ITO 20(2)(5), MUMBAI V. PRAVEEN KUMAR GUPTA, MUMBAI

ITA 853/MUM/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 0035 (ITAT-MUMBAI)
• Duration Of Justice: 6 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2010-2011
• Appeal Filed On: 07-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bogus purchase
• Section: 143(3); 131; 148

Judgement Text

P A G E | 1 IN THE INCOME TAX APPELLATE TRIBUNAL I BENCH, MUMBAI BEFORE SHRI RAJENDRA , AM AND SHRI RAVISH SOOD, JM ./ I.T.A. NO. 853/MUM/2017 ( / ASSESSMENT YEAR: 2010 - 11) ITO - 20(2)(5), ROOM NO. 208, 2 ND FLOOR, PIRAMAL CHAMBERS LALBAUG, PAREL, MUMBAI - 400 012 / VS. PRAVEEN KUMAR GUPTA PROP. HARYANA STEEL, INTERNATIONAL, 228, SHOP NO. 02, MOTIWALA MANSION, AZAD ROAD, MATUNGA, MUMBAI - 400 014 ./ ./ PAN/GIR NO. AACPG3961A ( /REVENUE ) : ( / ASSESSEE) / REVENUE BY : SHRI SAURABH KUMAR RAI, D.R / ASSESSEE BY : NONE / DATE OF HEARING : 22/08/2017 / DATE OF PRONOUNCEMENT : 30 /08/2017 / O R D E R PER RAVISH SOOD, JUDICIAL MEMBER T HE PRESENT APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A) - 32, MUMBAI, DATED 28.11 .2016, WHICH IN ITSELF ARISES FROM THE ASSESSMENT FRAMED BY THE A.O U/S 143(3) R.W.S. 147 OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT), DATED P A G E | 2 29.02.2016. THE ASSESSEE ASSAILING THE ORDER OF THE CIT(A) HAD RAISED BEFORE US THE FOLLOWING GROUNDS OF APPEAL: - '1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN GRANTING RELIEF OF RS. 71,31,427/ - BY RESTRICTING THE ADDITION FROM 12.5% TO 4.60% OF TOTAL BOGUS PURCHASES FROM HAWALA PARTIES. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) FAILED TO APPRECIATE THE FACT THAT THE ASSESSING OFFICER DISALLOWED 12.5% OF THE TOTAL BOGUS PURCHASES RELAYING ON VARIOUS CASE LAW S. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE ID. CIT(A) HAS FAILED TO APPRECIATE THE FACT THAT THE ONUS IS ON THE ASSESSEE TO EXPLAIN AND SUBSTANTIATE THE GENUINENESS AND TRUE NATURE OF THE PURCHASES TRANSACTION. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE ID. CIT(A) HAS FAILED TO APPRECIATE THAT THE HAWALA DEALERS HAVE ADMITTED ON OATH BEFORE THE SALES TAX AUTHORITIES THAT THEY HAVE NOT SOLD ANY MATERIAL TO ANYBODY. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE ID.CIT(A) ERRED IN CONCLUDING THAT ASSESSEE HAD MADE CASH PURCHASES FROM OTHER PARTIES WHICH WERE NOT RECORDED IN THE BOOKS WITHOUT MENTIONING HOW THIS AND WITH WHAT EVIDENCE BEFORE HIM SUCH FINDING WAS ARRIVED AT. IF SUCH EVIDENCE OF CASH PURCHASES WAS GIVEN THE SAME SHOULD HAVE BEEN REMANDED TO THE A.O. FOR HIS EXAMINATION AND COMMENTS. 6. THE APPELLANT PRAYS THAT THE ORDER FOR THE CIT(A) ON THE ABOVE GROUNDS BE REVERSED AND THAT OF THE A SSESSING OFFICER BE RESTORED. 7. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY. 2 . BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE WHO IS ENGAGED IN THE BUSINESS OF TRADING IN ALL KINDS OF IRON & STEEL SHEETS UNDER THE NAME AND STYLE OF M/S HARYANA STEEL INTERNATIONAL HAD E - FILED HIS RETURN OF INCOME FOR A.Y. 2010 - 11 ON 04.10.2010, DECLARING AN INCOME OF RS. 13,89,670/ - . THE A.O ON THE BASIS OF INFORMATION RECEIVED FROM THE OFFICE OF TH E DIRECTOR GENERAL OF INCOME TAX (INV.), MUMBAI, [ FOR SHORT DGIT(INV.) ] THAT INFORMATION WAS GATHERED BY THE SALES TAX DEPARTMENT, GOVT. OF MAHARASHTRA, IN RESPECT OF VARIOUS SUSPICIOUS PARTIES WHO WERE INVOLVED IN PROVIDING OF ACCOMMODATION P A G E | 3 ENTRIES WITH OUT DOING ANY ACTUAL BUSINESS. THE A.O WAS INFORMED BY THE OFFICE OF THE DGIT(INV.) THAT THE DETAILS SO GATHERED BY THE SALES TAX DEPARTMENT REVEALED THAT THE ASSESSEE HAD CARRIED OUT BOGUS PURCHASES FROM THE FOLLOWING HAWALA PARTY: - THE A.O ON THE BASIS OF THE AFORESAID INFORMATION REOPENED THE CASE OF THE ASSESSEE UNDER SEC. 147 AND ISSUED A NOTICE U/S 148 ON 07.03.2015 TO THE ASSESSEE. THE ASSESSEE IN RESPONSE TO THE SAID NOTICE FILED A LETTER DATED. 04.06.2015 AND REQUESTED THAT HI S ORIGINAL RETURN OF INCOME FILED ON 04.10.2010 MAY BE TREATED AS A RETURN OF INCOME FILED IN COMPLIANCE TO THE NOTICE ISSUED TO HIM U/S 148 OF THE ACT. THE A.O ACCEPTED THE SAID REQUEST OF THE ASSESSEE AND ISSUED NOTICES U/SS. 143(2)/142(1) TO THE A SSESSEE. 3 . THAT DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS THE A.O CALLED UPON THE ASSESSEE TO SUBSTANTIATE THE GENUINENESS OF THE PURCHASES MADE BY IT FROM M/S MAIRU ENTERPRIESE. THE ASSESSEE IN COMPLIANCE TO THE DIRECTIONS OF THE A.O FURNISHED THE COPIES OF BILLS IN RESPECT OF THE PURCHASES MADE FROM THE AFORESAID PARTY, COPY OF THE LEDGER ACCOUNT AND UNSIGNED DELIVERY CHALLANS. THE ASSESSEE HOWEVER FAILED TO PLACE ON RECORD THE PURCHASE REGISTER, LORRY RECEIPTS, TRANSPORTATION DETAILS ETC. TO EVIDE NCE THE GENUINENESS OF THE PURCHASE TRANSACTIONS. THE ASSESSEE FURTHER AVERRED BEFORE THE A.O THAT THE GENUINENESS OF THE PURCHASES MADE FROM THE AFORESAID PARTY COULD BE GATHERE D FROM THE VERY FACT THAT THE PAYMENT OF THE PURCHASE CONSIDERATION WAS MADE TO THE SAID SUPPLIER PARTY, VIZ. M/S MAIRU ENTERPRISES, ONLY VIDE CHEQUES. THE ASSESSEE FURTHER IN ORDER TO DRIVE HOME HIS CONTENTION THAT IT HAD MADE GENUINE PURCHASES FROM THE AF ORESAID PARTY, THEREIN PLACED ON RECORD AN AFFIDAVIT OF SH. RAMESH SR. NO. NAME OF T HE PARTY FINANCIAL YEAR AMOUNT (RS.) 1. M/S MAIRU ENTERPRISES 2009 - 10 9,02,71,220/ - P A G E | 4 P. BAFNA, PROP. M/S MAIRU ENTERPRISES. IN THE AFFIDAVIT IT WAS DEPOSED BY THE SUPPLIER PARTY THAT THOUGH HE HAD ISSUED BILLS TO SOME PARTIES WITHOUT ACTUAL DELIVERY OF GOODS, HOWEVER, ALL THE TRANSACTIONS MADE WITH THE ASSESSEE WERE GENUINE. THE A.O IN ORDER TO VERIFY THE GENUINENESS OF THE AFFIDAVIT ISSUED A LETTER TO M/S MAIRU ENTERPRISES, THEREIN CALLING UPON IT PRODUCE THE COPY AND THE ORIGINAL AFFIDAVIT. THOUGH INITIALLY NO COMPLIANCE WAS MADE BY THE AFORESAID PARTY, HOWEVER, THEREAFTER WHEN THE A.O ISSUED SUMMONS U/S 131, SH. RAMESH P. BAFNA, PROPRIETOR OF THE SAID CONCERN, VIZ. M/S MAIRU ENTERPRISES APPEARED BEFORE THE A.O AND HIS STATEMENT WAS RECORDED ON OATH U/S 131 OF THE ACT. THAT SH. RAMESH P. BAFNA THOUGH ACCEPTED THAT HE HAD G I VEN AN AFFIDAVIT TO THE ASSESSEE, HOWEVER, ON BEING DIRECTED TO PRODUCE THE ORIGINAL COPY OF THE AFFIDAVIT, HE SUBMITTED THAT AS THE AFFIDAVIT WAS PREPARED BY THE ASSESSEE, THEREFORE, HE WAS NEITHER HA VING THE ORIGINAL COPY OR THE XEROX OF THE SAME. THAT ON BEING CONFRONTED WITH THE CONTENTS OF THE AFFIDAVIT SH. RAMESH P. BAFNA EXPRESSED HIS UNAWARENESS OF THE SAME, FOR THE REASON THAT THE SAME WAS PREPARED BY THE ASSESSEE. SH. RAMESH P. BAFNA DELIBERAT ING ON THE NATURE OF HIS BUSINESS SUBMITTED THAT HE HAD MAD E PURCHASES FROM CERTAIN PARTIES THROUGH BROKERS AT A RATE LOWER THAN TH E PREVAILING MARKET PRICE, HOWEVER, SUBSEQUENTLY HE LEARNT THAT HIS PURCHASES WERE BACKED BY BOGUS BILLS, AS THE SUPPLIER PAR TIES HAD FAILED TO PAY THE DUES WITH THE SALES TAX DEPARTMENT. HE SUBMITTED THAT HE THEREAFTER CARRIED OUT ACTUAL SALE OF THESE GOODS TO VARIOUS PARTIES, INCLUDING THE ASSESSEE, HOWEVER, THE SAME HAVING BEEN PROCURED FROM THE OPEN/GREY MARKET, WAS THUS SO LD AT A RATE LOWER THEN THAT MENTIONED IN BILLS. SH. RAMESH P. BAFNA FURTHER CONFIRMED THAT HE HAD ISSUED BOGUS BILLS TO ALL THE PARTIES INCLUDING THE ASSESSEE, AND IN UNEQUIVOCAL TERMS STATED THAT HE HAD ACTUALL Y SUPPLIED THE GOODS TO THE ASSESSEE CONCERN . P A G E | 5 4. THE A.O THUS PERSUADED BY THE AFORESAID FACTUAL POSITION, THEREIN CONCLUDED THAT THE ASSESSEE HAD ACTUALLY MADE PURCHASES OF THE GOODS FROM THE AFORESAID PARTY, HOWEVER, THE SAME WERE BACKED BY BOGUS BILLS W H ICH WERE INFLATED AS AGAINST THE ACTUAL P URCHASE CONSIDERATION WHICH WAS PARTED BY THE ASSESSEE FOR PROCURING THE GOODS FROM THE AFORESAID CONCERN. THE A.O THUS BEING OF THE VIEW THAT THE ASSESSEE HAD BENEFITED FROM MAKING THE PURCHASES AT A LOWER RATE , AS AGAINST THAT SHOWN IN THE BILLS, THEREFO RE, REJECTED THE BO O KS OF ACCOUNTS OF THE ASSESSEE U/S 145(3) OF THE ACT. THE A.O THEREAFTER ESTIMATING THE BENEFIT FROM MAKING THE AFORESAID PURCHASES BY THE ASSESSEE AT 12.5%, THEREIN SCALED DOWN THE PURCHASE CONSIDERATION BY AN AMOUNT OF RS. 1,12,83 ,903/ - (I.E 12.5% OF RS. 9,02,71,220/ - ) AND MADE A CONSEQUENTIAL ADDITION OF THE SAID AMOUNT IN THE HANDS OF THE ASSESSEE. 5. THE ASSESSEE BEING AGGRIEVED WIT H THE PART SUSTAINING OF THE ADDITION BY THE A.O CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). THE CIT(A) AFTER DELIBERATING ON THE FACTS OF THE CASE IN THE BACKDROP OF THE CONTENTIONS RAISED BY THE ASSESSEE BEFORE HIM, THEREIN TAKING COGNIZANCE OF THE G.P RATE OF 4.60% AS STOOD REFLECTED BY THE ASSESSEE, THUS, THUS CONCLUDED THAT AN ADDITION TO TH E SAID EXTENT, VIZ. 4.60% OF THE VALUE OF THE PURCHASES MADE BY THE ASSESSEE FROM THE AFORESAID CONCERN WOULD BE JUSTIFIED . THE CIT(A) ON THE BASIS OF HIS AFORESAID CONVICTION SUBSTITUTED THE DISALLOWANCE OF RS. 1,12,83,903/ - (I.E 12.5% OF RS. 9,02,71,220/ - ) MADE BY THE A.O, BY AN AMOUNT OF RS. 41,52,476/ - (I.E 4.60% OF RS. 9,02,71,220/ - ) IN THE HANDS OF THE ASSESSEE. 6 . THE REVENUE BEING AGGRIEVED WITH THE ORDER OF THE CIT(A) HAD CARRIED THE MATTER IN APPEAL BEFORE US. THAT AS DURING THE COURSE OF THE HEARING OF THE APPEAL THE ASSESSEE RESPONDENT DESPITE HAVING BEEN P A G E | 6 PUT TO NOTICE AS REGARDS THE FIXATION OF THE HEARING OF THE PRESENT APPEAL HAD FAILED TO PUT UP AN APPEARANCE BEFORE US, THEREFORE, AS PER RULE 25 OF THE APPELLATE TRIBUNAL RULES, 1963, WE ARE PROCEEDING WITH TO DISPOSE OF THE PRESENT APPEAL ON MERITS, AFTER HEARING THE APPELLANT REVENUE. THE LD. DEPARTMENTAL R EPRESENTATIVES (FOR SHORT D.R) HAD PLACED RELIANCE ON THE ORDERS OF THE LOWER AUTHORITIES. 7 . WE HAVE HEARD THE LD. DEPARTMENTAL REPRESENTATIVE, PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL AVAILABLE ON RECORD. WE HAVE GIVEN A THOUGHTFU L CONSIDERATION TO THE FACTS OF THE CASE , AND AFTER PERUSING THE OBSERVATIONS RECORDED BY THE CIT(A) ARE UNABLE TO PERSUADE OURSELVES TO ACCEPT THE BASIS OF ESTIMATION OF THE EXTENT OF THE INFLATION OF THE BOGUS BILLS PROCURED BY THE ASSESSEE FROM THE AFOR ESAID CONCERN, VIZ. M/S MAIRU ENTERPRISES, AS AGAINST THE ACTUAL CONSIDERATION THAT WOULD HAVE BEEN PARTED BY THE ASSESSEE FOR PURCHASING THE GOODS UNDER CONSIDERATION. WE ARE OF THE CONSIDERED VIEW THAT THE IN THE BACKDROP OF THE FACT THAT THE SUPPLIER PA RTY, VIZ. M/S MAIRU ENTERPRISES HAD ITSELF ADMITTED THAT IT HAD PURCHASED GOODS FROM THE OPEN/GREY MARKET AT A LOWER RATES, WHICH THEREAFTER WAS SOLD BY IT TO VARIOUS PARTIES, INCLUDING THE ASSESSEE CONCERN AT A RATE LOWER THEN THAT AS STOOD REFLECTED IN T HE BILLS, THEREFORE, THE FACT THAT THE ASSESSEE HAD AS A MATTER OF FACT BENEFITED FROM PURCHASING THE GOODS, THUS CANNOT BE RULED OUT. WE ARE OF THE CONSIDERED VIEW THAT IN THE BACKDROP OF THE AFORESAID FACTUAL POSITION , THE QUANTIFICATION OF THE PROFIT/MA RGIN INVOLVED IN PROCURING OF THE GOODS UNDER CONSIDERATION, IN THE ABSENCE OF ANY MATERIAL, IS THUS LEFT TO A FAIR ESTIMATION ON THE PART OF THE A.O. WE ARE OF THE CONSIDERED VIEW THAT THE ELEMENT OF PROFIT EARNED BY AN ASSESSEE FROM MAKING OF PURCHASES F ROM THE OPEN/GREY MARKET WOULD INTER ALIA BE IN THE FORM OF SAVING OF THE SALES TAX. WE ARE OF THE CONSIDERED VIEW THAT IN THE BACKDROP OF THE AFORESAID FACT, THE ESTIMATION OF THE PROFIT ELEMENT ON P A G E | 7 THE PURCHASE OF THE STEEL SHEETS BY THE ASSESSEE FROM THE OPEN/GREY MARKET WOULD FAIRLY BE COVERED BY THE RATE OF 4.60% ADOPTED BY THE CIT(A). WE THUS FIND OURSELVES TO BE IN AGREEMENT WITH THE ADDITION SUSTAINED BY THE CIT(A), AND FIND NO REASON TO DISLODGE THE SAME. WE THUS UPHOLD THE ORDER OF THE CIT(A). 8. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED . ORDER PRO NOUNCED ON THE OPEN COURT ON 30 .08.2017 SD/ - SD/ - (RAJENDRA) (RAVISH SOOD) ACCOUNTANT MEMBER JUDICIAL MEMBER MUM BAI ; 30 .08.2017 PS. ROHIT KUMAR / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI