INCOME TAX OFFICER 33(1), MUMBAI V. SHRI CHETAN ARVIND SHAH, MUMBAI

ITA 6523/MUM/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 5802 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-02-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 15-11-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: PARESH SHAH
• Keywords: Bogus purchase; Accommodation entries; Set aside
• Section: 133(6); 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC, BENCH M UMBAI BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEM BER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBE R ITA NO.6523/MUM/2018 ( ASSESSMENT YEAR: 2010-11 ) ITO-33(1)(3) C-12, 7 TH FLOOR ROOM NO.707 PRATYAKSHKAR BHAWAN BKC, BANDRA(E) MUMBAI-400 051 VS. CHETAN ARVIND SHAH B/305, VEENA SUR CO-OP. HSG. SOCIETY MAHAVIR NAGAR KANDIVALI (W) MUMBAI-400 067 PAN/GIR NO. AAFPS3487E ( APPELLAN T ) .. RESPONDENT ) REVENUE BY SHRI ASHISH KUMAR, DR ASSESSEE BY SHRI PARESH SHAH. AR DATE OF HEARING 29/01/2020 DATE OF PRONOUNCEME NT 07 /02/2020 / 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)45, MUMBAI, DATED 02/07/2018 AND IT PERTAINS TO ASSESSMENT YEAR 2010-11. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. 'ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. C1T(A) ERRED IN RESTRICTING THE DISALLOWANCE @ 12.5 % OF BOGUS PURCHASE WITHOUT APPRECIATING THE FACT THAT THE AO HAS HELD IT TO BE NON-GENUINE AFTER CARRYING OUT PROPER INDEPENDENT INVESTIGATION IN THE CASE'. 2. 'ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN RESTRICTING THE DISALLOWANCE MADE B Y AO TO RS. 504,560/- I.E. 12.5% OF BOGUS PURCHASES OF RS. 40,36,4767 - O NLY ON THE BASIS THAT PURCHASES WERE DULY SUPPORTED BY BILLS AND ALL THE PAYMENTS WERE MADE BY ACCOUNT PAYEE CHEQUES BY OVERLOOKING FINDINGS OF THE SALES TAX ITA NO.6523/MUM/2018 CHETAN ARVIND SHAH 2 DEPARTMENT & DGIT (INV.), MUMBAI THAT DURING THE YE AR UNDER CONSIDERATION THE ASSESSEE WAS THE BENEFICIARY OF B OGUS PURCHASES AND BILLINGS FROM HAWALA DEALERS AND THERE WAS NO PROOF OF DELIVERY OF PRODUCTS TO THE ASSESSEE'. 3. 'THE APPELLANT PRAYS THAT THE ORDER OF THE LD. CTT(A) ON THE ABOVE GROUND BE SET ASIDE AND THAT OF THE ASSESSING OFFIC ER BE RESTORED'. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS ENGAGED IN THE BUSINESS OF TRADING IN INDUSTRIAL ELECTRONIC C OMPONENTS, FILED HIS RETURN OF INCOME FOR AY 2010-11 ON 14/10/2010, DECL ARING TOTAL INCOME OF RS.2,41,126/-. THE CASE HAS BEEN SUBSEQUE NTLY REOPENED U/S 147 OF THE ACT, ON THE BASIS OF INFORMATION REC EIVED 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 2.1 OF HIS ASSESSMENT ORDER AMOUNTING TO RS. 40,36,476/-. THE CASE WAS SELECTED FOR SCRUTINY AND THE ASSESSMENT H AS BEEN COMPLETED U/S. 143(3).R.W.S. 147 OF THE I.T.ACT, 19 61 ON 22/03/2016 AND DETERMINED TOTAL INCOME OF RS. 42,77,600/-, AFT ER MAKING 100% ADDITIONS TOWARDS ALLEGED BOGUS PURCHASE FROM THOSE PARTIES AND MADE ADDITIONS OF RS. 40,36,476/-. 4. BEING AGGRIEVED BY THE ASSESSMENT ORDER, THE ASS ESEE PREFERRED AN APPEAL BEFORE THE LD.CIT(A). BEFORE TH E LD.CIT(A), THE ASSESSE HAS FILED ELABORATE GROUNDS OF APPEAL, ON THE ISSUE, WHICH HAS BEEN REPRODUCED AT PARA 2.1 ON PAGES 2 OF LD.CI T(A) ORDER. THE SUM AND SUBSTANCE OF ARGUMENTS OF THE ASSESSEE BEFO RE THE LD.CIT(A) ARE THAT PURCHASE FROM THE ABOVE PARTY IS GENUINE, WHICH ITA NO.6523/MUM/2018 CHETAN ARVIND SHAH 3 IS SUPPORTED BY NECESSARY EVIDENCES. THEREFORE, NO ADDITIONS COULD BE MADE ON THE BASIS OF INFORMATION RECEIVED FROM T HIRD PARTY. THE 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 12.50% GROSS PROFIT ON TOTAL PURCHASES FROM THOSE P ARTIES. THE RELEVANT FINDINGS OF THE LD.CIT(A) ARE AS UNDER:- 5.1 I HAVE CONSIDERED THE ASSESSMENT ORDER AND TH E SUBMISSION OF THE APPELLANT INCLUDING THE CASE LAWS CITED. THE AO OBS ERVED IN THE ASSESSMENT ORDER IN PARA 7.1 OF ASSESSMENT ORDER TH AT THE AR OF THE ASSESSEE FILED COPY O LEDGER, COPIES OF PURCHASE B ILLS, BANK STATEMENTS BUT AS PER THE HAWALA PARTIES' STATEMENT, THE PURCH ASES WERE NOT MADE FROM THEM. DURING DIE APPELLATE PROCEEDINGS THE APP ELLANT FILED COPIES OF PURCHASE BILLS AND COPY OF BANK STATEMENTS HIGHLIGH TING THE PAYMENTS MADE FOR PURCHASES FROM THE SELLER PARTIES. IT IS N OTICED THAT ON ACCOUNT OF NON-AVAILABILITY OF THE SUPPLIERS AT THE GIVEN ADDR ESS AND NON-PRODUCTION OF DELIVERY CHALLANS, LORRY RECEIPTS, TRANSPORTATIO N DETAILS, THE AO ADDED ENTIRE ALLEGED BOGUS PURCHASES. 5.2 THOUGH, IT MAY BE A FACT THAT APPELLANT WAS NOT ABLE TO PRODUCE THE CONCERNED PARTIES BEFORE THE ASSESSING OFFICER MAY BE ON ACCOUNT OF TIME GAP- FACT REMAINS THAT THE APPELLANT PRODUCED DETAILS TO PROVE THE GENUINENESS OF THE PURCHASES. MERELY RELYING UPON T HE INFORMATION FROM THE SALES TAX DEPARTMENT, THE ASSESSING OFFICER COU LD NOT HAVE TREATED THE ENTIRE PURCHASES AS BOGUS. THE APPELLANT HAS BR OUGHT DOCUMENTARY EVIDENCES ON RECORD TO PROVE GENUINENESS OF SUCH TR ANSACTIONS, THE ACTION OF THE ASSESSING OFFICER IN IGNORING THEM CA NNOT BE ACCEPTED. WHEN THE PAYMENT TO THE CONCERNED PARTIES ARE THROU GH PROPER BANKING CHANNEL AND BECAUSE THAT THERE IS THE PAYMENTS MADE WERE AGAIN ROUTED BACK TO THE ASSESSEE, IT DOESN'T MEAN THAT THE ASSE SSEE DID NOT MAKE ANY PURCHASE, SO THAT THE ADDITION OF ENTIRE PURCHA SES IS NOT SUSTAINABLE IN LAW AND FACTS. ONLY COROLLARY THAT FOLLOWS IN SU CH SITUATION IS THAT THE APPELLANT COULD HAVE OBTAINED THE BILLS IN LIEU OF THE MATERIAL PURCHASED LOCALLY. IN THIS REGARD IT IS FOUND THAT MANY BENCH ES OF HAT AND HON'BLE HIGH COURTS HAVE HELD THAT WHEN PURCHASES ARE SUPPO RTED BY SUFFICIENT DOCUMENTARY EVIDENCES, THEN MERELY BECAUSE OF NON-A PPEARANCE BEFORE THE AO, ONE CANNOT CONCLUDE THAT THE PURCHASES WERE NOT MADE BY THE APPELLANT. THEREFORE, THE SAVING ON ACCOUNT OF VAT AND OTHER INCIDENTAL CHARGES MADE BY THE APPELLANT ON THE SAID BOGUS PUR CHASES CAN BE BROUGHT TO TAX AS ADDITIONAL PROFIT, KEEPING IN VIE W THE TOTALITY OF FACTS AND CIRCUMSTANCES OF THE CASE, THE DISALLOWANCE MADE BY THE AO IS RESTRICTED TO 12,5% OF SUCH PURCHASES OF RS,40,36,476 WHICH CO MES TO ITA NO.6523/MUM/2018 CHETAN ARVIND SHAH 4 RS,5,04,56Q, THE AO IS DIRECTED TO MODIFY THE ADDIT ION ACCORDINGLY AND THE APPELLANT GETS PART RELIEF. THIS GROUND IS PART LY ALLOWED. 5. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATE RIAL AVAILABLE ON RECORD AND GONE THROUGH ORDERS OF THE AUTHORITIE S BELOW. WE FIND THAT THE LD. AO HAS MADE 100% ADDITION TOWARDS ALLE GED BOGUS PURCHASES ON THE GROUND THAT THE ASSESSEE IS ONE OF THE BENEFICIARY OF ACCOMMODATION ENTRIES OF BOGUS PURCHASE BILLS IS SUED BY HAWALA DEALERS. ACCORDING TO THE LD. AO, ALTHOUGH ASSESEE HAS FILED CERTAIN BASIC EVIDENCES, BUT FAILED TO FILE FURTHER EVIDENC E IN THE BACKDROP OF CLEAR FINDING BY THE SALES TAX DEPARTMENT, MAHARASH TRA THAT THOSE PARTIES ARE INVOLVED IN PROVIDING ACCOMMODATION ENT RIES WITHOUT ACTUAL DELIVERY OF GOODS. THE LD. AO HAD ALSO TAKEN SUPPORT FROM THE INVESTIGATION CONDUCTED DURING THE COURSE OF AS SESSMENT 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 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. 6 HAVING CONSIDERED ARGUMENTS OF BOTH PARTIES AND A LSO, MATERIAL AVAILABLE ON RECORD, WE FIND THAT BOTH THE SIDES HAVE FAILED TO PROVE THE CASE IN THEIR FAVOUR WITH NECESSARY EV IDENCES. 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 ITA NO.6523/MUM/2018 CHETAN ARVIND SHAH 5 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 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 12.50% GROSS PROFIT ON TOTAL ALLEGED BO GUS 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 FAIRLY ADOPTED 12.50% PROFIT ON ALLEGED BOGUS PURCHASES ITA NO.6523/MUM/2018 CHETAN ARVIND SHAH 6 AND SUCH ESTIMATION IS SUPPORTED BY NUMBER OF DECIS IONS OF COURTS AND TRIBUNAL. HENCE, WE ARE INCLINED TO UPHOLD ORDE R 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 07/02/2 020 SD/- (SAKTIJIT DEY) SD/- (G. MANJUNATHA) JUDICIAL MEMBER ACCOUNTANT M EMBER MUMBAI ; DATED 07/02/2020 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//