SHRI HASMUKH J. RUPARELIA, MUMBAI V. ITO, WARD-22(1)(5), MUMBAI

ITA 1853/MUM/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 4076 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-11-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: H
• Assessment Year: 2009-2010
• Appeal Filed On: 29-03-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R BHOOPATHI
• Keywords: Bogus purchase; Principle of natural justice
• Section: 143(3); 133(6); 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH H MUMBAI BEFORE SHRI MAHAVIR SINGH (VICE PRESIDENT) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 1853/MUM/2019 ASSESSMENT YEAR: 2009-10 SHRI HASMUKH J. RUPARELIA, 13, HARI VALLABH CO. OP. SOCIETY, J.K. MEHTA ROAD, GREEN STREET, SANTACRUZ (WEST), MUMBAI-400054. VS. INCOME TAX OFFICER WARD, 22(1)(5), PIRAMAL CHAMBERS, LALBAUG, PAREL, MUMBAI-400012. PAN NO. AACPR1816P APPELLANT RESPONDENT ITA NO. 2248/MUM/2019 ASSESSMENT YEAR: 2009-10 INCOME TAX OFFICER WARD, 22(1)(5), 323, 3 RD FLOOR, PIRAMAL CHAMBERS, LALBAUG, PAREL, MUMBAI-400012. VS. SHRI HASMUKH J. RUPARELIA, 13, HARI VALLABH CO. OP. SOCIETY, J.K. MEHTA ROAD, GREEN STREET, SANTACRUZ (WEST), MUMBAI-400054. PAN NO. AACPR1816P APPELLANT RESPONDENT ASSESSEE BY : MR. KETAN VAJANI, AR REVENUE BY : MR. R. BHOOPATHI, DR DATE OF HEARING : 21/10/2020 DATE OF PRONOUNCEMENT : 02/11/2020 SHRI HASMUKH J. RUPARELIA ITA NO. 1853/MUM/2019 2 ORDER PER N.K. PRADHAN, A.M. THE CAPTIONED CROSS APPEALS- ONE BY THE ASSESSEE AN D THE OTHER BY THE REVENUE ARE DIRECTED AGAINST THE ORDER OF THE COM MISSIONER OF INCOME TAX (APPEALS)-34, MUMBAI AND [IN SHORT CIT(A)] AND AR ISE OUT OF THE ASSESSMENT COMPLETED U/S 143(3) R.W.S. 147 OF THE INCOME TAX A CT 1961 (THE ACT). AS COMMON ISSUES ARE INVOLVED, WE ARE PROCEEDING TO DI SPOSE THEM OFF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. ITA NO. 1853/MUM/2019 ASSESSMENT YEAR: 2009-10 2. THE GROUNDS OF APPEAL FILED BY THE ASSESSEE READ AS UNDER : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A), HAS ERRED IN CONFIRMING THE DISALLOWANCE ON ACCOUNT OF PURCHASES FROM ALLEGED SUSPICIOUS DEALERS TO THE EXTENT OF RS.7,59,122/- BEING 12. 5% OF THE PURCHASES MADE FROM THE SAID DEALERS. 2. THE CIT (A) HAS FAILED TO APPRECIATE THAT THE IMPUG NED DISALLOWANCE IS NOT JUSTIFIED FOR VARIOUS REASONS AND THE PURCHASES ARE DULY SUPPORTED BY VARIOUS DETAILS FURNISHED BY THE APPELLANT INCLUDING THE ST OCK RECORDS AND CORRESPONDING SALES REFLECTED IN THE BOOKS OF ACCOUNTS OF THE APP ELLANT. 3. THE CIT(A) HAS FAILED TO APPRECIATE THAT THE IMPUGN ED DISALLOWANCE IS IN VIOLATION OF PRINCIPLE OF NATURAL JUSTICE SINCE THE APPELLANT HAS NOT BEEN PROVIDED WITH THE MATERIAL USED AGAINST HIM AND ALSO CROSS EXAMINATIO N OF THE ALLEGED SUSPICIOUS DEALERS. 4. WITHOUT PREJUDICE TO THE ABOVE, THE CIT (A) HAS ERR ED IN ESTIMATING THE PROFIT MARGINAL 12.5% AND THEREBY CONTINUING THE DISALLOWA NCE TO THAT EXTENT IN THE CASE OF THE APPELLANT. SHRI HASMUKH J. RUPARELIA ITA NO. 1853/MUM/2019 3 ITA NO. 2248/MUM/2019 ASSESSMENT YEAR: 2009-10 3. THE GROUNDS OF APPEAL FILED BY THE REVENUE READ AS UNDER : 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN TAW THE LD. CIT(A) IS CORRECT IN ALLOWING THE APPEALS OF THE ASSESSEE ON ACCOUNT OF BOGUS PURCHASES IGNORING THE LATEST DECISION OF THE SUPREME COURT I N THE CASE OF M/S N.K.PROTIENS LTD. VS CIT NO. 769 OF 2017 DATED 16.01.2017 (SC) WHEREI N THE HON'BLE SUPREME COURT HAS DECIDED THE ISSUE OF BOGUS PURCHASES WITH A DIR ECTION OF MAKING ADDITION AMOUNTING TO ENTIRE BOGUS PURCHASE AS ASSESSEE'S IN COME. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW THE LD. CIT(A) IS RIGHT IN ALLOWING THE EXPENSES CLAIMED ON ACCOUN T OF PURCHASES MADE FROM M/S MAULIK CORPORATION, HOWEVER ASSESSEE DID NOT FURNIS H DETAILS OF PAYMENT MADE TO THE SAID PARTY EVEN IN SUBSEQUENT YEARS. 3. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW THE LD. CIT(A) FAILED TO APPRECIATE THE FACT THAT ONUS IS ONE THE ASSESSEE TO EXPLAIN AND SUBSTANTIATE THE GENUINENESS AND TRUE NATURE OF PURCHASE TRANSAC TIONS IN WHICH THE ASSESSEE FAILED DURING ORIGINAL ASSESSMENT PROCEEDINGS. 4. THE APPELLANT PRAYS THAT APPEAL IS BEING FILED BECA USE IT IS COVERED UNDER THE EXCEPTION PROVIDED IN PARA 10(E) OF THE AMENDED INS TRUCTION NO.3 OF 2018 DATED 20.08.2018. 4. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT THE A SSESSEE FILED HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR (AY) 2009-10 ON 0 3.10.2009 DECLARING TOTAL INCOME OF RS.9,83,250/-. ON RECEIPT OF INFORMATION FROM THE SALES TAX DEPARTMENT, GOVERNMENT OF MAHARASHTRA THAT THE ASSE SSEE HAD OBTAINED BOGUS PURCHASE BILLS FROM THE HAWALA PARTIES AMOUNT ING TO RS.60,72,978/- (VAISHALI ENTERPRISES RS.30,74,342/- AND MAULIK STE EL CORPORATION RS.29,98,636/-), THE ASSESSING OFFICER (AO) RE-OPEN ED THE ASSESSMENT BY ISSUING NOTICE U/S 148 DATED 08.03.2014. IN RESPONS E TO IT, THE ASSESSEE FILED A SHRI HASMUKH J. RUPARELIA ITA NO. 1853/MUM/2019 4 REPLY VIDE LETTER DATED 21.07.2014 STATING THAT THE RETURN FI LED ON 03.10.2009 MAY BE TREATED AS RETURN FILED IN RESPONSE TO THE N OTICE U/S 148 OF THE ACT. DURING THE COURSE OF RE-ASSESSMENT PROCEEDINGS, IN RESPONSE TO THE QUERY RAISED BY THE AO, THE ASSESSEE FILED VARIOUS DETAIL S E.G. COPY OF PURCHASE BILLS OF THE ALLEGED HAWALA PARTIES AND A CHART SHOWING C ORRESPONDING SALE DETAILS. TO VERIFY THE GENUINENESS OF THE TRANSACTION, THE A O ISSUED NOTICE U/S 133(6) TO THE SAID TWO PARTIES. HOWEVER, NO REPLY WAS RECE IVED BY THE AO FROM THEM. CONSIDERING THE FACTS OF THE CASE, THE AO MADE AN A DDITION OF RS.33,82,929/- WITH THE FOLLOWING OBSERVATIONS : 8.9 IT IS FURTHER SEEN THAT NO PAYMENT WAS MADE TO MAULIK STEEL CORPORATION IN SUBSEQUENT YEARS ALSO, FROM WHICH THE ASSESSEE CLAI MED TO HAVE MADE PURCHASE OF RS. 29,98,636/-. THE ASSESSEE WAS SPECIFICALLY ASKE D TO EXPLAIN WHY PAYMENT WAS NOT MADE TO THIS PARTY, BUT NO RESPONSE IN THIS REG ARD WAS RECEIVED. DURING THE COURSE OF SCRUTINY PROCEEDINGS, ASSESSEE WAS UNABLE TO SUBSTANTIATE THE PAYMENT TO THIS PARTY, EVEN IN THE SUBSEQUENT YEARS. THE QUEST ION ASKED VIDE ORDER SHEET NOTING DT. 24.03.2015 IS PLACED ON RECORDS. IT IS FURTHER PERTINENT TO MENTION HERE THAT THE SAME PARTY WAS KEPT IN BALANCE SHEET AS CREDITORS T ILL A.Y. 2011-12. IN VIEW OF THIS FACT, THE ENTIRE CLAIM OF PURCHASE FROM M/S. MAULIK STEEL CORPORATION OF RS.29,98,636/-AND 12.5% OF CLAIM OF PURCHASE FRO M M/S. VAISHALI ENTERPRISES I.E. 12.5% OF 30,74,342/-, WHICH WORKS OUT TO RS.3,84,29 3/- IS DISALLOWED AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. THE TOTAL DISALLOWANCE, THEREFORE, WORKS OUT TO RS.33,82,929/- (RS.29,98,636 + RS.3,84,293), WHI CH IS ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. 5. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE F ILED AN APPEAL BEFORE THE LD. CIT(A). WE FIND THAT VIDE ORDER DATED 11.12.2018, THE LD. CIT(A) BY FOLLOWING THE JUDGMENT OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF SIMIT SHRI HASMUKH J. RUPARELIA ITA NO. 1853/MUM/2019 5 P. SETH 356 ITR 461 (GUJ) CONFIRMED THE DISALLOWANCE @ 12. 5% MADE BY THE AO IN THE CASE OF PURCHASES OF RS. 30,74,342/-FROM M/S VAISHALI ENTERPRISES WHICH COMES TO RS.3,84,293/-. HOWEVER, HE RESTRICTE D THE DISALLOWANCE IN THE CASE OF PURCHASES FROM M/S MAULIK STEEL CORPORATION TO 12.5% OF THE DISPUTED PURCHASES OF RS. 29.98,636/-. THUS THE LD. CIT(A) R ESTRICTED THE TOTAL DISALLOWANCE TO RS.7,59,122/-. 6. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE RELI ES ON THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE AYS 2010-11 & 2011-12 AND SUBMITS THAT FACTS BEING IDENTICAL, THE PROFIT BE RESTRICTE D TO 8% OF THE DISPUTED PURCHASES OF RS.60,72,978/-. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESENTATIVE (DR), RELYING ON THE DECISION IN M/S N.K. PROTIENS LTD . (SUPRA), SUPPORTS THE ORDER OF THE AO AND EXPLAINS THAT THE ADDITION ORIGINALLY MADE AT RS.33,82,929/- BE CONFIRMED. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIALS ON RECORD. THE RELIANCE PLACED BY THE LD. DR ON THE DECISION IN M/S N.K. PROTIENS LTD. (SUPRA) IS MISPLACED. IN THAT CASE, THERE WAS SEAR CH PROCEEDINGS CONDUCTED BY THE REVENUE AT THE OFFICE PREMISES OF THE ASSESSEE WHEREIN BLANK SIGNED CHEQUE BOOKS AND VOUCHER OF NUMBER OF CONCERNS WERE FOUND. ACCORDINGLY, THE PURCHASES MADE FROM THESE CONCERNS WERE TREATED AS BOGUS BY THE AO AND THE ENTIRE DEPOSITS IN BANK ACCOUNTS OF THESE PARTIES WERE TREATED AS ASSESSEES INCOME ON PROTECTIVE BASIS. O N APPEAL, THE ITAT RESTRICTED THE ADDITION ON ACCOUNT OF ALLEGED BOGUS PURCHASES AT 25% I.E. RS.73,23,322/- OF THE TOTAL PURCHASES AMOUNTING TO RS.2,92,93,288/-. ON FURTHER APPEAL, THE HONBLE HIGH COURT MODIFIED THE ORDER OF THE TRIBUNAL AND DIRECTED FOR ADDITION OF ENTIRE BOGUS PURCHASES. AF TER HEARING THE COUNSELS, THE SHRI HASMUKH J. RUPARELIA ITA NO. 1853/MUM/2019 6 HONBLE SUPREME COURT DISMISSED THE SLP FILED BY TH E ASSESSEE AND CONFIRMED THE DECISION OF THE HIGH COURT FOR ADDITION OF ENTI RE INCOME ON ACCOUNT OF BOGUS PURCHASES. IN THE INSTANT CASE, THERE WAS INFORMATION FROM TH E SALES TAX DEPARTMENT, GOVERNMENT OF MAHARASHTRA THAT THE ASSE SSEE HAD OBTAINED BOGUS PURCHASE BILLS OF RS.60,72,978/- FROM TWO HAW ALA PARTIES. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE FILE D BEFORE THE AO COPY OF PURCHASE BILLS OF THE SAID TWO PARTIES AND A CHART SHOWING CORRESPONDING SALES DETAILS. IN VIEW OF THE ABOVE FACTS, THE INSTANT CA SE IS DISTINGUISHABLE FROM THE DECISION IN N.K. PROTEINS LTD . (SUPRA) RELIED ON BY THE LD. DR. AS MENTIONED EARLIER, ON SIMILAR FACTS, SIMILAR ISS UE AROSE BEFORE THE ITAT SMC-II BENCH, MUMBAI IN ASSESSEES OWN CASE FOR AYS 2010-11 & 2011- 12. THE TRIBUNAL VIDE ITS ORDER DATED 15.06.2020 HELD THAT : 5. I HAVE GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. I NOTED THAT ASSESSEE HAS FILED DETAILED EVIDENCES SUCH AS PURCH ASE BILLS, BOOKS OF ACCOUNT, BANK STATEMENT PROVING THAT THE PURCHASES ARE MADE THROU GH ACCOUNT PAYEE CHEQUES BUT THE ASSESSEE COULD NOT PRODUCE GENUINENESS OF PURCH ASE AS HE WAS NOT HAVING ANY EVIDENCE LIKE TRANSPORTATION OF GOODS, ENTRY OF GOO DS IN THE STOCK REGISTER AS ONE TO ONE CONSUMPTION PATTERN OF ALLEGED PURCHASES ITEM W ISE AND CONFIRMATION FROM THE PARTIES/ CONCERNS ETC. I NOTED THAT IN VIEW OF THE ABOVE, THE CIT(A) HAS RIGHTLY ESTIMATED THE PROFIT RATE OF ALLEGED BOGUS PURCHASE . BUT, I AM OF THE VIEW THAT THE PROFIT RATE CAN BE ESTIMATED ON SOME BASIS AS IN TH E STATE OF GUJART VAT IS AT 8%, WHEREAS IN MAHARASHTRA IT IS 4 TO 6% VARIES FROM IT EM TO ITEM. GOING BY THE FACT THAT THIS MATERIAL MIGHT HAVE BEEN PURCHASED BY ASSESSEE FROM GREY MARKET AT A LOWER PURCHASE PRICE SOME ELEMENT OF PROFIT IS EARNED. HE NCE, A REASONABLE ESTIMATE CAN SHRI HASMUKH J. RUPARELIA ITA NO. 1853/MUM/2019 7 BE MADE. HENCE, I ESTIMATE THE PROFIT RATE AT THE R ATE OF 8% OF THE BOGUS PURCHASES AND DIRECT THE ASSESSING OFFICER TO RECOMPUTE THE I NCOME ACCORDINGLY. 6. SIMILARLY, IN ITA NOS. 1855 & 1856/MUM/2019 FOR ASSESSMENT YEAR 2011- 12 & 2010-11 RESPECTIVELY, WHEREIN THE FACTS AND CI RCUMSTANCES ARE EXACTLY IDENTICAL AND HENCE, TAKING A CONSISTENT VIEW IN TH ESE TWO APPEALS ALSO, I ESTIMATE THE PROFIT RATE AT THE RATE OF 8% AND ASSESSING OFF ICER IS DIRECTED ACCORDINGLY. THE APPEALS OF ASSESSEE ARE PARTLY ALLOWED AS INDICATED ABOVE. 7.1 FACTS BEING IDENTICAL, WE FOLLOW THE ABOVE ORDE R OF THE CO-ORDINATE BENCH AND DIRECT THE AO TO RESTRICT THE ESTIMATION OF PROFIT TO 8% OF THE DISPUTED PURCHASES OF RS.60,72,978/-. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED WHEREAS THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 02/11/2020. SD/- SD/- (MAHAVIR SINGH) (N.K. PRADHAN) VICE PRESIDENT ACCOUNTANT MEMBER MUMBAI; DATED: 02/11/2020 RAHUL SHARMA, SR. P.S. SHRI HASMUKH J. RUPARELIA ITA NO. 1853/MUM/2019 8 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// (DY./ASSISTANT REGISTRAR) ITAT, MUMBAI