TEJDEEP STEELS, MUMBAI V. INCOME TAX OFFICER 19(3)(5), MUMBAI

ITA 7144/MUM/2018

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 9658 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-03-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 11-12-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R KAVITHA
• Assessee Lawyers: VIMAL KUMAR SETHIA
• Keywords: Principle of natural justice
• Section: 133(6); 143(1); 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY , JUDICIAL MEMBER ITA NO. 7144 / MUM . /201 8 ( ASSESSMENT YEAR : 20 10 11 ) TEJDEEP STEELS 74, BHANDARI STREET 1 ST KUMBHARWADA MUMBAI 400 004 PAN AABFT9449F . APPELLANT V/S INCOME TAX OFFICER WARD 19(3)(5) , MUMBAI . RESPONDENT ASS ESSEE BY : SHRI VIMAL KUMAR SETHIA REVENUE BY : MS. R. KA V ITHA DATE OF HEARING 19 .0 2 .2020 DATE OF ORDER 13.03.2020 O R D E R T HE CAPTIONED APPEAL HAS BEEN FILED BY THE ASSESSEE CHALLENGING THE ORDER D ATE D 15 TH MAY 2018, PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) 2, MUMBAI, FOR THE ASSESSMENT YEAR 2010 11. 2. T HE DISPUTE IN THE PRESENT APPEAL IS CONFINED TO THE ADDIT ION OF ` 8,88,847, MADE ON ACCOUNT OF NON GENUINE PURCHASES. 3. THE ASSESSEE HAD ALSO RAISED CERTAIN LEGAL ISSUES RELATING TO VIOLATION OF PRINCIPLE S OF NATURAL JUSTICE AS WELL AS VALIDITY OF RE 2 TEJDEEP STEELS OPENING OF ASSESSMENT YEAR UNDER SECTION 147 OF THE ACT. HOWEVER, AT THE TIME OF HEARING LEARNED AUTHORISED REPRESENTATIVE HAS NOT ADVANCED ANY ARGUMENT WITH REGARD TO THE AFORESAID GROUND S AND HAS RESTRICTED HIS ARGUMENT ON THE MERITS OF THE ISSUE. THEREFORE, GROUNDS NO.1 AND 2, RAISE BY THE ASSESSEE ARE TREATE D AS NOT PRESSED, HENCE, DISMISSED. 4. AS REGARDS THE MERITS OF THE ISSUE, BRIEF FACTS ARE, THE ASSESSEE , A PARTNERSHIP FIRM , IS ENGAGED IN THE BUSINESS OF TRADING IN FERROUS AND NON FERROUS METALS. FOR THE ASSESSMENT YEAR UNDER DISPUTE, THE ASSESSEE FILED I TS RETURN OF INCOME ON 25 TH SEPTEMBER 2010, DECLARING TOTAL INCOME OF ` 82,976. INITIALLY, THE RETURN OF INCOME FILED BY THE ASSESSEE WAS PROCESSED UNDER SECTION 143(1) OF THE ACT. SUBSEQUENTLY, ON THE BASIS OF INFORMATION RECEIVED FROM THE SALES TAX DEPAR T MENT, GOVERNMENT OF MAHARASHTRA THROUGH THE OFFICE OF THE DGIT (INV.), MUMBAI, THAT THE ASSESSEE IS A BENEFICIARY OF ACCOMMODATION EN TRIES PROVIDED BY CERTAIN ENTITIES IDENTIFIED AS A HAWALA OPERATOR S BY THE SALES TAX DEPARTMENT, THE ASSESSING OFFICER RE OPENED THE ASSESSMENT UNDER SECTION 147 OF THE ACT. IN THE COURSE OF THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER CALLED UPON THE ASSESSEE TO PROVE GENUINENESS OF PURCHASES AMOUNTING TO ` 71,10,781 CLAIMED TO HAVE BEEN MADE DURING THE YEAR FROM SIX ENT ITIES. FURTHER, TO INDEPENDENTLY VERIFY THE GENUINENESS OF SUCH PURCHASE S , THE 3 TEJDEEP STEELS ASSESSING OFFICER ISSUED NOTICE S UNDER SECTION 133(6) OF THE ACT TO THE CONCERN PARTIES WHICH , AS ALLEGED BY THE ASSESSING OFFICER , RETURNED BACK UNSERVED. AFTER PERUSING THE SU BMISSIONS MADE BY THE ASSESSEE, THE ASSESSING OFFICER WAS OF THE VIEW THAT THE ASSESSEE HAD FAILED TO PRO VE THE GENUINENESS OF PURCHASES A S THE ASSESSEE COULD ONLY FURNISH THE PURCHASE BILLS AND NO OTHER EVIDENCES COULD BE FURNISHED. FURTHER, HE OBSERVED , THE PURCHASE PRICE SHOWN IN THE PURCHASE BILLS CANNOT BE ACCEPTED AS SUCH PRICE MIGHT HAVE BEEN INFLATED. THUS, ULTIMATELY, HE TREATED THE PURCHASES MADE BY THE ASSESSEE TO BE NON GENUINE. H OWEVER, RELYING UPON CERTAIN JUDICIAL PRECEDENTS, HE ULTIMATELY CO NCLUDED THAT ONLY THE PROFIT EMBEDDED IN SUCH PURCHASES HAS TO BE CONSIDERED FOR ADDITION. ACCORDINGLY, APPLYING THE PROFIT RATE OF 12.5% ON THE DISPUTED PURCHASES OF ` 71,10,781, HE DISALLOWED AN AMOUNT OF ` 8,88,847, AND ADDED BACK TO THE INCOME OF THE A SSESSEE. THE AFORESAID ADDITION WAS ALSO CONFIRMED BY LEARNED COMMISSIONER (APPEALS). 5. T HE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED , THE ASSESSEE HAS ALREADY DECLARED A GROSS PROFIT RATE OF 10.72%, HENCE, FURTHER DISALLOWANCE @ 12.5% WOULD PUSH THE GROSS PROFIT RATE TO ALMOST 24%, WHICH IS UNIMAGINABLE IN THE NATURE OF BUSINESS CARRIED ON BY THE ASSESSEE. HE SUBMITTED , WHILE DECIDING I DENTICAL ISSUE IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2011 12, THE TRIBUNAL IN SIMILAR 4 TEJDEEP STEELS FACTS AND CIRCUMSTANCES HAS RESTRICTED THE DISALLOWANCE TO 5% OF THE NON GENUINE PURCHASES. THUS, HE SUBMITTED , IN TH E IMPUGNED ASSESSMENT YEAR ALSO THE DISALLOW ANCE SHOULD BE RESTRICTED TO 5% OF THE NON GENUINE PURCHAS E S. 6. THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED UPON THE OBSERVATIONS OF THE ASSESSING OFFICER AND THE LEARNED COMMISSIONER (APPEALS). 7. I HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE MATERI AL ON RECORD. IT IS EVIDENT , THOUGH , THE ASSESSING OFFICER HAS TREATED PURCHASES AS N ON GENUINE, HOWEVER, ULTIMATELY HE HAS PROCEEDED TO MAKE DISALLOWANCE BY APPLYING THE PROFIT RATE EMBEDDED IN SU CH PURCHASES. IN THE PROCESS, HE HAS ES TIMATED THE PROFIT R ATE @ 12.5%. I T IS NOT DISPUTED THAT THE ASSESSEE IS A TRADER IN FERROUS AND NON FERROUS METALS, WHEREIN , AS PER MARKET NORMS THE PROFIT RATE IS IN THE RANGE OF 4% TO 5%. IT IS ALSO A FACT ON RECORD THAT THE ASSESSEE IN THE IMPUGNED ASSESSMENT YEAR HAS DEC LARED A GROSS PROFIT RATE OF 10.72%. FURTHER, IT IS NOTICED THAT WHILE DECIDING IDENTICAL ISSUE IN ASSESSEES OWN CASE IN ASSESSMENT YEAR S 2009 10 AND 2011 12 VIDE ITA NO.4339 AND 4340/MUM./2018, DATED 25 TH JUNE 2019, THE CO ORDINATE BENCH HAS RESTRICTED T HE ADDITION TO 5% OF THE NON GENUINE PURCHASES. FACTS BEING MORE OR LESS IDENTICAL, RESPECTFULLY FOLLOWING THE AFORESAID DECISION OF THE CO ORDINATE BENCH IN ASSESSEES OWN CASE, I DIRECT THE 5 TEJDEEP STEELS ASSESSING OFFICER TO RESTRICT THE ADDITION TO 5% OF THE NON GENU INE PURCHASES. GROUND S RAISED BY THE ASSESSEE ARE PARTLY ALLOWED. 8. IN THE RESULT, APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN C OURT ON 13.03.2020 SD/ - SAKTIJIT DEY JUDICIAL MEMBER MUMBAI, DATED: 13.03.2020 COPY OF THE ORDER FORWARDED TO : (1) THE ASSESSEE; (2) THE REVENUE; (3) THE CIT(A); (4) THE CIT, MUMBAI CITY CONCERNED; (5) THE DR, ITAT, MUMBAI; (6) GUARD FILE . TRUE COPY BY ORDER PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY ASSISTANT REGISTRAR ITAT, MUMBAI