SYNDICATE ENGG. INDUSTRIES, Mumbai V. A.C.I.T. - 27(3), Mumbai

ITA 1088/MUM/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 2313 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: J
• Assessment Year: 2009-2010
• Appeal Filed On: 23-02-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: NEELAM C JADHAV
• Keywords: Bogus purchase; Unexplained expenditure; Peak credit; Accommodation entries; Reassessment proceedings
• Section: 69C; 143(3); 133(6); 148

Judgement Text

P A G E | 1 ITA NO.1088/MUM/2018 AY. 2009 - 10 M/S SYNDICATE ENGG. INDUSTRIES VS. ACIT - 27(3) IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH G MUMBAI BEFORE SHRI SAKTIJIT DEY (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 1088/MUM/2018 ASSESSMENT YEAR: 2009 - 10 M/S SYNDICATE ENGG. INDUSTRIAL PATANWALA INDL. ESTATE, L.B.S. MARG, GHATKOPER (W), MUMBAI - 400086. VS. ACIT - 27(3), TOWER NO. 6, 4 TH FLOOR, VASHI RAILWAY STATION BUILDING COMPLEX, VASHI NAVI MUMBAI - 400703. PAN NO. AAAFS6781N APPELLANT RESPONDENT ASSESSEE BY : MS . NEELAM C. JADHAV , AR REVENUE BY : MR. NITIN WAGHMODE , DR DATE OF HEARING : 08 /08/2019 DATE OF PRONOUNCEMENT : 28/08/2019 ORDER PER N.K. PRADHAN, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE . THE RELEVANT ASSESSMENT YEAR IS 2009 - 10. THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX - 25, MUMBAI [IN SHORT CIT(A)] AND ARISES OUT OF THE ASSESSMENT COMPLETED U/S 143(3) R.W.S. 147 OF THE INCOME TAX ACT 1961, (THE ACT). 2. THE GROUNDS OF APPEAL FILED BY T HE ASSESSEE READ AS UNDER : 1. GROUND - 1 THE C.I.T. (APPEALS) ERRED IN ESTIMATING ADDITIONAL PROFIT OF RS.7,48,174/ - @ 12.5% ON ALLEGED BOGUS PURCHASE OF RS.59,85,393/ - IN SPITE OF THE FACT THAT APPELLANT HAD ALREADY DECLARED A PROFIT OF 17.86% ON SALES AND 21 .75% ON CONSUMPTION WHICH INCLUDED THE SAID PURCHASE OF RS.59,85,393/ - . P A G E | 2 ITA NO.1088/MUM/2018 AY. 2009 - 10 M/S SYNDICATE ENGG. INDUSTRIES VS. ACIT - 27(3) 2. GROUND - 2: THE C.I.T. (APPEAL) ERRED IN ESTIMATING THE ADDITIONAL PROFIT OF RS.7,48,174/ - MERELY ON THE BASIS OF ASSUMPTIONS, PRESUMPTION AND SURMISES. 3. GROUND - 3: THE C.I.T. (APPEAL) ERRED IN ESTIMATING ADDITIONAL PROFIT @12.5% ON ALLEGED BOGUS PURCHASE OF RS.59,85,393/ - WHEREAS THE ASSESSING OFFICER HAS HELD ALLEGED BOGUS PURCHASE AS RS.47,63,759/ - . 3. BRIEFLY STATED, THE FACTS ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR (AY) 2009 - 10 ON 26.09.2009 DECLARING TOTAL INCOME AT RS.83,69,010/ - . THE NATURE OF BUSINESS OF THE ASSESSEE IS THAT OF MANUFACTURING FASTENER. UPON RECEIPT OF INFORMATION FROM THE DIRECTOR GENERAL OF INCOME TAX (INV.), MUMBAI (IN SHORT DG IT) THAT AS PER THE INVESTIGATION DONE BY THE SALES TAX DEPARTMENT, GOVERNMENT OF MAHARASHTRA, THE APPELLANT HAD TAKEN BOGUS PURCHASE BILLS FROM FOUR ACCOMMODATION ENTRY OPERATORS AMOUNTING TO RS.59,85,393/ - , THE ASSESSING OFFICER (AO) REOPENED THE ASSESS MENT DONE U/S 143(1), BY ISSUING NOTICE U/S 148 DATED 19.03.2014 TO THE ASSESSEE. DURING THE COURSE OF REASSESSMENT PROCEEDINGS, THE APPELLANT FILED BEFORE THE AO VIDE LETTER DATED 10.10.2014 STATING THAT (I) IT MANUFACTURES FASTENERS AND FOR THAT PURPOS E PURCHASES ARE MADE FROM THE PARTIES THROUGH REPRESENTATIVES WHO COME TO SELL THEIR PRODUCTS AND OFFER CREDIT FOR SUCH GOODS SOLD, (II) IT CHECKS THEIR INVOICE S WHICH CONTAIN ADDRESS, MVAT TIN AND CST TIN, (III) THEN IT CHECKS THE DETAILS AVAILABLE ON T HE SALES TAX DEPARTMENT FOR EXISTENCE AND GENUINENESS OF ALL PARTI ES LIKE TIN NO. AND STATUS ETC., (IV) THE REGISTERING AUTHORITY UNDER SALES TAX DEPARTMENT HAS TO VERIFY IN PERSON TO ISSUE THE TIN REGISTRATION CERTIFICATE, (V) THE ASSESSEE MADE PAYMENTS F OR THE GOODS PURCHASED FROM THE PARTY THROUGH P A G E | 3 ITA NO.1088/MUM/2018 AY. 2009 - 10 M/S SYNDICATE ENGG. INDUSTRIES VS. ACIT - 27(3) ACCOUNT PAYEE CROSSED CHEQUE, (VI) AS THE PAYMENT HAS BEEN MADE THROUGH ACCOUNT PAYEE CROSSED CHEQUE, IT IS ASSUME D THAT THERE MUST BE A BANK ACCOUNT OF THE PARTY IN THE SAME NAME IN WHICH THE CHEQUE IS ISSUED, (VII) IT IS COMPULSORY TO PRODUCE PAN DETAILS TO OPERATE THE SAID ACCOUNT AS PER RBI NORMS, (VIII) THE CHEQUE WILL BE DEPOSITED INTO THE SAME BANK ACCOUNT IN WHICH THE BILL WAS ISSUED AS PER THE KNOWLEDGE OF THE ASSESSEE, (IX) THE SAME GOODS ARE SOLD BY T HE ASSESSEE AND HENCE INCOME OF THE SAID TRANSACTION IS CONSIDERED IN THE CREDIT SIDE OF THE TRADING AND PL ACCOUNT AS SALES, (X) THEREFORE, THE AMOUNT IN QUESTION IS ALREADY CONSIDERED AS INCOME BY THE ASSESSEE AND THE SAME IS DECLARED WHILE FILING THE RETURN OF INCOME. HOWEVER, THE AO WAS NOT CONVINCED WITH THE ABOVE EXPLANATION OF THE ASSESSEE FOR THE REASON THAT THE NOTICES U/S 133(6) ISSUED BY HIM TO THE PARTIES CALL ING FOR DETAILS LIKE COPIES OF LEDGER ACCOUNT OF THE ASSESSEE IN THEIR BOOKS, NATURE OF GOODS SOLD ALONG WITH SAMPLE COPIES OF BILLS ISSUED, COPY OF DELIVERY CHALLANS OF GOODS DISPAT CHED ALONG WITH TRANSPORT BILLS, COPY OF BANK STATEMENT SHOWING THE RELEVANT RECEIPTS AND PAYMENT S OF OUTSTANDING RECEIPT AFTER THE END OF THE YEAR AND COPY OF THEIR RETURN OF INCOME FOR THE AY 2009 - 10, WERE RETURNED BY THE POSTAL AUTHORITIES. THE AO ALSO NOTED THAT THE APPELLANT FAILED TO PRODUCE THE PARTIES BEFORE HIM FOR EXAMINATION. THE AO NOTED THE PEAK OF THE PURCHASES WHICH WORKS OUT TO RS.47,63, 759/ - AND MADE AN ADDITION OF IT AS UNEXPLAINED EXPENDITURE U/S 69C TO THE INCOME SHOWN BY THE ASSESSEE. 4. IN APPEAL, THE LD. CIT(A) ESTIMATED THE PROFIT @ 12.5% OF THE DISPUTED PURCHASES FOR THE REASON THAT PROFIT ELEMENT IS EMBEDDED IN SUCH P A G E | 4 ITA NO.1088/MUM/2018 AY. 2009 - 10 M/S SYNDICATE ENGG. INDUSTRIES VS. ACIT - 27(3) PURCHASES A ND ADDING THE SAME TO THE INCOME SHOWN BY THE ASSESSEE WOULD MEET THE ENDS OF JUSTICE. THEREBY, HE DIRECTED THE AO TO ESTIMATE THE PROFIT TO RS.7,48,174/ - IN PLACE OF THE ADDITION OF PEAK CREDIT OF RS.47,63,759/ - . 5. BEFORE US, THE LD. COUNSEL FOR THE ASSE SSEE FILES A PAPER BOOK CONTAINING (I) ACKNOWLEDGEMENT OF FILING OF E - RETURN & STATEMENT OF COMPUTATION OF TOTAL INCOME, (II) NOTE ON BUSINESS ACTIVITY, (III) TAX AUDIT REPORT AND AUDITED BALANCE SHEET, PROFIT & LOSS ACCOUNT, (IV) SPECIMEN COPIES OF PURCHA SE BILLS OF (A) DONEAR TRADING PVT. LTD., (B) LINUX SALES AGENCY PVT. LTD., (C) NAKODA METALS, (D) NUTAN METALS, (V) HIGH COURT JUDGEMENTS : (A) KRISHNA TEXTILES V. CIT 310 ITR 227 (GUJ), (B) CIT V. KASHIRAM TEXTILE MILLS 284 ITR 61 (GUJ). 6. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESENTATIVE (DR) SUBMITS THE FACT THAT THE NOTICES U/S 133(6) DATED 03.12.2014 ISSUED BY THE AO CALLING FOR COPIES OF LEDGER ACCOUNT OF THE ASSESSEE IN THE BOOKS OF ACCOUNTS OF THE PARTIES, NATURE OF GOODS SOLD ALONG WITH SAM PLE COPIES OF BILLS ISSUED, COPY OF DELIVERY CHALLANS OF GOODS DISPATCHED ALONG WITH TRANSPORT BILLS, COPY OF BANK STATEMENT SHOWING THE RELEVANT RECEIPTS AND PAYMENT OF OUTSTANDING RECEIVED AFTER THE END OF THE YEAR AND COPY OF THEIR RETURN OF INCOME FOR THE AY 2009 - 10, WERE RETURNED UN - SERVED BY THE POSTAL AUTHORITIES. THEREAFTER, ON BEING REQUESTED BY THE AO TO PRODUCE THE PARTIES FOR EXAMINATION, THE ASSESSEE FAILED TO PRODUCE THEM. THUS THE LD. DR SUBMITS THAT THE ESTIMATION @ 12.5% MADE BY THE CIT(A) OF THE ALLEGED BOGUS PURCHASES OF RS.59,85,393/ - WHICH COMES TO RS.7,48,174/ - BE CONFIRMED. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIALS ON RECORD. AS MENTIONED EARLIER AS PER THE INFORMATION RECEIVED P A G E | 5 ITA NO.1088/MUM/2018 AY. 2009 - 10 M/S SYNDICATE ENGG. INDUSTRIES VS. ACIT - 27(3) FROM THE SALES TAX DEPARTM ENT, GOVERNMENT OF MAHARASHTRA, THE APPELLANT WAS THE BENEFICIARY OF ACCOMMODATION ENTRIES FROM FOUR PARTIES AMOUNTING TO RS.59,85,393/ - . THE AO HAS STATED THE TIN, PAN, NAME OF THE SUPPLIER AND AMOUNT AT PARA 3 OF HIS ASSESSMENT ORDER DATED 25.03.2015. TH E NOTICES ISSUED BY THE AO U/S 133(6) DATED 03.12.2014 CALLING FOR COPIES OF LEDGER ACCOUNT OF THE ASSESSEE IN THE BOOKS OF ACCOUNTS OF THE PARTIES, NATURE OF GOODS SOLD ALONG WITH SAMPLE COPIES OF BILLS ISSUED, COPY OF DELIVERY CHALLANS OF GOODS DISPATCHE D ALONG WITH TRANSPORT BILLS, COPY OF BANK STATEMENT SHOWING THE RELEVANT RECEIPTS AND PAYMENT OF OUTSTANDING RECEIVED AFTER THE END OF THE YEAR AND COPY OF THEIR RETURN OF INCOME FOR THE AY 2009 - 10, WERE RETURNED UN - SERVED BY THE POSTAL AUTHORITIES. THERE AFTER, ON BEING REQUESTED BY THE AO TO PRODUCE THE PARTIES FOR EXAMINATION, THE ASSESSEE FAILED TO PRODUCE THEM. THE ONLY SPECIFIC REPLY FILED BY THE ASSESSEE BEFORE THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS WAS THAT PAYMENTS FOR THE GOODS PURCH ASED FROM THE PAR TIES WERE MADE THROUGH ACCOUNT PAYEE CROSSED CHEQUE. THE OTHER REPLIES WERE GENERAL IN NATURE. HOWEVER, WE FIND THAT THE GROSS PROFIT OF THE APPELLANT DURING THE YEAR UNDER CONSIDERATION IS 17.86%. AS MENTIONED EARLIER THE APPELLANT IS E NGAGED IN MANUFACTURE OF FASTENER. HAVING CONSIDERED THE NATURE OF BUSINESS OF THE ASSESSEE THE ABOVE GROSS PROFIT RATE DECLARED BY THE APPELLANT IS REASONABLE. HOWEVER, CONSIDERING THE FACT THAT THE NOTICES ISSUED BY THE AO TO THE PARTIES WERE RETURNED BA CK BY THE POSTAL AUTHORITIES AS UN - SERVED AND FURTHER THAT THE ASSESSEE COULD NOT PRODUCE THE PARTIES BEFORE THE AO FOR EXAMINATION, WE ARE OF THE CONSIDERED VIEW THAT THE ESTIMATION ON THE ALLEGED BOGUS PURCHASES BE RESTRICTED TO 2% OF P A G E | 6 ITA NO.1088/MUM/2018 AY. 2009 - 10 M/S SYNDICATE ENGG. INDUSTRIES VS. ACIT - 27(3) RS.59,85,393/ - . ACC ORDINGLY, WE DIRECT THE AO TO MAKE AN ADDITION OF RS.1,19,707/ - IN PLACE OF RS.7,48,174/ - DONE BY THE LD. CIT(A). 8. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 28/08/2019. SD/ - SD/ - (SAKTIJIT DEY) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED: 28/08/2019 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// (SR. PRIVATE SECRETARY) ITAT, MUMBAI