SHRI RAKESH PRAFULCHANDRA BHATT, MUMBAI V. ACIT-31(3), MUMBAI

ITA 5924/MUM/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 7671 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-01-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2009-2010
• Appeal Filed On: 18-09-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: VIKASH KR AGARWAL
• Keywords: Bogus purchase
• Section: 69C; 143(3)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH , MUMBAI BEFORE SHRI RAJESH KUMAR, ACCOUNTANT MEMBER & SHRI RAM LAL NEGI, JUDICIAL MEMBER . / ITA NO. 5924 /MUM/201 7 ( / ASSESSMENT YEAR : 20 0 9 - 20 1 0 ) SHRI RAKESH PRAFUL CHANDRA BHATT, C - 10/207, BANDRA KURLA COMPLEX, MUMBAI - 400051 VS. ACIT - 31(3), MUMBAI ./ PAN NO. : A FGPB 5695 H ( / APPELLANT ) .. ( / RESPONDENT ) /AS SESSEE BY : SHRI HARESH P. SHAH, AR /REVENUE BY : SHRI VIKASH KR. AGARWAL, DR / DATE OF HEARING : 02 / 01 /201 9 / DATE OF PRONOUNCEMENT 09 / 01 /201 9 / O R D E R PER SHRI RAJESH KUMAR , A M : THIS APPEAL BY ASSESSEE ARISE S OUT OF THE ORDER OF THE CIT(A) 42 , MUMBAI, DATED 05.05.2017 , WHICH IN TURN HAS ARISEN OUT OF THE ORDER PASSED BY THE ASSESSING OFFICER U/S. 143(3) R.W.S.147 OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) RELATING TO A.Y. 20 09 - 201 0 . 2 . THE ONLY ISSUE RAISED BY THE ASSESSEE IN THE PRESENT APPEAL IS QUA THE CONFIRMATION OF ADDITION OF RS.17,37,393/ - BY CIT(A) BY UPHOLDING THE ORDER OF AO IN RESPECT OF BOGUS PURCHASES. 3. FACTS IN BRIEF ARE THAT THE ASSESSEE FILED RETURN OF INCOME ON 25 .09.2009 DECLARING TOTAL INCOME AT RS. 22,74,940/ - WHICH WAS PROCESSED U/S.143(1) OF THE ACT ON 19.03.2011 . THEREAFTER THE AO RECEIVED INFORMATION FROM THE DGIT(INVESTIGATION) THAT THE ASSESSEE HAS AVAILED FICTITIOUS PURCHASE BILLS FROM FIVE PARTIES AGGREG ATING TO RS.17,37,393/ - , ITA NO . 5924 / 1 7 2 THE DETAILS OF WHICH WE RE GIVEN BY THE AO AT PAGE 2 OF THE ASSESSMENT ORDER AND ACCORDINGLY THE CASE OF THE ASSESSEE WAS REOPENED BY ISSUING NOTICE U/S.148 OF THE ACT AFTER RECORDING THE REASON S ON THE SAID INFORMATION. THE NOTICE WAS ISSUED U/S.148 OF THE ACT ON 05.03.2014. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE ISSUED SHOW CAUSE NOTICE TO THE ASSESSEE AS TO WHY THE SAID PURCHASES SHOULD NOT BE CONSIDERED AS BOGUS AND ADDED TO THE INCOME OF THE ASSESSEE, WHICH WA S REPLIED BY THE ASSESSEE VIDE LETTER DATED 27.03.2015. THE ASSESSEE FILED BEFORE THE AO PURCHASE BILLS, STATEMENT OF PURCHASES AND CORRESPONDING SALES WITH SALES INVOICES, DETAILS OF PAYMENTS TO THE PARTIES THROUGH ACCOUNT PAYEE CHEQUES. ULTIMATELY THE AO ADDED 100% OF THE BOGUS PURCHASES TO THE TUNE OF RS.17,37,393/ - BY OBSERVING THAT THE ASSESSEE HAS ALSO MADE CASH PAYMENTS OF RS.3,22,837/ - THROUGH BEARER CHEQUE WHICH REQUIRES DIS ALLOWED U/S.40A(3) OF THE ACT BUT SINCE THE FULL ADDITION ON ACCOUNT OF BO GUS PURCHASES WAS BEING MADE, THEREFORE NO DISALLOWANCE U/S.40A(3) WAS REQUIRED TO BE MADE AND, THUS, FRAMED THE ASSESSMENT U/S.143(3) R.W.S.147 OF THE ACT, VIDE ORDER DATED 30.03.2015. 4. IN THE APPELLATE PROCEEDINGS, LD. CIT(A) SUSTAINED THE ORDER OF AO BY OBSERVING THAT THE ASSESSEE COULD NOT PROVE THE PURCHASE S THROUGH THE CONSUMPTION RECORD AND, THEREFORE, CAME TO THE CONCLUSION THAT THE ENTIRE AMOUNT OF PURCHASE S W ERE RIGHTLY HELD TO BE BOGUS BY THE AO. THE CIT(A) ALSO OBSERVED THAT THE ASSESSEE HAS NOT MADE ANY ACTUAL PURCHASE S FROM THE HAWALA DEALERS AND THE ACTUAL PURCHASE MAY HAVE BEEN MADE FROM SOME OTHER PERSONS BUT THE SOURCE OF THE PAYMENT TO ITA NO . 5924 / 1 7 3 THESE PERSONS HAS NOT BEEN ADMITTED AND SUBMITTED BY THE ASSESSEE. LD.CIT(A) ALSO OBSERVED THAT SINCE THE ENTIRE ADDITION IS BEING CONFIRMED NO SEPARATE ADDITION IS MADE FOR THE OTHER POSSIBLE DISALLOWANCES AND, THUS, DISMISSED THE APPEAL OF THE ASSESSEE. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD INCLUDI NG IMPUGNED ORDER. THE UNDISPUTED FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF TRADING IN ALUMINIUM PRODUCTS. DURING THE YEAR THE ASSESSEE WAS FOUND TO HAVE INDULGED IN AVAILING THE BOGUS PURCHASE BILLS FROM 5 PARTIES AGGREGATING TO RS.17,37,393/ - . DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSEE FURNISHED BEFORE THE AO THE PURCHASE BILLS, STATEMENT OF PURCHASES AND CORRESPONDING SALES WITH SALES INVOICES, STOCK TALLY, DETAILS OF PAYMENTS TO THE PARTIES THROUGH ACCOUNT PAYEE CHEQUE S. THE AO HAS NOT DOUBTED THE SA LES . THE CORRESPOND ING SALES W ERE ALSO MADE OUT OF THE THE SAID PURCHASE . S O IN THE PRESENT CIRCUMSTANCES, WE ARE NOT IN A POSITION TO SUSTAIN THE FINDINGS OF THE LD. CIT(A) WHO HAS CONFIRMED THE HUNDRED PERCENT(100%) OF THE BOGUS PURCHASES. DURING THE COURSE OF HEARING IT WAS POINTED BY THE LD. AR THAT THE VAT IS APPLICABLE TO THE ASSESSEE @4% AND GP SHOWN DURING THE YEAR 28.83% . SINCE THE ASSESSEE HAS SHOWN THE GP AT 28.83% ON THE ENTIRE PURCHASES INCLUDING BOGUS PURC HASE, SO AT THE MOST THE ADDITION COULD BE MADE ONLY TO BRING TO TAX THE SAVINGS WHICH THE ASSESSEE MAY HAVE MADE IN THE FORM OF VAT AND OTHER INCIDENTAL EXPEMSES BY PURCHASING THE GOODS FROM THE GREY MARKET AS THE CORRESPONDING SALES MADE BY THE ASSESSEE ARE NOT IN ITA NO . 5924 / 1 7 4 DISPUTE. WE DO NOT FIND ANY MERIT IN THE ARGUMENTS OF LD. DR THAT SUCH EXPENSES ON ACCOUNT OF BOGUS PURCHASE SHOULD BE COVERED U/S.69C OF THE ACT AS AN EXPENDITURE AS THE PROVISIONS OF SECTION 69C OF THE ACT ARE APPLICABLE WHEN THE SOURCES OF EXPENDITURE IS NOT EXPLAINED, WHERE AS IN THE PRESENT CASE, THE FACTS ARE DIFFERENT. UNDER THESE CIRCUMSTANCES, WE ARE OF THE VIEW THAT IT WOULD BE REASONABLE, IF SUCH PURCHASES ARE BROUGHT TO TAX BY APPLYING A REASONABLE PERCENTAGE CONSIDERING THE VAT R ATE APPLICABLE TO THE ASSESSEE. SINCE THE VAT APPLICABLE TO THE ASSESSEE IS 4%, IN OUR OPINION, THE REASONABLE GP WOULD BE 12.50 % OF THE BOGUS PURCHASE. ACCORDINGLY, THE AO IS DIRECTED TO APPLY 12.50 % OF THE TOTAL BOGUS PURCHASES. 6 . IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 09 / 01 /201 9 . SD/ - ( RAM LAL NEGI ) SD/ - (RAJESH KUMAR) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED 09 / 01 /201 9 . . / PRAKASH KUMAR MISHRA , S R.PS. / COPY OF THE ORDER FORWARDED TO : / BY ORDER, ( ASSISTANT REGISTRAR ) , / ITAT, MUMBAI 1. / THE APPELLANT - 2. / THE RESPONDENT - 3. ( ) / THE CIT(A), MUMBAI 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. //TRUE COPY//