ITO WD 2(1), KALYAN V. DHIRAJ S BALANI, ULHASNAGAR

ITA 893/MUM/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 9819 (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: 2011-2012
• Appeal Filed On: 23-02-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUMAN KUMAR
• Assessee Lawyers: ASHOK H CHUGH
• 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. 893/MUM/2016 ASSESSMENT YEAR: 2011 - 12 ITO - 2(1) 2 ND FLOOR, MOHAN PLAZA KHADAKPADA, WAYALE NAGAR, KALYAN (W) - 421301 VS. SHRI DHIRAJ SHANKAR BALANI BLOCK NO. C - 35, R.NO. 70, KURLA CAMP ROAD, ULHASNAGAR - 421004 PAN NO. AMBPB7121Q (APPELLANT) (RESPONDENT) REVENUE BY : SHRI SUMAN KUMAR, DR ASSESSEE BY : SHRI ASHOK H. CHUGH, AR 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 RELEVANT ASSESSMENT YEAR IS 2011 - 12 . THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER 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 UNDER: - 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.53,19,695/ - OUT OF THE TOTA L ITA NO. 893/MUM/2016 2 ADDITION OF RS.62,58,465/ - 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 RE STORED. 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 ASSESSEE AMOUNTED TO RS. 62,58,465 / - . THE BREAK UP IS AS UNDER: NO. NAME OF THE ENTRY PROVIDER AMOUNT IN THE BILLS TAKEN BY THE ASSESSEE 1. MAHADEV METAL RS.17,88,070/ - 2. ASIAN METAL INDUSTRIES RS.40,92,395/ - 3. SAROTAM STEELAGE RS.3,78,000/ - TOTAL RS.62,58,465/ - DURING THE COURSE OF VERIFICATION, THE AO ISSUED NOTICES TO THE CONCERNED SUPPLIERS. HOWEVER, THE LETTERS ISSUED TO THE CONCERNED PARTIES WERE RETURNED BACK AS UNSERVED BY THE POSTAL AUTHORITIES. THE AO THEN ASKED THE ASSESSEE TO PRODUCE THE CONCERNED SUP PLIERS TO ASCERTAIN THE GENUINENESS OF PURCHASES MADE FROM THEM. HOWEVER, THE ASSESSEE FAILED TO DO SO. THE AO THEN , CAME TO A ITA NO. 893/MUM/2016 3 FINDING THAT NO EFFORT WAS MADE BY THE ASSESSEE EITHER TO PRODUCE THE 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 WITH THE ASSESSEE AND THE ASSESSEE FAILED TO DISCHARGE THE BURDEN, THE AO MADE AN ADDITION OF RS. 62,58,465 / - 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 SAL ES 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 MADE BY ACCOUNT PAYEE CHEQUES, THEREFORE, THE DISALLOWANCE ON THE ENTIRE PURCHASES MADE FROM THE HAWALA DEALERS WAS NOT JUSTIFIED. CONSIDERING THE TOTALI TY OF FACTS, THE LD. CIT(A) DISALLOWED 1 5% AS INFLATED OUT OF TOTAL PURCHASES OF RS. 62,58,465/ - MADE FROM HAWALA DEALERS. THE AMOUNTS COMES TO RS.9 ,38,770 / - . 5. BEFORE US, THE LD. DR SUBMITS THAT THE LD. CIT(A) SHOULD NOT HAVE RESTRICTED THE DISALLOWANCE TO 1 5% OF 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. ITA NO. 893/MUM/2016 4 6. ON THE OTHER HAND, THE LD. COUNSEL OF THE ASSESSEE SUPPORTS THE ORDER OF THE LD. CIT(A) RESTRICTING THE DISALLOWANCE TO 15% OF THE PURCHASES MADE FROM UNVERIFIABLE PARTIES WHICH COMES TO RS.9,38,770/ - . 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED 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 PURCHA SES 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 @ 1 5% ON THE T OTAL PURCHASES OF RS. 62,58,465 / - MADE FROM HAWALA DEALERS. WE UPHOLD THE ORDER OF THE LD. CIT(A) RESTRICTING THE DISALLOWANCE TO RS. 9,38,770 / - . 8. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 26/0 7/201 7. SD/ - SD/ - (MAHAVIR SINGH) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED: 26/07/2017 RAHUL SHARMA, SR. P.S. ITA NO. 893/MUM/2016 5 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