ACIT- 27 (3), MUMBAI V. RAJESH RUPO JAGASIA, MUMBAI

ITA 5712/MUM/2018

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 6286 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-10-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 05-10-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K JOTHILAKSHMI NAYAKLD
• Assessee Lawyers: ADJOURNMENT DECLINED
• Keywords: Bogus purchase
• Section: 40A(3); 143(3); 142(1); 133(6); 143(2); 148

Judgement Text

1 ITA NO.5712/MUM/2018 RAJESH RUPO JAGASIA ASSESSMENT YEAR-2010-11 - 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.5712/MUM/2018 ( / ASSESSMENT YEAR:2010-11) ACIT - 27(3) ROOM NO.423, 4 TH FLOOR TOWER NO.6, VASHI RAILWAY STATION VASHI, NAVI MUMBAI 400 703 / VS. RAJESH RUP O JAGASIA 10-A/4, NAVJIVAN SOCIETY MG ROAD, CHEMBUR MUMBAI 400 074 !'# ./ ./PAN/GIR NO. AAGPJ-9707-P ( !' /APPELLANT ) : ( #$!' / RESPONDENT ) !' / APPELLANT BY : MS. K.JOTHILAKSHMI NAYAK-LD. DR #$!' / RESPONDENT BY : ADJOURNMENT DECLINED / DATE OF HEARING : 10/10/2019 / DATE OF PRONOUNCEMENT : 10/10/2019 / O R D E R MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER): - 1. AFORESAID APPEAL BY REVENUE FOR ASSESSMENT YEAR [IN SHORT REFERRED TO AS AY] 2010-11 CONTEST THE ORDER OF LD. COMMISSIO NER OF INCOME-TAX (APPEALS)-25, MUMBAI [IN SHORT REFERRED TO AS CIT( A)], APPEAL NO. CIT(A)- 25/IT-325/2015-16/178 DATED 12/07/2018 ON FOLLOWING GROUNDS OF APPEAL: - 2 ITA NO.5712/MUM/2018 RAJESH RUPO JAGASIA ASSESSMENT YEAR-2010-11 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) ERRED IN DELETING THE ADDITION OF RS.11,97,512/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF BOGUS PURCHASES, WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAD FAILED TO PRODUCE BILLS, VOUCHERS AND OTHER DOCUMENTARY EVIDE NCES IN SUPPORT OF HIS CLAIM AND WITHOUT CONSIDERING THE LATEST APEX COURT DECISION IN THE CASE OF N.K.PROTEINS LTD. WHEREIN IT IS HELD THAT ONCE IT IS PROVED THAT THE PURCHASES ARE BOGUS THEN ADDITIONS SHOULD BE MADE ON ENTIRE PURCHASES AND NO ON PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) ERRED IN ESTIMATING THE PROFIT FROM HAWALA PURCHASES BY DISA LLOWING ONLY RS.1,71,073/- BEING 12.5% OF THE BOGUS PURCHASES AS EVEN THE BASIC ONUS OF PRODUCING DELIVERY CHALLANS, TRANSPORT BILLS ETC. WERE NOT FULFILLED B Y THE ASSESSEE. THE ASSESSEES REPRESENTATIVE SOUGHT ADJOURNMENT IN THE MATTER WHICH WAS DECLINED. THEREFORE, THE MATTER WAS PROCEEDED WITH EX-PARTE QUA THE ASSESSEE AFTER PERUSAL OF MATERIAL ON RECORD AND AF TER CONSIDERING THE ARGUMENTS ADVANCED BY THE REVENUE. 2.1 FACTS ON RECORD WOULD REVEAL THAT THE ASSESSEE BEING RESIDENT INDIVIDUAL STATED TO BE ENGAGED AS PAINT CONTRACTOR AND DEALER IN HARDWARE ITEMS UNDER PROPRIETORSHIP CONCERN NAMELY M/S KRISH RAJ, WAS ASSESSED FOR IMPUGNED AY U/S. 143(3) R.W.S. 147 ON 25/03/2015 WH EREIN THE INCOME OF THE ASSESSEE WAS DETERMINED AT RS.35.64 LACS, AFTER SOLE ADDITION OF ALLEGED BOGUS PURCHASES FOR RS.13.68 LACS AS AGAINST RETURNED INCOME OF RS.21.96 LACS FILED BY THE ASSESSEE ON 15/10/2010 W HICH WAS PROCESSED U/S.143(1). 2.2 PURSUANT TO RECEIPT OF CERTAIN INFORMATION FROM SALES TAX DEPARTMENT, GOVT. OF MAHARASHTRA, IT TRANSPIRED THAT THE ASSESS EE OBTAINED BOGUS PURCHASES BILLS AMOUNTING TO RS.13.68 LACS FROM AN ENTITY NAMELY M/S UNIVERSAL SUPPLIERS. ACCORDINGLY, THE CASE WAS REOP ENED AS PER DUE 3 ITA NO.5712/MUM/2018 RAJESH RUPO JAGASIA ASSESSMENT YEAR-2010-11 PROCESS OF LAW VIDE ISSUANCE OF NOTICE U/S 148 ON 2 4/03/2014 WHICH WAS FOLLOWED BY STATUTORY NOTICES U/S 143(2) AND 142(1) WHEREIN THE ASSESSEE WAS DIRECTED TO SUBSTANTIATE THE PURCHASE TRANSACTI ONS. 3. THE ASSESSEE DEFENDED THE PURCHASES BY FURNISHIN G PURCHASE DETAILS ETC. BUT FAILED TO PRODUCE THE SUPPLIER FOR CONFIRM ATION OF TRANSACTIONS. NOTICE ISSUED U/S 133(6) TO THE SAID SUPPLIER REMAI NED UN-RESPONDED TO. THE FACTUAL MATRIX LED THE LD. AO TO FORM AN OPINIO N THAT THE PURCHASES WERE NOT GENUINE. IT WAS ALSO OBSERVED THAT SINCE T HE SALES WERE NOT SUSPECTED, THE GOODS MUST HAVE BEEN PROCURED FROM T HE OPEN MARKET IN CASH AND THEREFORE, THE DISALLOWANCE WOULD BE JUSTI FIED U/S 40A(3) ALSO. THEREFORE, THE STATED PURCHASES WERE DISALLOWED AND ADDED BACK TO THE INCOME OF THE ASSESSEE U/S 69C. 4. BEFORE LEARNED FIRST APPELLATE AUTHORITY, THE AS SESSEE AGITATED THE ADDITION BY WAY OF AN ELABORATE SUBMISSIONS. IT WAS , INTER-ALIA, CONTENDED THAT THE PAYMENTS WERE THROUGH BANKING CHANNELS AND THE SALES WERE NOT UNDER DOUBT. AFTER CONSIDERING THE FACTUAL MATRIX A ND ASSESSEES SUBMISSIONS, LD. CIT(A) OPINED THAT THE CORRECT APP ROACH WOULD BE TO ESTIMATE THE ADDITIONAL BENEFIT OR PROFIT EARNED ON THESE PURCHASES AND NOT TO DISALLOW THE ENTIRE PURCHASES. FINALLY, RELYING UPON THE DECISION OF HONBLE GUJARAT HIGH COURT RENDERED IN CIT V/S SIMIT P.SHETH 356 ITR 451 AND CIT V/S BHOLANATH POLY FAB PVT LTD. ITA NO.63 OF 20 12 23/10/2012, THE IMPUGNED ADDITIONS WERE RESTRICTED TO 12.5% OF THE DISPUTED PURCHASES. AGGRIEVED, THE REVENUE IS IN FURTHER APPEAL BEFORE US. IT APPEARS THAT THE ASSESSEE HAS ACCEPTED THE VERDICT OF LD. FIRST APPE LLATE AUTHORITY. 4 ITA NO.5712/MUM/2018 RAJESH RUPO JAGASIA ASSESSMENT YEAR-2010-11 5. AFTER CAREFUL CONSIDERATION OF ORDERS OF LOWER A UTHORITIES AND AFTER APPRECIATING THE ARGUMENTS ADVANCED BY REVENUE, WE ARE OF THE CONSIDERED OPINION THAT 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 DOCU MENTS AND THE PAYMENTS TO THE SUPPLIERS WERE THROUGH BANKING CHAN NELS. THE SALES TURNOVER ACHIEVED BY THE ASSESSEE HAS NOT BEEN DISP UTED / DISTURBED BY THE REVENUE. HOWEVER, AT THE SAME TIME, THE ASSESSEE MI SERABLY FAILED TO SUBSTANTIATE THE DELIVERY OF MATERIAL DURING ASSESS MENT AS WELL AS APPELLATE PROCEEDINGS. THE ASSESSEE FAILED TO PRODUCE THE STA TED SUPPLIER TO CONFIRM THE TRANSACTIONS AND THE ONUS CASTED UPON ASSESSEE, IN THIS REGARD, REMAINED UNDISCHARGED. THEREFORE, ON THE GIVEN FACT S AND CIRCUMSTANCES, DISALLOWANCE OF ENTIRE PURCHASES, IN OUR OPINION, W OULD NOT BE JUSTIFIED RATHER THE ADDITIONS WHICH COULD BE SUSTAINED, WOUL D BE TO ACCOUNT FOR PROFIT ELEMENT EMBEDDED IN THESE PURCHASE TRANSACTIONS TO FACTORIZE FOR PROFIT EARNED BY ASSESSEE AGAINST POSSIBLE PURCHASE OF MAT ERIAL IN THE GREY MARKET AND UNDUE BENEFIT OF VAT AGAINST SUCH BOGUS PURCHASES, WHICH LEARNED FIRST APPELLATE AUTHORITY HAS RIGHTLY DONE SO. THEREFORE, FINDING NO INFIRMITY IN THE IMPUGNED ORDER, WE DISMISS THE APP EAL. 6. SO FAR AS THE DECISION OF HONBLE GUJARAT HIGH C OURT RENDERED IN N.K. INDUSTRIES LTD. VS DCIT [72 TAXMANN.COM 289] IS CONCERNED, WE FIND THAT THE FACTS OF THAT CASE HAS ALREADY BEEN DISTIN GUISHED BY HONBLE BOMBAY HIGH COURT IN PR.CIT VS. M/S MOHOMMAD HAJI ADAM & CO. [ITA NO.1004 & OTHERS OF 2016, DATED 11/02/2019] WHEREIN HONBLE COURT HAS 5 ITA NO.5712/MUM/2018 RAJESH RUPO JAGASIA ASSESSMENT YEAR-2010-11 APPROVED THE ESTIMATION, ON SIMILAR FACTUAL MATRIX, BASED ON GROSS PROFIT RATE. THEREFORE, CONCURRING WITH THE APPROACH OF LD . CIT(A), WE DISMISS THE APPEAL. 7. FINALLY, THE APPEAL STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 10 TH OCTOBER, 2019 SD/- SD/- (SAKTIJIT DEY) (MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 10/10/2019 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.