SUNIL B. VORANI (HUF), MUMBAI V. ITO 17(3)(4), MUMBAI

ITA 5008/MUM/2017

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 9856 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-12-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Assessment Year: 2010-2011
• Appeal Filed On: 21-07-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: CHAUDHARY ARUN KUMAR SINGH
• Assessee Lawyers: MRS RUCHI M RATHOD
• Keywords: Bogus purchase; Rejection of books of accounts
• Section: 133(6)

Judgement Text

, G , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES G, MUMBAI BEFORE SHRI B.R.BASKARAN, AM AND SHRI AMARJIT SINGH , JM ITA NO.5008/MUM/2017 : ASST.YEAR 2010-2011 SHRI SUNIL B.VORANI (HUF) 23 SHIRIN MANSION, 14 KOSLA `X LANE, 1 ST FOOOR, PYDHONIE MUMBAI 400 003. PAN : AAQHS3185J. / VS. THE INCOME TAX OFFICER WARD 17(3)(4) MUMBAI. ( / APPELLANT) ( / RESPONDENT) /APPELLANT BY : MRS.RUCHI M.RATHOD, ADVOCATE /RESPONDENT BY : SHRI CHAUDHARY ARUNKUMAR SINGH / DATE OF HEARING : 03.12.2018 / DATE OF PRONOUNCEMENT : 03.12.2018 / O R D E R PER B.R.BASKARAN (AM) : THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 03.04.2017 PASSED BY THE LEARNED CIT(A)-28, MUMBAI AND IT RELATES TO ASST.YEAR 2010-2011. 2. THE ASSESSEE IS AGGRIEVED BY THE DECISION OF THE LEARNED CIT(A) IN GRANTING ONLY PARTIAL RELIEF IN RESPECT OF ADDITION RELATING TO ALLEGED BOGUS PURCHASES. 3. THE FACTS RELATING TO THE ISSUE ARE STATED IN BR IEF. THE ASSESSEE IS A TRADER IN IRON, STEEL AND HARDWARE AND IS CONDUCTIN G BUSINESS UNDER THE NAME AND STYLE OF M/S.S.S.TRADERS. THE REVENUE RECE IVED INFORMATION FROM ITA NO.5008/MUM/2017. SHRI SUNIL B.VORANI (HUF). 2 SALES-TAX DEPARTMENT, GOVERNMENT OF MAHARASHTRA, TH AT CERTAIN DEALERS WERE ONLY PROVIDING ACCOMMODATION BILLS WITHOUT ACT UALLY SUPPLYING MATERIALS. FROM THE INFORMATION FURNISHED BY THE SALES-TAX DEP ARTMENT, IT WAS NOTICED THAT THE ASSESSEE HAS PURCHASED GOODS FROM SOME OF SUCH DEALERS AGGREGATING TO RS.1,48,79,887/- DURING THE YEAR UN DER CONSIDERATION. HENCE, THE ASSESSING OFFICER REOPENED THE ASSESSMENT AND A SKED THE ASSESSEE TO PROVE THE GENUINENESS OF THE PURCHASES. THE ASSESSE E FURNISHED COPIES OF INVOICES AND ALSO DETAILS OF PAYMENTS MADE TO THE S UPPLIERS. THE ASSESSING OFFICER ISSUED NOTICE U/S 133(6) OF THE ACT, BUT MO ST OF THEM RETURNED BACK BY THE POSTAL AUTHORITIES AND SOME OF THE SUPPLIERS DI D NOT RESPOND TO THE NOTICES. HENCE, THE A.O. ASKED THE ASSESSEE TO PROD UCE THE PARTIES, BUT THE ASSESSEE COULD NOT PRODUCE THE SUPPLIERS. THE A.O. ALSO NOTICED THAT THE ASSESSEE HAS FAILED TO FURNISH COPIES OF DELIVERY C HALLANS, TRANSPORTATION DETAIL ETC. THE ASSESSEE ALSO FAILED TO FURNISH STO CK REGISTER. UNDER THESE SET OF FACTS THE A.O. TOOK THE VIEW THAT THE ASSESSEE C OULD NOT PROVE THE GENUINENESS OF THE PURCHASES. THE A.O. ALSO TOOK TH E VIEW THAT THE BOOKS OF ACCOUNT OF THE ASSESSEE ARE NOT RELIABLE. ACCORDING LY HE REJECTED THE BOOKS OF ACCOUNTS AND ESTIMATED THE TOTAL INCOME OF THE A SSESSEE AT 25% OF THE ENTIRE SALES VALUE DECLARED BY THE ASSESSEE. 4. IN THE APPELLATE PROCEEDINGS, THE LEARNED CIT(A) UPHELD THE REJECTION OF BOOKS OF ACCOUNT. HOWEVER HE TOOK THE VIEW THAT THE PROFIT SHOULD HAVE BEEN ESTIMATED ON THE ALLEGED BOGUS PURCHASES INSTE AD OF ESTIMATING THE PROFIT ON THE ENTIRE SALES. ACCORDINGLY, THE LEARNE D CIT(A) MODIFIED THE ORDER OF THE A.O. AND DIRECTED HIM TO ADD 25% VALUE OF BO GUS PURCHASES TO THE ITA NO.5008/MUM/2017. SHRI SUNIL B.VORANI (HUF). 3 INCOME DECLARED BY THE ASSESSEE. STILL AGGRIEVED, T HE ASSESSEE HAS FILED THIS APPEAL BEFORE US. 5. THE LEARNED AR SUBMITTED THAT THE ASSESSEE HAS F URNISHED COPIES OF INVOICES AND ALSO PROVED THAT THE PAYMENTS HAVE BEE N MADE THROUGH BANKING CHANNELS. HENCE, THERE WAS NO JUSTIFICATION FOR REJECTING THE BOOKS OF ACCOUNT AND ESTIMATING THE PROFIT. SHE FURTHER SUBM ITTED THAT THE ASSESSEE HAS ALSO PAID THE SALES TAX PAYABLE ON THE IMPUGNED PURCHASES SUBSEQUENTLY TO THE SALES-TAX DEPARTMENT. ACCORDIN GLY SHE SUBMITTED THAT THE ENTIRE ADDITION SHOULD HAVE BEEN DELETED BY LD CIT(A). IN THE ALTERNATIVE, THE LEARNED AR SUBMITTED THAT AN IDENTICAL ISSUE WA S CONSIDERED BY THE LEARNED CIT(A) IN THE CASE OF SISTER-CONCERN OF THE ASSESSEE, I.E., IN THE CASE OF SHRI SUNIL B.VORANI, WHEREIN THE LEARNED CIT(A) VIDE HIS ORDER DATED 27.12.2016, HAS UPHELD THE ADDITION TO THE EXTENT O F GP RATE DECLARED BY THE SAID ASSESSEE. THE LEARNED AR SUBMITTED THAT THE GP RATE DECLARED BY THE SAID ASSESSEE WAS 3.34% ONLY. THE SAID ORDER OF THE LEARNED CIT(A) HAS SINCE BEEN UPHELD BY THE SMC BENCH OF THE TRIBUNAL VIDE ORDER DATED 06.07.2017 PASSED IN ITA NO.1336/MUM/2017. ACCORDIN GLY, THE LEARNED AR PRAYED THAT THE ADDITION MAY BE SUSTAINED TO THE EX TENT OF GP RATE DECLARED BY THE ASSESSEE. 6. ON THE CONTRARY, THE LEARNED DEPARTMENTAL REPRES ENTATIVE SUBMITTED THAT THE ASSESSEE HAS NOT PRODUCED THE STOCK REGIST ER AND HAS NOT RECONCILED THE PURCHASES WITH THE SALES. THE LEARNED DR SUBMIT TED THAT IN THE CASE OF N.K. PROTEINS, THE HON'BLE GUJARAT HIGH COURT HAS C ONFIRMED THE ADDITION OF ENTIRE AMOUNT OF BOGUS PURCHASES. ACCORDINGLY HE SU BMITTED THAT THE ORDER ITA NO.5008/MUM/2017. SHRI SUNIL B.VORANI (HUF). 4 PASSED BY THE LEARNED CIT(A) DOES NOT CALL FOR ANY INTERFERENCE AS THE LEARNED CIT(A) HAS SUSTAINED ADDITION ONLY TO THE E XTENT OF 25% OF THE VALUE OF BOGUS PURCHASES. 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORDS. WE NOTICED THAT THE ASSESSEE HAS FURNISHED COPIES OF I NVOICES AND ALSO DETAILS OF PAYMENTS MADE WITH THE SUPPLIERS. IT COULD NOT FURN ISH EVIDENCES LIKE DELIVERY CHALLANS, TRANSPORTATION VOUCHERS ETC. THE ASSESSE E ALSO COULD NOT PRODUCE THE SUPPLIERS BEFORE THE ASSESSING OFFICER NOR IT C OULD OBTAIN CONFIRMATION LETTERS FROM THEM. THE A.O. HAS ALSO MADE INDEPENDE NT ENQUIRIES BY ISSUING NOTICES U/S 133(6) OF THE ACT, BUT ALL THE NOTICES HAVE BEEN EITHER RECEIVED BACK OR NOT RESPONDED TO. HENCE IT CANNOT BE SAID T HAT THE ASSESSEE HAS PROVED GENUINENESS OF THE PURCHASERS. IN VIEW OF T HE ABOVE SAID DEFICIENCIES, THE TAX AUTHORITIES HAVE REJECTED TH E BOOKS OF ACCOUNT. THOUGH THE ASSESSING OFFICER ESTIMATED THE GP AT THE RATE OF 25% ON THE ENTIRE SALES TURNOVER DECLARED BY THE ASSESSEE, YET THE LEARNED CIT(A) HAS RESTRICTED THE ADDITION TO 25% OF THE VALUE OF BOGUS PURCHASES. 8. IT IS AN ADMITTED FACT THAT THE ASSESSEE COULD N OT RECONCILE THE PURCHASES WITH THE SALES. THE ASSESSEE ALSO COULD NOT PRODUCE THE STOCK REGISTER. HENCE IT CANNOT BE SAID THAT THE ASSESSE E HAS PROVED THAT THE SALES DECLARED BY IT INCLUDED SALE OF MATERIALS PUR CHASED FROM HAWALA DEALERS. HOWEVER, SINCE THE LD CIT(A) HAS ESTIMATE D THE ADDITION ON PURCHASES, IT CAN BE PRESUMED THAT THE FIRST APPELL ATE AUTHORITY HAS ACCEPTED THAT THE SALES DECLARED BY THE ASSESSEE INCLUDED TH E SALES MADE OUT OF IMPUGNED PURCHASES, PARTICULARLY IN VIEW OF THE FAC T THAT THE REVENUE HAS NOT ITA NO.5008/MUM/2017. SHRI SUNIL B.VORANI (HUF). 5 CHALLENGED THE ORDER PASSED BY LD CIT(A). NOW THE ISSUE BOILS DOWN AS TO WHETHER THE ADDITION SUSTAINED BY LD CIT(A) IS REAS ONABLE OR NOT. 9. BEFORE US, THE LEARNED AR HAS RELIED ON THE ORDE R PASSED BY THE ITAT IN THE CASE OF SUNIL B.VORANI (SUPRA). HOWEVER, A PERUSAL OF THE SAID ORDER WOULD SHOW THAT THE ITAT HAS SIMPLY CONFIRMED THE O RDER OF THE LEARNED CIT(A) PASSED IN THE ABOVE SAID CASE, SINCE THE REV ENUE DID NOT CHALLENGE THE ORDER PASSED BY THE LEARNED CIT(A), I.E., IN AB SENCE OF THE APPEAL BY THE REVENUE, THE ITAT COULD NOT HAVE TAKEN AWAY THE REL IEF ALREADY GRANTED BY LD CIT(A). IT WAS OBSERVED SO IN THE ORDER PASSED BY ITAT. HENCE, IN OUR OPINION, THE ASSESSEE CAN NOT TAKE SUPPORT OF THE ABOVE SAID ORDER PASSED BY THE TRIBUNAL. 10. SINCE THE ASSESSEE HAS FAILED TO RECONCILE THE PURCHASES WITH THE SALES, WE ARE OF THE VIEW THAT THE PROFIT ELEMENT E MBEDDED IN SUCH PURCHASES IS JUSTIFIED. THE LEARNED AR SUBMITTED TH AT THE VAT APPLICABLE ON THE PRODUCT IS AROUND 5%. IN THESE KIND OF PURCHAS ES, THE ASSESSEE COULD HAVE MADE SAVINGS ON ACCOUNT OF VAT AND ALSO WOULD HAVE GOT MATERIALS AT DISCOUNTED RATE. CONSIDERING THESE POSITION OF THE ISSUE, WE ARE OF THE VIEW THAT THE ESTIMATE OF PROFIT AT 25% IS ON THE HIGHER SIDE. HENCE ON THE CONSPECTUS OF THE MATTER, WE ARE OF THE VIEW THAT T HIS ISSUE MAY BE PUT TO REST, IF THE ADDITION IS SUSTAINED TO 12.50% OF THE VALUE OF BOGUS PURCHASES. ACCORDINGLY, WE MODIFY THE ORDER PASSED BY THE LEAR NED CIT(A) AND DIRECT THE A.O. TO SUSTAIN THE ADDITION TO THE EXTENT OF 12.50 % OF THE VALUE OF BOGUS PURCHASES. ITA NO.5008/MUM/2017. SHRI SUNIL B.VORANI (HUF). 6 11. IN THE RESULT, THE APPEAL FILED BY THE ASS ESSEE IS PARTLY ALLOWED. ORDER HAS BEEN PRONOUNCED IN THE COURT ON 03.12.2 018 SD/- SD/- (AMARJIT SINGH) (B.R.BASKARAN) ! / JUDICIAL MEMBER ! / ACCOUNTANT MEMBER MUMBAI; DATED : 03 RD DECEMBER, 2018. DEVDAS* # $%&'&($ / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ! ! ' ( ) / THE CIT, MUMBAI. 4. ! ! ' / CIT(A)-28, MUMBAI 5. %&' (()* , ! )* , / DR, ITAT, MUMBAI 6. ',-. / GUARD FILE. / BY ORDER, %( //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI