SMRAT INFOCOM, MUMBAI V. ITO 33(3)(4), MUMBAI

ITA 2836/MUM/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 8774 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-01-2017
• Appeal Filed By: Assessee
• Bench Allotted: H
• Assessment Year: 2010-2011
• Appeal Filed On: 12-05-2015
• Court: TRIBUNAL
• Department Lawyers: M C OMI NINGSHEN
• Assessee Lawyers: RASHMIKANT C MOD I; KETKI RAJESHIRKE
• Keywords: Bogus purchase
• Section: 69C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI AMARJIT SINGH , JUDICIAL MEMBER ITA NO. 2836/M/2015 (AY 2010 - 2011 ) M/S. SMART INFOCOM, 306/307, PLOT NO.9, 338, STERLING INDUSTRIAL PREMISES LTD., RAMACHANDRAS LANE EXTN., MALAD (W), MUMBAI 400 064. / VS. ITO, ERSTWHILE WD 15(3)(3), NOW ITO - 33(3)(4), 1 ST FLOOR, C - 12, PRATYAKSHAKAR BHAVAN, BKC, BANDRA (E), MUMBAI. ./ PAN : ABEFS1558C ( / APPELLANT) .. ( / RESPONDENT ) / APPELLANT BY : SHRI RASHMIKANT C MODI & MS. KETKI RAJESHIRKE / RESPONDENT BY : SHRI M.C. OMI NINGSHEN, DR / DATE OF HEARING : 05.01.2017 / DATE OF PRONOUNCEMENT : 18 .01.2017 / O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE ASSESSEE ON 12.5.2015 IS AGAINST THE ORDER OF THE CIT (A) - 17, MUMBAI DATED 20.2.2012 FOR THE ASSESSMENT YEAR 2010 - 2011. 2. IN THIS APPEAL, THE ONLY ISSUE RAISED BY THE ASSESSEE RELATES TO THE BOGUS PURCHASES OF RS. 53.16 LAKHS (ROUNDED OFF) INVOLVING THE TAINTED SUPPLIERS QUA THE SALES TAX DEPARTMENT AND THE ADDITION ON ACCOUNT OF COMMISSION OF RS. 53,166/ - BEING 1% OF THE SAI D BOGUS PURCHASES. IN THE ASSESSMENT, AO MADE THE ADDITION OF ENTIRE SUCH PURCHASES U/S 69C OF THE ACT IGNORING THE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT JUDGMENT IN THE CASE OF CIT VS. NIKUNJ EXIMP ENTERPRISES PVT LTD (216 TAXMAN.COM 171) (BO M.) AND JUDGMENT OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. SIMIT P. SETH (356 ITR 451) (GUJ.) . ON APPEAL, CIT (A) CONFIRMED THE SAME. AGGRIEVED WITH THE SAID ORDER OF THE AO / CIT (A), ASSESSEE IS IN APPEAL BEFORE US. 2 3. DURING THE PROCEED INGS BEFORE US, AT THE OUTSET, LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE OFFICERS DID NOT FOLLOW THE BINDING JUDGMENTS ON THE ISSUE VIZ NIKUNJ EXIMP ENTERPRISES PVT LTD (SUPRA) AND SIMIT P SETH (SUPRA) AND PROCEEDED TO MAKE ENTIRE PURCHASES GIVING NO SUSTAINABLE REASONS FOR THE NON - COMPLIANCE OF THE SAID DECISIONS. 4. ON THE OTHER HAND, LD DR FOR THE REVENUE RELIED ON THE ORDERS OF THE REVENUE AUTHORITIES. 5. AFTER HEARING BOTH THE PARTIES, WE FIND, THE ASSESSEES NET PROFIT S (NP) OVER THE YEARS VARY F ROM 2 % TO 2.35% AND THE VAT RATE APPLICABLE IS 4%. CONSIDERING THE ABOVE FACTUAL MATRIX OF THE PRESENT CASE , WE ARE OF THE OPINION, THE ADDITION , IF ANY, SHOULD BE RESTRICTED TO LESS THAN 6.35% (IE 2.35 + 4) OF THE SAID BOGUS PURCHASES CONSIDERING THE SAI D JUDGMENT OF GUJARAT HIGH COURT (SUPRA). WE FIND THAT I T IS NOT TH E CASE OF THE REVENUE THAT THE NP RATE + VAT TOTALS TO 12.5%. HONBLE GUJARAT HIGH COURT APPROVED THE SAID 12.5% IN THE CASE OF SIMIT P SETH (SUPRA) CONSIDERING THE NATURE OF BUSINESS ACTIVITIES WHICH FALL S IN THE REAL ESTATE . THE APPLICABLE VAT RATE IS ALSO DIFFERENT IN STATE OF GUJARAT. ACCORDINGLY, WE DIRECT THE ASSESSING OFFICER TO RESTRICT THE DISALLOWANCE TO A ROUND FIGURE OF 7%. VAT FIGURES ARE CONSIDERED HERE FOR THE REASON TH AT THE ALLEGED BOGUS PURCHASES FROM THE GREY MARKET IS DONE WITHOUT SALE BILLS CAUSING LOSS TO THE STATE GOVERNMENT EXCHEQUER. THE PRESUMPTION IS THAT THE ALLEGED PURCHASES OF MATERIALS IS DONE WITHOUT BILLS . ACCORDINGLY, WE CONFIRM THE ADDITION TO THE E XTENT OF 7% OF THE SAID PURCHASES OF RS. 53.16 LAKHS. ADDITION SHOULD BE RESTRICTED. ACCORDINGLY, AO IS DIRECTED. THUS, THE GROUND IS PARTLY ALLOWED. 6. REGARDING THE ADDITION ON ACCOUNT OF COMMISSION OF RS. 53,166/ - , IT IS THE ARGUMENT OF THE LD COUNSE L FOR THE ASSESSEE THAT THE CIT (A) ENHANCED ASSESSMENT TO THAT EXTENT WITHOUT GIVING A NOTICE OR AN OPPORTUNITY TO THE ASSESSEE. IN THIS REGARD, LD AR BROUGHT OUR ATTENTION TO THE PROVISIONS OF SECTION 251(2) OF THE ACT AND SUBMITTED THAT THE SUB - SECTION (2) MANDATES THE CIT (A) TO NOT TO ENHANCE THE ASSESSMENT UNLESS R EASONABLE OPPORTUNITY OF SHOWING CAUSE AGAINST THE ENHANCEMENT, IF ANY, IN THE ASSESSMENT IS GRANTED . IN OUR VIEW, THIS ISSUE IS NOT SETTLED AND THE ADDITIONS OF THIS KIND ARE UNSUSTAINABLE IN LAW IN VIEW OF THE 3 JUDGMENTS IN THE CASE S OF (I) BIKRAM SINGH VS. DCIT, ITAT DELHI, ITA NO. 3522/DEL/2013; (II) APEX COURT JUDGMENT IN THE CASE OF CIT VS. SHAPOORJI PALLONJI MISTRY, 44 ITR 891 (SC) AND (III) CIT VS. RAI BAHADUR HARDUTROY MOTILAL CHAMAN IA (66 ITR 443). ADMITTEDLY, THE CIT (A) MADE THIS ENHANCEMENT OF ASSESSMENT WITHOUT GRANTING OPPORTUNITY TO THE ASSESSEE. EFFECT OF THIS FAILURE RESULTS IN DELETION OF THE ENHANCEMENT. ACCORDINGLY, THIS PART OF THE GROUND IS ALLOWED IN FAVOUR OF THE ASSESSEE . 7. IN THE RESULT, APPEAL OF THE ASSESSEE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 18 TH JANUARY, 2017. SD/ - SD/ - ( AMARJIT SINGH ) (D. KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; 18.01.2017 . . ./ OKK , 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 . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI