ITO 27 (2)(5), MUMBAI V. PARESH P. SANGHAVI, MUMBAI

ITA 5945/MUM/2018

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 3586 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-10-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 16-10-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R BHOOPATHI
• Assessee Lawyers: N B GAN DHI
• Keywords: Bogus purchase; Peak credit; Accommodation entries
• Section: 133(6); 143(1); 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH SMC , MUMBAI BEFORE SHRI C.N. PRASAD, HON'BLE JUDICIAL MEMBER AND SHRI RAJESH KUMAR, HON'BLE ACCOUNTANT MEMBER ITA NO. 5945 /MUM/201 8 (A.Y: 20 09 - 10) INCOME TAX OFFICER 27(2)(5 ) 4 TH FLOOR , TOWER N VASHI RAILWAY STATION COMPLEX VASHI, NAVI MUMBAI 400 071 V. SHRI PARESH P. SANGHAVI PROP. HIGHTECH ENTERPRISES 22, VAIKUNTH, SINDHI SOCIETY CHEMBUR, MUMBAI 400 071 PAN: AAHPS4872K (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI N.B. GANDHI DEPARTMENT BY : SHRI R. BHOOPATHI DATE OF HEARING : 19.09.2019 DATE OF PRONOUNCEMENT : 29 . 10.2019 O R D E R PER C. N. PRASAD (JM) 1. THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORDER OF THE LEARNED COMMISSIO NER OF INCOME TAX (APPEALS) 26 , MUMBAI [HEREINAFT ER IN SHORT LD.CIT(A)] DATED 10.07.2018 FOR THE A.Y. 2009 - 10 IN PARTLY SUSTAINING THE ADDITION MADE TOWARDS BOGUS PURCHASES. 2. BRIEFLY STATED THE FACTS ARE THAT, THE ASSESSEE IS EN GAGED IN THE BUSINESS OF RESELLER IN IRON & STEEL, BALL BEARINGS TOOLS & HARDWARE , 2 ITA NO. 5945/MUM/2018 (A.Y: 2009 - 10) SHRI PARESH P. SANGHAVI FILED RETURN OF INCOME ON 19.09.2009 FOR THE A.Y.2010 - 11 DECLARING INCOME OF . 3,18,120 / - AND THE RETURN WAS PROCESSED U/S. 143(1) OF THE ACT. SUBSEQUENTLY, ASSESSING OFF ICER RECEIVED INFORMATION FROM THE DGIT(INV.), MUMBAI ABOUT THE ACCOMMODATION ENTRIES PROVIDED BY VARIOUS DEALERS AND ASSESSEE WAS ALSO ONE OF THE BENEFICIARY FROM THOSE DEALERS. THE ASSESSMENT WAS REOPENED U/S. 147 OF THE ACT BASED ON THE INFORMATION REC EIVED FROM DGIT (INV.), MUMBAI, THAT THE ASSESSEE HAS AVAILED ACCOMMODATION ENTRIES FROM VARIOUS DEALERS WHO ARE ALL PROVIDING ACCOMMODATION ENTRIES WITHOUT THERE BEING TRANSPORTATION OF ANY GOODS. IN THE RE - ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS REQUIR ED TO PROVE THE GENUINENESS OF THE PURCHASES MADE FROM VARIOUS PARTIES WHICH WERE REFERRED TO IN THE ASSESSMENT ORDER. THE ASSESSEE PRODUCED COPIES OF BILLS, BANK STATEMENTS, COPIES OF VAT CHALLANS, LEDGER COPIES AND SUBMITTED THAT THE PURCHASES MADE ARE GENUINE. NOT CONVINCED WITH THE SUBMISSIONS OF THE ASSESSEE THE ASSESSING OFFICER TREATED THE PURCHASES OF .40,560/ - AS NON - GENUINE AND HE WAS OF THE OPINION THAT ASSESSEE HAD OBTAINED ONLY ACCOMMODATION ENTRIES WITHOUT THERE BEING ANY TRANSPORTATION OF MATERIALS AND THE ASSESSEE MIGHT HAVE MADE PURCHASES IN THE GRAY MARKET. IT IS THE FINDING OF THE ASSESSING OFFICER SINCE THE PURCHASES MADE BY THE ASSESSEE AND CLAIMED AS EXPENSES IN HIS PROFIT AND LOSS ACCOUNT ARE NOT GENUINE, THE PURCHASES TO THAT EXTE NT REMAINED UNVERIFIABLE AS THE NOTICES ISSUED U/S. 133(6) OF THE ACT WERE RETURNED 3 ITA NO. 5945/MUM/2018 (A.Y: 2009 - 10) SHRI PARESH P. SANGHAVI UNSERVED BY THE POSTAL AUTHORITIES. HE ALSO OBSERVED THAT THE DEALERS FROM WHOM THE ASSESSEE MADE PURCHASES STATED THAT THEY HAVE ISSUED ONLY ACCOMMODATION BILLS. THEREFO RE, RELYING ON VARIOUS JUDICIAL PRONOUNCEMENTS THE ASSESSING OFFICER TREATED THE PEAK CREDIT STANDING IN THE NAME OF THE PARTIES AS NON - GENUINE AND ADDED .34,720/ - TO THE INCOME OF THE ASSESSEE. ON APPEAL THE LD.CIT(A) CONSIDERING THE EVIDENCES AND VARIOUS SUBMISSIONS OF THE ASSESSEE RESTRICTED THE DISALLOWANCE TO THE EXTENT OF 12.5 % OF THE NON - GENUINE PURCHASES OF .40,560/ - . 3. LD. DR VEHEMENTLY SUPPORTED THE ORDER O F THE ASSESSING OFFICER. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE ORDERS OF THE AUTHORITIES BELOW. ON A PERUSAL OF THE ORDER OF THE LD.CIT(A), WE FIND THAT THE LD.CIT(A) CONSIDERED THIS ASPECT OF THE MATTER ELABORATELY WITH REFERENCE TO THE SUBMIS SIONS OF THE ASSESSEE AND THE AVERMENTS IN THE ASSESSMENT ORDER AND FOLLOWING THE DECISION OF THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT V. SIMIT P. SHETH [356 ITR 451] RESTRICTED THE DISALLOWANCE TO 12.5 % OF THE NON - GENUINE PURCHASES, WHILE HOLDING SO, THE LD.CIT(A) OBSERVED AS UNDER: - 5.3 I HAVE CONSIDERED THE FACTS OF THE CASE AND THE APPELLANT'S SUBMISSIONS. THE APPELLANT HAS CONTENDED THAT THE MODUS OPERANDI DETAILED IN THE IMPUGNED ORDER IS A MERE GUESSWORK AND THE ENTIRE ADDITION IS JUST AN ESTIMATE BASED ON ASSUMPTION AND SURMISES AND, THEREFORE, SHOULD BE DELETED. AS AGAINST THE APPELLANT'S CONTENTION, I FIND THAT AS PER THE INVESTIGATIONS CARRIED OUT BY THE SALES TAX 4 ITA NO. 5945/MUM/2018 (A.Y: 2009 - 10) SHRI PARESH P. SANGHAVI AUTHORITIES, THE ALLEGED HAWALA PARTIES WERE FOUND TO BE INVOLVED IN GIV ING ACCOMMODATION ENTRIES ONLY WITHOUT ACTUALLY SUPPLYING THE GOODS. THE LOGICAL INFERENCE IS THAT THE PURCHASES MADE BY THE APPELLANT WOULD ALSO BE IN THE NATURE OF ACCOMMODATION ENTRIES ONLY. IN ORDER TO VERIFY THE SAME, THE A.O. MADE INDEPENDENT INQUIRI ES BY ISSUING NOTICES U/S 133(6) TO THE AFOREMENTIONED PARTIES WHICH WERE RETURNED UNSERVED BY THE POSTAL AUTHORITIES WITH THE REMARK 'UNKNOWN/LEFT'. THE INSPECTOR WAS ALSO DEPUTED TO MAKE ENQUIRIES AND IT WAS REPORTED THAT THE SAID PARTIES DID NOT EXIST A T THE GIVEN ADDRESSES. THESE FACTS WERE COMMUNICATED TO THE APPELLANT WHO WAS ASKED TO PRODUCE THESE PARTIES ALONG WITH EVIDENCES IN ORDER TO VERIFY THE IDENTITY OF THE PARTIES AND THE GENUINENESS OF THE PURCHASE TRANSACTIONS WHICH THE APPELLANT FAILED TO DO. THE ONUS OF PROVING THE GENUINENESS OF SUCH PURCHASES IS ON THE APPELLANT WHICH THE APPELLANT HAS NOT BEEN ABLE TO DISCHARGE FULLY. AS FAR AS THE DOCUMENTATION SUBMITTED BY THE APPELLANT IN SUPPORT OF THE GENUINENESS OF PURCHASES MADE FROM THE PARTIES IS CONCERNED, IT HAS TO BE KEPT IN MIND THAT THESE PARTIES HAD ADMITTED ON OATH BEFORE THE SALES TAX AUTHORITIES THAT IT HAD GIVEN ACCOMMODATION ENTRIES ONLY WITHOUT ACTUALLY SUPPLYING THE GOODS. THE DOCUMENTATION SUBMITTED BY THE APPELLANT IN SUPPORT OF I TS CLAIM WOULD, THEREFORE, HAVE BEEN ORCHESTRATED TO PRESENT A FACADE OF GENUINENESS AND DOES NOT NECESSARILY MEAN THAT THE PURCHASES FROM THESE PARTIES ARE GENUINE. THE COURTS HAVE HELD THAT PAYMENT BY CHEQUE BY ITSELF IS NOT SACROSANCT SO AS TO PROVE GEN UINENESS OF PURCHASES WHEN THE SURROUNDING CIRCUMSTANCES ARE SUSPECT. HOWEVER, I FIND THAT THE A.O HAS NOT DOUBTED THE CORRESPONDING SALES AGAINST THE ALLEGED BOGUS PURCHASES. SINCE THERE CAN BE NO SALES WITHOUT CORRESPONDING PURCHASES, THE ONLY LOGICAL EX PLANATION IS THAT THE APPELLANT WOULD HAVE MADE PURCHASES FROM UNDISCLOSED PARTIES IN THE GREY MARKET AT LOWER RATES AND PURCHASES WERE SHOWN AS BEING MADE FROM THE IMPUGNED PARTIES TO SUPPRESS ITS PROFITS. IN SUCH A SITUATION, THE VARIOUS COURTS INCLUDING THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS SIMIT P. SHETH, 356 ITR 451 HAVE HELD THAT NOT THE ENTIRE PURCHASES BUT ONLY THE PROFIT ELEMENT EMBEDDED IN THESE PURCHASES WAS TO BE DISALLOWED. THE ESTIMATION WOULD VARY WITH THE NATURE OF BUSINESS AN D NO UNIFORM YARDSTICK COULD BE ADOPTED. CONSIDERING THE FACT THAT THE APPELLANT IS IN THE BUSINESS OF TRADING IN IRON, STEEL AND HARDWARE ITEMS, THE AO IS DIRECTED TO RESTRICT THE DISALLOWANCE TO 12.5% OF THE IMPUGNED PURCHASES OF RS. 40,560/ - WHICH SHOULD SUFFICIENTLY COVER THE PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES. THIS GROUND OF APPEAL IS PARTLY ALLOWED. 5. ON A CAREFUL PERUSAL OF THE ORDER OF THE LD.CIT(A) AND THE REASONS GIVEN THEREIN, WE DO NOT FIND ANY INFIRMITY IN THE ORDER PASSED BY THE LD. CIT(A). NONE OF THE FINDINGS AND OBSERVATIONS OF THE LD.CIT(A) HAVE BEEN REBUTTED WITH EVIDENCES BY THE REVENUE AND THUS WE DO NOT SEE ANY 5 ITA NO. 5945/MUM/2018 (A.Y: 2009 - 10) SHRI PARESH P. SANGHAVI INFIRMITY IN THE ORDER PASSED BY THE LD.CIT(A) IN SUSTAINING THE ADDITION/DISALLOWANCE TO THE EXTENT OF 12.5 % OF THE PURCHASES. WE SUSTAIN THE ORDER OF THE LD.CIT(A) AND REJECT THE GROUNDS RAISED BY THE REVENUE. 6. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 29 TH OCTOBER, 2019 SD/ - SD/ - (RAJESH KUMAR) (C.N. PRASAD) ACCO UNTANT MEMBER JUDICIAL MEMBER MUMBAI / DATED 29 / 10 / 2019 GIRIDHAR, SR.PS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY// BY ORDER ( ASSTT. REGISTRAR) ITAT, MUM