AMULAKH HATICHAND VORA, MUMBAI V. ADDL CIT RG 13(1), MUMBAI

ITA 520/MUM/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 0171 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 7 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-09-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 27-12-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 22-01-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PURUSHOTTAM KASHYAP
• Section: 143(3); 133(6); 131

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A MUMBAI BEFORE SHRI MAHAVIR SINGH (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 520/MUM/2015 ASSESSMENT YEAR: 2010 - 11 AMULAKH HATICHAND VORA PROP. MANHAR TRADING CORPORATION, 16/17, J.K. CHAMBERS, 77/83, NAGDEVI STREET, MUMBAI - 400003 VS. ACIT - 13(1), 403, AAYAKAR BHAVAN, M.K. ROAD MUMBAI - 400020. PAN NO. AAAPV5346C APPELLANT RESPONDENT ASSESSEE BY : SHRI K. GOPAL, AR REVENUE BY : SHRI PURUSHOTTAM KASHYAP, DR DATE OF HEARING : 07 /06/2017 DATE OF PRONOUNCEMENT : 04/09/2017 ORDER PER N.K. PRADHAN, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE. THE RELEVANT ASSESSME NT YEAR IS 2010 - 11 . THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE COMMISS IONER OF INCOME TAX (APPEALS) - 24 , MUMBAI AND ARISES OUT OF THE ASSESSMENT COMPLETED U/S 143(3) OF THE INCOME TAX ACT 1961, ( T HE ACT). ITA NO. 520/MUM/2015 2 2. THE GROUND OF APPEAL FILED BY THE ASSESSEE READ AS UNDER: - 1. UNDER THE FACTS AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX APPEAL HAS ERRED IN CONFIRMING ADDITION OF RS.21,589,917/ - . 1.01 UNDER THE FACTS AND IN LAW, T HE LEARNED CIT(A) FAILED TO APPRECIATE THE FACT THAT THE BOOKS OF ACCOUNTS WERE AUDITED U/S 44AB AND SAME WAS ACCEPTED BY THE AO. IN ABSENCE OF REJECTION OF BOOKS OF ACCOUNT, ADDITION MADE OUGHT TO HAVE BEEN DELETED. 1.02 THE LEARNED COMMISSIONER OF INCOME TAX APPEAL, ERRED IN CONFIRMING THE AO IN HOLDING THAT: - A) THE TRANSACTION OF PURCHASES SHOWN BY THE ASSESSEE IS ONLY AN ACCOMMODATION ENTRY WITHOUT ANY UNDERLYING GENUINE PURCHASE TRANSACTION. B) THE APPELLANT AS A BENEFICIARY OF THE BOGUS TRANSACTIONS. C) THE TOTAL STOCK OF THE ASSESSEE IS LESS THAN THE MATERIAL PURCHASED FROM THIS ALLEGED SUSPICIOUS DEA LERS. D) IT WAS OBSERVED FROM THE RECORD OF THE ASSESSEE THAT EXCEPT PURCHASE BILL, NO OTHER EVIDENCE OR DOCUMENT IS AVAILABLE. E) THERE WAS NO MATERIAL PURCHASED FROM THESE PARTIES, AND THE TRANSACTIONS WERE ONLY ON PAPER WITH THESE PAPER ENTITIES. F) THE ASSESSEE HAS FAILED TO PROVE THE GENUINENESS OF PURCHASES FROM THESE NINE PARTIES AND PURCHASES FROM THESE PARTIES ARE BOGUS AN D NON - GENUINE (VIDE PARA 4.9 OF ASSESSMENT ). 1.03 THE LEARNED CIT (A) ERRED IN APPRECIATING THE DIFFERENCE BETWEEN SUPPLIERS BEING ORGANIZED S ECTORS AND FROM UNORGANIZED SECTOR I.E. ALLEGED PURCHASES FROM DIFFERENT PARTIES, WHERE TRANSPORTATION AND OTHER DETAILS ABOUT DELIVERY BY TRUCK, TEMPO ARE MAINTAINED AND THE UNORGANIZED SECTOR, WHO DO NOT MAINTAIN SUCH RECORDS. 1.04 THE LEARNED CIT (A) FAILED TO APPRECIATE THE FACT THAT SMALL SUPPLIERS, I.E. SUPPLIER IN THIS CASE, WHO DO NOT HAVE THEIR OWN GODOWN, PREFER TO HOLD THE DEFECTIVE STOCK IN THE GODOWN OF YOUR APPELLANT. ITA NO. 520/MUM/2015 3 1.05 THE LEARNED CIT (A) FAILED TO APPRECIATE THE FACT THAT CONSIDERING THE NATURE OF BUSINESS OF THE APPELLANT AND VOLUME AND TYPES OF ITEMS TRADED, IT IS NOT POSSIBLE FOR THE APPELLANT TO MAINTAIN STOCK BOOK. 1.06 WITHOUT PREJUDICE TO ABOVE, THE LEARNED CIT (A) SHOULD HAVE MADE ADDITION ONLY TO THE EXTENT OF PROFIT ELEMENT INVOLVED IN SUCH PUR CHASES ALLEGED TO BE BOGUS. THE LEARNED CIT (A) OUGHT TO HAVE CONFIRMED ADDITION BASED ON GROSS PROFIT RATIO. 2. UNDER THE FACTS AND IN LAW, THE LEARNED CIT(A) ERRED IN CONFIRMING AD - HOC DISALLOWANCE OF RS1,20,922/ - BEING 10% OF TELEPHONE EXPENSE & MOTOR CAR EXPENSES & 5% OF CONVEYANCE AND STAFF WELFARE EXPENSES BY TREATING THE SAME AS PERSONAL IN NATURE. 3. WE BEGIN WITH THE 1 ST GROUND OF APPEAL. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS A DEALER OF M/S MAHARASHTRA SEAMLESS LTD., M/S TUBE INVESTMENT OF INDIA LTD., M/S ISMT LTD., M/S REMI METALS GUJARAT LTD. AND STO C KISTS OF CARBON STEEL, LOW TEMPERATURE ALLOY STEEL, SEAMLESS PIPES, BOILER TUBES, HYDRAULIC TUBES, HEAD EXCHANGER TUBES, G.I. & M.S. ERW PIPES, SQUARE & RECTANGULAR PIPES. THE ASSESSING OFFICER (AO) FOUND DURING THE COURSE OF ASSESSMENT PROCEEDINGS THAT THE ASSESSEE HAD PURCHASED MATERIALS AMOUNTING TO RS.2,15,89,916/ - FROM NINE PARTIES AND AS PER THE INFORMATION RECEIVED FROM SALES TAX DEPARTMENT, MAHARASHTRA , THE SAID PARTIES APPEARED IN THEIR LIST OF SUSPICIOUS DEALERS, WHO HAD ISSUED FALSE BILLS WITHOUT DELIVERY OF GOODS. IN ORDER TO VERIFY THE GENUINENESS OF TRANSACTIONS, THE AO ISSUED NOTICE U/S 133(6) TO THE SAID PARTIES AT THE ADDRESS PROVIDED BY THE ASSESSEE. THE AO FOU ND THAT EITHER THESE NOTICES WERE RETURNED BACK OR NO REPLY WAS RECEIVED FROM THE PARTIES. THE ASSESSEE DID NOT FILE BEFORE THE AO THE NEW ADDRESS OF THE SAID PARTIES. THEN THE AO ISSUED ITA NO. 520/MUM/2015 4 SUMMONS U/S 131 TO THE ASSESSEE TO PRODUCE THE PURCHASE A REGISTER, S ALES REGISTER, PURCHASE BILLS, TRANSPORTATION BILLS/RECEIPTS/CHALLANS ETC. THE AO ALSO RECORDED THE STATEMENT OF THE ASSESSEE U/S 131. THE AO OBSERVED THAT ACCEPT FOR THE PURCHASE BILLS, THE ASSESSEE COULD NOT FILE OTHER DOCUMENT OR EVIDENCE BEFORE HIM. T HE ASSESSEE WAS NOT MAINTAINING STOCK REGISTER. THE AO CAME TO A FINDING THAT MERE FILING BILLS IN SUPPORT OF PURCHASES AND PAYMENT THROUGH ACCOUNT PAYEE CHEQUE CANNOT BE CONCLUSIVE IN A CASE WHERE GENUINENESS OF TRANSACTION IS IN DOUBT. THEREFORE, THE AO MADE AN ADDITION OF RS.2,15,89,916/ - TO THE INCOME DECLARED BY THE ASSESSEE. 4. AGGRIEVED BY THE ORDER OF THE AO THE ASSESSEE FILED A N APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) AGREED WITH THE REASONS GIVEN BY THE AO AND CONFIRM ED THE ADDITION OF RS.2, 15,89,916/ - . 5. BEFORE US, THE LD. COUNSEL OF THE ASSESSEE FILES A P APER B OOK CONTAINING INTER ALIA THE COPY OF LEDGER ACCOUNTS OF SUPPLIERS IN THE BOOKS OF THE ASSESSEE AND COMPARATIVE CHART OF GROSS PROFIT OF THREE YEARS. IT IS SUBMITTED BY HIM THAT THE LD. CIT(A) SHOULD HAVE CONFIRMED ONLY THE PROFIT ELEMENT INVOLVED IN SUCH PURCHASES ALLEGED TO BE B OGUS. 6. ON THE OTHER HAND, THE LD. DR SUPPORTS THE ORDER PASSED BY THE LD. CIT(A). HE SUBMITS THAT EXCEPT FOR THE PURCHASE BILLS, THE ASSESSEE FAILED TO FILE BEFORE THE AO THE RELATED DOCUMENTS. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE REL EVANT MATERIALS ON RECORD. WE FIND THAT ON THE ONE HAND, THE ASSESSEE COULD ITA NO. 520/MUM/2015 5 PRODUCE BEFORE THE AO INVOICE COPIES OF THE REFERRED PARTIES, LEDGER COPIES OF THE ACCOUNTS OF THE SAID PARTIES AND PROOF THAT THE SAID PARTIES HAVE BEEN PAID BY THE ASSESSEE THROU GH ACCOUNT PAYEE CHEQUE. HOWEVER, WE FIND ON THE OTHER HAND THAT THE ASSESSEE FAILED TO FILE BEFORE THE AO THE CORRECT ADDRESS OF THE NINE PARTIES. THE ASSESSEE ALSO FAILED TO PRODUCE THE ABOVE PARTIES BEFORE THE AO FOR EXAMINATION. THE ASSESSEE FAILED TO FILE BEFORE THE AO THE PURCHASE REGISTER, SALES REGISTER, TRANSPOR TATION BILLS/RECEIPTS/CHALLANS. THE ASSESSEE WAS NOT MAINTAINING THE STOCK REGISTER. IN THE CASE OF CIT VS. SIMIT P. SHETH (2013) 38 TAXMANN.COM (GUJ), THE HONBLE GUJARAT HIGH COURT HAS HELD THAT WHERE PURCHASES WERE NOT BOGUS BUT WERE MADE FROM PARTIES OTHER THAN THOSE MENTIONED IN THE BOOKS OF ACCOUNT, NOT ENTIRE PURCHASE PRICE BUT ONLY PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES CAN BE ADDED TO INCOME OF THE ASSESSEE. THAT BEING THE POS ITION, NOT THE ENTIRE PURCHASE PRICE BUT ONLY THE PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES CAN BE ADDED TO THE INCOME OF THE ASSESSEE. THE HONBLE HIGH COURT REFERRED TO A SIMILAR VIEW TAKEN IN THE CASE OF CIT VS. VIJAY M. MISTRY CONSTRUCTION LTD. [2013] 355 ITR 498 (GUJ) AND CIT VS. BHOLANATH POLY FAB (P) LTD. [2013] 355 ITR 290 (GUJ). TAKING INTO ACCOUNT THE FACTS AND CIRCUMSTANCES OF THE INSTANT CASE, WE FOLLOW THE RATIO LAID DOWN IN THE ABOVE DECISIONS AND SET ASIDE THE ORDER OF THE LD. CIT(A) AND DI RECT THE AO TO ESTIMATE PROFIT @ 12.5% ON THE PURCHASES OF RS.2,15,89,916/ - . THUS THE 1 ST GROUND OF APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. ITA NO. 520/MUM/2015 6 8. WE NOW MOVE TO THE 2 ND GROUND OF APPEAL. WE FIND THAT THE AD - HOC DISALLOWANCE MADE BY THE AO OF RS.1,20,922/ - BEING 10% OF TELEPHONE EXPENSE AND MOTOR CAR EXPENSE AND 5% OF CONVEYANCE AND STAFF WELFARE EXPENSE BY TREATING THE SAME AS PERSONAL IN NATURE IS ON SURMISES. IT IS NOT BASED ON MATERIAL EVIDENCE. THEREFORE, WE DELETE THE ABOVE DISALLOWANCE S AND ALLOW TH E 2 ND GROUND OF APPEAL. 9. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 04/09/2017 . SD/ - SD/ - (MAHAVIR SINGH) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED: 04 .09.2017 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./ASSTT. REGISTRAR) ITAT, MUMBAI