RAJENDRA KEDIA, MUMBAI V. ITO 24(2)(3), MUMBAI

ITA 5611/MUM/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 8227 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-02-2017
• Appeal Filed By: Assessee
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 16-09-2016
• Court: TRIBUNAL
• Department Lawyers: BEENA SANTOSH
• Assessee Lawyers: R C JAIN
• Keywords: Bogus purchase; Unexplained expenditure; Business income; Accommodation entries
• Section: 69C; 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER ITA NO.5611/M/2016 (AY 2011 - 2012) SHRI RAJENDRA KEDIA, 701, BHARTI ENCLAVE CHS, CHINCHOLI BUNDER ROAD, MALAD (W), MUMBAI 400 064. / VS. ITO - 24(2)/(3), PRATYAKSHKAR BHAVAN, MUMBAI 400 064. ./ PAN : AABPK6593M ( / APPELLANT) .. ( / RESPONDENT ) / APPELLANT BY : SHRI R.C. JAIN / RESPONDENT BY : MS. BEENA SANTOSH, DR / DATE OF HEARING : 07 .02.2017 / DATE OF PRONOUNCEMENT : 15 .02.2017 / O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE ASSESSEE ON 16.9.2016 IS AGAINST THE ORDER OF THE CIT (A) - 41, MUMBAI DATED 1.6.2016 FOR THE ASSESSMENT YEAR 2011 - 2012. IN THIS APPEAL, ASSESSEE RAISED THE FOLLOWING GROUNDS WHICH READ AS UNDER: - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT (A) ERRED IN CONFIRMING THE ACTION OF THE AO IN DISREGARDING PURCHASES MADE BY THE ASSESSEE AND TREATING THE SAME AS UNEXPLAINED EXPENDITURE U/S 69C BY ADDING RS. 1,21,223/ - AS PEAK OF THE HIGHEST BILLS ACQUIRED WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAS MADE GENUINE PURCHASES AND WITHOUT APPRECIATING ALL THE RELEVANT EVIDENCES GIVEN BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT AS WELL AS IN APPELLATE PROCEEDINGS. 2. ON TH E FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT (A) ERRED IN CONFIRMING THE ACTION OF THE LD AO OF ADDING AN AD - HOC ADDITIONAL GROSS PROFIT MARGIN @ 1.5% AMOUNTING TO RS. 2,83,062/ - ON THE TOTAL SALES OF THE ASSESSEE OF RS. 1,88,70,818/ - WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAD CONDITIONALLY OFFERED TO AGREE ON THE ADDITION OF ADDITIONAL GROSS PROFIT OF ONE HALF OR THREE QUARTER PERCENT ON THE SALES MADE OUT OF THE ALLEGED BOGUS PURCHASES OF R S. 44,67,979/ - . 2. BRIEFLY STATE D RELEVANT FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PROPRIETOR OF M/S. BHARAT UDYOG AND M/S. DEV ABRASIVE AND THEY ARE ENGAGED IN THE BUSINESS OF MANUFACTURING OF COATED ABRASIVE PRODUCTS AND TRADING IN INDUSTRIAL CONSUMABLES. PARA 3 OF THE AOS ORD ER IS RELEVANT IN THIS REGARD. DURING THE ASSESSMENT PROCEEDINGS, AO FOUND THAT THE ASSESSEES TURNOVER IS ABOVE RS. 1.5 CRS OUT OF WHICH 2 THE PURCHASES AMOUNTING TO RS. 44.67 LAKHS WERE AFFECTED FROM THREE PARTIES NAMELY (I) M/S. UNIVERSAL TRADING CO; (II ) M/S. KUNAL ENTERPRISES AND (III) M/S. PIONEER TRADING COMPANY . AO ISSUED THE NOTICE U/S 133(6) OF THE ACT TO THE SAID THREE PARTIES AND THERE IS NO RESPONSE. ASSESSEE WAS ASKED TO FURNISH THE DETAILS AND ESTABLISH THE GENUINENESS OF THE PURCHASES. IN RESPONSE, ASSESSEE SUBMITTED THE RELEVANT DOCUMENTS. RELYING ON THE STATEMENTS GIVE BY THE THREE PARTIES (SUPRA) TO THE SALES TAX AUTHORITIES, WHEREIN THERE IS A CONFUSION WITH REGARD TO THE PROVIDING OF ACCOMMODATION ENTRIES, AO, INSTEAD OF MAKING ADDITI ON OF ENTIRE SUCH BOGUS PURCHASES, ANALYSED THE PEAK PURCHASES AND DISALLOWED THE SUM OF RS. 1,21,223/ - U/S 69C OF THE ACT. AO IGNORED VARIOUS DECISIONS RELIED UPON BY THE ASSESSEE. IN ADDITION TO THE ABOVE, AO MADE ADDITION OF RS. 2,83,062/ - IE 1. 5% OF ENTIRE TURNOVER OF THE ASSESSEE IN THE YEAR UNDER CONSIDERATION. THUS, THE ASSESSMENT WAS COMPLETED AT RS. 9,37,060/ - . ON APPEAL, CIT (A) CONFIRMED THE ADDITION MADE BY THE AO. AGAIN AGGRIEVED WITH THE SAID DECISION OF THE CIT (A), ASSESSEE IS IN FURTHE R APPEAL BEFORE THE TRIBUNAL. 3. DURING THE PROCEEDINGS BEFORE THE TRIBUNAL, LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE WAS TAXED THE SAME INCOME IN NUMBER OF WAYS WITHOUT REJECTING THE BOOKS OF ACCOUNTS OF THE ASSESSEE. FURTHER, LD AR SUBMITT ED THAT THERE IS NO JUSTIFICATION FOR PEAK PURCHASE ADDITION OF RS. 1,21,223/ - WHEN THE AO CHOSE TO THRUST ON THE ASSESSEE ADDITIONAL GP 1.5 % OF THE ENTIRE TURNOVER AMOUNTING TO RS. 2,83,062 / - . FURTHER, POINTING OUT THE MISTAKES IN READING OF THE ASSESSE ES CONCESSION WHICH WAS GIVEN WITHOUT PREJUDICE, LD COUNSEL FOR THE ASSESSEE READ OUT THAT ASSESSEE OFFERED 0.5% TO 0.75% ADDITIONAL GP CONSIDERING THE CONFUSION WITH REGARD TO THE STATEMENTS GIVEN BY THE SAID PARTIES TO THE SALES TAX AUTHORITIES. MENTIO NING THAT THE ASSESSEE OFFERED ONLY 1/2 OR 3 QUARTER PERCENTAGE OF ADDITIONAL GP, BUT THE SAME IS MISREAD AS 1 AND PERCENTAGE OF THE ADDITIONAL GP, WHICH IS NOT THE CASE. ASSESSEE PRAYED FOR RESTRICTING THE DISALLOWANCE TO 0.5% TO 0.75% OF THE SUSP ECTED PURCHASES AMOUNTING TO RS. 44.67 LAKHS FROM THE SAID THREE PARTIES. 4. ON HEARING BOTH THE PARTIES, I FIND, THE AO FELL INTO A N ERROR IN APPLYING 1.5% OF THE GROSS TURNOVER OF THE YEAR WITHOUT GIVING ANY JUSTIFYING REASONS / EVIDENCES. THEREFORE, I AM OF THE OPINION, MAKING ADDITION ON ACCOUNT OF PEAK PURCHASES AS WELL AS GP ADDITION IS UNSUSTAINABLE IN LAW. FURTHER, I FIND THA T NO REASON IN GIVEN BY 3 THE AO AS TO WHY THE ENTIRE PURCHASES WERE CONSIDERED FOR COMPUTING THE ADDITIONAL GP @ 1.5%. THEREFORE, I AM OF THE CONSIDERED OPINION THAT THE ADDITION SHOULD BE RESTRICTED TO ONLY 0.75% OF THE SUSPECTED PURCHASES AND ACCORDINGLY , THE ADDITION ON ACCOUNT OF PEAK PURCHASES STANDS DELETED. ACCORDINGLY I ORDER. AO IS DIRECTED TO COMPUTE THE ADDITION APPLYING THE FLAT RATE OF 0.75% ON THE PURCHASES MADE FROM THE THREE PARTIES NAMELY (I) M/S. UNIVERSAL TRADING CO; (II) M/S. KUNAL ENT ERPRISES AND (III) M/S. PIONEER TRADING COMPANY (SUPRA). ACCORDINGLY, GROUND NO.1 RAISED BY THE ASSESSEE IS DISMISSED AND GROUND NO.2 IS PARTLY ALLOWED. 5. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 1 5 T H FEBRUARY, 2017. S D / - (D. KARUNAKARA RAO) ACCOUNTANT MEMBER MUMBAI ; 15.02.2017 . . ./ OKK , SR. 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 . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI