MR.AMARLAL DHARMDAS KEWALRAMANI, MUMBAI V. INCOME TAX OFFICER-WARD 2(1), MUMBAI

ITA 4114/MUM/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 3427 (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: Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 08-06-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: CHAITNYA ANJARIA
• Assessee Lawyers: S M MAKHIJA; LIPSA A CHANCHLANI
• Keywords: Bogus purchase; Question of law

Judgement Text

T HE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA ( A M) & SHRI RAVISH SOOD ( J M) I.T.A. NO. 4114 /MUM/ 201 8 (ASSESSMENT YEAR 20 09 - 10 ) I.T.A. NO. 4115/MUM/2018 (ASSESSMENT YEAR 2010 - 11) I.T.A. NO. 4127/MUM/2018 (ASSESSMENT YEAR 2011 - 12) MR. AMARLAL DHARMDAS KEWALRAMANI PROPRIETOR M/S. AMAR PRODUCTS, BLOCK NO. A - 27, ROOM NO. 157 GOAL MAIDAN ULHASNAGAR - 421 001. PAN : AGXPK5156C V S . ITO WARD 2(1) 2 ND FLOOR MOHAN PLAZA WAYALE NAGAR KHADAKPADA KALYAN ( APPELLANT ) ( RESPONDE NT ) ASSESSEE BY SHRI S.M. MAKHIJA & MS. LIPSA A. CHANCHLANI DEPARTMENT BY SHRI CHAITNYA ANJARIA DATE OF HEARING 30 . 4 . 201 9 DATE OF PRONOUNCEMENT 03 . 5 . 201 9 O R D E R PER SHAMIM YAHYA (AM) : THESE ARE APPEALS BY THE ASSESSEE WHEREIN THE ASSESSEE IS AGGRIEVED THAT LEARNED CIT(A) HAS ERRED IN SUSTAINING 100% DISALLOWANCE ON ACCOUNT OF BOGUS PURCHASES AS UNDER : - A.Y. AMOUNT (RS.) 2009 - 10 1,69,784 2010 - 11 11,33,600 2011 - 12 23,89,800 2. THE ASSESSING OFFICER IN THESE CASES HAS MADE 10 0% ADDITION ON ACCOUNT OF BOGUS PURCHASES. UPON ASSESSEES APPEAL LEARNED CIT(A) CONFIRMED THE SAME. AGAINST THE ABOVE ORDER THE ASSESSEE IS IN APPEAL BEFORE THE ITAT. 3. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. IN SUPPORT OF HIS CASE LEA RNED COUNSEL OF THE ASSESSEE HAS PLACED RELIANCE UPON THE DECISION MR. AMARLAL DHARMDAS KEWALRAMANI 2 OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF PCIT VS. MOHOMMAD HAJI ADAM (INCOME TAX APPEAL NO. 1004 OF 2016 VIDE JUDGEMENT DATED 23.4.2019). 4. UPON CAREFUL CONSIDERATION, WE FIND THAT AS SESSEE HAS PROVIDED THE DOCUMENTARY EVIDENCE FOR THE PURCHASE. ADVERSE INFERENCES HAVE BEEN DRAWN DUE TO THE INABILITY OF THE ASSESSEE TO PRODUCE THE SUPPLIERS. WE FIND THAT IN THIS CASE THE SALES HAVE NOT BEEN DOUBTED. IT IS SETTLED LAW THAT WHEN SALES AR E NOT DOUBTED, 100% DISALLOWANCE FOR BOGUS PURCHASE CANNOT BE DONE. THE RATIONALE BEING NO SALES IS POSSIBLE WITHOUT ACTUAL PURCHASES. 5. WE NOTE THAT IN THE CASE OF MOHOMMAD HAJI ADAM (SUPRA) HON'BLE BOMBAY HIGH COURT HAS HELD AS UNDER : - 8 IN THE PR ESENT CASE, AS NOTED ABOVE, THE ASSESSEE WAS A TRADER OF FABRICS. THE A.O. FOUND THREE ENTITIES WHO WERE INDULGING IN BOGUS BILLING ACTIVITIES. A.O. FOUND THAT THE PURCHASES MADE BY THE ASSESSEE FROM THESE ENTITIES WERE BOGUS. THIS BEING A FINDING OF FACT, WE HAVE PROCEEDED ON SUCH BASIS. DESPITE THIS, THE QUESTION ARISES WHETHER THE REVENUE IS CORRECT IN CONTENDING THAT THE ENTIRE PURCHASE AMOUNT SHOULD BE ADDED BY WAY OF ASSESSEE'S ADDITIONAL INCOME OR THE ASSESSEE IS CORRECT IN CONTENDING THAT SUCH LOGIC CANNOT BE APPLIED. THE FINDING OF THE CIT(A) AND THE TRIBUNAL WOULD SUGGEST THAT THE DEPARTMENT HAD NOT DISPUTED THE ASSESSEE'S SALES. THERE WAS NO DISCREPANCY BETWEEN THE PURCHASES SHOWN BY THE ASSESSEE AND THE SALES DECLARED. THAT BEING THE POSITION, TH E TRIBUNAL WAS CORRECT IN COMING TO THE CONCLUSION THAT THE PURCHASES CANNOT BE REJECTED WITHOUT DISTURBING THE SALES IN CASE OF A TRADER. THE TRIBUNAL, THEREFORE, CORRECTLY RESTRICTED THE ADDITIONS LIMITED TO THE EXTENT OF BRINGING THE G.P. RATE ON PURCHA SES AT THE SAME RATE OF OTHER GENUINE PURCHASES. THE DECISION OF THE GUJARAT HIGH COURT IN THE CASE OF N.K. INDUSTRIES (SUPRA) CANNOT BE APPLIED WITHOUT REFERENCE TO THE FACTS. IN FACT IN PARAGRAPH 8 OF THE SAME JUDGMENT THE COURT HELD AND OBSERVED AS UNDE R: - SO FAR AS THE QUESTION REGARDING ADDITION OF RS.3,70,78,125/ - AS GROSS PROFIT ON SALES OF RS.37.08 C RORES MADE BY THE ASSESSING OFFICER DESPITE THE FACT THAT THE SAID SALES HAD ADMITTEDLY BEEN RECORDED IN THE REGULAR BOOKS DURING FINANCIAL YEAR 1997 - 98 IS CONCERNED, WE ARE OF THE VIEW THAT THE ASSESSEE CANNOT BE PUNISHED SINCE SALE PRICE IS ACCEPTED BY THE REVENUE. THEREFORE, EVEN IF 6% GROSS PROFIT IS TAKEN INTO ACCOUNT, THE CORRESPONDING COST PRICE IS REQUIRED TO BE DEDUCTED AND TAX CANNOT BE LEVIED ON THE SAME PRICE. WE HAVE TO REDUCE THE SELLING PRICE ACCORDINGLY AS A RESULT OF WHICH PROFIT COMES TO 5.66%. THEREFORE, CONSIDERING MR. AMARLAL DHARMDAS KEWALRAMANI 3 5.66% OF RS.3,70,78,125/ - WHICH COMES TO RS.20,98,621.88 WE THINK IT FIT TO DIRECT THE REVENUE TO ADD RS.20,98,621.88 AS GROSS PROFIT AND MAKE NECESSARY DEDUCTIONS ACCORDINGLY. ACCORDINGLY, THE SAID QUESTION IS ANSWERED PARTIALLY IN FAVOUR OF THE ASSESSEE AND PARTIALLY IN FAVOUR OF THE REVENUE. 9 IN THESE CIRCUMSTANCES, NO QUESTION OF LAW, THEREFORE, ARISES. ALL INCOME T AX APPEALS ARE DISMISSED, ACCORDINGLY. NO ORDER AS TO COSTS. 6. RESPECTFULLY FOLLOWING THE PRECEDENT, WE DIRECT THAT ADDITION IN THIS REGARD SHOULD BE RESTRICTED TO GROSS PROFIT WHICH IS AROUND 8%. THE LEARNED COUNSEL OF THE ASSESSEE FAIRLY AGREED TO THE SAME. 7. IN THE RESULT, ASSESSEES APPEALS ARE PARTLY ALLOWED. ORDER HAS BE EN PRONOUNCED IN THE COURT ON 3 . 5 . 201 9 . SD/ - SD/ - (RAVISH SOOD ) (SH A MIM YAHYA ) J U DICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DA TED : 3 / 5 / 20 1 9 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. BY ORDER, //TRUE COPY// ( ASSISTANT REGISTRAR ) PS ITAT, MUMBAI