PALAMOOTIL VERGHESE MATHEW, THANE V. DCIT,CIR-3, THANE

ITA 2902/MUM/2016

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 9415 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-09-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2009-2010
• Appeal Filed On: 20-04-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: S K RAMANI
• Keywords: Bogus purchase
• Section: 143(3); 142(1); 147; 148; 144

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL I , BENCH, MUMBAI , , , BEFORE SHRI RAJENDRA, AM AND SHRI RAM LAL NEGI, JM ./ ITA NO. 2902 / MUM/ 201 6 ( / ASSESSMENT YEAR: 2009 - 10 ) SH. PALAMOOTIL VERGHESE MATHEW, 401, WELLINGTON GHODBUNDER ROAD, HIRANANDANI ESTATE, THANE (W) - 400607 VS. THE DCIT, CIR - 3, ROOM NO. 2, B WING, 6 TH FLOOR, ASHAR IT PARK, ROAD NO. 16Z, WAGLE ESTATE, THANE (W) - 400604 ./ ./ PAN/GIR NO. : AGOPM 9419 M ( / APPELLANT ) .. ( / RESPONDENT ) /AS SESSEE BY : SH. S.K. RAMANI (AR) /REVENUE BY : SH. SAURABH KUMAR RAI (DR) / DATE OF HEARING : 02/08 /2017 / DATE OF PRONOUNCEMENT : 18/ 0 9 /2017 / O R D E R PER RAM LAL NEGI, JM THIS APPEA L HAS BEEN FILED BY THE ASSESSEE AGAINST ORDER DATED 26/02/2016 PASSED BY THE LD. CIT (A) - 2 , THANE , PERTAI NING TO THE ASSESSMENT YEAR 2009 - 10 , WHEREBY THE LD. CIT (A) HAS PARTLY ALLOWED THE APPEAL PREFERRED BY THE ASSESSEE AGAINS T ASSESSM ENT ORDER PASSED U/S 144 READ WITH SECTION 147 OF THE OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT) . 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2009 - 10 DECLARING THE TOTAL INCOME OF RS. 84,68,24 0/ - . SUBSEQUENTLY, THE AO RECEIVED INFORMATION FROM THE SALES TAX DEPARTMENT MAHARASHTRA THAT A LARGE NUMBER OF ENTITIES HAVE ISSUE BOGUS PURCHASE BILLS TO VARIOUS TAX PAYERS INCLUDING THE PRESENT ASSESSEE. ACCORDINGLY, THE AO ISSUED NOTICE U/S 148 OF THE ACT, TO THE ASSESSEE TO FILE RETURN IN RESPONSE TO THE 2 ITA NO. 2902/MUM/2016 ASSESSMENT YEAR: 2009 - 10 NOTICE WITHIN FIFTEEN DAYS. THE AO ALSO ISSUED NOTICE U/133(6) OF THE ACT TO M/S ADIGIN ENTERPRISES FROM WHOM THE ASSESSEE HAD OBTAINED BOGUS PURCHASE BILLS WORTH RS. 22,79,511/ - , BUT THE NOTICE WAS RECEIVED BACK UN - SERVED. APART FROM THE N OTICE S U/S 143(3) & 142(1) THE AO ISSUED SHOW CAUSE NOTICE TO THE ASSESSEE AS TO WHY THE PURCHASES SHOWN MADE FROM BOGUS ENTITY DURING THE YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION SHOULD NOT BE TREAT ED AS BOGUS EXPENSES AND THE SAID AMOUNT SHOULD NOT BE ADDED TO THE TOTAL INCOME. 3. THE ASSESSEE ONLY SUBMITTED P&L ACCOUNT ALONG WITH AUDIT REPORT AND COMPUTATION OF INCOME, HOWEVER, NO REPLY WAS FILED TO THE SHOW CAUSE NOTICE DESPITE AVAILING SEVERAL OP PORTUNITIES. ACCORDINGLY, THE AO PASSED THE ASSESSMENT ORDER ON THE BASIS OF MATERIAL AVAILABLE ON RECORD DETERMINING THE TOTAL INCOME OF THE ASSESSEE AT RS.1,09,82,537/ - AFTER MAKING INTER ALIA MAKING ADDITION OF RS. 22,79,511/ - ON ACCOUNT OF BOGUS PURCHA SES. IN APPEAL THE LD. CIT(A) CONFIRMED THE ADDITION MADE BY THE AO. THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL AGAINST THE SAID ORDER BY RAISING THE FOLLOWING GROUNDS OF APPEAL: 1. THE LEARNED CIT (APPEALS) ERRED IN NOT DELETING THE ADDITION OF RS. 22,7 9,511/ - MADE BY THE ITO ON THE GROUND OF ALLEGED BOGUS PURCHASES WITHOUT APPRECIATING THE FACT THAT THE 6 PURCHASES INVOLVED WERE MADE FROM ONE PARTY - M/S ADJIJIN ENTERPRISES AND THE PAYMENTS WERE MADE BY A/C PAYEE CHEQUES. 2. THE LEARNED CIT (APPEALS) ERRED IN NOT DELETING IN FULL THE DISALLOWANCE AT 15% OF EXPENSES MADE BY ITO. 4. GROUND NO 1 OF THE APPEAL PERTAINS TO ADDITION ON ACCOUNT OF BOGUS PURCHASES. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT SINCE THE ASSESSEE HAS SUBMITTED P&L ACC OUNT ALONG WITH AUDIT REPORT AND COMPUTATION OF INCOME, THE LD. CIT(A) HAS WRONGLY CONFIRMED THE ADDITION MADE BY THE A.O. THE LD. COUNSEL RELYING ON THE JUDGMENT OF HONBLE BOMBAY HIGH COURT PASSED 3 ITA NO. 2902/MUM/2016 ASSESSMENT YEAR: 2009 - 10 IN NIKUNJ ENTERPRISES 372 ITR 619 (BOM) SUBMITTED THAT TH E IMPUGNED ORDER IS LIABLE TO BE SET ASIDE AS THE SAME IS CONTRARY TO THE PRINCIPLES OF LAW LAID DOWN BY THE HONBLE HIGH COURT IN THE AFORESAID CASE. THE LD. COUNSEL FURTHER SUBMITTED THAT THE ASSESSEE CASE IS COVERED BY THE DECISION OF THE MUMBAI TRIBUNA L RENDERED IN ITA NO 1704/M/2017, CHANDERKANT VS. ITO , IN WHICH THE ADDITION OF 12.5% OF THE TOTAL BOGUS PURCHASES, ESTIMATED BY THE CIT(A) , HAS BEEN RESTRICTED TO 10% . 5 . ON THE OTHER HAND, THE LD. DR RELYING UPON THE FINDINGS OF THE LD. CIT(A) SUBMITTED THAT THE IMPUGNED ORDER DOES NOT WARRANT ANY INTERFERENCE AS THE FINDINGS OF THE LD. CIT(A) IS IN ACCORDANCE WITH THE PRINCIPLE OF LAW LAID DOWN BY THE DIFFERENT COURTS AND TRIBUNALS INCLUDING THE JUDGMENT OF HONBLE GUJARAT HIGH COURT PASSED IN N.K. PRO TIEN LIMITED VS. DCIT IN TAX APPEAL NO 240,261,242&260 OF 2003 IN WHICH IT HAS BEEN HELD THAT IF THE PURCHASES ARE NOT PROVED TO BE GENUINE THEN THE ENTIRE AMOUNT OF PURCHASES NEEDS TO BE TAKEN AS INCOM E . 6 . WE HAVE HEARD THE RIVAL SUBMISSIONS AND ALSO P ERUSED THE MATERIAL ON RECORD INCLUDING THE CASES RELIED UPON THE PARTIES. THE ONLY ISSUE IN THIS CASE IS WHETHER THE LD CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF ENTIRE AMOUNT OF BOGUS PURCHASES MADE BY THE ASSESSEE DURING THE RELEVANT FINANCIAL YEAR? WE NOTICE THAT THE AO HAS MADE DISALLOWANCE IN QUESTION WITHOUT REJECTING THE BOOKS OF ACCOUNT OF THE ASSESSEE. AO HAS ALSO NOT DISPUTED THE SALES MADE BY THE ASSESSEE DURING THE RELEVANT PERIOD. 7 . IN NIKUNJ ENTERPRISES 372 ITR 619 (BOM) , THE HON' BLE JURISDICTIONAL HIGH COURT HAS HELD THAT MERELY BECAUSE ITS SUPPLIERS HAD NOT APPEARED BEFORE THE A.O. OR THE LD. CIT(A) ONE COULD NOT CONCLUDE THAT THE PURCHASES WERE NOT MADE BY THE ASSESSEE. THE HONBLE GUJARAT HIGH COURT IN CIT VS. SUMIT P. SETH 356 ITR 451 (GUJ) HAS UPHELD THE DECISION OF THE TRIBUNAL AND SUSTAINED THE 4 ITA NO. 2902/MUM/2016 ASSESSMENT YEAR: 2009 - 10 ADDITION OF 12. 5 % OF THE TOTAL BOGUS PURCHASES HOLDING THAT ONLY PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES CAN BE ADDED TO THE INCOME OF THE ASSESSEE. 8 . SO, IN LIGHT OF THE FACTS O F THE CASE AND THE LAW LAID DOWN BY THE HONBLE HIGH COURTS IN THE CASES REFERRED ABOVE, WE PARTLY ALLOW THE APPEAL OF THE ASSESSEE AND RESTRICT THE ADDITION TO 12.5% OF THE TOTAL AMOUNT OF BOGUS PURCHASES MADE BY THE ASSESSEE DURING THE YEAR RELEVANT TO T HE ASSESSMENT YEAR UNDER CONSIDERATION. IN OUR CONSIDERED VIEW, THE FACTS OF THE CASES RELIED UPON BY THE REVENUE ARE DIFFERENT FROM THE FACTS OF THE PRESENT CASE. WE, ACCORDINGLY, DIRECT THE A.O. TO COMPUTE THE ADDITION IN TERMS OF THIS ORDER. 9. GROUND NO 2 PERTAINS TO CONFIRMATION OF 15% DIS ALLOWANCE MADE BY THE AO CLAIMED BY THE ASSESSEE UNDER THE HEAD MISCELLANEOUS EXPENSES. THE LD. COUNSEL SUBMITTED THAT SINCE THE AO HAS MADE THE DISALLOWANCE IN QUESTION WITHOUT GIVING ANY REASON THE SAME IS ARBITRA RY AND WITHOUT ANY BASIS. THEREFORE, THE LD. CIT(A) OUGHT TO HAVE DELETED THE SAME. ON THE OTHER HAND THE LD. DR RELIED ON THE CONCURRENT FINDINGS OF THE AUTHORITIES BELOW. 10. WE HAVE CONSIDERED SUBMISSIONS AND ALSO GONE THROUGH THE ORDERS PASSED BY THE AUTHORITIES BELOW. WE NOTICE THAT THE AO HAS MADE THE DISALLOWANCE OF 15% OF THE TOTAL MISCELLANEOUS EXPENDITURE CLAIMED BY THE ASSESSEE ON THE GROUND THAT THE ASSESSEE HAS FAILED TO SUBMIT ANY EVIDENCE TO PROVE THE EXPENSES. ON THE OTHER HAND, THE LD. CIT (A) HAS RESTRICTED THE DISALLOWANCE TO 10% OF THE TOTAL DISALLOWANCE DETERMINED BY THE AO HOLDING THAT THE APPELLANT HAS MAINTAINED PROPER RECORDS/BILLS/VOUCHERS IN ORDER TO CLAIM THE EXPENSES UNDER DIFFERENT HEAD. SINCE, THE ASSESSEE HAS MAINTAINED PROPER RECORD AND THE SAME HAS NOT BEEN REJECTED BY THE AUTHORITY CONCERNED, IN OUR CONSIDERED OPINION THERE IS NO JUSTIFICATION IN SUSTAINING 50% OF THE DISALLOWANCE ON AD HOC BASIS, MADE BY THE AO VIDE ASSESSMENT ORDER PASSED 5 ITA NO. 2902/MUM/2016 ASSESSMENT YEAR: 2009 - 10 U/S 144 READ WITH SECTION 147 OF T HE ACT. HENCE, WE FIND MERIT IN THE CONTENTION OF THE ASSESSEE AND HOLD THAT THE FINDINGS OF THE LD. CIT(A) IS NOT BASED ON ANY EVIDENCE ON RECORD. WE, THEREFORE, DELETE THE DISALLOWANCE SUSTAINED BY THE LD. CIT(A) ALLOW THIS GROUND OF APPEAL OF THE ASSESS EE. THE AO IS DIRECTED TO DELETE THE ADDITION. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 18 TH . SEPT, 2017. SD/ - SD/ - ( RAJENDRA ) ( RAM LA L NEGI ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; DATED: 18 / 9 / 2017 ALINDRA, 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 . / B Y ORDER, //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MU MBAI