SHIVAJI ANDHALE, MUMBAI V. ITO 28 (3)(2), MUMBAI

ITA 5469/MUM/2018

• Counselvise Citation: [2019] 114 COUNSELVISE.COM (IT) 6138 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-10-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 25-09-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AKHTAR HANSARI
• Keywords: Bogus purchase; Opportunity of being heard; Principle of natural justice; Accommodation entries; Set aside
• Section: 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC, BENC H MUMBAI BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMB ER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBE R ITA NO.5469/MUM/2018 ( ASSESSMENT YEAR :2010-11 ) SHIVAJI ANDHALE 18-B MANGALAM PLOT NO.7, SECTOR-4A, KOPARKHARINE MUMBAI VS. ITO-28(3)(2) MUMBAI PAN/GIR NO. A CVPA4952A APPELLANT ) .. RESPONDENT ) REVENUE BY AKHTAR H. ANSARI ASSESSEE BY ROSHAN OCHANI DATE OF HEARI NG 15/10 /2019 DATE OF PRONOUNCEME NT 15 /10 /201 9 / O R D E R PER BENCH : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST, THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS)26, MUMBAI, DATED 12/06/2018 AND IT PERTAINS TO ASSESSMENT YEAR 2010-11. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- THE APPELLANT COMPANY IS AGGRIEVED BY THE IMPUGNED ORDER PASSED BY LD.CIT(A)-26, MUMBAI CONFIRMING ADDITION IN RETURNE D INCOME BY ESTIMATING 12.5% OF ALLEGED BOGUS PURCHASES AMOUNTI NG TO RS.8,16,935/- MADE VIDE ASSESSMENT ORDER DATED 30/11/2015 PASSED BY ITO 28(3}(2). MUMBAI. 1. BECAUSE, ON THE FACTS AND CIRCUMSTANCES OF CASE , ASSESSMENT ORDER DATED 30/11/2015 BASED ON WHICH IMPUGNED ORDER HAS BEEN PASSED, ITA NO.5469/MUM/2018 SHIVAJI ANDHALE 2 ITSELF HAS NO LEGS TO STAND IN EYES OF LAW, NUGATOR Y AND WITHOUT JURISDICTION. WITHOUT PREJUDICE TO ABOVE GROUND APPELLANT RAISING GROUNDS MENTIONED HEREUNDER:- 2. BECAUSE, ON THE FACTS AND CIRCUMSTANCES OF CASE , IMPUGNED ORDER IS VOID-AB-INITIO SINCE SAME HAS BEEN PASSED WITHOUT P ROVIDING PLAUSIBLE OPPORTUNITY OF BEING HEARD AND THEREBY VIOLATING OF PRINCIPLE OF SUDI ALTERM PARTEM AND NATURAL JUSTICE. 3. BECAUSE, LOWER AUTHORITIES FAILED TO PERCEIVE T HAT APPELLANT HAS DUTIFUL RIGHT TO PRODUCE CONFIRMATION OF PARTIES WH ICH MUST BE RELIED ON BEFORE DRAWING ANY CONCLUSION IN THE INSTANT MATTER . 4 BECAUSE, IT'S A TRITE [AW THAT LOWER AUTHORITIES ARE ESTOPPED FROM TAKING COGNIZANCE OF ALLEGED INFORMATION RECEIVED F ROM SAFES TAX DEPARTMENT, WHEN APPELLANT IS IN APPEAL BEFORE SAID DEPARTMENT, WHICH IS PENDING DISPOSAL. WHEREAS ADDITION AMOUNTING TO RA 8,16.935/- IS MADE SOLELY ON SAID ALLEGED INFORMATION. 5. BECAUSE, ASSESSMENT ORDER AND CONSEQUENT FIRST APPELLATE ORDER PA DISRESPECTING THE VARIOUS JUDGMENTS DELIVERED BY J URISDICTIONAL HONBLE HIGH COURT AND HONBLE MUMBAI ITAT PARTICULARLY IN CASE OF ACIT-25(2), MUMBAI VERSUS SHRL MAHESH K. SHAH 2017 (2) TMJ 108 - I MUMBAI, HENCE THE APPEAL. THE APPELLANT COMPANY CRAVES TO LEAVE, ADD ALTER, M ODIFY OR / AND DELETE ANY OF THE ABOVE GROUND 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS AN INDIVIDUAL ENGAGED IN THE BUSINESS OF TRADING IN BU ILDING MATERIALS, FILED HIS RETURN OF INCOME FOR AY 2010-11, DECLARIN G TOTAL INCOME OF RS. 1198,870/-. THEREAFTER, THE CASE HAS BEEN REO PENED U/S 147, ON THE BASIS OF INFORMATION RECEIVED FROM DGIT, INV ESTIGATION, 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 SUPPRES PROFITS. AS PER LIST OF BENEFICI ARIES, 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. 65,35,482/-. THE CASE WAS SELECTED FOR SCRUTINY AND THE ASSESSMENT HAS BEEN C OMPLETED U/S. ITA NO.5469/MUM/2018 SHIVAJI ANDHALE 3 143(3).R.W.S. 147 OF THE I.T.ACT, 1961 ON 30/11/201 5 AND DETERMINED TOTAL INCOME OF RS. 20,65,810/-, AFTER MAKING ADDIT IONS TOWARDS ALLEGED BOGUS PURCHASE @ 12.50% OF TOTAL PURCHASES FROM THOSE PARTIES AND MADE ADDITIONS OF RS. 8,16,935/-. 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 4 TO 6 OF LD.CIT(A) ORDER. THE SUM AND SUBSTANCE OF THE ARGUMENTS OF THE ASSESSEE BEFO RE 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) CONFIRMED ADDITION MADE BY THE AO TOWARDS 12.50% PR OFIT ON ALLEGED BOGUS PURCHASES. THE RELEVANT FINDINGS OF T HE 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 BY THE SALES TAX AUTHORITIES, INS ABOVE MENTIONED 6 PARTIES WERE 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 APPELLA NT FROM THEM WOULD ALSO BE IN THE NATURE OF ACCOMMODATION ENTRIES ONLY. TO VER IFY THE SAME, THE AO HAD ISSUED NOTICE U/S 133(6) TO THE PARTIES WHICH WAS R ETURNED UN-SERVED BY THE POSTAL AUTHORITIES. THIS FACT WAS COMMUNICATED TO THE APPE LLANT WHO WAS ASKED TO PRODUCE THE PARTIES ALONG WITH EVIDENCES TO VERIFY THE GENUINE NESS OF THE TRANSACTIONS WHICH THE APPELLANT FAILED TO DO. AS FAR AS THE GENUINENESS O F PURCHASES MADE FROM THESE PARTIES IS CONCERNED, IT HAS TO BE KEPT IN MIND THAT THESE PARTIES HAD ADMITTED ON OATH BEFORE THE SALES TAX AUTHORITIES THAT THEY HAD GIVEN ACCOMMODATION ENTRIES ONLY WITHOUT ACTUAL LY SUPPLYING THE GOODS. THE DOCUMENTATION SUBMITTED BY THE APPELLANT IN SUPPORT OF ITS ITA NO.5469/MUM/2018 SHIVAJI ANDHALE 4 CLAIM WOULD , THEREFORE, HAVE BEEN ORCHESTRATED TO PRESENT A FACADE OF GENUINENESS AND DOES NOT NECESSARILY MEAN THAT THE PURCHASES FROM THESE PARTIES ARE GENUINE. THE COURTS HAVE HELD THA T PAYMENT BY CHEQUE BY ITSELF IS NOT SACROSANCT SO AS TO PROVE GENUINEN ESS OF PURCHASES WHEN THE SURROUNDING FEELS ARE SUSPECT HOWEVER, THE AP PELLANT HAS SHOWN ONWARD SALES OF THE GOODS PURCHASED WHICH HAS NOT B EEN DOUBLED 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 AT LOWER RATES AND PURCHASES WERE SHOWN AS BEING MADE FROM T HE IMPUGNED PARTIES TO SUPPRESS ITS PROFITS. IN SUCH & SITUATIO N, THE VARIOUS COURTS INCLUDING THE HONBLE GUJARAT HIGH COURT IN THE CAS E OF CIT VS SIMIT P.SHETH 356 ITR 451 HAVE HELD THAT NOT THE ENTIRE PURCHASES 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 AO HAS ESTIMATED THE PROFIT E LEMENT EMBEDDED IN THE IMPUGNED PURCHASES @ 12 5% WHICH IS REASONABLE AND NOT EXCESSIVE. IN VIEW OF THE DECISION OF THE HON'BLE GUJARAT HIGH CO URT (SUPRA), SINCE THE AO HAS ADDED ONLY THE PROFIT ELEMENT AND NOT THE ENTIR E PURCHASES. I FIND NO REASON TO INTERFERE WITH THE ADDITION MADE BY THE A O AND THE SAME IS SUSTAINED. THE APPELLANT'S ALTERNATE SUBMISSION THA T THIS PROFIT ELEMENT MAY BE ESTIMATED ON PURCHASES OF RS.46,57,425 AS AGAINS T RS.65,35,432/- TAKEN BY THE AO IS NOT TENABLE AS I HAVE DECIDED IN GROUN D NOS, 1 AND 2 THAT TILL SUCH LIME THE QUANTUM OF PURCHASES MADE BY THE APPE LLANT FROM THE 6 PARTIES AS PER HIS REVISED SALES LAX RETURN IS DECI DED BY THE SALES TAX AUTHORITIES, THE EXISTING REPORTED AMOUNT OF RS. 65 ,35,482/- WILL HAVE TO BE TREATED AS THE AMOUNT OF PURCHASES MADE BY THE APPE LLANT FROM THE 6 PARTIES. THE APPELLANT'S GROUNDS OF APPEAL ARE DISM ISSED, 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 @ 12.50% OF SUCH PURCHASES, ON THE GROUN D 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 ACCOMMODATION ENTRIES WITHOUT ACTUAL DELIVERY OF GO ODS. THE LD. AO HAD ALSO TAKEN SUPPORT FROM THE INVESTIGATION CONDU CTED DURING THE ITA NO.5469/MUM/2018 SHIVAJI ANDHALE 5 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 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 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 ITA NO.5469/MUM/2018 SHIVAJI ANDHALE 6 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 12.50% PROFIT AND THE LD. CIT(A) HAS CONFIRMED 12.5 0% PROFIT ON TOTAL ALLEGED BOGUS PURCHASE. ALTHOUGH, BOTH AUTHORITIES HAVE TAKEN 12.50% RATE OF PROFIT FOR ESTIMATION OF INCOME FROM ALLEGED BOGUS PURCHASE, BUT NO ONE COULD SUPPORT SAID RATE OF GRO SS PROFIT WITH NECESSARY EVIDENCES OR ANY COMPARABLE CASES. THEREF ORE, CONSIDERING FACTS AND CIRCUMSTANCES OF THIS CASE AN D CONSISTENT WITH VIEW TAKEN BY THE CO-ORDINATE BENCH IN NUMBER OF CA SES, WE ARE OF THE CONSIDERED OPINION THAT THE LD. CIT(A) HAS TAKE N ONE OF THE POSSIBLE METHOD FOR ESTIMATION OF PROFIT TO SETTLE DISPUTE BETWEEN THE PARTIES. 7. HOWEVER, THE ASSESEE HAS DISPUTED THE AMOUNT OF ALLEGED BOGUS PURCHASES CONSIDERED BY THE LD. AO, ON THE BA SIS OF INFORMATION RECEIVED FROM SALES TAX DEPARTMENT, MAH ARASHTRA, ON THE GROUND THAT ALTHOUGH, INFORMATION STATED THAT T OTAL PURCHASE FROM ALLEGED HAWALA DEALERS IS AT RS. 65,35,482/-, BUT A S PER HIS BOOKS OF ACCOUNT, THE PURCHASE FROM THOSE PARTIES IS ONLY AT RS. 46,57,425/-. THE ASSESSEE, FURTHER CLAIMS THAT IN SPITE OF PRODU CING NECESSARY EVIDENCES, THE LD. AO HAS CONSIDERED PURCHASES AS P ER INFORMATION RECEIVED FROM SALES TAX DEPARTMENT TO MAKE ADDITION S TOWARDS PROFIT ON ALLEGED BOGUS PURCHASES. WE FIND THAT THE RE IS NO CLARITY, IN RESPECT OF PURCHASE CLAIMS TO HAVE MADE FROM ALLEGE D HAWALA DEALERS. THE ASSESEE CLAIMS PURCHASE FROM THOSE PAR TIES IS AT RS. 46,57,425/-, WHEREAS THE INFORMATION RECEIVED FROM AUTHORITIES STATES ITA NO.5469/MUM/2018 SHIVAJI ANDHALE 7 THAT PURCHASE FROM THOSE PARTIES IS AT RS. 65,35,48 2/-. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT THE ISSUE NEEDS TO GO BACK TO THE FILE OF THE AO FOR THE PURPOSE OF VERIFICATION OF FACTS WITH REGARD TO TOTAL PURCHASE FROM ABOVE PARTIES AND HENCE, WE SET ASIDE THE ISSUE TO THE FILE OF THE AO AND DIRECT HIM TO REDO THE ASSE SSMENT, IN LIGHT OF CLAIM OF THE ASSESSEE THAT PURCHASE FROM THOSE PART IES IS ONLY AT RS. 46,57,425/-. 8. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS A LLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 15/10/ 2019 SD/- (MAHAVIR SINGH) SD/- (G. MANJUNATHA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 15/10/2019 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//