M/s. Anant Enterprises, Pune V. Additional Commissioner of Income-tax, Pune

ITA 763/PUN/2017

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 0353 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 2 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-06-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 31-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P U N A Y; ALOK MALVIYA ITA NO S
• Keywords: Bogus purchase; Revised return; Set aside
• Section: 22; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, PUNE (THROUGH VIRTUAL COURT) BEFORE SHRI D. KARUNAKARA RAO, AM AND SHRI PARTHA SARATHI CHAUDHURY , JM . / I TA NO. 763 /PUN/20 17 / ASSESSMENT YEAR : 2010 - 11 M/S. ANANT ENTERPRISES FLAT NO.11, PLOT NO.4/1 MIDC, PIMPRI, PUNE - 411 018 PAN : AACFA0876G ....... / APPELLANT / V/S. THE ADDL. COMMISSIONER OF INCOME TAX, RANGE - 8, PUNE. / RESPONDENT . / ITA NO. 764/PUN/2017 / ASSESSMENT YEAR : 2010 - 11 M/S. ANANT ENTERPRISES FLAT NO.11, PLOT NO.4/1 MIDC, PIMPRI, PUNE - 411 018 PAN : AACFA0876G ....... / APPELLANT / V/S. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE - 8, PUNE. / RESPONDENT A SSESSEE BY : NONE REVENUE BY : SHRI ALOK MALVIYA 2 ITA NO S . 763 & 764 /PUN/20 17 A.Y. 2010 - 11 / DATE OF HEARING : 11 .0 6 .2020 / DATE OF PRONOUNCEMENT : 22 .0 6 .2020 / ORDER PER BENCH : THESE TWO APPEALS PREFERRED BY THE ASSESSEE EMANATES FROM THE DIFFERENT ORDERS OF THE LD. CIT(APPEALS) - 6, PUNE DATED 15.12.2016 & 16.12.2016 FOR THE ASSESSMENT YEAR 2010 - 11 AS PER THE GROUNDS OF APPEAL ON RECORD. 2. AT THE TIME OF HEARING THROUGH VIDEO CONFERENCE, NEITHER THE ASSESSEE NOR HIS AUTHORIZED REPRESENTATIVE IS AVAILABLE. HOWEVER, THE LD. DR FOR THE REVENUE FAIRLY SUBMITTED THAT IN ITA NO.763/PUN/2017, THE CORE ISSUE IS BOGUS PURCHASES ADDITION AMOUNTING TO RS. 46,3 3,142/ - AND IN ITA NO.764/PUN/2017, THE ISSUE IS LEVYING PENALTY U/S.271(1)(C) OF THE INCOME TAX ACT, 1961 ( HEREINAFTER REFERRED TO AS THE ACT) CONSEQUENT TO THE BOGUS PURCHASES ADDITION MADE IN ITA NO.764/PUN/2017. FOR THE SAKE OF CONVENIENC E, FIRST WE WOULD TAKE UP ITA NO .763/PUN/2017 FOR THE ASSESSMENT YEAR 2010 - 11 FOR ADJUDICATION. ITA NO.763/PUN/2017 A.Y.2010 - 11 3. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE IN THIS APPEAL ARE AS FOLLOWS: 1) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WAS NOT JUSTIFIED IN SUSTAINING THE ADDITION MADE BY THE AO OF RS.46,33,142/ - OF PURCHASES CONSIDERING THEM AS BOGUS PURCHASES 3 ITA NO S . 763 & 764 /PUN/20 17 A.Y. 2010 - 11 SOLELY RELYING UPON THE REPORT OF THE SALES TAX DEPARTMENT. THE LD. CIT(A) FAILED TO PROPERLY APPRECIATE THE VARIOUS JUDICIAL PRECEDENTS QUOTED BEFORE HIM. THE JUDICIAL VIEW IS ONLY THE PROFIT PERCENTAGE OF SUCH PURCHASES CAN BE ESTIMATED FOR ADDITION AND 100% ADDITION OF SUCH PURCHASES CANNOT BE MADE. IT BE HELD ACCORDINGLY. 2) THE APPELLANT CRAVES TO LEAVE, A DD/AMEND OR ALTER ANY OF THE ABOVE GROUNDS OF APPEAL. 4 . THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE MANUFACTURE OF AUTO COMPONENTS. THE ASSESSEE FILED ITS RETURN OF INCOME FOR A.Y.2010 - 11 ON 24.09.2010 DECLARING TOTAL INCOME AT RS.64,28,290/ - . REVISED RETURN WAS FILED BY THE ASSESSEE ON 25.09.2010 DECLARING TOTAL INCOME OF RS.64,89,986/ - . THE ASSESSING OFFICER COMPLETED ASSESSMENT U/S.143(3) OF THE ACT ON 19.02.2013 DETERMINING TOTAL INCOME AT RS. 1,21,39,580/ - . THE ASSESSING OFFI CER MADE ADDITION OF RS.46,33,142/ - BEING PURCHASES MADE FROM M/S. RUMEET ENTERPRISES, MUMBAI TREATING THEM AS BOGUS AND ALSO DISALLOWED AN AMOUNT OF RS.10,16,450/ - BEING PRIOR PERIOD EXPENSES. 5. DURING THE FIRST APPELLATE PROCEEDINGS, THE LD. CIT(APPEAL S) CONFIRMED THE ADDITION OF RS.46,33,142/ - OF PURCHASES CONSIDERING THEM AS BOGUS PURCHASES. BEING FURTHER AGGRIEVED THE ASSESSEE HAS PREFERRED THIS APPEAL BEFORE US. 6. AT THE TIME OF HEARING THROUGH VIDEO CONFERENCE , THE LD. DR FOR THE REVENUE HAS PLAC ED RELIANCE ON THE RATIO LAID DOWN BY THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF PR.CIT VS. MOHAMMAD HAJI ADAM & CO. VIDE ITS JUDGMENT DATED 11.02.2019 IN ITA NO.1004 OF 2016 . THE LD. DR FURTHER SUBMITTED THAT IN SUCH SITUATION OF BOGUS PURCHASES, THE GP RATE OF GENUINE PURCHASES HAS TO BE IDENTIFIED AND ALONG WITH THAT BOGUS PURCHASE GP ALSO HAVE TO BE IDENTIFIED. THE DIFFERENCE OF THESE TWO CAN BE ADDED TO THE INCOME 4 ITA NO S . 763 & 764 /PUN/20 17 A.Y. 2010 - 11 OF THE ASSESSEE. FOR EXAMPLE, IF THE GP PERCENTAGE OF GENUINE PURCHASES COMES TO 8% WHE REAS GP PERCENTAGE OF BOGUS PURCHASES COMES TO 10%, THEN 2% OF BOGUS PURCHASES CAN BE ADDED TO THE INCOME OF THE ASSESSEE. 7 . WE HAVE PERUSED THE CASE RECORDS AND HEARD THE SUBMISSIONS OF THE LD. DR. WE HAVE ALSO GIVEN CONSIDERABLE THOUGHT TO THE JUDGMENT OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF PR. CIT VS. MOHOMMAD HAJI ADAM (SUPRA.) WHEREIN IT HAS BEEN HELD THAT NO AD - HOC ADDITION AT THE RATE OF 10% OF BOGUS PURCHASES IS WARRANTED. RATHER, THE ADDITION SHOULD BE MADE TO THE EXTENT OF DIFFERENCE BE TWEEN GROSS PROFIT RATE ON GENUINE PURCHASES AND GROSS PROFIT RATE OF BOGUS PURCHASES. REVERTING TO THE FACTS OF THE PRESENT CASE AND TAKING GUIDANCE FROM THE SAID JUDGMENT OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF PR.CIT VS. MOHOMMAD HAJI ADAM (SUPRA.), WE SET ASIDE THE ORDER OF THE LD. CIT(APPEAL) AND RESTORE THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER FOR UNDERTAKING THIS EXERCISE AND FINDING OUT THE EXCESS GROSS PROFIT RATE EARNED FROM BOGUS PURCHASES AND THEN MAKING THE ADDITION ACC ORDINGLY AFTER ALLOWING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. 8 . IN THE RESULT, APPEAL OF THE ASSESSEE IN ITA NO. 763/PUN/2017 IS ALLOWED FOR STATISTICAL PURPOSES . ITA NO.764/PUN/2017 A.Y. 2010 - 11 9 . IN THIS APPEAL, THOUGH THE ASSESSEE HAS RAISED MULTIPLE GROUNDS OF APPEAL, THE CRUX OF THE GRIEVANCE OF THE ASSESSEE IS WITH REGARD TO THE 5 ITA NO S . 763 & 764 /PUN/20 17 A.Y. 2010 - 11 IMPOSITION OF PENALTY U/S.271(1)(C) OF THE INCOME TAX ACT, 1961 ( HEREINAFTER REFERRED TO AS THE ACT) BY THE ASSES SING OFFICER AND AS CONFIRMED BY THE LD. CIT(APPEALS). 10. BEFORE US, THE LD. DR FAIRLY SUBMITTED THAT SINCE QUANTUM ADDITION ON BOGUS PURCHASES HAS BEEN REMITTED BACK TO THE FILE OF ASSESSING OFFICER FOR RE - ADJUDICATION, SIMILARLY PENALTY ISSUE SHOULD A LSO BE RESTORED BACK TO THE FILE OF ASSESSING OFFICER IN THE INTEREST OF JUSTICE. IN VIEW OF THE MATTER, WE SET ASIDE THE ORDER OF THE LD. CIT(APPEALS) IN THIS APPEAL ALSO AND REMIT THE MATTER O F PENALTY ISSUE BACK TO THE FILE OF ASSESSING OFFICER TO ADJUDICATE IN VIEW OF THE QUANTUM MATTER ALREADY IN FRONT OF HIM AS PER LAW AND AFTER PROVIDING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. 11. IN THE RESULT, APPEAL OF THE ASSESSEE IN ITA NO.764/PUN/2017 I S ALLOWED FOR STATISTICAL PURPOSES . 12. IN THE COMBINED RESULT, BOTH THE APPEALS OF THE ASSESSEE IN ITA NO.763 /PUN/2017 & ITA NO.764/PUN/2017 ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRO NOUNCED ON 22 ND DAY OF JUNE , 20 20 . SD/ - SD/ - D. KARUNAKARA RAO PARTHA SARATHI CHAUDHURY ACCOUNTANT MEMBER JUDICIAL MEMBER / PUNE; / DATED : 22 ND JUNE , 2020. SB 6 ITA NO S . 763 & 764 /PUN/20 17 A.Y. 2010 - 11 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. THE CIT(APPEALS) - 6, PUNE. 4. THE PR. CIT - 5, PUNE. 5 . , , , / DR, ITAT, B BENCH, PUNE. 6 . / GUARD FILE. // TRUE COPY // / BY ORDER, / PRIVATE SECRETARY , / ITAT, PUNE . 7 ITA NO S . 763 & 764 /PUN/20 17 A.Y. 2010 - 11 DATE 1 DRAFT DICTATED ON 11 .06 .2020 SR.PS/PS 2 DRAFT PLACED BEFORE AUTHOR 11 . 0 6 .20 20 SR.PS/PS 3 DRAFT PROPOSED AND PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM/JM 5 APPROVED DRAFT COMES TO THE SR. PS/PS SR.PS/PS 6 KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7 DATE OF UPLOADING OF ORDER SR.PS/PS 8 FILE SENT TO BENCH CLERK SR.PS/PS 9 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 10 DATE ON WHICH FILE GOES TO THE A.R 11 DATE OF DISPATCH OF ORDER