Shri Prakash Chand Dhariwal, Mumbai V. ITO,Ward-2, Jalore

ITA 19/JODH/2019

• Counselvise Citation: [2021] 104 COUNSELVISE.COM (IT) 9115 (ITAT-JODHPUR)
• Duration Of Justice: 2 year(s) 9 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-11-2021
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 17-01-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ABHINAV KOTHARI
• Keywords: Bogus purchase; Borrowed satisfaction
• Section: 145; 148; 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, JODHPUR BENCH, JODHPUR BEFORE SHRI SANDEEP GOSAIN, JUDICIAL MEMBER AND SHRI VIKRAM SINGH YADAV, ACCOUNTANT MEMBER ITA No. 19/JODH/2019 Assessment Year:2009-10 Shri Prakash Chand Dhariwal, 59, Carpenter Gali, Mumbai-04. Vs. I.T.O., Ward-2. Jalore. PAN No. AANPD 0203 D Assessee by Shri Amit Kothari, CA & Shri Abhinav Kothari, CA Revenue by Smt. Kajal Singh, JCIT-DR Date of Hearing 11/08/2021 Date of Pronouncement 08/11/2021 O R D E R PER: SANDEEP GOSAIN, J.M. The present appeal has been filed by the assessee against the order of the ld. CIT(A)-1, Jodhpur dated 30/11/2018 for A.Y. 2009-10 in the matter of order passed U/s 143(3)/147 of the Income Tax Act, 1961 (in short, the Act), wherein following grounds have been raised : “1. The ld. CIT(A) has erred in sustaining the action u/s 148 taken by the ld. AO. The proceedings are bad in law and bad on facts. The original order was also made u/s 143(3), and on the basis of change of opinion and borrowed satisfaction action u/s 148 was initiated which is bad in law and bad on facts 2. The ld CIT(A) has erred in partly sustaining the addition to the extent of Rs. 35,55,845/- for alleged purchases being made. The addition so sustained is bad in law and bad on facts. 2 ITA 27/Jodh/2021 Piyush Kumar Gogad Vs PCIT 3. The ld. CIT(A) has erred in sustaining interest u/s 234B. 4. The appellant pray for suitable costs. 5. The appellant crave liberty to add, amend, alter, modify or delete any of the ground of appeal on or before its hearing before your honour.” 2. The facts of the present appeal are that the appellant is engaged in trading business and assessment was completed u/s 143(3) vide order dated 25.9.2009. The proceedings u/s 148 were initiated on the basis of information received from DGIT(Inv) Mumbai on the basis of enquiry by VAT Department Mumbai, on the allegation that assessee was also involved in bogus purchase bills through parties at Mumbai. The proceedings was also challenged before the CIT(A), but the same was held to be valid, and now the assessee has challenged the same also in the second appeal. After careful consideration of the factual position and also the reasons given by the CIT(A), we find that so far as the proceedings u/s 148 are concerned, we find no fault in the same. The reasons were duly recorded which came to the knowledge of the AO subsequent to the making of the order. There is prima facie material which gives a valid jurisdiction to initiate such proceedings. The ld. CIT(A) has rightly observed that the sufficiency or correctness of the material cannot be considered at the stage of issuance of notice and such issues were also not raised before the AO. The information received cannot be said to be a borrowed satisfaction and therefore we find no infirmity in the proceedings initiated u/s 148 and this ground of appeal is therefore dismissed. 3 ITA 27/Jodh/2021 Piyush Kumar Gogad Vs PCIT 3. The second ground of appeal relates to part addition of Rs. 35,55,845/- sustained by the CIT(A) for profit on the bogus purchases. The AO made addition of Rs. 74,08,010/- being 12.5% on the bogus purchases as per the information received from the MVAT Authorities. The AO observed that the assessee is trading in metal on which GP % of 8.54% is being shown. It was observed that purchases made from certain parties of Mumbai were not verifiable and assessee could not furnish confirmation, delivery challan, weightment, octroi etc. the purchases were treated as not genuine. The notices also were returned unserved. The reply submitted by the assessee was found to be not satisfactory, the AO applied provisions of section 145 and estimated profit at 12.5%, resulting into addition of Rs. 74,08,010/-. The CIT(A) observed that the purchases could not be satisfactorily explained. The ld. CIT(A) however observed that the unserved notices could due to avoiding the liability arising on account of Sales Tax / VAT by the suppliers. The statement of third parties cannot be concluded adversely in isolation and without corroborating evidence against the assessee. The CIT(A) further observed that the corresponding sales made on the basis of these purchases had been accepted by the AO. The assessee had produced purchase invoices given by registered dealers and payments made by account payee cheques, and further corresponding sales being made. The CIT(A) observed that the details produced by the assessee fortify the claim of the assessee that the purchases are not bogus and merely because the supplier had not paid their due 4 ITA 27/Jodh/2021 Piyush Kumar Gogad Vs PCIT VAT, the genuineness of the goods purchased cannot be doubted. The assessee had given quantitative details. The ld. CIT(A) referred to certain judicial decisions in which under similar facts the addition was deleted. The ld. CIT(A) also referred to the decision of Bulaki Ram B Mistri, in which the ITAT Jodhpur Bench in ITA No. 546 to 548/Jodh/2014 had deleted such similar addition made on account of bogus purchases. In the conclusion the ld. CIT(A) observed that the profit estimated by the AO at 12.5% appears to be high and therefore he estimated the same at 6% of such purchases, resulting into the addition of Rs. 35,55,845/- allowing part relief to the assessee. 4. The contention of the assessee had been that on the basis of MVAT department observation of non payment of VAT by the dealers cannot be a basis for treating the genuine purchases as bogus. All the dealers from whom purchases had been made are registered dealer under the Sales Tax, and their TIN was duly submitted. The assessee referred to the decision of Hon’ble Rajasthan High Court in the case of Indian Gum Industries vs. ACIT reported in 37 Tax Up Date (Raj) 49 in which it was stated that a purchasing dealer is entitled to rely upon the certificate of registration of the selling dearler. All purchases were verifiable from the payments being made by account payee cheques. The material purchased had been sold, and profit derived from such sale is duly disclosed. The correctness, completeness of books of accounts had 5 ITA 27/Jodh/2021 Piyush Kumar Gogad Vs PCIT not been doubted. The assessee relied upon the decision which were also considered. 5. After careful consideration of the matter, we find that the addition sustained by the CIT(A) under the present facts was not justified. He had observed that the unserved notices could due to avoiding the liability arising on account of Sales Tax / VAT by the suppliers and also observed that the corresponding sales had been made on the basis of these purchases. He had also made a categorical finding that the details produced by the assessee fortify the claim of the assessee that the purchases are not bogus and merely because the supplier had not paid their due VAT, the genuineness of the goods purchased cannot be doubted. The assessee had given quantitative details. The ld. CIT(A) also referred to the decision of Bulaki Ram B Mistri, in which the ITAT Jodhpur Bench in ITA No. 546 to 548/Jodh/2014 had deleted such similar addition made on account of bogus purchases. There is no assetion as regards on what basis of material on records a conclusion had been drawn that the purchases are not bogus. Simply because the supplying dealer had not paid the VAT, the purchases made by the assessee cannot be treated as bogus purchases. Proper books of accounts had been maintained which had also not been rejected, corresponding sales are also accepted and profit earned thereon had also been subjected to tax. In these circumstances the profit estimated on such purchases at 6% is not 6 ITA 27/Jodh/2021 Piyush Kumar Gogad Vs PCIT justified and the addition so sustained deserves to be deleted and we direct to delete the same. 6. In the result, this appeal of the assessee is partly allowed. Sd/- Sd/- (VIKRAM SINGH YADAV) (SANDEEP GOSAIN) ACCOUNTANT MEMBER JUDICIAL MEMBER Jodhpur Dated 08/11/2021 *Ranjan Copy to: 1. The Appellant 2. The Respondent 3. The CIT 4. The CIT (A) 5. The DR 6. Guard File Assistant Registrar Jodhpur Bench