PRADEEP N. SHAH, MUMBAI V. INCOME TAX OFFICER WARD 19(2), MUMBAI

ITA 2362/MUM/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 4877 (ITAT-MUMBAI)
• Duration Of Justice: 9 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-02-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 17-04-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S K MITRA
• Keywords: Tangible material; Reason to believe
• Section: 143(3); 133(6); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY , JUDICIAL MEMBER ITA NO. 2362 / MUM . /2018 ( ASSESSMENT YEAR : 20 09 10 ) PRADEEP N. SHAH ROOM NO.216, 2 ND FLOOR 3 RD PANJRAPOLE LANE C.P. TANK, MUMBAI 400 004 PAN AWUPS7526D . APPELLANT V/S INCOME TAX OFFICER WARD 19(2), MUMBAI . RESPONDENT ASSESSEE BY : MS. POOJA JAIN REVENUE BY : SHRI S.K. MITRA DATE OF HEARING 10 . 1 2 .201 8 DATE OF ORDER 08.02.2019 O R D E R A FORESAID APPEAL HA S BEEN FILED BY THE ASSESSEE CHALLENGING THE ORDER DATED 2 ND JANUARY 2018 , PASSED BY THE LEARNED COMMISSIONER (APPEALS) 3 0 , MUMBAI , FOR THE ASSESSMENT YEAR 20 0 9 10 . 2 . BRIEF FACTS ARE, THE ASSESSEE IS AN INDIVIDUAL. AS STATED BY THE ASSESSING OFFICER, THE ASSESSEE IS ENGAGED IN THE BUSINESS OF TRADING IN FERROUS AND NON FERROUS METAL S . FOR THE ASSESSMENT YEAR UNDER DISPUTE, THE ASSESSEE FILED HIS RETURN OF INCOME ON 30 TH JULY 2009, 2 PRADEEP N. SHAH DECLARING INCOME OF ` 4,29,730. ASSESSMENT IN CASE OF THE ASSESSEE WAS COMPLETED UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT ) VIDE ORDER DATED 8 TH DECEMBER 2011 DETERMINING TOTAL INCOME OF ` 4,44,850,. SUBSEQUENTLY, ON THE BASIS OF INFORMATION RECEIVE D FROM THE DGIT (INV.), MUMBAI, AS WELL AS THE SALES TAX DEPARTMENT REVEALING THAT PURCHASES WORTH ` 87,57,824, CLAIMED TO HAVE BEEN EFFECTED IN THE RELEVANT PREVIOUS YEAR FROM 15 PARTIES ARE NOT GENUINE, THE ASSESSING OFFICER RE OPENED THE ASSESSMENT UNDE R SECTION 147 OF THE ACT. IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER CALLE D U P O N THE ASSESSEE TO PROVE THE GENUINENESS OF THE AFORESAID PURCHASES BY FURNISHING PROPER DOCUMENTARY EVIDENCES. AS OBSERVED BY THE ASSESSING OFFICER, THE ASSE SSEE COULD ONLY FURNISH THE PURCHASE INVOICES AND PAYMENT DETAILS ALONG WITH STOCK STATEMENT. HOWEVER, THE ASSESSEE COULD NOT FURNISH ANY EVIDENCE TO DEMONSTRATE PHYSICAL DELIVERY OF GOODS AT HIS BUSINESS PREMISES. FURTHER, THE ASSESSEE COULD NOT PRODUCE A NY OF THE SUPPLIERS TO PROVE THE GENUINENESS OF PURCHASES. THUS, ULTIMATELY, THE ASSESSING OFFICER CONCLUDED THAT THE PURCHASES CLAIMED TO HAVE BE EN MADE BY THE ASSESSEE AMOUNTING TO ` 87,57,824 ARE NON GENUINE. ACCORDI N GLY, HE REJECTED THE BOOKS OF ACCOUN T OF THE ASSESSEE UNDER SECTION 145(3) OF THE ACT. HOWEVER, SINCE THE ASSESSEE FURNISHED THE STOCK STATEMENT AND QUANTITATIVE TALLY, THE ASSESSING OFFICER WAS OF THE VIEW THAT THE 3 PRADEEP N. SHAH ASSESSEE MUST HAVE PURCHASED THE GOODS FROM GREY MARKET. ACCORDINGLY , HE PRO CEEDED TO ESTIMATE THE PROFIT @ 12.5% OF NON GENUINE PURCHASES OF ` 87,57,824, WHICH WORKED OUT TO ` 10,94,728. BEING AGGRIEVED WITH THE AFORESAID ADDITION, THE ASSESSEE PREFERRED APPEAL BEFORE THE FIRST APPELLATE AUTHORITY BY CHALLENGING BOTH THE VALIDITY OF RE OPENING OF ASSESSMENT UNDER SECTION 147 OF THE ACT AS WELL AS THE MERITS OF THE ADDITION MADE @ 12.5% OF THE NON GENUINE PURCHASES. 3 . THE LEARNED COMMISSIONER (APPEALS) AFTER CONSIDERING THE SUBMISSION S OF THE ASSESSEE IN THE CONTE XT OF FACTS AND MATERIAL ON RECORD HELD THE RE OPENING OF ASSESSMENT UNDER SECTION 147 OF THE ACT TO BE VALID. HE ALSO AGREED WITH THE ASSESSING OFFICER THAT THE ASSESSEE HAS FAILED TO PROVE THE GENUINENESS OF PURCHASES OF ` 87,57,824. ACCORDINGLY, HE UPHE LD THE REJECTION OF BOOKS OF ACCOUNT. HOWEVER, HE REDUCED THE ESTIMATION OF PROFIT ON NON GENUINE PURCHASES FROM 12.5% TO 6.5%. 4 . REITERATING THE STAND TAKEN BEFORE THE LEARNED COMMISSIONER (APPEALS), THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED , IN COU RSE OF THE ORIGINAL ASSESSMENT PROCEE DINGS, THE ASSESSING OFFICER HAS VERIFIED ALL THE PURCHASES EFFECTED BY THE ASSESSEE AND BEING SATISFIED WITH THE GENUINENESS OF SUCH PURCHASES HE COMPLETED THE ASSESSMENT 4 PRADEEP N. SHAH UNDER SECTION 143(3) OF THE ACT. THUS, S HE SUBM ITTED , MERELY RELYING UPON THE INFORMATION RECEIVED FROM EXTERNAL SOURCES, ASSESSMENT COULD NOT HAVE BEEN RE OPEN ED UNDER SECTION 147 OF THE ACT. THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED , AFTER RECEIVING THE NOTICE UNDER SECTION 148 OF THE ACT THE A SSESSEE HAD RAISED OBJECTIO NS BEFORE THE ASSESSING OFFICER. HOWEVER , WITHOUT DISPOSING OFF THE OBJECTIONS OF THE ASSESSEE, THE ASSESSING OFFICER HAS PASSED THE ASSESSMENT ORDER. THUS, S HE SUBMITTED , RE OPENING OF ASSESSMENT UNDER SECTION 147 OF THE ACT IS INVALID. FOR SUCH PROPOSITION, SHE RELIED UPON A NUMBER OF DECISIONS AS SUBMITTED IN THE PAPER BOOK. AS REGARD S THE MERITS OF THE ADDITION MADE ON ACCOUNT OF NON GENUINE PURCHASES, THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED , IN COURSE OF ORIGINAL AS W ELL AS RE ASSESSMENT PROCEEDINGS THE ASSESSEE HAS SUBMITTED ALL DOCUMENTARY EVIDENCES TO PROVE THE GENUINENESS OF PURCHASES. THEREFORE, MERELY BECAUSE, THE PARTIES DID NOT RESPOND TO THE NOTICES ISSUED UNDER SECTION 133(6) OF THE ACT , THE ADDITION CANNOT B E MADE ON ESTIMATE BASIS. 5 . THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED, AFTER COMPLETION OF ORIGINAL ASSESSMENT, FRESH MATERIAL / INFORMATION CAME TO THE POSSESSION OF THE ASSESSING OFFICER WHICH REVEALED ESCAPEMENT OF INCOME ON ACCOUNT OF NON GENUIN E PURCHASES. THEREFORE, ON THE BA SIS OF SUCH INFORMATION THE ASSESSING OFFICER HAS FORMED A PRIMA 5 PRADEEP N. SHAH FACIE BELIEF THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. ACCORDINGLY, HE INITIATED ACTION UNDER SECTION 147 OF THE ACT. THEREFORE, IT CANNOT BE SAID THAT THERE IS NO REASON TO BELIEVE FOR THE ASSESSING OFFICER TO RE OPEN THE ASSESSMENT. HE SUBMITTED , THE ASSESSING OFFICER HAS ALSO DISPOSED OFF THE OBJECTION S OF THE ASSESSEE INDEPENDENTLY BEFORE COMPLETION OF ASSESSMENT. THEREFORE, THE ASSESSMENT ORDER PASSED UNDER SECTION 143(3) R/W 147 OF THE ACT CANNOT BE SAID TO BE INVALID. AS REGARDS THE MERITS OF THE ADDITION SUSTAINED BY THE LEARNED COMMISSIONER (APPEALS) , LEARNED DEPARTMENTAL REPRESENTATIVE RELIED UPON THE OBSERVATIONS OF THE FIRST APPELLATE AUT HORITY. 6 . I HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED MATERIAL ON RECORD. I HAVE ALSO THOROUGHLY EXAMINED THE DECISIONS RELIED UPON BY THE LEARNED AUTHORISED REPRESENTATIVE. INSOFAR AS THE ISSUE RELATING TO VALIDITY OF RE OPENING OF ASSESSMENT UNDER SECTION 147 OF THE ACT IS CONCERNED, UNDISPUTEDLY, IN CASE OF THE ASSESSEE ASSESSMENT FOR THE IMPUGNED ASSESSMENT YEAR WAS ORIGINALLY COMPLETED UNDER SECTION 143(3) OF THE ACT VIDE ORDER DATED 8 TH DECEMBER 2011. AFTER COMPLETION OF THE ORIGINAL ASSESSMENT, THE ASSESSING OFFICER RECEIVED LETTER DATED 26 TH DECEMBER 2013, FROM THE DGIT (INV.), MUMBAI, STATING THAT AS PER THE INFORMATION RECEIVED FROM THE SALES TAX DEPARTMENT, PURCHASES WORTH ` 87,57,824 CLAIMED TO HAVE BEEN MADE 6 PRADEEP N. SHAH FROM 15 PARTIES ARE NOT GENUINE. THUS, AFTER COMPLETION OF THE ORIGINAL ASSESSMENT, THE ASSESSING OFFICER HAD TANGIBLE MATERIAL IN HIS POSSESSION IN THE FORM OF THE INFORMATION RECEIVED FROM DGIT (INV.), MUMBAI AND THE SALES TAX DEPARTMENT REVEALING THAT CERTAIN PURCHASES MADE BY THE ASSESSEE WERE NON GENUINE. THUS, THE AFORESAID INFORMATION / MATERIAL IN POSSESSION OF THE ASSESSING OFFICER WERE ENOUGH TO FORM A PRIMA FACIE BELIEF THAT INCOME HAS ESCAPED ASSESSME NT. FURTHER, THE CONTENTION OF THE LEARNED AUTHORISED REPRESENTATIVE THAT EACH ONE OF THE PURCHASES WAS VERIFIED BY THE ASSESSING OFFICER IS NOT BORNE OUT FROM THE FACTS ON RECORD. NEITHER THE ORIGINAL ASSESSMENT ORDER NOR ANY OTHER MATERIAL PLACED ON RECO RD ESTABLISH THAT IN COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER HAS VERIFIED AND EXAMINED THE PURCHASES CLAIMED TO HAVE BEEN MADE FROM THE AFORESAID PARTIES BY MAKING INDEPENDENT ENQUIRY. THAT BEING THE CASE, THE VALIDITY OF RE OPENING OF ASSESSMENT UNDER SECTION 147 OF THE ACT CANNOT BE ASSAILED . AS REGARDS THE CONTENTION OF THE LEARNED AUTHORISED REPRESENTATIVE THAT THE ASSESSING OFFICER HAS NOT DEALT WITH THE OBJECTION OF THE ASSESSEE BEFORE COMPLETION OF ASSESSMENT , I AM NOT CONVINC ED WITH THE SAME. AS COULD BE SEEN FROM THE LETTER DATED 6 TH JANUARY 2015 OF THE ASSESSING OFFICER ADDRESSED TO THE ASSESSEE, A COPY OF WHICH IS AT PAGE 54 OF THE PAPER BOOK, HE HAS SEPARATELY AND INDEPENDENTLY DISPOSED OFF THE OBJECTION 7 PRADEEP N. SHAH OF THE ASSESSEE PR IOR TO THE COMPLETION OF ASSESSMENT UNDER SECTION 143(3) R/W SECTION 147 OF THE ACT. THOUGH, THERE CANNOT BE ANY QUARREL WITH REGARD TO THE PROPOSITION LAID DOWN IN THE DECISIONS CITED BY THE LEARNED AUTHORISED REPRESENTATIVE, HOWEVER, THE PRINCIPLE LAID D OWN THEREIN WOULD NOT APPLY TO THE FACTS OF THE PRESENT APPEAL. HENCE, I REFRAIN FROM DEALING IN DETAIL THE RATIO LAID DOWN IN THESE DECISIONS. IN VIEW OF THE AFORESAID, I DO NOT FIND ANY VALID REASON TO QUASH THE ASSESSMENT ORDER PASSED UNDER SECTION 143(3) R/W 147 OF THE ACT. 7 . THE NEXT ISSUE WHICH ARISES FOR CONSIDERATIO N IS THE MERITS OF THE ADDITION MADE ON ACCOUNT OF NON GENUINE PURCHASES. 8 . AS COULD BE SEEN FROM THE FACTS ON RECORD, IN THE COURSE OF THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER HAS CALLED UPON THE ASSESSEE TO PROVE THE GENUINENESS OF PURCHASES THROUGH PROPER DOCUMENTARY EVIDENCES. HOWEVER, EXCEPT FURNISHING THE PURCHASE BILLS, PAYMENT DETAILS, STOCK STATEMENT, QUANTITATIVE DETAILS OF PURCHASES AND SALES, THE ASSESSEE COULD NOT F URNISH DELIVERY CHALLAN S AND TRANSPORTATION BILLS TO PROVE ACTUAL / PHYSICAL DELIVERY OF GOODS. IT IS EVIDENT , IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER TO ASCERTAIN THE GENUINE NE SS OF PURCHASES HAD CONDUCTED INDEPENDENT ENQUIRY BY ISS UING NOTICES UNDER SECTION 133(6) OF THE ACT 8 PRADEEP N. SHAH TO THE SELLING PARTIES. HOWEVER, ALL SUCH NOTICES RETURNED BACK UN SERVED BY THE POSTAL AUTHORITY. WHEN THE ASSESSING OFFICER CALLED UPON THE ASSESSEE TO PRODUCE THE CONCERNED PARTIES, HE ALSO FAILED TO DO SO. E VEN , THE ASSESSEE WAS UNABLE TO FURNISH ANY CONFIRMATION FROM THE CONCERNED PARTIES. IN THESE CIRCUMSTANCES, ASSESSEES CLAIM THAT PURCHASES ARE GENUINE CANNOT BE ACCEPTED. AS REGARDS THE DECISION OF THE LEARNED COMMISSIONER (APPEALS) TO ESTIMATE THE PROFI T @ 6.5% OF THE NON GENUINENESS PURCHASES, IN MY CONSIDERED OPINION, LOOKING AT THE NATURE OF BUSINESS CARRIED ON BY THE ASSESSEE AND THE APPLICABLE VAT RATE WHICH THE ASSESSEE MIGHT HAVE AVOIDED PAYING , ESTIMATION OF PROFIT @ 4% ON THE NON GENUINE PURCHAS ES WOULD BE REASONABLE. ACCORDINGLY, I DIRECT THE ASSESSING OFFICER TO RESTRICT THE ADDITION TO 4% OF THE NON GENUINE PURCHASES. GROUND NO.1 IS DISMISSED AND GROUND NO.2, IS PARTLY ALLOWED. 9 . IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 08.02 . 2019 SD/ SAKTIJIT DEY JUDICIAL MEMBER MUMBAI, DATED: 08.02.2019 9 PRADEEP N. SHAH 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