ITO 24(1)(3), MUMBAI V. BIJAL PRASHANT KALBAG, MUMBAI

ITA 804/MUM/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 5702 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-02-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 13-02-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SOURABH DESHPANDE
• Keywords: Bogus purchase; 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 ITA NOS. 804 & 805/MUM/2019 ( ASSESSMENT YEARS: 2009-10 & 2010-11 ) ITO 24(1)(3) R.NO. 606, PIRAMAL CHAMBERS, JEEJEEBHOY LANR, LALBAUGH, PAREL, MUMBAI 400 012. / VS. BIJAL PRASHANT KALBAG, 1/B, DASHMESH COLONY, FOUR BUNGLOW ROAD, ANDHERI (W), MUMBAI 400 058. ./ ./ PAN/GIR NO. : AIZPK3640D ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI SOURABH DESHPANDE / RESPONDENT BY : NONE / DATE OF HEARING 05/02/2020 / DATE OF PRONOUNCEMENT 12/02 /2020 / O R D E R PER SHRI G. MANJUNATHA- AM: THESE TWO APPEALS FILED BY THE REVENUE ARE DIRECTED AGAINST COMMON ORDERS OF THE CIT(A)-36, MUMBAI DATED 16/11/2018 FOR THE A.Y 2009-10 & 2010-11. SINCE, THE FACTS ARE IDENTICAL AND ISSUE IS COMMON, FOR THE SAKE OF CONVENIENCE, THESE APPEALS 804 & 805/MUM/2019. - 2 - WERE HEARD TOGETHER AND ARE DISPOSED OF BY THIS CONSOLIDATED ORDER. 2. THE REVENUE HAS RAISED MORE OR LESS COMMON GROUN DS OF APPEAL FOR BOTH ASST. YEARS. THEREFORE, FOR THE SAKE OF BREVITY, GROUNDS OF APPEAL FILED IN ITA 804/MUM/201 9 FOR A.Y 2009-10 ARE REPRODUCED AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) ERRED IN RESTRICTING THE ADDITION AT 12.5% AS AGAINST 18% MADE BY THE AO, PERTAINING TO HAWALA PURCHASES, NOTWITHSTANDING THAT THERE IS A SPECIFIC FINDING OF SALES TAX DEPARTMENT THAT THE PARITIES FROM WHOM PU RCHASES WERE ALLEGEDLY MADE HAD ISSUED FALSE BILLS WITHOUT DELIVERY OF GOODS, AND NONE OF THESE PARTIES WERE AVAILABLE AT THEIR ADDRESS WHEN VERIFICATION LETTER U/S 133(6) OF THE ACT WERE ISSUED. 2. ON THE FACTS AND CIRCUMSTANCE OF THE CASE AND IN LA W, THE LD. CIT(A) ERRED IN RESTRICTING THE ADDITION AT 12.5% AS AGAINST 18% MADE BY THE AO, PERTAINING TO HAWALA PURCHASES, WITHOUT APPRECIATING THE FACT THAT PAYMENTS MADE TH ROUGH CHEQUE WOULD NOT PROVE THE GENUINENESS OF TRANSACTI ON AND THE SAME PRINCIPLE IS UPHELD BY THE HONBLE APEX CO URT IN THE CASE O CIT VS. P MOHAN KALA 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LD. CIT(A) ERRED IN RESTRICTING THE ADDITION AT 12.5% AS AGAINST 18% MADE BY THE AO, WITHOUT CONSIDERING DECISION OF APEX COURT ON THE ISSUE OF BOGUS PURCHASES DATED 16.01.2 017 IN THE CASE OF NK PROTEINS VS. DCIT (2017) 84 TAXMANN. COM 195. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LD. CIT(A) ERRED IN RESTRICTING THE ADDITION AT 12.5% AS AGAINST 18% MADE BY THE AO, WITHOUT CONSIDERING DECISION OF BOMBAY 804 & 805/MUM/2019. - 3 - HIGH COURT IN THE CASE SHORELINE HOTEL VS. CIT 98 TAXMANN. COM 234. 5. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE AO BE RESTORED . 6. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GR OUND OR TO SUBMIT ADDITIONAL NEW GROUND WHICH MAY BE NECESSARY 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS ENGAGED IN THE BUSINESS OF MANUFACTURER OF TROPHIES , FILED HIS RETURN OF INCOME FOR A.Y 2009-10 ON 30/09/2009, DECLARING TOTAL INCOME AT RS. 10, 34,120/- AND SAID RETURN WAS PROCESSED U/S 143(1) OF THE I.T. ACT, 1961. T HE CASE HAS BEEN SUBSEQUENTLY REOPENED U/S 147 OF THE ACT, ON THE BASIS OF INFORMATION RECEIVED FROM DGIT, INVESTIGAT ION, MUMBAI, AS PER WHICH, SALES TAX AUTHORITIES OF GOVE RNMENT OF MAHARASTRA HAD TAKEN ACTIONS AGAINST NUMBER OF H AWALA DEALERS, WHO HAD ISSUED BOGUS PURCHASE BILLS TO VAR IOUS PARTIES IN MUMBAI AND OTHER PLACES. AS PER LIST OF BENEFICIARIES, THE ASSESSEE IS ONE OF THE BENEFICIA RY, WHO HAD TAKEN ACCOMMODATION BILLS OF BOGUS PURCHASES FR OM VARIOUS PARTIES AS LISTED BY THE AO IN HIS ASSESSME NT ORDER AMOUNTING TO RS. 11,51,619/-. THE CASE WAS SELECTE D FOR SCRUTINY AND THE ASSESSMENT HAS BEEN COMPLETED U/S. 143(3) R.W.S. 147 OF THE ACT, 1961 ON 10/03/2016 AN D DETERMINED TOTAL INCOME OF RS. 12,41,420,/-, AFTER MAKING 804 & 805/MUM/2019. - 4 - 18% PROFIT ADDITIONS TOWARDS ALLEGED BOGUS PURCHASE S FROM THOSE PARTIES AND MADE ADDITIONS OF RS. 2,07,291/-. 4. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A). BEFORE THE LD. CIT(A), THE ASSESSEE HAS REITERATED ITS SUBMISSION S MADE BEFORE THE AO. THE SUM AND SUBSTANCE OF ARGUMENTS OF THE ASSESSEE BEFORE THE LD. CIT(A) ARE THAT PURCHASE FR OM THE ABOVE PARTY IS GENUINE, WHICH IS SUPPORTED BY NECES SARY EVIDENCES. THEREFORE, NO ADDITIONS COULD BE MADE O N THE BASIS OF INFORMATION RECEIVED FROM THIRD PARTY. TH E LD. CIT(A), AFTER CONSIDERING RELEVANT SUBMISSION OF TH E ASSESSEE AND ALSO, BY FOLLOWING THE DECISION OF HON BLE GUJARATH HIGH COURT, IN THE CASE OF CIT VS. SIMITH P. SHETH (356 ITR 451) SCALED DOWN ADDITION MADE BY THE AO TOWARDS ALLEGED BOGUS PURCHASES TO 12.50% GROSS PRO FIT ON TOTAL PURCHASES FROM THOSE PARTIES. 5. NONE APPEARED FOR THE ASSESSEE. WE HAVE HEARD T HE LD. DR, PERUSED THE MATERIAL AVAILABLE ON RECORD AN D GONE THROUGH ORDERS OF THE AUTHORITIES BELOW. WE FIND T HAT THE LD. AO HAS MADE 18% ADDITION ON ALLEGED BOGUS PURCH ASES ON THE GROUND THAT THE ASSESSEE IS ONE OF THE BENEF ICIARY OF ACCOMMODATION ENTRIES OF BOGUS PURCHASE BILLS ISSUE D BY 804 & 805/MUM/2019. - 5 - HAWALA DEALERS. ACCORDING TO THE LD. AO, ALTHOUGH ASSESSEE HAS FILED CERTAIN BASIC EVIDENCES, BUT FAI LED TO FILE FURTHER EVIDENCE IN THE BACKDROP OF CLEAR FINDING B Y THE SALES TAX DEPARTMENT, MAHARASHTRA THAT THOSE PARTIE S ARE INVOLVED IN PROVIDING ACCOMMODATION ENTRIES WITHOUT ACTUAL DELIVERY OF GOODS. THE LD. AO HAD ALSO TAKEN SUPPO RT FROM THE INVESTIGATION CONDUCTED DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AS PER WHICH NOTICE ISSUED U/S 133(6) TO THE PARTIES WERE RETURNED UN-SERVED BY TH E 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 LOWER AU THORITIES THAT PURCHASES FROM THE ABOVE PARTY ARE SUPPORTED B Y NECESSARY EVIDENCES. IT HAS FURNISHED ALL POSSIBLE EVIDENCES, INCLUDING BOOKS OF ACCOUNTS; STOCK DETAI LS AND BANK STATEMENT TO PROVE THAT PAYMENT AGAINST SAID PURCHASE HAVE BEEN MADE THROUGH PROPER BANKING CHANNELS. 6. HAVING CONSIDERED ARGUMENTS OF THE LD. DR AND AL SO, MATERIAL AVAILABLE ON RECORD, WE FIND THAT BOTH THE SIDE HAVE FAILED TO PROVE THE CASE IN THEIR FAVOUR WITH NECES SARY EVIDENCES. ALTHOUGH, ASSESSEE HAS FILED CERTAIN BA SIC EVIDENCES, BUT FAILED TO FILE FURTHER EVIDENCES TO CONCLUSIVELY 804 & 805/MUM/2019. - 6 - PROVE PURCHASES TO THE SATISFACTIONS OF THE LD. AO. AT THE SAME TIME, THE LD. AO HAD ALSO FAILED TO TAKE THE INVESTIGATION TO A LOGICAL CONCLUSION BY CARRYING O UT NECESSARY ENQUIRES, BUT HE SOLELY RELIED UPON INFOR MATION RECEIVED FROM INVESTIGATION WING, WHICH WAS FURTHER SUPPORTED BY INFORMATION RECEIVED FROM MAHARASHTRA SALES DEPARTMENT. UNDER THESE CIRCUMSTANCES, IT IS DIFFI CULT TO ACCEPT ARGUMENTS OF BOTH THE SIDES. FURTHER, IN A CASE WHERE PURCHASES ARE CONSIDERED TO BE PURCHASES FROM SUSPICIOUS/HAWALA DEALERS, VARIOUS HIGH COURTS AND TRIBUNALS HAD CONSIDERED AND IDENTICAL ISSUE IN LIG HT OF INVESTIGATION CARRIED OUT BY THE SALES TAX DEPARTME NT AND HELD THAT IN CASE OF PURCHASES CLAIMS TO HAVE MADE FROM ALLEGED HAWALA DEALERS, ONLY PROFIT ELEMENT EMBEDDE D IN THOSE PURCHASES NEEDS TO BE TAXED, BUT NOT TOTAL PU RCHASES FROM THOSE PARTIES. THE HONBLE GUJARAT HIGH COURT , IN THE CASE OF CIT VS. SIMITH P. SHETH 356 ITR 451 HAD CON SIDERED A SIMILAR ISSUE AND HELD THAT AT THE TIME OF ESTIMA TION OF PROFIT FROM ALLEGED BOGUS PURCHASE NO UNIFORM YARDS TICKS COULD BE ADOPTED, BUT IT DEPENDS UPON FACTS OF EACH CASE. THE ITAT, MUMBAI, IN NUMBER OF CASES HAD CONSIDERED AN IDENTICAL ISSUE AND DEPENDING UPON FACTS OF EACH CA SE, DIRECTED THE LD. AO TO ESTIMATE GROSS PROFIT OF 10% TO 15% 804 & 805/MUM/2019. - 7 - ON TOTAL ALLEGED BOGUS PURCHASES. IN THIS CASE, CO NSIDERING THE NATURE OF BUSINESS OF THE ASSESSEE THE LD. AO H AS MADE 18% PROFIT ADDITIONS, WHEREAS THE LD. CIT(A) HAS SC ALED DOWN ADDITION TO 12.50% GROSS PROFIT ON TOTAL ALLEG ED BOGUS PURCHASE. ALTHOUGH, BOTH AUTHORITIES HAVE TAKEN DI FFERENT RATE OF PROFIT FOR ESTIMATION OF INCOME FROM ALLEGE D BOGUS PURCHASE, B7UT NO ONE COULD SUPPORT SAID RATE OF GR OSS PROFIT WITH NECESSARY EVIDENCES OR ANY COMPARABLE C ASES. THEREFORE, CONSIDERING FACTS AND CIRCUMSTANCES OF T HIS CASE AND CONSISTENT WITH VIEW TAKEN BY THE CO-ORDINATE B ENCH IN NUMBER OF CASES, WE ARE OF THE CONSIDERED OPINION T HAT THE LD. CIT(A) HAS TAKEN FAIR VIEW AND ESTIMATED 12.5% GROSS PROFIT ON ALLEGED BOGUS PURCHASES TO SETTLE DISPUTE BETWEEN THE PARTIES AND HENCE, WE ARE INCLINED TO UPHOLD OR DER OF THE LD. CIT(A) AND DISMISS APPEAL FILED BY THE REVE NUE. ITA NO. 805/MUM/2019 FOR AY 2010-11: 7. THE FACTS AND ISSUES INVOLVED IN THIS APPEAL ARE IDENTICAL TO FACTS AND ISSUES, WHICH WE HAD CONSIDE RED IN ITA NO. 804/MUM/2019 FOR ASSESSMENT YEAR 2009-10. THE REASONS GIVEN BY US IN PRECEDING PARAGRAPHS IN ITA NO. 804/MUM/2019 FOR ASSESSMENT YEAR 2009-10 SHALL MUTATIS MUTANDIS APPLY TO THIS APPEAL, AS WELL. TH EREFORE, 804 & 805/MUM/2019. - 8 - FOR SIMILAR REASONS, WE DISMISS APPEAL FILED BY THE REVENUE FOR A.Y 2010-11. 8. IN THE RESULT, APPEALS FILED BY THE REVENUE FOR BOTH AY'S ARE DISMISSED. THIS ORDER PRONOUNCED IN OPEN COUR T ON 12/02/2020 SD /- SD/- (SAKTIJIT DEY) ( G. MANJUNATHA ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED /02/2020 KRK, PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. &'( ) / THE CIT(A) 4. ) ( ) / CONCERNED CIT 5. ,-. //'( , '( , & / DR, ITAT, MUMBAI 6. .34 5 / GUARD FILE. / BY ORDER, , / //TRUE COPY// 1. / ( ASST. REGISTRAR) !' #, / ITAT, MUMBAI