ITO-20(1)(3), MUMBAI V. MR. BHERCHAND TIKAM CHAND JAIN, MUMBAI

ITA 5182/MUM/2019

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 3510 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-03-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 07-08-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANJAY J SETHI
• Keywords: Bogus purchase; Tax effect
• Section: 143(3); 133(6); 143(1); 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH SMC MUMBAI BEFORE SHRI VIKAS AWASTHY (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 5182/MUM/2019 ASSESSMENT YEAR: 2009-10 ITO-20(1)(3), ROOM NO. 114, 1 ST FLOOR, PIRAMAL CHAMBERS, LALBAUG, MUMBAI - 400012. VS. MR. BHERCHAND TIKAMCHAND JAIN, 46/50, OFF. NO.-16, 1 ST FLOOR, KIKA STREET, CP TANK ROAD, MUMBAI - 04 PAN NO. AETPJ 2091 M APPELLANT RESPONDENT REVENUE BY : MR. SANJAY J. SETHI, DR ASSESSEE BY : NONE DATE OF HEARING : 03/03/2021 DATE OF PRONOUNCEMENT : 05/03/2021 ORDER PER N.K. PRADHAN, A.M. THIS IS AN APPEAL FILED BY THE REVENUE. THE RELEVAN T ASSESSMENT YEAR IS 2009-10. THE APPEAL IS DIRECTED AGAINST THE ORDER O F THE COMMISSIONER OF INCOME TAX (APPEALS)-32, MUMBAI [IN SHORT CIT(A)] AND ARISES OUT OF THE ASSESSMENT COMPLETED U/S 143(3) R.W.S. 147 OF THE I NCOME TAX ACT 1961, (THE ACT). THOUGH THE CASE WAS FIXED FOR HEARING ON 13.01.2021 AND 03.03.2021, NEITHER THE ASSESSEE NOR HIS AUTHORIZED REPRESENTAT IVE APPEARED BEFORE THE BENCH ON THE ABOVE DATES. AS THERE IS NON-COMPLIANC E BY THE ASSESSEE, WE ARE ITA NO. 5182/M/2019 MR. BHERCHAND 2 PROCEEDING TO DISPOSE OFF THIS APPEAL AFTER EXAMINI NG THE MATERIALS AVAILABLE ON RECORD AND AFTER HEARING THE LD. DEPARTMENTAL REPRE SENTATIVE (DR). 2. THE GROUNDS OF APPEAL FILED BY THE REVENUE READ AS UNDER : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE I N LAW, THE LD. CIT(A)HAS ERRED IN GRANTING RELIEF OF RS.5,87,308/- BY RESTRICTING THE ADDITION TO 5% OF THE ALLEGED BOGUS PURCHASE FROM HAWALA PARTIES. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE I N LAW, THE LD. CIT(A) HAS FAILED TO APPRECIATE THE FACT THAT THE ONUS IS ON THE ASSESSE E TO EXPLAIN AND SUBSTANTIATE THE GENUINENESS AND THE TRUE NATURE OF THE PURCHASE TRA NSACTION. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE I N LAW, THE LD. CIT(A)HAS ERRED IN NOT CONSIDERING THE FACT THAT THE HAWALA DEALERS AD MITTED ON OATH BEFORE SALES TAX AUTHORITIES THAT THEY HAVE NOT SOLD ANY MATERIAL TO ANYBODY AND ASSESSES FAILED TO PRODUCES SUCH PARTIES AT ASSESSMENT STAGE THOUGH SP ECIFICALLY ASKED BY THE A.O. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE I N LAW, THE LD. CIT(A) HAS ERRED IN NOT APPRECIATING THE FACT THAT PURCHASES WERE MADE FROM SOME OTHER PARTIES WHICH WERE NOT RECORDED IN BOOKS OF ACCOUNTS AND ONLY ACC OMMODATION BILLS WERE OBTAINED FROM HAWALA PARTIES AND THERE BY ATTRACTIN G PROVISIONS OF SECTION 40A(3). 5. THOUGH THE TAX EFFECT IS BELOW THE MONETARY LIMIT P RESCRIBED IN THE CBDT INSTRUCTION NO. 3/2018 DATED 11.07.2018 AS AMENDED ON 20.08.2018 AS THE CASE FALLS IN THE EXCEPTION PROVIDED IN PARA10(E) OF THE SAID INSTRUCTION IN AS MUCH AS THE ADDITION IS BASED ON INFORMATION RECEIVED FROM EXTE RNAL SOURCES IN THE NATURE OF LAW ENFORCEMENT AGENCIES, NAMELY, SALES TAX AUTHORI TIES. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE FILED HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR (AY) 2009-10 ON 18.0 9.2009 DECLARING TOTAL INCOME OF RS.5,52,843/-. THE RETURN WAS PROCESSED U /S 143(1) OF THE ACT. ON RECEIPT OF INFORMATION FROM THE SALES TAX DEPARTMEN T, GOVERNMENT OF MAHARASHTRA THAT THE ASSESSEE HAD OBTAINED BOGUS PU RCHASE BILLS FROM SIX ITA NO. 5182/M/2019 MR. BHERCHAND 3 HAWALA PARTIES TOTALLING TO RS.1,17,46,149/-, THE A SSESSING OFFICER (AO) RE- OPENED THE ASSESSMENT BY ISSUING NOTICE U/S 148 OF THE ACT. IN RESPONSE TO IT, THE ASSESSEE VIDE LETTER DATED 12.06.2014 SUBMITTED THAT THE ORIGINA L RETURN FILED ON 18.09.2009 MAY BE TREATED AS RETURN FILED IN RESPONSE TO NOTICE U/S 148 OF THE ACT. DURING THE COURSE OF RE-ASSESSMENT PROC EEDINGS, THE AO ISSUED NOTICES U/S 133(6) OF THE ACT TO THE SUSPECTED PART IES. HOWEVER, THOSE NOTICES WERE RETURNED UN-SERVED BY THE POSTAL AUTHORITIES W ITH THE REMARKS NOT KNOWN. FURTHER IN RESPONSE TO A QUERY RAISED BY TH E AO, THE ASSESSEE FILED BEFORE HIM COPIES OF - BILLS/INVOICES OF THE SAID H AWALA PARTIES, LEDGER ACCOUNTS AND STATEMENT SHOWING PAYMENT DETAILS PARTY-WISE, I TEM-WISE AND QUANTITY- WISE ALONG WITH BANK STATEMENTS AND SALES TAX RETUR N ALONG WITH PAYMENT OF VAT CHALLANS. HOWEVER, THE AO WAS NOT CONVINCED WIT H THE ABOVE SUBMISSION OF THE ASSESSEE FOR THE REASON THAT HE HAS NOT MAIN TAINED ANY STOCK REGISTER/STOCK INVENTORY. CONSIDERING THE ABOVE FAC TS, THE AO ESTIMATED PROFIT @ 10% ON THE DISPUTED PURCHASES OF RS.1,17,46,149/- WHICH COMES TO RS.11,74,615/-. 4. AGGRIEVED BY THE ORDER OF THE AO THE ASSESSEE FI LED AN APPEAL BEFORE THE LD. CIT(A). WE FIND THAT VIDE ORDER DATED 31.05.2019, THE LD. CIT(A) RESTRICTED THE DISALLOWANCE TO 5% OF THE DISPUTED PURCHASES BY OBSERVING THAT : 4.2.1 I FIND THAT THE APPELLANT HAS FILED DETAI LS OF PURCHASE INVOICE, COPY OF BANK STATEMENT TO SHOW PAYMENTS MADE BY CHEQUE, COPY OF LEDGER ACCOUNTS OF THE SUPPLIER, LEDGER ACCOUNT OF THE ABOVE MENTIONED PAR TIES, BUT COULD NOT SUBMIT EVIDENCE OF RECEIPT OF SUCH GOODS BY WAY OF DELIVER Y CHALLANS ETC. FURTHER, THE NOTICES SENT TO THOSE PARTIES U/S 133(6) WERE RETUR NED UN-SERVED AND SUBSEQUENTLY THE SAID 9 PARTIES WERE NOT PRODUCED BEFORE THE AO FOR VERIFICATION OF THE GENUINENESS, OF THOSE PURCHASES. THE AO ACCORDI NGLY MADE AN ADDITION @ 10% ITA NO. 5182/M/2019 MR. BHERCHAND 4 OF SUCH SUSPICIOUS PURCHASES. THE SUBMISSION OF THE APPELLANT TO APPLY NET PROFIT RATE IS FOUND TO BE WITHOUT ANY BASIS, IN THE PRESE NT FACTS OF THE CASE. THE DECISIONS CITED BY THE APPELLANT ARE FOUND TO BE DISTINGUISHA BLE ON FACTS. 4.2.2 CONSIDERING THAT THE SAID PARTY HAD NOT BEEN PRODUCED BY THE APPELLANT AND THAT THERE WAS SALE BY THE APPELLANT CORRESPONDING TO PU RCHASES FROM THOSE PARTY, THE AO HAS CORRECTLY HELD THAT THE APPELLANT MUST HAVE PUR CHASED THE MATERIAL FROM GREY MARKET AND THE ACTUAL PURCHASE BILL WOULD HAVE BEEN INFLATED, SINCE THE APPELLANT WOULD HAVE HAD SAVINGS FROM SUCH PURCHASES ON ACCOU NT OF VAT, CASH DISCOUNT AND LOWER RATES. THE AO HAS MADE AN ADDITION IN RESPECT OF PROFIT ELEMENT ON SUCH PURCHASES @ 10%, WHICH APPEARS TO BE ON THE HIGHER SIDE, IN THE PRESENT FACTS AND CIRCUMSTANCES OF THE CASE WHEN THE GROSS PROFIT RAT E OF 6.02% HAS BEEN DECLARED BY THE APPELLANT FROM ITS BUSINESS OF TRADING IN FERRO US AND NON-FERROUS METALS. IN THIS REGARD, I FIND THAT THE VAT HAS BEEN CHARGED AT THE RATE OF 4% ON SUCH PURCHASES. CONSIDERING THE SAVINGS ON ACCOUNT OF PURCHASE IN T HE GREY MARKET ON ACCOUNT OF VAT, CASH DISCOUNT AND LOWER RATES ETC, THE ADDITION TO BE MADE IS FAIRLY ESTIMATED @ 5% OF THE BOGUS PURCHASE. IN THIS REGARD, RELIANCE IS PLA CED ON THE DECISION OF THE ITAT, MUMBAI, IN THE CASE OF PRASHANT ENTERPRISES, ITA NO. 5117/MUM/2013 A.Y 2010-11 DATED 24.02.2016 WHEREIN THE REASONABLE DISALLOWANC E HAS BEEN MADE @ 5% OF TOTAL PURCHASES IN THE SIMILAR LINE OF BUSINE SS. THE AO IS DIRECTED TO RE-COMPUTE THE DISALLOWANCE/ADDITION ACCORDINGLY @ 5% OF TOTAL SUCH PURCHASES OF RS.117,46,615/ - AND ALLOW RELIEF TO THE APPELLANT. 5. BEFORE US, THE LD. DR SUBMITS THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ORDER PASSED BY THE AO BE RESTORED. WE HAVE HEARD THE LD. DR AND PERUSED THE RELEVANT MATERIALS ON RECORD. THE GROSS PROFIT RATE OF 6.02% HAS BEEN DECLARED BY THE ASSESSEE FROM ITS BUSINESS OF TRADING IN FERROUS AND NON-FERROUS META LS. VAT HAS BEEN CHARGED @ 4% ON SUCH PURCHASES. HAVING CONSIDERED THE SAVINGS ON ACCOUNT OF PURCHASE ITA NO. 5182/M/2019 MR. BHERCHAND 5 IN THE GREY MARKET ON ACCOUNT OF VAT, CASH DISCOUNT AND LOWER RATES, THE LD. CIT(A) HAS RIGHTLY RESTRICTED THE DISALLOWANCE TO 5 % OF BOGUS PURCHASES. WE ALSO FIND THAT THE LD. CIT(A) HAVING CONSIDERED THE ORDER OF THE TRIBUNAL IN THE CASE OF PRASHANT ENTERPRISES (ITA NO. 5117/MUM/2013) FOR AY 2010-11 DATED 24.02.2016, BEING SIMILAR IN NATURE, HAS DIRECTED T HE AO TO RESTRICT THE DISALLOWANCE TO 5% OF THE DISPUTED PURCHASES OF RS. 1,17,46,615/- WHICH COMES TO RS.5,87,330/-. WE AFFIRM THE ABOVE ORDER OF THE LD. CIT(A) WHICH IS BASED ON SOUND REASONS. 6. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 05/03/2021. SD/- SD/- (VIKAS AWASTHY) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI; DATED: 05/03/2021 RAHUL SHARMA, SR. P.S. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSISTANT REGISTRAR) ITAT, MUMBAI