ITO - 24 (3)(5), MUMBAI V. RAJNISH MADAN MEHRA, MUMBAI

ITA 5488/MUM/2018

• Counselvise Citation: [2019] 114 COUNSELVISE.COM (IT) 6132 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-10-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 27-09-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AKHTAR HANSARI
• Assessee Lawyers: KETKI RAJESHIRKE
• Keywords: Bogus purchase; Question of law; 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.5488 & 5489/MUM/2018 ( ASSESSMENT YEARS :2010-11 & 2011-12 ) ITO-24(3)(5) 5 TH FLOOR, PIRAMAL CHAMBERS LALBAUG, MUMBAI-400 012 VS. RAJNISH MADAN MEHRA PROP. CAPRICOM SECURITIES SOLUTIONS, C-312, 3 RD FLOOR TWIN ARCADE, MILITARY ROAD MAROL ANDHERI(E) MUMBAI-400 059 PAN/GIR NO. AFRPM7812G APPELLANT ) .. RESPONDENT ) ASSESSEE BY KETKI RAJESH IRKE REVENUE BY AKHTAR H.ANSARI DATE OF HEARING 1 6 /10 /201 9 DATE OF PRONOUNCEME NT 16 /10 /201 9 / O R D E R PER G.MANJUNATHA (A.M) : THESE TWO APPEALS FILED BY THE REVENUE ARE DIRECTED AGAINST COMMON ORDER PASSED BY THE LD. COMMISSIONER OF INCO ME TAX (APPEALS) -36, MUMBAI, DATED 23/05/2018 FOR THE ASS ESSMENT YEARS (AY) 2010-11 & 2011-12. SINCE, THE FACTS ARE IDENTI CAL AND ISSUES ARE COMMON, FOR THE SAKE OF CONVENIENCE, THESE APPE ALS WERE HEARD TOGETHER AND ARE DISPOSED-OFF BY THIS CONSOLIDATED ORDER. 2. THE REVENUE HAS, MORE OR LESS FILED COMMON GROUN DS OF APPEAL FOR BOTH ASSESSMENT YEARS. THEREFORE, FOR T HE SAKE OF ITA NOS.5488 & 5489/MUM/2018 RAJNISH MADAN MEHRA 2 BREVITY, GROUNDS OF APPEAL FILED FOR AY 2010-11 ARE REPRODUCED AS UNDER:- 1.) WHETHER ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) WAS JUSTIFIED IN RESTRICTING THE DISALLOW ANCE MADE BY THE AO TO ONLY 12.5% OF THE TOTAL BOGUS PURCHASES OF RS . 472304 NOTWITHSTANDING THAT THE ASSESSEE FAILED TO ESTABLI SH THE GENUINENESS OF THE PURCHASES, AND COULD NOT PRODUCE/FURNISH THE SUPPLIER PARTIES/QUANTITY WISE DESCRIPTION OF GOODS PURCHASE D AND ALSO THE EVIDENCE OF TRANSPORTATION OF GOODS TO ITS PREMISES . 2.) THE APPELLANT PRAYS THAT THE ORDER OF THE CIT( APPEALS) ON THE ABOVE GROUND BE SET-ASIDE AND THAT OF THE AO BE RESTORED. 3.) THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER AN Y GROUND OR TO SUBMIT ADDITIONAL NEW GROUND WHICH MAY BE NECESSARY. ITA.NO.5488/MUM/2018:- 3. THE BRIEF FACTS OF THE CASE ARE THAT, THE ASSESS EE IS ENGAGED IN THE BUSINESS OF DEALER IN CCTV AND SURVEILLANCE SYS TEMS, FILED ITS RETURN OF INCOME ON 28/09/2010 FOR AY 2010-11, DECL ARING TOTAL INCOME OF RS.825420/-. 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. 4,72,304/-. 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 12/02/201 6 AND DETERMINED TOTAL INCOME OF RS. 9,83,360/-, AFTER MAKING ADDITI ONS TOWARDS ALLEGED BOGUS PURCHASE @ 33.34% OF TOTAL PURCHASES FROM THOSE PARTIES AND MADE ADDITIONS OF RS. 1,57,938/-. ITA NOS.5488 & 5489/MUM/2018 RAJNISH MADAN MEHRA 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 3 ON PAGES 3 TO 5 OF LD.CIT(A) O RDER. 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) SCALED DOWN ADDITION TO 12.50% PROFIT ON ALLEGED BOGUS PUR CHASES. THE RELEVANT FINDINGS OF THE LD.CIT(A) ARE AS UNDER:- 4.2.6 THUS, A STUDY OF DIFFERENT CASES, WHEREIN A DDITION ON ACCOUNT OF BOGUS PURCHASES HAS BEEN DEALT WITH BY VARIOUS COUR TS AND TRIBUNALS SHOWS THAT SUCH ADDITIONS HAVE BEEN UPHELD IN THEIR ENTIRETY ONLY IN A FEW CASES INCLUDING DECISIONS RENDERED IN THE CASES OF LA MEDICA, SRI GANESH RICE MILLS, VICKY FOODS (P.) LTD. ETC. WHERE APART FROM VARIOUS OTHER FACTORS THERE WAS LACK OF RELIABLE RECORD WIT H REFERENCE TO QUANTITATIVE DETAILS ETC, AND WHERE EVIDENCE PRODUC ED FOR PAYMENT WAS FOUND LACKING. IN OTHER CASES, WHERE THE FULL QUANT ITATIVE DETAILS ARE NOT AVAILABLE OR DETAILS PRODUCED WERE NOT FULLY RELIAB LE INASMUCH AS CONSUMPTION OF MATERIAL WAS SHOWN BUT YIELD WAS TOO LOW AND PAYMENTS WERE ALSO DOUBTFUL (INCLUDING THE CASES OF VIJAY P ROTEINS LTD., BHOLNATH POLY FAB PVT. LTD., SIMIT P. SHETH, SANKET STEEL TR ADERS, SATHYANARAYANA P. RATHITEC.) ADDITION WAS UPHELD IN THE RANGE OF 25% (AS IN VIJAY PROTEINS DEPENDING ON THE FACTS OF THE CASE. HOWEV ER, PERUSAL OF DECISIONS OF TRIBUNALS AND HIGH COURTS ON THIS ISSU E SHOWS THAT ALL SUCH CASES ARE DECIDED ON THE BASIS OF FACTS AND INVOLVE NO UNIFORM QUESTION OF LAW. FROM THE ABOVE DECISIONS, THE GROUND-RULE T HAT EMERGES IS THAT WHERE SUPPLIERS ARE NOT AVAILABLE, THE PRESENCE OF REASONABLE QUANTITATIVE DETAILS AND PAYMENTS BY ACCOUNT PAYEE CHEQUES ARE PRIMARY TESTS ON WHEN THE GENUINENESS OF PURCHASES IS REQUI RED TO BE TESTED. IN ADDITION, FROM CASES LIKE NIKUNJEXIMP ENTERPRISES ( P.) LTD (HIGH COURT AS WELL AS ITAT), M. K, BROTHERS, NANGALIA FABRICS PVT .. LTD, RAJIV G. KALATHIL, PERMANAND, SAGAR BOSS, DIAGNOSTICS ETC., IT EMERGES THAT OTHER ITA NOS.5488 & 5489/MUM/2018 RAJNISH MADAN MEHRA 4 ASPECTS SUCH AS STATEMENTS OF HAWALA PROVIDERS RECO RDED BY SALES TAX AUTHORITIES; AFFIDAVITS FILED BY SUCH SUPPLIERS BEF ORE SALES TAX AUTHORITIES; ABSENCE OF EVIDENCE IN SUPPORT OF TRANSPORTATION/DE LIVERY OF MATERIAL ETC., HAVE BEEN HELD LESS RELEVANT AS MERE INDICATORS AND NOT DECISIVE FACTORS, TO DRAW A CONCLUSION REGARDING GENUINENESS OF PURCH ASES. THUS, IN ESSENCE, THE BENEFIT DERIVED BY THE ASSESSES BY SHO WING PURCHASES: FROM SUCH BOGUS PARTIES IS THE LOWERING OF GP THAT WOULD HAVE BEEN EARNED BY THE ASSESSEE HAD SUCH PURCHASES AND CORRE SPONDING SATES BEEN REMOVED FROM THE ACCOUNTS. IN OTHER WORDS, THE EFFECTIVE LOWERING OF THE GP IS THE REAL ADDITIONAL INCOME OF THE ASSESSE E BY SHOWING SUCH PURCHASES AND ONLY SUCH COMPONENT WOULD THEREFORE B E TAXABLE. 4.2.7. KEEPING IN MIND THE TOTALITY OF THE FACTS AN D CIRCUMSTANCES AND THE GUIDELINES LAID DOWN IN JUDICIAL DECISIONS DISCUSSE D ABOVE, IT WOULD BE ADEQUATE TO MEET THE ENDS OF JUSTICE, IF THE DISALL OWANCE IS TO BE RESTRICTED TO 12.5 PERCENT OF THE BOGUS PURCHASES O F RS. 4,72,304/- WHICH AMOUNTS TO RS. 59,038/-. THE AO IS, THEREFORE, DIRE CTED TO RESTRICT THE DISALLOWANCE AS ABOVE. AO IS DIRECTED TO GIVE APPEA L EFFECT KEEPING IN MIND APPELLANT'S OBJECTION-AFTER EXAMINATION OF REC ORD END LAW. THE GROUNDS OF APPEAL ARE TREATED AS DISPOSED. 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 @ 33.34% 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 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 ITA NOS.5488 & 5489/MUM/2018 RAJNISH MADAN MEHRA 5 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 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 33.34% PROFIT, WHEREAS THE LD.CIT(A) HAS SCALED DOW N ESTIMATION OF ITA NOS.5488 & 5489/MUM/2018 RAJNISH MADAN MEHRA 6 PROFIT TO 12.50% ON TOTAL ALLEGED BOGUS PURCHASE. A LTHOUGH, 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 NUE 7. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DI SMISSED. ITA.NO.5489/MUM/2018:- 8. THE FACTS AND ISSUES INVOLVED IN THIS APPEAL ARE IDENTICAL TO FACTS AND ISSUES, WHICH WE HAVE ALREADY CONSIDERED IN ITA.NO.5488/MUM/2018. THE REASONS GIVEN BY US IN PR ECEDING PARAGRAPH IN ITA NO. 5488/MUM/2018 SHALL MUTATIS MU TANDIS APPLY TO THIS APPEAL ALSO. THEREFORE, FOR SIMILAR REASONS , WE DISMISS APPEAL FILED BY THE REVENUE. 9. AS A RESULT, BOTH APPEALS FILED BY THE REVENUE F OR AYS 2010-11 & 2011-12 ARE DISMISSED. ITA NOS.5488 & 5489/MUM/2018 RAJNISH MADAN MEHRA 7 ORDER PRONOUNCED IN THE OPEN COURT ON THIS 16 /10 /2019 SD/- (MAHAVIR SINGH) SD/- (G. MANJUNATHA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 16/10/2019 THIRUMALESH SR.PS COPY OF THE ORDER FORWARDED TO : BY ORDER, (ASSTT. REGISTRAR) ITAT, MUMBAI DATE INITIAL 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//