H.V. GORADIA (HUF), MUMBAI V. ITO 32(1)(5), MUMBAI

ITA 5675/MUM/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 3208 (ITAT-MUMBAI)
• Duration Of Justice: 5 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-05-2016
• Appeal Filed By: Assessee
• Bench Allotted: H
• Next Hearing Date: 10-03-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 18-12-2015
• Court: TRIBUNAL
• Department Lawyers: AMRIT KUMAR SINGH
• Keywords: Reopening of assessment; Bogus purchase; Opportunity of being heard; Cost of acquisition; Accommodation entries; Onus to prove; Reason to believe
• Section: 133(6); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI BEFORE S/SHRI B.R. BASKARAN (AM) & RAMLAL NEGI (JM) I.T.A. NO. 5675 /MUM/ 2015 (ASSESSMENT YEAR 2009 - 10 ) H.V. GORADIA (HUF) B - 704, JASH ENCLAVE BEHIND MARUTI TEMPLE GOVIND NAGAR BORIVALI WEST MUMB AI - 400092. VS. ITO, CIRCLE - 32(1)(5) MUMBAI ( APPELLANT ) ( RESPONDENT ) PAN NO . AAAHH0473E ASSESSEE BY SHRI SUNIL NAHTA DEPARTMENT BY SHRI AMRIT KUMAR SINGH DATE OF HEARING 10.3 . 201 6 DATE OF PRONOUNCEMENT 27 . 5 . 201 6 O R D E R PER B.R. B ASKARAN, A M : - THE ASSESSEE HAS FILED THIS APPEAL CHALLENGING THE ORDER DATED 30.11.2015 PASSED BY LEARNED CIT(A) - 44, MUMBAI FOR A.Y. 2009 - 10 ON FOLLOWING ISSUES : A) VALIDITY OF REOPENING OF ASSESSMENT U/S. 147 OF THE ACT. B) CONFIRMING THE ADDITION OF GRO SS PROFIT AT 30% OF NON - GENUINE PURCHASES. 2. FACTS RELATING TO THE ISSUES ARE STATED IN BRIEF. THE ASSESSEE IS CARRYING ON THE BUSINESS OF TRADING IN IRON AND STEEL THROUGH ITS PROPRIETARY CONCERN NAMED M/S. ESSVEE ENTERPRISES. IT FILED THE RETURN OF I NCOME FOR THE YEAR UNDER CONSIDERATION ON 18.9.2009 AND THE SAME WAS PROCESSED U/S. 143(1) OF THE ACT. SUBSEQUENTLY, THE ASSESSING OFFICER RECEIVED INFORMATION FROM DG I T(INV) THAT CERTAIN PARTIES HAVE ISSUED ACCOMMODATION BILLS FOR SUPPLY OF MATERIAL AND T HE ASSESSEE HAS PURCHASED GOODS FROM SUCH PARTIES TO THE TUNE H.V. GORADIA (HUF) 2 OF RS. 3.02 CRORES. ACCORDINGLY, THE ASSESSING OFFICER REOPENED THE ASSESSMENT OF THE YEAR UNDER CONSIDERATION BY ISSUING NOTI CE U/S. 148 OF THE ACT ON 10.3.2014. T HE ASSESSEE OBJECTED TO THE R EOPENING , AFTER OBTAINING REASONS THERE FOR AND THE ASSESSING OFFICER ALSO DISPOSED OF THE OBJECTION RAISED BY THE ASSESSEE. 3. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER ISSUED NOTICE U/S. 133(6) OF THE ACT TO THE SUPPLIER OF GOO DS BUT ALL THE NOTICES WERE RETURNED BY THE POSTAL AUTHORITIES WITH THE POSTAL REMARKS UNCLAIMED/LEFT. HENCE THE ASSESSING OFFICER ASKED THE ASSESSEE TO PRODUCE THE SUPPLIER ALONG WITH THE ENTRY REGISTER, LORRY RECEIPT OF PURCHASE OF GOODS, STOCK REGISTE R ETC. THE ASSESSING OFFICER ASKED THE ASSESSEE AS TO WHY THESE PURCHASES SHOULD NOT BE TAKEN AS BOGUS. THE ASSESSEE COULD NOT PRODUCE THE PARTIES BUT SIMPLY STATED THAT IT HAS MADE PAYMENTS TO THEM BY WAY OF ACCOUNT PAYEE CHEQUE S . THE ASSESSEE COULD PRODU CE ONLY PURCHASE AND SALES REGISTER AND IT DID NOT PRODUCE LORRY RECEIPT S OR STOCK REGISTER. THE ASSESSING OFFICER NOTICED THAT THE PARTIES FROM WHOM THE ASSESSEE HAS CLAIMED TO HAVE PURCHASED GOODS HAVE ACCEPTED BEFORE SALES TAX DEPARTMENT THAT THEY ARE PROVIDED ONLY ACCOMMODATION ENTRIES. ACCORDINGLY, THE ASSESSING OFFICER CAME TO THE CONCLUSION THAT THE ASSESSEE DID NOT MAKE PURCHASE S FROM THESE HAWALA DEALERS AND IT HAS ONLY AVAILED BENEFIT S FROM THEM BY PROCURING ACCOMMODATION BILLS , I.E., WITHOUT TA KING PHYSICAL DELIVERY OF GOODS. THE ASSESSING OFFICER EXPRESSED THE VIEW THAT THE ASSESSEE SHOULD HAVE OBTAIN ED THE ACCOMMODATION BILLS , ONLY TO ACCOUNT FOR ITEMS PURCHASED FROM GREY MARKET. THE ASSESSING OFFICER FURTHER TOOK THE VIEW THAT THE ASSESSEE SH OULD HAVE PURCHASED GOODS AT LOWER PRICE AND ACCOMMODATION BILLS SHOULD HAVE BEEN OBTAINED FOR HIGHER PRICE. SINCE THE ASSESSEE COULD NOT FURNISH SUFFICIENT DOCUMENTS TO SUPPORT THE CLAIM OF PURCHASE S, T HE ASSESSING OFFICER REJECTED THE BOOKS OF ACCOUNT U/ S. 145(3) OF THE ACT. THE AO ACCEPTED THE FACT THAT THE ASSESSEE COULD NOT HAVE SOLD THE GOODS WITHOUT PURCHASING THEM. ACCORDINGLY HE TOOK THE VIEW THAT THE ASSESSEE SHOULD HAVE PURCHASED GOODS FROM GREY MARKET. THE ASSESSING OFFICER FURTHER OBSERVED TH AT THE GROSS PROFIT AND NET H.V. GORADIA (HUF) 3 PROFIT RATE DISCLOSED BY THE ASSESSEE STOOD AT 1.64% AND 0.17% RESPECTIVELY AND THE SAME WAS CONSIDERED TO BE LOW BY HIM. ACCORDINGLY THE ASSESSING OFFICER PROCEEDED TO ESTIMATE THE PROFIT THAT THE ASSESSEE WOULD HAVE MADE ON IM PUGNED PURCHASES (DIFFERENCE BETWEEN THE VALUE SHOWN IN ACCOMMODATION BILLS AND THE ACTUAL PURCHASE COST IN GREY MARKET) AND ESTIMATED THE SAME AT 30% OF THE PURCHASE VALUE. ACCORDINGLY HE ADDED A SUM OF RS. 90.86 LAKHS TO THE TOTAL INCOME DECLARED BY THE ASSESSEE. 4. BEFORE LEARNED CIT(A) THE ASSESSEE CHALLENGED THE VALIDITY OF REOPENING OF THE ASSESSMENT AND ALSO THE PROFIT ESTIMATED AND ASSESSED BY THE ASSESSING OFFICER. HOWEVER, THE CONTENTION S OF THE ASSESSEE DID NOT FIND FAVOUR WITH LEARNED CIT(A) AN D HE ACCORDINGLY UPHELD THE VALIDITY OF REOPENING OF ASSESSMENT AND ALSO UPHELD THE ADDITION MADE BY THE ASSESSING OFFICER. AGGRIEVED, THE ASSESSEE HAS FILED THIS APPEAL BEFORE US. 5. THE FIRST ISSUE RELATES TO THE VALIDITY OF REOPENING OF ASSESSME NT. THE LD A.R SUBMITTED THAT THE ASSESSING OFFICER DID NOT APPLY HIS MIND TO THE INFORMATION RECEIVED FROM THE INVESTIGATION WING AND HE HAS REOPENED THE ASSESSMENT IN A MECHANICAL MANNER. IN THIS REGARD, HE PLACED RELIANCE ON THE DECISION RENDERED BY H ONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. KAMADHENU STEEL & ALLOYS LTD (248 CTR 33) AND SUBMITTED THAT THE ASSESSING OFFICER COULD NOT DRAW ADVERSE INFERENCE WITHOUT MAKING ANY ENQUIRIES. 6. ON THE CONTRARY, THE LD D.R SUBMITTED THAT THE ASSESSING OFFICER SHOULD HAVE ONLY PROPER REASON TO BELIEVE ABOUT ESCAPEMENT OF INCOME AT THE TIME OF REOPENING OF ASSESSMENT AND IT IS NOT REQUIRED THAT THE ASSESSING OFFICER SHOULD PROVE THE SAME. HE FURTHER SUBMITTED THAT THE ASSESSEES OBJECTION TO THE REOPENIN G OF ASSESSMENT HAS BEEN DULY ADDRESSED BY THE ASSESSING OFFICER. 7. HAVING HEARD RIVAL CONTENTIONS, WE ARE UNABLE TO AGREE WITH THE CONTENTIONS OF THE ASSESSEE WITH REGARD TO THE ISSUE RELATING TO VALIDITY OF REOPENING OF ASSESSMENT . WE NOTICE THAT THE ASSESSING OFFICER HAS RECEIVED INFORMATION FROM THE INVESTIGATION WING ON THE BASIS OF SEARCH CONDUCTED BY H.V. GORADIA (HUF) 4 THE SALES TAX AUTHORITIES. THE PARTIES FROM WHOM THE ASSESSEE HAS CLAIMED TO HAVE PURCHASED GOODS HAVE ADMITTED BEFORE THE SALES TAX AUTHORITIES THA T THEY HAVE GIVEN ONLY ACCOMMODATION BILLS WITHOUT ACTUALLY SUPPLYING GOODS. IN OUR VIEW, THIS INFORMATION RECEIVED BY THE AO WAS SUFFICIENT TO FORM BELIEF THAT THERE WAS ESCAPEMENT OF INCOME. IN OUR VIEW, IT CANNOT BE SAID THAT THE ASSESSING OFFICER HAS REOPENED THE ASSESSMENT IN A MECHANICAL MANNER. ACCORDINGLY WE UPHOLD THE ORDER OF LD CIT(A) PASSED ON THIS ISSUE. 8. THE NEXT ISSUE RELATES TO THE ADDITION OF PROFIT ESTIMATED ON THE BOGUS PURCHASES. THE LD A.R SUBMITTED THAT THE ASSESSEE COULD NOT FU RNISH LORRY RECEIPTS BEFORE THE AO, SINCE THE GOODS WERE TRANSPORTED DIRECTLY FROM THE SUPPLIERS PLACE TO THE CUSTOMERS PLACE. HE SUBMITTED THAT THE ASSESSEE HAS MADE PAYMENTS BY WAY OF ACCOUNT PAYEE CHEQUES AND FURTHER THE RATE OF GROSS PROFIT AND NET P ROFIT DECLARED BY THE ASSESSEE WAS CONSISTENT WITH THAT SHOW IN THE PAST SEVERAL YEARS. HE SUBMITTED THAT THE AO HAS NOT BROUGHT ANY MATERIAL TO SUPPORT HIS VIEW THAT THE ASSESSEE MIGHT HAVE PURCHASED GOODS FROM GREY MARKET. ACCORDINGLY HE SUBMITTED THAT THERE IS NO JUSTIFICATION IN ESTIMATING THE GROSS PROFIT ON THE ALLEGED BOGUS PURCHASES @ 30%. 9. THE LD D.R SUBMITTED THAT THE ASSESSING OFFICER HAS REJECTED THE BOOKS OF ACCOUNT, SINCE THE ASSESSEE COULD NOT PROVE THE PURCHASES BY PRODUCING THE SUPPLIE RS AND EVIDENCE S FOR TRANSPORTATION OF GOODS. ACCORDINGLY THE AO HAS ESTIMATED THE PROFIT FROM ACCOMMODATION BILLS AT 30%. THE ASSESSING OFFICER WAS FAIR ENOUGH IN OBSERVING THAT THE ASSESSEE COULD NOT HAVE SOLD THE GOODS WITHOUT MAKING CORRESPONDING PUR CHASES AND ACCORDINGLY CAME TO THE CONCLUSION THAT THE ASSESSEE COULD HAVE PURCHASED THE GOODS IN THE GREY MARKET AT LOWER RATES. HE SUBMITTED THAT THE PROFIT OF 30% ESTIMATED BY THE AO WAS JUSTIFIED. 10. WE HEARD THE PARTIES AND PERUSED THE RECORD. WE NOTICE THAT THE ASSESSING OFFICER HAS NOT SIMPLY FOLLOWED THE REPORT GIVEN BY THE SALES TAX DEPARTMENT . BUT HE HAS CARRIED OUT HIS OWN ENQUIRIES. THE AO HAS ISSUED H.V. GORADIA (HUF) 5 NOTICES U/S 133(6) OF THE ACT AND ALL THE NOTICES HAVE BEEN RETURNED BACK BY THE POSTAL DEP ARTMENT WITH THE REMARKS UNCLAIMED/LEFT. HENCE THE ASSESSING OFFICER HAS ASKED THE ASSESSEE TO PRODUCE THOSE SUPPLIERS, BUT THE ASSESSEE DID NOT PRODUCE THEM. THE ASSESSEE ALSO DID NOT FURNISH EVIDENCES FOR TRANSPORTATION OF GOODS AND ALSO STOCK REGIST ER. THERE SHOULD NOT BE ANY DOUBT THAT THE BURDEN TO PROVE THE EXPENSES IS PLACED UPON THE ASSESSEE AND WE NOTICE THAT THE ASSESSEE HAS FAILED IN DISCHARGING THOSE BURDEN. BEFORE US ALSO, THE ASSESSEE COULD NOT FURNISH EVIDENCES FOR TRANSPORTATION OF GOO DS EXCEPT STATING THAT THE GOODS WERE TRANSPORTED DIRECTLY FROM THE SUPPLIERS PLACE TO THE CUSTOMERS PLACE. UNDER THESE SET OF FACTS, WE ARE OF THE VIEW THAT THE AO WAS JUSTIFIED IN REJECTING THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE. 11. WE NOTI CE THAT THE ASSESSEE COULD NOT SUBSTANTIATE ITS CONTENTIONS THAT THE GOODS WERE TRANSPORTED DIRECTLY FROM SUPPLIERS PLACE TO THE CUSTOMERS PLACE BY PRODUCING ANY OTHER EVIDENCE OR CONFIRMATION FROM THE CUSTOMERS. SINCE THE SUPPLIERS WERE CLAIMED TO HAVE BE EN TRADING IN STEEL PRODUCTS, THEY SHOULD BE HAVING SUFFICIENT SPACE TO STOCK THE GOODS AND ALSO THEY SHOULD HAVE PROPER BUSINESS ADDRESS. HOWEVER, IT IS NOT UNDERSTANDABLE AS TO WHY THEY SHOULD REFRAIN FROM CLAIMING THE NOTICE ISSUED BY THE AO U/S 133(6) OF THE ACT, IF THEY ARE CARRYING ON BUSINESS IN A GENUINE WAY. EVEN THE ASSESSEE COULD NOT PRODUCE THE SUPPLIERS. WHEN THE SUPPLIERS COULD NOT BE PRODUCED AND WHEN THE PROOF FOR DELIVERY OF GOODS EITHER DIRECT OR INDIRECT COULD NOT BE PRODUCED, IN OUR V IEW, THE AO WAS JUSTIFIED IN PRESUMING THAT THE ASSESSEE COULD HAVE PURCHASED GOODS FROM THE GREY MARKET. THIS IS FOR THE REASON THAT THE ASSESSEE COULD NOT HAVE SOLD THE GOODS WITHOUT PURCHASING THEM FROM SOME SOURCE. THE PREPONDERANCE OF PROBABILITIES SUPPORT THIS VIEW OF THE AO. THE ASSESSING OFFICERS VIEW IS FURTHER STRENGTHENED BY THE FACT THAT THE SUPPLIERS HAVE ADMITTED BEFORE THE SALES TAX AUTHORITIES THAT THEY HAVE PROVIDED ONLY ACCOMMODATION ENTRIES. WE HAVE ALREADY NOTICED THAT THE AO HAS TR IED TO MAKE HIS OWN ENQUIRIES, BUT THE ASSESSEE ALSO COULD NOT AFFORD ITS HELP IN THAT H.V. GORADIA (HUF) 6 REGARD. UNDER THESE SET OF FACTS, THE INFERENCES DRAWN BY THE AO, IN OUR VIEW, CANNOT BE FOUND FAULT WITH. 12. AT THE TIME OF HEARING, THE LD A.R PLACED RELIANCE ON VA RIOUS DECISIONS RENDERED BY CO - ORDINATE BENCH OF TRIBUNAL ON THE ADDITIONS MADE ON ACCOUNT OF ALLEGED BOGUS PURCHASES. ON A CAREFUL PERUSAL OF THE SAME, WE NOTICE THAT THE ASSESSING OFFICER, IN EACH OF THE ABOVE SAID CASES, HAS PROCEEDED TO ASSESS THE INC OME ON DIFFERENT FOOTING AND HENCE THE DECISIONS HAVE BEEN RENDERED BY THE TRIBUNAL DEPENDING UPON THE FACTS PREVAILING IN EACH OF THE CASE. SINCE THERE IS NO PARITY OF FACTS, WE ARE OF THE VIEW THAT THOSE DECISIONS MAY NOT COME TO THE HELP OF THE ASSESSE E. 13. HOWEVER, WE NOTICE THAT THE ASSESSING OFFICER HAS NOT GIVEN ANY BASIS FOR ADOPTING THE PROFIT RATE AT 30%. SINCE THE ASSESSEE WAS CONTENDING THAT THE PURCHASES WERE GENUINE ONE, IT DID NOT HAVE AN OPPORTUNITY TO ADVANCE ITS ARGUMENTS WITH REGARD T O THE RATE OF 30% ADOPTED BY THE AO. ACCORDINGLY, WE ARE OF THE VIEW THAT THE ASSESSEE SHOULD BE PROVIDED WITH AN OPPORTUNITY TO ADVANCE ITS ARGUMENTS ON THE RATE OF PROFIT ESTIMATED BY THE AO. ACCORDINGLY WE SET ASIDE THIS MATTER RELATING TO ESTIMATION OF PROFIT FROM BOGUS PURCHASES TO THE FILE OF THE AO WITH THE DIRECTION TO DECIDE THE SAME AFRESH, AFTER AFFORDING OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THE ORDER OF LD CIT(A) PASSED ON THIS ISSUE STANDS MODIFIED ACCORDINGLY. ORDER HAS BEEN PRO NOU NCED IN THE OPEN COURT ON 27 .5 .2016 . SD/ - SD/ - (RAMLAL NEGI ) (B.R.BASKARAN ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 27 / 5 /20 1 6 COPY OF THE ORDER FORWARD ED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT 5. DR, ITAT, MUMBAI H.V. GORADIA (HUF) 7 6. GUARD FILE. BY ORDER, //TRUE COPY// ( DY./ASSTT. REGISTRAR) ITAT, MUMBAI PS