ACIT - 17(3), MUMBAI V. VINODKUMAR P. AGARWAL, MUMBAI

ITA 4174/MUM/2017

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 5058 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-10-2018
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: F
• Assessment Year: 2011-2012
• Appeal Filed On: 07-06-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: RAJEEV GUBGOTRA
• Keywords: Bogus purchase; Accommodation entries
• Section: 147; 148; 2; 11

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL F BENCH MUMB AI BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH JUDICIAL MEMBER ITA NO. 4175/MUM/2017 (ASSESSMENT YEAR 2009-10 ) SHRI JAI PRAVIN GANDHI 19, ANSARI ROAD, VILE PARLE (W), MUMBAI-400056. PAN: AEQPG3807H VS. ITO - 25(2)(4) ROOM NO. 606, 6 TH FLOOR, C- 12, BANDRA KURLA COMPLEX, MUMBAI - 400051. APPELLANT RESPONDE NT APPELLANT BY : SHRI DHAVAL SHAH WITH SHRI ABHISHEK CHOKSY (AR) RESPONDENT BY : SHRI RAJEEV GUBGOTRA (DR) DATE OF HEARING : 11.10.2018 DATE OF PRONOUNCEMEN T : 11.10.2018 ORDERUNDER SECTION 254(1)OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER; 1. THIS APPEAL BY ASSESSEE UNDER SECTION 253 OF INCOME -TAX ACT IS DIRECTED AGAINST THE ORDER OF LD. CIT(A)-39, MUMBAI DATED 10 .03.2017 FOR ASSESSMENT YEAR 2009-10. THE ASSESSEE HAS RAISED TH E FOLLOWING GROUNDS OF APPEAL: 1] ON THE FACTS ON THE CASE, THE LD. CIT (APPEALS) HAS ERRED IN CONFIRMING THE ADDITION MADE BY THE LD. A.O. IN RESPECT OF RS. 15, 69,349=00. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS PR OPRIETOR OF M/S GANDHI ENTERPRISES, ENGAGED IN THE BUSINESS OF TRADING IN IRON & STEEL. THE ASSESSEE FILED HIS RETURN OF INCOME ON 30.09.2009 D ECLARING TOTAL TAXABLE INCOME OF RS. 4,68,602/-. THE ASSESSMENT WAS COMPLE TED UNDER SECTION 143(1) OF THE ACT. SUBSEQUENTLY, THE ASSESSMENT WAS RE-OPENED UNDER ITA NO. 4175 MUM 2017-SHRI JAI PRAVIN GANDHI 2 SECTION 147 OF THE ACT. THE ASSESSMENT WAS RE-OPENE D ON THE BASIS OF INFORMATION RECEIVED FROM DGIT (INVESTIGATION) ABOU T THE ACCOMMODATION ENTRIES PROVIDED BY VARIOUS HAWALA DEALERS, WHO WER E INDULGING IN PROVIDING BOGUS BILL WITHOUT DELIVERY OF GOODS. ACC ORDINGLY, THE ASSESSMENT WAS RE-OPENED UNDER SECTION 147 OF THE A CT. THE NOTICE UNDER SECTION 148 DATED 24.03.2004 WAS ISSUED AND SERVED UPON THE ASSESSEE UNDER SECTION 148. THE ASSESSEE FILED ITS REPLY TO THE NOTICE UNDER SECTION 148 AND CONTENDED THAT ORIGINAL RETURN FILED ON 30. 09.2009 MAY BE TREATED AS RETURN IN RESPONSE TO THE NOTICE. THE ASSESSING OFFICER PROCEEDED FOR RE-ASSESSMENT. DURING THE RE-ASSESSMENT PROCEEDING, THE ASSESSEE WAS CONFRONTED THAT DGIT (INVESTIGATION), MUMBAI COMMUN ICATED THAT ASSESSEE HAS OBTAINED BOGUS BILL FROM SEVEN PARTIES AGGREGATING TO RS. 1,25,54,789/-. THE ASSESSING OFFICER ISSUED NOTICE UNDER SECTION 13(6) TO ALL SUCH SEVEN PARTIES. THE NOTICES WERE RETURNED B ACK BY POSTAL AUTHORITIES WITH THE REMARK NOT KNOWN/LEFT. THE ASSESSEE WAS ASKED TO SUBSTANTIATE THE PURCHASES. THE ASSESSEE FURNISHED HIS REPLY DAT ED 29.12.2014. IN THE REPLY, THE ASSESSEE CONTENDED THAT HE HAD PURCHASES IN IRON & STEEL PRODUCT FROM VARIOUS PARTIES, COPY OF LEDGER ACCOUN TS OF THE PARTIES WERE PROVIDED TO THE ASSESSING OFFICER. THE ASSESSEE ALS O CONTENDED THAT THE PURCHASES ARE ACCOUNTED IN THE BOOKS OF ACCOUNT AND THAT PAYMENTS WERE PAID THROUGH ACCOUNT PAYEE CHEQUE. THE GOODS ARE PH YSICALLY PURCHASED, MOVED AND SUPPLIED ON BOAT OF SHIPS ON THEIR WAREHO USE. THE MATERIAL ITA NO. 4175 MUM 2017-SHRI JAI PRAVIN GANDHI 3 WAS SOLD TO THE CUSTOMER. IT WAS ALSO CONTENDED THA T PROFIT OF THE BUSINESS CANNOT BE ASCERTAINED WITHOUT DEDUCTING THE COST OF PURCHASES. STATEMENTS SHOWING THE MOVEMENT OF GOODS FROM SUPPLIER TO THE CUSTOMER WERE ALSO FURNISHED. THE CONTENTION OF THE ASSESSEE WAS NOT A CCEPTED BY ASSESSING OFFICER HOLDING THAT THE ASSESSEE HAS NOT FURNISHED THE DELIVERY CHALLAN EVIDENCING THE RECEIPT OF GOODS BY ASSESSEE, MODE O F TRANSPORT OF HUGE QUANTITY OF GOODS. THE ASSESSING OFFICER ON HIS OBS ERVATION THAT THE ASSESSEE MAY HAVE OBTAINED FICTITIOUS INVOICES AND DISALLOWED 12.5% OF THE PURCHASES OF RS. 1,25,54,789/-. ON APPEAL BEFOR E THE LD. CIT(A), THE ACTION OF ASSESSING OFFICER WAS CONFIRMED. THEREFOR E, FURTHER AGGRIEVED BY THE ORDER OF LD. CIT(A), THE ASSESSEE HAS FILED THE PRESENT APPEAL BEFORE US. 3. WE HAVE HEARD THE SUBMISSION OF LD. AR OF THE ASSES SEE AND LD. DEPARTMENTAL REPRESENTATIVE (DR) FOR THE REVENUE AN D PERUSED THE MATERIAL AVAILABLE ON RECORD. THE LD. AR OF THE AS SESSEE SUBMITS THAT THE ASSESSEE HAS MADE PURCHASES FROM GENUINE PARTIES. A LL THE MATERIAL PURCHASED BY ASSESSEE WAS DULY RECORDED IN THE BOOK S OF ACCOUNT. THE ASSESSEE FURNISHED THE COMPLETE STATEMENT OF SALE. THE SALE OF ASSESSEE WAS NOT DISPUTED BY LOWER AUTHORITIES. THE LD. AR O F THE ASSESSEE FURTHER SUBMITS THAT THE VALUE ADDED TAX (VAT) RATE APPLICA BLE IN THE TRADE OF IRON & STEEL IS 4% ONLY. THE ASSESSEE HAS ALREADY D ECLARED GROSS PROFIT @ 1.24% OF HIS BUSINESS BASED ON SUCH PURCHASES. THE LD. AR OF THE ITA NO. 4175 MUM 2017-SHRI JAI PRAVIN GANDHI 4 ASSESSEE FURTHER SUBMITS THAT THE ADDITION MADE BY ASSESSING OFFICER AND SUSTAINED BY LD. CIT(A) IS EXCESSIVE AND UNREASONAB LE. IN SUPPORT OF HIS SUBMISSION, THE LD. AR OF THE ASSESSEE RELIED UPON THE DECISION OF SHRI SANJAY H. SHAH VS. ITO IN ITA NO. 5063,5064 & 5065/ MUM/2017 DATED 16.02.2018. 4. ON THE OTHER HAND, THE LD. DR FOR THE REVENUE SUPPO RTED THE ORDER OF AUTHORITIES BELOW. THE LD. DR FOR THE REVENUE FURTH ER SUBMITS THAT NO STRAIGHT JACKET FORMULA CAN BE APPLIED IN CASES, WH EREIN THE ADDITIONS ARE BASED ON THE PURCHASES SOWN THROUGH HAWALA DEALERS. THE ADDITIONS IN EACH CASE DEPEND ON THE FACT OF THE PARTICULAR CASE . THE DISALLOWANCE MADE BY LOWER AUTHORITIES ARE REASONABLE ONE. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSION OF THE PART IES AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THE ASSESS ING OFFICER DISALLOWED THE PURCHASES OF 12.5% ON HIS OBSERVATION THAT THE ASSESSEE HAS NOT FURNISHED THE RECEIPT OF GOODS AND MODE OF TRANSPOR TATION OF HUGE QUANTITY OF GOODS. WE HAVE NOTED THAT THE ASSESSING OFFICER HAS NOT DISPUTED THE SALE OF THE ASSESSEE, NOR REJECTED THE STATEMENT OF ACCOUNT. RATHER THE ASSESSING OFFICER OBSERVED THAT THE RECEIPT OF MATE RIAL IN QUESTION IS NOT IN DOUBT BUT THE MATERIAL HAS BEEN RECEIVED FROM THE S OURCE BEST KNOWN TO THE ASSESSEE. THE ASSESSEE HAS INFLATED THE EXPENDI TURE BY SHOWING HIGHER AMOUNT OF PURCHASED PRICE THROUGH FICTITIOUS INVOIC ES IN THE NAME OF HAWALA DEALERS AND DISALLOWED 12.5% OF THE PURCHASE S. THE LD. CIT(A) ITA NO. 4175 MUM 2017-SHRI JAI PRAVIN GANDHI 5 CONFIRMED THE ACTION OF ASSESSING OFFICER ON THE BA SIS OF DECISION OF HONBLE GUJARAT HIGH COURT IN CASE OF CIT VS. SIMIT SHETH 38 TAXMANN.COM 385 (GUJ) THAT ESTIMATED PROFIT ELEMENT EMBEDDED IN SUCH BOGUS PURCHASES WOULD BE 12.5%. 6. THE LD. AR OF THE ASSESSEE VEHEMENTLY SUBMITTED THA T THE VAT RATE APPLICABLE ON THE IRON & STEEL IN BOMBAY IS ONLY 4% . THUS, THE STATEMENT OF LD. AR OF THE ASSESSEE IS NOT DISPUTED BY REVENU E. IN OUR VIEW, CONSIDERING THE NATURE AND TRADE OF THE ASSESSEE AN D THE FACTUAL MATRIX OF THE CASE WHEN THE ASSESSEE HAS RECONCILED THE ENTIR E PURCHASES WITH ITS SALE. THE DISALLOWANCE MADE BY ASSESSING OFFICER AN D SUSTAINED BY LD. CIT(A) IS EXCESSIVE AND UNREASONABLE. 7. WE HAVE NOTED THAT THE ASSESSEE ALREADY DECLARED GP /TURNOVER RATIO PERCENTAGE AT 1.24%. THEREFORE, KEEPING IN VIEW, TH E POSSIBILITY OF REVENUE LEAKAGE, THE DISALLOWANCE ON ACCOUNT OF PUR CHASES IS RESTRICTED TO 8% OF THE AGGREGATE OF THE ALLEGED BOGUS PURCHASES, WHICH WOULD MEET THE END OF JUSTICE. HENCE, THE GROUND OF APPEAL RAISED BY ASSESSEE IS PARTLY ALLOWED. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 11 /10/2018. SD/- SD/- G.S. PANNU PAWAN SINGH ACCOUNTANT MEMBER J UDICIAL MEMBER MUMBAI, DATE: 11 .10.2018 SK ITA NO. 4175 MUM 2017-SHRI JAI PRAVIN GANDHI 6 COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. DR F BENCH, ITAT, MUMBAI 6. GUARD FILE BY ORDER, DY./ASST. REGISTRAR ITAT, MUMBAI