ITO -WD- 3(4), KALYAN V. SRUSHTI ENTERPRISES, DOMBIVALI

ITA 5103/MUM/2018

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 1483 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-10-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 04-09-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R BHOOPATHI
• Assessee Lawyers: DR P DANIEL
• Keywords: Bogus purchase; Bonafide belief
• Section: 133(6); 201; 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES SMC, MUMBAI BEFORE SHRI VIKAS AWASTHY, JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA NO. 5103/MUM/2018 ASSESSMENT YEAR : 2009-10 INCOME TAX OFFICER, WARD-3(4), KALYAN (W) VS. M/S.SRUSHTI ENTERPRISES, B-8, TRIDEV CHS LTD., RH-84, MIDC, DOMBIVALI (E) MUMBAI [PAN : ABLFS0060L] (APPELLANT) (RESPONDENT) C.O NO. 220/MUM/2019 (ARISING OUT OF ITA NO.5103/MUM/2018) ASSESSMENT YEAR : 2009-10 M/S.SRUSHTI ENTERPRISES, B-8, TRIDEV CHS LTD., RH-84, MIDC, DOMBIVALI (E) MUMBAI [PAN : ABLFS0060L] VS. INCOME TAX OFFICER, WARD-3(4), KALYAN (W) (CROSS-OBJECTOR) (RESPONDENT) REVENUE BY : SHRI R.BHOOPATHI , D R ASSESSEE BY : DR. P.DANIEL, A R DATE OF HEARING : 1 8 - 0 9 - 201 9 DATE OF PRONOUNCEMENT : 22 - 1 0 - 201 9 O R D E R PER RAJESH KUMAR, A.M: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS)-1, THANE, DATED 25-06-2018 CHALLENGING THE APPELLATE ORDER WH EREIN THE LD CIT(A) HAS DIRECTED TO ESTIMATE THE INCOME UNDER SECTION 44AF @ 5%. THE ASSESSEE HAS FILED CROSS-OBJECTION A GAINST ITA NO. 5103/MUM/2018 C.O.NO. 220/MUM/2019 : 2 : THE APPEAL OF REVENUE FOR THE AY.2009-10 CHALLENGIN G THE SAID DIRECTION OF THE ASSESSEE TO ESTIMATE THE INCO ME UNDER SECTION 44AF AND ALSO THE SUSTENANCE OF ADDITION ON ACCOUNT OF EXPENSES OF RS. 77,064/-. WE SHALL FIRST DECIDE THE GROUNDS RAISED BY THE ASSESSEE IN CROSS OBJECTIONS. 2. BRIEF FACTS OF THE CASE ARE THAT, ASSESSEE IS A PARTNERSHIP FIRM, ENGAGED IN THE BUSINESS OF SUPPLY OF HARDWARE MATERIALS. THE ASSESSEE FILED THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION ON 23-09-2009 ELECTRONICALLY, D ECLARING TOTAL INCOME AT RS.1,60,741/-. SUBSEQUENTLY, INFORM ATION WAS RECEIVED FROM SALES TAX DEPARTMENT THROUGH THE DGIT (INV.), PUNE, THAT THE ASSESSEE WAS ONE OF THE BENEFICIARIE S, WHO HAD OBTAINED BOGUS PURCHASE BILLS FROM THE ALLEGED HAWA LA DEALERS. AS A RESULT , THE CASE OF THE ASSESSEE WA S RE-OPENED U/S 147 OF THE ACT AFTER RECORDING NECESSARY REASON S U/S.148(2) OF THE ACT AND NOTICE U/S 148 OF THE ACT WAS ISSUED AND SERVED UPON THE ASSESSEE. THE AO OBSERVE D THAT OUT OF TOTAL PURCHASES AS DISCLOSED BY THE ASSESSEE OF RS.85,95,331/-, THE PURCHASES FROM HAWALA PARTIES W ERE OF RS. 8,30,706/-. THE ASSESSEE PRODUCED BILLS VOUCHER S, SALES BILLS , STOCK TALLY AND PAYMENT DETAILS . BEFORE T HE AO, ASSESSEE SUBMITTED THAT THE ASSESSEE HAS NO KNOWLED GE OF SUCH FACT HAWALA DEALERS AND WAS UNDER THE BONAFIDE BELIEF THAT THE GOODS PURCHASED WERE FROM THE GENUINE SUPP LIERS. THE ASSESSEE CONTENDED THAT THE PAYMENTS WERE ALSO MADE BY ACCOUNT PAYEE CHEQUES. THE NOTICES ISSUED UNDER SECTION 133(6) OF THE ACT TO THE SUPPLIERS WAS RETURNED UNS ERVED.THE ASSESSEE ALSO SUBMITTED THAT HE WAS FORCED TO PAY T HE SALES TAX DUES OF THE SUPPLIERS WHO DEFAULTED IN THE PAYM ENT OF VAT ITA NO. 5103/MUM/2018 C.O.NO. 220/MUM/2019 : 3 : AND WERE ABSCONDING AND HENCE FILED A REVISED RETUR N. THE ASSESSEE SUBMITTED BEFORE THE AO THAT IT HAD SOL D THE MATERIALS PURCHASED FROM THE ALLEGED BOGUS SUPPLIER S TO ITS CUSTOMERS AND THEREFORE THERE CANNOT BE ANY BOGUS PURCHASES AS ALLEGED AS THE STOCKS WERE PROCURED FR OM THE SUPPLIERS AND SUPPLIED TO THE CUSTOMERS. FINALLY TH E BAO TREATED THE SAID PURCHASES OF RS. 8,30,706/- AS NON GENUINE AND ADDED THE SAME TO THE INCOME OF THE ASSESSEE. T HE AO ALSO DISALLOWED RS. 77,064/- BEING 20% OF THE AGGRE GATE EXPENSES OF RS.3,85,321/= COMPRISING CONVEYANCE RS. 56,138/-, MOBILE EXPENSES RS. 50,400/- , MISC. EXPE NSES RS. 1,26,576/- AND TRANSPORT CHARGES RS. 1,52,207/- BY OBSERVING THAT BILLS , VOUCHERS PRODUCED BY THE ASS ESSEE , IT COULD NOT BE POSSIBLE TO VERIFY THE EXPENSES AND PE RSONAL ELEMENT COULD NOT BE RULES OUT. AGGRIEVED WITH THE SAID ORDER OF THE ASSESSMENT U/S.143(3) R.W.S.147 OF THE ACT, DT.23-02- 2015, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE C IT(A). 3. IN THE APPELLATE PROCEEDINGS, THE LD.CIT(A) PAR TLY ALLOWED THE APPEAL OF ASSESSEE AFTER TAKING INTO CO NSIDERATION THE CONTENTIONS OF THE ASSESSEE BY DIRECTING THE AO TO ESTIMATE THE INCOME AT 5% OF THE TURNOVER WHICH WOR KED OUT TO RS. 4,87,185 UNDER SECTION 44AF OF THE ACT WHILE SUSTAINING THE DISALLOWANCE OF RS. 77,064 AS THE GR OUND WAS NOT PRESSED. AGGRIEVED BY THE APPELLATE ORDER, THE REVENUE IS IN APPEAL BEFORE US. 4. AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATERIAL ON RECORD, WE OBSERVE THAT IN THIS CASE, UNDISPUTAB LY THE ASSESSEE IS BENEFICIARY OF BOGUS PURCHASE BILLS FR OM THE ITA NO. 5103/MUM/2018 C.O.NO. 220/MUM/2019 : 4 : ALLEGED HAWALA DEALER TO THE TUNE OF RS. 8,30,706/- . THE AUTHORITIES BELOW HAVE NOT DISPUTED THE SALES. MOR EOVER THE ASSESSEE HAS FURNISHED THE STOCK TALLY EXPLAINING T HE GOODS RECEIVED EVEN FROM THE ALLEGED HAWALA DEALER AND SA LES THEREOF. IN SUCH CASES, NORMALLY THE GOODS ARE PURC HASED FROM THE GREY MARKET WHILE THE BILLS OBTAINED FROM HAWALA OPERATORS THEREBY THE ASSESSEE MAKES SAVING OF INC IDENTAL EXPENSES INCLUDING VAT BUT IN THE PRESENT CASE THE VAT WAS RECOVERED FROM THE ASSESSEE WHEN THE SUPPLIER OF G OODS COULD NOT BE TRACED BY THE SALES TAX DEPTT. IN VIEW OF TH ESE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE VIEW T HAT THAT IT WOULD BE REASONABLE TO ASSESS THE PROFIT ELEMENT ON ALLEGED BOGUS PURCHASES @ 12.50%. THE GROUND NO. 1 & 2 ARE PARTLY ALLOWED. 5. AS REGARDS THE CONFIRMATION OF DISALLOWANCE OF E XPENSES OF RS. 77,064/- BY THE LD CIT(A), WE FIND THAT THE DISALLOWANCE HAS NOT BEEN PRESSED BEFORE THE FIRST APPELLATE AUTHORITY AND THEREFORE WE ARE NOT INCLINED TO DIST URB THE ORDER OF LD CIT(A) ON THIS ISSUE . ACCORDINGLY THE GROUND NO. 3 IS DISMISSED. 6. SINCE WE HAVE DECIDED THE ISSUES RAISED CROSS- OBJECTION FILED BY ASSESSEE, THE APPEAL BY THE REVE NUE BECOMES INFRUCTUOUS AND IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 22.10.2019 SD/- SD/- ( VIKAS AWASTHY ) (RAJESH KUMAR) / JUDICIAL MEMBER / ACCOUNTANT MEMBER /MUMBAI; /DATED : 22-10-2019 TNMM ITA NO. 5103/MUM/2018 C.O.NO. 220/MUM/2019 : 5 : / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A), MUMBAI 4. / CIT, MUMBAI 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE / BY ORDER, //TRUE COPY// / (DY./ASST. REGISTRAR) , / ITAT, MUMBAI