CHIRAG J. MEHTA, MUMBAI V. ACIT CIRCLE- 19 (2), MUMBAI

ITA 6520/MUM/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 5745 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-02-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2009-2010
• Appeal Filed On: 14-11-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: KUMAR PADMA
• Assessee Lawyers: PRAMITA ISHWER RATHI ARS
• Keywords: Reopening of assessment; Bogus purchase; Unexplained expenditure; Tangible material; Difference of opinion; Accommodation entries; Revised return; Change of opinion; Ignorance of law
• Section: 143(3); 133A; 13; 147; 246; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C, BENCH MUMBAI BEFORE SHRI C.N.PRASAD, JUDICIAL MEMBE R & SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ITA NO.6520 & 6521/MUM/2018 ( ASSESSMENT YEARS: 2009-10 & 2011-12 ) MR.CHIRAG J MEHTA (PROPRIETOR OF NAVPAD CHEMICALS) 103A, NADIA APARTMENT, 10 TH ROAD T.P.S. III, SANTACRUZ (EAST) MUMBAI-400 055 VS. ACIT,CIRCLE-19(2) PIRAMAL CHAMBERS LALBAUG, PAREL MUMBAI-400 012 PAN/GIR NO. A GKPM6888Q APPELLANT ) .. RESPONDENT ) ASSESSEE BY SHRI. ISHWER PRAKASH RATHI & MS. PRAMITA ISHWER RATHI, ARS REVENUE BY SHRI. KUMAR PADMAPANI BORA, DR DATE OF HEARING 1 3 /12 /201 9 DATE OF PRONOUNCEME NT 14 /02 /20 20 / O R D E R PER G.MANJUNATHA, ACCOUNTANT MEMBER : THESE TWO APPEALS FILED BY THE ASSESSEE ARE DIRECTE D AGAINST ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEAL S)-34, MUMBAI, DATED 28/08/2018 FOR THE AY 2009-10 & 2011-12. SINC E, FACTS ARE IDENTICAL AND ISSUES ARE COMMON, FOR THE SAKE OF CO NVENIENCE, THESE APPEALS WERE HEARD TOGETHER AND ARE DISPOSED-OFF BY THIS CONSOLIDATED ORDER. 2. THE ASSESSEE HAS MORE OR LESS RAISED COMMON GROU NDS OF APPEAL FOR BOTH AYS. THEREFORE, FOR THE SAKE OF BR EVITY, GROUNDS OF APPEAL FILED FOR AY 2009-10 ARE REPRODUCED AS UNDER :- ITA NOS.6520 & 6521/MUM/2018 CHIRAG J.MEHTA 2 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE HONBLE COMMISSIONER OF INCOME TAX (APPEALS) [CIT(A)] HAS ERRED IN UPHOLDING THE REOPENING OF ASSESSMENT DONE BY THE LEARNED ASS ESSING OFFICER (AO) U/S 147 OF THE ACT. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE HONBLE CIT(A) HAS ERRED IN UPHOLDING THE DISALLOWANCES OF RS. 87,61,453/-, BEING THE TOTAL AMOUNT OF PURCHASES FROM ALLEGED BOGUS PA RTIES, WITHOUT CONSIDERING THE FACT THAT THE APPELLANT IS A TRADE R AND THE SALES AGAINST SUCH PURCHASES MADE BY THE APPELLANT HAVE NOT BEEN DISPUTED. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESEE IS AN INDIVIDUAL AND PROPRIETOR OF M/S NAVPAD CHEMICALS IS ENGAGED I N THE BUSINESS OF WHOLE SELLER AND RESELLER IN DYES, CHEMICALS & PHARMA ITEMS, FILED HIS RETURN OF INCOME FOR AY 2009-10 ON 25/09/ 2009, DECLARING TOTAL INCOME AT RS. 6,95,124/-. A SURVEY OPERATIO N U/S 133A OF THE ACT, WAS CARRIED OUT ON 04/12/2012 IN THE BUSINESS PREMISES AND GODOWN OF THE ASSESSEE. DURING THE COURSE OF SURVEY , IT WAS OBSERVED THAT THE ASSESSEE WAS INVOLVED IN DEALING WITH PARTIES, WHO WERE ISSUING BOGUS PURCHASE BILLS IN ORDER TO R EDUCE THE TAXABLE PROFITS. DURING THE COURSE OF SURVEY, A STATEMENT O F THE ASSESSEE WAS RECORDED ON OATH, WHERE HE HAD ADMITTED OF HAVI NG TAKEN ACCOMMODATION ENTRIES OF BOGUS PURCHASES BILLS FROM VARIOUS PARTIES IN ORDER TO REDUCE ITS PROFITS AND ACCORDINGLY, ADM ITTED TO DISCLOSE ADDITIONAL INCOME ON ACCOUNT OF SUPPRESSION OF PROF ITS BY INFLATING THE PURCHASE FOR AY 2009-10,2010-11 & 2011-12. CONS EQUENT TO SURVEY OPERATIONS, THE CASE HAS BEEN REOPENED U/S 1 47 OF THE I.T.ACT, 1961, FOR THE REASONS RECORDED, AS PER WHI CH INCOME CHARGEABLE TO TAX HAD BEEN ESCAPED ASSESSMENT. IN R ESPONSE TO NOTICES U/S 148, THE ASSESSEE HAS BEEN FILED REVISE D RETURN OF INCOME ON 01/01/2013, DECLARING TOTAL INCOME OF RS. 94,56,577/-, INCORPORATING UNEXPLAINED EXPENDITURE ON ACCOUNT OF BOGUS PURCHASES. THE CASE HAS BEEN SELECTED FOR SCRUTINY AND THE ITA NOS.6520 & 6521/MUM/2018 CHIRAG J.MEHTA 3 ASSESSMENT HAS BEEN COMPLETED U/S 143(3) R.W.S. 147 OF THE I.T.ACT, 1961 ON 14/03/2014, DETERMINING THE TOTAL INCOME AT RS. 94,56,577/- BY ACCEPTING INCOME DECLARED BY THE ASSESSEE IN REV ISED RETURN FILED IN RESPONSE TO NOTICE U/S 148 OF THE I.T.ACT, 1961. 4. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSE P REFERRED AN APPEAL BEFORE THE LD.CIT(A). BEFORE THE LD.CIT(A), THE ASSESSEE HAS CHALLENGED THE ASSESSMENT PROCEEDINGS, IN LIGHT OF CERTAIN JUDICIAL PRECEDENTS, INCLUDING THE DECISION OF HON BLE SUPREME COURT IN THE CASE OF GKN DRIVESHAFTS (INDIA) LTD.VS CIT(2 003) 259 ITR 59 AND ALSO, ON THE GROUND OF CHANGE OF OPINION. THE ASSESSEE HAD ALSO CHALLENGED THE ADDITIONS MADE BY THE LD. AO TO WARDS DISALLOWANCES OF BOGUS PURCHASES, ON THE GROUND THA T MERELY ON THE BASIS OF ADMISSION IN STATEMENT RECORDED DURING THE SURVEY PROCEEDINGS U/S 133A, ADDITIONS COULD NOT BE MADE, WHEN THE ASSESSEE HAS FILED NECESSARY EVIDENCES TO PROVE PUR CHASES FROM THOSE PARTIES ARE GENUINE AND ALSO, IN ABSENCE OF A NY OBSERVATIONS WITH RESPECT TO INCORRECTNESS IN BOOKS OF ACCOUNTS OR SALES OUTSIDE IN BOOKS OF ACCOUNT. THE LD. AO HAS ACCEPTED SALES DEC LARED BY THE ASSESSEE AND HENCE, THE ENTIRE PURCHASES CANNOT BE TREATED AS INCOME UNDER ANY PIGMENT OF IMAGINATION. IN THIS RE GARD, HE RELIED UPON VARIOUS JUDICIAL PRECEDENTS, INCLUDING THE DEC ISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. S.KADERKHAN SO NS (2013) 352 ITR 480. 5. THE LD.CIT(A) AFTER CONSIDERING THE RELEVANT SUB MISSIONS OF THE ASSESSEE AND ALSO BY RELIED UPON THE DECISION O F HONBLE SUPREME COURT, IN THE CASE OF ACIT VS RAJESH JAWERI STCOK BROKERS ( 291 ITR 510) REJECTED LEGAL GROUNDS TAKEN BY THE ASSESSEE ITA NOS.6520 & 6521/MUM/2018 CHIRAG J.MEHTA 4 CHALLENGING REOPENING OF ASSESSMENT, ON THE GROUND THAT THERE IS A FRESH TANGIBLE MATERIAL IN FORM OF INFORMATION GATH ERED DURING THE SURVEY PROCEEDINGS CONDUCTED U/S 133A COUPLED WITH INFORMATION RECEIVED FROM DGIT(INV.), WHICH SUGGESTS ESCAPEMENT OF INCOME, ON ACCOUNT OF OBTAINING ACCOMMODATION ENTRIES OF PURCH ASE BILLS, WHICH IS SUFFICIENT TO FORM REASONABLE BELIEF OF ESCAPEME NT OF INCOME WITHIN THE MEANING OF SECTION 147 OF THE I.T.ACT, 1 961. HE, FURTHER NOTED THAT ALTHOUGH, THE ASSESSEE HAS CITED THE DEC ISION OF THE HONBLE SUPREME COURT, IN THE CASE OF GKN DRIVESHAF TS (INDIA) LTD. VS ITO (SUPRA), BUT FACT REMAINS THAT THE ASSESEE NEVER ASKED FOR REASONS RECORDED FOR REOPENING OF ASSESSMENT AT ANY TIME, DURING THE ASSESSMENT PROCEEDINGS AND ALSO, HAS NOT FILED ANY OBJECTIONS FOR REOPENING. THEREFORE, IT IS INCORRECT TO SAY TH AT THE PROCEDURE LAID DOWN BY THE HONBLE SUPREME COURT IN THE ABOVE CASE IS NOT FOLLOWED BY THE LD. AO. AS REGARDS, ADDITIONS MADE BY THE LD. AO TOWARDS UNEXPLAINED EXPENDITURE BEING BOGUS PURCHAS ES, THE LD.CIT(A) OBSERVED THAT IT IS A FACT OF MATTER, AS PER ASSESSMENT ORDER OF THE LD. AO, NOT A SINGLE PENNY HAS BEEN AD DED TO THE RETURN OF INCOME FILED IN RESPONSE TO 148 NOTICES ISSUED F OR REOPENING OF ASSESSMENT AND THUS, THERE CANNOT BE ANY CAUSE OF G RIEVANCE AND SUCH APPEAL DOES NOT SURVIVE AS PER THE PROVISIONS OF SECTION 246 OF THE I.T.ACT, 1961. HE, FURTHER NOTED THAT IT IS NOT A CASE THAT BOGUS BILLS HAVE BEEN OBTAINED FROM SUSPICIOUS DEALERS AN D CORRESPONDED MATERIALS HAVE BEEN PURCHASED FROM THE GREY MARKET. THE ASSESSEE HIMSELF HAS ADMITTED THAT SUCH BOGUS BILLS HAVE NOT ONLY BEEN OBTAINED, BUT ALSO VARIOUS EXPENDITURE HAS BEEN BOO KED IN ORDER TO REDUCE THE TAXABLE PROFIT. FURTHER, THE ASSESSEE HA S FILED REVISED RETURN AND INCORPORATED ADMISSION OF INCOME ON ACCO UNT OF SUPPRESSION OF PROFITS BY BOOKING BOGUS PURCHASES A ND ACCORDINGLY, ITA NOS.6520 & 6521/MUM/2018 CHIRAG J.MEHTA 5 THERE IS NO ERROR IN THE FINDINGS RECORDED BY THE L D. AO FOR MAKING ADDITIONS TOWARDS DISALLOWANCES OF PURCHASES AND AC CORDINGLY, AFFIRMED THE FINDINGS OF THE LD. AO AND DISMISSED A PPEALS FILED BY THE ASSESEE. AGGRIEVED BY THE LD.CIT(A) ORDER, THE ASSESSEE IS IN APPEAL BEFORE US. 6. THE LD. AR FOR THE ASSESSEE, AT THE TIME OF HEAR ING SUBMITTED THAT HE DO NOT WANT TO PRESS GROUND NO.1 TAKEN BY T HE ASSESEE CHALLENGING VALIDITY OF REASSESSMENT INITIATED U/S 147 OF THE I.T.ACT, 1961 AND HENCE, THE GROUND NO.1 OF ASSESSEE APPEAL HAS BEEN DISMISSED AS NOT PRESSED. 7. THE LD. AR FOR THE ASSESSEE SUBMITTED THAT THE L D.CIT(A) HAS ERRED IN UPHOLDING THE DISALLOWANCES OF RS. 87,61,4 53/-, BEING TOTAL AMOUNT OF PURCHASES FROM ALLEGED HAWALA/SUSPICIOUS DEALERS, WITHOUT CONSIDERING THE FACT THAT THE ASSESSEE IS A TRADER AND THE SALES AGAINST SUCH PURCHASES HAVE NOT BEEN DISPUTE D BY THE LD. AO. THE LD. AR, FURTHER SUBMITTED THAT NO DOUBT, TH E ASSESSEE HAS ADMITTED OF BEING TAKEN ACCOMMODATION BILLS OF BOGU S PURCHASES DURING SURVEY OPERATIONS CONDUCTED U/S 133A AND ALS O, ADMITTED ADDITIONAL INCOME IN THE STATEMENT RECORDED ON OATH . BUT, FACT REMAINS THAT SUCH STATEMENT WAS RECORDED UNDER COER CE AND UNDUE INFLUENCE AND ACCORDINGLY, HE WAS COMPELLED TO ADMI T ADDITIONAL INCOME ON THE BASIS OF ADVISE OF THE SURVEY TEAM. T HE LD. AR, FURTHER SUBMITTED THAT THERE IS NO ESTOPPELS AGAIN ST LAW, EVEN IF ASSESSEE ADMITTED CERTAIN INCOME OR NOT CLAIMED DED UCTIONS FOR CERTAIN EXPENDITURE BY MISTAKEN OF FACTS OR LAW, TH EN THE LD. AO IS BOUND TO ADVISE THE ASSESSEE AND COMPUTE CORRECT TO TAL INCOME AND TAX PAYABLE FOR THE RELEVANT PERIOD. THEREFORE, EVE N IF THE ASSESSEE ITA NOS.6520 & 6521/MUM/2018 CHIRAG J.MEHTA 6 HAD ADMITTED ADDITIONAL INCOME IN THE REVISED RETUR N FILED FOR THE YEAR IN RESPONSE TO 148 NOTICES, IT CAN CLAIM RELIEF DU RING THE APPEAL PROCEEDINGS AND ACCORDINGLY, IT HAS MADE A FRESH CL AIM BEFORE THE LD.CIT(A), BUT THE LD.CIT(A) HAS REJECTED ARGUMENTS OF THE ASSESEE ONLY ON THE GROUND THAT THERE IS NO ADDITION MADE B Y THE LD. AO TOWARDS BOGUS PURCHASES AND WHAT WAS DONE IS ACCEPT ED RETURN FILED BY THE ASSESSEE WITHOUT MAKING ANY ADDITIONS TOWARDS TOTAL INCOME DECLARED IN THE REVISED RETURN. THE LD. AR, FURTHER SUBMITTED THAT THE LAW IS VERY CLEAR, INSOFAR AS, ADDITION ON THE BASIS OF ADMISSION AS PER WHICH NO ADDITIONS CAN BE MADE ONL Y ON THE BASIS OF STATEMENT RECORDED DURING THE COURSE OF SURVEY, IF SUCH ADMISSION IS NOT CORROBORATED BY NECESSARY SUPPORTING EVIDENC ES. IN THIS CASE, THERE IS NO IOTA OF EVIDENCES, EITHER IN SURVEY PRO CEEDINGS OR DURING THE ASSESSMENT PROCEEDINGS OF ANY EVIDENCES, WHICH SUGGEST ACCOMMODATION ENTRIES EXCEPT THE STATEMENT OF THE A SSESEE DURING THE SURVEY. THE LD. AR, FURTHER SUBMITTED THAT THE ISSUE INVOLVED IN THE APPEAL IS WELL SETTLED NOW BY THE DECISIONS OF VARIOUS HIGH COURTS AND TRIBUNAL, WHERE THE JURISDICTION TRIBUNA L HAS CONSTANTLY HELD THAT IN CASE OF BOGUS PURCHASES ONLY PROFIT EL EMENT EMBEDDED IN SUCH PURCHASES NEEDS TO BE TAXED, BUT NOT WHOLE PURCHASES, FROM THE SO CALLED HAWALA/SUSPICIOUS DEALERS. IN THIS RE GARD, HE RELIED UPON VARIOUS JUDICIAL PRECEDENTS, INCLUDING THE DEC ISION OF HONBLE GUJARATH HIGH COURT, IN THE CASE OF SIMIT P.SHETH V S CIT (356 ITR 451) THE ASSESSEE HAD ALSO RELIED UPON THE DECISION OF HONBLE BOMBAY HIGH COURT, IN THE CASE OF MOHOMMAD HAJI ADA M & CO. ORS.VS PCIT IN SUPPORT OF HIS ARGUMENTS THAT ADDIT IONS, IF ANY IS REQUIRED TO BE MADE, THEN IT SHOULD BE RESTRICTED T O GROSS PROFIT DECLARED BY THE ASSESSEE FOR THE YEAR IN NORMAL COU RSE OF ITS ITA NOS.6520 & 6521/MUM/2018 CHIRAG J.MEHTA 7 BUSINESS ON REGULAR SALES. THE ASSESSEE HAD ALSO RE LIED UPON THE CBDT INSTRUCTIONS NO.14, DATED 11/04/1955. 8. THE LD. DR, ON THE OTHER HAND, STRONGLY SUPPORTI NG ORDER OF THE LD.CIT(A) SUBMITTED THAT THERE IS NO MERIT IN THE A RGUMENTS OF THE ASSESSEE THAT ADMISSION OF ADDITIONAL INCOME IS ON THE BASIS OF COERCION AND UNDUE INFLUENCE, BECAUSE THE ASSESEE H AD HIMSELF ADMITTED IN STATEMENT RECORDED ON OATH DURING THE S URVEY PROCEEDINGS, WHERE IT HAS BEEN CATEGORICALLY ADMITT ED OF OBTAINED ACCOMMODATION BILLS OF BOGUS PURCHASES FROM SUSPICI OUS/HAWALA DEALERS. THEREFORE, THE ASSESSEE CANNOT NOW CLAIM I GNORANCE OF LAW, BECAUSE IGNORANCE OF LAW CANNOT BE A GROUND FOR SEE KING RELIEF IN APPELLATE STAGES. THE LD. DR, FURTHER SUBMITTED THA T THE ASSESEE HAD CLEARLY ADMITTED ADDITIONAL INCOME ON ACCOUNT O F SUPPRESSION OF PROFITS FOR TAKING BOGUS PURCHASE BILLS AND ACCORDI NGLY, FILED REVISED RETURN OF INCOME AND INCORPORATED ADDITIONAL INCOME OFFERED DURING THE COURSE OF SURVEY. THEREFORE, THE LD. AO, AS WEL L AS THE LD.CIT(A) HAVE RIGHTLY REJECTED THE CLAIM OF THE ASSESSEE AND HENCE, THEIR ORDER SHOULD BE UPHELD. 9. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATE RIALS AVAILABLE ON RECORD AND GONE THROUGH ORDERS OF THE AUTHORITIES BELOW. IT IS AN ADMITTED FACT THAT A LONG LINE OF A UTHORITIES ESTABLISHED CLEARLY THAT THE ASSESSEE IS ENTITLED TO RAISE ADDI TIONAL GROUNDS NOT MERELY IN TERMS OF LEGAL SUBMISSIONS, BUT ALSO ADDI TIONAL CLAIMS NOT MADE IN THE RETURN FILED BY IT. THIS LEGAL PROPOSIT ION IS CLEARLY SUPPORTED BY THE DECISION OF HONBLE SUPREME COURT, IN THE CASE OF JUTE CORPORATION OF INDIA LIMITED VS CIT (1991) 197 ITR 688, FURTHER THE HONBLE SUPREME COURT, IN THE CASE OF GOETZ IND IA LTD.VS CIT ITA NOS.6520 & 6521/MUM/2018 CHIRAG J.MEHTA 8 (2006) 157 TAXMANN 01 HAD ALSO, CATEGORICALLY HELD THAT THE RESTRICTION IMPOSED ON THE LD. AO FOR NOT ADMITTING FRESH CLAIM WITHOUT FILING REVISED RETURN OF INCOME HAS NO APPL ICATION TO APPELLATE AUTHORITIES AND THE APPELLATE AUTHORITIES ARE AT LI BERTY TO ADMIT ADDITIONAL GROUND AND CLAIMS MADE BY THE ASSESEE IN ACCORDANCE WITH LAW. THE HONBLE BOMBAY HIGH COURT, IN THE CAS E OF CIT VS PRITHVI BROKERS AND SHAREHOLDERS (2012) 349 ITR 336 (BOM.) CLEARLY HELD THAT AN ASSESSEE IS ENTITLED TO RAISE NOT MERE LY AN ADDITIONAL LEGAL SUBMISSION BEFORE THE APPELLATE AUTHORITIES, BUT IS ALSO ENTITLED TO RAISE ADDITIONAL CLAIMS BEFORE THEM AND THE APPE LLATE AUTHORITIES HAVE DISCRETION, WHETHER OR NOT TO PERMIT SUCH ADD ITIONAL CLAIM TO BE RAISED, HOWEVER, THEY HAVE NO JURISDICTION TO CONS IDER THE SAME. THE SUM AND SUBSTANCE OF THE RATIOS LAID DOWN BY THE AB OVE JUDICIAL PRECEDENTS IS THAT THE ASSESSEE CAN MAKE NOT ONLY A DDITIONAL GROUND, BUT ALSO ADDITIONAL CLAIMS WITHOUT FILING R EVISED RETURN OF INCOME. IN THIS CASE, ON PERUSAL OF FACTS, IT IS N OTED THAT ALTHOUGH, THE ASSESSEE HAS MADE AN ADDITIONAL CLAIM TOWARDS U NEXPLAINED EXPENDITURE BEING BOGUS PURCHASES WITHOUT FILING RE VISED RETURN OF INCOME BEFORE THE LD. AO, BUT SUCH CLAIM HAS BEEN M ADE BEFORE THE LD.CIT(A) DURING THE APPELLATE PROCEEDINGS. THEREFO RE, WE ARE FO THE CONSIDERED VIEW THAT THE LD.CIT(A) WAS ERRED IN NOT CONSIDERING THE ADDITIONAL CLAIM MADE BY THE ASSESSEE AND HENCE, WE ADMIT THE ADDITIONAL CLAIM AND DECIDE THE ISSUE IN ACCORDANCE WITH LAW. 10. HAVING SAID SO, LET US EXAMINE THE ISSUE ON MER ITS. THE ASSESSEE HAS ADMITTED ADDITIONAL INCOME ON ACCOUNT OF BOGUS PURCHASES BILLS PURPORTEDLY OBTAINED FROM SUSPICIOU S/HAWALA DEALERS DURING THE SURVEY PROCEEDINGS US/ 133A, WHILE ANSWE RING A QUESTION IN STATEMENT RECORDED ON OATH. THE ASSESSEE HAD AL SO FILED REVISED ITA NOS.6520 & 6521/MUM/2018 CHIRAG J.MEHTA 9 RETURN, IN RESPONSE TO 148 NOTICE AND INCORPORATED ADDITIONAL INCOME OFFERED DURING THE COURSE OF SURVEY TOWARDS UNEXPLA INED EXPENDITURE BEING BOGUS PURCHASES. THESE ARE UNDISPUTED FACTS, BUT FACT REMAINS THAT WHETHER, THE CLAIM OF THE ASSESSEE THA T NO ADDITIONS COULD BE MADE TOWARDS ALLEGED BOGUS PURCHASES, WHEN THE ASSESSEE HAS FILED SUBSTANTIAL EVIDENCES BEFORE THE LD. AO DURING THE ASSESSMENT PROCEEDINGS AND ALSO, SUCH PURCHASES ARE RECORDED IN BOOKS OF ACCOUNT, NEEDS TO BE EXAMINED. IT IS AN ADMITTED LEGAL POSITION THAT THE HONBLE SUPREME COURT, IN THE CAS E OF S. KHADERKAN & SONS VS CIT(SUPRA) HAS CATEGORICALLY HE LD THAT SECTION 133A DOES NOT EMPOWERED ANY I.T AUTHORITY TO EXAMIN E ANY PERSON ON OATH, HENCE ANY SUCH STATEMENT HAS NO EVIDENCER Y VALUE AND ANY ADMISSION MADE DURING THE SUCH STATEMENT CANNOT , BY ITSELF, BE MADE THE BASIS FOR ADDITION. FURTHER, THE HONBLE K OLKATA HIGH COURT, IN THE CASE OF MAYANK PODDAR (HUF) VS WTO(2003) 26 2 ITR 633, HAS OBSERVED THAT IF, IN LAW AN ITEM IS NOT TAXABLE , NO AMOUNT OF ADMISSION OR MISAPPREHENSION CAN MAKE IT TAXABLE. T HE TAXABILITY OR THE AUTHORITY TO IMPOSE TAX IS INDEPENDENT OF ADMIS SION. NEITHER, THERE CAN BE ANY WAIVER OF THE RIGHT BY THE ASSESSE E AND THE DEPARTMENT CANNOT RELY UPON ANY SUCH ADMISSION OR M IS- APPREHENSION, IF IT IS OTHERWISE NOT TAXABLE. FURTH ER, THE CBDT HAS ISSUED INSTRUCTION NO. 14/1955, DATED 11/04/1955, W HERE IT HAS EMPHASIZED ON THE RULE OF THE LD. AO, WHILE FRAMING THE ASSESSMENT, AS PER WHICH OFFICERS OF THE DEPARTMENT MUST NOT TAKE ADVANTAGE OF IGNORANCE OF AN ASSESSEE AS HIS RIGHTS , IT IS ONE OF THEIR DUTIES TO ASSIST A TAX PAYER IN A EVERY REASO NABLE WAY, PARTICULARLY IN THE MATTER OF CLAIMING AND SECURING RELIEFS AND IN THIS REGARD, THE OFFICERS SHOULD TAKE THE INITIATIVE IN GUIDING THE TAX PAYER, WHERE PROCEEDINGS OR OTHER PARTICULARS BEFORE THEM INDICATE THAT ITA NOS.6520 & 6521/MUM/2018 CHIRAG J.MEHTA 10 SUM REFUND OR RELIEF IS DUE TO HIM. THEREFORE, FROM THE ABOVE, IT IS VERY CLEAR THAT EVEN, IF ASSESSEE ADMITS INCOME OR NOT CLAIMED ANY DEDUCTION FOR ANY EXPENDITURE BY MISCONCEPTION OF L AW OR FACT, THEN IT IS THE DUTY OF THE LD. AO TO COMPUTE THE CORRECT TO TAL INCOME AND TAX LIABILITY OF THE ASSESSEE. HENCE, WE ARE OF THE C ONSIDERED VIEW THAT THE LD.CIT(A) WAS ERRED IN NOT CONSIDERING THE CLAI M OF THE ASSESSEE TOWARDS ALLEGED BOGUS PURCHASES, MERELY FOR THE REA SONS THAT THE ASSESSEE HAS ADMITTED ADDITIONAL INCOME IN THE STAT EMENT RECORDED DURING THE COURSE OF SURVEY AND FURTHER, FILED REVI SED RETURN AND INCORPORATED ADDITIONAL INCOME. 11. INSOFAR AS, THE ISSUE OF ADDITIONS MADE TOWARDS ALLEGED BOGUS PURCHASES FROM HAWALA/SUSPICIOUS DEALERS, WE FIND T HAT DURING THE COURSE OF SURVEY PROCEEDINGS U/S 133A OR EVEN, DURI NG THE COURSE OF ASSESSMENT PROCEEDINGS, THE LD. AO NEVER BROUGHT ON RECORD ANY EVIDENCES, EXCEPT THE STATEMENT OF THE ASSESSEE MAD E DURING THE COURSE OF SURVEY TO PROVE THAT THE ALLEGED PURCHASE S CLAIM TO HAVE BEEN MADE FROM CERTAIN PARTIES ARE NON GENUINE. THE LD. AO HAS SOLELY RELIED UPON THE STATEMENT OF THE ASSESSEE MA DE, DURING THE COURSE OF SURVEY AND FURTHER, TAKEN SUPPORT FROM TH E INVESTIGATION CARRIED OUT BY THE MVAT DEPARTMENT, GOVERNMENT OF M AHARASHTRA, WHERE THEY HAVE INITIATED ACTION AGAINST CERTAIN DE ALERS ON THE SOLE GROUND THAT THEY ARE SUSPICIOUS/HAWALA DEALERS. EXC EPT, THIS NO FURTHER INDEPENDENT ENQUIRY WAS CONDUCTED BY THE LD . AO TO ASCERTAIN THE CORRECT NATURE OF TRANSACTIONS BETWEE N THE PARTIES. ON THE OTHER HAND, THE ASSESSEE HAS FILED NECESSARY EV IDENCES BEFORE THE LD. AO, INCLUDING PURCHASES BILLS, PAYMENT DETA ILS AND OTHER RELEVANT DETAILS TO PROVE THE PURCHASES FROM THE AB OVE PARTIES. THE ASSESSE HAD ALSO FILED BOOKS OF ACCOUNTS MAINTAINED FOR RELEVANT ITA NOS.6520 & 6521/MUM/2018 CHIRAG J.MEHTA 11 PERIOD, INCLUDING STOCK REGISTERS ECT. THE LD. AO, NEITHER POINTED OUT ANY DISCREPANCY IN BOOKS OF ACCOUNTS, NOR MADE OUT A CASE OF SALES OUTSIDE THE BOOKS. IN FACT, THE LD. AO HAS NOT DISP UTED SALES DECLARED BY THE ASSESEE FOR THE RELEVANT PERIOD. HE NCE, ONCE SALES ARE NOT DISPUTED, THE CORRESPONDING PURCHASES CANNO T BE TREATED AS NON GENUINE UNDER ANY PIGMENT OF IMAGINATION AND F URTHER, ONLY THE PROFIT ELEMENT EMBEDDED ON SUCH PURCHASES NEEDS TO BE TAXED. THIS LEGAL PROPOSITION IS SUPPORTED BY PLETHORA OF JUDI CIAL PRECEDENTS, INCLUDING THE DECISION OF HONBLE GUJARAT HIGH COUR T, IN THE CASE OF SIMIT P. SHETH (356 ITR 451), WHERE THE HONBLE HIG H COURT CATEGORICALLY HELD THAT IN CASES OF ALLEGED BOGUS P URCHASES, ONLY PROFIT ELEMENT EMBEDDED IN THOSE PURCHASES NEEDS TO BE TAXED, BUT NOT TOTAL PURCHASES, BECAUSE THE FINDINGS OF THE AU THORITIES BELOW WAS THAT THE ASSESSEE HAS PURCHASED GOODS FROM GREY MARKET AND TO COVER-UP SUCH PURCHASES HAS OBTAINED ACCOMMODATI ON BILLS FROM ENTRY PROVIDERS. THE HONBLE BOMBAY HIGH COURT IN T HE CASE OF PCIT VS MOHOMMAD HAJI ADAM & CO. & ORS IN (2019) 104 C CH 0391, HAD CONSIDERED AN IDENTICAL ISSUE AND HELD THAT PU RCHASES COULD NOT BE REJECTED WITHOUT DISTURBING SALES IN CASE OF TRA DER AND THE COURT FURTHER HELD THAT WHILE ARRIVE AT CONCLUSION THE AU THORITIES SHOULD ESTIMATE GROSS PROFIT RATE ON PURCHASES AT SAME RAT E OF OTHER GENUINE PURCHASES. THE ITAT, MUMBAI IN NUMBER OF CA SES HAD CONSIDERED AN IDENTICAL ISSUE AND AFTER CONSIDERING THE NATURE OF BUSINESS HAS CONSISTENTLY HELD THAT ONLY PROFIT ELE MENT EMBEDDED IN ALLEGED BOGUS PURCHASES NEEDS TO BE TAXED, WHEN THE SALES ARE NOT DOUBTED BY THE LD. AO. IN THIS CASE, ON PERUSAL OF RECORDS, THE ASSESSEE IS INTO THE BUSINESS OF WHOLE SELLER AND R ESELLER IN DYES AND CHEMICALS AND PHARMA ITEMS. THE ASSESSEE HAS DE CLARED GROSS PROFIT OF 5.61% TO 5.91% FOR AY 2009-10 TO AY 2011- 12. ALTHOUGH, ITA NOS.6520 & 6521/MUM/2018 CHIRAG J.MEHTA 12 THE RATE OF GROSS PROFIT DECLARED BY THE ASSESSEE I N HIS BOOKS OF ACCOUNTS IS NOT A CORRECT YARDSTICK TO DETERMINE TH E PROFIT ELEMENT IN ALLEGED BOGUS PURCHASES, BUT IF YOU GO THROUGH THE NATURE OF BUSINESS OF THE ASSESSEE AND INDUSTRY PRACTICE, AT ANY POINT OF TIME 100% ADDITIONS CANNOT BE SUSTAINED. FURTHER, ALTHOU GH THE ASSESSEE HAS CITED THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF MOHAMMAD HAZI ADAM AND COMPANY VS PCIT(SUPRA) AND REQUESTED TO SCALE DOWN ADDITIONS MADE BY THE LD. A O TOWARDS GROSS PROFIT RATE OF OTHER PURCHASES, BUT THE CLAIM OF THE ASSESSEE CANNOT BE ACCEPTED, BECAUSE THE GROSS PROFIT DECLAR ED BY THE ASSESSEE IN ITS REGULAR BOOKS OF ACCOUNTS CANNOT BE CONSIDERED AS CORRECT IN VIEW OF THE FACT THAT THERE IS SOME SORT OF DOUBT IS STILL THERE, IN RESPECT OF PURCHASES CLAIM TO HAVE MADE FROM CERTAIN PARTIES. THEREFORE, WE ARE OF THE CONSIDERED VIEW T HAT AFTER CONSIDERING FACTS AND CIRCUMSTANCES OF THIS CASE AN D CONSISTENT WITH VIEW TAKEN BY THE CO-ORDINATE BENCH IN NUMBER OF CA SES A REASONABLE AMOUNT OF PROFIT NEEDS TO BE ESTIMATED O F ALLEGED BOGUS PURCHASE TO MEET THE ENDS OF THE JUSTICE. HENCE, BY TAKING INTO ACCOUNT OVER ALL FACTS AND CIRCUMSTANCES OF THIS CA SE AND ALSO, CONSISTENT WITH VIEW TAKEN BY THE CO-ORDINATE BENCH IN SIMILAR CASES, WE DIRECT THE LD. AO TO ESTIMATE 12.5% PROFIT ON AL LEGED BOGUS PURCHASES. 12. IN THE RESULT, APPEAL FILED BY THE ASSESSEE FOR AY 2009-10 IS PARTLY ALLOWED. ITA NO. 6521/MUM/2018:- ITA NOS.6520 & 6521/MUM/2018 CHIRAG J.MEHTA 13 13. THE FACTS AND ISSUES INVOLVED IN THIS APPEAL AR E IDENTICAL TO THE FACTS AND ISSUES, WHICH WE HAD CONSIDERED IN ITA NO . 6520/MUM/2018. THE REASONS GIVEN BY US IN PRECEDING PARAGRAPHS IN IT NO. 6520/MUM/2018 SHALL MUTATIS MUTANDIS APPLY TO THIS APPEAL AS WELL. THEREFORE, FOR SIMILAR REASONS, WE DIRECT THE LD. AO TO ESTIMATE 12.5% PROFIT ON ALLEGED BOGUS PURCHASES. 14. IN THE RESULT, APPEAL FILED BY THE ASSESEE IS P ARTLY ALLOWED. 15. AS A RESULT, BOTH APPEALS FILED BY THE ASSESSEE ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 14 /02/ 2020 SD/- (C.N.PRASAD) SD/- (G. MANJUNATHA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED: 14/02/2020 THIRUMALESH SR.PS 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//