Deputy Commissioner of Income tax, Pune V. M/s. Ramelex Private Ltd, Pune

ITA 1157/PUN/2017

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 6047 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 4 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-09-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 09-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ALOK MALVIYA
• Keywords: Bogus purchase

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, PUNE BEFORE SHRI R.S. SYAL, VICE PRESIDENT AND SHRI S.S. VISWANETHRA RAVI, J UDICIAL MEMBER . / ITA NO . 1157 /PUN/2017 / ASSESSMENT YEAR : 20 09 - 10 THE DY. COMMISSIONER OF INCOME TAX, C IRCLE - 5, PUNE ....... / APPELLANT / V/S. M/S . RAMELEX PRIVATE LTD., S. NO. 282, SR. NO. 81/2, DANGAT INDUSTRIAL ESTATE, NDA ROAD, SHIVANE, PUNE 411023 PAN : AACCR4612E / RESPONDENT ASSESSEE BY : SHRI KISHOR PHADKE REVENUE BY : SHRI ALOK MALVIYA / DATE OF HEARING : 1 5 - 09 - 2020 / DATE OF PRONOUNCEMENT : 28 - 0 9 - 2020 / ORDER PER S.S. VISWANETHRA RAVI, JM : THIS APPEAL BY THE REVENUE AGAINST THE ORDER DATED 01 - 12 - 2016 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) - 4, PUNE [CIT(A)] FOR ASSESSMENT YEAR 20 09 - 10. 2. GROUND NO. 1 RAISED BY THE REVENUE CHALLENGING THE ACTION OF CIT(A) IN TREATING THE HAWALA PURCHASES FROM M/S. ENTECH ENTERPRISES AT 2 ITA NO . 1157/PUN/2017, A.Y. 2009 - 10 RS.11,63,175/ - ONLY AS AGAINST RS.1,16,53,175/ - IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 3. THE LD. DR, SHRI ALOK MALVIYA REFERRED TO PAGE 2 OF THE ASSESSMENT ORDER POINTING AT ITEM NO. 7 SUBMITTED THAT THE ASSESSEE SHOWN HAWALA PURCHASES FROM ENTECH ENTERPRISE AT RS.1,16,99,702/ - AND THE CIT(A) B Y ACCEPTING ASSESSEES SUBMISSIONS RESTRICTED TO THE AMOUNT OF RS.1,16,99,702/ - . HE SUBMITS THAT THE CIT(A) HAVING NO BASIS WITHOUT GETTING IT VERIFIED FROM THE AO ACCEPTED THE SUBMISSIONS OF ASSESSEE. THE ASSESSEE ALSO DID NOT PRODUCE ANY EVIDENCE REGAR DING THE SAID AMOUNT. THERE WAS NO OPPORTUNITY FOR THE AO TO VERIFY THE SAME AND PRAYED TO REMAND THE MATTER TO THE FILE OF AO. 4. THE LD. AR, SHRI KISHOR PHADKE SUBMITS THAT THE SAID FACT OF TYPOGRAPHICAL MISTAKE WAS BROUGHT TO THE NOTICE OF AO IN THE ASSESSMENT PROCEEDINGS ITSELF . THE ASSESSEE REQUESTED THE AO TO CHANGE THE FIGURES IN AMOUNT BUT HOWEVER THE AO DID NOT CONSIDER THE SAME. THE LD. AR REFERRED TO PAGE 32A OF THE PAPER BOOK AND SUBMITTED THAT THE COST ACCOUNTANT ISSUED A CERTIFICATE DATE D 27 - 01 - 2015 STATING THAT THERE WAS A TYPOGRAPHICAL ERROR AGAINST THE PARTY NAME ENTECH ENTERPRISE AND CONFIRMED THE CORRECT PURCHASE IS RS.11,63,175/ - BUT NOT RS.1,16,99,702/ - . FURTHER, HE REFERRED TO PAGE 33 OF THE PAPER BOOK AND SUBMITTED A LETTER DATE D 02 - 02 - 2015 TO ASSISTANT COMMISSIONER OF SALES TAX TO CONFIRM THE CORRECT AMOUNT OF TRANSACTION AGAINST ENTECH ENTERPRISE. IN SUPPORT OF HIS SUBMISSIONS ABOVE, HE REFERRED TO PAGE 16 AND 18 OF THE PAPER BOOK AND ARGUED THAT THE MISTAKE IN FIGURES OF AMOU NT AGAINST ENTECH ENTERPRISE WAS BROUGHT TO THE NOTICE OF AO , SINCE THE PROCEEDINGS WERE PENDING BEFORE THE SALES TAX DEPARTMENT REGARDING THE HAWALA PURCHASES , THE ASSESSEE COULD NOT PRODUCE CONFIRMATION BEFORE THE AO. IN THE APPELLATE PROCEEDINGS THE AS SESSEE SUBMITTED ALL THE DETAILS 3 ITA NO . 1157/PUN/2017, A.Y. 2009 - 10 REGARDING THE ACTUAL TRANSACTION HA D WITH ENTECH ENTERPRISE. HE SUBMITTED THAT THERE IS NO NECESSARY TO REMAND THE MATTER TO THE FILE OF AO FOR VERIFICATION AND SUPPORTED THE ORDER OF CIT(A). 5. HAVING HEARD THE SUBMISS IONS OF LD. DR AND LD. AR WE NOTE THAT THE ASSESSEE IN THE ASSESSMENT PROCEEDINGS ITSELF BROUGHT TO THE NOTICE OF AO REGARDING THE MISTAKE IN FIGURES OF TRANSACTION AGAINST ENTECH ENTERPRISES BUT HOWEVER IT IS SEEN THAT AT THE TIME OF ASSESSMENT PROCEEDING S THERE WAS NO CONFIRMATION REGARDING THE CORRECT FIGURE AMOUNT BEFORE THE AO IN VIEW OF PEND ENCY OF APPEALS BEFORE CONCERNED AUTHORIT IES. BEFORE THE CIT(A) , WE NOTE THAT THE ASSESSEE PRODUCED ALL THE DETAILS AS SUBMITTED BEFORE US IN PAGES 32A AND 33 TOG ETHER WITH PAGES 16 AND 18 , THE CIT(A) RESTRICTED THE AMOUNT TO RS .11,63,175/ - , I N VIEW OF THE SAME WE FIND NO INFIRMITY IN THE ORDER OF CIT(A) IN RESTRICTING THE TRANSACTION AMOUNT FROM ENTECH ENTERPRISES AT RS.11,63,175/ - INSTEAD OF RS.1,16,99,702/ - . TH US, GROUND NO. 1 RAISED BY REVENUE IS DISMISSED. 6. GROUND NOS. 2 TO 4 RAISED BY THE REVENUE CHALLENGING THE ACTION OF CIT(A) IN RESTRICTING THE ADDITION ON THE BASIS OF 15% IN THE FACTS THE CIRCUMSTANCES OF THE CASE. 7. HEARD BOTH PARTIES AND PERUSE D THE MATERIAL AVAILABLE ON RECORD. WE NOTE THAT THE AO ADDED ENTIRE HAWALA PURCHASES TO THE TOTAL INCOME OF ASSESSEE. THE CIT(A) RESTRICTED THE ADDITION @ 15% OF HAWALA PURCHASES. THE CONTENTION OF LD. AR WAS THAT THE ASSESSEE SHOWN GP RATE AT 45.16 ON ITS ACTUAL TRADING AND PAID TAXES ON NET PROFIT OF RS.7 CRORES. THE SAME GP RATE CANNOT BE APPLIED IN RESPECT OF BOGUS HAWALA PURCHASES TRANSACTION. THE AS SESSEE ACCEPTED 15% OF HAWALA PURCHASES AND THERE WAS NO APPEAL FILED BEFORE THIS TRIBUNAL. THE LD. DR VEHEMENTLY OPPOSED THE SUBMISSIONS OF LD. AR AND PRAYED TO RESTORE THE ORDER OF AO. WE NOTE THAT THIS TRIBUNAL 4 ITA NO . 1157/PUN/2017, A.Y. 2009 - 10 IN MANY CASES APPLIED PERCENTAGE METHOD DEPENDING ON THE FACTS THEREIN AND ALSO HELD ENTIRE ADDITION OF HAWALA PURCHASES IS NOT SUSTAINABLE. THE CIT(A) IN HIS ORDER FROM PARA 6.3 TO 6.3.4 DISCUSSED THE FACTS AND CIRCUMSTANCES OF THE CASE OF ASSESSEE AND RESTRICTED THE ADDITION TO 15% OF HAWALA PURCHASES. THE RELEVANT PORTION OF PARAS 6.3 TO 6.3.4 OF CIT(A) ARE REPRODUCED HERE - IN - BELOW : 6.3 DECISION : - THE QUESTION WHETHER ENTIRE PURCHASES SHOULD BE DISALLOWED OR ADDITION, SHOULD BE RESTRICTED TO THE PROFITS EMBODIED ON SALE PROCEEDS WAS' ANSWERED BY HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS PRESIDENT INDUSTRIES (258 ITR 654) AND HON'BLE MADHY A PRADESH HIGH COURT IN THE CASE OF CIT VS BALCHAND AJIT KUMAR (263 ITR 610) CONSIDERING THE ABOVE DECISIONS, IT IS CLEAR THAT ONLY THE PROFITS EMBODIED ON SALE PROCEEDS SHOULD BE TAXED INSTEAD OF ADDITION ON ACCOUNT OF ENTIRE PURCHASES. LOOKING TO THE CIR CUMSTANTIAL EVIDENCE IN THE PRESENT CASE, IT IS EVIDENT THAT IMPUGNED PURCHASES FROM THE ALLEGED SUPPLIERS WERE NOT GENUINE AND SUCH PURCHASES WERE ACTUALLY MADE FROM OPEN MARKET. ONE HAS TO CONSIDER THE TOTALITY OF FACTS, SURROUNDING CIRCUMSTANCES AND HUM AN PROBABILITY FOR ARRIVING AT SUCH A CONCLUSION. 6.3.1 IN THE PRESENT CASE, THE ASSESSEE IS NOT WILLING TO COME CLEAN AND HENCE ONE WILL HAVE TO TAKE RESOURCE TO MATERIAL ON RECORD FOR ARRIVING AT ANY CONCLUSION. THE ASSESSEE HAS FAILED TO PRODUCE THE S UPPLIERS AND WAS ALSO UNABLE TO PROVE THAT THE GOODS IN QUESTIONS WERE ACTUALLY SENT BY THE ALLEGED SUPPLIERS. 6.3.2 IN VIEW OF FACTS AND CIRCUMSTANCES IN THE PRESENT CASE, I ACCORDINGLY HOLD THAT THE APPELLANT HAS FAILED TO PROVE THE GENUINENESS OF PURC HASES MADE FROM THE AFORESAID PARTIES. 6.3.3 THE APPELLANT HAS OBTAINED THE CERTIFICATE FROM THE VAT AUDITOR DATED 27 - 01 - 2015 AND CONFIRMED THAT THE CORRECT PU RCHASES FROM ENTECH ENTERPRISES ARE TO THE TUNE OF RS. 11, 63,175/ - AND NOT RS.1,16,53,175/ - . THE BOGUS PURCHASE ARE ACCORDINGLY REDUCED BY RS.1,04,90,000/ - BEING A TYPO GRAPHICAL MISTAKE ON THE PART OF THE VAT AUDITOR. THE BALANCE UNVERIFIABLE PURCHASE REMAINS AT RS.1,00,84,750/ - . 6.3.4 THE ACTION OF THE AO TO DISALLOW 100% OF THE UNVERIFIABLE PUR CHASES CANNOT BE UPHELD AND CONSEQUENTLY IMPUGNED ADDITION CAN'T BE SUSTAINED. THE ASSESSING OFFICER HAS NOT DENIED THAT THE MATERIAL WAS NOT CONSUMED BY THE ASSESSEE. IT WOULD, THEREFORE, IMPLY THAT THE APPELLANT HAD ACTUALLY PURCHASED THE MATERIAL IN CAS H FROM THE OPEN MARKET AND ONLY BILL WAS TAKEN FROM THE AFORESAID PARTY. IT IS ALSO NOT IN DISPUTE THAT THE PURCHASE AMOUNT HAD BEEN PAID TITHE ALLEGED SUPPLIERS THROUGH BANKING CHANNEL /CASH. WHAT THE APPELLANT HAD ACTUALLY EARNED IN HAWALA TRANSACTIONS C OULD NOT HAVE EXCEEDED 20% INCLUSIVE OF VARIOUS TAXES AND PROFITS ON CASH TRANSACTIONS. IN VIEW OF THESE FACTS, THIS IS NOT A CASE WHERE THE ENTIRE CASH HAS BEEN SIPHONED OFF BY DEBITING THE BOGUS PURCHASES. THIS IS A CASE WHERE AT THE MOST, THE PURCHASES/ EXPENSES MIGHT HAVE BEEN INFLATED. THEREFORE, RELYING UPON THE DECISION OF HON'BLE GUJARAT HIGH COURT, IN THE CASE - OF SIMIT P SETH (356 ITR 451), I DIRECT THE ASSESSING 'OFFICER TO RESTRICT THE ADDITION TO RS.15,12,713/ - (I.E. 15% OF RS.1,00,84,750/ - ), INS TEAD OF RS.2,05,74,750/ - MADE BY HIM, BEING THE TOTAL OF SUCH ALLEGED BOGUS PURCHASES. 5 ITA NO . 1157/PUN/2017, A.Y. 2009 - 10 8. AS DISCUSSED ABOVE, WE NOTE THAT THE ASSESSEE PLACED RELIANCE ON MANY DECISIONS BEFORE THE CIT(A) WHICH IS REFLECTED FROM PAGES 9 TO 11 WHEREIN WE NOTE THAT DEPEN DING ON THE FACTS AND CIRCUMSTANCES INVOLVING THE CASES THEREIN THE ITAT, PUNE RESTRICTING THE ADDITION ON PERCENTAGE METHOD. IN THE PRESENT CASE ALSO THERE IS NO DISPUTE THAT THE ASSESSEE OFFERED THE GP RATE AT 46.15% ON ACTUAL TRADING AND PAID TAXES AND IN OUR OPINION THE SAME CANNOT BE APPLIED REGARDING THE HAWALA PURCHASES. THEREFORE, IN THE LIGHT OF REASONS RECORDED BY THE CIT(A) TOGETHER WITH CASE LAWS AS RELIED BY THE LD. AR WE FIND NO INFIRMITY IN THE ORDER OF CIT(A) AND IT IS JUSTIFIED. THUS, GROUND NOS. 2 TO 4 RAISED BY THE REVENUE ARE DISMISSED. 9. IN THE RESULT, THE APPEAL OF REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH SEPTEMBER, 2020 . SD/ - SD/ - ( R.S. SYAL ) ( S.S. VISWANETHRA RAVI ) VICE PRESIDENT JUDICIAL MEMBER / PUNE; / DATED : 28 TH SEPTEMBER, 2020. RK / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. THE CIT(A) - 4, PUNE 4. THE PR. CIT - 3, PUNE 5. , , , / DR, ITAT, B BENCH, PUNE. 6. / GUARD FILE. // // TRUE COPY// / BY ORDER, / PRIVATE SECRETARY, , / ITAT, PUNE