SHRI SAMIR H PADIA,MUMBAI vs. ITO 30(3)(2), MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “SMC”, MUMBAI Before Shri Shamim Yahya (AM) & Shri Pawan Singh (JM) ITA No. 4909/Mum/2018(Assessment year : 2010-11) ITO 30(3)(2), C-13, , 6th Shri Samir H Padia Vs 2A/83A, Sharda Estate Floor, Pratyaksh Kar Vazira Naka, L.T. Road, Bhawan , Road No. 610, Borivali (W), BKC Bandra, (E), Mumbai-400 092 Mumbai -400051 PAN : AGPPP8362F APPELLANT RESPONDEDNT

Appellant by None Respondent by Shri Akhtar H Ansari Sr DR Date of hearing 19-11-2019 Date of pronouncement 04-12-2019

O R D E R Per Pawan Singh, JM : 1. This appeal filed by the assessee is directed against the order of

CIT(A)-41, Mumbai dated 09-05-2018 for the assessment year

2010-11. The assessee has raised the following grounds of appeal:-

“(1) That the appellant under his bonafide belief is of the opinion that the proceeding initiated was without issue of requisite notice or recording the reasons u/s. 148(2) of the Act, Id. CIT(A) ought to have verified jurisdiction of the AO to assess the income u/s.!47,before confirming the order of the AO. (2) That the reopening invoked u/s. 147 is contrary to the law as merely on hear say version of authorities under the provisions of different Act and violation of the provision made there under which could create case of suspicion only. There is no application of mind to the information received by the AO to accord the jurisdiction to invoke this proceeding and therefore, the proceeding may be held as bad in law as being void ab initio.

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(3) Without prejudice to the aforesaid, on merit, Id. AO is erred to invoke S.69C of the Act particularly when the payments having made from the regular books/bank account of the business, source of expenditure payment u/s.69C is deemed to have explained and hence, the addition made is contrary to the fiction laid therein.”

proprietor of M/s Jyoti Traders, engaged in the business of

manufacturing and reselling of medical and surgical products, cloth,

sheets, etc. The return of income was filed on 30-09-2010 declaring

total income at Rs.5,57,428/- which was processed u/s 143(1) of the

I.T. Act, 1961. The assessment was re-opened under section 147 on

the basis of information received from Sale Tax Department,

Government of Maharashtra informing that certain hawala operators

were 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 beneficiaries. The assessee allegedly

made the purchases of Rs.9,09,988/- 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 19-03-

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2014 was issued to the assessee. Subsequently, the assessing officer

issued notice u/s 143(2) on 02-07-2015 fixing appointment on 21-07-

2015; however, there was no compliance from the assessee. The

Assessing Officer thereafter issued a notice u/s 142(1) along with a

questionnaire. During the assessment, the Assessing Officer noted

that the assessee has shown purchases from the following parties, who

were declared as hawala dealers by the Sale Tax Department,

Government of Maharashtra:

Name of the parties Bill amount (Rs.) 1 Tara Enterprises 4,16,000 2 Pratik Trading Company 4,93,988 Total Amount 9,09,988 3. In order to ascertain the genuineness of purchases, the AO issued

notices u/s 133(6) to both the parties calling upon for quantitative

details of sales, copy of ledger account of assessee reflecting the

sales, copy of bank statement highlighting the entry pertaining to

the transaction with the assessee. The notices sent by the AO were

returned by the postal authorities with the remark, “unclaimed”. The

assessing officer issued show cause notice to the assessee to prove

the purchases and to file the documentary evidences of Stock

Register, Lorry receipt, Evidence of consumption of material etc.

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The AO noted that the assessee failed to furnish necessary evidence

to substantiate the purchases. The AO further recorded that during

the assessment, the assessee was asked to segregate the trading and

manufacturing component from the purchases and also to co-relate

the material purchased for manufacturing and sales. The AO

recorded that assessee was given sufficient time but assessee failed

to produce such details. The AO, in absence of any explanation,

treated the entire purchases as unexplained expenditure and made

addition of 100% of the alleged bogus purchases. On appeal before

CIT(A), the action of assessing officer was upheld. Further

aggrieved by the order of Ld.CIT(A), the assessee has filed the

present appeal before us. 4. None appeared on behalf of assessee, despite service of notice of

hearing through ‘RPAD’, copy of acknowledgement due card (AD)

is placed on record. Therefore, we are left with no option except to

hear the submission of learned departmental representative (ld. DR)

for the revenue and to decide the appeal on the basis of material

available on record. 5. We have heard the submissions of the learned departmental

representative DR for the revenue and perused the record. The Ld.

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DR for the revenue submits that during the assessment assessee

failed to furnish necessary evidence and segregate and co-relate the

purchases with its manufacturing and trading activities. Before the

Ld .CIT(A), the assessee again failed to furnish any evidence. The

assessee is not entitled for any relief. On the issue of reopening, the

Ld. DR for the revenue submits that the AO has sufficient

information for making his belief to reopen the assessment. The

assessment was reopened on the basis of credible information

received from DGIT (Inv), Mumbai that certain parties were

indulging in providing bogus bill without actual delivery of goods.

The assessee was one of the beneficiaries from the parties shown in

the list of hawala dealers, copy of which was forwarded to the AO.

Thus, the AO reopened the assessment on the basis of credible

information.

and perused the material available on record. Grounds 1& 2 relate

to reopening and recording of reasons. We have noted that the AO

in para 2 of the assessment order has recorded that case was

reopened on the basis of information received from office of

DGIT(Inv), Mumbai about the assessee being involved in taking

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accommodation entry from hawala traders. On the basis of such

information, the AO identified that the assessee has shown

purchases from two parties, who were indulging in providing

accommodation entries. Names of those two parties were

forwarded to the AO. In our considered view, the AO was having

sufficient credible information to make his belief for reopening.

The Hon’ble Gujarat High Court in Peass Industrial Engineers (P)

Ltd (2016) 76 taxmann.com 106 (Gujarat) held that where Assessing

Authority had tangible material in form of specific information received by Investigation Wing that assessee had been beneficiary of bogus transactions, it was thoroughly justified in issuing notice for

reassessment. Therefore, considering the decision of Hon’ble

Gujarat High Court in Peass Industrial Engineers (P) Ltd (supra)

we do not find any merit in the ground of appeal raised by the

assessee. In the result, grounds 1 & 2 are dismissed. 7. Ground 3 relates to making addition u/s 69C on account of

unexplained expenditure. We have noted that during the assessment

the assessee was asked to furnish the evidence relating to stock

register, lorry receipt along with challan copy, and evidence for

utilisation of materials, mode of payment for purchase and bank

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statement. The AO recorded that the assessee failed to produce any

evidence. The AO disallowed the entire purchases of Rs.9,09,988/-

and added to the income of assessee as unexplained expenditure.

We have noted that the AO has not rejected the books of account of

the assessee. The sale of assessee is also not disputed by the AO.

The sale of assessee is also not disputed by the AO. The assessee is

engaged in the business of manufacturing and resale of medical and

surgical products, cloth and sheets. The AO has not mentioned the

turnover of the assessee. The assessee has declared income of

Rs.5.57 lakhs from its business activity. In our view, the entire

purchases, in absence of bringing any material on record that

assessee has shown any other purchases in its manufacturing and

trading activity, the 100% of disallowance is not justified. We are

of the further view that under the income-tax, only real income can

be taxed by the revenue, even if the entire transaction is not

verifiable, the amount taxable is the taxable income component and

not the entire transaction. After considering the facts of the present

case and the submission of Ld. DR for the revenue, we are of the

view that in order to fulfil the gap of revenue leakage, disallowance

of a reasonable percentage of the alleged bogus purchases would

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meet the ends of justice. Therefore, in our view, if disallowance is

restricted to 12.5% of the impugned bogus purchases that would

meet the ends of justice. Similar view was taken by Hon’ble

Bombay High Court in C IT vs Hari Ram Bambani in ITA No.313

of 2013 decided on 04-02-2015 wherein it was held that revenue is

not entitled to bring the entire sale consideration to tax but only the

profit attributable on such unrecorded sale consideration. 8. In the result, appeal of the assessee is partly allowed.

Order pronounced in the open court on 04-12-2019.

Sd/- Sd/-

(Shamim Yahya) (Pawan Singh) ACCOUNTANT MEMBER JUDICIALMEMBER Mumbai, Dt : 4th December, 2019 Pk/- Copy to : 1. Appellant 2. Respondent 3. CIT(A) 4. CIT 5. DR /True copy/ By order

Asstt. Registrar, ITAT, Mumbai