DCIT CEN CIR 1(4), MUMBAI V. SUNITA OMPRAKASH SINGH, MUMBAI

ITA 5530/MUM/2016

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 9563 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-09-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2007-2008
• Appeal Filed On: 09-09-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR MC OMI NINGSAHEN
• Keywords: Bogus purchase; Search and seizure; Opportunity of cross examination; Peak credit; Third party statement; Accommodation entries
• Section: 142(1); 2

Judgement Text

1 ITA NO.5530/MUM/2016 1 ITA NO.5530/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.5530/MUM/2016 (ASSESSMENT YEAR 2007-08) DY.CIT, CIR.1(4), MUMBAI VS M/S SUNITA OMPRAKASH S INGH FLAT NO.502, A WING, NEPTUNE DOSTI ESTATE, S.M. ROAD WADALA (E), MUMBAI 400 037 PAN : AMVPS1142G APPELLANT RESPONDENT APPELLANT BY DR MC OMI NINGSAHEN RESPONDENT BY SHRI DHARMESH SHAH DATE OF HEARING 09-08-2917 DATE OF PRONOUNCEMENT -09-2017 O R D E R PER G MANJUNATHA, AM : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAI NST THE ORDER OF THE CIT(A)-47, MUMBAI DATED 29-06-2016 AND IT PERTAINS TO AY 2007-08. 2. THE BRIEF FACTS OF THE CASE ARE THAT A SEARCH OPERA TION U/S 132(1) OF THE IT ACT, 1961 WAS CONDUCTED IN THE CASE OF M/S ARYA GR OUP OF COMPANIES ON 25- 04-2011. DURING THE COURSE OF SEARCH, SHRI OMPRAKA SH SINGH ADMITTED THAT HE ARRANGED ACOMMODATION ENTRIES AND BOGUS BILLS TO I NTERESTED PARTIES. CONSEQUENT TO SEARCH, ASSESSEES CASE WAS COVERED A S PER THE PROVISIONS OF 2 ITA NO.5530/MUM/2016 2 ITA NO.5530/MUM/2016 SECTION 153C OF THE ACT. NOTICE U/S 153C WAS ISSUE D AND SERVED ON THE ASSESSEE. IN RESPONSE TO THE NOTICE, THE ASSESSEE FILED RETURN OF INCOME ON 28- 12-2013 DECLARING TOTAL INCOME OF RS.6,54,535. SUB SEQUENTLY, NOTICE U/S 143(2) AND 142(1) OF THE ACT WERE ISSUED. IN RESPO NSE TO THE SAID NOTICE, THE AUTHORISED REPRESENTATIVE OF THE ASSESSEE ATTENDED FROM TIME TO TIME AND FILED THE DETAILS, AS CALLED FOR. DURING THE COURSE OF A SSESSMENT PROCEEDINGS, THE AO OBSERVED THAT THE ASSESSEE HAS TAKE BOGUS PURCHASE BILLS FROM 7 PARTIES, WHO HAVE BEEN DECLARED AS SUSPICIOUS HAWALA DEALERS BY THE SALES-TAX DEPARTMENT. IN VIEW OF THE FACTS AS BROUGHT OUT DURING THE SEAR CH OPERATION AND ALSO ON THE BASIS OF LIST PUBLISHED BY MAHARASHTRA SALES-TAX DE PARTMENT, THE ASSESSEE WAS SHOWCAUSED AS TO WHY THE PURCHASES MADE FROM THE AB OVE MENTIONED CONCERNS SHOULD NOT BE TREATED AS BOGUS AND ADDED B ACK TO THE TOTAL INCOME OF THE ASSESSEE. IN RESPONSE, THE ASSESSEE HAS FURNIS HED COPIES OF PURCHASE BILLS ALONGWITH PAYMENT PROOF AND SUBMITTED THAT MERELY B ECAUSE SOME THIRD PARTY STATEMENT SAYS THAT THE SAID PARTIES ARE INVOLVED I N ACCOMMODATION ENTRIES, TOTAL PURCHASES MADE FROM THE ABOVE PARTIES CANNOT BE HELD BOGUS DESPITE FURNISHING NECESSARY EVIDENCES. THE AO, AFTER CON SIDERING THE EXPLANATION OF THE ASSESSEE OBSERVED THAT THE CLAIMS OF THE ASSESS EE THAT THE PURCHASES ARE GENUINE IS HIGHLY MISPLACED AS ALL THOSE HAWALA TRA DERS HAVE, ON OATH, DURING SEARCH AND SEIZURE ACTION CATEGORICALLY STATED THAT THEY WERE ONLY PAPER 3 ITA NO.5530/MUM/2016 3 ITA NO.5530/MUM/2016 CONCERNS AND THEIR MAIN BUSINESS IS TO ISSUE PAPER BILLS WITHOUT ACTUAL DELIVERY OF GOODS. FROM THE ABOVE, IT CAN BE CONCLUDED THAT ALL THE SO-CALLED PURCHASES FROM THOSE HAWALA TRADERS HAVE BEEN NOTHING BUT SHA M TRANSACTIONS, JUST TO HELP THE RECIPIENT OF THE BOGUS BILLS TO REDUCE HIS PROFIT BY WAY OF INFLATING THE PURCHASES. THE AO FURTHER OBSERVED THAT THE TOTAL CREDITS OUTSTANDING IN THE ACCOUNTS OF THE ABOVE PARTIES IS ALSO NOT PAID, WHI CH FACT CLEARLY PROVED THAT THE PURCHASES ARE BOGUS IN NATURE AND ACCORDINGLY W ORKED OUT TOTAL PEAK CREDIT BALANCES IN THE ACCOUNTS OF BOGUS TRADERS CU M CREDITORS FROM WHOM THE ASSESSEE HAS TAKEN PURCHASE BILLS ADDED TO THE TOTA L INCOME OF THE ASSESSEE. 3. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE PRE FERRED APPEAL BEFORE THE CIT(A). BEFORE THE CIT(A), THE ASSESSEE REITER ATED HER SUBMISSIONS MADE BEFORE THE AO. THE CIT(A), AFTER CONSIDERING THE R ELEVANT DETAILS, HAS OBSERVED THAT THE FACTS GATHERED DURING THE COURSE OF SEARCH AND SUBSEQUENT POST SEARCH ENQUIRIES CONDUCTED DURING THE COURSE OF ASS ESSMENT PROCEEDINGS CLEARLY PROVES THAT THE SO-CALLED PURCHASES MADE FR OM THE HAWALA OPERATORS ARE NOT GENUINE. THE CIT(A) FURTHER OBSERVED THAT THOUGH THE FACTS INDICATED PURCHASES ARE NOT GENUINE, ASSESSEE HAS FILED CERTA IN EVIDENCES IN THE FORM OF PURCHASE BILLS AND PAYMENT PROOF, IT CANNOT BE DISO WNED IN TOTO. IN THE PRESENT CASE, THE AO HAS ACCEPTED THE SALES MADE BY THE ASSESSEE. THE PURCHASES / SALES CO-RELATION HAS NOT BEEN CONTROVE RTED BY THE AO. NO 4 ITA NO.5530/MUM/2016 4 ITA NO.5530/MUM/2016 DISCREPANCY IN BOOKS OF ACCOUNT OR STOCK REGISTERS HAS BEEN POINTED OUT. THE FACT THAT PAYMENTS MADE FOR THE PURCHASES ARE ROUTE D THROUGH BANKING CHANNELS IS NOT DISPUTED. NO EVIDENCE HAS BEEN BRO UGHT ON RECORD TO SHOW THAT CASH FROM THESE TRANSACTIONS ARE FLOWN BACK TO THE ASSESSEE. THUS, AT THE BEST, IT CAN BE CONCLUDED THAT THE PRIMARY INTENTIO N BEHIND AVAILING SUCH BOGUS BILLS WAS TO REDUCE PROFITS. ACCORDINGLY, ON CONSI DERING THE FACTS ON RECORDS, THE CIT(A) DIRECTED THE AO TO WORK OUT THE AVERAGE GROSS PROFIT AND APPLY IT ON THE TOTAL BOGUS PURCHASES MADE FROM THE ABOVE PARTI ES AGGRIEVED BY THE ORDER OF CIT(A), THE REVENUE IS IN APPEAL BEFORE US . 4. WE HAVE HEARD BOTH THE PARTIES AND PERUSED MATERIAL AVAILABLE ON RECORD. THE AO MADE ADDITIONS TOWARDS PURCHASES MADE FROM C ERTAIN PARTIES ON THE BASIS OF INFORMATION GATHERED DURING THE COURSE OF SEARCH WHICH REVEALED THAT THE SAID PARTIES ARE INVOLVED IN PROVIDING ACCOMMOD ATION ENTRIES WITHOUT ACTUAL DELIVERY OF GOODS. THE ASSESSEE CLAIMS THAT PURCHASES MADE FROM THOSE PARTIES ARE GENUINE, WHICH ARE SUPPORTED BY PROPER BILLS AND VOUCHERS AND ALSO PAYMENT FOR SUCH PURCHASES HAS BEEN MADE THROUGH PR OPER BANKING CHANNELS. THE ASSESSEE FURTHER CONTENDED THAT THE AO HAS NOT DISPUTED SALES DECLARED FOR THE RELEVANT FINANCIAL YEAR. NO ADVERSE COMMEN TS HAVE BEEN MADE ON BOOKS OF ACCOUNT OR STOCK REGISTERS. IN THE ABSEN CE OF ANY FINDING AS TO THE CORRECTNESS OF BOOKS OF ACCOUNT, ADDITIONS CANNOT B E MADE MERELY ON THE BASIS OF THIRD PARTY ADMISSION DESPITE FURNISHING ALL THE DETAILS TO PROVE THAT THE PURCHASES ARE GENUINE. 5. HAVING HEARD BOTH THE SIDES, WE FIND THAT THE AO HA S GATHERED SUFFICIENT 5 ITA NO.5530/MUM/2016 5 ITA NO.5530/MUM/2016 EVIDENCES WHICH PROVE THAT THE SAID PARTIES ARE INV OLVED IN PROVIDING ACCOMMODATION ENTRIES WITHOUT ACTUAL DELIVERY OF GO ODS. THOUGH THE ASSESSEE HAS FURNISHED CERTAIN EVIDENCES TO PROVE PURCHASES, BUT FAILED TO SUBSTANTIATE PURCHASES WITH FURTHER EVIDENCES IN THE BACKDROP OF CLEAR FINDING OF THE AO THAT THE SAID PARTIES HAVE CATEGORICALLY ADMITTED D URING THE COURSE OF SEARCH THAT THEY WERE MERELY PAPER CONCERNS INVOLVED IN PR OVIDING BOGUS BILLS. THEREFORE, WE ARE OF THE VIEW THAT THE PURCHASES MA DE FROM THE ABOVE PARTIES CANNOT BE CONSIDERED AS GENUINE IN NATURE. AT THE SAME TIME, THE ASSESSEE HAS FURNISHED CERTAIN BILLS AND ALSO FILED PROOF OF PAY MENT AND CLAIMS THAT PAYMENT AGAINST PURCHASES ARE MADE THROUGH BANKING CHANNELS . THE ASSESSEE FURTHER SUBMITTED THAT THE AO HAS NOT DOUBTED SALES DECLARE D BY THE ASSESSEE. NO ADVERSE COMMENTS HAVE BEEN MADE ABOUT BOOKS OF ACCO UNT AND STOCK DETAILS. UNDER THESE FACTUAL BACKGROUND, AT THE MOST, A REAS ONABLE INFERENCE CAN ONLY BE DRAWN THAT THE ASSESSEE HAS INFLATED PURCHASES T O REDUCE PROFIT. THEREFORE, WHAT NEEDS TO BE TAXED IS ONLY PROFIT ELEMENT EMBED DED IN THOSE PURCHASES AND NOT TOTAL PURCHASES. THE CIT(A), AFTER CONSIDE RING RELEVANT SUBMISSIONS OF THE ASSESSEE AND ALSO TAKING INTO ACCOUNT THE PAST GROSS PROFIT RATE DECLARED BY THE ASSESSEE HAS DIRECTED THE AO TO ESTIMATE PROFIT OF AVERAGE GROSS PROFIT DECLARED BY THE ASSESSEE IN THE PRECEDING FINANCIAL YEARS. WE DO NOT FIND ANY ERROR IN THE ORDER OF THE CIT(A). HENCE, WE ARE IN CLINED TO UPHOLD THE ORDER OF 6 ITA NO.5530/MUM/2016 6 ITA NO.5530/MUM/2016 CIT(A) AND DISMISS THE APPEAL FILED BY THE REVENUE. 6. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DISMI SSED. ORDER PRONOUNCED IN THE OPEN COURT ON 13 TH SEPTEMBER, 2017. SD/- SD/- (C.N. PRASAD) (G MANJUNATHA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DT : 13 TH SEPTEMBER, 2017 PK/- COPY TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT BY ORDER 5. DR /TRUE COPY/ ASSTT. REGISTRAR, ITAT, MUMBAI