DHANRAJ HIMMATRAF SANGHVI, MUMBAI V. INCOME TAX OFFICER 19(1)(4), MUMBAI

ITA 5145/MUM/2019

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 0180 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-03-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 06-08-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SANJAY SETHI
• Assessee Lawyers: ASIFA KHAN
• Section: 133(6); 143(1); 201; 147

Judgement Text

1 I.T.A. NO. 51 45 &51 46 /MUM/2019 IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) I.T.A. NO S .51 45 & 51 46 /2019 (ASSESSMENT YEAR S 20 1 0 - 1 1 & 201 1 - 1 2 ) DHANRAJ HIMMATRAJ SANGHVI 154/156, SHIV SADAN 1 ST FLOOR,ROOM NO.14 3 RD KUMBHARWADA, MUMBAI - 400 004 PAN : A ACPS7939J VS ITO 19 ( 1 )( 4 ), MUMBAI APPELLANT RESPONDENT APPELLANT BY MS. ASIFA KHAN, AR RESPONDENT BY SHRI SANJAY SETHI , DR DATE OF HEARING 25 - 02 - 2021 DATE OF PRONOUNCEMENT 1 1 - 03 - 2021 O R D E R PER SAKTIJIT DEY (JM) CAPTIONED APPEALS BY THE SAME ASSESSEE ARISE OUT OF TW O SEPARATE ORDERS, BOTH DATED 29 - 05 - 2019, OF LEARNED COMMIS SIONER OF INCOME - TAX (APPEALS) - 4, MUMBAI, FOR THE ASSESSMENT YEARS 2010 - 11 AND 2011 - 12. 2. THE COMMON DISPUTE IN THESE APPEALS BASICALLY RELATE TO ADDITION S MADE ON ACCOUNT OF NON GENUINE PURCHASES. 3. BRIEFLY THE FACTS, MORE OR LESS COMMON IN THESE APPEALS ARE, THE ASSESSEE, AN INDIVI DUAL, IS ENGAGED IN THE BUSINESS OF TRADING IN FERROUS AND NON FERROUS 2 I.T.A. NO. 51 45 &51 46 /MUM/2019 METALS. FOR THE ASSESSMENT YEARS UNDER DISPUTE, ASSESSEE HAD FILED HIS RETURNS OF INCOME IN REGULAR COURSE. THE RETURNS OF INCOME SO FILED WERE INITIALLY PROCESSED UNDER SECTION 143(1) OF THE ACT. SUBSEQUENTLY, THE ASSESSING OFFICER RECEIVED INFORMATION FROM THE SALES - TAX DEPARTMENT, GOVERNMENT OF MAHARASHTRA THROUGH THE INVESTIGATION WING THAT CERTAIN PURCHASES CLAIMED TO HAVE BEEN MADE DURING THE RELEVANT PERIOD ARE NON GENUINE AS THE CONCERNED SELLING DEALER HAS BEEN IDENTIFIED AS HAWALA OPERATOR. ON THE BASIS OF SUCH INFORMATION, THE ASSESSING OFFICER REOPENED THE ASSESSMENTS UNDER SECTION 147 OF THE ACT. IN COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER CALLED UPON THE ASSES SEE TO PROVE THE GENUINENESS OF PURCHASES THROUGH PROPER EVIDENCE. HOWEVER, EVIDENCES FURNISHED BY THE ASSESSEE WERE NOT TO THE SATISFACTION OF THE ASSESSING OFFICER. FURTHER, AS ALLEGED BY THE ASSESSING OFFICER, NOTICES ISSUED UNDER SECCTION 133(6) OF TH E ACT TO THE CONCERNED SELLING DEALERS RETURNED BACK UNSERVED AS THEY WERE NOT FOUND AT THE GIVEN ADDRESS. THEREFORE, HE CONCLUDED THAT THE PURCHASES ARE NON GENUINE. THEREAFTER, REJECTING THE BOOKS OF ACCOUNT OF THE ASSESSEE, THE ASSESSING OFFICER PROCEED ED TO ESTIMATE PROFIT ON THE ALLEGED NON GENUINE PURCHASES IN BOTH THE ASSESSMENT YEARS UNDER DISPUTE AT 12.5% AND ADDED BACK AN AMOUNT OF RS.3,98,183/ - IN ASSESSMENT YEAR 2010 - 11 AND RS.8,40,121/ - IN ASSESSMENT YEAR 2011 - 12. THOUGH, THE ASSESSEE CONTESTED THE AFORESAID ADDITIONS BEFORE LEARNED COMMISSIONER (APPEALS), HOWEVER, THEY WERE CONFIRMED. 4. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED, IN ASSESSMENT YEAR 2010 - 11, THE ASSESSEE HAS SHOWN GROSS PROFIT RATE OF 4.97% AND HAS ALSO PAID VAT AT 4%. WHER EAS, IN ASSESSMENT YEAR 2011 - 12, THE ASSESSEE HAS SHOWN GROSS PROFIT RATE OF 12.69% AND PAID VAT AT 4%. THUS, SHE SUBMITTED, CONSIDERING THE GROSS PROFIT SHOWN BY THE ASSESSEE AND THE FACT THAT V AT HAS ALSO BEEN PAID, NO FURTHER 3 I.T.A. NO. 51 45 &51 46 /MUM/2019 DISALLOWANCE ON ACCOUNT OF SUPPRESSION OF PROFIT SHOULD HAVE BEEN MADE. SHE SUBMITTED, THE ASSESSEE HAS PRODUCED PURCHASE BILLS, BANK STATEMENTS SHOWING PAYMENT, QUANTITATIVE DETAILS, ETC. TO PROVE THE GENUINENESS OF PURCHASES. SHE SUBMITTED, PURELY RELYING UPON THE INFORMATION RECE IVED FROM S ALES - TAX DEPARTMENT, ASSESSING OFFICER HAS TREATED THE PURCHASES AS NON GENUINE. FURTHER, SHE SUBMITTED, ADVERSE MATERIALS RELIED UPON IN COURSE OF ASSESSMENT PROCEEDINGS WERE ALSO NOT SUPPLIED TO THE ASSESSEE. FINALLY, THE LEARNED COUNSEL SUBMI TTED, CONSIDERING THE NATURE OF BUSINESS OF THE ASSESSEE AND THE PROFIT RATIO NORMALLY ATTACHED TO SUCH BUSINESS, DISALLOWANCE OF 12.5% IS ON A MUCH HIGHER SIDE; HENCE, SAME NEEDS TO BE SCALED DOWN. 5. THE LEARNED DEPARTMENTAL REPRESENTATIVE STRONGLY RELIE D UPON THE OBSERVATIONS OF THE ASSESSING OFFICER AND LEARNED COMMISSIONER (APPEALS). 6. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED MATERIALS ON RECORD. UNDISPUTEDLY, THE ASSESSING OFFICER WAS IN RECEIPT OF INFORMATION FROM THE SALES - TAX DEPARTMENT, GOVERNMENT OF MAHARASHTRA INDICATING THAT CERTAIN PURCHASES CLAIMED TO HAVE BEEN MADE BY THE ASSESSEE IN THE RELEVANT ASSESSMENT YEARS ARE NON GENUINE AS THE CONCERNED SELLING DEALERS WERE IDENTIFIED AS HAWALA OPERATORS. IN COURSE OF ASSESSMENT PROCEEDING S, THOUGH, THE ASSESSEE HAD FURNISHED PURCHASE INVOICES, BANK STATEMENT, ETC.; HOWEVER, HE COULD NEITHER PRODUCE THE CONCERNED SELLING DEALERS NOR ANY AUTHENTIC EVIDENCE TO ESTABLISH ON RECORD THAT THE GOODS, INDEED, WERE PURCHASED FROM THE DECLARED SOURCE AND WERE DELIVERED AT HIS PREMISES BY THEM. FURTHER, EFFORTS MADE BY THE ASSESSING OFFICER TO INDEPENDENTLY VERIFY THE GENUINENESS OF PURCHASES DID NOT FRUCTIFY AS NOTICES ISSUED UNDER SECTION 133(6) TO THE CONCERNED SELLING DEALERS RETURNED BACK UNSERVED , THEREBY, MAKING THE SO URCE OF PURCHASES UNVERIFIABLE. THEREFORE, 4 I.T.A. NO. 51 45 &51 46 /MUM/2019 ASSESSEES CLAIM THAT THE PURCHASES WERE MADE FROM THE DECLARED SOURCE REMAINED UNPROVED. AT THE SAME TIME, THE ASSESSING OFFICER HAS NOT DISPUTED THAT THE ASSESSEE HAS EFFECTED THE CORRESP ONDING SALES, MEANING THEREBY, THE DISPUTED GOODS, IN FACT, WERE PURCHASED BY THE ASSESSEE FROM UNVERIFIED SOURCES. THEREFORE, INSTEAD OF DISALLOWING THE ENTIRE PURCHASES, THE ASSESSING OFFICER HAS RESTRICTED THE DISALLOWANCE TO THE PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES BY ESTIMATING THE SAME AT 12.5%. NOW, THE ISSUE WHICH ARISES FOR CONSIDERATION IS WHETHER THE DISALLOWANCE MADE AT 12.5% IS FAIR AND REASONABLE. CONSIDERING THE FACT THAT THE ASSESSEE IS A TRADER IN FERROUS AND NON FERROUS METALS, WHEREI N, THE PROFIT MARGIN NORMALLY EXPECTED TO BE EARNED VARIES BETWEEN 2% TO 5%, WE ARE OF THE VIEW THAT DISALLOWANCE @5% OF THE ALLEGED NON GENUINE PURCHASES WOULD TAKE CARE OF SUPPRESSION OF PROFIT, IF ANY, ON ACCOUNT OF ALLEGED NON GENUINE PURCHASES. ACCOR DINGLY, WE DIRECT THE ASSESSING OFFICER TO RESTRICT THE DISALLOWANCE TO 5% OF THE ALLEGED NON GENUINE PURCHASES IN BOTH THE ASSESSMENT YEARS UNDER APPEAL. 3. IN THE RESULT, APPEALS ARE PARTLY ALLOWED. ORDER PRONOUNCED ON 1 1 /03/2021. S D / - S D / - (N.K.PRADHAN) ( SAKTIJIT DEY ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DT : 1 1 / 3 /2021 PAVANAN 5 I.T.A. NO. 51 45 &51 46 /MUM/2019 COPY TO : 1. APPELLANT 2. RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) 5. THE DR, ITAT, MUMBAI 6. GUARD FILE BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI