ITO 28(1)(1), MUMBAI V. ANIL NARAYAN LOKRE (PROP. ANIL TRADING CO.), MUMBAI

ITA 5296/MUM/2018

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 6053 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-10-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 12-09-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AKHTAR A ANSARI
• Keywords: Bogus purchase; Corroborative evidences
• Section: 143(3); 133(6); 143(2); 147; 148

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL SMC BENCH MU MBAI BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH JUDICIAL MEMBER ITA NO. 5296/MUM/2018 (ASSESSMENT YEAR 2010-11 ) ITO 28(1)(1) ROOM NO. 329, 3 RD FLOOR, TOWER NO.6, VASHI RAILWAY STATION COMPLEX, VASHI, NAVI MUMBAI-400705. VS. ANIL NARAYAN LOKRE (PROP. ANIL TRADING CO.), 205, BHAGTANI ENCLAVE, BEHIND ASIAN PAINTS, OFF. L.B.S.MARG, BHANDUP (W), MUMBAI- 400078. PAN: AAPPL1426L APPELLANT RESPONDE NT APPELLANT BY : SHRI AKHTAR A. ANSARI (DR) RESPONDENT BY : MS. LAZARI OSWAL WITH SHRI NIMESH CHOTTANI (AR) DATE OF HEARING : 01.10.2019 DATE OF PRONOUNCEMEN T : 01.10.2019 ORDERUNDER SECTION 254(1)OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER; 1. THIS APPEAL BY REVENUE IS DIRECTED AGAINST THE ORDE R OF LD. CIT(A)-26, MUMBAI DATED 28.06.2018 FOR ASSESSMENT YEAR 2010-11 THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: (1) 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DIRECTING THE A.O. IN RESTRICTI NG THE ADDITION TO 15% OF RS.15,30,070/- AS AGAINST 25% ADDITION OF RS.15,30, 070/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF BOGUS PURCHASES, WI THOUT APPRECIATING THE FACT THAT ASSESSEE HAD FAILED TO DISCHARGE THE ONUS TO ESTABLISH THE GENUINENESS OF THE TRANSACTIONS AND ALSO FAILED TO FURNISH CORROBORATIVE EVIDENCES IN SUPPORT OF HIS CLAIM AND WITHOUT CONSI DERING THE LATEST APEX COURT DECISION IN THE CASE OF N.K. PROTEINS LTD WHE REIN IT WAS HELD THAT ITA NO. 5296 MUM 2018-ANIL NARAYAN LOKRE 2 ADDITION ON THE BASIS OF BOGUS PURCHASE COULD NOT B E RESTRICTED TO CERTAIN PERCENTAGE WHEN ENTIRE TRANSACTION WAS FOUND AS BOG US. (2) THE APPELLANT PRAYS THAT INFORMATION WITH REGAR D TO BOGUS PURCHASES HAS BEEN RECEIVED FROM EXTERNAL SOURCES I.E FROM SALES TAX DEPARTMENT NOW KNOWN AS DIRECTOR GENERAL OF GST INTELLIGENCE (DGGI ) AND THE ISSUE IS SQUARELY COVERED UNDER CLAUSE (E) OF AMENDED PARA 1 0 OF THE CIRCULAR NO.3 OF 2018 DATED 11.07.2018 WHICH WAS ISSUED VIDE NOTI FICATION / CIRCULAR F.NO.279/MISC 142/2007-ITJ (PT) DATED 20.08.2018. (3) THE APPELLANT PRAYS THAT THE ORDER OF LD. CIT ( A) ON THE ABOVE GROUNDS BE REVERSED AND THAT OF THE ASSESSING OFFICER BE RE STORED. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS PR OPRIETOR OF M/S ANIL TRADING COMPANY ENGAGED IN THE BUSINESS OF MANUFACT URING OF TRANSFORMER, BRUSHING PARTIES FOR ELECTRICITY POWER SUPPLY , FILED ITS RETURN OF INCOME FOR ASSESSMENT YEAR 2010-11 ON 09. 10.2010 DECLARING TOTAL INCOME OF RS. 3,95,937/-. THE RETUR N OF INCOME WAS PROCESSED UNDER SECTION 143(1). THE ASSESSMENT WAS RE-OPENED UNDER SECTION 147 ON THE BASIS OF INFORMATION RECEIVED FR OM SALE TAX DEPARTMENT, GOVERNMENT OF MAHARASHTRA THAT CERTAIN HAWALA OPERATORS ARE INDULGING IN PROVIDING ACCOMMODATION BILLS WITH OUT ACTUAL DELIVERY OF GOODS. THE SALE TAX DEPARTMENT, GOVERNMENT OF MA HARASHTRA REFERRED THE LIST OF SUCH HAWALA DEALERS AND THE BE NEFICIARY TO THE DGIT (INVESTIGATION), MUMBAI. THE NAME OF ASSESSEE APPEA RED IN THE LIST OF BENEFICIARY. ON THE BASIS OF INFORMATION, THE ASSES SING OFFICER MADE A BELIEF THAT THE INCOME OF THE ASSESSEE ESCAPED ASSE SSMENT, THEREFORE, RE- OPENED THE ASSESSMENT UNDER SECTION 147. THE NOTICE UNDER SECTION 148 ITA NO. 5296 MUM 2018-ANIL NARAYAN LOKRE 3 DATED 25.03.2015 WAS SERVED UPON THE ASSESSEE. THE ASSESSEE IN RESPONSE TO THE NOTICE UNDER SECTION 148 FILED ITS REPLY DATED 01.06.2015 AND REQUESTED FOR SUPPLY OF REASONS RECO RDED. THE ASSESSING OFFICER AFTER SERVING NOTICE UNDER SECTIO N 143(2) PROCEEDED FOR RE-ASSESSMENT. DURING THE ASSESSMENT, THE ASSES SING OFFICER NOTED THAT THE ASSESSEE HAS SHOWN PURCHASES OF RS. 15,30, 070/- FROM THE FOLLOWING PARTIES, WHICH WERE DECLARED AS HAWALA DE ALERS BY THE SALE TAX DEPARTMENT, GOVERNMENT OF MAHARASHTRA. NAME OF THE PARTY BILL AMOUNT (RS.) 1 M/S PRAYOSHA TRADING CO. 5,47,831/- 2 M/S SOMNATH INTERNATIONAL 2,67,956/- 3 M/S. G.R. TRADE LINK 2,55,058/- 4 M/S. SHRADDHA TRADING CO. 2,07,454/- 5 M/S SHREE TRADING CORPORATION 1,51,847/- 6 M/S VARUN ENTERPRISES 99,924/- TOTAL 15,30,070 3. THE ASSESSING OFFICER IN ORDER TO VERIFY THE TRANSA CTION ISSUED NOTICE UNDER SECTION 133(6) TO ALL THE PARTIES. THE NOTICE SENT THROUGH REGISTERED POST WAS RETURNED BACK WITH THE REMARK LEFT. THE ASSESSEE WAS ASKED TO SHOW-CAUSE AS TO WHY THE PURCHASES SHO WN FROM ALL THE PARTIES SHOULD NOT BE TREATED AS NON-GENUINE. THE A SSESSEE IN ORDER TO SUBSTANTIATE THE PURCHASES STATED THAT THE GOODS WE RE DELIVERED BY THE SAID PARTIES AND ARE REFLECTED IN THE BOOKS OF ACCO UNT. THE PAYMENTS WERE MADE THROUGH CHEQUES ONLY. AFTER CONSIDERING T HE SUBMISSION OF ITA NO. 5296 MUM 2018-ANIL NARAYAN LOKRE 4 ASSESSEE, THE ASSESSING OFFICER CONCLUDED THAT THE ASSESSEE NOT BEEN ABLE TO FURNISH EVIDENCE OF TRANSPORTATION DETAILS AND DELIVERY CHALLANS. THE ASSESSEE FURNISHED THE BOOKS OF ACCOUNT, PURCHA SES BILLS. THE ASSESSING OFFICER AFTER CONSIDERING THE REPLY OF AS SESSEE, COPIES OF BILLS AND ON THE BASIS OF REPORT OF INVESTIGATION WING OF SALE TAX DEPARTMENT DISALLOWED 25% OF AGGREGATE OF PURCHASES SHOWN FROM THE SAID HAWALA PARTIES (I.E. RS. 3,82,517/-, BEING 25% OF RS. 15,30,070/-) IN THE ASSESSMENT ORDER DATED 24.11.2015 PASSED UND ER SECTION 143(3) R.W.S 147. 4. ON APPEAL BEFORE THE ADDITION WAS RESTRICTED TO THE EXTENT OF 15%. THE LD. CIT(A) WHILE RESTRICTING THE DISALLOWANCES RELI ED UPON THE DECISION OF HONBLE GUJARAT HIGH COURT IN CASE OF SIMITH P. SETH (356 ITR 451). THE LD. CIT(A) ALSO CONCLUDED THAT THE ASSESS EE HAS SHOWN THE GP RATIO FOR LAST THREE YEARS RANGING FROM 6.01% TO 12.63%, THE ASSESSING OFFICER ESTIMATED THE PROFIT @ 25% WHICH IS ON HIGHER SIDE. THUS, AGGRIEVED BY THE ORDER OF LD. CIT(A), THE REV ENUE HAS FILED THE PRESENT APPEAL BEFORE US. 5. WE HAVE HEARD THE SUBMISSION OF LD. DEPARTMENTAL RE PRESENTATIVE (DR) FOR THE REVENUE AND LD. AUTHORIZED REPRESENTAT IVE (AR) OF THE ASSESSEE AND PERUSED THE MATERIAL AVAILABLE ON RECO RD. THE LD. DR FOR THE REVENUE SUPPORTED THE ORDER OF ASSESSING OFFICE R. THE LD. DR FURTHER SUBMITS THAT INVESTIGATION WING OF INCOME-T AX DEPARTMENT HAS ITA NO. 5296 MUM 2018-ANIL NARAYAN LOKRE 5 MADE FULL-FLEDGED INVESTIGATION IN RESPECT OF HAWAL A TRADERS. THE HAWALA TRADERS WERE/ARE ENGAGED IN PROVIDING BOGUS BILL WITHOUT ACTUAL DELIVERY OF GOODS. THE ASSESSEE HAS SHOWN BOGUS PUR CHASES ONLY TO INFLATE THE PROFIT. THE LD. DR FOR THE REVENUE SUBM ITS THAT THE ASSESSING OFFICER HAS BROUGHT SUFFICIENT MATERIAL ON RECORD T O PROVE THAT THE PURCHASES SHOWN BY ASSESSEE WERE BOGUS. THE ASSESSE E IS NOT ENTITLED FOR ANY RELIEF. THE LD. DR FOR THE REVENUE PRAYED F OR SETTING-ASIDE THE ORDER OF LD. CIT(A) AND TO RESTORE THE ORDER OF ASS ESSING OFFICER. 6. ON THE OTHER HAND, THE LD. AR OF THE ASSESSEE SUBMI TS THAT THE ASSESSEE FURNISHED COMPLETE DETAILS OF PURCHASES AND THE COR RESPONDING SALES MADE AGAINST THE PURCHASES. THE ASSESSING OFFICER H AS NOT REJECTED THE BOOKS OF ACCOUNT. THE ASSESSING OFFICER MADE THE DI SALLOWANCE OF 25% OF THE ALLEGED BOGUS PURCHASES. THE ASSESSING O FFICER HAS NOT CONSIDERED THE GROSS PROFIT RATIO FOR EARLIER YEARS AS WELL AS FOR THE YEAR UNDER CONSIDERATION. THE ADDITIONS MADE ON ACC OUNT OF ALLEGED BOGUS PURCHASES BY ASSESSING OFFICER WAS UNREASONAB LE. THE LD. CIT(A) AFTER CONSIDERING THE GROSS PROFIT DECLARED IN THREE EARLIER CONSECUTIVE YEARS RESTRICTED THE DISALLOWANCE TO 15 %. THOUGH, THE PURCHASES OF ASSESSEE ARE GENUINE, HOWEVER, THE ASS ESSEE ACCEPTED IT TO BUY PEACE. THE LD. AR PRAYED FOR DISMISSAL OF PRESE NT APPEAL. 7. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE REPR ESENTATIVES AND PERUSED THE RECORD. THE ASSESSING OFFICER MADE THE DISALLOWANCE OF ITA NO. 5296 MUM 2018-ANIL NARAYAN LOKRE 6 25% OF THE ALLEGED BOGUS PURCHASES. THE ASSESSING O FFICER HAS NOT DISPUTED THE SALES OF THE ASSESSEE. THE ASSESSING O FFICER SOLELY RELIED UPON THE REPORT OF INVESTIGATION WING OF SALE TAX D EPARTMENT. THE ASSESSING OFFICER HAS NOT REJECTED THE BOOKS OF ACC OUNT OF THE ASSESSEE. BEFORE THE LD. CIT(A), THE ASSESSEE URGED THAT THE PURCHASES SHOWN BY ASSESSEE ARE GENUINE. THE PAYMENTS OF PURCHASES WER E MADE THROUGH ACCOUNT PAYEE CHEQUES. THE GOODS WERE RECEIVED BY A SSESSEE AND QUANTITATIVE DETAILS AND CORRESPONDING SALES OF SHO WN. THE ASSESSEE ALSO URGED THAT ASSESSING OFFICER HAS NOT CONSIDERE D THE VARIOUS DOCUMENTARY EVIDENCES FURNISHED BY ASSESSEE. THE AS SESSEE RELIED UPON THE DECISION OF HONBLE GUJARAT HIGH COURT IN SIMIT H P. SETH (SUPRA). THE LD. CIT(A) AFTER CONSIDERING THE MATERIAL PLACE D BEFORE HIM AND THE RATIO OF THE DECISIONS INCLUDING THE DECISION OF SI MITH P. SETH CONCLUDED THAT THE ASSESSEE HAS SHOWN GROSS PROFIT RATIO IN LAST THREE YEARS RANGING FROM 6.01% TO 12.63% AND THAT THE EST IMATION OF PROFIT MADE BY ASSESSING OFFICER @ 25% IS ON HIGHER SIDE. THE LD. CIT(A) DIRECTED THE ASSESSING OFFICER TO SCALE DOWN THE DI SALLOWANCE OF BOGUS PURCHASES TO 15% OF THE ALLEGED PURCHASES TO COVER UP THE PROFIT ELEMENT EMBEDDED IN THE IMPUGNED PURCHASES. WE ARE ALSO OF THE VIEW THAT UNDER INCOME TAX ACT, THE REVENUE IS ENTITLED TO TAX THE PROFIT ELEMENT ONLY AND NOT THE TRANSACTION, THEREFORE, WE AFFIRM THE ORDER OF LD. CIT(A). ITA NO. 5296 MUM 2018-ANIL NARAYAN LOKRE 7 8. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 01/010/2019. SD/- SD/- SHAMIM YAHYA PAWAN SINGH ACCOUNTANT MEMBER J UDICIAL MEMBER MUMBAI, DATE: 01.10.2019 SK COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. DR SMC BENCH, ITAT, MUMBAI 6. GUARD FILE BY ORDER, DY./ASST. REGISTRAR ITAT, MUMBAI