PARESHKUMAR BABULAL KADHI, MUMBAI V. ACIT 27(2)(5), MUMBAI

ITA 5806/MUM/2018

• Counselvise Citation: [2019] 111 COUNSELVISE.COM (IT) 3783 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 22 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: 08-10-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: C S SHARMA
• Keywords: Bogus purchase; Onus to prove
• 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 . 5806 / MUM/ 2018 ( / ASSESSMENT YEAR: 2011 - 12 ) PARESHKUMAR BABULAL KADHI, 8, KAVITA GROUND FLOOR, R. B. MEHTA MARG, GHATKOPAR (E), MUMBAI - 400 077 / VS. ACIT - 27(2)(5), ROOM NO. 421, 4 TH FLOOR, TOWER NO. 6 VASHI RAILWAY STATION COMMERCIAL COMPLEX, VASHI, NAVI MUMBAI. ./ ./ PAN NO. AA CPK 0992 P ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI RAVINDRA POOJARY, 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 REVENUE AGAINST THE ORDER OF LD. COMMIS S IONER OF INCOME TAX (APPEALS) - 25 IN SHORT REFERRED AS LD. CIT(A) , MUMBAI, DATED 11.07 .18 FOR A SSESSMENT YEAR (IN SHORT A Y ) 2011 - 12 . 2 I.T.A. NO. 5806 /MUM/201 8 PARESHKUMAR BABULAL KADHI, 2 . T HE BRIEF FACTS OF THE C ASE ARE THAT ASSESSEE IS AN INDIVIDUAL, RUNNING A PROPRIETARY CONCERN IN THE NAME & STYLE OF M/S. VIJAY TRADING CO. ASSESSEE FILED ITS RETURN OF INCOME FOR AY 2011 - 12 ON 27.09.11 DECLARING THE TOTAL INCOME AT RS. 4,96,399/ - . 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, THE CASE WAS RE - OPENED BY ISSUING NOTICE U/S. 148 ON 18.03.2016, W HICH WAS DULY SERVED ON THE ASSESSEE. IN RESPONSE TO THE SAID NOTICE, THE ASSESSEE VIDE LETTER DATED 02.04.2016 HAS SUBMITTED THAT THE RETURN OF INCOME ALREADY FILED MAY BE TREATED AS RETURN FILED IN RESPONSE TO NOTICE U/S. 148. AN ORDER U/S 143(3) R.W.S. 147 OF THE ACT WAS PASSED ON 16.12.2016 DETERMINING T HE TOTAL INCOME OF THE ASSESSEE AT RS. 9, 78,150 / - AFTER MAKING ADDITION OF RS. 4,81,747/ - , BEING PROFIT ELEMENT CALCULATED @ 12.5% EMBEDDED IN PURCHASES OF RS. 38,53,976/ - TREATED AS BOGUS. 3 I.T.A. NO. 5806 /MUM/201 8 PARESHKUMAR BABULAL KADHI, 3 . AGGRIEVED WITH THE ABOVE ORDER, ASSESSEE PREFERRED APPEAL BEFORE LD. CIT(A) AND LD. CIT(A), AFTER CONS IDERING THE 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 . AT THE TIME OF HEARING, LD. AR SUBMITTED THAT ASSESSEE IS PRESSING GROUND NO. 2 AND NOT PRESSING OTHER GROUNDS . THEREFORE, WITH REGARD TO GROUND NO. 2, 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 OF 13.21% AND OVER THE YEARS, ASSESSEE HAS DECLARED INCOME 13% TO 14%. HE SUBMITTED A CHART OF GROSS PROFIT AT THE TIME OF HEARING. FURTHER, HE SUBMITTED THAT THE ASSESSEES C ASE FALLS IN THE 4% VAT AND NOT IN 10% SLAB, ACCORDINGLY, HE SUBMITTED THAT 12.5% ESTIMATED BY LD. CIT(A) IS TOO HIGH AND HE RELIED UPON THE CASE OF COORDINATE BENCH OF 4 I.T.A. NO. 5806 /MUM/201 8 PARESHKUMAR BABULAL KADHI, ITAT PASSED IN ITA NO. 1862/MUM/2017, WHEREIN THE BENCH HAS ESTIMATED @ 3% OF THE ALLEG ED BOGUS PURCHASES. 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. 7. CONSIDERING THE RIVAL CONTENTIONS AND MATERIAL PLACED ON RECORD, WE NOTICE TH AT ITAT MUMBAI BENCH IN THE CASE OF HEERAMANECK & SON VRS. ACIT PASSED IN ITA NO. 1862/MUM/2017, WHEREIN IT WAS HELD AS UNDER: - 5. SO FAR AS THE QUANTUM OF ADDITIONS ARE CONCERNED, WE ARE OF THE CONSIDERED OPINION THAT THE ASSESSEE WAS ENGAGED IN TRADING ACTIVITIES, WHICH COULD NOT BE CARRIED OUT WITHOUT ACTUAL PURCHASE OF MATERIAL. THE TURNOVER ACHIEVED BY THE ASSESSEE HAS NOT BEE N DISPUTED OR DISTURBED BY THE REVENUE AND THE PAYMENTS WERE THROUGH BANKING CHANNELS. THE ASSESSEE WAS IN POSSESSION OF PRIMARY PURCHASE DOCUMENTS AND WAS ABLE TO RECONCILE THE QUANTITATIVE DETAILS. HOWEVER, AT THE SAME TIME, THE STATED PURCHASES WERE UND ER GRAVE DOUBT SINCE THE ASSESSEE COULD NOT PRODUCE ANY OF THE PARTY TO CONFIRM 5 I.T.A. NO. 5806 /MUM/201 8 PARESHKUMAR BABULAL KADHI, THE TRANSACTIONS AND THE INFORMATION RECEIVED FROM INVESTIGATION WING REVEALED THAT ALL THE SUPPLIERS WERE ENGAGED IN CARRYING OUT ONLY PAPER TRANSACTIONS WITHOUT ACTUAL DELIVE RY OF MATERIAL. THE COMPLETE ONUS TO PROVE THE PURCHASES CONCLUSIVELY WAS ON ASSESSEE, WHICH HAS REMAINED UN - DISCHARGED. IN SUCH A SCENARIO, THE ADDITION, WHICH COULD BE MADE, WAS TO ACCOUNT FOR PROFIT ELEMENT EMBEDDED IN THESE PURCHASE TRANSACTIONS TO FAC TORIZE FOR PROFIT ELEMENT EARNED BY ASSESSEE AGAINST POSSIBLE PURCHASE OF MATERIAL IN THE GREY MARKET AND UNDUE BENEFIT OF VAT AGAINST ALLEGED BOGUS PURCHASES, WHICH LOWER AUTHORITIES HAVE RIGHTLY DONE. HOWEVER, CONSIDERING GP RATE OF 10.59% ALREADY REFLEC TED BY THE ASSESSEE AS WELL AS VAT RATE APPLICABLE TO THE GOODS BEING DEALT WITH BY THE ASSESSEE, WE FIND THE ESTIMATION TO BE ON THE HIGHER SIDE AND THEREFORE, WE RESTRICT THE SAME TO 3% OF ALLEGED BOGUS PURCHASES OF RS.1,87,08,961/ - . THE SAME COMES TO RS .5,61,269/ - . THE ORDER OF LD. AO STANDS MODIFIED TO THAT EXTENT. THE LD. AO IS DIRECTED TO RE - COMPUTE THE INCOME OF THE ASSESSEE IN TERMS OF OUR ABOVE ORDER. 8 . THEREFORE, RESPECTFULLY FOLLOWING THE AFORESAID DECISION, WE NOTICE THAT SINCE ASSESSEE HAS ALREADY DECLARED GP RATIO @ 13.21% AND THE PRODUCTS WHICH FALLS IN THE SLAB RATE OF 4% , 6 I.T.A. NO. 5806 /MUM/201 8 PARESHKUMAR BABULAL KADHI, 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. ACCOUNT. 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 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. , , / DR, ITAT, 7 I.T.A. NO. 5806 /MUM/201 8 PARESHKUMAR BABULAL KADHI, MUMBAI 6. / GUARD F I LE / BY ORDER, . / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI