INDUBHAI PRUSHOTTAMDAS VORA, MUMBAI V. ITO WD 13(2)(3), MUMBAI

ITA 5622/MUM/2015

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 9345 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-09-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2007-2008
• Appeal Filed On: 14-12-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SUMAN KUMAR
• Keywords: Reopening of assessment; Bogus purchase; Unexplained expenditure; Search and seizure; Accommodation entries
• Section: 69C; 143(3); 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL I BENCH, MUMBAI BEFORE S H RI MAHAVIR SINGH, JM AND S H RI NK PRADHAN, AM ITA NO. 5622/MUM/2015 ASSESSMENT YEAR: 2007 - 08 INDUBHAI PURUSHOTTAMDAS VORA B/302, DWARKESH, K. T. ROAD, OPP. DIAMOND CINEMA, BORIVALI (W), MUMBAI - 400 092 PAN NO. AAAPV 3168 Q VS. ITO - 32(1)(5) PRATYAKSHAKAR BHAVAN, BANDRA KURLA COMPLEX, MUMBAI A SSESSEE .. RE VENUE ITA NO. 648/MUM/2016 ASSESSMENT YEAR: 2007 - 08 ITO - 32(1)(5) PRATYAKSHAKAR BHAVAN, BANDRA KURLA COMPLEX, MUMBAI VS. INDUBHAI PURUSHOTTAMDAS VORA B/302, DWARKESH, K. T. ROAD, OPP. DIAMOND CINEMA, BORIVALI (W), MUMBAI - 400 092 PAN NO. AAAPV 3168 Q REVENUE .. ASSESSEE & ITA NOS. 5620/MUM/201 5 ASSESSMENT YEAR: 2007 - 08 INDUBHAI PURUSHOTTAMDAS VORA (HUF) B/302, DWARKESH, L. T. ROAD, OPP. DIAMOND CINEMA, BORIVALI (W), MUMBAI - 400 092 PAN NO. AAAHI 0171 G VS. ITO - 32(1)(5) ROOM NO. 203, C - 11, 2 ND FLOOR, PRATYAKSHAKAR BHAVAN, BANDRA KURLA COMPLEX, MUMBAI - 51 ASSESSEE .. REVENUE ITA NO S . 64 7 /MUM/2016 ASSESSMENT YEAR: 2007 - 08 ITO - 32(1)(5) ROOM NO. 203, C - 11, 2 ND FLOOR, PRATYAKSHAKAR BHAVAN, BANDRA KURLA COMPLEX, MUMBAI - 51 VS. INDUBHAI PURUSHOTTAMDAS VORA (HUF) B/302, DWARKESH, L . T. ROAD, OPP. DIAMOND CINEMA, BORIVALI (W), MUMBAI - 400 092 PAN NO. AAA HI 0171 G REVENUE .. ASSESSEE ITA NOS. 5622 & 5620 /M /1 5 , 64 & 648 /M/16 ASSESSMENT YEAR: 2007 - 08 PAGE 2 OF 6 ASSESSEE BY .. SHRI SATISH MODY REVENUE BY .. MS. SUMAN KUMAR DATE OF HEARING .. 22.09.2017 DATE OF PRONOUNCEMENT .. 27 . 09 . 2017 O R D E R PER BENCH : TH ESE ARE FOUR APPEAL S BY THE REVENUE AND THE ASSESSEE ARE ARISING OUT OF THE DIFFERENT ORDER S OF CIT(A), MUMBAI, IN APPEAL NO S . CIT(A) - 44/ITO - 32(1)(5)/ITA - 108 & 109 /2014 - 15 BOTH DATED 1 3 - 0 3 - 201 5 . THE ASSESSMENT S W ERE FRAMED BY ITO, WARD - 32(1)(5), MUMBAI FOR THE A.Y. 200 7 - 0 8 VIDE ORDER DATED 27.02.2015 UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961(HEREINAFTER THE ACT). 2. THE ONLY COMMON ISSUE IN THESE FOUR APPEALS, TWO BY ASSESSEE AND TWO BY REVENUE, IS AGAINST THE ORDER OF CIT(A) RESTRICTING THE ADDITION MADE BY A.O. BY APPLYING PROFIT RATE @ 2.5 2% OF THE BOGUS PURCHASES. THE ASSESSEE HAS CHALLENGED THE RESTRICTION OF ADDITION AT 2.52% AND REVENUE HAS CHALLENGED THE DELETION. THE ASSESSEE HAS ALSO CHALLENGED THE REOPENING OF ASSESSMENT U/S. 147 OF THE ACT IN BOTH THE CASES, BUT SUBSEQUENTLY, DURIN G THE COURSE OF HEARING, THE LD. COUNSEL FOR THE ASSESSEE REQUESTED FOR WITHDRAWAL OF THIS GROUND UNDER THE INSPECTION OF THE ASSESSEE. IT MEANS THAT ONLY EFFECTIVE ISSUE IN THESE FOUR APPEALS IS AS REGARDS TO RESTRICTION OF ADDITION BY CIT(A) FOR APPLYING PROFIT RATE @ 2.52% OF BOGUS PURCHASE S REMAINS. 3. BRIEFLY STATED FACTS IN BOTH THE CASES ARE THAT , A SEARCH AND SEIZURE OPERATION WAS CONDUCTED BY THE SALES TAX DEPARTMENT OF MAHARASHTRA IN THE PRAVEEN KUMAR JAIN GROUP OF CASES AND FROM WHERE IT IS NOTIC ED THAT THIS GROUP OF CASES IS INVOLVED IN PROVIDING ACCOMMODATION ENTRIES LIKE BOGUS PURCHASES/SALES, UNSECURED LOANS, ETC. THE A.O. RECEIVED INFORMATION THROUGH INVESTIGATION WING OF THE DEPARTMENT THAT BOTH THE ASSESSEE S ARE BENEFICIARIES OF ITA NOS. 5622 & 5620 /M /1 5 , 64 & 648 /M/16 ASSESSMENT YEAR: 2007 - 08 PAGE 3 OF 6 ACCOMMODATION ENTRY LIKE BOGUS PURCHASES DURING THE FINANCIAL YEAR 2006 - 07 RELEVANT TO A.Y. 2007 - 08. BOTH THE ASSESSEES RECEIVED BOGUS PURCHASES AS UNDER: IN THE CASE OF INDUBHAI PURUSHOTTAMDAS VORA SR. NO. NAME OF THE CONCERN CONTROLLED AND MANAGED BY SH RI PRAVEEN KUMAR JAIN AMOUNT (RS.) 1 CAPETOWN MERCANTILE NOW KNOWN AS SUMUKH COMMERCIAL PVT. LTD. 74,85,048 2 FASTSTONE TRADING CO. PVT. LTD. NOW KNOWN AS ATHARV BUSINESS PVT. LTD. 1,08,86,323 3 JPK TRADING (I) LTD., NOW KNOWN AS DUKES BUSINESS PVT. LTD. 49,63,325 4 NATASHA ENTERPRISES 12,49,251 5 NEW PLANET TRADING CO. PVT. LTD. NOW KNOWN AS ANSH MERCHANDISE PVT. LTD. 49,63,325 6 OSTWAL TRADING (I) PVT. LTD. NOW KNOWN AS CASPER ENTERPRISES PVT. LTD. 31,25,214 TOTAL 3,26,72,486 IN THE CASE OF INDUBHAI PURUSHOTTAMDAS VORA (HUF) SR. NO. NAME OF THE CONCERN CONTROLLED AND MANAGED BY SHRI PRAVEEN KUMAR JAIN AMOUNT (RS.) 1 CAPETOWN MERCANTILE NOW KNOWN AS SUMUKH COMMERCIAL PVT. LTD. 40,12,442 2 FASTSTONE TRADING CO. PVT. LTD. NOW KNOWN AS ATHARV BUSINESS PVT. LTD. 60,17,034 3 JPK TRADING (I) LTD., NOW KNOWN AS DUKES BUSINESS PVT. LTD. 45,23,177 4 NATASHA ENTERPRISES 20,20,282 5 NEW PLANET TRADING CO. PVT. LTD. NOW KNOWN AS ANSH MERCHANDISE PVT. LTD. 21,74,873 6 OSTWAL TRADING (I) PVT. LTD. NOW KNOWN AS CASPER ENTERPRISES PVT. LTD. 34,83,874 TOTAL 2,22,31,682 4. ACCORDING TO THE A.O. THE ENTIRE PURCHASE IS BOGUS AND MERELY ACCOMMODATION ENTRY RECEIVED BY ASSESSEE FROM ENTRY PROVIDERS. ACCORDINGLY, HE DISALLOWED THE ENTIRE PURCHASES AND ADDE D TO THE RETURNED INCOME OF THE ASSESSEE, IN BOTH THE YEARS, U/S. 69C OF THE ACT AS UNEXPLAINED EXPENDITURE. AGGRIEVED, THE ASSESSEE PREFERRED APPEAL BEFORE THE LD. CIT(A) IN BOTH THE CASES. ITA NOS. 5622 & 5620 /M /1 5 , 64 & 648 /M/16 ASSESSMENT YEAR: 2007 - 08 PAGE 4 OF 6 5. THE CIT(A) RESTRICTED THE DISALLOWANCE AT 2.52% OF THE BOGUS PURCHASES IN BOTH THE YEARS, RELYING ON THE CASE LAW OF HONBLE SUPREME COURT IN THE CASE OF SARASWATI OIL TRADERS VS. CIT 254 ITR 259 (SC) AND HONBLE BOMBAY HIGH COURT IN THE CASE OF NIKUNJ ENTERPRISES 372 ITR 619 (BOM) . HE ALSO OBSERVED THAT THE ONLY PROFIT ELEMENT OF THE TOTAL COMPONENT IS IN DISPUTE, WHICH NEEDS TO BE ADDED TO THE ASSESSEES RETURNED INCOME. ACCORDINGLY, HE RESTRICTED THE ADDITION AT 2.52% OF THE BOGUS PURCHASES AS PROFIT. AGGRIEVED, IN BOTH THE CASES , REVENUE AS WELL AS ASSESSEE PREFERRED APPEAL BEFORE TRIBUNAL. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. ADMITTED FACTS ARE THAT ONE PRAVEEN KUMAR JAIN GROUP OF CASES WAS INVOLVED IN PROVIDING ACCOMM ODATION ENTRIES OF BOGUS PURCHASES AND RATHER THEY WERE PROVIDING ONLY BOGUS BILLS OF PURCHASE. THE ASSESSEE IS ONE OF THE BENEFICIARIES OF THE SAME. THE A.O. OR THE CIT(A) HAS NOT DOUBTED THE SALES MADE BY THE ASSESSEE OUT OF THE BOGUS PURCHASES. THE ASSE SSEE IS ENGAGED IN TRADING OF PLYWOOD UNDER THE NAME AND STYLE OF SHIV SHAKTI ENTERPRISES. ONCE THE SALE IS MADE BY ASSESSEE AND WHICH IS NOT DOUBTED, IT MEANS THAT THE ASSESSEE HAS PROCURED BILLS FROM THE ENTRY PROVIDER PRAVEEN KUMAR JAIN GROUP OF CASES A ND PRESUMABLY THE MATERIAL IS PURCHASED FROM GREY MARKET WITHOUT PAYMENT OF MAHARASHTRA VAT. THE ASSESSEE MIGHT HAVE PURCHASED AT LOWER PRICE, WHICH IS NOT VERIFIABLE. IN SUCH CIRCUMSTANCES, WE HAVE NO ALTERNATIVE EXCEPT TO ESTIMATE THE PROFIT RATE, I.E., THE NP RATE EARNED BY ASSESSEE ON THE SAVINGS HE HAS MADE OF MAHARASHTRA VAT AND PURCHASE OF ITEMS AT A LOWER PRICE. WE TAKE GUIDANCE FROM THE JUDGEMENT OF HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. SMITH P. SETH (2013) 356 ITR 451 (GUJ), WHEREIN HONBLE GUJARAT HIGH COURT HAS APPLIED PROFIT RATE AT 12.5% ON THE BOGUS PURCHASES AND RESPECTFULLY FOLLOWING THE SAME, WE ALSO WILL ESTIMATE THE PROFIT RATE AT A HIGHER RATE THAN APPLIED BY THE CIT(A) AT 2.52%, WHICH IS VERY LOW. ACCORDING TO US, A REASONABLE PROFIT RATE OF 10% WILL MEET THE END OF JUSTICE. WE DIRECT THE A.O. TO APPLY PROFIT RATE AT 10% AND ADD THE SAME TO THE RETURN INCOME OF BOTH THE ASSESSEES. ITA NOS. 5622 & 5620 /M /1 5 , 64 & 648 /M/16 ASSESSMENT YEAR: 2007 - 08 PAGE 5 OF 6 7. IN THE RESULT, THE A PPEAL S OF THE REVENUE ARE PARTLY ALLOWED AND THAT OF THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 27 - 0 9 - 2017. SD/ - SD/ - (NK PRADHAN) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 27 - 0 9 - 2017 ROSHANI, SR. PS COPY OF THE ORDER FORWARDED TO : //TRUE COPY// BY ORDER, ASSISTANT REGISTRAR ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT (A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE.