ITO -WD- 3(3), KALYAN V. KAPIL D. MEHTA, DOMBIVALI

ITA 5101/MUM/2018

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 6035 (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: SAURABH KUMARLD
• Assessee Lawyers: HARESH JOSHILD
• Keywords: Bogus purchase; Business income
• Section: 143(3); 142(1); 133(6); 143(2); 148

Judgement Text

1 SHRI KAPIL D. MEHTA ASSESSMENT YEARS 2009-10 & 2010-11 - 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.5101/MUM/2018 ( / ASSESSMENT YEAR:2010-11 ) INCOME TAX OFFICER - WARD - 3(3) KALYAN 2 ND FLOOR, RANI MANSION MURBAD ROAD, KALYAN (W)-421 301. / VS. SHRI KAPIL D. MEHTA M/S. SHREE RAM SALES CORPORATION C/O. TEX MECH INDUSTRIES 08, SHREE PARSWANATH INDL. ESTATE V.P.ROAD, NEAR JANKI HOTEL DOMBIVILI (EAST) !'#$ ./ ./PAN/GIR NO. ALIPM-0564-E ( '# /APPELLANT ) : ( $%'# / RESPONDENT ) & ./ I.T.A. NO.4985/MUM/2018 (&'( )' / ASSESSMENT YEAR:2010-11 ) & ./ I.T.A. NO.4986/MUM/2018 (&'( )' / ASSESSMENT YEAR:2009-10 ) SHRI KAPIL D. MEHTA M/S. SHREE RAM SALES CORPORATION C/O. TEX MECH INDUSTRIES 08, SHREE PARSWANATH INDL. ESTATE V.P.ROAD, NEAR JANKI HOTEL DOMBIVILI (EAST) / VS. INCOME TAX OFFICER - WARD - 3(3) KALYAN 2 ND FLOOR, RANI MANSION MURBAD ROAD, KALYAN (W)-421 301. !'#$ ./ ./PAN/GIR NO. ALIPM-0564-E ( '# /APPELLANT ) : ( $%'# / RESPONDENT ) REVENUE BY : SHRI SAURABH KUMAR-LD.DR ASSESSEE BY : SHRI HARESH JOSHI-LD. AR / DATE OF HEARING : 18/09/2019 2 SHRI KAPIL D. MEHTA ASSESSMENT YEARS 2009-10 & 2010-11 / DATE OF PRONOUNCEMENT : 03/10/2019 / O R D E R MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER): - 1.1 THE ASSESSEE IS UNDER APPEAL BEFORE US FOR AYS 2009-10 & 2010-11 WHEREAS THE REVENUE IS UNDER APPEAL BEFORE US FOR A Y 2010-11. THE IMPUGNED ORDER HAS BEEN PASSED BY LD. COMMISSIONER OF INCOME-TAX (APPEALS)-1, THANE, [IN SHORT REFERRED TO AS CIT(A) ], APPEAL NO.126 & 124/2015-16 D ATED 26/06/2018 WHICH IS COMMON ORDER FOR BOTH THE YEARS. 1.2 THE ASSESSEE, IN AY 2009-10, HAS RAISED FOLLOWI NG GROUNDS OF APPEAL:- 1. THE HON'BLE CIT (A) ERRED IN REJECTING THE BOO KS OF ACCOUNTS U/S 145(3) WITHOUT CONSIDERING THE FACTS AND CONTRARY TO THE PROVISION S OF THE INCOME TAX ACT, 1961. 2. THE HON'BLE CIT (A) ERRED IN CONFIRMING ADDITI ON OF PART UNPROVED PURCHASES OF RS.6.70,876/- WITHOUT CONSIDERING THE FACTS AND CON TRARY TO THE PROVISIONS OF THE INCOME TAX ACT, 1961. 3. THE HON'BLE CIT(A) HAS ERRED IN ESTIMATING GP BASED ON EARLIER YEARS WITHOUT CONSIDERING THE FACTS AND CONTRARY TO THE PROVISION S OF THE INCOME TAX ACT, 1961. WE HAVE HEARD AND CONSIDERED THE ARGUMENTS ADVANCED BY BOTH THE REPRESENTATIVES. 2.1 FACTS ON RECORD WOULD REVEAL THAT THE ASSESSEE BEING RESIDENT INDIVIDUAL STATED TO BE ENGAGED IN DEALING IN WEAVI NG ACCESSORIES & INDUSTRIAL HARDWARE UNDER PROPRIETORSHIP CONCERN NA MELY M/S SHREE RAM SALES CORPORATION, WAS ASSESSED FOR IMPUGNED AY U/S . 143(3) R.W.S. 147 ON 09/05/2015 WHEREIN THE INCOME OF THE ASSESSEE WA S DETERMINED AT RS.12.04 LACS, AFTER SOLE ADDITION OF ALLEGED BOGUS PURCHASES FOR RS.6.70 3 SHRI KAPIL D. MEHTA ASSESSMENT YEARS 2009-10 & 2010-11 LACS AS AGAINST RETURNED INCOME OF RS.5.33 LACS FIL ED BY THE ASSESSEE ON 29/09/2009 WHICH 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.6.70 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, NOTICE ISSUED U/S 133(6) TO CONFIRM THE TRANSACTIONS, REMA INED UN-RESPONDED TO AND THE ASSESSEE FAILED TO PRODUCE ANY OF THE SUPPL IER TO CONFIRM THE TRANSACTIONS. THEREFORE, THE BOOKS WERE REJECTED U/ S 145(3) AND THE STATED PURCHASES WERE ADDED TO THE INCOME OF THE ASSESSEE. 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, APPLIED GROSS PROFIT RATE OF 11.55% TO THE TOTAL SALES REFLECTED BY THE ASSES SEE DURING THE YEAR UNDER CONSIDERATION. THE SAID RATE WAS NOTHING BUT GROSS PROFIT RATE OF AY 2007- 08. THE SAME RESULTED INTO CONFIRMATION OF FULL ADD ITION IN THE HANDS OF THE ASSESSEE. AGGRIEVED, THE ASSESSEE IS UNDER APPEAL B EFORE US. 4 SHRI KAPIL D. MEHTA ASSESSMENT YEARS 2009-10 & 2010-11 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 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. HOWEVER, ESTIMATING THE ADDIT ION BY APPLYING GROSS PROFIT RATE OF EARLIER YEAR TO THE CURRENT YEAR ON TOTAL SALES, IN OUR CONSIDERED OPINION, WAS NOT CORRECT APPROACH. FOR EASE OF COMP UTATION, WE ESTIMATE THE ADDITIONS @8% OF ALLEGED BOGUS PURCHASES OF RS. 6,70,876/- WHICH COMES TO RS.53,670/-. THE BALANCE ADDITION STANDS D ELETED. THE LEARNED AO IS DIRECTED TO RECOMPUTE THE INCOME IN TERMS OF OUR ORDER. THE APPEAL STANDS PARTLY ALLOWED. 4. FACTS ARE PARI-MATERIA THE SAME IN AY 2010-11 W HEREIN THE ASSESSEE WAS SADDLED WITH ADDITIONS OF RS.16.13 LACS ON ACCO UNT OF ALLEGED BOGUS PURCHASES IN AN ASSESSMENT FRAMED U/S 143(3) R.W.S. 147 ON 09 /03/2015. THE FIRST APPELLATE AUTHORITY RESTRICTED THE SAME T O RS.3.90 LACS BY APPLYING THE GROSS PROFIT RATE OF EARLIER YEARS. THE SAME HA S GIVEN RISE TO CROSS- APPEALS BEFORE US. THE IMPUGNED ORDER IS COMMON ORD ER FOR BOTH THE YEARS. 5 SHRI KAPIL D. MEHTA ASSESSMENT YEARS 2009-10 & 2010-11 HENCE, OUR OBSERVATION, CONCLUSION AS WELL AS ADJUD ICATION AS FOR AY 2009- 10 SHALL MUTATIS MUTANDIS APPLY TO THIS YEAR ALSO. THE IMPUGNED ADDITIONS STAND RESTRICTED TO 8% OF ALLEGED BOGUS PURCHASES O F RS.6,13,909/- WHICH COMES TO RS.49,113/-. RESULTANTLY, THE ASSESSEES A PPEAL STANDS PARTLY ALLOWED WHEREAS THE REVENUES APPEAL STAND DISMISSE D. 5. ITA NOS. 4985-86/MUM/2018 STAND PARTLY ALLOWED W HEREAS ITA NO. 5101/MUM/2018 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 () *) / COPY OF THE ORDER FORWARDED TO : 1. '# / THE APPELLANT 2. $%'# / THE RESPONDENT 3. / ( ) / THE CIT(A) 4. / / CIT CONCERNED 5. 01 $,& , & , / DR, ITAT, MUMBAI 6. 12'3 / GUARD FILE / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI.