CHAGANLAL PUKHRAJ PARMAR, MUMBAI V. ITO 29(1)(2), MUMBAI

ITA 5588/MUM/2016

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 5398 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 8 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-05-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2009-2010
• Appeal Filed On: 14-09-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AWANGHI GIMSONLD
• Assessee Lawyers: VIMAL PUNMIYA LD
• Keywords: Bogus purchase; Rejection of books of accounts; Opportunity of being heard; Principle of natural justice; Accommodation entries; Reason to believe; Reassessment proceedings
• Section: 271(1)(c); 69C; 143(3); 142(1); 133(6); 147; 131; 148

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI , , BEFORE SHRI SAKTIJIT DEY, JM AND SHRI MANOJ KUMAR AGGARWAL, AM ./ I.T.A. NO.5588/MUM/2016 ( / ASSESSMENT YEAR: 2009-10) SHRI CHAGANLAL PUKHRAJ PARMAR MAHAVEER UNIVERSE, MAVEN, 1101 LBS ROAD, BHANDUP(W) MUMBAI-400 078. / VS. INCOME TAX OFFICER - 29(1)(2) MUMBAI. ! ./ ./PAN/GIR NO. AGMPP-7757-P ( /APPELLANT ) : ( / RESPONDENT ) ASSESSEE BY : SHRI VIMAL PUNMIYA-LD.AR DEPARTMENT BY : AWANGHI GIMSON-LD. DR / DATE OF HEARING : 13/05/2019 / DATE OF PRONOUNCEMENT : 16/05/2019 / O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER):- 1. AFORESAID APPEAL BY ASSESSEE FOR ASSESSMENT YEAR [AY] 2009-10 CONTEST THE ORDER OF LD. COMMISSIONER OF INCOME-TAX (APPEALS)-40, MUMBAI, [CIT(A)], APPEAL NO. CIT(A)-40/IT-759/2014-15 D ATED 14/07/2016 ON FOLLOWING GROUNDS OF APPEAL: - 2 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT (A) ERRED IN CONFIRMING THE RE-ASSESSMENT PROCEEDING U/S 147 INI TIATED BY THE LD. ASSESSING OFFICER. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE LD. CIT(A) FAILED TO CONSIDER THAT REASSESSMENT PROCEEDING CANNOT BE INI TIATED:- A) NO REASSESSMENT CAN BE MADE JUST TO MAKE AN E NQUIRY OR VERIFICATION. B) REASSESSMENT PROCEEDING CANNOT BE INITIATE MEREL Y ON THE INFORMATION RECEIVED FROM INVESTIGATION WING. C) REASSESSMENT PROCEEDING CANNOT BE INITIATED W HEN THE LD. AO HAVE REASON TO SUSPECT AND NOT REASON TO BELIEVE. 3. ON THE FACTS AND CIRCUMSTANCES OF CASE AND LAW, THE LD. CIT(A) ERRED IN CONFIRMING THE ASSESSMENT ORDER PASSED BY LD. AO U/ S 143(3) R.W.S. 147 OF INCOME TAX ACT, WHICH IS PASSED AGAINST THE PRINCIP AL OF NATURAL JUSTICE. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE L D. CIT (A) ERRED IN CONFIRMING THE ORDER OF THE LD. ASSESSING OFFICER WHO FAILED T O FULFILL THE CONDITION OF SEC. 151. 5. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE L D. CIT (A) ERRED IN CONFIRMING AND REJECTING THE BOOKS OF ACCOUNTS OF THE ASSESSEE IN VIEW OF SECTION 145(3) OF THE I.T.ACT, 1961. 6. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND L AW, THE LD. CIT(A) DIRECTED THE LD ASSESSING OFFICER TO ESTIMATE THE PROFIT OF 20% OF THE PURCHASES AND ERRED IN CONFIRMING THE ADDITION OF RS. 55,62,404/-( I.E 20% OF THE PURCHASES OF RS.2,78,12,020/-) IN VIEW OF SECTION 69C ONLY ON ES TIMATION AND WITHOUT ANY BASIS. 7. THE LD. CIT(A) ERRED IN CONFIRMING THE INTEREST CHARGED U/S234A, 234B, 234C & 234D OF THE I T ACT. 8. THE LD. CIT(A) ERRED CONFIRMING THE INITIATION O F THE PENALTY PROVISIONS U/S 271(1)(C) R.W.S. OF THE INCOME TAX ACT. THE APPEAL IS A RECALLED MATTER SINCE THE SAME WAS DISPOSED-OFF BY THE TRIBUNAL VIDE ORDER DATED 28/02/2018. HOWEVER, THE SAME WAS RECALLED VIDE MA NO. 560/MUM/2018 ORDER DATED 28/02/2019 IN VIEW OF THE FACT THAT CERTAIN GROUNDS WERE REMAINED TO BE ADJUDICATED. AC CORDINGLY, THE APPEAL HAS COME UP FOR FRESH HEARING BEFORE THIS BENCH. 2.1 BRIEF FACTS ARE THAT THE ASSESSEE BEING RESIDENT INDIVIDUAL STATED TO BE ENGAGED IN TRADING OF IRON & STEEL UNDER PROPRIETARY CONCERN NAMELY M/S MAHARASHTRA METALS WAS ASSESSED FOR IMPUGNED AY U/S 143(3) READ WITH SECTION 147 ON 05/03/2015 BY LD. INCOME TAX OFFICER-29(1)(2), MUMBAI 3 [AO] WHEREIN THE INCOME OF THE ASSESSEE WAS DETERMINED A T RS.281.78 LACS AFTER SOLE ADDITION ON ACCOUNT OF ALLEGED BOGUS PURCHASES FOR RS.278.12 LACS AS AGAINST RETURNED INCOME OF RS.3.6 6 LACS E-FILED BY THE ASSESSEE ON 22/09/2009 WHICH WAS PROCESSED U/S 143( 1). BESIDES VALIDITY OF REASSESSMENT PROCEEDINGS, THE ADDITION OF RS.278 .12 LACS AS MADE BY LD. AO ON ACCOUNT OF ALLEGED BOGUS PURCHASES IS THE SOLE SUBJECT MATTER OF PRESENT APPEAL BEFORE US. 2.2 THE REASSESSMENT PROCEEDINGS GOT TRIGGERED PURS UANT TO RECEIPT OF CERTAIN INFORMATION FROM DGIT (INVESTIGATION) / SALES TAX DEPARTMENT, MAHARASHTRA WHEREIN IT TRANSPIRED THAT THE ASSESSEE STOOD BENE FICIARY OF ACCOMMODATION PURCHASE BILLS AGGREGATING TO RS.278. 12 LACS FROM 12 SUSPICIOUS ENTITIES, THE DETAILS OF WHICH HAVE ALRE ADY BEEN EXTRACTED IN PARA 2 OF THE QUANTUM ASSESSMENT ORDER DATED 05/03/2015. A CCORDINGLY, THE CASE WAS REOPENED U/S 147 BY ISSUANCE OF NOTICE U/S 148 ON 05/02/2014 WHICH WAS FOLLOWED BY STATUTORY NOTICE U/S 142(1) W HEREIN THE ASSESSEE WAS DIRECTED TO SUBSTANTIATE THE AFORESAID PURCHASE S. 2.3 ALTHOUGH THE ASSESSEE DEFENDED THE PURCHASES MA DE BY HIM, HOWEVER, NOTICES ISSUED U/S 133(6) TO ALL THE ENTIT IES TO CONFIRM THE TRANSACTIONS, WERE RETURNED BACK UNSERVED BY THE PO STAL AUTHORITIES. THE INQUIRIES CONDUCTED BY SALES TAX AUTHORITIES REVEAL ED THAT THE AFORESAID PARTIES WERE ENGAGED IN PROVIDING ACCOMMODATION ENT RIES WITHOUT CARRYING OUT ANY ACTUAL BUSINESS WHICH WAS ALSO CONFIRMED BY THESE PARTIES IN THE SHAPE OF STATEMENTS / AFFIDAVITS FILED BEFORE SALES TAX AUTHORITIES. IT WAS ALSO OBSERVED THAT THE DELIVERY OF MATERIAL WAS NOT SUPPORTED BY ANY 4 DELIVERY CHALLANS, LORRY RECEIPTS ETC. AND MERE PAY MENT THROUGH BANKING CHANNELS WAS NOT SUFFICIENT TO PROVE THE PURCHASES. THE ASSESSEE COULD NOT PRODUCE ANY OF THE SUPPLIERS TO CONFIRM THE TRANSAC TIONS AND ALSO FAILED TO DEMONSTRATE DELIVERY OF MATERIAL . 2.4 THE ASSESSEES STATEMENT U/S 131 WAS RECORDED O N THE BASIS OF WHICH CONCLUSIONS WERE DRAWN THAT THE ASSESSEE WAS NOT EV EN ABLE TO IDENTIFY THE PARTIES. NO CONCRETE REPLY, EXPLANATION OR EVIDENCE COULD BE ADDUCED TO PROVE THE GENUINENESS OF THE TRANSACTIONS. RESULTAN TLY, THE BOOKS WERE REJECTED U/S 145(3) AND AFORESAID AMOUNT OF RS.278. 12 LACS WAS ADDED TO THE INCOME OF THE ASSESSEE AS UNEXPLAINED INVESTMEN T U/S 69C. 3.1 AGGRIEVED, THE ASSESSEE AGITATED THE SAME WITH PARTIAL SUCCESS BEFORE LD. CIT(A) VIDE IMPUGNED ORDER DATED 14/07/2 016, WHEREIN THE ASSESSEE CONTESTED THE VALIDITY OF REASSESSMENT PRO CEEDINGS AS WELL AS ADDITIONS ON MERITS. 3.2 ON LEGAL GROUND, IT WAS NOTED THAT THE CASE WAS REOPENED WITHIN 4 YEARS FROM THE END OF RELEVANT AY AND THEREFORE, PR IOR SANCTION BEFORE ISSUE OF NOTICE WAS NOT MANDATED U/S 151(2). FURTHER, THE REASSESSMENT PROCEEDINGS WERE TRIGGERED SINCE SCAM WAS UNEARTHED BY THE SALES TAX DEPARTMENT WHEREIN SEVERAL PARTIES WERE FOUND TO BE ISSUING HAWALA BILLS OF ACCOMMODATION ENTRIES AND IT WAS FOUND THAT THE ASS ESSEE HAD TAKEN SUCH ACCOMMODATION BILLS WHICH SUGGESTED ESCAPEMENT OF I NCOME IN THE HANDS OF THE ASSESSEE AND THE SUFFICIENCY OF REASONS, AT THIS STAGE, WAS NOT MATERIAL. RELIANCE WAS PLACED, INTER-ALIA, ON THE DECISION OF HONBLE APEX COURT RENDERED IN RAJESH JHAVERI STOCK BROKERS PVT. LTD. 291 ITR 500 TO 5 ARRIVE AT A CONCLUSION THAT THE REASSESSMENT PROCEE DINGS WERE PERFECTLY VALID. IT WAS ALSO OBSERVED THAT THE FIRST PROVISO TO SECTION 147 WAS ALSO NOT ATTRACTED. IN THE ABOVE BACKGROUND, THE REASSESSMEN T PROCEEDINGS WERE HELD TO BE VALID. 3.3 PROCEEDING FURTHER, THE ASSESSEES STATEMENT U/ S 131 AS RECORDED BY LD. AO WAS NOTED, ON THE BASIS OF WHICH IT WAS OBSE RVED THAT THE ASSESSEE WAS UNAWARE OF THE PERSONS FROM WHOM THE PURCHASES WERE MADE AND COULD NOT PROVIDE THE ADDRESS OF THE BROKER FROM WH OM SUCH PURCHASES WERE STATED TO BE MADE. FURTHER, THE ASSESSEE EXPRE SSED INABILITY TO PRODUCE EVIDENCE OF DELIVERY OF GOODS. THE MATERIAL ON RECORD AS WELL AS ASSESSEES SUBMISSIONS LED THE LD. FIRST APPELLATE AUTHORITY TO FORM AN OPINION THAT THE ASSESSEE FAILED TO DISCHARGE THE P RIMARY ONUS CASTED UPON HIM TO ESTABLISH THE GENUINENESS OF THE TRANSACTION S. IN THE ABOVE BACKGROUND, THE RATIO OF DECISION OF HONBLE APEX C OURT RENDERED IN CIT VS. DURGAPRASAD MORE 82 ITR 540 AS WELL AS SUMATI DAYAL VS. CIT 214 ITR 801 WAS APPLIED TO THE FACTUAL MATRIX. 3.4 PROCEEDING FURTHER, IN THE BACKGROUND OF VARIOU S DECISIONS OF HIGHER JUDICIAL AUTHORITIES, LD. CIT(A) PROCEEDED TO ESTIM ATE THE ADDITION ON ACCOUNT OF ALLEGED BOGUS PURCHASES IN VIEW OF THE FACT THAT THE SALES WERE ACCEPTED AND THEREFORE, THE ENTIRE PURCHASES COULD NOT BE TERMED AS BOGUS PURCHASES . THEREFORE, THE ADDITION WAS TO BE RESTRICTED TO A CCOUNT FOR ELEMENT OF PROFIT EMBEDDED IN PURCHASES. FINALLY, INTER-ALIA, FOLLOWING THE DECISION OF HONBLE GUJARAT HIGH COURT RENDERED IN CIT VS. SIMIT P.SHETH [356 ITR 451] & CIT VS. BHOLANATH POLY FAB. P. LTD. [355 ITR 290], THE 6 IMPUGNED ADDITIONS WERE RESTRICTED TO 20% OF ALLEGED BOGUS PURCHASES. AGGRIEVED, THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 4. THE LD. AR WHILE CONTESTING THE REASSESSMENT PRO CEEDINGS, PLEADED FOR REASONABLE ESTIMATION WHEREAS LD. DR SUBMITTED THAT THE ESTIMATION WAS FAIR & REASONABLE. 5. WE HAVE CAREFULLY CONSIDERED THE SAME AND DELIBE RATED ON JUDICIAL PRONOUNCEMENTS AS RELIED UPON. SO FAR AS THE VALIDI TY OF REASSESSMENT PROCEEDINGS IS CONCERNED, WE CONCUR WITH THE STAND TAKEN BY LD. FIRST APPELLATE AUTHORITY. THE PROCEEDINGS WERE TRIGGERED WITHIN 4 YEARS FROM THE END OF RELEVANT AY AND THEREFORE, SANCTION U/S 151( 2) WAS NOT REQUIRED AND ALSO, THE FIRST PROVISO TO SECTION 147 WAS NOT APPL ICABLE SINCE THE ORIGINAL RETURN WAS PROCESSED U/S 143(1). THE LD. AO WAS CLI NCHED WITH TANGIBLE INFORMATION IN THE SHAPE OF INFORMATION FROM SALES TAX AUTHORITIES WHICH PRIMA-FACIE SUGGESTED POSSIBLE ESCAPEMENT OF INCOME IN THE HAND S OF THE ASSESSEE. HENCE, NO INFIRMITY COULD BE FOUND IN TRI GGERING REASSESSMENT PROCEEDINGS AGAINST THE ASSESSEE. GROUND NOS. 1,2, & 4 STANDS DISMISSED. GROUND NO.3 ASSAILING VIOLATION OF PRINCIPLE OF NAT URAL JUSTICE WOULD STAND DISMISSED SINCE NOTHING ON RECORD SUGGEST THAT THE ASSESSEE WAS NOT PROVIDED WITH SUFFICIENT OPPORTUNITY OF BEING HEARD AND DEFEND HIS CASE. GROUND NO. 5 ASSAILS REJECTION OF BOOKS OF ACCOUNTS . HOWEVER, WE FIND THAT LD. AO HAS ONLY DISTURBED THE PURCHASES AND PARTIAL RELIEF HAS ALREADY BEEN PROVIDED BY FIRST APPELLATE AUTHORITY. THEREFORE, T HERE COULD BE NO OCCASION TO BE AGGRIEVED BY REJECTION OF BOOKS SINCE THE ISS UE IS LIMITED TO ESTIMATION ON ACCOUNT OF ALLEGED BOGUS PURCHASES ONLY. THIS GROUND STAND DISMISSED. 7 6. SO FAR AS THE QUANTUM ADDITIONS ARE CONCERNED, W E ARE OF THE CONSIDERED OPINION THAT THERE COULD BE NO SALE WITH OUT ACTUAL PURCHASE OF MATERIAL KEEPING IN VIEW THE ASSESSEES NATURE OF B USINESS. THE SALES TURNOVER WAS NOT DISPUTED BY THE LD. AO AND THE ASS ESSEE WAS IN POSSESSION OF PRIMARY PURCHASE DOCUMENTS VIZ. COPIE S OF INVOICES AND THE PAYMENTS WERE THROUGH BANKING CHANNELS. AT THE SAME TIME, NOTICES ISSUED U/S 133(6) ELICITED NO SATISFACTORY RESPONSE. THE A SSESSEE FAILED TO PRODUCE ANY OF THE SUPPLIERS TO CONFIRM THE TRANSACTIONS. IN FACT, THE ASSESSEE, IN STATEMENT U/S 131, COULD NOT EVEN IDENTIFY THE SUPP LIERS. THEREFORE, LD. CIT(A), IN OUR OPINION, CLINCHED THE ISSUE IN RIGHT PERSPECTIVE. HOWEVER, KEEPING IN VIEW THE FACT THAT THE APPLICABLE VAT RA TE ON IRON & STEEL WAS ON LOWER SIDE AND THE ASSESSEE WAS TRADING IN LOW-MARG IN ITEM, WE REDUCE THE ESTIMATION TO 5% OF ALLEGED BOGUS PURCHASES OF RS.2,78,12,020/- WHICH COMES TO RS.13,90,601/-. THE BALANCE ADDITION STAND DELETED. THE IMPUGNED ORDER STAND MODIFIED TO THAT EXTENT. GROUN D NO. 6 STANDS PARTLY ALLOWED. 7. GROUND NO. 7 & 8 ASSAILS INTEREST CHARGED U/S 23 4 AND INITIATION OF PENALTY U/S 271(1)(C). THE SAME BEING MANDATORY / C ONSEQUENTIAL / PRE- MATURE DO NOT REQUIRE OUR INDULGENCE AND HENCE, DIS MISSED. 8. THE APPEAL STANDS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 16/05/2019. SD/- SD/- (SAKTIJIT DEY) (MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER 8 MUMBAI; DATED : 16/05/2019 SR.PS:-JAISY VARGHESE ! / COPY OF THE ORDER FORWARDED TO : 1. !% / THE APPELLANT 2. &'!% / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT CONCERNED 5. ( )&* , * , / DR, ITAT, MUMBAI 6. ) ,-. / GUARD FILE / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI