SHRI JAWARARAM PARKHARAM MODI, MUMBAI V. INCOME TAX OFFICER-19(2)(1), MUMBAI

ITA 1255/MUM/2018

• Counselvise Citation: [2018] 112 COUNSELVISE.COM (IT) 5619 (ITAT-MUMBAI)
• Duration Of Justice: 8 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-11-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 05-03-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJESH KUMAR YADAV
• Assessee Lawyers: ASHOK D MEHTA; DIPESH N VORA
• Keywords: Bogus purchase; Assessment record
• Section: 201

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE S/ SHRI B.R. BASKARAN (AM) & SANDEEP GOSAIN (JM) I.T.A. NO. 12 5 5 /MUM/20 1 8 (ASSESSMENT YEAR 20 1 0 - 11 ) I.T.A. NO. 125 6/MUM/2018 (ASSESSMENT YEAR 2011 - 12) SHRI JAWARARAM PARKHARAM MODI 4, GRO UND FLOOR AHMED BUILDING 217, S.V.P. ROAD OPP MOTI TALKIES MUMBAI - 400 004. PAN ACJPM4596L VS. ITO - 19(2)(1) 2 ND FLOOR MATRU MANDIR BUILDING, TARDEO ROAD MUMBAI - 400 007. ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY SHRI ASHOK D. MEHTA & SHRI DIPESH N. VORA DEPARTMENT BY SHRI RAJESHKUMAR YADAV DATE OF HEARING 27 . 1 1 . 201 8 DATE OF PRONOUNCEMENT 27 . 1 1 . 201 8 O R D E R PER B.R. BASKARAN (AM) : - BOTH APPEALS FILED BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDERS PASSED BY THE LEARNED CIT(A) - 5 3, MUMBAI AND THEY RELATE TO A.YS. 2010 - 11 & 2011 - 12. THE ASSESSEE IS AGGRIEVED BY THE DECISION OF THE LEARNED CIT(A) IN CONFIRMING THE ADDITION RELATING TO BOGUS PURCHASES MADE BY THE ASSESSING OFFICER. THE ASSESSEE HAS ALSO RAISED CERTAIN LEGAL ISSUES. 2. WE HAVE HEARD THE PARTIES AND PERUSED THE RECORD. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF TRADING IN FERROUS AND NON - FERROUS METALS. THE REVENUE RECEIVED INFORMATION FROM THE SALES TAX DEPARTMENT OF MAHARASHTRA THAT CERTAIN DEALERS ARE PROVIDING ONLY ACCOMMODATION BILLS WITHOUT ACTUALLY SUPPLYING THE MATERIAL S. BEFORE THE SALES TAX AUTHORITIES, THOSE DEAL ERS HAVE CONFESSED THAT THEY HAVE PROVIDED ONLY ACCOMMODATION BILLS. FROM THE SHRI JAWARARAM PARKHARAM MODI 2 INFORMATION RECEIVED FROM SALES TAX DEPARTMENT, IT WAS NOTICED THAT THE ASSESSEE HAS PURCHASED MATERIAL S FROM SOME OF SUCH DEALERS AGGREGATING TO ` 58.59 LAKHS AND ` 28.74 LAKHS RESPECTIVELY DURING THE FINANCIAL YEAR S RELEVANT TO A .YS. 2010 - 11 & 2011 - 12. HENCE, THE ASSESSING OFFICER REOPENED THE ASSESSMENT OF BOTH YEARS REFE RRE D ABOVE. IN THE ASSESSMENT PROCEEDINGS, THE ASSESSEE FURNISHED EVIDENCE S AVAILABLE WITH IT TO PROVE FACTUM OF GENUINENESS OF PURCHASES. THE ASSESSING OFFICER ASKED THE ASSESSEE TO PRODUCE THE SUPPLIER S IN ORDER TO PROVE THE GENUINENESS OF PURCHASES , BUT THE ASSESSEE COULD NOT PRODUCE THEM BEFORE THE ASSESSING OFFICER. THE ASSESSING OFFICER FURTHER NOTICED THAT THE ASSESSEE HAS NOT FILED VITAL DOCUMENTS SUCH AS DELIVERY CHALLAN, TRANSPORT RECEIPTS, EVIDENCE FOR PAYMENT OF OCTROI, EXCISE RECORD ETC. HOWEV ER , THE ASSESSEE COULD PROVE THAT IT HAS SOLD THOSE GOODS AND ACCORDINGLY IT WAS CONTENDED THAT T HE ASSESSEE COULD NOT HAVE SOLD GOODS WITHOUT ACTUALLY PURCHASING THEM. ON B EING CONVINCED WITH THE SAID EXPLANATION S OF THE ASSESSEE, THE ASSESSING OFFICER TO OK THE VIEW THAT THE ASSESSEE MIGHT HAVE MADE SOME PROFIT ON THE PURCHASES CLAIMED TO H AVE BEEN MADE FROM NON - EXISTING PART IES . ACCORDINGLY, BY TAKING SUPPORT FROM THE DECISION RENDERED BY HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. SIMIT P. SHETH (3 56 ITR 451), THE ASSESSING OFFICER ESTIMATED THE PROFIT EMBEDDED IN THE IMPUGNED BOGUS PURCHASES @ 12.5%. A CCORDINGLY, THE ASSESSING OFFICER ADDED ` 7.32 LAKHS AND ` 3.59 LAKHS RESPECTIVELY IN A.Y. 2010 - 11 & 2011 - 12. THE LEARNED CIT(A) ALSO CONFIRMED THE S AME AND HENCE THE ASSESSEE HAS FILED THESE APPEALS BEFORE THE TRIBUNAL. 3. BEFORE US, THE LD A.R CHALLENGED THE VALIDITY OF RE - OPENING AND ALSO CHALLENGED THE ADDITIONS MADE BY THE AO WITHOUT CONFRONTING THE STATEMENT GIVEN BY THE SUPPLIERS BEFOR E THE SALES TAX AUTHORITIES. THE LD D.R, ON THE CONTRARY, SUBMITTED THAT THE VARIOUS LEGAL ISSUES URGED BY THE ASSESSEE WOULD REQUIRE EXAMINATION OF ASSESSMENT RECORDS FOR PROPERLY DEFENDING THEM. AT THIS POINT, THE LD A.R SUBMITTED THAT THE ASSESSEE WOU LD NOT BE PRESSING THE LEGAL GROUNDS, IF IT GETS PARTIAL RELIEF ON THE ADDITIONS MADE BY THE AO. SHRI JAWARARAM PARKHARAM MODI 3 4. WE HEARD THE PARTIES AND PERUSED THE RECORD. WE NOTICE THAT THE ASSESSEE IS A TRADER IN FERROUS AND NON - FERROUS MATERIALS. WE ALSO NOTICE THAT THE TAX AUTHORITIES HAVE ACCEPTED THE FACT THAT THE ASSESSEE HAS CO - RELATED THE ALLEGED BOGUS PURCHASES WITH THE SALES. THEY HAVE ALSO ACCEPTED THE FACT THAT THE ASSESSEE COULD NOT HAVE SOLD THE GOODS WITHOUT ACTUALLY PURCHASING THE SAME. HENCE THE AO HAS ESTIM ATED THE PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES @ 12.50% AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. THE CONTENTION OF THE LD A.R WAS THAT THE PROFIT RATE OF 12.50% ESTIMATED BY THE AO WAS ON THE HIGHER SIDE. HE SUBMITTED THAT THE VAT RATE APPLICABLE TO THE PURCHASES MADE BY THE ASSESSEE WAS ONLY 4% AND THE SALES TAX AUTHORITIES HAVE BRANDED THE SUPPLIERS AS HAWALA DEALIERS ONLY FOR THE REASON THAT THEY HAVE NOT REMITTED VAT COLLECTED FROM THE PARTIES. ACCORDINGLY HE SUBMITTED THAT THE PRO FIT RATE MAY BE ESTIMATED @ 5% AND THE ASSESSEE WOULD BE SATISFIED WITH THE SAME. 6. WE FIND SOME MERIT IN THE SUBMISSIONS MADE BY LD A.R. CONSIDERING THE FACT THAT THE VAT RATE APPLICABLE TO THE ASSESSEE WAS ONLY 4%, THE PROFIT RATE OF 12.50% ESTIMA TED BY THE AO/CIT(A), IN OU R VIEW, IS ON THE HIGHER SIDE. THE ASSESSEES CASE HERE MAY BE A CASE OF PURCHASES FROM GREY MARKET, WHEREIN THE ASSESSEE MAY BE SAVING VAT AND ALSO MAY BE GETTING MATERIALS AT A DISCOUNTED RATE. CONSIDERING THESE ASPECTS, WE AR E OF THE VIEW THAT THE PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES MAY BE TAKEN AT 6% AND THE SAME WOULD PUT THIS ISSUE AT REST. ACCORDINGLY WE MODIFY THE ORDER PASSED BY LD CIT(A) IN BOTH THE YEARS UNDER CONSIDERATION AND DIRECT THE AO TO RESTRICT THE ADDI TION TO 6% OF THE VALUE OF ALLEGED BOGUS PURCHASES. WE ORDER ACCORDINGLY. 7. SINCE WE HAVE GRANTED PARTIAL RELIEF TO THE ASSESSEE, THE VARIOUS LEGAL ISSUES URGED BY THE ASSESSEE ARE DISMISSED AS NOT PRESSED. SHRI JAWARARAM PARKHARAM MODI 4 8. IN THE RESULT, BOTH THE APPEAL S OF THE ASSESSEE ARE PARTLY ALLOWED. ORDER HAS BE E N PRONOUNCED IN THE COURT ON 27 . 1 1 .201 8 . SD/ - SD/ - (SANDEEP GOSAIN ) (B.R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 27 / 1 1 / 20 1 8 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// ( SENIOR PRIVATE SECRETARY ) PS ITA T, MUMBAI