SHRI ARVIND MANRUPCHAND SHAH, MUMBAI V. ITO 19(1)(1), MUMBAI

ITA 4105/MUM/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 3433 (ITAT-MUMBAI)
• Duration Of Justice: 10 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-05-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 08-06-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: CHAITNYA ANJARIA
• Assessee Lawyers: ADITI SHROFF A RS; HARISH SHARMA
• Keywords: Bogus purchase
• Section: 148

Judgement Text

P A G E | 1 ITA NO.4105/MUM/2018 A.Y. 2011 - 12 SHRI ARVIND MANRUPCHAND SHAH VS. I.T.O 19(1)(1) IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER AND SHRI RAVISH SOOD, JUDICIAL MEMBER ITA NO.4105/MUM/2018 (ASSESSMENT YEAR: 2011 - 12 ) SHRI ARVIND MANRUPCHAND SHAH C/O. D.C. BOTHRA & CO. LLP (CA) (FORMERLY KNOWN AS D.C. BOTHRA & CO.) 297, TARDEO ROAD,WILLE MANSION, 1 ST FLOOR, OPP BANK OF INDIA, NANA CHOWK, MUMBAI 400007 VS. I.T.O 19(1)(1),MATRU MANDIR. 2 ND FLOOR,TARDEO ROAD, MUMBAI - 400007 PAN AAQPS2135N (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI HARISH SHARMA & MS. ADITI SHROFF, A.RS RESPONDENT BY: SHRI CHAITNYA ANJARIA , D.R DATE OF HEARING: 30 .04 .2019 DATE OF PRONOUNCEMENT: 0 3 .05 .2019 O R D E R PER RAVISH SOOD, JM THE PRESENT APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A) - 30, MUMBAI, DATED 13.04.2018, WHICH IN TURN ARISES FROM THE ORDER PASSED BY THE A.O UNDER SEC.143(3) R.W.S. 147 OF THE INCOME TAX ACT, 1961 (FOR SHORT I - T. ACT) , DATED 22.02.2016 FOR A.Y. 2011 - 12. THE ASSESSEE ASSAILING THE ORDER OF THE CIT(A) HAS RAISED BEFORE US THE FOLLOWING GROUNDS OF APPEAL : P A G E | 2 ITA NO.4105/MUM/2018 A.Y. 2011 - 12 SHRI ARVIND MANRUPCHAND SHAH VS. I.T.O 19(1)(1) 1. THAT ON FACTS OF THE CASE AND IN LAW THE LD. CIT(APPEALS) HAS ERRED IN UPHOLDING THE VALIDITY OF THE REASSESSMENT PROCEEDING INITIATED U/S. 147 BY ISSUE OF NOTICE U/S 148 ON WRONG FACTS AND IN UNLAWFUL MANNER. 2. THAT THE LD. CIT(APPEALS) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF RS.2,61,276/ - BEING 12.5% OF THE PURCHASES OF TRADING GOODS FROM THE ALLEGED SUSPICIO US HAWALA DEALERS OF RS.20,90,206/ - WITHOUT PROPERLY APPRECIATING THE FACTS OF THE CASE AND LAW. 3. THAT BOTH THE APPEAL GROUNDS ARE INDEPENDENT GROUNDS & WITHOUT PREJUDICE TO EACH OTHER. 4. THAT THE APPELLANT CRAVES THE LEAVE TO AMEND, ALTER, SUBSTITUT E, AND OR TO RAISE NEW OR ADDITIONAL GROUNDS OF APPEAL AT THE TIME OF HEARING. 2. BRIEFLY STATED, THE ASSESSEE WHO IS ENGAGED IN THE BUSINESS OF TRADING IN FERROUS AND NON - FERROUS METAL S UNDER THE NAME OF M/S ALLOY STEEL CORPORATION HAD E - FILED HIS RETURN OF INCOME FOR A.Y. 2011 - 12 ON 21.09.2011 , DECLARING TOTAL INCOME OF RS.6,29,742/ - . THE RETURN OF INCOME FILED BY THE ASSESSEE WAS PROCESSED AS SUCH UNDER SEC.143(1) OF THE I - T. ACT. SUBSEQUENTLY, ON THE BASIS OF INFORMATION RECEIVED FROM THE DG IT (I NV.), MUMBAI THAT THE NAME OF THE ASSESSEE HAD FIGURED IN THE LIST OF THE PARTIES WHO HAD TAKEN BOGUS PURCHASE BILLS FROM CERTAIN HAWALA PARTIES, THE CASE OF THE ASSESSEE WAS REOPENED UNDER SEC.147. 3. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS IT WAS OBSERVED BY THE A.O THAT THE ASSESSEE HAD CLAIMED TO HAVE MADE PURCHASES FROM THE FOLLOWING TAINTED PARTIES : S.NO NAME OF THE PARTY BILL AMOUNT (RS.) 1. ATLAS INTERNATIONAL (I) RS. 7,56,246/ - 2. UNICON ENTERPRISE RS. 13,33,960/ - TOTAL RS. 20,90,206/ - IN ORDER TO VERIFY THE GENUINENESS AND VERACITY OF THE AFORESAID PURCHASE TRANSACTIONS , THE A.O CALLED UPON THE ASSESSEE TO FURNISH THE SUPPORTING DOCUMENTARY EVIDENCE ALONG WITH CERTAIN DETAILS VIZ. (I) NAME OF THE SELLER WITH CURRENT FULL ADDRESS; (II) PAN DETAILS; (III) BILL AND VOUCHER NUMBER S ; (IV) DESCRIPTION OF GOODS PURCHASE D ; (V) QUANTITY P A G E | 3 ITA NO.4105/MUM/2018 A.Y. 2011 - 12 SHRI ARVIND MANRUPCHAND SHAH VS. I.T.O 19(1)(1) OF GOODS PURCHASE D ALONG WITH RATE AND AMOUNT; AND (VI) MODE OF TRANSPORTATION. APART THERE FROM, THE DETAILS OF THE CORRESPONDING SALES OF GOODS WAS ALSO DIRECTED TO BE FURNISHED SO THAT THE PURCHASES CLAIMED TO HAVE BEEN MADE FROM THE AFOREMENTIONED PARTIES COULD BE CORRELATED WITH THE SAME . FURTHER, THE A.O IN ORDER TO VERIFY THE VERACITY OF T HE PURCHASE TRANSACTIONS ALSO ISSUED LETTERS UNDER SEC.133(6) TO THE AFOREMENTIONED PARTIES , WHICH HOWEVER WERE RETURNED BACK UNSERVED WITH THE REMARKS LEFT, NOT TRACEABLE, NOT KNOWN ETC. IN THE BACKDROP OF THE AFORESAID FACTS THE A.O DIRECTED THE AS SESSEE TO PRODUCE THE AFORESAID PARTIES SO THAT THE VERACITY OF THE PURCHASE TRANSACTIONS COULD BE VERIFIED. HOWEVER, THE ASSESSEE DESPITE SPECIFIC DIRECTIONS BY THE A.O FAILED TO PRODUCE THE PARTIES , AS A RESULT WHEREOF THE AUTHENTICITY OF THE PURCHASE TR ANSACTIONS COULD NOT BE VERIFIED BY THE A.O. STILL FURTHER, THE ASSESSEE ALSO FAILED TO PLACE ON RECORD DOCUMENTARY EVIDENCE WHICH WOULD HAVE PROVED THE GENUINENESS OF THE PURCHASE TRANSACTIONS TO THE HILT VIZ. (I) DELIVERY CHALLANS ;(II).TRANSPORT RECEIPTS ; AND (II I )GOODS INWARD REGISTER MAINTAINED AT THE GODOWN. IN THE BACKDROP OF THE AFORESAID FACTS , IT WAS CONCLUDED BY THE A.O THAT WHATEVER DOCUMENTARY EVIDENCE WAS PRODUCED BY THE ASSESSEE COULD NOT PROVE THAT HE HAD MADE GENUINE PURCHASE S FROM THE AFOREMENTIONED PARTIES. AS REGARDS THE CLAIM OF THE ASSESSEE THAT HE HAD MADE THE PAYMENTS TO THE AFOREMENTIONED PARTIES THROUGH ACCOUNT PAYEE CHEQUES, THE A.O HELD A CONVICTION THAT THE SAID FACT WOULD NOT CONCLUSIVELY PROVE THE GENUINENESS OF T HE PURCHASES CLAIMED TO HAVE BEEN MADE BY THE ASSESSEE FROM THE AFOREMENTIONED PARTIES. IN THE BACKDROP OF HIS AFORESAID DELIBERATIONS THE A.O WAS OF THE CONSIDERED VIEW THAT THE ASSESSEE HAD PURCHASED THE GOODS UNDER CONSIDERATION FROM THE OPEN/GREY MARKE T AND NOT FROM THE AFOREMENTIONED PARTIES. ON THE BASIS OF HIS AFORESAID OBSERVATIONS THE A.O MADE AN ADDITION OF RS.2,68,126/ - I.E @ 12.5% OF P A G E | 4 ITA NO.4105/MUM/2018 A.Y. 2011 - 12 SHRI ARVIND MANRUPCHAND SHAH VS. I.T.O 19(1)(1) THE AGGREGATE VALUE OF THE PURCHASE S OF RS.20,90,206/ - WHICH WERE CLAIMED BY THE ASSESSEE TO HAVE BEEN MADE FROM T HE AFOREMENTIONED PARTIES . 4. AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). HOWEVER, THE CIT(A) NOT BEING PERSUADED TO ACCEPT THE CONTENTION S ADVANCED BY THE ASSESSEE DISMISSED THE APPEAL. 5. THE ASSESSEE BEING AGGRIEVED WITH THE ORDER PASSED BY THE CIT(A) HAS CARRIED THE MATTER IN APPEAL BEFORE US. THE LD. AUTHORIZED REPRESENTATIVE (FOR SHORT A.R) FOR THE ASSESSEE AT THE VERY OUTSET OF THE HEARING OF THE APPEAL SUBMITTED , THAT THE LOWER AUTH ORITIES HAD MADE AN EXORBITANT ADDITION @ 12.5% OF THE AGGREGATE VALUE OF THE PURCHASES UNDER CONSIDERATION. IT WAS THE CONTENTION OF THE LD. A.R THAT AS THE VAT RATE APPLICABLE IN RESPECT OF FERROUS AND NON - FERROUS METALS WHICH WERE BEING TRADED BY THE AS SESSEE DURING THE YEAR UNDER CONSIDERATION WAS 4%, THEREFORE, THE ADDITION IN HIS CASE WAS LIABLE TO BE RESTRICTED TO THE SAID EXTENT. IN ORDER TO FORTIFY HIS CLAIM THAT THE VAT RATE APPLICABLE AS REGARDS THE ITEMS TRADED BY THE ASSESSEE WAS 4% DURING THE YEAR, THE LD. A.R TOOK US THROUGH A PURCHASE BILL AT PAGE 103 OF THE ASSESSES PAPER BOOK (FOR SHORT APB). THE LD. A.R IN SUPPORT OF HIS CONTENTION THAT THE ESTIMATION OF THE PROFIT ELEMENT EMBEDDED INSOFAR UNSUBSTANTIATED PURCHASES WERE CONCERNED WAS T O BE MADE IN THE BACKDROP OF THE APPLICABLE VAT RATE OF THE ITEM S BEING TRADED BY THE ASSESSEE , THEREIN RELIED ON THE ORDER OF A COORDINATE BENCH OF THE TRIBUNAL , VIZ. ITAT C BENCH, MUMBAI IN THE CASE OF IMI ALLOYS PVT. LTD. VS. DCIT - 5(1)(1), MUMBAI (IT A NO. 1606/MUM/2018, DATED 03.04.2019). 6. PER CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE (FOR SHORT D.R) RELIED ON THE ORDERS OF THE LOWER AUTHORITIES. IT WAS SUBMITTED BY THE LD. D.R THAT AS THE ASSESSEE HAD FAILED TO SUBSTANTIATE THE AUTHENTICITY P A G E | 5 ITA NO.4105/MUM/2018 A.Y. 2011 - 12 SHRI ARVIND MANRUPCHAND SHAH VS. I.T.O 19(1)(1) OF THE PURCHASE TRANSACTION UNDER CONSIDERATION, THEREFORE, THE LOWER AUTHORITIES HAD RIGHTLY MADE/SUSTAINED THE ADDITIONS @ 12.5% OF THE AGGREGATE VALUE OF SUCH PURCHASES. 7. WE HAVE HEARD THE AUTHORIZED REPRESENTATIVES FOR BOTH THE PARTIES, PERUSED THE ORDE RS OF THE LOWER AUTHORITIES AND THE MATERIAL AVAILABLE ON RECORD. ADMITTEDLY, THE ASSESSEE HAD FAILED TO DISCHARGE THE ONUS AND THEREIN FAILED TO SUBSTANTIATE THE GENUINENESS AND VERACITY OF THE PURCHASES WHICH WERE CLAIMED BY HIM TO HAVE BEEN MADE FROM THE AFOREMENTIONED TWO PARTIES VIZ. (I) ATL A S INTERNATIONAL (I) (RS.7,56,246/ - ); AND (II) UNICON ENTERPRISE (RS.13,33,960/ - ). INSOFAR , THE OBSERVATIONS OF THE LOWER AUTHORITIES THAT THE ASSESSEE COULD NOT SUBSTANTIATE THE AUTHENTICI TY OF THE PURCHASE TRANSACTIONS ON THE BASIS OF IRREFUTABL E DOCUMENTARY EVIDENCE IS CONCERNED , WE ARE PERSUADED TO SUBSCRIBE TO THE SAME. HOWEVER, WE ARE OF THE CONSIDERED VIEW THAT THE ESTIMATION OF THE PROFIT ELEMENT EMBEDDED IN THE PURCHASES CLAIMED BY THE ASSESSEE TO HAVE BEEN MADE FROM THE AFOREMENTIONED PARTIES I.E @ 12.5% OF THE AGGREGATE VALUE OF SUCH PURCHASE IS ON THE HIGH ER SIDE. WE FIND SUBSTANTIAL FORCE IN THE CONTENTION ADVANCED BY THE LD. A.R THAT AS THE VAT RATE APPLICABLE IN RESPECT OF THE GOODS THAT WERE TRADED BY THE ASSESSEE WAS 4% DURING THE YEAR UNDER CONSIDERATION , THEREFORE, THE ESTIMATION OF THE PROFIT WHICH THE ASSESSEE WOULD HAVE GENERATED BY MAKING THE PURCHASE FROM OPEN/GREY MARKET WAS TO BE WORKED OUT KEEPING IN VIEW THE AFORESA ID MATERIAL FACT. HOWEVER, AT THE SAME TIME WE ALSO CANNOT REMAIN OBLIVIOUS OF THE FACT THAT THE ASSESSEE BY MAKING SUCH PURCHASES FROM THE OPEN/GREY MARKET WOULD ALSO BE BENEFITED ON CERTAIN OTHER ASPECTS ALSO VIZ. CASH DISCOUNT ETC. APART THERE FROM, WE FIND THAT THE ASSESSEE HAD DECLARED A G.P RATE OF 4.57% DURING THE YEAR UNDER CONSIDERATION. IN THE TOTALITY OF THE AFORESAID FACTS, WE ARE OF THE CONSIDERED VIEW THAT THE ADDITIONS IN THE HANDS OF THE ASSESSEE P A G E | 6 ITA NO.4105/MUM/2018 A.Y. 2011 - 12 SHRI ARVIND MANRUPCHAND SHAH VS. I.T.O 19(1)(1) CAN SAFELY BE ESTIMATED AT 6% OF THE AGGREGA TE VALUE OF THE PURCHASES WHICH WERE CLAIMED BY HIM TO HAVE BEEN MADE FROM THE AFOREMENTIONED PARTIES. AS A RESULT THEREOF, THE ADDITION IS RESTRICTED TO THE EXTENT OF RS.1,25,413/ - . THE ORDER OF THE CIT(A) IS MODIFIED IN TERMS OF OUR AFORESAID OBSERVATION S. 8. THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRO NOUNCED IN THE OPEN COURT ON 0 3 . 05.2019 S D / - S D / - ( SHAMIM YAHYA) (RAVISH SOOD) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; 0 3 .0 5 .2019 PS. ROHIT / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI . P A G E | 7 ITA NO.4105/MUM/2018 A.Y. 2011 - 12 SHRI ARVIND MANRUPCHAND SHAH VS. I.T.O 19(1)(1)