ITO 27 (3)(5), MUMBAI V. VRAJLAL MANILAL SHAH, MUMBAI

ITA 6179/MUM/2018

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 3515 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-11-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 30-10-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bogus purchase
• Section: 143(3); 133(6); 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH SMC MUMBAI BEFORE SHRI SAKTIJIT DEY (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 6179/MUM/2018 ASSESSMENT YEAR: 2009 - 10 INCOME TAX OFFICER - 27(3)(5), R. NO. 428, 4 TH FLOOR, TOWER NO. 6, VASHI RAILWAY STATION, VASHI, NAVI MUMBAI - 400703. VS. SHRI VRAJLALMANILAL SHAH (PROP. M/S VACUUM FORM PRODUCTS) 37, VADHANI INDUSTRIAL ESTATE, L.B.S. ROAD, OPP. SHREYAS CINEMA, GHATKOPAR (W), MUMBAI - 400086. PAN NO. AAGPS2788D APPELLANT RESPONDENT REVENUE BY : SMT . JOTHILAKSHMI NAYAK , SR. DR ASSESSEE BY : MS. DINKLE HARIYA, AR DATE OF HEARING : 25/11/2019 DATE OF PRONOUNCEMENT : 28/11/2019. ORDER PER N.K. PRADHAN, A.M. THIS IS AN APPEAL FILED BY THE REVENUE. THE RELEVANT ASSESSMENT YEAR IS 20 09 - 1 0 . THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) - 25 , MUMBAI [IN SHORT CIT(A)] AND ARISES OUT OF THE ASSESSMENT COM PLETED U/S 143(3) R.W.S. 147 OF THE INCOME TAX ACT 1961, (THE ACT). 2. THE GROUNDS OF APPEAL FILED BY THE R EVENUE READ AS UNDER : I. WHETHER ON THE FACTS & THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS.1,38,10 4/ - MADE BY THE ASSESSING OFFICER ON ACCOUNT OF BOGUS PURCHASES WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAD SHRI VRAJLALMANILAL SHAH ITA NO. 6179/MUM/2018 2 FAILED TO PRODUCE BILLS, VOUCHERS AND OTHER DOCUMENTARY EVIDENCES IN SUPPORT OF HIS CLAIM AND WITHOUT CONSIDERING THE LATEST APEX COURT DECI SION IN THE CASE OF N. K. PROTEINS LTD. WHEREIN IT IS HELD THAT ONCE IT IS PROVED THAT THE PURCHASES ARE BOGUS THEN ADDITION SHOULD BE MADE ON ENTIRE PURCHASES AND NOT ON PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES? 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. C IT(A) ERRED IN ESTIMATING THE PROFIT FROM HAWALA PURCHASES BY DISALLOWING ONLY RS.19,729/ - BEING 12.5% OF THE BOGUS PURCHASES AS EVEN THE BASIC ONUS OF PRODUCING DELIVERY CHALLANS, TR ANSPORTATION DETAILS ETC. WERE NOT FULFILLED BY THE ASSESSEE? 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE FILED HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR (AY) 2011 - 12 ON 11.09.2011 DECLARING TOTAL INCOME OF RS.8,15,570/ - . THE ASSESSEE MANUFACTURES VACCUME FORMING/THERMO FORMING OF PLASTIC ITEMS. ON RECEIPT OF INFORMATION FROM THE SALES TAX DEPARTMENT, GOVERNMENT OF MAHARASHTRA THAT THE ASSESSEE HAD OBTAINED BOGUS PURCHASE BILLS FROM THREE PARTIES AMOUNTING TO RS.10,02,782/ - , THE AO RE - OPENED THE ASSESSMENT BY ISSUING NOTICE U/S 148 DATED 24.03.2014. IN RESPONSE TO IT, THE ASSESSEE SUBMITTED THAT THE RETURN FILED ON 11.09.2011 MAY BE TREATED AS RETURN FILED IN RESPONSE TO NOTICE U/S 148 OF THE ACT. DURING THE COURSE OF RE - ASSESSMENT PROCEEDINGS, THE AO ISSUED NOTICE U/S 133(6) TO THE SAID PARTIES. HOW EVER, THOSE NOTICES WERE RETURNED UN - SERVED BY THE POSTAL AUTHORITIES WITH THE REMARKS NOT KNOWN AND UNCLAIMED. KEEPING THE ABOVE FACTS IN MIND, THE AO ASKED THE ASSESSEE TO EITHER FURNISH THE CURRENT ADDRESS OF THE SAID PARTIES OR TO PRODUCE THEM BEFO RE HIM FOR VERIFICATION OF THE TRANSACTIONS. IN RESPONSE TO IT, THE ASSESSEE FAILED TO FURNISH THE CURRENT ADDRESS OF THE SAID PARTIES. FURTHER, THE ASSESSEE FAILED TO PRODUCE SHRI VRAJLALMANILAL SHAH ITA NO. 6179/MUM/2018 3 THOSE PARTIES BEFORE THE AO FOR EXAMINATION. CONSIDERING THE ABOVE FACTS, THE AO MADE AN ADDITION OF RS.10,02,782/ - TOWARDS BOGUS PURCHASES. 4. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT(A). WE FIND THAT VIDE ORDER DATED 04.09.2018, THE LD. CIT(A) BY FOLLOWING THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN CIT V. SIMIT P. SHETH (ITA NO. 553 OF 2012) AND CIT V. BHOLANATH POLYFAB (P.) LTD . (ITA NO. 63 OF 2012) RESTRICTED THE DISALLOWANCE TO 12.5% OF THE DISPUTED PURCHASES WHICH COMES TO RS.1,25,347/ - AND DELETED THE BALANCE AMOUNT OF RS.8,77,435 / - . 5. BEFORE US, THE LD. DEPARTMENTAL REPRESENTATIVE (DR) SUBMITS THAT THE NOTICES ISSUED BY THE AO U/S 133(6) WERE RETURNED UN - SERVED BY THE POSTAL AUTHORITIES WITH THE REMARKS NOT KNOWN AND UNCLAIMED. THE ASSESSEE ALSO FAILED TO PRODUCE THE SAID PAR TIES BEFORE THE AO FOR EXAMINATION. THE LD. DR FURTHER SUBMITS THAT THE ASSESSEE FAILED TO FURNISH BEFORE THE AO THE CURRENT ADDRESS OF THE SAID PARTIES. THUS IT IS EXPLAINED THAT THE ADDITION OF RS.10,02,782/ - MADE BY THE AO BE RESTORED. 6. ON THE OTHER H AND, THE LD. COUNSEL FOR THE ASSESSEE SUBMITS THAT THE LD. CIT(A) CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE HAS RIGHTLY RESTRICTED THE DISALLOWANCE TO 12.5% OF THE DISPUTED PURCHASES AND THE SAME MAY BE AFFIRMED. 7. WE HAVE HEARD THE RIVAL SUBMI SSIONS AND PERUSED THE RELEVANT MATERIALS ON RECORD. IN THE CASE OF N.K PROTEINS LTD . (SUPRA), THERE WAS SEARCH PROCEEDINGS CONDUCTED BY THE REVENUE AT THE OFFICE PREMISES OF THE ASSESSEE WHEREIN BLANK SIGNED CHEQUE BOOKS AND VOUCHER OF NUMBER OF CONCERNS WERE FOUND. ACCORDINGLY, THE PURCHASES MADE FROM THESE CONCERNS WERE TREATED AS SHRI VRAJLALMANILAL SHAH ITA NO. 6179/MUM/2018 4 BOGUS BY THE AO AND THE ENTIRE DEPOSITS IN BANK ACCOUNTS OF THESE PARTIES WERE TREATED AS ASSESSEES INCOME ON PROTECTIVE BASIS. ON APPEAL, THE ITAT RESTRICTED THE ADDITION ON ACCOUNT OF ALLEGED BOGUS PURCHASES AT 25% I.E. RS.73,23,322/ - OF THE TOTAL PURCHASES AMOUNTING TO RS.2,92,93,288/ - . ON FURTHER APPEAL, THE HONBLE HIGH COURT MODIFIED THE ORDER OF THE TRIBUNAL AND DIRECTED FOR ADDITION OF ENTIRE BOGUS PURCHASES. AFTER HEAR ING THE COUNSELS, THE HONBLE SUPREME COURT DISMISSED THE SLP FILED BY THE ASSESSEE AND CONFIRMED THE DECISION OF THE HIGH COURT FOR ADDITION OF ENTIRE INCOME ON ACCOUNT OF BOGUS PURCHASES. ON FACTS, THE INSTANT CASE IS DISTINGUISHABLE FROM THE DECISION IN N.K PROTEINS LTD . (SUPRA). IN THE INSTANT CASE, THERE IS A SPECIFIC FINDING BY THE LD. CIT(A) THAT IN CASE OF NON - EXISTENT PARTIES FROM WHOM PURCHASES ARE SHOWN TO HAVE BEEN MADE, ONLY A PART OF SUCH PURCHASES CAN BE DISALLOWED, PARTICULARLY IN SUCH CASE S WHERE THE CORRESPONDING SALES ARE NOT DOUBTED. ACCORDINGLY, THE PROFIT EMBEDDED IN SUCH SALES AGAINST THE ALLEGED BOGUS PURCHASES SHOULD BE BROUGHT TO TAX. WE FIND THAT CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS RIGHTLY REST RICTED THE DISALLOWANCE TO 1 2.5% OF SUCH DISPUTED PURCHASES WHICH COMES TO RS.1,25,347/ - AND DELETED THE BALANCE AMOUNT OF RS.8,77,435/ - . WE AFFIRM THE ORDER OF THE LD. CIT(A). 8. IN THE R ESULT, THE APPEAL FILED BY THE R EVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 28/11/2019. SD/ - SD/ - ( SAKTIJIT DEY ) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER SHRI VRAJLALMANILAL SHAH ITA NO. 6179/MUM/2018 5 MUMBAI ; DATED: 28/11/2019 RAHUL SHARMA, SR. P.S. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE . BY ORDER, (DY./ASSTT. REGISTRAR) ITAT, MUMBAI