SHRI LALIT NATHMAL SHAH, MUMBAI V. ITO - 19(2)(1), MUMBAI

ITA 4279/MUM/2019

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 7679 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-01-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 19-06-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SANJAY SETHI
• Section: 133(6); 201; 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES SMC , MUMBAI BEFORE S HRI SAKTIJIT DEY (J M ) ITA NO. 4279 /MUM/2019 ASSESSMENT Y EAR: 2010 - 11 SHRI LALIT NATHMAL SHAH, 82/84, 2 ND FLOOR, KIKA STREET, GULALWADI, MUMBAI - 400004 PAN: ACDPS9498P VS. T HE ITO 19(2)(1), ROOM NO. 218, 2 ND FLOOR, MATRU MANDIR, TARDEO ROAD, GRANT ROAD (W), MUMBAI - 400007 (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI AKASH KUMAR (AR) REVENUE BY : SHRI SANJAY SETHI (DR ) DATE OF HEARING: 14/12 /2020 DATE OF PRONOUNCEMENT: 18 / 01 /202 1 O R D E R PER SAKTIJIT DEY , JM THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDER DATED 28.05.2019 OF LEARNED COMMISS IONER OF INCOME TAX (APPEALS) 30, MUMBAI FOR THE ASSESSMEN T YEAR 2010 - 11. 2. THE DISPUTE IN THE PRESENT APPEAL IS CONFINED TO THE ADDITION/DISALLOWANCE MADE ON ACCOUNT OF NON GENUINE PURCHASES. 3. BRIEFLY THE FACTS ARE, THE ASSESSEE AN INDIVIDUAL IS STATED TO BE ENGAGED IN THE BUSINESS OF TRADING IN FERRO US AND NON - FERR OUS METALS. F OR THE ASSESSMENT YEAR UNDER DISPUTE, THE ASSESSEE FILED HIS RETURN OF INCOME ON 25.09.2010 DECLARING TOTAL INCOME OF RS. 2,49,903/ - . INITIALLY , THE RETURN OF INCOME FILED BY THE ASSESSEE WAS PROCESSED U/S 143 (1) OF THE ACT. SUB SEQUENTLY, ON THE BASIS OF INFORMATION RECEIVED FROM THE SALES TAX DEPARTMENT, GOVT. OF MAHARASHTRA THROUGH DGIT (INV.), MUMBAI THAT PURCHASES WORTH RS. 1,05,57,140/ - CLAIMED TO HAVE BEEN MADE DURING THE YEAR FROM FOUR PARTIES ARE NON GENUINE, T HE 2 ITA NO. 4279 / MUM/2019 ASSESSMENT YEAR: 201 0 - 1 1 ASSESSIN G OFFICER REOPENED THE ASSESSMENT U/S 147 OF THE ACT. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER FOUND THAT AS PER THE INFORMATION AVAILABLE ON RECORD THE CONCERNED SELLING DEALERS FROM WHOM T HE ASSESSEE CLAIMED TO HAVE PURCHASED THE GOODS WE RE IDENTIFIED AS HAWALA OPERATORS PROVIDING AC COMMODATION BILLS. THEREFORE, HE CALLED UPON THE ASSESSEE TO PROVE THE GENUINENESS OF THE PURCHASES. IN RESPONSE TO THE QUERY RAISED BY THE ASSESSING OFFICER , THOUGH , THE ASSESSEE FURNISHED SOME DOCUMENTARY EVI DENCES SUCH AS COPIES OF LEDGER ACCOUNTS, PURCHASE INVOICES, B ANK STATEMENT, DOCUMENTARY EVIDENCE, PAYMENT MADE THROUGH CHEQUE TO THE SELLING DEALERS, SALE INVOICES ETC, H OWEVER, THE ASSESSING OFFICER WAS NOT SATISFIED WITH THEM. FURTHER, HE OBSERVED , NOTI CE ISSUED U/S 133(6) OF THE ACT TO THE SELLING DEALER S FOR VERIFYING THE GENUINE NESS OF PURCHASES RETURN ED BACK UNSERVED. THEREFORE, THE ASSESSING OFFICER TREATED THE PURCHASES AS NON - GENUINE. HOWEVER, RELYING UPON A DECISION OF THE HONBLE GUJARAT HIGH CO URT IN CASE OF CIT VS. SIMIT P SHETH , 356 ITR 451 (GUJ), HE DISALLOWED 12.5% OF THE ALLEGED NON GENUINE PURCHASES , THEREBY , MAKING AN ADDITION OF RS. 13,19,643/ - . THE ASSESSEE CONTESTED THE AFORESA ID DISALLOWANCE BY PREFERRING APPEAL BEFORE LEARNED COMMISS IONER (APPEALS). IN COURSE OF THE APPEAL PRO CEEDINGS, LEARNED COMMISSIONER (APPEALS) ISSUED SHOW CAUSE NOTICE TO THE ASSESSEE TO EXPLAIN AS TO WHY INCOME SHOULD NOT BE ENHANCED. THOUGH , THE ASSESSEE OBJECTED TO THE PROPOSED ENHANCEMENT AND SUBMITTED T HAT N O ADDITION/DISALLOWANCE SHOULD BE MADE ON ACCOUNT OF NON GENUINE PURCHASES, HOWEVER, LEARNED COMMISSIONER (APPEALS) REJECTING THE SUBMISSIONS OF THE ASSESSEE PROCEEDED TO ENHANCE THE INCOME OF THE ASSESSEE BY DISALLOWING THE ENTIRE PURCHASES OF RS. 1,05,57 ,140/ - . 4. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED , WHILE DECIDING IDENTICAL ISSUE IN ASSESSEES OWN CASE IN ASSESSMENT YEAR 2011 - 12, THE TRIBUNAL HAS RESTRICTED THE DISALLOWANCE TO 5% OF THE NON - GENUINE PURCHASES. THUS, HE SUBMITTED , THE ORDER PASSED BY THE TRIBUNAL IN ASSESSEES OWN CASE WOULD SQUA RELY APPLY TO THE PRESENT APPEAL. HENCE , DISALLOWANCE SHOULD BE RESTRICTED TO 5% OF THE NON - GENUINE PURCHASES. 3 ITA NO. 4279 / MUM/2019 ASSESSMENT YEAR: 201 0 - 1 1 5. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED , LEARNED COMMISSIONER (APPEALS) H A S EXAMINED THE ISSUE IN DETAIL AND HAS PROVIDED VALID REASONS WHY ENHANCING THE INCOME . THUS, HE SUBMITTED , THE ORDER OF LEARNED COMMISSIONER (APPEALS) SHOULD BE SUSTAINED. 6. I HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD . A S FAR AS THE FACTS ARE CONCERNED, THERE IS NO DISPUTE THAT THE A SSESSEE IS A TRADER IN FERROUS AND NON - FERROUS METALS. IT IS ALSO A FACT THAT THE GENESIS OF THE PRESENT DISALLOWANCE IS THE INFORMATION RECEIVED FROM SALES TAX DEP ARTMENT INDICATING THAT CERTAIN E NTITIES FROM WHOM ASSESSEE CLAIMED TO HAVE PURCHASED GOODS HAVE BEEN IDENTIFIED AS ACCOMMODATION ENTRY PROVIDERS. HOWEVER, THE ASSESSING OFFICER HAS ACKNOWLEDGED THE FACT THAT THE ASSESSEE HAS E FFECTED THE CORRESPONDING SALES AND HAS ALSO OFFERED TO TAX TH E PROFIT ON SUCH SALES . IN SUCH CIRCUMSTANCES , ONLY THE PROFIT ELEM ENT EMBEDDED IN THE ALLEGED NON GENUINE PURCHASE CAN BE CONSIDERED FOR ADDITION. IT IS FURTHER NOTED BY ME , IN ASSESSEES OWN CASE IN ASSESSMENT YEAR 2011 - 12 ON ID ENTICAL FACTS AND CIRCUMST ANCES T HE ASSESSING OFFICER HAD MADE DISALLOWANCE AT 12.5% OF THE NON - GENUIN E PURCHASES WHICH WAS SUSTAINED BY LEARNED COMMISSIONER (APPEALS). HOWEVER, IN FURTHER APPEAL THE TRIBUNAL IN, ITA NO. 1397/MUM/2018 DATED 09.09.2019, TAKING NOTE OF THE FACT THAT THE ASSESSEE IS DEALING IN LOW PROFIT MARGIN ITEMS WHICH ATTRACT LOWER RATE OF TAX HAS RESTRICTED THE DISALLOWANCE TO 5% OF THE ALLEGED NON GENUINE PURCHASES. ADMITTEDLY, THE AFORESAID DECISION OF THE TRIBU NAL WAS NOT AVAILABLE BEFORE LEARNED COMMISSIONER (APPEALS ) WHEN SHE DECIDED THE APPEAL FOR THE IMPU GNED ASSESSMENT YEAR. B E THAT AS IT MAY , AFTER PERUSING THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE IN AY 2011 - 12 (SUPRA), I FIND THAT THE SAID DECISION HAS BEEN RENDERED ON IDENTICAL FACTS AND CIRCUM STANCES AS INVOLVED IN THE PRESENT APPEAL. THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF THE COORDINATE BENCH IN ASSESSEES OWN CASE AS REFERRED TO A BOVE, I DIRECT THE ASSESSING OFFICER TO RESTRICT THE DISALLOWANCE TO 5% OF THE ALLEGED NON GENUINE PURC HASES. GROUNDS ARE PARTLY ALLOWED. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. 4 ITA NO. 4279 / MUM/2019 ASSESSMENT YEAR: 201 0 - 1 1 ORDER PRONOUNCED IN THE OPEN COURT ON 18 TH JANUARY, 2021 . SD/ - ( SAKTIJIT DEY ) JUDICIAL MEMBER MUMBAI ; DATED: 18 / 01 /202 1 ALINDRA, PS / 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// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI