ACIT - CIRCLE-3 , KALYAN V. UDAY BHARATKUMAR MEHTA, MUMBAI

ITA 5697/MUM/2018

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 6282 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-10-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 05-10-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K JOTHILAKHSMI NAYAKLD
• Assessee Lawyers: MARLON REGO LD
• Keywords: Bogus purchase
• Section: 69C; 143(3)

Judgement Text

1 ITA NO.5697/MUM/2018 UDAY BHARATKUMAR MEHTA ASSESSMENT YEAR-2011-12 - IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI , , BEFORE HONBLE SHRI SAKTIJIT DEY, JM AND HONBLE SHRI MANOJ KUMAR AGGARWAL, AM ./ I.T.A. NO.5697/MUM/2018 ( / ASSESSMENT YEAR:2011-12) A CIT - CIRCLE - 3 KALYAN 2 ND FLOOR, RANI MANSION MURBAD ROAD KALYAN (W)-421 301. / VS. SHRI UDAY BHARATKUMAR MEHTA PROP. OF M/S. AKSHAT CHEMICALS 2/B, ANANT APARTMENT SENAPATI BAPAT MARG DOMBIVLI (E), DIST. THANE-421 201. !'# ./ ./PAN/GIR NO. AMQPM-4559-G ( !' /APPELLANT ) : ( #$!' / RESPONDENT ) !'% / APPELLANT BY : MS.K. JOTHILAKHSMI NAYAKLD. DR # $ !'% / RESPONDENT BY : SHRI MARLON REGO- LD. AR / DATE OF HEARING : 09/10/2019 / DATE OF PRONOUNCEMENT : 09/10/2019 / O R D E R MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER): - 1. AFORESAID APPEAL BY REVENUE FOR ASSESSMENT YEAR [IN SHORT REFERRED TO AS AY] 2011-12 CONTEST THE ORDER OF LD. COMMISSIO NER OF INCOME-TAX (APPEALS)-1, THANE, [IN SHORT REFERRED TO AS CIT(A )], APPEAL NO. ITA NO.512/2014-15 DATED 06/07/2018 ON FOLLOWING GROUNDS OF APPEAL: - 2 ITA NO.5697/MUM/2018 UDAY BHARATKUMAR MEHTA ASSESSMENT YEAR-2011-12 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN NOT APPRECIATING THE LAW CORRECTLY THAT ONCE THE PURCHASES ARE UNVERIFIABLE/NOT GENUINE/BOGUS, THE SAME SHOULD HAV E BEEN DISALLOWED IN ENTIRETY?'. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN LAW BY NOT APPRECIATING THE FACT THAT THE ASSESSEE COULD NOT ESTABLISH THE GENUINENESS OF THE PURCHASES FROM THE NON-EXISTENT VENDORS? 3. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN LAW BY NOT APPRECIATING THE FACT THAT THE ONUS TO JUSTIFY THE CLAIM OF EXPENSES IS ON THE ASSESSEE AND THE SAME HAS FAILED TO DISCHARGE IT IN RELATION TO THE PURCHASES MADE FROM THE NON-EXISTENT VENDORS? 4. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN LAW BY IGNORING, THE FACT THAT THE ASS ESSEE COULD NOT SUBSTANTIATE ITS CLAIM OF PURCHASES FROM NON-EXISTENT VENDORS BY MEANS OF RELEVANT SUPPORTING DOCUMENTS RELATED TO MOVEMENT AND DELIVERY OF GOODS, STOCK RE GISTER, ETC. TO ARRIVE AT DISALLOWANCE LOWER THAN 100% OF THE PURCHASES FROM THE NON-EXIST ENT VENDORS? 5. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN NOT APPRECIATING THE LAW CORRECTLY THAT ONCE THE PURCHASES ARE UNVERIFIABLE / NOT GENUINE / BOGUS, THE SAME SHOULD HAVE BEEN DISALLOWED IN ENTIRETY, PARTICULARLY IN VIEW OF THE RATIO OF THE DECISION O F THE HON'BLE GUJARAT HIGH COURT IN TAX APPEAL NO. 242 OF 2003 DATED 20/06/2016 IN THE CASE OF N. K. PROTEINS LTD. AGAINST WHICH THE SLP WAS DISMISSED BY THE HON'BLE APEX COU RT?. WE HAVE HEARD AND CONSIDERED THE ARGUMENTS ADVANCED BY BOTH THE REPRESENTATIVES. 2.1 FACTS ON RECORD WOULD REVEAL THAT THE ASSESSEE BEING RESIDENT INDIVIDUAL STATED TO BE ENGAGED IN THE BUSINESS OF TRADING OF CHEMICALS UNDER PROPRIETORSHIP CONCERN NAMELY M/S AKSHAT CHEM ICALS, WAS ASSESSED FOR IMPUGNED AY U/S. 143(3) ON 05/03/2014 WHEREIN T HE INCOME OF THE ASSESSEE WAS DETERMINED AT RS.26.78 LACS, AFTER SOL E ADDITION OF ALLEGED BOGUS PURCHASES FOR RS.21.29 LACS AS AGAINST RETURNED INCOME OF RS .5.48 LACS FILED BY THE ASSESSEE ON 28/09/2011 WHICH WAS INITIALLY PROCESSED U/S.143(1). THE ASSESSEE REFLECTED GROSS PROFIT RAT E OF 1.87% ON TURNOVER OF RS.942.08 LACS. THE GROSS PROFIT RATE SHOWN IN IMME DIATELY PRECEDING YEAR WAS 1.82%. 3 ITA NO.5697/MUM/2018 UDAY BHARATKUMAR MEHTA ASSESSMENT YEAR-2011-12 2.2 PURSUANT TO RECEIPT OF CERTAIN INFORMATION FROM SALES TAX DEPARTMENT, GOVT. OF MAHARASHTRA, IT TRANSPIRED THAT THE ASSESS EE STOOD BENEFICIARY OF ALLEGED BOGUS PURCHASES TO THE TUNE OF RS.21.29 LAC S FROM 7 ENTITIES, THE DETAILS OF WHICH HAVE ALREADY BEEN EXTRACTED AT PAR A-4 IN THE QUANTUM ASSESSMENT ORDER. ACCORDINGLY, THE ASSESSEE WAS DIR ECTED TO SUBSTANTIATE THE PURCHASE TRANSACTIONS. 2.3 THE ASSESSEE, IN DEFENSE, SUBMITTED XEROX COPIE S OF PURCHASE INVOICES AND SUBMITTED THAT THE PAYMENTS WERE THROU GH BANKING CHANNELS. HOWEVER, THE ASSESSEE FAILED TO SUBSTANTIATE THE DE LIVERY OF MATERIAL BY PRODUCTION OF TRANSPORT /OCTROI RECEIPTS ETC. DURIN G THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE, VIDE LETTER DATED 03/03/ 2014, STATED THAT WITH A VIEW TO BUY PEACE OF MIND AND TO AVOID FURTHER UNNE CESSARY LITIGATIONS, THE ASSESSEE WAS READY TO PAY TAX ON SUCH PURCHASES. AC CORDINGLY, THE STATED PURCHASES WERE DISALLOWED AND ADDED TO THE INCOME O F THE ASSESSEE U/S 69C WHILE FRAMING THE ASSESSMENT. 3.1 HOWEVER, SUBSEQUENTLY, THE ASSESSEE AGITATED TH E STATED ADDITIONS BEFORE LEARNED FIRST APPELLATE AUTHORITY BY SUBMITT ING THAT THE WHOLE AMOUNT COULD NOT BE ADDED BACK TO THE INCOME OF THE ASSESS EE RATHER THE ADDITIONS SHOULD BE RESTRICTED TO SOME REASONABLE ESTIMATIONS . RELIANCE WAS PLACED ON VARIOUS JUDICIAL PRONOUNCEMENTS TO SUPPORT THE S AID SUBMISSIONS. 3.2 THE LD. CIT(A), IN TERMS OF DECISION OF HONBLE DELHI HIGH COURT RENDERED IN CIT V/S JANSAMPARK ADVERTISING & MARKETING PVT. LTD . [2015 56 TAXMANN.COM 286], AFFORDED FRESH OPPORTUNITY TO THE ASSESSEE AND DIRECTED THE ASSESSEE TO ESTABLISH THE GENUINEN ESS OF THE PURCHASES 4 ITA NO.5697/MUM/2018 UDAY BHARATKUMAR MEHTA ASSESSMENT YEAR-2011-12 BY FILING THE REQUISITE INFORMATION / DOCUMENTARY E VIDENCES. HOWEVER, THE ASSESSEE AGAIN FAILED TO FURNISH THE REQUIRED DETAI LS IN PRESCRIBED FORMAT I.E. QUALITATIVE / QUANTITATIVE DETAILS, ITEM-WISE / PAR TY-WISE, MATERIAL PURCHASED ETC. WITH A PLEA THAT THE SAME WERE NOT MAINTAINED IN THE REQUIRED MANNER. THE PARTY COULD NOT FILE ANY CONFIRMATION OF ACCOUN TS AND ALSO FAILED TO PRODUCE ANY OF THE SUPPLIER FOR CONFIRMATION OF THE ACCOUNTS. 3.3 THE LD. FIRST APPELLATE AUTHORITY AFTER CONSIDE RING FACTUAL MATRIX IN THE LIGHT OF VARIOUS JUDICIAL PRONOUNCEMENTS, AS ENUMER ATED IN THE IMPUGNED ORDER, REJECTED ASSESSEES BOOKS OF ACCOUNTS U/S 14 5(3) AND NOTICED THE GROSS PROFIT RATES OF VARIOUS YEARS, WHICH COULD BE TABULATED IN THE FOLLOWING MANNER: - YEAR PURCHASES (RS.) SALES (RS.) G P RATE (%) 2009-10 -- RS.243.64 LACS 2.08% 2010-11 RS.672.30 LACS RS.680.18 LACS 1.82% 2011-12 RS. 911.53 LACS RS.942.08 LACS 1.87% 2012-13 RS.1054.06 LACS RS.1091.70 LACS 2.45% 2013-14 RS.2082.94 LACS RS.2144.04 LACS 2.53% APPLYING THE GP RATE OF 2013-14 I.E. NON-HAWALA YEA R TO THE TURNOVER OF YEAR UNDER CONSIDERATION, LD. CIT(A) WORKED OUT SUP PRESSED GROSS PROFIT (GP) OF RS.6.21 LACS. THE SAME WAS JUSTIFIED IN THE LIGHT OF 25% DISALLOWANCE MADE IN ASSESSEES OWN CASE FOR AY 200 9-10. FINALLY, THE IMPUGNED ADDITION OF RS.21.29 LACS WAS RESTRICTED T O RS.6.21 LACS WHICH TRANSLATED INTO DISALLOWANCE OF PURCHASES TO THE EX TENT OF APPROX. 29%. AGGRIEVED, THE REVENUE IS IN FURTHER APPEAL BEFORE US. 4. AFTER CAREFUL CONSIDERATION OF ORDERS OF LOWER A UTHORITIES AND AFTER APPRECIATING THE ARGUMENTS ADVANCED BY RESPECTIVE R EPRESENTATIVES, WE ARE 5 ITA NO.5697/MUM/2018 UDAY BHARATKUMAR MEHTA ASSESSMENT YEAR-2011-12 OF THE CONSIDERED OPINION THERE COULD BE NO SALE WI THOUT ACTUAL PURCHASE OF MATERIAL KEEPING IN VIEW THE ASSESSEES NATURE OF B USINESS I.E. TRADING. UNDISPUTEDLY THE ASSESSEE WAS IN POSSESSION OF PRIM ARY PURCHASE DOCUMENTS AND THE PAYMENTS TO THE SUPPLIER WAS THRO UGH BANKING CHANNELS. HOWEVER, AT THE SAME TIME, THE ASSESSEE M ISERABLY FAILED TO SUBSTANTIATE THE DELIVERY OF MATERIAL DURING ASSESS MENT AS WELL AS APPELLATE PROCEEDINGS. THE ASSESSEE FAILED TO PRODUCE ANY OF THE SUPPLIERS TO CONFIRM THE TRANSACTIONS AND THE ONUS CASTED UPON ASSESSEE, IN THIS REGARD, REMAINED UNDISCHARGED. UNDER SUCH CIRCUMSTANCES, TH E ADDITIONS WHICH COULD BE SUSTAINED, WAS TO ACCOUNT FOR PROFIT ELEME NT EMBEDDED IN THESE PURCHASE TRANSACTIONS TO FACTORIZE FOR PROFIT EARNE D BY ASSESSEE AGAINST POSSIBLE PURCHASE OF MATERIAL IN THE GREY MARKET AN D UNDUE BENEFIT OF VAT AGAINST SUCH BOGUS PURCHASES. THE LEARNED FIRST APP ELLATE AUTHORITY HAS REJECTED THE BOOKS AND APPLIED GROSS PROFIT RATE OF NON-HAWALA YEAR ON GROSS TURNOVER REFLECTED BY THE ASSESSEE. THE DISAL LOWANCE OF PURCHASES, IN THIS MANNER, TRANSLATED INTO ADDITION OF APPROX. 29% OF ALLEGED BOGUS PURCHASES. THE SAID ESTIMATION, IN OUR OPINION, WAS QUITE FAIR AND REASONABLE UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE AND WE FIND NO REASON TO INTERFERE IN THE SAME. SO FAR AS THE DECI SION OF HONBLE GUJARAT HIGH COURT RENDERED IN N.K. INDUSTRIES LTD. VS DCIT [72 TAXMANN.COM 289] IS CONCERNED, WE FIND THAT THE FACTS OF THAT CASE H AS ALREADY BEEN DISTINGUISHED BY HONBLE BOMBAY HIGH COURT IN PR.CIT VS. M/S MOHOMMAD HAJI ADAM & CO. [ITA NO.1004 & OTHERS OF 2 016, DATED 11/02/2019] WHEREIN HONBLE COURT HAS APPROVED THE ESTIMATION, ON SIMILAR 6 ITA NO.5697/MUM/2018 UDAY BHARATKUMAR MEHTA ASSESSMENT YEAR-2011-12 FACTUAL MATRIX, BASED ON GROSS PROFIT RATE. THEREFO RE, CONCURRING WITH THE APPROACH OF LD. CIT(A), WE DISMISS THE APPEAL. 5. RESULTANTLY, THE APPEAL STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 09 TH OCTOBER, 2019. SD/- SD/- (SAKTIJIT DEY) (MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 09/10/2019 SR.PS:-JAISY VARGHESE '( )( / COPY OF THE ORDER FORWARDED TO : 1. !' / THE APPELLANT 2. #$!' / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT CONCERNED 5. + ,# - , - , / DR, ITAT, MUMBAI 6. , ./0 / GUARD FILE / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI.