SHRI. NARESH C MISTRY, THANE V. ITO-3(1), THANE

ITA 98/MUM/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 3909 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-02-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 07-01-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R BHOOPATHI
• Keywords: Bogus purchase; Period of limitation; Condonation of delay
• Section: 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH SMC, MUMBAI BEFORE SHRI VIKAS AWASTHY, JUDICIAL MEMBER & SHRI N.K.PRADHAN, ACCOUNTANT MEMBER ITA NO.98/MUM/2019(A.Y.2009-10) SHRI NARESH C. MISTRY, M/S. NEO MECH ENGINEERS, PLOT NO.C-30, ROAD NO.16, WAGLE INDUSRIAL ESTATE, THANE (WEST) 400 604 PAN: AAWPM 0822A ...... APP ELLANT VS. INCOME TAX OFFICER 3(1) ROOM NO.3, B-WING, 6 TH FLOOR, ASHAR IT PARK, ROAD NO.16Z, WAGLE INDUSTRIAL ESTATE, THANE 400 604 ..... RESP ONDENT APPELLANT BY : SHRI NISHIT GANDHI RESPONDENT BY : SHRI R. BHOOPATHI DATE OF HEARING : 21/01/2020 DATE OF PRONOUNCEMENT : 20/02/2020 ORDER PER VIKAS AWASTHY, JM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST OR DER OF COMMISSIONER OF INCOME TAX (APPEALS)-2, PUNE (IN SHORT THE CIT(A) ) FOR THE ASSESSMENT YEARS 2009-10. 2. THE APPEAL BY THE ASSESSEE IS TIME BARRED BY 26 0 DAYS. THE ASSESSEE HAS FILED AN APPLICATION SEEKING CONDONATION OF DEL AY, SUPPORTED BY AN AFFIDAVIT. THE AR SUBMITTED THAT THE DELAY OCCURRE D IN FILING OF THE APPEAL ON 2 ITA NO.98/MUM/2019(A.Y.2009-10) ACCOUNT OF ILL HEALTH OF THE ASSESSEE AND FOR THE R EASON THAT THE ASSESSEE WAS NOT AWARE OF THE ORDER PASSED BY CIT(A). THE O RDER FROM CIT(A) WAS RECEIVED BY ONE OF THE EMPLOYEES OF THE ASSESSEE, W HO HAD LATER LEFT THE SERVICE OF THE ASSESSEE. THE LD. AUTHORIZED REPRES ENTATIVE FOR THE ASSESSEE CONTENDED THAT THE ASSESSEE CAME TO KNOW ABOUT THE IMPUGNED ORDER WHEN HE VISITED THE ASSESSING OFFICER ON 21/12/2018. TH E ASSESSEE WAS SERVED WITH DEMAND NOTICE AND THE ORDER GIVING EFFECT. THE AS SESSEE IMMEDIATELY THEREAFTER, SEARCHED FOR THE ORDER OF CIT(A) AT HIS PREMISES. AFTER LOCATING THE IMPUGNED ORDER, THE ASSESSEE FILED APPEAL BEFORE THE TRIBUNAL ON 07/11/2019 WITH A DELAY OF 260 DAYS. THE LD. AUTHORIZED REPRE SENTATIVE FOR THE ASSESSEE SUBMITTED THAT THE DELAY IN FILING OF THE APPEAL WA S NOT DELIBERATE. THE ASSESSEE WAS UNDER BONAFIDE IMPRESSION THAT THE DEM AND IN THE CASE OF ASSESSEE WAS DROPPED CONSEQUENT TO THE APPEAL BEFOR E THE CIT(A). THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE FURTHER PRAYED THAT THE DELAY OF 260 DAYS IN FILING OF THE APPEAL MAY BE CONDONED IN THE LIGHT OF JUDICIAL PRONOUNCEMENTS OF THE HONBLE JURISDICTIONAL HIGH C OURT AND THE HONBLE SUPREME COURT OF INDIA. TO SUPPORT HIS CONTENTIONS THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE PLACED RELIANCE ON THE FOLLOWING DECISIONS: (1) TAJ SATS AIR CATERING VS. CIT, INCOME TAX APPE AL NO.1096 OF 2012 DECIDED ON 13/08/2012. (2) PRIMA PAPER AND HANDLING PVT. LTD. VS. CIT, 141 TAXAMANN.COM 240(BOM) (3) RAM NATH SAO ALIAS RAM NATH SAHU & ORS. VS. GO BARDHAN SAO & ORS. 2002(3) SCC 195. 3 ITA NO.98/MUM/2019(A.Y.2009-10) 3. SHRI R. BHOOPATHI, REPRESENTING THE DEPARTMENT, VEHEMENTLY OPPOSED THE APPLICATION OF ASSESSEE SEEKING CONDONATION OF DELAY IN FILING OF THE APPEAL. THE LD. DEPARTMENTAL REPRESENTATIVE SUBMIT TED THAT THE ASSESSEE HAS NOT BEEN ABLE TO SHOW SUFFICIENT REASONS CAUSING DELAY IN FILING OF THE APPEAL. THE EXPLANATION FURNISHED BY THE ASSESSEE IS GENERI C AND NOT SPECIFIC. 4. WE HAVE HEARD THE SUBMISSIONS MADE BY RIVAL SIDE S ON CONDONATION OF DELAY IN FILING OF THE APPEAL THE APPEAL HAS BEEN FILED BY THE ASSESSEE BEYOND PERIOD OF LIMITATION. THE DELAY IS ATTRIBUTED TO T HE ILL HEALTH OF THE ASSESSEE. THE ASSESSEE HAS FILED MEDICAL RECORDS ALONG WITH A FFIDAVITS TO SUPPORT HIS CONTENTIONS. FURTHER, THE ASSESSEE HAS PLEADED THA T THE DELAY IS ON ACCOUNT OF NEGLIGENCE ON THE PART OF HIS EMPLOYEE, WHO AFTER R ECEIVING THE ORDER FROM CIT(A) HAS NOT INFORMED THE ASSESSEE AND LATER LEFT THE JOB. AFTER EXAMINING THE CONTENTS OF THE AFFIDAVIT WE ARE SATISFIED THAT THE DELAY IN FILING OF THE APPEAL IS NOT DELIBERATE OR INTENTIONAL. THE ASSESS EE/APPELLANT HAS BEEN ABLE TO SHOW SUFFICIENT REASON CAUSING DELAY IN FILING O F APPEAL. THE HONBLE APEX COURT HAS CONSISTENTLY HELD THAT THE EXPLANATION F URNISHED BY THE ASSESSEE IN EXPLAINING THE DELAY SHOULD BE ACCEPTED BY TAKING A LIBERAL VIEW. THUS, IN THE LIGHT OF REASONS EXPLAINED BY THE ASSESSEE AND T HE LAW LAID DOWN BY THE HONBLE APEX COURT, WE ARE INCLINED TO CONDONE DE LAY OF 260 DAYS IN FILING OF THE APPEAL. THE DELAY IS CONDONED AND THE APPEAL I S ADMITTED TO BE HEARD AND DISPOSED ON MERITS. 5. SHRI NISHIT GANDHI, LD.AUTHORIZED REPRESENTATIVE OF THE ASSESSEE EXPLAINING THE FACTS OF THE CASE SUBMITTED THAT THE ASSESSEE IS ENGAGED IN MANUFACTURING OF ENGINEERING GOODS. THE ASSESSING OFFICER REOPENED THE ASSESSMENT ON THE BASIS OF INFORMATION RECEIVED FRO M SALES TAX DEPARTMENT, GOVERNMENT OF MAHARASHTRA THAT THE ASSESSEE HAS OB TAINED BOGUS PURCHASE 4 ITA NO.98/MUM/2019(A.Y.2009-10) BILLS AMOUNTING TO RS.2,36,914/- FROM THREE HAWALA DEALERS, I.E. LAXMI TRADING CO. RS.52,728/-, BHOOMI ENTERPRISES RS.1,04,020 AND IMPEX TRADERS RS.80,156/-. THE ASSESSING OFFICER FURTHER OBSERVED THAT THERE ARE DISCREPANCIES IN THE REMAINING PURCHASES AMOUNTING TO RS.56,29,367/-, AS WELL. THE AO MADE ADHOC DISALLOWANCE @ 20% OF SUCH REMAINING PURCHASES AND MADE ADDITION OF RS.11,25,873/-. FURTHER, ASSE SSING OFFICER MADE ADHOC DISALLOWANCE @20% ON THE TOTAL EXPENDITURE CLAIMED AND THUS, MADE ADDITION OF RS.2,51,631/-. AGGRIEVED AGAINST ASSESSMENT ORD ER DATED 20/03/2016 PASSED UNDER SECTION 144 R.W.S. 147 OF THE ACT, THE ASSESSEE FILED APPEAL BEFORE THE CIT(A). THE CIT(A) GRANTED PART RELIEF TO THE ASSESSEE BY RESTRICTING DISALLOWANCE TO 10% ON REGULAR PURCHASES AND EXPEN DITURE CLAIMED AND CONFIRMED THE ENTIRE AMOUNT OF BOGUS PURCHASES. 6. THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESS EE SUBMITTED THAT THE ASSESSEE IN APPEAL HAS RAISED SEVEN GROUNDS OF APPE AL INCLUDING THE SUB- GROUNDS. THE ASSESSEE IS NOT PRESSING GROUND NO.1 TO 4 OF THE APPEAL. THUS, THE EFFECTIVE GROUNDS ARE GROUND NOS. 5 & 6 RELATI NG TO THE ADDITION MADE IN RESPECT OF BOGUS PURCHASES AND CONFIRMING OF ADHOC DISALLOWANCES OF RS.6,88,752/- IN RESPECT OF EXPENDITURE RESPECTIVEL Y. 7. ON THE OTHER HAND, LD. DEPARTMENTAL REPRESENTATI VE VEHEMENTLY DEFENDED THE IMPUGNED ORDER. THE LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE ASSESSEE DID NOT APPEAR BEFORE T HE ASSESSING OFFICER DURING ASSESSMENT PROCEEDINGS AND THUS, THE ASSESSING OFFI CER WAS CONSTRAINED TO PASS ASSESSMENT ORDER UNDER SECTION 144 OF THE ACT . THE ASSESSEE APPEARED BEFORE THE CIT(A) FOR THE FIRST TIME. EVEN BEFORE C IT(A) THE ASSESSEE FAILED TO PRODUCE VOUCHERS/BOOKS OF ACCOUNT, ETC. TO PROVE GE NUINENESS OF EXPENDITURE. STILL, THE CIT(A) GRANTED PART RELIEF BY RESTRI CTING DISALLOWANCE TO 10%. THE 5 ITA NO.98/MUM/2019(A.Y.2009-10) LD.DEPARTMENTAL REPRESENTATIVE PRAYED FOR DISMISSIN G THE APPEAL OF ASSESSEE AND CONFIRMING THE FINDING OF CIT(A). 8. WE HAVE HEARD THE SUBMISSIONS MADE BY RIVAL SIDE S AND HAVE PERUSED THE ORDERS OF AUTHORITIES BELOW. ADMITTEDLY, THE ASSESSEE DID NOT PARTICIPATE IN ASSESSMENT PROCEEDINGS BEFORE THE ASSESSING OF FICER. THE ASSESSING OFFICER MADE ADDITION OF RS.2,36,914/- IN RESPECT OF HAWALA TRANSACTIONS. AFTER PERUSAL OF THE ASSESSMENT ORDER WE FIND THAT THE ASSESSING OFFICER HAS NOT DOUBTED SALES MADE BY ASSESSEE. THUS, ENTIRE PURCHASES CAN NOT BE TREATED AS BOGUS. IT IS ONLY PROFIT ELEMENT IN THE BOGUS PURCHASES THAT IS TO BE BROUGHT TO TAX. AFTER TAKING INTO CONSIDERATION ENTIRETY OF FACTS, WE EST IMATE GP @12.5% ON THE ALLEGED BOGUS PURCHASES. THE GROUND NO.5 OF APP EAL IS PARTLY ALLOWED, ACCORDINGLY. 9 IN GROUND NO.6, THE ASSESSEE HAS ASSAILED ADHOC DISALLOWANCE OF RS.6,88,752/- IN RESPECT OF EXPENDITURE CLAIMED. THE ASSESSING OFFICER DURING ASSESSMENT PROCEEDINGS IN ORDER TO VERIFY GENUINENE SS OF THE EXPENSES CLAIMED IN THE P&L ACCOUNT CALLED FOR THE VOUCHERS AND BOOKS. THE ASSESSEE FAILED TO APPEAR BEFORE THE ASSESSING OFFICER. THE ASSESSING OFFICER MADE ADHOC DISALLOWANCE @ 20% OF TOTAL EXPENDITURE CLAIM ED. IN THE PROCEEDINGS BEFORE THE CIT(A) THE ASSESSEE AGAIN FAILED TO SUB STANTIATE THE EXPENDITURE. RATER, THE ASSESSEE ADMITTED THE FACT BEFORE THE CIT(A) THAT THERE CAN BE SOME ELEMENT OF PERSONAL EXPENDITURE IN THE EXPENSE S CLAIMED. THUS, TAKING INTO CONSIDERATION ENTIRETY OF FACTS, WE ARE OF C ONSIDERED VIEW THAT THE ENDS OF JUSTICE WOULD MEET IF, EXPENDITURE TO THE EXTENT OF 5% IS DISALLOWED. WE HOLD AND DIRECT ACCORDINGLY. THUS, GROUND NO.6 OF THE APPEAL IS PARTLY ALLOWED. 6 ITA NO.98/MUM/2019(A.Y.2009-10) 10. IN RESPECT OF GROUND NO.1 TO 4 OF THE APPEAL, T HE LD.AUTHORIZED REPRESENTATIVE OF THE ASSESSEE HAS STATED AT BAR TH AT HE IS NOT PRESSING THESE GROUNDS. THUS GROUND NO. 1 TO 4 OF THE APPEAL ARE DISMISSED AS NOT PRESSED. 11. THE GROUND NO.7 OF THE APPEAL IS GENERAL IN NAT URE AND HENCE, REQUIRE NO ADJUDICATION. 12. IN THE RESULT, APPEAL OF ASSESSEE IS PARTLY AL LOWED IN THE MANNER AFORESAID. ORDER PRONOUNCED IN THE OPEN COURT ON THURSDAY, THE 20 TH DAY OF FEBRUARY, 2020. SD/- SD/- (N.K.PRADHAN) (VIKAS AWASTHY) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED 20/02/2020 VM , SR. PS(O/S) 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// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI