SHRI SHANTILAL C SHAH , MUMBAI V. INCOME TAX OFFICER, 19(3) (3), MUMBAI , MUMBAI

ITA 6038/MUM/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 8340 (ITAT-MUMBAI)
• Duration Of Justice: 5 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-03-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 23-09-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MICHAEL JEROLD
• Keywords: Bogus purchase; Unexplained cash credit; Principle of natural justice; Peak credit; Accommodation entries; Reason to believe
• Section: 271(1)(c); 69C; 133(6); 143(1); 274; 13; 145(3); 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL G, BENCH MUM BAI BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBE R ITA NO.6038/MUM/2019 ( ASSESSMENT YEAR: 2009-10 ) SHANTILAL C. SHAH SHOP NO.17, MISTRY BUILDING 2 ND FLOOR, 159 2 ND KHUMBHARWADA LANE MUMBAI-400 004 VS. ITO-19(3)(3) MATRU MANDIR TARDEO ROAD MUMBAI-400 007 PAN/GIR NO. BDEPS5540M ( APPELLANT ) .. RESPONDENT ) REVENUE BY SHRI MICHAEL JEROLD, DR ASSESSEE BY SHRI VIMAL PUNMIYA, AR DATE OF HEARING 1 3 /02 /2020 DATE OF PRONOUNCEME NT 13 /03 /20 20 / O R D E R PER G.MANJUNATHA (A.M) : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-30, MU MBAI DATED 18/07/2019 AND IT PERTAINS TO THE A.Y 2009-10. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1) ON THE FACTS AND CIRCUMSTANCES OF HE CASE AND LA W, THE LD.CIT(A) ERRED IN ENHANCING THE ADDITION OF RS.80,54,296/- @ 12.5% ON ALLEGED PURCHASES OF RS.6,44,34,396/- TO RS.6,44,34,396/- BEING 100% OF SUCH PURCHASE SOLELY ON HIS OWN SUSPICION, SURMISES AND CONJECTURES AND ADDED THE SAME AS UNDISCLOSED INCOME OF THE ASSESSE E IN VIEW OF SECTION 69C OF THE INCOME TAX ACT, 1961. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD.CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS.36,54,193/- BEING PEAK CREDIT OF CASH DEPOSITS IN BANK ACCOUNT AS UNEXPLAINED CASH CREDIT U/S 68 OF THE INCOME TAX ACT, 1961 ITA NO.6038/MUM/2019 SHANTILAL C SHAH 2 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE LD.CIT(A) ERRED IN CONFIRMING THE INITIATION OF THE REASSESSM ENT PROCEEDINGS UNDER SECTION 147. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW THE LD.CIT(A) FAILED TO CONSIDER THAT REASSESSMENT PROCEEDING CAN NOT BE INITIATED A) NO REASSESSMENT CAN BE MADE JUST TO MAKE AN ENQU IRY OR VERIFICATION. B) REASSESSMENT PROCEEDING CANNOT BE INITIATE MEREL Y ON THE INFORMATION RECEIVED FROM INVESTIGATION WING C) REASSESSMENT PROCEEDING CANNOT BE INITIATED WHEN THE LD.CIT(A) HAVE REASON TO SUSPECT AND NOT REASON TO BELIEVE. 4. ON THE FACTS AND CIRCUMSTANCES OF CSE AND LAW TH E LD.CIT() ERED IN CONFIRMING THE ASSESSMENT ORDER UNDER SECTION 143 S UB SECTION 3 R.W.S. 147 OF INCOME TAX ACT, WHICH IS PASSED AGAIN ST THE PRINCIPAL OF NATURAL JUSTICE. 5. ON THE FACTS AND CIRCUMSTANCES OF CASE AND LAW T HE LD.CIT(A) ERRED IN CONFIRMING AND REJECTING THE BOOKS OF ACCOUNTS U NDER SECTION 145(3) OF THE INCOME TAX ACT, 1961 6. THE LD.CIT(A) ERRED IN CONFIRMING THE CHARGING O F INTEREST UNDER SECTION 234A, 234B,234C AND 234D OF THE INCOME TAX ACT, 1961 7. THE LD.CIT(A) ERRED IN CONFIRMING THE INITIATIO N OF THE PENALTY PROCEEDINGS UNDER THE SECTION 274 R.W.S. 271(1)(C) OF THE INCOME TAX ACT, 1961. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS ENGAGED IN THE BUSINESS OF TRADING IN FERROUS AND NON-FERROUS METALS, FILED HIS RETURN OF INCOME FOR AY 2009-10 ON 30/09/2009, DECLARING THE TOTAL INCOME AT RS. 4,02,066/- AND THE SAID RETURN WAS PROCESSED U/S 143(1) OF THE I.T.ACT, 1961. THE CASE HAS BEEN SUBS EQUENTLY, REOPENED U/S 147 OF THE ACT, ON THE BASIS OF INFORM ATION RECEIVED FROM DGIT, INVESTIGATION, MUMBAI, AS PER WHICH, SAL ES TAX AUTHORITIES OF GOVERNMENT OF MAHARASHTRA HAD TAKEN ACTIONS AGAINST NUMBER OF HAWALA DEALERS, WHO HAD ISSUED BOGUS PURC HASE BILLS TO VARIOUS PARTIES IN MUMBAI AND OTHER PLACES. AS PER LIST OF BENEFICIARIES, THE ASSESSEE IS ONE OF THE BENEFICIA RY, WHO HAD TAKEN ACCOMMODATION BILLS OF BOGUS PURCHASES FROM VARIOUS PARTIES AS LISTED BY THE AO IN PARA 5 OF HIS ASSESSMENT ORDER AMOUNTING TO RS. 6,44,34,369/-. THE CASE WAS SELECTED FOR SCRUTINY A ND THE ASSESSMENT HAS BEEN COMPLETED U/S. 143(3).R.W.S. 14 7 OF THE ITA NO.6038/MUM/2019 SHANTILAL C SHAH 3 I.T.ACT, 1961 ON 27/03/2015 AND DETERMINED TOTAL IN COME OF RS. 1,21,10,560/-, AFTER MAKING ADDITIONS OF 12.50% GRO SS PROFIT ON ALLEGED BOGUS PURCHASE FROM THOSE PARTIES AND MADE ADDITIONS OF RS. 80,54,296/-. 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 REITRATED THE SUBMISSIONS MADE BEFORE THE LD. AO. T HE SUM AND SUBSTANCE OF ARGUMENTS OF THE ASSESSEE BEFORE THE L D.CIT(A) ARE THAT PURCHASE FROM THE ABOVE PARTY IS GENUINE, WHIC H IS SUPPORTED BY NECESSARY EVIDENCES. THEREFORE, NO ADDITIONS COU LD BE MADE ON THE BASIS OF INFORMATION RECEIVED FROM THIRD PARTY. THE LD.CIT(A), AFTER CONSIDERING RELEVANT SUBMISSION OF THE ASSESS EE AND ALSO, BY FOLLOWING CERTAIN JUDICIAL DECISIONS HAS ENHANCED T HE ASSESSMENT AND MADE 100% ADDITIONS TOWARDS ALLEGED BOGUS PURCH ASES FROM THOSE PARTIES. THE LD. CIT(A) HAS ALSO CONFIRMED AD DITION MADE TOWARDS UNEXPLAINED CASH DEPOSITS TO BANK ACCOUNT U /S 68 OF THE INCOME TAX ACT, 1961. AGGRIEVED BY THE CIT(A) ORDER , THE ASSESSEE IS IN APPEAL BEFORE US. 5. THE FIRST ISSUE THAT CAME UP FOR OUR CONSIDERATI ON IS ADDITION TOWARDS ALLEGED BOGUS PURCHASES. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE T HROUGH ORDERS OF THE AUTHORITIES BELOW ALONG WITH CASE LAWS CITED BY BOTH PARTIES. WE FIND THAT THE LD. AO HAS MADE ADDITION OF 12.50% PR OFIT ON ALLEGED BOGUS PURCHASES ON THE GROUND THAT THE ASSESSEE IS ONE OF THE BENEFICIARY OF ACCOMMODATION ENTRIES OF BOGUS PURCH ASE BILLS ISSUED BY HAWALA DEALERS. ACCORDING TO THE LD. AO, ALTHOUG H ASSESEE HAS FILED CERTAIN BASIC EVIDENCES, BUT FAILED TO FILE F URTHER EVIDENCE IN THE ITA NO.6038/MUM/2019 SHANTILAL C SHAH 4 BACKDROP OF CLEAR FINDING BY THE SALES TAX DEPARTME NT, MAHARASHTRA THAT THOSE PARTIES ARE INVOLVED IN PROVIDING ACCOMM ODATION ENTRIES WITHOUT ACTUAL DELIVERY OF GOODS. THE LD. AO HAD AL SO TAKEN SUPPORT FROM THE INVESTIGATION CONDUCTED DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AS PER WHICH NOTICE ISSUED U/S 133(6) TO THE PARTIES WERE RETURNED UN-SERVED BY THE POSTAL AUTHORITIES. THEREFORE, HE CAME TO THE CONCLUSION THAT PURCHASES FROM THE SAID PARTIES ARE BOGUS IN NATURE. IT IS THE CONTENTIONS OF THE ASSES SEE BEFORE THE LOWER AUTHORITIES THAT PURCHASES FROM THE ABOVE PAR TY ARE SUPPORTED BY NECESSARY EVIDENCES. IT HAS FURNISHED ALL POSSIB LE EVIDENCES, INCLUDING BOOKS OF ACCOUNTS; STOCK DETAILS AND BANK STATEMENT TO PROVE THAT PAYMENT AGAINST SAID PURCHASES HAVE BEEN MADE THROUGH PROPER BANKING CHANNELS. 6 HAVING CONSIDERED ARGUMENTS OF BOTH THE PARTIES A ND ALSO, MATERIAL AVAILABLE ON RECORD, WE FIND THAT BOTH THE SIDES HAVE FAILED TO PROVE THE CASE IN THEIR FAVOUR WITH NECESSARY EV IDENCES. ALTHOUGH, ASSESSEE HAS FILED CERTAIN BASIC EVIDENCES, BUT FAI LED TO FILE FURTHER EVIDENCES TO CONCLUSIVELY PROVE PURCHASES TO THE SA TISFACTIONS OF THE LD.AO. FURTHER, MERE PAYMENT BY CHEQUE DOES NOT PRO VE THE GENUINENESS OF PURCHASE, MORE PARTICULARLY WHEN OTH ER CIRCUMSTANTIAL EVIDENCE SAYS OTHERWISE. AT THE SAME TIME, THE LD. AO HAD ALSO FAILED TO TAKE THE INVESTIGATION TO A L OGICAL CONCLUSION BY CARRYING OUT NECESSARY ENQUIRES, BUT HE SOLELY RELI ED UPON INFORMATION RECEIVED FROM INVESTIGATION WING, WHICH WAS FURTHER SUPPORTED BY INFORMATION RECEIVED FROM MAHARASHTRA SALES TAX DEPARTMENT. THE AO NEITHER POINTED OUT ANY DESCREPA NICES IN BOOKS OF ACCOUNTS NOR MADE OUT A CASE OF SALES OUTSIDE BO OKS OF ACCOUNTS. IN FACT, THE AO DID NOT DISPUTED SALES DECLARED FOR THE YEAR. UNDER ITA NO.6038/MUM/2019 SHANTILAL C SHAH 5 THESE CIRCUMSTANCES, IT IS DIFFICULT TO ACCEPT ARGU MENTS OF BOTH THE SIDES. FURTHER, IN A CASE WHERE PURCHASES ARE CONSI DERED TO BE PURCHASED FROM SUSPICIOUS/HAWALA DEALERS, VARIOUS H IGH COURTS 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 OF 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 GROSS PROFIT OF 10% TO 15% ON TOTAL ALLEGED BOGUS PURCHASES. IN THIS CASE, CONSIDERING THE NATURE OF BUSINESS OF THE ASSESSEE THE LD. AO HAS MADE ADDITION OF 12.50% PROFIT, WHEREAS THE LD. LD. CIT(A) HAS ENHANCED ADDITION TO 100% ON ALLEGED BOGUS PURCHASE S. ALTHOUGH, BOTH AUTHORITIES HAVE TAKEN DIFFERENT RATE OF PROFI T FOR ESTIMATION OF INCOME FROM ALLEGED BOGUS PURCHASE, BUT NO ONE COUL D SUPPORT SAID RATE OF GROSS PROFIT WITH NECESSARY EVIDENCES OR AN Y COMPARABLE CASES. ON THE OTHER HAND, THE LD. AR FOR THE ASSES SEE HAS FILED NECESSARY EVIDENCES TO PROVE THAT PROFIT ESTIMATED BY THE LD. AO AS WELL AS THE LD. CIT(A) IS ON HIGHER SIDE WHEN COMPA RED TO NATURE OF BUSINESS OF THE ASSESSEE. THE ASSESSEE HAS ALSO FIL ED COMPARATIVE GROSS PROFIT EARNED BY THE ASSESSEE FOR IMMEDIEATLY PRECEEDING THREE FINANCIAL YEARS AND ARGUED FOR LOWER RATE OF PROFIT ON ALLEGED BOGUS PURCHASES. IN THIS REGARD, HE HAS RELIED UPON THE DECISIONS OF HONBLE BOMBAY HIGH COURT IN THE CASE OF MOHAMED HA JI ADAM & ITA NO.6038/MUM/2019 SHANTILAL C SHAH 6 CO VS. PCIT, ITA NO 1004 OF 2016 DATED 11-2-2019. W E, FIND THAT, ESTIMATION OF PROFIT ON ALLEGED BOGUS PURCHASES IS PURELY A FACTUAL ISSUE WHICH DEPENDS UPON FACTS OF EACH CASE AND, HE NCE, IT IS DIFFICULT TO ACCEPT THE ARGUMENTS OF THE ASSESSEE T HAT FACTS OF ITS CASE IS SIMILAR TO FACTS CONSIDERED BY HONBLE BOMB AY HIGH COURT IN CASE OF MOHAMED HAJI ADAM & CO (SUPRA) AND HENCE, T HE CASE LAWS CITED BY THE ASSESSEE COUNSEL ARE REJECTED. FU RTHER, THE GROSS PROFIT DECLARED BY THE ASSESSEE IN EARLIER YEAR CAN NOT BE CONSIDERED AS GOOD YARDSTICK FOR COMPARISION, BECAUSE THE BOOK S OF ACCOUNT OF THE ASSESSEE DOES NOT GIVE TRUE AND CORRECT FIGURE. THEREFORE, CONSIDERING FACTS AND CIRCUMSTANCES OF THIS CASE AN D ALSO CONSISTENT WITH VIEW TAKEN BY THE CO-ORDINATE BENCH IN NUMBER OF CASES, WE ARE OF THE CONSIDERED OPINION THAT THE LD. AO HAS T AKEN A FAIR VIEW AND MADE ADDITION OF 12.50% GROSS PROFIT ON ALLEGED BOGUS PURCHASES. BUT, THE LD. CIT(A) WITHOUT ASSIGNING AN Y REASONS ENHANCED ADDITION TO 100% PROFIT ON ALLEGED BOGUS P URCHASES. HENCE, WE ARE NOT INCLINED TO AGREE WITH THE FINDIN GS OF THE LD. CIT(A) AND ACCORDINGLY, REVERSED THE FINDINGS OF TH E LD. CIT(A) AND UPHELD THE FINDINGS OF THE LD. AO AND ALSO SUSTAINE D 12.50% ADDITION ON ALLEGED BOGUS PURCHASES. 7. THE NEXT ISSUE THAT CAME UP FOR OUR CONSIDERATIO N IS ADDITION TOWARDS PEAK CASH DEPOSITS TO BANK ACCOUNT U/S 68 O F THE INCOME TAX ACT, 1961. THE AO HAS MADE ADDITION OF RS. 36,5 4,193/-, BEING PEAK CREDIT BALANCE OF CASH DEPOSITS TO BANK ACCOUN T ON THE GROUND THAT NO EXPLANATION HAS BEEN OFFERED FOR CASH DEPOS ITS. IT WAS THE SUBMISSION OF THE ASSESSEE BEFORE THE LD. AO THAT C ASH DEPOIST HAS BEEN EXPLAINED OUT OF CASH WITHDRWALS AND CASH SALE S. ITA NO.6038/MUM/2019 SHANTILAL C SHAH 7 8. HAVING CONSIDERED ARGUMENTS OF BOTH SIDES, WE FI ND THAT THE ASSESSEE IS ENGAGED IN TRADING BUSINESS AND HIS SAL ES CONSIST OF CASH AND CREDIT SALES. THE CASH DEPOSITS TO BANK HA S BEEN EXPLAINED OUT OF CASH SALES AND CASH WITHDRAWALS OF EARLIER PERIOD AND FOR WHICH NECESSARY CASH BOOK HAS BEEN PREPARED AND PRODUCED BEFORE THE AO. EVEN, BEFORE US, THE CASH B OOK HAS BEEN FILED AND EXPLAINED SOURCE FOR CASH DEPOSITS TO BAN K ACCOUNT. WE, THEREFORE, ARE OF THE CONSIDERED VIEW THAT THE LD. AO WAS ERRED IN MAKING ADDITION TOWARDS PEAK CREDIT FOR CASH DEPOSI TS U/S 68 OF THE INCOME TAX ACT, 1961. HENCE, WE DIRECT THE LD. AO T O DELETE ADDITION MADE TOWARDS CASH DEPOSITS U/S 68 OF THE I. T. ACT, 1961. 9. THE OTHER GROUNDS TAKEN BY THE ASSESSEE CHALLENG ING REOPENING ASSESSMENT U/S 147 OF THE INCOME TAX ACT, 1961 IS NOT PRESSED DURING THE COURSE OF HEARING AND HENCE, ALL OTHER GROUNDS ARE DISMISSED AS NOT PRESSED. 10. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 13 /03/ 2020 SD/- (SAKTIJIT DEY) SD/- (G. MANJUNATHA) JUDICIAL MEMBER ACCO UNTANT MEMBER MUMBAI ; DATED 13/03/2020 THIRUMALESH SR.PS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. ITA NO.6038/MUM/2019 SHANTILAL C SHAH 8 BY ORDER, (ASSTT. REGISTRAR) ITAT, MUMBAI 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//