RATIONAL ART & PRESS P. LTD, MUMBAI V. DCIT CEN CIR 8(1), MUMBAI

ITA 5897/MUM/2018

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 0332 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-12-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2009-2010
• Appeal Filed On: 12-10-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S C TIWARI
• Keywords: Bogus purchase; Principle of natural justice; Accommodation entries
• Section: 143(3); 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D, BENCH MUM BAI BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBE R ITA NO.5897/MUM/2018 ( ASSESSMENT YEAR: 2009-10 ) RATIONAL ART & PRESS PVT.LTD. 21 ST FLOOR, NIRMAL BUILDING NARIMAN POINT MUMBAI-400 021 VS. DCIT, CENTRAL CIRCLE-8(1) ROOM NO.656, 6 TH FLOOR AAYKAR BHAWAN, M.K.ROAD MUMBAI-400 020 PAN/GIR NO. AAACR7185E APPELLANT ) .. RESPONDENT ) REVENUE BY SHRI. S.C.TIWARI, CIT-DR ASSESSEE BY NONE DATE OF HEARING 02/12 /2019 DATE OF PRONOUNCEME NT 02 /12 /201 9 / O R D E R PER G.MANJUNATHA (A.M) : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST, THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS)50, MUMBAI, DATED 24/08/2018 AND IT PERTAINS TO ASSESSMENT YEAR 2009-10. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. THE LEARNED CIT(A) ERRED IN CONFIRMING ORDER OF A.O. DISALLOWING ALLEGED BOGUS PURCHASES OF RS. 5,07,507/- MADE FROM M/S. JIGNA ENTERPRISES WITHOUT APPRECIATING THAT THE PURCHASES WERE GENUINE AND CONSIDERATION WAS PAID THROUGH BANKING CHANNELS AND ASSESSEE FURNISHED COPY OF INVOICES, GOODS RECEIPT NOTE AND ALSO GAVE QUANTITATIVE / CONSUMPTION DETAILS AND HENCE DISALLOWANCE OF PUR CHASES OF RS. 5,07,507/- MAY BE DELETED, 2. THE LEARNED CIT(A) ERRED IN CONFIRMING ORD ER OF A.O. DISALLOWING ALLEGED BOGUS PURCHASES OF RS. 5,07,507/- MADE FROM M/S. JIGNA ITA NO.5897/MUM/2018 RATIONAL ART & PRESS PVT.LTD. 2 ENTERPRISES WITHOUT APPRECIATING THE LEARNED A.O. H AS NOT FURNISHED COPY OF STATEMENT OF M/S. JIGNA ENTERPRISES AND NO OPPOR TUNITY OF CROSS- EXAMINATION IS AFFORDED TO THE ASSESSEE AND THUS TH ERE IS VIOLATION OF PRINCIPLES OF NATURAL JUSTICE AND HENCE DISALLOWANC E OF PURCHASES OF RS. 5.07,507/- MAY BE DELETED. 3. WITHOUT PREJUDICE TO ABOVE ENTIRE DISAL LOWANCE OF PURCHASES OF RS. 5,07,507/- IS BAD IN LAW. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING, TRADING & EXPORTS OF TOBACCO PRODUCTS, FILED ITS RETURN OF INCOME FOR AY 2009-10 ON 29/04/2008, DECLARING TOTAL INCOME OF RS. 4,65,70,7 40/-. THE ASSESSMENT HAS BEEN COMPLETED U/S 143(3) R.W.S. 153 A OF THE ACT, ON 31/12/2010, DETERMINING TOTAL INCOME AT RS. 12,4 8,70,740/-. THEREAFTER, THE CASE HAS BEEN REOPENED U/S 147, ON THE BASIS OF INFORMATION RECEIVED FROM DGIT, INVESTIGATION, MUMB AI, AS PER WHICH, SALES TAX AUTHORITIES OF GOVERNMENT OF MAHAR ASHTRA HAD TAKEN ACTIONS AGAINST NUMBER OF HAWALA DEALERS, WH O HAD ISSUED BOGUS PURCHASE BILLS TO VARIOUS PARTIES. AS PER LI ST OF BENEFICIARIES, THE ASSESSEE IS ONE OF THE BENEFICIARY, WHO HAD TAK EN ACCOMMODATION BILLS OF BOGUS PURCHASES FROM M/S JIG NA ENTERPRISES AS LISTED BY THE AO IN HIS ASSESSMENT ORDER AMOUNTI NG TO RS. 5,07,507/-. THE CASE WAS SELECTED FOR SCRUTINY AND THE ASSESSMENT HAS BEEN COMPLETED U/S. 143(3).R.W.S. 147 OF THE I. T.ACT, 1961 ON 31/12/2014 AND DETERMINED TOTAL INCOME OF RS. 12,53 ,87,180/-, AFTER MAKING 100% ADDITIONS TOWARDS ALLEGED BOGUS PURCHAS E FROM M/S JIGNA ENTERPRISES AND MADE ADDITIONS OF RS. 5,07,50 7/-. 4. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESEE P REFERRED AN APPEAL BEFORE THE LD.CIT(A). BEFORE THE LD.CIT(A), THE ASSESSE HAS FILED ELABORATED WRITTEN SUBMISSIONS, ON THE ISSUE , WHICH HAS BEEN REPRODUCED AT PARA 9 ON PAGE 6 TO 8 OF LD. CIT(A) O RDER. THE SUM ITA NO.5897/MUM/2018 RATIONAL ART & PRESS PVT.LTD. 3 AND SUBSTANCE OF THE ARGUMENTS OF THE ASSESSEE BEFO RE THE LD.CIT(A) ARE THAT PURCHASE FROM THE ABOVE PARTY IS GENUINE, WHICH IS SUPPORTED BY NECESSARY EVIDENCES. THEREFORE, NO ADDITIONS COULD BE MADE ON THE BASIS OF INFORMATION RECEIVED FROM T HIRD PARTY. THE LD.CIT(A), AFTER CONSIDERING RELEVANT SUBMISSION OF THE ASSESSEE AND ALSO, BY FOLLOWING THE DECISION OF HONBLE SUPR EME COURT, IN THE CASE OF NK PROTEINS LTD. IN SLP 759 OF 2017 DATED 1 6-01-2017, CONFIRMED ADDITION MADE TOWARDS ALLEGED BOGUS PURCH ASES. THE RELEVANT FINDINGS OF THE LD.CIT(A) ARE AS UNDER:- 10.0 I HAVE CONSIDERED THE FACTS OF THE CASE, SUBM ISSIONS OF THE APPELLANT, THE OBSERVATIONS OF THE AO CONTAINED IN DIE ASSESSMENT ORDER AND THE OTHER MATERIALS ON RECORD ON THIS ISSUE. 10.1 THE FACTS ARE THAT THE AO HAS MADE ADDITION ON ACCOUNT OF PURCHASES MADE FROM M/S. JIGNA ENTERPRISES AMOUNTIN G TO RS.507507/-. THE A.O HAS IN THE ASSESSMENT ORDER RELIED ON THE INFORMATION RECEIVED FROM THE SALES TAX THAT THE APPELLANT HAS OBTAINED ACCOMMODATION PURCHASE BILL FROM AN ENTITY LISTED ON THE SALES TA X WEBSITE AND DECLARED AS HAWALA DEALER BY THE SALES TAX DEPARTMENT, MUMBA I. 10.2 I HAVE TAKEN NOTE OF THE FACT THAT THE A.O. H AS IN ORDER TO VERIFY THE GENUINENESS OF THE PURCHASES, ISSUED NOTICE U/S 133 (6) OF THE ACT TO M/S. JIGNA ENTERPRISES ON 06.12.2013. BUT NO RESPONSE WA S RECEIVED BY THE A.O. FROM THE SAID PARTY. THE APPELLANT HAS ALSO FA ILED TO PRODUCE THE SAID PARTY FOR VERIFICATION AND HENCE, FAILED TO DI SCHARGE THE BURDEN WHICH LIES ON IT OF PROVING THE PURCHASES. 10.3 THE APPELLANT HAS NOT FILED ANY TRANSPORTATIO N BILLS, CHALLANS, MATERIAL INWARD RECEIPTS ETC. TO PROVE THAT THE GOO DS HAVE ACTUALLY BEEN RECEIVED BY THE APPELLANT. THUS, THE FACTUM OF GOOD S BEING PHYSICALLY RECEIVED BY THE APPELLANT IS NOT PROVED. FURTHER, T HE APPELLANT HAS ALSO NOT FILED .ANY CONSUMPTION DETAILS FOR THE GOODS PU RCHASED FROM M/S. JIGNA ENTERPRISES. IN THE ABSENCE OF ANY DETAILS LI KE STOCK REGISTER, CONSUMPTION REGISTER ETC., BEING PRODUCED FOR VERIF ICATION, THE UTILIZATION / CONSUMPTION OF SUCH GOODS IS ALSO IN SERIOUS DOUBT. IN THESE CIRCUMSTANCES, IT IS DEAR THAT THE PURCHASE BILLS H AVE GONE TO REDUCE THE TAXABLE PROFITS. 10.4 IN THIS REGARD, RELIANCE IS PLACED ON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF NK PROTEINS LTD. IN SL P 759 OF 201, R DATED I6-01-2017,WHEREIN IT WAS HELD HAT ONCE IT IS PROVE D THAT THE PURCHASES ARE BOGUS, THEN THE ADDITION SHOULD BE MADE FOR THE ENTIRE PURCHASES AND NOT FOR PROFIT ELEMENT EMBEDDED HI SUCH PURCHASES. PARTICULARLY, IN THE ITA NO.5897/MUM/2018 RATIONAL ART & PRESS PVT.LTD. 4 PRESENT CASE AT HAND, THE APPELLANT HAS FAILED TO P ROVIDE ANY EVIDENCE TO SHOW THAT GOODS HAVE ACTUALLY BEEN RECEIVED AND ACT UALLY BEEN CONSUMED 10.5 IN VIEW OF THESE FACTS AND CIRCUMSTANCES, THE ACTION OF THE A.O IN THE BOGUS PURCHASES CLAIMED IN THE P&L A/C IS UPHEL D. HENCE, THE GROUND NO. 1 OF THE PRESENT APPEAL IS DISMISSED. 5. NONE APPEARED FOR THE ASSESSEE. WE HAVE HEARD TH E LD. DR, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE T HROUGH ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT THE LD. AO HAS MADE 100% ADDITIONS TOWARDS ALLEGED BOGUS PURCHASES, ON THE G ROUND THAT THE ASSESSEE IS ONE OF THE BENEFICIARY OF ACCOMMODATION ENTRIES OF BOGUS PURCHASE BILLS ISSUED BY HAWALA DEALERS. ACCO RDING TO THE LD. AO, ALTHOUGH ASSESEE HAS FILED CERTAIN BASIC EVIDEN CES, BUT FAILED TO FILE FURTHER EVIDENCE IN THE BACKDROP OF CLEAR FIND ING BY THE SALES TAX DEPARTMENT, MAHARASHTRA THAT THOSE PARTIES ARE INVO LVED IN PROVIDING ACCOMMODATION ENTRIES WITHOUT ACTUAL DELIVERY OF GO ODS. THE LD. AO HAD ALSO TAKEN SUPPORT FROM THE INVESTIGATION CONDU CTED DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AS PER WHICH NOTI CE ISSUED U/S 133(6) TO THE PARTY WERE RETURNED UN-SERVED BY THE POSTAL AUTHORITIES. THEREFORE, HE CAME TO THE CONCLUSION THAT PURCHASE FROM THE SAID PARTY IS BOGUS IN NATURE. IT IS THE CONTENTIONS OF THE ASSESSEE BEFORE THE LOWER AUTHORITIES THAT PURCHASE FROM THE ABOVE PARTY ARE SUPPORTED BY NECESSARY EVIDENCES. IT HAS FURNISHED ALL POSSIBLE EVIDENCES, INCLUDING BOOKS OF ACCOUNTS; STOCK DETAI LS AND BANK STATEMENT TO PROVE THAT PAYMENT AGAINST SAID PURCHA SES HAVE BEEN MADE THROUGH PROPER BANKING CHANNELS. 6 HAVING CONSIDERED ARGUMENTS OF THE LD. DR AND ALS O, MATERIAL AVAILABLE ON RECORD, WE FIND THAT BOTH THE SIDES FA ILED TO PROVE THE CASE IN THEIR FAVOUR WITH NECESSARY EVIDENCES. ALTH OUGH, ASSESSEE HAS FILED CERTAIN BASIC EVIDENCES, BUT FAILED TO FI LE FURTHER EVIDENCES ITA NO.5897/MUM/2018 RATIONAL ART & PRESS PVT.LTD. 5 TO CONCLUSIVELY PROVE PURCHASES TO SATISFACTIONS OF THE LD.AO. AT THE SAME TIME, THE LD. AO HAD ALSO FAILED TO TAKE THE I NVESTIGATION TO A LOGICAL CONCLUSION BY CARRYING OUT NECESSARY ENQUIR ES, BUT HE SOLELY RELIED UPON INFORMATION RECEIVED FROM INVESTIGATIO N WING, WHICH WAS FURTHER SUPPORTED BY INFORMATION RECEIVED FROM MAHA RASHTRA SALES TAX DEPARTMENT. UNDER THESE CIRCUMSTANCES, IT IS D IFFICULT TO ACCEPT ARGUMENTS OF BOTH THE SIDES. FURTHER, IN A SITUATIO N WHERE PURCHASE IS MADE FROM ALLEGED HAWALA DEALERS, VARIOUS HIGH C OURTS AND TRIBUNALS HAD CONSIDERED AN IDENTICAL ISSUE IN LIGH T OF INVESTIGATION CARRIED OUT BY THE SALES TAX DEPARTMENT AND HELD TH AT IN CASE PURCHASES CLAIMS TO HAVE MADE FROM ALLEGED HAWALA D EALERS, ONLY PROFIT ELEMENT EMBEDDED IN THOSE PURCHASES NEEDS TO BE TAXED, BUT NOT TOTAL PURCHASE FROM THOSE PARTIES. THE HONBLE GUJARAT HIGH COURT, IN THE CASE OF CIT VS SIMITH P.SHETH 356 ITR 451 HAD CONSIDERED A SIMILAR ISSUE AND HELD THAT AT THE TIM E OF ESTIMATION OF PROFIT FROM ALLEGED BOGUS PURCHASES NO UNIFORM YARD STICKS COULD BE ADOPTED, BUT IT DEPENDS UPON FACTS OF EACH CASE. TH E ITAT, MUMBAI, IN NUMBER OF CASES HAD CONSIDERED AN IDENTICAL ISSU E AND DEPENDING UPON FACTS OF EACH CASE, DIRECTED THE LD.AO TO ESTI MATE PROFIT OF 10 TO 15% ON TOTAL ALLEGED BOGUS PURCHASES. IN THIS CA SE, CONSIDERING THE NATURE OF BUSINESS OF THE ASSESSEE THE LD. AO H AS ESTIMATED 100% PROFIT, WHICH WAS CONFIRMED BY THE LD. CIT (A) . ALTHOUGH, BOTH AUTHORITIES HAVE CONSIDERED 100% ADDITION TOWARDS A LLEGED BOGUS PURCHASE, BUT NO ONE COULD SUPPORT SAID ADDITION WI TH NECESSARY EVIDENCES OR ANY COMPARABLE CASES. THEREFORE, CONSI DERING FACTS AND CIRCUMSTANCES OF THIS CASE AND CONSISTENT WITH VIEW TAKEN BY THE CO-ORDINATE BENCH IN NUMBER OF CASES, WE ARE OF THE CONSIDERED VIEW THAT A REASONABLE PROFIT ON ALLEGED BOGUS PURC HASES WOULD ITA NO.5897/MUM/2018 RATIONAL ART & PRESS PVT.LTD. 6 MEET ENDS OF JUSTICE. HENCE, WE DIRECT THE AO TO ES TIMATE 12.50% PROFIT ON ALLEGED BOGUS PURCHASES. 7. IN THE RESULT, APPEAL FILED BY THE ASSESSE IS PA RTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 02/12 /2019 SD/- ( SAK TIJIT DEY ) SD/- ( G. MANJUNATHA ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 02/12/2019 THIRUMALESH SR.PS COPY OF THE ORDER FORWARDED TO : BY ORDER, (ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//