INCOME TAX OFFICER WARD 2(4), MUMBAI V. VINOD D VAGASIA, MUMBAI

ITA 6162/MUM/2018

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 4768 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-10-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2007-2008
• Appeal Filed On: 29-10-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SAMATHA MULLAMUDH
• Keywords: Bogus purchase
• Section: 69C; 143(2); 148; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH SMC, MUMBAI BEFORE SHRI SHAMIM YAHYA (AM) & SHRI PAWAN SINGH (JM) ITA NO. 6162/MUM/2018(ASSESSMENT YEAR : 2007-08) INCOME-TAX OFFICER WARD 2(4), THANE, ROOM NO. 12, B WING, 6 TH FLOOR, ASHAR I.T. PARK, WAGLE INDUSTRIAL ESTATE ROAD NO. 16Z, AMBIKA NAGAR, THANE- 400604 VS VINOD D VAGASIA POONAM NAGAR, BLDG NO.C-25 CHS LTD, FLAT NO.102 MIRA ROAD-401 107 PAN : ABEPV3863H APPELLANT RESPONDEDNT APPELLANT BY MS. SAMATHA MULLAMUDH (DR) RESPONDENT BY NONE DATE OF HEARING 15-10-2019 DATE OF PRONOUNCEMENT 23-10-2019 O R D E R PER PAWAN SINGH, JM : 1. THIS APPEAL BY REVENUE IS DIRECTED AGAINST THE ORDE R OF LD. CIT(A)-1, THANE DATED 13.08.2018 FOR ASSESSMENT YEAR 2007-08. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: ' WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN NOT APPRECIATING THE LA W CORRECTLY THAT ONCE THE PURCHASES ARE UNVERIFIABLE/NOT GENUINE/BOGUS, T HE SAME SHOULD HAVE BEEN DISALLOWED IN ENTIRETY?'. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN LAW BY NOT APPRECIATING THE FACT THAT THE ASSESSEE COULD NOT ESTABLISH THE GENUINENESS OF THE PURCHASES FROM THE NON-EXISTENT VENDORS? 3. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN LAW BY NOT APPRECIATING THE FACT THAT THE ONUS TO JUSTIFY THE CLAIM OF EXPENSES IS ON THE ASSESSEE AND THE SAME HAS FAILED TO DISCHARGE IT IN RELATION TO THE PURCHASES MADE F ROM THE NON-EXISTENT VENDORS? 4. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN LAW BY IGNORING, THE FA CT THAT THE ASSESSEE ITA 6162/MUM/2018 VINOD D VAGASIA 2 COULD NOT SUBSTANTIATE ITS CLAIM OF PURCHASES FROM NON-EXISTENT VENDORS BY MEANS OF RELEVANT SUPPORTING DOCUMENTS RELATED T O MOVEMENT AND DELIVERY OF GOODS, STOCK REGISTER, ETC. TO ARRIVE A T DISALLOWANCE AT 25% OF THE PURCHASES FROM THE NON-EXISTENT VENDORS? 5. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN NOT APPRECIATING TH E LAW CORRECTLY THAT ONCE THE PURCHASES ARE UNVERIFIABLE / NOT GENUINE / BOGUS, THE SAME SHOULD HAVE BEEN DISALLOWED IN ENTIRETY, PARTICULAR LY IN VIEW OF THE RATIO OF THE DECISION OF THE HON'BLE GUJARAT HIGH COURT I N TAX APPEAL NO. 242 OF 2003 DATED 20/06/2016 IN THE CASE OF N. K. PROTE INS LTD. AGAINST WHICH THE SLP WAS DISMISSED BY THE HON'BLE APEX COURT AND ALSO DECISION OF HON'BLE SUPREME COURT IN CASE OF KANCHWALA GEMS V/S JCIT 288 ITR 10 (SC)? 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS IN THE BUSINESS OF TRADING IN CUT AND POLISHED DIAMONDS, FILED HIS RETURN OF I NCOME FOR AY 2007- 08 ON 30-07-2007 DECLARING TOTAL INCOME AT RS.1,20, 790/-. IN A SEARCH ACTION U/S 132 CARRIED OUT IN THE CASE OF RAJENDRA JAIN, SANJAY CHOUDHARY GROUP AND DHARMICHAND JAIN GROUP & OTHERS BY THE DDIT(INV), MUMBAI ON 03-10-2013 REVEALED THAT THE A SSESSEE WAS RUNNING THE BUSINESS ACTIVITY OF TRADING IN CUT & P OLISHED DIAMONDS FROM THE PREMISES OF POONAM NAGAR, BLDG NO.CX-25, F LAT NO.102, MIRA ROAD, THANE 401 107. THE PURCHASES AND SALE BILLS ALONGWITH THE DOCUMENTARY EVIDENCES WERE VERIFIED. ON VERIFICATION IT WAS SEEN THAT THE PURCHASE BILLS SUPPLIED BY M/S SU N DIAM WERE BARE BILLS WITHOUT ANY GOODS RECEIVED NOTE (GRN), PURCHA SE ORDER, DELIVERY CHALLAN, ENTRY IN GATE INWARD REGISTER, ETC. THE A SSESSING OFFICER, THEREFORE, OBSERVED THAT THE PURCHASES SHOWN WERE B OGUS PURCHASES AS THE BILLS DID NOT ESTABLISH THE DELIVERY OF MATERIA LS. ON THE BASIS OF ITA 6162/MUM/2018 VINOD D VAGASIA 3 THIS, THE ASSESSING OFFICER MADE A BELIEF THAT THE INCOME OF THE ASSESSEE ESCAPED ASSESSMENT, THEREFORE, RE-OPENED T HE ASSESSMENT UNDER SECTION 147. NOTICE UNDER SECTION 148 DATED29 .03.2014 WAS ISSUED AND SERVED UPON THE ASSESSEE. REASONS RECORD ED WERE SUPPLIED TO THE ASSESSEE. THE ASSESSING OFFICER AFTER SERVIN G NOTICE UNDER SECTION 143(2) DATED 21.07.2014 PROCEEDED FOR RE-AS SESSMENT. DURING THE ASSESSMENT, THE ASSESSING OFFICER NOTED THAT TH E GROSS RECEIPTS FROM SALE WAS AT RS.13,47,926/- ON WHICH GROSS PRO FIT WAS SHOWN AT RS.1,14,656 WHICH GAVE A GROSS PROFIT RATE OF 8.50% . DURING THE YEAR UNDER CONSIDERATION TOTAL TURNOVER WAS RS.13,47,926 /- OUT OF THAT ASSESSEE HAD MADE PURCHASES OF RS.5,19,550/- FROM SUN DIAM WHICH WAS THE SUSPICIOUS PURCHASE WHICH IS ABOUT 40% OF T HE TOTAL TURNOVER OF THE ASSESSEE. THE AR OF THE ASSESSEE WAS ACCORDI NGLY ASKED TO PRODUCE THE COPIES OF PURCHASE BILLS IN RESPECT OF M/S SUN DIAM ALONGWITH COPIES OF GOODS RECEIVED NOTE (GRN), PURC HASE ORDER, DELIVERY CHALLAN, GATE INWARD REGISTER AND STOCK RE GISTER ETC FOR VERIFICATION. THOUGH THE AR OF THE ASSESSEE FILED COPIES OF PURCHASE BILLS, BUT WAS UNABLE TO PROVIDE DETAILS LIKE PURCH ASE ORDER, DELIVERY CHALLAN, GATE INWARD REGISTER AND STOCK REGISTER, E TC. FOR VERIFICATION. THE ASSESSING OFFICER, THEREFORE, HELD THAT ASSESSE E HAS NOT PURCHASED ANY MATERIAL AMOUNTING TO RS.5,19,550/- INCLUDING VAT OF RS.5,144/- FROM M/S SUN DIAM AND IN FACT OBTAINED BOGUS PURCHA SE BILLS AND ITA 6162/MUM/2018 VINOD D VAGASIA 4 DEBITED EXPENSES TO THE P&L ACCOUNT. THEREFORE, HE DISALLOWED THE AMOUNT OF RS.5,19,550/- U/S 69C OF THE ACT AND ADD ED THE SAME TO THE TOTAL INCOME. 3. ON APPEAL, THE LD.CIT(A) REDUCED THE ADDITION TO TH E EXTENT OF 25% OF ALLEGED BOGUS PURCHASES OR TO THE EXTENT OF FALL IN GROSS PROFIT, WHICHEVER WAS HIGHER AND NOT 100% AS HAS BEEN DISAL LOWED BY THE AO. AGGRIEVED, THE REVENUE FILED THIS APPEAL. 4. BEFORE US, NONE APPEARED ON BEHALF OF THE ASSESSEE DESPITE SERVICE OF NOTICE THROUGH REGISTERED POST NOR WAS ANY APPLICAT ION FOR ADJOURNMENT FILED. THEREFORE, WE HEARD THE LD. DR FOR THE REVENUE, WHO SUPPORTED THE ORDER OF THE ASSESSING OFFICER AN D SUBMITTED THAT THE LD. CIT(A) ERRED IN DIRECTING THE ASSESSING OFFICER TO RESTRICT THE ADDITION TO THE EXTENT OF 25% OF ALLEGED BOGUS PURC HASES. THE LD. DR PRAYED FOR SUSTAINING THE DISALLOWANCE OF 100% OF T HE PURCHASES. 5. WE HAVE CONSIDERED THE SUBMISSIONS OF THE LD. DR AN D PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ASSESSING OFFICE R MADE THE ADDITIONS OF 100% OF THE PURCHASES SHOWN FROM THE BOGUS ENTRY PROVIDER. BEFORE, LD CIT(A) THE ASSESSEE URGED THAT THE PURCH ASES MADE BY THE ASSESSEE ARE GENUINE AND FURNISHED THE COPY OF THE BANK STATEMENT SHOWING THAT THE PAYMENT OF THE MATERIALS WAS MADE THROUGH BANKING CHANNEL. THE LD CIT(A) HIMSELF CONDUCTED THE INQUIR Y TO FIND OUT THE VERACITY OF THE PURCHASES. THE LD CIT(A) ASKED THE ASSESSEE TO PROVIDE ITA 6162/MUM/2018 VINOD D VAGASIA 5 THE DETAILS OF THE PURCHASES AND THE SALE OF THE MA TERIAL ON THE FORMAT, WHICH IS REPRODUCED BY HIM IN PARA 6.1 OF HIS ORDER . AND AFTER CONSIDERING THE INFORMATION AND THE EVIDENCES FURNI SHED BY THE ASSESSEE THE BOOKS OF ACCOUNT OF ASSESSEE WAS REJEC TED. AFTER REJECTING THE BOOKS OF ACCOUNTS THE LD CIT(A) ESTIMATED THE P ROFIT ON THE ALLEGED BOGUS PURCHASES AND ALSO TOOK ACCOUNT OF THE GROSS PROFIT DECLARED BY THE ASSESSEE IN EARLIER ASSESSMENT YEARS. THE LD CI T(A) CONCLUDED THAT THE ASSESSEE HAS SUPPRESSED THE PROFIT BY SHOWING T HE PURCHASES FROM HAWALA DEALERS AND MAINLY RELYING UPON THE DECIS ION OF AHMEDABAD TRIBUNAL IN THE CASE OF VIJAY PROTEINS LTD VS ACIT 58 ITD 428 (AHD) WHICH HAS BEEN UPHELD BY THE HONBLE SUPREME COURT, RESTRICTED THE DISALLOWANCE @25% OUT OF BOGUS PURCHASES AS REASON ABLE. THE LD. DR BEFORE US, COULD NOT SHOW ANY MATERIAL SO AS TO ARRIVE AT A DIFFERENT CONCLUSION THAN THE ONE ARRIVED AT BY THE LD. CIT(A ). THEREFORE, WE DO NOT SEE ANY INFIRMITY IN THE ORDER OF CIT (A). WE UPHOLD THE SAME AND DISMISS THE APPEAL FILED BY THE REVENUE. 6. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DISMI SSED. ORDER PRONOUNCED IN THE OPEN COURT ON 23-10-2019. SD/- SD/- (SHAMIM YAHYA) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIALMEMBER MUMBAI, DT :23 OCTOBER, 2019 PK/- ITA 6162/MUM/2018 VINOD D VAGASIA 6 COPY TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR /TRUE COPY/ BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI