PARASMAL F. SANGHVI, MUMBAI V. ITO - 19 (2)(5), MUMBAI

ITA 5405/MUM/2018

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 4658 (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: 2010-2011
• 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

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH SMC, MUMBAI BEFORE SHRI SHAMIM YAHYA (AM) & SHRI PAWAN SINGH (JM) ITA NO. 5405 & 5406/MUM/2018 (ASSESSMENT YEAR : 2010-`11 & 2012-13) PARASMAL F SANGHAVI (HUF) 601, MAHAVIR LANE CORNER KHETWADI BACK ROAD, MUMBAI 400 004 PAN : AAAHP5379M VS ITO, 19(2)(5), MUMBAI APPELLANT RESPONDEDNT APPELLANT BY SHRI VIMAL PUNMIYA RESPONDENT BY SHRI AKHTAR H ANSARI 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)-29, MUMBAI BOTH DATED 13.06.20 18 FOR ASSESSMENT YEAR 2010-11 AND 2012-13. IN BOTH THE AP PEALS, THE ASSESSEE HAS RAISED IDENTICAL GROUNDS OF APPEAL EXC EPT VARIATION OF FIGURE. FACTS FOR ALL THE ASSESSMENT YEARS ARE IDEN TICAL EXCEPT VARIATION OF ALLEGED BOGUS PURCHASES AND DISALLOWAN CES THEREOF @ 12.5% OF SUCH PURCHASES. THEREFORE, BOTH THE APPEAL S WERE CLUBBED, HEARD TOGETHER AND ARE DECIDED BY COMMON ORDER. FOR APPRECIATION OF FACTS, APPEAL FOR ASSESSMENT YEAR 2010-11 WAS TREAT ED AS LEAD CASE. IN APPEAL FOR ASSESSMENT YEAR 2010-11, THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: ITAS 5405 & 5406/MUM/2018 PARASMAL F SANGHAVI 2 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL) ERRED I N (A) ARRIVING AT THE CONCLUSION THAT PURCHASES MADE OF RS. 11581947/- FROM PARTIES MENTIONED IN ASSESSMENT ORDER ARE NOT GENUINE AND NOT MADE FROM THEM BUT FROM OTHER SOURCES (B) ESTIMATING RATE OF PROFIT AT 12.50% ON ALLE GED BOGUS PURCHASES OVER AND ABOVE GROSS PROFIT DECLARED OF 6.88% BY THE APP ELLANT ON SUCH PURCHASES.. (C) CONFIRMING ADDITION OF RS. 1447743/- 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 APPRECIATE THAT (A) PROCEEDING INITIATED UNDER SECTION 147 /14 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 CONTRARY TO THE PROVISIONS OF THE ACT AND LIABLE TO BE CANCELLED / ANNULLED 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING ORDER MADE UNDER SECTION 143(3) RWS 147 OF THE ACT BY THE LEARNED ASSESSING OFFICER WHICH IS ILLEGAL, BAD-IN-LAW, ULTRA VIRES A ND WITHOUT ALLOWING REASONABLE OPPORTUNITY OF THE HEARING, WITHOUT APPR ECIATING THE FACTS, SUBMISSION AND EVIDENCES IN THEIR PROPER PERSPECTIV E, WITHOUT PROVIDING COPIES OF MATERIAL USED AGAINST THE APPELLANT AND W ITHOUT PROVIDING CROSS 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 2010-11 ON 13-10-2010 DECLARING TOTAL INCOME AT RS.4,05,693. 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), ITAS 5405 & 5406/MUM/2018 PARASMAL F SANGHAVI 3 MUMBAI. THE NAME OF ASSESSEE APPEARED IN THE LIST O F BENEFICIARY. THE ASSESSEE ALLEGEDLY MADE THE PURCHASES OF RS. 1, 15,81,947/- FROM SUCH HAWALA DEALERS. ON THE BASIS OF INFORMATION, T HE ASSESSING OFFICER MADE A BELIEF THAT THE INCOME OF THE ASSESS EE ESCAPED ASSESSMENT, THEREFORE, RE-OPENED THE ASSESSMENT UND ER SECTION 147. NOTICE UNDER SECTION 148 DATED 26.02.2015 WAS ISSUE D AND SERVED UPON THE ASSESSEE. REASONS RECORDED WERE SUPPLIED T O THE ASSESSEE. THE ASSESSING OFFICER AFTER SERVING NOTICE UNDER SE CTION 143(2) DATED 26.06.2015 PROCEEDED FOR RE-ASSESSMENT. DURING THE ASSESSMENT, THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS SHOWN PURCHASES FROM THE FOLLOWING PARTIES, WHICH WAS DECLARED AS HAWALA DEALERS BY THE SALE TAX DEPARTMENT, GOVERNMENT OF MAHARASHTRA. NAME OF THE PARTIES BILL AMOUNT (RS.) 1 PRIME STEEL IMPEX 20,81,104/- 2 DEEP METAL & TUBE RS.21,06,593/- 3 JAY AMBE METAL RS.34,42,315/- 4. ASIAN METAL INDUSTRIES RS.34,91,686/- 5. SATYAM METAL & ALLOYS RS.4,60,249/- TOTAL 115,81,947/- 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 ITAS 5405 & 5406/MUM/2018 PARASMAL F SANGHAVI 4 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 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 SUPPLI ERS 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 14.03.2016 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 (DR) FOR THE ITAS 5405 & 5406/MUM/2018 PARASMAL F SANGHAVI 5 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 REJECTED THE BOOKS OF ACC OUNT WITHOUT MENTIONING SPECIFIC REASONS. THE ASSESSING OFFICER MADE THE DISALLOWANCE OF 12.5% OF THE ALLEGED BOGUS PURCHASE S. THE LD. AR OF THE ASSESSEE FURTHER SUBMITS THAT ASSESSEE HAS ALRE ADY SHOWN GROSS PROFIT (GP) AT 5.23%. THE ADDITION SUSTAINED ON ACCOUNT OF ALLEGED BOGUS PURCHASES IS ON HIGHER SIDE. THE LD. AR OF TH E ASSESSEE FURTHER SUBMITS THAT AFTER ADDITION SUSTAINED BY LD. CIT(A) , THE GP OF ASSESSEE WOULD BE EXTREMELY HIGH, WHICH IS NOT POSS IBLE IN THE BUSINESS OF ASSESSEE. 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). ITAS 5405 & 5406/MUM/2018 PARASMAL F SANGHAVI 6 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 PUR CHASES ONLY TO INFLATE THE PROFIT. THE LD. DR FOR THE REVENUE SUBM ITS THAT THE ASSESSING OFFICER HAS GIVEN SUFFICIENT RELIEF. THE ASSESSING OFFICER HAS REASONABLY ESTIMATED THE DISALLOWANCES. THE ASS ESSEE 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 5.23%. IT WAS ARGUED THAT THE GP PERCENTAGE AFTER ITAS 5405 & 5406/MUM/2018 PARASMAL F SANGHAVI 7 ADDITION WOULD BE ON HIGHER SIDE. THEREFORE, CONSIDERING THE FACT OF THE PRESENT CASE AND THE NATURE OF BUSINESS ACTIVIT IES OF THE ASSESSEE AND BY FOLLOWING THE DECISION OF HONBLE BOMBAY HIG H COURT, WE DIRECT THE ASSESSING OFFICER TO RESTRICT THE ADDITI ON WITH REGARD TO 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 ORDER IN ACCORDA NCE WITH LAW. IN THE RESULT THE E GROUND NO. 1 OF THE APPEAL IS PART LY 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. 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALL OWED. ITA NO. 5406/MUM/2018 A.Y. 2012-13 11. AS WE HAVE NOTED ABOVE, THE ASSESSEE HAS RAISED THE IDENTICAL GROUNDS OF APPEAL AS RAISED IN APPEAL FOR ASSESSMEN T YEAR 2010-11. 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 ITAS 5405 & 5406/MUM/2018 PARASMAL F SANGHAVI 8 YEAR 2010-11 ON SIMILAR GROUND, THE APPEALS FOR THE YEAR UNDER CONSIDERATION ARE ALSO ALLOWED WITH SIMILAR DIRECTI ON. 12. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALL OWED. 13. 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