LAVINA GWALANI, MUMBAI V. ITO, WARD 22 (2)(3), MUMBAI

ITA 6692/MUM/2019

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 4385 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-09-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2008-2009
• Appeal Filed On: 25-10-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SANJAY J SETHI
• Keywords: Bogus purchase; Search and seizure; Accommodation entries; Reassessment proceedings
• Section: 133(6); 143(1); 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (VIRTUAL COURT) SMC BENCH, MUMBAI BEFORE SHRI C.N. PRASAD, HON'BLE JUDICIAL MEMBER AND SHRI MANOJ KUMAR AGGA RWAL, HON'BLE ACCOUNTANT MEMBER ITA NO S . 6691 & 6692/ MUM/20 19 (A.Y S : 2007 - 08 & 2008 - 09) LAVINA GWALANI 28, VEENA BEENA, GURUNANAK ROAD BANDRA (W), MUMBAI - 400050 PAN: AAKPG2410J V. INCOME TAX OFFICER 22(2)(3 ) MUMBAI (APPELLANT) (RESPONDENT) ASSESSEE BY : NONE DEPARTMENT BY : SHRI SANJAY J. SETHI DATE OF HEARING : 02.09.2021 DATE OF PRONOUNCEMENT : 02 .09.2021 O R D E R PER C.N. PRASAD (JM) 1. THESE APPEALS ARE FILED BY THE ASSESSEE AGAINST COMMON ORDER OF THE LEARNED COMMISS IONER OF INCOME TAX (APPEALS) 34 , MUMBAI [HEREINAFTER IN SHORT LD.CIT(A)] DATED 06.08.2019 FOR THE A.Y. 20 07 - 08 AND 2008 - 09 , IN RESTRICTING THE DISALLOWANCE TO 12.5% OF PURCHASES AS AGAINST THE 25% OF THE PURCHASES DISALLOWED AS NON - GENUINE/BOGUS BY THE ASSESSING OFFICER . 2 ITA NOS. 6691 & 6692/MUM/2019 LAVINA GWALANI 2. BRIEFLY STATED THE FACTS ARE THAT, ASSESSEE ENGAGED IN BUSINESS OF EXPORTER OF JEWELLERY, FILED RETURN OF INCOME ON 31.10.2007 AND 29.09.2008 DECLARING INCOME OF . 4,26,701/ - AND . 3,16,570 / - FOR THE A.Y.2007 - 08 AND A.Y. 2008 - 09 RESPECTIVELY, AND THE RETUR N S WAS PROCESSED U/S. 143(1) OF THE ACT. SUBSEQUENTLY, ASSESSING OFFICER RECEIVED INFORMATION FROM THE DGIT (INV.,), MUMBAI ABOUT THE ACCOMMODATION ENTRIES PROVIDED BY VARIOUS DEALERS AND ASSESSEE WAS ALSO ONE OF THE BENEFICIARY FROM THOSE DEALERS. THE A SSESSMENT S WERE REOPENED U/S. 147 OF THE ACT BASED ON THE INFORMATION RECEIVED FROM DGIT(INV.), MUMBAI, THAT THE ASSESSEE HAS AVAILED ACCOMMODATION ENTRIES FROM VARIOUS DEALERS WHO ARE SAID TO BE PROVIDING ACCOMMODATION ENTRIES WITHOUT THERE BEING TRANSPOR TATION OF ANY GOODS. IN THE REASSESSMENT PROCEEDINGS, THE ASSESSEE WAS REQUIRED TO PROVE THE GENUINENESS OF THE PURCHASES MADE FROM VARIOUS PARTIES AS MENTIONED THE ASSESSMENT ORDER. IN RESPONSE ASSESSEE FURNISHED PURCHASE BILL ISSUED BY THE PARTY, COPY OF LEDGER ACCOUNT, COPY OF BANK ACCOUNT WHEREIN CHEQUE ISSUED BY THE ASSESSEE AND SUBMITTED THAT THE PURCHASES MADE FROM THE PARTIES ARE GENUINE. ASSESSEE FURTHER SUBMITTED THAT THE PAYMENTS ARE MADE THROUGH ACCOUNT PAYEE CHEQUES AS SUCH CONTENDED THAT AL L THE PURCHASES ARE GENUINE. 3 ITA NOS. 6691 & 6692/MUM/2019 LAVINA GWALANI 3. NOT CONVINCED WITH THE SUBMISSIONS OF THE ASSESSEE THE ASSESSING OFFICER TREATED THE PURCHASES AS NON - GENUINE AND HE WAS OF THE OPINION THAT ASSESSEE HAD OBTAINED ONLY ACCOMMODATION ENTRIES WITHOUT THERE BEING ANY TRANSPORTATIO N OF MATERIALS AND THE ASSESSEE MIGHT HAVE MADE PURCHASES IN THE GRAY MARKET. ASSESSING OFFICER OBSERVED THAT THE NOTICES ISSUED U/S. 133(6) OF THE ACT TO THE PARTIES ARE RETURNED UNSERVED AND THE ASSESSEE HAS NOT PRODUCED THE PARTIES BEFORE THE ASSESSING OFFICER. IT IS THE FINDING OF THE ASSESSING OFFICER THAT THE ASSESSEE FAILED TO PRODUCE THE PARTIES TO PROVE THE GENUINENESS OF THE TRANSACTIONS. THEREFORE, ASSESSING OFFICER TREATED 2 5 % OF THE ALLEGED BOGUS PURCHASES OF . 3,33,795 / - AND . 21,55,932 / - FOR THE A.Y. 2007 - 08 AND A.Y. 2008 - 09 RESPECTIVELY AS NON - GENUINE. ON APPEAL THE LD.CIT(A) CONSIDERING THE EVIDENCES AND VARIOUS SUBMISSIONS OF THE ASSESSEE RESTRICTED THE DISALLOWANCE TO 12.5% OF PURCHASES . 4. INSPITE OF ISSUE OF NOTICE NONE APPEARED ON BEHALF OF ASSESSEE NOR ANY ADJOU RNMENT WAS SOUGHT. THEREFORE, WE PROCEED TO DISPOSE OF THESE APPEALS ON MERITS ON HEARING LD.DR. 5. LD. DR VEHEMENTLY SUPPORTED THE ORDERS OF THE ASSESSING OFFICER. 4 ITA NOS. 6691 & 6692/MUM/2019 LAVINA GWALANI 6. WE HAVE HEARD LD.DR, PERUSED THE ORDERS OF THE AUTHORITIES BE LOW. ON A PERUSAL OF THE ORDER OF THE LD.CIT(A), WE FIND THAT THE LD.CIT(A) CONSIDERED THIS ASPECT OF THE MATTER ELABORATELY WITH REFERENCE TO THE SUBMISSIONS OF THE ASSESSEE AND THE AVERMENTS IN THE ASSESSMENT ORDER AND FOLLOWING VARIOUS JUDICIAL PRONOUNC EMENTS ALONG WITH THE DECISION OF THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT V. SIMIT P. SHETH [356 ITR 451] RESTRICTED THE ADDITION TO 12.5% OF PURCHASES. WHILE HOLDING SO, THE LD.CIT(A) OBSERVED AS UNDER: - 5.5. CONCLUSION ON CASE LAWS: THE NET CONCLUSION THAT CAN BE ARRIVED AT FROM THE ABOVE DISCUSSION IS THAT WHERE THE SALES AND PURCHASES ARE VERIFIABLE AND PROVEN E.G. TO OR FROM GOVERNMENT BODIES OR AGENCIES ETC NO ADDITION MAY BE MADE. IF HOWEVER, THE PURCHASES ARE BOGUS BUT THE DIREC T SALES ARE PROVED, THE ASSUMPTIONS ARE THAT THE PURCHASES WERE M ADE FROM UNKNOWN PARTIES AND THE AO CAN APPLY A PROFIT RATE TO DETERMINE THE LIABILITY OF THE APPELLANT. IT IS ALSO SEEN THAT PUTTING AN ONUS ON THE AQ TO TRACE THE MONEY TRAIL OR VERIFY THE WITHDRAWALS FROM THE BANKS ETC MAY GIVE MORE POINTERS BUT IT IS NOT SUFFICIENT BY ITSELF AND THE ITAT HAS NOT ACCEPTED SUCH AN ARGUMENT IN THE CASE OF SHRI GANPATRAJ A.SANGHAVI (SUPRA). IF THE BOGUS PURCHASES ARE UNPROVED AND ARE DECLARED CONSUMED BY APPE LLANT ITSELF IN ITS TRADING, MANUFACTURING OR NON - TRADING ACTIVITI ES, THE ENTIRE ADDITION CAN BE M ADE AS IT ONLY GOES TO INFLATE THE EXPENSES OF THE APPELLANT. (RE FER M /S. SHORELINE HOTEL PVT. LTD VS. CIT CENTRAL - 1 IN ITA N0.964/M/2015 DATED 19.05.2015). 5.6 IN VIEW OF THE ABOVE, IT IS AN ADMITTED FACT THAT SALES TAX DEPARTMENT HAS CONDUCTED SEARCH AND SEIZURE OPERATION AND HAS ESTABLISHED LARGE NUMBER OF COMPANIES/FIRMS/PARTNERSHIP CONCERNS AS HAWALA DEALERS WHO ARE ENGAGED IN ACCOMMODATION ENTRIES WITHOU T ACTUALLY SUPPLYING THE GOODS. THE APPELLANT IS ONE OF THE BENEFICIARY AND HAS RECEIVED SUCH ACCOMMODATION BILLS FROM ONE OF THE HAWALA OPERATOR TO THE EXTENT OF RS.3,33,795/ - . THE A.O. ATTEMPTED TO VERIFY SUCH PARTY BY MAKING INDEPENDENT ENQUIRIES U/S.1 33(6) OF THE I.T. ACT, 1961. IN RESPONSE TO NOT ICE U/S. 133(6) 5 ITA NOS. 6691 & 6692/MUM/2019 LAVINA GWALANI ISSUED, THE PARTY FILED THEIR COPY OF ACKNOWLEDGEMENT OF THE RETURN OF INCOME, COPY OF INVOICE, LEDGER OF THE APPELLANT IN THEIR BOOKS AND PHOTOCOPY OF BANK STATEMENT THE ONUS SHIFTED ON TH E APPELLANT PARTICULARLY IN THE BACKGROUND OF FINDING OF SALES TAX DEPARTMENT, MUMBAI. THE APPELLANT FILED CERTAIN DETAILS SUCH AS PURCHASE BILLS, LEDGER ACCOUNT, BANK STATEMENT ETC. HOWEVER, SOME OF THE SPECIFIC DETAILS REQUIRED TO ESTABLISH THE GENUIN ENESS OF PURCHASE SUCH AS EVIDENCE OF TRANSPORTATION OF GOODS, ENTRY OF GOODS IN THE STOCK REGISTER, ONE TO ONE CONSUMPTION PA TTERN OF ALLEGED PURCHASE ITEMS , CONFIRMATION FROM THE PARTIES CONCERNED ETC COULD NOT BE SUBMITTED BEFORE THE AO. NOR THE PRINCIPLE OFFICER OF THESE CONCERNS WAS PRODUCED BEFORE THE AO FOR EXAMINATION. HOWEVER, IT IS ALSO A FACT THAT THE AO HAS NOT QUESTIONED THE TOTAL SALE COMPONENT AND IF THERE IS A SALE, THERE SHOULD BE PURCH ASE. THE APPELLANT BEING A TRADING CONCERN, HAS INDULGED IN USING SUCH ACCOMMODATION ENTRY. AS EVIDENT FROM CATENA OF JUDGMENTS ON BOGUS PURCHASES, ONLY THE BENEFIT DERIVED BY USING SUCH ACCOMMODATION ENTRIES HAS TO BE BROUGHT TO TAX. THE ADVANTAGES FROM USING SUCH BOGUS BILLS ARE IN THE FORM OF SAVING VAT, SAVING OF TRANSPORTATION CHARGES AND VARIOUS TAXES ETC. THE AO HAS RIGHTLY DISALLOWED PART OF THE PURCHASES CLAIMED SUCH HAWALA DEALERS. H OWEVER, IN MY OPINION, THE RATIO OF THE JUDGMENT OF HON BLE G UJARAT HIGH COURT IN THE CASE OF SIMIT P. SETH 356 ITR 461 (GUJ.) IS APPLICABLE TO THE FACTS AND CIRCUMSTANCES OF THE A PPELLANT'S CASE. HERE, THE HONBLE COURT HAS HELD THAT DISALLOWANCE OF 12.5% OF THE PURCHASES FROM SUCH HAWALA DEALERS WILL BE JUSTIFIED BASED ON THE PREMISE THAT THE APPELLANT HAVE DERIVED BENEFIT TO THIS EXTENT BASED ON HIS NATURE OF BUSINESS. THUS THE DISALLOWANCE OF PURCHASE IS UPHELD IN PRINCIPLE BUT IT SHOULD BE BASED ON RATIO OF SIMIT P. SETH 356 ITR 461 (GUJ.) AS THE APPELLANT IS A TRADE R NOT MANUFACTURER. THUS THE A.O. IS DIRECTED TO RESTRICT THE DISALLOWANCE TO THE EXTENT OF 12.5% OF PURCHASE FROM SUSPICIOUS DEALERS. THUS, THE GROUND OF APPEAL IS PARTLY ALLOWED. I N THE RESULT, THE APPEAL FOR AY 2007 - 08 IS PARTLY ALLOWED. B. A.Y.20 08 - 09 (I.T.NO. 10403): 1.1. THE FACTS AND CIRCUMSTANCES OF THIS CASE ARE ABSOLUTELY IDENTICAL TO THAT OF A.Y.2007 - 08 EXCEPT THAT THE BILLS FOR BOGUS PURCHASES IN THIS YEAR ARE AS UNDER: SR. NO. NAME OF THE ENTITY AMOUNT (RS.) 1. M/S.ANKITA EXPORTS 10,20,042/ - 2 M/S. PRIME STAR 11,35,890/ - ' TOTAL 21,55,932 6 ITA NOS. 6691 & 6692/MUM/2019 LAVINA GWALANI 1.2. ON THE BASIS OF ARGUMENTS, DISCUSSION AND RELIANCE OF CASE LAWS, 25% DISALLOWANCE OF PURCHASES MADE BY THE A.O. IS UPHELD IN PRINCIPLE BUT RESTRICTED TO 12.5%. THE GROUND OF APPEAL FILED BY THE APPELLANT ON THIS ISSUE IS THEREFORE, PARTLY ALLOWED. 1.3 . IN THE RESULT, THE APPEAL FOR A.Y.2008 - 09 IS PARTLY ALLOWED . 7. ON A CAREFUL PERUSAL OF THE ORDER OF THE LD.CIT(A) AND THE REASONS GIVEN THEREIN, AND TAKING THE TOTALITY OF FACTS AND CIRCUMSTANCES INTO CONSID ERATION W E ARE OF THE VIEW THAT IT WOULD BE JUST AND PROPER TO RESTRICT THE ADDITION TO 8 % OF THE NON - GENUINE PURCHASES AS AGAINST 25 % DISALLOWED BY THE ASSESSING OFFICER IN BOTH THE SE A SSESSM ENT Y EARS . T HUS, WE DIRECT THE ASSESSING OFFICER TO RECOMPUTE THE INCOME OF THE ASSESSEE BY RESTRICTING THE DISALLOWANCE OF NON - GENUINE PURCHASES IN BOTH THESE ASSESSMENT YEARS TO 8 % . G ROUNDS RAISED BY THE ARE PARTLY ALLOWED . 8. IN THE RESULT, APPEAL S OF THE ASSESSEE ARE PARTLY ALLOWED . ORDER PRONOUNCED IN THE VIRTUAL COURT ON 02.09.2021. SD/ - SD/ - (MANOJ KUMA R AGGARWAL) (C.N. PRASAD) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI / DATED 02 .09.2021 GIRIDHAR, SR.PS 7 ITA NOS. 6691 & 6692/MUM/2019 LAVINA GWALANI COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY// BY ORDER (ASSTT. REGISTRAR) ITAT, MUM