PRAGNA C. MEHTA, MUMBAI V. ACIT 32(2), MUMBAI

ITA 438/MUM/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 9668 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-03-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2009-2010
• Appeal Filed On: 29-01-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ARJU GARODIA
• Assessee Lawyers: AJAY R SINGH
• Keywords: Bogus purchase
• Section: 69C; 133(6); 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH J MUMBAI BEFORE SHRI JOGINDER SINGH (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 438/MUM/2016 ASSESSMENT YEAR: 2009 - 10 PRAGNA C. MEHTA, 1003, ASHOPALAV CHSL, S. V. ROAD, BORIVLI (W), MUMBAI - 400092 VS. ACIT CIRCLE - 32(2) AAYAKAR BHAVAN, MUMBAI - 400020 PAN NO. AAHPM4038R APPELLANT RESPONDENT ASSESSEE BY : MR. AJAY R. SINGH , AR REVENUE BY : MS. ARJU GARODIA, DR DATE OF HEARING : 13 /03/2018 DATE OF PRONOUNCEMENT : 28/03/2018 ORDER PER N.K. PRADHAN, AM THIS IS AN APPEAL FILED BY THE ASSESSEE. THE RELEVANT ASSESSMENT YEAR IS 2009 - 10 . THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) - 44 , MUMBAI [IN SHORT CIT(A)] AND ARISES OUT OF THE ASSESSMENT COMPLETED U/S 143( 3 ) R.W.S. 147 OF THE INCOME TAX ACT 1961, (THE ACT). 2. THE LD. COUNSEL OF THE ASSESSEE SUBMITS THAT THE APPELLANT WOULD NOT LIKE TO PRESS THE 2 ND GROUND OF APPEAL REGARDING VALIDITY OF RE - OPENING U/S 148 OF THE ACT. HE SUBMITS THE SAME AND SIGNS AS NOT PRESSED IN THE RELEVANT PORTION OF THE GROUNDS OF APPEAL. ACCORDINGLY, THE 2 ND GROUND OF APPEAL IS DISMISSED AS NOT PRESSED. PRAGNA C. MEHTA ITA NO. 438/MUM/2016 2 3. THE 1 ST GROUND OF APPEAL READS AS UNDER: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED BY CONFIRMING THE ADDITION MADE BY AO BY MAKING AN ADDITION U/S 69C BY TAKING FAIR PROFIT @ 31.88% OF NON - GENUINE PURCHASES FROM PARTI ES DECLARED BY SALES TAX DEPARTMENT AS HAWALA PARTIES AMOUNTING TO RS.56,92,486/ - AND MAKE ADDITION THEREBY OF RS.18,14,765/ - . 4. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE FILED HER RETURN OF INCOME FOR THE ASSESSMENT YEAR (AY) 2009 - 10 DE CLARING TOTAL INCOME OF RS. 33,53,140 / - . ON THE BASIS OF INQUIRIES CONDUCTED BY THE SALES TAX DEPARTMENT, THE AO RECEIVED INFORMATION FROM THE DIRECTOR GENERAL OF INCOME TAX (INV.) THAT THE ASSESSEE HAD OBTAINE D BILLS OF BOGUS PURCHASES FROM SACHI MERCANTIL E PVT. LTD., ANSHU MERCANTILE PVT. LTD., SURACHI MULTITRADE PVT. LTD. AND DHIREN MERCANTILE PVT. LTD. AMOUNTING TO RS. 56,92,486 / - . DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AR OF THE ASSESSEE FILED A LETTER DATED 30.12.2014 AND SUBMITTED (I) LEDGER ACCOUNT OF THE FOUR PARTIES , (II) COPIES OF BILLS OF PURCHASES , (III) BANKS STATEMENTS FOR THE ACCOUNT PAYEE CHEQUES ISSUED TO THE FOUR PARTIES AND (IV) CORRESPONDING SALES INVOICES MADE AGAINST THE PURCHASES . THE AO, IN ORDER TO VERIFY THE GENUINENESS O F TRANSACTION, ISSUED NOTICE U/S 133(6) ON 16.12.2014 TO THE FOUR PARTIES. HOWEVER, THE SAID NOTICES WERE RECEIVED BACK IN THE OFFICE OF THE AO AS UNSERVED. THEN HE ASKED THE ASSESSEE VIDE ORDER SHEET NOTING DATED 27.12.2014 TO PRODUCE THE SAID PART IES . THE ASSESSEE FAILED TO PRODUCE THE PARTIES BEFORE THE AO TO PROVE THE GENUINENESS OF TRANSACTION. PRAGNA C. MEHTA ITA NO. 438/MUM/2016 3 IN VIEW OF THE ABOVE FACTS, THE AO ADOPTED A PROFIT RATIO OF 31.88 % ON THE SAID PURCHASES OF RS.56,92,486 / - AND THUS MADE AN ADDITION OF RS. 18,14,765 / - U/ S 69C OF THE ACT. 5. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE FILED AN AP PEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) AGREED WITH THE REASONS GIVEN BY THE AO AND CONFIRMED THE ADDITION OF RS.18,14,765/ - . 6. BEFORE US, THE LD. COUNSEL OF THE ASSESSEE S UBMITS THAT ON IDENTICAL FACTS, THE ITAT B BENCH MUMBAI IN ASSESSEES OWN CASE HAS RESTRICTED THE DISALLOWANCE TO 8% OF THE ALLEGED BOGUS PURCHASES AND THE SAME MAY BE FOLLOWED. ON THE OTHER HAND, THE LD. DR SUPPORTS THE ORDER PASSED BY THE LD. CIT(A). 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIALS ON RECORD. WE FIND THAT SIMILAR ISSUE AROSE BEFORE THE ITAT B BENCH MUMBAI IN ASSESSEES OWN CASE FOR AY 2011 - 12 (ITA NO. 3715 /MUM/2017). THE TRIBUNAL VIDE ORDER DATED 08.09.2017 HELD AT PARA 5 THE FOLLOWING: 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED RELEVANT MATERIAL ON RECORD. WE ARE OF THE CONSIDERED OPINION THAT THERE COULD BE NO SALE WITHOUT PURCHASE / CONSUMPTION OF MATERIAL KEEPING IN VIEW THE ASSESSEES NATURE OF BUSINESS WHICH WAS MATERIAL IN TENSIVE AND COULD NOT BE CARRIED OUT WITHOUT CONSUMPTION OF MATERIAL. THE SALES TURNOVER ACHIEVED BY THE ASSESSEE HAS NOT BEEN DISPUTED BY THE REVENUE AND THE PAYMENTS WERE THROUGH BANKING CHANNELS. THE PURCHASES WERE BACKED BY INVOICES. AT THE SAME TIME, THE ASSESSEE COULD NOT PRODUCE THE PARTY FOR CONFIRMATION AND NOTICE SENT U/S 133(6) REMAINED UN - SERVED, WHICH CAST SERIOUS DOUBT ON ASSESSEES CLAIM. THEREFORE, IN SUCH A SITUATION, THE ADDITION, WHICH COULD BE PRAGNA C. MEHTA ITA NO. 438/MUM/2016 4 MADE, WAS TO ACCOUNT FOR PROFIT ELEMENT EMBE DDED IN THESE PURCHASE TRANSACTIONS TO FACTORIZE FOR PROFIT ELEMENT EARNED BY ASSESSEE AGAINST POSSIBLE PURCHASE OF MATERIAL IN THE GREYMARKET AND UNDUE BENEFIT OF VAT AGAINST BOGUS PURCHASES, WHICH LOWER AUTHORITIES HAVE RIGHTLY DONE SO. HOWEVER, ON TOTAL ITY OF FACTS, WE CONSIDER ESTIMATED ADDITION TO BE ON THE HIGHER SIDE AND THEREFORE, RESTRICT THE SAME TO 8% OF ALLEGED BOGUS PURCHASES. THE LD. AO IS DIRECTED TO RE - COMPUTE THE INCOME OF THE ASSESSEE IN THE LIGHT OF ADDITION SUSTAINED BY US. 7.1 FACTS BE ING IDENTICAL, WE FOLLOW THE ABOVE ORDER OF THE CO - ORDINATE BENCH AND DIRECT THE AO TO RESTRICT THE DISALLOWANCE TO 8% OF THE ALLEGED BOGUS PURCHASES IN PLACE OF ADDITION OF RS.18,14,765/ - MADE BY HIM. 8. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. ORDE R PRONOUNCED IN THE OPEN COURT ON 28/03/2018. SD/ - SD/ - ( JOGINDER SINGH ) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED: 28/03/2018 RAHUL SHARMA, SR. P.S. 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