SHRI. MANISH KANJI PATEL, MUMBAI V. ITO 4 (1)(4), MUMBAI

ITA 6660/MUM/2019

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 5427 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-09-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2011-2012
• Appeal Filed On: 24-10-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SUNIL DESH
• Keywords: Bogus purchase; Rejection of books of accounts; Accommodation entries
• Section: 69C; 143(3); 143(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (VIRTUAL COURT) D BENCH, MUMBAI BEFORE SHRI C.N. PRAS AD, HON'BLE JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN , HON'BLE ACCOUNTANT MEMBER IT A. NO. 6660 /MUM/201 9 (A.Y: 20 11 - 12) SHRI MANISH KANJI PATEL ROOM NO. 22, 2 ND FLOOR 52 - A, MANI MAHAL, C.P. TANK ROAD MUMBAI - 400004 PAN: AAAP9055C V. INCOME TAX OFFICER 4(1)(4) 6 TH FLOOR, AAYAKAR BHAVAN M.K. ROAD , MUMBAI - 400020 (APPELLANT) (RESPONDENT) ITA.NO. 6690 /MUM/201 9 (A.Y: 20 11 - 12) INCOME TAX OFFICER 4(1)(4) 6 TH FLOOR, AAYAKAR BHAVAN M.K. ROAD , MUMBAI - 400020 V. SHRI MANISH KANJI PATEL ROOM NO. 22, 2 ND FLOOR 52 - A, MANI MAHAL, C.P. TANK ROAD MUMBAI - 400004 PAN: AAAP9055C (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI NISHIT GANDHI DEPARTMENT BY : SHRI SUNIL DESHPANDE DATE OF HEARING : 25 .06.2021 DATE OF PRONOUNCEMENT : 17 .09.2021 2 ITA.NO. 6660 & 6690 /MUM/2019 (A.Y: 2011 - 12) SHRI MANISH KANJI PATEL O R D E R PER C.N. PRASAD (JM) 1. BOTH THESE APPEALS ARE FILED BY THE ASSESSEE AND REVENUE AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - 9, MUMBAI [HEREINAFTER IN SHORT LD.CIT(A)] DATED 21.08.2019 FOR THE ASSESSMENT YEAR 2011 - 12 . 2. ASSESSEE IN ITS APPEAL HAS RAISED FOLLOWING GROUNDS: - THE LEARNED CIT(A) ERRED ON FACTS, IN LAW AND UNDER THE CIRCUMSTANCES IN CONFIRMING THE ADDITION MADE BY THE AO TO THE EXTENT OF RS.41,97,974/ - (12.5% OF RS.3,35,83,792/ - ). THE LEARNED CIT(A) ERRED IN RELYING ON THE ITAT ORDER N0.7299/M/2014, 7154/M/2012 & 7300/M/2014 ALL DT.18.05.2017 PASSED IN THE APPELLANT'S OWN CASE FOR AY 2008 - 09, 2009 - 10 & 2010 - 11 FOR RETAINING THE ADDITION MADE OF RS.41,97,974/ - EVEN WHEN IT WAS POINTED OUT TO HIM THAT, THE SAID ORDER OF ITAT IN THE APPELLANT'S OWN CASE WAS RECALLED AND LATER ON NEW ORDER WAS PAS SED FOR ALL THE SAID YEARS BEING ORDER DT.30.11.2018 ACCORDING TO WHICH THE ADDITION TO BE RETAINED WAS RESTRICTED TO 10% OF GROSS PROFIT ON SALES AFTER GIVING CREDIT FOR GROSS PROFIT ALREADY OFFERED BY HIM IN HIS RETURN OF INCOME FILED. THE APPELLANT RESP ECTFULLY SUBMITS THAT THE LEARNED CIT(A) OUGHT TO HAVE FOLLOWED THE ORDER OF ITAT IN THE APPELLANT'S OWN CASE DT.30.11.2018 FOR SUSTAINING ADDITION AND THE CIT(A) WRONGLY FOLLOWING THE ITAT ORDER IN THE APPELLANT'S OWN CASE DT.18.05.2017 WHICH WAS ALREADY RECALLED IS BAD IN LAW AND HAS GIVEN RISE TO INCORRECT ADDITION. THE APPELLANT, THEREFORE, PRAYS THAT THE ADDITION RETAINED BY CIT(A) OF RS.41,97,797/ - SHOULD BE DELETED AND THE ADDITION BASED ON THE ORDER OF ITAT DT.30.11.2018 BE CONFIRMED. 3 ITA.NO. 6660 & 6690 /MUM/2019 (A.Y: 2011 - 12) SHRI MANISH KANJI PATEL 3. BRIEFLY STATE D THE FACTS ARE THAT, ASSESSEE AN INDIVIDUAL ENGAGED IN THE BUSINESS OF TRADING IN DAMAGED PAPER AND BOARD, FILED RETURN OF INCOME ON 30.09.2011 DECLARING NIL INCOME FOR THE A.Y. 2011 - 12. SUBSEQUENTLY THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY U/S. 143(2) OF THE ACT UNDER COMPULSORY CATEGORY AND THE ASSESSMENT WAS COMPLETED U/S. 143(3) OF THE ACT ON 28.03.2014 DETERMINING THE INCOME AT . 3,46,50,940/ - . WHILE COMPLETING THE ASSESSMENT TH E ASSESSING OFFICER OBSERVED THAT ASSESSEE MADE PURCHASES OF .3,35,83,792/ - FROM M /S. NAVKAR ENTERPRISES AND THE ASSESSEE WAS REQUIRED TO PROVE THE GENUINENESS OF THE PURCHASES MADE FROM M/S.NAVKAR ENTERPRISES. IN RESPONSE ASSESSEE SUBMITTED THAT THE PURC HASES MADE ARE GENUINE. 4. 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. THEREFORE, ASSESSING OFFICER TREATED PURCHASES OF .3,35,83,792/ - MADE FROM M/S.NAVKAR ENTERPRISE S AS NON - GENUINE AND ADDED TO THE INCOME OF THE ASSESSEE. ON APPEAL THE LD.CIT(A) CONSIDERING THE EVIDENCES AND VARIOUS SUBMISSIONS OF THE ASSESSEE RESTRICTED THE DISALLOWANCE TO THE EXTENT 12.5% OF THE 4 ITA.NO. 6660 & 6690 /MUM/2019 (A.Y: 2011 - 12) SHRI MANISH KANJI PATEL NON - GENUINE PURCHASES. AGAINST THIS ORDER OF THE LD.CIT(A), ASSESSEE IS IN APPEAL BEFORE US. 5. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT , ASSESSING OFFICER HAS MADE THE DISALLOWANCE OF PURCHASES AMOUNTING .3,3 5,83,792/ - U/S 69C OF THE ACT AND SAID SECTION ANY ADDITION COULD BE MADE IN THE HANDS OF AN ASSESSEE ONLY IF THE ASSESSEE OFFERS NO EXPLANATION ABOUT THE SOURCE OF SUCH EXPENDITURE OR HE OFFERS AN UNSATISFACTORY EXPLANATION ABOUT THE SOURCE OF SUCH EXPEND ITURE. HOWEVER, THE BOOKS OF ACCOUNTS OF THE ASSESSEE ARE AUDITED AND HAVE NOT BEEN REJECTED BY ANY OF THE LOWER AUTHORITIES. THEREFORE, IN VIEW OF THE IN HON'BLE DELHI HIGH COURT IN THE CASE OF CIT V/S RADHIKA CREATION (ITA 692 OF 2009) NO DISALLOWANCE COULD AT ALL BE MADE IN THE HANDS OF THE ASSESSEE . 6. ALTERNATIVELY, LD. COUNSEL FOR THE ASSESSEE FURTHER SUBMITS THAT I N THE CASE OF THE ASSESSEE FOR THE EARLIER YEARS, THE HON'BLE TRIBUNAL HAS AFFIRMED THE ORDER OF THE LD. CIT(A) WHO HAS ESTIMATED THE DISAL LOWANCE BY TAKING 10% OF SALES AS GROSS PROFIT AND THEREAFTER DEDUCTING THEREFROM THE GROSS PROFIT ALREADY OFFERED BY THE ASSESSEE AND COMPUTING THE DISALLOWANCE. LD. COUNSEL FOR THE ASSESSEE REQUESTED THAT THE SAID VIEW TAKEN BY THE HON'BLE TRIBUNAL IN T HE EARLIER YEARS IN ITA 7154 / M UM / 2012, 7299 & 7300 / MUM / 2014 AND ITA 7627 /MUM/201 4 BE FOLLOWED (COPY 5 ITA.NO. 6660 & 6690 /MUM/2019 (A.Y: 2011 - 12) SHRI MANISH KANJI PATEL ENCLOSED). LD. COUNSEL FOR THE ASSESSEE RELIED IN THE CASE MADHUKANT B. GANDHI V. ITO IN ITA.NO. 1950/MUM/2009. 7. LD. DR VEHEMENTLY SUPPORTED THE ORDERS OF THE ASSESSING OFFICER. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE ORDERS OF THE AUTHORITIES BELOW . ON A PERUSAL OF THE ORDER OF THE LD.CIT(A), WE FIND THAT THE LD.CIT(A) FOLLOWING THE ORDER OF THE TRIBUNAL DATED 18.05.2017 IN ASSESSEES OWN CASE ESTIMATED THE PROFIT ELEMENT FROM THE NON - GENUINE PURCHASES AT 12.5 % . HOWEVER, WE NOTICED THAT THIS ORDER OF THE TRIBUNAL DATED 18.05.2017 WAS RECALLED AND THEREAFTER THE TRIBUNAL DISPOSED OFF THE APPEAL S B Y ORDER DATED 30.11.201 8 SUSTAINING THE ORDER OF THE LD.CIT(A) IN DIRECTING THE ASSESSING OFFICER TO ADOPT 10 % OF THE SALES AS GROSS PROFIT AND TO RECOMPUTE THE INCOME O F THE ASSESSEE . T HUS , THE LD.CIT(A) IS NOT CORRECT IN ESTIMATING THE PROFIT ELEMENT AT 12.5 % OF NON - GENUINE PURCHASES FOLLOWING THE ORDER OF THE TRIBUNAL DATED 18.05.2017 WHICH WAS INFACT RECALLED BY THE TRIBUNAL . W E NOTICED THAT THE FACTS IN THE APPEALS BEFOR E THE TRIBUNAL IN ITA.NO. 7154/MUM/2012 , 7300/MUM/2014 & 7299/MUM/2014 FOR THE A.Y. 2009 - 10, A.Y. 2010 - 11 AND A.Y. 2008 - 09 RESPECTIVELY WERE SLIGHTLY DIFFERENT THAN THE FACTS BEFORE US FOR THE ASSESSMENT YEAR UNDER CONSIDERATION I.E. A.Y. 2011 - 12 . IN THE 6 ITA.NO. 6660 & 6690 /MUM/2019 (A.Y: 2011 - 12) SHRI MANISH KANJI PATEL APPEALS BEFORE THE TRIBUNAL FOR THE A.Y. 2008 - 09 TO A.Y. 2010 - 11 THE ASSESSING OFFICER REJECTED THE BOOKS OF ACCOUNTS OF THE ASSESSEE AND ESTIMATED THE GROSS PROFIT ON SALES TO MAKE ADDITION TOWARDS NON - GENUINE PURCHASES . HOWEVER, IN THE APPEAL UNDER CONSIDERATION BEFORE US THERE IS NO REJECTION OF BOOKS OF ACCOUNTS OR ESTIMATION OF GROSS PROFIT ON SALES. T HE ASSESSING OFFICER SIMPLY DISALLOWED ENTIRE PURCHASES AS NON - GENUINE . HOWEVER, THE LD.CIT(A) ESTIMATED THE PROFIT ELEMENT ON SUCH PURCHASES AT 12.5 % FOLLOWING THE ORDER OF THE TRIBUNAL FOR THE A.Y. 2008 - 09 TO 2010 - 11 DATED 18.05.2017 IGNORING THE FACT THE TRIBUNAL HAD ALREADY RECALLED THE ORDER. 9. IT IS NOT IN DISPUTE THAT SALES HAVE BEEN ACCEPTED AS GENUINE FROM OUT OF THESE 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 7 ITA.NO. 6660 & 6690 /MUM/2019 (A.Y: 2011 - 12) SHRI MANISH KANJI PATEL HELD BY THE BOMBAY HIGH COURT IN THE CASE OF CIT V. NIKUNJ EXIMP [216 TAXMAN.COM 171]. WE AGREE WITH THE VIEW OF THE LD.CIT(A) 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 AND KEEPING IN VIEW THE NATURE OF BUSINESS OF THE ASSESSEE , IT WOULD BE JUS TIFIED IF THE PROFIT ELEMENT EMBEDDED IN THOSE PURCHASES ARE ESTIMATED AT 4 %. ACCORDINGLY, WE DIRECT THE ASSESSING OFFICER TO ESTIMATE THE PROFIT ELEMENT FRO M THE NON - GENUINE PURCHASES AT 4 % AND RESTRICT THE DISALLOWANCE OF PURC HASES TO 4 % AND RE COMPUTE THE INCOME ACCORDINGLY . ITA.NO. 6690/ MUM / 2019 ( A.Y. 2011 - 12 ) ( REVENUE APPEAL ) 10. C OMING TO THE REVENUES APPEAL, FOLLOWING GROUND IS RAISED: - 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.3,35,16,688/ - MADE FROM M/S NAVKAR ENTERPRISES ON ACCOUNT OF BOGUS PURCHASE WITHOUT APPRECIATING THE FACT THAT THE AO HAD MADE DETAILED ENQUIRIES AND HAD ESTABLISHED THAT THESE PURCHASE ENTRIES WERE JUST TO INFLATE PURCHASE AND REDUCE THE PROFIT.' 11. AS WE HAVE ESTIMATED THE PROFIT ELEMENT OF NON - GENUINE PURCHASES FOLLOWING VARIOUS JUDICIAL PRONOUNCEMENTS THE GROUND RAISED BY THE 8 ITA.NO. 6660 & 6690 /MUM/2019 (A.Y: 2011 - 12) SHRI MANISH KANJI PATEL REVENUE FOR SUSTENANCE OF ADDITION IN RESPECT OF ENTIRE PURCHASES IS REJECTED. G ROUND RAISED BY THE REVENUE IS DISMISSED . 12. I N THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED AND APPEAL OF THE REVENUE IS DISMISSED . O RDER PRONOUNCED ON 17 . 09 .2021 AS PER RULE 34(4) OF ITAT RULES BY PLACING THE PRONOUNCEMENT LIST IN THE NOTICE BOARD . SD/ - SD/ - (S. RIFAUR RAHMAN) (C.N. PRASAD) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI / DATED 17 / 09 / 2021 GIRIDHAR, SR.PS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 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