ITO 22(3)(5), MMBAI V. UNIVERSAL TRADING CO. , MUMBAI

ITA 6471/MUM/2019

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 0345 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-07-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 11-10-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SMITA VERMA
• Keywords: Bogus purchase
• Section: 69C; 133(6)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH SMC, MUMBAI , BEFORE SHRI VIKAS AWASTHY, JUDICIAL MEMBER . 6471 //20 19 (. . 2010-11 ) ITA NO.6471/MUM/2019 (A.Y.2010-11) . 6472 //20 19 (. . 2011-12 ) ITA NO.6472MUM/2019 (A.Y.2011-12) ITO-22(3)(5), 321, 3 RD FLOOR, PIRAMAL CHAMBERS, LALBAUG, MUMBAI-400012. ...... ' / APPELLANT VS. UNIVERSAL TRADING COMPANY 737/1, NEELGIRI, KHAR PALI ROAD, KHAR (WEST), MUMBAI-400052. PAN: AAAFU0060E . .... (*/ RESPONDENT ' +/ APPELLANT BY : MS. SMITA VERMA (* +/ RESPONDENT BY : NONE , / DATE OF HEARING : 06/05/2021 , / DATE OF PRONOUNCEMENT : 12/07/2021 / ORDER PER VIKAS AWASTHY, J.M: THESE TWO APPEALS BY THE REVENUE ARE DIRECTED AGAIN ST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-34, MUMBAI [HE REINAFTER REFERRED TO AS THE CIT(A)] DATED 04.07.2019 COMMON FOR THE ASSES SMENT YEARS (AY) 2010-11 2 . 6471 //20 19 (. .2010-11 ) ITA NO.6471/MUM/2019 (A.Y.2010-11) . 6472 //20 19 (. .2011-12 ) ITA NO.6472/MUM/2019 (A.Y.2011-12) & 2011-12. SINCE, THE ISSUE RAISED IN BOTH THE APPE ALS IS IDENTICAL, BOTH APPEALS ARE TAKEN UP TOGETHER FOR ADJUDICATION AND ARE DECI DED BY THIS COMMON ORDER. 2. THE BRIEF FACTS OF THE CASE AS EMANATING FROM TH E RECORDS ARE: THE ASSESSEE IS A TRADER IN ELECTRICAL GOODS. THE ASSES SMENT IN THE CASE OF ASSESSEE FOR AYS 2010-11 & 2011-12 WERE RE-OPENED ON THE GRO UND THAT THE ASSESSEE HAS INDULGED IN OBTAINING BOGUS PURCHASE BILLS FROM THE DEALERS, DECLARED AS HAWALA OPERATORS BY THE SALES TAX DEPARTMENT, GOVER NMENT OF MAHARASHTRA. DURING ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICE R (AO) FOUND THAT THE ASSESSEE HAS OBTAINED BOGUS BILLS AMOUNTING TO RS. 12,91,761/- IN THE PERIOD RELEVANT TO AY 2010-11 AND RS. 6,84,559/- DURING A Y 2011-12. THE NOTICES ISSUED UNDER SECTION 133(6) OF THE INCOME TAX ACT, 1961 [HEREINAFTER REFERRED TO AS THE ACT] BY THE AO TO THE DEALERS WERE RETU RNED BACK BY THE POSTAL AUTHORITIES UNSERVED. NO CONFIRMATIONS WERE FILED B Y THE ASSESSEE FROM THE DEALERS, THE ASSESSEE FAILED TO FURNISH LORRY RECEI PTS, DELIVERY CHALLANES, STOCK REGISTER, ETC. TO PROVE TRAIL OF GOODS. THUS, THE A SSESSEE FAILED TO DISCHARGE ITS ONUS IN PROVING GENUINENESS OF THE DEALERS AND ALLE GED BOGUS PURCHASES FROM THE SAID DEALERS. FOR AY 2010-11, THE AO ADOPTED GR OSS PROFIT (GP) RATE OF 33% AND THUS, MADE ADDITION OF RS. 4,26,281/- UNDER SEC TION 69C OF THE ACT. FOR AY 2011-12, THE AO APPLIED AVERAGE GP OF PRECEDING THR EE AYS I.E. 30% AND MADE ADDITION OF RS. 2,05,368/- UNDER SECTION 69C OF THE ACT. AGGRIEVED BY THE ASSESSMENT ORDER FOR THE RESPECTI VE AYS, THE ASSESSEE CARRIED THE ISSUE IN APPEAL BEFORE THE CIT(A). IN F IRST APPELLATE PROCEEDINGS, THE CIT(A) RESTRICTED THE DISALLOWANCE ON BOGUS PURCHAS ES IN BOTH THE IMPUGNED 3 . 6471 //20 19 (. .2010-11 ) ITA NO.6471/MUM/2019 (A.Y.2010-11) . 6472 //20 19 (. .2011-12 ) ITA NO.6472/MUM/2019 (A.Y.2011-12) AYS BY APPLYING UNIFORM RATE OF 12.5%. AGAINST THE FINDINGS OF CIT(A), THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 3. MS. SMITA VERMA REPRESENTING THE DEPARTMENT VEHE MENTLY DEFENDED THE ASSESSMENT ORDER AND PRAYED FOR REVERSING THE F INDINGS OF CIT(A) IN SO FAR AS RESTRICTING DISALLOWANCE ON BOGUS PURCHASES TO 1 2.5% THE LD. DEPARTMENTAL REPRESENTATIVE (DR) SUBMITTED THAT THE ASSESSEE HAS FAILED TO PROVE GENUINENESS OF THE DEALERS DECLARED AS HAWALA OPERA TOR BY THE SALES TAX DEPARTMENT, GOVERNMENT OF MAHARASHTRA. FURTHER, THE ASSESSEE HAS FAILED TO FURNISH RELEVANT EVIDENCE TO PROVE GENUINENESS OF T HE PURCHASE MADE FROM DECLARED HAWALA OPERATORS. THE AO DISALLOWED BOGUS PURCHASES AFTER CONSIDERING GP DECLARED BY THE ASSESSEE. 4. SUBMISSIONS MADE BY LD. DR HEARD, ORDERS OF THE AUTHORITIES BELOW EXAMINED. UNDISPUTEDLY, THE ASSESSEE HAS FAILED TO DISCHARGE HIS ONUS IN PROVING GENUINENESS OF THE DEALERS AND ALLEGED PURC HASES MADE FROM THEM. SINCE, THE AO ACCEPTED SALES TURNOVER DECLARED BY A SSESSEE, THE AO MADE ADDITION ON ACCOUNT OF BOGUS PURCHASES BY ADOPTING GP/AVERAGE GP DECLARED BY THE ASSESSEE. IN FIRST APPELLATE PROCEEDINGS, TH E CIT(A) HAS UPHELD THE FINDINGS OF AO IN SO FAR AS ASSESSEES INVOLVEMENT IN OBTAINING BOGUS PURCHASES BILLS. HOWEVER, THE CIT(A) HAS RESTRICTED THE ADDIT ION ON ACCOUNT OF BOGUS PURCHASES TO 12.5%. THE ASSESSEE HAS DECLARED GP OF 32.02% IN AY 2010-11 AND 23.55% IN AY 2011-12. IN PRECEDING AYS, THE ASS ESSEE HAS DECLARED GP OF MORE THAN 30%. SINCE, THE ASSESSEE HAS BEEN DECLARI NG SUO-MOTO HIGH RATE OF GP ON ENTIRE TRANSACTIONS, IT WOULD BE UNFAIR TO MA KE ADDITION ON ACCOUNT OF BOGUS PURCHASES BY APPLYING THE SAME RATE OF GP. TH E HONBLE BOMBAY HIGH 4 . 6471 //20 19 (. .2010-11 ) ITA NO.6471/MUM/2019 (A.Y.2010-11) . 6472 //20 19 (. .2011-12 ) ITA NO.6472/MUM/2019 (A.Y.2011-12) COURT IN THE CASE OF PCIT VS. PARAMSHAKTI DISTRIBUTORS PVT. LTD. IN INCO ME TAX APPEAL NO. 413 OF 2017 DECIDED ON 15.07.2019 HAS HELD THAT IT IS ONLY THE PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES THAT CAN BE BROU GHT TO TAX. IN BOGUS PURCHASE TRANSACTIONS, THE ASSESSEE AT THE MOST HAV E SAVED VAT CHARGES AND MINOR ADDITIONAL PROFIT MARGIN. THE UNDECLARED PROF IT/SAVINGS ARE COMPENSATED BY ESTIMATING ADDITIONAL PROFIT MARGIN OF 12.5% ON BOGUS PURCHASES. I FIND NO INFIRMITY IN THE IMPUGNED ORDER. HENCE, THE SAME IS UPHELD AND APPEAL OF THE REVENUE FOR AY 2010-11 AND 2011-12 ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON MONDAY , THE 12 TH DAY OF JULY, 2021. SD/- (VIKAS AWASTHY) / JUDICIAL MEMBER / MUMBAI, 1/ DATED: 12/07/2021 SK, PS ( 2 ( 2 ( 2 ( 2 COPY OF THE ORDER FORWARDED TO : 1. ' / THE APPELLANT , 2. (* / THE RESPONDENT. 3. 3 ( )/ THE CIT(A)- 4. 3 CIT 5. ( , . . . , / DR, ITAT, MUMBAI 6. 7 / GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI