M/S.CLASSIC METAL, PROP.CHAMPALAL DEVICHAND MEHTA (HUF), MUMBAI V. ITO 19(1)(3), MUMBAI

ITA 4742/MUM/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 4696 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 06-08-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: CHAITNYA ANJARIA
• Assessee Lawyers: POOJA M CHHAWACHHARIA
• Keywords: Bogus purchase; Initiation of penalty proceedings
• Section: 143(3); 147; 148

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL SMC BENCH MU MBAI BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH JUDICIAL MEMBER ITA NO. 4742/MUM/2018 (ASSESSMENT YEAR 2009-10 ) M/S CLASSIC METAL, PROP. CHAMPALAL DEVICHAND MEHTA (HUF), 319, 1 ST FLOOR, ROOM NO.8, JERIWALA BUILDING, SADASHIV CROSS LANE, MUMBAI- 400004. PAN: AAAHM3707Q VS. ITO - 19(1)(3) BKC, BANDRA MUMBAI. APPELLANT RESPONDE NT ITA NO. 4741/MUM/2018 (ASSESSMENT YEAR 2010-11 ) M/S CLASSIC METAL, PROP. CHAMPALAL DEVICHAND MEHTA (HUF), 319, 1 ST FLOOR, ROOM NO.8, JERIWALA BUILDING, SADASHIV CROSS LANE, MUMBAI- 400004. PAN: AAAHM3707Q VS. ITO - 19(1)(3) BKC, BANDRA MUMBAI. APPELLANT RESPONDE NT APPELLANT BY : MS. POOJA M. CHHAWACHHARIA (AR) RESPONDENT BY : SHRI CHAITNYA ANJARIA (DR) DATE OF HEARING : 31.07.2019 DATE OF PRONOUNCEMEN T : 31.07.2019 ORDERUNDER SECTION 254(1)OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER ; 1. THESE TWO APPEAL BY ASSESSEE ARE DIRECTED AGAINST T HE SEPARATE ORDERS OF LD. CIT(A)-29, MUMBAI DATED 11.05.2018 FOR ASSESSME NT YEAR 2009-10 & ASSESSMENT YEAR 2010-11. IN BOTH THE APPEALS, THE ASSESSEE HAS RAISED IDENTICAL GROUNDS OF APPEAL. FACTS FOR BOTH THE ASS ESSMENT YEARS ARE IDENTICAL, THEREFORE, BOTH THE APPEALS WERE CLUBBED , HEARD TOGETHER AND ITA NO. 4741 & 4742 MUM 2018-M/S CLASSIC METAL. 2 ARE DECIDED BY COMMON ORDER. FOR APPRECIATION OF FA CT, THE APPEAL FOR ASSESSMENT YEAR 2009-10 WAS TREATED AS LEAD CASE. I N APPEAL FOR ASSESSMENT YEAR 2009-10, THE ASSESSEE HAS RAISED TH E FOLLOWING GROUNDS OF APPEAL: 1. (A) ON FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, LD. CIT(A) ERRED IN CONFIRMING THE ACTION OF THE A.O AND APPROVING THE ADDITION CALCULATED BY THE A.O ON ALLEGED BOGUS PURCHASES WITHOUT APPRECIA TING THE FACTS THAT THE OPINION OF THE A.O IS BASED ON MERELY PRESUMPTIONS AND SUB CONJECTURES AND NOT ON ANY MATERIAL EVIDENCES CORROBORATING THE PUR CHASES WHEN IT IS AN ACCEPTED FACT THAT MATERIAL EVIDENCES SUPER CEDES A LL PRESUMPTIONS. (B) THE CIT (A) ERRED IN CONFIRMING THE ADDITION WI THOUT APPRECIATING THE UNDERSTATED VITAL FACTS THAT THE PURCHASES ARE DULY SUPPORTED WITH NECESSARY DOCUMENTARY EVIDENCES LINKING THE PURCHAS ES WITH SALES AND THERE APPEARS NO SIGN OF IT BEING BOGUS. (C) THE CIT (A) ERRED IN CONFIRMING THE ADDITION WI THOUT APPRECIATING THE UNDERSTATED VITAL FACTS THAT THE APPELLANT HAS ALRE ADY PAID TAXES AND THE GROSS PROFIT DECLARED BY HIM IN THE SAME YEAR AND T HE INDUSTRY AVERAGE FOR THE TRADER ALSO WAS NOT AS HIGH AS 12.5% G.P. (D) THE LD. CIT(A) HAS ERRED IN HOLDING THE IMPUGNE D PURCHASES TO BE BOGUS, IN SPITE OF VOLUMINOUS EVIDENCES ON RECORD S IMPLY ON THE BASIS THAT THE CURRENT ADDRESSES OF VENDORS WERE NOT PROVIDED AND THE VENDORS WERE NOT PRODUCED BEFORE THE RESPONDENT. (E) THE CIT (A) ERRED IN CONFIRMING THE ADDITION AT 12.5% WHEN ON THE SAME FACTS AND SUBMISSIONS IN THE PREVIOUS YEAR IT WAS RESTRICTED TO 8% BY AN APPELLATE AUTHORITY WHICH ALSO IS TOO HIGH FOR A TRADER WHO HAS ALREADY PAID TAXES ON THE SAME. (1) THE APPELLANT PRAYS THAT THE ADDITION/ DISALLOW ANCE OF ENTIRE 391002/- MADE IN RESPECT OF ALLEGED PURCHASES BE DELETED. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE CIT (A) ERRED IN DISMISSING THE GROUND FOR THE APPELLANT'S PLEA OF W ITHDRAWAL OF INITIATION OF PENALTY PROCEEDINGS U/S 271(1)(C). ITA NO. 4741 & 4742 MUM 2018-M/S CLASSIC METAL. 3 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE-FIRM IS ENGAGED IN THE BUSINESS OF FERROUS AND NON-FERROUS METALS, FILED I TS RETURN OF INCOME FOR ASSESSMENT YEAR 2009-10 DECLARING TOTAL INCOME OF RS. 8,60,946/-. THE RETURN OF INCOME WAS PROCESSED UNDER SECTION 14 3(1). THE ASSESSMENT WAS RE-OPENED UNDER SECTION 147 ON THE B ASIS OF INFORMATION RECEIVED FROM SALE TAX DEPARTMENT, GOVERNMENT OF MA HARASHTRA THAT CERTAIN HAWALA OPERATORS ARE INDULGING IN PROVIDING ACCOMMODATION BILLS WITHOUT ACTUAL DELIVERY OF GOODS. THE SALE TAX DEPA RTMENT, GOVERNMENT OF MAHARASHTRA REFERRED THE LIST OF SUCH HAWALA DEALERS AND THE BENEFICIARY TO THE DGIT(INVESTIGATION), MUMBAI. THE NAME OF ASSESSEE APPEARED IN THE LIST OF BENEFICIARY. THE ASSESSEE ALLEGEDLY MADE THE PURCHASES OF RS. 31,28,015/- FROM SUCH HAW ALA DEALERS. ON THE BASIS OF INFORMATION, THE ASSESSING OFFICER MADE A BELIEF THAT THE INCOME OF THE ASSESSEE ESCAPED ASSESSMENT, THEREFOR E, RE-OPENED THE ASSESSMENT UNDER SECTION 147. NOTICE UNDER SECTION 148 WAS ISSUED ON 28.03.2014 TO THE ASSESSEE. THE ASSESSEE IN RESPONS E TO THE NOTICE UNDER SECTION 148 FILED ITS REPLY DATED 28.03.2014 AND ST ATED THAT ORIGINAL RETURN FILED UNDER SECTION 139(1) BY ASSESSEE BE TR EATED AS RETURN IN RESPONSE TO THE SAID NOTICE. THE ASSESSING OFFICER AFTER SERVING NOTICE UNDER SECTION 143(2) DATED 26.11.2014 PROCEEDED FOR RE-ASSESSMENT. DURING THE ASSESSMENT, THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS SHOWN PURCHASES FROM THE FOLLOWING PARTIES, WHICH W AS DECLARED AS ITA NO. 4741 & 4742 MUM 2018-M/S CLASSIC METAL. 4 HAWALA DEALERS BY THE SALE TAX DEPARTMENT, GOVERNME NT OF MAHARASHTRA. NAME OF THE PARTIES BILL AMOUNT (RS.) 1 CHIRAG CORPORATION 85,280/- 2 ADINO TRADING COMPANY LTD. 8,21,382/- 2 SHREE MAHAVIR ENTERPRISES 22,21,353/- TOTAL 31,28,015/- 3. THE ASSESSEE WAS ASKED TO SUBSTANTIATE THE PURCHASE S AND TO FURNISH THE NAME OF DEALERS, PAN, BILLS, VOUCHERS, DESCRIPTION OF GOODS, QUANTITY, RATE AND AMOUNT. THE DATE OF DISPATCH OF GOODS AND THE NAME OF PLACE ALONG WITH MODE OF TRANSPORTATION BY ROAD OR OTHER MODE, VEHICLE NUMBER, AND PAYMENT DETAILS. THE ASSESSEE WAS ALSO ASKED TO FURNISH THE CORRESPONDING SALES OF GOODS. THE ASSESSING OFF ICER NOTED THAT THE ASSESSEE VIDE REPLY DATED 27.01.2015 STATED THAT TO BUY-PEACE. THE ASSESSEE IS AGREEABLE FOR ADDITION AT REASONABLE LO WER RATE. THE ASSESSING OFFICER AFTER CONSIDERING THE MATERIAL BE FORE HIM AND CONTENTION OF ASSESSEE DISALLOWED 12.5% OF THE AGGR EGATE OF TOTAL OF NON-GENUINE/ALLEGED HAWALA PURCHASES IN ASSESSMENT ORDER DATED 31.01.2015 PASSED UNDER SECTION 143(3) R.W.S 147. 4. ON APPEAL BEFORE THE LD. CIT(A), THE ACTION OF ASSE SSING OFFICER AND DISALLOWANCES MADE ON ACCOUNT OF BOGUS PURCHASES WA S SUSTAINED. FURTHER, AGGRIEVED BY THE ORDER OF LD. CIT(A), THE ASSESSEE HAS FILED THE PRESENT APPEAL BEFORE US. ITA NO. 4741 & 4742 MUM 2018-M/S CLASSIC METAL. 5 5. WE HAVE HEARD THE SUBMISSION OF LD. AUTHORIZED REPR ESENTATIVE (AR) OF THE ASSESSEE AND LD. DEPARTMENTAL REPRESENTATIVE (D R) FOR THE REVENUE AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE L D. AR OF THE ASSESSEE SUBMITS THAT THE ASSESSEE FURNISHED COMPLETE DETAIL S OF PURCHASES AND THE SALES MADE AGAINST THE ALLEGED BOGUS PURCHASES. THE ASSESSING OFFICER HAS NOT REJECTED THE BOOKS OF ACCOUNT. THE ASSESSING OFFICER MADE THE DISALLOWANCE OF 12.5% OF THE ALLEGED BOGUS PURCHASES. THE LD. AR OF THE ASSESSEE FURTHER SUBMITS THAT ASSESSEE HA S ALREADY SHOWN GROSS PROFIT (GP) RATE AT 5%. THE ADDITION SUSTAINE D ON ACCOUNT OF ALLEGED BOGUS PURCHASES IS ON HIGHER SIDE. THE LD. AR OF THE ASSESSEE FURTHER SUBMITS THAT THE HONBLE BOMBAY HIGH COURT IN A RECENT DECISION ON SIMILAR SET OF FACT IN PCIT VS. M HAJI ADAM & CO. IN ITA NO. 1004 OF 2016 DATED 11.02.2019 HELD THAT ADDITIO N IN RESPECT OF BOGUS PURCHASES IS TO BE LIMITED TO THE EXTENT OF B RINGING THE GP RATE ON SUCH PURCHASE AT THE SAME RATE AS ON OTHER GENUINE PURCHASES. THE LD. AR OF THE ASSESSEE SUBMITS THAT THE DISALLOWANCE OF ALLEGED BOGUS PURCHASE MAY BE RESTRICTED IN ACCORDANCE WITH THE D ECISION OF HONBLE JURISDICTIONAL HIGH COURT IN PCIT VS. M HAJI ADAM & CO. (SUPRA). 6. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESENTAT IVE (DR) FOR THE REVENUE SUPPORTED THE ORDER OF LOWER AUTHORITIES. T HE LD. DR FURTHER SUBMITS THAT INVESTIGATION WING OF INCOME-TAX DEPAR TMENT HAS MADE FULL-FLEDGED INVESTIGATION IN RESPECT OF HAWALA TRA DERS. THE HAWALA ITA NO. 4741 & 4742 MUM 2018-M/S CLASSIC METAL. 6 TRADERS WERE/ARE ENGAGED IN PROVIDING BOGUS BILL WI THOUT ACTUAL DELIVERY OF GOODS. THE ASSESSEE HAS SHOWN BOGUS PURCHASES ON LY TO INFLATE THE PROFIT. THE LD. DR FOR THE REVENUE SUBMITS THAT THE ASSESSING OFFICER HAS GIVEN SUFFICIENT RELIEF. THE ASSESSING OFFICER HAS REASONABLY ESTIMATED THE DISALLOWANCES. THE ASSESSEE IS NOT ENTITLED FOR ANY FURTHER RELIEF. 7. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE REPR ESENTATIVES AND PERUSED THE RECORD. WE HAVE NOTED, THOUGH THE ASSES SEE HAS RAISED GROUND AGAINST THE RE-OPENING, HOWEVER, NO SUBMISSI ON ON THE VALIDITY/INVALIDITY OF RE-OPENING IS MADE BY LD. AR FOR THE ASSESSEE. THEREFORE, THE GROUND RELATED TO RE-OPENING IS TREA TED AS NOT PRESSED AND DISMISSED. SO FAR AS THE GROUND RELATED TO ESTIMATE D DISALLOWANCE @ 12.5%, THE LD. AR OF THE ASSESSEE HAS VEHEMENTLY RE LIED UPON THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN M HAJI ADAM & CO.(SUPRA). WE HAVE NOTED THAT ON SIMILAR SET OF FA CT, THE HONBLE BOMBAY HIGH COURT IN PCIT VS. M HAJI ADAM & CO. (SU PRA) HELD THAT ADDITION IN RESPECT OF BOGUS PURCHASE BE LIMITED TO THE EXTENT OF BRINGING THE GP RATE ON BOGUS PURCHASE AT THE SAME RATE AS O THER GENUINE PURCHASES. WE HAVE FURTHER NOTED THAT THE ASSESSEE HAS SHOWN GP OF 5%. THEREFORE, RESPECTFULLY FOLLOWING THE ORDER OF HON BLE BOMBAY HIGH COURT, WE DIRECT THE ASSESSING OFFICER TO RESTRICT THE ADDITION WITH REGARD TO BOGUS PURCHASES BY BRINING THE GP RATE ON SUCH PURCHASES AT THE SAME RATE AS THAT OF OTHER GENUINE PURCHASES. N EEDLES TO ORDER THAT ITA NO. 4741 & 4742 MUM 2018-M/S CLASSIC METAL. 7 BEFORE MAKING ADDITION, THE ASSESSING OFFICER SHALL GRANT OPPORTUNITY TO THE ASSESSEE BEFORE PASSING THE ORDER IN ACCORDANCE WITH LAW. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALL OWED. ITA NO. 4741/MUM/2018 A.Y. 2010-11 9. AS WE HAVE NOTED ABOVE, THE ASSESSEE HAS RAISED THE IDENTICAL GROUNDS OF APPEAL AS RAISED IN APPEAL FOR ASSESSMENT YEAR 2009 -10. THE DISALLOWANCES MADE BY ASSESSING OFFICER ON ACCOUNT OF ALLEGED BOGUS PURCHASES ARE ALSO SIMILAR EXCEPT THE FACT THAT PAR TIES/ALLEGED HAWALA DEALERS ARE DIFFERENT. CONSIDERING OUR ORDER FOR AS SESSMENT YEAR 2009- 10 ON SIMILAR GROUND, THE APPEAL FOR THE YEAR UNDER CONSIDERATION IS ALSO ALLOWED WITH SIMILAR DIRECTION. 10. IN THE RESULT, APPEAL OF THE ASSESSEE FOR BOTH THE AYS ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 31/07/2019. SD/- SD/- SHAMIM YAHYA PAWAN SINGH ACCOUNTANT MEMBER J UDICIAL MEMBER MUMBAI, DATE: 31.07.2019 SK COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. DR SMC BENCH, ITAT, MUMBAI 6. GUARD FILE BY ORDER, DY./ASST. REGISTRAR ITAT, MUMBAI