DCIT 12 (2)(2), MUMBAI V. GROWEL PROJECTS LTD., MUMBAI

ITA 6446/MUM/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 8314 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-01-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2010-2011
• Appeal Filed On: 08-11-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V VINOD KUMAR
• Assessee Lawyers: P P BHANDARI
• Keywords: Bogus purchase; Accommodation entries; Set aside
• Section: 142(1); 133(6); 143(1); 143(2); 147; 148

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL G BENCH MUMB AI BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND SHRI S. RIFAUR REHMAN, ACCOUNTANT MEMBER ITA NO. 6446/MUM/2018 (ASSESSMENT YEAR 2010-11 ) DCIT 12(2)(2) ROOM NO. 262/245, 1 ST FLOOR, AAYAKAR BHAVAN, CHURCHGATE, MUMBAI-400029. VS. M/S GROWEL PROJECTS LIMITED CTS NO. 151, GROWEL HOUSE, AKURLI ROAD, KANDIVALI EAST, MUMBAI. PAN: AACCG2638M APPELLANT RESPONDE NT APPELLANT BY : SHRI V. VINOD KUMAR (SR. DR) RESPONDENT BY : SHRI P.P. BHANDARI (CA) DATE OF HEARING : 13.01.2020 DATE OF PRONOUNCEMEN T : 13.01.2020 ORDERUNDER SECTION 254(1)OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER; 1. THIS APPEAL BY REVENUE IS DIRECTED AGAINST THE ORDE R OF LD. CIT(A)-20, MUMBAI DATED 12.06.2018 FOR ASSESSMENT YEAR 2010-11 . THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. 'WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE, THE LD. CIT(A) WAS JUSTIFIED IN RESTRICTING THE ADDITION ON ACCOUN T OF BOGUS PURCHASES TO 12.5% OF SUCH BOGUS PURCHASES WITHOUT APPRECIATING THAT THE ONUS WAS ON THE ASSESSEE TO ESTABLISH GENUINENESS OF SUCH PURCH ASE ESPECIALLY WHEN THE SUPPLIERS WERE FOUND TO BE HAWALA PARTIES PROVIDING ACCOMMODATION ENTRIES?' 2. 'WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE, THE LD. CIT(A) WAS JUSTIFIED IN RESTRICTING THE ADDITION ON ACCOUN T OF BOGUS PURCHASES TO 12.5% OF SUCH BOGUS PURCHASES WITHOUT GIVING ANY RE ASONABLE JUSTIFICATION FOR THE SAME ?' ITA NO. 6446/MUM/2018-M/S GROWEL PROJECTS LIMITED 2 3. 'WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A) WAS RIGHT IN RESTRICTING THE ADDITION TO 12. 5% ON BOGUS PURCHASES OF SUCH BOGUS PURCHASES WITHOUT TAKING INTO CONSIDE RATION THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF M/S N.K. P ROTEINS LTD. VS. DY.CIT NO.769 OF 2017 DATED 16.01.2017(SC) WHEREIN THE 100% DISALLOWANCE ON BOGUS PURCHASES WAS UPHELD ?' 4. 'WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN NOT RELYING ON THE JUDGMENT OF HON 'BLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. SHRI GANESH RICE MILLS (294 ITR316) WITHOUT APPRECIATING THAT THE FACTS OF THE CASE ARE SIMILAR TO THOSE OF THE ASSESSEE ?' 5. 'THE APPELLANT PRAYS THAT THE ORDER OF THE LD. C IT(A) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE A.O. BE RESTOR ED.' 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A FIRM, ENGAGED IN THE BUSINESS OF PROJECT CONTRACTOR AND CONSULTANT, FIL ED ITS RETURN OF INCOME FOR ASSESSMENT YEAR 2010-11 ON 04.10.2010 DECLARING TOTAL INCOME OF RS. 78,89,650/-. INITIALLY, THE RETURN WAS PROCESSE D UNDER SECTION 143(1) ON 21.05.2011. SUBSEQUENTLY, THE CASE WAS RE-OPENED UNDER SECTION 147 ON THE BASIS OF INFORMATION RECEIVED FROM SALE TAX DEPARTMENT, GOVERNMENT OF MAHARASHTRA THROUGH DIRECTOR GENERAL (INVESTIGATION) THAT CERTAIN HAWALA DEALERS WERE INDULGING IN PROVI DING ACCOMMODATION BILLS WITHOUT ACTUAL DELIVERY OF GOODS. ON PERUSAL OF SUCH INFORMATION THE ASSESSING OFFICER TOOK HIS VIEWS THAT THE ASSES SEE IS ONE OF THE BENEFICIARIES OF PURCHASES OF RS. 1.29 LAKHS FROM T HOSE TWO HAWALA PARTIES. ON THE BASIS OF INFORMATION, THE ASSESSING OFFICER MADE A BELIEF THAT THE INCOME OF THE ASSESSEE ESCAPED ASSE SSMENT, THEREFORE, RE- ITA NO. 6446/MUM/2018-M/S GROWEL PROJECTS LIMITED 3 OPENED THE ASSESSMENT UNDER SECTION 147. NOTICE UN DER SECTION 148 WAS ISSUED TO THE ASSESSEE ON 20.03.2015. THE ASSES SEE FILED ITS REPLY DATED 06.04.2015 TO THE NOTICE UNDER SECTION 148 AN D STATED THAT THE RETURN THAT THE RETURN FILED UNDER COPY OF RETURN F ILED ON 4.10.2010. THE ASSESSING OFFICER AFTER SERVING NOTICE UNDER SECTIO N 143(2) AND 142(1) PROCEEDED TO COMPLETE THE ASSESSMENT. DURING THE RE -ASSESSMENT PROCEEDING, THE ASSESSING OFFICER ASKED THE ASSESSE E TO SUBSTANTIATE THE PURCHASES. THE ASSESSEE FILED ITS REPLY DATED 05.01 .2016. IN THE REPLY, THE ASSESSEE SUBMITTED THAT THEY HAVE PURCHASED THE MATERIAL FROM JAISALMER MARBLE FROM THESE TWO ENTITIES. THE MATER IAL WAS DISPATCHED FROM RAJASTHAN WAS RECEIVED BY ASSESSEE AND WAS CON SUMED THAT CONSTRUCTION SITE AT KANDIVALI (EAST), MUMBAI, THE SAID MATERIAL WAS USED IN SHOPPING MALL BUILDING AS PER THE DRAWING A ND SPECIFICATION OF CONTRACT. THE ASSESSEE ALSO FURNISHED THE COPY OF L EDGER ACCOUNT. THE ASSESSEE ALSO STATED THAT NO DISALLOWANCE OF PURCHA SES CAN BE MADE SOLELY ON THE BASIS OF INFORMATION OF SALE TAX DEPA RTMENT, GOVERNMENT OF MAHARASHTRA. THE SUBMISSION OF THE AS SESSEE WAS NOT ACCEPTED. THE ASSESSING OFFICER RECORDED THAT NOTIC E SENT TO BOTH THE PARTIES UNDER SECTION 133(6) WERE RETURNED BACK UNS ERVED. IT WAS ALSO NOTED THAT ASSESSEE FAILED TO PRODUCE THE PARTIES F OR VERIFICATION. THE ASSESSING OFFICER NOTED THAT THE ASSESSEE FAILED TO PROVE THE PARTIES AND ITS IDENTITY. THE ASSESSING OFFICER DISALLOWED THE 100% PURCHASES ITA NO. 6446/MUM/2018-M/S GROWEL PROJECTS LIMITED 4 SHOWN FROM BOTH THE ALLEGED HAWALA PARTIES. ON APP EAL BEFORE THE LD. CIT(A), THE ADDITION WAS RESTRICTED TO 12.5% OF THE SAID BOGUS PURCHASES. THE LD. CIT(A) RESTRICTED THE DISALLOWAN CE OF ALLEGED BOGUS PURCHASES BY RELYING UPON THE DECISION OF HONBLE G UJARAT HIGH COURT IN CASE OF SIMITH P. SETH (356 ITR 451). THUS, FURT HER AGGRIEVED, THE REVENUE HAS FILED THE PRESENT APPEAL BEFORE US. 3. WE HAVE HEARD THE SUBMISSION OF LD. DEPARTMENTAL RE PRESENTATIVE (DR) FOR THE REVENUE AND LD. AUTHORIZED REPRESENTAT IVE (AR) OF THE ASSESSEE AND PERUSED THE MATERIAL AVAILABLE ON RECO RD. THE LD. DR FOR THE REVENUE SUPPORTED THE ORDER OF ASSESSING OFFICE R. THE LD. DR FURTHER SUBMITS THAT THE INVESTIGATION WING OF INCO ME-TAX DEPARTMENT HAS MADE FULL-FLEDGED INVESTIGATION IN RESPECT OF H AWALA TRADERS. THE HAWALA TRADERS WERE/ARE ENGAGED IN PROVIDING BOGUS BILL WITHOUT ACTUAL DELIVERY OF GOODS. THE ASSESSEE HAS SHOWN BOGUS PUR CHASES ONLY TO INFLATE THE PROFIT. THE LD. DR FOR THE REVENUE SUBM ITS THAT THE ASSESSING OFFICER HAS BROUGHT SUFFICIENT MATERIAL ON RECORD T O PROVE THAT THE PURCHASES SHOWN BY ASSESSEE WERE BOGUS. THE ASSESSE E IS NOT ENTITLED FOR ANY RELIEF. THE LD. DR FOR THE REVENUE PRAYED F OR SETTING-ASIDE THE ORDER OF LD. CIT(A) AND TO RESTORE THE ORDER OF ASS ESSING OFFICER. 4. ON THE OTHER HAND, THE LD. AR OF THE ASSESSEE SUPPO RTED THE ORDER OF LD. CIT(A). THE LD. AR OF THE ASSESSEE SUBMITS THAT THE LD. CIT(A) REASONABLY RESTRICTED THE DISALLOWANCE ON ACCOUNT O F BOGUS PURCHASES ITA NO. 6446/MUM/2018-M/S GROWEL PROJECTS LIMITED 5 KEEPING IN VIEW THE POSSIBILITY OF REVENUE LEAKAGE. THE LD. AR OF THE ASSESSEE PRAYED FOR DISMISSAL OF THE APPEAL. 5. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE REPR ESENTATIVES AND PERUSED THE RECORD. DURING THE RE-ASSESSMENT PROCEE DING, THE ASSESSING OFFICER DISALLOWED THE ENTIRE PURCHASES SHOWN FROM TWO PARTIES ON TAKING VIEW THAT THE ASSESSEE IS ONE OF THE BENEFIC IARIES FROM THE HAWALA DEALERS. THE ASSESSING OFFICER DISALLOWED TH E 100% PURCHASES SHOWN FROM THE ALLEGED HAWALA PARTIES. ON APPEAL BE FORE THE LD. CIT(A), THE ASSESSEE MADE DETAILED SUBMISSION TO SU BSTANTIATE THE PURCHASES. THE ASSESSEE ALSO CONTENDED THAT THEY HA VE FURNISHED THE EVIDENCE OF DELIVERY OF THE MATERIAL. THE LD. CIT(A ) AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE CONCLUDED THAT THE A SSESSING OFFICER HEAVILY RELIED ON THE FACT THAT ASSESSEE COULD NOT PRODUCE AJAY STONE AND KARNI GRANIMARMO PVT. LTD. THE ASSESSING OFFICE R FAILED TO APPRECIATE THAT ASSESSEE HAS NO AUTHORITY TO ENFORC E THE ATTENDANCE OF PARTIES BEFORE HIM. THE ASSESSING OFFICER HAS NOT CLEARLY ESTABLISHED THAT GOODS WERE NOT ACTUALLY DELIVERED TO THE ASSES SEE. THE LD. CIT(A) AFTER CONSIDERING THE OTHER FACTOR THAT THE ASSESSE E HAS FURNISHED DELIVERY CHALLANS AND GOODS RECEIPT MEMO AND APPLYI NG THE RATIO OF THE DECISION OF HONBLE GUJARAT HIGH COURT IN SIMITH P. SETH (SUPRA) RESTRICTED THE ADDITION TO 12.5% OF THE TOTAL ADDIT ION ON ACCOUNT OF BUSINESS PROFIT ON SUCH PURCHASES. ITA NO. 6446/MUM/2018-M/S GROWEL PROJECTS LIMITED 6 6. WE ARE ALSO OF THE CONSIDERED VIEW THAT UNDER THE INCOME-TAX ACT, THE REVENUE IS NOT ENTITLED TO MAKE THE ADDITION OF ENT IRE TRANSACTION, RATHER TO TAX THE BUSINESS PROFIT. FURTHER KEEPING IN VIEW THE POSSIBILITY OF REVENUE LEAKAGE IN SUCH TRANSACTION A REASONABLE DI SALLOWANCE OF PURCHASES IS SUFFICIENT TO MEET THE ENDS OF JUSTICE . CONSIDERING THE FACT THAT LD. CIT (A) HAS ALREADY RESTRICTED THE ADDITIO N TO THE EXTENT OF 12.5%, WHICH IS REASONABLE IN THE PRESENT CASE. HEN CE, WE DO NOT FIND ANY MERIT IN THE GROUNDS OF APPEAL RAISED BY REVENU E. 7. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 13/01/2020. SD/- SD/- S.RIFAUR REHMAN PAWAN SINGH ACCOUNTANT MEMBER J UDICIAL MEMBER MUMBAI, DATE: 13.01.2020 SK COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. DR G BENCH, ITAT, MUMBAI 6. GUARD FILE BY ORDER, DY./ASST. REGISTRAR ITAT, MUMBAI