ITO WD 2(4), KALYAN V. TINCO INDUSTRIES, THANE

ITA 892/MUM/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 9815 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-07-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2009-2010
• Appeal Filed On: 23-02-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUMAN KUMAR
• Keywords: Bogus purchase; Onus to prove
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH B MUMBAI BEFORE SHRI MAHAVIR SINGH (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 892 /MUM/2016 ASSESSMENT YEAR: 2009 - 10 ITO - 2(4) 2 ND FLOOR, MOHAN PLAZA KHADAKPADA, WAYALE NAGAR, KALYAN (W) - 421301 VS. M/S TINCO INDUSTRIES F - 26, MIDC INDUSTRIAL AREA, BADLAPUR, TALUKA ULHASNAGAR, THANE - 421503 PAN NO. AABFT7250Q (APPE LLANT) (RESPONDENT) REVENUE BY : SHRI SUMAN KUMAR, D R ASSESSEE BY : NONE DATE OF HEARING : 03/07/2017 DATE OF PRONOUNCEMENT : 26/07/2017 ORDER PER N.K. PRADHAN, A.M . THIS IS AN APPEAL FILED BY THE REVENUE . THE REL EVANT ASSESSMENT YEAR IS 2009 - 10 . THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE COMMISS IONER OF INCOME TAX (APPEALS) - 3 , MUMBAI AND ARISES OUT OF THE ASSESSMENT COMPLETED U/S 143(3) R.W.S. 147 OF THE INCOME TAX ACT 1961, (THE ACT). 2. THE GROUNDS OF APPEAL FILED BY THE ASSESSEE READ AS UND ER: - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) - 3, THANE ERRED IN DELETING THE ADDITION OF RS.34,34,187/ - OUT OF THE TOTAL ADDITION OF ITA NO. 892/MUM/2016 2 RS.45,78,916/ - MADE ON ACCOUNT OF BOGUS PURCHASES, DESPITE HOLDING THAT THE PURCHASES WERE NOT GENUINE AND THE ASSESSEE FAILED TO PROVE GENUINENESS OF THE TRANSACTIONS. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, LD. CIT(A) - 3, THANE ERRED IN DELETING THE ABOVE ADDITION DESPITE THE FACT THAT THE ASSESSEE FAILED TO DISCHARGE HIS ONUS OF PROVING THE PURCHASES. 3. THE APPELLANT PRAYS THAT THE ORDER OF THE LD. CIT(A) - 3, THANE, MAY BE SET - ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER (AO) ON THE BASIS OF INFORMATION RECEIVED FROM THE SALES TAX DEPARTMENT , MAHARASHTRA FOUND THAT THE NAME OF THE ASSESSEE APPEARED IN THE LIST OF PERSONS WHO HAD OBTAINED BOGUS PURCHASE BILLS FROM THE ENTRY PROVIDERS. AS PER THE AO, THE BOGUS PURCHASE BILLS TAKEN BY THE ASSE SSEE AMOUNTED TO RS.45,78,916/ - . THE BREAK UP IS AS UNDER: NO. NAME OF THE ENTRY PROVIDER AMOUNT IN THE BILLS TAKEN BY THE ASSESSEE (RS.) 1. BHARAT INDUSTRIAL CORPORATION 74,250/ - 2. BLUE MOON TRADING CO. 6,44,800/ - 3. NAMRATA TRADING CO. 1,23,750/ - 4. CRYSTAL COMMERCIAL CO. 5,97,366/ - 5. BHAKTI ENTERPRISES 8,99,750/ - 6. PURAB ENTERPRISES 22,39,000/ - TOTAL 45,78,916/ - ITA NO. 892/MUM/2016 3 DURING THE COURSE OF VERIFICATION, THE AO ISSUED NOTICES TO THE CONCERNED SUPPLIERS. HOWEVER, THE LETTERS ISSUED TO THE M WERE RETURNED BACK BY THE POSTAL AUTHORITIES WITH THE REMARK NOT KNOWN/UNCLAIMED/REFUSED. THE AO THEN ASKED THE ASSESSEE TO PRODUCE THE CONCERNED SUPPLIERS TO ASCERTAIN THE GENUINENESS OF PURCHASES MADE FROM THEM. HOWEVER, THE ASSESSEE FAILED TO DO SO. THE AO THEN CAME TO A FINDING THAT NO EFFORT WAS MADE BY THE ASSESSEE EITHER TO PRODUCE A CONCERNED SUPPLIERS OR TO FURNISH THEIR WHEREABOUTS SO THAT VERIFICATION COULD BE MADE. AS THE ONUS TO PROVE THE GENUINENESS AND CORRECTNESS OF THESE PURCHASES WAS WI TH THE ASSESSEE AND THE ASSESSEE FAILED TO DISCHARGE THE BURDEN, THE AO MADE AN ADDITION OF RS.45,78,916/ - TO THE INCOME. 4. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) OBSERVED THAT (I) THE ASSESSEE DID NOT PRODUCE THE HAWALA DEALERS BEFORE THE AO FOR CROSS VERIFICATION, (II) THE STATEMENT OR AFFIDAVIT FILED BY THE HAWALA DEALERS BEFORE THE SALES TAX DEPARTMENT HAS EVIDENTIARY VALUE, WHICH CANNOT BE IGNORED, (III) IF THE PURCHASES WERE GENUINE IN TOTO, THE ASSESSEE COULD HAVE FILED COUNTER AFFIDAVIT AND SHOULD NOT HAVE PAID THE VAT ON BEHALF OF THE HAWALA DEALERS, BUT FAILED TO DO SO. 4.1 THE LD. CIT(A), HOWEVER, OBSERVED THAT ON THE PURCHASES THERE WERE CORRESPONDING SALES AND THE PAYMENTS WERE MA DE BY ACCOUNT PAYEE CHEQUES, THEREFORE, THE DISALLOWANCE OF ENTIRE PURCHASES MADE FROM THE HAWALA DEALERS WAS NOT JUSTIFIED. THE LD. CIT(A) RELIED ON THE DECISION IN THE CASE OF (I) SANJAY OIL CAKE INDUSTRIAL VS. CIT (2008) 316 ITR 274 (GUJ.), (II) VIJAY PROTEINS LTD. VS. ACIT 58 ITD 428 (A H D), (III) M/S NAND KISHORE MEGHRAJ JEWELLERS, JAIPUR CO. NO. 105/JP/09 ARISING OUT OF ITA NO. 433/JP/2009 - ITAT JAIPUR AND (IV) M/S ITA NO. 892/MUM/2016 4 TRIDENT JEWELLERS - ITAT JAIPUR ITA NO. 522/JP/2013. CONSIDERING THE TOTALITY OF FACTS, THE LD. CIT(A) DISALLOWED 25% AS INFLATED OUT OF THE TOTAL PURCHASES OF RS.45,78,916/ - MADE FROM HAWALA DEALERS. THE AMOUNTS COMES TO RS.11,44,729/ - . 5. BEFORE US, THE LD. DR SUBMITS THAT THE LD. CIT(A) SHOULD NOT HAVE RESTRICTED THE DISALLOWANCE TO 25% O F THE TOTAL PURCHASES BECAUSE THE ASSESSEE FAILED TO DISCHARGE THE ONUS OF PROVING THE GENUINENESS OF SUCH TRANSACTIONS. THE LD. DR THUS SUPPORTS THE ORDER PASSED BY THE AO. 6. NONE APPEARED ON BEHALF OF THE ASSESSEE. 7. WE HAVE HEARD THE LD. DR AND PERU SED THE RELEVANT MATERIAL ON RECORD. IN THE CASE OF CIT VS. SIMIT P. SHETH (2013) 38 TAXMANN.COM (GUJ), THE HONBLE GUJARAT HIGH COURT HAS HELD THAT WHERE PURCHASES WERE NOT BOGUS BUT WERE MADE FROM PARTIES OTHER THAN THOSE MENTIONED IN THE BOOKS OF ACCOUNT, NOT ENTIRE PURCHASE PRICE BUT ONLY PROFIT ELEMENT EMBEDDED IN SUCH PURC HASES CAN BE ADDED TO INCOME OF THE ASSESSEE. THAT BEING THE POSITION, NOT THE ENTIRE PURCHASE PRICE BUT ONLY THE PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES CAN BE ADDED TO THE INCOME OF THE ASSESSEE. THE HONBLE HIGH COURT REFER RED TO A SIMILAR VIEW TAKEN IN THE CASE OF CIT VS. VIJAY M. MISTRY CONSTRUCTION LTD. [2013] 355 ITR 498 (GUJ) AND CIT VS. BHOLANATH POLY FAB (P) LTD. [2013] 355 ITR 290 (GUJ). WE FIND THAT THE LD. CIT(A) HAS RIGHTLY ESTIMATED THE PROFIT ELEMENT @ 25% ON THE TOTAL PURCHASES OF RS.45,7 8,916/ - MADE FROM HAWALA DEALERS. WE UPHOLD THE ORDER OF THE LD. CIT(A) RESTRICTING THE DISALLOWANCE TO RS.11,44,729/ - . ITA NO. 892/MUM/2016 5 8. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 26/07/2017. SD/ - SD/ - (MAHAVIR SINGH) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED: 26/07/2017 RAHUL SHARMA, SR. P.S. 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 . BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI