ITO 17 (2)(1), MUMBAI V. ISHARDAS AGGARWAL & SONS, MUMBAI

ITA 5605/MUM/2018

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 3419 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-11-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 03-10-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AKHTAR HANSARI
• Keywords: Reopening of assessment; Bogus purchase; Accommodation entries
• Section: 142(1); 143(1); 143(2); 147; 148; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH SMC, MUMBAI BEFORE SHRI SHAMIM YAHYA (AM) & SHRI PAWAN SINGH (JM) ITA NO. 5605/MUM/2018(A Y : 2010-11) ITO 17(2)(1), 1ST FLOOR, ROOM NO. 134, AAYAKAR BHAVAN, M.K.ROAD, MUMBAI-400020 VS M/S ISHARDAS AGGARWAL & SONS 390, LATIF HOUSE, S.T. ROAD, MUMBAI-400 009 PAN : AABFI2423E APPELLANT RESPONDEDNT APPELLANT BY SHRI AKHTAR H ANSARI RESPONDENT BY NONE DATE OF HEARING 20-11-2019 DATE OF PRONOUNCEMENT 25-11-2019 O R D E R PER PAWAN SINGH, JM : 1. THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER OF CIT(A)- 56, MUMBAI DATED 31-07-2018 FOR THE ASSESSMENT YEAR 2010-11. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - 'ON THE FACTS AND CIRCUMSTANCES OF THE CASE, AND IN LAW, THE LD. CIT(A) HAS ERRED IN DIRECTING THE A.O. TO RESTRICT THE ADDITION OF RS. 45,91,500 /- BEING 12.5% OF BOGUS PURCHASE OF RS. 3,67,32,000/- TO 3% THEREBY GIVING A RELIEF OF RS.34,89,540/- TO THE ASSESSEE WITHOUT CONSIDERING THE FACT THAT THE AFORESAID ADDITION TO THE TOTAL INCOME OF THE ASSESSEE WAS MADE BY A.O. ON THE BASIS OF INFOR MATION RECEIVED FROM AN AUTHORITATIVE EXTERNAL SOURCE I.E. MAHARASHTRA SALES TAX DEPARTMENT THROUGH DGIT(INV.) MUMBAI. . 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE I S A FIRM, DOING BUSINESS IN IRON AND STEEL PIPE TRADING, FILED ITS RETURN OF IN COME ON 28-09-2010 DECLARING TOTAL INCOME AT RS.41,907/- WHICH WAS PRO CESSED U/S 143(1) OF 2 ITA 5605/MUM/2018 ISHARDAS AGGARWAL & SONS THE INCOME-TAX ACT (ACT). THE ASSESSMENT WAS RE-OPENED UNDER SECTION 147 ON THE BASIS OF INFORMATION RECEIVED FROM SALE TAX DEPARTMENT, GOVERNMENT OF MAHARASHTRA INFORMING THAT CERTAIN HA WALA OPERATORS WERE INDULGING IN PROVIDING ACCOMMODATION BILLS WITHOUT ACTUAL DELIVERY OF GOODS. THE SALE TAX DEPARTMENT, GOVERNMENT OF MAHAR ASHTRA REFERRED THE LIST OF SUCH HAWALA DEALERS AND THE BENEFICIARY TO THE DGIT (INVESTIGATION), MUMBAI. THE NAME OF ASSESSEE APPEARED IN THE LIST O F BENEFICIARIES. THE ASSESSEE ALLEGEDLY MADE THE PURCHASES OF RS. 3,67,31,998/- FROM SUCH HAWALA DEALERS. ON THE BASIS OF INFORMATION, THE AS SESSING OFFICER MADE A BELIEF THAT THE INCOME OF THE ASSESSEE ESCAPED ASSE SSMENT, THEREFORE, RE- OPENED THE ASSESSMENT