SHRI. JITENDRA S PATEL, Mumbai V. ITO-27(1)(5), MUMBAI

ITA 73/MUM/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 5744 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-02-2020
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 04-01-2019
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: RUCHI RATHOD
• Keywords: Bogus purchase; Corroborative evidences; Accommodation entries
• Section: 69C; 133(6); 147; 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC, BENCH M UMBAI BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBE R ITA NO.73/MUM/2019 ( ASSESSMENT YEAR: 2011-12 ) JITENDRA S.PATEL 202, JOLLY APARTMENT CO-OP HSG.SOC, KIRAL ROAD GHATKOPAR (W) MUMBAI-400 086 VS. ITO-27(1)(5) 4 TH FLOOR, TOWER NO.6 VASHI RAILWAY COMPLEX, VASHI, NAVI MUMBAI-400703 PAN/GIR NO. AAA PP5525F ( APPELLANT ) .. RESPONDENT ) & ITA NO.671/MUM/2019 ( ASSESSMENT YEAR: 2011-12 ) ITO-27(1)(5) 4 TH FLOOR, TOWER NO.6 VASHI RAILWAY COMPLEX, VASHI, NAVI MUMBAI-400703 VS. JITENDRA S.PATEL 202, JOLLY APARTMENT CO-OP HSG.SOC, KIRAL ROAD GHATKOPAR (W) MUMBAI-400 086 PAN/GIR NO. AAAPP5525F ( APPEL LANT ) .. RESPONDENT ) REVENUE BY SHRI ASHISH KUMAR, DR ASSESSEE BY MS. RUCHI RATHOD, AR DATE OF HEARING 30 / 01/2020 DATE OF PRONOUNCEME NT 14 / 0 2 /20 20 / O R D E R PER G.MANJUNATHA (A.M) : THESE CROSS APPEALS FILED BY THE ASSESSEE, AS WELL AS THE REVENUE ARE DIRECTED AGAINST, THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS)26, MUMBAI, DATED 30/11/2018 F OR THE AY 2011-12. SINCE, FACTS ARE IDENTICAL AND ISSUES ARE COMMON, FOR THE ITA NOS.73 & 671/MUM/2019 JITENDRA S. PATEL 2 SAKE OF CONVENIENCE, THESE APPEALS WERE HEARD TOGET HER AND ARE DISPOSED-OFF BY THIS CONSOLIDATED ORDER. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. LEARNED CIT(APPEAL) ERRED IN ADDING PROFIT @ 8% ON THE PURCHASES EFFECTED FROM REGISTERED DEALERS AND ERRED IN TREAT ING THE SAME AS BOGUS PURCHASE IGNORING THE DETAILED EVIDENCES BROU GHT ON RECORD & FURTHER ERRED IN LEVYING INTEREST THEREON AND IGNOR ING THE JUDICIAL PRECEDENTS BROUGHT TO HIS KNOWLEDGE. 2. LEARNED CIT(APPEAL) ERRED IN ADDING THE PURCHA SES PROFIT @ 8% ON THE PURCHASES ON THE BASIS OF INFORMATION RECEIVED FROM SALES TAX AUTHORITIES WHICH CONTRARY TO THE MATERIAL FACT ON RECORD AND MORE PARTICULARLY DISALLOWANCE IS CONTRARY TO THE PROVIS IONS OF SECTION 69C SINCE THE SOURCE IS IN DISPUTE AND NOT THE PURCHASE EXPENDITURE. 3. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW, THE LD.CIT(A) ERRED IN DIRECTING THE AO TO RESTRICT THE ADDITION TO 8% OF RS. 34,92,595/- AS AGAINST ADDITION @25% OF RS.34,92,595/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF BOGUS PURCHASE, WITHOUT APPRE CIATING THE FACT THAT THE ASSESSEE HAD FAILED TO DISCHARGE THE ONUS TO ES TABLISH THE GENUINENESS OF THE TRANSACTIONS AND ALSO FAILED TO FURNISH CORROBORATIVE EVIDENCES IN SUPPORT OF THE CLAIM. 2 ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT(A) ERRED IN ESTIMATING THE PROFIT FROM HAWALA PURCHASE S BY DISALLOWING ONLY RS.2,79,408/- BEING 8%OF THE BOGUS PURCHASES AS EV EN THE BASIC ONUS OF PRODUCING DELIVERY CHALLANS, TRANSPORTATION DETA ILS ETC, WERE NOT FULFILLED BY THE ASSESSEE. 3. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) ON THE ABOVE GROUNDS BE REVERSED AND THAT OF THE ASSESSING OFFICER BE RE STORED. 4. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS AN INDIVIDUAL ENGAGED IN THE BUSINESS OF TRADING IN T IMBER AND PLYWOOD, FILED HIS RETURN OF INCOME FOR AY 2011-12 ON 28/09/2011, DECLARING TOTAL INCOME AT RS. 6,96,913/-. THE CASE HAS BEEN SUBSEQUENTLY, REOPENED U/S 147 OF THE ACT, ON THE B ASIS OF INFORMATION RECEIVED FROM DGIT, INVESTIGATION, MUMB AI, AS PER ITA NOS.73 & 671/MUM/2019 JITENDRA S. PATEL 3 WHICH, SALES TAX AUTHORITIES OF GOVERNMENT OF MAHAR ASHTRA HAD TAKEN ACTIONS AGAINST NUMBER OF HAWALA DEALERS, WH O 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 PARA 5 OF H IS ASSESSMENT ORDER AMOUNTING TO RS. 34,92,595/-. THE CASE WAS SE LECTED FOR SCRUTINY AND THE ASSESSMENT HAS BEEN COMPLETED U/S. 143(3).R.W.S. 147 OF THE I.T.ACT, 1961 ON 20/10/2016 AND DETERMIN ED TOTAL INCOME OF RS. 15,70,060/-, AFTER MAKING ADDITIONS OF 25% G ROSS PROFIT TOWARDS ALLEGED BOGUS PURCHASE FROM THOSE PARTIES A ND MADE ADDITIONS OF RS. 8,73,149/-. 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 FILED ELABORATE WRITTEN SUBMISSIONS, ON THE ISSUE, WHICH HAS BEEN REPRODUCED AT PARA 5 ON PAGES 3 TO 4 OF LD.CIT(A) O RDER. THE SUM AND SUBSTANCE OF ARGUMENTS OF THE ASSESSEE BEFORE T HE LD.CIT(A) ARE THAT PURCHASE FROM THE ABOVE PARTY IS GENUINE, WHICH IS SUPPORTED BY NECESSARY EVIDENCES. THEREFORE, NO ADD ITIONS COULD BE MADE ON THE BASIS OF INFORMATION RECEIVED FROM THIR D PARTY. THE LD.CIT(A), AFTER CONSIDERING RELEVANT SUBMISSION OF THE ASSESSEE AND ALSO, BY FOLLOWING THE DECISION OF HONBLE GUJA RAT HIGH COURT, IN THE CASE OF CIT VS. SIMITH P. SHETH (356 ITR 451) H AS SCALED DOWN ADDITION MADE BY THE AO TOWARDS ALLEGED BOGUS PURCH ASES TO 8% GROSS PROFIT ON TOTAL PURCHASES FROM THOSE PARTIES. THE RELEVANT FINDINGS OF THE LD.CIT(A) ARE AS UNDER:- ITA NOS.73 & 671/MUM/2019 JITENDRA S. PATEL 4 6.1 GROUND NO.1 OF THE APPEAL IS AGAINST ADDITI ON OF RS 8,73,149/- AS EXPENDITURE U'S.69C OF THE ACT AS PER THE INVEST IGATIONS CARRIED OUT BY THE SALES TAX AUTHORITIES. THE AFOREMENTIONED PARTI ES WERE FOUND TO BE INVOLVED -N GIVING ACCOMMODATION ENTRIES ONLY WITHO UT ACTUALLY SUPPLYING THE GOODS. THE LOGICAL INFERENCE IS THAT THE PURCH ASES MADE BY THE APPELLANT WOULD ALSO BE IN THE NATURE OF ACCOMMODAT ION ENTRIES ONLY. TO VERIFY THE SAME, THE AO HAD MADE ENQUIRIES BY ISSUI NG NOTICES U/S 133(6) WHICH WERE RETURNED UNSERVED BY THE POSTAL AUTHORIT IES. THIS PARTY WAS FOUND TO BE NON-EXISTENT AT THE ADDRESS GIVEN BY (H E APPELLANT THE APPELLANT ALSO FAILED TO PROVIDE THE LATEST ADDRESS OF THE PARTY DURING THE SCRUTINY ASSESSMENT THE APPELLANT FURNISHED DETAILS OF PURCHASES AND CORRESPONDING SALES HOWEVER, THE APPELLANT COULD N OT PRODUCE THE PARTY BEFORE THE AO INSPITE OF OPPORTUNITY BEING GIVEN THE APPELLANT ALSO FAILED TO PRODUCE DELIVERY CHALLANS OR TRANSPORTATI ON DETAILS THE ONUS OF PROVING THE GENUINENESS OF SUCH PURCHASES IS ON THE APPELLANT WHICH THE APPELLANT HAD NOT BEEN ABLE TO DISCHARGE FULLY WHE N THE HAWALA PARTY HAD ADMITTED ON OATH THAT II HAD GIVEN ACCOMMODATIO N ENTRIES ONLY WITHOUT ACTUALLY SUPPLYING THE GOODS, THE GENUINENE SS OF PURCHASES MADE FROM THESE PARTIES WILL HAVE LA BE CONSIDER ED TAKING THIS INTO CONSIDERATION WHILE EXAMINING THE DOCUMENTATIO N SUBMITTED BY THE APPELLANT IN SUPPORT OF ITS CLAIM THE DOCUMENTARY E VIDENCES SUCH AS PURCHASE BILLS, PAYMENTS BY CHEQUES, ETC WOULD ALL HAVE BEEN ORCHESTRATED TO PRESENT A FACADE OF GENUINENESS AND DOES NOT NECESSARILY MEAN THAT THE PURCHASES FROM THESE PART IES ARE GENUINE. THE COURTS HAVE HELD THAT PAYMENT BY CHEQUE BY ITSELF IS NOT SACROSANCT SO AS TO PROVE GENUINENESS OF PURCHASES WHEN THE SURRO UNDING CIRCUMSTANCES ARE SUSPECT. HOWEVER, THE APPELLANT H AS SHOWN ONWARD SAFES WHICH HAS NOT BEEN DOUBLED BY THE ASSESSING O FFICER, SINCE THERE CAN BE NO SALES WITHOUT CORRESPONDING PURCHASES, TH E ONLY LOGICAL EXPLANATION IS THAT THE APPELLANT WOULD HAVE MADE P URCHASES FROM UNDISCLOSED PARTIES IN THE GREY MARKET AT LOWER RAT ES AND PURCHASES WERE SHOWN AS BEING MADE FROM THE IMPUGNED PARTIES TO S UPPRESS ITS PROFITS. IN SUCH A SITUATION THE VENOUS COURTS INCLUDING T HE HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS SIMIT P. SHETTH, 356 IT R 451 HAVE HELD THAT NOT THE ENTIRE PURCHASES BUT ONLY THE PROFIT ELEME NT EMBEDDED IN THESE PURCHASES WAS TO BE DISAVOWED. THE ITAT MUMBAI SMC BENCH VIDE ORDER DATED 0905/2018 FOR A.Y 2010-11 IN ASSESSEE'S OWN CASE HAS RESTRICTED THE ADDITION TO 8% RESPECTFULLY FOLLOWIN G ITATS ORDER THE PROFIT MARGIN IS RESTRICTED TO 8%. THIS GROUND OF APPEAL I S PARTLY ALLOWED. 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 THAT THE LD. AO HAS MADE ADDITION OF 25% PROFIT ON ALLEGED BOGUS 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 ITA NOS.73 & 671/MUM/2019 JITENDRA S. PATEL 5 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 THE LD. DR AND ALS O, MATERIAL AVAILABLE ON RECORD, WE FIND THAT BOTH THE SIDES HA VE FAILED TO PROVE THE CASE IN THEIR FAVOUR WITH NECESSARY EVIDENCES. ALTHOUGH, ASSESSEE HAS FILED CERTAIN BASIC EVIDENCES, BUT FAI LED TO FILE FURTHER EVIDENCES TO CONCLUSIVELY PROVE PURCHASES TO THE SA TISFACTIONS OF THE LD.AO. FURTHER, MERE PAYMENT BY CHEQUE DOES NOT PRO VE THE GENUINENESS OF PURCHASE, MORE PARTICULARLY WHEN OTH ER 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 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. ITA NOS.73 & 671/MUM/2019 JITENDRA S. PATEL 6 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 25% PROFIT ADDITIONS, WHEREAS THE LD CIT(A) HA S SCALED DOWN ADDITION TO 8% PROFIT ON ALLEGED BOGUS PURCHASES. A LTHOUGH, BOTH AUTHORITIES HAVE TAKEN DIFFERENT RATE OF PROFIT FOR ESTIMATION OF INCOME FROM ALLEGED BOGUS PURCHASE, BUT NO ONE COULD SUPPO RT SAID RATE OF GROSS PROFIT WITH NECESSARY EVIDENCES OR ANY COMPAR ABLE CASES. THEREFORE, CONSIDERING FACTS AND CIRCUMSTANCES OF T HIS CASE AND CONSISTENT WITH VIEW TAKEN BY THE CO-ORDINATE BENCH IN NUMBER OF CASES, WE ARE OF THE CONSIDERED OPINION THAT THE LD . CIT(A) HAS TAKEN ONE OF THE POSSIBLE VIEW AND ESTIMATED 8% GROSS PRO FIT ON ALLEGED BOGUS PURCHASES TO SETTLE DISPUTE BETWEEN THE PARTI ES AND HENCE, WE ARE INCLINED TO UPHOLD ORDER OF THE LD. CIT(A) A ND DISMISS APPEAL FILED BY THE ASSESSEE AND THE REVENUE. ITA NOS.73 & 671/MUM/2019 JITENDRA S. PATEL 7 8. IN THE RESULT, APPEAL FILED BY THE ASSESEE AND A PPEAL FILED BY THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 14 /02/ 2020 SD/- (SAKTIJIT DEY) SD/- (G. MANJUNATHA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 14/02/2020 THIRUMALESH SR.PS COPY OF THE ORDER FORWARDED TO : BY ORDER, (ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//