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The Income Tax Officer Ward 6 (3) (3) , Mumbai Versus M/s. Jostars Orogotech Pvt. Ltd. And Vice-Versa

2017 (10) TMI 584 - ITAT MUMBAI

Bogus purchases addition - Sales Tax Department in its enquiry have found that parties to be providing bogus accommodation entries - Held that:- Facts and circumstances of the case clearly prove that assessee has booked bogus purchases. The assessee has made purchase from grey market. Making purchases from the grey market gives the assessee selling on account of non-payment of tax and others at the expense of the exchequer. In such circumstances, following the precedent from Hon’ble Gujarat High .....

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r For The Assessee : Shri J.P.Bairagra ORDER Per Shamim Yahya, AM This is an appeal by the Revenue and cross objection by the assessee directed against order of learned CIT(A) dated 10.04.2015 and pertains to assessment year 2009-2010. 2. The issue raised in the Revenue s appeal is that learned CIT(A) erred in deleting the entire addition made by the Assessing Officer on account of bogus purchases amounting to ₹ 1,67,26,325. 3. The issue raised in the cross appeal read as under:- 1. The le .....

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ences of both purchases and sales were filed before the Assessing Officer and the CIT(A). 4. At the outset, learned Counsel of the assessee submitted that he shall not be pressing the ground No.1 raised in cross objection relating to validity of reopening. Accordingly this ground raised in the cross objection is dismissed as not pressed. 5. In this case the assessment was reopened. The Assessing Officer made his observations regarding the reopening as under:- An information is received from the .....

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ifton India Riddhi Enterprises ABQPV4099K 2008-09 2,78,20 6) Siddhi Enterprises AHUPK6877A 2008-09 72,800 7) Classic Enterprises AHGPM4137R 2008-09 9,64,714 8) Siddhivinayak Corporation 2008-09 2,16,320 9) Dipali Enterprises ALDPD0349R 2008-09 7,92,126 10) Shree Amaaya Entgerprises ABZPN7783R 2008-09 59,49,575 11) Dev Enterprises ACGPG0684C 2008-09 64,97,130 1,67,26,325 It may be mentioned that the above entities have been proclaimed as hawala dealers engaged in the activity of providing bogus b .....

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ne and the assessee has obtained accommodation entries in the shape of bogus bills of purchases to suppress its income for AY 2009-10. In view of the above, I have reason to believe that income chargeable to tax, in the garb of purchases by way of accommodation entries from the aforesaid entities has escaped assessment for AY 2009-10 within the meaning of section 147 of the Act. Therefore, it is clear that the assessee took accommodation entries through person to regularize its purchases which i .....

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n purchases. However, all the notices have been returned back by the postal authorities unserved. Hence, the assessee, vide order sheet noting dt. 24.2.2015, was given opportunity to produce the above parties along with copy of Form No.704, copy of 'J1 & J2' filed by the above parties and he was also asked to show cause why the above purchases should not be disallowed and added back to its total income. However, till date the assessee has neither not able to produce any of these part .....

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s not keeping day-to-day stock register for raw materials, finished goods, manufacturing a/c. Hence it is not possible to identify, match & co-relates the corresponding consumption/sales of the items purchased from the said tainted dealers. 4) The contention of the assessee that the payment were made by account payee cheque is not acceptable as it is not a fool proof method of substantiating the assessee's claim and is not sufficient to establish the genuineness of the purchases. Relianc .....

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unding circumstances and human probability for arriving at a conclusion as held in CIT Vs. Durga Prasad 82 ITR 540 (SC) and Sumati Daya Vs CIT (1995) 214 ITR 801(SC). 6) The purchases from Hawala operator falls within the ambit of the term colourable devices' and the Hon'ble Supreme Court observed in the case of McDowell & Co. Ltd. Vs. CTO 154 ITR 148 that tax planning may be legitimate provided it is within the framework of law. Colourable devices cannot be part of tax planning and .....

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s of the Sales Tax Department, which were given after conducting enquiries, indicates that either in their statement recorded in front of Sales Tax Authorities, the parties in question have clearly stated that they have not done any business activities and were involved merely in providing accommodation entries, though on record they show themselves as seller, trader or resellers or some of the aforesaid parties were not available at the given premises. Some of the parties have confirmed that th .....

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see to prove the genuineness of any expenditure which is claimed as deduction in computing its taxable income. Therefore, the onus, in the instant case, squarely lay on the assessee to prove the genuineness of the purchases which is shown to have been made from the parties which have been held to be bogus by the government authorities. It was incumbent on the assessee to prove that the suppliers were genuine suppliers and they really supplied material to the assessee and the assessee really made .....

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nt to establish the genuineness of the purchases [reliance is placed on Kachwal Gems Vs. Jt. CIT (supra)] 4.8 The assessee has failed to produce any of the suppliers before the undersigned in spite of opportunity being granted. It is unimaginable that all the suppliers suddenly vanished from the scene soon after the enquiries were started by the undersigned. 4.9 In view of the detailed findings discussed above, it is held that the assessee has failed to establish the genuineness of the purchases .....

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e by the bogus party to whom the payments were alleged to have been made, the question whether the purchases were made from some other source ought not to have weighted with the Tribunal as a factor in favour of the assessee. In light of the above exercise and conclusions, I am not satisfied with the submissions given by the assessee. From the above transactions, I am satisfied that the assessee has intentionally inflated the purchases to reduce his taxable income. This has been done by only sho .....

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t on record relevant material to prove the purchases as bogus. He also mentioned a list of orders and accordingly deleted the addition. 9. We may gainfully refer to the order of learned CIT(A) as under:- It is seen that A.O. has erred on the facts of the case in making addition of ₹ 1,67,26,325/- on account of bogus purchases. The case has been reopened on the basis of information received from DGIT (Inv) and Maharashtra Sales Tax Department. However, during the course of appellate hearing .....

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Apex Court, Hon. Gujarat High Court, Hon. Mumbai High Court and Hon. Mumbai IT AT wherein the Hon. High Courts, Hon. IT AT and Hon. Supreme Court has deleted the additions in other cases of bogus purchases : 1. Munjal Sales Corpn Vs CIT (2008) 168 Taxman 43 (SC) 2. CIT Vs Reliance Utilities & Power Ltd. (2009) 178 Taxman 135 (Bom) 3. Yatish Trading Co. (P) Ltd. Vs ACIT (2011) 129 ITD 237/9 taxmann.com 164 (Mum) 4. ITO Vs Strides Arcolab Ltd. (2012) 138 ITD 323/24 taxmann.com 89(Mum) 5. Morg .....

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1987) 163 ITR 249 11. Hon. Gujarat High Court decision in case of CIT Vs Nangalia Fabrics P. Ltd. (2014) 220 Taxman 17 12. Hon. Mumbai ITAT judgment dated 17.6.2016 in the case of M/s. Om Shree International Vs ACIT in ITA No. 3304/M/2014 and ITA No. 4575/M/2012. 13. Kishanchand Chelaram Vs. CIT-125 ITR 713-SC 14. H.R. Mehta Vs ACIT in ITA No.58 of 2001 (Bom) 15. CIT Vs. Nikunj Eximp Enterprises Pvt. Ltd. [372 ITR 619 (Bom)2015] 16. ACIT Vs. Ramila Pravin Shah (ITA No.5246/Mum/2013) 17. ACIT Vs. .....

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g System Pvt. Ltd. [53 Taxmann.com20(Mum)]. 26. Free India Assurance Services Ltd. Vs. DCIT(132 ITD 60) Mumbai Tribunal. 27. Balaji Textiles Industries Pvt. Ltd.[49 ITD 177 (Mum).] Therefore, since the facts and circumstances of the appellant s case here is identical to the abovementioned judicial orders, Grounds of appeal No.2 to 4 are allowed. 10. Against the above order, Revenue has filed appeal and assessee has filed cross objection. 11. We have heard both the Counsel and perused the records .....

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ario the Assessing Officer has made the necessary enquiry. The issue of notice to all the 11 parties have returned unserved. Assessee has not been able to provide any confirmation from any of the parties. In this factual scenario it is amply clear 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. 12. The Sales Tax Department in its enquiry have found tha .....

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existent. We find it further strange that assessee wants the Revenue to produce assessee s own venders, whom the assessee could not produce. The purchase bills from these non-existent / 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 Mo .....

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g about the contents. Learned Counsel of the assessee has also referred to them without making any discussion about the contents therefrom. Furthermore, we note that learned Counsel of the assessee has placed reliance on a couple of Tribunal decision. But in the light of Hon ble Apex Court decision and Hon ble High Court s decision referred hereinbelow, we are following the precedent from Hon ble High Court. 14. In these circumstances learned departmental representative has referred to Hon ble G .....

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sed by the Hon ble Apex Court vide order dated 16.1.2017. 15. We further note that Hon ble Rajasthan High Court in the case of CIT Jaipur v. M/s.Shruti Gems in ITA No.658/2009 vide order dated 23.05.2017 has inter alia referred to the decision of Hon ble Rajasthan High Court in ITA No.234/2008 in case of CIT Jaipur v. Aditya Gems for the following decision:- Considering the law declared by the Supreme Court in the case of Vijay Proteins Ltd. Vs. Commissioner of Income Tax, Special Leave to Appea .....

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