ITO 20(3)(5), MUMBAI V. ZAHID ABBAS MANKAD, MUMBAI

ITA 4580/MUM/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0911 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-05-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2010-2011
• Appeal Filed On: 06-08-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANUPAMA SINGALADR
• Keywords: Unexplained investment; Corroborative evidences

Judgement Text

, INCOME-TAX APPELLATE TRIBUNAL -GBENCH MUMBAI , , , BEFORE S/SHRI RAJENDRA,ACCOUNTANT MEMBER AND AMARJIT SINGH,JUDICIAL MEMBER ./ITA.S/4580-81/MUM/2015 , /ASSESSMENT YEARS:2010-11,11-12 ITO - 20(3)(5) 205,PIRAMAL CHAMBERS, LALBAUG,MUMBAI-12 VS. ZAHID ABBAS MANKAD,5/7 RETI BANDAR NEXT TO DR.A A KHAN CLINIC,DARUKAHA MUMBAI-400 010. PAN:AADPM9560A ( /APPELLANT ) ( / RESPONDENT ) REVENUE BY: MS.ANUPAMA SINGALA-DR ASSESSEE BY: NONE / DATE OF HEARING: 25.04.2017 / DATE OF PRONOUNCEMENT: 03.05.2017 ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA, AM - CHALLENGING THE ORDERS,DATED21/05/2015,OF THE CIT ( A)-32,MUMBAI,THE ASSESSING OFFICER(AO) HAS FILED APPEALS FOR THE ABOVE-MENTIONED TWO ASSES SMENT YEARS.ASSESSEE,AN INDIVIDUAL,IS ENGAGED IN THE BUSINESS OF SALES AND TRADING OF MS PLATES, STEEL BARS,SHEETS, ANGLES ETC.THE DETAILS OF DATES OF FILING OF RETURNS,RETURNED INCOMES, ASS ESSED INCOMES ETC. CAN BE SUMMARISED AS UNDER: AY. ROI FILED ON RETUNED INCOME ASSTT. DATE ASSES SED INCOME 2010-11 15.10.2010 RS.7.17 LAKHS 28.03.2014 RS.98.4 7LAKHS 2011-12 30.09.2011 RS.7.56 LAKHS 26.03.2014 RS.1.03 CRORES AS THE ISSUES INVOLVED IN BOTH THE APPEALS ARE COMM ON, SO, WE ARE ADJUDICATING THEM TOGETHER, FOR THE SAKE OF CONVENIENCE.INITIALLY THE RETURNS F OR BOTH THE YEARS WERE PROCESSED U/S.143 (1) OF THE ACT.LATER ON, A SURVEY U/S.133A WAS CARRIED OUT AT THE BUSINESS PREMISES OF THE ASSESSEE AND NOTICES U/S.148 WERE ISSUED AND THE ASSESSMENTS WER E COMPLETED U/S.143(3)R.W.S.147 OF THE ACT. ITA/4580/MUMBAI/2015-AY.2010-11. 2. DURING THE COURSE OF SURVEY PROCEEDINGS,THE MEMBERS OF THE TEAM FOUND THE BILLS OF PURCHASE OF GOODS FROM HAWALA DEALERS AND SAME WERE IMPOUNDE D.AS PER THE AO NO SUPPORTING DOCUMENTS FOR DELIVERY OF GOODS/RECEIPTS OF GOODS W ERE AVAILABLE WITH THE ASSESSEE,THAT OTHER DOCUMENTS SUCH AS QUOTATIONS, DELIVERY CHALLANS, L ORRY RECEIPTS AND WEIGHING SLIPS WERE ALSO NOT EXISTING.HE DIRECTED THE ASSESSEE TO FILE VARIO US DETAILS INCLUDING THE DETAILS OF PURCHASES AND SALES MADE DURING THE YEAR.HE FOUND THAT ASSESSEE H AD PURCHASED GOODS FROM NINE PARTIES DURING THE YEAR UNDER APPEAL,AMOUNTING RS. 3.65 CRORES.HE OBSERVED THAT THE GOODS WERE PURCHASED FROM THE PARTIES WHO WERE PROVIDING ACCOMMODATION E NTRIES,THAT THE SALES TAX DEPARTMENT OF GOVERNMENT OF MAHARASHTRA HAD DECLARED THE ABOVE SU PPLIERS BOGUS BILL PROVIDERS,THAT THE 4580-81/M/15 ZAHID ABBAS MANKAD 2 ASSESSEE COULD NOT EXPLAIN THE PURCHASES FROM THE A BOVE PARTIES ALONG WITH SUPPORTING EVIDENCES SUCH AS TRANSPORTATION RECEIPTS. HE DIRECTED THE AS SESSEE TO PRODUCE THE PARTIES.THE ASSESSEE FILED COPIES OF PURCHASE REGISTER,RETURN OF INCOME WITH C OMPUTATION OF INCOME AND COPY OF AUDIT REPORT.AS PER THE AO THE ASSESSEE DID NOT FILE DETA ILS CALLED FOR IN THE SPECIFIED FORMAT,THAT IN ABSENCE OF SUCH DETAILS IT WAS NOT POSSIBLE TO COND UCT FURTHER ENQUIRIES REGARDING GENUINENESS OF THE PURCHASE, THAT THE ASSESSEE DID NOT PRODUCE THE PARTIES ON SCHEDULED DATE. HE GAVE A FINAL OPPORTUNITY TO THE ASSESSEE TO EXPLAIN THE PURCHASE S.AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE, HE HELD THAT PURCHASES MADE BY THE ASSESS EE WERE NOT GENUINE,THAT THE GOODS HAD BEEN PURCHASED FROM OTHER SUPPLIERS,THAT THE ONLY BILLS OF THE ITEMS WERE OBTAINED FROM THE ABOVE- MENTIONED NINE PARTIES. HE REFERRED TO THE CASE OF VIJAY PROTEINS (58 ITD 428) AND HELD THAT THE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE WERE N OT VERIFIABLE.FINALLY,HE HELD THAT 25% OF THE PURCHASE PRICE, DEBITED IN THE BOOKS OF ACCOUNTS,TH ROUGH THE FICTITIOUS INVOICES OBTAINED FROM THE BOGUS SUPPLIERS, HAD TO BE DISALLOWED ON ACCOUNT OF INFLATION OF PURCHASES AND UNEXPLAINED INVESTMENT IN SUCH PURCHASES. THUS, THE AO MADE AN ADDITION OF RS. 91.30 LAKHS TO THE INCOME OF THE ASSESSEE FOR THE YEAR UNDER APPEAL. 3. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE PREF ERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY(FAA).BEFORE HIM, THE ASSESSEE MADE ELABOR ATE SUBMISSIONS. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND THE ASSESSMENT ORDE R,HE HELD THAT THE ASSESSEE HAD PRODUCED PURCHASE INVOICES, LEDGER STATEMENTS, THAT THE PAYM ENTS WERE MADE THROUGH BANKING CHANNELS AGAINST PURCHASE INVOICES, THAT THERE WAS NO EVIDEN CE TO PROVE THAT CASH HAD FLOWN BACK TO THE ASSESSEE, THAT THE ASSESSEE WAS A TRADER AND THE GO ODS PURCHASED WERE USED IN SALES AND NOT IN CONSUMPTION HAS MANUFACTURING, THAT UNLIKE MANUFACT URE OF GOODS THE ASSESSEE WAS ABLE TO ESTABLISH ONE-TO-ONE CORRELATION BETWEEN THE GOODS PURCHASED AND THE GOODS SOLD,THAT THE ITEM- WISE STOCK REGISTER SHOWED PURCHASES MADE FROM THE ABOVE PARTIES,THAT THE AO HAD ALSO NOT RULED OUT THE POSSIBILITY OF PURCHASING GOODS FROM GREY M ARKET BY THE ASSESSEE, THAT ONCE SALES WERE ACCEPTED THERE WAS NO REASON TO DOUBT THE PURCHASES .HE REFERRED TO THE CASES OF MK BROTHERS (163 ITR 249) AND NIKUNJ EXIMP ENTERPRISES PRIVATE LIMITED. (216 TAXMAN 171) AND HELD THAT UNDER THE ACT ONLY NET INCOME COULD BE TAXED,THAT T HE TRANSACTION WAS NOT VERIFIABLE, THAT ONLY INCOME COMPONENT WAS TAXABLE AND NOT THE ENTIRE TRA NSACTION AMOUNT, THAT GENERALLY IN SUCH CASES ADDITIONS WERE MADE BASED ON THE GP/NP RATIO, THAT THE AO HAD NOT RULED OUT THE POSSIBILITY OF PURCHASES BEING MADE FROM THE GREY MARKET FROM S OME OTHER PARTIES BY INVESTING UNACCOUNTED 4580-81/M/15 ZAHID ABBAS MANKAD 3 CASH, THAT THE ASSESSEE HAD MADE PAYMENTS BY CHEQUE S,THAT THE COURSE OF JUSTICE WOULD BE MET BY MAKING ADDITION OF A REASONABLE PERCENTAGE OF PURCH ASES IN ORDER TO FILL THE GAP OF ANY REVENUE LEAKAGES.THE FAA CONSIDERED THE AVERAGE RATE OF GP FROM THE AY.2006-07 TO THE AY.2011-12 AND HELD THAT ADDITION AT THE RATE OF 5.68% ON THE PURCHASES WOULD BE QUITE REASONABLE TO PROTECT LEAKAGES OF REVENUE.HE CONFIRMED THE ADDITION OF RS . 20.74 LAKHS AND THE ASSESSEE GOT RELIEF OF RS.70.55 LAKHS. 4. BEFORE US,THE DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ORDER OF THE AO AND STATED THAT THE ASSESSEE HAD NOT PRODUCED THE PARTIES, THAT EVIDENC E OF TRANSPORTATION OF GOODS WAS NOT AVAILABLE,THAT THE ADDITION MADE BY THE AO AT THE R ATE OF 25% WAS JUST AND REASONABLE. 5. WE HAVE PERUSED THE MATERIAL AVAILABLE ON RECORD.WE FIND THAT AN ACTION U/S.133A WAS CARRIED OUT AT THE BUSINESS PREMISE OF THE ASSESSEE,THAT TH E AO HAD MADE ADDITION OF RS. 91.30 LAKHS TO THE INCOME OF THE ASSESSEE ON ACCOUNT OF BOGUS PURC HASES,THAT THE AO HAD NOT DOUBTED THE GENUINENESS OF THE SALES MADE BY THE ASSESSEE, THAT THE FAA HAD PARTLY ALLOWED THE APPEAL FILED BY THE ASSESSEE.IT IS AN ESTABLISHED PRINCIPLE OF T AXATION THAT SALES CANNOT TAKE PLACE WITHOUT PURCHASES.THE AO HAD MADE AN ADDITION AT THE RATE O F 25% ON AN ESTIMATED BASIS, HOWEVER, THE FAA REDUCED IT TO 5.68% ON THE BASIS OF GP/NP RATES OF THE EARLIER YEARS. AS THE AO HAS NOT DOUBTED THE SALES AND THE ASSESSEE HAD NOT PRODUCED CERTAIN DETAILS,SO,IT WOULD BE IN THE INTEREST OF JUSTICE THAT ESTIMATE MADE BY THE FAA IS UPHELD. IN THE ESTIMATIONS, MADE BY THE AO/FAA,THE ESTIMATE MADE BY THE FAA,ACCORDING TO US,HAS GOT SO ME BASE AND SHOULD BE ENDORSED. SO,CONFIRMING THE SAME, WE DECIDE FIRST EFFECTIVE G ROUND OF APPEAL (GOA 1-3)AGAINST THE AO. ITA/4581/MUM/2012.AY.2011-12. FOLLOWING OUR ORDER FOR THE EARLIER ASSESSMENT YEAR , WE DECIDE THE FIRST EFFECTIVE GROUND OF APPEAL (GOA 1-3)AGAINST THE AO,AS THE FACTS OF THE CASE UNDER CONSIDERATION ARE IDENTICAL TO THE FACTS OF EARLIER YEAR. THE ONLY DIFFERENCE IS THE Q UANTUM OF DISALLOWANCE. AS A RESULT, APPEALS FILED BY THE A.O. STAND DISMISSED. ORDER PRONOUNCED IN THE OPEN COU RT ON 3 RD MAY,2017. 3 , 201 7 S D/- SD/ ( / AMARJIT SINGH ) ( / RAJENDRA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; /DATED : 03.05.2017. JV.SR.PS. 4580-81/M/15 ZAHID ABBAS MANKAD 4 / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR G BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.