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Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI
Before: SHRI SAKTIJIT DEY & SHRI RAJESH KUMAR
ITA no.7495 & 7496/Mum./2018 (Assessment Year : 2010–11 & 2011–12) Prabhat Gupta HUF Flat no.802, Chhadva Residency ……………. Appellant N.B. Patil Marg, Chembur (E) Mumbai 400 071 PAN AADHP5748M v/s ITO, Ward–26(2)(4), Mumbai ……………. Respondent & 09/Mum./2019 (Assessment Year : 2010–11 & 2011–12) ITO, Ward–26(2)(4), Mumbai ……………. Appellant v/s Prabhat Gupta HUF Flat no.802, Chhadva Residency ……………. Respondent N.B. Patil Marg, Chembur (E) Mumbai 400 071 PAN AADHP5748M Revenue by : Shri R. Bhoopathi Assessee by : Ms. Radha Halbe Date of Hearing – 09.01.2020 Date of Order – 05.02.2020 O R D E R PER SAKTIJIT DEY. J.M. These are two sets of cross appeals arising out of two separate 29th orders, both dated July 2018, passed by the learned Commissioner of Income Tax (Appeals)–38, Mumbai, pertaining to the assessment year 2010–11 and 2011–12.
The common issue involved in these appeals is in relation to the additions made/deleted on account of non–genuine purchases.
2 Prabhat Gupta HUF
Brief facts, more or less common in these appeals are, the assessee is a Hindu Undivided Family (HUF) and is engaged in the business of trading in TMT Bars, Steel, etc. For the assessment year 2010–11, the assessee filed its return of income on 12th February 2011, declaring total income of ` 4,29,750. Similarly, for the assessment year 2011–12, the assessee filed its return of income on 24th September 2011, declaring total income of ` 5,07,944. The returns of income so filed were initially processed under section 143(1) of the Act. Subsequently, on the basis of information received from the Sales Tax Department, Government of Maharashtra, through the O/o the DGIT (Inv.), Mumbai, that the assessee is a beneficiary of accommodation bills provided by certain entities identified as hawala operators, the Assessing Officer re–opened the assessment under section 147 of the Act. During the assessment proceedings, the Assessing Officer, as per the information available on record, found purchases worth ` 51,92,052 in assessment year 2010–11 and ` 54,43,711, in assessment year 2011–12, claimed to have been made from certain parties to be non–genuine. Therefore, he called upon the assessee to prove the genuineness of such purchases through proper documentary evidence. In response to the query raised by the Assessing Officer, the assessee submitted the details called for and also explained that the purchases made are genuine. The Assessing
3 Prabhat Gupta HUF Officer, however, did not find merit in the submissions of the assessee. He observed, the assessee could not furnish any documentary evidence to show transportation of goods from the selling dealers to the premises of the assessee. He observed, neither transport document could be furnished by the assessee nor the assessee could furnish goods received note, goods inspection notes, godown receipt, toll tax paid, loading and unloading expenditure details, etc., to prove delivery of goods at its premises. Further, he observed, independent enquiry conducted by him by issuing notices under section 133(6) of the Act to verify the genuineness of purchases did not bear any result, as, all such notices returned back un–served due to absence of the selling dealers in the given address. The Assessing Officer further observed, even the assessee in spite of being called upon to produce the concerned selling dealers could not do so. Due to the aforesaid reasons, the Assessing Officer ultimately concluded that the purchases made in both the assessment years are non–genuine. However, relying upon certain judicial precedents, he held that only profit element embedded in such purchases has to be added. Accordingly, he estimated such profit element @ 12.5% on the bogus purchase in both the assessment years and made the following additions:– A.Y. 2010–11 ` 6,49,007 A.Y. 2011–12 ` 6,80,464
4 Prabhat Gupta HUF
Contesting the aforesaid additions, assessee preferred appeals before the first appellate authority.
After considering the submissions of the assessee in the context of facts and material on record, learned Commissioner (Appeals) agreed with the Assessing Officer insofar as the issue of genuineness of purchases are concerned. He held that since the assessee could not furnish sufficient documentary evidence to prove the genuineness of purchases claimed to have been made from the concerned parties, such purchases cannot be accepted to be genuine. However, he did not agree with the estimation of rate of profit @ 12.5% as adopted by the Assessing Officer. He observed, the assessee has already declared gross profit ratio @ 3.3% on all its purchases. Further, the assessee has declared net profit @ 1.59%, whereas, VAT rate on such goods is shown at 4%. Considering these facts, learned Commissioner (Appeals) estimated the profit rate @ 4% and restricted the addition to 4% of the non–genuine purchases in both the assessment years under appeal. Against the aforesaid decision of learned Commissioner (Appeals), both, the assessee and the Revenue are in appeal before us.
While the assessee has raised grounds challenging, both, the re– opening of assessment under section 147 of the Act as well as the 5 Prabhat Gupta HUF merits of the additions sustained by learned Commissioner (Appeals), the Revenue has challenged the decision of learned Commissioner (Appeals) in restricting the addition to 4% of the non–genuine purchases.
The learned Authorised Representative submitted, the Assessing Officer has re–opened the assessment simply relying upon the information received from the O/o the DGIT (Inv.), Mumbai, without independently applying his mind. She submitted, no tangible material has come to the possession of the Assessing Officer to form belief that income has escaped assessment. Therefore, she submitted, re– opening of assessment under section 147 of the Act is invalid. As regards the merits of the issue, the learned Authorised Representative submitted, in course of assessment proceedings, the assessee has furnished all relevant and necessary evidences to prove the genuineness of purchases made during the year. She submitted, apart from purchase bills, bank statement, ledger account copy etc. the assessee has also furnished the details of corresponding sales, sales invoices, delivery challan and transportation bills relating to sale of goods to the end customers. Explaining the modus operandi, the learned Authorised Representative submitted, on receipt of purchase order from its customer, the assessee purchases the required goods. On arrival of vehicle along with goods in assessee’s premises, it is not 6 Prabhat Gupta HUF unloaded but sent directly to the customer/end user in the same vehicle. To prove such fact, learned Authorised Representative drew our attention to the purchase bills, corresponding sale bills, delivery challan, transport receipts relating to sale bills, etc. Further, she submitted, account confirmation from all the selling dealers were obtained and furnished before the Assessing Officer in the course of assessment proceedings. She submitted, the payments were made to the selling dealers through cheque which are reflected in the bank statement. Thus, she submitted, when all documentary evidences were furnished before the Assessing Officer to prove the purchases, there is no justification in treating the purchases as non–genuine and making addition by estimating the profit element at certain percentage. The learned Authorised Representative submitted, merely because the notices issued under section 133(6) of the Act returned back un–served, would not lead to the conclusion that the purchases are non genuine. Finally, the learned Authorised Representative submitted, while deciding identical issue in case of Prabhat Gupta (Individual), the Karta of the HUF, who is also in the similar line of business, in the assessment years 2009–10, 2010–11 and 2011–12, the Tribunal having found that the purchases are supported by valid documentary evidences, has fully deleted the addition made by treating such purchases as non–genuine. In this context, he drew our
7 Prabhat Gupta HUF attention to the aforesaid orders of the Tribunal. Thus, she submitted, facts being identical, following the aforesaid decision of the Tribunal the entire addition should be deleted.
The learned Departmental Representative submitted, the Assessing Officer having re–opened the assessment on the basis of specific information available on record, the validity of re–opening of assessment under section 147 of the Act cannot be questioned. As regards the merits of the issue, the learned Departmental Representative submitted, it has been established beyond doubt that the purchases made by the assessee in both the assessment years are non–genuine. Therefore, the books of account were rejected and addition was made by estimating profit rate. He submitted, the profit rate adopted by the Assessing Officer at 12.5% being reasonable should be restored.
We have considered rival submissions and perused the material on record. At the outset, we propose to deal with the validity of re– opening of assessment under section 147 of the Act. As could be seen from the facts on record, the return, of income filed by the assessee were initially not subjected to scrutiny but were simply processed under section 143(1) of the Act. Subsequently, the Assessing Officer received specific information from the O/o the DGIT (Inv.), revealing
8 Prabhat Gupta HUF that certain purchases claimed to have been made by the assessee are non–genuine as the concerned selling dealers were identified as hawala operators by the Sales Tax Department, Government of Maharashtra. On the basis of such information, the Assessing Officer has re–opened the assessment under section 147 of the Act. Thus, from the facts on record, it becomes clear that the purchases were never examined or verified at the time of processing of return of income under section 143(1). On the contrary, tangible material has come to the possession of the Assessing Officer subsequently revealing escapement of income on account of non–genuine purchases. There is no dispute that on the basis of such material, the Assessing Officer has re–opened the assessment under section 147 of the Act. That being the case, we do not find any merit in the grounds raised by the assessee challenging the validity of the re–opening of the assessment under section 147 of the Act, hence, dismissed
As regards the merits of the issue, undisputedly, the assessee is a trader in TMT Bars and Steel. On a perusal of the assessment order it is evident that in response to the query raised by the Assessing Officer with regard to the disputed purchases, the assessee had furnished the documentary evidences called for which has been acknowledged by the Assessing Officer. However, the Assessing Officer has treated such purchases as non–genuine primarily for two reasons.
9 Prabhat Gupta HUF Firstly, the assessee could not furnish any documentary evidence to demonstrate actual delivery of goods in its premises. Secondly, notices issued under section 133(6) of the Act return back un–served. From the material placed before us in the form of paper book, it is noticed that in the course of assessment proceedings, the assessee has furnished purchase invoices, corresponding sale invoices, delivery challan, transport receipt relating to the sales effected, account confirmation from selling dealers, etc. It is a fact on record that the assessee could not furnish any delivery challan or transportation documents to indicate actual delivery of goods at its premises. To explain this, learned Authorised Representative has submitted that as per assessee’s modus operandi, on receipt of a purchase order from the end customer, it purchases the goods from the selling dealers and the truck load is directly dispatched to the end customer without making delivery at assessee’s premises. The aforesaid contention of learned Authorised Representative appears to have some strength considering the documentary evidences only before us. It is noticed from the purchase bills and corresponding sale bills, the day the assessee purchased the goods, the very same day it is dispatched to the end customer. The sales effected by the assessee to end customer is supported by sales bills, transportation receipt, etc. Further, in the course of assessment proceedings, the assessee has furnished account
10 Prabhat Gupta HUF confirmation from the selling dealers. The Assessing Officer, however, has not cross verified all these documentary evidences through proper enquiry. The Assessing Officer has simply issued notices under section 133(6) of the Act and on not receiving any response from the concerned party he has kept quiet and not carried out any further enquiry to verify the authenticity of the documentary evidences filed before him. Learned Commissioner (Appeals) has also not conducted any enquiry himself to verify the genuineness of the documentary evidences filed by the assessee. The fact that both the Assessing Officer and learned Commissioner (Appeals) have proceeded to make the addition on estimate basis makes it clear that they have no doubt with regard to the fact that the goods representing such purchases have been entered in assessee’s books of account and corresponding sales have been effected. It is noticed, while deciding identical issue in case of the Karta of the HUF, who is not only in same line of business but had made similar purchases from common entities, the Tribunal in ITA no.272/Mum./2017 & Ors., dated 21st December 2017, relating to the Assessment Years 2009–10 and 2010–11 has deleted the additions. Similarly, identical addition made in assessment year 2011– 12 in case of Karta of the HUF was deleted by the Tribunal in an order passed in ITA no.798/Mum./2017, dated 21st February 2018. Facts being identical, respectfully following the aforesaid decision of the Co–
11 Prabhat Gupta HUF ordinate Bench passed in case of the Karta of the HUF, we delete the additions made on account of non–genuine in both the assessee years under dispute.
In the result, assessee’s appeals are allowed. Whereas, Revenue’s appeals are dismissed. Order pronounced in the open Court on 05.02.2020