ITO 29 (2)(4), MUMBAI V. NAVIN JAIDHAND DOSHI, MUMBAI

ITA 6418/MUM/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 8031 (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: 2009-2010
• Appeal Filed On: 06-11-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bogus purchase; Accommodation entries
• Section: 69C; 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.6418/MUM/2018 ( ASSESSMENT YEAR: 2009-10 ) ITO-29(2)(4) BUILDING NO. C-10 2 ND FLOOR, ROOM NO.205, PRATYAKSHAKAR BHAWAN BKC , BANDRA(EAST) MUMBAI-400 051 VS. SHRI. NAVIN JAICHAND DOSHI D-705, KALP NAGRI BALRAJESHWAR ROAD MULUND WEST MUMBAI-400 080 PAN/GIR NO. A DDPD0288P ( APPELLAN T ) .. RESPONDENT ) REVENUE BY SHRI KAILASH MANGAL, DR ASSESSEE BY NONE DATE OF HEARING 19/12/2019 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)40, MUMBAI, DATED 25/07/2018 AND IT PERTAINS TO ASSESSMENT YEAR 2009-10. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E LD.CIT(A) HAS ERRED IN RESTRICTING THE ADDITION OF RS.4,26,84,231/- BEI NG 100% TO RS.53,35,529/- BEING 12.5% OF THE AFORESAID BOGUS P URCHASES FROM HAWALA PARTIES IGNORING THE FACT THAT THE ASSESSEE HAD FAILED TO PRODUCE THE PARTIES. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) HAS ERRED IN RESTRICTING THE ADDITION OF RS.4,26,84,231/- BEI NG 100% TO RS.53,35,529/- BEING 12.5% OF AFORESAID BOGUS PURCH ASES IN VIEW OF THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F N.K.PROTEINS LTD., WHEREIN THE APEX COURT HAS DISMISSED THE SLP FILED AGAINST THE HIGH ITA NO.6418/MUM/2018 NAVIN JAICHAND DOSHI 2 COURT DECISION OF UPHOLDING THE 100% ADDITION MADE BY THE AO ON ACCOUNT OF BOGUS PURCHASES. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS ENGAGED IN THE BUSINESS OF WHOLESALER IN IRON AND STEEL, FILED HIS RETURN OF INCOME FOR AY 2009-10 ON 25/09/2009, DECLARING TOTA L INCOME OF RS.3,41,030/-. THEREAFTER, THE CASE HAS BEEN REOPEN ED U/S 147 OF THE ACT, ON THE BASIS OF INFORMATION RECEIVED FROM DGIT, INVESTIGATION, MUMBAI, AS PER WHICH, SALES TAX AUTH ORITIES OF GOVERNMENT OF MAHARASHTRA HAD TAKEN ACTIONS AGAINST NUMBER OF HAWALA DEALERS, WHO HAD ISSUED BOGUS PURCHASE BILLS TO VARIOUS PARTIES IN MUMBAI AND OTHER PLACES. AS PER LIST OF BENEFICIARIES, THE ASSESSEE IS ONE OF THE BENEFICIARY, WHO HAD TAKEN A CCOMMODATION BILLS OF BOGUS PURCHASES FROM VARIOUS PARTIES AS LI STED BY THE AO IN PARA 5.1 OF HIS ASSESSMENT ORDER AMOUNTING TO RS. 4 ,26,84,231/-. THE CASE WAS SELECTED FOR SCRUTINY AND THE ASSESSME NT HAS BEEN COMPLETED U/S. 143(3).R.W.S. 147 OF THE I.T.ACT, 19 61 ON 27/03/2014 AND DETERMINED TOTAL INCOME OF RS. 4,36,07,456/-, A FTER MAKING 100% ADDITIONS TOWARDS ALLEGED BOGUS PURCHASE FROM THOSE PARTIES AND MADE ADDITIONS OF RS. 4,26,84,231/-. 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 4 ON PAGES 2 TO 3 OF LD.CIT(A) O RDER. THE SUM AND SUBSTANCE OF ARGUMENTS OF THE ASSESSEE BEFORE T HE LD.CIT(A) 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 ITA NO.6418/MUM/2018 NAVIN JAICHAND DOSHI 3 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 12.5% GROSS PROFIT ON TOTAL PURCHASES FROM THOSE PARTIES. THE RELEVANT FINDINGS OF THE LD.CIT(A) ARE AS UNDER:- SINCE THE FACTS OF THE ASSESSEES CASE ARE SIMILAR RESPECTFULLY FOLLOWING THE DECISIONS, THE AO IS DIRECTED TO TAX 12.5% OF S UCH PURCHASES TOWARD* ELEMENT OF PROFIT EMBEDDED IN SUCH PURCHASES FROM T HE HAWALA PARTIES. I AM NOT IN AGREEMENT WITH THE ACTION OF THE AO IN T AXING ENTIRE AMOUNT OF HAWALA PURCHASES U/S. 69C OF THE I.T. ACT BECAUSE T HE AO HAS NOT BROUGHT ANYTHING ON RECORD TO SHOW THAT PURCHASES FROM GREY MARKET WERE MADE OUT OF UNDISCLOSED FUNDS AND PAYMENTS MAD E BY THE APPELLANT TO THE HAWALA DEALERS WERE NOT AVAILABLE FOR MAKING PURCHASES FROM GREY MARKET. SECONDLY, THERE LA NO EXACT QUANT IFICATION OF PURCHASES MADE FROM GREY MARKET WHICH BAA BEEN TAKEN BY THE A O EQUAL TO THE AMOUNT OF HAWALA BILL. I AM OF THE OPINION THAT IN ABSENCE OF ANY EVIDENCE THAT GREY MARKET PURCHASES WERE MADE OUT OF UNDISC LOSED SOURCES. IT WILL BE JUSTIFIED TO PRESUME THAT PAYMENTS MADE FOR HAWA LA PURCHASES WERE AVAILABLE FOR PURCHASES FROM GREY MARKET AND THE B EST COURSE OF ACTION WOULD BE ESTIMATION OF ADDITIONAL PROFIT FROM HAWAL A PURCHASES, AS HAS BEEN HELD IN THE DECISIONS QUOTED ABOVE. SIMILARLY, THERE NO COGENT REASON FOR PRESUMING THAT THE APPELLANT HAD UNDISCL OSED STOCK OF GOODS EQUAL TO BOGUS PURCHASES MADE BY HIM. IN ABSENCE OF COGENT REASONS, SUCH A PRESUMPTION WILL NOT STAND THE TEST OF PREPO NDERANCE OF PROBABILITY. THUS, ESTIMATION OF ELEMENT OF PROFIT EMBEDDED IN SUCH PURCHASES FROM THE HAWALA PARTIES WILL BE THE BEST COURSE OF ACTION AND THE AO IF DIRECTED TO TAX 12.5% OF SUCH PURCHASES TOWARDS ELEMENT OF PROFIT EMBEDDED IN PURCHASES FROM THE HAWALA PARTIE S. ACCORDINGLY, FIRST GROUND OF APPEAL IS PARTLY ALL OWED. 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 100% ADDITIONS TOWARDS ALLEGED BOGUS PURCHASES ON THE GR OUND 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 ITA NO.6418/MUM/2018 NAVIN JAICHAND DOSHI 4 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 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 ITA NO.6418/MUM/2018 NAVIN JAICHAND DOSHI 5 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 100% ADDITIONS, WHEREAS THE LD.CIT(A) HAS SCAL ED DOWN ADDITION TO 12.5% GROSS PROFIT ON TOTAL ALLEGED BOG US 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 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 12.5% 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/ 2020 ITA NO.6418/MUM/2018 NAVIN JAICHAND DOSHI 6 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//