JITENDRA M KOTHARI, MUMBAI V. INCOME TAX OFFICER 18(3)(2), MUMBAI

ITA 919/MUM/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 5387 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-05-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: F
• Assessment Year: 2011-2012
• Appeal Filed On: 15-02-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: CHAUDHARY ARUN KUMAR SINGH LD
• Assessee Lawyers: PRIYANKA JAIN LD
• Keywords: Bogus purchase; Question of law; Reassessment proceedings
• Section: 143(3); 142(1); 133(6); 147; 148

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY, JM AND SHRI MANOJ KUMAR AGGARWAL, AM ./ I.T.A. NO.919/MUM/2018 ( / ASSESSMENT YEAR: 2011-12) JITENDRA M.KOTHARI 239/8.KOTHARI HOUSE LJ ROAD, SHIVAJI PARK MUMBAI 400 016 / VS. ITO - 18(3)(2) PIRAMAL CHAMBERS. LALBAUG MUMBAI 400 012 ! ./ ./PAN/GIR NO. AFUPK-7320-Q ( /APPELLANT ) : ( / RESPONDENT ) ASSESSEE BY : MS. PRIYANKA JAIN LD. AR DEPARTMENT BY : CHAUDHARY ARUN KUMAR SINGH-LD.DR / DATE OF HEARING : 16/05/2019 / DATE OF PRONOUNCEMENT : 16/05/2019 / O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER):- 1. AFORESAID APPEAL BY ASSESSEE FOR ASSESSMENT YEAR [IN SHORT REFERRED TO AS AY] 2011-12 CONTEST THE ORDER OF LD. COMMIS SIONER OF INCOME-TAX (APPEALS)-33, MUMBAI, [IN SHORT REFERRED TO AS CIT (A)], APPEAL NO. CIT(A)- 33/RG21/201/2014-15 DATED 13/06/2016 QUA CONFIRMATION OF ADDITION OF RS.45.38 LACS ON ACCOUNT OF ALLEGED BOGUS PURCHASES. 2 2. IT IS NOTED THAT THE APPEAL HAS BEEN FILED WITH A DELAY 571 DAYS, THE CONDONATION OF WHICH HAS BEEN SOUGHT BY THE ASSESSE E VIDE CONDONATION PETITION AS SUPPORTED BY THE AFFIDAVIT OF THE ASSES SEE. UPON PERUSAL, IT IS NOTED THAT THE DELAY HAS BEEN ATTRIBUTED TO THE ADV ERSE MEDICAL CONDITIONS BEING FACED BY THE ASSESSEES SON DURING THE RELEVA NT PERIOD OF TIME. KEEPING IN VIEW THE PRINCIPLES LAID DOWN BY HONBLE APEX COURT IN 167 ITR 471 (SC) COLLECTOR, LAND ACQUISITION VS. KATIJI , THE BENCH FORMED AN OPINION THAT THE ASSESSEE DESERVE CONDONATION OF DE LAY AND ACCORDINGLY, WE PROCEED TO DISPOSE-OFF THE APPEAL ON MERITS. 3.1 FACTS IN BRIEF ARE THAT THE ASSESSEE BEING RESIDENT INDIVIDUAL STATED TO BE ENGAGED AS ELECTRICAL WORK CONTACTOR UNDER PROPRIETORSHIP CONCERN NAMELY M/S AMBICA SERVICE CENTRE WAS ASSESSED U/S 143(3) R.W.S.147 FOR IMPUGNED AY ON 25/03/2014 WHEREIN THE ASSESSEE WAS SADDLED WITH ADDITION OF RS.45.38 LACS ON ACCOUNT OF ALLEGED BOGUS PURCHASES. THE ORIGINAL RETURN OF INCOME FILED BY THE ASSESSEE WAS PROCESSED U/S 143(1). 3.2 THE REASSESSMENT PROCEEDINGS GOT TRIGGERED PURS UANT TO RECEIPT OF CERTAIN INFORMATION FROM SALES TAX DEPARTMENT, MAHARASHTRA WHEREIN IT TRANSPIRED THAT THE ASSESSEE STOOD BENEFICIARY OF A CCOMMODATION PURCHASE BILLS AGGREGATING TO RS.45.38 LACS FROM 3 SUSPICIOU S ENTITIES, THE DETAILS OF WHICH HAVE ALREADY BEEN EXTRACTED IN PARA 1 OF THE QUANTUM ASSESSMENT ORDER. ACCORDINGLY, THE CASE WAS REOPENED U/S 147 B Y ISSUANCE OF NOTICE U/S 148 ON 13/03/2013 WHICH WAS FOLLOWED BY STATUTO RY NOTICES U/S 143(2) & 142(1) WHEREIN THE ASSESSEE WAS DIRECTED TO SUBSTAN TIATE THE AFORESAID PURCHASES. 3 3.3 ALTHOUGH THE ASSESSEE DEFENDED THE PURCHASES MA DE BY HIM, HOWEVER, NOTICES ISSUED U/S 133(6) TO ALL THE ENTIT IES TO CONFIRM THE TRANSACTIONS, WERE RETURNED BACK UNSERVED BY THE PO STAL AUTHORITIES. THE INQUIRIES ALSO REVEALED THAT TIN (VAT REGISTRATION NOS.) OF THE SUPPLIERS WAS NOT ACTIVE ON THE DATE OF PURCHASES MADE BY THE ASS ESSEE. THE ASSESSEE FAILED TO PRODUCE ANY OF THE SUPPLIER TO CONFIRM TH E TRANSACTIONS. RESULTANTLY, THE AFORESAID PURCHASES WERE TREATED A S NON-GENUINE PURCHASES AND ACCORDINGLY, ADDED TO THE INCOME OF T HE ASSESSEE. 4. ALTHOUGH THE ASSESSEE PREFERRED APPEAL AGAINST T HE SAME, HOWEVER, ASSESSEES FAILURE TO ATTEND THE APPELLATE PROCEEDI NGS LED TO CONFIRMATION OF STAND OF LD. AO. AGGRIEVED, THE ASSESSEE IS IN FURT HER APPEAL BEFORE US. 5. THE LD. AUTHORIZED REPRESENTATIVE FOR ASSESSEE [ AR] PLEADED TO RESTRICT THE IMPUGNED ADDITION TO 24.65%, BEING GROSS PROFIT RATE DECLARED BY THE ASSESSEE FOR THE IMPUGNED AY AS DONE BY LD. FIR ST APPELLATE AUTHORITY, IN IDENTICAL CIRCUMSTANCES, FOR AYS 2009-10 & 2010- 11. THE LD. DR PLACED RELIANCE ON THE DECISION OF HONBLE GUJARAT HIGH CO URT RENDERED IN N.K.PROTEINS LTD. VS. CIT [2016-TIOL-3165-HC-AHM-IT ] TO SUBMIT THAT FULL ADDITIONS WERE JUSTIFIED. 6. WE HAVE CAREFULLY HEARD THE RIVAL SUBMISSIONS AN D PERUSED RELEVANT MATERIAL ON RECORD AND DELIBERATED ON JUDICIAL ANNO UNCEMENTS CITED BEFORE US. WE FIND THAT ASSESSEE WAS IN POSSESSION OF PRIM ARY PURCHASE DOCUMENTS AND THE PAYMENTS TO THE SUPPLIERS WAS THR OUGH BANKING CHANNELS. WE ARE OF THE CONSIDERED OPINION THAT THE RE COULD BE NO SALE WITHOUT ACTUAL PURCHASE OF MATERIAL KEEPING IN VIEW THE ASSESSEES NATURE OF BUSINESS ACTIVITIES. AT THE SAME TIME, NOTICES U /S 133(6) DID NO ELICIT ANY 4 SATISFACTORY RESPONSE AND THE ASSESSEE FAILED TO PR ODUCE EVEN A SINGLE SUPPLIER TO CONFIRM THE PURCHASE TRANSACTIONS. THER EFORE, 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. KEEPING IN VIEW THE DECISION OF LD. FIRST APPELLATE AUTHORI TY IN AYS 2009-10 & 2010- 11, WE RESTRICT THE IMPUGNED ADDITIONS TO 24.65% OF ALLEGED BOGUS PURCHASES OF RS.45,38,073/- WHICH COMES TO RS.11,18,635/-. TH E BALANCE ADDITIONS STAND DELETED. 7. OUR AFORESAID VIEW IS IN LINE WITH THE RECENT DE CISION OF HONBLE BOMBAY HIGH COURT RENDERED IN BUNCH OF APPEALS TITL ED AS PR.CIT VS. M/S MOHOMMAD HAJI ADAM & CO. [ITA NO.1004 & OTHERS OF 2 016, DATED 11/02/2019] WHEREIN HONBLE COURT DISTINGUISHING THE CITED CASE LAW OF HONBLE GUJARAT HIGH COURT RENDERED IN N.K. INDUSTRIES LTD. VS DY. C.I.T. IN TAX APPEAL NO. 240 OF 2003 AND CONNECTED APPEALS DECIDED ON 20TH JUNE, 2016 OBSERVED AS UNDER: - 8. IN THE PRESENT CASE, AS NOTED ABOVE, THE ASSESSE E WAS A TRADER OF FABRICS. THE A.O. FOUND THREE ENTITIES WHO WERE INDULGING IN BOGUS BI LLING ACTIVITIES. A.O. FOUND THAT THE PURCHASES MADE BY THE ASSESSEE FROM THESE ENTITIES WERE BOGUS. THIS BEING A FINDING OF FACT, WE HAVE PROCEEDED ON SUCH BASIS. DESPITE THIS, THE QUESTION ARISES WHETHER THE REVENUE IS CORRECT IN CONTENDING THAT THE ENTIRE PU RCHASE AMOUNT SHOULD BE ADDED BY WAY OF ASSESSEE'S ADDITIONAL INCOME OR THE ASSESSEE IS CORRECT IN CONTENDING THAT SUCH LOGIC CANNOT BE APPLIED. THE FINDING OF THE CIT(A) AND THE TRIBUNAL WOULD SUGGEST THAT THE DEPARTMENT HAD NOT DISPUTED THE ASSESSEE'S SALE S. THERE WAS NO DISCREPANCY BETWEEN THE PURCHASES SHOWN BY THE ASSESSEE AND THE SALES DECLARED. THAT BEING THE POSITION, THE TRIBUNAL WAS CORRECT IN COMING TO THE CONCLUSION THAT THE PURCHASES CANNOT BE REJECTED WITHOUT DISTURBING THE SALES IN CASE OF A TRADER. THE TRIBUNAL, THEREFORE, CORRECTLY RESTRICTED THE ADDITIONS LIMITED TO THE E XTENT OF BRINGING THE G.P. RATE ON PURCHASES AT THE SAME RATE OF OTHER GENUINE PURCHAS ES. THE DECISION OF THE GUJARAT HIGH COURT IN THE CASE OF N.K. INDUSTRIES LTD. (SUPRA) CANNOT BE APPLIED WITHOUT 5 REFERENCE TO THE FACTS. IN FACT IN PARAGRAPH 8 OF THE SAME JUDGMENT THE COURT HELD AND OBSERVED AS UNDER- SO FAR AS THE QUESTION REGARDING ADDITION OF RS.3 ,70,78,125/- AS GROSS PROFIT ON SALES OF RS.37.08 CRORES MADE BY THE ASSESSING OFFICER DESPI TE THE FACT THAT THE SAID SALES HAD ADMITTEDLY BEEN RECORDED IN THE REGULAR BOOKS DURIN G FINANCIAL YEAR 1997-98 IS CONCERNED, WE ARE OF THE VIEW THAT THE ASSESSEE CANNOT BE PUNISHE D SINCE SALE PRICE IS ACCEPTED BY THE REVENUE. THEREFORE, EVEN IF 6 % GROSS PROFIT IS TAK EN INTO ACCOUNT, THE CORRESPONDING COST PRICE IS REQUIRED TO BE DEDUCTED AND TAX CANNOT BE LEVIED ON THE SAME PRICE. WE HAVE TO REDUCE THE SELLING PRICE ACCORDINGLY AS A RESULT OF WHICH PROF IT COMES TO 5.66%. THEREFORE, CONSIDERING 5.66% OF RS.3,70,78,125/- WHICH COMES TO RS.20,98,621.88 WE THINK IT FIT TO DIRECT THE REVENUE TO ADD RS.20,98,621.88 AS GROSS PROFIT AND MAKE NECESSARY DEDUCTIONS ACCORDINGLY. ACCORDINGLY, THE SAID QUESTION IS ANSWERED PARTIALLY IN FAVOR OF THE ASSESSEE AND PARTIALLY IN FAVOR OF THE REVENUE. 9 IN THESE CIRCUMSTANCES, NO QUESTION OF LAW, THERE FORE, ARISES. ALL INCOME TAX APPEALS ARE DISMISSED, ACCORDINGLY. NO ORDER AS TO COSTS. 8. RESULTANTLY, THE APPEAL STANDS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 16/05/2019. SD/- SD/- (SAKTIJIT DEY) (MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 16/05/2019 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