KANAIYALAL S.SHAH, MUMBAI V. ITO 23(2)(4), MUMBAI

ITA 2725/MUM/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 2797 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2007-2008
• Appeal Filed On: 08-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: JALPESH VORA
• Keywords: Bogus purchase; Unexplained investment; Accommodation entries
• Section: 69C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH SMC, MUMBAI BEFORE SHRI G.S.PANNU, ACCOUNTANT MEMBER ITA NO. 2725/MUM/2015, (A.Y. 2007-08) ITA NO. 2726/MUM/2015, (A.Y. 2008-09) ITA NO. 2727/MUM/2015, (A.Y. 2009-10) KANIYALAL S. SHAH, 706, MOUNTVIEW, YOGI HILL, MULUND-WEST, MUMBAI 400 080 PAN:AAFPS 8481C ... APPELLA NT VS. THE ITO 23(2)(4), MUMBAI .... RESPONDENT APPELLANT BY : SHRI JALPESH VORA RESPONDENT BY : SHRI SANTOSH MANKOSKAR DATE OF HEARING : 30/06/2016 DATE OF PRONOUNCEMENT : 30 /06/2016 ORDER THE CAPTIONED THREE APPEALS BY THE ASSESSEE ARE DI RECTED AGAINST A COMMON ORDER OF THE CIT(A) - 40 PERTAINING TO ASS ESSMENT YEARS 2007- 08, 2008-09 & 2009-10 WHICH IN TURNS A HAVE ARISEN OUT OF SEPARATE ORDERS PASSED BY THE ASSESSING OFFICER UNDER SECTIO N 143(3)R.W.S 147 OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) DATED 18/03/2013 2. AT THE TIME OF HEARING, THE LD. REPRESENTATIVE F OR THE ASSESSEE POINTED OUT THAT A COMMON ISSUE IN ALL THE APPEALS ARISES FROM THE ACTION OF THE CIT(A) IN ESTIMATING OF PROFIT @ 15% , WITH RESPECT TO CERTAIN BOGUS PURCHASES. LD. REPRESENTATIVE FOR TH E ASSESSEE SUBMITTED 2 ITA NOS. 2725 TO 2727/MUM/2015 THAT THE LIMITED PLEA OF THE ASSESSEE IS THAT THE ESTIMATION OF PROFIT @ 15% ON THE ALLEGED BOGUS PURCHASES IS ON A VERY HIG H SIDE CONSIDERING THAT THE NORMAL EVIDENCES OF PROFIT IN THE CASE OF THE ASSESSEE RANGES FROM 4% TO 6%. 3. SINCE FACTS AND CIRCUMSTANCES ON THIS ASPECT AR E COMMON IN ALL THESE YEARS, I MAY REFER TO THE APPEAL FOR ASSESSME NT YEAR 2007-08 IN ORDER TO APPRECIATE THE CONTROVERSY. THE APPELLANT IS AN INDIVIDUAL, WHO IS ENGAGED IN THE BUSINESS OF DEALER AND SUPPL IER OF IRON, STEEL AND ALLIED PRODUCTS. THE ASSESSING OFFICER NOTICED THAT ASSESSEE HAD EFFECTED PURCHASES FROM CERTAIN PARTIES, WHO WERE FOUND TO BE INDULGING IN BOGUS SUPPLIES BY THE SALES TAX AUTHOR ITIES. IN ASSESSMENT YEAR 2007-08 SUCH PURCHASES AMOUNTED TO RS.32,71,39 5/- FROM THREE PARTIES NAMELY J.B. INTERLINK, N.B. ENTERPRISE AND P.K.TRADING CO. BASED ON THE INFORMATION RECEIVED FROM THE INVESTIGATION WING, THE ASSESSING OFFICER TREATED THE AFORESAID PURCHASES AS BOGUS AN D ADDED A SUM OF RS.32,71,395/- AS UNEXPLAINED INVESTMENT IN PURCHAS ES UNDER SECTION 69C OF THE ACT. IN APPEAL, ASSESSEE ASSAILED THE O RDER OF THE ASSESSING OFFICER IN LAW AND ON FACTS. THE CIT(A) CONSIDERED THE SUBMISSIONS PUT- FORTH BY THE ASSESSEE AND FOLLOWING CERTAIN JUDICIA L PRONOUNCEMENTS HELD THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN ADDING THE ENTIRE AMOUNT OF PURCHASES AS UNEXPLAINED INCOME. ACCORDI NG TO THE CIT(A), ASSESSEE MAY HAVE EFFECTED PURCHASES FROM OTHER PAR TIES, WHICH WERE NOT RECORDED IN THE ACCOUNT BOOKS AND THE IMPUGNED PURCHASES WERE MERELY ACCOMMODATION ENTRIES OBTAINED FROM SUCH PAR TIES. BE THAT AS IT MAY, THE CIT(A) PROCEEDED TO HOLD THAT ONLY PRO FIT ELEMENT ON SUCH 3 ITA NOS. 2725 TO 2727/MUM/2015 BOGUS PURCHASES BE BROUGHT TO TAX. ACCORDINGLY, CI T(A) ESTIMATED THE PROFIT ON SUCH ALLEGED BOGUS PURCHASES @15%. 4. IN THIS BACKGROUND, THE SINGULAR PLEA OF THE ASS ESSEE IS THAT THE ESTIMATION OF PROFIT @15% IS EXCESSIVE AND ON A HIGHER SIDE CONSIDERING THAT THE NORMAL PROFIT RATIO IN THE CAS E OF THE ASSESSEE IS 4% TO 6%. 5. THE LD. DEPARTMENTAL REPRESENTATIVE REITERATED THAT ESTIMATION MADE BY THE CIT(A) WAS NOT ON HIGHER SIDE. 6. HAVING CONSIDERED THE RIVAL STANDS AS ALSO THE F ACTS AND CIRCUMSTANCES OF THE CASE, IN MY VIEW, THE ESTIMATI ON OF PROFIT WITH RESPECT TO THE ALLEGED BOGUS PURCHASES MADE BY THE CIT(A) @15% IS QUITE ON A HIGHER SIDE CONSIDERING THAT THE PROFIT RATIOS SHOWN BY THE ASSESSEE IN HIS LINE OF BUSINESS, BEING AROUND 6%. IN ANY CASE, THE ESTIMATION OF PROFITS WITH RESPECT TO THE BOGUS PUR CHASES CANNOT CORRESPOND TO THE NORMAL BUSINESS OPERATIONS AND, T HEREFORE, IN MY VIEW IT WOULD MEET THE ENDS OF JUSTICE IF THE PROFI T ON THE IMPUGNED PURCHASES IS ESTIMATED @ 10%. THUS, I SET-ASIDE TH E ORDER OF CIT(A) TO THAT EXTENT AND DIRECT THE ASSESSING OFFICER TO RES TRICT THE ADDITION TO 10% OF THE IMPUGNED PURCHASES INSTEAD OF 15% DIRECT ED BY THE CIT(A). THUS, ON THIS ASPECT ASSESSEE PARTLY SUCCEEDS. THE AFORESAID DECISION SHALL PREVAIL FOR THE ADDITIONS MADE BY THE ASSESSI NG OFFICER ON ACCOUNT OF ALLEGED BOGUS PURCHASES FOR ALL THE THREE CAPTIO NED ASSESSMENT YEARS. 4 ITA NOS. 2725 TO 2727/MUM/2015 7. IN ASSESSMENT YEAR 2007-08, THE ONLY OTHER ISSUE RAISED IS WITH REGARD TO DENIAL OF DEDUCTION UNDER CHAPTER VIA TO THE EXTENT OF 50,000/-. THIS GROUND WAS NOT PRESSED AT THE TIME OF HEARING AND IS ACCORDINGLY DISMISSED. 8. IN ASSESSMENT YEAR 2008-09, THE OTHER ISSUE IS A GAINST THE ACTION OF THE CIT(A) IN DISALLOWING 10% OF EXPENSES OUT OF TRANSPORT CHARGES, CONVEYANCE, HEL MAJURI AND STAFF WELFARE AMOUNTIN G TO RS.36,120/-. THE LD. REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT THE ACCOUNT BOOKS OF THE ASSESSEE ARE SUBJECT TO AUDIT UNDER SE CTION 44AB OF THE ACT AND THE ASSESSING OFFICER HAS NOT FOUND ANY PARTICU LAR INFIRMITY OR DISCREPANCY IN THE CLAIM OF EXPENSES SO AS TO JUSTI FY ANY ADHOC DISALLOWANCES. 9. IN MY CONSIDERED OPINION, THE DISALLOWANCE IS PU RELY BASED ON SURMISES, WHICH IS UNSUSTAINABLE AND IS HEREBY DI RECTED TO BE DELETED. 10. IN ASSESSMENT YEAR 2008-09, THE ONLY OTHER ISS UE IS WITH REGARD TO DENIAL OF DEDUCTION UNDER CHAPTER VIA OF THE A CT TO THE EXTENT OF 75,000/-. THIS HAS NOT BEEN PRESSED AT THE TIME OF HEARING AND IS ACCORDINGLY DISMISSED. 11. IN ASSESSMENT YEAR 2009-10, APART FROM THE ISSU E RELATING TO PROFIT ON BOGUS ON PURCHASES, WHICH HAVE ALREADY BE EN DEALT WITH BY ME IN EARLIER PARAS, THE ONLY OTHER ISSUE IS REGARD ING ADHOC DISALLOWANCE OF 10% OF VARIOUS EXPENSES AMOUNTING TO RS.50,037/ -. THE SAID DISALLOWANCE BEING PURELY ON ADHOC BASIS AND ON SUR MISES IS DIRECTED TO BE DELETED. 5 ITA NOS. 2725 TO 2727/MUM/2015 12. IN THE RESULT, ALL THE CAPTIONED APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED, AS ABOVE. THE ABOVE DECISION WAS PRONOUNCED IN THE OPEN COUR T AT THE CONCLUSION OF HEARING IN THE PRESENCE OF BOTH THE P ARTIES ON 30/06/2016. SD/- (G.S. PANNU) ACCOU NTANT MEMBER MUMBAI, DATED 30 /06/2016 VM , SR. PS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT , 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