MR KETAN GOKULDAS BADIANI, Mumbai V. ITO 33(2)(2), Mumbai

ITA 2611/MUM/2019

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 4986 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-04-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: H
• Assessment Year: 2011-2012
• Appeal Filed On: 26-04-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Bogus purchase; Set aside
• Section: 142(1); 143(1); 250; 13; 145(3); 22; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI BEFORE SHRI M. BALAGANESH , AM AND SHRI AMARJIT SINGH, JM / I .T.A. NO. 2611 /MUM/20 1 9 ( / ASSESSMENT YEAR: 2011 - 12 ) MR. KETAN GOKULDAS BADIANI F - 221, RAJ ARCADE AHAVEER NAGAR D HANUKAR WADI KANDIWALI WEST, MUMBAI . / VS. ITO - 33(2)(2) 609, C - 12, PRATYAKSH KAR BHAVAN, BANDRA KURLA COMPLEX, BANDRA (E), MUMBAI - 400051. ./ ./ PAN/GIR NO. : AJAPB1472C ( / APPELLANT ) .. ( / RESPONDENT ) / DATE OF HEARING : 04 / 0 2 / 20 2 1 / DATE OF PRONOUNCEMENT : 07 /0 4 / 2021 / O R D E R PER AMARJIT SINGH, J M: THE ASSESSEE HAS FILED THE PRESENT APPEAL AGAINST THE ORDER DATED 21 .0 1 .201 9 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) - 45 , MUMBAI [HEREINAFTE R REFERRED TO AS THE CIT(A)] RELEVANT TO THE A.Y. 2011 - 12 . 2 . THE A SSESSEE HAS RAISED THE FOLLOWING GROUNDS: - 1. A) THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN LAW AND FACT SON RECORDS IN CONFIRMING AN ADDITION OF 15,61,217 BY ARBITRARILY ESTIMATING THE ADDITIONAL GROSS PROFIT @ 5% OF TURNOVER AS AGAIN ST 4.38% ALREADY OFFERED TO TAX BY THE APPELLANT. ASSESSEE BY : SHRI RAJENDRA THAKKAR (AR) REVENUE BY: SHRI GURBINDER SINGH (DR) ITA. NO. 2611 /M/201 9 A.Y. 2 0 11 - 12 2 B) THE APPELLANT SUBMIT THAT IT HAVE BEEN ENGAGED IN TRADING OF THE LEATHER ARTICLES, TRANSPORTED IN HAND CARTS, ITEMS OF PURCHASES ARE IDENTIFIABLE AGAINST THE SALES. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN LAW AND FACTS ON RECORDS IN HOLDING THE REOPENING OF THE ASSESSMENT AS VALID BASED ON INCORRECT FACT THAT NO OBJECTION WAS TAKEN BY THE APPELLANT AGAINST THE REOPENING OF THE ASSESSMENT, WHEREAS THE APPELLANT SUBMIT THAT THE ASSE SSMENT WAS MADE EX - PARTE WHILE SENDING THE NOTICE U/S 148 TO A PERSON NOT AUTHORIZED BY HIM AT THAT TIME. 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN LAW AND FACTS ON RECORDS IN COMPLETING THE ASSESSMENT ILLS 144, WHEREAS THE STATUTORY NOTICE U/S143(S) WAS NOT PROPERLY SERVED AND MANDATORY NOTICE U/S 142(1) WAS RECEIVED BY THE ASSESSE ON THE DATE WHICH HAPPENED TO BE DATE OF COMPLIANCE. 4. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN LAW AND FACTS ON RECORDS IN CONFIRMI NG AN ADDITION OF RS. 15,61,217 AS CALCULATED @ 5% OF THE PURCHASES OF RS. 3,12,24,345/ - MERELY FOLLOWING COROLLARY THAT THE APPELLANT COULD HAVE OBTAINED THE ACCOMMODATION BILLS LOCALLY TO SAVE VAT WITHOUT PUTTING ON RECORDS ANY MATERIAL EVIDENCE THAT THE APPELLANT HAVE OBTAINED THE BILLS FROM GREY MARKET, WHEREAS THE SUCH PURCHASES WERE DULY REFLECTED IN ANNEXURE J 1 OF FORM 704 BEING VAT AUDIT REPORT. THE APPELLANT PRAYS THAT THE APPEALS PRAYED FOR BE ADMITTED AND ALLOWED AND ADDITIONS CONFIRMED BY THE C IT (A) BE DELETED. ITA. NO. 2611 /M/201 9 A.Y. 2 0 11 - 12 3 THE APPELLANT CRAVES LEAVE TO ADD, TO ALTER OR TO AMEND ANY OF THE GROUNDS OF APPEAL AT OR BEFORE THE TIME OF HEARING. ' 3 . THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME ON 25.05.2011 DECLARING TOTAL I N COME TO THE TUNE OF RS.9,13,855 / - FOR THE A.Y.2011 - 12 . THE RETURN WAS PROCESSED U/S 143(1) OF THE ACT. THEREAFTER, THE ASSESSMENT OF THE ASSESSEE WAS REOPENED ON THE BASIS OF THE INFORMATION RECEIVED FROM THE DGIT(INV.), MUMBAI IN WHICH IT WAS CONVEYED THAT THE ASSESSEE HAS TAKEN THE BOGUS PURCHASE ENTRY IN SUM OF RS. 3,12,24,345/ - FROM THE FOLLOWING PARTIES.: - S. NO TIN NAME OF HAWALA PARTIES PAN F.Y AMT(RS. 1 27910671027V SEJAL ENTERPRISES ABMF1997F 2010 - 11 604631 2 27940256772V NISHA ENTERPRISES AWGPS3492N 2 010 - 11 1050141 3 27300350341V SHAKTI TRADING CO. AIOPGN8087B 2010 - 11 1365300 4 27190553859V IMPEX TRADING CO AMEPS9125N 2010 - 11 113535 5 27860582930V MILESTONE CORPORATION AFCPR4544M 2010 - 11 589500 6 27250554020V SHEETAL TRADING CO ABPPL5107M 2010 - 11 1 442813 7 27750595164V DEEP ENTERPRISES AMTPS9884P 2010 - 11 3328918 8 27470616755V SOMNATH INTERNATIONAL AISPG1601K 2010 - 11 31750 9 27580551753V SUN ENTERPRISES BFLPS5041C 2010 - 11 475875 10 27290663802V LIBERTY TRADING CORPORATION ANAPB3443P 2010 - 11 5287 50 11 27240608588V HARSH CORPORATION ADKPN3382R 2010 - 11 532543 12 27400628967V GLOBAL TRADE IMPEX AMRPB2286L 2010 - 11 581535 13 27060224373V CORAL TRADING CO APPMC3411V 2010 - 11 1057725 14 27360739569V VIRAJ TRADING CO AIFPM1 579F 2010 - 11 1090971 15 2771 0661730V MR CORPORATION BFLPS4883N 2010 - 11 1325813 16 27500560624V RK TRADERS BHWPS6408N 2010 - 11 1366155 ITA. NO. 2611 /M/201 9 A.Y. 2 0 11 - 12 4 17 27490615192V SHUBHLAXMI SALES CORP. AAVPS1333B 2010 - 11 247725 18 27540616280V NAVDEEP TRADING CORPN AAAPV4487A 2010 - 11 1113862 19 27650686108V A ARCO ENTERPRIES AQRPB8274G 2010 - 11 602438 20 27450723466V ABHILASHA SALES P. LTD. AAHCA8220G 2010 - 11 611852 21 27600666493V TORAL ENTERPRISES AAIPS3611F 2010 - 11 739028 22 27550632037V JAIN CORPORATION AAEPN7101P 2010 - 11 2461685 23 27790723085V ASHLEY T RADERS PVT LTD. AAHCA8221H 2010 - 11 604631 24 27860154093V SIDDHI ENTERPRISES AHUPK6877A 2010 - 11 1050141 25 27950092109V GHATALIA STEELS/DIVINE ENTERPRISES AALPG1552E 2010 - 11 1365300 26 27580726450V MERIDIAN TRADING CO. AZGPS2040D 2010 - 11 113535 27 2791 0742807V CHEHAR TRADING PVT. LTD. AADCC8422G 2010 - 11 589500 28 27980364002V PRATIK TRADING CO. AVBPS76574 2010 - 11 1442813 29 27140189603V ASHIT TRADERS AAIPD4282F 2010 - 11 3328918 30 27890612159V ASCENT ENTERPRISES AAEPB3795R 2010 - 11 321750 31 270607452 33V BALAJI IMPEX AMVPK3444R 2010 - 11 475875 32 27930794551V PLUTO MULTITRADE PVT. LTD. AAFCP5947B 2010 - 11 528750 33 27040801631V VIVA TRADING PVT. LTD. AADCV3609A 2010 - 11 532543 34 27750742983V ELEVEN IMPEX ADWPN1614N 2010 - 11 581535 4. THEREAFTER, THE NOTICE WAS GIVEN AND AFTER THE REPLY OF THE ASSESSEE, THE AO RAISED THE ADDITION IN SUM OF RS. 3,12,24,345/ - IN THE INCOME OF THE ASSESSEE AND ASSESSED THE INCOME IN SUM OF RS.3,22,53,200/ - . THEREAFTER, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A) WHO RES TRICTED THE ADDITION TO THE EXTENT OF 5% OF THE TOTAL BOGUS PURCHASE. THE ASSESSEE WAS NOT SATISFIED, THEREFORE, THE ASSESSEE HAS FILED THE PRESENT APPEAL BEFORE US. ISSUE NOS. 1 TO 4 ITA. NO. 2611 /M/201 9 A.Y. 2 0 11 - 12 5 4 . ALL THE ISSUES ARE IN CONNECTION WITH THE RESTRICTION THE ADDITION I N SUM OF RS.15,61,217/ - . THE LD. REPRESENTATIVE OF THE ASSESSEE HAS ARGUED THAT THE ASSESSEE HAS ALREADY OFFERED TO TAX IN SUM OF RS. 4.38 ON THE SAID PURCHASE, THEREFORE, RESTRICTED THE ADDITION TO THE EXTENT OF 5% COMES TO THE ADDITION OF 9.38% WHICH IS N OT JUSTIFIABLE, THEREFORE, THE ADDITION IS NOT LIABLE TO BE SUSTAIN ABLE IN ACCORDANCE WITH LAW. HOWEVER, ON THE OTHER HAND, THE LD. REPRESENTATIVE OF THE REVENUE HAS STRONGLY RELIED UPON THE ORDER PASSED BY THE CIT(A) IN QUESTION. BEFORE GOING FURTHER, WE DEEM IT NECESSARY TO ADVERT THE FINDING OF THE CIT(A) ON RECORD.: - 5.3 I HAVE CONSIDERED THE ASSESSMENT ORDER, THE REMAND REPORT AND THE SUBMISSIONS OF THE APPELLANT INCLUDING THE CASE LAWS CITED. THE AO HELD IN THE REMAND REPORT THAT THE APPELLANT PRODUC ED IT RETURNS, BALANCE SHEET, P&L ACCOUNT WITH TAC AUDIT REPORT, RECEIPTS ISSUED BY THE SALES TAX DEPARTMENT FOR IMPOUNDING THE BOOKS, STOCK REGISTER SHOWING THE ITEM WISE PURCHASES AND SALES, THE DETAILS WITH REGARD TO PURCHASES MADE FROM THE PARTIES, LED GER ACCOUNTS AND COPIES OF BANK STATEMENT IN UNION BANK OF INDIA LNDUSLND BANK INDICATING THE PAYMENT MADE TO THE SELLER PARTIES. IT IS NOTICED THAT THE AO GAVE NO ADVERSE FINDING WITH REGARD TO THE SALES EFFECTED BY THE ASSESSEE. WITHOUT PURCHASES BEING M ADE, THE SALES CANNOT BE MADE REGARDING WHICH NO DOUBT IS RAISED. IN THE CIRCUMSTANCES, IT APPEARS THAT THE ASSESSEE MAY HAVE PURCHASED THE GODS IN GREY MARKET AT A LOWER RATE AND OBTAINED BILLS FOR ACCOMMODATING THE PURCHASES MADE. IT IS ALSO SEEN THAT TH E AO HAS EJECTED THE BOOKS OF ACCOUNTS U/S 145(3) OF THE ACT. IF THE BOOKS RESULTS ARE NOT GIVING PROPER RESULTS THE AO HAS TO ESTIMATE THE PROFIT AT A REASONABLE PERCENTAGE, HE CANNOT MAKE ADDITION OF ALL PURCHASES AS THE INCOME. NO BUSINESS GIVES ALL PUR CHASES AS PROFITS PARTICULARLY THE ITA. NO. 2611 /M/201 9 A.Y. 2 0 11 - 12 6 TRADING MARGINS ARE LOW IN A COMPETITIVE MARKET. IT IS SEEN THAT MANY BENCHES OF ITAT AND HON'BLE HIGH COURTS HAVE HELD THAT WHEN PURCHASES ARE SUPPORTED BY SUFFICIENT DOCUMENTARY EVIDENCES, THEN MERELY BECAUSE OF NONAPPE ARANCE BEFORE THE AO, ONE CANNOT CONCLUDE THAT THE PURCHASES WERE NOT MADE BY THE ASSESSEE. IN THE CASE OF NANGALIA FABRICS 40 TAXMANN.COM 206, GUJARAT HIGH COURT HAS HELD THAT WHERE PURCHASES WERE SUPPORTED BY THE BILLS, ENTRIES WERE MADE IN THE BOOKS OF ACCOUNTS AND PAYMENT WAS MADE BY CHEQUE, THE SAID PURCHASES COULD NOT BE HELD AS BOGUS. THERE ARE MANY DECISIONS WHEREIN THE ITAT, MUMBAI, HAS UPHELD ADDITION OF A CERTAIN PERCENTAGE OF ALLEGED BOGUS PURCHASES UNDER SIMILAR FACTS. 