HARESH SOHANRAJ JAIN PROP.: NAVPAD STEEL CENTRE, MUMBAI V. DEPUTY COMMISSIONER OF INCOME TAX 15(2), MUMBAI

ITA 920/MUM/2018

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 0219 (ITAT-MUMBAI)
• Duration Of Justice: 7 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-09-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 15-02-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S K BEPARI
• Keywords: Bogus purchase; Peak credit
• Section: 69C; 143(3); 133(6); 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY , JUDICIAL MEMBER ITA NO. 920 / MUM . /2018 ( ASSESSMENT YEAR : 20 09 10 ) SHRI HARESH SOHANRAJ JAIN PROP. NAVPAD STEEL CENTRE ROOM NO.18/19, 2 ND FLOOR 2, GANDHI NIWAS 81/83 KHADILKAR ROAD MUMBAI 400 004 PAN ADPPJ0019E . APPELLANT V/S DY. COMMISSIONER OF INCOME TAX CIRCLE 15(2), MUMBAI . RESPONDENT ASSESSEE BY : SHRI SATISH MODI REVENUE BY : SHRI S.K. BEPARI DATE OF HEARING 1 0 .09.2018 DATE OF ORDER 19.09.2018 O R D E R A FORESAID APPEAL HA S BEEN FILED BY THE ASSESSEE CHALLENGING THE ORDER DATED 1 ST JANUARY 2018 , PASSED BY THE LEARNED COMMISSIONER (APPEALS) 53 , MUMBAI, FOR THE ASSESSMENT YEAR 20 09 10 . 2 . THE ONLY DISPUTE IN THE PRESENT APPEAL IS CONFINED TO THE ADDITION OF ` 15,55,840 MADE UNDER SECTION 69C OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT ) ON ACCOUNT OF BOGUS PURCHASES. 2 SHRI HARESH SOHANRAJ JAIN 3 . BRIEF FACTS ARE, THE ASSESSEE AN INDIVIDUAL IS A WHOLESALER IN FERROUS AND NON FERROUS METAL. FOR THE ASSESSMENT YEAR UNDER DISPUTE, THE ASSESSEE FILED ITS RETURN OF INCOME DECLARING TOTAL INCOME OF ` 17,70,732. ASSESSMENT IN CASE OF THE ASSESSEE WAS COMPLETED UNDER SECTION 143(3) OF THE ACT ON 29 TH DECEMBER 2011 ACCEPTING THE RETURNED INCOME. SUB SEQUENTLY, ON THE BASIS OF INFORMATION RECEIVED FROM DGIT (INV.), MUMBAI, THAT PURCHASES MADE BY THE ASSESSEE FROM TWO PARTIES , NAMELY , UNIVERSAL METAL CORPORATION AND D H RUV SALES CORPORATION ARE NON GENUINE, THE ASSESSING OFFICER RE OPENED THE ASSESSMENT UNDER SECTION 147 OF THE ACT. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER ON THE BASIS OF INFORMATION OBTAINED FROM THE SALES TAX DEPARTMENT, GOVERNMENT OF MAHARASHTRA, FOUND THAT PURCHASES MADE FROM THREE PARTIES ARE NOT GENUINE AS THOSE PART IES ARE IDENTIFIED AS ACCOMMODATION BILL PROVIDERS, THEREFORE, TO VERIFY THE GENUINENESS OF PURCHASES MADE, THE ASSESSING OFFICER ISSUED NOTICES UNDER SECTION 133(6) OF THE ACT TO THE CONCERNED PARTIES. AS OBSERVED BY THE ASSESSING OFFICER, ALL SUCH NOTICE S RETURNED UN SERVED BY THE POSTAL AUTHORITIES. EVEN THOUGH, THE ASSESSING OFFICER CALLED UPON THE ASSESSEE TO PRODUCE THE CONCERNED PARTIES, THE ASSESSEE FAILED TO DO SO. THEREFORE, HE CALLED UPON THE ASSESSEE TO EXPLAIN WHY THE PURCHASES MADE FROM THE CO NCERNED PARTIES SHOULD NOT BE TREATED AS BOGUS PURCHASES. IN RESPONSE TO THE QUERY RAISED BY 3 SHRI HARESH SOHANRAJ JAIN THE ASSESSING OFFICER, THE ASSESSEE SUBMITTED THAT THE PURCHASES MADE FROM THE CONCERNED PARTIES ARE GENUINE. IN RESPECT OF UNIVERSAL METAL CORPORATION AND D H RUV S ALES CORPORATION, THE ASSESSEE FURNISHED LEDGER ACCOUNT COPIES , PURCHASE BILLS, DELIVERY CHALLANS, BANK STATEMENTS AND STOCK REGISTER TO PROVE THE GENUINENESS OF PURCHASES. AS REGARDS PURCHASES FROM M/S. DOMET TRADING PVT. LTD. , THE ASSESSEE IN ADDITION TO LEDGER ACCOUNT COPIES, PURCHASE BILLS, DELIVERY CHALLANS, BANK STATEMENT, STOCK REGISTER, ETC., ALSO FURNISHED CONFIRMATION FROM THE CONCERNED PART Y ALONG WITH COPY OF THE INCOME TAX RETURN. THE ASSESSING OFFICER, HOWEVER, DID NOT FIND MERIT IN THE SUBMIS SIONS OF THE ASSESSEE AND PROCEEDED TO TREAT THE PURCHASES MADE FROM THE CONCERNED PARTIES AS NON GENUINE. HOWEVER, INSTEAD OF MAKING ADDITION OF THE ENTIRE PURCHASES, HE PROCEEDED TO WORK OUT THE ADDITION ON PICK CREDIT BASIS AT ` 15,55,840 WHICH WAS ADDE D TO THE INCOME OF THE ASSESSEE UNDER SECTION 69C OF THE ACT. 4 . THOUGH, THE ASSESSEE CHALLENGED THE AFORESAID ADDITION BEFORE THE FIRST APPELLATE AUTHORITY, HOWEVER, THE LEARNED COMMISSIONER (APPEALS) ALSO SUSTAINED THE ADDITION MADE BY THE ASSESSING OFFIC ER. 5 . THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED THAT NO ADDITION UNDER SECTION 69C OF THE ACT CAN BE MADE , SINCE , THE ASSESSEE HAS EXPLAINED THE SOURCE OF EXPENDITURE BY PRODUCING DOCUMENTARY 4 SHRI HARESH SOHANRAJ JAIN EVIDENCES SUCH AS PURCHASE BILLS, BANK STATEMENT, ETC. HE SUBMITTED THAT THE ASSESSEE HAS SHOWN GROSS PROFIT RATE OF 6% WHICH IS MORE THAN REASONABLE CONSIDERING THE NATURE OF BUSINESS CARRIED ON BY THE ASSESSEE. FURTHER, HE SUBMITTED THAT THE ASSESSEE HAS NOT ONLY PROVED THE MOVEMENT OF GOODS THROUGH THE STOCK REGISTER BUT HAS ALSO RECONCILED THE PURCHASES WITH SALES. HE SUBMITTED , M/S. DOMET TRADING PVT. LTD. IS A SISTER CONCERN OF THE ASSESSEE AND THE PURCHASES MADE FROM THE SAID CONCERN WAS NOT FOUND TO BE BOGUS AS PER THE REPORT OF THE DGIT (INV.), MUMBAI, REFERRED TO IN THE REASONS RECORDED BY THE ASSESSING OFFICER. HE SUBMITTED , IN COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE HAS NOT ONLY FURNISHED CONFIRMATION FROM THE SAID PARTY BUT ALSO THE COPY OF THE RETURN OF INCOME OF THE SAID PARTY TO PROVE ITS EXISTENCE. THEREFORE, IN ANY CASE OF THE MATTER, M/S. DOMET TRADING PVT. LTD., CANNOT BE TREATED AS A BOGUS DEALER. THUS, HE SUBMITTED THAT THE ADDITION MADE UNDER SECTION 69C OF THE ACT HAS TO BE DELE TED. 6 . THE LEARNED DEPARTMENTAL REPRESENTATIVE RELYING UPON THE OBSERVATION S OF THE LEARNED COMMISSIONER (APPEALS) AND THE ASSESSING OFFICER SUBMITTED THAT THE ASSESSEE HAV ING FAILED TO PRODUCE THE CONCERNED PARTIES BEFORE THE ASSESSING OFFICER TO PROVE THE GENUINENESS OF THE PURCHASES , THE ADDITION MADE IS PROPER. 5 SHRI HARESH SOHANRAJ JAIN 7 . I HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED MATERIAL ON RECORD. IT IS EVIDENT, THE ADDITION OF ` 15,55,840, MADE ON PEAK CREDIT BASIS IS ON ACCOUNT OF THE FACT THAT THE ASSESSING OFFICER TREA TED THE PURCHASES MADE FROM THREE PARTIES AS BOGUS , THE DETAILS OF WHICH ARE AS UNDER: I ) UNIVERSAL METAL CORPORATION ` 13,19,240 II ) DRUV SALES CORPORATION ` 13,012 III ) M/S. DOMET TRADING PVT. LTD. ` 15,55,840 8 . AS REGARDS PURCHASES MADE FROM UNIVERSAL METAL CORPORATION AND DHRU V SALES CORPORATION ARE CONCERNED, THOUGH, THE ASSESSEE HAS FURNISHED TH E PURCHASE BILL, BANK STATEMENT EVIDENCING PAYMENT MADE TO THEM, HOWEVER, THE ASSESSEE NEITHER WAS ABLE TO FURNISH ANY CONFIRMATION FROM THESE TWO PARTI ES NOR WAS A BLE TO PRODUCE THEM. THEREFORE , THE ASSESSEE COULD NOT CONCLUSIVELY PROVE THE GENUINENESS OF PURCHASES MADE FROM THEM. HOWEVER, IT IS A FACT ON RECORD THAT THE ASSESSEE HAS BEEN ABLE TO RECONCILE THE PURCHASES WITH SALES WHICH INDICATES THAT THE ASSESSEE M UST HAVE PURCHASED THE GOODS FROM A SOURCE OTHER THAN THE DECLARED SOURCE BY MAKING PAYMENT IN CASH TO AVOID PAYMENT OF VAT AND OTHER TAXES. THEREFORE, IN SUCH CIRCUMSTANCES, THE PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES HAS TO BE TREATED AS INCOME OF THE ASSESSEE. IN VIEW OF THE AFORESAID, I DIRECT THE ASSESSING OFFICER TO MAKE ADDITION @ 12.5% OF THE PURCHASES 6 SHRI HARESH SOHANRAJ JAIN MADE FROM UNIVERSAL METAL CORPORATION AND DHRU V SALES CORPORATION. AS REGARDS PURCHASES MADE FROM M/S. DOMET TRADING PVT. LTD. IS CONCERNED, IT IS SEEN FROM RECORD, IN C OURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE HAS FURNISHED CONFIRMATION AS WELL AS THE RETURN OF INCOME OF THE SAID PARTY. HOWEVER, THE ASSESSING OFFICER HAS REFUSED TO TAKE NOTE OF SUCH EVIDENCE SIMPLY BECAUSE OF THE FACT THAT NOTICE ISSUED UNDER SECTION 133(6) OF THE ACT BY HIM RETURNED UNSERVED. THE LEARNED COMMISSIONER (APPEALS) HAS ALSO REJECTED ASSESSEES CLAIM WITH REGARD TO THIS PARTY ON THE REASONING THAT THE ASSESSEE FAILED TO PRODUCE THE CONCERNED PARTY BEFORE THE ASSESSING OFFICER AND FURTHER THE COPY OF RETURN OF INCOME WAS FOR THE ASSESSMENT YEAR 2008 09. HE HAS ALSO OBSERVED THAT THE BANK STATEMENT FURNISHED BY THE ASSESSEE RELATING TO THIS PARTY WERE FOR FEW MONTHS. I N MY VIEW, WHEN THE ASSESSEE HAS FURNISHED CERTAIN DOC U MENTARY EVIDENCES WHICH OTHERWISE PROVES THE EXISTENCE OF M/S. DOMET TRADING PVT. LTD., BEFORE REJECTING SUCH EVIDENCES A PROPER ENQUIRY SHOULD HAVE BEEN MADE BY THE DEPARTMENTAL AUTHORITIES TO VERIFY THE CORRECTNESS OF THE ASSESSEES CLAIM. MORE SO, WHEN M/S. DOMET TRADING PVT. LTD., IS CLAIMED TO BE A SISTER CONCERN OF THE ASSESSEE. THE ASSESSING OFFICER BY SIMPLY ISSUING A SINGLE NOTICE UNDER SECTION 133(6) OF THE ACT HAS FINISHED HIS JOB WITHOUT MAKING ANY FURTHER ENQUIRY TO TEST THE VERACITY OF ASSESS EES CLAIM. THEREFORE, THE PURCHASES MADE FROM M/S. DOMET 7 SHRI HARESH SOHANRAJ JAIN TRADING PVT. LTD., CANNOT BE CONSIDERED TO BE NON GENUINE DUE TO LACK OF PROPER ENQUIRY MADE BY THE ASSESSING OFFICER. MORE SO , WHEN IN THE REPORT OF THE DGIT (INV.), MUMBAI, AS REFERRED TO IN THE R EASONS RECORDED, THE NAME OF THE ABOVE PARTY DOES NOT APPEAR AS A BOGUS DEALER. ACCORDINGLY, I DELETE THE ADDITION MADE IN RESPECT OF PURCHASES MADE FROM M/S. DOMET TRADING PVT. LTD. GROUNDS RAISED ARE PARTY ALLOWED. 9 . IN THE RESULT, ASSESSEES APPEAL IS P ARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 19 . 09 .2018 SD/ - SAKTIJIT DEY JUDICIAL MEMBER MUMBAI, DATED: 19.09.2018 COPY OF THE ORDER FORWARDED TO : ( 1 ) THE ASSESSEE; ( 2 ) THE REVENUE; ( 3 ) THE CIT(A); ( 4 ) THE CIT, MUMBAI CITY CONCERNED; ( 5 ) THE DR, ITAT, MUMBAI; ( 6 ) GUARD FILE . TRUE COPY BY ORDER PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY (SR. PRIVATE SECRETARY) ITAT, MUMBAI