KAMLABAI F JAIN, MUMBAI V. ITO 19(2)(2), MUMBAI

ITA 3295/MUM/2017

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 6915 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-12-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: H
• Assessment Year: 2009-2010
• Appeal Filed On: 05-05-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Reopening of assessment; Bogus purchase; Difference of opinion; Change of opinion; Reassessment proceedings
• Section: 148; 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES H , MUMBAI BEFORE S HRI RAJESH KUMAR (AM) AND SHRI RAM LAL NEGI (JM) ITA NO. 3295/MUM/2017 ASSESSMENT YEAR: 2009 - 2010 & ITA NO. 6344/MUM/2017 ASSESSMENT YEAR: 2010 - 2011 KAMALBAI FULCHAND JAIN, 133, KIKA STREET, GULALWADI, MUMBAI - 400004 PAN: AHIPJ9628C VS. THE ITO 19(2)(2), 2 ND FLOOR, MATRU MANDIR, TARDEO, MUMBAI - 400004 (APPELLANT) (RESPONDENT) ASSESSEE BY : NONE REVENUE BY : SHRI MANOJ KUMAR SINGH (D R) DA TE OF HEARING: 31/12 /201 8 DATE OF PRONOUNCEMENT: 31 / 12 /201 8 O R D E R PER RAM LAL NEGI, JM THESE APPEALS HAVE BEEN FILED BY THE ASSESSEE AGAINST THE TWO SEPARATE ORDER S DATED 24.03.2017 AND 14.08.2017 , PASSED BY THE C O MMISSIONER OF INCOME TAX (APPEALS) (FOR SHORT THE CIT (A)) - 29 AND 30 , MUMBAI RESPECTIVELY , FOR THE ASSESSMENT YEAR S 2009 - 10 AND 2010 - 11 , WHEREBY THE LD. CIT (A) HAS PARTLY ALLOWED THE APPEAL FILED BY THE ASSESSEE AGAINST THE ASSESSMENT ORDER PASSED U/S 1 43 (3) R.W.S 147 OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT) PERTAINING TO THE ASSESSMENT YEAR 2009 - 10 AND DISMISSED THE APPEAL FILED BY THE ASSESSEE AGAINST ASSESSMENT ORDER PASSED U/S 143 (3) R.W.S. 147 OF THE ACT PERTAINING TO THE ASSESSMENT YEAR 2010 - 11 . SINCE, THES E APPEALS PERTAIN TO THE SAME ASSESSEE, THE SAME WERE CLUBBED, HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2 ITA NO S . 6344 & 3295/MUM/2017 ASSESSMENT YEAR S : 2009 - 10 AND 2010 - 11 ITA NO. 3295/MUM/2017 (ASSESSMENT YEAR: 2009 - 2010) BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE AN INDIVIDUAL , ENGAGED IN THE BUSINESS OF TRADING IN FERROUS METALS AND INSULATING MATERIAL, FILED HER RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION DECLARING THE TOTAL INCOME OF RS. 7,27,040/ - . THE RETURN WAS PROCESSED U/S 143 (1) OF THE ACT. SUBSEQUENTLY, THE CASE WAS REOPENED AFTER ISSUING NOTICE U/S 148 OF THE ACT ON THE BASIS OF INFORMATION RECEIVED FROM SALES TAX DEPARTMENT THROUGH DGIT (INV.) TO THE EFFECT THAT DURING THE PREVIOUS YEAR THE ASSESSEE HAD OBTAINED ACCOMM ODATION ENTRIES FROM BOGUS PARTIES , WITHOUT PURCHASING ANY GOODS IN ORDER TO INFLATE PURCHASES OR EXPENSES. AS PER THE INFORMATION THE ASSESSEE HAD OBTAINED BOGUS ENTRIES FROM SEVEN BOGUS PARTIES TO SHOW THE PURCHASE S AMOUNTING TO RS. 3,61,87,617/ - . DURIN G THE COURSE OF RE - ASSESSMENT PROCEEDINGS, AO ISSUED NOTICES U/S 133 (6) TO THE PARTIES CONCERNED, HOWEVER, THE NOTICES WAS RETURNED BACK UN - SERVED BY THE POSTAL DEPARTMENT WITH THE REMARKS NOT FOUND. THE ASSESSEE WAS ALSO ASKED TO PRODUCE THE SAID PARTI ES AND ALSO TO PRODUCE THE DOCUMENTS SUCH AS DELIVERY CHALLANS, TRANSPORTATION RECEIPTS, OCTROI RECEIPTS, W EIGHBRIDGE RECEIPT, EXCISE GATE PASS ETC., BUT THE ASSESSEE FAILED TO PRODUCE THE SAME. ACCORDINGLY, THE AO FOLLOWING THE DECISION OF HON BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. SIMIT P. SHETH 356 ITR 451 (GUJ) ESTIMATED THE PROFIT ELEMENT EMBEDDED IN THE SAID PURCHASES @ 12.5% INCLUDING VAT AND ADDED BACK THE SAME TO THE INCOME OF THE ASSESSEE. 2. IN THE FIRST APPEAL, THE LD. CIT (A) RESTRICTED THE ADDITION TO 6.5% OF THE TOTAL AMOUNT OF BOGUS PURCHASES HOLDING THAT THE APPLICABLE VAT RATE DURING THE RELEVANT PERIOD ON THE ITEMS PURCHASED BY THE APPELLANT WAS 4% AND THE PROFIT MARGIN IN THE SAID INDUSTRY WAS ABOUT 2.5 % . A GAINST THE SAID FINDING S OF THE LD. CIT (A), THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 3 ITA NO S . 6344 & 3295/MUM/2017 ASSESSMENT YEAR S : 2009 - 10 AND 2010 - 11 3. THE ASSESSEE HAS CHALLENGED THE IMPUGNED ORDER PASSED BY THE LD. CIT (A) BY RAISING THE FOLLOWING GROUNDS : - GROUND NO. 1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT (A) 30 ERRED IN CONFIRMING THE ORDER OF THE INCOME TAX OFFICER 19(2)(2) [AO] IN REOPENING OF THE ASSESSMENT WITHOUT APPRECIATING/IGNORING THAT I) THE APPELLANT HAVING DISCLOSED ALL MATERIAL FACTS AND THE AO HAVING APPLIED HIS MIND TO THEM, THE RE OPENING IS INVALID BEING BASED ON CHANGE OF OPINION. II) THE PROCEEDINGS INITIATED U/S 147 OF THE INCOME TAX ACT, 1961 IS BASED ON THE INFORMATION RECEIVED FROM THE INVESTIGATION DEPARTMENT WHICH IS A THIRD PARTY. THEREFORE, THE REOPENING IS INVALID AND BAD IN LAW AND OUGHT TO BE QUASHED. WITHOUT PREJUDICE TO THE ABOVE GROUND GROUND NO. 2 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT (A) ERRED IN RESTRICTING THE DISALLOWANCE OF PURCHASES AMOUNTING TO RS. 23,52,195 BEING 6.5% OF THE TO TAL ALLEGED PURCHASES OF RS. 3,61,87,617 AND NOT CONSIDERING THE NET PROFIT OF THE APPELLANT. 4. THESE CASES WERE FIXED FOR HEARING FOR TODAY I.E., ON 31.12.2018. HOWEVER, WHEN THE CASE WAS CALLED OUT FOR HEARING, NONE APPEARED ON BEHALF OF THE ASSESSEE . WE NOTICE THAT THE ASSESSEE HAS NOT APPEARED DESPITE SERVICE OF NOTICE . HENCE, WE ARE OF THE CONSIDERED VIEW THAT THE ASSESSEE IS NOT INTERESTED IN PURSUING ITS CASE. WE ACCORDINGLY DECIDED TO DISPOSE OF THE APPEAL ON THE BASIS OF MATERIAL AVAILABLE ON R ECORD , AFTER HEARING THE LD. DEPARTMENTAL REPRESENTATIVE (DR). 5. T HE LD. DR SUBMITTED THAT SINCE THE LD. CIT (A) HAS RESTRICTED THE ADDITION TO 6.5% OF THE TOTAL AMOUNT OF BOGUS PURCHASES DETERMINED BY THE AO, THERE IS NO MERIT IN THE APPEAL OF THE ASSES SEE. 4 ITA NO S . 6344 & 3295/MUM/2017 ASSESSMENT YEAR S : 2009 - 10 AND 2010 - 11 6. WE HAVE PERUSED THE MATERIAL ON RECORD. THE AO HAS MADE ADDITION OF 12.5% OF THE TOTAL AMOUNT OF BOGUS PURCHASES BY FOLLOWING THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF SIMIT P. SHETH (SUPRA) , HOWEVER IN APPEAL THE LD. CIT (A) H AS RESTRICTED THE ADDITION TO 6.5% OF THE TOTAL AMOUNT OF BOGUS PURCHASES . THE OPERATIVE PART OF THE DECISION OF THE LD. CIT(A) READS AS UNDER: - 7.9 IN THE WRITTEN SUBMISSIONS, LD. AR, WITHOUT PREJUDICE TO THE REQUEST OF TOTAL DELETION OF THE ADDITION, A LTERNATIVE PLEA MADE THROUGH GROUND NO. 3 IS THAT, AO SHOULD HAVE ADDED 4% OF THE SUSPICIOUS PURCHASES BEING THE GROSS PROFIT RATIO OF THE APPELLANT. WHEREAS IN THE DECISION HONBLE COURT DECIDED THAT THE ESTIMATION SHOULD INCLUDE THE PROFIT MARGIN PLUS TH E TAX BENEFIT TO BE ESTIMATED IN THE PURCHASES MADE FROM THE GREY MARKET. THE APPELLANT FURNISHED THE COPIES OF THE INVOICES AND ON PERUSAL OF THE SAME THE PERCENTAGE OF VAT LEVIED ON THE ITEMS DEALT BY THE APPELLANT IS @ 4%. SINCE, THE APPELLANT IS ALSO I N THE SAME LINE OF BUSINESS I.E. TRADING IN FERROUS AND NON - FERROUS METALS AND INSULATING MATERIAL, AS PER THE LOGIC, THE PROFIT MARGIN SHOULD BE ADOPTED @ 2.5% AND NOT 1.15% NP RATIO, AS REQUESTED BY THE APPELLANT. IN VIEW OF THE ABOVE, IN MY CONSIDERED O PINION, IF THE PROFIT PERCENTAGE EMBEDDED ON SUCH PURCHASES IS RESTRICTED TO 6.5%, (I.E. 4% OF VAT LEVIED + 2.5% TOWARDS PROFIT MARGIN), THAT WILL MEETS THE ENDS OF JUSTICE, AS THE ESTIMATION IS IN LINE WITH THE LOGIC ADOPTED IN THE ABOVE CITED CASE. TAKI NG ALL THE FACTS INTO CONSIDERATION AND APPLYING THE LOGIC OF SIMIT P. SHETH CASE FOR ESTIMATING THE PROFIT ELEMENT EMBEDDED ON NON - GENUINE PURCHASES, THE AO IS DIRECTED TO RESTRICT THE ESTIMATION @ 6.5% ON THE TOTAL NON GENUINE PURCHASES OF RS. 3,61,87,6 17/ - , MADE FROM THE SEVEN PARTIES. APPEAL ON GROUND NO. 2 AND 3 ARE TREATED AS PARTLY ALLOWED. 7. WE NOTICE THAT THE LD. CIT (A) HAS RESTRICTED THE ADDITION TO 6.5% FOR THE REASON THAT THE HONBLE GUJARAT HIGH COURT HAS UPHELD THE ADDITION OF 12.5% OF T HE TOTAL AMOUNT OF BOGUS PURCHASES CONFIRMED BY THE ITAT, I.E. 10% VAT AND 2.5% PROFIT MARGIN THEREON. HENCE, IN THE PRESENT CASE THE ASSESSEE HAS PRODUCED THE DOCUMENTARY EVIDENCE TO ESTABLISH THAT THE VAT RATE APPLICABLE 5 ITA NO S . 6344 & 3295/MUM/2017 ASSESSMENT YEAR S : 2009 - 10 AND 2010 - 11 DURING THE RELEVANT PERIOD WAS 4% . HENCE, THE LD. CIT (A) HAS RIGHTLY RESTRICTED THE ADDITION TO 6.5% OF THE TOTAL AMOUNT OF BOGUS PURCHASE I.E., 4+ 2.5% OF THE PROFIT MARGIN. WE, THEREFORE , DO NOT FIND ANY INFIRMITY IN THE ORDER PASSED BY THE LD. CIT (A) TO INTERFERE WITH. ACCORDINGLY, W E UPHOLD THE FINDINGS OF THE LD. CIT (A) AND DISMISS THE APPEAL OF THE ASSESSEE. ITA NO. 6344/MUM/2017 (ASSESSMENT YEAR: 2010 - 2011 ) THE FACTS OF THE PRESENT CASE ARE IDENTICAL TO THE FACTS OF THE CASE OF THE ASSESSEE FOR THE A.Y. 2009 - 10 DISCUSSED ABOVE EXCEPT THE AMOUNT OF BOGUS PURCHASES DETERMINED BY THE AO. IN THE PRESENT CASE, THE AO MADE ADDITION OF 12.5% OF THE TOTAL AMOUNT OF BOGUS PURCHASES BY FOLLOWING THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. SIMIT P. SHETH (SUPRA). IN THE FIRST APPEAL, T HE LD. CIT (A) CONFIRMED THE ADDITION OF 12.5% AND DISMISSED THE APPEAL OF THE ASSESSEE. THE ASSESSEE IS IN APPEAL AGAINST THE IMPUGNED ORDER PASSED BY THE LD. CIT (A). 2 . THE ASSESSEE HAS RAISED THE FOLLOWING EFFECTIVE GROUND S OF APPEAL AGAINST THE IMPUGNED ORDER PASSED BY THE LD. CIT (A): - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT (A) ERRED IN CONFIRMING THE REOPENING OF ASSESSMENT UNDER SECTION 148 OF THE INCOME TAX ACT, 1961 (ACT) BY THE ITO 19(20(2). WITHOUT PREJUDICE TO THE ABOVE GROUND GROUND NO. 2 THE LEARNED CIT (A) ERRED IN CONFIRMING ACTION OF THE AO IN CONFIRMING DISALLOWANCE OF RS. 24,08,964/ - (12.5% OF RS. 1,92,71,714) ON ACCOUNT OF PURCHASES FROM SUSPICIOUS DEALERS WITHOUT APPRE CIATING THE FACT THAT ASSESSEE IS A WHOLESALE TRADER. 6 ITA NO S . 6344 & 3295/MUM/2017 ASSESSMENT YEAR S : 2009 - 10 AND 2010 - 11 GROUND NO. 2 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT (A) OUGHT TO HAVE REDUCED THE DISALLOWANCE TO RS. 8,01,703/ - (4.16% OF 1,92,71,714) AS THE GROSS PROFIT RATIO OF THE APPELLANT WAS ONLY 4.16%. GROUND NO. 3 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT (A) OUGHT TO HAVE REDUCED THE DISALLOWANCE TO RS. 12,52,661/ - (6.5% OF 1,92,71,714) FOLLOWING THE ORDER OF THE CIT (A) IN APPELLA NTS OWN CASE FOR THE AY 2009 - 10. 3. THE LD. DR SUBMITTED THAT SINCE THE ORDER PASSED BY THE LD. CIT (A) IS IN ACCORDANCE WITH THE RATIO LAID DOWN BY THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. SIMIT P. SHETH , THERE IS NO INFIRMITY IN THE ORDE R PASSED BY THE LD. CIT (A). 4. WE HAVE GONE THROUGH THE RELEVANT MATERIAL AVAILABLE ON RECORD. VIDE GROUND NO 1 T HE ASSESSEE HAS CHALLENGED THE ACTION OF THE LD. CIT (A) IN RE - OPENING OF THE ASSESSMENT BY THE AO. HOWEVER, WE DO NOT FIND ANY MERIT IN THE CONTENTION OF THE ASSESSEE. AO HAS ISSUED NOTICE U/S 148 OF THE ACT A S PER INFORMATION RECEIVED FROM THE SALES TAX DEPARTMENT THROUGH DGIT (INV.), DISCLOSING THAT THE ASSESSEE HAD PROCURED BOGUS PURCHASE BILLS AMOUNTING TO RS. 1,92,71,714/ - FROM FIVE PARTI ES. DURING THE REASSESSMENT PROCEEDINGS, THE ASSESSEE WAS GIVEN SUFFICIENT OPPORTUNITY TO PROVE THE GENUINENESS OF THE TRANSACTIONS, HOWEVER THE ASSESSEE FAILED TO ESTABLISH THE SAME. HENCE, IN OUR CONSIDERED VIEW, THE INFORMATION WAS SUFFICIENT FOR THE AO TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT . HENCE, THERE IS NO ILLEGALITY IN THE REOPENING OF THE ASSESSMENT IN THE PRESENT CASE. WE, THEREFORE, UPHOLD THE FINDINGS OF THE LD. CIT (A) DISMISS GROUND NO. 1 OF THE ASSESSEE. 7 ITA NO S . 6344 & 3295/MUM/2017 ASSESSMENT YEAR S : 2009 - 10 AND 2010 - 11 5. VIDE G ROUND NO. 2 AND 3, THE ASSESSEE HAS CHALLENGED THE ADDITION OF 12.5% OF THE PURCHASES IN QUESTION AND FURTHER URGED THAT THE LD. CIT (A) OUGHT TO HAVE REDUCED THE DISALLOWANCE TO 4.16% WHICH IS THE GROSS PROFIT RATIO DURING THE RELEVANT YEAR . THE ASSESSEE HAS FURTHER CONTENDED THAT THE LD. CIT (A) OUGHT TO HAVE REDUCED THE DISALLOWANCE TO 6.5% OF THE TOTAL AMOUNT OF BOGUS PURCHASES FOLLOWING THE ORDER OF THE CIT (A) PASSED IN THE ASSESSEES OWN CASE FOR THE A.Y. 2009 - 10. 6. SINCE, WE HAVE DISMISSED THE AS SESSEES APPEAL FOR THE A.Y. 2009 - 10 AND UPHELD THE ADDITION OF 6. 5 % SUSTAINED BY THE LD. CIT (A) BY FOLLOWING THE RATIO LAID DOWN BY THE HONBLE GUJARAT HIGH COURT IN THE CASE OF SIMIT P.SHETH (SUPRA), WE DO NOT FIND ANY REASON TO SUSTAIN ADDITION OF 12.5 % IN THE ASSESSMENT YEAR UNDER CONSIDERATION. WE FURTHER NOTICE THAT SINCE THE DEPARTMENT HAS NOT FILED ANY APPEAL AGAINST THE ORDER OF THE LD. CIT (A) IN THE ASSESSMENT YEAR 2009 - 10, THERE IS NO REASON TO TAKE A DIFFERENT VIEW IN THE PRESENT CASE, PARTICU LARLY WHEN THERE IS NO CHANGE OF FACTS IN THE PRESENT CASE. WE , THEREFORE, MODIFY THE IMPUGNED ORDER PASSED BY THE LD. CIT(A) AND RESTRICT THE ADDITION TO 6.5% I.E. 4% VAT AND 2.5% PROFIT MARGIN ON THE SAID TRANSACTION AND DIRECT THE AO TO COMPUTE THE ADDI TION @ 6.5% OF THE TOTAL AMOUNT OF BOGUS PURCHASES. IN THE RESULT, APPEAL FILED BY THE ASSESSEE FOR ASSESSMENT YEAR 2009 - 2010 IS DISMISSED AND FOR THE ASSESSMENT YEAR 2010 - 2011 IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST DEC EMBER, 2018 . SD/ - SD/ - ( RAJESH KUMAR ) ( RAM LAL NEGI ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; DATED: 31 / 12 / 2018 ALINDRA PS 8 ITA NO S . 6344 & 3295/MUM/2017 ASSESSMENT YEAR S : 2009 - 10 AND 2010 - 11 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, IT AT, MUMBAI 6. / GUARD FILE . / BY ORDER, //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI