TPP BOILERS P LTD, MUMBAI V. ITO-8(3)(1), MUMBAI

CO 270/MUM/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 7351 (ITAT-MUMBAI)
• Duration Of Justice: 1 month(s) 19 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 29-01-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 10-12-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Bogus purchase; Tax effect; Set aside
• Section: 143(1); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH SMC , MUMBAI BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA NO. 34 /M UM /20 19 ASSESSMENT YEAR: 2011 - 12 ITO - 8(3 )(1), MUMBAI VS. TPP BOILERS P LTD. 69/70, ASH OK CHAMBERS, 4 TH FLOOR, DEVAJI RATANJI STREET, BARUCH STREET, MUMBAI, PIN - 400009 . PAN: AADCT1409Q (APPELLANT) (RESPONDENT) & CO NO.270/MUM/2019 (A/O. ITA NO. 34 /M UM /20 19) ASSESSMENT YEAR: 2011 - 12 TPP BOIL ERS P LTD. 69/70, ASHOK CHAMBERS, 4 TH FLOOR, DEVAJI RATANJI STREET, BARUCH STREET, MUMBAI, PIN - 400009. PAN: AADCT1409Q VS. ITO - 8(3)(1), MUMBAI (APPELLANT) (RESPONDENT) PRESENT FOR: APPELLANT BY : R. BHOOPATI, CIT - DR RESPONDENT BY : AJAY C. GOSALIA DATE OF HEARING : 09 .01.2020 DATE OF PRONOUNCEMENT : 29 .01 . 20 20 ITA NO.34/MUM/2019 TPP BOILERS P LTD. 2 O R D E R PER RAJESH KUMAR , ACCOUNTANT MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE RE VENUE AND CROSS - OBJECTION FILED BY T HE ASSESSEE ARE AGAINST THE ORDER DATED 16.08 .2018 OF THE COMMISSIONER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS THE CIT(A)] RELEVANT TO ASSESSM ENT YEAR 2011 - 12 . 2. THE ONLY ISSUE RAISED BY THE REVENUE IN THIS APPEAL IS AGAINST RESTRICTING OF THE ADDITION MADE BY CIT(A) TO 12.5% ON BOGUS PURCHASES AS AGAINST THE ADDITION OF 100 % MADE BY THE AO. WHILE THE ASSESSEE BY WAY CROSS OBJECTION HAS CHALLENG ING THE MAINTAINABILITY OF THE APPEAL OF THE REVENUE ON THE GROUND THAT THE TAX EFFECT INVOLVED IS BE LOW 50 LACS. THE ASSESSEE HAS ALSO CHALLENGED THE ADDITION @12.50 AS SUSTAINED BY THE LD CIT(A). 3. THE FACTS IN BRIEF ARE THAT THE ASSESSEE FILED HIS RETURN OF INCOME ON 28 .09.201 1 DECLARING TOTAL INCOME OF RS. 10,32, 483 / - WHICH WAS PROCESSED U/S 143(1) OF THE ACT. THE CASE OF THE ASSESSEE WAS REOPENED U/S 147 OF THE ACT BY ISSUING NOTICE U/S 148 BY THE AO AFTER RECEIV ING INFORMATION FROM DGIT (INV.), MUMBAI THAT THE ASSESSEE IS BENEFICIARY OF HAWALA PURCH ASE ENTR IES TO THE TUNE OF RS.8,11,070/ - . THE AO I SSUED SHOW - CAUSE NOTICE TO THE ASSESSEE TO PROVE THE GENUINENESS OF THE PURCHASE S BY FURNISHING BILLS,VOUCHERS AND PAYMENT DETAILS ETC AND FAILING WHICH WHY THE SAME SHOULD NOT BE ADDED TO THE TOTAL INCOME OF THE ASSESSEE. ACCORDINGLY THE ASSESSEE FILED A COPY OF BILLS, VOUCHERS AND QUANT IT ATIVE DETAILS, TRANSPORT RECEIPTS OF PARTIES NAMELY ASIAN TUBE TRADING, RAJESWARI ENTERPRISE ITA NO.34/MUM/2019 TPP BOILERS P LTD. 3 AND AMBIKA SALES CORPORATION, EVIDENCES OF PAYMEN TS THROUGH BANKING CHANNELS AND OTHER EVIDENCES TO PROVE THE GENUINENESS OF E VIDENCES FURNISHED BY THE ASSESSEE AND CONSEQUENTLY TREATED THE ENTIRE PURCHASES AS BOGUS ON THE GROUND THAT THE ASSESSEE HAS NOT PROVED THE GENUINENESS OF THE SAME. 4. IN THE APPELLATE PROCEEDINGS, THE LD. CIT(A) PARTLY ALLOWED THE APPEAL OF THE ASSESS EE BY RESTRICTING THE ADDITION QUA TO 12.5% OF THE ALLEGED BOGUS PURCHASES BY FOLLOWING THE DECISIONS OF HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. SIMIT P. SHETH REPORTED IN 356 ITR 451 AND IN THE CASE OF M/S BHOLANATH POLY FAB. P. LTD. REPORTED IN 355 ITR 290 . 5. SO FAR AS THE GROUND NO. 1 IN CROSS OBJECTION I S CONCERNED , WE DO FIN D ANY MERIT IN THE SAME AS THE C IRCULAR N O .03 OF 2018 DATED 11.07.2018 AS AMENDED BY CIRCULAR NO. 17 DATED 08.08.2019 IS NOT APPLICABLE TO THE REVENUE APPEAL AS IT IS SP ECIFICALLY PROVIDE IN THE EXCEPTION THAT WHERE THE RE - OPENING IS DONE ON THE BASIS OF THIRD PARTY INFORMATION OR THIRD AGENCY IT IS NOT APPLICABLE TO THE REVENUES APPEAL EVEN IF THE TAX EFFECT IS LESS THAN LACS. ACCORDINGLY THE GROUND NO. 1 OF THE CROSS O BJECTION IS DISMISSED. 6.THE ISSUE RAISED BY THE REVENUE IN THE VARIOUS GROUNDS OF APPEAL IS QUA ADDITION OF BOGUS PURCHASES SUSTAINED @ 12.50% BY LD CIT(A) WHEREAS THE ASSESSEE HAS CHALLENGED THE SUSTENANCE OF THE ADDITION IN RESPECT OF BOGUS PURCHASE @12 .50 IN THE GROUND 2 OF THE CROSS OBJECTION. 7. AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATERIAL ON RECORD, WE OBSERVE THAT IN THIS CASE THE UNDISPUTED FACTS ARE THAT THE ASSESSEE W AS BENEFICIARY OF HAWALA PURCHASE ENTRIES TO THE TUNE OF ITA NO.34/MUM/2019 TPP BOILERS P LTD. 4 RS.8,11,070 / - . THOUGH , THE ASSESSEE HAS TRIED TO SUBSTANTIATE AND PROVE T HE GENUINENESS OF THE PURCHASES , THE AO TREATED THE ENTIRE PURCHASES AS NON GENUINE AND ADDED THE SAME TO THE INCOME OF THE ASSESSEE ON T HE GROUND THAT THESE PURCHASES WE RE MADE FROM HAWALA DEA LER S WHO WE RE ENGAGED IN ISSUING BOGUS PURCHASE BILLS ONLY WITHOUT DOING ANY ACTUAL BUSINESS . THE AO HOWEVER DID NOT DOUBT THE GENUINENESS OF THE SALES . T HE LD. CIT(A ) PARTLY ALLOWED THE APPEAL OF THE ASSESSEE BY REDUCING THE ADDITION BY APPLYING 12.5% O N THE BOGUS PURCHASES BY FOLLOWING THE DECISION OF CIT VS. SIMIT P. SHETH AND M/S BHOLANATH POLY FAB. P. LTD (SUPRA) . IN THIS CASE, WE OBSERVE THAT THE ASSESSEE IS DOING THE BUSINESS OF BOILER TUBE MANUFACTURING AND TRADING THEREOF A ND DURING THE YEAR THE A SSESSEE HAS G.P. OF 21.17%. CONSIDERING THESE FACTS WE ARE OF THE OPINION THAT THE RATE OF PROFIT AS APPLIED BY THE LD CIT(A) IS EXCESSIVE AND UNREASONABLE . KEEPING IN V IEW ASSESSEES LINE OF BUSINESS , IT WOULD BE FAIR AND REASONABLE IF RATE OF 6% ON THE ALLEGED PURCHASES IS APPLIED TO ASSESS THE PROFIT EMBEDDED THEREIN . ACCORDINGLY WE SET ASIDE THE ORDER OF CIT(A) AND DIRECT THE AO TO APPLY RATE OF 6%. 8 . IN THE RESULT, THE APPEAL OF THE REVEN UE IS DISMISSED AND CO OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 29.01 . 20 20 . SD/ - SD/ - ( SAKTIJIT DEY) (RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI , DATED: 29 .01 . 2020 . RS , SR. P.S. ITA NO.34/MUM/2019 TPP BOILERS P LTD. 5 COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT ( A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI. DATE INITIAL WHETHER DICTATION PAD ENCLOSED WITH THE FILE : YES/N O (AS THE ORDER HAS BEEN TYPED WITH THE HELP OF MANUSCRIPT) 1. DRAFT DICTATED ON SR.PS 2. DRAFT PLACED BEFORE AUTHOR SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS 6. DATE OF PRONOUNCEMENT SR.PS 7. FILE SENT TO THE BENCH CLERK SR.PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER