PREMJI MANSHI GALA, MUMBAI V. INCOME TAX OFFICER, WARD 3(2), MUMBAI

ITA 5521/MUM/2017

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 8636 (ITAT-MUMBAI)
• Duration Of Justice: 2 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-11-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 31-08-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N HEMALATHA
• Assessee Lawyers: RUCHI RATHOD
• Keywords: Bogus purchase; Rejection of books of accounts; Gift
• Section: 148

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI B.R. BASKARAN (AM) I.T.A. NO. 5521 /MUM/ 2017 (ASSESSMENT YEAR 20 09 - 10 ) I.T.A. NO. 5523/MUM/2017 (ASSESSMENT YEAR 2010 - 11) SHRI PREMJI MANSHI GALA 12, JAMES COTTAGE BUILDING CHANTALI MA IDAN NAUPADA, THANE W PIN 400 602. PAN : AAUPG3151A V S . ITO WARD 3(2) ROOM NO. 04 B WING, 6 TH FLOOR ASHAR I.T. PARK ROAD NO. 16Z AMBIKA NAGAR WAGLE INDUSTRIAL ESTATE THANE ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY MS. RUCHI RATHOD DEPARTMENT BY MS. N. HEMALATHA DATE OF HEARING 2 .1 1 . 201 7 DATE OF PRONOUNCEMENT 2 . 11 . 201 7 O R D E R BOTH THE APPEALS FILED BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDERS PASSED BY LD CIT(A) - 2, THANE AND THEY RELATE TO THE ASSESSMENT YEARS 2009 - 10 AND 2010 - 11. THE ASSESSEE IS AGGRIEVED BY THE DECISION OF LD CIT(A) IN PARTIALLY/FULLY CONFIRMING THE ADDITION RELATING TO BOGUS PURCHASES. 2. THE FACTS RELATING TO THE CASE ARE DISCUSSED IN BRIEF. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF TRADING IN STATIONERY ITEMS AND GIFT ARTICLES. CONSEQUENT TO THE INFORMATION RECEIVED FROM THE SALES TAX DEPARTMENT THAT CERTAIN PARTIES ARE ENGAGED IN THE BUSINESS OF PROVIDING ACCOMMODATION BILLS WITHOUT ACTUALLY SUPPLYING THE MATERIALS AND UPON NOTICING THAT THE ASSESSEE HAS PURCHASED GOODS FROM SOME OF SUCH PARTIES IN BOTH THE YEARS UNDER CONSIDERATION, THE AO REOPENED THE ASSESSMENT OF THESE YEARS BY ISSUING NOTICE U/S 148 OF THE ACT. IN AY 2009 - 10, THE AO ADDED ENTIRE PURCHASE AMOUNT OF SHRI PREMJI MANSHI GALA 2 RS.14.66 LAKHS. HOWEVER IN AY 2010 - 11, THE AO ESTIMATED PROFIT FROM THE SUSPICIOUS PURCHASES AT 12.50% AND ADDED THE SAME TO THE TOTAL INCOME. 3. IN AY 2009 - 10, THE LD CIT(A) NOTICED THAT THE GP RATE DECLARED BY THE ASSESSEE WAS 6.93% IN AY 2008 - 09 AND 17.53% IN AY 2010 - 11. HOWEVER IN AY 2009 - 10, THE ASSESSEE HAD DECLARED RATE OF GROSS PROFIT AT 3.97%. HENCE THE LD CIT(A) REJECTED THE BOOKS OF ACCOUNTS OF THE ASSESSEE AND PROPOSED TO ADOPT G.P RATE OF 10.60%, BEING THE DIFFERENCE OF G.P RATE DECLARED IN AY 2010 - 11 AND 2008 - 09. THE LD CIT(A) APPLIED THE G.P RATE OF 10.60% ON THE ENTIRE SALES OF THE ASSESSEE AND ACCORDINGLY SUSTAINED ADDITION TO THE EXTENT OF RS.6,58,981/ - AND DELETED THE ADDITION TO THE TUNE OF RS.8,07,342/ - . 4. IN AY 2010 - 11, THE LD CIT(A) UPHELD THE ORDER PASSED B Y THE AO IN ESTIMATING THE PROFIT FROM SUSPICIOUS PURCHASES AT 12.50%. 5. I HEARD THE PARTIES AND PERUSED THE RECORD. I NOTICE THAT THE ASSESSING OFFICER HAD DEPUTED HIS INSPECTOR TO LOCATE THE SUPPLIERS, BUT HE COULD NOT LOCATE THEM. THE AO ALSO A SKED THE ASSESSEE TO PRODUCE THE PARTIES BEFORE HIM, BUT THE ASSESSEE COULD NOT PRODUCE THEM. HENCE, IN MY VIEW, IT CANNOT BE SAID THAT THE ASSESSEE HAS CONCLUSIVELY PROVED THE GENUINENESS OF PURCHASES. IN THAT CASE, I AM OF THE VIEW THAT THE TAX AUTHORI TIES ARE JUSTIFIED IN ESTIMATING THE PROFIT FROM THE SUSPICIOUS PURCHASES. 6. THE LD A.R SUBMITTED THAT THE LD CIT(A) SHOULD NOT HAVE APPLIED THE G.P RATE ON ENTIRE VALUE OF SALES IN AY 2009 - 10, SINCE ONLY A PORTION OF PURCHASES HAVE BEEN SUSPECTED. I FIND MERIT IN THIS CONTENTION. I NOTICE THAT THE LD CIT(A) HAS ENHANCED THE GROSS PROFIT RATE BY 10.60%. IN AY 2010 - 11, THE TAX AUTHORITIES HAVE ESTIMATED THE PROFIT FROM SUSPICIOUS PURCHASES AT 12.50%, MEANING THEREBY, THEY HAVE ACCEPTED THE GENUINEN ESS OF SALES AND IT CANNOT BE SHRI PREMJI MANSHI GALA 3 DENIED THAT THE SALES CANNOT BE MADE WITHOUT MAKING CORRESPONDING PURCHASES. IN THIS VIEW OF MATTER ONLY, THE PROFIT HAS BEEN ESTIMATED AT 12.50% OF THE VALUE OF PURCHASES MADE IN AY 2010 - 11. THE BASIS IS THAT THE ASSESSEE D ID NOT PURCHASE FROM THE HAWALA PARTIES, BUT COULD HAVE SOURCED THE MATERIALS FROM GREY MARKET. 7. IN MY VIEW, IT WOULD BE JUSTIFIABLE TO ADOPT SAME METHODOLOGY TO ESTIMATE PROFIT FROM SUSPICIOUS PURCHASES IN BOTH THE YEARS, SINCE THE FACTS ARE IDENT ICAL IN BOTH THE YEARS. THE LD A.R SUBMITTED THAT THE VAT RATES APPLICABLE TO THE PRODUCTS DEALT BY THE ASSESSEE ARE 5% AND 12.50%. HENCE, IN MY VIEW, THE PROFIT ELEMENT MAY BE ESTIMATED IN BETWEEN THE TWO RATES AS IT WOULD TAKE CARE OF SAVINGS MADE BY W AY OF VAT TAX PLUS THE DISCOUNT, IF ANY, GOT BY THE ASSESSEE FROM THE PURCHASES MADE FROM GREY MARKET. ACCORDINGLY I MODIFY THE ORDERS PASSED BY LD CIT(A) IN BOTH THE YEARS AND DIRECT THE AO TO ESTIMATE THE PROFIT FROM THE VALUE OF SUSPICIOUS PURCHASES AT 10.60% IN BOTH THE YEARS. 8. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED. ORDER HAS BE EN PRONOUNCED IN THE COURT ON 2 .11 . 201 7. SD/ - (B.R.BASKARAN) ACCOUNTANT MEMBER MUMBAI ; DATED : 2 / 11 / 20 1 7 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// ( ASSTT. REGIST RAR /SENIOR PS ) PS ITAT, MUMBAI