PIYUSH AMRATLAL MEHTA , MUMBAI V. ITO 19(2)(5) , MUMBAI

ITA 736/MUM/2020

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 3732 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-10-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 30-01-2020
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SANJAY J SETHI
• Keywords: Set aside
• Section: 69C; 48; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (VIRTUAL COURT) SMC BENCH, MUMBAI BEFORE SHRI C.N. PRAS AD, HON'BLE JUDICIAL MEMBER IT A. NO S . 735, 736 & 737/MUM/2020 (A.Y S : 2011 - 12, 200 9 - 10 & 2010 - 11 ) SHRI PIYUSH A. MEHTA 10/11, GROUND FLOOR 48 TH KHETWADI LANE, MUMBAI - 400004 PAN: ALHPM6546K V. INCOME TAX OFFICER 19(2)(5 ) MATRU MANDIR, TARDEV ROAD MUMBAI 400 007 (APPELLANT) (RESPONDENT) ASSESSEE BY : NONE DEPARTMENT BY : SHRI SANJAY J. SETHI DATE OF HEARING : 22.09.2021 DATE OF PRONOUNCEMENT : 01 .10 .2021 O R D E R PER C.N. PRASAD (JM) 1. THESE APPEALS ARE FILED BY THE ASSESSEE AGAINST COMMON ORDER OF THE LEARNED COMMI SSIONER OF INCOME TAX (APPEALS) - 30, MUMBAI [HEREINAFTER IN SHORT LD.CIT(A)] DATED 10.05.2019 FOR THE A.Y. 2009 - 10 , A.Y. 2010 - 11 AND A.Y. 2011 - 12 . 2. ASSESSEE IN ALL THESE APPEAL S HAS RAISED FOLLOWING GROUNDS , EXCEPT FOR FIGURES : - 2 ITA.NOS. 735, 736 & 737/MUM/2020 (A.YS: 2011 - 12, 2009 - 10 & 2010 - 11) SHRI PIYUSH A. MEHTA GROUNDS OF APPEAL IN ITA.NO. 735/MUM/2020 (A.Y. 2011 - 12) 1) THE LEARNED INCOME TAX OFFICER ERRED IN ADDING TO THE INCOME OF THE ASSESSEE AN AMOUNT OF RS.6,99,765/ - BEING 12.50% OF THE ALLEGED NON GENUINE PURCHASE OF RS.55,98,127/ - ON ACCOUNT OF UNEXPLAINED PURCHASES U/S. 69C AND THE CIT APPEALS ERRED IN CONFIRMING AND FURTHER ENHANCING THE ADDITION TO 100% OF THE ALLEGED NON GENUINE PURCHASE. 2) YOUR PETITIONER HUMBLY SUBMITS THAT ALL DOCUMENTS AND EVIDENCES (WITH IN THE CONTROL OF YOUR PETITIONER) SUCH AS COPIES OF THE PURCHASE BILLS, COPIES OF LEDGER AC COUNTS OF THE VARIOUS PARTIES IN THE BOOKS OF YOUR PETITIONER, COPIES OF BANK STATEMENTS CONFIRMING THE PAYMENTS MADE, THE QUANTITATIVE STATEMENT IN RESPECT OF ENTIRE PURCHASES AND CORRESPONDING SALES WERE FURNISHED TO THE LEARNED INCOME TAX OFFICER DURING THE SCRUTINY ASSESSMENT. 3) YOUR PETITIONER HUMBLY SUBMITS THAT ON THE BASIS OF INFORMATION RECEIVED (WHICH CANNOT BE CONFIRMED/AUTHENTICATED) FROM THE INVESTIGATION WING OF THE SALES TAX DEPARTMENT THE LEARNED INCOME TAX OFFICER UNFAIRLY AND UNJUSTLY ADD ED TO THE INCOME OF YOUR PETITIONER U/S. 69C THE AMOUNT OF RS 6,99,1651 - AND THE CIT APPEALS ERRED IN NOT ONLY CONFIRMING THE ADDITION BUT ENHANCING THE ADDITION TO RS.55,98,127/ - . 4) YOUR PETITIONER HUMBLY SUBMITS THAT THE CASE LAWS CITED BY THE LEARNED I NCOME TAX OFFICER ARE DISTINGUISHABLE ON FACTS. 5) YOUR PETITIONER PRAYS THAT THE DISALLOWANCE OF RS.6,99,765/ - MADE BY THE LEARNED ASSESSING OFFICER AND THE FURTHER ENHANCEMENT MADE BY THE LEARNED CIT(A) BE DELETED AND/OR SET ASIDE. 6) YOUR PETITIONER STA TES THAT DUE TO UNAVOIDABLE CIRCUMSTANCES AND THE ABSENCE OF THE CONSULTANT, THERE IS A DELAY OF ALMOST 6 1 A MONTHS IN FILING THE APPEAL. YOUR PETITIONER PRAYS THAT THIS DELAY IN FILING THE APPEAL BE CONDONED. 7) YOUR PETITIONER CRAVES LEAVE TO ADD, ALTER, AMEND AND/ OR WITHDRAW ANY/ OR ALL THE ABOVE GROUNDS OF APPEAL . 3 ITA.NOS. 735, 736 & 737/MUM/2020 (A.YS: 2011 - 12, 2009 - 10 & 2010 - 11) SHRI PIYUSH A. MEHTA 3. BRIEFLY STATED THE FACTS ARE , ASSESSING OFFICER W HILE COMPLETING THE ASSESSMENT TREATED PURCHASES OF . 1,22,03,666 / - , .55,98,127 AND .95,92,830/ - FOR THE A.Y. 2009 - 10, A.Y. 2010 - 11 AND A.Y. 2011 - 12 RESPECTIVELY, MADE FROM VARIOUS PARTIES AS MENTIONED IN THE ASSESSMENT ORDER AS NON - GENUINE FOR THE REASON THAT ASSESSEE COULD NOT FILE LORRY RECEIPTS, TRANSPORTATION DETAILS ET.,. HOWEVER, ASSESSING OFF ICER DISALLOWED 12.5 % OF THE PURCHASES AMOUNTING TO . 15,25,458/ - , .6,99,765/ - AND .11,99,103/ - FOR THE A.Y. 2009 - 10, A.Y. 2010 - 11 AND A.Y. 2011 - 12 RESPECTIVELY, BY ESTIMATING THE PROFIT ELEMENT IN SUCH PURCHASES. WAS DISALLOWED. ASSESSEE PREFERRED APPE AL BEFORE THE LD.CIT(A) CONTENDING THAT ALL THE PURCHASES MADE FROM SUCH PARTIES ARE GENUINE AND ALTERNATIVELY ADDITION SHOULD BE RESTRICTED ONLY TO THE PERCENTAGE OF GROSS PROFIT SHOWN ON GENUINE PURCHASES. HOWEVER, THE LD.CIT(A) ENHANCED THE DISALLOWANC E TO 100% OF PURCHASES RELYING ON THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF SHORELINE HOTEL PVT. LTD., [98 TAXMANN.COM 234] WHICH WAS PASSED UNDER THE CONTEXT OF SECTION 236 OF THE ACT. AGAINST THIS ORDER ASSESSEE IS IN APPEAL BEFORE US. 4 ITA.NOS. 735, 736 & 737/MUM/2020 (A.YS: 2011 - 12, 2009 - 10 & 2010 - 11) SHRI PIYUSH A. MEHTA 4. INSPITE OF ISSUE OF NOTICE NONE APPEARED ON BEHALF OF THE ASSESSEE NOR ANY ADJOURNMENT WAS SOUGHT. THUS, I PROCEED TO DISPOSE OFF THIS APPEAL ON HEARING LD.DR ON MERITS. 5. LD.DR VEHEMENTLY SUPPORTED THE ORDER OF THE LD.CIT(A). 6. HEARD LD.DR , PERUSED THE OR DERS OF THE AUTHORITIES BELOW. AN IDENTICAL ISSUE HAS COME BEFORE THE COORDINATE BENCH IN THE CASE OF SHRI PRAVIN C. BOKADIA V . ITO IN ITA.NO. 3552/MUM/2019 DATED 17.07.2020 WHEREIN THE LD.CIT(A) ENHANCED THE ADDITION TO 100% OF NON - GENUINE PURCHASES RELYING ON THE DECISION IN THE CASE OF SHORELINE HOTEL PVT. LTD., (SUPRA) AND THE TRIBUNAL CONSIDERING THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF M. HAJI ADAM & CO. (ITA.NO. 1004 OF 2016 DATED 11.02.2019) DIRECTED THE ASSESSING O FFICER TO MAKE THE DISALLOWANCE IN ACCORDANCE WITH THE RATIO OF THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF M. HAJI ADAM & CO. (SUPRA). ON A PERUSAL OF THE COORDINATE BENCH DECISION IN THE CASE OF SHRI PRAVIN C. BOKADIA V. ITO (SUPRA) , I FIND THAT THE LD.CIT(A) ENHANCED THE DISALLOWANCE TO 100% OF THE NON - GENUINE PURCHASES PLACING RELIANCE IN THE CASE OF SHORELINE HOTELS PVT. LTD., (SUPRA), THE TRIBUNAL NOTICED THE DISTINGUISHING FEATURES OF THE HON'BLE BOMBAY HIGH COURT DECISION IN TH E 5 ITA.NOS. 735, 736 & 737/MUM/2020 (A.YS: 2011 - 12, 2009 - 10 & 2010 - 11) SHRI PIYUSH A. MEHTA CASE OF SHORELINE HOTELS PVT. LTD., (SUPRA) TO THE CASES WHERE THERE IS A DISALLOWANCE MADE UNDER NON - GENUINE PURCHASES AND T HE OBSERVATION OF THE TRIBUNAL IS AS UNDER: - 7. UPON ASSESSEE'S APPEAL LEARNED CIT(APPEALS) HAS ENHANCED THE ADDITION TO HUNDRE D PERCENT. IN DOING SO SHE HAS REFERRED TO THE HONOURABLE JURISDICTIONAL HIGH COURT DECISION IN THE CASE OF SHORELINE HOTELS PVT. LTD.(SUPRA). IT IS SETTLED LAW THAT CASE LAW CANNOT BE CONSIDERED IN ISOLATION OF THE CONTEXT THEREOF. THIS IS DULY THE RATIO ARISING OF OUT OF THE DECISION OF HONOURABLE SUPREME COURT IN THE CASE OF SUN ENGINEERING WORKS PVT. LTD. (198 ITR 2970. IN THE DECISION OF SHORTELINE HOTELS PVT. LTD. (SUPRA) CONSIDERED BY THE HON'BLE BOMBAY HIGH COURT WAS IN CONTEXT OF THE ORDER PASSED B Y LEARNED CIT(A) UNDER SECTION 263 OF THE INCOME TAX ACT, WHEREIN THE ITAT HAD UPHELD THE ORDER OF THE LEARNED CIT, INVOKING HIS JURISDICTION U/S. 263. THE ISSUE WAS EXPENDITURE INCURRED IN THE MAINTENANCE BY A HOTEL. IN CONTRAST THE PRESENT CASE IS A CASE WHERE THE ASSESSEE IS A DEALER IN STEEL AND DISALLOWANCE HAS BEEN DONE BY THE ASSESSING OFFICER ON A FINDING THAT THE ASSESSEE HAS MADE PURCHASES THROUGH GREY MARKET. 8. IN OUR CONSIDERED OPINION BY NO STRETCH OF IMAGINATION IT CAN BE SAID THAT THERE IS A NY SIMILARITY IN THE FACTS UPON WHICH THE HONOURABLE JURISDICTIONAL HIGH COURT HAS RENDERED THE ABOVE SAID DECISION AND THE FACTS OF THE PRESENT CASE. 7. THUS , I AM OF THE OPINION THAT THE LD.CIT(A) IS NOT CORRECT IN ENHANCING THE DISALLOWANCE TO 100% OF THE GENUINE PURCHASES PLACING RELIANCE ON THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF SHORELINE HOTELS PVT. LTD., (SUPRA). 8. IT IS NOT IN DISPUTE THAT SAL ES HAVE BEEN ACCEPTED AS GENUINE FROM OUT OF THESE PURCHASES. WHEN THE SALES HAVE BEEN ACCEPTED AS GENUINE THE ENTIRE PURCHASES CANNOT BE TREATED AS NON - GENUINE. THE HON'BLE 6 ITA.NOS. 735, 736 & 737/MUM/2020 (A.YS: 2011 - 12, 2009 - 10 & 2010 - 11) SHRI PIYUSH A. MEHTA GUJARAT HIGH COURT IN THE CASE OF BHOLANATH POLYFAB PVT. LTD [355 ITR 290] HELD THAT WHEN THE ASSESSEE MADE PURCHASES AND SOLD THE FINISHED GOODS AS A NATURAL COROLLARY NOT THE ENTIRE AMOUNT COVERED UNDER SUCH PURCHASES WOULD BE SUBJECT TO TAX BUT ONLY THE PROFIT ELEMENT EMBEDDED THEREIN. SIMILAR VIEW HAS BEEN TAKEN BY THE HON'BLE GU JARAT HIGH COURT IN THE CASE OF CIT V. SIMIT P. SETH [38 TAXMAN.COM 385]. SIMPLY BECAUSE THE PARTIES WERE NOT PRODUCED THE ENTIRE PURCHASES CANNOT BE ADDED AS HELD BY THE BOMBAY HIGH COURT IN THE CASE OF CIT V. NIKUNJ EXIMP [216 TAXMAN.COM 171]. 9. I AGREE WITH THE VIEW OF THE LOWER AUTHORITIES THAT THERE SHOULD BE AN ESTIMATION OF PROFIT ELEMENT FROM THESE PURCHASES AND SHOULD BE ESTIMATED REASONABLY AS THE ASSESSEE COULD NOT CONCLUSIVELY PROVE THAT THE PURCHASES MADE ARE FROM THE PARTIES AS CLAIMED, ESPECI ALLY IN THE ABSENCE OF ANY CONFIRMATIONS FROM THEM. TAKING THE TOTALITY OF FACTS AND CIRCUMSTANCES, KEEPING IN VIEW THE NATURE OF BUSINESS OF THE ASSESSEE I.E ., TRADING IN METALS , IT WOULD BE JUSTIFIED IF THE PROFIT ELEMENT EMBEDDED IN THOSE PURCHASES ARE ESTIMATED AT 8 %. ACCORDINGLY, I DIRECT THE ASSESSING OFFICER TO ESTIMATE THE PROFIT ELEMENT FROM THE NON - GENUINE PURCHASES AT 8 % AND RESTRICT THE DISALLOWANCE OF PURCHASES 7 ITA.NOS. 735, 736 & 737/MUM/2020 (A.YS: 2011 - 12, 2009 - 10 & 2010 - 11) SHRI PIYUSH A. MEHTA TO 8 % AND COMPUTE THE INCOME ACCORDINGLY FOR THE ASSESSMENT YEARS UNDER CONSIDERA TION I.E. A.Y: 2009 - 10, A.Y. 2010 - 11 AND A.Y. 2011 - 12. 10. IN THE RESULT, APPEAL S OF THE ASSESSEE ARE PARTLY ALLOWED. ORDER PRONOUNCED ON 01 .10 .2021 AS PER RULE 34(4) OF ITAT RULES BY PLACING THE PRONOUNCEMENT LIST IN THE NOTICE BOARD SD/ - (C.N. PRASAD) JUDICIAL MEMBER MUMBAI / DATED 01 / 10 / 2021 GIRIDHAR, SR.PS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY// BY ORDER (ASSTT. REGISTRAR) ITAT, MUM