ITO - 25(3)(4), MUMBAI V. SONIKA P. SHETTY, MUMBAI

ITA 5508/MUM/2018

• Counselvise Citation: [2019] 114 COUNSELVISE.COM (IT) 6130 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 18 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: 28-09-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AKHTAR HANSARI
• Assessee Lawyers: KESHAV B BHUJLE
• Keywords: Bogus purchase; Accommodation entries; Set aside
• Section: 40A(3); 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.5508 & 5509/MUM/2018 ( ASSESSMENT YEARS :2010-11 & 2011-12 ) ITO-25(3)(4) ROOM NO.605, C-10, 6 TH FLOOR PRATYAKSH KAR BHAWAN, BANDRA KURLA COMPLEX BANDRA(EAST), MUMBAI-400 051 VS. SMT. SONIKA P.SHETTY 29, GOLDEN BEACH LTD. RUIA PARK, JUHU VILE PARLE(W) MUMBAI-400 049 PAN/GIR NO. BIMPS6313P APPELLANT ) .. RESPONDENT ) ASSESSEE BY KESHAV B. BHUJLE REVENUE BY AKHTAR H.ANSARI DATE OF HEARING 16/10/2019 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 SEPARATE, BUT IDENTICAL ORDERS OF THE LD. COMMISSIO NER OF INCOME TAX (APPEALS) -37, MUMBAI, BOTH DATED 02/07/2018 FO R THE ASSESSMENT YEARS (AY) 2010-11& 2011-12. SINCE, THE FACTS ARE IDENTICAL AND ISSUES ARE COMMON, FOR THE SAKE OF CO NVENIENCE, THESE APPEALS WERE HEARD TOGETHER AND ARE DISPOSED-OFF BY THIS CONSOLIDATED ORDER. ITA.NO.5509/MUM/2018:- 2. THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPE AL:- ITA NOS.5508 & 5509/MUM/2018 SONIKA P.SHETTY 2 1. 'ON THE FACTS AND 111 THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE ID. CIT(A) ERRED IN RESTRICTING THE DISALLOWANCE @12,5% OF THE TOTAL AMOUNT OF BOGUS PURCHASE TRANSACTION @ 100% ADDED BY THE A O IN THE ASSESSMENT ORDER. ' 2. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE ID. CIT(A) FAILED TO CONSIDER THE FACT THAT THE HAWALA DEALERS HAD CONFIRMED ON OATH BEFORE THE SALES TAX DEPARTMENT THAT PURCHA SES MADE BY THE ASSESSE WERE WITHOUT SUPPLYING THE GOODS.' - 3. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE ID. CIT(A) FAILED TO CONSIDER THAT THE ASSESSEE HAS NOT DISCHARGED THE ONUS UPON HIM TO PROVE (HE GENUINENESS OF THE PURCHASE T RANSACTION CLAIMED BY IT. 4. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE ID. CIT(A) FAILED TO APPRECIATE THE FACT THAT PROVISION S OF SECTION 40A(3) ARE ATTRACTED IN THE CASE OF ASSESSEE AND 100% BOGUS PU RCHASE AMOUNT IS TO BE DISALLOWED.' 5. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE ID. CIT(A) FAILED TO APPRECIATE THE FACT THAT THE DECIS ION OF HONBLE APEX COURT IN THE CASE OF N K PROTEINS LTD., VS DCIT IN SLP (CIVIL) NO.769/2017 DATED 16-01-2017 HAS CONFIRMED THE 100% ADDITION ON THIS ISSUE.' 6. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE R ESTORED.' 7. 'THE APPELLANT CRAVES LEAVE TO AMEND OR TO ALTER ANY GROUND OR ADD A NEW GROUNDS, WHICH MAY BE NECESSARY,' 3. THE BRIEF FACTS OF THE CASE ARE THAT, THE ASSESS EE IS AN INDIVIDUAL DERIVES INCOME FROM BUSINESS AND PROFESS ION, FILED HER RETURN OF INCOME ON FOR AY 2011-12 ON 15/09/2011, D ECLARING TOTAL INCOME OF RS.5,92,600/-. THEREAFTER, THE CASE HAS B EEN REOPENED U/S 147, ON THE BASIS OF INFORMATION RECEIVED FROM DGIT, INVESTIGATION, MUMBAI, AS PER WHICH, SALES TAX AUTH ORITIES OF GOVERNMENT OF MAHARASHTRA HAD TAKEN ACTIONS AGAINST NUMBER OF HAWALA DEALERS, WHO HAD ISSUED BOGUS PURCHASE BILLS TO VARIOUS PARTIES IN MUMBAI TO REDUCE OR SUPPRESS PROFITS. A S 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. 3,54,016/-. THE CASE WAS SELECTED FOR SCRUTINY AND THE ASSESSMENT HAS BEEN COMPLETED U/S. 143(3).R.W.S. 147 OF THE I. T.ACT, 1961 ON ITA NOS.5508 & 5509/MUM/2018 SONIKA P.SHETTY 3 16/10/2017 AND DETERMINED TOTAL INCOME OF RS. 9,46, 620/-, AFTER MAKING 100% ADDITIONS TOWARDS ALLEGED BOGUS PURCHAS E AND MADE ADDITIONS OF RS. 3,54,016/-. 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 4 ON PAGES 2 TO 5 OF LD.CIT(A) O RDER. THE SUM AND SUBSTANCE OF 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) HAS SCALED DOWN ADDITION TO 12.50% PROFIT ON ALLEGED BO GUS PURCHASES. THE RELEVANT FINDINGS OF THE LD.CIT(A) ARE AS UNDER :- 5.8 THE A.O. HAD MADE THE ADDITION AS SOME OF THE S UPPLIERS WERE DECLARED HAWALA DEALERS BY THE VAT DEPARTMENT. THIS MAY BE A GOOD REASON FOR MAKING FURTHER INVESTIGATION BUT THE AO DID NOT MAKE ANY FURTHER INVESTIGATION AND MERELY COMPLETED THE ASSE SSMENT ON SUSPICION. ONCE THE ASSESSEE HAS BROUGHT ON RECORD THE DETAILS OF PAYMENTS BY ACCOUNT PAYEE CHEQUE, IT WAS INCUMBENT ON THE AO TO HAVE VERIFIED THE PAYMENT DETAILS FROM THE BANK OF THE ASSESSEE AND A LSO FROM THE BANK OF THE SUPPLIERS TO VERIFY WHETHER THERE WAS ANY IMMED IATE CASH WITHDRAWAL FROM THEIR ACCOUNT. NO SUCH EXERCISE HAS BEEN DONE OR FINDINGS RECORDED. THERE WAS NO DETAILED INVESTIGATION MADE BY THE AO HIMSELF. IT IS ALSO FOUND THAT THE PAYMENTS HAVE BEEN MADE BY ACCOUNT P AYEE CHEQUE WHICH ARE DULY REFLECTED IN THE BANK STATEMENT OF T HE ASSESSEE. THERE IS NO EVIDENCE TO SHOW THAT THE ASSESSEE HAS RECEIVED CASH BACK FROM THE SUPPLIERS. MERELY BECAUSE THE SUPPLIERS DID NOT FIL ED SOME CONFIRMATION AND DOCUMENTS, ONE CANNOT CONCLUDE THAT THE PURCHAS ES WERE NOT MADE ASSESSEE* THIS VIEW IS SUPPORTED BY THE DECISION OF NIKUNJ EXIMP ENTERPRISES VS 216 TAXMAN 171 (BOM). TO THIS EXTENT I AM IN VIEW WITH THE APPELLANT, IF APPELLANT HAS FULFILLED ITS ONUS MAKING THE PAYMENT BY CHEQUE AND HAS SUPPLIED THE ADDRESSES OF THE SELLER S THEN IT CANNOT BE ITA NOS.5508 & 5509/MUM/2018 SONIKA P.SHETTY 4 PRESUMED THAT SUPPLIER WERE BOGUS SIMPLY BECAUSE TH E SELLERS WERE NOT FOUND AT THE GIVEN ADDRESS. THERE IS A CONSIDERABLE TIME GAP BETWEEN THE PERIOD OF PURCHASE TRANSACTION AND PERIOD OF SCRUTI NY PROCEEDINGS. THE AO HAS NOT BROUGHT ANY MATERIAL ON RECORD TO SHOW T HAT THERE IS SUPPRESSION OF SALES. IT IS BASIC RULE OF ACCOUNTAN CY AS WELL AS OF TAXATION LAWS THAT PROFIT FROM BUSINESS CANNOT BE ASCERTAINE D WITHOUT DEDUCTING COST OF PURCHASE FROM SALES. ESTIMATION OF PROFIT R ANGING FROM 12.5% TO 15% HAS BEEN UPHELD BY THE HON'BLE GUJARAT HIGH COU RT IN THE CASE OF CIT VS. SIMT P. SHETH 356 TTR 451 (GUJ,) DEPENDING UPON THE NATURE OF BUSINESS. 5.9 CONSIDERING THE TOTALITY OF THE FACTS BEFORE ME , AS WELL AS THE JUDICIAL OPINION AVAILABLE, I AM INCLINED TO AGREE WITH THE APPELLANT'S STAND THAT THE ADDITION IS EXCESSIVE. THE A.O. HAS DISALLOWED THE AMOUNT OF RS.3,54,016/- ON ACCOUNT OF BOGUS PURCHASES. THE TO TAL PURCHASE DEBITED TO THE TRADING ACCOUNT FROM THESE PARTIES ARE RS.3, 54,016/-. I AM OF THE VIEW THAT ESTIMATION OF PROFIT AT 12.5% WOULD MEET THE ENDS OF JUSTICE. THEREFORE, I DIRECT THE AO TO ESTIMATE PROFIT OF 12 .5% ON THE TOTAL PURCHASES IN QUESTION WHICH WORKS OUT TO RS. 44,252 /- (12.5% OF RS.3,54,016/-). THE APPELLANT THEREFORE GETS RELIEF OF RS. 3,09,764/- OF RS.3,54,016 MINUS RS.44,252/-) , THE GROUNDS RAISED ARE PARTLY 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 100% ADDITIONS TOWARDS ALL EGED BOGUS PURCHASES, ON THE GROUND THAT THE ASSESSEE ONE OF T HE BENEFICIARY OF ACCOMMODATION ENTRIES OF BOGUS PURCHASE BILLS ISSUE D BY HAWALA DEALERS. ACCORDING TO THE LD. AO, ALTHOUGH ASSESEE HAS FILED CERTAIN BASIC EVIDENCES, BUT FAILED TO FILE FURTHER EVIDENC E IN THE BACKDROP OF CLEAR FINDING BY THE SALES TAX DEPARTMENT, MAHARASH TRA THAT THOSE PARTIES ARE INVOLVED IN PROVIDING ACCOMMODATION ENT RIES WITHOUT ACTUAL DELIVERY OF GOODS. THE LD. AO HAD ALSO TAKEN SUPPORT FROM THE INVESTIGATION CONDUCTED DURING THE COURSE OF AS SESSMENT PROCEEDINGS, AS PER WHICH NOTICE ISSUED U/S 133(6) TO THE PARTY WERE RETURNED UN-SERVED BY THE POSTAL AUTHORITIES. THERE FORE, HE CAME TO THE CONCLUSION THAT PURCHASE FROM THE SAID PARTY IS BOGUS IN NATURE. IT IS THE CONTENTIONS OF THE ASSESSEE BEFORE THE LO WER AUTHORITIES THAT A PURCHASE FROM THE ABOVE PARTY IS SUPPORTED BY NEC ESSARY ITA NOS.5508 & 5509/MUM/2018 SONIKA P.SHETTY 5 EVIDENCES. IT HAS FURNISHED ALL POSSIBLE EVIDENCES, INCLUDING BOOKS OF ACCOUNTS, STOCK DETAILS AND BANK STATEMENT TO PROVE THAT PAYMENT AGAINST SAID PURCHASES HAVE BEEN MADE THROUGH PROPE R 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 100% PROFIT, WHEREAS THE LD.CIT(A) HAS SCALED DOWN ESTIMATION OF ITA NOS.5508 & 5509/MUM/2018 SONIKA P.SHETTY 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.5508/MUM/2018:- 8. THE FACTS AND ISSUES INVOLVED IN THIS APPEAL ARE IDENTICAL TO FACTS AND ISSUES, WHICH WE HAD ALREADY CONSIDERED I N ITA.NO.5509/MUM/2018. THE REASONS GIVEN BY US IN PR ECEDING PARAGRAPH IN ITA NO. 5509/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. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 16 /1 0/2019 SD/- (MAHAVIR SINGH) SD/- (G. MANJUNATHA) JUDICIAL MEMBER ACCOUNTANT MEMBER ITA NOS.5508 & 5509/MUM/2018 SONIKA P.SHETTY 7 MUMBAI ; DATED 16/10/2019 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//