MAHAVIR METAL, MUMBAI V. ASST CIT 19(3), MUMBAI

ITA 1430/MUM/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 1033 (ITAT-MUMBAI)
• Duration Of Justice: 10 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-01-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 01-03-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: N HEMALATHA
• Keywords: Bogus purchase; Accommodation entries; Onus to prove
• Section: 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC , BENCH MUMBAI BEFORE SHRI R.C.SHARMA, AM ITA NO. 1430 / MUM/20 17 ( ASSESSMENT YEAR : 2010 - 11 ) SHRI. MAHAVIR METAL, 6, JAIKUWAR BHAVAN 8 TH KHETWADI LANE MUMBAI 400 004 VS. ASST. CIT 19(3) TARDEO MUMBAI 400 0 26 PAN/GIR NO. AAIFS6733N APPELLANT ) .. RESPONDENT ) ASSESSEE BY SHRI SATISH MODI REVENUE BY MS. N. HEMALATHA DATE OF HEARING 05 / 10 /201 7 DATE OF PRONOUNCEME NT 02 / 01 /201 8 / O R D E R PER R.C.SHARMA (A.M) : THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) - 29, MUMBAI DATED 18/01/2017 FOR A.Y.2010 - 11 IN THE MATTER OF ORDER PASSED U/S.143(3) R.W.S. 147 OF THE INCOME - TAX ACT, 1961. 2. IN THIS APPEAL, A SSESSEE IS AGGRIEVED FOR DELETING ADDITION OF 12.5% ON BOGUS PURCHASES. 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. 4. THE FACTS OF THE CASE ARE THAT THE ASSESSEE FIRM FILED ITS RETURN OF INCOME FOR THE A.Y.2010 - 11 ON 26.08 . 2010 DECLARING A T OTAL INCOME OF RS.1,85,521 / - . THE RETURN WAS PROCESSED U/S.143(1). SUBSEQUENTLY, THE AO RECEIVE D INFORMATION FROM THE DGIT(INV ), MUMBAI WHO IN TURN RECEIVED INFORMATION FROM THE SALES TAX DEPARTMENT ABOUT SOME HAWALA ENTRY ITA NO. 1430/MUM/2017 SHRI. MAHAVIT METAL 2 PROVIDERS ON THE BASIS OF WHI CH THE CASE WAS REOPENED U/S.147. THE INFORMATION WAS THAT THE SALES TAX DEPARTMENT HAS EXERCISED DUE DILIGENCE WHICH REVEALED THAT THE ASSESSEE WAS INVOLVED IN TAKING ACCOMMODATION ENTRIES OF BOGUS PURCHASES FROM 11 PARTIES AMOUNTING TO RS . 2,08,32,713/ - . 5. THE SALE S TAX DEPARTMENT HAS CLASSIFIED THESE PARTIES AS HAWALA DEALERS. AO OBSERVED THAT IT IS EVIDENT FROM THE REPORT OF THE SALES TAX DEPARTMENT AND STATEMENT RECORDED FROM THESE PARTIES THAT PURCHASES, SHOWN BY THE ASSESSEE FROM TH ESE PARTIES ARE BOGUS AND NOTHING BUT ACCOMMODATION ENTRIES TO INFLATE PURCHASES TO REDUCE TAXABLE PROFITS/INCOME. D URING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO ASKED THE ASSESSEE TO FURNISH DETAILS OF THE PURCHASES ALONGWITH THE NAME, ADD RESS, TIN NO. AND AMOUNT DEBITED IN THE P/L ACCOUNT. NOTICES U/S. 133(6) WERE ISSUED TO THE PARTIES MENTIONED SUPRA BUT THE SAME HAVE BEEN RETURNED BY THE POSTAL AUTHORITIES AS THE PARTIES WERE NON EXISTING AT THE GIVEN ADDRESS. THE AO HELD THAT THE BURDEN TO PROVE THE EXISTENCE OF THE PARTIES AND THE GENUINENESS OF THE PURCHASES LIES ON THE ASSESSEE AND ASSESSEE HAS FAILED TO DISCHARGE THE ONUS CAST ON IT AND HE TREATED THE PURCHASES AS NON GENUINE. RELYING ON THE DECISION OF GUJARAT HIGH COURT IN THE CASE OF SIMIT P. SHETH 356 ITR 451 AND M/S. BHOLENATH POLY FAB P.LTD. 355 ITR 290 MADE AN ADDITION OF 12.5% OF THE ALLEGED BOGUS PURCHASES WHICH WORKED OUT TO RS.26,04 , 089/ - . ITA NO. 1430/MUM/2017 SHRI. MAHAVIT METAL 3 6. BY THE I MPUGNED ORDER, CIT(A) FURTHER REDUCED THE ADDITION MADE BY AO BY THE G.P. RATE DECLARED BY ASSESSEE AFTER HAVING THE FOLLOWING OBSERVATION: - 3.3. THE SUBMISSIONS OF THE LD. COUNSEL FOR THE APPELLANT HAVE BEEN CAREFULLY CONSIDERED ALONGWITH THE FACTUAL MATRIX OF THE CASE. IN THE SUBMISSIONS, THE APPELLANT ALSO LISTED ITS OTHER GRIEVANCES LIKE CERTIFIED COPIES OF THE STATEMENT GIVEN BY THE ALLEGED BOGUS PARTIES HAVE NOT BEEN PROVIDED TO IT, OPPORTUNITY TO CROSS EXAMINE THE ALLEGED BOGUS PARTIES WAS ALSO NOT PROVIDED. ALSO, THE AO MERELY RELIED UPON THE COMMUNICATION OF SALES - TAX DEPARTMENT WITHOUT GIVING ANY REASON TO REBUT THE EVIDENCES FURNISHED BY IT. 3.3.1. THE LD. COUNSEL FOR THE APPELLANT EXPRESSED HIS GRIEVANCE THAT COPIES OF STATEMENTS HAVE NOT BEEN GIVEN TO THE - APPELLANT NOR AN OPPORTUNITY TO CROSS EXAMINE THE PARTIES HAS BEEN PROVIDED BUT NO EVIDENCE OF HIS REQUEST TO THE AO JA PROVIDE FOR CROSS EXAMINATION AND ALSO COPIES OF THE STATEMENT HAS BEEN PRODUCED BEFORE THE UNDERSIGNED. WITHOUT ANY REQUEST FROM THE APPELLANT THE AO CANNOT PROVIDE THIS INFORMATION. FURT HER, THE AO TREATED THE ALLEGED BOGUS AS WITNESSES OF THE APPELLANT AND ASKED IT TO PRODUCE THEM FOR EXAMINATION. HOWEVER, THE APPELLANT FAILED TO PRODUCE THEM. THE NOTICES ISSUED BY THE AO U/S.133(6) RETURNED UNSERVED AS THE PARTIES WERE NOT A VAILABLE AT THE GIVEN ADDRESS. THEREFORE, THE AO CANNOT PROVIDE FOR CROSS EXAMINATION OF THESE PARTIES. 3.3.2. IN AN/ CASE, THE AO DID NOT STATE THAT THE ABOVE PURCHASES ARE BOGUS. HE HAD ONLY TREATED THE PARTIES FROM WHOM PURCHASES ARE BEING MADE AS BOGUS TRCTO FROM SOME OTHER PARTIES IN THE GREY MARKET AT A LOWER RATE AND T THEREFORE SUPPRESSED PROFIT. HE HAD ESTIMATED THE PROFIT ON SUCH PURCHASES AT 12.5%, 3.3.3. THE HON'BLE ITAT, AHMEDABAD 'C' BENCH IN THE CASE OF VIJAY PROTEINS LTD. VS. ACIT 58 ITD 0 428 HELD THAT IN SIMILAR CIRCUMSTANCES, 25% OF THE PURCHASE PRICE ACCOUNTED THROUGH FICTITIOUS INVOICES HAS TO B'E DISALLOWED. THE HON'BLE HIGH COURT OF GUJARAT IN THE CASE OF SANJAY OIL CAKES V/S CIT 316 ITR 0274 DEAIT WITH SIMILAR CASE WHERE SOME OF T HE ALLEGED SUPPLIERS WHO HAD ISSUED BILLS TO THE ASSESSEE WERE NOT GENUINE AS THEY WERE NOT TRACEABLE. THE GOODS MUST HAVE BEEN RECEIVED FROM OTHER PARTIES. THE LIKELIHOOD OF THE PURCHASE PRICE OF THESE ALLEGED PURCHASES BEING INFLATED COULD NOT BE RUL ED OUT AND THEREFORE THE HON'BLE HIGH COURT HAS UPHELD THE DECISION OF CIT(A) AND THE ITAT DISALLOWING 25% OF THE PAYMENTS MAD E TO SUCH PARTIES, TH.E HON'BL E HIGH COURT OF GUJARAT IN THE CASE OF CIT VS. SIMIT P. SHETH 356 ITR 0451 HELD THAT ONCE THE SALE IS ACCEPTED BY THE AO, THE VERY BASIS OF PURCHASES COU L D NOT BE QUESTIONED. NOT THE ENTIRE PURCHASE PRICE COULD BE DISALLOWED BUT ONLY THE PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES COULD BE ADDED TO THE INCOME OF THE ASSESSEE. THE ESTIMATION VARIES WIT H THE NATURE OF BUSINESS AND NO UNIFORM YARDSTICK COULD BE ADOPTED. GIVEN THE FACTS AND CIRCUMSTANCES OF THE INSTANT CASE, I FIND IT REASONABLE TO ESTIMATE THE GROSS PROFIT ON THE ALLEGED BOGUS PURCHASES AT 12.5%. THE ACTION OF THE AO IN ESTIMATING THE GP @12.5% ON THE ALLEGED BOGUS PURCHASES IS CONFIRMED. HOWEVER, THE AO IS DIRECTED TO REDUCE THE PROFIT ALREADY DECLARED BY THE APPELLANT ON THESE PURCHASES FROM SUCH ESTIMATE. THESE GROUNDS OF APPEAL ARE PARTLY ALLOWED. ITA NO. 1430/MUM/2017 SHRI. MAHAVIT METAL 4 7. A SSESSEE IS IN FURTHER APPEAL BEFORE US. IT WAS ARGUED BY LEARNED AR THAT ASSESSEE HAS ALREADY DISCLOSED GP OF 3.83% WHICH IS VERY REASONABLE L OOKING TO THE NATURE OF TRADE THAT ASSESSEE WAS INVOLVED. 8. ON THE OTHER HAND, LEARNED DR RELIED ON THE ORDER OF THE LOWER AUTHORITIES. 9. I H AVE CONSIDERED RIVAL CONTENTIONS AND CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND FOUND FROM RECORD THAT AFTER GIVING ALL THE OPPORTUNITY AND MAKING ALL ENQUIRY, THE AO REACHED TO THE CONCLUSION THAT IT WAS THE CASE OF BOGUS SUPPLIER EVE N THOUGH PURCHASES WERE GENUINE WHICH WERE USED FOR MAKING SALES, HE ACCORDINGLY ADDED PROFIT INVOLVED ON SUCH BOGUS PURCHASES @12.5% . AFTER GIVING DETAILED REASON, THE CIT(A) HAS CONFIRMED THE FINDING OF AO WITH REGARD TO THE BOGUS SUPPLIERS, HOWEVER, HE HAS FURTHER REDUCED THE GP ADDITION OF 12.5% BY THE AMOUNT OF PROFIT DECLARED BY THE ASSESSEE. THE DETAILED FINDING SO RECORDED BY AO AND CIT(A) HAS NOT BEEN CONTROVERTED BY LEARNED AR BY BRINGING ANY POSITIVE MATERIAL ON RECORD. ACCORDINGLY, I DO NOT FIN D ANY REASON TO INTERFERE IN THE ORDER OF CIT(A) RESTRICTING THE ADDITION TO THE EXTENT OF 12.5% AND FURTHER REDUCTION OF PROFIT DECLARED BY THE ASSESSEE. 10. IN THE RESULT, APPEAL IS DISMISSED . O RDER PRONOUNCED IN THE OPEN COURT ON THIS 02 / 01 /201 8 SD/ - ( R.C.SHARMA ) ACCOUNTANT MEMBER MUMBAI ; DATED 02 / 01 /201 8 KARUNA SR. PS ITA NO. 1430/MUM/2017 SHRI. MAHAVIT METAL 5 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//