M/S KANCHAN FERROMET, Mumbai V. ITO 19 (2)(2), Mumbai

ITA 4925/MUM/2019

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 3717 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-02-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 25-07-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: JITENDRA SINGH
• Assessee Lawyers: SMITA VERMA
• Section: 201; 147

Judgement Text

1 ITA 4925/MUM/2019 IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY (JUDICIAL MEMBER) I.T.A. NO.4 9 2 5 /MUM/201 9 (ASSESSMENT YEAR : 201 0 - 1 1 ) M/S KANCHAN FERROMET 238, SANT SENA MAHARAJ MARG 2 ND KUMBHARWADA MUMBAI PAN : AA IFK0801B VS ITO - 19(2)(2) (APPELLANT) (RESPONDENT) APPELLANT BY SMT. SMITA VERMA (DR) RESPONDENT BY S HRI JITENDRA SINGH ( A R) DATE OF HEARING 02 - 0 2 - 2021 DATE OF PRONOUNCEMENT 2 5 /0 2 /2021 O R D E R PER SAKTIJIT DEY, JM THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDER DATED 2 4 - 0 5 - 201 9 OF LEARNED COMMISSIONER OF INCOME TAX (A PPEALS ) - 7 , MUMBAI FOR THE ASSESSMENT YEAR 201 0 - 1 1 . 2. THE DISPUTE IN THE PRESENT APPEAL IS CONFINED TO DISALLOWANCE MADE ON ACC OUNT OF NON GENUINE PURCHASES. PERTINENTLY, THOUGH , THE ASSESSEE HA S RAISED GROUND 2 CHALLENGING THE EX PARTE DISPOSAL OF APPEAL; HOWEVER, AT THE TIME OF 2 ITA 4925/MUM/2019 HEARING, LEARNED AUTHORISED REPRESENTATIVE DID NOT PRESS THIS GROUND AND REQUESTED TH E BENCH TO DECIDE THE APPEAL ON MERIT S . 3. BRIEFLY THE FACTS ARE, THE ASSESSEE IS A PARTNERSHIP FIRM AND ENGAGED IN THE BUSINESS OF TRADING IN FERROUS AND NON FERROUS METAL S . FOR THE ASSESSMENT YEAR UNDER DISPUTE, ASSESSEE FILED ITS RETURN OF INCOME ON 20 - 09 - 2010 DECLARING TOTAL INCOME OF RS.6,43,403/ - . SUBSEQUENTLY , THE A SSESSING O FFICER RECEIVED INFORMATION FROM THE SALES - TAX DEPARTMENT THROUGH THE INVESTIGATION WING OF THE DEPARTMENT THAT PURCHASES WORTH RS.1,01,49,312/ - CLAIMED TO HAVE BEEN MADE DURING THE YEAR FROM 12 PARTIES ARE NON GENUINE, AS THE CONCERNED PA RTIES INSTEAD OF MAKING ACTUAL SALE TRANSACTION, ARE ONLY PROVIDING ACCOMMODATION BILLS. ON THE BASIS OF SUCH INFORMATION, A SSESSING O FFICER REOPENED THE ASSESSMENT U NDER SECTION 147 OF THE ACT. IN COURSE OF ASSESSMENT PROCEEDINGS, THE A SSESSING O FFICER C ALLED UPON THE ASSESSEE TO PROVE THE GENUINENESS OF PURCHAS ES MADE THROUGH PROPER EVIDENCE. THOUGH , THE ASSESSEE P RODUCED SOME EVIDENCES TO PROVE THE PURCHASES; HOWEVER, THEY WERE NOT TO THE SATISFACTION OF THE A SSESSING O FFICER . THEREFORE, HE TREATED THE PURCHASES AS NON GENUINE. AFTER REJECTING THE BOOKS OF ACCOUNT OF THE ASSESSEE, THE A SSESSING O FFICER PROCEEDED TO DISALLOW 12.5% OF THE ALLEGED NON GENUINE PURCHASES ON THE REASONING THAT THERE IS EVERY POSSIB ILITY THAT TH E ASSESSEE MUST HAVE INFLATED T HE PRICE OF GOODS. THUS, HE DISALLOWED A N AMOUNT OF RS.12,68,664/ - OUT OF THE ALLEGED NON GENUINE PURCHASES. THE AFORESAID DISALLOWANCE MADE BY THE ASSESSING OFFICER WAS ALSO SUSTAINED BY LEARNED COMMISSIONER (A PPEALS ). 4. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED, IN COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE HAS FURNISHED VARIOUS DOCUMENTARY EVIDENCES TO PROVE THE GENUINENESS OF PURCHASES. HE SUBMITTED, THE QUANTITATIVE TALLY OF PURCHASE 3 ITA 4925/MUM/2019 AND SALES ARE ALSO FURNISHED BEFORE THE DEPARTMENTAL A UTHORIT IES . THEREFORE, THERE CANNOT BE ANY DOUBT REGARDING THE FACT THAT THE ASSESSEE HAS PURCHASED THE GOODS. HE SUBMITTED, MERELY BECAUSE SOME DOCUMENTARY EVIDENCES COULD NOT BE FURNISHED, THE PURCHASES CANNOT BE HELD AS NON GENUINE. FURTHER, HE SUBMITT ED , THE NORMAL PROFIT RATE IN THIS LINE OF BUSINESS VARIES BETWEEN 2% TO 5%. THEREFORE, DISALLOWANCE A T 12.5% IS HIGH AND EXCESSIVE. FINALLY , HE SUBMITTED, IN CASE OF ONE OF THE PARTNERS OF THE FIRM IN SIMILAR LINE OF BUSINESS, THE TRIBUNAL IN ITA NO.2211 /MUM/2018 DATED 14 - 12 - 2018, HAS RESTRICTED THE DISALLOWANCE TO 5% OF THE NON GENUINE PURCHASES. THUS, HE SUBMITTED , THE DISALLOWANCE MADE BY THE DEPARTMENTAL AUTHORITIES SHOULD BE SCALED DOWN TO A REASONABLE RATE. 5. THE LEARNED DEPARTMENTAL REPRESENTATIV E STRONGLY RELIED UPON THE OBSERVATIONS OF THE A SSESSING O FFICER AND LEARNED COMMISSIONER (A PPEALS ). SH E SUBMITTED , THE ASSESSEE HA VING FAILED TO PROVE THE GENUINENESS OF PURCHASE S, DISALLOWANCE MADE AT 12.5% IS REASONABLE. 6. I HAVE CONSIDERED RIVAL SUBMI SSIONS AND PERUSED MATERIALS ON RECORD. THOUGH , IT MAY BE A FACT THAT THE ASSESSEE WAS UNABLE TO FURNISH DOCUMENTARY EVIDENCE TO THE SATISFACTION OF THE A SSESSING O FFICER TO PROVE THE GENUINENESS OF PURCHASES MADE , H OWEVER, IT IS ALSO A FACT THAT THE SALE S MADE BY THE A SSESSEE HAVE NOT BEEN DOUBTED. THIS PRE - SUPPOSES THAT IN ABSENCE OF THE PURCHASES, THE ASSESSEE COULD NOT HAVE EFFECTED CORRESPONDING SALES. EVEN , THE A SSESSING O FFICER WAS ALSO CONVINCED WITH THIS FACT . H ENCE, INSTEAD OF DISALLOWING THE ENT IRE PURCHASES, HE DISALLOWED ONLY THE PROFIT ELEMENT BY ESTIMATING AT 12.5%. THEREFORE, THE ISSUE BEFORE ME IS , WHETHER THE DISALLOWANC E MADE AT 12.5% IS REASONABLE? KEEPING IN VIEW THE NATURE OF BUSINESS CARRIED ON BY THE ASSESSEE AND THE PROFIT RATE NOR MALLY ATTACHED TO SUCH LINE OF BUSINESS, I AM OF THE 4 ITA 4925/MUM/2019 CONSIDERED OPINION THAT DISALLOWANCE AT 5% OF THE ALLEGED NON GENUINE PURCHASES WOULD BE FAIR AND REASONABLE. ACCORDINGLY, I DIRECT THE A SSESSING O FFICER TO RESTRICT THE DISALLOWANCE TO 5% OF THE ALLEGED NON GENU INE PURCHASES. THIS GROUND IS PARTLY ALLOWED. 7 . IN THE RESULT, APPEAL IS PARTLY ALLOWED . ORDER PRONOUNC ED IN THE OPEN COURT ON THIS 2 5 /0 2 /2021. S D / - (SAKTIJIT DEY) JUDICIAL MEMBER MUMBAI, DATED : 2 5 / 0 2 /2021. PAVANAN, SR.P.S (ON CONTRACT) COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT. 2. THE RESPON D ENT. 3. THE CIT(A) 4. 4. THE CIT 5. D.R., ITAT, MUMBAI. 6. GUARD FILE. //TRUE COPY// BY ORDER I.T.A.T., MUMBAI. 5 ITA 4925/MUM/2019