ALOK GOENKA, MUMBAI V. INCOME TAX OFFICER 17(1)(1) FORMERLY INCOME TAX OFFICER WARD-13(1)(2), MUMBAI

ITA 7193/MUM/2017

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 7461 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-04-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 20-12-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: N HEMALATHA
• Keywords: Bogus purchase; Onus to prove
• Section: 131; 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES SMC , MUMBAI BEFORE S HRI G.S. PANNU (AM) AND SHRI RAM LAL NEGI (JM) ITA NO. 7193 /MUM/2017 ASSESSMENT Y EAR: 2010 - 1 1 SHRI ALOK GOENKA, 9 - A, 105/06, WHISPERING PALMS, XXCLUSIVE, LOKHANDAWALA TOWNSHIP, KO NDIVALI (EAST), MUMBAI 400101 PAN: AADPG2843C VS. THE ITO 17(1)(1), (FORMERLY ITO WARD 13(1)(2), AAYAKAR BHAVAN, MUMBAI - 400020 (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI BHUPENDRA SHAH (AR) REVENUE BY : MS. N. HEMALATHA ( D R) DATE OF HEARING: 09/04 /201 8 DATE OF PRONOUNCEMENT: 25 / 04 /201 8 O R D E R PER RAM LAL NEGI, JM THIS APPEAL HAS BEEN PREFERRED BY THE ASSESSEE AGAINST THE ORDER DATED 05.10.2017 PASSED BY THE LD. COMMI SSIONER OF INCOME TAX (APPEALS) - 2 8 , MUMBAI , FOR THE A S S ESSMENT YEAR 2010 - 11 , WHEREBY THE LD. CIT (A) HAS DISMISSED THE APPEAL FILED BY THE ASSESSEE AGAINST ASSESSMENT ORDER PASSED U/S 143 (3) OF THE INCOME TAX ACT, 1961 (FOR SHORT THE A CT). 2. BRIEF FAC TS OF THE CASE ARE THAT THE ASSESSEE ENGAGED IN THE BUSINESS OF TRADING IN CHEMICAL ITEMS, FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION DECLARING THE TOTAL INCOME OF RS. 19,42,990/ - . SINCE, THE CASE WAS SELECTED FOR SCRUTINY , NOTI CE U/S 143 (2) AND 142 (1) WERE ISSUED. IN RESPONSE TO THE SAID NOTICES, THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE APPEARED BEFORE THE AO AND SUBMITTED THE DETAILS CALLED FOR. DURING THE ASSESSMENT PROCEEDINGS, THE AO RECEIVED INFORMATION FROM THE SALE S TAX 2 ITA NO. 7193 / MUM/2017 ASSESSMENT YEAR: 2010 - 11 DEPARTMENT, MAHARASHTRA TO THE EFFECT THAT ASSESSEE HAD OBTAINED BOGUS PURCHASE BILLS FROM THREE BOGUS ENTITIES I.E. SHREEJI ENTERPRISES, PRATIK TRADING COMPANY AND SHREE GANESH TRADING COMPANY AMOUNTING TO RS. 17,50,580/ - . ACCORDINGLY, SUMMON UNDER SECTION 131 OF THE ACT WAS ISSUED AND STATEMENT WAS RECORDED. ON PERUSAL OF THE DOCUMENTS FURNISHED BY THE ASSESSEE AND ON BASIS OF STATEMENT OF THE ASSESSEE IT WAS NOTICED THAT THE ASSESSEE HAD OBTAINED BOGUS BILLS FROM THE AFORESAID BOGUS ENT ITIES WITHO UT ACTUALLY PURCHAS ING THE GOODS FROM THEM. ACCORDINGLY, THE AO ASKED THE ASSESSEE TO SHOW CAUSE AS TO WHY THE AMOUNT OF BOGUS PURCHASES SHOULD NOT BE ADDED TO THE TOTAL INCOME. THE ASSESSEE ONLY SUBMITTED THE LEDGER COPY PERTAINING TO PURCHASE OF ZINC CHL ORIDE FROM M/S SHREE GANESH TRADING AND M/S PRATIK TRADING COMPANY AND PARTY - WISE SUMMARY. THE ASSESSEE ALSO CONTENDED THAT PAYMENTS WERE MADE THROUGH BANKING CHANNELS AND SUBMITTED THAT THE ALL PURCHASES WERE GENUINE. HOWEVER, THE AO REJECTED THE CONTENTI ON OF THE ASSESSEE AND ADDED THE ENTIRE AMOUNT OF BOGUS PURCHASES TO THE INCOME OF THE ASSESSEE HOLDING THE TRANSACTION BOGUS. 3. FURTHER, THE ASSESSEE HAD DEBITED AN AMOUNT OF RS. 17,56,191/ - UNDER THE HEAD MISCELLANEOUS EXPENDITURE. THE ASSESSEE WAS AC CORDINGLY ASKED TO SUBSTANTIATE THE SAID EXPENDITURE. SINCE, THE ASSESSEE FAILED TO PRODUCE DOCUMENTARY EVIDENCE TO PROVE THE GENUINENESS OF EXPENSES CLAIM, THE AO MADE AD HOC DISALLOWANCES OF 10% OF THE MISCELLANEOUS EXPENDITURE CLAIMED BY THE ASSESSEE. A FTER MAKING THE AFORESAID ADDITION, THE AO DETER MINING THE TO T AL INCOME OF THE ASSESSE E AT RS. 38,68,630/ - AS AGAINST THE RETURN INCOME OF RS. 19,42,990/ - . 4. IN THE FIRST APPEAL, THE LD. CIT (A) CONFIRMED THE ADDITION S MADE BY THE AO AND DISMISS THE AP PEAL BY PASSING EX - PARTE ORDER AS THE APPELLANT ASSESSEE DID NOT APPEAR BEFORE THE LD. CIT (A) DESPITE SERVICE OF NOTICES. AGAINST THE SAID ORDER, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 3 ITA NO. 7193 / MUM/2017 ASSESSMENT YEAR: 2010 - 11 5 . T HE ASSESSEE HAS CHALLENGED THE IMPUGNED ORDER BY RAISIN G THE FOLLOWING EFFECTIVE GROUND S : - 1) IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE COMMISSIONER OF INCOME TAX (A) ERRED IN CONFIRMING THE IMPUGNED ADDITIONS ON AN EX - PARTE BASIS WITHOUT CONSIDERING THE SAME ON MERITS. WITHOUT PREJUDICE TO TH E ABOVE AND ALTERNATIVELY: A) IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE ASSESSING OFFICER ERRED IN ADDING RS. 17,50,580/ - AS ALLEGED BOGUS PURCHASES BEING 100% OF THE TOTAL PURCHASES AMOUNTING TO RS. 17,50,580/ - WHICH HAS BEEN FURTHER WRONG LY CONFIRMED BY THE LEARNED COMMISSIONER OF INCOME TAX (A). I) EVEN THOUGH THE PAYMENT FOR PURCHASES IS MADE FROM THE BOOKS BY A/C PAYEE CHEQUES AND CANNOT BE TERMED AS NON - GENUINE EVEN THOUGH THE SAME HAS BEEN FULLY ALLOWED BY THE JURISDICTIONAL MUMBAI TRIB UNAL IN RECENT CASE OF RAJEEV M KALATHIL 6727/M/12, GANPATRAJ A SANGHAVI [ITA NO. 2826/MUM/2013], RAMESH KUMAR & CO. APPEAL NO. 2959/MUM/2014, DEEPAK POPATLAL GALA [ITA NO. 5920/M/2013], RAMILA P SHAH [ITA NO. 5246/M/13], PARESH GANDHI [ITA NO. 5706/M/2013 ], HIRALAL CHUNILAL JAIN [ITA NO. 4547/M/14], TARLA SHAH [ITA NO. 5295/MUM/2013] AND M/S IMPERIAL IMP. & EXP [ITA NO. 5427/MUM/2015], SHIVSHANKAR R. SHARMA, [ITA NO. 5149/MUM/2014 & 4260/MUM/2015], GOVIND RATHOD [ITA NO. 439/MUM/20156], SHRI MAHESH K.SHAH ITA NO. 5194/MUM/2014, SHRI SANJAY DHOKAD [ITA NO. 929/MUM/2015, MANOHAR AND ANITA KANDA [ITA NO. 4693 - 97/MUM/2016], BIGWIN PAPER DISTRIBUTORS PVT. LTD. [ITA NO. 5 293 - 97/MUM/2016], SHRI SANJAY DHOKAD 2010 - 11 [ITA 4 ITA NO. 7193 / MUM/2017 ASSESSMENT YEAR: 2010 - 11 NO. 5243/MUM/2013] AND HI ROCK CONSTRUCTION CO. [ITA NO. 960/MUM/2015] JEETENDRA DEVNANI [5426/MUM/2015] GEOLIFE ORGANICS [ITA NO. 3699/M/16] AND M/S STEEL LINE (INDIA) [ITA NOS. 1321 TO 1323/M/16]. II) ONLY ON THE BASIS OF THE INFORMATION ON THE WEBSITE WWW.MA HAVAT.GOV.IN ABOUT 3 SUSPICISOUS DEALERS WHOSE COPY OF STATEMENT RECORDED WERE NOT FURNISHED TO THE APPELLANT. III) AS ALLEGED BOGUS PURCHASES WITHOUT APPRECIATING THE FACT THAT NO ADDITION CAN BE MADE IF THE SUPPLIERS ARE NOT TRACEABLE AS PER THE JUDGMENT OF THE BOMBAY HIGH COURT. IV) THEREBY TREATING THE SAME AS ALLEGED BOGUS PURCHASES EVEN THOUGH THE PAYMENTS WERE MADE BY A/C PAYEE CHEQUES FROM THE DISCLOSED BANK ACCOUNTS. V) WITHOUT AFFORDING THE APPELLANT AND OPPORTUNITY OF CROSS EXAMINING THE SUPPLIERS U/S 1 31 AND WITHOUT ISSUING NOTICES U/S 133 (6) TO THE AFOREMENTIONED SUPPLIERS. VI) WITHOUT REJECTING THE BOOKS OF ACCOUNTS U/S 145 93). 2. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE ASSESSING OFFICER ERRED IN DISALLOWING MISCELLANEOUS EXPENDITUR E AMOUNTING TO RS. 1,75,161/ - ON THE ADHOC BASIS, I.E. (10% OF THE TOTAL EXPENDITURE AMOUNTING TO ADDITION OF RS. 1,75,161/ - ) . 3. THE ASSESSING OFFICER HAS ERRED IN CHARGING INTEREST U/S 234A, B, C & D AND INITIATED PENALTY U/S 271 (1)(C) WHICH IS FURTHER WRONGLY CONFIRMED BY THE LEARNED COMMISSIONER OF INCOME TAX (A). 5 ITA NO. 7193 / MUM/2017 ASSESSMENT YEAR: 2010 - 11 [B] RELIEF PRAYED 1) TO QUASH THE APPELLATE ORDER PASSED EX - PARTE BY THE COMMISSIONER OF INCOME TAX (A) . 2) TO DELETE THE ADDITION AMOUNTING TO RS. 17,50,580/ - BEING 100% ADDITION IN RESPECT OF ALLEGED BOGUS PURCHASES. 3) TO DELETE THE DISALLOWANCE WITH RESPECT OF MISCELLANEOUS EXPENDITURE AMOUNTING TO RS. 1,75,161. 4) TO DELETE INTEREST CHARGED U/S 234 AND INITIATION OF PENALTY U/S 271 (1) (C). 6. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE SUBM ITTED THAT THE IMPUGNED ORDER IS BAD IN LAW AS THE ADDITIONS HAVE BEEN CONFIRMED WITHOUT HEARING THE ASSESSEE. THE LD. COUNSEL FURTHER CONTENDED THAT THE INFORMATION AND THE STATEMENT RECORDED BY THE SALES TAX DEPARTMENT WAS NOT SUPPLIED TO THE ASSESSEE. A S PER THE DECISION OF THE HONBLE BOMBAY HIGH COURT ADDITION CANNOT BE MADE ONLY ON THE GROUND THAT THE SUPPLIERS ARE NOT TRACEABLE. MOREOVER, THE PAYMENTS WERE MADE THROUGH BANKING CHAN NELS . THE AO HAS NOT REJECTED THE BOOKS OF ACCOUNT. SO FAR AS THE SEC OND GROUND IS CONCERNED THE LD. COUNSEL SUBMITTED THAT THE LD. CIT (A) HAS WRONGLY CONFIRMED THE ADDITION OF 10% OF THE TOTAL MISCELLANEOUS EXPENDITURE CLAIMED BY THE ASSESSEE ON AD - HOC BASIS @ 10%. 7. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESENTATIV E (DR) SUBMITTED THAT SINCE THE ASSESSEE HAS FAILED TO DISCHARGE THE BURDEN TO PROVE THE GENUINENESS OF TRANSACTION , THE AO HAS RIGHTLY MADE THE ADDITION IN QUESTION. FURTHER SINCE THE ASSESSEE DID NOT APPEAR BEFORE THE LD. CIT (A) DURING THE APPELLATE PR OCEEDINGS DESPITE THE SUFFICIENT OPPORTUNITIES GIVEN BY THE LD CIT(A) , THE LD. CIT(A) HAS RIGHTLY CONFIRMED THE ADDITION MADE BY THE AO ON ACCOUNT OF BOGUS PURCHASES. SO FAR AS THE MISCELLANEOUS EXPENDITURE IS CONCERNED, THE 6 ITA NO. 7193 / MUM/2017 ASSESSMENT YEAR: 2010 - 11 LD. DR SUBMITTED THAT ASSESSE E HAS FAILED TO PRODUCE ANY DOCUMENTARY EVIDENCE TO SUBSTANTIATE THE CLAIM, THEREFORE, THE AO HAS RIGHTLY MADE DISALLOWANCE OF 10% OF THE TOTAL AMOUNT OF EXPENSES CLAIMED BY THE ASSESSEE. SINCE, THE ASSESSEE DID NOT APPEAR BEFORE THE LD. CIT (A) DESPITE SER VICE OF NOTICE S , THE LD. CIT (A) HAS RIGHTLY PASSED THE ORDER EX - PARTE AND CONFIRMED THE DISALLOWANCE ON THE BASIS OF MATERIAL ON RECORD AFTER DUE APPLICATION OF MIND . HENCE, THERE IS NO INFIRMITY IN THE ORDER OF THE LD.CIT (A) TO INTERFERE WITH THE SAME . 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND GONE THROUGH THE RELEVANT MATERIAL ON RECORD. THE GRIEVANCE OF THE ASSESSEE IS THAT THE LD. CIT (A) HAS WRONGLY CONFIRMED 100% ADDITION AMOUNTING TO RS.17,50,580/ - ON ACCOUNT OF BOGUS PURCHASES MADE BY THE ASSES SEE DURING THE PREVIOUS YEAR. THOUGH, THE ASSESSEE HAS CONTENDED BEFORE THE AO AS WELL AS BEFORE US THAT THE PURCHASES ARE GENUINE. HOWEVER, WE DO NOT FIND ANY MERIT IN THE CONTENTION OF THE ASSESSEE AS THE EVIDENCE ON RECORD IS NOT SUFFICIENT TO PROVE THE GENUINENESS OF THE PURCHASES. ON THE OTHER HAND, SINCE, THE AO HAS NOT REJECTED THE SALE, IT CAN BE INFERRED THAT THE ASSESSEE HAD MADE PURCHASES IN THE GREY MARKET AND EVADED THE VAT AND OTHER TAXES APPLICABLE DURING THE RELEVANT PERIOD. SINCE, IT HAS BE EN ESTABLISHED THAT THE ASSESSEE HAS NOT PURCHASED THE MATERIAL FROM THE PARTIES MENTIONED IN THE BOOKS OF ACCOUNT , THE ASSESSEE IS REQUIRED TO PAY THE TAX ON THE PROFIT ELEMENT EMBEDDED IN THE PURCHASES IN QUESTION. KEEPING IN VIEW, THE NATURE OF THE BUS INESS OF THE ASSESSEE, WE HOLD THAT ADDITION 100% OF THE TOTAL BOGUS PURCHASES IS NOT JUSTIFIED . 9. THE HONBLE GUJRAT HIGH COURT IN CIT VS. SIMIT P. SETH 356 ITR 451(GUJ) HAS UPHELD THE DECISION OF THE ITAT AND SUSTAINED THE ADDITION 12.5% OF THE TOTAL BOGUS PURCHASES HOLDING THAT ONLY PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES CAN BE ADDED TO INCOME OF THE ASSESSEE. HENCE, APPLYING THE RATIO LAID DOWN BY THE HONBLE GUJARAT HIGH COURT IN THE AFORESAID CASE , WE MODIFY THE ORDER OF THE LD.CIT (A) AND RESTR ICT THE ADDITION TO 12.5% OF THE TOTAL 7 ITA NO. 7193 / MUM/2017 ASSESSMENT YEAR: 2010 - 11 AMOUNT OF BOGUS PURCHASES. THE AO IS DIRECTED TO MAKE ADDITION OF 12.5% OF THE TOTAL AMOUNT OF BOGUS PURCHASES TO THE INCOME OF THE ASSESSEE. 10. SO FOR AS THE SECOND GROUND OF APPEAL IS CONCERNED, WE NOTICE THAT THE AO HAS MADE DISALLOWANCE OF 10% OF THE TOTAL AMOUNT OF MISCELLANEOUS EXPENSES CLAIMED BY THE ASSESSEE HOLDING THAT THE ASSESSEE HAS SUBMITTED HEAD - WISE EXPENDITURE UNDER HEAD MISCELLANEOUS EXPENDITURE HOWEVER, AGAIN CLAIMED THE MISCELLANEOUS EXPENDITUR E OF RS.69,997/ - AND FAILED TO EXPLAIN THE SAME. WE FURTHER NOTICE THAT MOST OF THE PAYMENTS HAVE BEEN MADE BY CHEQUES. MOREOVER, IT IS NOT THE CASE OF THE REVENUE THAT THE SAID EXPENSES ARE NOT GENUINE. SINCE, THE AO HAS POINTED OUT THAT THE ASSESSEE HAS N OT EXPLAINED THE CLAIM OF RS. 69 , 997/ - MADE AS MISCELLANEOUS EXPENDITURE, THERE IS NO JUSTIFICATION OF MAKING DISALLOWANCE OF 10% OF THE TOTAL EXPENDITURE CLAIMED BY THE ASSESSEE THAT TOO WITHOUT ASSIGNING ANY REASON. WE THEREFORE, SUSTAIN THE ADDITION OF R S 69 , 997/ - OUT OF THE TOTAL EXPENSES CLAIMED UNDER THE HEAD MISCELLANEOUS EXPENDITURE , IN RESPECT OF WHICH THE ASSESSEE HAS FAILED TO GIVE ANY EXPLAN ATION . WE ACCORDINGLY DIR ECT THE AO TO MAKE ADDITION OF RS . 69 , 997/ - ONLY AND TO ALLOW THE REMAINING EXPE NSES. IN THE RESULT, APPEAL FILED BY THE ASSESSEE FOR A SSESSMENT YEAR 2010 - 20 11 IS PARTLY ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 25 TH APRIL , 2018 . SD/ - SD/ - ( G.S. PANNU ) ( RAM LAL NEGI ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; DATED: 25 / 04 / 201 8 ALINDRA, PS 8 ITA NO. 7193 / MUM/2017 ASSESSMENT YEAR: 2010 - 11 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . / BY ORDER, //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI