SHRI LALIT N. SHAH, MUMBAI V. INCOME TAX OFFICER 19(2)(1), MUMBAI

ITA 1397/MUM/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 0405 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-09-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 07-03-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ASHUTOSH RAJHANSLD
• Assessee Lawyers: NEELKANTH KHANDELALLD
• Keywords: Bogus purchase; Accommodation entries; Reassessment proceedings
• Section: 143(3); 142(1); 133(6); 143(1); 143(2); 147; 148

Judgement Text

1 ITA NO.1397/MUM/2018 AY 2011-12 SHRI LALIT N. SHAH - IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI , , BEFORE HONBLE SHRI MAHAVIR SINGH, JM AND HONBLE SHRI MANOJ KUMAR AGGARWAL, AM ./ I.T.A. NO.1397/MUM/2018 ( / ASSESSMENT YEAR:2011-12 ) SHRI LALIT N. SHAH PROP. OF M/S. SHAH IMPEX 82/84, KIKA STREET, 2 ND FLOOR GULALWADI, MUMBAI-400 004. / VS. INCOME TAX OFFICER - 19(2)(1) ROOM NO.218, MATRU MANDIR TARDEO ROAD MUMBAI-400 077. '# ./ ./PAN/GIR NO. ACDPS-9498-P ( #% /APPELLANT ) : ( &'#% / RESPONDENT ) REVENUE BY : SHRI ASHUTOSH RAJHANS-LD.DR ASSESSEE BY : SHRI NEELKANTH KHANDELAL-LD.AR / DATE OF HEARING : 09/09/2019 / DATE OF PRONOUNCEMENT : 09/09/2019 / O R D E R PER BENCH: - 1.1 AFORESAID APPEAL BY ASSESSEE FOR ASSESSMENT YEA R [AY] 2011-12 IS A RECALLED MATTER SINCE THE APPEAL WAS ORIGINALLY DIS MISSED BY SMC BENCH OF TRIBUNAL EX-PARTE VIDE ORDER DATED 18/10/2018. HOWEVER, UPON ASSESSEE S APPLICATION, THE ORDER HAS BEEN RECALLED VIDE MA NO .252/MUM/2019 ORDER 2 ITA NO.1397/MUM/2018 AY 2011-12 SHRI LALIT N. SHAH DATED 17/07/2019. ACCORDINGLY, THE APPEAL HAS COME UP FOR FRESH HEARING BEFORE THIS COORDINATE BENCH. 1.2 THE APPEAL CONTESTS THE ORDER OF LD. COMMISSIO NER OF INCOME TAX (APPEALS)-53, MUMBAI [CIT(A)], APPEAL NO. CIT(A)-53 /IT-185/ITO- 19(2)(1)/2017-18 ORDER DATED 22/12/2017 ON FOLLOWIN G GROUNDS OF APPEAL: - THE GROUND OR GROUNDS OF APPEAL ARE WITHOUT PREJUDI CE TO ONE ANOTHER. 1.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN CONFIRMING THE ACTION OF THE AO IN RE-OPENING OF TH E ASSESSMENT U/S. 147 OF THE INCOME TAX ACT, 1961 AS THE PRESCRIBED CONDITIONS THEREIN ARE NOT SATISFIED. 2.A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS.11,62,434/- MADE BY T HE AO TO THE INCOME OF THE APPELLANT ON ACCOUNT OF POSSIBLE PROFIT ELEMENT @ 12.5% EMBEDDED IN PURCHASES MADE THROUGH ALLEGED NON-GENUINE PARTIES ON THE BASIS OF INFORMATION OF THE SALES TAX DEPARTMENT ABOUT SUSPICIOUS DEALERS. B) THE LD. CIT(A) FAILED TO APPRECIATE THAT :- I) ALL THE PURCHASES ARE GENUINE BEYOND DOUBT AND SUPPORTED BY SUFFICIENT MATERIALS; II) ALL THE GOODS PURCHASED FROM THESE PARTIES HAVE BEEN BACKED BY CORRESPONDING SALES WHICH ARE ACCEPTED TO BE GENUINE; III) THE GROSS PROFIT RATIO S HOWN BY THE APPELLANT IS QUITE REASONABLE; IV) NOTHING HAS BEEN BROUGHT ON RECORD BY THE AO THAT MONEY HAS BEEN EXCHANGED IN THE HANDS IN LIEU OF PAYMENT MADE FOR THESE PURCHASES B Y ACCOUNT PAYEE CHEQUE; AND V) THE AO HAD NEITHER PROVIDED COPY OF MATERIALS AND STATEMENTS RELIED UPON BY HIM NOR ALLOWED ANY OPPORTUNITY TO THE APPELLANT TO CROSS E XAMINE THOSE PARTIES WHO HAVE BEEN ALLEGED TO HAVE PROVIDED THE ACCOMMODATION ENTRIES OF SUCH PURCHASES. C) IN REACHING TO THE CONCLUSION AND CONFIRMIN G SUCH ADDITION(SUBJECT TO CERTAIN RELIEF) MADE BY THE AO, THE ID. CIT(A) OMITTED TO CONSIDER RELEVANT FACTORS, CONSIDERATIONS, PRINCIPLES AND EVIDENCES WHILE HE WAS OVERWHELMED, INFLUENCED AND PREJUDICED BY IRRELEVANT CONSIDERATIONS AND FACTORS. D) WITHOUT PREJUDICE, THE RATE OR PERCENTAGE OF PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES AS CONFIRMED BY THE CIT(A) IS EXCESSIVE AND UNREASO NABLE ON THE FACTS OF THE CASE. 3. THE LD. CIT(A) ERRED IN HOLDING TH AT THE GROUND RAISED DISPUTING INITIATION OF PENALT Y PROCEEDINGS U/S.27L(L)(C) IS PREMATURE. THE APPELLA NT DENIES HIS LIABILITY FOR SUCH PENALTY. 2.1 FACTS IN BRIEF ARE THAT THE ASSESSEE BEING RESI DENT INDIVIDUAL STATED TO BE ENGAGED AS TRADER OF METALS, WAS ASSESSED FOR IM PUGNED AY U/S. 143(3) 3 ITA NO.1397/MUM/2018 AY 2011-12 SHRI LALIT N. SHAH R.W.S. 147 ON 29/02/2016 WHEREIN THE INCOME OF THE ASSESSEE WAS DETERMINED AT RS.17.31 LACS AFTER SOLE ADDITION OF ALLEGED BOGUS PURCHASES FOR RS.11.62 LACS AS AGAINST RETURNED INCOME OF RS. 5.68 LACS FILED BY THE ASSESSEE ON 27/09/2011 WHICH WAS PROCESSED U/S.143( 1). 2.2 PURSUANT TO RECEIPT OF CERTAIN INFORMATION FROM INVESTIGATION WING / SALES TAX DEPARTMENT, GOVT. OF MAHARASHTRA, IT TRAN SPIRED THAT THE ASSESSEE STOOD BENEFICIARY OF ALLEGED BOGUS PURCHASES TO THE TUNE OF RS.92.99 LACS FROM 4 ENTITIES, THE DETAILS OF WHICH HAVE ALREADY BEEN TABULATED AT PARA-5.1 OF THE QUANTUM ASSESSMENT ORDER. ACCORDINGLY, AS PE R DUE PROCESS OF LAW, RE-ASSESSMENT PROCEEDINGS WERE INITIATED AGAINST TH E ASSESSEE U/S 147 BY ISSUANCE OF NOTICE U/S 148 ON 07/11/2014. THE STATU TORY NOTICES U/S 143(2) & 142(1) WERE ISSUED IN DUE COURSE WHEREIN THE ASSE SSEE WAS DIRECTED TO SUBSTANTIATE THE PURCHASE TRANSACTIONS. THE ASSESSE E WAS SUPPLIED WITH RECORDED REASONS FOR REOPENING THE CASE. 2.3 ALTHOUGH, THE ASSESSEE DEFENDED THE PURCHASES BY SUBMITTING DETAILS OF SALES / PURCHASES, BANK STATEMENTS ETC., HOWEVER , NOTICES ISSUED U/S 133(6) TO ALL THE SUPPLIERS REMAINED UNSERVED AS WE LL AS UN-RESPONDED TO. THE ASSESSEE FAILED TO PRODUCE ANY OF THE SUPPLIERS TO CONFIRM THE STATED TRANSACTIONS WHICH LED THE LD. AO TO BELIEVE THAT T HE ASSESSEE REMAINED UNSUCCESSFUL IN DISCHARGING THE ONUS CASTED UPON HI M, IN THIS REGARD. CONSEQUENTLY, THE ASSESSEE WAS SADDLED WITH AN ESTI MATED ADDITION @12.5% AMOUNTING TO RS.11.62 LACS IN THE QUANTUM AS SESSMENT ORDER. THE LEARNED FIRST APPELLATE AUTHORITY, INTER-ALIA, RELYING UPON THE DECISION OF HONBLE GUJARAT HIGH COURT RENDERED IN CIT V/S SIMIT P. SHETH [356 ITR 4 ITA NO.1397/MUM/2018 AY 2011-12 SHRI LALIT N. SHAH 451] CONFIRMED THE ADDITIONS. AGGRIEVED, THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. WE HAVE HEARD AND CONSIDERED THE ARGUMEN TS PUT FORTH BY RESPECTIVE REPRESENTATIVES BEFORE US. 3. SO FAR AS THE LEGAL GROUNDS ARE CONCERNED, WE FI ND THAT THE ORIGINAL RETURN OF INCOME WAS PROCESSED U/S 143(1) AND THE O NLY REQUIREMENT UNDER LAW TO INITIATE REASSESSMENT PROCEEDINGS WAS THAT L EARNED AO HAD REASONS TO BELIEVE THAT CERTAIN INCOME ESCAPED ASSESSMENT I N THE HANDS OF THE ASSESSEE. THE LD. AO WAS CLINCHED WITH TANGIBLE MAT ERIAL IN THE SHAPE OF INFORMATION FROM INVESTIGATION WING / SALES TAX DEP ARTMENT WHICH, PRIMA- FACIE, SUGGESTED POSSIBLE ESCAPEMENT OF INCOME IN THE HAND S OF THE ASSESSEE. NOTHING MORE WAS REQUIRED AT THIS STAGE. THEREFORE, THE REASSESSMENT PROCEEDINGS WERE PERFECTLY VALID. NOTH ING ON RECORD SUPPORT THE LEGAL GROUNDS RAISED BY ASSESSEE BEFORE US. THE REFORE, THESE GROUNDS STAND DISMISSED. 4. SO FAR AS THE ESTIMATION OF ADDITIONS ARE CONCE RNED, WE ARE OF THE CONSIDERED OPINION THERE COULD BE NO SALE WITHOUT A CTUAL PURCHASE OF MATERIAL KEEPING IN VIEW THE ASSESSEES NATURE OF B USINESS. THE ASSESSEE WAS IN POSSESSION OF PRIMARY PURCHASE DOCUMENTS AND THE PAYMENTS TO THE SUPPLIER WAS THROUGH BANKING CHANNELS. THE SALES TU RNOVER REFLECTED BY THE ASSESSEE WAS NOT DISPUTED / DISTURBED BY LD.AO. HOW EVER, AT THE SAME TIME, THE ASSESSEE MISERABLY FAILED TO SUBSTANTIATE THE PURCHASES DURING ASSESSMENT PROCEEDINGS. NOTICES ISSUED U/S 133(6) R EMAINED UN- RESPONDED TO IN ALL THE CASES. UNDER SUCH CIRCUMSTA NCES, THE ADDITIONS WHICH COULD BE SUSTAINED, WAS TO ACCOUNT FOR PROFIT ELEMENT EMBEDDED IN 5 ITA NO.1397/MUM/2018 AY 2011-12 SHRI LALIT N. SHAH THESE PURCHASE TRANSACTIONS TO FACTORIZE FOR PROFIT EARNED BY ASSESSEE AGAINST POSSIBLE PURCHASE OF MATERIAL IN THE GREY M ARKET AND UNDUE BENEFIT OF VAT AGAINST SUCH BOGUS PURCHASES, WHICH LD. FIRS T APPELLATE AUTHORITY HAS RIGHTLY DONE. HOWEVER, KEEPING IN VIEW THE FACT THAT THE ASSESSEE WAS DEALING IN A LOW-MARGIN ITEM LIKE IRON & STEEL WHIC H ATTRACTS LOWER RATE OF TAX, THE ESTIMATION MADE BY LD. CIT(A) WOULD BE SLIGHTLY ON THE HIGHER SIDE. WE MODIFY THE SAME TO 5% OF SUSPICIOUS PURCHASES WHICH COMES TO RS.4,64,973/-. THE LD. AO IS DIRECTED TO RECOMPUTE THE INCOME IN TERMS OF OUR ORDER. THE GROUNDS, ON MERITS, STANDS PARTLY AL LOWED. 5. RESULTANTLY, THE APPEAL STANDS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 09 TH SEPTEMBER, 2019. SD/- SD/- (MAHAVIR SINGH) (MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 09/09/2019 SR.PS:-JAISY VARGHESE #$ %$ / COPY OF THE ORDER FORWARDED TO : 1. #% / THE APPELLANT 2. &'#% / THE RESPONDENT 3. . ( ) / THE CIT(A) 4. . / CIT CONCERNED 5. /0 &)1 , 1 , / DR, ITAT, MUMBAI 6. 0234 / GUARD FILE 6 ITA NO.1397/MUM/2018 AY 2011-12 SHRI LALIT N. SHAH / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI.