SHRI. RAJESH K SHAH (HUF), Mumbai V. ITO 27 (3)(1), Mumbai

ITA 1234/MUM/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 3683 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-03-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 05-03-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MOHAMMED RIZWAN
• Assessee Lawyers: MRS RUCHI M RATHOD
• Keywords: Bogus purchase; Reassessment proceedings
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC, BENCH MUMBAI BEFORE SHRI R.C.SHARMA, AM & SHRI PAWAN SINGH, JM ITA NO. 1233 & 1234/MUM/2019 ( ASSESSMENT YEAR: 2009-10 & 2010-11) SHRI RAJESH K. SHAH (HUF), 401, AMAR SMRUTI, 60 FEET ROAD, R.B. MEHTA MARG, GHATKOPAR EAST, MUMBAI- 400077. VS. I.T.O.-27(3)(1), ROOM NO.1, 3 RD FLOOR, TOWER NO. 6, RAILWAY COMMERCIAL COMPLEX, VASHI, NAVI MUMBAI- 400703. PAN/GIR NO. AAEHR 8886 D (APPELLANT ) .. (RESPONDENT ) ASSESSEE BY MRS. RUCHI M. RATHOD (AR) REVENUE BY SHRI MOHAMMED RIZWAN (ADDL.CIT) DATE OF HEARING 03/03/2020 DATE OF PRONOUNCEMENT 04/03/2020 / O R D E R PER: R.C. SHARMA, A.M. THESE ARE THE APPEALS FILED BY THE ASSESSEE AGAINS T THE SEPARATE ORDERS OF THE LD. CIT(A)-25, MUMBAI DATED 10/12/201 8 FOR THE A.Y. 2009- 10 & 2010-11 RESPECTIVELY IN THE MATTER OF ORDER P ASSED U/S 143(3) R.W.S. 147 OF THE INCOME TAX ACT, 1961 (IN SHORT, T HE ACT). 2. COMMON GRIEVANCE OF THE ASSESSEE IN BOTH THE YEA RS RELATE TO UPHOLDING ADDITION OF 12.5% IN RESPECT OF ALLEGED B OGUS PURCHASES MADE BY THE A.O.. 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PER USED. FACTS IN BRIEF ARE THAT THE ASSESSEE IS ENGAGED IN TRADING O F INDUSTRIAL GOODS, ITA NO. 1233 & 1234/MUM/2019 SH. RAJESH K SHAH (HUF) VS ITO 2 HARDWARE TOOLS, BEARING AND IRON AND STEEL. ON GETT ING INFORMATION FROM THE SALES TAX DEPARTMENT REGARDING ASSESSEE INVOLVE D IN TAKING ACCOMMODATION BILL OF PURCHASES, THE A.O. REOPENED THE ASSESSMENT AND IN THE REASSESSMENT PROCEEDINGS, THE A.O. ADDED 12. 5% OF ALLEGED BOGUS PURCHASES IN ASSESSEES INCOME. BY THE IMPUGN ED ORDER, THE LD. CIT(A) CONFIRMED THE ACTION OF THE A.O. AGAINST WHI CH THE ASSESSEE IS IN FURTHER APPEAL BEFORE THE ITAT. 4. AT THE OUTSET, THE LD AR OF THE ASSESSEE PLACED ON RECORD THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE A.Y. 2011-12 WHEREIN UNDER SIMILAR FACTS AND CIRCUMSTANCES, THE ADDITION ON ACCOUNT OF BOGUS PURCHASES WAS UPHELD BY THE TRIBUNAL @ 5%. THE PREC ISE OBSERVATION OF THE TRIBUNAL WAS AS UNDER: 7. CONSIDERING THE RIVAL CONTENTIONS AND MATERIAL PLACED ON RECORD, WE NOTICE THAT ITAT MUMBAI BENCH IN THE CASE OF HEERAM ANECK & SON VRS. ACIT PASSED IN ITA NO. 1862/MUM/2017, WHEREIN IT WA S HELD AS UNDER:- 5. SO FAR AS THE QUANTUM OF ADDITIONS ARE CONCERNE D, WE ARE OF THE CONSIDERED OPINION THAT THE ASSESSEE WAS ENGAGED IN TRADING ACTIVITIES, WHICH COULD NOT BE CARRIED OUT WITHOUT ACTUAL PURCHASE OF MATERIAL. THE TURNOVER ACHIEVED BY THE ASSESSEE HAS NOT BEEN DISPUTED OR DISTURBED BY THE REVENUE AND THE PAYMEN TS WERE THROUGH BANKING CHANNELS. THE ASSESSEE WAS IN POSSE SSION OF PRIMARY PURCHASE DOCUMENTS AND WAS ABLE TO RECONCIL E THE QUANTITATIVE DETAILS. HOWEVER, AT THE SAME TIME, TH E STATED PURCHASES WERE UNDER GRAVE DOUBT SINCE THE ASSESSEE COULD NOT PRODUCE ANY OF THE PARTY TO CONFIRM THE TRANSACTION S AND THE ITA NO. 1233 & 1234/MUM/2019 SH. RAJESH K SHAH (HUF) VS ITO 3 INFORMATION RECEIVED FROM INVESTIGATION WING REVEAL ED THAT ALL THE SUPPLIERS WERE ENGAGED IN CARRYING OUT ONLY PAPER T RANSACTIONS WITHOUT ACTUAL DELIVERY OF MATERIAL. THE COMPLETE O NUS TO PROVE THE PURCHASES CONCLUSIVELY WAS ON ASSESSEE, WHICH HAS R EMAINED UN- DISCHARGED. IN SUCH A SCENARIO, THE ADDITION, WHICH COULD BE MADE, WAS TO ACCOUNT FOR PROFIT ELEMENT EMBEDDED IN THESE PURCHASE TRANSACTIONS TO FACTORIZE FOR PROFIT ELEMENT EARNED BY ASSESSEE AGAINST POSSIBLE PURCHASE OF MATERIAL IN THE GREY M ARKET AND UNDUE BENEFIT OF VAT AGAINST ALLEGED BOGUS PURCHASES, WHI CH LOWER AUTHORITIES HAVE RIGHTLY DONE. HOWEVER, CONSIDERING GP RATE OF 10.59% ALREADY REFLECTED BY THE ASSESSEE AS WELL AS VAT RATE APPLICABLE TO THE GOODS BEING DEALT WITH BY THE ASS ESSEE, WE FIND THE ESTIMATION TO BE ON THE HIGHER SIDE AND THEREFO RE, WE RESTRICT THE SAME TO 3% OF ALLEGED BOGUS PURCHASES OF RS.1,8 7,08,961/-. THE SAME COMES TO RS.5,61,269/-. THE ORDER OF LD. AO ST ANDS MODIFIED TO THAT EXTENT. THE LD. AO IS DIRECTED TO RE-COMPUT E THE INCOME OF THE ASSESSEE IN TERMS OF OUR ABOVE ORDER. 8. THEREFORE, RESPECTFULLY FOLLOWING THE AFORESAID DECISION, WE NOTICE THAT SINCE ASSESSEE HAS ALREADY DECLARED GP RATIO AND TH E PRODUCTS WHICH FALLS IN THE SLAB RATE OF 4%, WHICH IS PLACED ON RECORD. SINCE THE CASE ARE DIFFERENT FROM CASE TO CASE BASIS AND THERE IS NO D ISPUTE THAT ASSESSEE HAS PAID VAT TO THE ALLEGED SUPPLIERS OF MATERIAL, HOWEVER, THERE IS NO RECORD TO COMPLEMENT THAT THE VAT WAS ACTUALLY PAID TO GOVT. ACCOUNT. THEREFORE, WE ARE INCLINED TO ESTIMATE THE INCOME @ 5%. ACCORDINGLY, WE DIRECT THE AO TO ESTIMATE THE INCOME OF THE ASSESEE @ 5% OF THE ALLEGED PURCHASES. 5. IT WAS FURTHER ARGUED BY THE LD AR THAT IN THE A .Y. 2011-12 SO DECIDED BY THE TRIBUNAL, THE ASSESSEE WAS NOT ASSES SED TO VAT, THEREFORE, ADDITION WAS MADE @ 5% ASSUMING THAT THE ASSESSEE HAS NOT ITA NO. 1233 & 1234/MUM/2019 SH. RAJESH K SHAH (HUF) VS ITO 4 PAID ANY VAT. AS PER THE LD AR DURING BOTH THE YEAR S UNDER CONSIDERATION, THE ASSESSEE WAS ASSESSED TO VAT, TH EREFORE, ADDITION OF 5% SHOULD BE REDUCED BY THE VAT ACTUALLY PAID BY TH E ASSESSEE. OUR ATTENTION WAS ALSO INVITED TO THE COPY OF THE ASSES SMENT ORDER UNDER MVAT ACT AND THE COPY OF TAX CHALLAN PAID UNDER MV AT ACT. 6. ON THE OTHER HAND, THE LD DR HAS RELIED ON THE O RDERS OF THE AUTHORITIES BELOW. 7. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND CAR EFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND FOU ND THAT THE ISSUE WITH REGARD TO BOGUS PURCHASES IN THE PRECEDING ASSESSME NT YEAR 2011-12 WAS DECIDED BY THE TRIBUNAL WHEREIN ADDITION TO THE EXTENT OF 5% WAS UPHELD. HOWEVER, IN THIS YEARS, THE ASSESSEE WAS NO T ASSESSED TO MVAT. HOWEVER, DURING BOTH THE YEARS UNDER CONSIDERATION, THE ASSESSSEE WAS ASSESSED TO MVAT, THEREFORE AMOUNT OF MVAT PAID BY THE ASSESSEE DESERVES TO BE REDUCED FROM THE ADDITION MADE IN RE SPECT OF BOGUS PURCHASES. RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE, WE DIRECT THE A.O. TO RESTRICT THE ADDITI ON ON ACCOUNT OF BOGUS PURCHASES TO THE EXTENT OF 5%. THE A.O. IS FURTHER DIRECTED TO VERIFY THE AMOUNT OF MVAT PAID BY THE ASSESSEE DURING BOTH THE YEARS UNDER CONSIDERATION AND TO GIVE CREDIT OF SUCH AMOUNT WHI LE COMPUTING THE ADDITION. MEANING THEREBY THE ADDITION OF 5% SHOULD BE FURTHER REDUCED ITA NO. 1233 & 1234/MUM/2019 SH. RAJESH K SHAH (HUF) VS ITO 5 BY THE AMOUNT OF MVAT PAID BY THE ASSESSEE IN BOTH THE YEARS UNDER CONSIDERATION. 8. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED IN PART. ORDER PRONOUNCED IN THE OPEN COURT ON 04 TH MARCH, 2020. SD/- (PAWAN SINGH) SD/- (R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI; DATED 04/ 03/2020 *RANJAN COPY OF THE ORDER FORWARDED TO : BY ORDER, (ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//