NAUSHAD H SAYED, MUMBAI V. ITO 17(1)(3), MUMBAI

ITA 4107/MUM/2015

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 9545 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 5 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-12-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 02-07-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: RAJESH KUMAR MISHRA LD
• Assessee Lawyers: NEELIAM C JADHAV; SHASHANK DUNDU LD ARS
• Keywords: Bogus purchase; Unexplained cash credit; Accommodation entries; Revised return
• Section: 143(3); 133(6); 68

Judgement Text

ITA NOS.4458 & 4107 /MUM/2015 NAUSHAD H. SAYED ASSESSMENT YEAR :2011-12 1 IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI . . , , BEFORE HONBLE SHRI C.N. PRASAD, JM AND HONBLE SHRI MANOJ KUMAR AGGARWAL, AM ./ I.T.A. NO.4458/MUM/2015 ( / ASSESSMENT YEAR: 2011-12) INCOME TAX OFFICER - 20(2)(4) ROOM NO.220, 2 ND FLOOR PIRAMAL CHAMBERS, PAREL, MUMBAI-400 012. / VS. NAUSHAD H. SAYED [PROP. M/S DAMANIA INDUSTRIES] SHOP NO.3, BPT, PLOT NO.345 COPPER SMITH STREET DOCKYARD ROAD, MUMBAI-10 ! ./ ./PAN/GIR NO. AMCPS-0651-D ( !# /APPELLANT ) : ( $!# / RESPONDENT ) & ./ I.T.A. NO.4107/MUM/2015 ( / ASSESSMENT YEAR: 2011-12) NAUSHAD H. SAYED [PROP. M/S DAMANIA INDUSTRIES] SHOP NO.3, BPT, PLOT NO.345 COPPER SMITH STREET DOCKYARD ROAD, MUMBAI-10 / VS. INCOME TAX OFFICER - 20(2)(4) ROOM NO.220, 2 ND FLOOR PIRAMAL CHAMBERS, PAREL, MUMBAI-400 012. ! ./ ./PAN/GIR NO. AMCPS-0651-D ( !# /APPELLANT ) : ( $!# / RESPONDENT ) ASSESSEE BY : MS. NEELIAM C.JADHAV & SHASHANK DUNDU - LD. ARS REVENUE BY : RAJESH KUMAR MISHRA - LD.DR / DATE OF HEARING : 13/12/2018 / DATE OF PRONOUNCEMENT : 20/12/2018 / O R D E R ITA NOS.4458 & 4107 /MUM/2015 NAUSHAD H. SAYED ASSESSMENT YEAR :2011-12 2 PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. THESE CROSS APPEALS FOR ASSESSMENT YEAR [AY] 201 1-12 AGITATE THE ORDER OF LD. COMMISSIONER OF INCOME-TAX (APPEALS)-3 2, MUMBAI, [CIT(A)], APPEAL NO. CIT(A)-32/IT-56/17(1)(3)/2014-15 D ATED 12/05/2015. THE GROUNDS RAISED BY REVENUE READ AS U NDER: - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. PR CIT(A) ERRED IN GRANTING RELIEF OF RS.16,33,711/- BY ADOPT ING AVERAGE RATE OF G.P. OF LAST 3 ASSESSMENT YEAR WHEREAS IN THE FACE OF CLEAR-CUT FA CTS ABOUT BOGUS PURCHASES, FOR GREY MARKET, THE RATE OF 5% ADOPTED BY THE AO WAS V ERY REASONABLE BECAUSE NO SALES TAX IS PAID ON SUCH PURCHASES. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LD. CIT(A) ERRED IN DELETING ADDITION OF RS 55,07,011/- MADE U/S 68, IG NORING THE FACT THAT THE ASSESSEE FAILED TO DISCHARGE THE ONUS OF PROVING NOT ONLY TH E IDENTITY BUT ALSO CREDIT WORTHINESS OF THE LENDERS AND THE GENUINENESS OF THE TRANSACTI ON. THE GROUNDS RAISED BY THE ASSESSEE READS AS UNDER: - 1. THE LD. COMMISSIONER OF INCOME TAX (OSD)(APPEAL )-32, MUMBAI HAS ERRED IN CONFIRMING PROFIT TO THE EXTENT @2% OF THE PROFIT O F RS.10,89,139/- (@2% OF RS.5,44,56,991). HE HAS NOT CONSIDERED THE G.P. @3. 21%. THE LD. COMMISSIONER OF INCOME TAX HAS NOT CONSIDERED THE AVERAGE G.P. O F PREVIOUS 3 YEARS. 2. THE LD. COMMISSIONER OF INCOME TAX HAS NOT CONSI DERED THE SALES MADE BY THE APPELLANT TO THE SAME PARTIES AMOUNTING TO RS.5,57, 45,281/-. HE HAS ERRED IN NOT CONSIDERING THE SAME FACT WHILE MAKING THE ADDITION IN THE PROFIT. 3. YOUR APPELLANT RELIED ON THE FOLLOWING DECISION S -CIT V ADINATH INDUSTRIES (2001) ITR 476 (GUJ) THE DEPARTMENT SLP DISMISSED (2001) 247 1TR(ST)35. -BABULAL C. BORANA V ITO (2006)282 ITR 251 (BOM) (H C). -CIT V NIKUNJ EXIM ENTERPRISES P.LTD. (2013) 216 TAXMAN L71(MAG.)(BOM) HC. -ITO V EAGLE IMPEX (ITA NO.597/MUM/2010 A.Y.2003-04 BENCH H, DT.22-02-2013. -DCIT V. SHRI RAJEEV G. KALATHIL, (MUM) (TRIB.)(ITA NO.6727/M/2012, DT.20/08/2014, BENCH 'D' A.Y.2009-10. -ITO-25(2)(2) V.SHRI PARESH ARVIND GANDHI (MUM)(TRIB)(LTA NO. 5706/M/2013 DT.13/05/2015) A.Y.2010-11. BENCH 'C -CIT DELHI-1 V. BHARAT ALUMINIUM CO.LTD. ALUMINUM S ADAN, CORE-6, ITA NO.160/2005 DELHI(HC) JUDGMENT DELIVERED ON:24 TH MAY,2007. 4. TO DELETE THE ALLEGED ADDITION OF RS.10,89,139/- ON ACCOUNT OF ALLEGED BOGUS PURCHASES (@2% OF RS.5,44,56,991/-). THE ASSESSMENT FOR IMPUGNED AY WAS FRAMED BY LD. IN COME TAX OFFICER-17(1)(3), MUMBAI [AO] IN SCRUTINY ASSESSMEN T U/S 143(3) ON 28/03/2014 WHEREIN THE INCOME OF THE ASSESSEE WAS D ETERMINED AT ITA NOS.4458 & 4107 /MUM/2015 NAUSHAD H. SAYED ASSESSMENT YEAR :2011-12 3 RS.103.11 LACS AFTER CERTAIN ADDITIONS / DISALLOWAN CES AS AGAINST RETURNED INCOME OF RS.19.81 LACS E-FILED BY THE ASS ESSEE ON 20/09/2011. DURING IMPUGNED AY, THE ASSESSEE BEING RESIDENT INDIVIDUAL WAS ENGAGED AS MANUFACTURER, DEALER & STOCKIEST OF STEEL ITEMS UNDER PROPRIETORSHIP CONCERN NAMELY M/S DAMANIA INDUSTRIES. THE ASSESSEE REFLECTED A TURNOVER OF RS.12.64 CRORES DURING THE IMPUGNED AY. 2.1 DURING ASSESSMENT PROCEEDINGS, PURSUANT TO RECE IPT OF CERTAIN INFORMATION FROM SALES TAX DEPARTMENT, MAHARASHTRA, IT