ITO - WD- 32 (1)(3), MUMBAI V. BIJAL NIRISH MASALIA, MUMBAI

ITA 6170/MUM/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 0456 (ITAT-MUMBAI)
• Duration Of Justice: 10 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-09-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 30-10-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASHUTOSH RAJHANSLD
• Assessee Lawyers: NISHIT M GANDHILD
• Keywords: Bogus purchase; Set aside
• Section: 143(3); 133(6); 143(2); 148

Judgement Text

1 ITA NO.6170/MUM/2018 A.Y. 2010-11 BIJAL NIRISH MASALIA - IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI , , BEFORE HONBLE SHRI MAHAVIR SINGH, JM AND HONBLE SHRI MANOJ KUMAR AGGARWAL, AM ./ I.T.A. NO.6170/MUM/2018 ( / ASSESSMENT YEAR:2010-11 ) INCOME TAX OFFICER - 32(1)(3) C-11, 2ND FLOOR, ROOM NO.210 PRATYAKSHKAR BHAVAN, BKC BANDRA (EAST), MUMBAI-400 051. / VS. BIJAL N IRISH MAS ALIA A/102, MEGHA APTS. 9 TH CARTER ROAD, BORIVALI(E) MUMBAI-400 066. ./ ./PAN/GIR NO. ALFPM-4799-J ( /APPELLANT ) : ( / RESPONDENT ) REVENUE BY : SHRI ASHUTOSH RAJHANS-LD.DR ASSESSEE BY : SHRI NISHIT M. GANDHI-LD.AR / DATE OF HEARING : 12/09/2019 / DATE OF PRONOUNCEMENT : 12/09/2019 / O R D E R PER BENCH: - 1. AFORESAID APPEAL BY REVENUE FOR ASSESSMENT YEAR [AY] 2010-11 CONTEST THE ORDER OF LD. COMMISSIONER OF INCOME-TAX (APPEALS)-44, MUMBAI, [IN SHORT REFERRED TO AS CIT(A)], APPEAL NO. CIT(A)-44/ITO- 2 ITA NO.6170/MUM/2018 A.Y. 2010-11 BIJAL NIRISH MASALIA 32(1)(3)/ITA-115/2016-17 DATED 30/08/2018 ON FOLLOWING GROUNDS OF APPEAL:- (1) 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A) ERRED IN RESTRICTING THE ADDITION TO RS.2,40,490/- @ 12.5% O F RS.19,23,920/- ON ACCOUNT OF BOGUS PURCHASES, WITHOUT APPRECIATING THE FACT THAT THE A SSESSEE HAS NOT PRODUCED ANY COGENT EVIDENCE TO SUBSTANTIATE THAT HE HAD TAKEN ACTUAL D ELIVERY OF GOODS PURCHASED FROM THE PARTIES AND THE NOTICES U/S.133(6) ISSUED TO THE PARTIES, F ROM WHOM ALLEGED BILLS WERE RECEIVED, WERE RETURNED UNDELIVERED BY THE POSTAL AUTHORITIES WITH THE REMARK NOT KNOWN AND THE ASSESSEE HAS ALSO FAILED TO PRODUCE THE PURCHASE PARTIES BEF ORE THE AO .' (2) 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN NOT APPRECIATING THE RATIO OF THE DECISION OF GUJARAT H IGH COURT IN THE CASE OF N.K. PROTEINS LTD. WHEREIN IT WAS CONFIRMED THAT IN THE EVENT OF BOGUS PURCHASES, THE ADDITION ON THE WHOLE OF SUCH PURCHASES WAS REQUIRED TO BE MADE AND THIS PAR TICULAR RATIO WAS CONFIRMED BY HON'BLE SUPREME COURT IN SLP NO. CC NO.769 OF 2017 DATED 16 .01.2017, BY DISMISSING THE SLP OF THAT ASSESSEE.' (3) 'THE APPELLANT PRAYS THAT THE ORDER OF THE LD. CIT(A) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE AO BE RESTORED.' 2.1 FACTS ON RECORD WOULD REVEAL THAT THE ASSESSEE BEING RESIDENT INDIVIDUAL STATED TO BE DEALING IN COLOR PAINTS AND JOB WORK OF PAINTING, WAS ASSESSED FOR IMPUGNED AY U/S. 143(3) R.W.S. 147 ON 11/03/2016 WHEREIN THE INCOME OF THE ASSESSEE WAS DETERMINED AT RS.26. 34 LACS, INTER-ALIA, AFTER ADDITION OF ALLEGED BOGUS PURCHASES FOR RS.19.23 LACS AS AGAINST RETURNED INCOME OF RS.7 LACS FILED BY THE ASSESSEE ON 12/10/2010 WHICH WAS PROCESSED U/S.143(1). 2.2 PURSUANT TO RECEIPT OF CERTAIN INFORMATION FROM INVESTIGATION WING / SALES TAX DEPARTMENT, GOVT. OF MAHARASHTRA, IT TRAN SPIRED THAT THE ASSESSEE STOOD BENEFICIARY OF ALLEGED BOGUS PURCHASES TO THE TUNE OF RS.19.23 LACS FROM 4 ENTITIES, THE DETAILS OF WHICH HAVE ALREADY BEEN EXTRACTED AT PARA-2 OF THE QUANTUM ASSESSMENT ORDER. ACCORDINGLY, AS PE R DUE PROCESS OF LAW, RE-ASSESSMENT PROCEEDINGS WERE INITIATED AGAINST TH E ASSESSEE U/S 147 BY 3 ITA NO.6170/MUM/2018 A.Y. 2010-11 BIJAL NIRISH MASALIA ISSUANCE OF NOTICE U/S 148 ON 24/03/2015 FOLLOWED B Y STATUTORY NOTICES U/S 143(2) & 142(1), WHEREIN THE ASSESSEE WAS DIRECTED TO SUBSTANTIATE THE PURCHASE TRANSACTIONS. 2.3 TO CONFIRM THE PURCHASES TRANSACTIONS, NOTICE U /S 133(6) WAS ISSUED TO ALL PARTIES, HOWEVER, THE SAME WERE RETURNED BAC K BY THE POSTAL AUTHORITIES WITH REMARKS NOT KNOWN. ALTHOUGH THE ASSESSEE DEFENDED THE PURCHASES, HOWEVER, NOT SATISFIED, LD. AO DISALLOWE D THE STATED PURCHASES AND ADDED THE SAME TO THE INCOME OF THE ASSESSEE. T HE LEARNED FIRST APPELLATE AUTHORITY, INTER-ALIA, RELYING UPON THE DECISION OF HONBLE GUJARAT HIGH COURT RENDERED IN CIT V/S SIMIT P. SHETH [356 ITR 451] & BHOLANATH POLYFABS PVT. LTD. [355 ITR 290] RESTRICTED THE IMPUGNED ADDITION TO 12.5% OF ALLEGED BOGUS PURCHASES. AGGRIEVED, THE REVENUE IS IN FURTHER APPEAL BEFORE US. IT APPEARS THAT THE ASSESSEE HAS NOT APP EALED ANY FURTHER. 3. BOTH THE REPRESENTATIVE HAD ADVANCED ARGUMENTS WHICH WE HAVE DULY CONSIDERED. 4. WE ARE OF THE CONSIDERED OPINION THERE COULD BE NO SALE WITHOUT ACTUAL PURCHASE OF MATERIAL KEEPING IN VIEW THE ASS ESSEES NATURE OF BUSINESS. THE ASSESSEE WAS IN POSSESSION OF PRIMARY PURCHASE DOCUMENTS AND THE PAYMENTS TO THE SUPPLIER WAS THROUGH BANKIN G CHANNELS. THE SALES TURNOVER REFLECTED BY THE ASSESSEE HAS NOT BEEN DIS TURBED / DISPUTED BY LD. AO. HOWEVER, AT THE SAME TIME, THE ASSESSEE MISERAB LY FAILED TO SUBSTANTIATE THE PURCHASES DURING ASSESSMENT PROCEE DINGS. NOTICES ISSUED U/S 133(6) TO ALL THE ENTITIES REMAINED UN-RESPONDE D TO. UNDER SUCH CIRCUMSTANCES, THE ADDITIONS WHICH COULD BE SUSTAIN ED, WAS TO ACCOUNT FOR 4 ITA NO.6170/MUM/2018 A.Y. 2010-11 BIJAL NIRISH MASALIA PROFIT ELEMENT EMBEDDED IN THESE PURCHASE TRANSACTI ONS TO FACTORIZE FOR PROFIT EARNED BY ASSESSEE AGAINST POSSIBLE PURCHASE OF MATERIAL IN THE GREY MARKET AND UNDUE BENEFIT OF VAT AGAINST SUCH BOGUS PURCHASES, WHICH LD. FIRST APPELLATE AUTHORITY HAS RIGHTLY DONE. THEREFO RE, CONCURRING WITH THE APPROACH OF LEARNED FIRST APPELLATE AUTHORITY IN RE STRICTING THE ADDITIONS TO 12.5%, WE DISMISS THE APPEAL. SO FAR AS THE DECISIO N OF HONBLE GUJARAT HIGH COURT RENDERED IN N.K. INDUSTRIES LTD. VS DCIT [72 TAXMANN.COM 289] IS CONCERNED, WE FIND THAT THE FACTS OF THAT CASE H AS ALREADY BEEN DISTINGUISHED BY HONBLE BOMBAY HIGH COURT IN PR.CIT VS. M/S MOHOMMAD HAJI ADAM & CO. [ITA NO.1004 & OTHERS OF 2 016, DATED 11/02/2019] WHEREIN HONBLE COURT HAS APPROVED THE ESTIMATION, ON SIMILAR FACTUAL MATRIX, BASED ON GROSS PROFIT RATE. 5. KEEPING IN VIEW THE SAME, THE APPEAL STANDS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 12 TH SEPTEMBER, 2019. SD/- SD/- (MAHAVIR SINGH) (MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 12/09/2019 SR.PS:-JAISY VARGHESE #$ %$ / COPY OF THE ORDER FORWARDED TO : 1. $% / THE APPELLANT 2. &'$% / THE RESPONDENT 5 ITA NO.6170/MUM/2018 A.Y. 2010-11 BIJAL NIRISH MASALIA 3. ( ( ) / THE CIT(A) 4. ( / CIT CONCERNED 5. )* &+, , , , / DR, ITAT, MUMBAI 6. *./0 / GUARD FILE / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI.