SUNIL MOHAN LAHORI, MUMBAI V. ASSISTANT COMMISSIONER OF INCOME TAX 21(3), MUMBAI

ITA 5948/MUM/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 9878 (ITAT-MUMBAI)
• Duration Of Justice: 5 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-03-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2009-2010
• Appeal Filed On: 20-09-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AARJ U GARODIA LD
• Assessee Lawyers: HIMANSHU GANDHI LD
• Keywords: Bogus purchase; Unexplained cash credit; Application of stay; Onus to prove; Reassessment proceedings
• Section: 69C; 133(6); 147; 68; 148; 37; 144

Judgement Text

ITA.NO. 5948 /MUM/2017 SUNIL MOHAN LAHORI ASSESSMENT YEAR - 2009 - 10 IN THE INCOME TAX APPELLATE TRIBUNAL J BENCH, MUMBAI , , BEFORE SHRI SAKTIJIT DEY, JM AND SHRI MANOJ KUMAR AGGARWAL, AM ./ I.T.A. NO.5948/MUM/2017 ( / ASSESSMENT YEAR: 2009 - 10) SUNIL MOHAN LAHORI 9, JANTA INDUSTRIAL COMPOUND 162, SENAPATI BAPAT MARG OPP.PHOENIX MALL LOWER PAREL (WEST) MUMBAI - 400 013 / VS. ASSISTANT COMMISSIONER OF INCOME - TAX 21(3) MUMBA I ./ ./ PAN/GIR NO. AAA PL - 4422 - H ( / APPELLANT ) : ( / RESPONDENT ) & STAY APPLICATION NO. 91/MUM/2018 [ ARISING OUT OF I.T.A. NO. 5948/MUM/2017] [ /ASSESSMENT YEAR 2009 - 10] SUNIL MOHAN LAHORI 9, JANTA INDUSTRIAL COMPOUND 162, SENAPATI BAPAT MARG OPP.PHOENIX MALL LOWER PAREL (WEST) MUMBAI - 400 013 / VS. ASSISTANT COMMISSIONER OF INCOME - TAX 21(3) MUMBAI ./ ./ PAN/GIR NO. AAAPL - 4422 - H ( / APPELLANT ) : ( / RESPON DENT ) ASSESSEE BY : HIMANSHU GANDHI .LD.AR REVENUE BY : AARJ U GARODIA , LD. DR / DATE OF HEARING : 2 8 /02/2018 / DATE OF PRONOUNCEMENT : 07 /03 /2018 ITA.NO.5948/MUM/2017 SUNIL MOHAN LAHORI ASSESSMENT YEAR - 2009 - 10 2 / O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. THE CAPTIONED APPEAL BY ASSESSEE FOR ASSESSMENT YEAR [AY] 20 09 - 10 CONTEST THE ORDER OF LD. COMMISSI ONER OF INCOME - TAX (APPEALS) - 33 [CIT (A)], MUMBAI, APPEAL NO.CIT(A) - 33/RG.21/212/2015 - 16 DATED 04/08/2017 BY RAISING THE FOLLOWING EFFECTIVE GROUNDS OF APPEAL: - 1. ON THE FACTS AND CIRCUMSTANCES OF CASE AND IN LAW , LD. CIT(A) ERRED IN CONFIRMING ADDITION U/S 69C AMOUNT RS.47,73,033/ - ON ACCOUNT OF PURCHASES FROM SUSPICIOUS PARTIES IDENTIFIED BY SALES TAX AUTHORITIES. 2. ON THE FACTS AND CIRCUMSTANCES OF CASE AND IN LAW, LD. CIT(A) ERRED IN CONFIRMING DISALLOWANCE U/S 37 AMOUNT RS.2,07,54,611/ - BEING 50% PURCHASES BY TREATING SAME AS BOGUS PURCHASE ON ASSUMPTIONS BASIS. 3. ON THE FACTS AND CIRCUMSTANCES OF CASE AND IN LAW, LD. CIT(A) ERRED IN CONFIRMING ADDITION U/ S 68 AMOUNT RS.2,50,000/ - BY TREATING SAME AS UNEXPLAINED CASH CREDIT. 4. ON THE FACTS AND CIRCUMSTANCES OF CASE AND IN LAW, LD. CIT(A) ERRED IN CONFIRMING ADDITION U/S 41 AMOUNT RS.21,10,711/ - OF ACCOUNT OF CESSATION OF LIABILITY. THE ASSESSMENT FOR I MPUGNED AY WAS FRAMED BY LD. ASSISTANT COMMISSIONER OF INCOME TAX - 1 8(2) MUMBAI [AO] U/S 14 4 R EAD WITH SECTION 147 OF THE INCOME TAX ACT, 1961 ON 26 /03/2015 WHEREIN THE INCOME OF THE ASSESSEE WAS DETERMINED AT RS.4,40,27,800/ - AFTER CERTAIN ADDITIONS / DISA LLOWANCES AS AGAINST RETURNED INCOME OF RS.7,80,546/ - FILED BY THE ASSESSEE ON 08/09/2009. 2. THE CASE OF THE ASSESSEE WAS SUBJECT TO REASSESSMENT PROCEEDINGS UPON RECEIPT OF CERTAIN INFORMATION FROM DGIT (INVESTIGATION) / SALES TAX DEPARTMENT, MAHARASHTR A THAT THE ASSESSEE STOOD BENEFICIARY OF BOGUS PURCHASE BILLS FROM CERTAIN ENTITIES . ACCORDINGLY, NOTICE U/S 148 DATED 03/02/2014 WAS ISSUED TO THE ASSESSEE . HOWEVER, THE ASSESSEE FAILED TO COMPLY WITH PROCEEDINGS IN ITA.NO.5948/MUM/2017 SUNIL MOHAN LAHORI ASSESSMENT YEAR - 2009 - 10 3 ANY MANNER, WHICH RESULTED INTO DETERMI NATION OF INCOME ON BEST JUDGMENT BASIS U/S 144. THE ASSESSEE CARRIED ON THE BUSINESS OF GARMENTS, TEXTILES, METALS, COMPUTERS, EXPORT - IMPORT ETC. UNDER PROPRIETORSHIP CONCERN NAMELY OM ENTERPRISES WHERE THE ASSESSEE HAS REFLECTED G ROSS PROFIT / NET PROFIT RATES OF 4.17% & 1.77% RESPECTIVELY ON TURNOVER OF RS.433.90 LACS. THE GROSS PURCHASES W ERE SHOWN AS RS.4 62.82 LACS . THE LD. AO, IN THE QUANTUM ASSESSMENT, HAS MADE THE FOLLOWING ADDITIONS: - NO. HEAD AMOUNT (RS.) 1 ON ACCOUNT OF BOGUS PURCHASES 47,73,0 33/ - 2 UNEXPLAINED CASH CREDIT U/S 68 49,02,971/ - 3 REMISSION OF LIABILITY U/S 41(1) 1 ,21,21,581/ - 4 50% OF BALANCE PURCHASES 2,07,54,611/ - 5 OUT OF EXPENSES 5,95,058/ - TOTAL 4,31,47,254/ - 3. AGGRIEVED, THE ASSESSEE CONTESTED THE SAME WITH PARTIAL SUCCESS BEFORE LD. CIT(A) VIDE IMPUGNED ORDER DATED 04/08/2017 WHERE , AFTER CONSIDERING VARIOUS REMAND REPORTS, ADDITIONS ON ACCOUNT OF BOGUS / OTHER PURCHASES HAVE BEEN CONFIRMED WHEREAS PARTIAL RELIEF HAS BEEN GRANTED AGAINST ADDITION MADE U/S 68 & U/S 41(1) WHERE AS EXPENSES DISALLOWANCE HAS BEEN DELETED ALTOGETHER. AGGRIEVED THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 4. THE LD. AUTHORISED REPRESENTATIVE [AR] FOR ASSESSEE VEHEMENTLY CONTESTED THE VARIOUS ADDITIONS BY DRAWING OUR ATTENTION TO THE DOCUMENTS PLACED IN THE PAPER - BOOK WHEREAS LD. DEPARTMENTAL REPRESENTATIVE [DR] SUBMITTED THAT THE ORDER OF LD. CIT(A) WAS QUITE FAIR & REASONABLE. ITA.NO.5948/MUM/2017 SUNIL MOHAN LAHORI ASSESSMENT