DILIP N. THAKKAR, MUMBAI V. INCOME TAX OFFICER 27(1)(1), MUMBAI

ITA 7441/MUM/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 7884 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-04-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2009-2010
• Appeal Filed On: 28-12-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D G
• Assessee Lawyers: RUCHI M RATHODLD
• Keywords: Bogus purchase; Reassessment proceedings
• Section: 69C; 143(3); 133(6); 147; 148

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI , , BEFORE HONBLE SHRI SANDEEP GOSAIN, JM AND HONBLE SHRI MANOJ KUMAR AGGARWAL, AM ./ I.T.A. NO.7441/MUM/2017 ( / ASSESSMENT YEAR: 2009-10) SHRI DILIP N. THAKKAR , HUF 9/64, GURUDARSHAN SOCIETY JASHUDA NAGAR, GHATKOPAR MUMBAI-400 086. / VS. INCOME TAX OFFICER - 2 7 (1)(1) 4 TH FLOOR, TOWER NO.6 VASHI RAILWAY STATION COMPLEX, VASHI. NAVI MUMBAI-400 086 . ./ ./PAN/GIR NO. AAEHD-0489-E ( /APPELLANT ) : ( !' / RESPONDENT ) ASSESSEE BY : MS. RUCHI M. RATHOD-LD.AR REVENUE BY : SHRI D.G. PANSARI - LD.DR / DATE OF HEARING : 22/04/2019 / DATE OF PRONOUNCEMENT : 22/04/2019 / O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. AFORESAID APPEAL BY ASSESSEE FOR ASSESSMENT YEAR [AY] 2009-10 CONTEST THE ORDER OF LD. COMMISSIONER OF INCOME-TAX (APPEALS)-25, MUMBAI, [CIT(A)], APPEAL NO. CIT(A)-25/IT-411/2015-16/207 D ATED 16/11/2017 ON FOLLOWING GROUNDS OF APPEAL: - 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, LEA RNED LD. CIT ERRED IN PARTLY CONFIRMING THE ADDITIONS MADE BY THE AO, FOR AN AMO UNT OF RS.1048442/- (8387535*12.5%) AND ERRED IN TREATING THE SAME AS B OGUS PURCHASE IGNORING THE DETAILED EVIDENCE BROUGHT ON RECORD & FURTHER ERRED IN LEVYING INTEREST THEREON AND IGNORING THE JUDICIAL PRECEDENTS BROUGHT TO HIS KNOWLEDGE. 2 2. LEARNED CIT(APPEAL) ERRED IN DISALLOWING EXPEND ITURES ON ADHOC BASIS TO THE TUNE OF RS.76,490/- MORE PARTICULARLY DISALLOWANCE IS CONTR ARY TO THE PROVISIONS OF SECTION 69C SINCE THE SOURCE IS IN DISPUTE AND NOT THE PURC HASE EXPENDITURE. 2.1 THE ASSESSMENT FOR IMPUGNED AY WAS FRAMED BY LD . INCOME TAX OFFICER-27(1)(1), MUMBAI [AO] U/S 143(3) READ WITH SECTION 147 OF THE ACT ON 22/03/2015 WHEREIN THE INCOME OF THE ASSESSE E WAS DETERMINED AT RS.68.08 LACS AFTER CERTAIN ADDITIONS AS AGAINST RETURNED INCOME OF RS.34.52 LACS FILED BY THE ASSESSEE ON 29/09/2009 W HICH WAS PROCESSED U/S 143(1). THE ESTIMATED ADDITION OF RS. 32.79 LACS ON ACCOUNT OF ALLEGED BOGUS PURCHASES & ADHOC DISALLOWANCE OF EXPENSES FOR RS.0.76 LACS IS THE SOLE SUBJECT MATTER OF PRES ENT APPEAL BEFORE US. THE ASSESSEE BEING RESIDENT HUF WAS STATED TO BE ENGAGED IN TRADING OF IRON & STEEL UNDER SOLE PROPRIETORSHIP CONCERN NAMELY M/S MINAL ENTERPRISES. 2.2 THE REASSESSMENT PROCEEDINGS GOT TRIGGERED BY I SSUANCE OF NOTICE U/S 148 DATED 18/03/2014 PURSUANT TO RECEIPT OF CER TAIN INFORMATION FROM DGIT (INVESTIGATION) / SALES TAX AUTHORITIES THAT THE ASSESSEE STOOD BENEFICIARY OF ALLEGED BOGUS PURCHASES AGGREGATING TO RS.83.87 LACS FROM VARIOUS ENTITIES. 2.3 NOTICES ISSUED U/S 133(6) TO ALL THE ENTITIES W ERE RETURNED BACK BY POSTAL AUTHORITIES. THE PHYSICAL INSPECTION OF FEW OF THESE ENTITIES BY WARD INSPECTOR REVEALED THAT NO SUCH PARTIES EXISTE D AT THE GIVEN ADDRESSES. THE AFORESAID FACT WAS CONFRONTED TO THE ASSESSEE WITH A DIRECTION OF PROVIDE NEW ADDRESSES OR PRODUCE THE P ARTIES ALONG WITH REQUISITE DOCUMENTS. THE ASSESSEE DEFENDED THE PURC HASES VIDE REPLY DATED 04/03/2015 BY SUBMITTING LEDGER EXTRACTS, COP IES OF PURCHASE INVOICES, COPIES OF BANK STATEMENT EVIDENCING PAYME NT THROUGH BANKING CHANNELS, STOCK REGISTERS ETC. HOWEVER, NONE OF THE SUPPLIERS COULD BE 3 PRODUCED BY THE ASSESSEE FOR CONFIRMATION OF TRANSA CTIONS. THE OVERALL FACTUAL MATRIX LED THE LD. AO TO DISBELIEVE THESE P URCHASES AND ACCORDINGLY, AN ADDITION OF RS.32.79 LACS WAS WORKE D OUT AGAINST THESE PURCHASES WHICH WAS NOTHING BUT PEAK OF THE CUMULAT IVE OUTSTANDING OF THE SUPPLIERS. ANOTHER ADDITION OF RS.76,490/- REPR ESENT ADHOC DISALLOWANCE OF 15% AGAINST PETTY CASH EXPENSES INC URRED UNDER THE HEAD CONVEYANCE EXPENSES, GENERAL EXPENSES, OFFICE EXPENSES & TELEPHONE EXPENSES. 3. THE LD. FIRST APPELLATE AUTHORITY, INTER-ALIA, RELYING UPON THE DECISION OF HONBLE GUJARAT HIGH COURT RENDERED IN CIT VS. SIMIT P. SHETH [356 ITR 451] & BHOLANATH POLY FAB. P. LTD. [355 ITR 290], RESTRICTED THE IMPUGNED ADDITIONS TO 12.5% BUT CONFIRMED THE STAND OF LD. AO IN MAKING ADHOC ADDITION OF RS.76,490/- AGAINST PETTY CASH EXPENDITURE. STILL AGGRIEVED, THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 4. THE LD. AUTHORIZED REPRESENTATIVE FOR ASSESSEE [ AR], SUBMITTED THAT THE ASSESSEE WAS DEALING IN LOW MARGIN ITEM LI KE IRON & STEEL AND THEREFORE, THE ESTIMATES WERE ON THE HIGHER SIDE. T HE LD. DR SUBMITTED THAT THE STAND OF AUTHORITIES IN IMPUGNED ORDER WOU LD NOT WARRANT ANY INTERFERENCE. 5. WE HAVE CAREFULLY HEARD THE RIVAL SUBMISSIONS AN D PERUSED RELEVANT MATERIAL ON RECORD INCLUDING JUDICIAL PRON OUNCEMENTS CITED BEFORE US. WE ARE OF THE CONSIDERED OPINION THAT TH ERE COULD BE NO SALE WITHOUT ACTUAL PURCHASE OF MATERIAL KEEPING IN VIEW THE FACT THAT THE ASSESSEE WAS ENGAGED IN TRADING ACTIVITIES. THE ASS ESSEE WAS IN POSSESSION OF PRIMARY PURCHASE DOCUMENTS AND MAINTA INED ADEQUATE STOCK RECORDS TO RECONCILE THE QUANTITATIVE DETAILS . THE PAYMENTS TO THE SUPPLIERS WERE THROUGH BANKING CHANNELS. THE SALES TURNOVER HAS NOT 4 BEEN DISPUTED BY THE REVENUE. AT THE SAME TIME. NOT ICES ISSUED U/S 133(6) TO ALL THE SUPPLIERS DID NOT ELICIT SATISFAC TORY RESPONSE. THE PHYSICAL INSPECTION REVEALED THAT NONE OF THE SUPPL IERS EXISTED AT THE GIVEN ADDRESS. THE ASSESSEE FAILED TO PROVIDE NEW A DDRESS OF ANY OF THE SUPPLIER AND COULD NOT PRODUCE ANY OF THE SUPPLIERS . THEREFORE, IN SUCH A SITUATION, THE ADDITION, WHICH COULD BE MADE, WAS T O ACCOUNT FOR PROFIT ELEMENT EMBEDDED IN THESE PURCHASE TRANSACTIONS TO FACTORIZE FOR PROFIT EARNED BY ASSESSEE AGAINST POSSIBLE PURCHASE OF MAT ERIAL IN THE GREY MARKET AND UNDUE BENEFIT OF VAT AGAINST SUCH BOGUS PURCHASES, WHICH LOWER AUTHORITIES HAVE RIGHTLY DONE. HOWEVER, IT IS NOTICED THAT THE ASSESSEE IS DEALING IN A LOW MARGIN ITEM LIKE METALS WHICH IS SUBJECTED TO LOWER VAT RATE. ANOTHER FACTOR TO BE NOTED IS TH AT THE ASSESSEE HAS REFLECTED A GROSS PROFIT RATE OF 6.70% AND NET PROFIT RATE OF 1.34% IN THE IMPUGNED AY. THEREFORE, KEEPING IN VIEW THE TOT ALITY OF FACTS AND CIRCUMSTANCES, WE REDUCE THE ESTIMATED NET ADDITION S TO 3% OF ALLEGED BOGUS PURCHASES OF RS.83,87,535/- WHICH COMES TO RS.2,51,626/-. THE BALANCE ADDITION STANDS DELETED. THIS GROUND STAND PARTLY ALLOWED. 6. THE ADHOC DISALLOWANCE OF 15% AGAINST PETTY CASH EXPENDITURE WOULD REQUIRE NO INTERFERENCE ON OUR PART IN THE AB SENCE OF ANY FRESH MATERIAL ON RECORD. ACCORDINGLY, THIS GROUND STAND DISMISSED. 7. THE APPEAL STANDS PARTLY ALLOWED IN TERMS OF OU R ABOVE ORDER. ORDER PRONOUNCED IN THE OPEN COURT ON 22 ND APRIL, 2019. SD/- SD/- (SANDEEP GOSAIN) (MAN OJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 22/04/2019 SR.PS, JAISY VARGHESE 5 !'! / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. !' / THE RESPONDENT 3. ) ( ) / THE CIT(A) 4. ) / CIT CONCERNED 5. *+!$ , , , , / DR, ITAT, MUMBAI 6. +-./ / GUARD FILE / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI.