SHRI RAJENDRA KUMAR BIYANI, MUMBAI V. INCOME TAX OFFICER-31(3)(1), MUMBAI

ITA 1372/MUM/2018

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 5490 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-07-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2007-2008
• Appeal Filed On: 06-03-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAM TIWARI LD DR
• Assessee Lawyers: RUSHABH MEHTA LD
• Keywords: Bogus purchase; Tangible material; Reason to believe; Reassessment proceedings
• Section: 143(3); 147; 131; 148

Judgement Text

ITA NOS.1372 TO 1375/MUM/2018 RAJENDRA KUMAR BIYANI ASSESSMENT YEARS-2007-08 TO 2010-11 IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI , BEFORE SHRI SAKTIJIT DEY, JM AND SHRI MANOJ KUMAR AGGARWAL, AM I.T.A. NOS.1372 TO 1375/MUM/2018 ( ASSESSMENT YEARS: 2007-08 TO 2010-11) RAJENDRA KUMAR BIYANI R8-18, JAI SHREE DHAN SOCIETY BANGUR NAGAR, GOREGAON (W) MUMBAI-400 104 VS. INCOME TAX OFFICER - 31(3)(1) C-13, PRATYAKSHKAR BHAVAN ROOM NO.408-A BANDRA KURLA COMPLEX BANDRA (EAST),MUMBAI-400 051 ! ' PAN/GIR NO. AABPB-1591-L ( !# APPELLANT ) : ( $%!# RESPONDENT ) A SSESSEE BY : RUSHABH MEHTA, LD.AR RE VENUE BY : RAM TIWARI, LD. DR & DATE OF HEARING : 18/07/2018 '() / DATE OF PRONOUNCEMENT : 20/07/2018 O R D E R PER BENCH 1. AFORESAID APPEALS BY ASSESSEE FOR ASSESSMENT YEA RS [AY] 2007- 08 TO 2010-11 CONTEST COMMON ORDER OF LD. COMMISSIO NER OF INCOME- TAX (APPEALS)-42 [CIT(A)], MUMBAI, APPEAL NO.CIT(A)-42/IT-83 TO 86/15- 16 DATED 30/11/2017. THE COMMON GRIEVANCE OF ASSESSEE, IN ALL THE APPEALS, IS ADDITION ON ACCOUNT OF CERTAIN ALLEGED BOGUS PURCHASES. THE ITA NOS.1372 TO 1375/MUM/2018 RAJENDRA KUMAR BIYANI ASSESSMENT YEARS-2007-08 TO 2010-11 2 ASSESSEE HAS ALSO CONTESTED THE REASSESSMENT PROCEE DINGS ON LEGAL GROUNDS. FIRST, WE TAKE UP APPEAL FOR 2007-08. ITA 1372/MUM/2018 FOR AY 2007-08 2.1 THE ASSESSEE, BEING RESIDENT INDIVIDUAL, ENGAGED IN MANUFACTURING OF CORRUGATED BOARD / BOXES AND LABOUR WORK UNDER PROPRIETORSHIP CONCERN NAMELY TIRUPATI PACKAGING WAS SUBJECTED TO REASSESSMENT PROCEEDINGS FOR THE IMPUGNED AY VIDE ORDER DATED 27 /02/2015 WHEREIN THE INCOME OF THE ASSESSEE WAS ASSESSED AT RS.7.30 LACS AFTER SOLE ADDITION OF RS.4.92 LACS ON ACCOUNT OF CERTAIN ALLEGED BOGUS PURCHASES. THE INCOME WAS INITIALLY ASSESSED U/S 143(3) ON 22/ 09/2009 AT RS.2.38 LACS. 2.2 THE ASSESSEE WAS SUBJECTED TO REASSESSMENT PROC EEDINGS FOR IMPUGNED AY PURSUANT TO RECEIPT OF CERTAIN INFORMAT ION FROM DGIT (INVESTIGATION) / SALES TAX DEPARTMENT, MAHARASHTRA REGARDING DEALERS BEING INDULGING IN BOGUS PURCHASE BILLS WITHOUT CARRYING OUT ANY ACTUAL BUSINESS . PURSUANT TO THE SAID INFORMATION, IT WAS FOUND THA T THE ASSESSEE MADE CERTAIN PURCHASES AGGREGATING TO RS.2 8,96,162/- FROM AN ENTITY NAMELY ARUN PAPER & IRON TRADERS. CONSEQUENTLY, NOTICE U/S 148 DATED 28/02/2014 WAS ISSUED TO THE ASSESSEE WHI CH WAS FOLLOWED BY STATUTORY NOTICES U/S 143(2) & 142(1). THE ASSES SEE REFLECTED GROSS PROFIT [GP] RATE OF 16.48% ON TURNOVER OF RS.91.99 LACS. IT WAS FOUN D THAT ALTHOUGH THE ASSESSEE MAINTAINED REGULAR BOOKS OF ACCOUNTS, BUT IT WAS NOT MAINTAINING ADEQUATE STOCK RECORDS. 2.3 THE SUPPLIER, IN RESPONSE TO NOTICE U/S 133(6), FILED LEDGER EXTRACT AND BANK STATEMENTS . THE SUMMONS U/S 131 WERE ISSUED TO ARUN ITA NOS.1372 TO 1375/MUM/2018 RAJENDRA KUMAR BIYANI ASSESSMENT YEARS-2007-08 TO 2010-11 3 AGARWAL, THE PROPRIETOR OF THE AFORESAID FIRM AND HIS STATEM ENT WAS RECORDED ON 19/02/2015 WHEREIN THE SAID PARTY ADMIT TED TO HAVE MADE BOGUS PURCHASES FROM CERTAIN PARTIES. IT WAS ALSO FOUND OUT THAT TH E AFORESAID PARTY WAS NOT MAINTAINING ANY STOCK RECOR D OR TRANSPORTATION BILL ETC. TO DEMONSTRATE MOVEMENT OF GOODS. 2.4 THE ASSESSEE, VIDE LETTER DATED 26/02/2015 DEFE NDED THE PURCHASES MADE BY HIM. HOWEVER, NOT CONVINCED, LD. AO, ON THE BASIS OF GP RATE ALREADY DECLARED BY THE ASSESSEE, ESTIMATED ADDITIO N AGAINST THE SAME @17% WHICH RESULTED INTO IMPUGNED ADDITIONS OF RS.4.92 L ACS IN THE HANDS OF THE ASSESSEE. 3. AGGRIEVED, THE ASSESSEE CONTESTED THE SAME ON LE GAL GROUNDS AS WELL AS ON MERITS WITHOUT ANY SUCCESS BEFORE LD. CI T(A) VIDE IMPUGNED ORDER DATED 30/11/2017 WHEREIN THE LD. FIRST APPELL ATE AUTHORITY, AFTER DUE CONSIDERATION OF FACTUAL MATRIX, CONFIRMED THE STAND OF LD. AO. AGGRIEVED THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 4. THE LD. AUHTORIZED REPRESENTATIVE FOR ASSESSEE [ AR], SHRI RUSHABH MEHTA, ON THE STRENGTH OF VARIOUS JUDICIAL PRONOUNCEMENTS, CONTESTED THE PROCEEDING ON LEGAL GROUNDS AS WELL A S ON MERITS WHICH HAVE BEEN CONTROVERTED BY LD. DEPARTMENTAL REPRESEN TATIVE, SHRI RAM TIWARI. 5. WE HAVE CAREFULLY HEARD THE RIVAL CONTENTIONS AN D PERUSED THE RELEVANT MATERIAL ON RECORD. SO FAR AS THE LEGAL GR OUNDS RAISED BEFORE US ARE CONCERNED, WE FIND THAT SUBSEQUENT TO COMPLETIO N OF ASSESSMENT PROCEEDINGS, SOME TANGIBLE MATERIAL IN THE SHAPE OF CERTAIN INFORMATION FROM INVESTIGATION WING / SALES TAX AUTHORITIES CAME INTO THE POSSESSION OF LD. AO SO AS TO TRIGGER THE REASSESSMENT PROCEED INGS. THE LD. AR ITA NOS.1372 TO 1375/MUM/2018 RAJENDRA KUMAR BIYANI ASSESSMENT YEARS-2007-08 TO 2010-11 4 HAS PLACED RELIANCE ON CERTAIN INFORMATION AS OBTAI NED FROM SALES TAX DEPARTMENT TO CONTROVERT THE FACT THAT THE AFORESAID PARTY WAS A BOGUS DEALER AT THE RELEVANT POINT OF TIME AND THEREFORE, THE IN FORMATION AS RECEIVED BY LD. AO WAS NOT CORRECT. IT WAS FURTHER SUBMITTED THAT THERE WAS NO INDEPENDENT APPLICATION OF MIND BY LD. AO BE FORE ACQUIRING VALID REASSESSMENT JURISDICTION WHICH HAS VITIATED THE AS SESSMENT PROCEEDINGS. WE HAVE CAREFULLY PERUSED THE SAME. T HE RELEVANT EXTRACT OF REASONS FOR REOPENING AS PLACED ON PAGE NUMBER-25 OF THE PAPER- BOOK READS AS UNDER:- NAME OF THE ASSESSEE: RAJENDRA KUMAR BIYANI PAN: AABPB1591L A.Y.: 2007-08 REASON FOR REOPENING RETURN OF INCOME FOR A.Y. 2007-08 WAS FILED BY THE ASSESSEE ON 31.10.2007 DECLARING TOTAL INCOME OF RS.2,08,079/- SUBSEQUENTLY, IT IS INFORME D BY THE OFFICE OF THE DIRECTOR GENERAL OF INCOME TAX (INV), MUMBAI VIDE LETTER NO. CORR. FIEL D/DGIT(INV)2013-14, DATED 26/12/2013, THAT THE ASSESSEE IS ONE OF THE BENEFICIARIES OF BI LLERS (HAWALA OPERATORS) AND HAD PURCHASED GOODS/MATERIAL FROM THE FOLLOWING PARTIES IN THE F.Y. 2006-07 RELEVANT TO A.Y. 2007-08 AMOUNTING TO RS.28,96,162/-. THESE PARTIES ARE IN THE LIST OF SUSPICIOUS DEALERS PUBLISHED BY THE SALES TAX DEPARTMENT, GOVT. OF MAH ARASTRA. ARUN PAPER & IRON TRADERS ADKPA5263C 28,96,162 IN VIEW OF THE ABOVE, I HAVE REASON TO BELIEVE THAT INCOME TO THE EXTENT OF RS.28,96,162/- HAS ESCAPED ASSESSMENT WITHIN THE MEANING OF PROVIS IONS OF SECTION 147 OF THE I.T. ACT AND ACCORDINGLY THE CASE IS REOPENED BY ISSUE OF NO TICE U/S 148 OF THE ACT, SO AS TO REASSESS THE ASSESSEES CORRECT INCOME FOR THE A.Y. 2009-10 A PERUSAL OF THE ABOVE DO NOT CONVINCE US WITH THE SUBMISSIONS MADE BY LD. AR. WE FIND THAT LD. AO WAS IN RECEIPT OF CONCR ETE TANGIBLE INFORMATION FROM DGIT (INVESTIGATION) VIDE LETTER NO. CORR.FIELD/DGIT(INV.)/2013-14 DATED 26/12/2013 WITH RESPECT TO THE ITA NOS.1372 TO 1375/MUM/2018 RAJENDRA KUMAR BIYANI ASSESSMENT YEARS-2007-08 TO 2010-11 5 ASSESSEE WHICH, PRIMA FACIE, SUGGEST POSSIBLE ESCAPEMENT OF INCOME. NOTHING MORE WAS REQUIRED AT THIS STAGE SO AS TO AC QUIRE VALID REASSESSMENT JURISDICTION UNDER LAW. AT THIS STAGE, ONLY A PRIMA FACIE OPINION WAS REQUIRED TO BE FORMED ON THE BASIS OF I NDEPENDENT APPLICATION OF MIND WHICH SUGGESTED ESCAPEMENT OF I NCOME AND THE SAME HAS RIGHTLY BEEN DONE BY LD. AO. THE INFORMATI ON, SO OBTAINED, MAY NOT BE CONCLUSIVELY ACCURATE OR SUFFICIENT BUT THE SAME MUST POINT OUT TO POSSIBLE ESCAPEMENT OF INCOME ONLY. THEREFOR E, THE LEGAL GROUNDS AS RAISED BEFORE US STAND DISMISSED. 6. SO FAR AS THE MERITS ARE CONCERNED, WE ARE OF TH E CONSIDERED OPINION THAT THE ASSESSEE WAS ENGAGED IN MANUFACTURING ACTIVITIES, WHICH COULD NOT BE CARRIED OUT WITHOUT CONSUMPTION OF ACTUAL MATERIAL. THE TURNOVER ACHIEVED BY THE ASSESSEE HAS NOT BEEN DISPUTED BY THE REVENUE AND THE PAYMENTS WERE THROUGH BANKING CHANN ELS. THE ASSESSEE WAS IN POSSESSION OF PRIMARY PURCHASE DOCU MENTS. HOWEVER, AT THE SAME TIME, AS NOTED BY LD. FIRST APPELLATE A UTHORITY, THE DELIVERY OF MATERIAL WAS UNDER DOUBT SINCE THE DOCUMENTS DID NO T BEAR ANY TRANSPORTATION DETAILS ETC. AND SECONDLY, THE ASSES SEE WAS NOT MAINTAINING ADEQUATE STOCK RECORDS REGARDING CONSUM PTION OF MATERIAL. THE ASSESSEE HAS ALSO PLACED ON RECORD ASSESSMENT O RDERS OF ARUN AGARWAL (ALLEGED BOGUS SUPPLIER ) TO CONTEND THAT THE SALE REFLECTED BY THE AFORESAID PARTY HAS BEEN ACCEPTED BY THE REVENU E AND THEREFORE THE ASSESSEES PURCHASES ARE ALSO GENUINE. HOWEVER, A PERUSAL OF THE ORDER FOR AY 2007-08 REVEAL THAT THE AFORESAID PARTY, IN TURN, MADE HUGE ALLEGED BOGUS PURCHASES OF MORE THAN RS.10.09 CRORES ITA NOS.1372 TO 1375/MUM/2018 RAJENDRA KUMAR BIYANI ASSESSMENT YEARS-2007-08 TO 2010-11 6 FROM TWO ENTITIES AND SUFFERED ESTIMATED ADDITIONS IN THE SIMILAR MANNER. SAME METHODOLOGY HAS BEEN ADOPTED BY THE RE VENUE WHILE COMPLETING THE ASSESSMENT UNDER QUESTION. THE REFORE, WE FIND NO FORCE THE ARGUMENT AS RAISED BY LD. AR. THE LD. AR, WHILE PLEADING FOR DELETION OF IMPUGNED ADDITIONS, HAS PL ACED RELIANCE ON CERTAIN JUDICIAL PRONOUNCEMENTS. WE FIND THE MATTER TO BE FACTUAL ONE AND FIND THAT THE DECISION IN EACH CASE HAS BEE N RENDERED KEEPING IN VIEW THE PECULIAR FACTS AND CIRCUMSTANCE S OF EACH CASE WHICH IS EVIDENT FROM THE FACT THAT THERE ARE NUMER OUS DECISIONS FAVORING BOTH THE SIDES AND THEREFORE, COULD NOT BE FOLLOWED WITHOUT CONSIDERING THE FACTUAL MATRIX OF EACH CASE. 7. KEEPING IN MIND THE ABOVE STATED FACTS, WE ARE O F THE OPINION THAT IN THE GIVEN SITUATION, THE ADDITION, WHICH COULD B E MADE, WAS TO ACCOUNT FOR PROFIT ELEMENT EMBEDDED IN THESE PURCHA SE TRANSACTIONS TO FACTORIZE FOR PROFIT ELEMENT EARNED BY ASSESSEE AGA INST POSSIBLE PURCHASE OF MATERIAL IN THE GREY MARKET AND UNDUE B ENEFIT OF VAT AGAINST ALLEGED BOGUS PURCHASES, WHICH LOWER AUTHOR ITIES HAVE RIGHTLY DONE. HOWEVER, CONSIDERING GP RATE ALREADY DECLARED BY THE ASSESSEE, WE FIND THAT THE ESTIMATION OF 17% IS ON THE HIGHER SIDE AND THEREFORE, WE RESTRICT THE SAME TO 5% OF ALLEGED BOGUS PURCHASES. THE SAME COMES TO RS.1,44,808/-. THE ORDER OF LD. FIRST APPELLATE AUT HORITY STAND MODIFIED TO THAT EXTENT. THIS GROUND AS WELL AS THE APPEAL STAN D PARTLY ALLOWED. ITA 1373 TO 1375 /MUM/2018 FOR AY 2008-09 TO 2010-1 1 ITA NOS.1372 TO 1375/MUM/2018 RAJENDRA KUMAR BIYANI ASSESSMENT YEARS-2007-08 TO 2010-11 7 8. IN AY 2008-09, THE ASSESSEE HAS BEEN SADDLED WIT H SIMILAR ADDITIONS OF RS.7.88 LACS AGAINST AGGREGATE PURCHAS ES OF RS.46,38,596/- STATED TO BE MADE FROM THE SAME SUPP LIER. FACTUAL MATRIX BEING THE SAME, WE RESTRICT THE IMPUGNED ADDITIONS TO 5% WHICH COMES TO RS.2,31,930/-. THE APPEAL STANDS PARTLY ALLOWED. 9. IN AY 2009-10, THE ASSESSEE HAS BEEN SADDLED WIT H SIMILAR ADDITIONS OF RS.8.55 LACS AGAINST AGGREGATE PURCHAS ES OF RS.50,31,452/- STATED TO BE MADE FROM THE TWO SUPPL IERS. FACTUAL MATRIX BEING THE SAME, WE RESTRICT THE IMPUGNED ADDITIONS TO 5% WHICH COMES TO RS.2,51,572/-. THE APPEAL STANDS PARTLY ALLOWED. 10. IN AY 2010-11, THE ASSESSEE HAS BEEN SADDLED W ITH SIMILAR ADDITIONS OF RS.6.42 LACS AGAINST AGGREGATE PURCHAS ES OF RS.37,80,956/- STATED TO BE MADE FROM THE FOUR SUPP LIERS. FACTUAL MATRIX BEING THE SAME, WE RESTRICT THE IMPUGNED ADDITIONS TO 5% WHICH COMES TO RS.1,89,048/-. THE APPEAL STANDS PARTLY ALLOWED. CONCLUSION 11. ALL THE APPEALS STAND PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 20 TH JULY, 2018 SD/- SD/- (SAKTIJIT DEY) (MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER *& MUMBAI; DATED : 20.07.2018 SR.PS:-THIRUMALESH ITA NOS.1372 TO 1375/MUM/2018 RAJENDRA KUMAR BIYANI ASSESSMENT YEARS-2007-08 TO 2010-11 8 ! 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