ITO 27 (1)(3), MUMBAI V. HEMANT AMRUTLAL SHAH, MUMBAI

ITA 6429/MUM/2018

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 3173 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-11-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Assessment Year: 2009-2010
• Appeal Filed On: 06-11-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K BHOOPATHI
• Keywords: Unexplained expenditure
• Section: 133(6); 148

Judgement Text

P A G E | 1 ITA NO.6429/MUM/2018 A.Y.2009 - 10 ITO - 27(1)(3) VS. SHRI HEMANT AMRUTLAL SHAH IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI BEFORE SHRI RAVISH SOOD, JUDICIAL MEMBER AND SHRI N.K. PRADHAN, ACCOUNTANT MEMBER ITA NO.6429/MUM/2018 (ASSESSMENT YEAR: 2009 - 10) ITO - 27(1)(3) ROOM NO. 409, 4 TH FLOOR, TOWER NO.6, VASHI RAILWAY STATION, COMPLEX, VASHI, NAVI MUMBAI 400 703 VS. SHRI HEMANT AMRUTLAL SHAH 21/182, SHREE NILAYAM, GARODIA NAGAR, GHATKOPAR (E), MUMBAI - 400 077 PAN AAEPS3274Q (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI K. BHOOPATHI, D.R RESPONDENT BY: NONE DATE OF HEARING: 11 .11.2019 DATE OF PRONOUNCEMENT: 1 5 .11.2019 O R D E R PER RAVISH SOOD, JM THE PRESENT APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A) - 26, MUMBAI, DATED 22.08.2018, WHICH IN TURN ARISES FROM THE ORDER PASSED BY THE A.O UNDER SEC.143(3) R.W.S 147 OF THE INCOME TAX ACT, 1961 (FOR SHORT ACT), DATED 1 1.02.2015 FOR A.Y. 2009 - 10. 2. BRIEFLY STATED, THE ASSESSEE WHO IS ENGAGED IN THE BUSINESS OF TRADING IN BALL BEARINGS, HARDWARE ETC . HAD ON 18.11.2009 FILED HIS O RIGINAL RETURN OF INCOME FOR A.Y 2009 - 10, DECLARING TOTAL INCOME AT RS.4,65,978/ - . ON THE BASIS OF INFORMATION RECEIVED BY THE A.O FROM THE DGI T (INV.), MUMBAI , THAT THE ASSESSEE WAS ONE OF THE BENEFICIARY WHO HAD OBTAINED ACCOMMODATION PURCHASE BILLS FROM THREE ENTERPRISES, VIZ. (I) M/S. NEM ENTERPRISES; (II) M/S JAINAM ENTERPRISES; AND (III) M/S GIRNAR SALES CORPORATION, AGGREGATING TO RS.62,383/ - , HIS CASE WAS REOPENED P A G E | 2 ITA NO.6429/MUM/2018 A.Y.2009 - 10 ITO - 27(1)(3) VS. SHRI HEMANT AMRUTLAL SHAH UNDER SEC. 147 OF THE ACT. IN COMPLIANCE TO THE NOTICE RECEIVED U/S 148 , THE ASSESSEE FILED THE RETURN OF INCOME DECLARING TOTAL INCOME AT RS. 4,82,260/ - . 3. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, THE A.O CALLED UPON THE ASSESSEE TO SUBSTANTIATE THE AUTHENTICITY OF THE PURCHASES CLAIMED TO HAVE BEEN MADE FROM THE AFOREMENTIONED PARTIES. ALSO, IN ORDER TO VERIFY THE AUTHENTICITY OF THE PURCHASE TRANSAC TIONS WHICH WERE CLAIMED BY THE ASSESSEE TO HAVE BEEN ENTERED INTO WITH THE AFORE SAID PARTIES, THE A.O ISSUED NOTICES UNDER SEC. 133(6) TO THEM, WHICH HOWEVER WERE RETURNED UNSERVED . IN THE BACKDROP OF THE AFORESAID FACTS, THE A.O CALLED UPON THE ASSESSEE TO PRODUCE THE AFORESAID PARTIES ALONG WITH THEIR RESPECTIVE CONFIRMATIONS. HOWEVER, THE ASSESSEE FAILED TO COMPLY WITH THE AFORESAID SPECIFIC DIRECTION AND DID NOT PRODUCE EITHER O F TH E AFOREMENTIONED PARTY FOR EXAMINATION BEFORE THE A.O. IN FACT, IT WAS CLAIM ED BY THE ASSESSEE THAT HE HAD IN HIS RETURN OF INCOME FILED IN COMPLIANCE TO THE NOTICE ISSUED SEC.148 OFFERED AS HIS INCOME 26% ( A PPROX.) OF THE AGGREGATE VALUE OF THE UNSUBS TANTIATED PURCHASES OF RS.62,383/ - . HOWEVER, THE A.O NOT FINDING FAVOUR WITH THE AFORESAID CLAIM OF THE ASSESSEE ADDED THE ENTIRE AMOUNT OF PURCHASES OF RS.62,383/ - UNDER SEC.69C OF THE ACT. 4. AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE T HE CIT(A). INSOFAR THE FACT THAT THE ASSESSEE HAD FAILED TO SUBSTANTIATE THE AUTHENTICITY OF THE IMPUGNED PURCHASE TRANSACTIONS, THE CIT(A) WAS IN AGREEMENT WITH THE VIEW TAKEN BY THE A.O. AT THE SAME TIME, TAKING COGNIZANCE OF THE FACT THAT THE SALES CORR ESPONDING TO THE IMPUGNED PURCHASES WERE ACCOUNTED FOR BY THE ASSESSEE IN HIS BOOKS OF ACCOUNTS, THE CIT(A) WAS OF THE VIEW THAT THE IMPUGNED PURCHASES WERE MADE BY THE ASSESSEE FROM UNDISCLOSED PARTIES OPERATING IN THE GREY MARKET AT LOWER RATES. ON THE B ASIS OF HIS AFORESAID OBSERVATIONS, THE CIT(A) WAS OF THE VIEW THAT THE ADDITION IN THE CASE OF THE ASSESSEE WAS LIABLE TO BE RESTRICTED ONLY TO THE EXTENT OF THE PROFIT ELEMENT EMBEDDED IN MAKING OF THE AFORESAID PURCHASES BY THE ASSESSEE FROM UNDISCLOSED SOURCES. OBSERVING, THAT THE G.P RATIO OF THE ASSESSEE DURING THE YEAR WAS 26.01%, THEREFORE, THE CIT(A) FOUND FAVOUR WITH THE CLAIM OF THE ASSESSEE THAT THE ADDITION IN RESPECT OF THE AFORESAID PURCHASES WAS LIABLE TO BE RESTRICTED TO THE EXTENT OF 26.01 % OF THE IR AGGREGATE VALUE . ACCORDINGLY, THE CIT(A) BEING OF THE VIEW THAT THE ADDITION/DISALLOWANCE TO THE EXTENT 26.01% OF THE AGGREGATE VALUE OF THE AFORESAID PURCHASES OF RS.62,383/ - WOULD P A G E | 3 ITA NO.6429/MUM/2018 A.Y.2009 - 10 ITO - 27(1)(3) VS. SHRI HEMANT AMRUTLAL SHAH SUFFICIENTLY COVER THE PROFIT ELEMENT EMBEDDED IN THE IMPUGNED PURCHASE S , THEREFORE, RESTRICTED THE ADDITION TO THE SAID EXTENT. 5. THE REVENUE BEING AGGRIEVED WITH THE AFORESAID ORDER OF THE CIT(A) HAS CARRIED THE MATTER IN APPEAL BEFORE US. A S THE RESPONDENT ASSESSEE DESPITE HAVING BEEN INTIMATED ABOUT THE FIXATION OF THE APPEAL, HAS HOWEVER, FAILED TO PUT UP AN APPEARANCE BEFORE US, THEREFORE, WE SHALL PROCEED WITH AS PER RULE 25 OF THE A PPELLATE TRIBUNAL RULES, 1962 , AND PROCEED WITH THE APPEAL AFTER HEARING THE APPELLANT REVENUE. 6. THE LD. DEPARTMENTAL REPRESENT ATIVE (FOR SHORT D.R) HAD RELIED ON THE ORDER PASSED BY THE A.O. IT WAS SUBMITTED BY THE LD. D.R , THAT AS THE ASSESSEE HAD FAILED TO SUBSTANTIATE THE AUTHENTICITY OF THE PURCHASES CLAIMED TO HAVE BEEN MADE FROM THE AFOREMENTIONED PARTIES, THEREFORE, THE A.O HAD RIGHTLY DISALLOWED THE AGGREGATE VALUE OF SUCH PURCHASES AMOUNTING TO RS.62,383/ - . 7. WE HAVE HEARD THE LD. D.R, PERUSED THE ORDER S OF THE LOWER AUTHORITIES AND THE MATERIAL AVAILABLE ON RECORD, AS WELL AS THE JUDICIAL PRONOUNCEMENT RELIED UPON BY HIM . ADMITTEDLY, THE ASSESSEE HAD FAILED TO SUBSTANTIATE THE AUTHENTICITY OF THE PURCHASES WHICH WERE CLAIMED BY HIM TO HAVE BEEN MADE FROM THE AFOREMENTIONED PARTIES. HOWEVER, AT THE SAME TIME, WE FIND THAT AS OBSERVED BY THE LOWER AUTHORITIES, THE SALES CORRESPONDING TO THE IMPUGNED PURCHASES HAD DULY BEEN ACCOUNTED BY THE ASSESSEE IN ITS BOOKS OF ACCOUNTS. IN OUR CONSIDERED VIEW, UNDER THE AFORESAID FACTUAL POSITION, IT CAN SAFELY BE CONCLUDED THAT THE ASSESSEE HAD CARRIED OUT THE PURCHASES OF THE GOODS NOT FROM THE AFOREMENTIONED HAWALA PARTIES, BUT FROM THE UNDISCLOSED PARTIES OPERATING IN THE OPEN/GREY MARKET. AS THE AFORESAID PURCHASES WERE DULY RECORDED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE, THEREFORE, WE ARE UNABLE TO COMPREHEND AS TO ON WHAT BA SIS THE A.O HAD CHARACTERISED THE SOURCE OF MAKING OF SUCH PURCHASES AS AN UNEXPLAINED EXPENDITURE UNDER SEC. 69C. BE THAT AS IT MAY, WE ARE IN AGREEMENT WITH THE VIEW TAKEN BY THE CIT(A) THAT THE ADDITION IN THE PRESENT CASE WAS LIABLE TO BE RESTRICTED ON LY TO THE EXTENT OF THE PROFIT ELEMENT EMBEDDED IN MAKING OF SUCH PURCHASE S BY THE ASSESSEE AT A DISCOUNTED V ALUE FROM THE OPEN/GREY MARKET. INSOFAR THE QUANTIFICATION OF SUCH PROFIT ELEMENT @ 26.01% OF THE AGGREGATE VALUE OF THE IMPUGNED PURCHASE S IS CONC ERNED, WE CONCUR WITH THE P A G E | 4 ITA NO.6429/MUM/2018 A.Y.2009 - 10 ITO - 27(1)(3) VS. SHRI HEMANT AMRUTLAL SHAH VIEW TAKEN BY THE CIT(A) THAT THE SAME WOULD SUFFICIENTLY COVER THE SAME. ACCORDINGLY, NOT FINDING ANY INFIRMITY IN THE ORDER OF THE CIT(A), WE UPHOLD THE SAME . 8. RESULTANTLY, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER P R ONOUNCED IN THE OPEN COURT ON 1 5 . 11.2019 S D / - S D / - ( N.K. PRADHAN ) (RAVISH SOOD) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; 15 .11 .2019 PS. ROHIT / 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 . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI