HEMANT M. MEHTA HUF, MUMBAI V. ACIT 33 (2), MUMBAI

ITA 6483/MUM/2018

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 2084 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-12-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2008-2009
• Appeal Filed On: 13-11-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: KUMAR PADMA
• Assessee Lawyers: R C JAIN
• Keywords: Bogus purchase
• Section: 143(3); 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC, BENCH MUMBAI BEFORE SHRI R.C.SHARMA, ACCOUNTANT MEMBER ITA NO.6483/MUM/2018 ( ASSESSMENT YEAR: 2008-09) HEMANT M MEHTA HUF A-307/308, EKTA TERRACE, DAHANUKAR WADI, KANDIVALI (W), MUMBAI. VS. A.C.I.T.-33(2), R. NO. 302, 3 RD FLOOR, C- 11, PRATYAKSHKAR BHAWAN, BANDRA-KURLA COMPLEX, BANDRA (EAST), MUMBAI. PAN/GIR NO.AACHH 8909 M (APPELLANT ) .. (RESPONDENT ) ASSESSEE BY SHRI R.C. JAIN & SHRI AJAY DAGA REVENUE BY SHRI KUMAR PADMAPANI BORA (SR.DR) DATE OF HEARING 04/12/2019 DATE OF PRONOUNCEMENT 06/12/2019 / O R D E R PER: R.C. SHARMA, A.M. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER DATED 09/07/2018 OF LD. CIT(A)-45, MUMBAI FOR THE A.Y. 20 08-09 IN THE MATTER OF ORDER PASSED U/S 143(3) R.W.S. 147 OF THE INCOME TAX ACT, 1961 (IN SHORT, THE ACT). 2. IN THIS APPEAL, THE ASSESSEE IS BASICALLY AGGRIE VED BY THE ACTION OF LD. CIT(A) FOR UPHOLDING THE ADDITION TO THE EXTENT OF 12.5% OF BOGUS PURCHASES. 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PER USED. THE FACTS IN BRIEF ARE THAT THE ASSESSEE IS ENGAGED IN THE BU SINESS OF TRADING OF CUT ITA NO. 6483/MUM/2018 HEMANT M MEHTA HUF VS ACIT 2 AND POLISHED DIAMONDS. THE A.O. GOT INFORMATION REG ARDING THE ASSESSEE BEING INVOLVED IN BOGUS PURCHASES. AFTER MAKING ENQ UIRY BY ISSUING NOTICE U/S 133(6) OF THE ACT, THE A.O. ADDED ENTIRE AMOUNT OF ALLEGED BOGUS PURCHASES IN ASSESSEES INCOME AMOUNTING TO R S. 14,37,867/-. 4. BY THE IMPUGNED ORDER, THE LD. CIT(A) OBSERVED T HAT THERE IS A REASON FOR SUCH PURCHASE OF DIAMONDS WITHOUT BILLS IN THE MARKET AND GETTING BOGUS PURCHASE BILLS PARTICULARLY WITHOUT A NY SPECIFICATION OF QUALITY OF DIAMONDS IN THE BILLS. THE LD. CIT(A) AL SO OBSERVED THAT IN THE PURCHASE BILLS FILED BY THE ASSESSEE, THERE IS NO M ENTION OF QUALITY OF DIAMONDS, ACCORDINGLY, THE LD. CIT(A) HAS RESTRICTE D THE ADDITION TO THE EXTENT OF 12.5% OF SUCH PURCHASES. 5. I HAVE CONSIDERED THE RIVAL CONTENTIONS AND CARE FULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WITH RESPECT T O ISSUE REGARDING ADDITION IN RESPECT OF BOGUS PURCHASES, THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF PR.CIT VS M/S MOHOMMAD HAJI AD AM & CO. IN ITA NO. 1004 OF 2016 VIDE ITS ORDER DATED 11/02/2019 H AVE HELD AS UNDER: 8. IN THE PRESENT CASE, AS NOTED ABOVE, THE ASSESS EE WAS A TRADER OF FABRICS. THE A.O. FOUND THREE ENTITIES WHO WERE IND ULGING IN BOGUS BILLING ACTIVITIES. A.O. FOUND THAT THE PURCH ASES MADE BY THE ASSESSEE FROM THESE ENTITIES WERE BOGUS. THIS BEING A FINDING OF FACT, WE HAVE PROCEEDED ON SUCH BASIS. DESPITE THIS, THE QUE STION ARISES WHETHER THE REVENUE IS CORRECT IN CONTENDING THAT THE ENTIR E PURCHASE AMOUNT SHOULD BE ADDED BY WAY OF ASSESSES ADDITIONAL INCOM E OR THE ASSESSEE IS CORRECT IN CONTENDING THAT SUCH LOGIC CANNOT BE APPLIED. THE FINDING OF THE CIT(A) AND THE TRIBUNAL WOULD SUGGEST THAT T HE DEPARTMENT HAD ITA NO. 6483/MUM/2018 HEMANT M MEHTA HUF VS ACIT 3 NOT DISPUTED THE ASSESSEE'S SALES. THERE WAS NO DIS CREPANCY BETWEEN THE PURCHASES SHOWN BY THE ASSESSEE AND THE SALES DECLARED. THAT BEING THE POSITION, THE TRIBUNAL WAS CORRECT IN COMING TO THE CONCLUSION THAT THE PURCHASES CANNOT BE REJECTED WITHOUT DISTURBING THE SALES IN CASE OF A TRADER. THE TRIBUNAL, THEREFORE, CORRECTLY RESTRICTED THE ADDITIONS LIMIT ED TO THE EXTENT OF BRINGING THE G.P. RATE ON PURCHASES AT THE SAME RAT E OF OTHER GENUINE PURCHASES. THE DECISION OF THE GUJARAT HIGH COURT I N THE CASE OF N.K. INDUSTRIES LTD.. (SUPRA) CANNOT BE APPLIED WITHOUT REFERENCE TO THE FACTS. IN FACT IN PARAGRAPH 8 OF THE SAME JUDGMENT THE COURT HELD AND OBSERVED AS UNDER- SO FAR AS THE QUESTION REGARDING ADDITION OF RS.3,7 0,78,125/- AS GROSS PROFIT ON SALES OF RS.37.08 CRORES MADE BY TH E ASSESSING OFFICER DESPITE THE FACT THAT THE SAID SALES HAD AD MITTEDLY BEEN RECORDED IN THE REGULAR BOOKS DURIN FINANCIAL YEAR 1997- 98 IS CONCERNED, WE ARE OF THE VIEW THAT THE ASSESS EE CANNOT BE PUNISHED SINCE SALE PRICE IS ACCEPTED BY THE REV ENUE. THEREFORE, EVEN IF 6 % GROSS PROFIT IS TAKEN INTO A CCOUNT, THE CORRESPONDING COST PRICE IS REQUIRED TO BE DEDUCTED AND TAX CANNOT BE LEVIED ON THE SAME PRICE. WE HAVE TO REDU CE THE SELLING PRICE ACCORDINGLY AS A RESULT OF WHICH PROF IT CONIES TO 5.66%. THEREFORE, CONSIDERING 5.66 % OF RS.3,70,78,125/WHI CH COMES TO RS.2098.62 1.88 WE THINK IT FIT TO DIRECT THE REVENUE TO ADD RS.20,98.621.88 AS G ROSS PROFIT AND MAKE NECESSARY DEDUCTIONS ACCORDINGLY. ACCORDINGLY, THE SAID QUESTION IS ANSW ERED PARTIALLY IN FAVOUR OF THE ASSESSEE AND PARTIALLY IN FAVOUR O F THE REVENUE.' 6. THE COORDINATE BENCH OF THE ITAT, MUMBAI IN THE CASE OF SHRI RAMESHKUMAR DAULATRAJ VS ITO IN ITA NO. 4192/MUM/20 18 ORDER DATED 07/05/2019 HAS HELD AS UNDER: 9. WHEN THESE FACTS WERE CONFRONTED TO THE LEARNED SR. DR, HE REQUESTED FOR APPLICATION OF REASONABLE PROFIT RATE AND ACCORDING TO HIM THE PROFIT RATE APPLIED BY THE AO AND CONFIRMED BY CIT(A) IS QUITE REASONABLE IN VIEW OF THE DECISION OF HONBLE GUJAR AT HIGH COURT IN THE CASE OF ITA NO. 6483/MUM/2018 HEMANT M MEHTA HUF VS ACIT 4 SMITH P.SETH (SUPRA). WE HAVE CONSIDERED THE RIVAL CONTENTIONS ITA NO. 4192/MUM/2018 AND ARE OF THE VIEW THAT HON'BLE BOMB AY HIGH COURT IN THE CASE OF MOHAMMAD HAJI ADAM & CO. AND ORS. (SUPR A) HAS CONSIDERED THIS ISSUE AND RESPECTFULLY FOLLOWING THE SAME, WE DIRECT THE AO TO RESTRICT THE PROFIT RATE ONLY TO THE EXTENT OF DIFFERENTIAL PERC ENTAGE AS DECLARED ON THE BOGUS PURCHASES AND AS DECLARED ON THE REGULAR PURCHASES, HENCE, WE DIRECT THE AO ACCORDINGLY. 7. IT IS CLEAR FROM THE ABOVE DECISIONS THAT IN CAS E OF BOGUS PURCHASES WHERE SALES ARE ACCEPTED, THE ADDITION IS REQUIRED TO BE MADE ONLY TO THE EXTENT OF DIFFERENCE BETWEEN THE GP DEC LARED BY THE ASSESSEE ON NORMAL PURCHASES VIS A VIS BOGUS PURCHA SES. RESPECTFULLY FOLLOWING THE ORDER OF THE HONBLE JURISDICTIONAL H IGH COURT AND THE COORDINATE BENCH OF THE ITAT, MUMBAI, I DIRECT THE A.O. TO RESTRICT THE ADDITION TO THE EXTENT OF LOWER GP DECLARED BY THE ASSESSEE IN RESPECT OF BOGUS PURCHASES AS COMPARED TO G.P. ON NORMAL PURCH ASES. THE ASSESSEE IS ALSO DIRECTED TO GIVE FULL DETAILS TO T HE A.O. WITH REGARD TO GP EARNED ON NORMAL PURCHASES AND ALSO GP EARNED ON AL LEGED BOGUS PURCHASES. I DIRECT ACCORDINGLY. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED IN PART. ORDER PRONOUNCED IN THE OPEN COURT ON 06 TH DECEMBER, 2019. SD/- (R.C.SHARMA) ACCOUNTANT MEMBER MUMBAI; DATED 06/12/2019 *RANJAN ITA NO. 6483/MUM/2018 HEMANT M MEHTA HUF VS ACIT 5 COPY OF THE ORDER FORWARDED TO : BY ORDER, (ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//