GAURAV A. SHAH, MUMBAI V. ITO - 32(1)(5), MUMBAI

ITA 879/MUM/2017

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 9977 (ITAT-MUMBAI)
• Duration Of Justice: 6 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-09-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 11-05-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 07-02-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: V JANARDHANAN
• Keywords: Bogus purchase; Unexplained expenditure
• Section: 69C

Judgement Text

, SMC , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES SMC, MUMBAI BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER ITA NO.879/MUM/2017 : ASST.YEAR 2009-2010 SHRI GAURAV A SHAH 308 SUMER NAGAR CHS LIMITED BUILDING NO.1, S.V.ROAD BORIVLI (WEST), MUMBAI 400 092. PAN : AWQPS1340D. / VS. THE INCOME TAX OFFICER WARD 32(1)(5) MUMBAI. ( / APPELLANT) ( / RESPONDENT) /APPELLANT BY : --- NONE --- /RESPONDENT BY : SHRI V.JANARDHANAN / DATE OF HEARING : 06.07.2017 / DATE OF PRONOUNCEMENT : 01.09.2017 / O R D E R THIS IS AN APPEAL BY THE ASSESSEE WHEREIN THE ASSESSEE IS AGGRIEVED BY THE ORDER OF THE LEARNED CIT(A) DATED 29.11.2016 PERTAINING TO ASSESSMENT YEAR 2009-2010, WHEREIN 100% DISALLOWANCES ON ACCOUNT OF BOGUS PURCHASES AMOUNTING TO RS.21,10,880 IS CONFIRMED. 2. IN THIS CASE, THE ASSESSING OFFICER HAD MADE A DISALLOWANCE OF RS.21,10,880 BEING 100% OF THE BOGUS PURCHASES. THE FINDINGS OF THE ASSESSING OFFICER ARE AS UNDER:- 4. DURING THE COURSE OF INVESTIGATION THE INVESTIGATION WING OF INCOME TAX DEPARTMENT, MUMBAI AND THE SALES TAX DEPARTMENT HAD FOUND THAT THE SAID CONCERNS WERE NOT DOING GENUINE BUSINESS OF PURCHASE AND SALES AND MERELY INDULGED IN PROVIDING ACCOMMODATION BILLS. THE ASSESSEE HAS TAKEN BOGUS PURCHASE ENTRIES TO THE TUNE OF RS. 21,10,880/- FROM THE ABOVE ITA NO.879/MUM/2017. SHRI GAURAV A SHAH. 2 PURCHASE PARTIES. TO ASCERTAIN THE GENUINENESS OF THE SAID PURCHASE TRANSACTION, THE ASSESSEE WAS ASKED TO PRODUCE THE DOCUMENTS MENTIONED ABOVE TO SUBSTANTIATE HIS CLAIM OF PURCHASE MADE FROM THESE HAWALA DEALERS. HOWEVER, AS DISCUSSED ABOVE THE ASSESSEE FAILED TO PRODUCE ANY EVIDENCE IN THIS REGARD. FURTHER, IN ORDER TO VERIFY THE TRANSACTION STATED TO BE ENTERED INTO WITH THE AFORESAID PARTIES, ACTION WAS TAKEN BY ISSUE OF NOTICE U/S.!33(6) OF THE I.T. ACT, 1961. HOWEVER, NOT SURPRISINGLY, NOTICE WAS RETURNED BY THE POSTAL AUTHORITIES WITH THE REMARK 'UNCLAIMED'. 5. THE ASSESSEE NEITHER ATTENDED NOR COMPLIED WITH THE DETAILS ASKED AND FAILED TO PRODUCE THE AFORESAID PARTIES ALONG WITH THEIR BOOKS OF ACCOUNT ARID OTHER DOCUMENTS. THE ASSESSEE FAILED TO SUBMIT THE EVIDENCES OF TRANSPORTATION & DISPATCH OF MATERIAL PURCHASED FROM AFORESAID PARTIES, EVIDENCE OF RECEIPT OF MATERIAL FROM AFORESAID PARTIES AT HIS SITE AND EVIDENCE OF UTILIZATION OF THE MATERIAL PURCHASED FROM THE AFORESAID PARTIES. THE ASSESSEE FAILED TO SUBMIT ANY DETAILS AFTER GIVING HIM SUFFICIENT OPPORTUNITIES OF BEING HEARD. IT CLEARLY IMPLIES THAT THE ASSESSEE HAVE NOT ANY DETAILS REGARDING THE CLAIM OF PURCHASE FROM THE AFORESAID PARTIES MADE BY HIM. THE ASSESSEE IS FAILED TO SUBSTANTIATE THE CLAIM OF PURCHASE AMOUNTING TO 6. RS. 21,10,880/- FROM THE AFORESAID HAWALA PARTIES. IN VIEW OF THE FOREGOING DISCUSSION, IT IS CRYSTAL CLEAR THAT THE ASSESSEE DID NOT MAKE PURCHASES FROM THESE HAWALA DEALERS. HENCE, IT CAN SAFELY BE CONCLUDE THAT THE PURCHASE AMOUNT OF RS. 21,10,880/- IS NON-GENUINE TRANSACTION AND WAS ENTERED TO AVOID THE PAYMENT OF LEGITIMATE TAXES. THE AMOUNT OF RS. 21,10,880/- IS CONSIDERED AS UNEXPLAINED EXPENDITURE U/S 69C OF THE INCOME TAX ACT, 1961 AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. 3. UPON ASSESSEES APPEAL, LEARNED CIT(A) CONFIRMED THE SAME. 4. AGAINST THIS ORDER, ASSESSEE HAS FILED APPEAL BEFORE THE ITAT. ITA NO.879/MUM/2017. SHRI GAURAV A SHAH. 3 5. I HAVE HEARD THE LEARNED DEPARTMENTAL REPRESENTATIVE AND PERUSED THE RECORDS. AN ADJOURNMENT PETITION HAS BEEN MOVED ON BEHALF OF THE ASSESSEE. IT IS NOTED THAT THIS APPEAL HAS BEEN FIXED EARLIER ALSO AND WAS ADJOURNED ON ASSESSEES REQUEST. IT IS NOTED THAT THE ISSUE RELATES TO BOGUS PURCHASE AND A NUMBER OF SUCH CASES HAVE ALREADY BEEN DISPOSED BY THE ITAT MUMBAI BENCHES. HENCE, THE ADJOURNMENT PETITION HAS BEEN REJECTED. 6. UPON CAREFUL CONSIDERATION OF THE FACTS OF THE CASE, I FIND THAT OVERWHELMING EVIDENCES HAVE BEEN REFERRED BY THE AUTHORITIES BELOW THAT THE IMPUGNED PURCHASES ARE BOGUS. THERE IS NO EVIDENCE OF THE ACTUAL MOVEMENT OF THE GOODS UNDER DISPUTE. IN THESE CIRCUMSTANCES, LEARNED DEPARTMENTAL REPRESENTATIVE HAS REFERRED TO HONBLE GUJARAT HIGH COURT DECISION IN THE CASE OF TAX APPEAL NO.240 OF 2003 IN THE CASE OF N.K.INDUSTRIES V. DCIT, ORDER DATED 20.06.2016, WHEREIN 100% OF THE BOGUS PURCHASES WAS HELD TO BE ADDED IN THE HANDS OF THE ASSESSEE AND TRIBUNALS RESTRICTION OF THE ADDITION TO 25% OF THE BOGUS PURCHASES WAS SET ASIDE. THE SPECIAL LEAVE PETITION AGAINST THIS ORDER ALONG WITH OTHERS HAS BEEN DISMISSED BY THE HONBLE APEX COURT VIDE ORDER DATED 16.01.2017. 7. I FIND THAT IN THIS CASE THE SALES HAVE NOT BEEN DOUBTED. IT IS SETTLED LAW THAT WHEN SALES ARE NOT DOUBTED, 100% DISALLOWANCE FOR BOGUS PURCHASE CANNOT BE DONE. THIS PROPOSITION IS SUPPORTED FROM HONBLE JURISDICTIONAL HIGH COURT DECISION IN THE CASE OF NIKUNJ EXIMP ENTERPRISES. HOWEVER, THE FACTS OF THE PRESENT CASE INDICATE THAT ASSESSEE HAS MADE PURCHASE FROM THE GREY MARKET. MAKING PURCHASES THROUGH THE GREY MARKET GIVES THE ASSESSEE SELLING ON ACCOUNT OF NON-PAYMENT OF TAX AND OTHERS AT THE EXPENSE OF THE ITA NO.879/MUM/2017. SHRI GAURAV A SHAH. 4 EXCHEQUER. IN SUCH SITUATION, IN MY CONSIDERED OPINION, ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE 12.5% DISALLOWANCE OUT OF THE BOGUS PURCHASES MEETS THE ENDS OF JUSTICE. THIS IS FOLLOWING THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF SMIT P. SETH, FOLLOWED BY THE ITAT MUMBAI BENCHES IN A NUMBER OF CASES. 8. ACCORDINGLY, I MODIFY THE ORDER OF LEARNED CIT(A) AND DIRECT THAT THE DISALLOWANCE BE LIMITED TO 12.5% OF THE BOGUS PURCHASE. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STANDS PARTLY ALLOWED. ORDER PRONOUNCED ON THIS 01 ST DAY OF SEPTEMBER, 2017. SD/- ( SHAMIM YAHYA ) ACCOUNTANT MEMBER MUMBAI; DATED : 01 ST SEPTEMBER, 2017. DEVDAS* / COPY OF THE ORDER FORWARDED TO : / BY ORDER, //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT, MUMBAI. 4. / CIT(A), MUMBAI 5. , , / DR, ITAT, MUMBAI 6. [ / GUARD FILE.