M/S. STROMAG ENGINEERS LTD, MUMBAI V. THE DCIT - 11(2)(2),MUMBAI, MUMBAI

ITA 1254/MUM/2020

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 6244 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-09-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2009-2010
• Appeal Filed On: 24-02-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bogus purchase
• Section: 201; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL , E BENCH MUMBAI BEFORE : SHRI M.BALAGANESH, A CCOUNTANT MEMBER & SHRI AMARJIT SINGH, JUDICIAL MEMBER ITA NO. 1254/ MUM/ 20 20 ( ASSESSMENT YEAR : 2009 - 10 ) & ITA NO. 1258/ MUM/ 2020 ( ASSESSMENT YEAR : 201 1 - 12 ) M/S. STROMAG ENGINEERS LTD., C - 1/2 & B - 2, NQANDIJYOT IND. ESTATE, ANDHERI KURLA ROAD SAKINAKA, ANDHERI(E) MUMBAI VS. THE DCIT - 11(2)(2) AAYAKAR BHAVAN M.K.ROAD, CHURCHGATE MUMBAI 400 020 PAN/GIR NO. AANCS3559E (APPELLANT ) .. (RESPONDENT ) ASSESS EE BY SHRI K. GOPAL REVENUE BY MS. AMRITA SINGH DATE OF HEARING 30/08/ 2021 DATE OF PRONOUNCEMENT 13 / 0 9 /202 1 / O R D E R PER M. BALAGANESH (A.M) : THESE APPEAL S IN ITA NO S . 1254/MUM/2020 & 1258/MUM/2020 FOR A.Y RS . 2009 - 10 & 2011 - 12 ARISE OUT OF THE ORDER BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - 18, MUMBAI IN APPEAL NO. CIT(A) - 18/IT - 10102/DCIT - 11(2)(2)/18 - 19 DATED 14/01/2020 (LD. CIT(A) IN SHORT) IN THE ITA NO . 1254/MUM/2020 & 1258/MUM/2020 M/S. STROMAG ENGINEERS LTD., 2 MATTER OF IMPOSITION OF PENALTY U/S.271(1)(C) OF THE INCOME TAX ACT, 196 1 (HEREINAFTER REFERRED TO AS ACT ). IDENTICAL ISSUES ARE INVOLVED IN BOTH THE APPEALS AND HENCE THEY ARE TAKEN UP TOGETHER AND DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. THE ONLY IDENTICAL ISSUE TO BE DECIDED IN THIS APPEAL IS AS TO WHETHER THE LD. CIT(A) WAS JUSTIFIED IN CONFIRMING THE LEVY OF PENALTY U/S.271(1)(C) OF THE ACT IN RESPECT OF ESTIMATED ADDITION MADE ON ACCOUNT OF BOGUS PURCHASES. 3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. W ITH THE CONSENT OF BOTH THE PARTIES, THE APPEAL FOR THE A.Y.2009 - 10 IS TAKEN AS THE LEAD CASE AND THE DECISION RENDERED THEREON WOULD APPLY WITH EQUAL FORCE FOR A.Y.2011 - 12 ALSO EXCEPT WITH VARIANCE IN FIGURES. THE RETURN OF INCOME FOR THE A.Y.2009 - 10 WAS FILED BY THE ASSESSEE COMPANY ON 25/09/2009 DECLARING TOTAL INCOME OF RS.4,32,63,690/ - . THE ASSESSMENT WAS FRAMED U/S.143(3) R.W.S. 147 OF THE ACT ON 23/02/2015 DETERMINING TOTAL INCOME OF RS.5,38,92,820/ - WHEREIN DISALLOWANCE ON ACCOUNT OF BOGUS PURCHASES OF RS.1,06,29,126/ - WAS MADE IN RESPECT OF PURCHASES MADE BY THE ASSESSEE FROM M/S. HARSHIL FERROMET PVT. LTD., M/S. RAJKAMAL STEEL, M/S. ANAND IMPEX AND M/S. JINDUTT CORPORATION. THE LD. AO IN THE ORIGINAL ASSESSMENT MADE DISALLOWANCE OF 100% O N VALUE OF PURCHASES MADE FROM AFORESAID PARTIES . THE LD. CIT(A) DETERMINED THE PROFIT ELEMENT EMBEDDED IN THE VALUE OF SUCH PURCHASE S AT 12% AND THEREAFTER DIRECTED TO ALLOW REDUCTION OF 4% TOWARDS VAT PAID AGAINST SUCH BOGUS PURCHASES. ON FURTHER APPEAL TO THE TRI BUNAL, THE TRIBUNAL VIDE ORDER DATED 16/01/2019 RESTRICTED THE ITA NO . 1254/MUM/2020 & 1258/MUM/2020 M/S. STROMAG ENGINEERS LTD., 3 DISALLOWANCE TO 12.5% OF BOGUS PURCHASES AS REDUCED BY GROSS PROFIT ALREADY DECLARED BY THE ASSESSEE ON THOSE TRANSACTIONS. THIS TRIBUNAL ORDER WAS ACCEPTED BY BOTH THE PARTIES I.E. BY THE ASSE SSEE AS WELL AS BY THE REVENUE BY NOT PREFERRING FURTHER APPEAL TO THE HIGH COURT. THE LD. AO LEVIED PENALTY U/S.271(1)(C) OF THE ACT PURSUANT TO THIS TRIBUNAL ORDER SINCE SOME ADDITION WAS INDEED SUSTAINED BY THE TRIBUNAL ON AN ESTIMATED BASIS. AT THE OUT SET , WE FIND THAT THE ADDITION TOWARDS BOGUS PURCHASES HAS BEEN MADE ONLY ON ESTIMATED BASIS. HENCE, NO PENALTY U/S.271(1)(C) ON THE SAME WOULD SURVIVE IN THE EYES OF LAW. MOREOVER , WE FIND THAT FOR THE A.Y.2009 - 10, THE GROSS PROFIT SHOWN BY THE ASSESSEE O N TOTAL TRANSACTION S IS 29.70% WHICH IS MUCH MORE THAN 12.5% PROFIT ESTIMATED BY THE TRIBUNAL IN THE QUANTUM PROCEEDINGS. WE FIND THAT THE TRIBUNAL HAS DIRECTED THE LD. AO TO ADOPT 12.5% LESS GROSS PROFIT ALREADY DECLARED BY THE ASSESSEE, THEN THERE WOULD BE NO ADDITION THAT COULD BE EFFECTIVELY SURVIVE IN THE TRANSACTION. HENCE, WE HOLD THAT IT IS NOT A FIT CASE FOR LEVY OF CONCEALMENT PENALTY U/S.271(1)(C) OF THE ACT. ACCORDINGLY, THE PENALTY IS HEREBY DIRECTED TO BE DELETED FOR THE A.Y.2009 - 10. 3.1. AS FAR AS THE A.Y.2011 - 12 IS CONCERNED, WE FIND THAT THE GP RATE ALREADY DECLARED BY THE ASSESSEE IS 28.3% WHICH IS ALSO MUCH MORE THAN THE PERCENTAGE DIRECTED BY THE TRIBUNAL TO BE ADDED. HENCE, WE HOLD THAT IT IS NOT A FIT CASE FOR LEVY OF CONCEALMENT PENAL TY U/S.271(1)(C) OF THE ACT. ACCORDINGLY, THE PENALTY IS HEREBY DIRECTED TO BE DELETED FOR A.Y.2011 - 12. ITA NO . 1254/MUM/2020 & 1258/MUM/2020 M/S. STROMAG ENGINEERS LTD., 4 4. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED ON 13 / 09 /202 1 BY WAY OF PROPER MENTIONING IN THE NOTICE BOAR D. SD/ - ( AMARJIT SINGH ) SD/ - (M.BALAGANESH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 13 / 09 / 2021 KARUNA , SR.PS COPY OF THE ORDER FORWARDED TO : BY ORDER, ( ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT . 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//