DCIT 4(1)(2), MUMBAI V. BHAWANI KITCHENWARE P.LTD, MUMBAI

ITA 156/MUM/2016

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 8809 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-11-2017
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2009-2010
• Appeal Filed On: 11-01-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: V JANARDHANAN LD
• Assessee Lawyers: AJAY R SINGHLD
• Keywords: Bogus purchase; Reassessment proceedings
• Section: 143(3); 147; 148

Judgement Text

ITA.NO.156/MUM/2016 BHAWANI KITCHENWARE PRIVATE LIMITED ASSESSMENT YEAR-2009-10 IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI . . , , BEFORE SHRI D.T. GARASIA, JM AND SHRI MANOJ KUMAR AGGARWAL, AM ./I.T.A. NO.156/MUM/2016 ( / ASSESSMENT YEAR: 2009-10) DEPUTY COMMISSIONER OF INCOME TAX 4(1)(2) ROOM NO.640,6 TH FLOOR AAYKAR BHAVAN, M.K.ROAD MUMBAI-400 020 / VS. BHAWAN I KITCHENWARE PRIVATE LIMITED B-2, HATKESH UDYOG NAGAR, MIRA BHAYANDAR ROAD MIRA ROAD(EAST) MUMBAI-401 101 ! ./ ./PAN/GIR NO. AAACB-9016-E ( !# /APPELLANT ) : ( $%!# / RESPONDENT ) A SSESSEE BY : AJAY R. SINGH,LD.AR RE VENUE BY : V. JANARDHANAN, LD. SR. DR / DATE OF HEARING : 24/10/2017 / DATE OF PRONOUNCEMENT : 01/11/2017 ITA.NO.156/MUM/2016 BHAWANI KITCHENWARE PRIVATE LIMITED ASSESSMENT YEAR-2009-10 2 / O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. THE CAPTIONED APPEAL BY REVENUE FOR ASSESSMENT Y EARS [AY] 2009- 10 ASSAILS THE ORDER OF THE LD. COMMISSIONER OF INC OME-TAX (APPEALS)-9 [CIT(A)], MUMBAI, APPEAL NO.CIT(A)-9/CIR.4/347/2014-15 DATED 09/10/2015 QUA RELIEF PROVIDED TO THE ASSESSEE AGAINST CERTAIN BOGUS PURCHASES. THE ASSESSMENT FOR IMPUGNED AY WAS FRAMED BY LD. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-4(1)(2), MUMBAI [AO] U/S 143(3) READ WITH SECTION 147 OF THE INCOME TAX ACT,1961 ON 27/01/2015. 2.1 FACTS LEADING TO THE SAME ARE THAT THE ASSESSEE BEING RESIDENT CORPORATE ASSESSEE ENGAGED IN THE BUSINESS OF MANUFACTURING OF STAINLESS STEEL UTENSILS WAS SUBJECTED TO AN ASSESSMENT U/S 143(3) READ WITH SECTION 147 FOR IMPUGNED AY ON 21/01/2015 AT RS.71,49,670/- AFTER ADDITION OF CERTAIN BOGUS PURCHASES FOR RS.37,67,766/-. THE ORIGINAL RETURN WAS FILED ON 06/07/2009 AT RS.33,81,908/- WHICH WAS PROCESSE D U/S 143(1). THE SOLITARY ISSUE INVOLVED IN THE APPE AL IS ADDITION AGAINST BOGUS PURCHASES . 2.2 THE REASSESSMENT PROCEEDINGS WERE INITIATED UPO N RECEIPT OF CERTAIN INFORMATION FROM SALES TAX DEPARTMENT, MAHARASHTRA REGARDING DEALERS INDULGING IN BOGUS PURCHASE BILLS AND IT WAS NOTED THAT THE ASSESSEE STOOD BENEFICIARY OF SUCH BOGUS PURCHASE BILLS TO THE TUNE OF RS.3,01,42,129/- FROM AN ENTITY NAMELY KHUSHI IMPEX . CONSEQUENTLY, NOTICE U/S 148 WAS ISSUED TO THE ASSESSEE WHICH WAS FOLLOWED BY STATUTORY NOTICES U/S 143(2) AND 142(1). ITA.NO.156/MUM/2016 BHAWANI KITCHENWARE PRIVATE LIMITED ASSESSMENT YEAR-2009-10 3 2.3 THE ASSESSEE SUBMITTED COPIES OF INVOICES AND C ONTENDED THAT THE PURCHASES WERE GENUINE. HOWEVER, NOT CONVINCED, LD. AO NOTED THAT THE ASSESSEE COULD NOT SUBSTANTIATE THE DELIVERY OF GOO DS AND MERE PAYMENT THROUGH BANKING CHANNELS WAS NOT SUFFICIENT TO PROVE THE PURCHASE TRANSACTIONS. THE LD. AO ALSO NOTED THAT T HE ASSESSEE FAILED TO PRODUCE THE SAID PARTY FOR CONFIRMATION OF ACCOU NTS AND HENCE FAILED TO DISCHARGE THE ONUS CASTED ON HIM. FINALLY, LD. A O ESTIMATED THE ADDITIONS AGAINST BOGUS PURCHASES @12.5% WHICH CAME TO RS.37,67,766/-. 3. AGGRIEVED, THE ASSESSEE CONTESTED THE SAME WITH PARTIAL SUCCESS BEFORE LD. CIT(A) VIDE IMPUGNED ORDER DATED 09/10/2 015 WHERE THE LD. CIT(A) AFTER CONSIDERING ASSESSEES SUBMISSIONS AND PLACING RELIANCE ON SEVERAL JUDICIAL PRONOUNCEMENTS NOTED THAT THE OPPO RTUNITY TO CROSS EXAMINE THE SUPPLIER WAS NOT GRANTED TO THE ASSESSE E AND THE TURNOVER WAS NOT DISTURBED / DISPUTED BY LD. AO. THE LD. CIT (A) ALSO NOTED THE GROSS PROFIT / NET PROFIT RATE EARNED BY THE ASSESS EE IN PRECEDING YEARS AND CONCLUDED THAT THE ASSESSEE SUPPRESSED PROFIT T O THE EXTENT OF 0.17% OF TURNOVER OF RS.17.57 CRORES AND THEREFORE, RESTRICTED THE SAME TO RS.2,97,818/-. AGGRIEVED, THE REVENUE IS IN FURT HER APPEAL BEFORE US. 4. THE LD. DEPARTMENTAL REPRESENTATIVE [DR] DREW OU R ATTENTION TO THE FACT THAT THE ASSESSEE COULD NOT SUBSTANTIATE T HE DELIVERY OF MATERIAL AND THEREFORE, LD. CIT(A) ERRED IN GRANTING SUBSTAN TIAL RELIEF TO THE ASSESSEE. PER CONTRA, LD. COUNSEL FOR ASSESSEE [AR] PLACED RELIANCE ON THE STAND OF LD. CIT(A) TO CONTEND THAT THE SAME WA S FAIR AND REASONABLE AND THEREFORE, NO FURTHER ADDITIONS WERE WARRANTED. ITA.NO.156/MUM/2016 BHAWANI KITCHENWARE PRIVATE LIMITED ASSESSMENT YEAR-2009-10 4 5. WE HAVE CAREFULLY HEARD THE CONTENTIONS AND PERU SED RELEVANT MATERIAL ON RECORD. WE ARE OF THE CONSIDERED OPINIO N THAT THERE COULD BE NO SALE WITHOUT PURCHASE /CONSUMPTION OF MATERIAL S INCE THE ASSESSEE WAS ENGAGED IN MANUFACTURING ACTIVITIES. THE SALES TURNOVER ACHIEVED BY THE ASSESSEE HAS NOT BEEN DISPUTED BY THE REVENUE A ND THE PAYMENTS WERE THROUGH BANKING CHANNELS. THE PURCHASES WERE B ACKED BY INVOICES. AT THE SAME TIME, THE ASSESSEE COULD NOT PRODUCE ANY CONFIRMATION FROM THE IMPUGNED SUPPLIER AND MISERAB LY FAILED TO SUBSTANTIATE THE DELIVERIES WHICH CAST SERIOUS DOUB T ON ASSESSEES CLAIM. THEREFORE, IN SUCH A SITUATION, THE ADDITION , WHICH COULD BE MADE, WAS TO ACCOUNT FOR PROFIT ELEMENT EMBEDDED IN THESE PURCHASE TRANSACTIONS TO FACTORIZE FOR PROFIT ELEMENT EARNED BY ASSESSEE AGAINST POSSIBLE PURCHASE OF MATERIAL IN THE GREY MARKET AND UNDUE BENEFIT OF VAT AGAINST SUCH BOGUS PURCHASES, WHICH LD. CIT(A) HAS RIGHTLY DONE. HOWEVER, WE FIND THE ESTIMATION TO BE ON THE LOWER SIDE KEEPING IN VIEW THE OVERALL FACTS AND CIRCUMSTANCES OF THE CASE SIN CE LD. AO, HIMSELF, HAD RESTRICTED THE ADDITIONS TO 12.5% OF ALLEGED BOGUS PURCHASES AND THE SAME HAS FURTHER BEEN REDUCED SUBSTANTIALLY BY LD. CIT(A). HENCE, WE ENHANCE THE SAME TO 5% OF ALLEGED BOGUS PURCHASES OF RS.3,01,42,129/- WHICH COMES TO RS.15,07,106/-. WE DIRECT SO. 6. RESULTANTLY, THE REVENUES APPEAL STANDS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 01 ST NOVEMBER, 2017. ITA.NO.156/MUM/2016 BHAWANI KITCHENWARE PRIVATE LIMITED ASSESSMENT YEAR-2009-10 5 SD/- SD/- (D.T. GARASIA) (MANOJ KUMAR AGGARW AL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 01.11 .2017 SR.PS:- THIRUMALESH ! / COPY OF THE ORDER FORWARDED TO : 1. !# / THE APPELLANT 2. $%!# / THE RESPONDENT 3. + ( ) / THE CIT(A) 4. + / CIT CONCERNED 5. $'- , - , / DR, ITAT, MUMBAI 6. . / GUARD FILE / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI