ACIT 25(3), MUMBAI V. TRANS CONDUCT (INDIA), MUMBAI

ITA 6346/MUM/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 3232 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-02-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2010-2011
• Appeal Filed On: 25-10-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: CHAUDHARY ARUN KUMAR SINGH
• Keywords: Bogus purchase; Onus to prove

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA, AM AND SHRI AMARJIT SINGH , JM ITA NO. 6346 /MUM/ 2017 (ASSESSMENT YEAR: 2010 - 11 ) ASST. CIT - 25(3) ROOM NO. 601, C - 10, 6 TH FLOOR, PRATYAKSHAKAR BHAVAN, BANDRA KURLA COMPLEX, BANDRA (E), MUMBAI - 400 051 VS. M/S. TRANS CONDUCT (INDIA) G - 1, PLOT NO. 140 - A, KESAR VILLA, MALVIYA ROAD, VILE PARLE (E), MUMBAI 400 057 PAN/GIR NO. AAFFT 2605 K ( REVENUE ) : ( ASSESSEE ) & CO NO. 26/MUM/2019 (ARISING OUT OF ITA NO. 6346 /MUM/ 2017) (ASSESSMENT YEAR: 2010 - 11 ) M/S. TRANS CONDUCT (INDIA) G - 1, PLOT NO. 140 - A, KESAR VILLA, MALVIYA ROAD, VILE PARLE (E), MUMBAI 400 057 VS. ASST. CIT - 25(3) ROOM NO. 601, C - 10, 6 TH FLOOR, PRATYAKSHAKAR BHAVAN, BANDRA KURLA COMPLEX, BANDRA (E), MUMBAI - 400 051 PAN/GIR NO. AAFFT 2605 K (ASSESSEE) : ( REVENUE ) REVENUE BY : SHRI CHAUDHARY ARUN KUMAR SINGH ASSESSEE BY : SHRI RAHUL HAKANI DATE OF HEARING : 21.02.2019 DATE OF PRONOUNCEMENT : 27.02 .2019 O R D E R PER BENCH: THIS APPEAL BY THE REVENUE AND CROSS OBJECTION BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - 37, MUMBAI (LD.CIT(A) FOR SHORT) DATED 21.08.2017 AND PERTAINS TO THE ASSESSMENT YEAR (A.Y.) 2010 - 11. 2. THE GROUNDS OF APPEAL RAISED IN REVENUE READ AS UNDER: 1. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) HAS ERRED IN ESTIMATING THE PROFIT AT 12.5% ON THE TOTAL BOGUS PURCHASES OF RS . 1,92,95,724/ - .' 2 ITA NO. 6346/MUM/2017 & CO NO. 26/MUM/2019 2. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) HAS ERRED IN NOT CONSIDERING THAT THE ADDITION WAS MADE ON THE BASIS OF INFORMATION RECEIVED FROM DIT(INV.) AND SALES TAX DEPARTMENT, MAHARASHTRA WITH REGARD TO BOGUS PURCHASE MADE BY THE ASSESSEE FROM 22 PARTIES WITHOUT SUPPLY OF ACTUAL GOODS.' 3. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) HAS ERRED IN NOT CONSIDERING THAT HAWALA OPERATORS HAVE ADMITTED ON OATH BEFORE THE SALES TAX AUTHORITIES THAT THEY HAVE NOT SOLD ANY MA TERIAL TO ANYBODY.' 4. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) HAS ERRED IN NOT CONSIDERING THAT THE ASSESSEE COULD NOT PROVE THE GENUINENESS AND CREDITWORTHINESS OF THE PURCHASE TRANSACTIONS DURING THE COURSE OF A SSESSMENT PROCEEDINGS.' 5. THE LD. CIT (A) HAS FAILE D TO UPHELD THE DECISION OF HON BLE APEX COURT IN THE CASE OF NK PROTEINS LTD. VS DCIT IN SLP(CIVIL) NO. 769/2017 DATED 16.01.2017 WHERE 100 % ADDITION WAS CONFIRMED BY THE APEX COURT. 3. THE GROUNDS R AISED IN ASSESSEES CROSS OBJECTION ARE AS UNDER: 1. THE LEARNED CIT(A) ERRED IN RESTRICTING ADDITION OF ALLEGED BOGUS PURCHASE TO RS . 24,11,965/ - BEING 12.5% OF ALLEGED BOGUS PURCHASE OF RS .1,92,95,724/ - WITHOUT APPRECIATING THAT ASSESSE HAD DISCHARGED I TS ONUS TO PROVE THE PURCHASES AS GENUINE AS PAYMENT WAS MADE THROUGH ACCOUNT PAYEE CHEQUES, PURCHASES WERE UTILIZED IN EXECUTING GOVERNMENT AND SEMI - GOVERNMENT CONTRACTS AND PURCHASES WERE DULY SUPPORTED BY INVOICES ETC AND ASSESSE HAS SHOWN REASONABLE GR OSS PROFIT AND HENCE THE ENTIRE ADDITION OF RS . 1,92,95,724 / - OUGHT TO BE DELETED. 2. WITHOUT PREJUDICE TO ABOVE, LEARNED CIT(A) FAILED TO APPRECIATE THAT ADDITION OF ALLEGED BOGUS PURCHASE TO THE EXTENT OF 12.5% OF ALLEGED BOGUS PURCHASE IS ON A VERY HIGH SIDE AND SAME MAY BE REDUCED. 3. WITHOUT PREJUDICE TO ABOVE, LEARNED CIT(A) FAILED TO APPRECIATE THAT GROSS PROFIT ALREADY OFFERED ON SALES OF ALLEGED BOGUS PURCHASES SHOULD BE SET OFF AGAINST THE ESTIMATED GROSS PROFIT OF 12.5% ON ALLEGED BOGUS PURCHASES. 4. BRIEF FACTS OF THE CASE ARE AS THAT THE ASSESSEE IS A FIRM AND IS ENGAGED IN THE BUSINESS OF CIVIL CONTRACTOR. THE AO HAD THE INFORMATION THAT SOME OF THE PARTIES FROM WHOM THE ASSESSEE HAD MADE PURCHASES WERE BOGUS AND THEY ARE ENGAGED IN THE BUSINESS OF PROVIDING BILLS WITHOUT ACTUAL DELIVERY OF GOODS. THE NAMES OF THE PARTY ARE AS UNDER: - S.NO. NAME OF SELLER AMOUNT 1 RAJ TRADERS 63,821 2 PARSHVA& CO. 3,00,331 3 JAIN TRADING CORP 14,46,336 W 4 ANMOL INDUSTRIES 2,17,565 5 MIHIR SALES PVT.LTD. 14,20,500 3 ITA NO. 6346/MUM/2017 & CO NO. 26/MUM/2019 6 K C ENTERPRISES 8,24,990 7 SHREE SARAWATI ENTERPRISES 10,16,558 8 DAKSHA ENTERPRISES 3,09,400 9 KRISH ENTERPRISES 3,27,086 10 SAMIR TRADING CORP. 4,67,468 11 R K TRADERS 5,02,762 12 VSK ENTERPRISES 16,62,709 13 SHREE ENTERPRISES 16,94,976 14 GALAXY CORPORATION 4,37,112 15 ABHILASHA SALES PVT.LTD. 20,75,466 16 SEVA ENTERPRISE 21,00,655 17 ASHLEY TRADERS PVT.LTD. 5,84,891 18 A P ENTERPRISES 23,81,873 19 SPAN ENTERPRISES 2,44,608 20 SHREE VALLABH TRADERS 2,54,654 21 SHREE VINAYAKA TRADERS 4,27,628 22 UDAY ENTERPRISES 5,04,335 TOTAL 1,92,95,724 THE ASSESSEE FAILED TO ESTABLISH THE GENUINENESS OF TRANSACTIONS DURING THE SCRUTINY PROCEEDINGS. THEREFORE, THE CLAIM OF PURCHASE AMOUNTING TO RS.1,92,95,724/ - WAS DISALLOWED BY THE AO AS BOGUS PURCHASES AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 4 ITA NO. 6346/MUM/2017 & CO NO. 26/MUM/2019 5. IN THE COURSE OF REASSESSMENT, THE ASSESSEE SUPPLIED THE INVOICES, LEDGER ACCOUNT AND BANK STATEMEN T IN SUPPORT OF PAYMENT MADE TO SUPPLIERS. HOWEVER, THE A.O. WAS NOT CONVINCED. HE NOTED THAT THE DETAILS AND EVIDENCE OF THE TRANSPORTATION OF GOODS HAVE NOT BEEN F ORWARDED. THE A.O. THEN PROCEEDED TO MAKE 100% DISALLOWANCE OF THE SAME. 6. UPON THE ASSE SSEE S APPEAL, THE LD. C IT(A) NOTED THAT THE SALES HAVE NOT BEEN DOUBTED. THAT THE ASSESSEE PRODUCED INVOICE BILLS ALONG WIT H THE DETAILS OF BANK TRANSACTIONS AND PAYMENTS HAVE BEEN MADE BY ACCOUNT PAYEE CHEQUE. REFERRING TO HONBLE GUJARAT HIGH COURT DECI SION IN THE CASE OF CIT VS. SIMIT P. SHETH (2013) 356 ITR 451(GUJ), HE OBSERVED THAT 12.5% DISALLOWANCE OF THE BOGUS IN THIS CASE SUFFICES . THEREFORE, THE LD. CIT(A) CONCLUDED AS UNDER: 5.7 THE SUPPLIERS WERE FOUND TO BE ENGAGED IN PROVIDING BOGUS BILL WITHOUT ACTUAL DEALING OF GOODS. THE APPELLANT MADE PAYMENTS FOR THESE PURCHASES BY ACCOUNT PAYEE CHEQUES DULY CLEARED THROUGH NORMAL BANKING CHANNEL; AND ARE DULY REFLECTED IN THE APPELLANTS BANK STATEMENTS. BEFORE THE A.O., THE APPELLANT PRODUCED DOCUMENTARY EVIDENCE LIKE COPIES OF INVOICES AND LEDGER ACCOUNTS OF THE VENDORS IN THE APPELLANTS BOOKS OF ACCOUNT RECORDING THESE PURCHASES TO SUBSTANTIATE THE GENUINENESS OF THESE PURCHASES. SINCE THE SALES RECEIPTS WAS NOT DOUBTED OR DISPUTED BY THE A.O. AND HE HAS ACCEPTED THE SALES RECEIPTS OF THE APPELLANT AS IT IS, THEREFORE, THE A.O. CANNOT DENY 6. IN THE RESULT, APPEAL IS PARTLY ALLOWED. 7. AGAINST THE ABOVE ORDER, THE REVENUE AND THE ASSESSEE ARE IN CROSS APPEAL BEFORE US. 8. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. WE HAVE GONE THROUGH THE PRECEDENT RELIED UPON. UP ON CAREFUL CONSIDERATION WE FIND THAT ASSESSEE HAS PROVIDED THE DOCUMENTARY EVIDENCE FOR THE PURCHASE. ADVERSE INFERENCE HAS BEEN DRAWN DUE TO THE INABILITY OF THE ASSESSEE TO PRODUCE THE TRANSPORTATION DETAILS . WE FIND THAT IN THIS CASE THE SALES HAVE NOT 5 ITA NO. 6346/MUM/2017 & CO NO. 26/MUM/2019 BEEN DOUBTED. IT IS SETTLED LAW THAT WHEN SALES ARE NOT DO UBTED, HUNDRED PERCENT DISALLOWANCE FOR BOGUS PURCHASE CANNOT BE DONE. THE RATIONALE BEING NO SALES IS POSSIBLE WITHOUT ACTUAL PURCHASES. THIS PROPOSITION IS SUPPORTED FROM HONOURABLE JURISDICTIONAL HIGH COURT DECISION IN THE CASE OF NIKUNJ EXIMP EN TERPRIS ES (IN WRIT PETITION NO 2860 ORDER DT 18.6.2014). IN THIS CASE , THE HONOURABLE HIGH COURT HAS UPHELD HUNDRED PERCENT ALLOWANCE FOR THE PURCHASES SAID TO BE BOGUS WHEN SALES ARE NOT DOUBTED. HOWEVER IN THAT CASE ALL THE SUPPLIES WERE TO THE GOVERNMENT AGENC Y. IN THE PRESENT CASE , THE FACTS OF THE CASE INDICATE THAT ASSESSEE HAS MADE PURCHASE FROM THE GREY MARKET. MAKING PURCHASES THROUGH THE GREY MARKET GIVES THE ASSESSEE SAVINGS ON ACCOUNT OF NON - PAYMENT OF TAX AND OTHERS AT THE EXPENSE OF THE EXCHEQUER. IN SUCH SITUATION , IN OUR CONSIDERED OPINION , ON THE FACTS AND CIRCUMSTANCES OF THE CASE , 12.5 % DISALLOWANCE OUT OF THE BOGUS PURCHASES MEETS THE END OF JUSTICE. HOWEVER , IN THIS REGARD THE LEARNED COUNSEL OF THE ASSESSEE HAS PRAYED THAT WHEN ONLY THE PROFI TS EARNED BY THE ASSESSEE ON THESE BOGUS PURCHASE TRANSACTION IS TO BE TAXED THE GROSS PROFIT ALREADY SHOWN BY THE ASSESSEE AND OFFERED TO TAX SHOULD BE REDUCED FROM THE STANDARD 12.5% BEING DIRECTED TO BE DISALLOWED ON ACCOUNT OF BOGUS PURCHASE. 9 . UPON CAREFUL CONSIDERATION WE FIND CONSIDERABLE COGENCY IN THE SUBMISSION OF THE LEARNED COUNSEL OF THE ASSESSEE, AS OTHERWISE IT WILL BE DOUBLE JEOPARDY TO THE ASSESSEE. MOREOVER, IT IS ALSO TO BE KEPT IN MIND THAT THE A.O. HAS NOT EVEN ISSUED A NOTICE TO THE A LLEG ED BOGUS SUPPLIERS. ACCORDINGLY , WE MODIFY THE ORDER OF LEARNED CIT - A AND DIRECT THAT THE DISALLOWANCE IN THIS CASE BE RESTRICTED TO 12.5 % OF THE BOGUS PURCHASES AS REDUCED BY THE GROSS PROFIT RATE ALREADY DECLARED BY THE ASSESSEE ON THESE TRANSACTIO NS. 6 ITA NO. 6346/MUM/2017 & CO NO. 26/MUM/2019 1 0 . IN THE RESULT THIS APPEAL FILED BY THE REVENUE IS DISMISSED AND THE ASSESSEE S CROSS OBJECTION STANDS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 2 7 . 0 2 . 2 0 1 9 S D / - S D / - ( AMARJIT SINGH ) (SHAMIM YAHYA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 2 7 . 0 2 . 2 0 1 9 ROSHANI , SR. PS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT - CONCERNED 5. DR, ITAT, MUMBAI 6. GUARD FILE BY ORDER, (DY./ASSTT. REGISTRAR) ITAT, MUMBAI