DILIP B SHAH, MUMBAI V. ITO 14(1)(1), MUMBAI

ITA 5560/MUM/2016

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 8067 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-12-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2009-2010
• Appeal Filed On: 14-09-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: RAM TIWARI
• Keywords: Bogus purchase; Peak credit; Accommodation entries
• Section: 69C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA , A M AND SHRI SANDEEP GOSAIN, JM ./ I.T.A. NO. 5560/MUM/2016 ( / ASSESSMENT YEAR: 2009 - 10 ) SHRI DILIP B. SHAH 5/20 A, GITA BUILDING, GAMDEVI, GRANT ROAD, MUMBAI - 400 002 / VS. ITO - 14(1)(1), 2 ND FLOOR, EARNEST HOUSE, NARIMAN POINT, MUMBAI - 400 021 ./ ./ PAN/GIR NO. AAPPS 9105 F ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : MS. RUCHI M. RATHOD / RESPONDENT BY : SHRI RAM TIWARI / DATE OF HEARING : 14.09.2017 / DATE OF PRONOUNCEMENT : 04.12 .2017 / O R D E R PER SHAMIM YAHYA , A. M.: THIS APPEAL BY THE ASSESSEE DIRECTED AGAINST THE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS) - 29 , MUMBAI DATED 19.07.2016 AND PERTAINS TO THE ASSESSMENT YEAR (A.Y.) 2009 - 10. 2. T HE ISSUE RAISED IS THAT LD. COMMISSIONER OF INCOME TAX (APPEA LS) ERRED IN SUSTAINING DISALLOWANCE OF 12.5 % OF BO GUS PURCHASE . 2 ITA NO. 5560/MUM/2016 (A.Y. 2009 - 10) SHRI DILIP B. SHAH VS. ITO 3. T HE GROUNDS OF APPEAL READ AS UNDER: 1. LEARNED ASSESSING OFFICER ERRED IN ADDING PEAK PURCHASES OF THE TOTAL PURCHASE VALUE AMOUNTING OF RS.19320247/ - IGNORING THE DETAILED EVIDENCES B ROUGHT ON RECORD AND FURTHER ERRED IN LEVYING INTEREST THEREON AND IGNORING THE JUDICIAL PRECEDENTS BROUGHT TO HIS KNOWLEDGE. 2. LEARNED ASSESSING OFFICER ERRED IN DISALLOWING THE PURCHASES ON THE BASIS OF INFORMATION RECEIVED FROM SALES TAX AUTHORITIES WH ICH CONTRARY TO THE MATERIAL FACT ON RECORD AND MORE PARTICULARLY IS CONTRARY TO THE PROVISIONS OF SECTION 69C SINCE THE SOURCE IS IN DISPUTE AND NOT THE PURCHASE EXPENDITURE. 3. I N THIS CASE , THE RETURN OF INCOME WAS FILED ON 16.09.2009 DECLARING TOTAL INCOME AT RS.8,13,210/ - . THE ASSESSING OFFICER IN THE ASSESSMENT ORDER HAS STATED THAT ASSESSMENT IN THIS CASE WAS INITIATED ON THE BASIS OF INFORMATION RECEIVED FROM THE OFFICE OF DGIT(INV.), MUMBAI. THE INFORMATION WAS THAT THE SALES TAX DEPARTMENT HAS E XERCISED DUE DILIGENCE WHICH REVEALED THAT THE ASSESSEE IS INVOLVED IN TAKING ACCOMMODATION ENTRIES OF BOG US PURCHASES TO THE TUNE OF RS. 1,93,20,247/ - FROM 11 PARTIES AS UNDER : - HAWALA PAN HAWALA DEALER NAME AMOUNT IN RS . AALCS2561E SUNICO TRADERS PVT. L TD. 38,79,639/ - AFMPS3081A GOPIKRISHNA TRADING CO/BLUE SKY TRADE IMPEX 33,33,712 / - AACCN6055H NANDKISHOR SALES AGENCY PVT. LTD. 6,20,837 / - AWTPS0269A TARA ENTERPRISES 36,28,779 / - AADCR7441L REMI TRADING COMP. P. LTD. 6,19,757/ - ACZPV3215F SKA ND INDUSTRIES 5,87,166 / - AACCM1443M NEWSPARK TRADING CO. P. LTD. 7,21,062 / - AGNPM5002H P M UDYOG 6,21,718 / - AHUPK6877A SIDDHI ENTERPRISES 15,42,646 / - ALXPM4040Q JASMINE ENTERPRISES 10,26,917/ - AL MPK4643E VANI ENTERPRISES 27,38,014/ - 3 ITA NO. 5560/MUM/2016 (A.Y. 2009 - 10) SHRI DILIP B. SHAH VS. ITO ASSESSING OFFICER AFTER ISSUING NOTICE U/S.148 HAD ASKED THE ASSESSEE TO FURNISH THE DETAILS REGARDING GOODS PURCHASED FROM THE PARTY, COPIES OF BILLS RAISED, LEDGER ACCOUNT OF THE PARTY, DOCUMENTARY EVIDENCES SUCH AS TRANSPORTATION BILLS, BANK STATEMENTS AND SO ON. THE AS SESSEE WAS ASKED TO PRODUCE THE PRINCIPAL PERSONS OF THE IMPUGNED PARTIES WHICH THE ASSESSEE FAILED TO DO SO. THE ASSESSEE FILED LEDGER ACCOUNT OF ALL THE PARTIES AND COPY OF HIS BANK STATEMENTS REFLECTING THE PAYMENTS MADE TO THESE PARTIES. NO EVIDENCE OF TRANSPORTATION O F GOOD S REQUIRED BY THE ASSESSING OFFICER WERE FURNISHED. THE ASSESSEE FURTHER ADMITTED THAT THE CONCERNED PARTIES ARE NOT A VAILABLE AT THEIR LAST KNOWN ADDRESSES NOR DOES HE KNOW THE CURRENT WHEREABOUTS OF THE PARTIE S. THE ASSESSEE CONFIRMED THAT IT HAS S OLD THE GOODS WHICH HAVE BEEN PURCHASED FROM THE ALLEGED HAWALA DEALERS AND HAS REALIZED THE SALE PROCEEDS. THEREFORE, IT WAS PLEADED THAT THE PURCHASES HAVE TO BE TREATED AS GENUINE. THE ASSESSING OFFICER HOWEVER, RE LYING ON THE DECISION OF THE HON'BLE IT AT, AHMEDABAD IN THE CASE OF VIJAY PROTEINS WORKED OUT THE PEAK CREDIT FOR THE PURCHASES MADE FROM THE ALLEGED HAWALA PARTIES. THE PEAK CREDIT WORKED OUT TO RS.90,13,127/ - WHICH HAS BEEN ADDED U/S.69C OF THE INCOME - TA X ACT BY THE ASSESSING OFFICER . 4. AG AINST THE ABOVE ORDER , THE ASSESSEE APPEALED BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEALS). THE LD. COMMISSIONER OF INCOME TAX (APPEALS) CONFI RMED THE ACTION OF THE ASSESSING OFFICER TO THE EXTENT OF 12.5% OF THE BOGUS PURCHASE. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) CONCLUDED AS UNDER: 4 ITA NO. 5560/MUM/2016 (A.Y. 2009 - 10) SHRI DILIP B. SHAH VS. ITO IT WAS FOR THE APPELLANT TO PROVE THAT THESE PURCHASES WERE GENUINE IN THE FACE OF CONTRARY STATEMENT GIVEN BY THE SELLERS. THE APPELLANT HAS MISERABLY FAILED TO DO SO AND TH EREFORE AGREED FOR THE GP ADDITION. IT IS NOT A CASE WHERE THE APPELLANT WAS FORCED OR COERCED INTO MAKING THE ADDITION. IF THE APPELLANT HAD ANY KIND OF EVIDENCE IN HIS POSSESSION, HE WOULD HAVE CERTAINLY FLASHED IT BEFORE THE AO. IN 'THESE CIRCUMSTANCES, THE AGREEMENT FOR ADDITION OF GP BY THE APPELLANT HAS TO BE TAKEN SERIOUSLY. 4.3.1. THE HORI'BLE ITAT, AHMEDABAD V C' BENCH IN THE CASE OF VIJAY PROTEINS LTD. VS. ACIT 58 ITD 0428 HELD THAT IN SIMILAR CIRCUMSTANCES, 25% OF THE PURCHASE PRICE ACCOUNTED THRO UGH FICTITIOUS INVOICES HAS TO BE DISALLOWED. THE HON'BLE HIGH COURT OF GUJARAT IN THE CASE OF SANJAY OIL CAKES V/S CIT 316 ITR 0274 DEALT WITH SIMILAR CASE WHERE SOME OF THE ALLEGED SUPPLIERS WHO HAD ISSUED BILLS TO THE ASSESSEE WERE NOT GENUINE AS THEY W ERE NOT TRACEABLE. THE GOODS WERE RECEIVED FROM OTHER PART I ES. THE LIKELIHOOD OF THE PURCHASE PRICE BEING INCLUDED COULD NOT BE RULED OUT AND THEREFORE THE HON'BLE HIGH COURT HAS UPHELD THE DECISION OF CIT(A) AND THE ITAT DISALLOWING 25% OF THE PAYMENTS MA DE TO SUCH PARTIES. THE HON'BLE HIGH COURT OF GUJARAT IN THE CASE OF CIT VS. SIMIT P. SHETH 356 ITR 0451 HELD THAT ONCE THE SALE IS ACCEPTED BY THE AO, THE VERY BASIS OF PURCHASES COULD NOT BE QUESTIONED. NOT THE ENTIRE PURCHASE PRICE COULD BE DISALLOWED B UT ONLY THE PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES COULD BE ADDED TO THE INCOME OF THE ASSESSEE. THE ESTIMATION VARIES WITH THE NATURE OF BUSINESS AND NO UNIFORM YARDSTICK COULD BE ADOPTED. GIVEN THE FACTS AND CIRCUMSTANCES OF THE INSTANT CASE, I FIND I T REASONABLE TO ESTIMATE THE PROFIT AT 12.5% OF THE ALLEGED PURCHASES OF RS.1,93,20,247/ - . 5. AGAINST THE ABOVE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS), THE ASSESSEE IS IN APPEAL BEFORE THE ITAT. 6. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. WE FIND THAT CREDIBLE AND COGENT INFORMATION WAS RECEIVED IN THIS CASE BY THE ASSESSING OFFICER THAT CERTAIN ACCOMMODATION ENTRY PROVIDER/BOGUS SUPPLIERS WERE BEING USED BY CERTAIN PARTIES TO OBTAINED BOGUS BILLS. THE ASSESSEE WAS FOUND TO HAV E TAKEN ACCOMMODATION ENTRY/BOGUS PURCHASE BILLS DURING THE CONCERNED ASSESSMENT YEAR FROM DIFFERENT PARTIES. BASED UPON THIS INFORMATION ASSESSMENT WAS REOPENED. THE CREDIBILITY OF INFORMATION RELATING TO REOPENING REMAINS UN - ASSAILED. IN SUCH FACTUAL SCE NARIO , THE 5 ITA NO. 5560/MUM/2016 (A.Y. 2009 - 10) SHRI DILIP B. SHAH VS. ITO ASSESSING OFFICER HAS MADE THE NECESSARY ENQUIRY. THE ISSUE OF NOTICE TO ALL THE PARTIES HAVE RETURNED UNSERVED. ASSESSEE HAS NOT BEEN ABLE TO PROVIDE ANY CONFIRMATION FROM ANY OF THE PARTY. ASSESSEE HAS ALSO NOT BEEN ABLE TO PRODUCE ANY OF THE PARTIES. NECESSARY EVIDENCE RELATING TO TRANSPORTATION OF THE GOODS WAS ALSO NOT ON RECORD. IN THIS FACTUAL SCENARIO , IT IS AMPLY CLEAR THAT THE ASSESSEE HAS OBTAINED BOGUS PURCHASE BILLS. MERE PREPARATION OF DOCUMENTS FOR PURCHASES CANNOT CONTROVERT OVERW HELMING EVIDENCE THAT THE PROVIDER OF THESE BILLS IS BOGUS AND NON - EXISTENT. 7. THE S ALES T AX DEPARTMENT IN ITS ENQUIRY HAS FOUND THE PARTIES TO BE PROVIDING BOGUS ACCOMMODATION ENTRIES. THE ASSESSING OFFICER ALSO ISSUED NOTICES TO THESE PARTIES AT THE A DDRESSES PROVIDED BY THE ASSESSEE. ALL THESE NOTICES HAVE RETURNED UNSERVED. ASSESSEE HAS NOT BEEN ABLE TO PRODUCE ANY OF THE PARTIES. NEITHER THE ASSESSEE HAS BEEN ABLE TO PRODUCE ANY CONFIRMATION FROM THESE PARTIES. IN SUCH CIRCUMSTANCES , THERE IS NO DOU BT THAT THESE PARTIES ARE NON - EXISTENT. WE FIND IT FURTHER STRANGE THAT ASSESSEE WANTS THE R EVENUE TO PRODUCE ASSESSEES OWN VENDORS, WHOM THE ASSESSEE COULD NOT PRODUCE. THE P URCHAS E BILLS FROM THESE NON - EXISTENT /BOGUS PARTIES CANNOT BE TAKEN AS COGENT EV IDENCE OF PURCHASES. IN LIGHT OF THE OVERWHELMING EVIDENCE , THE R EVENUE AUTHORITIES CANNOT PUT UPON BLINKERS AND ACCEPT THESE PURCHASES AS GENUINE. THIS PROPOSITION IS DULY SUPPORTED BY HONBLE APEX COURT DECISION IN THE CASE OF SUMATI DAYAL VS. CIT [1995 ] 214 ITR 801 (SC) AND CIT VS. DURGA PRASAD MORE [1971] 82 ITR 540 (SC) . IN THE PRESENT CASE , THE ASSESSEE WANTS THAT THE 6 ITA NO. 5560/MUM/2016 (A.Y. 2009 - 10) SHRI DILIP B. SHAH VS. ITO UNASSAILABLE FACT THAT THE SUPPLIERS ARE NON - EXISTENT AND , THUS , BOGUS SHOULD BE IGNORED AND ONLY THE DOCUMENTS BEING PRODUCED SHOULD BE CONSIDERED. THIS PROPOSITION IS TOTALLY UNSUSTAINABLE IN LIGHT OF HONBLE APEX COURT D ECISIONS. 8. WE FURTHER FIND THAT HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF NIKUNJ EXIMP E NTERPRISES (IN W RIT PETITION NO 2860, ORDER DT . 18.6.2014) HAS UPHELD 100% ALLOWANCE FOR THE PURCHASES SAID TO BE BOGUS WHEN THE SALES HAVE NOT BEEN DOUBTED. HOWEVER , THE FACTS OF THAT CASE WERE DIFFERENT. FURTHERMORE , THE SALES IN THAT CASE WERE BASICALLY TO GOVERNMENT DEPARTMENTS. HENCE , THE RATIO FROM THIS DECISION IS N OT APPLICABLE ON THE FACTS OF THE CASE. 9 . IN THESE CIRCUMSTANCES , THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS REFERRED TO HONBLE GUJARAT HIGH COURT DECISION IN THE CASE OF T AX A PPEAL N O . 240 OF 2003 IN THE CASE OF N K INDUSTRIES VS . DY . CIT VIDE ORDER D ATED 20 . 06.2016, WHEREIN 100% OF THE BOGUS PURCHASES WAS HELD TO BE ADDED IN THE HANDS OF THE ASSESSEE AND TRIBUNALS RESTRICTION OF THE ADDITION TO 25% OF THE BOGUS PURCHASES WAS SET ASIDE. IT WAS EXPOUNDED THAT WHEN PURCHASE BILLS HAVE BEEN FOUND TO BE B OGUS , 100% DISALLOWANCE WAS REQUIRED. THE SPECIAL LEAVE PETITION AGAINST THIS ORDER ALONG WITH OTHERS HAS BEEN DISMISSED BY THE HONBLE APEX COURT VIDE ORDER D ATED 16.1 . 2017. 10. WE FURTHER NOTE THAT HONBLE RAJASTHAN HIGH COURT HAS SIMILARLY TAKEN NOTE OF DECISIONS OF THE APEX COURT ON THE ISSUE OF BOGUS PURCHASES IN THE CASE OF CIT JAIPUR VS SHRUTI GEMS IN ITA NO. 658 OF 2009. THE HONBLE HIGH COURT HAS REFERRED TO THE 7 ITA NO. 5560/MUM/2016 (A.Y. 2009 - 10) SHRI DILIP B. SHAH VS. ITO DECISION OF CIT JAIPUR VS. ADITYA GEMS, D. B. IN ITA NO. 234 OF 2008 DATED 02.11.201 6, WHEREIN THE HONBLE COURT HAD INTER ALIA HELD AS UNDER: 'CONSIDERING THE LAW DECLARED BY THE SUPREME COURT IN THE CASE OF VIJAY PROTEINS LTD. VS. COMMISSIONER OF INCOME TAX, SPECIAL LEAVE TO APPEAL (C) NO.8956/2015 DECIDED ON 06.04.2015 WHEREBY THE SUP REME COURT HAS DISMISSED THE SLP CONFIRMED THE ORDER DATED 09.12.2014 PASSED BY THE GUJARAT HIGH COURT AND OTHER DECISIONS OF THE HIGH COURT OF GUJARAT IN THE CASE OF SANJAY OILCAKE INDUSTRIES VS. COMMISSIONER OF INCOME TAX (2009) 316 ITR 274 (GUJ) AND N.K . INDUSTRIES LTD. VS. DY. C.I.T., TAX APPEAL NO.240/2003 DECIDED ON 20.06.2016, THE PARTIES ARE BOUND BY THE PRINCIPLE OF LAW PRONOUNCED IN THE AFORESAID THREE JUDGMENTS. 11. HOWEVER , WE NOTE THAT THIS IS NOT AN APPEAL BY THE R EVENUE. HENCE , IT WILL NOT BE APPROPRIATE TO TAKE AWAY THE RELIEF ALREADY GRANTED BY THE R EVENUE TO THE ASSESSEE. HENCE , WE CONFI RM THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS). 12. WE FURTHER NOTE THAT SINCE WE ARE CONFIRMING THE ORDER OF THE LD. COMMISSIONER OF INCOME T AX (APPEALS) ON THE BASIS OF THE HONBLE SUPREME COURT AND HONBLE HIGH COURT DECISIONS, CASES FROM TRIBUNAL REFERRED BY THE ASSESSEE DO NOT HOLD PRECEDENCE OVER THEM. 13 . IN THE RESULT , THIS APPEAL FILED BY THE ASSESSEE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 04.12.2017 SD/ - SD/ - ( SANDEEP GOSAIN ) (S HAMIM YAHYA ) / J UDICIAL MEMBER / A CCOUNTANT MEMBER MUMBAI ; DATED : 04.12.2017 . . ./ ROSHANI , SR. PS 8 ITA NO. 5560/MUM/2016 (A.Y. 2009 - 10) SHRI DILIP B. SHAH VS. ITO / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. , , / D R, ITAT, MUMBAI 6. / GUARD F ILE / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI