ACIT 12(1)(1), MUMBAI V. AMBA ENTERPRISED LTD, MUMBAI

ITA 1347/MUM/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 7484 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-05-2019
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2009-2010
• Appeal Filed On: 27-02-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAJESH KUMAR YADAVLD
• Assessee Lawyers: NISHIT GANDHI LD
• Keywords: Bogus purchase; Reassessment proceedings; Set aside
• Section: 143(3); 142(1); 133(6); 148

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI . . , , BEFORE HONBLE SHRI C.N. PRASAD, JM AND HONBLE SHRI MANOJ KUMAR AGGARWAL, AM ./ I.T.A. NO.1347/MUM/2017 ( / ASSESSMENT YEAR: 2009-10) D CIT - 12(1)(1) 2 ND FLOOR, ROOM NO.223, AAYKAR BHAVAN M.K. ROAD MUMBAI-400 020. / VS. M/S. AMBA ENTERPRISES LTD. A-103, SHILPIN BUILDING, OFF BORSAPADA ROAD KANDIVALI (W) MUMBAI-400 067. ! ./ ./PAN/GIR NO. AAFCA-6033-R ( !# /APPELLANT ) : ( $!# / RESPONDENT ) ASSESSEE BY : SHRI NISHIT GANDHI- LD. AR REVENUE BY : SHRI RAJESH KUMAR YADAV - LD.DR / DATE OF HEARING : 25/04/2019 / DATE OF PRONOUNCEMENT : 03/05/2019 / O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. AFORESAID APPEAL BY REVENUE FOR ASSESSMENT YEAR [IN SHORT REFERRED TO AS AY] 2009-10 CONTEST THE ORDER OF LD. COMMIS SIONER OF INCOME- TAX (APPEALS)-20, MUMBAI, [IN SHORT REFERRED TO AS CIT(A)], APPEAL NO. CIT(A)-20/DCIT-12(1)(1)/IT-43/2015-16 D ATED 04/11/2016 ON FOLLOWING GROUNDS OF APPEAL:- 1. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A) ERRED IN RESTRICTING DISALLOWANCE OF BOGUS PURCHASE OF RS.1, 36,94,518/- TO 1.5% WITHOUT ANY BASIS WHEN HE HIMSELF HAS ACCEPTED THAT PURCHASES A RE NOT GENUINE AND HE SHOULD HAVE CONFIRMED FULL ADDITION ON ACCOUNT OF BOGUS PU RCHASES.' 2 2. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A) ERRED IN RESTRICTING THE ADDITION MADE ON ACCOUNT OF PURCHAS ES OF RS.1,36,94,518/- TO 1.5% WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE WAS NOT ABLE TO PRODUCE THE ALLEGED PARTIES AFTER GIVING AMPLE OPPORTUNITIES.' 3. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A) ALSO FAILED TO APPRECIATE THAT THE ALLEGED PARTIES HAVE ACCEPTED BEFORE THE MAHARASHTRA SALES TAX DEPARTMENT THAT NO ACTUAL BUSINESS OR TRA NSACTIONS HAVE BEEN CARRIED OUT BY THEM,' 4. 'THE APPELLANT PRAYS THAT THE ORDER OF THE LD. CIT(A) ON THE ABOVE GROUND BE SET ASIDE AND THAT OF THE A.O. BE RESTORED.' THE APPEAL IS A RECALLED MATTER SINCE THE SAME WAS ADJUDICATED EX-PARTE QUA THE ASSESSEE VIDE ORDER DATED 15/09/2017. HOWEVER, THE ORDER HAS SUBSEQUENTLY BEEN RECALLED, UPON ASSESSEES APPLICA TION, VIDE MA NO.194/MUM/2018 ORDER DATED 28/12/2018 . ACCORDINGLY, THE APPEAL HAS COME UP FOR FRESH HEARING BEFORE THIS BENCH. 2.1 BRIEFLY STATED, THE ASSESSEE BEING RESIDENT CORPORATE ASSESSEE STATED TO BE ENGAGED IN THE BUSINESS OF MANUFACTURING & PROCESSING OF IRON & STEEL WAS ASSESSED U/S 143(3) R.W.S. 147 ON 23/03/2015 WH EREIN THE INCOME WAS DETERMINED AT RS.205.21 LACS AFTER S OLE DISALLOWANCE OF ALLEGED BOGUS PURCHASES FOR RS.136.94 LACS AS AGAINST RETURNED INCOME OF RS.68.26 LACS E-FILED BY THE ASSESSEE ON 30/09/2 009 WHICH WAS PROCESSED U/S143(1). 2.2 THE REASSESSMENT PROCEEDINGS GOT TRIGGERED PURS UANT TO RECEIPT OF CERTAIN INFORMATION FROM SALES TAX DEPARTMENT, MAHARASHTRA THAT THE ASSESSEE OBTAINED BOGUS PURCHASE BILLS AGGREGATING TO RS.136.94 LACS FROM 4 ENTITIES, THE DETAILS OF WHICH HAVE ALREADY BEEN GIVEN IN THE QUANTUM ASSESSMENT ORDER. ACCORDINGLY, THE CASE WAS REOPENED VIDE NOTICE U/S 148 DATED 13/03/2014. THE REASONS WERE R EOPENING WERE SUPPLIED AS DEMANDED BY THE ASSESSEE. STATUTORY NOT ICES U/S 143(2) & 142(1) WERE ISSUED DIRECTING ASSESSEE TO FILE REQUI SITE DOCUMENTS IN RESPECT TO PURCHASE TRANSACTIONS. 3 2.3 THE ASSESSEE SUBMITTED COPY OF LEDGER ACCOUNT, TAX INVOICES AND TRANSPORT RECEIPTS IN SUPPORT OF THE TRANSACTIONS. HOWEVER, NOTICES ISSUED U/S 133(6) TO ALL THE PARTIES WERE RETURNED BACK UN SERVED BY THE POSTAL AUTHORITIES. THE WARD INSPECTOR REPORTED THAT NONE OF THE PARTIES EXISTED AT THE GIVEN ADDRESS. THE SAID FACTS WERE CONFRONTE D TO THE ASSESSEE. THE ASSESSEE SUBMITTED THAT THE MATERIAL PURCHASED DURING THE YEAR WAS USED IN PRODUCTION OF FINISHED GOODS AND THE SAME W AS ACCOUNTED FOR IN THE QUANTITATIVE DETAILS OF SALE, PURCHASE, PRODUCT ION, STOCK ETC. IT WAS ALSO SUBMITTED THAT THE PAYMENTS WERE MADE THROUGH BANKING CHANNELS. 2.4 HOWEVER, NOT SATISFIED, IT WAS NOTED THAT THE A FORESAID PARTIES ADMITTED BEFORE SALES TAX DEPARTMENT THAT THEY HAD ISSUED ACCOMMODATION BILLS ONLY WITHOUT DELIVERY OF ANY MA TERIAL. IT WAS ALSO NOTED THAT THE PAYMENT TO ALL THE SUPPLIERS WAS MAD E AFTER A GAP OF 6 TO 10 MONTHS WHICH WAS HIGHLY IMPRACTICAL FOR THIS TYP E OF PURCHASES SINCE THE MARGINS WERE LOW. THE PERUSAL OF SUPPLIERS ADD RESSES, TRANSPORT RECEIPTS LED THE LD. AO TO BELIEVE THAT NO ACTUAL D ELIVERY OF GOODS TOOK PLACE. NO WEIGHMENT SLIPS WERE SUBMITTED IN SUPPORT OF DELIVERY OF MATERIAL. THE ASSESSEE FAILED TO PRODUCE EXCISE REG ISTER IN SUPPORT OF RECEIPT OF GOODS AND SUBSEQUENT SALE. THEREFORE, FI NDING THAT THE ASSESSEE REMAINED UNSUCCESSFUL TO ESTABLISH THE GEN UINENESS OF THE TRANSACTIONS, THE PURCHASES WERE TERMED AS BOGUS PURCHASES. ACCORDINGLY, THE DEDUCTION OF THE SAME WAS DENIED U /S 37(1). 3. BEFORE LD. FIRST APPELLATE AUTHORITY, THE ASSESS EE MADE DETAILED SUBMISSIONS WHICH WERE DULY CONSIDERED. THE GIST OF VARIOUS TRIBUNALS DECISIONS ON THE ISSUE OF BOGUS PURCHASES WERE CONSIDERED ON PAGE NOS. 9 TO 15 OF THE IMPUGNED ORDER. AT PARA 4.3, IT WAS, INTER-ALIA, OBSERVED THAT LD. AO SIMPLY MADE ADDITIONS WITHOUT MUCH INQUIRY AND AT 4 THE SAME TIME, THE ASSESSEE ALSO FAILED TO DISCHARG E THE PRIMARY ONUS CASTED UPON HIM TO PROVE THE GENUINENESS OF THE PUR CHASES. FINALLY, THE IMPUGNED ADDITIONS WERE ESTIMATED AT 1.5% OF THE ALLEGED BOGUS PURCHASES. AGGRIEVED, THE REVENUE IS IN FURTHER APPEAL BEFORE US. IT APPEARS THAT NO FURTHER APPEAL HAS BEEN FILED BY TH E ASSESSEE. 4. THE LD. DEPARTMENTAL REPRESENTATIVE [DR] SUBMITT ED THAT THE LD. FIRST APPELLATE AUTHORITY DID NOT CONSIDER THE FACT UAL MATRIX AS OBSERVED BY LD. AO IN THE QUANTUM ASSESSMENT ORDER AND RESTR ICTED THE ADDITIONS MERELY TO 1.5%, WHICH WAS NOT JUSTIFIED UNDER THE C IRCUMSTANCES. THE LD. AUTHORIZED REPRESENTATIVE FOR ASSESSEE [AR], LAID M ULTIPLE PROPOSITIONS, INTER-ALIA, TO SUBMIT THAT THE ESTIMATIONS MADE BY LD. FIRST AP PELLATE AUTHORITY WOULD NOT WARRANT ANY INTERFERENCE. 5. WE HAVE CAREFULLY HEARD THE RIVAL SUBMISSIONS AN D PERUSED RELEVANT MATERIAL ON RECORD. AT THE OUTSET, WE MAY NOTE THAT BOTH THE REPRESENTATIVE, IN THE COURSE OF ARGUMENTS, HAVE RE LIED UPON VARIOUS JUDICIAL PRONOUNCEMENTS SO AS TO JUSTIFY REASONABLE NESS OF THE ESTIMATION ON ACCOUNT OF ALLEGED BOGUS PURCHASES. THE REVENUE WOULD SUBMIT THAT EVEN WHOLE ADDITION SHOULD BE SUSTAINED WHEREAS THE ASSESSEE WOULD GO TO OTHER EXTREME TO SUBMIT THAT T HE NO ADDITION OR A VERY MINIMUM ADDITION SHOULD BE SUSTAINED. WE ARE O F THE CONSIDERED OPINION THAT NO STRAIT-JACKET FORMULA COULD BE ADOP TED IN THE MATTER OF ESTIMATION AND THE SAME WOULD LARGELY DEPEND UPON T HE FACTUAL MATRIX OF A PARTICULAR CASE AND TO THE EXTENT OF INVESTIGATIO N CARRIED OUT BY THE LOWER AUTHORITIES. 6. THE FACTS AS ENUMERATED BY US IN PRECEDING PARAG RAPHS WOULD REVEAL THAT THE ASSESSEE HAS FAILED TO DISCHARGE TH E PRIMARY ONUS OF ESTABLISHING THE GENUINENESS OF THE PURCHASES WHICH IS EVIDENT FROM THE 5 FACT THAT THE ESTIMATION MADE BY LD. FIRST APPELLAT E AUTHORITY HAS BEEN ACCEPTED BY THE ASSESSEE. NOTICES ISSUED U/S 133(6) TO ALL THE SUPPLIERS DID NOT ELICIT ANY SATISFACTORY RESPONSE AND THE FI ELD INQUIRIES REVEALED THAT NOT EVEN A SINGLE SUPPLIER EXISTED AT THE GIVE N ADDRESS WHICH WOULD WEAKEN THE ARGUMENT THAT THERE WAS CONSIDERABLE TIM E GAP BETWEEN PURCHASES MADE BY THE ASSESSEE AND REPLIES SOUGHT B Y THE REVENUE. THE ASSESSEE FAILED TO PRODUCE ANY OF THE SUPPLIER TO CONFIRM THE TRANSACTIONS. AT THE SAME TIME, WE FIND THAT THE AS SESSEE WAS IN POSSESSION OF PRIMARY PURCHASE DOCUMENTS AND THE PA YMENTS TO SUPPLIERS WERE THROUGH BANKING CHANNELS, ALBEIT AFT ER A GAP OF 6-10 MONTHS AS NOTED BY LD. AO. THE SALES TURNOVER HAS N OT BEEN DISPUTED AND THE BOOKS OF ACCOUNTS WERE SUBJECT TO AUDIT. TH ERE COULD BE NO PRODUCTION OF MATERIAL WITHOUT ACTUAL CONSUMPTION O F MATERIAL. THE QUANTITATIVE DETAILS, TO A CERTAIN EXTENT, WERE PLA CED ON RECORD. THEREFORE, IN SUCH A SITUATION, THE ADDITION, WHICH COULD BE MADE, WAS TO ACCOUNT FOR PROFIT ELEMENT EMBEDDED IN THESE PURCHA SE TRANSACTIONS TO FACTORIZE FOR PROFIT EARNED BY ASSESSEE AGAINST POS SIBLE PURCHASE OF MATERIAL IN THE GREY MARKET AND UNDUE BENEFIT OF VA T AGAINST SUCH BOGUS PURCHASES. KEEPING IN VIEW THE FACT THAT THE ASSESSEE HAS ALREADY REFLECTED GROSS PROFIT / NET PROFIT RATE OF 14.60% & 4.1% RESPECTIVELY DURING THE IMPUGNED AY AND THE ASSESSEE WAS DEALING IN LOW MARGIN ITEM, WE ESTIMATE THE SAME TO 5% OF ALLEGED BOGUS PURCHASES. THE SAME WORKS OUT TO RS.6,84,726/-. THE IMPUGNED ORDER STAND MODIFIED TO THAT EXTENT. 7. THE APPEAL STANDS PARTLY ALLOWED IN TERMS OF OUR ABOVE ORDER. 6 ORDER PRONOUNCED IN THE OPEN COURT ON 03 RD MAY 2019. SD/- SD/- (C.N. PRASAD) (MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED :03/05/2019 SR.PS, JAISY VARGHESE ! / COPY OF THE ORDER FORWARDED TO : 1. !# / THE APPELLANT 2. $!# / THE RESPONDENT 3. + ( ) / THE CIT(A) 4. + / CIT CONCERNED 5. ,- & . , . , / DR, ITAT, MUMBAI 6. -/01 / GUARD FILE / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI.