CHIMANALAL K. BOKADIA, MUMBAI V. ITO -WD- 19 (1)(3), MUMBAI

ITA 5433/MUM/2018

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 4661 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-10-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 21-09-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SAMASTHA MULLAMADI
• Assessee Lawyers: P RIYANKA JAIN
• Keywords: Bogus purchase; Tangible material; Reason to believe
• Section: 143(3); 142(1); 133(6); 143(2); 147; 145; 148; 15

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH SMC, MUMBAI BEFORE SHRI SHAMIM YAHYA (AM) & SHRI PAWAN SINGH (JM) ITA NO. 5433/MUM/2018(ASSESSMENT YEAR : 2010-11) SHRI CHIMANLAL K BOKADIA M/S ISHWAR STEEL CORPORATION 15, ARDESHIR DADY CROSS LANE, OPP. MADHAV BAUG, CP TANK, MUMBAI 400 004 PAN : AJEPB4618C VS ITO, WD.(19)(1)(3), MUMBAI APPELLANT RESPONDEDNT APPELLANT BY MS. PRIYANKA JAIN RESPONDENT BY MS. SAMASTHA MULLAMADI DATE OF HEARING 14-10-2019 DATE OF PRONOUNCEMENT 14 -10-2019 O R D E R PER PAWAN SINGH, JM : 1. THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF LD. CIT(A)-30, MUMBAI DATED 06.06.2018 FOR ASSESSME NT YEAR 2010-11. THE ASSESSEE HAS RAISED THE FOLLOWING GRO UNDS 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. 1,02,45,394/-FROM PARTIES MENTIONED IN ASSESSMENT ORDER ARE NOT GENUI NE AND NOT MADE FROM THEM BUT FROM OTHER SOURCES (B) ESTIMATING RATE OF PROFIT AT 12.5% ON ALLEGED B OGUS PURCHASES OVER AND ABOVE GROSS PROFIT DECLARED OF 3.87% BY THE APPELLA NT ON SUCH PURCHASES.. (C) CONFIRMING ADDITION OF RS. 12,80,674/- MADE BY THE ASSESSING OFFICER TO THE TOTAL INCOME OF THE APPELLANT. 2. 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 CONCLUSION ARRIVED AT BY THE LEARNED ASSESSING OFFICER THAT PURCHASES MADE FROM PARTIES MENTIONED 2 ITA 5433/MUM/2018 CHIMANLAL K. BOKADIA IN ASSESSMENT ORDER ARE NON GENUINE AND THEREBY REJ ECTING BOOKS OF ACCOUNTS OF THE APPELLANT BY INVOKING PROVISIONS OF SECTION 145 (3) OF THE ACT. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) FAILED TO APPR ECIATE THAT (A) PROCEEDING INITIATED UNDER SECTION 147 /148 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 POSSESSIO N 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 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E 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 LEARNED AS SESSING OFFICER WHICH IS ILLEGAL, BAD-IN-LAW, ULTRA VIRES AND WITHOUT ALLOWI NG REASONABLE OPPORTUNITY OF THE HEARING, WITHOUT APPRECIATING THE FACTS, SUBMIS SION AND EVIDENCES IN THEIR PROPER PERSPECTIVE, WITHOUT PROVIDING COPIES OF MAT ERIAL USED AGAINST THE APPELLANT AND WITHOUT PROVIDING CROSS EXAMINATION O F PARTIES IS LIABLE TO BE ANNULLED. 5. 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 IS PR OPRIETOR OF M/S ISHWAR STEEL CORPORATION AND ENGAGED IN THE TRADING OF IRON AND STEEL, FILED RETURN OF INCOME FOR AY 2010-11 ON 26- 09-2010 DECLARING TOTAL INCOME AT RS. 4,27,235/-. THE RETUR N OF INCOME WAS PROCESSED UNDER SECTION 143(1). THE ASSESSMENT WAS RE-OPENED UNDER SECTION 147 ON THE BASIS OF INFORMATION RECEI VED FROM SALE TAX DEPARTMENT, GOVERNMENT OF MAHARASHTRA THAT CERT AIN HAWALA 3 ITA 5433/MUM/2018 CHIMANLAL K. BOKADIA OPERATORS ARE INDULGING IN PROVIDING ACCOMMODATION BILLS WITHOUT ACTUAL DELIVERY OF GOODS. THE SALE TAX DEPARTMENT, GOVERNMENT OF MAHARASHTRA REFERRED THE LIST OF SUCH HAWALA DEALER S AND THE BENEFICIARY TO THE DGIT (INVESTIGATION), MUMBAI. TH E NAME OF ASSESSEE APPEARED IN THE LIST OF BENEFICIARY. THE ASSESSEE ALLEGEDLY MADE THE PURCHASES OF RS. 1,02,45,394/- FROM SUCH H AWALA DEALERS. ON THE BASIS OF INFORMATION, THE ASSESSING OFFICER MADE A BELIEF THAT THE INCOME OF THE ASSESSEE ESCAPED ASSESSMENT, THEREFORE, RE- OPENED THE ASSESSMENT UNDER SECTION 147. NOTICE UND ER SECTION 148 DATED 23.09.2014 WAS ISSUED AND SERVED UPON THE ASS ESSEE. REASONS RECORDED WERE SUPPLIED TO THE ASSESSEE. THE ASSESSI NG OFFICER AFTER SERVING NOTICES UNDER SECTION 142(1) DATED 01-12-20 15 AND U/S 143(2) DATED 22.12.2015 PROCEEDED FOR RE-ASSESSMENT . DURING 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.) 1 HARSHIL FERROMET PVT LTD 10,62,320 2 NIRUSH TRADING CO. 17,420 3 VARDHMAN TRADING CO 4,73,070 4 STAINLESS IMPEX PVT LTD 1,16,513 5 WEL STEEL (INDIA) 25,57,151 6 KANAK STEEL (INDIA) 60,12,302 4 ITA 5433/MUM/2018 CHIMANLAL K. BOKADIA 7 BANARSIDAS AGGARWAL & SONS 6,618 TOTAL 1,02,45,394/- 3. THE ASSESSEE VIDE SHOW CAUSE NOTICE DATED 28.12.201 5 WAS ASKED TO SUBSTANTIATE THE PURCHASES AND ISSUED SHOW-CAUSE NO TICE AS TO WHY THE AFORESAID TRANSACTION SHOULD NOT BE TREATED AS NON-GENUINE. THE ASSESSING OFFICER ALSO CONDUCTED INQUIRY BY SENDING NOTICE UNDER SECTION 133(6) TO ALL THE PARTIES. THE NOTICES SENT TO THE PARTIES WERE RETURNED BACK WITH THE REMARK OF POSTAL AUTHORITIES NOT KNOWN OR LEFT. THE ASSESSEE FILED ITS EXPLANATION AND FURNI SHED THE COPY OF LEDGER ACCOUNT AND PROOF OF PAYMENT THROUGH CHEQUES . THE ASSESSING OFFICER NOT ACCEPTED THE EXPLANATION FURN ISHED BY ASSESSEE AND NOTED THAT THE ASSESSEE HAS NOT PRODUC ED LORRY RECEIPT, TRANSPORTATION DETAILS ETC. THE ASSESSING OFFICER REJECTED THE BOOKS OF ACCOUNT. THE ASSESSING OFFICER AFTER C ONSIDERING THE MATERIAL AVAILABLE BEFORE HIM AND THE SUBMISSION MA DE BY ASSESSEE CONCLUDED THAT THE ASSESSEE WAS IN POSSESSION OF GO ODS AND HAS SHOWN THE SALE AGAINST THE PURCHASES. THE SALE IS N OT POSSIBLE WITHOUT PURCHASES. THE ASSESSING OFFICER CONCLUDED THAT THE ASSESSEE IS INDULGED IN PURCHASING GOODS FROM THE H AWALA PARTIES TO SUPPRESS THE TRUE PROFIT AND REDUCE TAX LIABILITY. THE ASSESSING OFFICER ON HIS ABOVE SAID OBSERVATION CONCLUDED THA T IN SUCH CASES 5 ITA 5433/MUM/2018 CHIMANLAL K. BOKADIA DISALLOWANCES TO BE MADE TO THE EXTENT OF PROFIT EL EMENT EMBEDDED IN SUCH PURCHASES AND ACCORDINGLY DISALLOWED 12.5% OF THE AGGREGATE OF TOTAL OF NON-GENUINE/ALLEGED HAWALA PU RCHASES IN ASSESSMENT ORDER DATED 29.02.2016 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 LD . 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. NO SUBMISSIONS WAS MADE BY LD AR FOR THE ASSESSEE ON T HE ISSUES/ GROUNDS OF REOPENING AND REJECTION OF BOOKS OF ACCO UNTS, THUS THE GROUND NO. 2,3&4 ARE DISMISSED AS NOT PRESSED. GROU ND NO. 1 RELATES TO RESTRICTING THE DISALLOWANCE TO THE EXTE NT OF 12.5% OF THE IMPUGNED PURCHASES. THE LD. AR OF THE ASSESSEE SUB MITS THAT THE ASSESSEE FURNISHED COMPLETE DETAILS OF PURCHASES AN D THE SALES MADE AGAINST THE ALLEGED BOGUS PURCHASES. THE ASSESSING OFFICER MADE THE DISALLOWANCE OF 12.5% OF THE ALLEGED BOGUS PURC HASES. THE LD. AR OF THE ASSESSEE FURTHER SUBMITS THAT ASSESSEE HA S ALREADY SHOWN 6 ITA 5433/MUM/2018 CHIMANLAL K. BOKADIA GROSS PROFIT (GP) AT 3.87% . 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 NOT POSSIBLE IN THE TRADE OF THE ASSESSEE. THE LD. AR FOR THE ASSES SEE SUBMITS THAT THE RATE OF VALUE ADDED TAX (VAT) APPLICABLE ON THE ALLEGED PURCHASES IS ONLY @ 4%. 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 REPRESENTA TIVE (DR) FOR THE REVENUE SUPPORTED THE ORDER OF LOWER AUTHORITIE S. THE LD. DR FURTHER SUBMITS THAT INVESTIGATION WING OF INCOME-T AX DEPARTMENT HAS MADE FULL-FLEDGED INVESTIGATION IN RESPECT OF H AWALA TRADERS. 7 ITA 5433/MUM/2018 CHIMANLAL K. BOKADIA THE HAWALA TRADERS WERE/ARE ENGAGED IN PROVIDING BO GUS 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 SUFFIC IENT RELIEF. THE ASSESSING OFFICER HAS REASONABLY ESTIMATED THE DISA LLOWANCES. 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 3.87% AND THE VAT APPLICABLE ON THE ALL EGED PURCHASES IN ALSO 4%. THEREFORE, CONSIDERING THE F ACT OF THE PRESENT CASE AND THE NATURE OF BUSINESS ACTIVITIES OF THE A SSESSEE AND BY FOLLOWING THE DECISION OF HONBLE BOMBAY HIGH COURT , WE DIRECT 8 ITA 5433/MUM/2018 CHIMANLAL K. BOKADIA THE ASSESSING OFFICER TO RESTRICT THE ADDITION WITH REGARD TO BOGUS PURCHASES BY BRINING THE GP RATE ON SUCH PURCHASES AT THE SAME RATE AS THAT OF OTHER GENUINE PURCHASES. NEEDLES TO SAY THAT BEFORE MAKING ADDITION, THE ASSESSING OFFICER SHALL GRANT OPPORTUNITY TO THE ASSESSEE BEFORE PASSING THE ORDER IN ACCORDANCE WITH LAW. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 14-10-2019. SD/- SD/- (SHAMIM YAHYA) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DT : 14 TH OCTOBER, 2019 PK/- COPY TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI