ITO ,WARD 3(2), KALYAN V. DINESH MADHABHAI DHEDHI, DOMBIVALI

ITA 6183/MUM/2018

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 3517 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-11-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 30-10-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bogus purchase
• Section: 143(3); 133(6); 201; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH SMC MUMBAI BEFORE SHRI SAKTIJIT DEY (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 6183 /MUM/2018 ASSESSMENT YEAR: 201 1 - 1 2 THE INCOME TAX OFFICER, WARD 3(2), KALYAN, 2 ND FLOOR, RANI MANSION, MURBAD ROAD, KALYAN (W), 421301. VS. SHRI DINESH MADHABHAIDHEBHI, PROP. SHREERAM SWITCHGEAR, B - 10, SHREE GURUDATT TOWER, PANDURANGWADI, MANPADA ROAD, DOMBIVALI (E) - 421201 PAN NO. AOKPD4634D APPELLANT RESPONDENT REVENUE BY : SMT . JOTHILAKSHMI NAYAK , SR. DR ASSESSEE BY : NONE DATE OF HEARING : 25/11/2019 DATE OF PRONOUNCEMENT : 28/11/2019 ORDER PER N.K. PRADHAN, A.M. THIS IS AN APPEAL FILED BY THE REVENUE. THE RELEVANT ASSESSMENT YEAR IS 201 1 - 1 2 . THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) - 1, THANE [IN SHORT CIT(A)] AND ARISES OUT OF THE ASSESSMENT COMPLETED U/S 143(3) R.W.S. 147 OF THE INCOME TAX ACT 1961, (THE ACT) . THOUGH THE CASE WAS FIXED FOR HEARING ON 25.11.2019, NEITHER THE ASSESSEE NOR HIS AUTHORIZED REPRESENTATIVE APPEARED BEFORE THE BENCH ON THE ABOVE DATES. AS THERE IS NON - COMPLIANCE ON THE PART OF THE ASSESSEE, WE ARE SHRI DINESH MADHABHAIDHEBHI ITA NO. 6183/MUM/2018 2 PROCEEDING TO DISPOSE OFF THIS APPEAL ON MERITS, AFTER EXAMINING THE DOCUMENTS AVAILABLE ON RECORD. 2. THE GROUNDS OF APPEAL FILED BY THE R EVENUE READ AS UNDER : 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WAS JUSTI FIED IN NOT APPRECIATING THE LAW CORRECTLY THAT ONCE THE PURCHASES ARE UNVERIFIABLE/NOT GENUINE/BOGUS, THE SAME SHOULD HAVE BEEN DISALLOWED IN ENTIRETY? 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE 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 J USTIFY THE CLAIM OF EXPENSES IS ON T HE ASSESSEE AND THE SAME HAS F AILED TO DISCHARGE IT IN RELATION TO THE PURCHASES MADE FROM THE NON - EXISTENT VENDORS? 4. WHETHER ON THE FACTS AND IN THE CIRCU MSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN LAW BY IGNORING THE FACT THAT THE ASSESSEE COULD NOT SUBSTANTIATE ITS CLAIM OF PURCHASES FROM NON - EXISTENT VENDORS BY MEANS OF RELEVANT SUPPORTING DOCUMENTS RELATED TO MOVEMENT AND DELIVERY OF GOODS, STOCK REGISTER, ETC. T O ARRIVE AT DISALLOWANCE LOWER THAN 10 0% OF THE PURCHASES FROM THE NON - EXIGENT 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 THE LAW CORRECTLY THAT ONCE THE PURCHASES ARE UNVERIFIABLE/ NOT GENUINE / BOGUS, THE SAM E SHOULD HAVE BEEN DISALLOWED IN ENTIRETY, PARTICULARLY IN VIEW OF THE RATIO OF THE DECISION OF THE HON'BLE GUJARAT HIGH COURT IN TAX APPEAL NO. 242 OF 2003 DATED 20/06/2016 IN THE CASE OF N K. PROTEINS LTD. AGAINST WHICH THE SLP WAS DISMISSED BY THE HON'B LE APEX COURT AND ALSO DECISION OF HON'BLE SUPREME COURT IN CASE OF KANCHWALA GEMS V/S JCIT 288 ITR 10 (SC)? SHRI DINESH MADHABHAIDHEBHI ITA NO. 6183/MUM/2018 3 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE FILED HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR (AY) 2011 - 12 ON 21.09.2011 DECLAR ING TOTAL INCOME OF RS.2,71,641/ - . ON RECEIPT OF INFORMATION FROM THE SALES TAX DEPARTMENT, GOVERNMENT OF MAHARASHTRA THAT THE ASSESSEE HAD OBTAINED BOGUS PURCHASE BILLS AMOUNTING TO RS.6,78,766/ - FROM TWO HAWALA DEALERS, THE AO ISSUED NOTICE U/S 148 TO TH E ASSESSEE TO RE - OPEN THE ASSESSMENT. IN RESPONSE TO IT, THE ASSESSEE SUBMITTED THAT THE RETURN FILED ON 21.09.2011 BE TREATED AS RETURN FILED IN RESPONSE TO NOTICE U/S 148 OF THE ACT. DURING THE COURSE OF RE - ASSESSMENT PROCEEDINGS, THE ASSESSEE PRODUCED BEFORE THE AO BANK BOOK, CASH BOOK, LEDGER, SALES REGISTER, PURCHASE REGISTER AND FINANCIAL STATEMENTS. ON VERIFICATION OF THE DOCUMENTS FILED, THE AO NOTED THAT FURTHER PURCHASES OF RS.11,62,306/ - FROM OTHER TWO PARTIES WERE ALSO SUSPICIOUS. IN ORDER T O VERIFY THE GENUINENESS OF PURCHASES, THE AO ISSUED NOTICES U/S 133(6) TO THE HAWALA OPERATORS FROM WHOM THE ASSESSEE HAD MADE PURCHASES. THROUGH THE SAID NOTICES, THE AO HAD CALLED FOR INFORMATION SUCH AS COPIES OF LEDGER ACCOUNTS, BANK STATEMENTS, INCOM E TAX DOCUMENTS ETC. HOWEVER, THOSE NOTICES WERE RETURNED UN - SERVED BY THE POSTAL AUTHORITIES WITH THE REMARKS LEFT PLACE. THEREFORE, HE ASKED THE ASSESSEE TO PRODUCE THE SAID HAWALA PARTIES FOR EXAMINATION. HOWEVER, VIDE SUBMISSION DATED 17.07.2014, THE ASSESSEE EXPRESSED INABILITY TO PRODUCE THOSE PARTIES BEFORE THE AO FOR EXAMINATION. IN VIEW OF THE ABOVE FACTS, THE AO RELYING ON THE FINDINGS OF THE SALES TAX DEPARTMENT, GOVERNMENT OF MAHARASHTRA MADE AN ADDITION OF RS. 18,41,072/ - . SHRI DINESH MADHABHAIDHEBHI ITA NO. 6183/MUM/2018 4 4. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT(A). WE FIND THAT VIDE ORDER DATED 27.08.2018, THE LD. CIT(A) OBSERVED THAT THE QUANTUM OF GP OF RS.5,90,340/ - IS HIGHER THAN THE 25% I.E. RS.4,60,268/ - OF BOG US PURCHASES OF RS.18,41,072/ - . THEREFORE, HE SUSTAINED THE DISALLOWANCE TO THE EXTENT OF SUPPRESSED GP OF RS.5,90,340/ - AND DELETED THE BALANCE AMOUNT OF RS.12,50,732/ - (RS.18,41,072/ - MINUS RS.5,90,340/ - ). 5. BEFORE US, THE LD. DEPARTMENTAL REPRESENTATI VE (DR) SUBMITS THAT THE NOTICES ISSUED U/S 133(6) BY THE AO CALLING FOR INFORMATION SUCH AS COPIES OF LEDGER ACCOUNTS, BANK STATEMENTS, INCOME TAX DOCUMENTS WERE RETURNED UN - SERVED BY THE POSTAL AUTHORITIES WITH THE REMARKS LEFT PLACE. THOUGH THE ASSESS EE WAS REQUESTED BY THE AO TO PRODUCE THE SAID PARTIES FOR EXAMINATION, HE FAILED TO PRODUCE THEM. CONSIDERING THE FINDINGS OF THE SALES TAX DEPARTMENT, GOVERNMENT OF MAHARASHTRA AND THE INQUIRIES CONDUCTED BY THE AO, THE LD. DR SUBMITS THAT THE ORDER PASS ED BY THE AO BY MAKING AN ADDITION OF RS.18,41,072/ - BE CONFIRMED. 6. WE HAVE HEARD THE LD. DR AND PERUSED THE RELEVANT MATERIALS ON RECORD. IN THE CASE OF N.K PROTEINS LTD . (SUPRA), THERE WAS SEARCH PROCEEDINGS CONDUCTED BY THE REVENUE AT THE OFFICE PREM ISES OF THE ASSESSEE WHEREIN BLANK SIGNED CHEQUE BOOKS AND VOUCHER OF NUMBER OF CONCERNS WERE FOUND. ACCORDINGLY, THE PURCHASES MADE FROM THESE CONCERNS WERE TREATED AS BOGUS BY THE AO AND THE ENTIRE DEPOSITS IN BANK ACCOUNTS OF THESE PARTIES WERE TREATED AS ASSESSEES INCOME ON PROTECTIVE BASIS. ON APPEAL, THE ITAT RESTRICTED THE ADDITION ON ACCOUNT OF ALLEGED BOGUS PURCHASES AT 25% I.E. RS.73,23,322/ - OF THE TOTAL PURCHASES AMOUNTING TO RS.2,92,93,288/ - . ON FURTHER APPEAL, THE HONBLE HIGH COURT MODIFIED THE ORDER OF THE TRIBUNAL AND SHRI DINESH MADHABHAIDHEBHI ITA NO. 6183/MUM/2018 5 DIRECTED FOR ADDITION OF ENTIRE BOGUS PURCHASES. AFTER HEARING THE COUNSELS, THE HONBLE SUPREME COURT DISMISSED THE SLP FILED BY THE ASSESSEE AND CONFIRMED THE DECISION OF THE HIGH COURT FOR ADDITION OF ENTIRE INCOME ON ACCOU NT OF BOGUS PURCHASES. IN THE INSTANT CASE, AS MENTIONED EARLIER THE ASSESSEE PRODUCED BEFORE THE AO BANK BOOK, CASH BOOK, LEDGER, SALES REGISTER, PURCHASE REGISTER AND FINANCIAL STATEMENT. IN SUCH A SITUATION, THE AO COULD HAVE MADE CERTAIN INQUIRY TO V ERIFY THE GENUINENESS OF THE TRANSACTION. WE FIND THAT THE AO HAS NOT MADE EVEN A PRELIMINARY INQUIRY IN THIS REGARD AND THUS THE INSTANT CASE IS DISTINGUISHABLE FROM THE DECISION IN N.K PROTEINS LTD . (SUPRA) . THEREFORE, CONSIDERING THE FACTS AND CIRCUMSTA NCES OF THE CASE, WE ARE OF THE CONSIDERED VIEW THAT THE LD. CIT(A) HAS RIGHTLY SUSTAINED THE DISALLOWANCE OF RS.5,90,340/ - AND DELETED THE BALANCE AMOUNT OF RS.12,50,732/ - (RS.18,41,072/ - MINUS RS.5,90,340/ - ). THUS WE AFFIRM THE ORDER OF THE LD. CIT(A). 7. IN THE R ESULT, THE APPEAL FILED BY THE R EVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 28/11/2019. SD/ - SD/ - ( SAKTIJIT DEY ) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 28/11/2019 RAHUL SHARMA, SR. P.S. SHRI DINESH MADHABHAIDHEBHI ITA NO. 6183/MUM/2018 6 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE . BY ORDER, (DY./ASSTT. REGISTRAR) ITAT, MUMBAI