SURESH CHANDRA MITTAL, MUMBAI V. ITO 25(1)(3),

ITA 7458/MUM/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 0157 (ITAT-MUMBAI)
• Duration Of Justice: 8 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-08-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 31-07-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 19-12-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N HEMALATHA
• Assessee Lawyers: NARAYAN ATAL
• Keywords: Bogus purchase
• Section: 133(6); 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH SMC, MUMBAI BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER ITA NO.7458/M/2016 ASSESSMENT YEAR: 2009-10 M/S. SURESH CHANDRA MITTAL, B-202, SANJEEV ENCLAVE, J.B. ROAD, ANDHERI (W), MUMBAI-400 051 PAN: AAAFD0959P VS. ITO WARD 2 5 ( 1)(3 ), C-11, PRATYAKSHKAR BHAVAN, BANDRA KURLA COMPLEX, BANDRA (E), MUMBAI 400 051 (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI NARAYAN ATAL, A.R. REVENUE BY : MISS N. HEMALATHA, D.R. DATE OF HEARING : 31.07.2017 DATE OF PRONOUNCEMENT : 29.08.2017 O R D E R PER D.T. GARASIA, JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSES SEE AGAINST THE ORDER DATED 17.10.2016 OF THE COMMISSIONER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS THE CIT(A)] RELEVANT TO ASSESSMENT Y EAR 2009-10. 2. THE SHORT FACTS OF THE CASE ARE AS UNDER: THE ASSESSEE IS A PROPRIETOR OF M/S. PADAM ENTERPRI SES ENGAGED IN TRADING IN BLANK VIDEO CASSETTES AND STYLED AS M/S. PLUS INTERNATIONAL. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTICE D THAT ASSESSEE HAS SHOWN BOGUS PURCHASES OF RS.35,22,553/- FROM 3 PARTIES, A S DISCUSSED IN PARA 3 OF THE ASSESSMENT ORDER, FROM WHOM PURCHASES WERE MADE DUR ING THE YEAR, WAS FOUND TO BE APPEARING IN THE LIST OF HAWALA DEALERS WHO W ERE ENGAGED IN PROVIDING BOGUS BILLS OF PURCHASES AS FOUND DURING THE COURSE OF INVESTIGATION CONDUCTED BY DIT(LNV.), MUMBAI AND THOSE PARTIES WERE FOUND T O BE BLACK LISTED BY SALES- TAX DEPARTMENT OF MAHARASHTRA GOVERNMENT. NOTICE UN DER SECTION 148 OF THE ITA NO.7458/M/2016 M/S. SURESH CHANDRA MITTAL 2 ACT WAS ACCORDINGLY ISSUED AND ASSESSMENT WAS COMPL ETED TREATING THE PURCHASE FROM THE SAID PARTY AS BOGUS AND ADDING TH E WHOLE AMOUNT OF PURCHASE TO THE TOTAL INCOME OF THE ASSESSEE. THE INFORMATION, REGARDING BOGUS PURCHASES MADE BY ASSESSEE FROM ABOVEMENTIONED DEAL ERS, IS RECEIVED FROM MAHARASHTRA SALES TAX DEPARTMENT THROUGH DGIT(INV) MUMBAI WHICH SHOWS THAT AN INDEPENDENT STATUTORY AUTHORITY RESPONSIBLE FOR SALES TAX REVENUE AFTER DETAILED CONCLUSIVE FINDING FORWARDED THE SAID INFO RMATION. FURTHER, THE ALLEGED BOGUS DEALERS HAVE NOT FILED ANY AFFIDAVIT BEFORE S ALES TAX APPELLATE AUTHORITY OR HON'BLE BOMBAY HIGH COURT AGAINST THE SAID FINDI NGS. THERE ARE NO SUCH GENUINE LEGAL PROCEEDINGS UNDERTAKEN BY THE SAID DE ALERS. THE ASSESSING OFFICER (HEREINAFTER REFERRED TO AS THE AO) DIDN'T PROCEED TO MAKE ADDITIONS MERELY ON THE BASIS OF INFORMATION FROM THE SALES T AX DEPARTMENT AS INDEPENDENT ENQUIRY WAS CONDUCTED IN THE MATTER. HO WEVER, SUMMONS U/S 131, NOTICE UNDER SECTION 133(6) OF THE ACT ISSUED TO TH E PARTIES CONCERNED WERE RETURNED BACK AS UNSERVED. ASSESSEE FAILED TO PRODU CE THE PARTIES AND ALSO DID NOT PROVIDE THE WHEREABOUTS OF THE SAID PARTIES. HE NCE, LEDGER ACCOUNT OF THE ASSESSEE SHOWING PURCHASES FROM THE SAID PARTIES AN D CONFIRMATIONS FROM THE SAID PARTIES ARE SELF SERVING DOCUMENTS. THERE WAS NO EVIDENCE SUCH AS LORRY RECEIPTS REGARDING TRANSPORTATION OF GOODS FROM THE PREMISES OF VENDOR TO THE PREMISES OF ASSESSEE. THEREFORE, AO HAS MADE THE A DDITION ON ACCOUNT OF BOGUS PURCHASES OF RS.35,22,553/- FROM THREE PARTIE S AND AO HAS TREATED 12.5% OF THE SAID PURCHASES AS BOGUS PURCHASES. 3. MATTER CARRIED TO THE LD. CIT(A) AND THE LD. CIT (A) HAS DISMISSED THE APPEAL OF THE ASSESSEE. 4. I HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE P ARTIES. LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE, I FIND THAT TH E ISSUE IN CONTROVERSY IS COVERED BY THE DECISION OF THE TRIBUNAL IN THE CASE OF MADHUKANT B. GANDHI IN ITA NO.1950/M/2009 DATED 23.02.2010 WHEREIN THE TRI BUNAL HAS DEALT THIS ITA NO.7458/M/2016 M/S. SURESH CHANDRA MITTAL 3 ISSUE IN DETAIL WHICH READS AS UNDER: 3. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PER USING THE RELEVANT MATERIAL ON RECORD WE FIND FROM THE TRADING AND PROFIT AND LOSS ACCOUNT OF THE ASSESSEE FOR THE YEAR ENDED 31ST MARCH, 2005 RELEVANT TO THE ASSESSM ENT YEAR UNDER CONSIDERATION, COPY PLACED AT PAGE 18 OF THE PAPER BOOK, THAT THE OPENING STOCK AND CLOSING STOCK WAS SHOWN AT RS.3.55 LAKHS AND RS.12.37 LAKHS RESPE CTIVELY. PURCHASES WORTH RS.67.53 LAKHS WERE MADE AGAINST WHICH THE SALES OF RS.66.45 LAKHS WERE REFLECTED. PAGE 52 ONWARDS IS A QUANTITATIVE TALLY OF THE OPEN ING STOCK, PURCHASE, SALE AND CLOSING STOCK. WHEN WE CONSIDER THE QUANTUM OF THE PURCHASES HELD BY THE AO TO BE BOGUS VIS--VIS THE TOTAL QUANTITY OF SALES AND CLOSING STOCK, IT BECOMES CLEAR THAT SOME GOODS WERE IN FACT PURCHASED BY THE ASSESSEE W HICH WERE SUBSEQUENTLY SOLD, AS BUT FOR THE INCLUSION OF SUCH QUANTITY PURCHASED THE SALE OF THE QUANTITY DECLARED IS NOT POSSIBLE. AT THE SAME TIME THE ASSESSING OFF ICER ALSO BROUGHT THE INQUIRY TO THE LOGICAL CONCLUSION THAT THE PURCHASES FROM THES E THREE PARTIES WERE BOGUS. IT IS SIMPLE AND PLAIN THAT UNLESS SOME PURCHASES ARE MAD E THERE CANNOT BE CORRESPONDING SALE. THE ONLY POSSIBILITY WHICH EXIS TS IN SUCH A SITUATION IS THAT ASSESSEE MADE THE ENTRIES FOR BOGUS PURCHASES AT IN FLATED RATES WHILE KEEPING THE ACTUAL PURCHASES AT LOWER RATES OUTSIDE THE BOOKS O F ACCOUNT. IN SUCH A SCENARIO IF WE APPROVE THE VIEW TAKEN BY THE LOWER AUTHORITIES THAT THE PURCHASES FROM THESE THREE PARTIES TOTALING TO RS.42.99 LAKHS WERE BOGUS , THEN THE CORRESPONDING SALE WOULD ALSO HAVE TO BE DECLARED AS BOGUS, WHICH IS N OT THE CASE OF THE REVENUE IN AS MUCH AS THE FIGURE OF SALES HAS BEEN ACCEPTED BY TH E AO. AT THE SAME TIME THE FIGURES OF PURCHASES FROM THESE PARTIES CAN NOT BE EQUALLY ACCEPTED. 4. IT IS SEEN THAT THE ASSESSEE HAD SHOWN NET PROFI T RATE AT 2.13%. FROM THE IMPUGNED ORDER IT IS SEEN THAT THE RATE OF NET PROF IT FROM ASSESSMENT YEAR 2001- 2002 TO ASSESSMENT YEAR 2005-2006 RANGED BETWEEN 2. 13 TO 3.40%. IN VIEW OF THE FACT THAT IT HAS BEEN AMPLY ESTABLISHED THAT THE PU RCHASES RECORDED IN THE BOOKS OF ACCOUNT FROM THESE THREE PARTIES WERE BOGUS WITH A VIEW TO SUPPRESS THE PROFIT, NOW NEED TO ZERO IN ON THE CORRECT RATE OF NET PROF IT WHICH COULD BE APPLIED UNDER THESE CIRCUMSTANCES. SECTION 44AF, THOUGH NOT STRIC TLY APPLICABLE IN THIS CASE, PROVIDES FOR 5% NET PROFIT RATE ON THE TOTAL TURNOV ER. IN OUR CONSIDERED OPINION, IT WILL BE JUST AND FAIR IF THE NET PROFIT RATE OF 5% IS APPLIED ON THE GOODS SOLD WHICH WERE ALLEGEDLY PURCHASED THROUGH THESE PARTIES. ON THE CONCLUSION OF THE HEARING IN THIS CASE, A PROPOSAL TO THIS EFFECT WAS MADE FROM THE BENCH. BOTH THE SIDES FINALLY AGREED TO IT. WE HOLD THAT THE NET PROFIT RATE OF 5 % BE APPLIED. ON THE APPLICATION OF SUCH NET PROFIT RATE, THE EFFECTIVE ADDITION WILL B E RS.1,18,826 AS FOLLOWS:- PURCHASE FROM THESE THREE PARTIES RS.42,99,845 /- CONVERSION OF PURCHASE PRICE INTO SALE PRICE RS .45,14,837/- WITH PROFIT RATE OF 5%. (42,99,845 / 100 X 105) NET PROFIT (45,14,837 42,99,845) RS. 2,14,99 2/- LESS : NET PROFIT DECLARED BY THE ASSESSEE (45,14,8 37 X 2.13 / 100) RS. 96,166/- [SINCE THE NET PROFIT RATE DECLARED BY THE ASSESSEE IS 2.13%] ITA NO.7458/M/2016 M/S. SURESH CHANDRA MITTAL 4 FURTHER ADDITION (2,14,992 96,166) RS. 1,18, 826/- 5. WE, THEREFORE, UPHOLD THE ADDITION AT RS.1,18,82 6/- ALLOWING RELIEF OF RS.41,81,019/-. THIS GROUND IS PARTLY ALLOWED. 5. RESPECTFULLY FOLLOWING THE SAME, I DIRECT THE AO TO TAKE 8% OF GP INSTEAD OF 12.5%. 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 29.08.2017. SD/- (D.T. GARASIA) JUDICIAL MEMB ER MUMBAI, DATED: 29.08.2017. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.