P.KANTILAL & CO. , MUMBAI V. ITO - 19 (2)(5), MUMBAI

ITA 5372/MUM/2018

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 4650 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-10-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 18-09-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AKHTAR HANSARI
• Assessee Lawyers: NEELAM C JADHAV
• Keywords: Bogus purchase
• Section: 143(3); 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. 5372/MUM/2018 (ASSESSMENT YEAR 2009-10 ) ITA NO. 5373/MUM/2018 (ASSESSMENT YEAR 2010-11 ) ITA NO. 5374/MUM/2018 (ASSESSMENT YEAR 2011-12 ) M/S P. KANTILAL & CO. 144, KIKA STREET, GULALWADI, MUMBAI- 400004. PAN: AAAFP1901D VS. ITO - 19(2)(5) 2 ND FLOOR, ROOM NO. 210, MATRU MANDIR, TARDEO ROAD, MUMBAI-400007. APPELLANT RESPONDE NT APPELLANT BY : MS. NEELAM C. JADHAV (AR) RESPONDENT BY : SHRI AKHTAR H. ANSARI (SR. DR) DATE OF HEARING : 09.10.2019 DATE OF PRONOUNCEMEN T : 09.10.2019 ORDERUNDER SECTION 254(1)OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER ; 1. THESE THREE APPEALS BY ASSESSEE ARE DIRECTED AGAINS T THE SEPARATE ORDERS OF LD. CIT(A)-29, MUMBAI DATED 19.07.2018 FOR ASSES SMENT YEAR 2009- 10, 2010-11 & 2011-12. IN ALL THE APPEALS, THE ASSE SSEE HAS RAISED IDENTICAL GROUNDS OF APPEAL EXCEPT VARIATION OF FIG URE. FACTS FOR ALL THE ASSESSMENT YEARS ARE IDENTICAL EXCEPT VARIATION OF ALLEGED BOGUS PURCHASES AND DISALLOWANCES THEREOF @ 12.5% OF SUCH PURCHASES. THEREFORE, ALL THE APPEALS WERE CLUBBED, HEARD TOGE THER AND ARE DECIDED BY COMMON ORDER. FOR APPRECIATION OF FACTS IN APPEA L FOR ASSESSMENT ITA NO. 5372 T O 5374 MUM 2018-M/S P. KANTILAL & CO. 2 YEAR 2009-10 WAS TREATED AS LEAD CASE. IN APPEAL FO R ASSESSMENT YEAR 2009-10, THE ASSESSEE HAS RAISED THE FOLLOWING GROU NDS OF APPEAL: GROUND NO.1 THE LEARNED ASSESSING OFFICER ERRED IN TREATING THE APPELLANT AS A BENEFICIARY OF ACCOMMODATION BILLS ISSUED BY TWO SUPPLIERS VIZ. M/S. NUTAN METALS AND M/S. PRADEEP METALS AND CONSEQUENTLY TREATING THE P URCHASE MADE BY THE APPELLANT FROM THE SAID TWO PARTIES AS NON-GENUINE. GROUND NO.2 THE LEARNED ASSESSING OFFICER ERRED IN MAKING AN AD DITION OF RS. 13,69,607/- BEING 12.5% OF PURCHASE OF RS. 1,09,56, 858/- MADE FROM M/S. NUTAN METALS AND M/S. PRADEEP METALS. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PROPRIETOR OF M/S P. KANTILAL & CO., ENGAGED IN THE BUSINESS OF TRADING IN BRASS ALUMINIUM, FILED ITS RETURN OF INCOME FOR ASSESSMENT YEAR 2009 -10 DECLARING TOTAL INCOME OF RS. 72,370/-. THE RETURN OF INCOME WAS PR OCESSED UNDER SECTION 143(1). THE ASSESSMENT WAS RE-OPENED UNDER SECTION 147 ON THE BASIS OF INFORMATION RECEIVED FROM SALE TAX DEPARTM ENT, GOVERNMENT OF MAHARASHTRA THAT CERTAIN HAWALA OPERATORS ARE IN DULGING 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. 1,09,5 6,858/- 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, ITA NO. 5372 T O 5374 MUM 2018-M/S P. KANTILAL & CO. 3 RE-OPENED THE ASSESSMENT UNDER SECTION 147. NOTICE UNDER SECTION 148 DATED 03.03.2014 WAS ISSUED AND SERVED UPON THE ASS ESSEE. REASONS RECORDED WERE SUPPLIED TO THE ASSESSEE. THE ASSESSI NG OFFICER AFTER SERVING NOTICE UNDER SECTION 143(2) DATED 15.07.201 4 PROCEEDED FOR RE- ASSESSMENT. DURING THE ASSESSMENT, THE ASSESSING OF FICER NOTED THAT THE ASSESSEE HAS SHOWN PURCHASES FROM THE FOLLOWING PAR TIES, WHICH WAS DECLARED AS HAWALA DEALERS BY THE SALE TAX DEPARTME NT, GOVERNMENT OF MAHARASHTRA. NAME OF THE PARTIES BILL AMOUNT (RS.) 1 PRADEEP METALS SYNDICATE 25,76,675/- 2 NUTAN METALS 83, 80,183/- TOTAL 1,09,56,858/- 3. THE ASSESSEE WAS ASKED TO SUBSTANTIATE THE PURCHASE S AND ISSUED SHOW- CAUSE NOTICE AS TO WHY THE AFORESAID TRANSACTION SH OULD NOT BE TREATED AS NON-GENUINE. THE ASSESSEES FILED ITS EXPLANATION AN D FURNISH THE COPY OF LEDGER ACCOUNT AND PROOF OF PAYMENT THROUGH CHEQUES . THE ASSESSING OFFICER NOT ACCEPTED THE EXPLANATION FURNISHED BY A SSESSEE AND NOTED THAT THE ASSESSEE HAS NOT PRODUCED LORRY RECEIPT, T RANSPORTATION DETAILS ETC. THE ASSESSING OFFICER REJECTED THE BOOKS OF A CCOUNT. THE ASSESSING OFFICER AFTER CONSIDERING THE MATERIAL AVAILABLE BE FORE HIM AND THE SUBMISSION MADE BY ASSESSEE CONCLUDED THAT THE ASSE SSEE WAS IN POSSESSION OF GOODS AND HAS SHOWN THE SALE AGAINST THE PURCHASES. THE SALE IS NOT POSSIBLE WITHOUT PURCHASES. THE ASSESSI NG OFFICER CONCLUDED ITA NO. 5372 T O 5374 MUM 2018-M/S P. KANTILAL & CO. 4 THAT THE ASSESSEE MAY HAVE PURCHASES GOODS FROM OTH ER SUPPLIER WITHOUT BILLS, WHICH IS COMMONLY KNOWN AS GREY MARKET AND T HE ASSESSEE IS BENEFICIARY OF MARGIN OF GREY MARKET. THE ASSESSING OFFICER ON HIS ABOVESAID OBSERVATION DISALLOWED 12.5% OF THE AGGRE GATE OF TOTAL OF NON-GENUINE/ALLEGED HAWALA PURCHASES IN ASSESSMENT ORDER DATED 17.03.2015 PASSED UNDER SECTION 143(3) R.W.S 147. 4. ON APPEAL BEFORE THE LD. CIT(A), THE ACTION OF ASSE SSING OFFICER WAS SUSTAINED. FURTHER, AGGRIEVED BY THE ORDER OF LD. C IT(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 (D R) FOR THE REVENUE AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE L D. AR OF THE ASSESSEE SUBMITS THAT THE ASSESSEE FURNISHED COMPLETE DETAIL S OF PURCHASES AND THE SALES MADE AGAINST THE ALLEGED BOGUS PURCHASES. THE ASSESSING OFFICER HAS REJECTED THE BOOKS OF ACCOUNT WITHOUT M ENTIONING SPECIFIC REASONS. THE ASSESSING OFFICER MADE THE DISALLOWANC E OF 12.5% OF THE ALLEGED BOGUS PURCHASES. THE LD. AR OF THE ASSESSEE FURTHER SUBMITS THAT ASSESSEE HAS ALREADY SHOWN GROSS PROFIT (GP) AT 1.1 7%. THE ADDITION SUSTAINED ON ACCOUNT OF ALLEGED BOGUS PURCHASES IS ON HIGHER SIDE. THE LD. AR OF THE ASSESSEE FURTHER SUBMITS THAT AFTER A DDITION SUSTAINED BY LD. CIT(A), THE GP OF ASSESSEE WOULD RISE TO 5.98%, WHI CH IS EXTREMELY HIGH. ITA NO. 5372 T O 5374 MUM 2018-M/S P. KANTILAL & CO. 5 6. THE LD. AR OF THE ASSESSEE FURTHER SUBMITS THAT THE HONBLE BOMBAY HIGH COURT IN A RECENT DECISION ON SIMILAR SET OF F ACT IN PCIT VS. M HAJI ADAM & CO. IN ITA NO. 1004 OF 2016 DATED 11.02.2019 HELD THAT ADDITION IN RESPECT OF BOGUS PURCHASES IS TO BE LIM ITED TO THE EXTENT OF BRINGING THE GP RATE ON SUCH PURCHASE AT THE SAME R ATE AS ON OTHER GENUINE PURCHASES. THE LD. AR OF THE ASSESSEE SUBMI TS THAT THE DISALLOWANCE OF ALLEGED BOGUS PURCHASE MAY BE RESTR ICTED IN ACCORDANCE WITH THE DECISION OF HONBLE JURISDICTIONAL HIGH CO URT IN PCIT VS. M HAJI ADAM & CO. (SUPRA). 7. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESENTAT IVE (DR) FOR THE REVENUE SUPPORTED THE ORDER OF LOWER AUTHORITIES. T HE LD. DR FURTHER SUBMITS THAT INVESTIGATION WING OF INCOME-TAX DEPAR TMENT HAS MADE FULL-FLEDGED INVESTIGATION IN RESPECT OF HAWALA TRA DERS. THE HAWALA TRADERS WERE/ARE ENGAGED IN PROVIDING BOGUS BILL WI THOUT ACTUAL DELIVERY OF GOODS. THE ASSESSEE HAS SHOWN BOGUS PURCHASES ON LY TO INFLATE THE PROFIT. THE LD. DR FOR THE REVENUE SUBMITS THAT THE ASSESSING OFFICER HAS GIVEN SUFFICIENT RELIEF. THE ASSESSING OFFICER HAS REASONABLY ESTIMATED THE DISALLOWANCES. THE ASSESSEE IS NOT ENTITLED FOR ANY FURTHER RELIEF. 8. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE REPR ESENTATIVES AND PERUSED THE RECORD. A SHORT ISSUE FOR OUR ADJUDICAT ION IS WHETHER THE DISALLOWANCE OF ALLEGED BOGUS PURCHASE @ 12.5% IS R EASONABLE OR NOT. THE LD. AR OF THE ASSESSEE HAS VEHEMENTLY RELIED UP ON THE DECISION OF ITA NO. 5372 T O 5374 MUM 2018-M/S P. KANTILAL & CO. 6 HONBLE JURISDICTIONAL HIGH COURT IN M HAJI ADAM & CO.(SUPRA). WE HAVE NOTED THAT ON SIMILAR SET OF FACT, THE HONBLE BOMBAY HIGH COURT IN PCIT VS. M HAJI ADAM & CO. (SUPRA) HELD THAT ADD ITION IN RESPECT OF BOGUS PURCHASE BE LIMITED TO THE EXTENT OF BRINGING THE GP RATE ON BOGUS PURCHASE AT THE SAME RATE AS OTHER GENUINE PURCHASE S. WE HAVE FURTHER NOTED THAT THE ASSESSEE HAS SHOWN GP OF 1.17%. IT W AS ARGUED THAT THE GP PERCENTAGE AFTER ADDITION WOULD BE 6.05%, WHICH IS ON HIGHER SIDE. THEREFORE, CONSIDERING THE FACT OF THE PRESENT CASE AND THE NATURE OF BUSINESS ACTIVITIES OF THE ASSESSEE AND BY FOLLOWIN G THE DECISION OF HONBLE BOMBAY HIGH COURT, WE DIRECT THE ASSESSING OFFICER TO RESTRICT THE ADDITION WITH REGARD TO BOGUS PURCHASES BY BRIN ING THE GP RATE ON SUCH PURCHASES AT THE SAME RATE AS THAT OF OTHER GE NUINE PURCHASES. NEEDLES TO ORDER THAT BEFORE MAKING ADDITION, THE A SSESSING OFFICER SHALL GRANT OPPORTUNITY TO THE ASSESSEE BEFORE PASS ING THE ORDER IN ACCORDANCE WITH LAW. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALL OWED. ITA NO. 5373/MUM/2018 A.Y. 2010-11 ITA NO. 5374/MUM/2018 A.Y. 2011-12 10. AS WE HAVE NOTED ABOVE, THE ASSESSEE HAS RAISED THE IDENTICAL GROUNDS OF APPEAL AS RAISED IN APPEAL FOR ASSESSMENT YEAR 2009 -10. THE DISALLOWANCES MADE BY ASSESSING OFFICER ON ACCOUNT OF ALLEGED BOGUS PURCHASES ARE ALSO SIMILAR EXCEPT THE FACT THAT PAR TIES/ALLEGED HAWALA ITA NO. 5372 T O 5374 MUM 2018-M/S P. KANTILAL & CO. 7 DEALERS ARE DIFFERENT. CONSIDERING OUR ORDER FOR AS SESSMENT YEAR 2009- 10 ON SIMILAR GROUND, THE APPEALS FOR THE YEAR UNDE R CONSIDERATION ARE ALSO ALLOWED WITH SIMILAR DIRECTION. 11. IN THE RESULT, APPEAL OF THE ASSESSEE FOR ALL THE A YS ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 09/10/2019. SD/- SD/- SHAMIM YAHYA PAWAN SINGH ACCOUNTANT MEMBER J UDICIAL MEMBER MUMBAI, DATE: 09.10.2019 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