DHARMENDRA N. ZAVERI, MUMBAI V. ACIT 33(1), MUMBAI

ITA 7520/MUM/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 7397 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 31-12-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Bogus purchase; Set aside
• Section: 143(3); 133(6); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH SMC , MUMBAI BEFORE SHRI SAKTIJIT DEY , JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA NO. 7520 &7521 /M UM /20 18 ASSESSMENT YEAR: 2009 - 10 & 2010 - 11 DHARMENDRA N. ZAVERI B - 101, RAJSEEMA, IRANIWADI ROAD NO.3, KANDIVALI WEST, MUMBAI, PIN - 400067 . PAN: AAAPZ1308L VS. ACIT - 33(1) , MUMBAI (APPELLANT) (RESPONDENT) PRESENT FOR: APPELLANT BY : SHRI SUBASH CHHAJED & DEEPIKA CHHAJED RESPONDENT BY : SHRI R. BHOOPATI, CIT - DR DATE OF HEARING : 08.01.2020 DATE OF PRONOUNCEMENT : 31 .01 . 20 20 O R D E R PER RAJESH KUMAR , ACCOUNTANT MEMBER: THE PRESENT TWO APPE ALS HAS BEEN PREFERRED BY THE ASSESSEE AGAINST THE ORDER DATED 27.08.2018 & 19.11.2 018 OF THE COMMISSIONER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS THE CIT(A)] RELEVANT TO ASSESSMENT YEAR 2009 - 10 AND 2010 - 11 RESPECTIVELY. 2. THE ONLY ISSUE RAISED BY THE ASSESSEE IN THE GROUNDS OF APPEALS IS AGAINST THE CIT(A) CONFIRMING A DIS ALLOWANCE OF ITA NO.7520&7521/MUM/2018 DHARMENDRA N. ZAVERI 2 RS.6,91,911/ - BEING 12.5% OF THE ALLEGED BOGUS PURCHASES OF RS.55,38,294/ - THEREBY UPHOLDING THE ORDER OF AO. 3. THE FACTS IN BRIEF ARE THAT THE ASSESSEE FILED RETURN OF INCOME ON 29.09.2009 DECLARING A TOTAL INCOME OF RS.11,71,889/ - . THE CA SE OF THE ASSESSEE WAS REOPENED U/S 147 BY ISSUING A NOTICE U/S 148 DATED 10.03.2014 AFTER AO RECEIVED INFORMATION FROM DGIT(INV.) MUMBAI THAT THE ASSESSEE HAS MADE SOME PURCHASES FROM HAWALA PARTIES DURING THE FINANCIAL Y EAR 2009 - 10 AMOUNTING TO RS.55,38 ,294 / - NAMELY HITEN ENTERPRISES & ADIGIN ENTERPRISES WHICH W ERE DECLARED HAWALA DEALER S BY THE SALES TAX DEPARTMENT, MUMBAI, GOVT. OF MAHARASHTRA. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF WHOLESALE TRADING AND THE GP RATE OF THE ASSESSEE IS ONLY 2.32% . THE AO CALLED UPON THE ASSESSEE DURING THE ASSESSMENT PROCEEDINGS TO PROVE THE GENUINENESS OF THE PURCHASES AND ALSO ISSUED NOTICES U/S 133(6) OF THE ACT DATED 19.12.2014 TO THE SAID PARTIES WHICH WERE R ETURNED UNSERVED. THE ASSESSEE FURNISHED BEFORE T HE AO, THE COP IES OF CHALLANS, BANK DETAILS, CORRESPONDING SALES BILLS, IT RETURNS, AND AUDIT ANNUAL ACCOUNTS. HOWEVER, THE ASSESSEE COULD NOT PRODUCE THE RELEVANT DETAILS/PROOF S OF TRANSPORTATION AND CONFIRMATION S OF THESE PARTIES AND FINALLY, THE AO TREA TED THE SAID PURCHASES AS NON - GENUINE AND APPLIED @12.5% THEREBY ADDING THE SAME TO RS.6,91,911/ - IN THE ASSESSMENT FRAMED U/S 143(3) R.W.S. 147 OF THE ACT DATED 17.03.2015. 4. IN THE APPELLATE PROCEEDINGS, THE LD. CIT(A) CONFIRMED THE ADDITION AS MADE BY THE AO ON THE GROUND THAT THE ASSESSEE COULD NOT PRODUCE THE RELEVANT DETAILS, CONFIRMATION S FROM THESE PARTIES ITA NO.7520&7521/MUM/2018 DHARMENDRA N. ZAVERI 3 AND PROOF S OF TRANSPORTATION OF GOODS AND THE LD. CIT(A) ALSO WAS OF THE VIEW THAT THE ASSESSEE MIGHT HAVE PURCHASED GOODS FROM GREY MARKET AT THE LOWER RATE AND THUS JUSTIFIED THE ADDITION @12.5%. 5. AFTER HEARING THE BOTH THE PARTIES AND PERUSING THE MATERIAL ON RECORD, WE OBSERVE THAT THE UNDISPUTED FACTS ARE THAT THE ASSESSEE W AS BENEFICIARY OF HAWALA PURCHASE ENTRIES AS REPORTED BY THE SALES TAX DEPARTMENT, GOVT. OF MAHARASHTRA. WE FIND THAT THE AUTHORITIES BELOW HAS NOT DISPUTED THE SALES OF THE ASSESSEE AS ASSESSEE COULD PRODUCE BEFORE THE AUTHORITIES BELOW THE CORRESPONDING SALES OUT OF MATERIAL PURCHASE D . THE ONLY ISSUE REMAINS TO BE DECIDED AS TO WHETHER THE ADDITION SUSTAINED BY THE CIT(A) BY UPHOLDING THE ORDER OF AO IS REASONABLE OR NOT. IN THIS CASE, WE NOTE THAT GP RATE OF THE ASSESSEE WAS 2.31% AS THE ASSESSEE IS IN THE BUSINESS OF WHOLESALE TRADING. THE SAID FACT HAS BEEN NOTE D IN THE ASSESSMENT ORDER IN PARA 9 ALSO. C ONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE , WE ARE OF THE VIEW THAT SINCE THE ASSESSEE IS IN WHOLESALE BUSINESS, THE ADDITION @12.5% IS EXCESSIVE AND UNREASONABLE. THE COUNSEL OF THE ASSESSEE ALSO RELIED ON THE DECISION OF JURISDICTIONAL HIGH COURT IN THE CASE OF PCIT VS. M/S MOHAMMAD HAJI ADAM & CO. ITA NO.1004 OF 2006 ORDER DATED 11.02.2019 IN DEFENCE OF THIS ARGUMENT S IN WHICH THE HONBLE COURT HAS HELD THAT THE ADDITION HAS TO BE MADE ON THE BASIS OF GP OF THE ASSESSEE. ACCORDINGLY , WE SET ASIDE THE ORDER OF CIT(A) AND DIRECT THE AO TO APPLY A RATE OF 3% ON THE BOGUS PURCHASES. 6. NOW COMING TO ITA NO.7521/MUM/2018, THE IDENTICAL ISSUE HAS BEEN DECIDED IN ITA NO.7520/MUM/2018 (SUPRA), WE HAVE DIRECTE D THE AO TO APPLY A RATE OF 3% ON THE BOGUS PURCHASES. ACCORDINGLY, IN ITA NO.7520&7521/MUM/2018 DHARMENDRA N. ZAVERI 4 THIS CASE ALSO A RATE OF 3% IS TO BE APPLIED . THE AO IS DIRECTED ACCORDINGLY. 7. IN THE RESULT, THE TWO APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN C OURT ON 31.01 . 20 20 . SD/ - SD/ - ( SAKTIJIT DEY) (RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 31 .01 . 2020 . RS , 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 ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.