Damyantiben Ishersinh Parmar, Dadar & Nagar Haveli V. CIT (A), Silvassa

ITA 109/SRT/2021

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 1730 (ITAT-SURAT)
• Duration Of Justice: 1 year(s) 2 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: DB
• Next Hearing Date: 21-08-2022
• Assessment Year: 2011-2012
• Appeal Filed On: 28-06-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bogus purchase; Related party transaction; Condonation of delay
• Section: 147; 148; 143(3); 142(1); 143(1); 143(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND DR. ARJUN LAL SAINI, ACCOUNTANT MEMBER ITA No. 109/Srt/2021 (Assessment Year: 2011-12) (Virtual hearing) Damyantiben Ishversinh Parmar, Plt No. 255, M/s Popular Hotel, Silvasa, Dadra & Nagar Haveli, India-396230 PAN No. ADQPP 0260 N Vs. I.T.O., Ward-2, Vapi. Appellant/ assessee Respondent/ revenue Appellant represented by Shri Khushbu Bagrecha, AR Respondent represented by Shri Vinod Kumar Sr. DR Date of hearing 22/08/2022 Date of pronouncement 29/08/2022 Order under Section 254(1) of Income Tax Act PER: PAWAN SINGH, JUDICIAL MEMBER: 1. This appeal by the assessee is directed against the order of National Faceless Appeal Centre, Delhi (NFAC)/Commissioner of Income Tax (Appeals), Valsad dated 22/03/2021 for the Assessment year 2011-12. The assessee has raised following grounds of appeal: “1. The learned CIT(A) Valsad is not justified in confirming the treatment of material purchases made by the assessee as bogus and making an addition of Rs. 17,92,880/- without considering the evidence, submissions and representation made by the assessee.” 2. Perusal of record shows that impugned order was passed by ld NFAC on 22.03.2021 and the appeal before this Tribunal was filed on 29.06.2021, ITA No.109/Srt/2021 Damyantiben Ishversinh Parmar Vs ITO 2 thus, there is delay of 29 days in filing of this appeal. The assessee has filed her affidavit for seeking condonation of delay in filing the appeal. In the affidavit, the assessee has sworn the fact that she is senior citizen, and her health was not good during the month of April and May 2021 and it was a period of second wave of severe Covid-19 pandemic. The ld authorised representative (AR) for the assessee made her submissions on similar lines and prayed to condone the delay as the delay in filing the appeal was neither intentional or deliberate and that the assessee has good case on merit and may succeed if the appeal is heard on merit. 3. On the other hand, the ld senior departmental representative (DR) for the revenue has not opposed the plea of assessee in seeking the condonation of delay in filing appeal and submitted that the bench may take decision in accordance with law. 4. We have considered the contentions of the ld representative of the party on the plea of condonation of delay in filing appeal. Considering the facts that when the impugned order was passed on 22.03.2021, the nation was facing second wave of Covid-19 pandemic. The assessee is senior citizen and there is no intentional delay in filing the appeal, hence, the delay of 29 days in filing appeal is condoned. Consequently, the appeal is admitted for hearing on merit. ITA No.109/Srt/2021 Damyantiben Ishversinh Parmar Vs ITO 3 5. Brief facts of the case are that the assessee is engaged in the business of hotel and restaurant as a proprietorship of Hotel Popular. the assessee filed her return of income for the Assessment Year (AY) 2011-12 on 27/09/2011 declaring total income of Rs. 11,84,970/-. Initially, the assessment was accepted under Section 143(1) of the Income Tax Act, 1961 (in short, the Act). Subsequently, the case of assessee was reopened under Section 147 of the Act. Notice under Section 148 was issued to the assessee on 31/7/2013. In response to notice under Section 148, the assessee filed her reply and stated that the original return filed on 27/09/2011 may be treated as return in response to notice under Section 148 of the Act. The reasons for reopening, recorded was provided to the assessee on 08/08/2017. The Assessing Officer after serving statutory notices under Section 143(2) and 142(1) proceeded for assessment. During re-assessment, the Assessing Officer recorded that on verification of record and material, it was noted that the assessee has issued cheque against the purchases mostly at the end of the year i.e. in the month of March in the following manner: Sr. No. Name of the purchaser Amount (in Rs.) 1 Shroff & Co. 8,00,000/- 2 Kinnari Sea Foods 3,66,155/- 3 Noorani Health Products 41,315/- 4 Kureshi Suppliers 5,85,410/- Total 17,92,880/- ITA No.109/Srt/2021 Damyantiben Ishversinh Parmar Vs ITO 4 6. The assessee was asked to furnish bills/vouchers of purchases. The Assessing Officer recorded that no details were furnished. The Assessing Officer issued show cause notice as to why aggregate of purchases of Rs. 17,92,880/- should not be treated as bogus purchases. The assessee in response to such show cause notice, filed her reply and stated that she has purchases various items from unregistered dealers. On further verification, the Assessing Officer noted that the assessee has shown purchases from Prajeshsinh I Parmar which is group concerned of assessee. Prajeshsinh I Parmar opened bank account in his own PAN in the name of purchaser parties and cheques were deposited. The Assessing Officer treated all suppliers/entities as fabricated/bogus suppliers and made addition of aggregate of Rs. 17,92,880/- as bogus purchases while passing the assessment order on 27/11/2017 under Section 143(3) r.w.s. 147 of the Act. 7. Aggrieved by the additions, the assessee filed appeal before the ld. CIT(A). the appeal of the assessee was migrated to NFAC. Before the NFAC/ld. CIT(A), the assessee filed detailed written submissions as recorded in para 3 of its order. In the written submission, the assessee stated that bills and vouchers and ledgers copy of parties were furnished during the assessment. The assessee purchases various materials from unregistered dealers for running her hotel. The assessee has shown total purchases of ITA No.109/Srt/2021 Damyantiben Ishversinh Parmar Vs ITO 5 Rs. 2.181 crore out of which the purchases from unregistered dealer are only of Rs. 17,92,880/-. The bills were received from the parties and payments were made through cheques. Allegation of fictitious party is incorrect. Material is actually received in the hotel without which this material, the hotel business cannot run. The assessee further stated that the case of supplier/Prajesh Parmar was reopened on similar (common) grounds and similar addition of same amount is added in his total income. The same amount cannot be taxed twice. The addition of supplier/Prajesh Parmar was also made by same Assessing Officer. Based on aforesaid submission, the assessee prayed to delete the entire addition. 8. The NFAC/Ld.CIT(A) after considering the submission of assessee has held that the assessee has shown purchases from unregistered dealer. Son of assessee (Prajesh Parmar) opened account with his own bank in the name of purchaser party and presented cheques for encashment. Such acts were made only to avoid the payment of tax and upheld the entire addition. Further aggrieved, the assessee has filed the present appeal before this Tribunal. 9. We have heard the submissions of the Ld. A.R of the assessee and the learned Sr. DR for the revenue and have gone through the orders of the authorities below. The ld. AR of the assessee submits that the case of assessee was reopened along with the case of supplier. The assessee is ITA No.109/Srt/2021 Damyantiben Ishversinh Parmar Vs ITO 6 running hotel and restaurant business. The assessee has shown gross profit @ 27.8% and net profit @ 3.98%. The Assessing Officer has not disputed the sales of the assessee. The books of account of assessee were not rejected. The ld. AR submits that no sale is possible in absence of purchases. The Assessing Officer doubted because certain payments were made at the fag end of the financial year which cannot be a ground in absence of dispute of sale. The assessee is having total turnover of Rs. 3.2 crores and have shown a very good gross profit and net profit. The ld. AR submits that the similar addition is made in case of supplier, who happens to be son of assessee. The ld. AR submits that there is no prohibition under law for dealing with related party transaction unless the payment is made on unreasonable basis. There is no such allegation of Assessing Officer. The ld. AR submitted copy of assessment order in case of supplier is also placed on record. On our specific quarry, the ld AR for the assessee submits that appeal in case of supplier is pending before ld CIT(A). 10. On the other hand, the ld. Sr DR for the revenue supported the order of the lower authorities. The ld. Sr DR for the revenue further submits that during the assessment the assessing officer asked the assessee that payments made by assessee against the purchases shown by the assessee from four party was made at the end of financial year as ITA No.109/Srt/2021 Damyantiben Ishversinh Parmar Vs ITO 7 recorded in para-6 of the assessment order. The assessee on receipt of the reply of the assessee that such purchases were made from unregistered dealers, made further inquiry and find that such payment was made by assessee to her own son, who had opened different bank account in the name of four different parties. The assessing officer treated all four entity as fictitious and disallowed aggregate payment of such expenses. The ld DR for the revenue submits that the assessing officer has brought sufficient adverse evidence on record for making such disallowances. 11. We have considered the rival submissions of the parties and have gone through the orders of the lower authorities carefully. We find that the assessing officer made disallowance of Rs. 17,92,880/- by taking view that the assessee has shown purchases from Prajeshsinh I Parmar, who is group concerned of assessee. Prajeshsinh I Parmar is son of assessee, who opened bank account in his own PAN in the name of purchaser parties and cheques were deposited. The ld CIT(A)/ NFAC confirmed the disallowances with similar observations as of assessing officer. Before us, the ld AR for the assessee vehemently argued that the case of related party was also reopened his assessing officer and made similar (same) addition in his case and there is double addition of the same transaction. On perusal of assessment order in case of Prajeshsinh Iswarsinh Parmar ITA No.109/Srt/2021 Damyantiben Ishversinh Parmar Vs ITO 8 (PAN: ADWPP 2764), we find that case of that assessee was reopened by recording reasons that he was maintaining various bank accounts, which were not disclosed in his return of income. In such undisclosed bank accounts that assessee made transaction of Rs. 1.80 Crore, out of which transaction of Rs. 32.00 lacks were with the Popular Hotel managed by assessee (Damyantiben). Out of which disallowance of Rs. 17,92,880/- are the subject matter of appeal in our hand. The assessing officer made addition of Rs. 1.80 Crore in the assessment of Prajeshsinh Iswarsinh Parmar in the assessment order dated 30.12.2016 under section 143(3) rws 147. We are conscious of the fact that the additions made in the assessment of related party (Prajeshsinh I Parmar) are subject matter of appeal before ld CIT(A). Thus, we are restraining ourselves on making any observation on such transaction conducted through the impugned bank accounts. 12. Now adverting to other submissions of the ld AR for the assessee that the sales of the assessee is not disputed and that mere certain payments were made at the end of financial year to the related party cannot be doubted unless the assessing officer find such payment as unreasonable. And that the assessee has shown gross profit @ 27.8% and net profit @ 3.98% on the turnover of Rs. 3.2 Crore. We find that the assessing officer neither doubted the sale of the assessee nor rejected the books results. It ITA No.109/Srt/2021 Damyantiben Ishversinh Parmar Vs ITO 9 is settled position under income tax proceedings that when the transaction of sale or purchases, if not fully verifiable or the mode of payment or physical delivery is doubted, only profit element of such transaction may be disallowed to avoid the possibility of revenue leakage of such transaction. As we have already taken a view that transaction through undisclosed bank accounts is the subject matter of appeal which is still to be adjudicated. However, facts remained the same that the time and manner of certain payment against the purchases of material is not far from doubt. Therefore, we deem it appropriate to disturb the book result of the assessee and to avoid the possibility of revenue leakage the net profit (NP) ratio of assessee is estimated @ 6 % of turnover in place of 3.98% as declared by assessee. In the result, the grounds of appeal raised by the assessee is partly allowed. 13. In the result, this appeal of assessee is partly allowed. Order pronounced in the open court on 29 th August, 2022 and the result was also placed on notice board. Sd/- Sd/- (Dr. ARJUN LAL SAINI) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Surat, Dated: 29/08/2022 *Ranjan Copy to: 1. Assessee ITA No.109/Srt/2021 Damyantiben Ishversinh Parmar Vs ITO 10 2. Revenue 3. CIT(A) 4. CIT 5. DR 6. Guard File By order Sr. Private Secretary, ITAT, Surat