CHANDRAMOHAN MADANLAL MALHOTRA, MUMBAI V. ITO WD 3(2), THANE

ITA 7555/MUM/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 0190 (ITAT-MUMBAI)
• Duration Of Justice: 8 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-08-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 31-07-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 23-12-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: N HEMALATHA
• Keywords: Bogus purchase
• Section: 69C; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH SMC, MUMBAI BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER ITA NO.7555/M/2016 ASSESSMENT YEAR: 2009-10 CHANDRAMOHAN MADANLAL MALHOTRA PROP. OF M/S. MALHOTRA STEELS, SHOP NO.9 & 10, SHANKLESHWAR COMPLEX, MADHAVI COMPOUND, NEAR KOTAK BANK, VILLAGE REHNAL, BHIWANDI-421 302 PAN: AHHPM 6409P VS. INCOME TAX OFFICER, WARD 3(2), KALYAN (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : NONE REVENUE BY : MISS N. HEMALATHA, D.R. DATE OF HEARING : 31.07.2017 DATE OF PRONOUNCEMENT : 24.08.2017 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 19.09.2016 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 THAT THE ASSESSE E IS ENGAGED IN THE BUSINESS IN RESELLING IRON AND STEEL IN WHOLESALE A S WELL AS IN RETAIL. THE INFORMATION HAS BEEN RECEIVED BY THE SALES TAX DEPA RTMENT THAT ASSESSEE WAS ONE OF THE BENEFICIARIES OF TRANSACTIONS WITH HAWAL A DEALERS. THE ASSESSEE HAD SHOWN PURCHASES AMOUNTING TO RS.27,73,057/- FROM TH E FOLLOWING PARTIES. SR. NO. TIN OF HAWALA DEALER NAME OF HAWALA DEALER PAN OF HAWALA DEALER ASSTT. YEAR AMOUNT IN RS. 1. 27460624763V SHRADDHA AOTPM8042B 2009-10 3,35,088/- ITA NO.7555/M/2016 CHANDRAMOHAN MADANLAL MALHOTRA PROP. OF M/S. MALHOTRA STEELS 2 TRADING CO. 2. 27580551753V SUN ENTERPRISES BFLPS504IC 2009-10 3,91,643/- 3. 27710551730V M.R. CORPORATION BFLPS4883N 2009-10 4,21,371/- 4. 27900588728V BALAJI TRADING AIOPD3209N 2009-10 11,24,955/- TOTAL 27,73,057/- THE NAMES OF THESE PARTIES WERE APPEARING IN THE LI ST OF HAWALA DEALERS AS SUPPLIED BY THE SALES-TAX DEPARTMENT OF MAHARASH TRA. THE HAWALA DEALERS HAD ADMITTED BEFORE THE SALES- TAX AUTHORITIES IN T HEIR STATEMENT / AFFIDAVIT THAT THEY WERE PROVIDING ONLY ACCOMMODATION BILLS WITHOU T THERE BEING ANY ACTUAL PURCHASE / SALE OF GOODS. THOUGH THE PAYMENT WAS RE CEIVED BY THE SAID PARTIES FROM THEIR CUSTOMERS THROUGH BANKING CHANNELS, HOWE VER, AFTER CLEARING OF THE CHEQUES CASH WAS WITHDRAWN AND HANDED OVER TO THE C USTOMERS AFTER DEDUCTION OF NOMINAL COMMISSION CHARGES. THE ASSESSING OFFIC ER (HEREINAFTER REFERRED TO AS THE AO) ISSUED NOTICE UNDER SECTION 148 OF THE A CT DATED 15.05.2013 TO THE ASSESSEE FOR RE-OPENING OF THE ASSESSMENT PROCEEDIN GS. THE ASSESSEE HAS CHALLENGED THE REOPENING OF THE ASSESSMENT ON THE G ROUND THAT HIS CASE WAS REOPENED ON VAGUE AND GENERAL INFORMATION. THE AO HAS MADE THE ADDITION OF RS.27,73,057/- UNDE R SECTION 69C OF THE ACT. 3. MATTER CARRIED TO THE LD. CIT(A) AND THE LD. CIT (A) HAS RESTRICTED THE ADDITION OF 15%. 4. NONE APPEARED ON BEHALF OF THE ASSESSEE. I HAVE HEARD THE LD. D.R. AND THE LD. D.R. RELIED UPON THE DECISION OF THE TRIBUN AL, AHMEDABAD BENCH IN THE CASES OF SHWETAMBAR STEELS VS. ITO AHMEDABAD AND GA NESH RICE MILLS VS. CIT (294 ITR 316). THE FACTS IN THE PRESENT CASE S HOW THAT ASSESSEE COULD NOT PRODUCE THE PARTIES FROM WHOM GOODS ARE STATED TO H AVE BEEN PURCHASED. THE SUPPLIERS WERE FOUND TO BE ENGAGED IN PROVIDING BOG US BILL WITHOUT ACTUAL DEALING OF GOODS. IN THIS REGARD, THE ASSESSEE HAS STATED THAT THEY HAD SUBMITTED ITA NO.7555/M/2016 CHANDRAMOHAN MADANLAL MALHOTRA PROP. OF M/S. MALHOTRA STEELS 3 QUANTITATIVE DETAILS OF STOCK WITH RESPECT OF THE S ALES WITH PURCHASES FROM THE PARTIES DURING THE ASSESSMENT PROCEEDINGS. THE ASSE SSEE HAS SUBMITTED THE DETAIL OF CORRESPONDING SALES IN RESPECT OF THE PUR CHASE FROM THE SAID PARTIES. AS MENTIONED ABOVE THE AO HAS NEVER DISPUTED OR EXA MINED THE ASPECT OF SALES RECEIPTS. SINCE THE SALES MADE BY THE ASSESSEE WAS NOT DOUBTED OR DISPUTED BY THE AO AND HE HAS ACCEPTED THE SALES RECEIPTS OF TH E ASSESSEE AS IT IS, THEREFORE, THE AO CANNOT DENY THAT PURCHASES WERE NOT MADE BY THE ASSESSEE AND THE MATERIAL WAS NOT USED FOR ITS SALES. WHAT IS UNDER DISPUTE IS THE PURCHASES FROM THE PARTIES FROM WHOM BILLS HAVE BEEN TAKEN AND CHE QUES HAVE BEEN ISSUED TO THEM. PURCHASES ARE NOT IN DISPUTE BUT THE PARTIES FROM WHOM PURCHASE ARE SHOWN TO HAVE BEEN MADE ARE DISPUTED AND SUSPICIOUS . THE AO HAD MADE THE ADDITION AS SOME OF THE SUPPLIERS WERE DECLARED HAW ALA DEALERS BY THE VAT DEPARTMENT. THIS MAY BE A GOOD REASON FOR MAKING FU RTHER INVESTIGATION BUT THE AO DID NOT MAKE ANY FURTHER INVESTIGATION AND M ERELY COMPLETED THE ASSESSMENT ON SUSPICION. ONCE THE ASSESSEE HAS BROU GHT ON RECORD THE DETAILS OF PAYMENTS BY ACCOUNT PAYEE CHEQUE, IT WAS INCUMBENT ON THE AO TO HAVE VERIFIED THE PAYMENT DETAILS FROM THE BANK OF THE A SSESSEE AND ALSO FROM THE BANK OF THE SUPPLIERS TO VERIFY WHETHER THERE WAS A NY IMMEDIATE CASH WITHDRAWAL FROM THEIR ACCOUNT. NO SUCH EXERCISE HAS BEEN DONE OR FINDINGS RECORDED, THERE WAS NO DETAILED INVESTIGATION MADE BY THE AO HIMSELF. IT IS ALSO FOUND THAT THE PAYMENTS HAVE BEEN MADE BY ACCO UNT PAYEE CHEQUE WHICH ARE DULY REFLECTED IN THE BANK STATEMENT OF THE ASS ESSEE. THERE IS NO EVIDENCE TO SHOW THAT THE ASSESSEE HAS RECEIVED CASH BOOK FROM THE SUPPLIERS. MERELY BECAUSE THE SUPPLIERS DID NOT APPEAR BEFORE THE AO OR SOME CONFIRMATION LETTERS WERE NOT FURNISHED, ONE CANNOT CONCLUDE THA T THE PURCHASES WERE NOT MADE BY THE ASSESSEE. THIS VIEW IS SUPPORTED BY THE DECISION OF NIKUNJ EXIMP ENTERPRISES VS. CIT 216 TAXMAN 171 (BOM). TO THIS E XTENT, I AM OF THE VIEW THAT IF THE ASSESSEE HAS FULFILLED ITS ONUS OF MAKI NG THE PAYMENT BY CHEQUE AND HAS SUPPLIED THE ADDRESSES OF THE SELLERS THEN IT C ANNOT BE PRESUMED THAT SUPPLIER WERE BOGUS SIMPLY BECAUSE THE SELLERS WERE NOT FOUND AT THE GIVEN ITA NO.7555/M/2016 CHANDRAMOHAN MADANLAL MALHOTRA PROP. OF M/S. MALHOTRA STEELS 4 ADDRESS. THERE IS A CONSIDERABLE TIME GAP BETWEEN T HE PERIOD OF PURCHASE TRANSACTION AND PERIOD OF SCRUTINY PROCEEDINGS. THE AO HAS NOT BROUGHT ANY MATERIAL ON RECORD TO SHOW THAT THERE IS SUPPRESSIO N OF SALES. IT IS BASIC RULE OF ACCOUNTANCY AS WELL AS OF TAXATION LAWS THAT PROFIT FROM BUSINESS CANNOT BE ASCERTAINED WITHOUT DEDUCTING COST OF PURCHASE FROM SALES. I HELD THAT THE LD. CIT(A) HAS ESTIMATED 15% IS ON HIGHER SIDE. THEREF ORE, I RESTRICT THE ADDITION FROM 15% TO 12.5%. AO IS DIRECTED TO MAKE THE DISA LLOWANCE AT THE RATE OF 12.5% OF THE BOGUS PURCHASES OF RS.27,73,057/-. 5. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOW ED. ORDER PRONOUNCED IN THE OPEN COURT ON 24.08.2017. SD/- (D.T. GARASIA) JUDICIAL MEMB ER MUMBAI, DATED: 24.08.2017. * 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.