5.4 FURTHER, THIS IS ALSO NOT CASE IN WHICH THE SIGNED BLANK CHEQUE BOOKS ARE FOUND WITH THE BUYER TO HOLD THAT THE PURCHASES OF MATERIAL WERE NOT AT ALL MADE BUT ENTERED IN THE STOCK TO INFLATE THE RAW MATERIAL. THEREFORE, THE DECISION OF THE SUPREME COURT IN THE CASE OF N K PROT EINS LTD 250 TAXMAN 22(SC) WOULD NOT APPLY TO THE CASE. THEREFORE, THE SAVING ON ACCOUNT OF VAT AND OTHER INCIDENTAL CHARGES MADE BY THE APPELLANT ON THE SAID PURCHASE BILLS OBTAINED CAN BE BROUGHT TO TAX AS ADDITIONAL PROFIT. THE ASSESSEE FILED A COPY OF THE APPEAL ORDER FOR AY 2009 - 10 AND SUBMITTED THAT THE SAME PROFIT MAY BE ADOPTED FOR THIS YEAR ALSO. KEEPING IN VIEW THE TOTALITY OF FACTS AND CIRCUMSTANCES OF THE CASE, THE ADDITION IS RESTRICTED TO 5% OF BOGUS PURCHASES. ACCORDINGLY, THE ADDITION TO THE EXTENT OF 5% OF BOGUS PURCHASES OF RS.3,12,24,345, WHICH COMES TO RS.15,61,217 IS SUSTAINED. THE AO IS DIRECTED TO MODIFY THE ADDITION ACCORDINGLY. THE APPELLANT GETS PART RELIEF. THIS GROUND IS PARTLY ALLOWED. 5. ON APPRAISAL OF THE ABOVE SAID ORDER, WE FIND THAT THE CIT(A) HAS RESTRICTED THE ADDITION ON THE BASIS OF THE DECISION OF THE EARLIER YEAR FOR THE ITA. NO. 2611 /M/201 9 A.Y. 2 0 11 - 12 7 A.Y.2009 - 10 IN WHICH THE ADDITION WAS RESTRICTED TO THE EXTENT OF 5% OF THE BOGUS PURCHASE. IN THE INSTANT CASE, THE ASSESSEE HAS ALREADY DECLARED 4. 38% PROFIT ON THE PURCHASE . THE TOTAL ADDITION COMES TO THE EXTENT OF 9.38% WHICH SEEMS HIGH. SINCE THE ADDITION HAS BEEN RESTRICTED TO THE EXTENT OF 3% OF THE BOGUS PURCHASE , THEREFORE, THE EARLIER PROFIT TO THE EXTENT OF 4.38% IS LIABLE TO BE SET OFF. AC CORDINGLY, WE SET ASIDE THE FINDING OF THE CIT(A) ON THE ISSUE AND RESTRICT THE ADDITION TO THE EXTENT OF 5% OF THE BOGUS PURCHASE ONLY WHICH INCLUDES 4.38% PROFIT UPON THE BOGUS PURCHASE DECLARED BY THE ASSESSEE. ACCORDINGLY, WE RESTRICTED THE ADDITION TO THE EXTENT OF 5% OF THE TOTAL BOGUS PURCHASE AND DECIDE THESE ISSUES IN FAVOUR OF THE ASSESSEE AGAINST THE REVENUE. 6 . IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS HEREBY PARTLY ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 07 /0 4 /202 1 SD/ - SD/ - ( M. BALAGANESH ) (AMARJIT SINGH) / ACCOUNTANT MEMBER /JUDICIAL MEMBER MUMBAI; DATE D : 07 /0 4 /2021 V IJAY PAL SING H ( SR. PS ) ITA. NO. 2611 /M/201 9 A.Y. 2 0 11 - 12 8 / COPY OF THE ORDER FORWARDED TO : 1. / THE A PPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. / BY ORDER, //TRUE COPY// / /(DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI