INCOME TAX OFFICER-25(1)(2), MUMBAI V. SHAILESH R. PATEL, MUMBAI

ITA 6471/MUM/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 0515 (ITAT-MUMBAI)
• Duration Of Justice: 2 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 03-11-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N HEMLATHA
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH SMC, MUMBAI BEFORE SHRI G.S.PANNU, ACCOUNTANT MEMBER AND SHRI RAVISH SOOD, JUDICIAL MEMBER ITA NO. 6471/MUM/2017 (ASSESSMENT YEAR 2009-10) THE INCOME TAX OFFICER 25(1)(2), ROOM NO.403,C-10, BLDG., BKC , BANDRA(E), MUMBAI 400051 ..... APPELLANT VS. SHRI SHAILESH R.PATEL, SHOP NO.28, AT JUNCTION OF MILITARY ROAD, MAROL MAROSHI ROAD, ANDHERI (EAST), MUMBAI 400059 PAN: AAIPP6834B ...... RESPONDENT APPELLANT BY : MS.N.HEMLATHA RESPONDENT BY : NONE DATE OF HEARING : 29/01/2018 DATE OF PRONOUNCEMENT : 31/01/2018 ORDER PER G.S.PANNU,A.M: THE CAPTIONED APPEAL FILED BY THE REVENUE PERTAIN ING TO ASSESSMENT YEAR 2009-10 IS DIRECTED AGAINST AN ORDE R PASSED BY THE CIT(A) -37, MUMBAI DATED 14/08/2017, WHICH IN TUR N ARISES OUT OF AN ORDER PASSED BY THE ASSESSING OFFICER UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) DATED 31/ 03/2015. 2 ITA NO. 6471/MUM/2017 (ASSESSMENT YEAR 2009-10) 2. IN THIS APPEAL THE ONLY GRIEVANCE OF THE REVE NUE IS THAT THE CIT(A) ERRED IN RESTRICTING THE DISALLOWANCE TO 12. 50% OF THE TOTAL UNEXPLAINED PURCHASES OF RS.42,11,015/- INSTEAD OF ASSESSING THE ENTIRE GROSS AMOUNT OF PURCHASES. 3. AT THE TIME OF HEARING, IT WAS NOTED THAT NONE APPEARED ON BEHALF OF THE ASSESSEE NOR ANY APPLICATION FOR ADJO URNMENT HAS BEEN PLACED BEFORE US INSPITE OF NOTICE OF HEARING BEIN G SERVED UPON THE ASSESSEE. THEREFORE, WE PROCEED TO DISPOSE-OFF THE APPEAL EX-PARTE QUA THE RESPONDENT ASSESSEE AFTER HEARING THE LD. DEPAR TMENTAL REPRESENTATIVE ON MERITS IN TERMS OF RULE -25 OF IN COME TAX (APPELLATE TRIBUNAL) RULES, 1963. 4. AT THE OF HEARING THE LD. DEPARTMENTAL REPRESENT ATIVE POINTED OUT THAT THE ASSESSEE IS A TRADER IN STATIONERY ITE MS AND THE ASSESSMENT WAS REOPENED ON ACCOUNT OF INFORMATION RECEIVED FRO M THE SALES TAX DEPARTMENT OF MAHARASHTRA TO THE EFFECT THAT ASSESS EE HAD EFFECTED PURCHASES OF RS.42,11,015/- FROM PARTIES WHO WERE T REATED AS HAWALA OPERATORS I.E. THE PARTIES WHO WERE ISSUING ACCOMMO DATIONS BILLS AND NOT EFFECTING ACTUAL SALES/PURCHASES. IN THE ENSUI NG ASSESSMENT THE ASSESSEE RELIED UPON THE COPY OF INVOICES, BANK STA TEMENTS ETC. TO CONTEND THAT IT HAD ACTUALLY EFFECTED THE PURCHASES FROM THE CONCERNED PARTIES AND ALSO MADE PAYMENT THEREOF. THE ASSESSI NG OFFICER WAS GUIDED BY THE INFORMATION RECEIVED FROM SALES TAX D EPARTMENT OF MAHARASHTRA AND CONSIDERED PURCHASES TO THE EXTENT OF RS.42,11,015/- AS UNEXPLAINED INCOME. THE CIT(A) HAS SINCE AFFIRM ED THE DECISION OF THE ASSESSING OFFICER IN PRINCIPLE, BUT ON THE QUAN TIFICATION OF THE 3 ITA NO. 6471/MUM/2017 (ASSESSMENT YEAR 2009-10) ADDITION, HE RELIED UPON THE JUDGMENT OF THE HONBL E GUJARAT HIGH COURT IN THE CASE OF CIT VS. SIMIT P. SHETH, 356 IT R 451(GUJ). THE CIT(A) NOTED THAT EVEN IF THE STATED PURCHASES ARE FOUND T O BE UNEXPLAINED, BUT THERE WAS NO MATERIAL TO SHOW THAT THE CORRESPO NDING SALES SHOWN BY THE ASSESSEE WERE ALSO BOGUS. ACCORDING TO THE CIT(A) IN SUCH A CASE THE MATERIAL MUST HAVE BEEN PURCHASED BY THE ASSESS EE THOUGH NOT FROM THE STATED PARTIES BECAUSE OTHERWISE THE CORRE SPONDING SALES COULD NOT BE EFFECTED AND THE SAME HAVE NOT BEEN DO UBTED BY THE ASSESSING OFFICER. UNDER THESE CIRCUMSTANCES, THE CIT(A) RESTRICTED THE ADDITION TO 12.50% OF THE AMOUNT OF PURCHASES FOLLO WING THE RATIO OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF SI MIT P. SHETH (SUPRA). 5. BEFORE US, THE LD. DEPARTMENTAL REPRESENTATIVE R ELIED UPON THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE O F N.K.PROTEINS LTD. VS. DCIT IN SLP(CIVIL) NO.769/2017 DATED 16/01/2017 TO CONTEND THAT THE ENTIRE AMOUNT OF PURCHASES BE ASSESSED TO TAX A ND NOT MERELY THE PROFIT ELEMENT OF SUCH PURCHASES AS DONE BY THE CIT (A). 6. HAVING CONSIDERED THE STAND OF THE LD. DEPARTMEN TAL REPRESENTATIVE AS ALSO THE ORDERS OF THE AUTHORITIE S BELOW, IN OUR VIEW, THE CONCLUSION DRAWN BY THE CIT(A) IS FAIR AND APT HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF THE CASE AND DOES NOT RE QUIRE ANY INTERVENTION FROM OUR SIDE. NO DOUBT, THE CIT(A) A CCEPTED THE PLEA OF THE ASSESSING OFFICER THAT THE PURCHASES IN QUESTIO N WERE UNEXPLAINED. THE CIT(A) NOTED THAT ASSESSEE WAS A TRADER OF GOOD S AND THAT THE SALES CORRESPONDING TO THE STATED MATERIAL PURCHASES HAVE BEEN ACCEPTED, AS THERE WAS NO MATERIAL AVAILABLE WITH THE ASSESSING OFFICER TO THE 4 ITA NO. 6471/MUM/2017 (ASSESSMENT YEAR 2009-10) CONTRARY. IN THIS BACKGROUND, THE CIT(A) RELIED UP ON THE RATIO OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF SIMIT P. SHETH(SUPRA) TO CONTEND THAT THE PROFITS OF BUSINESS IN SUCH A SITU ATION COULD NOT BE ASCERTAINED WITHOUT DEDUCTING THE COST OF PURCHASES FROM THE SALES. BEFORE US, THE FINDINGS OF THE CIT(A) HAVE NOT BEEN ASSAILED ON THE BASIS OF ANY COGENT REASONING AND, THEREFORE, THE SAME AR E HEREBY AFFIRMED, WHICH ARE BASED ON JUDGMENT OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF SIMIT P. SHETH(SUPRA). IN SO FAR AS THE RELIANCE PLACED BY THE LD. DEPARTMENTAL REPRESENTATIVE ON THE JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF N.K.PROTEINS LTD.(SUPRA) IS CO NCERNED, THE SAME IN OUR VIEW IS NOT ATTRACTED TO THE FACTS OF THE PRESE NT CASE, INASMUCH AS, IN THE CASE BEFORE THE HONBLE SUPREME COURT EVIDEN CE WAS UNEARTHED IN COURSE OF SEARCH WHICH SHOWED BOGUS TRANSACTIONS , WHEREAS IN THE INSTANT CASE, THE ENTIRE DISCUSSION IN THE ASSESSME NT ORDER REVEALS THAT THE CASE OF THE ASSESSING OFFICER IS FULLY RESTING ON THE INFORMATION RECEIVED FROM THE SALES TAX AUTHORITIES OF MAHARASH TRA AND THERE IS NO INDEPENDENT MATERIAL OR EVIDENCE TO DEMONSTRATE THA T THE SPECIFIC TRANSACTIONS IN QUESTION WERE BOGUS. NOTABLY IT IS ONE THING TO TREAT THE EXPENSES AS UNEXPLAINED OR UNSUBSTANTIATED AND ANOTHER TO TREAT THE SAME AS BOGUS OR SHAM. FOR THE LATTER TO PREV AIL, POSITIVE EVIDENCE HAS TO BE LEAD WITH REGARD TO THE SPECIFIC TRANSACT IONS, WHICH IS ABSENT IN THE PRESENT CASE. UNDER THESE CIRCUMSTANCES, IN OUR VIEW, THE RELIANCE PLACED BY THE REVENUE IN THE CASE OF N.K. PROTEINS LTD.(SUPRA) IS NOT JUSTIFIED AND THAT THE CIT(A) MADE NO MISTAKE I N SUSTAINING THE ADDITION EQUIVALENT TO 12.50% OF THE UNEXPLAINED EX PENSES OF 5 ITA NO. 6471/MUM/2017 (ASSESSMENT YEAR 2009-10) PURCHASES INSTEAD OF GROSS AMOUNT OF PURCHASES. IN VIEW OF THE ABOVE, THE ORDER OF THE CIT(A) IS AFFIRMED AND THE REVENUE FAILS IN ITS APPEAL. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 31/01/2018. SD/- SD/- (RAVISH SOOD) (G.S. PANNU) JUDICIAL MEMBER ACCOCUNTANT MEMBER MUMBAI, DATED 31/01/2018 VM , SR. PS 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. BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI