BHARAT JEEVRAJ JAIN, MUMBAI V. ITO 19(3)(1), MUMBAI

ITA 6129/MUM/2018

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 4664 (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: 2011-2012
• Appeal Filed On: 26-10-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SAMASTHA MULLAMADI
• Assessee Lawyers: ZALAK NAGARIYA
• Keywords: Bogus purchase
• Section: 143(3); 143(2); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH SMC, MUMBAI BEFORE SHRI SHAMIM YAHYA ACCOUNTANT MEMBER & SHRI PAWAN SINGH JUDICIAL MEMBER ITA NO. 6129/MUM/2018(ASSESSMENT YEAR: 2011-12) BHARAT JEEVRAJ JAIN 2 ND KHATTAR GALLI THAKURDWAR, MUMBAI- 400 004 PAN : ADHPJ7518A VS ITO (19(3)(1), MUMBAI APPELLANT RESPONDEDNT APPELLANT BY MS. ZALAK NAGARIYA AR RESPONDENT BY MS. SAMASTHA MULLAMADI SR DR DATE OF HEARING 14-10-2019 DATE OF PRONOUNCEMENT 14-10-2019 O R D E R PER PAWAN SINGH, JUDICIAL MEMBER : 1. THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF LD. CIT(A)-53, MUMBAI DATED 17.08.2018 FOR ASSESSME NT YEAR 2011-12. THE ASSESSEE HAS RAISED THE FOLLOWING GRO UNDS OF APPEAL: 1.THE LD. COMMISSIONER OF INCOME-TAX (APPEALS) [HER EINAFTER REFERRED TO AS LD.CIT(A)] HAS ERRED IN UPHOLDING THE ORDER OF TH E LD. ASSESSING OFFICER AND DISALLOWING THE PURCHASE TO THE EXTENT OF 12.5% OF RS.1,59,66,402/- AMOUNTING TO RS.19,95,800/- ON ACCOUNT OF PURCHASE FROM NON GENUINE PURCHASE PARTIES. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS EN GAGED IN THE BUSINESS OF TRADING IN FERROUS AND NON-FERROUS META L, FILED RETURN OF INCOME FOR AY 2011-12 ON 13-09-2011 DECLARING TOTAL INCOME AT 2 ITA 6129/MUM/2018 BHARAT JEEVRAJ JAIN RS. 4,33 ,572/-. THE RETURN OF INCOME WAS PROCESSED UNDER SECTION 143(1). THE ASSESSMENT WAS RE-OPENED UNDER SECTION 147 ON THE BASIS OF INFORMATION RECEIVED FROM SALE TAX DEPARTM ENT, GOVERNMENT OF MAHARASHTRA THAT CERTAIN HAWALA OPERA TORS ARE 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. 1,59,66,402 /- FROM SUCH HAWALA DEALERS. ON THE 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 16.09.2014 WAS ISSUED AND SERVED UPON THE ASSESSEE. IN RESPONSE TO THE NOTICE UNDER SECTION 148, ASSESSEE FILED ITS RE SPONSE VIDE REPLY DATED 20.07.2015 AND STATED THAT THE RETURN FILED O N 13.09.2011 BE TREATED THE RETURN IN RESPONSE OF THE SAID NOTICE. THE REASONS RECORDED WERE SUPPLIED TO THE ASSESSEE. THE ASSESSI NG OFFICER AFTER SERVING NOTICE UNDER SECTION 143(2) DATED 16.09.201 6 PROCEEDED FOR RE-ASSESSMENT. DURING THE ASSESSMENT, THE ASSESSING OFFICER NOTED 3 ITA 6129/MUM/2018 BHARAT JEEVRAJ JAIN THAT THE ASSESSEE HAS SHOWN PURCHASES FROM THE FOLL OWING PARTIES, WHICH WAS DECLARED AS HAWALA DEALERS BY THE SALE TA X DEPARTMENT, GOVERNMENT OF MAHARASHTRA. NAME OF THE PARTIES BILL AMOUNT (RS.) 1 BHAGYALAXMI STEEL INDUSTRIES 40,11,354/- 2 VIJAY TRADING COMPANY 1,19,55,048/- TOTAL 1,59,66,402/- 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 ASKED TO P RODUCE THE PARTIES FOR VERIFICATION. THE ASSESSEE EXPRESSED HI S INABILITY TO PRODUCE THE PARTIES. THE ASSESSEE FILED ITS EXPLAN ATION 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 THE ASSE SSEE WAS IN POSSESSION OF GOODS AND HAS SHOWN THE SALE AGAINST THE PURCHASES. THE SALE IS NOT POSSIBLE WITHOUT PURCHASES. THE ASS ESSING OFFICER 4 ITA 6129/MUM/2018 BHARAT JEEVRAJ JAIN ON HIS ABOVE SAID OBSERVATION DISALLOWED 12.5% OF T HE AGGREGATE OF TOTAL OF NON-GENUINE/ALLEGED HAWALA PURCHASES IN AS SESSMENT ORDER DATED 16.11.2016 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 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 ASSESSEE HA S ALREADY SHOWN GROSS PROFIT (GP) AT 2.90%. THE ADDITION SUSTAINED ON ACCOUNT OF ALLEGED BOGUS PURCHASES IS ON HIGHER SIDE. THE LD. AR OF THE ASSESSEE FURTHER SUBMITS THAT AFTER ADDITION SUSTAI NED BY LD. CIT(A), THE GP OF ASSESSEE WOULD RISE SUBSTANTIALLY WHICH IS NOT POSSIBLE IN THE BUSINESS OF ASSESSEE. 5 ITA 6129/MUM/2018 BHARAT JEEVRAJ JAIN 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 REPRESENTAT IVE (DR) FOR THE REVENUE SUPPORTED THE ORDER OF LOWER AUTHORITIES. T HE LD. DR FURTHER SUBMITS THAT INVESTIGATION WING OF INCOME-TAX DEPAR TMENT HAS MADE FULL-FLEDGED INVESTIGATION IN RESPECT OF HAWAL A TRADERS. THE HAWALA TRADERS WERE/ARE ENGAGED IN PROVIDING BOGUS BILL WITHOUT ACTUAL DELIVERY OF GOODS. THE ASSESSEE HAS SHOWN BO GUS PURCHASES ONLY TO INFLATE THE PROFIT. THE LD. DR FOR THE REVE NUE SUBMITS THAT THE ASSESSING OFFICER HAS GIVEN SUFFICIENT RELIEF. THE ASSESSING OFFICER HAS REASONABLY ESTIMATED THE DISALLOWANCES. THE ASSESSEE IS NOT ENTITLED FOR ANY FURTHER RELIEF. 6 ITA 6129/MUM/2018 BHARAT JEEVRAJ JAIN 8. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE REPR ESENTATIVES AND PERUSED THE RECORD. A SHORT ISSUE FOR OUR ADJUDICAT ION IS WHETHER THE DISALLOWANCE OF ALLEGED BOGUS PURCHASE @ 12.5% IS R EASONABLE OR NOT. THE LD. AR OF THE ASSESSEE HAS VEHEMENTLY RELI ED UPON THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN M HAJI ADAM & CO.(SUPRA). WE HAVE NOTED THAT ON SIMILAR SET OF FA CT, THE HONBLE BOMBAY HIGH COURT IN PCIT VS. M HAJI ADAM & CO. (SU PRA) HELD THAT ADDITION IN RESPECT OF BOGUS PURCHASE BE LIMIT ED TO THE EXTENT OF BRINGING THE GP RATE ON BOGUS PURCHASE AT THE SAME RATE AS OTHER GENUINE PURCHASES. WE HAVE FURTHER NOTED THAT THE A SSESSEE HAS SHOWN GP OF 2.9%. IT WAS ARGUED THAT THE GP PERCENTAGE AFTER ADDITION WOULD BE SUBSTANTIALLY ON HIGHER SIDE . THEREFORE, CONSIDERING THE FACT OF THE PRESENT CASE AND THE NA TURE OF BUSINESS ACTIVITIES OF THE ASSESSEE AND BY FOLLOWING THE DEC ISION OF HONBLE BOMBAY HIGH COURT, WE DIRECT THE ASSESSING OFFICER TO RESTRICT THE ADDITION WITH REGARD TO BOGUS PURCHASES BY BRINING THE GP RATE ON SUCH PURCHASES AT THE SAME RATE AS THAT OF OTHER GE NUINE PURCHASES. NEEDLES TO SAY THAT BEFORE MAKING ADDITION, THE ASS ESSING OFFICER SHALL GRANT OPPORTUNITY TO THE ASSESSEE BEFORE PASS ING THE ORDER IN ACCORDANCE WITH LAW. 7 ITA 6129/MUM/2018 BHARAT JEEVRAJ JAIN 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