ITO 20(2)(2), MUMBAI V. MOHAMEDI KANCHWALA, MUMBAI

ITA 1249/MUM/2016

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 9274 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-09-2017
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2010-2011
• Appeal Filed On: 10-03-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SUMAN KUMAR
• Keywords: Bogus purchase; Corroborative evidences
• Section: 143(3); 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH B MUMBAI BEFORE SHRI MAHAVIR SINGH (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 1249 /MUM/2016 ASSESSMENT YEAR: 2010 - 11 ITO - 20(2)(2) R.NO. 212, PIRAMAL CHAMBERS, LALBAUG MUMBAI - 400012 VS. MOHAMEDI KANCHWALA 732 , B WING, ANJIRWADI FRANCIS TRANSITS CAMP MAZGAON MUMBAI - 400010 PAN NO. ABJPK1291P (APPELLANT) (RESPONDENT) REVENUE BY : SHRI SUMA N KUMAR, DR ASSESSEE BY: NONE DATE OF HEARING : 05/07/2017 DATE OF PRONOUNCEMENT: 25/09/2017 ORDER PER N.K. PRADHAN, A.M . THIS IS AN APPEAL FILED BY THE REVENUE. THE REL EVANT ASSESSMENT YEAR IS 2010 - 11 . THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) - 32, MUMBAI AND ARISES OUT OF THE ASSESSMENT COMPLETED U/S 143(3) OF THE INCOME TAX ACT 1961, ( T HE ACT). ITA NO. 1249/MUM/2016 2 2. THE GROUNDS OF APPEAL FILED BY THE REVENUE READ AS UNDER: - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) HAS ERRED IN GRANTING RELIEF OF RS.52,67,312/ - BY RESTRICTING THE ADDITION @5% (GP DECLARED BY THE ASSESSEE) OF TOTAL PURCHASES FROM HAWALA PARTI ES WITHOUT ANY ACTUAL PURCHASE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN IGNORING THE FACT THAT THE ASSESSEE FAILED TO DISCHARGE ITS BURDEN THAT ALLEGED BOGUS PARTIES INVOLVED WERE EXISTENT AND GENUINE. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRE D IN FINDING THAT CORRESPONDING SALES SHOWN OUT OF MATERIAL INVOLVED IN BOGUS PURCHASE WITHOUT MENTIONING HOW THIS AND WITH WHAT EVIDENCE BEFORE HIM SUCH FINDING WAS ARRIVED AT. IF SUCH EVIDENCE WAS GIVEN (AS CORRESPONDING SALES) THE SAME SHOULD HAVE BEEN REMANDED TO THE A.O. FOR HIS EXAMINATION AND COMMENTS. 4. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) ON THE ABOVE GROUNDS BE REVERSED AND THAT OF THE ASSESSING OFFICER BE RESTORED. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE HAD CLAI MED PURCHASES OF RS.1,78,65,386/ - . THE PURCHASES INCLUDED ALUMINIUM PLATES, S.S. SHEETS, PATTI, RODS, HANDLE, GLASS ETC. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER (AO) ISSUED NOTICE U/S 133(6) TO SEVERAL PARTIES AT THE ADDRESS PROV IDED BY THE ASSESSEE BY REGISTERED POST. THE NOTICES SENT TO THE FOLLOWING PARTIES COULD NOT BE SERVED AND WERE RETURNED BACK BY THE POSTAL AUTHORITIES WITH THE REMARKS NOT KNOWN EXCEPT IN THE CASE OF MEHUL TRADERS WHO DID NOT REPLY TO THE NOTICE. ITA NO. 1249/MUM/2016 3 SL. N O. NAME OF THE PARTY TIN AMOUNT (RS.) 1. NEW ZONE MULTITRADE PVT. LTD. 27930587111V 12,224/ - 2. ASCENT ENTERPRISES 27890612159V 45,31,971/ - 3. DONEAR TRADING PVT. LTD. 27910623885V 2,79,253/ - 4. MEHUL TRADERS 27260365107V 7,21,091/ - TOTAL 55,44,539/ - THEREAFTER TO FIND OUT THE GENUINENESS OF THE PURCHASES, THE AO ASKED THE ASSESSEE TO SUBMIT ADEQUATE SUPPORTING EVIDENCE AND ALSO TO PRODUCE THE PARTIES ALONG WITH THE IR BOOKS OF ACCOUNTS FOR EXAMINATION. IN RESPONSE TO IT , THE ASSESSEE SUBMITTED ONLY PHOTOCOPIES OF THE PURCHASE BILLS FROM THESE PARTIES ALONG WITH DELIVERY CHALLAN, BANK STATEMENT AND UNSIGNED COPY OF THEIR LEDGER ACCOUNTS. IT ALSO SUBMITTED THE STATEMEN TS OF RELEVANT PART OF ITS BANK ACCOUNTS WITH CITI BANK AND KONKAN MERCANTILE BANK. THE AO NOTED THAT THE ASSESSEE, IN SPITE OF HAVING BEING PROVIDED SPECIFIC OPPORTUNITY, DID NOT PRODUCE THE PERSONS WHO ARE STATED TO HAVE MADE THE CONCERNED SALES TO THE A SSESSEE. IN VIEW OF THE ABOVE, THE AO CONCLUDED THAT THE EXISTENCE OF THE PARTIES ARE NOT PROVED AND THE PURCHASES ARE NOT VERIFIABLE. THUS HE MADE AN ADDITION OF THE ABOVE AMOUNT RS.55,44,539/ - . 4. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE FILED A N APPEAL BEFORE THE LD. CIT(A). WE FIND THAT THE LD. CIT(A) HAS FOLLOWED THE DECISION OF HIS PREDECESSOR - IN - OFFICE AND RESTRICTED THE DISALLOWANCE TO ITA NO. 1249/MUM/2016 4 5% OF THE ALLEGED BOGUS PURCHASE OF RS.55,44,539/ - . IT COMES TO RS.2,77,227/ - . 5. BEFORE US, THE LD. DR S UBMITS THAT (I) THE NOTICE U/S 133(6) ISSUED BY THE AO WERE RETURNED BACK UNSERVED BY THE POSTAL AUTHORITIES IN THREE CASES AND IN ONE CASE THE PARTY DID NOT REPLY TO THE NOTICE, (II) THE ASSESSEE FAILED TO PROVE THE EXISTENCE OF THE PARTIES AND (III) THE PURCHASES WERE NOT VERIFIABLE. THUS IT IS SUBMITTED BY HIM THAT THE LD. CIT(A) SHOULD HAVE CONFIRMED THE FULL AMOUNT OF RS. 55,44,539/ - . NONE APPEARED ON BEHALF OF THE ASSESSEE. 6. WE HAVE HEARD THE LD. DR AND PERUSED THE RELEVANT MATERIALS ON RECORD. THE REASONS FOR OUR DECISION ARE GIVEN BELOW. IN THE CASE OF CIT VS. SIMIT P. SHETH (2013) 38 TAXMANN.COM (GUJ), THE HONBLE GUJARAT HIGH COURT HAS HELD THAT WHERE PURCHASES WERE NOT BOGUS BUT WERE MADE FROM PARTIES OTHER THAN THOSE MENTIONED IN THE BOOK S OF ACCOUNT, NOT ENTIRE PURCHASE PRICE BUT ONLY PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES CAN BE ADDED TO INCOME OF THE ASSESSEE. THAT BEING THE POSITION, NOT THE ENTIRE PURCHASE PRICE BUT ONLY THE PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES CAN BE ADDED TO THE INCOME OF THE ASSESSEE. THE HONBLE HIGH COURT REFERRED TO A SIMILAR VIEW TAKEN IN THE CASE OF CIT VS. VIJAY M. MISTRY CONSTRUCTION LTD. [2013] 355 ITR 498 (GUJ) AND CIT VS. BHOLANATH POLY FAB (P) LTD. [2013] 355 ITR 290 (GUJ). SO THE LD. CIT(A) HAS R IGHTLY RESORTED TO AN ESTIMATION OF THE PROFIT. ITA NO. 1249/MUM/2016 5 THUS TAKING INTO ACCOUNT THE FACT THAT THE ASSESSEE FAILED TO PRODUCE BEFORE THE AO THE CONCERNED FOUR PARTIES ALONG WITH THEIR BOOKS OF ACCOUNTS FOR VERIFICATION AND ALSO CONSIDERING THE NATURE OF BUSINESS OF THE ASSESSEE, WE DIRECT THE AO TO ESTIMATE THE PRO FIT @ 12.5 % ON THE ABOVE PURCHASES OF RS.55,44,539/ - . 7. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN C OURT ON 25/09/2017. SD/ - SD/ - (MAHAVIR SINGH) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED: 25/09/2017 RAHUL SHARMA, SR. P.S. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE . BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI