DINERO METALS PRIVATE LIMITED, MUMBAI V. INCOME TAX OFFICER WARD 15(1)(4), MUMBAI

ITA 5992/MUM/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 0372 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-02-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 25-09-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: N HEMALATHA
• Assessee Lawyers: R C JAIN
• Keywords: Bogus purchase; Accommodation entries

Judgement Text

- IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI , BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER ./ I.T.A. NO. 5992/MUM/2017 ( / ASSESSMENT YEAR: 2011 - 12 ) DINERO METALS PVT. LTD. C - SHOP NO. 16, 551 SHANGRILLA, P. K. ROAD, MULUND (W), MUMBAI - 400 080 / VS. ITO, WARD 15(1) (4) AAYKAR BHAWAN, MUMBAI - 400 020 ./ ./ PAN/GIR NO. AAACD 2923 J ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI R. C. JAIN / RESPONDENT BY : MS. N. HEMALATHA / DATE OF HEARING : 16.11.2017 / DATE OF PRONOUNCEMENT : 05.02 . 2018 / O R D E R PER S HAMIM YAHYA , A. M.: THIS A PPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE O RDER BY THE COMMISSIONER OF INCOME TAX (APPEALS) DATED 30.06.2017 AND PERTAINS TO THE A SSESSMENT YEAR 2011 - 12. 2 ITA NO. 5992/MUM/2017 (A.Y. 2011 - 12) DINERO METALS PVT. LTD. VS. ITO 2. T HE ISSUE RAISED IS THAT THE LD. CO MMISSIONER OF INCOME TAX (APPEALS) E RRED IN SUSTAINING DISALLOWANCE OF 12.5 %PERCENT OF BOGUS PURCHASE S. 3. T HE GROUNDS OF APPEAL READ AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) 24, MUMBAI ERRED IN DEC IDING THE APPEAL EX - PARTE WITHOUT GIVING PROPER OPPORTUNITY TO THE APPELLANT TO REPRESENT ITS CASE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) 24, MUMBAI ERRED IN CONFIRMING THE ADDITION OF 12.50% OF PURCHASES AM OUNTING TO RS.44,78,050/ - WHICH COMES TO RS.5,59,756/ - MADE BY THE LEARNED ASSESSING OFFICER BY TREATING THE PURCHASES OF THE ASSESSEE COMPANY AS BOGUS PURCHASES WITHOUT APPRECIATING THE FACT THAT THE PURCHASES WERE GENUINE, AND THEREBY CONFIRMING THE DISA LLOWANCE MADE BY THE LEARNED ASSESSING OFFICER. 4. A T THE OUTSET , THE L D COUNSEL OF THE ASSESSEE SUBMITTED THAT HE SHALL NOT BE PRESSING GROUND NO 1. H ENCE , THIS GROUND IS DISMISSED AS NOT PRESSED. 5. I N THIS CASE , DURING THE COURSE OF ASSESSMENT PROCEE DINGS, THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAD DEBITED PURCHASES OF RS.44,78,050/ - FROM SUPPLIERS WHOSE TIN MATCHED WITH THE INFORMATION RECEIVED FROM THE SALES TAX DEPARTMNET REGARDING BOGUS PARTIES WITH WHOM THE ASSESSEE HAD MADE PURCHASES. ON THE BASIS OF INFORMATION RECEIVED FROM THE INVESTIGATION WING OF THE INCOME TAX DEPARTMNET, MUMBAI, IT WAS FOUND THAT THE ASSESSEE HAD OBTAINED BOGUS PURCHASE BILLS TOTAL AMOUNTING TO RS.44,78,050/ - FROM TWO PARTIES, WHICH WERE STATED TO BE HAWALA OPERA TORS. THE ASSESSING OFFICER, ON GOING THROUGH THE SUBMISSIONS AND CONTENTIONS OF THE ASSESSEE, CONCLUDED THAT THE ASSESSEE FAILED TO PROVE WITH SUPPORTING 3 ITA NO. 5992/MUM/2017 (A.Y. 2011 - 12) DINERO METALS PVT. LTD. VS. ITO DOCUMENTARY EVIDENCES THAT THE MATERIAL WAS ACTUALLY DELIVERED IN ITS PREMISES AND ALSO FAILED TO EST ABLISH THAT THE MATERIAL WAS PHYSICALLY DELIVERED IN ITS PREMISES AND CONSUMED FOR BUSINESS ACTIVITIES. AS THE ASSESSEE FAILED TO FURNISH THE CONFIRMATION FROM THE PARTIES THAT IT HAD ACTUALLY SOLD AND DELIVERED MATERIAL TO THE ASSESSEE COMPANY AND HENCE, AN AMOUNT OF RS.5,59,756/ - , BEING 12.5% OF THE TOTAL NON - GENUINE PURCHASES OF RS.44,78,050/ - WAS TREATED AS INCOME OF THE ASSESSEE COMPANY AND ADDED TO THE RETURNED INCOME OF THE ASSESSEE. 6. A GAINST THE ABOVE ORDER , THE ASSESSEE APPEALED BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEALS). THE LD. COMMISSIONER OF INCOME TAX (APPEALS) CONF I RMED THE ACTION OF THE ASSESSING OFFICER IN MAKING ADDITION OF 12.5% OF THE BOGUS PURCHASE. 7. AGAINST THE ABOVE ORDER OF LEARNED CIT - A , THE ASSESSEE IS IN APPEAL BEFO RE THE ITAT. 8. I HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. I FIND THAT CREDIBLE AND COGENT INFORMATION WAS RECEIVED IN THIS CASE BY THE ASSESSING OFFICER THAT CERTAIN ACCOMMODATION ENTRY PROVIDER/BOGUS SUPPLIERS WERE BEING USED BY CERTAIN PART IES TO OBTAINED BOGUS BILLS, ASSESSEE WAS FOUND TO HAVE TAKEN ACCOMMODATION ENTRY/BOGUS PURCHASE BILLS DURING THE CONCERNED ASSESSMENT YEAR FROM DIFFERENT PARTIES. BASED UPON THIS INFORMATION ASSESSMENT WAS REOPENED. THE CREDIBILITY OF INFORMATION RELATING TO REOPENING REMAINS UN - ASSAILED. IN SUCH FACTUAL SCENARIO THE ASSESSING 4 ITA NO. 5992/MUM/2017 (A.Y. 2011 - 12) DINERO METALS PVT. LTD. VS. ITO 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 CONFIRMATION FROM ANY OF THE PARTY. A SSESSEE HAS ALSO NOT BEEN ABLE TO PRODUCE ANY OF THE PARTIES. NECESSARY EVIDENCE RELATING TO TRANSPORTATION OF THE GOODS WAS ALSO NOT ON RECORD. IN THIS FACTUAL SCENARIO IT IS AMPLY CLEAR THAT ASSESSEE HAS OBTAINED BOGUS PURCHASE BILLS. MERE PREPARATION OF DOCUMENTS FOR PURCHASES CANNOT CONTROVERT OVERWHELMING EVIDENCE THAT THE PROVIDER OF THESE BILLS ARE BOGUS AND NON - EXISTENT. 9. THE SALES TAX DEPARTMENT IN ITS ENQUIRY HAVE FOUND THE PARTIES TO BE PROVIDING BOGUS ACCOMMODATION ENTRIES. THE ASSESSING OFFI CER 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 PARTIES. NEITHER THE ASSESSEE HAS BEEN ABLE TO PRODUCE ANY CONFIRMATION FROM THES E PARTIES, IN SUCH CIRCUMSTANCES THERE IS NO DOUBT THAT THESE PARTIES ARE NON - EXISTENT, I FIND IT FURTHER STRANGE THAT ASSESSEE WANTS THE REVENUE TO PRODUCE ASSESSEE'S OWN VENDORS, WHOM THE ASSESSEE COULD NOT PRODUCE. THE PURCHASE BILLS FROM THESE NON - EXIS TENT 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 HONOURABLE APEX COUR T DECISION IN THE CASE OF SUMATI DAYAL VS. CIT [1995] 214 ITR 801 (SC) AND CIT VS. DURGA PRASAD MORE [1971] 82 ITR 540 (SC) . I N THE PRESENT CASE , THE ASSESSEE WANTS THAT THE 5 ITA NO. 5992/MUM/2017 (A.Y. 2011 - 12) DINERO METALS PVT. LTD. VS. ITO UNASSAILABLE FACT THAT THE SUPPLIERS ARE NON EXISTENT AND THUS BOGUS SHOULD BE IGN ORED AND ONLY THE DOCUMENTS BEING PRODUCED SHOULD BE CONSIDERED. THIS PROPOSITION IS TOTALLY UNSUSTAINABLE IN LIGHT OF ABOVE APEX COURT DECISIONS. 10. I FURTHER FIND THAT HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF NIKUNJ EXIMP ENTERPRISES (IN WRIT P ETITION NO 2860, ORDER DT. 18.6.2014) HAS UPHELD HUNDRED PERCENT ALLOWANCE FOR THE PURCHASES SAID TO BE BOGUS WHEN THE SALES HAVE NOT BEEN DOUBTED. HOWEVER THE FACTS OF THAT CASE WERE DIFFERENT. FURTHERMORE THE SALES IN THAT CASE WERE BASICALLY TO GOVERNME NT DEPARTMENTS. HENCE THE RATIO FROM THIS DECISION IS NOT FULLY APPLICABLE ON THE FACTS OF THE CASE. 11. IN THESE CIRCUMSTANCES , THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS REFERRED TO HONOURABLE GUJARAT HIGH COURT DECISION IN THE CASE OF TAX APPEAL NO 2 40 OF 2003 IN THE CASE OF N K INDUSTRIES VS DY CIT, ORDER DT 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 ASID E. IT WAS EXPOUNDED THAT WHEN PURCHASE BILLS HAVE BEEN FOUND TO BE BOGUS 100% DISALLOWANCE WAS REQUIRED. THE SPECIAL LEAVE PETITION AGAINST THIS ORDER ALONGWITH OTHERS HAS BEEN DISMISSED BY THE HONOURABLE APEX COURT VIDE ORDER DT 16 .1 2017 . 12. HOWEVER , I NOTE THAT THIS IS NOT AN APPEAL BY THE REVENUE. HENCE , ENHANCEMENT OF DISALLOWANCE CANNOT BE CONSIDERED ON THE FACTS AND CIRCUMSTANCES OF THE CASE. I HOLD THAT 12.5% DISALLOWANCE OUT OF BOGUS PURCHASE WOULD S ER VE THE END OF JUSTICE. 6 ITA NO. 5992/MUM/2017 (A.Y. 2011 - 12) DINERO METALS PVT. LTD. VS. ITO THIS PROPOSITION DRA WS SUPPORT FROM THE HONBLE GUJARAT HIGH COURT DECISION IN THE CASE OF CIT VS SIMIT P. SHETH [2013] 356 ITR 451 (GUJ.). HENCE , I CONFIRM THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS). 13. IN THE RESULT , THIS APPEAL FILED BY THE ASSESSEE STAND S DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 05.02.2018 SD/ - (S HAMIM YAHYA ) / A CCOUNTANT MEMBER MUMBAI ; DATED : 05.02.2018 . . ./ ROSHANI , SR. PS / 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