SHRI GANPATRAM D. PUROHIT, MUMBAI V. INCOME TAX OFFICER - 19(1)(3), MUMBAI

ITA 882/MUM/2018

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 2479 (ITAT-MUMBAI)
• Duration Of Justice: 9 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-11-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 13-02-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S K BEPARI
• Keywords: Reopening of assessment
• Section: 133(6); 147; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'SMC' BENCH, MUMBAI BEFORE SHRISAKTIJIT DEY, JUDICIAL MEMBER ITA NO. 882/MUM/2018 (ASSESSMENT YEAR: 2010-11) SHRI GANPATRAM D. PUROHIT PRIMEIR PIPE FITTING CO. ROOM NO. 20, BANSI BHUVAN 1ST FLOOR, 18/24, 3RD KHETWADI LANE, MUMBAI 400004 VS. INCOME TAX OFFICER - 19(1)(3) 2ND FLOOR, MATRU MANDIR TARDEO ROAD MUMBAI 400007 PAN AADPP5868L APPELLANT RESPONDENT APPELLANT BY: SHRI RAJIV KHANDELWAL RESPONDENT BY: SHRI S.K. BEPARI DATE OF HEARING: 26.09.2018 DATE OF PRONOUNCEMENT: 14.11.2018 O R D E R PER SAKTIJIT DEY, JM THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-30, MUMBAI DAT ED 10.01.2018AND IT RELATES TO A.Y. 2010-11. 2. THE ISSUE IN DISPUTE IN THE PRESENT APPEAL IS CONFI NED TO THE ADDITION MADE ON ACCOUNT OF ALLEGED NON-GENUINE PURCHASES. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE, AN I NDIVIDUAL, FILED HIS RETURN OF INCOME FOR THE IMPUGNED ASSESSMENT YEAR O N 26.09.2010 DECLARING TOTAL INCOME AT ` 3,64,644/-. THE RETURN OF INCOME FILED BY THE ASSESSEE WAS INITIALLY PROCESSED UNDER SECTION 143( 1) OF THE INCOME TAX ACT, 1961 (HEREINAFTER 'THE ACT'). SUBSEQUENTLY, ON THE BASIS OF INFORMATION RECEIVED FROM DGIT (INV). WING, MUMBAI AND THE SALE S TAX DEPARTMENT OF MAHARASHTRA GOVERNMENT THAT PURCHASES OF ` 1,43,31,116/- CLAIMED TO HAVE BEEN MADE FROM VARIOUS PARTIES ARE NOT GENUINE , AS THE CONCERNED PARTIES HAVE BEEN IDENTIFIED AS HAWALA OPERATORS BY THE SALES TAX DEPARTMENT, THE ASSESSING OFFICER (AO) REOPENED THE ASSESSMENT UNDER ITA NO. 882/MUM/2018 SHRI GANPATRAM D. PUROHIT 2 SECTION 147 OF THE ACT. DURING THE ASSESSMENT PROCE EDINGS THE AO CALLED UPON THE ASSESSEE TO PROVE THE GENUINENESS OF PURCH ASES BY FURNISHING DOCUMENTARY EVIDENCES AS WELL AS VARIOUS OTHER DETA ILS INCLUDING PROOF OF TRANSPORTATION AND DELIVERY OF GOODS. THE AO ALSO C ALLED UPON THE ASSESSEE TO FURNISH QUANTITATIVE TALLY OF PURCHASES MADE AND SALES EFFECTED. AS OBSERVED BY THE AO, THE ASSESSEE COULD FURNISH PURC HASE INVOICES, BANK STATEMENT SHOWING PAYMENT MADE TOWARDS PURCHASE OF GOODS. WHEREAS, THE ASSESSEE COULD NOT FURNISH ANY EVIDENCE TO DEMO NSTRATE TRANSPORTATION AND DELIVERY OF GOODS AT ASSESSEES PREMISES. THE A O ALSO OBSERVED THAT THE NOTICE ISSUED UNDER SECTION 133(6) OF THE ACT T O SELLING DEALERS TO CROSS VERIFY THE CLAIM OF THE ASSESSEE RETURNED BACK UNSE RVED BY THE POSTAL AUTHORITIES. THUS, ON THE BASIS OF THE ABOVE SAID F ACTS AND MATERIAL THE AO CONCLUDED THAT THE ASSESSEE COULD NOT PROVE THE GEN UINENESS OF THE PURCHASES. ACCORDINGLY, HE REJECTED THE BOOKS OF AC COUNT OF THE ASSESSEE UNDER SECTION 145(3) OF THE ACT. HAVING DONE SO THE AO OBSERVED THAT THE ASSESSEE HAS INDULGED IN THE ACTIVITY OF NON-GENUIN E PURCHASES TO SUPPRESS THE TRUE PROFIT AND REDUCE TAX LIABILITY. ACCORDINGLY, HE PROCEEDED TO QUANTIFY THE ADDITION BY ESTIMATING THE PROFIT A T 12.5% OF THE NON- GENUINE PURCHASES AND MADE AN ADDITION OF ` 17,91,390/-. BEING AGGRIEVED OF SUCH ADDITION THE ASSESSEE PREFERRED APPEAL BEFO RE THE LEARNED CIT(A). AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE I N THE CONTEXT OF THE FACTS AND MATERIAL ON RECORD THE LEARNED CIT(A) FOU ND THAT THE VAT RATE ON THE GOODS TRANSACTED BY THE ASSESSEE IS 4%. HE ALSO OBSERVED THAT CONSIDERING THE NATURE OF BUSINESS CARRIED ON BY TH E ASSESSEE THE PROFIT MARGIN CAN BE ADOPTED AT 2.5%. ACCORDINGLY, HE HELD THAT THE ADDITION SHOULD BE MADE AT 6.5% OF THE NON-GENUINE PURCHASES . 4. THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED, CO NSIDERING THE FACT THAT THE ASSESSEE CARRIES ON BUSINESS OF TRADI NG IN IRON AND STEEL THE NATURAL PROFIT RATE WHICH CAN BE ADOPTED IS AT THE MAXIMUM OF 5% AS THE PROFIT RATE IN SUCH LINE OF BUSINESS VARIES BETWEEN 2% TO 4%. THUS, HE REQUESTED TO RESTRICT THE ADDITION TO 5% OF THE ALL EGED NON-GENUINE PURCHASES. ITA NO. 882/MUM/2018 SHRI GANPATRAM D. PUROHIT 3 5. THE LEARNED DEPARTMENTAL REPRESENTATIVE (D.R.), ON THE OTHER HAND, RELIED UPON THE OBSERVATIONS OF THE LEARNED CIT(A). 6. I HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THERE IS NO DISPUTE THAT THE ASSESSEE IS TR ADING IN IRON AND STEEL GOODS. I AM ALSO OF THE VIEW THAT THE ASSESSEE HAS FAILED TO CONCLUSIVELY PROVE THE GENUINENESS OF PURCHASES MADE. THEREFORE, THE CLAIM OF THE ASSESSEE THAT NO ADDITION SHOULD HAVE BEEN MADE BY THE AO IS UNACCEPTABLE. AT THE SAME TIME THE AO HAS NOT DISPU TED THE SALES EFFECTED BY THE ASSESSEE, WHICH IS EVIDENT FROM THE FACT THA T HE HAS RESTRICTED THE ADDITION TO THE PROFIT ELEMENT BY ESTIMATING THE PR OFIT AT 12.5% OF THE NON- GENUINE PURCHASES.WHEREAS, THE LEARNED CIT(A) HAS R ESTRICTED THE ADDITION TO 6.5% OF THE NON-GENUINE PURCHASES. ADMITTEDLY, A GAINST THE ORDER OF THE CIT(A) THE DEPARTMENT HAS NOT PREFERRED ANY APPEAL. THEREFORE, IN THE PRESENT APPEAL I AM CONCERNED WITH THE REASONABLENE SS OF ESTIMATION OF PROFIT AT 6.5% OF THE NON-GENUINE PURCHASES. AFTER CONSIDERING THE PECULIAR FACTS AND CIRCUMSTANCES OF THE ASSESSEES CASE AND THE NATURE OF BUSINESS CARRIED ON AS WELL AS KEEPING IN VIEW THE JUDICIAL PRECEDENTS CITED BEFORE ME, I HOLD THAT ESTIMATION OF PROFIT @5% OF THE NON -GENUINE PURCHASES WILL BE FAIR AND REASONABLE. ACCORDINGLY, I DIRECT THE A O TO RESTRICT THE ADDITION TO 5% OF THE NON-GENUINE PURCHASES. 7. BEFORE PARTING I MUST OBSERVE, DURING THE COURSE OF HEARING THE LEARNED A.R. FOR THE ASSESSEE HAS RESTRICTED HIS AR GUMENTS ONLY TO THE REASONABLENESS OF PROFIT RATIO ADOPTED BY THE CIT(A ). ACCORDINGLY REST OF THE GROUNDS RAISED BY THE ASSESSEE, INCLUDING THE GROUN D RELATING TO REOPENING OF ASSESSMENT UNDER SECTION 147 OF THE ACT, ARE DEE MED AS NOT PRESSED, HENCE, DISMISSED. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 14 TH NOVEMBER, 2018. SD/ - (SAKTIJIT DEY) JUDICIALMEMBER MUMBAI, DATED: 14 TH NOVEMBER, 2018 ITA NO. 882/MUM/2018 SHRI GANPATRAM D. PUROHIT 4 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) -30, MUMBAI 4. THE PR. CIT- 19, MUMBAI 5. THE DR, SMC BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.