SHIVJI PARBAT PATEL, MUMBAI V. ITO WARD 19 (3)(3), MUMBAI

ITA 551/MUM/2020

• Counselvise Citation: [2021] 104 COUNSELVISE.COM (IT) 7211 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-11-2021
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: G
• Assessment Year: 2009-2010
• Appeal Filed On: 22-01-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: AMIT JHAVERI
• Keywords: Bogus purchase; Accommodation entries
• Section: 147; 148; 142(1); 37(1); 143(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (VIRTUAL COURT) “E” BENCH, MUMBAI BEFORE SHRI S. RIFAUR RAHMAN, HON'BLE ACCOUNTANT MEMBER AND SHRI RAVISH SOOD, HON'BLE JUDICIAL MEMBER ITA NO. 551/MUM/2020 (A.Y: 2009-10) Shri Shivji P. Patel Room No. 32, Motiwala Jublkee Baug Near Tardeo, Grant Road (E) Mumbai – 400007 PAN: AAFPP3647R v. Income Tax Officer – 19(3)(3) Room No. 216, 2 nd Floor Matru Mandir, Tardev Road Mumbai – 400 007 (Appellant) (Respondent) Assessee by : Shri Amit Jhaveri Department by : Shri B.K. Bagchi Date of Hearing : 13.10.2021 Date of Pronouncement : 30.11.2021 O R D E R PER S. RIFAUR RAHMAN, AM 1. This appeal is filed by the assessee against order of the Learned Commissioner of Income Tax (Appeals)–30, Mumbai [hereinafter in short “Ld.CIT(A)”] dated 27.09.2019 for the A.Y. 2009-10. 2. Brief facts of the case are that, return of income for the A.Y.2009-10 was originally filed on 29.09.2009 declaring total income at 2 ITA NO. 551/MUM/2020 (A.Y: 2009-10) Shri Shivji P. Patel ₹.4,79,960/- and the return was processed u/s. 143(1) of the Income-tax Act, 1961 (in short “Act”). Subsequently the case was reopened u/s. 147 of the Act by issue of notice u/s. 148 of the Act after recording reasons. The assessee vide his letter dated 17.12.2015 had requested to treat the return originally filed in response to the notice u/s. 148 of the Act. Subsequently notice u/s. 142(1) of the Act was issued and served on the assessee along with questionnaire. Assessee engaged in the business of counter retail sale of computer and computer related peripheral products/parts. The Assessing Officer received information from DGIT (Investigation), Mumbai based on the information received from Sales Tax Department, Government of Maharashtra about the dealers who are indulging in the practice of providing accommodation entries in the form of issuing bogus purchases without sales. Based on the above information Assessing Officer observed that assessee has availed accommodation entries from the 14 parties during this year to the extent of ₹.1,58,70,426/-. Based on the information submitted by the assessee, Assessing Officer rejected the information and contentions of the assessee and treated the purchases made from the parties as non-genuine and proceeded to estimate the profit element at 12.5% of the non-genuine purchases, disallowed ₹.19,83,804/-. Aggrieved assessee preferred an appeal before the Ld.CIT(A) and filed detailed submissions along with 3 ITA NO. 551/MUM/2020 (A.Y: 2009-10) Shri Shivji P. Patel various case laws. After considering the detailed submissions of the assessee, Ld.CIT(A) agreed with the finding of the Assessing Officer that these are non-genuine purchases and not convinced with the estimation of income adopted by the Assessing Officer. Accordingly, issued notice for enhancement u/s. 251(1)(a) of the Act and served on the assessee. Since there was no compliance to the notice of enhancement, Ld.CIT(A) proceeded to sustain 100% of the non-genuine purchases with the following observation: - “6.12 The assessee-appellant did not avail the opportunities provided of being heard. The findings of the Ld.AO with respect to purchases have not been rebutted; no further material was brought on record during appellate proceedings to substantiate the purchases held to be bogus by the Ld.AO. Mere filing of paper book without explaining the contents therein cannot tantamount to rebuttal. In the light of the above facts, there is no merit in the appeal. The grounds of appeal no 1 with respect to the addition by the Ld AO estimating the income to be 12.5 percent of the bogus purchases is dismissed. The income is enhanced to Rs. 1,58,70,426/being 100% of such purchases claimed as expenses in the Profit & Loss account, disallowed u/s 37(1) as it does not satisfy the conditions specified therein. Consequently, the income assessed by the AO, being 12.5% of the bogus purchases of Rs.19,83,804/- is enhanced to Rs. 1,58,70,426/-.” 3. Considered the rival submissions and material placed on record, we noticed that assessee has filed written submissions and filed purchases register, sales register, stock register, various ledger of parties, bank statement, purchase invoices and sales invoices and prayed that the purchases are genuine and submitted that Ld.CIT(A) is wrong to sustain 4 ITA NO. 551/MUM/2020 (A.Y: 2009-10) Shri Shivji P. Patel the whole purchases and even if the purchases are to be treated as non-genuine, Ld. AR submitted that assessee has sold materials, without there being purchases, sales cannot be completed. On alternative ground assessee prayed that by relying on Coordinate Bench decisions in the case of Milan K. Shah v. ITO in ITA.No. 5161/Mum/2018 dated 19.09.2019 and M/s. Reliable Ball Bearing Stores v. ITO in ITA.No. 8026/Mum/2019 dated 07.06.2021 in which the additions were sustained at 5% of the non- genuine purchases. 4. After considering the material placed on record we noticed that the Assessing Officer and the Ld.CIT(A) came to the conclusion that the purchases made by the assessee are non-genuine and Assessing Officer has considered all the information available on record and came to the conclusion that the income of the assessee should be estimated considering the fact assessee has sold the materials purchased from gray market. On the other hand, Ld.CIT(A) rejected the same and sustained the 100% of the non-genuine purchases by relying on certain case law overlooking the fact that the Hon'ble High Courts including Hon'ble Jurisdictional High Court has held that when the non-genuine purchases are supported by onward sales, only the profit element has to be disallowed and bring to tax, not the whole purchases. Therefore, we are 5 ITA NO. 551/MUM/2020 (A.Y: 2009-10) Shri Shivji P. Patel not in agreement with the finding of the Ld.CIT(A) and accordingly we are in agreement with the finding of the Assessing Officer. Coming to the submissions of the assessee that the income should be estimated only to the extent of 5% by relying on decision of the Coordinate Bench we observe that the Coordinate Bench has sustained the addition at 5% of the non-genuine purchases considering the fact that the respective assessees were in the business of iron and steel whereas in the present case the assessee is into computer and related peripherals business. Therefore, in our considered view the addition made by the Assessing Officer is proper and reasonable, accordingly appeal filed by the assessee is partly allowed. 5. In the result, appeal filed by the assessee is partly allowed. Order pronounced on 30.11.2021 as per Rule 34(4) of ITAT Rules by placing the pronouncement list in the notice board. Sd/- Sd/- (RAVISH SOOD) (S. RIFAUR RAHMAN) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai / Dated 30.11.2021 Giridhar, Sr.PS 6 ITA NO. 551/MUM/2020 (A.Y: 2009-10) Shri Shivji P. Patel Copy of the Order forwarded to: 1. The Appellant 2. The Respondent. 3. The CIT(A), Mumbai. 4. CIT 5. DR, ITAT, Mumbai 6. Guard file. //True Copy// BY ORDER (Asstt. Registrar) ITAT, Mum