ITO 28(3)(1), NAVI MUMBAI V. SHRI. SABESAN N NADAR, NAVI MUMBAI

ITA 914/MUM/2020

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 2798 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-10-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 04-02-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SMITA VERMA
• Keywords: Bogus purchase; Unexplained expenditure; Accommodation entries
• Section: 69C; 133(6); 250

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI SHRI SHAMIM YAHYA (AM) I.T.A. NO. 914/MUM/2020 (ASSESSMENT YEAR 2010-11) ITO-28(3)(1) ROOM NO. 316 3 RD FLOOR, TOWER NO. 6 VASHI RAILWAY STATION COMPLEX, VASHI NAVI MUMBAI-400706. VS. SHRI SABESAN N. NADAR W-81, RABALE MIDC THANE BELAPUR ROAD RABALE, NAVI MUMBAI 400 701. PAN : AAXPN7880N (APPELLANT) (RESPONDENT) ASSESSEE BY NONE DEPARTMENT BY MS. SMITA VERMA DATE OF HEARING 14 . 1 0 .2021 DATE OF PRONOUNCEMENT 14.10.2021 O R D E R THIS IS AN APPEAL BY THE REVENUE WHEREIN THE REVENU E IS AGGRIEVED THAT THE LEARNED CIT-A HAS REDUCED THE ADDITION FOR BOGU S PURCHASE OF RS. 13,54,425/- DONE @ 100% BY THE ASSESSING OFFICER BY SUSTAINING ONLY 12.5% FOR THE A.Y. 2010-11 VIDE ORDER DATED 14.11.2019. 2. THE ASSESSEE IN THIS CASE IS ENGAGED INTO THE BU SINESS OF MACHINERY MANUFACTURING AND FABRICATION WORK. THE ASSESSMENT WAS REOPENED UPON INFORMATION FROM SALES TAX DEPARTMENT THAT ASSESSEE HAS MADE PURCHASES FROM BOGUS DEALERS, THE AO MADE 100% ADDITION OF THE BOG US PURCHASE AMOUNTING TO RS. 13,54,425/-. 3. UPON ASSESSEE'S APPEAL LEARNED CIT-A HAS NOTED T HAT THE SALE HAS NOT BEEN DOUBTED. ACCORDINGLY PLACING RELIANCE UPON SEV ERAL CASE LAWS AND UPON THE FACTS OF THE CASE HE SUSTAINED 12.5% DISALLOWAN CE OUT OF THE BOGUS PURCHASES. LEARNED CIT(A) HELD AS UNDER :- SHRI SABESAN N. NADAR 2 ALL THE GROUNDS OF THE APPEAL ARE AGAINST ADDITION OF RS. 3,54,425/- AS UNEXPLAINED EXPENDITURE U/S 69C OF THE ACT. AS PER THE INVESTIGATIONS CARRIED OUT BY THE SALES TAX AUTHORITIES, THE AFOREM ENTIONED PARTIES WERE FOUND TO BE INVOLVED IN GIVING ACCOMMODATION ENTRIES ONLY WITHOUT ACTUALLY SUPPLYING THE GOODS. THE LOGICAL INFERENCE IS THAT THE PURCHASES MADE BY THE APPELLANT WOULD ALSO BE IN THE NATURE OF ACCOMMODATION ENTRIES ONLY. TO VERIFY THE SAME, THE AO HAD MADE ENQUIRIES BY ISSUING NOTICES U/S 133(6) WHICH WERE RETURNED UNSERVED BY THE POSTAL AUTHORITIE S. THIS PARTY WAS FOUND TO BE NON-EXISTENT AT THE ADDRESS GIVEN BY THE APP ELLANT. THE APPELLANT ALSO FAILED TO PROVIDE THE LATEST ADDRESS OF THE PARTY. DURING THE SCRUTINY ASSESSMENT THE APPELLANT FURNISHED DETAILS OF PURCHASE S AND CORRESPONDING SALES. HOWEVER, THE APPELLANT COULD NOT PRODUCE THE P ARTY BEFORE THE AO INSPITE OF OPPORTUNITY BEING GIVEN. THE APPELLANT ALS O FAILED TO PRODUCE DELIVERY CHALLANS OR TRANSPORTATION DETAILS. THE ONUS O F PROVING THE GENUINENESS OF SUCH PURCHASES IS ON THE APPELLANT WHI CH THE APPELLANT HAD NOT BEEN ABLE TO DISCHARGE FULLY. WHEN THE HAWALA PART Y HAD ADMITTED ON OATH THAT IT HAD GIVEN ACCOMMODATION ENTRIES ONLY WITH OUT ACTUALLY SUPPLYING THE GOODS, THE GENUINENESS OF PURCHASES MA DE FROM ONE PARTY WILL HAVE TO BE CONSIDERED TAKING THIS INTO CONSIDERATION WH ILE EXAMINING THE DOCUMENTATION SUBMITTED BY THE APPELLANT IN SUPPORT OF ITS CLAIM. THE DOCUMENTARY EVIDENCES SUCH AS PURCHASE BILLS, PAYMEN TS BY CHEQUES, ETC. WOULD ALL HAVE BEEN ORCHESTRATED TO PRESENT A FACADE OF GENUINENESS AND DOES NOT NECESSARILY MEAN THAT THE PURCHASES FROM THES E PARTIES ARE GENUINE. THE COURTS HAVE HELD THAT PAYMENT BY CHEQUE B Y ITSELF IS NOT SACROSANCT SO AS TO PROVE GENUINENESS OF PURCHASES WH EN THE SURROUNDING CIRCUMSTANCES ARE SUSPECT. HOWEVER, APPELLANT HAS SHO WN ONWARD SALES WHICH HAS NOT BEEN DOUBTED BY THE ASSESSING OFFICER. SINCE THERE CAN BE NO SALES WITHOUT CORRESPONDING PURCHASES, THE ONLY LOGI CAL EXPLANATION IS THAT THE APPELLANT WOULD HAVE MADE PURCHASES FROM UNDISCLO SED PARTIES IN THE GREY MARKET AT LOWER RATES AND PURCHASES WERE SHOWN A S BEING MADE FROM THE IMPUGNED PARTIES TO SUPPRESS ITS PROFITS.. IN SUCH A SITUATION; THE VARIOUS COURTS INCLUDING THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS SIMIT P. SHETH, 356 ITR 451 HAVE HELD THAT NOT THE ENTIRE PUR CHASES BUT ONLY THE PROFIT ELEMENT EMBEDDED IN THESE PURCHASES WAS TO BE D ISALLOWED. THE HON'BLE GUJARAT HIGH COURT IN THIS CASE HAS HELD THAT PROFIT MARGIN OF 12.5% OF THE BOGUS PURCHASES WILL BE REASONABLE. RESPECTFUL LY FOLLOWING THE ORDER IN THE CASE OF SIMIT P. SHETH THE ADDITION IS RESTRICT ED TO 12.5% OF THE BOGUS PURCHASES OF RS. 13,54,425/-. 4. AGAINST ABOVE ORDER REVENUE IS IN APPEAL BEFORE THE ITAT. 5. I HAVE HEARD ID LEARNED DEPARTMENTAL REPRESENTAT IVE AND PERUSED THE RECORD. I FIND THAT IN THIS CASE THE SALES OR OTHER ASPECTS OF THE WORKING HAVE NOT BEEN DOUBTED. IT IS SETTLED LAW THAT WHEN THESE ARE NOT DOUBTED, HUNDRED PERCENT DISALLOWANCE FOR BOGUS PURCHASE CANNOT BE D ONE. THE RATIONALE BEING NO SALES IS POSSIBLE WITHOUT ACTUAL PURCHASES. THIS PROPOSITION IS SUPPORTED FROM HONOURABLE JURISDICTIONAL HIGH COURT DECISION IN THE CASE OF NIKUNJ SHRI SABESAN N. NADAR 3 EXIMP ENTERPRISES (IN WRIT PETITION NO 2860, ORDER DATED 18.6.2014). IN THIS CASE THE HONOURABLE HIGH COURT HAS UPHELD HUNDRED P ERCENT ALLOWANCE FOR THE PURCHASES SAID TO BE BOGUS WHEN SALES ARE NOT DOUBT ED. HOWEVER THE FACTS OF THE PRESENT CASE INDICATE THAT ASSESSEE HAS MADE PU RCHASE FROM THE GREY MARKET. MAKING PURCHASES THROUGH THE GREY MARKET GI VES THE ASSESSEE SAVINGS ON ACCOUNT OF NON-PAYMENT OF TAX AND OTHERS AT THE EXPENSE OF THE EXCHEQUER. IN SUCH SITUATION IN OUR CONSIDERED OPINION ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE 12.5% DISALLOWANCE OUT OF THE BOGUS PU RCHASES DONE BY THE LEARNED CIT-A MEETS THE END OF JUSTICE. ACCORDINGLY I UPHOLD THE ORDER OF LEARNED CIT-A. THE DECISION OF N.K. PROTEINS LTD. ( 250 ITR 22) RELIED BY THE REVENUE WAS A DISMISSAL OF SLP BY HON'BLE SUPREME C OURT AND HAS ALREADY BEEN EXPLAINED AND DISTINGUISHED BY HON'BLE BOMBAY HIGH COURT IN THE CASE OF M. HAZI ADAM & CO. (ITA NO. 1004 OF 2006 DATED 11.2 .2019). 6. IN THE RESULT, APPEAL FILED BY THE REVENUE STAND S DISMISSED. 7. BEFORE PARTING I MAY ADD THAT IF THE ASSESSEE HA S FILED A CROSS APPEAL OR CROSS OBJECTION AND THE SAME HAS REMAINED UNHEARD, EITHER PARTY MAY APPLY FOR RECALL OF THIS ORDER SO THAT THE APPEALS CAN BE HEARD TOGETHER. PRONOUNCED IN THE OPEN COURT ON 14.10.2021. SD/- (SHAMIM YAHYA) ACCOUNTANT MEMBE R MUMBAI; DATED : 14/10/2021 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// ( ASSISTANT REGISTRAR) PS ITAT, MUMBAI