MANKESHWAR MECHANICAL WORKS, MUMBAI V. ASST CIT 15(1), MUMBAI

ITA 1223/MUM/2015

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 8600 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 8 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-11-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 02-03-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SUMAN KUMAR
• Assessee Lawyers: SHAILESH N DOSHI
• Keywords: Bogus purchase

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'B' BENCH, MUMBAI BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO.1223/MUM/2015 (ASSESSMENT YEAR: 2010-11) SHRI MANKESHWAR VS. A C I T 15(1) MECHANICAL WORKS SHRI MANKESHWAR BLDG. 110, B.N. PAI MARG REAY ROAD, MUMBAI 400033 [PRESENTLY ACIT, CIRCLE - 20(3)] 615, PIRAMAL CHAMBERS LALBAUG, PAREL MUMBAI 400012 PAN ABCFS2901H APPELLANT RESPONDENT APPELLANT BY: SHRI SHAILESH N. DOSHI RESPONDENT BY: SHRI SUMAN KUMAR DATE OF HEARING: 09.11.2017 DATE OF PRONOUNCEMENT: 09.11.2017 O R D E R PER PAWAN SINGH, J.M. THIS APPEAL BY THE ASSESSEE UNDER SECTION 253 OF TH E INCOME TAX ACT IS DIRECTED AGAINST THE ORDER OF THE CIT(A)-26, MUM BAI DATED 13.11.2014 FOR A.Y. 2010-11. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF AP PEAL: - 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT (A) HAS ERRED IN CONFIRMING THE ACTION OF AO IN MAKING ADDITION OF RS.42,32,185/- BEING PURCHASES F ROM FOUR PARTIES BY TREATING THEM AS BOGUS MERELY ON THE BAS IS OF INFORMATION FROM SALES TAX DEPARTMENT, MAHARASHTRA THAT THE SAID PARTIES ARE ENGAGED IN PROVIDING ACCOMMODATION BILLS (A) WITHOUT BRINGING ON RECORDS ANY INDEPENDENT AND REL IABLE EVIDENCES AND (B) WITHOUT CONDUCTING ANY ENQUIRY WH ATSOEVER ON THE DOCUMENTS FURNISHED BY THE APPELLANT. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT (A) HAS ERRED IN CONFIRMING THE ACTION OF AO IN MAKING ADDITION OF RS.42,32,185/- BEING PURCHASES F ROM FOUR PARTIES BY TREATING THEM AS BOGUS BY COMPLETELY IGN ORING (A) VARIOUS DOCUMENTARY EVIDENCES SUBMITTED BY THE APPE LLANT IN ITA NO.1223/MUM/2015 SHRI MANKESHWAR MECHANICAL WORKS 2 RESPECT OF TRANSACTIONS WITH THE SAID PARTIES SUCH AS INVOICES, DELIVERY CHALLANS, ENTRIES IN THE BANK STATEMENTS R EFLECTING PAYMENTS BY ACCOUNT PAYEE CHEQUES TO THE ALLEGED PA RTIES AND FURTHER SUPPORTED BY THE CERTIFICATE FROM THE BANKE RS TO THAT EFFECT AND (B) THE FACT THAT GROSS PROFIT RATE AND NET PROFIT RATE WERE HIGHEST DURING THE YEAR AS COMPARED TO PRECEDI NG FOUR YEARS. 3. WITHOUT PREJUDICE TO GROUND NO.1 AND 2 HERE ABO VE, ON THE FACTS AND CIRCUMSTANCES OF THE CASE, 100% DISALLOWA NCE OF PURCHASES FROM THE SAID FOUR SUPPLIERS/PARTIES IS N OT CALLED FOR (A) ON THE GROUND THAT THE APPELLANT HAS NOT MAINTA INED QUANTITATIVE TALLY AND USE/CONSUMPTION OF MATERIAL PURCHASED FROM THOSE PARTIES SPECIFICALLY WHEN SALES ARE ACCE PTED BY AO AND (B) ALSO IN VIEW OF JUDICIAL PRONOUNCEMENTS AVA ILABLE ON THE ISSUE IN THE PRESENT CASE. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE F IRM, ENGAGED IN THE BUSINESS OF SHIP REPAIR, MARINE WORKSHOP, STEEL REM OVAL, GENERAL FABRICATION JOB, MECHANICAL REPAIRS AND MACHINERY J OBS, FILED ITS RETURN OF INCOME FOR THE RELEVANT ASSESSMENT YEAR ON 26,09.20 10 DECLARING TOTAL INCOME OF ` 45,32,154/-. THE ASSESSMENT WAS COMPLETED ON 30.03. 2013 UNDER SECTION 143(3). THE AO WHILE PASSING THE ASSE SSMENT ORDER DISALLOWED A SUM OF ` 42,32,185/- AS BOGUS PURCHASES. THE AO DISALLOWED THE PURCHASES ON THE BASIS OF THE INFORMATION RECEI VED FROM THE SALES TAX AUTHORITIES THAT THE ASSESSEE IS ONE THE BENEFICIAR Y WHO HAD MADE PURCHASES FROM PARTIES WHOSE NAMES WERE LISTED IN T HE LIST OF HAVALA DEALERS. THE AO MADE THE DISALLOWANCE ON THE AGGRE GATE PURCHASES FROM FOUR PARTIES AS UNDER: - (I) RELIANCE ENTERPRISES ` 7,99,510/- (II) PARAS ENTERPRISES ` 12,30,242/- (III) KRISH CORPORATION 12,09,748/- (IV) D.N. ENTERPRISES ` 9,92,685/- THE AO DISALLOWED 100% OF THE PURCHASES MADE FROM T HE DISPUTED/ HAWALA DEALERS. ON APPEAL BEFORE THE CIT(A) THE ENT IRE DISALLOWANCES WERE SUSTAINED. FURTHER AGGRIEVED BY THE ORDER OF THE CI T(A) ASSESSEE FILED THE PRESENT APPEAL BEFORE US. ITA NO.1223/MUM/2015 SHRI MANKESHWAR MECHANICAL WORKS 3 4. THE LEARNED A.R. OF THE ASSESSEE ARGUED THAT THE AS SESSEE HAS FURNISHED ALL DETAILS AS REQUIRED BY THE AO TO PROV E THE GENUINENESS OF THE PURCHASES CONSISTING PROOF OF PAYMENT, PURCHASE INV OICES AND DELIVERY CHALLANS. IT WAS ARGUED THAT THE AO MADE THE DISALL OWANCE ON THE BASIS OF THIRD PARTY INFORMATION. THE AO HAS NOT GIVEN ANY F INDING ON THE VARIOUS EVIDENCES FURNISHED BY THE ASSESSEE. THE LEARNED A. R. FINALLY ARGUED THAT THE DISALLOWANCE MAY BE RESTRICTED TO A REASONABLE PERCENTAGE OF THE TOTAL PURCHASES. 5. ON THE OTHER HAND, THE LEARNED D.R. FOR REVENUE SUP PORTED THE ORDER OF THE AUTHORITIES BELOW. 6. WE HEARD THE RIVAL SUBMISSIONS AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE HAVE NOTED THAT THE AO HAS DI SALLOWED THE ENTIRE PURCHASES FROM ALL THE FOUR IMPUGNED/ALLEGED BOGUS PARTIES. THE AO HAS NOT REJECTED THE BOOKS OF ACCOUNT OR THE CONTENTS O F THE MATERIAL ON RECORD. THE AO HAS NOT EXAMINED THE GROSS PROFIT RATIO FOR EARLIER AND SUBSEQUENT YEARS. THE LEARNED CIT(A) CONFIRMED THE DISALLOWANC E MADE BY THE AO. WE ARE OF THE VIEW THAT UNDER THE INCOME TAX ONLY REAL INCOME CAN BE TAXED BY REVENUE. EVEN IF THE TRANSACTION IS NOT VERIFIABLE THE ONLY TAXABLE AMOUNT IS THE TAXABLE INCOME COMPONENT THEREIN AND NOT THE ENTIRE PURCHASES. CONSIDERING THE SUBMISSIONS OF THE LEARNED A.R. OF ASSESSEE THAT A REASONABLE DISALLOWANCE MAY BE MADE AND CONSIDERING THE FACTUAL MATERIALS OF THE CASE WE ARE OF THE OPINION THE IN ORDER TO FILL THE GAP OF REVENUE LEAKAGE DISALLOWANCE OF A REASONABLE PERCEN TAGE OF IMPUGNED PURCHASES WILL MEET THE END OF JUSTICE. IN OUR VIEW DISALLOWANCE OF 12.5% OF THE TOTAL DISPUTED PURCHASES WOULD BE SUFFICIENT TO FULFIL THE GAP OF REVENUE LEAKAGE. THE HON'BLE BOMBAY HIGH COURT IN T HE CASE OF CIT VS. SHRI HARIRAM BHAMBHANI IN ITA NO. 313 OF 2013 DECIDED ON 04.02.2015 ALSO HELD THAT REVENUE IS NOT ENTITLED TO BRING THE ENTIRE SALE CONSIDERATION TO TAX, BUT ONLY THE PROFIT ELEMENT OF SUCH UNRECOR DED SALES CONSIDERATION WHICH ALONE CAN BE SUBJECT TO INCOME TAX . WITH THESE OBSERVATIONS THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE PARTLY ALLOWED. ITA NO.1223/MUM/2015 SHRI MANKESHWAR MECHANICAL WORKS 4 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 9 TH NOVEMBER, 2017. SD/ - SD/ - (G.S. PANNU) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 9 TH NOVEMBER, 2017 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) -26, MUMBAI 4. THE CIT -15, MUMBAI 5. THE DR, B BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.