ACIT CIR 7(1)(1), MUMBAI V. GAUGES BOURDON INDIA P.LTD, MUMBAI

ITA 7206/MUM/2016

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 9163 (ITAT-MUMBAI)
• Duration Of Justice: 10 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-10-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2009-2010
• Appeal Filed On: 07-12-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V JUSTIN
• Assessee Lawyers: DR VINAY D MULYE
• Keywords: Bogus purchase; Accommodation entries
• Section: 133(6); 147; 10; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA , A M AND SHRI SANDEEP GOSAIN, JM ./ I.T.A. NO S . 7206 TO 7208/MUM/2016 ( / ASSESSMENT Y EAR S : 2009 - 10 TO 2011 - 12 ) ACIT, CIRCLE 7(1) - 1, ROOM NO. 130, 1 ST FLOOR, AAYAKAR BHAVAN, M. K. ROAD, MUMBAI - 400 020 / VS. M/S. GAUGES BOURDON INDIA PVT. LTD. 194 - 195, GOPI TANK ROAD, MAHIM, MUMBAI - 400 016 ./ ./ PAN/GIR NO. AAACG 1986 A ( / APPELLANT ) : ( / RESPONDENT ) / C.O. NOS. 188 TO 190/MUM/2017 (ARISING OUT OF ITA NOS. 7206 TO 7208/MUM/2016) ( / ASSESSMENT YEARS: 2009 - 10 TO 2011 - 12) M/S. GAUGES BOURDON INDIA PVT. LT D. 194 - 195, GOPI TANK ROAD, MAHIM, MUMBAI - 400 016 / VS. ACIT, CIRCLE 7(1) - 1, ROOM NO. 130, 1 ST FLOOR, AAYAKAR BHAVAN, M. K. ROAD, MUMBAI - 400 020 ./ ./ PAN/GIR NO. AAACG 1986 A ( CROSS OBJECTOR ) : ( ASSESSEE ) REVENUE BY : SHRI V. JUSTIN ASSESSEE BY : DR. VINAY D. MULYE / DATE OF HEARING : 17.08.2017 / DATE OF PRONOUNCEMENT : 16.10. 2017 2 ITA NO S . 7206 TO 7208/M/16 & CO NOS. 188 TO 190/M/17 (A.YS. 2009 - 10 TO 2011 - 12) M/S. GAUGES BOURDON INDIA PVT. LTD. / O R D E R PER SHAMIM YAHYA , A. M.: THESE ARE APPEALS BY THE R EVENUE AND THE CROSS OBJ ECTION S BY THE ASSESSEE EMANATING OUT OF THE ORDERS OF LEARNED CIT ( A ) FOR ASSESSMENT YEAR S 2009 - 10, 2010 - 11 AND 2011 - 12 RESPECTIVELY. 2. T HE COMMON ISSUE RAISED IN R EVENUE S APPEAL IS THAT THE LD. CIT ( A ) ERRED IN SUSTAINING AN ADDITION OF 12.5% OF THE B OGUS PURCHASES, AS AGAINST 100% ADDED BY THE ASSESSING OFFICER. 3. THE COMMON GROUND RAISED BY THE ASSESSEE IN THE CROSS OBJECTION IS THAT THE LD. CIT(A) HAS ERRED IN SUSTAINING EVEN 12.5% OF BOGUS PURCHASE AS ADDITION. 4. I N THESE CASES , THE ASSESSING O FFICER HAS MADE 100% DISALLOWANCE OF BOGUS PURCHASES AS UNDER : A.Y. 20 0 9 - 1 0 SR. NO. NAME OF THE PARTY AMOUNT 1 ATLAS ENTERPRISES 788 2 RAJRATAN METAL INDUSTRIES 45556415 3 RONAK INDUSTRIES 8904167 TOTAL 13461370 A.Y. 2010 - 11 SR. NO. NAME OF THE PART Y AMOUNT 1 ATLAS ENTERPRISES 18547 2 MALANI METAL INDIA 1969566 3 DHRUVIL TRADERS 146237 4 RAKESH ENTERPRISES 191875 5 PRADEEP ENTERPRISES 726700 6 RONAK INDUSTRIES 1178188 3 ITA NO S . 7206 TO 7208/M/16 & CO NOS. 188 TO 190/M/17 (A.YS. 2009 - 10 TO 2011 - 12) M/S. GAUGES BOURDON INDIA PVT. LTD. 7 RAJRATAN METAL INDUSTRIES 5468443 8 FORTUNE SALES CORPORATION 5957533 T OTAL 1,56,57,089 A.Y. 201 1 - 1 2 SR. NO. NAME OF THE PARTY PAN AMOUNT 1 D K STEEL & ENGINEERING CO. AAHFD2610C 15,82,334 2 DHRUVAL TRADERS BEIPK4877G 11,81,817 3 DINESH STEEL (INDIA) AJCPC9820C 17,20,238 4 RAJESHWARI METAL INDUSTRIES ABLPA9744H 50,70, 442 TOTAL 84,91,831 5 . UPON THE ASSESSEE S APPEAL , THE LEARNED CIT( A ) HAS REFERRED TO ASSESSEE'S LETTER , IN WHICH 1 2.5% ADDITION WAS ACCEPTED AND HA S ACCORDINGLY SUSTAINED THE ADDITION AT THE RATE OF 12.5% OF THE BOGUS PURCHASE. 6 . SINCE FACTS ARE ID ENTICAL , WE ARE REFERRING TO THE FACTS AN D FIGURES FROM ASSESSMENT YEAR 2009 - 10. 7 . I N THIS CASE , T HE AO HAD RECEIVED INFORMATION FROM THE SALES TAX DEPARTMENT THAT THE ASSESSEE HAD DEBITED THE BOGUS PURCHASES FROM THE FOLLOWING THREE PARTIES WHOSE DETAIL S ARE GIVEN HEREUNDER. SR. NO. NAME OF THE PARTY (M/S) AMOUNT (IN RS. ) 1 ATLAS ENTERPRISES 788/ - 2 RAJRATAN METAL INDUSTRIES 45, 56,41 5/ - 3 RONAK INDUSTRIES 89,04, 167/ - TOTAL 1, 34,61, 370/ - 4 ITA NO S . 7206 TO 7208/M/16 & CO NOS. 188 TO 190/M/17 (A.YS. 2009 - 10 TO 2011 - 12) M/S. GAUGES BOURDON INDIA PVT. LTD. THE AO ACCORDINGLY REOPENED THE ASSESSMENT UNDER SECTION 147 OF INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE 'ACT') AND DULY PROVIDED THE ASSESSEE WITH THE REASONS FOR REOPENING. THE AO ALSO ISSUED NOTICES UNDER SECTION 133(6) OF THE ACT TO ALL THE THREE PARTIES. HOWEVER, THEY CAME BACK UN SERVED. ON ITS PART, THE ASSESSEE COULD NOT PRODUCE ANY OF THE PARTIES TO PROVE THE GENUINENESS OF THE PURCHASES. ACCORDINGLY, THE AO CONCLUDED THAT PURCHASES IN QUESTION WERE INDEED BOGUS, DISREGARDING THE ASSESSEES CONTENTION THAT THE DOCUMENTATION IN T HE FORM OF INVOICES, LEDGER ACCOUNTS, ETC. OF THE RESPECTIVE PARTIES WOULD INDICATE THAT THEY WERE INDEED GENUINE PURCHASES. ACCORDING TO THE AO, THE ASSESSEE HAD ACTUALLY MADE PURCHASES OUT OF ITS BOOKS AND THEN MADE THE PAYMENTS IN QUESTION TO REGULARISE THOSE PURCHASES. IT HAD PRODUCED BILLS FROM THE AFOREMENTIONED THREE PARTIES AND SOUGHT TO GIVE THE COLOUR OF GENUINENESS TO THESE TRANSACTIONS. THEY HOWEVER REMAINED UNEXPLAINED. THE AO HAD MADE AN ADDITION ON ACCOUNT OF THE ENTIRE BOGUS PURCHASES STATIN G THAT HE HAD NOT DISPUTED THE FACT OF THE PURCHASE OF THE GOODS AND THE CONSEQUENT SALE OF THE FINISHED PRODUCTS. RATHER, WHAT HE HAD DISPUTED WAS THE SOURCE OF INVESTMENT IN THE SAID PURCHASES. ACCORDINGLY , HE HAD ADDED BACK THE ENTIR E BOGUS PURCHASES AM OUNTING TO RS. 1.34 CRORE. 8 . A GAINST THE ABOVE ORDER , THE ASSESSEE APPEALED BEFORE THE L D CIT ( A ) . THE LD. CIT(A) RESTRICTED THE ADDITION OF 12.5% OF THE BOGUS PURCHASE. IN THIS REGARD , HE REFERRED TO THE LETTER OF THE ASSESSEE IN WHICH THE ASSESSEE HAS AC CEPTED ADDITION AT THE RATE OF 12.5% OF THE BOGUS PURCHASE, AS UNDER: 5 ITA NO S . 7206 TO 7208/M/16 & CO NOS. 188 TO 190/M/17 (A.YS. 2009 - 10 TO 2011 - 12) M/S. GAUGES BOURDON INDIA PVT. LTD. 6.2 IT IS ON THE BACKGROUND OF THE ISSUES DISCUSSED IN THE PRECEDING TWO SUB - PARAGRAPHS THAT THE APPELLANTS OFFER TO BUY PEACE AND CEASE LITIGATION HAS TO BE SEEN. VIDE ITS LETTER DATED 14 TH SEPTERMBER, 2016 AND FILED ON THE SAME DATE, THE APPELLANT HAS OFFERED TO TAX AN ELEMENT OF PROFIT OF 12.5% AS EMBEDDED IN THE ALLEGEDLY BOGUS PURCHASES SOUGHT TO ADDED BACK BY THE A.O. IN THEIR TOTALITY. ON CAREFUL CONSIDERATION OF ALL THE ASPECTS O F THIS CASE, THE A.O. IS DIRECTED TO RESTRICT HIS ADDITION TO 12.% OF THE ALLEGEDLY BOGUS PURCHASES OF RS.1,34,61,370/ - . 9 . AGAINST THE ABOVE ORDER OF LEARNED CIT - A , THE ASSESSEE HAS FILED CROSS OBJECTION AND THE REVENUE HAS FILED APPEAL BEFORE THE ITAT . 10 . WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. W E FIND THAT CREDIBLE AND COGENT INFORMATION WAS RECEIVED IN THIS CASE BY THE ASSESSING OFFICER THAT CERTAIN ACCOMMODATION ENTRY PROVIDER/BOGUS SUPPLIERS WERE BEING USED BY CERTAIN PARTIES TO OBTAINED BOGUS BILLS. A SSESSEE WAS FOUND TO HAVE TAKEN ACCOMMODATION ENTRY/BOGUS PURCHASE BILLS DURING THE CONCERNED ASSESSMENT YEAR FROM DIFFERENT PARTIES. BASED UPON THIS INFORMATION , THE ASSESSMENT WAS REOPENED. THE CREDIBILITY OF INFORMATION RELATING T O REOPENING REMAINS UN - ASSAILED. IN SUCH FACTUAL SCENARIO , THE ASSESSING OFFICER HAS MADE THE NECESSARY ENQUIRY. THE ISSUE OF NOTICE TO ALL THE PARTIES HAVE RETURNED UNSERVED. ASSESSEE HAS NOT BEEN ABLE TO PROVIDE ANY CONFIRMATION FROM ANY OF THE PARTY. IN THIS FACTUAL SCENARIO , IT IS AMPLY CLEAR THAT ASSESSEE HAS OBTAINED BOGUS PURCHASE BILLS. MERE PREPARATION OF DOCUMENTS FOR PURCHASES CANNOT CONTROVERT OVERWHELMING EVIDENCE THAT THE PROVIDERS OF THESE BILLS ARE BOGUS AND NON - EXISTENT. 1 1 . THE SALES TAX DEPARTMENT IN ITS ENQUIRY HAVE FOUND THE PARTIES TO BE PROVIDING BOGUS ACCOMMODATION ENTRIES. THE ASSESSING OFFICER ALSO ISSUED NOTICES TO THESE 6 ITA NO S . 7206 TO 7208/M/16 & CO NOS. 188 TO 190/M/17 (A.YS. 2009 - 10 TO 2011 - 12) M/S. GAUGES BOURDON INDIA PVT. LTD. PARTIES AT THE ADDRESSES PROVIDED BY THE ASSESSEE. ALL THESE NOTICES HAVE RETURNED UNSERVED. ASSESSEE HAS NOT BEEN ABLE TO PRODUCE ANY OF THE PARTIES. NEITHER THE ASSESSEE HAS BEEN ABLE TO PRODUCE ANY CONFIRMATION FROM THESE PARTIES. IN SUCH CIRCUMSTANCE THERE IS NO DOUBT THAT THESE PARTIES ARE NON - EXISTENT. W E FIND AT F URTHER ST RANGE THAT ASSESSEE WANTS THE REVEN UE TO PRODUCE ASSESSEE'S OWN VENDORS, W HOM THE ASSESSEE COULD NOT PRODUCE. 1 2 . THE P URCHASE BILLS FROM THESE NON - EXISTENT/BOGUS PARTIES CANNOT BE TAKEN AS COGENT EVIDENCE OF PURCHASES. IN LIGHT OF THE OVERWHELMING EVIDENCE , THE R EVENUE AUTHORITIES CANNOT PUT UPON BLINKERS AND ACCEPT THESE PURCHASES AS GENUINE. THIS PROPOSITION IS DULY SUPPORTED BY HONBLE APEX COURT DECISION IN THE CASE OF SUMATI DAYAL 214 ITR801 AND DURGA PRASAD MORE 82 ITR 540. IN THE PRESENT CASE , THE ASSESSEE WANTS THAT THE UNASSAILAB LE FACT THAT THE SUPPLIERS ARE NON - EXISTENT AND THUS BOGUS SHOULD BE IGNORED AND ONLY THE DOCUMENTS BEING PRODUCED SHOULD BE CONSIDERED. THIS PROPOSITION IS TOTALLY UNSUSTAINABLE IN LIGHT OF ABOVE APEX COURT DECISIONS. 1 3 . IN THESE CIRCUMSTANCES , THE LD. DR HAS REFERRED TO HONBLE GUJARAT HIGH COURT DECISION IN THE CASE OF T AX A PPEAL N O . 240 OF 2003 IN THE CASE OF N K INDUSTRIES VS . DY CIT ORDER DT 20/06.2016, WHEREIN 100% OF THE BOGUS PURCHASES WAS HELD TO BE ADDED IN THE HANDS OF THE ASSESSEE AND TRIBUNA LS RESTRICTION OF THE ADDITION TO 25% OF THE BOGUS PURCHASES WAS SET ASIDE. IT WAS EXPOUNDED THAT WHEN PURCHASE BILLS HAVE 7 ITA NO S . 7206 TO 7208/M/16 & CO NOS. 188 TO 190/M/17 (A.YS. 2009 - 10 TO 2011 - 12) M/S. GAUGES BOURDON INDIA PVT. LTD. BEEN FOUND TO BE BOGUS 100% DISALLOWANCE WAS REQUIRED. THE SPECIAL LEAVE PETITION AGAINST THIS ORDER ALONG WITH OTHERS HAS BEEN DISMI SSED BY THE HONBLE APEX COURT VIDE ORDER DT . 16 .1 2017. 1 4 . WE FURTHER FIND THAT HONBLE JU RISDICTIONAL H IGH COURT IN THE CASE OF N IKUNJ E NTERPRISES HAS UPHELD 100% ALLOWANCE FOR THE PURCHASES WHEN THE SALES HAVE NOT BEEN DOUBTED. HOWEVER , THE FACTS OF T HAT CASE WERE DIFFERENT . F URTHERMORE , THE SALES IN THAT CASE WERE BASICALLY TO GOVERNMENT DEPARTMENTS. HENCE , THE RATIO FROM THIS DECISION IS NOT APPLICABLE ON THE FACTS OF THE CASE. 15 . IN THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASES , WE FIND THA T THE SALES HAVE NOT BEEN DOUBTED. THOUGH THE PURCHASE BILLS ARE BOGUS . I N SUCH CIRCUMSTANCES , 100% DISALLOWANCE OF BOGUS PURCHASES IS NOT PERMISSIBLE. IN SUCH CIRCUMSTANCES , DISALLOWANCE OF 12.5% OF THE BOGUS PURCHASES HAVE BEEN FOUND TO BE MEETING ENDS O F JUSTICE IN SEVERAL JUDGEMENTS AT THE ITAT MUMBAI FOLLOWING HONOURABLE GUJARAT HIGH COURT DECISION IN THE CASE OF SIMIT P. SETH. 1 6 . ACCORDINGLY , WE AFFIRM THE ORDER OF LEARNED CIT - A WHEREIN 12.5% OF THE BOGUS PURCHASES HAS BEEN SUSTAINED IN ADDITION. W E ALSO TAKE NOTE THAT BEFORE THE LEARNED CIT - A ASSESSEE HAD BY A LETTER A CCEPTED ADDITION AT THE RATE OF 12. 5% OF THE BOGUS PURCHASE. HENCE , WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF LEARNED CIT - A. ACCORDINGLY WE CONFIRM THE SAME. 8 ITA NO S . 7206 TO 7208/M/16 & CO NOS. 188 TO 190/M/17 (A.YS. 2009 - 10 TO 2011 - 12) M/S. GAUGES BOURDON INDIA PVT. LTD. 1 7 . IN THE RESULT , T H E APPEALS FILED BY THE R EVENUE AND THE CROSS OBJECTION S BY THE ASSESSEE STAND DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 16.10.2017 SD/ - SD/ - ( SANDEEP GOSAIN ) (S HAMIM YAHYA ) / J UDICIAL MEMBER / A CCOUNTANT MEMBER MUMBAI ; DATED : 16.10.2017 . . ./ ROSHANI , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPON DENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F ILE / BY ORDER , / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI