NAJMI ELECTRICALS & HARDWARE P.LTD, KALYAN V. ITO 1(3), MUMBAI

ITA 7562/MUM/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 0193 (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
• Assessment Year: 2010-2011
• Appeal Filed On: 23-12-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: N HEMALATHA
• Assessee Lawyers: AJAY R SINGH
• Keywords: Bogus purchase
• Section: 143(3); 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH SMC, MUMBAI BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER ITA NO.7562/M/2016 ASSESSMENT YEAR: 2010-11 M/S. NAJMI ELECTRICALS & HARDWARE PVT. LTD., SURYA MANZIL, SHIVAJI CHOWK, DR. AMBEDKAR ROAD, KALYAN PAN: AAACN6570F VS. INCOME TAX OFFICER 1(3), KALYAN (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI AJAY R. SINGH, A.R. 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 28.10.2016 OF THE COMMISSIONER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS THE CIT(A)] RELEVANT TO ASSESSMENT Y EAR 2010-11. 2. THE SHORT FACTS OF THE CASE ARE THAT IN THIS CAS E THE RETURNS OF INCOME, DECLARING TOTAL INCOME OF RS.6,52,540/- WAS E-FILED ON 13.10.2010 AND THE SAME WAS PROCESSED U/S 143(1) OF THE ACT. SUBSEQUEN TLY, THE INFORMATION WAS RECEIVED FROM THE SALES TAX DEPARTMENT THAT THE ASS ESSEE WAS ONE OF THE BENEFICIARIES OF THE ACCOMMODATION BILLS, ISSUED BY THE HAWALA DEALERS, THEREFORE, THE CASE OF THE ASSESSEE WAS REOPENED, A FTER RECORDING NECESSARY REASONS/SATISFACTION AND THE NOTICE U/S 148 OF THE ACT, WAS ISSUED AND SERVED UPON THE ASSESSEE. THE ASSESSEE IS ENGAGED IN THE B USINESS OF TRADING IN ELECTRICAL HARDWARE ITEMS. THE RE-ASSESSMENT ORDER U/S 143(3) R.W.S. 147 OF THE ITA NO.7562/M/2016 M/S. NAJMI ELECTRICALS & HARDWARE PVT. LTD. 2 ACT, WAS FINALIZED ON 09.03.2015, AT TOTAL INCOME O F RS.42,39,990/-, AFTER MAKING THE DISALLOWANCE 12.5% I.E. RS.35,87,450/-, OF THE BOGUS PURCHASES, TO THE INCOME OF THE ASSESSEE. 3. MATTER CARRIED TO THE LD. CIT(A) AND THE LD. CIT (A) HAS UPHELD THE ACTION OF THE AO. 4. I HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE P ARTIES. LD. D.R. RELIED UPON THE DECISION OF THE TRIBUNAL, AHMEDABAD BENCH IN THE CASES OF SHWETAMBAR STEELS VS. ITO AHMEDABAD AND GANESH RICE MILLS VS. CIT (294 ITR 316). THE FACTS IN THE PRESENT CASE SHOW THAT ASSESSEE COULD NOT PRODUCE THE PARTIES FROM WHOM GOODS ARE STATED TO HAVE BEEN PURCHASED. THE SUPPLIERS WERE FOUND TO BE ENGAGED IN PROVIDING BOGUS BILL WI THOUT ACTUAL DEALING OF GOODS. IN THIS REGARD, THE ASSESSEE HAS STATED THAT THEY HAD SUBMITTED 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 ITA NO.7562/M/2016 M/S. NAJMI ELECTRICALS & HARDWARE PVT. LTD. 3 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 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 FIND THAT THE ASSESSEE HAD ALREADY DECLARED GP & NP FOR LAST 6 YE ARS, WHICH READS AS UNDER: SR. NO. A.Y. GP NP 1. 2007-08 4.31% 0.44% 2. 2008-09 3.26% 0.04% 3. 2009-10 3.01% 1.10% 4. 2010-11 4.45% 0.32% 5. 2011-12 5% 0.33 6. 2012-13 4.72% 0.44 TOTAL 24.75% 1.67 FROM THE ABOVE CHART AND FOLLOWING THE DECISION OF ITAT, MUMBAI, F- BENCH IN ITA NO.3669/M/2016 AND CONSIDERING THE PAS T HISTORY OF THE GP SHOWN BY THE ASSESSEE, WE ARE OF THE VIEW THAT 12.5 % GP ESTIMATED BY THE DEPARTMENT, IN FACT, IS NOT SUSTAINABLE IN LAW. KE EPING IN VIEW OF TOTALITY OF ITA NO.7562/M/2016 M/S. NAJMI ELECTRICALS & HARDWARE PVT. LTD. 4 THE FACTS AND CIRCUMSTANCES OF THE CASE, I DIRECT T O RESTRICT THE ADDITION TO THE EXTENT OF 5% OF SAID PURCHASES. I DIRECT ACCORDING LY. 6. 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.