ITO - 27(1)(4), MUMBAI V. DARSHAK BHARAT SHAH, MUMBAI

ITA 4975/MUM/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 0415 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-09-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 27-08-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASHUTOSH RAJHANSLD
• Keywords: Bogus purchase; Tax effect
• Section: 143(3); 142(1); 133(6); 143(2); 148; 2

Judgement Text

1 ITA NO.4975/MUM/018 A.Y.2009-10 DARSHAK BHARAT SHAH - IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI , , BEFORE HONBLE SHRI MAHAVIR SINGH, JM AND HONBLE SHRI MANOJ KUMAR AGGARWAL, AM ./ I.T.A. NO.4975/MUM/2018 ( / ASSESSMENT YEAR:2009-10 ) INCOME TAX OFFICER - 27(1)(4) TOWER 6, 4 TH FLOOR ROOM NO.409, VASHI RAILWAY STATION COMPLEX, VASHI, NAVI MUMBAI. / VS. DARSHAK BHARAT SH A H A-6, 2 ND FLOOR, MAHAVIR APARTMENT PANT NAGAR, GHATKOPAR (W) MUMBAI-400 075. '# ./ ./PAN/GIR NO. AAFPS-7481-J ( #% /APPELLANT ) : ( &'#% / RESPONDENT ) REVENUE BY : SHRI ASHUTOSH RAJHANS-LD.DR ASSESSEE BY : LETTER DATED 27/08/2019 / DATE OF HEARING : 09/09/2019 / DATE OF PRONOUNCEMENT : 09/09/2019 / O R D E R PER BENCH: - 1. AFORESAID APPEAL BY REVENUE FOR ASSESSMENT YEAR [AY] 2009-10 CONTEST THE ORDER OF LD. COMMISSIONER OF INCOME-TAX (APPEALS)-24 MUMBAI, [IN SHORT REFERRED TO AS CIT(A)], APPEAL NO. CIT(A)-24/IT- 2 ITA NO.4975/MUM/018 A.Y.2009-10 DARSHAK BHARAT SHAH 535/520/ITO-27(1)(4)/2017-18 DATED 09/05/2018 QUA DELETION OF CERTAIN ADDITIONS ON ACCOUNT OF ALLEGED BOGUS PURCHASES. THE GROUNDS RAISED BY REVENUE READ AS UNDER: - 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS.4,43,671/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF BOGUS PURCHASES, WITHOUT APPRECIATING THE FACT T HAT THE ASSESSEE HAD FAILED TO PRODUCE BILLS, VOUCHERS AND OTHER DOCUMENTARY EVIDE NCES IN SUPPORT OF HIS CLAIM AND WITHOUT CONSIDERING THE LATEST APEX COURT DECIS ION IN THE CASE OF N K PROTEIN LTD. WHEREIN IT IS HELD THAT ONCE IT IS PROVED THAT THE PURCHASES ARE BOGUS THEN ADDITION SHOULD BE MADE ON ENTIRE PURCHASES AND NOT ON PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN ESTIMATING THE PROFIT FROM HAWALA PURCHASES BY DISALLOWING ONL Y RS.3,47,270/- BEING 12.5% OF THE BOGUS PURCHASES AS EVEN THE BASIC ONUS OF PR ODUCING TRANSPORT BILLS, DELIVERY CHALLANS ETC. WERE NOT FULFILLED BY THE AS SESSEE. NONE HAS APPEARED FOR ASSESSEE AND THEREFORE, THE M ATTER IS PROCEEDED WITH EX-PARTE QUA THE ASSESSEE. THE ASSESSEE, VIDE LETTER DATED 27/08 /2019 HAS SUBMITTED THAT APPEAL WOULD NOT BE MAINTAINABLE SINCE THE TAX