SMT. VIJAYLAXMI RAMESH UPADHYAY, MUMBAI V. ACIT-21(3), MUMBAI

ITA 4402/MUM/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 4073 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-02-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: F
• Assessment Year: 2009-2010
• Appeal Filed On: 05-07-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MRS KAVITA KAUSHAL
• Keywords: Bogus purchase; Rejection of books of accounts; Set aside
• Section: 274; 147

Judgement Text

IN THE INC OME TAX APPELLATE TRIBUNAL F BENCH, MUMBAI BEFORE SHRI PAWAN SINGH, J M & SHRI S . RIFAUR RAHMAN, AM ./ I.T.A. NO . 4402 , 4403 & 4404 / MUM/ 2018 ( / ASSESSMENT YEAR: 2009 - 10 TO 2011 - 12 ) SMT. VIJALAXMI RAMESH UPADHYAY, 36. GR. FLOOR, SAGAR PALLAZIO, OPP - SUDARSHAN HOTEL, ANDHERI KURLA ROAD, SAKINAKA, MUMBAI - 400 051 / VS. A CIT - 21(3 ) , PRATYAKSHKAR BHAVAN, C - 11, 5 TH FLOOR, BANDRA KURLA COMPLEX, MUMBAI - 400 051 ./ ./ PAN NO. A A IPU 8085 F ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI SATISH MODI, AR / RESPONDENTBY : MRS. KAVITA KAUSHAL, DR / DATE OF HEARING : 05.12 .2019 / DATE OF PRONOUNCEMENT : 26.02.2020 2 I.T.A. NO. 4402, 4403 & 4404 /MUM/201 8 SMT. VIJALAXMI RAMESH UPADHYAY / O R D E R PER S. RIFAUR RAHMAN (ACCOUNTANT MEMBER) : THE PRESENT THREE A PPEAL S HAVE BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. COMMIS S IONER OF INCOME TAX (APPEALS) - 3 8 , MUMBAI, D ATED 12.02 .18 FOR AY 2009 - 10 TO 2011 - 12 . 2 . SINC E THE ISSUES RAISED IN THESE APPEALS ARE IDENTICAL, THEREFORE, FOR TH E SAKE OF CONVENIENCE, THESE APPEALS ARE CLUBBED, HEARD AND DISPOSED OF BY THIS CONSOLIDATED ORDE R. FIRSTLY, WE ARE TAKING ITA NO. 4402MUM/2018 FOR AY 2009 - 10 FILED BY THE ASSESSEE. 3. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE IS A MANUFACTURER OF TRADING AND MANUFACTURING OF REFRACTORIES, PRODUCTS FROM GRAPHITE, M.S. PLATES, M.S. SCRAP, CRC SHEET , COLOUR COATED SHEET, ETC. BAS ED ON THE I NFORMATION RECEIVED FROM THE SALES TAX D EPARTM ENT THAT ASSESSEE IS INDULGED IN BOGUS PURCHASES FROM THE TWO PARTIES I.E. M/S SHANTINATH CORPORATION AND M/S SURACHI MULTITRADE PVT. LTD AS THESE TWO PARTIES ARE INVOLVED IN SUPPLYING BOGUS BILLS. ACCORDINGLY, AO ISSUED SHOW CAUSE NOTICE TO THE ASSESSEE T O PROVE THE GENUINENESS OF THE 3 I.T.A. NO. 4402, 4403 & 4404 /MUM/201 8 SMT. VIJALAXMI RAMESH UPADHYAY PURCHASES AND WHY IT SHOULD NOT BE ADDED AS THEIR INCOME. IN RESPONSE, ASSESSEE SUBMITTED THE RELEVANT INFORMATION AS CALLED FOR. AFTER CONSIDERING THE SUBMISSION OF ASSESSEE, AO REJECTED THE CONTENTIONS OF THE ASSESSEE AND B Y RELYING VARIOUS CASE LAW, DISALLOWED 100% OF THE ALLEGED BOGUS PURCHASES AS INCOME OF THE ASSESSEE. 4 . AGGRIEVED BY THE ABOVE ORDER OF AO, ASSESSEE PREFERRED APPEAL BEFORE LD. CIT(A) AND LD. CIT(A) CONFIRMED THE ADDITION MADE BY AO AND DISMISSED THE APP EAL OF THE ASSESSEE. 5 . NOW BEFORE US, THE ASSESSEE HAS PREFE RRED APPEAL BY RAISING THE GROUNDS OF APPEAL AS UNDER: - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE CIT(A) ERRED IN UPHOLDING THE ORDER OF THE ASSESSING OFFICER IN REOPEN ING THE ASSESSMENT UNDER SECTION 147 R.W.S. 148 OF THE ACT, WITHOUT APPRECIATING THE FACTS OF THE CASE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE CIT(A) ERRED IN CONFIRMING THE ORDER OF THE ASSESSING OFFICER IN M AKING ADDITION OF RS. 4 I.T.A. NO. 4402, 4403 & 4404 /MUM/201 8 SMT. VIJALAXMI RAMESH UPADHYAY 37,97,895/ - ON ACCOUNT OF ALLEGED BOGUS PURCHASE WITHOUT APPRECIATING THE FACTS OF THE CASE. WITHOUT PREJUDICE 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE CIT(A) OUGHT TO HAVE HELD THAT ONLY PROFIT ELEMENT ON T HE ALLEGED BOGUS PURCHASE COULD BE ASSESSED AS INCOME OF THE APPELLANT AS THE SALES HAVE BEEN ACCEPTED AND OUGHT TO HAVE DIRECTED THE ASSESSING OFFICER TO ASSESS CERTAIN PERCENTAGE OF THE ALLEGED BOGUS PURCHASE AS INCOME OF THE APPELLANT. 4. THE APPELLANT CRAVES LEAVE TO ADD/ALTER/MODIFY ANY/ALL GROUNDS OF APPEAL. 6 . BEFORE US , LD. AR APPEARING ON BEHALF OF THE ASSESSEE SUBM ITTED THAT ASSESSEE IS A TRADER AND MANUFACTURER OF REFRACTORIES, PRODUCTS FROM GRAPHITE, M.S. PLATES, M.S. SCRAP, CRC SHEET, COLOUR COATED SHEET, ETC. HE FURTHER SUBMITTED THAT AO HAS NOT REJECTED THE BOOKS OF ACCOUNTS AND JUST BECAUSE PARTIES WERE NOT PRODUCED BEFORE HIM AND AO TREATED THE ABOVE PURCHASES AS BOGUS, EVEN THOUGH ASSESSEE HAS PAID VAT OF 4% AND ALSO DECLARED GROSS PROFIT AS PER CHART GIVEN BELOW: - 5 I.T.A. NO. 4402, 4403 & 4404 /MUM/201 8 SMT. VIJALAXMI RAMESH UPADHYAY ASST. YEAR WORKING RATI O PURCHASES DISALLOWED WORKING RATIO 2009 - 10 1,03,77,122 X 100 19.17% 37,97,895 1,41,75,017 X 100 26.18% 5,41,45,622 5,41,45,622 2010 - 11 1,20,20,846 X 100 12.24% 3,89,18,969 5,09,39,815 X 100 51.88% 9,81,90,237 9,81,90,237 2011 - 12 1,09,62,540 X 100 11.40% 2,62,26,959 3,71,89,499 X 100 38.69% 9,61,26,641 9,61,26,641 7. LD. AR SUBMITTED THAT THE ABOVE CHART SHOWS THAT ASSESSEE HAS DECLARED REASONABLE GROSS PROFIT AND WHEN THE PURCHASES WERE DISALLOWED, THE GP RATIO INCREASED ABNORMALLY AND IT IS NOT AS PER THE NORMAL BUSINESS PROFIT. HE FURTHER SUBMITTED THAT AO HAS NOT DOUBTED THE SALES DECLARED BY THE ASSESSEE AND ASSESSEE IS IN THE BUSINE SS OF TRADING & MANUFACTURING AND ASSESSEE HAS UTILIZED THE MATERIAL PURCHASE FROM THESE PARTIES. 8 . ON THE OTHER HAND, LD. DR RELIED ON THE ORDERS PASSED BY THE REVENUE AUTHORITIES. 