HIRARAM CHOUDHARY, MUMBAI V. ITO 19 (2)(5), MUMBAI

ITA 6603/MUM/2019

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 8166 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-07-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 22-10-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SANJAY J SETHI
• Keywords: Accommodation entries; Reassessment proceedings
• Section: 143(1); 147; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (VIRTUAL COURT) SMC BENCH, MUMBAI BEFORE SHRI C.N. PRASAD, HON'BLE JUDICIAL MEMBER ITA NO S . 66 03 & 66 04 /MUM/2019 (A.Y S : 2010 - 11 & 20 11 - 12) SHRI HIRARAM T. CHOUDHARY SOKHARE BHAVAN, 57 ROOM NO. 4, GROUND FLOOR 3 RD KUMBARWADA, MUMBAI - 400004 PAN: AAAPC7750P V. INCOME TAX OFFICER - 19(1)(5 ) ROOM NO. 215, 2 ND FLOOR MATRU MANDIR , TARDEV ROAD MUMBAI 400007 (APPELLANT) (RESPONDENT) ASSESSEE BY : NONE DEPARTMENT BY : SHRI SANJAY J. SETHI DATE OF HEARING : 13.07.2021 DATE OF PRONOUNCEMENT : 30 . 07 .2021 O R D E R PER C.N. PRASAD (JM) 1. THESE APPEAL S ARE FILED BY THE ASSESSEE AGAINST COMMON ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) 21 , MUMBAI [HEREINAFTER IN SHORT LD.CIT(A)] DATED 17.07.2019 FOR THE A.Y. 2010 - 11 AND A.Y. 20 11 - 12 IN SUSTAINING THE ADDITION @12.5% OF THE ALLEGED NON - GENUINE PURCHASES MADE BY THE ASSESSING OFFICER. 2 ITA NO S . 66 03 & 66 04 /MUM/2019 (A.YS: 2010 - 11 & 2011 - 12) SHRI HIRARAM T. CHOUDHARY 2. BRIEFLY STATED THE FACTS ARE THAT, ASSESSEE AN INDIVIDUAL ENGAGED IN THE BUSINESS OF FERROUS AND NON - FERROUS METALS FILED RETURN OF INCOME ON 25.09.2010 AND 22.09.2011 DECLARING INCOME OF . 2,87,380 / - AND .4,12,240/ - FOR THE A.Y. 2010 - 11 AND A.Y . 2011 - 12 RESPECTIVELY, AND THE RETURN S WERE PROCESSED U/S. 143(1) OF THE ACT. SUBSEQUENTLY, ASSESSING OFFICER RECEIVED INFORMATION FROM THE DGIT(INV.,) , MUMBAI ABOUT THE ACCOMMODATION ENTRIES PROVIDED BY VARIOUS DEALERS AND ASSESSEE WAS ALSO ONE OF THE BENEFICIAR Y FROM THOSE DEALERS. THE ASSESSMENT S WERE REOPENED U/S. 147 OF THE ACT BASED ON THE INFORMATION RECEIVED FROM DGIT (INV.,) , MUMBAI, THAT THE ASSESSEE HAS AVAILED ACCOMMODATION ENTRIES FROM VARIOUS DEALERS WHO ARE SAID TO BE PROVIDING ACCOMMODATION ENTRIE S WITHOUT THERE BEING TRANSPORTATION OF ANY GOODS. IN THE REASSESSMENT PROCEEDINGS, THE ASSESSEE WAS REQUIRED TO PROVE THE GENUINE NESS OF THE PURCHASES MADE FROM VARIOUS DEALERS AS REFERRED IN ASSESSMENT ORDER. IN RESPONSE A SSESSEE FURNISHED COPIES OF PURCHASE INVOICE DELIVERY CHALLAN, STOCK MOVEMENT AND BANK STATEMENTS AND SUBMITTED THAT THE PURCHASES MADE ARE GENUINE. ASSESSEE FURTHER SUBMITTED THAT THE PAYMENTS ARE MADE THROUGH ACCOUNT PAYEE CHEQUES AS SUCH CONTENDED THAT ALL THE PURCHASES ARE GENUI NE . 3 ITA NO S . 66 03 & 66 04 /MUM/2019 (A.YS: 2010 - 11 & 2011 - 12) SHRI HIRARAM T. CHOUDHARY 3. NOT CONVINCED WITH THE SUBMISSIONS OF THE ASSESSEE THE ASSESSING OFFICER TREATED THE PURCHASES AS NON - GENUINE AND HE WAS OF THE OPINION THAT ASSESSEE HAD OBTAINED ONLY ACCOMMODATION ENTRIES WITHOUT THERE BEING ANY TRANSPORTATION OF MATERIALS AND THE ASSESS EE MIGHT HAVE MADE PURCHASES IN THE GRAY MARKET. IT IS THE FINDING OF THE ASSESSING OFFICER THAT ASSESSEE COULD NOT LINK THE PURCHASES WITH CORRESPONDING SALES AND BOOKS OF ACCOUNTS WERE ALSO NOT PRODUCED FOR VERIFICATION . THEREFORE, ASSESSING OFFICER TR EATED . 8,14,129/ - AND .16,17,314/ - AS NON - GENUINE , BEING 12.5 % OF THE TOTAL NON - GENUINE PURCHASES OF . 65,13,022 / - AND .1,29,38,500/ - FOR THE A.Y. 2010 - 11 AND A.Y . 20 11 - 12 RESPECTIVELY . ON APPEAL THE LD.CIT(A) SUSTAINED THE ACTION OF THE ASSESSING OFFICER. AGAINST THIS ORDER OF THE LD.CIT(A) ASSESSEE IS IN APPEAL. 4. INSPITE OF ISSUE OF NOTICE NONE APPEARED ON BEHALF OF ASSESSEE NOR ANY ADJOURNMENT WAS SOUGHT. THUS, I PROCEED TO DISPOSE OFF THESE APPEAL ON HEARING LD.DR ON MERITS. 5. LD.DR VEHEMENTLY SUP PORTED THE ORDERS OF THE AUTHORITIES BELOW. 6. HEARD LD.DR, PERUSED THE ORDERS OF THE AUTHORITIES BELOW. IT IS NOT IN DISPUTE THAT SALES HAVE BEEN ACCEPTED AS GENUINE FROM OUT OF THESE 4 ITA NO S . 66 03 & 66 04 /MUM/2019 (A.YS: 2010 - 11 & 2011 - 12) SHRI HIRARAM T. CHOUDHARY PURCHASES. WHEN THE SALES HAVE BEEN ACCEPTED AS GENUINE THE ENTIRE PURCHASES CANNOT BE TREATED AS NON - GENUINE. THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF BHOLANAT H POLYFAB PVT. LTD [355 ITR 290] HELD THAT WHEN THE ASSESSEE MADE PURCHASES AND SOLD THE FINISHED GOODS AS A NATURAL COROLLARY NOT THE ENTIRE AMOUNT COVERED UNDER SUCH PURCHASES WOULD BE SUBJECT TO TAX BUT ONLY THE PROFIT ELEMENT EMBEDDED THEREIN. SIMILAR VIEW HAS BEEN TAKEN BY THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT V. SIMIT P. SETH [38 TAXMAN.COM 385]. SIMPLY BECAUSE THE PARTIES WERE NOT PRODUCED THE ENTIRE PURCHASES CANNOT BE ADDED AS HELD BY THE BOMBAY HIGH COURT IN THE CASE OF CIT V. NIKUNJ EXIMP [216 TAXMAN.COM 171]. I AGREE WITH THE VIEW OF THE LOWER AUTHORITIES THAT THERE SHOULD BE AN ESTIMATION OF PROFIT ELEMENT FROM THESE PURCHASES AND SHOULD BE ESTIMATED REASONABLY AS THE ASSESSEE COULD NOT CONCLUSIVELY PROVE THAT THE PURCHASES MADE A RE FROM THE PARTIES AS CLAIMED, ESPECIALLY IN THE ABSENCE OF ANY CONFIRMATIONS FROM THEM. TAKING THE TOTALITY OF FACTS AND CIRCUMSTANCES, KEEPING IN VIEW THE NATURE OF BUSINESS OF THE ASSESSEE I.E. TRADER IN FERROUS AND NON - FERROUS METALS , IT WOULD BE JUS TIFIED IF THE PROFIT ELEMENT EMBEDDED IN THOSE PURCHASES ARE ESTIMATED AT 8 % . ACCORDINGLY, I DIRECT THE ASSESSING OFFICER TO ESTIMATE THE PROFIT ELEMENT FRO M THE NON - GENUINE PURCHASES AT 8 % FOR BOTH THE ASSESSMENT YEARS 5 ITA NO S . 66 03 & 66 04 /MUM/2019 (A.YS: 2010 - 11 & 2011 - 12) SHRI HIRARAM T. CHOUDHARY AND RESTRICT THE DISALLOWANCE OF PURC HASES TO 8 % AND COMPUTE THE INCOME ACCORDINGLY. 7. IN THE RESULT, APPEAL S OF THE ASSESSEE ARE PARTLY ALLOWED. ORDER PRONOUNCED ON 30 .07 .2021 AS PER RULE 34(4) OF ITAT RULES BY PLACING THE PRONOUNCEMENT LIST IN THE NOTICE BOARD SD/ - (C.N. PRASAD) JUDICIAL MEMBER MUMBAI / DATED / 07 / 2021 GIRIDHAR, SR.PS COPY OF THE ORDER FORWARDED TO : 1. THE ASSESSEE 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY// BY ORDER (ASSTT. REGISTRAR) ITAT, MUM