ITO, WARD 3 (2), KALYAN V. PARAS RAMNIKLAL SHAH, MUMBAI

ITA 6254/MUM/2018

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 2012 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-12-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 01-11-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R BHOOPATHI
• Keywords: Bogus purchase; Accommodation entries
• Section: 143(1); 201; 13(2); 13; 147; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH SMC , MUMBAI BEFORE SHRI C.N. PRAS AD, HON'BLE JUDICIAL MEMBER AND SHRI MANOJ KUMAR AGGARWAL , HON'BLE ACCOUNTANT MEMBER ITA NO S . 6254 & 6255 /MUM/201 8 ( A. Y S : 2010 - 11 & 2009 - 10 ) INCOME TAX OFFICER, WARD - 3( 2 ) 2 ND FLOOR, RANI MANSION MURBAD ROAD KALYAN(W) - 421 301 V. SHRI PARAS RAMNIKLAL SHAH GHAR SHOP NO - 05, PLOT NO - 296 JAIKISHAN BUILDING, R.N. NARKAR ROAD PATNAGAR, GHARKOPAR EAST MUMBAI 400 075 PAN: AKMPS6972P ( ASSESSEE ) (RESPONDENT) ASSESSEE BY : SHRI BHADRESH DOSHI DEPARTMENT BY : SHRI R. BHOOPATHI DATE OF HEARING : 02.12.2019 DATE OF PRONOUNCEMENT : 02 .1 2 .2019 O R D E R PER C. N. PRASAD (JM) 1. THESE APPEALS ARE FILED BY THE R EVENUE AGAINST THE COMMON ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) 1 , MUMBAI [HEREINAFTER IN SHORT LD.CIT(A)] DATED 21.08.2018 FOR THE A.Y. 2009 - 10 AND A.Y. 2010 - 11 RESPECTIVELY IN RESTRICTING THE DISALLOWANCE TO 5 % OF THE PURCHASES AS AGAINST ENTIRE PURCHASES DISALLOWED AS NON - GENUINE/BOGUS BY THE ASSESSING OFFICER. 2 ITA NOS. 6254 & 6255/MUM/2018 SHRI PARAS RAMNIKLAL SHAH 2. BRIEFLY STATED THE FACTS ARE THAT, THE ASSESSEE IS ENGAGED IN THE BUSINESS OF DEALER IN ELECTRIC, ELECTRONICS AND HARDWARE GOODS , FILED RETURN OF INC OME DECLARING INCOME OF . 3,52,040 / - & . 3,18,202 / - FOR THE A.YS. 2009 - 10 & 20 10 - 11 RESPECTIVELY. THE RETURNS WERE PROCESSED U/S. 143(1) OF THE ACT. SUBSEQUENTLY, ASSESSING OFFICER RECEIVED INFORMATION FROM THE DGIT(INV.), PUNE ABOUT THE ACCOMMODATION ENT RIES PROVIDED BY VARIOUS DEALERS AND ASSESSEE WAS ALSO ONE OF THE BENEFICIARY FROM THOSE DEALERS. THE ASSESSMENT S WERE REOPENED U/S. 147 OF THE ACT BASED ON THE INFORMATION RECEIVED FROM DGIT (INV.), PUNE , THAT THE ASSESSEE HAS AVAILED ACCOMMODATION ENTRI ES FROM VARIOUS DEALERS WHO ARE ALL PROVIDING ACCOMMODATION ENTRIES WITHOUT THERE BEING TRANSPORTATION OF ANY GOODS. IN THE RE - ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS REQUIRED TO PROVE THE GENUINENESS OF THE PURCHASES MADE FROM VARIOUS PARTIES WHICH WERE REFERRED TO IN THE ASSESSMENT ORDER S . THE ASSESSEE PRODUCED COPIES OF PURCHASE BILLS, ITEM WISE STOCK LEDGER, C OPIES OF LEDGER ACCOUNTS AND FURTHER SUBMITTED THAT PAYMENTS MADE TO THE PART Y IS THROUGH CHEQUE AND THEREFORE THE PURCHASES MADE ARE GENUINE. ASSESSEE ALSO REQUESTED FOR CROSS EXAMINATION OF THE DEALER ON WHOSE STATEMENT THE ASSESSING OFFICER IS RELYING ON. NOT CONVINCED WITH THE SUBMISSIONS OF THE ASSESSEE THE ASSESSING OFFICER TREATED THE PURCHASES AS NON - GENUINE AND HE WAS OF THE OPINION TH AT ASSESSEE HAD OBTAINED 3 ITA NOS. 6254 & 6255/MUM/2018 SHRI PARAS RAMNIKLAL SHAH ONLY ACCOMMODATION ENTRIES WITHOUT THERE BEING ANY TRANSPORTATION OF MATERIALS AND THE ASSESSEE MIGHT HAVE MADE PURCHASES IN THE GRAY MARKET. IT IS THE FINDING OF THE ASSESSING OFFICER SINCE THE PURCHASES MADE BY THE ASSESSEE AND CLAIMED AS EXPENSES IN HIS PROFIT AND LOSS ACCOUNT ARE NOT GENUINE, THE PURCHASES TO THAT EXTENT REMAINED UNVERIFIABLE. HE ALSO OBSERVED THAT THE DEALERS FROM WHOM THE ASSESSEE MADE PURCHASES STATED THAT THEY HAVE ISSUED ONLY ACCOMMODATION BILLS. THEREFO RE, ASSESSING OFFICER TREATED PURCHASES OF . 9,39,991 / - & . 4,12,664 / - AS NON - GENUINE AND ADDED TO THE INCOME OF THE ASSESSEE FOR THE A.YS. 2009 - 10 & 201 0 - 11 RESPECTIVELY . ON APPEAL THE LD.CIT(A) CONSIDERING THE EVIDENCES AND VARIOUS SUBMISSIONS OF THE ASSESSEE RESTRICTED THE DISALLOWANCE TO THE EXTENT 5 % OF THE NON - GENUINE PURCHASES FOR THE A.Y. 2009 - 10 & 2010 - 11 RESPECTIVELY . 3. LD. DR VEHEMENTLY SUPPORTED THE ORDER S OF TH E ASSESSING OFFICER. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE ORDERS OF THE AUTHORITIES BELOW. ON A PERUSAL OF THE ORDER OF THE LD.CIT(A), WE FIND THAT THE LD.CIT(A) CONSIDERED THIS ASPECT OF THE MATTER ELABORATELY WITH REFERENCE TO THE SUBMISSION S OF THE ASSESSEE AND THE AVERMENTS IN THE ASSESSMENT ORDER AND CONSIDERING THE NATURE OF THE BUSINESS OF THE ASSESSEE AND CONSIDERING VARIOUS DECISIONS OF HIGH COURTS RESTRICTED THE 4 ITA NOS. 6254 & 6255/MUM/2018 SHRI PARAS RAMNIKLAL SHAH DISALLOWANCE TO 5 % OF THE NON - GENUINE PURCHASES FOR THE A.Y. 2009 - 10 & A.Y. 2010 - 11 RESPECTIVELY , WHILE HOLDING SO, THE LD.CIT(A) FOR THE A.Y. 20 10 - 11 OBSERVED AS UNDER: - 6.5 AS REGARD THE CASE LAWS IN THE CASES OF SH. SIMIT P SHETH VS. ITO WD - 2(2), BRD, IN ITA NO. 3238 & 3293/AHD/20.09, ACIT VS KULUBI STEEL IN ITA NO. 15 68/AHD/2008, SMT. SAJJANDEVI B JAM VS. ITO IN ITA NO. 60/AHD/2009, M/S ESVEE STEEL ENTERPRISES VS. ACIT - 13(2) IN IT(SS) NO. 28/MUM/2011, DCIT VS. NITIN IMPEX IN ITA NO. 6178/MUM/2007, ETC., RELIED BY THE LD. A.R. ARE CONCERNED IT IS NOTICED THAT THE FACT S OF THE SAME ARE NOT APPLICABLE IN THE FACTS OF CASE OF APPELLANT, AS DURING THE COURSE OF RE ASSESSMENTS AS WELL AS APPELLATE PROCEEDINGS, THE LD. AR, TIME AND AGAIN WAS ASKED TO EXPLAIN / JUSTIFY THE GENUINENESS OF PURCHASES, MADE FROM HAWALA PARTIES, B Y FILING THEIR CURRENT CONFIRMATION, BANK STATEMENTS AND PRODUCE THESE HAWALA PARTIES FOR EXAMINATION, ETC., BUT FAILED TO DO SO. IN THE ABSENCE OF THESE DETAILS THE DEPARTMENT COULD NOT EXAMINE THE CORRECTNESS, REASONABLENESS AND GENUINENESS OF THESE PURC HASES. THE PERUSAL O F THE DECISIONS OF VARIOUS COURTS REVEALS THAT THERE ARE VARYING / DIFFERENT FINDINGS AND THE SAME DIFFER DIFFER FROM CASE TO CASE, BASED ON THE FACTS OF EACH CASE. THEREFORE, THE RATIO OF THOSE CASES CANNOT BE SAID TO BE SQUARELY APPLI CABLE IN THE A PPELLANTS CASE. 6.6. SINCE THE HAWALA PARTIES HAVE RUN AWAY FROM THEIR ORIGINAL ADDRESSES AND THE APELLANT IS NOT IN A POSITION TO FURNISH THE CURRENT VERIFIABLE ADDRESSES, THEREFORE, THE DEPARTMENT IS ALSO NOT IN A POSITION TO ENQUIRE THE GENUINENESS OF THESE PURCHASES, MAINLY DUE TO FAILURE ON THE PART OF THE APPELLANT. AS REGARDS THE CROSS EXAMINATION OF THESE HAWALA PARTIES IS CONCERNED, THE SAME COULD NOT BE CARRIED OUT IN VIEW OF THE FACT THAT THESE PARTIES WERE MEN OF NO MEANS, HENCE RUN AWAY FROM SITES. SECONDLY, THESE ARE THE PARTIES, FROM WHOM THE APPELLANT CLAIMED TO HAVE PURCHASED GOODS AND DEBITED IN THE P&L ACCOUNT, THEREFORE, IT WAS DUTY OF THE APPELLANT TO FURNISH THE VER IFIABLE CURRENT ADDRESSES/ CONFIRMATION OF LEDGER ACCOUNTS, ETC., FOR SUMMONING, TO ESTABLISH THE GENUINENESS OF THE PURCHASES AND ALSO TO ENSURE THEIR ATTENDANCE FOR CROSS VERIFICATION. 6.7. AS REGARDS OTHER ASPECTS SUCH AS PAYMENT THROUGH BANKING CHANNE LS, JUSTIFICATION FOR PURCHASES MADE FROM HAWALA PARTIES AS 5 ITA NOS. 6254 & 6255/MUM/2018 SHRI PARAS RAMNIKLAL SHAH GENUINE, SALES MADE AGAINST SUCH PURCHASES, ETC., I WOULD LIKE TO PLACE THE RELIANCE ON FINDING OF THE HON'BLE SUPREME COURT, IN THE CASE OF LACHMINARAYAN MADAN LAL V. CIT (1972) 86 ITR 439 (SC), WHEREIN IT IS HELD THAT EVEN IF THERE IS AN AGREEMENT, BETWEEN THE ASSESSEE AND ITS AGENTS FOR PAYMENTS OF CERTAIN AMOUNTS AS COMMISSION, ASSUMING THERE WAS SUCH PAYMENT, THAT DOES NOT BIND THE INCOME - TAX OFFICER TO HOLD THAT THE PAYMENT WAS MADE EXCLUSIVE LY AND WHOLLY FOR THE PURPOSES OF THE ASSESSEE'S BUSINESS. IN THIS CASE, THE SUPREME COURT INTER ALIA, HAS OBSERVED AS UNDER : - 'ALTHOUGH THERE MIGHT BE SUCH AN AGREEMENT IN EXISTENCE AND THE PAYMENTS MIGHT HAVE BEEN MADE, IT IS STILL OPEN TO THE INCOME - TA X OFFICER TO CONSIDER THE RELEVANT FACTORS AND DETERMINE FOR HIMSELF WHETHER THE COMMISSION SAID TO HAVE BEEN PAID IS PROPERLY DEDUCTIBLE. IN THIS CASE ABSOLUTELY NO MATERIAL ON RECORD HAS BEEN BROUGHT BY THE ASSESSEE TO SUGGEST THAT THE COMMISSION AGENTS HAD PROCURED ANY ORDERS FOR THE ASSESSEE. THE PRODUCTION OF BILLS OR PAYMENTS HAVING BEEN MADE BY ACCOUNT - PAYEE CHEQUES CANNOT BY ITSELF SHOW THAT THE COMMISSION AGENTS HAD PROCURED ANY ORDER FOR THE ASSESSEE. NO CORRESPONDENCE ..,........' 6.8. IN THE ABO VE CASE, THE HON'BLE SUPREME COURT HAS MADE IT VERY CLEAR THAT BY CREATING DOCUMENTS AND MAKING PAYMENT THROUGH BANKING CHANNEL TO GIVE COLOUR, DOES NOT SACROSANCT/ ESTABLISHES THE GENUINENESS OF THE TRANSACTION. IN NUMBER OF OTHER CASES, AS DISCUSSED ABOV E, IT IS NOTICED THAT THE DISALLOWANCE RANGING FROM 25% TO 100% OF BOGUS PURCHASES HAVE BEEN HELD AS REASONABLE, BASED ON THE FACTS OF THOSE CASES. IN VIEW OF THE FOREGOING DISCUSSION, THE PERCENTAGE OF DISALLOWANCE OF BOGUS PURCHASES, HAS TO BE BASED ON T HE FACTS OF EACH CASE, HENCE THE SAME CANNOT BE GENERALIZED IN EVERY CASE. 6.9 FROM THE ABOVE DISCUSSION, IT IS SEEN THAT THE VARIOUS COURTS HAVE UPHELD THE D ISALLOWANCES OF BOGUS PURCHASES, RANGING FROM 25% TO 100%, BASED ON THE FACTS OF EACH CASE AND NATURE OF BUSINESS. IN THE PRESENT CASE, IT IS SEEN THAT THE APPELLANT HAD RECORDED CORRESPONDING SALES AGAINST ALLEGED PURCHASES; THEREFORE, THIS IS NOT A CASE WHERE THE 100% CASH HAS BEEN SIPHONED OFF BY BOOKING OF BOGUS PURCHASES. 6.10 BEFORE THE S T DEPARTMENT, THESE SO CALLED HAWALA DEALERS, HAVE, INTER - ALIA, STATED AS UNDER: 1....... DO NOT HAVE ANY GO - DOWNS / STORAGE OF GOODS. 6 ITA NOS. 6254 & 6255/MUM/2018 SHRI PARAS RAMNIKLAL SHAH 2....... HAVE NOT ACTUALLY PURCHASED/SOLD ANY GOODS. ONLY PAPER BILLS ISSUED THAT TOO WITHOUT PHYSICALLY DELIVERY O F GOODS. 3 ..... .DO NOT MAINTAIN ANY BOOKS OF ACCOUNTS IN RESPECT OF ABOVE CONCERN. 4.. ...HAVE GIVEN BLANK SIGNED CHEQUE BOOK, BLANK BILLS AND BLANK CHALLAN ETC. 5...... HAVE SIGNED ON BLANK ACCOUNT OPENING FORM OF THE BANK, AS PER DIRECTION.' ....FOR WHICH I AM BEING PAID VERY NOMINAL AMOUNT/ CHARGED NOMINAL COMMISSION AND SO ON.. 6.11 CONSIDERING THE ABOVE FACTS AND IN VIEW OF THE DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. JANSAMPARK ADVERTISING AND MARKETING (P) LTD, IT IS ALSO AN OBL IGATION ON THE PART OF THE FIRST APPELLATE AUTHORITY TO ENSURE THAT THE EFFECTIVE ENQUIRY IS CARRIED OUT, TO ARRIVE AT LOGICAL CONCLUSION, THEREFORE, TO UNDERSTAND THE IMPACT OF BOOKING OF HAWALA PURCHASES ON THE PROFIT OF THE YEAR, THE LD AR WAS REQUIRED TO FURNISH THE COMPARATIVE DETAILS OF GP/NP AND GP/NP RATES FOR HAWALA YEARS, PRECEDING TWO YEARS AND SUBSEQUENT TWO YEARS. IN COMPLIANCE, THE APPELLANT HAS SUBMITTED THE DETAILS, AS UNDER : - ASST. YR. 2007 - 08 2008 - 09 2009 - 10 2010 - 11 2011 - 12 2012 - 13 2013 - 14 TURNOVER 1,69,41,983 1,69,75,821 1,59,41,290 1,35,29,826 2,00,28,932 3,08,44,256 2,38,62,589 GP 9,31,881 11,60,670 16,24,450 14,56,614 13,10,970 15,69,359 15,28,709 GP RATE 5.50% 6.84% 10.19% 10.77% 6.55% 5.09% 6.41% GP AFTER ADD OF BP -- - 24,59,998 18,23,426 19,10,120 -- .. GP RATE -- -- 15.43 13.48 9.54 -- -- NP 3,32,981 4,03,394 4,45,483 4,26,485 4,14,656 6,16,353 6,23,919 NP RATE 1.97% 2.38% 2.79% 3.15% 2.07% 2.00% 2.61% NP AFTER ADD OF BP -- -- 12,81,031 7,93,297 10,13,806 -- -- NP RATE -- -- 8.04% 5.86% 5.06% ~ - 6.12 FROM THE ABOVE DETAILS IT IS SEEN THAT IN THE YEARS UNDER APPEALS I.E. A.Y. 2009 - 10, A.Y. 2010 - 11 & 2011 - 12 THE APPELLANT HAD DECLARED NPS AT 2.79%, 3.15% & 2.07%, WHICH IS MUCH LESSER THEN THE NP RATE OF 5% PRESCRIBED IN THE PROVISIONS OF SECTION 44AF OF THE ACT FOR RETAILERS. CONSIDERING THE ABOVE FACTS THE LD. AR WAS QUESTIONED TO JUSTIFY THE LOWER RATE OF NP AS PER PROVISION OF SECTION 44AF VIS - A - VIS UN - VERIFIABILITY OF ABOVE ALLEGED PURCHASES, COUPLED WITH NON - FURNISHING OF CURRENT MAILING ADDRESSES/CONFIRMATIONS OF ABOVE ALLEGED SUPPLIERS, ETC. THE LD. AR, AFTER CONSIDERING THE ABOVE FACTS, VIDE ORDER SHEET ENTRY DATED 20.8.2018 REQUESTED THAT, THE 7 ITA NOS. 6254 & 6255/MUM/2018 SHRI PARAS RAMNIKLAL SHAH APPELLANT BEING RETAILER THE NP @5% OF THE TUR NOVER, AS PER THE PROVISIONS OF SECTION 44AF OF THE ACT MAY BE ESTIMATED OR ADDITION TO THE EXTENT OF BOG US PURCHASES, MAY BE SUSTAINED. 6.13 CONSIDERING THE ABOVE SUBMISSION OF THE LD. AR THE NP FOR AY 2009 - 10 AND 2010 - 11 IS HEREBY ESTIMATED @5% AS PER PROVISION OF SECTION 44AF OF THE ACT I.E. . 7,97,064/ - (RS. 1,59, 41,290 X5/100) AND RS. 6,76,491/ - (RS. 1,35,29,826 X 5/100), RESPEC TIVELY, AS AGAINST RS. 4,45,483/ - , AND RS. 4,26,485/ - DECLARED BY THE APPELLANT . THE APPELLANT WILL ACCORDI NGLY GET RELIEF OF RS. 5,88,409/ - [9,39,991 - 3,51,582 (7,97,06 5 - 4,45,483)] AND RS. 1,62,658/ - [4,12,664 - 2,50,006/ - (6,76,491 - 4,26,485)]. SINCE THE INCOME OF THE APPELLANT HAS BEEN ESTIMATED @5% OF THE TURNOVER, THEREFORE, NO FURTHER DISALLOWANCE IS REQUIRED TO BE MADE. 5. ON A CAREFUL PERUSAL OF THE ORDER OF THE LD.CIT(A) AND THE REASONS GIVEN THEREIN, WE DO NOT FIND ANY INFIRMITY IN THE ORDER PASSED BY THE LD.CIT(A). NONE OF THE FINDINGS AND OBSERVATIONS OF THE LD.CIT(A) HA VE BEEN REBUTTED WITH EVIDENCES BY THE R EVENUE AND THUS WE DO NOT SEE ANY INFIRMITY IN THE ORDER PASSED BY THE LD.CIT(A) IN SUSTAINING THE ADDITION/DISALLOWANCE TO THE EXTENT OF 5 % OF THE PURCHAS ES FOR THE A.Y. 2009 - 10 & A.Y. 2010 - 11 . GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 6. IN THE RESULT, APPEALS FILED BY THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 02 ND DECEMBER, 2019 SD/ - SD/ - ( MANOJ KUMAR AGGARWAL ) (C.N. PRASAD) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI / DATED 02/ 12 / 2019 GIRIDHAR , S R. PS 8 ITA NOS. 6254 & 6255/MUM/2018 SHRI PARAS RAMNIKLAL SHAH COPY OF THE ORDER FORWARDED TO : 1. THE ASSESSEE 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY// BY ORDER (ASSTT. REGISTRAR) ITAT, MUM