9 . WE HAVE HEARD COUNSELS FOR BOTH THE PARTIES AND WE HAVE ALSO PERUSED THE MATERIAL PLACED ON RECORD AS WELL AS THE ORDERS 6 I.T.A. NO. 4402, 4403 & 4404 /MUM/201 8 SMT. VIJALAXMI RAMESH UPADHYAY PASSED BY REVENUE AUTHORITIES. WE NOTICE THAT REVENUE AUTHORITIES ACCEPTED THE SALES DECLARED BY THE ASSESSEE AND DOUBTED ONLY THE PURCHASE MADE BY THE ASSESSEE. THE REVENUE AUTHORITIES HAVE NOT CONSIDER ED NOR VERIFIED THE QUANTITY DETAILS. IN THE SIMILAR SITUATION, WE COME ACROSS THE DECISION OF THE COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF SUNIL B. VORANI (HUF) VRS ITO (ITA NO. 1337/MUM/2017), WHEREIN IT WAS HELD AS UNDER: - BE THAT AS IT MAY, AFTER EVALUATING THE ENTIRE FACTS, GROUNDS RAISED BY THE ASSESSEE, PERUSAL OF THE RECORDS AND JUDGMENTS RELIED BY THE PARTIES, WE FIND THAT LD. CIT(A) HAS UPHELD THE FINDINGS OF AO IN ESTIMATING THE PROFIT @ 25% OF THE TOTAL SALES. IN OUR CONSIDERED VIEW, CONSIDERING THE FACTS OF THE PRESENT CASE AND WHILE RELYING UPON THE FOLLOWING JUDGMENTS: - 1) CLT VS BHOLANATH POLY FAB LTD. (2013) 355 ITR 290 (GUJ). (HC), 2. CIT V SIMIT D, SHETH (2013) 356 ITR 451 (GUJ) - (HC) AND 3. CIT VS. SANJAY OIL CAKE INDUSTRIES (2 009) 316 ITR 274 (GUJ) (1C) AND TAKING INTO CONSIDERATION THE FACTS OF THE PRESENT CASE, AND ALSO CONSIDERING THE ORDER PASSED BY THE COORDINATE BENCH OF SMC IN ASSESSEES OWN CASE AND TO ACCOUNT FOR THE PROFIT ELEMENT EMBEDDED IN THESE PURCHASE TRANSACTIO NS TO FACTORIZE PROFIT EARNED BY ASSESSEE 7 I.T.A. NO. 4402, 4403 & 4404 /MUM/201 8 SMT. VIJALAXMI RAMESH UPADHYAY AGAINST PURCHASE OF MATERIAL IN THE GREY MARKET AND UNDUE BENEFIT OF VAT AGAINST BOGUS PURCHASES, WE ARE OF THE CONSIDERED VIEW THAT UPHOLDING THE ADDITIONS @ 25% OF THE SALES BY LD. CIT(A) IS UNREASONABLE. THE EN DS OF JUSTICE WOULD BE MET IN CASE THE ADDITIONS ARE RESTRICTED @ 12.5 % OF PURCHASE AMOUNT OF RS. 2,26,39,391/ - . CONSEQUENTLY, ORDERS PASSED BY LD. CIT(A) ARE SET ASIDE AND HENCE WE DIRECT THE AO TO RESTRICT THE ADDITIONS TO THE EXTENT OF 12.5% OF THE BOG US PURCHASES OF RS. 2,26,39,391/ - . MADE FROM THE PARTIES. ACCORDINGLY, THESE GROUNDS RAISED BY THE ASSESSEE ARE PARTLY ALLOWED . 10 . T HEREFORE , RESPECTFULLY FOLLOWING THE ABOVE DECISION OF ITAT WHICH IS APPLICABLE MUTATIS MUTANDIS IN THE PRESENT CASE, WE ARE INCLINED TO RESTRICT THE DISALLOWANCE @ 12.5%. THEREFORE , WE DIRECT THE AO TO RESTRICT THE DISALLOWANCE @ 12.5% OF THE BOGUS PURCHASES. ACCORDINGLY , WE ALLOW THE ALTERNATE PLEA OF THE ASSESSEE IN GROUND NO. 3 OF THE APPEAL. OTHER GROUNDS RAISED BY THE ASSESSEE ARE ACCORDINGLY DISMISSED. HENCE, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 1 1 . SINCE THE FACTS IN OTHER APPEAL S FILED BY THE ASSESSEE ARE SIMILAR TO THE FACTS OF ABOVE APPEAL I.E. ITA NO. 8 I.T.A. NO. 4402, 4403 & 4404 /MUM/201 8 SMT. VIJALAXMI RAMESH UPADHYAY 4402/MUM/2018, THERE FORE, THE GROUNDS RAISED IN THESE APPEAL S ARE ALSO PARTLY A LLOWED . 12 . IN THE NET RESULT, ALL THE APPEAL FILED BY THE ASSESSEE STA NDS PARTLY A LLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 26 TH FEB 2020 . SD/ - SD/ - (PAWAN SINGH ) (S. RIFAUR RAHMAN ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED : 26 . 02 .2020 SR.PS. DHANANJAY / 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