ITO,WARD 2(4), KALYAN V. SHANTA ANIL GARAD, AMBERNATH

ITA 7017/MUM/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 6851 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-01-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2011-2012
• Appeal Filed On: 07-12-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V VINOD KUMAR
• Assessee Lawyers: S M MAKHIJA
• Keywords: Bogus purchase; Principle of natural justice; Rule of consistency; Accommodation entries
• Section: 143(3); 133(6); 13; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH G, MUMBAI BEFORE SHRI PAWAN SINGH (JM) & SHRI S. RIFAUR RAHMA N (A.M.) ITAS 7017 & 7018/MUM/2018(AY : 2011-12 & 2010-11) ITO, WD.2(4), KALYAN VS SMT. SHANTA ANIL GARAD, PR OP. SHIVSHAKTI TRADING CO 1518/ 1 & 2, MIDC SHED, MORIVALI VILLAGE, AMBERNATH PAN : AGLPG8260F APPELLANT RESPONDEDNT ITAS 7212 & 7213/MUM/2018(AY: 2010-11 & 2011-12) SMT. SHANTA ANIL GARAD, PROP. SHIVSHAKTI TRADING CO 1518/ 1 & 2, MIDC SHED, MORIVALI VILLAGE, AMBERNATH PAN : AGLPG8260F VS ITO, WD.2(4), KALYAN APPELLANT RESPONDEDNT APPELLANT BY SHRI V VINODKUMAR SR DR ASSESSEE BY SHRI S.M. MAKHIJA ADVOCATE DATE OF HEARING 20-01-2020 DATE OF PRONOUNCEMENT 20-01-2020 O R D E R PER PAWAN SINGH, JM : 1. THIS SET OF FOUR APPEALS TWO CROSS APPEALS EACH FOR AYS 2010-11 2011- 12 ARE DIRECTED AGAINST THE INDEPENDENT ORDERS OF T HE CIT(A)-3, THANE DATED 24-03-2018. IN ALL THE APPEALS, THE RESPECTI VE PARTY HAS RAISED CERTAIN COMMON GROUNDS OF APPEAL. FACTS FOR BOTH T HE ASSESSMENT YEARS ARE SAME EXCEPT FOR VARIATION IN FIGURE OF AD DITION ON ACCOUNT OF BOGUS PURCHASES. THEREFORE, ALL FOUR APPEALS WERE CLUBBED, HEARD AND 2 ITAS 7017, 7018 & 7212, 7213/MUM/2018 ARE DECIDED BY THIS CONSOLIDATED ORDER. FOR APPREC IATION OF FACTS, APPEAL FOR AY 2010-11 ARE TREATED AS LEAD CASE. 2. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE IS IN THE BUSINESS OF SUPPLY OF CHEMICAL PIGMENT AND SOLVENTS, FILED HER RETURN OF INCOME FOR AY 2010-11 ON 04-10-2010 DECLARING INCOME OF RS.6.00 L AKHS (APRROX). THE RETURN WAS INITIALLY ACCEPTED U/S 143(3) ON 04- 05-2011. SUBSEQUENTLY, THE CASE WAS REOPENED ON THE BASIS OF INFORMATION RECEIVED FROM SALES-TAX DEPARTMENT GOVERNMENT OF MA HARASHTRA. THE INFORMATION WAS RECEIVED THAT CERTAIN PARTIES WERE INVOLVED IN PROVIDING ACCOMMODATION ENTRIES WITHOUT ACTUAL DELI VERY OF GOODS. THE SALES TAX DEPARTMENT ALSO FORWARDED A LIST OF B ENEFICIARY OF SUCH HAWALA DEALERS AND ITS BENEFICIARY. THE NAME OF AS SESSEE APPEARED IN THE LIST OF SUCH PERSONS, WHO HAVE AVAILED SUCH HAW ALA ENTRIES. ON THE BASIS OF SUCH INFORMATION, THE AO REOPENED THE ASSE SSMENT ORDER U/S 147. NOTICE U/S 148 WAS ISSUED TO THE ASSESSEE DUR ING THE RE- ASSESSMENT PROCEEDINGS. THE AO NOTED THAT THE ASSE SSEE HAS AVAILED / SHOWN FOLLOWING PURCHASES FROM THE PARTIES WHOSE NA MES WERE SHOWN IN THE LIST OF HAWALA DEALERS. NO. NAME OF THE ENTRY PROVIDER AMOUNT IN THE BILLS TAKEN BY THE ASSESSEE IN 1 ADINATH ENTERPRISES 11,77,889/- 3 ITAS 7017, 7018 & 7212, 7213/MUM/2018 2 SAJ ENTERPRISES 9,23,386/- 3 SHAH INDUSTRIES 7,020/- 4 RAMDEV TRADING 9,69,800/- 5 MAGNUM ENTERPRISES 2,71,856/- 6 MONIL IMPEX 9,84,266 7 ANKUR SALES CORPORATION 91,125/- 8 MOKSH TRADING COMPANY 14,65,947/- 9 SOMNATH INTERNATIONAL 10,28,327/ - 10 SHRADHHA TRADING CO 10,75,485/- 11 AMI TRADERS 5,73,221/- 12 MERIDIAN SALES AGENCY PVT LTD 6,64,801/- 13 MARSHAL ENTERPRISES 16,26,302/- 14 SMARTLINK TRADE PRIVATE LIMITED 8,40,133/- TOTAL 1,16,00,558/- 3. DURING THE RE-ASSESSMENT, THE ASSESSING OFFICER ISS UED NOTICES TO ALL THE PARTIES UNDER SECTION ( U/S) 133(6) OF INCOME TAX A CT. HOWEVER, NOTICES WERE RETURNED BACK WITH THE REMARK, NOT KN OWN/UNCLAIMED/ REFUSED. THE AO ASKED THE ASSESSEE TO PRODUCE TH E PARTIES FOR VERIFICATION, BUT THE ASSESSEE FAILED TO PRODUCE TH E PARTIES. THE AO, ON THE BASIS OF INFORMATION RECEIVED FROM INVESTIGATIO N WING OF THE DEPARTMENT AND SALES-TAX DEPARTMENT, REJECTED THE B OOKS OF ACCOUNT OF THE ASSESSEE AND DISALLOWED 100% OF SUCH BOGUS PURC HASES, IN HIS ASSESSMENT ORDER DATED 12-06-2014. ON APPEAL BEFOR E CIT(A), THE LD.CIT(A) RESTRICTED THE ADDITION TO THE EXTENT OF 12.5% OF SUCH BOGUS PURCHASES. THUS, AGGRIEVED BY THE ORDER OF LD. CIT (A), BOTH THE PARTIES HAVE FILED THEIR RESPECTIVE APPEAL BY RAISI NG THE GROUNDS OF 4 ITAS 7017, 7018 & 7212, 7213/MUM/2018 APPEAL, WHICH WE HAVE EXTRACTED BELOW. THE ASSESSEE ITS APPEAL IN ITA NO.7212/MUM/2018 HAS RAISED THE FOLLOWING GROUNDS O F APPEAL:- 1. THE LD. CIT (APPEALS) HAS SERIOUSLY ERRED IN CO NFIRMING THE ACTION OF ASSESSING OFFICER IN REOPENING VALIDLY COMPLETED AS SESSMENT. I) ONLY ON THE BASIS OF INFORMATION RECEIVED FRO M SALES TAX DEPARTMENT TO THE EFFECT THAT ASSESSEE HAD TAKEN HAWALA BILLS FRO M SOME PARTIES INSTEAD OF ACTUALLY PURCHASING GOODS. II) WITHOUT MAKING ANY INDEPENDENT INQUIRIES/ DUE APPLICATION OF MIND. III) IN VIOLATION OF PRINCIPLES OF NATURAL JUSTICE BY NOT PROVIDING THE COPY OF STATEMENT RECORDED/ AFFIDAVIT FILED BEFORE SALES TAX DEPARTMENT AND NOT ALLOWING CROSS EXAMINATION OF THE ALLEGED HAWALA DE ALER. 2. WITHOUT PREJUDICE TO THE ABOVE APPELLANT SUBMI TS THAT LD CIT (APPEALS) HAS SERIOUSLY ERRED IN CONFIRMING THE ADDITION @ 12.50% OF THE ALLEGED BOGUS PURCHASES WITHOUT APPRECIATING THAT I) AS DECIDED BY VARIOUS JUDICIAL FORUMS UNDER S ITUATIONS ALIKE OF THE ASSESEE WHAT IS TO BE ADDED IS THE PROFIT ELEMENT E MBADED IN THE TRANSACTION WHICH IN ASSESEE'S CASE IS 2.89% ONLY. II) THAT ASSESSEE HAS PAID VAT ON ALLEGED BOGUS PUR CHASE TO THE MAHARASTRA VAT AUTHORITIES @12.50%, DEDUCTION FOR W HICH HAS TO BE ALLOWED WHILE MAKING ADDITION. III) ASSESSEE HAS ALREADY DECLARED GROSS PROFIT ON ALL THE PURCHASE RECORDED INCLUDING ALLEGED BOGUS PURCHASES @ 13.20% WHICH SUM ALSO IS REQUESTED TO BE REDUCED OUT OF THE ESTIMATED ADDITI ON MADE BY LD. CIT (A) (5)12.50% PROPOSED TO BE ADDED AS HAS BEEN HELD BY VARIOUS JUDICIAL AUTHORITIES. 4. THE REVENUE IN ITS CROSS APPEAL HAS RAISED FOLLOWIN G GROUNDS OF APPEAL: (1) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, LD CIT-(A) HAS ERRED IN LAW BY NOT APPRECIATING THE FACT THAT ASSESSEE COUL D NOT ESTABLISH THE GENUINENESS OF THE PURCHASES FROM NON-EXISTENT VEND ORS AS PER THE INFORMATION RECEIVED FROM SALES-TAX DEPARTMENT AGENCIES AND EST ABLISHED BY THE ASSESSING OFFICER. 5 ITAS 7017, 7018 & 7212, 7213/MUM/2018 (2) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT (A) HAS ERRED IN LAW BY NOT APPRECIATING THE FACT THAT THE ONUS TO JUSTIFY THE CLAIM OF EXPENSES IS ON THE ASSESSEE AND THE SAME HAS FAILED TO DISCHARGE IT IN RELATION TO CHANGES MADE FROM THE NON-EXISTENT VENDORS ? (3) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, LEARNED CIT(A) HAS ERRED IN LAW BY IGNORING THE FACT THAT THE ASSESSEE COULD NOT SUBSTANTIATE ITS CLAIM OF PURCHASE FROM NON-EXISTENT VENDORS BY MEANS OF SUPP ORTING DOCUMENTS RELATED TO MOVEMENTS OF GOODS, STOCK REGISTER ETC, TO ARRIVE AT DISALLOWANCE AT 12.5% OF THE PURCHASE FROM THE NON-EXISTENT VENDORS ? (4) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE UNDER LAW, THE LEARNED CIT(A) WAS JUSTIFIED IN NOT APPRECIATING THE LAW CO RRECTLY THAT ONCE THE PURCHASES ARE UNVERIFIABLE/NOT GENUINE/BOGUS, THE S AME SHOULD HAVE BEEN DISALLOWED IN ENTIRETY, PARTICULARLY IN VIEW OF THE RATIO OF DECISION OF HONOURABLE GUJARAT HIGH COURT IN TAX APPEAL NO. 242 OF 2003 DATED 20/06/2016 IN THE CASE OF N. K. PROTEINS LTD VERSU S DCIT, AGAINST WHICH THE SLP WAS DISMISSED BY HONOURABLE APEX COURT. (5) IT IS HUMBLY REQUESTED THAT ORDER OF THE LEARNED CI T(A) MAY BE VACATED AND THAT OF AO MAY BE RESTORED. 5. WE HAVE HEARD THE SUBMISSIONS OF LD.AR OF THE ASSES SEE AND THE LD. DR FOR THE REVENUE AND PERUSED THE MATERIAL AVAILAB LE ON RECORD. 6. AT THE OUTSET OF HEARING, THE LD.AR OF THE ASSESSEE SUBMITS THAT THE GROUNDS OF APPEAL RAISED BY ASSESSEE AS WELL AS REV ENUE ARE COVERED BY THE DECISION OF TRIBUNAL IN ASSESSEES OWN CASE FOR AY 2009-10 IN ITA NO.4961/MUM/2018 DATED 07-11-2019. 7. ON THE OTHER HAND, THE LD. DR FOR THE REVENUE SUPPO RTED THE ORDER OF ASSESSING OFFICER. THE LD. DR FURTHER SUBMITS THAT SALES-TAX DEPARTMENT AND INVESTIGATION WING OF THE DEPARTMENT MADE FULL-FLEDGED 6 ITAS 7017, 7018 & 7212, 7213/MUM/2018 ENQUIRY ABOUT THE MODUS OPERANDI OF HAWALA TRADERS, WHO WERE INDULGING IN PROVIDING ACCOMMODATION ENTRIES WITHOU T ACTUAL DELIVERY OF GOODS. IN THE CASE OF THE ASSESSEE, THE ASSESSE E FAILED TO PROVE THE GENUINENESS OF TRANSACTION. THE ASSESSEE WAS SPECI FICALLY ASKED TO PROVE THE TRANSPORTATION OF GOODS. THE ASSESSEE FA ILED TO BRING ANY EVIDENCE ON RECORD TO PROVE THE TRANSPORTATION OF G OODS TO THE ASSESSEE. THE LD. CIT(A) RESTRICTED THE ADDITION TO THE EXTEN T OF 12.5% DESPITE THE FACT THAT ASSESSEE FAILED TO PROVE THE GENUINEN ESS OF ENTIRE TRANSACTION. THE LD DR FOR THE REVENUE SUBMITS THAT THE ASSESSEE HAS SHOWN BOGUS PURCHASES ONLY TO INFLATE THE EXPENSES FOR REDUCING THE NET PROFIT. 8. IN REJOINDER SUBMISSION, THE LD.AR OF THE ASSESSEE SUBMITS THAT DURING THE FIRST APPELLATE STAGE, THE LD.CIT(A) SOUGHT THE REMAND REPORT FROM THE AO. THE AO FURNISHED HIS REMAND REPORT WHICH I S DULY RECORDED BY LD. CIT(A) AT PARA 6.1 OF THE IMPUGNED ORDER WHE REIN THE AO HAS CATEGORICALLY MENTIONED THAT THE GOODS WERE TRANSPO RTED THROUGH GOVIND TRANSPORT, BHIWANDI. 9. WHILE HEARING THE SUBMISSION OF THE ASSESSEE WE HAD NOTED THAT LD CIT(A) IN HIS ORDER HAS REFERRED THE DECISION OF TR IBUNAL IN ITA NO. 6161 &6162/MUM/20117 DATED 12-01-2018 AND 24-07-201 8 FOR AY 7 ITAS 7017, 7018 & 7212, 7213/MUM/2018 2009-10 IN ASSESSEES HUSBAND CASE, THUS, WE DIRECT ED THE LD AR FOR THE ASSESSEE TO PLACE THOSE DECISION OF CO-ORDINATE BE NCH. IN COMPLIANCE OF OUR DIRECTION, THE LD. AR FOR THE ASSESSEE PLACE D THE DECISIONS ON RECORD. 10. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTIES A ND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE AO DURING THE RE -ASSESSMENT PROCEEDINGS ISSUED NOTICES TO THE HAWALA PARTIES U/ S 133(6) OF THE ACT. ALL THE NOTICES WERE RETURNED UNSERVED WITH THE REM ARK OF POSTAL AUTHORITIES NOT KNOWN/UNCLAIMED/ REFUSED. TH E ASSESSEE WAS ASKED TO PRODUCE THE PARTIES. THE AO RECORDED THAT ASSESSEE FAILED TO PRODUCE THE PARTIES. THE AO REJECTED THE BOOKS OF ACCOUNT WITHOUT SPECIFYING ANY REASON AND DISALLOWED 100% OF THE PU RCHASES. 11. THE ASSESSEE IS IN THE BUSINESS OF CHEMICAL PIGMEN TS AND SUPPLIER OF SOLVENTS, I.E TRADER IN CHEMICALS. THE AO HAS NOT DOUBTED THE SALES OF ASSESSEE. IT IS SETTLED LAW THAT NO SALE IS POSSI BLE WITHOUT PURCHASES. THE AO HAS NOT EXAMINED THE PREVIOUS AND SUBSEQUENT YEARS GROSS PROFIT ON SIMILAR TRANSACTIONS. BEFORE THE LD. CIT (A), THE ASSESSEE STATED THAT THEY HAVE SHOWN GP OF 13% AND GP ON THE BUSINESS CARRIED OUT BY THE ASSESSEE IS 10% TO 15%. THE ASSESSEE HA S SHOWN NET PROFIT OF 2.89%. THE LD. CIT(A) RESTRICTED THE ADDITION T O THE EXTENT OF 8 ITAS 7017, 7018 & 7212, 7213/MUM/2018 12.5%. THE LD. AR OF THE ASSESSEE HAS STRONGLY REL IED UPON THE DECISION OF TRIBUNAL IN ASSESSEES OWN CASE FOR AY 2009-10. 12. WE HAVE NOTED THAT IN AY 2009-10, THE ASSESSEE HAS SHOWN GP @13.30% AND NP OF 4.9%. HOWEVER, FOR THE YEAR UNDE R CONSIDERATION, THE ASSESSEE HAS SHOWN GROSS PROFIT @13.20% AND NET PROFIT OF 2.89%. THE MAIN CONTENTION OF LD. DR FOR THE REVENUE IS TH AT THE ASSESSEE HAS SHOWN BOGUS PURCHASES ONLY TO INFLATE THE EXPENSES FOR REDUCING THE NET PROFIT. WE HAVE NOTED THAT THE NET PROFIT FOR THE YEAR UNDER CONSIDERATION IS DECREASED SUBSTANTIALLY. THEREFOR E, THE FACT FOR THE YEAR UNDER CONSIDERATION IS AT VARIANCE TO ASSESSME NT YEAR 2009-10. 13. IN OUR VIEW THAT IN CASE THE PURCHASES ARE UNVERIF IABLE DUE TO ANY REASON, EITHER THE FACTS WERE NOT INVESTIGATED PROP ERLY BY AO OR THE ASSESSEE FAILED TO DISCHARGE HIS ONUS. THE REVENUE IS ENTITLED TO TAX THE REAL INCOME COMPONENT AND NOT THE ENTIRE TRANSACTIO N. CONSIDERING THE FACT THAT FOR THE YEAR UNDER CONSIDERATION THE ASSE SSEE HAS SHOWN NET PROFIT @ 2.89% AND IN AY 2009-10 THE ASSESSEE HAS S HOWN NET PROFIT AT 4.90% AND IN AY 2008-09 AT 3.52%; IN AY 2007-08 AT 4.12%. THEREFORE, IN OUR VIEW A REASONABLE PERCENTAGE OF D ISALLOWANCE WILL BE SUFFICIENT TO FULFIL THE POSSIBILITY OF REVENUE LEA KAGE. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE AND THE DECISIO N OF TRIBUNAL ON 9 ITAS 7017, 7018 & 7212, 7213/MUM/2018 IDENTICAL SET OF FACTS IN ASSESSEES HUSBANDS CASE , WHO IS ALSO DOING SIMILAR BUSINESS ACTIVITY, THE CO-ORDINATE BENCH RE STRICTED THE ADDITION TO 8% OF THE TOTAL BOGUS PURCHASES. THEREFORE, WE DIRECT THE AO TO RESTRICT THE DISALLOWANCE @8% OF THE TOTAL ALLEGED / DISPUTED / BOGUS PURCHASES. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PART LY ALLOWED. ITA NO.7213/MUM/2018(AY 2011-12) 14. THE ASSESSEE HAS RAISED IDENTICAL GROUNDS OF APPEAL AS HAS BEEN RAISED IN APPEAL FOR AY 2010-11 WHEREIN WE HAVE RESTRICTED THE DISALLOWANCE TO 8% OF THE ALLEGED BOGUS PURCHASES. THEREFORE, K EEPING IN VIEW THE PRINCIPLE OF CONSISTENCY, THE DISALLOWANCE FOR THE YEAR UNDER CONSIDERATION IS ALSO DIRECTED TO BE RESTRICTED TO 8%. 15. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALL OWED. ITAS 7018&7017/MUM/2018(AYS 2010-11 & 2011-12 BY RE VENUE) 16. CONSIDERING THE FACT THAT WE HAVE RESTRICTED THE DI SALLOWANCE ON ACCOUNT OF BOGUS PURCHASES TO 8% IN ASSESSEES APPE AL, THE APPEALS FILED BY REVENUE HAVE BECOME INFRUCTUOUS AND ARE DI SMISSED AS INFRUCTUOUS. 17. AS A RESULT, THE APPEALS FILED BY THE ASSESSEE ARE PARTLY ALLOWED AND THE APPEALS FILED BY THE REVENUE ARE DISMISSED. 10 ITAS 7017, 7018 & 7212, 7213/MUM/2018 ORDER PRONOUNCED IN THE OPEN COURT ON 20 -01-2 020. SD/- SD/- (S. RIFAUR RAHMAN) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIALMEMBER MUMBAI, DT : 20 TH JANUARY, 2019 PK/- COPY TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR /TRUE COPY/ BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI