INCOME TAX OFFICER - 20(1)(5), MUMBAI V. SHRI ISMAILBHAI M. LOKHANDWALA, MUMBAI

ITA 5618/MUM/2017

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 3269 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 9 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-06-2021
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: I
• Assessment Year: 2011-2012
• Appeal Filed On: 04-09-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SHREEKALA PARDESHAI
• Assessee Lawyers: C V JAM
• Keywords: Bogus purchase
• Section: 143(3); 133(6); 147

Judgement Text

C IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI , . , BEFORE S H RI MAHAVIR SINGH, VP AND S H RI M. BALAGANESH, AM ./ ITA NO. 5618 /MUM/ 2017 ( / ASSESSMENT YEAR 2011 - 12 ) THE INCOME TAX OFFICER, 20(1) ROOM NO. 121, 1 ST FLOOR PIRAMAL CHAMBERS, PAREL, MUMBAI - 400 012 / VS. SHR I I SMAILBHAI M. LOHKANDWALA, 9, THLIZ CHS, ST. JOHN BAPTIT ROAD, BANDRA, MUMBAI - 400 050 ( / APPELLANT) ( / RESPONDENT) . / PAN NO. ABIPL3610Q / APPELLANT BY : MS. SHREEKALA PARDESHAI, DR / RESPONDENT BY : SHRI C.V. JAM, AR / DATE OF HEARING : 10.06.2021 / DATE OF PRONOUNCEMENT : 15 . 06.2021 / O R D E R . , / PER M. BALAGANESH , AM : T HIS APPEAL OF ASSESSEE IS ARISING OUT OF THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)] - 32 , MUMBAI [IN SHORT CIT(A)], DATED 27.06.2017 . THE ASSESSMENT WAS FRAMED BY THE INCOME TAX OFFICER , WARD 20(1)(2) ( IN SHORT ITO / AO) FOR THE A.Y. 2011 - 12 VIDE ORDER DATED 09.03.2016 UNDER SECTION 143(3) READ WITH SECTION 147 OF THE INCOME - TAX ACT, 1961 (HEREINAFTER THE ACT). PAGE | 2 ITA NO. 5618 /MUM/ 2017 SHRI ISMAILBHAI M. LOHKANDWALA; AY 11 - 12 2 . THE EFFECTIVE ISSUE TO BE DECIDED IN THIS APPEAL OF THE REVENUE IS AS TO WHETHER THE LEARNED CIT(A) WAS JUSTIFIED IN RESTRICTING THE ADDI TION ON ACCOUNT OF PROFIT ELEMENT AT THE RATE OF 2.42% OF THE ALLEGED BOGUS PURCHASES FROM T AINTED PARTIES IN THE FACTS AND CIRCUMSTANCES OF THE CASE OF THE INSTANT CASE. 3 . WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. W E FIND THAT THE ASSESSEE IS AN INDIVIDUAL ENGAGED IN THE BUSINESS OF TRADING IN IRON AND STEEL. IT IS NOT IN DISPUTE THAT THE ASSESSEE HAD INDEED MADE PURCHASES FROM SEVEN PARTIES TOTALING TO 1,75,16,051/ - , THE DETAILS OF WHICH ARE LISTED IN PAGE 2 OF THE ASSESSMENT ORDER. THE LEARNED ASSESSING OFFICER SOUGHT TO EXAMINE THE VERACITY OF THE SAID PURCHASES. THE ASSESSEE PRODUCED COPY OF LEDGERS, BANK STATEMENTS RELATED TO THE PURCHASE EVIDENCING PAYMENTS MADE TO SAID PARTIES BY ACCOUNT PAYEE CHEQUES. THE LEARNED ASSESSING OFFICER ISSUED NOTICES UNDER SECTION 133(6) OF THE ACT TO ALL THE PARTIES, WHICH WERE DULY SERVED BUT NO REPLIES WERE RECEIVED FROM THE SAID PARTIES IN RESPONSE THEREON. THE LEA RNED ASSESSING OFFICER DIRECTED THE ASSESSEE TO PRODUCE THE AFORESAID PARTIES, WHICH WAS ALSO NOT COMPLIED WITH BY THE ASSESSEE. ACCORDINGLY, THE LEARNED ASSESSING OFFICER PROCEEDED TO TREAT 100% OF OUTSTANDING PURCHASES (CREDIT PURCHASES) TO THE TUNE OF 25,44,256/ - AND 25% OF HAWALA PURCHASES TO THE TUNE OF 1,49,71,795/ - AS PROFIT ELEMENT EMBEDDED IN THE VALUE OF SUCH PURCHASES AND ACCORDINGLY, MADE ADDITION OF 62,87,205/ - IN THE ASSESSMENT. 4 . THE LEARNED CIT(A) BY GIVING THE CATEGORICAL FINDING THAT THE SALES MADE BY THE ASSESSEE OUT OF THE AFORESAID PURCHASES HAS NOT PAGE | 3 ITA NO. 5618 /MUM/ 2017 SHRI ISMAILBHAI M. LOHKANDWALA; AY 11 - 12 BEEN DOUBTED BY THE ASSESSING OFFICER AND HENCE, ONLY PROFIT ELEMENT C OULD BE BROUGHT TO TAX. IN RESPECT OF CREDIT PURCHASES MADE BY THE ASSESSEE TO THE TUNE OF 25,44,256/ - , THE LEARNED CI T(A) OBSERVED THAT THOSE PURCHASES WERE MADE BY THE ASSESSEE ON CREDIT AND THE BALANCE PAYABLE TO SUCH SUPPLIERS HAVE BEEN SHOWN AS OUTSTANDING LIABILITIES IN THE BALANCE SHEET OF THE ASSESSEE AND THE SAME HAD NOT BEEN WRITTEN BACK TO THE INCOME BY THE ASS ESSEE. EFFECTIVELY, THE LEARNED CIT(A) HELD THAT THE PARTIES FROM WHOM CREDIT PURCHASES HAVE BEEN MADE ARE GENUINE AND ACCORDINGLY DELETED THE ADDITION MADE IN THE SUM OF 25,44,256/ - . 5 . WITH RESPECT TO THE REMAINING PURCHASES TO THE TUNE OF 1,49,71,795/ - MADE FROM OTHER PARTIES WHO WERE TREATED AS TAINTED DEALERS, THE LEARNED CIT(A) OBSERVED THAT THE ASSESSEE HAS ALREADY RECORDED GROSS PROFIT OF 2.42% IN ITS BOOKS AND DIREC TED THE LEARNED ASSESSING OFFICER TO ADOPT THE SAME AS PROFIT ELEMENT EMBEDDED I N THE VALUE OF SUCH PURCHASES FOR THE PURPOSE OF MAKING ADDITION. AGGRIEVED BY THIS ORDER, THE REVENUE ALONE IS IN APPEAL AND ASSESSEE HAS NOT PREFERRED ANY APPEAL. 6 . BEFORE US, THE LEARNED DR VEHEMENTLY ARGUED THAT THE LEARNED CIT(A) OUGHT TO HAVE ESTIMATED THE PROFIT AT THE RATE OF 12.5% OF THE VALUE OF PURCHASES WHICH HAS BEEN CONSISTENTLY MADE BY THIS TRIBUNAL IN VARIOUS OTHER CASES. WE FIND THAT ASSESSEE IS ENGAGED IN IRON A ND STEEL INDUSTRY AND MOREOVER, ASSESSEE IS ONLY A TRADER IN IRON AND STEEL. THE ASSESSEE HAS DISCLOSED GROSS PROFIT OF 2.42% IN ITS BOOKS WHICH HAS BEEN ACCEPTED BY THE REVENUE. IT IS NOT IN DISPUTE THAT SALES MADE OUT OF THE PURCHASES OF 1,75,16,051/ - F ROM SEVEN PARTIES HAS PAGE | 4 ITA NO. 5618 /MUM/ 2017 SHRI ISMAILBHAI M. LOHKANDWALA; AY 11 - 12 / BY ORDER, //TRUE COPY// . /SR. PRIVATE SECRETARY , / ITAT, MUMBAI NOT BEEN DOUBTED BY THE REVENUE. FOR THE PURPOSE OF DETERMINING THE PROFIT ELEMENT EMBEDDED IN THE VALUE OF SUCH PURCHASES, TAKING INTO CONSIDERATION THE INDUSTRY IN WHICH THE ASSESSEE IS DEALING WITH, WE DEEM IT FIT APPROPRIATE TO ES TIMATE THE PROFIT AT 5% OF THE VALUE OF SUCH PURCHASES AS INCOME OF THE ASSESSEE, WHICH IN OUR CONSIDERED OPINION , WOULD MEET THE END S OF JUSTICE. ACCORDINGLY, THE GROUND RAISED BY THE REVENUE IS PARTLY ALLOWED. 7 . IN THE RESULT, THE APPEAL OF THE REVENUE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 15. 0 6.2021. SD/ - SD/ - ( /MAHAVIR SINGH) ( . / M. BALAGANESH ) ( / VICE P RESIDENT) ( / ACCOUNTANT MEMBER) , / MUMBAI, DATED: 15. 06.2021 , . / SUDIP SARKAR, SR.PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RE SPONDENT. 3. ( ) / THE CIT(A) 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. PAGE | 5 ITA NO. 5618 /MUM/ 2017 SHRI ISMAILBHAI M. LOHKANDWALA; AY 11 - 12