ACIT -CIRCLE- 3, KALYAN V. MAHENDRA NANDKISHORE SHAH , MUMBAI

ITA 5096/MUM/2018

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 6038 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-10-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 04-09-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AKHTAR H ANSARILD
• Assessee Lawyers: M SUBRAMANIAN LD
• Keywords: Bogus purchase
• Section: 143(3); 142(1); 143(2); 148

Judgement Text

1 ITA NO.5096-97/MUM/2018 MAHENDRA NANDKISHORE SHAH ASSESSMENT YEARS 2010-11 & 2011-12 - 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.5096/MUM/2018 ( / ASSESSMENT YEAR:2010-11 ) & ./ I.T.A. NO.5097/MUM/2018 ( / ASSESSMENT YEAR:2011-12 ) A CIT - CIRCLE - 3 ( KALYAN ) 2 ND FLOOR, RANI MANSION MURBAD ROAD, KALYAN (W)-421 301. / VS. SHRI MAHENDRA NANDKISHORE SHAH PROP. OF M/S. SHAH ENGINEERS B-402, VINIT SADAN, RAJAJI PATH DOMBIVLI (E)-421 201. !'#$ ./ ./PAN/GIR NO. ACSPS 3049 P ( #$ /APPELLANT ) : ( %&#$ / RESPONDENT ) REVEN UE BY : SHRI AKHTAR H. ANSARI-LD.DR ASSESSEE BY : SHRI M. SUBRAMANIAN-LD. AR / DATE OF HEARING : 18/09/2019 / DATE OF PRONOUNCEMENT : 03/10/2019 / O R D E R MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER): - 1. AFORESAID APPEALS BY REVENUE FOR ASSESSMENT YEAR S [IN SHORT REFERRED TO AS AY] 2010-11AND 2011-12 CONTEST COMMON ORDER O F LD. COMMISSIONER OF INCOME-TAX (APPEALS)-1, THANE, [IN SHORT REFERRE D TO AS CIT(A)], APPEAL 2 ITA NO.5096-97/MUM/2018 MAHENDRA NANDKISHORE SHAH ASSESSMENT YEARS 2010-11 & 2011-12 NOS. ITA NO.542 & 541/2014-15 D ATED 14/06/2018. THE GROUNDS RAISED IN AY 2010-11 READS AS UNDER: - 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN NOT APPRECIATING THE LAW CO RRECTLY THAT ONCE THE PURCHASES ARE UNVERIFIABLE/NOT GENUINE /BOGUS, THE SAME SHOULD HA VE BEEN DISALLOWED IN ENTIRETY?' 1 . 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN LAW BY NOT APPRECIATING THE FAC T THAT THE ASSESSEE COULD NOT ESTABLISH THE GENUINENESS OF THE PURCHASES FROM THE NON-EXISTENT VENDORS? 3. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN LAW BY NOT APPRECIATING THE FAC T THAT THE ONUS TO JUSTIFY THE CLAIM OF EXPENSES IS ON THE ASSESSEE AND THE SAME HAS FAILED TO DISCHARGE IT IN RELATION TO THE PURCHASES MADE FROM THE NON-EXISTENT VENDORS? 4. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. C1T(A) HAS ERRED IN LAW BY IGNORING, THE FACT THAT THE ASSESSEE COULD NOT SUBSTANTIATE ITS CLAIM OF PURCHASES FROM NON-EXISTENT VENDORS BY MEA NS OF RELEVANT SUPPORTING DOCUMENTS RELATED TO MOVEMENT AND DELIVERY OF GOODS , STOCK REGISTER, ETC. TO ARRIVE AT DISALLOWANCE AT 25% OF THE PURCHASES FROM THE NON-E XISTENT VENDORS? 5. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. C1T(A) HAS WAS JUSTIFIED IN NOT APPRECIATING THE LA W CORRECTLY THAT ONCE THE PURCHASES ARE UNVERIFIABLE / NOT GENUINE / BOGUS, THE SAME SH OULD HAVE DISALLOWED IN ENTIRETY, PARTICULARLY IN VIEW OF THE RATIO OF THE DECISION O F THE HON'BLE GUJARAT HIGH COURT IN TAX APPEAL NO. 242 OF 2003 DATED 20/06/2016 IN THE CASE OF N. K. PROTEINS LTD. AGAINST WHICH THE SLP WAS DISMISSED BY THE HON'BLE APEX COU RT?. 6. THE ORDER OF THE CIT(A) MAY BE VACATED AND THAT OF THE ASSESSING OFFICER MAY BE RESTORED. WE HAVE HEARD AND CONSIDERED THE ARGUMENTS ADVANCED BY BOTH THE REPRESENTATIVES. 2.1 FACTS FOR AY 2010-11 IN BRIEF, ARE THAT THE ASS ESSEE BEING RESIDENT INDIVIDUAL STATED TO BE ENGAGED AS CIVIL CONTRACTOR UNDER PROPRIETORSHIP CONCERN NAMELY M/S SHAH ENGINEERS, WAS ASSESSED FOR IMPUGNED AY U/S. 143(3) R.W.S. 147 ON 11/06/2014 WHEREIN THE INCOME OF THE ASSESSEE WAS DETERMINED AT RS.35.97 LACS, AFTER SOLE ADDITION OF ALLEGED BOGUS 3 ITA NO.5096-97/MUM/2018 MAHENDRA NANDKISHORE SHAH ASSESSMENT YEARS 2010-11 & 2011-12 PURCHASES FOR RS.16.99 LACS AS AGAINST RETURNED INCOME OF RS .18.97 LACS E-FILED BY THE ASSESSEE ON 21/09/2010 WHICH WAS PRO CESSED 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.16.99 LACS FROM 5 ENTITIES, THE DETAILS OF WHICH HAVE ALREADY BEEN EXTRACTED IN THE QUANTUM ASSESSMENT ORDER. ACCORDINGLY, AS PER DUE P ROCESS OF LAW, RE- ASSESSMENT PROCEEDINGS WERE INITIATED AGAINST THE A SSESSEE U/S 147 BY ISSUANCE OF NOTICE U/S 148 ON 10/05/2013 FOLLOWED B Y STATUTORY NOTICES U/S 143(2) & 142(1) WHEREIN THE ASSESSEE WAS DIRECTED T O SUBSTANTIATE THE PURCHASE TRANSACTIONS. 2.3 ALTHOUGH, THE ASSESSEE DEFENDED THE PURCHASES, HOWEVER, FAILED TO PRODUCE ANY OF THE SUPPLIER TO CONFIRM THE TRANSACT IONS. FINALLY, NOT SATISFIED WITH ASSESSEES EXPLANATIONS, LD.AO DISALLOWED THE STATED PURCHASES. 2.4 THE LD. CIT(A), AFTER CONSIDERING ASSESSEES SU BMISSIONS, VARIOUS JUDICIAL PRONOUNCEMENTS, MATERIAL ON RECORD AND AFT ER APPRECIATING THE GROSS PROFIT / NET PROFIT TRENDS FOR VARIOUS YEARS, RESTRICTED THE ADDITIONS TO 25% OF ALLEGED BOGUS PURCHASES. AGGRIEVED, THE REVE NUE IS IN FURTHER APPEAL BEFORE US. IT APPEARS THAT THE ASSESSEE HAS NOT PREFERRED ANY FURTHER APPEAL. 3. WE ARE OF THE CONSIDERED OPINION THERE COULD BE NO SALE WITHOUT ACTUAL PURCHASE OF MATERIAL KEEPING IN VIEW THE ASSESSEES NATURE OF BUSINESS. THE ASSESSEE WAS IN POSSESSION OF PRIMARY PURCHASE DOCUMENTS AND THE PAYMENTS TO THE SUPPLIER WAS THROUGH BANKING CHANNE LS. HOWEVER, AT THE 4 ITA NO.5096-97/MUM/2018 MAHENDRA NANDKISHORE SHAH ASSESSMENT YEARS 2010-11 & 2011-12 SAME TIME, THE ASSESSEE MISERABLY FAILED TO SUBSTAN TIATE THE PURCHASES DURING ASSESSMENT PROCEEDINGS. THE ASSESSEE FAILED TO PRODUCE ANY OF THE SUPPLIERS TO CONFIRM THE TRANSACTIONS AND ALSO FAIL ED TO PROVE THE DELIVERY OF MATERIAL. UNDER SUCH CIRCUMSTANCES, THE ADDITIONS W HICH 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 LEARNED FIRST APPELLATE AUTHORITY HAS RIGHTLY DONE SO. THEREFORE, CONCURRING WITH THE APPROACH OF LD. CIT(A), WE DISMISS THE APPEAL. 4. FACTS ARE PARI-MATERIA THE SAME IN AY 2011-12 WH EREIN THE ASSESSEE WAS SADDLED WITH ADDITIONS OF RS.13.83 LACS ON ACCO UNT OF ALLEGED BOGUS PURCHASES IN AN ASSESSMENT FRAMED U/S 143(3) R.W.S. 147 ON 11 /06/2014. THE FIRST APPELLATE AUTHORITY RESTRICTED THE SAME T O 25%. THE IMPUGNED ORDER IS COMMON ORDER FOR BOTH THE YEARS. HENCE, OU R OBSERVATION, CONCLUSION AS WELL AS ADJUDICATION AS FOR AY 2010-1 1 SHALL MUTATIS MUTANDIS APPLY TO THIS YEAR ALSO. RESULTANTLY, THE APPEAL ST ANDS DISMISSED. 5. BOTH THE APPEALS STAND DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 03 RD OCTOBER, 2019. SD/- SD/- (MAHAVIR SINGH) (MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 03/10/2019 SR.PS:-JAISY VARGHESE 5 ITA NO.5096-97/MUM/2018 MAHENDRA NANDKISHORE SHAH ASSESSMENT YEARS 2010-11 & 2011-12 () *) / COPY OF THE ORDER FORWARDED TO : 1. #$ / THE APPELLANT 2. %&#$ / THE RESPONDENT 3. - ( ) / THE CIT(A) 4. - / CIT CONCERNED 5. ./ %(0 , 0 , / DR, ITAT, MUMBAI 6. /123 / GUARD FILE / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI.