ITO 6(1)(3), MUMBAI V. AUTO SALES PVT. LTD., MUMBAI

ITA 7107/MUM/2018

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 8331 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 3 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: 10-12-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KAVITHA P KAUSHIK
• Keywords: Bogus purchase; Accommodation entries; Tax effect; Set aside
• Section: 133(6); 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.7107 & 7108/MUM/2018 ( ASSESSMENT YEARS: 2010-11 & 2011-12 ) ITO-6(1)(3) ROOM NO.508, 5 TH FLOOR AAYKAR BHAWAN M.K.ROAD MUMBAI-400 020 VS. AUTO SALES PVT.LTD. 63/69, 3 RD FLOOR NAGDEVI CROSS ROAD MUMBAI-400 003 PAN/GIR NO. AACCA0108J ( APPELLANT ) .. RESPONDENT ) REVENUE BY MS. KAVITHA P.KAUSHIK, DR ASSESSEE BY SHRI HITEN VASANT, AR DATE OF HEARING 1 8 /02 /2020 DATE OF PRONOUNCEME NT 13 /03 /20 20 / O R D E R PER G.MANJUNATHA (A.M) : THESE TWO APPEALS FILED BY THE ASSESSEE ARE DIRECT ED AGAINST ORDERS OF THE LD. COMMISSIONER OF INCOME TA X (APPEALS)-12, MUMBAI, BOTH DATED 19/09/2018 AND THEY PERTAINS TO AY 2010-11 & 2011-12. SINCE, THE FACTS ARE IDENTICAL AND ISSUES ARE COMMON, FOR THE SAKE OF CONVENIENCE, THESE APPEALS WERE HEARD T OGETHER AND ARE DISPOSED-OFF BY THIS CONSOLIDATED ORDER. 2. THE ASSESSEE HAS RAISED MORE OR LESS COMMON GROU NDS OF APPEAL FOR BOTH ASST. YEARS. THEREFORE, FOR THE SAK E OF BREVITY, GROUNDS OF APPEAL FILED FOR AY 2010-11 ARE REPRODUC ED AS UNDER:- 1. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD.CIT(A) HAS ERRED IN DIRECTING THE ASSESSING OFFI CER TO DISALLOW 12.5% ITA NO.7107 & 7108/MUM/2018 AUTO SALES PVT.LTD. 2 OF THE BOGUS PURCHASES RATHER THAN THE WHOLE OF SUC H PURCHASES AMOUNTING TO RS. 96,956/-.. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, LD.CIT(A) HAS ERRED IN DIRECTING THE ASSESSING OFFI CER TO DISALLOW 12.5% OF THE BOGUS PURCHASES RATHER THAN THE WHOLE OF SUCH P URCHASES WITHOUT APPRECIATING THAT SUCH ALLOWANCE OF 87.5% OF EXPEND ITURE IMPLY ALLOWANCE OF PURCHASES MADE N CASH FROM THE GREY MA RKET, THEREBY RENDERING THE PROVISIONS OF SECTION 40(A)(3) OF THE INCOME TAX ACT, 1961 TOTALLY REDUNDANT WHICH COULD NOT HAVE BEEN THE INT ENTION OF THE STATUTE. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD.CIT(A) HAS ERRED IN FAILING TO ABIDE BY THE LAND MARK DECISION OF HONBLE SUPREME COURT IN THE CASE OF N.K.PROTIENS L TD 16/01/2017 WHEREIN THE HONBLE SUPREME COURT HAS CONFIRMED THE ADDITION OF 100% OF THE BOGUS PURCHASES. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD.CIT(A) HAS ERRED IN DELETING THE QUANTUM ADDITIO N TO THE EXTENT OF RS.84,836/- MADE BY THE AO ON ACCOUNT OF BOGUS BILL PURCHASES FROM SIX PARTIES BY NOT APPRECIATING THAT THE ASSESSEE HAD F AILED TO FURNISH THE CONFIRMATION OF TRANSACTION WITH THE PURCHASE PARTI ES, AS ALSO THE PROOF OF TRANSPORTATION 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW LD.CIT(A) HAS ERRED IN RESTRICTING THE QUANTUM ADDITION IGNOR ING THAT THE INFORMATION ON ACCOUNT OF BOGUS PURCHASES IS RECEIVED FROM THE EXTERNAL AGENCY THAT THE ASSESSEE HAD RECEIVED ACCOMMODATION ENTRY FROM SUCH PARTIES. 6. THOUGH THE TAX EFFECT IN THIS CASE IS RS.26,215, HOWEVER THIS APPEAL HAS BEEN FILED BECAUSE IT IS COVERED BY EXCEPTION M ENTIONED IN PARA 10(E) OF THE CBDT CIRCULAR NO.3/2018 DT 11-7-2018 A S SUBSEQUENTLY CLARIFIED BY BOARD LETTER DATED 20/08/2018 VIDE NO. 279/MISC./142/2007- ITJ(PT.) 7. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(AP PEALS) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE AO BE RE STORED. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS ENGAGED IN THE BUSINESS OF TRADING IN NUTS BOLTS AND BEARINGS , FILED ITS RETURN OF INCOME FOR AY 2010-11 ON 27/09/2010, DECLARING THE TOTAL INCOME AT RS. 20,84,871/- AND SAID RETURN WAS PROCESSED U/S 1 43(1) OF THE I.T.ACT, 1961. THE CASE HAS BEEN, SUBSEQUENTLY REOP ENED U/S 147 OF THE ACT, ON THE BASIS OF INFORMATION RECEIVED FROM DGIT, INVESTIGATION, MUMBAI, AS PER WHICH, SALES TAX AUTH ORITIES OF ITA NO.7107 & 7108/MUM/2018 AUTO SALES PVT.LTD. 3 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 3 OF HIS ASSESSMENT ORDER AMOUNTING TO RS. 96, 956/-. THE CASE WAS SELECTED FOR SCRUTINY AND THE ASSESSMENT HAS BE EN COMPLETED U/S. 143(3).R.W.S. 147 OF THE I.T.ACT, 1961 ON 31/1 2/2015 AND DETERMINED TOTAL INCOME OF RS. 21,93,160/-, AFTER M AKING 100% ADDITIONS TOWARDS ALLEGED BOGUS PURCHASE FROM THOSE PARTIES AND MADE ADDITIONS OF RS. 96,956/-. 4. BEING, AGGRIEVED BY THE ASSESSMENT ORDER, THE AS SESEE PREFERRED AN APPEAL BEFORE THE LD.CIT (A). BEFORE T HE LD.CIT (A), THE ASSESSE HAS REITRATED HIS SUBMISSIONS MADE BEFORE T HE AO. THE SUM AND SUBSTANCE OF ARGUMENTS OF THE ASSESSEE BEFO RE THE LD.CIT (A) ARE THAT PURCHASE FROM THE ABOVE PARTY IS GENUI NE, 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 AND ALSO, BY FOLLOWING THE DECISION OF HONBLE GUJA RAT HIGH COURT, IN THE CASE OF CIT VS. SIMITH P. SHETH (356 ITR 451) H AS SCALED DOWN ADDITION MADE BY THE AO TOWARDS ALLEGED BOGUS PURCH ASES TO 12.50% GROSS PROFIT ON TOTAL PURCHASES FROM THOSE P ARTIES. 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 ITA NO.7107 & 7108/MUM/2018 AUTO SALES PVT.LTD. 4 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 BOTH THE PARTIES A ND ALSO, CONSIDERED MATERIAL AVAILABLE ON RECORD, WE FIND TH AT BOTH THE SIDES HAVE FAILED TO PROVE THE CASE IN THEIR FAVOUR WITH NECESSARY EVIDENCES. ALTHOUGH, ASSESSEE HAS FILED CERTAIN BAS IC EVIDENCES, BUT FAILED TO FILE FURTHER EVIDENCES TO CONCLUSIVELY PR OVE PURCHASES TO THE SATISFACTIONS OF THE LD.AO. FURTHER, MERE PAYMENT B Y CHEQUE DOES NOT PROVE THE GENUINENESS OF PURCHASE, MORE PARTICU LARLY WHEN OTHER 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 ITA NO.7107 & 7108/MUM/2018 AUTO SALES PVT.LTD. 5 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% ADDITIONS, WHEREAS THE LD.CIT(A) HAS SCAL ED 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 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 A FAIR VIEW AND ESTIMATED 12.50% G ROSS PROFIT ON ITA NO.7107 & 7108/MUM/2018 AUTO SALES PVT.LTD. 6 ALLEGED BOGUS PURCHASES TO SETTLE DISPUTE BETWEEN T HE PARTIES AND HENCE, WE ARE INCLINED TO UPHOLD ORDER OF THE LD. C IT(A) AND DISMISS APPEAL FILED BY THE REVENUE. 7. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DI SMISSED. ITA NO. 7107/MUM/2018 8. THE FACTS AND ISSUES INVOLVED IN THIS APPEAL ARE IDENTICAL TO THE FACTS AND ISSUES, WHICH WE HAD CONSIDERED IN ITA NO . 7108/MUM/2018 FOR ASST. YEAR 2010-11. THE REASONS GIVEN BY US IN PRECEDING PARAGRAPHS IN ITA NO.7108/MUM/2018 SHALL MUTATIS- MUTANDIS APPLY TO THIS APPEAL, AS WELL. THEREFORE, FOR SIMI LAR REASONS RECORDED IN ITA NO. 7108/MUM/2018, WE ARE INCLINED TO UPHOLD ORDER OF THE LD. CIT(A) AND DISMISS APPEAL FILED BY THE R EVENUE. 9. IN THE RESULT, APPEALS FILED BY THE REVENUE FOR ASST. YEARS 2010-11 AND 2011-12 ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 13 /03/2 020 SD/- (VIKAS AWASTHY) SD/- (G. MANJUNATHA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 13/03/2020 THIRUMALESH SR.PS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. ITA NO.7107 & 7108/MUM/2018 AUTO SALES PVT.LTD. 7 BY ORDER, (ASSTT. REGISTRAR) ITAT, MUMBAI 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//