Jitendra Ravindra Malpure, Nashik V. Income-Tax Officer, Ward -1(4), Nashik

CO 49/PUN/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 1860 (ITAT-PUNE)
• Duration Of Justice: 10 month(s) 21 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 14-06-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 28-02-2019
• Assessment Year: 2011-2012
• Appeal Filed On: 24-07-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Bogus purchase; Principle of natural justice; Difference of opinion; Change of opinion

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, PUNE . , , BEFORE SHRI D. KARUNAKARA RAO, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO.2479/PUN/2016 / ASSESSMENT YEAR : 2011-12 ITO, WARD- 1(4), NASHIK. ....... / APPELLANT / V/S. JITENDRA RAVINDRA MALPURE, SHOP NO.1, C-1, YASH ARCADE, RAMESHWAR NAGAR, KAMATWADE SHIVAR, NASHIK-422008. PAN : AFDPM7516F / RESPONDENT C.O. NO.49/PUN/2018 (ARISING OUT OF ITA NO.2479/PUN/2016) ASSESSMENT YEAR : 2011-12 JITENDRA RAVINDRA MALPURE, SHOP NO.1, C-1, YASH ARCADE, RAMESHWAR NAGAR, KAMATWADE SHIVAR, NASHIK-422008. PAN : AFDPM7516F ....... / APPELLANT / V/S. ITO, WARD- 1(4), NASHIK. / RESPONDENT ASSESSEE BY : SHRI SANKET JOSHI REVENUE BY : SHRI RAJESH GAWALI / DATE OF HEARING : 03.06.2019 / DATE OF PRONOUNCEMENT : 14.06.2019 / ORDER PER D. KARUNAKARA RAO, AM: THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORDER OF THE CIT(A)- 1, NASHIK DATED 19.08.2016 FOR THE ASSESSMENT YEAR 2011-12. THE 2 ITA NO.2479/PUN/2016 C.O. NO.49/PUN/2018 ASSESSEE HAS ALSO FILED THE CROSS OBJECTION AGAINST THE GROUNDS RAISED BY THE REVENUE IN ITS APPEAL. 2. FIRST, WE SHALL TAKE UP THE APPEAL OF THE REVENUE FOR ADJUDICATION. THE GROUNDS RAISED BY THE REVENUE ARE AS UNDER :- 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A)-1, NASHIK WAS JUSTIFIED IN DELETING THE ADDITION OF RS.63,43,426/- FOR A.Y.2011-12 ON ACCOUNT OF ALLEGED BOGUS PURCHASES FROM HAWALA DEALERS/PARTIES. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A)-1, NASHIK WAS JUSTIFIED IN DELETING THE PURCHASES TREATED AS BOGUS WHEN THE APPELLANT HAD NOT BEEN ABLE TO PRODUCE THE CERTAIN PARTIES FROM WHOM PURCHASES WERE MADE WHEN LETTERS SENT TO THE PARTIES WERE RETURNED UNDELIVERED OR THE PARTIES DID NOT RESPOND? 3. WHETHER THE LEARNED CIT(A)-1, NASHIK ERRED IN ASSUMING THAT THE PURCHASES WERE ONLY INFLATED WHEN IT WAS CLEAR FROM THE CONDUCT OF THE ASSESSEE, THE PARTIES FOUND MISSING AND RESULTS OF THE INVESTIGATION OF ANOTHER GOVT. DEPARTMENT (SALES TAX), THAT THE PURCHASES COULD NOT BE PROVED AS GENUINE AND THEREFORE THE DISALLOWANCE BY THE AO WAS JUSTIFIED? 4. WHETHER THE LEARNED CIT(A)-1, NASHIK ERRED IN PRESUMING THAT SIMPLY BECAUSE NO ADDITION WAS MADE IN THE CASE OF SALES, IT WAS ACCEPTED AS GENUINE AND FURTHER ASSUMING THAT THEREBY PURCHASES SHOULD BE GENUINE? 5. WHETHER THE LEARNED CIT(A)-1, NASHIK ERRED IN ACCEPTING THE AFFIDAVITS FROM SUPPLIERS WITHOUT ANY EXPLANATION FROM THE ASSESSEE WHY THE SUPPLIERS COULD NOT APPEAR BEFORE THE AO WHEN THEY WERE CALLED FOR EXAMINATION? 6. THE APPELLANT PRAYS THAT THE ORDER OF THE LEARNED CIT(A)-1, NASHIK MAY PLEASE BE CANCELLED AND THE ORDER OF ASSESSING OFFICER MAY PLEASE BE RESTORED. 7. THE APPELLANT PRAYS TO ADDUCE SUCH FURTHER EVIDENCE TO SUBSTANTIATE HIS CASE. 8. THE APPELLANT PRAYS LEAVE TO ADD, ALTER, CLARIFY, AMEND AND OR WITHDRAW ANY GROUNDS OF APPEAL AS AND WHEN THE OCCASION DEMANDS. 3. BEFORE US, AT THE OUTSET, LD. COUNSEL FOR THE ASSESSEE DEMONSTRATED THAT THIS IS A CASE OF BOGUS PURCHASE WHERE THE TRAIL OF GOODS WERE DEMONSTRATED TO THE ASSESSING OFFICER/CIT(A). FURTHER, BRINGING OUR 3 ITA NO.2479/PUN/2016 C.O. NO.49/PUN/2018 ATTENTION TO THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A), LD. COUNSEL SUBMITTED THAT BOTH THE OFFICERS I.E. ASSESSING OFFICER AND CIT(A), RESORTED TO MAKING THE ADDITION AT THE RATE OF 100% (BY THE ASSESSING OFFICER) AND 25% (BY THE CIT(A)) OF THE BOGUS PURCHASES OF RS.63,43,426/- RESPECTIVELY. IN THIS BACKGROUND, LD. COUNSEL MENTIONED THAT IN THIS CASE THE DECISION OF THE TRIBUNAL IN THE CASE OF M/S. CHHABI ELECTRICALS PVT. LTD. AND OTHERS VS. DCIT IN ITA NO.795/PUN/2014, RELATING TO ASSESSMENT YEAR 2010-11, DECIDED ON 28-04-2017 SHOULD APPLY AND THE DISALLOWANCE SHOULD BE RESTRICTED ONLY @ 10% OF THE BOGUS PURCHASES. 4. THE LD. DR FOR THE REVENUE, ON THE OTHER HAND, RELIED HEAVILY ON THE ORDER OF THE ASSESSING OFFICER. 5. ON HEARING BOTH THE PARTIES, WE FIND THIS IS A CASE OF BOGUS PURCHASES REASSESSED BY REOPENING THE ASSESSMENT. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ISSUE OF VIOLATION TO THE PRINCIPLE OF NATURAL JUSTICE RAISED IN THE GROUNDS ON THE BASIS OF CHANGE OF OPINION. DEVIATING FROM THE ABOVE LEGAL ISSUE, THE ASSESSEE RELIED HEAVILY ON THE ORDER OF THE CO-ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF M/S. CHHABI ELECTRICALS PVT. LTD. AND OTHERS (SUPRA). THE ASSESSEE PLEADED FOR RESTRICTING THE DISALLOWANCE @ 10% OF THE BOGUS PURCHASES. THE ASSESSEE ALSO QUESTIONED THE DECISION OF THE CIT(A) IN RESTRICTING THE DISALLOWANCE 25% OF THE BOGUS PURCHASES RESPECTIVELY. MEANWHILE, WE FIND THE JURISDICTIONAL HIGH COURT HAS DECIDED SIMILAR ISSUE IN THE CASE OF PR.CIT VS. M/S. MOHOMMAD HAJI ADAM & CO. VIDE INCOME TAX APPEAL 4 ITA NO.2479/PUN/2016 C.O. NO.49/PUN/2018 NO.1004 OF 2016 DATED 11.02.2019 WAS PRONOUNCED. IN PARA 8 OF THIS JUDGEMENT (SUPRA), WE FIND THE HONBLE JURISDICTIONAL HIGH COURT DISMISSED THE APPEALS FILED BY THE REVENUE WITH THE FOLLOWING OBSERVATIONS :- 8. IN THE PRESENT CASE, AS NOTED ABOVE, THE ASSESSEE WAS A TRADER OF FABRICS. THE A.O. FOUND THREE ENTITIES WHO WERE INDULGING IN BOGUS BILLING ACTIVITIES. A.O. FOUND THAT THE PURCHASES MADE BY THE ASSESSEE FROM THESE ENTITIES WERE BOGUS. THIS BEING A FINDING OF FACT, WE HAVE PROCEEDED ON SUCH BASIS. DESPITE THIS, THE QUESTION ARISES WHETHER THE REVENUE IS CORRECT IN CONTENDING THAT THE ENTIRE PURCHASE AMOUNT SHOULD BE ADDED BY WAY OF ASSESSEE'S ADDITIONAL INCOME 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 THE DEPARTMENT HAD NOT DISPUTED THE ASSESSEE'S SALES. THERE WAS NO DISCREPANCY BETWEEN THE PURCHASES SHOWN BY THE ASSESSEE AND THE SALES DECLARED. THAT BEING THE POSITION, THE TRIBUNAL WAS CORRECT IN COMING TO THE CONCLUSION THAT THE PURCHASES CANNOT BE REJECTED WITHOUT DISTURBING THE SALES IN CASE OF A TRADER. THE TRIBUNAL, THEREFORE, CORRECTLY RESTRICTED 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 THE GUJARAT HIGH COURT IN THE CASE OF N.K. I (SUPRA) CANNOT BE APPLIED WITHOUT REFERENCE TO THE FACTS. IN FACT IN PARAGRAPH 8 OF THE SAME JUDGMENT THE COURT HELD AND OBSERVED AS UNDER- SO FAR AS THE QUESTION REGARDING ADDITION OF RS.3,70,78,125/- AS GROSS PROFIT ON SALES OF RS.37.08 CRORES MADE BY THE ASSESSING OFFICER DESPITE THE FACT THAT THE SAID SALES HAD ADMITTEDLY BEEN RECORDED IN THE REGULAR BOOKS DURING FINANCIAL YEAR 1997-98 IS CONCERNED, WE ARE OF THE VIEW THAT THE ASSESSEE CANNOT BE PUNISHED SINCE SALE PRICE IS ACCEPTED BY THE REVENUE. THEREFORE, EVEN IF 6 % GROSS PROFIT IS TAKEN INTO ACCOUNT, THE CORRESPONDING COST PRICE IS REQUIRED TO BE DEDUCTED AND TAX CANNOT BE LEVIED ON THE SAME PRICE. WE HAVE TO REDUCE THE SELLING PRICE ACCORDINGLY AS A RESULT OF WHICH PROFIT COMES TO 5.66 %. THEREFORE, CONSIDERING 5.66 % OF RS.3,70,78,125/- WHICH COMES TO RS.20,98,621.88 WE THINK IT FIT TO DIRECT THE REVENUE TO ADD RS.20,98,621.88 AS GROSS PROFIT AND MAKE NECESSARY DEDUCTIONS ACCORDINGLY. ACCORDINGLY, THE SAID QUESTION IS ANSWERED PARTIALLY IN FAVOUR OF THE ASSESSEE AND PARTIALLY IN FAVOUR OF THE REVENUE. 6. FOLLOWING THE ABOVE SAID RATIO OF THE JUDGMENT (SUPRA), THE CO- ORDINATE BENCH OF THE TRIBUNAL REMANDED THE ISSUE TO THE FILE OF THE ASSESSING OFFICER IN THE CASE OF SHRI NANDKISHORE KISHANRAO DILERAO VS. 5 ITA NO.2479/PUN/2016 C.O. NO.49/PUN/2018 ITO VIDE ITA NO.1851/PUN/2018 FOR THE ASSESSMENT YEAR 2010-11 DATED 30.04.2019 AS PER THE DISCUSSION GIVEN IN PARA 4 OF THE ORDER OF THE TRIBUNAL. IN THIS CASE ALSO, THE CIT(A) RESTRICTED THE DISALLOWANCE @ 10% OF THE BOGUS PURCHASES. FOR THE SAKE OF COMPLETENESS OF THIS ORDER, THE RELEVANT PARA 4 OF THE ORDER OF THE TRIBUNAL (SUPRA) IS EXTRACTED HEREUNDER :- 4. I HAVE HEARD BOTH THE SIDES AND GONE THROUGH THE RELEVANT MATERIAL ON RECORD. THE ISSUE OF BOGUS PURCHASES HAS RECENTLY COME UP FOR CONSIDERATION BEFORE THE HONBLE BOMBAY HIGH COURT IN PR.CIT VS. MOHOMMAD HAJI ADAM & CO. VIDE ITS JUDGMENT DATED 11-02-2019 IN ITA NO.1004 OF 2016 AND OTHERS, THE HONBLE JURISDICTIONAL HIGH COURT HAS HELD THAT NO AD HOC ADDITION AT THE RATE OF 10% OF BOGUS PURCHASES IS WARRANTED. RATHER THE ADDITION SHOULD BE MADE TO THE EXTENT OF DIFFERENCE BETWEEN THE GROSS PROFIT RATE ON GENUINE PURCHASES AND GROSS PROFIT RATE OF HAWALA PURCHASES. SUCH DETAILS ARE NOT READILY AVAILABLE WITH THE LD. AR AS WELL TO FACILITATE THE CALCULATION OF GROSS PROFIT RATES OF GENUINE AND HAWALA PURCHASES. UNDER THESE CIRCUMSTANCES, I SET-ASIDE THE IMPUGNED AND REMIT THE MATTER TO THE FILE OF AO FOR APPLYING THE RATIO LAID DOWN BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE ABOVE NOTED CASE AND RECOMPUTE THE AMOUNT OF ADDITION, IF ANY, AFTER ALLOWING A REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. 7. FROM THE ABOVE, IT IS EVIDENT THAT RESTRICTING THE DISALLOWANCE @ 10% OF THE BOGUS PURCHASES ON AD-HOC BASIS IS NOT APPROVED BY THE HONBLE JURISDICTIONAL HIGH COURT (SUPRA). RATHER THE ADDITION SHOULD BE RESTRICTED TO THE EXTENT OF DIFFERENCE BETWEEN THE GROSS PROFIT RATE ON GENUINE PURCHASES AND GROSS PROFIT RATE OF HAWALA PURCHASES. FOR THESE PURPOSES, THE MATTER STANDS REMANDED TO THE FILE OF THE ASSESSING OFFICER. CONSIDERING THE COMMONALITY OF THE FACTS AND REJECTING THE ASSESSEES REQUEST FOR RESTRICTING TO 10% OF BOGUS PURCHASES, WE ARE OF THE OPINION THE ISSUE UNDER CONSIDERATION SHOULD ALSO BE REMANDED TO THE FILE OF THE ASSESSING OFFICER WITH SIMILAR DIRECTION AS GIVEN IN PARA 4 OF THE ORDER OF THE TRIBUNAL (SUPRA). THE ASSESSING OFFICER IS ALSO 6 ITA NO.2479/PUN/2016 C.O. NO.49/PUN/2018 DIRECTED TO EXAMINE THE ARGUMENTS RELATING TO THE CHANGE OF OPINION WHILE PASSING A SPEAKING ORDER ON TECHNICAL GROUND. ACCORDINGLY, ALL THE ISSUES RAISED BY THE REVENUE IN THIS APPEAL BOTH ON LEGAL AS WELL AS ON MERITS STAND ALLOWED FOR STATISTICAL PURPOSES. C.O.NO.49/PUN/2018 (BY ASSESSEE) 8. SINCE THE ISSUE RAISED IN THE GROUNDS OF APPEAL OF THE REVENUE IS REMANDED TO THE FILE OF THE ASSESSING OFFICER FOR FRESH ADJUDICATION, THEREFORE, THE CROSS OBJECTION OF THE ASSESSEE BECOMES ACADEMIC EXERCISE AND THE SAME IS DISMISSED AS INFRUCTUOUS. 9. IN THE RESULT, THE APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES AND THE CROSS OBJECTION OF THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED ON 14 TH DAY OF JUNE, 2019. SD/- SD/- ( /VIKAS AWASTHY) ( . /D. KARUNAKARA RAO) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / PUNE; / DATED : 14 TH JUNE, 2019. SUJEET / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. THE CIT(A)-1, NASHIK. 4. THE CCIT, NASHIK. 5. , , , / DR, ITAT, A BENCH, PUNE. 6. / GUARD FILE. / BY ORDER, // TRUE COPY // SENIOR PRIVATE SECRETARY , / ITAT, PUNE.