PAWANKUMAR NAGRAJ MEHTA, MUMBAI V. ACIT- 19 (2), MUMBAI

ITA 2847/MUM/2018

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 1633 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-09-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 04-05-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: KUSUM BA NSAL
• Keywords: Bogus purchase; Rejection of books of accounts; Set aside
• Section: 143(1); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH C, MUMBAI BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA NO.2847/M/2018 ASSESSMENT YEAR: 2010-11 MR. PAWANKUMAR NAGRAJ MEHTA, (PROPRIETOR: ROSE METALS), 28-30, 1 ST FLOOR, GAJANAN DARSHAN, C.P. TANK, MUMBAI 400004 PAN: AACPM 9957E VS. ACIT 19(2), ROOM NO.207, 2 ND FLOOR, MATRU MANDIR, GRANT ROAD, MUMBAI - 400007 (APPELLANT) (RE SPONDENT) PRESENT FOR: ASSESSEE BY : NONE REVENUE BY : MS. KUSUM BANSAL, D.R. DATE OF HEARING : 27.06.2019 DATE OF PRONOUNCEMENT : 17.09.2019 O R D E R PER RAJESH KUMAR, ACCOUNTANT MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSES SEE AGAINST THE ORDER DATED 26.02.2018 OF THE COMMISSIO NER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS TH E CIT(A)] RELEVANT TO ASSESSMENT YEAR 2010-11. 2. AT THE TIME OF HEARING NEITHER ASSESSEE NOR HIS AUTHORISED REPRESENTATIVE WAS PRESENT. THEREFORE, WE ARE DECI DING THE APPEAL ON MERIT AFTER HEARING THE LD. D.R. 3. THE ONLY ISSUE RAISED BY THE ASSESSEE IS AGAINST THE CONFIRMATION OF ADDITION TO THE TUNE OF RS.13,21,57 3/- EQUAL TO 6.5% OF THE TOTAL ALLEGED BOGUS PURCHASES AS AGAINS T THE ITA NO.2847/M/2018 MR. PAWANKUMAR NAGRAJ MEHTA 2 ADDITION OF RS.25,41,487/- MADE BY THE AO BEING 25% OF THE ALLEGED BOGUS PURCHASES. 4. THE FACTS IN BRIEF ARE THAT THE CASE OF THE ASSE SSEE WAS REOPENED UNDER SECTION 147 BY ISSUING NOTICE UNDER SECTION 148 DATED 20.10.2014 AFTER THE AO RECEIVED THE INFORMAT ION FROM DGIT (INV.), MUMBAI THAT ASSESSEE HAS ENTERED INTO HAWALA BOGUS PURCHASE TRANSACTIONS FROM PIONEER OVERSEES T O THE TUNE OF RS.2,03,31,893/-. PERTINENT TO STATE THAT ASSES SEE FILED RETURN ON 30.09.2010 DECLARING AN INCOME OF RS.30,71,298/- WHICH WAS PROCESSED UNDER SECTION 143(1) OF THE ACT. DUR ING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE FILE D VARIOUS EVIDENCES IN THE FORM OF BILLS, VOUCHERS, DELIVERY CHALLAN, PROOF OF TRANSPORTATION, BANK STATEMENT AND NOTE OF STOCK MO VEMENT. HOWEVER, THE AO, NOT FINDING THE SAID EVIDENCES AS ENOUGH FOR VERIFICATION OF PURCHASES, CAME TO CONCLUSION THAT PURCHASES REMAINED UNVERIFIABLE AND ACCORDINGLY REJECTED THE BOOKS OF ACCOUNTS UNDER SECTION 145(3) OF THE ACT. THEREAFT ER, BY FOLLOWING THE DECISION IN THE CASE OF CIT VS. SIMIT P. SHETH (2013) 356 ITR 451 ESTIMATED THE INCOME ON THE BOGUS PURCH ASES AT RS.25,41,487/- BEING 12.5% OF THE BOGUS PURCHASES. 5. IN THE APPELLATE PROCEEDINGS, THE LD. CIT(A) PAR TLY ALLOWED THE APPEAL OF THE ASSESSEE BY RESTRICTING THE ADDIT ION TO RS.13,21,573/- BEING 6.5% OF THE ALLEGED BOGUS PURC HASES OF RS.2,03,31,893/- BY OBSERVING THAT THE VAT APPLICAB LE TO THE ASSESSEE IS 4% AND AFTER ADDING A MARGIN OF 2.5%, A PPLIED THE PERCENTAGE OF 6.5%. ITA NO.2847/M/2018 MR. PAWANKUMAR NAGRAJ MEHTA 3 6. AFTER HEARING THE LD. D.R. AND PERUSING THE MATE RIAL ON RECORD, WE OBSERVE THAT IN THIS CASE THE ASSESSEE I S A DEALER IN FERROUS AND NON FERROUS METAL ITEMS AND UNDOUBTEDLY AVAILED HAWALA BOGUS PURCHASE ENTRIES FROM PIONEER OVERSEES TO THE TUNE OF RS.2,03,31,893/-. THE AO APPLIED 12.5% WHI CH WAS RESTRICTED TO 6.5% BY LD. CIT(A). IT IS APPARENT F ROM BOTH THE ORDERS PASSED BY THE AUTHORITIES BELOW THAT THEY HA VE ACCEPTED THE FACT THAT INCOME HAS TO BE ASSESSED ON PERCENTA GE BASIS AND ONLY DIFFERED ON THE PERCENTAGE TO BE APPLIED. SIN CE IN THE CASE OF THE ASSESSEE THE PROFIT MARGIN IS VERY MEAGER AN D THEREFORE ADDITION AS MADE BY THE LD. CIT(A) AT 6.5% SEEMS TO BE ON THE HIGHER SIDE. IN OUR OPINION, IN SIMILAR TYPE OF CA SES, THE CO- ORDINATE BENCHES OF THE TRIBUNAL HAVE BEEN TAKING A CONSISTENT VIEW THAT 2 TO 4% HAS TO BE APPLIED DEPENDING UPON THE FACTS OF EACH CASE IN THE CASE OF FERROUS AND NON FERROUS ME TALS TRADE. CONSIDERING ALL THESE FACTS, IN THE PRESENT CASE, I T WOULD BE REASONABLE, IF A RATE OF 4% IS APPLIED TO ASSESS TH E INCOME ON BOGUS PURCHASES. ACCORDINGLY, WE SET ASIDE THE ORD ER OF LD. CIT(A) AND DIRECT THE AO TO APPLY A RATE OF 4%. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 17.09.2019. SD/- SD/- (MAHAVIR SINGH) (RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 17.09.2019. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT ITA NO.2847/M/2018 MR. PAWANKUMAR NAGRAJ MEHTA 4 THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY /ASSTT. REGISTRAR, ITAT, MUMBAI.