TRANSPIRED THAT THE ASSESSEE REFLECTED AGGREGATE PURCHASES OF RS.18 6.17 LACS FROM FIVE ENTITIES WHICH WERE STATED TO BE INVOLVED IN PROVID ING ACCOMMODATION ENTRIES. THE DETAILS OF THESE PARTIES HAVE ALREADY BEEN EXTRACTED ON PAGE-2 OF THE QUANTUM ASSESSMENT ORDER. NOTICES ISSUED U/ S 133(6) TO ALL THESE ENTITIES TO VERIFY THE PURCHASES WERE RET URNED BACK WITH REMARKS NOT KNOWN. 2.2 THE ASSESSEE, VIDE REPLY DATED 17/02/2014 DREW ATTENTION TO THE REVISED RETURN FILED BY THE ASSESSEE DURING MARCH, 2013 AND SUBMITTED THAT NO PURCHASES WERE MADE BY THE ASSESSEE FROM AN Y OF THE STATED ENTITY EXCEPT PURCHASES OF RS.95.93 LACS MADE FROM M/S TUBE INDIA. HOWEVER, IT WAS NOTED THAT NO SUCH REVISED RETURN W AS E-FILED BY THE ASSESSEE. THE PERUSAL OF MANUAL REVISED RETURN FILE D BY THE ASSESSEE REVEALED THAT THE FIGURES OF OPENING & CLOSING STOC K, PURCHASES, CREDITORS WAS ALTERED WHEREAS THE FIGURES OF NET PROFIT REMAI NED UNCHANGED. THE OPENING STOCK AND PURCHASES WERE REDUCED BY RS.367. 77 LACS AS AGAINST CORRESPONDING REDUCTION IN CLOSING STOCK WH EREAS THE SUNDRY CREDITORS WERE REDUCED BY RS.382.48 LACS. THE PURCH ASE FIGURES WERE REDUCED FROM RS.13.83 CRORES TO RS.11.79 CRORES. TH E NOTEWORTHY FACT ITA NOS.4458 & 4107 /MUM/2015 NAUSHAD H. SAYED ASSESSMENT YEAR :2011-12 4 WAS THAT THE ASSESSEE REFLECTED NIL PURCHASES AGAINST 4 PARTIES OUT OF 5 SUSPICIOUS PARTIES AS POINTED OUT BY LD. AO. 2.3 THE ASSESSEE DEFENDED ITS STAND VIDE REPLY DATE D 13/03/2014, HOWEVER, NOT CONVINCED, LD.AO ESTIMATED THE ADDITIO NS AGAINST ALLEGED NON-GENUINE PURCHASES @5% WHICH CAME TO RS.27.22 LACS. THE ESTIMATION WAS MADE AGAINST PURCHASES OF RS.203.72 LACS AS REDUCED BY THE ASSESSEE IN THE REVISED RETURN OF INCOME AND SUSPICIOUS PURCHASES OF RS.340.84 LACS MADE BY ASSESSEE FROM S UPPLIERS TO WHOM NOTICES U/S 133(6) WAS ISSUED BUT THE SAME YIELDED NO RESPONSE. 2.4 THE ASSESSEE WAS SADDLED WITH ANOTHER ADDITION ON UNEXPLAINED CASH CREDIT U/S 68 FOR RS.55.07 LACS, BEING LOAN TA KEN FROM 2 PARTIES SINCE THE ASSESSEE FAILED TO SATISFACTORILY PROVE T HE THREE INGREDIENTS VIZ. IDENTITY, CREDITWORTHINESS & GENUINENESS AGAINST TH ESE LOANS. 3. THE LD. FIRST APPELLATE AUTHORITY, KEEPING IN VI EW THE GROSS PROFIT RATE REFLECTED BY THE ASSESSEE IN EARLIER YEARS, REDUCED THE SAME TO 2%. THE ADDITION U/S 68 WAS DELETED BY OBSERVING THAT T HE ASSESSEE FILED LOAN CONFIRMATIONS, INCOME TAX RETURNS OF THE LENDE R AND THE PAYMENTS WERE THROUGH BANKING CHANNELS. AGGRIEVED, THE ASSES SEE AS WELL AS REVENUE ARE UNDER APPEAL BEFORE US. 4. RIVAL CONTENTIONS HAVE BEEN HEARD AND PERUSED. T HE SUPPORTING DOCUMENTS AS KEPT IN THE PAPER-BOOK AS WELL AS JUDICIAL PRONOUNCEMENTS AS CITED BEFORE US HAVE ALSO BEEN CONSIDERED. IT IS NOTED THAT THE ASSESSEE HAS FILED THE REVISED RETURN OF INCOME IN A VERY CASUAL MANNER WITHOUT ANY COGENT JUSTIFICATION THEREOF SINCE THE FIGURES OF OPENING STOCK, CLOSING STOCK, PURCHASES & SUNDRY CREDITORS HAVE BEEN ALTERED WITHOUT THERE BEING ANY PLAUSIBLE REASON / JUSTIFIC ATION PARTICULARLY IN VIEW ITA NOS.4458 & 4107 /MUM/2015 NAUSHAD H. SAYED ASSESSMENT YEAR :2011-12 5 OF THE FACT THAT THE ACCOUNTS WERE SUBJECTED TO TAX AUDIT. NOTHING ON RECORD SUGGEST THAT SIMILAR CHANGES IN STOCK HAVE B EEN MADE BY THE ASSESSEE IN RETURN OF INCOME FILED FOR PRECEDING YE AR AS WELL AS IN SUCCEEDING YEARS. NO RECONCILIATION OF THESE FIGURE S VIS--VIS SALES TAX RETURNS HAVE BEEN PLACED ON RECORD. THE PERUSAL OF PURCHASE INVOICES, AS PLACED ON RECORD, PRIMA-FACIE, REVEAL THAT THE ASSESSEE MADE PURCHASES FROM THESE SUPPLIERS AND EVEN MADE PAYMEN T THROUGH BANKING CHANNELS IN SUBSEQUENT YEARS WHICH NEGATE T HE SUBMISSIONS THAT NO PURCHASES WERE MADE BY THE ASSESSEE FROM TH E IMPUGNED SUPPLIERS. HENCE, NO COGNIZANCE OF THE REVISED RETU RN FILED BY THE ASSESSEE, IN OUR OPINION, COULD BE TAKEN UNDER THE CIRCUMSTANCES. SECOND FACTOR TO BE NOTED IS THAT THE ASSESSEE, BEF ORE LD. AO, ADMITTED TO NOT MAINTAINING ITEM-WISE STOCK DETAILS AS AGAIN ST THE FINDING OF LD. CIT(A) THAT THE ASSESSEE HAD MAINTAINED ADEQUATE ST OCK DETAILS. THE TAX AUDITOR HAS ALSO VOUCHED FOR THE FACT THAT THE ASSESSEE WAS NOT MAINTAINING ADEQUATE STOCK RECORDS. FURTHER, THE NO TICES ISSUED U/S 133(6) TO ALL THE PARTIES RETURNED BACK UNSERVED WI TH THE REMARKS NOT KNOWN AND THE ASSESSEE FAILED TO PRODUCE EVEN A SINGLE SU PPLIER TO CONFIRM THE TRANSACTION. AT THE SAME TIME, THE TURN OVER ACHIEVED BY THE ASSESSEE HAS NOT BEEN DISTURBED BY THE REVENUE AND THE ASSESSEE WAS IN POSSESSION OF PRIMARY PURCHASE DOCUMENTS. THE FA CTUAL MATRIX, IN OUR OPINION, LEFT NO OPTION BEFORE LOWER AUTHORITIES EX CEPT TO MAKE SOME ESTIMATED ADDITIONS AGAINST THESE SUSPICIOUS PURCHA SES. THE FIRST APPELLATE AUTHORITY HAS PROVIDED RELIEF TO THE ASSE SSEE KEEPING IN VIEW THE GROSS PROFITS RATE REFLECTED BY THE ASSESSEE IN EARLIER ASSESSMENT YEARS. HOWEVER, WE FIND THAT THE CONDUCT OF THE ASS ESSEE AS WELL AS ITA NOS.4458 & 4107 /MUM/2015 NAUSHAD H. SAYED ASSESSMENT YEAR :2011-12 6 FACTUAL MATRIX DO NOT JUSTIFY ESTIMATION AT NORMAL RATES SINCE THE PURCHASES MADE BY THE ASSESSEE DURING IMPUGNED AY W ERE IN GRAVE DOUBT. THEREFORE, THE ESTIMATION OF 2% AS MADE BY L D. CIT(A) WAS ON THE LOWER SIDE AND THE SAME COULD NOT BE HELD TO BE REASONABLE. WE ENHANCE THE SAME TO 3% OF ALLEGED SUSPICIOUS PURCHA SES OF RS.5,44,56,991/- WHICH COMES TO RS.16,33,710/-. THE IMPUGNED ORDER STAND MODIFIED TO THAT EXTENT. THE ASSESSEES APPEA L STAND DISMISSED. THE GROUNDS RAISED BY THE REVENUE STANDS PARTLY ALL OWED. 5.1 SO FAR AS THE ADDITIONS OF CASH CREDIT U/S 68 I S CONCERNED, WE FIND THAT THE ASSESSEE HAS A RECEIVED A SUM OF RS.4.07 L ACS FROM AN ENTITY NAMELY ZENITH POLE & PIPE CO. THE PERUSAL OF THE BANK STATEMENT OF THIS ENTITY, AS PLACED ON RECORD, REVEAL THAT THERE ARE NO IMMEDIATE CASH DEPOSIT IN THE SAID ACCOUNT TO SOURCE THIS LOAN WHI CH WEAKENS THE CASE OF THE REVENUE THAT THE PARTY HAD NO CREDITWORTHINE SS. THE OTHER DOCUMENTS VIZ. COPY OF PAN, INCOME TAX RETURNS, CON FIRMATION OF ACCOUNTS ETC. FORTIFY THE STAND OF THE ASSESSEE. TH EREFORE, THIS ADDITION COULD NOT BE SUSTAINED AND NO INFIRMITY COULD BE FO UND IN THE OBSERVATION OF FIRST APPELLATE AUTHORITY, IN THIS REGARD. 5.2 ANOTHER LOAN OF RS.51 LACS IS STATED TO BE TAKE N BY THE ASSESSEE FROM AN INDIVIDUAL NAMELY DASWANT SINGH. IN SUPPORT OF THE SAME, THE ASSESSEE, IN SIMILAR MANNER, HAS PLACED ON RECORD H IS INCOME TAX RETURNS, CONFIRMATION OF ACCOUNT, BANK STATEMENTS E TC. UPON PERUSAL, IT APPEARS THAT THIS LOAN ACCOUNT HAS BEEN SETTLED BY THE ASSESSEE IN SUBSEQUENT YEARS AND THEREFORE, THERE WAS NO OCCASI ON TO CONSIDER THIS LOAN AS UNEXPLAINED CASH CREDIT. THIS BEING THE CAS E, THE CONCLUSION ITA NOS.4458 & 4107 /MUM/2015 NAUSHAD H. SAYED ASSESSMENT YEAR :2011-12 7 DRAWN BY FIRST APPELLATE AUTHORITY COULD NOT BE FAU LTED WITH. THIS GROUND RAISED BY THE REVENUE STANDS DISMISSED. 6. IN NUTSHELL, THE ASSESSEES APPEAL STANDS DISMIS SED WHEREAS THE REVENUES APPEAL STANDS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 20 TH DECEMBER, 2018. SD/- SD/- (C.N. PRASAD) ( MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 20/12/2018 SR.PS, JAISY VARGHESE ! / COPY OF THE ORDER FORWARDED TO : 1. !# / THE APPELLANT 2. $!# / THE RESPONDENT 3. + ( ) / THE CIT(A) 4. + / CIT CONCERNED 5. ,- & . , . , / DR, ITAT, MUMBAI 6. -/01 / GUARD FILE / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI.