ROYAL ENTERPRISES, MUMBAI V. ITO WD 33(3)(2), MUMBAI

ITA 2349/MUM/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 9940 (ITAT-MUMBAI)
• Duration Of Justice: 3 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-07-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2009-2010
• Appeal Filed On: 03-04-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Bogus purchase; Rejection of books of accounts
• Section: 143(3); 133(6); 147; 148; 15

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL BENCH D MUMBAI BEFORE SHRI D.T.GARASIA , JM AND SHRI RAJESH KUMAR, AM I.T.A. NO. 2349 /MUM/20 1 7 ( / ASSESSMENT YEAR : 2009 - 10 ) M/S ROYAL ENTERPRISES D - 41 , PLOT NO.602, SUPANTH CHS,SECTOR - 6, CHARKOP, KANDIVALI(W), MUMBAI - 400067 / VS. INCOME TAX OFFICER 3 3 ( 3 )(2), C - 13, BANDRA - KURLA - COMPLEX, BANDRA (W), MUMBAI - 400020. ./ PAN : AA EFR7910G ( / APPELLANT) : ( / RESPOND ENT ) / A SSESSEE BY : SHRI ASHWIN S CHHAG / RE VENUE T BY : SHRI PURUSHOTTAM KUMAR / DATE OF HEARING : 6.7 .2017 / DATE OF PRONOUNCEMENT : 13. .0 7 . 201 7 / O R D E R PER RAJES H KUMAR, A. M: THE CAPTIONED IS A PPEAL BY THE ASSESSEE PERTAINING TO ASSESSMENT YEAR 2009 - 10 . THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE CIT(A) - 45 , MUMBAI , DATED 8. 12 .201 6 WHICH IN TURN HA VE ARISE N FROM AN ORDER PASSED BY THE ASSESSING OFFICER DATE D 1 9 . 03 .20 1 5 UNDER SECTION 143(3) R.S.W.147 OF THE INCOME TAX ACT, 1961(IN SHORT THE ACT). 2 I.T.A. NO. 2349 /MUM/201 7 2. THE GROUNDS OF APPEAL TAKEN BY THE ASSESSEE (A) AND (B) PERTAIN TO THE RE - OPENING OF THE ASSESSMENT U/S 148 OF THE ACT AND AT THE TIME OF HEARING, THE LD. AR DID NOT PRESS THESE GROUNDS, THEREFORE, DISMISSED AS NOT PRESSED. 3. THE ISSUE RAISED IN GROUNDS OF APPEAL NO. (C) IS AGAINST THE CONFIRMATION OF ADDITION BY THE LD. CIT(A) AS MADE BY THE AO ON THE BASIS OF SURMISES AND PRESUMPTION. 4. THE FACTS O F THE CASE ARE THAT THE ASSESSEE FILED RETURN OF INCOME ON 29.9. 200 9 DECLARING A N INCOME OF RS. 1,22,474/ - WHICH WAS PROCESSED UNDER SECTION 143(1) OF THE ACT . THE CASE OF THE ASSESSEE WAS REOPENED U/S 148 OF THE ACT ON 13.3.2014 AFTER RECEIVING AN INFOR MATION FROM THE DGIT(INV), MUMBAI THAT ASSESSEE HAS AVAILED BOGUS ENTRIES OF BOGUS PURCHASES OF MATERIALS FROM TWO PARTIES AGGREGATING TO RS.47,42,400.00. THE AO ALSO NOTED THAT THE ASSESSEE HAS DECLARED GP AT THE RATE OF RS.9.38% AS PER THE PROFIT AND L OSS ACCOUNT. THE NOTICES ISSUED BY THE AO U/S 133(6) OF THE ACT TO THE HAWALA PARTIES WERE RE TURNED UNSE RVED . T HE AO , ULTIMATELY NOT CONVINCED WITH THE SUBMISSIONS AND CONTENTIONS OF THE ASSESSEE REJECTED THE BOOKS OF ACCOUNTS AND APPLIED GP AT THE RA TE OF 12.5% OF THE BOGUS PURCHASES WHICH WORKED OUT TO RS.5,92,800/ - AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE BY FRAMING ASSESSMENT U/S 147 R.W.S.143(3) OF THE ACT BY 3 I.T.A. NO. 2349 /MUM/201 7 ASSESSING THE TOTAL INCOME AT RS.7,15,274/ - VIDE ASSESSMENT ORDER DATED 19.3.2015 . 5. THE FIRST APPELLATE AUTHORITY ALSO CONFIRMED THE ACTION OF AO BY CONFIRMING THE ADDITION AT THE GP RATE OF 12.5%. AGGRIEVED BY THE ORDER OF THE LD.CIT(A) THE ASSESSEE IS IN SECOND APPEAL BEFORE US. 6 . WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISS IONS AND PERUSED THE MATERIAL PLACED BEFORE US INCLUDING THE ORDERS OF AUTHORITIES BELOW. THE UNDISPUTED FACT ARE THAT THE ASSESSEE HAS MADE BOGUS PURCHASE S FROM THE TWO PARTIES AGGREGATING TO RS.47,42,400.00 . THE AO AFTER CALLING FOR NECESSARY DOCUMENT S AND DETAILS FROM THE ASSESSEE ISSUED NOTICE S U/S 133(6) TO THE HAWALA PARTIES WHICH WERE RECEIVED BACK UNSERVED . AO AFTER REJECTING THE BOOKS OF ACCOUNTS APPLIED 12.5% AS PROFIT ON PURCHASES OF RS.47,42,400/ - AND ADDED THE SAME TO THE TOTAL INCOME OF T HE ASSESSEE. THE LD. CIT(A) ALSO CONFIRMED THE ADDITION MADE BY THE AO BY STATING THAT THE SAME TO BE FAIR AND REASONABLE . THE UNDISPUTED FACT IS THAT THE ASSESSEE HAS ALREADY DECLARED 9.38% IN THE BOOKS OF ACCOUNT WHICH HAS BEEN NOTED BY THE AO IN THE ASSESSMENT ORDER HIMSELF AND THEREFORE, THE APPLICATION OF GP RATE AT 12.5% ON BOGUS PURCHASES OVER AND ABOVE THE PROFIT DECLARED BY THE ASSESSEE IN T HE RETURN OF INCOME IS NOT FAIR. W E ARE ,THEREFORE, OF THE VIEW THAT THE APPLICATION OF GP 12.5% ON THE BOGUS PURCHASES IS REASONABLE BUT 4 I.T.A. NO. 2349 /MUM/201 7 THE GP DECLARED BY THE ASSESSEE IN THE BOOKS OF ACCOUNT SHOULD BE REDUCED FROM THE SAID PERCENTAGE AND ONLY THE DIFFERENTIAL SHOULD BE APPLIED. IN OTHER WORDS THE RATE AS APPLIED BY THE AO I.E 12.50% MINUS ALREADY DECLA RED IN THE PROFIT AND LOSS ACCOUNT I.E 9.38 % WHICH COMES TO 3.12% SHOULD BE APPLIED. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD.CIT(A) AND DIRECT THE ASSESSING OFFICER TO APPLY GP RATE 3.12% ON THE BOGUS PURCHASES TO COVER THE VARIOUS TYPES OF SAVING S SUCH AS SAVING ON ACCOUNT OF VAT AND OTHER INCIDENTAL CHARGES. RESULTANTLY, THE APPEAL OF THE ASSESSEE STANDS PARTLY ALLOWED. 7 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 13TH JULY , 2017 . S D SD ( D.T.GARASIA ) ( RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : . 13. 7 .2017 SR.PS:SRL: / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F ILE / BY ORDER, T RUE COPY / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI