MILAN TUBE TOOLS CORPORATION, MUMBAI V. ACIT-17(2), MUMBAI

ITA 4801/MUM/2018

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 5601 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-09-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2009-2010
• Appeal Filed On: 09-08-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AKHTAR ANSARI
• Keywords: Bogus purchase; Principle of natural justice
• Section: 143(3)

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI SHRI SHAMIM YAHYA (AM) & SHRI PAVAN KUMAR GADALE (JM) I.T.A. NO. 4801/MUM/2018 (ASSESSMENT YEAR 2009-10 ) MILAN TUBE TOOLS CORPORATION 116, NAGDEVI STREET NAGDEVI, MUMBAI-400 003. VS . ACIT-17(2) AAYAKAR BHAVAN MUMBAI (APPELLANT) (RESPONDENT) I.T.A. NO. 5029/MUM/2018 (ASSESSMENT YEAR 2009-10) ACIT-17(2) AAYAKAR BHAVAN MUMBAI VS . MILAN TUBE TOOLS CORPORATION 116, NAGDEVI STREET NAGDEVI, MUMBAI-400 003. ( APPELLANT ) ( RESPONDENT ) PAN : AAAFM3296Q ASSESSEE BY NONE DEPARTMENT BY SHRI AKHTAR ANSARI DATE OF HEARING 14.09 . 20 20 DATE OF PRONOUNCEMENT 17.09.2020 O R D E R PER SHAMIM YAHYA (AM) :- THESE ARE APPEALS BY THE REVENUE AND ASSESSEE ARISI NG OUT OF THE ORDER OF LEARNED CIT(A) DATED 20.6.2018 PERTAIN TO A.Y. 200 9-10. 2. IN THE APPEAL BY THE REVENUE IS AGGRIEVED THAT T HE LEARNED CIT(A) HAS REDUCED THE ADDITION FOR BOGUS PURCHASE OF RS. 12,7 7,831/- DONE @ 11.05% BY THE ASSESSING OFFICER BY SUSTAINING 5.25%. 3. IN THE CROSS APPEAL ASSESSEE HAS CHALLENGED THE ORDER OF LEARNED CIT(A) ON FOLLOWING GROUNDS :- 1. ON FACTS AND IN LAW, THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) (HEREINAFTER REFERRED TO AS THE 'LD. CIT(A)') HAD FAILED TO APPRECIATE THAT THE JURISDICTIONAL CONDITIONS PRECEDENT TO ISSUE O F NOTICE U/S.148 NOT COMPLIED, THE ASSESSMENT MADE U/S. 143(3) R.W.S. 147 IS BAD-IN-LAW. MILAN TUBE TOOLS CORPORATION 2 2. ON FACTS AND IN LAW, THE LD. CIT(A) HAD ERRED IN HOLDING THAT THE PROCEEDINGS U/S. 147 ARE NOT BAD-IN-LAW. 3. ON FACTS AND IN LAW, THE LD. CIT(A) HAD ERRED IN C ONFIRMING THE ADDITION OF RS.6,07,114/- BEING THE GROSS PROFIT @ 5. 25% OF THE ALLEGED PURCHASES OF RS. 1,15,64,080/- WITHOUT APPRECIATING THE FACT THAT THE APPELLANT HAS ALREADY SHOWN THE GROSS PROFIT @ 13.97% , 23.83%, 11.22%, 11.79% & 17.03% FROM M/S. A.P. ENTERPRISES, M/S.VID HI AND VRUSHTI TRADE PVT. LTD., M/S. PUSHTI IMPEX, M/S.PARAS (INDIA) AND M /S. KAVISH INTERNATIONAL RESPECTIVELY, ON THE SAID PURCHASES. UNDER THE FACTS AND CIRCUMSTANCES OF THE MATTER, THE ID. CIT(A) OUGHT TO H AVE DIRECTED THE LEARNED ASSESSING OFFICER (LAO) TO DELETE ENTIRE ADDITION MA DE BY LAO. 4. ON FACTS AND IN LAW, THE LD. CIT(A) HAD ERRED IN C ONFIRMING THE ADDITION OF RS.6,07,114/-WITHOUT APPRECIATING THE FACT TH AT NEITHER STATEMENTS OF THE PERSON CONCERNED WAS GIVEN TO THE APP ELLANT NOR ANY OPPORTUNITY TO CROSS EXAMINE THE PERSON WAS GIVEN TO TH E APPELLANT, WHICH IS AGAINST THE PRINCIPLES OF NATURAL JUSTICE. 5. ON FACTS AND IN LAW, THE LD. CIT(A) HAD ERRED IN C ONFIRMING THE ADDITION IN THE ABSENCE OF DELIVERY CHALLANS, TRANSPO RT RECEIPT, OTHER RECEIPTS, ETC. WITHOUT APPRECIATING THE SUBMISSIONS MADE BY THE A PPELLANT IN THIS REGARD. UNDER THE FACTS AND CIRCUMSTANCES OF THE MAT TER, THE LD. CIT(A) OUGHT TO HAVE DELETED THE SAID ADDITION. 6. ON FACTS AND IN LAW, THE LD. CIT(A) HAD FAILED TO APPRECIATE THAT SALES- TAX PAID CHALLAN AND CONFIRMATIONS OF M/S.A.P. ENTERP RISES, M/S.VIDHI AND VRUSHTI TRADE PVT. LTD. AND M/S.KAVISH INTERNATIONA L WERE ALSO SUBMITTED BEFORE HIM. UNDER THE FACTS AND CIRCUMSTANCES OF THE M ATTER, THE LD. CIT(A) OUGHT TO HAVE DELETED THE SAID ADDITION. 4. THE ASSESSEES BUSINESS HAS NOT BEEN MENTIONED I N THE ASSESSMENT ORDER. THE ASSESSMENT WAS REOPENED UPON INFORMATION FROM SALES TAX DEPARTMENT THAT ASSESSEE HAS MADE PURCHASES FROM BO GUS DEALERS. THE AO MADE 11.05% ADDITION OF THE BOGUS PURCHASE ON THE B ASIS OF PAST 3 YEARS GP RATE AMOUNTING TO RS. 12,77,831/-. 5. UPON ASSESSEE'S APPEAL LEARNED CIT-A HAS NOTED T HAT THE SALES HAS NOT BEEN DOUBTED. THE ASSESSEE ALSO STATED THAT HE HAS ALREADY SHOWN SUFFICIENT PROFIT ON THE IMPUGNED SALES AT A HIGHER RATE. ACCO RDINGLY PLACING RELIANCE UPON SEVERAL CASE LAWS AND UP ON THE FACTS OF THE C ASE HE SUSTAINED 5.25% DISALLOWANCE OUT OF THE BOGUS PURCHASES. MILAN TUBE TOOLS CORPORATION 3 6. AGAINST ABOVE ORDER REVENUE AND ASSESSEE ARE IN APPEAL BEFORE THE ITAT. WE HAVE HEARD LEARNED DEPARTMENTAL REPRESENTATIVE A ND PERUSED THE RECORD. WE FIND THAT IN THIS CASE THE SALES HAVE NOT BEEN D OUBTED IT IS SETTLED LAW THAT WHEN SALES ARE NOT DOUBTED, HUNDRED PERCENT DISALLO WANCE FOR BOGUS PURCHASE CANNOT BE DONE. THE RATIONALE BEING NO SALES IS POS SIBLE WITHOUT ACTUAL PURCHASES. THIS PROPOSITION IS SUPPORTED FROM HONOU RABLE JURISDICTIONAL HIGH COURT DECISION IN THE CASE OF NIKUNJ EXIMP ENTERPRI SES (IN WRIT PETITION NO 2860, ORDER DT. 18.6.2014). IN THIS CASE THE HONOUR ABLE HIGH COURT HAS UPHELD HUNDRED PERCENT ALLOWANCE FOR THE PURCHASES SAID TO BE BOGUS WHEN SALES ARE NOT DOUBTED. HOWEVER THE FACTS OF THE PRESENT CASE INDICATE THAT ASSESSEE HAS MADE PURCHASE FROM THE GREY MARKET. MAKING PURCHASE S THROUGH THE GREY MARKET GIVES THE ASSESSEE SAVINGS ON ACCOUNT OF NON -PAYMENT OF TAX AND OTHERS AT THE EXPENSE OF THE EXCHEQUER. 7. IN THE CASE OF M. HAZI ADAM & CO. (ITA NO. 1004 OF 2006 DATED 11.2.2019, HON'BLE BOMBAY HIGH COURT HAS HELD THAT THE DISALLOWANCE IN THE CASE OF BOGUS PURCHASE SHOULD BE RESTRICTED TO DIFF ERENCE BETWEEN THE GROSS PROFIT EARNED BY THE ASSESSEE ON GENUINE PURCHASES AND THE SAID BOGUS PURCHASES. IN THIS VIEW OF THE MATTER THE ASSESSEE GROUND THAT HE HAS ALREADY SHOWN SUFFICIENT PROFIT ON THE IMPUGNED PURCHASE IS ACCEPTABLE. THE ASSESSING OFFICER IS DIRECTED TO EXAMINE THE CLAIM OF THE ASS ESSEE AND GRANT THE NECESSARY RELIEF IN ACCORDANCE WITH THE ABOVE DECIS ION OF HON'BLE BOMBAY HIGH COURT. 8. IN THE RESULT, THIS APPEAL FILED BY THE REVENUE STANDS DISMISSED AND APPEAL BY THE ASSESSEE STANDS PARTLY ALLOWED. ORDER PRONOUNCED UNDER RULE 34(4) OF THE ITAT RULE S ON 17.9.2020. SD/- SD/- (PAVAN KUMAR GADALE) (SHAMIM YAHYA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI; DATED : 17/09/2020 MILAN TUBE TOOLS CORPORATION 4 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// ( ASSISTANT REGISTRAR) PS ITAT, MUMBAI