ACIT CIR. 1, KALYAN, KALYAN V. THAKOR ELECTRONIC LTD., BHIWANDI

ITA 6427/MUM/2016

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 7281 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-05-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2009-2010
• Appeal Filed On: 02-11-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bogus purchase; Accommodation entries
• Section: 133(6); 147; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA, AM AND SHRI RAM LAL NEGI, JM ./ I.T.A. NO. 6427/MUM/2016 ( / ASSESSMENT YEAR: 2009 - 10 ) ASST. CIT, CIRC LE - 1, 1 ST FLOOR, MOHAN PLAZA, WAYALE NAGAR, KALYAN (W) - 421 301 / VS. M/S. THAKOR ELECTRONICS LTD. PLOT NO. P - 1, P - 3, 1 ST FLOOR, SHREE RAJLAXMI HI - TECH TEXTILE PARK, BHIWANDI, NASHIK BYPASS ROAD, SONALE, BHIWANDI - 421 302 ./ ./ PA N/GIR NO. AABCT 4323 M ( REVENUE ) : ( ASSESSEE) ./ I.T.A. NO S . 6484 & 6485/MUM/2016 ( / ASSESSMENT YEAR S : 2009 - 10 & 2010 - 11 ) M/S. THAKOR ELECTRONICS LTD. PLOT NO. P - 1, P - 3, 1 ST FLOOR, SHREE RAJLAXMI HI - TECH TEXTILE PARK, B HIWANDI, NASHIK BYPASS ROAD, SONALE, BHIWANDI - 421 302 / VS. ASST. CIT, CIRCLE - 1, 1 ST FLOOR, MOHAN PLAZA, WAYALE NAGAR, KALYAN (W) - 421 301 ./ ./ PAN/GIR NO. AABCT 4323 M ( ASSESSEE) : ( REVENUE ) REVENUE BY : SHRI V. JUS TIN ASSESSEE BY : SHRI TANJIL PADVEKAR / DATE OF HEARING : 23.04.2018 / DATE OF PRONOUNCEMENT : 02.05 .2018 / O R D E R PER BENCH : TH ESE ARE CROSS APPEALS BY THE ASSESSEE AND REVENUE FOR ASSESSMENT YEARS 2009 - 10 AND APPEAL BY THE ASSESSEE FOR ASSESSMENT YEAR 2010 - 11, ARISING OUT OF THE 2 ITA NO S . 6427, 6484 & 6485/MUM/2016 M/S. THAKOR ELECTRONICS LTD. COMMON ORDER OF THE LD. COMMISSIONER OF INCOME TAX (AP PEALS) FOR TH E S E ASSESSMENT YEAR S DATED 26.08.2016. IN ASSESSEES APPEAL : 2. THE FIRST COMMON ISSUE RAISED IN THE ASSESSEE S APPEAL RELATES TO VALIDITY OF REOPENING U/S. 147 OF THE ACT. AT THE OUTSET, THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT HE SHALL NOT BE PRESSING FOR THIS GROUND, HENCE, GROUND RELATING TO THE VALIDITY OF REOPENING IS DISMISSED AS NOT PRESSED. 3. THE SECOND COMMON ISSUE RAISED RELATES TO SUSTENANCE OF ADDITION OUT OF THE ALLEGED BOGUS PURCHASES BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS). 4. IN REVENUES APPEAL, THE ISSUE RAISED IS THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN REDUCI NG THE ADDITION MADE BY THE ASSESSING OFFICER. 5. BRIEF FACTS OF THE CASE ARE AS UNDER: I N THIS CASE, THE ASSESSING OFFICER HAD RECEIVED INFORMATION FROM THE SALES TAX DEPARTMENT THAT THE ASSESSEE HAD AFFECTED PURCHASES FROM CERTAIN PARTIES, WHO HAVE BE EN DECLARED AS SUSPICIOUS. THESE PARTIES, IN THEIR STATEMENTS/ON THE BASIS OF SPORT VERIFICATION/SURVEY ACTION, DULY ADMITTED THE FACT THAT THEY HAVE NOT ACTUALLY DELIVERED ANY GOODS BUT HAVE MERELY PROVIDED THE BILLS AND REFUNDED BACK CASH TO THE BUYERS, AFTER DEDUCTING THEIR NOMINAL COMMISSIO N. THE DETAILS OF SUCH PARTIES WERE AS UNDER: 3 ITA NO S . 6427, 6484 & 6485/MUM/2016 M/S. THAKOR ELECTRONICS LTD. S. NO. NAME OF THE ENTRY PROVIDER AMOUNT OF B ILL (A. Y .2009 - 10) AMOUNT OF B ILL (A. Y .2010 - 11 ) 1 V M UDYOG 1390478 2 BAHIJI TRADING 293970 - 3 SHEELAL KNTCIPRISES 7157 03 - 4 PAYAL ENTERPRISES 5 1173 8 5 G K TRA DELINK 1316178 288 688 6 M R CORPORATION 482027 - 7 MARSHAL E NTERPRISES 326040 - 8 MAHAVIR ENTERPRISES 205148 - 9 SUN ENTERP RISES 456186 184704 10 SOMNATH IN TERNAT IONAL 775258 566514 11 SHRADHHA TRADING CO 5 07109 -- 12 AMI TRADERS 4 74048 393640 13 ANKUR SALES CORPORATION 225482 14 SAMBHAV SALES CORPORA TION 85050 15 ADINAIH TRADING CO . 1 42178 16 SAI ENTERPRISES 1 1 19990 17 PRAYOSHA TRADING CO _ 145782 18 BHUMI SALES CORPORATION 821 449 TOTAL RS. 7 7,73,415 RS. 36,62,945 IN VIEW OF THE ABOVE FACTS, THE ASSESSING OFFICER AFTER RECORDING NECESSARY REASONS/SATISFACTION FOR REOPENING, AS PER PROVISIONS OF SEC 147 OF THE 1 T ACT, 1961, HAD ISSUED NOTICES U/S 148, WHICH WERE DULY SERVED UPON ASSESSE E. 6. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTICED THAT THE PURCHASES FROM ABOVE REFERRED HAWALA PARTIES WERE NOT SUPPORTED BY CREDIBLE DOCU MENTARY EVIDENCE SUCH AS TRANSPORTATION BILLS, DELIVERY CHALLANS , GOODS RECEIPT NOTE, OTHER RECEIPTS, ET C. IN 4 ITA NO S . 6427, 6484 & 6485/MUM/2016 M/S. THAKOR ELECTRONICS LTD. COMPLIANCE, THE APPELLANT COULD NOT FURNISH CREDIBLE DOCUMENTARY EVIDENCES TO SU BSTANTIATE THE ABOVE PURCHASES AS WELL AS THE QUANTITATIVE DETAILS OF RAW MATERIAL VIS - A - VIS THE FINISHED GOODS TO ESTABLISH THE GENUINENESS OF THE ABOVE PURCHASES. T HE ASSESSEE HOWEVER, CONTENDED T HAT HE WA S ENGAGED IN THE BUSINESS OF MANUFACTURING AND SALE OF ELECTRIC RESISTANCE, AND THE RAW MATERIAL PURCHASED FROM THESE PARTIES WAS USED IN THE MANUFACTURING O F GOODS. IN ORDER T O VERILY THE GENUINENESS OF PURCHASES, THE ASSESSING OFFICER ISSUED LETTERS U/S 133(6) OF THE ACT TO ALL THE ABOVE REFERRED PARTIES, HOWEVER, THE NOTICES WERE RETURNED UN - SERVED, WITHOUT BEING SER V ED. THESE PARTIES HAD ADMITTED BEFORE THE GOVERNMENT AUTHORITIES (S. T DEPARTMENT), THA T T HEY WERE IS SUING BILLS, WITHOUT EFFECTING SALES OR PURCHASES, NOR GIVEN / T AKEN PHYSICAL DELIVERY OF GOODS. THE ASSESSING OFFICER OBSERVED THAT S INCE THE ASSESSEE FAILED TO FURNISH THE CONFIRMED COPIES OF LEDGER ACCOUNT, CURRENT MAILING ADDRESSES, CONF IRMATION FROM T HE SAID PARTIES, ETC. THEREFORE, T HE GENUINENESS OF THE PURCHASES COULD NOT BE VERIFIED. IN VIEW OF THE ABOVE FACTS, THE ASSESSING OFFICER CONCLUDED THAT THE ASSESSEE HAD INFLATED ITS EXPENSES BY BOOKING BOGUS PURCHASES, THEREFORE, THE ENTIRE PURCHASES OF RS . 77 , 73 , 415/ - AND R S. 3 6,62,945/ - , FROM THESE PARTIES, WERE ADDED BACK TO THE INCOME OF T H E ASSESSEE IN A Y S 2009 - 10 AND 2010 - 11, RESPECTIVELY. 7. AGAINST THE ABOVE ORDER, THE ASSESSEE APPEALED BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEALS). 5 ITA NO S . 6427, 6484 & 6485/MUM/2016 M/S. THAKOR ELECTRONICS LTD. 8. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) PRINCIPALLY UPHELD THE ACTION OF THE ASSESSING OFFICER. FOR ASSESSMENT YEAR 2009 - 10, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HELD THAT THE DISALLOWANCE OF 25% OUT OF HAWALA PURCHASES SHOULD BE DONE. FOR THE ASSESSMENT YEAR 2010 - 11, HE CONFIRMED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. 9. AGAINST THE ABOVE ORDER, FOR ASSESSMENT YEAR 2009 - 10, THE ASSESSEE AND THE REVENUE ARE IN CROSS APPEAL AND FOR ASSESSMENT YEAR 2010 - 11, THE ASSESSEE IS IN APPEAL BEF ORE US . 10. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. AS REGARDS MERITS OF ADDITION, WE FIND THAT CREDIBLE AND COGENT INFORMATION WAS RECEIVED IN THIS CASE BY THE ASSESSING OFFICER THAT CERTAIN ACCOMMODATION ENTRY PROVIDER/BOGUS SUPPLIERS WE RE BEING USED BY CERTAIN PARTIES TO OBTAINED BOGUS BILLS, ASSESSEE WAS FOUND TO HAVE TAKEN ACCOMMODATION ENTRY/BOGUS PURCHASE BILLS DURING THE CONCERNED ASSESSMENT YEAR FROM DIFFERENT PARTIES. BASED UPON THIS INFORM ATION ASSESSMENT WAS REOPENED. THE C REDIB ILITY OF INFORMATION RELATING TO REOPENING REMAINS UN AS SAILED . FURTHERMORE IT IS NOTED THAT IN SUCH FACTUAL SCENARIO ASSESSING OFFICER H AS MADE THE NECESSARY ENQUIRY. THE ISSUE OF NOTICE TO ALL THE PARTIES HAVE RETURNED UNSERVED. ASSESSEE HAS NOT BEEN A BLE TO PROVIDE ANY CONFIRMATION FROM ANY OF THE PARTY. ASSESSEE HAS ALSO NOT BEEN ABLE TO PRODUCE ANY OF THE PARTIES. THE NECESSARY EVIDENCE FOR TRANSPORTATION OF GOODS HAVE NOT BEEN PROVIDED BY THE ASSESSEE. IN THIS FACTUAL SCENARIO IT IS AMPLY THAT ASS ESSEE HAS OBTAINED BOGUS PURCHASE BILLS. MERE PREPARATION OF DOCUMENTS FOR PURCHASES CANNOT CONTROVERT 6 ITA NO S . 6427, 6484 & 6485/MUM/2016 M/S. THAKOR ELECTRONICS LTD. OVERWHELMING EVIDENCE THAT THE PROVIDER OF THESE BILLS IS BOGUS AND NON - EXISTENT AND THERE IS NO COGENT EVIDENCE OF TRANSPORTATION OF GOODS. THE SALES TA X DEPARTMENT IN ITS ENQUIRY HAS FOUND THE PARTIES TO BE PROVIDING BOGUS ACCOMMODATION ENTRIES. THE ASSESSING OFFICER ALSO ISSUED NOTICES TO THESE PARTIES AT THE ADDRESSES PROVIDED BY THE ASSESSEE. ALL THESE NOTICES HAVE RETURNED UNSERVED. ASSESSEE HAS NOT BEEN ABLE TO PRODUCE ANY OF THE PARTIES. THE ASSESSING OFFICER HAS NOTED THAT THERE IS NO COGENT EVIDENCE OF THE PROVISION OF GOODS. NEITHER THE ASSESSEE HAS BEEN ABLE TO PRODUCE ANY CONFIRMATION FROM THESE PARTIES. IN SUCH CIRCUMSTANCES, THERE IS NO DOUBT THAT THESE PARTIES ARE NON - EXISTENT. 11. HENCE PURCHASE BILLS FROM THESE NON - EXISTENT THE/BOGUS PARTIES CANNOT BE TAKEN AS COGENT EVIDENCE OF PURCHASES, IN LIGHT OF THE OVERWHELMING EVIDENCE THE REVENUE AUTHORITIES CANNOT PUT UPON BLINKERS AND ACCEPT THE SE PURCHASES AS GENUINE. THIS PROPOSITION IS DULY SUPPORTED BY HONBLE APEX COURT DECISION IN THE CASE OF SUMATI DAYAL 214 ITR 801 AND DURGA PRASAD MORE 82 ITR 540. IN THE PRESENT CASE THE ASSESSEE WANTS THAT THE UNASSAILABLE FACT THAT THE SUPPLIERS ARE N ON - EXISTENT AND THUS BOGUS SHOULD BE IGNORED AND ONLY THE DOCUMENTS BEING PRODUCED SHOULD BE CONSIDERED. THIS PROPOSITION IS TOTALLY UNSUSTAINABLE IN LIGHT OF ABOVE APEX COURT DECISIONS. 12. IN THESE CIRCUMSTANCES LEARNED DEPARTMENTAL REPRESENTATIVE HAS R EFERRED TO HONBLE GUJARAT HIGH COURT DECISION IN THE CASE OF APEX APPEAL NO. 240 OF 2003 IN THE CASE OF N K INDUSTRIES VS DY CIT, ORDER DATED 20.06.2016, WHEREIN HUNDRED PERCENT OF THE BOGUS PURCHASES WAS HELD TO BE ADDED IN THE HANDS OF THE ASSESSEE AN D TRIBUNALS RESTRICTION OF THE ADDITION TO 25% OF THE BOGUS PURCHASES WAS SET ASIDE. IT WAS EXPOUNDED THAT WHEN 7 ITA NO S . 6427, 6484 & 6485/MUM/2016 M/S. THAKOR ELECTRONICS LTD. PURCHASE BILLS HAVE BEEN FOUND TO BE BOGUS 100% DISALLOWANCE WAS REQUIRED. THE SPECIAL LEAVE PETITION AGAINST THIS ORDER ALONG WITH OTHERS HAS B EEN DISMISSED BY THE HONBLE APEX COURT VIDE ORDER DATED 16.1.2017. 13. WE FURTHER NOTE THAT HONBLE RAJASTHAN HIGH COURT HAS SIMILARLY TAKEN NOTE OF DECISIONS OF THE APEX COURT ON THE ISSUE OF BOGUS PURCHASES IN THE CASE OF CIT JAIPUR VS SHRUTI GEMS IN I TA NO. 658 OF 2009. THE HONBLE HIGH COURT HAS REFERRED TO THE DECISION OF CIT JAIPUR VS. ADITYA GEMS, D. B. IN ITA NO. 234 OF 2008 DATED 02.11.2016, WHEREIN THE HONBLE COURT HAD INTER ALIA HELD AS UNDER: 'CONSIDERING THE LAW DECLARED BY THE SUPREME COU RT IN THE CASE OF VIJAY PROTEINS LTD. VS. COMMISSIONER OF INCOME TAX, SPECIAL LEAVE TO APPEAL (C) NO.8956/2015 DECIDED ON 06.04.2015 WHEREBY THE SUPREME COURT HAS DISMISSED THE SLP CONFIRMED THE ORDER DATED 09.12.2014 PASSED BY THE GUJARAT HIGH COURT AND O THER DECISIONS OF THE HIGH COURT OF GUJARAT IN THE CASE OF SANJAY OILCAKE INDUSTRIES VS. COMMISSIONER OF INCOME TAX (2009) 316 ITR 274 (GUJ) AND N.K. INDUSTRIES LTD. VS. DY. C.I.T., TAX APPEAL NO.240/2003 DECIDED ON 20.06.2016, THE PARTIES ARE BOUND BY THE PRINCIPLE OF LAW PRONOUNCED IN THE AFORESAID THREE JUDGMENTS. 14. UPON CAREFUL CONSIDERATION WE FIND THAT SALES IN THESE CASES ARE NOT DOUBTED. WHEN SALES ARE NOT DOUBTED, 100% DISALLOWANCE FOR BOGUS PURCHASE IS NOT SUSTAINABLE AS PER THE DECISION OF T HE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF NIKUNJ EXIMP ENTERPRISES (IN WRIT PETITION NO 2860, ORDER DT. 18.6.2014). HOWEVER, THE FACTS OF THAT CASE WERE DIFFERENT INASMUCH AS SALES WERE TO THE GOVERNMENT DEPARTMENT. HOWEVER THE FACTS AND CIRCUMST ANCES OF THE PRESENT CASE INDICATE THAT ASSESSEE HAS ENGAGED INTO DEALINGS IN THE GREY MARKET. DEALINGS IN THE GREY MARKET GIVE THE ASSESSEE VARIOUS SAVINGS AT THE EXPENSE OF THE EXCHEQUER. HENCE, ON THE OVERALL CONSIDERATION OF FACTS AND CIRCUMSTANCES AND 8 ITA NO S . 6427, 6484 & 6485/MUM/2016 M/S. THAKOR ELECTRONICS LTD. FOLLOWING THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS SIMIT P. SHETH [2013] 356 ITR 451 (GUJ.) WE HOLD THAT A DISALLOWANCE OF 12.5% OF THE BOGUS PURCHASE WOULD MEET THE END OF JUSTICE. ACCORDINGLY, WE MODIFY THE ORDER'S OF AUTHORITIES BELOW AND DIRECT THAT THE DISALLOWANCE IN THIS CASE SHOULD BE RESTRICTED TO 12.5% OF THE BOGUS PURCHASE. THE LD. COUNSEL OF THE ASSESSEE FAIRLY AGREED TO THE ABOVE PROPOSITION. 15. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STAND S PARTLY ALLOWED AND THE APPEAL S FILED BY THE REVENUE STANDS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON 02.05.2018 SD/ - S D/ - ( RAM LAL NEGI ) (S HAMIM YAHYA) / J UDICIAL MEMBER / A CCOUNTANT MEMBER MUMBAI ; DATED : 02.05.2018 . . ./ 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 F ILE / B Y ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI