MR.HIRALAL TARACHAND JAIN, MUMBAI V. ITO 17(1)(5), MUMBAI

ITA 6654/MUM/2018

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 0306 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-12-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 26-11-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KUMAR PADMA
• Assessee Lawyers: NEHA PARANJAPE
• Keywords: Bogus purchase

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC , BENCH MUMBAI BEFORE SHRI R.C.SHARMA, AM & SHRI VIKAS AWASTHY , JM ITA NO. 6 654 & 6655 /MUM/201 8 ( ASSESSMENT YEAR: 2010 - 11 & 2011 - 12 ) MR. HIRALAL TARACHAND JAIN, ROOM NO. 15, LALJI PAUNSHI BUILDING, 4 TH FLOOR, KES HAVJI NAIK ROAD, MUMBAI - 09 VS. RAJEEV KUMAR SINGH I.T.O. - 17(1)(5), MUMBAI. PAN/GIR NO. AAAPJ 8690 F (APPELLANT ) .. (RESPONDENT ) ASSESSEE BY MS. NEHA PARANJAPE & SHRI S.L. JAIN (AR) REVENUE BY SHRI KUMAR PADMAPANI BORA (SR.DR) DATE OF HEARING 20 /12 / 2019 DATE OF PRONOUNCEMENT 23 / 12 /2019 / O R D E R PER: R.C. SHARMA, A.M. THESE ARE THE APPEAL S FILED BY THE ASSESSEE AGAINST THE SEPARATE ORDER S OF THE LD. CIT(A) - 56 , MUMBAI DATED 06/07/2018 FOR THE A.Y. 2010 - 11 AND 2011 - 12 RESPECTIVEL Y IN THE MATTER OF ORDER PASSED U/S 14 3(3) R.W.S. 147 OF THE INCOME TAX ACT, 1961 (IN SHORT, THE ACT). 2. COMMON GRIEVANCE OF THE ASSESSEE IN BOTH THE YEARS RELATE TO ADDITION OF 12.5% IN RESPECT OF BOGUS PURCHASES MADE BY THE ASSESSEE. 3. RIVAL CONTENTIO NS HAVE BEEN HEARD AND RECORD PERUSED. FACTS IN BRIEF ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF FERROUS AND NON - FERROUS METALS. THE A.O. GOT INFORMATION FROM THE SALES TAX ITA NO. 6654 & 6655 /MUM/2018 HIRALAL TARACHAND JAIN VS ITO 2 DEPARTMENT REGARDING THE ASSESSEE HAVING TAKEN BILL OF PURCHASES WITHOUT H AVING ACTUAL PURCHASES. AFTER MAKING DETAILED ENQUIRY, THE A.O. FOUND THE PURCHASES TO BE BOGUS, ACCORDINGLY, WORKED OUT 12.5% ON SUCH PURCHASES AND ADDED THE SAME IN THE ASSESSEES INCOME. BY THE IMPUGNED ORDER, THE LD. CIT(A) CONFIRMED THE ACTION OF THE A.O. AGAINST WHICH THE ASSESSEE IS IN FURTHER APPEAL BEFORE THE ITAT. 4 . WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND FOUND FROM THE RECORD THAT THE ASSESSEE IS ENGAGED IN TRADING OF FERROUS AN D NON - FERROUS METALS. THE A.O.REOPENED THE ASSESSMENT ON THE INFORMATION OF SALES TAX DEPARTMENT REGARDING THE ASSESSEES INVOLVEMENT IN TAKING ACCOMMODATION BILLS WITH REGARD TO BOGUS PURCHASES. THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF PR.CIT VS M/S MOHOMMAD HAJI ADAM & CO. IN ITA NO. 1004 OF 2016 VIDE ITS ORDER DATED 11 /02/2019 HAVE HELD AS UNDER: 8. IN THE PRESENT CASE, AS NOTED ABOVE, THE ASSESSEE WAS A TRADER OF FABRICS. THE A.O. FOUND THREE ENTITIES WHO WERE INDULGING IN BOGUS BILLING ACT IVITIES. A.O. FOUND THAT THE PURCHASES MADE BY THE ASSESSEE FROM THESE ENTITIES WERE BOGUS. THIS BEING A FINDING OF FACT, WE HAVE PROCEEDED ON SUCH BASIS. DESPITE THIS, THE QUESTION ARISES WHETHER THE REVENUE IS CORRECT IN CONTENDING THAT THE ENTIRE PURCHA SE AMOUNT SHOULD BE ADDED BY WAY OF ASSESSES ADDITIONAL INCOME 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 THE DEPARTMENT HAD NOT DISPUTED THE ASSESSEE'S SALES. T HERE WAS NO DISCREPANCY ITA NO. 6654 & 6655 /MUM/2018 HIRALAL TARACHAND JAIN VS ITO 3 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 LIMITED TO THE EXTENT OF BRINGING THE G.P. RATE ON PURCHASES AT THE SAME RATE OF OTHER GENUINE PURCHASES. THE DECISION OF THE GUJARAT HIGH COURT IN THE CASE OF N.K. INDUSTRIES LTD.. (SUPRA) CANN OT 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.3,70,78,125/ - AS GROSS PROFIT ON SALES OF RS.37.08 CRORES MADE BY THE ASSESSING OFFICER DESPITE THE FACT THAT THE SAID SALES HAD ADMITTEDLY BEEN RECORDED IN THE REGULAR BOOKS DURIN G FINANCIAL YEAR 1997 - 98 IS CONCERNED, WE ARE OF THE VIEW THAT THE ASSESSEE CANNOT BE PUNISHED SINCE SALE PRICE IS ACCEPTED BY THE REVENUE. THEREFORE, EVEN IF 6% GROSS PROFIT IS TAKEN INTO ACCOUNT, THE CORRESPONDING COST PRICE IS REQUIRED TO BE DEDUCTED AND TAX CANNOT BE LEVIED ON THE SAME PRICE. WE HAVE TO REDUCE THE SELLING PRICE ACCORDINGLY AS A RESULT OF WHICH PROFIT COM ES TO 5.66%. THEREFORE, CONSIDERING 5.66% OF RS.3,70,78,125/ WHICH COMES TO RS.20 ,98,62 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 ANSWERED PARTIALLY IN FAVOUR OF THE ASSESSEE AND PARTIALLY IN FAVOUR OF THE REVENUE.' 5. IT IS CLEAR FROM THE ABOVE DECISIONS THAT IN CASE OF BOGUS PURCHASES WHERE SALES ARE ACCEPTED, THE ADDITION IS REQUIRED TO BE MADE ONLY TO THE EXTENT OF DIFFERENCE BETWEEN THE GP DECLARED BY THE ASSESSEE ON NORMA L PURCHASES VIS A VIS BOGUS PURCHASES. RESPECTFULLY FOLLOWING THE ORDER OF THE HONBLE JURISDICTIONAL HIGH COURT AND THE COORDINATE BENCH OF THE ITAT, MUMBAI, WE DIRECT THE A.O. TO RESTRICT THE ADDITION TO THE ITA NO. 6654 & 6655 /MUM/2018 HIRALAL TARACHAND JAIN VS ITO 4 EXTENT OF LOWER GP DECLARED BY THE ASSESSEE IN RESPECT OF BOGUS PURCHASES AS COMPARED TO GP ON NORMAL PURCHASES. THE ASSESSEE IS ALSO DIRECTED TO GIVE FULL DETAILS TO THE A.O. WITH REGARD TO GP EARNED ON NORMAL PURCHASES AND ALSO GP EARNED ON ALLEGED BOGUS PURCHASES. WE DIRECT ACCORDINGLY. 6 . IN THE R ESULT, APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES ONLY . ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD DECEMBER , 2019. SD/ - ( VIKAS AWASTHY ) SD/ - (R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI; DATED 23 / 12 /2019 *RANJAN 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//