UNDER SECTION 147. NOTICE UND ER SECTION 148 DATED 27.03.2015 WAS ISSUED TO THE ASSESSEE. THE ASSES SEE, THEREAFTER ASKED FOR REASONS RECORDED FOR REOPENING OF ASSESSMENT WHICH WAS SUPPLIED TO THE ASSESSEE VIDE LETTER DATED 24-07-2015. ASSESSING O FFICER THEREAFTER ISSUED NOTICES U/S 142(1) & 143(2) ALONG WITH A QUESTIONNA IRE ON 29.03.2015.. DURING THE ASSESSMENT, THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS SHOWN PURCHASES FROM THE FOLLOWING PARTIES, WHO WER E DECLARED AS HAWALA DEALERS BY THE SALE TAX DEPARTMENT, GOVERNMENT OF M AHARASHTRA: NAME OF THE PARTIES BILL AMOUNT (RS.) 1 DHRV SALES CORPORATION 20,17,100 2 OM CORPORATION 28,00,687 3 DEEPALI ENTERPRISES 4,74,714 3 ITA 5605/MUM/2018 ISHARDAS AGGARWAL & SONS 4 SIDDHIVINAYAK TRADING 16,45,873 5 REKHA TRADING COMPANY 4,74,015 6 SIDDHIVINAYAK STEELS 12,46,533 7 NAMAN ENTERPRISES 8,62,331 8 SHANTINATH CORPORATION 9,60,009 9 BHAVANI TRADE LINK 53,13,852 10 CHANCHAL TUBE CORPORATION 29,10,354 11 SURAT TUBE CORPORATION 4,66,657 12 NADEEP TRADING CORPORATYION 46,36,811 TOTAL AMOUNT 3,67,31,998 3. THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS CLAIMED TOTAL PURCHASES OF RS.3,67,31,998/- FROM THE ABOVE PARTIES AND THE TIN PROVIDED BY THE ASSESSEE IN RESPECT OF THE ABOVE MENTIONED PARTIES WAS EXACTLY THE SAME AS APPEARING IN THE INFORMATION AVAILABLE IN HIS OF FICE. THE AO ASKED THE ASSESSEE TO FURNISH ALL RELEVANT EVIDENCE TO ESTABL ISH THAT GOODS HAVE ACTUALLY BEEN DELIVERED / SUPPLIED. THE ASSESSEE W AS ALSO ASKED TO FURNISH HIS EXPLANATION ON THE PURCHASES PURPORTED TO HAVE MADE FROM THE AFORESAID PARTY AND THE DETAILS OF BROKERS / AGENTS THROUGH WHOM PURCHASES WERE CLAIMED TO HAVE BEEN MADE BY THE ASS ESSEE INCLUDING NAME, ADDRESS, CONTRACT NUMBER, ETC. TO PROVE THE G ENUINENESS OF THE TRANSACTION. THE ASSESSEE, IN ITS REPLY DATED 22-0 2-2016 HAS FURNISHED COPIES OF PURCHASE BILLS AND PAYMENT DETAILS TO PUR CHASE PARTIES; HOWEVER, NO FURNISHED THE DETAILS OF BROKERS / AGENTS OR THE SUPPLIERS BEFORE THE AO. 4 ITA 5605/MUM/2018 ISHARDAS AGGARWAL & SONS THE AO NOTED THAT THE ASSESSEE HAS NOT MADE AVAILAB LE THE DETAILS OF TRANSPORTATION OF THE MATERIAL PURPORTED TO HAVE BE EN PURCHASED FROM THE AFORESAID HAWALA DEALERS, SUCH AS TRANSPORTATION RE CEIPTS, DELIVERY CHALLANS, AND LEDGER ACCOUNT CONFIRMATION FROM THE AFORESAID DEALERS. THE AO FURTHER NOTED THAT THE DEDUCTION OF VAT IN T HE BILL DOES NOT BOLSTER THE CASE OF THE ASSESSEE BECAUSE SUCH DEDUC TION DOES NOT PROVE GENUINENESS OF A PARTICULAR TRANSACTION IN TERMS OF SUPPLY OF MATERIAL, SUCH DEDUCTION IS BASICALLY LINKED WITH THE PAYMENT ASPECT ONLY AND CANNOT ESTABLISH THE PURPOSE FOR WHICH PAYMENT IS M ADE; THE PRODUCTION OF INVOICE IS OF NO HELP TO THE ASSESSEE SINCE IN T HE ACTIVITY OF ACCOMMODATION ENTRY, SUCH DOCUMENTS ARE METICULOUSL Y MAINTAINED BOTH BY THE ENTRY PROVIDER AND ENTRY SEEKER. THE AO FUR THER NOTED THAT IT WAS ALSO NOT IMPORTANT WHETHER THE AMOUNT IS SMALL OR B IG AND WHETHER THE ASSESSEE IS HAVING LOSS OR PROFIT. THERE MAY BE NU MBER OF REASONS FOR SEEKING THE ACCOMMODATION ENTRY AS IT LEADS TO GENE RATION OF THE CASH IN THE HANDS OF THE ASSESSEE. THE AO FURTHER OBSERVED THAT THE ONUS WAS ON THE ASSESSEE TO PROVE THE GENUINENESS OF EXPENDITUR E AS IT WAS THE ASSESSEE WHO HAS MADE THE CLAIM AND FURTHER THE HAW ALA PARTIES WERE PERSONALLY PRESENT FOR GIVING THE DEPOSITION BEFORE THE SALES-TAX AUTHORITIES BUT VANISHED INTO THIN AIR IMMEDIATELY WHEN INCOME-TAX DEPARTMENT STARTED MAKING ENQUIRY. THE AO ULTIMA TELY TOOK HIS VIEW 5 ITA 5605/MUM/2018 ISHARDAS AGGARWAL & SONS THAT THE ASSESSEE HAS INTENTIONALLY INFLATED THE PU RCHASES BY TAKING ACCOMMODATION ENTRY TO REDUCE THE PROFIT ELEMENT. HE OBSERVED THAT THE ASSESSEE HAS STATED THAT IT HAS SOLD THE GOODS PURC HASED FROM THE ALLEGED BOGUS PARTIES TO VARIOUS PARTIES. THEREFORE, ONLY PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES COULD ONLY BE ADDED TO INCOME OF THE ASSESSEE. ACCORDINGLY, FOLLOWING THE DECISION OF ITAT, MUMBAI IN THE CASE OF ACIT VS ARYA TEXTURISERS & TWISTERS (ITA NO.29/MUM/ 2002) DATED 03- 12-2005, AND ALSO THE JUDGMENT OF HONBLE GUJARAT H IGH COURT IN THE CASE OF CIT VS BHOLANATH POLY FAB PVT LTD (2013) 35 5 ITR 290 (GUJ), THE AO ADDED AN AMOUNT OF RS.45,91,500/- BEING THE PROF IT ELEMENT AT 12.5% EMBEDDED IN THE ALLEGED BOGUS PURCHASES. 4. ON APPEAL, THE LD.CIT(A) REDUCED THE ADDITION TO TH E EXTENT OF 3% OF TRANSACTIONS COVERED BY ACCOMMODATION ENTRIES, WITH THE FOLLOWING OBSERVATIONS:- 17. ALL SUBMISSIONS OF THE APPELLANT IS DULY CONSI DERED. THE GROSS PROFIT RATE OF IS 4.7%. THE ASSESSEE DEALS IN IRON AND STEEL. THE ASSESSING OFFICER DISALLOWED '12.5% OF THE ALLEGED, AMOUNT OF ACCOMMODATION ENTRIES. ON FACTS AND CIRCUMSTANCES O F THE CASE, I, AFTER CONSIDERING ALL ASPECTS WHICH INCLUDES (A) TH E EXTENT OF DOCUMENTATION APPELLANT HAS AND (B) THE STRENGTH OF EVIDENCES BROUGHT TO RECORD BY ASSESSING OFFICER AND MAKING RELATIVE WEIGHING OF SAME, HOLD THAT A MODERATE DISALLOWANCE SUFFICE IN THIS S PECIFIC CASE. IT IS DIRECTED THAT THE DISALLOWANCE BE KEPT AT 3% OF TRA NSACTIONS COVERED 6 ITA 5605/MUM/2018 ISHARDAS AGGARWAL & SONS ACCOMMODATION ENTRIES. REGROUPED GROUND 2 IS DISPOS ED OF ACCORDINGLY AND ASSESSING OFFICER IS DIRECTED TO MO DIFY ASSESSMENT. 5. AGGRIEVED BY THE ORDER OF LD.CIT(A), THE REVENUE HA S FILED THE PRESENT APPEAL BEFORE US. NONE APPEARED ON BEHALF OF ASSES SEE, DESPITE SERVICE OF NOTICE. THEREFORE, WE ARE LEFT WITH NO OPTION EXCE PT TO HEAR THE SUBMISSION OF LD. DR FOR THE REVENUE AND TO DECIDE THE APPEAL ON THE BASIS OF MATERIAL AVAILABLE ON RECORD. 6. THE LD. DR FOR THE REVENUE SUBMITS THAT DURING THE ASSESSMENT ASSESSEE FAILED TO FURNISH NECESSARY EVIDENCE. THE ASSESSEE WAS ONE OF THE BENEFICIARIES FROM THE PARTIES SHOWN IN THE LIST OF HAWALA DEALERS, COPY OF WHICH WAS FORWARDED TO THE AO. THE LD. DR FOR THE R EVENUE FURTHER SUBMITTED THAT THE INVESTIGATION WING OF THE INCOME -TAX DEPARTMENT MADE FULL-FLEDGED ENQUIRY. THE PARTIES FROM WHOM TH E ASSESSEE HAS SHOWN THE PURCHASES ARE BOGUS HAWALA DEALERS. THE H AWALA DEALERS ARE INDULGED IN ISSUING BOGUS BILLS WITHOUT DELIVERY OF ANY MATERIAL OR GOODS. THE ASSESSEE OBTAINED ACCOMMODATION BILLS ONLY IN O RDER TO INFLATE THE EXPENSES AND TO BRING DOWN THE PROFITABILITY IN ORD ER TO AVOID THE TAX. 7. WE HAVE CONSIDERED THE SUBMISSIONS OF THE LD. DR FO R THE REVENUE AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE HAVE NOTED THAT DURING THE ASSESSMENT THE ASSESSEE WAS ASKED TO FURNISH THE EV IDENCE RELATING TO THE ALLEGED HAWALA PURCHASES. THE AO RECORDED THAT THE ASSESSEE FAILED TO PRODUCE ANY EVIDENCE. THE AO, HOWEVER, FOLLOWING T HE DECISION OF 7 ITA 5605/MUM/2018 ISHARDAS AGGARWAL & SONS HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS B HOLANATH POLY FAB PVT LTD (SUPRA) AND THE DECISIONS OF THE TRIBUNAL C ITED ABOVE, ADDED 12.5% OF THE ALLEGED HAWALA PURCHASES BEING THE PRO FIT ELEMENT EMBEDDED IN SUCH UNRECORDED PURCHASE, WHICH CAME TO RS.45,91,500/-. ON APPEAL, THE LD. CIT(A) REDUCED THE ADDITION TO T HE EXTENT OF 3% ON SUCH HAWALA PURCHASES. THE LD CIT(A) CONSIDERED TH E GROSS PROFIT (GP) DECLARED BY THE ASSESSEE @ 4.7%. THE LD. CIT(A) AF TER CONSIDERING THE FACTS THAT THE ASSESSEE IS DEALING IN IRON AND STEE L AND HAS ALREADY DECLARED GP @ 4,7% AND CONSIDERING THE EVIDENCE FILED BY THE ASSESSEE SUSTAINED THE DISALLOWANCE TO THE EXTENT OF 3% OF THE IMPUGNE D PURCHASE. NO CONTRARY FACT TO TAKE OTHER VIEW IS BROUGHT TO OUR NOTICE. ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF LD.CIT(A) . WE UPHOLD THE SAME. THE GROUND OF THE REVENUE FAILS. 7. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 25-11-2019. SD/- SD/- (SHAMIM YAHYA) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIALMEMBER MUMBAI, DT : 25 TH NOVEMBER, 2019 PK/- COPY TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 8 ITA 5605/MUM/2018 ISHARDAS AGGARWAL & SONS 5. DR /TRUE COPY/ BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI