VINOD C. SANGHAVI, MUMBAI v. ITO 19 (3)(5), MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH SMC MUMBAI BEFORE SHRI SAKTIJIT DEY (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 6210/MUM/2018 ASSESSMENT YEAR: 2009 - 10 VINOD C. SANGHAVI ROOM NO. 7 GROUND F LOOR SHOP NO. 124/138 SURYADARSHAN 2 ND KUMBHARWADA MUMBAI - 400004. VS. ITO - 19(3)(5) MATRUMANDIR MUMBAI - 400007. PAN NO. BATPS4691H APPELLANT RESPONDENT ASSESSEE BY : NONE REVENUE BY : SMT . JOTHILAKSHMI NAYAK SR. DR DATE OF HEARING : 27/11/2019 DATE OF PRONOUNCEMENT : 29/11/2019 ORDER PER N.K. PRADHAN A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE. THE RELEVANT ASSESSMENT YEAR IS 20 09 - 1 0 . THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) - 30 MUMBAI [IN SHORT CIT(A)] AND ARISES OUT OF THE ASSESSMENT COMPLETED U/S 143(3) R.W.S 147 OF THE INCOME TAX ACT 1961 (THE ACT). THOUGH THE CASE WAS FIXED FOR HEARING ON 09.09.2019 26.11.2019 AND 27.11.2019 NEI THER THE ASSESSEE NOR HIS AUTHORIZED REPRESENTATIVE APPEARED BEFORE THE TRIBUNAL ON THE ABOVE DATES. AS THERE IS NON - COMPLIANCE BY THE VINOD C. SANGHAVI ITA NO. 6210/MUM/2018 2 ASSESSEE WE ARE PROCEEDING TO DISPOSE OFF THIS APPEAL AFTER EXAMINING THE MATERIALS AVAILABLE ON RECORD. 2. THE GROUNDS OF APPEAL FILED BY THE ASSESSEE READ AS UNDER: 1) IN THE FADS AND THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN CONFIRMING THE ORDER U/S 143(3) R.W.S 147 PASSED BY THE ASSESSING OFFICER BY IGNORING VARIOUS DETAILED WRITTEN SUBMISSIONS AND CASE LAWS SUBMITTED BY THE APPELLANT DURING THE COURSE OF A PPELLATE PROCEEDING. 2) IN THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE A.O. ERRED IN PASSING THE ORDER U/S 143(3) R.W.S 147 AND THEREFORE RENDERING THE WHOLE RE - ASSESSMENT BAD I N LAW ON THE BASIS OF BORROWED SATISFACTION PRESUMPTION AND SURMISES. 3) IN THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE ASSESSING OFFICER ERRED IN ADDING RS.5 63 215/ - AS ALLEGED BOGUS PURCHASES BEING 12.5% OF THE TOTAL PURCHASES AMOUNTING TO RS.45 05 724/ - WHICH HAS BEEN FURTHER WRONGLY CONFIRMED BY THE LD. CIT(A) BY IGNORING DETAILED WRITTEN SUBMISSIONS AND CASE LAWS FILED TO THE EXTENT OF 12.5% I.E. RS. 5 63 215/ - . A) EVEN THOUGH THE PAYMENT FOR PURCHASES IS MADE FROM THE BOOKS BY A/C PAYEE CHEQUES AND CANNOT BE TERMED AS BOGUS EVEN THOUGH THE SAME HAS BEEN FULLY ALLOWED BY THE JURISDICTIONAL MUMBAI TRIBUNAL IN RECENT CASE OF RAJEEV M KALATHIL 6727/M/12 GAN PATRAJ A SANGHAVI [I .T.A. NO. 2826/MUM/201 3] RAMESH KUMAR & CO. APPEAL NO. 2959/ MUM/2014 DEEPAK POPAT LAL GALA [ I TA NO 592 0 /M/13] RAMI LA P SHAH [I TA NO 5246/M/13] PARESH GANDHI [ ITA N O - 5706/M / 2013] HIRALAL CHUNILAL JAIN [ITA NO 4547/M/14] TARLA SHAH [I TA NO. 5295/MUM/2013] AND M/S. IMPERIAL IMP. & EXP [ITA NO . 5427/MUM/2015] SHIVSHANKAR R . SHARMA [ITA NO . 5149/MUM/2014 & 4260/MUM/2015] GOVIND RA THOD [ITA NO 439 /MUM/2016] SHRI MAHESH K. SHAH ITA NO. 51 94/MUM/2014 SHRI SANJAY DHOKAD [ITA NO. 929/MUM / 2015] MANOHAR AND ANIT A KANDA [ITA NO. 4693 - 97/MUM/201 6] BIGWIN PAPER DISTRIBUTORS PVT . LTD. [ITA NO. 5293 - 97 /MUM/2016] SHRI SANJAY DHOKAD 2010 - 11 [ITA NO. 5243/MUM/2013] AND HI ROCK CONSTRUCTION CO . [IT A NO. VINOD C. SANGHAVI ITA NO. 6210/MUM/2018 3 960/MUM/2015] JEETENDRADEVN ANI [5426/MUM/201 5] GEOLIFE ORGANICS [ITA NO 3699/M/16] AND M/S STEEL LINE (INDIA) [ITA NOS 1321 TO 1323/M/16 ] . B) ONLY ONTHE B ASIS OF THE INFORMATION ON THE WEBSITE WWW.MAHAVAT.GOV.IN IN ABOUT 1 6 SUSPICIOUS DEALERS WHOSE COPY OF STAT EMENT RECORDED WERE NOT FURNISHED TO THE APPELLANT. C) AS ALLEGED BOGUS PURCHASES WITHOUT APPRECIATING THE FACT THAT NO ADDITION CAN BE MADE IF THE SUPPLIERS ARE NOT TRACEABLE AS PER THE JUDGMENT OF THE BOMBAY HIGH COURT. D) THEREBY TREATING THE SAME AS ALLEGED BOGUS PURCHASES EVEN THOUGH THE PAYMENTS WERE MADE BY A/C PAYEE CHEQUES F ROM THE DISCLOSED BANK ACCOUNTS. 3. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT THE ASSESSEE FILED HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR (AY) 2009 - 10 ON 21.09.2009 DECLARING TOTAL INCOME OF RS.1 40 413/ - . THE RETURN WAS PROCESSED U/S 143(1) OF THE ACT. ON RECEIPT OF INFORMATION FRO M THE SALES TAX DEPARTMENT GOVERNMENT OF MAHARASHTRA THAT THE ASSESSEE HAD OBTAINED BOGUS PURCHASE BILLS OF RS.45 05 724/ - FROM ENTRY PROVIDERS THE ASSESSING OFFICER (AO) RE - OPENED THE ASSESSMENT BY ISSUING NOTICE U/S 148 OF THE ACT. DURING THE COURSE OF RE - ASSESSMENT PROCEEDINGS HE ASKED THE ASSESSEE TO FURNISH DETAILS SUCH AS CORRECT AND COMPLETE ADDRESS OF THE CONCERNED PARTIES PURCHASE DETAILS INVOICES/BILLS COPIES OF LEDGER ACCOUNT DETAILS OF TRANSPORTATION OF GOODS. AFTER RECEIPT OF THE ADDRESS OF THE CONCERNED PARTIES THE AO ISSUED NOTICES U/S 133(6) TO THEM TO ASCERTAIN THE GENUINENESS OF THE PURCHASES. HOWEVER THE NOTICES WERE RETURNED UN - SERVED BY THE POSTAL AUTHORITIES. THEREFORE THE AO ASKED THE ASSESSEE TO PRODUCE THOSE PARTIES BEFORE HIM FOR EXAMINATION. HOWEVER THE ASSESSEE EXPRESSED HIS INABILITY TO PRODUCE THOSE PARTIES. IN VIEW OF THE ABOVE FACTS THE AO RELYING ON THE JUDGMENT OF THE HONBLE GUJARAT VINOD C. SANGHAVI ITA NO. 6210/MUM/2018 4 HIGH COURT IN CIT V. SIMIT P. SHETH (2013) 356 ITR 451 (GUJ) ESTIMATED THE PROFI T @ 12.5% OF THE DISPUTED PURCHASES OF RS.45 05 724/ - AND THUS BROUGHT TO TAX AN AMOUNT OF RS.5 63 215/ - . 4. AGGRIEVED BY THE ORDER OF THE AO THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT(A). WE FIND THAT VIDE ORDER DATED 03.05.2018 THE LD. CIT(A) AGR EED WITH THE REASONS GIVEN BY THE AO AND CONFIRMED THE DISALLOWANCE OF RS.5 63 215/ - . 5. BEFORE US THE LD. DEPARTMENTAL REPRESENTATIVE (DR) SUBMITS THAT CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE THE CIT(A) HAS RIGHTLY CONFIRMED THE DISALLOWANCE @ 12.5% MADE BY THE AO. 6. WE HAVE HEARD THE LD. DR AND PERUSED THE RELEVANT MATERIALS ON RECORD. IN THE INSTANT CASE THE RETURN OF INCOME ORIGINALLY FILED BY THE ASSESSEE ON 21.09.2009 WAS PROCESSED U/S 143(1) OF THE ACT. THE HONBLE SUPREME COURT IN T HE CASE OF ACIT V. RAJESH JHAVERI STOCK BROKERS P. LTD. (2007) 291 ITR 500 (SC) ANALYZED THE DISTINCTION BETWEEN THE ACCEPTANCE OF A RETURN U/S 143(1) AND AN ASSESSMENT WHICH IS FRAMED U/S 143(3) OF THE ACT. IN THE FORMER CASE THE AO WOULD HAVE MUCH WIDER LATITUDE TO REOPEN THE ASSESSMENT. IN THE CASE OF AVIRAT STAR HOMES VENTURE P. LTD. V. ITO (2019) 411 ITR 321 (BOM) THE HONBLE BOMBAY HIGH COURT REFERRING TO THE ABOVE DECISION HAS HELD : THAT THE RETURN HAD BEEN ACCEPTED WITHOUT SCRUTINY. THE INCOME - TAX INVESTIGATION HAD SUBSEQUENTLY PROVIDED INFORMATION ABOUT CERTAIN COMPANIES HAVING BANK ACCOUNTS WITH A BANK IN KOLKATA AND WHO WERE INVOLVED IN GIVING ACCOMMODATION ENTRIES OF VARIOUS NAT URE TO SEVERAL BENEFICIARIES INCLUDING THE ASSESSEE. THE INFORMATION SUPPLIED BY THE INVESTIGATION WING TO THE ASSESSING OFFICER FORMED A VINOD C. SANGHAVI ITA NO. 6210/MUM/2018 5 PRIMA FACIE BASIS TO ENABLE THE ASSESSING OFFICER TO FORM A BELIEF OF INCOME CHARGEABLE TO TAX HAVING ESCAPED ASSESSME NT. THE ASSESSING OFFICER PERUSED THE INFORMATION SUPPLIED BY THE INVESTIGATION WING AND HAVING FORMED THE BELIEF THAT INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT COULD NOT BE STATED TO HAVE ACTED MECHANICALLY. FURTHER THE MERE FACT THAT THE ASSESSEE HAD ASKED FOR CERTAIN INFORMATION FROM THE ASSESSING OFFICER WHICH AT THIS STAGE WAS NOT SUPPLIED WOULD NOT INVALIDATE THE REASONS RECORDED BY THE ASSESSING OFFICER IN ISSUING THE NOTICE. THE NOTICE WAS VALID. AS THE ORIGINAL RETURN WAS PROCESSED U/S 143(1) AND THEN RE - OPENED BY ISSUING NOTICE U/S 148 OF THE ACT IN VIEW OF THE RATIO LAID DOWN IN THE ABOVE DECISIONS THE AO HAS RIGHTLY REOPENED THE ASSESSMENT. 6.1 IN THE INSTANT CASE THE NOTICES ISSUED BY THE AO U/S 133(6) TO THE PARTIES WERE RETURNED UN - SERVED BY THE POSTAL AUTHORITIES. THOUGH REQUESTED DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE FAILED TO PRODUCE THE PARTIES BEFORE THE AO FOR EXAMINATION. HOWEVER THE ASSESSEE HAS FILED BEFORE THE AO COPIES OF (I) LEDGER ACCOUNTS ALONG WITH PURCHASE INVOICES OF THE SAID PARTIES (II) BANK STATEMENT EVIDENCING PAYMENTS MADE THROUGH BANKS BY ISSUING ACCOUNT PAYEE CHEQUES IN RESPECT OF ALL THE PARTIES (III) CHART SHOWING DETAILS OF PURCHASES OF THE SAID PARTIES AND (IV) DETAILS IN RESPECT OF PURCHASES FROM THE SAID PARTIES AND THE CORRESPONDING SALES. WE ARE OF THE CONSIDERED VIEW THAT IN THE INSTANT CASE THE AO HAS RIGHTLY RELIED ON THE DECISION IN SIMIT P. SHETH (SUPRA) AND ESTIMATED THE PROFIT @ 12.5% ON THE DISPUTED PURCHASES OF RS.45 05 724/ - WHICH COMES TO RS. 5 63 215/ - WHICH IS SUBSEQUENTLY CONFIRMED BY THE LD. CIT(A). VINOD C. SANGHAVI ITA NO. 6210/MUM/2018 6 7. IN THE RESULT THE APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 29/11 /2019. SD/ - SD/ - ( SAKTIJIT DEY ) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED: 29/11/2019 RAHUL SHARMA SR. P.S. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - 4. CIT 5. DR ITAT MUMBAI 6. GUARD FILE . BY ORDER (DY./ASSTT. REGISTRAR) ITAT MUMBAI