BALAJI PIPES, MUMBAI V. ITO, 19(1)(2), MUMBAI

ITA 1116/MUM/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 6146 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-02-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 27-02-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AMIT PRATAP SINGH
• Assessee Lawyers: HARISH SHARMA A R S
• Keywords: Bogus purchase
• Section: 143(3); 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC, BENCH MUMBAI BEFORE SHRI R.C.SHARMA, AM & SHRI VIKAS AWASTHY, JM ITA NO. 1116/MUM/2019 ( ASSESSMENT YEAR: 2009-10) M/S BALAJI PIPES, C/O- D.C. BOTHRA & CO. LLP (CA) (FORMERLY KNOWN AS D.C. BOTHRA & CO.), 297, TARDEO ROAD, WILLE MANSION, 1 ST FLOOR, OPP BANK OF INDIA, NANA CHOWK, MUMBAI-400007. VS. I.T.O.-19(1)(2) 2 ND FLOOR, MATRU MANDIR, TARDEV ROAD, MUMBAI-400021. PAN/GIR NO.AAIFB 0628 D (APPELLANT ) .. (RESPONDENT ) ASSESSEE BY SHRI RAJ KUMAR SINGH & SHRI HARISH SHARMA (ARS) REVENUE BY SHRI AMIT PRATAP SINGH (DR) DATE OF HEARING 11/02/2020 DATE OF PRONOUNCEMENT 12/02/2020 / O R D E R PER: R.C. SHARMA, A.M. THIS IS THE APPEAL FILED BY THE ASSESSEE AGAINST T HE ORDER OF THE LD. CIT(A)-07, MUMBAI DATED 24/12/2018 FOR THE A.Y. 200 9-10 IN THE MATTER OF ORDER PASSED U/S 143(3) R.W.S. 147 OF THE INCOME TAX ACT, 1961 (IN SHORT, THE ACT). 2. IN THIS APPEAL, THE ASSESSEE IS BASICALLY AGGRIE VED FOR UPHOLDING ADDITION OF 12.5% ON ACCOUNT OF BOGUS PURCHASES. 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PER USED. FACTS IN BRIEF ARE THAT THE ASSESSEE IS A DEALER OF FERROUS AND NON-FERROUS ITA NO. 1116/MUM/2019 M/S BALAJI PIPES VS ITO 2 METALS. THE A.O. REOPENED THE ASSESSMENT ON GETTING INFORMATION FROM THE SALES TAX DEPARTMENT REGARDING THE ASSESSEE INV OLVED IN TAKING ACCOMMODATION BILL. AFTER MAKING DETAILED ENQUIRY, THE A.O. ADDED 12.5% OF ALLEGED BOGUS PURCHASES IN ASSESSEES INCO ME WHICH WAS CONFIRMED BY THE LD. CIT(A). NOW THE ASSESSEE IS IN FURTHER APPEAL BEFORE THE ITAT. 4. THE LD AR APPEARING ON BEHALF OF THE ASSESSEE HA S CONTENDED THAT THE ISSUE IS COVERED BY THE DECISION OF HONBLE JUR ISDICTIONAL HIGH COURT IN THE CASE OF PR.CIT VS M/S MOHOMMAD HAJI ADAM & C O. IN ITA NO. 1004 OF 2016 VIDE ITS ORDER DATED 11/02/2019, ACCO RDING TO WHICH ADDITION CAN BE MADE ONLY TO THE EXTENT OF DIFFEREN CE BETWEEN THE G.P. DECLARED ON REGULAR PURCHASES VIS A VIS BOGUS PURCH ASES. HE HAS FURTHER CONTENDED THAT NO WHERE THE A.O. OR THE LD. CIT(A) HAS DISPUTED THE CORRESPONDING SALES AND THE ASSESSEE HAS FILED QUAN TITATIVE DETAILS OF ALL THE PURCHASES AND EXTRACT OF PURCHASE REGISTER AND SALES REGISTER OF ENTIRE YEAR CONTAINING INWARD AND OUTWARD MOVEMENT OF TRADING GOODS. FURTHERMORE, COPY OF INVOICE AND DEILVERY CHALLANS ISSUED BY THE SUPPLIER WAS ALSO PRODUCED BEFORE THE A.O. WITH RESPECT OF A LLEGED BOGUS PURCHASES ALONGWITH CONFIRMATION LETTER FROM THE SU PPLIER. UNDER THESE FACTS AND CIRCUMSTANCES, IT WAS CONTENDED THAT THE A.O. WAS NOT JUSTIFIED IN MAKING ADDITION OF 12.5%. ITA NO. 1116/MUM/2019 M/S BALAJI PIPES VS ITO 3 5. ON THE OTHER HAND, THE LD DR HAS RELIED ON THE O RDERS OF THE AUTHORITIES BELOW AND CONTENDED THAT AFTER MAKING D ETAILED ENQUIRY, THE A.O. ISSUED NOTICE U/S 133(6) OF THE ACT AND REACHE D TO THE CONCLUSION THAT THE ASSESSEE HAS NOT ACTUALLY PURCHASED THE GO ODS BUT ONLY TAKEN BILLS. ACCORDINGLY, THE A.O. WAS JUSTIFIED IN MAKIN G ADDITION OF 12.5%. 6. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND CAR EFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND FOU ND THAT BEFORE THE A.O., THE ASSESSEE HAS FILED FOLLOWING DOCUMENTS: (I) EXTRACT OF PURCHASE REGISTER AND SALES REGISTER OF ENTIRE YEAR. (II) ITEM WISE AND BILL WISE EXTRACT OF STOCK REGIS TER OF ENTIRE YEAR CONTAINING INWARD AND OUTWARD MOVEMENT OF TRADING G OOD DEALTWITH. (III) COPY OF INVOICE AND DELIVERY CHALLANS ISSUED BY ALLEGED HAWALA DEALERS FOR ALLEGED PURCHASES MADE. (IV) CONFIRMATION LETTER OF FOLLOWING ALLEGED HAWAL A DEALERS ALONGWITH COPY OF THEIR SALE TAX RETURN AND PAID VA T CHALLAN: A) SHANTI PIPES & TUBES B) PIONEER METALS & ALLOYS C) HEENA METALS. HOWEVER, NO DEFECT WAS POINTED OUT BY THE A.O. IN T HE ABOVE DOCUMENTS AND HE JUST ESTIMATED PROFIT @ 12.5% ON THE ALLEGED BOGUS PURCHASES. WITH RESPECT TO ISSUE REGARDING ADDITION IN RESPECT OF BOGUS PURCHASES, THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE O F PR.CIT VS M/S MOHOMMAD HAJI ADAM & CO. IN ITA NO. 1004 OF 2016 VI DE ITS ORDER DATED 11/02/2019 HAVE HELD AS UNDER: ITA NO. 1116/MUM/2019 M/S BALAJI PIPES VS ITO 4 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 DIS CREPANCY 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 LIMIT ED TO THE EXTENT OF BRINGING THE G.P. RATE ON PURCHASES AT THE SAME RAT E OF OTHER GENUINE PURCHASES. THE DECISION OF THE GUJARAT HIGH COURT I N THE CASE OF N.K. INDUSTRIES LTD.. (SUPRA) CANNOT BE APPLIED WITHOUT REFERENCE TO THE FACTS. 7. 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 ITA NO. 1116/MUM/2019 M/S BALAJI PIPES VS ITO 5 DIFFERENTIAL PERCENTAGE AS DECLARED ON THE BOGUS PU RCHASES AND AS DECLARED ON THE REGULAR PURCHASES, HENCE, WE DIRECT THE AO A CCORDINGLY. 8. IT IS CLEAR FROM THE ABOVE DECISIONS THAT IN CAS E OF BOGUS PURCHASES WHERE SALES ARE ACCEPTED AND ASSESSEE HAS FILED QUANTITATIVE DETAILS OF PURCHASES AND ALSO STOCK REGISTER REFLEC TING GOODS RECEIVED, THE ADDITION IS REQUIRED TO BE MADE ONLY TO THE EXT ENT OF DIFFERENCE BETWEEN THE GP DECLARED BY THE ASSESSEE ON NORMAL P URCHASES VIS A VIS BOGUS PURCHASES. RESPECTFULLY FOLLOWING THE ORDER O F THE HONBLE JURISDICTIONAL HIGH COURT AND THE COORDINATE BENCH OF THE ITAT, MUMBAI, WE RESTORE THE MATTER BACK TO THE FILE OF 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 PURCHASES. TH E ASSESSEE IS ALSO DIRECTED TO GIVE FULL DETAILS TO THE A.O. WITH REGA RD TO GP EARNED ON NORMAL PURCHASES AND ALSO GP EARNED ON ALLEGED BOGU S PURCHASES. WE DIRECT ACCORDINGLY. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED IN PART FOR STATISTICAL PURPOSES ONLY. ORDER PRONOUNCED IN THE OPEN COURT ON 12 TH FEBRUARY, 2020. SD/- (VIKAS AWASTHY) SD/- (R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI; DATED 12/02/2020 *RANJAN COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT ITA NO. 1116/MUM/2019 M/S BALAJI PIPES VS ITO 6 BY ORDER, (ASSTT. REGISTRAR) ITAT, MUMBAI 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//