RAKESH JITENDRA SHAH, MUMBAI V. ITO WD 32(3)(1), MUMBAI

ITA 3660/MUM/2017

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 9476 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-09-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 19-05-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: N HEMALATHA
• Keywords: Bogus purchase; Reasonable cause

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'SMC' BENCH, MUMBAI BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER ITA NO.3660/MUM/2017 (ASSESSMENT YEAR: 2009-10) SHRI RAKESH JITENDRA SHAH VS. INCOME TAX OFFICER - 32(3) - 1 601, PRIYAS SOECITY CKP COLONY, EKASR ROAD BORIVALI (W), MUMBAI 400092 ROOM NO. 107, C - 11 PRATYAKSHA KAR BHAVAN, BKC BANDRA, MUMBAI 400051 PAN AJMPS0113P APPELLANT RESPONDENT ASSESSEE BY: SHRI ASHWIN KASHINATH REVENUE BY: MS. N. HEMALATHA DATE OF HEARING: 03.08.2017 DATE OF PRONOUNCEMENT: 29.09.2017 O R D E R PER G.S. PANNU, AM THIS APPEAL BY THE ASSESSEE HAS BEEN FILED AGAINST THE ORDER OF THE CIT(A)-44, MUMBAI DATED 06.01.2017 FOR A.Y. 2009-10 . 2. THE ONLY ISSUE IN THIS APPEAL ARISES WITH REGARD TO THE ADDITION ON ACCOUNT OF BOGUS PURCHASES AMOUNTING TO ` 21,09,700/- 3. BEFORE PROCEEDING FURTHER IT MAY BE NOTICED THAT TH ERE IS A DELAY OF 21 DAYS IN FILING OF THE APPEAL BEFORE THE TRIBUNAL . IN THIS CONTEXT THE ASSESSEE VIDE AFFIDAVIT DATED 12.05.2017 SUBMITTED THAT THE DELAY HAS OCCURRED DUE TO THE DEATH OF HIS FATHER ON 26 TH FEBRUARY, 2017 AND MADE A REQUEST TO CONDONE THE DELAY IN FILING THE APPEAL. CONSIDERING THAT THE ASSESSEE HAD A REASONABLE CAUSE AND ALSO THE FACT T HAT THERE IS ONLY A SMALL DELAY OF 21 DAYS, THE DELAY IS CONDONED AND T HE APPEAL IS ADMITTED FOR ADJUDICATION. ITA NO. 3660/MUM/2017 SHRI RAKESH JITENDRA SHAH 2 4. AT THE TIME OF HEARING THE LEARNED A.R. FOR THE ASS ESSEE SUBMITTED THAT THE ASSESSEE WOULD BE SATISFIED IF ONLY A PERC ENTAGE OF PROFIT RELATABLE TO THE UNPROVED PURCHASES IS ADDED FOLLOWING THE RA TIO OF THE DECISION OF THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF N.K. INDUSTRIES LTD. VS. DCIT (ITA NOS. 240-242, 260 & 261 OF 2003 DATED 20.06.20 16). 5. ON THE OTHER HAND, THE LEARNED D.R. FOR REVENUE POI NTED OUT THAT THE ENTIRE AMOUNT OF PURCHASES HAS BEEN HELD TO BE UNPROVED AND, THEREFORE, ADDITION OF THE ENTIRE PURCHASES MADE BY THE LOWER AUTHORITIES DESERVES TO BE UPHELD. 6. I HAVE CONSIDERED THE RIVAL SUBMISSIONS. NOTABLY TH E DISCUSSION IN THE ORDERS OF THE AUTHORITIES BELOW REVEALS THAT TH E PRIMARY REASON TO TREAT THE PURCHASES AS UNPROVED IS THE INFORMATION RECEIVED FROM THE SALES TAX DEPARTMENT OF GOVERNMENT OF MAHARASHTRA. THE AO HAS ALSO MADE INDEPENDENT ENQUIRIES WHICH HAS NOT YIELDED AN Y RESPONSE. HOWEVER, IT IS NOTABLE THAT THE ASSESSEE CANVASSED THAT IF THE PURCHASES FROM THE SAID PARTIES ARE FOUND TO BE UNPROVED, IT DOES NOT DISPROVE THAT THE MATERIAL WAS INDEED PROCURED ESPECIALLY WHEN TH E CORRESPONDING SALES HAVE BEEN ACCEPTED. THERE IS NO NEGATION TO T HE AFORESAID PROPOSITION CANVASSED BY THE ASSESSEE AND CONSIDERI NG THE SAME, IN MY VIEW, IT IS IN THE FITNESS OF THINGS THAT 12.5% OF THE TOTAL PURCHASE IS ADDED TO THE TOTAL INCOME ON THIS COUNT. THIS IS IN LINE WITH THE DECISION OF THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF SI MIT P. SHAH 356 ITR 451 (GUJ). 7. IN SO FAR AS THE POINT OF THE LEARNED D.R. AND THE RELIANCE ON THE CASE OF N.K. INDUSTRIES LTD. (SUPRA) ARE CONCERNED IT WO ULD SUFFICE TO NOTE THAT IN THAT CASE THERE WAS SEARCH ACTION AND THE MATERIAL FOUND AT THE TIME OF SEARCH PROVED THE BOGUS NATURE OF THE PURCHASES. TH E INSTANT IS A CASE WHERE A MERE NON-SUBSTANTIATION OF PURCHASES ON THE PART OF THE ASSESSEE HAS LED THE AO TO TREAT THE PURCHASES AS UNPROVED. THEREFORE THE RATIO LAID DOWN IN THE JUDGEMENT IN THE CASE N.K. INDUSTR IES LTD. (SUPRA) IS NOT ATTRACTED IN THE PRESENT CASE AND ACCORDINGLY T HE AO IS DIRECTED TO ITA NO. 3660/MUM/2017 SHRI RAKESH JITENDRA SHAH 3 MAKE AN ADDITION OF 12.5% OF THE UNPROVED PURCHASES AND DELETE THE BALANCE AMOUNT. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH SEPTEMBER, 2017. SD/ - (G.S. PANNU) ACCOUNTANT MEMBER MUMBAI, DATED: 29 TH SEPTEMBER, 2017 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) -44, MUMBAI 4. THE CIT 32, MUMBAI 5. THE DR, SMC BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.