ITO 27 (1)(5), MUMBAI V. JIGNESH R. KAPASI, MUMBAI

ITA 6430/MUM/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 3526 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-02-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2009-2010
• Appeal Filed On: 06-11-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRS SAMATHA MULLAMUDI
• Assessee Lawyers: TANNA
• Keywords: Bogus purchase; Tangible material; Onus to prove
• Section: 143(3); 133(6); 143(2); 139(1); 147; 148

Judgement Text

1 IN THE INCOME-TAX APPELLATE TRIBUNAL F BENCH MUMB AI BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO. 6430/MUM/2018 (ASSESSMENT YEAR 2009-10 ) ITO 27(1)(5), ROOM NO. 410, 4 TH FLOOR, TOWER NO.6, VASHI RAILWAY STATION COMPLEX, VASHI, NAVI MUMBAI-400703. VS. SHRI JIGNESH R. KAPASI, 1, HANSA APARTMENT, 126/127, GARODIA NAGAR, GHATKOPAR (E), MUMBAI-400077. PAN: AABPK2503R APPELLANT RESPONDE NT APPELLANT BY : MRS. SAMATHA MULLAMUDI (DR) RESPONDENT BY : SHRI M.R. TANNA (AR) DATE OF HEARING : 19.02.2020 DATE OF PRONOUNCEMEN T : 19.02.2020 ORDER UNDER SECTION 254(1)OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER; 1. THIS APPEAL BY REVENUE UNDER SECTION 253 OF INCOME- TAX ACT (ACT) IS DIRECTED AGAINST THE ORDER OF LD. COMMISSIONER OF I NCOME-TAX (APPEALS)- 26, MUMBAI [HEREINAFTER REFERRED AS LD. CIT(A)] DAT ED 16.08.2018 FOR ASSESSMENT YEAR 2009-10. THE ASSESSEE HAS RAISED TH E FOLLOWING GROUNDS OF APPEAL: 1) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS. 1, 84,367/- ON ACCOUNT OF BOGUS PURCHASES WITHOUT APPRECIATING THA T THE ONUS WAS ON THE ASSESSEE TO ESTABLISH THE GENUINENESS OF SUC H PURCHASES BY PROVIDING DOCUMENTARY EVIDENCE BEFORE THE ASSESSING OFFICER AND THE ASSESSEE, FAILED TO DISCHARGE ITS ONUS? 2) THE APPELLANT PRAYS THAT THE ORDER OF CIT(A) ON THE ABOVE GROUNDS BE REVERSED AND THAT OF THE ASSESSING OFFICER RESTO RED. ITA NO. 6430 MUM 2018-SHRI JIGNESH R. KAPASI 2 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PROPRIETOR OF M/S FEAR DEAL CORPORATION ENGAGED IN THE BUSINESS OF TRADING IN HARDWARE, FILED HIS RETURN OF INCOME ON 18.08.2009 DECLARING TOTAL INCOME OF RS. 5,02,017/- FOR ASSESSMENT YEAR 2009-10. THE RETURN OF INCOME WAS PROCESSED UNDER SECTION 143(1). THE ASSESSMENT WAS RE-OPENED UNDER SECTION 147 ON THE BASIS OF INFORMATION RECEIVED FR OM SALE TAX DEPARTMENT, GOVERNMENT OF MAHARASHTRA THAT CERTAIN HAWALA OPERATORS ARE INDULGING IN PROVIDING ACCOMMODATION BILLS WITH OUT ACTUAL DELIVERY OF GOODS. THE SALE TAX DEPARTMENT, GOVERNMENT OF MA HARASHTRA REFERRED THE LIST OF SUCH HAWALA DEALERS AND THE BE NEFICIARY TO THE DGIT (INVESTIGATION), MUMBAI. THE NAME OF ASSESSEE APPEA RED IN THE LIST OF BENEFICIARY. THE ASSESSEE ALLEGEDLY MADE THE PURCHA SES OF RS. 67,37,966/- FROM SUCH HAWALA DEALERS. ON THE BASIS OF INFORMATION, THE ASSESSING OFFICER MADE A BELIEF THAT THE INCOME OF THE ASSESSEE ESCAPED ASSESSMENT, THEREFORE, RE-OPENED THE ASSESSMENT UND ER SECTION 147. NOTICE UNDER SECTION 148 WAS ISSUED ON 30.03.2014 T O THE ASSESSEE. THE ASSESSEE IN RESPONSE TO THE NOTICE UNDER SECTION 14 8 FILED ITS REPLY DATED 19.08.2014 AND STATED THAT ORIGINAL RETURN FILED ON 28.08.2009 UNDER SECTION 139(1) BY ASSESSEE BE TREATED AS RETURN IN RESPONSE TO THE SAID NOTICE. THE ASSESSING OFFICER AFTER SERVING NOTICE UNDER SECTION 143(2) PROCEEDED FOR RE-ASSESSMENT. DURING THE ASSESSMENT, THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS SHOWN PURCHASES FROM THE FOLLOWING ITA NO. 6430 MUM 2018-SHRI JIGNESH R. KAPASI 3 PARTIES, WHICH WAS DECLARED AS HAWALA DEALERS BY TH E SALE TAX DEPARTMENT, GOVERNMENT OF MAHARASHTRA. NAME OF THE PARTIES AMOUNT RS.) NEW STEEL (INDIA) 11,40,772 PAYAL ENTERPRISES 28,988 BHUMI ENTERPRISES 83,449 K.V. TRADING CO. 34,283 COSMOS ENTERPRISES 18,405 CITIZEN ENTERPRISES 52,238 JAINAM ENTERPRISES 7,36,084 GIRNAR SALES CORPORATION 7,38,857 DHARMI ENTERPRISES 39,04,890 TOTAL 67,37,966 3. THE ASSESSING OFFICER IN ORDER TO VERIFY THE TRANSA CTION ISSUED NOTICE UNDER SECTION 133(6) OF THE ACT TO ALL THE PARTIES. THE N OTICE WAS RETURNED BACK UNSERVED BY THE POSTAL DEPARTMENT WITH THE REMARK NOT KNOWN OR LEFT, EXCEPT TO DHARMI ENTERPRISES. THE PROPRIETOR OF DHA RMI ENTERPRISES FILED HIS AFFIDAVIT CONFIRMING THE TRANSACTION. THE ASSES SING OFFICER ACCEPTED THE CONFIRMATION FILED BY DHARMI ENTERPRISES. THE ASSES SEE WAS CONFRONTED WITH THE FACTS ABOUT THE RETURN OF NOTICES. THE ASS ESSEE WAS ASKED TO PRODUCE THE PARTIES FOR VERIFICATION. THE ASSESSING OFFICER RECORDED THAT THE ASSESSEE FAILED TO PRODUCE THE PARTIES. THE ONUS TO PROVE THE GENUINENESS OF PURCHASES WAS ON ASSESSEE, THE ASSESSEE FAILED TO D ISCHARGE HIS ONUS. THE ITA NO. 6430 MUM 2018-SHRI JIGNESH R. KAPASI 4 ASSESSEE WAS ASKED TO SUBSTANTIATE THE PURCHASES AN D TO FURNISH THE DELIVERY CHALLANS, TRANSPORT BILLS ETC. THE ASSESSING OFFICE R RECORDED THAT THE ASSESSEE FAILED TO BRING ENOUGH EVIDENCE TO PROVE THE EXISTE NCE OF THE PARTIES. THE ASSESSEE MERELY FILED COPIES OF THE BILLS AND PAYME NTS THROUGH CHEQUES. NO EVIDENCE REGARDING THE TRANSPORTATION OF GODS WAS F ILED. THE ASSESSING OFFICER AFTER CONSIDERING THE MATERIAL BEFORE HIM A ND REPORT OF INVESTIGATION WING AND SALES TAX DEPARTMENT CONCLUDED AND BY FOLL OWING THE DECISION OF GUJARAT HIGH COURT IN SIMITH P SHETH 356 ITR 451(GU J) TOOK HIS VIEW THAT IT WOULD BE JUST FAIR AND PROPER TO MAKE ADDITION O F PROFIT ELEMENT EMBEDDED IN SUCH BOGUS PURCHASE. THE ASSESSING OFFI CER ACCEPTED THE CONFIRMATION FILED BY DHARMI ENTERPRISES AND ALLOWE D THE PURCHASES OF RS. 39,37,066/-. THE ASSESSING OFFICER DISALLOWED 12.5% OF THE AGGREGATE OF TOTAL PURCHASES OF REMAINING EIGHT PARTIES NON-GENU INE/ALLEGED HAWALA PURCHASES OF RS. 28,33,076/-. THE ASSESSING OFFICER WORKED OUT THE DISALLOWANCE OF RS. 354,135/-, IN THE ASSESSMENT OR DER PASSED UNDER SECTION 143(3) R.W.S 147 DATED 27.03.2015. 4. ON APPEAL BEFORE THE LD. CIT(A), THE ADDITION ON AC COUNT OF PURCHASES SHOWN FROM GIRNAR SALES CORPORATION AND JAINAM ENTE RPRISES WAS ALSO DELETED. THE LD CIT(A) DELETED THE ADDITIONS/ DISAL LOWANCE BY CONSIDERING THE FACTS THE ASSESSING OFFICER IN SUBSEQUENT YEARS I.E. 2010-11 & 2011-12 ALLOWED PURCHASES FROM BOTH THE PARTIES. AGGRIEVED BY THE ORDER OF LD. CIT(A), THE REVENUE HAS FILED THE PRESENT APPEAL B EFORE US. ITA NO. 6430 MUM 2018-SHRI JIGNESH R. KAPASI 5 5. WE HAVE HEARD THE SUBMISSION OF LD. DEPARTMENTAL RE PRESENTATIVE (DR) FOR THE REVENUE AND THE LEARNED AUTHORISED REPRESENTATI VE (LD AR) FOR THE ASSESSEE AND PERUSED THE MATERIAL AVAILABLE ON RECO RD. THE LD. DEPARTMENTAL REPRESENTATIVE (DR) FOR THE REVENUE SUPPORTED THE O RDER OF LOWER AUTHORITIES. THE LD. DR FURTHER SUBMITS THAT INVEST IGATION WING OF INCOME- TAX DEPARTMENT HAS MADE FULL-FLEDGED INVESTIGATION IN RESPECT OF HAWALA TRADERS. THE HAWALA TRADERS WERE/ARE ENGAGED IN PRO VIDING BOGUS BILL WITHOUT ACTUAL DELIVERY OF GOODS. THE ASSESSEE HAS SHOWN BOGUS PURCHASES ONLY TO INFLATE THE PROFIT. THE LD. DR FOR THE REVE NUE SUBMITS THAT THE ASSESSING OFFICER HAS GIVEN SUFFICIENT RELIEF. THE ASSESSING OFFICER HAS REASONABLY ESTIMATED THE DISALLOWANCES. THE ASSESSE E IS NOT ENTITLED FOR ANY FURTHER RELIEF. ON RE-OPENING THE LD. DR SUBMITS TH AT THERE WAS SUFFICIENT TANGIBLE MATERIAL/INFORMATION IN THE FORM OF INFORM ATION FROM DGIT (INVESTIGATION) THAT SALE TAX DEPARTMENT, GOVERNMEN T OF MAHARASHTRA HAS UNEARTHED THE SCHEME ABOUT THE HAWALA ENTRY PROVIDE R, WHO WERE ENGAGED IN PROVIDING BOGUS BILLS, THEREFORE, THE ASSESSING OFFICER HAS SUFFICIENT REASON FOR MAKING BELIEF THAT THE INCOME OF THE ASS ESSEE HAS ESCAPED ASSESSMENT. 6. ON THE OTHER HAND THE LD AR FOR THE ASSESSEE SUPPOR TED THE ORDER OF THE LD CIT(A). THE LD AR FOR THE ASSESSEE SUBMITS THAT THE ASSESSING OFFICER HIMSELF ALLOWED THE SIMILAR PURCHASES FROM GIRNAR SALES CORPORATION AND JAINAM ENTERPRISES IN SUBSEQUENT YEARS I.E. 2010-11 & 2011-12 ALLOWED ITA NO. 6430 MUM 2018-SHRI JIGNESH R. KAPASI 6 PURCHASES FROM BOTH THE PARTIES IN THE ASSESSMENT O RDER PASSED UNDER SECTION 143/147 DATED 29.01.2019 AND 20.10.2016 RES PECTIVELY. 7. WE HAVE CONSIDERED THE SUBMISSIONS OF LD. DR FOR TH E REVENUE AND PERUSED THE RECORD. GROUND NO.1 RELATES TO DISALLOWANCE OF 12.5% OF THE BOGUS PURCHASES FROM GIRNAR SALES CORPORATION AND JAINAM ENTERPRISES. THE ASSESSING OFFICER MADE ADDITION TO THE EXTENT OF PR OFIT ELEMENT EMBEDDED IN SUCH TRANSACTIONS AND RESTRICTED THE DISALLOWANC E TO THE EXTENT OF 12.5% OF THE ALLEGED NON-GENUINE PURCHASES OF EIGHT PART IES BY FOLLOWING THE DECISION OF HONBLE GUJARAT HIGH COURT IN CIT VS. S IMITH P. SETH [356 ITR 451 (GUJ.)]. BEFORE LD CIT(A) THE ASSESSEE STATED THAT THE PROPRIETOR OF GIRNAR SALES CORPORATION AND JAINAM ENTERPRISES SH. RAJESH DOSHI EXPIRED ON 04/05/2012. RAJESH DOSHI WAS PROPITIATOR OF GIRN AR SALES CORPORATION AND KARTA OF RAJESH DOSHI HUF, BEING PROPRIETOR JA INAM ENTERPRISES. THE ASSESSEE FILED COPY OF DEATH CERTIFICATE OF RAJESH DOSHI. IT WAS FURTHER CONTENTED THAT SIMILAR PURCHASES WAS ALLOWED BY ASS ESSING OFFICER IN AY 2010-11 & 2011-12 ALLOWED PURCHASES FROM BOTH THE PARTIES IN THE ASSESSMENT ORDER PASSED UNDER SECTION 143/147 DATED 29.01.2019 AND 20.10.2016. 8. THE LD CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE CONCLUDED THAT THE ASSESSING OFFICER ALLOWED PURCHASES FROM BOTH THE PARTIES IN THE ASSESSMENT ORDER PASSED UNDER SECTION 143/147 DATED 29.01.2019 AND 20.10.2016. MOREOVER THE REQUIREMENT OF PRODUCING T HE PROPRIETOR OF ITA NO. 6430 MUM 2018-SHRI JIGNESH R. KAPASI 7 GIRNAR SALES CORPORATION AND JAINAM ENTERPRISES IS IMPOSSIBLE, ACCORDINGLY LD CIT(A) DIRECTED THE ASSESSING OFFICER TO ALLOW T HE PURCHASES FROM BOTH THE PARTIES. IN OUR VIEW THAT LD CIT(A) HAS TAKEN A CORRECT VIEW AND DIRECTED THE ASSESSING OFFICER TO ALLOW THE PURCHASES. WE AR E ALSO OF THE VIEW THAT THE ASSESSING OFFICER MUST FOLLOW THE CONSISTENCY O N SAME SET OF FACTS. THUS, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF LD CIT(A). NO CONTRARY FACTS OR LAW IS BROUGHT TO OUR NOTICE TO TAKE OTHER VIEW. IN THE RESULT THE ORDER OF THE LD CIT(A) IS AFFIRMED. 9. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 19/02/2020. SD/- SD /- S. RIFAUR RAHMAN PAWAN SINGH ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATE: 19.02.2020 SK COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. DR F BENCH, ITAT, MUMBAI 6. GUARD FILE BY ORDER, DY./ASST. REGISTRAR ITAT, MUMBAI