RICHI JEWEL, MUMBAI V. INCOME TAX OFFICER -18(3)(2), MUMBAI

ITA 6554/MUM/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 0588 (ITAT-MUMBAI)
• Duration Of Justice: 2 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-02-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 09-11-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: N HEMLATA
• Assessee Lawyers: S SRIRAM
• Keywords: Bogus purchase; Accommodation entries; Onus to prove
• Section: 143(3); 133(6); 148

Judgement Text

P A G E | 1 ITA NO. 6554/MUM/2017 AY: 2010 - 11 M/S. RICHI JEWEL VS. ITO WD - 18(3)(2) IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, M UMBAI BEFORE SHRI G.S.PANNU, AM AND SHRI RAVISH SOOD, JM ITA NO. 6554 /MUM/2017 ( / ASSESSMENT YEAR:2010 - 11 ) M/S. RICHI JEWEL ROOM NO. 24, 2 ND FLOOR, 48, BIHARI BAUG, 3 RD FLOOR, BHOIWADA, MUMBAI - 400002 / VS. ITO W ARD 18(3)(2), ERNES HOUSE, 6 TH FLOOR, NARIMAN POINT,MUMBAI - 400021. ./ ./ PAN NO. AAKFR6536Q ( / APPELLANT) : ( / RESPONDENT ) / APPELLANT BY : SHRI S. SRIRAM, A.R / RESPONDENT BY : MS. N. HEMLATA, SR. D.R / DATE OF HEARING : 01.02.2018 / DATE OF PRONOUNCEMENT : 0 7 .02.2018 / O R D E R PER RAVISH SOOD, JUDICIAL MEMBER: THE PRESENT APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A) - 29, MUMBAI, DATED 22.08.2017, WHICH IN ITSELF ARISES FROM THE ORDER PASSED BY THE A.O UNDER SEC. 143(3) R.W.S. 147 OF THE INCOME TAX ACT, 1961 (FOR SHORT ACT). TH E ASSESSEE ASSAILING THE ORDER OF THE CIT(A) HAD RAISED BEFORE US THE FOLLOWING GROUNDS OF THE APPEAL: - P A G E | 2 ITA NO. 6554/MUM/2017 AY: 2010 - 11 M/S. RICHI JEWEL VS. ITO WD - 18(3)(2) 1 THE LEARNED CIT(A) - 29 HAS ERRED IN DISMISSING THE APPEAL WITHOUT CONSIDERING THE SUBMISSION MADE BY THE APPELLANT AND ALSO WITHOUT CONSIDERING THE JUDG MENT BY CIT(A) - 29, MUMBAI FOR THE SAME ASSESSEE FOR A.Y. 2009 - 10 FOR THE SAME FACTS AND CIRCUMSTANCES, AND UPHELD THE ADDITION MADE BY INCOME TAX OFFICER WARD - 18(3)(2). 2 THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER OR DELETE THE SAID GROUND OF APPEAL. 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE FIRM WHICH IS ENGAGED IN THE BUSINESS OF TRADING IN IMITATION JEWELLERY HAD E - FILED ITS RETURN OF INCOME ON 21.09.2010, DECLARING TOTAL INCOME OF RS.39,130/ - . TH E DIRECTOR OF INCOME TAX (INV.) , MUMBAI SHARED WITH THE A.O CERTAIN INFORMATION RECEIVED BY HIM FROM THE S ALE S TAX DEPARTMENT , MAHARASHTRA, WHICH REVEALED THAT THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION HAD TAKEN ACCOMMODATION ENTRIES AS REGARDS BOGUS PURCHASES FROM THE FOLLOWING PART Y : SR. NO. NAME OF THE ENTRY PROVIDER PAN F.Y. AMOUNT OF BILL TAKEN BY THE ASSESSEE (RS.) 1. HARSH METAL CORPORATION ALGPG2817C 2009 - 10 11,84,844/ - THE A.O ON THE BASIS OF THE AFORESAID INFORMATION REOPENED THE C ASE OF THE ASSESSEE AND ISSUED A NOTICE UNDER SEC. 148 OF THE ACT. THAT WHILE FRAMING THE ASSESSMENT THE A.O IN ORDER TO VERIFY THE GENUINENESS AND VERACITY OF THE PURCHASES CLAIMED BY THE ASSESSEE TO HAVE BEEN MADE FROM THE AFOREMENTIONED PARTY, VIZ. M/S HARSH METAL CORPORATION, ISSUED A NOTICE UNDER SEC. 133(6) , THEREIN CALLING UPON THE LATTER TO PLACE ON RECORD THE CONFIRMATION OF THE TRANSACTION S CARRIED OUT WITH THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION. HOWEVER, THE AFOREMENTIONED PARTY, VIZ. M/S HARSH METAL CORPORATION FAILE D TO FURNISH ANY REPLY WITH THE A.O. THE A.O IN THE BACKDROP OF THE AFORESAID FACTS CALLED UPON THE ASSESSEE T O EXPLAIN AS TO WHY THE P A G E | 3 ITA NO. 6554/MUM/2017 AY: 2010 - 11 M/S. RICHI JEWEL VS. ITO WD - 18(3)(2) PURCHASES WHICH WERE CLAIMED BY IT TO HAVE BEEN MADE FROM THE AFOREMENTIONED PARTY MAY NOT BE CHARACTERISED AS BOGUS PURCH ASE S AND ADDED BACK TO ITS RETURN OF INCOME. THE REPLY FILED BY THE ASSESSEE IN ITS ATTEMPT TO DRIVE HOME ITS CONTENTION THAT THE PURCHASE S MADE FROM THE AFOREMENTIONED PARTY WERE GENUINE, HOWEVER , DID N OT FIND FAVOUR WITH THE A.O, WHO OBSERVED AS UNDER: - THE PRIMARY ONUS IS CASTED ON THE ASSESSEE TO ESTABLISH THE GENUINENESS OF PURCHASES CLAIMED BY HIM. AS PER SECTION 101, 102 AND 106 OF THE INDIAN EVIDENCE ACT, THE ONUS LIES UPON THE ASSESSEE TO PROVE ALL EXPENSES, INCLUDING PURCHASES TO THE SATISFACTION OF A.O. IN THE INSTANT CASE, THE ASSESSEE TO DISCHARGE THIS ONUS. FURTHER, HE FAILED TO FURNISH CONFIRMATIONS FROM THE ALLEGED SUPPLIERS AND ALSO FAILED TO PRODUCE THESE PARTIES FOR EXAMINATION. MERE FILING LEDGER A CCOUNT AND PAYMENT MADE THROUGH ACCOUNT PAYEE CHEQUE CANNOT BE A PROOF AT ALL IN A CASE WHERE GENUINENESS OF TRANSACTION IS ITSELF IS IN DOUBT. THERE IS A SPECIFIC FINDING OF MAHARASHTRA SALES TAX DEPARTMENT THAT THESE PARTIES HAS ISSUED FALSE BILLS, WITHO UT DELIVERY OF GOODS AND PAYMENT OF SALES TAX. ON EXAMINATION OF THE FACTS IN TOTALITY AND FROM THE SUBMISSIONS OF THE ASSESSEE, IT IS TO BE INFERRED THAT ASSESSEE HAS NOT PURCHASED THE GOODS FROM THE ALLEGED SUPPLIERS. THE ASSESSEE HAS PURCHASED THE GOODS FROM SOME UNDISCLOSED PARTIES IN CASH AND JUST OBTAINED BOGUS BILLS IN FICTITIOUS NAMES AND MADE THE PAYMENT TO GIVE A COLOR OF GENUINE PURCHASES. THE ASSESSEE HAS BEEN UNABLE TO GIVE ANY CONVINCI NG OR COGENT EXPLANATION AS TO HOW THESE GOODS HAPPENED TO COME IN HIS POSSESSION. LOGICAL CONCLUSION WHICH MAY BE DRAWN IN SUCH A SITUATION IS THAT THE ASSESSEE HAS RECORDED SALES IN THE BOOKS OF ACCOUNTS WHICH MATERIALS ARE PURCHASED FROM THE UNDISCLOSED PARTIES WITHOUT BILLS AT COMPARATIVELY LESSER PRICES. TO REGULARIZE THE PURCHASES FROM UNDISCLOSED PARTIES, THE ASSESSEE HAS TAKEN ACCOMMODATION BILLS FROM THE ABOVE SAID PARTIES. THE ASSESSEE BY HIS MYSTERIOUS AND CLANDESTINE DEALINGS, HAS NOT ONLY EVADED THE EXCISE DUTY AND SALE TAXES, BUT ALSO CAUSED GREAT LOSS TO THE REVENUE. THE FIRST AND FOREMOST IS THAT HE HAS TAKEN AWAY THE RIGHT OF THE REVENUE FOR CROSS - VERIFICATION OF HIS BOGUS PURCHASES AND HIS BOOK RESULT. IT IS TO BE NOTED THAT IT IS THE INALIENABLE RIGHT OF THE DEPARTMENT TO CROSS VERIFY WHEREVER THERE IS REASONABLE DOUBT ON THE BOOKS OR BOOK RESULT OF THE ASSESSEE. THE SECOND, HE HAS MANIPULATED HIS PURCHASES TO THE DISADVANTAGE OF THE REVENUE AS HE PLEASES. HE CIRCUMVENTED THE PROVISION S OF 40A (3) AND OTHER SECTIONS OF THE ACT TO HIS ADVANTAGE. FINALLY, CAUSED LOSS TO REVENUE BY MANIPULATING THE PURCHASES . P A G E | 4 ITA NO. 6554/MUM/2017 AY: 2010 - 11 M/S. RICHI JEWEL VS. ITO WD - 18(3)(2) THE A.O ON THE BASIS OF HIS AFORESAID OBSERVATIONS CONCLUDED THAT THE ASSESSEE HAD FAILED TO SUBSTANTIATE THE VERACITY OF THE PURCHASE TRANSACTIONS CLAIMED TO HAVE BEEN MADE FROM THE AFOREMENTIONED PARTY, VIZ. M/S HARSH METAL CORPORATION . THE A.O NOT BEING INSPIRED BY THE CORRECTNESS OF THE BOOKS OF ACCOUNTS OF THE ASSESSEE , REJECTED THE SAME UNDER SEC. 145(3) OF THE ACT. THE A.O OBSERVED THAT AS THE ASSESSEE HAD NEITHER PRODUCED THE ALLEGED SUPPLIER FOR EXAMINATION, NOR PLAC ED ON RECORD ITS CONFIRMATION , THEREFORE, IT HAD FAILED TO DISCHARGE THE PRIMARY ONUS TO PROVE THE GENUINENESS OF THE PURCHASE TRANSACTIONS UNDER CONSIDERATIO N. THE A.O IN THE BACKDROP OF THE AFORESAID FACTS OBSERVED THAT AS THE ASSESSEE HAD MADE THE PURCHASES OF THE GOODS UNDER CONSIDERATION, THOUGH NOT FROM THE AFOREMENTIONED PARTY, BUT FROM CERTAIN UNIDENTIFIED SOURCES, THEREFORE, IT COULD SAFELY BE CONCLUD ED THAT IT HAD BENEFITTED BY SAVING ON THE EXCISE AND SALE TAX COMPONENT IN RESPECT OF THE SAID PURCHASES. THE ASSESSEE DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS IN ORDER TO AVAIL P EACE OF MIND VOLUNTARILY AGREED FOR AN ADDITION OF 12.5% OF THE VALUE OF THE BOGUS PURCHASES OF RS.11,84,844/ - . THE A.O DELIBERATING ON THE FACTS OF THE CASE MADE AN ADDITION/DISALLOWANCE @ 12.5% OF THE BOGUS PURCHASES OF RS.11,84,844/ - , AND MADE AN ADDITION OF RS.1,48,106/ - IN THE HANDS OF THE ASSESSEE. 3. AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). THE ASSESSEE SUBMITTED BEFORE THE CIT(A) THAT AS IT HAD PRODUCED THE PURCHASE BILLS, SALE BILLS, LEDGER ACCOUNTS, BANK AND CASH BOOK, STOCK REGISTER ETC BEFORE THE A.O, THEREFORE , THE PRIMARY ONUS SO CAST UPON IT AS REGARDS PROVING THE IDENTITY OF THE PARTY AND THE GENUINENESS OF THE TRANSACTION S WAS DULY DISCHARGED . HOWEVER, THE CIT(A) AFTER DELIBERATING ON THE CONTENTION S OF THE ASSESSEE DID NOT FIND FAVOUR WITH THE SAME. THE CIT( A) FINDING HIMSELF AS BEING IN P A G E | 5 ITA NO. 6554/MUM/2017 AY: 2010 - 11 M/S. RICHI JEWEL VS. ITO WD - 18(3)(2) AGREEMENT WITH THE VIEW TAKEN BY THE A.O THAT THE ASSESSEE HAD FAILED TO SUBSTANTIATE THE GENUINENESS AND VERACITY OF THE PURCHASE TRANSACTIONS UNDER CONSIDERATION, THEREFORE, IN THE TOTALITY OF THE FACTS CONCLUDED THAT THE A SSESSEE HAD MADE THE PURCHASE S UNDER CONSIDERATION FROM THE PARTIES OTHER THAN THOSE MENTIONED IN THE BOOKS OF ACCOUNTS. THE CIT(A) ADVERTING TO THE QUANTIFICATION OF THE PROFIT WHICH THE ASSESSEE WOULD HAVE GENERATED FROM MAKING THE AFOREMENTIONED PURCHAS ES , RELIED ON THE JUDGMENT OF THE HONBLE HIGH COURT OF GUJARAT IN THE CASE OF COMMISSIONER OF INCOME - TAX VS. SIMIT P. SHET H (2013) 356 ITR 451 (GUJ) AND CONFIRMED THE DISALLOWANCE OF 12.5% OF THE VALUE OF THE BOGUS PURCHASE S MADE BY THE A.O . 4. THE ASSESSEE BEING AGGRIEVED WITH THE ORDER OF THE CIT(A) HAD CARRIED THE MATTER IN APPEAL BEFORE US. THE LD. AUTHORIZED REPRESENTATIVE (FOR SHORT A.R) FOR THE ASSESSEE SUBMITTED THAT AS THE ASSESSEE HAD ALREADY ACCOUNTED FOR A GROSS PROFIT OF 7. 8 5% IN ITS BOOKS OF ACCOUNT , THEREFORE, THE ADDITION IN THE HANDS OF THE ASSESSEE SHOULD HAVE BEEN RESTRICTED TO THE EXTENT OF 4.65 % (I.E 12.5% ( - ) 7. 8 5%) OF THE VALUE OF THE BOGUS PURCHASES . PER CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE ( FOR SHORT D.R) RELIE D ON THE ORDER S OF THE LOWER AUTHORITIES. 5. WE HAVE HEARD THE AUTHORIZED REPRESENTATIVES FOR BOTH THE PARTIES, PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT IT REMAINS AS A MATTER OF FACT THAT THE ASSESSE E HAD FAILED TO SUBSTANTIATE THE GENUINENESS AND VERACITY OF THE PURCHASES CLAIMED TO HAVE BEEN MADE FROM THE AFOREMENTIONED HAWALA PARTY, VIZ. M/S HARSH METAL CORPORATION. RATHER , WE FIND THAT THE ASSESSEE HAD DURING THE COURSE OF THE ASSESSMENT PROCEEDIN GS P A G E | 6 ITA NO. 6554/MUM/2017 AY: 2010 - 11 M/S. RICHI JEWEL VS. ITO WD - 18(3)(2) VOLUNTARILY AGREED FOR A G.P. ADDITION OF 12.5% OF THE BOGUS PURCHASES MADE FROM THE AFOREMENTIONED PART Y . WE ARE OF THE CONSIDERED VIEW THAT THE CIT(A) AFTER TAKING COGNIZANCE OF THE ORDER OF THE ITAT, AHMEDABAD IN THE CASE OF THE VIJAY PROTEINS LTD. VS. ACIT (1996) 58 ITD 428 AND THE JUDGMENT OF THE HONBLE HIGH COURT OF GUJARAT IN THE CASE OF COMMISSIONER OF INCOME - TAX VS. SIMIT P. SHETH (2013) 356 ITR 451 (GUJ) , HAD UPHELD THE DISALLOWANCE MADE BY THE A.O @ 12.5% OF THE VALUE OF THE BOGUS PURCH ASES. WE ARE OF THE CONSIDERED VIEW THAT NOT ONLY THE QUANTUM OF ADDITION MADE BY THE LOWER AUTHORITIES IS FOUND TO BE IN CONFORMITY WITH THE VIEW TAKEN BY THE COORDINATE BENCHES OF THE TRIBUNAL, BUT RATHER, THE FACT THAT THE ASSESSEE HAD DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS ON ITS OWN AGREED FOR A N ADDITION OF 12.5% OF THE VALUE OF THE BOGUS PURCHASES , FORTIFIED THE ADDITION MADE BY THE A.O. WE THUS, FINDING NO REASON TO DISLODGE THE WELL REASONED QUANTIFICATION OF THE PROFIT INVOLVED IN MAKING OF THE BOGUS PURCHASES BY THE ASSESSEE, THEREFORE, UPHOLD THE SAME . BEFORE PARTING, WE MAY HEREIN OBSERVE THAT WE ARE UNABLE TO PERSUADE OURSELVES TO ACCEPT THE CONTENTION OF THE LD. A.R THAT AS THE ASSESSEE HAD ALREADY ACCOUNTED FOR A G.P OF 7.85% IN ITS BOOKS OF ACCOUNTS, THEREFORE, THE ADDITION OF 12.5% SHOULD HAVE BEEN SCALED DOWN TO THE SAID EXTENT. WE ARE OF THE CONSIDERED VIEW THAT AS THE ADDITION OF 12.5% OF THE BOGUS PURCHASES BY THE LOWER AUTHORITIES IS BASED ON THE BENEFITS WHICH THE ASSESSEE COULD SAFELY BE HELD TO HAVE MADE B Y PURCHAS ING THE GOODS AT A LOWER RATE FROM THE OPEN/GREY MARKET, I.E BY SAVING ON THE EXCISE AND SALE TAX COMPONENT, CASH DISCOUNTS ETC., THEREFORE, THE PROFIT ACCOUNTED FOR BY THE ASSESSEE ON THE SALE OF THE SAID GOODS IN ITS BOOKS OF ACCOUNT WOULD HAVE NO BEARING ON THE QUANTIFICATION OF THE AFORESAID PROFIT AT 12.5%. WE THUS FINDING NO REASON TO DISLODGE THE WELL REASONED ORDER OF THE CIT(A), THEREFORE, IN TERMS OF OUR AFORESAID OBSERVATIONS UPHOLD THE SAME . P A G E | 7 ITA NO. 6554/MUM/2017 AY: 2010 - 11 M/S. RICHI JEWEL VS. ITO WD - 18(3)(2) 6. THE AP PEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER PRO NOUNCED IN THE OPEN COURT ON 0 7 . 02.2018 S D / - S D / (G.S. PANNU) (RAVISH SOOD) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; 07 .02.2018 PS. ROHIT KUMAR / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI P A G E | 8 ITA NO. 6554/MUM/2017 AY: 2010 - 11 M/S. RICHI JEWEL VS. ITO WD - 18(3)(2)