MANOJKUMAR PARASMAL CHANDAN, MUMBAI V. ITO 19(2)(3), MUMBAI

ITA 3893/MUM/2018

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 3081 (ITAT-MUMBAI)
• Duration Of Justice: 9 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-03-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 01-06-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: D G
• Keywords: Bogus purchase; Set aside
• Section: 201; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES D , MUMBAI BEFORE SHRI B.R. BASKARAN , ACCOUNTANT MEMBER AND SHRI RAVISH SOOD, JUDICIAL MEMBER ITA NO. 3893 /MUM/201 8 ASSESSMENT YEAR : 20 1 0 - 11 SHRI MANOJKUMAR PARASMAL CHANDAN, E1/202, BHARAT NAGAR, GRANT ROAD, MUMBAI [PAN : A C TPC9691A ] VS. I NCOME T AX O FFICER - 1 9 ( 2 )( 3 ), MUMBAI (APPELLANT) (RESPONDENT) APPELLANT BY : SMT. RUTUJA N. PAWAR, RESPONDENT BY : S HRI D.G. PANSARI, SR.AR - CIT DATE OF HEARING : 0 6 - 03 - 201 9 DATE OF PRONOUNCEMENT : 06 - 03 - 201 9 O R D E R PER B.R. BASKARAN , ACCOUNTANT MEMBER: TH E ASSESSEE HAS FILED THIS APPEAL, CHALLENGING THE ORDER DATED 1 7 - 0 4 - 201 8 PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - 5 3, MUMBAI, CONFIRMING THE ADDITION RELATING TO ALLEGED BOGUS PURCHASES FOR THE AY. 2010 - 11. ITA NO. 3893 /MUM/ 20 1 8 : 2 : 2. THE FACTS RELATING TO THE ISSUE ARE STATED IN BRIEF . T HE ASSESSEE IS A TRADER IN METALS AND IS CARRYING ON BUSINESS UNDER THE NAME AND STYLE OF M/S. METAL INOX INDIA. THE REVENUE RECEIV ED THE INFORMATION FROM THE SALES TAX DEPARTMENT OF GOVT. OF MAHARASHTRA THAT CERTAIN DEALERS ARE INDULGING IN PROVIDING ONLY ACCOMMODATION BILLS, WITHOUT ACTUALLY SUPPLYING THE MATERIALS. IT WAS NOTICED THAT THE ASSESSEE HAS PURCHASED GOODS TO THE TUNE OF RS. 153.69 LAKHS FROM THREE OF SUCH DEALERS. HENCE THE AO RE - OPENED THE ASSESSMENT FOR THE YEAR UNDER CONSIDERATION BY ISSUING NOTICES U/S. 148 OF THE INCOME TAX ACT (ACT). BEFORE THE AO, THE ASSESSEE FURNISHED LEDGER ACCOUNT COPY, CHEQUE PAYMENT DETAILS AND ALSO RECONCILED THE PURCHASES WITH SALE S . HOWEVER, THE ASSESSEE DID NOT FURNISH PROOF FOR TRANSPORTATION OF MATERIALS. HENCE , AO TOOK THE VIEW THAT THE ASSESSEE MIGHT HAVE PURCHASED THE GOODS FROM GREY MARKET . A CCORDINGLY BY FOLLOWING THE DECISION RENDERED BY THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT - 1 VS. SIMIT P SHETH [ 356 ITR 451] AND ALSO IN THE CASE OF M/S. BHOLENAT H POLY FAB P. LTD., [355 ITR 290] , T HE AO TOOK THE VIEW THAT THE PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES SHOULD BE ASSESSED TO TAX. THE AO ITA NO. 3893 /MUM/ 20 1 8 : 3 : ESTIMATED THE PROFIT AT 12.5% OF THE VALUE OF THE ALLEGED BOGUS PURCHASES AND ACCORDINGLY MADE AN ADDITION OF RS. 1 9.21 LAKHS TO THE TOTAL INCOME OF THE ASSESSEE. THE LD.CIT(A) CONFIRMED THE SAME AND HENCE THE ASSESSEE FILED THIS APPEAL BEFORE US. 3 . THE SUBMISSIONS OF THE LD. AR ARE THAT THE ASSESSEE IS A SMALL TIME TRAD ER IN METALS AND THE MATERIALS WE RE SUPPLIED TO HIM BY HAND CART BY THE SUPPLIERS. HENCE THE ASSESSEE COULD NOT PRODUCE ANY TRANSPORT VOUCHERS. SHE SUBMITTED THAT THE PURCHASES ARE SUPPORTED BY INVOICES AND DELIVERY CHALLANS . THE PAYMENTS HAVE BEEN MADE BY WAY OF CHEQUES ONLY . THE ASSESSE E HAS MAINTAINED STOCK REGISTER AND HAS RECONCILED THE PURCHASES WITH THE SALES AND THIS FACT HAS BEEN NOTED BY THE AO IN PARA 3 OF THE ASSESSMENT ORDER. HOWEVER, LD. CIT(A) HAS TAKEN THE VIEW THAT THE ASSESSEE HAS NOT MAINTAINED STOCK REGISTER, WHICH IS CONTRARY TO THE OBSERVATIONS MADE BY THE AO. LD. AR ACCORDINGLY SUBMITTED THAT THE ASSESSEE HAS PROVED THE PURCHASES AND HENCE NO ADDITION IS CALLED FOR. 4 . ON THE CONTRARY, LD. DR SUBMITTED THAT THE IMPUGNED SUPPLIERS HAVE BEEN IDENTIFIED AS HAWALA DEALERS BY THE SALES ITA NO. 3893 /MUM/ 20 1 8 : 4 : TAX DEPARTMENT AND FURTHER, THESE PARTIES HAVE ADMITTED BEFORE THE SALES TAX DEPARTMENT THAT THEY HAVE PROV IDED ONLY ACCOMMODATION BILLS WITHOUT ACTUALLY SUPPL YING THE MATERIALS. SINCE THE ASSESSEE HAS RECONCILED THE PURCHASES AND SALES, AO HAS TAKEN THE VIEW THAT THE PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES SHOULD BE ASSESSED TO TAX, WHICH HAS BEEN REASONABLY ESTIMATED AT 12.5% BY THE AO. ACCORDINGLY, THE LD . DR SUBMITTED THAT THE LD. CIT(A) WAS JUSTIFIED IN CONFIRMING THE ADDITION MADE BY THE AO. 5 . WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. WE NOTICE FROM THE ASSESSMENT ORDER THAT THE ASSESSEE HAS RECONCILED THE PURCHASES WITH SALES AND DETAILS OF STOCK REGISTER W ERE ALSO PRODUCED BEFORE THE AO. HENCE THE LD. CIT(A) WAS WRONG IN OBSERVING THAT THE STOCK REGISTER WAS NOT PRODUCED . IF THE PURCHASES AND SALES ARE RECONCILED , T HE QUESTION OF ESTIMATING THE PROFIT S HALL ARISE , IF THE PURCHASE S WERE FOUND TO HAVE BEEN NOT MADE FROM THE APPARENT PARTIES . IN THE INSTANT CASE, THE LD. CIT(A) HAS CONFIRMED THE PROFIT ELEMENT ESTIMATED AT 12.5% OF THE VALUE OF BOGUS PURCHASES. ACCORDING TO LD. AR, THE ASSESSEE HAS FURNISHED ALL RELEVANT DETAILS AVAI LABLE WITH HIM AND HENCE NO ADDITION SHOULD HAVE ITA NO. 3893 /MUM/ 20 1 8 : 5 : BEEN MADE. HOWEVER, A PERUSAL OF THE ASSESSMENT ORDER WOULD SHOW THAT ASSESSEE HAS FAILED TO PROVE THE TRANSPORTATION OF MATERIALS . E VEN THOUGH LD. AR SUBMITS THAT THE MATERIALS WERE TRANSPORTED BY HAND CART, THE SAME HAS NOT BEEN SUBSTANTIATED WITH ANY MATERIAL. IN THE ABSENCE OF EVIDENCE SUPPORTING TRANSPORTATION OF MATERIAL AND IN THE ABSENCE OF ANY CONFIRMATION LETTERS OBTAINED FRO M SUPPLIERS AND ALSO IN VIEW OF THE FAILURE OF THE ASSESSEE TO PRODUCE SUPPLIERS BEFORE THE AO, IN OUR OPINION , THE AO WAS JUSTIFIED IN DRAWING INFERENCE THAT THE ASSESSEE WOULD HAVE PURCHASED THE MATERIALS FROM THE GREY MARKET. IN THAT SITUATION, THE POSS IBILITY IS THAT THE ASSESSEE WOULD HAVE PURCHASED MATERIAL AT A PRICE LOWER THAN THAT SHOWN IN THE PURCHASE BILLS. HENCE, THE AO HAS ESTIMATED THE PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES. 5 .1. THE LD. AR SUBMITTED THAT THE VAT APPLICABLE TO THE PROVI SIONS DELIVERED BY THE ASSESSEE IS 4% . THE ASSESSEE WOULD ALSO BE INCURRING CERTAIN EXPENDITURE FOR OBTAINING THE BILLS. IN VIEW OF THESE FACTS , IN OUR VIEW, THE RATE OF PROFIT ESTIMATED BY AO I.E., 12.5% IS ON THE HIGHER SIDE. HENCE, ON A CONSPECTUS OF THE MATTER, WE ARE OF THE VIEW THAT THIS ISSUE ITA NO. 3893 /MUM/ 20 1 8 : 6 : WOULD MEET THE ENDS OF JUSTICE , IF THE PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES IS ESTIMATED AT 4%. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD. CIT(A) ON THIS ISSUE AND DIRECT THE AO TO RESTRICT THE ADDIT ION TO 4% OF THE VALUE OF THE ALLEGED BOGUS PURCHASES. WE ORDER ACCORDINGLY. 6 . IN THE RESULT, THE APPEAL OF ASSESSEE IS PARTLY ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 6 TH DAY OF MA R CH , 2019 SD/ - SD/ - (RAVISH SOOD ) ( B. R . BASKARAN ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / MUMBAI; / DATED : 6 TH MARCH , 201 9 TNMM ITA NO. 3893 /MUM/ 20 1 8 : 7 : / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) , MUMBAI 4. / CIT, MUMBAI 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE / BY ORDER, //TRUE COPY// / (DY./ASST. REGISTRAR) , / ITAT, MUMBAI