NARYAN MAVJI PATEL, THANE V. ITO WD 1(3), KALYAN

ITA 3510/MUM/2017

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 9889 (ITAT-MUMBAI)
• Duration Of Justice: 3 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-09-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 15-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N HEMALATHA
• Assessee Lawyers: MAYUR J GOS RANI
• Keywords: Bogus purchase; Business income
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH SMC, MUMBAI BEFORE SHRI G.S.PANNU, ACCOUNTANT MEMBER ITA NO.3510/MUM/2017 ( ASSESSMENT YEAR 2009-10) NARAYAN MAVJI PATEL, GOVARDHAN DHAM, AGRA ROAD, OPP.S.T.WORK SHOP, THANE (W) 400 601. PAN:AAWPP8683J ...... AP PELLANT VS. THE INCOME-TAX OFFICER, WARD -1(3) MOHAN PLAZA, WAGLE NAGAR, KHADAKPADA, KALYAN (W)- 421 301 .... RE SPONDENT APPELLANT BY : SHRI MAYUR J. GOS RANI RESPONDENT BY : MS. N. HEMALATH A DATE OF HEARING : 25/07/2017 DATE OF PRONOUNCEMENT : 06 /09/2017 ORDER THE CAPTIONED APPEAL FILED BY THE ASSESSEE P ERTAINING TO ASSESSMENT YEAR 2009-10 IS DIRECTED AGAINST AN ORDER PASSED BY CIT(A)-2, MUMBAI DATED 29/03/2017, WHICH IN TURN, ARISES OUT OF ORDER P ASSED BY THE ASSESSING OFFICER UNDER SECTION 143(3) R.W.S. 147 OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) DATED 21/03/2014. 2 ITA NO.3510/MUM/2017 ( ASSESSMENT YEAR 2009-10) 2. IN THIS APPEAL, ALTHOUGH THE ASSESSEE HAS RAISE D MULTIPLE GROUNDS OF APPEAL, BUT AT THE TIME OF HEARING, THE SOLITARY GR IEVANCE OF THE ASSESSEE WAS AGAINST THE ACTION OF THE CIT(A) IN ESTIMATING THE GROSS PROFIT FOR THE YEAR AT 8.86% AND THEREBY, SUSTAINING THE ADDITION ON ACCOU NT OF ALLEGED BOGUS PURCHASE AT RS.4,30,902/-. 3. BRIEFLY PUT, THE FACTS RELEVANT FOR THE POINT RA ISED BEFORE ME AT THE TIME OF HEARING CAN BE SUMMARIZED AS FOLLOWS. THE ASSES SEE IS AN INDIVIDUAL, WHO IS ENGAGED IN THE BUSINESS OF TRADING IN TIMBER AND PL YWOOD. IN THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT ASSES SEE HAD EFFECTED PURCHASES OF RS.4,30,902/- FROM TWO CONCERNS, WHOSE NAMES F IGURED IN THE LIST OF HAWALA PARTIES AS PER THE LIST OF SALES TAX DEPARTMENT O F MAHARASHTRA. THE AFORESAID AMOUNT OF PURCHASE WAS TREATED AS NOT GENUINE AND, THEREFORE, A SUM OF RS.4,30,902/- WAS ADDED TO THE RETURNED INCOME. TH E CIT(A) AFFIRMED THE DECISION OF THE ASSESSING OFFICER IN PRINCIPLE, SO HOWEVER, HE CARRIED OUT AN EXERCISE TO UNDERSTAND THE IMPACT OF BOOKING OF HAW ALA PURCHASES ON THE PROFIT FOR THE YEAR. FOR THAT PURPOSE, THE CIT(A) COMPARED THE LEVEL OF PROFIT DECLARED BY THE ASSESSEE FOR ASSESSMENT YEARS 2008- 09 TO 2012-13. THE CIT(A) NOTED THAT IN ASSESSMENT YEAR 2012-13 ASSESSEE HAD DECLARED A GROSS PROFIT OF 8.86% AND APPLIED THE SAID RATE TO COMPUTE THE GR OSS PROFIT FOR THE INSTANT YEAR ON THE TOTAL SALES DECLARED, THEREBY DETERMINI NG THE SUPPRESSED GROSS PROFIT AT RS.8,78,741/-. AFTER COMPARING IT WITH T HE DISALLOWANCE MADE BY THE ASSESSING OFFICER OUT OF BOGUS PURCHASE OF RS.4,30, 902/-, HE LIMITED THE ADDITION TO THAT EXTENT. AGAINST SUCH A DECISION, ASSESSEE IS IN FURTHER APPEAL BEFORE THE TRIBUNAL. 3 ITA NO.3510/MUM/2017 ( ASSESSMENT YEAR 2009-10) 4. BEFORE THE TRIBUNAL THE ONLY POINT RAISED BY THE ASSESSEE IS THE ESTIMATION OF GROSS PROFIT AT 8.86% AND ITS APPLICA TION ON THE TOTAL TURNOVER OF THE ASSESSEE IN ORDER TO COMPUTE THE SUPPRESSED PR OFIT IS NOT AT ALL JUSTIFIED. 5. IT IS QUITE CLEAR THAT THE ONLY ADVERSE INFORMAT ION WITH THE ASSESSING OFFICER WAS WITH RESPECT TO THE PURCHASES EFFECTED FROM TWO HAWALA PARTIES DESIGNATED BY THE SALES TAX DEPARTMENT OF MAHARASHT RA AND, THEREFORE, IN MY VIEW, THERE IS NO JUSTIFICATION FOR THE CIT(A) TO M AKE THE ADDITION WITH RESPECT TO THE ENTIRE BUSINESS OF THE ASSESSEE. CONSIDERI NG THE SAME, IN MY VIEW, IT WOULD BE APPROPRIATE IF THE GROSS PROFIT PERCENTAGE OF 8.86% ADOPTED BY THE CIT(A) IS APPLIED ONLY TO UNPROVED PURCHASES OF RS .4,30,902/- IN ORDER TO TAX THE ESCAPED PROFIT. NOTABLY, THE TRIBUNAL IN SIMIL AR CASES HAS ADOPTED A PERCENTAGE OF 12.50%; SO HOWEVER, IT HAS BEEN BRO UGHT OUT THAT SUCH CASES ARE MOSTLY IN THE LINE OF FERROUS AND NON-FERROUS M ETALS, WHEREAS IN THE INSTANT CASE THE BUSINESS IS OF DEALING IN TIMBER AND PLYWO OD. ACCORDINGLY, THE PROFIT ESTIMATION DETERMINED BY THE CIT(A) AT 8.86% IS UPH ELD SUBJECT, OF COURSE TO ITS APPLICATION ONLY ON THE UNPROVED PURCHASE OF RS.4,3 0,902/-. THEREFORE, THE ORDER OF THE CIT(A) IS SET-ASIDE AND THE ASSESSING OFFICER IS DIRECTED TO RESTRICT THE ADDITION, AS ABOVE. 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTL Y ALLOWED AS ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 06/09/2017 SD/- (G.S. PANNU) ACCOCUNTANT MEMBER MUMBAI, DATED 06/09/2017 VM , SR. PS 4 ITA NO.3510/MUM/2017 ( ASSESSMENT YEAR 2009-10) 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