TUSHAR M. PAREKH PROP. PAREKH ENTERPRISES,MUMBAI vs. INCOME TAX OFFICER-17(3)(4), MUMBAI

This appeal filed by the assessee is directed against, the order of the Commissioner of Income Tax (Appeals)–28, Mumbai, dated 25/01/2018 and it pertains to Assessment Year 2010-11.

The assessee has raised the following grounds of appeal:- A) Principles of natural justice violated 1) The learned Commissioner of Income Tax (Appeals) – 28, Mumbai [CIT(A)] erred on facts and in law in not giving a reasonable and sufficient Opportunity of being heard while deciding the appeal of the appellant. 2) The learned CIT(A) failed to appreciate that the appellant was prevented by a reasonable and sufficient cause from furnishing the various details and evidences called for by the AO. 3) The appellant prays that as the principles of natural justice have been violated, the order of the CIT(A) may be set aside lo the AO to decide

During the assessment the assessee was asked to substantiate the purchases and to furnish the name of dealers/parties, Permanent Accountant Number/ TIN number, Bills, Vouchers, description of goods purchased, quantity, rate and amount, the date of dispatch of Tushar M Parekh goods and the name of place along with mode of transportation by road or other mode, Vehicle Number, and payment details. The assessing officer noted that no response was made by the assessee and notice u/s 271(1)(b) r.w.s. 274 was issued, calling upon the assessee as to why penalty be not imposed for non compliance of notice issued by assessing officer. The AO also issued notice to the said hawala dealers/parties u/s 133(6) on 27.11.2015 to verify the genuineness of purchases. The AO noted that the notices send to the parties / dealers were return back unserved with the remark of postal authorities ‘not known’ , left, refused. The assessee was again asked to made his comment on the report of postal authorities that parties are not available at the given address. The assessee furnished its reply dated 22.02.2016. In the reply the assessee stated that he is carrying the business of iron and steel of wholesale trading. The assessee made genuine transaction. The assessee received the bills and made payment through banking transaction. The assessee also stated that the bills were raised inclusive of VAT. The assessee came to know that the parties from which material was purchased not deposited the amount of VAT collected from assessee and hence, the input tax credit for the said year would be disallowed. The assessee having left no option made the payment of VAT. The assessee also stated that as per his knowledge the Sales Tax Department that TIN number of certain parties have been cancelled and the input credit of Tushar M Parekh VAT claim by him against those purchases have been disallowed.

Aggrieved by the additions/ disallowance of 100% of the alleged bogus purchases, in the assessment order, the assessee filed appeal before the ld. CIT(A). Before the ld. CIT(A), the assessee made elaborate submissions on reopening as well as on merit. The Ld. CIT(A) after considering the submission dismiss the appeal of assessee and confirm the addition in the assessment order. Further aggrieved by the order of Ld. CIT(A), the assessee has filed the present appeal before this Tribunal.

The Ld. AR submits that, in the application the assessee has stated that entire record including documents related with the purchases during the year, were seized by the Sales Tax Department. Now, the assessee has obtained the copies of those documents from Sales Tax Department, which consists of the documents as narrated above. The evidences could not file earlier as the same were not available with Tushar M Parekh the assessee and were in possession of Sales Tax Department. The ld AR submits that the assessee was prevented by sufficient cause in not filing those documents before the lower authorities. The Ld. AR of the assessee submits that the application of the assessee for admission of additional evidences may be allowed and the matter may be restored to the file of the AO to consider the issue afresh.

On merit the Ld. AR of the assessee submits that the assessee has very good case on merit as the lower authority has disallowed the entire purchases. The assessee is in the business of trading in ferrous and non ferrous metals. The purchases shown by assessee are genuine, though disputed by the revenue. The Ld.AR submits that recently, the Hon’ble Bombay High Court on similar set of facts in PCIT vs Mohd. Haji Adam & Co. in of 2016 dated 11.02.2019 held the purchases cannot be rejected without disturbing the sales of trader. It was also held that the disallowance to the extent of bringing GP rate on bogus purchases at the same rate of other genuine purchases is justified.

On the other hand, the Ld. DR for the revenue supported the order of lower authorities. On admission of additional evidence the Ld. DR submits that the assessee was given sufficient opportunity by lower authorities. The assessee despites availing opportunity has not filed such documents evidences before lower authorities. The Ld. DR further submits that in case the application for admission of Tushar M Parekh additional evidences is accepted, the matter may be restored to the file of AO for verification and consideration afresh. On merit the ld. DR for the Revenue argued that the Investigation Wing of the Income-tax Department made full-fledged enquiry. The parties from whom the assessee has shown the purchases are bogus Hawala dealers. The hawala dealers are indulged in issuing bogus bills without delivery of any material or goods. The assessee obtained accommodation bills only in order to inflate the expenses and to bring down the profitability in order to avoid the tax. The ld. DR for the Revenue prayed for dismissal of the appeal. In support of his submission the Ld. DR for the revenue are relied upon the decision of Tribunal in Shoreline Hotel Pvt.Ltd. vs CIT in dated 19/06/2015, which has been approved by Hon’ble Bombay High Court in ITA.No.332 of 2016, dated 11/09/2018.

We have considered the submission of the both the parties and perused the order of lower authorities. The AO during the assessment disallowed the entire purchases of alleged bogus purchases by taking view that the assessee fail to produce documentary evidences in the form of purchase bills, invoices, transportation or other evidences to substantiate the genuineness of purchases. The Ld. CIT(A) confirm the action of AO on similar lines. Before us, the Ld. AR of the assessee has filed an application for an admission of Tushar M Parekh documentary/additional evidence. In the application the assessee has stated that documents of the assessee were seized by the Sales Tax Department, the assessee has obtained the copies of those documents from Sales Tax Department, which consists of the documents as narrated above. The evidences could not file earlier as the same were not available with the assessee and were in possession of Sales Tax Department. We have perused the documentary evidence furnished by assessee. The documentary evidences consists of copies of purchases invoices of alleged bogus parties (page No.94 to 170), the corresponding sales ( page No.171 to 244), working of gross profit of alleged bogus parties ( Page No.245 and 246) and working of gross profit for purchases and sales excluding the alleged bogus parties (page No. 247 and 248). We have noted that the assessee has shown sufficient cause for admission of additional evidence; the documentary evidences filled by the assessee have direct nexus/relevance with the dispute under adjudication. The assessee has shown sufficient cause for not filing such evidence before the lower authorities Therefore; we admit the additional evidences furnished by assessee. Since, we have admitted the additional evidences filed by the assessee. Hence, we deem it appropriate the restore the appeal to the file of AO to consider the documentary evidences furnished by the assessee and pass the order afresh in accordance with law. Needless to order that before passing the order,

In the result, appeal of the assessee is allowed for statistical purpose.