SHRI VAGARAM HARLALJI BISHNOI, MUMBAI V. I.T.O. - 19(3)(5), MUMBAI

ITA 1036/MUM/2018

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 2484 (ITAT-MUMBAI)
• Duration Of Justice: 8 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-11-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 22-02-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PBG
• Assessee Lawyers: SATISH MODI SHRI S K BEPARI
• Keywords: Bogus purchase
• Section: 133(6); 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'SMC' BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO. 1036/MUM/2018 (ASSESSMENT YEAR: 2009-10) SHRI VAGARAM HARLALJI BISHNOI 301, 3RD FLOOR, F WING, VAIBHAV 63 DADARKAR COMPOUND TARDEO, MUMBAI 400034 VS. INCOME TAX OFFICER - 19(3)(5) NANA CHOWK, MATRUMANDIR MUMBAI 400007 PAN ABYPB8266G APPELLANT RESPONDENT APPELLANT BY: SHRI SATISH MODI RESPONDENT BY: SHRI S.K. BEPARI DATE OF HEARING: 27.09.2018 DATE OF PRONOUNCEMENT: 14.11.2018 O R D E R PER SAKTIJIT DEY, JM THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-53, MUMBAI DAT ED 22.12.2017AND IT RELATES TO A.Y. 2009-10. 2. THE ONLY ISSUE ARISING FOR CONSIDERING IN THE PRESE NT APPEAL IS IN RELATION TO THE ADDITION MADE OF ` 11,17,155/- ON ACCOUNT OF BOGUS PURCHASE. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE, AN I NDIVIDUAL, IS CARRYING ON BUSINESS OF TRADING IN FERROUS AND NON- FERROUS METALS THROUGH HIS PROPRIETARY CONCERN, M/S. VIJAY METAL DISTRIBUT ORS. FOR THE ASSESSMENT YEAR UNDER DISPUTE THE ASSESSEE FILED ITS RETURN OF INCOME ON 27.09.2009 DECLARING TOTAL INCOME OF ` 4,70,280/-. THE RETURN OF INCOME FILED BY THE ASSESSEE WAS INITIALLY PROCESSED UNDER SECTION 143( 1) OF INCOME TAX ACT, 1961 (HEREINAFTER 'THE ACT'). SUBSEQUENTLY, ON THE BASIS OF INFORMATION RECEIVED FROM THE DGIT (INV.) WING, MUMBAI AS WELL AS THE SALES TAX DEPARTMENT OF GOVERNMENT OF MAHARASHTRA THAT PURCHA SES CLAIMED TO ITA NO. 1036/MUM/2018 SHRI VAGARAM HARLALJI BISHNOI 2 HAVE BEEN MADE BY THE ASSESSEE FROM TEN PARTIES / E NTITIES AGGREGATING TO ` 89,37,244/- IS BOGUS, SINCE, THE CONCERNED PARTIES ARE HAWALA OPERATORS AND ARE PROVIDING ACCOMMODATION BILLS WITHOUT ACTUA L SALE TRANSACTION AND DELIVERY OF GOODS, THE ASSESSING OFFICER (AO) REOPE NED THE ASSESSMENT UNDER SECTION 147 OF THE ACT. DURING THE ASSESSMENT PROCEEDINGS THE AO APART FROM CALLING UPON THE ASSESSEE TO PROVE THE G ENUINENESS OF THE PURCHASES CLAIMED TO HAVE BEEN MADE FROM THE CONCER NED PARTIES THROUGH PROPER DOCUMENTARY EVIDENCES ALSO CONDUCTED INDEPEN DENT ENQUIRY BY ISSUANCE OF NOTICE UNDER SECTION 133(6) OF THE ACT. AS ALLEGED BY THE AO, ALL THE NOTICES ISSUED UNDER SECTION 133(6) OF THE ACT WERE RETURNED BACK BY THE POSTAL AUTHORITIES WITH THE REMARKS NOT KNOWN , NO SUCH ADDRESS, LEFT, ETC. THUS, THE AO CALLED UPON THE ASSESSEE TO PRODUCE THE CONCERNED PARTIES BEFORE HIM AND ALSO TO EXPLAIN WHY THE PURC HASES SHOWN TO HAVE BEEN MADE FROM THOSE PARTIES SHOULD NOT BE TREATED AS NON-GENUINE. IN RESPONSE, THE ASSESSEE WHILE JUSTIFYING THE PURCHAS ES CLAIMED TO HAVE BEEN MADE AS GENUINE ALSO FURNISHED SOME DOCUMENTARY EVI DENCES LIKE COPIES OF LEDGER ACCOUNTS AND PURCHASE INVOICES, COPIES OF BA NK STATEMENT EVIDENCING PAYMENT MADE TOWARDS THE PURCHASES, QUAN TITATIVE TALLY OF PURCHASES AND SALES, ETC. THE AO, HOWEVER, WAS NOT CONVINCED WITH THE EXPLANATION OF THE ASSESSEE. THOUGH, THE AO DID NOT DISPUTE THE CORRELATION OF PURCHASES ITSELF BUT HE WAS OF THE V IEW THAT THE ASSESSEE HAS FAILED TO PROVE THE GENUINENESS OF PURCHASES MADE F ROM THE CONCERNED PARTIES. ACCORDINGLY, HE REJECTED THE BOOKS OF ACCO UNT OF THE ASSESSEE UNDER SECTION 145(3) OF THE ACT. FURTHER, THE AO OB SERVED THAT THE ASSESSEE HAS INDULGED IN SUCH ACTIVITY TO SUPPRESS THE TRUE PROFIT AND REDUCE THE TAX LIABILITY. ACCORDINGLY, RELYING UPON THE DECISION O F THE HON'BLE GUJARAT HIGH COURT IN THE CASE CIT VS. SIMIT P. SHETH (2013) 356 ITR 451 HE CONCLUDED THAT THE PROFIT ELEMENT EMBEDDED IN THE BOGUS PURCH ASES HAS TO BE CONSIDERED FOR ADDITION. ACCORDINGLY, APPLYING THE PROFIT RATE OF 12.5% ON THE ALLEGED NON-GENUINE PURCHASES OF ` 89,37,244/- HE MADE AN ADDITION OF ` 11,17,155/-. THOUGH, THE ASSESSEE CHALLENGED THE AF ORESAID ADDITION BEFORE THE LEARNED CIT(A), HOWEVER HE FAILED IN HIS ATTEMPT. ITA NO. 1036/MUM/2018 SHRI VAGARAM HARLALJI BISHNOI 3 4. THE LEARNED AUTHORISED REPRESENTATIVE (A.R.) SUBMIT TED, THE ASSESSEE IS A TRADER IN IRON AND STEEL WHICH HAS A VERY LOW MARGIN OF PROFIT VARYING BETWEEN 1% TO 5%. HE SUBMITTED, THE ASSESSE E HAS ESTABLISHED ONE TO ONE CORRELATION BETWEEN PURCHASES AND SALES AND IT CANNOT BE SAID THAT THE PURCHASES MADE BY THE ASSESSEE ARE NON-GENUINE. HE SUBMITTED, WHEN THE SALES EFFECTED BY THE ASSESSEE ARE NOT DISPUTED , EVEN ASSUMING THAT THE ASSESSEE HAS CONCLUSIVELY FAILED TO PROVE THE PURCH ASES, THE ADDITION CAN ONLY BE MADE APPLYING THE GROSS PROFIT RATE. THUS, HE SUBMITTED, LOOKING AT THE NATURE OF BUSINESS CARRIED ON BY THE ASSESSEE, ESTIMATION OF PROFIT @5% OF THE ALLEGED NON-GENUINE PURCHASE WILL BE REASONA BLE. 5. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPRESE NTATIVE. RELIED UPON THE OBSERVATIONS OF THE LEARNED CIT(A). 6. I HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE FACTUAL MATRIX OF THE CASE REVEALS THAT ON THE BASIS OF SPECIFIC INFORMATION IN THE POSSESSION OF THE AO REVEALING T HAT CERTAIN PURCHASES CLAIMED TO HAVE BEEN MADE BY THE ASSESSEE ARE NOT G ENUINE, THE ASSESSMENT WAS REOPENED UNDER SECTION 147 OF THE AC T. DURING THE ASSESSMENT PROCEEDINGS, THOUGH, THE ASSESSEE PRODUC ED SOME DOCUMENTARY EVIDENCES TO PROVE THE GENUINENESS OF T HE PURCHASES MADE, HOWEVER, NO EVIDENCE WAS FURNISHED BY THE ASSESSEE TO PROVE THE ACTUAL DELIVERY OF GOODS AT ASSESSEES BUSINESS PREMISES. FURTHER, THE ASSESSEE WAS UNABLE TO PRODUCE A SINGLE PARTY BEFORE THE AO THOUGH THE AO HAD SPECIFICALLY CALLED UPON THE ASSESSEE TO DO SO. EVE N, THE NOTICES ISSUED UNDER SECTION 133(6) OF THE ACT BY THE AO TO THE CO NCERNED PARTIES COULD NOT BE SERVED BY THE POSTAL AUTHORITIES DUE TO NON- AVAILABILITY OF THOSE PARTIES IN THE GIVEN ADDRESS. THUS, FROM THE AFORES AID FACTS IT IS VERY MUCH CLEAR THAT THE EXISTENCE OF THE PARTIES FROM WHOM T HE ASSESSEE CLAIMED TO HAVE MADE PURCHASES WAS NOT ESTABLISHED. THEREFORE, THE CLAIM OF THE ASSESSEE THAT PURCHASES ARE GENUINE COULD NOT BE CO NCLUSIVELY PROVED. AT THE SAME TIME, IT IS EVIDENT, DURING THE ASSESSMENT PROCEEDINGS THE ASSESSEE HAD FURNISHED QUANTITATIVE TALLY OF PURCHA SES AND SALES AND THEREFORE WAS ABLE TO ESTABLISH ONE TO ONE CORRELAT ION BETWEEN THE ITA NO. 1036/MUM/2018 SHRI VAGARAM HARLALJI BISHNOI 4 PURCHASES MADE AND SALES EFFECTED. THUS, IT PROVES THAT THE ASSESSEE MUST HAVE PURCHASED THE GOODS FROM SOME SOURCE, AS IN TH E ABSENCE OF SUCH PURCHASE THE ASSESSEE COULD NOT HAVE EFFECTED THE S ALES. THIS FACT IS ALSO NOT DOUBTED BY THE DEPARTMENT. IN THESE CIRCUMSTANC ES THE ONLY CONCLUSION ONE CAN REACH IS THAT THE ASSESSEE MUST HAVE PURCHASED THE GOODS FROM SOMEWHERE OTHER THAN THE DECLARED SOURCE . THEREFORE, TO PREVENT LEAKAGE OF REVENUE THE PROFIT ELEMENT EMBED DED IN SUCH PURCHASES CAN BE CONSIDERED FOR ADDITION. IN FACT, THE AO HAS ACTUALLY DONE SO BY ESTIMATING THE PROFIT AT 12.5%. THEREFORE, THE ONLY ISSUE ARISING FOR CONSIDERATION IS THE REASONABLEPROFIT PERCENTAGE WH ICH CAN BE CONSIDERED FOR ADDITION. AS DISCUSSED EARLIER, THE AO HAS ESTI MATED THE PROFIT AT 12.5%. HOWEVER, LOOKING AT THE NATURE OF BUSINESS C ARRIED ON BY THE ASSESSEE AND THE PROFIT ELEMENT GENERALLY INVOLVED IN SUCH TYPE OF BUSINESS, I AM OF THE VIEW THAT ESTIMATION OF PROFI T @5% WILL BE REASONABLE HAVING REGARD TO THE PECULIAR FACTS AND CIRCUMSTANC ES OF THE PRESENT CASE. ACCORDINGLY, THE AO IS DIRECTED TO RESTRICT THE ADD ITION TO 5% OF THE NON- GENUINE PURCHASES. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 14 TH NOVEMBER, 2018. SD/ - (SAKTIJIT DEY) JUDICIALMEMBER MUMBAI, DATED: 14 TH NOVEMBER, 2018 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) -53, MUMBAI 4. THE PR.CIT- 19, MUMBAI 5. THE DR, SMC BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.