SIDDHI SYNTHETICS PVT. LTD., MUMBAI V. ITO 4(3)(4), MUMBAI

ITA 7113/MUM/2018

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 8334 (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: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 10-12-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: KAVITHA P KAUSHIK
• Keywords: Bogus purchase; Principle of natural justice; Accommodation entries
• Section: 133(6); 143(1); 250; 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.7113/MUM/2018 ( ASSESSMENT YEAR: 2011-12 ) SIDDHI SYNTHETICS PVT.LTD. SHOP NO.2, GR.FLOOR 36-A, CHAMPA GALLY X LANE BADAMWADI, KALBADEVI ROAD MUMBAI-400 002 VS. ITO-4(3)(4) ROOM NO.637 AAYKAR BHAWAN, M.K.ROAD MUMBAI-400 020 PAN/GIR NO. AAICS7387R ( APPELLANT ) .. RESPONDENT ) REVENUE BY MS. KAVITHA P.KAUSHIK, DR ASSESSEE BY SHRI. LAVANYA RAJPUROHIT DATE OF HEARING 18/02/2020 DATE OF PRONOUNCEME NT 13 /03 /20 20 / O R D E R PER G.MANJUNATHA (A.M) : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-2, MUM BAI DATED 05/09/2018 AND IT PERTAINS TO THE A.Y 2011-12. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1) ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AN D IN LAW, THE LD. CIT(A)-2 HAS ERRED IN SUSTAINING THE ASSESSMENT ORD ER PASSED BY THE AO, WITHOUT APPRECIATING THAT THE AO HAS ERRED IN INVOK ING THE PROVISIONS OF SEC 147 AND REOPENING OUR ASSESSMENT FOR THE YEAR UNDER CONSIDERATION. THE IMPUGNED ORDER IS THEREFORE LIAB LE TO BE QUASHED. 2) ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD, CIT(A)-2 HAS ERRED IN SUSTAINING THE ADDITION MADE BY THE AO, ON THE BASIS OF MATERIALS / INFORMATION, IF ANY, COLLECTED BEHIND OUR BACK, WITHOUT GIVING US COPIES THEREOF AND OPPORTUNITY TO CROSS E XAMINE THE WITNESS AND TO REBUT THE SAME. THEREFORE, SUCH EVIDENCE IS NO EVIDENCE IN THE ITA NO.7113/MUM/2018 SIDDHI SYNTHETICS PVT.LTD. 2 EYES OF LAW. THE IMPUGNED ORDER IS THEREFORE AGAINS T THE PRINCIPLES OF NATURAL JUSTICE AND HENCE ILLEGAL AND VOID ON THIS SCORE ALONE. 3) ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AN D IN LAW, THE LD. CIT(A)-2 HAS ERRED IN SUSTAINING THE ADDITION MADE BY THE AO, IGNORING THE FACT THAT THE APPELLANT HAS PRODUCED ALL AND EV ERY DETAILS, DOCUMENTS AND RECORDS PROVING GENUINENESS OF HIS IMPUGNED PUR CHASES AND THAT TOO WITHOUT POINTING OUT ANY INFIRMITY IN THE DETAILS, DOCUMENTS AND RECORDS PRODUCED BY THE APPELLANT. SUCH ORDER CANNOT BE SUS TAINED IN THE EYES OF LAW. IT MAY PLEASE BE QUASHED. 4) ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AN D IN LAW, THE LD. CIT(A)-2 HAS ERRED IN SUSTAINING THE ADDITION MADE BY THE AO, WITHOUT APPRECIATING THAT NONE OF THE APPELLANT'S SALES ARE SUSPECTED. HIS BOOKS OF ACCOUNTS ARE NOT REJECTED. HIS BOOKS OF ACCOUNTS ARE AUDITED. QUANTITY DETAILS ARE SUBMITTED WHICH HAS NOT BEEN DISPROVED BY THE AO. H ENCE, NO PART OF PURCHASES CAN BE TERMED AS BOGUS AND DISALLOWED. TH E HON'BLE CIT(A)-2 HAS ERRED IN SUSTAINING THE DISALLOWANCE. 5. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AN D IN LAW, THE LD.CIT(A)-2 HAS ERRED IN SUSTAINING THE IMPUGNED AS SESSMENT ORDER WITHOUT APPRECIATING THAT THE AO HAS PASSED THE IMP UGNED ASSESSMENT ORDER WITHOUT DISPOSING OFF THE OBJECTIONS FILED BY THE APPELLANT AGAINST THE AO INVOKING PROVISIONS OF SEC.147 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS ENGAGED IN THE BUSINESS OF MANUFACTURER OF CLOTHS, FILED ITS RETURN OF INCOME FOR AY 2011-12 ON 28/09/2011, DECLARING THE TOTAL INCOM E AT RS. 1,65,963/- 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 BASIS OF INFORMATION RECEIVED FROM DGIT , INVESTIGATION, MUMBAI, AS PER WHICH, SALES TAX AUTHORITIES OF GOVE RNMENT OF MAHARASHTRA HAD TAKEN ACTIONS AGAINST NUMBER OF HA WALA DEALERS, WHO HAD ISSUED BOGUS PURCHASE BILLS TO VARIOUS PART IES IN MUMBAI AND OTHER PLACES. AS PER LIST OF BENEFICIARIES, THE ASSESSEE IS ONE OF THE BENEFICIARY, WHO HAD TAKEN ACCOMMODATION BILLS OF BOGUS PURCHASES FROM M/S SAMIR TRADING CORPORATION AMOUNT ING TO RS. 1,11,510/-. THE CASE WAS SELECTED FOR SCRUTINY AND THE ASSESSMENT HAS BEEN COMPLETED U/S. 143(3).R.W.S. 147 OF THE I. T.ACT, 1961 ON ITA NO.7113/MUM/2018 SIDDHI SYNTHETICS PVT.LTD. 3 11/12/2015 AND DETERMINED TOTAL INCOME OF RS. 2,77, 470/-, AFTER MAKING 100% ADDITIONS TOWARDS ALLEGED BOGUS PURCHAS E FROM THOSE PARTIES AND MADE ADDITIONS OF RS. 1,11,510/-. 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 ITS 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 DELHI HIGH COURT IN THE CASE OF CIT VS LA MEDICA (2001) 250 ITR 575, HAS UPHELD 100% AD DITION MADE BY THE AO TOWARDS ALLEGED BOGUS PURCHASES. 5. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATE RIAL AVAILABLE ON RECORD AND GONE THROUGH ORDERS OF THE AUTHORITIE S BELOW ALONG WITH CASE LAWS CITED BY BOTH PARTIES. WE FIND THAT THE LD. AO HAS MADE 100% ADDITION ON ALLEGED BOGUS PURCHASES ON TH E GROUND THAT THE ASSESSEE IS ONE OF THE BENEFICIARY OF ACCOMMODA TION 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 133(6) TO THE PARTIES WERE RETURNED UN-SERVED BY TH E POSTAL AUTHORITIES. THEREFORE, HE CAME TO THE CONCLUSION T HAT PURCHASES ITA NO.7113/MUM/2018 SIDDHI SYNTHETICS PVT.LTD. 4 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 BOTH THE PARTIES A ND ALSO, MATERIAL AVAILABLE ON RECORD, WE FIND THAT BOTH THE SIDES HAVE FAILED TO PROVE THE CASE IN THEIR FAVOUR WITH NECESSARY EV IDENCES. 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 PURCHASES CLAIMS TO HAVE MADE FROM ALLEGED HAWALA D EALERS, ONLY PROFIT ELEMENT EMBEDDED IN THOSE PURCHASES NEEDS TO BE TAXED, BUT ITA NO.7113/MUM/2018 SIDDHI SYNTHETICS PVT.LTD. 5 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, WHICH HAS BEEN UPHELD BY THE L D.CIT(A). ALTHOUGH, BOTH AUTHORITIES HAVE MADE 100% ADDITION ON ALLEGED BOGUS PURCHASE, BUT NO ONE COULD SUPPORT SAID RATE OF GROSS PROFIT WITH NECESSARY EVIDENCES OR ANY COMPARABLE CASES. O N THE OTHER HAND, THE LD. AR FOR THE ASSESSEE HAS CITED NUBER O F DECISIONS OF ITAT, MUMBAI IN SUPPORT OF HIS ARGUMENTS, WHERE THE TRIBUNAL HAS ESTIMATED PROFIT RANGING FROM 2% TO 15% DEPENDING U PON NATURE OF BUSINESS. THEREFORE, CONSIDERING FACTS AND CIRCUMST ANCES OF THIS CASE AND CONSISTENT WITH VIEW TAKEN BY THE CO-ORDIN ATE BENCH IN NUMBER OF CASES, WE ARE OF THE CONSIDERED VIEW THAT ADDITION MADE BY THE LD. AO AND THE LD. CIT(A) IS ON HIGHER SIDE WHEN COMPARED TO NATURE OF BUSINESS OF THE ASSESSEE AND ACCORDINGLY, WE DIRECT THE LD. AO TO ESTIMATE 12.50% GROSS PROFIT ON ALLEGED BOGU S PURCHASES. 7. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS P ARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 13 /03/ 2020 SD/- (VIKAS AWASTHY) SD/- (G. MANJUNATHA) JUDICIAL MEMBER ACCOUNTANT MEMBER ITA NO.7113/MUM/2018 SIDDHI SYNTHETICS PVT.LTD. 6 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//