MEHTA TRADING CORPORATION, MUMBAI V. ACIT - 24 (2), MUMBAI

ITA 5439/MUM/2018

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 4665 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 20 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: 2011-2012
• Appeal Filed On: 24-09-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SAMASTHA MULLAMADI
• Keywords: Bogus purchase
• Section: 143(3); 142(1); 133(6); 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. 5439/MUM/2018(ASSESSMENT YEAR : 2011-12) M/S MEHTA TRADING CORPORATION, R 141F, GRD P 139/7, VRINDAWAN CHAWL LAKDI BUNDER ROAD, DARUKHANA, MAZGAON, MUMBAI-400 010 PAN : AAAFM2829F VS ACIT 24(2), MUMBAI APPELLANT RESPONDEDNT APPELLANT BY NONE RE SPONDENT 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)-36, MUMBAI DATED 30.05.2018 FOR ASSESSME NT YEAR 2011-12. THE ASSESSEE HAS RAISED THE FOLLOWING GRO UNDS OF APPEAL: 1) THE COMMISSIONER OF INCOME TAX (APPEAL) - 36, M UMBAI [HEREINAFTER REFERRED AS CIT(A)] ERRED IN CONFIRMING THE ADDITIO N OF RS. 9,97,9427- BEING 12.5% OF ALLEGED BOGUS PURCHASES OF RS. 79,83,9427- MADE BY THE APPELLANT. THE APPELLANT SUBMITS THAT (I) IT HAS ACTUALLY BOUG HT THE MATERIALS (II) MADE THE PAYMENT TOWARDS MATERIALS BOUGHT THROUGH BANKIN G CHANNEL (III) MATERIAL BOUGHT HAS BEEN SOLD AND ACCOUNTED IN THE BOOKS OF THE APPELLANT WHICH HAS BEEN ACCEPTED BY THE AO. THEREFORE, UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE, THE APPELLANT PRAYS THAT THE ADDITION MADE BY THE AO AND CONFIRMED BY THE CIT(A) SHALL BE DELETED. 2) IN THE ALTERNATIVE AND WITHOUT PREJUDICE TO THE ABOVE, THE CIT(A) ERRED IN CONFIRMING THE ADDITION 9,97,9427- BEING 12.5% OF A LLEGED BOGUS PURCHASES 2 ITA 5439/MUM/2018 MEHTA TRADING CORPORATION MADE BY THE APPELLANT WITHOUT APPRECIATING THE FACT THAT THE APPELLANT ITSELF HAS DECLARED GROSS PROFIT @ 11.44% ON THE ALLEGED B OGUS PURCHASES. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FIRM IS ENGAGED IN THE BUSINESS OF TRADING OF FERROUS AND NON FERROUS STEE L, FILED RETURN OF INCOME FOR AY 2011-12 ON 24-08-2010 DECLARING TOTAL INCOME AT RS.18,72,940 /-. THE RETURN OF INCOME WAS PROCESSED 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 OPERA TORS ARE 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. 78,83,540/- 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 U/S 148 DATED 16.03.2015 WAS SERVED ON THE ASSESSEE. REASONS RECORDED WERE ALS O SUPPLIED TO THE ASSESSEE. THE ASSESSING OFFICER AFTER SERVING NOTIC ES UNDER SECTION 143(2) AND 142(1) PROCEEDED FOR RE-ASSESSMENT. DURI NG THE 3 ITA 5439/MUM/2018 MEHTA TRADING CORPORATION 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 SHREE NAVDURGA STEEL TRADERS 79,83,540 TOTAL 79,83,540 3. IN ORDER TO VERIFY THE TRANSACTION, THE ASSESSING O FFICER ISSUED NOTICE UNDER SECTION 133(6) TO THE PARTY. THE NOTICE WAS R ETURN BACK UNSERVED BY THE POSTAL AUTHORITIES. THE ASSESSEE WA S 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 ASSESSEE FILED ITS EXPLANATION AND FURNISHED THE CO PY OF LEDGER ACCOUNT AND PROOF OF PAYMENT THROUGH CHEQUES. THE A SSESSING OFFICER NOT ACCEPTED THE EXPLANATION FURNISHED BY A SSESSEE AND NOTED THAT THE ASSESSEE HAS NOT PRODUCED LORRY RECE IPT, TRANSPORTATION DETAILS ETC. THE ASSESSING OFFICER AFTER CONSIDERING THE MATERIAL AVAILABLE BEFORE HIM AND THE SUBMISSIO N MADE BY ASSESSEE CONCLUDED THAT THE ASSESSEE WAS IN POSSESS ION OF GOODS AND HAS SHOWN THE SALE AGAINST THE PURCHASES. THE SALE IS NOT POSSIBLE WITHOUT PURCHASES. THE ASSESSING OFFICER CONCLUDED THAT THE ASSESSEE MAY HAVE PURCHASED GOODS FROM OTHER SUPPLI ERS WITHOUT 4 ITA 5439/MUM/2018 MEHTA TRADING CORPORATION 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 16.03.2016 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 L D. CIT(A), THE ASSESSEE HAS FILED THE PRESENT APPEAL BEFORE US. 5. NONE APPEARED BEFORE US, WHEN THE APPEAL WAS TAKEN FOR HEARING, DESPITE THE FACT THAT NOTICE SENT THROUGH REGISTERE D POST WITH ACKNOWLEDGEMENT CARD (RPAD). THUS, WE LEFT NO OPTI ON, EXCEPT THE HEAR THE SUBMISSIONS OF THE LD. DR AND TO DECID E THE APPEAL ON THE BASIS OF MATERIAL AVAILABLE ON RECORD. THE LD . DR SUBMITTED THAT THE INVESTIGATION WING OF INCOME-TAX DEPARTMEN T 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 5 ITA 5439/MUM/2018 MEHTA TRADING CORPORATION HAS REASONABLY ESTIMATED THE DISALLOWANCES. THE ASS ESSEE IS NOT ENTITLED FOR ANY FURTHER RELIEF. 6. WE HAVE CONSIDERED THE SUBMISSION OF LD DR FOR THE REVENUE AND GONE THROUGH THE RECORD CAREFULLY. THE SHORT ISSUE FOR OUR ADJUDICATION IS WHETHER THE DISALLOWANCE OF ALLEGED BOGUS PURCHASE @ 12.5% IS REASONABLE OR NOT. WE HAVE NOTED THAT TH E ASSESSEE IN THE GROUNDS OF APPEAL HAS MENTIONED THAT THE ASSESS EE HAS DECLARED GROSS PROFIT (GP) @ 11.44%. THE HONBLE JURISDICTI ONAL HIGH COURT IN M HAJI ADAM & CO. IN ITA NO. 1004 OF 2016 DATED 11.02.2019 HELD THAT ADDITION IN RESPECT OF BOGUS P URCHASE TO BE LIMITED TO THE EXTENT OF BRINGING THE GP RATE ON BO GUS PURCHASE AT THE SAME RATE AS OTHER GENUINE PURCHASES. 7. 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 PURCHASE S BY BRINGING THE GP RATE ON SUCH PURCHASES AT THE SAME RATE AS THAT OF OTHER GENUINE PURCHASES. NEEDLES TO SAY THAT BEFORE MAKING ADDITI ON, THE ASSESSING OFFICER SHALL GRANT OPPORTUNITY TO THE AS SESSEE BEFORE PASSING THE ORDER IN ACCORDANCE WITH LAW. 6 ITA 5439/MUM/2018 MEHTA TRADING CORPORATION 8. 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 JUDICIALMEMBER MUMBAI, DT : 14 TH OCTOBER, 2019 PK/- COPY TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR /TRUE COPY/ BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI