ITO 17 (2)(4), MUMBAI V. MUKESH J. SHAH, MUMBAI

ITA 5577/MUM/2018

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 3700 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-11-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 03-10-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bogus purchase; Opportunity of being heard; Accommodation entries
• Section: 133(6); 143(1); 147; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH SMC , MUMBAI BEFORE SHRI C.N. PRAS AD, HON'BLE JUDICIAL MEMBER AND SHRI MANOJ KUMAR AGGARWAL , HON'BLE ACCOUNTANT MEMBER ITA NO. 5577 & 5578 /MUM/201 8 ( A. Y S : 2009 - 10 & 2011 - 12 ) INCOME TAX OFFICER 17(2)(4) ROOM NO. 123B, 1 ST FLOOR AAYAKAR BHAVAN, M.K. ROAD MUMBAI 400 020 V. LATE SHRI MUKESH J. SHAH {REPRESENTED BY L/H SHRI HIREN MUKESH SHAH} 3 RD FLOOR, 47, MAHAKALI CHAWLS TAMBA KANTHA , PYDHONE MUMBAI 400 003 PAN: ANTPS9112K ( ASSESSEE ) (RESPONDENT) ASSESSEE BY : SHRI JITENDRA SINGH DEPARTMENT BY : SHRI AKHTAR H. ANSARI DATE OF HEARING : 14.11.2019 DATE OF PRONOUNCEMENT : 22 .11 .2019 O R D E R PER C. N. PRASAD (JM) 1. THESE APPEAL S ARE FILED BY THE REVENUE AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) 58 , MUMBAI [HEREINAFTER IN SHORT LD.CIT(A)] DATED 23.07.2018 & 24.07.2019 FOR THE A.Y S . 2009 - 10 & 2011 - 12 RESPECTIVEL Y IN RESTRICTING THE DISALLOWANCE TO 6.25% & 5.25% OF THE PURCHASES AS AGAINST 25% PURCHASES DISALLOWED AS NON - GENUINE/BOGUS BY THE ASSESSING OFFICER. 2 ITA NO. 5577 & 5578 /MUM/2018 LATE SHRI MUKESH J. SHAH 2. BRIEFLY STATED THE FACTS ARE THAT, THE ASSESSEE IS ENGAGED IN THE BUSINESS OF DEALERS IN IRON & STEEL , FILED RETURN OF INCOME AND DECLARING INCOME OF . 4,50,848 / - & .7,64,392/ - FOR THE A.Y S . 2009 - 10 & 2011 - 12 RESPECTIVELY. THE RETURN S WERE PROCESSED U/S. 143(1) OF THE ACT. SUBSEQUENTLY, ASSESSING OFFICER RECEIVED INFORMATION FROM THE DGIT(INV.), MUMBA I ABOUT THE ACCOMMODATION ENTRIES PROVIDED BY VARIOUS DEALERS AND ASSESSEE WAS ALSO ONE OF THE BENEFICIARY FROM THOSE DEALERS. THE ASSESSMENT WAS REOPENED U/S. 147 OF THE ACT BASED ON THE INFORMATION RECEIVED FROM DGIT (INV.), MUMBAI, THAT THE ASSESSEE HA S AVAILED ACCOMMODATION ENTRIES FROM VARIOUS DEALERS WHO ARE ALL PROVIDING ACCOMMODATION ENTRIES WITHOUT THERE BEING TRANSPORTATION OF ANY GOODS. IN THE RE - ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS REQUIRED TO PROVE THE GENUINENESS OF THE PURCHASES MADE FR OM VARIOUS PARTIES WHICH WERE REFERRED TO IN THE ASSESSMENT ORDER. THE ASSESSEE PRODUCED COPIES OF BILLS, BANK STATEMENTS, COPIES OF VAT CHALLANS, LEDGER COPIES AND SUBMITTED THAT THE PURCHASES MADE ARE GENUINE. NOT CONVINCED WITH THE SUBMISSIONS OF THE ASSESSEE THE ASSESSING OFFICER TREATED THE PURCHASES AS NON - GENUINE AND HE WAS OF THE OPINION THAT ASSESSEE HAD OBTAINED ONLY ACCOMMODATION ENTRIES WITHOUT THERE BEING ANY TRANSPORTATION OF MATERIALS AND THE ASSESSEE MIGHT HAVE MADE PURCHASES IN THE GRAY M ARKET. IT IS THE FINDING OF THE ASSESSING OFFICER SINCE THE PURCHASES MADE 3 ITA NO. 5577 & 5578 /MUM/2018 LATE SHRI MUKESH J. SHAH BY THE ASSESSEE AND CLAIMED AS EXPENSES IN HIS PROFIT AND LOSS ACCOUNT ARE NOT GENUINE, THE PURCHASES TO THAT EXTENT REMAINED UNVERIFIABLE. HE ALSO OBSERVED THAT THE DEALERS FROM WHOM THE ASSESSEE MADE PURCHASES STATED THAT THEY HAVE ISSUED ONLY ACCOMMODATION BILLS. THEREFORE, PLACING RELIANCE ON VARIOUS JUDICIAL PRONOUNCEMENTS THE ASSESSING OFFICER ESTIMATED THE PROFIT ELEMENT AT 25% OF SUCH PURCHASES OF .32,76,024/ - & . 46,47, 968/ - AND TREATED PURCHASES OF .8,19,006/ - & .11,61,992/ - AS NON - GENUINE AND ADDED TO THE INCOME OF THE ASSESSEE FOR THE A.Y S . 2009 - 10 & 2011 - 12 RESPECTIVELY . ON APPEAL THE LD.CIT(A) CONSIDERING THE EVIDENCES AND VARIOUS SUBMISSIONS OF THE ASSESSEE REST RICTED THE DISALLOWANCE TO THE EXTENT 6.25 % & 5.25% OF THE NON - GENUINE PURCHASES FOR THE A.Y. 2009 - 10 & 2011 - 12 RESPECTIVELY . 3. LD. DR VEHEMENTLY SUPPORTED THE ORDER S OF THE ASSESSING OFFICER. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE ORDERS OF THE AU THORITIES BELOW. ON A PERUSAL OF THE ORDER OF THE LD.CIT(A), WE FIND THAT THE LD.CIT(A) CONSIDERED THIS ASPECT OF THE MATTER ELABORATELY WITH REFERENCE TO THE SUBMISSIONS OF THE ASSESSEE AND THE AVERMENTS IN THE ASSESSMENT ORDER AND CONSIDERING THE NATURE OF THE BUSINESS OF THE ASSESSEE AND FOLLOWING VARIOUS HON'BLE HIGH COURTS RESTRICTED THE DISALLOWANCE TO 6.25 % & 5.25% OF THE NON - GENUINE PURCHASES FOR THE 4 ITA NO. 5577 & 5578 /MUM/2018 LATE SHRI MUKESH J. SHAH A.Y. 2009 - 10 & 2011 - 12 RESPECTIVELY , WHILE HOLDING SO, THE LD.CIT(A) FOR THE A.Y. 2009 - 10 OBSERVED AS UNDER: - 4. THE ISSUE RAISED IN GROUNDS 1 TO 8 IS DISALLOWANCE OF SUMS REPRESENTED BY BOGUS ACCOMMODATION ENTRIES. THESE ENTRIES ARE DEBITED TO PROFIT AND LOSS ACC OUNT HAVING EFFECT IN DETERMINATION OF TAXABLE PRO FIT. THE DISALLOWANCE MADE IS RS 8,19,006 BEING 25% OF TOTAL VALUE OF ACCOMMODATION ENTRIES OF WHICH ASSESSING OFFICER HAD RECEIVED INFORMATION. IT IS A SETTLED LEGAL POSITION THAT THE ONUS IS ON ASSESSEE TO PROVE THE EXPENSE IS GENUINE. HERE ASSESSING OFFICER MADE EFFORT TO VERIFY GE NUINENESS OF TRANSACTION AND FAILED. THE ONUS THEREFORE SHIFTS TO ASSESSEE, WHO FAILED TO DISCHARGE THE SAME. AS CLEARLY BROUGHT OUT IN PARAGRAPH 8 OF ASSESSMENT ORDER, THE RELEVANT EVIDENCE WERE NOT PRODUCED. THE PURCHASE BILLS PRODUCED BEFORE ASSESSING O FFICER WAS NOT CORRECT AND COMPLETE AS PER ASSESSMENT ORDER. A TRANSACTION HAS TWO PARTS BEING PAYMENT FOR GOODS/SERVICES AND TRANSFER OF GOODS/RENDERING OF SERVICE. ONLY IF BOTH ARE PROVED IT CAN BE SAID THAT THE TRANSACTION IS GENUINE. THE EVIDENCE FURNI SHED COVERS ONLY THE LIMB OF PAYMENT BUT NOTHING ON ACTUAL TRANSFER OF GOODS. HERE THE CASE IS THAT THE EVIDENCE IS FACTITIOUS AND HENCE EVIDENCE ON ACTUAL TRANSFER OF GOODS ONLY SUBSTANTIATE THE CASE. THE ASSESSEE HAS FAILED IN SUBSTANTIATING THE SAME. 5. IN COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER ISSUED NOTICE UNDER SECTION 133(6) TO THE ALLEGED SUSPICIOUS PARTIES./ HAWALA OPERATORS. THEY WERE RETURNED AS NOT CLAIMED / NOT FOUND. THE MATTER WAS PUT TO ASSESSEE. DOCUMENTARY EVIDENCE OF REQU ISITE STRENGTH TO ESTABLISH GENUINENESS OF TRANSACTION W.R.T FACTS RECORDED IN PRECEDING PARAGRAPH WAS NOT PRODUCED BEFORE ASSESSING OFFICER TO SUBSTANTIATE THE CLAIMED TRANSACTION. IN GROUND 7 IT IS STATED THAT THE COPIES POSTAL REMARKS WERE NOT COMMUNICA TED TO ASSESSEE. THIS IS NOT MATERIAL AS FACTS ARE COMMUNICATED PROVIDING ASSESSEE REASONABLE OPPORTUNITY OF BEING HEARD. 6. ON THE ISSUE OF CROSS EXAMINATION OF WITNESS RAISED IN GROUND 5 IN THIS CASE THE ASSESSING OFFICER INDEED ATTEMPTED TO CARRY OUT SA ME BY ISSUING NOTICE UNDER SECTION 133(6) TO CONCERNED PARTIES, FAILED, AND AS PART OF SHIFTING ONUS, ASKED ASSESSEE TO PROVIDE DETAILS WHICH ASSESSEE FAILED. THIS GROUND IS ALSO REJECT ED. 7. ON THE ASPECT OF QUANTITATIVE TALLY STATED BEFORE ME CORRESPONDI NG TO GROUND 4, IT AGAIN IS NOTED TO BE FROM WITHIN THE ACCOUNTS OF ASSESSEE AND DOES NOT PROVE THAT THE TRANSACTION IS 5 ITA NO. 5577 & 5578 /MUM/2018 LATE SHRI MUKESH J. SHAH GENUINE IN THE FACTS AND CIRCUMSTANCES OF THE CASE AS TRANSFER OF GOODS IS NOT PROVED AND ADVERSE RESULT AGAINST ISSUE OF NOTICE TO THE ALLEGED ENTRY PROVIDERS, WHO WERE TO BE WITNESS OF APPELLANT. 8. ON ACCOUNT OF DISCUSSION ABOVE, I HOLD THAT THE ASSESSING OFFICER IS CORRECT IN HIS FINDING THAT THE ENTRY IS BOGUS. ORDINARILY ONCE PURCHASE IS HELD BOGUS, ENTIRE PURCHASE IS TO BE DISALLOWED AS A BOOK ENTRY HAVING EFFECT OF REDUCING PROFIT IS CREATED SOLELY FOR REDUCING NORMAL PROFIT. HOWEVER JUDICIAL DECISIONS NEED TO BE FOLLOWED BY WHICH A FIXED PER CENT OF SAME I.E BOGUS ENTRY/ ACCOMMODATION ENTRY IS ADDED TO INCOME [EG: DC IT, 14( 1)(2), MUMBAI VS M/S FAGIOLI INDIA PVT. LTD. (ITA NO. 4557 & 4558/MUM/2015 DATED 28.07.2017, WHICH INTER ALIA CONSIDERED DECISION OF HON. SUPREME COURT IN N K PROTIENS VS DCIT (SLP 759 TO 2017) DATED 16.01.2017]. IN THE CITED CASE OF M/S FAGIOLI INDIA PVT. LTD. GROSS PROFIT WAS 37% AND HON.LTAT DECIDED THAT ESTIMATE OF PROFIT BE 12.5% ON THE FIGURE OF ACCOMMODATION ENTRY OR BOGUS PURCHASE. FURTHER IN SHRI MEHUL K. MEHTA PROP. VAISHNAVI EN TERPRISES VS INCOME TAX OFFICER 15(1)(3), MUMBAI IN I.T.A. NO.3 227/MUM /2016 DATED 14.03.2017 IN THE CONTEXT OF THE CASE THE HON. ITAT ORDERED AS UNDER: WE DO NOT FIND ANY INFIRMITY IN THE WELL REASONED APPELLATE ORDER OF LEARNED CL '(A) WHICH WE ARE INCLINED TO AFFIRM/SUSTAIN EXCEPT THAT, IN OUR CONSIDERED VIEW , THE END OF JUSTICE WILL BE MET IN THE INSTANT CASE IF GP IS ESTIMATED TO TUNE OF 12.5% OF THE PURCHASES FROM THESE ALLEGED HAWALA OPERATORS WHICH WILL COVER ANY LEAKAGE OF REVENUE BY WAY OF VAT, COMMISSION ETC. , THUS, AS COMPARED TO THE GP RATIO AT 7.11% DECLARED BY THE ASSESSEE, WE ARE ESTIMATING GP RATIO AT THE RATE OF 12.5% ON THE SAID BOGUS PURCHASES WHEREIN THE ASSESSEE WILL BE ALLOWED CREDIT OF DECLARED GP RATIO OF 7.11% AND NET ADDITION TO GP RATIO SHALL BE TO THE TUNE OF 5.39% ON BOGUS PURCHASES, HENCE, WE AL LOW PARTIAL RELIEF TO THE ASSESSEE. WE ORDER ACCORDINGLY. IT CAN BE SEEN THAT IN THE ABOVE THE HON.LTAT HAS REDUCED ADDITION FURTHER VIS - A - VIS THE ORIGINALLY ACCEPTED FIGURE OF 12.5%. 9. ALL SUBMISSIONS OF THE APPELLANT IS DULY CONSIDERED. THE GROSS PROFIT RATE OF ASSESSEE IS 8.06%. THE DISPUTED TRANSACTION IS RESELLING OF IRON AND STEEL. THE ASSESSING OFFICER DISALLOWED 25 % OF THE ALLEGED AMOUNT OF ACCOMMODATION ENTRIES. ON FACTS AND CIRCUMSTANCES OF THE CASE, I, AFTER CONSIDERING ALL ASPECTS INCLUDING STRENGTH OF EVIDENCES FROM EITHER SIDE HOLD THAT DISALLOWANCE BE KEPT AT 6.25% OF TRANSACTIONS COVERED BY ACCOMMODATION ENTRIES. 6 ITA NO. 5577 & 5578 /MUM/2018 LATE SHRI MUKESH J. SHAH 5. ON A CAREFUL PERUSAL OF THE ORDER OF THE LD.CIT(A) AND THE REASONS GIVEN THEREIN, WE DO NOT FIND ANY INFIRMITY IN THE ORDER PA SSED BY THE LD.CIT(A). NONE OF THE FINDINGS AND OBSERVATIONS OF THE LD.CIT(A) HAVE BEEN REBUTTED WITH EVIDENCES BY THE REVENUE AND THUS WE DO NOT SEE ANY INFIRMITY IN THE ORDER PASSED BY THE LD.CIT(A) IN SUSTAINING THE ADDITION/DISALLOWANCE TO THE EXTENT OF 6.25% & 5.25% OF THE PURCHAS ES FOR THE A.Y. 2009 - 10 & 2011 - 12 RESPECTIVELY. GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 6. IN THE RESULT, APPEALS FILED BY THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 22 ND NOVEMBER 2019 SD/ - SD/ - ( MANOJ KUMAR AGGARWAL ) (C.N. PRASAD) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI / DATED 22 / 11 / 2019 GIRIDHAR , S R. PS COPY OF THE ORDER FORWARDED TO : 1. THE ASSESSEE 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY// BY ORDER (ASSTT. REGISTRAR) ITAT, MUM