ITO 32(1)(5), MUMBAI V. HARSHAD V SHETH, MUMBAI

ITA 5248/MUM/2015

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 9647 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-09-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Assessment Year: 2011-2012
• Appeal Filed On: 06-11-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T A KHAN
• Keywords: Bogus purchase; Unexplained expenditure; Business income
• Section: 69C; 143(3); 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH H, MUMBAI BEFORE SHRI SHAMIM YAHYA, ACCOUNTNAT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO.5248/MUM/2015 (ASSESSMENT YEAR- 2011-12) ITO-32(1)(5) , ROOM NO. 302, C-11, 2 ND FLOOR, PRATYAKSH KAR BHAVAN, BANDRA-KURLA COMPLEX, BANDRA(E), MUMBAI-400051. VS. SHRI HARSHAD V. SHETH PROP. M/S. SHREENATH TRADERS, E-1204, VRINDAVAN RAMBAUG LANE, OFF. S.V. ROAD, BORIVALI (W), MUMBAI-400092. PAN: AAGPS4727A (APPELLANT) (RESPONDENT) REVENUE BY : SHRI T. A. KHAN (DR) ASSESSEE BY : NONE DATE OF HEARING : 21.09.2017 DATE OF PRONOUNCEMENT : 21.09.2017 ORDER UNDER SECTION 254(1) OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER: 1. THIS APPEAL BY REVENUE UNDER SECTION 253 OF THE INC OME-TAX ACT (THE ACT) IS DIRECTED AGAINST THE ORDER OF COMMISSIONER OF IN COME TAX (APPEALS)-44 [LD. CIT(A)], MUMBAI DATED 03.09.2015 FOR THE ASSES SMENT YEAR (AY) 2011-12. THE REVENUE HAS RAISED THE FOLLOWING GROUN DS OF APPEAL. 1) 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN RESTRICTING ADDITION OF UNEXPLAINED EXPENDITURE TO RS.7,47,695/- (@ 8% OF RS.93,46,177) U/S. 69C OF TH E I.T. ACT ON ACCOUNT OF BOGUS PURCHASES AS AGAINST THE ADDITION OF RS.93 ,46,177/- MADE BY THE AO WITHOUT APPRECIATING THAT THE ASSESSEE HAS NOT P RODUCED ANY COGENT ITA NO.5248/M/2015- SHRI HARSHAD V. SHETH 2 EVIDENCE TO SUBSTANTIATE THE FACT THAT IT HAD TAKEN ACTUAL DELIVERY OF GOODS PURCHASED FROM THE PARTIES AND THAT THE NOTICES UND ER 133(6) ISSUED TO THE PARTIES FROM WHOM ALLEGED BILLS WERE RECEIVED WERE RETURNED UNDELIVERED BY THE POSTAL AUTHORITIES WITH THE REMARK 'NOT AVAI LABLE AT THIS ADDRESS' AND THE ASSESSEE HAS ALSO FAILED TO PRODUCE THE PUR CHASE PARTIES BEFORE THE AO.' 2) 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD CIT(A) ERRED IN DELETING THE DISALLOWANCE MADE BY T HE AO OVERLOOKING THE STATEMENT GIVEN BY THE PARTY AND EXPLICIT FINDING O F THE INVESTIGATION CARRIED OUT BY THE SALES TAX DEPARTMENT AND CORROBO RATED BY THE ENQUIRIES OF THE AO.' 3) 'THE APPELLANT PRAYS THAT THE ORDER OF THE LD. C IT(A) ON THE ABOVE GROUND BE SET ASIDE AND THAT OF THE ASSESSING OFFIC ER BE RESTORED.' 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PROPRIETOR OF M/S. SHREENATH TRADERS ENGAGED IN THE BUSINESS OF TRADING IN IRON AND STEEL, FILED HIS RETURN OF INCOME FOR RELEVANT ASSESSMENT YEAR ON 29.09.201 1 DECLARING TOTAL INCOME OF RS. 11,95,020/-. THE ASSESSMENT WAS COMPL ETED ON 20.03.2014 UNDER SECTION 143(3) OF THE ACT. THE ASSESSING OFFI CER WHILE PASSING THE ASSESSMENT ORDER MADE THE DISALLOWANCE OF RS. 93,46 ,177/- ON ACCOUNT OF BOGUS PURCHASES. ON APPEAL BEFORE THE LD. CIT(A), T HE DISALLOWANCE WAS RESTRICTED @ 8% OF THE BOGUS PURCHASES. HENCE, AGGR IEVED BY THE ORDER OF LD. CIT(A), THE REVENUE HAS FILED THE PRESENT APPEA L BEFORE US. 3. NONE APPEARED ON BEHALF OF ASSESSEE DESPITE REPEATE D CALLS. WE HAVE HEARD THE LD. DEPARTMENTAL REPRESENTATIVE (DR) FOR THE RE VENUE AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE LD. DR FOR THE RE VENUE SUPPORTED THE ITA NO.5248/M/2015- SHRI HARSHAD V. SHETH 3 ORDER OF ASSESSING OFFICER AND ARGUED THAT THE ASSE SSEE HAS SHOWN THE PURCHASES FROM NINE PARTIES WHO WERE DECLARED AS HA WALA DEALERS BY THE SALES TAX DEPARTMENT, GOVERNMENT OF MAHARASHTRA. TH E INVESTIGATION WING OF THE INCOME-TAX DEPARTMENT IS ALSO MADE THE ENQUI RIES ABOUT THE HAWALA DEALERS AND FIND THAT THE HAWALA DEALERS WERE INVOL VED IN ISSUING BOGUS BILLS WITHOUT DELIVERY OF MATERIAL OR GOODS. THE ASSESSEE HAS SHOWN HIS PURCHASES FROM ALL HAWALA SUCH DEALERS ONLY TO INFLATE THE PR OPERTY. IT WAS ARGUED THAT THE ORDER OF LD. CIT(A) MAY BE REVERSED AND THE ASS ESSING OFFICER BE RESTORED. 4. WE HAVE CONSIDERED THE SUBMISSION OF LD. DR FOR THE REVENUE AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ASSESSING OFF ICER DURING THE ASSESSMENT PROCEEDING OBSERVED THAT THE ASSESSEE HA S SHOWN THE PURCHASES FROM FOLLOWING NINE WHO WERE DECLARED AS HAWALA PAR TIES: SR. NO. NAME OF THE DEALER AMOUNT (RS.) 1. SHIVRAI TRADERS 2,76,464 2. NISHA ENTERPRISE 16,69,408 3. GHATALIASTEELS/DIVINE ENTERPRISES 13,77,923 4. KRISHNA TRADING CO. 2,97 ,425 5. VIJAY TRADING CO. 3,78,102 6. BHAGYALAXMI STEEL INDUSTRIES. 4,32,750 7. JINESHWAR ENTERPRISES 9,32,257 8. ANMOL FEROMET PVT.LTD. 14,02,7 82 9. AADESHWAR STEEL & ENGG.CO. 25,79,066 TOTAL 94,46,177 5. THE ASSESSING OFFICER ISSUED NOTICE UNDER SECTION 1 33(6) OF THE ACT TO ALL THE ABOVE NINE PARTIES. THE POSTAL AUTHORITIES RET URNED ALL THE NOTICE WITH THE ITA NO.5248/M/2015- SHRI HARSHAD V. SHETH 4 REMARK NOT KNOWN, EXCEPT IN CASE OF M/S. SHREENAT H TRADERS AS UNCLAIMED AFTER ISSUING TWO INTIMATIONS. THE ASSESS EE WAS ASKED TO PROVIDE THE ADDRESSES AND WHEREABOUTS OF ALL THE DEALERS FO R VERIFICATION AND ALSO PROVE THE GENUINENESS OF THE PURCHASES. THE ASSESSE E INSTEAD OF FILING ADDRESSES OF THE PARTIES FURNISHED THE COPY OF LEDG ER ACCOUNT OF THE PARTIES. HOWEVER, THE EVIDENCE OF THE ASSESSEE WAS NOT ACCEP TED BY THE ASSESSING OFFICER AND THE ASSESSING OFFICER MADE THE ADDITION OF ENTIRE PURCHASES FROM NINE PARTIES FOR RS. 93,46,177/-. THE ASSESSI NG OFFICER RELIED ON THE STATEMENT OF THE VARIOUS PARTIES RECORDED, INFORMAT ION AND THE DOCUMENTS FURNISHED BY THE SALES TAX DEPARTMENT. ON APPEAL BE FORE THE LD. CIT(A), THE ASSESSEE CONTENDED THAT THE ASSESSING OFFICER HAS N OT CONSIDERED THE COPY OF LEDGER ACCOUNT, BANK STATEMENT, STOCK-REGISTER IN D ETAILED AND ON DETAILS OF PURCHASES, ITEM WISE, QUANTITY-WISE AND CORRESPO NDING SALES OF ALL THE MATERIALS. THE ASSESSEE ALSO CONTENDED THAT THE ASS ESSING OFFICER HAS MADE THE ADDITION OF ENTIRE PURCHASES INSTEAD OF BRINGIN G ANY MATERIAL ON RECORD. AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE, T HE LD. CIT(A) GIVE THE FOLLOWING FINDING: 5.7 IT IS SEEN FROM THE TAR THAT A SUMMARY OF ITEM WISE SALES AND PURCHASES IN QUANTITY IS GIVEN. THERE IS NO OPENING STOCK OR CLOSING STOCK. THE TOTAL SALES IS RS 11,82,85,463/- AND NET PROFIT SHOWN IS RS 12,46,549/- (1.05%).THE PURCHASES ARE RS 10,93,12,169/- AND GRO SS PROFIT MARGIN IS RS 89,73,294/- (7.58%).THE IMPUGNED PURCHASES AT RS 93,46,177/- IS 8.5% OF THE TOTAL PURCHASES SHOWN. SINCE THIS IS A CASE OF TRADING, IF ITA NO.5248/M/2015- SHRI HARSHAD V. SHETH 5 PURCHASES ARE HELD ENTIRELY AS BOGUS, THE CORRESPON DING SALES CANNOT BE HELD TO HAVE TAKEN PLACE. THE- DISALLOWANCE MADE BY AO HAS RESULTED IN GP % OF 15.48% AND NP OF 10.9% WHICH IS QUITE HIGH FOR TRADING IN STEEL. ON SIMILAR FACTS IN THE CASE HARSHAD V. SETH HUF, W HERE THE IMPUGNED PURCHASES WERE RS 96,87,457/- AND SOME OF THE IMPUG NED PARTIES WERE ALSO SAME, THE LD. CIT(A) UPHELD DISALLOWANCE AT 8% OF IMPUGNED PURCHASES. THEREFORE, 8% OF THE PURCHASES I.E. 8% O F RS.93,46,177/- WHICH WORKS OUT TO OF RS. 7,47,695/- IS UPHELD FOR LACK O F CREDIBLE EVIDENCE BEING PROVIDED BY THE APPELLANT TO SUBSTANTIATE THE PURCH ASES. THE APPELLANT GETS RELIEF OF RS.85,98,482/-. 6. FROM THE FINDING OF THE LD. CIT(A), WE HAVE NOTED T HAT LD. CIT(A) EXAMINED THE ITEM WISE SALES AND PURCHASES OF THE ASSESSEE. THE LD. CIT(A) FURTHER EXAMINED THE GROSS PROFIT/NET PROFIT RATIO DURING T HE RELEVANT AY, THE LD. CIT(A) FURTHER EXAMINED THE PERCENTAGE OF BOGUS PUR CHASES/IMPUGNED PURCHASES EQUALLY THE ENTIRE PURCHASES DURING THE Y EAR AND CONCLUDED THAT AS THE ASSESSEE IS A TRADER, IF THE PURCHASES ARE HELD AS BOGUS, THE CORRESPONDING SALES CANNOT BE HELD TO HAVE TAKEN PL ACE IN ABSENCE OF PURCHASE. ON THE BASIS OF HIS OBSERVATION, THE LD. CIT(A) RESTRICTED THE ADDITION @ 8% OF THE IMPUGNED/BOGUS PURCHASES. THE LD CIT(A)HAS ALREADY EXAMINED THE PROFITABILITY EMBEDDED IN THE ALLEGED BOGUS PURCHASES. THE LD CIT(A) BROUGHT THE REVENUE LEAKAGE IN THE SAID TRAN SACTION TO TAX. CONSIDERING THE FACT THAT LD. CIT(A) HAS EXAMINED T HE FACT VERY MINUTELY AND GAVE HIS CATEGORICAL FINDING ON THE ISSUE WHICH DOES NOT REQUIRE ANY ITA NO.5248/M/2015- SHRI HARSHAD V. SHETH 6 INTERFERENCE AT OUR END. HENCE, THE GROUNDS OF APPE AL RAISED BY THE REVENUE ARE DISMISSED. 7. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DISMI SSED. ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST DAY OF SEPTEMBER 2017. SD/- SD/- (SHAMIM YAHYA) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI; DATED 21/09/2017 S.K.PS COPY OF THE ORDER FORWARDED TO : BY ORDER, (ASSTT.REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY/