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Income Tax Appellate Tribunal, MUMBAI BENCH “SMC”, MUMBAI
Before: Shri Pawan Singh (JM) & Shri G Manjunatha (AM) Shri Panish P Mehta vs
Appellant by None Respondent by Shri Akhtar H Ansari Date of hearing 26-09-2019 Date of pronouncement 01-10-2019 O R D E R
Per Pawan Singh, JM :
This appeal filed by the assessee is directed against the order of CIT(A)- 30, Mumbai dated 31-05-2018 for AY 2009-10. The assessee has raised the following grounds of appeal:- “GROUND OF APPEAL l.THE ORDER PASSED BY THE LEARNED COMMISSIONERS APPEAL SHOULD BE SET ASIDE IN TOTO. THE LEARNED COMMISSIONER APPEAL NOT CONSIDERED THE FACTS OF THE CASES AND CASES DECIDED BY THE VARIOUS BENCHES OF 1TAT FOR NON GENUINE PURCHASES DECIDED BY THE VAT DEPARTMENT, 2.THE CIT (A) DISMISSED THE CASE WITHOUT GOING THROUGH THE FACTS OF THE CASES HENCE SHOULD BE SET ASIDE AND THE ARBITRARY INCOME OF RS. 10939Q2/- WHICH IS NOT CORRECT AND SHOULD BE SET ASIDE, THE LEARNED AO ADDED THE ARBITRARY INCOME OF RS. 1093902/- WHICH IS NOT CORRECT AND SHOULD BE SET ASIDE IN TOTO ABIN1TIO. ON ACCOUNT OF NON GENEUINE PURCHASE AS STATED BY VAT DEPARTMENT. 3.THE LEARNED AO ARRIVED THE FIGURE OF 12.50% FROM THE CASE LAW MENTION. IN FACT OF THE CASE WHICH IS NOT RELEVENT TO US WE ARE TRADERS AND RUNNING BUSINESS ON VERY THIN MARGIN. WE HAVE THE GROSS PROFIT IN THE COMPANY 7.12% ONLY. HENCE THE ADDITION OF AMOUNT SHOULD BE SETB ASIDE IN TOTO.”
The brief facts of the case are that assessee is engaged in the business of trading ferrous and non ferrous metals, filed his return of income for AY 2009-
2 ITA 5274/Mum/2008 10 on 21-09-2009 declaring income of Rs.64,66,688. Initially the return was processed u/s 143(1). Thereafter, the case was reopened on the basis of information received from DGIT(Inv) wherein it was informed that sales-tax department, Maharashtra has identified certain dealers, who were indulging in providing accommodation entries in the form of bogus bills without supply of any goods. A list of beneficiaries was also forwarded by the DGIT(Inv). The assessee was one of the beneficiaries of such bogus bills. The AO reopened the assessment u/s 147. Notice u/s 148 dated 10-02-2014 was issued and served upon the assessee. In response to the notice u/s 148, the assessee filed his response and stated that the return filed originally may be treated as return filed in response to notice u/s 148. Reasons for reopening was provided to the assessee. The AO proceeded for re-assessment. During the re-assessment, the assessing officer noted that assessee has shown purchases from the following 10 parties:-
Sr.No Name of Hawala party Amount 1 R J Mehta Metal Industries 10,78,100 2 Manav Impex 10,08,000 3 Stelco Steel Industries 5,42,276 4 Shubh Labh Metal and Alloys / Bright 9,24,281 Enterprise 5 Rolex Trading Company 19,62,744 6 Coral Trading Co 6,85,270 7 Dhanera Metal Corporation 2,85,270 8 Manish Industrial Corporation 19,90,297 9 Asian Metal Industries 1,21,654 10 Prime Steel Impex 1,52,741 Total 87,51,217
3 ITA 5274/Mum/2008 In order to verify the genuineness of purchases, the AO issued notice u/s 133(6) to all the parties, through registered post at the address provided by the assessee. Notices could not be served on all the parties and were returned back by the postal authorities with the remark, “not known”/ “no such address”/ “left”. The assessee was given opportunity to establish the genuineness of purchases by furnishing supporting evidences and to produce the parties. The assessee failed to produce the parties. However, the assessee furnished copy of ledger account, purchase bills, bank statement showing that payments were made through banking channel. Thereafter, the assessing officer asked the assessee to furnish the details of invoices, bills, ledger account and transportation of goods / lorry receipts. The assessee filed the quantitative details of purchases and corresponding sales. After examining the evidences furnished by assessee, the AO rejected the books of account of the assessee.
The AO, by making reliance on the decision of Gujarat High Court in case of CIT vs Simit P Sheth of 2012 order dated16-01-2013 and CIT vs Bholanath Poly Fab (P) Ltd 355 ITR 290 (Guj) took the view that only profit element embedded in such purchases is to be taken from the said purchases shown by the hawala / nonexistent parties. The assessee has obtained accommodation entries of Rs.87.51 lakhs. Therefore, the AO, considering the margin of profit on such purchases disallowed 12.5% of the aggregate of 4 ITA 5274/Mum/2008 purchases which came to Rs.10,93,902. On appeal before CIT(A), the action of AO in making addition of 12.5% of the total alleged bogus purchases was confirmed. Thus, further aggrieved by the order of CIT(A), the assessee has filed present appeal before us.
None appeared on behalf of assessee despite the service of notice through registered post. Perusal of record shows that notice has been duly received on behalf of assessee as the acknowledgement of service of notice is available on record. Considering the fact that neither the assessee nor his representative has come forward to explain the fact, therefore, we are left with no option except to hear the Ld.DR for the revenue and to decide the appeal on the basis of material on record. The Ld.DR submits that Investigation Wing of Income-tax department made a fullfledged enquiry. The parties from whom the assessee has shown purchases are bogus hawala dealers. The hawala dealers were indulging in showing bogus bills without delivery of any material or goods.
The assessee obtained accommodation bills in order to inflate the expenses to bring down the profit in order to avoid the payment of genuine tax. The lower authorities have already given substantial relief to the assessee.
We considered the submissions of the ld DR for the revenue and gone through the order of the lower authorities. We have also deliberated on the case law relied by the lower authorities. Perusal of records reveals that the assessee has not challenged the validity of re-opening before the Ld.CIT(A) hence, the 5 ITA 5274/Mum/2008 issue of reopening attained finality. Moreover, the assessee has only challenged the quantum of addition made by the AO. We have further noted that on the basis of information and examining the list of beneficiaries, the AO identified that assessee has shown purchases from 10 parties mentioned above.
In order to verify the genuineness of purchases, the AO issued notices to the parties. However, none of the parties could be served with the notice and the notices were returned with the remark, “not known”/ “no such address”/ “left”, by the postal authorities. The assessee was also given opportunity to produce all the parties for verification. The assessee failed to produce the party.
However, the assessee filed ledger account copy, purchase bills and bank statement. The AO further asked the assessee to prove the transportation and delivery of goods. The assessee failed to prove the delivery of goods by showing documentary evidence about the transportation of goods. The AO after considering the facts took the view that only profit element embedded in such purchases should be disallowed. The AO disallowed 12.5% of the purchases shown from all the parties. The Ld. CIT(A) affirmed the action of AO holding that there is no proof of delivery of purchases. No such evidence is filed either before AO or before Ld. CIT(A). Before us, neither the assessee has filed any documentary evidence to show gross profit earned during the year nor prove the delivery of goods or any written submission explaining the receipt of goods by the assessee. We have noted that AO rejected the books of 6 ITA 5274/Mum/2008 account and fairly estimated the profit earned on such impugned purchases.
Therefore, we do not find any merit in the grounds of appeal raised by the assessee.
In the result, appeal of the assessee is dismissed.
Order pronounced in the open court on 01-10-2019.