ITO 26 (2)(3), MUMBAI V. MOHAMMED ALI AZIMULLAH SHAIKH, MUMBAI

ITA 7056/MUM/2018

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 8337 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-03-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 07-12-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KAVITHA P KAUSHIK
• Keywords: Bogus purchase; Accommodation entries
• Section: 133(6); 143(1); 13; 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC, BENCH M UMBAI BEFORE SHRI VIKAS AWASTHY, JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBE R ITA NO.7056/MUM/2018 ( ASSESSMENT YEAR: 2011-12 ) ITO-26(2)(3) BUILDING NO.C-11 7 TH FLOOR PRATYAKSHAKAR BHAVAN BKC, BANDRA (E) MUMBAI-400 051 VS. MOHAMMED ALI AZIMULLAH SHAIKH PROP.OF M/S. M.M.STEEL CORPORATION ROOM NO.20, SUNITA NIWAS CHAWL, STAR GLASS MARG K .A. ROAD, JARIMARI MUMBAI-400 072 PAN /GIR NO. ANUPS0748N ( APPELLANT ) .. RESPONDENT ) REVENUE BY MS. KAVITHA P.KAUSHIK, DR ASSESSEE BY NONE DATE OF HEARING 17/02 /2020 DATE OF PRONOUNCEME NT 13 /03 /20 20 / O R D E R PER G.MANJUNATHA (A.M) : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-38, MUMBAI DATED 21/06/2018 AND IT PERTAINS TO THE A.Y 2011-12. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. ''WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) HAS ERRED IN RESTRICTING THE DISALL OWANCE TO 12.5% OF THE TOTAL AMOUNT OF BOGUS PURCHASE TRANSACTION INSTEAD OF 25% OF THE TOTAL AMOUNT OF BOGUS PURCHASE MADE BY THE AO? 2.'WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) HAS ERRED IN NOT CONSIDERING THAT T HE ADDITION WAS MADE ON THE BASIS OF INFORMATION RECEIVED FROM DIT(INV.) AND SALES TAX ITA NO.7056/MUM/2018 MOHAMMED ALI AZIMULLAH SHAIKH 2 DEPARTMENT, MAHARASHTRA WITH REGARD TO BOGUS PURCHA SE MADE BY THE ASSESSES FROM DEALERS WITHOUT SUPPLY OF ACTUAL GOOD S?' 3. 'WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW, THE LD. CIT (A) HAS ERRED IN NOT CONSIDERING T HAT THE HAWALA OPERATORS HAVE ADMITTED ON OATH BEFORE THE SALES TA X AUTHORITIES THAT THEY HAVE NOT SOLD ANY MATERIAL TO ANYBODY?' 4. ''WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) HAS ERRED IN NOT CONSIDERING T HAT THE ASSESSEE COULD NOT PROVE THE GENUINENESS AND CREDIT WORTHINESS OF PURCHASE TRANSACTIONS DURING THE COURSE OF ASSESSMENT PROCEE DINGS?' 5. THE LD. CIT (A) FAILED TO UPHOLD THE DECISION O F HON'BLE APEX COURT IN THE CASE OF N K PROTEINS LTD. VS. DCIT IN SLP (CIVIL) NO.769/2017 DATED 16.01.2017 WHERE 100% OF ADDITION WAS CONFIRMED BY THE APES COURT?' 6. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT (A) HAS ERRED IN NOT APPRECIATING THE FACT THAT APPLICABILITY OF PROVISI ONS OF SECTION 440A(3) ATTRACTS 100% BOGUS PURCHASES TO BE HELD AS PROFIT ' 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS ENGAGED IN THE BUSINESS OF TRADING IN IRON, STEEL & ROD CUT P IECES ETC., FILED HIS RETURN OF INCOME FOR AY 2011-12 ON 28/09/2011, DECL ARING THE TOTAL INCOME AT RS. 2,36,139/- AND SAID RETURN WAS PROCES SED U/S 143(1) OF THE I.T.ACT, 1961. THE CASE HAS BEEN, SUBSEQUENT LY REOPENED U/S 147 OF THE ACT, ON THE BASIS OF INFORMATION RECEIVE D FROM DGIT, INVESTIGATION, MUMBAI, AS PER WHICH, SALES TAX AUTH ORITIES OF GOVERNMENT OF MAHARASHTRA HAD TAKEN ACTIONS AGAINST NUMBER OF HAWALA DEALERS, WHO HAD ISSUED BOGUS PURCHASE BILLS TO VARIOUS PARTIES IN MUMBAI AND OTHER PLACES. AS PER LIST OF BENEFICIARIES, THE ASSESSEE IS ONE OF THE BENEFICIARY, WHO HAD TAKEN A CCOMMODATION BILLS OF BOGUS PURCHASES FROM VARIOUS PARTIES AS LI STED BY THE AO IN PARA 5 OF HIS ASSESSMENT ORDER AMOUNTING TO RS. 31 ,37,647/-. THE CASE WAS SELECTED FOR SCRUTINY AND THE ASSESSMENT H AS BEEN COMPLETED U/S. 143(3).R.W.S. 147 OF THE I.T.ACT, 19 61 ON 31/08/2016 AND ETERMINED TOTAL INCOME OF RS. 10,20,550/-, AFTE R MAKING 25% ITA NO.7056/MUM/2018 MOHAMMED ALI AZIMULLAH SHAIKH 3 ADDITIONS TOWARDS ALLEGED BOGUS PURCHASE FROM THOSE PARTIES AND MADE ADDITIONS OF RS. 7,84,412/-. 4. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESEE H AS PREFERRED AN APPEAL BEFORE THE LD.CIT (A). BEFORE THE LD.CIT (A), THE ASSESSE HAS REITRATED HIS SUBMISSIONS MADE BEFORE THE AO. T HE SUM AND SUBSTANCE OF ARGUMENTS OF THE ASSESSEE BEFORE THE L D.CIT (A) ARE THAT PURCHASE FROM THE ABOVE PARTY IS GENUINE, WHIC H IS SUPPORTED BY NECESSARY EVIDENCES. THEREFORE, NO ADDITIONS COU LD BE MADE ON THE BASIS OF INFORMATION RECEIVED FROM THIRD PARTY. THE LD.CIT(A), AFTER CONSIDERING RELEVANT SUBMISSION OF THE ASSESS EE AND ALSO, BY FOLLOWING THE DECISION OF HONBLE GUJARAT HIGH COUR T, IN THE CASE OF CIT VS. SIMITH P. SHETH (356 ITR 451) HAS SCALED DO WN ADDITION MADE BY THE AO TOWARDS ALLEGED BOGUS PURCHASES TO 1 2.50% GROSS PROFIT ON TOTAL PURCHASES FROM THOSE PARTIES. 5. NONE APPEARED FOR THE ASSESSEE. WE HAVE HEARD TH E LD. DR, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE T HROUGH ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT THE LD. AO HAS MADE 25% NET PROFIT ADDITION ON ALLEGED BOGUS PURCHASES ON THE G ROUND THAT THE ASSESSEE IS ONE OF THE BENEFICIARY OF ACCOMMODATION ENTRIES OF BOGUS PURCHASE BILLS ISSUED BY HAWALA DEALERS. ACCO RDING TO THE LD. AO, ALTHOUGH ASSESEE HAS FILED CERTAIN BASIC EVIDEN CES, BUT FAILED TO FILE FURTHER EVIDENCE IN THE BACKDROP OF CLEAR FIND ING BY THE SALES TAX DEPARTMENT, MAHARASHTRA THAT THOSE PARTIES ARE INVO LVED IN PROVIDING ACCOMMODATION ENTRIES WITHOUT ACTUAL DELIVERY OF GO ODS. THE LD. AO HAD ALSO TAKEN SUPPORT FROM THE INVESTIGATION CONDU CTED DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AS PER WHICH NOTI CE ISSUED U/S ITA NO.7056/MUM/2018 MOHAMMED ALI AZIMULLAH SHAIKH 4 133(6) TO THE PARTIES WERE RETURNED UN-SERVED BY TH E POSTAL AUTHORITIES. THEREFORE, HE CAME TO THE CONCLUSION T HAT PURCHASES FROM THE SAID PARTIES ARE BOGUS IN NATURE. IT IS TH E CONTENTIONS OF THE ASSESSEE BEFORE THE LOWER AUTHORITIES THAT PURCHASE S FROM THE ABOVE PARTY ARE SUPPORTED BY NECESSARY EVIDENCES. IT HAS FURNISHED ALL POSSIBLE EVIDENCES, INCLUDING BOOKS OF ACCOUNTS; ST OCK DETAILS AND BANK STATEMENT TO PROVE THAT PAYMENT AGAINST SAID P URCHASES 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. 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 ITA NO.7056/MUM/2018 MOHAMMED ALI AZIMULLAH SHAIKH 5 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 25% GROSS PROFIT ADDITIONS, WHEREAS THE LD.CIT (A) HAS SCALED DOWN ADDITION TO 12.50% GROSS PROFIT ON TOTAL ALLEG ED BOGUS PURCHASE. ALTHOUGH, BOTH AUTHORITIES HAVE TAKEN DIF FERENT RATE OF PROFIT FOR ESTIMATION OF INCOME FROM ALLEGED BOGUS PURCHASE, BUT NO ONE COULD SUPPORT SAID RATE OF GROSS PROFIT WITH NE CESSARY EVIDENCES OR ANY COMPARABLE CASES. THEREFORE, CONSIDERING FAC TS AND CIRCUMSTANCES OF THIS CASE AND CONSISTENT WITH VIEW TAKEN BY THE CO- ORDINATE BENCH IN NUMBER OF CASES, WE ARE OF THE CO NSIDERED OPINION THAT THE LD. CIT(A) HAS TAKEN A FAIR VIEW AND HAS E STIMATED 12.50% GROSS PROFIT ON ALLEGED BOGUS PURCHASES TO SETTLE D ISPUTE 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 13 /03/2 020 ITA NO.7056/MUM/2018 MOHAMMED ALI AZIMULLAH SHAIKH 6 SD/- ( VIK AS AWASTHY ) SD/- ( G. MANJUNATHA ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 13/03/2020 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//