BHARAT H. BHANSALI, MUMBAI V. ITO 19 (1)(2), MUMBAI

ITA 6118/MUM/2018

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 4769 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-10-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 26-10-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SAMASTHA MULLAMADI
• Keywords: Bogus purchase; Opportunity of being heard
• 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. 6118/MUM/2018(ASSESSMENT YEAR: 2010-11) BHARAT H BHANSALI ROOM NO.13, 3 RD FLOOR 97/99, SHIV VILAS BLDG 5 TH KUMBARWADA, 2 ND PATHAN STREET, MUMBAI-400 004 PAN : AIFPB5740B VS ITO, 19(1)(2), MUMBAI APPELLANT RESPONDEDNT APPELLANT BY NONE RESPONDENT BY MS. SAMASTHA MULLAMADI SR DR DATE OF HEARING 15-10-2019 DATE OF PRONOUNCEMENT 23-10-2019 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)-30, MUMBAI DATED 17.08.2018 FOR ASSESSMENT Y EAR 2010-11. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF AP PEAL: 01. ON THE FACT AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL)-30), ERRED IN C ONFIRMING ADDITION OF RS. 11,51,018/- BEING ESTIMATING PROFIT ELEMENT IN TREATING THE GENUINE PURCHASES OF RS. 92,08,1437- AS NON-GENUINE PURCHAS ES WITHOUT APPRECIATING THE LAW, FACTS AND CIRCUMSTANCES OF THE CASE. THE PROVISIONS OF THE ACT OUGHT TO HAVE BEEN PROPER LY CONSTRUED AND REGARD BEING HAD TO FACTS OF THE CASE NO SUCH ADDITION SHO ULD HAVE BEEN MADE. REASONS ASSIGNED BY THE LEARNED ASSESSING OFFICER A RE WRONG AND UNLAWFUL TO JUSTIFY THE ADDITION OF RS 11,51,018/-. THE SAME TO BE DELETED. 02. ON THE FACT AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL)-30, ERRED IN PA SSING THE ORDER WITHOUT GIVING PROPER OPPORTUNITY OF BEING HEARD. ITA 6118/MUM/2018 BHARAT H BHANSALI 2 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS P ROPRIETOR OF M/S BHANSALI IMPEX, ENGAGED IN THE BUSINESS OF TRADING IN FERROUS AND NON- FERROUS METAL, FILED RETURN OF INCOME FOR AY 2010-1 1 ON 08-09-2010 DECLARING TOTAL INCOME AT RS.2,36,2310 /-. THE RETU RN OF INCOME WAS PROCESSED UNDER SECTION 143(1). THE ASSESSMENT WAS RE-OPENED UNDER SECTION 147 ON THE BASIS OF INFORMATION RECEIVED FR OM SALE TAX DEPARTMENT, GOVERNMENT OF MAHARASHTRA THAT CERTAIN HAWALA OPERATORS ARE INDULGING IN PROVIDING ACCOMMODATION BILLS WITH OUT ACTUAL DELIVERY OF GOODS. THE SALE TAX DEPARTMENT, GOVERNM ENT OF MAHARASHTRA REFERRED THE LIST OF SUCH HAWALA DEALER S AND THE BENEFICIARY TO THE DGIT (INVESTIGATION), MUMBAI. TH E NAME OF ASSESSEE APPEARED IN THE LIST OF BENEFICIARY. THE ASSESSEE ALLEGEDLY MADE THE PURCHASES OF RS.92,08,143/- FROM SUCH HAWA LA DEALERS. ON THE BASIS OF INFORMATION, THE ASSESSING OFFICER MAD E A BELIEF THAT THE INCOME OF THE ASSESSEE ESCAPED ASSESSMENT, THEREFOR E, RE-OPENED THE ASSESSMENT UNDER SECTION 147. NOTICE UNDER SECTION 148 DATED 23.09.2014 WAS ISSUED AND SERVED UPON THE ASSESSEE. IN RESPONSE TO THE NOTICE UNDER SECTION 148, THE ASSESSEE FILED HI S REPLY AND STATED THAT THE RETURN FILED ON 08.09.2010 BE TREATED AS R ETURN IN RESPONSE TO SAID NOTICE. REASONS RECORDED WERE SUPPLIED TO THE ASSESSEE. THE ASSESSING OFFICER AFTER SERVING NOTICE UNDER SECTIO N 143(2) DATED ITA 6118/MUM/2018 BHARAT H BHANSALI 3 10.08.2015 PROCEEDED FOR RE-ASSESSMENT. DURING THE ASSESSMENT, THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS SHOWN PURCHASES FROM THE FOLLOWING PARTIES, WHICH WAS DECLARED AS HAWALA DEALERS BY THE SALE TAX DEPARTMENT, GOVERNMENT OF MAHARASHTRA. NAME OF THE PARTIES BILL AMOUNT (RS.) 1 PARSHVA & CO 13,682/- 2 SHUBHA LABH METAL AND ALLOYS / BRIGHT ENTERPRISE 1,17,286/- 3 ROLEX TRADING COMPANY 3,48,749/- 4 AMAR ENTERPRISES 1,88,344/- 5 DAKSHA ENTERPRISES 2,27,894/- 6 LIBERTY TRADING CORPORATION 3,24,472/- 7 MERCURY ENTERPRISES 9,47,234/- 8 RAJDEEP MEALS & TUBES 44,064/- 9 DEEPLOK METAL ALLOYS PVT LTD 7,19,108/- 10 MANIBHADRA METAL INDUSTRIES 8,62,834/- 11 VIJAY INDUSTRIES 8,94,720/- 12 VATIKA TRADING CVO 8,12,030/- 13 PRAYASH STEELAGE 15,97,586/- 14 HITECH IMPEX 7,75,402/- 15 MEHUL TRADERS 6,922 16 MAHAVIR ENTERPRISES 1,03,498/- 17 RAJ TRADELINK 2,21,760/- 18 KALASH METALS PVT LTD 10,02,549/- TOTAL 92,08,143/- 3. THE ASSESSEE WAS ASKED TO SUBSTANTIATE THE PURCHASE S AND ISSUED SHOW- CAUSE NOTICE AS TO WHY THE AFORESAID TRANSACTION SH OULD NOT BE TREATED ITA 6118/MUM/2018 BHARAT H BHANSALI 4 AS NON-GENUINE, THE ASSESSEE WAS SPECIFICALLY ASKED TO FURNISH ALL THE EVIDENCES IN RESPECT OF THE ABOVE PURCHASES AND TO PRODUCE THE PARTIES FOR VERIFICATION. THE ASSESSEE FILED ITS EXPLANATIO N AND FURNISHED THE COPY OF LEDGER ACCOUNT AND PROOF OF PAYMENT THROUGH CHEQUES. THE ASSESSEE EXPRESSED HIS INABILITY TO PRODUCE THE PAR TIES. THE ASSESSING OFFICER AFTER CONSIDERING THE MATERIAL AVAILABLE BE FORE HIM AND THE SUBMISSION MADE BY ASSESSEE CONCLUDED THAT THE DISA LLOWANCE @ 12.5% OF THE AGGREGATE OF NON-GENUINE/ALLEGED HAWAL A PURCHASES WOULD BE FAIR TO TAX THE ELEMENT OF DILUTED INCOME BY SHOWING THE PURCHASES FROM THE SAID PARTIES IN ASSESSMENT ORDER DATED 18.01.2016 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 LD. C IT(A), THE ASSESSEE HAS FILED THE PRESENT APPEAL BEFORE US. 5. NONE APPEARED BEFORE US; DESPITE THE SERVICE OF NOT ICE OF HEARING THROUGH REGISTERED POST WITH ACKNOWLEDGE (RPAD), HO WEVER ON PERUSAL OF THE RECORD WE FIND THAT THE ASSESSEE HAS ALREADY FILED HIS WRITTEN SUBMISSION AND THE DOCUMENTARY EVIDENCES IN THE FORM OF PAPER BOOK, ON RECORD. THUS, WE LEFT NO OPTION EXCE PT TO HEAR THE SUBMISSIONS OF LEARNED DEPARTMENTAL REPRESENTATIVE (LD. DR) AND TO DECIDE THE APPEAL ON THE BASIS OF MATERIAL AVAILABL E ON RECORD. WE ITA 6118/MUM/2018 BHARAT H BHANSALI 5 HAVE HEARD THE SUBMISSION OF LD. DR FOR THE REVENUE AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE LD. DR FOR THE RE VENUE SUBMITS THAT INVESTIGATION WING OF INCOME TAX AS WELL AS SALES T AX DEPARTMENT OF GOVERNMENT OF MAHARASHTRA MADE A FULL-FLEDGED INVES TIGATION TO UNEARTH THE MODUS OPERANDI OF THE HAWALA TRADERS, W HO WERE INDULGED IN PROVIDING THE BOGUS BILLS WITHOUT ACTUAL DELIVER Y OF THE GOODS. THE ASSESSEE IS ONE OF THE BENEFICIARIES OF THE PURCHAS ES FROM THE HAWALA DEALERS. THE ASSESSING OFFICER HAS ALREADY GRANTED SUFFICIENT RELIEF TO THE ASSESSEE AND THE ASSESSEE IS NOT ENTITLED FOR F URTHER RELIEF AND THE APPEAL OF THE ASSESSEE IS LIABLE TO BE DISMISSED. 6. WE HAVE CONSIDERED THE SUBMISSIONS OF THE LD. DR FO R THE REVENUE AND ALSO GONE THROUGH THE WRITTEN SUBMISSION OF THE ASS ESSEE AND THE DOCUMENTS FILED IN THE FORM OF THE PAPER BOOKS. IN THE WRITTEN SUBMISSION FILED BEFORE US, THE ASSESSEE HAS NARRAT ED THAT IN ORDER TO SUBSTANTIATE THE GENUINENESS OF THE PURCHASES HE HA D PRODUCED PURCHASES INVOICES, MODE OF DELIVERY, CORRESPONDING SALES BILLS, QUANTITY-WISE TALLY OF IMPUGNED PURCHASES AND CORRE SPONDING SALES. BANKS STATEMENT HIGHLIGHTING THE NAME OF THE PARTIE S, COPY OF AUDIT REPORT AND STOCK REGISTER. THE ASSESSEE HAS TURNOVE R OF RS. 1,19,49,357/ AND THE GROSS PROFIT (GP) IS RS.2,86,1 02/- ( 2.39%) AND IN CASE THE ALLEGED ADDITION IS SUSTAIN IT WOULD RISE TO 9.64%, THEREBY ITA 6118/MUM/2018 BHARAT H BHANSALI 6 INCREASE OF 403.35% IN GP RATIO. THE ASSESSEE ALSO MENTIONED ITS GP RATIO OF AY 2007-08 AT 2.31% AND FOR AY 2008-08 @ 3 .03%. 7. WE HAVE SEEN THAT THE ASSESSING OFFICER WHILE PASSI NG ASSESSMENT ORDER MADE ADDITION ON ACCOUNT OF BOGUS PURCHASES @ 12.5% OF THE AGGREGATE OF PURCHASES SHOWN FROM THE ALLEGED HAWAL A TRADERS. THE LD CIT(A) CONFIRMED THE ACTION OF THE ASSESSING OFFICE R ON THE SIMILAR LINES. THE ASSESSING OFFICER HAS NOT MADE ANY INDEP ENDENT INQUIRY. THE BOOKS OF ACCOUNTS OF THE ASSESSEE WERE NOT REJE CTED. THE ASSESSEE IS TRADER IN FERROUS AND NON-FERROUS METAL, THE SAL E OF THE ASSESSEE WAS NOT DISPUTED. THE ASSESSEE HAS ALREADY SHOWN A GP @ 2,39%. THE ASSESSEE IN ITS WRITTEN SUBMISSION HAS MENTIONED TH AT IN CASE THE ADDITION @123.%% IS SUSTAINED, THE GP OF ASSESSEE W OULD INCREASE TO 9.64% WHICH IS UNREASONABLE. 8. THE HONBLE BOMBAY HIGH COURT IN A RECENT DECISION ON SIMILAR SET OF FACT IN PCIT VS. M HAJI ADAM & CO. IN ITA NO. 1004 OF 2016 DATED 11.02.2019 HELD THAT ADDITION IN RESPECT OF BOGUS P URCHASES IS TO BE LIMITED TO THE EXTENT OF BRINGING THE GP RATE ON SU CH PURCHASE AT THE SAME RATE AS ON OTHER GENUINE PURCHASES. CONSIDERIN G THE WRITTEN SUBMISSIONS OF THE ASSESSEE THAT THE DISALLOWANCE O F ALLEGED BOGUS PURCHASE IS UNREASONABLE. WE HAVE SEEN THAT ON SIM ILAR SET OF FACT, THE HONBLE BOMBAY HIGH COURT IN PCIT VS. M HAJI ADAM & CO. (SUPRA) ITA 6118/MUM/2018 BHARAT H BHANSALI 7 HELD THAT ADDITION IN RESPECT OF BOGUS PURCHASE BE LIMITED TO THE EXTENT OF BRINGING THE GP RATE ON BOGUS PURCHASE AT THE SA ME RATE AS OTHER GENUINE PURCHASES. WE HAVE FURTHER NOTED THAT THE A SSESSEE HAS SHOWN GP OF 2.39%. THEREFORE, CONSIDERING THE FACT OF THE PRESENT CASE AND THE NATURE OF BUSINESS ACTIVITIES OF THE ASSESSEE A ND BY FOLLOWING THE DECISION OF HONBLE BOMBAY HIGH COURT, WE DIRECT TH E ASSESSING OFFICER TO RESTRICT THE ADDITION WITH REGARD TO BOG US PURCHASES BY BRINING THE GP RATE ON SUCH PURCHASES AT THE SAME R ATE AS THAT OF OTHER GENUINE PURCHASES. NEEDLES TO SAY THAT BEFORE MAKIN G ADDITION, THE 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 23-10-2019. SD/- SD/- (SHAMIM YAHYA) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIALMEMBER MUMBAI, DT : 23 OCTOBER, 2019 PK/- COPY TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR /TRUE COPY/ BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI