TMI Blog2021 (5) TMI 297X X X X Extracts X X X X X X X X Extracts X X X X ..... : Shri T. S. Khalsa (Sr. AR) ORDER PER AMARJIT SINGH, JM: The above mentioned appeals have been filed by the revenue against the different order passed by the Commissioner of Income Tax (Appeals)-18, Mumbai [hereinafter referred to as the CIT(A) ] relevant to the A.Ys.2009-10 to 2011-12 ITA. NO.3229/Mum/2019:- 2. The revenue has filed the present appeal against the order dated 28.02.2019 passed by the Commissioner of Income Tax (Appeals)-18, Mumbai [hereinafter referred to as the CIT(A) ] relevant to the A.Y.2009-10. 3. The revenue has raised the following grounds: - 1. Whether on the facts and in the circumstances of the case and in law, was Ld. CIT(A) justified in restricting the suppressed profit to the extent of 12.5% of the purchases made from the bogus entities, without appreciating the ratio of the decision of Hon ble ITAT Delhi Bench in the case of DCIT Vs Smt Phoolwati Devi (2009) 314 ITR AT1 (Delhi) wherein the Hon tie Tribunal has hold that despite the documentation supporting the claim of the assessee superficially, the evidence could not be accepted in view of the surrounding circumstances and human probabilities? 2. Whether o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... BHAKTI ENTERPRISE AVUPS4656H 2009-10 129375 3 27380604146V PURAB ENTERPRISES BJYPS4594M 2009-10 175501 4 26400387728V CHEMI-AGE ENTERPRISE 2009-10 970563 Total 13,05,599/- The notice u/s 133(6) was issued on 13.10.2014. After the reply of the assessee, the AO raised the addition to the extent of total bogus purchase of ₹ 13,05,599/-. The total income of the assessee was assessed to the tune of ₹ 50,89,360/-. Feeling aggrieved, the assessee filed an appeal before the CIT(A) who restricted the addition to the extent of 12.5% of the bogus purchase in sum of ₹ 13,05,599/-. The revenue was not satisfied, therefore, the revenue has filed the present appeal before us. 5. We have heard the argument advanced by the Ld. Representative of the revenue and has gone through the case carefully. The Ld. Representat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t be produced. The supplier was in fact the appellant‟s witness and the Ld. Assessing Officer was not required to force its attendance. It was for the appellant to produce it as per Civil Procedure Code which applies to the income-tax proceedings also. It is trite that once a transaction is shown to be of the nature of income, the onus shifts to the assessee to show that the same was not taxable. It can thus be safely assumed that the appellant has grossly failed in its duty to mitigate the burden cast upon it in so far as proving the genuineness of the transaction from the said parties is concerned. 5.2.3 In this regard it is also pertinent to mention that while dealing with the concept of burden of proof, onus of proving is always on the person who makes the claim and not on the Revenue as being made out by the Ld. AR in his submission. While dealing with the issue of deciding the burden of proof, Hon‟ble Supreme Court in the cases of CIT Vs. Durgaprasad More 82 ITR 540 and SumatiDayal Vs. CIT 214 ITR 801 has held that the apparent must be considered real until it is shown that there are reasons to believe that the apparent is not real and that taxing authorities ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 609 where it was held that the I.T. Authorities are entitled to pierce the veil of Corporate Entity and to look into reality of transaction. In the case of McDowell Co. 154 ITR 148(SC) it was stated that implications of tax avoidance are manifold. First, there is substantial loss of much needed public revenue. Next, there is serious disturbance caused to the economy of the country due to piling of mountain of black money, causing inflation. Thus, there is the large hidden loss to the community (as pointed out by Master Sheatcroft in 18 Modern Law Review 209) by some of members in the country being involved in the perpetual war waged between the tax payer and his expert team of advisors, and accountants on the one side and the tax gatherer and his perhaps not so successful advisors on the other side. Hon‟ble Court further held that it was for the Court to take stock to determine the nature of new and sophisticated legal devices to avoid tax and consider whether the, situation created by the devices would be related to the existing legislation with the aid of emerging techniques of interpretation as was done in Ramsay, Burmah Oil and Dawson to expose the devices ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not fettered, by technical rules of evidence, as held by the Hon'ble Supreme Court in the case of Dhakeswari Cotton Mills Ltd. v. CIT [1954] 26 ITR 775. The Hon'ble Supreme Court, in the case of Chuharmal (supra) held that what was meant by saying that Evidence Act did not apply to the proceedings under Income-tax Act,1961, was that the rigours of Rules of evidence, contained in the Evidence Act was not applicable; but that did not mean that when the taxing authorities were desirous of invoking the principles of Evidence Act, in proceedings before them, they were prevented from doing so. It was further held by the Hon'ble Apex Court that all that Section 110 of the Evidence Act, 1872 did, was to embody a salutary principle of common law jurisprudence viz, where a person was found in possession of anything, the onus of proving that he was not its owner, was on that person. Thus, this principle could be attracted to a set of circumstances that satisfies its conditions and was applicable to taxing proceedings. 5.2.9 In such type of cases, reliance is often placed on a number of decisions including those in the cases of NikunjEximp in ITA No. 5604 of 2010 (Bombay H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on filed against notice u/s . 148. 5.2.13 Hon‟ble Bombay High Court in the case of Killick Nixon Ltd, v. Deputy Commissioner of Income-tax [2012] 20 taxmann.com TOS (Bom.) was similarly faced with the question of sham transactions and it inter alia, held as under : Section 254 of the Income-tax Act, 1961, read with mile 2) of the Poe tar ah =? (Appellate Tribunal) Rules, 1963 - Appellate Tribunal - Assessee transferred certain land to bank Assessee cited incurred long-term and short-term capital losses on share trading transactions - Accordingly, it set off said losses against capital gain earned on sale of land - Assessing Officer found that assessee entered into sham and bogus share trading transactions resulting in capital loss with purpose to reduce tax liability arose on capital gain - Assessing Officer, therefore, discarded capital losses - Commissioner (Appeals) confirmed order of Assessing Officer - Tribunal also confirmed order of Assessing Officer, and while doing so, referred to a decision of Supreme Court in case of SumatiDayal uv. CIT [1995] 214 ITR 801 / 80 Taxman 89 to held that evidence produced must be analysed by applying theory of surrounding cir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hods . It is the obligation of every citizen to pay the taxes without resorting to subterfuges. The above observations should be read with para 46 where the majority holds on this aspect one of us, Chinappa Reddy, J. has proposed a separate opinion with which we agree , The words this aspect express the majority's agreement with the judgment of Reddy, J. only in relation to tax evasion through the use of colourable devices and by resorting to dubious methods and subterfuges. Thus, it cannot be said that all tax planning 's legal/ illegitimate/ impermissible. Moreover, Reddy, J. himself says that he agrees any the majority. In the judgment of Reddy, J. there are repeated references to schemes and devices in contradistinction to legitimate avoidance of tax liability by Dace 15 of 39 incurred long-term and short-term capital losses on share trading transactions - Accordingly, it set off said losses against capital gain earned on sale of land - Assessing Officer found that assessee entered into sham and bogus share trading transactions resulting in capital loss with purpose to reduce tax liability arose on capital gain - Assessing Officer, therefore, discarded capital losse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty judgment in McDowell held that tax planning may be legitimate provided it is within the framework of law (para-45). In the latter part of para 45, it held that colourable device cannot be a part of tax planning and tt is wrong to encourage the belief that it is honourable to avoid payment of tax by resorting to dubious methods . It is the obligation of every citizen to pay the taxes without resorting to subterfuges. The above observations should be read with para 46 where the majority holds on this aspect one of us, Chinappa Reddy, J. has proposed a separate opinion with which we agree , The words this aspect express the majority's agreement with the judgment of Reddy, J. only in relation to tax evasion through the use of colourable devices and by resorting to dubious methods and subterfuges. Thus, it cannot be said that all tax planning 's legal/ illegitimate/ impermissible. Moreover, Reddy, J. himself says that he agrees any the majority. In the judgment of Reddy, J. there are repeated references to chemes and devices in contradistinction to legitimate avoidance of tax liability y Dace and as there were no other purchases of chuni-bhusi, the benefit of deduct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubt about it. The investigations got done by the Assessing Officer leave hardly any doubt about it. The failure on the part of the assessee to show cause strengthens the Department's case. This stoic silence of the assessee also blunts the assessee's argument that Shri Ilukamchand statement was recorded at its back. It may have been recorded at its back, but the results thereof were informed to the assessee and that is what the assessee was asked to explain and failed to do So. Thus, now we are not assuming but are concluding that the purchases of ₹ 6,500 were in fact bogus. In case of bogus entries, in our opinion, what could be the best remedy, has been discussed above. The Assessing Officer has simply done that. We are unable to appreciate Shri Singhui's contention. Had there been suppression of sales, probably, depending on the facts of the case, the addition to the extent of g.p. rate would have been sufficient. But in case of bogus purchases we do not see q better solution than the one adopted by the Assessing Officer. 12. But what about the quantitative record which is said to have allied. In the instant case the assessee has mainta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tified In not giving benefit of the alleged amount spent towards the purchases of gas cylinders. 5.2.17 In Samurai Software (P.) Ltd. v. Commissioner of Income-tax [2008] 299 ITR 324 (RAJ.), it was held as under: 8. The Tribunal considered the matter in paragraph 6 of its order thus: 6. We have carefully considered the rival submissions of the parties, perused the material available on record and the decision relied upon by the learned Departmental representative. We find that as a result of search on the assessee-company, the purchases totaling to ₹ 4,37,048 were not found recorded in the seized books of account of the assessee-company. No surrender was made on behalf of the company by any of the directors of the assessee-company. The surrender was made by Shri Mahesh Toshniwal, one of the directors of the company in his individual capacity and not on behalf of the assessee-company and the same was considered in his personal assessment. Under the law, the company is a separate juridical person. The surrender made by Shri Mahesh Toshniwal, in his individual capacity is not binding on the assessee-company. Shn Mahesh Toshniwal in his personal statements, has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rchases were genuine, It was true that no loan had been taken i from those parties. The case before the Assessing Officer was that the assessee claimed some purchases from some parties, whom he could not produce or those parties were not available when the summon under section 131 was issued. Therefore, the initial dispute was with regard to genuineness of the transaction regarding purchase of wool from the parties, the assessee had failed to discharge the onus to prove the genuineness of the transactions, mere mentioning of section 68 did not affect the addition made when transactions Were found bogus. 5.2.19 In Sanjay Oilcake Industries vs. Commissioner of Income-ta, [2009) 316 ITR 274 (Guj), it was held as under: 12, Thus, it is apparent that both the Commissioner (Appeals) and the Tribunal have concurrently accepted the finding of the Assessing Officer that the apparent sellers who had issued sale bills were not traceable. That goods were received from the parties other than the persons who had issued bills for such goods. Though the purchases are shown to have been made by making payment thereof by account payee cheques, the cheques have been deposited in han ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an adjudicating body based on surrounding circumstances and human probabilities is not bad in law and deserves to be upheld. In the case of McDowell Co. Ltd. v. CTO [1985] 154 ITR 148 /22 Taxman 11, the Apex Court held that colourable devices are not part of legitimate tax planning. Going by the ratio of these decisions, we are of the view that the assessee-firm cannot be dissociated from the scheme of declaration of gold under the amnesty scheme in the names of the family members of the partners of the assessee-firm, as different individuals could not have hit upon the same idea of acquiring gold in the year of account relevant for the assessment year 1978-79 and declaring such gold under the amnesty scheme and getting the gold valued by the same valuer on the same day and filing their returns under the amnesty scheme on the same day, i.e., 30-3-1987, and subsequently getting the gold converted into ornaments through Karigars on more or less the same day and subsequently selling the ornaments to the assessee-firm in the same year of account without the planning, controlling and coordination of a central agency and that agency in the surrounding circumstances appears to be only t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In GTC Industries Ltd. v. Assistant Commissioner of Income-tax [1998] 65 ITD 380 (BOM), it was held as under: 105. In our opinion right to cross-examine the witness who made adverse report, is not an invariable attribute of the requirement of the dictum, audialterampartem‟. The principles of natural justice do not require formal cross-examination. Formal cross-examination is a part of procedural justice. It is governed by the rules of evidence, and is the creation of Court. It is part of legal and statutory Justice, and not a part of natural justice, therefore, it cannot be laid down as a general proposition of law that the revenue cannot rely on any evidence which has not been subjected to cross-examination. However, if a witness has given directly incriminating statement and the addition in the assessment is based solely or mainly on the basis of such statement, in that eventuality it is incumbent on the Assessing Officer to allow cross-examination. Adverse evidence and material, relied upon in the order, to reach the finality, should be disclosed to the assessee. But this rule is not applicable where the material or evidence used is of Collateral Nature. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ck, purchases and the quantity manufactured during the year under consideration were sold by the assessee. The purchases of the entire 1,02,514 meters of cloth were sold during the year under consideration. The Hon‟ble Tribunal, therefore, accepted the assessee‟s contention that the finished goods were purchased by the assessee, may be not from the parties shown in the accounts, but from other sources. In that view of the matter, the Tribunal was of the opinion that not the entire amount, but the profit margin embedded in such amount would subjected to tax. The Tribunal relied on its earlier decision in the case of Steel Traders vs. ITO [IT appeal Nos. 2801 2937 (Ahd) of 2008,, dated 20-05-2011] and also made reference to the Tribunal‟s decision in the case of Vijay Proteins Ltd. vs. Asstt. CIT [1996] 58 ITD 428 (Ahd). On appeal by the Department, the Hon‟ble Gujarat High Court held as follows : We are of the opinion that the Tribunal committed no error. Whether the purchases themselves were bogus or whether the parties from whom such purchases were allegedly made were bogus is essentially a question of fact. The Tribunal having examined the evidence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ;ble Gujarat High Court held that since the purchases were not bogus, but were made from parties other than those mentioned in books of accounts, only the profit element embedded in such purchases could be added to the assessee‟s income and as such no question of law arose in such estimation. While arriving at the above conclusion, the Hon‟ble Court also relied on the decision in the case of Vijay M. Mistry Construction Ltd. 355 ITR 498 (Guj) and further approved the decision of Ahmedabad Bench, ITAT in the case of Vijay Proteins 58 ITD 428. 5.2.29 In the case of Vijay Proteins (supra), the Hon‟ble ITAT was seized with a case of bogus suppliers of oil cakes where 33 parties were found to be bogus by the departmental authorities even though payments were made to the said parties by cross cheques and in fact the A.O. in that case had brought adequate material on record to prove that the cross cheques had not been given to parties from whom supplies were allegedly procured but these were encashed from a bank account in the name of another entity, possibly hawala dealer. Subsequently, the money deposited in that account was withdrawn in cash almost on the same da ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
