ITO - 27 (1)(4), MUMBAI V. DHARMESH BABULAL PATEL, MUMBAI

ITA 5724/MUM/2018

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 3651 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2019
• 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
• Department Lawyers: C S SHARMA
• Keywords: Bogus purchase; Set aside
• Section: 201; 147; 148; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES SMC , MUMBAI BEFORE S HRI S. RIFAUR RAHMAN (AM ) AND SHRI RAM LAL NEGI (JM) ITA NO. 5724/MUM/2018 ASSESSMENT Y EAR: 2009 - 10 THE ITO - 27(1)(4), TOWER NO. 6, 4 TH FLOOR, ROOM NO. 409, VASHI RLY STATION, COMP LEX, VASHI, NAVI MUMBAI VS. SHRI DHARMESH BABULAL PATEL, 603, SUN SHINE ARTS, KALE GURUJI MARG, DADAR, MUMBAI - 400028 PAN: AHHPP2409E (APPELLANT) (RESPONDENT) REVENUE BY : SHRI C.S. SHARMA (DR) ASSESSEE BY : NONE DA TE OF HEARING: 26 /09 /201 9 DATE OF PRONOUNCEMENT: 30 / 0 9 /201 9 O R D E R PER RAM LAL NEGI, JM THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE ORDER DATED 21.06.2018 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) - 24 (FOR SHORT THE CIT(A) , MUMBAI , FOR THE ASSESSMENT YEAR 2009 - 10 , WHEREBY THE LD. CIT(A) HAS PARTLY ALLOWED T HE APPEAL FILED BY THE ASSESSEE AGAINST THE ASSESSMENT ORDER PASSED U/S 144 R.W.S 147 OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT). 2. THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION DECLARING NIL INCOME. SINCE, THE AO RECEIVED INFORMATION FROM DGIT (INV.) THAT THE ASSESSEE DURING THE PREVIOUS YEAR HAD OBTAINED BOGUS BILLS FROM THREE HAWALA DEALERS AMOUNTI NG TO RS. 61,269/ - ,WITHOUT ACTUAL PURCHASING GOODS. ON THE BASIS OF THE SAID INFORMATION, THE AO REOPENED THE ASSESSMENT AFTER ISSUING NOTICE U/S 148 OF THE ACT TO THE ASSESSEE AFTER RECORDING THE REASONS FOR REOPENING OF THE RETURN. ACCORDINGLY, THE AO IS SUED NOTICE U/S 142 (1) AND 143 (2) OF THE ACT. HOWEVER, THE ASSESSEE DID NOT RESPOND TO THE SAID NOTICES. THE AO AGAIN ISSUED LETTER TO THE ASSESSEE TO 2 ITA NO. 5724 / MUM/2018 ASSESSMENT YEAR: 2009 - 1 0 FURNISH THE DETAILS REGARDING THE PURCHASES MADE FROM HAWALA DEALERS. AGAIN, THE ASSESSEE DID NOT RESPO ND TO THE SAID LETTER. ACCORDINGLY, THE AO COMPLETED THE ASSESSMENT U/S 144 READ WITH 147 OF THE ACT AND AFTER MAKING INTERALIA THE AMOUNT OF BOGUS PURCHASES TO THE INCOME OF THE ASSESSEE DETERMINED THE TOTAL INCOME AT RS. 5,77,550/ - . THE ASSESSEE CHALLENG ED THE ASSESSMENT ORDER BEFORE THE CIT(A). THE LD. CIT(A) AFTER HEARING THE ASSESSEE RESTRICTED THE ADDITION TO 12.5% . AGAINST THE SAID ORDER, THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 3 . THE REVENUE HAS CHALLENGED THE IMPUGNED ORDER PASSED BY THE LD . CIT (A) ON THE FOLLOWING EFFECTIVE GROUNDS : - 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) ERRED IN DELETING THE ADDITION OF RS. 53,611/ - MADE BY THE ASSESSING OFFICER ON ACCOUNT OF BOGUS PURCHASES, WITHOUT APPRECIATING THE F ACT THAT THE ASSESSE HAD FAILED TO PRODUCE BILLS, VOUCHERS AND OTHER DOCUMENTARY EVIDENCES IN SUPPORT OF HIS CLAIM AND WITHOUT CONSIDERING THE LATEST APEX COURT DECISION IN THE CASE OF N K PROTEIN LTD. WHEREIN IT IS HELD THAT ONCE IT IS PROVED THAT THE PUR CHASES ARE BOGUS THEN ADDITION SHOULD BE MADE ON ENTIRE PURCHASES AND NOT ON PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT (A) ERRED IN ESTIMATING THE PROFIT FROM HAWALA PURCHASES BY DISALLOWING ONLY RS. 7,658/ - , BEING 12.5% OF THE BOGUS PURCHASES AS EVEN THE BASIC ONUS OF PRODUCING TRANSPORTATION DOCUMENTS, INWARD REGISTER ETC. WERE NOT FULFILLED BY THE ASSESSE. 4. THIS CASE WAS FIXED FOR HEARING ON 26.09.2019 . HOWEVER, ON THE SAID DATE, WHEN THE C ASE WAS CALLED OUT FOR HEARING, NONE APPEARED ON BEHALF OF THE ASSESSEE . FROM THE RECORD, WE OBSERVED THAT THE ASSESSEE HAD NOT APPEARED DESPITE SERVICE OF NOTICE. THE NOTICE ISSUED ON 27.08.2019 HAS NOT RECEIVED BACK UN - SERVED . HENCE, WE DECIDED TO DISPOS E OF THE APPEAL ON THE BASIS OF MATERIAL ON RECORD AFTER HEARING THE DEPARTMENTAL REPRESENTATIVE (DR). 5. THE LD. DR SUBMITTED BEFORE US THAT SINCE THE ASSESSEE HAD FAILED TO DISCHARGE THE ONUS OF PROVING GENUINENESS OF THE TRANSACTION OF PURCHASE BY 3 ITA NO. 5724 / MUM/2018 ASSESSMENT YEAR: 2009 - 1 0 ADDU CING COGENT EVIDENCE, THE LD. CIT(A) OUGHT TO HAVE CONFIRMED THE ADDITION MADE BY THE AO IN ACCORDANCE WITH THE LAW LAID DOWN BY THE HONBLE GUJARAT HIGH COURT IN THE CASE OF N.K. PROTEINS LTD. [1996] 58 ITD 428 . THE LD. DR FURTHER SUBMITTED THAT SINCE THE AO HAS MADE THE ADDITION CONSIDERING THE PROFIT EMBEDDED IN THE QUESTIONED TRANSACTION, THE ORDER OF THE LD. CIT(A) IS ERRONEOUS AND THE SAME IS LIABLE TO SET ASIDE. 6. WE HAVE CAREFULLY GONE THROUGH THE RELEVANT RECORD INCLUDING THE CASES RELIED UPON BY THE AUTHORITIES BELOW. WE ARE CONVINCED FROM THE MATERIAL ON RECORD THAT THE ASSESSEE HAS FAILED TO ESTABLISH THE GENUINENESS OF THE PURCHASES IN QUESTION BY ADDUCING COGENT AND CONVINCING EVIDENCE. THE NOTICES ISSUED BY THE AO WERE RECEIVED BACK UN - SERVED . THE ASSESSEE ALSO FAILED TO PRODUCE THE PARTIES BEFORE THE AO FOR VERIFICATION. HENCE, IN OUR CONSIDERED VIEW, THE AO HAS RIGHTLY CONCLUDED THAT THE ASSESSEE HAS NOT MADE THE QUESTIONED PURCHASES FROM THE PARTIES MENTIONED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. HOWEVER, THE AO HAS NOT REJECTED THE SALE OF THE GOODS SO PURCHASED. THE ABOVE - MENTIONED FACTS GIVE RISE TO THE CONCLUSION THAT THE ASSESSEE HAD PURCHASED THE GOODS IN QUESTION FROM GREY MARKET AND EVADED THE TAX APPLICABLE DURING THE RELEVANT PE RIOD. UNDER THESE CIRCUMSTANCES, THE AO HAD NO OPTION BUT TO MAKE AN ADDITION ON ESTIMATION BASIS CONSIDERING THE APPLICABLE RATE OF VAT OR OTHER TAXES AND THE PROFIT EMBEDDED IN THE SAID TRANSACTION. IN THE FIRST APPEAL THE LD. CIT(A) HAS RESTRICTED THE A DDITION TO 12.5%, HOLDING THAT THE ESTIMATE REACHED AT BY THE AO IS ON MUCH HIGHER SIDE. THE OPERATIVE PART OF THE DECISION OF THE LD. CIT (A) READS AS UNDER: - I AM OF THE OPINION THAT THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE ARE MORE AKIN TO THE C ASES DECIDED BY THE HONBLE HIGH COURT IN THE CASE OF SMIT P SETH (SUPRA). THEREFORE, I HEREBY CONFIRM THE DISALLOWANCE TO THE EXTENT 12.5% AMOUNTING TO RS. 7,658/ - OF THE SO CALLED BOGUS PURCHASES MADE BY THE LD. AO. 7. THE LD CIT(A) HAS RESTRICTED THE ADDITION TO 12.5%, ESTIMATED BY THE AO BASICALLY ON THE GROUND THAT THE ADDITION OF TOTAL AMOUNT OF BOGUS PURCHASES IS ON THE HIGHER SIDE AND NOT JUSTIFIED. T HE HONBLE GUJARAT HIGH COURT IN THE CASE CIT VS. SIMIT P. SETH 356 ITR 451(GUJ) , HAS UPHELD THE DECISION OF THE 4 ITA NO. 5724 / MUM/2018 ASSESSMENT YEAR: 2009 - 1 0 TRIBUNAL AND SUSTAINED THE ADDITION 12.5% OF THE TOTAL AMOUNT OF BOGUS PURCHASES DETERMINED BY THE TRIBUNAL, HOLDING THAT ONLY PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES CAN BE ADDED TO INCOME OF THE ASSESSEE. HENCE, IN OUR CONSIDERED VIEW, THE ORDER PASSED BY THE LD. CIT(A) IS BASED ON THE PRINCIPLES OF LAW DOWN BY THE HONBLE GUJARAT HIGH COURT IN THE SAID CASE. ON THE OTHER HAND THE LAW RELIED UPON BY THE LD. DR IS DISTINGUISHABLE ON FACTS. HENCE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT (A) TO INTERFERE WITH. ACCORDINGLY, WE UPHOLD THE ORDER OF THE LD. CIT (A) AND DISMISS THE SOLE GROUND OF THE REVENUES APPEAL AND DIRECT THE AO TO MAKE ADDITION OF 12.5% OF THE TOTAL AMOUNT OF QUESTIONED PURCHASES. IN THE RESULT, APPEAL F ILED BY THE REVENUE FOR ASSESSMENT YEAR 2009 - 2010 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH SEPTEMBER , 2019 . SD/ - SD/ - ( S. RIFAUR RAHMAN ) ( RAM L AL NEGI ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; DATED: 30 / 0 9 / 201 9 ALINDRA, PS / COPY OF THE ORDER FORWARDED TO : 1. / T HE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . / BY ORDER, //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI