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Income Tax Appellate Tribunal, MUMBAI BENCH “F”, MUMBAI
Before: SHRI ABY T. VARKEY & MS. PADMAVATHY S.
1 ITA 716/Mum/2023 Uttam Ghevvarchand Shrishrimal IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “F”, MUMBAI
BEFORE SHRI ABY T. VARKEY (JUDICIAL MEMBER) AND MS. PADMAVATHY S. (ACCOUNTANT MEMBER)
I.T.A. No.716/Mum/2023 (Assessment year 2011-12) Uttam Ghewarchand Shrishrimal vs Income-tax Officer 19(3)(5), Mumbai 13/21, Sheth Virchand Umersey Aayakar Bhavan, M.K. Road Building, 3rd Floor, Office No.307, Churchgate, Mumbai-400 020 Near C.P. Tank, Mumbai-400 004 PAN: ACWPJ4359F APPELLANT RESPONDENT
Assessee represented by Shri Mayur Makadia Department represented by Vrunda V Matkari – Sr AR
Date of hearing 14-06-2023 Date of pronouncement 26-06-2023
O R D E R PER : MS PADMAVATHY S. (AM)
This appeal is against the order of the Commissioner of Income-tax (Appeals), National Faceless Appeal Centre, Delhi) [hereinafter ‘Ld.CIT(A)’] dated 28/01/2023 for the assessment year 2011-12. The assessee raised the following grounds of appeal:-
“1. On the facts and circumstances of the case and in law the Ld. CIT (A) erred in ignoring that the reopening made by Ld. A.O is bad in law as the same is merely on the basis of the statement of certain parties made before the sales-tax authorities. The Ld. AO ought tohave formed an independent belief that there is an escapement of income rather than merely relying on the information forwarded by the Sales Tax Authorities and the Investigation Wing of the Income Tax Department.
2 ITA 716/Mum/2023 Uttam Ghevvarchand Shrishrimal
On the facts and circumstances of the case and in law the Ld. CIT (A) erred in confirming the addition of Rs. 31,15,652 as non-genuine purchases on the basis of difference calculated from Purchase as per Stock register and purchase as per Assessment Order, wherein the Ld. CIT (A) has erred by not considering certain purchases made by the Appellant at all. Had these purchases also been considered, there would not be any difference at all. 3. On the facts and circumstances of the case and in law the Ld. CIT (A) erred in upholding addition @ 50% of balance amount of alleged Bogus purchase i.e. Rs. 42,50,040 being 50% of (Rs. 1,16,15,733 - Rs. 31,15,652) without considering the submissions of the appellant that the purchases are genuine purchases for which the Appellant had duly furnished the invoices, copies of bank statement supporting the payment made through banking channeli.e. by account payee cheque only, Stock register showing subsequent sale and therebydischarged the onus regarding purchases made by Appellant. 4. On the facts and circumstances of the case and in law the Ld.CIT (A) erred in appreciating that the Ld A.O has not doubted the subsequent sale of such goods, the purchases of which have been alleged to be non-genuine. Therefore, the sustained addition of bogus purchases would tantamount to a dual addition which is not permissible. 5. On the facts and circumstances of the case and in law the Ld. CIT (A) erred in sustaining the addition made by the Ld. A.O without appreciating the fact that the additionhas been made without providing the copies of the statements recorded by the Sales Tax Department during the course of investigation to the appellant.”
During the course of hearing the Ld.AR submitted that ground No.1 with regard to the validity of reopening is not pressed and accordingly, the same is dismissed as not pressed.
The assessee is an individual engaged in the business of trading in ferrous and non ferrous metal. For the assessment year 2011-12, the assessee filed the return on 21/09/2011 declaring a total income ofrs.3,22,300/-. The return was processed under section 143(1) of the Income-tax Act (in short, 'the Act'). The Assessing officer issued a reopening notice under section 148 for the reason that the communication was
3 ITA 716/Mum/2023 Uttam Ghevvarchand Shrishrimal received from Sales-tax department as per which the assessee is involved in taking entries of bogus purchases from the following parties:- S.No. Name of the party Amount 1 Ratandeep tubes 1,355,369 2 Sunidhi Metal 2,011,939 3 Veer Industries 2,179,533 4 Atlas International 573,113 5 Nirma Metal Industries 1,285,056 6 Kanak Metal Industries 4,210,723 TOTAL 1,16,15,733
The assessee did not file any return in response to notice under section 148. Further notices issued by the Assessing Officer was returned unserved and the assessee did not respond even to the final notice of opportunity issued by the Assessing Officer. Therefore, the Assessing Officer passed an order under section 147 r.w.s. 144 where he has treated the entire purchases as shown in the table above as not genuine and accordingly, made the addition. Aggrieved, the assessee filed appeal before the CIT(A). Before the CIT(A), the assessee filed additional evidence wherein he has submitted copies of invoices, ledger account, copy of stock register, etc. The CIT(A), after considering the evidences submitted by the assessee gave partial relief to the assessee. The CIT(A) sustained the addition made to the extent of difference between the amount treated as bogus purchases by the Assessing Officer and the amount reflected in the stock register. The CIT(A) also made 50% o the amount reflected in the stock register for the reason that the assessee did not file any confirmation from the parties, no PAN or addresses of the six parties was produced. Aggrieved, the assessee is in appeal before the Tribunal.
4 ITA 716/Mum/2023 Uttam Ghevvarchand Shrishrimal 4. The Ld.AR submitted that the assessee had filed all the necessary evidences to support the genuineness of the purchases before the CIT(A). The CIT(A) while reconciling the amount as per the stock register missed out certain entries while sustaining the disallowance. In this regard, the Ld.AR drew our attention to the reconciliation statement prepared party-wise, certain lines items which have not been taken into consideration by the CIT(A) for the purpose of disallowance (page 227 of paper book). The Ld.AR also submitted that the lower authority have not distributed the sales figure and have taken only the purchases as bogus. The Ld.AR in this regard relied on the decision of the Hon'ble Bombay High Court in the case of PCIT vs Mohammed Haji Adam & Company (32019) 104 CCH 0391 (Bom) dated 11/02/2019 where it has been held that – “8. In the present case, as noted above, the assessee was a trader of fabrics. The A.O. found three entities who were indulging in bogus billing activities. A.O. found that the purchases 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 assessee's additional income or the assessee is correct in contending that such logic cannot be applied. The finding of the CIT(A) and the Tribunal would suggest that the department had not disputed the assessee's sales. There was no discrepancy between the 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, correctly restricted the additions limited to the extent of bringing the G.P. rate on purchases at the same rate of other genuine purchases. The decision of the Gujarat High Court in the case of N.K. Industries Ltd. (supra) cannot be applied without reference to 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.3,70,78,1257- as gross profit on sales of Rs.37.08 Crores made by the Assessing Officer despite the fact that the said sales had admittedly been recorded in the regular books during Financial Year 1997-98 is concerned, we are of the view that the
5 ITA 716/Mum/2023 Uttam Ghevvarchand Shrishrimal assessee cannot be punished since sale price is accepted by the revenue. Therefore, even if 6 % gross profit is taken into account, the corresponding cost price is required to be deducted and tax cannot be levied on the same price. We have to reduce the selling price accordingly as a result of which profit comes to 5.66 %. Therefore, considering 5.66 % of Rs.3,70,78,1257- which 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 assessee and partially in favour of the revenue. "
The Ld.AR relying on the above decision, without prejudice submitted that the GP ratio of 8% can be considered for the purpose of making the disallowance and not the entire bogus purchases. The Ld.AR drew our attention to the P&L Account and the balance-sheet of the assessee wherein it is noticed that the total purchases of the assessee as per the statement of accounts is Rs.1,33,24,493/- whereas the Assessing Officer has made an addition of Rs.1.16 crores which is more than 80% of the total purchases. The Ld.AR accordingly submitted that the Assessing Officer is not right in making addition of 100% of the purchases.
The Ld.DR, on the other hand, submitted that the assessee did not furnish any details before the Assessing Officer during the course of assessment. The CIT(A) while admitting the additional evidence submitted by the assessee did not call for any remand report from the Assessing Officer and has proceeded to consider the evidences for the purposes of adjudication. Therefore, the Ld.DR submitted that the Assessing Officer was not given proper opportunity to examine the evidences submitted by he assessee. The Ld.DR also submitted that the assessee has not furnished the return of income in response to notice under section 148. Given this, the Ld.DR prayed that the issue may be remanded back to the AO for de novo verification.
6 ITA 716/Mum/2023 Uttam Ghevvarchand Shrishrimal 7. We heard the parties and perused the materials on record. We notice that the assessee neither responded to the notices issued by the Assessing Officer under section 148 nor filed any return of income. The Assessing Officer, based on communication received from the DDIT(Inv) with regard to the information received from sales-tax department, as per which, the assessee is involved in taking bogus entries towards purchases, has computed 100% of the purchases as non genuine and accordingly made the addition. The CIT(A), on the other hand, had admitted the additional evidences submitted by the assessee and has given partial relief only to the extent of 50% of the amount reflected in the stock register. On perusal of records, we notice that there are certain discrepancies in the figures considered by the CIT(A) for the purpose of disallowance and the figures as per assessee's stock register. It is also noticed that the CIT(A) did not call for any remand report from the Assessing Officer with regard to the additional evidences submitted by the assessee and there is per se violation of Rule 46A of the Income-tax Rules, 1962. Considering these facts, we are of the view that the issue should go back to the Assessing Officer for fresh verification of the evidences submitted by the assessee. Accordingly we remit the issue for a fresh verification to the Assessing Officer with a direction to consider the reconciliation statement of the stock register prepared by the assessee and also to keep in mind the decision of the Hon’ble Bombay High Court in the case of Mohammed Haji Adam & Co (supra) wherein Hon ’ble Court held that profit embedded in the sale of bogus purchases can only be added since the Assessing Officer in the instant case as noted (supra) has not disturbed the sales figures shown by the assessee and decide accordingly. Needless to say that the assessee be given an opportunity of being heard.
7 ITA 716/Mum/2023 Uttam Ghevvarchand Shrishrimal 8. In the result, the appeal is allowed for statistical purpose.
Order pronounced in the open court on 26/06/2023.
Sd/- sd/- (ABY T. VARKEY) (PADMAVATHY S) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai, Dt : 26th June, 2023 Pavanan प्रतितिति अग्रेतििCopy of the Order forwarded to : 1. अिीिार्थी/The Appellant , प्रतिवादी/ The Respondent. 2. 3. आयकर आयुक्त CIT तवभागीय प्रतितिति, आय.अिी.अति., मुबंई/DR, ITAT, 4. Mumbai 6. गार्ड फाइि/Guard file. BY ORDER, //True Copy// Asstt. Registrar / Senior Private Secretary ITAT, Mumbai