HABIT OF DESCRIBING “BOGUS” BY TAX AUTHORITIES DESERVES TO BE CONDEMENED- discussion in view of recent judgment of the Supreme Court – SLP of Revenue dismissed after hearing

[CA DEV KUMAR KOTHARI]

Related judgments:

PR. COMMISSIONER OF INCOME TAX SURAT 1 SURAT  Petitioner(s)  VERSUS TEJUA ROHITKUMAR KAPADIA   2018 (7) TMI 590 - SUPREME COURT

PR. COMMISSIONER OF INCOME TAX, SURAT-I VERSUS TEJUA OHITKUMAR KAPADIA 2017 (10) TMI 729 - GUJARAT HIGH COURT TAX APPEAL NO. 691 of 2017  Dated: - 18 September 2017

Habit of tax authorities of describing “BOGUS”:

Unfortunately in our country, government officers, particularly tax authorities are in habit of describing many things, deeds and acts and documents provided by  tax payers as bogus, ignoring facts, documents, and evidences.

Such description is made by tax officers very loosely and in casual manner,  even without regard to financial and social status of tax payers, their past track record and submissions made and explanations offered by tax payers.

While doing so, tax officers have not regard of tax paid by taxpayer. A taxpayer who has paid huge tax, is also many times described in orders to have made a petty claim of deduction or exemption as not genuine or bogus. 

Tax officers very loosely use words like bogus purchases, bogus sales, bogus capital , bogus gifts, bogus loans, bogus capital gains or bogus claim of any deduction, exemption etc.

Such statements are made , as if tax officers have fundamental  right to say anything  like bogus, non-genuine, designed to defraud revenue, tax evasion etc.

Unfortunately there seems no one to ask them how they use such words without application of mind and in complete disregards of facts, documents, including statutory evidences.

Case of TEJUA OHITKUMAR KAPADIA:

In this case LD. AO disallowed certain claims of purchases branding them to be BOGUS.  On appeal of assesse Ld. CIT(A) deleted addition after consideration of all facts which were available to the Ld. AO also. However, as stated in earlier paragraph, tax authorities can, without any hesitation calling any transaction as bogus. We find several reported cases on such additions and disallowances.

Revenue carried matter before the Tribunal\. Ld. Tribunal confirmed order of CIT(A) and found that the purchases of assesse, were genuine. Revenue carried matter before   High Court of Gujarat, and on such appeal the High Court also upheld orders of appellate authorities below and held that Tribunal has found facts correctly  and no substantial question of law is involved and therefore appeal was dismissed.

Observations of the High Court is analysed bellows:

  The AO on behalf of Revenue disallowed  certain purchases as bogus purchase.

The CIT(A) / first  appellate authority in this case and on appeal of revenue the second appellate authority that is  the  Tribunal came to concurrent conclusion that the purchases  made by the assessee from Raj Impex were duly supported by bills and payments were made by Account Payee cheque.

Raj Impacts also confirmed the transactions.

 There was no evidence to show that the amount was recycled back to the assesse that is to say that assesse got cash against cheque.

The assesse, a  trader had also shown sales out of purchases made from Raj Impex which were also accepted by the Revenue.

Therefore, allegation of bogus purchases was contrary to facts.

CIT(A) and Tribunal had concurrently held purchases to be verified, accounted for in stock ( which assesse sold). These are findings of facts.

No question of law arises from the order of Tribunal. Hence appeal was dismissed.

 

From order of CIT(A) and Tribunal:

On reading of the judgment of the Tribunal in this case we find as follows with highlights added:

Quote:

          29. After considering the facts and the submissions, the ld. CIT(A) found that what has been disallowed are the purchases claimed to have been made by the assessee from M/s. Raj Impex. The ld. CIT(A) further found that all the payments made by the assessee were by account payee cheques to M/s. Raj Impex. The ld. CIT(A) further observed that since the assessee was a trader, therefore the purchases made from M/s. Raj Impex have been found to be sold and the sales have been accepted by the A.O. The ld. CIT(A) concluded by holding that there was no basis or evidence to treat the purchases from M/s. Raj Impex as bogus and accordingly directed the A.O. to delete the addition of ₹ 51,98,656/-.

30. Aggrieved by this, the revenue is before us. The ld. D.R. strongly supported the findings of the A.O. The ld. counsel for the assessee reiterated what has been stated before the lower authorities.

31. We have given a thoughtful consideration to the orders of the authorities below. There is no dispute that the purchases made from M/s. Raj Impex were duly supported by bills and all the payments have been made by account payee cheques. There is also no dispute that M/s. Raj Impex have confirmed all the transactions. There is no evidence to draw the conclusion that the entire purchase consideration which the assessee had paid to M/s. Raj Impex had come back to the assessee in cash.

32. It is also true that no adverse inference has been drawn so far as the sales made by the assessee is concerned. We also find that the entire purchases made by the assessee from M/s. Raj Impex have been accounted by Raj Impex and have paid the taxes accordingly. Considering the facts in totality well appreciated by the First Appellate Authority, we do not find any error or infirmity in the findings of the First Appellate Authority. Ground No. 1 is accordingly dismissed.

Unquote: Therefore, it is clear that findings recorded by Ld. CIT(A) and Tribunal are finding of facts. The AO made addition due to mere reason of doubts and presumptions caused due to reason of search. The doubts raised by AO have no basis or evidence. In such circumstances litigation up to the Supreme Court clearly shows that no mind is applied and appeals are preferred by revenue as a matter of routine.

Un-necessary litigation by Revenue even before the Supreme Court:

As can be seen Tribunal, as a final fact finding authority found purchases to be genuine and allegation of Bogus as un-founded. This finding was concurrent with same finding given by the CIT(A).

Therefore, in such case where is a question of law?

However, Revenue filed SLP before the Supreme Court, against judgment / order of Gujarat High Court. 

Proceedings and order / Judgment of Supreme Court:

The Bench: The appeal was heard by the bench of   HON'BLE MR. JUSTICE ROHINTON FALI NARIMAN  and  HON'BLE MR. JUSTICE NAVIN SINHA.

Four Advocates for Petitioner(s) / Revenue four  Ld. Advocates namely 

(1) Mr. Vikramjit Banerjee, ASG,

(2) Ms. Swarupma Chaturvedi, 

(3)  Mr. Rajesh K.Singh, and

(4)  Mr. Anshul Gupta appeared.

RECORD OF PROCEEDINGS In  SPECIAL LEAVE PETITION mentions as follows:

 “ UPON hearing the counsel the Court made the following  ORDER :

Heard.

Delay condoned.

The special leave petition is dismissed.

Pending applications, if any, shall stand disposed of.

Therefore in this case The Petition for Condonation was also granted by the Supreme Court.

Thereafter hearing took place, revenue was represented through four senior counsels.

After hearing  counsels from both sides, the SLP was dismissed.

This means that the order and judgments right from stage of CIT(A) to the High Court stands affirmed on the issue in appeal.

Pending litigation:

Readers in practice are well aware of wrong approach of loosely branding “BOGUS” followed by Tax Officers. There are many appeals filed by assesse and after relief is allowed by CIT(A) or Tribunal, revenue carry further  litigation, including up to the supreme Court on such matters.

This is sheer wastage of public money by Tax authorities by resorting to wrong practices of considering tax payer as Chor.

Such practices must come to an end.

Such litigation must also come to an end.

The Assessing Officers must have some regard to the tax payer. They must bear in mind that tax payers pay out of which they get their salary and perquisites also.

There should not be litigation initiated by Assessing Officers or CIT in revision or CIT(A) in enhancement proceedings based on bias, presumption, conjecture under which they loosely declare tax payer as chor , tax evader, etc.

Psychological aspects:

It is general psychology that one consider other also similar to himself. Thus an honest person generally do not  doubt honesty of others and consider him honest. Whereas a dishonest person is in habit of calling others also Chor or dishonest. Even in family and social  relations, honesty and trust are  important. In these relations also we find that people who are honest, generally consider others also honest.

Grape wine information in social circles are that in fact in government offices, and public sector companies, there are Bogus purchases , bogus claims. Though they are well documented. Perhaps for this reason, some officers have pre-set mind to describe Bogus and tax payer as a tax evader. This is very unfortunate. Perhaps this arises out of human psychology expressed in common saying “CHORO KO SARE NAJAR AATE HAI CHOR” and JO JAISA HOTA HAI VESA HI ORO KO SAMAJHATA HAI.