2019 (8) TMI 1328 - AT - Income Tax

Rectification u/s 254 - Profit estimation on alleged bogus purchase from Hawala/Suspicious dealers - HELD THAT - Tribunal had recorded its finding, in respect of issue involved in appeal regarding profit estimation on alleged bogus purchase from Hawala/Suspicious dealers and after considering relevant facts and also by following the decision of ITAT, Mumbai Bench in assessee s own case for earlier assessment year has directed the AO to estimate 12.5% net profit on alleged bogus purchases. We, further noted that if, you go through contents of miscellaneous application filed by the assessee in light of findings recorded by the Tribunal in its order dated 27/02/2019, we are of the considered view that the assessee has failed to make out a case of prima-facie mistake apparent on record, which could be rectified u/s 254(2). Further, what the assessee seeking is to review the decision rendered by the Tribunal in the given facts and circumstances of the case and also by following the decision of co-ordinate bench in assessee s own case for earlier assessment years, which is not permissible u/s 254(2) of the I.T.Act, 1961. Therefore, we are of the considered view that there is no merit in miscellaneous application filed by the assessee and accordingly, the same is dismissed.

Issues:
1. Request to recall the order of the Tribunal dated 27/02/2019 in ITA.No. 990/Mum/2018 for AY 2008-09 based on alleged factual mistakes.
2. Allegation of incorrect addition to income against the principle of natural justice.
3. Non-inclusion of relevant case laws and submissions in the Tribunal's order.
4. Retraction of statements by a key witness not considered.
5. Distinction of facts for the current year from previous years not acknowledged.
6. Allegation of misinterpretation of earlier year's order by the Tribunal.
7. Discrepancy in the estimation of profit margins in the diamond industry.
8. Sales Tax department's acceptance of transactions not factored into the decision-making process.
9. Allegation of non-consideration of crucial facts amounting to a mistake apparent from the record.

Analysis:
1. The assessee filed a Miscellaneous Application to recall the Tribunal's order based on alleged factual mistakes. The application highlighted discrepancies in the addition made to the income, contending that the Tribunal's decision deviated from the indications given during the hearing. The assessee argued that the addition of 12.5% to income was against the principle of natural justice as a different percentage was initially suggested by the Senior Member during the hearing.

2. The application pointed out the non-inclusion of relevant case laws and submissions in the Tribunal's order. It specifically mentioned instances where the Tribunal failed to discuss applicable case laws and their relevance to the current case, raising concerns about the completeness of the decision-making process.

3. The failure to consider the retraction of statements by a key witness was another crucial issue raised in the application. The assessee emphasized that the retraction by the witness was a significant fact that should have been considered in the appeal, as it could impact the decision on the alleged transactions.

4. The application also highlighted the distinction of facts for the current year from previous years, emphasizing that the Tribunal did not acknowledge the differences in circumstances that could affect the outcome of the appeal. Additionally, the misinterpretation of the earlier year's order by the Tribunal was alleged, suggesting that the Tribunal incorrectly applied precedents from previous cases.

5. Concerns were raised regarding the estimation of profit margins in the diamond industry, with the application arguing that the addition of 12.5% to the Gross Profit (GP) was not in line with industry norms. The application contended that such a significant increase in GP was unreasonable given the nature of the diamond trade.

6. The Sales Tax department's acceptance of transactions as genuine was not factored into the decision-making process, according to the application. It highlighted that the submission of VAT returns to the Sales Tax authorities should have been considered as a crucial aspect in determining the legitimacy of the transactions.

7. Lastly, the application alleged that crucial facts going to the root of the issue were not considered, constituting a mistake apparent from the record. It argued that the failure to address these fundamental aspects amounted to an error that should have been rectified under the provisions of section 254(2) of the I.T. Act, 1961. However, the Tribunal dismissed the application, stating that the assessee failed to establish a prima facie mistake apparent on record that warranted a recall of the order.

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