ACIT 32(2), MUMBAI V. SMT PRAGNA C. MEHTA, MUMBAI

ITA 2993/MUM/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 0727 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-12-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 07-05-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SMITA VERMA
• Keywords: Bogus purchase
• Section: 69C; 143(3); 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH SMC MUMBAI BEFORE SHRI VIKAS AWASTHY (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 2993/MUM/2019 ASSESSMENT YEAR: 2010-11 ACIT-32(2), R. NO. 720, 7 TH FLOOR, KAUTILYA BHAVAN, C-41-43, G BLOCK, BKC, BANDRA (EAST) MUMBAI-400051. VS. SMT. PRAGNA C. MEHTA, 1003, ASHOPLAV CHSL, S.V. ROAD, BORIVALI (WEST), MUMBAI-400092. PAN NO. AAHPM4038R APPELLANT RESPONDENT CROSS OBJECTION NO. 56/MUM/2020 (ITA NO. 2993/MUM/2019) ASSESSMENT YEAR: 2010-11 SMT. PRAGNA C. MEHTA, 1003, ASHOPLAV CHSL, S.V. ROAD, BORIVALI (WEST), MUMBAI-400092. VS. ACIT-32(2), R. NO. 720, 7 TH FLOOR, KAUTILYA BHAVAN, C-41-43, G BLOCK, BKC, BANDRA (EAST) MUMBAI- 400051. PAN NO. AAHPM4038R APPELLANT RESPONDENT REVENUE BY : MS. SMITA VERMA, DR ASSESSEE BY : MR. AJAY SINGH, AR DATE OF HEARING : 21/12/2020 DATE OF PRONOUNCEMENT : 22/12/2020 ORDER PER N.K. PRADHAN, A.M. THE APPEAL FILED BY THE REVENUE AND THE CROSS OBJEC TION BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF THE COMM ISSIONER OF INCOME TAX ITA NO. 2993/MUM/2019 & CO NO. 56/M/2020 SMT. PRAGNA C. MEHTA 2 (APPEALS)-46, MUMBAI [IN SHORT CIT(A)] AND ARISE OUT OF THE ASSESSMENT COMPLETED U/S 143(3) R.W.S 147 THE INCOME TAX ACT 1 961, (THE ACT). 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE FILED HER RETURN OF INCOME FOR THE ASSESSMENT YEAR (AY) 2010- 11 ON 28.09.2010 DECLARING TOTAL INCOME OF RS.36,26,405/-. THE ASSES SEE IS A RE-SELLER AND IMPORTER OF FIRE FIGHTING SYSTEMS AND ALLIED ITEMS. ON RECEIPT OF INFORMATION FROM THE SALES TAX DEPARTMENT, GOVERNMENT OF MAHARA SHTRA THAT THE ASSESSEE HAD OBTAINED BOGUS PURCHASE BILLS AMOUNTIN G TO RS.44,47,793/-, THE AO REOPENED THE ASSESSMENT AND ISSUED NOTICE U/ S 133(6) TO THE CONCERNED PARTIES FOR VERIFICATION. HOWEVER, THOSE NOTICES WERE RETURNED UNSERVED BY THE POSTAL AUTHORITIES WITH THE REMARKS LEFT/CLOSED. THEREAFTER, THE AO ISSUED A SHOW CAUSE NOTICE TO TH E ASSESSEE TO FURNISH DETAILS WHICH HAS BEEN EXTRACTED AT PAGE 3-5 OF THE ASSESSMENT ORDER. IN COMPLIANCE TO THE SHOW CAUSE NOTICE, THE ASSESSEE F ILED BEFORE THE AO COPY OF LEDGER ACCOUNT, PURCHASE BILLS, CORRESPONDING SA LE BILLS AND BANK STATEMENT REFLECTING PAYMENTS MADE. HOWEVER, THE AO WAS NOT CONVINCED WITH THE DETAILS FILED BY THE ASSESSEE AND MADE AN ADDITION OF RS.12,12,468/- ON THE FOLLOWING REASONS : TO DETERMINE THE EXACT PROFIT ELEMENT FROM SUCH BO GUS PURCHASES RELIANCE CAN BE PLACED ON THE PRECEDENT FOLLOWED BY THIS OFFICE BY ADOPTING GROSS PROFIT RATIO OF ASSESSEE'S BUSINESS. AS SUCH THE G.P. RATIO FOR THI S YEAR IS 27.26% WHICH SEEMS TO BE REASONABLE. HENCE, IN VIEW OF THE FACTS STATED A BOVE AND CONSIDERING THE FACT THAT FOR A.Y. 2009-10 THE SIMILAR ADDITION ON ACCOUN T OF BOGUS PURCHASE WAS MADE @ 31.88% & FOR A.Y. 2011-12 @ 31.34 % BEING G.P. RAT IOS OF RESPECTIVE A.Y. VIDE ORDER U/S. 143(3) R.W.S. 147 OF THE INCOME TAX ACT 1961 DATED 31-03-2015, I WORKED OUT THE PROFIT ELEMENT FROM SUCH BOGUS PURCH ASES @ 27.26% WHICH IS G.P. RATIO OF THE ASSESSEE'S BUSINESS FOR THE YEAR UNDER CONSIDERATION. AS SUCH THE ADDITION TO THE TUNE OF RS.12,12,468/- BEING 27.26% OF NON-GENUINE PURCHASES OF RS.44,47,793/- IS BEING MADE THIS YEAR U/S. 69C OF THE ACT. ITA NO. 2993/MUM/2019 & CO NO. 56/M/2020 SMT. PRAGNA C. MEHTA 3 3. IN APPEAL, THE LD. CIT(A) BY FOLLOWING THE DECIS ION IN CIT V. SIMIT SHETH (2013) 38 TAXMANN.COM 385 (GUJ), BHOLANATH POLYFAB PVT. LTD. 355 ITR 290 (GUJ), ESTIMATED THE PROFIT @ 12.5% OF THE PURCHASE S MADE FROM THE BOGUS PARTIES. 4. BEFORE US, THE LD. DEPARTMENTAL REPRESENTATIVE ( DR) SUBMITS THAT THE ADDITION OF RS.12,12,468/- HAS BEEN RIGHTLY MADE BY THE AO AND THE SAME BE CONFIRMED. ON THE OTHER HAND, THE LD. COUNSEL FOR T HE ASSESSEE SUBMITS THAT SIMILAR ISSUE AROSE BEFORE THE TRIBUNAL IN ASSESSEE S OWN CASE FOR AY 2009- 10 (ITA NO. 438/MUM/2016) AND AY 2011-12 (ITA NO. 3 715/MUM/2017) AND THE TRIBUNAL HAS RESTRICTED THE DISALLOWANCE TO 8% OF THE ALLEGED BOGUS PURCHASES AND THE SAME BE FOLLOWED. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIALS ON RECORD. THE REASONS FOR OUR DECISIONS ARE GIVEN BELOW. AS RECORDED BY THE AO, THE ASSESSEE FILED BEFORE H IM COPY OF LEDGER ACCOUNT, PURCHASE BILLS, CORRESPONDING SALE BILLS A ND BANK STATEMENT REFLECTING PAYMENTS MADE. ONLY THE NOTICE ISSUED BY THE AO TO THE CONCERNED PARTIES U/S 133(6) WERE RETURNED UN-SERVED BY THE P OSTAL AUTHORITIES WITH THE REMARK LEFT/CLOSED. WE FIND THAT SIMILAR ISSUE AROSE BEFORE THE TRIBUN AL IN AY 2009-10 AND AY 2011-12. THE TRIBUNAL VIDE ORDER DATED 08.09.2017 FOR AY 2011-12 (ITA NO. 3715/MUM/2017) HELD THAT : 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED RELEVANT MATERIAL ON RECORD. WE ARE OF THE CONSIDERED OPINION THAT THERE COULD B E NO SALE WITHOUT PURCHASE / CONSUMPTION OF MATERIAL KEEPING IN VIEW THE ASSESSE ES NATURE OF BUSINESS WHICH WAS MATERIAL INTENSIVE AND COULD NOT BE CARRIED OUT WITHOUT CONSUMPTION OF MATERIAL. THE SALES TURNOVER ACHIEVED BY THE ASSESS EE HAS NOT BEEN DISPUTED BY ITA NO. 2993/MUM/2019 & CO NO. 56/M/2020 SMT. PRAGNA C. MEHTA 4 THE REVENUE AND THE PAYMENTS WERE THROUGH BANKING C HANNELS. THE PURCHASES WERE BACKED BY INVOICES. AT THE SAME TIME, THE ASSE SSEE COULD NOT PRODUCE THE PARTY FOR CONFIRMATION AND NOTICE SENT U/S 133(6) R EMAINED UN-SERVED, WHICH CAST SERIOUS DOUBT ON ASSESSEES CLAIM. THEREFORE, IN SUCH A SITUATION, THE ADDITION, WHICH COULD BE MADE, WAS TO ACCOUNT FOR P ROFIT ELEMENT EMBEDDED IN THESE PURCHASE TRANSACTIONS TO FACTORIZE FOR PROFIT ELEMENT EARNED BY ASSESSEE AGAINST POSSIBLE PURCHASE OF MATERIAL IN THE GREYMA RKET AND UNDUE BENEFIT OF VAT AGAINST BOGUS PURCHASES, WHICH LOWER AUTHORITIE S HAVE RIGHTLY DONE SO. HOWEVER, ON TOTALITY OF FACTS, WE CONSIDER ESTIMATE D ADDITION TO BE ON THE HIGHER SIDE AND THEREFORE, RESTRICT THE SAME TO 8% OF ALLE GED BOGUS PURCHASES. THE LD. AO IS DIRECTED TO RE-COMPUTE THE INCOME OF THE ASSE SSEE IN THE LIGHT OF ADDITION SUSTAINED BY US. 6. FACTS BEING IDENTICAL, WE FOLLOW THE ABOVE ORDER OF THE CO-ORDINATE BENCH AND DIRECT THE AO TO RESTRICT THE DISALLOWANC E TO 8% OF THE ALLEGED BOGUS PURCHASES. 7. IN THE RESULT, THE APPEAL BY THE REVENUE IS DISM ISSED; THE CROSS OBJECTION BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 22/12/2020. SD/- SD/- (VIKAS AWASTHY) ( N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI; DATED:22/12/2020 RAHUL SHARMA, SR. P.S. ITA NO. 2993/MUM/2019 & CO NO. 56/M/2020 SMT. PRAGNA C. MEHTA 5 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