HANUMANCHAND N. GANDHI, MUMBAI V. INCOME TAX OFFICER 19(1)(5), MUMBAI

ITA 953/MUM/2018

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 9896 (ITAT-MUMBAI)
• Duration Of Justice: 7 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-09-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 16-02-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SWA
• Keywords: Bogus purchase; Tangible material; Accommodation entries; Reason to believe
• Section: 234B; 133(6); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY , JUDICIAL MEMBER ITA NO. 953 / MUM . /2018 ( ASSESSMENT YEAR : 20 10 11 ) HANUMANCHAND N. GANDHI 104, ADESHIR DADY STREET 1 ST FLOOR, OFFICE NO.5 NATWAR HOUSE, C.P. TANK MUMBAI 400 004 PAN ADTPG8775A . APPELLANT V/S INCOME TAX OFFICER WARD 19(1)(5), MUMBAI . RESPONDENT ITA NO.954/MUM./2018 ( ASSESSMENT YEAR : 2009 10 ) HANUMANCHAND N. GANDHI 104, ADESHIR DADY STREET 1 ST FLOOR, OFFICE NO.5 NATWAR HOUSE, C.P. TANK MUMBAI 400 004 PAN ADTPG8775A . APPELLANT V/S INCOME TAX OFFICER WARD 19(1)(5), MUMBAI . RESPONDENT ASSESSEE BY : SHRI RAJIV KHANDELWAL REVENUE BY : SHRI SWAPAN KUMAR BEPARI DATE OF HEARING 11 .09.2018 DATE OF ORDER 26.09.2018 2 HANUMANCHAND N. GANDHI O R D E R A FORESAID APPEAL S HA VE BEEN FILED BY THE ASSESSEE CHALLENGING SEPARATE ORDER S , BOTH DATED 2 2 ND DECEMBER 2017 , PASSED BY THE LEARNED COMMISSIONER (APPEALS) 53 , MUMBAI, FOR THE ASSESSMENT YEAR S 2009 10 AND 20 10 11 . 2 . GROUNDS RAISED IN BOTH THE APPEALS ARE COMMON EXCEPT THE QUANTUM OF ADDITION MENTIONED THEREIN. 3 . THE FIRST COMMON ISSUE RAISED IN BOTH THE APPEALS IS AGAINST THE VALIDITY OF RE OPENING OF ASSESSMENT UNDER SECTION 147 OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT ). 4 . BRIEF FACTS ARE, THE ASSESSEE , AN INDIVIDUAL , IS ENGAGED IN THE BUSINESS OF TRADING IN FERROUS AND NON FERROUS METALS. FOR THE ASSESSMENT YEAR 2009 10 THE ASSESSEE FILED ITS RETURN OF INCOME ON 30 TH SEPTEMBER 2009 DECLARING TOTAL INCOME OF ` 2,43,087. SIMILARLY, FOR THE ASSESSMENT YEAR 2010 11 THE ASSESSEE FILED HIS RETURN OF INCOME ON 30 TH SEPTEMBER 2010 DECLARING TOTAL INCOME OF ` 1,10,356. THE RETURN S FILED BY THE ASSESSEE FOR THE AFORESAID ASSESSMENT YEAR S WERE PROCESSED UNDER SECTION 143 (1) OF THE ACT ACCEPTING THE RETURNED INCOME. SUBSEQUENTLY, ON THE BASIS OF INFORMATION RECEIVED FROM DGIT (INV.), MUMBAI, THAT THE SALES TAX DEPARTMENT, MAHARASHTRA GOVERNMENT, HAS UNEARTHED A SCAM REVEALING LARGE NUMBER OF 3 HANUMANCHAND N. GANDHI PARTIES/HAWALA OPERATOR S PROVID ING ACCOMMODATION ENTRIES THROUGH BOGUS INVOICES, THE ASSESSING OFFICER RE OPENED THE ASSESSMENT FOR THE AFORESAID ASSESSMENT YEARS UNDER SECTION 147 OF THE ACT BY ISSUING NOTICES UNDER SECTION 148 OF THE ACT. AFTER COMPLYING TO THE NOTICES ISSUED UNDER SE CTION 148 OF THE ACT THE ASSESSEE PARTICIPATED IN THE ASSESSMENT PROCEEDINGS. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS CALLED UPON TO PROVE THE GENUINENESS OF PURCHASES WORTH ` 74,32,444, SHOWN TO HAVE BEEN MADE FROM SEVEN PARTIES IN ASSESSMENT YEAR 2009 10 AND PURCHASES OF ` 54,61,976, FROM FOUR PARTIES IN ASSESSMENT YEAR 2010 11. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND FACTS AVAILABLE ON RECORD, THE ASSESSING OFFICER ULTIMATELY CONCLUDED THAT THE ASSESSEE WAS UNABLE TO PROVE THE G ENUINENESS OF PURCHASES MADE FROM THE CONCERNED PARTIES THROUGH PROPER DOCUMENTARY EVIDENCES. ACCORDINGLY, HE REJECTED THE BOOKS OF ACCOUNT OF THE ASSESSEE AND TREATED THE PURCHASES CLAIMED TO HAVE BEEN MADE FROM THE CONCERNED PARTIES AS NON GENUINE. HOWEV ER, HE RESTRICTED THE ADDITION TO 12.5% OF THE TOTAL NON GENUINE PURCHASES IN BOTH THE ASSESSMENT YEAR S . BEING AGGRIEVED OF THE AFORESAID ADDITION S MADE BY THE ASSESSING OFFICER , THOUGH , THE ASSESSEE PREFERRED APPEAL BEFORE THE LEARNED COMMISSIONER (APPEAL S), HOWEVER, HE WAS UNSUCCESSFUL. 4 HANUMANCHAND N. GANDHI 5 . THE LEARNED AUTHORISED REPRESENTATIVE CHALLENGING THE VALIDITY OF RE OPENING OF ASSESSMENT SUBMITTED THAT THE ASSESSING OFFICER HAS RE OPENED THE ASSESSMENT MECHANICALLY WITHOUT PROPER APPLICATION OF MIND. HE SUBMITTED , SIMPLY RELYING UPON THE INFORMATION OBTAINED FROM THE DGIT (INV.), MUMBAI, THE ASSESSING OFFICER HAS RE OPENED THE ASSESSMENT. DRAWING OUR ATTENTION TO THE REASONS FOR RE OPENING OF ASSESSMENT AS PLACED IN THE PAPER BOOK , THE LEARNED AUTHORISED REPRESENTAT IVE SUBMITTED , THOUGH IN THE REASONS RECORDED THE ASSESSING OFFICER HAS STATED THAT THE ESCAPEMENT OF INCOME IS ON ACCOUNT OF INFLATION OF PURCHASES, HOWEVER, THE ASSESSING OFFICER ULTIMATELY HAS NOT MADE ANY ADDITION ON ACCOUNT OF INFLATION OF PURCHASES. THEREFORE, THE ASSESSMENT ORDER PASSED SHOULD BE HELD AS INVALID. FOR SUCH PROPOSITION, HE RELIED UPON THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN JET AIRWAYS LTD., 331 ITR 263 (BOM.). 6 . T HE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED , SINCE THE ASSESSING OFFICER HAD TANGIBLE MATERIAL BEFORE HIM INDICATING ESCAPEMENT OF INCOME ON ACCOUNT OF BOGUS PURCHASES RE OPENING OF ASSESSMENT UNDER SECTION 147 OF THE ACT IS VALID. 7 . I HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED MATERIALS ON RECORD. UND ISPUTEDLY, FOR THE AFORESAID ASSESSMENT YEARS THE RETURN S FILED BY THE ASSESSEE WERE PROCESSED UNDER SECTION 143(1) OF THE ACT ACCEPTING THE RETURNED INCOME. THUS, NEITHER THE RETURN S OF INCOME 5 HANUMANCHAND N. GANDHI WERE SUBJECTED TO SCRUTINY NOR THE ASSESSING OFF ICER HAD ANY O CCASION TO VERIFY/ EXAMINE THE VARIOUS CLAIMS MADE BY THE ASSESSEE INCLUDING THE PURCHASES BY CALLING FOR THE BOOKS OF ACCOUNT AND OTHER DOCUMENTARY EVIDENCES. THEREFORE, THE ASSESSING OFFICER HAS NOT FORMED ANY OPINION WITH REGARD TO THE GENUINENESS OF PUR CHASES CLAIMED TO HAVE BEEN MADE BY THE ASSESSEE. IN THE AFORESAID FACT SITUATION WHEN SUBSEQUENTLY COGENT AND TANGIBLE MATERIAL CAME TO THE POSSESSION OF THE ASSESSING OFFICER INDICATING ESCAPEMENT OF INCOME ON ACCOUNT OF NON GENUINE PURCHASES MADE BY THE ASSESSEE , THE ASSESSING OFFICER HAD REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT. THAT BEING THE CASE, THE ASSESSING OFFICER IS EMPOWERED UNDER THE ACT TO RE OPEN THE ASSESSMENT UNDER SECTION 147 OF THE ACT. IT IS RELEVANT TO OBS ERVE , IN THE REASONS RECORDED THE ASSESSING OFFICER HAS CLEARLY AND CATEGORICALLY MENTIONED THE REASONS FOR RE OPENING OF ASSESSMENT IS DUE TO THE NON GENUINE PURCHASES. ULTIMATELY THE ADDITION MADE BY THE ASSESSING OFFICER IS ALSO ON ACCOUNT OF NON GENUIN E PURCHASES. THEREFORE, THE CONTENTION OF THE LEARNED AUTHORISED REPRESENTATIVE THAT THE ASSESSING OFFICER HAS NOT MADE ADDITION OF THE ESCAPED INCOME WHICH IS THE SUBJECT MATTER OF THE RE OPENING AS PER THE REASONS RECORDED , IN MY VIEW, IS NOT A VALID ARG UMENT. IN VIEW OF THE AFORESAID, I UPHOLD THE VALIDITY OF RE OPENING OF ASSESSMENT YEAR UNDER SECTION 147 OF THE ACT. 6 HANUMANCHAND N. GANDHI 8 . THE NEXT COMMON ISSUE RAISED IN GROUND NO.2, RELATES TO THE MERIT OF ADDITION S MADE ON ACCOUNT OF BOGUS PURCHASES. 9 . AS DISCUSSED EARLIER , THE ASSESSING OFFICER RECEIVED SPECIFIC INFORMATION FROM THE DGIT (INV.), MUMBAI, AND THE SALES TAX DEPARTMENT, THAT PURCHASES SHOWN TO HAVE BEEN MADE FROM SOME PARTIES IN THE AFORESAID ASSESSMENT YEARS ARE NOT GENUINE AS THOSE PARTIES HAVE BEEN IDENTIFIE D BY THE SALES TAX DEPARTMENT, GOVERNMENT OF MAHARASHTRA, AS HAWALA OPERATOR S PROVIDING ACCOMMODATION BILLS WITHOUT ACTUAL SALES TRANSACTION AND DELIVERY OF GOODS. ON THE STRENGTH OF THE AFORESAID INFORMATION IN HIS POSSESSION, THE ASSESSING OFFICER, DURIN G THE ASSESSMENT PROCEEDING S, CALLED UPON TH E ASSESSEE TO PROVE THE GENUINENESS OF PURCHASES BY FURNISHING VARIOUS DOCUMENTARY EVIDENCES , SUCH AS , NAME OF THE SELLERS WITH PRESENT ADDRESS, PAN OF SELLERS, BILLS WITH VOUCHER NUMBER , DATE AND DESCRIPTION OF GOODS, PROOF OF DISPATCH OF GOODS, MODE OF TRANSPORTATION, ETC. THE ASSESSING OFFICER ALSO CALLED FOR DETAILS OF CORRESPONDING SALES OF GOODS ALONG WITH STOCK REGISTER. AS OBSERVED BY THE ASSESSING OFFICER, THE ASSESSEE FURNISHED S OME DETAILS BUT COULD NOT FURNISH CONCLUSIVE EVIDENCE TO PROVE GENUINENESS OF PURCHASES. HE OBSERVED, EVEN NOTICES ISSUED UNDER SECTION 133(6) OF THE ACT TO THE CONCERNED PARTIES CAME BACK UNSERVED WITH POSTAL REMARK NOT KNOWN . THE ASSESSEE ALSO FAILED T O FURNISH DELIVERY CHALLAN, TRANSPORT 7 HANUMANCHAND N. GANDHI RECEIPTS, GOODS INWARD REGISTER, ETC., TO PROVE ACTUAL DELIVERY OF GOODS. THUS, ON THE BASIS OF AFORESAID FACTS, THE ASSESSING OFFICER CONCLUDED THAT THE PURCHASES MADE BY THE CONCERNED PARTIES ARE NOT GENUINE. HOWEVER , BEING OF THE OPINION THAT THE ASSESSEE HAS OBTAINED THE ACCOMMODATION ENTRIES TO SUPPRESS TRUE PROFIT AND REDUCE ITS TAX LIABILITY, THE ASSESSING OFFICER PROCEEDED TO ESTIMATE THE PROFIT @ 12.5% OF THE TOTAL NON GENUINE PURCHASES IN BOTH THE ASSESSMENT Y EARS. THIS RESULTED IN ADDITION OF ` 9,29,056 IN ASSESSMENT YEAR 2009 10 AND ` 6,82,746 IN ASSESSMENT YEAR 2010 11. BEING AGGRIEVED OF SUCH ADDITIONS, THE ASSESSEE PREFERRED APPEALS BEFORE THE LEARNED COMMISSIONER (APPEALS). HOWEVER, THE LEARNED COMMISSION ER (APPEALS) SUSTAINED THE ADDITIONS MADE BY THE ASSESSING OFFICER. 10 . THE LEARNED AUTHORISED REPRESENTATIVE REITERATING THE SUBMISSIONS MADE BEFORE THE DEPARTMENTAL AUTHORITIES SUBMITTED THAT THE ASSESSEE HAS FURNISHED NOT ONLY THE PURCHASE BILLS BUT ALSO THE PAYMENT DETAILS THROUGH BANKING CHANNEL TO PROVE THE GENUINENESS OF PURCHASES. HE SUBMITTED THAT THE ASSESSEE HAS PAID VAT NOT ONLY AT THE TIME OF PURCHASE BUT ALSO SUBSEQUENTLY ON THE DEMAND OF SALES TAX DEPARTMENT. THEREFORE , THE PURCHASES MADE CANNO T BE HELD AS NON GENUINE. THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED , ONLY BECAUSE THE ASSESSEE DID NOT FURNISH DELIVERY CHALLANS, TRANSPORT DETAILS OR COULD NOT PRODUCE THE CONCERNED PARTIES BEFORE THE 8 HANUMANCHAND N. GANDHI ASSESSING OFFICER FOR THAT REASON ALONE PURCHASE S CANNOT BE TREATED AS NON GENUINE. HE SUBMITTED , WITHOUT MAKING PROPER ENQUIRY, THE ASSESSING OFFICER HAS MADE THE ADDITION SIMPLY RELYING UPON THE INFORMATION OBTAINED FROM THE SALES TAX DEPARTMENT. THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED , THE AS SESSEE HAS SHOWN GROSS PROFIT OF 5.5% IN ASSESSMENT YEAR 2009 10 AND 5.16% IN ASSESSMENT YEAR 2010 11. HE SUBMITTED , THE GROSS PROFIT RATE SHOWN BY THE ASSESSEE IS COMPARABLE TO THE GROSS PROFIT RATE SHOWN IN SIMILAR LINE OF BUSINESS. HE SUBMITTED , EVEN IF THE PURCHASES ARE HELD AS NON GENUINE, HOWEVER, PROFIT ESTIMATED @ 12.5% IS ON A MUCH HIGHER SIDE, HENCE, SHOULD BE REDUCED TO A REASONABLE PERCENTAGE. IN THIS CONTEXT, HE RELIED UPON THE FOLLOWING TWO DECISIONS: I ) RAJENDRA KUMAR BIYANI V/S ITO, ITA NO.13 72 1375/MUM./ 2018, 20.07.2018; AND II ) SHRI VIKRAM N. CHANDAN V/S ITO, ITA NO.248/MUM./2018, DATED 06.08.2018. 11 . THE LEARNED DEPARTMENTAL REPRESENTATIVE STRONGLY RELYING UPON THE OBSERVATIONS OF THE ASSESSING OFFICER AND THE LEARNED COMMISSIONER (APPEALS) SU BMITTED , THE ASSESSEE HAVING FAILED TO PROVE THE GENUINENESS OF PURCHASES MADE THROUGH PROPER DOCUMENTARY EVIDENCES , THE ADDITION MADE BY THE ASSESSING OFFICER IS REASONABLE, HENCE, SHOULD BE SUSTAINED. 9 HANUMANCHAND N. GANDHI 12 . I HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED MATE RIALS ON RECORD. I HAVE ALSO APPLIED MY MIND TO THE DECISION S RELIED UPON. IT IS EVIDENT, THE ASSESSING OFFICER RECEIVED SPECIFIC INFORMATION FROM THE SALES TAX DEPARTMENT INDICATING THAT PURCHASES MADE BY THE ASSESSEE FROM CERTAIN PARTIES ARE NOT GENUINE AS SUCH PARTIES ARE HAWALA OPERATORS AND PROVIDING ACCOMMODATION ENTRIES WITHOUT ACTUAL DELIVERY OF GOODS. ON THE STRENGTH OF AFORESAID INFORMATION, THE ASSESSING OFFICER IN COURSE OF THE ASSESSMENT PROCEEDINGS, HAS CALLED UPON THE ASSESSEE TO PROVE THE GE NUINENESS OF PURCHASES THROUGH PROPER DOCUMENTARY EVIDENCE. AS COULD BE SEEN, THOUGH, THE ASSESSEE HAS FURNISHED PURCHASE BILLS, PAYMENT DETAILS, ETC., HOWEVER, THE ASSESSEE WAS UNABLE TO PROVE THE ACTUAL DELIVERY OF GOODS BY FURNISHING DELIVERY CHALLAN AN D TRANSPORTATION RECEIPTS. IT IS ALSO A FACT ON RECORD, NOTICES ISSUED UNDER SECTION 133(6) OF THE ACT RETURNED BACK UNSERVED DUE TO UNAVAILABILITY OF THE CONCERNED PARTIES IN THE GIVEN ADDRESS. THE ASSESSEE ALSO FAILED TO PRODUCE EITHER THE CONCERNED PART IES BEFORE THE ASSESSING OFFICER OR ANY CONFIRMATION IN SUPPORT OF THE PURCHASES MADE. THUS, UNDISPUTEDLY, THE ASSESSEE WAS UNABLE TO CONCLUSIVELY PROVE THE GENUINENESS OF PURCHASE MADE FROM THE DECLARED SOURCE. IN THESE CIRCUMSTANCES, THE CLAIM OF THE ASS ESSEE THAT THE PURCHASES MADE ARE GENUINE CANNOT BE ACCEPTED. THOUGH, BEFORE ME , THE LEARNED AUTHORISED REPRESENTATIVE HAS CONTENDED THAT STATEMENTS OF THIRD PARTIES RELIED UPON BY THE ASSESSING OFFICER WERE NOT CONFRONTED AND 10 HANUMANCHAND N. GANDHI OPPORTUNITY TO CROSS EXAMINE THE CONCERNED PARTIES WAS NOT ALLOWED TO THE ASSESSEE BUT THE MOOT QUESTION WHICH BEGS ANSWER IS , WHAT IS THE STANDARD OF EVIDENCE PRODUCED BY THE ASSESSEE TO PROVE THE GENUINENESS OF PURCHASES MADE. IF THE FACTS AND MATERIAL AVAILABLE ON RECORD ARE EXAMIN ED CAREFULLY IT BECOMES CLEAR THAT THE ASSESSEE HAS FAILED TO ESTABLISH THAT THE GOODS WERE PURCHASES FROM THE DECLARED SOURCE. THUS, THE DEPARTMENTAL AUTHORITIES, IN MY VIEW, WERE CORRECT IN HOLDING THE PURCHASES MADE TO BE NON GENUINE. HOWEVER, CONSIDERI NG THE NATURE OF BUSINESS CARRIED ON BY THE ASSESSEE AND OT HER RELEVANT FACTS AND MATERIAL AVAILABLE ON RECORD, ESTIMATION OF PROFIT AT 12.5%, IN MY VIEW, IS ON A MUCH HIGHER SIDE. HENCE, REQUIRES TO BE SCALED DOWN TO A REASONABLE AMOUNT. AFTER PERUSAL OF THE DECISIONS CITED BEFORE ME BY THE LEARNED AUTHORISED REPRESENTATIVE, I AM OF THE VIEW THAT ESTIMATION OF PROFIT @ 5% OF NON GENUINE PURCHASES IN BOTH THE ASSESSMENT YEARS WOULD BE REASONABLE AND WILL MEET THE ENDS OF JUSTICE. THE ASSESSING OFFICER IS DI RECTED TO SUSTAIN THE ADDITION TO THAT EXTENT ONLY. GROUNDS RAISED ARE PARTLY ALLOWED. 13 . THE COMMON ISSUE RAISED IN GROUND NO.3, RELATES TO LEVY OF INTEREST UNDER SECTION 234B OF THE ACT. 14 . LEVY OF INTEREST BEING CONSEQUENTIAL AND MANDATORY, DO NOT REQUIRE ANY INTERFERENCE FROM THIS FORUM. GROUND RAISED IS DISMISSED. 11 HANUMANCHAND N. GANDHI 15 . IN THE RESULT, ASSESSEES APPEALS ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 26.09.2018 SD/ - SAKTIJIT DEY JUDICIAL MEMBER MUMBAI, DATED: 26.09.2018 COPY OF THE ORDER FORWARDED TO : ( 1 ) THE ASSESSEE; ( 2 ) THE REVENUE; ( 3 ) THE CIT(A); ( 4 ) THE CIT, MUMBAI CITY CONCERNED; ( 5 ) THE DR, ITAT, MUMBAI; ( 6 ) GUARD FILE . TRUE COPY BY ORDER PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY (SR. PRIVATE SECRETARY) ITAT, MUMBAI