The ACIT, Central Circle-2(3), Ahmedabad V. Shri Jayesh P. Shah, Ahmedabad

ITSSA 292/AHD/2016

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 9518 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 8 month(s) 23 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 27-06-2019
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2010-2011
• Appeal Filed On: 04-10-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: O P VAISHNAV
• Keywords: Bogus purchase
• Section: 143(3); 250; 132

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD BEFORE SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER AND MS. MADHUMITA ROY, JUDICIAL MEMBER ITA/IT(SS)A NO. AY APPELLANT RESPONDENT IT(SS)A NO.183/AHD/2016 2009-10 DCIT, CENTRAL CIRCLE 2(3) AHMEDABAD M/S. MP AGENCY, 4 TH FLOOR, PARISEEMA COMPLEX, OPP. SWAGAT BUILDING, CG ROAD, AHMEDABAD-380009 PAN : AAPFM 5258 B ITA NO. 1549/AHD/2016 2009-10 M/S. MP AGENCY, AHMEDABAD-380009 PAN : AAPFM 5258 B DCIT, CENTRAL CIRCLE 2(3) AHMEDABAD IT(SS)A NO.292/AHD/2016 2010-11 ACIT, CENTRAL CIRCLE 2(3) AHMEDABAD SHRI JAYESH P. SHAH 32, ELLORA PARK SOCIETY, NARANPURA, AHMEDABAD PAN : AFXPS 5364 K IT(SS)A NO.309/AHD/2016 2010-11 SHRI JAYESH P. SHAH AHMEDABAD PAN : AFXPS 5364 K DCIT, CENTRAL CIRCLE 2(3) AHMEDABAD IT(SS)A NO.293/AHD/2016 2011-12 ACIT, CENTRAL CIRCLE 2(3) AHMEDABAD SHRI JAYESH P. SHAH AHMEDABAD PAN : AFXPS 5364 K IT(SS)A NO.310/AHD/2016 2011-12 SHRI JAYESH P. SHAH AHMEDABAD PAN : AFXPS 5364 K DCIT, CENTRAL CIRCLE 2(3) AHMEDABAD IT(SS)A NO.294/AHD/2016 2012-13 ACIT, CENTRAL CIRCLE 2(3) AHMEDABAD SHRI JAYESH P. SHAH AHMEDABAD PAN : AFXPS 5364 K IT(SS)A NO.311/AHD/2016 2012-13 SHRI JAYESH P. SHAH AHMEDABAD PAN : AFXPS 5364 K DCIT, CENTRAL CIRCLE 2(3) AHMEDABAD ASSESSEE(S) BY : SHRI S.N. SOPARKAR, SR. ADVOCATE MS. URVASHI SHODHAN, AR REVENUE BY : SHRI O.P. VAISHNAV, CIT-DR / DATE OF HEARING : 27/06/2019 / DATE OF PRONOUNCEMENT: 27/06/2019 / O R D E R PER BENCH : THIS BUNCH OF EIGHT APPEALS, CROSS APPEALS BY REVE NUE AND ASSESSEE, ARE DIRECTED AGAINST THE RESPECTIVE ORDERS PASSED BY TH E LEARNED CIT(A)-12, IT(SS)A NO. 183, 292, 293, 294, 309, 310,311/AHD/201 6 AND ITA NO.1549/AHD/2016 GROUP OF 8 APPEALS - JAYESH P SHAH & MP AGENCY AYS: 2009-10, 2010-11,2011-12 & 2012-13 2 AHMEDABAD, WHEREBY AND WHEREUNDER THE DISALLOWANCE OF BOGUS PURCHASE AS NON-GENUINE EXPENSES HAS BEEN DELETED. SINCE ALL T HE MATTERS RELATE TO THE SAME ISSUE, ALL ARE HEARD ANALOGOUSLY AND ARE DISPOSED O F BY A COMMON ORDER. 2. WE TAKE UP IT(SS)A NO.183/AHD/2016 AS THE LEAD C ASE. THIS APPEAL HAS BEEN DIRECTED AGAINST THE ORDER DATED 28.03.2016 PA SSED BY THE LEARNED CIT(A)- 12, AHMEDABAD ARISING OUT OF ORDER DATED 29.03.2014 PASSED BY THE DCIT, CENTRAL CIRCLE-2(3), AHMEDABAD UNDER SECTION 143(3) R.WS. 153A(1) OF THE INCOME-TAX ACT, 1961, FOR ASSESSMENT YEAR 2009-10. 3. THE BRIEF FACTS OF THE CASE ARE THAT A SEARCH UN DER SECTION 132 OF THE ACT WAS CARRIED OUT IN THE CASE OF JAYESH STEEL GROUP O N 13.10.2011. ASSESSEES CASE WAS ALSO COVERED IN THE SAID SEARCH ACTION. DURING THE SEARCH PROCEEDINGS, EVIDENCES WERE FOUND THAT THERE WERE SOME BOGUS PUR CHASES BY THE ASSESSEE, WHICH, ACCORDING TO THE LEARNED ASSESSING OFFICER, WAS DONE BY THE ASSESSEE WITH AN INTENTION TO INFLATE THE PURCHASE AND REDUC E THE PROFIT. THE SAID ASSESSMENT WAS ULTIMATELY FINALIZED UNDER SECTION 1 43(3) R.W.S. 153A(1)(B) OF THE ACT WITH AN ADDITION OF RS.3,06,85,523/-. IN A PPEAL, THE SAME WAS RESTRICTED TO THE EXTENT OF RS.18,90,106/- BY THE LEARNED FIRS T APPELLATE AUTHORITY WITH THE OBSERVATION THAT ON PURCHASES FROM M/S. MEHTA STEEL DEPOT, THE APPEL LANT HAS EARNED A HIGHER PROFIT MARGIN VIS-A-VIS THE MARGIN ALREADY DISCLOSED IN THE AUDITED BOOKS. SIMILARLY, LEARNED CIT(A), AFTER CONSIDERING THE PU RCHASE PRICE FROM M/S. MEHTA STEEL DEPOT AND FROM OTHER SUPPLIERS AND ALSO AFTER CONSIDERING THE AVERAGE SALE PRICE, WHICH ACCORDING TO THE LEAR NED CIT(A) WAS FAIR AND REASONABLE, FINALLY HELD THAT AN ADDITIONAL PROFIT COMPONENT OF 7.5% IS EMBEDDED AS INFLATED PURCHASE PRICE ON PURCHASES OF RS.2,52,01,413/- SHOWN FROM M/S. MEHTA STEEL DEPOT, WHICH HAS BEEN BROUGHT TO TAX WHILE HOLDING AT THE SAME TIME THAT THE ADDITION ON ACCOUNT OF BOGUS NATURE OF PURCHASES FROM M/S. MEHTA STEEL DEPOT IS NOT SUSTAINABLE. THUS, TH E ADDITION HAS BEEN RESTRICTED TO RS.18,90,106/- AT 7.5% OF ENTIRE AMO UNT OF RS.2,52,01,413/-. IT(SS)A NO. 183, 292, 293, 294, 309, 310,311/AHD/201 6 AND ITA NO.1549/AHD/2016 GROUP OF 8 APPEALS - JAYESH P SHAH & MP AGENCY AYS: 2009-10, 2010-11,2011-12 & 2012-13 3 4. AT THE TIME OF HEARING BEFORE US, LEARNED SENIOR COUNSEL APPEARING FOR THE ASSESSEE SUBMITTED BEFORE US THAT THE ISSUE IN APPEAL IS SQUARELY COVERED BY AND UNDER THE JUDGMENT PASSED BY THE CO-ORDINATE BE NCH OF THIS TRIBUNAL IN THE MATTER OF ITO VS. BALAJI BUILDERS VIDE ITA NO. 593/AHD/2016 AND CO NO.57/AHD/2016 FOR ASSESSMENT YEAR 2011-12, ORDER D ATED 18.06.2018, WHEREBY AND WHEREUNDER, TAKING INTO CONSIDERATION T HE RATIO LAID DOWN BY THE HONBLE JURISDICTIONAL HIGH COURT ON THE SAME ISSUE IN THE MATTER OF GUJARAT AMBUJA EXPORTS LTD VS. DCIT, (2017) 250 TAXMAN 0482 , 5% OUT OF TOTAL PURCHASES WAS DISALLOWED. 5. THE LEARNED DEPARTMENTAL REPRESENTATIVE, ON THE OTHER HAND, HAS FAILED TO CONTROVERT SUCH SUBMISSIONS MADE BY THE LEARNED SR. COUNSEL APPEARING FOR THE ASSESSEE. 6. WE HAVE HEARD REPRESENTATIVES OF THE RESPECTIVE PARTIES. WE HAVE ALSO CAREFULLY CONSIDERED THE ORDER PASSED BY THE HONBL E JURISDICTIONAL HIGH COURT IN THE MATTER OF GUJARAT AMBUJA EXPORTS LTD VS. DCI T (SUPRA) AND THE JUDGMENT PASSED BY THE CO-ORDINATE BENCH OF THIS TR IBUNAL, AS RELIED UPON BY THE LEARNED SR. COUNSEL APPEARING FOR THE ASSESSEE. WE FIND THAT THE ISSUE IN APPEAL IS IDENTICAL WITH THAT OF THE JUDGMENT RELIE D UPON BY THE ASSESSEE. THE OBSERVATIONS MADE BY THE CO-ORDINATE BENCH ON THE S AME ISSUE ARE AS FOLLOWS:- 5. WE HAVE HEARD THE REPRESENTATIVES OF THE RESPE CTIVE PARTIES. WE HAVE PERUSED THE RELEVANT MATERIALS AVAILABLE ON RECORD. SO FAR AS THE GENUINENESS OF THE TRANSACTION IS CONCERNED, WE ARE SATISFIED UPON THE METHOD AND MANNER APPLIED BY THE LD.CIT(A) IN COMING TO THE CONCLUSIO N ON THE BASIS OF THE CONTENT OF THE REMAND REPORT, OTHER EVIDENCES AND SPECIALLY ON THE BANK STATEMENT OF THE SUPPLIERS WHICH WAS, IN FACT, OBTAINED BY THE AO HI MSELF AND WE THUS DECLINED TO INTERFERE WITH THE SAME. THE APPEAL PREFERRED BY THE REVENUE ON THIS GROUND IS DISMISSED. 5.1. IN RESPECT OF THE CROSS OBJECTION OF THE ASSE SSEE, WE HAVE ALSO GONE THROUGH THE ORDER PASSED BY THE LD.TRIBUNAL IN THE MATTER O F GUJARAT AMBUJA EXPORTS LTD.(SUPRA) AS RELIED UPON BY THE LD.AR. THE REASON FOR DISALLOWANCE OF ONLY 5% OUT OF TOTAL PURCHASE HAS BEEN JUSTIFIED IN THE FOLLOWING MANNER BY THE CO- ORDINATE BENCH OF THIS TRIBUNAL. IT(SS)A NO. 183, 292, 293, 294, 309, 310,311/AHD/201 6 AND ITA NO.1549/AHD/2016 GROUP OF 8 APPEALS - JAYESH P SHAH & MP AGENCY AYS: 2009-10, 2010-11,2011-12 & 2012-13 4 HAVING CONSIDERED ALL THE JUDGMENTS CITED BY BOTH SIDES, WE FEEL THAT IN THE FACTS OF THE PRESENT CASE, SOME TOKEN DISALLOWA NCE IS TO BE MADE TO TAKE CARE OF SOME POSSIBLE INFLATION IN THE PURCHAS E PRICE IN RESPECT OF PURCHASES FROM VISHAL TRADERS. WE HOLD FOR ONLY A T OKEN DISALLOWANCE ONLY BECAUSE OF THESE REASONS THAT THE YIELD REPORT ED BY THE ASSESSEE IS BETTER IN THE PRESENT YEAR AS COMPARED TO THE PRECE DING YEAR. IT IS ALSO NOTED BY US THAT AS NOTED BY LEARNED CIT(A), THE PR ICES CHARGED BY VISHAL TRADERS ARE AT PAR WITH OTHER PARTIES AND TH E GP/NP IS BETTER IN THE PRESENT YEAR AS COMPARED TO THE PRECEDING YEAR. HENCE, WE FELL THAT ONLY A TOKEN DISALLOWANCE WILL MEET THE ENDS OF JUS TICE IN THE FACTS OF THE PRESENT CASE AS NOTED ABOVE. HERE, THIS QUESTION MA Y BE RELEVANT AS TO WHEN ALL THE ABOVE FACTORS ARE SUPPORTING THE CASE OF THE ASSESSEE THEN WHY EVEN A TOKEN DISALLOWANCE IS CALLED FOR? ON THI S ASPECT, WE FEEL THAT THERE IS INCONSISTENCY IN THE STATEMENTS OF THREE P ERSONS RELATED WITH VISHAL TRADERS AND IT IS QUITE POSSIBLE THAT SOME E XTRA PRICE IS PAID BY THE ASSESSEE TO THIS PARTY TO OBTAIN MATERIAL AND BILLS AND HENCE, WE FEEL THAT IN TOTALITY OF THE FACTS OF THIS CASE, SOME DISALLO WANCE IS JUSTIFIED. NOW, THE NEXT QUESTION IS THEN HOW MUCH TOKEN DISALLOWAN CE IS JUSTIFIED IN THE FACTS OF THE PRESENT CASE. LEARNED AR OF THE ASSESS EE HAS INDICATED FOR 2 3 % DISALLOWANCE BUT WE FEEL THAT 5% DISALLOWANCE O UT OF PURCHASE FROM VISHAL TRADERS WILL MEET THE ENDS OF JUSTICE IN THE FACTS OF THE PRESENT CASE. WE DIRECT THE ASSESSING OFFICER ACCORDINGLY. THE BALANCE DISALLOWANCE IS DELETED. THE RELEVANT GROUND OF THE REVENUE IS REJECTED AND THAT OF THE ASSESSEE IS PARTLY ALLOWED. 5.1 WE FIND THAT THE FACTS OF THE CASE IN HAND IS I DENTICAL TO THAT OF THE ASSESSEE DEALT IN THE AFORESAID JUDGEMENT AND THERE FORE, THE CASE OF THE ASSESSEE IS SQUARELY COVERED BY THE AFORESAID DECIS ION. TAKING INTO CONSIDERATION THE ENTIRE ASPECTS OF THE MATTER AND THE RATIO OF THE JUDGEMENT, WE THINK IT FIT TO MODIFY THE ORDER PASS ED BY THE LD.CIT(A) BY DISALLOWING 5% FROM 12.5% AS MADE BY HIM IN EFFE CT RS.8,16,362/- OUT OF THE TOTAL PURCHASE. 7. RESPECTFULLY RELYING UPON THE JUDGMENT PASSED BY THE CO-ORDINATE BENCH (SUPRA) AND IN THE ABSENCE OF ANY CHANGE OF C IRCUMSTANCES, WE FIND NO ALTERNATIVE BUT TO RESTRICT SUCH ADDITION AT 5% OF THE TOTAL PURCHASES IN THE CASE OF ASSESSEE BEFORE US. WE, THEREFORE, DIRECT THE A SSESSING OFFICER TO EXTENT RELIEF TO THE ASSESSEE ACCORDINGLY. 8. IN THE RESULT, THE APPEAL OF THE REVENUE BEARING IT(SS)A NO. 183/AHD/2016 AND THE CROSS-APPEAL THEREOF BY THE AS SESSEE BEARING ITA NO. IT(SS)A NO. 183, 292, 293, 294, 309, 310,311/AHD/201 6 AND ITA NO.1549/AHD/2016 GROUP OF 8 APPEALS - JAYESH P SHAH & MP AGENCY AYS: 2009-10, 2010-11,2011-12 & 2012-13 5 1549/AHD/2016 FOR AY 2009-10 IN THE CASE OF MP AGEN CY ARE PARTLY ALLOWED AS INDICATED ABOVE. 9. THE ISSUE RAISED BY THE ASSESSEE AND REVENUE IN THE CASE OF SHRI JAYESH P. SHAH FOR AYS 2010-11, 2011-12 AND 2012-13, BY WA Y OF CROSS-APPEALS, IS SIMILAR TO THE ISSUE RAISED BY BOTH THE PARTIES IN THE CASE OF MP AGENCY (SUPRA) FOR ASSESSMENT YEAR 2009-10. IN THE CASE OF SHRI J AYESH P. SHAH, THE LEARNED AUTHORIZED REPRESENTATIVE SUBMITTED THAT THE FACTS RELATING TO THE DISALLOWANCE ON ISSUE OF BOGUS PURCHASE ARE SIMILAR TO THE FACTS IN THE CASE OF M/S. MP AGENCY (SUPRA). HOWEVER, LEARNED CIT(A) HAS GONE O NE STEP AHEAD AND SUSTAINED THE DISALLOWANCE AS PURCHASE @ 5.26% AND ALSO DISALLOWED 5% ON GROSS PROFIT EARNED BY THE ASSESSEE. HE SUBMITTED THAT O NCE THE DISALLOWANCE MADE IN PURCHASE, IT HAS DIRECT IMPACT ON THE PROFITABIL ITY. ONCE AGAIN MAKING SIMILAR ADDITION IN GP WILL NOT BE JUSTIFIABLE. ACCORDINGLY , HE PRAYED FOR SUSTAINING THE ADDITION AS PER THE JUDICIAL PRECEDENT IN THE CASE OF GUJARAT AMBUJA EXPORTS LTD VS. DCIT (SUPRA). CONSIDERED THE SUBMISSIONS O F BOTH THE PARTIES AND WE ARE IN AGREEMENT WITH THE ASSESSEES COUNSEL AND HI S SUBMISSIONS. THE SIMILAR ADDITION WHICH HAS DIRECT IMPACT IN THE PROFITABILI TY CANNOT BE MADE. RESPECTFULLY FOLLOWING THE HONBLE JURISDICTIONAL H IGH COURT JUDGMENT IN THE CASE OF GUJARAT AMBUJA EXPORTS LTD VS. DCIT (SUPRA) , WE RESTRICT THE DISALLOWANCE @ 5% OF PURCHASE AS HELD IN THE AFORES AID PARAGRAPH NOS. 6 & 7. 10. IN THE RESULT, ALL APPEALS OF THE ASSESSEE AND REVENUE ARE PARTLY ALLOWED AS INDICATED ABOVE. ORDER PRONOUNCED IN THE COURT ON 27 TH JUNE, 2019 AT AHMEDABAD. SD/- SD/- (S. RIFAUR RAHMAN) ACCOUNTANT MEMBER (MS. MADHUMITA ROY) JUDICIAL MEMBER AHMEDABAD; DATED 27/06/2019 **BT IT(SS)A NO. 183, 292, 293, 294, 309, 310,311/AHD/201 6 AND ITA NO.1549/AHD/2016 GROUP OF 8 APPEALS - JAYESH P SHAH & MP AGENCY AYS: 2009-10, 2010-11,2011-12 & 2012-13 6 '#$% &% / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A) 5. ! %% , , / DR, ITAT, AHMEDABAD 6. , / GUARD FILE . / BY ORDER, TRUE COPY / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. DATE OF DICTATION- 27.06.2019 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 27.06.2019 OTHER MEMBER 27.06.2019. 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S. - 27.06.2019. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 27.06.2019.. 5. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK27.0 6.2019 6. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 7. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 8. DATE OF DESPATCH OF THE ORDER