EFFECT OF QUANTUM ADDITIONS BEING CONTESTED BY THE REVENUE IS LESS THAN MONETARY LIMIT OF RS.50 LACS AS PRESCRIBED BY CBDT IN ITS LA TEST CIRCULAR NO. 17/2019 DATED 08/08/2019. HOWEVER, THE SAID PLEA STAND REJE CTED IN VIEW OF THE EXCEPTION (E) OF CLAUSE-10 AS ADDED BY AMENDED CIRC ULAR DATED 20/08/2018 SINCE THE QUANTUM ADDITIONS WERE MADE IN THIS CASE PURSUANT TO RECEIPT OF INFORMATION FROM SALES TAX DEPARTMENT, MAHARASHTRA WHICH IS ON OUTSIDE AGENCY. IN THE ABOVE BACKGROUND, WE PROCEED TO DISP OSE-OFF THE APPEAL ON MERITS. 2.1 FACTS ON RECORD WOULD REVEAL THAT THE ASSESSEE BEING RESIDENT INDIVIDUAL STATED TO BE ENGAGED AS TRADER IN ELECTR ICAL /ELECTRONIC GOODS 3 ITA NO.4975/MUM/018 A.Y.2009-10 DARSHAK BHARAT SHAH UNDER PROPRIETORSHIP CONCERN NAMELY M/S DATA BYTE S YSTEM WAS ASSESSED FOR IMPUGNED AY U/S. 143(3) R.W.S. 147 ON 24/03/201 5 WHEREIN THE INCOME OF THE ASSESSEE WAS DETERMINED AT RS.11.77 LACS AFT ER SOLE ADDITION OF ALLEGED BOGUS PURCHASES FOR RS.7.90 LACS AS AGAINST RETURNED INCOME OF RS.3.86 LACS FILED BY THE ASSESSEE ON 19/09/2009 WH ICH WAS PROCESSED U/S.143(1). 2.2 PURSUANT TO RECEIPT OF CERTAIN INFORMATION FROM INVESTIGATION WING / SALES TAX DEPARTMENT, GOVT. OF MAHARASHTRA, IT TRAN SPIRED THAT THE ASSESSEE STOOD BENEFICIARY OF ALLEGED BOGUS PURCHASES TO THE TUNE OF RS.27.78 LACS FROM 9 PARTIES, THE DETAILS OF WHICH HAS ALREADY BE EN EXTRACTED AT PARA-5.1 OF THE QUANTUM ASSESSMENT ORDER. ACCORDINGLY, AS PE R DUE PROCESS OF LAW, RE-ASSESSMENT PROCEEDINGS WERE INITIATED AGAINST TH E ASSESSEE U/S 147 BY ISSUANCE OF NOTICE U/S 148 ON 31/03/2014. IN RESPON SE, THE ASSESSEE OFFERED ORIGINAL RETURN AS FILED ON 29/09/2009. THE STATUTORY NOTICES U/S 142(1) AND 143(2) WERE ISSUED IN DUE COURSE OF ASSE SSMENT PROCEEDINGS WHEREIN THE ASSESSEE WAS DIRECTED TO SUBSTANTIATE T HE PURCHASE TRANSACTIONS. 2.3 TO CONFIRM THE PURCHASES TRANSACTIONS, NOTICES U/S 133(6) WERE ISSUED TO ALL PARTIES, HOWEVER THE SAME WERE RETURNED BACK UNSERVED BY POSTAL AUTHORITIES WITH THE REMARKS LEFT. THE FIELD INQU IRIES REVEALED DID NOT THROW ANY LIGHT ON THE WHEREABOUTS OF THE SUPPLIERS. THES E FACTS WERE CONFRONTED TO THE ASSESSEE. THE ASSESSEE SUBMITTED THAT THE PU RCHASES WERE GENUINE AND THE PAYMENT TO SUPPLIERS WERE THROUGH BANKING C HANNELS. HOWEVER, THE ASSESSEE FAILED TO PRODUCE ANY OF THE SUPPLIERS. RE SULTANTLY, LD. AO WORKED 4 ITA NO.4975/MUM/018 A.Y.2009-10 DARSHAK BHARAT SHAH OUT PEAK OF PURCHASES AT RS.7.90 LACS AND ADDED THE SAME TO THE INCOME OF THE ASSESSEE. THE LEARNED FIRST APPELLATE AUTHOR ITY, RELYING UPON THE DECISION OF HONBLE GUJARAT HIGH COURT RENDERED IN CIT V/S SIMIT P. SHETH [356 ITR 451] RESTRICTED THE ADDITION TO 12.5% OF DISPUTED PURCHA SES WHICH CAME TO RS.3.47 LACS AND DELETED THE BALANCE ADDITI ONS. AGGRIEVED, THE REVENUE IS IN FURTHER APPEAL BEFORE US. IT APPEARS THAT THE ASSESSEE IS NOT IN FURTHER APPEAL. WE HAVE HEARD AND CONSIDERED THE AR GUMENTS RAISED BY LD. DR BEFORE US. 3. WE ARE OF THE CONSIDERED OPINION THERE COULD BE NO SALE WITHOUT ACTUAL PURCHASE OF MATERIAL KEEPING IN VIEW THE ASS ESSEES NATURE OF BUSINESS. THE ASSESSEE WAS IN POSSESSION OF PRIMARY PURCHASE DOCUMENTS AND THE PAYMENTS TO SUPPLIERS WERE THROUGH BANKING CHANNELS. THE SALES TURNOVER REFLECTED BY THE ASSESSEE HAS NOT BEEN DIS TURBED / DISPUTED BY LD. AO. HOWEVER, AT THE SAME TIME, NOTICE ISSUED U/S 13 3(6) TO ALL THE ENTITIES REMAINED UNSERVED AND FIELD INQUIRES DID NOT THROW ANY LIGHT ON THE WHEREABOUTS OF THE SUPPLIERS. THE ASSESSEE FAILED T O PRODUCE EVEN A SINGLE PARTY TO CONFIRM THE TRANSACTION AND THE PRIMARY ON US CASTED UPON ASSESSEE, TO SUBSTANTIATE THE PURCHASE TRANSACTIONS , REMAINED UN- DISCHARGED. UNDER SUCH CIRCUMSTANCES, THE ADDITIONS WHICH COULD BE SUSTAINED, WAS TO ACCOUNT FOR PROFIT ELEMENT EMBEDD ED IN THESE PURCHASE TRANSACTIONS TO FACTORIZE FOR PROFIT EARNED BY ASSE SSEE AGAINST POSSIBLE PURCHASE OF MATERIAL IN THE GREY MARKET AND UNDUE B ENEFIT OF VAT AGAINST SUCH BOGUS PURCHASES, WHICH LD. FIRST APPELLATE AUT HORITY HAS RIGHTLY DONE. THEREFORE, CONCURRING WITH THE APPROACH OF LEARNED FIRST APPELLATE AUTHORITY 5 ITA NO.4975/MUM/018 A.Y.2009-10 DARSHAK BHARAT SHAH IN RESTRICTING THE ADDITIONS TO 12.5%, WE DISMISS T HE APPEAL. SO FAR AS THE DECISION OF HONBLE GUJARAT HIGH COURT RENDERED IN N.K. INDUSTRIES LTD. VS DCIT [72 TAXMANN.COM 289] IS CONCERNED, WE FIND THAT THE FACTS OF THAT CASE HAS ALREADY BEEN DISTINGUISHED BY HONBLE BOMB AY HIGH COURT IN PR.CIT VS. M/S MOHOMMAD HAJI ADAM & CO. [ITA NO.100 4 & OTHERS OF 2016, DATED 11/02/2019] WHEREIN HONBLE COURT HAS APPROVED THE ESTIMATION, ON SIMILAR FACTUAL MATRIX, BASED ON GRO SS PROFIT RATE. 4. IN RESULT, THE APPEAL STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 09 TH SEPTEMBER, 2019. SD/- SD/- (MAHAVIR SINGH) (MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 09/09/2019 SR.PS:-JAISY VARGHESE #$ %$ / COPY OF THE ORDER FORWARDED TO : 1. #% / THE APPELLANT 2. &'#% / THE RESPONDENT 3. . ( ) / THE CIT(A) 4. . / CIT CONCERNED 5. /0 &)1 , 1 , / DR, ITAT, MUMBAI 6. 0234 / GUARD FILE / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI.