HASMUKH JAGSHI VISARIA, THANE V. INCOME TAX OFFICER 1 (5) KALYAN, KALYAN

MA 823/MUM/2017

• Counselvise Citation: [2018] 124 COUNSELVISE.COM (IT) 6643 (ITAT-MUMBAI)
• Duration Of Justice: 6 month(s) 15 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 18-05-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2011-2012
• Appeal Filed On: 03-11-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V JUSTIN
• Keywords: Bogus purchase; Rejection of books of accounts
• Section: 12

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL ' G ' BENCH, MUMBAI BEFORE SHRI R.C. SHARMA, ACCOUNTANT MEMBER AND SHRI SANDEEP GOSAIN , JUDICIAL MEMBER M A NO S . 823 & 824 /MUM/2017 (ARISING OUT OF ITA NOS. 2303 & 2302/MUM/2016) (ASSESSMENT YEAR S : 2011 - 12 & 2009 - 10 ) SHRI HASMUKH JAGSHI VISARI 201, VAGAD APPARTMENT NEAR JANAM HOSPITAL CHARAI, THANE VS. INCOME TAX OFFICER - 1(5) 1ST FLOOR, MOHA N PLAZA WAYALE NAGAR KALYAN PAN AAAPV9059L APPLICANT RESPONDENT APPLICANT BY: SHRI MANI JAIN RESPONDENT BY: SHRI V. JUSTIN DATE OF HEARING: 18.05.2018 DATE OF PRONOUNCEMENT: 18 .05.2018 O R D E R PER R.C. SHARMA , AM THESE MISCELLANEOUS APPLICATIONS ARE FILED BY THE ASSESSEE IN RESPECT OF ALLEGED MISTAKE IN THE ORDER OF THE TRIBUNAL DATED 29.08.2017 IN RESPECT OF ITA NOS. 2303 & 2302/MUM/2016. 2. THROUGH THESE MISCELLANEOUS APPLICATIONS IT WAS POINTED OUT BY THE LEARNED A.R. THAT DISALLOWANCE IN RESPECT OF BOGUS PURCHASES HAS BEEN RESTRICTED TO 12.5% ONLY RELYING ON THE OBSERVATION OF CIT(A) WHEREIN CIT(A) HAS RELIED ON THE JUDICIAL PRONOUNCEMENTS HAVING DIFFERENT FACTS . IT WAS ARGUED BY THE LEARNED A.R. THAT DURING THE COURSE OF HEARING BEFORE THE HON'BLE BENCH, AN ARGUMENT WAS ALSO TAKEN BY THE LEAR NED A.R. THAT NO INDEPENDENT ENQUIRY HAS BEEN MADE BY THE LEARNED AO WHILE CONFIRMING THE DISALLOWANCE ON ACCOUNT OF BOGUS PURCHASE. IT IS SUBMITTED THAT IT IS A M A NO S . 823 & 824 /MUM/ 2017 SHRI HASMUKH JAGSHI VISARI 2 SETTLED LAW THAT AO IS DULY BOUND TO MAKE INDEPENDENT ENQUIRY ON THE INFORMATION RECEIVED BY I TS OFFICE AND HE CANNOT MAKE DISALLOWANCE IN A MECHANICAL WAY. SUPPORTED CASE LAWS WERE ALSO SUBMITTED BEFORE THE BENCH. ALSO, THE LEARNED A.R. HAD SUBMITTED THAT THE APPLICANT HAS SHOWN G.P. @7.13% WHICH IS MORE THAN AVERAGE MARGIN IN THE PAPER INDUSTRY A ND ACCORDINGLY, NO DISALLOWANCE WAS REQUIRED TO BE MADE. 3. LEARNED AR INVITED OUR ATTENTION TO PARA 7 WHEREIN APPEAL OF THE ASSESSEE WAS DISMISSED BY OBSERVING THAT THE FINDINGS RECORDED BY CIT(A) ARE AS PER MATERIAL ON RECORD, THEREFORE, DO NOT REQUIRE A NY INTERFERENCE. AS PER LEARNED AR THE HON'BLE MEMBERS IN LIGHT OF SAID OBSERVATIONS HAS CONFIRMED THE DISALLOWANCE BY 12.5% OF THE ALLEGED BOGUS PURCHASES. HE CONTENDED THAT THE SAID FINDING / CONCLUSION OF THE HON'BLE TRIBUNAL CONSTITUTES A MISTA KE APPARENT FROM THE RECORD AS THE HON'BLE MEMBERS HAVE OVERLOOKED THE FACTS MENTIONED AND CASE LAWS RELIED UPON BY THE AR OF THE ASSESSEE, DURING THE COURSE OF HEARING HELD ON 03 .08.2017. IT WAS FURTHER SUBMITTED THAT THE HON'BLE TRIBUNAL HAS DECIDED THE ISSUE WITHOUT CONSIDERING THE DECISIONS FURNISHED BY THE AR DURING THE COURSE OF HEARING, FOR SUPPORTING THE PROPOSITION THAT FOR WANT OF SUPPLIERS PRESENCE BEFORE AO, ADDITION CANNOT BE MADE WHEN ASSESSEE HAS ALREADY PROVIDED QUANTITATIVE DETAILS, PAYMENTS ARE THROUGH BANK AND ALSO IF ASSESSEE SUBMITTED ALL THE RELEVANT DETAILS. 4. IT WAS FURTHER CONTENDED THAT THE HON'BLE BENCH HAS NOT CONSIDERED/ OVERLOOKED THE DECISION OF THE 'HON'BLE COORDINATE BENCH IN CASE OF GEOLIFE ORGANICS VS. ACIT - 23(2) ITA NO. 3699/M/2016 FURNISHED & REFERRED BY THE AR IN SUPPORT OF HIS ARGUMENT. IN THIS CASE ON THE SIMILAR FACTS AS THAT M A NO S . 823 & 824 /MUM/ 2017 SHRI HASMUKH JAGSHI VISARI 3 OF THE APPELLANT CASE, THE SAME HON'BLE CONSTITUTION BENCH UPHELD THE ADDITION OF 2% OF THE ALLEGED BOGUS PURCHASES. FACTS OF SAID CASE ARE SQUARELY APPLICABLE TO THE ASSESSEES CASE. 5. LEARNED AR FURTHER SUBMITTED THAT LD.CIT(A) BY RELYING ON THE DECISION OF M/S. SANKET STEEL TRADERS [IT NO. 2801/AHD/2008 DATED20/05/2011] AND CIT VS. SIMIT SHETH (2013) [38 TAXMANN.COM 385 (GUJ. HC)] HA D HELD THAT 12.5% OF THE ALLEGED BOGUS PURCHASES SHALL BE DISALLOWED. 6 . IT WAS ALSO SUBMITTED THAT THE HON'BLE TRIBUNAL ALSO OVERLOOKED THE FACT THAT THE LD. AR, DURING THE COURSE OF HEARING, HAS DISTINGUISHED THE DECISIONS RELIED UPON BY THE ID. CIT(A) A S UNDER: ( I) WITH RESPECT TO THE DECISION OF M/S. SANKET STEEL IT WAS ARGUED THAT: M/S. SANKET STEEL WAS CARRYING OUT ITS BUSINESS OPERATION IN CITY OF VADODARA, GUJARAT AND THE JUDGEMENT RELATED TO AY 2004 - 05 WHEREAS THE PRESENT APPELLANT IS OPERATING IN SOUTH MUMBAI, MAHARASHTRA AND THE TRANSACTIONS RELATED TO AY 2010 - 11 WHERE COMPETITION IS VERY HIGH. ALSO, IT IS ALSO NOT CLEAR WHETHER M/S. SANKET STEEL WAS A STOCKIST OR NOT. (II) WITH RESPECT TO THE DECISION OF CIT VS. SIMIT SHETH, IT WAS ARGUED THAT: THE JUDGMENT IN THE CASE OF SIMIT SHETH IS RELEVANT TO ASSESSMENT YEAR AY 2006 - 07 WHEREAS THE APPELLANT'S CASE PERTAINS TO AY 2010 - 11. SIMIT SHETH WAS CARRYING OUT HIS BUSINESS OPERATION IN STATE OF GUJARAT WHEREAS THE PRESENT APPELLANT IS OPERAT ING IN SOUTH MUMBAI, MAHARASHTRA WHERE COMPETITION IS VERY HIGH. IN THE CASE OF M/S. SIMIT SHETH, THE SUPPLIERS MADE THEIR STATEMENTS ON OATH TO THE EFFECT THAT THEY HAD NOT SUPPLIED THE STEEL TO THE ASSESSEE BUT IN THE CASE OF THE APPELLANT COMPANY NO S UCH STATEMENT WAS GIVEN BY THE SUPPLIER. THE AO HAD REJECTED THE BOOKS OF ACCOUNT IN THAT CASE. HOWEVER, IN THE CASE OF APPELLANT, THE ID. AO HAS NOT REJECTED THE BOOKS OF ACCOUNTS. ALSO, IT IS ALSO NOT CLEAR WHETHER SIMIT SHETH WAS A STOCKIST OR NOT. THUS, THE HON'BLE BENCH OVERLOOKED THE ABOVE SUBMISSIONS THAT THE FACTS, PLACE OF BUSINESS AND YEAR IN CONSIDERATION IN BOTH THE DECISIONS WERE DIFFERENT AND AS SUCH GROSS PROFIT MARGIN IN THOSE TWO CASES CANNOT BE USED FOR COMPARISON PURPOSE. THEREFORE, T HE RATIO OF THESE DECISIONS CANNOT BE APPLIED. 8. IT IS RESPECTFULLY SUBMITTED THAT IGNORING THE BASIC, VITAL FACTS OF THE CASE HAVING BEARING ON THE OUTCOME OF THE APPEAL AND NON - M A NO S . 823 & 824 /MUM/ 2017 SHRI HASMUKH JAGSHI VISARI 4 CONSIDERING THE COORDINATE BENCH DECISION IN CASE OF GEOLIFE ORGANICS VS. ACIT (SUPRA), WHICH IS MORE IDENTICAL TO FACTS AS THAT OF APPELLANT WHILE ADJUDICATING THE APPEAL IS A MISTAKE APPARENT FROM RECORD AND DESERVES TO BE RECTIFIED U/S 254(2) OF THE ACT . 6. RELIANCE WAS PLACED ON THE DECISION OF HONBLE SUPREME COURT IN CASE OF HONDA SEIL POWER PRODUCTS LTD., 295 ITR 466 IN SUPPORT OF THE PROPOSITION THAT FAILURE TO CONSIDER THE DECISION OF THE CO - ORDINATE BENCH CITED BY ASSESSEE IS A MISTAKE APPARENT FROM RECORD. RELIANCE WAS ALSO PLACED ON THE DECISION OF GUJARAT HIGH COURT IN THE CASE OF DATTANI & CO., 41 TAXMANN.COM 260 AND ALLAHABAD HIGH COURT IN THE CASE OF LAXMI ELECTRONIC CORPORATION LTD., 54 TAXMAN 515, ITO VS. 58 ITR 634 (ITAT ALLAHABAD HIGH C OURT), W HEREIN IT WAS HELD THAT TRIBUNAL LOST SIGHT OF A MATERIAL FACT AT TIME OF WRITING ITS ORDER OR JUDGMENT WHICH FACT WAS DULY BROUGHT TO ITS NOTICE BY ASSESSEE - WHETHER SUCH AN INADVERTENT ERROR WAS NOT A PATENT ERROR OF LAW AND IT WAS AN ERROR APPAR ENT FROM RECORD WHICH COULD BE RECTIFIED UNDER SECTION 35 OF 1922 ACT - HELD, YES. 7. IN VIEW OF THE ABOVE, IT WAS CONTENDED THAT THE HON'BLE TRIBUNAL MAY, IN LIGHT OF THE ERRORS POINTED IN ABOVE PARAGRAPHS AND ALSO IN LIGHT OF DECISIONS AS REFERRED ABOVE, AMEND ITS ORDER TO RECTIFY THE AFORESAID MISTAKE APPARENT FROM RECORD AND GRANT APPROPRIATE RELIEF. 8. ON THE OTHER HAND, IT WAS ARGUED BY LEARNED DR THAT THERE IS NO MISTAKE IN THE ORDER OF THE TRIBUNAL. 9. WE HAVE CONSIDERED RIVAL CONTENTIONS AND CAREF ULLY GONE THROUGH THE MISC ELLANEOUS APPLICATION FILED BY ASSESSEE AND THE ORDER OF TRIBUNAL DATED 29/08/2017. WE HAD ALSO DELIBERATED ON THE JUDICIAL PRONOUNCEMENTS CITED BY LEARNED AR WITH REFERENCE TO SCOPE OF SECTION 254(2) AS WELL AS THE JUDICIAL PRONOUNCEMENTS CITED DURING THE COURSE OF ORIGINAL HEARING WITH M A NO S . 823 & 824 /MUM/ 2017 SHRI HASMUKH JAGSHI VISARI 5 REGARDING TO AD DITION TO BE UPHELD ON ACCOUNT OF BOGUS PURCHASES. WE HAVE ALSO TESTED THE CORRECTNESS OF JUDICIAL PRONOUNCEMENTS RELIED ON BY CIT(A) FOR UPHOLDING ADDITION OF 12.5% OF BOGUS PURCHASES. 10 . FROM THE RECORD, WE ALSO OBSERVE THAT ASSESSEE HAS DISTINGUISHED THE CASE RELIED ON BY LEARNED CIT(A) IN CASE OF SANKET STEEL AND SIMIT SHETH (SUPRA) WHILE UPHOLDING ADDITION OF 12.5% AND IT WAS ARGUED THAT PLACE OF BUSINESS AND YEAR UNDER CONSIDERATION IN BOTH THE DECISIONS WERE DIFFERENT AND AS SUCH GROSS PROFIT MARG IN IN THESE TWO CASES CANNOT BE USED FOR COMPARISON PURPOSES. THEREFORE, THE RATIO OF THESE DECISIONS CANNOT BE APPLIED TO THE FACTS OF INSTANT CASE. AFTER GOING THROUGH THE JUDGMENT OF SIMIT SHETH WE FOUND THAT IT IS PERTAINING TO A.Y.2006 - 07 WHEREAS ASSE SSEES CASE PERTAINS TO A.Y.2009 - 10 & 2011 - 12. SIMIT SHETH WAS CARRYING ON HIS BUSINESS IN THE STATE OF GUJARAT WHEREAS THE PRESENT ASSESSEE IS OPERATING IN SOUTH MUMBAI, MAHARASHTRA WHERE COMPETITION IS VERY HIGH. WE ALSO OBSERVE THAT IN THE CASE OF SIMIT SHETH SUPPLIERS MADE THEIR STATEMENT ON OATH TO THE EFFECT THAT THEY DID NOT SUPPLY THE STEEL TO THE ASSESSEE BUT IN THE CASE OF THE ASSESSEE COMPANY, NO SUCH STATEMENT WAS GIVEN BY THE SUPPLIERS. IN THE PRESENT CASE, BOOKS OF ACCOUNTS HAVE NOT BEEN REJEC TED BY THE AO WHERE AS IN THE CASE OF SIMITH SHETH BOOKS OF ACCOUNTS WERE REJECTED BY THE AO. SIMILARLY IN THE CASE OF SANKET STEEL, ASSESSEE WAS CARRYING ON HIS BUSINESS IN THE STATE OF GUJARAT AND THE JUDGMENT RELATED TO THE A.Y.2004 - 05 WHEREAS THE PRESE NT ASSESSEE IS OPERATING IN THE SOUTH MUMBAI AND THE TRANSACTIONS ARE RELATED TO THE A.Y.2009 - 10 & 2011 - 12. WE ALSO OBSERVE THAT TRIBUNAL HAD NOT TAKEN INTO M A NO S . 823 & 824 /MUM/ 2017 SHRI HASMUKH JAGSHI VISARI 6 CONSIDERATION THE JUDICIAL PRONOUNCEMENTS OF CO - ORDINATE BENCH AS CITED BY ASSESSEE. 1 1 . HONBLE SU PREME COURT IN THE CASE OF HONDA SEIL POWER PRODUCTS LTD., HAS HELD THAT FAILURE TO CONSIDER THE DECISION OF THE CO - ORDINATE BENCH CITED BY ASSESSEE IS A MISTAKE APPARENT FROM THE RECORD. WE ALSO OBSERVE THAT LOOSING SIGHT OF MATERIAL FACTS AT TIME OF WRIT ING ORDER AMOUNTS TO MISTAKE APPARENT FROM RECORD IN TERMS OF DECISION OF GUJARAT HIGH COURT IN THE CASE OF DATTANI & CO. (SUPRA). KEEPING IN VIEW THE MISTAKES AS DISCUSSED ABOVE WHICH ARE APPARENT FROM DOCUMENTS PLACED ON RECORD AND ARGUMENTS ADVANCED DUR ING THE COURSE OF HEARING, WE RECALL THE ORDER SO PASSED BY THE TRIBUNAL DATED 29/08/2017. 11. IN THE RESULT, M.A FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 18 TH MAY, 2018. SD/ - SD/ - ( SANDEEP GOSAIN ) ( R.C. SHARMA ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 18 TH MAY, 2018 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) - THANE - 2 4. THE CIT - THANE - 1 5. THE DR, G BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.