BHARAT TALAKCHAND DOSHI, MUMBAI V. ASSISTANT COMMISSIONER OF INCOME TAX 17(1), MUMBAI

ITA 493/MUM/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 8989 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-06-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 23-01-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MRS JYOTI LAXMI NAYAK
• Keywords: Bogus purchase; Reassessment proceedings
• Section: 143(3); 143(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH B MUMBAI BEFORE SHRI MAHAVIR SINGH (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 493/MUM/2018 ASSESSMENT YEAR: 2009 - 10 SHRI BHARAT TALAKCHAND DOSHI, 9, KRISHNA KUNJ, 2 ND FLOOR, 148 - P K ROAD, MULUND WEST, MUMBAI - 400080. VS. ASST. COMMISSIONER OF INCOME TAX 17(1), R. NO. 117, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 400020. PAN NO. AABPD9162B APPELLANT RESPONDENT ASSESSEE BY : MR. RAHUL HAKANI , AR REVENUE BY : MRS. JYOTI LAXMI NAYAK , SR. DR DATE OF HEARING : 10 /0 6 /2019 DATE OF PRONOUNCEMENT: 28/06/2019 ORDER PER N.K. PRADHAN, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE. THE RELEVANT ASSESSMENT YEAR IS 2009 - 1 0 . THE APPEAL IS DIRECTED AGAINST THE ORDER OF T HE COMMISSIONER OF INCOME TAX - 28 , MUMBAI [IN SHORT CIT(A)] AND ARISES OUT OF THE ASSESSMENT COMPLETED U/S 143(3) R.W.S. 147 OF THE INCOME TAX ACT 1961, (THE ACT). 2. THE GROUNDS OF APPEAL FILED BY THE ASSESSE E READ AS UNDER: 1. LD . CI T(A) ERRED IN ENHANCING ADDITION OF ALLEGED BOGUS PURCHASE FROM 3 PARTIES BY RS. 1,02,81,94 0/ - [ ORIGINAL DISALLOWANCE BY AO WAS SHRI BHARAT TALAKCHAND DOSHI ITA NO. 493/MUM/2018 2 RS .14,68, 848/ - BEING 12 . 5% OF TOTAL ALLEGED BOGUS PURCHASE OF RS. 1 ,17,50, 778 / - FROM 3 PARTIES] WITHOUT APPRECIATING THAT THE GROUNDS TOR ENHANCEMENT WERE INCORRECT AND UNSUSTAINABLE IN LAW AND HENC E, THE ENHANCEMENT OF RS. 1,02 , 81,940/ - MAYBE DELETED. 2. THE LD . CI T(A) AND A.O . ERRED IN MAKING AD DITION OF ALLEGED BOGUS PURCHASE S M E RELY ON THE BASIS OF SALES TAX ENQUIRY AND HENCE THE DISALLOWANCE OF RS .1,17,50, 778 / - MAY BE DELETED. 3. THE LD. CIT(A) AND A.O. FAILED TO APPRECIATE THAT THE ALLEGED BOGUS PURCHASES ARE MADE WHOLLY AND EXCLUSIVELY FOR BUSINESS PURPOSES AND THE PAYMENTS WERE MADE THROUGH BANKING CHANNELS, SUPPLIERS HAD PAN NO. VAT NO, T IN N O. , SALES ARE NOT DOUBTED, THE BOOKS OF ACCOUNTS ARE NOT REJECTED BY A.O . AND HENCE DISALLOWANCE OF RS1,17,50,778 / - MAY BE DELETED. 4. THE LD . CIT(A) AND AO FAILED TO APPRECIATE THAT ASSESSEE HAD PROVED QUANTITY TALLY BY LI NKING THE ALLEGED BOGUS PURCHASES WITH THE SALES AND HENCE DISALLOWANCE OF RS.1,17,50,778/ - MAY BE DELETED. 5. THE LD . CI T(A) AND A.O. ERRED IN NO T PROVIDING OPPORTUNITY OF CROSS - EXAMINATION OF THIRD PARTIES TO THE ASSESSE E THEREBY VIOLATING PRINCIPLES OF NA TURAL JUSTI CE AND HENCE DISALLOWANCE OF RS.1 ,17,50,778 / - MAY BE DELETED. 6. THE LEARNED CIT(A) FAILED TO APPRECIATE THAT ASSESSEE HAS DISCLOSED GROSS PROFIT OF 10 . 612 % WHICH IS REASONABLE AND HENCE ENTIRE PURCHASES FROM THREE PARTIES CANNOT BE DISALLOWED. 3. BRIEFLY STATED THE FACTS ARE THAT THE ASSESSEE FILED HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR (AY) 2009 - 10 ON 27.09.2012 DECLARING INCOME OF RS.40,98,411/ - . THE SAID RETURN OF INCOME WAS PROCESSED U/S 143(1) OF THE ACT. THE ASSESSING OFFICER (AO) RECE IVED INTIMATION FROM THE DIRECTOR GENERAL OF INCOME TAX (INV), MUMBAI THAT AS PER THE INFORMATION RECEIVED FROM THE SALES TAX DEPARTMENT, GOVERNMENT OF SHRI BHARAT TALAKCHAND DOSHI ITA NO. 493/MUM/2018 3 MAHARASHTRA, THE ASSESSEE HAD OBTAINED BOGUS PURCHASE BILLS FROM THE FOLLOWING HAWALA OPERATORS : BENEF ICIARY NAME BENEFICIARY PAN NAME - PAN - BENEFICIARY HAWALA NAME HAWALA PAN FY AMOUNT RS. BHARAT ENTERPRISES AABPD9162B BHARAT TALAKCHANDDOSHI ASIAN STEEL AWZPS2908L 2008 - 09 27,19,668 BHARAT ENTERPRISES AABPD9162B BHARAT TALAKCHANDDOSHI PERFECT TRADING CORPORATION AGEPT0871G 2008 - 09 15,57,556 BHARAT ENTERPRISES AABPD9162B BHARAT TALAKCHANDDOSHI SHARAD ENTERPRISES AQGPB8903P 2008 - 09 74,73,564 ON THE BASIS OF THE ABOVE INFORMATION, THE AO REOPENED THE ASSESSMENT BY ISSUING NOTICE U/S 148. IN RESPONSE TO A QUERY RAISED BY THE AO DURING THE COURSE OF REASSESSMENT PROCEEDINGS TO EXPLAIN AS TO WHY THE ABOVE PURCHASES FROM THE HAWALA OPERATORS SHOULD NOT BE ADDED BACK TO THE TOTAL INCOME, THE ASSESSEE SUBMITTED THAT THE PAYMENTS TO THE SAID PARTIES WERE MA D E THROUGH ACCOUNT PAYEE CHEQUES/ELECTRONIC FUND TRANSFER AND THE AMOUNT IS RECEIVED FROM THE SALES PARTIES TO ACCOUNT PAYEE CHEQUES/ELECTRONIC FUND TRANSFER. THE ASSESSEE ALSO FURNISHED BEFORE THE AO STATEMENT REFLECTING PURCHASE OF THE IT EMS AND CORRESPONDING SALES AND THE BANK STATEMENTS, EVIDENCING THE PAYMENTS IN SUPPORT OF ITS CLAIM THAT THE PURCHASES WERE GENUINE. THE AO NOTED THAT THE ASSESSEE, HOWEVER, EXPRESSED HIS INABILITY TO PRODUCE THE SAID PARTIES AS THEY WERE NOT AVAILABLE AT THE ADDRESS AS PER THE PURCHASE INVOICES AND ALSO SINCE THERE IS NO TRANSACTION WITH THE SAID PARTIES, IT WOULD BE DIFFICULT TO LOCATE THEM. SHRI BHARAT TALAKCHAND DOSHI ITA NO. 493/MUM/2018 4 THE AO HAS RECORDED THAT THE ASSESSEE FAILED TO PRODUCE ANY OF THE SUPPLIERS, BROKERS OR TRANSPORTERS BEFORE HI M IN SPITE OF OPPORTUNITY BEING GIVEN . CONSIDERING THE FACTS OF THE CASE, THE AO HELD THAT ONLY PROFIT ELEMENT BEING EMBEDDED IN SUCH PURCHASES CAN BE BROUGHT TO TAX. ACCORDINGLY, FOLLOWING THE DECISION IN THE CASE OF CIT V. SIMIT P. SHETH (2013) 356 ITR 451 (GUJ), THE ESTIMATED THE PROFIT @ 12.5% ON THE NON - GENUINE PURCHASES OF RS.1,17,50,788/ - AND IT COMES TO RS.14,68,848/ - . 4. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT(A). WE FIND THAT THE LD. CIT(A) HAD GIVEN AN ENHANCEMENT NOTICE U/S 251(1)(A) R.W.S. 251(2) OF THE ACT PROPOSING ENHANCEMENT OF RS.1,02,81,940/ - (RS.1,17,50,788/ - MINUS RS.14,68,848/ - ALREADY ADDED BY THE AO). IN RESPONSE TO IT, THE ASSESSEE FILED A REPLY BEFORE HIM STATING THAT (I) THE AO HAS MEREL Y DOUBTED PURCHASES WHICH CANNOT LEAD TO INFERENCE OF BOGUS PURCHASES, (II) TRANSACTION SETTLED LONG BACK WITH THESE PARTIES AND THE ASSESSEE CANNOT BE EXPECTED TO KEEP THEIR CURRENT WHEREABOUTS, (III) THESE PARTIES ARE DEPARTMENTAL WITNESSES, SO CROSS EXA MINATION THEREON SHOULD HAVE BEEN ALLOWED, (IV) SIGNIFICANTLY, IT WAS ADMITTED THAT THERE MAY BE CASES OF GENUINE SALES BUT VAT DEFAULT, (V) DUE TO RECENT JUDGMENT OF BHOLENATH POLY FA B AND SIMIT P. SHETH , THE ASSESSEE ACCEPTED TO BE ASSESSED @ 12.5% WITHO UT CONCEDING THE FACTS OF BOGUS PURCHASE, (VI) LEDGER ACCOUN T OF THE PARTIES DULY SUBMITTED. SHRI BHARAT TALAKCHAND DOSHI ITA NO. 493/MUM/2018 5 HOWEVER, THE LD. CIT(A) DID NOT AGREE WITH THE ABOVE EXPLANATIONS OF THE ASSESSEE AND MADE AN ENHANCEMENT OF RS.1,02,81,940/ - BESIDES CONFIRMING RS.14,68,848/ - . 5. BEFORE US, THE LD. COUNSEL OF THE ASSESSEE REITERATES THE EXPLANATION FILED BEFORE THE LD. CIT(A) IN RESPONSE TO HIS NOTICE FOR ENHANCEMENT. ON THE OTHER HAND, THE LD. DR FULLY SUPPORTS THE ORDER PASSED BY THE LD. CIT(A). 6. WE HAVE HEARD THE RIVAL SU BMISSIONS AND PERUSED THE RELEVANT MATERIALS ON RECORD. THE NATURE OF BUSINESS OF THE ASSESSEE IN THE PRESENT CASE IS TRADING IN G.I., M.S., S.S., C.I. IN VARIOUS GRADES AND SIZES OF PIPES AND PIPE FITTINGS. IN THE INSTANT CASE, AS DISCUSSED EARLIER, THE A O WAS CONCERNED WHETHER TO TAX THE ENTIRE AMOUNT OF PURCHASES OR ONLY THE PROFIT ELEMENT EMBEDDED THEREIN. RELYING ON THE DECISION IN SIMIT P. SHETH (SUPRA) , THE AO ESTIMATED THE PROFIT @ 12.5% ON THE DISPUTED PURCHASES OF RS.1,17,50,788/ - WHICH COMES TO R S.14,68,848/ - . ON THE OTHER HAND, THE LD. CIT(A) HAS BROUGHT TO TAX THE ENTIRE DISPUTED PURCHASES. IN THE CASE OF SIMIT P. SHETH (SUPRA), THE HONBLE GUJARAT HIGH COURT HAS HELD THAT WHERE PURCHASES WERE NOT BOGUS BUT WERE MADE FROM PARTIES OTHER THAN THOS E MENTIONED IN THE BOOKS OF ACCOUNT, NOT ENTIRE PURCHASE PRICE BUT ONLY PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES CAN BE ADDED TO INCOME OF THE ASSESSEE. THAT BEING THE POSITION, NOT THE ENTIRE PURCHASE PRICE BUT ONLY THE PROFIT ELEMENT EMBEDDED IN SUCH PU RCHASES CAN BE ADDED TO THE INCOME OF THE ASSESSEE. THE HONBLE HIGH COURT REFERRED TO A SIMILAR VIEW TAKEN IN THE CASE OF SHRI BHARAT TALAKCHAND DOSHI ITA NO. 493/MUM/2018 6 CIT VS. VIJAY M. MISTRY CONSTRUCTION LTD. [2013] 355 ITR 498 (GUJ) AND CIT VS. BHOLANATH POLY FAB (P) LTD. [2013] 355 ITR 290 (GUJ). WE ARE OF THE CONSIDERED VIEW THAT CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE, THE AO HAS RIGHTLY BROUGHT TO TAX THE PROFIT ELEMENT EMBEDDED IN THE DISPUTED PURCHASES BY ESTIMATING @ 12.5% OF RS.1,17,50,788/ - WHICH COMES TO RS.14,68,848/ - AND WE CONFIRM IT. THE ENHANCEMENT OF RS. 1.02.81.940/ - MADE BY THE LD. CIT(A) IS DELETED. 7 . IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 28/06/2019. SD/ - SD/ - ( MAHAVIR SINGH ) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED: 28/06/2019 RAHUL SHARMA, SR. P.S. 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