ACIT- 27 (3), MUMBAI V. TEJAS D. MANIAR, MUMBAI

ITA 5693/MUM/2018

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 7400 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-10-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 05-10-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bogus purchase; Unexplained expenditure; Peak credit
• Section: 69C; 143(3); 205

Judgement Text

P A G E | 1 ITA NO.5693/MUM/2018 A.Y. 2011 - 12 ACIT - 27(3) VS. SHRI TEJAS D. MANIAR IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI RAVISH SOOD, JUDICIAL MEMBER AND SHRI N.K. PRADHAN, ACCOUNTANT MEMBER ITA NO.5693/MUM/2018 (ASSESSMENT YEAR: 2011 - 12) ASSISTANT COMMISSINOER OF INCOME TAX - 27(3),R. NO. 423, 4 TH FLOOR, TOWER NO.6 , VASHI RAILWAY STATION, VASHI, NAVI MUMBAI 400703 VS. SHRI TEJAS D. MANIAR PROP.M/S UNICARE MEDICAL SYSTEM, 205 2 ND FLOOR,SAHAKAR, R. N. MARG, HINGWALA LANE,GHATKOPAR (EAST) MUMBAI 400077 PAN AKYPM8421D (APPELLANT) (RESPONDENT) APPELLANT BY: SMT. JOTHILAKSHMI NAYAK RESPONDENT BY: SHRI DEVENDRA JAIN, ADVOCATE DATE OF HEARING: 07.10.2019 DA TE OF PRONOUNCEMENT: 1 6 .10.2019 O R D E R PER RAVISH SOOD, JM THE PRESENT APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A) - 25, MUMBAI, DATED 04 .07.2018, WHICH IN TURN ARISES FROM THE ORDER PASSED BY THE A.O UNDER SEC. 143(3) R.W.S 147 OF THE INCOME TAX ACT, 1961 (FOR SHORT ACT), DATED 10.03.2015 FOR A.Y. 2011.12 . THE REVENUE HAS ASSAILED THE IMPUGNED ORDER ON THE FOLLOWING GROUNDS OF APPEAL: (I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) ERRED IN DELETING THE ADDITION OF RS.7,05,023/ - MADE BY THE ASSESSING OFFICER ON ACCOUNT OF BOGUS PURCHASES, WITHOUT APPRECIATING THE FACT THAT ASSESSEE HAD FAILED TO PRODUCE BILLS, VOUCHERS AND OTHER DOCUMENTARY EVIDENCES IN SUPPORT OF HIS CLAIM AND WITHO UT CONSIDERING THE LATEST APEX COURT DECISION IN THE CASE OF N. K. PROTIENS LTD. WHEREIN IT IS HELD THAT ONCE IT IS PROVED THAT THE PURCHASES ARE BOGUS THEN ADDITION SHOULD BE MADE ON ENTIRE PURCHASES AND NOT ON PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES. ( II) ON THE FACTS AND CIRCUMSTANCES OF CASE AND IN LAW, THE LD. CIT(A) ERRED IN ESTIMATING THE PROFIT FROM HAWALA PURCHASES BY DISALLOWING ONLY RS.1,03,477/ - BEING 12.5% OF THE BOGUS PURCHASES P A G E | 2 ITA NO.5693/MUM/2018 A.Y. 2011 - 12 ACIT - 27(3) VS. SHRI TEJAS D. MANIAR AS EVEN THE BASIS ONUS OF PRODUCING DELIVERY CHALLANS, TRANSPORT BILLS ETC. WERE NOT FULFILLED BY THE ASSESSEE. (III) THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) ON THE ABOVE GROUNDS BE REVERSED AND THAT OF THE ASSESSING OFFICER BE RESTORED. (IV) THE APPELLANT CRAVES LEAVE TO AMEND, MODIFY AND ALTER ANY GROUNDS OF APPEAL DURING THE COURSE OFHEARING OF THIS CASE. 2. BRIEFLY STATED, THE ASSESSEE WHO IS A DEALER IN MEDICAL INSTRUMENTS AND MACHINES HAD FILED HIS RETURN OF INCOME FOR A.Y. 2011 - 12 ON 22.07.2011, DECLARING HIS TOT AL INCOME AT RS.26,94, 240/ - . THE RETURN OF INCOME FILED BY THE ASSESSEE WAS PROCESSED AS SUCH UNDER SEC.143(1) OF THE ACT. SUBSEQUENTLY, ON THE BASIS OF INFORMATION RECEIVED FROM THE SATES TAX DEPARTMENT THAT THE ASSESSEE AS A BENEFICIARY HAD OBTAINED ACCOMMODATION PURCHASE BILLS, ITS CASE WAS REOPENED UNDER SEC.147 OF THE ACT. 3. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS IT WAS OBSERVED BY THE A.O THAT THE ASSESSEE HAD CLAIMED TO HAVE MADE PURCHASES FROM THE FOLLOWING THREE PARTIES: SR. NO. TI N OF HAWALA SUPPLIER HAWALA PAN NAME OF THE HAWALA SUPPLIER AMOUNT (RS.) 1. 27940584729V AACCK9104C KOTSONS IMPEXPVT. LTD. 19,317/ - 2, 27820682280V AMOPB9319H HARIOM ENTERPRISES 1,89,000/ - 3. 27350746025V AACCH2625M H.R. SALES PVT. LTD. 6,19,500/ - TOTAL 8,27,817/ - THE ASSESSEE DESPITE HAVING BEEN AFFORDED SUFFICIENT OPPORTUNITY TO SUBSTANTIATE THE VERACITY OF THE AFORESAID PURCHASES TRANSACTIONS, HOWEVER, FAILED TO PLACE ON RECORD THE REQUISITE DOCUMENTARY EVIDENCE. ALSO, THE ASSESSEE DESPITE SPE CIFIC DIRECTIONS BY THE A.O FAILED TO PRODUCE THE AFORESAID PARTIES FOR NECESSARY VERIFICATION. IN FACT, THE NOTICES WHICH WERE ISSUED BY THE A.O UNDER SEC.133(6) WHEREIN THE AFORESAID PARTIES WERE CALLED UPON TO FURNISH THE COPIES OF THE LEDGER ACCOUNT OF THE ASSESSEE IN THEIR RESPECTIVE BOOKS OF ACCOUNTS, NATURE OF GOODS SOLD ALONG WITH THE COPIES OF BILLS ISSUED, COPIES OF DELIVERY CHALLANS FOR GOODS DISPATCHED ALONG WITH TRANSPORT BILLS, COPY OF BANK STATEMENT SHOWING RELEVANT RECEIPTS AND PAYMENT OF OU TSTANDING RECEIVED AFTER THE END OF THE YEAR , AND ALSO THEIR COPY OF THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION, WERE HOWEVER , RETURNED UNSERVED BY THE POSTAL AUTHORITIES. ACCORDINGLY, THE A.O CONCLUDED THAT THE ASSESSEE HAD NOT MADE ANY GENUINE PURCHASES FROM THE AFOREMENTIONED PARTIES. AT THE SAME TIME, THE A.O OBSERVED , THAT THE GOODS CLAIMED BY THE ASSESSEE TO HAVE BEEN PURCHASE D FROM THE AFOREMENTIONED PARTI E S WERE P A G E | 3 ITA NO.5693/MUM/2018 A.Y. 2011 - 12 ACIT - 27(3) VS. SHRI TEJAS D. MANIAR SHOWN TO HAVE BEEN RECORDED IN THE STOCK REGISTER AND THE CORRESPONDING SALES OF THE SAME WERE ALSO ACCOUNTED FOR BY THE ASSESSEE IN ITS BOOKS OF ACCOUNTS . IN THE BACKDROP OF THE FACT THAT THE ASSESSEE COULD NOT HAVE CARRIED OUT THE SALES WITHOUT MAKING THE CORRESPONDING PURCHASES, IT WAS CONCLUDED BY THE A.O , THAT THE ASSESSEE HAD ONLY OBTAINED ACCOMMODATION BILLS FROM THE AFOREMENTIONED HAWALA PARTIES AND HAD NOT MADE ANY GENUINE PURCHASE FROM THEM. IN FACT, THE A.O WAS OF THE VIEW THAT THE AMOUNT WHICH WAS SHOWN BY THE ASSESSEE TO HAVE BEEN PAID TO THE AFORE MENTIONED PARTIES WOULD HAVE BEEN RECEIVED BACK BY HIM IN CASH AS NO PURCHASES WERE MADE FROM THEM. ACCORDINGLY, THE A.O OBSERVED, THAT THE ASSESSEE WOULD HAD THEREAFTER UTILISED THE CASH WHICH WAS RECEIVED BACK FROM THE AFOREMENTIONED HAWALA PARTIES FOR F INANCING THE SUBSEQUENT CASH PURCHASES FROM THE UNDISCLOSED PARTIES OPERATING IN THE OPEN/GREY MARKET . BACKED BY HIS AFORESAID CONVICTION, THE A.O ADDED THE PEAK OF THE CREDIT OF RS. 8,08,500./ - STANDING IN THE NAME OF THE BOG U S PARTIES , AS AN UNEXPLAINED EXPENDITURE INCURRED UNDER SEC.69C OF THE ACT. 4. AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). AFTER NECESSARY DELIBERATIONS , THE CIT(A) CONCLUDED THAT THE ADDITION IN THE HANDS OF THE ASSESSEE WAS LIABLE TO BE RESTRICTED TO TH E EXTENT OF THE PROFIT INVOLVED IN MAKING OF SUCH PURCHASES BY THE ASSESSEE FROM THE OPEN/GREY MARKET. ACCORDINGLY, THE CIT(A) DRAWING SUPPORT FROM C ERTAIN JUDICIAL PRONOUNCEMENT SRESTRICTED THE ADDITION TO THE EXTENT OF RS. 1,03,477/ - I.E 12.5% OF THE AGGRE GATE VALUE OF THE IMPUGNED PURCHASES OF RS.8,27,817/ - . 5. THE REVENUE BEING AGGRIEVED WITH THE ORDER OF THE CIT(A) HAS CARRIED THE MATTER IN APPEAL BEFORE US. THE LD. DEPARTMENTAL REPRESENTATIVE (FOR SHORT D .R) TOOK US THROUGH THE FACTS OF THE CASE. IT WAS SUBMITTED BY THE LD. D.R , THAT AS THE ASSESSEE HAD MADE THE PURCHASES FROM UNDISCLOSED SOURCES, THEREFORE, THE A.O IN ALL FAIRNESS HAD MADE AN ADDITION OF THE PEAK CREDIT OF THE PURCHASES AMOUNTING TO RS.8,08,500/ - UNDER SEC.69C OF THE ACT. IT WAS VEHE MENTLY SUBMITTED BY THE LD. D.R , THAT THE CIT(A) WITHOUT GIVING ANY COGENT REASON , HAD MOST ARBITRARILY AND WITHOUT ANY BASIS RESTRICTED THE ADDITION ONLY TO THE EXTENT OF 12.5% OF THE AGGREGATE VALUE OF THE PURCHASES UNDER CONSIDERATION. 6. PER CONTRA, THE LD. AUTHORISED REPRESENTATIVE (FOR SHORT A .R) FOR THE ASSESS EE RELIED ON THE ORDER OF THE CIT(A). IT WAS AVERRED BY THE LD. A.R , THAT AS THE ASSESSEE HAD MADE THE P A G E | 4 ITA NO.5693/MUM/2018 A.Y. 2011 - 12 ACIT - 27(3) VS. SHRI TEJAS D. MANIAR PURCHASES FROM ITS REGULAR BOOKS OF ACCOUNTS, THEREFORE, IT WAS ABSOLUTELY I NCORRECT ON THE PART OF THE A.O TO HAVE HELD THAT THE PURCHASES AS AN UNEXPLAINED EXPENDITURE UNDER SEC. 69C OF THE ACT. IN SUPPORT OF HIS CONTENTION , THE LD. A.R RELIED ON THE ORDER OF THE ITAT, MUMBAI BENCH H IN THE CASE OF FANCY WEAR VS. ITO, WARD - 24(3 )(1), MUMBAI (ITA NO.1596 1597/MUM/2016, DATED 20.09.2017). 7. WE HAVE HEARD THE AUTHORIZED REPRESENTATIVES FOR BOTH THE PARTIES, PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL AVAILABLE ON RECORD , AND A LSO THE JUDICIAL PRONOUNCEMENT S RELI ED UPON BY THEM. ADMITTEDLY, AS THE ASSESSEE HAD FAILED TO SUBSTANTIATE THE VERACITY OF THE PURCHASE S CLAIMED TO HAVE BEEN MADE FROM THE AFOREMENTIONED PARTIES, THEREFORE,THE A.O HAD RIGHTLY CONCLUDED THAT IT HAD NOT MADE ANY GENUINE PURCHASES , BUT HAD MER ELY OBTAIN ED ACCOMMODATION BILLS FROM THE SAID PARTIES, IN ORDER TO FACILITATE ROUTING OF THE TRANSACTIONS THROUGH ITS BOOKS OF ACCOUNTS . AS REGARDS THE OBSERVATIONS OF THE LOWER AUTHORITIES, THAT THE ASSESSEE HAD NOT MADE ANY GENUINE PURCHASES FROM THE AFORESAID HAWALA PARTIES AND HAD PROCURED THE GOODS FROM THE OPEN/GREY MARKET, WE FIND , THAT THERE IS NO DISPUTE ON THE SAID ASPECT , AS THE ASSESSEE HAD ACCEPTED THE ORDER OF THE CIT(A) AND HAD NOT CARRIED THE MATTER ANY FURTHER IN APPEAL BEFORE US. ONLY I SSUE WHICH ARISES FROM THE PRESENT APPEAL, IS AS REGARDS THE QUANTIFICATION OF THE AMOUNT OF THE ADDITION IN RESPECT OF THE BOGUS PURCHASES MADE BY THE ASSESSEE FROM THE UNDISCLOSED PARTIES OPERATING IN THE OPEN/GREY MARKET. AS REGARDS THE CHARACTERISATION OF THE PURCHASES UNDER CONSIDERATION AS AN UNEXPLAINED EXPENDITURE BY THE A.O, WITH A CONSEQUENTIAL ADDITION OF THE PEAK CREDIT OF RS. 8,08,500/ - , WE ARE IN AGREEMENT WITH THE CIT(A) , THAT THE SAID VIEW WAS NOT SUSTAINABLE. IN FACT, WE FIND , THAT NOW WHEN THE A.O HIMSELF WHILE FRAMING THE ASSESSMENT , HAD OBSERVED , THAT THE PURCHASE CONSIDERATION AFTER HAVING BEEN RECEIVED BACK BY THE ASSESSEE IN CASH FROM THE AFOREMENTIONED PARTIES WOULD HAD THEREAFTER BEEN UTILISED BY HIM FOR MAKING THE IMPUGNED PURCHASES FROM THE OPEN/GREY MARKET , THEREFORE, IT IS BEYOND OUR COMPREHENSION AS TO HOW THE SAID PURCHASES COULD HAVE BEEN BROUGHT BY HIM WITHIN THE SWEEP OF SEC.69C OF THE ACT. IN SUM AND SUBSTANCE, ONCE IT IS ADMITTED BY THE A.O , THAT THE PURCHASE CONSIDERATION R ECEIVED BACK BY THE ASSESSEE FROM THE AFOREMENTIONED DUMMY PARTIES WOULD HAVE BEEN UTILISED FOR MAKING THE PURCHASES FROM THE OPEN/GREY MARKET, THEREFORE, AFTER SO OBSERVING , IT WOULD BE INCORRECT ON THE PART OF THE A.O TO HAVE CONCLUDE D THAT THE SOURCE OF THE INVESTMENT/EXPENDITURE IN MAKING P A G E | 5 ITA NO.5693/MUM/2018 A.Y. 2011 - 12 ACIT - 27(3) VS. SHRI TEJAS D. MANIAR OF SUCH PURCHASES WAS TO BE HELD AS UNEXPLAINED WITHIN THE MEANING OF SEC.69C OF THE ACT . AS A MATTER OF FACT, WE ARE IN AGREEMENT WITH THE VIEW TAKEN BY THE CIT(A), THAT THE ADDITION IN THE HANDS OF THE ASSESSEE WAS LIABLE TO BE RESTRICTED ONLY TO THE EXTENT OF THE PROFIT ELEMENT INVOLVED IN MAKING OF THE AFORESAID PURCHASES AT A DISCOUNTED VALUE FROM THE OPEN/GREY MARKET. AS THE ASSESSEE BY MAKING THE PURCHASES FROM THE UNREGULATED OR OPEN/GREY MARKET , WOULD HAD BEEN BENEFITED BY PROCURING THE GOODS AT A DISCOUNTED VALUE AS IN COMPARISON TO THE VALUE AT WHICH THE SAME HAD BEEN BOOKED IN HIS BOOKS OF ACCOUNTS , THEREFORE, WE ARE PERSUADED TO SUBSCRIBE TO THE VIEW TAKEN BY THE CIT(A) , THAT THE ADDITION IN THE HANDS OF THE ASSESSEE WAS LIABLE TO BE RESTRICTED ONLY TO THE EXTENT OF THE PROFIT INVOLVED IN MAKING OF SUCH PURCHASES. WE FIND THAT THE CIT(A) AFTER RELYING ON JUDGMENT OF THE HONBLE HIGH COURT OF GUJARAT IN THE CASE OF CIT - 1, VS. SIMIT P. SHETH IN ITA NO. 553 OF 2012, DATED 16.01.2013 , HAD FAIRLY ESTIMATED THE PROFIT ELEMENT INVOLVED IN MAKING OF THE IMPUGNED PURCHASES BY THE ASSESSEE FROM UNDISCLOSED SOURCE AT 12.5% OF THE IR AGGREGATE VALUE . ACCORDINGLY, FINDING NO INFIRMITY IN THE ORDER OF THE CIT(A), WE UPHOLD THE SAME. 8. RESULTANTLY, THE APPEAL OF THE REVENUE IS DISMISSED . ORDER PR ONOUNCED IN THE OPEN COURT ON 1 6 . 10.2019 S D / - S D / - ( N.K. PRADHAN ) (RAVISH SOOD) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; . 1 6 . 10 .2019 PS. ROHIT / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI P A G E | 6 ITA NO.5693/MUM/2018 A.Y. 2011 - 12 ACIT - 27(3) VS. SHRI TEJAS D. MANIAR