HITESH KANTILAL GANDHI, MUMBAI V. ASST CIT 30(1), MUMBAI

ITA 6734/MUM/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 0358 (ITAT-MUMBAI)
• Duration Of Justice: 8 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-08-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2013-2014
• Appeal Filed On: 17-11-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: POOJA SWAROOP
• Assessee Lawyers: VIPUL SHAH
• Keywords: Bogus purchase; Principle of natural justice
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH F, MU MBAI BEFORE SHRI B.R. BASKARAN, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO.6734/MUM/2016 (ASSESSMENT YEAR- 2013-14) HITESH KANTILAL GANDHI FLAT NO. 23/24, 2 ND FLOOR, SOLITAIRE, CENTRAL AVENUE ROAD, SANTACRUZ (W), MUMBAI-400054 PAN: AEPPG0628D VS. A.C.I.T.-30(1), C-10/709, PRATYAKSHA KAR BHAVAN, BANDRA KURLA COMPLEX, BANDRA (E), MUMBAI-400051. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI VIPUL SHAH (AR) REVENUE BY : MS. POOJA SWAROOP (DR) DATE OF HEARING : 16.08.2017 DATE OF PRONOUNCEMENT : 16.08.2017 ORDER UNDER SECTION 254(1) OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER: 1. THIS APPEAL U/S 253 OF THE INCOME-TAX ACT (THE ACT) IS DIRECTED AGAINST THE ORDER OF LD. CIT-41, MUMBAI DATED 28.09.2016 FOR THE AY 2013 -14. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED CIT (A) ERRED IN CONFIRMING THE REJECTION OF AUDITED BO OK OF ACCOUNT U/S 145(3) OF THE IT ACT, 1961 WITHOUT APPRECIATING THE FACT THAT NO SHOW CAUSE NOTICE WAS GIVEN BEFORE REJECTION, WHICH IS AGAINST THE PROVIS IONS OF LAW AND IS IN UTTER VIOLATION OF PRINCIPLES OF NATURAL JUSTICE. THE APPELLANT PRAYS THAT THE ASSESSMENT BE SET ASID E. 2. FOR ADDITION OF RS.30,44,478/- 2.1.1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN CONFIRMING THE ESTIMATE OF ADDITION AL MARGIN OF 8% CALCULATED AT A SUM OF RS. 30,44,478/- ON THE PURCHASES FROM A LLEGED NON GENUINE PARTIES, MERELY ON THE BASIS OF INFORMATION FROM DGIT(INV.), WITHOUT CARRYING OUT ANY APPLICATION OF MIND AND INDEPENDENT VERIFICATION OF DOCUMENTS ON RECORD. ITA NO. 6734/M/2016- HITESH KANTILAL GANDHI. 2 2.1.2 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN NOT APPRECIATING THE FACT THAT THE ASSESSING OFFICER HIMSELF HAS CONFIRMED THE PURCHASE OF MATERIAL AND ITS SUBSEQUE NT EXPORT. 2.1.3 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN NOT FOLLOWING THE BINDING JUDICIAL PRECEDENTS OF JURISDICTIONAL TRIBUNAL AND HIGH COURT WHICH IS IN VIOLATION OF JU DICIAL SYSTEM OF OUR COUNTRY. THE APPELLANT PRAYS THAT THE ADDITION OF RS.30,44,4 78/- BE DELETED. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PROPRIETOR OF M/S V.V. ENTERPRISE AND ENGAGED IN THE BUSINESS OF TRADING AND EXPORT O F CUT AND POLISHED DIAMONDS. THE ASSESSEE FILED ITS RETURN OF INCOME FOR RELEVAN T AY ON 30.09.2013. THE ASSESSMENT WAS COMPLETED ON 31.01.2016. THE ASSESSI NG OFFICER (AO) WHILE PASSING THE ASSESSMENT ORDER OBSERVED THAT ASSESSEE HAS MADE THE PURCHASES FROM PARTIES WHICH ARE HAWALA DEALERS AS PER THE INFORMA TION RECEIVED FROM DGIT (INVEST). THE ASSESSEE HAS SHOWN TO HAVE PURCHASES OF RS. 3,80,55,983/-. THE AO ON THE BASIS OF GROSS PROFIT (GP) RATES DISALLOWED THE 8% OF PURCHASES FROM THOSE DEALERS (HAWALA DEALERS). ON APPEAL BEFORE THE LD. CIT(A), THE ACTION OF AO WAS CONFIRMED. THUS, FURTHER AGGRIEVED BY THE ORDER OF LD. CIT(A), THE ASSESSEE HAS FILED THE PRESENT APPEAL BEFORE US. 3. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVE (AR ) OF ASSESSEE AND LD. DEPARTMENTAL REPRESENTATIVE (DR) FOR THE REVENUE AN D PERUSED THE MATERIAL AVAILABLE ON RECORD. THE LD. AR OF THE ASSESSEE ARG UED THAT THE AO MADE THE ADDITION ON THE BASIS OF INFORMATION OF THIRD PARTY . DURING THE COURSE OF ASSESSMENT, THE ASSESSEE HAS PROVED THE GENUINENESS OF THE PURCHASES. THE ASSESSEE HAS FILED THE PURCHASE BILL FROM M/S MAYAN K IMPEX, M/S NAZAR IMPEX AND M/S NAYAN GEMS. COPY OF STOCK REGISTER AND SAL E OF THE DIAMONDS WERE ALSO ITA NO. 6734/M/2016- HITESH KANTILAL GANDHI. 3 FILED. THE ASSESSEE ALSO FILED THE COPY OF AFFIDAVI TS OF PROPRIETOR M/S MAYANK IMPEX, M/S NAZAR IMPEX AND M/S NAYAN GEMS CONFIRMI NG THE SALE OF GOODS TO THE ASSESSEE. THE LD. AR OF THE ASSESSEE FURTHER AR GUED THAT THE SAME AO IN THE SUBSEQUENT ASSESSMENT ORDER DATED 30.08.2016 FOR AY 2012-13 PASSED U/S.143(3) R.W.S. 147 OF THE ACT, DISALLOWED ONLY 3 % ON SIMILAR PURCHASES FROM TWO OF THE COMMON PARTIES. ON THE OTHER HAND, LD. D R FOR THE REVENUE STRONGLY SUPPORTED THE ORDER OF AO. IT WAS FURTHER ARGUED TH AT FACT OF EACH AND EVERY YEAR HAS TO BE CONSIDERED INDEPENDENTLY. IT WAS FURTHER ARGUED THAT 8% OF THE DISALLOWANCE IS REASONABLE ONE. THE LD DR PRAYED FO R DISMISSAL OF THE APPEAL. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSION OF THE PART IES AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THE AO DURING THE ASSE SSMENT PROCEEDING NOTICED THAT THE ASSESSEE HAS MADE PURCHASES FROM THE FOLLO WING PARTIES WHICH ARE HAWALA DEALERS AS PER THE INFORMATION RECEIVED FROM DGIT(I NVESTIGATION): SR.NO. NAME OF THE ASSESSEE AMOUNT (RS. 1. MAYANK IMPEX 1,31,66,408/- 2. NAZAR IMPEX 54,26,427/- 3. NAYAN GEMS 1,94,63,148/- TOTAL 3,80,55,983/- 5. THE ASSESSEE WAS ASKED TO PROVE THE GENUINENESS OF THE PURCHASES. THE ASSESSEE VIDE REPLY DATED 19.01.2006 CONTENDED THAT THE PURC HASES ARE GENUINE. THE PURCHASES HAVE BEEN ENTERED INTO BOOKS OF ACCOUNTS AND THE PAYMENTS HAVE BEEN MADE THROUGH CHEQUES ONLY. THE ASSESSEE ALSO FILED THE AFFIDAVITS OF THE PROPRIETORS OF M/S MAYANK IMPEX, M/S NAZAR IMPEX AN D M/S NAYAN GEMS. THE CONTENTION OF ASSESSEE WAS NOT ACCEPTED BY AO HOLDI NG THAT THE ASSESSEE FAILED TO FILE ON RECORD THE DELIVERY CHALLAN, THE ASSESSEE H AS PROVIDED ONLY STOCK STATEMENT ITA NO. 6734/M/2016- HITESH KANTILAL GANDHI. 4 AND ENTRIES OF THE PURCHASES. THE AO ON THE BASIS O F COMPARATIVE POSITION IN TRADING OF JEMS AND DIAMONDS DISALLOWED 8% OF THE A LLEGED BOGUS PURCHASES ON THE BASIS OF ESTIMATION. THE AO WORKED OUT THE AD DITION OF RS. 34,00,478/- I.E. 8% OF THE TOTAL PURCHASES FROM THIRD PARTIES. THE L D. CIT(A) SUSTAINED THE ADDITION ON THE BASIS OF DECISION OF HONBLE GUJARAT HIGH CO URT IN VIJAY PROTEINS LTD. VS. CIT [2015] 56 TAXMANN.COM 44 (GUJ.) AND CIT VS. SIM IT P. SHETH [2013] 356 ITR 451 (GUJ.). WE HAVE NOTED THAT THE AO IN A SUBSEQUE NT ASSESSMENT ORDER DATED 30.08.2016 PASSED U/S 143(3) R.W.S. 147 FOR AY 2012 -13 MADE THE ADDITION @ 3% OF SIMILAR BOGUS PURCHASE. WE HAVE FURTHER NOTICED THAT DURING THE FINANCIAL YEAR RELEVANT AY 2012-13, THE ASSESSEE HAS SHOWN ALSO P URCHASES FROM M/S NAZAR IMPEX PVT. LTD. & M/S MAYANK IMPEX OF RS. 1,05,47,0 08/- AND 1,87,59,261/- RESPECTIVELY. THE AO MADE THE ADDITION @ 3% ON SUCH ALLEGED BOGUS PURCHASES. WE HAVE NOTED THAT THE ASSESSMENT ORDER U/S 143(3) R.W.S. 147 DATED 30.08.2016 FOR AY 2012-13 AND THE ASSESSMENT ORDER IMPUGNED IN THE PRESENT APPEAL ARE PASSED BY SAME ASSESSING OFFICER /ACIT. THUS, CONSI DERING THE FACT THAT THE AO FOR AY 2012-13 HAS DISALLOWED ONLY 3% OF THE BOGUS PURCHASES FROM THE SAME PARTIES. THUS, CONSIDERING THE FACT, WE DIRECT THE AO TO SUSTAIN THE DISALLOWANCE @ 3% OF TOTAL PURCHASES FROM THREE IMPUGNED BOGUS PAR TIES IN THE YEAR UNDER CONSIDERATION. 6. WITH THESE OBSERVATIONS, APPEAL FILED BY THE ASSESS EE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 16 TH DAY OF AUGUST 2017. SD/- SD/- (B.R. BASKARAN) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI; DATED 16/08/2017 ITA NO. 6734/M/2016- HITESH KANTILAL GANDHI. 5 S.K.PS 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/