ARIF KHAN, MUMBAI V. ITO 26(1)(2), MUMBAI

ITA 4999/MUM/2019

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 8346 (ITAT-MUMBAI)
• Duration Of Justice: 2 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-10-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 31-07-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SAMATHA MULLAMUDI
• Keywords: Bogus purchase; Additional evidence

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A , BENCH MUMBAI BEFORE SHRI MAHAVIR SINGH , JM & SHRI M.BALAGANESH, AM ITA NO. 4999 /MUM/201 9 ( ASSESSMENT YEAR : 2010 - 11 ) ARIF KHAN 7,8,9, STANLY COMPOUND KHERANI ROAD SAKINAKA, MUMBAI 400 072 VS. INCOME TA X OFFICER 26(1)(2), INCOME TAX DEPARTMENT OFFICE KAUTILYA BHAVAN C - 41, C - 43, G - BLOCK BKC, MUMBAI 400 051 PAN/GIR NO. AWYPK8579N (APPELLANT ) .. (RESPONDENT ) ASSESSEE BY SHRI BHARAT KUMAR REVENUE BY MS. SAMATHA MULLAMUDI DATE OF HEARING 24 / 09 /2019 DATE OF PRONOUNCEMENT 04 / 10 /2019 / O R D E R PER M. BALAGANESH (A.M) : THIS APPEAL IN ITA NO. 4999/MUM/2019 FOR A.Y. 2010 - 11 ARISES OUT OF THE ORDER BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - 38, MUMBAI IN APPEAL NO. CIT(A) - 38/ITO - 26(1)(2)/IT - 600/2015 - 16 DATED 17/01/2019 (LD. CIT(A) IN SHORT) AGAINST THE ORDER OF ASSESSMENT PASSED U/S.14 4 OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS ACT) DATED 19/02/2016 BY THE LD. INCOME TAX OFFICER 26(1)(2), MUMBAI (HEREINAFTE R REFERRED TO AS LD. AO). ITA NO .4999/MUM/2019 ARIF KHAN 2 2. THE ONLY ISSUE TO BE DECIDED IN THIS APPEAL IS AS TO WHETHER THE LD. CIT(A) WAS JUSTIFIED IN CONFIRMING THE ADDITION MADE BY THE LD. AO IN THE SUM OF RS.17,30,838/ - ON ACCOUNT OF ALLEGED BOGUS PURCHASES IN THE FACTS AND CIRCUM STANCES OF THE CASE. 3. WE HAVE HEARD RIVAL SUBMISSIONS. WE FIND THAT ASSESSEE IS A PROPRIETOR OF M/S. H K ENGINEERING WORKS ENGAGED IN THE BUSINESS OF MANUFACTURING OF PRESSURE DIE CASTING IN NON - FERROUS METALS. DURING THE YEAR UNDER CONSIDERATION, THE A SSESSEE MADE PURCHASES FROM THE FOLLOWING THREE PARTIES. 1. OMKAR TRADING CORPORATION - RS.6,16,242/ - 2. PREMIER ENTERPRISES - RS.4,11,060/ - 3. M/S. ARYEN SALES CORPORATION - RS.7,03,536/ - ------------------ -- TOTAL RS.17,30,838/ - == ======= 3.1. THE LD. AO BASED ON THE INFORMATION COLLECTED FROM MAHARASHTRA SALES TAX DEPARTMENT ALLEGED THAT THESE PARTIES HAD MERELY SUPPLIED BOGUS BILLS TO THE ASSESSEE ON ACCOUNT OF PURCHASES AND THAT NO MOVEMENT OF GOODS HAD ACTUALLY HAPPENED FROM THE END OF THE SUPPLIERS TO THE ASSESSEE. THE LD. AO OBSERVED THAT ASSESSEE COULD NOT ESTABLISH THE IDENTITY OF THE SAID PARTIES AND PROVED THAT THE PURCHASES MADE FROM THE SAID PARTIES WERE GENUINE AND ACCORDINGLY , PROCEEDED TO DISALLOW THE ENTIRE PURCHASES IN THE SUM OF RS.17,30,838/ - IN THE ASSESSMENT. THE ASSESSEE BEFORE THE LD. CIT(A) SUBMITTED THAT THE TRANSACTIONS DURING THE YEAR UNDER CONSIDERATION WERE CARRIED OUT BY HIS FATHER WHO WAS RUNNING THE BUSINESS AT THE RELEVANT POINT IN TIME AND THAT HE IS NOT AWARE OF THE BUSINESS ACTIVITIES CARRIED ON DURING THAT TIME. IT WAS ALSO SUBMITTED BY THE ASSESSEE THAT HIS FATHER HAD SUBSEQUENTLY EXPIRED AND ALL THE RECORDS ITA NO .4999/MUM/2019 ARIF KHAN 3 AND DETAILS WERE LYING IN THE CUSTODY OF THE CHARTERED ACCOUNTANT WHO ALSO EXPIRED IN THE Y EAR 2010. HENCE, THE ASSESSEE COULD NOT PRODUCE ALL THE RELEVANT DETAILS BEFORE THE LD. AO. WE FIND THAT ASSESSEE HAD FILED PETITION FOR ADMISSION OF ADDITIONAL EVIDENCE COMPRISING OF (I) INCOME TAX R ETURN ACKNOWLEDGEMENT WITH THE AUDIT REPORT (II) PROFIT AND LOSS AC COUNT AND BALANCE SHEET WITH ANNEXURES (III) SAMPLE COPIES OF INVOICE (IV) COPY OF BANK STATEMENT OF THE ASSESSEE FOR THE PERIOD 01/04/2009 TO 31/03/2011. 3.2. THE LD. CIT(A) ADMITTED THIS ADDITIONAL EVIDENCE AND CALLED FOR A REMAND REPORT FROM THE LD. AO . THE LD. AO IN HIS REMAND REPORT OBSERVED THAT NOTICES ISSUED U/S.133(6) OF THE ACT TO THESE PARTIES RETURNED UNSERVED BY THE POSTAL AUTHORITIES AND THEREAFTER , THE WARD INSPECTOR WAS DEPUTED TO SERVE THE NOTICES THEREON. THE REPORT OF THE WARD INSPECTOR REVEAL S THAT HE WAS UNABLE TO SERVE NOTICES AS THESE PURCHASE PARTIES REMAIN UNTRACEABLE. THE LD. AO ALSO REPORTED IN THE REMAND REPORT THAT ASSESSEE NEITHER FILED ANY WRITTEN SUBMISSIONS NOR APPEARED BEFORE HIM DURING THE REMAND PROCEEDINGS ALSO. WE FIND T HAT THE LD. CIT(A) BASED ON THESE OBSERVATIONS MADE BY THE LD. AO IN THE REMAND REPORT U PHELD THE FINDINGS OF THE LD. AO. 3.3. WE FIND THAT THE ASSESSEE WAS A STUDENT AT THE RELEVANT POINT IN TIME AND WAS ONLY 20 YEARS OLD. THE ASSESSEE WAS ADMITTEDLY NOT AWARE OF THE BUSINESS ACTIVITIES CARRIED ON BY HIS FATHER WHO LATER DIED. THUS, THE ASSESSEE FROM THE AVAILABLE DETAILS WITH HIM HAD PRODUCED EVIDENCES BEFORE THE LD. CIT(A) TO JUSTIFY THE FACT OF CONSUMPTION OF THOSE MATERIALS PURCHASED BY HIM FROM THE A LLEGED SUPPLIERS. SINCE THE MATERIALS ARE CONSUMED IN THE MANUFACTURING PROCESS OF THE ASSESSEE AND FINISHED GOODS THEREON HAVE BEEN SOLD LATER ON, WHICH HAS NOT BEEN DISPUTED BY ITA NO .4999/MUM/2019 ARIF KHAN 4 THE REVENUE BEFORE US , W E HOLD THAT ONLY PROFIT PERCENTAGE OF THOSE ALLEGED P URCHASES SHOULD BE BROUGHT TO TAX. WE FIND THAT THIS TRIBUNAL HAS BEEN CONSISTENTLY HOLDING THAT ADOPTION OF 12.5% PROFIT ON ALLEGED PURCHASES WOULD MEET THE ENDS OF JUSTICE. ACCORDINGLY, WE DIRECT THE LD. AO TO TAX ONLY PROFIT OF 12.5% ON ALLEGED BOGUS PU RCHASES IN THE PECULIAR FACTS AND CIRCUMSTANCES OF THE INSTANT CASE. NO ARGUMENTS WERE ADVANCED BY THE LD. AR ON THE VALIDITY OF REOPENING, HENCE, THEY ARE DISMISSED AS NOT PRESSED. ACCORDINGLY, THE GROUNDS RAISED BY THE ASSESSEE ARE PARTLY ALLOWED. 4. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 04 / 10 /201 9 SD/ - ( MAHAVIR SINGH ) SD/ - (M.BALAGANESH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 04 / 10 / 2019 KARUNA , SR.PS COPY OF THE ORDER FORWARDED TO : BY ORDER, 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY// ITA NO .4999/MUM/2019 ARIF KHAN 5 ( ASSTT. REGISTRAR) ITAT, MUMBAI DATE INITIAL 1. DRAFT DICTATED ON 24/09/2019 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 26/09/2019 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS 7. FILE SENT TO THE BENCH CLERK SR.PS 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER. 11. DICTATION PAD IS ENCLOSED YES