ITO 28(3)(4), MUMBAI V. VIKAS M ARORA, MUMBAI

ITA 980/MUM/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 4120 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-02-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 21-02-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SOURABH DESHPANDE
• Keywords: Bogus purchase
• Section: 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC, BENCH M UMBAI BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBE R ITA NO.980/MUM/2019 ( ASSESSMENT YEAR: 2010-11 ) ITO-28(3)(4) ROOM NO.320, 3 RD FLOOR TOWER NO.6, VASHI RAILWAY STATION COMPLEX, VASHI NAVI MUMBAI-400 703 VS. VIKAS M ARORA 28-1003, SEAWOODS ESTATE NRI COMPLEX NERUL NAVI MUMBAI-400 706 PAN/GIR NO. A EKPA7854C ( APPELLANT ) .. RESPONDENT ) REVENUE BY SHRI SOURABH DESHPANDE, DR ASSESSEE BY SHRI ASHOK MEHTA, AR DATE OF HEARING 06/02/2020 DATE OF PRONOUNCEME NT 14 / 0 2 /20 20 / O R D E R PER G.MANJUNATHA (A.M) : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST, THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS)26, MUMBAI, DATED 07/12/2018 AND IT PERTAINS TO ASSESSMENT YEAR 2010-11. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: (1) 'WHETHER ON THE FACTS AND IN THE CIRCUM STANCES OF THE CASE AND IN LAW, THE LD. CIT(A] HAS ERRED IN DIRECTING THE A .O. TO RESTRICT THE ADDITION OF BOGUS PURCHASES TO 12.5% AS AGAINST 25% ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT BOGUS PURCHASES WI THOUT APPRECIATING THE FACT THAT PARTIES FROM WHOM THOSE PURCHASES WER E MADE PROVEN ACCOMMODATION ENTRY PROVIDERS AS CONCLUDED BY SALES TAX AUTHORITIES PURSUANT TO THE INVESTIGATION CARRIED OUT BY THEM' ? (2) 'WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD, CIT(A) HAS ERRED IN NOT CONSIDERING TH E LATEST APEX COURT DECISION IN THE CASE OF N. K. PROTEINS LTD VS. DC1T (769 OF 2017), ITA NO.980/MUM/2019 VIKAS M ARORA 2 WHEREIN THE HON'BLE SUPREME COURT HAS CONFIRMED 100 % ADDITION MADE ON ACCOUNT OF BOGUS PURCHASES'? (3) THE APPELLANT PRAYS THAT THE ORDER OF LD.CIT(A) ON THE ABOVE GROUNDS BE REVERSED AND THAT OF THE ASSESSING OFFICER BE RE STORED, 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS ENGAGED IN THE BUSINESS OF TRADING IN IRON AND STEEL, FILED HI S RETURN OF INCOME FOR AY 2010-11 ON 3/08/2010, DECLARING TOTAL INCOME AT RS. 7,84,505/-. THE CASE HAS BEEN SUBSEQUENTLY REOPENED U/S 147 OF THE I.T.ACT, 1961 AND THE ASSESSMENT HAS BEEN COMPLETED U/S 143( 3) R.W.S. 147 OF THE I.T.ACT, 1961, DETERMINING THE TOTAL INCOME AT RS. 36,15,570/- BY MAKING ADDITIONS TOWARDS 25% PROFIT ON ALLEGED B OGUS/NON GENUINE PURCHASES FROM CERTAIN PARTIES. THE ASSESSE E CARRIED THE MATTER IN APPEAL BEFORE THE FIRST APPELLATE AUTHORI TY. THE LD.CIT(A), VIDE ITS ORDER DATED 07/12/2018, HAS SCALED DOWN AD DITIONS MADE BY THE LD. AO TOWARDS ALLEGED BOGUS PURCHASES FROM 25% TO 12.5% PROFIT ON TOTAL PURCHASES FROM THOSE PARTIES. AGGRI EVED, BY THE LD.CIT(A) ORDER, THE ASSESSEE, AS WELL AS THE REVEN UE HAVE FILED APPEAL BEFORE THE ITAT. THE ITAT HAS DISPOSED-OFF A PPEAL FILED BY THE ASSESSEE, VIDE ITS ORDER DATED 23/01/2020 IN IT A NO.337/MUM/2019 AND DIRECTED THE AO TO ESTIMATE GP ON ALLEGED BOGUS PURCHASES BY TAKING NOTE OF GP DECLARED BY TH E ASSESSEE ON NORMAL PURCHASES BY FOLLOWING THE DECISION OF HONB LE BOMBAY HIGH COURT, IN THE CASE OF PCIT VS MOHAMMAD HAZI ADOM & COMPANY IN ITA NO.1004 OF 2016, DATED 11/02/2019, HOWEVER THE APPEAL FILED BY THE ASSESSEE IS REMAINED PENDING FOR DISPOSAL. 4. THE LD. AR FOR THE ASSESEE, AT THE TIME OF HEARI NG SUBMITTED THAT THE APPEAL OF THE ASSESSEE HAS BEEN DISPOSED OFF, WHERE THE TRIBUNAL HAS DIRECTED THE LD. AO TO FOLLOW THE DECI SION OF HONBLE BOMBAY HIGH COURT, IN THE CASE OF M/S MOHAMMAD HAZI ADOM & ITA NO.980/MUM/2019 VIKAS M ARORA 3 COMPANY (SUPRA) AND REDUCE THE GP ON ALLEGED BOGUS PURCHASES TO THE EXTENT OF GP DECLARED ON NORMAL PURCHASES. IN T HIS REGARD, HE HAS FILED COPY OF ORDER OF THE TRIBUNAL IN ITA NO. 337/MUM/2019. THE LD. DR, ON THE OTHER HAND STRONGLY SUPPORTING ORDER OF THE LD. AO SUBMITTED THAT, THE LD.CIT(A) HAS ESTIMATED GP ON A LLEGED BOGUS PURCHASES @12.5% WITHOUT CONSIDERING THE FACT THAT THE ASSESSEE IS ONE OF THE BENEFICIARY OF ACCOMMODATION ENTRY OF BO GUS PURCHASES, AS CONCLUDED BY SALES TAX AUTHORITIES, PURSUANT TO THE INVESTIGATION CARRIED OUT BY THEM. 5. HAVING HEARD BOTH THE SIDES AND CONSIDERED MATER IAL ON RECORD. WE FIND THAT THE ASSESSEE, AS WELL AS THE R EVENUE HAVE FILED APPEAL AGAINST ORDER OF THE LD.CIT(A). AS, IT APPEA RS, THE FACT THAT REVENUE HAS ALSO FILED AN APPEAL, WAS NOT BROUGHT T O THE NOTICE OF THE TRIBUNAL, WHEN ASSESSEES APPEAL CAME UP FOR HE ARING. THEREFORE, THE TRIBUNAL DISPOSED OFF ASSESSEES APP EAL BY DIRECTING THE LD. AO TO ESTIMATE GP ON ALLEGED BOGUS PURCHASE S AT THE RATE OF GP DECLARED BY THE ASSESSEE ON NORMAL PURCHASES IN BOOKS OF ACCOUNTS BY FOLLOWING THE DECISION OF HONBLE BOMBA Y HIGH COURT, IN THE CASE OF MOHAMMAD HAZI ADOM & COMPANY (SUPRA). T HE RELEVANT FINDINGS OF THE TRIBUNAL ARE AS UNDER:- 5. I HAVE CONSIDERED THE RIVAL CONTENTIONS AND C AREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WITH RESPECT T O ISSUE REGARDING ADDITION IN RESPECT OF BOGUS PURCHASES, THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF PR.CIT VS M/S MOHOMMAD HAJI AD AM & CO. IN ITA NO. 1004 OF 2016 VIDE ITS ORDER DATED 11/02/2019 HA VE HELD AS UNDER: 8. IN THE PRESENT CASE, AS NOTED ABOVE, THE ASSESS EE WAS A TRADER OF FABRICS. THE A.O. FOUND THREE ENTITIES WHO WERE INDULGING IN BOGUS BILLING ACTIVITIES. A.O. FOUND THAT THE PURCH ASES 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 PURCHASE AMOUNT SHOULD BE ADDED BY WAY OF ASSESSES ADDITIONAL ITA NO.980/MUM/2019 VIKAS M ARORA 4 INCOME OR THE ASSESSEE IS CORRECT IN CONTENDING THA T SUCH LOGIC CANNOT BE APPLIED. THE FINDING OF THE CIT(A) AND TH E TRIBUNAL WOULD SUGGEST THAT THE DEPARTMENT HAD NOT DISPUTED THE ASSESSEE' S SALES . T HERE W AS N O DISCREPANCY BETWEEN T HE 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, CORRECTL Y RESTRICTED THE ADDITIONS LIMITED TO THE EXTENT 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 REFERENCE T O 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 DESPITE THE FA CT THAT THE SAID SALES HAD ADMITTEDLY BEEN RECORDED IN THE REGULAR BOOKS DURING FINANCIAL YEAR 1997-98 IS CONCERNED, W E ARE OF THE VIEW THAT THE ASSESSEE CANNOT BE PUNISHED SI NCE SALE PRICE IS ACCEPTED BY THE REVENUE. THEREFORE, E VEN IF 6% GROSS PROFIT IS TAKEN INTO ACCOUNT, THE CORRESPO NDING COST PRICE IS REQUIRED TO BE DEDUCTED AND TAX CANNO T BE LEVIED ON THE SAME PRICE. WE HAVE TO REDUCE THE SEL LING PRICE ACCORDINGLY AS A RESULT OF WHICH PROFIT CONIE S TO 5.66%. THEREFORE, CONSIDERING 5.66% OF RS.3,70,78,125/WHIC H 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 FAVOUR OF THE ASS ESSEE AND PARTIALLY IN FAVOUR OF THE REVENUE 6. THE COORDINATE BENCH OF THE ITAT, MUMBAI IN THE CASE OF SHRI RAMESHKUMAR DAULATRAJ VS ITO IN ITA NO. 4192/MUM/20 18 ORDER DATED 07/05/2019 AFTER FOLLOWING THE ABOVE DECISION OF HO NBLE BOMBAY HIGH COURT HELD AS UNDER: 9. WHEN THESE FACTS WERE CONFRONTED TO THE LEARNED SR. DR, HE REQUESTED FOR APPLICATION OF REASONABLE PROFIT RATE AND ACCORDING TO HIM THE PROFIT RATE APPLIED BY THE AO AND CONFIRMED BY CIT(A) IS QUITE REASONABLE IN VIEW OF THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF SMITH P.SETH (SUPRA). WE HAVE CONSIDERED THE RIVAL CONTENTIONS ITA NO. 4192/MUM/2018 AND ARE OF THE VIEW THAT HON'BLE BOMBAY HIGH COURT IN THE CASE OF MOHAMMAD H AJI ADAM & CO. AND ORS. (SUPRA) HAS CONSIDERED THIS ISSUE AN D RESPECTFULLY FOLLOWING THE SAME, WE DIRECT THE AO TO RESTRICT TH E PROFIT RATE ONLY TO THE EXTENT OF DIFFERENTIAL PERCENTAGE AS DECLARE D ON THE BOGUS PURCHASES AND AS DECLARED ON THE REGULAR PURCHASES, HENCE, WE DIRECT THE AO ACCORDINGLY. 7. IT IS CLEAR FROM THE ABOVE DECISIONS THAT IN CAS E OF BOGUS PURCHASES WHERE SALES ARE ACCEPTED, THE ADDITION IS REQUIRED TO BE MADE ONLY TO THE ITA NO.980/MUM/2019 VIKAS M ARORA 5 EXTENT OF DIFFERENCE BETWEEN THE GP DECLARED BY THE ASSESSEE ON NORMAL PURCHASES VIS A VIS BOGUS PURCHASES. RESPECTFULLY F OLLOWING THE ORDER OF THE HONBLE JURISDICTIONAL HIGH COURT AND THE COORD INATE BENCH OF THE ITAT, MUMBAI, I DIRECT THE A.O. TO RESTRICT THE ADD ITION TO THE EXTENT OF LOWER GP DECLARED BY THE ASSESSEE IN RESPECT OF BOG US PURCHASES AS COMPARED TO GP ON NORMAL PURCHASES. THE ASSESSEE IS ALSO DIRECTED TO GIVE FULL DETAILS TO THE A.O. WITH REGARD TO GP EAR NED ON NORMAL PURCHASES AND ALSO GP EARNED ON ALLEGED BOGUS PURCH ASES. I DIRECT ACCORDINGLY. 6. THE FACTS OF THE PRESENT CASE ARE IDENTICAL TO T HE FACTS, WHICH HAVE BEEN CONSIDERED BY THE TRIBUNAL IN ITA NO.337/ MUM/2019. HENCE, WE DIRECT THE LD. AO TO FOLLOW THE FINDINGS OF THE TRIBUNAL GIVEN IN ITA NO.337/MUM/2019 FILED BY THE ASSESSEE AND ESTIMATE THE GP ON ALLEGED ON NON GENUINE PURCHASES AT THE R ATE OF GP, AS DECLARED BY THE ASSESSEE ON NORMAL PURCHASES IN BOO KS OF ACCOUNTS FOR THE IMPUGNED ASSESSMENT YEAR. 7. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DI SMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 14 /02/ 2020 SD/- (SAKTIJIT DEY) SD/- (G. MANJUNATHA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 14/02/2020 THIRUMALESH SR.PS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. ITA NO.980/MUM/2019 VIKAS M ARORA 6 BY ORDER, (ASSTT. REGISTRAR) ITAT, MUMBAI 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//