SHRI AMIT L KOTHARI, Mumbai V. INCOME TAX WARD-27(1)(1), Mumbai

ITA 850/MUM/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 7905 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-04-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 12-02-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: VIDHYADHAR V LD
• Assessee Lawyers: MEHUL SHAHLD
• Keywords: Bogus purchase; Reassessment proceedings
• Section: 143(3); 142(1); 133(6); 147; 148

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI , $ , & BEFORE SHRI SAKTIJIT DEY, JM AND SHRI MANOJ KUMAR AGGARWAL, AM ./ I.T.A. NO.850/MUM/2018 ( ' ' ' ' (' (' (' (' / ASSESSMENT YEAR: 2009-10) SHRI AMIT L. KOTHARI 2, BIPIN VILLA, SANGHANI ESTATE GARDEN LANE, GHATKOPAR (W) MUMBAI-400 086 / VS. INCOME T AX OFFICER - 27(1)(1) 4 TH FLOOR, TOWER NO.6 RAILWAY STATION COMPLEX VASHI, NAVI MUMBAI. ) ./ ./PAN/GIR NO. AACPK-0459-M ( )+ /APPELLANT ) : ( ,-)+ / RESPONDENT ) & ./ I.T.A. NO.2057/MUM/2018 ( ' ' ' ' (' (' (' (' / ASSESSMENT YEAR: 2009-10) INCOME T AX OFFICER - 27(1)(1) 4 TH FLOOR, TOWER NO.6 RAILWAY STATION COMPLEX VASHI, NAVI MUMBAI. / VS. SHRI AMIT L. KOTHARI 2, BIPIN VILLA, SANGHANI ESTATE GARDEN LANE, GHATKOPAR (W) MUMBAI-400 086 ) ./ ./PAN/GIR NO. AACPK-0459-M ( )+ /APPELLANT ) : ( ,-)+ / RESPONDENT ) ASSESSEE BY : SHRI MEHUL SHAH-LD.AR REVENUE REVENUE REVENUE REVENUE BY BYBY BY . .. . : SHRI VIDHYADHAR V.LD.DR /0 / DATE OF HEARING : 16/04/2019 1(/0 / DATE OF PRONOUNCEMENT : 23/04/2019 2 / O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER):- 1. AFORESAID CROSS-APPEALS FOR ASSESSMENT YEAR [AY] 2009-10 CONTEST THE ORDER OF LD. COMMISSIONER OF INCOME-TAX (APPEAL S)-25, MUMBAI [CIT(A)], APPEAL NO. CIT(A)-25/IT-130/2015-16 DATED 02/01/2018 ON COMMON GROUND OF APPEAL VIZ. ESTIMATION ON ACCOUNT OF ALLEGED BOGUS PURCHASES. THE ASSESSEE IS AGGRIEVED BY ESTIMATION OF 12.5% ON ACCOUNT OF ALLEGED BOGUS PURCHASES AS MADE BY LD. CIT(A) WHEREAS THE REVENUE IS AGGRIEVED BY THE FACT THAT DISALLOWANCE OF RS.64.57 LACS AS WORKED OUT BY LD.AO HAS BEEN RESTRICTED BY LD. FIRST APPELLATE AU THORITY TO 12.5%. 2.1 FACTS LEADING TO THE CROSS APPEALS ARE THAT THE ASSESSEE BEING RESIDENT INDIVIDUAL STATED TO BE ENGAGED IN TRADING OF CHEMICALS UNDER PROPRIETARY CONCERN NAMELY M/S SUVIDHI ENTERPRISES [WRONGLY BEEN REFERRED TO AS M/S SAPPHIRE MICRO SYSTEM BY LD. AO] WAS REASSESSED FOR IMPUGNED AY U/S 143(3) READ WITH SECTION 147 ON 21/03/2015 BY LD. INCOME TAX OFFICER-27(1)(1), MUMBAI [AO] WHEREIN THE INCOME OF THE ASSESSEE WAS DETERMINED AT RS.67.78 LACS AFTER CERTAIN DISALLOWA NCES AS AGAINST RETURNED INCOME OF RS.2.94 LACS FILED BY THE ASSESS EE WHICH WAS PROCESSED U/S 143(1). THE ADDITION OF RS.64.57 LACS AS MADE BY LD. AO ON ACCOUNT OF ALLEGED BOGUS PURCHASES IS THE SOLE SUBJECT MATTER OF PRESENT APPEAL BEFORE US. 2.2 THE REASSESSMENT PROCEEDINGS GOT TRIGGERED PURS UANT TO RECEIPT OF CERTAIN INFORMATION FROM SALES TAX DEPARTMENT, MAHARASHTRA WHEREIN IT 3 TRANSPIRED THAT THE ASSESSEE STOOD BENEFICIARY OF A CCOMMODATION PURCHASE BILLS AGGREGATING TO RS.96.73 LACS FROM TWO ENTITIE S. ACCORDINGLY, THE CASE WAS REOPENED U/S 147 BY ISSUANCE OF NOTICE U/S 148 WHICH WAS FOLLOWED BY STATUTORY NOTICES U/S 143(2) AND 142(1) WHEREIN THE ASSESSEE WAS DIRECTED TO SUBSTANTIATE THE AFORESAID PURCHASES. 2.3 ALTHOUGH THE ASSESSEE DEFENDED THE PURCHASES MA DE BY HIM, HOWEVER, NOTICES ISSUED U/S 133(6) TO BOTH THE ENTI TIES TO CONFIRM THE TRANSACTIONS, WERE RETURNED UNDELIVERED BY THE POST AL AUTHORITIES. THE PHYSICAL INSPECTION BY WARD INSPECTOR REPORTED THAT NONE OF THE PARTY EXISTED AT THE GIVEN ADDRESS. THE ASSESSEE FAILED T O PRODUCE ANY OF THE SUPPLIER TO CONFIRM THE TRANSACTIONS AND ALSO FAILE D TO SUBSTANTIATE THE DELIVERY OF MATERIAL. THE FACTUAL MATRIX LED THE LD . AO TO DISBELIEVE THE PURCHASES MADE BY THE ASSESSEE AND ACCORDINGLY, THE DISALLOWANCE WAS ESTIMATED AT RS.64.57 LACS, BEING PEAK OF THE CUMUL ATIVE OUTSTANDING OF THE TWO SUPPLIERS. 3. AGGRIEVED, THE ASSESSEE AGITATED THE SAME WITH P ARTIAL SUCCESS BEFORE LD. CIT(A) VIDE IMPUGNED ORDER DATED 02/01/2 018, WHEREIN, INTER- ALIA RELYING UPON THE JUDGEMENT OF HONBLE GUJARAT HIGH COURT RENDERED IN CIT VS. SIMIT P.SHETH [356 ITR 451], THE ESTIMATION WERE RESTRICTED TO 12.5% OF ALLEGED BOGUS PURCHASES. THE STAND OF LD. FIRST APPELLATE AUTHORITY HAS GIVEN RISE TO CROSS-APPEALS BEFORE US. 4. THE LD. AUTHORIZED REPRESENTATIVE FOR ASSESSEE [ AR], SHRI MEHUL SHAH, DRAWING OUR ATTENTION TO ASSESSEES FINANCIAL STATE MENTS SUBMITTED THAT THE ASSESSEE PROCURED GOODS ONLY FROM THESE TW O SUPPLIERS DURING 4 IMPUGNED AY AND ACHIEVED TURNOVER AGAINST THESE PUR CHASES. THEREFORE, THE SUBSTANTIAL ADDITIONS WERE NOT JUSTIFIED KEEPIN G IN VIEW THE GROSS / NET PROFIT ALREADY DECLARED BY THE ASSESSEE. THE LD. DR CONTRO VERTED THE SAME BY SUBMITTING THAT THE ASSESSEE MADE PURCHASES FROM NON-EXISTENT PARTIES. 5. WE HAVE CAREFULLY HEARD THE RIVAL SUBMISSIONS AN D PERUSED RELEVANT MATERIAL ON RECORD. WE ARE OF THE CONSIDERED OPINIO N THAT THERE COULD BE NO SALE WITHOUT ACTUAL PURCHASE OF MATERIAL KEEPING IN VIEW THE FACT THAT THE ASSESSEE WAS ENGAGED IN TRADING ACTIVITIES. THE ASS ESSEE WAS IN POSSESSION OF PRIMARY PURCHASE DOCUMENTS AND THE AC COUNTS WERE SUBJECTED TO AUDIT. THE PAYMENTS TO THE SUPPLIERS W ERE THROUGH BANKING CHANNELS. THE SALES TURNOVER HAS NOT BEEN DISPUTED BY THE REVENUE. THE PURCHASES MADE BY THE ASSESSEE FROM TWO SUPPLIERS C ONSTITUTE GROSS PURCHASE OF THE ASSESSEE. AT THE SAME TIME, THE ASS ESSEE FAILED TO CONCLUSIVELY SUBSTANTIATE THE DELIVERY OF MATERIAL. NOTICES ISSUED U/S 133(6) TO THE TWO SUPPLIERS DID NOT ELICIT SATISFACTORY RE SPONSE. THEREFORE, IN SUCH A SITUATION, THE ADDITION, WHICH COULD BE MADE, WAS T O ACCOUNT FOR PROFIT ELEMENT EMBEDDED IN THESE PURCHASE TRANSACTIONS TO FACTORIZE FOR PROFIT EARNED BY ASSESSEE AGAINST POSSIBLE PURCHASE OF MAT ERIAL IN THE GREY MARKET AND UNDUE BENEFIT OF VAT AGAINST SUCH BOGUS PURCHASES, WHICH LD. FIRST APPELLATE AUTHORITY HAS RIGHTLY DONE. HOWEVER , KEEPING IN VIEW THE FACT THAT THE ASSESSEE ALREADY DECLARED NET PROFIT RATE OF 1.69% DURING THE IMPUGNED AY AND THESE WERE THE ONLY PURCHASES MADE BY THE ASSESSEE, WE RESTRICT THE IMPUGNED ADDITIONS TO 3% OF ALLEGED BOGUS PURCHASES WHICH COMES TO RS.2,89,126/-. THE IMPUGNED ORDER STAND MO DIFIED TO THAT EXTENT. 5 THE REVENUES APPEAL STANDS DISMISSED. GROUND NO. 3 OF ASSESSEES APPEAL STAND PARTLY ALLOWED. NO ARGUMENTS HAVE BEEN RAISED WITH RESPECT TO OTHER GROUNDS. 6. THE REVENUES APPEAL STANDS DISMISSED WHEREAS TH E ASSESSEES APPEAL STAND PARTLY ALLOWED IN TERMS OF OUR ABOVE O RDER. ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD APRIL, 2019. SD/- SD/- (SAKTIJIT DEY) (MANOJ KUMAR AGGARWAL) . .. . / JUDICIAL MEMBER . .. . / ACCOUNTANT MEMBER . MUMBAI; DATED : 23/04/2019 SR.PS:-JAISY VARGHESE / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT CONCERNED 5. , , / DR, ITAT, MUMBAI 6. '#$ / GUARD FILE / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI.