INDIGO METALOOYS P.LTD, MUMBAI V. ITO 5(2)(1), MUMBAI

ITA 1523/MUM/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 5650 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-07-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2009-2010
• Appeal Filed On: 03-03-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SAURABH DESH
• Assessee Lawyers: ASHOK J PATIL
• Keywords: Bogus purchase; Accommodation entries
• Section: 143(3); 147

Judgement Text

P A G E | 1 ITA NO. 1523/MUM/2017 A.Y. 2009 - 10 M/S INDIGO METALLOYS P. LTD. VS. INCOME TAX OFFICER - 5(2)(1) IN THE INCOME TAX APPELLATE TRIBUNAL K BENCH, M UMBAI BEFORE SHRI R.C.SHARMA, AM AND SHRI RAVISH SOOD, JM ITA NO.1523 /MUM/201 7 ( / ASSESSMENT YEAR:2009 - 10) M/S INDIGO METALLOYS P. LTD. OFFICE NO. 2,3,4 & 5 SHIVNERI BLDG, MUGHBHAT LANE, GIRGAON, MUMBAI - 400 004 / VS. INCOME TAX OFFICER - 5(2 )(1) MUMBAI ./ ./ PAN NO. AABCI8026L ( / APPELLANT) : ( / RESPONDENT ) / APPELLANT BY : SHRI ASHOK J. PATIL, A.R / RESPONDENT BY : SHRI SAURABH DESHPANDE , D.R / DATE OF HEARING : 28 .06.2018 / DATE OF PRONOUNCEMENT : 0 4 .0 7 .2018 / O R D E R PER RAVISH SOOD, JUDICIAL MEMBER: THE PRESENT APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A) - 10, MUMBAI, DATED 25.11.2016 , WHICH IN ITSELF ARISES FROM THE ORDER PASSED BY THE A.O UNDER SEC.147 R.W. SEC. 143(3) OF THE INCOME TAX, 1961 (FOR SHORT ACT), DATED 13.03.2015. THE ASSESSEE ASSAILING THE ORDER OF THE CIT(A) HAD RAISED BEFORE US THE FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE COMMISSIONER OF INCOME TAX (APPEALS) CIT(A) ERRED IN UPHOLDING THE ASSESSMENT WHERE THE ASSESSING OFFICER (A.O) HAS ADDED12.5% OF THE ALLEGED BOGUS PURCHASES TO THE INCOME OF THE APPELLANT. 2. THE CIT(A) FAILED TO APPRECIATE THAT THE APPELLANT WAS NOT GIVEN ANY DOCUMENT OR STATEMENT OF THE PARTIES INVESTIGATED BY THE SALE TAX DEPARTMENT STATING THE NAME OF THE APPELLANT HAS BENEFITTED FROM BOGUS ENTRIES. 3. THE CIT(A) FAILED TO APPRECIATE THAT THE G.P. RATIO OF THE APPELLANT BECOMES UNREASONABLE AS COMPARED TO THE OTHER PERSONS ENGAGED IN SIMILAR BUSINESS AND APPELLANTS OWN BUSINESS FOR EARLIER AND SUBSEQUENT YEARS. P A G E | 2 ITA NO. 1523/MUM/2017 A.Y. 2009 - 10 M/S INDIGO METALLOYS P. LTD. VS. INCOME TAX OFFICER - 5(2)(1) 4. THE APPELLANT CRAVES LEAVE TO ADD AMEND OR DELETE ANY OF THE GROUNDS OF APPEAL. 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE WHICH IS ENGAGED IN THE BUSINESS OF TRADING IN FERROUS AND NON - FERROUS METALS HAD FILED ITS RETURN OF INCOME FOR A.Y. 2009 - 10 ON 24.09.2009, DECLARING TOTAL INCOME OF RS. 23,08,144/ - . ON THE BASIS OF INFORMATION RECEIVED FROM THE S ALES TAX DEPARTMENT, MUMBAI THAT THE ASSESSEE HAD TAKEN ACCOMMODATION ENTRIES OF RS.3,30,42,768/ - WITHOUT TAKING ACTUAL DELIVERY OF GOODS, THE CASE OF THE ASSESSEE WAS REOPENED UNDER SEC. 147 OF THE ACT. 3. D URING THE COURSE OF THE ASSESSMENT PROCEEDINGS , THE A.O CALLED UPON THE ASSESSEE TO SUBSTANTIATE THE AUTHENTICITY OF THE PURCHASES MADE FROM THE FOLLOWING PARTIES: S. NO. NAME OF THE HAWALA ENTITY AS PER LIST PAN F.Y. TIN OF HAWALA OPERATOR AMOUNT (IN RS.) 1. VIJAYSAGAR TRADING PRIVATE LIMITED AACCV2871K 2008 - 09 27560559427V 3,098,948 2. SURAT TUBE CORPORATION APMPS5397D 2008 - 09 27550304371V 804,602 3. RATNAJYOTI METAL & TUBES PVT. LTD. AADCR3441A 2008 - 09 27360557694V 1,849,219 4. JINALAY TRADING PRIVATE LIMITED AACCJO495P 2008 - 09 27950675467V 2,669,966 5. AVION SALES PRIVATE LIMITED AAHCA2114M 2008 - 09 27360675452V 3,259,202 6. RAJESHWARI TRADING PVT. LTD. AACCR7829M 2008 - 09 27480388751V 4,150,864 7. SUNSHINE METAL INDUSTRIES AEWPV0725R 2008 - 09 27700589808V 1,222,776 8. SWASTIK SALES AGENCY PVT LTD AAKCS1682F 2008 - 09 27290563504V 1,445,441 9, NAVKAR METAL PRIVATE LIMITED AACCN5588P 2008 - 09 27840624457V 6,204,072 10. NAKODA TUBES PVT. LTD AACCN5589N 2008 - 09 27740624415V 8,337,678 TOTAL 33,042,768 HOWEVER, THE ASSESSEE FAILED TO PROVE THE GENUINENESS AND VERACITY OF THE PURCHASE S CLAIMED TO HAVE BEEN MADE FROM THE AFOREMENTIONED PARTIES TO THE SATISFACTION OF THE A.O. IT WAS OBSERVED BY THE A.O THAT DESPITE SPECIFIC DIRECTIONS , THE ASSESSEE HAD FAILED TO PLACE ON RECORD THE COPY OF THE DELIVERY CHALLANS, LORRY RECEIPTS , WEIGHMENT SLIPS, OCTROI CHALLANS ETC. PERTAINING TO P A G E | 3 ITA NO. 1523/MUM/2017 A.Y. 2009 - 10 M/S INDIGO METALLOYS P. LTD. VS. INCOME TAX OFFICER - 5(2)(1) THE AFORESAID PURCHASE TRANSACTIONS. STILL FURTHER, THE ASSESSEE ALSO FAILED TO COMPLY WITH THE SPECIFIC DIRE CTIONS OF THE A.O AND NEITHER PRODUCED THE AFOREMENTIONED PARTIE S FOR NECESSARY VERIFICATIONS NOR SUBMITTED ANY DOCUMENTARY EVIDENCE IN SUPPORT OF THE PURCHASES CLAIMED TO H AVE BEEN MADE FROM THEM. RATHER, THE ASSESSEE TRIED TO PROVE THE AUTHENTICITY OF TH E PURCHASE TRAN SACTIONS BY PLACING ON RECORD COPIES OF THE PURCHASE BILLS OF THE AFOREMENTIONED PARTIES AND TAKING SUPPORT OF THE FACT THAT THE PAYMENT OF THE PURCHASE CONSIDERATION WERE MADE TO THE SAID PARTIES THROUGH ACCOUNT PAYEE CHEQUES. THE A.O IN TH E BACKDROP OF THE AFORESAID FACTS CONCLUDED THAT THOUGH THE ASSESSEE HAD FAILED TO SUBSTANTIATE THE GENUINENESS AND VERACITY OF THE PURCHASE TRANSACTIONS CLAIMED TO HAVE BEEN MADE FROM THE AFO REMENTIONED PARTIES, BUT A PERUSAL OF THE FACTS REVEALED THAT IN FACT PURCHASES OF THE GOODS UNDER CONSIDERATION WERE MADE BY THE ASSESSEE. THE A.O HELD A CONVICTION THAT THE ASSESSEE BY PROCURING THE PURCHASE BILLS FROM THE AFOREMENTIONED PARTIES , HAD TRIED TO INFLATE THE PURCHASES AS AGAINST THE VALUE FOR WHICH THE G OODS WERE ACTUALLY PROCURED FROM THE OPEN/GREY MARKET. ON THE BASIS OF HIS AFORESAID OBSERVATIONS, THE A.O RELYING ON THE JUDGEMENT OF THE HONBLE HIGH COURT OF GUJARAT IN THE CASE OF CIT VS. SIMIT P. SHETH (2013) 356 ITR 451 (GUJ) MADE AN ADDITION OF 12.5 % OF THE TOTAL PURCHASES OF RS.3,30,42,768/ - AND ADDED AN AMOUNT OF RS.41,30,346/ - TO THE INCOME OF THE ASSESSEE. 4. AGGRIEVED, THE ASSESSEE CARRIED T HE MATTER IN APPEAL BEFORE THE CIT(A). T HE CIT(A) AFTER DELIBERATING ON THE FACTS OF THE CASE IN THE BACKDROP OF THE CONTENTION S ADVANCED BY THE ASSESSEE BEFORE HIM , WAS HOWEVER NOT PERSUADED TO SUBSCRIBE TO THE CLAIM OF THE ASSESSEE THAT ITS PURCHASE TRANSACTIONS FROM THE AFORESAID PARTIES WERE WELL IN ORDER. THE CIT(A) NOT FINDING ANY INFIRMITY IN THE O RDER OF THE A.O UPHELD THE DISALLOWANCE MADE BY HIM TOWARDS BOGUS PURCHASE AT THE RATE OF 12.5% OF THE VALUE OF THE BOGUS PURCHASES . 5. THE ASSESSEE BEING AGGRIEVED WITH THE ORDER OF THE CIT(A) HA S CARRIED THE MATTER IN APPEAL BEFORE US. THE LD. AUTHORIZE D REPRESENTATIVE (FOR SHORT P A G E | 4 ITA NO. 1523/MUM/2017 A.Y. 2009 - 10 M/S INDIGO METALLOYS P. LTD. VS. INCOME TAX OFFICER - 5(2)(1) A.R) AT THE VERY OUTSET OF THE HEARING OF THE APPEAL SUBMITTED THAT THE LOWER AUTHORITIES HAD ERRED IN CHARACTERISING THE GENUINE PURCHASES CLAIMED BY THE ASSESSEE TO HAVE BEEN MADE FROM THE AFOREMENTIONED PARTIES AS BOGUS. TH E LD. A.R IN ORDER TO DRIVE HOME HIS AFORESAID CONTENTION SUBMITTED THAT AS THE DOCUMENTARY EVIDENCE SUBSTANTIATING THE AUTHENTICITY OF THE PURCHASE TRANSACTIONS TO THE HILT WERE PLACED ON THE RECORD OF THE A.O, THEREFORE, THERE WAS NO REASON FOR HIM TO HAVE HELD THE SAME AS BOGUS. IT WAS SUBMITTED BY THE LD. A.R THAT EVEN IF THE PURCHASE TRANSACTIONS WERE TO BE HELD AS BOGUS , THE ADDITION OF 12.5% OF THE VALUE OF THE PURCHASE TRANSACTIONS UNDER CONSIDERATION, IN THE BACKDROP OF THE GP RATE OF 6.88% SHOWN BY THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION , WAS HIGHLY EXORBI TANT AND COULD NOT BE SUSTAINED. THE LD. A.R FURTHER RELIED ON THE FOLLOWING CASE LAWS : - (I) GEO LIFE ORGANIC AND ORS. VS. ACIT, MUMBAI (ITA NO. 3699/MUM/2016, DATED 05.05.2017); (II) ACI T - 19(3), MUMBAI VS. M/S STEEL LINE (INDIA), MUMBAI (ITA NO. 1321 - 1323/MUM/2016, DATED 29.08.2017 ). THE LD. A.R REFERRING TO THE AFORESAID CASE LAWS SUBMITTED THAT THE TRIBUNAL IN THE AFOREMENTIONED CASES INVOLVING IDENTICAL FACTS, HAD IN ALL FAIRNESS RESTRICTED THE ADDITION IN THE HANDS OF THE ASSESSEE TO THE EXTENT OF 2% OF THE VALUE OF THE PURCHASE TRANSACTION S . ON THE BASIS OF THE AFORESAID SUBMISSIONS , IT WAS CLAIMED BY THE LD. A.R THAT IN ALL FAIRNESS THE ADDITION IN THE CASE OF THE ASSESSEE MAY ALSO BE RESTRICTED TO THE EXTENT OF 2% OF THE VALUE OF THE PURCHASE TRANSACTIONS UNDER CONSIDERATION. PER CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE (FOR SHORT D.R) RELIED ON THE ORDERS OF THE LOWER AUTHORITIES. THE LD. D.R SUBMITTED THAT AS THE RESPECT IVE PARTIES FROM WHOM THE ASSESSEE HAD CLAIMED TO HAVE MADE PURCHASES WERE NOT FOUND AVAILABLE AT THEIR RESPECTIVE ADDRESSES, THEREFORE, THE NOTICES UNDER SEC.133(6) COULD NOT BE SERVED ON THEM. THE LD. D.R IN HIS CONTENTION THAT THE ADDITION MADE BY THE A .O AND SUSTAINED BY THE CIT(A) AT THE RATE OF 12.5% OF THE VALUE OF THE BOGUS PURCHASES UNDER CONSIDERATION WAS WELL IN ORDER , RELIED ON THE ORDER OF A COORDINATE BENCH OF THE TRIBUNAL, VIZ. ITAT C BENCH, MUMBAI IN THE CASE OF SOMAN SUN C IT I VS. JCIT (ITA NO. P A G E | 5 ITA NO. 1523/MUM/2017 A.Y. 2009 - 10 M/S INDIGO METALLOYS P. LTD. VS. INCOME TAX OFFICER - 5(2)(1) 2960/MUM/2016, DATED 23.10.2017 ), THE LD. D.R REFERRING TO THE AFORESAID ORDER OF THE TRIBUNAL SUBMITTED THAT THE TRIBUNAL IN THE SAID CASE HAD UPHELD THE 100% ADDITION OF THE VALUE OF BOGUS PURCHASES MADE BY THE ASSESSEE . THE LD. A.R REBUTTING T HE AFORESA ID CONTENTIONS OF THE REVENUE , SUBMITTED THAT THE CASE LAW RELIED UPON BY THE LD. D.R WAS DISTINGUISHABLE ON FACTS , AS THE SAME PERTAINED TO AN ASSESSEE WHO UNLIKE THE ASSESSEE UNDER CONSIDERATION WAS INTO MANUFACTURING BUSINESS. ON A SPECIFIC QU ERY BY THE BENCH AS TO THE VAT RATE AS WAS APPLICABLE IN THE CASE OF THE ASSESSEE F OR THE YEAR UNDER CONSIDERATION , I T WAS SUBMITTED BY THE LD. A.R THAT THE SAME WAS 4%. THE LD. A.R IN ORDER TO FORTIFY HIS AFORESAID CLAIM T OOK US THROUGH A PURCHASE BILL ( P AGE 70 ) OF THE ASSESSEE PAPER BOOK (FOR SHORT APB) , WHICH DULY SUBSTANTIATED HIS CLAIM THAT THE RATE OF VAT ON PURCHASE OF THE GOODS UNDER CONSIDERATION WAS 4%. 6. WE HAVE HEARD THE AUTHORIZED REPRESENTATIVES FOR BOTH THE PARTIES, PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL AVAILABLE ON RECORD. WE FIND FROM A PERUSAL OF THE ORDER S O F THE LOWER AUTHORITIES THAT IT REMAIN S AS A MATTER OF FACT THAT THE ASSESSEE HAD FAILED TO SUBSTANTIATE THE GENUINENESS AND VERACITY OF THE PURCHASE TRANSACTION S CLAIMED TO HAVE BEEN MADE FROM THE AFOREMENTIONED PARTIES. WE MAY HEREIN OBSERVE THAT THE COPIES OF PURCHASE BILLS PRODUCED BY THE A SSESSEE BEFORE THE LOWER AUTHORITIES AND THE FACT THAT PAYMENT OF THE PURCHASE CONSIDERATION WERE MADE TO THE AFOREMENTIONED PARTIES BY ACCOUNT PAYEE CHEQUES , CANNOT BE HELD AS SACROSANCT FOR PROVING THE AUTHENTICITY OF THE PURCHASE TRANSACTIONS. WE FIND T HAT IT REMAINS AS A MATTER OF FACT THAT THE ASSESSEE DESPITE SPECIFIC DIRECTIONS BY THE A.O HAD FAILED TO PLACE ON RECORD THE REQUISITE DOCUMENTARY EVIDENCE, VIZ. DELIVERY C HALLANS, OCTROI RECEIPTS, WEIGH MENT SLIPS ETC , WHICH THUS CONCLUSIVELY PROVED THAT THE ASSESSEE HAD FAILED TO SUBSTANTIATE THE GENUINENESS AND VERACITY OF THE PURCHASE TRANSACTIONS UNDER CONSIDERATION . WE ARE OF THE CONSIDERED VIEW THAT THE LOWER AUTHORITIES IN THE BA CKDROP OF THE FACTS OF THE CASE, OBSERVING THAT THE ASSESSEE WHICH HAD PURCHASE D THE GOODS UNDER CONSIDERATION, THOUGH NOT FROM THE AFOREMENTIONED PARTIES AS CLAIMED BY IT, BUT RATHER F ROM THE P A G E | 6 ITA NO. 1523/MUM/2017 A.Y. 2009 - 10 M/S INDIGO METALLOYS P. LTD. VS. INCOME TAX OFFICER - 5(2)(1) OPEN/GREY MARKET , HAD RESTRICTED THE ADDITION TO THE EXTENT OF THE PROFIT ELEMENT INVOLVED IN MAKING OF SUCH PURC HASES . WE ARE PERSUAD ED TO SUBSCRIBE TO THE VIEW OF THE LOWER AUTHORITIES THAT THE ADDITION IN THE HANDS OF THE ASSESSEE IN RESPECT OF THE BOGUS PURCHASES WAS LIABLE TO BE RESTRICTED TO THE EXTENT THE SAME WERE INFLATED BY THE ASSESSEE BY PROCURING BOGUS BILLS FROM THE AFOREME NTIONED HAWALA PARTIES, AS AGAINST THE ACTUAL PURCHASE CONSIDERATION SHELLED OUT FOR THE SAME. HOWEVER, WE DO NOT FIND OURSELVES TO BE IN AGREEMENT WITH THE QUANTIFICATION OF THE ADDITION/DISALLOWANCE AT 12.5% OF THE VALUE OF TOTAL BOGUS PURCHASES AS HAD BEEN SUSTAINED BY THE CIT(A). WE ARE OF THE CONSIDERED VIEW THAT THE PROFIT/BENEFIT WHICH WOULD BE GENERATED BY AN ASSESSEE BY PROCURING THE GOODS FROM THE OPEN/GREY MARKET , CAN FAIRLY BE ESTIMATED CONSIDERING THE SAVING ON VAT AND OTHER SUCH ANCILL ARY BENEFITS. WE THUS, ARE OF THE CONSIDERED VIEW THAT IN THE CASE OF THE PRESENT ASSESSEE BEFORE US , THE DETERMINATION OF THE COST SAVING ON THE PROCUREME NT OF THE GOODS BY IT FROM THE OPEN/GREY MARKET, KEEPING IN VIEW VAT RATE OF 4% AS WAS INVOLVED IN RE SPECT OF THE FERROUS AND NON - FERROUS GOODS TRADED BY THE ASSESSEE DURI NG THE YEAR UNDER CONSIDERATION, COUPLED WITH OTHER ANCILLARY BENEFITS FLOWING FROM MAKING OF SUCH PURCHASES , COULD FAIRLY BE ADOPTED AT 6% OF THE VALUE OF THE BOGUS PURCHASES INVOLVED U NDER CONSIDERATION. WE THUS, IN TERMS OF OUR AFORESAID OBSERVATIONS RESTRICT THE ADDITION/DISALLOWANCE IN THE HANDS OF THE ASSESSEE TO AN AMOUNT OF RS.19,82,566/ - I.E 6% OF THE TOTAL VALUE OF THE BOGUS PURCHASES OF RS.3,30,42,768/ - . THE ORDER PASSED BY THE CIT(A) IS MODIFIED AS OBSERVED BY US HEREINABOVE. 7. THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED IN TERMS OF OUR AFORESAID OBSERVATIONS. ORDER PRONOU NCED IN THE OPEN COURT ON 0 4 .0 7 .2018 S D / - S D / - (R.C. SHARMA) (RAVISH SOOD) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; 04 .0 7 .2018 PS. ROHIT P A G E | 7 ITA NO. 1523/MUM/2017 A.Y. 2009 - 10 M/S INDIGO METALLOYS P. LTD. VS. INCOME TAX OFFICER - 5(2)(1) / 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 . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI