SHYAM K GYANCHANDANI, ULHASNAGAR V. DCIT CIR 2, KALYAN

ITA 4846/MUM/2016

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 1268 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 4 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-11-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 20-07-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: AGAINST DATED PASSED
• Keywords: Bogus purchase; Opportunity of being heard; Additional evidence; Cost of acquisition; Accommodation entries
• Section: 271(1)(c); 69C; 142(1); 40(a)(ia); 133(6); 201(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUMBAI BEFORE SHRI RAJESH KUMAR , AM AND SHRI AMARJIT SINGH , JM I.T.A. NO . 4846 /M/ 20 1 6 ( ASSESSMENT YEAR : 2011 - 12 ) SHYAM K. GYANCHANDANI 402, SHREE GANPATI PLAZA, CHOPRA COURT, ULHASNAGAR - 421003 . VS. ACIT, CIRCLE - 2, OFFICE OF DEPUTY COMMR. OF INCOME TAX, 2 ND FLOOR, MOHAN PLAZA, WAYALE NAGAR, KALYAN (W) - 421301 ./ ./ PAN/GIR NO. : AAZPG 6917 H ( APPELLANT ) .. ( RESPONDENT ) DATE OF HEARING : 03 . 10 .2018 DATE OF PRONOUNCEMENT : 28.1 1. 201 8 O R D E R PER AMARJIT SINGH, JM: THE PRESENT APPEA L HA S BEEN FILED BY THE ASSESSEE AGAINST THE ORDER DATED 09 . 03 .201 6 PASSED BY THE COMMIS S IONER OF INCOME TAX (APPEALS) - 3 , THANE [HEREINAFTER REFERRED TO AS THE CIT(A)] RELEVANT TO THE ASSESSMENT YEAR 20 11 - 12 . 2 . THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: - 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, FIRST APPELLATE AUTHORITY ERRED IN DISALLOWING THE SUM OF RS.13,25,460/ - ON ACCOUNT OF NON DEDUCTION OF TAX AT SOURCE, ASSESSEE BY: SHRI HARI H. DUDANI DEPARTMENT BY: SHRI RAJEEV GUBGOTRA ( DR) ITA. NO. 4846 /M/201 6 A.Y. 2011 - 12 2 WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE IS NOT ASSESSEE IN DEFAULT AS PER FIRST PROVISO TO SECTION 201(1). SO THE ACTION TAKEN BY T HE FIRST APPELLATE AUTHORITY IS BAD IN LAW AND THE SAME SHALL BE ALLOWED FROM COMPUTATION OF TAXABLE INCOME. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, FIRST APPELLATE AUTHORITY ERRED IN MAKING ADDITION U/S 69C OF THE ACT TO THE TUNE OF RS.49,96,826/ - BEING 25% OF RS.1,99,87,304 AS ASSUMED INFLATED PURCHASE COST. THE FIRST APPELLATE AUTHORITY HAS NOT APPRECIATED THE FACT THAT THE ASSESSEE IS TRADER AND HAS SOLD THE ABOVE GOODS PURCHASED AND HAD OFFERED THE TAX ON THE IN COME EARNED ON THE ABOVE PURCHASES. SO THE ACTION TAKEN BY THE FIRST APPELLATE AUTHORITY IS BAD IN LAW AND ADDITION MADE ABOVE SHALL BE DELETED. REFERENCE TO VARIOUS JUDGMENTS FAVOURING ARE CITED IN BELOW CASE LAWS FOR YOUR PERUSAL ON WHICH WE PLACE OU R RELIANCE: SH RI GANPATRAJ A SANGHAVI V/S ACIT 15(3) ITA. NO. 2826/M/2013 (AND ALL OTHER CASE LAWS, ASSESSEE IS RELYING ARE GIVEN IN FACTS OF THE CASES) 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, AND I LAW, THE APPELLANT PRAISE FOR QUASHING THE PE NALTY PROCEEDINGS INITIATED BY AO UNDER SEC.274 R.W. 271(1)(C) OF THE ACT. 4. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER OR VARY ANY GROUND OF APPEAL ON OR BEFORE THE HEARING OF THE APPEAL. 5. KINDLY STAY THE DEMAND. 3 . THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED HIS RETURN OF INCOME ON 27 . 09 .20 1 1 DECLARING TOTAL IN COME TO THE TUNE OF RS.15,28,744 / - FOR THE A.Y 2011 - 12 . THE CASE WAS SELECTED FOR SCRUTINY. THEREFORE, THE STATUTORY NOTICES U/S 143(2) & 142(1) OF THE ACT WERE ISSUED AND SERVED UPON THE ASSESSEE. THE ASSESSEE IS CARRYING ON BUSINESS OF TRADING IN LDO & FURNACE OIL UNDER THE NAME & STYLE OF M/S. S.K. ENTERPRISES. DURING THE YEAR UNDER CONSIDERATION, THE GROSS TURNOVER WAS TO THE TUNE OF RS. 15,68,62,434/ - AN D NET PROFIT WAS DECLARED TO THE TUNE OF RS.16,57,172/ - . THE ASSESSEE DEBITED CERTAIN EXPENSES TO THE P&L ITA. NO. 4846 /M/201 6 A.Y. 2011 - 12 3 ACCOUNT BUT TDS WAS NOT DEDUCTED, THEREFORE, THE TOTAL AMOUNT TO THE TUNE OF RS.13,25,460/ - WAS DISALLOWED IN VIEW OF THE PROVISION U/S 40(A)(IA) OF T HE ACT AND ADDED TO THE INCOME OF THE ASSESSEE. THE ASSESSEE ALSO MADE SOME PURCHASES TO THE TUNE OF RS.1,99,87,304/ - FROM RUMEET ENTERPRISES AND MUMBAI TRADING COMPANY AND THE SAID PARTIES WERE HAWALA DEALERS, THEREFORE, NOTICES U/S 40(A)(IA) OF THE ACT W ERE ISSUED AND FINDING NO JUSTIFIABLE EXPLANATION, THE SAID AMOUNT WAS ADDED TO THE INCOME OF THE ASSESSEE. THE TOTAL INCOME OF THE ASSESSEE WAS ASSESSED TO THE TUNE OF RS.2,28,41,507/ - . FEELING AGGRIEVED, T HE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A) WHO RESTRICTED THE CLAIM OF BOGUS PURCHASE TO THE EXTENT OF 25% OF THE TOTAL PURCHASE TO THE TUNE OF RS.1,99,87,304 / - AND REJECTED THE CLAIM TO THE TUNE OF RS.13,25,460/ - U/S 40(A)(I A) OF THE ACT ON ACCOUNT OF NON - DEDUCTION TAX U/S 194A OF THE ACT, THEREFORE, THE ASSESSEE FILED THE PRESENT APPEAL BEFORE US. ISSUE NO . 1 : - 4 . UNDER THIS ISSUE THE ASSESSEE HAS CHALLENGED THE CONFIRMATION OF THE DISALLOWANCE TO THE TUNE OF RS.13,25,460 / - ON ACCOUNT OF NON - DEDUCTION OF TAX AT SOURCE. THE LD. REPRESENTATIVE OF THE ASSESSEE HAS ARGUED THAT THE ASSESSEE WAS NOT IN DEFAULT AS PER THE PROVISO TO SECTION 201(1) OF THE ACT BECAUSE THE PAYEE HAD DEPOSITED THE TAX UPON THE AMOUNT PAID BY ASSESSEE, THEREFORE, IN THE SAID CIRCUMSTANCES, THE CLAIM OF THE ASSESSEE IS LIABLE TO BE ALLOWED. IT IS ALSO ARGUED THAT THE ASSESSEE WAS NOT IN POSSESSION OF THE DOCUMENTS/RETURN OF INCOME OF THE PAYEE IN WHICH THE ITA. NO. 4846 /M/201 6 A.Y. 2011 - 12 4 PAYEE HAD DEPOSITED THE TAX UPON THE PAYMENT MADE BY ASSESSEE BUT THE ASSESSEE HAS NOW IN POSSESSION OF THE SAME, T HEREFORE, T HE ASSESSEE SHOULD BE ALLOWED TO ADDUCE THE EVIDENCE IN SUPPORT OF THE CLAIM . T HE ASSESSEE ALSO FURNISHED THE CERTIFICATE PRODUCED ON BEHALF OF RELIGARE FINANCE LTD. IN WHICH TAX UPON THE PAID AMOUNT BY THE ASSESSEE HAS PROPERLY BEEN PAID, THEREFORE, THE ASSESSEE IS REQUIRED TO BE ALLOWED TO PUT HIS VERSION IN ACCORDANCE WITH LAW. HOWEVER, ON THE OTHER HAND, THE LD. REPRESENTATIVE OF THE DEPARTMENT HAS REFUTED THE SAID CONTENTION AND ARGUED THAT NO CONFIRMATION OF ANY KIND WAS PROD UCED BEFORE THE AUTHORITY BELOW, THEREFORE, THE CLAIM OF ASSESSEE IS NOT LIABLE TO BE ALLOWABLE. TAKING INTO ACCOUNTS , ALL THE FACTS AND CIRCUMSTANCES, WE NOTICED THAT THE RELIGARE FINANCE LTD. HAS FURNISHED THE STATEMENT IN WHICH THE TAX AMOUNT HAS BEEN PAID UPON THE PAYMENT MADE BY ASSESSEE. NO NEW EVIDENCE IS GOING TO BE PRODUCED . T HE EVIDENCE IS ONLY IN CONNECTION WITH THE RELEVANT PERIOD. THE CLAIM OF THE ASSESSEE IS LIABLE TO BE EXAMINED IN VIEW OF PROVISO TO SECTION 201(1) OF THE I.T. ACT, 1961, THEREFORE, IN THE SAID CIRCUM STANCES, WE SET ASIDE THE FINDING OF THE CIT(A) ON THIS ISSUE AND RESTORED THE ISSUE BEFORE THE AO TO DECIDE THE MATTER AFRESH BY GIVING AN OPPORTUNITY OF BEING HEARD TO THE ASSESSEE IN ACCORDANCE WITH LAW AND ALSO BY CONSIDERING THE ADDITIONAL EVIDENCE PR ODUCED BEFORE US . ACCORDINGLY, THIS ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE AGAINST THE REVENUE. I SSUE NO . 2 : - ITA. NO. 4846 /M/201 6 A.Y. 2011 - 12 5 5. UNDER THIS ISSUE THE ASSESSEE HAS CHALLENGED OF THE ADDITION TO THE EXTENT OF 25% OF THE BOGUS PURCHASE TO THE TUNE OF RS.1,99,87,304/ - U/S 69C OF THE ACT, 1961. IT IS ARGUED THAT THE GROSS PROFIT OF THE ASSESSEE IN THE YEAR OF 2009 - 10 WAS TO THE TUNE OF RS.5.04% WHEREAS THE NET PROFIT WAS TO THE TUNE OF RS.0.57% AND THE GROSS PROFI T IN THE YEAR OF 2010 - 11 WAS @ 5.00% WHEREAS THE NET PROFIT WAS TO THE TUNE OF RS.1% AND THE GROSS PROFIT IN THE YEAR 2011 - 12 WAS @ 5.08% WHEREAS THE NET PROFIT RATIO WAS @1.06%, THEREFORE, IN THE SAID CIRCUMSTANCES, THE ADDITION TO THE EXTENT OF 25% OF TH E BOGUS PURCHASE IS VERY HIGH WHICH IS LIABLE TO BE REDUCED OR DELETED IN VIEW OF THE LAW SETTLED IN CIT VS. NIKUNJ EXIM ENTERPRISES P. LTD. (372 ITR 619), GANPATRAJ VS. ACIT 15(3) , RAMESH KUMAR VS. ACIT 21(1) IN ITA. NO. 2959/M/2014 AND BABULAL C. BORANA VS. ITO (2005) 195 CTR BOM 199, 2006 282 ITR 251 (BOM) AND M/S. FANCY WEAR VS. ITO IN ITA. NO. 1596/M/2016 ETC. HOWEVER, ON THE OTHER HAND, THE LD. REPRESENTATIVE OF THE DEPARTMENT HAS REFUTED THE SAID CONTENTION. IN VIEW OF THE ARGUMENT ADVANCED BY THE LD. REPRESENTATIVE OF THE PARTIES AND PERUSING THE RECORD, W E NOTICED THAT THE AO HAS CONDUCTED THE REASONABLE ENQ UIRY AND ARRIVED AT THIS CONCLUSION THAT THE ASSESSEE HAS TAKEN THE ACCOMMODATION ENTRIES FROM RUMEET ENTERPRISES IN SUM OF RS.1,73,26,679/ - AND ACCOMMODATION ENTRIES FROM MUMBAI TRADING COMPANY IN SUM OF RS.26,60,625/ - TOTAL TO THE TUNE OF RS.1,99,87,304/ - . THE AO ISSUED THE NOTICES U/S 133(6) OF THE ACT WHICH WERE RETURN ED UNCLAIMED . T HE AO ALSO DEPUTED THE INSPECTOR WHO REPORTED THAT THE PARTIES WERE NOT DOING THE BUSINESS AT THE GIVEN ADDRESS. ITA. NO. 4846 /M/201 6 A.Y. 2011 - 12 6 THE AO ALSO TOOK INTO CONSIDERATION THE FACT ASCERTAINED BY SALES TAX DEPARTMENT, MAHARASHTRA IN WHICH THE SAID PARTIES HAD BEEN SHOWN AS HAWALA DEALERS. THE SAID PARTIES ALSO SUBMITTED THE AFFIDAVIT BEFORE THE MAHARASHTRA SALES TAX AUTHORITY IN WHICH THE Y ADMITTED THAT THEY DID NOT ACTUALLY TRANSFERRED THE GOODS . THE ASSESSEE ONLY SHOWED THE TRANSACTION THROUGH BANKING CHANNEL BUT DID NOT PROVE THE DELIVERY OF GOODS , CHALLAN, LORRY NO. ETC. ANYHOW, WE NOTICE D THAT THE BOOKS OF ACCOUNT HAVE NOT BEEN REJECTED BY THE AO AND THE SALE IS NOT DISPUTED. THE ASSESSEE IS IN THE BUSINESS OF TRADING IN LDO & FURNACE OIL UNDER THE NAME & STYLE OF M/S. S.K. ENTERPRISES . IN VIEW OF THE DECISION OF HONBLE GUJARAT HIGH COURT IN CASE OF CIT. VS. SIMIT P SHETH (2013) 38 TAXMANN.COM 385 (GUJ) , W E ARE OF THE VIEW THAT THE PROFIT EMBEDDED TO THE BOGUS PURCHASE IS LIABLE TO BE ADDED TO THE INCOME OF THE ASSESSEE. THE GROSS PROFIT AND NET PROFIT THREE YEARS OF THE ASSESSEE HAS BEEN MENTIONED ABOVE. CONSIDERING ALL THE FACTS AND CIRCUMSTANCES OF THE P RESENT CASE AND ALSO CONSIDERING THE LAW MENTIONED ABOVE, WE ARE OF THE VIEW THAT THE INTEREST OF JUSTICE WILL MEET IF ADDITION TO THE EXTENT OF BOGUS PURCHASE BE RESTRICTED TO THE EXTENT OF 12.5%. ACCORDINGLY, WE SET ASIDE THE FINDING OF THE CIT(A) ON THI S ISSUE AND ALLOWED THE CLAIM OF THE ASSESSEE. ACCORDINGLY, THIS ISSUE IS DECIDED PARTLY IN FAVOUR OF THE ASSESSEE AGAINST THE REVENUE. I SSUE NO. 3 : - 6 . ISSUE NO. 3 IS PRE - MATURE, THEREFORE, THE SAME IS HEREBY ORDERED TO BE DISMISSED. ITA. NO. 4846 /M/201 6 A.Y. 2011 - 12 7 I SSUE NO. 4 : - 7 . ISSUE NO. 4 IS FORMAL IN NATURE WHICH NOWHERE REQUIRED FOR ANY ADJUDICATION. 8 . IN RESULT, APPEAL FILED BY THE ASSESSEE IS HEREBY ORDERED TO BE PARTLY ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 28. 11 .2018 SD/ - SD/ - ( R AJESH KUMAR ) ( AMARJIT SINGH ) / ACCOUNTANT MEMBER / JUDICIALMEMBER MUMBAI; DATED : 28. 11 . 2018 . V IJAY / 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// SR. PRIVATE SECRETARY , / ITAT, MUMBAI