R.K. SALES CORPORATION, MUMBAI V. ITO WD 13(2)(1), MUMBAI

ITA 5727/MUM/2014

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 2330 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-11-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 14-10-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 11-09-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: J P BCORAGRA
• Keywords: Business income; Onus to prove

Judgement Text

- IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI , BEFORE SHRI SANJAY ARORA , A M ./ I.T.A. NO. 5727 /MUM/2014 ( / ASSES SMENT YEAR: 2010 - 11 ) R. K. SALES CORPORATION 307, POPATLAL CHAMBERS, 4 TH CROSS LANE, CLIVE ROAD, DANA BUNDER, MUMBAI - 400 009 / VS. ITO - WARD 13(2)(1) AAYAKAR BHAVAN, MUMBAI ./ ./ PAN/GIR NO. AAAFR 4578 A ( / APP ELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI J. P. BCORAGRA / RESPONDENT BY : SMT. BHARATI SINGH / DATE OF HEARING : 05.11.2015 / DATE OF PRONOUNCEMENT : 20 .11.2015 / O R D E R PER SANJAY ARORA, A. M.: THIS IS AN A PPEAL BY THE ASSESSEE DIRECTED AGAINST THE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS) - 24 , MUMBAI (CIT(A) FOR SHORT) DATED 24.06.2014 , PARTLY ALLOWING THE A SSESSEES APPEAL CONTESTING ITS ASSESS MENT U/S.143(3) OF THE INCOME TAX ACT, 1961 (THE ACT HEREINAFTER) FOR THE ASSESSMENT YEAR (A.Y.) 2010 - 11 VIDE ORDER DATED 19.3.2013 . 2 ITA NO. 5727/MUM/2014 (A.Y. 2010 - 11) R. K. SALES CORPORATION VS. ITO 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A FIRM ENGAGED IN THE BUSINESS OF TRADING IN WASTE PAPER, SUPPLYI NG OLD NEWSPAPER S AND WASTE PAPER (RADDI S ) TO PAPER MANUFACTURING MILLS AND OTHER RESELLERS IN THE SA ID TRADE. ITS ACCOUNTS FOR THE YEAR REVEAL ED PURCHASE S AT RS.578.48 LACS, OF WHICH FOR RS.303.99 LACS W ERE FROM UNREGISTERED DEALERS AND THE BALANCE RS.274 .49 LACS FROM REGISTERED DEALERS. THE ASSESSEE EXPLAINED THE UNREGISTERED PURCHASES AS BEING FROM H AWKERS (RADDIWALAS) WHO COLLECT THE WASTE PAPER FROM D OOR TO DOOR, AND WHICH I T MAKES IN LOTS OF 100/200 KGS. COMPLETE DETAILS , BOTH IN THE QUANTITY AND IN V ALUE , STOOD MAINTAINED; THE ASSESSEE MAINTAINING BOTH , PURCHASE AND SALE REGISTER S , AS WELL AS STOCK REGISTER. IT DID NOT, HOWEVER, ON BEING CALLED UPON TO , FURNISH THE NAMES AND ADDRESSES OF THE SUPPLIERS FROM WHOM THE UNREGISTERED PURCHASES WERE MADE. TH E ASSESSEES EXPLANATION THAT THIS WAS SO AS IT WAS OPERATING IN AN UNORGANIZED SECTOR , WAS FOUND NOT VALID. BY OWN ADMISSION, THE PAYMENTS TO THE SUPPLIERS WERE MADE 15 TO 45 DAYS FROM THE DATE OF SALE OF THE GOODS ( BY THE ASSESSEE ) , SO THAT THE GOODS WER E PURCHASED BY IT ON CREDIT. IN FACT, THE ASSESSEE W AS PURCHASING GOODS FROM PRINCIPALLY THE SAME SET OF PERSONS, A ND OPERATING IN AN ORGANIZED MANNER. THE PURCHASES, THE ONUS TO ESTABLISH WHICH WAS SQUARELY ON IT, WERE NOT AMENABLE TO PROPER VERIFICATION. THE ASSESSING OFFICER (A.O.) , ACCORDINGLY, DISALLOWED 2% OF THE SAID PURCHASES, I.E., RS.6,07,974/ - , CONSIDERING THE SAME AS UNVERIFIABLE/INFLATED TO THAT EXTENT, AND ASSESSED THE ASSESSEES BUSINESS INCOME ACCORDINGLY. IN APPEAL, THE LD. CIT(A) CONCURRED WITH THE FINDINGS OF THE A.O. ; THE ASSESSEE BEING UNABLE TO IMPROVE UPON ITS CASE IN ANY MANNER. THE ASSESSEE WAS RUNNING AN ORGANIZED BUSINESS, PURCHASING GOODS ON CREDIT, AND FROM SUBSTANTIALLY THE SAME SET OF SUPPLIERS . I T WAS THEREFORE NOT UNDERSTOOD THAT WHY THE IR NAMES AND ADDRESSES COULD NOT BE ADDUCED , SO THAT RESULTING PURCHASES, WHICH WERE IN CASH, WERE UNVERIFIABLE. HE, HOWEVER, IN VIEW OF THE ASSESSEE HAVING , AT 4.43%, RETURNED A HIGHER GROSS PROFIT RATIO TH A N THAT FOR A.Y. 2008 - 09 (AT 4.08%), REDUCE D THE DISALLOWANCE TO 1.5% (FROM 2%) OF THE IMPUGNED PURCHASES. AGGRIEVED, THE ASSESSEE IS IN SECOND APPEAL. 3 ITA NO. 5727/MUM/2014 (A.Y. 2010 - 11) R. K. SALES CORPORATION VS. ITO 3. BEFORE US, IT WAS SUBMITTED BY THE LD. A UTHORIZED REPRESENTATIVE (A R ) , THE ASSESSEES COUNSEL, THA T THE VERY SAME ISSUE HAD ARISEN IN THE ASSESSEES CASE FOR A.Y. 2008 - 09 (IN ITA NO. 760/MUM(D)/2010), WHEREIN THE T RIBUNAL VIDE ITS ORDER DATED 25.02.2015 (COPY ON RECORD) , EVEN AS IT FOUND THAT THE ASSESSEE HAD NOT BEEN ABLE TO SUBSTANTIATE ITS PURCHASES, AND THUS DISCHARGE THE ONUS FOR ESTAB LISHING ITS CLAIM FOR DEDUCTION IN ITS RESPECT, HELD THAT THERE WAS NO JUSTIFICATION FOR THE A.O. FOR ADOPTING 2% OF THE RELEVANT PURCHASES; THE REVENUE CITING NO COMPARATIVE CASES WHILE MAKING THE DISALLOWANCE, WHICH IT RESTRICTED TO RS.2 LACS. THE SAME W AS PRAYED FOR BEING ADOPTED IN - AS - MUCH AS HE AGREED THAT S O ME ESTIMATE IN THE MATTER WOULD HAVE TO BE NECESSARILY MADE. THE LD. DEPARTMENTAL REPRESENTATIVE (DR), ON THE OTHER HAND, WOULD SUBMIT OF THE MATTER BEING TOTALLY FACTUAL, S O THAT THE ORDER BY THE TRIBUNAL FOR A.Y. 2008 - 09 D ID NOT LAY DOWN ANY BINDING PRECEDENT FOR BEING ADOPTED. 4. THE PARTIES STAND HEARD, AND THE MATERIAL ON RECORD PERUSED. THE FIRST OBSERVATION IN THE MATTER IS THAT THE FACTS AND CIRCUMSTANCES OF THE CASE AND, AS IT APPEARS , TH E ARGUMENT SET UP IN CANVASSING THE RESPECTIVE CASE S IS THE SAME AS THAT FOR A.Y. 2008 - 09. TRUE, THE BURDEN OF PROOF IS ON THE ASSESSEE, WHO COULD NOT STATE ANY REASON, MUCH LESS COGENT , FOR NON - SUBMISSION OF THE NAMES AND ADDRESSES OF THE SUPPLIERS OF GOO DS PURCHASED IN THE NON - REGISTERED DEALER CATEGORY . AGAIN, THE ORDER BY THE TRIBUNAL IN A.Y . 2008 - 09 CANNOT BE SAID TO L AY D OW N A N Y BINDING PRECEDENT IN - AS - MUCH AS THE ISSUE IS ESSENTIALLY ONE OF ESTIMATE, I.E., THE EXTENT TO WHICH THE PURCHASES MAY BE CON SIDERED, IN THE FACTS AND CIRCUMSTANCES OF THE CASE , AS INFLATED. THE TRIBUNAL AGAIN HAS NOT SPECIFIED ANY BASIS, AND MADE AN AD - HOC ESTIMATE, AT A SUM WHICH IT CONSIDERED REASONABLE TO PLUG THE LEAKAGE OF THE REVENUE. IN THIS REGARD IT NEEDS TO BE APPRECI ATED, EVEN AS ARGUED BY THE LD. AR, THAT THE REVENUE HAS NOT SEGREGATED (OR CAUSED TO) THE GROSS PROFIT EARNED ON THE REGISTERED AND NON - REGISTERED PURCHASES WHICH COULD BE, GIVEN THAT THE ASSESSEE IS MAINTAINING THE RELEVANT R ECORD S , VIZ. PURCHASE , SALE AND STOCK REGISTERS , OR OTHERWISE MADE OUT 4 ITA NO. 5727/MUM/2014 (A.Y. 2010 - 11) R. K. SALES CORPORATION VS. ITO ANY CASE WITH REFERENCE TO THE PRICING OF THE GOODS BOUGHT AS UNREGISTERED PURCHASES VIS - - VIS THAT BOUGHT FROM REGISTERED DEALERS. THE LD. CIT(A) HAS NOTED THE GROSS PROFIT TO BE COMPARABLE; RATHER, IMPROVED , W ITH REFERENCE TO THAT FOR A.Y. 2008 - 09. UNDER THE CIRCUMSTANCES, I FIND NO REASON TO ESTIMATE IN EXCESS OF THAT BY THE TRIBUNAL IN THE ASSESSEES CASE FOR A.Y. 2008 - 09, SO THAT I RESTRICT THE DISALLOWANCE ON ACCOUNT OF UNVERIFI ABLE CASH PURCHASES FROM UNRE GISTERED DEALERS TO , AGAIN, A FLAT SUM OF RS.2 LACS. I DECIDE ACCORDINGLY , AND THE ASSESSEE GETS PART RELIEF . 5. IN THE RESULT, THE ASSESSEES APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON NOVEMBER 20 , 201 5 SD/ - (S ANJAY ARORA) / A CCOUNTANT MEMBER MUMBAI ; DATED : 20 . 11 .201 5 . . ./ ROSHANI , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F ILE / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI