ASST CIT 32(3), MUMBAI V. SHITAL S. SHAH, MUMBAI

ITA 930/MUM/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 8246 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-02-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2010-2011
• Appeal Filed On: 10-02-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BEENA SANTOSH
• Assessee Lawyers: V G GINDE
• Keywords: Bogus purchase; Accommodation entries; Onus to prove
• Section: 69C; 143(3); 133(6)

Judgement Text

, INCOME TAX APPELLATE TRIBUNAL,MUMBAI - E BENCH , IOU , BEFORE S/SH. RAJENDRA,ACCOUNTANT MEMBER & PAWAN SINGH, JUDICIAL MEMBER /.ITA NO.930/MUM/2015, /ASSESSMENT YEAR-2010-11 ASSTT.CIT- 32(3), ROOM NO. 108, 1 ST FLOOR, BUILDING NO. C-11, PRATYAKSHAKAR BHAVAN, BANDRA KURLA COMPLEX, BANDRA(E), MUMBAI- 400051. VS. SHRI SHITAL S SHAH 305, MADHUR APARTMENT, T P S ROAD NO. 56, BORIVALI (W), MUMBAI-400092 PAN: AXNPS2077F ( /APPELLANT) ( / RESPONDENT) ./C.O. NO. 142/MUM/2016 / ASSESSMENT YEAR 2010-11 ( /APPELLANT) ( / RESPONDENT) ! / REVENUE BY : MS. BEENA SANTOSH (DR) / ASSESSEE BY : SHRI V.G. GINDE ! / DATE OF HEARING : 12/01/2017 ! '( / DATE OF PRONOUNCEMENT : 15/02/2017 PER PAWAN SINGH, JM ' #$ IOU IOUIOU IOU : 1. THIS APPEAL BY REVENUE AND THE CROSS OBJECTION (C.O .) THEREIN BY ASSESSEE ARE DIRECTED AGAINST THE ORDER OF LD. COMMISSIONER OF I NCOME-TAX (APPEALS)-35, MUMBAI DATED 12.11.2014 FOR ASSESSMENT YEAR (AY) 20 10-11. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD.CIT(A) ERRED IN RESTRICTING OF ADDITION OF RS.2,38,32,673/ - TO RS.37,63,260/- U/S 69C OF THE ACT AS PROFIT ON THE BOGUS PURCHASES WITHOUT GI VING ANY REASONS OF REDUCTION OF DISALLOWANCE.' 2. 'ON THE FACT AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD CIT(A) HAS GROSSLY ERRED IN NOT APPRECIATING THE FACT THAT THE NOTICES UNDER SECTION 133(6) ISSUED TO PARTIES FROM WHOM ALLEGED BILLS WE RE RECEIVED WERE RETURNED UNDELIVERED BY THE POSTAL AUTHORITIES AND THE ASSES SEE HAS ALSO FAILED TO PRODUCE THE PARTIES BEFORE THE AO.' SHRI SHITAL S SHAH 305, MADHUR APARTMENT, T P S ROAD NO. 56, BORIVALI (W), MUMBAI-400092 PAN: AXNPS2077F VS ASSTT.CIT- 32(3), ROOM NO. 108, 1 ST FLOOR, BUILDING NO. C-11, PRATYAKSHAKAR BHAVAN, BANDRA KURLA COMPLEX, BANDRA(E), MUMBAI-400051. ITA NO.930/M/15 & C .O. 142 MUM 2016 SHRI SHITAL S SHAH 2 3. 'ON THE FACT AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD CIT (A) HAS ERRED IN NOT APPRECIATING THAT THE ASSESSEE HAS NOT PRODUCED ANY COGENT EVIDENCE TO SUBSTANTIATE THE FACT THAT HE HAD TAKEN ACTUAL DELIVERY OF GOODS PURCHASED FROM THESES PARTIES. 4. 'ON THE FACT AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD CIT (A) ERRED IN DELETING THE DISALLOWANCE MADE BY THE AO O VERLOOKING THE STATEMENT GIVEN BY THE PARTIES AND EXPLICIT FINDING OF THE IN VESTIGATION CARRIED OUT BY THE SALES TAX DEPARTMENT AND CORROBORATED BY THE ENQUIR ES OF THE AO.' 2. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE IS PR OPRIETOR OF M/S SHEETAL INVESTMENT AND ENGAGED IN THE BUSINESS OF CIVIL CONTRACTOR, FI LED RETURN OF INCOME FOR RELEVANT AY ON 26.09.2010 DECLARING TOTAL INCOME OF RS. 27 ,61,040/-. THE ASSESSMENT U/S 143(3) WAS COMPLETED ON 07.06.2013. DURING THE ASSE SSMENT PROCEEDING, THE ASSESSEE APPROACHED THE SETTLEMENT COMMISSION MUMBA I ON THE DISPUTE/MATTER OF BOGUS PURCHASES. THE ASSESSEE DECLARED ADDITIONAL I NCOME IN THE APPLICATION FILED BEFORE THE SETTLEMENT COMMISSION. DUE TO PENDENCY O F APPLICATION OF ASSESSEE BEFORE THE SETTLEMENT COMMISSION, THE ASSESSMENT PR OCEEDING WERE KEPT IN ABEYANCE. NO SETTLEMENT COULD BE ARRIVED BEFORE SET TLEMENT COMMISSION AS THE APPLICATION OF THE APPLICANT WAS CONSIDERED AS INVA LID, THUS, THE PROCEEDING BEFORE THE SETTLEMENT COMMISSION WAS DISALLOWED. THE AO AG AIN TAKE UP THE ASSESSMENT PROCEEDING AND WHILE FRAMING ASSESSMENT, THE AO BES IDES THE OTHER DISALLOWANCE, DISALLOWED A SUM OF RS. 2,38,32,673/- ON ACCOUNT OF BOGUS PURCHASES U/S 69C OF THE ACT. ON APPEAL BEFORE THE LD. CIT(A), THE DISALLOWA NCE WAS RESTRICTED TO RS. 37,63,260/-, WHICH WAS DECLARED AS ADDITIONAL INCOM E BEFORE THE SETTLEMENT COMMISSION. AGGRIEVED BY THE ORDER OF LD. CIT(A), T HE REVENUE HAS FILED THE PRESENT APPEAL AGAINST SUSTAINING THE DISALLOWANCE AT RS. 37,63,260/-. THE ASSESSEE HAS FILED A C.O. FOR DELETING THE ENTIRE DISALLOWAN CE. 3. WE HAVE HEARD LD. DEPARTMENTAL REPRESENTATIVE (DR) FOR REVENUE AND LD. AUTHORIZED REPRESENTATIVE (AR) FOR THE ASSESSEE AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE LD. DR FOR THE REVENUE SUPPORTED THE ORDER OF AO AND WOULD ARGUE THAT IN ADDITION TO THE ADDITIONAL INCOME OFFERED B Y ASSESSEE BEFORE THE SETTLEMENT COMMISSION, CERTAIN PERCENTAGE ON ACCOUNT OF BOGUS PURCHASES MAY FURTHER BE DISALLOWED. THE LD. DR ARGUED THAT DURING THE ASSE SSMENT PROCEEDINGS THE ASSESSEE HAS FAILED TO PROVE THE GENUINENESS OF PURCHASES FR OM THE PARTIES. THE ASSESSEE HAS ITA NO.930/M/15 & C .O. 142 MUM 2016 SHRI SHITAL S SHAH 3 PURCHASED MATERIAL FROM THE PARTIES, WHO WERE DECLA RED AS BOGUS/HAWALA DEALER BY VAT/SALES TAX DEPARTMENT, GOVERNMENT OF MAHARASHTRA . ON THE OTHER HAND, LD. AR OF THE ASSESSEE WOULD ARGUE THAT THE ASSESSEE HAS P ROVED THE GENUINENESS OF TRANSACTION. THE PURCHASES OF THE ASSESSEE WERE GEN UINE. THE ASSESSEE HAS PROVED THE CONSUMPTION OF THE MATERIAL IN THE CIVIL CONTRACT E XECUTED, WHICH WERE AWARDED BY MUNICIPAL CORPORATION GREATER MUMBAI. THE ASSESSEE PROVED THE GENUINENESS BY PAYMENTS CERTIFICATE BY ACCOUNTING IN THE STOCK REG ISTER AND THE PAYMENTS WAS MADE THROUGH ACCOUNT PAYEE CHEQUES. THE CLAIM OF EXPENSE S OF ASSESSEE HAS BEEN CORROBORATED BY VARIOUS DOCUMENTARY EVIDENCES FILED BEFORE THE AO AS WELL AS BY LD. CIT(A). THE AO RELIED UPON THE INFORMATION OF THIRD PARTY, THE MERE APPEARANCE OF NAMES OF CERTAIN SUPPLIER ON THE WEBSITE OF SALE TA X DEPARTMENT; GOVERNMENT OF MAHARASHTRA DOES NOT PROVE THAT THOSE PARTIES HAVE NOT SUPPLIED THE MATERIAL AGAINST THE PAYMENT RECEIVED BY THOSE PERSONS. ALL THE STAT EMENT ON WHICH THE AO RELIED WERE GENERAL STATEMENT, THERE WAS NO REFERENCE IN T HE SAID STATEMENT ABOUT THE ASSESSEE. THE AO HAS NOT GIVEN ANY OPPORTUNITY TO C ROSS-EXAMINE THOSE PARTIES ON WHOSE STATEMENT THE RELIANCE WAS MADE. IT WAS FURTH ER ARGUED BY LD. AR OF THE ASSESSEE THAT DURING THE ASSESSMENT PROCEEDING ON 1 8.02.2013, THE ASSESSEE FILED APPLICATION U/S 245C BEFORE THE INCOME-TAX SETTLEME NT COMMISSION TO SETTLE ALL THE ISSUES. THE APPLICATION OF THE ASSESSEE WAS ACCEPTE D BY SETTLEMENT COMMISSION FOR CONSIDERATION. HOWEVER, THE APPLICATION OF ASSESSEE WAS DECLARED AS INVALID DUE TO SOME TECHNICAL REASON AND NO SETTLEMENT COULD BE AR RIVED. IN SUPPORT OF C.O. LD. AR OF ASSESSEE ARGUED THAT LD. CIT(A) ON THE BASIS OF DECLARED ADDITIONAL INCOME SUSTAINED THE DISALLOWANCE WITHOUT GIVING ANY INDEP ENDENT FINDING. IT WAS ARGUED THAT ENTIRE DISALLOWANCE IS LIABLE TO BE DELETED. 4. WE HAVE CONSIDERED THE RIVAL CONTENTION OF THE PART IES AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. DURING THE ASSESSMENT PROCEEDING , THE AO ASKED THE ASSESSEE TO FURNISH THE DETAIL OF THE PARTIES FROM THE ASSESSEE HAS MADE THE PURCHASES. THE ASSESSEE SUBMITTED THE DETAILS TO THE AO. AFTER PER USING THE SUCH DETAILS THE AO NOTICED THAT ASSESSEE HAVE MADE PURCHASES FROM THE FOLLOWING PARTIES: ADINATH TRADING CO. RS. 6,51,801/- AMBIKA TRADE IMPEX RS. 11,89,735/- ITA NO.930/M/15 & C .O. 142 MUM 2016 SHRI SHITAL S SHAH 4 ATLANTIC TRADERS RS. 8,42,582/- BALAJI TRADERS RS. 41,60,942/- DHARMESH TRADING CO RS. 43,03,057/- KRSNA ENTERPRISES RS. 22,07,753/- MAHAVIR ENTERPRISES RS. 46,04,468/- OM ENTERPRISES RS. 18,14,688/- PRAYOSHA TRADING CO. RS. 7,54,523/- SHIVRAJ TRADERS RS. 5,94,675/- JAIN CORPORATION RS. 27,08,667/- TOTAL: RS. 2,38,32,673/- 5. THE AO NOTICED THAT THE NAME OF ALL PARTIES WAS SHO WN IN THE LIST PROVIDED BY THE SALE TAX DEPARTMENT, GOVERNMENT OF MAHARASHTRA. THE AO ISSUED NOTICE U/S 133(6) TO VERIFY THE ADDRESSES OF THE PARTIES. THE NOTICES ISSUED TO THESE PARTIES WERE RETURNED BACK UNSERVED. THE AO FURTHER MADE THE ENQ UIRY THROUGH INSPECTOR ON WHICH IT WAS REVEALED THAT THE PARTIES WERE PROVIDI NG ACCOMMODATION ENTRIES. DURING THE ASSESSMENT PROCEEDING, THE ASSESSEE AGAIN VIDE REPLY DATED 03.06.2013 CONTENDED THAT ASSESSEE IS DOING CONSTRUCTION/REPAIR WORK FOR MUNICIPAL CORPORATION, MUMBAI UNDER THE CONTRACT OF M/S SETH CONSTRUCTION COMPANY . ALL PURCHASED MATERIAL HAS CONSUMED, PAYMENT OF MATERIAL WERE MADE THROUGH BAN K CHALLAN, THE STATEMENT PROVIDED BY SALES TAX DEPARTMENT AND THE VERIFICAT ION CONDUCTED BY DEPARTMENTAL IS NOT SUFFICIENT FOR TREATING THE PURCHASES AS NO N-GENUINE. THE ASSESSEE DEALT WITH VARIOUS BUSINESS DEALERS AND PARTIES AND IT IS NOT HER RESPONSIBILITY TO TRACE ALL OF THEM, THE OFFICE OF AO DO NOT PRODUCE THE PARTY FOR CROSS-EXAMINATION AND THE LIST OF BOGUS/HAWALA DEALER IS NOT PROVIDED. THE CONTENTION OF THE ASSESSEE WAS NOT ACCEPTED BY AO HOLDING THAT ASSESSEE COULD NOT PRODUCE DELIV ERY CHALLAN, LORRY RECEIPT, MODE OF TRANSPORTATION, EVIDENCE OF PAYMENT OF OCTROI AN D STOCK REGISTER ETC. IN SUPPORT OF GENUINENESS OF PURCHASES. THE AO FURTHER CONCLUDED THAT THE AFFIDAVIT, DEPOSITION AND STATEMENT OF HAWALA OPERATORS ARE ENOUGH TO SHO W THAT ASSESSEE DID NOT PURCHASE ANY GOODS OR THESE ENTITIES ARE NOT CARRYING OUT AN Y BUSINESS. THE SALES TAX DEPARTMENT HAS MADE A FINDING AND UPLOADS IN THEIR WEBSITE, THE NAME AND ENTITIES, WHO WERE INVOLVED IN GIVING BOGUS BILLS ONLY, AFTER THEM CARRYING OUT DETAILED ENQUIRY AND INVESTIGATION. THE FINDING OF THE POSTA L AUTHORITY THAT THE PARTIES ARE NOT AVAILABLE AT THE GIVEN ADDRESSES. THE AO DISALLOWED THE AGGREGATE OF PURCHASES FROM ALL 11 PARTIES. ON APPEAL BEFORE THE LD. CIT(A), TH E ASSESSEE MADE THE SIMILAR ITA NO.930/M/15 & C .O. 142 MUM 2016 SHRI SHITAL S SHAH 5 CONTENTION AND IN ADDITION SUBMITTED THAT AT THE BE ST 8% OF THE VALUE OF CONTRACT SHOULD BE TAKEN TO BE SUFFICIENT FOR THE PURPOSE OF COVERING ALL THE ISSUES. THE LD. CIT(A) AFTER CONSIDERING THE CONTENTION OF ASSESSEE PASSED THE FOLLOWING ORDER: I HAVE GONE THROUGH THE FACTS OF THE CASE, C ONTENTION OF THE AO AND SUBMISSIONS OF THE APPELLANT. THE AO HAS GONE INTO THE ISSUE BY SENDING 133(6) NOTICES AND MAKING FIELD ENQUIRIES, BUT HAS NOT FOU ND ANY CONCRETE EVIDENCE TO DOUBT THE GENUINENESS OF THE PAYMENTS BEING SHOWN B Y THE APPELLANT THROUGH THE BANK ACCOUNT. THE AO HAS ALSO DEFINITELY NOT BE EN ABLE TO QUESTION THE AVAILABILITY OF THE INVENTORY THAT HAS BEEN SUBSEQU ENTLY USED. TO THAT EXTENT, THE EXAMINATION OF THAT ASPECT HAS NOT CREATED ANY DOUB T IN TERMS OF THE PURCHASES. HOWEVER, AS FAR AS THE EVIDENCE SUBMITTED BY THE AP PELLANT IS ALSO CONCERNED, THE APPELLANT HAS FILED HIS OWN BOOKS, LEDGER ACCOU NTS AND ITS OWN BANK STATEMENT TO FURTHER HIS ARGUMENT. THE FACT THAT TH E PAYMENTS ARE BEING MADE THROUGH CHEQUES IS NOT SOMETHING THAT IS BEING DOUB TED. IN FACT, THAT IS THE CONTENTIOUS ISSUE, THAT THESE PARTIES WHICH ARE IND ICATED BY THE SALES TAX DEPARTMENT THROUGH A PROCEDURE WHICH APPEARS TO BE TECHNICALLY CORRECT ON PAPER ARE IN FACT ENGAGED IN FALSE BILLING FOR A FE E/COMMISSION. THE ONUS OF PROVING THE ENTIRE TRANSACTIONS TO BE GENUINE IS DE FINITELY ON THE TAX PAYER, WHEN HE IS MAKING THE CLAIM OF PURCHASE AND ESPECIA LLY IN LIGHT OF THE DOUBT THAT HAS BEEN RAISED BY THE ENQUIRIES CONDUCTED BY THE SALES TAX DEPARTMENT, THE ONUS IS EVEN MORE ON THE TAX PAYER TO SHOW THAT AS FAR AS HE IS CONCERNED, HE HAS DISCHARGED HIS TAX RELATED LIABILITIES IN AN ACCURATE MANNER. SO THEREFORE, WHILE ON ONE HAND THE AO MAY NOT HAD A C LINCHING PROOF BUT THE PRIMARY RESPONSIBILITY WHICH IS ENSUED ON THE TAX P AYER HAS ALSO NOT BEEN DISCHARGED IN TERMS OF ESTABLISHING THE GENUINENESS OF THE TRANSACTION. MERELY FILING COPIES OF HIS OWN LEDGER ACCOUNTS AND BANK A CCOUNTS DOES IN NO WAY ESTABLISH THAT THE PARTIES ACTUALLY EXISTED, BUT TH EN CONSIDERING THAT THE BOOKS OF ACCOUNTS HAVE NOT BEEN DISPUTED, SALES HAVE NOT BEEN DISPUTED AND NEITHER CHEQUES HAVE BEEN SHOWN TO BE RECEIVED BACK AS CASH BY THE APPELLANT, I AM OF THE CONSIDERED VIEW THAT IN THE CONTEXT OF THE SITU ATION WHERE THE AO HAS HIMSELF SAID THAT WHAT IS BEING DOUBTED IS NOT THE QUANTITY OF PURCHASES PER SE, WHICH HAS ENTERED INTO THE BOOKS OF THE APPELLANT, BUT THAT THE PURCHASES WERE BILLED THROUGH BOGUS PARTIES, THEN THE CAUSE OF JUS TICE WOULD BE SERVED BY LOOKING AT THE GROSS PROFIT MARGINS BEING DECLARED BY THE APPELLANT. CONSIDERING THE ABOVE FACT THAT THE DECLARAT ION OF ADDITIONAL INCOME OF RS. 37,63,260/- WAS MADE BY THE APPELLANT BEFORE THE SE TTLEMENT COMMISSION, THE SAME IS THEREFORE, TAKEN FOR THE PURPOSE OF DISALLO WANCE TO BE MADE ON THIS ACCOUNT. THEREBY, THE APPELLANT GETS A RELIEF OF RS . 2,00,69,413/-. 6. WE HAVE SEEN THAT THE LD. CIT(A) HAS CONSIDERED THE CONTENTION OF THE ASSESSEE THAT THERE WAS NO MATERIAL BEFORE THE AO TO DOUBT THE GE NUINENESS OF PAYMENTS MADE BY ASSESSEE THROUGH BANK CHALLAN. THE LD. CIT(A) HAS E XAMINED THE ENTIRE TRANSACTION AND OBSERVED THAT THE ONUS TO PROVE THAT TRANSACTIO N IS GENUINE IS ON THE TAX PAYER/ASSESSEE WHEN HE IS MAKING THE CLAIM WHEN THE DEPARTMENT DOUBTED THE GENUINITY ON THE BASIS OF ENQUIRIES CONDUCTED BY SA LES TAX DEPARTMENT. THE LD. CIT ITA NO.930/M/15 & C .O. 142 MUM 2016 SHRI SHITAL S SHAH 6 (A) HAS OBSERVED THAT AO HIMSELF SAID THAT DOUBT IS NOT THE QUANTITY OF PERSE BUT THE PURCHASES WERE BILLED THROUGH BOGUS PURCHASES. AFTE R EXAMINING THE GROSS PROFIT DECLARED BY THE ASSESSEE, THE LD. CIT(A) SUSTAINED THE DISALLOWANCE WHICH WAS OFFERED BY ASSESSEE BEFORE THE SETTLEMENT COMMISSIO N AND THUS GRANTED PARTIAL RELIEF. WE HAVE SEEN THAT ORDER OF CIT(A) IS REASONED ONE A ND DOES NOT REQUIRE ANY FURTHER INTERFERENCE AT OUR END. HENCE, THE APPEAL OF THE R EVENUE IS DISMISSED. C.O. NO. 142/MUM/2016 7. THE ASSESSEE HAS RAISED THE GROUND FOR DELETING THE ENTIRE DISALLOWANCE SUSTAINED BY LD. CIT(A). AS WE HAVE ALREADY OBSERVED THAT THE OR DER OF LD. CIT(A) IS REASONED ONE. THE LD. CIT(A) SUSTAINED THE DISALLOWANCE TO T HE EXTENT OF ADDITIONAL INCOME OFFERED BY ASSESSEE ON THE MATTER OF BOGUS PURCHASE S. THE LD. CIT(A) SUSTAINED THE DISALLOWANCE ON THE BASIS OF GROSS PROFIT. THUS, WE DO NOT FIND ANY MERIT IN THE C.O. FILED BY ASSESSEE. HENCE, C.O. FILED BY ASSESSEE IS ALSO DISMISSED. AS A RESULT, APPEAL FILED BY THE REVENUE AND CROSS APPEAL OF THE ASSESSEE ARE DISMISSED. ' ,-' .,( / 0 ! ' ,-' V 2 ' 3 ' . ORDER PRONOUNCED IN THE OPEN COURT ON 15 TH FEBRUARY, 2017. ! 8 9 15 QJOJH ,2017 ! SD/- SD/- ( / RAJENDRA ) ( IOU / PAWAN SINGH ) /ACCOUNTANT MEMBER /JUDICIAL MEMBER / MUMBAI, 9/ DATE: 15 TH FEBRUARY, 2017 S.K. #%&!&'()&*) / COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ /, ( B' , 4. THE CONCERNED CIT / /, B' 5. DR E BENCH, ITAT, MUMBAI / CD '., , .. . 6. GUARD FILE/ +)&' //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR ( ., , /ITAT, MUMBAI