RELIANCE FORGE (INDIA), MUMBAI V. INCOME TAX OFFICER WARD 19(3)(1), MUMBAI

ITA 6661/MUM/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 3768 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-03-2020
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 26-11-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SATISH CHANDRA RAJORE
• Keywords: Bogus purchase; Question of law; Onus to prove

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH SMC, MUMBAI BEFORE SHRI R.C. SHARMA, ACCOUNTANT MEMBER & SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO.6661 /MUM/2018 : A.Y : 2009-10 M/S. RELIANCE FORGE (INDIA) 109/6, DR. M G MAHIMTURA MARG, GROUND FLOOR 3 RD KUMBHARWADA LANE MUMBAI 400 004 VS. INCOME TAX OFFICER, WARD 19(3)(1) MUMBAI PAN NO: AAEFR7494P ASSESSEE BY : NONE REVENUE BY : SHRI SATISHCHANDRA RAJORE DATE OF HEARING : 26/02/2020 DATE OF PRONOUNCEMENT : 02/03/2020 O R D E R PER R.C. SHARMA, ACCOUNTANT MEMBER THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A)- 6, MUMBAI DATED 06/06/2018 FOR A.Y.2009-10 IN THE M ATTER OF ORDER PASSED U/S.143(3) R.W.S. 147 OF THE INCOME TAX ACT, 1961. 2. IN THIS APPEAL ASSESSEE IS AGGRIEVED FOR CONFIRM ING ADDITION OF 12.5% OF ALLEGED BOGUS PURCHASES MADE BY THE ASSESS EE. 3. NOBODY APPEARED ON BEHALF OF THE ASSESSEE INSPIT E OF ISSUANCE AND SERVICE OF NOTICE AND NO ADJOURNMENT PETITION WAS A LSO FILED BY ASSESSEE, THEREFORE, BENCH DECIDED TO DISPOSE THE APPEAL AFTE R CONSIDERING THE CONTENTION OF LD. DR AND MATERIAL PLACED ON RECORD. ITA NO.6661/MUM/2018 M/S. RELIANCE FORGE (INDIA) 2 4. WE HAVE GONE THROUGH THE ORDERS OF THE AUTHORITI ES BELOW AND FOUND FROM RECORD THAT AO GOT INFORMATION FROM SALE S TAX DEPARTMENT REGARDING ASSESSEE INVOLVED IN TAKING ACCOMMODATION BILL WITHOUT PHYSICAL DELIVERY OF THE GOODS. ACCORDINGLY, ASSESSMENT WAS REOPENED AND DURING THE COURSE OF RE-ASSESSMENT PROCEEDINGS, AO MADE DE TAILED ENQUIRY WITH REGARD TO THE ALLEGED PURCHASES AND FOUND THAT PURC HASES WERE NOT GENUINE, ACCORDINGLY, AO ADDED ONLY 12.5% OF ALLEGE D BOGUS PURCHASES IN ASSESSEES INCOME BY FOLLOWING THE DECISION OF GUJA RAT HIGH COURT IN CASE OF SIMIT P SHETH 356 ITR 451. 5. BY THE IMPUGNED ORDER, CIT(A) CONFIRMED THE ACTI ON OF THE AO AFTER OBSERVING AS UNDER:- 8.3 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE, DISCUSSION OF THE AO IN THE ASSESSMENT ORDER, ORAL CONTENTIONS AND SU BMISSIONS OF THE APPELLANT AND MATERIAL AVAILABLE ON RECORD. IN THE PRESENT CASE, THERE IS OVERWHELMING EVIDENCE IN THE FORM OF INFORMATION WI TH REGARD TO THE SUPPLIERS, GIVEN BY THE SALES TAX AUTHORITIES THAT THEY WERE ENGAGED ONLY IN ISSUING HAWALA BILLS AND NO GOODS WERE EVER SUPPLIE D BY THEM. AFTER WEIGHING THE EVIDENCE PROS AND CONS, I FIND THAT TH E APPELLANT HAS NOT RECONCILED THE PURCHASES WITH THE ITEMS SOLD AND FA ILED TO RECONCILE 1:1 OF THE ITEMS PURCHASED AND SOLD. ONUS IS ALWAYS ON THE APP ELLANT TO PROVE AS TO HOW THE MATERIAL PURCHASED WAS FIRSTLY OBTAINED. I RECORD A FINDING OF FACT HERE THAT THE APPELLANT FAILED TO FURNISH CRUCIAL E VIDENCES LIKE PROOF OF DELIVERY OF PURCHASES, TRANSPORT CHALLANS AND GOODS INWARD REGISTER AT GODOWN ETC., EITHER BEFORE THE LD. AO OR BEFORE ME. THUS, IT CAN BE SAFELY PRESUMED THAT EITHER THEY ARE NON-EXISTENT OR EVEN IF THEY DID EXIST, THEY WERE NOT BACKED BY SUFFICIENT EVIDENCE TO UNDERGO THE TE ST OF SCRUTINY. 8.3.1 THE SUPPLIER WAS IN FACT THE APPELLANT'S WITN ESS AND THE LD. AO WAS NOT REQUIRED TO FORCE THEIR ATTENDANCE. IT WAS FOR THE APPELLANT TO PRODUCE THEM AS PER CIVIL PROCEDURE CODE WHICH APPLIES ON ALL FO URS TO THE INCOME-TAX PROCEEDINGS. IT IS TRITE THAT ONCE A TRANSACTION IS SHOWN TO BE OF THE NATURE OF INCOME, THE ONUS SHIFTS TO THE ASSESSEE TO SHOW THA T THE SAME IS NOT TAXABLE. IT CAN THUS SAFELY BE ASSUMED THAT THE APPELLANT HAS G ROSSLY FAILED IN HIS DUTY TO MITIGATE THE BURDEN CAST UPON IT IN SO FAR AS PROVI NG THE GENUINENESS OF THE TRANSACTION FROM THE SAID PARTIES ARE CONCERNED. ITA NO.6661/MUM/2018 M/S. RELIANCE FORGE (INDIA) 3 8.3.2 IN THIS REGARD, IT IS ALSO PERTINENT TO MENTI ON THAT WHILE DEALING WITH THE CONCEPT OF BURDEN OF PROOF, ONUS OF PROVING IS ALWA YS ON THE PERSON WHO MAKES THE CLAIM AND NOT ON THE REVENUE. WHILE DEALI NG WITH THE ISSUE OF DECIDING THE BURDEN OF PROOF, HON'BLE SUPREME COURT IN THE CASES OF CIT VS. DURGAPRASAD MORE 82 ITR 540 AND SUMATI DAYAL VS. CI T 214 ITR 801 HAS HELD THAT THE APPARENT MUST BE CONSIDERED REAL UNTI L IT IS SHOWN THAT THERE ARE REASONS TO BELIEVE THAT THE APPARENT IS NOT REAL AN D THAT TAXING AUTHORITIES ARE ENTITLED TO LOOK INTO SURROUNDING CIRCUMSTANCES TO FIND OUT THE REALITY AND THE MATTER HAS TO BE CONSIDERED BY APPLYING THE TES T OF HUMAN PROBABILITIES. THE HON'BLE COURT ALSO HELD THAT, IT IS NO DOUBT, T RUE THAT IN ALL CASES IN WHICH A RECEIPT IS SOUGHT TO BE TAXED AS INCOME THE BURDEN LIES ON THE DEPARTMENT TO PROVE THAT IT IS WITHIN THE TAXING PR OVISION AND IF A RECEIPT IS IN THE NATURE OF INCOME, THE BURDEN TO PROVE THAT IT I S NOT TAXABLE BECAUSE IT FALLS WITHIN EXEMPTION PROVIDED BY THE ACT, LIES UPON THE ASSESSEE. IN THE CASE OF DURGAPRASAD MORE (SUPRA), THE HONORABLE COURT WENT ON TO ADD THAT A PARTY WHO RELIES ON A RECITAL IN A DEED HAS TO ESTABLISH THE TRUTH OF THIS RECITAL, OTHERWISE IT WILL BE VERY EASY TO MAKE SELF-SERVING STATEMENTS IN DOCUMENTS EITHER EXECUTED OR TAKEN BY A PARTY WHO RELIED ON T HOSE RECITALS. IF ALL THAT AN ASSESSEE WHO WANTS TO EVADE TAX HAS TO HAVE SOME RE CITALS MADE IN A DOCUMENT EITHER EXECUTED BY HIM OR EXECUTED IN HIS FAVOUR THEN THE DOOR WILL BE LEFT WIDE OPEN TO EVADE TAX. THE HON'BLE COURT F URTHER HELD THAT THE TAXING AUTHORITIES WERE NOT REQUIRED TO PUT ON BLIN KERS WHILE LOOKING AT THE DOCUMENTS PRODUCED BEFORE THEM. THEY WERE ENTITLED TO LOOK INTO THE SURROUNDING CIRCUMSTANCES TO FIND OUT THE REALITY O F THE RECITALS MADE IN THOSE DOCUMENTS. 8.3.3 THE ONUS TO PROVE THAT APPARENT, IS NOT THE R EAL ONE, IS ON THE PARTY WHO CLAIMS IT TO BE SO, AS HELD BY THE HON'BLE SUPREME COURT IN THE CASE OF CIT V. DAULAT RAM RAWATMULL [1973] 87 ITR 349 AND CIT V. DURGA PRASAD MORE (SUPRA). IN THE LATTER CASE, IT HAS BEEN HELD BY TH E APEX COURT THAT THOUGH AN APPARENT STATEMENT MUST BE CONSIDERED REAL UNTIL IT WAS SHOWN THAT THERE WERE REASONS TO BELIEVE THAT APPARENT WAS NOT THE R EAL, IN A CASE WHERE AN AUTHORITY RELIED ON SELF SERVING RECITALS IN DOCUME NTS, IT WAS FOR THE PARTY TO ESTABLISH THE PROOF OF THOSE RECITALS; THE TAXING A UTHORITIES WERE ENTITLED TO LOOK INTO THE SURROUNDING CIRCUMSTANCES TO FIND OUT REALITY OF SUCH RECITALS. 8.3.4 IT IS ALSO A SETTLED LEGAL PROPOSITION THAT I F NO EVIDENCE IS GIVEN BY THE PARTY TO WHOM THE BURDEN IS CAST, THE ISSUE MUST BE FOUND AGAINST HIM. THEREFORE, ONUS IS ALWAYS ON A PERSON WHO ASSERTS A PROPOSITION OR FACT, WHICH IS NOT SELF-EVIDENT. THE ONUS, AS A DETERMINI NG FACTOR OF THE WHOLE CASE CAN ONLY ARISE IF THE TRIBUNAL, WHICH IS VESTED WIT H THE AUTHORITY TO DETERMINE, FINALLY ALL QUESTIONS OF FACT, FINDS THE EVIDENCE PRO & CON, SO EVENLY BALANCED THAT IT CAN COME TO NO CONCLUSION, THEN, THE ONUS WILL DETERMINE THE MATTER. THERE CANNOT BE ANY DOUBT THA T ONUS AS A DETERMINING FACTOR COMES INTO PLAY WHERE, EITHER THERE IS NO EV IDENCE ON EITHER SIDE, OR WHERE IT IS EQUALLY WORTHLESS OR WHERE IT IS EQUALL Y BALANCED. IT IS IMPERATIVE ITA NO.6661/MUM/2018 M/S. RELIANCE FORGE (INDIA) 4 TO MENTION HERE THAT WHERE SUCH IS NOT THE CASE AND ALL AVAILABLE EVIDENCE IS CONSIDERED, WITHOUT REFERENCE TO THE ONUS AND WITHO UT RELYING ON THE CIRCUMSTANCES THAT ONUS LIES ON A PARTICULAR PARTY, THE ISSUE IS DETERMINED ON FACTS AND THE ONUS CANNOT BE SAID TO HAVE INFLUENCE D THE DECISIONS. HOWEVER, IN THE INSTANT CASE, THE APPELLANT HAS MISERABLY FA ILED TO LEAD EVIDENCE. 8.3.5 IN THE PRESENT CASE, AO CONCLUDED THAT THE AS SESSEE INDULGED IN NON- GENUINE TRANSACTION AND INTENTION OF INDULGING IN S UCH ACTIVITY IS TO SUPPRESS THE TRUE PROFITS AND TO REDUCE THE TAX LIABILITY. T HEREFORE, AN ADDITION ON ACCOUNT OF A HIGHER MARGIN OF PROFIT IS AIR AND EQU ITABLE. IN THE DECISION OF HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. S IMIT SHETH 356 ITR 451 (GUJ) WHEREIN ALSO IT IS FOUND THAT SOME OF THE ALL EGED SUPPLIERS OF STEEL TO THE ASSESSEE HAD NOT SUPPLIED ANY GOODS BUT HAD ONL Y PROVIDED SALE BILLS AND HENCE, PURCHASES FROM THE SAID PARTIES WERE HELD TO BE BOGUS. THE AO IN THAT CASE ADDED THE ENTIRE AMOUNT OF PURCHASES TO GROSS PROFIT OF THE ASSESSEE. LD. CIT(A) HAVING FOUND THAT THE ASSESSEE HAD INDEED PU RCHASED THOUGH NOT FROM NAMED PARTIES BUT OTHER PARTIES FROM GREY MARKET, P ARTIALLY SUSTAINED THE ADDITION AS PROBABLE PROFIT OF THE ASSESSEE. THE TR IBUNAL HOWEVER, SUSTAINED THE ADDITION TO THE EXTENT OF 12.5%. TAKING INTO AC COUNT THE ABOVE FACTS, THE HON'BLE GUJARAT HIGH COURT HELD THAT SINCE THE PURC HASES WERE NOT BOGUS BUT WERE MADE FROM PARTIES OTHER THAN THOSE MENTION ED IN BOOKS OF ACCOUNTS, ONLY THE PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES COULD BE ADDED TO THE ASSESSEE'S INCOME AND CONCLUDED THAT NO QUESTION OF LAW AROSE IN SUCH ESTIMATION. AS FAR AS ASSESSEE'S RELIANCE ON VARIOU S DECISIONS OF HON'BLE APEX COURT AND HON'BLE ITAT ARE CONCERNED, IT IS ST ATED THAT THEY HAVE BEEN DELIVERED IN RESPECT OF SPECIFIC FACTS OF THOSE CAS ES AND THUS CANNOT BE GENERALIZED. 8.3.6 THE FACTS OF THE PRESENT CASE ARE EXACTLY SIM ILAR TO THE ABOVE CASE. THE APPELLANT MADE PURCHASES FROM EIGHT PARTIES WHO ARE SAID TO BE HAWALA OPERATORS, WHO ARE INDULGED IN PROVIDING BOGUS BILL S WITHOUT SUPPLY OF ANY MATERIAL. UNDER THESE CIRCUMSTANCES, AS THE APPELLA NT COULD NOT PROVE HIS CLAIM OF PURCHASES DEBITED TO THE PROFIT & LOSS ACC OUNT, THERE IS NO OTHER WAY TO THE AO, BUT TO ESTIMATE THE PROFIT ELEMENT EMBED DED ON SUCH PURCHASES. AS STATED EARLIER, THE FACTS OF THE PRESENT CASE ARE E XACTLY SIMILAR TO THE CITED CASE AND RESPECTFULLY FOLLOWING THE ABOVE CITED DEC ISION, THE ACTION OF THE AO IN ESTIMATING THE ADDITION @12,5% ON THE TOTAL PURC HASES FROM THE EIGHT PARTIES IS CONFIRMED. THE AO, IN THE ASSESSMENT ORDER, HAS FURTHER MENTIO NED THAT THE AR OF THE ASSESSEE HAD AGREED FOR THE ADDI TION OF 12.5% OF HAWALA PURCHASES. THEREFORE, THE ASSESSEE SHOULD NOT HAVE HAD ANY GRIEVANCE AT ALL TO FILE THIS APPEAL. ACCORDINGLY, GROUND NOS.4, 5, 6 & 7 OF THE APPEAL ARE TREATED AS DISMISSED. 6. AGAINST THE ABOVE ORDER OF CIT(A), ASSESSEE IS I N FURTHER APPEAL BEFORE US. ITA NO.6661/MUM/2018 M/S. RELIANCE FORGE (INDIA) 5 7. FROM THE RECORD WE FOUND THAT AFTER REOPENING AS SESSMENT, AO MADE DETAILED ENQUIRY BY ISSUE OF NOTICE TO THE SUP PLIERS AND FOUND THAT ASSESSEE HAS TAKEN ACCOMMODATION BILL OF THE PURCHA SES. THEREAFTER, CONSIDERING THE REPLY FILED BY AO, AO ONLY ADDED PR OFIT ELEMENT IN SUCH ALLEGED BOGUS PURCHASES WHICH WORKS OUT AT 12.5%. A GAINST WHICH ASSESSEE APPROACHED TO THE CIT(A). THE CIT(A) HAS D EALT WITH THREADBARE VIDE PARA 8.3 TO 8.3.6 OF HIS APPELLATE ORDER. IN T HIS, THE CIT(A) HAS OBSERVED THAT BEFORE THE AO, ASSESSEE HIMSELF HAS C ONCEDED FOR ADDITION OF 12.5% OF HAWALA PURCHASES, THEREFORE, ASSESSEE S HOULD NOT HAVE ANY GRIEVANCE AT ALL TO FILE APPEAL BEFORE HIM. THEREAF TER, CIT(A) HAS CONSIDERED VARIOUS JUDICIAL PRONOUNCEMENTS ON THE I SSUE AND AFTER APPLYING THE SAME TO THE FACTS OF THE CASE, CONFIRM ED THE ADDITION TO THE EXTENT OF 12.5% OF THE ALLEGED BOGUS PURCHASES. NOT HING WAS PLACED BEFORE US SO AS TO PERSUADE US TO DEVIATE FROM THE FINDINGS OF THE CIT(A). ACCORDINGLY, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF CIT(A) FOR UPHOLDING ADDITION OF 12.5% OF ALLEGED BOGUS PU RCHASES. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 02/03/20 20 SD/- (PAWAN SINGH) SD/- (R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEM BER MUMBAI; DATED 02/03/2020 KARUNA SR.PS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI ITA NO.6661/MUM/2018 M/S. RELIANCE FORGE (INDIA) 6 BY ORDER, (ASSTT. REGISTRAR) ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//