HARIRAM R. PARMAR, MUMBAI V. ITO-19(1)(5), MUMBAI

ITA 7481/MUM/2018

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 8165 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-06-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 28-12-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AKHTAR HUSSAIN ANSARI
• Assessee Lawyers: NISHITH GANDHI
• Keywords: Bogus purchase; Opportunity of being heard; Principle of natural justice; Period of limitation; Accommodation entries; Time period of passing order
• Section: 143(3); 133(6); 147; 263; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC, BENCH M UMBAI BEFORE HONBLE SHRI MAHAVIR SINGH, VICE PRESIDENT & HON BLE SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ITA NOS.7481 & 7482/MUM/2018 ( ASSESSMENT YEARS: 2009-10 & 2010-11 ) HARIRAM R. PARMAR 48/50, HINGWAL BLDG OFFC NO.8 3 RD FLOOR, NEAR GULAWADI C.P. TANK ROAD MUMBAI-400 004 VS. ITO-19(1)(5) MUMBAI PAN/GIR NO. A BOPP8624Q ( APPELLANT ) .. ( RESPONDENT ) ASSESSEE BY SHRI NISHITH GANDHI, AR REVENUE BY SHRI. AKHTAR HUSSAIN ANSARI JCIT, SR. DR DATE OF HE ARING 1 8 /0 6 /2020 DATE OF PRONOUNCEME NT 18 / 0 6 /20 20 / O R D E R PER BENCH : THESE TWO APPEALS FILED BY THE ASSESSEE ARE DIREC TED AGAINST SEPARATE, BUT IDENTICAL ORDERS OF THE LD. C OMMISSIONER OF INCOME TAX (APPEALS)-52, MUMBAI, BOTH DATED 31/10/2 018 AND THEY PERTAINS TO AY 2009-10 AND 2010-11. SINCE, FACTS AN D ISSUES INVOLVED IN THESE APPEALS FILED BY THE ASSESEE ARE IDENTICAL, FOR THE SAKE OF CONVENIENCE, THESE APPEALS WERE HEARD TOGET HER AND ARE DISPOSED-OFF BY THIS CONSOLIDATED ORDER. 2. THE ASSESSEE HAS, MORE OR LESS RAISED COMMON GRO UNDS OF APPEAL FOR BOTH ASSESSMENT YEARS. THEREFORE, FOR TH E SAKE OF CONVENIENCE, GROUNDS OF APPEALS FILED FOR THE ASST. YEAR 2009-10 ARE REPRODUCED AS UNDER: ITA NOS 7481 & 7482/MUM/2018 HARIRAM R PARMAR 2 1.1 IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT (A)-52, MUMBAI [THE CIT(A)FOR SHORT] ERRED IN CONFIRMING THE ORDER PASSED U/S 144 R.W.S. 263 BY THE LEARNED INCO ME TAX OFFICER- 19(1)(5), MUMBAI, [THE AOFOR SHORT] IN VIOLATION OF THE PRINCIPLES OF NATURAL JUSTICE IN AS MUCH AS. (I) NO PROPER, EFFECTIVE AND REASONABLE OPPORTUNITY OF BEING HEARD WAS GRANATED TO THE APPELLANT NEITHER AT THE ASSESSMENT NOR DURING THE APPELLANT STAGE; (II) THE ASSESSMENT WAS ACTUALLY TAKEN UP FOR HEARI NG ONLY AT THE FAG END OF THE LIMITATION PERIOD; AND; (III) THE ORDER HAS BEEN PASSED WITHOUT PROVIDING T HE APPELLANT A COPY OF THE INFORMATION AND DOCUMENTS RELIED UPN BY THE AO AND WITHOUT PROVIDING AN OPPORTUNITY TO CROSS EXAMI NE THE PERSON ON WHOSE STATEMENTS RELIANCE HAS BEEN PLACED BY THE AO. 1.2 IT IS SUBMITTED IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE ORDER IS LIABLE TO BE HELD AS BAD AND ILLE GAL FOR BREACH OF PRINCIPLES OF NATURAL JUSTICE. 2.1 IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. AO ERRED IN FRAMING THE ASSESSMENT OF THE APPELLANT U/ S 144 OF THE ACT AND THE LD.CIT(A) ERRED IN CONFIRMING THE SAME. 3.2 WHILE DOING SO, HE COMPLETELY FAILED TO APPRE CIATE THAT THE NECESSARY PRE-CONDITIONS FOR INITIATING AND COMPLETING THE AS SESSMENT U/S 144 OF THE ACT WERE NOT FULFILLED IN THE PRESENT CASE. 4.1 IN THE FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW, THE ORDER PASSED BY THE AO IS VOID AND ILLEGAL FOR WANT OF JU RISDICTION AND IN ANY CASE DESERVES TO BE QUASHED SINCE THE SAME HAS BEEN PASSED RELYING ON CERTAIN STATEMENTS OF SOME THIRD PARTIES RECORDED WITHOUT THE KNOWLEDGE OF THE APPELLANT AND WITHOUT PROVIDIN G ON OPPORTUNITY TO CROSS-EXAMINE THEM. 5.1 IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) ERRED IN CONFIRMING THE ACTION OF THE AO MAKING A D ISALLOWANCE OF RS.3,34,000/- BEING 15% OF THE TOTAL PURCHASES AMOU NTING TO RS.22,29,336/- OF THE ACT TREATING THE SAME AS ALLE GED TAINTED PURCHASES WITHOUT APPRECIATING THE FACTS AND EVIDEN CES IN THE PRESENT CASE. . 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E HAS FILED HIS RETURN OF INCOME FOR AY 2009-10 ON 26/09/2009, DECL ARING TOTAL INCOME AT RS. 1,83,722/-. THE ASSESSMENT HAS BEEN C OMPLETED U/S ITA NOS 7481 & 7482/MUM/2018 HARIRAM R PARMAR 3 147, RWS 143(3) OF THE INCOME TAX ACT, 1961 ON 04/0 3/2014, DETERMINING THE INCOME AT RS. 13,40,030/-. THE CASE HAS BEEN, SUBSEQUENTLY REOPENED U/S 147 OF THE ACT, ON THE BA SIS OF INFORMATION RECEIVED FROM DGIT, INVESTIGATION, MUMB AI, AS PER 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 BENEFICIARIES WHO HAD TAKEN ACCOMMODATION BILLS OF BOGUS PURCHASE S FROM VARIOUS PARTIES AS LISTED BY THE AO IN PARA. 3 OF HIS ASSESSMENT ORDER AMOUNTING TO RS. 22,29,336/-. 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 23/12/2016 AND DETERMIN ED TOTAL INCOME OF RS. 16,74,430/-, AFTER MAKING ADDITIONS OF 15% G ROSS PROFIT ON ALLEGED BOGUS PURCHASE FROM THOSE PARTIES AND MADE ADDITIONS OF RS. 3,34,000/- TO TOTAL INCOME OF THE ASSESSEE. 4. BEING AGGRIEVED BY THE ASSESSMENT ORDER, THE ASS ESEE PREFERRED AN APPEAL BEFORE THE LD.CIT(A). BEFORE TH E LD.CIT(A), THE ASSESSEE HAS FILED ELABORATE GROUNDS OF APPEALS WHI CH HAS BEEN REPRODUCED AT PARA 3 ON PAGE 2 OF THE LD. CIT(A) OR DER. 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 HONBLE GUJARAT HIGH COUR T, IN THE CASE OF CIT VS. SIMITH P. SHETH (356 ITR 451) HAS UPHELD AD DITION MADE BY ITA NOS 7481 & 7482/MUM/2018 HARIRAM R PARMAR 4 THE LD. AO TOWARDS ALLEGED BOGUS PURCHASES TO 15% G ROSS PROFIT ON TOTAL PURCHASES FROM THOSE PARTIES. 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH ORDERS OF THE AUTHORITIES BELOW ALONG WITH CASE LAWS CITED BY BOTH PARTIES. WE FIND THAT THE LD. AO HAS MADE ADDITION OF 15% PROFIT ON ALLEGED BOGUS PU RCHASES ON THE GROUND THAT THE ASSESSEE IS ONE OF THE BENEFICIARY OF ACCOMMODATION ENTRIES OF BOGUS PURCHASE BILLS ISSUE D 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. 6. HAVING CONSIDERED ARGUMENTS OF BOTH PARTIES AND ALSO, CONSIDERING MATERIAL AVAILABLE ON RECORD, WE FIND T HAT 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 ITA NOS 7481 & 7482/MUM/2018 HARIRAM R PARMAR 5 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 INFORMATION RECEIVED FROM INVESTIGATION WING, WHICH WAS FURTHER SUPPORTED BY INFORMATION RECEIVED FROM MAHARASHTRA SALES TAX DEPARTMENT. THE AO NEITHER POINTED OUT ANY DISCREPA NCIES 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 FOR US TO ACCE PT ARGUMENTS OF BOTH THE SIDES. FURTHER, IN A CASE WHERE PURCHASES ARE C ONSIDERED 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 ADDITION OF 15% PROFIT, WHICH HAS BEEN UPHELD BY THE LD. LD.CIT(A). ALTHOUGH, BOTH AUTHORITIES HAVE TAKEN 15 % RATE OF PROFIT FOR ESTIMATION OF INCOME FROM ALLEGED BOGUS PURCHAS E, BUT NO ONE ITA NOS 7481 & 7482/MUM/2018 HARIRAM R PARMAR 6 COULD SUPPORT SAID RATE OF GROSS PROFIT WITH NECESS ARY EVIDENCES OR ANY COMPARABLE CASES. THEREFORE, CONSIDERING FACTS AND CIRCUMSTANCES OF THIS CASE AND CONSISTENT WITH VIEW TAKEN BY THE CO- ORDINATE BENCH IN NUMBER OF CASES, WE ARE OF THE CO NSIDERED OPINION THAT PROFIT RATE ADOPTED BY BOTH AUTHORITIES APPEAR S TO BE ON HIGHER SIDE AND ACCORDINGLY, WE DIRECT THE LD. AO TO ESTIM ATE 5% GROSS PROFIT ON TOTAL ALLEGED BOGUS PURCHASES. 7. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS P ARTLY ALLOWED. ITA NO. 7482/MUM/2018 8. THE FACTS AND ISSUE INVOLVED IN THIS APPEAL ARE IDENTICAL TO FACTS AND ISSUES, WHICH WE HAD CONSIDERED IN ITA NO . 7481/MUM/2018 FOR ASST. YEAR 2009-10. THE REASONS G IVEN BY US IN PRECEDING PARAGRAPHS IN ITA NO.7481/MUM/2018 SHALL MUTATIS MUTANDIS APPLY TO THESE APPEALS, AS WELL. THEREFORE , FOR SIMILAR REASONS, WE DIRECT THE AO TO ESTIMATE 5% PROFIT ON ALLEGED BOGUS PURCHASES FOR ASST. YEARS 2010-11. 9. IN THE RESULT, APPEALS FILED BY THE ASSESSEE FOR ASST. YEAR 2010-11 IS PARTLY ALLOWED. 10. AS A RESULT, APPEALS FILED BY THE ASSESSEE FOR ASST. YEARS 2009- 10 AND 2010-11 ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS: 18 /0 6/2020 ITA NOS 7481 & 7482/MUM/2018 HARIRAM R PARMAR 7 SD/- (MAHAVIR SINGH) SD/- (G. MANJUNATHA) VICE PRESIDENT ACCOUNTANT MEMBER MUMBAI ; DATED: 18/06/2020 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//