MUFFAZAL HAKIM PENWALA, MUMBAI V. ITO 17(2)(4), MUMBAI

ITA 3739/MUM/2017

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 9296 (ITAT-MUMBAI)
• Duration Of Justice: 3 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-09-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 23-05-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: N HEMALATHA
• Assessee Lawyers: MRS RUCHI M RATHOD
• Keywords: Bogus purchase
• Section: 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH SMC, MUMBAI BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER ITA NO.3739/M/2017 ASSESSMENT YEAR: 2009-10 SHRI MUFFAZAL HAKIM PENWALA, INDIA HOUSE, GROUND FLOOR, SHOP NO.1-2, 246, A.R. STREET, MUMBAI-400 003 PAN: AABPP1934H VS. COMMISSIONER OF INCOME TAX (APPEAL)-28, EARNEST HOUSE, NCPA MARG, NARIMAN POINT, MUMBAI 400 021 (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : MRS. RUCHI M. RATHOD, A.R. REVENUE BY : SHRI N. HEMALATHA, D.R. DATE OF HEARING : 08.08.2017 DATE OF PRONOUNCEMENT : 20.09.2017 O R D E R PER D.T. GARASIA, JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSESS EE AGAINST THE ORDER DATED 03.03.2017 OF THE COMMISSIONER OF I NCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS THE CIT(A)] R ELEVANT TO ASSESSMENT YEAR 2009-10. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS AN INDIVIDUAL ENGAGED IN BUSINESS AS DEALER IN OFFICE AND SCHOOL STATIONERY ITEMS ON WHOLESALE AND RETAIL BASIS. DURING THE YEAR THE ASS ESSING OFFICER (HEREINAFTER REFERRED TO AS THE AO) FOUND THAT ASSE SSEE HAD MADE BOGUS PURCHASES FROM FOLLOWING PARTIES: SR. NO. NAME OF THE PARTY AMOUNT OF PURCHASE (RS) 1. M/S. KAVITA SALES 7,51,789/- ITA NO.3739/M/2017 SHRI MUFFAZAL HAKIM PENWALA 2 2. M/S. KESARI TRADING CO. 33,83,405/- 3. M/S. MODERN TRADERS 29,45,680/- 4. M/S. SANGURA TRADING PVT. LTD. 29,16,909/- 5. M/S. SONOTRON TRADING CO. LTD. 29,75,325/- 6. M/S. VIRANI ENTERPRISES 29,67,450/- TOTAL 1,59,40,558/- 3. THE ASSESSEE WAS ASKED TO PRODUCE THE ABOVE PART IES FOR VERIFICATION. THERE WAS NO COMPLIANCE OF NOTICE UND ER SECTION 133(6). THEREFORE, THE AO HAS MADE THE ADDITION ON ACCOUNT OF BOGUS PURCHASES OF RS.73,56,771/-. 4. MATTER CARRIED TO THE LD. CIT(A) AND THE LD. CIT (A) HAS APPLIED 4% BY OBSERVING AS UNDER: 4.2 IN VIEW OF FACTS AND CONFINED TO PECULIARITIES , I FIND IT JUST AND REASONABLE INFERENCE THAT THE APPELLANT HAD THE OPP ORTUNITY TO PLAY WITH THE PURCHASE PRICE. TO WHAT EXTENT IS THE ONLY QUESTION REMAINING. HOLDING THAT SOME GUESSWORK IS INEVITABLE IN SUCH CIRCUMSTANCES, I FI ND THAT A 4% PROFIT RATE ON UNVERIFIED COMPONENT OF PURCHASES SHALL MEET THE EN DS OF JUSTICE, KEEPING IN VIEW 20.88% GP ALREADY DECLARED. THE PERCENTAGE OF VAT H OWEVER IS SUBJECT TO VERIFIABILITY THEREOF FROM RECORD OF AO. APPROPRIAT E REDUCTION MAY BE MADE THEREOF FROM IMPUGNED PURCHASES SUBJECT TO EVIDENCE BEING O N RECORD OF AO. THE GROUNDS ARE PARTLY ALLOWED. 5. THE LD. A.R. SUBMITTED THAT THE PURCHASES MADE B Y THE ASSESSEE ARE GENUINE THOUGH THE VENDERS ARE FOUND T O BE DEFAULTERS ON THE RECORD OF SALES TAX DEPARTMENT. ASSESSEE HAS M AINTAINED PROPER AND SUFFICIENT RECORDS AND ASSESSEE HAS BEEN IN BUS INESS FOR MORE THAN 27 YEARS. THE ASSESSEE HAS PLACED SUFFICIENT INFORMATION AND PRODUCED LEDGER ACCOUNT AND BANK STATEMENT. TO VER IFY THE CLAIM OF PURCHASES, NOTICE UNDER SECTION 133(6) WAS ISSUED T O THE SUPPLIER BUT PARTY COULDNT BE PRODUCED. THEREFORE, 4% ON GP HA S BEEN SUSTAINED BY LD. CIT(A). BUT THE YEAR IN WHICH THE ASSESSEE IS TRADER HE HAS ALREADY DECLARED THE GP OF 20.88% AND IF HE IS SADD LED WITH MORE GP ITA NO.3739/M/2017 SHRI MUFFAZAL HAKIM PENWALA 3 THEN IT IS 34% WHICH IS A TRADING IMPOSSIBILITY. NO SPECIFIC ALLEGATION IN THE STATEMENT AGAINST THE ASSESSEE WAS RECORDED AND NO CROSS EXAMINATION OF CONCERNED PARTIES WAS ALLOWED. THER EFORE, WHEN ASSESSEE HAS DECLARED MORE GP RELYING UPON THE JUDG MENT OF ITAT IN ITA NO.3699/M/2016 GP SHOULD BE ESTIMATED @ 2%. 6. THE LD. D.R. RELIED UPON THE ORDER OF REVENUE AU THORITIES. 7. I HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE P ARTIES. I FIND THAT THE ISSUE IN CONTROVERSY IS COVERED BY THE DECISION OF TRIBUNAL IN THE CASE OF M/S. GEOLIFE ORGANICS & ORS. IN ITA NO.3699 /M/2016 & ORS. AND IN THE CASE OF M/S. ALLIED BLENDERS AND DISTILL ERS PVT. LTD. IN ITA NOS.2447 & 2446/M/2015. FOR THE SAKE OF CONVEN IENCE, THE RELEVANT PORTION FROM THE CASE OF M/S. GEOLIFE ORGA NICS & ORS. IN ITA NO.3699/M/2016 & ORS., IS REPRODUCED AS UNDER: 10. WE HAVE CONSIDERED RIVAL CONTENTIONS AND CAREF ULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE HAVE ALSO DELIBERATED ON VARIOUS JUDICIAL PRONOUNCEMENTS REFERRED BY LOWER AUTHORITIES IN THE IR RESPECTIVE ORDERS AS WELL AS CITED BY LEARNED AR AND DR DURING THE COURSE OF HEA RING BEFORE US. FROM THE RECORD WE FOUND THAT THE BASIS ON WHICH AO DISALLOWED THE ALLEGED BOGUS PURCHASES IS THE NON-APPEARANCE OF THE SUPPLIERS BEFORE THE AO TO VE RIFY THE PURCHASES. IN THIS REGARD WE FOUND THAT MANY BENCHES OF ITAT AND HON'B LE HIGH COURTS HAVE HELD THAT WHEN PURCHASES ARE SUPPORTED BY SUFFICIENT DOCUMENT ARY EVIDENCES THEN MERELY BECAUSE OF NON-APPEARANCE BEFORE THE AO, ONE CANNOT CONCLUDE THAT THE PURCHASES WERE NOT MADE BY THE ASSESSEE. SEVERAL DECISIONS CI TED IN SUPPORT OF THE SAID ARGUMENT ARE NIKUNJ EXIMP ENTERPRISES (P.) LTD. V. CIT 216 TAXMAN 171 (BOM.), CIT V. NANGALIA FABRICS (P.) LTD. 220 TAXMANN 17 (GUJ.) , CIT V. M.K. BROS. 163 ITR 249 (GUJ.), ASSTT. CIT V. AKRUTI DYEING & PRINTING MILL S (P.) LTD. [TAX APPEAL NO. 997 OF 2008, DATED 27/01/2009],CIT V. VEEKAY PRINTS (P.) L TD. [TAX APPEAL NO. 2557 OF 2010, DATED. 1/2/2012], DIAGNOSTICS V. CIT 334 ITR 111 (CAL.), ITO V. TOTARAM B. SHARMA [TAX APPEAL NOS. 1344/2008 & 1355/2008, DATE D 9-2-2010], DY. CIT V. ADINATH INDUSTRIES [2001] 252 ITR 476 (GUJ.), CIT V . PRECIOUS JEWELS CORPN. 17 TAXMANN.COM 264 (RAJ.), CIT V. RAJESH P. SONI [TAX APPEAL NO.1107 OF 2006, DATED 27-2-2012. ITA NO.3739/M/2017 SHRI MUFFAZAL HAKIM PENWALA 4 8. RESPECTFULLY FOLLOWING THE TRIBUNAL DECISION, I ESTIMATE THE GP @ 2%. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 20.09.2017. SD/- (D.T. GARASIA) JUDICIAL MEMB ER MUMBAI, DATED: 20.09.2017. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.