SHRI NARESH S. KHANNA, MUMBAI V. ITO 24(3)(1), MUMBAI

CO 246/MUM/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 8935 (ITAT-MUMBAI)
• Duration Of Justice: 2 month(s) 27 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 14-01-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 18-10-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: KAVITA P KAUSHIKLD
• Assessee Lawyers: ABHISHEK JHUNJHUNWALALD
• Keywords: Bogus purchase; Condonation of delay
• Section: 143(3); 142(1); 133(6); 143(2); 64; 148

Judgement Text

SHRI NARESH S.KHANNA ASSESSMENT YEAR :2010-11 1 IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI , , BEFORE HONBLE SHRI MAHAVIR SINGH, JM AND HONBLE SHRI MANOJ KUMAR AGGARWAL, AM ./ I.T.A. NO.5858/MUM/2018 ( / ASSESSMENT YEAR : 2010-11 ) INCOME TAX OFFICER - 24(3)(1) ROOM NO.415, 4TH FLOOR PIRAMAL CHAMBER, PAREL MUMBAI- 400 012. / VS. SHRI NARESH S. KHANNA 302-B, SANJIVAN ENCLAVE SEVEN BUNGLOW, J.P. ROAD, ANDHERI(W), MUMBAI- 400 058. $% ./ ./PAN/GIR NO. AAHPK-3259-J ( %' /APPELLANT ) : ( ()%' / RESPONDENT ) & C.O. NO.246/MUM/2019 ARISING OUT OF ITA NO. 5858/MUM/2018] ( / ASSESSMENT YEAR : 2010-11 ) SH RI NARESH S. KHANNA 302-B, SANJIVAN ENCLAVE SEVEN BUNGLOW, J.P. ROAD, ANDHERI(W), MUMBAI- 400 058. / VS. INCOME TAX OFFICER - 24(3)(1) ROOM NO.415, 4TH FLOOR PIRAMAL CHAMBER, PAREL MUMBAI- 400 012. $% ./ ./PAN/GIR NO. AAHPK-3259-J ( %' /APPELLANT ) : ( ()%' / RESPONDENT ) ASSESSEE BY : SHRI ABHISHEK JHUNJHUNWALA-LD. AR REVENUE BY : MS. KAVITA P. KAUSHIK-LD. DR / DATE OF HEARING : 14/01/2020 / DATE OF PRONOUNCEMENT : 14/01/2020 / O R D E R MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1.1 AFORESAID APPEAL BY REVENUE FOR ASSESSMENT YEAR [IN SHORT REFERRED TO AS AY] 2010-11 CONTEST THE ORDER OF LD. COMMIS SIONER OF INCOME- SHRI NARESH S.KHANNA ASSESSMENT YEAR :2010-11 2 TAX (APPEALS)-36, MUMBAI, [IN SHORT REFERRED TO AS CIT(A)], APPEAL NO. CIT(A)-36/IT-237/ITO-24(3)(1)/2017-18 ORDER DATED 2 5/07/2018 ON FOLLOWING GROUNDS OF APPEAL: - THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN RES TRICTING THE DISALLOWANCE MADE BY THE AO TO ONLY 12.5% OF THE TOTAL BOGUS PURCHASES O F RS.66,97,799/-, NOTWITHSTANDING THAT THE ASSESSEE COULD NOT PROVE T HE GENUINENESS OF THE PURCHASE BY EITHER PRODUCING THE SUPPLIER PARTIES OR BY FURN ISHING OTHER DOCUMENTS WHICH COULD HAVE CONCLUSIVELY ESTABLISHED RECEIPTS OF THE GOODS CLAIMED TO HAVE BEEN PURCHASED. 1.2 THE ASSESSEE HAS FILED CROSS-OBJECTIONS AGAINST THE SAME WHICH IS STATED TO HAVE BEEN FILED WITH A DELAY OF 36 DAYS. THE ASSESSEE SEEK CONDONATION OF DELAY DUE TO ADVERSE MEDICAL CONDITI ONS BEING FACED BY THE ASSESSEE. THE RELEVANT MEDICAL RECORDS HAVE BEE N PLACED ON RECORD. KEEPING IN VIEW THE FACT THAT THE ASSESSEE IS A SEN IOR CITIZEN, THE BENCH FORMED AN OPINION THAT THE DELAY WAS TO BE CONDONED . ACCORDINGLY, THE MATTER WAS PROCEEDED WITH ON MERITS. THE ASSESSEE, IN ITS CROSS- OBJECTIONS ASSAILS THE ADDITIONS SUSTAINED BY LEARN ED FIRST APPELLATE AUTHORITY. 1.3 WE HAVE CAREFULLY HEARD RIVAL SUBMISSIONS AND P ERUSED RELEVANT MATERIAL ON RECORD. WE HAVE ALSO DELIBERATED ON JUD ICIAL PRONOUNCEMENTS CITED BEFORE US. OUR ADJUDICATION TO SUBJECT MATTER OF THE APPEAL WOULD BE AS GIVEN IN THE SUCCEEDING PARA GRAPHS. 2.1 FACTS ON RECORD WOULD REVEAL THAT THE ASSESSEE BEING RESIDENT INDIVIDUAL STATED TO BE ENGAGED AS DEALER OF AUDIO VISUAL EQUIPMENT UNDER PROPRIETORSHIP CONCERN NAMELY M/S KHANNA EXPO RTS, WAS ASSESSED FOR IMPUGNED AY U/S. 143(3) R.W.S. 147 ON 22/12/2017 WHEREIN THE INCOME OF THE ASSESSEE WAS DETERMINED AT RS.83. 64 LACS, AFTER SOLE ADDITION OF ALLEGED BOGUS PURCHASES FOR RS.66.97 LA CS AS AGAINST SHRI NARESH S.KHANNA ASSESSMENT YEAR :2010-11 3 RETURNED INCOME OF RS.16.66 LACS E-FILED BY THE ASS ESSEE ON 04/10/2010 WHICH WAS PROCESSED U/S.143(1). 2.2 PURSUANT TO RECEIPT OF CERTAIN INFORMATION FROM SALES TAX DEPARTMENT, GOVT. OF MAHARASHTRA / DGIT (INVESTIGAT ION), IT TRANSPIRED THAT THE ASSESSEE OBTAINED BOGUS PURCHASES BILLS AG GREGATING TO RS.66.97 LACS FROM AS MANY AS 6 ENTITIES, THE DETAI LS OF WHICH HAVE ALREADY BEEN EXTRACTED IN PARA-5 OF THE QUANTUM ASS ESSMENT ORDER. ACCORDINGLY, THE CASE WAS REOPENED AS PER DUE PROCE SS OF LAW VIDE ISSUANCE OF NOTICE U/S 148 ON 31/03/2017 WHICH WAS FOLLOWED BY STATUTORY NOTICES ISSUED U/S 143(2) AND 142(1) WHER EIN THE ASSESSEE WAS DIRECTED TO SUBSTANTIATE THE PURCHASE TRANSACTI ONS. THE ASSESSEE REFLECTED TURNOVER OF RS.321.35 LACS WITH GP / NP R ATES OF 4.94% % 3.57% RESPECTIVELY. 2.3 THE ASSESSEE DEFENDED THE PURCHASES BY FURNISHI NG COPIES OF PURCHASE INVOICES, BANK STATEMENTS EVIDENCING PAYME NT TO SUPPLIERS THROUGH BANKING CHANNELS, LEDGER EXTRACTS ETC. HOWE VER, NOTICES ISSUED U/S 133(6) TO ALL THE ENTITIES, TO CONFIRM THE TRAN SACTIONS, WERE RETURNED UNDELIVERED BY THE POSTAL AUTHORITIES. THE ASSESSEE FAILED TO PRODUCE ANY OF THE SUPPLIERS BUT RELIED ON THE DOCUMENTS FU RNISHED IN SUPPORT OF THE PURCHASE TRANSACTIONS. THE ASSESSEE ALSO FAILED TO PROVIDE THE LATEST ADDRESSES OF THE SUPPLIERS. FINALLY, NOT SATISFIED WITH ASSESSEES SUBMISSIONS / EXPLANATIONS, THE STATED PURCHASES WE RE TREATED AS BOGUS PURCHASES AND ADDED TO THE INCOME OF THE ASSESSEE. 3. THE LEARNED CIT(A), AFTER CONSIDERING ASSESSEES SUBMISSIONS AND INTER-ALIA, RELYING UPON THE DECISION OF HONBLE GUJARAT HIGH C OURT IN CIT V/S SIMIT P.SHETH (355 ITR 290) RESTRICTED THE ADDITIONS TO 12.5% OF SHRI NARESH S.KHANNA ASSESSMENT YEAR :2010-11 4 THESE PURCHASES. THE SAID ADJUDICATION HAS GIVEN RI SE TO CROSS-APPEALS BEFORE US. THE REVENUE IS AGGRIEVED BY REDUCTION IN ADDITIONS WHEREAS THE ASSESSEE IS AGGRIEVED BY ADDITION OF 12.5% AS S USTAINED BY LD. CIT(A). 4. AFTER CAREFUL CONSIDERATION OF ORDERS OF LOWER A UTHORITIES AND AFTER APPRECIATING THE ARGUMENTS ADVANCED BY RESPECTIVE R EPRESENTATIVES, WE ARE OF THE CONSIDERED OPINION THAT THERE COULD BE N O SALE WITHOUT ACTUAL PURCHASE OF MATERIAL KEEPING IN VIEW THE ASSESSEES NATURE OF BUSINESS. UNDISPUTEDLY THE ASSESSEE WAS IN POSSESSION OF PRIM ARY PURCHASE DOCUMENTS AND THE PAYMENTS TO THE SUPPLIERS WERE TH ROUGH BANKING CHANNELS. THE ASSESSEES BOOKS OF ACCOUNTS WERE SUB JECTED TO AUDIT. HOWEVER, AT THE SAME TIME, THE ASSESSEE MISERABLY F AILED TO SUBSTANTIATE THE PURCHASES AND FAILED TO PRODUCE AN Y OF THE SUPPLIERS TO CONFIRM THE TRANSACTIONS. NOTICES ISSUED U/S 133(6) TO ALL THE ENTITIES ELICITED NO RESPONSE AND THEREFORE, THE PRIMARY ONU S CASTED UPON ASSESSEE, IN THIS REGARD, REMAINED UNDISCHARGED. 5. THE STATED FACTUAL MATRIX, IN OUR CONSIDERED OPI NION, WOULD MAKE IT A FIT CASE TO MAKE ESTIMATED ADDITIONS TO ACCOUNT F OR PROFIT ELEMENT EMBEDDED IN THESE PURCHASE TRANSACTIONS TO FACTORIZ E FOR PROFIT EARNED BY ASSESSEE AGAINST POSSIBLE PURCHASE OF MATERIAL I N THE GREY / UNORGANIZED MARKET AND UNDUE BENEFIT OF VAT AGAINST SUCH BOGUS PURCHASES, WHICH LEARNED FIRST APPELLATE AUTHORITY HAS RIGHTLY DONE SO. HOWEVER, WE FIND THAT THE ASSESSEE HAS REFLECTED GP RATE OF 4.94% IN THIS YEAR WHICH IS MORE THAN GP RATE REFLECTED IN P RECEDING TWO YEARS. THEREFORE, WE SCALE DOWN THE ESTIMATED ADDITIONS FR OM 12.5% TO 8% OF ALLEGED BOGUS PURCHASES OF RS.66,97,799/-. THE SAME COMES TO SHRI NARESH S.KHANNA ASSESSMENT YEAR :2010-11 5 RS.5,35,824/-. THE IMPUGNED ORDER STAND MODIFIED TO THAT EXTENT. THE LD.AO IS DIRECTED TO RE-COMPUTE THE INCOME OF THE A SSESSEE. 6. RESULTANTLY, THE REVENUES APPEAL STANDS DISMISS ED WHEREAS THE ASSESSEES CROSS-OBJECTIONS STANDS PARTLY ALLOWED T O THE EXTENT INDICATED IN THE ORDER. ORDER PRONOUNCED IN THE OPEN COURT ON 14 TH JANUARY, 2020. SD/- SD/- (MAHAVIR SINGH) (MA NOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 14/01/2020 SR.PS, JAISY VARGHESE !'! / COPY OF THE ORDER FORWARDED TO : 1. %' / THE APPELLANT 2. ()%' / THE RESPONDENT 3. G ( ) / THE CIT(A) 4. G / CIT CONCERNED 5. HI(BJ , J , / DR, ITAT, MUMBAI 6. IKLM / GUARD FILE / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI.