AJAY RADHESHVAM KEJRIWAL, MUMBAI V. INCOME TAX OFFICER, WARD 30(1)(1), MUMBAI

ITA 1903/MUM/2018

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 5812 (ITAT-MUMBAI)
• Duration Of Justice: 3 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-07-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 26-03-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: CIRCUMSTANCES OF CASE
• Keywords: Bogus purchase
• Section: 147; 148; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI B. R. BASKARAN , AM AND SHRI AMARJIT SINGH, JM / I .T.A. NO. 1903 / MUM/ 20 1 8 ( / ASSESSMENT YEAR: 2010 - 11 ) AJAY RADHESHYAM KEJRIWAL 1 - A - 65, MANALI EVERSHINE NAGAR, M ALAD (WEST), MUMBAI - 400064. / VS. ITO, WARD 30(1)(1), MUMBAI - C 13, 5 TH FLOOR, BANDRA . ./ ./ PAN/GIR NO. : AANPK 4820 F ( / APPELLANT ) .. ( / RESPONDENT ) / DATE OF HEARING : 28 .0 6 .2018 / DATE OF PRONOUNCEMENT : 0 6. 07 . 201 8 / O R D E R PER AMARJIT SINGH, J M: THE ASSESSEE HAS FILED THE PRESENT APPEAL AGAIN ST THE ORDER DATED 30 .0 9 .201 6 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) - 41 MUMBAI [HEREINAFTER REFERRED TO AS THE CIT(A)] R ELEVANT TO THE AY. 20 10 - 1 1 . 2 . THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: - ( ON THE FACTS AND CIRCUMSTANCES OF THE C ASE AND LAW APPLICABLE THERETO, THE LD. CIT(A) ERRED IN HOLDING THE VALIDITY OF THE RE - OPENING OF ASSESSMENT PROCEEDINGS U/S 147 OF THE I.T. ACT, 1961. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND LAW APPLICABLE THERETO, THE LD. CIT(A) ERRED IN TREATI NG THE PURCHASE FROM VARIOUS REVENUE BY: S HRI N. HEMALATHA ASSESSEE BY : SHRI NEELAM C . JADHAV ITA. NO.1903 /M/1 8 A.Y.2010 - 11 2 PARTIES AS NON - GENUINE AND BOGUS AND THEREBY CONFIRMING THE DISALLOWANCE OF RS.12,99,576/ - BEING 30% OF THE TOTAL AMOUNT OF PURCHASES MADE FROM VARIOUS SUPPLIERS AMOUNTING TO RS.43,31,920/ - . 3. THE APPELLANT PRAYS THAT VARIOUS DISALLOWANCES/ADDITIONS CONFIRMED BY THE CIT(A) MAY BE DELETED. 4. . YOUR APPELLANT CRAVES LEAVE TO ADD TO ALTER, AMEND OR DELETE ANY OF THE FOREGOING GROUNDS OF APPEAL. 3 . THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E FILED ITS RE TURN OF INCOME ON 26 .09.20 10 DECLARING TOTAL INCOME TO THE TUNE OF RS.3,31,590/ - . THE RETURN WAS PROCESSED U/S 143(1) OF THE I.T. ACT, 1961. THEREAFTER, THE CASE WAS SELECTED FOR SCRUTINY AND NOTICE U/S 147 OF THE ACT WAS ISSUED . THE FOLLOWING REASONS WERE GIVEN IN THE NOTICE .: - ON PERUSAL OF RECORD, IT IS SEEN THAT YOU HAVE FILED THE RETURN OF INCOME ON 26.09.2010 SHOWING TOTAL INCOME TO THE TUNE OF RS.3,31,590/ - WHICH WAS DULY PROCESSED U/S 143(1) OF THE ACT 1961. ON PERUSAL OF RECORD, IT IS SEEN THAT YOU HAVE SHOWN SALES OF RS.1,41,99,367/ - AND PURCHASES OF RS.1,31,25,827/ - . IT IS RECEIVED FROM THE INFORMATION ON RECORD WHICH IS RECEIVED FROM DGIT(INV.) MUMBAI, THAT THE CLAIM OF PURCHASE FROM THE FOLLOWING CONCERN ARE NOT GENUINE AND BOGUS AND TO THIS EXTENT THE CHARGE OF TAX ON SUCH INC OME HAS ESCAPED THE ASSESSMENT. NAME OF THE HAWALA OPERATOR PAN F.Y. AMOUNT (RS.) MANIBHADRA TRADING CO. (TIN - 27670243292V) AYZPS5296B 2009 - 10 1,18,404 N.B. ENTERPROSES (TIN - 27490339033V) AAYPL7194J 2009 - 10 3,12,000 ANMOL INDUSTRIES (TIN - 27420506930V) AFFPJ7343M 2009 - 10 4,01,960 BLUE NILE ENTERPRISE(TIN - AGLPB1616Q 2009 - 10 5,05,804 ITA. NO.1903 /M/1 8 A.Y.2010 - 11 3 27340548975V) ANKIT ENTERPRISES (TIN - 27060103705V) AZLPS1660G 2009 - 10 6,28,517 PRAKASH ENTERPRISES (TIN - 27840097650V) AVGPS5468P 2009 - 10 9,36,000 SHRINATH T RADING TIN - 27720543528V) AHRPD7500J 2009 - 10 9,14,435 GREAT INTERNATIONAL CO. (TIN - 27680504653V) - 2009 - 10 5,14,800 TOTAL 43,31,920 4. NOTICE U/S 148 OF THE ACT WAS ALSO ISSUED UPON THE INFORMATION OF THE DGIT(INV.) . T HE ASSESSEE HAS PURCHASED THE MATE RIAL FROM 8 PARTIES TOTAL TO THE TUNE OF RS.43,31,920/ - . THE SAID PURCHASE WAS BOGUS AND IN REPLY , THE ASSESSEE DID NOT GIVE ANY INFORMATION. THEREFORE THE ASSESSING OFFICER ADDED THE TOTAL PURCHASE TO THE TUNE OF RS.43,31,920/ - TO THE INCOME OF THE ASSESS EE AND THE INCOME OF THE ASSESSEE WAS ASSESSED TO THE TUNE OF RS. 46,63,520/ - . AGGRIEVED BY THIS ORDER, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A) WHO RESTRICTED THE SAID ADDITION TO THE EXTENT OF 30% BUT THE ASSESSEE WAS NOT SATISFIED, THEREFORE, THE A SSESSEE HAS FILED THE PRESENT APPEAL BEFORE US. 5. WE HAVE HEARD THE ARGUMENT ADVANCED BY THE LD. REPRESENTATIVE OF THE PARTIES AND PERUSED THE RECORD. WE OBSERVED THAT THE ASSESSE E HAS FILED THE PRESENT APPEAL 464 DAYS DELAY ED . THE APPLICATION OF THE CO NDONATION HAS BEEN FILED ALONG WITH THE AFFIDAVIT . THE REASON HAS BEEN MENTIONED IN THAT APPLICATION THAT THE ASSESSEE SUFFERED HUGE LOSSES IN THE BUSINESS, THEREFORE, HE HAD SOLD HIS OFFICE AT MASJID BUNDER AND ALL OF HIS SAVINGS AND ITA. NO.1903 /M/1 8 A.Y.2010 - 11 4 INVESTMENTS WERE EXHA USTED. HE STAYED IN PUNE FROM 2016 TO END OF 2017 AND HE WAS NOT AWARE OF INCOME TAX MATTERS AND HE HAD TO TRAVEL FROM PUNE TO MUMBAI IN CONNECTION WITH HIS BUSINESS. THERE WAS NO ONE ELSE TO LOOK AFTER MY FAMILY. THEREFORE, HE HAS FILED THE PRESENT APPEAL DELAYED, HE ALSO RECEIVED THE PENALTY NOTICE AND AFTER RECEIVED OF THE NOTICE , HE WENT TO CONCERN ITO WHO ADVISE D TO FILE THE APPEAL BEFORE THE ITAT. ANYHOW, IN VIEW OF THE CIRCUMSTANCES, WHEN THE ASSESSEE HAD SUSTAINED THE HUGE LOSS AND SOLD OUT ALMOST H IS SAVING AND INVESTMENT AND ALSO REM AINED OUT OF CITY FOR THE PERIOD OF MORE THAN ONE YEAR . WE ARE ALSO OF THE VIEW THAT THE CONTROVERSY IS ALSO REQUIRED TO BE DECIDED ON MERIT, THEREFORE, WE ARE OF THE VIEW THAT THE DELAY IS LIABLE TO BE CONDONED. HENCE RELYING UPON THE JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF N. BALAKRISHNAN VS. M. KRISHNAMURTHY (1998) 7 SCC 123, WE CONDONE D THE DELY. ISSUE NO.1: - 6 . UNDER THIS ISSUE THE ASSESSEE HAS CHALLENGED THE VALIDITY OF REOPENING OF THE ASSESSMENT ORDER U /S 147 OF THE I.T. ACT, 1961. AT THE TIME OF ARGUMENT, THE LD. REPRESENTATIVE O F THE ASSESSEE DID NOT PRESS THIS ISSUE, THEREFORE, THIS ISSUE IS BEING DECIDED IN FAVOUR OF THE REVENUE AGAINST THE ASSESSEE BEING NOT PRESSED. ISSUE NO.2 : - 7 . UNDER THIS ISS UE , THE ASSESSEE HAS CHALLENGED THE CONFIRMATION OF THE ADDITION TO THE EXTENT OF 30% OF THE BOGUS PURCHASE TO THE TUNE OF RS.43 ,31,920/ - . THE AO AFTER RECIEPT OF THE LETTER OF DGIT(INV.) ITA. NO.1903 /M/1 8 A.Y.2010 - 11 5 ADDED THE WHOLE PURCHASE TO THE INCOME OF THE ASSESSEE I.E. TO THE T UNE OF RS.43,31,920/ - . ON APPEAL FILED BY THE ASSESSEE BEFORE THE CIT(A), THE CIT(A) HAS RESTRICTED THE ADDITION TO THE EXTENT OF 30% OF THE BOGUS PURCHASE. BEFORE GOING FURTHER, WE DEEMED IT NECESSARY TO ADVERT THE FINDING OF THE CIT(A) ON RECORD .: - 5. I HAVE CONSIDERED THE FACTS AND CIRCUMSTANCES OF THE CASE. I HAVE ALSO PERUSED THE FINDINGS OF THE A.O. IN THE ASSESSMENT ORDER. 5.1 SO FAR THE VALIDITY OF RE - OPENING IS CONCERNED, IT IS FOUND THAT THE REASONS FOR RE - OPENING WAS BOGUS PURCHASE MADE BY THE ASSESSEE AS PER INFORMATION FROM THE OFFICE OF THE DGIT(LNV.), MUMBAI AND SALES TAX, DEPARTMENT BASED ON IN - DEPTH INVESTIGATION AND ENQUIRIES. THEREFORE, IT IS FOUND THAT THE NOTICE UNDER SECTION 148 WAS ISSUED ON THE BASIS OF FRESH INFORMATION AND TANGIBL E MATERIALS. THE INFORMATION WAS SPECIFIC AND RELATED TO THE ASSESSEE AND THE QUANTUM OF BOGUS PURCHASE MADE BY THE ASSESSEE WAS ALSO MENTIONED. IN VIEW OF ABOVE, GROUND CHALLENGING THE VALIDITY OF RE - OPENING OR ASSESSMENT PROCEEDINGS IS DISMISSED. 5.2 SO FAR THE ADDITION ON ACCOUNT OF THE PURCHASES ARE CONCERNED, IT IS FOUND THAT THE APPELLANT HAS NOT FILED ANY EVIDENCE LIKE PURCHASE INVOICES, BANK STATEMENT, EVIDENCE OF TRANSPORTATION AND DELIVERY EITHER AT ASSESSMENT OR APPELLATE STAGE. THE ENQUIRIES AND INVESTIGATION CONDUCTED BY THE SALES TAX DEPARTMENT ALONG WITH THE DEPOSITION OF ALLEGED SUPPLIERS CLEARLY ESTABLISH THAT THESE PARTIES HAVE ISSUED BOGUS BILLS WITHOUT ANY SUPPLY OF GOODS. THE AO HAS CONFRONTED ALL THE MATERIALS AND FINDINGS TO THE ASSESS EE. IN FACT, FINDINGS OF THE SALES TAX DEPARTMENT WERE AVAILABLE ON ITS WEB - SITE AND IT WAS IN PUBLIC DOMAIN. THE ASSESSEE HAS ALSO FAILED TO BRING ANY EVIDENCE OF ACTUAL PURCHASE, TRANSPORTATION AND DELIVERY OF GOODS. THEREFORE, IT IS HELD THAT THE APPELL ANT HAS FAILED TO PROVE THAT THE GOODS WERE BASED FROM THE AFORESAID PARTIES. 5.1 ON THE ISSUE OF BOGUS PURCHASE, DECISIONS LIKE VIJAY PROTEINS LTD. VS. CIT [2015] 58 TAXMANN,COM 44 (GUJ) , CIT VS. SIMIT P, SHETH [2013] 356 ITR 451 (GUJ.) SUPPORT DISALLOWA NCE OF CERTAIN PERCENTAGE OF PURCHASE PRICE. THE DISALLOWANCE IS JUSTIFIED BECAUSE THE EXACT SOURCE OF GOODS OR EXACT AMOUNT OF INFLATION IS KNOWN TO THE ASSESSEE ONLY. FURTHER, WITHOUT A MUCH BIGGER BENEFIT ITA. NO.1903 /M/1 8 A.Y.2010 - 11 6 THAN THE NORMAL GP RATIO, NO PRUDENT PERSON WILL ENTER INTO TRANSACTIONS OF PURCHASING MATERIALS FROM ONE SOURCE AND TAKING BILLS FROM ANOTHER. AS A CONSEQUENCE, THE PROFIT EMBEDDED IN SUCH TRANSACTIONS OF PURCHASE AND SALES WILL BE MUCH HIGHER THAN THE NORMAL GP RATIO. 5.4 IN THE FACTS AND ARE URN STA NCES OF THE CASE, I FIND 30% OF PURCHASE DISALLOWANCE TO BE FAIR AND REASONABLE IN THIS CASE. I AM OF THE OPINION THAT DISALLOWANCE OF 100% OF THE PURCHASE AMOUNT IS NOT JUSTIFIED EVEN IF THE ORDER IS PASSED UNDER SECTION 144 FOR FAILURE ON PART OF ASSESSE E TO FILE DETAILS AND EVIDENCES OF PURCHASE UNLESS IT IS PROVED THAT THE ENTIRE CASH CORRESPONDING TO CHEQUE PAYMENTS WAS RETURNED AND CAME TO THE POCKET OF THE ASSESSEE AND THE ASSESSEE HAS NOT PURCHASED ANY MATERIAL FROM ANY OTHER SOURCE. IN THE PRESENT CASE, IN - DEPTH ENQUIRIES WERE NOT CONDUCTED BY THE AO. THE AO DID NOT CAN OUT FURTHER INVESTIGATION FROM THE BANK TO EXAMINE WHETHER THE SUPPLIERS HAD WITHDRAWN CASH FROM HIS ACCOUNT. ACCORDINGLY, ADDITION OF RS. 12,99,576/ - [ BEING 30% OF RS. 43,31,920/ - ] IS SUSTAINED AND BALANCE RS. 30,32,344/ - BEING 70% OF RS. 3,31,920/ - J IS DELETED. THE GROUND IS PARTLY ALLOWED. 8 . ON APPRAISAL OF THE ABOVE SAID ORDER, WE NOTICED THAT THE CIT(A) HAS DECIDED THE MATTER OF CONTROVERSY ON THE BASIS OF THE DECISION OF VIJA Y PROTEINS LTD. VS. CIT (2015) 58 TAXMANN.COM 44 (GUJ) AND CIT VS. SIMIT P. SHETH (2013) 356 ITR 451 (GUJ). THE PROFIT EMBEDDED TO PURCHASE IS LIABLE TO BE CONSIDERED. 9 . WE NOTICE THAT THE CIT(A) HAS ESTIMATED PROFIT @ 30% BUT HE HAS NOT GIVEN ANY BASIS F OR THE SAME. AT THE TIME OF HEARING, THE LD. AR FURNISHED A RECONCILIATION STATEMENT RECONCILING THE PURCHASES WITH SALES. IN THAT SITUATION, ESTIMATION A PROFIT IS JUSTIFIED, SINCE THE GOODS COULD NOT HAVE BEEN SOLD WITHOUT PURCHASING IT. THE LD. AR SUBMI TTED THAT THE VAT RATE APPLICABLE TO THESE GOODS IN 4% . ITA. NO.1903 /M/1 8 A.Y.2010 - 11 7 10. SINCE THE ASSESSEE COULD CORRELATE PURCHASES WITH SALES, THE PROFIT , IF ANY, MADE IN SUCH PURCHASES COULD BE ASSESSED AS PER THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF SIMIT P. SHET H (SUPRA). CONSIDERING THE VAT RATE OF 4% , WE ARE OF THE VIEW THAT THE PROFIT ELEMENT INVOLVED IN THE IMPUGNED PURCHASES MAY BE ESTIMATED @ 6%. ACC ORDINGLY, WE MODIFY THE ORDER OF LD. CIT(A) AND DIRECT THE AO TO SUSTAIN ADDITION TO THE EXTENT OF 6% OF VALU E OF IMPUGNED PURCHASE. 11 . IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS HERE BY ORDERED TO BE PARTLY ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 06. 07. 201 8 . SD/ - SD/ - ( B. R. BASKARAN ) ( AMARJIT SINGH ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI; DATED : 06. 07. 201 8 . VIJAY / 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) , / ITAT, MUMBAI