HEERAMANECK & SON, MUMBAI V. ACIT CIR 17(1), MUMBAI

ITA 1862/MUM/2017

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 0221 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-12-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: H
• Assessment Year: 2009-2010
• Appeal Filed On: 16-03-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MANOJ KUMAR SINGH LD
• Assessee Lawyers: PRAKASH JOTWANI LD
• Keywords: Bogus purchase; Tangible material; Onus to prove
• Section: 133(6); 147; 148

Judgement Text

1 ITA NO.1862/MUM/2017 HEERAMANECK & SON ASSESSMENT YEAR: 2009-10 IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI , , BEFORE HONBLE SHRI PAWAN SINGH, JM AND HONBLE SHRI MANOJ KUMAR AGGARWAL, AM ./ I.T.A. NO.1862/MUM/2017 ( / ASSESSMENT YEAR: 2009-10) HEERAMANECK & SON GF, READYMONEY BUILDING BATTERY STREET COLABA, MUMBAI-400 039. / VS. ASSISTANT COMMISSIONER OF INCOME TAX-CIRCLE- 17(1) CHURCHGATE MUMBAI-400 020. ./ ./PAN/GIR NO. AAFFM-4776-L ( /APPELLANT ) : ( !' / RESPONDENT ) ASSESSEE BY : PRAKASH JOTWANI- LD. AR REVENUE BY : MANOJ KUMAR SINGH - LD.DR / DATE OF HEARING : 15/11/2018 / DATE OF PRONOUNCEMENT : 05/12/2018 / O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. AFORESAID APPEAL BY ASSESSEE FOR ASSESSMENT YEAR [AY] 2009-10 CONTEST THE ORDER OF LD. COMMISSIONER OF INCOME-TAX (APPEALS)-28, 2 ITA NO.1862/MUM/2017 HEERAMANECK & SON ASSESSMENT YEAR: 2009-10 MUMBAI, [CIT(A)], APPEAL NO.CIT(A)-28/IT-41/ACIT-17(1)/2015-16 DATED 05/12/2016 ON FOLLOWING GROUNDS:- 1.THE LEARNED CIT(A) 28, MUMBAI (THE CIT(A)) ERRE D IN CONFIRMING THE ORDER DATED 10/03/2015 PASSED BY THE ACIT, CIRCLE - 17(1), MUMB AI ('THE AO') AND IN DISMISSING THE APPELLANT'S APPEAL. 2.THE LEARNED CIT (A) FAILED TO APPRECIATE AND OUGH T TO HAVE HELD, THAT THE ORDER PASSED BY THE AO: I.WAS ILLEGAL, BAD IN LAW AND WITHOUT JURISDICTION AS THE JURISDICTIONAL CONDITIONS PRECEDENT PRESCRIBED BY SECTION 147 AND 148 OF THE INCOME TAX ACT, 1961 ('THE ACT') HAD NOT BEEN FULFILLED. II.WAS GROSSLY CONTRARY TO THE PRINCIPLES OF NATURA L JUSTICE. III.WAS ILLEGAL AND CONTRARY TO LAW INTER ALIA AS T HE AO HAD PASSED HIS ORDER SOLELY ON ALLEGATIONS MADE BY THE SALES TAX DEPARTMENT WITHOU T ANY INDEPENDENT APPLICATION OF MIND. IV.WAS VITIATED BY SUSPICION, SURMISES AND CONJECTU RES V.WAS NOT BASED ON MATERIAL. VI.WAS CONTRARY TO THE MATERIAL AND THE EVIDENCE ON RECORD. VII.DESERVED TO BE CANCELLED, OR WITHOUT PREJUDICE, REVERSED 3.THE ORDER OF THE CIT(A) IS VITIATED, INTER ALIA B Y: A)A FAILURE TO CONSIDER AND TO ADJUDICATE UPON THE GROUNDS OF APPEAL FILED IN THE APPEAL BEFORE HIM. B) A NON CONSIDERATION OF THE GROUNDS OF APPEAL AND THE STATEMENT OF FACTS FILED IN THE APPEAL BEFORE HIM. C) A NON CONSIDERATION OF THE WRITTEN SUBMISSION FI LED BY THE APPELLANT BEFORE HIM. D) NON APPLICATION OF MIND AND A FAILURE TO CONSIDE R THE EVIDENCE AND THE MATERIAL ON RECORD. E)ALLEGATIONS WHICH ARE FACTUALLY INCORRECT AND CON TRARY TO THE MATERIAL AND EVIDENCE BEFORE HIM, EG: I.THAT THE ONLY SINGLE ISSUE RELATED TO SUPPRESSED PROFIT IN VIEW OF INFLATED PURCHASES. II.THAT ADEQUATE OPPORTUNITY WAS PROVIDED BY THE AO TO THE APPELLANT. III.THE APPELLANT FAILED TO ESTABLISH ITS ONUS OF E STABLISHING AND PROVING THE PURCHASES. I.THE APPELLANT, EVEN IN APPEAL, HAS NOT BEEN ABLE TO CONTROVERT TO ANY CONVINCING LENGTH THE ISSUES RAISED BY THE AO. F)IT, BEING BASED ON SUSPICION, CONJECTURES AND SUR MISES. 4.THE ORDER OF THE CIT(A) IS ERRONEOUS IN LAW AND F ACTS AND DESERVES TO BE REVERSED. 2. THE FACTS ON RECORD REVEAL THAT DURING IMPUGNED AY, THE ASSESSEE BEING RESIDENT FIRM WAS STATED TO BE ENGAGED IN TRADING OF SILVER ARTICLES, JEWELRY, ORNAMENTS, PRECIOUS STONES, MARBLE ITEMS, GLASS ITEMS ETC. THE ORIGINAL RETURN OF INCOME WAS FILED BY THE ASSESSEE ON 26/09/2009 AT RS.61.66 LACS WHICH WAS PROCESSED U/S 143(1). PURSU ANT TO RECEIPT OF CERTAIN INFORMATION FROM INVESTIGATION WING, IT TRANSPIRED THAT DURING IMPUGNED AY, THE ASSESSEE MADE PURCHASES FROM SUSPI CIOUS / HAWALA 3 ITA NO.1862/MUM/2017 HEERAMANECK & SON ASSESSMENT YEAR: 2009-10 DEALERS FOR AGGREGATE AMOUNT OF RS.187.08 LACS FROM 9 DEALERS, THE DETAILS OF WHICH HAVE ALREADY BEEN EXTRACTED AT PARA 2.2 OF THE QUANTUM ASSESSMENT ORDER. ACCORDINGLY, THE REASSESSMENT PRO CEEDINGS WERE INITIATED AGAINST THE ASSESSEE BY ISSUANCE OF NOTIC E U/S 148 ON 30/03/2014. THE REASONS LEADING TO REOPENING HAS AL SO BEEN EXTRACTED AT PARA 2.2 . NOTICES SENT U/S 133(6) ALL THESE PARTIES TO CONF IRM THE TRANSACTIONS WERE EITHER RETURNED UN-SERVED OR NO R EPLY WAS RECEIVED AGAINST THE SAME. FEW PARTIES DENIED HAVING MADE AN Y SUCH TRANSACTIONS WITH THE ASSESSEE. ACCORDINGLY, THE AS SESSEE WAS REQUIRED TO SUBSTANTIATE THE PURCHASES MADE FROM THESE PARTI ES. THE ASSESSEE DEFENDED THE SAME BY SUBMITTING THAT GOODS WERE SOL D TO THE CUSTOMERS AND THE PAYMENTS TO SUPPLIERS WERE THROUGH BANKING CHANNELS. AT THE SAME TIME, THE ASSESSEE EXPRESSED INABILITY TO PROD UCE ANY OF THE SUPPLIERS. THE FACTUAL MATRIX LED THE LD. AO TO BEL IEVE THAT THE ASSESSEE FAILED TO DISCHARGE THE PRIMARY ONUS CASTED UPON TO SUBSTANTIATE THE PURCHASES AND CAME TO CONCLUSION THAT ONLY PAPER BI LLS WERE OBTAINED BY THE ASSESSEE WITHOUT ACTUAL DELIVERY OF MATERIAL TO REDUCE THE GROSS PROFIT BY INFLATING THE PURCHASES. FINALLY, RELYING UPON V ARIOUS JUDICIAL PRONOUNCEMENTS, THE ESTIMATION AGAINST THESE BOGUS PURCHASES HAS BEEN MADE @14.29% WHICH RESULTED INTO AN ADDITION O F RS.26.73 LACS IN THE HANDS OF THE ASSESSEE. THE STAND OF LD. AO, UPO N CONFIRMATION BY FIRST APPELLATE AUTHORITY, IS UNDER APPEAL BEFORE U S. 3. THE LD. AUHTORIZED REPRESENTATIVE FOR ASSESSEE [ AR], SHRI PRAKASH JOTWANI AGITATED THE ADDITIONS ON LEGAL GROUNDS AS WELL AS ON 4 ITA NO.1862/MUM/2017 HEERAMANECK & SON ASSESSMENT YEAR: 2009-10 MERITS WHICH HAS BEEN CONTROVERTED BY LD. DEPARTMEN TAL REPRESENTATIVE [DR], SHRI MANOJ KUMAR SINGH. 4. WE HAVE CAREFULLY HEARD THE RIVAL CONTENTIONS AN D PERUSED RELEVANT MATERIAL ON RECORD INCLUDING DOCUMENTS PLACED IN TH E PAPER-BOOK. SO FAR AS THE LEGAL GROUNDS QUESTIONING THE JURISDICTION O F LD. AO, AS RAISED BY LD. AR IS CONCERNED, WE FIND THAT REASSESSMENT PROC EEDINGS HAVE BEEN INITIATED WITHIN A PERIOD OF 4 YEARS FROM THE END O F RELEVANT AY AND THE ORIGINAL RETURN OF INCOME WAS PROCESSED U/S 143(1). THEREFORE, THE ONLY REQUIREMENT, IN SUCH A CASE, TO ACQUIRE THE VALID J URISDICTION UNDER LAW WAS THAT THE ASSESSING OFFICER HAD REASONS TO BELIE VE THAT CERTAIN INCOME ESCAPED ASSESSMENT. THE TANGIBLE MATERIAL IN THE SHAPE OF INFORMATION FROM INVESTIGATION WING CAME TO THE POS SESSION OF LD. AO WHO BY UTILIZING THE SAME FORMED THE REQUISITE BELI EF THAT CERTAIN INCOME ESCAPED ASSESSMENT. IN OUR OPINION, AT THIS STAGE, ONLY A PRIMA FACIE OPINION WAS REQUIRED TO BE FORMED THAT CERTAIN INCO ME ESCAPED ASSESSMENT AND NOTHING MORE. THEREFORE, THE REASSES SMENT JURISDICTION AS ACQUIRED BY LD. AO WAS PERFECTLY VALID AND WE FI ND NO INFIRMITY IN THE SAME. ALL THE GROUNDS RAISED UNDER THE APPEAL, QUA THIS PLEA, STANDS DISMISSED. 5. SO FAR AS THE QUANTUM OF ADDITIONS ARE CONCERNED , WE ARE OF THE CONSIDERED OPINION THAT THE ASSESSEE WAS ENGAGED IN TRADING ACTIVITIES, WHICH COULD NOT BE CARRIED OUT WITHOUT ACTUAL PURCH ASE OF MATERIAL. THE TURNOVER ACHIEVED BY THE ASSESSEE HAS NOT BEEN DISP UTED OR DISTURBED BY THE REVENUE AND THE PAYMENTS WERE THROUGH BANKIN G CHANNELS. THE ASSESSEE WAS IN POSSESSION OF PRIMARY PURCHASE DOCU MENTS AND WAS 5 ITA NO.1862/MUM/2017 HEERAMANECK & SON ASSESSMENT YEAR: 2009-10 ABLE TO RECONCILE THE QUANTITATIVE DETAILS. HOWEVER , AT THE SAME TIME, THE STATED PURCHASES WERE UNDER GRAVE DOUBT SINCE THE A SSESSEE COULD NOT PRODUCE ANY OF THE PARTY TO CONFIRM THE TRANSACTION S AND THE INFORMATION RECEIVED FROM INVESTIGATION WING REVEALED THAT ALL THE SUPPLIERS WERE ENGAGED IN CARRYING OUT ONLY PAPER TRANSACTIONS WIT HOUT ACTUAL DELIVERY OF MATERIAL. THE COMPLETE ONUS TO PROVE THE PURCHASES CONCLUSIVELY WAS ON ASSESSEE, WHICH HAS REMAINED UN-DISCHARGED. IN SUCH A SCENARIO, THE ADDITION, WHICH COULD BE MADE, WAS TO ACCOUNT FOR P ROFIT ELEMENT EMBEDDED IN THESE PURCHASE TRANSACTIONS TO FACTORIZ E FOR PROFIT ELEMENT EARNED BY ASSESSEE AGAINST POSSIBLE PURCHASE OF MAT ERIAL IN THE GREY MARKET AND UNDUE BENEFIT OF VAT AGAINST ALLEGED BOG US PURCHASES, WHICH LOWER AUTHORITIES HAVE RIGHTLY DONE. HOWEVER, CONSIDERING GP RATE OF 10.59% ALREADY REFLECTED BY THE ASSESSEE AS WELL AS VAT RATE APPLICABLE TO THE GOODS BEING DEALT WITH BY THE ASS ESSEE, WE FIND THE ESTIMATION TO BE ON THE HIGHER SIDE AND THEREFORE, WE RESTRICT THE SAME TO 3% OF ALLEGED BOGUS PURCHASES OF RS.1,87,08,961/- . THE SAME COMES TO RS.5,61,269/-. THE ORDER OF LD. AO STANDS MODIFIED TO THAT EXTENT. THE LD. AO IS DIRECTED TO RE-COMPUTE THE INCOME OF THE ASSESSEE IN TERMS OF OUR ABOVE ORDER. 6. THE APPEAL STANDS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 05 TH DECEMBER, 2018 SD/- SD/- (PAWAN SINGH) (MA NOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 05/12/2018 SR.PS, JAISY VARGHESE 6 ITA NO.1862/MUM/2017 HEERAMANECK & SON ASSESSMENT YEAR: 2009-10 !'#$ # / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. !' / THE RESPONDENT 3. ) ( ) / THE CIT(A) 4. ) / CIT CONCERNED 5. * +!$, , , , / DR, ITAT, MUMBAI 6. + -. / GUARD FILE / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI.