SUJEET Y.SINGH, MUMBAI V. DCIT 30(3), MUMBAI

ITA 1541/MUM/2017

• Counselvise Citation: [2018] 124 COUNSELVISE.COM (IT) 7303 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-10-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2010-2011
• Appeal Filed On: 06-03-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: NISHANT SAMAIYA
• Keywords: Bogus purchase; Accommodation entries
• Section: 133(6); 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'G' BENCH, MUMBAI BEFORE SHRI B.R. BASKARAN, ACCOUNTANT MEMBER AND SHRI RAVISH SOOD, JUDICIAL MEMBER ITA NO. 1541/MUM/2017 (ASSESSMENT YEAR: 2010) SHRI SUJEET Y. SINGH SHOP NO. 20A, YASHODHAM SHOPPING COMPLEX CENTRE GEN AK, GOREGAON (E) MUMBAI VS. D C I T - 30(3) C-10, BANDRA KURLA COMPLEX BANDRA (E), MUMBAI, PAN AVSPS5928G APPELLANT RESPONDENT APPELLANT BY: MS. DINKLE HARIYA RESPONDENT BY: SHRI NISHANT SAMAIYA DATE OF HEARING: 01.10.2018 DATE OF PRONOUNCEMENT: 01.10.2018 O R D E R PER B.R. BASKARAN, AM THIS APPEAL FILED BY ASSESSEE IS DIRECTED AGAINST T HE ORDER DATED 30.11.2016 PASSED BY THE CIT(A)-41, MUMBAI AND IT R ELATES TO A.Y. 2006- 07. THE ASSESSEE IS AGGRIEVED BY THE DECISION OF TH E CIT(A) IN PARTIALLY CONFIRMING THE ADDITION RELATED TO BOGUS PURCHASES. 2. THE ASSESSEE IS A MANUFACTURER OF DRUGS AND PHARMAC EUTICALS. THE REVENUE RECEIVED INFORMATION FROM THE SALES TAX DEP ARTMENT OF GOVERNMENT OF MAHARASHTRA THAT CERTAIN DEALERS ARE INDULGING IN PROVIDING ACCOMMODATION ENTRIES WITHOUT ACTUALLY SUPPLYING MA TERIALS. IT WAS NOTICED THAT THE ASSESSEE HEREIN HAS PURCHASED GOOD S FROM TWO OF SUCH PARTIES TO THE TUNE OF ` 70.34 LAKHS DURING THE YEAR UNDER CONSIDERATION AND THE AO REOPENED THE ASSESSMENT FOR THE YEAR UND ER CONSIDERATION BY ISSUING NOTICE UNDER SECTION 148 OF THE INCOME TAX ACT, 1961 (HEREINAFTER 'THE ACT'). THE AO NOTICED THAT THE ASSESSEE DID NO T MAINTAIN STOCK REGISTER. THE NOTICES ISSUED BY THE AO UNDER SECTIO N 133(6) OF THE ACT WERE RETURNED UNSERVED. BEFORE THE AO THE ASSESSEE SUBMI TTED THAT THE ITA NO. 1541/MUM/2017 SHRI SUJEET Y. SINGH 2 P0RUCHASES WERE MADE ON CREDIT AND IN THE SUBSEQUEN T YEAR THE ASSESSEE HAS WRITTEN OFF ALL THE BALANCES DUE TO BOTH THE SU PPLIES. IT WAS ALSO SUBMITTED THAT THE ASSESSEE HAS MANUFACTURED DRUGS BY USING CHEMICALS PURCHASED FROM BOTH THE PARTIES AND HAVE EXPORTED T HE SAME. ACCORDINGLY IT WAS POINTED OUT THAT THERE IS NO REASON TO DOUBT THE GENUINENESS OF THE PURCHASES. THE AO WAS NOT CONVINCED WITH THE EXPLAN ATION OF THE ASSESSEE. ACCORDINGLY HE DISALLOWED THE ENTIRE AMOU NT OF ` 70.34 LAKHS AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. 3. IN THE APPELLATE PROCEEDINGS, THE LEARNED CIT(A) TO OK THE VIEW THAT THE PROFIT ELEMENT EMBEDDED IN THE TRANSACTIONS OF PURCHASE SHOULD BE ASSESSED. FOR THIS PURPOSE HE TOOK SUPPORT OF THE D ECISIONS RENDERED BY THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF VIJAY PROTEINS LTD. VS. CIT (2015) 58 TAXMANN.COM 44 (GUJ) AND CIT VS. SIMIT P. SHETH (2013) 356 ITR 451 (GUJ). THE LEARNED CIT(A) TOOK THE VIEW THAT TH E PROFIT ELEMENT EMBEDDED IN THE PURCHASES CAN BE ESTIMATED AT 30%. ACCORDINGLY HE SUSTAINED THE ADDITION TO THE EXTENT OF 30% AND GRA NTED PARTIAL RELIED. STILL AGGRIEVED, ASSESSEE HAS FILED THIS APPEAL BEFORE US . 4. THE LEARNED A.R. SUBMITTED THAT THE ASSESSEE HAS A SKED FOR REASONS FOR REOPENING OF THE ASSESSMENT BUT THE AO HAS NOT FURNISHED THE SAME TILL DATE. THE LEARNED A.R. FURTHER SUBMITTED THAT THE A SSESSEE HAS EXPORTED ITS GOODS AND HENCE THE GOODS COULD NOT HAVE BEEN MANUF ACTURED WITHOUT USING MATERIAL PURCHASED FROM THE IMPUGNED DEALERS. ACCORDINGLY THE LEARNED A.R. SUBMITTED THAT THERE IS NO REASON TO S USTAIN THE ADDITION PARTIALLY ALSO. 5. ON THE CONTRARY, THE LEARNED D.R. SUBMITTED THAT T HE ASSESSEE HAS FAILED TO FURNISH ANY EVIDENCE TO PROVE RECEIPT OF MATERIALS AND ITS CONSUMPTION. THE ASSESSEE HAS NOT MAINTAINED ANY ST OCK REGISTER. ACCORDINGLY THE LEARNED D.R. SUBMITTED THAT THE LEARNED CIT(A) WAS JUSTIFIED IN SUSTAINING THE ADDITION TO THE EXTENT OF 30% OF THE VALUE OF B OGUS PURCHASE. 6. IN THE REJOINDER THE LEARNED A.R. SUBMITTED THAT TH E PROFIT ELEMENT OF 30% ESTIMATED BY THE LEARNED CIT(A) IS VERY MUCH ON THE HIGHER SIDE. THE ITA NO. 1541/MUM/2017 SHRI SUJEET Y. SINGH 3 LEARNED A.R. SUBMITTED THAT THE ASSESSEE IS SHOWING GROSS PROFIT @ 28.62% WHICH IS VERY MUCH COMPARABLE WITH THE MARKET TREND . IT WAS POINTED OUT TO THE LEARNED A.R. THAT THE ASSESSEE HAS NOT MAINTAIN ED STOCK REGISTER AND HAS ALSO NOT PROVED RECEIPT AND CONSUMPTION OF MATE RIALS. ACCORDINGLY IT WAS SUGGESTED THAT THE PROFIT ELEMENT EMBEDDED IN T HE IMPUGNED PURCHASES IS REQUIRED TO BE ADDED, THE LEARNED A.R. SUBMITTED THAT THE PROFIT ELEMENT OF 30% ESTIMATED BY THE CIT(A) IS ON THE HIGHER SID E AND ACCORDINGLY PRAYED THAT IT MAY BE REDUCED. SHE SUBMITTED THAT THE HON' BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. SIMIT P. SHETH 356 ITR 451 H AS SUSTAINED THE ADDITION TO THE EXTENT OF 12.5%. THE LEARNED D.R. SUBMITTED THAT 12.5% ESTIMATED BY THE HON'BLE GUJARAT HIGH COURT INCLUDED PROFIT ELEM ENT OF 2.5%. 7. HAVING HEARD THE RIVAL SUBMISSION, WE ARE OF THE VI EW THAT THE PROFIT ELEMENT EMBEDDED IN THE IMPUGNED PURCHASES ARE REQU IRED TO BE ASSESSED IN THE HANDS OF THE ASSESSEE, AS THE ASSESSEE HAS F AILED TO FURNISH THE STOCK REGISTER AND ALSO EVIDENCE FOR RECEIPT AND CO NSUMPTION OF MATERIALS. SINCE THE ASSESSEE HAS EXPORTED MATERIALS, THE RECE IPT OF MATERIALS CANNOT BE DOUBTED. THE POSSIBILITY IS THAT THE ASSESSEE MI GHT HAVE PURCHASED MATERIALS FROM ONE PARTY AND OBTAINED BILLS FROM AN OTHER PARTY. ACCORDINGLY THE PROFIT ELEMENT EMBEDDED IN THE PURC HASE MAY BE ADDED IN THE HANDS OF THE ASSESSEE. THE LEARNED CIT(A) HAS E STIMATED THE PROFIT ELEMENT AT 30% WHICH, IN OUR VIEW, IS ON THE HIGHER SIDE. THE LEARNED A.R. SUBMITTED THAT THE VAT RATE APPLICABLE TO THE IMPUG NED PURCHASES IS 12.5%. ACCORDINGLY, BY FOLLOWING THE RATIO RENDERED BY THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF SIMIT P. SHETH (SUPRA) WE MODIFY THE ORDER PASSED BY THE LEARNED CIT(A) AND DIRECT THE AO TO S USTAIN THE ADDITION TO THE EXTENT OF 15% OF THE VALUE OF ALLEGED BOGUS PUR CHASES. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 1 ST OCTOBER, 2018. SD/ - SD/ - (RAVISH SOOD) (B.R. BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 1 ST OCTOBER, 2018 ITA NO. 1541/MUM/2017 SHRI SUJEET Y. SINGH 4 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) -41, MUMBAI 4. PR. CIT-24/30, MUMBAI 5. THE DR, G BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.