SHRI PURARAM HARKAJI GEHLOTH, MUMBAI V. I.T.O. - 20(2)(5), MUMBAI

ITA 833/MUM/2018

• Counselvise Citation: [2018] 112 COUNSELVISE.COM (IT) 5688 (ITAT-MUMBAI)
• Duration Of Justice: 9 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-11-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 09-02-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAJESH KUMAR YADAV
• Keywords: Bogus purchase; Accommodation entries; Set aside
• Section: 133(6); 201

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE S/ SHRI B.R. BASKARAN (AM) & SANDEEP GOSAIN (JM) I.T.A. NO. 833 /MUM/20 1 8 (ASSESSMENT YEAR 20 1 0 - 11 ) I.T.A. NO. 834/MUM/2018 (ASSESSMENT YEAR 2011 - 12) SHRI PURARAM HARKAJI GEHLOTH 146, MUJI NIWAS BUILDING 1 ST FLOOR, OFFICE NO. 14 3 RD KUMBHARWADA LANE MUMBAI - 400 004. PAN : AHMPG4909M VS. ITO 20(2)(5) MUMBAI ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY SHRI MAHAVIR JAIN DEPARTMENT BY SHRI RAJESHKUMAR YADAV DATE OF HEARING 29 . 1 1 . 201 8 DATE OF PRONOUNCEMENT 29 . 1 1 . 201 8 O R D E R PER B.R. BASKARAN (AM) : - BOTH THE APPEALS FILED BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDERS PASSED BY THE LEARNED CIT(A) - 32, MUMBAI AND THEY RELATE TO A.YS. 2010 - 11 & 2011 - 12. IN BOTH THE APPEALS THE ASSESSEE IS AGGRIEVED BY THE DECISION OF THE LEARNED CIT(A) IN CONFIRMING THE ADDITION RELATING TO ALLEGED BOGUS PURCHASES. 2. THE ASSESSEE HA S ALSO URGED A LEGAL GROUND CHALLENGING THE VALIDITY OF RE OPENING OF ASSESSMENT. HOWEVER, NO ARGUMENT TOOK P LACE ON THIS LEGAL ISSUE AND HENCE THE SAME IS DISMISSED. 3. FACTS RELATING TO THE ADDITION RELATING TO BOGUS PURCHASES ARE D ISCUSSED IN BRIEF. THE ASSESSEE IS AN INDIVIDUAL RUNNING A PROPRIETARY CONCERN NAMED M/S. PRAKASH TUBES INDIA AND IS DEALING IN FE RROUS AND NON - FERROUS METALS. THE REVENUE RECEIVED INFORMATION FROM THE SALES TAX DEPARTMENT OF GOVERNMENT OF MAHARASHTRA THAT SOME OF THE DEALERS WERE PROVIDING ONLY ACCOMMODATION ENTRIES WITHOUT ACTUALLY SUPPLYING THE MATERIAL S . IT WAS SHRI PURARAM HARKAJI GEHLOTH 2 NOTICED THAT THE A SSESSEE PURCHASED MATERIAL FROM SOME OF SUCH DEALERS AGGREGATING TO ` 55.47 LAKHS AND ` 161.97 LAKHS RESPECTIVELY IN THE YEARS RELEVANT TO A.YS. 2010 - 11 & 2011 - 12 . HENCE, THE ASSESSING OFFICER REOPENED THE ASSESSMENT OF BOTH THE YEARS UNDER CONSIDERATION. 4. IN ORDER TO VERIFY THE GENUINENESS OF PURCHASES, THE AO ISSUED N OTICE S U/S. 133(6) OF THE ACT, BUT THEY WERE RETURNED BACK UNSERVED. HENCE THE AO ASKED THE ASSESSEE TO PROVIDE CORRECT ADDRESS OF THE SUPPLIER S . HOWEVER, THE ASSESSEE COULD NOT FURNISH THE SAME. INSTEAD THE ASSESSEE FURNISH PAN NUMBER OF SUPPLIERS. HENCE THE AO TOOK THE VIEW THAT THE ASSESSEE HAS FAILED TO PROVE THE GENUINENESS OF THE PURCHASES MADE FROM THE HAWALA DEALERS . TAKING SUPPORT OF THE DECISION RENDERED BY HON'BLE GUJARAT HIG H COURT IN THE CASE OF SIMIT P. SHETH (356 ITR 451), THE ASSESSING OFFICER TOOK THE VIEW THAT PROFIT ELEMENT EMBEDDED IN THESE PURCHASES SHOULD BE BROUGHT TO TAX. THE ASSESSING OFFICER ESTIMATED PROFIT ELEMENT AT 12.5% AND ACCORDINGLY ESTIMATED PROFIT AT ` 6.93 LAKHS AND ` 20.24 LAKHS RESPECTIVELY FOR A.YS. 2010 - 11 & 2011 - 12. THE ASSESSING OFFICER COMPLETED THE ASSESSMENT OF BOTH THE YEARS BY ADDING PROFIT SO ESTIMATED BY HIM. IN THE APPELLATE PROCEEDINGS BEFORE LD CIT(A) , THE ASSESSEE COULD NOT WIN ITS CAS E S AND HENCE THE ASSESSEE HAS FILED THIS APPEAL BEFORE US. 5. WE HAVE HEARD THE PARTIES AND PERUSED THE RECORD. WE NOTICED THAT THE ASSESSEE IS DEALING IN FERROUS AND NON - FERROUS METAL S AND IT WAS STATED THAT VAT RATE APPLICABLE THEREON WAS 4%. SINCE THE ASSESSING OFFICER HAS ESTIMATED THE PROFIT ELEMENT EMBEDDED IN THE PURCHASES, IT IS APPARENT THAT THE ASSESSING OFFICER WAS SATISFIED THAT THE ASSESSEE HAS RECONCILED THE PURCHASES AND SALES. IN THAT SITUATION, THE ASSESSEE COULD NOT HAVE SOLD GOODS WITHOUT ACTUALLY PURCHASING THEM. HENCE, THE ASSESSING OFFICER WAS JUSTIFIED IN MAKING ADDITION IN RESPECT OF PROFIT ELEMENT EMBEDDED IN PURCHASES. T HE POSSIBILITY IN THESE KIND OF CASES IS THAT THE ASSESSEE COULD HAVE PURCHASE D MATERIALS FROM ONE SOURCE AND COULD HAVE OBTAINED INVOICES FROM OTHER SOURCE. SHRI PURARAM HARKAJI GEHLOTH 3 IN THIS KIND OF SITUATIONS, THE POSSIBILITY COULD BE THAT THE ASSESSEE WOULD HAVE MAD E SAVINGS ON ACCOUNT OF VAT TAX AND DISCOUNTS. HENCE, IN OUR VIEW, THE PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES SHOUL D BE ESTIMATED BY CONSIDERING THESE ELEMENTS. WE HAVE NOTICED THAT AO HAS ESTIMATED THE PROFIT ELEMENT AT 12.5%. C ONSIDERING THE VAT RATE OF 4%, WE ARE OF THE VIEW THAT THE ESTIMATE SO MADE BY THE AO IS ON THE HIGHER SIDE. ACCORDINGLY, IN THE FACTS AND C IRCUMSTANCES OF THE CASE, WE ARE OF THE VIEW THAT PROFIT ELEMENT EMBEDDED IN THE PURCHASES MAY BE TAKEN AT 6% AND THE SAME WOULD TAKE CARE OF REVENUE LEAKAGES, IF ANY. ACCORDINGLY, WE SET ASIDE THE ORDER PASSED BY THE LEARNED CIT(A) ON THIS ISSUE IN BOTH T HE YEARS AND DIRECT THE ASSESSING OFFICER TO ESTIMATE PROFIT AT 6% OF THE VALUE OF ALLEGED BOGUS PURCHASES IN BOTH THE YEARS UNDER CONSIDERATION. 5. IN THE RESULT, BOTH THE APPEALS FILED BY THE ASSESSEE ARE PARTLY ALLOWED. ORDER HAS BE E N PRONOUNCED IN THE COURT ON 29 . 1 1 .201 8 . SD/ - SD/ - (SANDEEP GOSAIN ) (B.R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 29 / 1 1 / 20 1 8 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// ( SENIOR PRIVATE SECRETARY ) PS ITAT, MUMBAI