AL-CAN EXPORTS P.LTD, THANE V. DCIT RG 5(1), MUMBAI

ITA 1022/MUM/2015

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 7870 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 10 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-12-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 16-02-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAJESH KUMAR YADAV
• Assessee Lawyers: NEHA PARANJPE A RS
• Keywords: Bogus purchase; Accommodation entries; Reassessment proceedings
• Section: 143(3); 133(6); 148

Judgement Text

ITA NO. 1022/MUM/2015 AL CAN EXPORTS P. LTD VS. DCIT 1 IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, M UMBAI BEFORE SHRI R.C SHARMA , AM AND SHRI RAVISH SOOD, JM ITA NO. 1022/MUM/2015 ( / ASSESSMENT YEAR:2009 - 10) AL - CAN EXPORTS P. LTD SHEETAL INDL ESTATE, KASMIRA ROAD, NEXT TO BHARAT GAS GODOWN, BHAYANDER (E), THANE 401 105. / VS. DCIT RG 5(1), C - 11 BKC BANDRA (E), MUMBAI. ./ ./ PAN NO. AACCA3381R ( / APPELLANT) : ( / RESPONDENT ) / APPELLANT BY : SH. K. GOPAL & MS. NEHA PARANJPE, A.RS. / RESPONDENT BY : SHRI RAJESH KUMAR YADAV, D.R. / DATE OF HEARING : 04.12.2017 / DATE OF PRONOUNCEMENT : 27 .12.2017 / O R D E R PER RAVISH SOOD, JUDICIAL MEMBER: THE PRESENT APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) - 9, MUMBAI, DATED 03.11.2014 FOR A.Y. 2009 - 10 , WHICH IN ITSELF ARISES FROM THE ORDER PASSED BY THE A.O UNDER SEC. 143(3) R.W.S 147 OF THE INCOME - TAX ACT, 1961 (FOR SHORT ACT), DATED 25.02.2014. THE ASSESSEE ITA NO. 1022/MUM/2015 AL CAN EXPORTS P. LTD VS. DCIT 2 ASSAILING THE ORDER OF THE CIT(A) HAD RAISED BEFORE US THE FOLLOWING GROUNDS OF APPEAL: - 1. THE LD. CIT(APPEALS) WAS NOT JUSTIFIED IN CONFIRMING THE VALIDITY OF THE REASSESSMENT PROCEEDINGS. THE INITIATION OF THE REASSESSMENT PROCEEDINGS , THE REASSESSMENT PROCEEDINGS THEMSELVES AND ALSO THE ORDER OF REASSESSMENT, ARE ILLEGAL AND INVALID. 2. THE LEARNED CIT(APPEALS) WAS NOT JUSTIFIED IN CONFIRMING THE DISALLOWANCE OF AN AMOUNT OF RS. 29,81,640/ - AS ALLEGED BOGUS PURCHASES. T H E REASONS GIV EN BOTH B Y THE LD. DY. CIT AND THE LEARNED CIT(APPEALS) IN THIS REGARD ARE INCORRECT AND UNJUSTIFIED. SPECIFICALLY, THE LEARNED CIT(APPEALS) HAS GROSSLY ERRED IN STATING THAT THE APPELLANT COULD NOT PRODUCE EVIDENCE OF ACTUAL DELIVERY OF MATERIAL PURCHASED OR EVIDENCE REGARDING ALLEGEDLY BOGUS INVOICES. THE APPELLANT CRAVES LEAVE TO ADD TO, TO ALTER OR TO AMEND THE ABOVE GROUNDS OF APPEAL. 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY WHICH IS ENGAGED IN THE BUSINESS OF MANUFA CTURING AND EXPORT OF SEAMLESS ALUMINIUM BOTTLES ETC. HAD FILED ITS RETURN OF INCOME FOR A.Y. 20 09 - 1 0 ON 29 .09.20 09 , DECLARING AN INCOME OF RS. 54,38,570/ - . ORIGINAL ASSESSMENT UNDER SEC. 143(3) WAS FRAMED ON 12.12.2001 AT AN INCOME OF RS. 54,38,570/ - . THE REAFTER, ON THE BASIS OF INFORMATION RECEIVED BY THE A.O FROM THE INVESTIGATION WING OF THE INCOME TAX DEPARTMENT THAT THE ASSESSEE WAS ONE OF THE BENEFICIARY OF TRANSACTIONS ROUTED THROUGH THE HAWALA DEALERS AS INFORMED BY THE SALES TAX (VAT) DEPA RTMENT, STATE OF MAHARASHTRA, THE CASE OF THE ASSESSEE WAS REOPENED AND A NOTICE UNDER SEC. 148 WAS ISSUED ON 25.03.2013. THE ASSESSEE VIDE ITS LETTER DATED 16.07.2013 SUBMITTED BEFORE THE A.O THAT ITS ORIGINAL RETURN OF INCOME FILED ON 30.10.2010 BE TREAT ED AS ONE FILED IN RESPONSE TO NOTICE UNDER SEC. 148. 3. THE A.O DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS ON THE BASIS OF THE INFORMATION PROVIDED BY THE SALES TAX DEPARTMENT THAT THE ITA NO. 1022/MUM/2015 AL CAN EXPORTS P. LTD VS. DCIT 3 ASSESSEE AS A BENEFICIARY HAD TAKEN ACCOMMODATION BILLS FROM THE FOLLOWING PARTIES: SR. NO. NAME OF THE PARTY AMOUNT 1. BHARAT ENTERPRISES RS. 5,02,679/ - 2. TRISHNA MULTITRADE PVT. LTD. RS.14,08,945/ - 3. MAGNITUDE TRADING PVT. LTD. RS. 5,06,102/ - 4. LARCHAN TRADING PVT. LTD. RS. 3,41,146/ - 5. CAROLIN ENTERPRISES RS. 30,160/ - 6. SANGURA TRADING PVT. LTD. RS. 50,440/ - 7. P.Y DISTRIBUTORS P. LTD RS. 1,42,168/ - TOTAL RS.29,81,640/ - , THEREFORE, IN ORDER TO VERIFY THE GENUINENESS AND VERACITY OF THE SAID PURCHASE TRANSACTIONS CALLED UPON THE ASSESSEE TO PLACE ON RECORD DOCUMENTARY EVIDENCE, VIZ. COPIES OF PURCHASE ORDERS, BILLS RAISED, NATURE OF EXPENDITURE ETC. THE ASSESSEE IN COMPLIANCE TO THE DIRE CTIONS OF THE A.O FURNISHED DETAILS OF PURCHASES, MATERIAL INWARD NOTE AND BANK STATEMENT EVIDENCING THE PAYMENT OF THE PURCHASE CONSIDERATION TO THE AFORESAID PARTIES. THE ASSESSEE IN ORDER TO SUBSTANTIATE THE GENUINENESS OF THE PURCHASE TRANSACTIONS CLAI MED TO HAVE BEEN MADE FROM THE AFOREMENTIONED PARTIES, THEREIN SUBMITTED THAT THE SAID RESPECTIVE PARTIES WERE BEING ASSESSED TO INCOME TAX AND THE MATERIAL PURCHASED FROM THEM WAS UTILIZED IN ITS TRADING AND MANUFACTURING OPERATIONS. THE A.O IN ORDER TO V ERIFY THE AUTHENTICITY OF THE PURCHASE TRANSACTIONS ISSUED NOTICES U/S 133(6) TO THE AFORESAID PARTIES, VIZ. (I). M/S BHARAT ENTERPRISES; (II). M/S TRISHNA MULTITRADE PVT. LTD; (III). M/S MAGNITUDE TRADING PVT. LTD; (IV). M/S LARCHAN TRADING PVT. LTD; (V). M/S CAROLIN ENTERPRISES; (VI). M/S SANGURA TRADING PVT. LTD; AND (VII).M/S P.Y DISTRIBUTORS. HOWEVER, ALL ITA NO. 1022/MUM/2015 AL CAN EXPORTS P. LTD VS. DCIT 4 OF THE AFORESAID NOTICES U/S 133(6) WERE RETURNED UNSERVED BY THE POSTAL AUTHORITIES WITH THE REMARKS NOT KNOWN. 4. THE A.O AFTER DELIBERATING ON THE CONTENTIONS OF THE ASSESSEE AND THE MATERIAL PLACED ON RECORD BY HIM TO SUBSTANTIATE THE AUTHENTICITY OF THE PURCHASES CLAIMED TO HAVE BEEN MADE FROM THE AFORESAID PARTIES CONCLUDED THAT THE ASSESSEE HAD FAILED TO DISCHARGE THE ONUS CAST UPON IT . TH E A.O AFTER TAKING COGNIZANCE OF THE FACTS AS HAD EMERGED DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, VIZ. (I). THE INFORMATION GATHERED FROM THE SALES TAX DEPARTMENT REVEALED THAT THE AFORESAID PARTIES WERE PROVIDING ACCOMMODATION ENTRIES AND NOT CARR YING ON ANY GENUINE PURCHASE AND SALE TRANSACTIONS; (II). THAT AS PER THE INFORMATION RECEIVED FROM THE SALES TAX DEPARTMENT THE ASSESSEE WAS ONE OF THE BENEFICIARY WHO HAD TAKEN ACCOMMODATION ENTRIES OF BOGUS PURCHASES FROM THE AFORESAID PARTIES; (III). T HE ASSESSEE COMPANY DESPITE SPECIFIC DIRECTIONS FAILED TO PLACE ON RECORD DOCUMENTARY EVIDENCE TO PROVE THE VERACITY OF THE PURCHASE TRANSACTIONS; (IV). THE AFORESAID PARTIES IN THEIR STATEMENTS RECORDED U/S 14 OF MVAT, 2002 BY THE SALES TAX (VAT) DEPARTME NT HAD ACCEPTED THAT THEY WERE NOT DO I NG ANY GENUINE BUSINESS AND WERE MERELY ISSUING BOGUS BILLS ; (V). T HE AFORESAID PARTIES WERE NOT AVAILABLE AT THE GIVE N ADDRESSES AND THE NOTICE S ISSUED TO THEM U/S 133(6) WERE RETURNED UNSERVED BY THE POSTAL AUTHORITI ES; (VI). THE ASSESSEE COULD NOT PLACE ON RECORD DOCUMENTARY EVIDENCE WHICH COULD PROVE THE DELIVERY AND/OR RECEIPT OF THE GOODS FROM THE AFORESAID PARTIES; (VII). THAT THE ASSESSEE COULD NOT PRODUCE CONTEMPORANEOUS RECORDS TO ESTABLISH THE RECEIPT OF GOOD S PURCHASED FROM THE AFORESAID PARTIES; (VIII). THAT PAYMENT BY ACCOUNT PAYEE CHEQUES TO THE AFORESAID PARTIES WOULD NOT CONCLUSIVELY ESTABLISH THE GENUINENESS OF THE PURCHASES; AND (IX). THE FAILURE ON THE PART OF THE ASSESSEE TO PRODUCE THE AFORESAID PAR TIES FURTHER PROVED THE FACT THAT NO GENUINE PURCHASES ITA NO. 1022/MUM/2015 AL CAN EXPORTS P. LTD VS. DCIT 5 WERE MADE BY THE ASSESSEE, THEREFORE, CONCLUDED THAT THE ASSESSEE HAD NOT MADE ANY GENUINE PURCHASES FROM THE AFORESAID PARTIES AND ADDED THE AGGREGATE OF THE VALUE OF PURCHASES OF RS. 29,81,640/ - TO T HE INCOME OF THE ASSESSEE. 5. AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). THE CIT(A) AFTER DELIBERATING ON THE FACTS OF THE CASE CONCLUDED THAT THE ASSESSEE HAD FAILED TO PLACE ON RECORD ANY CLINCHING DOCUMENTARY EVIDENCE , WHIC H WOULD PROVE THAT THE ASSESSEE WAS IN ACTUAL RECEIPT OF MATERIAL FROM THE AFOREMENTIONED PARTIES. THE CIT(A) OBSERVED THAT UNLIKE AS IN THE CASE OF GENUINE PURCHASE BILLS, THERE WAS NO MENTION OF THE MODE OF DELIVERY (TRANSPORT) ON THE BILLS OF THE AFORES AID PARTIES. T H E CIT(A) FURTHER OBSERVED THAT AS THE ASSESSEE HAD NEITHER PLACED ON RECORD DOCUMENTARY EVIDENCE TO SUBSTANTIATE THE VERACITY OF THE PURCHASE TRANSACTIONS, NOR PRODUCED THE PARTIES FOR EXAMINATION BY THE A.O, THEREFORE, THE A.O HAD RIGHTLY CONCLUDED THAT THE ASSESSEE BY BOOKING THE AFORESAID PURCHASES HAD INFLATED THE EXPENSE. THUS, THE CIT(A) IN THE BACKDROP OF HIS AFORESAID OBSERVATIONS UPHELD THE ORDER OF THE A.O. 6. THE ASSESSEE BEING AGGRIEVED WITH THE ORDER OF THE CIT(A) HAD CARRIED THE MATTER IN APPEAL BEFORE US. THE LD. AUTHORISE D REPRESENTATIVE (F OR SHORT A.R) FOR THE ASSESSEE, SH. K.GOPAL, SUBMITTED THAT THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF MANUFACTURING AND EXPORT OF SEAMLESS ALUMINIUM BOTTLES ETC. THE LD. A.R TOOK US THROUGH PAGE 2 PARA 4.2 OF THE ASSESSMENT ORDER AND SUBMITTED THAT T HE ASSESSEE HAD IN THE NORMAL COURSE OF ITS MANUFACTURING BUSINESS MADE PURCHASES OF CONSUMABLES AND CORRUGATED BOXES AGGREGATING TO RS. 29,81,640/ - FROM THE 7 PARTIES THEREIN MENTIONED. THE LD. A.R DREW OUR ATTENTION TO PAGE 9 - 14 OF HIS PAPER BOOK (FOR SHORT APB) WHEREIN THE DETAILS OF PURCHASES UNDER CONSIDERATION ALONGWITH THE ITA NO. 1022/MUM/2015 AL CAN EXPORTS P. LTD VS. DCIT 6 DESCRIPTION OF THE MATERIAL AND ITS CONSUMPTION WAS MENTIONED. THE LD. A.R SUBMITTED THAT THOUGH THE ASSESSEE HAD DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS PRODUCED DOCUMENTARY EVIDENCES TO SUBSTANTIATE THE VERACITY OF THE PURCHASE TRANSACTIONS, BUT HOWEVER, THE A.O HAD MOST ARBITRARILY BRUSHED ASIDE THE SAME AND WRONGLY CONCLUDED THAT NO GENUINE PURCHASES WERE MADE BY THE ASSESSEE FROM THE AFOREM ENTIONED PARTIES. IT WAS SUBMITTED BY THE LD. A.R THAT THE ASSESSEE IN ORDER TO FORTIFY THE GENUINENESS OF THE PURCHASE TRANSACTIONS UNDER CONSIDERATION HAD ALSO PRODUCED BEFORE HIM EVIDENCE AS REGARDS THE DELIVERY OF THE GOODS AT THE SITE OF THE ASSESSEE , HOWEVER , AN OBSERVATION TO THE CONTRARY WAS RECORDED BY HIM WHILE FRAMING THE ASSESSMENT. THE LD. A.R SUBMITTED THAT THE FACT THAT THE PURCHASES UNDER CONSIDERATION WERE CONSUMED IN THE BUSINESS COULD BE GATHERED BEYOND DOUBT FROM THE FACT THAT IN CASE IF THE PURCHASES WERE DEFLATED TO THE SAID EXTENT, THE GROSS PROFIT RATE WOULD SWELL TO AN EXORBITANT FIGURE. THE LD. A.R FURTHER AVERRED THAT AS THE GP RATE OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION WAS IN CONFORMITY WITH THAT OF THE PRECEDING YEAR, THEREFORE, NO ADVERSE INFERENCE AS REGAR D S THE GENUINENESS OF THE PURCHASES UNDER CONSIDERATION WAS LIABLE TO BE DRAWN. ALTERNATIVELY, IT WAS SUBMITTED BY THE LD. A.R THAT NOW WHEN THE FACT THAT THE PURCHASES UNDER CONSIDERATION WERE CONSUMED IN THE BUSINE SS OF THE ASSESSEE AND THUS FORMED PART OF ITS DULY RECORDED SALES, THEREFORE, THE ADDITION OF THE ENTIRE PURCHASE CONSIDERATION COULD NOT HAVE BEEN MADE, RELIED ON THE ORDER OF A COORDINATE BENCH OF THE TRIBUNAL, VIZ. ITAT, H BENCH IN THE CASE OF HARESH A. ROHRA VS. ITO [ ITA N O. 4563/MUM/2015; DT. 05.06.2017]. PER CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE (FOR SHORT D.R) SUBMITTED THAT THE INFORMATION GATHERED BY THE A.O FROM THE SALES TAX AUTHORITIES THAT THE AFORESAID PARTIES WERE ONLY PROVIDIN G ACCOMMODATION BILLS AND THE ASSESSEE HAD NOT MADE ANY GENUINE ITA NO. 1022/MUM/2015 AL CAN EXPORTS P. LTD VS. DCIT 7 PURCHASES FROM THEM , STOOD ESTABLISHED FROM THE FACT THAT THE NOTICES SENT BY THE A.O TO ALL OF THE SAID PARTIES U/S 133(6) WERE RETURNED UNSERVED BY THE POSTAL AUTHORITIES. THE LD. D.R SUBMITTED THAT INDEPENDENT OF THE INFORMATION RECEIVED BY THE A.O FROM THE SALES TAX DEPARTMENT, EVEN OTHERWISE THE ASSESSEE HAD FAILED TO SUBSTANTIATE THE GENUINENESS AND VERACITY OF THE PURCHASE TRANSACTIONS UNDER CONSIDERATION. THE LD. D.R FURTHER SUBMITTED THAT THE PAYMENTS MADE BY THE ASSESSEE TO THE AFORESAID PARTIES VIDE CHEQUES COULD NOT BE HELD AS SACROSANCT AND AS A CLINCHING EVIDENCE OF THE GENUINENESS OF THE PURCHASE TRANSACTIONS UNDER CONSIDERATION. THE L D. D.R TOOK US THROUGH PAGE 9 OF THE CIT (A) ORDER AND SUBMITTED THAT IN THE BACKDROP OF THE INFORMATION RECEIVED FROM THE SALES TAX DEPARTMENT, COUPLED WITH THE FACT THAT THE GENUINENESS OF THE PURCHASE TRANSACTIONS COULD NOT BE ESTABLISHED BY THE ASSESSE E BEFORE THE LOWER AUTHORITIES, THEREFORE, THE CIT(A) HAD UPHELD THE ADDITION OF BOGUS PURCHASES IN THE HANDS OF THE ASSESSEE. 7. WE HAVE HEARD THE AUTHORISED REPRESENTATIVES FOR BOTH THE PARTIES, PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND TH E MATERIAL AVAILABLE ON RECORD. WE HAVE DELIBERATED ON THE CONTENTIONS OF THE PARTIES IN THE BACKDROP OF THE FACTS OF THE CASE. WE FIND THAT IT REMAINS AS A MATTER OF FACT THAT THE A.O WAS IN RECEIPT OF INFORMATION FROM THE SALES TAX DEPARTMENT THAT THE AF OREMENTIONED 7 PARTIES WERE ONLY PROVIDING ACCOMMODATION ENTRIES AND NOT CARRYING ON ANY GENUINE PURCHASE AND SALE TRANS A CTIONS. WE FIND THAT THE A.O ON RECEIPT OF THE AFORESAID INFORMATION HAD NOT MERELY ACTED ON THE SAME AND DRAWN ADVERSE INFERENCES IN T HE HANDS OF THE ASSESSEE, BUT RATHER, HAD AFFORDED SUFFICIENT OPPORTUNITY TO THE ASSESSEE TO PROVE THE GENUINENESS OF THE PURCHASE TRANSACTIONS ON THE BASIS OF IRREFUTABLE AND CLINCHING EVIDENCE. WE ARE OF THE CONSIDERED VIEW THAT THE ASSESSEE IN THE BACKD ROP OF THE INFORMATION RECEIVED FROM THE SALES ITA NO. 1022/MUM/2015 AL CAN EXPORTS P. LTD VS. DCIT 8 TAX DEPARTMENT , WHICH RAISED SERIOUS DOUBTS AS REGARDS THE GENUINENESS OF THE PURCHASES CLAIMED TO HAVE BEEN MADE FROM THEM, TH US REMAINED UNDER A HEAVY ONUS TO SUBSTANTIATE THE VERACITY OF THE PURCHASE TRANSA CTIONS UNDER CONSIDERATION AND DISPEL ALL THE DOUBTS AS REGARDS THE SAME ON THE BASIS OF CLINCHING AND IRREFUTABLE EVIDENCE. HOWEVER, WE WOULD NOT HESITATE TO OBSERVE THAT THE ASSESSEE COULD NOT SUBSTANTIATE THE GENUINENESS OF THE TRANSACTIONS TO THE HILT. WE FIND THAT THE FACT THAT ALL THE NOTICES ISSUED BY THE A.O UNDER SEC. 133(6) WERE RETURNED BY THE POSTAL AUTHORITIES WITH T HE REMARKS NOT KNOWN RAISES SERIOUS DOUBTS AS REGARDS THE GENUINENESS OF THE PURCHASE TRANSACTIONS UNDER CONSIDERATION, THE AUTHENTICITY OF WHICH AS OBSERVED BY US HEREINABOVE, WAS ALREADY HAUNTED BY DOUBTS IN THE BACKDROP OF THE INFORMATION RECEIVED FROM THE SALES TAX DEPARTMENT. WE ARE OF TH E CONSIDERED VIEW THAT NOW WHEN IT WAS THE CLAIM OF THE ASSESSEE THAT IT HAD MADE PURCHASES FROM THE AFORESAID PARTIES AND HAD CLAIMED THE SAME AS AN EXPENSE WHILE COMPUTING ITS INCOME, THEREFORE , IT WAS FOR HIM TO ESTABLISH THE GENUINENESS OF THE SA ME TO THE SATISFACTION OF THE A.O . WE ARE OF THE CONSIDERED VIEW THAT IN THE BACKDROP O F THE FACT S EMERGING FROM THE RECORD, VIZ. (I). THE NOTICES SENT BY THE A.O TO THE PARTIES WERE RETURNED UNSERVED BY THE POSTAL AUTHORITIES; (II). NEITHER OF THE AFORESAID PARTIES WERE PRODUCED FOR EXAMINATION BEFORE THE A.O; AND (III). THE PURCHASE BILLS UNLIKE GENUINE BILLS DID NOT MENTION OF THE MODE OF DELIVERY (TRANSPORT), THE VERACITY OF THE INFORMATION RECEIVED FROM THE SALES TAX DEPARTMENT THAT THE ASSESSEE HAD ONLY TAKEN ACCOMMODATION BILLS AND NOT CARRIED OUT ANY GENUINE PURCHASES FURTHER ST OOD F ORTIFIED. 8. BE THAT AS IT MAY, WE CANNOT REMAIN OBLIVIOUS OF THE FACT THAT THE BOOK RESULTS OF THE ASSESSEE WHICH ARE FOUND TO BE CONFORMITY WITH THAT OF THE PRECEDING YEAR, THEREIN ESTABLISHES THAT THE PURCHASES OF THE GOODS UNDER CONSIDERATION WERE CON SUMED IN THE COURSE OF THE ITA NO. 1022/MUM/2015 AL CAN EXPORTS P. LTD VS. DCIT 9 BUSINESS AND THE CORRESPONDING SALES STOOD DULY RECORDED. WE FIND THAT THE SALES OF THE ASSESSEE HAD NOT BEEN REJECTED BY THE A.O. WE ARE OF T HE CONSIDERED VIEW THAT IN THE BACKDROP OF THE AFORESAID FACTS AS HAD EMERGED FROM THE RECORDS, IT CAN SAFELY BE CONCLUDED THAT THE ASSESSEE HAD PURCHASED THE GOODS UNDER CONSIDERATION, THOUGH NOT FROM THE AFOREMENTIONED PARTIES, BUT FROM THE OPEN/GREY MARKET. WE THUS ARE OF THE CONSIDERED VIEW THAT IN THE BACKDROP OF OUR AFORESAID OBSERVATI ONS THE ADDITION OF THE ENTIRE AMOUNT OF RS. 29,81,640/ - PERTAINING TO THE PURCHASES MADE FROM THE AFORESAID PARTIES COULD NOT HAVE BEEN MADE IN THE HANDS OF THE ASSESSEE , AND THE SAME WAS LIABLE TO BE RESTRICTED ONLY TO THE EXTENT OF THE PROFIT ELEMENT INVOLVED IN MAKING OF SUCH PURCHASES FROM THE OPEN/GREY MARKET. WE FIND THAT THE HONB L E HIGH COURT OF GUJARAT IN THE CASE OF CIT VS. SIMIT P. SHETH (2013) 356 ITR 451 (GUJ) , KEEPING IN VIEW THE VAT RATE OF 10% INVOLVED IN RESPECT OF IRON & STEEL AS WERE TRADED IN BY THE ASSESSEE BEFORE THEM, HAD THEREIN UPLED THE OBSERVATION OF THE TRIBUNAL THAT AN ADDITION OF 12.5% OF THE VALUE OF THE PURCHASES MADE BY THE ASSESSEE FROM THE OPEN/GREY M ARKET WOULD SUFFICIENTLY BE TAKEN AS THE PROFIT WHICH THE ASSESSEE WOULD HAD MADE BY SAVING ON VAT, OCTROI ETC. FROM PURCHASING THE GOODS FROM THE OPEN/GREY MARKET . WE THUS IN THE BACKDROP OF THE VIEW TAKEN BY THE HONBLE HIGH COURT IN THE CASE OF SIMIT P. SHETH (SUPRA) , KEEPING IN VIEW THE FACT THAT THE ASSESSEE HAD MAINLY PURCHASED ACIDS OR CORRUGATED BOXES FROM THE AFOREMENTIONED PARTIES, ON WHICH THE VAT RATES DURING THE YEAR UNDER CONSIDERATION, VIZ. F.Y. 2008 - 09 WAS 4% AND 5%, RESPECTIVELY, THEREFORE, KEEPING IN VIEW CERTAIN OTHER MONETARY BENEFITS WHICH THE ASSESSEE WOULD HAD MADE FROM MAKING SUCH PURCHASES, THEREFORE, RESTRICT THE ADDITION IN THE HANDS OF THE ASSESSEE TO THE EXTENT OF 6% OF PURCHASES OF RS. 29,81,640/ - . WE THUS RESTRICT THE ADDITION IN THE ITA NO. 1022/MUM/2015 AL CAN EXPORTS P. LTD VS. DCIT 10 HANDS OF THE ASSESSEE TO RS. 1,78,900/ - [ I.E 6% OF RS. 29,81,640/ - ] . THE ORDER OF THE CIT(A) IS THUS MODIFIED TO THE SAID EXTENT. 9 . THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED IN TERMS OF OUR AFORESAID OBSERVATIONS. ORDER PRONOUNCED IN THE OPEN COURT ON 27 /12/2017 SD/ - SD/ - (R.C SHARMA ) ( RAVISH SOOD ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; 27 .12 .2017 * PS. ROHIT KUMAR / 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 . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI ITA NO. 1022/MUM/2015 AL CAN EXPORTS P. LTD VS. DCIT 11