ITO 3 (4), KALYAN V. HARSHAD JAYANTILAL SHAH, MUMBAI

ITA 5633/MUM/2018

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 1981 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-11-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 04-10-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BHERA RAM
• Assessee Lawyers: LAJANI K OSWAL
• Keywords: Bogus purchase; Corroborative evidences
• Section: 133(6); 143(1); 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY , JUDICIAL MEMBER AND SHRI N.K. PRADHAN, , ACCOUNTANT MEMBER ITA NO. 5633 /MUM. /2018 ( ASSESSMENT YEAR : 2009 10 ) INCOME TAX OFFICER WARD 3(4), KALYAN . APPELLANT V/S HARSHAD JAYANTILAL SHAH FLAT NO.1204, SANGEETA ENCLAVE VISHWASHANKAR NAGAR ROAD SARVODAYA NAGAR, MULUND (W) MUMBAI 400 080 PAN AWPPS8150G . RESPONDENT ITA NO. 5265 /MUM. /2018 ( ASSESSMENT YEAR : 2009 10 ) ITA NO. 5266 /MUM. /2018 ( ASSESSMENT YEAR : 2010 11 ) ITA NO. 5267 /MUM. /2018 ( ASSESSMENT YEAR : 2011 12 ) HARSHAD JAYANTILAL SHAH FLAT NO.1204, SANGEETA ENCLAVE VISHWASHANKAR NAGAR ROAD SARVODAYA NAGAR, MULUND (W) MUMBAI 400 080 PAN AWPPS8150G . APPELLANT V/S INCOME TAX OFFICER WARD 3(4), KALYAN . RESPONDENT REVENUE BY : SHRI BHERA RAM ASSESSEE BY : SHRI LAJANI K. OSWAL DATE OF HEARING 20.11.2019 DATE OF ORDER 28.11. 2019 2 HARSHAD JAYANTILAL SHAH O R D E R PER SAKTIJIT DEY. J.M. THIS IS A SET OF FOUR APPEALS, THREE BY THE ASSESS EE AND ONE BY THE REVENUE, ARISING OUT OF A COMMON ORDER DATED 20 TH JULY 2018, PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) 1, THANE, PERTAINING TO THE ASSESSMENT YEAR S 2009 10, 2010 11 AND 2011 12. 2. SINCE , ALL THESE APPEALS PERTAIN TO THE SAME ASSESSEE INVOLVING COMMON ISSUE ARISING OUT OF IDENTICAL SET OF FACTS AND CIRCUMSTANCES, THEREFORE, AS A MATTER OF CONVENIENCE, THESE APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OFF BY WAY OF THIS CONSOLIDATED ORDER. 3. THE COMMON ISSUE ARISING IN THESE APPEALS RELATES TO ADDITION DELETED/SUSTAINED BY LEARNED COMMISSIONER (APPEALS) ON ACCOUNT OF NON GENUINE PURCHASES. 4. BRIEF FACTS, WHICH ARE COMMON IN ALL THESE APPEALS ARE, THE ASSESSEE IS AN INDIVIDUAL. AS MENTI ONED BY THE ASSESSING OFFICER, THE ASSESSEE IS A SEMI WHOLESALER IN IRON AND STEEL GOODS. FOR THE ASSESSMENT YEAR UNDER DISPUTE, THE ASSESSEE FILED ITS RETURN OF INCOME IN REGULAR COURSE. THE RETURN S OF INCOME FILED BY THE ASSESSEE WERE INITIALLY PROCESSED UNDER SECTION 143(1) OF THE INCOME TAX ACT, 1961 3 HARSHAD JAYANTILAL SHAH (FOR SHORT 'THE ACT' ). SUBSEQUENTLY, ON THE BASIS OF INFORMATION RECEIVED FROM THE DGIT (INV.), PUNE, AS WELL AS THE SALES TAX DEPARTMENT, GOVERNMENT OF MAHARASHTRA, THE ASSESSING OFFICER FOUND THAT CERTAIN PURCHASES CLAIMED TO HAVE BEEN MADE BY THE ASSESSEE IN DIFFERENT ASSESSMENT YEARS ARE NON GENUINE AS THEY HAVE BEEN PURCHASED FROM ENTITIES WHO HAVE BEEN IDENTIFIED AS HAWALA OPERATORS PROVIDING ACCOMMODATION BILLS. THE DETAILS OF SUCH NON GENUINE PURCHAS ES ARE AS UNDER: 2009 10 ` 8,32,000 2010 11 ` 8,57,128 2011 12 ` 3,25,086 5. ON THE BASIS OF SUCH INFORMATION, THE ASSESSING OFFICER RE OPENED THE ASSESSMENT S UNDER SECTION 147 OF THE ACT. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER CALLED UPON THE ASSESSEE TO PROVE THE GENUINENESS OF PURCHASES IN DIFFERENT ASSESSMENT YEARS. AS ALLEGED BY THE ASSESSING OFFICER, THE ASSESSEE FAILED TO PRODUCE THE SE LLING DEALERS AS WELL AS THE BANK DETAILS. THE ASSESSEE COULD ONLY FURNISH THE COPIES OF THE PURCHASE BILLS AND AUDIT REPORT. FURTHER, THE NOTICES ISSUED UNDER SECTION 133(6) OF THE ACT WERE RETURNED BACK UNSERVED AS THE SELLING DEALERS WERE NOT FOUND RETU RNED BACK UNSERVED AS THE SELLING DEALERS WERE NOT FOUND IN THE GIVEN ADDRESS. THEREFORE, HOLDING THAT THE GENUINENESS OF PURCHASES 4 HARSHAD JAYANTILAL SHAH CLAIMED TO HAVE BEEN MADE BY THE ASSESSEE WERE NOT PROVED THROUGH SUPPORTING EVIDENCE, THE ASSESSING OFFICER HELD SUCH PURCH ASES TO BE NON GENUINE. CONSEQUENTLY, AFTER REJECTING THE BOOKS OF ACCOUNT UNDER SECTION 145(3) OF THE ACT, THE ASSESSING OFFICER ADDED BACK THE ENTIRE NON GENUINE PURCHASES IN THE ASSESSMENT YEARS UNDER DISPUTE. BEING AGGRIEVED WITH SUCH ADDITION S , THE AS SESSEE PREFERRED APPEALS BEFORE THE FIRST APPELLATE AUTHORITY. 6. A FTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE IN THE CONTEXT OF FACTS AND MATERIAL ON RECORD, LEARNED COMMISSIONER (APPEALS) AGREED WITH THE ASSESSING OFFICER THAT THE ASSESSEE WAS UNABLE TO PROVE THE GENUINENESS OF PURCHASES MADE IN DIFFERENT ASSESSMENT YEAR S . THUS, HE OBSERVED, IN SUCH CASES AS PER THE JUDICIAL PRECEDENTS PROFIS HAS TO BE ESTIMATED AT 25%. FURTHER, HE OBSERVE D , THE GROSS PROFIT RATE SHOWN BY THE ASSESSEE IN THE ASSESSMENT YEAR S UNDER DISPUTE ARE IN THE LOWER SIDE. H E OBSERVED , IN ASSESSMENT YEAR 2013 14 , WHEREIN , THERE IS NO ALLEGATION OF ANY NON GENUINE PURCHASES, THE ASSESSEE HAD SHOWN GROSS PROFIT RATE OF 4 .75%. APPLYING THE GROSS PROFIT RATE OF 4.75% TO THE NON GENUINE PURCHASES IN DIFFERENT ASSESSMENT YEAR S UNDER DISPUTE, LEARNED COMMISSIONER (APPEALS) FOUND THAT THE QUANTUM OF SUPPRESSED GROSS PROFIT WOR KS OUT TO ` 3,75,543 IN ASSESSMENT YEAR 2009 - 10 WOULD BE MORE THAN THE DISALLOWANCE OF 25% OF BOGUS PURCHASE S. TH US, APPLYING THE SAME 5 HARSHAD JAYANTILAL SHAH RATIO, LEARNED COMMISSIONER (APPEALS) SUSTAINED DISALLOWANCE ON ACCOUNT OF NON GENUINE PURCHASES AT ` 3,70,543 IN ASSESSMENT YEAR 2009 10 . WHEREAS, IN RESPECT OF THE AS SESSMENT YEAR 2010 11 AND 2011 12, HE FOUND THAT THE QUANTUM OF SUPPRESSED GROSS PROFIT IS MORE THAN THE AMOUNT OF NON GENUINE PURCHASES ADDED BY THE ASSESSING OFFICER. ACCORDINGLY, HE SUSTAINING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. WHILE THE RE VENUE HAS COME IN APPEAL AGAINST THE PARTIAL RELIEF GRANTED BY THE LEARNED COMMISSIONER (APPEALS) IN THE ASSESSMENT YEAR 2009 10, THE ASSESSEE HAS CHALLENGED THE DISALLOWANCE SUSTAINED BY THE LEARNED COMMISSIONER (APPEALS) IN ALL THESE ASSESSMENT YEARS UND ER DISPUTE. 7. THOUGH, THE ASS ESSEE IN HIS APPEALS HAS CHALLENGED THE VALIDITY OF RE OPENING OF ASSESSMENT UNDER SECTION 147 OF THE ACT, HOWE VER, AT THE TIME OF HEARING LEARNED AUTHORISED REPRESENTATIVE DID NOT PRESS SUCH GROUND. ACCORDINGLY, GROUND NO.1, IN ALL THESE APPEALS ARE DISMISSED AS NOT PRESSED. 8. AS REGARDS THE MERITS OF THE ISSUE , THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED , THE ASSESSEE IS A WHOLESALER AND THE GROSS PROFIT ALWAYS REMAINED WITHIN THE RANGE OF 3% AND 5%. SHE SUBMITTED , THE ADDIT ION S SUSTAINED BY THE LEARNED COMMISSIONER (APPEALS) HAS PUSHED THE GROSS PROFIT RATE TO UNREASONABLY HIGH RATE OF 6 HARSHAD JAYANTILAL SHAH MORE THAN 40% IN THE ASSESSMENT YEAR 2009 10. SHE SUBMITTED, IN ASSESSMENT YEAR S 2010 11 AND 2011 12 LEARNED COMMISSIONER (APPEALS) HAS SUSTA INED THE ADDITION IN ITS ENTIRETY WHICH IS GROSSLY UNFAIR AND UNREASONABL E. H E SUBMITTED , CONSIDERING THE NATURE OF BUSINESS CARRIED ON BY THE ASSESSEE AND THE FACT THAT HE IS A WHOLESALER , DISALLOWANCE CAN BE RESTRICTED TO 5% OF THE NON GENUINE PURCHASES. 9. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED , THE ASSESSEE HAS FAILED TO PROVE THE PURCHASES CLAIMED TO HAVE BEEN MADE FROM CERTAIN PARTIES. THEREFORE, IN SUCH CIRCUMSTANCES, THE ENTIRE AMOUNT REPRESENTING SUCH PURCHASES HAS TO BE DISALLOWED AND ADD ED TO THE INCOME OF THE ASSESSEE. THEREFORE, HE SUBMITTED , LEARNED COMMISSIONER (APPEALS) WAS NOT JUSTIFIED IN GRANTING PARTIAL RELIEF TO THE ASSESSEE IN THE ASSESSMENT YEAR 2009 10. 10. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. UNDISPUTEDLY, THE ASSESSEE IS A SEMI WHOLESALER IN IRON & STEEL GOODS. THOUGH, IT MAY BE A FACT THAT THE ASSESSEE WAS NOT ABLE TO PROVE THE GENUINENESS OF PURCHASES FROM THE DECLARED SOURCE BY FURNISHING ANY CLINCHING EVIDENCE , HOWEVER, IT IS A FACT ON RE CORD THAT THE SALES MADE BY THE ASSESSEE HAVE NOT BEEN DISPUTED OR DOUBTED BY THE REVENUE AUTHORITIES. THEREFORE, LOGICAL CONCLUSION WOULD BE, THE 7 HARSHAD JAYANTILAL SHAH ASSESSEE MIGHT HAVE PURCHASED THE GOODS FROM GREY MARKET WITHOUT PAYING VAT / SALES TAX. IN SUCH CIRCUMSTANCE S, THE ADDITION CAN BE MADE IN RESPECT OF THE PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES. IN FACT, THE LEARNED COMMISSIONER (APPEALS) HAS ALSO COME TO SIMILAR CONCLUSION. HOWEVER, THE METHODOLOGY ADOPTED BY HIM IN WORKING OUT THE SUPPRESSED GROSS PROFIT, IN OUR VIEW, IS TOTALLY INCORRECT, AS IT HAS PUSHED THE GROSS PROFIT RATE TO ALMOST ASTRONOMICAL FIGURE S . IT IS EVIDENT, THE GROSS PROFIT RATE SHOWN BY THE ASSESSEE IN THE ASSESSMENT YEAR S UNDER DISPUTE ARE AS UNDER: A.Y. 2009 10 3.50% A.Y. 2010 11 3% A.Y. 2011 12 3% 11. THE LEARNED COMMISSIONER (APPEALS) HAS HIMSELF STATED THAT IN THE ASSESSMENT YEAR 2013 14, W HEREIN THERE IS NO NON GENUINE PURCHASE , THE ASSESSEE HAS SHOWN GROSS PROFIT RATE OF 4.75%. THUS, CONSIDERING THE AVERAGE GROSS PROFIT RATE SHOWN BY THE ASSESSEE AND OTHER RELEVANT FACTORS, WE ARE OF THE CONSIDER ED OPINION THAT DISALLOWANCE SHOULD BE RESTRICTED TO 8% OF THE NON GENUINE PURCHASES MADE IN EACH ASSESSMENT YEAR UNDER CONSIDERATION. THE ASSESSING OFFICER IS DIRECTED TO COMPUTE THE DISALL OWANCE ACCORDINGLY. GROUNDS RAISED BY THE ASSESSEE ARE PARTLY ALLOWED AND GROUNDS RAISED BY THE REVENUE IN THE ASSESSMENT YEAR 2009 10 ARE DISMISSED. 8 HARSHAD JAYANTILAL SHAH 12. IN THE RESULT, REVENUES APPEAL IS DISMISSED AND ASSESSEES APPEALS ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN C OURT ON 28.11.2019 SD/ - N.K. PRADHAN ACCOUNTANT MEMBER SD/ - SAKTIJIT DEY JUDICIAL MEMBER MUMB AI, DATED: 28.11.2019 COPY OF THE ORDER FORWARDED TO : (1) THE ASSESSEE; (2) THE REVENUE; (3) THE CIT(A); (4) THE CIT, MUMBAI CITY CONCERNED; (5) THE DR, ITAT, MUMBAI; (6) GUARD FILE . TRUE COPY BY ORDER PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY ASSISTANT REGISTRAR ITAT, MUMBAI