AMBERNATH STEEL TUBE AND SANITARY STORE, MUMBAI V. INCOME TAX OFFICER 2(1), KALYAN

ITA 5858/MUM/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 0377 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-02-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 14-09-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: N HEMALATHA
• Assessee Lawyers: AJAY R SINGH
• Keywords: Bogus purchase
• Section: 133(6)

Judgement Text

- IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI , BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER ./ I.T.A. NO. 5858/MUM/2017 ( / ASSESSMENT YEAR: 2009 - 10 ) M/S. AMBERNATH STEEL TUBE AND SANITARY STORE PARTNER SHRI VIMAL ADHIA STATION ROAD, AMBARNATH (W) - 421 501 / VS. ITO, WARD 2(1), KALYAN, DIST. THANE ./ ./ PAN/GIR NO. AAHFA 7639 L ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI AJAY R. SINGH / RESPONDENT BY : MS. N. HEMALATHA / DATE OF HEARING : 16.11.2017 / DATE OF PRONOUNCEMENT : 05.02 .20 18 / O R D E R PER S HAMIM YAHYA , A. M.: THIS A PPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE O RDER BY THE COMMISSIONER OF INCOME TAX (APPEALS) DATED 03.07.2017 AND PERTAINS TO THE A SSESSMENT YEAR 2009 - 10. 2. THE FIRST ISSUE RAISED PERTAIN S TO THE VALIDITY OF REOPENING. AT THE OUTSET, THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT HE SHALL NOT BE PRESSING FOR THIS GROUND. ACCORDINGLY , THIS GROUND IS DISMISSED AS NOT PRESSED. 2 ITA NO. 5858/MUM/2017 (A.Y. 2009 - 10) M/S. AMBERNATH STEEL TUBE AND SANITARY STORE VS. ITO 3. THE NEXT ISSUE RAISED IS THAT THE LD. COMMISSIONER OF INCOME TAX (APPEAL S) ERRED IN UPHOLDING THE DISALLOWANCE OF BOGUS PURCHASE AMOUNTING TO RS.1,43,345/ - . 4. BRIEF FACTS OF THE CASE ARE AS UNDER: IN THIS CASE, THE ASSESSING OFFICER OBSERVED THAT D URI NG THE YEAR UNDER CONSIDERATION THE ASSESSEE HAS ENTERED INTO TRANSACTION S WITH CERTAIN PARTIES WHOSE NAMES ARE APPEARING IN THE LIST OF HAWALA ENTRY PROVIDERS PUBLISHED IN THE OFFICIAL WEBSITE OF MAHARASHTRA SALES TAX DEPARTMENT. MAJORITY OF THE TRANSACTIONS OF THE ASSESSEE WITH THESE PARTIES PERTAINS TO PURCHASES O THE FOLLOW ING PARTIES AND THE DETAILS OF TRANSACTIONS ENTERED INTO BY THE ASSESSEE: - S R. NO. NAME OF THE PARTY AMOUNT RS. 1. MARUTI STEEL TRADERS RS. 26,990 / - 2. SHIV INDUSTRIES RS. 42,356 / - 3 BALAJI TRADING RS. 80,089 / - TOTAL RS. 1,49,43 5 / - THAT H OWEVER, THE SE NOTICES WERE RECEIVED BACK UNSERVED WITH POSTAL REMARK 'NOT FOUND'. MEANWHILE, ON PERUSAL OF THE DATA UPLOADED BY THE SALES TAX DEPARTMENT, ON ITS OFFICIAL WEBSITE, IT IS SEEN THAT THE ABOVE MENTIONED PARTIES (FROM WHOM THE ASSESSEE HAS CLAIMED PURCHASE S/EXPENSES) ARE INVOLVED IN ISSUING OF HAWALA BILLS. THEREFORE, FURTHER DETAILS WERE OBTAINED FROM THE SALES TAX DEPARTMENT, MUMBAI, REGARDING THESE PARTIES WHICH CONSIST OF THE REPORT OF THE SALES TAX AUTHORITY, THE STATEMENTS OF THE CONCERNED PARTIES REC ORDED BY SALES TAX AUTHORITY AND THE AFFIDAVITS SUBMITTED BY THE CONCERNED PARTIES BEFORE SALES TAX AUTHORITY. TH AT TH E EXAMINATION OF SUCH DOCUMENTS/DATA SHOWS THAT THESE PARTIES ARE INVOLVED IN 3 ITA NO. 5858/MUM/2017 (A.Y. 2009 - 10) M/S. AMBERNATH STEEL TUBE AND SANITARY STORE VS. ITO ISSUING OF HAWALA BILLS. DETAILED INFORMATION SUCH AS COPIES OF LEDGER ACCOUNTS, BANK STATEMENT, IT DOCUMENTS, ETC. HAVE ALSO BEEN CALLED FOR U/S 133(6) FROM THESE PARTIES, HOWEVER, THE NOTICES ISSUED U/S 133(6) TO THESE PARTIES WERE RETURNED BACK UNSERVED FROM POSTAL AUTHORITIES. THAT F ROM ALL THE ABOVE FACTS, IT IS CLEAR THAT THE PURCHASES CLAIMED BY THE ASSESSEE FROM THESE PARTIES ARE NOT GENUINE. 5. ACCORDINGLY, THE ASSESSING OFFICER PROCEEDED TO DISALLOW 100% OF THE ABOVE PURCHASE. 6. UPON THE ASSESSEES APPEAL, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) C ONFIRMED THE DISALLOWANCE. 7. AGAINST THIS ORDER, THE ASSESSEE IS IN APPEAL BEFORE THE ITAT. 8. I HAVE HEARD BOTH THE COUNSELS AND PERUSED THE RECORDS. UPON CAREFUL CONSIDERATION, I FIND THAT THOUGH OVERWHELMING EVIDENCE HAS BEEN PRODUCED BY THE AUTHORIT IES BELOW THAT THE PURCHASES ARE BOGUS. HOWEVER, AS EXPOUNDED BY THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF NIKUNJ EXIMP ENTERPRISES (IN WRIT PETITION NO 2860, ORDER DT. 18.6.2014), WHEN SALES ARE NOT DOUBTED 100% DISALLOWANCE O F BOGUS PURCHASE CANNOT BE DONE. HOWEVER, THE FACTS OF THE PRESENT CASE INDICATE THAT ASSESSEE HAS MADE PURCHASE FROM THE GREY MARKET. MAKING PURCHASES THROUGH THE GREY MARKET GIVES THE ASSESSEE SELLING ON ACCOUNT OF NON - PAYMENT OF TAX AND OTHERS AT THE EXPENSE OF THE EXCH EQUER . IN SUCH SITUATION, IN MY CONSIDERED OPINION, ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE 12.5% DISALLOWANCE OUT OF THE BOGUS PURCHASES 4 ITA NO. 5858/MUM/2017 (A.Y. 2009 - 10) M/S. AMBERNATH STEEL TUBE AND SANITARY STORE VS. ITO MEETS THE ENDS OF JUSTICE. THIS IS FOLLOWING THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF SIMI T P. SHETH (2013) 356 ITR 451, FOLLOWED BY THE ITAT MUMBAI BENCHES IN A NUMBER OF CASES. ACCORDINGLY, I MODIFY THE ORDER OF THE AUTHORITIES BELOW AND D IRECT THAT THE DISALLOWANCE IN THIS CASE SHOULD BE RESTRICTED TO 12.5% OF THE BOGUS PURCHASE. 9. THE L AST ISSUE RAISED IS THA T THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN UPHOLDING 20% DISALLOWANCE OF EXPENSES. ON THIS ISSUE, THE ASSESSING OFFICER DISALLOWED 20% OF THE FOLLOWING EXPENSES ON THE GROUND THAT THEY ARE NOT FULLY VOUCHED FOR: I. CONV EYANCE EXPENSES RS.48,500/ - II. TELEPHONE EXPENSES RS.5,799/ - III. DELIVERY EXPENSES RS.1,82,490/ - TOTAL RS.2,36,789/ - 10. UPON THE ASSESSEES APPEAL, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) CONFIRMED THE SAME. 11. AGAINST THIS APPE AL, THE ASSESSEE IS IN APPEAL BEFORE THE ITAT. 12. I HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. ON CAREFUL CONSIDERATION I FIND THAT THIS IS AN ADHOC DISALLOWANCE AND IN THE INTEREST OF JUSTICE I HOLD THAT 10% DISALLOWANCE W OULD MEET THE END OF JUSTICE. ACCORDINGLY, THE ORDERS OF THE AUTHORITIES BELOW ARE MODIFIED AND THE DISALLOWANCE IS RESTRICTED TO 10% IN THIS CASE. THE LD. COUNSEL OF THE ASSESSEE HAS FAIRLY AGREED TO THE ABOVE PROPOSITION. 5 ITA NO. 5858/MUM/2017 (A.Y. 2009 - 10) M/S. AMBERNATH STEEL TUBE AND SANITARY STORE VS. ITO 13. IN THE RESULT, TH IS APPEAL BY THE ASSESSEE STAN DS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 05.02.2018 SD/ - (S HAMIM YAHYA ) / A CCOUNTANT MEMBER MUMBAI ; DATED : 05.02.2018 . . ./ ROSHANI , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / TH E APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F ILE / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI