KUNAL STEEL, MUMBAI V. ACIT -17(2), MUMBAI

ITA 5511/MUM/2018

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 4770 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-10-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 28-09-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SAMATHA MULLAMUDHI
• Keywords: Bogus purchase; Unexplained expenditure; Accommodation entries
• Section: 142(1); 143(2); 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH SMC, MUMBAI BEFORE SHRI SHAMIM YAHYA (AM) & SHRI PAWAN SINGH (JM) ITA NO. 5511/MUM/2018(ASSESSMENT YEAR: 2009-10) M/S KUNAL STEEL, 113, KANSARA STREET, DARUKHANA, 3 RD LANE, MUMBAI- 9 PAN : AAHFK2164J VS ACIT 17(2), MUMBAI APPELLANT RESPONDEDNT APPELLANT BY NONE RESPONDENT BY MS. SAMATHA MULLAMUDHI ( SR.DR) DATE OF HEARING 16-10-2019 DATE OF PRONOUNCEMENT 23-10-2019 O R D E R PER PAWAN SINGH, JM : 1. THIS APPEAL BY ASSESSEE IS DIRECTED AGAINST THE ORD ER OF LD. CIT(A)-57, MUMBAI DATED01.06.2018 FOR ASSESSMENT YEAR 2009-10. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: ' 1. THERE IS DELAY OF 2 DAYS IN FILING THE APPEAL. D ELAY OCCURRED DUE TO SATURDAY AND SUNDAY. THE 2 DAYS DELAY SHALL BE COND ONED. 2. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW THE LD CIT (APPEAL - 57) ERRED IN GIVING RELIEF OF 4.5% AND CA LCULATED THE INCOME @ 8% OF ALLEGED HAWALA PURCHASES. THE ADDITION SHALL BE DELETED. 3. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW THE LD CIT (APPEAL - 57) ERRED AND ALLOWED RELIEF ON GROSS PUR CHASES A/C I.E. INCLUDING TAXES; HOW EVE THE ASSESSEE HAVE DEBITED NET PURCHA SES TO THE PURCHASE A/C. THE DIRECTION SHALL BE GIVEN TO ACIT TO GIVE RELIEF ON NET PURCHASES. 4. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW THE LD CIT (APPEAL - 57) ERRED IN TREATING GENUINE PURCHASES A S UNEXPLAINED EXPENDITURE. THE UNEXPLAINED EXPENDITURE BE DELETED. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE, A PA RTNERSHIP FIRM DEALING IN IRON & STEEL ITEMS, FILED ITS RETURN OF INCOME F OR AY 2009-10 ON 15- 09-2010 DECLARING TOTAL INCOME AT RS.14,26,694/-. T HE RETURN WAS ITA NO. 5511/M/2018 KUNAL STEEL 2 INITIALLY PROCESSED AND ACCEPTED UNDER SECTION 143( 1). SUBSEQUENTLY, ON THE BASIS OF INFORMATION RECEIVED FROM THE DGIT( INV) THAT THE ASSESSEE WAS ONE OF THE PARTIES INVOLVED IN RECEIVI NG ACCOMMODATION ENTRIES FROM BOGUS / HAWALA DEALERS, THE ASSESSING OFFICER MADE A BELIEF THAT THE INCOME OF THE ASSESSEE ESCAPED ASSE SSMENT, THEREFORE, RE-OPENED THE ASSESSMENT UNDER SECTION 147. NOTICE UNDER SECTION 148 DATED 28.03.2016 WAS ISSUED AND SERVED UPON THE ASS ESSEE. THE ASSESSEE, VIDE LETTER DATED 25-04-2016 STATED TO CO NSIDER ORIGINAL RETURN FILED AS RETURN FILED IN RESPONSE TO NOTICE U/S 148. THE ASSESSING OFFICER AFTER SERVING NOTICE UNDER SECTIO N 143(2) / 142(1) DATED 26.08.2016 PROCEEDED FOR RE-ASSESSMENT. DURIN G THE ASSESSMENT, IT WAS FOUND THAT ASSESSEE HAD MADE PURCHASES OF RS .2,19,23,582/- FROM HANUMAN STEELS WHICH WAS THE SUSPICIOUS PURCHA SE. THE AR OF THE ASSESSEE WAS ACCORDINGLY ASKED TO PRODUCE THE E VIDENCE TO ESTABLISH THAT GOODS HAVE ACTUALLY BEEN DELIVERED / SUPPLIED. THE ASSESSEE WAS ALSO ASKED TO FURNISH ITS EXPLANATION ON THE PURCHASES PURPORTED TO HAVE MADE FROM THE AFORESAID PARTY AND THE DETAILS OF BROKERS / AGENTS THROUGH WHOM PURCHASES WERE CLAIME D TO HAVE BEEN MADE BY THE ASSESSEE INCLUDING NAME, ADDRESS, CONTA CT NUMBER, ETC TO PROVE THE GENUINENESS OF THE TRANSACTION. THE ASSE SSEE WAS ALSO SHOW CAUSED TO EXPLAINED WHY EXPENDITURE CLAIMED IN RESP ECT OF PURCHASES SHOWN TO HAVE MADE FROM THE AFORESAID DEALER SHOULD NOT BE ITA NO. 5511/M/2018 KUNAL STEEL 3 DISALLOWED. THE ASSESSEE EXPLAINED THAT THE PAYMEN TS WERE MADE BY ACCOUNT PAYEE CHEQUE. THE ASSESSING OFFICER, HOWEV ER, OBSERVED THAT PAYMENT MADE BY ACCOUNT PAYEE CHEQUE WAS NOT A FOOL PROOF METHOD OF SUBSTANTIATING THE ASSESSEES CLAIM AND WAS NOT SUFFICIENT TO ESTABLISH THE GENUINENESS OF THE PURCHASES. FOR TH IS PROPOSITION THE ASSESSING OFFICER PLACED RELIANCE ON THE JUDGEMENT OF HONBLE SUPREME COURT IN THE CASE OF KACHWAL GEMS VS JT.CIT (2007) 288 ITR 10 (SC). THE ASSESSING OFFICER AFTER CONSIDERI NG THE MATERIAL BEFORE HIM CONCLUDED D THAT THE ASSESSEE HAS SUPPRE SSED PROFIT TO THE TUNE OF RS.27,40,448/- BEING 12.5% OF NON GENUINE P URCHASES OF RS.2,19,23,592/- AND THE SAME WAS ACCORDINGLY ADDED TO THE TOTAL INCOME. ON APPEAL, THE LD.CIT(A), ON FINDING THAT T HE GP ADOPTED BY THE ASSESSING OFFICER ON THE ALLEGED BOGUS PURCHASE S EXCESSIVE, REDUCED THE ADDITION TO THE EXTENT OF 8% OF ALLEGED BOGUS PURCHASES. FURTHER AGGRIEVED, THE ASSESSEE FILED THIS APPEAL. 3. BEFORE US, NONE APPEARED ON BEHALF OF THE ASSESSEE. THE NOTICE OF HEARING SENT THROUGH RPAD WAS RETURNED BY THE POSTA L AUTHORITY WITH THE REMARK, NOT FOUND. THEREFORE, WE LEFT NO OP TION EXCEPT TO HEAR THE SUBMISSIONS OF THE LEARNED DEPARTMENTAL REPRESE NTATIVE ( LD. DR) FOR THE REVENUE, WHO SUPPORTED THE ORDER OF THE ASS ESSING OFFICER AND SUBMITTED THAT THE LD. CIT(A) HAS ALREADY GRANTED S UFFICIENT RELIEF TO THE ASSESSEE IN DIRECTING THE ASSESSING OFFICER TO RESTRICT THE ADDITION TO ITA NO. 5511/M/2018 KUNAL STEEL 4 THE EXTENT OF 8% OF ALLEGED BOGUS PURCHASES. THE AS SESSEE IS ONE OF THE BENEFICIARIES OF THE PURCHASES MADE FROM THE HA WALA DEALERS, WHICH WERE INDULGED IN PROVIDING THE BOGUS BILLS WI THOUT DELIVERY OF THE GOODS OR MATERIAL. 4. WE HAVE CONSIDERED THE SUBMISSIONS OF THE LD. DR AN D PERUSED THE MATERIAL AVAILABLE ON RECORD. DURING THE ASSESSMENT THE ASSESSING OFFICER MADE DISALLOWANCES OF PURCHASES @ 12.5% OF THE AGGREGATE OF THE ALLEGED PURCHASED SHOWN FROM THE IMPUGNED/ HAWA LA DEALERS BY TAKING VIEW THAT ONLY ESTIMATED PROFIT ON SUCH PURC HASES IS LIABLE TO BE DISALLOWED. ON APPEAL THE LD.CIT (A) FOUND THAT SI NCE PURCHASES WERE AND CORRESPONDING SALES WERE ALSO MADE, THE AS SESSING OFFICER HAS NOT DOUBTED THE SALES. THE SALES ARE NOT POSSIB LE WITHOUT THE PURCHASES. THE ASSESSEE HAS SHOWN GROSS PROFIT (GP) @ 4.28%, WHICH IS REASONABLE IN THE TRADE OF THE ASSESSEE. THE LD CIT(A) AFTER CONSIDERING THE GP DECLARED BY THE ASSESSEE DIRECTE D THE ASSESSING OFFICER TO REDUCE THE GP ALREADY DECLARED BY THE AS SESSEE AND THEREBY DIRECTED THE ASSESSING OFFICER TO ESTIMATE THE GP @ 8% AND GRANTED RELIEF TO THE ASSESSEE. 5. WE HAVE EXAMINED THE FACTS OF THE PRESENT CASE INDE PENDENTLY. THE ASSESSING OFFICER DISALLOWED 12.5% OF THE IMPUGNED PURCHASES. THE LD CIT(T), WHILE GRANTING RELIEF TO THE ASSESSEE HAS E STIMATED THE OVERALL GP OF ASSESSEE @ 8%. THEREFORE, IS NO CONSIDERATION OF THE FACTS ON ITA NO. 5511/M/2018 KUNAL STEEL 5 RECORD ABOUT THE TOTAL TURNOVER OF THE ASSESSEE. TH E LD CIT(A) WHILE ESTIMATING THE GP TO 8% HAS NOT BROUGHT THE FACTS, IF THE ASSESSEE HAS SHOWN OTHER PURCHASES, WHICH WERE ACCEPTED AS GENUI NE. 6. WE HAVE NOTED THAT ON SIMILAR SET OF FACT, THE HON BLE BOMBAY HIGH COURT IN PCIT VS. M HAJI ADAM & CO. (ITA NO. 1004 O F 2016 DATED 11.02.2019) HELD THAT ADDITION IN RESPECT OF BOGUS PURCHASE BE LIMITED TO THE EXTENT OF BRINGING THE GP RATE ON BO GUS PURCHASE AT THE SAME RATE AS OTHER GENUINE PURCHASES. WE HAVE F URTHER NOTED THAT THE ASSESSEE HAS SHOWN GP OF 4.28. THEREFORE, CONSIDERING THE FACT OF THE PRESENT CASE AND THE NATURE OF BUSINESS ACTIVITIES OF THE ASSESSEE AND BY FOLLOWING THE DECISION OF HONBLE B OMBAY HIGH COURT, WE DIRECT 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 ORDE R IN ACCORDANCE WITH LAW. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS PART LY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 23-10-20 19. SD/- SD/- (SHAMIM YAHYA) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIALMEMBER MUMBAI, DT : 23 OCTOBER, 2019 PK/- ITA NO. 5511/M/2018 KUNAL STEEL 6 COPY TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR /TRUE COPY/ BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI