TEJASH SURESH SHAH, MUMBAI V. ITO 26(3)(5), MUMBAI

ITA 7252/MUM/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 2785 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-03-2020
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 18-12-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SATISH CHANDRA RAJORE
• Keywords: Bogus purchase; Accommodation entries
• Section: 133(6); 143(1); 143(2); 13; 147; 148

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL SMC BENCH MU MBAI BEFORE SHRI, R.C. SHARMA, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO. 7252/MUM/2018 (ASSESSMENT YEAR 2010-11 ) ITA NO. 7253/MUM/2018 (ASSESSMENT YEAR 2011-12 ) TEJASH SURESH SHAH, PROP. M/S. JAS INC. FLAT NO.1, 13 TH FLOOR, A WING, AVANTI APARTMENT, FLANT ROAD, KING CIRCLE, MUMBAI-400022 PAN: AACPS6696L VS. ITO- 26(3)(5) MUMBAI. APPELLANT RESPONDE NT APPELLANT BY : NONE RESPONDENT BY : SHRI SATISHCHANDRA RAJORE (DR) DATE OF HEARING : 26.02.2020 DATE OF PRONOUNCEMEN T : 02.03.2020 ORDERUNDER SECTION 254(1)OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER; 1. THESE TWO APPEALS BY ASSESSEE ARE DIRECTED AGAINST THE ORDERS OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-38, MUMBAI [LD . CIT(A)] BOTH DATED 26.07.2018 FOR ASSESSMENT YEAR 2010-11 & 2011 -12. IN BOTH THE APPEALS, THE ASSESSEE HAS RAISED CERTAIN COMMON GRO UNDS OF APPEAL. FACTS FOR BOTH THE ASSESSMENT YEARS ARE IDENTICAL EXCEPT VARIATION OF FIGURES OF BOGUS PURCHASES, THEREFORE, BOTH THE APPEALS WERE, HEARD TOGETHER AND ARE DECIDED BY A CONSOLIDATED ORDER FOR THE SAKE OF GRA VITY. FOR APPRECIATION OF FACT, THE APPEAL FOR ASSESSMENT YEAR 2010-11 IS TRE ATED AS LEAD CASE. IN ITA NO(S). 7252 & 725 3 MUM 2018-TEJASH SURESH SHAH 2 APPEAL FOR ASSESSMENT YEAR 2010-11, THE ASSESSEE HA S RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) COMMITTED A GROSS ERROR OF LAW AND FACT IN SUSTAINING THE ADDITION TO THE EXTENT OF RS. 11,03,632/- MADE BY THE ASSESSING OFFICER. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) GROSSLY ERRED IN UPHOLDING THE ADDITION TO THE EXTENT OF RS 11,03,63 2/- BY TAKING THE GROSS PROFIT AT THE RATE OF 12.5% ON THE PURCHASES MADE B Y THE APPELLANT.. 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) COMMITTED A GROSS ERROR OF LAW AND FACT IN NOT APPRECIATING THAT THE APPELLANTS GROSS PROFIT IN THESE TRANSACTIONS IS ONLY 4.5% AND THERE IS NO GRO UND OR JUSTIFICATION FOR MAKING ANY ADDITION MORE THAN THE ABOVE PERCENTAGE. 4. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) GROSSLY ERRED IN UPHOLDING THE IMPUGNED ADDITION ON THE ALLEGED GROU ND OF BOGUS PURCHASE MADE BY THE APPELLANT AND EARNING A GROSS PROFIT OF 12.5% THEREON WITHOUT ANY BASIS WHATSOEVER. 5. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) GROSSLY ERRED IN MAKING THE IMPUGNED ADDITION OF RS 11,03,632/- BY T AKING THE GROSS PROFIT AT THE RATE OF 12.5% ON THE PURCHASES MADE BY MERELY F OLLOWING THE DECISION OF THE GUJARAT HIGH COURT IN THE CASE OF CIT V/S SIMIT P. SHETH 356 ITR 451, FACTS OF WHICH ARE NOT AT ALL APPLICABLE TO THE CAS E IN HAND AND ARE CLEARLY DISTINGUISHABLE FROM THAT OF THE APPELLANT. THE APPELLANT THEREFORE PRAYS TO YOUR HONOURS TO KI NDLY DELETE THE UNCALLED FOR AND JUSTIFIABLE IMPUGNED ADDITION MADE. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS PR OPRIETOR OF M/S JAS INC. ENGAGED IN TRADERS IN COMPUTER PARTS, ACCESSORIES, PRINT CARTRIDGES AND SONY PROFESSIONAL TAPES, FILED HIS RETURN OF INCOME FOR ASSESSMENT YEAR 2010-11 ON 15.10.2010 DECLARING TOTAL INCOME OF RS. 5,78,724/-. INITIALLY, THE RETURN WAS PROCESSED UNDER SECTION 143(1). SUBS EQUENTLY, THE ASSESSMENT WAS RE-OPENED UNDER SECTION 147. THE ASS ESSMENT WAS RE- ITA NO(S). 7252 & 725 3 MUM 2018-TEJASH SURESH SHAH 3 OPENED UNDER SECTION 147 ON THE BASIS OF INFORMATIO N RECEIVED FROM SALE TAX DEPARTMENT, GOVERNMENT OF MAHARASHTRA THAT CER TAIN DEALERS WERE INDULGING IN PROVIDING ACCOMMODATION ENTRIES OF SAL E AND PURCHASES WITHOUT ACTUAL DELIVERY OF GOODS. THE LIST OF SUCH DEALERS ALONG WITH BENEFICIARIES WHO WERE PROVIDING/RECEIVING ACCOMMOD ATION ENTRIES WERE FORWARDED TO INVESTIGATION WING OF INCOME TAX DEPAR TMENT. ON THE BASIS OF SUCH INFORMATION, THE ASSESSING OFFICER MADE A B ELIEF THAT THE INCOME OF THE ASSESSEE ESCAPED ASSESSMENT, THEREFORE, RE-OPEN ED THE ASSESSMENT UNDER SECTION 147. NOTICE UNDER SECTION 148 DATED 09.03.2 015 WAS ISSUED AND SERVED UPON THE ASSESSEE. THE ASSESSING OFFICER AFT ER SERVING A STATUTORY NOTICE UNDER SECTION 143(2) AND 143(1) DATED 08.05. 2015 PROCEEDED FOR RE- ASSESSMENT. DURING THE ASSESSMENT, THE ASSESSING OF FICER NOTED THAT THE ASSESSEE HAS SHOWN PURCHASES FROM THE FOLLOWING PAR TIES, WHICH WAS DECLARED AS HAWALA DEALERS BY THE SALE TAX DEPARTME NT, GOVERNMENT OF MAHARASHTRA. NAME OF THE BILL PROVIDER AMOUNT (IN RS.) 1 BALAJI TRADING 5,86,818/- 2 G.R. TRADE LINK 3,48,712/- 3 SHRADHHA TRADING CO. 11,89,718/- 4 SOMNATH INTERNATIONAL 15,46,857/- 5 M.R. CORPORATION 15,90,933/- 6 SUN ENTERPRISES 18,41,259/- 7 NEELOFAR TRADE PRIVATE LTD. 4,27,944/- 8 BHUMI SALE CORPORATION 12,96,816/- TOTAL 88,29,057/- ITA NO(S). 7252 & 725 3 MUM 2018-TEJASH SURESH SHAH 4 3. THE ASSESSING OFFICER DURING THE RE-ASSESSMENT ASKE D THE ASSESSEE TO FILE THE LIST OF PARTIES FROM WHOM THE ASSESSEE HAS SHOW N PURCHASES AND PAID CONSIDERATION. THE ASSESSEE FURNISHED THE DETAILS O F PARTIES FROM WHOM ASSESSEE HAS SHOWN PURCHASES, WHICH WERE EXACTLY TH E SAME AS HAS BEEN RECEIVED BY THE ASSESSING OFFICER. THE ASSESSEE WAS ISSUED SHOW-CAUSE NOTICE AND TO PRODUCE THE PARTIES. THE ASSESSEE IN RESPONSE TO THE SHOW CAUSE NOTICE FURNISHED THE COPY OF LEDGER ACCOUNT, PURCHASE BILLS AND BANK STATEMENT. AFTER PERUSAL OF DETAILED FURNISHED BY A SSESSEE, THE ASSESSING OFFICER NOTED THAT ASSESSEE HAS NOT PRODUCED THE EV IDENCE OF TRANSPORTATION OF GOODS, LORRY RECEIPT. THE PAYMENT THROUGH CHEQUE DOES NOT ESTABLISH THAT THE PURCHASES MADE FROM GENUINE AND EXISTING P ARTIES. IN ORDER TO VERIFY THE TRANSACTION, THE ASSESSING OFFICER ISSUE D NOTICE UNDER SECTION 133(6). THE NOTICES WERE RETURNED BACK BY POSTAL AU THORITY WITH REMARK NOT KNOWN. ON THE BASIS OF RECORD AVAILABLE BEFO RE THE ASSESSING OFFICER. THE ASSESSING OFFICER RECORDED THAT ASSESS EE FAILED TO PRODUCE THE PARTIES, THE NAME OF ALL PARTIES APPEARED IN THE LI ST OF HAWALA DEALERS. THE RECEIPT OF MATERIAL IN QUESTION WAS NOT IN DOUBT BU T MATERIAL HAS BEEN RECEIVED FROM SOURCES BEST KNOWN TO THE ASSESSEE. T HE ASSESSING OFFICER CONCLUDED THAT TAX CAN BE LEVIED ONLY ON REAL INCOM E. THE BASIC RULE OF ACCOUNTANCY IS THAT PROFIT FROM BUSINESS CANNOT BE ASCERTAINED WITHOUT DEDUCTING COST OF PURCHASES FROM SALES OTHERWISE IT WOULD AMOUNT TO LEVY OF INCOME TAX ON GROSS RECEIPT OR SALES. THUS, THE ASSESSEE DEFINITELY ITA NO(S). 7252 & 725 3 MUM 2018-TEJASH SURESH SHAH 5 INFLATED THE EXPENDITURE BY SHOWING HIGHER AMOUNT O F PURCHASE THROUGH FICTITIOUS INVOICES FROM THE BOGUS PARTIES. THE ASS ESSING OFFICER CONSIDERED 12.5% OF PURCHASES IN THE BOOKS OF ACCOUNT THROUGH FICTITIOUS INVOICES IN THE NAME OF HAWALA PARTIES. ACCORDINGLY, THE ASSESS ING OFFICER DISALLOWED 12.5% OF RS. 88,29,057/-. THE DISALLOWANCE WAS WORK ED OUT TO RS. 11,03,632/-. 4. ON APPEAL BEFORE THE LD. CIT(A), THE RE-OPENING AS WELL AS ADDITION ON ACCOUNT OF BOGUS PURCHASES WERE UPHELD. FURTHER, AG GRIEVED, THE ASSESSEE HAS FILED THE PRESENT APPEAL BEFORE US. 5. NONE APPEARED ON BEHALF OF ASSESSEE DESPITE SERVICE OF NOTICE THROUGH REGISTERED POST ACKNOWLEDGMENT DUE (RPAD). PERUSAL OF RECORD REVEALS THAT THE AUTHORITY LETTER OF M/S YRK & ASSOCIATE LLP, CH ARTERED ACCOUNTANT IS ON RECORD. NEITHER THE ASSESSEE APPEARED NOR HIS RE PRESENTATIVE TURNED UP. THEREFORE, WE LEFT NO OPTION EXCEPT TO HEAR THE SUB MISSION OF LD. DEPARTMENTAL REPRESENTATIVE (DR) FOR THE REVENUE AN D THE MATERIAL AVAILABLE ON RECORD. THE LD. DR SUPPORTED THE ORDER OF LOWER AUTHORITIES. THE LD. DR SUBMITS THAT INVESTIGATION WING OF DEPAR TMENT CONDUCTED FULL- FLEDGED INVESTIGATION ABOUT THE HAWALA TRADERS, WHO WERE ENGAGED IN PROVIDING ACCOMMODATION ENTRIES WITHOUT ACTUAL DELI VERY OF GOODS. BEFORE ASSESSING OFFICER, THE ASSESSEE FAILED TO BRING ANY EVIDENCE ABOUT ACTUAL DELIVERY OF GOODS BY THE ASSESSEE. THE ASSESSING OF FICER DISALLOWED ONLY PROFIT MARGIN EMBEDDED IN SUCH TAINTED/BOGUS PURCHA SES. THE ASSESSING ITA NO(S). 7252 & 725 3 MUM 2018-TEJASH SURESH SHAH 6 OFFICER REASONABLY ESTIMATED THE DISALLOWANCE @ 12. 5%. THE ASSESSEE IS NOT ENTITLED FOR FURTHER RELIEF. 6. WE HAVE CONSIDERED THE SUBMISSION OF LD. DR FOR THE REVENUE AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THOUGH THE ASSESS EE HAS RAISED AS MANY AS FIVE GROUNDS OF APPEAL, HOWEVER, AS PER OUR CONSIDE RED VIEW, THE SOLE GROUND OF APPEAL RELATES TO CONFIRMING THE ACTION O F ASSESSING OFFICER IN ESTIMATING THE DISALLOWANCE OF BOGUS PURCHASES @ 12 .5% OF THE AGGREGATE OF DISPUTED PURCHASES. 7. WE HAVE NOTED THAT DURING THE RE-ASSESSMENT, THE AS SESSEE WAS ASKED TO SUBSTANTIATE THE PURCHASES AND TO PRODUCE THE PARTI ES. THE ASSESSEE FILED ITS REPLY AND FURNISHED THE COPY OF LEDGER ACCOUNT, PUR CHASE BILLS/INVOICES AND BANK STATEMENT SHOWING THE PAYMENT OF CONSIDERATION . THE ASSESSING OFFICER NOTED THAT NO EVIDENCE RELATING TO THE TRAN SPORTATION OF GOODS WAS FURNISHED. THE ASSESSING OFFICER AFTER PERUSAL OF D ETAILED FURNISHED BY ASSESSEE, THE ASSESSING OFFICER TOOK HIS VIEW THAT ASSESSEE FAILED TO PRODUCE THE EVIDENCE OF TRANSPORTATION OF GOODS, LO RRY RECEIPT, MERE PAYMENT THROUGH CHEQUE DOES NOT ESTABLISH THAT THE PURCHASES MADE FROM GENUINE AND EXISTING PARTIES. THE NOTICES ISSUED UN DER SECTION 133(6) WERE RETURNED BACK BY POSTAL AUTHORITY WITH REMARK NOT KNOWN. THE ASSESSING OFFICER AFTER CONSIDERING THE MATERIAL BE FORE HIM CONCLUDED THAT ASSESSEE FAILED TO PRODUCE THE PARTIES, THE NAME OF ALL PARTIES APPEARED IN THE LIST OF HAWALA DEALERS. THE ASSESSING OFFICER F URTHER CONCLUDED THAT THE ITA NO(S). 7252 & 725 3 MUM 2018-TEJASH SURESH SHAH 7 RECEIPT OF MATERIAL IN QUESTION WAS NOT IN DOUBT BU T MATERIAL HAS BEEN RECEIVED FROM SOURCES BEST KNOWN TO THE ASSESSEE. T HE ASSESSING OFFICER FINALLY CONCLUDED THAT TAX IS LEVIABLE ON REAL INCO ME AND THE BASIC RULE OF ACCOUNTANCY IS THAT PROFIT FROM BUSINESS CANNOT BE ASCERTAINED WITHOUT DEDUCTING COST OF PURCHASES FROM SALES OTHERWISE IT WOULD AMOUNT TO LEVY OF INCOME TAX ON GROSS RECEIPT OR SALES. THE ASSESS ING OFFICER CONCLUDED THAT THE ASSESSEE OBTAINED BOGUS BILLS TO INFLATE T HE EXPENDITURE THROUGH FICTITIOUS INVOICES FROM THE BOGUS PARTIES. THE ASS ESSING OFFICER DISALLOWED 12.5% OF PURCHASES. THE DISALLOWANCE WAS WORKED OUT TO RS. 11,03,632/-. ON APPEAL, THE LD. CIT(A) AFFIRMED THE ACTION OF AS SESSING OFFICER HOLDING THAT DISALLOWANCE OF 12.5% IN THE BUSINESS OF WHOLE SALE TRADING OF ELECTRONIC ITEMS SUCH AS COMPUTER PARTIES, ACCESSOR ISES, PRINT CARTRIDGES AND SONY TAPES ARE RATIONAL AND JUSTIFIED. WE HAVE NOTE D THAT BEFORE US THE ASSESSEE HAS NOT FILED EVEN A SINGLE DOCUMENT TO SU BSTANTIATE HIS CONTENTION. WE ARE CONSCIOUS OF THE FACT THAT UNDER THE INCOME TAX PROCEEDING ONLY TAX CAN BE LEVIED ON THE INCOME COMPONENT AND NOT ON TH E ENTIRE TRANSACTION. EVEN THE ENTIRE TRANSACTION ARE NOT VERIFIABLE THE LOWER AUTHORITIES ARE ENTITLED TO TAX THE INCOME COMPONENT OF TRANSACTION ONLY. WE HAVE NOTED THAT LOWER AUTHORITIES HAVE MADE THE DISALLOWANCE K EEPING IN VIEW THE NATURE AND BUSINESS ACTIVITIES OF THE ASSESSEE AND DISALLOWED 12.5% OF THE TAINTED PURCHASES. IN OUR VIEW, THE ASSESSING OFFIC ER HAS MADE A REASONABLE DISALLOWANCE, WHICH DOES NOT REQUIRE ANY INTERFEREN CE AT OUR END. ITA NO(S). 7252 & 725 3 MUM 2018-TEJASH SURESH SHAH 8 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMISSED. ITA NO. 7253/MUM/2018 FOR AY 2011-12 9. THE ASSESSEE HAS RAISED THE IDENTICAL GROUNDS OF AP PEAL AS RAISED IN APPEAL FOR AY 2010-11, WHICH WE HAVE DISMISSED. CONSIDERI NG THE FACT THAT WE HAVE DISMISSED THE APPEAL FOR A.Y. 2010-11 ON SIMIL AR SET OF FACT. THEREFORE, THE APPEAL FOR THIS YEAR IS ALSO DISMISS ED WITH SIMILAR OBSERVATION. 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALSO DISMI SSED. ORDER PRONOUNCED IN THE OPEN COURT ON 02/03/2020. SD/- SD/- R.C. SHARMA PAWAN SIN GH ACCOUNTANT MEMBER JUD ICIAL MEMBER MUMBAI, DATE: 02.03.2020 SK COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. DR SMC BENCH, ITAT, MUMBAI 6. GUARD FILE BY ORDER, DY./ASST. REGISTRAR ITAT, MUMBAI