SANJAYKUMAR H. JAIN, MUMBAI V. ITO 19 (2)(4), MUMBAI

ITA 6790/MUM/2018

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 1388 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-12-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 29-11-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KUMAR PADMA
• Keywords: Bogus purchase
• Section: 143(3); 201; 44AB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC, BENCH MUMBAI BEFORE SHRI R.C.SHARMA, AM & SHRI VIKAS AWASTHY, JM ITA NO. 6790/MUM/2018 ( ASSESSMENT YEAR: 2009-10) SANJAYKUMAR H JAIN, 35, 5 TH KUMBHARWADA LANE, MARUTI MANDIR MARG, MUMBAI-400004. VS. I.T.O., WARD-19(2)(4), MUMBAI. PAN/GIR NO.AAAPJ 7719 F (APPELLANT ) .. (RESPONDENT ) ASSESSEE BY NONE REVENUE BY SHRI KUMAR PADMAPANI BORA (SR.DR) DATE OF HEARING 12/12/2019 DATE OF PRONOUNCEMENT 12/12/2019 / O R D E R PER: R.C. SHARMA, A.M. THIS IS THE APPEAL FILED BY THE ASSESSEE AGAINST T HE ORDER OF THE LD. CIT(A)-2, MUMBAI DATED 01/03/2018 FOR THE A.Y. 2009 -10 IN THE MATTER OF ORDER PASSED U/S 143(3) R.W.S. 147 OF THE INCOME TAX ACT, 1961 (IN SHORT, THE ACT). 2. AT THE TIME OF HEARING, NO BODY APPEARED ON BEHA LF OF THE ASSESSEE IN SPITE OF ISSUE AND SERVICE OF NOTICE, T HEREFORE, THE BENCH DECIDED TO DISPOSE OFF THE APPEAL AFTER HEARING THE LD. DR AS WELL AS CONSIDERING THE MATERIAL PLACED ON RECORD. 3. WE HAVE GONE THROUGH THE ORDERS OF THE AUTHORITI ES BELOW AND FOUND FROM THE RECORD THAT THE ASSESSEE IS ENGAGED IN TRADING OF FERROUS ITA NO. 6790/MUM/2018 SANJAYKUMAR H JAIN VS ITO 2 AND NON-FERROUS METALS. THE ASSESSMENT WAS REOPENED ON GETTING INFORMATION FROM THE SALES TAX DEPARTMENT REGARDING THE ASSESSEE BEING INVOLVED IN BOGUS PURCHASE TRANSACTIONS. AFTE R MAKING DETAILED ENQUIRY, THE A.O. ADDED 12.5% OF ALLEGED BOGUS PURC HASES IN ASSESSEES INCOME WHILE PASSING REASSESSMENT ORDER U/S 143(3) R.W.S. 147 OF THE ACT. BY THE IMPUGNED ORDER, THE LD. CIT(A) CONFIRME D THE ACTION OF THE A.O., AGAINST WHICH THE ASSESSEE IS IN FURTHER APPE AL BEFORE THE ITAT. 4. WE HAD GONE THROUGH THE ORDERS OF THE AUTHORITIE S BELOW AND FOUND THAT THE ASSESSEE IS AN INDIVIDUAL, ENGAGED I N TRADING ACTIVITIES AND THE SAME WAS CONDUCTED UNDER THE PROPRIETARY FI RM NAME AND STYLE OF M/S FAMOUS STEEL. THE ACCOUNTS OF THE FIRM WERE AUDITED U/S 44AB OF THE ACT. DURING THE PERIOD, THE ASSESSEE HAS MADE P URCHASES OF GOODS FROM VARIOUS PARTIES AND SOLD THE SAME UNDER SAME C ONDITION, THERE WAS NO MANUFACTURING OR PROCESSING ACTIVITY. THE QUANTI TATIVE DETAILS OF SUCH PURCHASES, SALES AND OPENING AND CLOSING STOCK ALON GWITH STOCK REGISTER WERE SUBMITTED TO THE ASSESSING OFFICER. THE COPIES OF PURCHASES BILLS WITH THEIR RESPECTIVE SALES BILLS IN RESPECT OF THE SE TWO SUPPLIERS WERE ALSO SUBMITTED ALONGWITH COPIES OF BANK STATEMENT S HOWING THEIR PAYMENT. WITH RESPECT TO ISSUE REGARDING ADDITION I N RESPECT OF 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 201 6 VIDE ITS ORDER DATED 11/02/2019 HAVE HELD AS UNDER: ITA NO. 6790/MUM/2018 SANJAYKUMAR H JAIN VS ITO 3 8. IN THE PRESENT CASE, AS NOTED ABOVE, THE ASSESS EE WAS A TRADER OF FABRICS. THE A.O. FOUND THREE ENTITIES WHO WERE IND ULGING IN BOGUS BILLING ACTIVITIES. A.O. FOUND THAT THE PURCH ASES MADE BY THE ASSESSEE FROM THESE ENTITIES WERE BOGUS. THIS BEING A FINDING OF FACT, WE HAVE PROCEEDED ON SUCH BASIS. DESPITE THIS, THE QUE STION ARISES WHETHER THE REVENUE IS CORRECT IN CONTENDING THAT THE ENTIR E PURCHASE AMOUNT SHOULD BE ADDED BY WAY OF ASSESSES ADDITIONAL INCOM E 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 T HE DEPARTMENT HAD NOT DISPUTED THE ASSESSEE'S SALES. THERE WAS NO DIS CREPANCY 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 LIMIT ED TO THE EXTENT OF BRINGING THE G.P. RATE ON PURCHASES AT THE SAME RAT E OF OTHER GENUINE PURCHASES. THE DECISION OF THE GUJARAT HIGH COURT I N THE CASE OF N.K. INDUSTRIES LTD.. (SUPRA) CANNOT 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.3,7 0,78,125/- AS GROSS PROFIT ON SALES OF RS.37.08 CRORES MADE BY TH E ASSESSING OFFICER DESPITE THE FACT THAT THE SAID SALES HAD AD MITTEDLY BEEN RECORDED IN THE REGULAR BOOKS DURING FINANCIAL YEAR 1997-98 IS CONCERNED, WE ARE OF THE VIEW THAT THE A SSESSEE CANNOT BE PUNISHED SINCE SALE PRICE IS ACCEPTED BY THE REVENUE. THEREFORE, EVEN IF 6% GROSS PROFIT IS TAKE N INTO ACCOUNT, THE CORRESPONDING COST PRICE IS REQUIRED T O 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 CONIES TO 5.66%. THEREFORE, CONSIDERING 5.66% OF RS.3,70,78,125/-WHICH COMES TO RS.20,98,621.88 WE T HINK IT FIT TO DIRECT THE REVENUE TO ADD RS.20,98,621.88 AS GRO SS PROFIT AND MAKE NECESSARY DEDUCTIONS ACCORDINGLY. ACCORDINGLY, THE SAID ITA NO. 6790/MUM/2018 SANJAYKUMAR H JAIN VS ITO 4 QUESTION IS ANSWERED PARTIALLY IN FAVOUR OF THE ASS ESSEE AND PARTIALLY IN FAVOUR OF THE REVENUE.' 5. THE COORDINATE BENCH OF THE ITAT, MUMBAI IN THE CASE OF SHRI RAMESHKUMAR DAULATRAJ VS ITO IN ITA NO. 4192/MUM/20 18 ORDER DATED 07/05/2019 AFTER FOLLOWING THE ABOVE DECISION OF HO NBLE BOMBAY HIGH COURT HELD AS UNDER: 9. WHEN THESE FACTS WERE CONFRONTED TO THE LEARNED SR. DR, HE REQUESTED FOR APPLICATION OF REASONABLE PROFIT RATE AND ACCORDING TO HIM THE PROFIT RATE APPLIED BY THE AO AND CONFIR MED BY CIT(A) IS QUITE REASONABLE IN VIEW OF THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF SMITH P.SETH (SUPRA). WE HAVE CONSIDERE D THE RIVAL CONTENTIONS ITA NO. 4192/MUM/2018 AND ARE OF THE VI EW THAT HON'BLE BOMBAY HIGH COURT IN THE CASE OF MOHAMMAD HAJI ADAM & CO. AND ORS. (SUPRA) HAS CONSIDERED THIS ISSUE AND RESPECTF ULLY FOLLOWING THE SAME, WE DIRECT THE AO TO RESTRICT THE PROFIT RATE ONLY TO THE EXTENT OF DIFFERENTIAL PERCENTAGE AS DECLARED ON THE BOGUS PU RCHASES AND AS DECLARED ON THE REGULAR PURCHASES, HENCE, WE DIRECT THE AO A CCORDINGLY. 6. IT IS CLEAR FROM THE ABOVE DECISIONS THAT IN CAS E OF BOGUS PURCHASES WHERE SALES ARE ACCEPTED, THE ADDITION IS REQUIRED TO BE MADE ONLY TO THE EXTENT OF DIFFERENCE BETWEEN THE GP DEC LARED BY THE ASSESSEE ON NORMAL PURCHASES VIS A VIS BOGUS PURCHA SES. RESPECTFULLY FOLLOWING THE ORDER OF THE HONBLE JURISDICTIONAL H IGH COURT AND THE COORDINATE BENCH OF THE ITAT, MUMBAI, WE RESTORE TH E MATTER BACK TO THE FILE OF THE A.O. TO DECIDE THE MATTER AFRESH TO VERIFY THE CORRECTNESS OF G.P. CALCULATION SO FILED BY THE ASSESSEE AND TO DECIDE THE SAME IN TERMS OF HONBLE BOMBAY HIGH COURT DECISION REFERRE D ABOVE. ITA NO. 6790/MUM/2018 SANJAYKUMAR H JAIN VS ITO 5 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES ONLY. ORDER PRONOUNCED IN THE OPEN COURT ON 12 TH DECEMBER, 2019. SD/- (VIKAS AWASTHY) SD/- (R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI; DATED 12/12/2019 *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//