ACIT 22 (3), MUMBAI V. M/S RAMNIKLAL S GOSALIA & CO., MUMBAI

ITA 7339/MUM/2019

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 3685 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-06-2021
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2010-2011
• Appeal Filed On: 29-11-2019
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: RAJESH MISHRA
• Assessee Lawyers: DRUTIKA
• Keywords: Bogus purchase; Depreciation; TDS; FORM 26AS
• Section: 40A(3); 143(3); 142(1); 40(a)(ia); 143(1); 250; 80IA; 143(2); 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE SHRI S RIFAUR RAHMAN, ACCOUNTANT MEMBER & SHRI PAVAN KUMAR GADALE, JUDICIAL MEMBER ITA NO. 7339/MUM/2019 (A.YS: 2010-11) ACIT 22(3) 305, 3 RD FLR, PIRAMAL CHAMBERS LAL BAUG, PAREL, MUMBAI 400012 VS. M/S RAMNIKLAL S . GOSALI & CO. 608 NATIONAL HOUSE BAPURAO JAGTAP ROAD, JACOB CIRCLE, MUMBAI 400011. PAN/GIR NO. : AADFR2284G APPELLANT .. RESPONDENT APPELLANT BY : SHRI RAJESH MISHRA , DR RESPONDENT BY : MS. DRUTIKA, AR DATE OF HEARING 20 .0 5 .2021 DATE OF PRONOUNCEMENT 02 .0 6 .2021 / O R D E R PER PAVAN KUMAR GADALE, JM: THIS APPEAL IS FILED BY THE REVENUE AGAINST THE SEPARATE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) - 33 MUMBAI, PASSED U/S. 143(3) AND 250 O F THE INCOME TAX ACT, 1961. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL I. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN IGNORING THE LATEST DECISION OF SC IN THE CASE OF MS. NK PROTEINS LTD VS. CIT, WHEREIN THE SU PREME COURT HAS DECIDED THE ISSUE OF BOGUS PURCHASES WITH A ITA NO. 7339/MUM/2019 M/S. RAMNIKLAL GOSALIA & CO. - 2 - DIRECTION OF MAKING ADDITION AMOUNTING TO ENTIRE BO GUS PURCHASES AS ASSESSEE INCOME. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE CIT(A) ERRED IN ESTIMATING THE PROFIT ELEM ENT EMBEDDED IN THE AMOUNT REPRESENTED BY BOGUS PURCHAS E RECORDED IN THE BOOKS OF ACCOUNTS AT 12.5% OF THE T OTAL BOGUS PURCHASE WITHOUT APPRECIATING THE FACT THAT ANY EXP ENDITURE NOT FOUND TO BE INCURRED AT ALL THAT THE SAME IS AL SO NOT LAID OUT OR EXPENDED WHOLLY AND EXCLUSIVELY FOR THE PURP OSE OF BUSINESS IS NOT ADMISSIBLE IN TERMS OF THE PROVISIO NS OF SEC. 37 OF THE ACT. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE CIT(A) FAILED TO APPRECIATE THE FACT THAT ONUS IS ON THE ASSESSEE TO EXPLAIN AND SUBSTANTIATE THE GENUINENES S AND TRUE NATURE OF PURCHASE TRANSACTIONS. 4. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A ) ON THE ABOVE GROUND BE REVERSED AND THAT OF THE AO BE RESO RTED. 5. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER AN Y GROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS ENGAGED IN THE BUSINESS AS A CIVIL CONTRACTOR AND F ILED THE RETURN OF INCOME FOR THE A.Y 2009-10 ON 30.08.2010 WITH THE TOTAL INCOME OF RS.20,63,35,060/-, THE RETURN O F INCOME WAS PROCESSED U/S 143(1) OF THE ACT. SUBSEQUENTLY, THE CASE WAS SELECTED FOR SCRUTINY AN D THE NOTICE U/S 143(2) AND 142(1) OF THE ACT ALONG WITH QUESTIONNAIRE WERE ISSUED. IN COMPLIANCE, THE LD AR OF THE ASSESSEE APPEARED FROM TIME TO TIME AND FURNISH ED THE DETAILS AND THE CASE WAS DISCUSSED. ON PERUSA L OF ITA NO. 7339/MUM/2019 M/S. RAMNIKLAL GOSALIA & CO. - 3 - THE FINANCIAL STATEMENTS THE A.O FOUND (I) THE ASSE SSEE HAS INCOME FROM HOUSE PROPERTY AND THE ANNUAL VALU E OF THE PROPERTY WAS NOT CONSIDERED AND HENCE MADE AN ADDITION OF RS.1,93,200/.-(II)THE ASSESSEE HAS MADE PAYMENTS IN CASH FOR CONFERENCE EXPENSES AND THERE IS CONTRAVENTION OF PROVISIONS U/SEC 40A(3) OF THE ACT RS.33,866/-(III)DISALLOWANCE OF COMMISSION AND BROK ERAGE EXPENSES U/SEC 40(A)(IA) OF THE ACT FOR NON DEDUCTI ON OF TDS OF RS. 4,140/-.(IV) DISALLOWANCE OF DEPRECIATI ON ON INTANGIBLE ASSETS OF RS.7,41,577/-(V) EXCESS CLAIM OF DEPRECIATION ON RECALCULATION OF DEPRECIATION ON WI ND MILLS OF RS. 3,94,556/-.(VI)THE A.O. HAS RECEIVED T HE INFORMATION FROM SALES TAX DEPARTMENT, MAHARASHTRA, MUMBAI THAT THE ASSESSEE HAS OBTAINED BOGUS PURCHAS E BILLS FROM M/S. ARYAN SALES CORPORATION OF RS. 14,72,640/- AND THE A.O. HAS CALLED FOR THE DETAILS U/S 142(1) OF THE ACT. WHEREAS, THE ASSESSEE HAS FILED A LETTER DATED 22.01.2013 MENTIONING THE FACTS AND THE DETAI LS OF PURCHASE TRANSACTIONS. THE A.O FOUND THAT THE ASSES SEE HAS OBTAINED THE BOGUS PURCHASE BILLS AND MADE ADDITION APPLYING THE RATIO OF JUDICIAL DECISION A ND ESTIMATING THE INCOME @ 25% ON NON GENUINE PURCHASE S WHICH WORKS OUT TO RS.3,68,160/-(VII) DIFFERENCE IN RECEIPTS AS PER FORM 26AS AND COULD NOT BE RECONCIL ED OF RS2,33,609/- AND (VIII) DISALLOWANCE OF EXCESS CLA IM OF ITA NO. 7339/MUM/2019 M/S. RAMNIKLAL GOSALIA & CO. - 4 - DEDUCTION U/S 80IA OF THE ACT OF RS. 3,94,556/-.FI NALLY THE A.O. HAS ASSESSED THE TOTAL INCOME OF RS. 20,79,09,610/- AND PASSED THE ORDER U/S 143(3) DATE D 15.03.2013. 3. AGGRIEVED BY THE ORDER, THE ASSESSEE HAS FILED A N APPEAL WITH THE CIT(A).THE LD.CIT(A) CONSIDERED TH E GROUNDS OF APPEAL, FINDINGS OF THE A.O. AND SUBMISSIONS. THE CIT(A) ON THE DISPUTED ISSUE OF ESTIMATION OF INCOME ON PURCHASES HAS RESTRICTED TH E ADDITION @12.5% AS AGAINST @25% AND IN OTHER ISSUES HAS GRANTED RELIEF AND PARTLY ALLOWED THE APPEAL. AGGRIEVED BY THE CIT(A) ORDER, THE REVENUE HAS FILE D THE APPEAL WITH THE HONBLE TRIBUNAL. 4.AT THE TIME OF HEARING, THE LD.DR SUBMITTED THAT THE CIT(A) HAS ERRED IN PASSING THE ORDER WITHOUT CONSIDERING THE FACTS THAT THE GENUINENESS OF THE PURCHASES WERE NOT PROVED AND SUPPORTED THE ORDERS OF THE A.O. CONTRA LD.AR SUPPORTED THE ORDER OF THE CIT(A). 5. WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE SOLE CRUX OF THE DISPUTED I SSUE AS ITA NO. 7339/MUM/2019 M/S. RAMNIKLAL GOSALIA & CO. - 5 - ENVISAGED BY THE LD. DR IS THAT THE CIT(A) HAS REST RICTED THE ADDITION TO THE EXTENT @12.5% OF THE BOGUS PURC HASES CONSIDERING THE GP RATIO AND PROFIT ELEMENT EMBEDDE D. WE FOUND THAT THE CIT(A) HAS DEALT ON THE FACTS AND G. P RATE FOR THE ASST YEAR 2010-11 AND RELIED ON THE RATIO O F ITAT DECISIONS AND ESTIMATED THE GP RATE @ 12.5% . THE L D.DR COULD NOT CONTROVERT THE OBSERVATIONS OF THE LD. CI T(A) WITH ANY NEW COGENT EVIDENCE AND MATERIAL BUT RELIE D ONLY THE A.O ORDER. WE ARE OF THE OPINION THAT THE CIT( A) DEALT ON THE FACTS AND CONSIDERED THE PROFIT ELEMENT IN T HE BOGUS PURCHASES AND THE A.O HAS NOT DISPUTED THE S ALES. ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE OR DER OF THE CIT(A) ON THIS DISPUTED ISSUE AND UPHOLD THE SA ME AND DISMISS THE GROUNDS OF APPEAL RAISED BY THE REV ENUE. 6. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 02.06.2021 SD/- SD/- ( S RIFAUR RAHMAN ) (PAVAN KUMAR GADALE) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED 02.06.2021 KRK, PS ITA NO. 7339/MUM/2019 M/S. RAMNIKLAL GOSALIA & CO. - 6 - / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / THE CIT(A) 4. ( ) / CONCERNED CIT 5. !!' , $ % , / DR, ITAT, MUMBAI 6. () * + / GUARD FILE. / BY ORDER, ! //TRUE COPY// ( ASST. REGISTRAR) ITAT, MUMBA I