DCIT 8(2)(2), MUMBAI V. STEAMLINE INDUSTRIES LTD, MUMBAI

ITA 5842/MUM/2015

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 7273 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 4 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-05-2018
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2009-2010
• Appeal Filed On: 29-12-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: V JUSTIN
• Assessee Lawyers: R C JAIN
• Keywords: Bogus purchase; Accommodation entries; Onus to prove
• Section: 147; 131; 6; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA , A M AND SHRI RAM LAL NEGI, JM ./ I.T.A. NO S . 5842 & 5843/MUM/2015 ( / ASSESSMENT YEAR S : 2009 - 10 & 2011 - 1 2 ) DY. CIT - 8(2)(2), ROOM NO. 615, M. K. ROAD, MUMBAI - 400 020 / VS. M /S. STEAMLINE INDUSTRIES LTD. 178/26, CHATRABHUJ KHETASHI, SANT TUKARAM ROAD, MASJID BUNDER, MUMBAI - 400 009 ./ ./ PAN/GIR NO. AAACS 7421 C ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI V. JUSTIN / RESPONDENT BY : SHRI R. C. JAIN / DATE OF HEARING : 26.04.2018 / DATE OF PRONOUNCEMENT : 02.05. 2018 / O R D E R PER BENCH : TH ESE ARE APPEALS BY THE REVENUE AGAINST THE RESPECTIVE ORDERS OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) FOR THE CONCERNED ASSESSMENT YEARS. 2. THE COMMON GROUNDS RAISED READ AS UNDER: (I) THE LD. CIT (A) HAS ERRED ON FACTS AND IN LAW IN GIVING RELIEF IN RESPECT OF THE AMOUNT OF ADDITION ON ACCOUNT OF BOGUS PURCHASE AFTER NOTING THAT APPELLANT FAILED TO NEGATE THE INFORMATION BASED ON ENQUIRY CONDUCTED BY DGIT(INV.) MUMBAI, AS PER THE LIST ON THE MAHARASHTRA SALES T AX WEBSITE, WERE HAWALA DEALERS AND PROVIDING ACCOMMODATION BILLS. (II) THE LD. CIT (A) HAS ERRED ON FACTS AND IN LAW, IN ALLOWING DEDUCTION IN RESPECT OF AMOUNT OF ADDITION ON ACCOUNT OF BOGUS PURCHASES AS THE PARTIES FROM 2 ITA NO S . 5842 & 5843/MUM/2015 M/S. STEAMLINE INDUSTRIES LTD. WHOM PURCHASES WERE MADE W ERE HAWALA DEALERS AND THE ABSOLUTE BURDEN OF PROOF IS CAST ON THE ASSESSEE AND THIS BURDEN OF PROOF NEVER SHIFTS TO THE DEPARTMENT. (HI) THE LD. CIT (A) HAS ERRED ON FACTS AND IN LAW WITHOUT APPRECIATING THAT THIS BEING A CASE OF UTTER DISREGARD AND SUBVERSION OF LAW, BURDEN OF PROOF CAST ON THE ASSESSEE WAS OF A VERY HIGH DEGREE AND ASSESSEE FAILED TO DISCHARGE THIS BURDEN. (IV) THE LD. CIT (A) HAS ERRED ON FACTS AND IN LAW, IN NOT GIVING EFFECT TO SECTION 114(G) OF THE INDIAN EVIDENCE ACT WHIC H CLEARLY LAYS DOWN THAT IF A FACT IN KNOWLEDGE OF A PARTY IS NOT EXPLAINED, ADVERSE INFERENCE CAN BE DRAWN AGAINST THE PARTY POSSESSING THE KNOWLEDGE OF FACTS/INFORMATION. 2. THE LD.CIT(A)'S ORDER IS CONTRARY IN LAW AND ON FACTS AND DESERVES TO BE SET ASIDE. 3. SINCE THE FACTS ARE IDENTICAL WE ARE REFERRING TO THE FACTS AND FIGURES FROM THE ASSESSMENT YEAR 2009 - 10. 4. IN THIS CASE, THE ASSESSMENT WAS REOPENED FOR THE FOLLOWING REASONS: THE INFORMATION IS RECEIVED FROM DCIT(INV.), MUMBAI THAT DURI NG THE YEAR, THE ASSESSEE HAVE MADE BOGUS TRANSACTIONS WITH THE FOLLOWING PARTIES TO RS.70,25,711/ - . SR. NO. NAME OF THE PARTY FY AMOUNT (RS.) 1 SAMPARK STEELS 2008 - 09 18,53,098 2 PRAYAN TRADING COMPANY 2008 - 09 24,48,056 3 G S ENTERPRISES 2008 - 09 6,29 ,555 4 VITARAG TRADING CO. 2008 - 09 20,95,002 TOTAL 2008 - 09 70,25,711 DURING PROCEEDINGS U/S. 131 OF THE ACT, THE ASSESSEE WAS ASKED TO PRODUCE THE EVIDENCES IN SUPPORT OF SAID PURCHASES. THE ASSESSEE SUBMITTED THE BILLS WITHOUT PROPER SUPPORTING EVID ENCES SUCH AS DELIVERY CHALLAN, LORRY RECEIPT WERE PRODUCED. THE ASSESSEE COULD NOT FURNISH ONE TO ONE MOVEMENT OF THE ALLEGED BOGUS PURCHASE TRANSACTION IN HIS STOCK REGISTER. THE PURCHASES OF RS.70,25,711/ - WITH THE ABOVE MENTIONED ALLEGED PARTIES FOR A Y 2009 - 10 IS HELD TO BE NON GENUINE AS THESE PARTIES ARE ALSO CONSIDERED TO BE 3 ITA NO S . 5842 & 5843/MUM/2015 M/S. STEAMLINE INDUSTRIES LTD. INVOLVED IN THE BUSINESS OF PROVIDING ACCOMMODATION BILLS AS PER AVERMENTS OF THE SALES TAX DEPARTMENT. THE FACTS THAT THE ASSESSEE SUBMITTED THE BILLS WITHOUT ANY SUPPORTING DO CUMENTS COUPLED WITH THE FACT THAT THE PARTIES ARE CONSIDERED TO BE INVOLVED IN THE BUSINESS OF ISSUING ACCOMMODATION BILLS AS PER THE AVERMENTS OF THE SALES TAX DEPARTMENT, THIS PROVES THAT THE ABOVE PURCHASES ARE NOT GENUINE AND THEY HAVE BEEN BOOKED ONL Y TO REDUCE THE PROFIT AND EVADE TAX. IN VIEW OF THE ABOVE, I AM SATISFIED THAT THE ASSESSEE HAS ESCAPED INCOME TO THE EXTENT OF RS.70,25,711/ - WITHIN THE MEANING OF SECTION 147 OF THE INCOME TAX ACT, 1961. 5. IN RESPONSE, THE ASSESSEE SUBMITTED THAT T HE ASSESSEE HAS PURCHASED THE ABOVE MATERIAL THROUGH BROKER FROM FOUR PARTIES AND THE ASSESSEE HAS SE N T THE ABOVE MATERIAL DIRECTLY TO ITS CLIENT WITHOUT ANY CHANGES IN THE QUANTITY AND QUALITY. THE ASSESSEE SUBMITTED CERTAIN DOCUMENTS OF PURCHASES WITH TH IS REPLY. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS FAILED TO PRODUCE THE PARTIES. HE CONCLUDED AS UNDER: 4.4 IT IS SIGNIFICANT TO STATE THAT THE AFORESAID FOUR I.E. SAMPARK STEELS, PRAYAN TRADING COMPANY, GS ENTERPRISES & VITARAG TRADING CO HAV E THEMSELVES BEFORE THE SALES TAX AUTHORITY ADMITTED THAT THEY HAVE INDULGED INTO THE PRACTICE OF BOGUS SALES/PURCHASES AND THAT THE ASSESSEE HAS MADE BOGUS PURCHASES FROM THEM. THUS, IT IS IMPERATIVE ON THE PART OF THE ASSESSEE TO PRODUCE THE ABOVE PARTIE S FOR CONFRONTATION IN ORDER TO REBUT THAT THE PURCHASES ARE GENUINE. BUT, THE ASSESSEE DID NOT PRODUCE BOTH THE AFORESAID PARTIES. MERELY SUBMITTING THE INVOICES PER SE DO NOT PROVE THE TRANSACTION TO BE GENUINE UNLESS PERSONS FROM WHOM PURCHASES ARE MADE ARE CONFRONTED. EMPHASIS IS SUPPLIED TO THE FACT THAT AFORESAID TWO PARTIES HAVE ADMITTED BEFORE SALES TAX AUTHORITY .IN INDULGING BOGUS SALES/PURCHASES. THE ASSESSEE, AS SUCH, HAS FAILED TO DISCHARGE ITS ONUS BY NOT SUBSTANTIATING THE GENUINENESS OF THE TRANSACTION. IN THE ABSENCE OF ANY VERIFIABLE EVIDENCE AND NOT PRODUCING THE AFORESAID PARTIES BY THE ASSESSEE AND NON CONFRONTATION OF THEM, IT IS CONCLUDED THAT THE ASSESSEE HAS INDULGED INTO BOG - AS PURCHASES WITH THE AFORESAID PARTIES. 6. UPON THE ASSE SSEES APPEAL, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HELD THAT THE ASSESSEE HAS SUPPLIED ALL THE NECESSARY DOCUMENTS, HENCE PLACING RELIANCE UPON THE HON'BLE BOMBAY HIGH COURT DECISION IN THE CASE OF NIKUNJ EXIMP 4 ITA NO S . 5842 & 5843/MUM/2015 M/S. STEAMLINE INDUSTRIES LTD. ENTERPRISES (IN WRIT PETITION NO 286 0, ORDER DT. 18.6.2014) AND SEVERAL OTHER ITAT DECISION, HE DELETED THE ADDITION. 7. AGAINST THE ABOVE ORDER, THE REVENUE IS IN APPEAL BEFORE US. 8. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. WE FIND THAT CREDIBLE AND COGENT INFORMATION WA S RECEIVED IN THIS CASE BY THE ASSESSING OFFICER THAT CERTAIN ACCOMMODATION ENTRY PROVIDER/BOGUS SUPPLIERS WERE BEING USED BY CERTAIN PARTIES TO OBTAINED BOGUS BILLS, ASSESSEE WAS FOUND TO HAVE TAKEN ACCOMMODATION ENTRY/BOGUS PURCHASE BILLS DURING THE CONC ERNED ASSESSMENT YEAR FROM DIFFERENT PARTIES. BASED UPON THIS INFORMATION ASSESSMENT WAS REOPENED. THE CREDIBILITY OF INFORMATION RELATING TO REOPENING REMAINS UNASSAILED . FURTHERMORE IT IS NOTED THAT IN SUCH FACTUAL SCENARIO ASSESSING OFFICER HAS MADE THE NECESSARY ENQUIRY. THE ISSUE OF NOTICE TO ALL THE PARTIES HAVE RETURNED UNSERVED. ASSESSEE HAS NOT BEEN ABLE TO PROVIDE ANY INFORMATION ABOUT THE CURRENT WHEREABOUTS OF THE PARTIES. ASSESSEE HAS ALSO NOT BEEN ABLE TO PRODUCE ANY OF THE PARTIES. THE NECESS ARY EVIDENCE FOR TRANSPORTATION EXPENSES OF GOODS HAVE NOT BEEN PROVIDED BY THE ASSESSEE , BY CLAIMING THAT GOODS WERE DIRECTLY SENT TO THE SELLER FROM PURCHASER . IN THIS FACTUAL SCENARIO IT IS AMPLY THAT ASSESSEE HAS OBTAINED BOGUS PURCHASE BILLS. MERE PRE PARATION OF DOCUMENTS FOR PURCHASES CANNOT CONTROVERT OVERWHELMING EVIDENCE THAT THE PROVIDER OF THESE BILLS ARE BOGUS AND NON - EXISTENT AND THERE IS NO COGENT EVIDENCE OF TRANSPORTATION EXPENSES OF GOODS. THE S ALES T AX DEPARTMENT IN ITS ENQUIRY HAVE FOUND THE PARTIES TO BE PROVIDING BOGUS ACCOMMODATION ENTRIES. THE ASSESSING 5 ITA NO S . 5842 & 5843/MUM/2015 M/S. STEAMLINE INDUSTRIES LTD. OFFICER ALSO ISSUED NOTICES TO THESE PARTIES AT THE ADDRESSES PROVIDED BY THE ASSESSEE. ALL THESE NOTICES HAVE RETURNED UNSERVED. ASSESSEE HAS NOT BEEN ABLE TO PRODUCE ANY OF THE PARTIE S. NEITHER THE ASSESSEE HAS BEEN ABLE TO PRODUCE ANY CONFIRMATION FROM THESE PARTIES NOR THEIR CURRENT WHEREABOUTS ARE KNOWN . IN SUCH CIRCUMSTANCES, THERE IS NO DOUBT THAT THESE PARTIES ARE NON - EXISTENT. 9. HENCE PURCHASE BILLS FROM THESE NON - EXISTENT THE /BOGUS PARTIES CANNOT BE TAKEN AS COGENT EVIDENCE OF PURCHASES, IN LIGHT OF THE OVERWHELMING EVIDENCE THE REVENUE AUTHORITIES CANNOT PUT UPON BLINKERS AND ACCEPT THESE PURCHASES AS GENUINE. THIS PROPOSITION IS DULY SUPPORTED BY HONBLE APEX COURT DECISION IN THE CASE OF SUMATI DAYAL 214 ITR 801 AND DURGA PRASAD MORE 82 ITR 540. IN THE PRESENT CASE THE ASSESSEE WANTS THAT THE UNASSAILABLE FACT THAT THE SUPPLIERS ARE NON - EXISTENT AND THUS BOGUS SHOULD BE IGNORED AND ONLY THE DOCUMENTS BEING PRODUCED SHOULD B E CONSIDERED. THIS PROPOSITION IS TOTALLY UNSUSTAINABLE IN LIGHT OF ABOVE APEX COURT DECISIONS. 10. IN THESE CIRCUMSTANCES LEARNED DEPARTMENTAL REPRESENTATIVE HAS REFERRED TO HONBLE GUJARAT HIGH COURT DECISION IN THE CASE OF APEX APPEAL NO. 240 OF 2003 I N THE CASE OF N K INDUSTRIES VS DY CIT, ORDER DATED 20.06.2016, WHEREIN HUNDRED PERCENT OF THE BOGUS PURCHASES WAS HELD TO BE ADDED IN THE HANDS OF THE ASSESSEE AND TRIBUNALS RESTRICTION OF THE ADDITION TO 25% OF THE BOGUS PURCHASES WAS SET ASIDE. IT WAS EXPOUNDED THAT WHEN PURCHASE BILLS HAVE BEEN FOUND TO BE BOGUS 100% DISALLOWANCE WAS REQUIRED. THE SPECIAL LEAVE PETITION AGAINST THIS ORDER ALONG WITH OTHERS HAS BEEN DISMISSED BY THE HONBLE APEX COURT VIDE ORDER DATED 16.1.2017. 6 ITA NO S . 5842 & 5843/MUM/2015 M/S. STEAMLINE INDUSTRIES LTD. 11. WE FURTHER NOTE THA T HONBLE RAJASTHAN HIGH COURT HAS SIMILARLY TAKEN NOTE OF DECISIONS OF THE APEX COURT ON THE ISSUE OF BOGUS PURCHASES IN THE CASE OF CIT JAIPUR VS SHRUTI GEMS IN ITA NO. 658 OF 2009. THE HONBLE HIGH COURT HAS REFERRED TO THE DECISION OF CIT JAIPUR VS. AD ITYA GEMS, D. B. IN ITA NO. 234 OF 2008 DATED 02.11.2016, WHEREIN THE HONBLE COURT HAD INTER ALIA HELD AS UNDER: 'CONSIDERING THE LAW DECLARED BY THE SUPREME COURT IN THE CASE OF VIJAY PROTEINS LTD. VS. COMMISSIONER OF INCOME TAX, SPECIAL LEAVE TO APPEA L (C) NO.8956/2015 DECIDED ON 06.04.2015 WHEREBY THE SUPREME COURT HAS DISMISSED THE SLP CONFIRMED THE ORDER DATED 09.12.2014 PASSED BY THE GUJARAT HIGH COURT AND OTHER DECISIONS OF THE HIGH COURT OF GUJARAT IN THE CASE OF SANJAY OILCAKE INDUSTRIES VS. COM MISSIONER OF INCOME TAX (2009) 316 ITR 274 (GUJ) AND N.K. INDUSTRIES LTD. VS. DY. C.I.T., TAX APPEAL NO.240/2003 DECIDED ON 20.06.2016, THE PARTIES ARE BOUND BY THE PRINCIPLE OF LAW PRONOUNCED IN THE AFORESAID THREE JUDGMENTS. 12. IN THE BACKGROUND OF THE AFORESAID DISCUSSION AND PRECEDENT WE ARE OF THE CONSIDERED OPI NI ON THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN GRANTING 100% RELIEF TO THE ASSESSEE. WE FURTHER FIND SALES IN THESE CASES ARE NOT DOUBTED. WHEN SALES ARE NOT DOUBTED, 1 00% DISALLOWANCE FOR BOGUS PURCHASE IS NOT SUSTAINABLE AS PER THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF NIKUNJ EXIMP ENTERPRISES (IN WRIT PETITION NO 2860, ORDER DT. 18.6.2014). HOWEVER, THE FACTS OF THAT CASE WERE DIFFERENT INAS MUCH AS SALES WERE TO THE GOVERNMENT DEPARTMENT. HOWEVER THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE INDICATE THAT ASSESSEE HAS ENGAGED INTO DEALINGS IN THE GREY MARKET. DEALINGS IN THE GREY MARKET GIVE THE ASSESSEE VARIOUS SAVINGS AT THE EXPENSE OF TH E EXCHEQUER. HENCE, ON THE OVERALL CONSIDERATION OF FACTS AND CIRCUMSTANCES AND FOLLOWING THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS SIMIT P. SHETH [2013] 356 ITR 451 (GUJ.) WE HOLD THAT A DISALLOWANCE OF 12.5% OF THE BOGUS 7 ITA NO S . 5842 & 5843/MUM/2015 M/S. STEAMLINE INDUSTRIES LTD. PURCHASE WO ULD MEET THE END OF JUSTICE. ACCORDINGLY, WE MODIFY THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) AND DIRECT THAT THE DISALLOWANCE IN THIS CASE SHOULD BE RESTRICTED TO 12.5% OF THE BOGUS PURCHASE. THE LD. COUNSEL OF THE ASSESSEES RELIANCE UPON THE HONBLE DELHI HIGH COURT DECISION IN THE CASE OF CIT VS. JMD COMPUTERS AND COMMUNICATION (P.) LTD. [2009] 20 DTR 370 (DEL) IS NOT APPLICABLE ON THE FACTS OF THE PRESENT CASE. IN THE SAID DECISION THE HONBLE HIGH COURT DID NOT FIND ANY INFIRMITY IN TH E CONCURRENT ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) AND THE ITAT . MOREOVER, THE SAID CASE WAS RELATED TO INVESTIGATION CARRIED OUT BY THE INSPECTOR. FURTHERMORE, SINCE WE HAVE ADJUDICATED THIS CASE BY REFERENCE TO THE HONBLE APEX COURT AND HONBLE HIGH COURT DECISIONS APPLICA BLE ON THE FACTS OF THIS CASE, THE OTHER TRIBUNALS DECISIONS REFERRED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS) AND LD. COUNSEL OF THE ASSESSEE ARE NOT APPLICABLE . 13. IN THE RESULT, THESE APPEALS FILED BY THE R EVENUE STAND S PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 02.05.2018 SD/ - SD/ - ( RAM LAL NEGI ) (S HAMIM YAHYA) / J UDICIAL MEMBER / A CCOUNTANT MEMBER MUMBAI ; DATED : 02.05.2018 . . ./ ROSHANI , SR. PS 8 ITA NO S . 5842 & 5843/MUM/2015 M/S. STEAMLINE INDUSTRIES LTD. / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F ILE / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI