Income Tax Appellate Tribunal - Mumbai
Haresh K. Sanghvi, Mumbai vs Income Tax Officer-17(1)(5), Mumbai on 2 January, 2018
आयकर अपील य अ धकरण "एक-सद य मामला" यायपीठ मुंबई म।
IN THE INCOME TAX APPELLATE TRIBUNAL "SMC" BENCH, MUMBAI ी शमीम याहया, लेखा सद य के सम ।
BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER
आयकर अपील सं./I.T.A. No.4975/Mum/2017
( नधारण वष / Assessment Year: 2011-12)
Haresh K. Sanghvi ITO-17(1)(5),
Prop. M/s. Mahavir Metal Syndicate Room No. 117, Aaykar Bhavan,
बनाम/
35/37, Bapu Khote Lane, M. K. Road, Mumbai-400 001
Gulal Wadi, Mumbai-400 004 Vs.
थायी ले खा सं . /जीआइआर सं . /PAN/GIR No. AJVPS 5483 K (अपीलाथ /Appellant) : ( यथ / Respondent) अपीलाथ क ओर से / Appellant by : Shri Praful L. Vora यथ क ओर से/Respondent by : Ms. N. Hemalatha सनु वाई क तार ख / : 11.10.2017 Date of Hearing घोषणा क तार ख / : 02.01.2018 Date of Pronouncement आदे श / O R D E R Per Shamim Yahya, A. M.:
This appeal by the assessee is directed against order of ld. Commissioner of Income Tax (Appeals) dated 04.04.2017 and pertains to the assessment year 2011-12.
2. The issue raised is that ld. Commissioner of Income Tax (Appeals) erred in sustaining disallowance of 12.5 %percent of bogus purchase. 2 ITA No. 4975/Mum/2017 (A.Y. 2011-12)
Haresh K. Sanghvi vs. ITO
3. The grounds of appeal read as under:
1. Ld. A.O. has not maintained date wise proceeding sheet, has not recorded the reasoning for reopening of the case before issue of Notice u/s. 147/148 of the Act. Subsequent recording of reasoning after issuance of Notice is not permissible, any additions or amendments in reasons to believe is also not permissible Ld-A.O. has merely relied on DIGT(I) Mumbai and Sales Tax Department information's, has not made any inquiries in that respect, relied on borrowed informations and opinions of other authorities, are also not allowed for reopening of the completed assessment proceedings. Therefore, Notice u/s.
147/148 is liable to be quashed and all collateral proceedings are also liable to be annulled and / or set aside.
2. Ld.A.O. has not brought any documents and evidence in respect of information's in respect of vendors in dispute, no materials are available on record and if available not given to the Appellant at any stage of proceedings, therefore, there is a clear violation of rules of natural justice by Ld. A.O. and for the reasons assessment order passed is liable to be set aside on this count also with impugned appeal order.
3. Ld.A.O. and Ld-CIT (Appeals) did not considered the Paper Book submitted during the course of assessment proceedings at all and/or not properly considered while deciding the matter of the Appellant. Allegations of non productions of details called for are false, baseless and against the evidence on record.
4. Additions made by Ld. A.O. and sustained by Ld. CIT(Appeals) are based on suspicion, conjectures, surmises based on third parties opinion. Appellant has declared his initial burden by advising and producing the details asked for and therefore, further burden is on the authority to bring sufficient materials to discard the evidences submitted with the Paper-Book, which has not been done by the lower authorities, therefore, both orders passed by the ; lower authorities may be set aside, additions may be deleted or may be reduced to token amount in the interest of justice.
5. Appellant craves the liberty with prayer to allowed to add or to alter or to amend or to change any grounds of appeal on or before of the hearing of this appeal.
6. Appellant may be allowed to submit an application for issuing of an Ad- Interim Stay Order and an Absolute Stay Order and Paper-Book after filing of this appeal.
4. In this case on receipt of information from the DGIT (Investigation), Mumbai, it came to light that the assessee had made purchases from the following suspicious 3 ITA No. 4975/Mum/2017 (A.Y. 2011-12) Haresh K. Sanghvi vs. ITO parties/hawala parties during the assessment year 2010-11, relevant to assessment year 2011-12, the details of which are as follows:
Sr. No. Name of the hawala party Amount (Rs.)
1. DHRUV SALES CORPORATION 1,72,510
2. OM CORPORATION 7,985
3. SAGAR ENTERPRISES 44,708
4. MANIBHADRA TRADING CO 52,826
5. SEJAL ENTERPRISES 10,13,982
6. POLARIS SALES AGENCY PRIVATE 11,08,259
LIMITED
7. ASHTVINAYAK SALES AGENCY 17,70,483
8. DONEAR TRADING PRIVATE LIMITED 82,545
9. JIGAN ENTERPRISES 1,721
10. CHIRAC CORPORATION 1,03,845
11. NIHSA ENTERPRISES 1,24,931
12. AIMMOL INDUSTRIES 2,13,914
13. LEOIMPEX 5,684
14. IMPEX TRAIDNG CO. 94,291
15. MAHAVIR CORPORATION 1,77,596
16. SHANTINATH CORPORATION 1,79,877
17. DEEP ENTERPRISES 4,16,211
18. BLUE NILE ENTERPRISES 34,02,554
19. CORAL TRADING CO 1,97,027
20. SHUBHLAXMI SALES CORPORATION 64,547
21. MARUTI IMPEX 13,87,370
22. ANSHU MERCANTILE PVT LTD 7,29,349
23. ROHIT ENTERPRISES 1,78,501
24. VIDHI METAL INDUSTRIES 31,44,770
25. S. S. ENTERPRISES 6,61,612
26. POOJA METAL & ALLOYS 8,87,122
27. NAVRATAN METAL IMPEX 8,29,272
28. SUBHAM STEEL IMPEX 13,12,053
Total 1,83,65,545
4
ITA No. 4975/Mum/2017 (A.Y. 2011-12)
Haresh K. Sanghvi vs. ITO
5. Subsequently, by virtue of notice u/s. 142(1), the assessee was asked to prove the genuineness of above purchases by producing relevant documentary evidences such as purchase order, sale invoice, delivery challan, mode of payment, mode of transportation, relevant entry in stock register etc. The assessee was also asked to produce purchase parties to prove the genuineness of above purchases. Further, notices u/s 133(6) of the Income Tax Act was issued to above mentioned hawala parties but all the notices received back with the remark 'left/not known'. The assessee was also asked to show cause as to why the expenditure claimed in respect of purchases shown to have made from the aforesaid dealer should not be disallowed. The assessee vide order sheet noting dated 10.11.2015 has furnished copies of (a) ledger account of the purchase party; and (b) Purchase Bill. Before the Assessing Officer, the assessee submitted that he/she has shown corresponding sales of material alleged to be purchased from hawala parties and had offered the income thereon for taxation. There can be no sale without purchase, therefore requested to treat the purchases as genuine. However, the Assessing Officer noted that till date the assessee has neither submitted the confirmation of above purchases from respective purchase parties nor produced the broker/agents or the suppliers before the undersigned. Hence, he proceeded to make a disallowance of 12.5% of the purchase.
6. Against the above order, the assessee appealed before the ld. Commissioner of Income Tax (Appeals) challenging both the reopening and merits of the addition. The 5 ITA No. 4975/Mum/2017 (A.Y. 2011-12) Haresh K. Sanghvi vs. ITO ld. Commissioner of Income Tax (Appeals) confirmed the action of the assessing officer in making addition of 12.5% of the bogus purchase by holding as under:
As regards reopening:
3.1 From the assessment order I find that the initial assessment was made only in the section 143(1) and hence only reason to believe is required for a valid initiation of proceedings under section 147. There was a receipt of information by the AO from DGIT investigation about the appellant having made purchases from suspicious parties/ hawala parties; the information was specific and the details of the 28 such suspicious parties was provided.
4. I find that the case in any way is squarely covered by the jurisdictional High Court judgement in the case of NIKUNJ EXIMP which the assessing officer has also relied upon[107 DTR 69] it was held that the receipt of information that bills produced were not genuine can give rise to reasonable belief in the mind of the assessing officer that the income chargeable to tax has escaped assessment. In view of the clear ruling and mandate of the honourable jurisdictional High Court I find the objection non-maintainable.
As regards merits:
5.1 It is yet another case in the long line of cases relating to hawala parties and the addition made by the AO is based on the following grounds:
a. The assessee did not furnish any Ledger account confirmation from the said dealer/supplier.
b. The assessee failed to produce the suppliers of Disputed purchases. c. Sales-tax Department had provided substantial evidence to put the purchases in doubt.
The assessing officer proceeded to add 12.5% of such purchases amounting to Rupees 1.83 crores and accordingly addition of Rupees 22.95 Lacs was made. 5.2 In the statement of facts again ipse dixit statements have been made but the allegation which has been made by the assessing officer have not been controverted rather virtually the whole of statement of facts contests the reopening. There is no effective controverting submission. 5.3 While it is true that no addition would be possible merely because the said parties were not produced but in the instant case there are other factors also.
The appellant has also not tried to prove whether there was any delivery challan, one-to-one correspondence of purchases and sales, whether there were proper stock in register entries, whether if the products were subject to 6 ITA No. 4975/Mum/2017 (A.Y. 2011-12) Haresh K. Sanghvi vs. ITO Octroi/EXCISE there were proper gate passes et cetera to prove the movement of goods; there is no contention in respect of delivery challans. Even in the case of N1KUNJ EXIMP which is relied upon by the assessee there was Ledger account confirmation from the parties concerned it was based on those Ledger account party CONFIRMATIONS and non-production of the alleged suppliers that it was held that mere nonproduction of the alleged suppliers cannot lead to a sustainable addition. But in the instant case there were not even CONFIRMATIONS which distinguishes and sets apart the addition.
7. Against the above order of ld. Commissioner of Income Tax (Appeals), the assessee is in appeal before the ITAT.
8. I have heard both the counsel and perused the records.
9. As regards the reopening of the assessee, on a careful consideration, I note that in this case information was received by the Assessing Officer from DGIT Investigation (Mumbai) there are some parties who are engaged in the hawala transactions and are also involved in issuing bogus purchase bills for sale of material without delivery of goods, which information was based on information received by Revenue from Maharashtra Sales Tax Authority. Information was received that the assessee was beneficiary of hawala accommodation entries from entry providers by way of bogus purchase. The accommodation entry provider has deposed and admitted before the Maharashtra Sales Tax Authority vide statement/ affidavit that they were engaged in providing bogus accommodation entries wherein bogus sale bills were issued without delivery of goods, in consideration for commission. These, accommodation entry providers, on receipt of cheques from parties against bogus bills 7 ITA No. 4975/Mum/2017 (A.Y. 2011-12) Haresh K. Sanghvi vs. ITO for sale of material, later on withdrew cash from their bank accounts, which was returned to beneficiaries of bogus bills after deduction of their agreed commission. The Assessee was stated to be one of the beneficiaries of these bogus entries of sale of material from hawala entry operators in favour of the assessee wherein the assessee made alleged bogus purchases through these bogus bills issued by hawala entry providers in favour of the assessee. These dealers were surveyed by the Sales Tax Investigation Department whereby the directors of these dealers have admitted in a deposition vide statements/affidavit made before the Sales Tax Department that they were involved in. issuing bogus purchase bills without delivery of any material. There is a list of such parties wherein the assessee is stated to be beneficiary of bogus purchase bills.
10. From the above, I find that tangible and cogent incriminating material were received by the AO which clearly showed that the assessee was beneficiary of bogus purchase entries from bogus entry providers which formed the reason to believe by the AO that income has escaped assessment. The information so received by the AO has live link with reason to believe that income has escaped assessment. On these incriminating tangible material information, assessment was reopened. At this stage there has to be prima facie belief based on some tangible and material information about escapement of income and the same is not required to be proved to the hilt. In 8 ITA No. 4975/Mum/2017 (A.Y. 2011-12) Haresh K. Sanghvi vs. ITO this regard, I refer to the decision of the Hon'ble Apex Court in the case of CIT(A) Vs. Rajesh Jhaveri Stock Brokers P. Ltd, 291 ITR 500:-
"Section 147 authorises and permits the Assessing Officer to assess or reassess income chargeable to lax if he has reason to believe that income for any assessment year has escaped assessment. The word "reason" in the phrase "reason to believe" would mean cause or justification. If the AO has cause or justification to know or suppose (hat income had escaped assessment, it can be said to have reason to believe that an income had escaped assessment. The expression cannot be read to mean that the AO should have finally ascertained the fact by legal statute with solicitude for the public exchequer with an inbuilt idea of fairness to taxpayers. As observed by the Supreme Court in Central Provinces Managnese Ore Co, ltd. v. ITO(1991) 191 ITR 662, for initiation of action under section 147(a) (as the provision stood at the relevant time) fulfillment of the two requisite conditions in that regard is essential. At that stage, the final outcome of the proceeding is not relevant. In other words, at the initiation stage, what is required is "reason to believe", but not the established fact of escapement of income. At the stage of issue of notice, the only question is whether there was relevant material on which a reasonable person could have formed a requisite belief Whether the materials would conclusively prove the escapement is not the concern at that stage. This is so because the formation of belief by the AO is within the realm of subjective satisfaction ITO v. Selected Dalurband Coal Co, (P.) Ltd. (1996) 217 ITR 597 (Supreme Court): Raymond Woollen Mills Ltd. v. ITO (1999) 236 ITR 34 (Supreme Court)."
11. The above discussion and precedent from Apex Court fully justify the validity of reopening in this case. Further I find that the Ld. CIT(A) has carefully examined the issue and has properly appreciated the issue. Hence, I do not find any infirmity in the same. Accordingly, I uphold the order of the Ld. CIT(A) on the issue of reopening. Since, the issue has been decided on the basis of the Hon'ble Apex Court decision, the other case laws referred by assessee are not supporting the assessee's case.
9ITA No. 4975/Mum/2017 (A.Y. 2011-12)
Haresh K. Sanghvi vs. ITO
12. As regards merits of addition, I 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. Based upon this information assessment was reopened. The credibility of information relating to reopening has been confirmed by the learned CIT(A) and by ITAT as above. 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 evidence of the provision of goods. Neither the assessee 10 ITA No. 4975/Mum/2017 (A.Y. 2011-12) Haresh K. Sanghvi vs. ITO has been able to produce any confirmation from these parties. In such circumstances, there is no doubt that these parties are non-existent.
13. 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.
14. 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. 11 ITA No. 4975/Mum/2017 (A.Y. 2011-12)
Haresh K. Sanghvi vs. ITO
15. However I note that this is not an appeal by the revenue. Hence it will not be appropriate to take away the relief already granted by the revenue to the assessee, Hence I confirm the order of learned CIT(A).
16. In the result, this appeal filed by the assessee stands dismissed.
प रणामतः नधा रती क अपील खा रज क जाती है ।
Order pronounced in the open court on 02.01.2018 Sd/-
(Shamim Yahya) लेखा सद य / Accountant Member मंब ु ई Mumbai; दनांक Dated :02.01.2018 व. न.स./Roshani, Sr. PS आदे श क त ल प अ े षत/Copy of the Order forwarded to :
1. अपीलाथ / The Appellant
2. यथ / The Respondent
3. आयकर आयु त(अपील) / The CIT(A)
4. आयकर आयु त / CIT - concerned
5. वभागीय त न ध, आयकर अपील य अ धकरण, मुंबई / DR, ITAT, Mumbai
6. गाड फाईल / Guard File आदे शानुसार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपील य अ धकरण, मुंबई / ITAT, Mumbai