NADEEM YUSUF SARA, MUMBAI V. INCOME TAX OFFICER 21(2)(4), MUMBAI

ITA 6935/MUM/2017

• Counselvise Citation: [2018] 130 COUNSELVISE.COM (IT) 0022 (ITAT-MUMBAI)
• Duration Of Justice: 3 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-03-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 07-12-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ARJU GARODIA
• Assessee Lawyers: MRS RUCHI M RATHOD
• Keywords: Bogus purchase; Onus to prove
• Section: 133(6); 68

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI B.R. BASKARAN (AM) I.T.A. NO. 6935/MUM/2017 (ASSESSMENT YEAR 2009-1 0) I.T.A. NO. 6936/MUM/2017 (ASSESSMENT YEAR 2010-1 1) I.T.A. NO. 6938/MUM/2017 (ASSESSMENT YEAR 2012-1 3) SHRI NADEEM YUSUF SARA FLAT NO. 101, NIGHAHE KARAM CHS LTD. S.V. SAVARKAR MARG MAHIM, MUMBAI. PAN : BLFPS0265L VS . ITO, WARD 21(2)(4) 1 ST FLOOR PIRAMAL CHAMBERS PAREL, LALBAUG MUMBAI-400 012. (APPELLANT) (RESPONDENT) ASSESSEE BY MRS. RUCHI M. RATHOD DEPARTMENT BY MS. ARJU GARODIA DATE OF HEARING 22.2.2018 DATE OF PRONOUNCEMENT 26.3.2018 O R D E R ALL THREE APPEALS FILED BY THE ASSESSEE ARE DIRECTE D AGAINST A COMMON ORDER DATED 12.9.2017 PASSED BY THE LEARNED CIT(A)- 33, MUMBAI AND THEY RELATE TO A.YS. 2009-10, 2010-11 & 2012-13. SINCE ISSUES URGED IN THESE APPEALS ARE IDENTICAL IN NATURE, THEY WERE HEARD TO GETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER, FOR THE SAKE OF C ONVENIENCE. 2. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF TRADI NG IN TIMBER AND PLYWOOD UNDER NAME AND STYLE OF M/S. N.Y. TIMBERS. THE REVENUE RECEIVED INFORMATION FROM SALES TAX DEPARTMENT OF GOVERNMENT OF MAHARASHTRA THAT CERTAIN DEALERS ARE INDULGING IN PROVIDING ACCOMMOD ATION BILLS, WITHOUT ACTUALLY SUPPLYING THE MATERIAL. FROM THE INFORMATI ON FURNISHED BY THE SALES TAX DEPARTMENT, IT WAS NOTICED THAT THE ASSESSEE HE REIN HAS PURCHASED GOODS FROM SOME OF SUCH DEALERS DURING THE THREE YEARS UN DER CONSIDERATION AS DETAILED BELOW :- SHRI NADEEM YUSUF SARA 2 ASSESSMENT YEAR AMOUNT 2009-10 1,87,44,685 2010-11 1,22,12,828 2012-13 1,16,58,941 HENCE THE AO REOPENED THE ASSESSMENTS OF THE ABOVE SAID THREE YEARS. SINCE THE ASSESSEE DID NOT FURNISH CONFIRMATION LETTERS F ROM THE DEALERS AND SINCE NOTICE ISSUED BY THE ASSESSING OFFICER UNDER SECTIO N 133(6) OF THE ACT WAS NOT RESPONDED, THE ASSESSING OFFICER TREATED THE ABOVE SAID PURCHASES AS BOGUS. SINCE THE ASSESSEE HAS SOLD GOODS, THE ASSESSING OF FICER OPINED THAT THE ASSESSEE MIGHT HAVE PURCHASED GOODS FROM SOME OTHER PARTIES AND WOULD HAVE MADE PROFIT BY PURCHASING GOODS AT LOWER RATE. ACCO RDINGLY, THE ASSESSING OFFICER ESTIMATED THE PROFIT FROM THE ABOVE SAID PU RCHASES @ 12.5% BY FOOLING THE DECISION RENDERED BY HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. SIMIT P. SHETH (38 TAXAMN.COM 385). 3. IN A.YS. 2010-11 & 2012-13, THE ASSESSING OFFICE R ALSO NOTICED THAT THE ASSESSEE HAS MAINTAINED AN ACCOUNT WITH HDFC BANK B UT DID NOT DISCLOSE THE SAME IN ITS RETURN OF INCOME. ACCORDINGLY, THE ASSE SSING OFFICER ASSESSED AGGREGATE AMOUNT FOUND CREDITED IN THE BANK ACCOUNT IN THE EACH OF THE ABOVE SAID TWO YEARS AS INCOME OF THE ASSESSEE IN THE RES PECTIVE YEAR. ACCORDINGLY, THE ASSESSING OFFICER ASSESSED A SUM OF ` 29.62 LAKHS IN A.Y. 2010-11 AND ` 17.75 LAKHS IN A.Y. 2012-13. 4. THE ASSESSEE CHALLENGED THE ASSESSMENT ORDERS OF ALL THE THREE YEARS, REFERRED ABOVE, BY FILING APPEALS BEFORE THE LEARNE D CIT(A), BUT COULD NOT WIN IN THOSE APPEALS. ACCORDINGLY, THE ASSESSEE HAS FILED THESE APPEALS BEFORE THE TRIBUNAL. 5. THE FIRST ISSUE RELATES TO THE ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT OF BOGUS PURCHASES. I NOTICED THAT THE ASSE SSEE HAS PLACED RELIANCE ON THE PURCHASE INVOICES AVAILABLE WITH IT AND PAYMENT S MADE TO THE PARTIES. THE ASSESSEE COULD NOT OBTAIN THE CONFIRMATION LETTERS FROM THOSE SUPPLIERS NOR COULD IT PRODUCE THE SUPPLIERS BEFORE THE ASSESSING OFFICER. THE ASSESSING SHRI NADEEM YUSUF SARA 3 OFFICER HAS NOTICED THAT THE SALES TAX DEPARTMENT H AS CONSIDERED THEM TO BE HAWALA DEALERS, I.E., THEY DID NOT SUPPLY ANY MATER IAL ON THE STRENGTH OF BILLS GIVEN BY THEM. HOWEVER, THE ASSESSEE APPEARS TO HA VE RECONCILED THE PURCHASES MADE FROM THE ABOVE SAID SUPPLIERS WITH S ALES. UNDER THESE SET OF FACTS, THE ASSESSING OFFICER HAS TAKEN THE VIEW THA T THE ASSESSEE MIGHT HAVE PURCHASED GOODS FROM SOME OTHER SOURCES AND COULD H AVE OBTAIN BILLS FROM THESE PARTIES. THE AO ALSO TOOK THE VIEW THAT THE A SSESSEE MIGHT HAVE MADE PROFITS BY WAY OF SAVINGS IN VAT TAX AND LOWER RATE S. ACCORDINGLY HE ESTIMATED THE PROFIT FROM THESE PURCHASES @ 12.50%. 6. LEARNED AR SUBMITTED THAT THE VAT RATE APPLICABL E TO THE PRODUCTS PURCHASED FROM THESE DEALERS STOOD AT 4% AND 12.5%. ACCORDINGLY SHE SUBMITTED THAT THE ASSESSING OFFICER WAS NOT JUSTIF IED IN ADOPTING A COMMON RATE OF 12.5% ON ALL PURCHASES MADE BY THE ASSESSEE . SHE FURTHER SUBMITTED THAT THE ASSESSEE HAS RECONCILED PURCHASES AND SALE S AND HENCE NO ADDITION SHOULD HAVE BEEN MADE MERELY FOR THE REASON THAT TH E ASSESSEE COULD NOT PRODUCE THE PARTIES. 7. ON THE CONTRARY, LEARNED DR SUBMITTED THAT THE R ESPONSIBILITY TO PROVE THE GENUINENESS OF PURCHASES IS PLACED UPON THE ASS ESSEE AND IN THE INSTANT CASE, THE ASSESSEE HAS FAILED TO PROVE THE GENUINEN ESS OF PURCHASES BY OBTAINING CONFIRMATION LETTERS FROM THEM OR BY PROD UCING THEM BEFORE THE ASSESSING OFFICER. 8. I HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED T HE RECORD. ADMITTEDLY, THE ASSESSEE COULD NOT CONCLUSIVELY PROVE THE PURCH ASES BY FURNISHING CONFIRMATION LETTERS OBTAINED FROM THE IMPUGNED SUP PERS. THE NOTICES ISSUED BY THE AO TO THE SUPPLIERS HAVE NOT BEEN RESPONDED BY THEM. THESE FACTS SHOW THAT THE IDENTITY OF THE SUPPLIERS HAS NOT BEEN EST ABLISHED BY THE ASSESSEE. UNDER THESE SET OF FACTS, I AM OF THE VIEW THAT THE ASSESSING OFFICER WAS JUSTIFIED IN PRESUMING THAT THE ASSESSEE MIGHT HAVE PURCHASED GOODS FROM SOME OTHER SOURCES. WHEN PURCHASES ARE MADE FROM TH E GREY MARKET, NORMALLY SHRI NADEEM YUSUF SARA 4 APPLICABLE VAT WILL BE SAVED AND THERE IS A POSSIBI LITY THAT THE ASSESSEE MIGHT HAVE PURCHASED GOODS AT A LOWER RATE ALSO. UNDER TH ESE SET OF FACTS, I AM OF THE VIEW THAT THE ASSESSING OFFICER WAS JUSTIFIED IN ES TIMATING THE PROFIT FROM PURCHASES. HOWEVER, I NOTICED THAT THE VAT RATE AP PLICABLE TO THE GOODS PURCHASED BY THE ASSESSEE WAS 4% AND 12.5%. PROFIT THAT MIGHT HAVE BEEN MADE BY THE ASSESSEE BY WAY OF LOWER RATES SHOULD A LSO BE CONSIDERED. HENCE, IT MAY NOT BE PROPER TO APPLY RATE OF 12.5% ON ALL PURCHASES. ACCORDINGLY, I MODIFY THE ORDER PASSED BY THE LEARNED CIT(A) ON TH IS ISSUE AND DIRECT THE ASSESSING OFFICER TO ESTIMATE THE PROFIT FROM IMPUG NED BOGUS PURCHASES @ 10% ON THE ALLEGED BOGUS PURCHASES, WHICH WILL TAKE CARE OF REVENUE LEAKAGES, IF ANY. WE ORDER ACCORDINGLY. 9. THE NEXT ISSUE CONTESTED BY THE ASSESSEE IN A.YS . 2010-11 & 2012-13 RELATE TO ADDITION OF DEPOSITS FOUND IN HDFC BANK A CCOUNT OF THE ASSESSEE. 10. I HAVE HEARD THE PARTIES ON THIS ISSUE AND PERU SED THE RECORD. ADMITTEDLY, THE ASSESSEE DID NOT DISCLOSE THIS BANK ACCOUNT IN ITS BOOKS OF ACCOUNT AS WELL AS IN THE RETURN OF INCOME FILED BE FORE THE ASSESSING OFFICER. BEFORE THE TRIBUNAL, THE ASSESSEE CLAIMED THAT IT H AS BORROWED MONEY FROM CERTAIN PERSONS AND REPAID THE SAME DURING THE SAME YEAR UNDER CONSIDERATION. HOWEVER, IN MY VIEW, FILING OF CONFI RMATION LETTER OBTAINED FROM SO CALLED CREDITORS WOULD NOT MEET THE REQUIREMENTS OF SECTION 68 OF THE ACT. UNDER SECTION 68 OF THE ACT, INITIAL ONUS TO PROVE THE CASH CREDIT IS PLACED UPON THE ASSESSEE I.E. THE ASSESSEE IS REQUIRED TO PROVE THREE MAIN INGREDIENTS VIZ (I) IDENTITY OF CREDITOR, (II) CREDITWORTHINESS OF THE CREDITOR AND (III) GENUINENESS OF THE TRANSACTION. ADMITTEDLY, FILING MERE CONFIRMATION LETTER OBTAINED FROM THE CREDITOR WOULD NOT DISCHARGE THE ONUS PLACED UPON THE ASSESSEE U/S. 68 OF THE ACT. SINCE, THE ASSESSEE FA ILED TO DISCHARGE THE ONUS PLACED UPON HIM, I HAVE NO OTHER OPTION BUT TO CONF IRM THE ORDER PASSED BY LD CIT(A) IN BOTH THE YEARS UNDER CONSIDERATION, WHERE IN HE HAS CONFIRMED ADDITION MADE BY THE ASSESSING OFFICER. SHRI NADEEM YUSUF SARA 5 11. IN THE RESULT, ALL THE THREE APPEALS ARE PARTLY ALLOWED. ORDER HAS BEEN PRONOUNCED IN THE COURT ON 26.3.2 018. SD/- (B.R.BASKARAN) ACCOUN TANT MEMBER MUMBAI; DATED : 26/3/2018 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. BY ORDER, //TRUE COPY// ( SENIOR PRIVATE SECRETARY) PS ITAT, MUMBAI