BALBIRSINGH B. BANSAL, MUMBAI V. ASST CIT 30(1), MUMBAI

ITA 6339/MUM/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 0284 (ITAT-MUMBAI)
• Duration Of Justice: 9 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-08-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 27-10-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Bogus purchase
• Section: 69C; 143(3); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH H, MU MBAI BEFORE SHRI B.R. BASKARAN ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO. 6340 /MUM/2016 (ASSESS MENT YEAR- 2010-11) SHRI BALBIR SINGH B. BANSAL D-201, PLEASANT PARK, EVERSHINE NAGAR, MALAD (WEST), MUMBAI -400067 PAN: AABPB4008N VS. ACIT 30(1 ) MUMBAI. (APPELLANT) (RESPONDENT) ITA NO. 6339/MUM/2016 (ASSESSMEN T YEAR- 2011-12) SHRI BALBIR SINGH B. BANSAL D-201, PLEASANT PARK, EVERSHINE NAGAR, MALAD (WEST), MUMBAI -400067 PAN: AABPB4008N VS. ACIT 30(1 ) MUMBAI. (APPELLANT) (RESPONDENT) ASSESSEE REPRESENTED BY : SHRI NAVIN KUMAR MISHRA (AR) REVENUE REPRESENTED BY : SHRI M.C. OMININESHEN (DR) DATE OF HEARING : 17.08.2017 DATE OF ORDER : 17.08.2017 ORDER UNDER SECTION 254(1) OF INCOME-TAX ACT PER PAWAN SINGH JUDICIAL MEMBER ; 1. THESE TWO APPEAL BY ASSESSEE UNDER SECTION 253 OF I NCOME-TAX ACT (ACT) ARE DIRECTED AGAINST TWO SEPARATE ORDER OF LD. COMMISSIONER (APPEALS)- 41, MUMBAI DATED 10.08.2016 FOR ASSESSME NT YEAR (AY) 2010-11 & 2011-12 RESPECTIVELY. THE ASSESSEE HAS RA ISED IDENTICAL GROUNDS OF APPEAL. THE FACTS OF BOTH THE AY ARE NOT MUCH IN VARIANCE. THUS, BOTH THE APPEALS WERE HEARD TOGETHER AND ARE DECIDED BY A ITA NO.6339 & 6340/M/20 16 SHRI BALBIRSINGH B. BANSAL 2 CONSOLIDATED ORDER. FOR APPRECIATION OF FACTS, WE A RE REFERRING THE FACT FOR AY 2010-11 IN ITA NO. 6340/MUM/2016. THE ASSESSEE H AS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LD CIT(A) ERRED IN CONFIRMING THE ACTION OF LD AO FOR REOPENING OF THE COMPLETED ASSESSMENT U/S. 147 OF THE IT ACT 1961 WI THOUT ASSIGNING ANY VALID REASON AND THE REASON ASSIGNED FOR DOING SO A RE WRONG AND CONTRARY TO THE PROVISION OF INCOME TAX ACT AND RULES MADE T HERE UNDER. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE HON'BLE CIT(A) ERRED IN DIRECTING THE LD AO TO TREAT A SUM OF RS. 3,14,425/- BEING 30% OF THE PURCHASES MADE FROM ALLEGED MVAT PARTY L ISTED ON MVAT SITE AS HAWALA TRADER AS UNEXPLAINED EXPENSES U/S. 69C O F THE IT ACT 1961 AND THE REASON ASSIGNED FOR DOING SO ARE WRONG AND CONT RARY TO THE PROVISION OF INCOME TAX ACT AND RULES MADE THERE UNDER. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED RETURN OF INCOME FOR RELEVANT AY ON 02.10.2010 DECLARING TOTAL INCOME OF RS. 81,78,745/-. THE RETURN OF INCOME WAS PROCESSED U/S 143(3) ACCEPTING THE RETURN INCOME OF THE ASSESSEE. SUBSEQUENTLY, THE ASSESSMENT WAS RE-O PENED UNDER SECTION 147. THE ASSESSMENT WAS REOPENED ON THE BASIS OF I NFORMATION RECEIVED FROM DGIT(INV.) THAT ASSESSEE HAD ENTERED INTO HAWA LA TRANSACTION FOR PURCHASE OF MATERIAL FOR RS. 10,48,085/-. NOTICE U/ S 148 DATED 07.02.2014 WAS SERVED. THE REASONS RECORDED WERE ALSO PROVIDED TO THE ASSESSEE. THE ASSESSEE CONTESTED THE RE-OPENING PROCEEDING. THE A SSESSMENT WAS COMPLETED ON 25.03.2015 U/S 143(3) R.W.S. 147 OF TH E ACT. THE ASSESSING OFFICER (AO) WHILE PASSING THE ASSESSMENT ORDER DIS ALLOWED 100% OF PURCHASES. ACCORDINGLY, ADDITION OF RS. 10,48,085/ - WAS ADDED IN THE TOTAL INCOME OF ASSESSEE. ON APPEAL BEFORE THE LD. CIT(A), THE RE-OPENING OF WAS SUSTAIN, HOWEVER, THE DISALLOWANCE ON ACCOU NT OF PURCHASES WAS ITA NO.6339 & 6340/M/20 16 SHRI BALBIRSINGH B. BANSAL 3 PARTLY SUSTAINED@ 30%OF BOGUS PURCHASES. FURTHER, A GGRIEVED BY THE ORDER OF LD. CIT(A), THE ASSESSEE FILED THE PRESENT APPEAL BEFORE US. 3. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVE (AR ) OF ASSESSEE AND LD. DEPARTMENTAL REPRESENTATIVE (DR) FOR THE REVENUE AN D PERUSED THE MATERIAL AVAILABLE ON RECORD. FIRST GROUND OF APPEA L RELATES TO THE RE- OPENING OF THE ASSESSMENT U/S 147 OF THE ACT. THE L D. AR OF THE ASSESSEE HAS NOT ARGUED ANYTHING AGAINST THIS GROUND OF APPE AL. THUS, THIS GROUND OF APPEAL IS TREATED AS NOT PRESSED. HENCE, THE SAM E IS DISMISSED AS NOT PRESSED. 4. GROUND NO.2 RELATES TO DISALLOWANCE OF UNEXPLAINED EXPENSES/ BOGUS PURCHASES @ 30%. THE LD. AR OF THE ASSESSEE ARGUED THAT ASSESSEE IS IN THE BUSINESS OF MANUFACTURING OF ENGINEERING GOODS AND ALSO DOING LABOUR JOB. THE ASSESSEE PURCHASED MATERIAL FROM M/S BHARA T SALE CORPORATION FOR RS. 7,29,872/- AND FROM M/S OM ENTERPRISES FOR RS. 3,18,213/-. THE ASSESSEE PURCHASED THE MATERIAL FROM THE GENUINE PA RTIES. THE PURCHASES AND SALES WERE DULY RECORDED IN THE BOOKS OF ACCOUN TS BY THE ASSESSEE. THE ASSESSEE FURNISHED THE DELIVERY CHALLAN AND BIL LS OF PURCHASES. THE QUANTITATIVE DETAILS FROM THE PURCHASE IN OPENING S TOCK AND SALES WERE ALSO SHOWN. THE PAYMENTS WERE MADE THROUGH ACCOUNT PAYEE CHEQUES. THE ASSESSEE HAS FULLY DISCHARGED HIS ONUS BY GIVIN G THE NECESSARY EVIDENCE ABOUT THE EXPENDITURE INCURRED ON GENUINE PURCHASES. THE AO INSTEAD OF BRINGING ANY MATERIAL ON RECORD MADE THE DISALLOWANCE ONLY ON ITA NO.6339 & 6340/M/20 16 SHRI BALBIRSINGH B. BANSAL 4 THE BASIS OF INFORMATION OF SALES TAX DEPARTMENT AN D INFORMATION OF DGIT(INV.). THE AO DISALLOWED THE 30% OF THE PURCH ASE WITHOUT ANY BASIS. IT WAS ARGUED THAT THE ENTIRE ADDITION MAY B E DELETED. ON THE OTHER HAND, THE LD. DR FOR THE REVENUE SUPPORTED THE ORDE RS OF AUTHORITIES BELOW. THE LD. DR FOR THE REVENUE ARGUED THAT THE I NVESTIGATION WING OF THE INCOME-TAX DEPARTMENT MADE FULL-FLEDGED ENQUIRY . THE PARTIES FROM WHOM THE ASSESSEE HAS SHOWN THE PURCHASES ARE BOGUS HAWALA DEALERS. THE HAWALA DEALERS ARE INDULGED IN ISSUING BOGUS BI LLS WITHOUT DELIVERY OF ANY MATERIAL OR GOODS. THE ASSESSEE OBTAINED ACCOMM ODATION BILLS ONLY IN ORDER TO INFLATE THE EXPENSES AND TO BRING DOWN THE PROFITABILITY IN ORDER TO AVOID THE TAX. THE LD. DR FOR THE REVENUE PRAYED FOR DISMISSAL OF THE APPEAL. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSION OF THE PART IES AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. DURING THE ASSESSMENT PROCEEDING, THE AO HAS NOTICED THAT THE ASSESSEE HA S ENTERED INTO TRANSACTION FOR PURCHASE FROM THE FOLLOWING PARTIES : S.NO. NAME OF THE SUPPLIER TIN AMOUNT 1 BHARAT STEEL CORPORATION 27640720112V 7,29,872 2 OM ENTERPRISES 27680554123V 3,18,213 TOTAL 10,48,085 THE AO ASKED THE ASSESSEE TO PRODUCE THE VARIOUS DE TAILS LIKE COPY OF LEDGER ACCOUNT, INVOICE, DELIVERY CHALLAN, LORRY RE CEIPT, BANK STATEMENT, OCTROI RECEIPT, GOODS RECEIPT AND NOT TALLY BETWEEN SALES AND PURCHASES. THE AO ALSO SEND THE NOTICE TO THE PARTIES U/S 133( 6). IN RESPONSE TO THE ITA NO.6339 & 6340/M/20 16 SHRI BALBIRSINGH B. BANSAL 5 QUERIES OF AO, THE ASSESSEE FIELD HIS REPLY DATED 3 0.02.2015. IN THE REPLY ASSESSEE CONTENDED THAT HE IS ENGAGED IN MANUFACTUR ING OF AUTO-PARTS AND ENGINEERING GOODS. THE GOODS PURCHASED HAVE BEEN CO NSUMED OR SOLD TO VARIOUS PARTIES. THE ASSESSEE FURNISHED THE DETAILS OF SALES AND PURCHASES ALONG WITH DELIVERY CHALLAN, ALONG WITH QUANTITATIV E DETAILS AND SALES AND CLOSING STOCK. THE ASSESSEE FURTHER CONTENDED THAT PURCHASES WERE MADE THROUGH ACCOUNT PAYEE CHEQUE AND FURNISHED THE BANK STATEMENT. AFTER CONSIDERING THE SUBMISSION AND THE NECESSARY EVIDEN CE FURNISHED BY ASSESSEE, THE AO CONCLUDED THAT CERTAIN PURCHASES R EMAINED UNVERIFIABLE. THROUGH, THERE IS POSSIBILITY OF LEAKAGE OF REVENU E AND CONCLUDED THAT THE ASSESSEE HAS NOT PURCHASED THE GOODS FROM THE P ARTIES AND ONLY ACCOMMODATION BILLS WERE TAKEN IN ORDER TO INFLATE THE EXPENSES. HENCE, THE ENTIRE PURCHASES WERE DISALLOWED. 6. WE HAVE NOTED THAT THE AO HAS NOT GIVEN ANY OBSERVA TION ABOUT THE SERVICE OF NOTICES SENT U/S 133(6), OR ANY REPLY WA S RECEIVED FROM SUCH PARTIES. THE AO MADE THE DISALLOWANCE OF THE ENTIRE PURCHASES FROM BOTH THE PARTIES. THE LD. CIT(A) ON THE BASIS OF DECISIO N OF HONBLE GUJARAT HIGH COURT IN VIJAY PROTEINS LTD. VS. CIT [2015] 58 TAXMANN.COM 44 (GUJ.) AND CIT VS. SIMITH P. SHETH [2013] 356 ITR 4 51 (GUJ.) HELD THAT DISALLOWANCE OF 100% OF THE PURCHASES AMOUNT IS NOT JUSTIFIED UNLESS IT IS PROVED ENTIRE CASH RETURN TO THE ASSESSEE. THE LD. CIT(A) SUSTAINED THE 30% OF PURCHASES ON ESTIMATION BASIS HOLDING IT AS REASONABLE. WE HAVE ITA NO.6339 & 6340/M/20 16 SHRI BALBIRSINGH B. BANSAL 6 NOTICED THAT NEITHER THE AO NOR THE LD. CIT(A) EXAM INED THE GROSS PROFIT (G.P) OR NET PROFIT (N.P) RATIO EARNED BY ASSESSEE DURING THE RELEVANT AY. THE AO MADE THE DISALLOWANCE OF ENTIRE PURCHASES FR OM TWO ALLEGED BOGUS DEALERS. THE LD. CIT(A) SUSTAINED 30% OF THE PURCHASES WITHOUT CONSIDERING THE G.P. RATIO FOR THE YEAR UNDER CONSI DERATION. WE HAVE NOTICED THAT NEITHER THE AO NOR THE LD. CIT(A) REJE CTED THE STATEMENT OF ACCOUNT NOR DISPUTED THE SALES OF THE ASSESSEE. WE ARE OF VIEW THAT UNDER INCOME-TAX ACT ONLY REAL INCOME CAN BE TAXED BY THE REVENUE. WE ARE FURTHER OF THE VIEW THAT IN CASE WHOLE TRANSACTION IS NOT VERIFIABLE DUE TO VARIOUS REASONS, THE ONLY TAXABLE IS THE TAXABLE IN COME COMPONENT AND NOT THE ENTIRE TRANSACTION. THE HONBLE BOMBAY HIGH COURT IN CASE OF CIT VS. HARIRAM BHAMBHANI IN ITA NO. 313/2013 DECID ED ON 04.02.2015 HELD THAT REVENUE IS NOT ENTITLED TO BRING THE ENTI RE SALE CONSIDERATION TO TAX, BUT ONLY THE PROFIT ATTRIBUTABLE ON THE TOTAL UNRECORDED SALE CONSIDERATION ALONE CAN BE SUBJECT TO INCOME-TAX. 7. AS WE HAVE ALREADY NOTICED THAT NEITHER THE AO NOR THE LD. CIT(A) EXAMINED THE G.P. RATIO OR N.P. RATIO OF ASSESSEE F OR EARLIER YEAR AND IN SUBSEQUENT YEAR. THUS, AFTER CONSIDERING THE FACTS OF THE PRESENT CASE, RIVAL SUBMISSIONS OF LD. REPRESENTATIVE OF THE PART IES, WE ARE OF THE OPINION THAT IN ORDER TO FILL UP THE GAP OF REVENUE LEAKAGE , THE DISALLOWANCE OF 12.5% OF IMPUGNED PURCHASES WOULD MEET THE END OF J USTICE. THUS, THE AO IS DIRECTED TO RESTRICT THE DISALLOWANCE @ 12.5% OF TOTAL PURCHASES ITA NO.6339 & 6340/M/20 16 SHRI BALBIRSINGH B. BANSAL 7 IMPUGNED/BOGUS/DISPUTED PURCHASES FROM THESE TWO PA RTIES. HENCE, THIS GROUND OF APPEAL IS PARTLY ALLOWED. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALL OWED. ITA NO. 6339/MUM/2016 9. THE ASSESSEE HAS RAISED THE IDENTICAL GROUNDS OF AP PEAL. FACTS OF THE PRESENT CASE ARE NOT AT MUCH VARIANCE. IN THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS SHOWN TO HAVE PURCHASES OF RS. 14,09,0 47/- FROM TWO PARTIES NAMELY M/S SIDDHIVINAYAK STEEL FOR RS. 21,778/- AND M/S LAXMI TRADERS FOR RS. 13,87,269/-. THE AO MADE THE DISALLOWANCE O F ENTIRE PURCHASES WHILE PASSING THE ASSESSMENT ORDER U/S 143(3) R.W.S . 147 OF THE ACT DATED 25.03.2015. WE MAY NOTE THAT ASSESSMENT ORDER FOR A Y 2011-12 U/S. 143(3) R.W.S. 147 OF THE ACT WAS PASSED SIMULTANE OUSLY WITH ORDER FOR AY 2010-11. 10. AS WE HAVE ALREADY PARTLY ALLOWED THE APPEAL FOR AY 2010-11 ON IDENTICAL GROUNDS OF APPEAL. THUS, THIS APPEAL IS A LSO ALLOWED WITH SIMILAR OBSERVATIONS. 11. IN THE RESULT, APPEALS FOR AY 2010-11 & 2011-12 ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH DAY OF AUGUST 2017. SD/- SD/- (B.R. BASKARAN) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI; DATED 17/8/2017 S.K.PS COPY OF THE ORDER FORWARDED TO : ITA NO.6339 & 6340/M/20 16 SHRI BALBIRSINGH B. BANSAL 8 BY ORDER, (ASSTT .REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY/