MANGESH NIHALCHAND JAIN, HUF, MUMBAI V. INCOME TAX OFFICER 18(2)(3), MUMBAI

ITA 229/MUM/2019

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 6507 (ITAT-MUMBAI)
• Duration Of Justice: 1 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-02-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 17-01-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D G
• Keywords: Bogus purchase; Set aside
• Section: 143(3); 143(1); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH D, MUMBAI BEFORE SHRI RAJESH KUMAR, ACCOUNTANT MEMBER AND SHRI RAM LAL NEGI, JUDICIAL MEMBER ITA NO.229/M/2019 ASSESSMENT YEAR: 2010-11 M/S. MANGESH NIHALCHAND JAIN, HUF, ROOM NO.10, 1 ST FLOOR, OVAL WADI, VITHAL WADI, 11, MATKA GALLI, MUMBAI 400 002 PAN: AADHJ1227P VS. ITO 18(2)(3), ROOM NO.306, 3 RD FLOOR, EARNEST HOUSE, NARIMAN POINT, MUMBAI - 400021 (APPELLANT) (R ESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI FENIL BHATT, A.R. REVENUE BY : SHRI D.G. PANSARI, D.R. DATE OF HEARING : 14.02.2019 DATE OF PRONOUNCEMENT : 19.02.2019 O R D E R PER RAJESH KUMAR, ACCOUNTANT MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSES SEE AGAINST THE ORDER DATED 28.12.2018 OF THE COMMISSIO NER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS TH E CIT(A)] RELEVANT TO ASSESSMENT YEAR 2010-11. 2. THE ASSESSEE HAS RAISED VARIOUS GROUNDS ON LEGAL ISSUE AS WELL AS ON MERIT. AT THE TIME OF HEARING THE ASSES SEE HAS NOT PRESSED THE GROUND NO.1 & 2 AND THEREFORE THE SAME ARE DISMISSED AS NOT PRESSED. ITA NO.229/M/2019 M/S. MANGESH NIHALCHAND JAIN 2 3. IN THE 3 RD GROUND OF APPEAL, THE ASSESSEE HAS CHALLENGED THE CONFIRMATION OF ADDITION BY LD. CIT(A) AS MADE BY THE AO ON ACCOUNT OF BOGUS PURCHASES. 4. THE FACTS IN BRIEF ARE THAT THE ASSESSEE FILED R ETURN OF INCOME OF RS.3,63,180/- ON 15.10.2010 WHICH WERE PR OCESSED UNDER SECTION 143(1) OF THE ACT. THE ASSESSEE IS E NGAGED IN THE BUSINESS OF NON FERROUS METALS, TIN AND ALLIED ITEM S IN THE NAME AND STYLE OF MANU METAL CO. THE AO REOPENED THE CA SE OF THE ASSESSEE UNDER SECTION 147 OF THE ACT BY ISSUING NO TICE UNDER SECTION 148 ON 19.09.2014 WHICH WAS DULY SERVED UPO N THE ASSESSEE AFTER THE AO RECEIVED INFORMATION FROM THE INVESTIGATION WING WHICH IN TURN HAS RECEIVED INFORMATION FROM THE SALES TAX DEPARTMENT, GOVERNMENT OF MAHARASHTRA THAT ASSE SSEE IS BENEFICIARY OF TAKING BOGUS HAWALA ENTRIES IN THE F ORM OF PURCHASES FROM THREE PARTIES NAMELY; SKAND INDUSTRIES - RS.28,66,916/- MAHAVIR ENTERPRISES - RS.15,47,724/- GREAT INTERNATIONAL - RS.17,09,760/- RS.61 ,24,400/-. 5. THE ASSESSEE FILED A LETTER DATED 08.10.2014 BEF ORE THE AO STATING THAT ORIGINAL RETURN FILED ON 15.10.2010 MA Y BE TREATED AS RETURN FILED IN RESPONSE TO NOTICE ISSUED UNDER SECTION 148 THEREAFTER THE ASSESSEE FILED VARIOUS DETAILS BEFOR E THE AO COMPRISING COPIES OF LEDGER, BILLS, VOUCHERS, BANK STATEMENT ETC. THEREAFTER, THE AO VIDE ORDER SHEET DATED 29.02.201 6 SENT SHOW CAUSE NOTICE TO THE ASSESSEE THAT IN ABSENCE OF CON FIRMATIONS FROM THE SUPPLIERS WHY THE ENTIRE PURCHASES SHOULD NOT BE TREATED AS BOGUS AND ADDED TO THE INCOME OF THE ASS ESSEE. ITA NO.229/M/2019 M/S. MANGESH NIHALCHAND JAIN 3 FINALLY, THE AO MADE ADDITION @ 25% OF THE BOGUS PU RCHASES BY FRAMING ASSESSMENT UNDER SECTION 143(3) READ WITH S ECTION 147 VIDE ORDER DATED 15.03.2016. 6. IN THE APPELLATE PROCEEDINGS, THE LD. CIT(A) DIS MISSED THE APPEAL OF THE ASSESSEE BY UPHOLDING THE ORDER OF AO BY OBSERVING THAT THE NP OF THE ASSESSEE IS 0.39% ON A TOTAL TURNOVER OF RS.376 LAKHS AND AFTER TAKING INTO ACCO UNT THE DISALLOWANCE OF RS.15.31 LAKHS BY THE AO THE GROSS PROFIT COMES TO 4.46% WHICH IS REASONABLE. 7. AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATERIAL ON RECORD INCLUDING THE IMPUGNED ORDER PASSED BY LD. C IT(A), WE OBSERVE THAT IN THIS CASE THE ASSESSEE IS TRADING I N NON FERROUS METAL AND OTHER ITEMS WHICH IS SUBJECT TO 4% OF VAT. IN THIS CASE UNDOUBTEDLY THE ASSESSEE HAS AVAILED THE ENTRI ES OF BOGUS PURCHASES TO THE TUNE OF RS.61,24,410/-. THE AO HA S NOT DOUBTED THE CORRESPONDING SALES. THE ONLY BASIS FO R MAKING ADDITION IS THE INFORMATION FROM THE SALES TAX DEPA RTMENT AND THE AO HAS NOT CARRIED OUT ANY FURTHER VERIFICATION DESPITE ASSESSEE HAVING FILED ALL THE NECESSARY EVIDENCES I N THE FORM OF BILLS, VOUCHERS, LEDGER, BOOKS OF ACCOUNTS, BANK ST ATEMENT ETC. UNDER THESE CIRCUMSTANCES, THE NORMAL PRESUMPTION I S DRAWN THAT ASSESSEE MIGHT HAVE PURCHASED THE GOODS FROM T HE GREY MARKET THEREBY MAKING SAVINGS IN THE FORM OF NON FE RROUS IN THE FORM OF NON PAYMENT OF VAT AND OTHER INCIDENTAL SAV INGS. IN OUR VIEW, THE CONFIRMATION OF ORDER OF THE AO BY LD . CIT(A) UPHOLDING THE GP RATE OF 25% IS TOO EXCESSIVE AND U NREASONABLE ESPECIALLY IN THE CASE OF NON FERROUS METAL TRADING WHEREIN THE GP NORMALLY VARIES FROM 2% TO 4%. IN THE PRESENT C ASE ALSO THE ITA NO.229/M/2019 M/S. MANGESH NIHALCHAND JAIN 4 GP OF THE ASSESSEE IS 2.72% WHICH IS NOT IN DISPUTE . THEREFORE, IN OUR OPINION, IT WOULD BE REASONABLE TO ESTIMATE THE INCOME ON THE BOGUS PURCHASES AT A RATE WHICH IS MADE UP OF V AT + 2% GP THEREON. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD . CIT(A) AND DIRECT THE AO TO APPLY A RATE OF 6% TO BRING TO TAX THE BOGUS PURCHASES. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 19.02.2019. SD/- SD/- ( RAM LAL NEGI) (RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED:19.02.2019. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORDER DY/ASS TT. REGISTRAR, ITAT, MUMBAI.