DCIT CIRCLE-1, Thane V. M/S.ASIAN HARDWARE AND TOOLS, MUMBAI

ITA 5332/MUM/2018

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 6039 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-10-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 17-09-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AKHTAR HANSARI
• 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. 5332/MUM/2018 (ASSESSMENT YEAR 2009-10 ) ITA NO. 5333/MUM/2018 (ASSESSMENT YEAR 2010-11 ) DCIT CIRCLE- 1 ROOM NO. 22, B- WING, 6 TH FLOOR, ASHAR IT PARK, ROAD NO.16Z, WAGLE INDUSTRIAL ESTATE, THANE(W) - 400604 VS. M/S ASIAN HARDWARE AND TOOLS, JAMBHLI NAKA, GANDHI CHOWK, THANE (WEST)-400601. PAN: AAEFA7273M APPELLANT RESPONDE NT APPELLANT BY : SHRI AKHTAR H. ANSARI (DR) RESPONDENT BY : NONE 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. THESE TWO APPEAL BY REVENUE ARE DIRECTED AGAINST TH E CONSOLIDATED ORDER OF LD. CIT(A)-3 NASIK (CAMP OFFICE THANE) DAT ED 15.06.2018 FOR ASSESSMENT YEAR 2009-10 & 2010-11. IN BOTH THE APPE ALS, THE REVENUE HAS RAISED IDENTICAL GROUNDS OF APPEAL. FACTS FOR B OTH THE ASSESSMENT YEARS ARE IDENTICAL, THEREFORE, BOTH THE APPEALS WE RE CLUBBED, HEARD TOGETHER AND ARE DECIDED BY COMMON ORDER. FOR APPRE CIATION OF FACT, THE APPEAL FOR ASSESSMENT YEAR 2009-10. THOUGH THE REVENUE HAS RAISED AS MANY AS SEVEN GROUNDS OF APPEAL, HOWEVER, IN OUR CONSIDERED VIEW, THE ONLY SUBSTANTIAL GROUND OF APPEAL IS WHET HER THE LD. CIT(A) ITA NO. 5332 & 5333 MUM 2018-M/S ASIAN HARDWARE AND TOOLS 2 WAS NOT JUSTIFIED IN RESTRICTING THE DISALLOWANCE O F BOGUS PURCHASES TO THE EXTENT OF 12.5% OF BOGUS/HAWALA DEALERS/NON-EXI STENT VENDORS. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE-FIRM IS ENGAGED IN THE BUSINESS OF TRADING IN HARDWARE, FILED ITS RETURN O F INCOME FOR ASSESSMENT YEAR 2009-10 ON 30.09.2009 DECLARING TOT AL INCOME OF RS. 16,32,700/-. THE RETURN OF INCOME WAS PROCESSED UND ER 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 ASSESSEE ALLEGEDLY MADE THE PURCHASES OF RS. 2, 76,275/- FROM M/S SACHI MERCANTILE PVT. LTD., WHOSE NAME WERE INCLUDE D IN THE LIST SUCH HAWALA DEALER. ON THE BASIS OF INFORMATION, THE ASS ESSING OFFICER MADE A BELIEF THAT THE INCOME OF THE ASSESSEE ESCAP ED ASSESSMENT, THEREFORE, RE-OPENED THE ASSESSMENT UNDER SECTION 1 47. NOTICE UNDER SECTION 148 WAS ISSUED TO THE ASSESSEE. THE ASSESSE E VIDE ITS LETTER DATED 16.10.2014 STATED THAT THE RETURN ORIGINALLY FILED ON 30.09.2009 MAY BE TREATED AS RETURN IN RESPONSE TO THE NOTICE UNDER SECTION 148. THE ASSESSING OFFICER AFTER SERVING NOTICE UNDER SE CTION 143(2) ITA NO. 5332 & 5333 MUM 2018-M/S ASIAN HARDWARE AND TOOLS 3 PROCEEDED FOR RE-ASSESSMENT. DURING THE ASSESSMENT, THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS SHOWN PURCHASES OF RS. 2,76,275/- FROM THE FOLLOWING PARTY, WHICH WAS DECLARED AS HAW ALA DEALERS BY THE SALE TAX DEPARTMENT, GOVERNMENT OF MAHARASHTRA. NAME OF THE PARTY BILL AMOUNT (RS.) 1 M/S SACHI MERCANTILE PVT. LTD. 2,76,275 / - 3. THE ASSESSING OFFICER IN ORDER TO VERIFY THE TRANSA CTION ISSUED NOTICE UNDER SECTION 133(6) TO M/S SACHI MERCANTILE PVT. L TD. THE NOTICE SENT THROUGH REGISTERED POST WAS RETURNED BACK WITH THE REMARK LEFT. THE ASSESSEE WAS ASKED TO PRODUCE THE PARTY AND SUBSTAN TIATE THE PURCHASES. THE ASSESSING OFFICER AFTER CONSIDERING THE REPORT OF INVESTIGATION WING OF SALE TAX DEPARTMENT DISALLOWE D THE ENTIRE PURCHASES SHOWN FROM SACHI MERCANTILE PVT LTD. IN A SSESSMENT ORDER DATED 31.10.2014 PASSED UNDER SECTION 143(3) R.W.S 147. 4. ON APPEAL BEFORE THE LD. CIT(A), THE LD. CIT(A) RES TRICTED THE ADDITION TO THE EXTENT OF 12.5%. THE LD. CIT(A) WHILE RESTRI CTING THE DISALLOWANCES RELIED UPON THE DECISION OF HONBLE G UJARAT HIGH COURT IN CASE OF SIMITH P. SETH (356 ITR 451). THE LD. CI T(A) ALSO CONCLUDED THAT ASSESSEE MIGHT HAVE MADE THE PURCHAS ES FROM GREY MARKET, OPERATING IN THE GREY MARKET LEADS TO VARIO US SAVINGS ON ACCOUNT OF NON-PAYMENTS OF VARIOUS TAXES BY USE OF UNACCOUNTED MONEY AND ON SUCH PURCHASES, WHEN SALES ARE NOT DI SPUTED, THE ITA NO. 5332 & 5333 MUM 2018-M/S ASIAN HARDWARE AND TOOLS 4 REASONABLE DISALLOWANCES SHOULD BE CONSIDERED TO AV OID THE REVENUE LEAKAGE. THUS, AGGRIEVED BY THE ORDER OF LD. CIT(A ), THE REVENUE HAS FILED THE PRESENT APPEAL BEFORE US. 5. NONE APPEARED ON BEHALF OF ASSESSEE DESPITE THE SER VICE OF NOTICE OF HEARING OF THIS APPEAL. THUS, WE LEFT NO OPTION TO HEAR THE SUBMISSION OF LD. DR AND TO DECIDE THE APPEAL ON THE BASIS OF MATERIAL AVAILABLE ON RECORD. 6. WE HAVE HEARD THE SUBMISSION OF LD. DEPARTMENTAL RE PRESENTATIVE (DR) FOR THE REVENUE AND PERUSED THE MATERIAL AVAIL ABLE ON RECORD. THE LD. DR FOR THE REVENUE SUPPORTED THE ORDER OF ASSES SING OFFICER. THE LD. DR FURTHER SUBMITS THAT INVESTIGATION WING OF I NCOME-TAX DEPARTMENT HAS MADE FULL-FLEDGED INVESTIGATION IN R ESPECT OF HAWALA TRADERS. THE HAWALA TRADERS WERE/ARE ENGAGED IN PRO VIDING 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 BROUGHT SUFFICIENT M ATERIAL ON RECORD TO PROVE THAT THE PURCHASES SHOWN BY ASSESSEE WERE BOG US. THE ASSESSEE IS NOT ENTITLED FOR ANY RELIEF. 7. WE HAVE CONSIDERED THE SUBMISSIONS OF LD. DR FOR TH E REVENUE AND PERUSED THE RECORD. THE ASSESSING OFFICER MADE THE DISALLOWANCE OF 100% OF THE ALLEGED BOGUS PURCHASES. THE ASSESSING OFFICER HAS NOT DISPUTED THE SALES OF THE ASSESSEE. THE ASSESSING O FFICER SOLELY RELIED ITA NO. 5332 & 5333 MUM 2018-M/S ASIAN HARDWARE AND TOOLS 5 UPON THE REPORT OF INVESTIGATION WING OF SALE TAX D EPARTMENT. BEFORE THE LD. CIT(A), THE ASSESSEE URGED THAT THE PURCHAS ES 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 WERE S HOWN TO THE ASSESSING OFFICER. THOUGH, THE ASSESSEE FAIRLY STAT ED THAT THEY ARE UNABLE TO PRODUCE THE SUPPLIER FOR VERIFICATION. IT WAS ALSO URGED THAT THE ASSESSEE HAS PAID SALE TAX ON BEHALF OF THE DEA LERS AND 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 O F SIMITH P. SETH (SUPRA) CONCLUDED THAT IT HAS BEEN HELD BY VARIOUS COURTS THAT WHERE ASSESSEE COULD SHOW THAT HE HAS MADE PURCHASES AND THERE ARE CORRESPONDING SALES AGAINST THE PURCHASES, IN SUCH CIRCUMSTANCES, IT IS APPROPRIATE TO TAX THE POSSIBLE PROFIT OF SUCH PURC HASE FROM NON- GENUINE PARTIES. ACCORDINGLY, THE LD. CIT(A) RESTR ICTED THE DISALLOWANCE TO 12.5% OF THE PURCHASES OF RS. 2,76, 275/-. WE HAVE NOTED THAT THE LD. CIT(A) AFTER CONSIDERING THE MAT ERIAL AND THE VARIOUS DECISION OF SUPERIOR COURTS ARRIVED ON A FAIR CONCL USION, WHICH WE AFFIRM. EVEN OTHERWISE THE REVENUE AUTHORITY IS REQ UIRED TO TAX THE PROFIT EARNED BY THE ASSESSEE ON SUCH BOGUS PURCHAS ES AND NOT THE ITA NO. 5332 & 5333 MUM 2018-M/S ASIAN HARDWARE AND TOOLS 6 ENTIRE TRANSACTION. THE LD. DR FOR THE REVENUE FAIL ED TO BRING ANY CONTRARY DECISION TO OUR NOTICE TO TAKE ANY OTHER V IEW. 8. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ITA NO. 5333/MUM/2018 A.Y. 2010-11 9. AS WE HAVE NOTED ABOVE, THE REVENUE HAS RAISED THE IDENTICAL GROUNDS OF APPEAL AS RAISED IN APPEAL FOR ASSESSMENT YEAR 2 009-10. THE DISALLOWANCE MADE BY ASSESSING OFFICER ON ACCOUNT O F ALLEGED BOGUS PURCHASES FROM THE SAME SIMILAR OTHER ALLEGED HAWAL A DEALER. CONSIDERING OUR ORDER FOR ASSESSMENT YEAR 2009-10 O N SIMILAR GROUND, THE APPEAL FOR THE YEAR UNDER CONSIDERATION IS ALSO DISMISSED WITH SIMILAR DIRECTION. 10. IN THE RESULT, APPEAL OF THE REVENUE FOR BOTH THE A YS ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 03/010/2019. 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