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Income Tax Appellate Tribunal, “F ” BENCH, MUMBAI
Before: SHRI SHAMIM YAHYA, AM & SHRI PAWAN SINGH, JM
O R D E R Per Bench: These are cross appeals by the Revenue and assessee and cross objection by the assessee arising out of the order of the ld. Commissioner of Income Tax (Appeals) dated 11.06.2015 and pertain to assessment year 2011-12.
M/s. Parth Traders 2. In the Revenues appeal, the issue raised is that the ld. Commissioner of Income Tax (Appeals) erred in not sustaining 100% disallowance of bogus purchase by the assessing officer.
In the assessee's appeal, the issue raised is that the ld. Commissioner of Income Tax (Appeals) erred in sustaining 25% disallowance of the bogus purchase.
In the cross objection, the issue raised is that the ld. Commissioner of Income Tax (Appeals) has not appreciated that assessee has not been allowed the opportunity to cross examine hawala dealers. It has further been stated that the ld. Commissioner of Income Tax (Appeals) has obtained behind the back of the assessee consent from the consultant for 25% disallowance of the bogus purchase.
At the outset, we note that there is a delay of 368 days in filing the appeal by the assessee. The reasonable cause for the same has been attributed to be the ailment of one of the senior partners who happens to be the father of other partners. It was the preoccupation of the partner dealing with the tax matters with the illness of his father that has been attributed to be the reasonable cause for the delay in filing the appeal by the assessee.
Upon hearing both the counsel and perusing the records, we condone the delay in filing the aforesaid appeal by the assessee.
Brief facts of the case are as under:
M/s. Parth Traders The assessee is a partnership firm and deals in the business of trading in iron and steel. In this case, the information was received that few of the parties, from whom the assessee had purchased the material/goods, were suspicious. This information was received from the Sales Tax Department. Sales Tax Department claimed that these parties had stated, on oath, before them that they have merely provided entries to the beneficiaries and no goods were actually delivered by them. The details of such bogus purchases, claimed to had been made, from the Hawala parties, are as under:
S.NO. Name of the entry provider Amount of bill 1 Shubh Enterprises 14,49,573/, 2 Darshan Sales Corporation 38,56,462/- 3 Riddhi Siddhi Corporation 8,16,177/- 4 Shrilabh Impex 25,48,451/- 5 Mercury Enterprises 22,41,661/- 6 N.R. Traders 9,12,184/- 7 Ambika Sales Corporation 42,96,323/- 8 Rushabh Enterprises 7,18,523/- 9 H.R. Sales Pvt. Ltd. 10,17,117/- TOTAL 1,78,56,471/-
During the course of assessment proceedings, in order to justify the genuineness of purchases, the notices u/s. 133(6) of the I.T. Act, 1961, were issued to the above partners, on given addresses, but returned back unserved with a remark "not know”. The Assessing Officer did not accept the explanation of the assessee for the reason that the assessee neither could furnish the confirmation / current mailing address, corroborative evidences, date-wise stock inward / outward register etc. nor could produce these hawala parties, for examination. In view of these facts, the Assessing Officer disallowed entire hawala
M/s. Parth Traders purchases, amounting to Rs.1,78,56,471/- and added back to the total income of the assessee.
Upon the assessee's appeal, the ld. Commissioner of Income Tax (Appeals) restricted the addition to 25% of the bogus purchase.
We have heard both the counsel and perused the records. We find that credible and cogent information was received in this case by the assessing officer that certain accommodation entry provider/bogus suppliers were being used by certain parties to obtained bogus bills, assessee was found to have taken accommodation entry/bogus purchase bills during the concerned assessment year from different parties. Furthermore it is noted that in such factual scenario Assessing Officer has made the necessary enquiry.The issue of notice to all the parties have returned unserved. Assessee has not been able to provide any confirmation from any of the party. Assessee has also not been able to produce any of the parties. The necessary evidence for transportation of goods have not been provided by the assessee. In this factual scenario it is amply that assessee has obtained bogus purchase bills. Mere preparation of documents for purchases cannot controvert overwhelming evidence that the provider of these bills are bogus and non- existent and there is no cogent evidence of transportation of goods. The sales tax Department in its enquiry have found the parties to be providing bogus accommodation entries. The assessing officer also issued notices to these parties at the addresses provided by the assessee. All these notices have returned unserved. Assessee has not been able to produce any of the parties. The assessing officer has noted that there is no cogent
M/s. Parth Traders evidence of the provision of goods. Neither the assessee has been able to produce any confirmation from these parties. In such circumstances, there is no doubt that these parties are non-existent.
Hence purchase bills from these non-existent the/bogus parties cannot be taken as cogent evidence of purchases, in light of the overwhelming evidence the revenue authorities cannot put upon blinkers and accept these purchases as genuine. This proposition is duly supported by Hon’ble Apex Court decision in the case of Sumati Dayal 214 ITR 801 and Durga Prasad More 82 ITR 540. In the present case the assessee wants that the unassailable fact that the suppliers are non-existent and thus bogus should be ignored and only the documents being produced should be considered. This proposition is totally unsustainable in light of above apex court decisions. In this factual background, the assessee’s plea for opportunity to cross examine the person from whom he has obtained bogus bills is totally unsustainable.
In these circumstances learned departmental representative has referred to Hon’ble Gujarat High Court decision in the case of Apex Appeal No. 240 of 2003 in the case of N K Industries vs Dy CIT, order dated 20.06.2016, wherein hundred percent of the bogus purchases was held to be added in the hands of the assessee and tribunals restriction of the addition to 25% of the bogus purchases was set aside. It was expounded that when purchase bills have been found to be bogus 100% disallowance was required. The special leave petition against this order along with others has been dismissed by the Hon’ble Apex Court vide order dated 16.1.2017.
M/s. Parth Traders 13. We further note that Hon’ble Rajasthan high court has similarly taken note of decisions of the apex court on the issue of bogus purchases in the case of CIT Jaipur vs Shruti Gems in of 2009. The Hon’ble High Court has referred to the decision of CIT Jaipur vs. Aditya Gems, D. B. in ITA No. 234 of 2008 dated 02.11.2016, wherein the Hon’ble Court had inter alia held as under:
"Considering the law declared by the Supreme Court in the case of Vijay Proteins Ltd. Vs. Commissioner of Income Tax, Special Leave to Appeal (C) No.8956/2015 decided on 06.04.2015 whereby the Supreme Court has dismissed the SLP confirmed the order dated 09.12.2014 passed by the Gujarat High Court and other decisions of the High Court of Gujarat in the case of Sanjay Oilcake Industries Vs. Commissioner of Income Tax (2009) 316 ITR 274 (Guj) and N.K. Industries Ltd. Vs. Dy. C.I.T., Tax Appeal No.240/2003 decided on 20.06.2016, the parties are bound by the principle of law pronounced in the aforesaid three judgments.
Upon careful consideration we find that sales in this case have not been doubted.
As held by the Hon'ble jurisdictional High Court Nikunj Eximp Enterprises (in writ petition no 2860, order dt. 18.6.2014) that when sales are not doubted, hundred percent disallowance of purchasers as bogus is not permissible. However the facts of that case were a little different inasmuch as the sales-was to the government departments. Be as it may, we find that in this case, the facts of the case indicate that assessee has engaged into the grey market for making purchases. Making such purchases gives the assessee various benefits in the form of tax saving etc at the expense of Exchequer. In similar facts and circumstances following the decision of Hon’blee Gujarat High Court in the case of CIT vs Simit P. Sheth [2013] 356 ITR 451 (Guj) a disallowance of 12.5% has been held to be meeting the end's of justice in various decisions of the ITAT Mumbai in such cases.
Accordingly, we hold that in the present case the disallowance should be restricted to M/s. Parth Traders 12.5% of the bogus purchase. The counsel of the assessee fairly agreed to the above proposition.
In the result, the Revenue’s appeal and assessee's cross objection are dismissed and the assessee's appeal is partly allowed. Order pronounced in the open court on 22.03.2018
Sd/- Sd/- (Pawan Singh) (Shamim Yahya) �या�यक सद�य / Judicial Member लेखा सद�य / Accountant Member मुंबई Mumbai; �दनांक Dated : 22.03.2018 व.�न.स./Roshani, Sr. PS आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : अपीलाथ� / The Appellant 1. ��यथ� / The Respondent 2. आयकर आयु�त(अपील) / The CIT(A) 3. आयकर आयु�त / CIT - concerned 4. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, मुंबई / DR, ITAT, Mumbai 5. गाड� फाईल / Guard File 6. आदेशानुसार/ BY ORDER,