MANOHAR P. KANUNGO, MUMBAI V. ACIT 19(2), MUMBAI

ITA 3345/MUM/2017

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 8668 (ITAT-MUMBAI)
• Duration Of Justice: 6 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-11-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 08-05-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAM TIWARI
• Keywords: Bogus purchase; Rejection of books of accounts; Accommodation entries
• Section: 143(3); 133(6); 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC , BENCH MUMBAI BEFORE SHRI R.C.SHARMA, AM ITA NO. 3345/ MUM/20 17 ( ASSESSMENT YEAR : 2009 - 10 ) SHRI MANOHAR P. KANUNGO 297, TARDEO ROAD WILLE MANSION, 1 ST FLOOR OPP. BANK OF INDIA MANA CHOWK MUMBAI 400 007 VS. ACIT 19(2) MATRU MANDIR TARDEO ROAD MUMBAI - 400 007 PAN/GIR NO. AAMPK1529K APPELLANT ) .. RESPONDENT ) ASSESSEE BY SHRI RAJKUMAR SINGH REVENUE BY SHRI RAM TIWARI DATE OF HEARING 27/09 /201 7 DATE OF PRONOUNCEME NT 21 / 11 /201 7 / O R D E R PER R.C.SHARMA (A.M) : THIS IS AN APPEAL FILED BY ASSESSEE AGAINST THE ORDER OF CIT(A) - 30, MUMBAI DATED 10/03/2017 FOR A.Y. 2009 - 10 IN THE MATTER OF ORDER PASSED U/S.143(3) R.W.S. 147 OF THE IT ACT. 2. THE FOLLOWING GR OUNDS HAVE BEEN TAKEN BY THE ASSESSEE: - 1. THAT THE ID. C.I.T.(APPEALS) HAS ERRED IN CONFIRMING THE ADHOC 12.5% ADDITION MADE BY THE ID. A.O. AMOUNTING TO RS. 8,86,6157 - OF THE ALLEGED HAWALA PURCHASES AMOUNTING TO RS. 70,92,9147 - GIVING FALSE REASONS IN P ARA 6.4 OF HIS APPELLATE ORDER THAT APPELLANT HAS FAILED TO RECONCILE 1:1 ALLEGED PURCHASES WITH THE SALES MADE AND WRONGLY STATING THAT A.O. HAS GIVEN A FINDING THAT STOCK IS NOT MAINTAINED IN PROPER FORM WHICH ARE CONTRARY TO A.O.'S OWN FINDING RECORDED IN PARA 3.12 OF THE IMPUGNED ASSESSMENT ORDER. 2. THAT THE ID. C.I.T. (APPEALS) WHILE CONFIRMING THE ALLEGED ADHOC 12.5% ADDITION OF THE SUBJECT PURCHASES HAS ALSO FAILED IN NOT APPRECIATING THAT ON CORRESPONDING SALES MADE OUT OF SUCH ALLEGED ITA NO. 3345/MUM/2017 SHRI MANOHAR P KANUNGO 2 PURCHASES A SSESSEE HAS ALREADY RECORDED AND DECLARED GROSS PROFIT RATE OF 11.33%, THEREFORE NO ADHOC ADDITION AS MADE BY THE ID. A.O. WAS WARRANTED AT ALL. IN VIEW OF THE ABOVE ADDITION MADE @ 12.5% OF THE DISPUTED PURCHASES BEING WRONG ON FACTS AND BAD IN LAW THERE FORE SAME MAY KINDLY BE DELETED. THAT THE APPELLANT CRAVES THE LEAVE TO AMEND, ALTER, SUBSTITUTE AND OR TO RAISE NEW OR ADDITIONAL GROUNDS OF APPEAL AT THE TIME OF HEARING. 2. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. 3. FACTS IN BRIEF ARE TH AT THE ASSESSEE IS AN INDIVIDUAL, ENGAGED IN THE BUSINESS OF TRADING IN FERROUS AND NON - FERROUS AND BASIC METALS , FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2009 - 10, ON 26 - 09 - 2009, DECLARING TOTAL INCOME OF RS . 38,43,213/ - . THE RETURN WAS PROCESSED U/S 143(1) OF THE ACT. SUBSEQUENTLY, I NFORMATION RECEIVED FROM THE DGI T(INV.), MUMBAI, THAT THERE WAS A SCAM UNEARTHED BY THE SALES TAX DEPARTMENT REGARDING ISSUE OF HAWALA BILLS AND ACCOMMODATION ENTRIES ISSUED BY SEVERAL PARTIES IN MUMBAI, AVAILED BY ASSESSEES TO INFLATE THEIR PURCHASES OR EXPENSES AND THEREBY REDUCING THEIR TAX LIABILITIES. AS PER THE INFORMATION, THE ASSESSEE ALSO INDULGED IN BOGUS PURCHASES FROM TWO PARTIES, TO THE TUNE OF RS. 70,92,914/ - . ASSESSMENT WAS REOPENED BY ISSUING NOTICE U/S 148 OF THE ACT ON 18 - 03 - 2014 AND FINALIZED U/S 143(3) R.W.S 147 OF THE ACT 25 - 03 - 2015 , ASSESSING THE TOTAL INCOME AT RS. 47,29,830/ - . 4. DURING THE COURSE OF REOPENED ASSESSMENT PROCEEDINGS, TO ASCERTAIN THE GENUINENESS OF PURCHASES SHOW N IN THE ACCOUNTS, ITA NO. 3345/MUM/2017 SHRI MANOHAR P KANUNGO 3 NOTICES U/S 133(6) WERE SENT TO THE CONCERNED PARTIES WHICH REVEALED THAT THE CLAIM OF EXPENSES ON ACCOUNT OF PURCHASE FROM THE PARTIES MENTIONED IN THE ASSESSMENT ORDER IS NOT GENUINE. THE ASSESSEE WAS ASKED TO PRODUCE THE SAID PARTIES FROM WHOM SUCH PURCHASES WERE CLAIMED TO HAVE BEEN MADE, FOR EXAMINATION. THE ASSESSEE FAILED TO DO SO AND ALSO COULD NOT FILE THE VITAL DOCUMENTS SUCH AS DELIVERY CHALLANS, TRANSPORT RECEIPTS ETC. ASSESSEE COULD NOT ESTABLISH GENUINENESS OF PURCHASES MADE . LD; A0 REJECTED THE BOOKS OF ACCOUNTS U/S 145(3) OF THE ACT, SINCE THE PURCHASES TO THAT EXTENT REMAINED UNVERIFIABLE AND CONCLUDED THAT THE PURCHASES MADE WAS NON GENUINE TRANSACTIONS TO SUPPRESS THE PROFITS AND TO REDUCE THE TAX LIABILITY. THEREFORE, R ELYING ON THE DECISION OF GUJARAT HIGH COURT IN THE CASE OF SMIT P. SHETH, LD. AO ESTIMATED THE PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES, @1 2.5% ON THE TOTAL PURCHASES OF RS. 70,92,914 / - MADE FROM TWO PARTIES, WHICH WORKED OUT TO RS. 8,86,615/ - , AND THE AMO UNT IS ADDED TO THE TOTAL INCOME OF THE ASSESSEE . PENALTY PROCEEDINGS U/S 271( 1 )(C) OF THE ACT WERE ALSO. 5. AGAINST THE ABOVE ORDER OF CIT(A), ASSESSEE IS IN FURTHER APPEAL BEFORE ME. 6. IT WAS CONTENDED BY LEARNED AR THAT ASSESSEE WAS DEALING IN FERRO US AND NON - FERROUS METALS AND HE HAS SHOWN A VERY HIGH GP OF 11.5%. IN RESPECT OF HAWALA PURCHASES, THE GP SO DECLARED WAS 11.33%. AS PER LEARNED AR, ASSESSEE HAS MAINTAINED STOCK REGISTER ITA NO. 3345/MUM/2017 SHRI MANOHAR P KANUNGO 4 AND QUANTITATIVE DETAILS OF PURCHASES, SALES WERE ALSO FURNISHED BEFORE LOWER AUTHORITIES . AS PER LEARNED AR , RATE OF VAT AT MAHARASHTRA IS 4% WHEREAS AT GUJARAT IT IS 10%, ACCORDINGLY , THE DECISION RELIED BY CIT(A) IS NOT APPLICABLE TO THE FACTS OF THE CASE. 7. ON THE OTHER HAND, LEARNED DR RELIED ON THE ORDER OF TH E LOWER AUTHORITIES. 8. I HAVE CONSIDERED RIVAL CONTENTIONS AND CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. FROM THE RECORD, I FOUND THAT ASSESSEE HAS FURNISHED DETAILS WITH REGARD TO THE PURCHASES AND ALSO ESTABLISHED CO - RELATION BETWEE N THE CORRESPONDING SALES. THE ASSESSEE HAS DECLARED GP OF 11.33% ON THE ALLEGED BOGUS PURCHASES. KEEPING IN VIEW THE TOTALITY OF FACTS AND CIRCUMSTANCES OF THE CASE, I DIRECT THE AO TO RESTRICT THE ADDITION TO THE EXTENT OF 10% OF GP. I DIRECT ACCORDINGL Y. 9. IN THE RESULT, APPEAL IS ALLOWED IN PART. O RDER PRONOUNCED IN THE OPEN COURT ON THIS 21 / 11 /2017 SD/ - ( R.C.SHARMA ) ACCOUNTANT MEMBER MUMBAI ; DATED 21 / 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//