MAHESH VASANT RAUT, MUMBAI V. CIT (A)- 38 , MUMBAI

ITA 6514/MUM/2018

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 8329 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-03-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 14-11-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: KAVITHA P KOUSHIK
• Keywords: Bogus purchase; Principle of natural justice; Accommodation entries
• Section: 40A(3); 133(6); 143(1); 13; 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC, BENCH M UMBAI BEFORE SHRI VIKAS AWASTHY, JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBE R ITA NO.6514/MUM/2018 ( ASSESSMENT YEAR: 2011-12 ) MAHESH VASANT RAUT 6B/104, CHANDIVALI SUN VIEW CHS LTD., MHADA COLONY CHANDIVALI ANDHERI(EAST) MUMBAI-400 072 VS. ACIT-26(2) ROOM NO.510, 5 TH FLOOR C-10, PRATYAKSHKAR BHAWAN BKC, BANDR(E) MUMBAI-400 051 PAN/GIR NO. ADPPR2310E ( APPELLANT ) .. RESPOND ENT ) & ITA NO.7051 & 7052/MUM/2018 ( ASSESSMENT YEARS: 2010-11& 2011-12 ) ACIT-26(2) ROOM NO.510, 5 TH FLOOR C-10, PRATYAKSHKAR BHAWAN BKC, BANDR(E) MUMBAI-400 051 VS. MAHESH VASANT RAUT 6B/104, CHANDIVALI SUN VIEW CHS LTD., MHADA COLONY CHANDIVALI ANDHERI(EAST) MUMBAI-400 072 PAN/GIR NO. ADPPR2310E ( APPELLANT ) .. RESPONDENT ) REVENUE BY MS. KAVITHA P. KOUSHIK, DR ASSESSEE BY NONE DATE OF HEARING 1 7 /02/2020 DATE OF PRONOUNCEME NT 13 / 0 3 /20 20 / O R D E R PER G.MANJUNATHA (A.M) : THESE CROSS APPEALS FILED BY THE ASSESSEE, AS WELL AS THE REVENUE FOR THE ASST. YEAR 2011-12 ARE DIRECTED AGAINST THE MAHESH VASANT RAUT 2 ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEAL S)-38, MUMBAI, DATED 28/06/2018. THE REVENUE HAS FILED APPEAL AGAI NST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - 38, THANE, DATED 28/06/2018 FOR AY 2011-12. SINCE, THE FACTS AND IS SUES INVOLVED IN THESE APPEALS FILED BY THE ASSESEE, AS WELL AS THE REVENUE ARE IDENTICAL, FOR THE SAKE OF CONVENIENCE, THESE APPEA L WERE HEARD TOGETHER AND ARE DISPOSED -OFF BY THIS CONSOLIDATED ORDER. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL FOR ASST. YEAR 2011-12: 1. THE LD. CIT(APPEALS) HAS WRONGLY AND UNJUSTIFIAB LY RELIED ON THE ASSESSMENT ORDER OF THE LD. ASSESSING OFFICER. 2. THE LD. ASSESSING OFFICER HAS FAILED TO PROVE TH E ALLEGED BOGUS PURCHASES BY THE APPELLANT MERELY ON THE GROUND OF HAVING RECEIVED INFORMATION FROM THE SALES TAX DEPARTMENT. 3. THE APPELLANT HAD NO MORAL OR STATUTORY RESPONSI BILITIES TO PRODUCE THE PERSONS FROM THE PURCHASES WERE MADE. 4. THE LD. A.O, HAS FAILED TO ACCEPT THE GENUINE BA NK TRANSACTIONS MADE AGAINST THE PURCHASE OF MATERIALS. THE CLAIM OF THE LD. A.O, FOR THE PURCHASES BEING BOGUS IS WITHOUT ANY BASIS. ADDITIO N MADE ON THIS ACCOUNT TO THE TOTAL INCOME OF THE APPELLANT IS FI T TO BE DELETED. 5. THE APPELLANT HAS BEEN DENIED THE PRINCIPLES OF NATURAL JUSTICE BY NOT ACCEPTING THE GENUINE TRANSACTION FOR PURCHASE OF M ATERIALS. 6. THE ADDITION MADE BY THE LD. A.O. IS BAD AND ARB ITRARY AND IS FIT TO BE CANCELLED. 3. THE REVENUE HAS RAISED MORE OR LESS COMMON GROUN DS OF APPEAL FOR BOTH ASST. YEARS. THEREFORE, FOR THE SAK E OF BREVITY, GROUNDS OF APPEAL FILED FOR ASST. YEAR 2011-12 ARE REPRODUCED AS UNDER: 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN RESTRICTING THE DISALLO WANCE TO 25% OF THE TOTAL AMOUNT OF BOGUS PURCHASE TRANSACTION INSTEAD OF 100 % OF THE TOTAL AMOUNT OF BOGUS PURCHASE MADE BY THE AO. 2. WHETHER ON THE FACTS ARID IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN NOT CONSIDERING THAT TH E ADDITION WAS MADE ON THE BASIS OF INFORMATION RECEIVED FROM DIT(INV.) A ND SALES TAX DEPARTMENT, MAHARASHTRA WITH REGARD TO BOGUS PURCHA SE MADE BY THE ASSESSES FROM DEALERS WITHOUT SUPPLY OF ACTUAL GOOD S. MAHESH VASANT RAUT 3 3. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN JAW, THE LD. CIT(A) HAS ERRED IN NOT CONSIDERING TH AT THE HAWALA OPERATORS HAVE ADMITTED ON OATH BEFORE THE SALES TA X AUTHORITIES THAT THEY HAVE NOT SOLD ANY MATERIAL TO ANYBODY. 4. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE L. CIT(A) HAS ERRED IN NOT CONSIDERING THAT TH E ASSESSEE COULD NOT PROVE THE GENUINENESS AND CREDIT WORTHINESS OF THE PURCHASE TRANSACTIONS DURING THE COURSE OF ASSESSMENT PROCEE DINGS. 5. THE LD. CIT(A) FAILED TO UPHOLD THE DECISION O F HONBLE APEX COURT IN THE CASE OF N K PROTEINS LTD. VS DCIT IN THE SLP(C IVIL) NO. 769/2017 DATED 16.01.2017 WHERE 100% OF ADDITION MADE WAS CO NFIRMED BY THE APEX COURT. 6. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD, CIT(A) ERRED IN NOT APPRECIATING THE FACT THAT APPL ICABILITY OF PROVISIONS OF SECTION 40A(3) ATTRACTS 100% BOGUS PURCHASES TO BE HELD AS PROFIT. 4. THE BRIEF FACTS OF THE CASE EXTRACTED FROM ASST. YEAR 2011-12 ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING, PROCESSING, AND PACKING LIFT MATERIALS FROM ONE POI NT TO ANOTHER POINT, FILED HIS RETURN OF INCOME FOR AY 2011-12 ON 26/09/2011, DECLARING THE TOTAL INCOME AT RS. 21,22,211/- AND S AID RETURN WAS PROCESSED U/S 143(1) OF THE I.T.ACT, 1961. THE CASE HAS BEEN, SUBSEQUENTLY REOPENED U/S 147 OF THE ACT, ON THE BA SIS OF INFORMATION RECEIVED FROM DGIT, INVESTIGATION, MUMB AI, AS PER WHICH, SALES TAX AUTHORITIES OF GOVERNMENT OF MAHAR ASHTRA HAD TAKEN ACTIONS AGAINST NUMBER OF HAWALA DEALERS, WH O HAD ISSUED BOGUS PURCHASE BILLS TO VARIOUS PARTIES IN MUMBAI A ND OTHER PLACES. AS PER LIST OF BENEFICIARIES, THE ASSESSEE IS ONE O F THE BENEFICIARY, WHO HAD TAKEN ACCOMMODATION BILLS OF BOGUS PURCHASE S FROM VARIOUS PARTIES AS LISTED BY THE AO IN PARA 5 OF H IS ASSESSMENT ORDER AMOUNTING TO RS. 8,12,804/-. THE CASE WAS SEL ECTED FOR SCRUTINY AND THE ASSESSMENT HAS BEEN COMPLETED U/S. 143(3).R.W.S. 147 OF THE I.T.ACT, 1961 ON 21/01/2016 AND DETERMIN ED TOTAL INCOME OF RS. 29,35,020/-, AFTER MAKING 100% ADDITIONS TOW ARDS ALLEGED BOGUS PURCHASE FROM THOSE PARTIES AND MADE ADDITION S OF RS. 8,12,804/-. MAHESH VASANT RAUT 4 5. 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 ELOBARATE WRITTEN SUBMISSIONS WHICH HAS BEEN SUMMERISED AT PARA 5 ON PAGES 7 TO 12 OF THE LD. CIT(A) ORDER. TH E SUM AND SUBSTANCE OF ARGUMENTS OF THE ASSESSEE BEFORE THE L D.CIT(A) ARE THAT PURCHASE FROM THE ABOVE PARTY IS GENUINE, WHIC H IS SUPPORTED BY NECESSARY EVIDENCES. THEREFORE, NO ADDITIONS COU LD BE MADE ON THE BASIS OF INFORMATION RECEIVED FROM THIRD PARTY. THE LD.CIT(A), AFTER CONSIDERING RELEVANT SUBMISSION OF THE ASSESS EE AND ALSO, BY FOLLOWING THE DECISION OF HONBLE GUJARAT HIGH COUR T, IN THE CASE OF CIT VS. SIMITH P. SHETH (356 ITR 451) HAS SCALED DO WN ADDITION MADE BY THE AO TOWARDS ALLEGED BOGUS PURCHASES TO 2 5% GROSS PROFIT ON TOTAL PURCHASES FROM THOSE PARTIES. 6. 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 ALONG WITH CASE LAWS CITED BY BOTH PARTIES. WE FIND THAT THE LD. AO HAS MADE ADDITION OF 100% PROF IT ON ALLEGED BOGUS PURCHASES ON THE GROUND THAT THE ASSESSEE IS ONE OF THE BENEFICIARY OF ACCOMMODATION ENTRIES OF BOGUS PURCH ASE BILLS ISSUED BY HAWALA DEALERS. ACCORDING TO THE LD. AO, ALTHOUG H ASSESEE HAS FILED CERTAIN BASIC EVIDENCES, BUT FAILED TO FILE F URTHER EVIDENCE IN THE BACKDROP OF CLEAR FINDING BY THE SALES TAX DEPARTME NT, MAHARASHTRA THAT THOSE PARTIES ARE INVOLVED IN PROVIDING ACCOMM ODATION ENTRIES WITHOUT ACTUAL DELIVERY OF GOODS. THE LD. AO HAD AL SO TAKEN SUPPORT FROM THE INVESTIGATION CONDUCTED DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AS PER WHICH NOTICE ISSUED U/S 133(6) TO THE PARTIES WERE RETURNED UN-SERVED BY THE POSTAL AUTHORITIES. THEREFORE, HE CAME TO THE CONCLUSION THAT PURCHASES FROM THE SAID PARTIES ARE MAHESH VASANT RAUT 5 BOGUS IN NATURE. IT IS THE CONTENTIONS OF THE ASSES SEE BEFORE THE LOWER AUTHORITIES THAT PURCHASES FROM THE ABOVE PAR TY ARE SUPPORTED BY NECESSARY EVIDENCES. IT HAS FURNISHED ALL POSSIB LE EVIDENCES, INCLUDING BOOKS OF ACCOUNTS; STOCK DETAILS AND BANK STATEMENT TO PROVE THAT PAYMENT AGAINST SAID PURCHASES HAVE BEEN MADE THROUGH PROPER BANKING CHANNELS. 7. HAVING CONSIDERED ARGUMENTS OF LD. DR AND ALSO, CONSIDERING RELEVANT MATERIAL AVAILABLE ON RECORD, WE FIND THAT BOTH THE SIDES HAVE FAILED TO PROVE THE CASE IN THEIR FAVOUR WITH NECESSARY EVIDENCES. ALTHOUGH, ASSESSEE HAS FILED CERTAIN BAS IC EVIDENCES, BUT FAILED TO FILE FURTHER EVIDENCES TO CONCLUSIVELY PR OVE PURCHASES TO THE SATISFACTIONS OF THE LD.AO. FURTHER, MERE PAYMENT B Y CHEQUE DOES NOT PROVE THE GENUINENESS OF PURCHASE, MORE PARTICU LARLY WHEN OTHER CIRCUMSTANTIAL EVIDENCE SAYS OTHERWISE. AT THE SAME TIME, THE LD. AO HAD ALSO FAILED TO TAKE THE INVESTIGATION TO A L OGICAL CONCLUSION BY CARRYING OUT NECESSARY ENQUIRES, BUT HE HAS SOLELY RELIED UPON INFORMATION RECEIVED FROM INVESTIGATION WING, WHICH WAS FURTHER SUPPORTED BY INFORMATION RECEIVED FROM MAHARASHTRA SALES TAX DEPARTMENT. THE AO NEITHER POINTED OUT ANY DESCREPA NICES IN BOOKS OF ACCOUNTS NOR MADE OUT A CASE OF SALES OUTSIDE BO OKS OF ACCOUNTS. IN FACT, THE AO DID NOT DISPUTED SALES DECLARED FOR THE YEAR. UNDER THESE CIRCUMSTANCES, IT IS DIFFICULT TO ACCEPT ARGU MENTS OF BOTH THE SIDES. FURTHER, IN A CASE WHERE PURCHASES ARE CONSI DERED TO BE PURCHASED FROM SUSPICIOUS/HAWALA DEALERS, VARIOUS H IGH COURTS AND TRIBUNALS HAD CONSIDERED AN IDENTICAL ISSUE IN LIGH T OF INVESTIGATION CARRIED OUT BY THE SALES TAX DEPARTMENT AND HELD TH AT IN CASE OF PURCHASES CLAIMS TO HAVE MADE FROM ALLEGED HAWALA D EALERS, ONLY PROFIT ELEMENT EMBEDDED IN THOSE PURCHASES NEEDS TO BE TAXED, BUT NOT TOTAL PURCHASE FROM THOSE PARTIES. THE HONBLE GUJARAT HIGH MAHESH VASANT RAUT 6 COURT, IN THE CASE OF CIT VS SIMITH P.SHETH 356 ITR 451 HAD CONSIDERED A SIMILAR ISSUE AND HELD THAT AT THE TIM E OF ESTIMATION OF PROFIT FROM ALLEGED BOGUS PURCHASES NO UNIFORM YARD STICKS COULD BE ADOPTED, BUT IT DEPENDS UPON FACTS OF EACH CASE. TH E ITAT, MUMBAI, IN NUMBER OF CASES HAD CONSIDERED AN IDENTICAL ISSU E AND 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 SCA LED DOWN ADDITION TO 25% PROFIT ON ALLEGED BOGUS PURCHASES. ALTHOUGH, BOTH AUTHORITIES HAVE TAKEN DIFFERENT RATE OF PROFIT FOR ESTIMATION OF INCOME FROM ALLEGED BOGUS PURCHASE, BUT NO ONE COULD SUPPO RT SAID RATE OF GROSS PROFIT WITH NECESSARY EVIDENCES OR ANY COMPAR ABLE CASES. THEREFORE, CONSIDERING FACTS AND CIRCUMSTANCES OF T HIS CASE AND CONSISTENT WITH VIEW TAKEN BY THE CO-ORDINATE BENCH IN NUMBER OF CASES, WE ARE OF THE CONSIDERED VIEW THAT RATE OF P ROFIT ADOPTED BY THE LD. CIT(A) IS ON HIGHER SIDE WHEN COMPARED TO N ATURE OF BUSINESS OF THE ASSESSEE AND ACCORDINGLY, WE DIRECT THE LD. AO TO ESTIMATE 12.50% PROFIT ON ALLEGED BOGUS PURCHASES. 8. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DI SMISSD AND APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ITA NO. 7051/MUM/2018-ASST YEAR 2010-11 9. THE FACTS AND ISSUES INVOLVED IN THIS APPEAL ARE IDENTICAL TO THE FACTS AND ISSUES, WHICH WE HAD CONSIDERED IN ITA NO . 6514/MUM/2018 AND ITA NO. 7050/MUM/2018 FOR ASST. Y EAR 2011- 12. THE REASONS GIVEN BY US IN PRECEDING PARAGRAPHS IN MAHESH VASANT RAUT 7 6514/MUM/2018 AND ITA NO. 7050/MUM/2018 FOR ASST. Y EAR 2011-12 SHALL MUTATIS-MUTANDIS APPLY TO THIS APPEAL, AS WELL. THEREFORE, FOR SIMILAR REASONS, WE DIRECT THE LD. AO TO ESTIMATE 1 2.50% PROFIT ON ALLEGED BOGUS PURCHASES. 10. AS RESULT, APPEAL FILED BY THE ASSESSEE FOR AS ST. YEAR 2011-12 IS PARTLY ALLOWED AND APPEALS FILED BY THE REVENUE FOR ASST. YEARS 2010-11 AND 2011-12 ARE DISMISSED ORDER PRONOUNCED IN THE OPEN COURT ON THIS 13 /03/ 2020 SD/- (VIKAS AWASTHY) SD/- (G. MANJUNATHA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 13/03/2020 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//