ITO 19(2)(3), MUMBAI V. MUKESH S. DOSHI, MUMBAI

ITA 844/MUM/2017

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 6936 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-06-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: I
• Assessment Year: 2009-2010
• Appeal Filed On: 06-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: REEPAL TRALSHWALLA
• Keywords: Bogus purchase; Unexplained expenditure; Accommodation entries
• Section: 133(6); 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL I BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY , JUDICIAL MEMBER AND SHRI DR. A.L. SAINI , ACCOUNTANT MEMBER ITA NO. 844 / MUM . /2017 ( ASSESSMENT YEAR : 20 09 10 ) INCOME TAX OFFICER WARD 19 (2)( 3 ), MUMBAI . APPELLANT V/S SHRI MUKESH S. DOSHI M/S. MAXWELL FORGE INDUSTRIES 63/A, 1 ST KUBHARWADA BHANDAR STREET NEAR GOL DEVAL, MUMBAI 400 004 PAN ABQPD5578B . RESPONDENT REVENUE BY : SHRI SAURABH KUMAR RAI ASSESSEE BY : SHRI REEPAL TRALSHWALLA DATE OF HEARING 20 .0 6 .2018 DATE OF ORDER 20.06.2018 O R D E R PER SAKTIJIT DEY, J.M. AFORESAID APPEAL BY THE REVENUE IS AGAINST ORDER DATED 28 TH NOVEMBER 2016, PASSED BY THE L EARNED COMMISSIONER (APPEALS) 30 , MUMBAI, FOR THE ASSESSMENT YEAR 20 09 10 . 2 . THE DISPUTE IN THE PRESENT APPEAL IS CONFINED TO THE DECISION OF THE LEARNED COMMISSIONER (APPEALS) IN SU STAINING THE ADDITION @ 12.5% ON THE ALLEGED BOGUS PURCHASES. 2 SHRI MUKESH S. DOSHI 3 . BRIEF FACTS ARE, THE ASSESSEE AN INDIVIDUAL CARRIES ON THE BUSINESS OF TRADING IN FERROUS AND NON FERROUS METALS THROUGH HIS PROPRIETARY CONCERN M/S. MAXELL FORGE INDUSTRIES. FOR THE ASSESSMENT YEAR UNDER DISPUTE, THE ASSESSEE HAD ORIGINALLY FILED ITS RETURN OF INCOME ON 2 ND SEPTEMBER 2009, DECLARING TOTAL INCOME OF ` 7,03,1 59. SUBSEQUENTLY, ON THE BASIS OF INFORMATION RECEIVED FROM DGIT, INVESTIGATION WING, MUMBAI, TO THE EFFECT THAT PURCHASES WORTH ` 61,77,214, CLAIMED TO HAVE BEEN MADE FROM FIVE PARTIES ARE NOT GENUINE AS THOSE PARTIES HAVE BEEN IDENTIFIED AS ACCOMMODATION ENTRY PROVIDERS BY THE SALES TAX / VAT DEPARTMENT BY THE MAHARASHTRA GOVERNMENT, THE ASSESSING OFFICER RE OPENED THE ASSESSMENT UNDER SECTION 147 OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT ). DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER , TO VERIFY THE GENUINENESS OF THE PURCHASES , ISSUED NOTICES UNDER SECTION 133(6) OF T HE ACT TO THE CONCERNED PARTIES. HOWEVER , AS OBSERVED BY THE ASSESSING OFFICER , THE NOTICES WERE RETURNED BACK BY THE POSTAL AUTHORITIES WITHOUT BEING SERVED. THEREAFTER, T HOUGH , THE ASSESSING OFFICER CALLED UPON THE ASSESSEE TO PRODUCE THE CONCERNED PARTIES BEFORE HIM AND FURNISH THEIR CURRENT ADDRESSES, HOWEVER, AS ALLEGED BY THE ASSESSING OFFICER , THE ASSESSEE COULD NEITHER PRODUCE THE CONCERNED PARTIES NOR FURNISH THEIR CURRENT ADDRESSES. THE ASSESSEE SIMPLY FURNISHED LEDGER ACCOUNT OF T HOSE PARTIES IN ASSESSEES BOOK, C OPIES OF PURCHASE BILLS AND BANK 3 SHRI MUKESH S. DOSHI STATEMENT SHOWING PAYMENT MADE THROUGH BANK. THE ASSESSING OFFICER WAS NOT CONVINCED WITH THE EVIDENCES SUBMITTED BEFORE HIM BY THE ASSESSEE AND ULTIMATELY CONCLUDED THAT THE PURCHASES SHOWN BY THE ASSESSEE FROM THE FIVE PARTIES CANNOT BE TREATED AS GENUINE. ACCORDINGLY, AFTER REJECTING THE BOOKS OF ACCOUNT OF THE ASSESSEE, HE PROCEEDED TO ADD THE AMOUNT OF ` 61,77,214, REPR ESENTING THE ALLEGED BOGUS PURCHASES AS UNEXPLAINED EXPENDITURE OF THE ASSESSEE. BEING AGGRIEVED OF SUCH ADDITION, THE ASSESSEE PREFERRED AN APPEAL BEFORE FIRST APPELLATE AUTHORITY. 4 . THE LEARNED COMMISSIONER (APPEALS) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE IN THE CONTEXT OF FACTS AND MATERIAL ON RECORD, THOUGH, AGREED WITH THE ASSESSING OFFICER THAT ASSESSEE HAS FAILED TO PROVE THE GENUINENESS OF THE PURCHASES CLAIMED TO HAVE BEEN MADE FROM THE CONCERNED PARTIES, HOWEVER, ULTIMATELY HE CONCLUDED THAT THE ENTIRE AMOUNT REPRESENTING THE ALLEGED BOGUS PURCHASES CANNOT BE TREATED AS INCOME OF THE ASSESSEE , BUT , ONLY THE PROFIT ELEMENT EMBEDDED THEREIN SHOULD BE CONSIDERED FOR ADDITION. ACCORDINGLY, HE DIRECTED THE ASSESSING OFFICER TO RESTRICT THE AD DITION TO 12.5% OF THE ALLEGED BOGUS PURCHASES. 5 . THE LEARNED DEPARTMENTAL REPRESENTATIVE CONTESTING THE AFORESAID DECISION OF THE LEARNED COMMISSIONER (APPEALS) SUBMITTED 4 SHRI MUKESH S. DOSHI THAT NEITHER BEFORE THE ASSESSING OFFICER NOR BEFORE THE LEARNED COMMISSIONER (APPEAL S) COULD THE ASSESSEE ESTABLISH THE GENUINENESS OF PURCHASES MADE. HE SUBMITTED , EVEN THE LEARNED COMMISSIONER (APPEALS) HAS ALSO ACCEPTED THIS FACT. FURTHER, THE LEARNED COMMISSIONER (APPEALS) HAS ALSO OBSERVED THAT THE ASSESSEE FAILED TO ESTABLISH ONE TO ONE CO RELATION BETWEEN THE PURCHASES AND SALES. HE SUBMITTED , IN SUCH CIRCUMSTANCES, THERE IS NO REASON TO RESTRICT THE ADDITION TO 12.5% OF THE BOGUS PURCHASES. 6 . THE LEARNED AUTHORISED REPRESENTATIVE STRONGLY RELIED UPON THE OBSERVATIONS OF THE LEARNED COMMISSIONER (APPEALS). 7 . WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED MATERIALS ON RECORD. AS COULD BE SEEN FROM THE FACTS ON RECORD, CERTAIN PURCHASES SHOWN BY THE ASSESSEE WERE TREATED AS BOGUS , SINCE , AS PER THE INFORMATION OBTAINED FROM THE SALES T AX / VAT DEPARTMENT OF GOVERNMENT OF MAHARASHTRA , SUCH SELLING PARTIES ARE ONLY PROVIDING ACCOMMODATION ENTRIES. IT IS ALSO A FACT THAT NOTICES ISSUED UNDER SECTION 133(6) OF THE ACT WERE RETURNED UN SERVED. H OWEVER, THE LEARNED COMMISSIONER (APPEALS) HAS RECORDED A FACTUAL FINDING THAT THE ASSESSING OFFICER HAS NOT DISPUTED THE SALE TURNOVER OF THE ASSESSEE. THUS, IN SUCH CIRCUMSTANCES, THE LOGICAL CONCLUSION WHICH ONE CAN ARRIVE AT IS , IN THE ABSENCE OF PURCHASES MADE THE ASSESSEE 5 SHRI MUKESH S. DOSHI COULD NOT HAVE ACHIEVED THE SALE TURNOVER. THEREFORE , THERE IS A STRONG POSSIBILITY THAT THE ASSESSEE MAY NOT HAVE PURCHASED THE GOODS FROM THE DECLARED SOURCE BUT FROM GREY MARKET BY AVOIDING PAYMENT OF SALES TAX / VAT. IN THESE CIRCUMSTANCES, THE DECISION OF THE LEARNED COMMISS IONER (APPEALS) IN RESTRICT ING THE ADDITION TO 12.5% OF THE ALLEGED BOGUS PURCHASES TO TAKE CARE FOR THE REVENUE LEAKAGE, IF ANY, APPEARS TO BE REASONABLE. MORE SO, CONSIDERING THE FACT THAT THE ASSESSING OFFICER HIMSELF WHILE DEALING WITH IDENTICAL ISSUE IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2010 11 AND 2011 12, HAS RESTRICTED THE ADDITION TO 12.5% OF THE ALLEGED BOGUS PURCHASES. IN VIEW OF THE AFORESAID, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LEARNED COMMISSIONER (APPEALS) ON THIS ISSUE. GR OUNDS RAISED ARE DISMISSED. 8 . IN THE RESULT, REVENUES APPEAL IS DISMISSED/ ORDER PRONOUNCED IN THE OPEN COURT ON 27.06. 2 0 18 SD/ - DR. A.L. SAINI ACCOUNTANT MEMBER SD/ - SAKTIJIT DEY JUDICIAL MEMBER MUMBAI, DATED: 27.06.2018 6 SHRI MUKESH S. DOSHI COPY OF THE ORDER FORWARDED TO : ( 1 ) THE ASSESSEE; ( 2 ) THE REVENUE; ( 3 ) THE CIT(A); ( 4 ) THE CIT, MUMBAI CITY CONCERNED; ( 5 ) THE DR, ITAT, MUMBAI; ( 6 ) GUARD FILE . TRUE COPY BY ORDER PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY (SR. PRIVATE SECRETARY) ITAT, MUMBAI