SALIM EBRAHIM PETIWALA, MUMBAI V. ITO 15(1)(1), MUMBAI

ITA 1866/MUM/2017

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 9300 (ITAT-MUMBAI)
• Duration Of Justice: 6 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-09-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 01-06-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 17-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAM TIWARI
• Assessee Lawyers: NAVEEN KUMAR MISHRA
• Keywords: Bogus purchase; Unexplained expenditure; Peak credit
• Section: 69C; 133(6)

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI B.R. BASKARAN (AM) I.T.A. NO. 1866 /MUM/ 2017 (ASSESSMENT YEAR 20 1 0 - 1 1 ) SALIM EBRAHIM PETIWALA MOHANLAL JAIN & CO.,CAS 10, CHARTERED HOUSE GROUND FLOOR DR.C.H. STREET, MARINE LINES, MUMB AI - 400 002. PAN : AABPB2749L VS. ITO 17(3)(2) AAYAKAR BHAVAN M.K. ROAD MUMBAI PIN : 400020. ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY SHRI NAVEEN KUMAR MISHRA DEPARTMENT BY SHRI RAM TIWARI DATE OF HEARING 20 .9. 201 7 DATE OF PRONOUNCEMENT 20 . 9 . 201 7 O R D E R THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 23 - 11 - 2016 PASSED BY LD CIT(A) - 28, MUMBAI AND IT RELATES TO THE ASSESSMENT YEAR 2010 - 11. THE ASSESSEE IS AGGRIEVED BY THE DECISION OF LD CIT(A) IN CONFIRMING THE ADD ITION RELATING TO ALLEGED BOGUS PURCHASES. 2. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF TRADING IN GLASS & MIRRORS. DURING THE COURSE OF SCRUTINY ASSESSMENT, THE AO ISSUED NOTICES U/S 133(6) OF THE ACT TO FIVE PARTIES, FROM WHOM THE ASSESSEE HAD PURCHA SED GOODS EXCEEDING RS.1.00 LAKH. NOTICES ISSUED TO THREE PARTIES WERE RETURNED UNSERVED. THE AO ALSO NOTICED THAT THE NAMES OF THE FIVE DEALERS ALSO FINDS PLACE IN THE LIST OF HAWALA DEALERS PUBLISHED BY SALES TAX DEPARTMENT. HENCE THE ASSESSING OFFICE R ASKED THE ASSESSEE TO PROVE THE GENUINENESS OF PURCHASES. THE ASSESSEE SUBMITTED THAT IT HAS SOLD ALL THE GOODS TO A SINGLE PARTY AND ALSO CORRELATED PURCHASES WITH SALES. HOWEVER, THE AO TOOK THE VIEW THAT THESE SUPPLIERS ARE NON - EXISTENT PARTIES AND ACCORDINGLY TOOK THE VIEW THAT THE ASSESSEE SHOULD SALIM EBRAHIM PETIWALA 2 HAVE PURCHASED GOODS BY WAY OF CASH FROM SOME OTHER SOURCE AND THE BILLS WERE OBTAINED FROM THESE PARTIES IN ORDER TO REGULARIZE THOSE PURCHASES. ACCORDINGLY THE AO TOOK THE VIEW THAT THE PEAK CREDIT OF P URCHASE AND SALE TRANSACTIONS SHOULD BE ASSESSED AS UNEXPLAINED AMOUNT USED BY THE ASSESSEE TO MAKE THESE PURCHASES. ACCORDINGLY THE AO COMPUTED THE PEAK CREDIT AT RS.37,09,866/ - OUT OF THE PURCHASES MADE FROM FIVE PARTIES AGGREGATING TO RS.52.42 LAKHS. THE AO COMPLETED THE ASSESSMENT BY ADDING PEAK CREDIT OF RS.37.09 LAKHS TO THE TOTAL INCOME OF THE ASSESSEE AS UNEXPLAINED EXPENDITURE U/S 69C OF THE ACT. THE LD CIT(A) ALSO CONFIRMED THE SAME. 3. THE LD A.R SUBMITTED THAT THE ASSESSEE HAS CORRELAT ED THE PURCHASES WITH SALES AND HENCE THERE IS NO REASON TO TREAT THE PURCHASES AS UNEXPLAINED EXPENDITURE AND ASSESS THE PEAK CREDIT AMOUNT. HE SUBMITTED THAT THE ADDITION MADE BY THE AO GIVES RISE TO A GROSS PROFIT RATE OF ALMOST 79%, WHICH IS EXTRA - ORDI NARY IN THIS TRADE. HE SUBMITTED THAT THE DIVISION BENCH OF TRIBUNAL HAS SUSTAINED AN ADDITION OF 2% OF THE VALUE OF PURCHASES IN THE CASE OF M/S STEEL LINE (INDIA) IN THE ORDER DATED 29 - 08 - 2017 PASSED IN ITA NO.1321 TO 1323/MUM/2016. ON THE CONTRARY, TH E LD A.R PLACED RELIANCE ON THE DECISION RENDERED BY HONBLE SUPREME COURT IN THE CASE OF N .K. PROTEINS (CIVIL APPEAL NO.769/2017). 4. I HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE RECORD. IN MY VIEW THE DECISION RENDERED IN THE CASE OF N.K. PROT EINS (SUPRA) BY HONBLE SUPREME COURT IS NOT APPLICABLE, SINCE THE SAID DECISION WAS RENDERED ON THE BASIS OF FACTS AVAILABLE IN THAT CASE. I HAVE GONE THROUGH THE FACTS AVAILABLE IN THE CASE OF N.K. PROTEINS LTD (SUPRA) AND NOTICE THAT, IN THAT CASE, THE REVENUE CONDUCTED SEARCH IN THE HANDS OF THAT ASSESSEE AND FOUND THE BLANK SIGNED CHEQUE BOOKS AND VOUCHERS OF NUMBER OF CONCERNS AT ITS PREMISES. THIS FACT, IN MY VIEW, SHOWS THAT THE ASSESSEE BEFORE THE HONBLE SUPREME COURT WAS OPERATING ALL THE SALIM EBRAHIM PETIWALA 3 ACCOU NTS OF THE CONCERNS, WHICH FACTOR ESTABLISHED BOGUS NATURE OF THE PURCHASES. IN ANY CASE, THE ISSUE AGITATED BEFORE ME WOULD DEPEND UPON THE FACTS PREVAILING IN EACH CASE AND HENCE THE ASSESSEE ALSO, IN MY VIEW, CANNOT TAKE SUPPORT OF THE DECISION RENDERE D IN OTHER CASES. THERE IS NO DISPUTE WITH REGARD TO THE FACT THAT THE ASSESSEE HAS MAINTAINED STOCK REGISTER AND HAS PROVED THAT THE PURCHASED GOODS HAVE BEEN SOLD. WHEN THE SALES WERE ACCEPTED, IN MY VIEW, IT MAY NOT BE CORRECT TO TREAT THE PURCHASES AS UNEXPLAINED EXPENDITURE. THE AO HIMSELF HAS OBSERVED THAT THE ASSESSEE MIGHT HAVE PURCHASED GOODS FROM SOME OTHER SOURCES, IN WHICH CASE, IT MAY BE PROPER TO ASSESS THE PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES. ACCORDINGLY, I AM OF THE VIEW THAT THE AD DITION MAY BE RESTRICTED TO 12.50% OF THE VALUE OF IMPUGNED PURCHASES AND THE SAME WOULD MEET THE ENDS OF JUSTICE. ACCORDINGLY, I SET ASIDE THE ORDER PASSED BY LD CIT(A) AND DIRECT THE AO TO RESTRICT THE ADDITION TO 12.50% OF THE VALUE OF IMPUGNED PURCHAS ES. 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER HAS BE EN PRONOUNCED IN THE COURT ON 20 . 9 . 201 7. SD/ - (B.R.BASKARAN) ACCOUNTANT MEMBER MUMBAI ; D ATED : 20 / 9 / 20 1 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// ( DY./ASSTT. REGISTRAR) PS ITAT, MUMBA