PIYUSH L RAMBHIA, MUMBAI V. ITO 30(2)(5), MUMBAI

ITA 5810/MUM/2016

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 8416 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-11-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2009-2010
• Appeal Filed On: 28-09-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ARJU GARODIA
• Keywords: Bogus purchase
• Section: 143(3); 133(6); 148

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL J BENCH, MUMBAI . . , , BEFORE SHRI C.N. PRASAD , JM AND SHRI RAJESH KUMAR, AM ITA NO. 5810 / MUM/ 2 0 1 6 ( / ASSESSMENT YEAR: 2 0 0 9 - 10 ) PIYUSH L RAMBHIA B - 403, ANKUR CHS, NANA SHANKAR SETH CHOWK, MALAD(W) MUMBAI - - 4000 64 / VS. INCOME TAX OFFICER - 30(2)(5), C - 13, 5 TH FLOOR, BKC BANDRA, MUMBAI - 400051 ( / APPELLANT) : ( / RESPONDENT ) ./ PAN : ADRPR2130C / ASSESSEE BY : SHRI HEMANT SHARMA / REVENUE BY : MS.ARJU GARODIA / DATE OF HEARING : 28.9.2017 / DATE OF PRONOUNCEMENT : 10. 11 . 201 7 / O R D E R PER RAJESH KUMAR, A. M: THIS IS AN APPEAL FILED BY THE ASSESSEE CHALLENGING THE ORDER DATED 1.7.2016 OF LD.CIT(A) UPHOLDING THE ADDITION AT 30% AMOUNTING TO RS.15.20 LAKHS OF THE ALLEGED BOGUS PURCHASES WITH REGARD TO T HE ASSESSMENT YEAR 2009 - 10 AS AGAINST THE 100% MADE BY THE AO. 2 ITA NO. 5810 /MUM/201 6 2. THE FACTS IN BRIEF ARE THAT THE ASSESSEE HAS BEEN CARRYING ON BUSINESS OF MANUFACTURING DIGITAL TEMPERATURE CONTROLLERS HAVING INDUSTRIAL APPLICATION AND HAS FILED RETURN OF INCOME ON 29.9 .2009 DECLARING A TOTAL INCOME OF RS.4,24,394/ - . THE AO RECEIVED THE INFORMATION FROM SALES TAX DEPARTMENT, GOM AND DGIT (INVESTIGATION), MUMBAI THAT THE ASSESSEE HAS AVAILED ENTRIES OF BOGUS PURCHASES BILLS FROM THE HAWALA OPERATORS WHOSE NAMES WERE LISTED IN THE WEBSITE OF SALES TAX DEPARTMENT, GOM AS SUSPICIOUS DEALERS SUPPLYING BOGUS BILLS TO THE PARTIES WITHOUT PROVIDING ACTUAL AND PHYSICAL DELIVERY OF THE MATERIAL. THEREAFTER, THE AO REOPENED THE ASSESSMENT BY ISSUING NOTICE U/S 148 DATED 5.3.2014 AFTER RECORDING THE REASONS FOR ISSUANCE OF NOTICE U/S 148 AS REQUIRED BY PROVISIONS OF SECTION 148 ( 2) OF THE ACT . THE AO , DURING THE COURSE OF RE - ASSESSMENT PROCEEDINGS , NOTED THAT THE ASSESSEE HAS PURCHASED MATERIAL FROM THE HAWALA DEALERS TO THE TUNE OF RS.50,65,495/ - FROM 9 PARTIES . T HE AO ALSO TRIED TO VERIFY THE GENUINENESS OF THE PURCHASES BY ISSUING NOTICE U/S 133(6) OF THE ACT WHICH WAS RETURNED UNSERVED. T HE ASSESSEE SUBMITTED BEFORE THE AO THAT THE PURCHASE S FROM THESE PARTIES WE RE GENUINE BY FURNISHING THE COPIES OF BILLS FOR PURCHASES OF MATERIALS FROM THE SELLERS PARTIES. THE AO ALSO ASKED THE ASSESSEE TO FURNISH THE BOOKS OF ACCOUNT, DOCUMENTARY EVIDENCES IN RESPECT OF HAWALA DEALERS VIDE SHOW CAUSE 3 ITA NO. 5810 /MUM/201 6 NOTICE DATED 29.10.2014 WH ICH WAS NOT RESPONDED BY THE ASSESSEE . SIMILARLY, A NOT ICE DATED 12.2.2015 WAS ALSO NOT RESPONDED BY THE ASSESSEE. SUBSEQUENTLY , THE ASSESSEE FILED DETAILS OF STOCK , MONTHWISE STATEMENT OF PURCHASE AND CLOSING STOCK AS ON 20.2.2015. HOWEVER , FAILED TO PR ODUCE THE PARTIES OR FURNISH DELIVERY CHALLAN S LORRY RECEIPT AND TRANSPORTATION DETAILS ETC. THE AO ULTIMATELY ADDED THE ENTIRE AMOUNT OF PURCHASES MADE FROM HAWAL A DEALERS TO THE INCOME OF THE ASSESSEE BY FRAMING T HE ASSESSMENT U/S 143(3) R.W.S 147 O F THE A C T BY ASSESSING THE TOTAL INCOME ASSESSEE AT RS.50,89,890/ - VIDE ORDER DATED 12.3.2015. IN THE APPELLATE PROCEEDINGS, THE LD.CIT(A) PARTLY ALLOWED THE APPEAL OF THE ASSESSEE BY DELETING T HE ADDITION TO THE EXTENT O F 70% OF ALLEGED PURCHASES BY OB SERVING AND HOLDING AS UNDER : 5. I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELLANT. I HAVE ALSO PERUSED THE FIN DINGS OF THE A.O. IN THE ASSESSMENT ORDER. 5.1 SO FAR THE ADDITION ON ACCOUNT OF THE PURCHASES ARE CONCERNED, IT IS FOUND THAT THE NOTICES U /S 133(6) ISSUED TO ALL THE 9 PARTIES RETURNED UNSERVED. THE ASSESSEE FAILED TO PRODUCE THE PARTIES IN SPITE OF SPECIFIC REQUESTS MADE BY THE AO. NEITHER ANY OTHER TRACEABLE ADDRESS OF ANY OF THE PARTIES WAS FILED BY THE ASSESSEE. THE ENQUIRIES AND INVEST IGATION CONDUCTED BY THE SALES TAX DEPARTMENT ALONG WITH THE DEPOSITION OF ALLEGED SUPPLIERS CLEARLY ESTABLISH THAT THESE PARTIES HAVE ISSUED BOGUS BILLS WITHOUT ANY SUPPLY OF GOODS. THE AO HAS CONFRONTED ALL THE MATERIALS AND FINDINGS TO THE ASSESSEE. IN FACT, FINDINGS OF THE SALES TAX DEPARTMENT WERE AVAILABLE ON ITS WEB - SITE AND IT WAS IN PUBLIC DOMAIN. THE ASSESSEE HAS ALSO FAILED TO BRING EVIDENCE OF ACTUAL TRANSPORTATION AND DELIVERY OF GOODS. THEREFORE, IT IS HELD THAT THE 4 ITA NO. 5810 /MUM/201 6 APPELLANT HAS FAILED TO PR OVE THAT THE GOODS WERE PURCHASED FROM THE AFORESAID PARTIES. 5.2 ON THE ISSUE OF BOGUS PURCHASE, DECISIONS LIKE VIJAY PROTEINS LTD. VS. C IT [2015] 58 TAXMANN.COM 44 (GUJ) , C IT VS. SIMIT P. SHETH [2013] 356 ITR 451 (GUJ.) AND SEVERAL OTHER DECISIONS SUP PORT DISALLOWANCE OF CERTAIN PERCENTAGE OF PURCHASE PRICE. THE DISALLOWANCE IS JUSTIFIED BECAUSE THE EXACT SOURCE OF GOODS OR EXACT AMOUNT OF INFLATION IS KNOWN TO THE ASSESSEE ONLY. FURTHER, WITHOUT A MUCH BIGGER BENEFIT THAN THE NORMAL GP RATIO, NO PRUDE NT PERSON WILL ENTER INTO TRANSACTIONS OF PURCHASING MATERIALS FROM ONE SOURCE AND TAKING BILLS FROM ANOTHER. AS A CONSEQUENCE, THE PROFIT EMBEDDED IN SUCH TRANSACTIONS OF PURCHASE AND SALES WILL BE MUCH HIGHER THAN NORMAL GP RATIO. 5.3 IN THE FACTS AND CIRCUMSTANCES OF THE CASE, I FIND 30% OF PURCHASE DISALLOWANCE TO BE FAIR AND REASONABLE IN THIS CASE: THE G.P.RATIO SHOWN BY THE APPELLANT DURING THE YEAR UNDER CONSIDERATION IS FOUND AT 16.82 %. I AM OF THE OPINION THAT THE DISALLOWANCE OF 100% OF THE PURCHASE AMOUNT IS NOT JUSTIFIED UNLESS IT IS PROVED THAT THE ENTIRE CASH WAS RETURNED AND CAME TO THE POCKET OF THE ASSESSEE AND THE ASSESSEE HAS NOT PURCHASED ANY MATERIAL FROM ANY OTHER SOURCE . IN THE PRESENT CASE, IN - DEPTH ENQUIRIES WERE NOT CONDUC TED BY THE AO. THE AO DID NOT CARRY OUT FURTHER INVESTIGATION FROM THE BANK TO EXAMINE WHETHER THE SUPPLIER HAD WITHDRAWN CASH FROM HIS ACCOUNT. ACCORDINGLY, ADDITION OF RS.15,19,6 49 / - [ BEING 300 % OF RS.50,65,495/ - IS SUSTAINED AND BALANCE RS.35,45,847/ - [ BEING 70 % OF RS.50,65,495/ - ] IS DELETED. THE GROUND IS PARTLY ALLOWED. 3 . WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL PLACED BEFORE US INCLUDING THE IMPUGNED ORDERS OF AUTHORITIES BELOW. THE UNDISPUTED FACTS ARE THAT THE ASSESSEE HAS MADE PURCHASE S TO THE TUNE OF RS.50,65,495/ - FROM 9 PARTIES WHICH WERE DECLARED AS HAWALA OPERATORS BY THE SALES TAX DEPARTMENT OF THE GOVERNMENT OF MAHARASHTRA . THE 5 ITA NO. 5810 /MUM/201 6 ASSESSEE COULD NOT PROVE THE GENUINENESS OF THE PURCHASES MADE FROM THESE HAWALA DE ALERS BY DOCUMENTARY EVIDENCES. THE LD.CIT(A) AFTER CONSIDERING THE CONTENTIONS OF THE ASSESSEE REDUCED THE ADDITION TO THE TUNE OF 30% OF THE BOGUS PURCHAS ES BY OBSERVING THAT THE AO CANNOT MAKE DISALLOWANCE OF 100% PURCHASES FROM THE HAWALA PARTIES . WE ALSO NOTE THAT THE ASSESSEE HAS DECLARED GP AT THE RATE OF 16.82% IN THE CURRENT YEAR . I N SUCH TYPE OF CASE S , THE CO - ORDINATE BENCHES OF THE TRIBUNAL HAS TAKEN A CONSISTENT VIEW THAT THE ADDITION SHOULD BE MADE FROM 4% TO 12.5% DEPENDING ON TH E FACTS OF THE CASE HOLDING THAT IT IS REASONABLE IN SUCH TYPE OF CASES TO PREVENT LEAKAGE OF REVENUE WHICH THE ASSESSEE MIGHT HAVE MADE BY PURCHASING THE MATERIAL FROM THE GRAY MARKET BY NON MAKING PAYMENT OF VAT AND OTHER INCIDENTAL LEVIES. IN VIEW OF THE SAID FACTS, WE ARE OF THE CONSIDERED VIEW TH A T THE ADDITION SUSTAINED BY THE LD.CIT(A) AT THE RA T E OF 30% IS ON HIGHER SIDE AND SHOULD BE RESTRICTED TO 12.5%, PARTICULARLY IN VIEW OF THE FACTS THAT THE GP DECLARED BY THE ASSESSEE AT THE R A TE OF 16.82%. THEREFORE, WE ARE OF THE VIEW TH A T THE ORDER PASSED BY THE LD.CIT(A) IS NOT JUSTIFIED AND HENCE NEEDS INTERFERENCE. ACCORDINGLY, BY FOLLOWING THE PRECEDENT SET DOWN BY THE CO - ORDINATE BENCHES OF THE TRIBUNAL WE RESTRICT THE ADDITION TO THE 6 ITA NO. 5810 /MUM/201 6 EXTE NT OF 12.5 % AND DIRECT THE AO TO MAKE THE AMENDMENT IN THE ASSESSMENT. WE ORDER ACCORDINGLY. 4 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 13TH NOV , 2017. S D SD (C.N. PRASAD) (RAJESH KUMAR) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED : 13TH NOV .2017 SRL,SR.PS / COPY OF THE ORDER FORWARDED TO : 1. / THE A PPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F ILE / BY ORDER, T RUE COPY / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI