LANCY G. DCUNHA, THANE V. ITO WD 1(4), THANE

ITA 1185/MUM/2016

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 8960 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 9 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-12-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 07-03-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PADMA RAM MIRDHA
• Assessee Lawyers: SANJAY T TUPE
• Keywords: Bogus purchase; Principle of natural justice
• Section: 143(3); 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES A, MUMBAI BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA NO. 1185/MUM/2016 ASSESSMENT YEAR : 2011-12 M R S. LANCY G. D E CUNHA, DIGVIJAY INDUSTRIAL ESTATE NO.1,GALA NO. 14, 1 ST POKHRAN ROAD, THANE [PAN : A A NPD 5901 A ] VS. INCOME TAX OFFICER ( CENTRAL ) , THANE ( APPELLANT ) (RESPONDENT) APPELLANT BY : SHRI SANJAY T. TUPE, AR RESPONDENT BY : SHRI PADMA RAM MIRDHA, DR DATE OF HEARING : 13 - 1 2 - 201 8 DATE OF PRONOUNCEMENT : 19 - 1 2 - 201 8 O R D E R PER RAJESH KUMAR, ACCOUNTANT MEMBER: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS)-1, THANE, DATED 11-12-2015. THE GROUNDS RAISED BY ASSESSEE AR E AS UNDER: ITA NO.1185/MUM/2016 2 1. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE A ND IN LAW THE LEARNED AO ERRED IN DISALLOWING AN AMOUNT OF RS. 8, 72,892/- ON ACCOUNT OF UNPROVED PURCHASES BY IGNORING THE REAL FACTS. 2. THE CIT ERRED BY ADDING THE AVG. G.P. OF 27.05% & ENHANCED THE GROSS PROFIT BY RS. 8,06,485/- WITHOUT ASKING A NY EXPLANATION & WITHOUT ANY OPPORTUNITY TO EXPLAIN SA ME, WHICH IS AGAINST THE NATURAL JUSTICE. THE ONLY ISSUE RAISED BY ASSESSEE IS AGAINST THE CO NFIRMATION OF ADDITION ON ACCOUNT OF BOGUS PURCHASES BY APPLYING AVERAGE GROSS PROFIT (GP) OF 27.05% TO THE TUNE OF RS. 8,06 ,485/-. 2. THE FACTS IN BRIEF ARE THAT THE ASSESSING OFFICE R (AO), THE AO RECEIVED INFORMATION FROM THE SALES TAX TAX DEPT T , GOVT OF MAHARASHTRA THAT THE ASSESSE IS BENEFICIARY OF ENRI ES OF BOGUS PURCHASES FROM TWO PARTIES TO THE TUNE OF RS. 8,72, 892/- AND ON THAT BASIS AFTER RECORDING REASONS TO BELIEVE , REO PENED THE ASSESSMENT. DURING THE COURSE OF RE-ASSESSMENT PRO CEEDINGS, TH4E AO NOTED THAT ASSESSEE HAS MADE BOGUS PURCHAS ES FROM TWO PARTIES I.E., APEX METAL CORPORATION RS. 5,66,4 61/- AND DARSHAN SALES CORPORATION RS. 3,06,431/-, AGGREGATI NG TO RS. 8,72,892/-. ACCORDINGLY, ASSESSEE WAS ASKED TO ISS UE SHOW CAUSE AS TO WHY THE PURCHASES FROM THE SAID PARTIES SHOULD NOT BE ADDED TO THE INCOME OF ASSESSEE ON ACCOUNT OF BE ING ITA NO.1185/MUM/2016 3 NON-GENUINE, WHICH WAS REPLIED BY ASSESSEE BY SUBMI TTING THAT ASSESSEE HAS IN FACT MADE PURCHASES FROM THESE PART IES AND AFTER DULY RECODING THE SAME THE CORRESPONDING SALES WERE MADE. THUS NONE OF THE PARTIES WERE NON GENUINE THOUGH MAY BE DECLARED AS HAWALA ENTRY PROVIDER BY THE SALES TAX DEPTT. . TH EREAFTER, AO IN ORDER TO VERIFY THE PURCHASES, ISSUED NOTICE U/S. 1 33(6) OF THE INCOME TAX ACT (ACT), WHICH WAS RETURNED UN-SERVED AND FINALLY, THE AO ADDED THE ENTIRE PURCHASES TO THE INCOME OF ASSESSEE BY BRINGING U/S. 143(3) R.W.S. 147 OF THE ACT VIDE ORD ER DT. 28-02- 2014. 3. IN THE APPELLATE PROCEEDINGS, LD. CIT(A) AFTER C ONSIDERING THE SUBMISSIONS AND CONTENTIONS OF ASSESSEE, REJECT ED THE BOOKS OF ACCOUNT OF ASSESSEE ON ACCOUNT OF BEING UN-RELIA BLE AND INCOMPLETE FOR THE VARIOUS REASONS STATED IN THE AP PELLATE ORDER AND APPLIED GP OF 27.05% BASED UPON AVERAGE OF THE LAST FIVE YEARS, WHICH HAS RESULTED IN THE ENHANCEMENT OF GRO SS PROFIT OF RS. 28,86,256/- AGAINST THE GP SHOWN BY ASSESSEE AT RS. 20,79,771/-, RESULTING INTO CONFIRMATION OF ADDITIO N TO THE TUNE OF RS. 8,06,485/- REPRESENTING THE CONFIRMATION O F ADDITIONS TO THE EXTENT OF 92.4% OF THE SAID ALLEGED NON-GENUINE PURCHASES. ITA NO.1185/MUM/2016 4 4. AFTER HEARING BOTH THE SIDES AND PERUSING THE MA TERIAL ON RECORD, WE OBSERVE THAT THIS IS A CASE OF PROCUREME NT OF BOGUS BILLS OF PURCHASES WITHOUT PURCHASE OF ACTUAL MATE RIAL, WHICH THE AO COULD NOT VERIFY EVEN BY ISSUING NOTICE U/S. 133(6) OF THE ACT. THE AO MADE 100% ADDITION TOWARDS BOGUS PURCH ASES TO THE INCOME OF ASSESSEE, WHEREAS THE CIT(A) BY APPLY ING AVERAGE GP OF 27.05%, SUSTAINED THE ADDITION TO THE TUNE OF RS. 8,06,485/- WHICH ACCOUNTS FOR 92.4% OF THE UNPROVED PURCHASES. NORMALLY IN SUCH TYPES OF CASES WHERE T HE BOGUS BILLS ARE AVAILED BY THE ASSESSEES, THE PURCHASES ARE MADE FROM THE GREY MARKETS THEREBY MAKING SAVINGS OF VAT AND OTHER INCIDENTAL EXPENSES. IN THE PRESENT CIRCUMSTANCES, WHEN THE AO HAS NOT DOUBTED THE SALES OF THE ASSESSEE, A CERTAI N PERCENTAGE OF THE SAID PURCHASES HAVE TO BE TAXED AND NOT THE ENT IRE PURCHASES. THE COORDINATE BENCHES HAVE BEEN TAKING A VIEW TO TAX THE BOGUS PURCHASES BY APPLYING GP RANGING FROM 4% TO 12.5% DEPENDING UPON THE FACTS OF THE PARTICULAR CA SE. THEREFORE, IN THE PRESENT FACTS, WE ARE OF THE VIEW THAT IF RATE OF 12.5% OF THE BOGUS PURCHASES IS APPLIED IN ORDER TO TAX THE BOGUS PURCHASES, IT WOULD REASONABLE. ACCORDINGLY, WE DIRECT THE ITA NO.1185/MUM/2016 5 AO TO APPLY THE RATE OF 12.5% OF THE BOGUS PURCHASE S BY SETTING ASIDE THE ORDER OF THE CIT(A). THE APPEAL IS PART LY ALLOWED. 5. IN THE RESULT, THE APPEAL OF ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 19 TH DAY OF DECEMBER, 2018 SD/- SD/- ( MAHAVIR SINGH ) (RAJESH KUMAR) /JUDICIAL MEMBER /ACCOUNTANT MEMBER /MUMBAI; /DATED : 19 TH DECEMBER, 2018 TNMM / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT, MUMBAI. 4. / CIT(A), MUMBAI 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. ITA NO.1185/MUM/2016 6 / BY ORDER, //TRUE COPY// / (DY./ASST. REGISTRAR) , / ITAT, MUMBAI