NAVIN JAIDHAND DOSHI, MUMBAI V. DCIT-23(3), MUMBAI

ITA 5600/MUM/2018

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 3830 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-11-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 03-10-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: KAVITA P KAUSHIK
• Keywords: Bogus purchase; Search and seizure; Opportunity of being heard; Principle of natural justice; Initiation of penalty proceedings; Reason to believe
• Section: 234B; 143(1); 147; 68; 148

Judgement Text

IN THE INC OME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI BEFORE SHRI C. N. PRASAD , J M & SHRI S . RIFAUR RAHMAN, AM ./ I.T.A. NO . 5600/MUM/2018 ( / ASSESSMENT YEAR: 2009 - 10 ) MR. NAVIN JECHAND DOSHI, D - 705, KALP NAGRI, BALRAJESHWAR ROAD, MULUND WEST, MUMBAI - 400 080 / VS. THE DY. COMMISSIONER OF INCOME TAX, CIRCLE 2 3(3 ), C/10, 4 TH FLOOR, PRATYAKSHKAR BHAVAN, BANDRA KURLA COMPLEX, BANDRA EAST, MUMBAI. ./ ./ PAN NO. A DDPD0288P ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI VIMAL PUNAMIYA , AR / RESPONDENTBY : MS. KAVITA P. KAUSHIK , DR / DATE OF HEARING : 20.10 .20 20 / DATE OF PRONOUNCEMENT : 04.11.2020 / O R D E R PER S. RIFAUR RAHMAN (ACCOUNTANT MEMBER) : THE PRESENT A PPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. COMMIS S IONER OF INCOME TAX (APPEALS) - 40 , IN SHORT LD. CIT(A), MUMBAI, D ATED 25.07.18 FOR AY 2009 - 10 . 2 I.T.A. NO. 5600 /MUM/201 8 MR. NAVIN JECHAND DOSHI 2. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE IS ENGAGED IN THE BUSINESS AS WHOLESALE DEALER IN IRON & STEEL. THE RETURN WAS ORIGINALLY FILED ON 25.09.2009 DECLARING TOTAL INCOME OF RS. 3,41,030/ - . THE SAME WAS PROCESSED U/S 143(1) OF THE ACT. ON INFORMATION FROM SALES TAX DEPARTMENT, A SEARCH AND SEIZURE ACTION WAS TAKEN IN PREMISES OF ASSESSEE AND IT S GROUP CONCERN AND IT WAS ALLEGED THAT ASSESSEE IS INDULGED IN BOGUS PURCHASES. ACCORDINGLY, ASSESSMENT WAS REOPENED BY ISSUING NOTICE U/S 148 OF THE ACT. THEREAFTER, AO MADE ADDITION ON AC COUNT OF BOGUS PURCHASES TO THE ASSESSEE . 3 . AGGRIEVED BY THE ABOVE ORDER OF AO, ASSESSEE PREFERRED APPEAL BEFORE LD. CIT(A) AND LD. CIT(A) AFTER CONSIDERING THE SUBMISSION OF ASSESSEE, RESTRICTED THE ADDITI ON 12.5 % BY RELYING ON THE VARIOUS JUDGMENTS. ACCORDINGLY, LD. CIT(A) PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. 4 . NOW BEFORE US, TH E ASSESSEE IS IN APPEAL CHALLENGING THE ORDER OF LD. CIT(A) ON THE GROUNDS MENTIONED BELOW: - 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD CIT(A) ERRE D IN CONFIRMING THE INITIATION OF THE REASSESSMENT PROCEEDING UNDER SECTION 147. 3 I.T.A. NO. 5600 /MUM/201 8 MR. NAVIN JECHAND DOSHI 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD CIT(A) FAILED TO CONSIDER THAT REASSESSMENT PROCEEDING CANNOT BE INITIATED. A) NO REASSESSMENT CAN BE MADE JUST TO MAKE AN ENQUIRY OR VERIFICATION. B) REASSESSMENT PROCEEDING CANNOT BE INITIATE MERELY ON THE INFORMATION RECEIVED FROM INVESTIGATION WING. C) REASSESSMENT PROCEEDING CANNOT BE INITIATED WHEN 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 SUB SECTION 3 R W S 147 OF INCOME TAX ACT WHICH IS PASSED AGAINST THE PRINCIPAL OF NATURAL JUSTICE. 4. THE LD CIT(A) E RRED IN CONFIRMING AND TREATING RS.53,35,529/ - BEING 12.5 PERCENT OF THE TOTAL PURCHASES OF RS.4,26,84,231/ - AS BOGUS NON - GENUINE EXPENDITURE AND THEREBY ERRED IN CONFIRMING THE ADDITION TO THE TOTAL INCOME OF THE ASSESSEE. 5. THE LD CIT(A) ERRED IN CONFIR MING THE ADDITION AND TREATING RS.5,82,195/ - AS DISCLOSED INCOME OF THE ASSESSEE IN VIEW OF SECTION 68 OF THE INCOME TAX ACT, 4 I.T.A. NO. 5600 /MUM/201 8 MR. NAVIN JECHAND DOSHI 1961 FOR INTRODUCTION OF NEW CAPITAL ALLEGEDLY FORM UNKNOWN SOURCES, WITHOUT GIVING A FAIR OPPORTUNITY OF BEING HEARD TO YOUR APPE LLANT AND DISREGARDING THE EXPLANATION MADE. 6. THE LD. CIT(A) ERRED IN CONFIRMING THE CHARGING OF INTEREST UNDER SECTION 234A, 234B 234C AND 234D OF THE INCOME TAX ACT 1961. 7. THE LD. CIT(A) ERRED IN CONFIRMING THE INITIATION OF THE PENALTY PROCEEDING UNDER SECTION 271(L)(C) OF THE INCOME TAX ACT 1961. 8. THE ASSESSEE CRAVES LEAVE TO ADD FURTHER GROUNDS OR TO AMEND OR ALTER THE EXISTING GROUNDS OF APPEAL ON OR BEFORE THE DATE OF HEARING. 5 . AT THE OUTSET, LD. AR APPEARING ON BEHALF OF THE ASSESSEE SUBM ITTED BEFORE US THAT ASSESSEE IS NOT PRESSING GROUND NO. 1 TO 3. WITH REGARD TO GROUND NO. 4 ON ACCOUNT OF BOGUS PURCHASE, LD. AR SUBMITTED THAT THIS GROUND IS SQUARELY COVERED BY THE CONSOLIDATED ORDER OF COORDINATE BENCH OF HONBLE ITAT IN ITA 2606, 2605 & 2604 /MUM/201 6 FOR AY 2008 - 09 TO 2011 - 12 IN ASSESSEES OWN CASE, WHEREIN HONBLE ITAT HAS R ESTRICTED THE ADDITION ON BOGUS PURCHASE @ 2 % . 5 I.T.A. NO. 5600 /MUM/201 8 MR. NAVIN JECHAND DOSHI 6 . ON THE OTHER HAND, LD. DR RELIED ON THE ORDERS PASSED BY REVENUE AUTHORITIES, HOWEVER HE CONCEDED THAT THIS GROUND IS COVERED BY THE ORDER OF ITAT. 7 . CONSIDERED THE RIVAL SUBMISSION AND MATERIAL PLACED ON RECORD. WE NOTICE FROM THE RECORDS THAT THE IDENTICAL GROUND RAISED IN THE PRESENT APPEAL HAS ALREADY BEEN DECIDED BY THE COORDINATE B ENCH OF ITAT IN ITA NO . 2606, 2605 & 2604/MUM/2016 FOR AY 2008 - 09 TO 2011 - 12 IN ASSESSEES OWN CASE ON MERITS. FOR THE SAKE OF CLARITY, WHICH IS REPRODUCED BELOW: - 4. AFTER CAREFUL CONSIDERATION, WE ARE OF THE CONSIDERED OPINION THERE COULD BE NO SALE WITHOUT ACTUAL PURCHASE OF MATERIAL KEEPING IN VIEW THE ASSESSEES NATURE OF BUSINESS. UNDISPUTEDLY THE ASSESSEE WAS IN POSSESSION OF PRIMARY PURCHASE DOCUMENTS AND THE PAYMENT S TO THE SUPPLIERS WERE THROUGH BANKING CHANNELS. THE SALES TURNOVER ACHIEVED BY THE ASSESSEE HAS NOT BEEN DISPUTED BY THE REVENUE. THE BOOKS OF ACCOUNTS WERE SUBJECT TO AUDIT. HOWEVER, AT THE SAME TIME, THE ASSESSEE MISERABLY FAILED TO SUBSTANTIATE THE PU RCHASES AND COULD NOT PRODUCE ANY OF THE SUPPLIERS TO CONFIRM THE TRANSACTIONS AND FIELD INQUIRIES INDICATED THAT NONE 6 I.T.A. NO. 5600 /MUM/201 8 MR. NAVIN JECHAND DOSHI OF THE SUPPLIERS WAS EXISTING AT THE GIVEN ADDRESSES. THEREFORE, THE ONUS CASTED UPON ASSESSEE, IN THIS REGARD, REMAINED UNDISCHARGED. HE NCE, ON THE GIVEN FACTS AND CIRCUMSTANCES, THE ADDITIONS WHICH COULD BE SUSTAINED, WOULD BE TO ACCOUNT FOR PROFIT ELEMENT EMBEDDED IN THESE PURCHASE TRANSACTIONS TO FACTORIZE FOR PROFIT EARNED BY ASSESSEE AGAINST POSSIBLE PURCHASE OF MATERIAL IN THE GREY M ARKET AND UNDUE BENEFIT OF VAT AGAINST SUCH BOGUS PURCHASES, WHICH LEARNED CIT(A) HAS RIGHTLY DONE. HOWEVER, KEEPING IN VIEW THE FACT THAT THE ASSESSEE WAS DEALING IN THIN MARGIN ITEM LIKE IRON & STEEL AND THE ASSESSEE REFLECTED GROSS PROFIT RATE OF 3.27%, WE ESTIMATE THE ADDITIONS @2% OF ALLEGED BOGUS PURCHASES OF RS.2,18,12,572/ - WHICH COMES TO RS.4,36,251/ - . THE IMPUGNED ORDER STAND MODIFIED TO THAT EXTENT. RESULTANTLY, THE APPEAL STANDS PARTLY ALLOWED. 5. FACTS ARE PARI - MATERIA THE SAME IN AYS 2010 - 11 & 2011 - 12 WHEREIN THE ASSESSEE WAS SADDLED WITH ADDITIONS OF RS.313.73 LACS & RS.254.61 LACS RESPECTIVELY. THE ADDITIONS WERE RESTRICTED BY FIRST APPELLATE AUTHORITY TO 12.5% OF ALLEGED BOGUS PURCHASES, AGAINST WHICH THE ASSESSEE IS IN FURTHER APPEAL BEFOR E US WITH SIMILAR GROUNDS OF APPEAL. KEEPING IN LINE WITH ESTIMATION MADE BY US FOR AY 2008 - 09, WE RESTRICT THE ADDITIONS TO 2% OF ALLEGED 7 I.T.A. NO. 5600 /MUM/201 8 MR. NAVIN JECHAND DOSHI BOGUS PURCHASES WHICH COMES TO RS.6,27,465/ - FOR AY 2010 - 11 AND RS.5,09,235/ - FOR AY 2011 - 12. BOTH THESE APPEAL STAND S PARTLY ALLOWED. 6. IN THE RESULT, ALL THE THREE APPEALS STAND PARTLY ALLOWED TO THE EXTENT INDICATED IN THE ORDER 8 . T HEREFORE , RESPECTFULLY FOLLOWING THE ABOVE DECI SION OF COORDINATE BENCH IN ASSESSEES OWN CASE WHICH IS APPLICABLE MUTATIS MUTANDIS IN THE PRESENT CASE, WE ARE INCLINED TO RESTRICT THE DISALLOWANCE @ 2 % OF ALLEGED PURCHASES . THEREFORE, WE DIRECT THE AO TO RESTRICT THE DISALLOWANCE @ 2 % OF THE ALLEGED BOGUS PURCHASES. ACCORDINGLY , WE PARTLY A LLOW THE GROUND RAISED BY THE ASSESSEE. 9 . W ITH REGARD TO GROUND NO. 5 ON ACCOUNT OF ADDITION U/S 68 OF THE ACT ON UNDISCLOSED INCOME, LD. AR SUBMITTED THAT ASSESSEE IS IN BUSINESS FOR LAST SEVERAL YEARS. THE ADDITION OF CAPITAL OF RS. 5,82,195/ - WAS OUT OF THE PAST SAVINGS OF THE ASSESSEE. HE FURTHER SUBMITTED THAT THE FUNDS WERE ARRANGED FROM FAMILY MEMBERS IN ORDER TO ARRANGE FUNDS FOR MEDICAL REQUIREMENT AND TREATMENT OF HIS AILING WIFE AND THE SAME IS INTRODUCED AS CAPITAL DURING THE YEAR. THEREFORE, THE ABOVE 8 I.T.A. NO. 5600 /MUM/201 8 MR. NAVIN JECHAND DOSHI ADDITION MADE BY THE LD. C IT(A) IS NOT JUSTIFIED AND SAME IS REQUIRED TO BE DELETED. 10 . ON THE OTHER HAND, LD. DR RELIED ON THE ORDERS PASSED BY REVENUE AUTHORITIES. 11 . CONSIDERED THE RIVAL SUBMISSION AND MATERIAL PLACED ON RECORD. WE NOTICE FROM THE RECORDS THAT ASSESSEE HAS IN TRODUCED THE CAPITAL IN THE FIRM AND NOT DISCLOSED THE PROPER SOURCE. IT IS FACT THAT ASSESSEE IS IN THE BUSINESS FOR SO MANY YEARS. BUT THE FUNDS WERE NOT DEPOSITED IN THE BANK, BUT INTRODUCED IN THE BUSINESS. IT IS THE DUTY OF THE ASSESSEE TO DISCLOSE TH E PROPER SOURCE. THE PROFIT DECLARED BY THE ASSESSEE IS ALSO NOT CONSIDERABLE TO SUPPORT THE CONTENTION OF THE ASSESSEE. IF IT IS PRIVATE SOURCE FROM FAMILY OR FRIENDS, IT SHOULD BE PROPERLY DISCLOSED. SINCE, NO DOCUMENTARY EVIDENCE OR ANY CONFIRMATIONS WE RE FILED BEFORE US, IT IS POSSIBLE THAT ASSESSEE MIGHT HAVE CERTAIN PRIVATE SAVINGS. THEREFORE, WE ARE INCLINED TO ALLOW 50% OF THE CAPITAL INTRODUCED BY HIM AS GENUINE. ACCORDINGLY, GROUND RAISED BY ASSESSEE IS PARTLY ALLOWED . 9 I.T.A. NO. 5600 /MUM/201 8 MR. NAVIN JECHAND DOSHI 12. WITH REGARD TO GROUND NO. 6, IT IS CONSEQUENTIAL AND ACCORDINGLY, IT IS DISMISSED . 13. WITH REGARD TO GROUND NO. 7, INITIATION OF PENALTY PROCEEDINGS AND CHALLENGING THEM AT THIS STAGE IS PREMATURE. THEREFORE, THIS GROUND OF APPEAL IS DISMISSED . 1 4 . IN TH E NET RESULT, THE APPEAL FILED BY THE ASSESSEE STA NDS PARTLY A LLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 04.11. 2020 . SD/ - SD/ - (C. N. PRASAD ) (S. RIFAUR RAHMAN ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED : 04.11 .2020 SR.PS. DHANANJAY / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE / BY ORDER, . / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI