T.M. MOHAMEDALLY, MUMBAI V. ITO WD 18(3)(4), KALYAN

ITA 3799/MUM/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 0166 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-09-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 18-07-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 02-06-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Bogus purchase
• Section: 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES D, MUMBAI BEFORE SHRI P K BANSAL, VICE PRESIDENT & SHRI AMARJIT SINGH, JUDICIAL MEMBER ITA NO. 3799/MUM/2016 ASSESSMENT YEAR : 2010-11 M/S. T M MOHAMEDALLY HARHARWALA BLDG., 112 LOHAR CHAWL CRAWFORD MARKET MUMBAI 400 002 PAN AACFT2448M VS. ITO WARD 18(3)(4) MUMBAI (APPELLANT) (RESPONDENT) APPELLANT BY : NONE RESPONDENT BY : SHRI PURUSHOTTAM KUMAR DATE OF HEARING : 31. 08 .2017 DATE OF PRONOUNCEMENT : 04. 0 9 .2017 O R D E R PER P K BANSAL, VICE-PRESIDENT: THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT(A) - 29, MUMBAI, DATED 22.03.2016, FOR A.Y.2010 -11. THE ONLY GRIEVANCE OF THE ASSESSEE RELATES TO THE SUSTENANCE OF THE AD HOC ADDITION OF ` 13,61,229/- BY THE CIT(A) AGAINST THE ADDITION MAD E BY THE ASSESSING OFFICER AMOUNTING TO ` 90,74,861/- ON ACCOUNT OF BOGUS PURCHASES. 2. NONE APPEARED ON BEHALF OF THE ASSESSEE EVEN THO UGH NOTICE WAS SENT FROM TIME TO TIME THROUGH RPAD. ON 05.01.2017 THE APPEAL WAS FIXED, BUT NONE APPEARED AND, THEREFORE, HEARING WAS ADJOURNED TO 02.03.2017. AGAIN ITA NO.3799/MUM/2016 M/S. T M MOHAMEDALLY 2 ON 02.03.2017 NONE APPEARED AND THE CASE WAS ADJOUR NED TO 29.03.2017 AND THEREAFTER TO 18.07.2017. TODAY, ON 31.08.2017 ALS O NONE APPEARED ON BEHALF OF THE ASSESSEE. WE, THEREFORE, DECIDED TO DISPOSE OF THE APPEAL AFTER HEARING THE LEARNED DR AND ON THE BASIS OF THE MATE RIAL AVAILABLE ON RECORD. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FI RM IS CARRYING ON THE BUSINESS OF TRADING IN HAND TOOLS, AIRCRAFT TOOLS, REFRIGERATION TOOLS, AUTOMOBILES TOOLS, ELECTRONIC AND ELECTRICAL TOOLKI TS, PNEUMATIC TOOLS, MEASURING TOOLS, VARIOUS INDUSTRIAL TOOLS AND HARDW ARE ITEMS. THE ASSESSEE ALSO HAS A BRANCH AT KAKINADA, HYDERABAD. DURING T HE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS SHOWN SALES OF ` 10,65,44,702/-, GROSS PROFIT AT ` 2,24,05,388/- AND NET PROFIT AT ` 17,04,000/- DURING THE YEAR, THE ASSESSING OFFICER RECEIVED INFORMATION FROM THE SAL ES TAX DEPARTMENT, THE NAMES OF THE PARTIES WHO HAD ADMITTED THROUGH SWORN AFFIDAVITS THAT THEY HAD BEEN ISSUING HAWALA BILLS WITHOUT ACTUAL SALES AND THE ASSESSEE WAS ONE OF THE BENEFICIARIES OF THESE PARTIES: M/S. SAMARY SALES CORPORATION RS. 2,55,000 M/S. SUNRISE ENTERPRISES RS. 3,510 M/S. KAVISH INTERNATIONAL RS. 4,01,472 M/S. NEM ENTERPRISES RS. 26,20,887 M/S. A P ENTERPRISES RS. 30,37,579 M/S. RIDDHI ASSOCIATES RS. 27,56,413 RS . 90,74,861 SUBSEQUENTLY, PROCEEDINGS U/S. 147 WAS INITIATED AG AINST THE ASSESSEE. THE ASSESSING OFFICER ASKED THE ASSESSEE TO PROVE THE G ENUINENESS OF THE ITA NO.3799/MUM/2016 M/S. T M MOHAMEDALLY 3 PURCHASES BEING MADE FROM THE AFORESAID SIX PARTIES . THE ASSESSEE FAILED TO DO SO AND, THEREFORE, THE ASSESSING OFFICER TREATED THE SAID PURCHASES AS BOGUS AND ADDED THE SAME TO THE INCOME OF THE ASSES SEE. WHEN THE MATTER WENT BEFORE THE CIT(A), THE CIT(A) RELIED ON THE FO LLOWING DECISIONS: I. VIJAY PROTEINS LTD. VS. ACIT 58 ITD 0428; II. SUN PHARMACEUTICALS INDUSTRIES VS. DCIT 353 ITR 474 III. N K INDUSTRIES LTD. VS. ITO 362 ITR 542 HE TOOK A VIEW THAT ENTIRE PURCHASE PRICE COULD NOT BE DISALLOWED BUT ONLY THE PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES COULD BE ADDED TO THE INCOME OF THE ASSESSEE. HE, THEREFORE DIRECTED THE ASSESS ING OFFICER TO RESTRICT THE DISALLOWANCE TO 15% OF THE ALLEGED BOGUS PURCHASES OF ` 9,74,861/- I.E. AT ` 13,61,229/-. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 3. WE HAVE HEARD THE LEARNED DR AND PERUSED THE MAT ERIAL AVAILABLE ON RECORD. THE LEARNED DR VEHEMENTLY ARGUED THAT THE CIT(A) INCORRECTLY DELETED THE ADDITION. IT WAS FURTHER ARGUED THAT T HE ENTIRE DISALLOWANCE MADE BY THE ASSESSING OFFICER SHOULD HAVE BEEN SUSTAINED BY THE CIT(A). THE ASSESSING OFFICER TREATED THE PURCHASES MADE FROM S IX PARTIES AS STATED HEREINABOVE TO BE NON-GENUINE. IN OUR VIEW, WHAT I S TAXABLE IS THE TAXABLE COMPONENT AND NOT THE ENTIRE TRANSACTION. THE ASSE SSING OFFICER EVEN THOUGH REJECTED THE BOOKS OF ACCOUNT HAS NOT ESTIMA TED THE PROFITS EXCEPT MAKING THE ADDITION IN RESPECT OF THE SAID PURCHASE S. THE DISALLOWANCE OF ITA NO.3799/MUM/2016 M/S. T M MOHAMEDALLY 4 ENTIRE PURCHASES FROM THE SIX ALLEGED HAWALA TRADER S CANNOT BE SUSTAINED IN VIEW OF THE DECISION OF MUMBAI HIGH COURT IN CIT VS . HARIRAM BHAMBHANI IN ITA 313/2013 DECIDED ON 04.12.2015, WHEREIN IT HAS BEEN HELD THAT REVENUE CANNOT BRING THE ENTIRE SALES CONSIDERATION TO TAX BUT ONLY THE PROFIT ATTRIBUTABLE ON THE TOTAL UNRECORDED SALES CONSIDER ATION, WHICH ALONE CAN BE SUBJECT TO INCOME TAX. IN OUR OPINION, THE ESTIMAT ION OF THE PROFIT ON THE PURCHASES @15% IS ON THE HIGH KEEPING IN VIEW THAT THE ASSESSEE WOULD HAVE SAVED ON VAT @12.5%. WE SET ASIDE THE ORDER O F THE CIT(A) AND DIRECT THE ASSESSING OFFICER TO ESTIMATE THE PROFIT ON THE PURCHASES OF ` 90,74,861/- @ 12.5% AND ADDED IT TO THE INCOME RETURNED BY THE ASSESSEE. THUS, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED BY M ODIFYING THE ORDER OF THE CIT(A) TO THAT EXTENT. 4. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 4 TH DAY OF SEPTEMBER, 2017. SD/- SD/- (AMARJIT SINGH) (P K BANSAL) JUDICIAL MEMBER VICE-PRESIDENT MUMBAI; DATED: 4 TH SEPTEMBER, 2017 SA ITA NO.3799/MUM/2016 M/S. T M MOHAMEDALLY 5 COPY OF THE ORDER FORWARDED TO : 1. THE APP ELL ANT. 2. THE RESPONDENT. 3. T HE CIT(A), MUMBAI 4. THE CIT 5. DR, D BENCH, ITAT, MUMBAI BY ORDER, #TRUE COPY # ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI