BHIKHADEVI J. PATEL, MUMBAI V. ITO 33 (1)(2), MUMBAI

CO 236/MUM/2019

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 2093 (ITAT-MUMBAI)
• Duration Of Justice: 1 month(s) 27 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 06-12-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 10-10-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: KUMAR PADMAPANI BORA
• Keywords: Bogus purchase; Accommodation entries
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC, BENCH MUMBAI BEFORE SHRI R.C.SHARMA, ACCOUNTATNT MEMBER ITA NO. 6396/MUM/2018 ( ASSESSMENT YEAR: 2009-10) INCOME TAX OFFICER 33(1)(2), MUMBAI. VS. SMT. BHIKHADEVI J PATEL, C-312, RASHMI AVENUE, THAKUR COMPLEX, KANDIVALI (EAST), MUMBAI-400101. PAN/GIR NO.AEDPP 3340 M (APPELLANT ) .. (RESPONDENT ) C.O. NO. 236/MUM/2019 (ARISING OUT OF ITA NO. 6396/MUM/2018) ( ASSESSMENT YEAR: 2009-10) SMT. BHIKHADEVI J PATEL, C-312, RASHMI AVENUE, THAKUR COMPLEX, KANDIVALI (EAST), MUMBAI-400101. VS. INCOME TAX OFFICER 33(1)(2), MUMBAI. PAN/GIR NO. AEDPP 3340 M (APPELLANT ) .. (RESPONDENT ) REVENUE BY SHRI KUMAR PADMAPANI BORA (SR.DR) ASSESSEE BY SHRI BHUPENDRA SHAH (AR) DATE OF HEARING 04/12/2019 DATE OF PRONOUNCEMENT 06/12/2019 / O R D E R PER: R.C. SHARMA, A.M. THE APPEAL FILED BY THE REVENUE AND CROSS OBJECTIO N FILED BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF THE LD. CIT(A)-45, MUMBAI DATED 02/07/2018 FOR THE A.Y. 2009-10 IN THE MATTER OF ORDER PASSED U/S 143(3) R.W.S. 147 OF THE INCOME TAX ACT, 1961 (IN S HORT, THE ACT). ITA NO. 6396/MUM/2018 & CO 236/MUM/2019 ITO VS SMT. BHIKHADEVI J PATEL 2 2. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PER USED. FACTS IN BRIEF ARE THAT THE ASSESSEE IS ENGAGED IN THE TRADI NG OF FERROUS AND NON- FERROUS METALS. THE A.O. GOT INFORMATION FROM THE D GIT(INV.), MUMBAI/SALES TAX DEPARTMENT REGARDING THE ASSESSEE BEING ENGAGED IN TAKING ACCOMMODATION ENTRIES WITH REGARD TO PURCHAS ES. AFTER MAKING ENQUIRY WITH THE SUPPLIER OF GOODS, THE A.O. FOUND THAT THE ASSESSEE HAS TAKEN BOGUS PURCHASE BILLS OF RS. 19,09,152/- WHICH WAS ADDED BY HIM IN THE INCOME OF THE ASSESSEE. BY THE IMPUGNED ORDER, THE LD. CIT(A) RESTRICTED THE ADDITION ON ACCOUNT OF BOGUS PURCHAS ES TO THE EXTENT OF 12.5%, AGAINST WHICH, THE REVENUE IS IN APPEAL AND THE ASSESSEE HAS FILED C.O. BEFORE THE ITAT. 3. I HAVE CONSIDERED THE RIVAL SUBMISSIONS AND CARE FULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND FOUND FROM THE RECORD THAT THE ASSESSEE WAS FOUND TO BE ENGAGED IN BUSINESS OF RES ELLING IN FERROUS AND NON-FERROUS METALS. INFORMATION WAS RECEIVED FROM D GIT(INV.), MUMBAI/SALES TAX DEPARTMENT THAT THE ASSESSEE HAS M ADE BOGUS PURCHASES AND DEALING FROM VARIOUS PARTIES AMOUNTIN G TO RS. 19,09,152/. AFTER MAKING DETAILED INQUIRY, THE A.O. FOUND THE P URCHASES TO BE BOGUS, MADE WITHOUT TAKING PHYSICAL DELIVERY OF GOODS, ACC ORDINGLY, SAME WAS ADDED BY THE A.O. TO THE ASSESSEES INCOME. BY THE IMPUGNED ORDER, THE LD. CIT(A) AFTER CONSIDERING THE FACT THAT THE DEPA RTMENT HAS ACCEPTED ITA NO. 6396/MUM/2018 & CO 236/MUM/2019 ITO VS SMT. BHIKHADEVI J PATEL 3 THE SALE OF THE GOODS ALLEGED TO BE PURCHASED WITHO UT DELIVERY, RESTRICTED THE ADDITION TO THE EXTENT OF 12.5% OF SUCH PURCHAS ES. 4. I HAVE CONSIDERED THE RIVAL CONTENTIONS AND CARE FULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WITH RESPECT T O ISSUE REGARDING ADDITION IN RESPECT OF BOGUS PURCHASES, THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF PR.CIT VS M/S MOHOMMAD HAJI AD AM & CO. IN ITA NO. 1004 OF 2016 VIDE ITS ORDER DATED 11/02/2019 H AVE HELD AS UNDER: 8. IN THE PRESENT CASE, AS NOTED ABOVE, THE ASSESS EE WAS A TRADER OF FABRICS. THE A.O. FOUND THREE ENTITIES WHO WERE IND ULGING IN BOGUS BILLING ACTIVITIES. A.O. FOUND THAT THE PURCH ASES MADE BY THE ASSESSEE FROM THESE ENTITIES WERE BOGUS. THIS BEING A FINDING OF FACT, WE HAVE PROCEEDED ON SUCH BASIS. DESPITE THIS, THE QUE STION ARISES WHETHER THE REVENUE IS CORRECT IN CONTENDING THAT THE ENTIR E PURCHASE AMOUNT SHOULD BE ADDED BY WAY OF ASSESSES ADDITIONAL INCOM E OR THE ASSESSEE IS CORRECT IN CONTENDING THAT SUCH LOGIC CANNOT BE APPLIED. THE FINDING OF THE CIT(A) AND THE TRIBUNAL WOULD SUGGEST THAT T HE DEPARTMENT HAD NOT DISPUTED THE ASSESSEE'S SALES. THERE WAS NO DISCREPANCY BETWEEN THE PURCHASES SHOWN BY THE ASSE SSEE AND THE SALES DECLARED. THAT BEING THE POSITION, TH E TRIBUNAL WAS CORRECT IN COMING TO THE CONCLUSION THAT THE PURCHA SES CANNOT BE REJECTED WITHOUT DISTURBING THE SALES IN CASE OF A TRADER. THE TRIBUNAL, THEREFORE, CORRECTLY RESTRICT ED THE ADDITIONS LIMITED TO THE EXTENT OF BRINGING THE G.P. RATE ON PURCHASES AT THE SAME RATE OF OTHER GENUINE PURCHASES. THE DECISION OF TH E GUJARAT HIGH COURT IN THE CASE OF N.K. INDUSTRIES LTD.. (SUPRA) CANNOT BE APPLIED WITHOUT REFERENCE TO THE FACTS. IN FACT IN PARAGRAPH 8 OF T HE SAME JUDGMENT THE COURT HELD AND OBSERVED AS UNDER- ITA NO. 6396/MUM/2018 & CO 236/MUM/2019 ITO VS SMT. BHIKHADEVI J PATEL 4 SO FAR AS THE QUESTION REGARDING ADDITION OF RS.3,7 0,78,125/- AS GROSS PROFIT ON SALES OF RS.37.08 CRORES MADE BY TH E ASSESSING OFFICER DESPITE THE FACT THAT THE SAID SALES HAD AD MITTEDLY BEEN RECORDED IN THE REGULAR BOOKS DURIN FINANCIAL YEAR 1997- 98 IS CONCERNED, WE ARE OF THE VIEW THAT THE ASSESS EE CANNOT BE PUNISHED SINCE SALE PRICE IS ACCEPTED BY THE REV ENUE. THEREFORE, EVEN IF 6 % GROSS PROFIT IS TAKEN INTO A CCOUNT, THE CORRESPONDING COST PRICE IS REQUIRED TO BE DEDUCTED AND TAX CANNOT BE LEVIED ON THE SAME PRICE. WE HAVE TO REDU CE THE SELLING PRICE ACCORDINGLY AS A RESULT OF WHICH PROF IT CONIES TO 5.66%. THEREFORE, CONSIDERING 5.66 % OF RS.3,70,78,125/WHI CH COMES TO RS.2098.62 1.88 WE THINK IT FIT TO DIRECT THE REVENUE TO ADD RS.20,98.621.88 AS G ROSS PROFIT AND MAKE NECESSARY DEDUCTIONS ACCORDINGLY. ACCORDINGLY, THE SAID QUESTION IS ANSW ERED PARTIALLY IN FAVOUR OF THE ASSESSEE AND PARTIALLY IN FAVOUR O F THE REVENUE.' 5. THE COORDINATE BENCH OF THE ITAT, MUMBAI IN THE CASE OF SHRI RAMESHKUMAR DAULATRAJ VS ITO IN ITA NO. 4192/MUM/20 18 ORDER DATED 07/05/2019 AFTER FOLLOWING THE ABOVE DECISION OF HO NBLE BOMBAY HIGH COURT HELD AS UNDER: 9. WHEN THESE FACTS WERE CONFRONTED TO THE LEARNED SR. DR, HE REQUESTED FOR APPLICATION OF REASONABLE PROFIT RATE AND ACCORDING TO HIM THE PROFIT RATE APPLIED BY THE AO AND CONFIR MED BY CIT(A) IS QUITE REASONABLE IN VIEW OF THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF SMITH P.SETH (SUPRA). WE HAVE CONSIDERE D THE RIVAL CONTENTIONS ITA NO. 4192/MUM/2018 AND ARE OF THE VI EW THAT HON'BLE BOMBAY HIGH COURT IN THE CASE OF MOHAMMAD HAJI ADAM & CO. AND ORS. (SUPRA) HAS CONSIDERED THIS ISSUE AND RESPECTF ULLY FOLLOWING THE SAME, WE DIRECT THE AO TO RESTRICT THE PROFIT RATE ONLY TO THE EXTENT OF DIFFERENTIAL PERCENTAGE AS DECLARED ON THE BOGUS PU RCHASES AND AS DECLARED ON THE REGULAR PURCHASES, HENCE, WE DIRECT THE AO A CCORDINGLY. 6. IT IS CLEAR FROM THE ABOVE DECISIONS THAT IN CAS E OF BOGUS PURCHASES WHERE SALES ARE ACCEPTED, THE ADDITION IS REQUIRED TO BE MADE ONLY TO THE EXTENT OF DIFFERENCE BETWEEN THE GP DEC LARED BY THE ITA NO. 6396/MUM/2018 & CO 236/MUM/2019 ITO VS SMT. BHIKHADEVI J PATEL 5 ASSESSEE ON NORMAL PURCHASES VIS A VIS BOGUS PURCHA SES. RESPECTFULLY FOLLOWING THE ORDER OF THE HONBLE JURISDICTIONAL H IGH COURT AND THE COORDINATE BENCH OF THE ITAT, MUMBAI, I DIRECT THE A.O. TO RESTRICT THE ADDITION TO THE EXTENT OF LOWER GP DECLARED BY THE ASSESSEE IN RESPECT OF BOGUS PURCHASES AS COMPARED TO GP ON NORMAL PURCHAS ES. THE ASSESSEE IS ALSO DIRECTED TO GIVE FULL DETAILS TO THE A.O. W ITH REGARD TO GP EARNED ON NORMAL PURCHASES AND ALSO GP EARNED ON ALLEGED B OGUS PURCHASES. I DIRECT ACCORDINGLY. 7. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D WHEREAS THE C.O. OF ASSESSEE IS ALLOWED IN PART. ORDER PRONOUNCED IN THE OPEN COURT ON 06 TH DECEMBER, 2019. SD/- (R.C.SHARMA) ACCOUNTANT MEMBER MUMBAI; DATED 06/12/2019 *RANJAN COPY OF THE ORDER FORWARDED TO : BY ORDER, (ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//