VIPUL P SHAH , Mumbai V. ITO 27 (3)(5), Mumbai

ITA 752/MUM/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 5736 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-02-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 11-02-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SOURABH DESH
• Assessee Lawyers: SANJAY R PARIKH
• Keywords: Reopening of assessment; Bogus purchase; Principle of natural justice; Accommodation entries; Set aside
• Section: 143(3); 133(6); 143(1); 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBER SL. NO. ITA / CO NO. A.Y APPELLANT RESPONDENT 1 752/MUM/2019 2009 - 10 VIPUL P SHAH 1/5 KANDHARI COLONY, 2 ND ROAD CHEMBUR, MUMBAI PAN AACPS6641P ITO 27 (3)(5) VIASHI RLY STN COMPLEX, VASHI, NAVI MUMBAI 2 753/MUM/2019 2010 - 11 3 754/MUM/2019 2009 - 10 VINIT P SHAH, HUF 2/4 KANDHARI COLONY, 2 ND ROAD CHEMBUR, MUMBAI PAN AAAHV4423J ITO 27 (3)(5) VIASHI RLY STN COMPLEX, VASHI, NAVI MUMBAI / APPELLANT BY : SHRI SANJAY R. PARIKH , AR / RESPONDENT BY : SH RI SOURABH DESHPANDE , DR / / / / DATE OF HEARING 04/02 /20 20 / DATE OF PRONOUNCEMENT 14 /02 /20 20 / O R D E R PER SHRI G. MANJUNATHA- AM: - 2 - THESE THREE APPEALS FILED BY TWO DIFFERENT ASSESSE ES ARE DIRECTED AGAINST SEPARATE, BUT IDENTICAL ORDERS OF THE CIT ( A)-25, MUMBAI, ALL DATED 19/12/2018 FOR THE A.Y 2009-10 & 2010-11. SI NCE, THE FACTS ARE IDENTICAL AND ISSUE IS COMMON, FOR THE SAKE OF CONVENIENCE, THESE APPEALS WERE HEARD TOGETHER AND ARE DISPOSED OF BY THIS CONSOLIDATED ORDER. 2. BOTH ASSESSEES HAVE RAISED MORE OR LESS COMMON GROUNDS IN THEIR RESPECTIVE APPEALS. THEREFORE, FOR THE SAKE O F BREVITY, GROUNDS OF APPEAL FILED IN ITA 752/MUM/2019 FOR A.Y 2009-10 AR E REPRODUCED AS UNDER: A. REOPENING OF ASSESSMENT. 1. THE LD. CIT(A) ERRED ON FACTS AND IN LAW IN HOLDING THAT THE REOPENING OF ASSESSMENT BY THE A.O U/S 147 WAS AS P ER LAW. 2. THE APPELLANT PRAYS THAT YOUR HONOURS HOLD THAT THE REOPENING OF ASSESSMENT BY THE AO U/S 147 WAS BAD IN LAW AND THE CONSEQUENT ORDER PASSED U/S 143(3) R.W.S 147 IS ALS O BAD IN LAW. B. PRINCIPLES OF NATURAL JUSTICE VIOLATED 3. THE LD. CIT(A) ERRED ON FACTS AND IN LAW IN NOT APPRECIATING THAT AO HAD NOT GIVEN THE APPELLANT AN OPPORTUNITY TO CROSS EXAMINE THE PARTIES WHO HAD STATED BEFORE THE SALES TAX AUTHORITIES THAT THEY HAD ONLY GIVEN ACCOMMODATING ENTRIES. AS THE PRINCIPLES OF NATURAL JUSTICE ARE VIOLATED, THE ORDER U/S 143(3) R.W.S 147 BAD IN LAW. 4. THE APPELLANT PRAYS THAT YOUR HONOURS HOLD THAT THE ORDER U/S 143(3) R.W.S 147 IS BAD IN LAW AS THE PRINCIPLES OF NATURAL JUSTICE ARE VIOLATED. - 3 - C. ADDITION OF GROSS PROFIT ALLEGED BOGUS PURCHASES OF RS. 5,39,484/- 5. THE LD. CIT(A) ERRED ON FACTS AND IN LAW IN CONF IRMING THE ADDITION MADE BY THE AO ON ACCOUNT ON BOGUS PURCHAS ES TO THE EXTENT OF RS. 5,39,484/- BEING ESTIMATED GROSS PROF IT @ 12.50 OF THE BOGUS PURCHASES AMOUNTING TO RS. 43,15,874/-. 6. THE APPELLANT PRAYS THAT THE ADDITION ON ACCOUNT OF ESTIMATED GROSS PROFIT ON ALLEGED BOGUS PURCHASES OF RS. 5,39 ,484/- CONFIRMED BY THE CIT(A) OUT OF THE ADDITION OF RS. 6,47,381/- MAY BE DELETED. 7. WITHOUT PREJUDICE TO THE ABOVE, THE LD. CIT(A) E RRED ON FACTS AND IN LAW IN ADOPTING THE ESTIMATED GROSS PROFIT @ 12.50% WITHOUT ANY BASIS. 8. THE APPELLANT PRAYS THAT IF YOUR HOURS ARE NOT I NCLINED TO DELETE THE ENTIRE ADDITION, THE ESTIMATED GROSS PRO FIT ON THE ALLEGED BOGUS PURCHASES MAY BE ESTIMATED CONSIDERIN G THE FACTS OF THE APPELLANTS CASE AND THE PAST HISTORY OF THE APPELLANTS CASE. D. GENERAL 9. THE ABOVE GROUNDS OF APPEAL ARE WITHOUT PREJUDIC E TO ONE ANOTHER AND THE APPELLANT CRAVES LEAVE TO ADD, ALTE R, AMEND, DELETE OR MODIFY ANY OF THE ABOVE GROUNDS OF APPEAL . 3. THE BRIEF FACTS OF THE CASE EXTRACTED FROM IT NO . 752/MUM/2019 ARE THAT THE ASSESSEE IS ENGAGED IN TH E BUSINESS OF WHOSELLERS AND RESELLERS OF CHEMICALS, FILED HIS RE TURN OF INCOME FOR AY 2009-10 ON 26/09/2009, DECLARING TOTAL INCOME OF RS. 3,68,490/- AND SAID RETURN WAS PROCESSED U/S 143(1) OF THE I.T .ACT, 1961. THE CASE HAS BEEN SUBSEQUENTLY, REOPENED U/S 147 OF THE ACT, ON THE - 4 - BASIS OF INFORMATION RECEIVED FROM DGIT, INVESTIGAT ION, MUMBAI, AS PER WHICH, SALES TAX AUTHORITIES OF GOVERNMENT OF M AHARASHTRA 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 PURCHASES FR OM VARIOUS PARTIES AS LISTED BY THE AO IN PARA 4 OF HIS ASSESS MENT ORDER AMOUNTING TO RS. 43,15,874/-. THE CASE WAS SELECTED FOR SCRUTINY AND THE ASSESSMENT HAS BEEN COMPLETED U/S. 143(3).R.W.S . 147 OF THE I.T.ACT, 1961 ON 18/03/2015 AND DETERMINED TOTAL IN COME OF RS. 10,15,870/-, AFTER MAKING 15% PROFIT ADDITIONS ON A LLEGED BOGUS PURCHASE FROM THOSE PARTIES AND MADE ADDITIONS OF R S. 6,47,381/-. 4. 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 4 ON PAGES 3 TO 8 OF LD.CIT(A) O RDER. THE SUM AND SUBSTANCE OF ARGUMENTS OF THE ASSESSEE BEFORE THE L D.CIT(A) ARE THAT PURCHASE FROM THE ABOVE PARTY IS GENUINE, WHICH IS SUPPORTED BY NECESSARY EVIDENCES. THEREFORE, NO ADDITIONS COULD BE MADE ON THE BASIS OF INFORMATION RECEIVED FROM THIRD PARTY. THE ASSESSEE HAD ALSO CHALLENGED REOPENING ASSESSMENT U/S 147 OF THE ACT. 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 SCALED DO WN ADDITION MADE BY THE AO TOWARDS ALLEGED BOGUS PURCHASES TO 12.50% GROSS PROFIT ON TOTAL PURCHASES FROM THOSE PARTIES. THE LD. CIT(A) HAS ALSO REJECTED - 5 - LEGAL GROUND TAKEN BY THE ASSESSEE CHALLENING REOPE NING ASSESSMENT U/S 147 OF THE ACT. 5. 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 15% PROFIT ON ALLEGED BOGUS PURCHASES 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 ASSESS MENT PROCEEDINGS, AS PER WHICH NOTICE ISSUED U/S 133(6) TO THE PARTIE S 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 ASSESSEE BEFORE THE LO WER AUTHORITIES THAT PURCHASES FROM THE ABOVE PARTY ARE SUPPORTED BY NEC ESSARY EVIDENCES. IT HAS FURNISHED ALL POSSIBLE EVIDENCES, INCLUDING BOOKS OF ACCOUNTS; STOCK DETAILS AND BANK STATEMENT TO PROVE THAT PAYMENT AGAINST SAID PURCHASES HAVE BEEN MADE THROUGH PROPE R BANKING CHANNELS. 6 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. - 6 - ALTHOUGH, ASSESSEE HAS FILED CERTAIN BASIC EVIDENCE S, BUT FAILED TO FILE FURTHER EVIDENCES TO CONCLUSIVELY PROVE PURCHASES T O THE SATISFACTIONS OF THE LD.AO. FURTHER, MERE PAYMENT BY CHEQUE DOES NOT PROVE 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 LOGI CAL 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. 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 THI S CASE, - 7 - CONSIDERING THE NATURE OF BUSINESS OF THE ASSESSEE THE LD. AO HAS MADE 15% PROFIT ADDITIONS, WHEREAS THE LD. CIT(A) H AS SCALED DOWN ADDITION TO 12.50% PROFIT ON ALLEGED BOGUS PURCHASE S. ALTHOUGH, 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, BUT SAID ESIMATION IS SUPPORTED BY CERTAIN JUDICIAL PRE CEDENTS WHERE UNDER IDENTICAL CASES, THE COURTS AND TRIBUNAL HAVE UPHELD ESTIMATION OF PROFIT. IN THIS CASE, THE CIT(A) HAS ADOPTED 12.50% PROFIT. IT IS THE CONTENTION OF THE LD. AR FOR THE ASSESSEE THAT RATE OF PROFIT ADOPTED BY THE LD. CIT(A) IS ON HIGHER SIDE WHEN COMPARED TO NATURE OF BUSINESS OF THE ASSESSEE. IN THIS REGARD, HE HAS RELIED UPON THE DECISION OF HONBLE BOMBAY HIGH COURT IN CASE O F PCIT VS. MOHAMED HAJI ADAM & CO (SUPRA), WHERE IT WAS HELD T HAT GP ON ALLEGED BOGUS PURCHASES SHOULD BE BROUGHT ON FAR WI TH GP DECLARED ON NORMAL PURCHASES. THEREFORE, CONSIDERING FACTS A ND CIRCUMSTANCES OF THIS CASE AND BY RESPECTFULLY FOLLOWING THE DECI SION OF HONBLE BOMBAY HIGH COURT IN CASE OF PCIT VS. MOHAMED HAJI ADAM & CO (SUPRA), WE SET ASIDE THE ISSUE TO THE FILE OF THE LD. AO AND DIRECT HIM TO FOLLOW THE FINDINGS OF HONBLE HIGH COURT WHILE ESTIMATING GP ON ALLEGED BOGUS PURCHASES. 7. IN THE RESULT, APPEAL FILED BY THE ASSESEE IS AL LOWED FOR STATISTICAL PURPOSE. - 8 - ITA NO.753/MUM/2019 AND 754/MUM/2019:- 8. THE FACTS AND ISSUES INVOLVED IN THESE TWO APPEA L ARE IDENTICAL TO THE FACTS AND ISSUES, WHICH WE HAD CONSIDERED IN ITA NO. 752/MUM/2019 FOR AY 2009-10. THE REASONS GIVEN BY U S IN PRECEDING PARAGRAPHS IN ITA NO. 752/MUM/2019 FOR AY 2009-10 SHALL MUTATIS MUTANDIS APPLY TO THESE APPEALS, AS WELL. THEREFORE, FOR SIMILAR REASONS RECORDED IN HIS ITA NO. 752/MUM/201 9, WE SET ASIDE THE APPEALS TO FILE OF THE LD. AO AND DIRECT HIM TO FOLLOW THE FINDINGS OF HONBLE BOMBAY HIGH COURT IN CASE OF PCIT VS. MOHAM ED HAJI ADAM & CO (SUPRA) WHILE ESTIMATING GP ON ALLEGED BOGUS P URCHASES. 9. IN THE RESULT, ALL APPEALS FILED BY THE ASSESSE ES ARE ALLOWED FOR STATISTICAL PURPOSE. THIS ORDER PRONOUNCED IN OPEN COURT ON: 14 /02/ 2020 SD/- SD/- (SAKTIJIT DEY) (G. MANJUNATHA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 14/02/2020 KRK, PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ! / THE CIT(A) 4. ! ( ) / CONCERNED CIT - 9 - 5. '# , , / DR, ITAT, MUMBAI 6. #$%& / GUARD FILE. / BY ORDER, //TRUE COPY// / // / ( ASST. REGISTRAR) , , , , / ITAT, MUMBAI