ITO-28(1)(4), Mumbai V. M/S INTERCER ENGG. WORKS, Mumbai

ITA 676/MUM/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 5735 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-02-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 06-02-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bogus purchase; Corroborative evidences; Accommodation entries
• Section: 133(6); 143(1); 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC, BENCH M UMBAI BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBE R ITA NO.676/MUM/2019 ( ASSESSMENT YEAR: 2009-10 ) ITO-28(1)(4) ROOM NO.330, 3 RD FLOOR TOWER NO.6, VASHI RAILWAY STATION COMPLEX, VASHI NAVI MUMBAI-400 703 VS. INTERCER ENGG. WORKS 311, MIDC, TTC THANE BELAPUR ROAD, RABALE, NAVI MUMBAI-400 701 PAN/GIR NO. A AAFI5054L ( APPELLANT ) .. RESPONDENT ) REVENUE BY SHRI ASHISH KUMAR, DR ASSESSEE BY SHRI RAVINDRA POOJARY, AR DATE OF HEARING 30/01/2020 DATE OF PRONOUNCEME NT 14 / 0 2 /20 20 / 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)26, MUMBAI, DATED 26/11/2018 AND IT PERTAINS TO ASSESSMENT YEAR 2009-10. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. ' ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DIRECTING THE A.O. IN RESTRICTING T HE ADDITION TO 12.5% OF RS.7,22,151/-AS AGAINST 100% ADDITION MADE BY THE A O ON ACCOUNT OF BOGUS PURCHASES, WITHOUT APPRECIATING THE FACT THAT ASSESSEE HAD FAILED TO DISCHARGE THE ONUS TO ESTABLISH THE GENUINE OF T HE TRANSACTIONS AND ALSO FAILED TO FURNISH CORROBORATIVE EVIDENCES IN S UPPORT OF HIS CLAIM. 2. THE APPELLANT PRAYS THAT THE ORDER OF LD.CIT(A) ON THE ABOVE GROUNDS BE REVERSED AND THAT OF THE AO BE RESTORED. ITA NO.676/MUM/2019 INTERCER ENGG.WORKS 2 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A PARTNERSHIP FIRM, WHICH IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF GLASS BOTTLES MOULDS, FILED ITS RETURN OF INCOME FOR AY 2009-10 ON 16/09/2009, DECLARING TOTAL INCOME OF RS. 14,87,730 /- AND SAID 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 B ASIS 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 2 OF H IS ASSESSMENT ORDER AMOUNTING TO RS. 7,22,151/-. 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 13/03/2016 AND DETERMIN ED TOTAL INCOME OF RS. 22,09,881/-, AFTER MAKING 100% ADDITIONS TOW ARDS ALLEGED BOGUS PURCHASE FROM THOSE PARTIES AND MADE ADDITION S OF RS. 7,22,151/-. 4. 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 ELABORATE WRITTEN SUBMISSIONS, ON THE ISSUE, WHICH HAS BEEN REPRODUCED AT PARA 5 ON PAGES 2 TO 3 OF LD.CIT(A) O RDER. THE SUM AND SUBSTANCE OF ARGUMENTS OF THE ASSESSEE BEFORE T HE LD.CIT(A) ARE THAT PURCHASE FROM THE ABOVE PARTY IS GENUINE, WHICH IS SUPPORTED BY NECESSARY EVIDENCES. THEREFORE, NO ADD ITIONS COULD BE MADE ON THE BASIS OF INFORMATION RECEIVED FROM THIR D PARTY. THE LD.CIT(A), AFTER CONSIDERING RELEVANT SUBMISSION OF THE ASSESSEE ITA NO.676/MUM/2019 INTERCER ENGG.WORKS 3 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:- 6.1 GROUNDS NO.1 & 2 OF THE APPEAL ARE AGAINST ADD ITION OF 100% OF ALLEGED BOGUS PURCHASE AS INCOME OF THE APPELLANT. AS PER THE INVESTIGATIONS CARRIED OUT BY THE SALES TAX AUTHORI TIES, THE AFOREMENTIONED PARTY WAS FOUND TO BE INVOLVED IN GI VING ACCOMMODATION ENTRIES ONLY WITHOUT ACTUALLY SUPPLYING THE GOODS. THE LOGICAL INFERENCE IS THAT THE PURCHASES MADE BY THE APPELLANT WOULD ALSO BE IN THE NATURE OF ACCOMMODATION ENTRIES ONLY. TO VERIFY THE SAME, THE AO HAD MADE ENQUIRIES BY ISSUING NOTICES U/S 133(6) WHICH WERE RETURNED UNSERVED BY THE POSTAL AUTHORITIES. THIS PARTY WAS FOUND TO BE NON EXISTENT AT THE ADDRESS GIVEN BY THE APPELLANT. THE APPELLANT ALSO FAILED TO PROVIDE THE LATEST ADDRESS OF THE PARTY. DURING THE SCRUTINY A SSESSMENT THE APPELLANT FURNISHED DETAILS OF PURCHASES AND CORRESPONDING SA LES. HOWEVER, THE APPELLANT COULD NOT PRODUCE DELIVERY CHALLANS OR TR ANSPORTATION DETAILS. THE ONUS OF PROVING THE GENUINENESS OF SUCH PURCHAS ES IS ON THE APPELLANT WHICH THE APPELLANT HAD NOT BEEN ABLE TO DISCHARGE FULLY. WHEN THE HAWALA PARTY HAD ADMITTED ON OATH THAT IT HAD G IVEN ACCOMMODATION ENTRIES ONLY WITHOUT ACTUALLY SUPPLYING THE GOODS, THE GENUINENESS OF PURCHASES MADE FROM THESE PARTIES WILL HAVE TO BE C ONSIDERED TAKING THIS INTO CONSIDERATION WHILE EXAMINING THE DOCUMENTATIO N SUBMITTED BY THE APPELLANT IN SUPPORT OF ITS CLAIM. THE DOCUMENTARY EVIDENCES SUCH AS PURCHASE BILLS PAYMENTS BY CHEQUES WOULD ALL HAVE BEEN ORCHESTRATED TO PRESENT A FAADE OF GENUINENESS AND DOES NOT NECESS ARILY MEAN THAT THE PURCHASES FROM THESE PARTIES ARE GENUINE. THE COURT S HAVE HELD THAT PAYMENT BY CHEQUE BY ITSELF IS NOT SACROSANCT SO AS TO PROVE GENUINENESS OF PURCHASES WHEN THE SURROUNDING CIRUC MSANCES ARE SUSPECT. HOWEVER, THE APPELLANT HAS SHOWN ONWARD SA LES WHICH HAS NOT BEEN DOUBTED BY THE ASSESSING OFFICER. SINCE, THERE CAN BE NO SALES WITHOUT CORRESPONDING PURCHASE, THE ONLY LOGICAL EX PLANATION IS THAT THE APPELLANT WOULD HAVE MADE PURCHASES FROM UNDISCLOSE D PARTIES IN THE GREY MARKET AT LOWER RATES AND PURCHASES WERE SHOWN AS BEING MADE FROM THE IMPUGNED PARTIES TO SUPPRESS ITS PROFITS. IN SUCH SITUATION, THE VARIOUS COURTS INCLUDING THE HONBLE GUJARAT HIGH C OURT IN THE CASE OF CIT VS SIMIT P.SHETH, 356 ITR 451 HAVE HELD THAT NO T THE ENTIRE PURCHASES BUT ONLY THE PROFIT ELEMENT EMBEDDED IN T HESE PURCHASE WAS TO BE DISALLOWED AND ACCORDINGLY HELD THAT 12.5% OF THE PURCHASES WILL BE REASONABLE AS PROFIT ON MARGIN AGAINST THE BOGUS PU RCHASES. IN VIEW OF THIS DECISION OF HONBLE GUJARAT HIGH COURT (SUPRA) , THE ADDITION OF THE 100% OF THE BOGUS PURCHASES AT RS. 7,22,151/- MADE BY THE AO IS RESTRICTED TO 12.5% OF THE SAME WHICH SHOULD SUFFIC IENTLY COVER THE PROFIT ELEMENT EMBEDDED IN THE IMPUGNED PURCHASES. THE APP ELLANTS GROUNDS OF APPEAL ARE PARTLY ALLOWED. ITA NO.676/MUM/2019 INTERCER ENGG.WORKS 4 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 ON ALLEGED B OGUS 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 THE LD. DR AND ALS O, MATERIAL AVAILABLE ON RECORD, WE FIND THAT BOTH THE SIDES HA VE FAILED TO PROVE THE CASE IN THEIR FAVOUR WITH NECESSARY EVIDENCES. 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. FURTHER, MERE PAYMENT BY CHEQUE DOES NOT PRO VE THE GENUINENESS OF PURCHASE, MORE PARTICULARLY WHEN OTH ER CIRCUMSTANTIAL EVIDENCE SAYS OTHERWISE. AT THE SAME TIME, THE LD. ITA NO.676/MUM/2019 INTERCER ENGG.WORKS 5 AO HAD ALSO FAILED TO TAKE THE INVESTIGATION TO A L OGICAL CONCLUSION BY CARRYING OUT NECESSARY ENQUIRES, BUT HE SOLELY RELI ED 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 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% PROFIT ADDITIONS, WHEREAS THE LD.CIT(A) H AS SCALED 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 ITA NO.676/MUM/2019 INTERCER ENGG.WORKS 6 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 TAKEN ONE OF THE POSSIBLE VIEW AND ESTIM ATED 12.50% GROSS PROFIT ON ALLEGED BOGUS PURCHASES TO SETTLE DISPUTE BETWEEN THE PARTIES AND HENCE, WE ARE INCLINED TO UPHOLD OR DER 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 14 /02/ 2020 SD/- ( SAKTIJIT DEY ) SD/- ( G. MANJUNATHA ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 14/02/2020 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//