SHRI RAJENDRA SURESH SAWANT, MUMBAI V. ACIT-27(3), MUMBAI

ITA 2266/MUM/2018

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 1889 (ITAT-MUMBAI)
• Duration Of Justice: 7 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-11-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 11-04-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AJAY KUMAR OJHA
• Assessee Lawyers: RUCHI RATHOD
• Keywords: Bogus purchase
• Section: 133(6); 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC , BENCH MUMBAI BEFORE SHRI R.C.SHARMA, AM & SHRI AMARJIT SINGH , JM ITA NO. 2266 / MUM/20 1 8 ( ASSESSMENT YEAR : 2009 - 10 ) SHRI RAJENDRA SURESH SAWANT, 125, 1 ST FLOOR, SWASTIK DISA CORPORATE PARK, OPP. SHREYA S CINEMA, LBS MARG GHATKOPAR (W), MUMBAI 400 086 VS. ACIT 27(3) 4 TH FLOOR, TOWER NO.6 VASHI RAILWAY STATION VASHI, NAVI MUMBAI 400 701 PAN/GIR NO. AGDPS7936A ( APPELLANT ) .. ( RESPONDENT ) ASSESSEE BY MS. RUCHI RATHOD REVENUE BY SHRI AJAYKUMA R OJHA DATE OF HEARING 13 / 11 /201 8 DATE OF PRONOUNCEMENT 16 / 11 /201 8 / O R D E R PER R.C.SHARMA (A.M) : THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) - 25, MUMBAI DATED 22/12/2017 FOR A.Y.2009 - 10 IN THE MATT ER OF ORDER PASSED U/S.143(3) R.W.S. 147 OF THE IT ACT. 2. IN THIS APPEAL, ASSESSEE IS AGGRIEVED FOR UPHOLDING ADDITION OF 12.5% IN RESPECT OF ALLEGED BOGUS PURCHASES. 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. ITA NO. 2266/MUM/2018 SHRI RAJENDRA SURESH SAWANT 2 4. FACTS IN BRIEF ARE THAT TH E ASSESSEE IS AN INDIVIDUAL AND IS INVOLVED IN THE BUSINESS ACTIVITY OF INTERIOR DESIGNER AND CONTRACTORS AND SUCH ACTIVITY IS CARRIED OUT IN PROPRIETORSHIP CONCERN, BUSINESS NAME AND STYLE AS M/S RAJENDRA SAWANT & ASSOCIATES . FOR THE YEAR UNDER CONSIDERAT ION, THE ASSESSEE HAS FILE D RETURN OF INCOME DECL ARING TOTAL INCOME OF RS. 31,88, 710/ - WHICH WAS FILED ON 30 / 09 / 2009 UNDER E - FILING SYSTEM. A NOTICE U/S. 148 WAS ISSUED IN RESPECT OF INFORMATION COVERED FROM THE INVESTIGATION REGARDING BOGUS PURCHASE HAVIN G BEEN MADE BY THE ASSESSEE. IN RE - ASSESSMENT ORDER AO MADE ADDITION IN RESPECT OF ENTIRE PURCHASE U/S.69C. IN T HE ASSESSMENT ORDER IT WAS OBSERVED THAT ASSESSEE HAS AFFECTED PURCHASES FROM THOSE PARTIES WHO HAS BEEN DECLARED AS HAWALA AS PER THE INFORMATI ON RECEIVED FROM THE DGIT &SALES TAX DEPARTMENT AND ON THE BASIS OF SUCH INFORMATION GATHERED FROM THE DGIT. 5. BY THE IMPUGNED ORDER CIT(A) RESTRICTED THE ADDITION TO THE EXTENT OF 12.5% OF ALLEGED BOGUS PURCHASES AGAINST WHICH ASSESSEE IS IN FURTHER APPE AL BEFORE US. 6. IT WAS ARGUED BY LEARNED AR MS. RUCHI RATHOD THAT ASSESSEE IS ENGAGED IN THE BUSINESS OF INTERIOR DESIGNING AND HAS SHOWN GROSS PROFIT OF 16.07% AS COMPARED TO THE AVERAGE GROSS PROFIT OF 14% IN THE EARLIER YEAR. IT WAS SUBMITTED THAT ASSE SSEE HAS DECLARED NET INCOME OF RS. 31.88 LAKHS IN RESPECT OF SALE OF RS.2.35 CRORES WHICH COMES A NET PROFIT RATE OF 8.01%. IT WAS FURTHER ARGUED THAT I N TODAY'S BUSINESS ITA NO. 2266/MUM/2018 SHRI RAJENDRA SURESH SAWANT 3 MODEL IT IS IMPOSSIBLE TO HAVE PROFIT @ 28.07% (GP DECLARED J6.07% PLUS 12.5% CONFIR MED BY CIT). RELIANCE WAS PLACED ON THE JUDGMENT OF MUFFAZAL HAKIM PENWALA V/S CIT (ITA NO. 3739/M/2017) DATED 20.09.2017 WHICH IS AS UNDER: - ''THE LD. A.R. SUBMITTED THAT THE PURCHASES MADE BY THE ASSESSEE ARE GENUINE THOUGH THE VENDERS ARE FOUND TO BE DE FAULTERS ON THE RECORD OF SALES TAX DEPARTMENT. ASSESSEE HAS MAINTAINED PROPER AND SUFFICIENT RECORDS AND ASSESSEE HAS BEEN IN BUSINESS FOR MORE THAN 27YEARS. THE ASSESSEE HAS PLACED SUFFICIENT INFORMATION AND PRODUCED LEDGER ACCOUNT AND BANK STATEMENT. TO VERIFY THE CLAIM OF PURCHASES, NOTICE UNDER SECTION 133(6) WAS ISSUED TO THE SUPPLIER BUT PARTY COUL NT BE PRODUCED. THEREFORE, 4% ON GP HAS BEEN SUSTAINED BY LD. ('IT(A). FTUL THE YEAR IN WHICH THE ASSESSEE IS TRADER HE HAS ALREADY DECLARED THE GP OF 20 .88% AND IF HE IS SADDLED WITH MORE GP ITA NO.3739 /M/20L7 SHH MITFFAZAL HAKIM PENWALA 3 THEN IT IS 34% WHICH IS A TRADING IMPOSSIBILITY. NO SPECIFIC ALLEGATION IN IHE STATEMENT AGAINST THE ASSESSEE WAS RECORDED AND NO CROSS EXAMINATION OF CONCERNED PARTIES WAS ALLOWED. THEREFORE, WHEN ASSESSEE HAS DECLARED MORE GP RELYING UPON THE JUDGMENT OF ITAT IN ITA NO.3699/M/2016 GP SHOULD BE ESTIMATED @ 2%. I HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES. I FIND THAT THE ISSUE IN CONTROVERSY IS COVERED BY TH E DECISION OF TRIBUNAL IN THE CASE OF M/S. GEOLIFE ORGANICS & ORS. IN ITA NO.3699/M/2016 & ORS. AND IN THE CASE OF M/S. ALLIED BLENDERS AND DISTILLERS PVT. LTD. IN ITA NOS.2447 & 2446/M/2015. FOR THE SAKE OF CONVENIENCE, THE RELEVANT PORTION FROM THE CASE OF M/S. GEOLIFE ORGANICS & ORS. IN ITA NO.3699/M/20L6 & ORS., IS REPRODUCED AS UNDER: '10. WE HAVE CONSIDERED RIVAL CONTENTIONS AND CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE HAVE ALSO DELIBERATED ON VARIOUS JUDICIAL PRONOUNCEMENTS REFE RRED BY LOWER AUTHORITIES IN THEIR RESPECTIVE ORDERS AS WELL AS CITED BY LEARNED AR AND DR DURING THE COURSE OF HEARING BEFORE US. FROM (HE RECORD WE FOUND THAT THE BASIS ON WHICH AO DISALLOWED THE ALLEGED BOGUS PURCHASES IS THE NON - APPEARANCE OF THE SUPPL IERS BEFORE THE AO TO VERIFY THE PURCHASES. IN THIS REGARD WE FOUND THAT MANY BENCHES OF ITA T AND HON'BLE HIGH COURTS HAVE HELD THAT WHEN PURCHASES ARE SUPPORTED BY SUFFICIENT DOCUMENTARY EVIDENCES THEN MERELY BECAUSE OF NON - APPEARANCE BEFORE THE AO. ONE CANNOT CONCLUDE THAT THE PURCHASES WERE NOT MADE BY THE ASSESSEE. SEVERAL DECISIONS CITED IN SUPPORT OF THE SAID ARGUMENT ARE NIKUNJ EXIMP ENTERPRISES (P.) LID. V. CIT 216 TAXMAN 171 (BOM.), CITV. NANGALIA FABRICS (P.) LTD. 220 TAXMANN 17 (GUJ.), CIT V. M. K. BROS. 163 ITR 249 (GUJ.), ASSTT. ITA NO. 2266/MUM/2018 SHRI RAJENDRA SURESH SAWANT 4 CIT V. AKRULI DYEING & PRINTING MILLS (P.) LTD. [TAX APPEAL NO. 997 OF 2008, DATED 27/01/2009],CIT V. VEEKAY PRINTS (P.) LTD. [TAX APPEAL NO. 2557 OF 2010, DATED. 1/2/2012], DIAGNOSTICS V. CIT 334 ITR 111 (CAT.), ITO V. TOTARAM B. SHARMA [TAX APPEAL NOS. 1344/2008 & 1355/2008, DATED 9 - 2 - 2010], DY. CITV. ADINATH INDUSTRIES [2001] 252 ITR 476 (GUJ.), CIT V. PRECIOUS JEWELS CORPN. 17 TAXMANN.COM 264 (RAJ.), CIT V. RAJESH P. SONI [TAX APPEAL NO. 1107 OF 2006, DATED 27 - 2 - 2012. ' 8. RESPECTFULLY FOLLOWING THE TRIBUNAL DECISION, I ESTIMATE THE GP @2%. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 7. IT WAS FURTHER CONTEND ED BY MS. RUCHI RATHOD, LD. AR THAT THE NECESSARY DETAILS AVAILABLE WITH THE ASSESSEE TO PR OVE HIS CLAIM HAS BEEN BROUGHT ON RECORD AND EVEN THE INFORMATION OF THOSE DEALERS WHICH WERE WITHIN THE KNOWLEDGE OF THE ASSESSEE HAS BEEN BROUGHT ON RECORD. HENCE, UNLESS ANY CONTRARY MATERIAL BROUGHT ON RECORD AFTER GRANTING APPROPRIATE CROSS - EXAMINATIO N OPPORTUNITY AGAINST THE PARTY CONCERN FAVOURING SUCH INCRIMINATORY MATERIALS AND AGAINST THE ASSESSEE ADDITIONS CANNOT BE MADE. 8 . LEARNED AR ALSO PLACED ON RECORD THE ORDER OF THE CO - ORDINATE BENCH UNDER SIMIL AR FACTS AND CIRCUMSTANCES, WHEREIN THE GROS S PROFIT DECLARED BY THE ASSESSEE WAS REASONABLE AND MORE THAN THE GROSS PROFIT DECLARED IN THE EARLIER YEARS, ADDITION W AS RESTRICTED TO THE EXTENT OF 2 % OF BOGUS PURCHASES . 9. ON THE OTHER HAND, LEARNED DR RELIED ON THE ORDER OF LOWER AUTHORITIES AND CO NTENDED THAT CIT(A) HAS VERY REASONABLY RESTRICTED ITA NO. 2266/MUM/2018 SHRI RAJENDRA SURESH SAWANT 5 THE ADDITION TO THE EXTENT OF 12.5% OF BOGUS PURCHASE, THEREFORE, ASSESSEE DO NOT DESERVE ANY FURTHER RELIEF. 10. WE HAVE CONSIDERED RIVAL CONTENTIONS AND CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITI ES BELOW. WE HAD ALSO DELIBERATED ON THE VARIOUS JUDICIAL PRONOUNCEMENTS REFERRED BY LOWER AUTHORITIES IN THEIR RESPECTIVE ORDERS AS WELL AS CITED BY LEARNED AR AND DR DURING THE COURSE OF HEARING BEFORE US IN THE CONTEXT OF FACTUAL MATRIX OF THE CASE. IN THE INSTANT CASE BEFORE US ASSESSEE IS INVOLVED IN THE BUSINESS OF INTERIOR DESIGNING AND CONTRACTORS IN RESPECT OF CERTAIN PURCHASES, AS PER AO THE ASSESSEE COULD NOT ESTABLISH GENUINENESS FROM THE RESPECTIVE PARTIES, THEREFORE, AO ADDED SUCH PURCHASES U/ S.69C. 11. BY THE IMPUGNED ORDER, CIT(A) RESTRICTED THE ADDITION TO THE EXTENT OF 12.5% OF ALLEGED BOGUS PURCHASES. CONTENTION OF LEARNED AR WAS THAT ASSESSEE HAS FURNISHED ALL THE INFORMATION SO AS TO SUBSTANTIATE THE GENUINENESS OF PURCHASES. SHE FURTHER CONTENDED THAT GROSS PROFIT AND NET PROFIT DECLARED BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION WAS MUCH BETTER THAN THE GP AND NP DECLARED IN THE SIMILAR TRADE. THEREFORE, KEEPING IN VIEW TOTALITY OF FACTS AND CIRCUMSTANCES OF THE CASE, WE DIRECT THE AO TO RESTRICT THE ADDITION TO THE EX TENT OF 2 % OF THE ALLEGED BOGUS PURCHASES. WE DIRECT ACCORDINGLY. ITA NO. 2266/MUM/2018 SHRI RAJENDRA SURESH SAWANT 6 12 . IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED IN PART. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 16 / 11 /201 8 SD/ - ( AMARJIT SINGH ) SD/ - (R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 16 / 11 /201 8 KARUNA SR. PS COPY OF THE ORDER FORWARDED TO : BY ORDER, ( ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//