MR.PUNIT MALHOTRA, MUMBAI V. INCOME TAX OFFICER WARD 17(2)5, MUMBAI

ITA 5537/MUM/2018

• Counselvise Citation: [2019] 111 COUNSELVISE.COM (IT) 9494 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-11-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 01-10-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AKHTAR HANSARI
• Assessee Lawyers: J P PUROHIT
• Keywords: Bogus purchase; Set aside
• Section: 143(3); 142(1); 201; 143(2); 148; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES SMC , MUMBAI BEFORE S HRI S. RIFAUR RAHMAN (AM ) AND SHRI RAM LAL NEGI (JM) ITA NO. 5537 /MUM/2018 ASSESSMENT Y EAR: 2010 - 11 MR. PUNIT MALHOTRA, PUNIT SALES CORPORATION, 39/43, 3 RD FLOOR, M.K. MARG, CHURC HGATE, MUMBAI - 400020 PAN: AGIPM0375L VS. THE INCOME TAX OFFICER, WARD 17(2) 5, AAYAKAR BHAVAN, 1 ST FLOOR, M.K. MARG, CHURCHGATE, MUMBAI - 400020 (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI J.P. PUROHIT (A R) REVENUE BY : SHRI AKHTAR H. ANSARI ( D R ) DATE OF HEARING: 11/11 /201 9 DATE OF PRONOUNCEMENT: 29 / 11 /201 9 O R D E R PER RAM LAL NEGI, JM THE ASSESSEE HAS FILED THE PRESENT APPEAL AGAINST THE ORDER DATED 05.06.2018 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) - 28 (FOR SHORT THE CIT(A) , MUMBAI , WHICH PERTAINS TO THE ASSESSMENT YEAR 2010 - 11 , WHEREBY THE LD. CIT(A) HAS DISMISSED T HE APPEAL FILED BY THE ASSESSEE AGAINST THE ASSESSMENT ORDER PASSED U/S 143(3) R.W.S. 147 OF THE I NCOME TAX ACT, 1961 (FOR SHORT THE ACT). 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE PROPRIETOR OF M/S PUNIT SALES CORPORATION , ENGAGED IN THE BUSINESS OF TRADING , FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION DECLARING TO TAL INCOME OF RS. 16,88,810 / - . SINCE, IT CAME TO THE NOTICE OF THE AO THAT THE ASSESSEE HAD SHOWN PURCHASES AMOU NTING TO RS. 6,31,966/ - FROM A BOGUS ENTITY DECLARED BY THE SALES TAX DEPARTMENT, MAHARASHTRA WHICH USED TO PROVIDE ACCOMMODATION BILLS WITHOUT S UPPLYING ANY GOODS. ACCORDINGLY, THE AO ISSUED NOTICE U/S 148 OF THE ACT. THEREAFTER THE AO ISSUED NOTICES U/S 143(2) AND 2 ITA NO. 5 537 / MUM/2018 ASSESSMENT YEAR: 2010 - 1 1 142(1) OF THE ACT. IN RESPONSE THEREOF, THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE APPEARED AND FILED THE DETAILS. THE ASSESSEE CON TENDED THAT THE PURCHASES WERE GENUINELY MADE FROM THE AFORESAID PARTIES, HOWEVER, THE AO REJECTING THE CONTENTION OF THE ASSESSEE, TREATED THE QUESTIONED PURCHASES AS BOGUS TRANSACTION AND MADE ADDITION OF SAID AMOUNT TO THE INCOME OF THE ASSESSEE . THE AS SESSEE CHALLENGED THE ASSESSMENT ORDER BEFORE THE LD. CIT (A). THE LD. CIT (A) AFTER HEARING THE ASSESSEE DISMISSED THE ASSESSEES APPEAL AND CONFIRMED THE ADDITION . AGAINST THE SAID FINDINGS, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 3 . THE ASSESSEE HAS CHALLENGED THE IMPUGNED ORDER PASSED BY THE LD. CIT (A) ON THE FOLLOWING EFFECTIVE GROUND S : - 1. IN THE FACTS & CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW THE LEARNED CIT (APPEALS) ERRED IN CONFIRMING THE ORDER PASSED BY THE LEARNED ASSESSING OFFICE R UNDER SECTION 143 (3) R.W.S. 147 OF THE INCOME TAX ACT, 1961. 2. IN THE FACTS & CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW THE LEARNED CIT (APPEALS) ERRED IN NOT APPRECIATING THAT THE APPELLANT HAD MADE GENUINE PURCHASES IN ORDINARY COURSE OF BUSINESS AND THE SAME IS SUPPORTED BY PROPER DOCUMENTS. 3. IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED CIT (APPEALS) ERRED IN CONFIRMING ADDITION OF RS. 6,31,966/ - ON ACCOUNT OF SUPPRESSED PROFITS ON BOGUS PURCHASES BEING 100% OF THE PURCHASES FROM THE SAID PARTY. 4. BEFORE US THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THAT SINCE THE ASSESSEE HAS DISCHARGED THE PRIMARY ONUS OF ESTABLISHING GENUINENESS OF THE PURCHASES BY SUBMITTING THE DOCUMENTARY EVIDENCE, THE LD CIT(A) HAS WRONGLY MADE 100% ADD ITION OF THE ALLEGED BOGUS PURCHASES. PLACING RELIANCE ON THE JUDGMENT OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. NIKUNJ EXIMP ENTERPRISES PVT. LTD , THE LD. COUNSEL SUBMITTED THAT MERELY BECAUSE THE ASSESSEE COULD NOT PRODUCE THE PARTIES BEFO RE THE AUTHORITIES BELOW, IT COULD NOT BE CONCLUDED THAT THE GOODS WERE NOT PURCHASED. THE LD. COUNSEL FURTHER SUBMITTED THAT IN ANY CASE THE ADDITION SHOULD BE JUST AND REASONABLE. THE LD 3 ITA NO. 5 537 / MUM/2018 ASSESSMENT YEAR: 2010 - 1 1 COUNSEL FURTHER SUBMITTED THAT SINCE THE FINDINGS OF THE LD CIT(A) ARE CONTRARY TO THE SETTLED PRINCIPLES OF LAW, THE SAME MAY BE SET ASIDE OR MODIFIED IN THE INTEREST OF JUSTICE. 5. ON THE OTHER HAND, T HE LD. DR SUBMITTED THAT SINCE THE ASSESSEE HAD FAILED TO DISCHARGE THE ONUS OF PROVING GENUINENESS OF THE TRANSACTION OF PURCHASE BY ADDUCING COGENT EVIDENCE, THE LD. CIT(A) HAS RIGHTLY CONFIRMED THE ADDITION MADE BY THE AO IN ACCORDANCE WITH THE LAW LAID DOWN BY THE HONBLE GUJARAT HIGH COURT IN THE CASE OF N.K. PROTEINS LTD. [1996] 58 ITD 428 . THE LD. DR FURTHER SUBMITT ED THAT SINCE THE ACTION OF THE LD. CIT (A) IS IN ACCORDANCE WITH THE PRINCIPLE OF LAW LAID DOWN BY THE HONBLE GUJARAT HIGH COURT, THERE IS NO INFIRMITY IN THE ORDER OF THE LD. CIT(A) . 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY GONE THROUGH THE RELEVANT RECORD INCLUDING THE CASES RELIED UPON BY THE AUTHORITIES BELOW. WE ARE CONVINCED FROM THE MATERIAL ON RECORD THAT THE ASSESSEE HAS FAILED TO ESTABLISH THE GENUINENESS OF THE PURCHASES IN QUESTION BY ADDUCING COGENT AND CONVINCING EVIDENCE. THE NO TICES ISSUED BY THE AO WERE RECEIVED BACK UN - SERVED. THE ASSESSEE ALSO FAILED TO PRODUCE THE PARTIES BEFORE THE AO FOR VERIFICATION. HENCE, IN OUR CONSIDERED VIEW, THE AO HAS RIGHTLY CONCLUDED THAT THE ASSESSEE HAS NOT MADE THE QUESTIONED PURCHASES FROM TH E PARTIES MENTIONED IN THE BOOKS OF ACCOUNT. WE FURTHER NOTICE THAT, THE AO HAS NOT REJECTED THE SALE OF THE GOODS SO PURCHASED. THE ABOVE - MENTIONED FACTS GIVE RISE TO THE CONCLUSION THAT THE ASSESSEE HAD PURCHASED THE GOODS IN QUESTION FROM GREY MARKET AN D EVADED THE TAX APPLICABLE DURING THE RELEVANT PERIOD. UNDER THESE CIRCUMSTANCES, THE AO HAD NO OPTION BUT TO MAKE AN ADDITION ON ESTIMATION BASIS CONSIDERING THE APPLICABLE RATE OF VAT OR OTHER TAXES AND THE PROFIT EMBEDDED IN THE SAID TRANSACTION. HOWEV ER, THE AO MADE ADDITION OF THE TOTAL AMOUNT OF BOGUS PURCHASES, WHICH WAS CONFIRMED BY THE LD. CIT(A). 7 . IN THE CASE OF CIT VS. SIMIT P. SETH 356 ITR 451(GUJ) , THE HONBLE GUJRAT HIGH COURT HAS UPHELD THE DECISION OF THE TRIBUNAL AND SUSTAINED THE ADDITI ON OF 12.5% OF THE TOTAL AMOUNT OF BOGUS PURCHASES DETERMINED BY THE TRIBUNAL, HOLDING THAT ONLY PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES CAN BE ADDED TO 4 ITA NO. 5 537 / MUM/2018 ASSESSMENT YEAR: 2010 - 1 1 INCOME OF THE ASSESSEE. HENCE, IN OUR CONSIDERED VIEW, THE ORDER PASSED BY THE LD. CIT(A) CONTRARY TO THE PRINCIPLES OF LAW LAID DOWN BY THE HONBLE GUJARAT HIGH COURT IN THE SAID CASE. ON THE OTHER HAND, THE LAW RELIED UPON BY THE LD. DR IS DISTINGUISHABLE ON FACTS. HENCE, FOLLOWING THE RATIO LAID DOWN BY THE HONBLE GUJARAT HIGH COURT, DISCUSSED ABOVE, WE SET ASIDE THE IMPUGNED ORDER PASSED BY THE LD. CIT(A) AND RESTRICT THE ADDITION TO 12.5% OF THE TOTAL AMOUNT OF BOGUS PURCHASES . ACCORDINGLY, WE DIRECT THE AO TO MAKE ADDITION OF 12.5% OF THE TOTAL AMOUNT OF QUESTIONED PURCHASES. IN THE RESULT, APPEAL FILED BY THE ASSESSEE FOR ASSESSMENT YEAR 2010 - 2011 IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH NOVEMBER , 2019 . SD/ - SD/ - ( S. RIFAUR RAHMAN ) ( RAM LAL NEGI ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; DATED: 29 / 11 / 201 9 ALINDRA, PS / 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// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI