MR.VISHAL AMARSHI GALA, MUMBAI V. INCOME TAX OFFICER WARD 28(3)(4), MUMBAI

ITA 5324/MUM/2018

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 6036 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-10-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 14-09-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AKHYTAR H ANSARI
• Assessee Lawyers: HIRAL D SAJPAL
• Keywords: Bogus purchase
• 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. 5324/MUM/2018 (ASSESSMENT YEAR 2009-10 ) MR. VISHAL AMARSHI GALA C/O GAUTAM MARKETING, PLOT NO.42, SECTOR-19A, OPP. APMC, OPP TO MANU MOTORS, VASHI, NAVI MUMBAI- 400703. PAN: AEGPG1475B VS. ITO WARD- 28(3)(4), 3 RD FLOOR, TOWER NO6, VASHI RAILWAY STATION COMPLEX, VASHI, NAVI MUMBAI-400703. APPELLANT RESPONDE NT APPELLANT BY : MISS. HIRAL D. SAJPAL (AR) RESPONDENT BY : SHRI AKHYTAR H. ANSARI (DR) DATE OF HEARING : 03.10.2019 DATE OF PRONOUNCEMEN T : 03.10.2019 ORDERUNDER SECTION 254(1)OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER ; 1. THIS APPEAL BY ASSESSEE IS DIRECTED AGAINST THE ORD ER OF LD. CIT(A)-26 MUMBAI (VASHI, NAVI MUMBAI) DATED 15.06.2018 FOR AS SESSMENT YEAR 2009-10. THOUGH THE ASSESSEE HAS RAISED AS MAN Y AS FOUR GROUNDS OF APPEAL, HOWEVER, IN OUR CONSIDERED VIEW, THE ONL Y SUBSTANTIAL GROUND OF APPEAL ARE TWO I.E. (I) WHETHER THE REOPE NING UNDER SECTION 147 IS VALID, (II) WHETHER THE LD. CIT(A) WAS NOT JUSTIFIED IN RESTRICTING THE DISALLOWANCE OF BOGUS PURCHASES TO THE EXTENT O F 12.5% OF BOGUS/HAWALA DEALERS/NON-EXISTENT VENDORS. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE-FIRM IS ENGAGED IN THE BUSINESS OF TRADING IN OIL, FILED ITS RETURN OF INC OME FOR ASSESSMENT ITA NO. 5324 MUM 2018-MR. VISHAL AMARSHI GALA 2 YEAR 2009-10 ON 15.07.2009 DECLARING TOTAL INCOME O F RS. 9,14,450/-. THE RETURN OF INCOME WAS PROCESSED UNDER SECTION 14 3(1). THE ASSESSMENT WAS RE-OPENED UNDER SECTION 147 ON THE B ASIS OF INFORMATION RECEIVED FROM SALE TAX DEPARTMENT, GOVE RNMENT OF MAHARASHTRA THAT CERTAIN HAWALA OPERATORS ARE INDUL GING IN PROVIDING ACCOMMODATION BILLS WITHOUT ACTUAL DELIVERY OF GOOD S. THE SALE TAX DEPARTMENT, GOVERNMENT OF MAHARASHTRA REFERRED THE LIST OF SUCH HAWALA DEALERS AND THE BENEFICIARY TO THE DGIT (INV ESTIGATION), MUMBAI. THE NAME OF ASSESSEE APPEARED IN THE LIST O F BENEFICIARY. THE ASSESSEE ALLEGEDLY MADE THE AGGREGATE PURCHASES OF RS. 35,38,225/- FROM FOUR HAWALA DEALERS NAMELY STHAPNA TRADE IMPEX P. LTD., MEETHI TRADE IMPEX, SWASTIK ENTERPRISES & SHI VAM TRADING CO., WHOSE NAMES WERE INCLUDED IN THE LIST SUCH HAWALA D EALER. ON THE BASIS OF INFORMATION, THE ASSESSING OFFICER MADE A BELIEF THAT THE INCOME OF THE ASSESSEE ESCAPED ASSESSMENT, THEREFOR E, RE-OPENED THE ASSESSMENT UNDER SECTION 147. NOTICE UNDER SECTION 148 WAS ISSUED TO THE ASSESSEE. THE ASSESSEE VIDE ITS LETTER DATED 21 .09.2014 STATED THAT THE RETURN ORIGINALLY FILED ON 15.07.2009 MAY BE TR EATED AS RETURN IN RESPONSE TO THE NOTICE UNDER SECTION 148. THE ASSES SING OFFICER AFTER SERVING NOTICE UNDER SECTION 143(2) PROCEEDED FOR R E-ASSESSMENT. DURING THE ASSESSMENT, THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS SHOWN PURCHASES OF RS. 35,38,225/- FROM THE FO LLOWING PARTY, ITA NO. 5324 MUM 2018-MR. VISHAL AMARSHI GALA 3 WHICH WAS DECLARED AS HAWALA DEALERS BY THE SALE TA X DEPARTMENT, GOVERNMENT OF MAHARASHTRA. NAME OF THE PARTY BILL AMOUNT (RS.) 1 STHAPNA TRADE IMPEX P. LTD. 105906 2 MEETHI TRADE IMPEX 15601 3 SWASTIK ENTERPRISES 963799 4 SHIVAM TRADING CO. 2452919 TOTAL 3538225 3. THE ASSESSING OFFICER IN ORDER TO VERIFY THE TRANSA CTION ISSUED NOTICE UNDER SECTION 133(6) TO FOLLOWING FOUR PARTIES. THE NOTICE SENT THROUGH REGISTERED POST WAS RETURNED BACK WITH THE REMARK LEFT. THE ASSESSEE WAS ASKED TO PRODUCE THE PARTY AND SUBSTANTIATE THE PURCHASES. THE ASSESSING OFFICER AFTER CONSIDERING THE REPORT OF I NVESTIGATION WING OF SALE TAX DEPARTMENT DISALLOWED THE 12.5% OF THE PU RCHASES SHOWN FROM FOLLOWING FOUR PARTIES IN ASSESSMENT ORDER DAT ED 19.03.2015 PASSED UNDER SECTION 143(3) R.W.S 147. 4. ON APPEAL BEFORE THE LD. CIT(A), THE LD. CIT(A), TH E ACTION OF AO ON REOPENING AS WELL AS DISALLOWANCE TO THE EXTENT OF 12.5% OG ALLGED BOGUS PURCHASES WAS UPHELD. THUS, AGGRIEVED BY THE ORDER OF LD. CIT(A), THE ASSESSEE HAS FILED THE PRESENT APPEAL BEFORE US. 5. WE HAVE HEARD THE SUBMISSION OF LD. AUTHORIZED REPR ESENTATIVE (AR) OF THE ASSESSEE AND LD. DEPARTMENTAL REPRESENTATIVE (DR) FOR THE ITA NO. 5324 MUM 2018-MR. VISHAL AMARSHI GALA 4 REVENUE AND PERUSED THE MATERIAL AVAILABLE ON RECOR D. THE LD. AR OF THE ASSESSEE SUBMITS THAT THE ASSESSEE FURNISHED CO MPLETE DETAILS OF PURCHASES AND THE SALES MADE AGAINST THE ALLEGED BO GUS PURCHASES. THE ASSESSING OFFICER HAS WRONGLY MADE THE DISALLOWANCE OF 12.5% OF THE ALLEGED BOGUS PURCHASES. THE ADDITION MADE ON ACCOU NT OF ALLEGED BOGUS PURCHASES WAS UNREASONABLE AND ON THE HIGHER SIDE. THE LD. AR FOR THE ASSESSEE SUBMITS THAT THE ASSESSEE HAS ALRE ADY DECLARED GROSS PROFIT @ 4.3% AND NET PROFIT @. .624%. THE LD AR FO R THE ASSESSEE SUBMITS THAT THE MARGIN IN THE BUSINESS OF THE ASSE SSEE IS VERY LOW. THE DISALLOWANCES MADE BY AO ARE EXTREMELY HIGH. I T WAS PRAYED THAT TO AVOID THE PROTRACTED LITIGATION THE ASSESSEE WIL L BE SATISFY IF THE DISALLOWANCE IS RESTRICTED AT REASONABLE PERCENTAGE . IN SUPPORT OF HER SUBMISSIONS THE LD AR FOR THE ASSESSEE RELIED ON TH E DECISION OF BOMBAY HIGH COURT IN PCIT VS M/S MOHAMMAD HAJI ADA M &CO (ITA NO. 1004 OF 2016 DATED 11.02.2019) 6. ON THE OTHER HAND, THE LD. DR FOR THE REVENUE SUPPO RTED THE ORDER OF ASSESSING OFFICER. THE LD. DR FURTHER SUBMITS THAT INVESTIGATION WING OF INCOME-TAX DEPARTMENT HAS MADE FULL-FLEDGED INVE STIGATION IN RESPECT OF HAWALA TRADERS. THE HAWALA TRADERS WERE/ ARE ENGAGED IN PROVIDING BOGUS BILL WITHOUT ACTUAL DELIVERY OF GOO DS. THE ASSESSEE HAS SHOWN BOGUS PURCHASES ONLY TO INFLATE THE PROFI T. THE LD. DR FOR THE REVENUE SUBMITS THAT THE ASSESSING OFFICER HAS BROUGHT SUFFICIENT ITA NO. 5324 MUM 2018-MR. VISHAL AMARSHI GALA 5 MATERIAL ON RECORD TO PROVE THAT THE PURCHASES SHOW N BY ASSESSEE WERE BOGUS. THE ASSESSEE IS NOT ENTITLED FOR ANY RELIEF. 7. WE HAVE CONSIDERED THE SUBMISSIONS OF LD. AR FOR TH E ASSESSEE AND THE LD. DR FOR THE REVENUE AND PERUSED THE RECORD. THE LD. AR FOR THE ASSESSEE NOT ARGUED ANYTHING AGAINST THE GROUNDS NO .(I) 1&2, THEREFORE, THESE GROUNDS ARE TREATED AS NOT PRESSED AND DISMISSED ACCORDINGLY. ON GROUNDS RELATED TO THE DISALLOWANCE @12.5% OF THE ALLEGED BOGUS PURCHASES, THE ASSESSING OFFICER MADE THE DISALLOWANCE OF 12.5%. THE ASSESSING OFFICER HAS NOT DISPUTED TH E SALES OF THE ASSESSEE. BOOKS OF ACCOUNTS OF THE ASSESSEE WAS NO T REJECTED. THE ASSESSING OFFICER SOLELY RELIED UPON THE REPORT OF INVESTIGATION WING OF SALE TAX DEPARTMENT. NO INDEPENDENT INQUIRY WAS CONDUCTED BY AO. BEFORE THE LD. CIT (A), THE ASSESSEE URGED THAT THE PURCHASES SHOWN BY ASSESSEE ARE GENUINE. THE PAYMENTS OF PURC HASES WERE MADE THROUGH ACCOUNT PAYEE CHEQUES. AFTER CONSIDERING TH E SUBMISSION OF THE ASSESSEE THE LD. CIT(A) SUSTAINED THE ACTION OF AO. WE ARE OF THE CONSIDERED OPINION THAT UNDER INCOME TAX ACT ONLY R EAL INCOME CAN BE TAXED BY THE REVENUE. WE MAY FURTHER CONCLUDE TH AT EVEN IF THE TRANSACTION IS NOT VERIFIABLE, THE ONLY TAXABLE IS THE TAXABLE INCOME COMPONENT AND NOT THE ENTIRE TRANSACTION. AFTER CON SIDERING THE FACTS AND CIRCUMSTANCES AND THE NATURE OF BUSINESS ACTIVI TY OF THE ASSESSEE, WE ARE OF THE OPINION THAT IN ORDER TO FULFILL THE GAP OF REVENUE LEAKAGE ITA NO. 5324 MUM 2018-MR. VISHAL AMARSHI GALA 6 THE DISALLOWANCE OF REASONABLE PERCENTAGE OF SUCH P URCHASES WOULD MEET THE END OF JUSTICE. 8. RECENTLY THE HIGH HONBLE BOMBAY HIGH COURT IN CIT VERSUS MOHD. HAJI ADAM & CO. (SUPRA) HELD THE ADDITION IN RESPEC T OF BOGUS PURCHASES TO BE LIMITED TO THE EXTENT OF BRINGING T HE GROSS PROFIT RATE ON SUCH PURCHASES AT THE SAME RATE AS OF OTHER GENU INE PURCHASE. RESPECTFULLY FOLLOWING THE DECISION OF THE HONBLE BOMBAY HIGH COURT AS REFEREED ABOVE, AND CONSIDERING THE SUBMIS SIONS OF THE LD AR FOR THE ASSESSEE THAT THE ASSESSEE HAS ALREADY DECL ARED THE GP AT 4.3%, WE DIRECT THE ASSESSING OFFICER TO RESTRICT THE DIS ALLOWANCE @ 5 % OF THE ALLEGED BOGUS PURCHASE SHOWN FROM THE IMPUGNED HAWALA DEALERS. IN THE RESULT THIS GROUND OF APPEAL IS PARTLY ALLOW ED. 9. IN THE RESULT, APPEAL OF THE ASSESSEE PARTLY ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT ON 03/10/2019. SD/- SD/- SHAMIM YAHYA PAWAN SINGH ACCOUNTANT MEMBER J UDICIAL MEMBER MUMBAI, DATE: 03.10.2019 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