ABHIJEET DIES & TOOLS PVT LTD, MUMBAI V. DCIT 12(1)(1), MUMBAI

ITA 1430/MUM/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 5987 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-09-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 11-03-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MICHAEL JERALD
• Keywords: Bogus purchase; Unexplained expenditure; Accommodation entries; Set aside
• Section: 69C; 37(1); 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES A , MUMBAI BEFORE S HRI S. RIFAUR RAHMAN (AM ) AND SHRI RAM LAL NEGI (JM) ITA NO. 1430/MUM/2019 ASSESSMENT Y EAR: 2012 - 13 ABHIJEET DIES & TOOLS PVT. LTD., 38 - C, GOVERNMENT INDUSTRIAL ESTATE, CHARKOP, KAN DIVALI WEST, MUMBAI - 400067 PAN: AAACA4238M VS. THE DCIT 12(1)(1), ROOM NO. 223, 2 ND FLOOR, MAHARSHI KARVE ROAD, CHURCHGATE, MUMBAI - 400020 (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI VIMAL PUNMIYA (AR ) REVENUE BY : SHRI MICHAEL JERALD (D R ) DATE OF HEARING: 02/09 /2020 DATE OF PRONOUNCEMENT: 21 / 09 /2020 O R D E R PER RAM LAL NEGI, JM TH E ASSESSEE HAS FILED THE PRESENT APPEAL AGAINST THE ORDER DATED 15.01.2018 PASSED BY THE C OMMISSIONER OF INCOME TAX (APPEALS) - 2 0 (FOR SHORT THE CIT(A) , MUMBAI , FOR THE ASSESSMENT YEAR 2012 - 13 , WHEREBY THE LD. CIT(A) HAS DISMISSED T HE APPEAL FILED BY THE ASSESSEE AGAINST THE ASSESSMENT ORDER PASSED U/S 143 (3) OF THE INCOME TAX ACT, 1961 (FOR S HORT THE ACT). 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURING MOULDS AND DIES, FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION DECLARING T OTAL INCOME OF RS. 48,65,750/ - SINCE T HE CASE WAS SELECTED FOR SCRUTINY , THE AO ISSUED NOTICE U/S 143 (2) AND 142 (1) OF THE ACT. IN RESPONSE THEREOF, THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE COMPANY FURNISHED THE DETAILS AND DISCUSSED THE CASE. IT WAS NOTICED DURING THE ASSESSMENT PROCEEDI NGS THAT THE ASSESSEE HAD TAKEN ACCOMMODATION BILLS SHOWING PURCHASE OF RS. 2,03,503/ - FROM M/S VARDHMAN TRADERS WHICH WAS ONE OF THE HAWALA DEALERS AS PER THE LIST ISSUED BY SALES 2 ITA NO. 14 30 / MUM/2019 ASSESSMENT YEAR: 2012 - 13 TAX DEPARTMENT, STATE OF MAHARASHTRA. ACCORDINGLY, AO ASKED THE ASSESSEE TO ESTABLISH THE GENUINENESS OF PURCHASES BY FURNISH ING TRANSPORT BILLS, GOODS RECEIPT NOTE, WEIGHMENT SLIP ETC. T HE AR OF THE ASSESSEE SUBMITTED LEDGER ACCOUNT AND COPY OF INVOICES AND CONTENDED THAT THE MATERIALS WERE GENUINELY PURCHASE D BY THE ASSESSEE . HOWEVER, T HE AO REJECTING THE CONTENTION OF THE ASSESSEE TREAT ING THE PURCHASES IN QUESTION AS BOGUS, DISALLOWED U/S 37(1) OF THE ACT AS UNEXPLAINED EXPENDITURE AND ADDED THE SAME TO THE INCOME OF THE ASSESSEE AND DETERMINED THE TOTAL INCOME AT RS. 50,69, 250/ - . AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE CHALLENGED THE ASSESSMENT ORDER BEFORE THE LD. CIT (A) . SINCE, THE ASSESSEE DID NOT APPEAR BEFORE THE LD. CIT (A) DESPITE SEVERAL OPPORTUNITIES GIVEN TO PRESENT ITS CASE, THE LD. CIT(A ) PROCEEDED EX PA RTE HOLDING THAT THE ASSESSEE IS NOT INTERESTED IN PURSUING ITS APPEAL AND DECIDED THE SAME ON THE BASIS OF MATERIAL AVAILABLE ON RECORD. THE ASSESSEE IS IN APPEAL AGAINST THE IMPUGNED ORDER PASSED BY THE LD. CIT (A). 3 . THE ASSESSEE HAS CHALLENGED TH E IMPUGNED ORDER PASSED BY THE LD. CIT (A) ON THE FOLLOWING EFFECTIVE GROUND S : - 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT (A) ERRED IN CONFIRMING THE ADDITIONS OF THE GENUINE PURCHASES OF RS. 2,03,503/ - AND THEREBY ERRED IN TREATING THE SA ME AS UNEXPLAINED EXPENDITURE IN VIEW OF SECTION 69C OF THE INCOME TAX ACT, 1961. 2. THE LD. CIT (A) ERRED IN CONFIRMING THE CHARGING OF INTEREST UNDER SECTION 234B, 234C AND 234D OF THE INCOME TAX ACT, 1961. 3. THE LD. CIT (A) ERRED IN CONFIRMING THE INIT IATION OF THE PENALTY PROCEEDING UNDER SECTION 271 (1) (C) OF THE INCOME TAX ACT, 1961. 4. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED BEFORE US THAT THE LD. CIT (A) HAS WRONGLY CONFIRMED THE ADDITION MADE BY THE AO ON THE BASIS OF INFORMATION RECEIVED FR OM THE S ALES TAX DEPARTMENT, MAHARASHTRA, ALLEGING THAT DURING THE YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION THE ASSESSEE OBTAINED ACCOMMODATION ENTRIES FROM M/S VARDHMAN TRADERS, A HAWALA DEALER . THE LD. COUNSEL FURTHER CONTENDED THAT THE AO HAS NOT CONDUCTED ANY 3 ITA NO. 14 30 / MUM/2019 ASSESSMENT YEAR: 2012 - 13 ENQUIRY TO VERIFY THE CONTENTION OF THE ASSESSEE THAT THE PURCHASES ARE GENUINE . THE LD. COUNSEL FURTHER SUBMITTED THAT ASSESSEE HAS FURNISHED PURCHASE BIL LS ALONG WITH DELIVERY CHALLANS; A LL PAYMENTS WERE MADE THROUGH ACCOUNT PAY EES CHEQUE S AND T HE ASSESSEE HAS PAID VAT WHICH IS REFLECTED IN THE PURCHASE BILLS. THE LD. COUNSEL FURTHER CONTENDED THAT T HERE IS NO IOTA OF EVIDENCE TO ESTABLISH THAT ASSESSEE RECEIVED BACK THE AMOUNT IN CASH FROM THE SUPPLIER. THE LD. COUNSEL FURTHER S UBMITTED THAT SINCE THE AO HAS NOT DISPUTED THE SALE, THE LD. CIT (A) OUGHT TO HAVE ACCEPTED THE PURCHASES ALSO AS THERE CANNOT BE ANY SALE WITHOUT PURCHASES. THE LD. COUNSEL WITHOUT PREJUDICE SUBMITTED THAT IN ANY CASE 100% ADDITION IS NOT SUSTAINABLE IN LAW. THE LD. COUNSEL RELIED ON THE VARIOUS DECISIONS OF THE ITAT TO SUBSTANTIATE HIS CONTENTION. 5. THE LD. COUNSEL FURTHER SUBMITTED THAT THE ISSUE INVOLVED IN THIS CASE IS COVERED BY THE ORDER OF THE MUMBAI TRIBUNAL RENDERED IN THE CASE OF ASSESSEES SISTER CONCERN M/S ABHIJEET PLASTIC INDIA PVT. LTD., ITA NO. 1426 TO 1428/MUM/2019 . IN THE SAID CASE THE TRIBUNAL DEALT WITH THE IDENTICAL ISSUE AND DIRECTED THE AO TO MAKE ADDITION TO THE EXTENT OF SHORTFALL IN GROSS PROFIT IN THE ASSESSMENT YEARS 2010 - 11 AND 2011 - 12 TO MAKE THE SAME 15%. 6. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESENTATIVE (DR) ADMITTED THAT IN THE CASE OF ABHIJEET PLASTIC INDIA LTD., THE TRIBUNAL HAS DIRECTED THE AO TO MAKE ADDITION TO BRING THE GP AT 15%, HOWEVER SUPPORTED THE ORDE R PASSED BY THE LD. CIT (A) CONFIRMING 100% ADDITION ON THE GROUND THAT 15% GP IS NOT JUSTIFIED IN ASSESSEES CASE. THE LD. DR RELIED ON THE JUDGMENT OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF PR. CIT VS. JAKHARIA FABRIC (P) LTD. (2020) 118 TAXMANN.CO M 406 (BOMBAY), PR. CIT VS. RISHABHDEV TECHNOCABLE LTD. (2020) 115 TAXMANN.COM 333 (BOMBAY) AND POOJA PAPER TRADING CO. (P) LTD. VS. INCOME TAX OFFICER (2019) 104 TAXMANN.COM 95 (BOMBAY) TO FORTIFY HIS ARGUMENTS. 7 . WE HAVE HEARD THE RIVAL SUBMISSIONS OF T HE PARTIES AND PERUSED THE MATERIAL ON RECORD INCLUDING THE CASES RELIED UPON BY THE PARTIES. THE ASSESSEE HAS CHALLENGED THE IMPUGNED ORDER ALLEGING THAT THE AO HAS PASSED THE ASSESSMENT ORDER ON THE BASIS OF INFORMATION RECEIVED FROM THE SALES TAX DEPART MENT MAHARASHTRA, WITHOUT CONDUCTING ANY ENQUIRY ; THE ASSESSEE WAS 4 ITA NO. 14 30 / MUM/2019 ASSESSMENT YEAR: 2012 - 13 NOT GIVEN AN OPPORTUNITY TO CROSS EXAMINE THE WITNESSES WHOSE STATEMENTS WERE RELIED BY THE AO . THE LD. COUNSEL HAS FURTHER RAISED THE POINT THAT THERE CANNOT BE ANY SALE WITHOUT PURCHASES AND THE AUTHORITIES BELOW HAVE REJECTED THE PURCHASES WITHOUT REJECTING THE SALES. WE NOTICE THAT THE ASSESSEE HAS FAILED TO ADDUCE COGENT AND CONVINCING EVIDENCE TO PROVE THE GENUINENESS OF THE PURCHASES IN QUESTION. HENCE, IN OUR CONSIDERED VIEW, THE AUT HORITIES BELOW HAVE RIGHTLY HELD THAT THE ASSESSEE HAS FAILED TO ESTABLISH THE GENUINENESS OF THE QUESTION PURCHASE. SO FAR AS ADDITION IS CONCERNED, I N THE PRESENT CASE , THE LD. CIT(A) HAS CONFIRMED T HE 100% ADDITION MADE BY THE AO, WHICH IS CONTRARY TO T HE RATIO LAID DOWN BY THE VARIOUS COURTS AND THE TRIBUNAL RELIED UPON BY THE ASSESSEE. AS POINTED OUT BY THE LD. COUNSEL, THE SMC BENCH OF THE MUMBAI TRIBUNAL HAS DEALT WITH THE IDENTICAL ISSUE IN THE CASE OF ABHIJEET PLASTIC INDIA PVT. LTD. VS. DCIT, (SU PRA) DIRECTED THE AO TO MAKE ADDITION TO THE EXTENT TO SHORTFALL TO MAKE THE GP AT 15%. THE FINDINGS OF THE COORDINATE BENCH READ AS UNDER: 5. ON THE OTHER HAND, THE LEARNED D.R. RELIED ON THE ORDERS PASSED BY THE AUTHORITIES BELOW AND CONTENDED THAT THE AO HAS MADE DETAILED ENQUIRY WITH REGARD TO THE GENUINENESS OF PURCHASES AND THEREAFTER CAME TO THE CONCLUSION THAT ONLY TO REDUCE THE PROFIT ASSESSEE HAS TAKEN PURCHASE BILLS WITHOUT ACTUAL DELIVERY OF GOODS. HE CONTENDED THAT THE ORDERS THE AUTHORITIES B ELOW SHOULD BE UPHELD. 6. I HAVE CONSIDERED THE RIVAL CONTENTIONS AND CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. I HAVE ALSO DELIBERATED ON THE VARIOUS JUDICIAL PRONOUNCEMENTS REFERRED TO BY THE LOWER AUTHORITIES IN THEIR RESPECTIVE ORDER S AS WELL AS CITED BY THE LEARNED A.R. DURING THE COURSE OF HEARING BEFORE ME. FROM THE RECORD I FOUND THAT ON THE INFORMATION FROM SALES TAX DEPARTMENT THE AO HAD ADDED THE ENTIRE PURCHASES IN ASSESSEES INCOME. THE GROSS PROFIT SHOWN BY THE ASSESSEE IN T HE RESPECTIVE YEARS ARE AS UNDER: - A.Y. 2009 - 10 16.47% A.Y. 2010 - 11 12.75% A.Y. 2011 - 12 14.88% 5 ITA NO. 14 30 / MUM/2019 ASSESSMENT YEAR: 2012 - 13 I ALSO FOUND THAT THE ASSESSEE HAS PAID VAT ON THE GOODS SO PURCHASED. LOOKING TO THE GROSS PROFIT RATIO DECLARED BY THE ASSESSEE IT IS CLEAR THAT THE ASS ESSEE HAS SHOWN VERY REASONABLE GROSS PROFIT RATIO IN ALL THE YEARS UNDER CONSIDERATION. THERE ARE VARIOUS JUDICIAL PRONOUNCEMENTS TO THE FACT THAT IN CASE GROSS PROFIT SHOWN BY THE ASSESSEE IS 15% OR MORE NO ADDITION IS WARRANTED. IN THE INSTANT CASE THE ASSESSEE HAS DECLARED GROSS PROFIT OF 16.47% IN A.Y. 2009 - 10, ACCORDINGLY I DIRECT THE AO NOT TO MAKE ANY ADDITION. HOWEVER, IN ASSESSMENT YEARS 2010 - 11 AND 2011 - 12 THE GROSS PROFIT SHOWN BY THE ASSESSEE IS 12.75% AND 14.88%, WHICH ARE LOWER THAN 15%. ACCO RDINGLY I DIRECT THE AO TO MAKE ADDITION TO THE EXTENT OF SHORTFALL IN GROSS PROFIT IN THESE TWO YEARS AS COMPARED TO THE GROSS PROFIT OF 15% I.E. 2.25% IN A.Y. 2010 - 11 & 0.12 @ IN A.Y. 2011 - 12. I DIRECT ACCORDINGLY. 7. IN THE RESULT, THE APPEAL FOR A.Y. 2 009 - 10 IS ALLOWED WHEREAS APPEALS FOR A.Y. 2010 - 11 AND A.Y. 2011 - 12 ARE ALLOWED IN PART, IN TERMS INDICATED HEREINABOVE. 8 . AS POINTED OUT BY THE LD. COUNSEL, M/S ABHIJEET PLASTIC INDIA PVT. LTD. IS ALSO ENGAGED IN THE BUSINESS OF MANUFACTURING MOULDS A ND DIES. THE AO MADE 100% ADDITION OF THE ALLEGED BOGUS PURCHASES. IN THE FIRST APPEAL, THE LD. CIT(A) CONFIRMED THE ADDITION . IN THE FURTHER APPEAL, THE ITAT SET ASIDE THE ORDER PASSED BY THE LD. CIT(A) AND DIRECTED THE AO TO MAKE ADDITION TO THE EXTENT O F SHORTFALL TO MAKE THE GP OF 15% OBSERVING THAT IN THE ASSESSMENT YEARS 2010 - 11 AND 2011 - 12 THE GROSS PROFIT SHOWN BY THE ASSESSEE IS 12.75% AND 14.88 %, WHICH ARE LOWER THAN 15%. IN THE PRESENT CASE, THE ASSESSEE HAS SHOWN GROSS PROFIT OF 12.06% IN THE AS SESSMENT YEAR UNDER CONSIDERATION AND 16.81% IN THE PRECEDING ASSESSMENT YEAR. T HE FACTS AND THE ISSUES INVOLVED IN THE PRESENT CASE ARE IDENTICAL TO THE FACTS AND THE ISSUES INVOLVED IN THE CASE OF M/S ABHIJEET PLASTIC INDIA PVT. LTD. (SUPRA), AND T HE COO RDINATE BENCH HAS DIRECTED THE AO TO MAKE ADDITION TO THE EXTENT OF SHORTFALL TO MAKE THE GROSS PROFIT TO 15% . ON THE OTHER HAND, IN THE CASES RELIED UPON BY THE LD. DR THE HONBLE HIGH COURT HAS HELD THAT IN THE CASES OF BOGUS PURCHASES NOT THE ENTIRE AMO UNT OF BOGUS PURCHASES BUT ONLY PROFIT EMBEDDED IN SUCH TRANSACTION SHOULD BE ADDED TO THE TOTAL INCOME OF THE ASSESSEE. SINCE, THE FACTS OF THE 6 ITA NO. 14 30 / MUM/2019 ASSESSMENT YEAR: 2012 - 13 PRESENT CASE ARE SIMILAR TO THE FACTS OF THE CASE OF M/S ABHIJEET PLASTIC INDIA PVT. LTD. (SUPRA) AND THE ISSUE S INVOLVED IN BOTH THE CASES ARE IDENTICAL, W E RESPECTFULLY FOLLOW THE PRINCIPLE APPLIED BY THE COORDINATE BENCH IN THE CASE OF M/S ABHIJEET PLASTIC INDIA PVT. LTD. (SUPRA) IN THIS CASE. ACCORDINGLY, WE SET ASIDE THE IMPUGNED ORDER PASSED BY THE LD. CIT (A ) AND DIRECT THE AO TO DETERMINE THE GP OF THE ASSESSEE @ 16.81%, WHICH IS THE GP OF THE ASSESSEE IN PREVIOUS ASSESSMENT YEAR HOLDING THAT THE EXPECTED GP CANNOT BE LESS THAN THE GP ACHIEVED IN THE PREVIOUS ASSESSMENT YEAR. 9 . THE REMAINING GROUNDS ARE EIT HER CONSEQUENTIAL OR PRE MATURE, THEREFORE DO NOT REQUIRE ADJUDICATION. IN THE RESULT, APPEAL FILED BY THE ASSESSEE FOR ASSESSMENT YEAR 2012 - 2013 IS PARTLY ALLOWED. ORDER PRONOUNCED ON 21 ST SEPTEMBER , 2020 UNDER RULE 34 (4) OF THE INCOME TAX APPE LLATE TRIBUNAL RULES, 1963. . SD/ - SD/ - ( S. RIFAUR RAHMAN ) ( RAM LAL NEGI ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; DATED: 21 / 0 9 / 2020 ALINDRA, PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT (A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . / BY ORDER, //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI