ABDEALI SAIFEE MAMAJI, MUMBAI V. ACIT CIR 13(3), MUMBAI

ITA 7903/MUM/2010

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 4229 (ITAT-MUMBAI)
• Duration Of Justice: 8 year(s) 3 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-03-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 16-11-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: M RAJAN
• Keywords: Bogus purchase; Unexplained investment; Unexplained expenditure; Accommodation entries; Tax effect; Set aside
• Section: 69C; 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUM BAI BEFORE SHRI SHAMIM YAHYA, AM AND SHRI RAM LAL NEGI, JM ITA NO.7903/MUM/2010 (ASSESSMENT YEAR: 2007-08) ABDEALI SAIFEE MAMAJI BADAMIA MANOR, 34 CLERK ROAD,OPP. RACE COURSE MAHALAXMI, MUMBAI-400 034 VS. ACIT, CIRCLE - 13(3) EARNEST HOUSE NARIMAN POINT MUMBAI-400 021 PAN/GIR NO. AA DPM2845A ( APPELLANT ) : ( RESPONDENT ) & ITA NO.8650/MUM/2010 (ASSESSMENT YEAR: 2007-08) ACIT - 13(3) ROOM NO.430, 4 TH FLOOR AAYKAR BHAVAN, M.K. ROAD NEW MARINE LINES MUMBAI-400 020 VS. ABDEALI SAIFEE MAMAJI BADAMIA MANOR, 34 CLERK ROAD,OPP. RACE COURSE MAHALAXMI, MUMBAI-400 034 PAN/GIR NO. AA DPM2845A ( APPELLANT ) : ( RESPONDENT ) ASSESSEE BY : NONE REVENUE BY : SHRI. M. RAJAN DATE OF HEARING : 07.03 .2019 DATE OF PRONOUNCEMENT : 12 .03.2019 O R D E R PER SHAMIM YAHYA, A. M.: THESE ARE CROSS APPEALS BY THE ASSESSEE AND THE REV ENUE ARISING OUT OF THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-24, MUMBAI (LD. CIT(A) FOR SHORT) DATED 30.09.2010 AND PERTAIN TO THE ASSESSMENT YEAR (A.Y.) 2007-08. 2 ITA NO.7903 & 8650/MUM/2010 ABDEALI SAIFEE MAMAJI 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE REA D AS UNDER: A) HOLDING AT PARA 2.3 OF HIS ORDER THAT THE PURCHASES MADE BY THE ASSESSEE FROM 4 PARTIES AMOUNTING TO RS.33,55,845/- WERE SUCCESSFULLY PROVED BY THE DEPARTMENT TO BE BOGUS , CONSCIOUSLY OVERLOOKING THAT THE PURCHASES WERE MADE BY ACCOUNT PAYEE CHEQUES TO SUPPLIERS WHOSE IDENTITIES WERE ESTABLISHED BY T HEIR CONFIRMATIONS AND PANS, AS APPEARING AT PAGE 3 OF HIS ORDER, B) HOLDING AT PARA 2.3 OF HIS ORDER THAT THE PURCHASES MADE BY THE ASSESSEE WERE BOGUS PURCHASES, WHILE ACCEPTING TH AT THE SALES MADE FROM THESE PURCHASES WERE GENUINE SALES WHICH WERE BOOKED IN THE REGULAR BOOKS OF ACCOUNTS AND THESE ARE THE VERY SALES WHICH HAVE BEEN ACCEPTED BY THE AO AND ACKNOWLEDGING THA T THE ASSESSEE HAS SUCCESSFULLY PROVED THAT ALL THE SALES EFFECTED BY THE ASSESSEE IN RELATION TO THE SO-CALLED ALLEGED BOGUS PURCHASES (EMPHASIS SUPPLIED) HAVE IN FACT BEEN DONE BY THE A SSESSEE, C) HOLDING AT PARA 2.3 OF HIS ORDER THAT THE DEPARTME NT HAS TO FIRST ESTIMATE THE EXTENT OF UNEXPLAINED INVESTMENT REQUI RED TO MAKE THE BOGUS PURCHASES OF RS.33,55,845/-. OVERLOOKING TH E SUBMISSIONS THAT THERE WAS NO CASE OF UNEXPLAINED INVESTMENT AS THE PURCHASES AS THE PURCHASES WERE MADE BY ACCOUNT PAYEE CHEQUES TO SUPPLIERS WHOSE IDENTITIES WERE ESTABLISHED BY THEIR CONFIRMA TIONS AND PANS, AS APPEARING AT PAGE 2 AND 3 OF HIS ORDER, D) ESTIMATING AT PAGE 5 OF HIS ORDER THE SO-CALLED UNE XPLAINED INVESTMENT OF RS.8,38,961/- FOR MAKING PURCHASES OF RS.33,55,845/- AS HAVING BEEN MADE OUT OF BOOKS OF ACCOUNTS SINCE THE DEPARTMENT HAS ESTABLISHED BEYOND DOUBT THE BOGUS PURCHASES, COMPLETELY IGNORING THE SUBMISSIONS MADE AND RECORDED BY HIM T HAT THE PURCHASE WERE MADE BY ACCOUNT PAYEE CHEQUES, E) DIRECTING THE AO TO MAKE AN ADDITION, WITHOUT ANY B ASIS, OF A SUM REPRESENTING THE DIFFERENCE BETWEEN THE GP AS DECLA RED BY THE ASSESSEE, AND THE GP CALCULATED WITHOUT THE BOGUS PURCHASE OF RS.33,55,845/-, F) DIRECTING THE AO TO MAKE ADDITIONS UNDER A DIFFEREN T HEAD OF INCOME (S. 69: UNEXPLAINED INVESTMENTS), WHEN THE AO HAD M ADE ADDITIONS U/S 69C (UNEXPLAINED EXPENDITURE), WITHOUT GIVING A NY FINDING WHETHER AND HOW THE AO HAD ERRED IN HIS CONCLUSIONS . G) WITHOUT PREJUDICE TO (F) ABOVE, ERRED IN ISSUING TH E SAID DIRECTIONS, FOR IF THE LD. CIT(A) WAS OF THE OPINION THAT THE ADDIT IONS WERE WRONGLY MADE BY THE AO U/S 69C (THE SOURCE OF THE EXPENDITU RE HAVING BEN SATISFACTORILY EXPLAINED) HE COULD NOT DIRECT THE A DDITIONS TO BE MADE U/S 69C, AS THE ONUS IN BOTH THE SECTIONS IS SIMILA R IN NATURE. THE ASSESSEE-APPELLANT CRAVES LEAVE TO ADD, ALTER, MODIFY OR DELETE ANY OF THE ABOVE GROUNDS TAKEN. 3 ITA NO.7903 & 8650/MUM/2010 ABDEALI SAIFEE MAMAJI 3. THE GROUNDS OF APPEAL RAISED BY THE REVENUE READ S AS UNDER: I. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) ERRED IN RESTRICTING THE ADDITION OF RS.33,5 5,845/- ON ACCOUNT OF BOGUS PURCHASE TO RS.8,38,961/- I.E. 25% II. WHILE DOING SO, THE LD. CIT(A) HAS NEITHER GIVEN AN Y WORKING NOR ANY BASIS FOR ESTIMATING UNEXPLAINED INVESTMENT @ 25% OF BOGUS PURCHASES, PARTICULARLY WHEN ALLEGED SELLER OF GOOD S TO THE ASSESSEE BEING PROVIDER OF THE ACCOMMODATION ENTRIES HAS ADM ITTED DURING SURVEY U/S. 133A THAT ACCOMMODATION ENTRIES WERE PR OVIDED TO THE ASSESSEE AND ALSO THE FIELD ENQUIRIES RESULTED IN C ONFIRMATION OF BOGUS PURCHASES BECAUSE ALLEGED SELLER OF GOODS TO THE AS SESSEE WAS NOT FOUND EXISTING ON THE GIVEN ADDRESS. 2. THE APPELLANT PRAYS THAT THE ORDER OF CIT(A) ON THE ABOVE GROUND BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE REST ORED. 3. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD ANY NEW GROUND, IF NECESSARY. 4. THESE CROSS APPEALS BY THE ASSESSE AND REVENUE A RE RELATING TO GRIEVANCE THAT LD.CIT(A) HAS ERRED IN SUSTAINING 25 % DISALLOWANCE ON ACCOUNT OF BOGUS PURCHASES. 5. THE ASSESSING OFFICER IN THIS CASE HAS MADE 100% ADDITION ON ACCOUNT OF BOGUS PURCHASE AMOUNT TO RS.33,55,845/-. UPON ASSESSEES APPEAL LD. CIT(A) HAS REDUCED THE DISALLOWANCE TO 2 5% HOLDING THAT SALES HAVE NOT BEEN DOUBTED HENCE 100% DISALLOWANCE IS NO T SUSTAINABLE. 6. AGAINST THE ABOVE ORDER ASSESSEE & REVENUE ARE I N CROSS APPEAL. WE HAVE HEARD THE LD. DEPARTMENTAL REPRESENTATIVE. NON E APPEARED ON BEHALF OF THE ASSESSEE DESPITE NOTICE. HENCE WE ADJUDICATE THE ISSUE AFTER HEARING THE LD. DR AND PERUSING THE RECORD. 7. UPON CAREFUL CONSIDERATION WE FIND THAT ASSESSEE HAS PROVIDED THE DOCUMENTARY EVIDENCE FOR THE PURCHASE. ADVERSE INFE RENCE HAVE BEEN 4 ITA NO.7903 & 8650/MUM/2010 ABDEALI SAIFEE MAMAJI DRAWN DUE TO THE INABILITY OF THE ASSESSEE TO PRODU CE THE SUPPLIERS. WE FIND THAT IN THIS CASE THE SALES HAVE NOT BEEN DOUB TED. IT IS SETTLED LAW THAT WHEN SALES ARE NOT DOUBTED, 100% DISALLOWANCE FOR B OGUS PURCHASE CANNOT BE DONE. THE RATIONALE BEING NO SALES IS POS SIBLE WITHOUT ACTUAL PURCHASES. THIS PROPOSITION IS SUPPORTED FROM HONOU RABLE JURISDICTIONAL HIGH COURT DECISION IN THE CASE OF NIKUNJ EXIMP ENT ERPRISES (IN WRIT PETITION NO. 2860, ORDER DATED 18.06.2014). IN THIS CASE THE HONOURABLE HIGH COURT HAS UPHELD 100% ALLOWANCE FOR THE PURCHA SES SAID TO BE BOGUS WHEN SALES ARE NOT DOUBTED. HOWEVER, IN THAT CASE A LL THE SUPPLIES WERE TO GOVERNMENT AGENCY. IN THE PRESENT CAE THE FACTS OF THE CASE INDICATE THAT ASSESSEE HAS MADE PURCHASE FROM THE GREY MARKET. MA KING PURCHASES THROUGH THE GREY MARKET GIVES THE ASSESSEE SAVINGS ON ACCOUNT OF NON- PAYMENT OF TAX AND OTHERS AT THE EXPENSE OF THE EXC HEQUER. IN SUCH SITUATION IN OUR CONSIDERED OPINION ON THE FACTS AN D CIRCUMSTANCES OF THE CASE THE 12.5% DISALLOWANCE OUT OF THE BOGUS PURCHA SES MEETS THE END OF JUSTICE. ACCORDINGLY, WE MODIFY THE ORDER OF LD. C IT(A) AND DIRECT THAT THE DISALLOWANCE IN THIS CASE BE RESTRICTED TO 12.5% OF THE BOGUS PURCHASES. WE ALSO NOTE THAT REVENUES APPEAL IS ALSO NOT MAIN TAINABLE DUE TO LOW TAX TAX EFFECT AS PER CBDT INSTRUCTION. 8. IN THE RESULT, THIS APPEAL FILED BY THE ASSESSEE STANDS PARTLY ALLOWED AND APPEAL FILED BY THE REVENUE STANDS DISMISSED. 5 ITA NO.7903 & 8650/MUM/2010 ABDEALI SAIFEE MAMAJI ORDER PRONOUNCED IN THE OPEN COURT ON 12 TH MARCH, 2019. SD/- SD/- (RAM LAL NEGI) (SHAMIM YAHYA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI; DATED : 12.03.2019 THIRUMALESH , SR. PS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT - CONCERNED 5. DR, ITAT, MUMBAI 6. GUARD FILE BY ORDER, (DY./ASSTT. REGISTRAR) ITAT, MUMBAI