MOHD ISMAIL I A SHAIKH, MUMBAI V. ITO 26(3)(4), MUMBAI

ITA 4642/MUM/2018

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 4204 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-10-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2009-2010
• Appeal Filed On: 30-07-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AKHTAR HANSARI
• Keywords: Bogus purchase
• Section: 142(1); 143(1); 147; 148; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH D, MUMBAI BEFORE SHRI VIKAS AWASTHY, JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA NO.4642/M/2018 ASSESSMENT YEAR: 2009-10 M/S. MOHD. ISMAIL I.A. SHAIKH, (PROP. SARCO WIRE TRADERS) SHOP NO.21, 4 TH LANE, TAAR BAZAR, KURLA ANDHERI ROAD, SAKINAKA, MUMBAI 400 072 PAN: AKHPS5579E VS. ITO 26(3)(4) MUMBAI (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : NONE REVENUE BY : SHRI AKHTAR H. ANSARI, D.R. DATE OF HEARING : 01.10.2020 DATE OF PRONOUNCEMENT : 27.10.2020 O R D E R PER RAJESH KUMAR, ACCOUNTANT MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSESSEE AGAINST THE ORDER DATED 27.02.2018 OF THE COMMISSIONER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS THE CIT(A)] RELEVANT TO ASSESSMENT YEAR 2009-10. 2. THE ASSESSEE HAS CHALLENGED THE ORDER OF LD. CIT(A) ON JURISDICTIONAL ISSUE AS WELL AS ON MERIT. 3. AT THE TIME OF HEARING WHEN THE CASE WAS CALLED UP FOR HEARING NONE ATTENDED ON BEHALF THE ASSESSEE NOR ANY APPLICATION SEEKING ADJOURNMENT WAS FILED AND THEREFORE THE ITA NO.4642/M/2018 M/S. MOHD. ISMAIL I.A. SHAIKH 2 CASE IS BEING DECIDED ON MERIT EX-PARTE. WE ARE INCLINED TO ADJUDICATE THE ISSUE ON MERIT ONLY AND NOT ON JURISDICTIONAL ISSUE. 4. THE FACTS IN BRIEF ARE THAT THE ASSESSEE FILED THE RETURN OF INCOME ON 01.10.2009 DECLARING AN INCOME OF RS.1,43,567/- WHICH WAS PROCESSED UNDER SECTION 143(1) OF THE ACT. THEREAFTER, THE CASE OF THE ASSESSEE WAS REOPENED UNDER SECTION 148 OF THE ACT BY ISSUING NOTICE DATED 18.03.2013 AFTER AO RECEIVED INFORMATION FROM DGIT (INV.) WING, MUMBAI THAT ASSESSEE IS BENEFICIARY OF HAWALA PURCHASE ENTRIES FROM THREE PARTIES AGGREGATING TO RS.51,21,288/-. THE NOTICE ISSUED UNDER SECTION 148 OF THE ACT WAS NOT COMPLIED WITH BY THE ASSESSEE. THEREAFTER AGAIN NOTICE UNDER SECTION 142(1) OF THE ACT WAS BY ISSUED A COUPLE OF TIMES WHICH WERE DULY SERVED ON THE ASSESSEE WITH NO COMPLIANCE ON THE PART OF THE ASSESSEE. FINALLY A SHOW CAUSE NOTICE WAS TO THE ASSESSEE DATED 04.02.2015 CALLING UPON THE ASSESSEE TO FURNISH VARIOUS EVIDENCES TO PROVE THE GENUINENESS OF THE PURCHASES FROM THREE PARTIES. EVEN THEN THE ASSESSEE DID NOT RESPOND TO THE SAID SHOW CAUSE NOTICE. FINALLY, ASSESSMENT WAS FRAMED UNDER SECTION 144 READ WITH SECTION 147 OF THE ACT BY ADDING ENTIRE BOGUS PURCHASES TO THE INCOME OF THE ASSESSEE. 5. IN THE APPELLATE PROCEEDINGS, THE LD. CIT(A) PARTLY ALLOWED THE APPEAL OF THE ASSESSEE BY SUSTAINING THE ADDITION TO THE EXTENT OF 25% OF THE BOGUS PURCHASES THEREBY CONFIRMING RS.12,80,322/- BY FOLLOWING THE DECISIONS OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. SIMIT P. SHETH (2013) 356 ITR 451 (GUJ) , CIT VS. VIJAY M. MISTRY CONSTRUCTION LTD. (2013) 355 ITA NO.4642/M/2018 M/S. MOHD. ISMAIL I.A. SHAIKH 3 ITR 498 (GUJ) AND CIT VS. BHOLANATH POLY FAB (P.) LTD. (2013) 355 ITR 290 (GUJ) AND BY HOLDING THAT IT IS ONLY THE PROFIT ELEMENT WHICH HAS TO BE ASSESSED TO TAX AND NOT THE ENTIRE PURCHASES. 6. AFTER HEARING THE LD. D.R AND PERUSING THE MATERIAL ON RECORD, WE OBSERVE THAT THE ASSESSEE IS A SCRAP DEALER AND GP DURING THE YEAR WAS 4.04%. IN PRINCIPLE ,WE ARE IN AGREEMENT WITH THE FINDING OF THE LD. CIT(A) THAT IT IS ONLY THE NET PROFIT WHICH CAN BE BROUGHT TO TAX AND NOT THE ENTIRE PURCHASES, HOWEVER, CONSIDERING THE NATURE OF BUSINESS OF THE ASSESSEE AND THE MARGIN ON THE TRADING, WE FIND THE ADDITION SUSTAINED BY LD. CIT(A) IS ON THE HIGHER SIDE AND IS UNREASONABLE. IN OUR OPINION, IN SUCH TYPE OF CASES THE NORMAL PRESUMPTION IS THAT ASSESSEE MIGHT HAVE PURCHASED THE GOODS FROM THE GREY MARKET THEREBY SAVING INCIDENTAL EXPENSES THEREBY EARNING A HIGHER PROFIT THAN THE NORMAL PROFITS. THEREFORE, IN OUR OPINION, IT WOULD BE FAIR AND REASONABLE IF A RATE OF 8 % IS APPLIED ON THE SAID ALLEGED BOGUS PURCHASES. ACCORDINGLY, WE DIRECT THE AO TO APPLY GP @ 8%. THE ORDER OF LD CIT(A) IS MODIFIED, ACCORDINGLY. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 27.10.2020. SD/- SD/- (VIKAS AWASTHY) (RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 27.10.2020. * KISHORE, SR. P.S. ITA NO.4642/M/2018 M/S. MOHD. ISMAIL I.A. SHAIKH 4 COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.