PRAVIN DAYALDAS GANDHI, MUMBAI V. ITO - 32(2)(5), MUMBAI

ITA 3532/MUM/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 5606 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-06-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 23-05-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ISHWAR PRAKASH RATHI
• Keywords: Reopening of assessment; Bogus purchase; Set aside
• Section: 69C; 143(3); 133(6); 143(1); 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH C, MUMBAI BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA NOS.3532 & 3533/M/2018 ASSESSMENT YEARS: 2010-11 & 2011-12 ITA NOS.3534 & 3535/M/2018 ASSESSMENT YEARS: 2010-11 & 2011-12 SHRI PRAVIN DAYALDAS GANDHI, A-WING, FLAT NO.9, HIREN CHS, GOKHALE ROAD, DAHANUKAR WADI, KANDIVALI (W), MUMBAI 400 067 PAN: ACBPG2335H VS. ITO-32(2)(5), C-13, PRATYAKSHAKAR BHAVAN, BKC, BANDRA (E), MUMBAI - 400051 (APPELLANT) (RE SPONDENT) PRESENT FOR: ASSESSEE BY : SHRI ISHWAR PRAKASH RATHI, A.R. REVENUE BY : SHRI ARVIND KUMAR, D.R. DATE OF HEARING : 19.06.2019 DATE OF PRONOUNCEMENT : 28.06.2019 O R D E R PER RAJESH KUMAR, ACCOUNTANT MEMBER: THE ABOVE TITLED FOUR APPEALS HAVE BEEN PREFERRED BY THE ASSESSEE AGAINST THE ORDER DATED 09.08.2016 OF THE COMMISSIONER OF INCOME TAX (APPEALS) [HEREINAFTER R EFERRED TO AS THE CIT(A)] RELEVANT TO ASSESSMENT YEARS 2010-11 & 2011-12. ITA NO.3532/M/2018 A.Y. 2010-11 2. THE ISSUE RAISED IN GROUND NO.1 IS AGAINST THE O RDER OF LD. CIT(A) UPHOLDING THE REOPENING OF ASSESSMENT FRAME D BY THE AO UNDER SECTION 147 OF THE ACT. ITA NOS.3532 & 3533/M/2018 & ORS. SHRI PRAVIN DAYALDAS GANDHI 2 3. AT THE TIME OF HEARING THE LD. COUNSEL OF THE AS SESSEE DID NOT PRESS THIS GROUND AND ACCORDINGLY THE SAME IS D ISMISSED AS NOT PRESSED. 4. THE ISSUE RAISED IN GROUND NO.2 IS AGAINST THE C ONFIRMATION OF DISALLOWANCE TO THE TUNE OF 12.5% OF THE ALLEGED BOGUS PURCHASES OF RS.1,11,71,532/- THEREBY SUSTAINING A N ADDITION OF RS.13,96,441/- WHICH IS OVER AND ABOVE THE GROSS PROFITS SHOWN BY THE ASSESSEE IN THE BOOKS OF ACCOUNTS. 5. THE FACTS IN BRIEF ARE THAT THE ASSESSEE FILED R ETURN OF INCOME ON 11.09.2010 DECLARING AN INCOME OF RS.2,40 ,872/- WHICH WAS PROCESSED UNDER SECTION 143(1) OF THE ACT . THEREAFTER, THE CASE OF THE ASSESSEE WAS REOPENED U /S 147 R.W.S. 148 OF THE ACT AFTER AO RECEIVED AN INFORMATION FRO M SALES TAX DEPARTMENT, GOVERNMENT OF MAHARASHTRA AND DGIT, (INVESTIGATION) THAT ASSESSEE IS A BENEFICIARY OF B OGUS HAWALA PURCHASE BILLS TO THE TUNE OF RS.1,11,71,532/- FROM 10 HAWALA PARTIES AS DETAILED IN PARA 2 OF THE ASSESSMENT ORD ER. THE AO ISSUED NOTICE UNDER SECTION 148 OF THE ACT ON 27.02 .2014 AND THEREAFTER DURING THE ASSESSMENT PROCEEDINGS CALLED UPON THE ASSESSEE TO FURNISH VARIOUS DETAILS AND EVIDENCES T O PROVE THE GENUINENESS OF THESE PURCHASES. THE AO ALSO ISSUED NOTICES UNDER SECTION 133(6) OF THE ACT TO THESE PARTIES. HOWEVER, THE SAID NOTICES WERE NOT RETURNED UNSERVED OR UNCLAIM ED. THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDING S FILED BILLS, VOUCHERS, BANK DETAILS ETC TO PROVE THE GENUINENESS OF THE PURCHASES. HOWEVER, THE AO WAS NOT CONVINCED WITH THE SAID EVIDENCES AND CAME TO THE CONCLUSION THAT ASSESSEE SHOULD HAVE FURNISHED THE INWARD STOCK REGISTER AND CONSUMPTION /SALES ITA NOS.3532 & 3533/M/2018 & ORS. SHRI PRAVIN DAYALDAS GANDHI 3 RECORDS TO PROVE THE GENUINENESS OF THE PURCHASES. FINALLY THE AO AFTER REJECTING THE BOOKS OF ACCOUNTS UNDER SECT ION 1145(3) OF THE ACT ADDED THE ENTIRE PURCHASES AS UNEXPLAINED E XPENDITURE UNDER SECTION 69C OF THE ACT BY FRAMING ASSESSMENT UNDER SECTION 143(3) READ WITH SECTION 147 VIDE ORDER DAT ED 18.03.2015. 6. IN THE APPELLATE PROCEEDINGS, THE LD. CIT(A) PAR TLY ALLOWED THE APPEAL OF THE ASSESSEE BY SUSTAINING THE ADDITI ON TO THE EXTENT OF 12.5% OF THE BOGUS PURCHASES THEREBY CONF IRMING THE ADDITION TO THE EXTENT OF RS.13,96,441/- BY FOLLOWI NG THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE O F NIKUNJ ENTERPRISES 372 ITR 619 (BOM.). THE LD. CIT(A) OBS ERVED THAT THE ENTIRE PURCHASES CAN NOT BE ADDED TO THE INCOME OF THE ASSESSEE AND IT IS ONLY A PROFIT ELEMENT EMBEDDED I N THESE PURCHASES WHICH SHOULD BE BROUGHT TO TAX AND ACCORD INGLY APPLIED A RATE OF 12.5% . 7. AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATERIAL ON RECORD, WE OBSERVE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF TRADING OF IRON AND STEEL SHEETS, ANGLES, COILS ETC. AND THE GP RATE VARIES FROM 1.18% TO 2.20% AS IS APPARENT FROM THE STATEMENT OF COMPARATIVE GP OF FOUR YEARS FILED DUR ING THE COURSE OF HEARING. WE NOTE THAT DURING THE YEAR UN DER CONSIDERATION, THE GP RETURNED BY THE ASSESSEE WAS 1.83%. THE LD. CIT(A) HAS CORRECTLY HELD THAT ENTIRE PURCHASES COULD NOT BE ADDED TO THE INCOME OF THE ASSESSEE AND THAT ONLY P ROFIT ELEMENT IN THE SAID PURCHASES HAVE TO BE BROUGHT TO TAX HOW EVER WE ARE NOT IN AGREEMENT WITH THE RATE APPLIED ON THE ALLEG ED PURCHASES. IN THIS CASE, WE OBSERVE THAT THE ASSESSEE HAS ALRE ADY ACCOUNTED ITA NOS.3532 & 3533/M/2018 & ORS. SHRI PRAVIN DAYALDAS GANDHI 4 FOR THESE PURCHASES IN THE BOOKS OF ACCOUNTS AND H AVE RETURNED THE PROFITS ON THESE PURCHASES. UNDER THESE CIRCUM STANCES, IN OUR VIEW, THE ONLY SAVINGS WHICH THE ASSESSEE MAY H AVE MADE BY PURCHASING THE GOODS FROM THE GREY MARKET HAVE TO B E BROUGHT TO TAX. IN THE PRESENT CASE, THE ASSESSEE IS A DEA LER IN IRON AND STEEL ITEMS AND THE APPLICABLE VAT RATE IS 4%. UND ER THESE CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE PURCHASE S WHICH ARE STATED TO BE BOGUS SHOULD BE BROUGHT TO TAX @ 5%. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD. CIT(A) AND DIRECT THE AO TO APPLY A RATE OF 5% ON THESE BOGUS PURCHASES. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ITA NOS.3533, 3534 & 3535/M/2018 9. THE ISSUE INVOLVED IN THESE APPEALS IS IDENTICAL TO THE ONE AS DECIDED BY US ABOVE IN ITA NO.3532/M/2018 FOR A .Y. 2010- 11. THEREFORE, OUR FINDINGS IN ITA NO.3532/M/2018 FOR A.Y. 2010-11 WOULD, MUTATIS MUTANDIS, TO THESE APPEALS A S WELL. ACCORDINGLY THE APPEALS OF THE ASSESSEE ARE ALLOWED . 10. IN THE RESULT, ALL THE FOUR APPEALS OF THE ASSE SSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 28.06.2019. SD/- SD/- (MAHAVIR SINGH) (RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 28.06.2019. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT ITA NOS.3532 & 3533/M/2018 & ORS. SHRI PRAVIN DAYALDAS GANDHI 5 THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY /ASSTT. REGISTRAR, ITAT, MUMBAI.