DHARMENDRA MANSUKKLAL PAREKH, MUMBAI V. ASST CIT 31(1), MUMBAI

ITA 19/MUM/2017

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 9642 (ITAT-MUMBAI)
• Duration Of Justice: 8 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-09-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 02-01-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: N HEMALATHA
• Assessee Lawyers: SANJUKTA CHOW DHURY
• Section: 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'SMC' BENCH, MUMBAI BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER ITA NO.19/MUM/2017 (ASSESSMENT YEAR: 2010-11) SHRI DHARMENDRA M. PARIKH VS. ASSISTANT COMMISSIONER PROP. M/S. DHARMESH STEEL A/2, SHRUTI BUILDING, YASHODHAM DINDOSHI, GOREGAON (EAST) MUMBAI 400063 OF INCOME TAX 31(1) MUMBAI PAN AACPP4474D APPELLANT RESPONDENT ASSESSEE BY: MS. SANJUKTA CHOWDHURY REVENUE BY: MS. N. HEMALATHA DATE OF HEARING: 10.08.2017 DATE OF PRONOUNCEMENT: 22.09.2017 O R D E R PER G.S. PANNU, AM THIS APPEAL BY THE ASSESSEE HAS BEEN FILED AGAINST THE ORDER OF THE CIT(A)-42, MUMBAI DATED 02.09.2016 FOR A.Y. 2010-11 . 2. IN THIS APPEAL THE SOLITARY GRIEVANCE OF THE ASSESS EE IS AGAINST THE ACTION OF THE INCOME TAX AUTHORITIES IN MAKING AN A DHOC ADDITION OF 12.5% OF THE PURCHASES FOUND BE INGENUINE BY THE AO. 3. IN BRIEF THE RELEVANT FACTS ARE THAT THE ASSESSEE I S AN INDIVIDUAL WHO IS CARRYING ON THE BUSINESS AS DEALER IN IRON AND S TEEL AND CRANES AND FOR THE ASSESSMENT YEAR UNDER CONSIDERATION HE FILED TH E RETURN OF INCOME DECLARING INCOME OF ` 8,35,610/-. THE ASSESSMENT WAS REOPENED BY ISSUANCE OF NOTICE UNDER SECTION 147/148 OF THE ACT ON ACCOUNT OF INFORMATION RECEIVED FROM THE SALES TAX DEPARTMENT OF GOVERNMENT OF MAHARASHTRA THAT THE ASSESSEE HAD EFFECTED PURCHASE S OF ` 1,67,89,448/- FROM THREE PARTIES WHO WERE INVOLVED ONLY IN PROVID ING ACCOMMODATION ITA NO. 19/MUM/2017 SHRI DHARMENDRA M. PARIKH 2 ENTRIES WITHOUT DOING ANY ACTUAL BUSINESS. IN THE E NSUING ASSESSMENT PROCEEDINGS THE AO REQUIRED THE ASSESSEE TO JUSTIFY THE PURCHASES FROM THE THREE PARTIES BY SUBMITTING THE PURCHASE BILLS, DEL IVERY CHALLANS, TRANSPORT RECEIPTS, OCTROI RECEIPTS, WEIGHT RECEIPTS, STOCK R EGISTER, INWARD AND OUTWARD REGISTER, CONSUMPTION REGISTER REFLECTING R ECONCILIATION OF STOCK, PURCHASES AND SALES, ETC. THE DISCUSSION IN THE ASS ESSMENT ORDER REVEALS THAT THE ASSESSEE WAS ALSO REQUIRED TO PRODUCE THE SAID PARTIES FOR VERIFICATION AFTER THE NOTICE ISSUED BY THE AO UNDE R SECTION 133(6) OF THE ACT TO THE PARTIES CAME BACK WITH THE REMARKS NOT KNOWN/UNCLAIMED FROM THE ADDRESS GIVEN BY THE ASSESSEE HIMSELF. THE ASSESSMENT ORDER ALSO RECORDS THAT THE ASSESSEE COULD NOT PRODUCE SUPPORT ING DOCUMENTS LIKE TRANSPORT BILLS, OCTROI BILLS, CONSUMPTION REGISTER , STOCK MOVEMENT REGISTER, ETC. NEVERTHELESS, ALL THAT THE ASSESSEE PRODUCED B EFORE THE AO WAS THE PURCHASE INVOICES AND THE FACT THAT THE PAYMENTS FO R PURCHASES WERE MADE THROUGH BANKING CHANNELS. BE THAT AS IT MAY THE AO INFERRED THAT THE ASSESSEE WAS NOT ABLE TO PROVE THE PURCHASES AND SH E CONCLUDED THAT THE ASSESSEE DID NOT PURCHASE THE MATERIAL FROM THE PAR TIES IN QUESTION. THE AO PROCEEDED TO OBSERVE THAT THE PURCHASES HAD BEEN EFFECTED BY THE ASSESSEE IN GRAY MARKET FROM OTHER SOURCES. THEREFO RE, CONSIDERING THE JUDGEMENT OF THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. SIMIT P. SHETH 356 ITR 451 SHE HAS CONSIDERED IT APPROPRIATE TO MAKE AN ADDITION OF 12.5% OF THE TOTAL PURCHASE OF ` 1,67,89,448/- BEING ` 20,98,681/-. THUS, IN THIS MANNER THE AO ASSESSED THE TOTAL INCO ME AT ` 29,34,2900/- AS AGAINST THE RETURNED INCOME OF ` 8,35,L610/-. 4. BEFORE THE CIT(A) THE ASSESSEE CONTENDED THAT THE P URCHASES COULD NOT BE CONSIDERED AS INGENUINE AND THAT IN THE ABSE NCE OF REJECTION OF BOOKS OF ACCOUNT NO SUMMARY ADDITION COULD HAVE BEE N MADE BY THE AO. THE CIT(A) HAS AFFIRMED THE ACTION OF THE AO RELYIN G ON THE JUDGEMENT THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. SIMIT P. SHETH 356 ITR 451 FOR SUSTAINING AN ADDITION AT AN ESTIMATED RATE OF PROFIT IN CASES WHERE THE PURCHASES HAD NOT BEEN FOUND TO BE ADEQUATELY P ROVED. AGAINST SUCH A DECISION OF THE CIT(A) THE ASSESSEE IS IN FURTHER A PPEAL BEFORE THE TRIBUNAL. ITA NO. 19/MUM/2017 SHRI DHARMENDRA M. PARIKH 3 5. BEFORE ME THE LEARNED A.R. FOR THE ASSESSEE POINTED OUT THAT THE ASSESSEE HAD DISCHARGED HIS BASIC ONUS OF EXPLAININ G THE PURCHASES AND THEREFORE WHEN THE SALES ARE ACCEPTED ALONG WITH TH E STOCK POSITION, ETC. THE PURCHASES COULD NOT HAVE BEEN TREATED AS INGENU INE. 6. ON THE OTHER HAND, THE LEARNED D.R. FOR REVENUE HAS RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW AND POINTED OUT THA T THE LOWER AUTHORITIES HAVE ALREADY COMPUTED THE INCOME IN A MANNER WHICH IS GENERALLY BEING FOLLOWED BY DIFFERENT BENCHES OF THE TRIBUNAL IN TH E CASES OF UNPROVED PURCHASES FROM PARTIES WHO HAVE BEEN LISTED AS HAVA LA PARTIES BY THE SALES TAX DEPARTMENT OF MAHARASHTRA. THEREFORE ACCORDING TO HER NO INTERFERENCE IS CALLED FOR IN THE ORDERS OF THE AUT HORITIES BELOW. 7. I HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS. AT THE OUTSET I MAY REFER TO SOME OF THE FINDINGS OF THE AO WHICH HAVE REMAINED UNASSAILED. NOTABLY THE ONLY PLEA OF THE ASSESSEE TO SUBSTANTIA TE THE PURCHASES WAS ON THE ACCOUNT OF THE FACT THAT THE AMOUNTS HAVE BEEN PAID THROUGH CHEQUES. SO HOWEVER IN THE LIGHT OF THE INFORMATION FROM THE SALES TAX DEPARTMENT IT WAS IMPERATIVE THAT THE SUBSTANTIATION OF THE PU RCHASES HAD TO BE DONE WITH MORE EVIDENCES. PERTINENTLY, THE ASSESSEE HAS NOT LAID DOWN ANY EVIDENCE TO SUBSTANTIATE THE MOVEMENT OF GOODS IN A S MUCH AS THERE IS NO EVIDENCE OF TRANSPORTATION BILLS, OCTROI BILLS OR D ELIVERY CHALLANS. EVEN IF THE CASE OF THE ASSESSEE IS THAT HE HAS NOT TAKEN PHYSI CAL DELIVERY BUT THE MATERIAL HAS BEEN SOLD BACK TO BACK YET THE FACTUM OF THE MOVEMENT OF GOODS AND ACCOMPANYING LIABILITY OF OCTROI, ETC. WE RE REQUIRED TO BE BROUGHT ON RECORD BY THE ASSESSEE TO SUBSTANTIATE THE TRANS ACTIONS IN QUESTION. THEREFORE, IN MY VIEW THE AO MADE NO MISTAKE IN COM ING TO THE CONCLUSION THAT THE ASSESSEE COULD NOT SUBSTANTIATE THAT THE P URCHASES HAVE BEEN MADE FROM THE THREE PARTIES IN QUESTION. IN THIS BA CKGROUND THE ASSESSING OFFICER HAS FOLLOWED THE RATIO LAID DOWN BY THE HON 'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. SIMIT P. SHETH 356 ITR 451 I N MAKING THE ADDITION ONLY ON THE ELEMENT OF PROFIT EMBEDDED IN MAKING OF THE PURCHASES FROM GRAY MARKET, WHICH HAS BEEN ESTIMATED AT 12.5% OF T HE IMPUGNED ITA NO. 19/MUM/2017 SHRI DHARMENDRA M. PARIKH 4 PURCHASES. UNDER THE CIRCUMSTANCE, IN MY VIEW THE O RDERS OF THE AUTHORITIES BELOW DESERVE TO BE AFFIRMED. I HOLD SO . 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED AS ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 22 ND SEPTEMBER, 2017. SD/ - (G.S. PANNU) ACCOUNTANT MEMBER MUMBAI, DATED: 22 ND SEPTEMBER, 2017 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) -42, MUMBAI 4. THE PR. CIT 31, MUMBAI 5. THE DR, SMC BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.