ITO 25(3)(5), MUMBAI V. NAYAN M SHAH (HUF), MUMBAI

ITA 6372/MUM/2016

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 8521 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-11-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 07-06-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 28-10-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUMAN KUMAR LD
• Assessee Lawyers: DHIREN P TALATILD
• Keywords: Bogus purchase; Reassessment proceedings
• Section: 147; 148; 144

Judgement Text

ITA NO.6372/M/2016 & CO.NO. 124/MUM/2017 NAYAN NARENDRA SHAH (HUF) ASSESSMENT YEAR 2009-10 IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI , , BEFORE SHRI MAHAVIR SINGH, JM AND SHRI MANOJ KUMAR AGGARWAL, AM ./I.T.A. NO. 6372/MUM/2016 ( / ASSESSMENT YEAR: 2009-10) INCOME TAX OFFICER 25(3)(5) ROOM NO.608,C-10 6 TH FLOOR, PRATYAKSHKAR BHAVAN BKC BANDRA (E) MUMBAI 400 051 / VS. NAYAN NARENDRA SH AH (HUF) (PROP. PADME WIRE INDUSTRIES) 306/A, SHYAMKAMAL BUILDING TEJPAL ROAD, VILE PARLE(E) MUMBAI 400 057 ./ ./PAN/GIR NO. AALHS-6023-E ( ! /APPELLANT ) : ( '#! / RESPONDENT ) & CROSS OBJECTION NO.124/MUM/2017 ( / ASSESSMENT YEAR: 2009-10) NAYAN NARENDRA SHAH (HUF) (PROP. PADME WIRE INDUSTRIES) 306/A, SHYAMKAMAL BUILDING TEJPAL ROAD, VILE PARLE(E) MUMBAI 400 057 / VS. INCOME TAX OFFICER 25(3)(5) ROOM NO.608,C-10 6 TH FLOOR, PRATYAKSHKAR BHAVAN BKC BANDRA (E) MUMBAI 400 051 ./ ./PAN/GIR NO. AALHS-6023-E ( ! /APPELLANT ) : ( '#! / RESPONDENT ) A SSESSEE BY : DHIREN P.TALATI,LD.AR RE VENUE BY : SUMAN KUMAR, LD.DR / DATE OF HEARING : 05/10/2017 / DATE OF PRONOUNCEMENT : 08/11 /2017 ITA NO.6372/M/2016 & CO.NO. 124/MUM/2017 NAYAN NARENDRA SHAH (HUF) ASSESSMENT YEAR 2009-10 2 / O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. THE CAPTIONED APPEAL BY REVENUE FOR ASSESSMENT Y EAR [AY] 2009- 10 ASSAILS THE ORDER OF THE LD. COMMISSIONER OF IN COME-TAX (APPEALS)- 37 [CIT(A)], MUMBAI, APPEAL NO. CIT(A)-37/IT-32/ITO 25(3)(5)/2015-16 ORDER DATED 23/08/2016 . THE ASSESSMENT WAS FRAMED BY LD. INCOME TAX OFFICER 25(3)(5) , MUMBAI ON 05/03/2015 U/S 144 READ WITH SECTION 147 OF THE INCOME TAX ACT,1961 . THE ASSESSE HAS FILED CROSS OBJECTION AGAINST THE SAME. THE REVENUE IS AGGRIEVED BY RELIEF GIVEN BY LD. CIT(A) TO THE ASSESSEE ON ACCOUNT OF CERTAIN BOGUS PURCHASES. THE REGISTRY HAS NOTED THAT THE CROSS OBJECTION FILED BY THE ASSESSE E HAS BEEN FILED WITH A DELAY OF 109 DAYS. THE ASSESSEE, VIDE SUBSEQUENT AF FIDAVIT DATED 06/10/2017 EXPLAINING THE REASONS OF DELAY HAS REQU ESTED FOR THE CONDONATION OF THE SAME. THE LD. DR RAISED NO SERIO US OBJECTIONS AGAINST THE SAME. IN THE INTEREST OF JUSTICE, THE D ELAY IS CONDONED. THE ONLY GROUND PRESSED IN THE CROSS OBJECTION IS THE Q UANTUM OF ADDITION TO BE MADE AGAINST ALLEGED BOGUS PURCHASES. 2.1 FACTS LEADING TO THE SAME ARE THAT THE ASSESSEE BEING RESIDENT HUF ENGAGED IN THE BUSINESS OF MANUFACTURING & RESELLING OF COPPER WIRE, VARNISH, INSULATING MATERIAL UNDER PROPRIETORSHIP CONCERN NAMELY PADME WIRE INDUSTRIES WAS SUBJECTED TO AN ASSESSMENT U/S 144 READ WITH SECTION 147 FOR IMPUGNED AY ON 05/03/2015 WHERE THE INCOME OF T HE ASSESSEE WAS DETERMINED AT RS.45,46,645/- AFTER CER TAIN ADDITIONS OF ALLEGED BOGUS PURCHASES FOR RS.39,59,761/-. THE ORIGINAL RETURN WAS FILED ITA NO.6372/M/2016 & CO.NO. 124/MUM/2017 NAYAN NARENDRA SHAH (HUF) ASSESSMENT YEAR 2009-10 3 ON 15/05/2009 AT RS.5,86,884/- WHICH WAS PROCESSED U/S 143(1). THE SOLITARY ISSUE INVOLVED IN THE APPEAL IS ADDITION O F CERTAIN BOGUS PURCHASES . 2.2 THE REASSESSMENT PROCEEDINGS WERE INITIATED UPO N RECEIPT OF CERTAIN INFORMATION FROM SALES TAX DEPARTMENT, MAHARASHTRA REGARDING DEALERS INDULGING IN BOGUS PURCHASE BILLS AND IT WAS NOTED THAT THE ASSESSEE STOOD BENEFICIARY OF SUCH BOGUS PURCHASE BILLS TO THE TUNE OF RS.39,59,761/- FROM FOUR SUCH PARTIES. CONSEQUENTLY , NOTICE U/S 148 DATED 08/03/2014 WAS ISSUED TO THE ASSESSEE WHICH W AS FOLLOWED BY STATUTORY NOTICES U/S 143(2) AND 142(1). 2.3 TO CONFIRM THESE TRANSACTIONS, REQUISITE DETAIL S WERE CALLED FROM ALLEGED BOGUS SUPPLIERS BY ISSUE OF SUMMONS, BUT THE SAME WERE RETURNED BACK UN-SERVED BY THE POSTAL AUTHORITIES WITH REMARKS LIKE NOT KNOWN OR LEFT. THE SAME WAS CONFRONTED TO THE ASSESSEE WHO COULD N OT FURNISH ANY COGENT MATERIAL TO ESTABLISH THE GENUIN ENESS OF THE SAME. ACCORDINGLY, LD. AO DISALLOWED THE PURCHASES AND AD DED THE SAME TO THE INCOME OF THE ASSESSEE. 3. AGGRIEVED, THE ASSESSEE CONTESTED THE SAME WITH PARTIAL SUCCESS BEFORE LD.CIT(A) VIDE IMPUGNED ORDER DATED 23/08/20 16. THE ASSESSEE, INTER-ALIA, CONTENDED THAT THE PURCHASES WERE GENUINE SINCE DOCUMENTARY EVIDENCES VIZ. PURCHASE / SALES INVOICES, BANK STATEMENT EVIDENCING PAYMENT TO ALLEGED BOGUS SUPPLIERS, LEDG ER EXTRACTS, DELIVERY CHALLANS ETC. WERE SUBMITTED BEFORE THE LD. AO AND FURTHER CORRESPONDING SALE HAVE BEEN MADE BY THE ASSESSEE A ND THEREFORE ENTIRE PURCHASES COULD NOT BE DISALLOWED. THE LD. C IT(A) AFTER CONSIDERING THE SAME AND PLACING RELIANCE ON CERTAI N JUDICIAL ITA NO.6372/M/2016 & CO.NO. 124/MUM/2017 NAYAN NARENDRA SHAH (HUF) ASSESSMENT YEAR 2009-10 4 PRONOUNCEMENTS RESTRICTED THE IMPUGNED ADDITIONS TO 12.5% OF ALLEGED BOGUS PURCHASES OF RS.39,59,761/- WHICH CAME TO RS.4,94,970/-. AGGRIEVED, THE REVENUE IS IN FURTHER APPEAL BEFORE US WHEREAS THE ASSESSEE, VIDE CROSS OBJECTIONS, ASSAILED IMPUGNED ADDITIONS. 4. THE LD. DEPARTMENTAL REPRESENTATIVE [DR] PLACING RELIANCE ON THE STAND OF LD. AO CONTENDED THAT THE ASSESSEE FAILED TO PROVE THE GENUINENESS OF IMPUGNED PURCHASES AND THEREFORE, FU LL DISALLOWANCE WAS JUSTIFIED. PER CONTRA, LD. REPRESENTATIVE FOR ASSESSEE [AR] CONTENDED THAT THE ADDITION WAS ON THE HIGHER SIDE AND THE BENEFIT OF VAT PAID BY THE ASSESSEE SHOULD BE GRANTED TO HIM. 5. WE HAVE CAREFULLY HEARD THE RIVAL CONTENTIONS AN D PERUSED RELEVANT MATERIAL ON RECORD. WE ARE OF THE CONSIDERED OPINIO N THAT THERE COULD BE NO SALE WITHOUT PURCHASE OF MATERIAL SINCE THE ASSE SSEE WAS ENGAGED IN MATERIAL INTENSIVE BUSINESS. THE SALES TURNOVER ACHIEVED BY THE ASSESSEE HAS NOT BEEN DISPUTED OR DISTURBED BY THE REVENUE AND THE PAYMENTS WERE THROUGH BANKING CHANNELS. THE PURCHAS ES WERE BACKED BY INVOICES AND CORRESPONDING SALE INVOICES. AT THE SAME TIME, THE ASSESSEE COULD NOT PRODUCE ANY CONFIRMATION FROM TH E IMPUGNED SUPPLIERS AND SUMMONS ISSUED TO THE SAID SUPPLIERS REMAINED UN- SERVED , WHICH CAST SERIOUS DOUBT ON ASSESSEES CLAIM. THE REFORE, IN SUCH A SITUATION, THE ADDITION, WHICH COULD BE MADE , WAS TO ACCOUNT FOR PROFIT ELEMENT EMBEDDED IN THESE PURCHASE TRANSACTI ONS TO FACTORIZE FOR PROFIT ELEMENT EARNED BY ASSESSEE AGAINST POSSIBLE PURCHASE OF MATERIAL IN THE GREY MARKET AND UNDUE BENEFIT OF VAT AGAINST SUCH BOGUS PURCHASES, WHICH LD. CIT(A) HAS RIGHTLY DONE SO. TH E ASSESSEE, IN HIS CROSS OBJECTIONS HAS STATED THAT THE IMPUGNED PURCH ASES OF ITA NO.6372/M/2016 & CO.NO. 124/MUM/2017 NAYAN NARENDRA SHAH (HUF) ASSESSMENT YEAR 2009-10 5 RS.39,59,761/- INCLUDES VAT AMOUNT OF RS.1,52,299/- AND THE SAME HAS NOT BEEN DEBITED TO THE PROFIT & LOSS ACCOUNT AND A CCORDINGLY, THE SAME SHOULD NOT BE TAKEN INTO ACCOUNT FOR THE PURPOSES O F ARRIVING AT ESTIMATED ADDITIONS. WE AGREE WITH ASSESSEES CONTE NTION TO THAT EXTENT AND THEREFORE, RESTRICT THE DISALLOWANCE TO 12.5% O F NET PURCHASES OF RS.38,07,462/- WHICH COMES TO RS.4,75,933/-. THE OR DER OF LD.CIT(A) STANDS MODIFIED TO THAT EXTENT. 6. RESULTANTLY, THE REVENUES APPEAL STANDS DISMISS ED WHEREAS ASSESSEES CROSS OBJECTIONS STANDS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 08 TH NOVEMBER, 2017. SD/- SD/- (MAHAVIR SINGH) (MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 08.11.2017 SR.PS:- THIRUMALESH ! / COPY OF THE ORDER FORWARDED TO : 1. ! / THE APPELLANT 2. '#! / THE RESPONDENT 3. * ( ) / THE CIT(A) 4. * / CIT CONCERNED 5. '%- , - , / DR, ITAT, MUMBAI 6. ./ / GUARD FILE / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI