RAJESH VASANTRAI DOSHI, MUMBAI V. ACIT CENT. CIR. 3, THANE, THANE

ITA 5901/MUM/2016

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 8438 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-11-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 04-10-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Bogus purchase; Search and seizure; Corroborative evidences; Accommodation entries
• Section: 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH B, MUMBAI BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER AND SHRI MANOJ KUMAR AGGARWAL, ACCOUNTANT MEMBER ITA NO.5899/M/2016 ASSESSMENT YEAR: 2009-10 ITA NO.5900/M/2016 ASSESSMENT YEAR: 2010-11 ITA NO.5901/M/2016 ASSESSMENT YEAR: 2011-12 SHRI RAJESH VASANTRAI DOSHI, 301/A, ADITYA TOWER, CHANDAVARKAR ROAD, NEAR OM SHANTI CHOWK, BORIWALI (W), MUMBAI-400 092 PAN: AEGPD4152C VS. ACIT, CEN. CIR. 3, THANE (APPELLANT) (RESPONDENT) ITA NO.5906/M/2016 ASSESSMENT YEAR: 2009-10 ITA NO.5907/M/2016 ASSESSMENT YEAR: 2010-11 ITA NO.5908/M/2016 ASSESSMENT YEAR: 2011-12 ASSTT. COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-3, THANE VS. SHRI RAJESH VASANTRAI DOSHI, 301/A, ADITYA TOWER, CHANDAVARKAR ROAD, NEAR OM SHANTI CHOWK, BORIWALI (W), MUMBAI-400 092 PAN: AEGPD4152C (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI SHAILESH PARMAR, A.R. REVENUE BY : SHRI RANJIT SINGH ARNEJA, D.R. SHRI SUMAN KUMAR, SR. A.R. DATE OF HEARING : 16.08.2017 DATE OF PRONOUNCEMENT : 10.11.2017 ITA NO.5899/M/2016& ORS. SHRI RAJESH VASANTRAI DOSHI 2 O R D E R PER D.T. GARASIA , JUDICIAL MEMBER: THE ABOVE TITLED APPEALS, THREE BY THE ASSESSEE AN D THE OTHER THREE BY THE REVENUE, HAVE BEEN PREFERRED AGAINST T HE COMMON ORDER DATED 21.07.2016 OF THE COMMISSIONER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS THE CIT(A)] RELEVANT TO ASSESSMENT YEARS 2009-10, 2010-11 & 2011-12. 2. THE SHORT FACTS OF THE CASE ARE THAT A SEARCH AC TION U/S 132(L) WAS CONDUCTED ON 12/09/2012 BASED ON A SUSPICIOUS TRANSACTION REFERENCE (SIR) RECEIVED FROM FINANCIAL INTELLIGENCE UNIT INDIA (FIU-IND). ENQUIRIES IN RESPECT OF THE SIR HAD REVE ALED THAT SHRI RAJESH VASANTRAI DOSHI, PROP. OF M/S HINDUSTAN LABO RATORIES HAD OBTAINED ACCOMMODATION ENTRIES FROM A HAWALA ENTRY PROVIDER. THESE ENTRIES WERE FOR PURCHASE OF RAW MATERIAL WHI CH INDICATED THAT PURCHASES WERE BEING INFLATED SO AS TO REDUCE PROFI T. DURING THE COURSE OF SEARCH IT WAS FOUND THAT NO BILLS/VOUCHER S/ BOOKS OF ACCOUNTS OR ANY FINANCIAL DOCUMENT WAS AVAILABLE FO R THE PERIOD BEFORE MARCH 2011. AS PER THE INVESTIGATION WING TH ERE WAS FIRE ON 17.02.2011 AND THE COPY OF FIR WAS PLACED ON RECORD. AS PER THE REPORT OF INVESTIGATION WING, BOGUS BILL FOR PURCHA SE OF RAW MATERIALS/PACKING MATERIAL TOTALING RS.46,30,86,636 /- WERE FOUND FOR THE PERIOD FROM F.Y. 2008-09 TO F.Y. 2010-11. IN A LL THE BOGUS BILLS OBTAINED FROM 15 PARTIES APPEARING IN THE LIST OF H AWALA OPERATORS PREPARED BY THE MAHARASHTRA SALES TAX DEPARTMENT AR E FOUND IN THE CASE OF ASSESSEE IN VARIOUS PERIODS. ON THE BASIS OF DISCREPANCIES ITA NO.5899/M/2016& ORS. SHRI RAJESH VASANTRAI DOSHI 3 FOUND DURING THE SEARCH THE ASSESSEE WAS ASKED TO F URNISH THE INFORMATION REGARDING THE BOGUS PURCHASES MADE FROM 15 PARTIES. THE ASSESSEE WAS ASKED TO GIVE QUANTITATIVE AND QUA LITATIVE DETAILS OF PURCHASES ALONG WITH NAME OF COMMODITY MADE DURING THE YEAR UNDER CONSIDERATION ALONG WITH SUPPORTING EVIDENCE FROM THE FOLLOWING PARTIES: SR. NO. TIN NAME OF THE PARTY F.Y. 08-09 1. 270305407V NAG ESHWAR ENT 30192752 2 27070530257V PRAJIT INDUSTRIES 3409635 3 27070656939V JAINAM TRADE COR 23302103 4 27120511239V AJANTA ENTERPRISES 96341 5 2716066072V PARASNATH ENT. 28131357 6 27210286613V GRACIS PHARMA 80496 7 27310540795 OM CORPORATION 37709850 8 27340548975V BLUE NILE ENT 57809432 9 27450374751V NIKHIL ENTERPRISES 13894847 10 27100207711V SYMPHONY METAL 502142200 11 27750403201V SHAH INDUSTRIES 35322948 12 27220690273V YSH CHEM 0 13 27680504653V GREAT INTERNATIONAL 47097846 14 27830258239V P.K. TRADING CO. 56418772 15 27320257792V R.K. ENTERPRISES 3141374 TOTAL 38,71,24,854/- 3. IN RESPONSE TO THIS, THE ASSESSEE REPLIED AS UND ER: 9.1.4) IN SHORT, FROM THE ABOVE, THE ASSESSEES SA Y IS HIGH-LIGHTED AS UNDER: A) MY MAJOR SUPPLY OF PRODUCTS WAS TO THE GOVERNMENT DEPARTMENTS. B) I HAVE TO UNDERGO THE PROCESS OF TENDERING. C) INCLUDE TIME PERIOD WITHIN WHICH THE SUPPLY IS TO BE MADE SPECIFICATION OF THE GOODS/PRODUCTS, PAYMENT TERMS, QUALITY ASSURANCE ET C. D) IF GOODS SUPPLIED ARE NOT ACCORDING TO THE SPECIFI CATION THAT ALSO BECOMES A REASON FOR BLACKLISTING. A PARTY ONCE BLACKLISTED IS DEBARRED FROM GETTING ANY TENDER FOR ANY OTHER SUPPLY OF ANY OTHER GOVERN MENT DEPARTMENT OR SCHEMES OF GOVERNMENT'. E) THE ROOT CAUSE OF APPROACHING VENDORS OTHER THAN T HE REGULAR VENDORS WAS THAT I HAD NO CHOICE AS THE SUPPLY TIME WAS FIX ED'. F) ALL THE PARTIES WHICH YOU HAVE REFERRED TO WERE TH E REGULAR MARKET PARTIES AND MADE GENUINE SUPPLY OF THE MATERIAL. G) 'L REITERATE THAT I HAD PURCHASED THE GOODS GENUINE LY FROM THESE PARTIES ITA NO.5899/M/2016& ORS. SHRI RAJESH VASANTRAI DOSHI 4 REFERRED TO IN YOUR SHOW CAUSE NOTICE WITHOUT WHICH THE MANUFACTURING AND SUPPLY MADE BY ME TO VARIOUS GOVERNMENT DEPARTM ENTS-WOULD NOT HAVE BEEN POSSIBLE. H) 'MY SALES ARE GENUINE'. I) 'WITHOUT PURCHASES SALES IS IMPOSSIBLE'. J) THE PARTIES ARE GENUINE PARTIES AND WERE REGISTERE D WITH THE SALES TAX DEPARTMENT HAVING ISSUED SALES TAX NUMBER, K) THE PARTIES COLLECTED SALES TAX I.E., VAT BUT DID NOT PAY OR PARTIALLY- PAID'. L) 'TO ESCAPE THEIR LIABILITY THEY CAME OUT WITH A WEL L DESIGNED, CONCOCTED STORY BY SAYING THAT THEY HAD NOT MADE GENUINE SUPP LY OF THE GOODS, M) BUT NOWHERE ANY NOTING OR ENTRY WAS FOUND REGARDIN G THE RECEIPT OF ANY AMOUNT IN CASH FROM ANY OF THE ABOVE PARTIES, N) 'THE ALLEGATION OF FIVE ABOVE PARTIES FLUIL THEY HA D RETURNED THE CASH BACK AGAINST THE CHEQUES ISSUED TO THEM'. O) I STRONGLY OBJECT TO YOUR PROPOSAL OF MAKING ANY A DDITION OIL OF PURCHASES MADE BY ME FROM THESE PARTIES DURING THE FINANCIAL YEARS 2008- 09, 2009-10 AND 2010-I I. P) NO SUCH EVIDENCE OF ANY CASH PAYMENT FOR PURCHASIN G THE GOODS WAS FOUND Q) STATEMENTS OF THESE PARTIES HAVE NO EVIDENTIARY VA LUE AND CANNOT BE RELIED UPON. 4. AFTER CONSIDERING THE REPLY, AO MADE THE ADDITIO N IN A.Y. 2009-10 OF RS.38,71,24,854/-. IN RESPECT OF ASSESS MENT YEAR 2010-11 AND 2011-12 THE FACTS ARE IDENTICAL EXCEPT THE AMOU NT OF DISALLOWANCE. THE AMOUNT OF DISALLOWANCE WAS OF RS .2,92,87,304/- IN A.Y. 2010-11 AND RS.4,66,74,478/- IN A.Y. 2011-1 2. 5. MATTER CARRIED TO THE LD. CIT(A) AND THE LD. CIT (A) HAS PARTLY ALLOWED THE APPEAL BY OBSERVING AS UNDER: 18. TO CONCLUDE I CONFIRM 25% OF THE DISALLOWANCE MADE BY THE AO IN THE ASST. ORDER ON ACCOUNT OF IMPUGNED HAWALA PURCHASES. THE CONFIRMED DISALLOWANCE WORKS OUT AS UNDER IN DIFFERENT ASST YEARS: ASST YEAR DISALLOWANCE BY THE AO DISALLOWANCE CONFIRMED @ 25% 2009 - 10 38,71,24,854/ - 9,67,81,213 2010-11 2,92,87,304/- 73,21,026/- 2011-12 4,66,74,478/- 1,16,68,620/- ALL THE THREE APPEALS ARE ALLOWED PARTLY AS INDICA TED ABOVE. ITA NO.5899/M/2016& ORS. SHRI RAJESH VASANTRAI DOSHI 5 6. THE DEPARTMENT IS IN APPEAL AGAINST RELIEF PROVI DED WHEREAS ASSESSEE IS IN APPEAL AGAINST ADDITIONS @25%. 7. THE LD. A.R. OF THE ASSESSEE SUBMITTED THAT THE PURCHASES WERE GENUINE SINCE QUANTITATIVE DETAILS WERE FILED WITH SUPPORTING EVIDENCE FROM THE PARTIES. OUR ATTENTION IS DRAWN TO THE FACT THAT THE ASSESSEE WAS ENGAGED IN BUSINESS OF MANUFACTURING O F VARIOUS PHARMACEUTICAL PRODUCTS AND IT IS ADMITTED FACT ON RECORD THAT THEIR MAJOR SUPPLY WAS TO THE GOVERNMENT DEPARTMENTS AND VARIOUS SCHEMES RUN BY GOVERNMENT. WHENEVER THERE WAS A PU RCHASE REQUIREMENT FROM GOVERNMENT DEPARTMENT, ASSESSEE CA LLED VARIOUS PARTIES TO SUPPLY THE GOODS WITH SPECIFICATION. TH E ASSESSEE HAS MADE SUPPLY TO THE GOVERNMENT AND PURCHASED THE RAW MATERIAL AND HENCE ADDITIONS WERE NOT JUSTIFIED. FURTHER, THE PA YMENTS WERE THROUGH BANKING CHANNELS. THE LD. A.R. FURTHER SUBM ITTED THAT THE ASSESSEE COULD NOT LOCATE THE SUPPLIER SINCE CONSID ERABLE TIME HAD ELAPSED. RELIANCE WAS PLACED UPON THE DECISION OF V ARIOUS DECISION OF HONBLE BOMBAY HIGH COURT AND TRIBUNAL. IT WAS A LSO SUBMITTED THAT THE IMPUGNED ADDITIONS OF RS.38.71 CRORES IN A Y 2009-10 WOULD TRANSLATE INTO GROSS PROFIT RATE OF 85.76% WHICH WA S NOT POSSIBLE. IN THE ALTERNATIVE, LD. AR PLEADED FOR REASONABLE ESTI MATION OF THE INCOME. 8. PER CONTRA, LD. DR SUBMITTED THAT THE ASSESSEE C OULD NOT PROVE DELIVERY OF MATERIAL AND EVIDENCES TO SUBSTANTIATE THE PURCHASES AND THEREFORE, LD. CIT ERRED IN GIVING RELIEF TO THE AS SESSEE. ITA NO.5899/M/2016& ORS. SHRI RAJESH VASANTRAI DOSHI 6 9. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE P ARTIES. LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT IN ALL THESE GROUP CASES IT IS A FACT ON RECORD THAT ASSES SEE IS ENGAGED IN BUSINESS OF SUPPLY OF MEDICINES AND PHARMACEUTICAL PRODUCTS TO VARIOUS GOVERNMENT ORGANIZATIONS AS WELL AS OTHERS. A SEARCH AND SEIZURE ACTION UNDER SECTION 132 OF THE INCOME TAX ACT WAS CONDUCTED ON 12.09.12 IN THE CASE OF ASSESSEE ALONG WITH MEMBERS OF DOSHI GROUP. THE ASSESSEE HAD MADE PURCHASES FROM 15 PARTIES. THE ASSESSEE COULD NOT PRODUCE THE PARTIES AND ASSESSEE WAS UNABLE TO PRODUCE THE RECORDS INCLUDING THE VOUCHERS, BOOKS O F ACCOUNTS FROM F.Y. 2010-11 AND EARLIER YEARS. THERE WAS FIRE WHI CH TOOK PLACE IN THE ASSESSEES FACTORY PREMISES ON 17.02.11 AND HEN CE, NO RECORDS WERE AVAILABLE. THE ASSESSEE HAS FILED THE FIR REGARDING OCCURRENCE OF FIRE IN HIS FACTORY PREMISES. THEREFORE, ASSESS EE WAS NOT ABLE TO PRODUCE ANY RECORD. IN THIS SITUATION, ASSESSEES GP IS THE ONLY FACTOR FOR DETERMINING THE GROSS PROFIT ON ACCOUNT OF BOGU S PURCHASES. WE FIND THAT THE LD. CIT(A) CONSIDERED THE GP FROM A.Y . 2007-08 TO A.Y. 2013-14 WHICH ARE AS UNDER: ASST. YEAR SALES AMOUNT (RS.) AMT OF GROSS PROFIT (RS.) % GP ON SALES AMOUNT OF ADDITION TOTAL GROSS PROFIT AFTER CONSIDERING THE AMOUNT OF ADDITION (RS.) GP PERCENTAGE AFTER CONSIDERING THE AMOUNT OF ADDITION 2007-08 29,84,18,626.00 7,95,28,531.23 26.65 7,95, 28,531.23 2008-09 1,00,34,35,257.00 17,28,72,530.69 17.23 17 ,28,72,530.69 2009-10 60,32,19,886.00 13,01,91,591.00 21.58 38,71,24,854 51,73,16,445.00 85.76 2010-11 1,03,05,96,073.00 22,60,80,433.00 21.94 2,92,87,304 25,53,67,737.00 24.78 2011-12 61,67,41,799.00 16,92,95,433.00 27.45 4,66, 74,478 21,59,69,911.00 35.02 2012-13 94,06,53,739.00 26,75,20,522.00 28.44 26,7 5,20,522.00 2013-14 84,98,92,309.00 14,45,97,406.00 17.01 14,4 5,97,406.00 TOTAL FOR ALL YEARS 5,34,29,57,689.00 1,19,00,86,446.92 22.2739 (AVERAGE GP%) ITA NO.5899/M/2016& ORS. SHRI RAJESH VASANTRAI DOSHI 7 THE PROFIT SHOWN BY THE PEER WAS AS FOLLOWS:- ASST. YEAR CIPLA ABOTT IPCA RELISH AUROBINDO % GP % GP % GP % GP % GP 2007-08 24.27 16.22 18.2 5.33 14.46 2008-09 17.16 9.95 15.96 0.95 10.87 2009-10 20.88 10.77 17.36 0.74 15.54 2010-11 21.68 5.66 18.1 6.82 20.35 2011-12 16.94 8.79 17.19 8.01 20.4 2012-13 18.62 11.03 19.28 -2.51 11.17 2013-14 22.14 0 17.06 -4.95 14.5 10. WE FIND THAT GROSS PROFIT SHOOTS UPTO 85.76% IN A.Y. 2009-10, 24.78% IN AY IS 85.76%, IN A.Y. 2010-11 THE GROSS PROFIT WILL BE 24.78% 2010-11 AND 35.2% IN AY 2011-12 WHICH WOULD BE AN ABSURD IN ANY KIND OF BUSINESS OF MANUFACTURING. TH E LD. CIT(A) HAS RESTRICTED THE IMPUGNED ADDITIONS TO 25%, WHICH IS STILL ON THE HIGHER SIDE. THEREFORE, WE ESTIMATE THE SAME @7% OF IMPUGN ED PURCHASES WHICH COMES TO RS.2,70,98,740/- FOR AY 2009-10, RS. 20,50,111/- FOR AY 2010-11 & RS.32,67,213/- FOR AY 2011-12. 11. IN THE RESULT, DEPARTMENTAL APPEALS ARE DISMISS ED AND THE ASSESSEES APPEALS ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 10.11. 2017. SD/- SD/- (MANOJ KUMAR AGGARWAL) (D.T. GARASIA) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 10.11.2017. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI ITA NO.5899/M/2016& ORS. SHRI RAJESH VASANTRAI DOSHI 8 THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.