Pramod Shankarrao Salunkhe, Kolhapur V. Pr. Commissioner of Income-tax -2, Kolhapur

ITA 974/PUN/2018

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 3877 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 4 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-10-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 08-10-2021
• Assessment Year: 2010-2011
• Appeal Filed On: 29-05-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J P CHANDRAKAR
• Keywords: Bogus purchase; Question of law; Accommodation entries; Set aside
• Section: 69C; 72; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, PUNE BEFORE SHRI R.S.SYAL, VP AND SHRI PARTHA SARATHI CHAUDHURY , JM . / I TA NO. 974 /PUN/20 18 / ASSESSMENT YEAR : 2010 - 11 PRAMOD SHANKARRAO SALUNK H E FLAT NO.7, TAKSHAK APARTMENT, E WARD, NAGALA PARK, KOLHAPUR - 416 003 PAN : ALNPS2900F ....... / APPELLANT / V/S. THE PR. COMMISSIONER OF INCOME TAX - II, KOLHAPUR. / RESPONDENT A SSESSEE BY : NONE REVENUE BY : SHRI J.P CHANDRAKAR / DATE OF HEARING : 08 . 10 .2021 / DATE OF PRONOUNCEMENT : 08 . 10 .2021 / ORDER PER PARTHA SARATHI CHAUDHU RY, JM : THIS APPEAL PREFERRED BY THE ASSESSEE EMANATES FROM THE ORDER OF THE LD. PR. COMMISSIONER OF INCOME TAX - 2 , KOLHAPUR DATED 28.03.2018 PASSED U/S.263(1) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR THE ASSESSMENT YEAR 2010 - 11 AS PER THE GROUNDS OF APPEAL ON RECORD. 2 . THOUGH THE ASSESSEE HAS RAISED MULTIPLE GROUNDS OF APPEAL AS PER THE APPEAL MEMO, THE CRUX OF THE GRIEVANCE OF THE ASSES SEE IS AGAINST THE REVISIONARY JURISDICTION ASSUMED BY THE LD. PR . COMMISSIONER OF INCOME TAX U/S.263 OF THE ACT. 2 ITA NO. 974 /PUN/20 18 A.Y. 2010 - 11 3. AT THE TIME OF HEARING , THERE WAS NO APPEARANCE FROM ASSESSEE EITHER PERSONALLY OR THROUGH HIS AUTHORIZED REPRESENTATIVE. THERE WAS NO ADJOURNMENT PETITION ALSO FILED BY THE ASSESSEE. THE CASE WAS HEARD AFTER RECORDING SUBMISSIONS OF THE LD. DR. 4. THE BRIEF FACTS IN THIS CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF CONSTRUCTION. IN THIS CASE, THE ASSESSMENT ORDER U/S.143(3) R.W.S.147 OF THE ACT WAS COMPLETED ON 02.02.2016 ASSESSING TOTAL INCOME AT RS.29,39,980/ - . ON PERUSAL OF THE RECORDS, IT WAS NOTICED BY THE ASSESSING OFFICER THAT ASSESSMENT IN THIS CASE WAS REOPENED FOR ASSESSMENT YEAR 2010 - 11 ON THE BASIS OF INFORMATION RECEIVED FROM SALES TAX DEPARTMENT THAT CERTAIN DEALERS WERE ENGAGED IN PROVIDING ACCOMMODATION ENTRIES TO VARIOUS BENEFICIARIES ACROSS MAHARASHTRA, WHERE BILLS ARE ISSUED WITHOUT EFFECTING ACTUAL SALE AND THE SAME WAS WITH THE MOTIVE TO SUPPRESS THE ACTUA L PROFIT AND EVADE THE TAX. THE ASSESSEE WAS ONE OF THE BENEFICIARIES AND FOUND TO HAVE MADE BOGUS PURCHASES FROM THE FOLLOWING PARTIES: 4.1 DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER HAD MADE DISALLOWANCE TO THE EXTENT OF RS.28,530/ - BEING 20% OF SUCH BOGUS PURCHASES OF RS.1,42,647/ - . 5. THAT DURING THE REVISIONARY PROCEEDINGS U/S.263 OF THE ACT , THE LD. PR. COMMISSIONER OF INCOME TAX HAD RELIED ON THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF N.K. PROTEINS LTD. VS. DCIT (2016) 72 TAXMAN.COM SR. NO. NAME OF THE ASSESSEE AMOUNT (RS.) 1 KANAK GURU TUBES & METALS PVT. LTD. 1,42,647 TOTAL PURCHASES MADE BY THE ASSESSEE 1,42,647 3 ITA NO. 974 /PUN/20 18 A.Y. 2010 - 11 289 ( GUJARAT) WHEREIN IT HAS BEEN HELD THAT WHEN THE ENTIRE PURCHASES WERE FOUND TO BE BOGUS THEN CONFIRMING DISALLOWANCE OF ONLY 25% OF BOGUS PURCHASES GOES AGAINST THE PRINCIPLE OF SECTION 68 AND 69C OF THE I.T A CT, 1961. THE SAID GUJARAT HIGH COURTS DECISION HAS BEEN AFFIRMED BY THE SUPREME COURT BY DISMISSING THE SLP FILED BY THE ASSESSEE A ND ACCORDINGLY, IT WAS HELD BY THE LD. PR. COMMISSIONER OF INCOME TAX THAT THE ADDITION ON PERCENTAGE BASIS ON BOGUS/HAWALA PURCHASES IS NOT CORRECT IN LAW. 5.1 THE LD. PR. COMMISSIONER OF INCOME TAX AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, ASSESSMENT ORDER AND VARIOUS JUDICIAL PRECEDENTS REFERRED VIDE PARA 7 OF HIS ORDER WAS OF THE VIEW THAT THE ASSESSING OFFICER IS REQUIRED TO RE - EXAMINE THE FACTUAL MATRIX AND THEN DECIDE WHETHER ADDITION OF ENTIRE PURCHASES OR ONLY PROFIT ELEMENT IS WARRA NTED IN THIS CASE AND ACCORDINGLY, THE LD. PR. COMMISSIONER OF INCOME TAX SET ASIDE THE MATTER TO ASSESSING OFFICER FOR FRESH DETERMINATION OF INCOME AFTER PROPER EXAMINATION OF FACTS AND LAW. 6. THE LD. DR FOR THE REVENUE HAS SUBMITTED THAT SINCE IT IS P ROVED THAT THERE ARE BOGUS PURCHASES THEN THERE IS NO QUESTION OF APPLICATION OF PERCENTAGE BASIS ON THE ENTIRE PURCHASES AND ACCORDINGLY, 100% OF THE TOTAL BOGUS PURCHASES SHOULD BE DISALLOWED. HE FURTHER SUBMITTED THAT THE LD. PR. COMMISSIONER OF INCOME TAX HAS ASSUMED JURISDICTION U/S.263 OF THE ACT AFTER RELYING ON THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF N.K. PROTEINS VS. DCIT (SUPRA.). THE LD. DR FURTHER SUBMITTED THAT BECAUSE THERE IS DISALLOWANCE MADE BY THE ASSESSING OFFICER A T 20% OF THE BOGUS PURCHASES WHICH IS ALSO AGAINST THE DECISION OF THE HONBLE GUJARAT HIGH COURT (SUPRA.), THEREFORE, ORDER PASSED BY THE ASSESSING OFFICER IS ERRONEOUS IN SO FAR AS PREJUDICIAL TO THE INTEREST OF THE REVENUE. 4 ITA NO. 974 /PUN/20 18 A.Y. 2010 - 11 7. WE HAVE PERUSED THE CASE RECORD S AND HEARD THE SUBMISSIONS OF THE LD. DR. WE HAVE ALSO CONSIDERED THE FINDINGS OF THE LD. PR. COMMISSIONER OF INCOME TAX. WE FIND THAT T HE ASSESSING OFFICER HAS DISALLOWED 20% OF THE BOGUS PURCHASES AND THE FACTS HEREIN SUGGEST THAT THE ASSESSEE HA S CONSUMED SUCH BOGUS PURCHASES. I T IS ALSO OBSERVED THAT THE ASSESSEE ALLEGEDLY PURCHASED GOODS THROUGH THE HAWALA DEALERS AND THEREAFTER , CONSUMED FOR CONSTRUCTION OF SHOWROOM OF SAI SERVICE STATION SITUATED AT KOLHAPUR. IN SUCH A SITUATION, IT CANNOT BE SAID THAT THE ENTIRE AMOUNT OF HAWALA PURCHASE BILLS REQUIRES ADDITION. THE HONBLE JURISDICTIONAL HIGH COURT IN PR.CIT VS. PARAMSHAKTI DISTRIBUTORS PVT. LTD., VIDE ITS JUDGMENT DATED 15.07.2019 IN ITA NO.413/2017 , HAS SUSTAINED THE ADDITION @ 10% OF THE AMOUNT OF PURCHASES, BEING, THE PROFIT ELEMENT INVOLVED THEREIN. THE RELEVANT EXTRACTS OF THE HONBLE HIGH COURTS DECISION READS AS FOLLOWS: 2. THE FIRST QUESTION PERTAINS TO RESTRICTING THE ADDITION OF RS.23.16 LAKHS TO RS.2,21,600/ - BY THE TRIBUNAL. THE ASSESSING OFFICER HAD MADE THE SAID ADDITION ON THE GROUND THAT THE ASSESSEES PURCHASES WERE FOUND TO BE BOGUS. THE ENTIRE PURCHASE AMOUNT WAS THEREFORE, ADDED TO THE ASSESSEES INCOME. THE TRIBUNAL, HOWEVER, RESTRIC TED TO THE SAID SUM OF RS.2,21,600/ - . THE TRIBUNAL RECORDED THAT THE ASSESSING OFFICER HAS NOT REJECTED EITHER THE PURCHASES OR THE SALES MADE OUT OF THE SAID PURCHASES. THE TRIBUNAL THEREFORE, WAS OF THE OPINION THAT THE ADDITION SHOULD BE RESTRICTED TO 1 0% OF THE TOTAL PURCHASES. THE REVENUE STRONGLY DISPUTES THIS PROPOSITION. 3. WITHOUT ELABORATION, WHAT THE TRIBUNAL BY THE IMPUGNED JUDGMENT HELD IS THAT THE DEPARTMENT HAD NOT REJECTED THE INSTANCE OF THE PURCHASES SINCE THE SALES OUT OF PURCHASE OF SUC H RAW MATERIAL WAS ACCOUNTED FOR AND ACCEPTED. WITH ABOVE POSITION, THE TRIBUNAL APPLIED THE PRINCIPLE OF TAXING THE PROFIT EMBEDDED IN SUCH PURCHASES COVERED BY THE BOGUS BILLS, INSTEAD OF DISALLOWING THE ENTIRE EXPENDITURE. WE DO NOT FIND ANY ERROR IN TH E VIEW OF THE TRIBUNAL. NO QUESTION OF LAW ARISES. IN VIEW OF THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT, WE ARE OF THE CONSIDERED VIEW THAT IT WOULD BE REASONABLE TO SUSTAIN ADDITION @ 10% OF THE AMOUNT OF BOGUS PURCHASES, BEING PROFIT ELEMENT INVOLVED THEREIN. 5 ITA NO. 974 /PUN/20 18 A.Y. 2010 - 11 8. THAT ALSO IN THE RECENT DECISION OF THE PUNE BENCH OF THE TRIBUNA L IN THE CASE OF ASHOKA BUILDCON LIMITED VS. ACIT, ITA NO.1088/PUN/2017 & ITA NO.1135/PUN/2017 DATED 04.10.2021 HAS PLACED RELIANCE ON THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF PR.CIT VS. PARAMSHAKTI D ISTRIBUTORS PVT. LTD. (SUPRA.) AND SUSTAINED 10% OF ADDITION ON THE AMOUNT OF BOGUS PURCHASES IN THE FACTS AND SITUATION WHEREIN SUCH BOGUS PURCHASES WERE CONSUMED BY THE ASSESSEE. THE RELEVANT FINDINGS OF THE TRIBUNAL READS AS FOLLOWS: 11. WE HAVE HEARD BOTH SIDES AND GONE THROUGH THE RELEVANT MATERIAL AVAILABLE ON RECORD. IT IS OBSERVED THAT THE ASSESSEE ALLEGEDLY PURCHASED RAW MATERIALS THROUGH THE HAWALA PURCHASE BILLS AND THEREAFTER CONSUMED THE SAME IN THE POWER PROJECT SITES. IN SUCH A SITUATION, IT CANNOT BE SAID THAT THE ENTIR E AMOUNT OF HAWALA PURCHASE BILLS REQUIRES ADDITION. THE HONBLE JURISDICTIONAL HIGH COURT IN PR.CIT VS. PARAMSHAKTI DISTRIBUTORS PVT. LTD., VIDE ITS JUDGMENT DATED 15.07.2019 IN ITA NO.413/2017 , HAS SUSTAINED THE ADDITION @ 10% OF THE AMOUNT OF PURCHASES , BEING, THE PROFIT ELEMENT INVOLVED THEREIN. THE RELEVANT EXTRACTS OF THE HONBLE HIGH COURTS DECISION READS AS FOLLOWS: 2. THE FIRST QUESTION PERTAINS TO RESTRICTING THE ADDITION OF RS.23.16 LAKHS TO RS.2,21,600/ - BY THE TRIBUNAL. THE ASSESSING OFFICE R HAD MADE THE SAID ADDITION ON THE GROUND THAT THE ASSESSEES PURCHASES WERE FOUND TO BE BOGUS. THE ENTIRE PURCHASE AMOUNT WAS THEREFORE, ADDED TO THE ASSESSEES INCOME. THE TRIBUNAL, HOWEVER, RESTRICTED TO THE SAID SUM OF RS.2,21,600/ - . THE TRIBUNAL RECO RDED THAT THE ASSESSING OFFICER HAS NOT REJECTED EITHER THE PURCHASES OR THE SALES MADE OUT OF THE SAID PURCHASES. THE TRIBUNAL THEREFORE, WAS OF THE OPINION THAT THE ADDITION SHOULD BE RESTRICTED TO 10% OF THE TOTAL PURCHASES. THE REVENUE STRONGLY DISPUTE S THIS PROPOSITION. 3. WITHOUT ELABORATION, WHAT THE TRIBUNAL BY THE IMPUGNED JUDGMENT HELD IS THAT THE DEPARTMENT HAD NOT REJECTED THE INSTANCE OF THE PURCHASES SINCE THE SALES OUT OF PURCHASE OF SUCH RAW MATERIAL WAS ACCOUNTED FOR AND ACCEPTED. WITH ABO VE POSITION, THE TRIBUNAL APPLIED THE PRINCIPLE OF TAXING THE PROFIT EMBEDDED IN SUCH PURCHASES COVERED BY THE BOGUS BILLS, INSTEAD OF DISALLOWING THE ENTIRE EXPENDITURE. WE DO NOT FIND ANY ERROR IN THE VIEW OF THE TRIBUNAL. NO QUESTION OF LAW ARISES. IN VIEW OF THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT, WE ARE OF THE CONSIDERED VIEW THAT IT WOULD BE REASONABLE TO SUSTAIN ADDITION @ 10% OF THE AMOUNT OF BOGUS PURCHASES, BEING PROFIT ELEMENT INVOLVED THEREIN. THUS, GROUNDS OF APPEAL RAISED BY T HE ASSESSEE ARE PARTLY ALLOWED. 12. SINCE THE LD. CIT(A) AS PER REASONING GIVEN IN HIS ORDER HAS RESTRICTED THE ADDITION TO 25%, WHICH IS HIGHER THAN THAT APPROVED IN THE ABOVE JUDICIAL PRECEDENT AND THEREFORE, IN OUR CONSIDERED OPINION, THERE CAN BE NO GRIEVANCE AT THE END OF THE REVENUE. 6 ITA NO. 974 /PUN/20 18 A.Y. 2010 - 11 9. THEREFORE, IN THE FACTS AND SITUATION WHEREIN BOGUS PURCHASES WERE MADE AND THEY WERE CONSUMED, THE HONBLE JURISDICTIONAL HIGH COURT HAS HELD 10% ADDITION OF SUCH BOGUS PURCHASES TO BE REASONABLE , WHEREAS, IN THIS CASE, THE ASSESSING OFFICER IN THE ASSESSMENT ORDER HAS MADE DISALLOWANCE AT 20% OF SUCH BOGUS PURCHASES WHICH IS MORE THAN THAT HELD BY THE HONBLE JURISDICTIONAL HIGH COURT (SUPRA.). IN SUCH SCENARIO, THERE SHOULD NOT BE ANY GRIEVANCE O F THE REVENUE AND REVISIONARY JURISDICTION ASSUMED BY THE LD. PR. COMMISSIONER OF INCOME TAX U/S.263 OF THE ACT IS THEREFORE UNCALLED FOR. A CCORDINGLY, WE HO LD THAT THE ORDER PASSED BY THE LD. PR. COMMISSIONER OF INCOME TAX U/S.263 OF THE ACT IS NOT VALID IN LAW UNDER THE GIVEN CIRCUMSTANCES. HENCE, WE ALLOW THE APPEAL OF THE ASSESSEE. 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRO NOUNCED ON 08 TH DAY OF OCTOBER , 20 2 1 . S D/ - S D/ - R.S.SYAL PARTHA SARATHI CHAUDHURY VICE PRESIDENT JUDICIAL MEMBER / PUNE; / DATED : 08 TH OCTOBER , 202 1 . SB / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. THE PR. CIT(APPEALS) - 2, KOLHAPUR. 4 . , , , / DR, ITAT, A BENCH, PUNE. 5 . / GUARD FILE. / BY ORDER, // T RUE C OPY // / PRIVATE SECRETARY , / ITAT, PUNE . 7 ITA NO. 974 /PUN/20 18 A.Y. 2010 - 11 DATE 1 DRAFT DICTATED ON 08 . 10 .2021 SR.PS/PS 2 DRAFT PLACED BEFORE AUTHOR 08 . 10 .202 1 SR.PS/PS 3 DRAFT PROPOSED AND PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM/JM 5 APPROVED DRAFT COMES TO THE SR. PS/PS SR.PS/PS 6 KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7 DATE OF UPLOADING OF ORDER SR.PS/PS 8 FILE SENT TO BENCH CLERK SR.PS/PS 9 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 10 DATE ON WHICH FILE GOES TO THE A.R 11 DATE OF DISPATCH OF ORDER