MOHMAD TAUFIQ NAVLAKHIYA, MUMBAI V. ITO 20(2)(2), MUMBAI

ITA 7219/MUM/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0175 (ITAT-MUMBAI)
• Duration Of Justice: 6 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-07-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 08-12-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: B SATYANARAYANA RAJU
• Assessee Lawyers: VIRAG SHAH
• Keywords: Bogus purchase; Rejection of books of accounts; Principle of natural justice
• Section: 143(3)

Judgement Text

, SMC , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES SMC, MUMBAI BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER ITA NO.7219/MUM/2016 : ASST.YEAR 2009-2010 SHRI MOHMAD TAUFIQ NAVLAKHIYA 401, JUNE APARTMENT GAUTHAM LANE NO.2, ANDHERI (WEST) MUMBAI 400 058. PAN : ACQPN5792A. / VS. THE INCOME TAX OFFICER WARD 20(2)(2) MUMBAI. ( / APPELLANT) ( / RESPONDENT) /APPELLANT BY : SHRI VIRAG SHAH /RESPONDENT BY : SHRI B.SATYANARAYANA RAJU (SR.DR) / DATE OF HEARING : 16.05.2017 / DATE OF PRONOUNCEMENT : 03.072017 / O R D E R THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LEARNED CIT(A) DATED 29.09.2016 AND PERTAINS TO ASSESSMENT YEAR 2009-2010. 2. THE ISSUE RAISED IS THAT CIT(A) ERRED IN CONFIRMING THE ADDITION AT 13% MARGIN OF PURCHASE OF RS.1,64,98,290 OF BOGUS PURCHASES WHICH RESULTED INTO ADDITION OF RS.33,64,650. 3. BRIEF FACTS OF THE CASE ARE AS UNDER:- 3.1 THE ASSESSEE HAS FILED HIS RETURN OF INCOME ON 29.09.2009 BY DECLARING TOTAL INCOME OF RS.10,70,980. THE ASSESSMENT ORDER U/S 143(3) OF THE ACT, WAS COMPLETED ON 09.10.2011 BY ASSESSING TOTAL INCOME AT RS.11,89,872. THEREAFTER, THE CASE HAS BEEN REOPENED BY ISSUING NOTICE U/S ITA NO.7219/MUM/2016. SHRI MOHMAD TAUFIQ NAVLAKHIYA. 2 148 OF THE ACT DATED 27.03.2014. THE CASE HAS BEEN REOPENED FOR THE REASON THAT AN INTIMATION VIDE LETTER BEARING NO. DGIT (LNV.)/CORR.FIELD/2Q13- 14 DATED 26/12/2013 WAS RECEIVED IN THE OFFICE OF AO FROM THE OFFICE OF THE DIRECTOR GENERAL OF INCOME TAX (INV.), MUMBAI, WHEREIN IT WAS STATED THE INFORMATION WAS RECEIVED FROM SALES TAX DEPARTMENT, GOVT. OF MAHARASHTRA REGARDING CASES INVOLVING BOGUS PURCHASES / HAWALA TRANSACTIONS. ACCORDINGLY, THE OFFICE OF THE DGLT(LNV.), MUMBAI HAS FORWARDED THE LIST OF BENEFICIARIES WHO HAVE TAKEN BOGUS PURCHASE. THE DATA CONTAINS THE DETAILS OF TRANSACTIONS OF EACH BENEFICIARY WITH BOGUS BILLER, THEIR TIN AND PAN DETAILS AND THE PAN DETAILS OF THE BENEFICIARIES. FROM THE DATA ON VERIFICATION, IT WAS FOUND THAT THE ASSESSEE, DURING F.Y. 2008-09 HAS ACQUIRED SOME BOGUS PURCHASE BILLS AMOUNTING TO RS.1,64,98,290 FROM TWENTY PARTIES. ACCORDINGLY, THE TOTAL PURCHASE MADE FROM THESE PARTIES WORKED OUT TO RS.1,64,98,290. IN RESPONSE TO NOTICE U/S 148 OF THE ACT, ASSESSEE SUBMITTED THAT RETURN FILED U/S 139(1) OF THE ACT BE TREATED FILED IN RESPONSE TO THE NOTICE U/S148 OF THE ACT. COPY OF REASONS WERE SUPPLIED TO THE ASSESSEE VIDE AO'S LETTER DATED 01.08.2014 3.2 BY TAKING ABOVE FACTUAL ASPECTS INTO CONSIDERATION AND FOLLOWING THE PRINCIPLE OF NATURAL JUSTICE, ASSESSEE WAS GIVEN AN OPPORTUNITY TO MAKE A SUBMISSION BY THE AO. IN RESPONSE TO THAT ASSESSEE FILED LETTER DATED 28.10.2014 , WHEREIN HE SUBMITTED THAT FIRE BROKE OUT IN THE MANISH MARKET ON 26.11.2011 AND ALL RECORDS WERE LOST DUE TO FIRE. HENCE ASSESSEE WAS UNABLE TO PRODUCE PURCHASE BILLS, DELIVERY CHALLANS, STOCK REGISTER AND LEDGER OF ALL THE PARTIES. HOWEVER, ALL THE PAYMENTS HAVE BEEN MADE BY CHEQUE. COPIES OF BANK STATEMENTS WERE PRODUCED BEFORE THE AO. HE ALSO SUBMITTED ITA NO.7219/MUM/2016. SHRI MOHMAD TAUFIQ NAVLAKHIYA. 3 THAT GP DURING THE YEAR WAS 10.61%. THE SUBMISSION MADE BY THE ASSESSEE AND OTHER DOCUMENTS FURNISHED BY HIM WERE CAREFULLY CONSIDERED BY AO. AT THE OUTSETS, AS PER THE AO, IT NEEDS TO BE MENTIONED THAT CONTENTION PUT FORTH BY THE ASSESSEE WAS NOT ACCEPTABLE. MOREOVER, THE FACT REMAINS THAT THESE PARTIES HAVE ADMITTED IN FRONT OF THE SALES TAX DEPARTMENT THAT THEY HAVE NOT MADE ANY SALE OR PURCHASE TRANSACTIONS. THIS PROVES THAT THE PURCHASES SHOWN TO HAVE BEEN MADE BY THE ASSESSEE FROM THESE FIRMS WERE BOGUS. SINCE THE ASSESSEE HAS MADE PAYMENT THROUGH ACCOUNT PAYEE CHEQUES, THE ONLY INEVITABLE CONCLUSION TO BE DRAWN WAS THAT THE ASSESSEE MUST HAVE MADE THESE PURCHASES FROM OPEN MARKET FROM SOME PARTIES BEST KNOWN TO HIM. 3.3 IN VIEW OF THESE FACTS AND CIRCUMSTANCES AND COMPARATIVE POSITION OF TRADING RESULTS, THE AO REACHED THE CONCLUSION THAT THE ASSESSEE WAS A BENEFICIARY OF THE ACCOMMODATION BILLS ISSUED BY THE PARTIES MENTIONED ABOVE, WHEREAS, THERE WAS NOT ACTUAL DELIVERY/ PHYSICAL DELIVERY OF THE GOODS. ACCOMMODATION BILLS WERE OBTAINED FOR INTRODUCING UNACCOUNTED GOODS INTO THE ACCOUNTED STREAM. SINCE THE SALES WERE CLAIMED TO BE GENUINE BY THE ASSESSEE, IT WAS PROVIDED THAT THE ASSESSEE WAS ACTUALLY IN POSSESSION OF GOODS. THIS WAS BASED ON THE FOOTINGS THAT THERE CANNOT BE ANY SALES WITHOUT PURCHASES. AT THE SAME TIME, IT DID PURCHASE GOODS FROM SOME OTHER SUPPLIERS, MAY BE WITHOUT BILLS, WHICH WAS COMMONLY KNOWN AS GREY MARKET AND THIS BE SO, THE ASSESSEE HAS BEEN BENEFITED BY PROVIDING MARGIN OF GREY MARKET. SUCH PURCHASES, IN THIS LINE OF BUSINESS CANNOT BE DENTED AS PER THE PREVAILING PRACTICE OF THE MARKET. AO HELD THAT THE PURCHASE RATE AS MENTIONED IN THE SUPPLIER'S SALES INVOICE CANNOT BE ITA NO.7219/MUM/2016. SHRI MOHMAD TAUFIQ NAVLAKHIYA. 4 ACCEPTED. CONSEQUENTLY, THE BOOKS OF ACCOUNTS HAVE BEEN REJECTED AS PER PROVISIONS OF SECTION 145(3) OF THE ACT. AO PLACED RELIANCE ON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF M/S. KANCHWALA GEMS REPORTED IN 288 ITR 10, WHEREIN IT WAS HELD THAT IF CERTAIN PURCHASES REMAIN UNVERIFIABLE, THE REJECTION OF BOOKS OF ACCOUNTS WAS A CORRECT STEP. 3.4 THE ASSESSING OFFICER, AFTER HAVING REJECTING BOOKS RESULT OF THE ASSESSEE, HAS ESTIMATED THE INCOME OF THE ASSESSEE. THE ASSESSING OFFICER, BY KEEPING IN MIND THE PRINCIPLE LAID DOWN BY HON'BLE SUPREME COURT IN THE CASE OF H.M. ESUFALI ABDULALI, POINTED OUT THAT THE METHOD TO BE ADOPTED MUST BE WHICH IS APPROXIMATELY NEARER TO THE TRUTH. THE AO MADE DISALLOWANCE OF THE G.P. @ 13% OF THE ABOVE SAID PURCHASES AMOUNTING TO RS.1,64,98,290/- WHICH WORKS OUT AT RS.21,44,778/- AND THE SAME HAS BEEN TAKEN AS UNPROVED / NON-GENUINE PURCHASE AND ACCORDINGLY ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 4. UPON ASSESSEES APPEAL, THE LEARNED CIT(A) CONFIRMED THE ADDITION BY CONCLUDING AS UNDER:- ON PERUSAL OF COPY OF THE LEDGER ACCOUNT FILED BY THE APPELLANT, IT IS FOUND THAT THE DETAILS OF PURCHASES ARE FROM THE 20 HAWALA PARTIES. IT IS TO REITERATE THAT THE CASE WAS REOPENED BY ISSUING NOTICE U/S 148 OF THE ACT. IN ORDER TO VERIFY THE GENUINENESS OF THE PURCHASE, APPELLANT WAS ASKED TO PRESENT HIS CASE. APPELLANT HAS JUST SUBMITTED THAT THERE WAS A FIRE IN THE MARKET AND AL! RECORDS WERE LOST. HE FAILED TO PRODUCE THE PARTIES. EVEN IF, FOR THE SAKE OF ARGUMENT IT IS ACCEPTED THAT RECORD IS LOST IN THE FIRE, BUT A LIST OF 20 PARTIES WAS BEFORE THE APPELLANT. THESE PARTIES WERE HIS WITNESSES. HE KNOWS THE PARTIES. ALL THESE PARTIES MUST NOT HAVE BEEN PLACED IN THE SAME MANISH MARKET ITA NO.7219/MUM/2016. SHRI MOHMAD TAUFIQ NAVLAKHIYA. 5 WHERE FIRE BROKE OUT. APPELLANT'S CONTENTION IS NOT ACCEPTABLE. THE FACT IS THAT APPELLANT HAS FAILED TO PRODUCE THE PARTIES, THEREBY HAS NOT DISCHARGED THE ONUS CAST UPON HIM TO PROVE GENUINENESS OF EXPENSES ON ACCOUNT OF PURCHASE OF MATERIALS. IN VIEW OF THIS, AO HAS MADE DISALLOWANCE OF THE G.P. @ 13% OF THE ABOVE SAID PURCHASES AMOUNTING TO RS.1,64,98,290/- WHICH WORKS OUT AT RS.21,44,778/- AND THE SAME HAS BEEN TAKEN AS UNPROVED / NON-GENUINE PURCHASE AND ACCORDINGLY ADDED TO THE TOTAL INCOME OF THE APPELLANT. 5. AGAINST THE ABOVE ORDER, THE ASSESSEE IS IN APPEAL BEFORE THE ITAT. 6. I HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. I FIND THAT OVERWHELMING EVIDENCES ARE ON RECORD THAT THE IMPUGNED PURCHASES ARE BOGUS. COGENT MATERIALS WERE RECEIVED FROM SALES TAX DEPARTMENT, WHEREIN THESE SUPPLIERS WERE FOUND TO BE BOGUS. THEY HAD ALSO ACCEPTED THE SAME. ASSESSEES PLEA THAT ALL HIS DOCUMENTS GOT BURNED, CANNOT BE A REASON TO DENY THE SUBSTANTIAL EVIDENCE THAT THE BOGUS PURCHASES HAVE BEEN BOOKED BY THE ASSESSEE. AS RIGHTLY POINTED OUT BY THE LEARNED CIT(A), A LIST OF 20 PARTIES WAS ALWAYS BEFORE THE ASSESSEE AND THESE PARTIES ARE ASSESSEES WITNESSES. SINCE HE KNOWS THESE PARTIES, ASSESSEE COULD HAVE SUBMITTED EVIDENCE FROM THEM TO DISCHARGE THE ONUS CAST UPON HIM TO PROVE THE GENUINENESS OF THE PURCHASES. HENCE, IT IS CLEAR THAT THE ASSESSEE HAS BOOKED BOGUS PURCHASES. 7. I FIND ALSO THAT OVERWHELMING EVIDENCES ARE ON RECORD IN THIS CASE TO SHOW THAT PURCHASES IN THIS CASE ARE BOGUS. THIS IS MORE SO IN THE LIGHT OF THE FACT THAT ASSESSEE HAS FAILED TO PRODUCE ANY INDEPENDENT EVIDENCES TO PROVE THE PURCHASES LIKE TRANSPORT BILLS, DELIVERY CHALLENS, MODE OF TRANSPORTATION ITA NO.7219/MUM/2016. SHRI MOHMAD TAUFIQ NAVLAKHIYA. 6 EITHER DURING THE ASSESSMENT PROCEEDINGS OR DURING THE APPELLATE PROCEEDINGS. 8. THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS SUBMITTED THAT IN A SIMILAR CASE OF BOGUS PURCHASE, GUJARAT HIGH COURT IN IT APPEAL NO.240 OF 2003 IN THE CASE OF N.K.INDUSTRY V. DCIT IN ORDER DATED 20.06.2016 WHEREIN 100% OF THE BOGUS PURCHASES HAS BEEN HELD TO BE ADDED IN THE HANDS OF THE ASSESSEE AND TRIBUNALS RESTRICTION OF ADDITION TO 25% OF THE BOGUS PURCHASES WAS SET ASIDE. THE SPECIAL LEAVE PETITION AGAINST THIS ORDER HAS BEEN DISMISSED BY THE HONBLE APEX COURT BY ORDER DATED 16.01.2017. 9. HOWEVER, I FIND THAT IT MAY NOT BE APPROPRIATE IN THIS CASE TO TAKE AWAY THE RELIEF THAT HAS BEEN GRANTED BY THE ASSESSING OFFICER. HENCE, IN THESE CIRCUMSTANCES, I FIND THAT IT IS CLEAR THAT THE ASSESSEE HAS MADE THE PURCHASES FROM GREY MARKET AND PURCHASES FROM GREY MARKET GIVE BENEFIT TO THE ASSESSEE IN THE FORM OF NON-PAYMENT OF TAXES AND OTHERS. HENCE, DISALLOWANCE OF 13% OF THE BOGUS PURCHASES IS VERY REASONABLE. HENCE, I DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LEARNED CIT(A). ACCORDINGLY, I UPHOLD THE SAME. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS DISMISSED. ORDER PRONOUNCED ON THIS 3 RD DAY OF JULY, 2017. SD/- ( SHAMIM YAHYA ) ACCOUNTANT MEMBER MUMBAI; DATED : 03 RD JULY, 2017. DEVDAS* ITA NO.7219/MUM/2016. SHRI MOHMAD TAUFIQ NAVLAKHIYA. 7 / COPY OF THE ORDER FORWARDED TO : / BY ORDER, //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT, MUMBAI. 4. / CIT(A), MUMBAI 5. , , / DR, ITAT, MUMBAI 6. [ / GUARD FILE.