NIKUNJ YOGESH VORA, MUMBAI V. INCOME TAX OFFICER 19(2)(4), MUMBAI

ITA 1852/MUM/2018

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 9898 (ITAT-MUMBAI)
• Duration Of Justice: 6 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-09-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 22-03-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: IN CIRCUMSTANCES OF CA SE
• Keywords: Bogus purchase; Initiation of penalty proceedings; Accommodation entries
• Section: 142(1); 234B; 147; 148; 12; 2

Judgement Text

IN TH E INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI B. R. BASKARAN , AM AND SHRI AMARJIT SINGH , JM I.T.A. NO . 1852 /M/201 8 ( ASSESSMENT YEAR S : 2011 - 1 2 ) SHRI NIKUNJ YOGESH VORA ROOM NO.21, D.S. KAPOL NIWAS, S.V.P. ROAD, 4 TH KHETWADI, GIRGAON, MUMBAI - 400004 . VS. ITO, 19(2)(4) ROOM NO.217, 2 ND FLOOR, MATRU MANDIR, TARDEO ROAD, MUMBAI - 400007. ./ ./ PAN/GIR NO. : AFGPV 4725 H ( APPELLANT ) .. ( RESPONDENT ) DATE OF HEARING : 28 .0 6 .201 8 DATE OF PRONOUNCEMENT : 26. 09 . 2018 O R D E R PER AMARJIT SINGH, JM: THE ASSESSEE HAS FILED PRESENT APPEA L AGAINST THE ORDER DATED 22.01.2018 PASSED BY THE COMMIS S IONER OF INCOME TAX (APPEALS) - 54 , MUMBAI [HEREINAFTER REFERRED TO AS THE CIT(A)] RELEVANT TO THE ASSESSMENT YEAR 201 1 - 1 2 . 2 . THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: - THE GROUND OR GROUNDS OF APPEAL ARE WITHOUT PREJUDICE TO ONE ANOTHER. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE ID. CIT ERRED IN CONFIRMING THE ACTION OF THE AO ASSESSEE BY: SHRI NEELKANTH KHANDELWAL DEPARTMENT BY: SHRI N. HEM A LATHA (SR. AR ) ITA NO . 1852 /MUM/2018 A.Y. 2011 - 12 2 IN RE - OPENING THE ASSESSMENT U/S.147 OF THE INCOME TAX ACT, 1961 AS THE PRESCRIBED CONDITIONS THERE ARE NOT SATISFIED. A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE ID. CIT ERRED IN CONFIRMING THE ADDITION TO THE EXTENT OF RS. 6,90,525/ - , AFTER SET OFF INCREMENTAL GROSS PROFIT @ 5.16% ALREADY SHOWN BY THE APPELLANT, MADE BY THE 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 T HE BASIS OF INFORMATION OF THE SALES TAX DEP ARTMENT ABOUT SUSPICIOUS DEALERS HAVING REJECTED THE ACCOUNTS U/S.L45( 3). B) THE ID. 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 SATES WHICH ARC ACCEPTED TO BE GENUINE; III) THE GROSS PROFIT RATIO SHOWN BY THE APPELLANT IS QUITE REASONABLE; IV) NOTHING HAS BEEN BROUGHT ON RECORD BY THE AO THAT MONEY HAS EXCHANGED THE HANDS IN LIEU OF PAYMENT MADE FOR THESE PURCHASES BY ACCOUNT PAYEE CHEQUE; AND V) THE AO HAD NEITHER PROVIDED COPY OF MATERIALS AND STATEMENTS RELA YING UPON BY HIM NOR ALLOWED ANY OPPORTUNITY TO THE APPELLANT TO CRO SS EXAMINE THOSE PARTIES WHO HAVE BEEN ALLEGED TO HAVE PROVIDED T HE ACCOMMODATION ENTRIES OF SUCH PURCHASES, C| IN REACHING TO THE CONCLUSION AND CONFIRMING SUCH ADDITION (SUBJECT CERTAIN RELIEF) MADE BY THE AO, THE ID. C1T(A} OMITTED TO CONSIDER RELEVA NT FACTORS, CONSIDERATIONS, PRINCIPLES AND EVIDENCES WHILE HE WAS OVERWHELMED, INFLUENCED AND PREJUDICED BY IRRELEVANT CONSIDERATIONS A FACTORS. D) WITHOUT PREJUDICE, THE RATE OR PERCENTAGE OF PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES AS FIXED BY THE AO AND CONFIRMED BY THE CIT(A) IS EXCESSIVE AND UNREASONABLE ON THE FACTS OF THE CASE. ITA NO . 1852 /MUM/2018 A.Y. 2011 - 12 3 3. THE LD. CIT(A) ERRED IN HOLDING THAT LEVY OF INTEREST U/S 234B AND 234C OF THE I.T. ACT, 1961 IS MANDATORY. THE APPELLANT DENIES HIS LIABILITY FOR SUCH INTEREST. 4. THE LD. CIT(A) ERRED IN HOLDING THAT THE GROUND RAISED DISPUTING INITIATION OF PENALTY PROCEEDINGS US/ 271(1)(C) IS PREMATURE. THE APPELLANT DENIES HIS LIABILITY FOR SUCH PENALTY. 4 . THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED HIS RETURN O F INCOME ON 30 .09 .20 11 DECLARING TOTAL INCOME TO THE TUNE OF RS. 2,82,170 / - . THE RETURN WAS PROCESSED U/S 143(1) OF THE ACT. THE CASE WAS REOPENED U/S 147 OF THE ACT AND NOTICE U/S 1 48 OF THE ACT WAS ISSUED AND SERVED UPON THE ASSESSEE. THEREAFTER, NOTICES U/S 143(2) AND 142(1) OF THE ACT WERE ISSUED AND SERVED UPON THE ASSESSEE. THE ASSESSEE WAS IN THE BUSINESS OF RESELLER OF NON - FERROUS METALS. THE CASE OF THE ASSESSEE WAS REOPENED UPON THE INFORMATION DGIT (INV.) WING, MUMBAI IN WHICH IT WAS CONVEYED THAT THE ASSESSEE HAD TAKEN THE ACCOMMODATION ENTRIES FROM 8 PARTIES WHOSE NAME ARE BEING MENTIONED BELOW .: - TIN HAWALA PARTY/ARTIES PAN F.Y. AMOUNT IN RS. 27400628967V GLOBAL TRADE IMPEX AMRPB2286L 2010 - 11 1,018,091 27750709236V ATLAS INTERNATIONAL (I) ATHPB9489L 2010 - 11 770,117 27290804161V UNICON ENTERPRISE AWNPB0239M 2010 - 11 143,670 27540672055V PREMIER ENTERPRISE APWPB1348D 2010 - 11 683,774 27420676874V SEEMANT TRADING CO. AQRPB8469K 2010 - 11 1,064,054 27720355445V NIRMA METAL INDUSTRIES AHWPB5557E 2010 - 11 782,887 27650686108V AARCO ENTERPRIES AQRPB8274G 2010 - 11 990,148 27250773725V PRAVIN IMPEX ANSPB6684L 2010 - 11 71,461 55,24,202/ - ITA NO . 1852 /MUM/2018 A.Y. 2011 - 12 4 THE TOTAL PURCHASE WAS TO THE TUNE OF RS.55,24,202/ - . A FTER CONSIDERING THE REPLY OF THE ASSESSEE , THE PURCHASE TO THE TUNE OF RS.55,24,202/ - WAS RESTRICTED TO THE EXTENT OF 12.5% I.E.6,90,525/ - . THE INCOME OF THE ASSESSEE WAS ASSESSED TO THE TUNE OF RS.9,72,700/ - . FEELING AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A) WHO CONFIRMED THE ADDITION , THEREFORE , THE ASSESSEE HAS FILED THE PRESENT APPEAL BEFORE US. ISSUE NO. 1: - 5. AT THE TIME OF ARGUMENT, THE LD. REPRESENTATIVE OF THE ASSESSEE DID NOT PRESS THE ISSUE, THEREFORE, THE ISSUE NO. 1 IS BEING DECIDED IN FAVOUR OF THE REVENUE AGAINST THE ASSESSEE BEING NOT PRESSED. ISSUE NO . 2 : - 6. UNDER TH IS ISSUE THE ASSESSEE HAS CHALLENGED THE ADDITION @ 12.5% OF THE BOGUS PURCHASE TO THE TUNE OF RS. 55,24,202/ - I.E. TO THE TUNE OF RS. 6,90,525 / - . THE LD. REPRESENTATIVE OF THE ASSESSEE HAS ARGUED THAT THE ASSESSEE HAS FURNISHED THE LEDGER ACCOUNT, STOCK SUMMA RY, ITEM WISE PURCHASED, COPIES OF BANK - STATEMENT AND SHOWED THE CORRESPONDING SALE ETC. TO THE AUTHORITIES BUT T HE AO DID NOT CONSIDER THE SA ME, T HEREFORE, ASSESSING THE PROFIT @ 12.5% OF THE BOGUS PURCHASE IS WRONG AGAINST THE LAW AND FACTS AND IS LIABLE TO BE SET ASIDE. IT IS ALSO ARGUED THAT THE CIT(A) HAS DECIDED THE MATTER OF CONTROVERSY ON THE BASIS OF THE DECISION OF THE GUJARAT HIGH COU RT IN ITA NO . 1852 /MUM/2018 A.Y. 2011 - 12 5 THE CASE OF CIT VS. SIMIT P. SHETH 356 ITR 451, WITHOUT APPRECIATING THE FACTS THAT THE FACTS OF THE PRESENT CASE IS DISTINGUISHABLE HENCE THE ADDITION TO THE EXTENT OF 12.5% IS LIABLE TO BE REDUCED /DELETED IN ACCORDANCE WITH LAW AS WELL AS ON SEEING THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE. IT IS SPECIFICALLY ARGUED THAT THE ASSESSEE IS IN THE PROFESSION OF NON - FERROU METALS AND IN THE SAID PROFESSION THE NET PROFIT IS TO THE EXTENT OF 2% TO 5% , THEREFORE, THE PROFIT UPON THE BOGUS PURCHASE I S LIABLE TO BE REDUCED. IT IS ALSO SPECIF ICALLY ARGUED THAT APPELLANT HAS ALREADY SHOWN THE GROSS PROFIT @ 5.16 % IN ITS BOOKS OF ACCOUNT ON THE RELEVANT SALE OUT OF THESE PURCHASE. IN THE SAID CIRCUMSTANCES, THE PROFIT ASSESSED UPON THE BOGUS PURCHASE IS L IABLE TO BE REDUCED. HOWEVER, ON THE OTHER HAND, THE LD. REPRESENTATIVE OF THE DEPARTMENT HAS REFUTED THE SAID CONTENTION AND STRONGLY RELIED UPON THE ORDER PASSED BY THE CIT(A) IN QUESTION. ON THE APPRAISAL OF THE ORDER OF THE CIT(A) , WE NOTICED THAT THE MATTER OF CONTROVERSY HAS ALREADY BEEN ADJUDICATED BY THE CIT(A) ON THE BASIS OF THE DECISION OF THE GUJARAT HIGH COURT IN THE CASE OF CIT VS. SIMIT P. SHETH (SUPRA) AND IN THE CASE OF VIJAY PROTEIN VS. ACIT 58 ITD 0428 AND ON THE BASIS OF THE SANJAY OIL CAKES VS. CIT 316 ITR 0274. IT IS CORRECT THAT THE FACTS OF THE PRESENT CASE IS SOME DIFFERENT TO THE CASE RELIED BY CIT(A) IN HIS ORDER. THE ASSESSEE IS THE TRADER IN IRON - STEEL AND THE PROFIT IN THE SAID PROFESSION FLU CTUATE TO THE EXTENT OF 1% TO 3 % . T HE ASSESSEE HAS ALSO S HOWN THE GROSS PROFIT OF RS.5.16 % IN ITS BOOKS OF ACCOUNT ON THE RELEVANT SALE OUT OF ITA NO . 1852 /MUM/2018 A.Y. 2011 - 12 6 THESE PURCHASE . THEREFORE, TAKING INTO ACCOUNT, ALL THE FACTS AND CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE INTE REST OF JUSTICE WILL MET IF THE ADDITION UPON THE BOGUS PURCHASE BE RESTRICTED TO THE EXTENT OF 6%. ACCORDINGLY, THIS ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE AGAINST THE REVENUE. IN RESULT, APPEAL FILED BY THE ASSESSEE IS HEREBY PARTLY ALLOWED. ISSUE NO . 3 : - 9. ISSUE NO. 3 IS CONSEQUENTIAL IN NATURE, THERE IS NO NEED TO DECIDE THE SAME. ISSUE NO. 4 : - 10. ISSUE NO. 4 IS FORMAL IN NATURE WHICH NOWHERE REQUIRED FOR ANY ADJUDICATION. 10 . IN THE RESULT , APPEAL FILED BY THE ASSESSEE IS HEREBY ORDERED TO BE PARTLY ALLOWED . ORDER P RONOUNCED IN THE OPEN COURT ON 26. 09. 201 8 . SD/ - SD/ - ( B. R. BASKARAN ) (AMARJIT SINGH) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI; DATED : 26. 09. 2 018 . V IJAY ITA NO . 1852 /MUM/2018 A.Y. 2011 - 12 7 / 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// SR. PRIVATE SECRETARY ) , / ITAT, MUMBAI