Jitendra Roopraj Mehta, Pune V. Income tax Officer, Pune

ITA 441/PUN/2017

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 4631 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 1 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-03-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Pune
• Assessment Year: 2010-2011
• Appeal Filed On: 21-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M K VERMA
• Keywords: Bogus purchase; Reason to believe; Reassessment proceedings; Set aside
• Section: 143(3); 143(1); 148

Judgement Text

] IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH SMC, PUNE BEFORE SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER . / ITA NOS.440 TO 442/PUN/2017 / ASSESSMENT YEARS : 2009-10 TO 2011-12 JITENDRA ROOPRAJ MEHTA, 302, MURAD SOCIETY, 586/5/A, GULTEKDI, MARKET YARD, PUNE 37. PAN : AFTPM1918B. . / APPELLANT V/S THE INCOME TAX OFFICER, WARD 5(1), PUNE. . / RESPONDENT ASSESSEE BY : SHRI PRAMOD SHINGTE. REVENUE BY : SHRI M.K. VERMA. / ORDER PER ANIL CHATURVEDI, AM : 1. THESE APPEALS FILED BY THE ASSESSEE ARE EMANATING OUT O F COMMON ORDER OF COMMISSIONER OF INCOME TAX (A) 4, PUNE DATED 15.11.2016 FOR THE ASSESSMENT YEARS 2009-10 TO 2011-12. 2. BEFORE ME, AT THE OUTSET, BOTH THE PARTIES SUBMITTED THAT THOUGH THE APPEALS FILED BY THE ASSESSEE ARE FOR DIFFEREN T ASSESSMENT YEARS BUT THE FACTS AND ISSUES INVOLVED IN ALL THE THREE APPEALS ARE IDENTICAL EXCEPT THE ASSESSMENT YEARS AND THE AMOUNTS INVOLVED AND THEREFORE THE SUBMISSIONS MADE BY T HEM WHILE ARGUING ONE APPEAL WOULD BE EQUALLY APPLICABLE TO THE OTHER APPEALS ALSO AND THUS, ALL THE THREE APPEALS CAN BE HEAR D TOGETHER. / DATE OF HEARING : 24.12.2018 / DATE OF PRONOUNCEMENT: 22.03.2019 2 ITA NOS.440 TO 442/PUN/2017 IN VIEW OF THE AFORESAID SUBMISSIONS OF BOTH THE PARTIES, I , FOR THE SAKE OF CONVENIENCE, PROCEED TO DISPOSE OF ALL THE THREE APPEALS BY A CONSOLIDATED ORDER BUT HOWEVER, PROCEED WITH NARRATING THE FACTS IN ITA NO.440/PUN/2017 FOR ASSESSMENT YEAR 2009-10. 3. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON RE CORD ARE AS UNDER :- ASSESSEE IS AN INDIVIDUAL STATING TO BE ENGAGED IN THE BUSINESS OF TRADING OF COMPUTERS, PARTS AND ACCESSORIES. A SSESSEE ELECTRONICALLY FILED HIS RETURN OF INCOME ON 29.09.2009 DECLA RING TOTAL INCOME OF RS5,34,620/-. THE RETURN OF INCOME WAS INITIA LLY PROCESSED U/S 143(1) OF THE ACT. THEREAFTER, ON THE BASIS OF THE INFORMATION RECEIVED FROM SALES TAX DEPARTMENT, IT WAS FOUND THAT ASSESSEE HAD INDULGED INTO HAWALA TRANSACTIONS AND WAS O NE OF THE BENEFICIARIES. AO THEREAFTER ISSUED NOTICE U/S 148 OF THE AC T AND IT IS STATED TO HAVE BEEN SERVED ON THE ASSESSEE. CONSEQ UENTLY, THE CASE WAS TAKEN FOR SCRUTINY AND THEREAFTER THE ASSESSM ENT WAS FRAMED U/S 143(3) R.W.S. 147 OF THE ACT VIDE ORDER DATE D 16.02.2015 AND THE TOTAL INCOME WAS DETERMINED AT RS.8,73 ,970/-. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATT ER BEFORE LD.CIT(A), WHO VIDE CONSOLIDATED ORDER DATED 15.11.2016 FOR A.Y 2009-10 TO 2011-12 DISMISSED THE APPEALS OF THE ASSESSE E. AGGRIEVED BY THE ORDER OF LD.CIT(A), ASSESSEE IS NOW IN AP PEAL AND HAS RAISED THE FOLLOWING GROUNDS : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LEARNED CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS.3,39,350 /- BEING 10% OF G.P RATIO INVOLVED IN UNREGISTERED DEALER(URD) PURCHASES OF RS.33,93,506/ - OVER AND ABOVE THE G.P . RATIO OF 3 ITA NOS.440 TO 442/PUN/2017 7.93% DECLARED BY THE APPELLANT DISREGARDING THE UN DISPUTED FACT THAT BOOKS OF ACCOUNTS OF APPELLANT ARE NOT REJECTE D AND URD PURCHASES AND CORRESPONDING SALES BOTH ARE ALREADY PART OF THE G.P RATIO DECLARED BY THE APPELLANT AND HENCE THE A DDITION IF ANY SHOULD HAVE BEEN RESTRICTED TO DIFFERENCE BETWEEN T HE G. P AS DETERMINED BY THE ASSESSING OFFICER AND G.P ALREADY DECLARED BY THE APPELLANT, AS OTHERWISE IT AMOUNTS TO DOUBLE TA XATION OF THE SAME INCOME. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW LEARNED CIT(A) ERRED IN DISMISSING THE APPEAL EVEN THOUGH CONCURRING WITH THE APPELLANTS CONTENTION OF DECISI ON OF CIT VS. BHOLANATH POLY FAB PVT.LTD.(2012) 355 ITR 290 (GUJ) THAT IT IS THE PROFIT CLEMENT EMBEDDED IN SUCH URD PURCH ASES WHICH IS SUBJECT TO TAX AND IN SUPPORT HIMSELF RELIED UPON A NUMBER DECISIONS OF TRIBUNALS AND HIGH COURTS WHEREBY G.P ADDITION OF 5% TO 25% EMBEDDED IN SUCH PURCHASES WAS UPHELD CONSID ERING THE PAST G.P TREND OF THE ASSESSEE'S IN THOSE CASES, BU T FAILED TO APPRECIATE THE CRUX OF ALL THE DECISIONS THAT G.P A DDITION IN THOSE CASES WAS NOT OVER AND ABOVE THE G.P ALREADY DECLAR ED BY THE ASSESSEE. 3.WITHOUT PREJUDICE TO ABOVE GROUNDS, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CI T(A) ERRED IN CONFIRMING THE ADDITION OF RS.3,39,350/- AS G.P INV OLVED IN URD PURCHASES, WHICH WERE ORIGINALLY ALLEGED AS BOG-US PURCHASES OF RS.33,93,506/- IN THE REASONS RECORDED WHILE REOPEN ING THE ASSESSMENT BASED ON INFORMATION RECEIVED FROM SALES TAX DEPARTMENT BUT WERE FINALLY DETERMINED AS PURCHASE S FROM UNREGISTERED DEALER (URD) BY THE ASSESSING OFFICER, WITHOUT MAKING A DISTINCTION BETWEEN THE TERMS BOGUS PURCHASES AND URD PURCHASES AND REJECTING APPELLANTS CLAIM THAT WHEN NO ADDITION IS MADE ON THE GROUND FOR WHICH ASSESSMENT WAS REOPENE D U/S 147, NO OTHER ADDITION CAN BE MADE BY THE ASSESSING OFFI CER WHICH DID NOT FORM PART OF THE REASONS RECORDED BY HIM IN VIE W OF THE DECISION OF HON'BLE BOMBAY HIGH COURT IN CIT VS. JET AIRWAYS(INDIA) LTD 331 ITR 236 AND GUJARAT HIGH COURT IN TAX APPEAL NO. 964 AND 967 OF 2011 IN MATTER OF CIT VS. MOHMED JUNED DADANI, HENCE BEYOND JURISDICTION OF ASSESSING OFFICER. 4. SIMILAR GROUNDS HAVE BEEN RAISED BY THE ASSESSEE IN A.YS 2010-11 AND 2011-12. 5. ON THE BASIS OF INFORMATION RECEIVED FROM SALES TAX DEPARTMENT, IT WAS NOTICED THAT ASSESSEE HAD MADE PURC HASES AGGREGATING TO RS.33,93,506/- IN A.Y 2009-10 FROM 3 PARTIES LISTED ON PAGE 2 OF THE ASSESSMENT ORDER. AO WAS OF THE VIEW T HAT THE PURCHASES MADE BY THE ASSESSEE FROM THE AFORESAID 3 PA RTIES WERE 4 ITA NOS.440 TO 442/PUN/2017 NOT GENUINE AND THE PURCHASES HAVE BEEN MADE BY THE ASSESSEE TO INFLATE THE EXPENSES/REDUCE THE TOTAL INCOME OF THE ASSE SSEE. ASSESSEE WAS ASKED TO PROVE THE GENUINENESS OF PURC HASES BY PRODUCING THE ORIGINAL PURCHASE BILLS, BANK ACCOUNT EXTRACT AND CONFIRMATION FROM THE PARTIES. TO PROVE THE GENUINENESS, AS SESSEE FURNISHED DETAILS REGARDING THE PURCHASES, PROOF OF RECEIPT OF GOODS, PROOF OF PAYMENT THROUGH BANK, CORRESPONDING SALES ETC. A SSESSEE HOWEVER DID NOT FURNISH THE CONFIRMATIONS FROM THE PARTIES FROM WHOM THE PURCHASES WERE MADE. AO THEREFORE CONCLUDED T HE PURCHASES TO BE NOT FULLY VERIFIABLE AND TREATED THE PURC HASES AS URD PURCHASES. HE THEREAFTER RELYING ON THE DECISION O F JAIPUR TRIBUNAL IN THE CASE OF ITO VS DEEPAK DALELA REPORTED IN ( 50 DTR 502) AND AFTER TAKING INTO CONSIDERATION THE AVERAGE GROS S PROFIT OF THE ASSESSEE FOR THE PAST THREE YEARS, MADE ADDITION OF 10% OF SUCH PURCHASES AND ADDED RS.3,39,350/-. AS FAR AS A.Y 2010-11 IS CONCERNED, AO RELYING ON THE DECISION DATED 23.10.2012 OF HONBLE GUJARAT HIGH COURT IN THE CASE OF BHOLANATH POLY FAB LTD AND TAKING INTO CONSIDERA TION THE GROSS PROFIT FOR THE YEAR UNDER CONSIDERATION OF 6.39%, M ADE ADDITION OF RS.5,03,248/- (6.39% OF PURCHASES OF RS 78,75,560/-). AS FAR AS A.Y 2011-12 IS CONCERNED, AO RELYING ON THE DECISION DATED 23.10.2012 OF HONBLE GUJARAT HIGH COURT IN THE CASE OF BHOLANATH POLY FAB LTD (SUPRA) AND TAKING INTO CONSIDERATION THE GROSS PROFIT FOR THE YEAR UNDER CONSIDE RATION OF 8.27%, MADE ADDITION OF RS 1,89,360/-(8.27% OF PURCHASES OF 5 ITA NOS.440 TO 442/PUN/2017 RS. 22,89,725/-). AGGRIEVED BY THE ORDER OF AO, ASSESSEE C ARRIED THE MATTER BEFORE LD.CIT(A), WHO UPHELD THE ORDER OF AO B Y OBSERVING AS UNDER: 5.3 DECISION: - I HAVE PERUSED THE ASSESSMENT ORDER AND THE SUBMISSION MADE BY THE LD. AR OF THE APPELLANT. TH E AO HAS REOPENED THE CASE U/S 147 FOR ALL THE THREE ASSESSM ENT YEARS ON THE BASIS OF INFORMATION RECEIVED FROM SALES TAX DE PARTMENT REGARDING ALLEGED BOGUS HAWALA PURCHASES FROM THE F EW PARTIES AS STATED IN REASONS RECORDED BY THE ASSESSING OFFICER AND REPRODUCED BY HIM IN THE BODY OF THE ASSESSMENT ORDER. THE AO HAS MADE ADDITION ON THE BASIS OF GROSS PROFIT INVOLVED IN P URCHASES AT 10%, 6.39% AND 8.27% AMOUNTING TO RS.3,39,350/- FOR A.Y. 2009-10, RS.5,3,248/- FOR A.Y. 2010-11 AND RS.1,89,360/- FOR A.Y. 2011-12 RESPECTIVELY. THE SALES TAX DEPARTMENT HAD CONDUCTE D SURVEYS ON THE VARIOUS ENTRY PROVIDERS AND IT CAME TO LIGHT TH AT THE PURCHASES AMOUNTING TO RS.33,93,506/-, RS.78,75,560/- AND RS. 22,89,725/- FOR THE A.Y. 2009-10, A.Y. 2010-11 AND A.Y. 2011-12 RESPECTIVELY WERE PURCHASES WHICH WERE TREATED BY THE SALES TAX DEPARTMENT AS IN THE NATURE OF ACCOMMODATION BILLS / HAWALA TR ANSACTIONS. 5.3.1. THE APPELLANT HAS CHALLENGED THE ACT OF THE AO IN REOPENING THE CASE U/S 147 OF THE ACT ON THE BASIS OF INFORMA TION RECEIVED FROM THE SALES TAX DEPARTMENT. IN THE PRESENT CASE, THERE BEING A CONFIRMATION FROM THE HAWALA OPERATOR AGAINST THE H AWALA PURCHASES, SUCH REASON, AS HELD BY VARIOUS JUDICIAL PRONOUNCEMENTS IS SUFFICIENT TO REOPEN CASE AND AS SUCH THIS CONTENTION OF THE APPELLANT IS DISMISSED: 5.3.2. IT IS OBSERVED THAT THE APPELLANT TOO, IN HI S RETURN, HAS DISCLOSED THIS AMOUNT OF PURCHASE AS URD I.E. FROM UNREGISTERED DEALERS. 5.3.3 THERE ARE NUMBER OF DECISIONS B:- THE VARIOUS COURTS, WHEREIN 25% TO 100% DISALLOWANCES OF BOGUS PURCHASES HAVE B EEN UPHELD. WITHOUT GOING TO THE NITTY-GRITTY OF THE DECISIONS. SOME OF THESE ARC REPRODUCED AS UNDER : XXXXXX XXXXXX XXXXXX 5.3.4 IN VIEW OF THE FOREGOING DECISIONS, IT IS VER Y CLEAR THAT VARIOUS COURTS /TRIBUNALS HAVE HELD THAT PERCENTAGE OF DISA LLOWANCE OF BOGUS PURCHASES HAS TO BE BASED ON THE FACTS OF EAC H CASE AND CANNOT BE GENERALIZED IN ALL CASES. MOREOVER, THE QUESTION WHETHER ENTIRE PURCHASES SHOULD BE DISALLOWED OR ADDITION S HOULD BE RESTRICTED TO THE PROFITS EMBODIED ON SALE PROCEEDS WAS ANSWERED BY HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT US PRESIDENT INDUSTRIES (258 ITR 654) AND HON'BLE MADHYA PRADESH HIGH COURT IN THE CASE OF CIT VS. BALCHAND AJIT KUMAR (263 ITR 610). CONSIDERING THE ABOVE DECISIONS, IT IS CLEAR THAT O NLY THE PROFITS EMBODIED ON SALE' PROCEEDS SHOULD BE TAXED INSTEAD OF ADDITION ON 6 ITA NOS.440 TO 442/PUN/2017 ACCOUNT OF ENTIRE PURCHASES. LOOKING TO THE CIRCUMS TANTIAL EVIDENCE IN THE PRESENT CASE, IT IS EVIDENT THAT IMPUGNED PU RCHASES FROM THE ALLEGED SUPPLIERS WERE NOT GENUINE. ONE HAS TO CONS IDER THE TOTALITY OF FACTS, SURROUNDING CIRCUMSTANCES AND HUMAN PROBA BILITY FOR ARRIVING AT SUCH A CONCLUSION. UNDER SUCH CIRCUMSTA NCES, I DON'T FIND ANY INFIRMITY IN THE ORDER OF THE AO IN MAKING AN A DDITION ASSUMING GP @ 10% ON PURCHASES FOR A.Y. 2009-10, 6.39% FOR A .Y. 2010-11 AND 8.27% FOR A.Y. 2011-12. ACCORDINGLY, THE GROUND NO.1 RAISED FOR ALL THE THREE A.YS BY THE APPELLANT. AGGRIEVED BY THE ORDER OF LD.CIT(A), ASSESSEE IS NOW IN APPEAL 6. BEFORE ME, LD AR REITERATED THE SUBMISSIONS MADE BEFOR E LOWER AUTHORITIES AND POINTING TO THE REASONS RECORDED B Y THE AO FOR REOPENING THE ASSESSMENT AND WHICH ARE REPRODUCED BY THE AO IN THE ASSESSMENT ORDER SUBMITTED THAT AO HAD INITIATED THE REOPENING THE ASSESSMENT FOR THE REASON THAT ASSESSEE HAD MADE BOGUS PURCHASES BUT HOWEVER IN THE REASSESSMENT ORDE R PASSED, AO HAS NOT TREATED THE PURCHASES AS BOGUS BUT HAS T REATED THE PURCHASES AS URD PURCHASES WITHOUT MAKING THE DISTINCT ION BETWEEN THE TERMS BOGUS PURCHASES AND URD PURCHA SES. HE THEREFORE RELYING ON THE DECISION OF HONBLE BOMBAY HIGH C OURT IN THE CASE OF CIT VS. JET AIRWAYS INDIA LTD REPORTED IN (2011) 331 ITR 236 SUBMITTED THAT IF AFTER ISSUING A NOTICE U/S 148 O F THE ACT, THE AO ACCEPTED THE CONTENTION OF THE ASSESSEE AND HO LDS THAT THE INCOME WHICH HE HAS INITIALLY FORMED A REASON TO BELIEVE HAD ESCAPED ASSESSMENT HAS NOT ESCAPED ASSESSMENT, THEN IT IS NOT OPEN TO INDEPENDENTLY ASSESS OTHER INCOME. IN THE PRES ENT CASES, RELYING ON THE AFORESAID DECISION OF HONBLE BOMBAY HIGH CO URT, HE SUBMITTED THAT FOR THE THREE ASSESSMENT YEARS SINCE THERE IS NO ADDITION FOR ALLEGED BOGUS OR NON GENUINE PURCHASES, THE ADDITION 7 ITA NOS.440 TO 442/PUN/2017 MADE BY THE AO IN ALL THE THREE ASSESSMENT YEARS ON AC COUNT OF GROSS PROFIT OF URD PURCHASES ARE BEYOND THE JURISDICTION OF THE AO. ON THE MERITS OF THE ADDITION, HE SUBMITTED THAT ASS ESSEE HAS MAINTAINED COMPLETE RECORD OF THE ITEMS PURCHASED AND ITS SALE, THE PAYMENT FOR PURCHASES ARE THROUGH BANKING CHANNELS , THE PARTIES FROM WHOM THE PURCHASES HAVE BEEN MADE HAVE V ALID PAN AND GST REGISTRATION NUMBER AND ASSESSEE HAS ALSO PAID VAT ON THE PURCHASES MADE. HE THEREFORE SUBMITTED THAT NO AD DITION EVEN ON MERITS IS CALLED FOR IN THE PRESENT THREE CASES. LD DR ON THE OTHER HAND SUPPORTED THE ORDER OF LOWER AUTHORITIES. 7. I HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE M ATERIAL ON RECORD. THE ISSUE RAISED IN ALL THE 3 APPEALS IS WITH RE SPECT TO ADDITION MADE ON ACCOUNT OF PURCHASES MADE IN THE RE-AS SESSMENT ORDER FRAMED U/S 143(3) R.W.S. 147 OF THE ACT. THE REASON S RECORDED FOR REOPENING AS REPRODUCED BY THE AO IN THE ASSESSMENT ORDERS REFERS TO THE INFORMATION RECEIVED FROM SALES TAX DEPARTMENT ABOUT HAWALA TRANSACTIONS OF PURCHASES MADE BY THE ASS ESSEE AMOUNTING TO RS 33.93 LACS (ROUNDED OFF) IN A.Y 2009-10 FROM THE 3 PARTIES NOTED IN THE ORDER AND THE AFORESAID PURCHASE S BEING BOGUS/NON GENUINE. HOWEVER, FINALLY THE AO DOES NOT TR EATS THE PURCHASES AS NON-GENUINE / BOGUS BUT MAKES ADDITION BY TREATING THE PURCHASES AS URD PURCHASES. THE ADDITION IS MADE ONLY OF THE GROSS PROFIT ON SUCH ALLEGED URD PURCHASES. WE FIND THAT HONBLE BOMBAY HIGH COURT IN THE CASE OF JET AIRWAYS (SUP RA) HAS HELD THAT IF AFTER ISSUING NOTICE U/S 148 OF THE ACT, AO HOLD S THAT THE INCOME WHICH HE HAS INITIALLY FORMED A REASON TO BELIEVE HAD 8 ITA NOS.440 TO 442/PUN/2017 ESCAPED ASSESSMENT HAS NOT ESCAPED ASSESSMENT, THEN IT IS NOT OPEN TO HIM TO INDEPENDENTLY ASSESS SOME OTHER INCOME. IN THE PRESENT CASE WHEN SEEN IN THE LIGHT OF THE AFORESAID DEC ISION OF HONBLE BOMBAY HIGH COURT (SUPRA) THE REASONS FOR REOPE NING WAS ON ACCOUNT OF BOGUS/NON GENUINE PURCHASES BUT NO ADDIT ION HAS BEEN MADE ON THAT COUNT BUT ADDITION HAS BEEN MADE FO R THE REASON THAT THE PURCHASES ARE URD PURCHASES. I FURT HER FIND THAT DURING THE COURSE OF REASSESSMENT PROCEEDINGS ASSESSEE HAD FURNISHED THE DETAILS CALLED FOR TO PROVE HIS CONTENTION THA T THE PURCHASES ARE GENUINE EXCEPT FOR THE CONFIRMATION OF THE PARTIES FROM WHOM THE PURCHASES WERE MADE. BEFORE ME, NO FAULT HAS BEEN POINTED OUT IN THOSE DETAILS SUBMITTED BY THE ASSE SSEE. CONSIDERING THE TOTALITY OF THE AFORESAID FACTS AND RELYING ON THE DECISION OF HONBLE BOMBAY HIGH COURT CITED HEREINABOVE, I AM OF THE VIEW THAT THE AO WAS NOT JUSTIFIED IN INITIATING THE REASSESSMENT PROCEEDINGS. I THEREFORE SET ASIDE THE ASS ESSMENT ORDERS FOR ALL THE 3 YEARS. THUS, THE GROUNDS OF THE ASSESSEE ARE ALLOWED. 8. IN THE RESULT, ALL THE THREE APPEALS OF ASSESSEE AR E ALLOWED. ORDER PRONOUNCED ON 22 ND DAY OF MARCH, 2019. SD/- ( ANIL CHATURVEDI ) ' / ACCOUNTANT MEMBER PUNE; DATED : 22 ND MARCH, 2019. YAMINI 9 ITA NOS.440 TO 442/PUN/2017 #$%&'(' % / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. 4. 5 6. CIT(A)-4, PUNE. PR.CIT-3, PUNE. '#$ %%&',) &', *+ / DR, ITAT, SMC PUNE; $-.// GUARD FILE. / BY ORDER // TRUE COPY // 012%3&4 / SR. PRIVATE SECRETARY ) &', / ITAT, PUNE.