ITO 33(2)(1), MUMBAI V. SHRI JIDTENDRA R. SANGHVI, MUMBAI

ITA 5867/MUM/2018

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 0010 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-12-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2010-2011
• Appeal Filed On: 11-10-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MOHAMMED RIZWAN ADD
• Keywords: Bogus purchase
• Section: 143(2); 148; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH F, MUMBAI BEFORE SHRI PAWAN SINGH (JM) & SHRI S RIFAUR RAHMAN (AM) ITA NO. 5867/MUM/2018(ASSESSMENT YEAR: 2010-11) ITO 33(2)(1), PRATYAKSHYA KAR BHAWAN, BANDRA KURLA COMPLEX, BANDRA (E), MUMBAI-400051 VS SHRI JITENDRA R SANGHVI PROP M/S SANGHVI ENTERPRISES F-504, PUSHP HERITAGE BUILDING DAHANUKARWADI, KANDIVALI (W), MUMBAI 400 067 PAN : BELPS7955A APPELLANT RESPONDEDNT APPELLANT BY SHRI MOHAMMED RIZWAN ADD.CIT-DR RESPONDENT BY NONE DATE OF HEARING 12-12-2019 DATE OF PRONOUNCEMENT 18-12-2019 O R D E R PER PAWAN SINGH, JM : 1. THIS APPEAL BY REVENUE IS DIRECTED AGAINST THE ORDE R OF CIT(A)-45, MUMBAI DATED 25-04-2016 WHICH ARISES FROM ASSESSMEN T ORDER PASSED U/S 144 DATED 19-03-2016. THE REVENUE HAS RAISED THE F OLLOWING GROUNDS OF APPEAL:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) HAS ERRED IN RESTRICTING THE ADDITION OF RS2 ,26,304/-MADE IN RESPECT OF BOGUS PURCHASES TO RS.7,07,198/-ESPECIAL LY WHEN LD. CIT(A) HAS CLEARLY FOUND THAT THE ASSESSEE DID NOT FULLY SUBSTANTIATE THE CLAIM OF GENUINE PURCHASES. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN NOT MAKING INQUIRY OR DIREC TION THE AO TO CONDUCT INQUIRIES TO ESTABLISH THE CORRECT FACTS IN THIS CASE, WHEN IT IS 2 ITA 5867/MUM/2018 JITENDRA R SANGHVI NOTED THAT THE ASSESSEE HAD COMPLETELY FAILED TO ES TABLISH THE GENUINENESS OF PURCHASE. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DETERMINING THE PROFIT PERC ENTAGE AT THE RATE OF 8% OF BOGUS PURCHASES, WHILE THE ASSESSEE FAILED TO ESTABLISH THE GENUINENESS OF THE PURCHASE CLAIMED. 2. BRIEF FACTS OF THE CASE ARE THAT ASSESSEE S A PROPR IETOR OF M/S SANGHVI ENTERPRISES, FILED HIS RETURN OF INCOME FOR AY 2010 -11 ON 14-10-2010 DECLARING INCOME OF RS.12,55,250. SUBSEQUENTLY, ON THE BASIS OF INFORMATION RECEIVED FROM SALES-TAX DEPARTMENT, GOV ERNMENT OF MAHARASHTRA, WHICH REFERRED THE LIST OF HAWALA DEAL ERS AND THE BENEFICIARY TO THE DGIT (INVESTIGATION), MUMBAI. THE NAME OF AS SESSEE APPEARED IN THE LIST OF BENEFICIARIES. THE ASSESSEE ALLEGEDLY MADE THE PURCHASES OF RS. 28,28,794/- FROM FOUR SUCH HAWALA DEALERS. ON THE B ASIS OF INFORMATION, ON THE BASIS OF SUCH INFORMATION, THE AO ISSUED NOT ICES U/S 148 DATED 02- 03-2015. THE ASSESSEE NEITHER FILED ANY RETURN OF INCOME NOR RESPONDED TO OTHER NOTICES ISSUED U/S 143(2) / 142(1). THE A O, ON THE BASIS OF MATERIAL BEFORE HIM REJECTED THE BOOKS OF ACCOUNT O F ASSESSEE AND MADE 25% OF ADDITION OF AGGREGATE OF THE PURCHASES SHOWN FROM SUCH HAWALA PARTIES IN THE ASSESSMENT ORDER DATED 19-03-2016 PA SSED UNDER SECTION 144 OF THE ACT. ON APPEAL BEFORE LEARNED CIT(A), T HE ADDITION WAS RESTRICTED TO 8%. THE LD. CIT(A) RESTRICTED THE AD DITION HOLDING THAT ASSESSEE MIGHT HAVE OBTAINED THE BILLS IN LIEU OF M ATERIALS PURCHASED 3 ITA 5867/MUM/2018 JITENDRA R SANGHVI LOCALLY. THE VALUE ADDED TAX (VAT) AND OTHER INCID ENTAL CHARGES ON THE SAID BOGUS PURCHASES COULD BE BROUGHT TO TAX AS ADD ITIONAL PROFIT ON SUCH PURCHASES AND THEREBY RESTRICTED THE ADDITION TO 8% OF SUCH BOGUS PURCHASES. THUS, AGGRIEVED BY THE ORDER OF LD. CIT (A), THE REVENUE HAS FILED THE PRESENT APPEAL BEFORE US. 3. NONE APPEARED ON BEHALF OF THE ASSESSEE DESPITE THE SERVICE OF NOTICE THROUGH REGISTERED POST ACKNOWLEDGE (RPAD). THEREF ORE, WE LEFT NO OPTION BUT TO HEAR THE SUBMISSIONS OF LEARNED DEPAR TMENTAL REPRESENTATIVE (LD. DR) FOR THE REVENUE AND DECIDE THE APPEAL ON T HE BASIS OF MATERIAL AVAILABLE ON RECORD. THE LD. DR FOR THE REVENUE SUB MITS THAT THE INCOME- TAX DEPARTMENT HAD MADE FULL-FLEDGED ENQUIRY REGARD ING HAWALA TRADERS WHO WERE INDULGING IN PROVIDING THE ACCOMMODATION B ILLS WITHOUT ACTUAL DELIVERY OF GOODS. THE ASSESSEE IS ONE OF THE BENEF ICIARY OF SUCH BENEFICIARY. BEFORE THE AO, THE ASSESSEE HAS NOT FU RNISHED ANY EVIDENCE TO SUBSTANTIATE THE PURCHASES. EVEN THEN THE ASSES SING OFFICER ON A REASONABLE BASIS HAS MADE ADDITION OF 25% ONLY. TH E LD. CIT(A) RESTRICTED THE SAME TO 8% ONLY ON HIS ASSUMPTION TH AT THE ASSESSEE MIGHT HAVE PURCHASED THE GOODS LOCALLY AND HAVE SAVED VAT AND OTHER INCIDENTAL CHARGES. THE LD. DR PRAYED FOR RESTORIN G THE ADDITION TO THE EXTENT OF 25% OF THE PURCHASES. 4 ITA 5867/MUM/2018 JITENDRA R SANGHVI 4. WE HAVE CONSIDERED THE SUBMISSION OF THE LD. DR FOR THE REVENUE AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE HAVE NOTED THAT THE DURING THE ASSESSMENT THE AO RECORDED THAT THE ASSESSEE HA S NOT RESPONDED TO THE NOTICES SENT TO THE ASSESSEE. THE ASSESSING OFFICER AFTER REJECTING THE BOOKS OF ACCOUNT OF THE ASSESSEE ESTIMATED ADDITION @25% OF AGGREGATE OF THE PURCHASES SHOWN FROM THOSE FOUR ALLEGED HAWALA PART IES. THE AO HAS NOT MADE ANY INDEPENDENT ENQUIRY HIMSELF. THE AO MADE ADDITIONS SOLELY ON THE BASIS OF INFORMATION OF INVESTIGATION AGENCY . BEFORE THE LD. CIT(A), THE ASSESSEE FURNISHED BANK STATEMENT SHOWI NG THE PAYMENT TO THE DEALERS, WHICH WAS VERIFIED BY THE AO. IT WAS FURTHER URGED BEFORE THE LD. CIT(A) THAT THE AO MERELY RELIED UPON THE I NFORMATION OF SALES- TAX DEPARTMENT AND TREATED 25% OF PURCHASES AS BOGU S. THE ASSESSEE FURTHER CLAIMED THAT HE HAS SUFFICIENT DOCUMENTARY EVIDENCE TO PROVE THE GENUINENESS OF TRANSACTION. AFTER CONSIDERING THE SUBMISSION OF ASSESSEE, THE LD. CIT(A) TOOK HIS VIEW THAT IN SUCH TYPE OF T RANSACTION THE PARTIES HAVE SAVED VAT AND OTHER INCIDENTAL CHARGES WHICH C AN BE BROUGHT TO TAX BEING ADDITIONAL PROFIT EARNED BY THE ASSESSEE AND ACCORDINGLY RESTRICTED THE ADDITION TO 8% OF SUCH PURCHASES. 5. WE ARE ALSO OF THE VIEW THAT UNDER THE INCOME-TAX A CT, THE REVENUE AUTHORITIES ARE ENTITLED TO TAX THE REAL INCOME AND NOT THE INCOME BASED ON HYPOTHETICAL BASIS. CONSIDERING THE FACTS THAT LD. CIT(A) RESTRICTED THE 5 ITA 5867/MUM/2018 JITENDRA R SANGHVI ADDITION TO AVOID THE POSSIBILITY OF REVENUE LEAKAG E OF THE ADDITIONAL BENEFIT WHICH THE ASSESSEE MIGHT HAVE EARNED BY SHO WING SUCH PURCHASES. ACCORDINGLY, WE DO NOT FIND ANY MERIT IN THE APPEAL FILED BY THE REVENUE. 6. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DI SMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 18-12-2019. SD/- SD/- (S RIFAUR RAHMAN) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIALMEMBER MUMBAI, DT : 18 TH DECEMBER, 2019 PK/- COPY TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR /TRUE COPY/ BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI