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Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
Before: SHRI SAKTIJIT DEY, JM & SHRI MANOJ KUMAR AGGARWAL, AM
आदेश / O R D E R
Per Bench
Aforesaid appeals by assessee for Assessment Years [AY] 2007- 08 to 2010-11 contest common order of Ld. Commissioner of Income- Tax (Appeals)-42 [CIT(A)], Mumbai, Appeal No.CIT(A)-42/IT-83 to 86/15- 16 dated 30/11/2017. The common grievance of assessee, in all the appeals, is addition on account of certain alleged bogus purchases. The to 1375/Mum/2018 Rajendra Kumar Biyani Assessment Years-2007-08 to 2010-11 assessee has also contested the reassessment proceedings on legal grounds. First, we take up appeal for 2007-08.
ITA 1372/Mum/2018 for AY 2007-08 2.1 The assessee, being resident individual, engaged in manufacturing of corrugated board / boxes and labour work under proprietorship concern namely Tirupati Packaging was subjected to reassessment proceedings for the impugned AY vide order dated 27/02/2015 wherein the income of the assessee was assessed at Rs.7.30 Lacs after sole addition of Rs.4.92 Lacs on account of certain alleged bogus purchases. The income was initially assessed u/s 143(3) on 22/09/2009 at Rs.2.38 Lacs. 2.2 The assessee was subjected to reassessment proceedings for impugned AY pursuant to receipt of certain information from DGIT (Investigation) / Sales Tax Department, Maharashtra regarding dealers being indulging in bogus purchase bills without carrying out any actual business. Pursuant to the said information, it was found that the assessee made certain purchases aggregating to Rs.28,96,162/- from an entity namely Arun Paper & Iron Traders. Consequently, notice u/s 148 dated 28/02/2014 was issued to the assessee which was followed by statutory notices u/s 143(2) & 142(1). The assessee reflected Gross Profit [GP] Rate of 16.48% on turnover of Rs.91.99 Lacs. It was found that although the assessee maintained regular books of accounts, but it was not maintaining adequate stock records. 2.3 The supplier, in response to notice u/s 133(6), filed ledger extract and bank statements. The summons u/s 131 were issued to Arun ITA Nos.1372 to 1375/Mum/2018 Rajendra Kumar Biyani Assessment Years-2007-08 to 2010-11 Agarwal, the proprietor of the aforesaid firm and his statement was recorded on 19/02/2015 wherein the said party admitted to have made bogus purchases from certain parties. It was also found out that the aforesaid party was not maintaining any stock record or transportation bill etc. to demonstrate movement of goods. 2.4 The assessee, vide letter dated 26/02/2015 defended the purchases made by him. However, not convinced, Ld. AO, on the basis of GP rate already declared by the assessee, estimated addition against the same @17% which resulted into impugned additions of Rs.4.92 Lacs in the hands of the assessee.
Aggrieved, the assessee contested the same on legal grounds as well as on merits without any success before Ld. CIT(A) vide impugned order dated 30/11/2017 wherein the Ld. first appellate authority, after due consideration of factual matrix, confirmed the stand of Ld. AO. Aggrieved the assessee is in further appeal before us.
The Ld. Auhtorized Representative for Assessee [AR], Shri Rushabh Mehta, on the strength of various judicial pronouncements, contested the proceeding on legal grounds as well as on merits which have been controverted by Ld. Departmental Representative, Shri Ram Tiwari.
We have carefully heard the rival contentions and perused the relevant material on record. So far as the legal grounds raised before us are concerned, we find that subsequent to completion of assessment proceedings, some tangible material in the shape of certain information from investigation wing / sales tax authorities came into the possession of Ld. AO so as to trigger the reassessment proceedings. The Ld. AR to 1375/Mum/2018 Rajendra Kumar Biyani Assessment Years-2007-08 to 2010-11 has placed reliance on certain information as obtained from Sales Tax Department to controvert the fact that the aforesaid party was a bogus dealer at the relevant point of time and therefore, the information as received by Ld. AO was not correct. It was further submitted that there was no independent application of mind by Ld. AO before acquiring valid reassessment jurisdiction which has vitiated the assessment proceedings. We have carefully perused the same. The relevant extract of reasons for reopening as placed on page number-25 of the paper- book reads as under:-
Name of the assessee: RAJENDRA KUMAR BIYANI PAN: AABPB1591L A.Y.: 2007-08 Reason for Reopening Return of income for A.Y. 2007-08 was filed by the assessee on 31.10.2007 declaring total income of Rs.2,08,079/- Subsequently, it is informed by the office of the Director General of Income Tax (Inv), Mumbai vide letter No. Corr. Field/DGIT(Inv)2013-14, dated 26/12/2013, that the assessee is one of the beneficiaries of billers (hawala operators) and had purchased goods/material from the following parties in the F.Y. 2006-07 relevant to A.Y. 2007-08 amounting to Rs.28,96,162/-. These parties are in the list of suspicious dealers published by the Sales Tax Department, Govt. Of Maharastra. Arun Paper & Iron Traders ADKPA5263C 28,96,162 In view of the above, I have reason to believe that income to the extent of Rs.28,96,162/- has escaped assessment within the meaning of provisions of section 147 of the I.T. Act and accordingly the case is reopened by issue of notice u/s 148 of the Act, so as to reassess the assessee’s correct income for the A.Y.2009-10 A perusal of the above do not convince us with the submissions made by Ld. AR. We find that Ld. AO was in receipt of concrete tangible information from DGIT (investigation) vide letter No. Corr.Field/DGIT(inv.)/2013-14 dated 26/12/2013 with respect to the to 1375/Mum/2018 Rajendra Kumar Biyani Assessment Years-2007-08 to 2010-11 assessee which, prima facie, suggest possible escapement of income. Nothing more was required at this stage so as to acquire valid reassessment jurisdiction under law. At this stage, only a prima facie opinion was required to be formed on the basis of independent application of mind which suggested escapement of income and the same has rightly been done by Ld. AO. The information, so obtained, may not be conclusively accurate or sufficient but the same must point out to possible escapement of income only. Therefore, the legal grounds as raised before us stand dismissed.
So far as the merits are concerned, we are of the considered opinion that the assessee was engaged in manufacturing activities, which could not be carried out without consumption of actual material. The turnover achieved by the assessee has not been disputed by the revenue and the payments were through banking channels. The assessee was in possession of primary purchase documents. However, at the same time, as noted by Ld. first appellate authority, the delivery of material was under doubt since the documents did not bear any transportation details etc. and secondly, the assessee was not maintaining adequate stock records regarding consumption of material. The assessee has also placed on record assessment orders of Arun Agarwal (alleged bogus supplier) to contend that the sale reflected by the aforesaid party has been accepted by the revenue and therefore the assessee’s purchases are also genuine. However, a perusal of the order for AY 2007-08 reveal that the aforesaid party, in turn, made huge alleged bogus purchases of more than Rs.10.09 crores to 1375/Mum/2018 Rajendra Kumar Biyani Assessment Years-2007-08 to 2010-11 from two entities and suffered estimated additions in the similar manner. Same methodology has been adopted by the revenue while completing the assessment under question. Therefore, we find no force the argument as raised by Ld. AR. The Ld. AR, while pleading for deletion of impugned additions, has placed reliance on certain judicial pronouncements. We find the matter to be factual one and find that the decision in each case has been rendered keeping in view the peculiar facts and circumstances of each case which is evident from the fact that there are numerous decisions favoring both the sides and therefore, could not be followed without considering the factual matrix of each case.
Keeping in mind the above stated facts, we are of the opinion that in the given situation, the addition, which could be made, was to account for profit element embedded in these purchase transactions to factorize for profit element earned by assessee against possible purchase of material in the grey market and undue benefit of VAT against alleged bogus purchases, which lower authorities have rightly done. However, considering GP rate already declared by the assessee, we find that the estimation of 17% is on the higher side and therefore, we restrict the same to 5% of alleged bogus purchases. The same comes to Rs.1,44,808/-. The order of Ld. first appellate authority stand modified to that extent. This ground as well as the appeal stand partly allowed.
ITA 1373 to 1375 /Mum/2018 for AY 2008-09 to 2010-11 to 1375/Mum/2018 Rajendra Kumar Biyani Assessment Years-2007-08 to 2010-11 8. In AY 2008-09, the assessee has been saddled with similar additions of Rs.7.88 Lacs against aggregate purchases of Rs.46,38,596/- stated to be made from the same supplier. Factual matrix being the same, we restrict the impugned additions to 5% which comes to Rs.2,31,930/-. The appeal stands partly allowed.
In AY 2009-10, the assessee has been saddled with similar additions of Rs.8.55 Lacs against aggregate purchases of Rs.50,31,452/- stated to be made from the two suppliers. Factual matrix being the same, we restrict the impugned additions to 5% which comes to Rs.2,51,572/-. The appeal stands partly allowed.
In AY 2010-11, the assessee has been saddled with similar additions of Rs.6.42 Lacs against aggregate purchases of Rs.37,80,956/- stated to be made from the four suppliers. Factual matrix being the same, we restrict the impugned additions to 5% which comes to Rs.1,89,048/-. The appeal stands partly allowed.