ITO 33 (1)(8), MUMBAI V. UNIQUE EXPORTS, MUMBAI

ITA 6577/MUM/2019

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 1634 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-06-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2011-2012
• Appeal Filed On: 18-10-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bogus purchase; Set aside
• Section: 69C; 143(3)

Judgement Text

ITA NO.6577/MUM/2019 A.Y.2011 - 12 ITO - 33(1)(8) VS. M/S UNIQUE EXPORTS 1 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH F MUMBAI BEFORE SHRI RAJESH KUMAR (ACCOUNTANT MEMBER) AND SHRI RAVISH SOOD (JUDICIAL MEMBER) ITA NO.6577/MUM/2019 (ASSESSMENT YEAR: 2011 - 12) ITO - 33(1)(8) R. NO. 751, 7 TH FLOOR, KAUTILYA BHAVAN, BKC, BANDRA (E), MUMBAI 400 051 VS. M/S UNIQUE EXPORTS B/3, 102, KAMLA NAGAR, M.G. ROAD, KANDIVALI (W), MUMBAI - 400067 PAN NO. AAAFU0255F (REVENUE) (ASSESSEE) ASSESSEE BY : SHRI DEVENDRA JAIN , A.R REVENUE BY : SHRI JITENDRA KUMAR , D.R DATE OF HEARING : 15 /06/2021 DATE OF PRONOUNCEMENT : 16 /06/2021 ORDER PER RAVISH SOOD, J.M: THE PRESENT APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A) - 45, MUMBAI, DATED 03.07.2019, WHICH IN TURN ARISES FROM THE ORDER PASSED BY THE A.O UNDER SEC. 143(3) R.W.S 254 OF THE INCOME TAX ACT, 1961 (FOR SHORT ACT) , DATED, 29.12.2018 FOR A.Y. 2011 - 12. THE REVENUE HAS ASSAILED THE IMPUGNED ORDER ON THE FOLLOWING GROUNDS OF APPEAL BEFORE US: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD, CIT(A) ERRED IN RESTR ICTING THE DISALLOWANCES TO 2.37% OF THE BOGUS PURCHASES WITHOUT APPRECIATING THE FACT THAT THE IDENTITY AND THE GENUINENESS OF THE PURCHASE TRANSACTION WITH THE BOGUS PURCHASE PARTIES COULD NOT BE ESTABLISHED BY THE ASSESSEE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LA W, THE LD. CIT(A) ERRED IN RANDOMLY RESTRICTING THE DISALLOWANCES TO 2.37% THE BOGUS PURCHASES ITA NO.6577/MUM/2019 A.Y.2011 - 12 ITO - 33(1)(8) VS. M/S UNIQUE EXPORTS 2 WITHOUT APPRECIATING THE FACT THAT THE AO HAD HELD THE PURCHASES TO BE UNVERIFIED AFTER CARRYING THE PROPER INDEPE NDENT INVESTIGATION. 3. ON THE FACTS & CIRCUMS TANCES OF THE CASE AND IN THE LAW LD. CIT(A) ERRED IN NOT APPRECIATING THE FACT THAT THE ASSESSEE HAS FAILED TO PRODUCE DELIVERY CHALLAN, PROOF OF DELIVERY OF GOODS, STOCK REGISTER AND QUANTITATIVE STOCK STATEMENT WHEREBY CORRESPONDING PURC HASE COULD BE LI NKED WITH SALES. 4. THE APPELLANT PRAYS THAT THE ORDER OF THE LD. CIT(A) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 5. THE APPELLANT CRAVES LEAVE TO AMEND OR TO ALTER ANY GROUND OR ADD A NEW GROUND, WHICH MAY BE NECE SSARY. 2. BRIEFLY STATED, THE ASSESSEE FIRM WHICH IS ENGAGED IN THE BUSINESS OF EXPORT OF IMITATION JEWELLERY HAD FILED ITS RETURN OF INCOME FOR A.Y. 2011 - 12 ON 29.09.2011, DECLARING A TOTAL INCOME OF RS.18,08,340/ - . ORIGINAL ASSESSMENT WAS FRAMED U/S 143(3), DATED 11.03.2014, WHEREIN THE A.O AFTER INTER ALIA MAKING AN ADDITION/DISALLOWANCE TO WARDS BOGUS PURCHASE OF RS.1,03,34,330/ - U/S 69C OF THE ACT HAD ASSESSED THE TOTAL INCOME OF THE ASSESSEE FIRM AT RS.1,21,99,536/ - . ON APPEAL, THE CIT(A) DELETED THE DISALLOWANCE MADE BY THE A.O U/S 69C. AGGRIEVED, THE REVENUE CARRIED THE MATTER IN APPEAL BEFORE THE INCOME TAX APPELLATE TRIBUNAL (FOR SHORT TRIBUNAL ). AFTER DELIBERATING ON THE ISSUE IN QUESTION THE TRIBUNAL VIDE ITS ORDER DATED 12.07.2017 REMITTED THE ISSUE BACK TO THE FILE OF THE A.O, WITH A DIRECTION TO EXAMINE THE ASSESSES CLAIM OF REC ONCILIATION OF GOODS PURCHASED AND GOODS EXPORTED/SOLD BY EXAMINING THE RELEVANT DOCUMENTS IN LIGHT OF CERTAIN JUDICIAL PRONOUNCEMENTS. THE A.O IN THE COURSE OF THE SET - ASIDE PROCEEDINGS VIDE HIS ORDER PASSED U/S 143(3) R.W.S 254, DATED 29.12.2018 MADE AN ADDITION OF RS. 25,83,582/ - ON ACCOUNT OF PROFIT WHICH THE ASSESSEE WOULD HAVE GENERATED BY PURCHASING THE IMPUGNED GOODS FROM THE OPEN/GREY MARKET, AND ASSESSED ITS TOTAL INCOME AT RS.44,48,790/ - . 3. AGGRIEVED, THE ASSESSEE ASSAILED THE ORDER PASSED BY TH E A.O U/S 143(3) R.W.S 254, DATED 29.12.2018, BEFORE THE CIT(A). ALTHOUGH THE CIT(A) CONCURRED WITH T HE VIEW TAKEN BY THE A.O THAT T H E ASSESSEE HAD PROCURED THE GOODS IN QUESTION NOT FROM THE PARTIES IN QUESTION BUT FROM THE OPEN/GREY MARKET HOWEVER , HE WA S OF THE VIEW THAT THE PROFIT MADE BY THE ASSESSEE FROM ITA NO.6577/MUM/2019 A.Y.2011 - 12 ITO - 33(1)(8) VS. M/S UNIQUE EXPORTS 3 PROCURING THE GOODS AT A DISCOUNTED VALUE FROM THE OPEN/GREY MARKET THAT WAS ESTIMATED BY THE A.O I.E @ 25% OF THE VALUE OF THE IMPUGNED PURCHASE S WAS ON THE HIGHER SIDE. RELYING ON THE JUDGMENT OF TH E H ONBLE HIGH COURT OF BOMBAY IN THE CASE OF PCIT VS. MOHAMMAD HAJI ADAM, ITA NO. 1004 OF 2016, THE CIT(A) DIRECTED THE A.O TO RESTRICT THE ADDITION TO THE EXTENT OF DIFFERENCE BETWEEN THE G.P RATE ON PURCHASES WHICH WERE ALLEGED TO BE BOGUS AND THE G.P R ATE ON THE NORMALLY ACCEPTED PURCHASES. OBSERVING, THAT THE ASSESSEE HAD CLAIMED THAT THE DIFFERENTIAL G.P RATE [ I,E DIFFERENCE BETWEEN THE G.P RATE OF PU RCHASES ALLEGED TO BE BOGUS AND THE G.P RATE ON THE NORMALLY ACCEPTED PURCHASES ] WAS 2.37%, THE CIT(A) DIRECTED THE A.O TO CALL FOR THE WORKING OF THE DIFFERENTIAL G.P RATE , AND AFTER VERIFYING THE SAME APPLY THE VERIFIED DIFFERENTIAL RATE ON THE IMPUGNED BOGUS PURCHASES OF RS.1,03,34,330/ - . ACCORDINGLY, IN THE BACKDROP OF HIS AFORESA ID OBSERVATIONS THE CIT(A) DIRECTED THE A.O TO MODIFY THE ADDITION MADE BY HIM. 4. THE REVENUE BEING AGGRIEVED WITH THE ORDER OF THE CIT(A) HAS CARRIED THE MATTER IN APPEAL BEFORE US. AS IS DISCERNIBLE FROM THE ORDER S OF THE LOWER AUTHORITIES, WE FIND, THA T IT IS A MATTER OF FACT BORNE FROM THE RECORDS THAT THE ASSESSEE HAD FAILED TO SUBSTANTIATE THE AUTHENTICITY OF THE IMPUGNED PURCHASES OF RS.1,03,34,330/ - TO THE SATISFACTION OF THE A.O, BOTH IN THE COURSE OF THE ORIGINAL ASSESSMENT AS WELL AS IN THE COUR SE OF THE SET - ASIDE PROCEEDING S . CONTROVERSY INVOLVED IN THE CASE BEFORE US HINGES AROUND THE QUANTIFICATION OF THE PROFIT THAT THE ASSESSEE WOULD HAVE GENERATED BY PROCURING THE GOODS NOT FROM THE ALLEGED SUPPLIER S BUT FROM THE OPEN/GREY MARKET. AS THE PR OFIT ELEMENT THAT WAS QUANTIFIED BY THE A.O VIDE HIS ORDER PASSED U/S 143(3) R.W.S 254, DATED 29.12.2018 I.E @ 25% OF THE VALUE OF THE IMPUGNED PURCHASES OF RS.1,03,34,330/ - WAS FOUND BY THE CIT(A) TO BE HIGHLY PITCHED AND EXORBITANT, THEREFORE, FOLLOWING THE JUDGMENT OF THE HONBLE HIGH COURT OF BOMBAY IN THE CASE OF PCIT VS. MOHAMMAD HAJI AND ADAM, ITA NO. 1004 OF 2016, IT WAS CONCLUDED BY HIM THAT THE ADDITION QUA THE IMPUGNED BOGUS PURCHASES WAS LIABLE TO BE MADE ONLY TO THE EXTENT OF THE DIFFERENTIAL ITA NO.6577/MUM/2019 A.Y.2011 - 12 ITO - 33(1)(8) VS. M/S UNIQUE EXPORTS 4 G .P RATE [ I.E DIFFERENCE BETWEEN THE G.P RATE OF PURCHASES ALLEGED TO BE BOGUS AND THE G.P RATE ON THE NORMALLY ACCEPTED PURCHASES ] . AS THE ASSESSEE HAD CLAIMED THAT THE DIFFERENTIAL G.P RATE IN ITS CASE WAS 2.37%, THEREFORE, THE CIT(A) IN ALL FAIRNESS HAD DIRECTED THE A.O TO CALL FOR THE DIFFERENTIAL G.P WORKING , AND APPLY THE VERIFIED DIFFERENTIAL RATE ON THE IMPUGNED BOGUS PURCHASES OF RS.1,03,34,330/ - . INSOFAR THE AFORESAID VIEW SO TAKEN BY THE CIT(A) IS CONCERNED, WE DO NOT FIND ANY INFIRMIT Y IN THE SAME. AS THE CIT(A) BY RELYING ON THE JUDGMENT OF THE HONBLE HIGH COURT OF JURISDICTION IN THE CASE OF MOHAMMAD HAJI ADAM ( S UPRA) HAD DIRECTED THE A.O TO RESTRICT THE ADDITION QUA THE IMPUGNED BOGUS PURCHASES TO THE EXTENT OF THE VERIFIED DIFFERE NTIAL G.P RATE, THE SAME , BEING IN CONFORMITY WITH THE VIEW TAKE N BY THE HONBLE HIGH COURT IN ITS AFORESAID ORDER IS ACCORDINGLY SUSTAINED. 5. RESULTANTLY, AS THE APPEAL FILED BY THE REVENUE IS DEVOID AND BEREFT OF ANY MERIT, THE SAME IS THUS DISMISSED. ORDER PRO NOUNCED IN THE OPEN COURT ON 16 .06.2021 SD/ - SD/ - (RAJESH KUMAR) (RAVISH SOOD) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; DATED: 16 .06.2021 * 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 . BY ORDER, //TRUE COPY// (SR. PRIVATE SECRETARY) ITAT, MUMBAI