INDUSTRIAL ENGINEERS DISTRIBUTORS PVT. LTD., MUMBAI V. ITO 4 (2)(3), MUMBAI

ITA 5974/MUM/2018

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 1487 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-10-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 17-10-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAM TIWARI
• Assessee Lawyers: JITENDRA SINGH
• Keywords: Bogus purchase; Set aside
• Section: 201

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES SMC, MUMBAI BEFORE SHRI VIKAS AWASTHY, JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA NO. 5974/MUM/2018 ASSESSMENT YEAR : 2009-10 INDUSTRIAL ENGINEERS DISTRIBUTORS PVT. LTD., 182, GOPAL NIWAS, LOHAR CHAWL, MUMBAI [PAN : AABCI5672E] VS. INCOME TAX OFFICER - 4(2)(3), MUMBAI (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI JITENDRA SINGH , A R RESPONDENT BY : SHRI RAM TIWARI , D R DATE OF HEARING : 16 - 0 9 - 201 9 DATE OF PRONOUNCEMENT : 15 - 1 0 - 201 9 O R D E R PER RAJESH KUMAR, A.M: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS)-2, MUMBAI, DATED 31-07-2018. 2. IN THIS APPEAL, THE ASSESSEE HAS RAISED TWO GROU NDS. THE FIRST GROUND OF APPEAL RAISED BY THE ASSESSEE CHALLENGES THE JURISDICTION OF THE ASSESSING OFFICER TO RE-O PEN THE ASSESSMENT OF THE ASSESSEE U/S.147 OF THE INCOME TA X ACT (ACT) WHEREAS THE SECOND GROUND OF APPEAL IS AGAINS T THE ITA NO. 5974/MUM/2018 : 2 : CONFIRMATION OF ADDITION OF RS.6,31,482/- AS MADE B Y THE AO @ 12.5% OF THE TOTAL ALLEGED BOGUS PURCHASES. 3. AT THE TIME OF HEARING, THE LD AR DID NOT PRESS THE GROUND NO.1 AND THEREFORE, THE SAME IS DISMISSED AS NOT PRESSED. 4. AS FAR AS THE GROUND NO.2 IS CONCERNED, THE FACT S IN BRIEF ARE THAT ASSESSEE FILED RETURN OF INCOME ON 2 8-09-2009, DECLARING INCOME OF RS.7,16,069/-, WHICH WAS PROCES SED U/S.143(1) OF THE INCOME TAX ACT (HEREINAFTER CALLE D THE ACT). THEREAFTER, THE AO OBSERVED FROM THE RECORDS BEFORE HIM THAT ASSESSEE HAS MADE PURCHASES OF RS.50,51,858/- FROM CERTAIN PARTIES WHICH WERE DECLARED AS HAWALA PARTIES BY SA LES TAX DEPARTMENT, GOVT OF MAHARASHTRA AS THEY WERE NOT DOING ANY GENUINE BUSINESS. ACCORDINGLY, THE ASSESSMENT W AS RE- OPENED U/S.147 OF THE ACT AFTER RECORDING REASONS T O BELIEVE AND NOTICE U/S.148 OF THE ACT WAS ISSUED ON 12-03-2 014, WHICH WAS DULY SERVED UPON THE ASSESSEE. 5. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ASS ESSEE WAS CALLED UPON BY THE AO TO FILE EVIDENCES IN SUPP ORT OF PURCHASE AND PROVE THE GENUINENESS OF THE SAME. IN RESPONSE THE ASSESSEE FILED WRITTEN REPLY ALONG WITH EVIDENC ES TO CORROBORATE THE PURCHASES. HOWEVER, THE AO WAS NOT CONVINCED WITH THE SUBMISSIONS OF ASSESSEE AND ACCO RDINGLY HELD THAT THE SAID PURCHASES AS BOGUS PURCHASES AS THE NOTICE ISSUED U/S.133(6) OF THE ACT TO THESE PARTIE S WERE RETURNED UN-SERVED. ULTIMATELY, THE AO BROUGHT TO T AX THE PROFIT ELEMENT IN THE SAID PURCHASES @12.5% WHICH C OMES TO ITA NO. 5974/MUM/2018 : 3 : RS.6,31,482/- AND THE SAME WAS ADDED TO THE INCOME OF ASSESSEE, IN THE ORDER FRAMED U/S.143(3) R.W.S. 147 OF THE ACT, DT.27-03-2015. 6. IN THE APPELLATE PROCEEDINGS, LD.CIT(A) CONFIRME D THE ORDER OF AO BY RELYING ON THE DECISION OF THE HON'B LE GUJARAT HIGH COURT IN THE CASE OF HON'BLE GUJARAT HIGH COUR T IN THE CASE OF SIMIT P.SHETH (2013) [356 ITR 451] (GUJ). 7. LD.AR VEHEMENTLY ARGUED BEFORE US THAT THE ASSES SEE IS DEALING IN ELECTRONIC GOODS AND THE GROSS PROFIT OF THE ASSESSEE DURING THE YEAR IS ABOUT 7%. LD.AR ALSO S UBMITTED THAT IN ORDER TO PROVE THE PURCHASES, ASSESSEE HAS FILED ALL THE NECESSARY EVIDENCES .THE LD AR ARGUED THAT THE LD C IT(A) HAS IGNORED THE CIRCUMSTANTIAL EVIDENCES WHICH PROVE TH AT THE MARGIN IN THE ASSESSEES TRADE IS VERY MEAGER. THE LD.AR SUBMITTED THAT SINCE ASSESSEE HAS ALREADY DECLARED 7% OF THE GROSS PROFIT ON THE TOTAL PURCHASES, INCLUDING THE BOGUS PURCHASES, THEREFORE, THE ADDITION MADE BY THE AO A S CONFIRMED BY THE CIT(A) @12.5% IS TOO HIGH AND WOU LD LEAD TO UN-REALISTIC PROFIT OF THE ASSESSEE, WHICH IS TO O IMPRACTICABLE IF THE ADDITION IS SUSTAINED. ACCORDI NGLY, LD.AR PRAYED THAT REASONABLE ADDITION MAY BE SUSTAINED BY DELETING THE SAID HYPOTHETICAL ADDITION. 8. LD.DR, ON THE OTHER HAND, RELIED HEAVILY ON THE ORDERS OF CIT(A) AND AO SUBMITTED THAT THE APPEAL OF ASSESSEE MAY BE DISMISSED AS THE ASSESSEE WAS FOUND TO BE ENGAGED I N INVOLVING BOGUS PURCHASES FROM HAWALA PARTIES WITHO UT ANY BUSINESS AND THUS MADE SAVINGS TOWARDS NON-PAYMENT OF ITA NO. 5974/MUM/2018 : 4 : VAT AND VARIOUS OTHER LEVIES. THE LD DR ,THEREFORE, PRAYED BEFORE THE BENCH THAT THE ADDITION CONFIRMED BY THE LD.CIT(A) MAY BE SUSTAINED. 9. AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATERIAL ON RECORD, WE OBSERVE THAT IN THIS CASE, UNDISPUTED LY, ASSESSEE IS BENEFICIARY OF BOGUS HAWALA PURCHASE EN TRIES. DURING THE YEAR, THE ASSESSEE HAS DECLARED GROSS PR OFIT OF 7%, ALL THE PURCHASES INCLUDING HAWALA PURCHASES. THERE FORE, ADDITION @12.5% APPEARS TO BE EXCESSIVE AND UNREASO NABLE IN VIEW OF THE PROFITS OF THE ASSESSEE. SINCE THE ASSE SSEE HAS ALREADY DISCLOSED GROSS PROFIT @7%, , WE ARE ,THERE FORE , OF THE OPINION THAT IT WOULD BE REASONABLE AND FAIR IF TH E GROSS PROFIT IS BROUGHT TO TAX @ 6% TO THE SAID BOGUS P URCHASES OVER AND ABOVE THE DECLARED PROFITS BY THE ASSESSEE . ACCORDINGLY, WE SET ASIDE THE ORDER OF CIT(A) AND D IRECT THE AO TO MAKE ADDITION @ 6%. HENCE, THE GROUNDS RAISED BY ASSESSEE MAY BE TREATED AS PARTLY ALLOWED. 10. IN THE RESULT, THE APPEAL OF ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 15 TH OCTOBER, 2019 SD/- SD/- ( VIKAS AWASTHY ) (RAJESH KUMAR) / JUDICIAL MEMBER / ACCOUNTANT MEMBER /MUMBAI; /DATED : 15-10-2019 TNMM / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT ITA NO. 5974/MUM/2018 : 5 : 3. ( ) / THE CIT(A), MUMBAI 4. / CIT, MUMBAI 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE / BY ORDER, //TRUE COPY// / (DY./ASST. REGISTRAR) , / ITAT, MUMBAI