SHRI DILIP KUMAR SUMERMAL KANUNGO, MUMBAI v. ITO 19(1)(4), MUMBAI

ITA 5194/MUM/2019 | 2009-2010
Pronouncement Date: 16-03-2021 | Result: Partly Allowed

Appeal Details

RSA Number 519419914 RSA 2019
Assessee PAN AADPK9350N
Bench Mumbai
Appeal Number ITA 5194/MUM/2019
Duration Of Justice 1 year(s) 7 month(s) 8 day(s)
Appellant SHRI DILIP KUMAR SUMERMAL KANUNGO, MUMBAI
Respondent ITO 19(1)(4), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 16-03-2021
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted SMC
Tribunal Order Date 16-03-2021
Last Hearing Date 04-03-2021
First Hearing Date 04-03-2021
Assessment Year 2009-2010
Appeal Filed On 07-08-2019
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH SMC MUMBAI BEFORE SHRI VIKAS AWASTHY (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 5194/MUM/2019 ASSESSMENT YEAR: 2009-10 & ITA NO. 5195/MUM/2019 ASSESSMENT YEAR: 2011-12 SHRI DILIP KUMAR SUMERMAL KANUNGO C/O D.C. BOTHRA & CO. (CA) (FORMERLY KNOWN AS D.C. BOTHRA& CO.) 297 TARDEO ROAD WILLE MANSION 1 ST FLOOR OPP. BANK OF INDIA NANA CHOWK MUMBAI - 400 007. VS. ITO 19(1)(4) 2 ND FLOOR MATRU MANDIR TARDEO ROAD MUMBAI- 400 007. PAN NO. AADPK 9350 N APPELLANT RESPONDENT ASSESSEE BY : MR. RAJ KUMAR SINGH AR REVENUE BY : MR. SANJAY J. SETHI DR DATE OF HEARING : 04/03/2021 DATE OF PRONOUNCEMENT : 16/03/2021 ORDER PER N.K. PRADHAN A.M. THE CAPTIONED APPEALS FILED BY THE ASSESSEE ARE DIR ECTED AGAINST THE ORDER OF THE ORDER OF THE COMMISSIONER OF INCOME TAX (APP EALS)-5 MUMBAI [IN SHORT CIT(A)] AND ARISE OUT OF THE ASSESSMENT COM PLETED U/S 143(3) R.W.S. 147 OF THE INCOME TAX ACT 1961 (THE ACT). FOR TH E SAKE OF CONVENIENCE AS SHRI DILIP KUMAR SUMERMAL ITA NO. 5194 & 5195/M/2019 2 COMMON ISSUES ARE INVOLVED WE ARE PROCEEDING TO DI SPOSE OFF THESE APPEALS BY A CONSOLIDATED ORDER. FACTS BEING IDENTICAL WE BEGIN WITH THE AY 2009-10. 2. THE GROUND OF APPEAL FILED BY THE ASSESSEE READS AS UNDER: THAT THE ID. C.I.T (APPEALS) HAS ERRED IN CONFIRMI NG THE AD-HOC DISALLOWANCE MADE BY THE A.O. AT RS.15 51 341/- BEING 12.5% OF TRADING P URCHASES OF RS.1 24 10 733/- FROM THE ALLEGED HAWALA PARTIES TREATING THE SAME AS NO N-GENUINE MERELY ON THE BASIS OF INFORMATION RECEIVED FROM SALES TAX DEPARTMENT OF G OVERNMENT OF MAHARASHTRA WITHOUT BRINGING ANY CONTRARY EVIDENCE ON RECORD OR DOING ANY OWN WORTHWHILE INDEPENDENT INVESTIGATION AND ALSO WITHOUT PROPERLY APPRECIATING THE FACTS OF THE CASE AND LAW AND ALSO VARIOUS DOCUMENTARY EVIDENCES AND DETAILS FURNISHED AND ALSO COGENT EXPLANATION OFFERED ON RECORD. BEING THE ALL EGED DISALLOWANCE MADE BY A.O. & CONFIRMED BY ID. C.I.T. (APPEALS) WRONG ON FACTS AN D BAD IN LAW THEREFORE SAME MAY KINDLY BE DELETED. 3. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT T HE ASSESSEE FILED HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR (AY) 2009-10 ON 30.0 3.2010 DECLARING TOTAL INCOME OF RS.4 49 838/-. HERE THE ASSESSEE IS A RES ELLER OF FERROUS AND NON- FERROUS METALS. THE ASSESSING OFFICER (AO) COMPLETE D THE ASSESSMENT U/S 143(3) ON 30.12.2011 DETERMINING THE INCOME AT RS.4 75 249/-. ON RECEIPT OF INFORMATION FROM THE SALES TAX DEPARTMENT GOVERNME NT OF MAHARASHTRA THAT THE ASSESSEE HAD OBTAINED BOGUS PURCHASE BILLS AMOU NTING TO RS.1 24 10 733/- FROM 8 PARTIES THE AO ISSUED NOTICE U/S 148 FOR RE OPENING THE ASSESSMENT. DURING THE COURSE OF RE-ASSESSMENT PROCEEDINGS THE AO ISSUED NOTICE U/S 133(6) TO THE SAID PARTIES TO VERIFY THE GENUINENES S OF THE PURCHASES. HOWEVER THOSE NOTICES WERE RETURNED UN-SERVED BY THE POSTAL AUTHORITIES WITH THE REMARK LEFT NOT TRACEABLE NOT KNOWN ETC. TH EREAFTER THE AO ASKED THE ASSESSEE TO PRODUCE THOSE PARTIES FOR EXAMINATION. HOWEVER THE ASSESSEE SHRI DILIP KUMAR SUMERMAL ITA NO. 5194 & 5195/M/2019 3 FAILED TO DO SO. HAVING EXAMINED THE DETAILS FILED BY THE ASSESSEE THE AO NOTED THAT THE ASSESSEE COULD NOT FILE IMPORTANT DOCUMENT S SUCH AS DELIVERY CHALLANS TRANSPORT RECEIPTS GOODS-INWARD REGISTER MAINTAINE D IN THE GODOWN. CONSIDERING THE ABOVE FACTS THE AO ESTIMATED THE P ROFIT @ 12.5% OF THE DISPUTED PURCHASES OF RS.1 24 10 733/- AND ACCORDIN GLY BROUGHT TO TAX RS.15 51 341/-. 4. IN APPEAL THE LD. CIT(A) VIDE ORDER DATED 27.05.2019 CONFIRMED THE ABOVE ADDITION MADE BY THE AO BY OBSERVING THAT : 8.4.8. FROM THE FACTS AVAILABLE ON RECORDS IT IS OBSERVED THAT IN THE PRESENT CASE ALSO THE AO HAS NEITHER DISBELIEVED THE PURCHASES NOR TH E CORRESPONDING SALES/WORKS MADE. THE AO HAS HELD THAT THE IMPUGNED PURCHASES W ERE NOT MADE FROM ABOVE REFERRED DEALERS/PARTIES BUT FROM SOMEWHERE ELSE/OP EN MARKET. THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE ARE SIMILAR TO TH AT OF FACTS ADJUDICATED BY THE HON'BLE GUJARAT HIGH COURT AND HON'BLE ITAT MUMBAI IN ABOVE REFERRED CASES. SINCE THE ACTION OF THE AO IS IN CONFORMITY WITH ABOVE R EFERRED DECISIONS NO FAULT CAN BE FOUND WITH THE ACTION OF THE AO IN DISALLOWING 12. 5% OF SUCH PURCHASES. HENCE THE IMPUGNED DISALLOWANCE OF RS.15 51 341/- IS CONFIRME D. 5. BEFORE US THE LD. COUNSEL FOR THE ASSESSEE SUBM ITS THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE JUDGMENT OF THE HON BLE BOMBAY HIGH COURT IN THE CASE OF PR. CIT V. MOHOMMAD HAJI ADAM & CO & ORS (2019) 104 CCH 0391 IS APPLICABLE AND THE LD. CIT(A) SHOULD HAVE FOLLOWED IT WHEN IT WAS CITED BEFORE HIM DURING THE COURSE OF APPEAL HEARING. ON THE OTHER HAND THE LD. DEPARTMENTAL REPRESENTA TIVE (DR) SUPPORTS THE ESTIMATION OF 12.5% DONE BY THE AO AND THEN CON FIRMED BY THE LD. CIT(A). FURTHER IT IS STATED BY HIM THAT CONSIDERING THE F ACTS OF THE PRESENT CASE THE LD. SHRI DILIP KUMAR SUMERMAL ITA NO. 5194 & 5195/M/2019 4 CIT(A) HAS RIGHTLY DISTINGUISHED THE DECISION IN MOHOMMAD HAJI ADAM & CO & ORS (SUPRA). 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIALS ON RECORD. THE LD. CIT(A) HAS DISTINGUISHED THE PRESENT CASE OF THE ASSESSEE FROM MOHOMMAD HAJI ADAM & CO & ORS (SUPRA) (HEREAFTER THAT CASE) ON THE GROUND THAT (I) IN THAT CASE THE ASSESSEE WAS A TRADER IN COTTON AND MAN-MADE FABRICS ON RETAILS AS WELL AS SEMI WHOLESALE BASIS AND MAIN LY DEALT IN SUITING AND SHIRTING MATERIALS WHEREAS IN THE PRESENT CASE TH E APPELLANT IS ENGAGED IN TRADING OF FERROUS AND NON-FERROUS METALS (II) IN THAT CASE IT IS OBSERVED THAT THOUGH DURING THE COURSE OF SURVEY OPERATIONS U/S 1 33A OF THE ACT BOGUS/HAWALA/SUSPICIOUS PARTIES CONCERNED THEREIN I N THEIR STATEMENT HAD ADMITTED THAT THEY ARE ENGAGED IN ISSUING BOGUS/HAW ALA BILLS BUT SUBSEQUENTLY ALL THE THREE PARTIES CONCERNED THERE IN HAD FILED AFFIDAVITS STATING THAT AS FAR AS ASSESSEE IS CONCERNED THEY HAD ACTUA LLY MADE SALES ; WHEREAS IN THE PRESENT CASE THE AO IN THE ASSESSMENT ORDER HA S GIVEN A FACTUAL FINDING THAT IN ORDER TO VERIFY THE GENUINENESS OF THE TRAN SACTION NOTICES U/S 133(6) WERE ISSUED TO THE SAID PARTIES AT THE ADDRESS PROV IDED BY THE ASSESSEE HOWEVER SAID NOTICES COULD NOT BE SERVED AND RETUR NED BACK UN-SERVED BY THE POSTAL AUTHORITIES WITH THE REMARKS LEFT NOT TR ACEABLE NOT KNOWN ETC. AND (III) IN THAT CASE THE BOMBAY HIGH COURT WHILE DIS MISSING ALL APPEALS HAS HELD THAT IN THESE CIRCUMSTANCES NO QUESTION OF LAW T HEREFORE ARISES; HENCE THE ORDER OF THE TRIBUNAL IN THE FACTS AND CIRCUMSTANC ES OF THAT CASE HAS BEEN CONFIRMED AND NO QUESTION OF LAW ARISES. SHRI DILIP KUMAR SUMERMAL ITA NO. 5194 & 5195/M/2019 5 6.1 AT THIS MOMENT LET US NARRATE AT LENGTH THE DE CISION IN MOHOMMAD HAJI ADAM & CO & ORS (SUPRA). IN THAT CASE DURING THE COURSE OF SURVEY OPERATIONS IN THE CASE OF ENTITIES FROM WHOM THE ASSESSEE HAD CLA IMED TO HAVE MADE PURCHASES THE DEPARTMENT COLLECTED INFORMATION SUG GESTING THAT SUCH PURCHASES WERE NOT GENUINE. THE AO NOTICED THAT THE ASSESSEE HAD SHOWN PURCHASES OF FABRICS WORTH RS.29.41 LAKHS FROM THRE E GROUP CONCERNS NAMELY M/S MANOJ MILLS M/S ASTHA SILK INDUSTRIES AND M/S SHRI RAM SALES AND SYNTHETICS. ON THE BASIS OF STATEMENT RECORDED DURI NG SUCH SURVEY OPERATIONS THE AO CONCLUDED THAT THE SELLING PARTIES WERE ENGA GED ONLY IN SUPPLYING THE BOGUS BILLS THAT THE GOODS IN QUESTION WERE NEVER SUPPLIED TO THE ASSESSEE AND THEREFORE THE PURCHASES WERE BOGUS. HE THEREFORE ADDED THE ENTIRE SUM IN THE HANDS OF THE ASSESSEE AS ITS ADDITIONAL INCOME. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A) WHO ACCEPTED THE FACTU M OF PURCHASES BEING BOGUS. HOWEVER HE COMPARED THE PURCHASES AND SALES STATEM ENTS OF THE ASSESSEE AND OBSERVED THAT THE DEPARTMENT HAD ACCEPTED THE SALE AND THEREFORE THERE WAS NO REASON TO REJECT THE PURCHASES BECAUSE WITHOUT PURCHASES THERE CANNOT BE SALES. HE THEREFORE HELD THAT UNDER THESE CIRCUMS TANCES THE AO WAS NOT CORRECT IN ADDING THE ENTIRE AMOUNT OF PURCHASES AS THE ASSESSEES INCOME. HE THEREFORE DELETED THE ADDITION REFRESHING IT TO 10 % OF THE PURCHASE AMOUNT. HE ALSO DIRECTED THE AO TO MAKE ADDITION TO THE EXTENT OF DIFFERENCE BETWEEN THE GROSS PROFIT RATE AS PER THE BOOKS OF ACCOUNTS ON U NDISPUTED PURCHASES AND GROSS PROFIT ON SALES RELATING TO THE PURCHASES MAD E FROM THE SAID THREE PARTIES. THE ASSESSEE CARRIED THE MATTER BEFORE THE TRIBUNAL . THE REVENUE ALSO CARRIED THE ISSUE BEFORE THE TRIBUNAL. THE TRIBUNAL ALLOWED THE APPEAL OF THE ASSESSEE PARTLY AND DISMISSED THAT OF THE REVENUE. THE TRIBU NAL NOTED THAT THE CIT(A) HAD NOT GIVEN ANY REASONS FOR RETAINING 10% OF THE PURCHASES BY WAY OF AD-HOC SHRI DILIP KUMAR SUMERMAL ITA NO. 5194 & 5195/M/2019 6 ADDITIONS. THE TRIBUNAL THEREFORE DELETED SUCH AD DITIONS BUT RETAINED THE PORTION OF THE ORDER OF THE CIT(A) TO THAT EXTENT H E PERMITTED THE AO TO TAX THE ASSESSEE ON THE BASIS OF DIFFERENCE IN THE GP RATES . IN FURTHER APPEAL BEFORE THE HONBLE BOMBAY HIGH COURT THE REVENUE REFERRED TO THE DECISION OF THE DIVISION BENCH OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF N.K. INDUSTRIES LTD. V. DCIT IN TAX APPEAL NO. 240 OF 2003 AND CONN ECTED APPEALS DECIDED ON 20.06.2016 AND ALSO POINTED OUT THAT THE SLP AGAINS T SUCH DECISION WAS DISMISSED BY THE HONBLE SUPREME COURT. THE HONBLE BOMBAY HIGH COURT HELD : 8. IN THE PRESENT CASE AS NOTED ABOVE THE ASSESS EE WAS A TRADER OF FABRICS. THE A.O. FOUND THREE ENTITIES WHO WERE INDULGING IN BOG US BILLING ACTIVITIES. A.O. FOUND THAT THE PURCHASES MADE BY THE ASSESSEE FROM THESE ENTITIES WERE BOGUS. THIS BEING A FINDING OF FACT WE HAVE PROCEEDED ON SUCH BASIS. D ESPITE THIS THE QUESTION ARISES WHETHER THE REVENUE IS CORRECT IN CONTENDING THAT T HE ENTIRE PURCHASE AMOUNT SHOULD BE ADDED BY WAY OF ASSESSEE'S ADDITIONAL INC OME OR THE ASSESSEE IS CORRECT IN CONTENDING THAT SUCH LOGIC CANNOT BE APPLIED. THE F INDING OF THE CIT(A) AND THE TRIBUNAL WOULD SUGGEST THAT THE DEPARTMENT HAD NOT DISPUTED THE ASSESSEE'S SALES. THERE WAS NO DISCREPANCY BETWEEN THE PURCHASES SHOW N BY THE ASSESSEE AND THE SALES DECLARED. THAT BEING THE POSITION THE TRIBUN AL WAS CORRECT IN COMING TO THE CONCLUSION THAT THE PURCHASES CANNOT BE REJECTED WI THOUT DISTURBING THE SALES IN CASE OF A TRADER. THE TRIBUNAL THEREFORE CORRECTLY RES TRICTED THE ADDITIONS LIMITED TO THE EXTENT OF BRINGING THE G.P. RATE ON PURCHASES AT TH E SAME RATE OF OTHER GENUINE PURCHASES. THE DECISION OF THE GUJARAT HIGH COURT I N THE CASE OF N.K. INDUSTRIES (SUPRA) CANNOT BE APPLIED WITHOUT REFERENCE TO THE FACTS. IN FACT IN PARAGRAPH 8 OF THE SAME JUDGMENT THE COURT HELD AND OBSERVED AS UNDER- SO FAR AS THE QUESTION REGARDING ADDITION OF RS.3 70 78 125/- AS GROSS PROFIT ON SALES OF RS.37.08 CRORES MADE BY THE ASSESSING O FFICER DESPITE THE FACT THAT THE SAID SALES HAD ADMITTEDLY BEEN RECORDED IN THE REGULAR BOOKS DURING SHRI DILIP KUMAR SUMERMAL ITA NO. 5194 & 5195/M/2019 7 FINANCIAL YEAR 1997-98 IS CONCERNED WE ARE OF THE VIEW THAT THE ASSESSEE CANNOT BE PUNISHED SINCE SALE PRICE IS ACCEPTED BY THE REVENUE. THEREFORE EVEN IF 6 % GROSS PROFIT IS TAKEN INTO ACCOUNT THE CORRESPONDING COST PRICE IS REQUIRED TO BE DEDUCTED AND TAX CANNOT BE LEVIED ON THE SAME PRICE. WE HAVE TO REDUCE THE SELLING PRICE ACCORDINGLY AS A RESULT OF WHICH PROFIT COMES TO 5.66 %. THEREFORE CONSIDERING 5.66 % OF RS.3 70 78 125/- WHICH COMES TO RS.20 98 621.88 WE THINK IT FIT TO DIRECT THE REVEN UE TO ADD RS.20 98 621.88 AS GROSS PROFIT AND MAKE NECESSARY DEDUCTIONS ACCOR DINGLY. ACCORDINGLY THE SAID QUESTION IS ANSWERED PARTIALLY IN FAVOUR OF TH E ASSESSEE AND PARTIALLY IN FAVOUR OF THE REVENUE. 6.2 IN MOHOMMAD HAJI ADAM & CO & ORS (SUPRA) TO PUT IT SIMPLY THE AO FOUND THREE ENTITIES WHO WERE INDULGING IN BOGUS BI LLING ACTIVITIES THE AO FOUND THAT THE PURCHASES MADE BY THE ASSESSEE FROM THESE ENTITIES WERE BOGUS. THE FINDING OF THE CIT(A) AND THE TRIBUNAL W OULD SUGGEST THAT THE DEPARTMENT HAD NOT DISPUTED THE ASSESSEE'S SALES. T HERE WAS NO DISCREPANCY BETWEEN THE PURCHASES SHOWN BY THE ASSESSEE AND THE SALES DECLARED. THAT BEING THE POSITION THE TRIBUNAL WAS CORRECT IN COM ING TO THE CONCLUSION THAT THE PURCHASES CANNOT BE REJECTED WITHOUT DISTURBING THE SALES IN CASE OF A TRADER. THE TRIBUNAL THEREFORE CORRECTLY RESTRICT ED THE ADDITIONS LIMITED TO THE EXTENT OF BRINGING THE GP RATE ON PURCHASES AT THE SAME RATE OF OTHER GENUINE PURCHASES. THE HONBLE BOMBAY HIGH COURT HE LD THAT NO PURCHASES CAN BE REJECTED WITHOUT DISTURBING THE SALES IN CAS E OF A TRADER THUS ADDITIONS LIMITED TO THE EXTENT OF BRINING THE GP RATE ON PUR CHASES AT THE SAME RATE OF OTHER GENUINE PURCHASES. WE FIND THAT THE FACTS IN THE INSTANT CASE ARE SIMI LAR TO THE ABOVE DECISION. FOLLOWING THE SAME WE SET ASIDE THE ORDE R OF THE LD. CIT(A) AND SHRI DILIP KUMAR SUMERMAL ITA NO. 5194 & 5195/M/2019 8 DIRECT THE AO TO RESTRICT THE ADDITIONS LIMITED TO THE EXTENT OF BRINGING THE G.P. RATE ON DISPUTED PURCHASES AT THE SAME RATE OF OTHE R GENUINE PURCHASES. FACTS BEING IDENTICAL OUR DECISION FOR THE AY 2009 -10 APPLIES MUTATIS MUTANDIS TO AY 2011-12. 7. IN THE RESULT THE APPEALS ARE ALLOWED FOR STATI STICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 16/03/2021. SD/- SD/- (VIKAS AWASTHY) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI; DATED: 16/03/2021 RAHUL SHARMA SR. P.S. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - 4. CIT 5. DR ITAT MUMBAI 6. GUARD FILE. BY ORDER //TRUE COPY// (DY./ASSISTANT REGISTRAR) ITAT MUMBAI