SHREE GIRIRAJ METALEX P.LTD, MUMBAI V. ITO 13(2)(3), MUMBAI

ITA 3559/MUM/2017

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 0589 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: J
• Assessment Year: 2007-2008
• Appeal Filed On: 15-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: CHAUDHARY ARUN KUMAR SINGH
• Assessee Lawyers: DR P DANIEL
• Keywords: Bogus purchase; Unexplained cash credit; Retrospective amendment; Accommodation entries; Reason to believe
• Section: 143(3); 147; 131; 68; 148; 6; 12; 154

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL G BENCH MUMB AI BEFORE SHRI PAWAN SINGH JUDICIAL MEMBER AND SHRI N.K. PRADHAN, ACCOUNTANT MEMBER ITA NO. 3559/MUM/2017 (ASSESSMENT YEAR 2007-08 ) SHRI GIRIRAJ METALEX PVT. LTD. B-2/203, BREEZY CORNER, MAHAVIR NAGAR, BORIVALI (WEST), MUMBAI-400067 . PAN: AAJCS2480A VS. DCIT, CIRCLE-13(2 )(2) ROOM NO. 146, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI-400020. APPELLANT RESPONDE NT ITA NO. 3343/MUM/2017 (ASSESSMENT YEAR 2009-10 ) SHRI GIRIRAJ METALEX PVT. LTD. B-2/203, BREEZY CORNER, MAHAVIR NAGAR, BORIVALI (WEST), MUMBAI-400067 . PAN: AAJCS2480A VS. DCIT, CIRCLE-13(2 )(2) ROOM NO. 146, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI-400020. APPELLANT RESPONDE NT ITA NO. 3307/MUM/2017 (ASSESSMENT YEAR 2010-11 ) SHRI GIRIRAJ METALEX PVT. LTD. B-2/203, BREEZY CORNER, MAHAVIR NAGAR, BORIVALI (WEST), MUMBAI-400067 . PAN: AAJCS2480A VS. DCIT, CIRCLE-13(2 )(2) ROOM NO. 146, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI-400020. APPELLANT RESPONDE NT APPELLANT BY : DR. P. DANIEL (ADVOCATE) RESPONDENT BY : SHRI CHAUDHARY ARUN KUMAR SINGH (DR) ITA NO. 3559, 3343 & 3307 MUM 20 17-SHRI GIRIRAJ METALEX PVT. LTD. 2 DATE OF HEARING : 19.11.2018 DATE OF PRONOUNCEMEN T : 30.11.2018 ORDERUNDER SECTION 254(1)OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER; 1. THIS GROUP OF THREE APPEALS BY ASSESSEE ARE DIRECTE D AGAINST THE ORDER OF LD. CIT(A)-21, MUMBAI DATED 20.03.2017 FOR ASSESSME NT YEARS 2007-08, 2009-10 & 2010-11 RESPECTIVELY. IN ALL APPEALS, THE ASSESSEE HAS RAISED SOME COMMON GROUNDS OF APPEAL IN ALL ASSESSMENT YEA RS, THEREFORE, WITH THE CONSENT OF PARTIES, ALL APPEALS WERE CLUBBED, H EARD AND ARE DECIDED BY A COMMON ORDER TO AVOID THE CONFLICTING DECISION. I N APPEAL FOR ASSESSMENT YEAR 2007-08 IN ITA NO. 3559/MUM/2017, T HE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: [1] ON THE FACTS AND IN LAW, LEARNED CIT (A) HAS ER RED IN CONFIRMING THE VALIDITY OF THE ISSUE OF THE NOTICE U/S 148 AND ASS ESSMENT THEREOF. [2] ON THE FACTS AND IN LAW, LEARNED CIT (A) HAS ER RED IN CONFIRMING THE ADDITION OF RS.1,89,00,000/= MADE BY THE AO U/S.68 OF THE I.T. ACT, 1961. [3] ON THE FACTS AND IN LAW, LEARNED CIT (A) HAS ER RED IN CONFIRMING THE PARTIAL ADDITION OF RS.3,75,210/- MADE BY THE AO U1 S.68 OF THE I. T. ACT, 1961. [4] THE ABOVE GROUNDS OF APPEAL ARE WITHOUT PREJUDI CE TO ONE ANOTHER AND THE APPELLANT CRAVE LEAVE TO ADD, TO ALTER AND I OR AMEND ANY OF THE FOREGOING GROUNDS AND TO MAKE NEW OR ADDITIONAL SUB MISSIONS AT THE HEARING OF THE APPEAL AS WELL AS TO SUBMIT FRESH DOCUMENTS AND INFORMATION AS ADVISED. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS EN GAGED IN THE BUSINESS OF IRON & STEEL, FILED ITS RETURN OF INCOME FOR ASSESS MENT YEAR 2007-08 ON ITA NO. 3559, 3343 & 3307 MUM 20 17-SHRI GIRIRAJ METALEX PVT. LTD. 3 16.10.2007 DECLARING TOTAL INCOME OF RS. 7,15,749/- . THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) ON 16.11.2009. SUBSE QUENTLY, THE ASSESSMENT WAS RE-OPENED UNDER SECTION 147 ON 26.03 .2014. NOTICE UNDER SECTION 148 WAS ISSUED TO THE ASSESSEE ON 26.03.201 4. THE ASSESSING OFFICER RE-OPENED THE ASSESSMENT ON THE BASIS OF IN FORMATION RECEIVED FROM THE INVESTIGATION WING, MUMBAI REGARDING THE B ENEFICIARY OF ACCOMMODATION ENTRIES PROVIDED BY ONE SHRI PRAVIN K UMAR JAIN THROUGH VARIOUS COMPANIES AND FIRM CONTROLLED AND MANAGED B Y HIM AND HIS ASSOCIATES. IT WAS FURTHER RECORDED THE ASSESSEE HA S RECEIVED A SHARE APPLICATION MONEY FROM 16 PARTIES OF AGGREGATING RS . 1,89,00,000/-. THE ASSESSEE HAS RECEIVED SHARE APPLICATION MONEY FROM THE COMPANIES MANAGED AND CONTROLLED BY SHRI PRAVIN KUMAR JAIN. T HEREFORE, IT IS CLEARLY EVIDENT THAT ASSESSEE HAS TAKEN ACCOMMODATI ON ENTRIES OF RS. 1.89 CRORE. THEREFORE, THE ASSESSING OFFICER HAS REASON TO BELIEVE THAT INCOME OF RS. 1.89 CRORE CHARGEABLE TO TAX HAS ESCAPED ASS ESSMENT BY THE REASONS ON FAILURE ON THE PART OF ASSESSEE TO DISCL OSE FULLY AND TRULY ALL MATERIAL FACTS WITHIN THE MEANING OF SECTION 147 OF THE ACT. IN RESPONSE TO THE NOTICE, THE ASSESSEE FILED HIS OBJECTION AGA INST THE RE-ASSESSMENT. THE OBJECTION OF ASSESSEE WAS DISPOSED OF ON 02.03. 2015. AFTER DISPOSING THE OBJECTION OF ASSESSEE, THE ASSESSING OFFICER PR OCEEDED TO MAKE THE ITA NO. 3559, 3343 & 3307 MUM 20 17-SHRI GIRIRAJ METALEX PVT. LTD. 4 RE-ASSESSMENT AND MADE ADDITION OF RS. 1.89 CRORE A S UNEXPLAINED CASH CREDIT UNDER SECTION 68 OF THE ACT. THE ASSESSING O FFICER IN PARA 3.8 OF THE ASSESSMENT ORDER ALSO DISALLOWED PURCHASES OF 1 2.5% OF PURCHASES, WHICH WERE SHOWN IN THE LIST OF HAWALA DEALERS OF G OVERNMENT OF MAHARASHTRA. THE ASSESSEE HAS SHOWN THE TOTAL PURCH ASES OF RS. 93,80,181/-. THE ASSESSING OFFICER DISALLOWED 12.5% OF SUCH PURCHASES AND ADDED BACK TO THE TOTAL INCOME OF ASSESSEE. HOW EVER, THIS FIGURE WAS NOT ADDED WHILE COMPUTING THE TOTAL INCOME AT THE T IME OF PASSING THE ASSESSMENT ORDER. THE ASSESSING OFFICER PASSED THE ORDER UNDER SECTION 154 AND ADDED THE SAME TO THE COMPUTATION OF INCOME VIDE ITS ORDER DATED 01.06.2015. 3. AGGRIEVED BY THE ADDITIONS IN THE ASSESSMENT ORDER, THE ASSESSEE FILED APPEAL BEFORE THE LD. CIT(A), THE ASSESSEE CHALLENG ED THE VALIDITY OF RE- OPENING AS WELL AS ADDITION ON ACCOUNT OF BOGUS PUR CHASES AND DISALLOWANCE ON SHARE CAPITAL. THE LD. CIT(A) CONFI RMED THE ACTION OF ASSESSING OFFICER ON RE-OPENING OF ASSESSMENT AS WE LL AS IN ADDITION OF SHARE PREMIUM. HOWEVER, THE DISALLOWANCE ON ACCOUNT OF BOGUS PURCHASE WAS RESTRICTED TO 4% OF THE TOTAL PURCHASES. THEREF ORE, FURTHER AGGRIEVED BY THE ORDER OF LD. CIT(A), THE ASSESSEE HAS FILED THE PRESENT APPEAL BEFORE US. ITA NO. 3559, 3343 & 3307 MUM 20 17-SHRI GIRIRAJ METALEX PVT. LTD. 5 4. WE HAVE HEARD THE SUBMISSION OF LD. AUTHORIZED REPR ESENTATIVE (AR) OF THE ASSESSEE AND LD. DEPARTMENTAL REPRESENTATIVE (D R) FOR THE REVENUE AND PERUSED THE MATERIAL AVAILABLE ON RECORD. 5. GROUND NO.1 OF THE APPEAL RELATES TO VALIDITY OF NO TICE UNDER SECTION 148. THE LD. AR OF THE ASSESSEE SUBMITS THAT THE ASSESSM ENT WAS COMPLETED UNDER SECTION 143(3) ON 16.11.2009. THE NOTICE UNDE R SECTION 148 WAS ISSUED AFTER FOUR YEAR FROM THE END OF RELEVANT ASS ESSMENT YEAR. THERE WAS FAILURE ON THE PART OF ASSESSEE TO DISCLOSE FUL LY AND TRULY ALL MATERIAL FACTS. IN THE ORIGINAL ASSESSMENT, THERE WAS ALSO D ISALLOWANCE OF SHARE ISSUE EXPENSES, THEREFORE, ALL MATERIAL FACTS RELEV ANT FOR ASSESSMENT WAS FURNISHED BY THE ASSESSEE. THE ASSESSEE FURNISHED A LL THE DETAILS OF SHARE HOLDING BEFORE THE ASSESSING OFFICER. THE ASSESSING OFFICER WAS SATISFIED ABOUT THE SHARE PREMIUM AND PASSED THE ORDER OF ASS ESSMENT UNDER SECTION 143(3) OF THE ACT. THEREFORE, THE RE-ASSESS MENT IS INVALID. IN SUPPORT OF HIS SUBMISSION, THE LD. AR OF THE ASSESS EE RELIED UPON THE DECISIONS OF (I) CIT V. MYSORE CEMENTS LTD. [2013] 355 ITR 136 (KAR.) (II) JASHAN TEXTILES MILLS P. LTD. V. DY. CIT [2006 ] 284 ITR 592 (BOM) (III) CIT V. FORAMER FRANCE [2003] 264 ITR 566 (SC) (IV) VOLTAS LTD. V. ACIT [2012] 349 ITR 656 (BOM) & (VI) SADHANA NITRO CHEM LTD. V. A.B. KOLI ACIT [2014] 368 ITR 505 (BOM). ITA NO. 3559, 3343 & 3307 MUM 20 17-SHRI GIRIRAJ METALEX PVT. LTD. 6 6. IN SECOND ALTERNATIVE SUBMISSION, THE LD. AR OF THE ASSESSEE SUBMITS THAT THE ASSESSING OFFICER RECEIVED CERTAIN INFORMATION FROM INVESTIGATION WING. THE ASSESSING OFFICER ARRIVED AT A CONCLUSION AND MADE THE BELIEF WITHOUT APPLICATION OF MIND THAT INCOME HAS ESCAPED ASSESSMENT. THEREFORE, RE-ASSESSMENT IS INVALID. IN SUPPORT OF HIS SUBMISSION, THE LD. AR OF THE ASSESSEE RELIED UPON THE FOLLOWING DECISI ON: (I) CIT V. SFIL STOCK BROKING LTD. [2010] 325 ITR 285 (DELHI) (II) SARTHAK SECURITIES CO. P. LTD. V. ITO [2010] 329 ITR 110 (DELHI) & (II I) HIRACHAND KANUGA V. DCIT (ITA/4261 & 4262/MUM/2012 (ITAT). 7. IN THIRD ALTERNATIVE SUBMISSION, THE LD. AR OF THE ASSESSEE SUBMITS THAT THE ASSESSEE FILED HIS OBJECTION AGAINST THE RE-OPENING ON 29.01.2015. THE OBJECTION OF ASSESSEE WAS DECIDED /DISPOSED OF BY A SSESSING OFFICER ON 02.03.2015. THE ASSESSING OFFICER PASSED THE ASSESS MENT ORDER ON 23.03.2015, THEREFORE, THE ASSESSING OFFICER VIOLAT ED THE PRINCIPLE ENUNCIATED BY HONBLE JURISDICTIONAL HIGH COURT IN ASIAN PAINT LTD. VS. DCIT 296 ITR 90 (BOM) AND IN ARONI COMMERCIALS LTD. VS. DCIT 362 ITR 403(BOM). THE LD. AR OF THE ASSESSEE SUBMITS TH AT IN ASIAN PAINTS LTD. (SUPRA), THE HONBLE HIGH COURT HELD THAT IF T HE ASSESSING OFFICER DID NOT ACCEPT THE OBJECTION, SO FILED HE SHALL NOT PROCEED FURTHER IN THE MATTER WITHIN A PERIOD OF FOUR WEEKS FROM THE DATE OF RECEIPT OF SERVICE OF ITA NO. 3559, 3343 & 3307 MUM 20 17-SHRI GIRIRAJ METALEX PVT. LTD. 7 THE ORDER ON OBJECTION ON ASSESSEE. THE HONBLE HIG H COURT FURTHER DIRECTED THAT ALL CONCERNED, THE ASSESSING OFFICER MUST FOLLOW THE PROCEDURE STRICTLY IN ALL SUCH CASE. IN ARONI COMME RCIALS LTD. (SUPRA) WHILE REFERRING ITS EARLIER DECISION IN ASIAN PAINT S LTD. (SUPRA), IT WAS DIRECTED THAT THE LAW DIRECTED BY THE HONBLE HIGH COURT IS BINDING ON ALL AUTHORITIES FUNCTIONING WITHIN JURISDICTIONAL OF TH E COURT. IT IS NOT OPEN TO THE ASSESSING OFFICER TO FEIGN IGNORANCE OF THE LAW DECLARED BY THE COURT AND PASSED THE ORDERS IN DEFIANCE OF IT, WHEREIN IN ASIAN PAINTS LTD. (SUPRA), IT WAS CLEARLY LAID DOWN THAT WHEN ASSESSM ENT SOUGHT TO BE RE- OPENED UNDER SECTION 148 AND THE OBJECTION OF THE A SSESSEE HAVE BEEN OVERRULED BY ASSESSING OFFICER, THAT IN SUCH CASES, THE ASSESSING OFFICER WILL NOT PROCEED FURTHER IN THE MATTER FOR A PERIOD OF FOUR WEEKS FROM THE RECEIPT OF ORDER. 8. IN FOURTH ALTERNATIVE SUBMISSION, THE LD. AR OF THE ASSESSEE SUBMITS THAT IF THE ASSESSING OFFICER RE-OPENED THE CASE BASED ON T HE SEARCH, THE ASSESSMENT SHOULD HAVE BEEN COMPLETED UNDER SECTION 153C. THE ASSESSMENT IS NOT MADE UNDER SECTION 153C WHICH MEA NS THAT NOTHING INCRIMINATING MATERIAL AGAINST THE ASSESSEE WAS DED UCTED AT THE TIME OF SEARCH. THEREFORE, NO ASSESSMENT CAN BE FRAMED UNDE R SECTION 147 AS WELL. THEREFORE, THE ASSESSMENT IS INVALID. ON MERI T, THE LD. AR OF THE ITA NO. 3559, 3343 & 3307 MUM 20 17-SHRI GIRIRAJ METALEX PVT. LTD. 8 ASSESSEE SUBMITS THAT SHARE PREMIUM IS CAPITAL RECE IPT AND NOT TAXABLE WHICH HAS BEEN HELD IN A NUMBER OF JUDICIAL DECISIO N. IN SUPPORT OF HIS SUBMISSION, THE LD. AR OF THE ASSESSEE RELIED UPON THE FOLLOWING DECISION: (I) CIT V. CREATIVE WORLD TELEFILMS LTD. (2011) 333 ITR 100 (BOM) (II) CIT V. ORCHID INDUSTRIES PVT. LTD. (2017) 397 ITR 1 36 (BOM) (III) PR.CIT V. APEAK INFOTECH (2017) 397 ITR 148 (BOM), (IV) CI T V. ARL INFRATDCH LTD. (2017) 394 ITR 383 (BOM) (V) CIT V. GREEN INFR A LTD. (2017) 392 ITR 7 (BOM) & (VI) ASSOCIATED TRANSRAIL STRUCTUER L TD. V. ACIT (2017) 397 ITR 573 (GUJ). 9. THE LD. AR OF THE ASSESSEE FURTHER SUBMITS THAT THE PROVISO OF SECTION 68 OF INCOME-TAX ACT HAS BEEN INTRODUCED BY FINANCE AC T 2012 W.E.F. APRIL 1 ST 2013 AND THUS EFFECTIVE FROM AY 2013-14 ONWARD AND NOT FOR THE AY UNDER CONSIDERATION. THE AMENDMENT INTRODUCED IN TH E ACT IS NOT WITH RETROSPECTIVE EFFECT NOR THE PROVISO IS INSERTED FO R REMOVAL OF DOUBT OR AS DECLARATORY. THEREFORE, NO ADDITION UNDER SECTIO N 68 CAN BE MADE. IN SUPPORT OF HIS SUBMISSION, THE LD. AR OF THE ASSESS EE RELIED UPON THE DECISION OF JURISDICTIONAL HIGH COURT IN CIT V. GAG AN INFRASTRUCTURE P. LTD. 394 ITR 680(BOM). 10. ON THE OTHER HAND, THE LD. DR FOR THE REVENUE SUPPO RTED THE ORDER OF LOWER AUTHORITIES. THE LD. DR FOR THE REVENUE FURTH ER SUBMITS THAT THE ITA NO. 3559, 3343 & 3307 MUM 20 17-SHRI GIRIRAJ METALEX PVT. LTD. 9 ASSESSING OFFICER WAS HAVING SPECIFIC INFORMATION A BOUT THE MODUS OPERANDI ADOPTED BY ACCOMMODATION ENTRY PROVIDER. THE ASSESS ING OFFICER RECEIVED INFORMATION FROM INVESTIGATION WIN G, MUMBAI ABOUT THE SEARCH CONDUCTED BY SHRI PRAVIN KUMAR JAIN AND HIS ASSOCIATES. IN THE SEARCH, IT WAS TRANSPIRED THAT SHRI PRAVIN KUMAR JA IN AND HIS ASSOCIATES WERE MANAGING 71 COMPANIES. SUBSEQUENT TO THE SEARC H ACTION, IT WAS REVEALED THAT ASSESSEE IS ONE OF THE BENEFICIARIES WHO HAVE RECEIVED ACCOMMODATION ENTRY IN THE FORM OF SHARE APPLICATIO N. IN THE REASONS OF RE-OPENING, THE ASSESSING OFFICER HAS CLEARLY MENTI ONED THAT THE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT BY THE REA SONS OF FAILURE ON THE PART OF ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MA TERIALS WITHIN THE MEANING OF SECTION 147 OF THE ACT. THEREFORE, NOTIC E UNDER SECTION 148 WAS ISSUED. THE OBJECTION OF ASSESSEE AGAINST THE R E-OPENING WAS DULY CONSIDERED AND DISPOSED OF. THE ASSESSEE HAS NOT RA ISED SUCH ISSUE FOR THE FIRST TIME BEFORE THE TRIBUNAL. 11. WE HAVE CONSIDERED THE RIVAL SUBMISSION OF THE PART IES AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. WE HAVE AL SO DELIBERATED ON THE CASE LAW RELIED BY LOWER AUTHORITIES AND BY REPRESE NTATIVE OF THE PARTIES. THE ORIGINAL ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) ON 16.11.2009. THE ASSESSMENT WAS RE-OPENED UNDER SECT ION 147 ON ITA NO. 3559, 3343 & 3307 MUM 20 17-SHRI GIRIRAJ METALEX PVT. LTD. 10 26.03.201. ADMITTEDLY THE ASSESSMENT WAS RE-OPENED AFTER FOUR YEAR FROM THE END OF RELEVANT ASSESSMENT YEAR. THE ASSESSEE F ILED OBJECTION AGAINST THE RE-OPENING ON 27.01.2015. THE OBJECTION OF ASSE SSEE WAS DISPOSED OF ON 02.03.2015 AND SOON THEREAFTER THE ASSESSMENT OR DER WAS PASSED ON 23.03.2015. ADMITTEDLY, THERE IS NO REFERENCE IN TH E ASSESSMENT ORDER, IF THE ORDER DISPOSING OF OBJECTION WAS PROVIDED BY TH E ASSESSING OFFICER TO THE ASSESSEE OR NOT. 12. THE HONBLE BOMBAY HIGH COURT IN ASIAN PAINT VS. DC IT (SUPRA) HELD THAT IF THE ASSESSING OFFICER DOES NOT ACCEPT THE O BJECTIONS FILED TO NOTICE UNDER SECTION 148, HE SHALL NOT PROCEED FURTHER IN THE MATTER FOR A PERIOD OF FOUR WEEKS FROM THE DATE OF RECEIPT OF SERVICE O F THE SAID ORDER ON OBJECTIONS ON THE ASSESSEE. 13. FURTHER, THE HONBLE BOMBAY HIGH COURT IN ARONI COM MERCIALS LTD. (SUPRA) WHILE FOLLOWING ITS EARLIER DECISION IN ASIAN PAINTS LTD. V. DY. CIT [2008] 296 ITR 90 HAS CLEARLY LAID DOWN THAT WHEN AN ASSESSMENT IS SOUGHT TO BE REOPENED UNDER SECTION 148 AND THE OBJ ECTIONS OF THE ASSESSEE HAVE BEEN OVERRULED BY THE ASSESSING OFFIC ER, THEN IN SUCH A CASE THE ASSESSING OFFICER WILL NOT PROCEED FURTHER IN THE MATTER FOR A PERIOD OF FOUR WEEKS FROM THE DATE OF RECEIPT OF TH E ORDER REJECTING THE OBJECTIONS OF THE ASSESSEE. IT WAS FURTHER HELD THA T IT IS AXIOMATIC THAT THE ITA NO. 3559, 3343 & 3307 MUM 20 17-SHRI GIRIRAJ METALEX PVT. LTD. 11 LAW DECLARED BY THIS COURT IS BINDING ON ALL AUTHOR ITIES FUNCTIONING WITHIN THE JURISDICTION OF THIS COURT. IT IS NOT OPEN TO T HE ASSESSING OFFICER TO FEIGN IGNORANCE OF THE LAW DECLARED BY THIS COURT A ND PASS ORDERS IN DEFIANCE OF THE LAW LAID DOWN BY THIS COURT. 14. CONSIDERING THE DECISION OF JURISDICTIONAL HIGH COU RT IN ASIAN PAINT LTD. (SUPRA) AND ARONI COMMERCIALS LTD. (SUPRA) WE HAVE NOTED THAT THE ASSESSING OFFICER HAS PASSED THE ORDER IN DEFIANCE OF LAW DECLARED BY HONBLE JURISDICTIONAL HIGH COURT. THEREFORE, THE R E-ASSESSMENT ORDER PASSED BY ASSESSING OFFICER IS INVALID. IN THE RESU LT, THE GROUND NO.1 OF THE APPEAL IS ALLOWED. 15. SINCE WE HAVE ALLOWED THE APPEAL OF ASSESSEE ON LEG AL GROUND HOLDING THAT THE RE-ASSESSMENT ORDER IS INVALID, THEREFORE, DISCUSSION ON MERIT OF THE CASE HAS BECOME ACADEMIC. 16. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. IN ITA NO. 3343/MUM/2017 FOR ASSESSMENT YEAR 2009-10. 17. THE ASSESSEE HAS RAISED THE FOLLOWING GROUND OF AP PEAL: THE LD. CIT(A) ERRED IN CONFIRMING PARTIAL ADDITIO N OF RS. 49,35,460/-. 18. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED RETURN OF INCOME FOR ASSESSMENT YEAR 2009-10 ON 12.09.2009 DECLARING TOT AL INCOME AT RS. 35,56,330/-. THE RETURN WAS SELECTED FOR SCRUTINY A ND ASSESSMENT ORDER ITA NO. 3559, 3343 & 3307 MUM 20 17-SHRI GIRIRAJ METALEX PVT. LTD. 12 UNDER SECTION 143(3) WAS PASSED ON 27.10.2011 ASSES SING TOTAL INCOME OF RS. 35,67,254/-. SUBSEQUENTLY, THE ASSESSMENT WAS R E-OPENED UNDER SECTION 147. NOTICE UNDER SECTION 148 DATED 17.06.2 014 WAS SERVED UPON THE ASSESSEE. THE ASSESSMENT WAS RE-OPENED ON THE BASIS OF INFORMATION RECEIVED FROM DGIT (INVESTIGATION) THAT ASSESSEE IS A BENEFICIARY OF HAWALA TRANSACTION. ACCORDINGLY CASE WAS RE-OPENED. ASSESSEE FILED OBJECTION ON 08.03.2014. THE ASSESSMENT WAS COMPLET ED ON 16.03.2015 UNDER SECTION 147 R.W.S 143(3). DURING THE ASSESSME NT, THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS SHOWN PURCHASES FROM 10 PARTIES WHICH WERE SHOWN IN THE LIST OF HAWALA DEALERS. THE ASSESSEE HAS SHOWN AGGREGATE PURCHASES OF RS. 12,33,86,518/- FROM SUCH 10 PARTIES. THE ASSESSEE WAS ASKED TO SUBSTANTIATE THE TRANSACTION WITH DOCUMENTARY EVIDENCE. THE ASSESSEE ASKED FOR CROSS-EXAMINATION OF THE SAID PARTIES. THE ASSESSING OFFICER ISSUED SUMMON UNDER SECTION 1 31 OF THE ACT TO ALL SUCH PARTIES. THE NOTICE WAS NOT SERVED UPON EIGHT PARTIES, ONE OF THE PARTIES WAS NOT FOUND AT THE ADDRESS AND ONE PARTY ON WHICH NOTICE WAS SERVED NOT RESPONDED. THE NAME OF PARTIES, THE TRAN SACTION OF PURCHASES AND STATUS OF NOTICE UNDER SECTION 131 IS SUMMARIZE D AS UNDER: SR.NO. NAME OF THE PARTY TRANSACTION AMOUNT (RS.) REMARKS OF SUMMON U/S 131 1 M/S NAVDEEP TRADING 2,06,40,231/- NOT SERVED ITA NO. 3559, 3343 & 3307 MUM 20 17-SHRI GIRIRAJ METALEX PVT. LTD. 13 CORPORATION 2 M/S GRIFTON INDIA RIDDHI ENTERPRISE 54,69,807 ADDRESS NOT FOUND 3 M/S DHRUV SALES CORPORATION 55,74,837 NOT SERVED 4 M/S K.K. ENTERPRISE 45,84,138 NOT SERVED 5 M/S SHUBHLAXMI SALES CORPORATION 2,08,05,558 NOT SERVED 6 M/S NAMAN ENTERPRISES 4,37,11,757 NOT SERVED 7 M/S OM CORPORATION 62,29,885 SERVED BUT NOT RESPONDED 8 M/S IMPEX TRADING CO. 62,01,980 NOT SERVED 9 M/S SHANTINATH CORPORATION 89,67,025 NOT SERVED 10 M/S P.K. TRADING CO. 13,01,300 NOT SERVED 19. THE ASSESSEE WAS INFORMED ABOUT THE STATUS OF PARTI ES THAT THE QUESTION OF CROSS-EXAMINATION GOT DEFEATED DUE TO NON-AVAILABIL ITY OF THE PARTIES. AFTER CONSIDERING THE SUBMISSION OF PARTIES, THE AS SESSING OFFICER WHILE PASSING THE RE-ASSESSMENT ORDER, THE ASSESSING OFFI CER DISALLOWED 12% OF THE ALLEGED BOGUS PURCHASES. THE ASSESSING OFFICER CALCULATED THE DISALLOWANCE OF RS. 14806383/- AND ADDED BACK TO TH E TOTAL INCOME. ON APPEAL BEFORE THE LD. CIT(A), THE ASSESSEE CHALLENG ED THE VALIDITY OF RE- OPENING AS WELL AS DISALLOWANCE ON ACCOUNT OF BOGUS PURCHASES. THE LD. CIT(A) UPHELD THAT VALIDITY OF RE-OPENING, HOWEVER, THE DISALLOWANCE ON ACCOUNT OF BOGUS PURCHASES WAS RESTRICTED TO 4% OF THE ITA NO. 3559, 3343 & 3307 MUM 20 17-SHRI GIRIRAJ METALEX PVT. LTD. 14 IMPUGNED/DISPUTED PURCHASES. THUS, FURTHER AGGRIEVE D, THE ASSESSEE HAS FILED THE PRESENT APPEAL BEFORE US. 20. THE ASSESSEE HAS NOT CHALLENGED THE VALIDITY OF RE- OPENING IN THE PRESENT APPEAL. THEREFORE, THE ISSUE OF RE-OPENING ATTAINS FINALITY IN THIS YEAR. THE ASSESSEE HAS ONLY CHALLENGED THE ACTION OF LD. CIT( A) IN SUSTAINING/RESTRICTING THE ADDITION OF IMPUGNED PUR CHASES TO THE EXTENT OF 4% OF THE ALLEGED BOGUS PURCHASES FROM IMPUGNED PAR TIES. 21. WE HAVE HEARD THE SUBMISSION OF LD. AR OF THE ASSES SEE AND LD. DR FOR THE REVENUE AND PERUSED THE MATERIAL AVAILABLE ON R ECORD. THE LD. AR OF THE ASSESSEE SUBMITS THAT DURING THE ASSESSMENT, TH E ASSESSEE PROVIDED COMPLETE DETAILS OF PURCHASES. THE ASSESSING OFFICE R HAS NOT DISCUSSED IN THE ORDER ABOUT THE VARIOUS DOCUMENTARY EVIDENCE FU RNISHED BY ASSESSEE. THE ASSESSEE FURNISHED THE COPY OF BILLS RAISED BY PARTIES, LEDGER ACCOUNTS OF THE PARTIES, BANK STATEMENT REFLECTING THE PAYME NT AND CORRESPONDING SALE OF THE MATERIAL ALONG WITH STOCK DISPOSAL STAT EMENT. THE ASSESSING OFFICER DISOWNED ALL THE TRANSACTION AND ADDED 12% OF THE ALLEGED PURCHASES ON PRESUMPTION BASIS. THE LD. CIT(A) ALSO SUSTAINED THE ADDITION TO THE EXTENT OF 4% DESPITE THE FACT THAT ASSESSEE HAS SHOWN GROSS PROFIT OF 1.17% WHICH WAS HIGHER THAN THE EAR LIER YEARS. THE VAT RATE APPLICABLE ON THE STEEL & IRON ITEM DURING THE RELEVANT PERIOD WAS ITA NO. 3559, 3343 & 3307 MUM 20 17-SHRI GIRIRAJ METALEX PVT. LTD. 15 ONLY 4%. THE LD. AR OF THE ASSESSEE SUBMITS THAT NO T DISALLOWANCE IS WARRANTED. THE DISALLOWANCE RESTRICTED BY LD. CIT(A ) IS EXCESSIVE. AS THE PROFIT MARGIN IN THE STEEL ITEM ARE VERY LOW. 22. ON THE OTHER HAND, THE LD. DR FOR THE REVENUE SUPPO RTED THE ORDER OF LOWER AUTHORITY. THE LD. DR FURTHER SUBMITS THAT TH E LD. CIT(A) HAS ALREADY GRANTED SUFFICIENT RELIEF TO THE ASSESSEE AND THAT THE ASSESSEE IS NOT ENTITLED FOR ANY FURTHER RELIEF. 23. WE HAVE CONSIDERED THE RIVAL SUBMISSION OF THE PART IES AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THE ASSESS ING OFFICER DISALLOWED THE PURCHASES OF 12% SHOWN FROM THE PART IES WHICH WERE IDENTIFIED AS HAWALA TRADERS BY THE SALE TAX DEPART MENT, GOVERNMENT OF MAHARASHTRA. WE HAVE NOTED THAT WHILE MAKING DISALL OWANCE, THE ASSESSING OFFICER HAS NOT DISCUSSED ABOUT DOCUMENTA RY EVIDENCES FURNISHED BY THE ASSESSEE. THE ASSESSING OFFICER HA S NOT DISPUTED THE SALE OF THE ASSESSEE. THE BOOKS OF ACCOUNT OF THE ASSESS EE WERE ALSO NOT REJECTED BY THE ASSESSING OFFICER. THE ASSESSING OF FICER MADE THE DISALLOWANCE ONLY ON THE BASIS OF 3 RD PARTY INFORMATION. DURING THE FIRST APPELLATE STAGE, THE LD. CIT(A) OBSERVED THAT ON TH E REQUEST OF ASSESSEE, SUMMON UNDER SECTION 131 WERE ISSUED TO ALL 10 PART IES. THE SUMMONS COULD BE SERVED ONLY ON ONE PARTY. THE OTHER NINE P ARTIES WERE NOT FOUND ITA NO. 3559, 3343 & 3307 MUM 20 17-SHRI GIRIRAJ METALEX PVT. LTD. 16 ON THE ADDRESS MENTIONED ON THE PURCHASE BILL. EVEN THE NOTICES WERE NOT RETURNED, NO RESPONSE WAS FILED. THE LD. CIT(A) AFT ER CONSIDERING THE SUMMARY OF TURNOVER IN GROSS PROFIT FOR EARLIER AND SUBSEQUENT YEAR NOTED THAT AVERAGE GROSS PROFIT OF THE ASSESSEE FOR ASSESSMENT YEAR 2007-08 TO 2011-12 IS 1.48%. THE GP FOR THE CURRENT YEAR IS 1.17%. THE LD. CIT(A) WORKED OUT THE PERCENTAGE OF DISALLOWANC E TO THE TOTAL TURNOVER WHICH COMES TO 8.55%. CONSIDERING THE PERC ENTAGE OF TOTAL TURNOVER AND PERCENTAGE OF DISALLOWANCE AND CONSIDE RING THE VAT RATE OF IRON & STEEL ITEM DURING THE RELEVANT PERIOD, THE D ISALLOWANCE WAS RESTRICTED TO 4% OF THE IMPUGNED PURCHASES. THE LD. CIT(A) ALSO CONSIDERED THE CONTENTION OF THE ASSESSEE THAT THER E IS NO PURCHASES FROM GRIFTON INDIA RIDDHI ENTERPRISES WHICH IS SHOWN BY ASSESSING OFFICER OF 54,69,807/-. THE LD. CIT(A) DIRECTED THE ASSESSING OFFICER TO VERIFY IF ANY PURCHASES CLAIMED FROM GRIFTON INDIA RIDDHI EN TERPRISES AND RECOMPUTED THE DISALLOWANCE AS PER HIS DECISION. WE HAVE NOTED THAT THE LD. CIT(A) PASSED A REASONED ORDER BY CONSIDERING A LL THE CONTENTION OF THE ASSESSEE, WHICH IN OUR VIEW, DO NOT REQUIRE ANY FURTHER INTERFERENCE. 24. IN THE RESULT, GROUND OF APPEAL RAISED BY ASSESSEE IS DISMISSED. 25. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMISSED. ITA NO. 3307/MUM/2017 FOR ASSESSMENT YEAR 2010-11 ITA NO. 3559, 3343 & 3307 MUM 20 17-SHRI GIRIRAJ METALEX PVT. LTD. 17 26. WE HAVE NOTED THAT THE ASSESSEE HAS RAISED IDENTICA L GROUND OF APPEAL EXCEPT VARIATION OF DISALLOWANCE UNDER SECTION 68 ( IMPUGNED PURCHASES) AS RAISED IN APPEAL FOR A.Y. 2009-10. FACTS OF THE APPEAL UNDER CONSIDERATION ARE ALMOST SIMILAR EXCEPT THE FIGURE OF DISALLOWANCE OF PURCHASES. CONSIDERING OUR DECISION IN APPEAL FOR A .Y. 2009-10 ON IDENTICAL GROUNDS OF APPEAL, THE GROUNDS OF APPEAL RAISED IN THE APPEAL UNDER CONSIDERATION IS ALSO DISMISSED. 27. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMISSED. 28. ORDER PRONOUNCED IN THE OPEN COURT ON 30/11/2018. SD/- SD/- N.K. PRADHAN PAWAN SINGH ACCOUNTANT MEMBER J UDICIAL MEMBER MUMBAI, DATE: 30.11.2018 SK COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. DR G BENCH, ITAT, MUMBAI 6. GUARD FILE BY ORDER, DY./ASST. REGISTRAR ITAT, MUMBAI