GHEVERCHAND DAMJI HARIA, MUMBAI V. ACIT 21(3), MUMBAI

ITA 300/MUM/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 0071 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-09-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 13-01-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: AGAINST DATED PASSED
• Keywords: Bogus purchase; Opportunity of being heard
• Section: 40A(3); 142(1); 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI BEFORE SHRI B. R. BASKARAN , AM AND SHRI AMARJIT SINGH , JM I.T.A. NO . 300 /M/ 20 1 7 ( ASSESSMENT YEAR : 201 1 - 12 ) ZAVERCHAND DAMJI HARIA, ZEAL APPAREL, 124, ASHISH INDUSTRIAL ESTATE . VS. ACIT - 21(3) ./ ./ PAN/GIR NO. : AALPH 7225 H ( APPELLANT ) .. ( RESPONDENT ) DATE OF HEARING : 26 . 0 6 .2018 DATE OF PRONOUNCEMENT : 19. 09. 201 8 O R D E R PER AMARJIT SINGH, JM: THE PRESENT APPEA L HA S BEEN FILED BY THE ASSESSEE AGAINST THE ORDER DATED 07 . 1 0 .201 6 PASSED BY THE COMMIS S IONER OF INCOME TAX (APPEALS) - 33 , MUMBAI [HEREINAFTER REFERRED TO AS THE CIT(A)] RELEVANT TO THE ASSESSMENT YEAR 2011 - 12 . 2 . THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: - 1.1 THE LEARNED COMMISSIONER OF INCOME TAX ( APPEALS ) 33 HAS ERRED IN LAW AND FACTS IN CONFIRMING THE DISALLOWING OF THE GENUINE PURCHASE OF MATERIAL ON ADHOC BASIS @ 25% RS.1,23,557 @25% OF RS, 4,94,227 .) WHICH IS FACTUALLY NOT CORRECT. 1.2 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW APPELLANT HAD PURCHASED THE MATERIALS FROM THE ABOVE ASSESSEE BY: SHRI CHHANGUR S. CHAUHAN DEPARTMENT BY: SHRI V. VIDHYADHAR (DR) ITA. NO. 300 /M/201 7 A.Y. 2011 - 12 2 MENT IONED COMPANIES AND PAID THE AMOUNT THROUGH CHEQUE. APPELLANT HAS SUBMITTED THE LEDGER ACCOUNT, PURCHASE BILL AND MODES OF PAYMENT MADE TO THE SUPPLIER AND COPY OF BANK CERTIFICATE FOR PAYMENT OF OUTSTANDING BILL OF THE ABOVE SUPPLIER. 1.3 ON THE FAC TS AND CIRCUMSTANCES OF THE CASE AND IN LAWS, THE LEARNED CIT (A) 33 HAS NOT APPRECIATED AND FAILS TO VERIFIED THE NATURE OF PURCHASE. APPELLANT PURCHASE FROM MARUTI IMPEX IS FURNITURE AND PURCHASE FROM TRICHIPURAM TRADING P. LTD IS INCLUDED IN SUNDRY EXPENSES AND IT IS DOUBLE ADDED IN THE INCOME TO THE ASSESSEE. 1.5. THE CIT (A) HAS FAILED TO APPRECIATE THE EVIDENCE FILED BY THE APPELLANT FOR THE PURCHASE OF THE MATERIAL FROM THE SUPPLIER. CIT (A) ERRED IN LAW AND FACTS AND CONFIRMED THE ADDITION ON ADHOC BASIS @ 25 % OF THE GROSS PURCHASE OF THE MATERIAL. 1.6 WITHOUT PREJUDICE TO ABOVE, APPELLANT SUBMITS THAT THE SAID ORDER IS UNJUSTIFIED ON THE FACTS AND MERITS OF THE CASE. APPELLANT PRAYS THAT THE ADDITION / DISALLOWANCE ON ACCOUNT OF AD HOC BASIS PURCHASE RS. 1,23,557 / - BE DELETED. 2.1 THE LEARNED CIT (A) HAS ERRED IN LAW AND FACTS IN CONFIRMING THE ADVANCE GIVEN TO THE EMPLOYEE AND LABOUR CONTRACTOR OF RS. 3,47,000/ - TREATING AS APPELLANT HAS VIOLATED SECTION 40(A) (3] OF THE INCOME TAX ACT. 2.2. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW DURING THE YEAR UNDER CONSIDERATION APPELLANT HAS GIVEN ADVANCE TO HIS EMPLOYEE AND LABOUR CONTRACTOR WHICH IS AS UNDER; - EMPLOYEE OF THE APPELLANT MR. ANKIT GALA RS, 1,00,000/ - MR. RAJESH PATIL RS. 60,000 MR. LTESH GALA RS. 30,000 PERMANENT LABOUR CONTRACTOR; A TOZ GARMENTS RS. 55,000 MOHAMMED NASIM RS. 52,500 MOHAMMED NASIM RS, 49,400 ALL THE TEMPORARY ADVANCE ARE MADE TO THE EMPLOYEES FOR THE EMERGENCY MEDICAL EXPENSES AND ADVANCE TO THE LABOUR CONTRACTOR FOR THE PURCHASE OF THE MACHINE. 2.3 ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LA , THE LEARNED CIT ( A) HAS FAILED T O APPRECIATE THE GENUINE OF ITA. NO. 300 /M/201 7 A.Y. 2011 - 12 3 ADVANCE AND NATURE OF EMERGENCY FOR WHICH SUCH ADVANCE IS GIVEN TO THE EMPLOYEE. 2.4 ON THE ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAWS, THE LEANED CIT (A) GROSSLY ERRED IN RELYING UPON HONOURABLE RAJSTHAN HIGH COURT JUDGMENT IN THE CASE OF KEJRIWAL IRON STORES V/S CIT (1988) 169 ITR 12, WITHOUT APPRECIATING THAT THE FACTS INVOLVED IN THE APPELLANT CASE ARE DIFFERENT FROM T HE FACTS OF THE ABOVE CASE LAW . 2.5. WITHOUT PREJUDICE TO ABOV E, APPELLANT SUBMITS THAT THE SAID ORDER IS UNJUSTIFIED ON THE FACTS AND MERITS OF THE CASE. APPELLANT PRAYS THAT THE ADDITIONS/DISALLOWANCES OF RS.3,47,000/ - MADE IN RESPECT OF ADVANCE GIVEN TO THE EMPLOYEE AND LABOUR CONTRACTOR BE DELETED. 3 . THE BR IEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED HIS RETURN OF INCOME ON 30 . 09 .20 1 1 DECLARING TOTAL IN COME TO THE TUNE OF RS.50,50,095 / - FOR THE A.Y 2011 - 1 2 . THE RETURN WAS PROCESSED U/S 143(1) OF THE ACT. THEREAFTER, THE ASSESSMENT OF THE ASSESSEE WAS REOPENED ON THE BASIS OF INFORMATION RECEIVED FROM SALES TAX AUTHORITIES IN WHICH IT WAS STATED THAT THE ASSESSEE HAS PROCURED BOGUS BILLS FROM THE PARTY WITHOUT ACTUAL PURCHASING AND HAS TAKEN DELIVERY OF GOODS. NOTICE U/S 1 48 OF THE ACT WAS ISSUED. NOTICES U/S 143(2) & 142(1) OF THE ACT WERE ISSUED AND SERVED UPON THE ASSESSEE. THEREAFTER, THE PURCHASE FROM 3 PARTIES NAMELY MONISH ENTERPRISES IN SUM OF RS.288,433/ - , MARUTI IMPEX IN SUM OF RS.127,191/ - & TRICHIPURA M TRADING P. LTD. IN SUM OF RS. 78,603/ - WAS DISALLOWED AND THE TOTAL AMOUNT TO THE TUNE OF RS.4,94,227/ - WAS ADDED TO THE INCOME OF THE ASSESSEE. THE ASSESSEE HAS ALSO MADE THE CASH PAYMENT ITA. NO. 300 /M/201 7 A.Y. 2011 - 12 4 TO THE 6 PARTIES TOTAL TO THE TUNE OF RS.3,47,000/ - WHICH WAS ALSO DISALLOWE D U/S 40A(3) OF THE ACT AND ADDED TO THE INCOME OF THE ASSESSEE. AFTER SOME MORE DISALLOWANCE, THE INCOME OF THE ASSESSEE WAS ASSESSED TO THE TUNE OF RS.84,95,560/ - . FEELING AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A) WHO PARTLY ALLOWED THE C LAIM OF THE ASSESSE E BUT RESTRICT ED THE CLAIM TO THE EXTENT OF 25% OF THE BOGUS PURCHASE AND ADVANCE TO THE TUNE OF RS.3,47,000/ - . FEELING AGGRIEVED , THE ASSESSEE HAS FILED THE PRESENT APPEAL BEFORE US. ISSUE NO S . 1 TO 6 : - 4 . WE HAVE HEARD THE ARGUMENT ADVANCED BY THE LD. REPRESENTATIVE OF THE PARTIES AND PERUSED THE RECORD. THE CASE OF THE ASSESSEE WAS REOPENED UPON THE INFORMATION RECEIVED FROM THE SALES TAX DEPARTMENT IN WHICH IT WAS CONVEYED THAT THE ASSESSEE HAS TAKEN THE ACCOMMODATION ENTRY WITHOUT ACTUAL DELIVERY FROM 3 PARTIES NAMELY MONISH ENTERPRISES IN SUM OF RS.288,433/ - , MARUTI IMPEX IN SUM OF RS.127,191/ - & TRICHIPURA M TRADING P. LTD. IN SUM OF RS.78,603/ - TOTAL AMOUNT TO THE TUNE OF RS.4,94,227/ - WHICH WAS DISALLOWED AND WAS ADDED TO THE INCOME OF THE ASSESSEE . THE ASSESSING OFFICER RESTRICT ED THE ADDITION TO THE EXTEN T OF 100% OF THE BOGUS PURCHASE. O N APPEAL , THE CIT(A) HAS RESTRICTED THE ADDITION OF BOGUS PURCHASES TO THE EXTENT OF 25%. THE LD. REPRESENTATIVE OF THE ASSESSEE HAS ARGUED THAT THE IN THE BUSINESS OF CLOTH , THE PROFIT/ MARGIN IS VERY MUCH LESS AND ASSESSING THE PROFIT RATIO @ 25% OF THE TOTAL ITA. NO. 300 /M/201 7 A.Y. 2011 - 12 5 PURCHASE IS VERY HIGH, THEREFORE, THE SAME IS LIABLE TO BE REDUCED IN ACCORDANCE WITH LAW. IN SUPPORT OF THIS CONTENTION, THE LD. REPRE SENTATIVE OF THE ASSESSEE HAS PLACED RELIANCE UPON THE LAW SETTLED IN CIT VS. SIMIT P. SHETH (2013) 356 ITR 451 (GUJ) (HIGH COURT) AND THE CIT VS.NIKUNJ EXIMPT ENTERPRISES (P) LTD. (2013) 216 216 TAXMAN 171 (BOM) AND OTHER CASES. HOWEVER ON THE OTHER HAND , THE LD. REPRESENTATIVE OF THE DEPARTMENT HAS STRONGLY RELIED UPON THE ORDER PASSED BY THE CIT (A) IN QUESTION. IN THE INSTANT CASE , NO DOUBT AFTER THE RECEIPT OF THE INTIMATION FROM SALES TAX AUTHORITIES, THE AO ISSUED THE NOTICES TO THE RELEVANT PARTIES WHICH WERE NOT SERVED TO THEM. AFTER INTIMATION TO THE ASSESSEE, THE ASSESSEE HAS FAILED TO PRODUCE THE SAME BEFORE THE ASSESSING OFFICER. THE GROSS AND NET PROFIT OF THE LAST 3 YEARS IS HEREBY MENTIONED BELOW .: - ASSESSMENT YEAR TURN OVER GROSS PROFIT NET PROFIT 2011 - 12 10,55,26,527 2,49,44,758 58,14,444 2010 - 11 8,52,33,881 2,04,95,526 46,63,617 2009 - 10 6,99,38,657 1,68,48,166 24,33,218 THE FACT OF THE EACH CASE IS QUITE DIFFERENT . THE PROFIT RATIO IN EACH PROFESSION IS ALSO DIFFERENT AND BASED UPON THE FACTS AND CIRCUMSTANCES OF THE EACH CASE. THE ASSESSEE IN THE PRESENT CASE IS IN THE PROFESSION OF CLOTH. THE ADDITION TO THE EXTENT OF 25% OF THE BOGUS PURCHASE DOES NOT SEEMS JUST IFIABLE. THE RELYING UPON THE FINDING OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. SIMIT P. SHETH (2013) 356 ITR 451 (GUJ) (HIGH COURT) . AND TAKEN INTO ITA. NO. 300 /M/201 7 A.Y. 2011 - 12 6 ACCOUNT OF THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE, THE INTEREST OF JUSTICE WILL MEE T IF W E RESTRICT THE ADDITION OF BOGUS PURCHASE TO THE TUNE OF RS.3,47,000/ - TO THE EXTENT OF 12.5%. WE ORDERED ACCORDINGLY. ACCORDINGLY, THIS ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE AGAINST THE REVENUE. ISSUE NOS. 2 .1 TO 2.5 : - 5. UNDER THESE ISSUES THE ASSESSEE HAS CHALLENGED THE CONFIRMATION OF ADDITION ON ACCOUNT OF ADVANCE GIVEN TO THE EMPLOYEE AND LABOUR CONTRACTOR TO THE TUNE OF RS. 3,47,000/ - IN VIEW OF THE PROVISION U/S 40(A)(3) OF THE ACT. THE LD. REPRESENTATIVE OF THE ASSESSEE HAS ARGUED THAT THE ASSESSEE DID NOT PURCHASE ANYTHING AND THE PROVISION OF SECTION 40A(3) OF THE ACT IS ATTRACTED ONLY IN THE CASE WHERE THE GENUINENESS OF ALL THE EXPENSES INCURRED IN CASH IS IN DOUBT, THEREFORE, THE DISALLOWANCE IS WRONG AGAINST LAW AND FACTS AND THE CLAIM OF THE ASSESSEE IN CONNECTION WITH LOAN AND ADVANCE IS LIABLE TO BE ALLOWED. IT IS ALSO ARGUED THAT THE ASSESSEE HAS GIVEN THE COPY OF LEDGER WHICH LIES AT PAGE NO. 124 (EXHIBIT N) ON RECORD AND ACCORDINGLY THE CLAIM IS QUITE JUSTIFIABLE HENCE LIABLE TO BE ALLOWED. IT IS ALSO SPECIFICALLY ARGUED THAT THE ASSESSEE HAS GIVEN THE LOAN AND ADVANCES WHICH HAS BEEN RECEIVED BY HIM, THEREFORE, THE ADDITION IS NOT JUSTIFIABLE. IT IS QUITE CLEAR THAT THE EXPENSE WHICH IS NOT GENUINE IS LIABLE TO BE DISALLOWED IN VIEW OF THE PROVISION U/S 40A(3) OF THE ACT. IN THE PRESENT CASE THE CONTROVERSY IS IN CONNECTION WITH THE LOAN AND ITA. NO. 300 /M/201 7 A.Y. 2011 - 12 7 ADVANCES GIVEN TO THE LABOUR/CONTRACTOR. THE ASSESSEE HAS SUBMITTED THE DETAILS WHICH LIES AT PAGE NO. 124 OF THE PAPER BOOK. THE CONTENTION OF THE ASSESSEE IS ALSO THAT THE HE HAS RECEIVED THE LOAN AND ADVANCES LATER ON. ALL THE FACTS ARE REQUIRED TO BE EXAMINED AT THE END OF THE AO, THEREF ORE, IN THE INTER EST OF JUSTICE, W E SET ASIDE THE FINDING OF THE CIT(A) ON THIS ISSUE AND RESTORED THE ISSUE BEFORE THE AO TO DECIDE THE MATTER OF CONTROVERSY AFRESH IN VIEW OF THE EVIDENCE ADDUCED ON RECORD BY GIVING AN OPPORTUNITY OF BEING HEARD TO THE ASSESSEE IN ACCORD ANCE WITH LAW. ACCORDINGLY, THIS ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE AGAINST THE REVENUE. 6 . IN RESULT, APPEAL FILED BY THE ASSESSEE IS HEREBY ORDERED TO BE PARTLY ALLOWED . ORDER P RONOUNCED IN THE OPEN COURT ON 19. 09 . 2018 . SD/ - SD/ - ( B. R. BASKARAN ) (AMARJIT SINGH) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI; DATED : 19. 09. 2018 VIJAY / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT ITA. NO. 300 /M/201 7 A.Y. 2011 - 12 8 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. / BY ORDER, //TRUE COPY// / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI