RAJESH G JAIN, MIRA-BHAYANDAR V. ITO Ward 2(2), Thane Park

ITA 150/MUM/2022

• Counselvise Citation: [2022] 103 COUNSELVISE.COM (IT) 9871 (ITAT-MUMBAI)
• Duration Of Justice: 8 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-10-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: D
• Next Hearing Date: 09-10-2022
• Assessment Year: 2010-2011
• Appeal Filed On: 27-01-2022
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bogus purchase
• Section: 143(3); 133(6); 143(2)

Judgement Text

ITA No.150/Mum/2022 A.Y.2010-11 Rajesh G. Jain Vs. ITO, Ward 2(2) 1 IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, MUMBAI BEFORE SHRI ABY T VARKEY, JUDICIAL MEMBER & SHRI AMARJIT SINGH, ACCOUNTANT MEMBER ITA No.150/Mum/2022 (A.Y. 2010-11) Rajesh G. Jain Flat No. 304, Janki Orchid 90 Feet Road, Bhayandar West 401101 Vs. ITO, Ward 2(2) B Wing, 6 th Floor, Ashar IT Park Road No. 16, Wagle Estate, Thane - 400604 स्थायी लेखा सं./जीआइआर सं./PAN/GIR No: AAEPJ5354H Appellant .. Respondent Appellant by : None Respondent by : Mahita Nair Date of Hearing 10.10.2022 Date of Pronouncement 21.10.2022 आदेश / O R D E R Per Amarjit Singh (AM): The present appeal filed by the assessee is directed against the order passed by the ld. CIT(A)-1, Mumbai which in turn arises from the order passed by the A.O u/s 143(3) of the Act. The assessee has raised the following grounds before us: “1. The Order is bad in law as it is against the express provision of the Circular No. 19/2019 dated 14th August 2019 which provides for compulsory issue of a computer-generated Document Identification Number (DIN) and quoting of the same in the body of such communication, by any income-tax authority relating to assessment, appeals, orders, statutory or otherwise, exemptions, enquiry. investigation, verification of information, penalty, prosecution, rectification, approval etc. to the assessee or any ITA No.150/Mum/2022 A.Y.2010-11 Rajesh G. Jain Vs. ITO, Ward 2(2) 2 other person, on or after the 1st day of October, 2019, failing which such communication shall be treated as invalid and shall be deemed to have never been issued 2. On the facts and in circumstances of case and in law, the Ld CIT(A) erred in estimating the profit from alleged Hawala purchases being Rs.4,22,145/@ 12.50% of the alleged bogus purchases of Rs. 33,37,160, based on the information available on the web site of sales tax department called "Revised List of Hawala Parties. The estimated profit @ 12 50% is on a higher side. 3. On the facts and in circumstances of case and in law, the Ld. CIT(A) erred in estimating the profit from alleged Hawala purchases being Rs.5,00,471/@ 12.50% of the alleged bogus purchases of Rs.40,03,764/- based on the information available on the web site of sales tax department called "Revised List of Hawala Parties. The estimated profit @ 12.50% is on a higher side. 4. On the facts and in circumstances of case and in law, the Ld CIT(A) erred in disallowing 100% of alleged Hawala purchases based on the information available on the web site of sales tax department called "Revised List of Hawala Parties being Rs.6,27,906/- which is in contradiction to the Ld. CIT(A)'s own decision of estimating the profit from alleged Hawala purchases @12.50% from similar transactions. 5. On the facts and in circumstances of the case and in law, the Ld. CIT(A) erred in disallowing a sum of Rs. 67,17,345/- being unexplained sundry creditors for goods outstanding at the year-end without realizing the fact that these creditors represent unpaid alleged Hawala purchases for the year which also amounts to disallowing 100% of alleged Hawala purchases which is in contradiction to the Ld. CIT(A)'s own decision of estimating the profit from alleged Hawala purchases @1 2.50% from similar transactions. 6. On the facts and in circumstances of case and in law, the L.d. CIT(A) erred in by confirming an Ad Hoc addition of Rs 75,000/- on account of lower household withdrawal considering the status of the appellant and his standard in the society. 7. On the facts and in circumstances of case and in law, the Ld. CIT(A) erred by confirming an Ad Hoc addition of Rs 50,000/- on account of various expenses which were allegedly not fully verifiable 8. On the facts and in circumstances of case and in law, the Ld CIT(A) erred in not following the ratio of jurisdictional ITAT and the High Court, according to which only profit element embedded in the alleged bogus purchases can be taxed and not the whole of the alleged bogus purchases, 9. The Ld CIT(A) has erred on the facts of the case by not appreciating the effect of the "addition in totality on the resulting rate of Gross Profit which, ITA No.150/Mum/2022 A.Y.2010-11 Rajesh G. Jain Vs. ITO, Ward 2(2) 3 under normal circumstances, is highly unrealistic in any line of business activity. 10. The Ld. CIT(A) has erred in law by not adopting the theory of contemporary correlation by ignoring the inevitable consequences, incidents and corollaries which must inevitably have flowed when an imaginary state of affairs has been treated as real. 11. The above grounds of appeal are supplementary or complimentary to the other grounds of appeal and not to the exclusion of any other ground of appeal. 12. The appellant craves to leave to amend, modify and alter any grounds of appeal during the course of hearing of this case.” 2. This case was listed for hearing for 4 times, however neither anybody has attended from the side of the assessee nor submitted any written submission, therefore, the appeal of the assessee is adjudicated after hearing the ld. D.R and after taking into consideration the material on record. 3. Fact in brief is that return of income showing total income of Rs.3,73,640/- was filed on 21.09.2010. The assessee was engaged in the business of supplying building material. The case of the assessee was selected for scrutiny assessment and notice issued u/s 143(2) of the Act was issued on 28.09.2011. During the course of assessment the A.O noticed that assessee had shown purchases made from hawala parties aggregating to Rs.83,29,186/-. Out of these only one party i.e M/s Abhishek Enterprises complied with the notice issued u/s 133(6) and stated that he did not have any transaction with assessee and other 7 parties had not made compliance with the notices issued by the A.O. Therefore, the A.O asked the assessee to produce the parties before him to prove the genuineness of the transaction but the assessee failed to in doing so, therefore, the A.O had disallowed an amount of Rs.80,08,830/- on account of bogus purchases. ITA No.150/Mum/2022 A.Y.2010-11 Rajesh G. Jain Vs. ITO, Ward 2(2) 4 The A.O has further noticed that assessee had shown outstanding sundry creditors amounting to Rs.78,53,348/-. The A.O had issued notices u/s 133(6) to these parties but they have also not made any compliance with the notices issued by the A.O. The assessee was asked to produce these parties before the A.O to prove the genuineness of transaction, however, the assessee had not made any compliance. Accordingly, the A.O had disallowed Rs.65,17,345/- on account of unexplained sundry creditors. 4. During the course of assessment the A.O has also noticed that assessee had debited various expenses incurred in cash to the profit and loss account and proper bills and vouchers were not maintained such expenses i.e conveyance Rs.32,540/-, staff welfare Rs.5450/-, stamp duty Rs.9000/- sundry expenses Rs.6750/-, diesel and truck of Rs.2,17,650/-etc. Therefore, the A.O has made addition of Rs.50,000/- on account of adhoc basis. The A.O has also noticed that assessee shown house withdrawal of Rs.89,420/- only, considering the status of the assessee A.O had made addition of Rs.75,000/- to the total income of the assessee. 5. During the course of appellate proceedings the ld. CIT(A) has restricted the addition in respect of bogus purchases @ 12.5% of such purchases after following the decision of ITAT, Ahmedabad in the case of Simit P. Sheth Vs. ITO i.e ITA No. 3238 & 3293/Ahd/2009. In case of M/s Abhishek Enterprises the disallowance was restricted to Rs.6,53,022/- on the ground that no transaction was carried out by that party with the assessee. In respect of sundry creditors the ld. CIT(A) stated that assessee has not furnished confirmation from these creditors in spite of being asked by the A.O during the course of assessment ITA No.150/Mum/2022 A.Y.2010-11 Rajesh G. Jain Vs. ITO, Ward 2(2) 5 proceedings and therefore, addition of Rs.64,17,345/- made by the A.O was confirmed in respect of such creditors. In respect of addition of Rs.75,000/- and Rs.50,000/- on account of household withdrawal and expense incurred in cash the assessee has not submitted any detail before the CIT(A), therefore, the ld. CIT(A) has confirmed such additions. 6. During the course of appellate proceedings before us neither the assessee has attended nor submitted any detail, therefore, after hearing the ld. D.R and after taking into consideration the material on record, we consider that in respect of bogus purchases the assessee had not produced an supporting documents in the form of delivery challan, lorry receipt stock register in support of such purchases, therefore we don’t find any reason to interfere in the decision of ld. CIT(A) in restricting such purchases to the extent of 12.5% of the purchase amount. However, in respect of Abhishek Enterprises the ld. CIT(A) has sustained the full amount of purchases of Rs.6,35,022/-. The ld. CIT(A) had restricted the addition to the extent of 12.5% in respect of bogus parties who had ven not made compliance to the notices issued, therefore, we restrict the addition in respect of purchases made from Abishek Enterprises also to the extent of 12.5% of such purchases of Rs.6,35,022/-. In respect of sundry creditors even during remand report proceedings the assessee has failed to make any compliance in spite of opportunity provided by the ld. CIT(A). The assessee had failed to furnish the confirmation from the sundry creditors. These facts demonstrate that the assessee had failed to furnish even basic document like confirmation from the creditors before the lower authorities, therefore, we don’t find any reason to interfere in the decision of ld. CIT(A). ITA No.150/Mum/2022 A.Y.2010-11 Rajesh G. Jain Vs. ITO, Ward 2(2) 6 In respect of disallowance out of household expenses and other miscellaneous expenses we find that the A.O has not substantiate the reason for such disallowance with relevant break up and defect in the nature of detail submitted by the assessee during the course of assessment proceedings, therefore, we consider that decision of ld. CIT(A) in sustaining these addition is not justified. Accordingly, we direct the A.O to delete the addition of Rs. 75,000/- on account of low household withdrawal and Rs. 50,000/- on account of discrepancy in expenses. 7. In the result, the appeal of the assessee is partly allowed. Order pronounced in the open court on 21.10.2022 Sd/- Sd/- (Aby T Varkey) (Amarjit Singh) Judicial Member Accountant Member Place: Mumbai Date 21.10.2022 Rohit: PS आदेश की प्रतितिति अग्रेतिि/Copy of the Order forwarded to : 1. अपीलाथी / The Appellant 2. प्रत्यथी / The Respondent. 3. आयकर आयुक्त(अपील) / The CIT(A)- 4. आयकर आयुक्त / CIT 5. विभागीय प्रविवनवध, आयकर अपीलीय अवधकरण DR, ITAT, Mumbai 6. गार्ड फाईल / Guard file. सत्यावपि प्रवि //True Copy// आदेशानुसार/ BY ORDER, उि/सहायक िंजीकार (Dy./Asstt. Registrar) आयकर अिीिीय अतिकरण/ ITAT, Bench, Mumbai.