MUKESH C PARIKH, MUMBAI V. ITO 24(2)(2), MUMBAI

ITA 4640/MUM/2018

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 8197 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-08-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: D
• Assessment Year: 2010-2011
• Appeal Filed On: 26-07-2018
• Result in Favour of: Matter Remanded
• Court: TRIBUNAL
• Assessee Lawyers: M.N. SHAH
• Keywords: Bogus purchase
• Section: 147; 144; 69C; 80C; 142(1); 133(6); 143(2)

Judgement Text

ITA No.4640/Mum/2018 A.Y.2010-11 Mukesh C. Shah Vs. ITO-24(2)(2) 1 IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, MUMBAI BEFORE SHRI PAVAN KUMAR GADALE, JUDICIAL MEMBER & SHRI AMARJIT SINGH, ACCOUNTANT MEMBER ITA No.4640/Mum/2018 (A.Y. 2010-11) Mukesh C. Parikh Kamla Vihar, Wing ‘D’ 5 th Floor, Kamla Vihar ABCD Bldg, Kamla Vihar Garden, Mahavir Nagar, Kandivali (W) Mumbai – 400 067 Vs. ITO-24(2)(2) Piramal Chambers, Lalbaug, Parel, Mumbai – 400 012 स्थायी लेखा सं./जीआइआर सं./PAN/GIR No: AABPP9110B Appellant .. Respondent Appellant by : Shri M.N. Shah Respondent by : Smt. Mahita Nair Date of Hearing 01.08.2022 Date of Pronouncement 12.08.2022 आदेश / O R D E R Per Amarjit Singh (AM): The present appeal filed by the assessee is directed against the order passed by the ld. CIT(A)-36, Mumbai, which in turn arises from the order passed by the A.O u/s 144 r.w.s 147 of the Act for A.Y.2010-11. The assessee has raised the following grounds before us: ITA No.4640/Mum/2018 A.Y.2010-11 Mukesh C. Shah Vs. ITO-24(2)(2) 2 “1. In confirming that assessment was done u/s 144 of the Income-tax Act, 1961. 2. The learned CIT (A) has erred in directing that the disallowing expenses of Rs.61,742/-be retained is improper and be directed to be deleted. 3. The learned CIT (A) has erred in directing addition of bogus creditors of Rs.8,89,331/-be retained without giving sufficient opportunity to your appellant is improper and be directed to be deleted. 4. The learned CIT (A) has erred in directing that the disallowance of the purchases be retained to the extent of 12.5% by incorrectly observing that appellant had requested and agreed that disallowance be retained at 12.5% which was a submission made without prejudice to the plea that entire addition of Rs.2,91,30,011/- was improper and be directed to be deleted. 5. The learned CIT (A) has erred in directing addition of Rs 80,000/- and Rs.80,243/- being capital introduced by your appellant in Vimalanath Steel Co. and in M/s Standard Steel Co. respectively be retained is improper and be directed to be deleted 6. The learned CIT (A) has erred in adding interest from Bank of India of Rs.15,250/- in the Total Income of your appellant be retained is improper and be directed to be deleted 7. The learned CIT (A) has erred in directing the addition of the deduction u/s 80C of the Income Tax Act, 1961 by granting deduction u/s 80C of the Income Tax Act, 1961 of Rs.93,338/-as against claim made of Rs.98.198/- in its Return of Income which is improper and be directed to be deleted. Your appellant prays leave to add to, amend, alter or delete any of the grounds as may be.” 2. Fact in brief is that assessee is an individual and conducting business in the name of M/s Vimalnath Steel as a proprietary concern dealing in Iron Steel alloys hardware material etc. The return of income declaring income of Rs.3,10,860/- was filed on 28.09.2010. The case was selected for scrutiny and notice u/s 143(2) was issued on 27.09.2011. During the course of assessment the A.O has issued a number of notices u/s 142(1) and however, the assessee has not made any compliance, therefore, the assessment was completed ex-parte u/s 144 of the Act after making various addition and total income was assessed at ITA No.4640/Mum/2018 A.Y.2010-11 Mukesh C. Shah Vs. ITO-24(2)(2) 3 Rs.3,74,97,290/-. Further, facts of the case are discussed while adjudicating the ground of appeal filed by the assessee as under: (i) Ground No.1: Against confirming assessment made u/s 144 of the Act: 3. Assessee has not pressed this ground of appeal, therefore, the same stand dismissed. (ii) Ground No.2: Disallowance of expenses of Rs.61,742/-: 4. The assessee has also not pressed this ground of appeal, therefore, the same stand dismissed. (iii) Ground No.3: Addition of bogus creditors of Rs.8,89,331/-: 5. During the course of assessment the A.O issued notice u/s 133(6) of the Act for verification of sundry creditors in the name of the following parties: (i) M/s Desmet Steel & Wires Rs. 70,735/- (ii) M/s Star Wire Products Rs.18,596/- Total Rs.89,331/- The notice issue u/s 133(6) were returned unserved, therefore, A.O asked the assessee to furnish the correct address of these parties and also to produce these parties in person before him. Because of non- compliance of these directions the A.O had treated the said sundry creditors as bogus and added to the total income of the assessee. 6. The assessee filed the appeal before the ld. CIT(A). The ld. CIT(A) has dismissed the appeal of the assessee. Reiterating the facts reported the facts by the assessee. ITA No.4640/Mum/2018 A.Y.2010-11 Mukesh C. Shah Vs. ITO-24(2)(2) 4 7. During the course of appellate proceedings before us the ld. Counsel submitted that these sundry creditors were not included in the alleged bogus parties list released by the sale tax department. It is further submitted that in the case of two parties the notice issued u/s 133(6) were returned unserved. It is further submitted that copy of ledger confirmation of M/s Desmet Steel and Wires and M/s Star Wire Products containing address, PAN etc. which has been submitted during the course of assessment proceedings. It is also submitted that the outstanding amount was also paid at the end of F.Y. 2009-10. However, during the course of appellate proceedings before us, the assessee has filed copies of ledger account and copies of bank account to substantiate the claim of the assessee that payment have been made to the aforesaid outstanding sundry creditors. Therefore, we restore this issue to the file of the A.O for deciding afresh after verification of the ledger account and bank account of the assessee. Accordingly, this ground of appeal of the assessee is allowed for statistical purposes. (iv) Ground No.4: Disallowance of purchases to the extent of 12.5: 8. During the course of assessment the A.O has received information from the DGIT(Inv.), Mumbai, on the basis of verification made by the sale tax department that the assessee had obtained accommodation entries of purchases from 23 parties as listed at page no. 3 and 4 of the assessment order. The A.O stated that these parties had not sold any goods to the assessee and obtained the bogus purchase bills without establishing that any delivery of goods were made by these parties to the assessee. However, the A.O has also pointed out that without purchase of the goods, sales cannot be undertaken and stated that assessee might have purchased the goods from the grey market for benefit of lower ITA No.4640/Mum/2018 A.Y.2010-11 Mukesh C. Shah Vs. ITO-24(2)(2) 5 duties etc. however, the A.O stated that assessee has not explained the sources of expenditure incurred for purchasing the goods, therefore, he treated the whole amount of purchases of Rs.2,97,30,011/- as unexplained u/s 69C of the Act and added to the total income of the assessee. 9. The assessee filed the appeal before the ld. CIT(A). The ld. CIT(A) stated that the issue in hand was the profit earned while transacting in grey market therefore restricted the disallowance to the extent of 12.5% of the bogus purchases to the amount of Rs.3,71,625/-. 10. During the course of appellate proceedings before us the ld. Counsel contended that with regard to purchase from 23 parties the assessee has already submitted the detail in respect of purchases from the said parties i.e copies of parties ledger account in the books of account of the assessee, copies of invoices for purchases made from said parties, copies of delivery challans evidencing the receipt of goods, detail of payment made by account payee cheques copies of bank statement etc. The ld. counsel also submitted that sale tax department has listed the defaulter of VAT payment and suspicious dealers therefore, it is not justified that such dealers were not existed. The ld. counsel further submitted that if the sales were treated as genuine corresponding purchases have also to be treated as genuine. The ld. Counsel submitted that making disallowance @ 12.5% of the alleged bogus purchases is unjustified comparing to the gross profit margin of the assessee and considering the prevailing gross profit rate in the metal industry. The ld. Counsel has also referred a number of judicial pronouncements of coordinate benches of the ITAT i.e in the case of Dharmendra N. Zaveri Vs. ACIT-33(1) ITA No. 7520 & 7521/Mum/2018 dated 31.01.2020 and ITA No.4640/Mum/2018 A.Y.2010-11 Mukesh C. Shah Vs. ITO-24(2)(2) 6 in the case of M/s Pavapuri Metals & Tube Vs. ITO-19(2)(5) in ITA No. 1148/Mum/2019 dated 29.09.2010. The ld. Counsel has also referred the decision of Hon’ble Gujarat High Court in the case of PCIT Vs. Mohommad Hazi Adam & Co. ITA No. 1004 of 2016 dated 11.02.2019; and in the case of Omkar Metal & Alloys Corporation Vs. ITO-19(2)(4), Mumbai, ITA No. 1114 to 1116/Mum/2018; and in the case of Surana Enterprises Vs. ITO (ITAT Delhi) ITA No. 5415/Del/2018; and in the case of Hemant M. Mehta HUF Vs. ACIT-33(2) in ITA No. 6483/Mum/2018. On the other hand, the ld. D.R has supported the order of lower authorities. 11. Heard both the sides and perused the material on record. During the course of assessment the A.O had disallowed 100% purchases made by the assessee from the 23 parties on the basis of information received from the DGIT (Inv) that these parties were alleged in providing bogus bill of purchases. The ld. CIT(A) has restricted the disallowance to the extent of 12.5% on such purchases stating that the sales reported by the assessee was not disproved by the A.O. We have gone through the decision of the coordinate benches and the decision of Hon’ble Jurisdictional High Court. It is evident from the findings of the lower authorities that the genuineness of the sales made in comparison of purchases were not doubted. The AO has categorically pointed out at page 5 to 6 of the assessment order that assessee had purchased goods from grey market for benefits of lower duties. With respect to the issue regarding addition in respect of bogus purchases, the Hon’ble jurisdictional High court in the case of Pr. CIT vs. M/s Mohommad Hazi Adam & Co. in ITA No. 1004 of 2016 vide its order dated 11.02.2019 has ITA No.4640/Mum/2018 A.Y.2010-11 Mukesh C. Shah Vs. ITO-24(2)(2) 7 restricted the addition to the extent of the difference in the gross profit not disclosed by the assessee in the alleged bogus purchases. Following the decision of the Hon’ble jurisdictional High Court as supra we restore this issue to the file of the A.O for deciding afresh in the light of the decision of Hon’ble jurisdictional High Court in the case of Pr.CIT Vs. M/s Mohommad Hazi Adam & Co. Accordingly, this ground of appeal of the assessee is allowed for statistical purposes. (v) Ground No.5: Addition of Rs.80,000/- and Rs.80,243/- being capital introduced by the assessee: 12. During the course of assessment the A.O has made addition of Rs.80,000/- u/s 68 of the Act on account of capital introduced by the assessee into the business and Rs.80,243/- u/s 69 of the Act on account of capital introduced by the assessee as partner of M/s Standard Steel Company. 13. The ld. CIT(A) had sustained the disallowance made by the A.O. 14. During the course of appellate proceedings before us the ld. Counsel submitted that aforesaid amount have been invested by the assessee out of his past saving and funds available in the saving bank account. The ld. Counsel has also submitted that copy of confirmation of the transaction with M/s Standard Steel Company and acknowledgment of filing of return of income for A.Y. 2010-11 was also submitted. 15. Heard both the sides and perused the material on record. We consider that it is appropriate to restore this issue also to the file of the A.O for deciding afresh after verification of the relevant detail and ITA No.4640/Mum/2018 A.Y.2010-11 Mukesh C. Shah Vs. ITO-24(2)(2) 8 document mentioned by the ld. Counsel. Accordingly, this ground of appeal is allowed for statistical purposes. (vi) Ground No.6: Interest earned from bank of India of Rs.15,250/- 16. The assessee has not pressed this ground, therefore, this ground of appeal is also stand dismissed. (vii) Ground No.7: Deduction u/s 80C: 17. During the course of assessment the A.O has disallowed deduction u/s 80C amounting to Rs.4,680/- stating that LIC receipt provided by the assessee was not relevant to the assessment year 2010-11. The ld. CIT(A) after considering LIC receipts furnished during the course of remand proceedings directed the A.O to verify the claim of the assessee and give relief to the assessee as per law. After hearing both the side, we direct the A.O to verify the claim of the assessee as per the direction of the ld. CIT(A). Therefore, this ground of appeal is also allowed for statistical purposes. 18. In the result, the appeal of the assessee is partly allowed for statistical purpose. Order pronounced in the open court on 12.08.2022 Sd/- Sd/- (PAVAN KUMAR GADALE) (AMARJIT SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai, Dated 12.08.2022 PS: Rohit ITA No.4640/Mum/2018 A.Y.2010-11 Mukesh C. Shah Vs. ITO-24(2)(2) 9 आदेश की प्रतितिति अग्रेतिि/Copy of the Order forwarded to : 1. अपीलाथी / The Appellant 2. प्रत्यथी / The Respondent. 3. संबंधधत आयकर आयुक्त / The CIT(A) 4. आयकर आयुक्त(अपील) / Concerned CIT 5. धिभागीय प्रधतधनधध, आयकर अपीलीय अधधकरण, अहमदाबाद / DR, ITAT, Mumbai 6. गार्ड फाईल / Guard file. आदेशानुसार/BY ORDER, सत्याधपत प्रधत //True Copy// (Asst. Registrar) ITAT, Mumbai