ADARSH KAUL, MUMBAI V. ASSISTANT COMMISSIONER OF INCOME TAX 31(1), MUMBAI

ITA 5906/MUM/2017

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 6334 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-01-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 18-09-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: M R
• Assessee Lawyers: M N NANDGAONKAR
• Keywords: Bogus purchase; Accommodation entries; Reassessment proceedings
• Section: 143(3); 133(6); 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A MUMBAI BEFORE SHRI JOGINDER SINGH ( VICE PRESIDENT ) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 5906/MUM/2017 ASSESSMENT YEAR: 2009 - 10 ADARSH KAUL C/O VAV AIRCONDITIONING UNIT NO. 2, IT PARK, TECHNIPLEX - II, JUNCTION OF VEER SAVARKAR FLYOVER, SV ROAD, GOREGAON MUMBAI - 400062. VS. ASSISTANT COMMISSIONER OF INCOME TAX 31(1), ROOM NO. 110, C - 13, PRATYAKSHAKARBHAVAN, BANDRAKURLA COMPLEX, MUMBAI - 400051. PAN NO. AHRPK7595A APPELLANT RESPONDENT ASSESSEE BY : MR. M.N. NANDGAONKAR , AR REVENUE BY : MR. PANKAJ KUMAR, DR DATE OF HEARING : 01/01/2019 DATE OF PRONOUNCEMENT : 28/01/2019 ORDER PER N.K. PRADHAN, AM THIS IS AN APPEAL FILED BY THE ASSESSEE. THE RELEVANT ASSESSMENT YEAR IS 2009 - 10 . THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) - 42 , MUMBAI [IN SHORT CIT(A)] AND ARISES OUT OF THE ASSESSMENT COMPLETED U/S 143(3) R.W. S. OF THE INCOME TAX ACT 1961, (THE ACT). 2. THE GROUND OF APPEAL READ S AS UNDER: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE & IN LAW THE ASSESSING OFFICER HAS ERRED IN HOLDING AND THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ADARSH KAUL ITA NO. 5906/MUM/2017 2 ADDITION OF RS.11,83,91 3/ - TO THE INCOME OF THE APPELLANT MADE BY ORDER U/S 143(3) R.W.S. 147 ON ACCOUNT OF ALLEGED HAWALA PURCHASES. 3. IN A NUTSHELL, THE FACTS ARE THAT THE ASSESSEE FILED HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR (AY) 2009 - 10 ON 27.09.2009 DECLARING TOTAL INCOME OF RS.67,97,632/ - . THE ASSESSING OFFICER (AO) COMPLETED THE ASSESSMENT U/S 143(3) ON 22.12.2011 DETERMINING THE TOTAL INCOME AT RS.1,59,13,550/ - . SUBSEQUENTLY, HAVING RECEIVED INFORMATION FROM THE SALES TAX DEPARTMENT, GOVERNMENT OF MAHARASHTRA THAT THE ASSESSEE HAD OBTAINED ACCOMMODATION ENTRIES OF RS.11,83,913/ - FROM A HAWALA OPERATOR (TULSIANI TRADING PVT. LTD.), THE AO REOPENED THE ASSESSMENT BY ISSUING NOTICE U/S 148 OF THE ACT. DURING THE COURSE OF REASSESSMENT PROCEEDINGS, IN RESPONSE TO THE QUESTIONNAIRE ISSUED BY THE AO ALONG WITH NOTICE U/S 142(1), THE ASSESSEE FAILED TO PROVIDE TO THE AO THE ITEM - WISE DAY - TO - D AY STOCK REGISTER AND PURCHASE CONSUMPTION OR SALE DETAILS OF THE IMPUGNED ASSESSMENT YEAR. FURTHER, THE AO ISSUED NOTICE U/S 133(6) TO THE ABOVE PARTY. HOWEVER, THE SAID NOTICE WAS RETURNED BY THE POSTAL AUTHORITIES WITH THE REMARK NOT KNOWN AND LEFT ADDRESS. THE AO AGAIN REQUEST ED THE ASSESSEE TO PROVE THE GE NUINENESS OF THE SAID PURCHASE. IN RESPONSE TO IT, THE ASSESSEE SUBMITTE D ONLY A COPY OF T HE LEDGER ACCOUNT OF THE PARTY. THE AO WAS NOT CONVINCED WITH THE ABOVE SUBMISSION FOR THE REASON THAT THE ASSESSEE FAILED TO FURNISH THE DAY - TO - D AY ITEM - WISE STOCK REGISTER ALONG WITH SUPPORTING DOCUMENTS LIKE TRANSPORT BILLS, OCTROI BI LLS, STORES REGISTER, STOCK MOVEMENT REGISTER, EVIDENCE OF CONSUMPTION OF MATERIALS PURCHASED FROM THE SAID PARTY. THEREFORE, THE AO TREATED ADARSH KAUL ITA NO. 5906/MUM/2017 3 THE ABOVE AMOUNT AS BOGUS EXPENDITURE INCURRED BY THE ASSESSEE AND MADE AN ADDITION OF RS.11,83,913/ - . 4. AGGRIEVE D BY THE ORDER OF THE AO, THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT(A). IT IS OBSERVED BY THE LD. CIT(A) THAT IF THE BOGUS PURCHASES ARE UNPROVED OR WHERE THE ALLEGED PURC HASES ARE DECLARED CONSUMED BY THE ASSESSEE ITSELF IN ITS TRADING, MANUFACTURIN G OR NON - TRADING ACTIVITIES AND WHICH IS NOT SUBSTANTIATED BY THE ASSESSEE, THE ENTIRE ADDITION CAN BE MADE AS SUCH BOGUS EXPENDITURE ONLY GOES TO INFLATE THE EXPENSES OF THE ASSESSEE. THE LD. CIT(A) THUS HELD THAT IN THE INSTANT CASE THE ASSESSEE WAS NOT IN A POSITION TO PROVE THE ACTUAL PURCHASE FROM THE HAWALA DEALER AND ALSO HE COULD NOT PROVE THE PURCHASE INDIRECTLY THROUGH HIS CONSUMPTION/RE - SALE RECORD. THEREFORE, THE LD. CIT(A) CONFIRMED THE ADDITION OF RS.11,83,913/ - MADE BY THE AO HOLDING IT AS BO GUS EXPENDITURE. 5. BEFORE US, THE LD. COUNSEL OF THE ASSESSEE SUBMITS THAT ONLY THE PROFIT ELEMENT EMBEDDED IN THE SO - CALLED BOGUS PURCHASES MAY BE BROUGHT TO TAX INSTEAD OF THE FULL AMOUNT. ON THE OTHER HAND, THE LD. DR RELIES ON THE ORDER PASSED BY T HE LD. CIT(A). 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIALS ON RECORD. IN THE INSTANT CASE, THE ASSESSEE MADE THE PAYMENT FOR PURCHASES THROUGH BANKING CHANNEL. HOWEVER, IT FAILED TO PRODUCE BEFORE THE AO THE DAY - TO - DAY ITEM W ISE STOCK REGISTER ALONG WITH SUPPORTING DOCUMENTS LIKE TRANSPORT BILLS, OCTROI BILLS, STORES REGISTERS, ADARSH KAUL ITA NO. 5906/MUM/2017 4 STOCK MOVEMENT REGISTER, EVIDENCE OF CONSUMP TION OF THE MATERIALS PURCHASED. IN THE CASE OF CIT VS. SIMIT P. SHETH (2013) 38 TAXMANN.COM (GUJ), THE HONBLE GUJARAT HIGH COURT HAS HELD THAT WHERE PURCHASES WERE NOT BOGUS BUT WERE MADE FROM PARTIES OTHER THAN THOSE MENTIONED IN THE BOOKS OF ACCOUNT, NOT ENTIRE PURCHASE PRICE BUT ONLY PROFIT ELEMENT EMBEDDED IN SUCH PURC HASES CAN BE ADDED TO THE INCOME OF THE ASSESSEE. THAT BEING THE POSITION, NOT THE ENTIRE PURCHASE PRICE BUT ONLY THE PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES CAN BE ADDED TO THE INCOME OF THE ASSESSEE. THE HONBLE HIGH COURT REFERRED TO A SIMILAR VIEW TAKEN IN THE CASE OF CIT VS. VIJAY M. MISTRY CONSTRUCTION LTD. [2013] 355 ITR 498 (GUJ) AND CIT VS. BHOLANATH POLY FAB (P) LTD. [2013] 355 ITR 290 (GUJ). 6.1 HAVING REGARD TO THE ABOVE DECISION, WE ARE OF THE CONSIDERED VIEW THAT THE PROFIT EMBEDDED IN THE DISPUTED PURCHASES BE BROU GHT TO TAX. CONSEQUENTLY, WE DIRECT THE AO TO ESTIMATE THE PROFIT @ 12.5% OF THE DISPUTED PURCHASE AMOUNT OF RS.11,83,913/ - AND BRING THE RESULTANT AMOUNT TO TAX. 7. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 28/01 /2019. SD/ - SD/ - (JOGINDER SINGH) (N.K. PRADHAN) VICE PRESIDENT ACCOUNTANT MEMBER MUMBAI ; DATED: 28/01/2019 RAHUL SHARMA, SR. P.S. ADARSH KAUL ITA NO. 5906/MUM/2017 5 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 . BY ORDER, //TRUE COPY// (SR. PRIVATE SECRETARY) ITAT, MUMBAI