YEAR - 2009 - 10 4 5. WE HAVE CAREFULLY HEARD THE RIVAL CONTENTIONS AND PERUSED RELEVANT MATERIAL ON RECORD. SO FAR AS THE ADD ITION ON ACCOUNT OF ALLEGED BOGUS PURCHASES & OTHER PURCHASES IS CONCERNED, WE FIND THAT THE ASSESSEE HAS BEEN SADDLED WITH PURCHASES DISALLOWANCE OF RS.255.27 LACS , WHICH IS ROUGHLY 55 % OF GROSS PURCHASES REFLECTED BY THE ASSESSEE . IT IS TO BE NOTED THAT THE ASSESSEE WAS A TRADER AND COULD NOT ACHIEVE TURNOVER WITHOUT PURCHASE OF ACTUAL MATERIAL AND THEREFORE SUCH HIGHER DISALLOWANCE WAS NOT JUSTIFIED . UPON PERUSAL OF IMPUGNED ORDER, WE FIND THAT THE ADDITION HAS BEEN SUSTAINED PRIMARILY IN VIEW OF THE FAC T THAT THE NOTICES U/S 133(6) TO CONFIRM THE TRANSACTIONS EITHER REMAINED UN - SERVED OR ELICITED NO RESPONSE. HOWEVER, THE SALES TURNOVER ACHIEVED BY THE ASSESSEE HAS NOT BEEN DISPUTED BY THE REVENUE AND THE P URCHASES WERE BACKED BY INVOICES. AT THE SAME TI ME, THE ASSESSEE COULD NOT PRODUCE ANY CONFIRMATION FROM ANY OF THE SUPPLIERS DESPITE BEING PROVIDED WITH ADEQUATE OPPORTUNITY AND NOTICES ISSUED U/S 133(6) ELICITED NO RESPONSE, WHICH CAST SERIOUS DOUBTS ON ASSESSEES CLAIM. IT IS ALSO EVIDENT FROM PERUSA L OF TAX AUDIT REPORT THAT THE ASSESSEE WAS NOT MAINTAINING ADEQUATE STOCK RECORDS. THEREFORE, IN SUCH A SITUATION, THE ADDITION, WHICH COULD BE MADE, WAS TO ACCOUNT FOR PROFIT ELEMENT EMBEDDED IN THESE PURCHASE TRANSACTIONS TO FACTORIZE FOR PROFIT ELEMENT EARNED BY ASSESSEE AGAINST POSSIBLE PURCHASE OF MATERIAL IN THE GREY MARKET AND UNDUE BENEFIT OF VALUE ADDED TAX [VAT] AGAINST SUCH BOGUS PURCHASES . THE LD. AR HAS CONTENDED THAT ADDITION OF ALLEGED BOGUS PURCHASES COULD NOT BE MADE U/S 69C SINCE THE PAYM ENTS WERE THROUGH BANKING CHANNELS WITH WHICH WE ARE NOT CONVINCED SINCE WE HAVE ALREADY OBSERVED THAT THE PURCHASES REFLECTED BY THE ASSESSEE WERE IN GRAVE ITA.NO.5948/MUM/2017 SUNIL MOHAN LAHORI ASSESSMENT YEAR - 2009 - 10 5 DOUBT AND THE ASSESSEE MISERABLY FAILED TO PROVE THE SAME. THIS FACT LEADS US TO THE LOGICAL CONCLU SION THAT SINCE THE ASSESSEE WAS ENGAGED IN TRADING ACTIVITIES, THE GOODS MUST HAVE BEEN SOURCED BY THE ASSESSEE FROM SOMEWHERE ELSE, THE SOURCE OF INVESTMENT OF WHICH REMAINED UNEXPLAINED. THEREFORE, AFTER CONSIDERING THE FACTUAL MATRIX, WE ESTIMATE THE I MPUGNED ADDITIONS IN THE FOLLOWING MANNER: - NO. HEAD ESTIMATION OF ADDITIONS AMOUNT (RS.) 1 . ALLEGED BOGUS PURCHASES 5% OF RS.47,73,033/ - 2,38,652/ - 2 BALANCE PURCHASES 1 % OF RS.4,15,09,222/ - 4,15,092/ - TOTAL 6,53,744/ - CONSEQUENTLY, GROUND NUMBERS 1 & 2 STANDS PARTLY ALLOWED. 6. SO FAR AS THE ADDITION ON ACCOUNT OF UNEXPLAINED CASH CREDIT U/S 68 IS CONCERNED, WE FIND THAT THE SAME IS IN RESPECT OF UNSECURED LOAN OBTAINED BY THE ASSESSEE FROM AN ENTITY NAMELY SHUBHAM INTERNATIONAL. THE LD. AR HAS CO NTENDED THAT THE PAYMENTS WERE THROUGH BANKING CHANNELS AND THEREFORE THE ADDITION WAS NOT JUSTIFIED. HOWEVER, UPON PERUSAL OF IMPUGNED ORDER, IT IS NOTED THAT THE ASSESSEE WAS NOT ABLE TO SATISFY THE THREE INGREDIENTS VIZ. IDENTITY, CREDITWORTHINESS & GEN UINENESS AGAINST THE SAME. NEEDLESS TO SAY THAT THE COMPLETE ONUS TO PROVE THE SAME REST ON THE ASSESSEE. THEREFORE, IN THE INTEREST OF JUSTICE, WE REMIT THE MATTER BACK TO THE FILE OF LD. AO WITH A DIRECTION TO ASSESSEE TO SUBSTANTIATE THE SAME AND DEMONS TRATE FULFILLMENT OF REQUIREMENTS OF SECTION 68. THIS GROUND STAND ALLOWED FOR STATISTICAL PURPOSES. 7. UPON PERUSAL OF IMPUGNED ORDER, WE FIND THAT ADDITION U/S 41(1) FOR RS. 21,10,711/ - AS SUSTAINED BY LD. CIT(A) COMPRISED OF ADDITION OF ITA.NO.5948/MUM/2017 SUNIL MOHAN LAHORI ASSESSMENT YEAR - 2009 - 10 6 RS.11,34,299/ - O N ACCOUNT OF LIABILITY AGAINST SUSPICIOUS SUPPLIERS. SINCE, WE HAVE ALREADY ESTIMATED ADDITION AGAINST GROSS PURCHASES, SEPARATE ADDITION THEREOF U/S 41(1) DO NOT SURVIVE AND ACCORDINGLY, D ELETED. THE BALANCE ADDITION OF RS.9,76,412/ - PERTAIN TO AN ENTITY NAMELY FIND TECHNOLOGY PRIVATE LIMITED . THE ADDITION HAS BEEN SUSTAINED BY LD. FIRST APPELLATE AUTHORITY SINCE NOTICE U/S 133(6) ELICITED NO RESPONSES. UPON PERUSAL OF LEDGER EXTRACT, IT IS NOTED THAT THERE IS NO TRANSACTION BY ASSESSEE WITH THE SAID ENTIT Y DURING IMPUGNED AY AND LD. AR HAS CONTENDED THAT THE SAID AMOUNT IS STILL OUTSTANDING AND IS SUBJECT MATTER OF CERTAIN LITIGATION / SETTLEMENT. IN VIEW OF THE STATE D FACT, T H E MATTER STANDS REMITTED BACK TO THE FILE OF LD. AO WITH A DIRECTION TO THE ASSE SSEE TO SUBSTANTIATE THE FACT THAT THERE WAS NO REMISSION OR CESSATION OF LIABILITY DURING IMPUGNED AY WITHIN THE MEANING OF SECTION 41(1). RESULTANTLY, THIS GROUND STANDS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 8. SINCE THE QUANTUM APPEAL HAS BEEN DISPOS ED - OFF, THE STAY APPLICATION FILED BY THE ASSESSEE B ECOMES INFRUCTUOUS AND HENCE, DISMISSED. 9. RESULTANTLY, THE ASSESSEES APPEAL STANDS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PR ONOUNCED IN THE OPEN COURT ON 07 TH MARCH , 2018 . SD/ SD/ ( SAKTIJIT DEY ) (MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 07 . 03 .2018 SR.PS: - THIRUMALESH ITA.NO.5948/MUM/2017 SUNIL MOHAN LAHORI ASSESSMENT YEAR - 2009 - 10 7 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI