HARISH RADESHYAM KHANDELWAL, MUMBAI V. ITO 30(1)(4), MUMBAI

ITA 5515/MUM/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 7784 (ITAT-MUMBAI)
• Duration Of Justice: 6 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-03-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 09-09-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: POOJA SWAROOP
• Assessee Lawyers: D C JAIN
• Keywords: Bogus purchase; Business income; Corroborative evidences; Accommodation entries; Reassessment proceedings
• Section: 143(3); 133(6); 131; 145; 148

Judgement Text

H IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI BEFORE SHRI C.N. PRASAD, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER ./ I.T.A. NO.5515/ MUM/2016 ( / ASSESSMENT YEAR : 2009-10) SHRI HARISH RADESHYAM KHANDELWAL, C/O D.C. JAIN & CO., 75, BOMBAY MUTUAL BLDG. 293, DR. D.N. ROAD, FORT, MUMBAI 400 001. / V. THE INCOME TAX OFFICER 30(1)(4), C-13, 6 TH FLOOR, PRATYAKSHAKAR BHAVAN, ROOM NO. 604, BANDRA KURLA COMPLEX, BANDRA (E), MUMBAI 400 051. ./ PAN : AABPK6531H ( / APPELLANT ) .. ( / RESPONDENT ) ASSESSEE BY : SHRI D.C. JAIN REVENUE BY : MS. POOJA SWAROOP , DR / DATE OF HEARING : 28-02-2017 / DATE OF PRONOUNCEMENT : 17-03-2017 / O R D E R PER RAMIT KOCHAR, ACCOUNTANT MEMBER THIS APPEAL, FILED BY THE ASSESSEE, BEING ITA NO. 5515/MUM/2016, IS DIRECTED AGAINST THE APPELLATE ORDER DATED 12 TH JULY, 2016 PASSED BY LEARNED COMMISSIONER OF INCOME TAX (APPEALS)- 41, MUMBAI (H EREINAFTER CALLED THE CIT(A)), FOR ASSESSMENT YEAR 2009-10, THE APPELLAT E PROCEEDINGS BEFORE LEARNED CIT(A) ARISING FROM THE ASSESSMENT ORDER DA TED 30 TH JANUARY, 2015 PASSED BY LEARNED ASSESSING OFFICER (HEREINAFTER CA LLED THE AO ) U/S 143(3) R.W.S. 147 OF THE INCOME-TAX ACT,1961 (HEREINAFTER CALLED THE ACT). ITA 5515/MUM/2016 2 2. THE GROUNDS OF APPEAL RAISED BY ASSESSEE IN MEM O OF APPEAL FILED WITH THE INCOME-TAX APPELLATE TRIBUNAL, MUMBAI (HEREINAF TER CALLED THE TRIBUNAL) READ AS UNDER:- 1. UNDER THE FACTS AND CIRCUMSTANCES THE LEARNED CIT ( APPEALS) ERRED IN CONFIRMING THE REOPENING OF THE ASSESSMENT BY ISSUE OF NOTICE U/S 148 BY THE ASSESSING OFFICER BASED ON THE INFOR MATION FROM DIRECTOR GENERAL OF INCOME TAX (INV.) MUMBAI AND SALES TAX DEP ARTMENT. 2. UNDER THE FACTS AND CIRCUMSTANCES THE LEARNED CIT (A PPEALS) ERRED IN ACCEPTING THE ADDITION OF RS. 1700096/- MADE BY THE ASSESSING OFFICER TO THE RETURNED INCOME ESTIMATING THE G.P. AT TH E RATE OF 20.17% AGAINST THE DECLARED G.P. OF 10.56%. 3. UNDER THE FACTS AND CIRCUMSTANCES THE LEARNED CIT (A PPEALS) ERRED IN CONFIRMING THE APPLICATION OF PROVISIONS OF SECTION 145 (3) FOR REJECTION OF BOOKS. 4. UNDER THE FACTS AND CIRCUMSTANCES THE LEARNED CIT (APPEALS) AS WELL AS THE LEARNED ASSESSING OFFICER FAILED TO APPRE CIATE THAT :- A/ THE SALES DECLARED HAVE BEEN ACCEPTED AND THE PUR CHASE ARE DULY SUPPORTED WITH PURCHASE BILLS AND PAYMENTS ARE MADE BY ACCOUNT PAYEE CHEQUE ETC. ETC. B/ THE PURCHASE MADE FROM M/S. CHEMI AGE ENTERPRISES SUPPORTED WITH DULY SWORN AFFIDAVIT. C/ THERE WAS NO EVIDENCE TO PROVE THAT CASH HAS BEEN RE CEIVED BACK FROM THE ASSESSEE. D/ NO OPPORTUNITY FOR CROSS EXAMINATION PROVIDED BY ISSUE OF SUMMONS U/S 131 OF I.T. ACT. 3. THE LD. COUNSEL FOR ASSESSEE, AT THE OUTSET, SUB MITTED THAT ASSESSEE DOES NOT WANT TO PRESS GROUND NO. 1 RELATING TO CHA LLENGE TO THE LEGALITY AND VALIDITY OF RE-OPENING OF THE ASSESSMENT U/S 147/14 8 OF 1961 ACT. THE LD. D.R. DID NOT RAISED ANY OBJECTION TO THE SUBMISSION OF THE LD. COUNSEL WITHDRAWING GROUND NO 1. THUS, GROUND NO. 1 FILED B Y THE ASSESSEE IN MEMO OF APPEAL STANDS DISMISSED AS NOT BEING PRESSED. WE ORDER ACCORDINGLY. ITA 5515/MUM/2016 3 4. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS PROPRIETOR OF M/S KHANDELWAL MARKETING COMPANY WHICH IS ENGAGED IN BU SINESS OF TRADING OF CHEMICALS. THE RETURN OF INCOME WAS FILED BY ASSESSEE WITH REV ENUE FOR THE IMPUGNED ASSESSMENT YEAR ON 04-09-2009 WHICH WAS PROCESSED U /S 143(1) OF 1961 ACT. NO DETAILED SCRUTINY WAS CONDUCTED BY REVENUE IN CA SE OF THE ASSESSEE FOR THE IMPUGNED ASSESSMENT YEAR U/S 143(3) R.W.S. 143(2) O F 1961 ACT. INFORMATION WAS RECEIVED BY AO FROM DIRECTOR GENER AL OF INCOME-TAX (INV.), MUMBAI THAT SOME BUSINESSMEN HAD INDULGED IN THE AC CEPTANCE OF BOGUS PURCHASE BILLS FROM BOGUS HAWALA DEALERS WHO WERE E NGAGED IN PROVIDING ACCOMMODATION ENTRIES. IT WAS INFORMED TO THE A.O. THAT SALES TAX DEPARTMENT, MUMBAI, GOVT. OF MAHARASHTRA CARRIED ON DETAILED ENQUIRES IN RESPECT OF ABOVE PARTIES AND RECORDED STATEMENTS, D EPOSITION, AFFIDAVITS ETC. OF MAIN PERSONS OF ABOVE CONCERNS WHICH ESTABLISHED TH AT THESE CONCERNS ARE ENGAGED IN PROVIDING BOGUS BILLS. IT WAS ALSO INFOR MED TO THE AO THAT THESE PARTIES ADMITTED THAT THEY WERE NOT DOING ANY BUSIN ESS. IT WAS INFORMED TO AO THAT IT IS ALSO ESTABLISHED THAT NO ACTUAL GOODS OR SERVICES ARE DELIVERED BY THESE PARTIES TO THEIR CUSTOMERS AND THEY ISSUED ON LY BOGUS BILLS AFTER CHARGING COMMISSION. IT WAS INFORMED TO A.O. THAT A SSESSEE IS BENEFICIARY OF SUCH BOGUS PURCHASE BILLS AND DURING PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION, THE ASSESSEE H AD ACCEPTED BOGUS BILLS FROM FOLLOWING FOUR PARTIES:- NAME TIN AMOUNT (RS) DHRUV SALES CORPORATION 27760622173V 665,163 ACCURE IMPEX PRIVATE LTD. 27530626228V 599,612 RIDDHI DYECHEM CORPORATION INTERNATIONAL CHEMICALS 27910403695V 2,541,448 ITA 5515/MUM/2016 4 CHEMI-AGE ENTERPRISE 27400387728V 9,794,547 TOTAL 1,36,00,770 THUS, WITH ABOVE BACKGROUND, A.O. OPINED THAT HE HA D REASONS TO BELIEVE THAT INCOME HAD ESCAPED ASSESSMENT WITHIN MEANING OF SEC TION 147 OF 1961 ACT . HENCE, NOTICE DATED 18 TH MARCH, 2014 U/S 148 OF 1961 ACT WAS ISSUED TO ASSESSEE AFTER RECORDING OF REASONS FOR RE-OPENING OF THE ASSESSMENT AND THE SAID NOTICE WAS DULY SERVED UPON THE ASSESSEE. THUS , THE ASSESSMENT WAS REOPENED BY AO WITHIN FOUR YEARS FROM THE END OF RE LEVANT ASSESSMENT YEAR. THE REASONS FOR REOPENING OF THE ASSESSMENT WAS COM MUNICATED TO THE ASSESSEE BY AO VIDE LETTER DATED 9 TH JUNE, 2014 . THE ASSESSEE DID NOT FILE ANY OBJECTION AGAINST THE REOPENING OF THE ASSESSMENT, HENCE, REASSESSMENT PROCEEDINGS WERE COMPLETED BY AO ON MERITS AS DETAI LED HEREUNDER. DURING COURSE OF REASSESSMENT PROCEEDINGS, THE ASSESSEE FU RNISHED COPIES OF PURCHASE INVOICES, LEDGER AND EXPLANATION OF TRANSP ORTS CHARGES ON PURCHASE OF GOODS, BANK STATEMENTS AND CONTENDED THAT THE PU RCHASE TRANSACTIONS ENTERED INTO WITH THESE PARTIES ARE GENUINE. THE A.O. CONSIDERED SUBMISSIONS OF ASSESSEE AND OBS ERVED THAT THE PARTIES WITH WHOM ASSESSEE ENTERED INTO THESE ALLEGED BUSIN ESS TRANSACTIONS OF PURCHASE OF MATERIAL, IN THEIR STATEMENT RECORDED O N OATH BEFORE SALES TAX AUTHORITIES HAVE CATEGORICALLY ACCEPTED THAT THEY H AVE NOT DONE ANY BUSINESS AS WELL AS THERE WAS NO ACTUAL DELIVERY OF GOODS TO THE PURCHASING PARTIES. THE A.O. ISSUED NOTICES U/S. 133(6) OF THE ACT TO THESE AFORE-STATED FOUR PARTIES TO VERIFY GENUINENESS OF PURCHASES BUT THE NOTICES WER E RETURNED UN-SERVED BY POSTAL AUTHORITIES WITH REMARKS 'LEFT'. THE ASSESSE E WAS ASKED BY AO TO PRODUCE THESE PARTIES, BUT THE ASSESSEE FAILED TO PRODUCE SAID PARTIES BEFORE AO NOR SUBMITTED ANY DOCUMENTARY EVIDENCES TO PROVE GENUINENESS OF THESE PURCHASES. THE ASSESSEE , HOWEVER, SUBMITTED CERTAI N DETAILS SUCH AS COPY OF PURCHASE BILLS, PURCHASE REGISTER, LEDGER ACCOUNTS, COPY OF BANK STATEMENT ITA 5515/MUM/2016 5 ONLY IN SUPPORT OF HIS CLAIM, BUT THE ASSESSEE COUL D NOT PRODUCE THE AFORE- STATED PARTIES BEFORE AO NOR IN THE OPINION OF AO , THE ASSESSEE COULD PRODUCE COGENT EVIDENCES WHICH COULD PROVE GENUINENESS OF P URCHASE TRANSACTIONS. THE ASSESSEE WAS SHOW CAUSED BY AO AS TO WHY THIS A MOUNT OF RS. 1,36,00,770/- TOWARDS PURCHASES FROM THESE FOUR CON CERNS SHOULD NOT BE TREATED AS BOGUS PURCHASES AND ADDED BACK TO THE TO TAL INCOME OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION. IN REPLY , THE ASSESSEE SUBMITTED THAT WHEN THEY HAD PURCHASED THE GOODS, THE PARTIES WERE AVAILABLE AT THE ADDRESS GIVEN IN THE INVOICE. THE SAID ADDRESSES WE RE CORRECT AT THE TIME WHEN THE ASSESSEE HAD PURCHASED THE GOODS. IT WAS S UBMITTED THAT THE SALES TAX DEPARTMENT GRANTS REGISTRATION TO A DEALER WHER EIN ALL DETAILS ARE CALLED FOR VERIFICATIONS, INCLUDING BANK ACCOUNT, PAN , ADDRES S ETC. AND BEFORE GRANT OF RC, EVEN VISIT TO THE PREMISES OF THE DEALERS WERE DONE BY SALES TAX AUTHORITIES TO CONFIRM PLACE OF BUSINESS OF THE DEA LERS. THE SIGNATORY TO THE APPLICATION WAS REQUIRED TO ATTEND BEFORE REGISTRAT ION AUTHORITY AND SIGN IN HIS PRESENCE WHICH ESTABLISHES THAT DEALER IS IN EX ISTENCE WHEN RC IS OBTAINED. THE ASSESSEE SUBMITTED THAT HE HAD PURCHA SED MATERIAL FROM THEM AND SOLD MATERIAL TO HIS CUSTOMERS . IT WAS SUBMITT ED BY ASSESSEE THAT DURING ASSESSMENT YEAR 2009-10, THE SALES(NET OF SALES TAX ) WAS OF RS. 1,76,85,320/- AND PURCHASES(NET OF SALES TAX) WAS OF RS. 1,58,17, 462/-. THENCE , IT WAS SUBMITTED BY ASSESSEE BEFORE AO THAT THERE WAS NO Q UESTION OF SELLING THE MATERIAL IF THERE WAS NO PURCHASES AND HENCE THE AS SESSEE SUBMITTED THAT PURCHASES WERE GENUINE AS THE MATERIAL WAS DULY SOL D AND CORRESPONDING PURCHASES AS RECORDED IN BOOKS OF ACCOUNTS SHOULD B E ACCEPTED . THE A.O., HOWEVER, REJECTED SUBMISSIONS OF THE ASSE SSEE WHEREBY HE OBSERVED THAT THE ASSESSEE HAS GIVEN A MERE GENERAL SUBMISSI ON WITHOUT ANY CORROBORATIVE EVIDENCES. IT WAS OBSERVED BY AO THAT NO STATEMENT SHOWING MOVEMENT OF GOODS WAS EVER FURNISHED. THE AO OBSERV ED THAT THESE FOUR PARTIES FROM WHOM PURCHASES WERE ALLEGEDLY MADE BY ASSESSEE THEMSELVES ITA 5515/MUM/2016 6 ADMITTED IN FRONT OF THE SALES TAX DEPARTMENT THAT THEY HAVE NOT MADE ANY SALE OR PURCHASE TRANSACTION AND THEY WERE NOT ENGA GED IN ANY BUSINESS. THUS, AO OBSERVED THAT IT IS PROVED THAT PURCHASES SHOWN TO HAVE BEEN MADE FROM THESE PARTIES ARE BOGUS. THE AO OBSERVED THAT AS PER STATEMENT GIVEN BY THESE HAWALA DEALERS, THE MODUS OPERANDI OF THESE T RANSACTIONS ARE THAT FIRST THEY ISSUED ONLY BOGUS BILLS WITHOUT DELIVERY OF GO ODS, RECEIVED CHEQUE PAYMENTS FROM PURCHASING PARTIES AND SUBSEQUENTLY A FTER DEDUCTING THEIR COMMISSION THEY HAVE REPAID THE BALANCE SUM TO THE PURCHASE PARTIES IN CASH. IT WAS OBSERVED BY AO THAT MERE FILING OF PUR CHASE BILLS AND PAYMENT BY ACCOUNT PAYEE CHEQUES WAS NOT SACROSANCT AND WAS NO T SUFFICIENT TO ESTABLISH GENUINENESS OF THESE PURCHASES. THE A.O. RELIED ON DECISION OF HONBLE SUPREME COURT IN THE CASE OF KACHWAL GEMS V. JT. CI T (2007) 288 ITR 10(SC) AND DECISION OF HONBLE SUPREME COURT IN THE CASE O F MCDOWELL AND CO. LIMITED V. CIT 154 ITR 148(SC). THUS, THE A.O. HEL D THAT ASSESSEE WAS A BENEFICIARY OF ACCOMMODATION ENTRIES THROUGH BOGUS BILLS ISSUED BY THESE FOUR PARTIES WHEREBY THERE WERE NO ACTUAL DELIVERY OF TH E GOODS. THE AO OBSERVED THAT ONUS IS ON THE ASSESSEE TO PROVE GENUINENESS O F TRANSACTIONS AS THESE TRANSACTIONS ARE APPEARING IN ASSESSEES BOOKS OF A CCOUNTS AND IN THE INSTANT CASE , THE ASSESSEE HAD FAILED TO DISCHARGE ONUS CA ST UPON HIM. THE AO HELD THAT ASSESSEE WAS BENEFICIARY OF THE ACCOMMODATION BILLS ISSUED BY THESE FOUR PARTIES WHEREIN THERE WAS NO ACTUAL DELIVERY/SUPPL Y OF MATERIAL/GOODS TO THE ASSESSEE BY THESE PARTIES. THE AO ALSO OBSERVED THA T THERE CANNOT BE SALES WITHOUT PURCHASES AND HENCE IT WAS OBSERVED BY THE AO THAT PURCHASE RATES CANNOT BE ACCEPTED BECAUSE ASSESSEE HAS PURCHASED A CTUAL MATERIAL/GOODS FROM GREY MARKET BY MAKING PAYMENT IN CASH, WHILE F ROM THESE FOUR PARTIES ONLY BOGUS BILLS WERE OBTAINED. HENCE , THE A.O. WA S NOT SATISFIED ABOUT THE CORRECTNESS AND COMPLETENESS OF BOOKS OF ACCOUNTS O F THE ASSESSEE WHICH WAS REJECTED BY THE AO BY INVOKING PROVISIONS OF SECTIO N 145(3) OF 1961 ACT . THE AO OBSERVED THAT ASSESSEE HAD SHOWN GP RATE @ 10.56 % OF THE TURNOVER, HOWEVER, AFTER CONSIDERING THE SUBMISSIONS OF THE A SSESSEE, NATURE AND ITA 5515/MUM/2016 7 VOLUME OF THE BUSINESS ETC. , THE AO ESTIMATED GP R ATIO TO BE 20.17% OF THE TURNOVER , VIDE ASSESSMENT ORDER DATED 30-01-2015 P ASSED BY THE AO U/S 143(3) R.W.S. 147 OF 1961 ACT. 5. AGGRIEVED BY THE ASSESSMENT ORDER DATED 30-01-20 15 PASSED BY A.O. U/S 143(3) R.W.S. 147 OF 1961 ACT, THE ASSESSEE PREFERR ED AN APPEAL BEFORE LD. CIT(A) WHO ALSO REJECTED CONTENTIONS OF THE ASSESSE E , RELYING UPON THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF VIJAY PROTEINS LTD. V. CIT [2015] 58 TAXMANN.COM 44 (GUJ.) AND CIT V. SIMI T P. SHETH [2013] 356 ITR 451 (GUJ.) , WHEREIN ADDITIONS MADE BY A.O. WER E SUSTAINED BY LEARNED CIT(A) , VIDE APPELLATE ORDERS DATED 12-07-2016 PAS SED BY LEARNED CIT(A). 6. AGGRIEVED BY APPELLATE ORDER DATED 12-07-2016 PA SSED BY LD. CIT(A), THE ASSESSEE FILED SECOND APPEAL BEFORE TRIBUNAL. 7. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT ASSESSEE HAS PURCHASED MATERIAL , INTER-ALIA, FROM FOLLOWING FOU R PARTIES, WHICH WERE ALLEGED TO BE HAWALA DEALERS ENGAGED IN PROVIDING A CCOMMODATION ENTRIES: NAME TIN AMOUNT (RS) DHRUV SALES CORPORATION 27760622173V 665,163 ACCURE IMPEX PRIVATE LTD. 27530626228V 599,612 RIDDHI DYECHEM CORPORATION INTERNATIONAL CHEMICALS 27910403695V 2,541,448 CHEMI-AGE ENTERPRISE 27400387728V 9,794,547 TOTAL 1,36,00,770 LD. COUNSEL FOR ASSESSEE SUBMITTED THAT ABOVE PURCH ASES TO THE TUNE OF RS. 1,36,00,770/- WERE TREATED AS BOGUS PURCHASES BY A UTHORITIES BELOW. IT WAS SUBMITTED THAT ORIGINALLY RETURN OF INCOME WAS PROC ESSED U/S 143(1) OF 1961 ACT AND NO SCRUTINY ASSESSMENT WAS FRAMED BY REVENU E U/S 143(3) R.W.S. 143(2) OF 1961 ACT. THE ASSESSMENTS WERE REOPENED W ITHIN FOUR YEARS FROM ITA 5515/MUM/2016 8 THE END OF ASSESSMENT YEAR. HE SUBMITTED THAT A.O. HAD RECEIVED INFORMATION FROM DIRECTOR GENERAL OF INCOME-TAX (INV.), MUMBAI THAT SOME BUSINESSMEN HAD INDULGED IN THE ACCEPTANCE OF BOGUS PURCHASE BI LLS FROM THE BOGUS HAWALA BILLS PROVIDERS WHO WERE MERELY PROVIDING AC COMMODATION ENTRIES WITHOUT SUPPLYING/DELIVERING ACTUAL MATERIAL IN CON SIDERATION OF COMMISSIONS. IT WAS INFORMED TO THE A.O. BY SALES TAX DEPARTMENT , MUMBAI, GOVT. OF MAHARASHTRA THAT THEY CARRIED ON DETAILED ENQUIRES IN RESPECT OF ABOVE HAWALA PARTIES AND RECORDED STATEMENTS, DEPOSITION, AFFIDA VITS ETC. OF CONCERN PERSONS OF THESE ACCOMMODATION ENTRY PROVIDERS WHEREIN THEY ADMITTED THAT THE SAID CONCERNS ARE PROVIDING BOGUS BILLS AND WERE NOT ENG AGED IN ANY BUSINESS. THE ASSESSEES NAME ALSO FIGURED IN THE LIST OF BENEFIC IARIES WHO HAS ALLEGED TO HAVE RECEIVED BOGUS BILLS FROM ABOVE STATED FOUR EN TRY PROVIDERS. IT WAS SUBMITTED THAT BASED UPON THE SAME, A.O. REOPENED THE ASSESSMENT AND TREATED PURCHASES MADE FROM THESE FOUR PARTIES TO T HE TUNE OF RS. 1,36,00,770/- AS BOGUS PURCHASES AND GROSS PROFITS WERE ESTIMATED @20.17% AS AGAINST GROSS PROFITS @10.56% OF TURNOV ER DECLARED BY THE ASSESSEE IN RETURN OF INCOME FILED WITH REVENUE. I T WAS SUBMITTED THAT A.O. WAS NOT SATISFIED ABOUT CORRECTNESS AND COMPLETENES S OF BOOKS OF ACCOUNTS OF THE ASSESSEE WHICH WERE REJECTED BY THE AO BY INVOK ING PROVISIONS OF SECTION 145(3) OF 1961 ACT WHEREIN AO ESTIMATED GROSS PROFI TS ON THE TURNOVER @20.17% INSTEAD OF GP @10.56% ON TURNOVER DECLARED BY ASSESSEE IN RETURN OF INCOME FILED WITH REVENUE. THE LD. COUNSEL FOR A SSESSEE SUBMITTED THAT ASSESSEE IS REGULARLY BUYING MATERIAL FROM ONE OF T HE PARTY LISTED AS ALLEGED BOGUS HAWALA DEALER NAMELY CHEMI-AGE ENTERPRISES AN D DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAD PURCHASED MATE RIAL WORTH RS. 9,794,547/- FROM THE SAID PARTY. IT IS SUBMITTED T HAT DEALINGS FOR PURCHASE OF MATERIAL WITH THIS PARTY NAMELY CHEMI-AGE ENTERPRIS ES WAS ENTERED IN BY ASSESSEE IN EARLIER YEARS AS WELL IN SUBSEQUENT YEA RS ALSO. OUR ATTENTION WAS DRAWN TO PAPER BOOK PAGE NO. 24 TO 28 FILED WITH TH E TRIBUNAL WHEREBY COMPLETE DETAILS OF SALE AND PURCHASE WERE PRODUCED . IT IS SUBMITTED THAT ITA 5515/MUM/2016 9 THESE MATERIALS WERE SOLD TO LUPIN LIMITED AND THE TOTAL SALES OF THE MATERIAL WAS RS. 1,76,85,230.00 AGAINST THE TOTAL PURCHASES OF RS. 1,58,17,461/- AND COMPLETE RECONCILIATION WAS PRODUCED BEFORE THE A.O . ALSO. OUR ATTENTION WAS DRAWN TO PAGES 29-36 OF PAPER BOOK FILED WITH TRIBU NAL WHEREIN COMPLETE RECONCILIATION OF PURCHASE AND SALES ARE PLACED W.R .T. PURCHASES FROM THESE FOUR PARTIES. THE LEDGER ACCOUNTS OF THESE FOUR PA RTIES ALONG WITH INVOICES RAISED BY THESE PARTIES ARE ALSO PLACED AT PAPER BO OK/PAGES 37-83 FILED WITH THE TRIBUNAL. THE ASSSESSEE HAS ALSO PLACED ITS BAN K STATEMENT IN PAPER BOOK / PAGES 84-137 FILED WITH THE TRIBUNAL TO CONTEND T HAT PAYMENTS WERE MADE BY CHEQUES. IT WAS SUBMITTED THAT STOCK RECORDS WER E MAINTAINED AND PRODUCED. THE SALE AND PURCHASES WERE RECONCILED QU ANTITAVILY AND NO DISCREPANCY WAS FOUND. IT WAS SUBMITTED THAT THE A CCOUNTS OF THE ASSESSEE WERE AUDITED BY A QUALIFIED CHARTERED ACCOUNTANT AS PROVIDED U/S 44AB OF 1961 ACT AND TAX-AUDITORS HAVE NOT MADE ANY ADVERSE REMARKS AGAINST ASSESSE. THE LEARNED COUNSEL FOR THE ASSESSEE SUB MITTED THAT GP RATIO FOR THE LAST THREE YEARS WAS AS UNDER:- F.Y. 2006-07 8.69% F.Y. 2007-08 8.79% F.Y. 2008-09 10.56% THUS, IT WAS SUBMITTED THAT THE GP RATIO IN THE PRE VIOUS YEAR RELEVANT TO THE IMPUGNED ASSESSMENT YEAR 2009-10 IS BETTER THAN EAR LIER YEARS AND AUTHORITIES BELOW ERRED IN APPLYING GP RATIO OF 20. 17% ON TOTAL TURNOVER. 8. THE LD. D.R. SUBMITTED THAT IT WAS INFORMED TO T HE A.O. THAT SALES TAX DEPARTMENT, MUMBAI, GOVT. OF MAHARASHTRA CARRIED ON DETAILED ENQUIRES IN RESPECT OF CERTAIN PARTIES AND RECORDED STATEMENTS, DEPOSITION, AFFIDAVITS ETC. OF MAIN PERSONS OF ABOVE CONCERNS WHICH ESTABLISHED THAT THEY WERE INDULGING IN PROVIDING BOGUS ACCOMMODATION BILLS AGAINST COMM ISSION AND THERE WAS ITA 5515/MUM/2016 10 NO ACTUAL DELIVERY OF MATERIAL/GOODS BY THESE PARTI ES AS THEY WERE NOT ENGAGED IN BUSINESS. THE ASSESSEE WAS ONE OF THE BE NEFICIARY OF THE SAID ACCOMMODATION ENTRIES PROVIDED BY THESE PARTIES. N OTICES WERE ISSUED BY AO U/S 133(6) OF 1961 ACT BUT THE SAME RETURNED UN-SER VED. THE ASSESSEE WAS ASKED TO PRODUCE THESE PARTIES WHICH THE ASSESSEE F AILED TO PRODUCE THESE PARTIES BEFORE THE AUTHORITIES BELOW. THE ASSESSEE COULD NOT PROVE THAT THERE WAS MOVEMENT OF GOODS WHEREIN IT COULD NOT BE SHOWN WITH CONCLUSIVE EVIDENCE THAT MATERIAL/ GOODS WERE ACTUALLY DELIVER ED TO THE ASSESSEE. THE AUTHORITIES BELOW HAVE RIGHTLY CONCLUDED THAT THE A SSESSEE PURCHASED MATERIAL FROM SOME OTHER DEALERS FROM GREY MARKET I N CASH. IT WAS SUBMITTED THAT THE AUTHORITIES BELOW HAD RIGHTLY REJECTED BOO KS OF ACCOUNTS OF THE ASSESSEE U/S 145(3) OF 1961 ACT AND ESTIMATED GROSS PROFIT RATIO OF 20.17% OF TURNOVER. THE LEARNED DR RELIED UPON DECISION OF HO NBLE SUPREME COURT IN THE CASE OF KACHWAL GEMS(SUPRA) AND HONBLE GUJARAT HIGH COURT IN THE CASE OF VIJAY PROTEINS 9. IN REJOINDER, THE LD. COUNSEL FOR ASSESSEE SUBMI TTED THAT A.O. DID NOT MAKE ANY ENQUIRY TO VERIFY CHEQUE PAYMENTS , PURCHA SE AND SALE BILLS , WHICH DETAILS WERE PRODUCED BEFORE THE AUTHORITIES BELOW. IT WAS SUBMITTED THAT REQUEST WAS SUBMITTED BEFORE THE AO TO ISSUE SUMMON S U/S 131 OF 1961 ACT TO THE ABOVE FOUR PARTIES , WHICH AO DID NOT ACCEDE D TO. 10. WE HAVE CONSIDERED RIVAL CONTENTIONS AND ALSO P ERUSED THE MATERIAL AVAILABLE ON RECORDS INCLUDING CASE LAWS CITED BEFO RE US . INFORMATION WAS RECEIVED BY AO FROM DIRECTOR GENERAL OF INCOME-TAX (INV.), MUMBAI THAT SOME BUSINESSMEN HAD INDULGED IN ACCEPTANCE OF BOGUS PUR CHASE BILLS FROM BOGUS HAWALA DEALERS WHO WERE ENGAGED IN PROVIDING ACCOMM ODATION ENTRIES WITHOUT ANY DELIVERY OF GOODS AND WERE NOT ENGAGED IN ANY BUSINESS , WHICH FACTS HAVE ALSO BEEN ADMITTED BY THESE HAWALA ENTRY PROVIDERS IN THEIR STATEMENTS RECORDED AND AFFIDAVITS FILED BEFORE SA LES TAX AUTHORITIES. IT WAS ITA 5515/MUM/2016 11 INFORMED TO A.O. THAT ASSESSEE IS BENEFICIARY OF SU CH BOGUS PURCHASE BILLS AND DURING PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEA R UNDER CONSIDERATION, THE ASSESSEE HAD ACCEPTED BOGUS BILLS FROM FOLLOWING FO UR PARTIES, WHICH IS AN ACCOMMODATION ENTRIES WITHOUT DELIVERY OF ANY GOODS :- NAME TIN AMOUNT (RS) DHRUV SALES CORPORATION 27760622173V 665,163 ACCURE IMPEX PRIVATE LTD. 27530626228V 599,612 RIDDHI DYECHEM CORPORATION INTERNATIONAL CHEMICALS 27910403695V 2,541,448 CHEMI-AGE ENTERPRISE 27400387728V 9,794,547 TOTAL 1,36,00,770 THUS, WITH ABOVE BACKGROUND, ASSESSMENT WAS REOPENE D BY AO AFTER RECORDING REASONS FOR RE-OPENING BY ISSUING NOTIC E DATED 18 TH MARCH, 2014 U/S 148 OF 1961 ACT TO ASSESSEE, WHICH WAS DULY SER VED ON THE ASSESSEE. THE ASSESSEE HAS FURNISHED COPIES OF PURCHASE INVOICES, LEDGER EXTRACTS OF THESE PARTIES, BANK STATEMENTS TO EVIDENCE PAYMENTS BY CH EQUE, STATEMENT OF PURCHASE AND SALE , AS WELL QUANTITATIVE DETAILS OF PURCHASE AND SALE DULY RECONCILED BEFORE THE AUTHORITIES BELOW AND ASSESS EE HAD CONTENDED THAT THE PURCHASE TRANSACTIONS ENTERED INTO WITH THESE PARTI ES ARE ALL GENUINE PURCHASES. IT WAS SUBMITTED BY ASSESSEE BEFORE AUTH ORITIES BELOW THAT WHEN ASSESSEE PURCHASED MATERIAL FROM THESE PARTIES , TH ESE PARTIES EXISTED AND THE SALES TAX DEPARTMENT GRANT REGISTRATION ONLY AFTER DETAILED VERIFICATIONS AND ENQUIRIES , HENCE THESE PURCHASES ARE GENUINE. THE A.O. ISSUED NOTICES U/S. 133(6) OF THE ACT TO THESE AFORE-STATED FOUR PARTIE S TO VERIFY GENUINENESS OF PURCHASES BUT NOTICES WERE RETURNED UN-SERVED BY PO STAL AUTHORITIES WITH REMARKS 'LEFT'. THE ASSESSEE WAS ASKED BY AO TO PRO DUCE THESE PARTIES, BUT THE ASSESSEE FAILED TO PRODUCE SAID PARTIES BEFORE AO. THE ASSESSEE HAS AVERRED THAT IT ASKED AO TO ISSUE SUMMONS TO THESE PARTIES U/S 131 OF 1961 ACT , WHICH REQUEST WAS NOT ACCEDED TO BY THE AO AS AVERRED BY ASSESSEE. WE HAVE OBSERVED THAT NO REQUEST FOR CROSS EXAMINATION WAS MADE BY THE ITA 5515/MUM/2016 12 ASSESSEE BEFORE THE AUTHORITIES BELOW TO CROSS-EXAM INE THESE PARTIES. IT WAS SUBMITTED BY ASSESSEE THAT DURING ASSESSMENT YEAR 2 009-10, THE SALES(NET OF SALES TAX) WAS OF RS. 1,76,85,320/- AND PURCHASES(N ET OF SALES TAX) WAS OF RS. 1,58,17,462/-. THENCE , IT IS SUBMITTED BY ASSESSEE THAT THERE WAS NO QUESTION OF SELLING THE MATERIAL IF THERE WAS NO PU RCHASES AND HENCE ASSESSEE SUBMITTED THAT PURCHASES WERE GENUINE AS THE MATERI AL WAS DULY SOLD AND CORRESPONDING PURCHASES AS RECORDED IN BOOKS OF ACC OUNTS SHOULD BE ACCEPTED . HOWEVER, THE ASSESSEE COULD NOT PRODUCE ANY EVIDENCE TO SUBSTANTIATE ACTUAL MOVEMENT OF GOODS FROM THESE PA RTIES TO THE ASSESSEE . THE PURCHASES WERE MADE BY ASSESSEE FROM THESE PART IES AND AMOUNTS ARE APPEARING IN BOOKS OF ACCOUNTS OF THE ASSESSEE AND SINCE INCRIMINATING INFORMATION HAS BEEN RECEIVED BY REVENUE, THE ONUS HAS NOW AGAIN SHIFTED BACK TO ASSESSEE TO PROVE GENUINENESS OF PURCHASE T RANSACTIONS WITH COGENT MATERIAL . IT IS THE AVERMENT OF REVENUE THAT THE A SSESSEE DID NOT PURCHASED MATERIAL FROM THESE PARTIES AND ONLY BOGUS BILLS AR E OBTAINED FROM THESE PARTIES, AND SINCE SALES ARE NOT DOUBTED, THE MATER IAL WAS IN-FACT PURCHASED BUT FROM SOME OTHER DEALERS IN GREY MARKET WITHOUT BILL BY MAKING PAYMENT IN CASH . THESE FACTS ARE ESPECIALLY IN THE KNOWLED GE OF THE ASSESSEE AS PURCHASES WERE MADE BY THE ASSESSEE AND ONUS IS ON ASSESSEE TO PROVE GENUINENESS OF PURCHASE TRANSACTIONS AS THESE TRA NSACTIONS ARE APPEARING IN ASSESSEES BOOKS OF ACCOUNTS AND IN THE INSTANT CAS E , THE ASSESSEE HAD FAILED TO DISCHARGE ONUS CAST UPON HIM. THE ASSESSEE COULD NOT ESTABLISH WITH COGENT MATERIAL SUBSTANTIATING ACTUAL MOVEMENT OF G OODS FROM THESE PARTIES TO THE ASSESSEE NOR ASSESSEE COULD PRODUCE THESE PA RTIES BEFORE THE AUTHORITIES BELOW. THE ASSESSEE DID NOT SEEK CROSS EXAMINATION OF THESE PARTIES. THE ASSESSEE WAS ,HOWEVER, ABLE TO RECONCI LE PURCHASES QUANTITATIVELY WITH SALES . THE AO HAS APPLIED GROSS PROFIT RATIO OF 20.17% ON TOTAL TURNOVER AS AGAINST GROSS PROFIT RATIO OF 10.56% ON TURNOVER DECLARED BY ASSESSEE, AFTER REJECTING BOOKS OF ACCOUNTS. THE LEARNED CIT(A) HA S ALSO UPHELD RE- ASSESSMENT ORDER OF THE AO. THE ASSESSEE HAS HOWEVE R CONTENDED THAT IT HAD ITA 5515/MUM/2016 13 DEALING WITH M/S CHEMI-AGE ENTERPRISES IN THE PRECE DING YEARS AS WELL IN SUBSEQUENT YEARS WHICH IS CONTINUING AS OF DATE. UN DER THE FACTUAL MATRIX OF THE CASE , WE ARE OF THE OPINION THAT PROFIT EMBED DED IN THESE PURCHASES ARE TO BE ESTIMATED TO COVER LOSS OF REVENUE BY WAY OF VAT, TAXES AND COMMISSION ETC . THE ASSESSEE HAS DECLARED GROSS PROFIT RATIO OF 10.56% ON TURNOVER IN THE IMPUGNED ASSESSMENT YEAR AS AGAINST GROSS PROF IT RATIO OF 8.79% IN IMMEDIATELY PRECEDING YEAR, WHILE REVENUE HAS ESTIM ATED GROSS PROFIT OF 20.17% ON TOTAL TURNOVER. IN OUR CONSIDERED VIEW, E ND OF JUSTICE WILL BE MET IN THE INSTANT CASE, IF THE ADDITIONS ARE SUSTAINED TO THE TUNE OF ADDITION BY WAY OF 5% OF THE ALLEGED BOGUS PURCHASES FROM THREE PAR TIES NAMELY M/S DHRUV SALES CORPORATION, M/S ACCURE IMPEX PRIVATE LIMITED AND RIDDHI DYECHEM CORPORATION INTERNATIONAL CHEMICALS , WHICH WERE TO THE TUNE OF RS.38,06,223/- , WHICH WILL LEAD TO ENHANCEMENT OF GP RATIO TO THE EXTENT OF 5% OF RS.38,06,223/- WHICH COMES TO SUSTAINING ADDI TION TO THE TUNE OF RS.1,90,311/- TO COVER PROFIT EMBEDDED IN THESE BOG US PURCHASES AND LOSS OF REVENUE BY WAY OF VAT, TAXES, COMMISSION ETC. , IN ADDITION TO PROFITS AS REPORTED BY THE ASSESSEE. WITH RESPECT TO CHEMI-AGE ENTERPRISES FROM WHERE THE ASSESSEE MADE PURCHASES TO THE TUNE OF RS.97,95 ,547/- DURING RELEVANT PREVIOUS YEAR AND WITH WHOM IT IS STATED THAT DEALI NGS ARE CONTINUING AS OF NOW, THE ASSESSEE NEEDED TO BE GRANTED ONE MORE OPP ORTUNITY TO PRODUCE THE SAID PARTY BEFORE THE AO AND SATISFY THE AO ABOUT I TS CONTENTIONS THAT PURCHASES WERE GENUINE, TO THE SATISFACTION OF AO. THE AO SHALL GRANT REASONABLE AND ADEQUATE OPPORTUNITY TO THE ASSESSEE TO PRODUCE THE SAID PARTY BEFORE THE AO AND ALSO TO PRODUCE ANY OTHER E VIDENCES AND EXPLANATION WHICH THE ASSESSEE MAY DEEM FIT IN HIS DEFENSE BEFO RE THE AO. IN ABSENCE OF SATISFACTION BEING ACHIEVED BY THE AO AS TO GENUINE NESS OF PURCHASES MADE BY THE ASSESSEE FROM CHEMI-AGE ENTERPRISES, THE AO SHALL ENHANCE GP RATIO BY 5% AND BRING THE SAME TO TAX AS PROFITS EMBEDDED IN SAID PURCHASES IN ADDITION TO PROFITS AS REPORTED BY THE ASSESSEE IN RETURN OF INCOME FILED WITH ITA 5515/MUM/2016 14 REVENUE, AS WAS ORDERED TO BE DONE BY US WITH RESPE CT TO OTHER THREE PARTIES AS PER OUR ORDERS. WE ORDER ACCORDINGLY. 11. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IN ITA NO. 5515/MUM/2016 FOR ASSESSMENT YEAR 2009-10 IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH MARCH, 2017. # $% &' 17-03-2017 ( ) SD/- SD/- (C.N. PRASAD) (RAMIT KOCHAR) JUDICIAL MEMBER ACCOUNTANT MEMBER $ MUMBAI ; & DATED 17-03-2017 .9../ R.K. R.K. R.K. R.K. , EX. SR. PS !'#$%&%# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. : ( ) / THE CIT(A)- CONCERNED, MUMBAI 4. : / CIT- CONCERNED, MUMBAI 5. =>( 99?@ , ?@ , $ / DR, ITAT, MUMBAI H BENCH 6. (BC D / GUARD FILE. / BY ORDER, = 9 //TRUE COPY// / ( DY./ASSTT. REGISTRAR) , $ / ITAT, MUMBAI