SHRI. HARIRAM S. BISHNOI, MUMBAI V. INCOME TAX OFFICER-WARD 15(2)(4), MUMBAI

ITA 2091/MUM/2016

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 8888 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-10-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 31-03-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: V JENARDHANAN
• Keywords: Bogus purchase; Principle of natural justice
• Section: 133(6)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL K , BENCH, MUMBAI , , , BEFORE SHRI RAJENDRA, AM AND SHRI RAM LAL NEGI, JM ./ ITA NO. 2091 / MUM/ 201 6 ( / ASSESSMENT YEAR: 2011 - 12 ) SHRI HARIRAM S. BISHNOI, 107/111, 1 ST FLOOR, 3 RD KUMBHARWADA LANE, MUMBAI - 400004 VS. THE INCOME TAX OFFICER WARD 15(2) (4), ./ ./ PAN/GIR NO. : AFGPB 8257 B ( / APPELLANT ) .. ( / RESPONDENT ) / ASSESSEE BY : SHRI SATISH R. MODY ( A R) / REVENUE BY : SHR I V. JENARDHANAN (D R) / DATE OF HEARING : 14 /08 /2017 / DATE OF PRONOUNCEMENT : 23 / 10 / 2017 / O R D E R PER RAM LAL NEGI, JM THIS APPEA L HAS BEEN FILED BY THE ASSESSEE AGAINST ORDER DATED 22/02/2016 PASSED BY THE LD. COMMISS IONER OF INCOME TAX (APPEALS) - 3 0 , MUMBAI , PERTAI NING TO THE ASSESSMENT YEAR 2011 - 12 , WHEREBY THE LD. CIT (A) HAS PARTLY ALLOWED THE APPEAL FILED BY THE ASSESSEE AGAINST ASSESSMENT ORDER PASSED U/S 14 3(3) OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT) . 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE THE SOLE PROPRIETOR M/S RAJ HANS METAL SYNDICATE, ENGAGED IN THE BUSINESS OF TRADING IN FERROUS AND NON FERROUS METAL, FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION DECLARING TOTAL INCOME OF RS.18,12,985/ - . SINCE, THE CASE WAS SELECTED FOR SCRUTINY, NOTICES U/S 142(2) OF THE ACT, WAS ISSUED TIME TO TIME AND THE AUTHORIZED REPRESENTATIVE APPEARED BEFORE AO AND ALSO FILED THE DET AILS 2 ITA NO. 2091 /MUM/2016 ASSESSMENT YEAR: 2011 - 12 CALLED FOR . IN ORDER TO VERIFY THE GENUINENESS OF THE PURCHASES MADE BY THE ASSESSEE DURING THE RELEVANT YEAR, NOTICES U/S 133(6) OF THE ACT, WERE ISSUED TO THE PARTIES FROM WHOM THE ASSESSEE HAD ALLEGED TO HAVE PURCHASED THE GOODS. HOWEVER, NOTICES I SSUED TO PRAYASH STEELAGE, MANGLIK METAL (INDIA),MALANI (METAL) INDIA, KALASH METALS PVT. LTD., KANAK STEEL INDUSTRIES AND MAHADEV METALS RECEIVED BACK UN - SERVED FROM POSTAL DEPARTMENT WITH THE REMARKS THEREON EITHER NOT KNOWN OR LEFT. IT ALSO CAME TO T HE NOTICE OF THE AO THAT THE AFORESAID ENTITIES DURING THE RELEVANT PERIOD INDULGED IN ISSU ING BOGUS BILLS TO VARIOUS ASSESSES WITHOUT SUPPLYING ANY GOODS. ACCORDINGLY, THE ASSESSEE WAS ASKED TO PRODUCE THE PARTIES ALONG WITH THE DETAILS TO PROVE GENUINENE SS OF THE TRANSACTION OF PURCHASES IN QUESTION. HOWEVER, THE ASSESSEE NEITHER PRODUCE D THE PARTIES BEFORE AO NOR FILED THE DETAILS TO THE SATISFACTION OF AO. ACCORDINGLY, THE AO MADE ADDITION OF RS. 30,09,302/ - CALCULATING THE PEAK AMO UNT ON THE BASIS OF A LLEGED PURCHASES MADE FROM THE ABOVE MENTIONED SIX PARTIES AND DETERMINED THE INCOME OF THE ASSESSEE AT. RS. 42,22,290/ - 3 . FEELING AGGRIEVED, THE ASSESSEE CHALLENGED THE ASSESSMENT ORDER BEFORE THE LD. CIT (A). THE LD. CIT (A) AFTER HEARING THE ASSESSEE PARTLY ALLOWED THE APPEAL AND RESTRICTED THE ADDITION TO 1 2.5 % OF THE BOGUS PURCHASES MADE BY THE AO. 4 . THE ASSESSEE HAS RAISED THE FOLLOWING GROUND S OF APPEAL AGAINST THE IMPUGNED ORDER PASSED BY THE LD. CIT (A): - 1. THE LEARNED COMMISSIONER OF INCOME TA X HAD ERRED IN RETAINING AND ADDING AN ADDITION OF RS. 985,120/ - BEING 12.5% OF THE TOTAL PURCHASES AMOUNTING TO RS. 78,80,961/ - DETAILS ON PAGE NO. 5 OF ASSESSMENT ORDER. 2. THE LEARNED COMMISSIONER OF INCOME TAX HAS ERRED IN IGNORING THE CONTENTS OF THE FO LLOWING DECISIONS: 3 ITA NO. 2091 /MUM/2016 ASSESSMENT YEAR: 2011 - 12 A. DCIT 25(3) VS. RAJEEV G. KALATHIL I.T.A. NO. 6727/MUM/2012 ORDER DATED 20.08.2014. B. HIRALAL CHUNILAL JAIN ITAT C. NIKUNJ EXIMP ENTERPRISES PVT. LTD. (372 ITR 619). YOUR PETITIONER SUBMITS THAT THE TOTAL PURCHASE EFFECTED BY HIM FROM SO C ALLED BOGUS DEALERS IS RS. 78,80,961/ - AND NOT RS. 94,30,485/ - WHICH INCLUDES OPENING BALANCES OF SOME OF THE SUPPLIERS. 3. THE LEARNED COMMISSIONER OF INCOME TAX HAS FURTHER ERRED IN IGNORING THE FACTS THAT THE ASSESSEE HAD EARNED GROSS PROFIT OF 12.16% FRO M SALE OF RS. 10,09,46,875/ - WHICH IS ON THE HIGHER SIDE. 4. THE ORDER APPEALED AGAINST IS BAD IN LAW AND IS AGAINST THE PRINCIPLE OF NATURAL JUSTICE. 5. THE ORDER APPEALED IS BASED ON SURMISES AND CONJECTURES. 5 . BEFORE US, THE LD. COUNSEL FOR ASSESSEE SU BMITTED THAT THE LD. CIT(A) HAS WRONGLY SUSTAINED THE ADDITION OF 12.5% AND THAT THE FINDINGS ARE CONTRARY TO THE PRINCIPLES OF LAW LAID DOWN BY THE HONBLE BO MBAY HIGH COURT IN NIKUNJ EXIMP ENTERPRISES PVT. LTD 372 ITR 619 (BOM) AND VARIOUS DECISIONS OF T HE ITAT. THE LD COUNSEL FURTHER SUBMITTED THAT THE LD. CIT(A) HAS PASSED THE IMPUGNED ORDER IGNORING THE FACT THAT THE ASSESSEE HAD EARNED GROSS PROFIT OF 12.16% FROM SALE OF RS.1,09,46,875/ - . S INCE THE ASSESSEE HAS FURNISHED THE COPIES OF PURCHASE INVOICE S, DETAILS OF ASSETS PURCHASED BANK STATEMENTS ETC. AND FURTHER PROVED THAT THE PAYMENTS WERE MADE THROUGH BANKING CHANNELS, THE LD. CIT (A) HAS WRONGLY SUSTAINED THE ADDITION OF 12 .5 % OF THE TOTAL QUESTIONED PURCHASES . THE LD. COUNSEL FURTHER SUBMITTED TH AT SINCE, THE FINDINGS OF THE LD. CIT(A) IS NOT BASED ON THE LAW LAID DOWN BY THE VARIOUS HIGH COURTS AND 4 ITA NO. 2091 /MUM/2016 ASSESSMENT YEAR: 2011 - 12 THE DECISIONS OF THE VARIOUS BENCH OF THE INCOME TAX APPELLATE TRIBUNAL, THE SAME IS LIABLE TO BE SET ASIDE . 6. ON THE OTHER HAND , THE DEPARTMENTAL R EPRESENTATIVE (DR) RELYING ON THE FINDINGS OF THE LD. CIT(A) SUBMITTED THAT THE LD.CIT (A) HAS RIGHTLY SUSTAINED THE ADDITION TO 1 2. 5% OF THE BOGUS PURCHASES MADE BY THE ASSESSEE DURING THE RELEVANT YEAR. SINCE, THE ASSESSEE HAS FAILED TO PROVE GENUINENESS OF THE TRANSACTION, THERE IS NO REASON TO INTERFERE WITH THE FINDINGS OF THE LD. CIT(A) 7 . WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ENTIRE RECORD AND ALSO GONE THROUGH THE CASES RELIED UPON BY THE AUTHORITIES BELOW AS WELL AS REFERRED BEFORE US. THE ONLY GRIEVANCE OF THE ASSESSEE IS THAT THE LD. CIT (A) HAS WRONGLY SUSTAINED THE ADDITION OF 1 2. 5% OF THE BOGUS PURCHASE . WE NOTICE THAT THE AO HAS NOT REJECTED THE BOOKS OF ACCOUNT AND ACCEPTED THE SALES SHOWN BY THE ASSESSEE. SINCE, THE AO HAS NO T REJECTED THE SALES SHOWN DURING THE RELEVANT YEAR, THE ENTIRE AMOUNT OF PURCHASES CANNOT BE ADDED TO THE INCOME OF THE ASSESSEE AS THERE CANNOT BE SALE WITHOUT ANY PURCHASE. IF THE ASSESSEE HAD NOT PURCHASED THE GOODS IN QUESTION FROM THE PARTIES CONCERN ED, IT IMPLIES THAT PURCHASES WERE MADE FROM THE PARTIES OTHER THAN THOSE MENTIONED IN THE BOOKS OF ACCOUNT . HENCE, THERE IS NO JUSTIFICATION IN MAKING ADDITION OF THE ENTIRE AMOUNT OF BOGUS PURCHASES DETERMINED BY THE AO. SINCE, IT HAS BEEN ESTABLISHED T HAT THE ASSESSEE HAD NOT PURCHASED THE GOODS IN QUESTION FROM THE PARTIES CONCERNED , IT CAN BE CONCLUDED THAT THE ASSESSEE HAD MADE THE QUESTIONED PURCHASES FROM GREY MARKET WITHOUT PAYING VAT AND OTHER TAXES. UNDER THESE CIRCUMSTANCES, THE AO OUGHT TO HAV E MADE ADDITION KEEPING IN VIEW THE PROFIT ELEMENT EMBEDDED IN THE PURCHASES IN QUESTION. 8 . THE HONBLE BOMBAY HIGH COURT IN CIT VS. NIKUNJ EXIMP ENTERPRISES PVT. LTD. 372 ITR 619 (BOM) , WHILE UPHOLDING THE DECISION OF MUMBAI TRIBUNAL, HAS 5 ITA NO. 2091 /MUM/2016 ASSESSMENT YEAR: 2011 - 12 OBSERVED THA T MERELY BECAUSE THE SUPPLIERS HAD NOT APPEARED BEFORE THE ASSESSING OFFICER OR THE CIT (A) ONE COULD NOT CONCLUDE THAT THE PURCHASES WERE NOT MADE BY THE RESPONDENT/ASSESSEE. THE HONBLE GUJRAT HIGH COURT IN CIT VS. SIMIT P. SETH 356 ITR 451(GUJ) UPHELD T HE DECISION OF THE TRIBUNAL AND SUSTAINED THE ADDITION 12.5% OF THE TOTAL BOGUS PURCHASES HOLDING THAT ONLY PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES CAN BE ADDED TO INCOME OF THE ASSESSEE. HENCE, FOLLOWING THE PRINCIPLES LAW LAID DOWN BY THE HONBLE HIGH COURTS OF BOMBAY AND GUJARAT, DISCUSSED ABOVE, WE UPHOLD THE ORDER OF THE LD. CIT(A) AND DISMISS ALL THE GROUNDS OF APPEAL OF THE ASSESSEE AND DIRECT THE AO TO MAKE ADDITION @ 1 2. 5% OF THE TOTAL AMOUNT OF BOGUS PURCHASES MADE BY THE ASSESSEE TO THE INCOME OF THE ASSESSEE. IN THE RESULT, APPEAL FILED BY THE ASSESSEE FOR ASSESSMENT YEAR 20 11 - 12 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD OCTOBER, 2017 . SD/ - SD/ - ( RAJENDRA ) ( RAM LAL NEGI ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; DATED: 23 / 10 / 2017 ALINDRA, PS / COPY OF THE ORDER FORWARDED TO : 1. / TH E APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . 6 ITA NO. 2091 /MUM/2016 ASSESSMENT YEAR: 2011 - 12 / BY ORDER, //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MU MBAI