ITO 19(3)(3), MUMBAI V. SHYAMSUNDARAM P CHAUHAN, MUMBAI

ITA 133/MUM/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 8494 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-01-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 10-01-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AKHTAR HANSARI
• Keywords: Bogus purchase
• Section: 143(3); 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC, BENCH MUMBAI BEFORE SHRI R.C.SHARMA, ACCOUNTANT MEMBER ITA NO. 133/MUM/2019 ( ASSESSMENT YEAR: 2010-11) I.T.O.-19(3)(3), 2 ND FLOOR, ROOM NO. 201, MATRU MANDIR, TARDEO ROAD, MUMBAI-07 VS. SHRI SHYAMSUNDAR P. CHAUHAN, PROP OF PRATAP STEEL, SHOP NO. 4, TULSI BUILDING, 178, KHETWADI BACK ROAD, MUMBAI-400004. PAN/GIR NO. AEFPC 1885 A (APPELLANT ) .. (RESPONDENT ) REVENUE BY SHRI AKHTAR H ANSARI (DR) ASSESSEE BY SHRI RAJ KUMAR SINGH (AR) DATE OF HEARING 14/01/2020 DATE OF PRONOUNCEMENT 20/01/2020 / O R D E R PER: R.C. SHARMA, A.M. THIS IS THE APPEAL FILED BY THE REVENUE AGAINST TH E ORDER OF THE LD. CIT(A)-54, MUMBAI DATED 10/10/2018 FOR THE A.Y. 2010-11 IN THE MATTER OF ORDER PASSED U/S 143(3) R.W.S. 147 OF THE INCOME TAX ACT, 1961 (IN SHORT, THE ACT). 2. IN THIS APPEAL, THE ONLY GRIEVANCE OF THE REVENU E RELATES TO LD. CIT(A)S ORDER GIVING FURTHER RELIEF OF G.P. DECLAR ED BY THE ASSESSEE IN RESPECT OF ALLEGED BOGUS PURCHASES. ITA NO. 133/MUM/2019 ITO VS SHRI SHYAMSUNDAR P CHAUHAN 2 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PER USED. IN THIS CASE, THE A.O. REOPENED THE ASSESSMENT ON OBTAINING INFORMATION FROM THE SALES TAX DEPARTMENT WITH REGARD TO ASSESS EE HAVING TAKEN BOGUS BILLS WITH REGARD TO PURCHASES. AFTER MAKING DETAILED ENQUIRY AND VERIFYING THE FACTS, THE A.O. MADE ADDITION BY ESTIMATING PROFIT AT 12.5% OF ALLEGED BOGUS PURCHASES. BY THE IMPUGNED O RDER, THE LD. CIT(A) AFTER CONSIDERING VARIOUS JUDICIAL PRONOUNCE MENTS AND THE FACTS OF THE CASE, DIRECTED THE A.O. TO GIVE FURTHER RELI EF OF GROSS PROFIT ALREADY DECLARED BY THE ASSESSEE. THUS, THE G.P. OF 12.5% ADDED BY THE A.O. WAS FURTHER REDUCED BY THE G.P. RATE DECLA RED BY THE ASSESSEE. THE PRECISE OBSERVATION OF THE LD. CIT(A) WAS AS UNDER: 6.4 THE SUBMISSIONS OF THE ID. COUNSEL ARE CAREFU LLY CONSIDERED. ACCORDING TO THE APPELLANT ALL THE FIVE PARTIES FRO M WHOM ALLEGED BOGUS PURCHASES WERE MADE WERE REGISTERED U NDER THE LOCAL SALES TAX LAW HAVING VAT NUMBERS ALLOTTED BY THE SALES TAX DEPARTMENT. THE PURCHASES AFFECTED FROM T HESE PARTIES ARE DULY RECORDED IN THE BOOKS OF THE APPEL LANT AND ARE EVIDENCED BY THE INVOICES ISSUED .BY THEM. THE STOCK REGISTER IS ALSO MAINTAINED BY THE APPELLANT, WHICH REFLECTS THE PURCHASES AND THE SALES. THE GOODS PURCHASED FR OM THESE FIVE PARTIES HAVE BEEN SOLD TO VARIOUS CUSTOMERS AN D PAYMENT TO THE PURCHASES PARTIES HAVE BEEN MADE THROUGH PRO PER BANKING CHANNELS. THE APPELLANT RELIED UPON VARIOUS CASE LAWS CITED SUPRA THE FACTS OF WHICH CAN BE DISTINGU ISHED FROM THOSE OF THE PRESENT CASE. ITA NO. 133/MUM/2019 ITO VS SHRI SHYAMSUNDAR P CHAUHAN 3 6.5 THE LD.AO TRIED TO VERIFY THE GENUINENESS OF T HE PURCHASES BY ISSUING NOTICES U/S. 133(6) TO THE PAR TIES. HOWEVER, THE NOTICES WERE RETURNED BACK. THE ASSESS EE COULD NOT FILE VITAL DOCUMENTS LIKE DELIVERY CHALLANS, TR ANSPORT RECEIPTS ETC. MERE FILING OF THE EVIDENCE IN SUPPOR T OF PURCHASES AND PAYMENT MADE THROUGH ACCOUNT PAYEE CHEQUES CANNOT BE CONCLUSIVE IN A CASE WHERE GENUINENESS OF THE TRANSACTION IS IN DOUBT, AS THE PURCHASES FROM THE ALLEGED PARTIES WHICH ARE RECORDED IN THE BOOKS OF ACCOUNTS COULD NOT BE PROVED TO BE GENUINE, THE LD. AO ESTIMATED A PROFIT OF 12.5% OF THE ALLEGED BOGUS PURCHASES AS ADDITIONAL INCOME OF THE ASSESSEE. 6.6 AS THE PARTIES COULD NOT BE PRODUCED AND NO CO NFIRMATIONS WERE FILED FROM THE PARTIES, THE GENUINENESS OF THE PURCHASES REMAINED TO BE ESTABLISHED BEYOND DOUBT. THEREFORE, IT CAN BE PRESUMED THAT THE ASSESSEE HAD MADE PURCHASES BECAUSE THE CORRESPONDING SALES HAVE BEEN DISCLOSED AND ACCEPTED BY THE AO. BUT THE PURCHASES MAY HAVE NOT BEEN MADE FROM THE ALLEGED HAWALA PARTIES BUT FROM GREY MARKET, THEREBY RESULTING IN ADDITIONAL P ROFIT TO THE ASSESSEE. THEREFORE, A REASONABLE PROFIT ELE MENT HAS TO BE ADDED TO THE INCOME OF THE 'ASSESSEE WHICH HA S BEEN ESTIMATED AT 12.5% BY THE LD.AO. 6.7 COMING TO THE ADDITION MADE, THE HON'BLE ITAT, AHMEDABAD 'C' BENCH IN THE CASE OF VIJAY PROTEINS L TD. VS ACIT 58 ITD 0428 HELD THAT IN SIMILAR CIRCUMSTAN CES, 25% OF THE PURCHASE PRICE ACCOUNTED THROUGH FICTIOU S INVOICES HAS TO BE DISALLOWED. THE GOODS MUST HAVE BEEN RECEIVED FROM OTHER PARTIES. THE LIKELIHOOD OF THE PURCHASE PRICE OF THESE ALLEGED PURCHASES BEING INFLATED COU LD NOT BE ITA NO. 133/MUM/2019 ITO VS SHRI SHYAMSUNDAR P CHAUHAN 4 RULED OUT AND THEREFORE THE HON'BLE HIGH COURT HAS UPHELD THE DECISION OF CIT (A) AND THE ITAT DISALLOWING 25 % OF THE PAYMENTS MADE TO SUCH PARTIES. THE HON'BLE HIGH COU RT OF AHAMEDABAD IN THE CASE OF CIT VS SIMIT P. SHETH 365 ITR 0451 HELD THAT ONCE THE SALE IS ACCEPTED BY THE AO, THE VERY BASIS OF PURCHASES COULD NOT BE QUESTIONED. NOT THE ENTIRE PURCHASE PRICE COULD BE DISALLOWED BUT ONLY THE PRO FIT ELEMENT EMBEDDED IN SUCH PURCHASES COULD BE ADDED T O THE INCOME OF THE ASSESSEE. THE ESTIMATION VARIES WITH THE NATURE OF BUSINESS AND NO UNIFORM YARDSTICK COULD B E ADOPTED. 6.8 THE LD.AO HAS ESTIMATED THIS PROFIT AT 12.5%. AS THE PURCHASES COULD NOT BE ESTABLISHED AS GENUINE, THE ESTIMATION MADE BY THE LD.A0 OF 12.5% OF THE ALLEGE D BOGUS PURCHASES IS CONFIRMED. THE ACTION OF THE LD.A0 IN ESTIMATING THE GP AT 12.5% OF THE ALLEGED BOGUS PURCHASE IS UP HELD. HOWEVER, THE LD.A0 IS DIRECTED TO REDUCE THE GP ALREADY DECL ARED BY THE ASSESSEE ON THESE ALLEGED BOGUS PURCHASES. THESE GR OUNDS OF APPEAL ARE PARTLY ALLOWED. 4. I HAVE GONE THROUGH THE ORDERS OF THE AUTHORITIE S BELOW AND FOUND THAT THE A.O. HAS ESTIMATED PROFIT AT 12.5% O F ALLEGED BOGUS PURCHASES IN VIEW OF THE FACT THAT CORRESPONDING SA LES WERE NOT DOUBTED. THE LD. CIT(A) AFTER FOLLOWING THE DECISIO N OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS SIMIT P SH ETH 365 ITR 0451 WHEREIN IT HAS BEEN HELD THAT ONCE THE SALE IS ACCE PTED BY THE A.O., THE VERY BASIS OF PURCHASES COULD NOT BE QUESTIONED . NOT THE ENTIRE PURCHASE PRICE COULD BE DISALLOWED BUT ONLY THE PRO FIT ELEMENT EMBEDDED IN SUCH PURCHASES COULD BE ADDED TO THE IN COME OF THE ITA NO. 133/MUM/2019 ITO VS SHRI SHYAMSUNDAR P CHAUHAN 5 ASSESSEE. ACCORDINGLY, FURTHER GIVEN RELIEF OF G.P. ALREADY DECLARED BY THE ASSESSEE FROM 12.5% SO ESTIMATED BY THE A.O. TH E DETAILED FINDINGS SO RECORDED BY THE LD. CIT(A) HAS NOT BEEN CONTROVERTED, ACCORDINGLY, I DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF THE LD. CIT(A), HENCE, UPHOLD THE SAME. 5. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 20 TH JANUARY, 2020. SD/- (R.C.SHARMA) ACCOUNTANT MEMBER MUMBAI; DATED 20/01/2020 *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//