BHANSALI FERROMET PVT. LTD., MUMBAI V. ITO 5 (1)(2), MUMBAI

ITA 5763/MUM/2018

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 1983 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-11-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 05-10-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BHERA RAM
• Assessee Lawyers: ADITI SHROFF
• Section: 143(1); 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY , JUDICIAL MEMBERAND SHRI N.K. PRADHAN, ACCOUNTANT MEMBER ITA NO .5763 / MUM . /2018 ( ASSESSMENT YEAR : 2010 11 ) BHANSALI FERROMET PVT. LTD. C/O D.C. BOTHRA & CO. LLP (CA) (FORMERLY KNOWN AS D.C. BOTHRA & CO.) 297, TARDEO ROAD, WILLE MANSION 1 ST FLOOR, OPP. BANK OF INDIA NANA CHOWK, MUMBAI 400 007 PAN AABCB1688D . APPELLANT V/S INCOME TAX OFFICER WARD 5(1)(2), MUMBAI . RESPONDENT ASSESSEE BY : MS. ADITI SHROFF REVENUE BY : SHRI BHERA RAM DATE OF HEARING 21.11.2019 DATE OF ORDER 28.11.2019 O R D E R PER SAKTIJIT DEY. J.M. T HE CAPTIONED APPEAL HAS BEEN FILED BY THE ASSESSEE CHALLENGING THE ORDER DATED 28 TH JUNE 2018, PASSED BY THE LEARNED COMMISSIONER (APPEALS) 10 , MUMBAI, FOR THE ASSESSMENT YEAR 2010 11. 2. GROUND NO.1, CHALLENGING THE VALIDITY OF RE OPENING OF ASSESSMENT UNDER SECTION 147 OF THE INCOME TAX ACT, 1961 (FOR SHORT 'THE ACT' ) IS NOT PRESSED, HENCE, DISMISSED. 2 BHANSALI FERROMET PVT. LTD. 3. IN GROUND NO.2, THE ASSESSEE HAS CHALLENGED THE DISALLOWANCE OF ` 2,74,718, ON ACCOUNT OF NON GENUINE PURCHASES. 4. BRIEF FACTS ARE, THE ASSESSEE COMPANY IS ENGAGED IN TRADING OF FERROUS AND NON FERROUS METALS. FOR THE ASSESSMENT YEAR UNDER DISPUTE, THE ASSESSEE FILED ITS RETURN OF INCOME ON 30 TH SEPTEMBER 2010, DECLARING TOTAL INCOME OF ` 11,83,674. THE RETURN OF INCOME FILED BY THE ASSESSEE WAS INITIALLY PROCESSED UNDER SECTION 143(1) OF THE ACT. SUBSEQUENTLY, ON THE BASIS OF INFORMATION RECEIVED FROM DGIT (INV.), MU MBAI, AS WELL AS THE SALES TAX DEPARTMENT, GOVERNMENT OF MAHARASHTRA, INDICATING THAT PURCHASES WORTH ` 21,97,746, CLAIMED TO HAVE BEEN MADE FROM FOUR PARTIES ARE NON GENUINE, THE ASSESSING OFFICER RE OPENED THE ASSESSMENT UNDER SECTION 147 OF THE ACT. IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER CALLED UPON THE ASSESSEE TO PROVE THE GENUINENESS OF PURCHASES. AS ALLEGED BY THE ASSESSING OFFICER, THE ASSESSEE FAILED TO FURNISH THE REQUIRED DOCUMENTARY EVIDENCE TO PROVE THE GENUINENESS OF PU RCHASES. THUS, THE ASSESSING OFFICER ULTIMATELY HELD THAT THE PURCHASES MADE BY THE ASSESSEE ARE NON GENUINE. HOWEVER, RELYING UPON HIS DECISION IN RESPECT OF SIMILAR ISSUE IN ASSESSEES OWN CASE IN ASSESSMENT YEAR 2009 10, HE RESTRICTED THE ADDITION TO 12 .5% OF THE NON GENUINE PURCHASES. THE ASSESSEE CHALLENGED THE AFORESAID ADDITION BEFORE THE FIRST APPELLATE AUTHORITY. 3 BHANSALI FERROMET PVT. LTD. 5. THE LEARNED COMMISSIONER (APPEALS) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, HOWEVER, DID NOT FIND MERIT IN THEM AND ACCORDINGL Y SUSTAINED THE ADDITION MADE BY THE ASSESSING OFFICER. 6. THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED THAT THOUGH TE ASSESSEE WAS UNABLE TO PROVE THE GENUINENESS OF PURCHASES DUE TO VARIOUS FACTORS WHICH PREVENTED IT FROM DOING SO, HOWEVER, THE PROFIT R ATE ADOPTED @ 12.5% IS HIGH AND UNREASONABLE CONSIDERING THE NATURE OF BUSINESS, VAT RATE AND GROSS PROFIT SHOWN BY THE ASSESSEE. SHE SUBMITTED THAT THE APPLICABILITY OF VAT RATE TO THE GOODS TRADED BY THE ASSESSEE IS 4%. WHEREAS, THE ASSESSEE HAS SHOWN GR OSS PROFIT RATE OF 5.3%. THUS, HE SUBMITTED THAT THE ADDITIONS SHOULD BE RESTRICTED BETWEEN 5% AND 6% OF THE NON GENUINE PURCHASES. 7. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE ADDITION MADE @ 12.5% BEING REASONABLE SHOULD NOT BE INTERFERED WITH. 8. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. UNDISPUTEDLY, THE ASSESSEE WAS UNABLE TO PROVE THE GENUINENESS OF PURCHASES MADE WITH CLINCHING EVIDENCE. THEREFORE, THE EXPENDITURE INCURRED BY THE ASSESSEE ON ACCOUNT OF SUCH PURCHASES CANNOT BE ALLOWED. HOWEVER, SALES EFFECTED BY THE ASSESSEE HAVE NOT BEEN DISPUTED OR DOUBTED. THAT BEING THE CASE, THE ASSESSING 4 BHANSALI FERROMET PVT. LTD. OFFICER HAS RESTRICTED THE ADDITION TO THE PROFIT ELEMENT ESTIMATED @ 12.5% OF THE NON GENUINE PURCHASES. BEFORE US, THE DISPUTE IS RESTRICTED TO THE QUANTUM OF PROFIT ELEMENT WHICH CAN BE CONSIDERED FOR THE ADDITION. AFTER CONSIDERING THE NATURE OF BUSINESS, THE GROSS PROFIT SHOWN BY THE ASSESSEE AND APPLICABLE VAT RATE, WE ARE OF THE CONSIDERED OPINION THAT DISALLOWAN CE CAN BE REASONABLY RESTRICTED TO 8% OF THE NON GENUINE PURCHASES. THE ASSESSING OFFICER IS DIRECTED TO WORK OUT THE DISALLOWANCE ACCORDINGLY. THIS GROUND IS PARTLY ALLOWED. 9. IN GROUND NO.3, THE ASSESSEE HAS CHALLENGED THE AD HOC DISALLOWANCE OF ` 50,000, OUT OF MOTOR CAR EXPENDITURE. 10. BRIEF FACTS ARE, DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS DEBITED AN AMOUNT OF ` 2,89,962, TOWARDS VEHICLE EXPENDITURE INCLUDING INSURANCE. NOTICING THE ABOVE, THE ASSESSING OFFICER CALLED UPON THE ASSESSEE TO PROVE SUCH CLAIM BY FURNISHING EVIDENCE INCLUDING LOG BOOK FOR TRAVELLING. ALLEGING THAT THE ASSESSEE WAS UNABLE TO SUBMIT THE LOG BOOK FOR TRAVELLING, HE MADE AN AD HOC DISALLOWANCE OF ` 50,000, OUT OF THE EXPENDITURE CLAIMED. THE DISALLOWANCE MADE WAS ALSO SUSTAINED BY THE LEARNED COMMISSIONER (APPEALS) WHILE DECIDING ASSESSEES APPEAL. 11. THE LEARNED AUTHORISED REPRESENTATIVE SU BMITTED THAT THE ASSESSEE BEING A COMPANY THERE CANNOT BE ANY PERSONAL USE OF THE 5 BHANSALI FERROMET PVT. LTD. VEHICLE SO AS TO MAKE DISALLOWANCE ON THAT ACCOUNT. IN SUPPORT OF SUCH CONTENTION, SHE RELIED UPON THE DECISION OF THE TRIBUNAL, AHMEDABAD BENCH, IN DCIT V/S DEVER SONS INDUS TRIES PVT. LTD., ITA NO.431/AHD./ 2016, DATED 1 ST JANUARY 2019. 12. THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED UPON THE OBSERVATIONS OF THE ASSESSING OFFICER AND THE LEARNED COMMISSIONER (APPEALS). 13. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE MAT ERIAL ON RECORD. UNDISPUTEDLY, THE ASSESSEE IS A COMPANY AND THE VEHICLE AS STATED BEFORE US HAS BEEN SHOWN IN THE FIXED ASSET OF THE COMPANY. THEREFORE, THE ELEMENT OF PERSONAL USE OF VEHICLE CANNOT BE PRESUMED UNLESS THERE IS EVIDENCE BROUGHT ON RECORD T O INDICATE SUCH USE. IT IS EVIDENT THAT THE ASSESSING OFFICER HAS MADE AN AD HOC DISALLOWANCE OF ` 50,000, PURELY ON CONJECTURE AND SURMISES BY STATING THAT THE ASSESSEE FAILED TO FURNISH LOG BOOK FOR TRAVELLING. IN OUR VIEW, SUCH PRESUMPTIVE DISALLOWANCE WITHOUT ANY BASIS CANNOT BE SUSTAINED. THE DECISION OF THE CO ORDINATE BENCH CITED BEFORE US BY THE LEARNED AUTHORISED REPRESENTATIVE ALSO SUPPORT THIS VIEW. IF THE ASSESSING OFFICER WANTS TO MAKE ANY DISALLOWANCE ON ACCOUNT OF PERSONAL USE OF VEHICLE BY T HE DIRECTORS OR ANY OTHER PERSON, MATERIAL HAS TO BE BROUGHT ON RECORD TO PROVE SUCH FACTS. NO DISALLOWANCE WITHOUT ANY BASIS CAN BE MADE. ACCORDINGLY, THE ADDITION MADE IS DELETED. 6 BHANSALI FERROMET PVT. LTD. 14. IN THE RESULT, APPEAL STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN C OURT ON 28.11.2019 SD/ - N.K. PRADHAN ACCOUNTANT MEMBER SD/ - SAKTIJIT DEY JUDICIAL MEMBER MUMBAI, DATED: 28.11.20 1 9 COPY OF THE ORDER FORWARDED TO : (1) THE ASSESSEE; (2) THE REVENUE; (3) THE CIT(A); (4) THE CIT, MUMBAI CITY CONCERNED; (5) THE DR, ITAT, MUMBAI; (6) GUARD FILE . TRUE COPY BY ORDER PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY ASSISTANT REGISTRAR ITAT, MUMBAI