SHUBHAM ELECTROTECH P.LTD, NAVI MUMBAI V. DCIT CIR 3, THANE

ITA 132/MUM/2016

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 8009 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-12-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2009-2010
• Appeal Filed On: 11-01-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: V JUSTIN
• Keywords: Bogus purchase
• Section: 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH E , MUMBAI BEFORE SHRI G.S. PANNU, HON'BLE ACCOUNTANT MEMBER AND SHRI C.N. PRASAD, HON'BLE JUDICIAL MEMBER ITA.NO. 132 /MUM/201 6 (A.Y: 2009 - 10 ) M/S. SHUBHAM ELE C TRO TECH PVT. LTD., PLOT NO. EL 126, ELECTRONIC ZONE, TTC INDUSTRIAL AREA, MAHAPE, NAVI MUMBAI 400 710 PAN NO: AAJCS 8027 P V. DEPUTY COMMISSIONER OF INCOME TAX - CIRCLE 3, THANE (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI DEVENDRA JAIN REVENUE BY : SHRI V . JUSTIN DATE OF HEARING : 07 .12. 2017 DATE OF PRONOUNCEMENT : 20 .12 .2017 O R D E R PER C. N. PRASAD (JM) 1. THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX ( APPEALS) - 2, THANE DATED 12.11.2015 FOR THE ASSESSMENT YEAR 2009 - 10. THE ONLY GRIEVANCE OF THE ASSESSEE IN ITS APPEAL IS IN RESPECT OF THE CONFIRMATION OF DISALLOWANCE OF PURCHASES TO THE TUNE OF . 27,27,159/ - MADE FROM KANAK SALES CORPORATION TREATING AS BOGUS PURCHASES. 2. BRIEFLY STATED THE FACTS ARE THAT, THE ASSESSEE IN THE COURSE OF THE ASSESSMENT PROCEEDINGS WAS REQUIRED TO PROVE THE GENUINENESS OF THE 2 ITA.NO.132/MUM/2016 (A.Y: 2009 - 10) M/S. SHUBHAM ELECTROTECH PVT. LTD. PURCHASES MADE FROM KANAK SALES CORPORATION AS A CCORDING TO THE INFORMATION REC EIVED FROM THE SALES TAX DEPARTMENT , KANAK SALES CORPORATION WAS PROVIDING ONLY BOGUS BILLS AND ASSESSEE IS ONE OF THE BENEFICIARIES AS THE PU RCHASES MADE FROM THE SAID PART Y. TO VERIFY THE GENUINENESS OF THE TRANSACTION THE ASSESSING OFFICER ISSUED NOTICE U/S. 133(6) OF THE ACT, H OWEVER , THE NOTICE RETURNED UNSERVED. INSPECTOR WAS ALSO DEPUTED TO SERVE NOTICE BUT THE INSPECTOR COULD NOT FIND THE PREMISES OF THE PARTY, THEREFORE, ASSESSEE WAS REQUIRED TO SHO W CAUSE AS TO WHY THE SAID PURCHASES SHOULD NOT BE TREATED AS B OGUS EXPENSES. ASSESSEE FILED LETTER DATED 03.03.2013 SURRENDERING THE SAID AMOUNT AS INCOME FOR THE ASSESSME NT YEAR 2009 - 10 TO BUY PEACE, TO AVOID LITIGATION AND TO COOPERATE WITH THE DEPARTMENT , SUBJECT TO NOT LEVYING PENALTY / PROSECUTION. THE ASSESSMENT WA S COMPLETED TREATING THE SAID PURCHASES AS BOGUS EXPENSES AND ADDED TO THE INCOME OF THE ASSESSEE. ASSESSING OFFICER INITIATION PENALTY PROCEEDINGS U/S. 271(1) (C) OF THE ACT FOR CONCEALMENT OF INCOME THROUGH INACCURATE PARTICULARS. ASSESSEE PREFERRED APP EAL BEFORE THE LD.CIT(A) A ND THE LD.CIT(A) SUSTAINED THE DISALLOWANCE ON THE GROUND ASSESSEE HIMSELF ACCEPTED THE ADDITION IN THE ASSESSMENT PROCEEDINGS. 3. LEARNED COUNSEL FOR THE ASSESSEE BEFORE US SUBMITS THAT ASSESSEE AGREED FOR ADDITION ONLY FOR THE REASON THAT THE NOTICE WAS RETURNED UNSERVED AND THERE IS NOTHING TO SUGGEST THAT THE PURCHASES MADE FROM 3 ITA.NO.132/MUM/2016 (A.Y: 2009 - 10) M/S. SHUBHAM ELECTROTECH PVT. LTD. KANAK SALES CORPORATION ARE BOGUS. HE SUBMITS THAT ASSESSING OFFICER HAS TREATED THE PURCHASES MADE FROM KANAK SALES CORPORATION AS BOGU S ONLY B ASED ON THE INFORMATION OF THE SALES TAX DEPARTMENT AND IN ANY CASE THE ENTIRE PURCHASES CANNOT BE TREATED AS BOGUS WHEN ONCE THE SALES WERE ACCEPTED AN D ONLY THE PROFIT ELEMENT SHOULD BE BROUGHT TO TAX. LEARNED COUNSEL FOR THE ASSESSEE SUBMITS TH AT IN SIMILAR CIRCUMSTANCES IN THE CASE OF PRABHAV CONSTRUCTION CO. V. ITO IN ITA.NO.4405/MUM/2016 DATED 13.01.2017 MUMBAI BENCH HELD THAT 12% OF THE PURCHASES SHOULD BE CONSIDERED AS INCOME OF THE ASSESSEE FOLLOWING THE DECISION OF THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF SATHYANARAYAN P. RATHI [ 351 ITR 150 ] . HE FURTHER SUBMITS THAT THE MUMBAI BENCHES OF THE TRIBUNAL CONSISTENTLY HOLDING THAT NOT THE ENTIRE PURCHASES SHOULD BE TREATED AS INCOME OF THE ASSESSEE BUT ONLY THE PROFIT ELEMENT IN SUCH PURCHASES SHOULD BE ASSESSED AS INCOME IN VIEW OF THE HON'BLE GUJARAT HIGH COURT DECISION IN THE CASE OF CIT V . SIMIT P. SETH [356 ITR 451] AND SATHYANARAYAN P. RATHI ( SUPRA) . LEARNED COUNSEL FOR THE ASSESSEE SUBMITS THAT IN VIEW OF THE DECISION S , PROFIT ELEMENT OF 12.5% MAY BE ESTIMATED IN ASSESSEES CASE AND NOT THE ENTIRE PURCHASES AS INCOME. 4. LD.DR VEHEMENTLY SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW . 5. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE ORDERS OF THE AUTHORITIES BEL OW. THOUGH THE ASSESSEE AGREED IN THE COURSE OF 4 ITA.NO.132/MUM/2016 (A.Y: 2009 - 10) M/S. SHUBHAM ELECTROTECH PVT. LTD. ASSESSMENT PROCEEDINGS TO TREAT THE ENTIRE PURCHASES AS INCOME TO AVOID LITIGATION AND TO COOPERATE WITH THE DEPARTMENT SUBJECT TO NOT LEVYING PENALTY . ASSESSEE AGITATED THE ADDIT ION BEFORE THE LD.CIT(A) CO NTEND ING THAT NOT THE ENTIRE PURCHASES TREATED AS BOGUS SHOULD BE CONSIDER ED AS INCOME OF THE ASSESSEE BUT ONLY THE PROFIT ELEMENT EMBEDDED IN IT SHOULD BE CONSIDERED AS INCOME IN VIEW OF THE VARIOUS DECISION S OF H ON'BLE HIGH COURTS. THIS PLEA OF THE ASSESSEE WAS REJECTED BY THE LD.CIT(A). WE FIND MUMBAI BENCH ES OF THE TRIBUNAL IS CONSISTE NT LY HOLDING THAT NOT THE ENTIRE PURCHASES TREATED AS BOGUS SHOULD BE CONSIDERED AS INCOME OF T HE ASSESSEE WHEN ONCE THE SALES ARE ACCEPTED AND ONLY THE PROF IT ELEMENT EMBEDDED IN SUCH PURCHASES SHOULD BE CONSID ERED AS INCOME OF THE ASSESSEE FOLL OW ING THE DECISION OF THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT V . SIMIT P. SETH (SUPRA) AND SATHYANARAYAN P. RATHI ( SUPRA). IN THE CIRCUMSTANCES RESPECTFULLY FOLLOWING THE SAME , WE DIRECT THE ASSESSING OFFICER TO ESTIMATE THE INCOME FROM THESE PURCHASES AT 12.5% AND RECOMPUTE THE INCOME OF THE ASSESSEE. 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON THE 20 TH DECEMBER , 2017. SD/ - SD/ - ( G.S. PANNU ) (C.N. PRASAD) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI / DATED 20 / 12 / 2017 GIRIDHAR , SPS 5 ITA.NO.132/MUM/2016 (A.Y: 2009 - 10) M/S. SHUBHAM ELECTROTECH PVT. LTD. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY// BY ORDER, (ASSTT. REGISTRAR) ITAT, MUM BAI