Firoz Ahmed Moh. Motin Choudhary, Pune V. Income-tax Officer, Pune

ITA 942/PUN/2017

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 3036 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 1 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-05-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 17-04-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SHRI
• Assessee Lawyers: DINESH R GULBANI
• Keywords: Bogus purchase; Unexplained expenditure; Source of fund; Difference of opinion; Accommodation entries; Change of opinion
• Section: 69C; 143(3)

Judgement Text

SMC IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, PUNE . , BEFORE SHRI D. KARUNAKARA RAO, AM . / ITA NO.942/PUN/2017 / ASSESSMENT YEAR : 2010-11 SHRI FIROZ AHMED MOH. MOTIN CHOUDHARY, STAR LUBRICANTS, NEAR PARSHURAM ROLLING MILL, VIDYANAGAR, CHINCHWAD, PUNE 411 019 PAN : AFTPC7046Q . /APPELLANT VS. ITO, WARD-9(1), AKURDI, PUNE . / RESPONDENT / APPELLANT BY : SHRI DINESH R. GULBANI / RESPONDENT BY : SHRI PANKAJ GARG / DATE OF HEARING : 17.05.2018 / DATE OF PRONOUNCEMENT:25.05.2018 / ORDER PER D. KARUNAKARA RAO, AM : THIS IS THE APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF CIT(A)-13, PUNE, DATED 11-01-2017 FOR THE ASSESSMENT YEAR 2010 -11. 2. GROUNDS RAISED BY THE ASSESSEE READ AS UNDER : 1. ON THE FACTS AND CIRCUMSTANCES PREVAILING IN TH E CASE AND AS PER PROVISIONS OF LAW, THE ASSESSING OFFICER MADE ADDIT IONS U/S. 69C AMOUNTING TO RS. 28,54,540/-, U/S. 145(3) AMOUNTING TO RS. 2,40,007/- AND ALSO GRANTED RELIEF OF RS. 18,17,394/- TOWARDS THE PAYMENT MADE DURING THE YEAR. THE ASSESSING OFFICER HAS CREATED A SITUATED WHEREIN THERE IS CHANGE OF OPINION ON ONE SINGLE MATTER IN ISSUE WHICH IS DEALT IN THREE DIFFERENT MANNERS. 2. ON THE FACTS & CIRCUMSTANCES PREVAILING IN THE CASE & AS PER PROVISIONS OF LAW, THE LD CIT APPEALS HAS GRANTED R ELIEF OF RS. 2,40,007/- AND IN BOTH THE ORDERS (AO & CIT APPEALS ORDER) AMO UNT OF RS. 18,17,394 PAID TO ARIHANT TRADERS IS NOT DISPUTED A ND THEREFORE ADDITIONS U/S. 69C AMOUNTING TO RS. 28,54,540/- IF SUSTAINED WILL RESULT IN CHANGE OF OPINION WHILE THE MATTER IN ISSUE IS J UST OF UNPAID CREDITORS IN BOOKS OF ACCOUNTS DURING THE YEAR. ITA NO.942/PUN/2017 SHRI FIROZ AHMED MOH. MOTIN CHOUDHARY 2 3. ON THE FACTS & CIRCUMSTANCES PREVAILING IN THE CASE & AS PER PROVISIONS OF LAW, THE ADDITIONS MADE BY ASSESSING OFFICER HAVE SHOOT UP THE GROSS PROFIT RATIOS TO 45.96% & NET PROFIT RATI O TO 41.96% WHILE THE SALES ARE NOT AT ALL DISPUTED IN THE ASSESSMENT ORD ER U/S 143(3) R.W.S. 147. IN SUCH A SITUATION ADDITIONS CANNOT BE SUSTAI NED AT SUCH HIGHER RATIOS CONSIDERING THE TRADING ACTIVITY OF THE DEAL ER AND ALSO WHEN COMPARED TO EARLIER YEARS RATIOS DULY SUBMITTED BEF ORE AO & CIT APPEAL. THE APPELLANT BE GRANTED JUST & PROPER RELIEF IN THIS BEHALF. 4. ON THE FACTS AND CIRCUMSTANCES PREVAILING IN THE CASE AND AS PER PROVISIONS OF LAW, THAT THE ADDITIONS MADE BY THE L D. ASSESSING OFFICER AMOUNTING TO RS. 28,54,540/- IS WITHOUT ANY INVESTI GATION, PURELY ON THE INFORMATION OF SALES TAX DEPARTMENT AND JUST A MATTER OF UNPAID CREDITORS U/S 41(1) AS PER PROVISIONS OF DIRECT TAX LAWS. 5. ON THE FACTS & CIRCUMSTANCES PREVAILING IN THE C ASE & AS PER PROVISIONS OF LAW, WITHOUT PREJUDICE TO THE ABOVE G ROUNDS AND AS PER ORDER 143(3) THE ASSESSING OFFICER AT PARA 12 PAGE 7 HAS COMPUTED THE AVERAGE GP RATIOS AT 13.41% ON UNDISPUTED SALES TUR NOVER CONTRADICTORY TO THE ADDITIONS MADE IN ASSESSMENT ORDER U/S.143(3 ) R.W.S.147 WHICH SHOOTS UP THE GP RATIO AT 45.96% IN CASE OF THE DEA LER. THEREFORE WHEN TWO VIEWS ARE POSSIBLE THE VIEW FAVOURING ASSESSEE SHOULD BE ALLOWED. 6. THE APPELLANT PRAYS TO BE ALLOWED, AMEND, DELETE , MODIFY & RECTIFY ANY GROUNDS OF APPEAL AT THE TIME OF HEARING. 3. BRIEFLY STATED, RELEVANT FACTS OF THE CASE INCLU DE THAT THE ASSESSEE IS AN INDIVIDUAL AND IS ENGAGED IN THE BUSINESS OF TRADIN G IN OIL UNDER THE NAME AND STYLE STAR LUBRICANTS. ASSESSEE FILED THE RETURN OF INCOME ON 15-10-2010 DECLARING TOTAL INCOME OF RS.4,27,540/-. NOTICE U/ S.148 OF THE ACT WAS ISSUED TO THE ASSESSEE ON 06-01-2014. IN RESPONSE TO THE SAME, ASSESSEE FILED A LETTER ON 24-12-2014 STATING THAT THE RETURN FILED ON 15-10-2010 MAY BE TREATED AS RETURN IN RESPONSE TO NOTICE U/S.148 OF THE ACT. ON THE BASIS OF INFORMATION RECEIVED FROM THE INVESTIGATION WING OF SALES TAX D EPARTMENT, AO FOUND THAT ASSESSEE MADE PURCHASES FROM M/S. ARIHANT TRADERS A MOUNTING TO RS.46,71,934/-. ASSESSEE FURNISHED COPIES OF PURCH ASE BILLS, LEDGER EXTRACT OF THE CONCERNED PARTY, BANK ACCOUNT STATEMENT, BOOKS OF ACCOUNTS WITH BILLS AND VOUCHERS. HOWEVER, AO HELD THAT THE ONUS OF PROVIN G THE GENUINENESS OF TRANSACTIONS OF ALLEGED PURCHASES LIES ON THE ASSES SEE. WITH REGARD TO THE PURCHASES MADE BY THE ASSESSEE F ROM M/S. ARIHANT TRADERS, THE AO MADE ADDITION OF RS.28,54,540/- BY HOLDING AS UNDER : ITA NO.942/PUN/2017 SHRI FIROZ AHMED MOH. MOTIN CHOUDHARY 3 9. SO FAR, IN RESPECT OF PURCHASES MADE FROM M/S. ARIHANT TRADERS TOTALLING TO RS.46,71,934/-, THE ASSESSEE COULD SUB MIT PROOF OF PAYMENT MADE OF RS.18,17,394/- ONLY. IN RESPECT OF BALANCE AMOUNT OF RS.28,54,540/- IT IS CLAIMED THAT SOME AMOUNT WAS P AID IN CASH AND SOME AMOUNT IS OUTSTANDING. HOWEVER, NO DOCUMENTAR Y EVIDENCE LIKE VALID RECEIPT OF PAYMENT MADE, CONFIRMATION OF THE CONCERNED PARTY WAS SUBMITTED. THUS, IT IS CRYSTAL CLEAR THAT THE ASSE SSEE IS NOT AT ALL IN A POSITION TO PROVE THE PURCHASES MADE OF RS.28,54,54 0/- AS GENUINE. THEREFORE, THE AMOUNT OF RS.28,54,540/- IS ADDED TO THE TOTAL INCOME OF THE ASSESSEE AS UNEXPLAINED EXPENDITURE U/S.69C OF THE ACT. FURTHER, THE AO ALSO ADDED RS.2,40,007/- ON ACCOUN T OF REJECTION OF BOOKS OF ACCOUNT/RE-COMPUTATION OF GROSS PROFIT BY HOLDING AS UNDER : 12. . . . . . . . .NO DOUBT, THE PROFIT ELEMENT IN VOLVED IN SUCH TYPE OF TRANSACTIONS IS ALWAYS ON HIGHER SIDE. THUS, NO CO MPARISON CAN BE MADE WITH THE PROFIT RATIOS OF THE ASSESSEES IN THE SIMILAR L INE OF BUSINESS. CONSIDERING THE TOTAL FACTS, AFTER REJECTION OF THE BOOKS, TO COVER UP PROFIT @15% ON THE UNPROVED PURCHASES OF RS.18,17,394/-, I RE-COMPUTE THE GROSS PROFIT OF THE ASSESSEE @13.41% OF TOTAL TURNOVER OF RS.87,69,862/ - WHICH COMES TO RS.11,76,038/-. AFTER DEDUCTING THE GROSS PROFIT A LREADY SHOWN BY THE ASSESSEE OF RS.9,36,031/-, THE BALANCE PROFIT OF RS.2,40,007 /- (1176038 936031) IS HEREBY ADDED TO THE TOTAL INCOME OF THE ASSESSEE. THUS, TOTAL ADDITION OF RS.30,94,547/- IS MADE TO THE TOTAL INCOME OF THE A SSESSEE ON THIS ACCOUNT..... EVENTUALLY, THE AO AT THE END OF THE ASSESSMENT U/S .143(3) R.W.S. 147 OF THE ACT MADE ADDITION OF RS.30,94,547. 4. IN THE FIRST APPELLATE PROCEEDINGS, THE CIT(A) U PHELD THE ACTION OF THE AO IN MAKING ADDITION OF RS.28,54,540/- AS PURCHASE S MADE FROM UNACCOUNTED SOURCE OF INCOME. CONTENTS OF PARA NO.2.1.9 OF THE ORDER OF CIT(A) ARE RELEVANT AND THEREFORE, THE SAME IS EXTRACTED AS UN DER : 2.1.9 THE APPELLANT HAS ARGUED THAT THE LEARNED AO HAS ACCEPTED HIS TURNOVER, THEREFORE, HE COULD NOT HAVE DISALLOWED T HE PURCHASES. I DO NOT AGREE WITH THE APPELLANT. THE LEARNED AO HAS NOT D ISALLOWED THE PURCHASES ON THE GROUND THAT THEY WERE NOT GENUINE, BUT HAS MADE THE ADDITION BECAUSE THE APPELLANT COULD NOT FURNISH THE EVIDENCE OF HAVING MADE THE PAYMENT FOR THE PURCHASES OUT OF HIS ACCOUNTED SOURCES OF INCOME. THEREFORE, THE FACT OF THE PURCHASE AND CORRESPONDING SALES ARE ACCEPTED. THE LEARNED AO HAS ACCEPTED THE APPELLANTS CONTENTION THAT HIS PURCHASES ARE G ENUINE. ACCORDINGLY, I DO NOT FIND ANY ERROR IN THE LEARNED AOS DECISION TO ADD RS.28,54,540/- ON ACCOUNT OF THE PURCHASES MADE FROM THE UNACCOUNT ED SOURCE OF INCOME. ITA NO.942/PUN/2017 SHRI FIROZ AHMED MOH. MOTIN CHOUDHARY 4 WITH REGARD TO THE ADDITION OF RS.2,40,007/-, THE C IT(A) DELETED THE SAME BY OBSERVING AS UNDER : 2.2.3 I HAVE CONSIDERED THE ARGUMENTS OF THE LEAR NED AO AND OF THE APPELLANT. I CONSIDER THAT THIS ADDITION SHOULD BE CONSIDERED TO HAVE BEEN SUBSUMED IN THE ADDITION MADE BY THE LEARNED AO OF RS.28,54,540/- ON ACCOUNT OF THE PURCHASES MADE FROM HIS UNACCOUNTED SOURCES. NO SEPARATE ADDITION NEEDS TO BE MADE AS THE APPELLANT WOULD HA VE USED THE ADDITIONAL INCOME GENERATED FROM HIS ADDITIONAL GROSS PROFIT T OWARDS MAKING THE UNACCOUNTED PURCHASED. IN OTHER WORDS, THE APPELLA NT NEEDS TO BE GRANTED TELESCOPING FOR THIS ADDITION. ACCORDINGLY, I DELETE THE ADDITION OF RS.2,40,007/- MADE BY THE LEARNED AO. 5. AGGRIEVED WITH THE ORDER OF CIT(A) CONFIRMING TH E ADDITION OF RS.28,54,540/- ON ACCOUNT OF UNACCOUNTED SOURCE OF INCOME, THE ASSESSEE FILED THE PRESENT APPEAL WITH THE GROUNDS EXTRACTED ABOVE . 6. BEFORE US, LD. COUNSEL FOR THE ASSESSEE SUBMITTE D THAT THE AO MADE ADDITION OF RS.30,94,547/- WHICH INCLUDES ADDITION OF RS.28,54,540/- AND ANOTHER SUM OF RS.2,40,007/-. MENTIONING ABOUT THE ABSENCE OF ANY DISPUTE WITH REGARD TO RS.2,40,007/- IN VIEW OF THE RELIEF GRANTED BY THE CIT(A), LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSE E IS IN APPEAL AGAINST THE ADDITION OF RS.28,54,540/- ONLY. FROM THE ORDER OF CIT(A), IT IS EVIDENT THAT PROOF OF PAYMENT AND FILING OF CONFIRMATION LETTER FROM THE SELLER ARE THE TWIN REASONS FOR CONCLUDING THE ASSESSEES FAILURE TO PR OVE THE GENUINENESS OF THE PURCHASES TO THE EXTENT OF RS.28,54,540/-. LD. COU NSEL FOR THE ASSESSEE SUBMITTED THAT THE AO SUSPECTED THE ABOVE PURCHASES FROM M/S. ARIHANT TRADERS QUA THE ALLEGATION OF ACCOMMODATION ENTRIES /BILLS ON THE BASIS OF THE INFORMATION SUPPLIED BY THE SALES TAX DEPARTMENT (P ARA NO.4 OF THE AO.). 7. LD. DR FOR THE REVENUE RELIED ON THE ORDERS OF A O/CIT(A). 8. I HEARD BOTH THE SIDES ON THE SOLITARY ISSUE OF CONFIRMING OF ADDITION OF RS.28,54,540/- BY THE CIT(A) ON THE GROUND THAT THE Y CONSTITUTE BOGUS ITA NO.942/PUN/2017 SHRI FIROZ AHMED MOH. MOTIN CHOUDHARY 5 PURCHASES AS THE PAYMENT IS STILL PENDING PAYABLE T O M/S. ARIHANT TRADERS. OTHERWISE, THE AO ALLOWED THE PURCHASES TO THE EXTE NT THE PAYMENT WAS MADE. IN MY VIEW, SUCH AN APPROACH IN MATTERS RELATING TO BOGUS PURCHASES INVOLVING THE INFORMATION RECEIVED FROM SALES TAX DEPARTMENT, IS NOT SUSTAINABLE. I FIND MAKING ENTIRE ADDITION OF RS.28,54,540/- IS NOT APP ROPRIATE AS THESE PURCHASES ARE INFACT LINKED TO THE ALLEGATION OF ACCOMMODATIO N ENTRIES/LISTING OF HAWALA SUPPLIERS BY THE SALES TAX DEPARTMENT. THE CIT(A) DID NOT DEAL WITH THE LIKELY GP RATE OF SUCH SUSPECTED PURCHASES AND ALSO THE AP PLICABILITY OF THE CATENA OF DECISIONS ON THIS ISSUE. 9. I FIND THAT SIMILAR ISSUE OF BOGUS PURCHASES HA S BEEN DECIDED BY THE TRIBUNAL IN SERIES OF DECISIONS. FURTHER, IT IS NO T THE CASE OF THE REVENUE THAT SOMETHING IS WRONG WITH THE INVOICES, PAYMENTS, TRA IL OF GOODS PURCHASED ETC. I FIND THE COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF MR. KHAN AFZALHUSSAIN MOHD. SAIE VS. DCIT ITA NOS. 2708 AND 2709/PUN/20 16, DATED 23-03-2018 CONFIRMING THE ADDITION TO ONLY 10% OF SUCH ALLEGE D BOGUS PURCHASES APPLY TO THE FACTS OF THIS CASE. I THEREFORE FIND IT TO REL EVANT TO EXTRACT THE FINDINGS GIVEN BY THE TRIBUNAL IN PARA NO.11 OF ORDER OF TRIBUNAL HERE AS UNDER : 11. NOW, COMING TO THE MERITS OF ADDITION. THE IS SUE RAISED IN THE PRESENT APPEAL IS AGAINST BOGUS PURCHASES. WE HAVE ALREADY ADJUDICATED SIMILAR ISSUE IN SERIES OF DECISIONS WITH LEAD ORDER IN M/S. CHHA BI ELECTRICALS PVT. LTD. VS. DCIT IN ITA NO.795/PUN/2014, RELATING TO ASSESSMENT YEAR 2010-11, ORDER DATED 28.04.2017. THE ASSESSEE IN THE FIRST YEAR I .E. ASSESSMENT YEAR 2009-10 HAS MAINTAINED QUANTITATIVE DETAILS. IN OTHER WORD S, IT HAS THE EVIDENCE OF PURCHASING GOODS AND ITS SALES. IN SUCH CIRCUMSTAN CES, AT BEST, HIGHER GROSS PROFIT RATE CAN BE APPLIED. FOLLOWING OUR DECISION IN EARLIER ORDERS, WE HOLD THAT GP RATE OF 10% OVER AND ABOVE GP DECLARED BY T HE ASSESSEE IN ITS BOOKS OF ACCOUNT, BE APPLIED TO WORK OUT THE ADDITI ONAL INCOME IN THE HANDS OF ASSESSEE. THE GROUND OF APPEAL NO.3 RAISED BY THE ASSESSEE IS THUS, PARTLY ALLOWED. CONSIDERING THE SAME, I DIRECT THE ASSESSING OFFICE R TO MAKE ADDITION IN THE HANDS OF ASSESSEE BY ADOPTING GP RATE AT 10% OF BOGUS PURCHASES OF ITA NO.942/PUN/2017 SHRI FIROZ AHMED MOH. MOTIN CHOUDHARY 6 RS.28,54,540/-. ACCORDINGLY, THE GROUNDS RAISED B Y THE ASSESSEE ARE PARTLY ALLOWED. 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON THIS 25 TH DAY OF MAY, 2018. SD/- (D.KARUNAKARA RAO) / ACCOUNTANT MEMBER / PUNE; DATED : 25 TH MAY, 2018. SATISH / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT; 2. / THE RESPONDENT; 3. ( ) / THE CIT(A) - 13 , PUNE 4. / THE CIT - 13 , PUNE 5. , , SMC / DR SMC, ITAT, PUNE; 6. / GUARD FILE. / BY ORDER, //TRUE COPY// //TRUE COPY// SENIOR PRI VATE SECRETARY , / ITAT, PUNE