SHREEKISHAN JOSHI, MUMBAI V. DCIT 30(3), MUMBAI

ITA 6345/MUM/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 0019 (ITAT-MUMBAI)
• Duration Of Justice: 10 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2010-2011
• Appeal Filed On: 27-10-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ARJU GARODIA
• Keywords: Bogus purchase; Tangible material; Corroborative evidences; Accommodation entries; Reason to believe
• Section: 143(3); 133(6); 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH J MUMBAI BEFORE SHRI C.N. PRASAD (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 6344/MUM/2016 ASSESSMENT YEAR: 2009 - 10 & ITA NO. 6345 /MUM/2016 ASSESSMENT YEAR: 2010 - 11 SHRI SHREEKISHAN JOSHI 922/923, 9 TH FLOOR CORPORATE AVENUE SONAWALA ROAD, GOREGAON (E) MUMBAI - 400063. VS. DCIT - 30(2) C - 13/6 TH FLOOR BKC MUMBAI - 400051. PAN NO. AABPJ7710M APPELLANT RESPONDENT ASSESSEE BY : NONE REVENUE BY : MS. AR JU GARODIA , DR DATE OF HEARING : 16 /08/2017 DATE OF PRONOUNCEMENT : 30/08/2017 ORDER PER N.K. PRADHAN, A.M . THE CAPTIONED APPEALS FILED BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF THE COMMIS SIONER OF INCOME TAX (APPEALS) - 41 , THANE AND ARISE OUT OF THE ASSESSMENT COMPLETED U/S 14 3(3) R.W.S. 147 FOR AY 2009 - 10 & AY 2010 - 11 OF THE INCOME TAX ACT 1961 (THE ACT). AS ITA NOS. 6344 & 6345/MUM/2016 2 COMMON ISSUES ARE INVOLVED, WE ARE PROCEEDING TO DISPOSE THEM OFF THROUGH A CONS OLIDATED ORDER FOR THE SAKE OF CONVENIENCE. WE MENTION HERE THAT NOTICE WAS ISSUED TO THE PARTIES FIXING THE CASE FOR HEARING ON 16.08.2017. NEITHER THE ASSESSEE NOR HIS AUTHORIZED REPRESENTATIVE APPEARED ON THE ABOVE DATE. WE PROCEED TO DECIDE THE CASE ON THE BASIS OF AVAILABLE RECORD. 2. THE GROUNDS OF APPEAL FILED BY THE ASSESSEE FOR THE AY 2009 - 10 READ AS UNDER: - 1) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE AUTHORITIES BELOW HAVE ERRED IN RE - OPENING THE ASSESSMENT U/S 147 OF THE I T ACT AS ALREADY A SCRUTINY ASSESSMENT HAD TAKEN PLACE U/S 143(3) WHEREIN ALL THE RELEVANT ASPECTS OF TRANSACTIONS OF PURCHASES FROM HAWALA/SUSPICIOUS DEALERS HAD BEEN EXAMINED BY THE AO AND THE REASONS ASSIGNED FOR SUCH RE - OPENING WERE NOT IN ACCORDANCE WITH T HE PROVISIONS OF THE I T ACT AND THE RULES MADE THERE UNDER. 2) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE AUTHORITIES BELOW HAVE FURTHER ERRED IN/SUSTAINING/MAKING AN ADDITION OF A SUM OF RS11,19,998/ - @ 8% ON THE ENTIRE SALES TURNOVER OF RS1 0,71,86,850/ - INSTEAD OF THE DECLARED PROFITS 6.96% WHICH OUGHT TO HAVE BEEN ONLY ON PURCHASES OF RS70,97,397/ - FROM THE SO CALLED HAWALA/SUSPICIOUS/NON GENUINE DEALERS AND THE REASONS ASSIGNED FOR DOING SO WERE WHOLLY WRONG AND NOT IN ACCORDANCE WITH THE FACTS OF THE CASE AND PROVISIONS OF THE INCOME TAX ACT, 1961 AND RULES MADE THERE UNDER. 3) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE AUTHORITIES BELOW HAVE ERRED IN INITIATING PENALT Y PROCEEDINGS U/S 271(L) (C) OF THE INCOME TAX ACT, AS NO I NCOME WAS CONCEALED NOR ANY INACCURATE DETAILS OF SUCH INCOME WERE FURNISHED BY THE APPELLANT. ITA NOS. 6344 & 6345/MUM/2016 3 3. THE GROUND S OF APPEAL FOR THE AY 2010 - 11 IS DIFFERENT ONLY IN RESPECT OF THE 2 ND GROUND WHICH READS AS UNDER: 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE AUTHORITIES BELOW HAVE FURTHER ERRED IN/SUSTAINING/MAKING AN ADDITION OF A SUM OF RS 22,87,989/ - @ 7 % ON THE ENTIRE SALES TURNOVER OF RS 17,24,15,151 / - I NSTEAD OF THE DECLARED PROFITS 5.67 % WHICH OUGHT TO HAVE BEEN ONLY ON PURCHASES OF RS 1,08 ,73,782 / - FROM THE SO CALLED HAWALA/SUSPICIOUS/NON GENUINE DEALERS AND THE REASONS ASSIGNED FOR DOING SO WERE WHOLLY WRONG AND NOT IN ACCORDANCE WITH THE FACTS OF THE CASE AND PROVISIONS OF THE INCOME TAX ACT, 1961 AND RULES MADE THERE UNDER. 4. WE BEGIN W ITH THE A.Y. 2009 - 10. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER (AO) RE - OPENED THE ASSESSMENT BY ISSUING NOTICE U/S 148 AS HE FOUND THAT THE ASSESSEE HAD OBTAINED ACCOMMODATION ENTRIES IN THE FORM OF PURCHASES FROM BOGUS CONCERNS WHICH WERE IN THE BUSINESS OF PROVIDING BILLS WITHOUT DELIVERY OF GOODS IN EXCHANGE OF CASH ON COMMISSION BASIS. THE REASONS RECORDED BY HIM FOR THE AY 2009 - 10 IS PRODUCED BELOW: IN THIS CASE, THE RETURN OF INCOME WAS FILED ON 29.09.2009 DECLARING TOTAL INCOME OF RS.73,43,200/ - WHICH WAS PROCESSED U/S 143(1) ON 11.03.2011. THE CASE WAS SELECTED FOR SCRUTINY AND ASSESSMENT U/S 143(3) WAS COMPLETED ON 26.12.2011 DETERMINING THE TOTAL INCOME AT RS.86,10,560/ - . ASSESSEE IS THE PROPRIETOR OF M/S SALASAR EXTERIORS. INFORMATION HAS NOW BEEN RECEIVED FROM DGIT(INV), MUMBAI THAT M/S SALASAR EXTERIOR IS INVOLVED IN BOGUS PURCHASES TRANSACTIONS AMOUNTING TO RS.70,97,399/ - WITH THE FOLLOWING PA RTIES: ITA NOS. 6344 & 6345/MUM/2016 4 M/S OM CORPORATION RS.2,25,000 M/S SHAH INDUSTRIES 23,47,498 M/S RAJ TRADERS RS.8,27,500 M/S N.B. ENTERPRISES RS.5,39,731 M/S CORAL TRADING CO. RS.31,57,670 TOTAL RS.70,97,399 THE ABOVE PARTIES ARE INVOLVED IN PROVIDING BILLS WITHOUT ACTUAL DELIVERY OF MATERIALS AS PER THE INFORMATION RECEIVED. IN VIEW OF THIS, I HAVE REASON TO BELIEVE THAT INCOME TO THE TUNE OF RS.70,97,399/ - HAS ESCAPED ASSESSMENT IN AY 2009 - 10 WITHIN THE MEANING OF SECTION 147 OF THE INCOME TAX ACT. SIMILAR IS T HE REASONS RECORDED FOR RE - OPENING THE ASSESSMENT FOR THE AY 2010 - 11. 4.1 DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO ASKED THE ASSESSEE TO FURNISH SUPPORTING EVIDENCE IN RESPECT OF PURCHASES MADE FROM THE ABOVE ENTITIES. IN RESPONSE TO IT, THE ASSESSEE FURNISHED COPIES OF THE PURCHASE BILLS, DELIVERY CHALLANS AND STOCK REGISTER. THE ASSESSEE FURTHER SUBMITTED BEFORE THE AO THAT THE PURCHASES WERE GENUINE AND PAYMENTS HAVE BEEN MADE THROUGH BANKING CHANNEL . HOWEVER, THE AO WAS NOT CONVINCED WIT H THE ABOVE EXPLANATION OF THE ASSESSEE. THE AO , TO VERIFY THE TRANSACTION S, ISSUED NOTICE U/S 133(6) TO THE SAID PARTIES AT THE ADDRESS APPEARING ON THE INVOICE FURNISHED BY THE ASSESSEE. HOWEVER, THE NOTICES WERE RETURNED BACK AS UNSERVED BY THE POSTAL AUTHORITIES. THE AO THEN ASKED THE ASSESSEE TO PRODUCE THE CONCERNED PARTIES FOR VERIFICATION. THE AR OF THE ASSESSEE SUBMITTED ITA NOS. 6344 & 6345/MUM/2016 5 BEFORE THE AO THAT THE SUPPLIERS WERE NOT AVAILABLE AT THE ADDRESS AND HENCE, IT WA S NOT POSSIBLE TO PRODUCE THE SAID PARTIES FOR VERIFICATION. THE AO CAME TO A FINDING THAT THE ASSESSEE FAILED TO BRING ON RECORD THE RELEVANT AND CORROBORATIVE MATERIALS IN SUPPORT OF ITS CONTENTION. THEREFORE, HE ESTIMATED THE NET PROFIT @ 8% AS AGAINS T 6.96% DISCLOSED BY THE ASSESSEE AND MADE AN ADDITION OF RS.11,19,998/ - FOR THE AY 2009 - 10. 4.2 FOR THE AY 2010 - 11 THE AO ESTIMATED THE NET PROFIT @ 7% AS AGAINST 5.67% DISCLOSED BY THE ASSESSEE AND MADE AN ADDITION OF RS.22,87,989/ - . 5. AGGRIEVED THE OR DER OF THE AO, THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) FOR THE AY 2009 - 10 HELD; IN THE PRESENT CASE, THE N.P. RATIO SHOWN BY THE APPELLANT DURING THE YEAR UNDER CONSIDERATION IS FOUND AT 6.96%. THE AO HAS ENHANCED THE N.P. RATI O TO 8% RESULTING INTO ADDITION OF RS.11,19,998/ - . IF THE DISALLOWANCE WITH REFERENCE TO COST OF UNVERIFIED PURCHASES IS CALCULATED, IT IS COMING TO RS.11,19,998/ - *100/70,97,399/ - = 15.78% WHICH IS THE MOST FAIR AND REASONABLE IN THE FACTS AND CIRCUMSTANC ES OF THE CASE. HENCE, I FIND THE INCREASE IN N.P. RATIO TO BE FAIR AND REASONABLE IN THIS CASE. ACCORDINGLY, ADDITION OF RS.11,19,998/ - MADE BY THE AO IS SUSTAINED. 5.1 FOR THE AY 2010 - 11 THE LD. CIT(A) HAS HELD: IN THE PRESENT CASE, THE N.P. RATIO SH OWN BY THE APPELLANT DURING THE YEAR UNDER CONSIDERATION IS FOUND AT 5.67%. THE AO HAS ENHANCED THE N.P. RATIO TO 7% RESULTING INTO ADDITION OF RS.22,87,989/ - . IF THE DISALLOWANCE WITH REFERENCE TO COST OF UNVERIFIED PURCHASES IS CALCULATED, IT IS COMING T O ITA NOS. 6344 & 6345/MUM/2016 6 RS.22,87,989/ - *100/1,08,73,782/ - = 21.04% WHICH IS THE MOST FAIR AND REASONABLE IN THE FACTS AND CIRCUMSTANCES OF THE CASE. HENCE, I FIND THE INCREASE IN N.P. RATIO TO BE FAIR AND REASONABLE IN THIS CASE. ACCORDINGLY, ADDITION OF RS. 22,87,989/ - MADE BY THE AO IS SUSTAINED. 6. NO ONE APPEARED ON BEHALF OF THE ASSESSEE. THE LD. DR SUPPORTED THE ORDER PASSED BY THE LD. CIT(A). 7. WE HAVE HEARD THE LD. DR AND PERUSED THE RELEVANT MATERIALS ON RECORD. WE BEGIN WITH THE 1 ST GROUND OF APPEAL. WE HAVE MENTIO NED AT PARA 3 HERE - IN - ABOVE THE REASONS RECORDED BY THE AO FOR REOPENING THE ASSESSMENT. THE REASONS BEING INFORMATION RECEIVED FROM THE DGIT (INV), MUMBAI THAT THE PROPRIETARY CONCERN OF THE ASSESSEE WAS INVOLVED IN BOGUS PURCHASE AMOUNTING TO RS.70,97,39 9/ - FROM F IVE PARTIES DURING AY 2009 - 10 AND OF RS. 1,08,73,782/ - FROM SIX PARTIES. WE FIND THAT THE NOTICE U/S 148 WAS ISSUED ON THE BASIS OF TANGIBLE MATERIALS WHICH WAS NOT DISCLOSED BY THE ASSESSEE IN THE RETURN OF INCOME. THEREFORE, WE UPHOLD THE ORDER OF THE LD. CIT(A) ON THE ABOVE GROUND AND DISMISS THE 1 ST GROUND OF APPEAL. 7.1 WE NOW MOVE TO THE 2 ND GROUND OF APPEAL. WE FIND THAT THE ASSESSEE HAD FILED BEFORE THE AO COPIES OF PURCHASE BILLS, DELIVERY CHALLANS AND COPY OF STOCK REGISTER. IN THE CASE OF CIT VS. SIMIT P. SHETH (2013) 38 TAXMANN.COM (GUJ), THE HONBLE GUJARAT HIGH COURT HAS HELD THAT WHERE PURCHASES WERE N OT BOGUS BUT WERE MADE FROM PARTIES OTHER THAN THOSE MENTIONED IN THE BOOKS OF ACCOUNT, NOT ENTIRE PURCHASE PRICE BUT ONLY PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES CAN BE ADDED TO INCOME OF THE ASSESSEE. THAT BEING THE POSITION, NOT THE ENTIRE PURCHASE ITA NOS. 6344 & 6345/MUM/2016 7 PR ICE BUT ONLY THE PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES CAN BE ADDED TO THE INCOME OF THE ASSESSEE. THE HONBLE HIGH COURT REFERRED TO A SIMILAR VIEW TAKEN IN THE CASE OF CIT VS. VIJAY M. MISTRY CONSTRUCTION LTD. [2013] 355 ITR 498 (GUJ) AND CIT VS. BHO LANATH POLY FAB (P) LTD. [2013] 355 ITR 290 (GUJ). IN VIEW OF THE ABOVE, WE SET ASIDE THE ORDER OF THE LD. CIT(A) AND DIRECT THE AO TO ESTIMATE PROFIT @ 6.96% ON THE PURCHASES OF RS.70,97,399/ - IN AY 2009 - 10 AND @ 5.67% ON THE PURCHASES OF RS.1,08,73,782 / - IN A.Y 2010 - 11 . THUS WE ALLOW THE 2 ND GROUND OF APPEAL FOR THE AY 2009 - 10 AND AY 2010 - 11. 7.2 AS THE PENALTY U/S 271(1)(C) HAS BEEN INITIATED ONLY, IT IS PREMATURE TO CONSIDER THE 3 RD GROUND OF APPEAL. 8. IN THE RESULT, THE APPEALS ARE PARTLY ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT ON 30/08/2017. SD/ - SD/ - ( C.N. PRASAD ) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED: 30/08/2017 RAHUL SHARMA, SR. P.S. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - 4. CIT ITA NOS. 6344 & 6345/MUM/2016 8 5. DR, ITAT, MUMBAI 6. GUARD FILE . BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI