PRAVINCHANDRA P. SHAH, MUMBAI V. ITO 19(2)(5), MUMBAI

ITA 6765/MUM/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1147 (ITAT-MUMBAI)
• Duration Of Justice: 5 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-04-2017
• Appeal Filed By: Assessee
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 18-11-2016
• Court: TRIBUNAL
• Department Lawyers: BEENA SANTOSH
• Keywords: Bogus purchase; Accommodation entries; Onus to prove
• Section: 143(3); 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC , BENCH MUMBAI BEFORE SHRI R.C.SHARMA, AM ITA NO. 6 765 / MUM/20 1 6 ( ASSESSMENT YEAR : 2009 - 10 ) SHRI PRAVINCHANDRA P. SHAH 91, MARUTI MANDIR MARG MUMBAI 400 004 VS. ITO 19 (2)(5), MUMBAI PAN/GIR NO. AAFPS5809J APPELLANT ) .. RESPONDENT ) ITA NO. 6766/ MUM/20 16 ( ASSESSMENT YEAR : 2009 - 10 ) M/S. METAL STAR, 91, MARUTI MANDIR MARG, 5 TH KUMBHARWADA LANE MUMBAI 400 004 VS. ITO 19 (2)(3), MUMBAI PAN/GIR NO. AAHFM5637B APPEL LANT ) .. RESPONDENT ) ASSESSEE BY SHRI BHUPENDRA SHAH REVENUE BY MS. BEENA SANTOSH DATE OF HEARING 26 / 04 /201 7 DATE OF PRONOUNCEME NT 27 / 04 /201 7 / O R D E R PER R.C.SHARMA (A.M) : THESE ARE THE APPEALS FILED BY THE TWO ASSESS EES AGAINST THE ORDER OF CIT(A) - 30 DATED 27/09/2016 & 28/09/2016 RESPECTIVELY FOR THE A.Y.2009 - 10 IN THE MATTER OF ORDER PASSED U/S.143(3) R.W.S.147 OF THE IT ACT. 2. GRIEVANCE OF ASSESSEE IN BOTH THE APPEALS ARE SIMILAR WHEREIN ASSESSEES HAVE ALLEGED ADDI TION CONFIRMED BY THE CIT(A) @7% OF THE BOGUS PURCHASES. ITA NO. 6765/MUM/2016 & ITA NO.6766/MUM/2016 SHRI PRAVINCHANDRA P SHAH M/S.METAL STAR 2 3. FACTS IN BRIEF ARE THAT THE ASSESSEE PRAVINCHANDRA P. SHAH IS AN INDIVIDUAL, ENGAGED IN THE BUSINESS OF 'TRADIN G OF FERROUS AND NON - FERROUS METALS UNDER THE NAME AND STYLE OF M/S. STEEL PLUS CORP ORATION& M/S AJIT METAL SYNDICATE. THE RETURN OF INCOME FOR THE YEAR UNDER APPEAL WAS FILED ON 29 - 09 - 2009, DECLARING TOTAL INCOME OF RS. 5,04,780/ - .THE CASE WAS REOPENED U/S 147, BY WAY OF ISSUING NOTICE U/S 148 OF THE ACT ON 07 - 03 - 2014, ON TH E BASIS OF THE INFORMATION RECEIVED FROM THE DGIT (INV.), MUMBAI, THAT THE ASSESSEE IS ONE OF THE BENEFICIARIES OF THE ACCOMMODATION ENTRIES PROVIDED BY SOME OF THE MVAT DEALERS WHO ARE INDULGING IN ISSUING BOGUS SALE/PURCHASE BILLS, WHICH WAS INVESTIGATED AND KEPT ON THE PUBLIC DOMAIN BY THE SALES TAX DEPARTMENT. AO COMPLETED THE ASSESSMENT U/S 143(3) R.W.S 147 OF THE ACT ON 13 - 03 - 201 5 AND ADD ED 12.5% OF BOGUS PURCHASE AMOUNTING TO RS.2 6 ,13,193/ - IN ASSESSEES INCOME. BY THE IM P UGNED ORDER CIT(A) RESTRICTE D THE ADDITION TO THE EXTENT OF 7% OF SUCH PURCHASES. AGAINST WHICH ASSESSEE IS IN FURTHER APPEAL BEFORE US. ASSESSEE IS ALSO AGGRIEVED FOR UPHOLDING THE REOPENING U/S.147. 4. IT WAS CONTENDED BY LEARNED AR THAT THE ASSESSEE WAS NOT PROVIDED WITH THE COPIE S OF CONFESSIONAL STATEMENTS GIVEN BEFORE THE SALES TAX AUTHORITIES ON WHICH AO RELIED FOR MAKING ADDITION AND AN OPPORTUNITY TO CROSS-EXAMINE THE PARTIES WAS ALSO NOT PROVIDED. COPIES OF THE LETTERS AND THE NOTES OF POSTAL AUTHORITIES RECORDING REASONS FO R NON - SERVICE WERE NOT PROVIDED. NOTICE U / S 148 IS ISSUED BY THE A O AND ONUS TO PROVE THAT THE ITA NO. 6765/MUM/2016 & ITA NO.6766/MUM/2016 SHRI PRAVINCHANDRA P SHAH M/S.METAL STAR 3 PA RTIES ARE BOGUS LIES WITH THE AO . THE BOOKS OF ACCOUNTS WERE REJECTED BY THE A O THOUGH THE BOOKS OF ACCOUNTS WERE MAINTAINED IN THE NORMAL COURSE OF BUSINESS A ND AUDITED U /S 44AB OF THE IT ACT. THE ASSESSEE IS ENGAGED IN SEMI - WHOLESALE BUSINESS OF FERROUS AND NON- FERROUS METAL, HENCE PROFIT MARGINS ARE NOT SO HIGH. THEREFORE, HON'BLE GUJARATH HIGH COURT 'S DECISION IN THE CASE OF SIMIT P. SHETH CANNOT BE APPLIED IN THE ASSESSEES CASE. 5. IT WAS FURTHER CONTENDED BY LEARNED AR THAT ADDITION IS BASED O N THE INFORMATION RECEIVED FROM THE DGIT(INV.) BASED ON INQUIRIES CARRIED OUT BY TH E SALES TAX DEPARTMENT AND THERE IS NO PROOF WITH THE AO THAT THE PURCHASES MADE W ERE NON - GENUINE. ALL THE DETAILS / DO CUMENTS WERE FURNISHED TO THE AO BUT THE A O HAS NOT DEALT WITH THE SAME WHILE PASSING THE IMPUGNED ORDER. THOUGH THE EVIDENCES ARE USED AGAINST THE ASSESSEE , THE SAME WERE NOT PROVIDED AND THIRD PARTIES COULD NOT BE CON FRONTED. THE LD. AO ERRED IN NOT GIVING THE COPIES OF THE LETTERS AND THE NOTES OF THE POSTAL AUTHORITIES RECORDING REASONS FOR NON - SERVICE OF NOTICES TO THESE PARTIE S. 6. LEARNED AR RELIED ON THE FOLLOWING DECISIONS: - A. ITO VS DEEPAK POPATLAL ALA - ITA NO.5920/MUM/2013 B. RAMESHKUMAR& CO. VS. ACIT - ITA NO. 2959/MUM/ 2014 C. GANPATRAJ A. SANGHVI VS. ACIT - ITA NO. 2826JMUM / 2013 ITA NO. 6765/MUM/2016 & ITA NO.6766/MUM/2016 SHRI PRAVINCHANDRA P SHAH M/S.METAL STAR 4 7. ON THE OTHER HAND LEARNED DR SUPPORTED THE ORDER OF CIT(A) AND CONTENDED THAT HE HAS DEALT WITH THE ISSUE VERY ELABORATELY AND AFTER RECORDING HIS FINDING RESTRICTED THE ADDITION TO THE EXTENT OF 7% OF THE PURCHASES. 8. I HAVE CONSIDERED RIVAL CONTENTIONS AND CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. I HAVE ALSO DELIBERATED ON THE JUDICIAL PRONOUNCEMENTS REF ERRED BY LOWER AUTHORITIES IN THEIR RESPECTIVE ORDERS AS WELL AS CITED BY LEARNED AR AND DR DURING THE COURSE OF HEARING BEFORE US. I FOUND THAT ASSESSEE HAS TRIED TO RECONCILE THE PURCHASES WITH REFERENCE TO THE DELIVERY C HALLAN AS WELL AS SALES A FFECT ED BY IT. ITEMWISE RE - CONCILIATION STATEMENT WAS ALSO FILED BEFORE THE LOWER AUTHORITIES. I FOUND THAT ASSESSEE HAD SHOWN GP RATE IN EARLIER YEARS RANGING FROM 3 3.5% AND NET PROFIT AT 1 - 1.5%. IT WAS ALSO CONTENTION OF LEARNED AR THAT THESE GP RATES WERE AC CEPTED BY THE DEPARTMENT EVEN DURING SCRUTINY ASSESSMENT. KEEPING IN VIEW TOTALITY OF FACTS AND CIRCUMSTANCES OF THE CASE, I RESTRICT THE ADDITION TO THE EXTENT OF 3.5 % OF THE BOGUS PURCHASES , SO AS TO COMPENSATE THE LEAKAGE OF REVENUE . I DIRECT ACCORDINGL Y. 9. THE FACTS AND CIRCUMSTANCES IN THE CASE OF METAL STAR ARE SIMILAR, THEREFORE, FOLLOWING THE REASONING GIVEN HEREINABOVE, I DIRECT TO RESTRICT THE ADDITION TO THE EXTENT OF 3.5 % OF THE BOGUS PURCHASES. ITA NO. 6765/MUM/2016 & ITA NO.6766/MUM/2016 SHRI PRAVINCHANDRA P SHAH M/S.METAL STAR 5 10. IN THE RESULT, BOTH THE APPEALS ARE ALLOWED IN PART IN TERMS INDICATED HEREINABOVE. O RDER PRONOUNCED IN THE OPEN COURT ON THIS 27 / 04 /2017 S D/ - ( R.C.SHARMA ) ACCOUNTANT MEMBER MUMBAI ; DATED 27 / 04 /201 7 KARUNA SR. PS COPY OF THE O RDER 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//