SHOBHA HARISH KHANDELWAL, MUMBAI V. ITO 30(3)(3), MUMBAI

ITA 5056/MUM/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 8486 (ITAT-MUMBAI)
• Duration Of Justice: 5 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-02-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 08-08-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: B S BIST
• Assessee Lawyers: D C JAIN
• Keywords: Bogus purchase; Tangible material; Corroborative evidences
• Section: 143(3); 133(6); 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH E,MUM BAI BEFORE SHRI B.R. BASKARAN, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO.5056/MUM/2016 (ASSESSMENT YEAR- 2010-11) SMT. SHOBHA HARISH KHANDELWAL C/O. D.C. JAIN & CO., 75, BOMBAY MUTUAL BUILDING 293, DR. D. N. ROAD, FORT, MUMBAI-400001 PAN: AABPK6532E VS. ITO 30 (3)(3), C-13, 6 TH FLOOR, PRATYAKSHAKAR BHAVAN, ROOM NO. 604, BANDRA KURLA COMPLEX, BANDRA (E), MUMBAI-400051. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI D.C. JAIN (AR) REVENUE BY : SHRI B.S. BIST (DR) DATE OF HEARING : 25.01.2017 DATE OF PRONOUNCEMENT : 01.02.2017 ORDER UNDER SECTION 254(1) OF INCOME TAX ACT PER PAWAN SINGH, JM: 1. THIS APPEAL U/S 253 OF THE INCOME-TAX ACT ( THE AC T) FILED BY ASSESSEE IS DIRECTED AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME-TAX (APPEALS) [FOR SHORT THE CIT(A)] 41, MUMBAI DATED 23.05.2016 FOR ASSESSMENT YEAR (AY) 2010-11. THE ASSESSEE HAS RAISED AS MANY AS FIVE GROUNDS OF APPE AL. HOWEVER, AS PER OUR CONSIDERED OPINION, THERE ARE TWO SUBSTANTIAL GROUN DS OF APPEAL ARE (1) WHETHER THE LD. CIT(A) ERRED IN CONFIRMING THE RE-OPENING OF AS SESSMENT. (2) WHETHER THE LD. CIT(A) ERRED IN CONFIRMING A SUM OF RS. 9,18,317/- (30%) OUT OF RS. 30,61,058/- ON ACCOUNT OF BOGUS PURCHASES. REST OF THE GROUNDS OF APPEAL IS ARGUMENTATIVE IN N ATURE. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED RETURN OF INCOME FOR RELEVANT AY ON 24.09.2010. THE RETURN OF INCOME WAS PROCESSED U/S 143(1). SUBSEQUENTLY, THE CASE WAS RE-OPENED ON THE INFORMATION RECEIVED FROM SALE S TAX DEPARTMENT AND DGIT (INVESTIGATION) MUMBAI THAT ASSESSEE OBTAINED THE A CCOMMODATION ENTRIES IN THE FORM OF PURCHASES FROM BOGUS TRADERS WHICH ARE IN THE BU SINESS PROVIDING BILLS WITHOUT 2 ITA NO.5056/M/2016 SMT. SHOBHA HARISH KHANDELWAL DELIVERY OF GOODS. NOTICE U/S 148 DATED 19.03.2014 WAS SERVED ON ASSESSEE. IN RESPONSE TO THE NOTICE, THE ASSESSEE REPLIED THAT T HE RETURN ALREADY FILED ON 24.09.2010 MAY BE TREATED AS RETURN IN RESPONSE TO THE SAID NO TICE. THE ASSESSING OFFICER (AO) COMPLETED THE ASSESSMENT U/S 143(3) R.W.S. 147 OF T HE ACT. THE AO MADE THE ADDITION BY MAKING A DISALLOWANCE OF RS. 30,61,058/- ON AC COUNT OF BOGUS PURCHASES. DISALLOWANCE CONSIST OF PURCHASES OF RS. 9,21,752/ - FROM M/S J.M.D. ORGENIC AND RS. 21,39,306/- FROM M/S CHEMIC AGE ENTERPRISES. O N APPEAL BEFORE THE LD. CIT(A), THE DISALLOWANCE WAS RESTRICTED TO 30% OF THE TOTAL ADDITIONS AND REMAINING (70% OF ADDITIONS) OF RS. 21,42,741/- WAS DELETED. THUS, FU RTHER AGGRIEVED BY THE ORDER OF LD. CIT(A), THE ASSESSEE FILED THE PRESENT APPEAL BEFOR E US. 3. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVE (AR ) OF THE ASSESSEE AND LD. DEPARTMENTAL REPRESENTATIVE (DR) FOR THE REVENUE AN D PERUSED THE MATERIAL AVAILABLE ON RECORD. THE LD AR FOR THE ASSESSEE HAS NOT ARGUE D ANYTHING AGAINST THE GROUND NO.1 RAISED IN THE PRESENT APPEAL. THUS, THE GROUN D NO. 1 IS TREATED AS NOT PRESSED AND THE SAME IS DISMISSED AS NOT PRESSED. 4. GROUND NO.2 RELATES TO CONFIRMING THE 30% OF THE DI SALLOWANCE ON ACCOUNT OF THE BOGUS PURCHASES. THE LD. AR OF THE ASSESSEE ARGUED THAT ASSESSEE HAS FILED THE COPIES OF PURCHASES OF INVOICE, LEDGER ACCOUNT, BANK STATE MENT AND THE STATEMENTS SHOWING PURCHASE AND CORRESPONDING SALES WITH RESPECT TO BO TH THE PARTIES. IT WAS ARGUED THAT THE ASSESSEE REMAINED IN REGULAR BUSINESS WITH M/S CHEMIC AGE ENTERPRISES IN EARLIER AS WELL AS IN SUBSEQUENT YEAR. THE AFFIDAVIT FROM M /S CHEMIC AGE ENTERPRISES WAS ALSO FILED BEFORE THE LOWER AUTHORITY CONFIRMING TH E BUSINESS WITH THEM . THE AO HAS NOT PROVIDED OPPORTUNITY TO CROSS-EXAMINE THE PARTI ES , WHICH STATED TO HAVE ISSUED BOGUS BILL, THE ADDITIONS WERE MADE ON THE BASIS OF SALES TAX AUTHORITIES INFORMATION I.E. THE THIRD PARTY INFORMATION WITHOUT VERIFYING THE CORRECTNESS. THE LD. AR OF THE ASSESSEE RELIED UPON THE DECISION OF JURISDICTIONAL HIGH COURT IN CIT VS. M/S NIKUNJ EXIMP ENTERPRISES PVT. LTD. IN ITA NO. 5604/2010 DA TED 17.12.2012 AND DECISION OF MUMBAI TRIBUNAL IN ACIT VS. SHRI RAMILA PRAVIN SHAH IN ITA NO. 5246/MUM/2013 DATED 05.03.2015. ON THE OTHER HAND, LD. DR FOR THE REVENUE SUPPORTED THE ORDER OF AUTHORITIES BELOW AND ARGUED THAT LD. CIT(A) HAS AL READY GIVEN A SUBSTANTIAL RELIEF TO THE ASSESSEE. THE ASSESSEE IS NOT ENTITLED FOR ANY FURTHER RELIEF. IT WAS FURTHER ARGUED 3 ITA NO.5056/M/2016 SMT. SHOBHA HARISH KHANDELWAL THAT THE ASSESSEE FAILED TO PROVE THE TRANSPORTATIO N OF THE GOODS AS NO DOCUMENTS SHOWING THE DETAILS OF VEHICLE BILLS, TRANSPORTATIO N BILLS, INWARD REGISTER, STOCK REGISTER AND THE PAYMENT RECEIVED AGAINST SUCH SALES. 5. WE HAVE CONSIDERED THE RIVAL CONTENTION OF THE PART IES AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. DURING THE ASSESSMENT PROCEEDING , THE AO OBSERVED THAT ASSESSEE HAS SHOWN THE PURCHASES FROM M/S JMD ORGANIC OF RS . 9,21,752/- AND FROM M/S CHEMIC AGE ENTERPRISES OF RS. 21,39,306/-. THE AO A SKED THE ASSESSEE TO FURNISH THE SUPPORTING EVIDENCE IN RESPECT OF PURCHASES FROM TH E PARTIES. THE ASSESSEE FURNISHED THE COPY OF PURCHASE BILLS AND CONTENDED THAT PURCH ASES WERE MADE THROUGH BANKING CHANNEL. THE CONTENTION OF ASSESSEE WAS NOT ACCEPTE D HOLDING THAT ASSESSEE HAS NOT PRODUCED THE PARTIES, DETAILS OF VEHICLE BILLS, TRA NSPORTATION BILL, INWARD REGISTER, STOCK REGISTER AND THE PAYMENT RECEIVED AGAINST SUCH SALE S. THE NOTICE SENT U/S 133(6) TO THE PARTIES WERE RETURNED UN-SERVED. THE ASSESSEE WAS A SKED TO PRODUCE THE PARTIES, ASSESSEE STATED THAT SUPPLIER ARE NOT AVAILABLE AN D IT IS NOT POSSIBLE FOR ASSESSEE TO PRODUCE THE PARTIES FOR EXAMINATION. THE AO FURTHER CONCLUDED THAT ASSESSEE FAILED TO DISCHARGE THE PRIMARY ONUS THAT PURCHASES ARE BONAF IDE AND DISALLOWED THE ENTIRE PURCHASES OF THESE TWO PARTIES. THE LD. CIT(A) WHIL E CONSIDERING THE APPEAL UPHOLD THE RE-OPENING OF THE ASSESSMENT HOLDING THAT A NOT ICE U/S 148 WAS ISSUED ON THE BASIS OF FRESH INFORMATION AND TANGIBLE MATERIAL AND THUS THE RE-OPENING WAS VALID. ON THE GROUNDS OF ADDITION/DISALLOWANCE THE LD. CIT(A) OBS ERVED THAT ASSESSEE FAILED TO PRODUCE THE PARTIES, NO ALTERNATIVE ADDRESS WAS FIL ED IN RESPECT OF SAID PARTIES. THE AO CONFRONTED ALL THE MATERIAL AND FINDING TO THE ASSE SSEE. MOREOVER, THE INFORMATION OF SALES TAX DEPARTMENT WAS AVAILABLE ON THE WEBSITE A ND IT WAS IN THE PUBLIC DOMAIN. THE ASSESSEE FAILED TO BRING THE ACTUAL TRANSPORTAT ION AND DELIVERY OF GOODS AND THUS THE ASSESSEE FAILED TO PROVE THE GOODS WERE PURCHAS ED FROM THESE TWO PARTIES. THE LD. CIT(A) EXAMINED THE G.P. RATIO OF THE ASSESSEE WHIC H IS 22.44% AND CONSIDERING THE FACT OF THE CASE AND THE CIRCUMSTANCES SUSTAINED TO 30% OF DISALLOWANCE HOLDING REASONABLE IN CASE OF ASSESSEE INSTEAD OF DISALLOWA NCE OF 100%. WE HAVE ALSO CONSIDERED THE FACT INDEPENDENTLY. WE ARE OF THE CO NSIDERED OPINION THAT UNDER THE INCOME TAX ACT ONLY THE REAL INCOME CAN BE TAXED BY THE REVENUE. WE MAY FURTHER CONCLUDE THAT EVEN IF THE TRANSACTION IS NOT VERIFI ABLE, THE ONLY TAXABLE IS THE TAXABLE INCOME COMPONENT, NOT THE ENTIRE TRANSACTION. THE A SSESSEE IS ENGAGED IN THE BUSINESS 4 ITA NO.5056/M/2016 SMT. SHOBHA HARISH KHANDELWAL OF TRADING OF CHEMICALS AFTER CONSIDERING THE RIVAL CONTENTION OF BOTH THE PARTIES, WE ARE OF THE OPINION THAT IN ORDER TO FULFILL THE GAP OF REVENUE LEAKAGE, THE DISALLOWANCE OF REASONABLE PERCENTAGE OF SUCH IMPUGNED PURCHASE WOULD MEET THE END OF JUSTICE. THOUGH THE CASE WAS EXAMINED BY LD. CIT(A) ON THE S IMILAR LINE AND THE LD. CIT(A) SUSTAINED THE 30% OF IMPUGNED PURCHASES AS PER OUR VIEW THE 30% OF THE IMPUGNED PURCHASES IS AT HIGHER SIDE. CONSIDERING THE SUBMIS SION OF BOTH THE PARTIES, THE ADDITION IS RESTRICTED TO 12% OF TOTAL IMPUGNED PUR CHASES (DISPUTED PURCHASES). THE HONBLE BOMBAY HIGH COURT IN CIT VS. HARIRAM BHAMBH ANI IN ITA NO. 313/2013 DECIDED ON 04.02.2015 ALSO HELD THAT REVENUE IS NOT ENTITLED TO BRING THE ENTIRE SALES CONSIDERATION TO TAX BUT ONLY THE PROFIT ATTRIBUTAB LE TO THE TOTAL UNRECORDED CONSIDERATION ALONE CAN BE SUBJECT TO TAX. IN VIEW OF THE ABOVE DISCUSSION, WE RESTRICT THE DISALLOWANCE TO 12% OF THE TOTAL IMPUGNED/BOGUS PURCHASES. THUS, THE GROUND OF APPEAL IS PARTLY ALLOWED. 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 1 ST FEBRUARY, 2017. SD/- SD /- (B.R. BASKARAN) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI; DATED 01/02/2017 S.K.PS COPY OF THE ORDER FORWARDED TO : BY ORDER, (ASSTT.REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY/