BHARAV TUBE (INDIA), MUMBAI V. INCOME TAX OFFICER 19(1)(2), Mumbai

ITA 3929/MUM/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 9956 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-05-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 04-06-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: CHA
• Assessee Lawyers: PRAFUL L VORA
• Keywords: Bogus purchase; Application of stay; Set aside

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B, MUMBAI BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER S.A. NO. 238/MUM/2019 (ARISING IN ITA NO.3929/MUM/2018, AY.2009-10) ASSESSMENT YEAR : 2009-10 M/S. BHAIRAV TUBE (INDIA), C/O. M/S. NAKODA METAL INDUSTRIES, ROOM NO. 101, 1 ST FLOOR, LAKDAWALA SAPHIRE CENTRE, 4 TH KUMBHARWADA LANE, MUMBAI [PAN : AAEFT1198E] VS. THE INCOME TAX OFFICER-19(1)(2), MUMBAI (APPLICANT) (RESPONDENT) ITA NO. 3929/MUM/2018 ASSESSMENT YEAR : 2009-10 M/S. BHAIRAV TUBE (INDIA), C/O. M/S. NAKODA METAL INDUSTRIES, ROOM NO. 101, 1 ST FLOOR, LAKDAWALA SAPHIRE CENTRE, 4 TH KUMBHARWADA LANE, MUMBAI [PAN : AAEFT1198E] VS. THE INCOME TAX OFFICER-19(1)(2), MUMBAI (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI PRAFUL L. VORA, A R RESPONDENT BY : SHRI CHA ITANYA ANJARIA, D R DATE OF HEARING : 2 4 - 05 - 201 9 DATE OF PRONOUNCEMENT : 27 - 05 - 201 9 O R D E R PER RAJESH KUMAR, AM: BY VIRTUE OF THIS STAY APPLICATION, THE ASSESSEE SEEKS STAY OF DEMAND OF RS.21,76,720/-, RAISED BY THE ASSES SING SA NO. 238/MUM/2019 ITA NO. 3929/MUM/2018 : 2 : OFFICER IN THE ASSESSMENT FRAMED U/S.143(3) R.W.S.147 OF THE INCOME TAX ACT [ACT], DATED 12-03-2015. 2. WE OBSERVE FROM THE PERUSAL OF QUANTUM APPEAL BEF ORE US THAT ASSESSEE HAS CHALLENGED THE CONFIRMATION OF ADD ITION EQUAL TO 15.00 % OF THE BOGUS PURCHASES, BY CIT(A) UP HOLDING THE ORDER OF THE ASSESSING OFFICER. SINCE THE ISSUE IN VOLVED IN THE PRESENT APPEAL IS VERY SMALL AND PERTAINS TO BOGU S PURCHASES, WE ARE OF THE VIEW THAT IT WOULD BE REASONA BLE AND PROPER TO DISPOSE-OFF THE QUANTUM APPEAL ITSELF INSTEAD OF DECIDING THE STAY PETITION. WHEN THE LD.DR WAS ASKED FO R HIS OBJECTIONS, IF ANY, FOR HEARING THE QUANTUM APPEAL, HE EXPRESSED HIS WILLINGNESS TO ARGUE THE CASE. THEREFO RE, WE ARE DECIDING THE APPEAL IN THE ENSUING PARAS. 3. THE FACTS IN BRIEF ARE THAT, THE ASSESSEE FILED RETUR N OF INCOME ON 27-08-2009, DECLARING INCOME OF RS.2,16,2 00/- WHICH WAS PROCESSED U/S.143(1) OF THE ACT. THEREAFT ER, THE CASE OF THE ASSESSEE WAS SELECTED UNDER CASS AND ORD ER U/S.143(3) OF THE ACT WAS PASSED ON 10-10-2011, ASSE SSING THE INCOME AT RS.2,45,620/-. THEREAFTER, THE ASSESSI NG OFFICER RECEIVED INFORMATION FROM THE SALES TAX DEPARTMENT, SA NO. 238/MUM/2019 ITA NO. 3929/MUM/2018 : 3 : GOVERNMENT OF MAHARASHTRA THAT THE ASSESSEE IS BENEFICI ARY OF HAWALA BOGUS PURCHASE ENTRIES TO THE TUNE OF RS.3,40,69,263/- FROM 25 PARTIES, THE DETAILS OF THE SA ME HAVE BEEN GIVEN BY THE ASSESSING OFFICER AT PAGE 2 OF THE ASSESSMENT ORDER. DURING THE YEAR, THE ASSESSEE HAS S HOWN GROSS PROFIT AND NET PROFIT OF 4.41% AND 0.44% RESPECTI VELY. THEREAFTER, THE CASE OF THE ASSESSEE WAS RE-OPENED BY ISSUING NOTICE U/S.148 OF THE ACT ON 28-03-2014. THE ASSESSIN G OFFICER THEREAFTER ISSUED SHOW CAUSE NOTICE TO THE ASSE SSEE, CALLING UPON TO FURNISH VARIOUS DETAILS QUA THE SAID PURCHASES, SUCH AS NAMES AND ADDRESSES OF THE SELLERS, PAN DETA ILS AND BILLS, VOUCHERS ,EVIDENCES OF TRANSPORTATION ETC., AND PAYMENTS MADE TO THE CREDITORS, WHICH WERE DULY FILED BY THE ASS ESSEE. THE ASSESSING OFFICER ALSO ISSUED NOTICE U/S.133(6) OF THE ACT IN ORDER TO VERIFY THE SAID PURCHASES. HOWEVER, ALL THE NOTICES WERE RETURNED UN-SERVED. FINALLY, THE ASSESSING OFFIC ER TREATED THE SAID PURCHASES AS NON-GENUINE AND HAWALA PURCH ASES AND APPLIED 15% ON SUCH PURCHASES TO BRING THE SAID PURCHASES TO TAX RESULTING INTO AN ADDITION OF RS.51,10 ,389/-, BY FRAMING ASSESSMENT U/S.143(3) R.W.S. 147 OF THE A CT, DT.12-03-2015. SA NO. 238/MUM/2019 ITA NO. 3929/MUM/2018 : 4 : 4. IN THE APPELLATE PROCEEDINGS, LD.CIT(A) AFTER CONS IDERING THE CONTENTIONS AND SUBMISSIONS OF ASSESSEE, SUSTAINED THE ADDITION AND DISMISSED THE APPEAL OF ASSESSEE BY SUST AINING THE ADDITION BY HOLDING THAT LITTLE HIGHER ADDITION OF 1 5% WAS MADE AS AGAINST 12.5% IN THE DECISION OF HON'BLE GUJ ARAT HIGH COURT IN THE CASE OF CIT VS. SIMIT P. SHETH [356 ITR 45 1] (GUJARAT). 5. AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATE RIAL ON RECORD, WE OBSERVE THAT THE ASSESSEE IS UNDOUBTEDLY A BENEFICIARY OF HAWALA PURCHASE ENTRIES TO THE TUNE OF RS.3,40,69,263/-. THOUGH, THE ASSESSEE HAS FILED VA RIOUS DETAILS IN THE FORM OF PURCHASE INVOICES, PAN DETAILS OF THE SUPPLIERS HOWEVER NOTICES ISSUED BY THE ASSESSING O FFICER U/S.133(6) OF THE ACT WERE RETURNED UN-SERVED IN ALL TH E 25 CASES AND CONSEQUENTLY, ASSESSING OFFICER TREATED THE ENTIRE PURCHASES AS NON-GENUINE. WE NOTE THAT THE ASSESSIN G OFFICER, WITHOUT DISPUTING THE CORRESPONDING SALES, AP PLIED PROFIT RATE AT 15% ON SUCH PURCHASES, WHICH WAS UPHELD BY THE LD.CIT(A) ALSO. SA NO. 238/MUM/2019 ITA NO. 3929/MUM/2018 : 5 : 5.1. AFTER CONSIDERING THE FACTS BEFORE US, WE OBSERV E THAT IN THIS TYPE OF CASES, PURCHASES ARE NORMALLY MADE FROM THE GREY MARKET AND BILLS ARE PROCURED FROM THE HAWALA OPERATO RS. THUS, THE ASSESSEE MAKES SAVINGS BY NON-PAYMENT OF V AT AND OTHER INCIDENTAL LEVIES. WE FURTHER NOTICE THAT THE ASSESSEE IS DEALING IN FERROUS AND NON-FERROUS METAL ITEMS, IN WHICH PROFIT RATE (GP RATE) WILL BE NORMALLY RANGING B ETWEEN 3% TO 4% WHEREAS THE ASSESSEE DISCLOSED THE GP RATE O F 4.41% IN THE BOOKS OF ACCOUNT. THEREFORE, WE ARE NOT IN AGR EEMENT WITH THE CONCLUSION OF LD.CIT(A) IN SUSTAINING ADDIT ION TO THE EXTENT OF 15% OF BOGUS PURCHASES. IN THE PRESENT CASE WE ARE OF THE CONSIDERED OPINION THAT A PROFIT RATE OF 5% WO ULD BE REASONABLE IN ORDER TO BRING TO TAX THE VARIOUS TYPES OF SAVINGS SUCH AS NON-PAYMENT OF VAT AND OTHERS CHARGE S. WE, THEREFORE, SET ASIDE THE ORDER OF CIT(A) AND DIRECT THE ASSESSING OFFICER TO APPLY RATE OF 5% ON THE BOGUS PURCHASES. 6. IN THE RESULT, THE APPEAL OF ASSESSEE IS PARTLY ALLO WED. SA NO. 238/MUM/2019 ITA NO. 3929/MUM/2018 : 6 : 7. SINCE WE HAVE ALREADY DISPOSED THE QUANTUM APPEAL IN THIS CASE, THE STAY APPLICATION FILED BY THE ASSESSEE B ECOMES INFRUCTUOUS AND THE SAME IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 27 -05-201 9 SD/- SD/- (MAHAVIR SINGH) (RAJESH KUMAR) / JUDICIAL MEMBER / ACCOUNTANT MEMBER /MUMBAI; /DATED : 27-05-2019 TNMM SA NO. 238/MUM/2019 ITA NO. 3929/MUM/2018 : 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