ITO 19(2)(4), MUMBAI V. MR. NEMICHAND K. SHAH, MUMBAI

ITA 56/MUM/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 8851 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-01-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 03-01-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AKHTAR HANSARI
• Keywords: Bogus purchase
• Section: 143(3); 201; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC, BENCH MUMBAI BEFORE SHRI R.C.SHARMA, ACCOUNTANT MEMBER ITA NO. 56/MUM/2019 ( ASSESSMENT YEAR: 2010-11) I.T.O.-19(2)(4), ROOM NO. 217, 2 ND FLOOR, MATRU MANDIR, TARDEO, MUMBAI-400007. VS. MR. NEMICHAND K. SHAH, 56/64, 1 ST FLOOR, ROOM NO. 2, NAGINBHAI GELABHAI JAIN TRUST BLDG., NANUBHAI DESAI ROAD, MUMBAI-400004. PAN/GIR NO.AAPPS 2838 H (APPELLANT ) .. (RESPONDENT ) REVENUE BY SHRI AKHTAR H ANSARI (DR) ASSESSEE BY NONE DATE OF HEARING 13/01/2020 DATE OF PRONOUNCEMENT 13/01/2020 / O R D E R PER: R.C. SHARMA, A.M. THIS IS THE APPEAL FILED BY THE REVENUE AGAINST TH E ORDER OF THE LD. CIT(A)-52, MUMBAI DATED 31/10/2018 FOR THE A.Y. 201 0-11 IN THE MATTER OF ORDER PASSED U/S 143(3) R.W.S. 147 OF THE INCOME TAX ACT, 1961 (IN SHORT, THE ACT). 2. IN THIS APPEAL, THE REVENUE IS AGGRIEVED BY THE ACTION OF THE LD. CIT(A) FOR CONFIRMING THE ADDITION TO THE EXTENT OF 12.5% ON BOGUS PURCHASES, LESS GROSS PROFIT DECLARED BY THE ASSESS EE. 3. I HAVE GONE THROUGH THE ORDERS OF THE AUTHORITIE S BELOW AND FOUND THAT IN RESPECT OF BOGUS PURCHASES, THE A.O. HAS MA DE ADDITION BY ITA NO. 56/MUM/2019 ITO VS MR. NEMICHAND K SHAH 2 ESTIMATING PROFIT @ 12.5%. BY THE IMPUGNED ORDER, T HE LD. CIT(A) HAS GIVEN FURTHER RELIEF OF GROSS PROFIT ALREADY DECLAR ED BY THE ASSESSEE AFTER HAVING THE FOLLOWING OBSERVATION: 6.7 FROM THE AFORESAID CITED DECISION OF GUJARAT H IGH COURT IN THE CASE OF SIMIT P SHETH (SUPRA), IT CAN BE OBSERVED THAT THE APPROPRIATE GP PERCENTAGE FOR COMPUTING THE UNACCOUNTED PROFITS FR OM THE PURCHASES FROM THE ALLEGED HAWALA/BOGUS SUPPLIERS S HOULD FACTOR THE SAVINGS OF TAXES ETC. DUE TO THE UNACCOUNTED SA LES AND THE GP ALREADY SHOWN IN THE REGULAR BOOKS. IT IS OBSERV ED THAT THE RATIO OF THE DECISION OF THE GUJARAT HIGH COURT IN THE CA SE OF SIMIT P SHETH (SUPRA) CANNOT BE SQUARELY APPLIED TO THE FAC TS OF THE CASE OF OUR ASSESSEE SINCE THE SALES TAX RATE PREVALENT IN GUJARAT WAS 10% AS AGAINST ONLY 4% APPLICABLE IN MAHARASHTRA FOR TH E RELEVANT PERIOD. HOWEVER, THE FACTS OF THE CASE OF THE ASSES SEE ARE SOMEWHAT SIMILAR TO THAT OF RATNAGIRI STEELS (SUPRA). IN THE CASE OF RATNAGIRI STEELS (SUPRA), THE HON'BLE ITAT AFTER CONSIDERING THE HEALTHY GP SHOWN OF 5.45%, DIRECTED THE AO TO ALLOW SET OFF OF THE BOOK GP AGAINST THE SAID RATE OF 12.5% WHILE COMPUTING THE ADDITIONAL PROFITS FROM THE PURCHASES FROM THE ALLEGED HAWALA/ BOGUS SUPPLIERS. IN THE INSTANT CASE, IT IS OBSERVED THAT THE ASSESSEE HAS SHOWN A GP OF 3.15%. THEREFORE, AS WAS DONE BY THE HON'BLE ITAT, MUMBAI IN THE CASE OF RATNAGIRI STEEL (SUPRA) , IT WILL BE APPROPRIATE IF RATE OF 12.5% IS APPLIED FOR COMPUTI NG THE UNACCOUNTED PROFITS RELATED TO PURCHASES FROM THE HAWALA/BOGUS SUPPLIERS AND AGAINST THIS SET OFF OF THE GP SHOWN IN THE REGULAR BOOKS IN RESPECT OF THE PURCHASES FROM THE HAWALA/BOGUS SUPPLIERS IS ALLOWED. ACCORDINGLY, THE AO IS DIRECT ED TO COMPUTE THE ADDITIONAL PROFITS IN RESPECT OF THE PURCHASES FROM THE ALLEGED HAWALA/BOGUS SUPPLIERS BY ADOPTING RATE OF 12.5%. HOWEVER, THE AO WILL ALLOW A SET OFF OF THE GP ALRE ADY SHOWN BY THE ASSESSEE IN THE REGULAR BOOKS IN RESPECT OF THE PUR CHASES FROM THE SAID ITA NO. 56/MUM/2019 ITO VS MR. NEMICHAND K SHAH 3 ALLEGED HAWALA/BOGUS SUPPLIERS. ACCORDINGLY, GROUND NOS. 3 TO 6 OF THE APPEAL ARE PARTLY ALLOWED. 4. THE ORDER PASSED BY THE LD. CIT(A) GIVING FURTHE R CREDIT OF G.P. DECLARED BY THE ASSESSEE IS DULY SUPPORTED BY THE J UDICIAL PRONOUNCEMENTS AND AFTER APPLYING THE SAME TO THE F ACTS OF THE CASE, THE LD. CIT(A) HAS CORRECTLY DIRECTED TO REDUCE THE G.P. OF 12.5% BY THE G.P. RATE OF 3.5% ALREADY SHOWN BY THE ASSESSEE. NO THING WAS BROUGHT ON RECORD SO AS TO PERSUADE ME TO DEVIATE FROM THE FINDINGS OF THE LD. CIT(A). ACCORDINGLY, I DO NOT FIND ANY REASON TO IN TERFERE IN THE ORDER OF THE LD. CIT(A) AND UPHOLD THE SAME. 5. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 13 TH JANUARY, 2020. SD/- (R.C.SHARMA) ACCOUNTANT MEMBER MUMBAI; DATED 13/01/2020 *RANJAN COPY OF THE ORDER FORWARDED TO : BY ORDER, (ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//