GOODS. UNDER THESE CIRC UMSTANCES, PURCHASES FROM THESE PARTIES CANNOT BE CONSIDERED AS GENUINE. AT THE SAME TIME, THE ASSESSEE HAS FILED NECESSARY EVIDENCES IN THE FORM OF PURCHASE BILLS AND PAYMENT PROOF TO JUSTIFY THAT THE PURCHASES FROM AB OVE PARTIES ARE GENUINE. THE AO HAS NOT DISPUTED SALES DECLARED BY THE ASSESSEE. THE AO, NEITHER MADE ANY ADVERSE COMMENTS ON BOOKS OF ACCOU NT NOR FOUND ANY INCONSISTENCY IN STOCK REGISTER. IN THE ABSENCE OF ANY FINDING AS TO INCORRECTNESS OF BOOKS OF ACCOUNT AND STOCK REGISTE RS, PURCHASES FROM THE ABOVE PARTIES CANNOT BE DISALLOWED IN TOTO. THEREF ORE, CONSIDERING THE OVERALL FACTS AND CIRCUMSTANCES OF THE CASE AND ALS O RELYING UPON THE DECISIONS OF HONBLE GUJARAT HIGH COURT IN THE CASE OF VIJAY PROTEINS LTD VS CIT (2015) 58 TAXMAN.COM 414 (GUJ) AND ALSO IN THE CASE OF SMIT P SHETH VS CIT 351 ITE 451 (GUJ), WE ARE OF THE CONSIDERED VIE W THAT UNDER THESE FACTUAL CIRCUMSTANCES WHAT NEEDS TO BE TAXED IS ONL Y THE PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES AND NOT THE TOTAL PURCHA SES FROM THE ABOVE PARTIES. THE MUMBAI BENCH OF THE TRIBUNAL IN SEVER AL CASES HAS TAKEN A CONSIDERED VIEW THAT ESTIMATION OF PROFIT AT 12.5% ON BOGUS PURCHASES WOULD MEET ENDS OF JUSTICE. THEREFORE, WE DIRECT T HE AO TO ESTIMATE NET PROFIT AT 12.5% ON TOTAL BOGUS PURCHASES FROM THOSE TWO PARTIES. 5. IN THIS VIEW OF THE MATTER AND CONSISTENT WITH OUR ORDER OF EVEN DATED, WE DIRECT THE AO TO ESTIMATE PROFIT AT 12.5% ON TOTAL ALLEGED BOGUS PURCHASES. 6. IN THE RESULT, APPEAL FILED BY THE REVENUE IS PARTL Y ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 13 TH SEPTEMBER, 2017. SD/- SD/- (C.N. PRASAD) (G MANJUNATHA) JUDICIAL MEMBER ACCOUNTANT MEMBER 6 ITA NO.5446/MUM/2016 MUMBAI, DT : 13 TH SEPTEMBER, 2017 PK/- COPY TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR /TRUE COPY/ BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI