SHRI ISHRARAM G CHOUDHARY, MUMBAI V. INCOME TAX OFFICER 19(1)(5), MUMBAI

ITA 4106/MUM/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 4121 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-05-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 08-06-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: CHAITNYA ANJARIA
• Assessee Lawyers: NIMESH K CHOTHANI
• Keywords: Bogus purchase
• Section: 143(1); 148

Judgement Text

P A G E | 1 ITA NO. 4106/MUM/2018 A.Y. 2009 - 10 SHRI ISHRARAM G. CHOUDHARI VS. THE INCOME TAX OFFICER - 19(1)(5) IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER AND SHRI RAVISH SOOD, JUDICIAL MEMBER ITA NO.4106/MUM/2018 (ASSESSMENT YEAR: 2009 - 10 ) SHRI ISHRARAM G. CHOUDHARI PROPRIETOR OF M/S SHREE RAMDEV METAL (INDIA) 71, 1 ST FLOOR, RAM MANDIR BLDG. BHANDARI STREET, NEAR GOLDEVAL, MUMBAI 400 004 VS. THE INCOME TAX OFFICER 19(1)(5) , MUMBAI PAN AFZPC9784P (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI NIMESH K. CHOTHANI, A.R RESPONDENT BY: SHRI CHAITNYA ANJARIA, D.R DATE OF HEARING: 30 .04.2019 DATE OF PRONOUNCEMENT: 0 8 .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 09.05.2018, 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), DA TED 21.03.2015 FOR A.Y. 2009 - 10. THE ASSESSEE ASSAILING THE ORDER OF THE CIT(A) HAS RAISED BEFORE US THE FOLLOWING GROUNDS OF APPEAL: 1. THE LEARNED COMMISSION ER OF INCOME TAX (APPEALS) 30, MUMBAI ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER OF REOPENING THE ASSESSMENT U/S. 147 OF THE ACT AND ISSUING NOTICE U/S. 148 OF THE ACT. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - 30, MUMBAI ON T HE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW ERRED IN P A G E | 2 ITA NO. 4106/MUM/2018 A.Y. 2009 - 10 SHRI ISHRARAM G. CHOUDHARI VS. THE INCOME TAX OFFICER - 19(1)(5) CONFIRMING ESTIMATED ADDITIONS OF RS.9,33, 503 / - I.E @ 12.5% OF TOTAL ALLEGED UN - EXPLAINED EXPENDITURE OIL OF SUSPICIOUS /NON - GENUINE PURCHASES OF RS.74,68, 022/ - MADE BY THE ASSESSING OFFICER. 3. TH E APPELLANT PRAYS TO LEAVE, ADD, AMEND OR ALTER THE ABOVE GROUNDS OF APPEAL ON OR BEFORE THE FINAL DATE OF HEARING. 2. BRIEFLY STATED, THE ASSESSEE WHO IS ENGAGED IN THE BUSINESS OF TRADING IN FERROUS AND NON - FERROUS METALS HAD FILED HIS RETURN OF INCOME FOR A.Y 2009 - 10 ON 23.09.2009, DECLARING TOTAL INCOME OF RS.3,32,090/ - . 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 SALES TAX DEPAR TMENT, MAHARASHTRA, THAT THE NAME OF THE ASSESSEE HAD FIGURED IN THE LIST OF THE PERSONS WHO HAD PROCURED BOGUS PURCHASE BILLS FROM CERTAIN HAWALA PARTIES, HIS CASE WAS REOPENED UNDER SEC.147 OF THE I - T ACT. 3. DURING THE COURSE OF THE ASSESSMENT PROCEEDIN GS IT WAS OBSERVED BY THE A.O THAT THE ASSESSEE HAD CLAIMED TO HAVE MADE PURCHASES AGGREGATING TO RS.24,68,022/ - FROM TH E FOLLOWING TAINTED PARTIES: NAME OF THE HAWALA PARTY AMOUNT (RS.) SIDDHIVINAYAK STEEL 1,31,347/ - DEEP ENTERPRISES 2,27,915/ - CHANCHAL TUBE CORPORATION 2,80,247/ - SURAT TUBE CORPORATION 94,824/ - ASIAN STEEL 5,70,528/ - MONAL METAL ALLOYS PVT. LTD. 35,974/ - HINDUSTAN STEEL IMPEX 4,80,767/ - GREAT INTERNATIONAL 5,81,978/ - SHAH INDUSTRIES 7,33,980/ - NEWZONE MULTITRADE PVT. LTD. 43,30,462/ - TOTAL 76,68,022/ - IN ORDER TO VERIFY THE GENUINENESS AND VERACITY OF THE PURCHASE TRANSACTIONS UNDER CONSIDERATION, THE ASSESSEE WAS CALLED UPON BY THE A.O TO FURNISH CERTAIN SUPPORTING DOCUMENTARY EVIDENCE VIZ. (I ) NAME OF THE SELLER WITH CURRENT FULL ADDRESS; (II) PAN DETAILS; (III) BILLS AND P A G E | 3 ITA NO. 4106/MUM/2018 A.Y. 2009 - 10 SHRI ISHRARAM G. CHOUDHARI VS. THE INCOME TAX OFFICER - 19(1)(5) VOUCHER N UMBERS; (IV) DESCRIPTION OF GOODS PURCHASED ALONG WITH QUANTITY , RATE AND AMOUNT; (V) DETAILS OF GOODS DISPATCHED ALONG WITH DATE; AND (VI) MODE OF TRANSPORTATION AL ONG WITH THE DETAILS OF THE PAYMENTS MADE TOWARDS PURCHASE CONSIDERATION. APART THERE FROM, THE ASSESSEE WAS ALSO DIRECTED TO FURNISH THE REQUISITE DETAILS OF THE CORRESPONDING SALES OF GOODS AND CORRELATE THE PURCHASES UNDER CONSIDERATION AS AGAINST THE SAME. HOWEVER, THE ASSESSEE FAILED TO PLACE ON RECORD SUPPORTING DOCUMENTARY EVIDENCE WHICH COULD CONCLUSIVELY PROVE THE AUTHENTICITY OF THE AFORE SAID PURCHASE TRANSACTIONS. APART THERE FROM, THE ASSESSEE DESPITE SPECIFIC DIRECTIONS BY THE A.O ALSO FAILED TO PRODUCE THE AFOREMENTIONED PARTIES FOR NECESSARY EXAMINATION BEFORE HIM. IT WAS OBSERVED BY THE A.O THAT DESPITE SPECIFIC DIRECTION S THE ASSESSEE HAD FAILED TO PLACE ON RECORD THE REQUISITE SUPPORTING DOCUMENTS VIZ. (I) DELIVERY CHALLAN S; (II) TRANSPORT RECEIPTS; (III) GOODS INWARD REGISTER MAINTAINED AT GODOWN ETC. IN THE BACKDROP OF THE AFORESAID FACTS , THE A.O WAS OF THE VIEW THAT THE ASSESSEE HAD FAILED TO DISCHARGE THE ONUS AS REGARDS PROVING THE AUTHENTICITY OF THE PURCHASE TRANSAC TIONS UNDER CONSIDERATION. INSOFAR , THE CLAIM OF THE ASSESSEE THAT HE HAD MADE PAYMENTS OF THE PURCHASE CONSIDERATION TO THE AFOREMENTIONED PARTIES THROUGH BANKING CHANNEL WAS CONCERNED, THE A.O WAS OF THE VIEW THAT THE SAME WAS NOT SACROSANCT AND DID NOT CONCLUSIVELY PROVE THE AUTHENTICITY OF THE PURCHASE TRANSACTIONS . IN THE BACKDROP OF HIS AFORESAID DELIBERATIONS, IT WAS OBSERVED BY THE A.O THAT THE ASSESSEE HAD PURCHASED THE GOODS FROM THE OPEN/GREY MARKET AND HAD ONLY OBTAINED THE ACCOMMODATION BILLS F ROM THE AFOREMENTIONED PARTIES. T HE A.O HOLDING A CONVICTION THAT THE ASSESSEE BY MAKING THE PURCHASES FROM THE UNORGANISED SECTOR OPERATING IN THE OPEN/GREY MARKET WOULD HAVE BENEFITTED BY PROCURING SUCH GOODS AT A DISCOUNTED VALUE, THUS MADE AN ADDITION OF RS.9,33,503/ - I.E @ 12.5% P A G E | 4 ITA NO. 4106/MUM/2018 A.Y. 2009 - 10 SHRI ISHRARAM G. CHOUDHARI VS. THE INCOME TAX OFFICER - 19(1)(5) OF THE AGGREGATE VALUE OF THE AFORESAID BOGUS PURCHASES OF RS.7 6, 68,022/ - . 4. AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). HOWEVER, THE CIT(A) NOT BEING IMPRESSED WITH THE CONTENTION S ADVANCED BY THE ASSESSEE DISMISS ED THE APPEAL. 5. THE ASSESSEE BEING AGGRIEVED WITH THE ORDER OF THE CIT(A) HAS CARRIED THE MATTER IN APPEAL BEFORE US. IT WAS SUBMITTED BY THE LD. AUTHORIZED REPRESENTATIVE (FOR SHORT A.R) FOR THE ASSESSEE, THAT THE LOWER AUTHORITIES HAD ERRED IN MAKING AN EXORBITANT ADDITION /DISALLOWANCE @ 12.5% OF THE AGGREGATE VALUE OF THE PURCHASES WHICH WERE CLAIMED BY THE ASSESSEE TO HAVE BEEN MADE FROM THE AFOREMENTIONED PARTIES. IN SUPPORT OF HIS AFORESAID CONTENTION, THE LD. A.R SUBMITTED THAT THE G.P RATE OF HIS BUSINESS OF TRADING IN FERROUS AND NON - FERROUS METAL S FOR THE YEAR UNDER CONSIDERATION WAS 5.93%. FURTHER, I N ORDER TO FORTIFY HIS AFORESAID CLAIM THAT THE G.P RATE FOR THE YEAR UNDER CONSIDERATION WAS 5.93% , THE LD. A.R DREW OUR ATTENT ION TO PAGE 11 AND PARA 9 OF THE ORDER OF THE CIT(A) . 6. PER CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE (FOR SHORT D.R) SUBMITTED THAT AS THE ASSESSEE HAD FAILED TO SUBSTANTIATE THE GENUINENESS AND VERACITY OF THE PURCHASES CLAIMED TO HAVE BEEN MADE FR OM THE AFOREMENTIONED PARTIES, THEREFORE, THE LOWER AUTHORITIES HAD RIGHTLY MADE AN ADDITION @ 12.5% OF THE AGGREGATE VALUE OF SUCH PURCHASES CLAIMED TO HAVE BEEN MADE FROM THE AFOREMENTIONED PARTIES. 7. WE HAVE HEARD THE AUTHORIZED REPRESENTATIVES FOR B OTH THE PARTIES, PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL AVAILABLE ON RECORD. ADMITTEDLY, THE ASSESSEE IN THE PRESENT CASE HAD FAILED TO SUBSTANTIATE THE AUTHENTICITY OF THE PURCHASE TRANSACTION S P A G E | 5 ITA NO. 4106/MUM/2018 A.Y. 2009 - 10 SHRI ISHRARAM G. CHOUDHARI VS. THE INCOME TAX OFFICER - 19(1)(5) UNDER CONSIDERATION ON THE BASIS OF ANY CREDIBLE DOCUMENTARY EVIDENCE . AS IS DISCERNIBLE FROM THE ORDERS OF THE LOWER AUTHORITIES, THE ASSESSEE DESPITE BEING AFFORDED SUFFICIENT OPPORTUNITY TO PLACE ON RECORD DOCUMENTARY EVIDENCE IN SUPPORT OF HIS CLAIM OF HAVING MADE GENUINE PURCHASES FROM THE AFOREMENTIONED PARTIES, VIZ. COPIES OF DELIVERY CHALLANS, TRANSPORT RECEIPTS, GOODS INWARD REGISTER MAINTAINED AT GODOWN ETC. , FAILED TO PRODUCE THE SAME. INSOFAR , THE OBSERVATIONS OF THE LOWER AUTHORITIES THAT THE ASSESSEE HAD FAILED TO SUBSTANTIATE THE AUTHENTICITY OF THE PURCHASE T RANSACTIONS UNDER CONSIDERATION ARE CONCERNED, WE ARE PERSUADED TO SUBSCRIBE TO THE SAME. ADMITTEDLY, NOW WHEN THE SALES OF THE ASSESSEE HAVE NOT BEEN DISTURBED, THEREFORE, THE ADDITION IN HIS HANDS WAS LIABLE TO BE RESTRICTED ONLY TO THE EXTENT OF THE PRO FIT ELEMENT EMBEDDED IN THE PURCHASES WHICH COULD SAFELY BE HELD TO HAVE BEEN MADE BY HIM FROM THE OPEN/GREY MARKET. HOWEVER, AT THE SAME TIME WE ARE UNABLE TO ACCEPT THE ESTIMATION BY THE LOWER AUTHORITIES OF THE PROFIT ELEMENT EMBEDDED IN THE PURCHASES U NDER CONSIDERATION @ 12.5% OF THE AGGREGATE VALUE OF SUCH PURCHASES. AS A MATTER OF FACT, NO COGENT REASON HAS BEEN GIVEN BY THE LOWER AUTHORITIES IN WORKING OUT OF SUCH PROFIT ELEMENT BY APPLYING A RATE OF 12.5%. WE FIND THAT THE HONBLE HIGH COURT OF BOM BAY HAD RECENTLY IN ITS JUDGMENT IN THE CASE OF PR. COMMISSIONER OF INCOME TAX - 17 VS. M/S MOHOMMAD HAJI ADAM & COMPANY (ITA NO.1004 OF 2016, DATED 11.02.2019) , HAD OBSERVED THAT ADDITION AS REGARDS THE PURCHASES WHICH WERE FOUND TO BE BOGUS , WAS TO BE LIMI TED TO THE EXTENT OF BRINGING THE G.P RATE OF SUCH BOGUS PURCHASES AT THE SAME RATE AS THAT OF ITS OTHER PURCHASE S . IN THE BACKDROP OF THE AFORESAID JUDGMENT OF THE HONBLE J URISDICTIONAL HIGH COURT, WE ARE OF THE CONSIDERED VIEW THAT THE ADDITION IN THE CASE OF THE ASSESSEE AS REGARDS THE BOGUS PURCHASES OF RS. 76,68,022/ - HAS TO BE WORKED OUT BY BRINGING THE G.P RATE O F SUCH BOGUS PURCHASES IN CONFORMITY WITH P A G E | 6 ITA NO. 4106/MUM/2018 A.Y. 2009 - 10 SHRI ISHRARAM G. CHOUDHARI VS. THE INCOME TAX OFFICER - 19(1)(5) THE G.P RATE OF HIS GENUINE PURCHASES PERTAINING TO THE YEAR UNDER CONSIDERATION. WE THUS IN TE RMS OF OUR AFORESAID OBSERVATIONS RESTORE THE MATTER TO THE FILE OF THE A.O, WHO SHALL RESTRICT THE ADDITION IN THE HANDS OF THE ASSESSEE IN TERMS OF OUR AFORESAID OBSERVATIONS. 8. THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OP EN COURT ON 0 8 . 05.2019 S D / - S D / - ( SHAMIM YAHYA) (RAVISH SOOD) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; 08 .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. 4106/MUM/2018 A.Y. 2009 - 10 SHRI ISHRARAM G. CHOUDHARI VS. THE INCOME TAX OFFICER - 19(1)(5)