ITO 24(3)(4), MUMBAI V. RUPESH R DOSHI, MUMBAI

ITA 3913/MUM/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 0283 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-08-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 09-06-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V JUSTIN
• Keywords: Bogus purchase; Sale consideration of property below Jantri Value; Accommodation entries
• Section: 143(3); 133(6); 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'E' BENCH, MUMBAI BEFORE SHRI P K BANSAL, VICE PRESIDENT AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NOS.3912 & 3913/MUM/2016 (ASSESSMENT YEARS: 2009-10 & 2011-12) INCOME TAX OFFICER - 24(3)(4) VS. SHRI RUPESH R. DOSHI ROOM NO. 517, 5TH FLOOR PIRAMAL CHAMBERS PAREL, MUMBAI 400012 B - 14, NAND BHUVAN INDL. ESTATE MAHAKALI CAVES ROAD OPP. INDIA TV CO., ANDHRI (W) MUMBAI 400093 PAN AABPD8629D APPELLANT RESPONDENT APPELLANT BY: SHRI V. JUSTIN RESPONDENT BY: NONE DATE OF HEARING: 03.08.2017 DATE OF PRONOUNCEMENT: 09.08.2017 O R D E R PER P.K. BANSAL, VICE PRESIDENT BOTH THESE APPEALS HAVE BEEN FILED BY THE ASSESSEE AGAINST THE COMMON ORDER OF THE CIT(A)-36, MUMBAI DATED 18.03.2 016 FOR ASSESSMENT YEARS 2009-10 AND 2011-12. 2. EVEN THOUGH NOTICE WAS DULY SERVED NONE APPEARED ON BEHALF OF THE ASSESSEE. WE, THEREFORE, DECIDED TO DISPOSE OFF THE SE APPEALS AFTER HEARING THE LEARNED D.R. THE LEARNED D.R. BEFORE SUBMITTED THAT IN BOTH THESE APPEALS THE ISSUED INVOLVED IS COMMON. THEREFORE BO TH THESE APPEALS BE DECIDED ON THE BASIS OF THE FACTS INVOLVED FOR A.Y. 2009-10. 3. THE BRIEF FACTS FOR A.Y. 2009-10 ARE THAT THE ASSES SEE FILED THE RETURN OF INCOME ON 25.09.2009 DECLARING TOTAL INCOME AT N IL CLAIMING CURRENT YEAR LOSS OF ` 3,71,834/- WHICH WAS PROCESSED UNDER SECTION 143(3) . SUBSEQUENTLY THE CASE REOPENED AND NOTICE UNDER SEC TION 148 AS ISSUED ON 28.03.2013. IN RESPONSE THERETO THE ASSESSEE FILED A COPY OF THE RETURN OF INCOME FILED BY HIM ON 25.09.2009 AND REQUESTED TO TREAT THE SAME AS THE ITA NOS. 3912&3913/MUM/2016 SHRI RUPESH R. DOSHI 2 RETURN FILED IN RESPONSE TO NOTICE UNDER SECTION 14 8. THE ASSESSEE HAS SHOWN TURNOVER FROM STEEL BUSINESS AT ` 11,63,28,608/- AND G.P. AT ` 1,04,06,221/-. THE PURCHASES WERE SHOWN AT ` 8,4623,982/- OUT OF THE TOTAL PURCHASES MADE. THE AO NOTED BOGUS PURCHASES FROM SIX PARTIES AS PER THE INFORMATION RECEIVED FROM THE SALES TAX DEP ARTMENT AS UNDER: - S.NO. NAME OF THE SUPPLIER/PARTY PAN AMOUNT ( ` ) 1. M/S. CENTURIAN SALES CORPORATION AKTPP1250C 22,58,942 2. M/S. SHREE SAI TRADING CO. ATQPP8547E 45,70,252 3. . M/S. R.K. ISPAT BIAPS2799R 30,34,164 4. M/S. ENTECH ENTERPRISES APFAR1134F 31,13,032 5. M/S. KOTSONS IMPEX PVT. LTD. AACCK9104C 22,76,186 6. M/S. JINDUTT STEELS BACPS6687L 1,20,55,024 TOTAL 2,73,07,600 THE AO THEREFORE ASKED THE ASSESSEE TO PROVE THE GE NUINENESS OF THE PURCHASES. THE ASSESSEE SUBMITTED THAT THE TRANSACT IONS OF PURCHASES WERE MADE THROUGH BROKERS AND NO DIRECT DEAL WITH T HE PARTIES. THE SALES BILLS CORRESPONDING TO PURCHASES MADE FROM THESE PA RTIES WERE FILED. THE ASSESSEE ALSO SUBMITTED THAT THE GROSS PROFIT FROM THESE PURCHASES IS 23.47% WHILE THE TOTAL GROSS PROFIT DURING THE IMPU GNED ASSESSMENT YEAR WAS SHOWN AT 8.95%. THE AO ISSUED NOTICE UNDER SECT ION 133(6) TO THESE PARTIES FOR VERIFICATION OF THE PURCHASES WHICH RET URNED BACK UNSERVED. ULTIMATELY THE AO REJECTED THE BOOKS OF ACCOUNT AND ADDED THE ALLEGED BOGUS PURCHASES AT ` 2,73,07,700/- HOLDING THAT THE ASSESSEE HAD RECEIVE D BOGUS BILLS/ACCOMMODATION ENTRIES. WHEN THE MATTER WENT BEFORE THE CIT(A), THE CIT(A) AFTER DISCUSSING VARIOUS CASE LA W AS RELIED BY THE LEARNED A.R. DIRECTED THE AO TO ESTIMATE THE GROSS PROFIT @ 12.5% ON THE PURCHASES IN EACH OF THE ASSESSMENT YEAR IN VIEW OF THE DECIS ION OF THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. SMIT P. S HETH 356 ITR 451, BHOLANATH POLYFAB PVT. LTD. 355 ITR 290 AND DCIT VS . RAJEEV G. KALATHIL 51 TAXMAN.COM 514 AND THAT OF THE AHMADABAD BENCH O F THIS TRIBUNAL IN THE CASE OF SANKET STEEL TRADERS VS. ITO IN ITA NO. 2801 & 2937/AHD/2008 DATED 20.05.2011. THE REVENUE HAS CO ME IN APPEAL AGAINST THE REDUCTION OF THE ADDITION. ITA NOS. 3912&3913/MUM/2016 SHRI RUPESH R. DOSHI 3 4. WE HAVE HEARD THE LEARNED D.R. AND GONE THROUGH TH E ORDERS OF THE TAX AUTHORITIES BELOW. WE NOTED THAT THE AO REOPENE D THE ASSESSMENT ON THE BASIS OF THE INFORMATION RECEIVED FROM THE SALE S TAX DEPARTMENT, GOVERNMENT OF MAHARASHTRA THAT THE ASSESSEE MADE BO GUS PURCHASES FROM VARIOUS PARTIES AMOUNTING TO ` 2,73,07,600/-. THE AO ASKED THE ASSESSEE TO PROVE THE GENUINENESS OF THE PURCHASES WHICH IN THE OPINION OF THE AO THE ASSESSEE COULD NOT PROVE. THE ASSESSEE CONTENDE D THAT ALL THE PURCHASES WERE GENUINE BUT THE AO DID NOT ACCEPT TH E CONTENTION OF THE ASSESSEE. THE AO, THEREFORE, MADE THE ADDITION IN R ESPECT OF ALL THESE PURCHASES. THE CIT(A) RESTRICTED THE ADDITION BY ES TIMATING THE GROSS PROFIT ON THESE PURCHASES @12.5% AND CONCLUDED THAT THE PU RCHASES WERE MADE FROM BOGUS PARTIES BUT THE PURCHASES ITSELF WERE NO T BOGUS AND ONLY THE PROFIT MARGIN EARNED IN SUCH PURCHASES WOULD BE SUB JECT TO TAX AND NOT THE ENTIRE PURCHASES. THE CIT(A) WHILE HOLDING SO R ELIED ON THE ORDERS OF THE HON'BLE GUJARAT HIGH COURT IN THE CASES OF CIT VS. SMIT P. SHETH 356 ITR 451, BHOLANATH POLYFAB PVT. LTD. 355 ITR 290. W E HAVE CONSIDERED THE FACTS OF THE CASE INDEPENDENTLY ALONGWITH THE ORDER OF THE TAX AUTHORITIES BELOW. THE LEARNED D.R. BEFORE US VEHEMENTLY RELIED ON THE ORDER OF THE AO. IN OUR VIEW IF THE TRANSACTION IS NOT VERIFIABL E THE ONLY TAXABLE AMOUNT IS THE TAXABLE INCOME COMPONENT THEREIN AND NOT THE ENTIRE TRANSACTIONS. IF THE ASSESSEE HAD PROCURED BILLS FROM SOME PARTIES A ND PURCHASES HAVE BEEN MADE FROM THESE PARTIES BUT FROM SOME OTHER PA RTIES THE ASSESSEE WOULD HAVE SAVED VAT. THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. HARIRAM BHAMBHANI IN ITA NO. 313 OF 2013 DECIDE D ON 04.02.2015 ALSO HELD THAT THE REVENUE IS NOT ENTITLED TO TREAT THE ENTIRE SALE CONSIDERATION TO TAX, BUT ONLY THE PROFIT ATTRIBUTA BLE TO THE TOTAL UNRECORDED SALE CONSIDERATION ALONE CAN BE SUBJECT TO TAX. IN OUR VIEW THE CIT(A) HAS RIGHTLY ESTIMATED THE PROFIT EMBEDDED IN THE PURCHASES @12.5%. THEREFORE, IN OUR VIEW NO INTERFERENCE IS CALLED FO R IN THE ORDER OF THE CIT(A). THE CIT(A) HAS RIGHTLY RESTRICTED THE ADDIT ION TO 12.5% OF SUCH PURCHASES. WE THEREFORE DISMISS THE GROUND TAKEN BY THE REVENUE IN BOTH THE APPEALS. ITA NOS. 3912&3913/MUM/2016 SHRI RUPESH R. DOSHI 4 5. IN THE RESULT, THE APPEALS FILED BY THE REVENUE STA ND DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 9 TH AUGUST, 2017. SD/ - SD/ - (PAWAN SINGH) (P.K. BANSAL) JUDICIAL MEMBER VICE PRESIDENT MUMBAI, DATED: 9 TH AUGUST, 2017 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) -36, MUMBAI 4. THE CIT - 24, MUMBAI 5. THE DR, E BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.