DISHA INTERNATIONAL, MUMBAI V. JT CIT 24(1), MUMBAI

ITA 3598/MUM/2016

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 7801 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-12-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 24-05-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: V JUSTIN
• Assessee Lawyers: HARSHVARDHA DATAR
• Keywords: Bogus purchase
• Section: 143(3); 142(1); 133(6)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE SHRI MAHAVIR SINGH , JM AND SHRI RAJESH KUMAR, AM I .T.A. NO. 3598 /MUM/201 6 ( / ASSESSMENT YEAR : 2 0 11 - 12 ) M/S DISHA INTERNATIONAL, C/O JAYESH SANGHRAJKA AND CO. LLP CHARTERED ACCOUNTANTS, UNIT NO.405 - 408, HIND RAJASTHAN CENTRE, D S PHALKE ROAD, DADAR(E), MUMBAI - 400014 VS. JOINT COMMISSIONER OF INCOME TAX - 24(1), BANDRA KURLA COMPLEX, MUMBAI - 400051 / APPELLANT .. / RESPONDENT ./ PAN : AA AFDA4786E / ASSESSEE BY : SHRI HARSHVARDHA DATAR /RE VENUE BY : SHRI V .JUSTIN / DATE OF HEARING : 1 3 .12.2017 / DATE OF PRONOUNCEMENT : 19. 12 . 2017 / O R D E R PER RAJESH KUMAR, ACCOUNTANT MEMBER : THIS IS AN APPEAL FILED BY THE ASSESSEE CHALLENGING THE ORDER DATED 1 . 0 3 .201 6 PASSED BY THE LD.CIT(A) - 41 FOR THE ASSESSMENT YEAR 20 11 - 12 . 2. THE ONLY ISSUE RAISED BY THE ASSESSEE I N THE VARIOUS GROUNDS OF APPEAL IS AGAINST THE SUSTENANCE OF ADDITION AT RS. 20,10,169 / - BY THE LD.CIT(A) BEING 30 % OF THE TOTAL DEDUCTION AS AGAINST THE DISALLOWANCE AT 100% PURCHASES TO THE TUNE OF RS.67,00,563/ - BY THE AO . ITA 3598 / MUM/201 6 2 3. FACTS OF THE CASE ARE TH AT THE ASSESSEE FILED RETURN OF INCOME ON 21 .9.2011 DECLARING TOTAL INCOME OF RS. 1,41,57,843 / - . THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AND THE STATUTORY PROCESS UNDER SECTION 143(2) AND 142(1) WAS FOLLOWED. THE ASSESSEE IS ENGAGED IN THE BUS INESS OF EXPORT OF JEWELLERY. THE ASSESSEE ,DURING THE YEAR, SHOW ED A TURNOVER OF RS.22,67,79,278/ - AND GP RS.3,42,71,936/ - AT THE RATE OF 15.11% AS AGAINST THE GP AT RS.16.00% IN THE EARLIER YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION ON TURNOVER OF RS.22,40,75,866/ - . THE AO RECEIV ED THE INFORMATION FROM THE DGIT(INV), SALES TAX DEPARTMENT, GOVERNMENT OF MAHARASHTRA THAT THE ASSESSEE IS A BENEFICIARY OF BOGUS PURCHASES AS IT MADE PURCHASES OF RS.67,00,563/ - FROM TWO PARTIES VIZ M/S PAYAL ENTERPRISES AND M/S RAJ TRADERS AMOUNTING TO RS.57,20,787/ - AND RS.9,79,776/ - RESPECTIVELY. THE AO CALLED FOR THE EXPLANATION FROM THE ASSESSEE TO PROVE THE GENUINENESS OF THE ABOVE PURCHASES AND ALSO IN ORDER TO VERIFY THE GENUINENESS OF PURCHASES I SSUED NOTICES TO THE PARTIES U/S 133(6) OF THE ACT WHICH WERE RETURNED UNSERVED . ACCORDINGLY, THE AO ISSUED SHOW CAUSE NOTICE TO THE ASSESSEE TO SHOW CAUSE AS TO WHY THE SAID AMOUNT OF BOGUS PURCHASES SHOULD NOT BE TREATED AS INCOME OF THE ASSESSEE AND B E ADDED TO THE TOTAL INCOME OF THE ASSESSEE, WHICH WAS REPLIED BY THE ASSESSEE BY SUBMITTING A COP IES OF PURCHASE BILLS AND OTHER DETAILS AS MENTIONED IN PARA 4.3 OF THE ASSESSMENT ORDER . HOWEVER, AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, TH E AO CAME TO THE CONCLUSION THAT THE ASSESSEE HAS FAILED TO PROVE THE GENUINENESS OF THE PURCHASES MADE FROM THESE PARTIES AND ITA 3598 / MUM/201 6 3 CONSEQUENTLY ADDED THE ENTIRE AMOUNT OF BOGUS PURCHASES AMOUNTING TO RS. 67,00,563/ - BY FRAMING THE ASSESS MENT U/S 143(3) O F THE ACT VIDE ASSESSMENT ORDER DATED 2 4. 3.2014 ASSESSING THE TOTAL INCOME OF THE ASSESSEE AT RS. 2,09,34,181/ - . IN THE APPELLATE PROCEEDINGS, THE LD.CIT(A) AFTER CONSIDERING THE SUBMISSIONS AND CONTENTIONS OF THE ASSESSEE , THE LD.CIT(A) PARTLY ALLOWED THE APP EAL OF ASSESSEE RESTRICT ING THE ADDITION TO RS. 20,10,169/ - BEING 30% OF THE TOTAL DEDUCTION AS AGAINST 100% OF THE TOTAL PURCHASES BEING RS.67,00,563/ - . AGGRIEVED BY THE ORDER OF THE LD.CIT(A), THE ASSESSEE IS IN APPEAL BEFORE US. 4. THE LD. AR VEHEM ENTLY SUBMITTED BEFORE US THAT THE ORDER PASSED BY THE LD.CIT(A) IN RESTRICTING THE ADDITION TO 30 % OF THE ALLEGED BOGUS PURCHASE S IS TOTALLY WRONG AND AGAINST THE FACTS. THE LD. AR SUBMITTED BEFORE THE BENCH THAT BY NO AMOUNT OF REASONING THE INCOME COU LD BE ASSESSED AT 30%. THE LD COUNSEL SUBMITTED THAT THE TRIBUNAL IN THE CASE OF CIT V/S SIMIT P SHETH (2013) 356 ITR 451 (GUJ), THE HONBLE GUJARAT HIGH COURT HAS DISALLOWED 12.5% OF SUCH BOGUS PURCHASES, WHERE AS , THE CO - ORDINATE BENCH ES OF THE TRIBUN AL DIRECTED THE ADDITION RANGING FROM 5 TO 12.5% IN NUMBER OF CASES. THEREFORE, THE LD. AR SUBMITTED BEFORE US THAT THE ASSESSEE HAS SUBMITTED ALL THE NECESSARY EVIDENCES BEFORE THE LOWER AUTHORITIES TO PROVE THE ASSESSEES CASE, THE TOTAL ADDITION AT THE RATE OF 30% AS SUSTAINED BY THE LD. CIT(A) IS ON THE VERY HIGH SIDE WITHOUT ANY REASON S AND JUSTIFICATION. T HE LD.AR, THEREFORE PRAYED THAT A REASONABLE VIEW IN THE MATTER BE TAKEN. ITA 3598 / MUM/201 6 4 5 . THE LD. DR RE - ITERATED THE FACTS OF THE CASE AND RELIED UP ON THE DECISION OF THE AO . THE LD. DR SUBMITTED THAT THE ASSESSEE HAS AVAILED BOGUS BILLS OF PURCHASES TO SUPPRESS THE PROFIT AND THEREFORE, THE LD.CIT(A) HAS TAKEN A VERY REASONABLE VIEW IN SUSTAINING ONLY 30 % OF THE PURCHASES INSTEAD OF UPHOLDING THE O RDER OF THE AO. ACCORDINGLY, PRAYED THAT THE ORDER OF LD.CIT(A) BE AFFIRMED . 6. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL PLACED BEFORE US INCLUDING THE IMPUGNED ORDERS OF AUTHORITIES BELOW. WE FIND FROM THE RECORD THA T THE AO ADDED 100% OF THE ALLEGED PURCHASES WHEREAS THE LD.CIT(A) HAS UPHELD THE ADDITION TO THE EXTENT OF 30 % OF THE ALLEGED PURCHASES. I N SUCH TYPE OF CASES WITH SIMILAR AND IDENTICAL FACTS THE PROFIT IS BROUGHT TO TAX WHICH THE ASSESSEE MAY HAVE MADE BY PURCHAS ING THE GOODS AND MATERIALS FROM THE GREY MARKETS THEREBY MAKING HIGHER PROFITS BU WAY OF NON PAYMENT OF VAT AND OTHER INCIDENTAL LEVY OF TAXES . T HEREFORE A REASONABLE PERCENTAGE OF THE BOGUS PURCHASE TOWARDS SAVINGS SHOULD BE MADE TO COVER THE LEAKAGES OF REVENUE FOR THE REASON THAT THE ASSESSEE MIGHT HAVE PURCHASED THE MATERIAL FROM GR E Y MARKET THEREBY SAVING VAT AND OTHER INCIDENTAL TAXES. CONSIDERING THE DECISION S OF THE CO - ORDINATE BENCH ES IN SUCH TYPE OF CASES, WE CONSIDER IT REASONABLE A ND FAIR TO SUSTAIN THE ADDITION AT THE RATE OF 10 % OF THE TOTAL ALLEGED BOGUS PURCHASES. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD.CIT(A) AND DIRECT THE AO TO RESTRICT THE ADDITION TO 10 % OF THE TOTAL BOGUS PURCHASES. ACCORDINGLY, THE APPEAL OF THE ASSESS EE IS PARTLY ALLOWED. ITA 3598 / MUM/201 6 5 7 . IN THE RESULT, APPEAL FILED BY T HE ASSESSEE IS PARTLY ALLOWED . O RDER WAS PRONOUNCED IN THE OPEN COURT ON 19TH DEC, 2017 . S D SD ( MAHAVIR SI NGH ) ( RAJESH KUMAR ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED : 19. 1 2 .2017 SRL,SR.PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE / BY ORDER, T RUE COPY / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI