ANIL DADARAO GARAD, AMBERNATH V. DCIT,CIRCLE-2, KALYAN

ITA 7214/MUM/2018

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 8339 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-03-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 14-12-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MICHAEL JEROLD
• Assessee Lawyers: S M MAKHIJA
• Keywords: Bogus purchase; Principle of natural justice; Accommodation entries; Reassessment proceedings
• Section: 143(3); 133(6); 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A, BENCH MUM BAI BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBE R ITA NO.7019/MUM/2018 ( ASSESSMENT YEAR: 2011-12 ) ITO, WARD-2(1) 2 ND FLOOR, MOHAN PLAZA BLDG WAYLE NAGAR KHADAKPADA KALYAN (W)-421 301 VS. ANIL DADARAO GARAD PROP. OF M/S SHIVJEET CHEMICALS W-34, MORIVALI, MIDC AMBERNATH THANE-421 501 PAN/GIR NO. AA ZPG8732G ( APPELLANT ) .. RESPONDENT ) & ITA NO.7214/MUM/2018 ( ASSESSMENT YEAR: 2011-12 ) ANIL DADARAO GARAD PROP. OF M/S SHIVJEET CHEMICALS W-34, MORIVALI, MIDC AMBERNATH THANE-421 501 VS. DCIT, CIRCLE-2 MOHAN PLAZA, KHADAKPADA KALYAN (W)-421 301 PAN/GIR NO. AAZPG8732G (APPELLANT ) .. RESPONDENT ) REVENUE BY SHRI MICHAEL JEROLD, DR ASSESSEE BY SHRI S.M.MAKHIJA, AR DATE OF HEARING 13/02/2020 DATE OF PRONOUNCEME NT 13 / 0 3 /20 20 / O R D E R PER G.MANJUNATHA (A.M) : THESE CROSS APPEALS FILED BY THE REVENUE, AS WELL AS THE ASSESSEE ARE DIRECTED AGAINST ORDER OF THE LD. COMM ISSIONER OF INCOME TAX (APPEALS)-3, THANE, DATED 24/09/2018 FOR THE AY 2011- 12. SINCE, FACTS ARE IDENTICAL AND ISSUES ARE COMM ON, FOR THE SAKE ITA NO.7019 & 7214/MUM/2018 ANIL DADARAO GARAD 2 OF CONVENIENCE, THE APPEAL FILED BY THE REVENUE AND CROSS OBJECTION FILED BY THE ASSESSEE WERE HEARD TOGETHER AND ARE DISPOSED-OFF BY THIS CONSOLIDATED ORDER. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE, THE ID. CIT(A] HAS ERRED IN LAW BY NOT APPRECIATING THE FOCI THAT THE ASSESSEE COULD NOT ESTABLISH THE GENUINENESS OF THE PURCHASES TO THE T UNE OF RS, 2,28,49,151/- FROM THE NONEXISTENT VENDORS AS PER T HE INFORMATION RECEIVED FROM SALES TAX LAW DEPARTMENT AGENCIES AND ESTABLISHED BY THE ASSESSING OFFICER? 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD, CIT(A) HAS ERRED IN LAW BY NOT APPRECIATING THE FACT THAT THE ONUS TO JUSTIFY THE CLAIM OF EXPENSES IS ON THE ASSESSEE BUT HE HAS FAI LED TO DISCHARGE IT IN RELATION TO THE PURCHASES MADE FROM THE NON-EXISTEN T VENDORS? 3. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE, THE LD. CIT(A) HAS ERRED IN LAW BY IGNORING THE FACT THAT THE ASSE SSEE COULD NOT SUBSTANTIATE HIS CLAIM OF PURCHASES FROM NON-EXISTE NT VENDORS BY MEANS OF SUPPORTING DOCUMENTS RELATED TO MOVEMENT OF GOOD , STOCK REGISTER, ETC., TO ARRIVE AT DISALLOWANCE AT 8% OF THE PURCHA SES FROM THE NON- EXISTENT VENDORS? 4. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD, CIT[A) WAS JUSTIFIED IN NOT APPRECIATING THE LA W CORRECTLY THAT ONCE THE PURCHASES ARE UN VERIFIABLE /NOT GENUINE/BOGUS, THE SAME SHOULD HAVE BEEN DISALLOWED IN ENTIRETY, PARTICULARLY IN VIEW O F THE RATIO OF THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN TAX APPEAL NO. 242 OF 2003 DATED 20/06/2016 IN THE CASE OF N. K, PROTEINS LID. VS DC IT, AGAINST WHICH THE SLP WAS DISMISSED BY THE HONBLE APEX COURT? 5. IT IS HUMBLY REQUESTED THAT THE ORDER OF THE L D, CIT(A} MAY BE VACATED AND THAT OF THE AO MAY BE RESTORED. 6. THE DEPARTMENT CRAVES LEAVE TO ADD, AMEND, ALTE R OR DELETE ANY GROUNDS OF APPEAL. 3. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: THE LD. CIT (APPEALS) HAS SERIOUSLY ERRED IN CONFIR MING THE ACTION OF ASSESSING OFFICER IN REOPENING VALIDLY COMPLETED AS SESSMENT, I) ONLY ON THE BASIS OF INFORMATION RECEIVED FR OM SALES TAX DEPARTMENT TO THE EFFECT THAT ASSESSEE HAD TAKEN HAWALA BILLS FROM SOME PARTIES INSTEAD OF ACTUALLY PURCHASING GOODS, II) WITHOUT MAKING ANY INDEPENDENT INQUIRIES/ DUE APPLICATION OF MIND. ITA NO.7019 & 7214/MUM/2018 ANIL DADARAO GARAD 3 III) IN VIOLATION OF PRINCIPLES OF NATURAL JUSTICE BY NOT PROVIDING THE COPY OF STATEMENT RECORDED/ AFFIDAVIT FILED BEFORE SALES TA X DEPARTMENT AND NOT ALLOWING CROSS EXAMINATION OF THE ALLEGED DEALER. 2. WITHOUT PREJUDICE TO THE ABOVE APPELLANT SUBM ITS THAT LD CIT (APPEALS) HAS SERIOUSLY ERRED IN CONFIRMING THE FOL LOWING ADDITIONS OF THE ALLEGED BOGUS PURCHASES WITHOUT APPRECIATING THAT A S DECIDED BY VARIOUS JUDICIAL FORUMS UNDER SITUATIONS ALIKE OF THE ASSES SES WHAT IS TO BE ADDED IS THE PROFIT ELEMENT EMBEDDED IN THE TRANSACTION W HICH IN ASSESEE'S CASE IS 3.76% ONLY. 1) THE ADDITION OF RS. 17, 36,860- BEING 8% OF THE ALLEGED BOGUS PURCHASES AMOUNTING TO RS.2,17,10,751/- II) AN AMOUNT OF RS.11,38,400/- BEING ALLEGED BOGU S PURCHASES MADE FROM M/S. AMI TRADERS. III) THE LD. CIT (A) HAS ERRED IN CONFIRMING THE AD DITIONS / DISALLOWANCE OF RS.28,75,260/- WITHOUT APPRECIATING THAT ASSSES SEE HAS PAID [ON ALLEGED BOGUS PURCHASE TO THE MAHARASTRA VAT AUTHORITIES @12.5%, DEDUCTION FOR WHICH HAS TO BE ALLOWED WHILE MAKI NG ADDITION- IV) THE LD.CIT (A) HAS ERRED IN CONFIRMING THE ADDI TIONS / DISALLOWANCE OF RS.28,75,260/-' WITHOUT APPRECIATING ASSESSES HAS A LREADY DECLARED GROSS PROFIT ON ALL THE PURCHASE RECORDED INCLUDING ALLEGED BOGUS PURCHASES {P 16.19% WHICH SUM A/SO IS REQUESTED TO BE REDUCED OUT OF THE ESTIMATED ADDITION MADE BY THE LD. DT (A), AS H AS BEEN HELD BY VARIOUS JUDICIAL AUTHORITIES. 3. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, AFTE R AND/OR ANY OF THE GROUNDS AT THE TIME OF OR BEFORE THE HEARING OF APP EAL. 4. THE APPELLANT THEREFORE PRAYS THAT INITIATION OF REASSESSMENT PROCEEDINGS MAY PLEASE BE HELD AS ILLEGAL, ORDER PA SSED IN PURSUANCE THERETO MAY BE QUASHED OR ALTERNATIVELY ADDITION MA DE/CONFIRMED MAY BE SUITABLY REDUCED. 4. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS AN INDIVIDUAL AND ENGAGED IN THE BUSINESS OF MANUFACTU RING & RESELLERS OF DYES AND CHEMICALS. THE ASSESSEE HAS FILED HIS R ETURN OF INCOME FOR AY 2011-12 ON 27/09/2011, DECLARING TOTAL INCOM E OF RS. 19,49,540/- AND SAID RETURN WAS PROCESSED U/S 143(1 ) OF THE I.T.ACT, 1961. THE CASE HAS BEEN SELECTED FOR SCRUTINY AND DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO, ON THE BA SIS OF INFORMATION RECEIVED FROM DGIT, INVESTIGATION, MUMB AI, NOTICED THAT THE ASSESSEE HAS OBTAINED BOGUS PURCHASE BILLS FROM HAWALA/SUSPICIOUS DEALERS. THE AO FURTHER NOTED THA T AS PER DETAILS AVAILABLE, SALES TAX AUTHORITIES OF GOVERNMENT OF M AHARASHTRA HAD ITA NO.7019 & 7214/MUM/2018 ANIL DADARAO GARAD 4 TAKEN ACTIONS AGAINST NUMBER OF HAWALA DEALERS, WHO HAD ISSUED BOGUS PURCHASE BILLS TO VARIOUS PARTIES IN MUMBAI A ND OTHER PLACES. AS PER LIST OF BENEFICIARIES, THE ASSESSEE IS ONE O F THE BENEFICIARY, WHO HAD TAKEN ACCOMMODATION BILLS OF BOGUS PURCHASE S FROM VARIOUS PARTIES AS LISTED BY THE AO IN HIS ASSESSME NT ORDER AT PARA 4 ON PAGE 3, AMOUNTING TO RS. 2,28,49,151/-. THE ASSE SSMENT HAS BEEN COMPLETED U/S. 143(3) OF THE I.T.ACT, 1961 ON 25/03/2014 AND DETERMINED TOTAL INCOME OF RS. 2,50,23,690/-, AFTER MAKING 100% ADDITIONS TOWARDS ALLEGED BOGUS PURCHASE FROM THOSE PARTIES AND MADE ADDITIONS OF RS. 2,28,49,151/-. 5. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESEE P REFERRED AN APPEAL BEFORE THE LD.CIT(A). BEFORE THE LD.CIT(A), THE ASSESSE HAS REITRATED HIS ARGUMENTS MADE BEFORE THE LD. AO. THE 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 ITAT, MUMBAI IN ASSESSEE OWN CASE FOR EARLIER YEAR HAS SCALED DOWN ADDITION MADE BY THE A O TOWARDS ALLEGED BOGUS PURCHASES TO 8% GROSS PROFIT ON TOTAL PURCHASES FROM THOSE PARTIES, EXCEPT IN CASE OF M/S AMI TRADERS, W HERE HE HAS CONFIRMED 100% ADDITION ON THE GROUND THAT NO PAYME NT HAS BEEN MADE TO THE PARTY AGAINST PURCHASES. AGGRIEVED BY T HE LD. CIT(A) ORDER, THE ASSESSEE AS WELL AS THE REVENUE ARE IN A PPEAL BEFORE US. 6. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATE RIAL AVAILABLE ON RECORD AND GONE THROUGH ORDERS OF THE AUTHORITIE S BELOW. WE FIND ITA NO.7019 & 7214/MUM/2018 ANIL DADARAO GARAD 5 THAT THE LD. AO HAS MADE 100% ADDITION ON ALLEGED B OGUS 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. 7 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 ITA NO.7019 & 7214/MUM/2018 ANIL DADARAO GARAD 6 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 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 8% GROSS PROFIT ON TOTAL ALLEGED BOGUS PURCHASE, EXCEPT IN THE CASE OF M/S AMI TRADERS. ALTHOUGH, BOTH AUTH ORITIES HAVE TAKEN DIFFERENT RATE OF PROFIT FOR ESTIMATION OF IN COME FROM ALLEGED BOGUS PURCHASE, BUT NO ONE COULD SUPPORT SAID RATE OF GROSS PROFIT WITH NECESSARY EVIDENCES OR ANY COMPARABLE CASES. H OWEVER, THE RATE OF PROFIT ADOPTED BY THE LD. CIT(A) IS SUPPORT ED BY THE FINDINGS OF THE TRIBUNAL IN ASSESSEE OWN CASE FOR ASST. YEAR 20 09-10, IN ITA ITA NO.7019 & 7214/MUM/2018 ANIL DADARAO GARAD 7 NO. 6161/MUM/2017. THEREFORE, CONSIDERING FACTS AND CIRCUMSTANCES OF THIS CASE AND CONSISTENT WITH VIEW TAKEN BY THE CO- ORDINATE BENCH IN NUMBER OF CASES, INCLUDING IN ASS ESSEE OWN CASE, WE ARE OF THE CONSIDERED OPINION THAT THE LD. CIT(A ) HAS TAKEN A FAIR VIEW AND ESTIMATED 8% GROSS PROFIT ON ALLEGED BOGUS PURCHASES TO SETTLE DISPUTE BETWEEN THE PARTIES IN RESPECT OF PU RCHASES FROM ALL PARTIES, EXCEPT M/S AMI TRADERS. ALTHOUGH, THE LD. CIT(A) HAS GIVEN REASON OF NON PAYMENT TO PARTY AGAINST PURCHASES FO R CONFIRMING 100% ADDITION INRESPECT OF M/S AMI TRADERS, BUT FOR THAT REASON ALONE ADDITION CANNOT BE SUSTAINED AT 100% PROFIT O N BOGUS PURCHASES. WE, THEREFORE, UPHELD THE FINDINGS OF LD . CIT(A) INSOFAR AS 8% PROFIT ESTIMATION ON ALLEGED BOGUS PURCHASES IN RESPECT OF ALL PARTIES. ACCORDINGLY, WE DIRECT THE LD. AO TO ESTIM ATE 8% PROFIT ON ALLEGED BOGUS PURCHASES FROM ALL PARTIES, INCLUDING PURCHASES FROM M/S AMI TRADERS. 8. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DI SMISSED AND APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 13 /03/ 2020 SD/- (SAKTIJIT DEY) SD/- (G. MANJUNATHA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 13/03/2020 THIRUMALESH SR.PS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT ITA NO.7019 & 7214/MUM/2018 ANIL DADARAO GARAD 8 BY ORDER, (ASSTT. REGISTRAR) ITAT, MUMBAI 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//