SHASHI KUMAR S. NAIR, THANE V. ITO 19(3)(4),

ITA 6811/MUM/2016

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 9097 (ITAT-MUMBAI)
• Duration Of Justice: 10 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-10-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 20-06-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 21-11-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: N HEMALATHA
• Assessee Lawyers: DINESH CHAWLA
• Keywords: Bogus purchase

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC , BENCH MUMBAI BEFORE SHRI R.C.SHARMA, AM ITA NO. 6811 / MUM/20 16 ( ASSESSMENT YEAR : 2010 - 11 ) SHRI SHASHI KUMAR S. NAIR OFFICE 55, GROUND FLOOR WONDER COMPLEX KAPURWADI THANE (W) 400607 VS. ITO 19(3)(4) MUMB AI PAN/GIR NO. ABUPN9393G APPELLANT ) .. RESPONDENT ) ASSESSEE BY SHRI DINESH CHAWLA REVENUE BY MS. N. HEMALATHA DATE OF HEARING 04 / 10/ 201 7 DATE OF PRONOUNCEME NT 09 / 10 /201 7 / 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) - 34, MUMBAI DATED 19/03/2016 FOR A.Y.2010 - 11 IN THE MATTER OF ORDER PASSED U/S.143(3) OF THE INCOME - TAX ACT, 1961. 2. IN THIS APPEAL, ASSESSEE IS AGGRIEVED FOR UPHOLDING ADDITION TO THE EXTENT OF 10 0 % OF THE BOGUS PURCHASES. 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. FACTS IN BRIEF ARE THAT INFORMATION WAS RECEIVED BY AO FROM THE MAHARASHTRA SALES TAX DEPARTMENT REGARDING FICTITIOUS PU RCHASES FROM M/S. DONEAR TRADING PVT. LTD , M/S. LINUX SALES AGENCY PVT. LTD.., M/S. SMART LINK TRADER PVT. LTD. AND M/S. SHRISHTI MERCANTILE PVT. LTD. AFTER RECEIVING THE INFORMATION FROM ITA NO. 6811/MUM/2016 SHRI SHASHI KUMAR S NAIR 2 THE SALES TAX DEPARTMENT, THE A O ISSUED LETTERS OF ENQ UIRY M / S 13 3( 6) OF THE ACT. HOWEVER SUCH ENQUIRY LETTERS ISSUED WERE RETURNED BACK 'UNSERVED'. 4. IN VIEW OF ABOVE DISCUSSION T HE AO DISALLOWED THE ENTIRE PURCHASES AMOUNTING TO RS.9,05,549/ - MADE FROM THE FOUR PARTIES AND ADDED BACK THIS AMOUNT TO THE INCOME OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION. 5. BY THE IMPUGNED ORDER, CIT(A) CONFIRMED THE ACTION OF THE AO. 6. BEFORE ME, L EARNED AR PLACED RELIANCE ON THE FOLLOWING CASE LAWS WHERE IN IT WAS HELD THAT PURCHASES CANNOT BE TERMED AS BOGUS BY THE AO MERELY BE CAUSE THE SUPPLIER WAS LISTED AS A HAWALA DEALER BY THE VAT AUTHORITIES FOR ISSUING BOGUS BILLS WITHOUT ACTUALLY SELLING ANY GOODS. A) THE ITAT IN THE CASE OF ACIT VS. RAMILA PRAVIN SHAH (ITA NO. 5246/MUM/2013, DATED 05.03.2015) STATES THAT NOTICES C OMING BACK, DOES NOT MEAN, THOSE PARTIES ARE BOGUS, THEY ARE JUST DENYING THEIR BUSINESS TO AVOID SALES TAX/ VAT ETC. FURTHER, ALSO PAYMENTS ARE THROUGH PROPER BANKING CHANNEL AND FAILURE TO PRODUCE PARTIES CANNOT BE TREATED ADVERSELY AGAINST ASSESSEE. B) THE ITAT IN CASE OF RARNESH KUMAR & CO. VS. THE ACIT (ITA/2959/MUM/2014, DATED 28.11.2014) STATED THAT PURCHASES ARE SUPPORTED BY PROPER INVOICES AND PAYMENTS HAVE BEEN MADE BY ACCOUNT PAYEE CHEQUES WHICH ARE DULY REFLECTED IN BOOKS OF ACCOUNTS. FURTH ER, ALSO THERE IS NO EVIDENCE TO SHOW THAT ASSESSEE HAS RECEIVED CASH BACK FROM SUPPLIER. C) THE ITAT IN THE CASE OF ITO VS. DEEPAK POPATLAL GALA (5920 - 6203/MUM/2013, DATED 11.03.2015) STATES THAT THE AO WAS NOT JUSTIFIED IN MAKING ADDITION ON THE BAS IS OF STATEMENTS GIVEN BY THE THIRD PARTIES BEFORE THE SALES TAX DEPARTMENT, WITHOUT CONDUCTING ANY FURTHER INVESTIGATION ESPECIALLY WHEN THE ASSESSEE HAS DISCHARGED ITS PRIMARY ONUS OF SHOWING BOOKS OF ACCOUNT, PAYMENT THROUGH ACCOUNT PAYEE CHEQUE AND SAL E VOUCHER FOR SALE OF GOODS. D) THE ITAT IN CASE OF DCIT VS. SHRI RAJEEV G. KALATHIL (ITA NO. 6727/MUM/2012) STATES THAT AO HAS NOT VERIFIED THE IMMEDIATE CASH WITHDRAWAL FROM THE SUPPLIER ACCOUNT AND MOVEMENT OF GOODS IS NOT ITA NO. 6811/MUM/2016 SHRI SHASHI KUMAR S NAIR 3 IN DOUBT, THEREFORE NO D ISALLOWANCE ON ACCOUNT OF PURCHASES IS CALLED FOR. 7. THE ITAT IN CASE OF ITO VS. SHRI PARESH ARVIND GANDHI (ITA NO. 5706/MUM/2013) STATES THAT AO HAS NOT VERIFIED WHETHER THERE WAS IMMEDIATE CASH WITHDRAWAL FROM THE ACCOUNT OF THE SUPPLIER AND ALSO IT IS EVIDENT THAT PART OF THE GOODS RECEIVED WAS FORMING PART OF CLOSING STOCK. THEREFORE NO DISALLOWANCE IS CALLED FOR. 8. ON THE OTHER HAND LEARNED DR RELIED ON THE ORDER OF LOWER AUTHORITIES. 9. I HAVE CONSIDERED RIVAL CONTENTIONS AND CAREFULLY GONE THROUG H THE ORDERS OF THE AUTHORITIES BELOW AND FOUND THAT THE ASSESSEE IS INTO THE BUSINESS OF MANUFACTURING CHEMICALS WHICH ARE USED IN TEXTILE INDUSTRY, RUBBER INDUSTRY, PHARMA INTERMEDIATES, ADHESIVES LAMINATIONS AND OTHER SPECIALTY CHEMICALS. PURCHASES MADE BY HIM WERE DULY RECORDED IN BOOKS THROUGH PROPER TAX INVOICE RECEIVED FROM THE SUPPLIER AND THROUGH GOODS RECEIPT `NOTE (GRN) IN BOOKS. THE MATERIALS SO PURCHASED WAS ALSO USED IN MANUFACTURING PROCESS OF ASSESSEE. FURTHER, PAYMENTS OF GOODS PURCHASED WE RE ALSO THROUGH ACCOUNT PAYEE CHEQUES. THESE HAVE BEEN REFLECTED IN THE BANK STATEMENT OF THE ASSESSEE. THE CORRESPONDING SALES OF GOODS SO MANUFACTURED BY THE ASSESSEE HAS NOT BEEN DECLINED BY THE AO NOR THE BOOKS OF ACCOUNTS WERE REJECTED. ACCORDINGLY, T HERE IS NO JUSTIFICATION FOR ADDITION OF 100% OF PURCHASES. AT THE MOST PROFIT ELEMENT EMBODIED IN SUCH PURCHASES MAY BE ADDED. 10 . IN VIEW OF THE ABOVE DISCUSSION AND APPLYING THE PROPOSITION OF LAW LAID DOWN IN THE ABOVE JUDICIAL PRONOUNCEMENTS TO THE FA CTS OF INSTANT CASE AND KEEPING IN VIEW THE TOTALITY OF FACTS AND CIRCUMSTANCE S OF THE CASE VIS - - VIS GP RATE ALREADY DECLAR ED BY THE ASSESSEE, I UPHOLD THE ITA NO. 6811/MUM/2016 SHRI SHASHI KUMAR S NAIR 4 ADDITION TO THE EXTENT OF 12.5% ON SUCH BOGUS PURCHASES. I DIRECT ACCORDINGLY. 11 . AO HAS ALSO DISA LLOWED ON ADHOC BASIS 20% OF GENERAL EXPENSES AND 10% OF TELEPHONE, MOTOR CAR AND VEHICLE MAINTENANCE EXPENSES. THE DISALLOWANCE OF GENERAL EXPENDITURE WAS MADE BY THE AO ON THE PLEA THAT THERE WAS SELF - MADE VOUCHERS, BUT I FOUND THAT THESE WERE DULY ACKNO WLEDGED BY THE RECIPIENT AND THE AO COULD NOT POINT OUT ANY SPECIFIC UNVOUCHED EXPENDITURE. I THEREFORE, DIRECT THE AO TO RESTRICT THE DISALLOWANCE TO THE EXTENT OF 10% OF GENERAL EXPENSES . DISALLOWANCE IN RESPECT OF TELEPHONE, MOTOR CAR AND VEHICLE MAINTE NANCE EXPENDITURE ARE DIRECTED TO BE RESTRICTED TO 10% KEEPING IN VIEW TOTALITY OF FACTS AND CIRCUMSTANCES OF THE CASE. 1 2 . IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED IN PART. O RDER PRONOUNCED IN THE OPEN COURT ON THIS 09 / 10 /2017 S D/ - ( R.C.SHARMA ) ACCOUNTANT MEMBER MUMBAI ; DATED 09 / 10 /201 7 KARUNA SR. 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, MUMBA I 6. GUARD FILE. //TRUE COPY//