MALCHAND D. CHOUDHARY, MUMBAI V. INCOME TAX OFFICER 26(2)(2), MUMBAI

ITA 6846/MUM/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 0229 (ITAT-MUMBAI)
• Duration Of Justice: 2 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-02-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 04-12-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ARJU GORADIA
• Keywords: Bogus purchase
• Section: 133(6)

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI B.R. BASKARAN (AM) I.T.A. NO. 6846 /MUM/ 2017 (ASSESSMENT YEAR 20 09 - 10 ) I.T.A. NO. 6898/MUM/2017 (ASSESSMENT YEAR 2010 - 11) SHRI MALCHAND D. CHOUDHARY 901, EVEREST BUILDING LAKE HOMES COMPLEX POWAI, MUMBAI - 400 076. PAN : ACHPC2425Q V S . ITO - 26(2)(2) C - 11, ROOM NO. 704 7 TH FLOOR, PRATYAKSHKAR BHAVAN, BKC BANDRA EAST MUMBAI - 400 051. ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY SHRI JAYANT BHATT DEPARTMENT BY MS. ARJU GORADIA DATE O F HEARING 21. 2 . 201 8 DATE OF PRONOUNCEMENT 21 . 2 . 201 8 O R D E R THE ASSESSEE HAS FILED THESE APPEALS CHALLENGING THE ORDERS PASSED BY LD CIT(A) - 38, MUMBAI AND THEY RELATE TO THE ASSESSMENT YEARS 2009 - 10 AND 2010 - 11. THE LD CIT(A) CONFIRMED THE ADDITION RELATING TO ALLEGED BOGUS PURCHASES MADE IN AY 2009 - 10. HOWEVER HE GRANTED PARTIAL RELIEF TO THE ASSESSEE IN 2010 - 11 IN RESPECT OF ADDITIONS RELATING TO BOGUS PURCHASES AND CESSATION OF LIABILITY. 2. I HEARD THE PARTIES AND PERUSED THE RECORD. THE ASSESSEE IS A MANUFACTURER OF ALL TYPES OF PACKING MATERIAL AND PAPER ROLLS. CONSEQUENT TO THE INFORMATION RECEIVED FROM THE SALES TAX DEPARTMENT, IT CAME TO THE NOTICE OF THE REVENUE THAT THE ASSESSEE HAS MADE PURCHASES TO THE TUNE OF RS.26,78,563/ - AND RS.13,59,586/ - DURING THE YEARS RELEVANT TO THE ASSESSMENT YEARS 2009 - 10 AND 2010 - 11 RESPECTIVELY FROM THE PARTIES, WHO WERE LISTED OUT BY THE SALES TAX DEPARTMENT AS HAWALA DEALERS, I.E., THEY HAVE PROVIDED ONLY ACCOMMODATION BILLS WITHOUT ACTUALLY SUPPLYING THE MATERIAL. DURING THE COURSE OF ASSESSMENT SHRI MALCHAND D. CHOUDHARY 2 PROCEEDINGS, THE AO ISSUED NOTICES U/S 133(6) OF THE ACT, BUT THEY WERE RETURNED BACK UN - SERVED. HENCE THE AO ASKED THE ASSESSEE TO PRODUCE THE SUPPLIERS, BUT THE ASSESSEE FAILED. HENCE THE AO TREAT ED THE ABOVE SAID PURCHASES AS BOGUS IN NATURE. HOWEVER HE ADDED 25% VALUE OF ALLEGED BOGUS PURCHASES IN AY 2009 - 10 AND DISALLOWED ENTIRE AMOUNT OF ALLEGED BOGUS PURCHASES IN AY 2010 - 11. THE AO ALSO NOTICED THAT THE ALLEGED BOGUS PURCHASES HAVE BEEN MA DE FROM M/S FORAM TRADERS AND M/S VSK ENTERPRISES IN BOTH THE YEARS. HE FURTHER NOTICED THAT PART OF AMOUNT DUE TO THEM WAS OUTSTANDING AS ON 31.3.2010. SINCE THE PURCHASES HAVE BEEN HELD TO BE BOGUS, THE AO TOOK THE VIEW THAT THEIR OUTSTANDING BALANCE I S NO LONGER PAYABLE AND ACCORDINGLY ASSESSED THE SAME AGGREGATING TO RS.21,79,594/ - AS CESSATION OF LIABILITY U/S 41(1) OF THE ACT. 3. BEFORE LD CIT(A), THE ASSESSEE PLEADED FOR DELETION OF THE DISALLOWANCE OF PURCHASES BY SUBMITTING THAT HE HAS MAIN TAINED STOCK REGISTER FOR THE RECEIPT AND ISSUE OF MATERIALS. THE LD CIT(A) CONFIRMED THE ORDER PASSED BY AO IN 2009 - 10, WHEREIN THE AO HAD DISALLOWED 25% OF THE VALUE OF ALLEGED BOGUS PURCHASES. IN AY 2010 - 11, THE LD CIT(A) SUSTAINED DISALLOWANCE TO THE EXTENT OF 25% OF THE ALLEGED BOGUS PURCHASES AND ALSO 25% OF THE LIABILITY TREATED AS CEASED. 4. THE LD A.R SUBMITTED THAT THE ASSESSEE HAS RECONCILED THE RECEIPT AND ISSUE OF MATERIALS IN AY 2009 - 10. HE FURTHER SUBMITTED THAT THE ASSESSEE HAS DECLAR ED G.P RATE OF AROUND 21% FROM AY 2004 - 05 ONWARDS. HE HAS DECLARED G.P RATE AT 21.21% AND 28.65% RESPECTIVELY IN AY 2009 - 10 AND 2010 - 11. ACCORDINGLY HE SUBMITTED THAT THE PROFIT ESTIMATED @ 25% IS TOO HIGH AND THE SAME WOULD RESULT IN ABNORMAL ADDITION. HE FURTHER SUBMITTED THAT THE ADDITION MADE U/S 41(1) IS NOT WARRANTED WHEN THE LIABILITY STILL EXISTS AND FURTHER THE OUTSTANDING AMOUNT IS PART OF VERY SAME TRANSACTION OF PURCHASES. HE FURTHER SUBMITTED THAT SHRI MALCHAND D. CHOUDHARY 3 THE AO CANNOT MAKE ADDITION OF BOTH PURCHAS ES AND CORRESPONDING CREDITORS BALANCE. ON THE CONTRARY, THE LD D.R SUBMITTED THAT THE ASSESSEE HAS FAILED TO PRODUCE THE SUPPLIERS BEFORE THE AO. 5. I AGREE WITH THE CONTENTION OF THE LD A.R THAT AO WAS NOT RIGHT IN MAKING ADDITION OF BOTH PURCHASE S AND CORRESPONDING CREDITORS BALANCE, BECAUSE BOTH RELATE TO SAME TRANSACTION OF PURCHASE ONLY. ACCORDINGLY I SET ASIDE THE ORDER PASSED BY LD CIT(A) IN RESPECT OF ADDITION MADE U/S 41(1) OF THE ACT IN AY 2010 - 11 AND DIRECT THE AO TO DELETE THE ADDITION MADE BY HIM U/S 41(1) OF THE ACT. 6. IN RESPECT OF ADDITION RELATING TO BOGUS PURCHASES, I NOTICE THAT THE LD CIT(A) HAS SUSTAINED ADDITION TO THE EXTENT OF 25%. I NOTICE THAT THE ASSESSEE HAS BEEN DECLARING G.P RATE @ 21% IN THE EARLIER YEARS. IN AY 2009 - 10, THE ASSESSEE DECLARED G.P RATE AT THE SAME LEVEL AND IN AY 2010 - 11, HE HAS DECLARED G.P RATE @ 28.65%, I.E., AT HIGHER LEVEL. THE ASSESSEE HAS ALSO RECONCILED THE RECEIPT OF ISSUE OF MATERIALS IN AY 2009 - 10. OTHER THINGS BEING EQUAL, THE BOOKING OF BOGUS PURCHASES WOULD HAVE REDUCED THE G.P RATE IN THE NORMAL CIRCUMSTANCES. HENCE, UNDER THESE SET OF FACTS, I AM OF THE VIEW THAT THE ADDITION SUSTAINED @ 25% OF VALUE OF ALLEGED BOGUS PURCHASES IS ON THE HIGHER SIDE IN BOTH THE YEARS UNDER CONSIDER ATION. ACCORDINGLY I MODIFY THE ORDER PASSED BY LD CIT(A) ON THIS ISSUE IN BOTH THE YEARS UNDER CONSIDERATION AND DIRECT THE AO TO SUSTAIN ADDITION TO THE EXTENT OF 12% OF THE VALUE OF ALLEGED BOGUS PURCHASES. IN MY VIEW, THE SAME WOULD MEET THE ENDS OF JUSTICE IN BOTH THE YEARS. SHRI MALCHAND D. CHOUDHARY 4 7. IN THE RESULT, BOTH THE APPEALS FILED BY THE ASSESSEE ARE PARTLY ALLOWED. ORDER HAS BE EN PRONOUNCED IN THE COURT ON 2 1.2. 201 8 . SD/ - (B.R.BASKARAN) AC COUNTANT MEMBER MUMBAI ; DATED : 21 / 2 / 20 1 8 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COP Y// ( SENIOR P RIVATE S ECRETARY ) PS ITAT, MUMBAI