ITO 27(2)(1), MUMBAI V. M/S.K.L.INDUSTRIES, MUMBAI

ITA 5961/MUM/2018

• Counselvise Citation: [2019] 111 COUNSELVISE.COM (IT) 9898 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-12-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 16-10-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AKHTAR HANSARI
• Keywords: Bogus purchase
• Section: 142(1); 143(1); 143(2); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH SMC, MUMBAI BEFORE SHRI SHAMIM YAHYA (AM) & SHRI PAWAN SINGH (JM) ITA NO. 5961/MUM/2018(A : 2009-10) ITO 27(2)(1), MUMBAI VS M/S K.L. INDUSTRIES 1001-B, VIKHROLI (W) MUMBAI 400 083 PAN : AAFK2680A APPELLANT RESPONDEDNT A PP ELLANT BY SHRI AKHTAR H ANSARI SR DR RESPONDENT BY NONE DATE OF HEARING 26-11-2019 DATE OF PRONOUNCEMENT 04-12-2019 O R D E R PER PAWAN SINGH, JM : 1. THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER OF THE CIT(A)-26, MUMBAI DATED 04-07-2018. THE REVENUE HA S RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE ID CIT(A) ERRED IN DELETING THE ADDITION OF RS.60,386/ -MADE BY ASSESSING OFFICER ON ACCOUNT OF BOGUS PURCHASES, WITHOUT APPR ECIATING THE FACT THAT THE ASSESSEE HAD FAILED TO PRODUCE BILLS, VOUC HERS AND OTHERS DOCUMENTARY EVIDENCES IN SUPPORT OF ITS CLAIM AND W ITHOUT CONSIDERING THE LATEST APEX COURT DECISION IN THE CASE OF N.K. PROTEIN LTD. WHEREIN IT IS HELD THAT ONCE IT IS PROVED THAT THE PURCHASE S ARE BOGUS THEN ADDITION SHOULD BE MADE ON ENTIRE PURCHASES AND NOT ON PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW , THE LD. CIT(A) ERRED IN ESTIMATING THE PROFIT FROM HAWALA P URCHASES BY DISALLOWING ONLY RS.10,656/-BEING 15% OF THE BOGUS PURCHASES AS EVEN THE BASIC ONUS OF PRODUCING DELIVERY CHALLANS, TRANSPORTATION DETAILS ETC WERE NOT FULFILLED BY THE ASSESSEE. THE APPELLANT PRAYS THAT 2 ITA 5961/MUM/2018 M/S K.L. I NDUSTRIES THE ORDER OF THE CIT(A) ON THE ABOVE GROUNDS BE REV ERSED AND THAT OF THE ASSESSING OFFICER BE RESTORED. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE, A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF MANUFACTURING IN STEEL T UBULAR POLES, ETC. FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2010-11 ON 21-09- 2010 DECLARING TOTAL INCOME AT RS.3,51,920/-. THE RETURN WAS PROCESSED U/S 143(1) OF THE INCOME-TAX ACT, 1961. THE ASSESSMENT WAS RE-OPENED UNDER SECTION 147 ON THE BASIS OF INFORMA TION RECEIVED FROM SALE TAX DEPARTMENT, GOVERNMENT OF MAHARASHTRA THAT CERTAIN HAWALA OPERATORS ARE INDULGING IN PROVIDING ACCOMMODATION BILLS WITHOUT ACTUAL DELIVERY OF GOODS. THE SALE TAX DEPARTMENT, GOVERNMENT OF MAHARASHTRA REFERRED THE LIST OF SUCH HAWALA DEALER S AND THE BENEFICIARY TO THE DGIT (INVESTIGATION), MUMBAI. THE NAME OF AS SESSEE APPEARED IN THE LIST OF BENEFICIARIES. THE ASSESSEE ALLEGED LY MADE THE PURCHASES OF RS.71,042/- FROM SUCH HAWALA DEALERS. ON THE BAS IS OF INFORMATION, THE ASSESSING OFFICER MADE A BELIEF THAT THE INCOME OF THE ASSESSEE ESCAPED ASSESSMENT, THEREFORE, RE-OPENED THE ASSESS MENT UNDER SECTION 147. NOTICE UNDER SECTION 148 DATED 26-03-2015 WAS ISSUED TO THE ASSESSEE. HOWEVER, THE ASSESSEE, VIDE LETTER DATED 16-04-2015 3 ITA 5961/MUM/2018 M/S K.L. I NDUSTRIES SUBMITTED THAT THE RETURN FILED ON 21-09-2010 MAY B E TREATED AS RETURN HAVING BEEN FILED IN RESPONSE TO NOTICE U/S 148 OF THE ACT. SUBSEQUENTLY, THE ASSESSING OFFICER THEREAFTER ISSU ED A NOTICES U/S 143(2) AND 142(1) ALONGWITH A QUESTIONNAIRE. DURIN G THE ASSESSMENT, THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS S HOWN PURCHASES FROM THE FOLLOWING PARTIES, WHICH WAS DECLARED AS H AWALA DEALERS BY THE SALE TAX DEPARTMENT, GOVERNMENT OF MAHARASHTRA: NAME OF THE PARTIES BILL AMOUNT (RS.) 1 RIDDHI ENTERPRISES 71,042/- TOTAL 71,042/- 3. THE ASSESSING OFFICER ISSUED NOTICES U/133(6) TO TH E ABOVE PARTIES, BUT ALL THE NOTICES RETURNED UNSERVED BY THE POSTAL AUT HORITIES WITH THE REMARK, LEFT. THEREFORE, THE WARD INSPECTOR WAS DEPUTED TO MAKE ENQUIRY AND THE LOCAL ENQUIRY ALSO FAILED TO THROW ANY LIGHT ON THE WHEREABOUTS OF THE PARTIES. THIS FACT WAS BROUGHT TO THE NOTICE OF THE ASSESSEE BY THE ASSESSING OFFICER. THE ASSESSEE WAS ASKED TO PRODUCE THE PARTIES, ALTERNATIVELY ALSO SHOW CAUSE AS TO WH Y THE PURCHASES MADE FROM THE ABOVE PARTY SHOULD NOT BE DISALLOWED AS UN EXPLAINED EXPENDITURE. AS THE ASSESSEE FAILED TO FURNISH EVI DENCE SUCH AS, 4 ITA 5961/MUM/2018 M/S K.L. I NDUSTRIES DELIVERY CHALLANS, TRANSPORTATION DETAILS, ETC. TO SUBSTANTIATE HIS CLAIM OF PURCHASES FROM AFORESAID PARTIES, THE ASSESSING OFF ICER, RELYING UPON THE DECISION OF ITAT, JAIPUR BENCH IN THE CASE OF KACHW ALA GEMS VS JCIT IN ITA NO.134/JP/2002 DATED 10-12-2003 MADE ADDITIO N OF 100% OF THE AMOUNT OF ALLEGED BOGUS PURCHASES TO THE TOTAL INCOME. 4. ON APPEAL, THE LD. CIT(A), ON FINDING THAT THE GP R ATIO OF THE ASSESSEE FOR THE LAST THREE YEARS RANGED FROM 12.07% TO 16.4 1%. THE LD. CIT(A) ACCORDINGLY RESTRICTED THE ADDITION TO THE E XTENT OF 15% OF SUCH ALLEGED BOGUS PURCHASES BEING THE PROFIT ELEMENT EM BEDDED IN SUCH PURCHASES, BY RELYING UPON THE DECISION OF HONBLE GUJARAT HIGH COURT IN CIT VS SIMIT P SHETH 356 ITR 451 (GUJ). AGGRI EVED BY THE ORDER OF LD. CIT(A), THE REVENUE HAS FILED THE PRES ENT APPEAL BEFORE US. 5. NONE APPEARED ON BEHALF OF THE ASSESSEE BEFORE US. THE NOTICE OF HEARING SENT BY RPAD HAS BEEN RETURNED BY THE POSTA L AUTHORITIES WITH THE REMARK, LEFT. THEREFORE, WE ARE LEFT WITH NO ALTERNATIVE BUT TO HEAR THE LD. DR FOR THE REVENUE AND DISPOSE OF THE APPEAL ON THE BASIS OF MATERIAL AVAILABLE ON RECORD. THE LD DR SUBMITS THAT THE LD CIT(A) GRANTED RELIEF TO THE ASSESSEE DESPITE THE FACTS TH AT THE ASSESSEE FAILED TO PROVE THE GENUINENESS OF THE PURCHASES DURING THE A SSESSMENT 5 ITA 5961/MUM/2018 M/S K.L. I NDUSTRIES 6. WE HAVE CONSIDERED THE SUBMISSIONS OF THE LD. DR FO R THE REVENUE AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE LD. D R HEAVILY RELIED UPON THE ORDER OF THE ASSESSING OFFICER. HOWEVER, WE FIND THAT THE DECISION ARRIVED AT BY THE LD. CIT(A) IN RESTRICTIN G THE ADDITION TO THE EXTENT OF PROFIT ELEMENT EMBEDDED IN SUCH BOGUS PUR CHASES AT 15% IS IN CONFORMITY WITH THE DECISION OF THE HONBLE GUJA RAT HIGH COURT IN CIT VS SIMIT P SHETH(SUPRA) AND OTHER DECISIONS MEN TIONED IN HIS ORDER. WE HAVE NOTICED THAT NEITHER THE AO HAS NOT REJECTED THE SALES OF THE ASSESSEE, NOR STATEMENT OF ACCOUNTS MAINTAINED BY ASSESSEE WAS REJECTED. THE ASSESSING OFFICER DISALLOWED THE ENTI RE AMOUNT OF PURCHASES. WE ARE OF THE CONSIDERED OPINION THAT U NDER INCOME TAX ACT ONLY REAL INCOME CAN BE TAXED BY THE REVENUE. WE MAY FURTHER NOTE THAT EVEN IN CASES WHERE THE WHOLE TRANSACTION IS NOT VERIFIABLE DUE TO VARIOUS REASONS, THE ONLY TAXABLE IS THE TAX ABLE INCOME COMPONENT AND NOT THE ENTIRE TRANSACTION. THE HON BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. HARIRAM BHAMBANI IN ITA NO.313 OF 2013 DECIDED ON 04.02.15 HELD THAT THE REVENUE IS N OT ENTITLED TO BRING THE ENTIRE SALES CONSIDERATION TO TAX, BUT ONLY TH E PROFIT ATTRIBUTABLE ON THE TOTAL UNRECORDED SALE CONSIDERATION ALONE CAN BE SUBJECT TO INCOME 6 ITA 5961/MUM/2018 M/S K.L. I NDUSTRIES TAX . WE HAVE NOTED THAT THE LD CIT(A) REASONABLY DISALL OWED THE PURCHASE, WHICH IS SUFFICIENT TO PREVENT THE REVENU E LEAKAGE. NO OTHER CONTRARY DECISION HAS BEEN BROUGHT TO OUR NOTICE BY THE LD. DR SO AS TO ENABLE US TO COME TO A DIFFERENT CONCLUSION THAN TH E ONE ARRIVED AT BY THE LD. CIT(A). THEREFORE, IN THIS VIEW OF THE MAT TER, WE UPHOLD THE ORDER OF THE LD. CIT(A) AND DISMISS THE APPEAL FILE D BY THE REVENUE. 7. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 04-12-2019. SD/- SD/- (SHAMIM YAHYA) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIALMEMBER MUMBAI, DT : 4 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