HIREN C. PAREKH, MUMBAI V. ITO 25(2)(1), MUMBAI

CO 17/MUM/2017

• Counselvise Citation: [2017] 123 COUNSELVISE.COM (IT) 3102 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 15 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 07-06-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: H
• Next Hearing Date: 09-05-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 23-01-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: M C OMI NINGSHAN
• Assessee Lawyers: SNEHAL R SHAH
• Keywords: Bogus purchase; Accommodation entries
• Section: 69C; 133(6)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI BEFORE SHRI MAHAVIR SINGH , JM AND SHRI RAJESH KUMAR, AM ITA NO. 01/ MUM/ 20 1 5 ( / ASSESSMENT YEAR: 2010 - 11 ) INCOME TAX OFFICER - 32 (1)( 5 ), ROOM NO.203, C - 11, 2 ND FLOOR,, PRATYAKSHAKAR BHAVAN, BANDRA - KURLA COMPLEX, BANDRA (E), MUMBAI - 400051 / VS. SHRI HIREN C PAREKH, PROP M/S ASIATIC METALS AND ALLOYS, 402, NARMADA APARTMENTS, SIMPOLI ROAD, HARIDAS NAGAR, BORIVALI (W), MUMBIA - 400092 ( / APPELLANT) : ( / RESPONDENT ) CROSS - OBJECTION NO.17/MUM/2017 ARISING OUT OF ITA NO. 01/ MUM/ 2015 ( / ASSESSMENT YEAR: 2010 - 11 ) SHRI HIREN C PAREKH, PROP M/S ASIATIC METALS AND ALLOYS, 402, NARMADA APARTMENTS, SIMPOLI R OAD, HARIDAS NAGAR, BORIVALI (W), MUMBIA - 400092 / VS. INCOME TAX OFFICER - 32 (1)( 5 ), ROOM NO.203, C - 11, 2 ND FLOOR,, PRATYAKSHAKAR BHAVAN, BANDRA - KURLA COMPLEX, BANDRA (E), MUMBAI - 400051 ( / APPELLANT) : ( / RESPONDENT ) ./ PAN : AFXPP83250 ( / APPELLANT) : ( / RESPONDENT ) / A SSESSEE BY : MS. SNEHAL R SHAH /R EVENUE BY : SHRI M C OMI NINGSHAN / DATE OF HEARING : 9.5. 2017 / DAT E OF P RONOUNCEMENT : 7. 6 . 201 7 2 ITA NO. 01/ MUM/201 5 AND CO NO.17/MUM/2017 / O R D E R PER RAJESH KUMAR, A. M: THESE CROSS - APPEALS BY THE RESPECTIVE PARTIES ARE DIRECTED AGAINST THE ORDER DATED 17.10.2014 PASSED BY THE LD.CIT(A) - 35, MUMBAI FOR THE ASSESSMENT YEAR 2010 - 11. 2. VARIOU S GROUNDS HAVE BEEN RAISED BY THE REVENUE IN THIS APPEAL WHEREIN COMMON ISSUE IS AGAINST THE DELETION OF ADDITION TO THE TUNE OF RS.62,90,240/ - BY THE LD.CIT(A) AS MADE BY THE AO UNDER SECTION 69C OF THE INCOME TAX ACT, 1961 ON ACCOUNT OF UNEXPLAINED EXP ENDITURE IN RESPECT OF BOGUS PURCHASES BY IGNORING THE FACTS THAT THE NOTICES UNDER SECTION 133(6) WERE RETURNED UNSERVED AND INVESTIGATION CARRIED OUT BY THE SALES TAX DEPARTMENT OF GOVERNMENT OF MAHARASHTRA . 3. THE ASSESSEE HAS ALSO FILED CROSS - OBJEC TION CHALLENGING THE ORDER OF LD. CIT(A) IN SUSTENANCE OF ADDITION TO THE TUNE OF 12% OF THE TOTAL BOGUS PURCHASES WHICH WORKED OUT TO RS.8,57,760/ - AND PRAYED THAT IN VIEW OF THE DECISION IN THE CASE OF CIT V/S SIMIT P SETH (356 ITR 451) GUJARAT HIGH C OURT THE ADDITION SHOULD BE RESTRICTED TO 3,39,530/ - ON THE GROUND THAT THE ASSESSEE HAS ALREADY REFLECTED GP MARGIN OF 7.25% AND BALANCE NEEDS TO BE SUSTAINED AND NOT AT THE RATE OF 12%. 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO FOUND TH AT THE ASSESSEE HAS MADE TOTAL PURCHASES OF RS.2,03,55,145/ - AND ACCORDINGLY CALLED UPON THE ASSESSEE TO FILE DETAILS OF PURCHASES MADE 3 ITA NO. 01/ MUM/201 5 AND CO NO.17/MUM/2017 DURING THE YEAR ALONG WITH NAMES AND ADDRESSES OF THE SUPPLIERS. IN THE MEAN TIME, THE AO RECEIVED INFORMATION FROM THE SALES TAX DEPARTMENT, GOVERNMENT OF MAHARASHTRA WHICH WAS AVAILABLE ON THE WEBSITE OF THE GOVERNMENT OF MAHARASHTRA THAT CERTAIN PARTIES FROM WHOM THE ASSESSEE HAS MADE CERTAIN PURCHASES WERE ENGAGED IN PROVIDING ACCOMMODATION ENTRIES IN RESPECTS OF BOGUS PURCHASES AND ACCORDINGLY ISSUED NOTICE U/S 133(6) TO THE PARTIES BUT THE SAME WERE RETURN ED UNSERVED WITH THE POSTAL REMARKS ADDRESSEE ARE NOT KNOWN AND UNCLAIMED. THEREFORE, THE AO ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE FOR THE REASON S THAT THE PARTIES WERE NOT GENUINE AND ALL PURCHASE MADE BY T HE ASSESSEE WERE IN DOUBT. 5 . IN THE APPELLATE PROCEEDINGS , THE LD.CIT(A) PARTLY ALLOWED THE APPEAL OF T HE ASSESSEE BY SUSTAINING THE 12% OF SUCH PURCHASES AS GP BY OBSERVING AND HOLDING AS UND ER : 3. DECISION: I HAVE GONE THROUGH THE FACTS OF THE CASE, FINDING OF THE AO AND SUBMISSIONS OF THE APPELLANT IN THIS REGARD. IT IS NOT BEING DISPUTED BY THE AO THAT THE PURCHASES HAVE ACTUALLY BEEN MADE, WHAT IS BEING DISPUTED IS WHETHER THE PURCHA SE HAVE BEEN MADE FROM THE SAID 4 PARTIES. THE FACT THAT THE PAYMENTS HAVE BEEN MADE THROUGH THE ACCOUNT PAYEE CHEQUES IS ALSO NOT BEING QUESTIONED BY THE AO IN TERMS OF THE GENUINENESS OF THE CHEQUES OR THE SOURCES, OF THE PAYMENTS THROUGH THE RELEVAN T BANK ACCOUNT, BUT IT ALSO REMAINS A FACT THAT THE SAID PARTIES WERE NOT FOUND AT THE GIVEN ADDRESS AND THEY ALSO FEATURED IN THE LIST OF SUSPECTED PARTIES OF THE SALES TAX DEPARTMENT. THE APPELLANT, WHILE GIVING THE ACCOUNT PAYEE CHEQUES, STATEMENTS, CON FIRMATIONS, LEDGER ACCOUNTS OF THE' SELLERS AND ALSO GIVING QUANTITATIVE DETAILS IN TERMS OF SALES MADE ETC HOWEVER, HAS ALSO BEEN UNABLE TO PROVIDE WITH ANY ACTUAL DELIVERY CHALLANS OF ANY OF THE GOODS TRANSPORTED DURING THE YEAR'. IN THE LIGHT OF THE AB OVE 4 ITA NO. 01/ MUM/201 5 AND CO NO.17/MUM/2017 FA CTS 'WHERE THE FACTOR OF ,PURCHASES IS NOT BEING DISPUTED, BUT THE GENUINENESS OF THE SELLERS IS BEING DISPUTED, IN MY CONSIDERED OPINION, DISALLOWANCE OF THE PROFIT ELEMENT EMBEDDED IN THE IMPUGNED PURCHASES WOULD SERVE THE PURPOSE OF JUSTICE. IN TH IS REGARD, I RELY ON THE DECISION OF THE HON.BLE GUJARAT HIGH COURT IN THE CASE' OF SI MIT SHETH PRONOUNCED ON 16.1.2013 WHEREIN THE HON.BLE COURT HAVE HELD THAT 'NOT THE ENTIRE PURCHASE, BUT ONLY PROFIT ELEMENT ERNBEDED IN SUCH PURCHASES CAN BE ADDED TO T HE INCOME OF THE ASSESSEE.'. AS REGARDS TO WHAT IS THE APPROPRIATE PROFIT ELEMENT PERCENTAGE, WHILE THERE CAN BE NO UNIFORM YARDSTICK ADOPTED, WHILE LOOKING AT THE NORMS IN THE MARKET AND CONSIDERING THE TRADE OF THE APPELLANT, 12% GP ,ON THE IMPUGNED COM PONENT OF PURCHASES IS DIRECTED TO BE ADDED TO THE PROFIT OF THE APPELLANT FOR THE YEAR. THEREFORE, RS.8,57,760/ - IS TO BE ADDED BACK TO THE PROFIT OF THE APPELLANT FOR THE YEAR. THE APPELLANT WOULD GET A RELIEF OF RS.62,90,240/ - 6 . WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL PLACED ON RECORD INCLUDING THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT THE ASSESSEE HAS RAISED THE ISSUE IN THE CROSS - OBJECTION THAT THE ADDITION SUSTAINED TOWARDS GP ON BOGUS PURCHASES AT THE RATE OF 1 2% OVER AND ABOVE, THE GP OF 7.5% ALREADY DECLARED BY THE ASSESSEE . THE LD. AR SUBMITTED BEFORE THE BENCH THAT THE CIT(A) HAS ERRED IN SUSTAINING 12% OF GP ON SUCH BOGUS PURCHASES WITHOUT ALLOWING ANY CREDIT TOWARDS GROSS PROFIT RATE ALREADY DECLARE D BY THE ASSESSEE IN THE BOOKS OF ACCOUNTS INCLUDED IN THE SO CALLED BOGUS PURCHASES AND PRAYED THAT GP OF 4.7% SHOULD BE SUSTAINED WHICH WORKED OUT BY SUBTRACTING 7.25% OF THE GP DECLARED BY THE ASSESSEE FROM 12% OF GP APPLIED BY THE LD.CIT(A). HAVIN G HEARD BOTH THE PARTIES, WE FIND THAT IT WOULD BE REASONABLE IF GP INSTEAD OF 4.75 % AS PRAYED BY THE ASSESSEE, THE GP OF 8% IS APPLIED IN PLACE OF 12 %. WE, THEREFORE, DIRECT THE AO TO APPLY TO GP 8% ON THE 5 ITA NO. 01/ MUM/201 5 AND CO NO.17/MUM/2017 BOGUS PURCHASES. THE CROSS - OBJECTION FILED BY TH E ASSESSEE IS PARTLY ALLOWED. 7 . IN VIEW OF THE ABOVE DISCUSSIONS, THE APPEAL OF THE REVENUE IS DISMISSED AS INFRUCTUOUS. 8 . IN THE RESULT, THE CROSS - OBJECTION IS PARTLY ALLOWED AND THAT OF REVENUES APPEAL STANDS DISMISSED. ORDER PRONOUNCED IN THE O PEN COURT ON 7TH JUNE , 2017. S D SD ( MAHAVIR SINGH ) (RAJESH KUMAR) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED : 7. 6 .2017 SRL,SR.PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F ILE / BY ORDER, T RUE COPY / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI