Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, MUMBAI BENCH “SMC”, MUMBAI
Before: SHRI SHAMIM YAHYA & SHRI PAWAN SINGH
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “SMC”, MUMBAI BEFORE SHRI SHAMIM YAHYA ACCOUNTANT MEMBER & SHRI PAWAN SINGH JUDICIAL MEMBER ITA No. 6129/Mum/2018(Assessment year: 2011-12)
Bharat Jeevraj Jain Vs ITO (19(3)(1), Mumbai 2nd Khattar Galli Thakurdwar, Mumbai- 400 004 PAN : ADHPJ7518A APPELLANT RESPONDEDNT
Appellant by Ms. Zalak Nagariya AR Respondent by Ms. Samastha Mullamadi Sr DR Date of hearing 14-10-2019 Date of pronouncement 14-10-2019
O R D E R Per Pawan Singh, Judicial Member : 1. This appeal filed by the assessee is directed against the order of
ld. CIT(A)-53, Mumbai dated 17.08.2018 for Assessment Year
2011-12. The assessee has raised the following grounds of appeal:
“1.The Ld. Commissioner of Income-tax (Appeals) [hereinafter referred to as “Ld.CIT(A)”] has erred in upholding the order of the Ld. Assessing Officer and disallowing the purchase to the extent of 12.5% of Rs.1,59,66,402/- amounting to Rs.19,95,800/- on account of purchase from non genuine purchase parties.”
Brief facts of the case are that the assessee is engaged in the
business of trading in ferrous and non-ferrous metal, filed return of
income for AY 2011-12 on 13-09-2011 declaring total income at
2 ITA 6129/Mum/2018 Bharat Jeevraj Jain
Rs. 4,33 ,572/-. The return of income was processed under section
143(1). The assessment was re-opened under section 147 on the
basis of information received from Sale Tax Department,
Government of Maharashtra that certain hawala operators are
indulging in providing accommodation bills without actual delivery
of goods. The Sale Tax Department, Government of Maharashtra
referred the list of such hawala dealers and the beneficiary to the
DGIT (Investigation), Mumbai. The name of assessee appeared in
the list of beneficiary. The assessee allegedly made the purchases
of Rs. 1,59,66,402 /- from such hawala dealers. On the basis of
information, the Assessing Officer made a belief that the income of
the assessee escaped assessment, therefore, re-opened the
assessment under section 147. Notice under section 148 dated
16.09.2014 was issued and served upon the assessee. In response to
the notice under section 148, assessee filed its response vide reply
dated 20.07.2015 and stated that the return filed on 13.09.2011 be
treated the return in response of the said notice. The Reasons
recorded were supplied to the assessee. The Assessing Officer after
serving notice under section 143(2) dated 16.09.2016 proceeded for
re-assessment. During the assessment, the Assessing Officer noted
3 ITA 6129/Mum/2018 Bharat Jeevraj Jain
that the assessee has shown purchases from the following parties,
which was declared as hawala dealers by the Sale Tax Department,
Government of Maharashtra.
Name of the parties Bill amount (Rs.) 1 BHAGYALAXMI STEEL INDUSTRIES 40,11,354/- 2 VIJAY TRADING COMPANY 1,19,55,048/- TOTAL 1,59,66,402/-
The assessee was asked to substantiate the purchases and issued
show-cause notice as to why the aforesaid transaction should not be
treated as non-genuine. The assessee was asked to produce the
parties for verification. The assessee expressed his inability to
produce the parties. The assessee filed its explanation and
furnished the copy of ledger account and proof of payment through
cheques. The Assessing Officer not accepted the explanation
furnished by assessee and noted that the assessee has not produced
Lorry Receipt, Transportation Details etc. The Assessing Officer
after considering the material available before him and the
submission made by assessee concluded that the assessee was in
possession of goods and has shown the sale against the purchases.
The sale is not possible without purchases. The Assessing Officer
4 ITA 6129/Mum/2018 Bharat Jeevraj Jain
on his above said observation disallowed 12.5% of the aggregate of
total of non-genuine/alleged hawala purchases in assessment order
dated 16.11.2016 passed under section 143(3) r.w.s 147.
On appeal before the ld. CIT(A), the action of Assessing Officer
was sustained. Further, aggrieved by the order of ld. CIT(A), the
assessee has filed the present appeal before us.
We have heard the submission of ld. Authorized Representative
(AR) of the assessee and ld. Departmental Representative (DR) for
the revenue and perused the material available on record. The ld.
AR of the assessee submits that the assessee furnished complete
details of purchases and the sales made against the alleged bogus
purchases. The Assessing Officer has rejected the books of account
without mentioning specific reasons. The Assessing Officer made
the disallowance of 12.5% of the alleged bogus purchases. The ld.
AR of the assessee further submits that assessee has already shown
Gross Profit (GP) at 2.90%. The addition sustained on account of
alleged bogus purchases is on higher side. The ld. AR of the
assessee further submits that after addition sustained by ld. CIT(A),
the GP of assessee would rise substantially which is not possible in
the business of assessee.
5 ITA 6129/Mum/2018 Bharat Jeevraj Jain
The ld. AR of the assessee further submits that the Hon’ble Bombay
High Court in a recent decision on similar set of fact in PCIT vs. M
Haji Adam & Co. in ITA No. 1004 of 2016 dated 11.02.2019 held
that addition in respect of bogus purchases is to be limited to the
extent of bringing the GP rate on such purchase at the same rate as
on other genuine purchases. The ld. AR of the assessee submits that
the disallowance of alleged bogus purchase may be restricted in
accordance with the decision of Hon’ble jurisdictional High Court
in PCIT vs. M Haji Adam & Co. (supra).
On the other hand, the ld. Departmental Representative (DR) for the
revenue supported the order of lower authorities. The ld. DR further
submits that Investigation Wing of Income-tax Department has
made full-fledged investigation in respect of hawala traders. The
hawala traders were/are engaged in providing bogus bill without
actual delivery of goods. The assessee has shown bogus purchases
only to inflate the profit. The ld. DR for the revenue submits that
the Assessing Officer has given sufficient relief. The Assessing
Officer has reasonably estimated the disallowances. The assessee is
not entitled for any further relief.
6 ITA 6129/Mum/2018 Bharat Jeevraj Jain
We have considered the submissions of both the representatives and
perused the record. A short issue for our adjudication is whether the
disallowance of alleged bogus purchase @ 12.5% is reasonable or
not. The ld. AR of the assessee has vehemently relied upon the
decision of Hon’ble jurisdictional High Court in M Haji Adam &
Co.(supra). We have noted that on similar set of fact, the Hon’ble
Bombay High Court in PCIT vs. M Haji Adam & Co. (supra) held
that addition in respect of bogus purchase be limited to the extent of
bringing the GP rate on bogus purchase at the same rate as other
genuine purchases. We have further noted that the assessee has
shown GP of 2.9%. It was argued that the GP percentage after
addition would be substantially on higher side. Therefore,
considering the fact of the present case and the nature of business
activities of the assessee and by following the decision of Hon’ble
Bombay High Court, we direct the Assessing Officer to restrict the
addition with regard to bogus purchases by brining the GP rate on
such purchases at the same rate as that of other genuine purchases.
Needles to say that before making addition, the Assessing Officer
shall grant opportunity to the assessee before passing the order in
accordance with law.
7 ITA 6129/Mum/2018 Bharat Jeevraj Jain
In the result, appeal of the assessee is partly allowed.
Order pronounced in the open court on 14 -10-2019.
Sd/- Sd/- (Shamim Yahya) (Pawan Singh) ACCOUNTANT MEMBER JUDICIALMEMBER Mumbai, Dt : 14th October, 2019 Pk/- Copy to : 1. Appellant 2. Respondent 3. CIT(A) 4. CIT 5. DR /True copy/ By order
Asstt. Registrar, ITAT, Mumbai