ITO - 32(1)(5), MUMBAI V. HARSHAD V. SHETH 9HUF), MUMBAI

ITA 1531/MUM/2020

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 5746 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-09-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Assessment Year: 2011-2012
• Appeal Filed On: 18-03-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bogus purchase; Unexplained expenditure; Capital asset
• Section: 201; 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA (AM) & SHRI RAVISH SOOD (JM) I.T.A. NO.1531/MUM/2020 (ASSESSMENT YEAR 2011-12) ITO - 32(1)(5) ROOM NO.729, 7 TH FLOOR KAUTILYA BHAVAN BKC, BANDRA(E) MUMBAI-400 051 PAN : AAAHH2277N VS. HARSHAD V SHETH E-1204 VRINDAVAN RAMBAUG LANE OFF S.V.ROAD BORIVALI(W) MUMBAI-400092 ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY NONE DEPARTMENT BY SHRI NEERAJ KUMAR DATE OF HEARING 06.09 .2021 DATE OF PRONOUNCEMENT 08 .09. 2021 O R D E R PER SHAMIM YAHYA (AM) :- THIS IS AN APPEAL BY THE REVENUE, WHEREIN THE REVEN UE IS AGGRIEVED THAT THE LD.CIT(A) HAS REDUCED THE ADDITION FOR BOGUS PU RCHASE OF RS.9,62,696/- DONE @15% BY AO BY SUSTAINING ONLY 12.5% FOR THE AY 2011-12 VIDE ORDER DATED 10/01/2020. 2. THE ASSESSEE IN THIS CASE IS ENGAGED INTO METAL TRADE. THE ASSESSMENT WAS REOPENED UPON INFORMATION FROM SALES TAX DEPART MENT THAT ASSESSEE HAS MADE PURCHASES FROM BOGUS DEALERS. THE AO MADE 15% ADDITION OF THE BOGUS PURCHASE. 3. THE NECESSARY OF FACTS ARE AS UNDER:- HARSHAD VINODRAI SHETH(HUF) (HEREAFTER REFERRED TO AS THE ASSESSEE OR THE APPELLANT) IS A HUF ENGAGED IN TRADING OF IRON AND STEEL IN TH E PROPRIETARY CONCERN BY NAME M/S. N J CORPORATION. RETURN OF INCOME FOR A.Y. 201 1-12 WAS FILED ON 29.09.2011 DECLARING TOTAL INCOME AT RS.7,87,040. THE AO RECEI VED INFORMATION FROM DGIT(INV), MUMBAI/SALES TAX DEPARTMENT THAT SOME OF THE DEALER S UNDER MODVAT ACT 2002 INDULGING IN THE PRACTICE OF PROVIDING ACCOMMODATIO N ENTRIES BY ISSUING BOGUS SALES ITA NO.1531/MUM/2020 2 BILLS/TAX INVOICES, SALES-TAX AUTHORITIES FORWARDED THE LIST OF 'HAWALA DEALERS' AND ALSO THE LIST OF 'BENEFICIARIES' TO THE INCOME-TAX ACT DEPARTMENT. AS PER THE SAID LIST, THE APPELLANT OBTAINED ENTRIES FOR BOGUS PURCHASES FROM SEVEN ENTITIES WHOSE NAMES ARE GIVEN BY THE AO IN PARA 2 OF THE ORDER. THE TOT AL TRANSACTION WITH THE SAID PARTIES WAS AT A VALUE OF RS.64,17,972. AFTER RECORDING THE REASONS AND FOLLOWING DUE PROCEDURE, THE AO REOPENED THE ASSESSMENT U/S 147 O F THE I.T. ACT. REASSESSMENT WAS COMPLETED ASSESSING THE TOTAL TAXABLE INCOME AT RS.17,49,740 AFTER MAKING AN ADDITION OF RS.9,62,696 BEING 15% OF BOGUS PURCHASE S AS UNEXPLAINED EXPENDITURE 4. UPON ASSESSEES APPEAL LD.CIT(A) HAS NOTED THAT THE SALES HAVE NOT BEEN DOUBTED. ACCORDINGLY PLACING RELIANCE UPON SEVERAL CASE LAWS AND UPON THE FACTS OF THE CASE, HE SUSTAINED 12.5% DISALLOWANCE OUT OF THE BOGUS PURCHASES. LD.CIT(A)S CONCLUDING ORDER IS AS UNDER:- IN THE PRESENT CASE FROM THE FACTS AVAILABLE ON RE CORDS, IT IS OBSERVED THAT THE AO HAS NEITHER DISBELIEVED THE PURCHASES NOR THE CORRESPON DING SALES MADE. THE AO HAS HELD THAT THE IMPUGNED PURCHASES WERE NOT MADE FROM ABOV E REFERRED DEALERS/PARTIES BUT FROM SOMEWHERE ELSE/OPEN MARKET. THE FACTS AND CIRC UMSTANCES OF THE PRESENT CASE ARE SIMILAR TO THAT OF FACTS ADJUDICATED BY THE HON BLE GUJARAT HIGH COURT AND HON'BLE ITAT, MUMBAI IN ABOVE REFERRED CASES. HOWEV ER THE ESTIMATION MADE BY THE AO AT 15% IS ON HIGHER SIDE AND MORE THAN THE PERCE NTAGE DETERMINED BY THE COURTS IN THE ABOVE REFERRED CASES. THEREFORE, THE PROFIT IS RESTRICTED TO 12.5% OF THE BOGUS ALLEGED PURCHASES. THE AO IS DIRECTED ADD 12.5% OF RS.64,17,972 WORKING OUT TO RS.8,02,247 AND MODIFY THE ADDITION ACCORDINGLY. AP PELLANT GETS PART RELIEF. THESE GROUNDS ARE PARTLY ALLOWED. 5. AGAINST THE ABOVE ORDER, REVENUE IS IN APPEAL B EFORE THE ITAT. WE HAVE HEARD THE LD. DR AND PERUSED THE RECORD. 6. WE FIND THAT IN THIS CASE, THE SALES HAVE NOT BE EN DOUBTED IT IS SETTLED LAW THAT WHEN SALES ARE NOT DOUBTED, 100% DISALLOWANCE FOR BOGUS PURCHASE CANNOT BE DONE. THE RATIONALE BEING NO SALES IS POS SIBLE WITHOUT ACTUAL PURCHASES. THIS PROPOSITION IS SUPPORTED FROM HONB LE JURISDICTIONAL HIGH COURT DECISION IN THE CASE OF NIKUNJ EXIMP ENTERPRI SES( IN WRIT PETITION NO.2860, ORDER DATED 18.06.2014). IN THIS CASE, THE HONBLE HIGH COURT HAS UPHELD 100% DISALLOWANCE FOR THE PURCHASES SAID TO BE BOGUS, WHEN SALES ARE NOT DOUBTED. HOWEVER, THE FACTS OF THE PRESENT CASE INDICATE THAT ASSESSEE HAS MADE PURCHASE FROM THE GREY MARKET. MAKING PURCHASE S THROUGH THE GREY MARKET GIVES THE ASSESSEE SAVINGS ON ACCOUNT OF NO N-PAYMENT OF TAX AND ITA NO.1531/MUM/2020 3 OTHERS AT THE EXPENSE OF THE EXCHEQUER. IN SUCH SIT UATION, IN OUR CONSIDERED OPINION ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE 12.5% DISALLOWANCE OUT OF THE BOGUS PURCHASES DONE BY THE LD.CIT(A) MEETS THE END OF JUSTICE. ACCORDINGLY, WE UPHOLD THE ORDER OF LD.CIT(A). 7. THE DECISION OF N.K.PROTIENS RELIED BY THE REVE NUE WAS A DISMISSAL OF SLP BY THE HONBLE SUPREME COURT AND HAS ALREADY BEEN EXPL AINED AND DISTINGUISHED BY HONBLE BOMBAY HIGH COURT IN THE CASE OF MOHAMMA D HAZI ADAM & CO IN ITA NO.1004 OF 2006, DATED 11.02.2019. 8. IN THE RESULT, THIS APPEAL FILED BY THE REVENU E STANDS DISMISSED. 9. BEFORE PARTING, WE MAY ADD THAT IF THE ASSESSEE HAS FILED A CROSS-APPEAL OR CROSS-OBJECTION, AND THE SAME HAS REMAINED UNHEARD, EITHER PARTY MAY APPLY FOR RECALL OF THIS ORDER SO THAT THE APPEALS CAN BE HEARD TOGETHER. PRONOUNCED IN THE OPEN COURT ON 08 .09.2021. SD/- SD/- (RAVISH SOOD) (SHAMIM YAHYA) JUDICIAL MEMBER ACCOUNTAN T MEMBER MUMBAI; DATED : 08/09/2021 THIRUMALESH, SR.PS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// ( ASSISTANT REGISTRAR) ITAT, MUMBAI