RANJAN RAMESH DOSHI, MUMBAI V. INCOME TAX OFFICER WARD-27(3)(1), MUMBAI

ITA 5750/MUM/2018

• Counselvise Citation: [2019] 111 COUNSELVISE.COM (IT) 3786 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 05-10-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: C S SHARMA
• Assessee Lawyers: MRS RUCHI M RATHOD
• Keywords: Bogus purchase; Question of law
• Section: 143(3); 148

Judgement Text

IN THE INC OME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI S . RIFAUR RAHMAN , AM & SHRI RAM LAL NEGI, JM ./ I.T.A. NO . 5750 / MUM/ 2018 ( / ASSESSMENT YEAR: 2011 - 12 ) SHRI R ANJAN RAMESH DOSHI, A/501, SHANKESHWAR TOWER, SUDHA PARK, SANTI PATH, GHATKOPAR (E), MUMBAI - 400 077 / VS. ITO - 27(3)(1 ), ROOM NO. 1, 3RD FLOOR, TOWER NO. 6 VASHI RAILWAY STATION COMMERCIAL COMPLEX, VASHI, NAVI MUMBAI - 77 ./ ./ PAN NO. AEMPD 3478 F ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : MRS. RUCHI M. RATHOD , AR / RESPONDENTBY : SHRI C. S. SHARMA, DR / DATE OF HEARING : 26 .09 .201 9 / DATE OF PRONOUNCEMENT : 30.09.2019 / O R D E R PER S. RIFAUR RAHMAN, ACCOUNTANT MEMBER : THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. COMMIS S IONER OF INCOME TAX (APPEALS) - 25 IN SHORT REFERRED AS LD. CIT(A) , MUMBAI, DATED 12 .07 .18 FOR A SSESSMENT YEAR (IN SHORT A Y ) 2011 - 12 . 2 I.T.A. NO. 5750 /MUM/201 8 SHRI RANJAN RAMESH DOSHI, 2 . T HE BRIEF FACTS OF THE C ASE ARE THAT ASSESSEE IS AN INDIVIDUAL, ENGAGED IN THE BUSINESS OF SUPPLIER OF INDUSTRIAL GOODS AND ITEM. ASSESSEE FILED ITS RETUR N OF INCOME FOR AY 2011 - 12 ON 29 .09.11 DECLAR ING THE TOTAL INCOME AT RS. 5,02,378 / - . SUBSEQUENTLY, ON THE BASIS OF INFORMATION RECEIVED FROM THE INVESTIGATION WING, MUMBAI, WITH REGARD TO THE ASSESSEE HAVING TAKEN ACCOMMODATION BILL FOR PURCHASE THROUGH PARTIES DECLARED AS HAWALA OPERATORS BY MAHARASHTRA SALES TAX DEPARTMENT, T HE CASE WAS RE - OPENED BY ISSUING NOTICE U/S. 148 ON 24 .03.2016 . IN RESPONSE TO THE SAID NOTICE, THE ASSESSEE VIDE LETTER DATED 01.04 .2014 HAS SUBMITTED THAT THE RETURN OF INCOME HAS ALREADY FILED ON 29 .09.11 MAY BE TREATED AS RETURN FILED IN RESPONSE TO NO TICE U/S. 148. AN ORDER U/S 143(3) R.W.S. 147 OF THE ACT WAS PASSED ON 24.03.15 DETERMINING T HE TOTAL INCOME OF THE ASSESSEE AT RS. 21,66,480/ - AF TER MAKING ADDITION OF RS. 16,64,103 / - , BEING PROFIT ELEMENT CALCULATED @ 12.5% E MBEDDED IN PURCHASES OF RS. 1,33,12,823 / - TREATED AS BOGUS. 3 . AGGRIEVED WITH THE ABOVE ORDER, ASSESSEE PREFERRED APPEAL BEFORE LD. CIT(A) AND LD. CIT(A), AFTER CONSIDERING THE 3 I.T.A. NO. 5750 /MUM/201 8 SHRI RANJAN RAMESH DOSHI, SUBMISSION OF THE ASSESSEE AS WELL ORDER PASSED BY AO , HAD SUSTAINED THE DISALLOWANCE MADE BY AO @ 12.5%. 4 . AGGRIEVED WITH THE ABOVE ORDER, ASSESSE HAS PREFERRED THE APPEAL BEFORE US. 5 . LD. AR SUBMITTED THAT LD. CIT(A) HAS SUSTAINED THE ADDITION MADE BY THE AO ON ESTIMATING @ 12.5% OF THE ALLEGED BOGUS PURCHASES OVERLOOKING THAT ASSESSEE HAS ALREADY DECLARED GP RATIO . HE SUBMITTED A CHART OF GROSS PROFIT AT THE TIME OF HEARING, WHICH IS PLACED ON RECORD. A CCORDINGLY, HE SUBMITTED THAT 12.5% ESTIMATED BY LD. CIT(A) IS TOO HIGH AND HE RELIED UPON THE JUDGMENT PASSED BY THE HONBLE JURISDICTIONAL BOMBAY HIGH COURT IN ITA NO. 1004 OF 2016 IN THE CASE OF PR.CIT VRS. M/S MOHOMMAD HAJI ADAM & CO. 6. ON THE OTHER HAND, LD. DR RELIED UPON THE ORDERS PASSED BY REVENUE AUTHORITIES AND SUBMITTED THAT ESTIMATION MADE BY LD. CIT(A) SHOULD BE SUSTAINED. 4 I.T.A. NO. 5750 /MUM/201 8 SHRI RANJAN RAMESH DOSHI, 7. CONSIDERING THE RIVAL CONTENTIONS AND MATERIAL PLACED ON RECORD, WE NOTICE THAT HONBLE JURISDICTIONAL BOMBAY HIGH COURT IN ITA NO. 1004 OF 2016 IN THE CASE OF PR.CIT VRS. M/S MOHOMMAD HAJI ADAM & CO , WHEREIN IT WAS HELD AS UNDER: - 8 . IN THE PRESENT CASE, AS NOTED ABOVE, THE ASSESSEE WAS A TRADER OF FABRICS. THE A.O. FOUND THREE ENTITIES WHO WERE INDULGING IN BOGUS BILLING ACTIVITIES. A.O. FOUND THAT THE PURCHASES MADE BY THE ASSESSEE FROM THESE ENTITIES WERE BOGUS. THIS BEING A FINDING OF FACT, WE HAVE PR OCEEDED ON SUCH BASIS. DESPITE THIS, THE QUESTION ARISES WHETHER THE REVENUE IS CORRECT IN CONTENDING THAT THE ENTIRE PURCHASE AMOUNT SHOULD BE ADDED BY WAY OF ASSESSEE'S ADDITIONAL INCOME OR THE ASSESSEE IS CORRECT IN CONTENDING THAT SUCH LOGIC CANNOT BE APPLIED. THE FINDING OF THE CIT(A) AND THE TRIBUNAL WOULD SUGGEST THAT THE DEPARTMENT HAD NOT DISPUTED THE ASSESSEE'S SALES. THERE WAS NO DISCREPANCY BETWEEN THE PURCHASES SHOWN BY THE ASSESSEE AND THE SALES DECLARED. THAT BEING THE POSITION, THE TRIBUNAL WAS CORRECT IN COMING TO THE CONCLUSION THAT THE PURCHASES CANNOT BE REJECTED WITHOUT DISTURBING THE SALES IN CASE OF A TRADER. THE TRIBUNAL, THEREFORE, CORRECTLY RESTRICTED THE ADDITIONS LIMITED TO THE EXTENT OF BRINGING THE G.P. RATE ON PURCHASES AT THE SAME RATE OF OTHER GENUINE PURCHASES. THE DECISION OF THE GUJARAT HIGH 5 I.T.A. NO. 5750 /MUM/201 8 SHRI RANJAN RAMESH DOSHI, COURT IN THE CASE OF N.K. INDUSTRIES LTD. (SUPRA) CANNOT BE APPLIED WITHOUT REFERENCE TO THE FACTS. IN FACT IN PARAGRAPH 8 OF THE SAME JUDGMENT THE COURT HELD AND OBSERVED AS UNDER - ' S O FAR AS THE QUESTION REGARDING ADDITION OF RS.3,70,78,125/ - AS GROSS PROFIT ON SALES OF RS.37.08 CRORES MADE BY THE ASSESSING OFFICER DESPITE THE FACT THAT THE SAID SALES HAD ADMITTEDLY BEEN RECORDED IN THE REGULAR BOOKS DURING FINANCIAL YEAR 1997 - 98 IS C ONCERNED, WE ARE OF THE VIEW THAT THE ASSESSEE CANNOT BE PUNISHED SINCE SALE PRICE IS ACCEPTED BY THE REVENUE. THEREFORE, EVEN IF 6 % GROSS PROFIT IS TAKEN INTO ACCOUNT, THE CORRESPONDING COST PRICE IS REQUIRED TO BE DEDUCTED AND TAX CANNOT BE LEVIED ON TH E SAME PRICE. WE HAVE TO REDUCE THE SELLING PRICE ACCORDINGLY AS A RESULT OF WHICH PROFIT COMES TO 5.66 %. THEREFORE, CONSIDERING 5.66 % OF RS.3,70,78,125/ - WHICH COMES TO RS.20,98,621.88 WE THINK IT FIT TO DIRECT THE REVENUE TO ADD RS.20,98,621.88 AS GROS S PROFIT AND MAKE NECESSARY DEDUCTIONS ACCORDINGLY. ACCORDINGLY, THE SAID QUESTION IS ANSWERED PARTIALLY IN FAVOUR OF THE ASSESSEE AND PARTIALLY IN FAVOUR OF THE REVENUE.' 6 I.T.A. NO. 5750 /MUM/201 8 SHRI RANJAN RAMESH DOSHI, 9 IN THESE CIRCUMSTANCES, NO QUESTION OF LAW, THEREFORE, ARISES. ALL INCOME TAX APPE ALS ARE DISMISSED, ACCORDINGLY. NO ORDER AS TO COSTS. 8 . THEREFORE, RESPECTFULLY FOLLOWING THE AFORESAID DECISION, WE NOTICE THAT SINCE ASSESSEE HAS ALREADY DECLARED GP RATIO AND THE PRODUCTS WHICH FALLS IN THE SLAB RATE OF 4% , WHICH IS PLACED ON RECORD. SINCE THE CASE ARE DIFFERENT FROM CASE TO CASE BASIS AND THERE IS NO DISPUTE THAT ASSESSEE HAS PAID VAT TO THE ALLEGED SUPPLIERS OF MATERIAL, HOWEVER, THERE IS NO RECORD TO COMPLEMENT THAT THE VAT WAS ACTUALLY PAID TO GOVT. ACC OUNT. THEREFORE, WE ARE INCLINED TO ESTIMATE THE INCOME @ 5%. ACCORDINGLY, WE DIRECT THE AO TO ESTIMATE THE INCOME OF THE ASSESEE @ 5% OF THE ALLEGED PURCHASES. 9 . IN THE NET RESULT, THE APPEAL FILED BY THE ASSESSEE STA NDS PARTLY ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH SEPT 20 19 . SD/ - SD/ - ( RAM LAL NEGI ) (S. RIFAUR RAHMAN ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED : 30 . 09 .201 9 SR.PS . DHANANJAY 7 I.T.A. NO. 5750 /MUM/201 8 SHRI RANJAN RAMESH DOSHI, / 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 I LE / BY ORDER, . / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI