CHHABILKUMAR P. ADANI, MUMBAI V. INCOME TAX OFFICER 19(1)(3), MUMBAI

ITA 2211/MUM/2018

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 9134 (ITAT-MUMBAI)
• Duration Of Justice: 8 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-12-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 09-04-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K BEPARI
• Assessee Lawyers: JITENDRA SINGH
• Keywords: Bogus purchase
• Section: 143(3); 143(1); 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY , JUDICIAL MEMBER AND SHRI N.K. PRADHAN , ACCOUNTANT MEMBER ITA NO. 2211 / MUM/2018 ( ASSESSMENT YEAR : 20 10 11 ) CHHABILKUMAR P. ADANI PROP: M/S KANCHAN TUBES INDIA 238, 2 ND KUMBHARWADA LANE SANT SENA MAHARAJ MARG MUMBAI 400 004 PAN ABSPC8423A . APPELLANT V/S INCOME TAX OFFICER WARD 19(1)(3), MUMBAI . RESPONDENT ITA NO. 2212 / MUM/2018 ( ASSESSMENT YEAR : 20 09 10 ) CHHABILKUMAR P. ADANI PROP: M/S KANCHAN TUBES INDIA 238, 2 ND KUMBHARWADA LANE SANT SENA MAHARAJ MARG MUMBAI 400 004 PAN ABSPC8423A . APPELLANT V/S INCOME TAX OFFICER WARD 19(1)(3), MUMBAI . RESPONDENT ASSESSEE BY : SHRI JITENDRA SINGH REVENUE BY : SHRI S.K. BEPARI DATE OF HEARING 05 . 12 .2018 DATE OF ORDER 14.12.2018 2 CHHABILKUMAR P. ADANI O R D E R PER SAKTIJIT DEY, J.M. AFORESAID APPEALS BY THE ASSESSEE ARE DIRECTED AGAINST TWO SEPARATE ORDERS, BOTH DATED 04.01.2018, OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS) 53, MUMBAI, PERTAINING TO ASSESSMENT YEARS 2009 - 10 AND 2010 - 11. 2 . THE ONLY COMMON ISSUE ARISING FOR CONSIDERATION IN BOTH THE APPEALS RELATE TO ADDITION MADE ON ACCOUNT OF BOGUS PURCHASES. 3 . BRIEFLY THE FACTS ARE, THE ASSESSEE, AN INDIVIDUAL, IS ENGAGED IN THE BUSINESS OF TRADING IN FERROUS AND NONFERROUS METALS THROUGH HIS PROPRIETARY CONCERN M/S KANCHAN TUBE. FOR THE ASSESSMENT YEAR 2009 - 10 ASSESSEE FILED HIS RETURN OF INCOME ON 30.09.2009 D ECLARING TOTAL INCOME OF ` 3,64,870. SIMILARLY, FOR ASSESSMENT YEAR 2010 - 11 THE ASSESSEE FILED HIS RETURN OF INCOME ON 23.09.2010 DECLARING TOTAL INCOME OF ` 3,60,576. THE RETURN OF INCOME FILED FOR THE ASSESSMENT YEAR 2009 - 10 WAS SELECTED FOR SCRUTINY AND AN ASSESSMENT ORDER WAS PASSED UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (ACT) ON ` 22,12,2011 DETERMINING THE TOTAL INCOME AT ` 4,55,130. WHEREAS, THE RETURN OF INCOME FILED FOR THE ASSESSMENT YEAR 2010 - 11 WAS PROCESSED UNDER SECTION 143(1) OF THE ACT ACCEPTING THE RETURNED INCOME. SUBSEQUENTLY, ON THE BASIS OF INFORMATION RECEIVED FROM THE DGIT 3 CHHABILKUMAR P. ADANI (INVESTIGATION), MUMBAI AS WELL AS SALES - TAX DEPARTMENT, GOVERNMENT OF MAHARASHTRA THAT PURCHASES WORTH ` 22,57,631 IN ASSESSMENT YEAR 2009 - 10 AND ` 78,49,678 IN ASSESSMENT YEARS 2010 - 11 ARE NOT GENUINE AS THEY WERE MADE FROM CONCERNS / PARTIES WHO HAVE BEEN IDENTIFIED AS HAWALA OPERATORS B Y THE SALES TAX DEPARTMENT, GOVT. OF MAHARASHTRA, THE ASSESSING OFFICER REOPENED THE ASSESSMENT FOR BOTH THE ASSESSMENT YEARS UNDER SECTION 147 OF THE ACT. DURING THE ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER CALLED UPON THE ASSESSEE TO PRODUCE NECESSAR Y EVIDENCES TO PROVE THE GENUINENESS OF THE PURCHASES. AS OBSERVED BY THE ASSESSING OFFICER, THE ASSESSEE WAS UNABLE TO PRODUCE DELIVERY CHALLANS, TRANSPORT DOCUMENTS ETC. TO PROVE DELIVERY OF GOODS. THE NOTICES ISSUE BY THE ASSESSING OFFICER UNDER SECTION 133 (6) OF THE ACT TO ASCERTAIN THE GENUINENESS OF THE PURCHASES ALSO RETURNED UNSERVED DUE TO UNAVAILABILITY OF THE PARTIES. IN VIEW OF THE AFORESAID, THE ASSESSING OFFICER ULTIMATELY HELD THAT THE GENUINENESS OF PURCHASES MADE FROM THE CONCERNED PARTIES IN BOTH THE ASSESSMENT YEARS IS NOT PROVED. ACCORDINGLY, HE REJECTED BOOKS OF ACCOUNT OF THE ASSESSEE AND PROCEEDED TO ESTIMATE THE PROFIT AT THE RATE OF 12.5% OF THE BOGUS PURCHASES IN BOTH THE ASSESSMENT YEARS UNDER APPEAL. THIS RESULTED IN ADDITION OF ` 2,82,204 IN ASSESSMENT YEAR 2009 - 10 AND RS. 9,81,210 IN ASSESSMENT YEAR 2010 - 11. BEING AGGRIEVED WITH THE AFORESAID ADDITIONS, THOUGH, THE ASSESSEE PREFERRED 4 CHHABILKUMAR P. ADANI APPEALS BEFORE THE LEARNED COMMISSIONER (APPEALS), HOWEVER, HE ALSO SUSTAINED THE ADDITIONS MADE BY THE ASSESSING OFFICER. 4 . THE LEARNED OF THE AUTHORISED REPRESENTATIVE SUBMITTED, CONSIDERING THE FACT THAT THE ASSESSEE IS A TRADER IN FERROUS AND NONFERROUS METALS, ESTIMATION OF PROFIT AT 12.5% OF THE ALLEGED BOGUS PURCHASES IS HIGH AND EXCESSIVE. HE SUBMITTED, IN THIS TYPE OF BUSINESS, AS PER THE INDUSTRY NORM, PROFIT RATE DOES NOT EXCEED 2 TO 3%. HE SUBMITTED, ESTIMATION OF PROFIT SHOULD BE MADE AT A REASONABLE RATE. 5 . THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED UPON THE OBSERVATIONS OF THE DEPART MENTAL AUTHORITIES. 6 . WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED MATERIAL ON RECORD. IT IS EVIDENT, THE ASSESSING OFFICER HAD SPECIFIC INFORMATION IN HIS POSSESSION TO INDICATE THAT CERTAIN PURCHASES MADE BY THE ASSESSEE IN THE IMPUGNED ASSESSMENT YEA RS ARE NOT GENUINE. IT IS ALSO EVIDENT, THE ASSESSEE COULD NOT CONCLUSIVELY PROVE THAT THE PURCHASES CLAIMED TO HAVE BEEN MADE FROM THE DECLARED SOURCE ARE GENUINE. HOWEVER, THE DEPARTMENTAL AUTHORITIES HAVE NOT DISPUTED THE SALES EFFECTED BY THE ASSESSEE, MEANING THEREBY, THE ASSESSEE MIGHT HAVE PURCHASED THE GOODS FROM SOME UNKNOWN PARTIES/SOURCE. FOR THIS REASON ALONE THE ASSESSING OFFICER HAS ESTIMATED THE PROFIT AT 12.5% OF THE NON 5 CHHABILKUMAR P. ADANI GENUINE PURCHASES. THEREFORE, THE DISPUTE NOW IS ONLY WITH REGARD TO TH E PROFIT RATE TO BE APPLIED FOR ESTIMATING THE INCOME ON NON GENUINE PURCHASES. AFTER CONSIDERING THE OVERALL FACTS AND CIRCUMSTANCES OF THIS PARTICULAR CASE WE ARE OF THE CONSIDERED OPINION THAT ESTIMATION OF PROFIT @ 5% OF THE ALLEGED NON GENUINE PURCHAS ES WOULD BE REASONABLE. ACCORDINGLY, WE DIRECT THE ASSESSING OFFICER TO RESTRICT THE ADDITION IN BOTH THE ASSESSMENT YEARS UNDER APPEAL TO 5% OF THE NON GENUINE PURCHASES. WE MAKE IT CLEAR, OUR AFORESAID DECISION IS PURELY ON THE BASIS OF FACTS INVOLVED I N THE PRESENT APPEALS. GROUNDS ARE PARTLY ALLOWED. 7 . IN THE RESULT APPEALS ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 14.12.2018 SD/ - N.K. PRADHAN ACCOUNTANT MEMBER SD/ - SAKTIJIT DEY JUDICIAL MEMBER MUMBAI, DATED: 14.12.2018 6 CHHABILKUMAR P. ADANI COPY OF THE ORDER FORWARDED TO : ( 1 ) THE ASSESSEE; ( 2 ) THE REVENUE; ( 3 ) THE CIT(A); ( 4 ) THE CIT, MUMBAI CITY CONCERNED; ( 5 ) THE DR, ITAT, MUMBAI; ( 6 ) GUARD FILE . TRUE COPY BY ORDER PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY (SR. PRIVATE SECRETARY) ITAT, MUMBAI