SHRI MUKESHKUMAR BHANDARI, MUMBAI V. INCOME TAX OFFICER 19(2)(3), MUMBAI

ITA 5326/MUM/2018

• Counselvise Citation: [2019] 111 COUNSELVISE.COM (IT) 9911 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-12-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 17-09-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AKHTAR HANSARI
• Assessee Lawyers: ARBINA SHAIKH
• Keywords: Bogus purchase; Tangible material; Onus to prove; Reason to believe
• Section: 143(3); 234B; 133(6); 143(2); 139(1); 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. 5326/MUM/2018 (ASSESSMENT YEAR 2011-12 ) SHRI MUKESHKUMAR BHANDARI 40/27, GROUND FLOOR, SHREE NIWAS BLDG, 2 ND CARPENTER STREET, C.P. TANK, MUMBAI- 400004. PAN: AGQPB2876F VS. ITO - 19(2)(3) MATRU MANDIR, NANA CHOWK, MUMBAI-400007. APPELLANT RESPONDE NT APPELLANT BY : MISS. ARBINA SHAIKH (AR) RESPONDENT BY : SHRI AKHTAR H. ANSARI (SR. DR) DATE OF HEARING : 27.11.2019 DATE OF PRONOUNCEMEN T : 20.12.2019 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)-30, MUMBAI DATED 11.07.2018 FOR ASSESSMENT YEAR 2011-12 . THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL) ERRED IN (A) ARRIVING AT THE CONCLUSION THAT PURCHASES MADE OF RS. 4628848/- FROM PARTIES MENTIONED IN ASSESSMENT ORDER ARE NON GENUI NE (B) CONFIRMING ESTIMATION OF PROFIT ELEMENT @ 12.50 % ON ALLEGED NON GENUINE PURCHASES OF RS.4628848/- WHICH IS OVER AND ABOVE THE NORMAL PROFIT DECLARED @ 10.09% IN BOOKS OF ACCOUNTS. (B) CONFIRMING ADDITION OF RS. 578606/- ON ABOVE BA SIS MADE BY THE ASSESSING OFFICER TO THE TOTAL INCOME OF THE APPELL ANT. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN AND F AILED TO APPRECIATE THAT ITA NO. 5326 MUM 20 18-SHRI MUKESHKUMAR BHANDARI. 2 (A) PROCEEDING INITIATED UNDER SECTION 147 1148 OF THE ACT IS ON THE BASIS OF REASON TO SUSPECT AND NOT ON REASON TO BELIEVE. (B) THERE IS NO NEW TANGIBLE MATERIAL IN POSSESSION OF THE ASSESSING OFFICER WHICH JUSTIFY ISSUANCE OF NOTICE U/S 148 OF THE ACT (C) REASONS PROVIDED TO THE APPELLANT IS UNSIGNED A ND UNDATED. (D) THE INITIATION OF PROCEEDING UNDER SECTION 147 OF THE ACT AND ISSUANCE OF NOTICE UNDER SECTION 148 IS BAD IN LAW AND CONTR ARY TO THE PROVISIONS OF THE ACT AND LIABLE TO BE CANCELLED 1 ANNULLED 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFI RMING ORDER MADE UNDER SECTION 143(3) RWS 147 OF THE ACT BY THE LEAR NED ASSESSING OFFICER WHICH IS ILLEGAL, BAD-IN-LAW, ULTRA VIRES AND WITHO UT ALLOWING REASONABLE OPPORTUNITY OF THE HEARING, WITHOUT APPRECIATING TH E FACTS, SUBMISSION AND EVIDENCES IN THEIR PROPER PERSPECTIVE, WITHOUT PROV IDING COPIES OF MATERIAL USED AGAINST THE APPELLANT AND WITHOUT PROVIDING CR OSS EXAMINATION, IS LIABLE TO BE ANNULLED. 4. THE LEARNED ASSESSING OFFICER ERRED IN CHARGING INTEREST UNDER SECTION 234B AND 234C OF THE ACT. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS AN INDIVIDUAL AND RUNNING A PROPRIETARY FIRM IN THE NAME OF JAYDEEP IMPEX AND ENGAGED IN TRADING OF FERROUS AND NON-FERROUS METALS, FILED HIS RETURN OF INCOME FOR ASSESSMENT YEAR 2011-12 ON 23.09.2011 DECLARING TOT AL INCOME OF RS. 4,38,715/-. THE RETURN OF INCOME WAS PROCESSED UNDE R SECTION 143(1). THE ASSESSMENT WAS RE-OPENED UNDER SECTION 147 ON T HE BASIS 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 ITA NO. 5326 MUM 20 18-SHRI MUKESHKUMAR BHANDARI. 3 ASSESSEE ALLEGEDLY MADE THE PURCHASES OF RS. 46,28, 848/- FROM SUCH HAWALA DEALERS. ON THE BASIS OF INFORMATION, THE AS SESSING OFFICER MADE A BELIEF THAT THE INCOME OF THE ASSESSEE ESCAPED AS SESSMENT, THEREFORE, RE-OPENED THE ASSESSMENT UNDER SECTION 147. NOTICE UNDER SECTION 148 WAS ISSUED ON 07.11.2014 TO THE ASSESSEE. THE ASSES SEE IN RESPONSE TO THE NOTICE UNDER SECTION 148 FILED ITS REPLY AND ST ATED THAT ORIGINAL RETURN FILED ON 23.09.2011 UNDER SECTION 139(1) BY ASSESSE E BE TREATED AS RETURN IN RESPONSE TO THE SAID NOTICE. THE ASSESSING OFFIC ER AFTER SERVING NOTICE UNDER SECTION 143(2) PROCEEDED FOR RE-ASSESSMENT. D URING THE ASSESSMENT, THE ASSESSING OFFICER NOTED THAT THE AS SESSEE HAS SHOWN PURCHASES FROM THE FOLLOWING PARTIES, WHICH WAS DEC LARED AS HAWALA DEALERS BY THE SALE TAX DEPARTMENT, GOVERNMENT OF M AHARASHTRA. NAME OF THE PARTIES BILL AMOUNT (RS.) ASHTAVINAYAK SALES AGENCY 6,02,992 STELCO STEEL INDUSTRIES 1,51,728 SHUBH LABH METAL ALLOYS/ BRIGHT ENTERPRISE 2,26,148 HARISH METAL & TUBES 2,57,530 MALANI METAL (INDIA) 4,82,028 SAMCO STEEL & ALLOYS 14,03,948 MERIDIAN TRADING CO. 3,68,628 MANIDHARI ENTERPRISES 5,58,230 GOOD LUCK METAL IMPEX 2,32,232 RATNAKAR TRADERS 3,45,354 TOTAL 46,28,848 3. THE ASSESSEE WAS ASKED TO SUBSTANTIATE THE PURCHASE S AND TO FURNISH THE NAME OF DEALERS, BILLS &, VOUCHERS, DESCRIPTION OF GOODS PURCHASED, QUANTITY, RATE AND AMOUNT, THE DATE OF DISPATCH OF GOODS AND THE NAME OF PLACE ALONG WITH MODE OF TRANSPORTATION BY ROAD OR OTHER MODE, VEHICLE ITA NO. 5326 MUM 20 18-SHRI MUKESHKUMAR BHANDARI. 4 NUMBER, AND PAYMENT DETAILS. THE ASSESSEE WAS ALSO ASKED TO FURNISH THE CORRESPONDING SALES OF GOODS. THE ASSESSING OF FICER NOTED THAT ASSESSEE COULD NOT PRODUCE ANY EVIDENCE DURING THE COURSE OF HEARING NOR ACCEPTED THE REPORT OF SALE TAX DEPARTMENT. THE ASSESSING OFFICER IN ORDER TO VERIFY THE TRANSACTION ISSUED NOTICE UN DER SECTION 133(6) OF THE ACT. THE NOTICE WAS RETURNED BACK UNSERVED BY T HE POSTAL DEPARTMENT WITH THE REMARK NOT KNOWN OR LEFT. THE ONUS TO PROVE THE GENUINENESS OF PURCHASES WAS ON ASSESSEE, THE ASSES SEE FAILED TO DISCHARGE HIS ONUS. THE ASSESSING OFFICER ASKED THE ASSESSEE TO FURNISH CERTAIN DETAILS SUCH AS PURCHASE BILL, INVOICES, CO PY OF LEDGER ACCOUNT, DETAILED OF TRANSPORTATION OF GOODS, LORRY RECEIPT AND EVIDENCE SHOWING THAT GOODS WERE RECEIVED BY ASSESSEE AND CONSUMED. IN RESPONSE TO THE QUERIES OF ASSESSING OFFICER, THE ASSESSEE SUBMITTE D PURCHASE BILL OF SPECIFIED PARTIES, COPY OF BANK STATEMENT SHOWING T HE PAYMENT THROUGH BANKING CHANNEL, QUANTITATIVE TALLY OF PURCHASES AN D CORRESPONDING SALES. THE EXPLANATION AND THE EVIDENCE FURNISHED B Y ASSESSEE WAS NOT ACCEPTED BY ASSESSING OFFICER BY TAKING VIEW THAT T HE HAWALA PARTIES IN THEIR STATEMENT BEFORE SALE TAX AUTHORITIES HAVE AD MITTED ON OATH THAT THEY HAVE NOT DONE ANY GENUINE BUSINESS. ON THE BA SIS OF REPORT OF SALE TAX DEPARTMENT, THE ASSESSING OFFICER CONCLUDED THA T THE EXPENSES INCURRED BY ASSESSEE ON THE PURCHASES SHOWN FROM HA WALA DEALER ARE UNVERIFIABLE. THE ASSESSING OFFICER REJECTED THE BO OKS OF ACCOUNT OF ITA NO. 5326 MUM 20 18-SHRI MUKESHKUMAR BHANDARI. 5 ASSESSEE BY INVOKING THE PROVISION OF SECTION 145(3 ). THE ASSESSING OFFICER AFTER CONSIDERING THE MATERIAL BEFORE HIM A ND FOLLOWING THE DECISION OF HONBLE GUJARAT HIGH COURT IN CIT VS. S IMITH P. SHETH (ITA NO. 553/2012) CONCLUDED THAT A REASONABLE RATE OF N ON-GENUINE PURCHASE, IF PROFIT ELEMENT EMBEDDED IN SUCH PURCHA SES IS TAKEN AS PROFIT EARNED FROM SUCH PURCHASES WOULD BE FAIR AND EQUITA BLE. ON THE BASIS OF AFORESAID OBSERVATION, THE ASSESSING OFFICER DISALL OWED 12.5% OF THE AGGREGATE OF TOTAL OF NON-GENUINE/ALLEGED HAWALA PU RCHASES, IN THE ASSESSMENT ORDER DATED 30.10.2015 PASSED UNDER SECT ION 143(3) R.W.S 147. 4. ON APPEAL BEFORE THE LD. CIT(A), THE ACTION OF ASSE SSING OFFICER AND DISALLOWANCES MADE ON ACCOUNT OF BOGUS PURCHASES WA S SUSTAINED. FURTHER, 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. AUTHORISED REPR ESENTATIVE (AR) OF THE ASSESSEE AND THE LD. DEPARTMENTAL REPRESENTATIV E (DR) FOR THE REVENUE. THE LD. AR OF THE ASSESSEE SUBMITS THAT TH E ASSESSING OFFICER MADE THE ADDITION WITHOUT DISPUTING THE SALES OF AS SESSEE. THE SALE IS NOT POSSIBLE WITHOUT PURCHASES. THE ASSESSING OFFICER R EJECTED THE BOOKS OF ACCOUNT WITHOUT RECORDING VALID REASONS. THE ASSESS ING OFFICER RELIED ON THE INFORMATION OF THIRD PARTIES. THE LD. AR SUB MITS THAT THE DISALLOWANCE OF 12.5% OF THE BOGUS PURCHASES IS ON HIGHER SIDE. THE ITA NO. 5326 MUM 20 18-SHRI MUKESHKUMAR BHANDARI. 6 ASSESSEE HAS ALREADY DECLARED PROFIT @ 10.09% IN TH E BOOKS OF ASSESSEE. THE LD. AR SUBMITS THAT DISALLOWANCE ON BOGUS PURCH ASES MAY BE RESTRICTED TO A REASONABLE DISALLOWANCES CONSIDERIN G THE PROFIT DECLARED BY THE ASSESSEE. IN SUPPORT OF HER SUBMISSION, THE LD. AR OF THE ASSESSEE RELIED ON THE DECISION OF HONBLE BOMBAY HIGH COURT IN PCIT VS. M/S MOHOMMAD HAJI ADAM & CO. IN ITA NO. 1004/2016. 6. ON THE OTHER HAND, THE LD. DR FOR THE REVENUE SUPPO RTED THE ORDER OF LOWER AUTHORITIES. THE LD. DR FURTHER SUBMITS THAT INVESTIGATION WING OF INCOME-TAX DEPARTMENT HAS MADE FULL-FLEDGED INVESTI GATION IN RESPECT OF HAWALA TRADERS. THE HAWALA TRADERS WERE/ARE ENGAGED IN PROVIDING BOGUS BILL WITHOUT ACTUAL DELIVERY OF GOODS. THE ASSESSEE HAS SHOWN BOGUS PURCHASES ONLY TO INFLATE THE PROFIT. THE LD. DR FO R THE REVENUE SUBMITS THAT THE ASSESSING OFFICER HAS GIVEN SUFFICIENT REL IEF. THE ASSESSING OFFICER HAS REASONABLY ESTIMATED THE DISALLOWANCES. THE ASSESSEE IS NOT ENTITLED FOR ANY FURTHER RELIEF. ON RE-OPENING THE LD. DR SUBMITS THAT THERE WAS SUFFICIENT TANGIBLE MATERIAL/INFORMATION IN THE FORM OF INFORMATION FROM DGIT (INVESTIGATION) THAT SALE TAX DEPARTMENT, GOVERNMENT OF MAHARASHTRA HAS UNEARTHED THE SCHEME ABOUT THE HAWALA ENTRY PROVIDER, WHO WERE ENGAGED IN PROVIDING BOGUS BILLS, THEREFORE, THE ASSESSING OFFICER HAS SUFFICIENT REASON FOR MAK ING BELIEF THAT THE INCOME OF THE ASSESSEE HAS ESCAPED ASSESSMENT. ITA NO. 5326 MUM 20 18-SHRI MUKESHKUMAR BHANDARI. 7 7. WE HAVE CONSIDERED THE SUBMISSIONS OF LD. DR FOR TH E REVENUE AND PERUSED THE RECORD. THOUGH THE ASSESSEE HAS RAISED GROUNDS OF APPEAL AGAINST THE VALIDITY OF REOPENING, HOWEVER, NO SUBM ISSION WAS MADE ON SUCH GROUND OF APPEAL; THEREFORE, THE GROUND NO. 2 & 3 OF THE APPEAL ARE TREATED AS NOT PRESSED. 8. GROUND NO.1 RELATES TO DISALLOWANCE OF 12.5% OF THE ALLEGED NON- GENUINE PURCHASES. THE ASSESSING OFFICER DURING THE ASSESSMENT ISSUED SHOW-CAUSE NOTICE TO THE ASSESSEE TO PROVE THE GENU INENESS OF THE PURCHASES AND TO PRODUCE THE PARTIES FOR VERIFICATI ON. THE ASSESSING OFFICER NOTED THAT THE ASSESSEE FAILED TO PRODUCE T HE PARTIES. THE ASSESSING OFFICER ALSO MADE INVESTIGATION BY ISSUIN G NOTICE UNDER SECTION 133(6) TO ALL THE DEALERS. THE NOTICES SENT TO DEALERS WERE RETURNED BACK WITH THE REMARK OF POSTAL AUTHORITIES LEFT. THE ASSESSING OFFICER HAS NOT DISPUTED THE SALE OF THE ASSESSEE. THE ASSESSING OFFICER AFTER REJECTING THE BOOKS OF ACCO UNT MADE ADDITION TO THE EXTENT OF PROFIT ELEMENT EMBEDDED IN SUCH TRANS ACTIONS AND RESTRICTED THE DISALLOWANCE TO THE EXTENT OF 12.5% OF THE ALLE GED NON-GENUINE PURCHASES. THE LD. CIT(A) CONFIRMED THE ACTION OF A SSESSING OFFICER BY FOLLOWING THE DECISION OF HONBLE GUJARAT HIGH COUR T IN CIT VS. SIMITH P. SETH [356 ITR 451 (GUJ.)]. 9. WE HAVE NOTED THAT THE ASSESSEE IS ENGAGED IN THE B USINESS OF DEALING IN FERROUS AND NON-FERROUS METALS. THE LOWER AUTHORITY HAS NOT EXAMINED ITA NO. 5326 MUM 20 18-SHRI MUKESHKUMAR BHANDARI. 8 THE GROSS PROFIT (GP) OR PROFITABILITY ALREADY DECL ARED BY THE ASSESSEE ON SUCH NON-GENUINE AND OTHER GENUINE PURCHASES. THERE FORE, CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE, WE DIRECT THE ASSESSING OFFICER THAT DISALLOWANCE BE RESTRICTED TO 12.5% - (MINUS) THE GP DECLARED BY ASSESSEE ON SUCH BOGUS PURCHASES. IN THE RESULT, TH E GROUND NO.1 OF APPEAL RAISED BY ASSESSEE IS PARTLY ALLOWED. 10. GROUND NO.4 RELATES TO CHARGING OF INTEREST UNDER S ECTION 234B & 234C. THESE GROUNDS OF APPEAL ARE CONSEQUENTIAL AND NEEDS NO SPECIFIC ADJUDICATION. 11. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 20/12/2019. SD/- SD/- SHAMIM YAHYA PAWAN SINGH ACCOUNTANT MEMBER J UDICIAL MEMBER MUMBAI, DATE: 20.12.2019 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