ACIT 27 (3), MUMBAI V. RAMJI GANGDA PATEL, MUMBAI

ITA 6234/MUM/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 0527 (ITAT-MUMBAI)
• Duration Of Justice: 10 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-09-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 31-10-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASHIM KUMAR MODI
• Assessee Lawyers: M SUBRAMANIAN
• Keywords: Bogus purchase; Unexplained expenditure; Search and seizure
• Section: 69C; 143(3); 133(6); 143(1)

Judgement Text

P A G E | 1 ITA NO.6234/MUM/2018 A.Y. 2011 - 12 ACIT CIRCLE - 27(3) VS. SHRI RAMJI GANGDAS PATEL IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI RAJESH KUMAR, ACCOUNTANT MEMBER AND SHRI RAVISH SOOD, JUDICIAL MEMBER ITA NO.6234/MUM/2018 (ASSESSMENT YEAR: 2011 - 12) ACIT - 27(3 ), ROOM NO. 423 , 4 TH FLOOR, TOWER NO. 6, VASHI RAILWAY STATION COMPLEX, VASHI, NAVI MUMBAI 400 70 3 VS. SHRI RAMJI GANGDAS PATEL A/7, K.K. SAMRUITI, NEW MANEKLAL ESTATE, SANT NARSHI MEHTA MARG, GHATKOPAR (WEST), MUMBAI - 400086 PAN AAKPP6340E (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI ASHIM KUMAR MODI, D.R RESPONDENT BY: SHRI M. SUBRAMANIAN, A.R DATE OF HEARING: 09.09.2019 DA TE OF PRONOUNCEMENT: 1 3 .09.2019 O R D E R PER RAVISH SOOD, JM THE PRESENT APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A) - 25, MUMBAI, DATED 17.08.2018, WHICH IN TURN ARISES FROM THE ORDER PASSED BY THE A.O UNDER SEC. 143(3) R.W.S 147 OF THE INCOME TAX ACT, 1961 (FOR SH ORT ACT) FOR A.Y . 2011 - 12 , DATED 26.03.2015 . THE REVENUE HAS ASSAILED THE IMPUGNED ORDER ON THE FOLLOWING GROUNDS OF APPEAL BEFORE US: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) ERRED IN DELETING THE ADDITION OF RS.7,70,653/ - MADE BY THE ASS ESSING OFFICER ON ACCOUNT OF BOGUS PURCHASES, WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAD FAILED TO PRODUCE P A G E | 2 ITA NO.6234/MUM/2018 A.Y. 2011 - 12 ACIT CIRCLE - 27(3) VS. SHRI RAMJI GANGDAS PATEL BILLS, VOUCHERS AND OTHER DOCUMENTARY EVIDENCES IN SUPPORT OF HIS CLAIM AND WITHOUT CONSIDERING THE LATEST APEX COURT DECISION IN THE CASE OF N.K. PROTIENS LTD. WHEREIN IT IS HELD THAT ONCE IT IS PROVED THAT THE PURCHASES ARE BOGUS THEN ADDITION SHOULD BE MADE ON ENTIRE PURCHASES AND NOT ON PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES. 2. ON THE FACTS AND CIRCUMSTANCES OF CASE AND IN LAW, THE LD.CIT(A) ERRED IN ESTIMATING THE PROFIT FROM HAWALA PURCHASES BY DISALLOWING ONLY RS. 1,10 ,093/ - BEING 12.5% OF THE BOGUS PURCHASES AS EVEN THE BASIC ONUS OF PRODUCING DELIVERY CHALLANS, TRANSPORT BILLS ETC. WERE NOT FULFILLED BY THE ASSESSEE. 3. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) ON THE ABOVE GROUNDS BE REVERSED AND THAT OF THE ASSESSING OFFICER BE RESTORED . 4. THE APPELLANT CRAVES LEAV E TO AMEND, MODIFY AND ALTER ANY GROUNDS OF APPEAL OR ADD A NEW GROUND WHICH MAY BE NECESSARY. 2. BRIEFLY STATED, THE ASSESSEE WHO IS A BUILDING CONTRACTOR HAD FILED HIS RETURN OF INCOME FOR A.Y.2011 - 12 ON 30.09.2011, DECLARING TOTAL INCOME AT RS.36,80,9 40/ - . THE RETURN OF INCOME FILED BY THE ASSESSEE WAS PROCESSED AS SUCH UNDER SEC. 143(1) OF THE ACT. ON THE BASIS OF INFORMATION RECEIVED BY THE A.O FROM THE DGIT (INV.) MUMBAI, THAT THE ASSESSEE AS A BENEFICIARY HAD OBTAINED ACCOMMODATION PURCHASE BILLS FROM CERTAIN HAWALA PARTIES, THE CASE OF THE ASSESSEE WAS REOPENED UNDER SEC. 147 OF THE ACT. 3. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS IT WAS OBSERVED BY THE A.O THAT THE ASSESSEE HAD CLA IMED TO HAVE MADE PURCHASES AGGREGATING TO RS.8,80,746/ - FROM TH E FOLLOWING TAINTED PARTIES: SR. NO. TIN OF HAWALA SUPPLIER HAWALA PAN NAME OF THE HAWALA SUPPLIER AMOUNT (RS.) 1. 27870855640V ASHMIT ENTERPRISES ASEPB4308A 4,08,137/ - 2. 27620838657V AMUL ENTERPRISES ALJPD5079Q 4,72,609/ - TOTAL 8,80,746/ - IN ORDER TO VERIFY THE AUTHENTICITY OF THE AFORESAID PURCHASE TRANSACTIONS , THE A.O DIRECTED THE ASSESSEE TO FURNISH SUPPORTING DOCUMENTARY EVIDENCE. HOWEVER, THE ASSESSEE FAILED TO COMPLY WITH THE DIRECTION OF THE A.O. ACCORDINGLY, THE A.O DIRECTED THE ASSESSEE TO PRODUCE THE AFOREMENTIONED PARTIES ALONG WITH SUPPORTING DOCUMENT ARY EVIDENCE WHICH WOULD SUBSTANTIATE THE VERACITY OF ITS CLAIM OF HAVING MADE PURCHASES FROM THEM. THE ASSESSEE ONCE AGAIN FAILED TO COMPLY WITH THE DIRECTIONS OF THE A.O AND DID NOT PRODUCE THE PARTIES FOR NECESSARY EXAMINATION BEFORE HIM. IN THE BACKDRO P OF THE AFORESAID FACTS, THE A.O IN ORDER TO VERIFY THE GENUINENESS OF THE PURCHASES CLAIMED BY THE ASSESSEE TO HAVE BEEN MADE FROM THE AFOREMENTIONED PARTIES ISSUED NOTICE S UNDER SEC. 133(6) OF THE ACT , . THEREIN CALLING UPON THE P A G E | 3 ITA NO.6234/MUM/2018 A.Y. 2011 - 12 ACIT CIRCLE - 27(3) VS. SHRI RAMJI GANGDAS PATEL AFOREMENTIONED PARTIES TO FURNISH THE COPIES OF THE LEDGER ACCOUNT OF THE ASSESSEE IN THEIR BOOKS OF ACCOUNTS, NATURE OF GOODS SOLD ALONG WITH SAMPLE COPY OF THE BILLS ISSUED, COPIES OF THE DELIVERY CHALLANS FOR THE GOODS DISPATCHED ALONG WITH TRANSPORT BILLS, COPY OF BANK STATEME NTS SHOWING THE RECEIPT OF THE SALE CONSIDERATION ALONG WITH THE DETAILS AS REGARDS THE RECEIPT OF THE OUTSTANDING AMOUNT AFTER THE END OF THE YEAR AND ALSO THE COPY OF THEIR RETURNS OF INCOME FOR THE YEAR UNDER CONSIDERATION. HOWEVER, THE NOTICES ISSUED U NDER SEC. 133(6) BY THE A.O WERE RETURNED UNSERVED BY THE POSTAL AUTHORITIES. THE A.O BROUGHT THE AFORESAID FACT TO THE NOTICE OF THE ASSESSEE AND DIRECTED HIM TO PRODUCE THE PARTIES ALONG WITH SUPPORTING DOCUMENTARY EVIDENCE. THE ASSESSEE ONCE AGAIN FAILE D TO COMPLY WITH THE SPECIFIC DIRECTIONS OF THE A.O AND FAILED TO PRODUCE THE AFOREMENTIONED PARTIES, BROKERS OR TRANSPORTERS , IN SPITE OF SPECIFIC OPPORTUNITY PROVIDED TO HIM. I T WAS OBSERVED BY THE A.O THAT THE AFOREMENTIONED PARTIES DID NOT EXIST AT THE ADDRESS ES PROVIDED BY THE ASSESSEE . ALSO, IT WAS NOTICED BY HIM THAT THE ASSESSEE HAD NOT FURNISHED THE ADDRESSES WHERE THE SAID PARTIES WERE PERSONALLY AVAILABLE. ACCORDINGLY, IN THE BACKDROP OF THE AFORESAID FACTS , THE A.O HELD A CONVICTION THAT THE ASS ESSEE HAD FAILED TO DISCHARGE THE ONUS THAT WAS CAST UPON HIM AS REGARDS THE PROV ING THE GENUINENESS OF THE PURCHASE TRANSACTIONS BY SUBMITTING THE SUPPORTING DOCUMENTARY EVIDENCE VIZ. COPIES OF DELIVERY CHALLANS, TRANSPORT BILLS ETC. INSOFAR THE CLAIM O F THE ASSESSEE THAT THE PAYMENTS TO THE AFOREMENTIONED PARTIES WERE MADE BY ACCOUNT PAYEE CHEQUES WAS CONCERNED, THE A.O WAS OF THE VIEW THAT THE SAID FACT WAS NOT SACROSANCT AND WOULD NOT ON A STANDALONE BASIS PROVE THE GENUINENESS OF THE PURCHASE TRANSAC TION UNDER CONSIDERATION. ALSO, IT WAS OBSERVED BY THE A.O THAT THE ASSESSEE COULD NOT SUBSTANTIATE THAT THE SALES OF THE GOODS CLAIMED TO HAVE BEEN PURCHASED FROM THE AFOREMENTIONED PARTIES HAD BEEN RECORDED IN HIS BOOKS OF ACCOUNT. APART THERE FROM, IT W AS NOTICED BY THE A.O THAT THE PAYMENTS MADE TO THE AFOREMENTIONED PARTIES TOWARDS THE ALLEGED PURCHASE CONSIDERATION WAS ALSO WITNESSED BY A SUBSTANTIAL DELAY. ON THE BASIS OF HIS AFORESAID OBSERVATIONS , T HE A.O MADE AN ADDITION OF THE ENTIRE PURCHASE CON SIDERATION OF RS.8,80,746/ - AS AN UNEXPLAINED EXPENDITURE UNDER SEC. 69C IN THE HANDS OF THE ASSESSEE. 4. AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). THE CIT(A) AFTER DELIBERATING ON THE CONTENTION S ADVANCED BY THE ASSESSEE WA S HOWEVER NOT PERSUADED TO SUBSCRIBE TO THE DISALLOWANCE OF ENTIRE VALUE OF THE PURCHASES CLAIMED BY THE ASSESSEE TO HAVE BEEN MADE FROM THE AFOREMENTIONED PARTIES. IN FACT, THE CIT(A) WAS OF THE VIEW THAT THOUGH THE P A G E | 4 ITA NO.6234/MUM/2018 A.Y. 2011 - 12 ACIT CIRCLE - 27(3) VS. SHRI RAMJI GANGDAS PATEL ASSESSEE HAD FAILED TO ESTABLISH ONE TO ONE NEXUS/LINK BETWEEN THE PURCHASE S AND SALES, HOWEVER, THE FACT THAT THE MATERIALS PURCHASED WERE THEREAFTER SOLD BY THE ASSESSEE COULD NOT BE DOUBTED. ACCORDINGLY, THE CIT(AL) WAS OF THE VIEW THAT AS THE PURCHASES CLAIMED BY THE ASSESSEE TO HAVE BEEN M ADE FROM THE AFOREMENTIONED PARTIES COULD NOT BE VERIFIED, THEREFORE, THE PURCHASE PRICE CLAIMED BY THE ASSESSEE TO HAVE BEEN PAID ON THE BASIS OF THE INVOICES/BILLS COULD NOT BE ACCEPT ED AS THE CORRECT PRICE PAID FOR THE GOODS PURCHASE D BY THE ASSESSEE. THE CIT(A) WAS OF THE VIEW THAT IN THE BACKDROP OF THE AFORESAID FACTS, THE POSSIBILITY OF THE OVER INVOICING OF THE MATERIAL PURCHASED IN ORDER TO REDUCE THE PROFIT COULD NOT BE RULED OUT. AS SUCH , THE CIT(A) WAS OF THE VIEW THAT THE GROSS PROFIT RATE SH OWN BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION COULD NOT BE RELIED UPON. ON THE BASIS OF HIS AFORESAID OBSERVATIONS , THE CIT(A) HELD A CONVICTION THAT IN ALL FAIRNESS THE ADDITION IN THE HANDS OF THE ASSESSEE WAS LIABLE TO BE RESTRICTED TO THE EXT ENT OF THE PROFIT WHICH THE ASSESSEE WOULD HAVE MADE BY PURCHASING THE GOODS FROM THE UNIDENTIFIED PARTIES OPERATING IN THE OPEN/GREY MARKET. ACCORDINGLY, THE CIT(A) ESTIMATED THE PROFIT ELEMENT IN THE HANDS OF THE ASSESSEE @ 12.5% OF THE AGGREGATE VALUE O F PURCHASE OF RS.8,80,746/ - AND RESTRICTED THE ADDITION TO AN AMOUNT OF RS.1,10,093/ - . 5. THE REVENUE BEING AGGRIEVED WITH THE ORDER OF THE CIT(A) HAS CARRIED THE MATTER IN APPEAL BEFORE US. IT WAS SUBMITTED BY THE LD. DEPARTMENTAL REPRESENTATIVE (FOR SHOR T D.R) THAT THE CIT(A) HAD ERRED IN CONFINING THE RESTRICTION ONLY TO THE EXTENT OF 12.5% OF THE AGGREGATE VALUE OF THE BOGUS PURCHASES BOOKED BY THE ASSESSEE IN HIS BOOKS OF ACCOUNT. IT WAS SUBMITTED BY THE LD. D.R THAT THE ORDER OF THE CIT(A) MAY BE SE T ASIDE AND THAT OF THE A.O BE RESTORED. IN SUPPORT OF HIS AFORESAID CONTENTION THE LD. D.R HAD RELIED ON THE JUDGEMENT OF THE HONBLE SUPREME COURT IN THE CASE OF N.K. PROTEINS LTD VS. DCIT (2017) 292 CTR 354(SC). 6. PER CONTRA, THE LD. AUTHORIZED REPRE SENTATIVE (FOR SHORT A.R) FOR THE ASSESSEE RELIED ON THE ORDER PASSED BY THE CIT(A) . 7. WE HAVE HEARD THE AUTHORIZED REPRESENTATIVES FOR BOTH THE PARTIES, PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL AVAILABLE ON RECORD , AND THE JUDICIAL PRONOUNCEMENTS RELIED UPON BY THEM . ADMITTEDLY, AS IS DISCERNIBLE FROM THE ORDERS OF THE LOWER AUTHORITIES, IT STAND ESTABLISHED BEYOND ANY DOUBT THAT THE ASSESSEE DESPITE HAVING BEEN AFFORDED SUFFICIENT OPPORTUNITY , HAD FAILED TO DISCHARGE THE ONUS AS WAS CAST UPON IT AS REGARDS PROVING THE AUTHENTICITY OF THE PURCHASE TRANSACTIONS UNDER CONSIDERATION. WE HAVE GIVEN A THOUGHTFUL P A G E | 5 ITA NO.6234/MUM/2018 A.Y. 2011 - 12 ACIT CIRCLE - 27(3) VS. SHRI RAMJI GANGDAS PATEL CONSIDERATION TO THE FACTS OF THE CASE AND ARE PERSUADED TO SUBSCRIBE TO THE VIEW TAKEN BY THE CIT(A) , THAT THOUGH THE ASSESSE E COULD NOT ESTABLISH ONE TO ONE NEXUS BETWEEN THE PURCHASES MADE FROM THE AFOREMENTIONED PARTIES AND THE SALES ACCOUNTED FOR IN HIS BOOK ACCOUNTS , HOWEVER, THE FACT THAT THE MATERIAL RECEIVED HAD BEEN SOLD HAS NOT BEEN DISPROVED. IN SUM AND SUBSTANCE, THE FACT THAT THE GOODS PURCHASED BY THE ASSESSEE FROM THE AFOREMENTIONED PARTIES FORM PART OF ITS SALES/RECEIPTS HAD NOT BEEN DISPROVED OR DISLODGED BY THE REVENUE ON THE BASIS OF ANY IRREFUTABLE DOCUMENTARY EVIDENCE. IN FACT, IT IS NOT THE CASE OF THE REVENUE THAT THE G.P RATE OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION HAD WITNESSED A STEEP DECLINE, WHICH UNDER SUCH CIRCUMSTANCES WOULD HAD FORTIFIED THE CLAIM OF THE REVENUE THAT THE PURCHASES OF THE MATERIA L DID NOT FORM PART OF THE SALES/RECEIPTS OF THE ASSESSEE. APART THERE FROM, WE FIND THAT THOUGH DOCUMENTARY EVIDENCE FURNISHED BY THE ASSESSEE TO SUBSTANTIATE THE AUTHENTICITY OF THE PURCHASES CLAIMED TO HAVE BEEN MADE FROM THE AFOREMENTIONED PARTIES WAS NOT TO THE SATISFACTION OF THE A.O, HOWEVER, THE SAME AT LEAST LEADS SUBSTANTIAL CREDENCE TO THE FACT THAT MATERIAL THEREIN STATED HAD BEEN PURCHASED BY THE ASSESSEE. IN FACT, THE PAYMENT S MADE BY THE ASSESSEE VIDE ACCOUNT PAYEE CHEQUES TO THE AFOREMENTIONED PARTIES ALSO SUPPORTS THE FACT THAT GOODS HAD BEEN PURCHASED BY THE ASSESSEE. WE MAY HEREIN OBSERVE THAT IT IS NOT THE CASE OF THE REVENUE THAT THE PAYMENTS MADE BY THE ASSESSEE VIDE ACCOUNT PAYEE CHEQUES HAD THEREAFTER FOUND ITS WAY BACK TO THE POCKET OF THE ASSESSEE. ACCORDINGLY, IN THE BACKDROP OF THE AFORESAID FACTS , WE ARE IN AGREEMENT WITH THE VIEW TAKEN BY THE CIT(A) THAT THE ASSESSEE HAD PURCHASED THE GOODS NOT FROM THE AFOREMENTIONED PARTIES, BUT FROM THE OPEN/GREY MA RKET. WE THUS CONCUR WITH THE VIEW TAKEN BY THE CIT(A) THAT THE ADDITION IN THE HANDS OF THE ASSESSEE IN RESPECT OF THE AFORESAID UNVERIFIED PURCHASE COULD HAVE BEEN RESTRICTED ONLY TO THE EXTENT OF THE PROFIT ELEMENT WHICH THE ASSESSEE WOULD HAD MADE BY P ROCURING THE SAID GOODS AT A DISCOUNTED VALUE FROM THE PARTIES OPERATING IN THE OPEN/GREY MARKET. AS REGARDS THE RELIANCE PLACED BY THE REVENUE ON THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF N.K PROTEINS LTD. , W E ARE AFRAID THAT THE SAME BEING DISTINGUISHABLE ON FACTS WOULD NOT ASSIST THE CASE OF THE REVENUE. IN THE CASE BEFORE THE HONBLE SUPREME COURT, IT WAS CONCLUSIVELY PROVED THAT THE ASSESSEE HAD ONLY BOOKED BOGUS ENTRIES OF PURCHASES IN ITS BOOKS OF ACCOUNTS AND HAD NOT RECEIVED ANY CORR ESPONDING MATERIAL . WE THUS IN THE BACKDROP OF OUR AFORESAID OBSERVATIONS ARE OF THE CONSIDERED VIEW THAT THE CIT(A) HAD IN ALL FAIRNESS RESTRICTED THE ADDITION IN THE CASE OF THE ASSESSEE ONLY TO THE EXTENT OF THE PROFIT ELEMENT , WHICH WE FIND HAD FAIRLY BEEN ESTIMATED BY P A G E | 6 ITA NO.6234/MUM/2018 A.Y. 2011 - 12 ACIT CIRCLE - 27(3) VS. SHRI RAMJI GANGDAS PATEL HIM @ 12.5% OF THE AGGREGATE VALUE OF THE AMOUN T OF PURCHASE S UNDER CONSIDERATION . ACCORDINGLY, FINDING NO INFIRMITY IN THE ORDER OF THE CIT(A), WE UPHOLD THE SAME. 8. THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPE N COURT ON 1 3 .09.2019 S D / - S D / - ( RAJESH KUMAR) (RAVISH SOOD) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; 13 .09.2019 PS. ROHIT / 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 . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI