D KETAN & CO., MUMBAI V. ITO 32(1)(4), MUMBAI

ITA 1302/MUM/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 5591 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2009-2010
• Appeal Filed On: 23-02-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: RAM TIWARI LD DR
• Keywords: Bogus purchase
• Section: 143(3); 133(6); 147

Judgement Text

ITA.NO.1302/MUM/2017 D. KETAN & CO. ASSESSMENT YEAR-2009-10 IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI , BEFORE SHRI SAKTIJIT DEY, JM AND SHRI MANOJ KUMAR AGGARWAL, AM I.T.A. NO.1302/MUM/2017 ( ASSESSMENT YEAR: 2009-10) D . KETAN & CO. H 304, OLD ASHOK NAGAR 179 LT ROAD, VAZIRA NAKA BORIVALI (W) MUMBAI-400 092 VS. INCOME TAX OFFICER - 32(1)(4) C-10, 3 RD FLOOR PRATYAKSHKAR BHAVAN BKC, BANDRA(EAST) MUMBAI-400 051 ! ' PAN/GIR NO. AADFD-2513-L ( !# APPELLANT ) : ( $%!# RESPONDENT ) ASSESSEE BY : NONE REVENUE BY : RAM TIWARI, LD.DR & DATE OF HEARING : 26/07/2018 '() / DATE OF PRONOUNCEMENT : 31/07/2018 O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. AFORESAID APPEAL BY ASSESSEE FOR ASSESSMENT YEAR [AY] 2009-10 CONTEST THE ORDER OF LD. COMMISSIONER OF INCOME-TAX (APPEALS)-44 [CIT(A)], MUMBAI, APPEAL NO.CIT(A)-44/ITO-32(1)(4)/ITA-424/2015-16 DATED 13/12/2016 QUA CONFIRMATION OF FOLLOWING ADDITIONS:- ITA.NO.1302/MUM/2017 D. KETAN & CO. ASSESSMENT YEAR-2009-10 2 NO. PARTICULARS AMOUNT (RS.) 1. ADDITION OF 12.5% AGAINST ALLEGED BOGUS PURCHASE S 23,67,467 2. INTEREST DISALLOWANCE U/S 36(1)(III) 6,11,326 3. LATE PAYMENT OF SALES TAX AND TDS 33,911 4. INTEREST FOR LATE PAYMENT TO THE CREDITORS 9,9 2,587 TOTAL 40,05,291 NONE HAS APPEARED FOR ASSESSEE AND NO VALID ADJOURN MENT APPLICATION IS ON RECORD. LEFT WITH NO OPTION, WE PROCEED TO DISPO SE-OFF THE SAME ON THE BASIS OF MATERIAL AVAILABLE ON RECORD AND AFTER HEARING LD. DEPARTMENTAL REPRESENTATIVE, SHRI. RAM TIWARI. THE ASSESSMENT FOR IMPUGNED AY WAS FRAMED BY LD. INCOME TAX OFFICER-32(1)(4), MUMBAI [AO] U/S 143(3) READ WITH SECTION 147 OF THE INCOME TAX ACT,1961 ON 20/03/2015 WHEREIN THE INCOME OF THE ASSESSEE HAS B EEN DETERMINED AT RS.51.55 LACS AS AGAINST ASSESSED INCOME OF RS.11.5 0 LACS U/S.143(3). 2.1 THE ASSESSEE BEING RESIDENT INDIVIDUAL WAS ENGAGED IN THE BUSINESS OF TRADING OF IRON & STEEL. PURSUANT TO RECEIPT OF CERTAIN INFORMATION FROM SALES TAX DEPARTMENT, MAHARASHTRA & DGIT (INVESTIGATION) REGARDING DEALERS INDULGING IN HAWALA BILLING , IT WAS FOUND THAT THE ASSESSEE MADE AGGREGATE PURCHASES OF RS. 1 89.39 LACS FROM TWELVE SEARCH PARTIES THE DETAILS HAS BEEN EXTRACTE D AT PARA-4 OF THE QUANTUM ASSESSMENT ORDER. THE ASSESSEE DEFENDED THE PURCHASES BY SUBMITTING THAT THE PAYMENTS WERE THROUGH BANKING C HANNELS. HOWEVER, THE ASSESSEE FAILED TO PRODUCE ANY OF THE PARTY ALO NG WITH INWARD REGISTER AND STOCK REGISTER . ACCORDINGLY, LD. AO MADE ESTIMATED ADDITION OF 12.5% AGAINST THE SAME WHICH RESULTED INTO IMPUG NED ADDITIONS OF RS.23.67 LACS. ITA.NO.1302/MUM/2017 D. KETAN & CO. ASSESSMENT YEAR-2009-10 3 2.2 THE IMPUGNED ADDITION U/S 36(1)(III) PERTAINING TO INTEREST OF RS.6.11 LACS AS DEBITED BY THE ASSESSEE IN THE PROFIT & LOS S ACCOUNT WAS MADE SINCE IT WAS NOTED THAT THE ASSESSEE DIVERTED INTER EST BEARING LOANS TOWARDS GRANT OF INTEREST FREE LOANS. THE ADDITION OF RS.33,911/- PERTAIN TO ADDITION ON ACCOUNT OF LATE PAYMENT OF SALES TAX . THE LAST ADDITION IS WITH RESPECT TO INTEREST ON LATE PAYMENT TO SUNDRY CREDITORS SINCE THE ASSESSEE CHARGED INTEREST @.11% FROM SUNDRY DEBTORS AS AGAINST 2.65% PAID TO SUNDRY CREDITORS . AFTER CONSIDERING THE FACTUAL MATRIX, THE INTEREST HAS BEEN DISALLOWED TO THE EXTENT OF RS.9. 92 LACS. 3. AGGRIEVED, THE ASSESSEE CONTESTED THE SAME WITH OUT ANY SUCCESS BEFORE LD. CIT(A) VIDE IMPUGNED ORDER DATED 13/12/2 016, WHEREIN THE MATTER HAS BEEN CONCLUDED IN THE FOLLOWING MANNER:- 5. DECISION ON GROUNDS OF APPEAL NO.1: 5.1 THE RELEVANT FACTS ARE LIKE THIS. THE ASSESSEE IS A FIRM WHICH IS ENGAGED IN THE BUSINESS OF DEALING IN IRON AND STEEL BARS. THIS GR OUND RELATES TO DISALLOWANCE OF RS.23,67,467/- AS BOGUS PURCHASES AND CONSEQUENT AD DITION OF THE SAME AMOUNT. THE AO HAS RECEIVED INFORMATION FROM THE SALES TAX DEPARTMENT THAT THE APPELLANT HAS SHOWN PURCHASES FROM 7 BOGUS CONCERNS. THE TOTA L PURCHASES FROM THESE 7 PARTIES COMES TO RS.1,89,39,741/-. DURING THE COURS E OF ASSESSMENT, THE A.O. ISSUED NOTICES U/S.133(6) TO THE SAID PARTIES. ALL THE NOTICES WERE RETURNED UN-SERVED BY THE POSTAL AUTHORITIES. IT IS THE CONTENTION OF THE A.O. THAT THE ASSESSEE FAILED TO ESTABLISH THE GENUINENESS OF PURCHASES. SINCE THE A .O DID NOT DOUBT THE GENUINENESS OF SALES HE CAME TO THE CONCLUSION THAT THE ASSESSEE MUST HAVE MADE PURCHASES FROM GREY MARKET AND THEREFORE THE PURCHA SE RATE MENTIONED IN THE ALLEGED BILLS CANNOT BE ACCEPTED. AFTER CONSIDERING THE TOTALITY OF FACTS, THE A.O. STATED THAT THE APPELLANT HAS ARRANGED BILLS WORTH RS.1,89,39,741/- TO SUPPRESS HIS TRUE PROFIT. THE AO THEREAFTER ESTIMATED HIS TRUE P ROFIT BY TAKING 12.5% OF THE BOGUS PURCHASE AS FAIR PROFIT. THE AO ACCORDINGLY MADE AN ADDITION OF RS.23,67,467/- 5.2 IT IS SEEN FROM RECORD THAT THE A.O. HAS NOT ME CHANICALLY DISALLOWED THE ENTIRE DISPUTED PURCHASES AMOUNTING TO RS.1,89,39,741/-, R ATHER HE HAS DISALLOWED 12.5% OF THE AMOUNT OF PURCHASE IN DISPUTE. IT IS NOT IN DISPUTE THAT THE NOTICES U/S 133(6) ISSUED TO THE SUPPLIERS MENTIONED ABOVE CAME BACK U NDELIVERED. WHEN THE BASIC DETAILS LIKE PURCHASES REMAIN UNVERIFIABLE, IT IS O PEN FOR THE A.O. TO REJECT THE BOOK RESULTS OF THE ASSESSEE. THUS IT IS HELD THAT THE A .O. WAS RIGHT IN REJECTING THE BOOK RESULTS OF THE ASSESSEE. FURTHERMORE, AS STATED ABO VE THE A.O. HAS HIMSELF ESTIMATED THE PROFIT RATE WHICH SHOULD HAVE ARISEN BECAUSE OF THE ALLEGED BOGUS PURCHASE RATHER THAN DISALLOWING THE ENTIRE PURCHAS ES. THE A.O. ALSO FAIRLY ITA.NO.1302/MUM/2017 D. KETAN & CO. ASSESSMENT YEAR-2009-10 4 CONCEDED IN PARA 4.5 OF HIS ORDER THAT THE APPELLAN T HAD INCURRED EXPENDITURE ON SUCH PURCHASES, BUT SUCH EXPENDITURES REMAIN UNEXPL AINED. FURTHER THE RATE OF PROFIT TAKEN BY THE AO ON THE DISPUTED PURCHASES SE EMS REASONABLE CONSIDERING THE VOLUME AND NATURE OF TRADE OF THE ASSESSEE. SINCE T HE A.O. HAS HIMSELF GIVEN SUBSTANTIAL RELIEF TO THE ASSESSEE BY A SPEAKING OR DER I DO NOT SEE ANY REASON TO INTERFERE IN THE ORDER OF THE A.O. THE GROUNDS OF A PPEAL NO.1 IS DISMISSED AND ACCORDINGLY ADDITION OF RS.23,67,467/- IS CONFIRMED . 6. DECISION ON GROUNDS OF APPEAL NO.2: 6.1 THE RELEVANT FACTS ARE LIKE THIS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTED BY THE AO THAT THE INTEREST-BEARING LO ANS OF RS.24,74,367/- HAS BEEN DIVERTED BY THE APPELLANT TO ADVANCE INTEREST FREE LOANS WITHOUT EXPLAINING ANY BUSINESS EXPEDIENCY. THE AO THEREFORE DISALLOWED TH E CLAIM OF INTEREST AMOUNTING TO RS.6,11,326/- UNDER THE PROVISION OF 36(1)(III) OF THE IT ACT 1961. 6.2 DURING THE COURSE OF APPEAL PROCEEDINGS NO ONE APPEARED NOR WAS ANY WRITTEN SUBMISSION MADE. IN ABSENCE OF ANY WRITTEN SUBMISSI ON AND/OR DOCUMENT TO SUBSTANTIATE THE CLAIM OF THE APPELLANT AND AFTER C ONSIDERING THE TOTALITY OF FACTS OF THIS CASE IT IS HELD THAT THE AO HAS RIGHTLY DISALL OWED INTEREST U/S 36(1)(III). ADDITION OF RS.6,11,326/- IS CONFIRMED. THE GROUNDS OF APPEA L NO.2 IS ACCORDINGLY DISMISSED. 7. DECISION ON GROUNDS OF APPEAL NO.3: 7.1 THE RELEVANT FACTS ARE LIKE THIS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTED BY THE AO THAT THE APPELLANT HAS INCUR RED EXPENDITURE UNDER THE HEAD SALES TAX LATE PAYMENT FEES. THE AO DISALLOWED AN AMOUNT OF RS. 33,911/- CLAIMED AS ABOVE ON THE GROUND THAT SUCH EXPENDITUR E IS NOT ALLOWABLE IN LAW AND ADDED RS. 33,911/- TO THE TOTAL INCOME OF THE APPEL LANT. 7.2 DURING THE COURSE OF APPEAL PROCEEDINGS NO ONE APPEARED NOR WAS ANY WRITTEN SUBMISSION MADE. IN ABSENCE OF ANY WRITTEN SUBMISSI ON AND/OR DOCUMENT TO SUBSTANTIATE THE CLAIM OF THE APPELLANT AND AFTER C ONSIDERING THE TOTALITY OF FACTS OF THIS CASE IT IS HELD THAT THE AO HAS RIGHTLY MADE T HE ADDITION. ADDITION OF RS. 33,911/- IS CONFIRMED. THE GROUNDS OF APPEAL NO.3 IS ACCORDI NGLY DISMISSED. 8. DECISION ON GROUNDS OF APPEAL NO.4: 8.1 THE RELEVANT FACTS ARE LIKE THIS. DURING THE CO URSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTED BY THE AO THAT THE APPELLANT HAS INCURRED EXPENDITURE UNDER THE HEAD INTEREST ON DELAYED PAYMENTS TO SUPPLIERS. THE AO D ISALLOWED AN AMOUNT OF RS.9,92,587/- CLAIMED AS ABOVE ON THE GROUND THAT T HE APPELLANT HAS CLAIMED EXORBITANT INTEREST ON DELAYED PAYMENTS TO CREDITOR S VIS--VIS INTEREST RECEIVABLE ON DELAYED RECEIPTS FROM DEBTORS. THE AO ACCORDINGLY M ADE AN ADDITION RS.9,92,587/- TO THE TOTAL INCOME OF THE APPELLANT. 8.2 DURING THE COURSE OF APPEAL PROCEEDINGS NON-ONE APPEARED NOR WAS ANY WRITTEN SUBMISSION MADE. IN ABSENCE OF ANY WRITTEN SUBMISSI ON AND/OR DOCUMENT TO SUBSTANTIATE THE CLAIM OF THE APPELLANT AND AFTER C ONSIDERING THE TOTALITY OF FACTS OF THIS CASE IT IS HELD THAT THE AO HAS RIGHTLY MADE T HE ADDITION. ADDITION OF RS.9,92,587/- IS CONFIRMED. THE GROUNDS OF APPEAL N O.4 IS ACCORDINGLY DISMISSED. 9. THE GROUNDS OF APPEAL NOS.5 & 6 ARE GENERAL IN NATURE AND THEREFORE THESE GROUNDS DO NOT REQUIRE ANY COMMENTS. 10. IN THE RESULT, THE APPEAL IS DISMISSED. ITA.NO.1302/MUM/2017 D. KETAN & CO. ASSESSMENT YEAR-2009-10 5 AGGRIEVED, THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. THE LD. DR SUPPORTED THE STAND TAKEN BY LOWER AUTHORITIES. 4. UPON PERUSAL OF THE ORDER OF LD. FIRST APPELLATE AUTHORITY, WE FIND THAT THE ASSESSEE COULD NOT REBUT THE CONCLUSIONS A S DRAWN BY LD. AO AND REMAINED NEGLIGENT IN SUBSTANTIATING HIS CASE. SIMILAR IS THE SITUATION BEFORE US. SINCE THE PRIMARY ONUS REMAINED UN-DISCH ARGED BY THE ASSESSEE, THE LOWER AUTHORITIES WERE JUSTIFIED IN M AKING IMPUGNED ADDITIONS / DISALLOWANCES AND THEREFORE, WE SEE NO REASON TO INTERFERE WITH THE SAME. 5. RESULTANTLY, THE ASSESSEES APPEAL STAND DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST JULY, 2018 SD/- SD/- (SAKTIJIT DEY) (M ANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER *& MUMBAI; DATED : 31.07.2018 SR.PS:-THIRUMALESH ! COPY OF THE ORDER FORWARDED TO : 1. !# / THE APPELLANT 2. $%!# / THE RESPONDENT 3. / THE CIT(A) 4. / CIT CONCERNED 5. + ,$ - -) *& / DR, ITAT, MUMBAI 6. , ./0 & GUARD FILE ' / BY ORDER, # '$ % (DY./ASSTT.REGISTRAR) *& / ITAT, MUMBAI