SHARAD VRAJLAL DOSHI, MUMBAI V. ITO 17 (3)(3), MUMBAI

ITA 6096/MUM/2018

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 4666 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-10-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 25-10-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SAMASTHA MULLAMADI
• Keywords: Bogus purchase; Set aside
• Section: 143(3); 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. 6096/MUM/2018 (ASSESSMENT YEAR : 2009-10) SHARAD VRAJLAL DOSHI 51/57, DONALD STREET DAMAR GALLY, MASJID BUNDER MUMBAI-400 009 PAN : AACPD0897Q VS ITO 17(3)(3), MUMBAI APPELLANT RESPONDEDNT APPELLANT BY SHRI ASHOK MEHTA RESPONDENT BY MS. SAMASTHA MULLAMADI DATE OF HEARING 14-10-2019 DATE OF PRONOUNCEMENT 14-10-2019 O R D E R PER PAWAN SINGH, JM : 1. THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF LD. CIT(A)-28, MUMBAI DATED 17.08.2018 FOR ASSESSMENT Y EAR 2009- 10. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THE LEARNED ASSESSING OFFICER AND CIT(A) -34 E RRED IN ASSESSING THE TOTAL INCOME OF RS. 15,78,5607- INSTEAD OF THE RETU RNED INCOME OF RS. 3,06,294/-. 2. THE LEARNED ASSESSING OFFICER ERRED IN NOT PRO VIDING ALL THE EVIDENCE RECEIVED FROM THE INVESTIGATION WORKING OF INCOME T AX DEPARTMENT AND THE VAT DEPARTMENT AND THE CIT(A)-34 ERRED IN REJECTING THE GROUNDS WITHOUT ANY REASONING. 3. THE LEARNED ASSESSING OFFICER AND CIT(A)-34 ER RED IN CONCLUDING THAT THE SATES TAX DEPARTMENT HAS CERTIFIED THAT THE ABO VE SAID PARTIES ARE 'NON- GENUINE' WITHOUT ADEQUATE EVIDENCE. THE AO FAILED T O UNDERSTAND THAT THE SALES TAX DEPARTMENT HAS ONLY CLAIM THAT THESE DEAL ERS ARE 'SUSPICIOUS' DEALERS AND HAVE NOT EVEN COMPLETED ASSESSMENTS IN THESE CASES. 2 ITA 6096/MUM/2018 SHARAD VRAJLAL DOSHI 4. THE LEARNED CIT(A) -34 ERRED IN CONCLUDING THA T THE PARTIES ARE ASSESSEE'S WITNESS WITHOUT APPRECIATING THAT IT WAS THE CLAIM OF THE DEPARTMENT THAT THE PURCHASES WERE BOGUS AND THEREF ORE IT WAS THE WITNESS OF THE DEPARTMENT AND THE DEPARTMENT IS TO PRODUCE THE PARTY. 5. THE LEARNED ASSESSING OFFICER AND CLT(A)-34 FA ILED TO MAKE ADDITION ON THE ISSUE FOR WHICH ASSESSMENT IS REOPENED AND M ADE ADDITION ON GROSS PROFIT. THUS THE ENTIRE ASSESSMENT NEEDS TO BE SET ASIDE FOLLOWING JET AIRWAYS LTD BOMBAY HIGH COURT 331ITR 236. 6. THE LEARNED ASSESSING OFFICER AND CIT(A)-34 ER RED IN TREATING THE PURCHASES AS NON-GENUINE WITHOUT APPRECIATING THE F ACT THAT THE ASSESSEE HAD RECEIVED DELIVERY OF GOODS AND SOLD THE SAME TO THI RD PARTIES AND THAT THERE CANNOT BE ANY SALES WITHOUT PURCHASES. 7. THE LEARNED ASSESSING OFFICER AND CIT(A) -34 E RRED IN REJECTING BOOKS OF ACCOUNTS U/S 145(3) BASED ON SURMISES AND CONJEC TURES WITHOUT INDICATING ANY ERROR IN THE BOOKS OF ACCOUNTS 8. WITHOUT PREJUDICE TO THE ABOVE GROUND THAT THE PURCHASES ARE GENUINE, WE PLEAD THAT LEARNED AO AND CIT(A) -34 ERRED IN MA KING A GP ADDITION OF 12.5% 9. THE LEARNED ASSESSING OFFICER AND CIT(A) -34 E RRED IN MAKING AN ADDITION OF 12.5% WITHOUT DEDUCTING THE GP ALREADY SHOWN BY THE ASSESSEE ON THESE GOODS. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS P ROPRIETOR OF M/S SHARAD STEEL CORPORATION AND IS ENGAGED IN TRADING IN IRON AND STEEL FILED RETURN OF INCOME FOR AY 2009-10 ON 25-09-200 9 DECLARING TOTAL INCOME AT RS. 3,06,294/-. THE RETURN OF INCO ME WAS PROCESSED UNDER SECTION 143(1). THE ASSESSMENT WAS RE-OPENED UNDER SECTION 147 ON THE BASIS OF INFORMATION RECEIVED FROM SALE TAX DEPARTMENT, GOVERNMENT OF MAHARASHTRA THAT CERTAIN HAWALA OPERA TORS ARE 3 ITA 6096/MUM/2018 SHARAD VRAJLAL DOSHI INDULGING IN PROVIDING ACCOMMODATION BILLS WITHOUT ACTUAL DELIVERY OF GOODS. THE SALE TAX DEPARTMENT, GOVERNMENT OF MA HARASHTRA REFERRED THE LIST OF SUCH HAWALA DEALERS AND THE BE NEFICIARY TO THE DGIT (INVESTIGATION), MUMBAI. THE NAME OF ASSESSEE APPEARED IN THE LIST OF BENEFICIARY. THE ASSESSEE ALLEGEDLY MA DE THE PURCHASES OF RS. 1,01,78,109/- FROM SUCH HAWALA DEALERS. ON T HE BASIS OF INFORMATION, THE ASSESSING OFFICER MADE A BELIEF TH AT THE INCOME OF THE ASSESSEE ESCAPED ASSESSMENT, THEREFORE, RE-OPEN ED THE ASSESSMENT UNDER SECTION 147. NOTICE UNDER SECTION 148 DATED 11.03.2014 WAS ISSUED AND SERVED UPON THE ASSESSEE. REASONS RECORDED WERE SUPPLIED TO THE ASSESSEE. THE ASSESSI NG OFFICER AFTER SERVING NOTICE UNDER SECTION 143(2) DATED 31.07.201 4 PROCEEDED FOR RE-ASSESSMENT. FOR THE YEAR UNDER SCRUTINY THE ASS ESSEE HAS SHOWN SALES TURN OVER OF RS. 5,17,95,621/- AND GROSS PROF IT OF RS. 1,08,627/-. DURING THE ASSESSMENT, THE ASSESSING OF FICER NOTED THAT THE ASSESSEE HAS SHOWN PURCHASES FROM THE FOLLOWING PARTIES, WHICH WAS DECLARED AS HAWALA DEALERS BY THE SALE TAX DEPA RTMENT, GOVERNMENT OF MAHARASHTRA. NAME OF THE PARTIES BILL AMOUNT (RS.) 1 SIDHIVINAYAK TRADING COMPANY 35,93,401/- 4 ITA 6096/MUM/2018 SHARAD VRAJLAL DOSHI 2 J.B. INTERLINK 30,021 3 REKHA TRADING CO 41,93,620/- 4 AMAR ENTERPRISES 1,38,877/- 5 SUN ENTERPRISES 1,78,724/- 6 M.R. CORPORATION 10,99,249/- 7 NAVDEEP TRADING CORPORATION 1,31,196/- 8 GRIFTON INDIA RIDHI ENTERPRISES 3,56,985/- 9 D.K. ENTERPRISES 4,04,227/- 10 P.K. TRADING 32,121/- 11 PAWAN ENTERPRISES 19,688/- TOTAL 1,01,78,109/- 3. THE ASSESSEE WAS ASKED TO SUBSTANTIATE THE PURCHASE S AND ISSUED SHOW-CAUSE NOTICE AS TO WHY THE AFORESAID TRANSACTI ON SHOULD NOT BE TREATED AS NON-GENUINE. THE ASSESSEE WAS ALSO ASKED TO PRODUCE THE PARTY FOR VERIFICATION. THE ASSESSEE FILED ITS EXPL ANATION AND FURNISHED THE COPY OF LEDGER ACCOUNT AND PROOF OF P AYMENT THROUGH CHEQUES. THE ASSESSING OFFICER NOT ACCEPTED THE EXP LANATION FURNISHED BY ASSESSEE AND NOTED THAT THE ASSESSEE H AS NOT PRODUCED LORRY RECEIPT, TRANSPORTATION DETAILS ETC. THE ASS ESSING OFFICER AFTER CONSIDERING THE MATERIAL AVAILABLE BEFORE HIM AND THE SUBMISSION MADE BY ASSESSEE CONCLUDED THAT CERTAIN PURCHASE SHOWN BY THE ASSESSEE REMAINED UNVERIFIABLE AND THE RE IS POSSIBILITY OF REVENUE LEAKAGE, THE GROSS PROFIT (GP) SHOWN BY ASSESSEE IS VERY 5 ITA 6096/MUM/2018 SHARAD VRAJLAL DOSHI LOW. THE ASSESSING OFFICER CONCLUDED THAT THE ASSE SSEE MAY HAVE PURCHASED GOODS FROM OTHER SUPPLIERS WITHOUT BILLS, WHICH IS COMMONLY KNOWN AS GREY MARKET AND THE ASSESSEE IS B ENEFICIARY OF MARGIN OF GREY MARKET. THE ASSESSING OFFICER ON HIS ABOVE SAID OBSERVATION DISALLOWED 12.5% OF THE AGGREGATE OF TO TAL OF NON- GENUINE/ALLEGED HAWALA PURCHASES IN ASSESSMENT ORDE R DATED 29.01.2015 PASSED UNDER SECTION 143(3) R.W.S 147. 4. ON APPEAL BEFORE THE LD. CIT(A), THE ACTION OF ASSE SSING OFFICER WAS SUSTAINED. FURTHER, AGGRIEVED BY THE ORDER OF L D. CIT(A), THE ASSESSEE HAS FILED THE PRESENT APPEAL BEFORE US. 5. WE HAVE HEARD THE SUBMISSION OF LD. AUTHORIZED REPR ESENTATIVE (AR) OF THE ASSESSEE AND LD. DEPARTMENTAL REPRESENT ATIVE (DR) FOR THE REVENUE AND PERUSED THE MATERIAL AVAILABLE ON R ECORD. THE LD. AR OF THE ASSESSEE SUBMITS THAT THE ASSESSEE FURNIS HED COMPLETE DETAILS OF PURCHASES AND THE SALES MADE AGAINST THE ALLEGED BOGUS PURCHASES. THE ASSESSING OFFICER HAS REJECTED THE B OOKS OF ACCOUNT WITHOUT MENTIONING SPECIFIC REASONS. THE ASSESSING OFFICER MADE THE DISALLOWANCE OF 12.5% OF THE ALLEGED BOGUS PURC HASES. THE LD. AR OF THE ASSESSEE FURTHER SUBMITS THAT THE ADDITIO N SUSTAINED ON ACCOUNT OF ALLEGED BOGUS PURCHASES IS ON HIGHER SID E. THE LD. AR OF 6 ITA 6096/MUM/2018 SHARAD VRAJLAL DOSHI THE ASSESSEE FURTHER SUBMITS THAT AFTER ADDITION SU STAINED BY LD. CIT(A), THE GP OF ASSESSEE WOULD RISE TO UNREASONAB LY HIGH. 6. THE LD. AR OF THE ASSESSEE FURTHER SUBMITS THAT THE HONBLE BOMBAY HIGH COURT IN A RECENT DECISION ON SIMILAR SET OF F ACT IN PCIT VS. M HAJI ADAM & CO. IN ITA NO. 1004 OF 2016 DATED 11.02 .2019 HELD THAT ADDITION IN RESPECT OF BOGUS PURCHASES IS TO B E LIMITED TO THE EXTENT OF BRINGING THE GP RATE ON SUCH PURCHASE AT THE SAME RATE AS ON OTHER GENUINE PURCHASES. THE LD. AR OF THE ASSES SEE SUBMITS THAT THE DISALLOWANCE OF ALLEGED BOGUS PURCHASE MAY BE R ESTRICTED IN ACCORDANCE WITH THE DECISION OF HONBLE JURISDICTIO NAL HIGH COURT IN PCIT VS. M HAJI ADAM & CO. (SUPRA). 7. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESENTA TIVE (DR) FOR THE REVENUE SUPPORTED THE ORDER OF LOWER AUTHORITIE S. THE LD. DR FURTHER SUBMITS THAT INVESTIGATION WING OF INCOME-T AX DEPARTMENT HAS MADE FULL-FLEDGED INVESTIGATION IN RESPECT OF H AWALA TRADERS. THE HAWALA TRADERS WERE/ARE ENGAGED IN PROVIDING BO GUS BILL WITHOUT ACTUAL DELIVERY OF GOODS. THE ASSESSEE HAS SHOWN BOGUS PURCHASES ONLY TO INFLATE THE PROFIT. THE LD. DR FO R THE REVENUE SUBMITS THAT THE ASSESSING OFFICER HAS GIVEN SUFFIC IENT RELIEF. THE 7 ITA 6096/MUM/2018 SHARAD VRAJLAL DOSHI ASSESSING OFFICER HAS REASONABLY ESTIMATED THE DISA LLOWANCES. THE ASSESSEE IS NOT ENTITLED FOR ANY FURTHER RELIEF. 8. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE REPR ESENTATIVES AND PERUSED THE RECORD. THOUGH, THE ASSESSEE HAS RAISED AS MANY AS TEN GROUNDS OF APPEAL, HOWEVER AS PER OUR CONSIDERED VI EW, A SHORT ISSUE FOR OUR ADJUDICATION IS WHETHER THE DISALLOWA NCE OF ALLEGED BOGUS PURCHASE @ 12.5% IS REASONABLE OR NOT. THE LD . AR OF THE ASSESSEE HAS VEHEMENTLY RELIED UPON THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN M HAJI ADAM & CO.(SUPR A). WE HAVE NOTED THAT ON SIMILAR SET OF FACT, THE HONBLE BOMB AY HIGH COURT IN PCIT VS. M HAJI ADAM & CO. (SUPRA) HELD THAT ADDITI ON IN RESPECT OF BOGUS PURCHASE BE LIMITED TO THE EXTENT OF BRING ING THE GP RATE ON BOGUS PURCHASE AT THE SAME RATE AS OTHER GENUINE PURCHASES. THEREFORE, CONSIDERING THE FACT OF THE PRESENT CASE AND THE NATURE OF BUSINESS ACTIVITIES OF THE ASSESSEE AND BY FOLLOWIN G THE DECISION OF HONBLE BOMBAY HIGH COURT, WE DIRECT THE ASSESSING OFFICER TO RESTRICT THE ADDITION WITH REGARD TO BOGUS PURCHASE S BY BRINING THE GP RATE ON SUCH PURCHASES AT THE SAME RATE AS THAT OF OTHER GENUINE PURCHASES. NEEDLES TO SAY THAT BEFORE MAKING ADDITI ON, THE 8 ITA 6096/MUM/2018 SHARAD VRAJLAL DOSHI ASSESSING OFFICER SHALL GRANT OPPORTUNITY TO THE AS SESSEE BEFORE PASSING THE ORDER IN ACCORDANCE WITH LAW. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 14-10-2019. SD/- SD/- (SHAMIM YAHYA) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIALMEMBER MUMBAI, DT : 14 TH OCTOBER, 2019 PK/- COPY TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR /TRUE COPY/ BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI