AMBERNATH STEEL TUBE AND SANITARY STORE, MUMBAI V. INCOME TAX OFFICER 2(1), KALYAN

ITA 6217/MUM/2017

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 8540 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-02-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 11-10-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: N HEMALATHA
• Assessee Lawyers: RAVINDRA POOJARI
• Keywords: Bogus purchase; Reassessment proceedings

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH SMC, MUMBAI BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER ITA NO.6217/M/2017 ASSESSMENT YEAR: 2011-12 M/S. AMBERNATH STEEL TUBE AND SANITARY STORE, PARTNER-SHRI VIMAL ADHIA, STATION ROAD, AMBARNATH (W)-421 501 PAN: AAHFA7639L VS. INCOME TAX OFFICER 2(1), KALYAN, 2 ND FLOOR, MOHAN PLAZA, WAYALE NAGAR, KHADAK PADA, KALYAN (W)- 421 301 (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI RAVINDRA POOJARI, A.R. REVENUE BY : MS. N. HEMALATHA, D.R. DATE OF HEARING : 21.12.2017 DATE OF PRONOUNCEMENT : 14.02.2018 O R D E R PER D.T. GARASIA, JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSESS EE AGAINST THE ORDER DATED 03.07.2017 OF THE COMMISSIONER OF I NCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS THE CIT(A)] R ELEVANT TO ASSESSMENT YEAR 2011-12. 2. THE SHORT FACTS OF THE CASE ARE THAT ASSESSEE IS ENGAGED IN BUSINESS OF RETAIL TRADING OF GI & MS PIPES AND FIT TINGS AND PLUMBING AND SANITARY ITEMS. THE ASSESSEE HAS PURC HASED THE GOODS FROM SHIV TRADERS AND ASSESSEE WAS ASKED TO PRODUCE THE PARTY BUT ASSESSEE WAS UNABLE TO PRODUCE THE PARTY. THEREFOR E, ASSESSING OFFICER (HEREINAFTER REFERRED TO AS THE AO) TREATED THE PURCHASES OF RS.1,13,139/- AS BOGUS PURCHASES AND ADDED THE SAM E TO THE INCOME OF THE ASSESSEE. ITA NO.6217/M/2017 M/S. AMBERNATH STEEL TUBE AND SANITARY STORE 2 3. MATTER CARRIED TO THE LD. CIT(A) AND THE LD. CIT (A) DISMISSED THE APPEAL OF THE ASSESSEE. 4. DURING THE COURSE OF HEARING, THE LD. A.R. SUBMI TTED THAT THE LD. CIT(A) ERRED IN CONFIRMING THE ADDITION ON THE BASIS OF INFORMATION RECEIVED FROM DG(INV) TREATING THE PURC HASES AS BOGUS WITHOUT APPRECIATING THAT THE DETAILS OF PURCHASE B ILLS, PURCHASE REGISTER, DETAILS OF SALES, LEDGERS, BANK STATEMENT S, QUANTITATIVE TALLY ETC. WERE FURNISHED IN THE REASSESSMENT PROCEEDINGS , THUS THE ADDITION OF RS.1,13,139/- AS BOGUS PURCHASES MAY BE DELETED AS THE GENUINENESS OF THE PURCHASES WERE PROVED BEYOND DOU BT AND SALES ARE ACCEPTED. 5. ON THE OTHER HAND, THE LD. D.R. RELIED UPON THE ORDERS OF THE REVENUE AUTHORITIES. 6. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE P ARTIES. LD. D.R. RELIED UPON THE DECISION OF THE TRIBUNAL, AHME DABAD BENCH IN THE CASES OF SHWETAMBAR STEELS VS. ITO AHMEDABAD AN D GANESH RICE MILLS VS. CIT (294 ITR 316). THE FACTS IN THE PRESENT CASE SHOW THAT ASSESSEE COULD NOT PRODUCE THE PARTIES FR OM WHOM GOODS ARE STATED TO HAVE BEEN PURCHASED. THE SUPPLIERS WE RE FOUND TO BE ENGAGED IN PROVIDING BOGUS BILL WITHOUT ACTUAL DEAL ING OF GOODS. IN THIS REGARD, THE ASSESSEE HAS STATED THAT THEY HAD SUBMITTED QUANTITATIVE DETAILS OF STOCK WITH RESPECT OF THE S ALES WITH PURCHASES FROM THE PARTIES DURING THE ASSESSMENT PROCEEDINGS. THE ASSESSEE HAS SUBMITTED THE DETAIL OF CORRESPONDING SALES IN RESP ECT OF THE PURCHASE ITA NO.6217/M/2017 M/S. AMBERNATH STEEL TUBE AND SANITARY STORE 3 FROM THE SAID PARTIES. AS MENTIONED ABOVE THE AO HA S NEVER DISPUTED OR EXAMINED THE ASPECT OF SALES RECEIPTS. SINCE THE SALES MADE BY THE ASSESSEE WAS NOT DOUBTED OR DISPUTED BY THE AO AND HE HAS ACCEPTED THE SALES RECEIPTS OF THE ASSESSEE AS IT IS, THEREF ORE, THE AO CANNOT DENY THAT PURCHASES WERE NOT MADE BY THE ASSESSEE A ND THE MATERIAL WAS NOT USED FOR ITS SALES. WHAT IS UNDER DISPUTE I S THE PURCHASES FROM THE PARTIES FROM WHOM BILLS HAVE BEEN TAKEN AN D CHEQUES HAVE BEEN ISSUED TO THEM. PURCHASES ARE NOT IN DISPUTE B UT THE PARTIES FROM WHOM PURCHASE ARE SHOWN TO HAVE BEEN MADE ARE DISPU TED AND SUSPICIOUS. THE AO HAD MADE THE ADDITION AS SOME O F THE SUPPLIERS WERE DECLARED HAWALA DEALERS BY THE VAT DEPARTMENT. THIS MAY BE A GOOD REASON FOR MAKING FURTHER INVESTIGATION BUT THE AO DID NOT MAKE ANY FURTHER INVESTIGATION AND MERELY COMPLETED THE ASSESSMENT ON SUSPICION. ONCE THE ASSESSEE HAS BROUGHT ON RECO RD THE DETAILS OF PAYMENTS BY ACCOUNT PAYEE CHEQUE, IT WAS INCUMBENT ON THE AO TO HAVE VERIFIED THE PAYMENT DETAILS FROM THE BANK OF THE ASSESSEE AND ALSO FROM THE BANK OF THE SUPPLIERS TO VERIFY WHETH ER THERE WAS ANY IMMEDIATE CASH WITHDRAWAL FROM THEIR ACCOUNT. NO SU CH EXERCISE HAS BEEN DONE OR FINDINGS RECORDED. THERE WAS NO DETAIL ED INVESTIGATION MADE BY THE AO HIMSELF. IT IS ALSO FOUND THAT THE P AYMENTS HAVE BEEN MADE BY ACCOUNT PAYEE CHEQUE WHICH ARE DULY RE FLECTED IN THE BANK STATEMENT OF THE ASSESSEE. THERE IS NO EVIDENC E TO SHOW THAT THE ASSESSEE HAS RECEIVED CASH BACK FROM THE SUPPLIERS. MERELY BECAUSE THE SUPPLIERS DID NOT APPEAR BEFORE THE AO OR SOME CONFIRMATION LETTERS WERE NOT FURNISHED, ONE CANNOT CONCLUDE THA T THE PURCHASES WERE NOT MADE BY THE ASSESSEE. THIS VIEW IS SUPPORT ED BY THE ITA NO.6217/M/2017 M/S. AMBERNATH STEEL TUBE AND SANITARY STORE 4 DECISION OF NIKUNJ EXIMP ENTERPRISES VS. CIT 216 TA XMAN 171 (BOM). TO THIS EXTENT, WE ARE OF THE VIEW THAT IF T HE ASSESSEE HAS FULFILLED ITS ONUS OF MAKING THE PAYMENT BY CHEQUE AND HAS SUPPLIED THE ADDRESSES OF THE SELLERS THEN IT CANNOT BE PRES UMED THAT SUPPLIER WERE BOGUS SIMPLY BECAUSE THE SELLERS WERE NOT FOUN D AT THE GIVEN ADDRESS. THERE IS A CONSIDERABLE TIME GAP BETWEEN T HE PERIOD OF PURCHASE TRANSACTION AND PERIOD OF SCRUTINY PROCEED INGS. THE AO HAS NOT BROUGHT ANY MATERIAL ON RECORD TO SHOW THAT THE RE IS SUPPRESSION OF SALES. IT IS BASIC RULE OF ACCOUNTANCY AS WELL A S OF TAXATION LAWS THAT PROFIT FROM BUSINESS CANNOT BE ASCERTAINED WIT HOUT DEDUCTING COST OF PURCHASE FROM SALES. ESTIMATION OF PROFIT R ANGING FROM 12.5% TO 15% HAS BEEN UPHELD BY THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS SIMIT P SHETH 356 ITR 451 (GUJ.). W E FIND THAT MUMBAI TRIBUNAL, IN THE CASE OF MADHUKANT B GANDHI IN ITA NO.1950/M/09, CONSIDERING THE VARIOUS JUDGMENTS OF VARIOUS HIGH COURTS HAS HELD THAT IN VIEW OF THE FACT THAT IT HA S BEEN AMPLY ESTABLISHED THAT PURCHASE RECORDS IN BOOKS OF ACCOU NT FROM THESE PARTIES WERE BOGUS WHICH SUPPRESS TO THE PROFIT NOW NEED TO ZERO IN CORRECT RATE OF NET PROFIT SHOULD BE APPLIED UNDER THESE CIRCUMSTANCES. THE TRIBUNAL IN THIS CASE HAS APPLI ED 5% GP. HENCE, FOLLOWING THE SAME RATIO, I APPLY 5% GP ON THE ABOV E BOGUS PURCHASES WHICH COMES TO RS.5,657/-. 7. IN THE RESULT, THIS GROUND OF APPEAL OF THE ASSE SSEE IS PARTLY IS PARTLY ALLOWED. ITA NO.6217/M/2017 M/S. AMBERNATH STEEL TUBE AND SANITARY STORE 5 8. THE SECOND ISSUE RELATES TO ADDITION OF RS.61,00 4/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS ASKED TO PRODUCE THE BOOKS OF ACCOUNTS, BILL AND VOUCHERS. ON VERIF ICATION OF DETAILS PRODUCED BY THE ASSESSEE IT WAS SEEN THAT SOME EXPE NDITURES ARE NOT FULLY SUPPORTED WITH VOUCHERS AND ASSESSEE HAS MADE EXPENSES FOR WHICH THE PROPER VOUCHER. THEREFORE, AO HAS DISALL OWED 20% OF ABOVE EXPENSES WHICH COMES TO RS.61,004/-. 9. MATTER CARRIED TO THE LD. CIT(A) AND THE LD. CIT (A) HAS DISMISSED THE SAME. 10. I HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES. I FIND THAT THE ASSESSEE HAS TAKEN THE CONTENTION THAT AO HAS N EVER ASKED THE ASSESSEE TO PRODUCE THE BOOKS OF ACCOUNTS AND NO NO TICE WAS ISSUED TO THE ASSESSEE FOR PRODUCING THE BOOKS OF ACCOUNTS . THEREFORE, IN THE INTEREST OF JUSTICE AND FAIRPLAY, I RESTORE THI S ISSUE BACK TO THE FILE OF AO AND AO IS DIRECTED TO DECIDE AFTER GIVING DUE OPPORTUNITY OF HEARING TO THE ASSESSEE. HENCE, THIS GROUND OF APPE AL IS ALLOWED FOR STATISTICAL PURPOSES. 11. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 14.02.2018. SD/- (D.T. GARASIA) JUDICIAL MEMB ER MUMBAI, DATED: 14.02.2018. * KISHORE, SR. P.S. ITA NO.6217/M/2017 M/S. AMBERNATH STEEL TUBE AND SANITARY STORE 6 COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.