ATUL J. SHAH, MUMBAI V. INCOME TAX OFFICER 19(1)(2), MUMBAI

ITA 1853/MUM/2023

• Counselvise Citation: [2024] 130 COUNSELVISE.COM (IT) 2917 (ITAT-MUMBAI)
• Duration Of Justice: 7 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-01-2024
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: A
• Next Hearing Date: 21-12-2023
• Assessment Year: 2009-2010
• Appeal Filed On: 22-05-2023
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ASSESSEE
• Keywords: Condonation of delay; Bogus purchase; Principle of natural justice; Accommodation entries; Bonafide mistake; Bogus
• Section: 147; 143(3); 143(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL "A" BENCH, MUMBAI SHRI B.R. BASKARAN, ACCOUNTANT MEMBER SHRI RAHUL CHAUDHARY, JUDICIAL MEMBER ITA No. 1853/MUM/2023 (Assessment Year: 2009-10) Atul J Shah Shop No. 4, Ground Floor, Daruwala Building, Khetwadi Back Road, Girgaon, Mumbai - 40004 [PAN: AAZPS072L] ............... Appellant Income Tax Officer 19(1)(2), Matru Mandir Grant Road, Mumbai - 400007 Vs ................ Respondent Appearance For the Appellant/Assessee For the Respondent/Department : : Shri P.K. Ajwani Shri Devendra Harnesha Shri Anil Sant Date Conclusion of hearing Pronouncement of order : : 22.12.2023 03.01.2024 O R D E R Per Rahul Chaudhary, Judicial Member: 1. By way of the present appeal the Assessee has challenged the order, dated 16/10/2019, passed by the Ld. Commissioner of Income Tax (Appeals), Mumbai - 30 [hereinafter referred to as ‘the CIT(A)’] for the Assessment Year 2009-10, whereby the Ld. CIT(A) had dismissed the appeal of the Assessee against the Assessment Order, dated 16/03/2015, passed under Section 143(3) read with Section 147 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’). 2. The Assessee has raised the following grounds of appeals: ITA No. 1853/Mum/2023 (Assessment Year: 2009-10) 2 1. “The learned CIT (A) has erred in directing that the disallowance of the purchases of Rs. 4,26,18,638/- be retained to the extent of 100% by incorrectly observing that appellant had made bogus purchase from 5 parties as mentioned in the assessment order. 2. The learned CIT (A) has erred in confirming the disallowance @100% of Rs. 4,26,18,638/- being purchases by treating them as bogus purchase by merely relying on observation made by the learned assessing officer that he had received information from sales tax department and DGIT (Investigation) that the assessee has accepted bogus accommodation entry which is incorrect and ignoring the fact these are merely internal enquiries carried out by Sale Tax Authorities, in respect of third parties. 3. The learned CIT (A) has erred in confirming the disallowance without appreciating the fact that addition has been made merely on presumptions and without bringing any adverse material on record and conclusive findings to prove that purchases are non genuine. 4. The learned CIT (A) has erred in confirming the disallowance without appreciating the fact that sales reported by the appellant have not been suspected by the learned assessing officer. The A.O. has also not doubted the books of accounts which are audited which are placed on record with the assessing officer and hence purchases ought to have been treated as genuine. 5. The learned CIT (A) has erred in confirming the disallowance @100% of Rs. 4,26,18,638/- being purchases which invades the Principal of Natural Justice. 6. The learned CIT (A) has erred in confirming the disallowance @ 100% of Rs. 4,26,18,638/- being purchases without appreciating the fact that addition has been made by the assessing officer by merely relying on the information received from sales tax department and DGFT (Investigation Wing) without making any independent enquiry by himself. He has further required your appellant to produce parties and their books of accounts which is also one of the reason why purchases have been treated as bogus. Your appellant has no access to books of accounts third parties and merely because suppliers had not appeared before AO, the purchase could not be treated as bogus. The disallowance made by A.O was based solely on third party information, which was not subjected any further scrutiny. 7. The learned CIT (A) has erred in confirming the disallowance @ being 100% of Rs. 4,26,18,638/- being purchases without appreciating the fact that no copies of materials/ information/evidences, on the basis of which the AO has formed his opinion to make disallowance of above referred purchases have ITA No. 1853/Mum/2023 (Assessment Year: 2009-10) 3 been furnished to the appellant even though same has been used against the appellant. 8. The learned CIT (A) has failed to appreciate the fact addition to the extent of 100% invades the Principal of Natural Justice & Principal of Unjust Enrichment. 9. The Assessee prays to the honorable bench that such a huge disallowance not only invades the Principal of Natural Justice & Principal of Unjust Enrichment, but will also lead to fall of assessee both Financially as well as mentally. 10. That, the appellant further craves leave to add, alter or amend the foregoing ground of appeal as and when considered necessary.” 3. The relevant facts in brief are that the Appellant filed return of income for the Assessment Year 2009–10 on 17/09/2009 declaring total income of INR 6,38,950/- which was processed under section 143(1) of the Act. Subsequently, information was received from Director General of Income Tax (Investigation), Mumbai to the effect that the Appellant had obtained the accommodation entries of bogus purchases aggregating to INR 4,26,18,638/- from the following five parties: Name Amount(INR) 1. Siddhivinayak Trading Company 27,87,440/- 2. Mehta Steel Corporation/Mahavir Fabrication 72,37,080/- 3. Coral Trading Co 9,48,314/- 4. Roopam Impex 90,65,555/- 5. R J Corporation 2,43,70,692/- Total 4,26,18,638/- 4. On the basis of the above information, reassessment proceedings under Section 147 of the Act were initiated which culminated into Assessment Order, dated 16/03/2015, passed under section 143(3) read with section 147 of the Act whereby the income of the Appellant was assessed at INR 70,31,750/- after making disallowance of INR 63,92,796/- being profit element embedded in alleged bogus purchases of INR 4,26,18,638/- computed at the rate of 15%. ITA No. 1853/Mum/2023 (Assessment Year: 2009-10) 4 5. Being aggrieved, the Appellant carried the issue in appeal before CIT(A). Vide order, dated 16/10/2019, the CIT(A) dismissed the aforesaid appeal preferred by the Appellant and enhanced the addition from 15% to 100% of alleged bogus purchases. 6. Being aggrieved by the order passed by CIT(A), the Appellant has preferred the present appeal on the grounds reproduced in paragraph 2 above. 7. At the outset, the Learned Departmental Representative pointed out that the present appeal is barred by limitation by 1255 days and submitted that the same ought to be dismissed for that reason alone. 8. The Learned Authorised Representative for the Appellant, seeking condonation of delay in filing the appeal, submitted the Appellant was running a small business in the name of A J Shah & Co., being a proprietorship entity carrying on family business looked after, jointly, by the Appellant and his father (Mr. Jayantilal Shah). At the relevant time, the father of the Appellant was not keeping good health. In the year 2019, the father of the Appellant faced multiple medical issues relating to brain cells uncontrollable blood pressure, blood clotting in brain, tonic seizures. In April 2020, the father of the Appellant expired leaving the Appellant completely unstable mentally as well as financially. The spread of Covid-19 Pandemic started at around that time and lockdown was imposed. Further, during September, 2019 to January, 2022, the Appellant was also facing minor medical issues. In the aforesaid circumstances, the Appellant lost contact with the tax consultant. The Ld. Authorised Representative for the Appellant further submitted that on getting intimation about the recovery proceedings vide letter dated 08/12/2022, the Appellant again reached out to the new tax consultant and follow up regarding filing of ITA No. 1853/Mum/2023 (Assessment Year: 2009-10) 5 appeals for the Assessment Years 2009-10, 2010-11 and 2011-12 before the Tribunal. Though, appeal papers for the aforesaid three assessment years were handed over for filing respective appeals, the appeals were filed only for the Assessment Years 2010-11 and 2011- 12 and the filing of appeal for the Assessment Year 2009-10 was inadvertently missed out by the tax consultant on getting the common order, dated 23/03/2023, passed by the Mumbai Bench of the Tribunal disposing appeal for Assessment Year 2010-11 (ITA No. 112/Mum/2023) and Assessment Year 2011-12 (ITA No. 113/Mum/2023), the Appellant raised query regarding the order for the Assessment Year 2009-10. The Appellant was surprised to know that the appeal for the Assessment Year 2009-10 was not filed and therefore, made efforts to get the appeal prepared and filed without any further delay. The appeal for the Assessment Year 2009-10 was eventually filed on 22/05/2023 after a delay of 1255 days. On the basis of the aforesaid, the Ld. Authorised Representative for the Appellant submitted that the delay caused in filing the appeal was neither intentional nor deliberate and was caused by bonafide mistake on the part of the Appellant and the tax consultant. Further, the Appellant was mentally disturbed as he was dealing with his own ill health, and the grief of demise of his father. He further submitted that in case the period during which the lockdown was imposed is excluded, the delay in filing the appeal would get reduced substantially. The Ld. Authorised Representative for the Appellant vehemently submitted that the Appellant was not able to file the appeal in time on account of bonafide reasons, which have been explained by the Appellant, and requested the delay in filing the appeal be condoned. Advancing arguments on merits, the Authorised Representative for the Appellant submitted the Appellant has a good case for not sustaining addition made at the rate of 100% of the ITA No. 1853/Mum/2023 (Assessment Year: 2009-10) 6 purchases by placing reliance upon the decision of the Mumbai Bench of the Tribunal in Appellant’s own case for the Assessment Years 2010-11 and 2011-12. 9. Per Contra, the Ld. Departmental Representative opposed Appellant’s application seeking condonation of delay and submitted that the time for filing appeal expired prior to the imposition of lockdown on account of Covid-19 Pandemic and that the Appellant has failed to provide any reasonable explanation for not filing the appeal within the specified period. On merits, the Learned Departmental Representative placed reliance upon the order passed by the CIT(A) and contended that the CIT(A) was justified in enhancing disallowance to 100% of bogus purchases as the Appellant had failed to discharge the onus to substantiate the claim of expenditure incurred on purchases. 10. We have given thoughtful consideration to the rival submissions, perused the material on record and examined the position in law. 11. We note that the impugned order was passed by the CIT(A) on 16/10/2019. At the relevant time, the Appellant was dealing with medical issues faced by his father who passed away in April 2020. Lockdown was imposed on account of the spread of Covid-19 Pandemic in March 2020. In case the period starting from 15/03/2020 to 28/02/2022 (i.e. the period specified in the order, dated 10/01/2022, passed by the Hon’ble Supreme Court in suo motu Writ Petition (C) No. 3 of 2022 while dealing with the issue of limitation arising on account of Covid-19 Pandemic) is excluded on account of difficulty of the Appellant to engaged/meet tax consultant, the effective delay in filing the appeal gets reduced substantially. Further, we note that the Appellant had preferred appeal before the Tribunal for the Assessment Years 2010-11 and 2011-12 wherein identical ITA No. 1853/Mum/2023 (Assessment Year: 2009-10) 7 addition on account of alleged bogus purchases was made by the Assessing Officer. It is the contention of the Appellant that while the tax consultant was instructed to file the appeal for Assessment Year 2009-10 and the documents pertaining to same were handed over along with the documents pertaining to Assessment Years 2010-11 and 2011-12, inadvertently the appeal for Assessment Year 2009-10 was not filed by the tax consultant. The aforesaid facts came to the knowledge of the Appellant on receiving the common order, dated 23/03/2023, passed by the Tribunal disposing appeal for Assessment Year 2010-11 (ITA No. 112/Mum/2023) and Assessment Year 2011-12 (ITA No. 113/Mum/2023). Thereafter, on 23/05/2023, the Appellant filed the present appeal. After considering the totality of facts and circumstances leading to the filing of the appeal, we are of the view that the delay in filing of the appeal needs to be condoned in view of the explanation furnished by the Appellant which we find to be sufficient and reasonable. In the case of Collector of Land Acquisition Vs. Mst. Katiji & others AIR 1987 1353 (SC), the Hon’ble Supreme Court has emphasized that substantial justice should prevail over technical considerations. The requirement that every day’s delay must be explained does not mean that a pedantic approach should be adopted. The aforesaid doctrine must be applied in a rational common sense manner by adopting a pragmatic approach, and more so, in circumstances where a litigant does not stand to benefit by lodging the appeal late as is the case before us. Accordingly, keeping in view the facts and circumstances of present case, we condone the delay of 1255 days in filing the present appeal and proceed to decide the appeal on merits. 12. It is admitted position that, vide common order dated 23/03/2023, passed by the Tribunal in the case of the Appellant in appeals for Assessment Year 2010-11 (ITA No. 112/Mum/2023) and Assessment ITA No. 1853/Mum/2023 (Assessment Year: 2009-10) 8 Year 2011-12 (ITA No. 113/Mum/2023) the Tribunal has restricted the amount of disallowance to 7.5% of the bogus purchases. The relevant extract of the aforesaid decision of the Tribunal read as under: “4. Shri Tejas Shah appearing on behalf of the assessee submitted that the assessee is engaged in the business of trading in ferrous and non- ferrous metals. The assessee had filed his original return of income declaring total income of Rs.2,98,850/- on 18/09/2010. The return of the assessee was processed u/s. 143(1) of the Income Tax Act, 1961 [in short 'the Act']. The assessee has declared G.P of 0.25%. The assessment for any 2010-11 in the case of assessee was reopened on the ground that the assessee had obtained bogus purchase bills from hawala operators. The ld. Authorized Representative for the assessee submits that as per information received by the Assessing Officer from DGIT (Investigation), Mumbai, the assessee has taken bogus purchase entries from ten parties, aggregating to Rs. 2,55,29,591/- The ld. Authorized Representative for the assessee submits that admittedly the assessee failed to appear before the Assessing Officer to discharge his onus, the Assessing Officer estimated 25% as suppression of profits on alleged bogus purchases and made addition of Rs.63,82,398/-. Aggrieved by the assessment order dated 16/03/2016 the assessee carried the issue in appeal before the CIT(A). The CIT(A) restricted the addition to 12.5% of the alleged bogus purchases. The Id. Authorized Representative for the assessee submits that the sales declared by the assessee have been accepted by the Department. The Id. Authorized Representative for the assessee prays that the CIT(A) has estimated G.P on very much higher side, a reasonable estimate may be made to disallow alleged bogus purchases. He proposed disallowance of 2-3%. 5. Per contra, Shri Manoj Kumar Sinha representing the Department vehemently defended the impugned order. The Id. Departmental Representative submits that assessee had neither appeared before the Assessing Officer nor before the CIT(A). The assessee has failed to discharge his onus in proving genuineness of the purchases made from suspicious dealers. The assessee has obtained accommodation entries from declared hawala operators. The CIT(A) has been quite considerate in restricting the disallowance @12.5% on unproved purchases. The Id. Departmental Representative prayed for upholding the findings of the CIT(A). “6 Both sides heard, orders of the authorities below examined. Undisputedly, the assessee failed to furnish documentary evidence to prove genuineness of unproved purchases made from alleged hawala ITA No. 1853/Mum/2023 (Assessment Year: 2009-10) 9 entry providers. In fact, the assessee has neither appeared before the Assessing Officer nor the CIT(A) to discharge his onus in proving genuineness of the suspicious dealers and purchases. The Assessing Officer and the CIT(A) estimated suppressed G.P on unproved purchases Admittedly, the Assessing Officer has accepted the sales turnover and inventory declared by the assessee. In such circumstances, it is only the element of suppressed profits that has to be brought to tax [Re. PCIT vs. Paramshakhti Distributors Pvt. Ltd. in Income Tax Appeal No.413 of 2017 decided on 15/07/2019 by Hon'ble Bombay High Court.) in trading of ferrous and non-ferrous metals, generally, the G.P ranges between 5% to 8%. Considering the entire facts of the case, we modify the order of CIT(A) and restrict the addition to 7.5% of the unproved purchases. We hold and order accordingly. 7. In the result, appeal by the assessee is partly allowed.” (Emphasis Supplied) 13. Both the sides agreed that there is no change in the facts and circumstances in the present assessment year. Accordingly, respectfully following the decision of the Tribunal in the case of the Appellant for the Assessment Year 2010-11 and 2011-12, we restrict the disallowance on account of bogus purchases to 7.5% of such bogus purchases [aggregating to INR 4,26,18,638/-]. Thus, Ground No. 1 raised by the Appellant is partly allowed while all the other grounds raised by the Appellant are dismissed. 14. In result, the present appeal preferred by the Assessee is partly allowed. Order pronounced on 03.01.2024. Sd/- Sd/- (B.R. Baskaran) Accountant Member (Rahul Chaudhary) Judicial Member म ुंबई Mumbai; दिन ुंक Dated : 03.01.2024 Alindra, PS ITA No. 1853/Mum/2023 (Assessment Year: 2009-10) 10 आदेश की प्रतितिति अग्रेतिि/Copy of the Order forwarded to : 1. अपील र्थी / The Appellant 2. प्रत्यर्थी / The Respondent. 3. आयकर आय क्त/ The CIT 4. प्रध न आयकर आय क्त / Pr.CIT 5. दिभ गीय प्रदिदनदध, आयकर अपीलीय अदधकरण, म ुंबई / DR, ITAT, Mumbai 6. ग र्ड फ ईल / Guard file. आिेश न स र/ BY ORDER, सत्य दपि प्रदि //True Copy// उप/सह यक पुंजीक र /(Dy./Asstt. Registrar) आयकर अपीलीय अदधकरण, म ुंबई / ITAT, Mumbai