DHARMIK EXIM PVT. LTD., MUMBAI V. DCIT-12(2)(2), MUMBAI

ITA 1480/MUM/2019

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 9065 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 10 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-02-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2000-2001
• Appeal Filed On: 11-03-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bogus purchase
• Section: 69C; 143(3); 142(1); 133(6); 143(1); 250

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, MUMBAI BEFORE SHRI PRAMO KUMAR, VICE PRESIDENT & SHRI PAVAN KUMAR GADALE, JUDICIAL MEMBER ITA No. 1480 & 1481/Mum/2019 (A.YS: 2000-01 & 2001-02) Dharmik Exim Pvt Ltd C/o Sharma Shah & Associates, CAs, Kartar Mansion No.1, 2nd Floor, 35, Tribhuvan Road, off Lemington Road, Mumbai - 400004 Vs. DCIT-12(2)(2) Mumbai.-400020 ./ज आइआर ./PAN/GIR No. : AAACD3656N Appellant .. Respondent ITA No. 1812 & 1813/Mum/2019 (A.YS: 2000-01 & 2001-02) DCIT-12(2)(2) Mumbai-400020 Vs. Dharmik Exim Pvt Ltd C/o Sharma Shah & Associates, CAs, Kartar Mansion No.1, 2nd Floor, 35, Tribhuvan Road, off Lemington Road, Mumbai - 400004 ./ज आइआर ./PAN/GIR No. : AAACD3656N Appellant .. Respondent Assessee by: Mr. Pankaj Toprani.AR Revenue by : Mr. Sanyam Joshi. Sr.DR Date of Hearing 25.01.2022 Date of Pronouncement 17.02.2022 ITA No. 1480, 1481, 1812 & 1813/Mum/2019 M/s. Dharmik Exim Pvt Ltd, Mumbai. - 2 - आद श / O R D E R PER PAVAN KUMAR GADALE JM: These are the cross appeals filed by the assesee and the revenue against the separate orders of the CIT(A)-20, Mumbai Passed u/s 143(3) r.w.s 254 and 250 of the Income tax Act, 1961. Since the issues involved in these appeals are similar, identical and inter related therefore they are clubbed, heard and consolidated order is passed. For the sake of convenience, we shall take up the assessee appeal in ITA No. 1480/Mum/2019, for the A.Y 2000-01 as a lead case and the facts narrated therein. The assessee has raised the following grounds of appeal: 1. The Ld. CIT (A) has erred in holding that addition of Rs. 1,72,67,964/- on account of bogus purchases by AO gain ignoring the directions of ITAT and material placed on record mention in para 5.10 of CIT(A) order. 2. The appellant feels aggrieved against the addition made on account of bogus purchase without providing the evidences of material on which they have relied thus denying the natural justice. 3. The appellant feels aggrieved by the order which has been passed at the fact end of the time barring. 4. The appellant feels aggrieved by the additions made to the Income by the AO ignoring facts and legal issue. ITA No. 1480, 1481, 1812 & 1813/Mum/2019 M/s. Dharmik Exim Pvt Ltd, Mumbai. - 3 - 5. Recovery proceedings for recovery of demand raised may be stayed as appellant has paid the demand as per the original CIT(A) order. 6. the appellant feels aggrieved by the additions made to the income by the AO and accordingly seeks relief in this appeal. 7. The appellant reserves the right to add, to delete and or amend any of the foregoing grounds. 2. The Brief facts of the case are that, the assessee company is engaged in the business of export trader in steel. The assessee has filed the return of income for theA.Y2000-01 on 20.11.2000 disclosing a total income of Rs.20,27,420/- and the return of income was processed u/s 143(1) of the Act. Subsequently, the case was selected for scrutiny and the assessment was completed with an addition on account of bogus purchases by the A.O of Rs. 3,77,10,613/- and order u/s 143(3) of the Act was passed on 28.03.2003 determining a total income of Rs.3,97,38,030/-. Aggrieved by the A.O. order, the assessee has filed an appeal before the CIT(A), whereas the CIT(A) has restricted the addition to the extent of 25% of total purchases and partly allowed the assessee’s appeal. Aggrieved by the CIT(A) order, the assessee and the revenue has filed appeal before the Hon’ble Tribunal, whereas the Hon’ble Tribunal in ITA No.2245 & 2916 /Mum/2004 dated 06.02.2007 had restored the issue of genuineness of purchases from 8 parties aggregating to Rs. 3,79,00,113/- to the file of the A.O. to decide a fresh. Therefore the A.O. as per the directions of the Honble Tribunal has passed an order ITA No. 1480, 1481, 1812 & 1813/Mum/2019 M/s. Dharmik Exim Pvt Ltd, Mumbai. - 4 - u/s 144 r.w.s 147 and 254 of the Act on 24.12.2007 and determined the total income of Rs.3,79,00,113/-. 3. Aggrieved by the order, the assessee has filed an appeal before the CIT(A), but the CIT(A) has restricted disallowance to the extent of 25% of alleged bogus purchases. Against the CIT(A) order, both the assessee and the revenue has assailed an appeal with the Hon’ble Tribunal. Whereas, the Hon’ble Tribunal in ITA No. 232 & 151/Mum/2009 dated 09.09.2010 has confirmed the disallowance of entire purchases there by allowing the revenue appeal and dismissed the assessee’s ground on the issue of bogus purchase. Aggrieved by the Honble Tribunal order, the assessee has filed an appeal before the Hon’ble High Court of Mumbai and the matter was restored to the file of the Honble Tribunal for fresh consideration. Whereas, the Hon’ble Tribunal in ITANo.232/Mum/2009&1297/Mum/2012 dated 19.08.2015 as per the directions of the Hon’ble High Court of Mumbai has heard the matter and observed at page 2 Para 3 0f the order as under: 3. The matter further travelled to the Hon’ble Bombay High Court, wherein the Hon’ble Bombay High Court vide its order dated 9-1-2012 set aside the order of the ITAT insofar as it relates to disallowance of purchases amounting to Rs.3.79 crores and restored the matter back to the file of ITAT for fresh consideration of the issue. The precise observation of the Hon’ble High Court was as under :- 1. Whether the ITAT was justified in disallowing the purchases made by assessee from a parties amounting ITA No. 1480, 1481, 1812 & 1813/Mum/2019 M/s. Dharmik Exim Pvt Ltd, Mumbai. - 5 - to Rs.3.79 crores, is the question raised in this appeal. The ITAT has dismissed the appeal filed by the Assessee mainly on the ground that the assessee failed to furnish the permanent account numbers of the 8 parties from whom the assessee claimed to have made purchases. It is the case of the assessee that the permanent account numbers of the 8 parties were in fact furnished during the course of assessment proceeding. The assessee has also filed an affidavit and stated on oath that the purchases made were from genuine parties whose permanent account numbers have been set out in the said affidavit. Since the assessee has furnished the permanent account numbers of the 8 parties from whom the purchases have been made by the assessee, we set aside the order of ITAT in so far as it relates to disallowing purchases amounting to Rs.3.79 crores and restore the matter to the file of ITAT for fresh consideration of the issue.” In vie w of the above direction given by the Hon’ble jurisdictional High Court in respect of assessment year 2000-01, we are in sesin of the matter. 4. As per the directions of the Hon’ble ITAT, the A.O in order to examine the alleged bogus purchases of 8 parties amounting to Rs. 3,79,00,113/- has issued notice u/s 142(1) of the Act and also issued a show cause notice to the assessee referred at Para 4 of the A.O order. The assessee has filed the explanations in compliance to the show cause notice at page 4 Para 5 of the order. 5. Whereas, the A.O. found the submissions are not tenable and called for the copies of the affidavits filed before the Honble High Court. The assessee has filed the submissions on 26-12-2016 along with the PAN of the parties. ITA No. 1480, 1481, 1812 & 1813/Mum/2019 M/s. Dharmik Exim Pvt Ltd, Mumbai. - 6 - The A.O. observed that in the regular Assesseement proceedings the parties have not responded to notice issued u/sec133 (6) of the Act. The A.O. considering the facts and circumstances that the assessee has not filed complete information and the purchases are treated as non genuine has assessed the total income of Rs. 3,97,38,030/- and passed the order u/s 143(3) r.w.s 254 of the Act on 30.12.2016. 6. Aggrieved by the order, the assessee has filed an appeal before the CIT(A), whereas in the appellate proceedings the CIT(A) considered the grounds of appeal, submissions of the assessee and the history of the assessee’s case at page 4 to 6 of the appellate order. Whereas, in respect of the disputed issue where the assessee has filed the confirmations of parties and the material information against the addition of Rs. 3,79,00,113/- the CIT(A) has granted relief in respect of 3 parties aggregating to Rs.2,06,32,149/- referred at Para 5.8 of the order and sustained the addition of RS.1,72,67,964/- and partly allowed the assessee’s appeal. 7. Aggrieved by the order of the CIT(A), the assessee has filed an appeal before the Honble Tribunal. 8. At the time of hearing, the Ld. AR submitted that the CIT(A) erred in sustaining the addition of Rs.1,72,67,964/- on account of bogus purchases, irrespective of the fact that the assessee has placed all the material information before the ITA No. 1480, 1481, 1812 & 1813/Mum/2019 M/s. Dharmik Exim Pvt Ltd, Mumbai. - 7 - CIT(A).The Ld. AR also submitted that the material filed before the A.O was not considered and substantiated the submissions with the paper book and prayed for granting the relief. Contra, the Ld.DR has supported the order of the CIT(A) and submitted that the relief is already granted to the assessee. 9. We heard the rival submissions and perused the material available on record. The sole disputed issue is in respect of addition of bogus purchases made by the A.O. and partly confirmed by the Ld.CIT(A). We find on perusal of the Assessment Order, the Assessing Officer has made 100% addition of purchases in respect of parties and there was no proper compliance to the notice u/s. 133(6) of the Act. Whereas the assessee has made bogus purchases from the dealers and in turn it provides savings to the assessee in nonpayment of state taxes. We considered the facts,circumstances and the judicial decisions of the Honble High Court and Tribunal in the identical cases and the judicial precedence were estimating the profit element embedded @ 12.5% of doubtful/ bogus purchases was accepted. We find that the assessing officer has not doubted the sales but made 100% addition of purchases. We rely on the ratio of decision of Hon'ble Jurisdictional High Court in the case of CIT v. Nikunj Eximp (216 Taxman.com 171) and Honble ITA No. 1480, 1481, 1812 & 1813/Mum/2019 M/s. Dharmik Exim Pvt Ltd, Mumbai. - 8 - Gujarat High court in CIT Vs. Simit P Sheth (2013) (356 ITR 451).Accordingly,we restrict the addition to the extent of 12.5% of the bogus purchases sustained by the CIT(A) and modify the Ld.CIT(A) order sustaining the addition @ 12.5% of purchases. We found that the assessee has fought three rounds of litigation before the Honorable Tribunal. We Considering the facts, circumstances, record of long drawn litigation, submissions of the assessee took a possible and reasonable view in restricting the addition to the extent of 12.5% of the bogus purchases sustained by the CIT(A) and partly allow the ground of appeal of the assessee. 10.. In the result, the appeal filed by the assessee is partly allowed. ITA No. 1812/Mum/2019, A.Y 2000-01 11. The revenue has raised the following grounds of appeal: 1. Whether on the facts and in circumstance of the case in law, the Ld. CIT(A) has erred in deleting the addition of Rs. 2,06,32,149/- which represents the amount of unexplained expenditure taxed u/s 69C of the Act without appreciating the fact th at the assessee has not satisfactorily discharged the primary onus of providing the identity of the seller and the genuineness of the transaction. 2. The appellant prays that the order of the CIT(A) on the grounds be set asid e ad that of the AO be restored. 3. The appellant craves leave to amend or alter any grounds or add a new ground which may be necessary. ITA No. 1480, 1481, 1812 & 1813/Mum/2019 M/s. Dharmik Exim Pvt Ltd, Mumbai. - 9 - 12. At the time of hearing, the Ld.DR submitted that the CIT(A) has erred in granting the relief irrespective of the fact that the assessee has entered into bogus purchase transactions and the CIT(A) has over looked the genuineness of purchases. Contra, the Ld.AR submitted that the assessee has filed the cross appeal. The Ld.DR could not controvert the findings of the CIT(A) with any cogent material or new information and relied on the order of the A.O. 13. We heard the rival submissions and perused the material on record. We find the CIT(A) has relied on the judicial decisions, confirmations, PAN and passed a reasonable order. Accordingly, we are not inclined to interfere with the order of the CIT(A) on this disputed issue of granting the relief and uphold the same and dismiss the grounds of appeal of the revenue. 14, The appeal filed by the revenue is dismissed. In the result, the assessee appeal is partly allowed and the revenue appeal is dismissed. ITA No. 1480, 1481, 1812 & 1813/Mum/2019 M/s. Dharmik Exim Pvt Ltd, Mumbai. - 10 - ITA No. 1481/Mum/2019, A.Y 2001-02 & ITA No. 1813/Mum/2019, A.Y 2001-02(Revenue) 15. As the facts and circumstances in these appeals are identical to ITA No. 1480/Mum/2019 and 1813/Mum/2019 for A.Y. 2000-01, the decision rendered in above paragraphs would apply mutatis mutandis for this case also. Accordingly, grounds of appeal of the assessee are partly allowed and the revenue are dismissed 16. In the result, the assessee’s appeals ITA Nos. 1480 & 1481/Mum/2019 for the A.Y 2000-01 & 2001-02 are partly allowed and revenue appeal ITA Nos. 1812 & 1813/Mum/2019 for the A.Y 2000-01 & 2001-02 are dismissed. Order pronounced in the open court on 17.02.2022. Sd/- Sd/- (PRAMOD KUMAR) (PAVAN KUMAR GADALE) VICE PRESIDENT JUDICIAL MEMBER Mumbai, Dated 17.02.2022 KRK, PS ITA No. 1480, 1481, 1812 & 1813/Mum/2019 M/s. Dharmik Exim Pvt Ltd, Mumbai. - 11 - /Copy of the Order forwarded to : 1. / The Appellant 2. / The Respondent. 3. आ र आ / The CIT(A) 4. आ र आ ( ) / Concerned CIT 5. "#$ % & &' , आ र ) र*, हमद द / DR, ITAT, Mumbai 6. % -. / 0 / Guard file. ान ु सार/ BY ORDER, " & //True Copy// 1. ( Asst. Registrar) ITAT, Mumbai