RUPESH CHIMANLAL SAVLA, MUMBAI V. ITO WD 3(3), KALYAN

ITA 6179/MUM/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 8695 (ITAT-MUMBAI)
• Duration Of Justice: 3 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-01-2017
• Appeal Filed By: Assessee
• Bench Allotted: Not Allotted
• Assessment Year: 2009-2010
• Appeal Filed On: 19-10-2016
• Court: TRIBUNAL
• Department Lawyers: R M MADHAVI
• Keywords: Reopening of assessment; Bogus purchase; Rejection of books of accounts; Business income; Principle of natural justice; Opportunity of cross examination; Tangible material; Accommodation entries; Onus to prove
• Section: 69C; 143(3); 133(6); 131

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH MUMBAI BEFORE SHRI C.N.PRASAD,JM & SHRI MANOJ KUMAR AGGARWAL , AM INCOME TAX APPEAL NO. 6179 - 6182 /MUM/201 6 ( / ASSESSMENT YEAR : 20 0 9 - 10 ) SHRI RUPESH CHIMANLAL SAVLA PROP. OF SAVLA INTERNATIONAL 16, ROYAL TUSK, B.S. ROAD DADAR (W) MUM B A I 400 02 8 ( / APPELLANT) VS. ITO 3 ( 3 ) 2 ND FLOOR, RANI MANSION MURBAD ` ROAD , KALYAN (WEST) , MUMBAI ( / RESPONDENT ) ./ ./ PAN/GIR NO. : AMRPS 4468 B / A PPELLANT S BY : SHRI RAJIV KHANDELWAL SHRI NAGIN PARIKH / REVENUE BY : SMT. RM MADHAVI / DATE OF HEARING : 30 /1 1 /2016 / DATE OF PRONOUNCEMENT : 30 /1 2 /2016 / O R D E R PER C.N.PRASAD (J.M.) : ALL THESE FOUR APPEALS ARE FILED BY THE ASSESSEE AGAINST THE COMMON ORDER OF THE CIT (APPEALS) - I, THANE DATED 25.08.2016 FOR THE ASSESSMENT YEARS 2009 - 10 TO 2012 - 13 ARISING OUT OF THE ASSESSMENT ORDER S PASSED UNDER SECTION 143(3) READ WITH 147 OF THE ACT. AS THE FACTS AND ISSUES ARE IDENTICAL ALL THE APPEALS ARE HEARD TOGETHER AND DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. 1 ASSESSEE CHALLENGED THE ORDER OF THE LD. CIT (APPEALS) IN SUSTAINING THE REOPENING OF ASSESSMENT UNDER SECTION 147 OF THE ACT IN ALL THESE APPEALS. THE L D. COUNSEL FOR THE ASSESSEE SUBMITS, THE REOPENING OF 2 RUPESH CHIMANLAL SAVLA ITA NO.6179 - 6182/MUM/2016 ASSESSMENTS IN ALL THESE CASES IS BAD IN LAW. THE DR SUPPORTS THE ORDERS OF THE CIT (APPEALS) IN SUSTAINING THE REOPENING OF ASSESSMENT. 2.2 ON HEARING BOTH THE PARTIES, WE ARE O F THE CONSIDERED VIEW T HAT THE ASSESSMENTS WERE REOPENED BASED ON THE INFORMATION RECEIVED FROM THE SALES TAX DEPARTMENT AND THEREFORE, WE ARE OF THE VIEW THAT THERE IS TANGIBLE MATERIAL CAME ON RECORD AFTER PASSING INTIMATION U/S 143(1) OR AFTER COMPLETION OF ASSESSMENTS U/S 1 43(3) . IN THE CIRCUMSTANCES, WE HOLD THAT SINCE THE ASSESSMENTS WERE REOPENED BASED ON TANGIBLE MATERIALS AND INFORMATION COMING INTO THE POSSESSION OF THE ASSESSING OFFICER AT LATER STAGE, WE HOLD THAT THE REOPENING OF ASSESSMENTS U/S 147 OF THE ACT FOR ALL THESE YEARS IS VALID, H ENCE THE GROUNDS RAISED BY THE A SSESSEE AGAINST REOPENING OF ASSESSMENTS ARE DISMISSED. 3. ON MERITS, I N ALL THESE ASSESSMENT YEARS, THE ASSESSMENTS WERE REOPENED BY ISSUE OF NOTICE UNDER SECTION 147 BASED ON THE INFORMATION RECEIVED BY THE ASSESSING OFFICER FROM THE SALES TAX DEPAR TMENT, MAHARASHTRA, S TATING THAT SOME DEALERS HAVE PROVIDED ACCOMMODATION ENTRIES FOR BOGUS PURCHASE BILLS TO LARGE NUMBER OF TAXPAYERS. ON THE BASIS OF THIS INFORMATION, THE ASSESSMENTS WERE REOPE NED IN ASSESSEES CASE FOR THE ASSESSMENT YEARS 2009 - 10 TO 2012 - 13 AND ASSESSMENTS WERE COMPLETED BY ORDER DATED 22.08.2014 UNDER SECTION 143(3) READ WITH 147 OF THE ACT. FROM THE INFORMATION OBTAINED BY THE ASSESSING OFFICER FROM SALES TAX DEPARTMENT, HE WAS OF THE OPINION THAT ASSESSEE HAS ALSO OBTAINED BOGUS PURCHASE BILLS FROM VARIOUS PARTIES LISTED IN THE SALES TAX DEPARTMENT WEBSITE. I N THE COURSE OF ASSESSMENT PROCEEDINGS, FROM THE DETAILS FILED BY 3 RUPESH CHIMANLAL SAVLA ITA NO.6179 - 6182/MUM/2016 THE ASSESSEE, IT WAS NOTICED BY THE ASSESSING OFFI CER THAT THE ASSESSEE HAS SHOWN PURCHASES AS UNDER : SL.NO. NAME OF THE DEALER ASSESSMENT YEAR 2009 - 10 2010 - 11 2011 - 12 2012 - 13 1. M/S MARUTI CORPORATION 6,37,308 1,84,387 2. M/S MANSHI TRADERS 12,01,458 3. M/S SANGURA TRADING P. LTD. 3,52,688 4. M/S D.D. CORPORATION 10,40,399 5. M/S PAYAL ENTERPRISES 43,264 6. M/S AMIT TRADING CO. 3,78,831 7. M/S GOPIKRISHNA TRADING CO. 5,91,470 8. M/S J.K. AGENCY 2,11,314 18,14,329 7,85,287 9. M/S MAYUR TRADING CO. 2,75,174 1,23,750 10. M/S G.M. INTERNATIONAL 2,17,451 11. M/S RUMMIT ENTERPRISES 5,98,154 12. M/S N.K. TRADING CO. 6,00,402 13. M/S REAL TRADERS 1,14,261 14. M/S BHAKTI ENTERPRISES 20,36,702 28,48,950 15. M/S J.B.SHAH & CO. 30,27,088 TOTAL AMOUNT RS. 47,31,906 36,52,734 28,21,989 58,76,038 4 . THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS REQUIRED THE ASSESSEE TO SUBMIT XEROX COPIES OF PURCHASE BILLS, TRANSPORT BILLS, DELIVERY CHALLANS, O C TROI PAYMENTS, RECEIPTS IN RESPECT OF THE TRANSACTIONS MADE WITH THE ABOVE PARTIES DURING THE YEAR S UNDER CONSIDERATION. THE ASSESSEE SUBMITTED XEROX COPIES OF BILLS OF PURCHASES FROM THE ABOVE PARTIES AND FURTHER SUBMITTED THAT ALL THE PURCHASES ARE MADE WIT HIN THE LOCAL LIMITS AND THE DELIVERY HAS BEEN DONE BY HAND, THEREFORE, NO TRANSPORT, OCTROI AND DELIVERY CHALLANS ARE SUBMITTED. 5 . THE ASSESSING OFFICER REQUIRED THE ASSESSEE TO PRODUCE THE PARTIES FROM WHOM THE PURCHASES WERE MADE TO PROVE THE GENUINENESS OF THE TRANSACTION. HE ALSO DEPUTED THE INSPECTOR TO GET INFORMATION UNDER SECTION 4 RUPESH CHIMANLAL SAVLA ITA NO.6179 - 6182/MUM/2016 133 (6) OF THE ACT FROM THE ABOVE DEALERS. SOME NOTICES SENT WERE RETURNED UNSERVED AND I N SOME CASES INSPECTOR REPORTED THAT THE PARTIES ARE NOT CARRYING ON BUSINESS ACTIVITY AT THE GIVEN ADDRESS. THE ASSESSING OFFICER FURTHER NOTICED FROM THE AUDIT REPORT THAT ASSESSEE IS MAINTAINING ONLY CASH BOOK, BANK BOOK, PURCHASE REGISTER, SALES REGIS TER, JOURNAL AND GENERAL LEDGER AND AUDITORS HAVE CERTIFIED THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF RETAIL TRADING INVOLVING LARGE NUMBER OF ITEMS IN SMALL QUANTITIES PER ITEM AND THEREFORE IT IS NOT POSSIBLE FOR THEM TO MAINTAIN QUANTITY DETAILS, THEREFORE, THE SAME IS NOT POSSIBLE TO REPORT, THE ASSESSING OFFICER CONCLU DED THAT BOOKS OF ACCOUNT OF THE ASSESSEE CANNOT BE STATED AS CORRECT AND COMPLETE. THEREFORE, HE REJECTED THE BOOKS OF ACCOUNTS AND BOOK RESULTS UNDER 14 5 OF THE ACT. THE ASSESSI NG OFFICER HELD THAT SINCE THE ASSESSEE IS UNABLE TO PRODUCE THE PARTIES IN PERSON BEFORE HIM, THE ASSESSEES CLAIM FOR PURCHASES FROM THESE PARTIES ARE DISALLOWED AND ADDED TO THE INCOME OF THE ASSESSEE, WITHIN THE MEANING OF SECTION 69C OF THE ACT. THE MATTER WAS CARRIED BEFORE THE LD. CIT (APPEALS) AND LD. CIT (APPEALS) SUSTAINED THE ADDITIONS AGREEING WITH THE VIEW OF THE ASSESSING OFFICER THAT THE ASSESSEE HAS FAILED TO PRODUCE THE PARTIES, THE NOTICES ISSUED TO THE PARTIES WERE RETURNED UNSERVED OR TH EY WERE NOT AVAILABLE AT THE GIVEN ADDRESSES . HE FURTHER OBSERVED THAT THE PARTIES HAVE DEPOSED BEFORE THE SALES TAX AUTHORITIES THAT THEY ARE PROVIDING ONLY ACCOMMODATION ENTRIES AND AFTER RECEIV ING PAYMENTS FROM THE CUSTOMERS THROUGH BANK ING CHA NNELS , TH EY HAVE RETURNED THE MONIES TO THE CUSTOMERS IN CASH AFTER RETAINING A SMALL PORTION TOWARDS COMMISSION. THEREFORE, HE CONCLUDED THAT THE PURCHASES 5 RUPESH CHIMANLAL SAVLA ITA NO.6179 - 6182/MUM/2016 ARE NOT GENUINE AND THE ASSESSING OFFICER IS JUSTIFIED IN TREATING THEM AS BOGUS PURCHASES. 6. THE LD. CO UNSEL FOR THE ASSESSEE BEFORE US SUBMITS THAT THE INFORMATION SAID TO HAVE BEEN RECEIVED FROM SALES TAX DEPARTMENT BY THE ASSESSING OFFICER IS NOT GIVEN TO THE ASSESSEE. THE ASSESSING OFFICER HAS NOT PROVIDED INSPECTION REPORT TO THE ASSESSEE AND IT WAS K EPY ONLY ON RECORD. THE INFORMATION ABOUT NOTICES RETURNED UNSERVED WAS NOT INTIMATED TO THE ASSESSEE. THE COUNSEL FOR THE ASSESSEE SUBMITS THAT THE BILLS WERE ISSUED IN THE FINANCIAL YEAR 2008 - 09 TO 2011 - 12 AND THE INSPECTION SAID TO HAVE BEEN MADE IN 2 014 AND NOTHING IS MENTIONED IN THE ASSESSMENT ORDER AS TO WHO HAS GONE FOR VERIFICATION AND WHAT THEY HAVE VERIFIED. THE LD. COUNSEL SUBMITS THAT THEY ARE ONLY THE SUSPECTED DEALERS IN THE SALES TAX WEBSITE AND THE TRANSACTIONS BY THE ASSESSEE WITH THEM ARE GENUINE. THE LD. COUNSEL SUBMITS THAT STOCK REGISTER CANNOT BE MAINTAINED FOR THE INVENTORIES LIKE BUTTONS, THREADS, ROLLS ETC. WHICH THE ASSESSEE DOES TRADING IN THOSE ITEMS I.E. TAILORING ITEMS , I N VIEW OF THE LARGE NUMBER OF ITEMS IN SMALL QUANTITI ES PER ITEM, IT IS NOT POSSIBLE FOR MAINTAINING STOCK RECORD. THE LD. COUNSEL SUBMITS THAT THE ASSESSEE HAS EXPLAINED AS TO WHY THERE ARE NO TRANSPORT BILLS, OCTROI PAYMENTS, DELIVERY CHALLANS FOR THE ITEMS TRADED BY IT AS THESE ITEMS ARE OF LOCAL PURCHAS ES AND DELIVERED BY HAND. THE LD. COUNSEL SUBMITS THAT THE ASSESSEE HAS PRODUCED LEDGER COPIES OF THE CONCERNED PARTIES, ALL OTHER NECESSARY EVIDENCES LIKE PURCHASE BILLS, BANK STATEMENTS PROVING THE PAYMENTS MADE THROUGH CHEQUES ETC. TO PROVE THE GENUINE NESS 6 RUPESH CHIMANLAL SAVLA ITA NO.6179 - 6182/MUM/2016 OF THE TRANSACTIONS AND WHEREAS THE ASSESSING OFFICER HAS NOT BROUGHT ANY EVIDENCE AGAINST THE ASSESSEE EXCEPT THE INFORMATION OBTAINED FROM THE SALES TAX DEPARTMENT TO PROVE THAT THE PURCHASES ARE NOT GENUINE. THE LD. COUNSEL SUBMITS THAT SINCE THE DEPARTMENT HAS MADE ALLEGATION THAT THE PURCHASES ARE BOGUS, THE ONUS IS ON THE DEPARTMENT TO PROVE SUCH FACT THROUGH C OGENT E VIDENCES. 7. THE LD. COUNSEL FURTHER SUBMITS THAT ON IDENTICAL FACTS AND CIRCUMSTANCES, THE HONBLE JU RISDICTIONAL HIGH COURT A S WELL AS THE TRIBUNAL OF MUMBAI BENCHES DELETED THE ADDITION MADE UNDER SECTION 69C IN THE FOLLOWING CASES: SL. DECISION CITATION / ITA NOS. 1. CIT VS. NIKUNJ EXIMP ENTERPRISES (P) LTD 372 ITR 619 (BOM) 2. ITO VS. TAKHTMAL BHURALAL PICHHOLIYA 4526 TO 4528/M/2014 3. ITV VS. HIREN SHANTILAL DOSHI 715/M/2015 4. ACIT VS VISHAL P MEHTA 5313/M/2013 5. ITO VS. ASHOK TALREJA (HUF) 4629/M/2014 AND OTHERS 6. TALCO MARKETING VS. ITO 3394 AND 3395/M/2014 7. DCIT VS.RAJEEV G KALATHIL 6727/M/2012 8. ITO VS PARESH ARVIND GANDHI 5706/M/2013 9. ITO VS. SANJAY V DHRUV 5089/M/2014 8 . THE LD. DR VEHEMENTLY SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES. THE LD. DR SUBMITS THAT INSPITE OF THE SPECIFIC REQUEST MADE BY THE 7 RUPESH CHIMANLAL SAVLA ITA NO.6179 - 6182/MUM/2016 ASSESSING OFFICER TO PROVE THE GENUINENESS OF THE TRANSACTIONS BY PRODUCING THE PARTIES, THE ASSESSEE FAILED TO PRODUCE THE PARTIES AND SUBMIT PROPER EVIDENCES TO ESTABLISH THE TRANSACTIONS OF PURCHASES AS GENUINE. THEREFORE, THE ASSESSING OFFICER WAS JUS TIFIED IN TREATING THE PURCHASES MADE FROM THE CONCERNED PARTIES AS BOGUS PURCHASES. 9. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND THE MATER IAL AVAILABLE ON RECORD. IT IS VERY MUCH APPARENT FROM THE ASSESSMENT ORDER THAT THE BASIS FOR TREATING THE PURCHASES MADE BY THE ASSESSEE FROM CERTAIN PARTIES AS MENTIONED IN THE ASSESSMENT ORDERS IS ONLY THE INFORMATION OBTAINED BY THE ASSESSING OFFICER FROM SALES TAX DEPARTMENT. WE FIND THAT THIS INFORMATION WAS NOT PART ED TO THE ASSESSEE BY THE ASSESSING OFFICER. IT IS ALSO NOT KNOWN AS TO WHAT KIND OF INFORMATION ASSESSING OFFICER HAS GOT FROM THE SALES TAX DEPARTMENT RELATING TO THE PRESENT ASSESSEE BEFORE US. SOLELY BASED ON THIS INFORMATION OBTAINED FROM SALES TAX DEPARTMENT, ASSESSING OFFICER REQUIRED THE ASSESSEE TO PRODUCE THESE PARTIES FOR VERIFICATION AND SIMULTANEOUSLY HE DEPUTED THE INSPECTORS TO ISSUE NOTICES UNDER SECTION 133(6) TO THESE P A RTIES. AGAIN, WE NOTICED FROM THE ASSESSMENT ORDER THAT INSPECTOR HA S GIVEN A REPORT STATING THAT SOME OF THE NOTICES WERE RETURNED UNSERVED AND IT WAS ALSO REPORTED BY THE INSPECTIOR THAT NO SUCH BUSINESS ACTIVITIES ARE CARRIED OUT AT THE GIVEN ADDRESS IN SOME OF THE PARTIES. AGAIN, THIS REPORT OF THE INSPECTOR WAS NEVER FORWARDED TO THE ASSESSEE AT ANY POINT OF TIME, BUT WAS KEPT ON RECORD. THUS, IT IS APPARENT THAT SOLE BASIS OF ADDITION IS ONLY 8 RUPESH CHIMANLAL SAVLA ITA NO.6179 - 6182/MUM/2016 THE INFORMATION OBTAINED FROM THE SALES TAX DEPARTMENT BY THE ASSESSING OFFICER. THE ASSESSEE FOR WHATEVER REASON MIGHT NOT HAVE PRODUCED THE PARTIES FOR VERIFICATION MAY BE DUE TO LAPSE OF TIME OR MAY BE DUE TO THE DEALERS SHIFTING FROM THEIR BUSINESS PREMISES ETC., BUT HE HAS PRODUCED THE COPIES OF BANK STATEMENTS, WHERE THE PAYMENTS WERE MADE THROUGH CHEQUES AND THE LEDGER C OPIES OF THE BOOKS OF THE ASSESSEE OF THE PARTIES ETC. TO PROVE THE GENUINENESS OF THE PURCHASES. THE ASSESSING OFFICER NEVER DOUBTED THE SALES MADE BY THE ASSESSEE FOR SUCH PURCHASES, IN FACT, HE HAS ACCEPTED THE SALES. WITHOUT THERE BEING ANY PURCHASES , THERE COULD NOT BE ANY SALES. IT IS ALSO NOT PROVED BY THE ASSESSING OFFICER THAT THE AMOUNTS PAID BY THE ASSESSEE TO THE DEALERS WERE RETURNED BACK T O THE ASSESSEE AND THE PURCHASE BILLS ISSUED ARE ONLY ACCOMMODATION ENTRIES. SIMPLY BECAUSE THE ASSESS EE COULD NOT PRODUCE THE DEALERS, THE ENTIRE PURCHASES CANNOT BE TREATED AS BOGUS PURCHASES. THE ASSESSING OFFICER COULD HAVE MADE FURTHER INVESTIGATIONS TO ASCERTAIN THE GENUINENESS OF THE TRANSACTIONS. 10 . WE FIND THAT ON IDENTICAL SITUATION AND FACTS, THE COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF ITO VS. SANJAY V DHRUV IN ITA NO.5089/2014 , DATED 29.02.2016 HELD THAT THE PURCHASES CANNOT BE TREATED AS BOGUS PURCHASES AND ADDITION CANNOT BE SUSTAINED UNDER SECTION 69C OBSERVING AS UNDER : WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IT IS EVIDENT FROM THE ASSESSMENT ORDER THAT ON THE BASIS OF INFORMATION OBTAINED FROM THE SALES TAX DEPARTMENT, ASSESSING OFFICER ISSUED 9 RUPESH CHIMANLAL SAVLA ITA NO.6179 - 6182/MUM/2016 NOTICES UNDER SECTION 133(6) TO THREE PARTIES OUT OF WHICH TWO NOTICES WERE RETURNED UNSERVED BY THE POSTAL AUTHORITIES AND IN CASE OF ONE OF THE PARTIES THROUGH NOTICE WAS SERVED, THERE WAS NO RESPONSE . THEREFORE, HE CALLED UPON THE ASSESSEE TO PRODUCE THE CONCERNED PARTIES. AS THE ASSESSEE FAILED TO PRODUCE THE CONCERNED PARTIES, THE ASSESSING OFFICER, THEREFORE, PRIMARILY RELYING UPON THE INFORMATION OBTAINED FROM THE SALES TAX DEPARTMENT, HELD THE PURCHASES TO BE BOGUS AND MADE ADDITION UNDER SECTION 69C OF THE ACT. THOUGH, IT MAY BE A FACT THAT ASSESSEE WAS NOT ABLE TO PRODUCE THE CONCERNED PARTIES BEFORE THE ASSESSING OFFICER, FOR WHATEVER MAY BE THE REASON, FACT REMAINS DURING ASSESSMENT PROCEEDINGS ITSELF THE ASSESSEE HAD PRODUCED CONFIRMED LEDGER COPIES OF CONCERNED PAR TIES, BANK ACCOUNT STATEMENT, PURCHASE BILLS, DELIVERY CHALLANS, ETC., TO PROVE THE GENUINENESS OF THE PURCHASES. IT IS ALSO A FACT ON RECORD THAT THE ASSESSING OFFICER HAS NOT DOUBTED THE SALES EFFECTED BY THE ASSESSEE. THUS, IT IS LOGICAL TO CONCLUDE THA T WITHOUT CORRESPONDING PURCHASES BEING EFFECTED THE ASSESSEE COULD NOT HAVE MADE THE SALES. MOREOVER, THE ASSESSING OFFICER HAS NOT BROUGHT ANY MATERIAL ON RECORD TO CONCLUSIVELY ESTABLISH THE FACT THAT PURCHASES ARE BOGUS. MERELY RELYING UPON THE INFORMA TION FROM THE SALES TAX DEPARTMENT OR THE FACT THAT PARTIES WERE NOT PRODUCED THE ASSESSING OFFICER COULD NOT HAVE TREATED THE PURCHASES AS BOGUS AND MADE ADDITION. IF THE ASSESSING OFFICER HAD ANY DOUBT WITH REGARD TO PURCHASES MADE, IT WAS INCUMBENT UPON HIM TO MAKE FURTHER INVESTIGATION TO ASCERTAIN THE GENUINENESS OF THE TRANSACTIONS. WITHOUT MAKING ANY ENQUIRY OR INVESTIGATION THE ASSESSING OFFICER CANNOT SIT BACK AND MAKE THE ADDITION BY SIMPLY RELYING UPON THE INFORMATION OBTAINED FROM THE SALES TAX DEPARTMENT AND ISSUING NOTICES UNDER SECTION 133(6) OF THE ACT. AS THE ASSESSING OFFICER HAS FAILED TO MAKE ANY ENQUIRY OR INVESTIGATION TO PROVE THE FACT THAT THE PURCHASE TRANSACTIONS ARE NOT GENUINE WHEREAS THE ASSESSEE HAS BROUGHT DOCUMENTARY EVIDENCES ON RECORD TO PROVE GENUINENESS OF 10 RUPESH CHIMANLAL SAVLA ITA NO.6179 - 6182/MUM/2016 SUCH TRANSACTIONS WHICH ARE NOT FOUND TO BE FABRICATED OR NON GENUINE, THE ACTION OF THE ASSESSING OFFICER IN IGNORING THEM CANNOT BE ACCEPTED. MOREOVER, AS RIGHTLY OBSERVED BY THE LEARNED COMMISSIONER (APPEALS), WHEN THE PAYMENT TO THE CONCERNED PARTIES ARE THROUGH PROPER BANKING CHANNEL AND THERE IS NO EVIDENCE BEFORE THE ASSESSING OFFICER THAT THE PAYMENTS MADE WERE AGAIN ROUTED BACK TO THE ASSESSEE, THE ADDITION MADE UNDER SECTION 69C CANNOT BE SUSTAINED. MOREOVER, THE DECISIONS RELIED UPON BY THE LEARNED A.R. ON CAREFUL ANALYSIS WERE FOUND TO BE SQUARELY APPLICABLE TO THE FACTS OF THE PRESENT APPEAL. THEREFORE, FINDING NO INFIRMITY IN THE ORDER OF THE FIRST APPELLATE AUTHORITY, WE UPHOLD THE SAME BY DISMISSING THE GROU NDS RAISED BY THE DEPARTMENT. 11 . S IMILARLY IN THE CASE OF SHARAD C ONSTRUCTION PVT. LTD., VS. ACIT, ITA NOS. 2812 - 14/ 20 15 DATED 30.09.2016, THE COORDINATE BENCH HELD AS UNDER : 2. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD IN THE LIGHT OF THE DECISIONS RELIED UPON. AT THE OUTSET, WE MUST OBSERVE, THE ASSESSING OFFICER HAS NOT REJECTED THE BOOKS OF ACCOUNT OF THE ASSESSEE. THIS FACT IS NOT DISPUTED BY THE LEARNED DEPARTMENTAL REPRESENTATIVE. IT IS FURTHER EVIDENT, THE ALLEGATION OF BOGUS PURCHASES WAS CONTAINED IN A REPORT RECEIVED FROM THE DGIT (INV.). IT IS A FACT ON RECORD TO ASCERTAIN THE GENUINENESS OF PURCHASES, THE ASSESSING O FFICER SUMMONED ONE OF THE DIRECTORS OF THE ASSESSEE COMPANY AND RECORDED A STATEMENT UNDER SECTION 131 OF THE ACT ON 28 TH JANUARY 2013. ON A PERUSAL OF THE SAID STATEMENT REPRODUCED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER REVEALS THAT IN QUESTION NO.21, THE ASSESSING OFFICER SPECIFICALLY ASKED THE ASSESSEE TO EXPLAIN THE ALLEGATION OF BOGUS PURCHASES. IN REPLY, IT WAS SUBMITTED BY THE ASSESSEE AS UNDER: 11 RUPESH CHIMANLAL SAVLA ITA NO.6179 - 6182/MUM/2016 Q.21: AS PER THE INFORMATION RECEIVED, IT SEEMS THAT THE ASSESSEE COMPANY M/S. SHARAD CONSTRUCTIONS P. LTD. HAS BOOKED BOGUS PURCHASES DURING THE FINANCIAL YEAR 2009 2010 (I.E., A.Y. 210 11), PLEASE CONFIRM WHETHER IT IS TRUE? ANS: REGARDING ALLEGED BOGUS BILL IN YEAR 2009 10 (A.Y. 2010 11) IN PARTICULAR, LAST YEAR WE RECEIVED NOTICE & SHOW CASE NOTICE FROM SALES TAX DEPTT. INFORMING US THAT 4 5 SUPPLIERS HAD NOT PAID VAT COLLECTED FROM US AND NOT KNOWING ABOUT THIS AS SUPPLIERS ALREADY COLLECTED VAT FROM US, AS A ROUTINE, WE HAD TAKEN SET OFF OF VAT WHERE VAT WAS PAID MORE THAN 4% I.E., 12.5%. WE WONDER, HOW THESE BILLS BECOMES BOGUS WHERE NO SET OFF WAS TAKEN AND SUFFICIENT PROOF HAS BEEN GIVEN TO THEIR DEPT. EVEN FOR MATERIALS PURCHASED UNDER 12.5% VAT. WE HAVE GIVEN ENOUGH EVIDENCE THAT IN MATTER OF PURCHASE OF MARBLE (NAVODAYA TRAD E) & STAINLESS STEEL PIPE (NUTAN METALS) WHEREIN IT WAS EXPLAINED THAT THE MATERIAL WAS ACTUALLY RECEIVED AT VARIOUS SITES, THE MATERIAL WAS CONSUMED AND THE SAME WAS ALSO CERTIFIED BY THE ARCHITECT APPOINTED BY THE CUSTOMERS. WE HAVE ALSO SHOWN PAYMENT RE CEIVED FROM CLIENTS AFTER CERTIFIED BY ARCHITECT AS USED IN THE RESPECTIVE WORK AND TALLIES WITH THE RECORD. REGARDING BRICK SUPPLIERS REGAL BRICKS & SAND SUPPLIERS, WE HAVE NOT PURCHASED ANY MATERIAL FROM THIS PARTY DURING THE PERIOD. 12 RUPESH CHIMANLAL SAVLA ITA NO.6179 - 6182/MUM/2016 THUS, WE PRESUME T HAT, PERHAPS SALES TAX DEPT. FORWARDED SUCH UNSCRUTINIZED MATTERS TO I.T. DEPT. WHICH AGAIN SAYS THE BILLS AS BOGUS. I AM SUBMITTING FOLLOWING DOCUMENTS IN SUPPORT OF OUR CLAIM. (I) OUR STATEMENT OF FACTS; (II) OUR DIFFERENT CORRESPONDENCE WITH SALES TAX DEPT. (A) LETTER DATED 10.09.2012, 22.09.2012, 05.10.2012, 17.10.2012, 21.12.2012. (B) OUR ADVOCATE LETTER DATED 10.09.2012 & 17.09.2012. 10. FURTHER, IN REPLY TO QUESTION NO.22, ASSESSEE REPLIED AS UNDER: Q.22: DO YOU WANT TO SAY ANYTHING ELSE? ANS: WE AS SURE THE DEPARTMENT THAT AS AND WHEN WE ARE CALLED TO SUBSTANTIATE / CLARIFY OUR SUBMISSION, WE SHALL BE GLAD TO HELP AND CO OPERATE WITH THE DEPARTMENT. WE ARE SURE THAT BEFORE FINALIZING YOUR OPINION, WE SHALL BE GIVEN ENOUGH CHANCE TO VERIFY A) SAID AFFID AVIT OF ALLEGED SUPPLIERS CONFIRMING HAVALA BILLS; B) OPPORTUNITY TO CROSS EXAMINE SUCH DEALERS IN PERSON; C) ANY OTHER REMEDY ALLOWED TO US LEGALLY. WE ARE SURE, DEPARTMENT WILL CLEAR THE MATTER IN VIEW OF OUR REQUIREMENT AS ASSESSEE , AND WE HOPE OUR NAME WILL BE CLEARED FROM ABOVE ALLEGATIONS. 13 RUPESH CHIMANLAL SAVLA ITA NO.6179 - 6182/MUM/2016 11. THUS, AS COULD BE SEEN FROM THE AFORESAID FACT, THE ASSESSEE NOT ONLY DENIED THE ALLEGATION OF BOGUS PURCHASES BUT ALSO SPECIFICALLY REQUESTED THE ASSESSING OFFICER TO ALLOW HIM AN OPPORTU NITY TO VERIFY THE ADVERSE MATERIAL AND ALSO REQUESTED FOR CROSS EXAMINATION OF THE DEALERS WHO ALLEGEDLY STATED OF HAVING PROVIDED ACCOMMODATION BILLS. AS AGAINST THE AFORESAID FACTS, THE ASSESSING OFFICER HAS SIMPLY RELIED UPON THE INFORMATION RECEIVED F ROM DGIT (INV.), TO INFER THAT PURCHASES MADE FROM CERTAIN PARTIES AS REFERRED TO IN THE ASSESSMENT ORDER AND REPRODUCED IN EARLIER PART OF OUR ORDER ARE BOGUS. IN FACT, IN THE ASSESSMENT ORDER, NOWHERE THE ASSESSING OFFICER HAS DISCUSSED IN DETAIL THE NAT URE OF INFORMATION OBTAINED FROM DGIT (INV.) NOR THE SPECIFIC ADVERSE MATERIAL ON THE BASIS OF WHICH THE ALLEGATION OF BOGUS PURCHASES WERE MADE. UNDISPUTEDLY, BEFORE THE ASSESSING OFFICER, THE ASSESSEE HAD PRODUCED ITS BOOKS OF ACCOUNT, PURCHASE BILLS, BA NK STATEMENTS, ETC. IT IS ALSO NOT DISPUTED THAT THE PAYMENT MADE TOWARDS PURCHASES ARE THROUGH ACCOUNT PAYEE CHEQUES AND REFLECTED NOT ONLY IN THE BOOKS OF ACCOUNT BUT IN THE BANK ACCOUNT COPIES. IT IS SETTLED POSITION OF LAW, ENTRIES MADE IN THE BOOKS OF ACCOUNT IN REGULAR COURSE ORDINARILY, SHALL BE PRESUMED TO BE CORRECT UNLESS THERE IS STRONG EVIDENCE TO PROVE THE CONTRARY. IT IS AN ADMITTED POSITION THAT THE ASSESSING OFFICER HAS NOT REJECTED THE BOOKS OF ACCOUNT OF THE ASSESSEE. THIS PRE SUPPOSES THA T THERE IS NO DISCREPANCY IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. THAT BEING THE CASE, THE PURCHASES HAVING BEEN REFLECTED IN THE BOOKS OF ACCOUNT CANNOT BE TREATED AS BOGUS WITHOUT ANY CORROBORATIVE EVIDENCE TO ESTABLISH SUCH FACT. MOREOVER, THE ALLEGATI ON OF THE ASSESSEE THAT THE ASSESSING OFFICER HAD NOT CONFRONTED HIM THE ADVERSE MATERIALS NOR PROVIDED AN OPPORTUNITY TO CROSS EXAMINE THE DEALERS, WHO ADMITTED OF HAVING PROVIDED ACCOMMODATION BILLS IS WELL FOUNDED. AS WE HAVE NOTED EARLIER, IN THE COURS E OF ASSESSMENT PROCEEDINGS, THE ASSESSEE HAD NOT ONLY REQUESTED THE ASSESSING OFFICER TO ALLOW HIM TO VERIFY THE ADVERSE MATERIAL IN HIS POSSESSION BUT HAS ALSO REQUESTED FOR CROSS EXAMINATION OF THE DEALERS WHOSE AFFIDAVIT / STATEMENTS WERE RELIED 14 RUPESH CHIMANLAL SAVLA ITA NO.6179 - 6182/MUM/2016 UPON T O INFER BOGUS PURCHASE. HOWEVER, IT IS APPARENT ON RECORD, THE ASSESSING OFFICER HAS NOT CONFRONTED THE ADVERSE MATERIALS, IF ANY, IN HIS POSSESSION TO THE ASSESSEE NOR HAS ALLOWED HIM TO CROSS EXAMINE THE DEALERS WHO ALLEGEDLY ADMITTED OF HAVING PROVIDED ACCOMMODATION BILLS WITHOUT ACTUAL DELIVERY OF GOODS. THAT BEING THE CASE, THE INFERENCE DRAWN ON THE BASIS OF ADVERSE MATERIALS WITHOUT CONFRONTING THEM TO THE ASSESSEE IS IN GROSS VIOLATION OF RULES OF NATURAL JUSTICE. FURTHERMORE, NOT GRANTING OPPORTUNI TY TO THE ASSESSEE TO CROSS EXAMINE THE DEALERS WHO ALLEGEDLY ADMITTED OF HAVING PROVIDED ACCOMMODATION BILLS ALSO VITIATES THE PROCEEDINGS, THEREFORE, THE ADDITION MADE ON ACCOUNT OF BOGUS PURCHASES IS LEGALLY UNSUSTAINABLE. IN THIS CONTEXT, WE MAY REFER TO THE DECISION OF THE HON'BLE SUPREME COURT IN ANDAMAN TIMBER (SUPRA). THE OBSERVATION OF THE LEARNED COMMISSIONER (APPEALS) IN THIS CONTEXT, IN OUR VIEW, IS TOTALLY IRRELEVANT. ONLY BECAUSE THE ASSESSEE OFFERED TO PAY THE SALES TAX / VAT, IT WILL NOT TAK E AWAY HIS RIGHT TO BE CONFRONTED WITH ADVERSE MATERIALS OR OPPORTUNITY OF CROSS EXAMINATION. IF THE ASSESSING OFFICER INTENDS TO UTILISE ANY ADVERSE MATERIAL IN DETRIMENT TO THE INTEREST OF THE ASSESSEE, HE IS BOUND TO CONFRONT THEM TO ASSESSEE WITH OPPOR TUNITY TO REBUT THEM. FURTHER, THE ALLEGATION OF THE LEARNED COMMISSIONER (APPEALS) THAT THE ASSESSEE HAD NEVER ASKED FOR CROSS EXAMINATION OF THE SELLERS / SUPPLIERS BEFORE THE SALES TAX AUTHORITIES IS FACTUALLY INCORRECT AS PERUSAL OF THE LETTERS FILED B Y THE ASSESSEE BEFORE THE SALES TAX AUTHORITIES ON DIFFERENT DATES CLEARLY REVEALS THAT THE ASSESSEE HAD REPEATEDLY REQUESTED THE SALES TAX OFFICER NOT ONLY TO PROVIDE HIM WITH THE ADVERSE MATERIAL BUT ALSO ALLOW HIM OPPORTUNITY TO CROSS EXAMINE THE SO CAL LED BOGUS DEALERS. AS NOTED BY US AND IT IS ALSO A FACT ON RECORD, BEFORE THE ASSESSING OFFICER ASSESSEE HAD SUBMITTED PURCHASE INVOICES, BOOKS OF ACCOUNT, ETC., TO PROVE THE GENUINENESS OF PURCHASES. IN ADDITION, IT IS NOT DISPUTED THAT THE ENTIRE PAYMENT S TOWARDS PURCHASES HAVE BEEN MADE THROUGH ACCOUNT PAYEE CHEQUE. BEFORE THE FIRST APPELLATE AUTHORITY, THE ASSESSEE HAD PRODUCED COPIES OF DELIVERY CHALLANS AND ALSO CONFIRMATIONS FROM 15 RUPESH CHIMANLAL SAVLA ITA NO.6179 - 6182/MUM/2016 THE CONCERNED DEALERS TO PROVE THE PURCHASES. THUS, THESE DOCUMENTARY E VIDENCES PRODUCED BY THE ASSESSEE DEMONSTRATE THAT TO SOME EXTENT THE ASSESSEE DID DISCHARGE ITS ONUS TO PROVE THE GENUINENESS OF THE PURCHASES. AS OPPOSED TO THIS, THE ASSESSING OFFICER EXCEPT THE REPORT OF THE DGIT (INV.) HAD NOT BROUGHT ON RECORD ANY OT HER COGENT / CORROBORATING EVIDENCE TO PROVE THE PURCHASES AS BOGUS. ADMITTEDLY, THE ASSESSING OFFICER HAS NOT MADE ANY INDEPENDENT ENQUIRY BY EVEN ISSUING NOTICES UNDER SECTION 133(6) TO THE SO CALLED BOGUS SUPPLIERS. THAT BEING THE CASE, IF THE A.O. OR T HE LEARNED CIT(A) WERE NOT SATISFIED WITH THE EVIDENCES PRODUCED BY THE ASSESSEE AND STILL HAD DOUBT WITH REGARD TO THE GENUINENESS OF PURCHASES IT SHOULD HAVE TRIGGERED A PROPER ENQUIRY / INVESTIGATION AT THEIR END TO ASCERTAIN THE GENUINENESS OF ASSESSEE S CLAIM. WITHOUT MAKING ANY ENQUIRY / INVESTIGATION AND BY MERELY RELYING UPON THE INFORMATION SUPPLIED BY THE DGIT (INV.), WHO IN TURN HAD OBTAINED SUCH INFORMATION FROM SALES TAX AUTHORITIES, IN OUR VIEW, IS NOT ENOUGH TO PROVE THE PURCHASES AS BOGUS. W ITHOUT BRINGING SUFFICIENT EVIDENCE ON RECORD TO FALSIFY ASSESSEES CLAIM OF PURCHASES FROM THE CONCERNED DEALERS, THE CONCLUSION DRAWN ON THE ISSUE OF BOGUS PURCHASES, IN OUR VIEW, IS MORE ON CONJECTURE AND SUSPICION RATHER THAN ON STRONG EVIDENCE. IN THE COURSE OF HEARING, THE LEARNED AUTHORISED REPRESENTATIVE HAS PRODUCED A COMPARATIVE CHART SHOWING THE GROSS PROFIT RATE SHOWN BY THE ASSESSEE IN THE ASSESSMENT YEARS UNDER APPEAL AND THE PERCENTAGE OF DISALLOWANCE. IT IS RELEVANT TO REPRODUCE THE SAID CHA RT HEREUNDER: DETAILS OF PURCHASE AND SALES A.Y. TOTAL SALES TOTAL EXP. GROSS PROFIT GROSS PROFIT RATE TOTAL PURCHASE ADDITION BY A.O. % OF DIS - ALLOWANC E 2009 10 269,069,179 219,395,082 49,674,098 18.46 90,568,548 352,583 0.39% 2010 11 350,977,344 261,177,515 89,799,829 25.59 83,012,809 2,634,662 3.17% 2011 12 369,103,176 282,931,389 79,780,057 23.35 138,158,440 1,048,372 0.76% 16 RUPESH CHIMANLAL SAVLA ITA NO.6179 - 6182/MUM/2016 12. THE WORKING SHOWN IN THE AFORESAID CHART INDICATES THAT THE ASSESSEE IS CONSISTENTLY SHOWING A HEALTHY GROSS PROFIT RATE OVER THE YEARS. MOREOVER, WHEN THE PAYMENTS TOWARDS PURCHASES WERE MADE THROUGH ACCOUNT PAYEE CHEQUES, TO CERTAIN EXTENT, IT ESTABLISHES THE GENUINENESS OF PURCHASES UNLESS ADVERSE MATERIAL IS BROUGHT ON RECORD TO PROVE THE CONTRARY. THIS VIEW OF OURS IS SUPPORTED BY THE DECISION OF THE TRIBUNAL, MUMBAI BENCH, IN RAMESH & CO. V/S ACIT, ITA NO.2959/MUM./2014, DATED 28 TH NOVEMBER 2014. MOREOVER, THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN CIT V /S NIKUNJ EXIM ENTERPRISE PVT. LTD. (SUPRA) ALSO SUPPORT ASSESSEES CASE THAT WHEN PAYMENTS ARE MADE THROUGH ACCOUNT PAYEE CHEQUE TO SUPPLIERS AND SALES EFFECTED ARE NOT DOUBTED, FURTHER, WHEN BOOKS OF ACCOUNT ARE NOT REJECTED PURCHASES CANNOT BE TREATED A S BOGUS. THE OTHER DECISIONS OF THE TRIBUNAL RELIED UPON BY THE LEARNED AUTHORISED REPRESENTATIVE ALSO EXPRESS THE VIEW THAT MERELY ON THE BASIS OF INFORMATION OBTAINED FROM THE SALES TAX DEPARTMENT, NO ADDITION CAN BE MADE ON ACCOUNT OF BOGUS PURCHASES. T HEREFORE, ON OVER ALL CONSIDERATION OF FACTS AND MATERIAL ON RECORD, WE ARE OF THE OPINION THAT THE ADDITION MADE ON ACCOUNT OF BOGUS PURCHASES IS LEGALLY UNSUSTAINABLE, HENCE, WE DELETE THE SAME. 12 . IN VIEW OF THE ABOVE DISCUSSION, WE HOLD THAT THERE IS NO MATERIAL ON RECORD TO CONCLUSIVELY PROVE THAT THE PURCHASES MADE BY THE ASSESS EE ARE BOGUS PURCHASES AND NOTHING IS BROUGHT ON RECORD TO SUGGEST THAT THE INFORMATION GATHERED BY THE SALES TAX DEPARTMENT CONCLUSIVELY PROVES THAT THE DEALERS ARE PROVI DING ONLY THE ACCOMMODATION ENTRIES TO THE ASSESSEE BEFORE US, THUS WE HOLD THAT ADDITION MADE UNDER SECTION 69C CANNOT BE SUSTAINED. 17 RUPESH CHIMANLAL SAVLA ITA NO.6179 - 6182/MUM/2016 13. HOWEVER, AT THE SAME TIME, KEEPING IN VIEW THE NATURE OF BUSINESS OF THE ASSESSEE AND THE FACT THAT THE A SS ESSEE IS MAKING LOCAL PURCHASES WITHOUT ANY TRANSPORTATION BILLS, DELIVERY CHALLANS ETC., THE POSSIBILITY OF THE ASSESSEE MAKING PURCHASES IN GREY MARKET ON CASH CANNOT BE RULED OUT. THEREFORE, KEEPING IN VIEW THE FACTS AND CIRCUMSTANCES OF THE CASE, WE DIRECT TH E ASSESSING OFFICER TO DISALLOW 2 % OF THE ABOVE PURCHASES TO MEET THE ANOMALIES . 14 . IN THE RESULT, APP EAL S OF THE A SSESSEE ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 30 TH D AY OF DECEMBER 2016. SD/ - SD/ - MANOJ KUMAR AGGARWAL C.N.PRASAD / / ACCOUNTANT MEMBER JUDICIAL MEMBER / MUMBAI; / DATED / 1 2 / 2016 LR, SPS 18 RUPESH CHIMANLAL SAVLA ITA NO.6179 - 6182/MUM/2016 / COPY OF THE ORDER FORWARDED TO : / BY ORDER, (ASSTT. REGISTRAR) , / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A), MUMBAI. 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. // TRUE COPY / /