MUKUNDCHAND M. VAGHELA HUF, MUMBAI V. ITO 19(2)(3), MUMBAI

ITA 5764/MUM/2018

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 2005 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-11-2019
• 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: BHERA RAM
• Assessee Lawyers: ADITI SHROFF
• Section: 143(1); 201; 64; 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 .576 4 / MUM . /2018 ( ASSESSMENT YEAR : 201 1 1 2 ) MUKUNDCHAND M. VAGHELA HUF 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 AA FHM2329P . APPELLANT V/S INCOME TAX OFFICER WARD 19 ( 2 )( 3 ), MUMBAI . RESPONDENT ASSESSEE BY : MS. ADITI SHROFF REVENUE BY : SHRI BHERA RAM DATE OF HEARING 24 .11.2019 DATE OF ORDER 29.11.2019 O R D E R PER SAKTIJIT DEY. J.M. T HE CAPTIONED APPEAL HAS BEEN FILED BY THE ASSESSEE CHALLENGING THE ORDER DATED 2 3 RD JULY 2018 , PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) 6 , MUMBAI, PERTAINING TO THE ASSESSMENT YEAR 201 1 12 . 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 3. IN GROUND NO.2, THE ASSESSEE HAS CHALLENGED THE DISALLOWANCE OF ` 8,04,351 , ON ACCOUNT OF NON GENUINE PURCHASES. 4. BRIEF FA CTS ARE, THE ASSESSEE COMPANY, A HINDU UNDIVIDED FAMILY (HUF) , IS TRADING IN FERROUS AND NON FERROUS METALS THROUGH ITS PROPRIETARY CONCERN IN THE NAME AND STYLE OF M/S. GIRIRAJ STEELS . FOR THE ASSESSMENT YEAR UNDER DISPUTE, THE ASSESSEE FILED ITS RETURN OF INCOME ON 30 TH SEPTEMBER 201 1 , DECLARING TOTAL INCOME OF ` 2 , 05 , 221 . THE RETURN OF INCOME FILED BY THE ASSESSEE WAS INITIALLY PROCESSED UNDER SECTION 143(1) OF THE ACT. O N THE BASIS OF INFORMATION RECEIVED FROM DGIT (INV.), MUMBAI, AS WELL AS THE SALES TAX DEPARTMENT, GOVERNMENT OF MAHARASHTRA, INDICATING THAT PURCHASES WORTH ` 64 , 34 , 814 , CLAIMED TO HAVE BEEN MADE FROM EIGHT 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 PURCHASES. THUS, THE ASSESSING OFFICER ULTIMATELY HELD THAT THE PURCHASES MADE BY THE ASSESSEE ARE NON GENUINE. HO WEVER, CONSIDERING THE FACT THAT THE ASSESSEE HAS RECORDED THE PURCHASES IN HIS BOOKS OF ACCOUNT AND NOT MADE ANY OUT OF BOOKS SALES, HE RESTRICTED THE ADDITION TO 12.5% OF THE NON GENUINE PURCHASES. THE 3 ASSESSEE CHALLENGED THE AFORESAID ADDITION BEFORE TH E FIRST APPELLATE AUTHORITY. 5. A FTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, LEARNED COMMISSIONER (APPEALS), HOWEVER, DID NOT FIND MERIT IN THEM AND ACCORDINGLY , SUSTAINED THE ADDITION MADE BY THE ASSESSING OFFICER. 6. THE L EARNED AUTHORISED REPRESENTATI VE SUBMITTED , THOUGH, THE ASSESSEE WAS UNABLE TO PROVE THE GENUINENESS OF PURCHASES DUE TO VARIOUS FACTORS WHICH PREVENTED IT FROM DOING SO, HOWEVER, THE PROFIT RATE ADOPTED @ 12.5% IS HIGH AND UNREASONABLE CONSIDERING THE NATURE OF BUSINESS, VAT RATE AND GROSS PROFIT SHOWN BY THE ASSESSEE. SHE SUBMITTED , THE APPLICABLE VAT RATE ON THE GOODS TRADED BY THE ASSESSEE IS 4%. WHEREAS, THE ASSESSEE HA S SHOWN GROSS PROFIT RATE OF 5.2 %. THUS, S HE SUBMITTED , THE ADDITION SHOULD BE RESTRICTED BETWEEN 5% TO 6% ON THE NON GENUINE PURCHASES. 7. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED , 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 PURCHA SES CANNOT BE ALLOWED. HOWEVER, SALES EFFECTED BY THE ASSESSEE 4 HAVE NOT BEEN DISPUTED OR DOUBTED. THAT BEING THE CASE, THE ASSESSING OFFICER HAS RESTRICTED THE ADDITION TO THE PRO FIT ELEMENT ESTIMATED @ 12.5% ON THE NON GENUINE PURCHASES. BEFORE US, THE DI SPUTE IS RESTRICTED TO THE QUANTUM OF PROFIT ELEMENT WHICH CAN BE CONSIDERED FOR 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 DISALLOWANCE CAN BE R EASONABLY 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 THE RESULT, APPEAL STANDS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN C OURT ON 29.11.2019 SD/ - N.K. PRADHAN ACCOUNTANT MEMBER SD/ - SAKTIJIT DEY JUDICIAL MEMBER MUMB AI, DATED: 29.11.2019 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