ITO ,WARD- 17 (1)(3), MUMBAI V. BOON PETROCHEM HOUSE, MUMBAI

ITA 6403/MUM/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 8030 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-01-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 06-11-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bogus purchase; Accommodation entries; Reason to believe
• Section: 133(6); 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B, BENCH MUM BAI BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBE R ITA NO.6403/MUM/2018 ( ASSESSMENT YEAR: 2011-12 ) ITO-17(1)(3) ROOM NO.135, 1 ST FLOOR, AAYKAR BHAWAN M.K.ROAD MUMBAI-400 020 VS. BOON PETROCHEM HOUSE 53/55, BHANDARI STREET MASJID BUNDER MUMBAI-400 003 PAN/GIR NO. AA AFB7130J ( APPELLANT ) .. RESPONDENT ) REVENUE BY SHRI KAILASH MANGAL, DR ASSESSEE BY NONE DATE OF HEARING 1 9 /12 /2019 DATE OF PRONOUNCEME NT 15 / 01 /20 20 / O R D E R PER G.MANJUNATHA (A.M) : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST, THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS)55, MUMBAI, DATED 21/08/2018 AND IT PERTAINS TO ASSESSMENT YEAR 2011-12. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. 'WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) WAS JUSTIFIED IN RESTRICTING THE ADDITI ON MADE BY THE AO TO 8% OF RS.30,36,314/- AGAINST THE ADDITION MADE AT 12.5 % OF THE BOGUS PURCHASES, IGNORING THAT THE NOTICES U/S.133(6) ISS UED BY THE ASSESSING OFFICER TO THE ALLEGED SUPPLIERS, WERE RETURNED UNS ERVED AND THE ASSESSEE WAS ALSO UNABLE TO PROVE THE GENUINENESS O F THE PURCHASES EITHER BY PRODUCING THE SUPPLIERS FOR EXAMINATION O R BY FURNISHING OTHER SUBSTANTIATING DOCUMENTS WHICH WERE REQUIRED BY TH E ASSESSING OFFICER ? 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN OVERLOOKING THE FACT THAT T HE ADDITION MADE BY ITA NO.6403/MUM/2018 BOON PETROCHEM HOUSE 2 THE AO WAS BASED ON THE DETAILS OF THE SCAM UNEARTH ED BY THE SALES TAX DEPARTMENT, WHEREIN IT WAS ESTABLISHED THAT THE ASS ESSEE HAS TAKEN MERE ACCOMMODATION ENTRIES / BOGUS BILLS FROM THE S UPPLIERS WITHOUT ACTUALLY MAKING PURCHASES FROM THEM ?' THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GR OUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY. (THIS CASE FALLS UNDER THE EXCEPTION 10(E) OF THE C IRCULAR NO.03/2018 DOTED 11.07.2018 AS AMENDED ON 20.08.201 8) 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF RESALE AND TRADING IN CHEMICALS, FILED ITS RETURN OF INCOME FOR AY 2011-1 2 ON 23/09/2011 DECLARING TOTAL INCOME OF RS.36,583/-. THEREAFTER, THE CASE HAS BEEN REOPENED U/S 147 OF THE ACT, ON THE BASIS OF INFORM ATION RECEIVED FROM DGIT, INVESTIGATION, MUMBAI, AS PER WHICH, SAL ES TAX AUTHORITIES OF GOVERNMENT OF MAHARASHTRA HAD TAKEN ACTIONS AGAINST NUMBER OF HAWALA DEALERS, WHO HAD ISSUED BOGUS PURC HASE BILLS TO VARIOUS PARTIES IN MUMBAI AND OTHER PLACES. AS PER LIST OF BENEFICIARIES, THE ASSESSEE IS ONE OF THE BENEFICIA RY, WHO HAD TAKEN ACCOMMODATION BILLS OF BOGUS PURCHASES FROM VARIOUS PARTIES AS LISTED BY THE AO IN PARA 2 OF HIS ASSESSMENT ORDER AMOUNTING TO RS. 38,66,298/-. THE CASE WAS SELECTED FOR SCRUTINY AND THE ASSESSMENT HAS BEEN COMPLETED U/S. 143(3).R.W.S. 147 OF THE I. T.ACT, 1961 ON 29/02/2016 AND DETERMINED TOTAL INCOME OF RS. 12,46 ,110/-, AFTER MAKING 12.50% ADDITIONS TOWARDS ALLEGED BOGUS PURCH ASE FROM THOSE PARTIES AND MADE ADDITIONS OF RS. 3,79,539/-. 4. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESEE P REFERRED AN APPEAL BEFORE THE LD.CIT(A). BEFORE THE LD.CIT(A), THE ASSESSE HAS FILED ELABORATE WRITTEN SUBMISSIONS, ON THE ISSUE, WHICH HAS BEEN REPRODUCED AT PARA 6 ON PAGES 3 TO 4 OF LD.CIT(A) O RDER. THE SUM AND SUBSTANCE OF ARGUMENTS OF THE ASSESSEE BEFORE T HE LD.CIT(A) ITA NO.6403/MUM/2018 BOON PETROCHEM HOUSE 3 ARE THAT PURCHASE FROM THE ABOVE PARTY IS GENUINE, WHICH IS SUPPORTED BY NECESSARY EVIDENCES. THEREFORE, NO ADD ITIONS COULD BE MADE ON THE BASIS OF INFORMATION RECEIVED FROM THIR D PARTY. THE LD.CIT(A), AFTER CONSIDERING RELEVANT SUBMISSION OF THE ASSESSEE AND ALSO, BY FOLLOWING THE DECISION OF HONBLE GUJA RAT HIGH COURT, IN THE CASE OF CIT VS. SIMITH P. SHETH (356 ITR 451) S CALED DOWN ADDITION MADE BY THE AO TOWARDS ALLEGED BOGUS PURCH ASES TO 8% GROSS PROFIT ON TOTAL PURCHASES FROM THOSE PARTIES. THE RELEVANT FINDINGS OF THE LD.CIT(A) ARE AS UNDER:- 7. GROUND NOS.L, 2 & 3 RELATES TO RE-OPENING OF THE ORDER AND THE ADDITION MADE TO THE TOTAL INCOME ON ACCOUNT OF BOGUS PURCHA SES MADE BY THE APPELLANT. AS THEY ARE INTERCONNECTED, THEY ARE TAK EN TOGETHER FOR ADJUDICATION, I HAVE CONSIDERED THE FACTS OF THE CA SE, AO'S ORDER AND APPELLANT'S SUBMISSION. FROM THE PERUSAL OF AO'S OR DER, IT IS SEEN THAT AN INFORMATION WAS RECEIVED IN RESPECT OF ACCOMMODATIO N ENTRIES TAKEN BY THE APPELLANT IN RESPECT OF 5 PARTIES DECLARED AS H AWALA BY THE MAHARASHTRA-. SALES..TAX DEPARTMENT TO THE TUNA OF RS. 38,66,298/-'. AS REGARDS GROUND NO,L & 2, IS CONCERNED, THE CONTENTI ONS OF THE APPELLANT CANNOT BE ACCEPTED THAT THERE WAS NO PROPER REASON ON RECORD FOR RE- OPENING OF THE CASE AS THE MODUS OPERAND! ADOPTED B Y THE PARTIES MENTIONED IN THE ORDER WHO HAVE GIVEN ACCOMMODATION ENTRIES ARE ELABORATELY DISCUSSED IN THE ORDER. AFTER HAVING GO NE THROUGH THE SAME, I FEEL THE AO HAS APPROPRIATELY RE-OPENED THE CASE AS IT IS A SETTLED LAW THAT IF THE AO HAS REASON TO BELIEVE THAT CERTAIN I NCOME HAS ESCAPED ASSESSMENT, RE-ASSESSMENT PROCEEDINGS CAN BE INITIA TED. IN THE APPELLANT'S CASE, THE AO HAD THE INFORMATION WHICH IS BASED ON THE INDEPENDENT ENQUIRIES CONDUCTED BY THE SALES TAX DE PARTMENT: ABOUT THE HAWALA DEALERS AND THEIR MODUS OPERAND! OF GIVI NG ACCOMMODATION ENTRIES. IN VIEW OF THE ABOVE, GROUND NOS.L&2 OF TH E APPELLANT IS DISMISSED. AS REGARDS GROUND NO.3 IS CONCERNED REGARDING THE A DDITION OF RS.3,79,539/- AT 12.5% OF PURCHASES OF RS 30,36,314 /- (RS.38,66,298 RS.8,29,984/-), IT IS GATHERED FROM THE AO'S ORDER THAT THE APPELLANT HAS NOT BEEN ABLE TO PROVIDE ANY CORROBORATIVE EVIDENCE TO PROVE ITS PURCHASES FROM THE AFORESAID SIX PARTIES. FURTHER, THE AO HAS TRIED TO ASCERTAIN THE GENUINENESS OF PURCHASES BY ISSUING N OTICES U/S.133(6) TO THE PARTIES BUT THEY CAME BACK UNSERVED. THIS FACT WAS BROUGHT TO THE NOTICE OF THE APPELLANT BUT THE APPELLANT EXPRESSED ITS INABILITY TO PRODUCE THE PARTIES. DURING THE COURSE OF APPELLATE PROCEED INGS, THE APPELLANT HAS NOT BROUGHT ANYTHING NEW TO PROVE ITS GENUINENESS O F THE CLAIM BEFORE ME. THE APPELLANT HAS MERELY STATED THAT THE PURCHA SES ARE GENUINE AND ALSO RELIED ON PLETHORA OF CASE LAWS. HAVING CONSID ERED THE SAME, I FEEL ITA NO.6403/MUM/2018 BOON PETROCHEM HOUSE 4 THAT ALL THE CASE LAWS RELIED BY THE APPELLANT DOES NOT APPLY TO THE APPELLANT'S CASE AS THE APPELLANT HAS FAILED TO DIS CHARGE THE ONUS OF BRINGING THE PARTIES BEFORE THE AO. IN VIEW OF THE ABOVE FACTS, I AM OF THE CONSIDERED OPINION THAT THE AO HAS APPROPRIATELY MA DE THE ADDITION BUT THE PERCENTAGE OF 12.5% APPEARS TO BE EXCESSIVE AND ACCORDINGLY, FT IS DIRECTED THAT THE PERCENTAGE MAY BE TAKEN AS B% THU S GIVING PARTIAL RELIEF TO THE APPELLANT. THE APPELLANT GETS RELIEF OF RS.1 ,36,634/-I.E (RS.3,79,539/- RS.2,42,905/- AT 8% OF RS. 30,36314/ -). THUS, GROUND NO.3 OF THE APPELLANT IS PARTLY ALLOWED. 5. NONE APPEARED FOR THE ASSESSEE. WE HAVE HEARD TH E LD. DR, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE T HROUGH ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT THE LD. AO HAS MADE ADDITION OF 12.50% PROFIT ON ALLEGED BOGUS PURCHASES ON THE GRO UND THAT THE ASSESSEE IS ONE OF THE BENEFICIARY OF ACCOMMODATION ENTRIES OF BOGUS PURCHASE BILLS ISSUED BY HAWALA DEALERS. ACCO RDING TO THE LD. AO, ALTHOUGH ASSESEE HAS FILED CERTAIN BASIC EVIDEN CES, BUT FAILED TO FILE FURTHER EVIDENCE IN THE BACKDROP OF CLEAR FIND ING BY THE SALES TAX DEPARTMENT, MAHARASHTRA THAT THOSE PARTIES ARE INVO LVED IN PROVIDING ACCOMMODATION ENTRIES WITHOUT ACTUAL DELIVERY OF GO ODS. THE LD. AO HAD ALSO TAKEN SUPPORT FROM THE INVESTIGATION CONDU CTED DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AS PER WHICH NOTI CE ISSUED U/S 133(6) TO THE PARTIES WERE RETURNED UN-SERVED BY TH E POSTAL AUTHORITIES. THEREFORE, HE CAME TO THE CONCLUSION T HAT PURCHASES FROM THE SAID PARTIES ARE BOGUS IN NATURE. IT IS TH E CONTENTIONS OF THE ASSESSEE BEFORE THE LOWER AUTHORITIES THAT PURCHASE S FROM THE ABOVE PARTY ARE SUPPORTED BY NECESSARY EVIDENCES. IT HAS FURNISHED ALL POSSIBLE EVIDENCES, INCLUDING BOOKS OF ACCOUNTS; ST OCK DETAILS AND BANK STATEMENT TO PROVE THAT PAYMENT AGAINST SAID P URCHASES HAVE BEEN MADE THROUGH PROPER BANKING CHANNELS. 6 HAVING CONSIDERED ARGUMENTS OF THE LD. DR AND ALS O, MATERIAL AVAILABLE ON RECORD, WE FIND THAT BOTH THE SIDES HA VE FAILED TO PROVE ITA NO.6403/MUM/2018 BOON PETROCHEM HOUSE 5 THE CASE IN THEIR FAVOUR WITH NECESSARY EVIDENCES. ALTHOUGH, ASSESSEE HAS FILED CERTAIN BASIC EVIDENCES, BUT FAI LED TO FILE FURTHER EVIDENCES TO CONCLUSIVELY PROVE PURCHASES TO THE SA TISFACTIONS OF THE LD.AO. AT THE SAME TIME, THE LD. AO HAD ALSO FAILE D TO TAKE THE INVESTIGATION TO A LOGICAL CONCLUSION BY CARRYING O UT NECESSARY ENQUIRES, BUT HE SOLELY RELIED UPON INFORMATION RE CEIVED FROM INVESTIGATION WING, WHICH WAS FURTHER SUPPORTED BY INFORMATION RECEIVED FROM MAHARASHTRA SALES TAX DEPARTMENT. UN DER THESE CIRCUMSTANCES, IT IS DIFFICULT TO ACCEPT ARGUMENTS OF BOTH THE SIDES. FURTHER, IN A CASE WHERE PURCHASES ARE CONSIDERED T O BE PURCHASED FROM SUSPICIOUS/HAWALA DEALERS, VARIOUS HIGH COURTS AND TRIBUNALS HAD CONSIDERED AN IDENTICAL ISSUE IN LIGHT OF INVES TIGATION CARRIED OUT BY THE SALES TAX DEPARTMENT AND HELD THAT IN CASE O F PURCHASES CLAIMS TO HAVE MADE FROM ALLEGED HAWALA DEALERS, ON LY PROFIT ELEMENT EMBEDDED IN THOSE PURCHASES NEEDS TO BE TAX ED, BUT NOT TOTAL PURCHASE FROM THOSE PARTIES. THE HONBLE GUJA RAT HIGH COURT, IN THE CASE OF CIT VS SIMITH P.SHETH 356 ITR 451 HAD C ONSIDERED A SIMILAR ISSUE AND HELD THAT AT THE TIME OF ESTIMATI ON OF PROFIT FROM ALLEGED BOGUS PURCHASES NO UNIFORM YARDSTICKS COULD BE ADOPTED, BUT IT DEPENDS UPON FACTS OF EACH CASE. THE ITAT, M UMBAI, IN NUMBER OF CASES HAD CONSIDERED AN IDENTICAL ISSUE A ND DEPENDING UPON FACTS OF EACH CASE, DIRECTED THE LD.AO TO ESTI MATE GROSS PROFIT OF 10% TO 15% ON TOTAL ALLEGED BOGUS PURCHASES. IN THIS CASE, CONSIDERING THE NATURE OF BUSINESS OF THE ASSESSEE THE LD. AO HAS MADE 12.50% PROFIT ADDITIONS, WHEREAS THE LD.CIT(A) HAS SCALED DOWN ADDITION TO 8% GROSS PROFIT ON TOTAL ALLEGED B OGUS PURCHASE. ALTHOUGH, BOTH AUTHORITIES HAVE TAKEN DIFFERENT RAT E OF PROFIT FOR ESTIMATION OF INCOME FROM ALLEGED BOGUS PURCHASE, B UT NO ONE COULD SUPPORT SAID RATE OF GROSS PROFIT WITH NECESSARY EV IDENCES OR ANY ITA NO.6403/MUM/2018 BOON PETROCHEM HOUSE 6 COMPARABLE CASES. THEREFORE, CONSIDERING FACTS AND CIRCUMSTANCES OF THIS CASE AND CONSISTENT WITH VIEW TAKEN BY THE CO-ORDINATE BENCH IN NUMBER OF CASES, WE ARE OF THE CONSIDERED OPINIO N THAT THE LD. CIT(A) HAS TAKEN ONE OF THE POSSIBLE METHOD AND EST IMATED 8% GROSS PROFIT ON ALLEGED BOGUS PURCHASES TO SETTLE DISPUTE BETWEEN THE PARTIES AND HENCE, WE ARE INCLINED TO UPHOLD OR DER OF THE LD. CIT(A) AND DISMISS APPEAL FILED BY THE REVENUE.. 7. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DI SMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 15 /01/2 020 SD/- (MAHAVIR SINGH) SD/- (G. MANJUNATHA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 15 /01/2020 THIRUMALESH SR.PS 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//