PRAKASH R BUDHRANI, MUMBAI V. INCOME TAX OFFICER-2(3), KALYAN

ITA 6686/MUM/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 0332 (ITAT-MUMBAI)
• Duration Of Justice: 2 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-02-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 23-11-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: N HEMALATHA
• Keywords: Reopening of assessment; Bogus purchase; Cost of acquisition

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC , BENCH MUMBAI BEFORE SHRI R.C.SHARMA, AM & SHRI SANDEEP GOSAIN , JM ITA NO. 6686/ MUM/20 17 ( ASSESSMENT YEAR : 2009 - 10 ) MR. PRAKASH R BUDHRANI PLOT NO.103, KALA PALACE GOL MAIDAN, UL HASNAGAR MUMBAI, MAHARA SHTRA 421 001 VS. ITO 2(3) KALYAN PAN/GIR NO. ABEPB7438E APPELLANT ) .. RESPONDENT ) ASSESSEE BY MS. NEHA PARANJPE REVENUE BY MS. N. HEMALATHA DATE OF HEARING 07 / 02 /201 8 DATE OF PRONOUNCEME NT 12 / 02 /201 8 / O R D E R PER R.C.SHARMA (A.M) : THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) - 3, MUMBAI DATED 17/08/2017 FOR A.Y.2009 - 10 IN THE MATTER OF ORDER PASSED U/S.143(3) R.W.S. 147 OF THE I.T ACT 1961. 2. GRIEVANCE OF ASSESSEE RELA TES TO REOPENING OF ASSESSMENT AS WELL AS MERIT OF THE ADDITION MADE IN RESPECT OF BOGUS PURCHASES TO THE EXTENT OF 25%. 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. 4. FACTS IN BRIEF ARE THAT THE ASSESSEE IS A CABLE OPERATOR. THE CASE WAS REOP ENED ON THE BASIS OF INFORMATION RECEIVED FROM THE SALES TAX ITA NO. 6686/MUM/2017 MR. PRAKASH R. BUDHRANI 2 DEPARTMENT THAT, PARTIES NAMELY M/S. O.K. ENTERPRISES, M/S. SHUBH LAXMI SALES CORPORATION, NAVDEEP TRADING CO. AND DHRUV SALES CORPORATION FROM WHOM THE ASSESSEE HAD MADE PURCHASES WERE INVOLVED IN PROVIDING HAWALA ENTRIES AND ASSESSEE WAS ONE OF BENEFICIARIES . THEREFORE, THE AO ADDED BACK THE ENTIRE AMOUNT OF THE PURCHASES MADE FROM THE ABOVE PARTIES AS BOGUS PURCHASES. 5. BY THE IMPUGNED ORDER CIT(A) RESTRICTED THE ADDITION TO THE EXTENT OF 25% AFTER HAVING THE FOLLOWING OBSERVATION. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE APPELLANT, THE OBSERVATIONS OF THE AO IN THE ASSESSMENT ORDER; CASE LAWS RELIED UPON BY THE APPELLANT AND THE FACTS OF THE CASE II. DURING APPELLATE PROCEEDINGS, TH E AR OF THE APPELLANT SUBMITTED COPIES OF LEDGER ACCOUNTS, PURCHASE BILLS OF THE SUPPLIERS, COPY OF BANK STATEMENT OF MAKING THE PAYMENTS BY ACCOUNT PAYEE CHEQUES. THE AR OF THE APPELLANT HAS SUBMITTED THE CORRESPONDING SALES ON THE PURCHASES MADE FROM THE AFORESAID SUPPLIERS. THE AR OF THE APPELLANT HAS FILED THE COMPARATIVE CHART OF GP RATIO FOR THE YEAR UNDER APPEAL @11.99% AS COMPARED TO PREVIOUS YEAR @ 11.89%, WHICH IS MORE OR LESS THE SAME. THE AR OF THE APPELLANT PLACED RELIANCE ON THE FOLLOWING CASE S: - A) ITAT MUMBAI IN THE CASE OF DCIT VS. RAJEEV G. KALATHI WHEREIN IT HAS BEEN HELD THAT INFORMATION RECEIVED FROM SALE TAX DEPARTMENT HAVE BEEN GOOD STARTING POINT FOR MAKING FURTHER INVESTIGATION AND TAKE IT TO LOGICAL END. BUT, HE LEFT THE JOB AT INIT IAL POINT ITSELF. SUSPENSION OF HIGHEST DEGREE CANNOT TAKE PLACE OF EVIDENCE. B) RAJESH P. SONI VS. ACIT 100 TT3 892(AHD) C) CIT VS. NIKUNJ EXIMP ENTERPRISES PVT, LTD. 372 ITR 619(BOM) D ) GANAPATRAJ A. SANGHAVI VS. ACIT ITA NO. 2826/MUM/2013 E) ACIT VS. MA HESH K. SHAH (ITAT) MUMBAI WHEREIN IT HAS BEEN HELD THAT PURCHASES CANNOT BE TREATED AS BOGUS MERELY ON THE BASIS OF STATEMENTS AND AFFIDAVITS FILED BY THE ALLEGED VENDORS BEFORE THE SALES - TAX DEPARTMENT. THE SAID STATEMENT CANNOT BE RELIED UPON WITHOUT CR OSS - EXAMINATION OF THE PARTIES. THE FACT THAT THE PARTIES DID NOT RESPOND TO THE NOTICE U/S.133(6) IS NOT RELEVANT IF THE ASSESSEE FILED COPIES OF PURCHASE INVOICES, EXTRACTS OF STOCK LEDGER ETC. .. ON THE PURCHASES, THERE WERE CORRESPONDING SALES AND THE PAYMENTS WERE MADE BY ACCOUNT PAYEE CHEQUES, THEREFORE, THE DISALLOWANCE OF ENTIRE PURCHASES MADE FROM HAWALA DEALER IS NOT JUSTIFIED. (III) FROM THE ABOVE DISCUSSION, IT CAN BE CONCLUDED THAT, IT IS CASE WHERE THE GOODS WERE RECEIVED FROM THE PARTIES OTHE R THAN THE PERSONS ITA NO. 6686/MUM/2017 MR. PRAKASH R. BUDHRANI 3 WHO HAD ISSUED THE BILLS OF SUCH GOODS. THOUGH THE PURCHASES WERE SHOWN TO HAVE BEEN MADE BY MAKING PAYMENT TO HAWALA DEALERS BUT GOODS MUST HAVE COME FROM GREY MARKET, THEREFORE, UNDER SUCH CIRCUMSTANCES, THE CHANCES OF PURCHASE COST BE ING INFLATED COULD NOT BE RULED OUT. '' CONSIDERING THE TOTALITY OF THE FACTS OF THE CASE, I AM OF THE CONSIDERED OPINION TO DISALLOW 25% OF UNVERIFIABLE PURCHASES MADE FROM UNVERIFIABLE/HAWALA PARTIES. THE DISALLOWANCE @ 25% OUT OF UNVERIFIABLE PURCHASES FROM UNVERIFIABLE/HAWALA DEALER HAD BEEN UPHELD IN THE AFORESAID CASE: (1) SANJAY OIL CAKE INDUSTRIES VS CIT (2008) 316 ITR 274 (GUJ) (2) VIJAY PROTEINS LTD VS ACIT 58 ITD 428 (ABD) (3) M/S NAND KISHORE MEGHRAJ JEWELLERS, JAIPUR CO. NO. 105/JP/09 ARISI NG OUT OF ITA NO. 433/JP/2009 BY ITATJAIPUR (4) M/S. TRIDENT JEWELLERS ITATJAIPUR ITA NO. 552/JP/2013. IN VIEW OF THE ABOVE STATED FACTS, THE DISALLOWANCE @ 25% OF RS.14,99,920/ - WORKS OUT TO RS.3,74,980 / - AND THE SAME IS ADDED TO THE TOTAL INCOME OF THE A SSESSEE. THE APPELLANT GET RELIEF OF RS.11,24,940/ - I.E.(14,99,920 - 3,74,980). ACCORDINGLY, THE APPEAL OF THE APPELLANT ON THIS GROUND IS PARTLY ALLOWED. ' 6. AGAINST THE ABOVE ORDER OF CIT(A), ASSESSEE IS IN FURTHER APPEAL BEFORE US. 7. WE HAVE CONSIDERE D RIVAL CONTENTIONS AND CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND FOUND FROM RECORD THAT BEFORE CIT(A) ASSESSEE HAS SUBMITTED COPIES OF LEDGER ACCOUNT, PURCHASE BILLS OF THE SUPPLIERS, COPY OF BANK STATEMENT OF MAKING THE PAYMENTS BY A CCOUNT PAYEE CHEQUE. CORRESPONDING SALES WITH RESPECTIVE PURCHASES SO MADE WERE ALSO FILED. COMPARATIVE CHART OF GP RATE FOR THE YEAR UNDER APPEAL @11.99% WAS ALSO FILED. THE CIT(A) ALSO RECORDED A FINDING TO THE EFFECT THAT IT IS A CASE WHERE GOODS WERE R ECEIVED FROM THE PARTIES OTHER THAN THE PERSONS WHO HAD ISSUED THE BILLS OF SUCH GOODS . THUS, THE ITA NO. 6686/MUM/2017 MR. PRAKASH R. BUDHRANI 4 CORRESPONDING SALE OF GOODS HAVE NOT BEEN DECLINED NEITHER BY AO NOR BY THE CIT(A). KEEPING IN VIEW THE TOTALITY OF FACTS AND CIRCUMSTANCES OF THE CASE, VIS - - VIS NATURE OF ASSESSEES BUSINESS, WE MODIFY THE ORDER OF THE LOWER AUTHORITIES AND RESTRICT THE ADDITION TO THE EXTENT OF 12.5% OF ALLEGED BOGUS PURCHASES. WE DIRECT ACCORDINGLY. 8. IN THE RESULT, APPEAL IS ALLOWED IN PART. O RDER PRONOUNCED IN THE OPEN COURT ON THIS 12 / 02 /201 8 S D/ - ( SANDEEP GOSAIN ) S D/ - ( R.C.SHARMA ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 12 / 02 /201 8 KARUNA SR. PS COPY OF THE ORDER F ORWARDED 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//