ITO 25(3)(4), MUMBAI V. SUNIL B. DOSHI, MUMBAI

ITA 3322/MUM/2017

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 8286 (ITAT-MUMBAI)
• Duration Of Justice: 6 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-11-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2011-2012
• Appeal Filed On: 05-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V JUSTIN
• Assessee Lawyers: VIMAL PUNIMIYA
• Keywords: Bogus purchase; Tangible material
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL E , BENCH MUMBAI BEFORE SHRI R.C.SHARMA, AM & SHRI SANDEEP GOSAIN , JM ITA NO. 3322 / MUM/20 1 7 ( ASSESSMENT YEAR : 2011 - 12 ) ITO 25(3)(4) R.NO.605, C - 10, 6 T H FLOOR PRATYAKSHAKAR BHAVAN BKC, BANDRA (E) MUMBAI 400 051 VS. SHRI SUNIL B. DOSHI 10, HARI VIJAY SOCIETY BHAGAT SINGH ROAD VILE PARLE (W) MUMBAI 400 056 PAN/GIR NO. AGGPD4879C APPELLANT ) .. RESPONDENT ) ITA NO. 2571/ MUM/20 17 ( ASSESSMENT YEAR : 2011 - 12 ) SHRI SUNIL B. DOSHI 10, HARI VIJAY SOCIETY BHAGAT SINGH ROAD VILE PARLE (W) MUMBAI 400 056 VS. ITO 25(3)(4) R.NO.605, C - 10, 6 T H FLOOR PRATYAKSHAKAR BHAVAN BKC, BANDRA (E) MUMBAI 400 051 PAN/GIR NO. AGGPD4879C APPELLANT ) .. RESPONDENT ) REVENUE BY SHRI V. JUSTIN ASSESSEE BY SHRI VIMAL PUNIMIYA DATE OF HEARING 07 / 09/ 201 7 DATE OF PRONOUNCEME NT 22 / 11 /201 7 / O R D E R PER R.C.SHARMA (A.M) : THESE ARE CROSS APPEALS FILED BY ASSESSEE AND REVENUE A GAINST THE ORDER OF CIT(A) 37, MUMBAI DATED 17/02/2017 IN THE MATTER OF ORDER PASSED U/S.143(3) R.W.S. 147 OF THE IT ACT. 2. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. ITA NO. 3322/MUM/2017 SHRI SUNIL B DOSHI 2 3. FACTS IN BRIEF ARE THAT DURING THE COURSE OF RE - ASSESSMENT PROCEEDINGS, AO OBSERVED THAT ASSESSEE HAD MADE PURCHASES FROM THE SUPPLIERS WHO WERE FOUND TO BE BOGUS BY THE SALES TAX DEPARTMENT. AO ASKED THE ASSESSEE TO SUBMIT THE DETAI LS, TO PROVE THE GENUINENESS OF THE ABOVE PURCHASE TRANSACTION. BY SUBMITTING FOLLOWING DETAILS, THE ASSESSEE HAD AL SO DISCHARGED HIS PRIMARY ONUS OF PROVING GENUINENESS OF TRANSACTION. (I) LEDGER COPY OF PURCHASES PARTIES IN CONSIDERATION. SHOWING PURCH ASES, PAYMENTS AND BALANCE AT THE END OF THE YEAR. (II) COPIES OF PURCHASE BILLS. (III) COPY OF BANK STATEMENT SHOWING PAYMENT OF PURCHASES MADE BY ACCOUNT PAYEE CHEQUES. (IV) PURCHASE - SALES TALLY SHEET. (V) S TOCK REGISTER SHOWING ALL TRANSACTION OF PURCHASE - SALES AND STOCK OF QUANTITY OF GOODS. (VI) INCOME TAX AUDIT REPORT. (VII) VAT AUDIT REPORT SHOWING ALL PURCHASES - SALES WITH THEIR TIN NUMBER. 4. BEING NOT SATISFIED BY ASSESSEES SUBMISSION , AO ADDED BACK ENTIRE PURCHASES IN ASSESSEES INCO ME. 5 . BY THE IMPUGNED ORDER CIT(A) FOUND THAT SUPPLIERS WERE BOGUS BUT PURCHASES WERE GENUINE, ACCORDINGLY PROFIT ELEMENT TO THE EXTENT OF 12.5% WAS ESTIMATED ON THE SAME. THUS , ADDITION WAS RESTRICTED TO 12.5% OF THE PURCHASES. ITA NO. 3322/MUM/2017 SHRI SUNIL B DOSHI 3 6. IT WAS ARGUED BY LEARN ED AR THAT AO HAS NOT CONDUCTED ANY ENQUIRY ON HIS BEHALF , TO PROVE THE ABOVE PURCHASES MADE FROM CONCERNS TO BE NON - GENUINE. HE HAS MERELY RELIED ON BORROWED INFORMATION AND STATEMENTS GIVEN BY DIT(INV.), MUMBAI. WHEREAS, THE JURISDICTIONAL CONDITION P RECEDENT TO REOPEN OR REASSESS THE CASE IS TO HAVE A FRESH TANGIBLE MATERIAL ON RECORD, WHICH IS NOT THE CASE IN PRESENT RE - ASSESSMENT MADE U/S. 143(3) R.W.S 147 OF THE ACT. 7 . AS PER LEARNED AR ASSESSEE HAS FURNISHED THE FOLLOWING DOCUMENTS TO SUBSTANTIAT E GENUINENESS OF PURCHASES. 1. ASSESSEE - HAS ALL BILLS OF PURCHASES. 2. ALL PAYMENT MADE THOUGHT ACCOUNT PAYEE CHEQUE. 3. SUPPLIER PROVIDED ALL IDENTITY TO BANK FOLLOWING KYC NORMS. 4. ASSESSEE HAS STOCK REGISTER AND ALL QUANTITY IS RECORDED IN STOCK REGISTER. 5. ALL EXPENSES ARE ALLOWED IN PROFIT 85 LOSS ACCOUNT INCLUDING TRANSPORT CHARGES 6. ALL SALES OF ASSESSEE WERE ACCEPTED. WITHOUT PURCHASES SALES CANNOT TAKEN PLACE. 7. ASSESSEE ACCOUNTS DULY AUDITED BY TAX AUDITOR AS WELL VAT AUDITORS. 8. THE SUPPLIER OF GOODS GAVE WRONG STATEMENT TO VAT DEPARTMENT TO EVADE VAT. 9. ALL PURCHASES BILLS ALSO HAD SHOWN VAT AMOUNT WHICH IS DULY PAID BY ASSESSEE TO SUPPLIER. 10. THERE IS NO EVIDENCE THAN CASH RECEIVED BACK BY ASSESSEE. 11 . IF SOME SUPPLIERS HAVE SMALL PLACE OF BUSINESS THAN IT CANNOT ASSUMED THAT ASSESSEE DID HAWALA TRANSACTION 8 . RELIANCE WAS ALSO PLACED ON THE JUDICIAL PRONOUNCEMENTS PLACED IN THE PAPER BOOK FOR DELETING THE ADDITION MADE ON ACCOUNT OF PURCHASES, WHEN THE ASSESSEE HAS SHOWN SUBSTANTIAL GP. 9 . ON THE OTHER HAND, LEARNED DR RELIED ON THE ORDER OF THE AO AND CONTENDED THAT ALL THE SUPPLIERS WERE FOUND TO BE BOGUS BY THE SALES TAX ITA NO. 3322/MUM/2017 SHRI SUNIL B DOSHI 4 DEPARTMENT, ACCORDINGLY AO WAS JUSTIFIED IN MAKING 100% ADDITION WITH R ESPECT TO SUCH PURCHASES. 10 . WE HAVE CONSIDERED RIVAL CONTENTIONS AND CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND FOUND FROM RECORD THAT ASSESSEE IS ENGAGED IN TRADING OF FERROUS AND NON - FERROUS METALS. ON THE BASIS OF INFORMATION FROM SALES TAX DEPARTMENT, AO MADE ADDITION WITH RESPECT TO THE ALLEGED BOGUS PURCHASE. BY THE IMPUGNED ORDER, CIT(A) OBSERVED THAT WHERE PURCHASES ARE HELD AS BOGUS THEN THE CORRESPONDING SALES SHOULD ALSO BE HELD BOGUS AS WITHOUT THE MATERIAL BEING PURCHASED SALES IS NOT POSSIBLE, THEREFORE, WITHOUT CORRESPONDING PRODUCT ION / SALES BEING HELD BOGUS, IT CANNOT BE THE CASE OF BOGUS PURCHASES. AFTER OBSERVING AT PARA 5.6, CIT(A) FOUND THAT IT IS A CASE OF PURCHASES FROM BOGUS PARTIES, HOWEVER, PURCHASES ITSELF W ERE NOT BOGUS. THE CIT(A) HA S OBSERVED THAT ASSESSEE MADE PAYMENT OF PURCHASES THROUGH ACCOUNT PAYEE CHEQUE DULY CLEARED THROUGH NORMAL BANKING CHANNE L. THE CIT(A) FOUND THAT BEFORE THE AO ASSESSEE HAS PRODUCED DOCUMENTARY EVIDENCE LIKE COPIES OF INV OICES AND LEDGER ACCOUNTS OF THE VENDORS IN THE A SSESSEE 'S BOOKS OF ACCOUNT RECORDING THESE PURCHASES TO SUBSTANTIATE THE GENUINENESS OF THESE PURCHASES. SINCE THE SALES RECEIPTS WAS NOT DOUBTED OR DISPUTED BY THE AO AND HE HAS ACCEPTED THE SALES RECEIPTS OF THE A SSESSEE AS IT IS, THEREFORE, THE AO CANNOT DENY THAT PURCHASES WERE NOT MADE BY THE A SSESSEE AND THE MATERIAL WAS NOT USED FOR ITS CONTRACT WORK. ITA NO. 3322/MUM/2017 SHRI SUNIL B DOSHI 5 11 . IN PARA 5.8, CIT(A) OBSERVED THAT THE A.O. HAD MADE THE ADDITION AS SOME OF THE SUPPLIERS WERE DEC LARED HAWALA DEALERS BY THE VAT DEPARTMENT. THIS MAY BE A GOOD REASON FOR MAKING FURTHER INVESTIGATION BUT THE AO DID NOT MAKE ANY FURTHER INVESTIGATION AND MERELY COMPLETED THE ASSESSMENT ON SUSPICION. ONCE THE ASSESSEE HAS BROUGHT ON RECORD THE DETAILS O F PAYMENTS BY ACCOUNT PAYEE CHEQUE, IT WAS INCUMBENT ON THE AO TO HAVE VERIFIED THE PAYMENT DETAILS FROM THE BANK OF THE ASSESSEE AND ALSO FROM THE BANK OF THE SUPPLIERS TO VERIFY WHETHER THERE WAS ANY IMMEDIATE CASH WITHDRAWAL FROM THEIR ACCOUNT. NO SUCH EXERCISE HAS BEEN DONE OR FINDINGS RECORDED. THERE WAS NO DETAILED INVESTIGATION MADE BY THE AO HIMSELF. IT IS ALSO FOUND THAT THE PAYMENTS HAVE BEEN MADE BY ACCOUNT PAYEE CHEQUE WHICH ARE DULY REFLECTED IN THE BANK STATEMENT OF THE ASSESSEE. THERE IS NO E VIDENCE TO SHOW THAT THE ASSESSEE HAS RECEIVED CASH BACK FROM THE S UPPLIERS. THE AO HAS NOT BROUGHT ANY MATERIAL ON RECORD TO SHOW THAT THERE IS SUPPRESSION OF SALES. IT IS BASIC RULE OF ACCOUNTANCY AS WELL AS OF TAXATION LAWS THAT PROFIT FROM BUSINESS CANNOT BE ASCERTAINED WITHOUT DEDUCTING COST OF PURCHASE FROM SALES. AFTER GIV ING THESE OBSERVATIONS, CIT(A) HA S DIRECTED AO TO ESTIMATE PROFIT AT 12.5%. 10. FROM THE RECORD WE FOUND THAT ASSESSEE HAS ALREADY DECLARED GP OF 6.40% ON THE TOT AL SALES. THE GP DECLARED BY THE ASSESSEE WITH RESPECT TO THE ALLEGED BOGUS PURCHASES WERE BETTER THAN THE GP DECLARED IN RESPECT OF REMAINING SALES. THEREFORE, CONSIDERING TOTALITY OF FACTS AND ITA NO. 3322/MUM/2017 SHRI SUNIL B DOSHI 6 CIRCUMSTANCES OF THE CASE, WE MODIFY BOTH THE ORDERS OF THE L OWER AUTHORITIES AND DIRECT THE AO TO RESTRICT ADDITION TO THE EXTENT OF 2% OF THE ALLEGED BOGUS PURCHASES SO AS TO COVER LEAKAGE OF REVENUE IF ANY. WE DIRECT ACCORDINGLY. 11. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED WHEREAS APPEAL OF THE ASSESSEE IS ALLOWED IN PART. O RDER PRONOUNCED IN THE OPEN COURT ON THIS 22 / 11 /2017 S D/ - ( SANDEEP GOSAIN ) S D/ - ( R.C.SHARMA ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 22 / 11 /201 7 KARUNA SR. PS COPY OF THE ORDER FORWARDED TO : BY ORDER, ( ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//