AMULAKH HATICHAND VORA, MUMBAI V. JCIT RG 13(1), MUMBAI

ITA 2776/MUM/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 5358 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-05-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 18-04-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R A DHYNAI
• Keywords: Bogus purchase; Rejection of books of accounts; Opportunity of being heard; Set aside
• Section: 143(3); 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A MUMBAI BEFORE SHRI MAHAVIR SINGH (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 2776/MUM/2017 ASSESSMENT YEAR: 2011 - 12 AMULAKH HATICHAND VORA, PROP. MANHAR TRADING CORPORATION, 16/17, J.K. CHAMBERS, 77/83, NAGDEVI STREET, MUMBAI - 400003 VS. JOINT COMMISSIONER OF INCOME TAX, RANGE 13(1), ROOM NO. 418, 4 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 400020. PAN NO. AAAPV5346C APPELLANT RESPONDENT ASSESSEE BY : MR. K. GOPAL , AR REVENUE BY : MR. R.A. DHYNAI , DR DATE OF HEARING : 15/05/2019 DATE OF PRONOUNCEMENT: 24/05/2019 ORDER PER N.K. PRADHAN, AM THIS IS AN APPEAL FILED BY THE ASSESSEE. THE RELEVANT ASSESSMENT YEAR IS 2011 - 1 2 . THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE COMMIS SIONER OF INCOME TAX (APPEALS) - 28 , MUMBAI [IN SHORT CIT(A)] AND ARISES OUT OF THE ASSESSMENT COMPLETED U/S 143(3) OF THE INCOME TAX ACT 1961, (THE ACT). 2. THE 1 ST GROUND OF APPEAL IS GENERAL IN NATURE. SO WE BEGIN WITH THE 2 ND GROUND OF APPEAL WHICH IS AS UNDER: I. THE LD. CIT( A) ERRED IN CON FIRMING THE ACTION OF THE LD. A. O. I N MAKING ADDITION OF RS.34,26,754/ - UNDER SECTION 40A(2)(B) OF THE ACT WITHOUT AMULAKH HATICHAND VORA ITA NO. 2776/MUM/2017 2 APPRECIATING THE FACTS AND CIRCUMSTANCES OF THE CASE. HENCE, THE ADDITION OF RS.34,26,754/ - MADE UNDER SECTION 40A(2)(B) IS UNJUSTIFIED AND THE SAME MAY BE DELETED, II. THE LD. CIT( A) FAILED TO APPRECIATE THE FACT THAT THE EXPENSES OF RS.34,26,754/ - HAVE BEEN INCURRED BY THE APPELLANT DURING THE COURSE OF BUSINESS ACTIVITIES AND THE SAME ARE SUPPORTED WITH PROPER DOCUMENTARY EVIDE NCES. HENCE, THE ADDITION OF RS.34,26, 754/ - MADE UNDER SECTION 40A(2)(B) IS UNJUSTIFIED AND THE SAME MAY BE DELETED. 3. BRIEFLY STATED, THE FACTS ARE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER (AO) ISSUED NOTICES U/S 133(6) TO THE COMMISSION AGENTS TO ASCERTAIN THE GENUINENESS OF THE TRANSACTIONS. THE AO FOUND THAT IN THE CASE OF TEN PARTIES, TH E NOTICES ISSUED BY HIM U/S 133(6) REMAINED UN - SERVED AND THE ASSESSEE ALSO FAILED TO SUBMIT CONFIRMATION FROM THEM. THE COMMISSION PAID AMOUNTED TO RS.63,520/ - . ALSO THE AO OBSERVED THAT THE PAYMENT OF COMMISSION TO SONS AND NEAR RELATIVES AS DETAILED B ELOW WAS NOT INCURRED FOR THE PURPOSE OF BUSINESS: SR. NO. NAME OF RELATIVES AMOUNT (RS.) 1. JIGNESH VORA (HUF) 3,53,987/ - 2. PINAL VORA (HUF) 3,76,891/ - 3. PINAL VORA 11,52,200/ - 4. RUPESH VORA 4,730/ - 5. JIGNESH VORA 11,25,580/ - AMULAKH HATICHAND VORA ITA NO. 2776/MUM/2017 3 6. RUPESH VORA 2,49,846/ - TOTAL 33,63,234/ - THUS THE AO MADE AND ADDITION OF RS.34,26,754/ - (RS.33,63,234 + RS.63,520). 4. IN APPEAL, THE LD. CIT(A) AGREED WITH FINDINGS OF THE AO AND CONFIRMED THE ADDITION OF RS.34,26,754/ - . 5. BEFORE US, THE LD. COUNSEL OF THE ASSESSEE SUBMITS THAT THE SAID EXPENSES OF RS.34,26,754/ - ARE SUPPORTED WITH PROPER DOCUMENTARY EVIDENCE AND HENCE THE DISALLOWANCE MADE U/S 40A(2)(B) IS UNJUSTIFIED. THE LD. COUNSEL ALSO REFERS TO THE PAPER BOOK (P/B) FIL ED BEFORE THE TRIBUNAL CONTAINING INTER ALIA (I) COPY OF LETTER DATED 11.12.2013 FILED BY JIGNESH A VORA (HUF) IN RESPONSE TO THE NOTICE U/S 133(6) ALONG WITH IT RETURN, BANK STATEMENT AND COMMISSION INVOICE, (II) COPY OF LETTER DATED 11.12.2013 FILED BY P INAL A VORA (HUF) IN RESPONSE TO THE NOTICE U/S 133(6) ALONG WITH IT RETURN, BANK STATEMENT AND COMMISSION INVOICE, (III) COPY OF LETTER DATED 11.12.2013 FILED BY PINAL A VORA IN RESPONSE TO THE NOTICE U/S 133(6) ALONG WITH IT RETURN, BANK STATEMENT AND CO MMISSION INVOICE, (IV) COPY OF LETTER DATED 11.12.2013 FILED BY RUPESH A VORA (HUF) IN RESPONSE TO THE NOTICE U/S 133(6) ALONG WITH IT RETURN, BANK STATEMENT AND COMMISSION INVOICE , (V) COPY OF LETTER DATED 11.12.2013 FILED BY JIGNESH A VORA IN RESPONSE T O THE NOTICE U/S 133(6) ALONG WITH IT RETURN, BANK STATEMENT AND COMMISSION INVOICE AND (VI) COPY OF LETTER DATED 11.12.2013 FILED BY RUPESH A VORA (HUF) IN AMULAKH HATICHAND VORA ITA NO. 2776/MUM/2017 4 RESPONSE TO THE NOTICE U/S 133(6) ALONG WITH IT RETURN, BANK STATEMENT AND COMMISSION INVOICE. ON THE OTHER HAND, THE LD. DR SUPPORTS THE ORDER PASSED BY THE LD. CIT(A). 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIALS ON RECORD. WE ARE OF THE CONSIDERED VIEW THAT THE DISALLOWANCE MADE BY THE AO OF PAYMENT OF COMMISSION AND BRO KERAGE NEEDS VERIFICATION. THEREFORE, WE SET ASIDE THE ORDER OF THE LD. CIT(A) AND RESTORE THE MATTER TO THE FILE OF THE AO TO MAKE AN ORDER AFRESH AFTER GIVING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. WE DIRECT THE ASSESSEE TO FILE THE RELEV ANT DOCUMENTS/EVIDENCE BEFORE THE AO. THUS THE 2 ND GROUND OF APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. 7. THE 3 RD GROUND OF APPEAL I. THE LD. CIT(A) ERRED IN CONFIRMING THE ACTION OF LD. A.O, IN MAKING ADDITION OF RS.29,48,332/ - BEING PURCHASES MADE DURING THE PREVIOUS YEAR RELEVANT TO IMPUGNED ASSESSMENT YEAR BY TREATING THE SAME AS BOGUS WITHOUT APPRECIATING THE FACTS AND CIRCUMSTANCES OF THE CASE. HENCE, THE ESTIMATION OF PROFIT AMOUNTING TO RS.29,48,332/ - ON ALLEGED BOGUS PURCHASES IS UNJUSTIFIED AND THE SAME MAY BE DELETED. II. THE LD. CI T(A) FAILED TO APPRECIATE THAT THE MATERIAL PURCHASED DURING THE YEAR ARE DULY ACCOUNTED IN THE BOOK OF THE APPELLANT AND THE SAME ARE SUPPORTED BY PROPER DOCUMENTARY EVIDENCES. THE SAID MATERIAL WAS SUBSEQUENTLY SOLD BY THE APPELLANT AND THE PROFIT EARNED THEREON IS OFFERED FOR TAX. HENCE, THE ADDITION OF RS.29,48,332/ - BY TREATING THE PURCHASES AS BOGUS IS UNJUSTIF IED AND THE SAME MAY BE DELETED. AMULAKH HATICHAND VORA ITA NO. 2776/MUM/2017 5 III. THE LD. CIT(A) FURTHER, FAILE D TO THE APPRECIATE THAT THE LD. A.O. HAS NEITHER REJECTED THE BOOKS OF ACCOUNTS OF THE APPELLANT NOR POINTED ANY DISCREPANCIES IN THE SAME. THE LD. A. O. ALSO ACCEPTED THE SALES MADE DURING THE Y EAR. HENCE, THE ADDITION (IF RS. 29,48,332/ - IS UNJUSTIFIED AND THE SAME MAY BE DELETED. IV. WITHOUT PREJUDICE TO THE ABOVE THE LD. CIT (A) ERRED I N UPHOLDING THE ACTION OF LD. A.O. BY TREATING THE PURCHASES AS BOGUS ON THE BASIS OF THE CERTAIN INFORMATION RECEIVED FROM SALES TAX DEPARTMENT WITHOUT PROVIDING THE APPELLANT AN OPPORTUNITY TO CROSS EXAMINE THE PERSONS RELYING ON WHOSE STATEMENT AN ADVER SE INFERENCE HAS BEEN DRAWN AGAINST THE APPELLANT. HENCE, THE ADDITION OF RS.29,48,332/ - IS UNJUSTIFIED AND THE SAME MAY BE DELETED . 8. THE AO NOTED THAT THE ASSESSEE WAS INVOLVED IN BOGUS BILLINGS WITHOUT DELIVERY OF GOODS AS REPORTED BY THE SALES TAX DEP ARTMENT, GOVERNMENT OF MAHARASHTRA. IN ORDER TO VERIFY THE GENUINENESS OF PURCHASES, THE AO ISSUED NOTICE U/S 133(6) TO THE PARTIES IN THE ADDRESS GIVEN BY THE ASSESSEE. HOWEVER, THE NOTICES WERE EITHER RETURNED BY THE POSTAL AUTHORITIES OR NO REPLY WAS RE CEIVED FROM THOSE PARTIES. THE AO APPRISED THESE FACTS TO THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE. HOWEVER, NEITHER THE NEW ADDRESS OF THE PARTIES WERE FURNISHED NOR THESE PARTIES WERE PRODUCED BEFORE THE AO ALONG WITH CONFIRMATION OF ACCOUNTS. ALSO THE AO FOUND THAT IN SOME CASES, THE LIABILITY HAS CEASED TO EXIST. THEREFORE, THE AO MADE AN ADDITION OF RS.29,48,332/ - . 9. IN APPEAL, THE LD. CIT(A) FOLLOWED HIS ORDER FOR THE EARLIER ASSESSMENT YEAR AND CONFIRMED THE ADDITION OF RS.29,48,332/ - MADE BY THE AO. AMULAKH HATICHAND VORA ITA NO. 2776/MUM/2017 6 10. BEFORE US, THE LD. COUNSEL OF THE ASSESSEE SUBMITS THAT MERELY ON THE BASIS OF THE FINDINGS THAT THE NOTICES ISSUED U/S 133(6) WERE RETURNED BACK BY THE POSTAL AUTHORITIES IN SOME CASES AND NO REPLY WAS RECEIVED IN SOME CASES WOULD NOT BE A GR OUND TO MAKE A DISALLOWANCE OF RS.29,48,332/ - . ON THE OTHER HAND, THE LD. DR SUPPORTS THE ORDER PASSED BY THE LD. CIT(A). 11. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIALS ON RECORD. THE NATURE OF BUSINESS OF THE ASSESSEE IN THE PRESENT CASE IS THAT OF A SUPPLIER AND STOCKIEST OF PIPES AND TUBES. SIMILAR ISSUE AROSE IN THE CASE OF THE ASSESSEE IN AY 2010 - 11 (ITA NO. 520/MUM/2015). THE TRIBUNAL VIDE ORDER DATED 14.09.2017 HELD AS UNDER : IN THE CASE OF CIT VS. SIMIT P. SHETH (2013) 38 TAXMANN.COM (GUJ), THE HONBLE GUJARAT HIGH COURT HAS HELD THAT WHERE PURCHASES WERE NOT BOGUS BUT WERE MADE FROM PARTIES OTHER THAN THOSE MENTIONED IN THE BOOKS OF ACCOUNT, NOT ENTIRE PURCHASE PRICE BUT ONLY PROFIT ELEMENT EMBEDDED IN SUCH PURC HASES CAN BE ADDED TO INCOME OF THE ASSESSEE. THAT BEING THE POSITION, NOT THE ENTIRE PURCHASE PRICE BUT ONLY THE PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES CAN BE ADDED TO THE INCOME OF THE ASSESSEE. THE HONBLE HIGH COURT REFERRED TO A SIMILAR VIEW TAKEN IN THE CASE OF CIT VS. VIJAY M. MISTRY CONSTRUCTION LTD. [2013] 355 ITR 498 (GUJ) AND CIT VS. BHOLANATH POLY FAB (P) LTD. [2013] 355 ITR 290 (GUJ). TAKING INTO ACCOUNT THE FACTS AND CIRCUMSTANCES OF THE INSTANT CASE, WE FOLLOW THE RATIO LAID DOWN IN THE AB OVE DECISIONS AND SET ASIDE THE ORDER OF THE LD. AMULAKH HATICHAND VORA ITA NO. 2776/MUM/2017 7 CIT(A) AND DIRECT THE AO TO ESTIMATE PROFIT @ 12.5% ON THE PURCHASES OF RS.2,15,89,916/ - 11.1 FACTS BEING IDENTICAL, WE FOLLOW THE ABOVE ORDER OF THE CO - ORDINATE BENCH AND DIRECT THE AO TO RESTRICT THE DISA LLOWANCE TO 12.5% OF RS.29,48,332/ - AND BRING TO TAX RS.3,68,541/ - ONLY . 12. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 24/05/2019. SD/ - SD/ - (MAHAVIR SINGH) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED: 24/05/2019 RAHUL SHARMA, SR. P.S. 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// (SR. PRIVATE SECRETARY) ITAT, MUMBAI