HANWANTRAJ A. JAIN (HUF), MUMBAI V. ITO - WD- 19 (1)(5), MUMBAI

ITA 5515/MUM/2018

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 3675 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-11-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2008-2009
• Appeal Filed On: 28-09-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SAMATHA MULLAMUDHI
• Keywords: Bogus purchase; Principle of natural justice; Accommodation entries; Reason to believe
• Section: 142(1); 234B; 143(1); 143(2); 147; 148

Judgement Text

1 ITAS 5515 & 5516/MUM/2018 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH SMC, MUMBAI BEFORE SHRI SHAMIM YAHYA (AM) & SHRI PAWAN SINGH (JM) ITA NO. 5515 & 5516/MUM/2018(AYS : 2008-09 & 2009- 10) HANWANTRAJ A JAIN (HUF) SONU METAL DISTRIBUTORS, 11/13, CHANDRA BHAVAN BLDG 1 ST PARSIWADA LANE, V.P. ROAD, MUMBAI-400 004 PAN : AAAHH0055E VS ITO, WD.19(1)(5), MUMBAI APPELLANT RESPONDEDNT APPELLANT BY SHRI VIMAL PUNMIYA RESPONDENT BY MS. SAMATHA MULLAMUDHI (DR) DATE OF HEARING 16-10-2019 DATE OF PRONOUNCEMENT 01-11-2019 O R D E R PER PAWAN SINGH, JM : 1. THESE APPEALS BY ASSESSEE ARE DIRECTED AGAINST THE IDENTICAL ORDERS OF LD. CIT(A)-29, MUMBAI BOTH DATED 18-04-2016 FOR AS SESSMENT YEARS 2008-09 & 2009-10. IN BOTH THE APPEALS, THE ASSESSE E HAS RAISED IDENTICAL GROUNDS OF APPEAL EXCEPT VARIATION OF FIG URE. FACTS FOR BOTH THE ASSESSMENT YEARS ARE IDENTICAL EXCEPT VARIATION OF ALLEGED BOGUS PURCHASES AND DISALLOWANCES THEREOF @ 12.5% OF SUCH PURCHASES. THEREFORE, BOTH THE APPEALS WERE CLUBBED, HEARD TOG ETHER AND ARE DECIDED BY COMMON ORDER. FOR APPRECIATION OF FACTS IN APPEAL FOR ASSESSMENT YEAR 2008-09 WAS TREATED AS LEAD CASE. I N APPEAL FOR ASSESSMENT YEAR 2008-09, THE ASSESSEE HAS RAISED TH E FOLLOWING GROUNDS OF APPEAL: 2 ITAS 5515 & 5516/MUM/2018 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW THE LD CIT(A) ERRED IN CONFIRMING THE INITIATION OF THE REASSESSM ENT PROCEEDING UNDER SECTION 147. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD CIT(A) FAILED TO CONSIDER THAT REASSESSMENT PROCEEDING CAN NOT BE INITIATED. A) NO REASSESSMENT CAN BE MADE JUST TO MAKE AN EN QUIRY OR VERIFICATION. B| REASSESSMENT PROCEEDING CANNOT BE INITIATE MER ELY ON THE INFORMATION RECEIVED FROM INVESTIGATION WING. C) REASSESSMENT PROCEEDING CANNOT BE INITIATED WH EN THE LD. CIT(A) HAVE REASON TO SUSPECT AND NOT REASON TO BELIEVE. 3. ON THE FACTS AND CIRCUMSTANCES OF CASE AND LAW THE LD CIT(A) ERRED IN CONFIRMING THE ASSESSMENT ORDER UNDER SECTION 143 S UB SECTION 3 R W S 147 OF INCOME TAX ACT WHICH IS PASSED AGAINST THE PRINC IPAL OF NATURAL JUSTICE. 4. THE LD CIT(A) ERRED IN CONFIRMING AND TREATING RS.1 ,97,470/- BEING 12.5 PERCENT OF THE TOTAL PURCHASES OF RS. 15,79,76 0/- AS BOGUS NON- GENUINE EXPENDITURE AND THEREBY ERRED IN ADDING THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. 5 THE LD. CIT(A) ERRED IN CONFIRMING THE CHARGIN G OF INTEREST UNDER SECTION 234A, 234B 234C AND 234D OF THE INCOME TAX ACT 1961. 6. THE LD. CIT(A) ERRED IN CONFIRMING THE INITIAT ION OF THE PENALTY PROCEEDING UNDER SECTION 271(1 )(C) OF THE INCOME T AX ACT 1961. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE, PROP RIETOR OF M/S SONU METAL DISTRIBUTORS AND IS DEALING IN FERROUS AND NO N-FERROUS METALS, FILED ITS RETURN OF INCOME FOR AY 2008-09 ON 11-09- 2008 DECLARING TOTAL INCOME AT RS.9,10,770/-. THE RETURN OF INCOME WAS PROCESSED UNDER SECTION 143(1) AND WAS ACCEPTED ON RETURNED I NCOME. SUBSEQUENTLY, THE CASE WAS REOPENED ON THE BASIS OF INFORMATION RECEIVED FROM THE DGIT (INV) THAT THE ASSESSEE WAS ONE OF THE PARTIES 3 ITAS 5515 & 5516/MUM/2018 INVOLVED IN RECEIVING ACCOMMODATION ENTRIES FROM BO GUS / HAWALA DEALERS, THE ASSESSING OFFICER MADE A BELIEF THAT T HE INCOME OF THE ASSESSEE ESCAPED ASSESSMENT. NOTICE UNDER SECTION 1 48 DATED 16.03.2015 WAS ISSUED AND SERVED UPON THE ASSESSEE. THE ASSESSEE, VIDE LETTER DATED 04-03-2016 STATING TO CONSIDER O RIGINAL RETURN FILED AS RETURN FILED IN RESPONSE TO NOTICE U/S 148. THE AS SESSING OFFICER AFTER SERVING NOTICE UNDER SECTION 143(2) / 142(1) DATED 04-03.2016 PROCEEDED FOR RE-ASSESSMENT. DURING THE ASSESSMENT, IT WAS FOUND THAT ASSESSEE HAD MADE PURCHASES OF RS.15,79,760/- FROM SHREE SUNDHA STEELS PVT LTD WHICH WAS THE SUSPICIOUS PURCHASE. T HE AR OF THE ASSESSEE WAS ACCORDINGLY ASKED TO PRODUCE THE EVIDE NCE TO ESTABLISH THAT GOODS HAVE ACTUALLY BEEN DELIVERED / SUPPLIED. THE ASSESSEE WAS ALSO ASKED TO FURNISH ITS EXPLANATION ON THE PURCHA SES PURPORTED TO HAVE MADE FROM THE AFORESAID PARTY AND THE DETAILS OF BROKERS / AGENTS THROUGH WHOM PURCHASES WERE CLAIMED TO HAVE BEEN MA DE BY THE ASSESSEE INCLUDING NAME, ADDRESS, CONTACT NUMBER, E TC TO PROVE THE GENUINENESS OF THE TRANSACTION. THE ASSESSEE WAS A LSO SHOWCAUSED TO EXPLAINE WHY EXPENDITURE CLAIMED IN RESPECT OF PURC HASES SHOWN TO HAVE MADE FROM THE AFORESAID DEALER SHOULD NOT BE D ISALLOWED. THE ASSESSEE EXPLAINED THAT THE PAYMENTS WERE MADE BY A CCOUNT PAYEE CHEQUE. SIMILARLY DETAILS OF CORRESPONDING SALES O F GOODS WERE ALSO 4 ITAS 5515 & 5516/MUM/2018 CALLED FOR AND TO LINK THE PURCHASE WITH SALES SUPP ORTED BY BILLS AND VOUCHERS AND REFLECTION IN THE STOCK REGISTER OF IT S ENTRY AND EXIT ITEM BY ITEM. THE ASSESSEE WAS ALSO ASKED TO PRODUCE BO OKS OF ACCOUNTS, BILLS AND VOUCHERS FOR VERIFICATION. THE ASSESSING OFFICER OBSERVED THAT THOUGH FEW DETAILS WERE FURNISHED, BUT IT COULD NOT LINK THE PURCHASES WITH CORRESPONDING SALES AND BOOKS OF ACCOUNT WERE ALSO NOT PRODUCED FOR VERIFICATION AND HENCE NO VERIFICATION COULD BE MADE. THEREFORE, AFTER ANALYSIS OF FACTS OF THE GIVEN CASE AS DISCUS SED ABOVE, HE HELD THAT 12.5% WAS THE QUANTUM OF PROFIT ELEMENT INVOLV ED ON ACCOUNT OF NON-GENUINE PURCHASE OF RS.15,79,760/-, WOULD MEET THE ENDS OF JUSTICE. ACCORDINGLY, AN AMOUNT OF RS.1,97,470/- W AS DISALLOWED AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 3. ON APPEAL, THE LD.CIT(A) FOUND THE DISALLOWANCE AT 12.5% ON THE ALLEGED BOGUS PURCHASES TO BE REASONABLE. THEREFOR E, HE UPHELD THE ADDITION. FURTHER AGGRIEVED, THE ASSESSEE FILED TH IS APPEAL. 4. WE HAVE HEARD THE SUBMISSIONS OF THE LEARNED AUTHOR ISED REPRESENTATIVE (AR) OF THE ASSESSEE AND THE LEARNED DEPARTMENTAL REPRESENTATIVE (DR) FOR THE REVENUE. THE LD AR FOR THE ASSESSEE SUBMITS THAT THE ASSESSEE FURNISHED THE ENTIRE EVID ENCES TO SUBSTANTIATE THE GENUINENESS OF THE PURCHASES. THE ASSESSING OFF ICER HAS NOT DISCUSSED THE EVIDENCES FURNISHED BY THE ASSESSEE. NO INVESTIGATION 5 ITAS 5515 & 5516/MUM/2018 WAS CONDUCTED BY THE ASSESSING OFFICER. THE ASSESSI NG OFFICER VAGUELY HELD THAT THE ASSESSEE FURNISHED FEW DETAILS AND CO ULD NOT LINK THE PURCHASES. THE LD CIT(A) CONFIRMED THE ACTION OF TH E ASSESSING OFFICER THAT THE DISALLOWANCE IS REASONABLE. THE LD AR FOR THE ASSESSEE SUBITS THAT THE ASSESSEE HAS ALREADY SHOWN GP OF 4.43% ON GENUINE PURCHASES. IT WAS ARGUED THAT THE GP ON ALLEGED NON -GENUINE IS ONLY 3.91% ONLY. THE LD. AR OF THE ASSESSEE FURTHER SUBM ITS THAT THE HONBLE BOMBAY HIGH COURT IN A RECENT DECISION ON S IMILAR SET OF FACT IN PCIT VS. M HAJI ADAM & CO. IN ITA NO. 1004 OF 20 16 DATED 11.02.2019 HELD THAT ADDITION IN RESPECT OF BOGUS P URCHASES IS TO BE LIMITED TO THE EXTENT OF BRINGING THE GP RATE ON SU CH PURCHASE AT THE SAME RATE AS ON OTHER GENUINE PURCHASES. THE LD. AR OF THE ASSESSEE SUBMITS THAT THE DISALLOWANCE OF ALLEGED BOGUS PURC HASE MAY BE RESTRICTED IN ACCORDANCE WITH THE DECISION OF HONB LE JURISDICTIONAL HIGH COURT IN PCIT VS. M HAJI ADAM & CO. (SUPRA). 5. 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 6 ITAS 5515 & 5516/MUM/2018 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. 6. 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 RELIED UP ON THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN M HAJI ADAM & CO.(SUPRA). WE HAVE NOTED THAT ON SIMILAR SET OF FACT, THE HONBLE BOMBAY HIGH COURT IN PCIT VS. M HAJI ADAM & CO. (SUPRA) HELD THAT ADD ITION IN RESPECT OF BOGUS PURCHASE BE LIMITED TO THE EXTENT OF BRING ING THE GP RATE ON BOGUS PURCHASE AT THE SAME RATE AS OTHER GENUINE PU RCHASES. WE HAVE FURTHER NOTED THAT THE ASSESSEE HAS SHOWN GP OF 4.4 3% ON GENUINE PURCHASES. IT WAS ARGUED THAT THE GP ON ALLEGED NON -GENUINE IS ONLY 3.91%. THEREFORE, CONSIDERING THE FACT OF THE PRES ENT CASE AND THE NATURE OF BUSINESS ACTIVITIES OF THE ASSESSEE AND B Y FOLLOWING THE DECISION OF HONBLE BOMBAY HIGH COURT, WE DIRECT TH E ASSESSING OFFICER TO RESTRICT THE ADDITION WITH REGARD TO BOG US PURCHASES BY BRINING THE GP RATE ON SUCH PURCHASES AT THE SAME R ATE AS THAT OF OTHER GENUINE PURCHASES. NEEDLES TO SAY THAT BEFORE MAKIN G ADDITION, THE 7 ITAS 5515 & 5516/MUM/2018 ASSESSING OFFICER SHALL GRANT OPPORTUNITY TO THE AS SESSEE BEFORE PASSING THE ORDER IN ACCORDANCE WITH LAW. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALL OWED. ITA NO.5516/MUM/2018 (AY 2009-10) 8. THE FACTS AND CIRCUMSTANCES IN THIS APPEAL RUN PARA MATERIA TO THE APPEAL FOR ASSESSMENT YEAR 2008-09 IN ITA NO.5515/M UM/2018, WHICH WE HAVE ALREADY DECIDED ABOVE. THE GROUNDS O F APPEAL RAISED IN THIS APPEAL ALSO IDENTICAL TO APPEAL FOR AY 2008 -09. THEREFORE, THE DECISION ARRIVED AT AGAINST APPEAL FOR AY 2008-09 A PPLIES MUTATIS MUTANDIS TO THIS APPEAL ALSO. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALL OWED. 10. AS A RESULT, BOTH THE APPEALS FILED BY THE ASSESSEE ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 01-11-2019. SD/- SD/- (SHAMIM YAHYA) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIALMEMBER MUMBAI, DT : 1 ST NOVEMBER, 2019 PK/- COPY TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI 8 ITAS 5515 & 5516/MUM/2018 DATE INITIAL 1. DRAFT DICTATED ON 1 7 - 1 0 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 22 - 1 0 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. 5. APPROVED DRAFT COMES TO THE SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON 7. FILE SENT TO THE BENCH CLERK 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER. 11. DRAFT DICTATION SHEETS ARE ATTACHED SR.PS