ITO 24(1)(3), MUMBAI V. BALJEETSINGH S. KHATORODA, MUMBAI

ITA 4317/MUM/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 0526 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-08-2017
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2010-2011
• Appeal Filed On: 10-07-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SUMAN KUMAR LD
• Assessee Lawyers: PREETI SINGHANIA LD
• Keywords: Bogus purchase
• Section: 69C; 143(3)

Judgement Text

ITA NO.4317/MUM/2015 BALJEET SINGH SURJAN SINGH KHATRODA ASSESSMENT YEAR-2010-11 IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI , , BEFORE SHRI JOGINDER SINGH, JM AND SHRI MANOJ KUMAR AGGARWAL, AM ./I.T.A. NO.4317/MUM/2015 ( / ASSESSMENT YEARS: 2010-11) INCOME TAX OFFICER 24(1)(3) 6 TH FLOOR, ROOM NO. 606 PIRAMAL CHAMBERS LALBAUG, PAREL MUMBAI 400 012 / VS. BALJEET SINGH SURJAN SINGH KHATRODA PROP. M/S BRIGHT HARDWARE & ELECTRICAL STORES SHOP NO.8, SITA NIWAS OPP. GREEN VALLEY MAHAKALI NEW DEVELOPMENT ROAD ANDHERI (EAST) MUMBAI 400 093 ! ./ ./PAN/GIR NO. AAGPK-7842-L ( !# /APPELLANT ) : ( $%!# / RESPONDENT ) A SSESSEE BY : PREETI SINGHANIA, LD. AR RE VENUE BY : SUMAN KUMAR, LD. DR / DATE OF HEARING : 31/07/2017 / DATE OF PRONOUNCEMENT : 02/08/2017 I ITA NO.4317/MUM/2015 BALJEET SINGH SURJAN SINGH KHATRODA ASSESSMENT YEAR-2010-11 2 / O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. THE CAPTIONED APPEAL BY REVENUE FOR ASSESSMENT YEAR [AY] 2010- 11 ASSAILS THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-36 [CIT(A)], MUMBAI DATED 06/04/2015. THE ONLY ISSUE I NVOLVED IN THE APPEAL IS QUANTUM ADDITION AGAINST CERTAIN BOGUS PURCHASES. 2. BRIEFLY STATED, THE ASSESSEE BEING RESIDENT INDIVIDUAL ENGAGED AS ELECTRICAL CONTRACTOR UNDER PROPRIETORSHIP CONCERN NAMELY BRIGHT ELECTRICAL & HARDWARE STORES, WAS ASSESSED U/S 143(3) FOR IMPUGNED AY ON 29/03/2013 AT RS.54,71,300/- AFTER SOLE ADDITION OF RS.41,04,922/- U/S 69C QUA CERTAIN BOGUS PURCHASES AS AGAINST RETURNED INCOME OF RS.13,66,380/- E-FILED BY THE ASSESSEE ON 29/09/2010. THE ASSESSEE REFLECTED TURNOVER OF RS.2.11 CRORES WITH GP / NP RATE OF 10.86% & 5.75% RESPECTIVELY. 2.1 DURING THE ASSESSMENT PROCEEDINGS, IT WAS NOTED THAT THE ASSESSEE MADE PURCHASES FROM 9 PARTIES AGGREGATING RS.41,04,922/- WHICH WERE LISTED AS NON-GENUINE PARTIES AS PER INFORMATION RECEIVED FROM THE SALES TAX DEPARTMENT . THE ASSESSEE WAS ASKED TO PRODUCE THE SAID PARTIES ALONG WITH DOCUMENTARY EVIDENCES T O SUBSTANTIATE DELIVERY OF GOODS. THE ASSESSEE CONTENDED THAT THE PURCHASES WERE GENUINE AND IN SUPPORT, PRODUCED PURCHASE BILLS, LE DGER EXTRACT AND BANK STATEMENTS. HOWEVER, NOT CONVINCED, LD. AO NOT ED THAT THE ASSESSEE COULD NOT PROVE THE ACTUAL DELIVERY OF GOO DS AND THEREFORE ADDED THE SAME U/S 69C AS UNEXPLAINED PURCHASES. I ITA NO.4317/MUM/2015 BALJEET SINGH SURJAN SINGH KHATRODA ASSESSMENT YEAR-2010-11 3 3. AGGRIEVED, THE ASSESSEE CONTESTED THE SAME WITH PARTIAL SUCCESS BEFORE LD. CIT(A) VIDE IMPUGNED ORDER DATED 06/04/2 015 WHERE THE ASSESSEE CONTENDED THAT THE MATERIAL PURCHASED FROM THE ALLEGED BOGUS SUPPLIER WAS CONSUMED IN THE CONTACT WORK AND LD. A O MADE THE ADDITION WITHOUT ANY INDEPENDENT INVESTIGATIONS. TH E LD. CIT(A) NOTED THAT THE SALES REVENUE EARNED BY ASSESSEE WERE NOT DISPUTED AND AFTER PLACING RELIANCE ON MANY JUDICIAL PRONOUNCEMENTS, R ESTRICTED THE ADDITIONS TO GP RATE OF 10.48%+VAT (EITHER 4% OR 12 .5%) WITH A DIRECTION TO LD. AO TO VERIFY THE BILLS AND RE-COMP UTE THE DISALLOWANCE ACCORDINGLY. AGGRIEVED, THE REVENUE IS IN APPEAL BE FORE US. 4. THE LD. DEPARTMENTAL REPRESENTATIVE, WHILE SUPPO RTING THE STAND TAKEN BY LD. AO, CONTENDED THAT THE ASSESSEE COULD NOT PROVE ACTUAL DELIVERY OF MATERIAL AND MERE PAYMENT THROUGH BANKI NG CHANNELS WAS NOT SUFFICIENT TO ESTABLISH THE GENUINENESS OF THE PURCHASES. 4.1 PER CONTRA, LD. COUNSEL FOR ASSESSEE [AR] DREW ATTENTION TO TH E FACT THAT SALE WAS MADE TO REPUTED PARTIES AND CONT RACT WORK COULD NOT BE UNDERTAKEN WITHOUT CONSUMPTION OF ANY MATERIAL. MOREOVER, THE ASSESSEE WAS IN POSSESSION OF PURCHASE INVOICES, PA YMENTS WERE THROUGH BANKING CHANNELS AND GP / NP RATE WAS COMMENSURATE WITH RATES OF OTHER YEARS. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. WE ARE CONVINCED WITH THE ARGUM ENTS OF THE REVENUE THAT THE ASSESSEE HAS FAILED TO DISCHARGE THE PRIMA RY ONUS OF PROVING THE PURCHASES AS IT COULD NOT PRODUCE EVIDENCES TO SHOW ACTUAL DELIVERY OF MATERIAL AND ALSO COULD NOT PRODUCE CONFIRMATORY LE TTERS FROM THE ALLEGED BOGUS SUPPLIERS AND THUS FAILED TO SUBSTANTIATE THE PURCHASES. HOWEVER, I ITA NO.4317/MUM/2015 BALJEET SINGH SURJAN SINGH KHATRODA ASSESSMENT YEAR-2010-11 4 AT THE SAME TIME, THE ASSESSEE IS IN POSSESSION OF PURCHASE INVOICES, PAYMENTS ARE THROUGH BANKING CHANNELS & DECLARED GP / NP RATE WAS COMMENSURATE WITH OTHER YEARS AND THEREFORE, WHOLE ADDITION WAS NOT JUSTIFIED IN VIEW OF THE FACT THAT EVEN IF ALL THE PURCHASES ARE FOUND TO BE BOGUS, THE SALES TURNOVER HAS NOT BEEN DISPUTED BY THE REVENUE. THEREFORE, IN SUCH A SITUATION, THE ADDITION, WHICH COULD BE MADE, WAS TO ACCOUNT FOR PROFIT ELEMENT EMBEDDED IN THESE PURCHA SE TRANSACTIONS TO FACTORIZE PROFIT EARNED BY ASSESSEE AGAINST PURCHAS E OF MATERIAL IN THE GREY MARKET AND UNDUE BENEFIT OF VAT AGAINST BOGUS PURCHASES. THEREFORE, FOR EASE OF CALCULATIONS, WE RESTRICT TH E SAID DISALLOWANCE TO 12.50% OF BOGUS PURCHASES OF RS.41,04,922/- WHICH COMES TO RS.5,13,115/-. THE CONCLUSION DRAWN BY LD. CIT(A) A RE MODIFIED TO THAT EXTENT. 6. RESULTANTLY, THE REVENUES APPEAL STANDS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 02 ND AUGUST, 2017. SD/- SD/- (JOGINDER SINGH) (MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 02 .08.2017 SR.PS:- THIRUMALESH I ITA NO.4317/MUM/2015 BALJEET SINGH SURJAN SINGH KHATRODA ASSESSMENT YEAR-2010-11 5 / COPY OF THE ORDER FORWARDED TO : 1. !# / THE APPELLANT 2. $%!# / THE RESPONDENT 3. + ( ) / THE CIT(A) 4. + / CIT CONCERNED 5. $'- , - , / DR, ITAT, MUMBAI 6. ./ / GUARD FILE / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI