PAWANRAJ P. DOSHI, MUMBAI V. ITO - WD - 19 (2)(5), MUMBAI

ITA 5403/MUM/2018

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 4656 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-10-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 19-09-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AKHTAR HANSARI
• Keywords: Bogus purchase; Tangible material; Reason to believe
• Section: 143(3); 143(2); 147; 148

Judgement Text

1 ITAS 5403 & 5404/MUM/2018 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH SMC, MUMBAI BEFORE SHRI SHAMIM YAHYA (AM) & SHRI PAWAN SINGH (JM) ITA NO. 5403 & 5404/MUM/2018 (ASSESSMENT YEAR : 2009-10 & 2010-11) PAWANRAJ P DOSHI B-1402, SHREEPATI CASTLE BLDG, 10 TH KHETWADI MAIN ROAD, MUMBAI-400 004 PAN : AIXPD1908M VS ITO, 19(2)(5), MUMBAI APPELLANT RESPONDEDNT APPELLANT BY SHRI VIMAL PUNMIYA CA RESPONDENT BY SHRI AKHTAR H ANSARI SR DR DATE OF HEARING 10-10-2019 DATE OF PRONOUNCEMENT 15-10-2019 O R D E R PER PAWAN SINGH, JM : 1. THESE TWO APPEALS BY ASSESSEE ARE DIRECTED AGAINST THE SEPARATE ORDERS OF LD. CIT(A)-30, MUMBAI DATED 08.08.2018 FO R ASSESSMENT YEAR 2009-10 AND DATED 30-07-2018 FOR AY 2010-11. I N BOTH THE APPEALS, THE ASSESSEE HAS RAISED IDENTICAL GROUNDS OF APPEAL EXCEPT VARIATION OF FIGURE. FACTS FOR ALL THE ASSESSMENT Y EARS ARE IDENTICAL EXCEPT VARIATION OF ALLEGED BOGUS PURCHASES AND DIS ALLOWANCES THEREOF @ 12.5% OF SUCH PURCHASES. THEREFORE, BOTH THE APPEALS WERE CLUBBED, HEARD TOGETHER AND ARE DECIDED BY COM MON ORDER. FOR APPRECIATION OF FACTS, APPEAL FOR ASSESSMENT YEAR 2 009-10 WAS 2 ITAS 5403 & 5404/MUM/2018 TREATED AS LEAD CASE. IN APPEAL FOR ASSESSMENT YEAR 2009-10, THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : 1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL) ERRED IN (A) ARRIVING AT THE CONCLUSION THAT PURCHASES MADE OF RS. 1,47,04,183/- FROM PARTIES MENTIONED IN ASSESSMENT ORDER ARE NOT GENUINE AND NOT MADE FROM THEM BUT FROM OTHER SOURCES (B) ESTIMATING RATE OF PROFIT AT 12.5% ON ALLEG ED BOGUS PURCHASES OVER AND ABOVE GROSS PROFIT DECLARED OF 4.32% BY THE APPELLA NT ON SUCH PURCHASES.. (C) CONFIRMING ADDITION OF RS. 1838022/- MADE B Y THE ASSESSING OFFICER TO THE TOTAL INCOME OF THE APPELLANT. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) FAILED TO APPR ECIATE THAT (A) PROCEEDING INITIATED UNDER SECTION 147 714 8 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 POSSE SSION OF THE ASSESSING OFFICER WHICH JUSTIFY ISSUANCE OF NOTICE U/S 148 OF THE ACT (C) 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 / ANNULLED 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE 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 OF PARTIES IS LIABLE TO BE ANNULLED. 4. THE LEARNED ASSESSING OFFICER ERRED IN CHARGING INTEREST UNDER SECTION 234A, 234B, 234C AND 234D OF THE ACT. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED RETURN OF INCOME FOR AY 2009-10 ON 29-09-2009 DECLARING TOTAL INCOME AT RS.4,65,946/-. THE RETURN OF INCOME WAS PROCESSED U NDER 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 OPERA TORS ARE 3 ITAS 5403 & 5404/MUM/2018 INDULGING IN PROVIDING ACCOMMODATION BILLS WITHOUT 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 APPEARED IN THE LIST OF BENEFICIARY. THE ASSESSEE ALLEGEDLY MA DE THE PURCHASES OF RS. 1,47,04,183 /- FROM SUCH HAWALA DEALERS. ON THE BASIS OF INFORMATION, THE ASSESSING OFFICER MADE A BELIEF TH AT THE INCOME OF THE ASSESSEE ESCAPED ASSESSMENT, THEREFORE, RE-OPEN ED THE ASSESSMENT UNDER SECTION 147. NOTICE UNDER SECTION 148 DATED 08- 03-2014 WAS ISSUED AND SERVED UPON THE ASSESSEE. RE ASONS RECORDED WERE SUPPLIED TO THE ASSESSEE. THE ASSESSING OFFICE R AFTER SERVING NOTICE UNDER SECTION 143(2) DATED 23.12.2014 PROCEE DED FOR RE- ASSESSMENT. DURING THE ASSESSMENT, THE ASSESSING OF FICER NOTED THAT THE ASSESSEE HAS SHOWN PURCHASES FROM THE FOLLOWING PARTIES, WHICH WAS DECLARED AS HAWALA DEALERS BY THE SALE TAX DEPA RTMENT, GOVERNMENT OF MAHARASHTRA. NAME OF THE PARTIES BILL AMOUNT (RS.) 1 N B ENTERPRISES 2,07,963 2 PARAS STEEL INDIA 3,11,929 3 SHAKTI TRADING CO 4,95,542 4 RELIANT METAL CORP 14,03,099 4 ITAS 5403 & 5404/MUM/2018 5. ASHOK METAL 11,39,636 6. PADMAVATI METAL 145,38,792 7. RAJ STAR METAL 12,49,049 8. PRIME STEEL IMPEX 12,65,765 9. ASIAN METAL INDS 21,23,890 10. ANAND IMPEX 4,67,534 11. MAHAVEER METAL CORP 12,05,391 12. B R CORPORATION 2,09,040 13. JINDUTT CORPORATION 4,42,943 14. VANDNA METAL SYNDICATE 5,22,273 15. AVINASH ENTERPRISES 6,32,665 16. APSARA ENTERPRISES 15,88,672 TOTAL 1,47,04, 183 3. THE ASSESSEE WAS ASKED TO SUBSTANTIATE THE PURCHASE S AND ISSUED SHOW-CAUSE NOTICE AS TO WHY THE AFORESAID TRANSACTI ON SHOULD NOT BE TREATED AS NON-GENUINE. THE ASSESSEE FILED ITS EXPL ANATION AND FURNISHED THE COPY OF LEDGER ACCOUNT AND PROOF OF P AYMENT THROUGH CHEQUES. THE ASSESSING OFFICER NOT ACCEPTED THE EXP LANATION FURNISHED BY ASSESSEE AND NOTED THAT THE ASSESSEE H AS NOT PRODUCED LORRY RECEIPT, TRANSPORTATION DETAILS ETC. THE ASS ESSING OFFICER REJECTED THE BOOKS OF ACCOUNT. THE ASSESSING OFFICE R AFTER CONSIDERING THE MATERIAL AVAILABLE BEFORE HIM AND T HE SUBMISSION MADE BY ASSESSEE CONCLUDED THAT THE ASSESSEE WAS IN POSSESSION OF 5 ITAS 5403 & 5404/MUM/2018 GOODS AND HAS SHOWN THE SALE AGAINST THE PURCHASES. THE SALE IS NOT POSSIBLE WITHOUT PURCHASES. THE ASSESSING OFFICER C ONCLUDED THAT THE ASSESSEE MAY HAVE PURCHASED GOODS FROM OTHER SU PPLIERS WITHOUT BILLS, WHICH IS COMMONLY KNOWN AS GREY MARK ET AND THE ASSESSEE IS BENEFICIARY OF MARGIN OF GREY MARKET. T HE ASSESSING OFFICER ON HIS ABOVESAID OBSERVATION DISALLOWED 12. 5% OF THE AGGREGATE OF TOTAL OF NON-GENUINE/ALLEGED HAWALA PU RCHASES IN ASSESSMENT ORDER DATED 14.03.2016 PASSED UNDER SECT ION 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 L D. 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 REPRESENT ATIVE (DR) FOR THE REVENUE AND PERUSED THE MATERIAL AVAILABLE ON R ECORD. THE LD. AR OF THE ASSESSEE SUBMITS THAT THE ASSESSEE FURNIS HED COMPLETE DETAILS OF PURCHASES AND THE SALES MADE AGAINST THE ALLEGED BOGUS PURCHASES. THE ASSESSING OFFICER HAS REJECTED THE B OOKS OF ACCOUNT WITHOUT MENTIONING SPECIFIC REASONS. THE ASSESSING OFFICER MADE THE DISALLOWANCE OF 12.5% OF THE ALLEGED BOGUS PURC HASES. THE LD. 6 ITAS 5403 & 5404/MUM/2018 AR OF THE ASSESSEE FURTHER SUBMITS THAT ASSESSEE HA S ALREADY SHOWN GROSS PROFIT (GP) AT 4.32% . THE ADDITION SUSTAINED ON ACCOUNT OF ALLEGED BOGUS PURCHASES IS ON HIGHER SIDE. THE LD. AR OF THE ASSESSEE FURTHER SUBMITS THAT AFTER ADDITION SUSTAI NED BY LD. CIT(A), THE GP OF ASSESSEE WOULD RISE SUBSTANTIALLY WHICH I S EXTREMELY HIGH. 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 B E LIMITED TO THE EXTENT OF BRINGING THE GP RATE ON SUCH PURCHASE AT THE SAME RATE AS ON OTHER GENUINE PURCHASES. THE LD. AR OF THE ASSES SEE SUBMITS THAT THE DISALLOWANCE OF ALLEGED BOGUS PURCHASE MAY BE R ESTRICTED IN ACCORDANCE WITH THE DECISION OF HONBLE JURISDICTIO NAL HIGH COURT 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 HAWAL A TRADERS. THE HAWALA TRADERS WERE/ARE ENGAGED IN PROVIDING BOGUS BILL WITHOUT ACTUAL DELIVERY OF GOODS. THE ASSESSEE HAS SHOWN BO GUS PURCHASES 7 ITAS 5403 & 5404/MUM/2018 ONLY TO INFLATE THE PROFIT. THE LD. DR FOR THE REVE NUE 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 RELI ED UPON THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN M HAJI ADAM & CO.(SUPRA). WE HAVE NOTED THAT ON SIMILAR SET OF FA CT, THE HONBLE BOMBAY HIGH COURT IN PCIT VS. M HAJI ADAM & CO. (SU PRA) HELD THAT ADDITION IN RESPECT OF BOGUS PURCHASE BE LIMIT ED TO THE EXTENT OF BRINGING THE GP RATE ON BOGUS PURCHASE AT THE SAME RATE AS OTHER GENUINE PURCHASES. WE HAVE FURTHER NOTED THAT THE A SSESSEE HAS SHOWN GP OF 4.32%. IT WAS ARGUED THAT THE GP PERCENTAGE AFTER ADDITION OF 12.5% WOULD BE ON HIGHER SIDE, WHICH IS NOT POSSIBLE IN THE BUSINESS OF ASSESSEE . THEREFORE, CONSIDERING THE FACT OF THE PRESENT CASE AND THE NATURE OF BUSINESS ACTIVITIES OF THE ASSESSEE AND BY FOLLOWING THE DECISION OF HONBLE BOMBAY HIGH CO URT, WE DIRECT THE ASSESSING OFFICER TO RESTRICT THE ADDITI ON WITH REGARD TO 8 ITAS 5403 & 5404/MUM/2018 BOGUS PURCHASES BY BRINING THE GP RATE ON SUCH PURC HASES AT THE SAME RATE AS THAT OF OTHER GENUINE PURCHASES. NEEDL ES TO ORDER THAT BEFORE MAKING ADDITION, THE ASSESSING OFFICER SHALL GRANT OPPORTUNITY TO THE ASSESSEE BEFORE PASSING THE ORDE R IN ACCORDANCE WITH LAW. IN THE RESULT THE E GROUND NO. 1 OF THE A PPEAL IS PARTLY ALLOWED. 9. GROUND NO. 2 RELATES TO VALIDITY OF REOPENING AND GROUND NO.3 RELATES TO DENIAL OF OPPORTUNITY. THE LD AR FOR THE ASSESSEE NOT ARGUED ON THESE GROUNDS OF APPEAL THEREFORE, BOTH T HE GROUNDS OF APPEAL ARE TREATED AS NOT PRESSED AND THEREBY DISMI SSED. ITA NO. 5404/MUM/2018 A.Y. 2010-11 10. AS WE HAVE NOTED ABOVE, THE ASSESSEE HAS RAISED THE IDENTICAL GROUNDS OF APPEAL AS RAISED IN APPEAL FOR ASSESSMEN T YEAR 2009-10. THE DISALLOWANCES MADE BY ASSESSING OFFICER ON ACCO UNT OF ALLEGED BOGUS PURCHASES ARE ALSO SIMILAR EXCEPT THE FACT TH AT PARTIES/ALLEGED HAWALA DEALERS ARE DIFFERENT. CONSIDERING OUR ORDER FOR ASSESSMENT YEAR 2010-11 ON SIMILAR GROUND, THE APPEALS FOR THE YEAR UNDER CONSIDERATION ARE ALSO ALLOWED WITH SIMILAR DIRECTI ON. 11. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALL OWED. 9 ITAS 5403 & 5404/MUM/2018 12. AS A RESULT, BOTH THE APPEALS FILED BY THE ASSESSEE ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 15-10-2019. SD/- SD/- (SHAMIM YAHYA) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIALMEMBER MUMBAI, DT : 15 TH OCTOBER, 2019 PK/- COPY TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI