ITO 26(1)(5), MUMBAI, MUMBAI V. SHRI ISRAR AHMED J B CHOUDHARY, MUMBAI

ITA 7118/MUM/2018

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 8333 (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
• 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.7118/MUM/2018 ( ASSESSMENT YEAR: 2011-12 ) ITO-26(1)(5) ROOM NO.708, 7 TH FLOOR PRATYAKSHAKAR BHAVAN BKC, BANDRA MUMBAI-400 051 VS. ISRAR AHMED J B CHOUDHARY 23, VALLIBHAI HAIDERBHAI COMPOUND, LBS MARG KURLA(W), MUMBAI-400 070 PAN/GIR NO. AAAPI5555Q ( APPELLANT ) .. RESPONDENT ) REVENUE BY MS. KAVITHA P.KAUSHIK, DR ASSESSEE BY NONE 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) : 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 9.96% OF THE TOTAL AMOUNT OF BOGUS PURCHASE TRANSACTION INSTEAD OF 15% OF THE TOTAL AMOUNT OF BOGUS PURCHASE MADE BY THE AO FOR 2011-12 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 DEPARTMENT, MAHARASHTRA WITH REGARD TO BOGUS PURCHA SE MADE BY THE ASSESSES FROM DEALERS WITHOUT SUPPLY OF ACTUAL GOOD S?' ITA NO.7118/MUM/2018 ISRAR AHMED J B CHOUDHARY 2 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 PROVISIONS OF SECTION 440A(3) ATTRACTS 100% BOGUS P URCHASES 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 FERROS AND NON-FERROS M ETALS, FILED HIS RETURN OF INCOME FOR AY 2011-12 ON 23/09/2011, DECL ARING THE TOTAL INCOME AT RS. 4,37,348/- AND SAID RETURN WAS PROCES SED U/S 143(1) OF THE I.T.ACT, 1961. THE CASE HAS BEEN SUBSEQUENTL Y, 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 2 OF HIS ASSESSMENT ORDER AMOUNTING TO RS. 39 ,17,678/-. 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 10/03/2016 AND ETERMINED TOTAL INCOME OF RS. 10,45,000/-, AFTE R MAKING ADDITION OF 15% PROFIT ON ALLEGED BOGUS PURCHASE FROM THOSE PARTIES AND MADE ADDITIONS OF RS. 5,87,652/-. ITA NO.7118/MUM/2018 ISRAR AHMED J B CHOUDHARY 3 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 9 .96% 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 15% ADDITION ON ALLEGED BOGUS PURCHASES ON THE GROUND T HAT 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 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.7118/MUM/2018 ISRAR AHMED J B CHOUDHARY 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 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 PURCHASES CLAIMS TO HAVE MADE FROM ALLEGED HAWALA D EALERS, ONLY PROFIT ELEMENT EMBEDDED IN THOSE PURCHASES NEEDS TO BE TAXED, BUT ITA NO.7118/MUM/2018 ISRAR AHMED J B CHOUDHARY 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 15% ADDITIONS, WHEREAS THE LD.CIT(A) HAS SCALE D DOWN ADDITION TO 9.96% GROSS PROFIT ON TOTAL ALLEGED BOG US 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 9.96% GR OSS PROFIT ON 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. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 13 /03/ 2020 SD/- (VIKAS AWASTHY) SD/- (G. MANJUNATHA) JUDICIAL MEMBER ACCOUNTANT MEMBER ITA NO.7118/MUM/2018 ISRAR AHMED J B CHOUDHARY 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//