ITO 19 (2)(3), MUMBAI V. MR. MOHAMMED A. KATHAWALA, MUMBAI

ITA 5714/MUM/2018

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 6287 (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: 2009-2010
• Appeal Filed On: 05-10-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bogus purchase; Unexplained expenditure; Business income
• Section: 142(1); 133(6); 143(2); 148; 144

Judgement Text

1 ITA NO.5714/MUM/2018 MOHAMMED A.KATHAWALA ASSESSMENT YEAR-2009-10 - 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.5714/MUM/2018 ( / ASSESSMENT YEAR:2009-10) IT O - 19(2) (3) ROOM NO.218, MATRU MANDIR TARDEO ROAD, GRANT ROAD MUMBAI- 400 007 / VS. MOHAMME D A.KATH A WALA 6-C, EDWARD BUILDING 165, ALIBHAI PREMJI MARG MUMBAI 400 007 !'# ./ ./PAN/GIR NO. AANPK-4522-G ( !' /APPELLANT ) : ( #$!' / RESPONDENT ) !' / APPELLANT BY : MS. JOTHILAKSHMI NAYAK-LD. DR #$!' / RESPONDENT BY : NONE / 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] 2009-10 CONTEST THE ORDER OF LD. COMMISSIO NER OF INCOME-TAX (APPEALS)-30, MUMBAI [IN SHORT REFERRED TO AS CIT( A)], APPEAL NO. CIT(A)- 2 ITA NO.5714/MUM/2018 MOHAMMED A.KATHAWALA ASSESSMENT YEAR-2009-10 30/19(2)(3)/10652/2017-18 DATED 06/07/2018 ON FOLLOWING GROUNDS OF APPEAL: - 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD.CIT(A) ERRED IN RESTRICTING THE ADDITION @ 12.5% INSTEAD OF 100% MADE BY THE AO AS ADDITION MADE IN THE CASE WAS ON THE BASIS OF INFORMATION RE CEIVED FROM EXTERNAL SOURCES IN THE NATURE OF LAW ENFORCEMENT. 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) ERRED IN NOT CONSIDERING THE ORDER OF HONBLE SUPREME COU RT IN THE CASE OF N.K.PROTEINS LTD. DATED 16-01-2017, WHICH IS ON THE SIMILAR ISSU E OF BOGUS PURCHASES AND WHEN THE APEX COURT ORDER WAS ALREADY THE LAW OF THE LAN D WHEN THE LD. CIT(A) HAS PRONOUNCED ITS ORDER ON 06-07-2018. NONE HAS APPEARED FOR ASSESSEE AND NO VALID ADJOURN MENT APPLICATION IS ON RECORD. LEFT WITH NO OPTION, THE MATTER IS PROCE EDED WITH EX-PARTE QUA THE ASSESSEE ON THE BASIS OF MATERIAL ON RECORD AND AFT ER CONSIDERING THE SUBMISSIONS OF THE REVENUE. 2.1 FACTS ON RECORD WOULD REVEAL THAT THE ASSESSEE BEING RESIDENT INDIVIDUAL EARNING BUSINESS INCOME, WAS ASSESSED FO R IMPUGNED AY U/S. 144 R.W.S. 147 ON 05/03/2015 WHEREIN THE INCOME OF THE ASSESSEE WAS DETERMINED AT RS.5.81 LACS, AFTER SOLE ADDITION OF ALLEGED BOGUS PURCHASES FOR RS.2.40 LACS AS AGAINST RETURNED INCOME OF RS.3 .41 LACS FILED BY THE ASSESSEE ON 27/09/2009 WHICH 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.2.40 LACS FROM AN E NTITY NAMELY M/S SUNRISE ENTERPRISES. ACCORDINGLY, THE CASE WAS REOP ENED AS PER DUE PROCESS OF LAW VIDE ISSUANCE OF NOTICE U/S 148 ON 0 7/03/2014 WHICH WAS 3 ITA NO.5714/MUM/2018 MOHAMMED A.KATHAWALA ASSESSMENT YEAR-2009-10 FOLLOWED BY STATUTORY NOTICES U/S 143(2) AND 142(1) WHEREIN THE ASSESSEE WAS DIRECTED TO SUBSTANTIATE THE PURCHASE TRANSACTI ONS. 3. THE FAILURE ON THE PART OF THE ASSESSEE TO FILE REQUISITE DETAILS LED THE LD. AO TO FRAME ASSESSMENT ON BEST JUDGMENT BASIS U/S 144. DURING ASSESSMENT PROCEEDINGS, NOTICE ISSUED U/S 133(6) TO THE SAID SUPPLIER REMAINED UN-RESPONDED TO. THE FACTUAL MATRIX LED TH E LD. AO TO FORM AN OPINION THAT THE PURCHASES WERE NOT GENUINE AND ACC ORDINGLY, THE SAME WERE ADDED TO THE INCOME OF THE ASSESSEE AS UNPROVE D PURCHASES / UNEXPLAINED EXPENDITURE. 4. BEFORE LEARNED FIRST APPELLATE AUTHORITY, THE AS SESSEE AGITATED THE ADDITION BY WAY OF AN ELABORATE SUBMISSIONS. IT WAS SUBMITTED THAT NOTICE U/S 148 WAS NEVER RECEIVED BY THE ASSESSEE AND THER EFORE, THE REQUISITE DETAILS COULD NOT BE FILED. THE ASSESSEE, INTER-ALIA, PLEADED FOR REASONABLE ESTIMATION AGAINST DISPUTED PURCHASES. THE LEARNED FIRST APPELLATE AUTHORITY, AFTER DUE CONSIDERATION OF FACTUAL MATRIX AND ASSES SEES SUBMISSIONS, ESTIMATED THE ADDITIONS @12.5% RELYING UPON THE DEC ISION OF HONBLE GUJARAT HIGH COURT RENDERED IN CIT V/S SIMIT P.SHETH 356 ITR 451. AGGRIEVED, THE REVENUE IS IN FURTHER APPEAL BEFORE US. 5. AFTER CAREFUL CONSIDERATION OF IMPUGNED ORDER IN THE LIGHT OF SUBMISSIONS ADVANCED BY REVENUE, WE ARE OF THE CONS IDERED OPINION THAT THERE COULD BE NO SALE WITHOUT ACTUAL PURCHASE OF M ATERIAL KEEPING IN VIEW THE ASSESSEES NATURE OF BUSINESS. THE SALES TURNOV ER ACHIEVED BY THE ASSESSEE HAS NOT BEEN DISPUTED / DISTURBED BY THE R EVENUE. HOWEVER, AT THE SAME TIME, THE ASSESSEE MISERABLY FAILED TO SUP PLY THE REQUISITE 4 ITA NO.5714/MUM/2018 MOHAMMED A.KATHAWALA ASSESSMENT YEAR-2009-10 INFORMATION / DOCUMENTARY EVIDENCES TO SUBSTANTIATE THE PURCHASE TRANSACTIONS. THEREFORE, ON THE GIVEN FACTS AND CIR CUMSTANCES, DISALLOWANCE OF ENTIRE PURCHASES, IN OUR OPINION, WOULD NOT BE J USTIFIED RATHER THE ADDITIONS WHICH COULD BE SUSTAINED, WOULD BE TO ACC OUNT FOR PROFIT ELEMENT EMBEDDED IN THESE PURCHASE TRANSACTIONS TO FACTORIZ E FOR PROFIT EARNED BY ASSESSEE AGAINST POSSIBLE PURCHASE OF MATERIAL IN T HE GREY MARKET AND UNDUE BENEFIT OF VAT AGAINST SUCH BOGUS PURCHASES, WHICH LEARNED FIRST APPELLATE AUTHORITY HAS RIGHTLY DONE. THEREFORE, FI NDING NO INFIRMITY IN THE IMPUGNED ORDER, WE DISMISS THE APPEAL. 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 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 (SAKTIJIT DEY) (MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : SR.PS:-JAISY VARGHESE 5 ITA NO.5714/MUM/2018 MOHAMMED A.KATHAWALA ASSESSMENT YEAR-2009-10 '( )( / 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. SR. NO. DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATION SHEETS ARE ATTACHED DIRECTLY TYPE D ON COMPUTER / LAPTOP SR.PS/PS 2 DRAFT DICTATED ON NOT APPLICABLE SR.PS/PS 3 DRAFT PLACED BEFORE AUTHOR NOT APPLICABLE SR.PS/PS 4 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 5 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 6 APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 7 ORDER PRONOUNCEMENT ON SR.PS/PS 8 FILE SENT TO THE BENCH CLERK SR.PS/PS 9 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 10 DATE ON WHICH FILE GOES TO THE AR 11 DATE OF DISPATCH OF ORDER