INCOME TAX OFFICER WARD 32(1)(4), MUMBAI V. SHRI DHARMESH D MODI, MUMBAI

ITA 5836/MUM/2018

• Counselvise Citation: [2019] 111 COUNSELVISE.COM (IT) 9899 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-12-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 10-10-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AKHTAR HANSARI
• Keywords: Bogus purchase; Competent authority; Set aside
• Section: 143(3); 142(1); 133(6); 143(2); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH SMC, MUMBAI BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT & SHRI PAWAN SINGH (JM) ITA NO. 5836/MUM/2018 (A Y: 2011-12) ITO WARD-32(1)(4), C-11, 2 ND FLOOR, ROOM NO. 202, PRATYAKSHAKAR BHAVAN, BKC, BANDRA (EAST), MUMBAI-400051 V/S SHRI DHARMESH D. MODI, B- 106, SHRI KRUPA CHS LTD. 5 TH KASTURBA ROAD, BORIVALI (E), MUMBAI-400066 PAN : AAEPM0995L APPELLANT RESPONDEDNT ITA NO. 5837/MUM/2018 (A Y: 2011-12) ITA NO. 5838/MUM/2018 (A Y: 2010-11) ITO WARD-32(1)(4), C-11, 2 ND FLOOR, ROOM NO. 202, PRATYAKSHAKAR BHAVAN, BKC, BANDRA (EAST), MUMBAI-400051 V/S SMT. DARSHANA D. MODI, B- 106, SHRI KRUPA CHS LTD. 5 TH KASTURBA ROAD, BORIVALI (E), MUMBAI-400066 PAN : AFOPMK2023C APPELLANT RESPONDEDNT APPELLANT BY SHRI AKHTAR H ANSARI SR DR RESPONDENT BY NONE DATE OF HEARING 25-11-2019 DATE OF PRONOUNCEMENT 04-12-2019 O R D E R PER PAWAN SINGH, JUDICAL MEMBER 1. THIS GROUP OF THREE APPEALS FILED BY THE REVENUE ARE DIRECTED AGAINST THE SEPARATE ORDERS OF LEARNED CIT(A)-45, MUMBAI, ALL D ATED 15.06.2018. ALL APPEALS RELATES TO THE SAME GROUP, OUT OF WHICH TWO APPEALS IN CASE OF SMT. DARSHANA D. MODI FOR ASSESSMENT YEAR 2010- 11 & 2011-12 AND THIRD APPEAL RELATES TO DHARMESH D. MODI. IN AL L APPEALS, THE 2 ITA 5836 TO 5838 MUM 2018-SHRI DHARMESH D. MODI & SMT DARSHANA D MODI REVENUE HAS RAISED IDENTICAL GROUNDS OF APPEAL. FAC TS OF ALL THE APPEALS ARE IDENTICAL EXCEPT VARIATION OF FIGURES OF ALLEGE D BOGUS PURCHASES. THUS, ALL APPEALS WERE CLUBBED, HEARD AND ARE DECID ED BY A COMMON ORDER. FOR APPRECIATION OF FACTS, THE APPEAL FOR AS SESSMENT YEAR 2010- 11 IN SMT. DARSHANA D. MODI IS TREATED AS LEAD CASE . THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- (I) 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN RESTRICTING THE ADDITION TO RS.49,9 20/- (@ 5% OF RS.9,98,400/-) ON ACCOUNT OF BOGUS PURCHASES, WITHO UT APPRECIATING THAT THE FACT THAT THE ASSESSEE HAS NOT PRODUCED ANY COG ENT EVIDENCE TO SUBSTANTIATE THAT HE HAD TAKEN ACTUAL DELIVERY OF G OODS PURCHASED FROM THE PARTIES AND THE NOTICES U/S. 133(6) ISSUED TO THE P ARTIES, FROM WHOM ALLEGED BILLS WERE RECEIVED, WERE RETURNED UNDELIVERED BY T HE POSTAL AUTHORITIES WITH THE REMARK 'NOT KNOWN' AND THE ASSESSEE HAS AL SO FAILED TO PRODUCE THE PURCHASE PARTIES BEFORE THE AO.' (II) 'ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) ERRED IN NOT APPRECIATING THE RATIO OF THE DECISION OF GUJARAT HIGH COURT IN THE CASE OF N.K. PROTEINS LTD. WHEREIN IT WAS CONFI RMED THAT IN THE EVENT OF BOGUS PURCHASES, THE ADDITION ON THE WHOLE OF SU CH PURCHASES WAS REQUIRED TO BE MADE AND THIS PARTICULAR RATIO WAS C ONFIRMED BY THE HON'BLE SUPREME COURT IN SLP NO.CC NO.769 OF 2017 DATED 16. 01.2017, BY DISMISSING THE SLP OF THAT ASSESSEE.' (III)'THE APPELLANT PRAYS THAT THE ORDER OF THE LD. CIT(A) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE AO BE RESTORED .' 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PROPRIETOR OF DHARMESH ENTERPRISES AND ENGAGED IN THE BUSINESS OF TRADING IN CHEMICALS, FILED ITS RETURN OF INCOME ON 29-09-2010 DECLARING TOTAL INCOME AT RS.6,26,950/- WHICH WAS PROCESSED U/S 143 (1) OF THE INCOME- 3 ITA 5836 TO 5838 MUM 2018-SHRI DHARMESH D. MODI & SMT DARSHANA D MODI TAX ACT (ACT). THE ASSESSMENT WAS RE-OPENED UNDER SECTION 147 ON T HE BASIS OF INFORMATION RECEIVED FROM SALE TAX DEPARTM ENT, GOVERNMENT OF MAHARASHTRA INFORMING THAT CERTAIN HAWALA OPERATORS WERE INDULGING IN PROVIDING ACCOMMODATION BILLS WITHOUT ACTUAL DELIVE RY OF GOODS. THE SALE TAX DEPARTMENT, GOVERNMENT OF MAHARASHTRA REFERRED THE LIST OF SUCH HAWALA DEALERS AND THE BENEFICIARY TO THE DGIT (INV ESTIGATION), MUMBAI. THE NAME OF ASSESSEE APPEARED IN THE LIST OF BENEFI CIARIES. THE ASSESSEE ALLEGEDLY MADE THE PURCHASES OF RS. 9,98,400/- FROM SUCH HAWALA DEALERS. ON THE BASIS OF INFORMATION, THE ASSESSING OFFICER MADE A BELIEF THAT THE INCOME OF THE ASSESSEE ESCAPED ASSESSMENT, THEREFOR E, RE-OPENED THE ASSESSMENT UNDER SECTION 147. NOTICE UNDER SECTION 148 DATED 23.03.2015 WAS ISSUED TO THE ASSESSEE AFTER OBTAINING NECESSAR Y SANCTION FROM COMPETENT AUTHORITY. ASSESSING OFFICER THEREAFTER I SSUED NOTICES U/S 142(1) & 143(2) ALONG WITH A QUESTIONNAIRE ON 22.07.2015. DURING THE ASSESSMENT, THE ASSESSING OFFICER NOTED THAT THE AS SESSEE HAS SHOWN PURCHASES FROM THE FOLLOWING PARTIES, WHO WERE DECL ARED AS HAWALA DEALERS BY THE SALE TAX DEPARTMENT, GOVERNMENT OF MAHARASHT RA: NAME OF THE PARTIES BILL AMOUNT (RS.) 1 CHEMI-AGE ENTERPRISE 1,87,200/- 2 RIDDHI ENTERPRISES 8,11,200/- TOTAL 9,98,400/- 4 ITA 5836 TO 5838 MUM 2018-SHRI DHARMESH D. MODI & SMT DARSHANA D MODI 3. IN ORDER TO ASCERTAIN THE GENUINENESS OF PURCHAS E, THE ASSESSING OFFICER ISSUED NOTICE UNDER SECTION 133(6) TO THE PARTIES. THE NOTICES SENT BY ASSESSING OFFICER WERE RETURNED BACK UNSERVED WITH THE REMARK OF POSTAL AUTHORITY LEFT / NOT KNOWN. NO OTHER OR FR ESH ADDRESS WAS FURNISHED BY ASSESSEE. THE ASSESSING OFFICER ASKED THE ASSESSEE TO FURNISH ALL RELEVANT EVIDENCE TO ESTABLISH THAT GOO DS HAVE ACTUALLY BEEN DELIVERED / SUPPLIED. THE ASSESSEE ALONG WITH HIS REPLY FURNISHED LEDGER ACCOUNT, PURCHASE BILL, BANK STATEMENT, HIGHLIGHTIN G THE PAYMENT MADE THROUGH CHEQUES. THE ASSESSING OFFICER ON THE BASIS OF REPORT OF INVESTIGATION WING CONCLUDED THAT THE HAWALA PARTIE S ISSUED ONLY BOGUS BILL WITHOUT DELIVERY OF GOODS, RECEIVED CHEQUE PAY MENT AND AFTER DEDUCTING THEIR COMMISSION REPAID THE BALANCE TO TH E PURCHASE PARTY. THE PURCHASES SHOWN BY ASSESSEE ARE UNVERIFIABLE AN D THERE IS POSSIBILITY OF REVENUE LEAKAGE. THE ASSESSING OFFIC ER REJECTED THE BOOKS OF ACCOUNT AND ON THE BASIS OF DECISION OF HONBLE GUJARAT HIGH COURT IN SIMITH P. SHETH 356 ITR 451 (GUJ.) ESTIMATED GRO SS PROFIT AT 15% AND ACCORDINGLY, DISALLOWED 15% OF THE IMPUGNED/ALL EGED BOGUS PURCHASES, WHILE PASSING THE ASSESSMENT ORDER ON 22 .01.2016 UNDER SECTION 143(3) R.W.S. 147. ON APPEAL, THE LD. CIT(A ) REDUCED/ RESTRICTED THE ADDITION TO THE EXTENT OF 5% OF THE TRANSACTION S COVERED BY 5 ITA 5836 TO 5838 MUM 2018-SHRI DHARMESH D. MODI & SMT DARSHANA D MODI ACCOMMODATION/HAWALA PURCHASES. THUS, AGGRIEVED BY THE ORDER OF LD. CITA(A), THE REVENUE HAS FILED THE PRESENT APPEAL BEFORE THE TRIBUNAL. 4. NONE APPEARED ON BEHALF OF ASSESSEE, DESPITE SER VICE OF NOTICE. THEREFORE, WE ARE LEFT WITH NO OPTION EXCEPT TO HEA R THE SUBMISSION OF LD. DR FOR THE REVENUE AND TO DECIDE THE APPEAL ON THE BASIS OF MATERIAL AVAILABLE ON RECORD. 5. THE LD. DR FOR THE REVENUE SUBMITS THAT DURING TH E 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 TH E REVENUE 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 ON LY IN ORDER TO INFLATE THE EXPENSES AND TO BRING DOWN THE PROFITAB ILITY IN ORDER TO AVOID THE TAX. THE LD. CIT(A) RESTRICTED THE ADDITION ONL Y TO THE EXTENT OF 5% WITHOUT APPRECIATING THE FACT THAT ASSESSEE FAILED TO SHOW SUFFICIENT EVIDENCE ABOUT THE CONSUMPTION OF MATERIAL AND ULTI MATE SALE. THE LD. DR FOR THE REVENUE PRAYED FOR REVERING THE ORDER OF LD. CIT(A) AND TO RESTORE THE ORDER OF ASSESSING OFFICER. 6 ITA 5836 TO 5838 MUM 2018-SHRI DHARMESH D. MODI & SMT DARSHANA D MODI 6. WE HAVE CONSIDERED THE SUBMISSIONS OF THE LD. DR FOR 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 HONBLE GUJARAT HIGH COURT IN THE CASE OF SIMITH P. SHETH (SUPRA) AND THE DECISIONS OF THE TRIBUNAL CITED ABOVE, ADDED 15 % OF THE ALLEGED HAWALA PURCHASES BEING THE PROFIT ELEMENT EMBEDDED IN SUCH BOGUS PURCHASES. ON APPEAL, THE LD. CIT(A) REDUCED THE AD DITION TO THE EXTENT OF 5% ON SUCH HAWALA PURCHASES. THE LD CIT(A) CONSI DERED THAT THE GROSS PROFIT (GP) ESTIMATED BY THE ASSESSING OFFICE R IS NOT SUSTAINABLE AND THAT THE ASSESSEE MAY HAVE SAVE VAT AND OTHER I NCIDENTAL CHARGES BY PURCHASING THE MATERIAL FROM LOCAL TRADERS. AND ONLY THE VAT CHARGES AND OTHER INCIDENTAL CHARGES CAN BE BROUGHT TO TAX AS ADDITIONAL PROFIT EARNED BY ASSESSEE BY SHOWING PURCHASES FROM SUCH HAWALA PARTIES. WE HAVE NOTED THAT THE ASSESSING OFFICER H AS NEITHER EXAMINED THE GROSS PROFIT EARNED BY ASSESSEE IN PREVIOUS OR SUBSEQUENT YEARS NOR REJECTED THE SALES OF ASSESSEE. THE SALE IS NOT POS SIBLE WITHOUT THE PURCHASES. IN OUR CONSIDERED VIEW, THE INCOME TAX A UTHORITY ARE ENTITLED TO TAX THE REAL INCOME COMPONENT ONLY AND NOT ON HYPOTHETICAL BASIS. THEREFORE, WE DO NOT FIND ANY INFIRMITY IN T HE ORDER PASSED BY LD. 7 ITA 5836 TO 5838 MUM 2018-SHRI DHARMESH D. MODI & SMT DARSHANA D MODI CIT(A). WE UPHOLD THE SAME. THE GROUND OF THE REV ENUE FAILS. NO CONTRARY FACT OR LAW IS BROUGHT TO OUR NOTICE TO TA KE A CONTRARY VIEW. 7. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED . ITA NO. 5836/MUM/2018 FOR A.Y. 2011-12 8. THE REVENUE HAS RAISED THE IDENTICAL GROUNDS OF A PPEAL AS RAISED IN ITA NO. 5838/MUM/2018, WHICH WE HAVE DISMISSED. THEREFO RE, THIS APPEAL IS ALSO DISMISSED WITH SIMILAR OBSERVATION. 9. IN THE RESULT, THE APPEAL OF THE REVENUE IS ALSO DISMISSED. ITA NO. 5837/MUM/2018 FOR A.Y. 2011-12 10. THE REVENUE HAS RAISED THE IDENTICAL GROUNDS OF APP EAL AS RAISED IN ITA NO. 5837/MUM/2018, WHICH WE HAVE DISMISSED. THEREFO RE, THIS APPEAL IS ALSO DISMISSED WITH SIMILAR OBSERVATION. 11. IN THE RESULT, THE APPEAL OF THE REVENUE IS ALSO DI SMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 04-12 -2019. SD/- SD/- (SHAMIM YAHYA) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIALMEMBER MUMBAI, DT : 4 TH DECEMBER, 2019 SK/- COPY TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR TRUE COPY/ BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI