KISHORKUMAR MOHANLAL VYAS HUF, MUMBAI V. INCOME TAX OFFICER-29(2)(1), MUMBAI

ITA 2683/MUM/2019

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 1407 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-07-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 30-04-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SMITA VERMA
• Keywords: Reopening of assessment; Difference of opinion; Corroborative evidences; Change of opinion
• Section: 143(3); 133(6); 143(1); 145(3); 147; 148

Judgement Text

1 KISHORKUMAR M VYAS IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY (JUDICIAL MEMBER) I.T.A. NO.2683/MUM/2019 - ASSESSMENT YEAR 2009-10 I.T.A. NO.2685/MUM/2019 - ASSESSMENT YEAR 2010-11 KISHORKUMAR M VYAS, HUF 1/13, FLY MY SADAN, GAMDEVI ROAD BHANDUP (W), MUMBAI-400 078 PAN : AACHK3179C VS ITO - 29(2)(1), MUMBAI APPELLANT RESPONDENT I.T.A. NO.2684/MUM/2019 - ASSESSMENT YEAR 2009-10 I.T.A. NO.2686/MUM/2019 - ASSESSMENT YEAR 2010-11 KISHORKUMAR M VYAS, 1/13, FLY MY SADAN, GAMDEVI ROAD BHANDUP (W), MUMBAI-400 078 PAN : AAAPV8029L VS ITO - 29(2)(1), MUMBAI APPELLANT RESPONDENT APPELLANT BY SHRI C.V. JAIN, AR RESPONDENT BY S MT. SMITA VERMA DATE OF HEARING 14 - 0 6 - 2021 DATE OF PRONOUNCEMENT 0 6 - 0 7 - 2021 O R D E R CAPTIONED APPEALS BY TWO DIFFERENT ASSESSEES ARE A GAINST SEPARATE ORDERS OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-40, MUMBAI FOR THE ASSESSMENT YEARS 2009-10 AND 201011. SINCE, THESE APPEALS AR E CONNECTED MATTERS BEING OF 2 KISHORKUMAR M VYAS THE INDIVIDUAL AND HUF AND HAVING COMMON ISSUES, TH EY ARE CLUBBED TOGETHER AND TAKEN UP FOR DISPOSAL IN THIS CONSOLIDATED ORDER, F OR THE SAKE OF CONVENIENCE. 2. THE GROUNDS RAISED IN THESE APPEALS ARE MORE OR LESS IDENTICAL. IN GROUNDS 1 AND 2 ASSESSEE HAS CHALLENGED THE VALIDITY OF REOPE NING OF ASSESSMENT UNDER SECTION 147 OF THE INCOME TAX ACT, 1961. WHEREAS, I N GROUNDS 3 AND 4, ASSESSEES HAVE CHALLENGED THE MERITS OF THE DISALLOWANCE MADE BECAUSE OF ALLEGED NON GENUINE PURCHASES. 3. BRIEFLY THE FACTS ARE, BOTH THE ASSESSEES ARE ST ATED TO BE TRADING IN IRON & STEEL AS WELL AS ALLIED PRODUCTS. IT IS STATED, THE ASSESSEES PURCHASE THE GOODS FROM LOCAL WHOLESALERS OR ON GOVERNMENT AUCTION AND RESA LE THEM TO RETAILERS OR SOME WHOLESALERS IN THE LOCAL MARKET. FOR THE IMPUGNED A SSESSMENT YEARS, THE ASSESSEES FILED THEIR RETURNS OF INCOME IN REGULAR COURSE. IN ASSESSMENT YEAR 2009- 10 ASSESSMENTS WERE ORIGINALLY COMPLETED UNDER SECT ION 143(3) OF THE ACT. WHEREAS, IN ASSESSMENT YEAR 2010-11, THE RETURNS FI LED WERE PROCESSED UNDER SECTION 143(1) OF THE ACT. SUBSEQUENTLY, THE ASSESS ING OFFICER RECEIVED INFORMATION FROM THE SALES-TAX DEPARTMENT THROUGH THE INVESTIGA TION WING INDICATING THAT THE ASSESSEES ARE BENEFICIARIES OF ACCOMMODATION ENTRIE S BY WAY OF NON GENUINE PURCHASE BILLS ISSUED BY CERTAIN ENTITIES IDENTIFIE D AS HAWALA OPERATORS. BASED ON SUCH INFORMATION, THE ASSESSING OFFICER REOPENED TH E ASSESSMENTS FOR THE IMPUGNED ASSESSMENT YEARS. IN COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER CALLED UPON THE ASSESSEES TO PROVE THE GENU INENESS OF PURCHASES THROUGH SUPPORTING EVIDENCE. THOUGH, THE ASSESSEES FURNISHE D SOME EVIDENCE TO SUPPORT THE CLAIM THAT PURCHASES ARE GENUINE; HOWEVER, THE ASSESSING OFFICER WAS NOT CONVINCED. HE OBSERVED THAT THE ASSESSEES COULD NOT FURNISH ANY EVIDENCE TO PROVE THAT GOODS WERE PURCHASED FROM THE CONCERNED PARTIES. FURTHER, HE 3 KISHORKUMAR M VYAS OBSERVED, NOTICES ISSUED UNDER SECTION 133(6) OF TH E ACT TO THE CONCERNED PARTIES SEEKING INFORMATION REGARDING THE TRANSACTION WITH THE ASSESSEE DID NOT YIELD ANY RESULT. THUS, HE CONCLUDED THAT THE PURCHASES ARE N ON GENUINE. ACCORDINGLY, HE REJECTED THE BOOKS OF ACCOUNT OF THE ASSESSEE UNDER SECTION 145(3) OF THE ACT. HOWEVER, CONSIDERING THE FACT THAT THE ASSESSEES HA VE FURNISHED QUANTITATIVE TALLY OF PURCHASES AND SALES, THE ASSESSING OFFICER CONCL UDED THAT THEY MUST HAVE PURCHASED THE GOODS FROM UNVERIFIED SOURCES AND IN THE PROCESS HAVE SUPPRESSED TRUE PROFIT. THUS, INSTEAD OF DISALLOWING THE ENTIR E PURCHASES, THE ASSESSING OFFICER DISALLOWED 12.5%, BEING THE PROFIT ELEMENT EMBEDDED IN THE ALLEGED NON GENUINE PURCHASES IN RESPECT OF BOTH THE ASSESSEES FOR THE ASSESSMENT YEARS UNDER DISPUTE. THE ASSESSEES CONTESTED THE AFORESAID DISA LLOWANCES BEFORE LEARNED COMMISSIONER (APPEALS). AFTER CONSIDERING THE SUBMI SSIONS OF THE ASSESSEES, LEARNED COMMISSIONER (APPEALS) DID NOT ENTERTAIN TH E GROUNDS RAISED BY THE ASSESSEE CHALLENGING THE VALIDITY OF REOPENING OF A SSESSMENT. AS REGARDS THE MERITS OF THE DISALLOWANCE MADE, LEARNED COMMISSION ER (APPEALS) GRANTED PARTIAL RELIEF TO THE ASSESSEES BY DIRECTING THE ASSESSING OFFICER TO WORK OUT THE ADDITIONS AFTER REDUCING THE GROSS PROFIT/NET PROFIT ALREADY SHOWN BY THE ASSESSEE AGAINST THE PROPOSED ADDITION OF 12.5% OF THE ALLEGED NONG ENUINE PURCHASES. 4. THE LEARNED AUTHORIZED REPRESENTATIVE OF THE ASS ESSEE SUBMITTED, INSOFAR AS ASSESSMENT YEAR 2009-10 IS CONCERNED, THE ASSESSING OFFICER HAD INITIALLY COMPLETED ASSESSMENTS UNDER SECTION 143(3) OF THE A CT AFTER CONDUCTING PROPER ENQUIRY ON ALL ASPECTS INCLUDING THE PURCHASES MADE BY THE ASSESSEES. HE SUBMITTED, IN COURSE OF ORIGINAL ASSESSMENT PROCEED INGS, THE ASSESSEES HAVE ALSO FURNISHED ALL THE DETAILS CALLED FOR RELATING TO TH E PURCHASES INCLUDING CONFIRMATIONS FROM SOME OF THE PARTIES. THUS, HE SU BMITTED, ONCE THE PURCHASES 4 KISHORKUMAR M VYAS WERE VERIFIED AND ACCEPTED IN THE ORIGINAL ASSESSME NT PROCEEDINGS, THE REOPENING OF ASSESSMENT DOUBTING THE PURCHASES IS INVALID AS IT IS MERELY ON A CHANGE OF OPINION WITHOUT PROPER APPLICATION OF MIND. IN SUPP ORT OF SUCH CONTENTION, LEARNED COUNSEL RELIED UPON VARIOUS DECISIONS AS RE FERRED TO IN THE WRITTEN SUBMISSIONS AND SPECIFICALLY RELIED UPON A DECISION OF THE ITAT, MUMBAI BENCH IN THE CASE OF RITESH KANTILAL BAFNA VS ITO ITA 2327/M UM/2017 DATED 19-08-2019. THUS, HE SUBMITTED, THE REOPENING OF ASSESSMENT BEI NG INVALID, THE ASSESSMENT ORDERS SHOULD BE QUASHED. 5. AS REGARDS THE MERITS OF THE ISSUE, LEARNED AUTH ORIZED REPRESENTATIVE SUBMITTED, THE ASSESSEES ARE DEALERS IN IRON AND ST EEL (FERROUS ITEMS), WHEREIN, PROFIT MARGIN IS VERY LESS. THUS, HE SUBMITTED, IF AT ALL ANY DISALLOWANCE HAS TO BE MADE, LET IT BE RESTRICTED TO 2% ON THE ALLEGED NON GENUINE PURCHASES. 6. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTE D, AFTER COMPLETION OF ORIGINAL ASSESSMENT IN ASSESSMENT YEAR 2009-10, THE ASSESSING OFFICER RECEIVED SPECIFIC INFORMATION FROM THE INVESTIGATION WING IN DICATING THAT CERTAIN PURCHASES MADE BY THE ASSESSEE ARE NON GENUINE. THUS, BASED O N SUCH FRESH AND TANGIBLE INFORMATION AND MATERIAL AVAILABLE ON RECORD, THE A SSESSING OFFICER HAS REOPENED THE ASSESSMENTS UNDER SECTION 147 OF THE ACT. HE S UBMITTED, IN ASSESSMENT YEAR 2010-11, THE RETURNS OF INCOME FILED BY THE ASSESSE ES WERE SIMPLY PROCESSED UNDER SECTION 143(1) AND NO SCRUTINY HAS TAKEN PLAC E. THEREFORE, WHEN NO OPINION WAS FORMED, THERE CANNOT BE ANY CHANGE OF OPINION. THEREFORE, SHE SUBMITTED, THERE CANNOT BE ANY ISSUE REGARDING THE VALIDITY OF REOPENING OF ASSESSMENTS UNDER SECTION 147 OF THE ACT. 5 KISHORKUMAR M VYAS 7. AS REGARDS THE MERITS OF THE ISSUE, SHE SUBMITTE D, BOTH THE ASSESSING OFFICER AND LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) AR E FAIRLY REASONABLE IN RESTRICTING THE DISALLOWANCE TO THE PROFIT ELEMENT ONLY. 8. I HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED MATERIALS ON RECORD. NO DOUBT, IN ASSESSMENT YEAR 2009-10, ASSESSMENTS IN C ASE OF BOTH THE ASSESSEES WERE INITIALLY COMPLETED UNDER SECTION 143(3) OF TH E ACT. HOWEVER, IT IS OBSERVED, AFTER RECEIVING THE NOTICES ISSUED UNDER SECTION 14 8 OF THE ACT, THE ASSESSEES HAD RAISED OBJECTION AGAINST REOPENING OF ASSESSMENT. I T IS EVIDENT, THE ASSESSING OFFICER HAS DEALT WITH THE OBJECTIONS OF THE ASSESS EE IN SEPARATE ORDERS. THUS, THE ASSESSING OFFICER HAS ACTED IN CONFORMITY WITH THE LEGAL PRINCIPLES BEFORE PROCEEDING TO RE-ASSESS THE INCOME OF THE ASSESSEES . IT IS FURTHER NOTICED FROM THE MATERIAL ON RECORD THAT THE ASSESSING OFFICER HAS O NLY MADE ROUTINE ENQUIRY IN COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS. HE HAS N OT MADE SPECIFIC ENQUIRY IN RESPECT OF THE PURCHASES. IT IS ALSO A FACT ON RECO RD, AFTER COMPLETION OF ORIGINAL ASSESSMENTS FOR ASSESSMENT YEAR 2009-10, THE ASSESS ING OFFICER RECEIVED INFORMATION FROM THE INVESTIGATION WING OF THE DEPA RTMENT INDICATING THAT CERTAIN PURCHASES CLAIMED TO HAVE BEEN MADE BY THE ASSESSEE ARE NON GENUINE AS THE CONCERNED SELLING DEALERS HAVE INDULGED IN PROVIDIN G ACCOMMODATION BILLS. THUS, IT IS EVIDENT, THE ASSESSING OFFICER HAD TANGIBLE MATE RIAL AVAILABLE WITH HIM TO FORM A BELIEF THAT INCOME CHARGEABLE TO TAX HAS ESCAPED AS SESSMENT. THUS, THE CONTENTION OF THE ASSESSEE THAT THE ASSESSING OFFIC ER HAS REOPENED THE ASSESSMENT ON A MERE CHANGE OF OPINION WITHOUT PROP ER APPLICATION OF MIND IS CONTRARY TO FACTS ON RECORD; HENCE, UNACCEPTABLE. 9. INSOFAR AS ASSESSMENT YEAR 2010-11 IS CONCERNED, IT IS AN ADMITTED FACTUAL POSITION THAT THE RETURNS OF INCOME FILED BY BOTH T HE ASSESSEES WERE ONLY 6 KISHORKUMAR M VYAS PROCESSED UNDER SECTION 143(1) OF THE ACT. THUS, TH ERE WAS NO OCCASION FOR EXAMINING THE PURCHASES MADE BY THE ASSESSEES. CONS IDERING THE AFORESAID FACTUAL POSITION, I AM UNABLE TO ACCEPT ASSESSEES CONTENTION THAT THE ASSESSMENTS WERE NOT REOPENED VALIDLY. THE DECISIONS RELIED UPO N BY THE LEARNED COUNSEL FOR THE ASSESSEE BEING FACTUALLY DISTINGUISHABLE; THERE IS NO NEED FOR DELIBERATING ON THEM AT LENGTH. IN VIEW OF THE AFORESAID, I HOLD TH AT THE GROUNDS RAISED BY THE ASSESSEES CHALLENGING THE VALIDITY OF REOPENING OF ASSESSMENT UNDER SECTION 147 OF THE ACT DO NOT HAVE MERIT. ACCORDINGLY, I DISMI SS THEM. 10. AS REGARDS THE MERITS OF THE ISSUE, IT IS BORNE OUT FROM RECORD THAT THE DOUBT, IF ANY, IS ONLY WITH REGARD TO THE SOURCE OF PURCHASES AND NOT THE PURCHASES. FOR THIS REASON ALONE, THE ASSESSING OFF ICER RESTRICTED THE DISALLOWANCE ONLY TO THE PROFIT ELEMENT EMBEDDED IN THE PURCHASE S, WHICH WAS FURTHER REDUCED BY LEARNED COMMISSIONER (APPEALS). AT THE TIME OF HEARING, LEARNED AUTHORIZED REPRESENTATIVE HAS BROUGHT TO MY NOTICE A DECISION OF THE CO-ORDINATE BENCH IN CASE OF M/S STERLING STEEL INDUSTRIES VS ITO IN ITA 7096/MUM/2018 DATED 20-04- 2020, WHEREIN, IN CASE OF A SIMILARLY PLACED ASSESS EE, THE TRIBUNAL HAS RESTRICTED THE DISALLOWANCE TO 2% ON THE ALLEGED NON GENUINE P URCHASES. CONSIDERING THE NATURE OF BUSINESS OF BOTH THE ASSESSEES AND KEEPI NG IN VIEW THE DECISION OF CO- ORDINATE BENCH IN CASE OF M/S STERLING STEEL INDUST RIES (SUPRA), I AM OF THE VIEW THAT DISALLOWANCE @2% ON THE ALLEGED NON GENUINE PU RCHASES WOULD BE FAIR AND REASONABLE. ACCORDINGLY, I DIRECT THE ASSESSING OFF ICER TO COMPUTE THE DISALLOWANCE AT 2% ON THE ALLEGED NON GENUINE PURCH ASES IN ALL THE ASSESSMENT YEARS UNDER DISPUTE. GROUNDS 3 AND 4 ARE PARTLY ALL OWED. 11. IN THE RESULT, APPEALS ARE PARTLY ALLOWED. 7 KISHORKUMAR M VYAS ORDER PRONOUNCED IN THE OPEN COURT ON 06/07/202 1. SD/- SAKTIJIT DEY JUDICIAL MEMBER MUMBAI, DT : 06/07/2021 PAVANAN COPY TO : 1. APPELLANT 2. RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) 5. THE DR, ITAT, MUMBAI 6. GUARD FILE /TRUE COPY/ BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI