ITO ,WARD- 3 (2), KALYAN V. GANESH MASROOJI DESAI, KALYAN

ITA 6187/MUM/2018

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 3521 (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: 2010-2011
• Appeal Filed On: 30-10-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bogus purchase
• Section: 69C; 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. 6187/MUM/2018 ASSESSMENT YEAR: 2010 - 11 THE INCOME TAX OFFICER, WARD 3(2), KALYAN, 2 ND FLOOR, RANI MANSION, MURBAD ROAD, KALYAN (W), 421301. VS. SHRI GANESH MASROOJI DESAI, PROP. GANESH STEEL (INDIA), SHOP NO. - 1, SONARPADA, KALYANSHIL ROAD, OPP. DNS BANK, DOMBIVALI - 421202. PAN NO. AHHPD9971B APPELLANT RESPONDENT REVENUE BY : SMT . JOTHILAKSHMI NAYAK , SR. DR ASSESSEE BY : NONE 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 2010 - 11. THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) - 1, THANE [IN SHORT CIT(A)] AND ARISES OUT OF THE ASSESSMENT COMPLETED U/S 143(3) R.W.S. 147 OF THE INCOME TAX ACT 1961, (THE ACT). THOUGH THE CASE WAS FIXED FOR HEARING ON 25.11.2019, NEITHER THE ASSESSEE NOR HIS AUTHORIZED REPRESENTATIVE APPEARED BEFORE THE BENCH ON THE ABOVE DATES. AS THERE IS NON - COMPLIANCE ON THE PART OF THE ASSESSEE, W E ARE SHRI GANESH MASROOJI DESAI ITA NO. 6187/MUM/2018 2 PROCEEDING TO DISPOSE OFF THIS APPEAL ON MERITS, AFTER EXAMINING THE DOCUMENTS AVAILABLE ON RECORD. 2. THE GROUNDS OF APPEAL FILED BY THE R EVENUE READ AS UNDER : 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN NOT APPRECIATING THE LAW CORRECTLY THAT ONCE THE PURCHASES ARE UNVERIFIABLE/NOT GENUINE/BOGUS, THE SAME SHOULD HAVE BEEN DISALLOWED IN ENTIRETY? 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW. THE LD. CIT(A) HAS ERRE D IN LAW BY NOT APPRECIATING THE FACT THAT THE ASSESSEE COULD NOT ESTABLISH THE GENUINENESS OF THE PURCHASES FROM THE NON - EXISTENT VENDORS? 3. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN LAW BY NOT APPRECI ATING THE FACT THAT THE ONUS TO JUSTIFY THE CLAIM OF EXPENSES IS ON T HE ASSESSEE AND THE SAME HAS F AILED TO DISCHARGE IT IN RELATION TO THE PURCHASES MADE FROM THE NON - EXISTENT VENDORS? 4. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW , THE LD. CIT(A) HAS ERRED IN LAW BY IGNORING THE FACT THAT THE ASSESSEE COULD NOT SUBSTANTIATE ITS CLAIM OF PURCHASES FROM NON - EXISTENT VENDORS BY MEANS OF RELEVANT SUPPORTING DOCUMENTS RELATED TO MOVEMENT AND DELIVERY OF GOODS, STOCK REGISTER, ETC. TO ARR IVE AT DISALLOWANCE AT 2 5 % OF THE PURCHASES FROM THE NON - EXIGENT VENDORS? 5. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN NOT APPRECIATING THE LAW CORRECTLY THAT ONCE THE PURCHASES ARE UNVERIFIABLE/ NOT GENUINE / BOGUS, THE SAME SHOULD HAVE BEEN DISALLOWED IN ENTIRETY, PARTICULARLY IN VIEW OF THE RATIO OF THE DECISION OF THE HON'BLE GUJARAT HIGH COURT IN TAX APPEAL NO. 242 OF 2003 DATED 20/06/2016 IN THE CASE OF N K. PROTEINS LTD. AGAINST WHICH THE SLP WA S DISMISSED BY THE HON'BLE APEX COURT AND ALSO DECISION OF HON'BLE SUPREME COURT IN CASE OF KANCHWALA GEMS V/S JCIT 288 ITR 10 (SC)? SHRI GANESH MASROOJI DESAI ITA NO. 6187/MUM/2018 3 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE FILED HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR (AY) 2010 - 11ON 22.09.2010 DECLARING TOTAL INCOME OF RS.1,48,170/ - . ON RECEIPT OF INFORMATION FROM THE SALES TAX DEPARTMENT, GOVERNMENT OF MAHARAS HTRA THAT THE ASSESSEE HAD MADE BOGUS PURCHASES FROM THREE PARTIES AMOUNTING TO RS.6,96,565/ - , THE AO RE - OPENED THE ASSESSMENT BY ISSUING NOTICE U/S 148 DATED 29.04.2013. DURING THE COURSE OF RE - ASSESSMENT PROCEEDINGS, THE ASSESSEE SUBMITTED BEFORE THE AO THAT HE IS A TRADER IN STAINLESS STEEL, PIPES AND RODS REQUIRED FOR MANUFACTURING COMPANIES AND FUNCTIONS UNDER THE NAME AND STYLE GANESH STEEL INDIA. IT WAS FURTHER EXPLAINED TO THE AO THAT THE ASSESSEE MAINTAINS REGULAR BOOKS OF ACCOUNTS WHICH ARE SUBJ ECT TO AUDIT. THE AUDITED STATEMENTS IN FORM NO. 3CB AND 3CD WERE FILED BEFORE THE AO. DURING THE COURSE OF RE - ASSESSMENT PROCEEDINGS, THE AO ISSUED NOTICE U/S 133(6) TO THE SAID TWO PARTIES CALLING FOR INFORMATION. HOWEVER, THOSE NOTICES WERE RETURNED UN - SERVED BY THE POSTAL AUTHORITIES WITH THE REMARK NOT KNOWN. ON THE BASIS OF THE ABOVE FACTS, THE AO WAS NOT CONVINCED WITH THE ABOVE EXPLANATION OF THE ASSESSEE AND MADE A DISALLOWANCE OF RS.6,96,565/ - U/S 69C OF THE ACT. 4. AGGRIEVED BY THE ORDER OF TH E AO, THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT(A). THERE WAS NO COMPLIANCE BY THE ASSESSEE TO THE NOTICE ISSUED BY THE LD. CIT(A) DURING THE COURSE OF APPELLATE PROCEEDINGS. THEREFORE, RELYING ON THE MATERIALS AVAILABLE ON RECORDS, HE DECIDED THE IS SUE ON MERITS. THE LD. CIT(A), RELYING ON THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF VIJAY PROTEINS AND SANJAY OILCAKE MILLS ESTIMATED THE DISALLOWANCE @ 25% OF THE DISPUTED PURCHASES. THUS HE CONFIRM ED THE DISALLOWANCE OF RS.1,74,141/ - AND DELETED THE BALANCE AMOUNT OF RS.5,22,424/ - . SHRI GANESH MASROOJI DESAI ITA NO. 6187/MUM/2018 4 5. BEFORE US, THE LD. DEPARTMENTAL R EPRESENTATIVE (DR) SUBMITS THAT THE NOTICES ISSUED BY THE AO U/S 133(6) TO THE CONCERNED PARTIES WERE RETURNED UN - SERVED BY THE POSTAL AUTHORITIES WITH THE REMARKS NOT K NOWN. IT IS STATED THAT THE ASSESSEE FAILED TO PRODUCE COPIES OF BILLS, TR ANSPORTATION AND OCTROI PAYMENT RECEIPTS IN RESPECT OF THE SAID TRANSACTION MADE WITH THE CONCERNED PARTIES DURING THE YEAR UNDER CONSIDERATION. THEREFORE, THE LD. DR SUBMITS THAT T HE DISALLOWANCE MADE BY THE AO OF RS.6,96,565/ - U/S 69C BE RESTORED. 6. WE HAVE HEARD THE LD. DR 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 PR EMISES 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 BOGUS BY THE AO AND THE ENTIRE DEPOSITS IN BANK ACCOUNTS OF THESE PARTIES WERE TREATE D 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 MODIFIE D THE ORDER OF THE TRIBUNAL AND DIRECTED FOR ADDITION OF ENTIRE BOGUS PURCHASES. AFTER HEARING 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 ACC OUNT OF BOGUS PURCHASES. IN THE INSTANT CASE, THE ASSESSEE IS A TRADER IN STAINLESS STEEL, PIPES AND RODS. THE ASSESSEE FILED BEFORE THE AO COPIES OF AUDITED STATEMENTS OF ACCOUNTS IN FORM NO. 3CB AND 3CD. THE ASSESSEE ALSO STATED BEFORE THE AO THAT HE I S MAINTAINING REGULAR BOOKS OF ACCOUNTS. IN SUCH A SITUATION, THE AO SHRI GANESH MASROOJI DESAI ITA NO. 6187/MUM/2018 5 COULD HAVE VERIFIED THE DETAILS FROM THE BOOKS OF ACCOUNTS AND MADE FURTHER INQUIRIES AND THUS THE INSTANT CASE IS DISTINGUISHABLE FROM THE DECISION IN N.K PROTEINS LTD . (SUPRA) . WE FIND THAT NO ELEMENTARY INQUIRY HAS BEEN DONE BY THE AO IN THE PRESENT CASE. THEREFORE, CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE CONSIDERED VIEW THAT THE LD. CIT(A) HAS RIGHTLY RESTRICTED THE DISALLOWANCE TO 25% OF THE DISP UTED PURCHASES OF RS.6,96,565/ - WHICH COMES TO RS.1,74,141/ - AND DELETED THE BALANCE AMOUNT OF RS.5,22,424/ - . THEREFORE, WE AFFIRM THE ORDER OF THE LD. CIT(A). 7. IN THE R ESULT, THE APPEAL FILED BY THE R EVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN CO URT ON 28/11/2019. SD/ - SD/ - ( SAKTIJIT DEY ) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER 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