ITO 20(2)(2), MUMBAI V. MOHAMMEDBHAI HAJI DEESAWALA, MUMBAI

ITA 1319/MUM/2020

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 4397 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-09-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 27-02-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANJAY J SETHI
• Keywords: Bogus purchase; Accommodation entries; Reassessment proceedings
• Section: 143(1); 13; 22; 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (VIRTUAL COURT) SMC BENCH, MUMBAI BEFORE SHRI C.N. PRAS AD, HON'BLE JUDICIAL MEMBER ITA NO. 1319 / MUM/20 20 ( A. Y : 2009 - 10 ) INCOME TAX OFFICER 20 ( 2 ) (2) ROOM NO. 212 , 2 ND FLOOR PIRAMAL CHAMBERS, L ALBAUG MUMBAI 400 012 V. MOHAMMEDBHAI HAJI DEESAWALA FLAT NO. 602, 6 TH FLOOR KETAN APARTMENTS, 22 ND BELVEDERE ROAD MAZGAON, MUMBAI - 400010 PAN: AEMPD3927R ( A PPELLANT) (RESPONDENT) ASSESSEE BY : NONE DEPARTMENT BY SHRI SANJAY J. SETHI DATE OF HEARING : 13.09.2021 DATE OF PRONOUNCEMENT : 13 .09.2021 O R D E R PER C. N. PRASAD (JM) 1. THIS APPEAL IS FILED BY THE REVENUE AGAINST ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) 32 , MUMBAI [HEREINAFTER IN SHORT LD.CIT(A)] DATED 11.12.2019 FOR THE A.Y. 2009 - 10 IN RESTRICTING THE ADDITION @5% AS AGAINST @ 12. 5% MADE BY THE ASSESSING OFFICER. 2 ITA NO. 1319/MUM/2020 (A.Y: 2009 - 10) MOHAMMEDBHAI HAJI DEESAWALA 2. BRIEFLY STATED THE FACTS ARE THAT, ASSESSEE ENGAGED IN BUSINESS OF DEALER IN COPPER AND ALLUM INIUM WIRES, FILED RETURN OF INCOME ON 20.09.2009 DECLARING INCOME OF . 5,81,088 / - FOR THE A.Y. 2009 - 10 AND THE RETURN WAS PROCESSED U/S. 143(1) OF THE ACT. SUBSEQUENTLY, ASSESSING OFFICER RECEIVED INFORMATION FROM THE DGIT(INVESTIGATION) , MUMBAI ABOUT TH E ACCOMMODATION ENTRIES PROVIDED BY VARIOUS DEALERS AND ASSESSEE WAS ALSO ONE OF THE BENEFICIARY FROM THOSE DEALERS. THE ASSESSMENT WAS REOPENED U/S. 147 OF THE ACT BASED ON THE INFORMATION RECEIVED FROM DGIT (INVESTIGATION) , MUMBAI, THAT THE ASSESSEE HAS AVAILED ACCOMMODATION ENTRIES FROM VARIOUS PARTIES AS REFERRED IN THE ASSESSMENT ORDER WHO ARE SAID TO BE PROVIDING ACCOMMODATION ENTRIES WITHOUT THERE BEING TRANSPORTATION OF ANY GOODS. IN THE REASSESSMENT PROCEEDINGS, THE ASSESSEE WAS REQUIRED TO PROVE THE GENUINENESS OF THE PURCHASES MADE FROM THE PARTIES MENTIONED IN THE ASSESSMENT ORDER. IN RESPONSE ASSESSEE FURNISHED PURCHASE BILLS, BANK STATEMENT MARKING THEIR PAYMENTS TO THE PARTIES, COPIES OF LEDGER ACCOUNTS, COPIES OF PURCHASE BILLS AND SUBSEQU ENT SALE OF GOODS PURCHASED FROM THE PARTIES AND SUBMITTED THAT THE PURCHASES MADE ARE GENUINE. ASSESSEE FURTHER SUBMITTED THAT THE PAYMENTS ARE MADE THROUGH ACCOUNT PAYEE CHEQUES AS SUCH CONTENDED THAT ALL THE PURCHASES ARE GENUINE. 3 ITA NO. 1319/MUM/2020 (A.Y: 2009 - 10) MOHAMMEDBHAI HAJI DEESAWALA 3. NOT CONVINCED WITH TH E SUBMISSIONS OF THE ASSESSEE THE ASSESSING OFFICER TREATED THE PURCHASES AS NON - GENUINE AND HE WAS OF THE OPINION THAT ASSESSEE HAD OBTAINED ONLY ACCOMMODATION ENTRIES WITHOUT THERE BEING ANY TRANSPORTATION OF MATERIALS AND THE ASSESSEE MIGHT HAVE MADE PU RCHASES IN THE GRAY MARKET. IT IS THE FINDING OF THE ASSESSING OFFICER THAT THE ASSESSEE FAILED TO PRODUCE THE PARTIES IN SUPPORT OF ITS CLAIM THAT PURCHASES ARE GENUINELY MADE FROM THE PARTIES. THEREFORE, ASSESSING OFFICER TREATED 1 2 . 5% OF THE ALLEGED B OGUS PURCHASES OF . 27,02,913 / - FOR THE A.Y. 2009 - 10 AS NON - GENUINE. ON APPEAL THE LD.CIT(A) CONSIDERING THE EVIDENCES AND VARIOUS SUBMISSIONS OF THE ASSESSEE RESTRICTED THE ADDITION TO 5% AS AGAINST 1 2 . 5% OF THE NON - GENUINE PURCHASES . 4. IN SPITE OF ISSUE OF NOTICE NONE APPEARED ON BEHALF OF THE ASSESSEE NOR ANY ADJOURNMENT WAS SOUGHT. THEREFORE, I PROCEED TO DISPOSE OFF THIS APPEAL ON MERITS ON HEARING THE LD.DR. 5. LD. DR VEHEMENTLY SUPPORTED THE ORDERS OF THE ASSESSING OFFICER. ON A PERU SAL OF THE ORDER OF THE LD.CIT(A), I FIND THAT THE LD.CIT(A) CONSIDERED THIS ASPECT OF THE MATTER ELABORATELY WITH REFERENCE TO THE SUBMISSIONS OF THE ASSESSEE AND THE AVERMENTS IN THE ASSESSMENT ORDER AND FOLLOWING VARIOUS JUDICIAL PRONOUNCEMENTS RESTRICT ED THE ADDITION TO 4 ITA NO. 1319/MUM/2020 (A.Y: 2009 - 10) MOHAMMEDBHAI HAJI DEESAWALA 5% OF THE NON - GENUINE PURCHASES OF . 27,02,913 / - , WHILE HOLDING SO, THE LD.CIT(A) OBSERVED AS UNDER: - 4.4.1 I FIND THAT THE APPELLANT HAS FILED RETURN OF INCOME, DETAILS OF SALES AND PURCHASES, INVOICES, LEDGER ACCOUNT OF THE ABOVE ME NTIONED PARTIES, BANK STATEMENT SHOWING PAYMENTS TO THE PARTIES AND SUBSEQUENT SALES MADE OUT OF SUCH PURCHASES. BUT NEITHER ANY ACCOUNT CONFIRMATIONS HAVE BEEN FILED FROM THE SAID 6 PARTIES NOR THE SAID PARTIES HAVE BEEN PRODUCED BEFORE THE AO FOR VERIFIC ATION OF THE GENUINENESS OF THOSE PURCHASES. 4.4.2 CONSIDERING THAT THE APPELLANT WAS ABLE TO CORRELATE THE PURCHASES OF MATERIALS WITH THE SALE OF SUCH GOODS, THE AO HAS RIGHTLY HELD THAT THE APPELLANT MUST HAVE PURCHASED THE MATERIAL FROM GREY MARKET AND THE ACTUAL PURCHASE BILLS, IN THE NATURE OF ACCOMMODATION BILLS WOULD HAVE BEEN INFLATED, SINCE THE APPELLANT WOULD HAVE HAD SAVINGS FROM SUCH PURCHASES ON ACCOUNT OF VAT, CASH DISCOUNT AND LOWER RATES. THE AO HAS MADE AN ADDITION IN RESPECT OF PROFIT ELE MENT ON SUCH PURCHASES @ 12.5%, WHICH APPEARS TO BE ON THE HIGHER SIDE, IN THE PRESENT FACTS AND CIRCUMSTANCES OF THE CASE WHEN THE GROSS PROFIT RATE OF 2.47% HAS BEEN DECLARED BY THE APPELLANT FROM ITS OVERALL BUSINESS TRANSACTIONS, AS PER THE AUDIT REPOR T. IN THIS REGARD, I FIND THAT IN THE DECISION OF THE ITAT, MUMBAI IN THE CASE OF PRASHANT ENTERPRISES, ITA NO. 5117/MUM/2013 A.Y 2010 - 11 DATED 24.02.2016 THE REASONABLE DISALLOWANCE HAS BEEN MADE @ 5% OF TOTAL SUSPICIOUS PURCHASES IN THE SIMILAR LINE OF B USINESS OF TRADING IN FERROUS METALS ETC. CONSIDERING THAT THE VAT RATE ON THE ITEMS OF SUCH SUSPICIOUS PURCHASES MADE BY THE APPELLANT OF COPPER STRIPS/COPPER WIRES/COPPER COIL/ALUMINIUM WIRE ETC. IS 4%, AS PER THE COPY OF BILLS SUBMITTED AND THE ABOVE - SA ID DECISION OF THE ITAT MUMBAI, THE REASONABLE RATE OF DISALLOWANCE IN RESPECT OF PROFIT ELEMENT ON SUCH BOGUS PURCHASES AGGREGATING TO RS.27,02,913/ - , IN THE CASE OF APPELLANT IS FAIRLY ESTIMATED AT @ 5%. ACCORDINGLY, THE ADDITION MADE BY THE A.O IS RESTR ICTED TO RS.1,35,146/ - . THE A.O IS DIRECTED TO RECOMPUTE THE INCOME AND ALLOW RELIEF ACCORDINGLY. GROUND NO. 2 TO 5 ARE PARTLY ALLOWED. 5 ITA NO. 1319/MUM/2020 (A.Y: 2009 - 10) MOHAMMEDBHAI HAJI DEESAWALA 6. ON A CAREFUL PERUSAL OF THE ORDER OF THE LD.CIT(A) AND THE REASONS GIVEN THEREIN, I DO NOT FIND ANY INFIRMITY IN THE ORDER PASSED BY THE LD.CIT(A) IN RESTRICTING THE ADDITION/DISALLOWANCE TO THE EXTENT OF 5% OF THE ALLEGED NON - GENUINE PURCHASES . GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 7. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE VIRTUAL COURT ON 13.09.2021. SD/ - (C.N. PRASAD) JUDICIAL MEMBER MUMBAI / DATED 13/09/2021 GIRIDHAR, SR.PS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY// BY ORDER (ASSTT. REGISTRAR) ITAT, MUM