DCIT-7(2)(2), MUMBAI V. M/S. NEW AGE FIRE PROTECTION ENGINEERING PVT. LTD., MUMBAI

ITA 1566/MUM/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 2065 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-12-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 15-03-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJENDRA JOSHI
• Assessee Lawyers: N O N E
• Keywords: Bogus purchase
• Section: 201

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (V I RTUAL COURT) , B BENCH MUMBAI BEFORE SHRI M.BALAGANESH, AM & SHRI AMARJIT SINGH , JM ITA NO. 1566 /MUM/ 20 19 ( ASSESSMENT YEAR : 201 1 - 12 ) DCIT 7(2)(2) MUMBAI ROOM NO.126B, FIRST FLOOR AAYAKA R BHAVAN M.K.ROAD, MUMBAI 400 020 VS. M/S. NEW AGE FIRE PROTECTION ENGINEERING PVT. LTD., 101/102, CHAMPAKLAL UDYOG BHAVAN SION (E) MUMBAI 400 022 PAN/GIR NO. AACCN9026C (APPELLANT ) .. (RESPONDENT ) REVENUE BY SHRI RAJENDRA JOSHI ASSESSEE BY N ONE DATE OF HEARING 02 / 12 /2020 DATE OF PRONOUNCEMENT 04 / 12 /2020 / O R D E R PER M. BALAGANESH (A.M) : THIS APPEAL IN ITA NO. 1566/MUM/2019 FOR A.Y. 2011 - 12 ARISES OUT OF THE ORDER BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - 16, MUMBAI IN APPEAL NO. CIT(A) - 16/ACIT - 7(2)(2)/IT - 16/2016 - 17 DATED 24/12/2018 (LD. CIT(A) IN SHORT) AGAINST THE ORDER OF ASSESSMENT PASSED U/S.143(3) R.W.S. 147 OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO ITA NO . 1566/MU M/2019 M/S. NEW AGE FIRE PROTECTION ENGINEERING PVT. LTD., 2 AS ACT) DATED 01/03/2016 BY THE LD. ASST. COMM ISSIONER OF INCOME TAX, CIRCLE 7(2)(2), MUMBAI (HEREINAFTER REFERRED TO AS LD. AO). 2. THE ONLY ISSUE TO BE DECIDED IN THIS APPEAL IS AS TO WHETHER THE LD. CIT(A) WAS JUSTIFIED IN RESTRICTING THE ADDITION MADE ON ACCOUNT OF BOGUS PURCHASES TO 12.5% OF VAL UE THEREON AS AGAINST 25% ADDED BY THE LD. AO IN THE FACTS AND CIRCUMSTANCES OF THE INSTANT CASE. 3. NONE APPEARED ON BEHALF OF THE ASSESSEE. WE HAVE HEARD THE LD. DR AND PERUSED THE MATERIALS AVAILABLE ON RECORD. WE FIND THAT ASSESSEE IS A PRIVATE LIMITE D COMPANY ENGAGED IN TRADING AND EXPORT OF FIRE FIGHTING EQUIPMENTS TO PUBLIC SECTOR COMPANIES AND FOR EXPORTS. IT IS NOT IN DISPUTE THAT ASSESSEE HAD MADE CERTAIN PURCHASES FROM FIVE PARTIES TOTALLING TO RS.35,92,013/ - WHOSE NAMES APPEARED TO BE TAINTED D EALERS IN THE WEBSITE OF SALES TAX DEPARTMENT OF GOVERNMENT OF MAHARASHTRA PURSUANT TO WHICH THE ASSESSEES CASE WAS SOUGHT TO BE RE OPENED. THE ASSESSEE FILED THE REQUISITE DETAILS BEFORE THE LD. AO AND TH E LD. AO OBSERVED THAT ASSESSEE IN THE INSTANT CASE WAS NOT ABLE TO PROVE THE VERACITY OF PURCHASES MADE FROM AFORESAID FIVE PARTIES, HOWEVER, HAD FURNISHED DETAILS OF CORRESPONDING SALES MADE THEREON. IN OTHER WORDS, THE SALES MADE BY THE ASSESSEE OUT OF THE CORRESPONDING DISPUTED PURCHASES HAVE BEEN PROV ED BY THE ASSESSEE IN THE INSTANT CASE AND THE SAME WAS NOT DISPUTED BY THE LD. AO. THE LD. AO PROCEEDED TO BRING TO TAX THE PROFIT ELEMENT EMBEDDED IN THE VALUE OF SUCH DISPUTED PURCHASES AND SUCH PROFIT ELEMENT WAS ESTIMATED AT 25% AND ACCORDINGLY, THE L D. AO MADE AN ADDITION OF RS.8,98,003/ - IN THE ASSESSMENT. THE LD. CIT(A) BY PLACING RELIANCE ON THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF VIJAY M MISTRY CONSTRUCTIONS LTD., REPORTED IN 355 ITR 498 AND YET ANOTHER DECISION OF HONBLE GU JARAT HIGH CO URT IN THE CASE OF CIT VS. ITA NO . 1566/MU M/2019 M/S. NEW AGE FIRE PROTECTION ENGINEERING PVT. LTD., 3 SIMIT P SHETH REPORTED IN 38 T AXMANN.COM 385 DETERMINED THE PROFIT ELEMENT EMBEDDED IN THE VALUE OF SAID DISPUTED PURCHASES TO BE AT 12.5% AND GRANTED RELIEF ACCORDINGLY TO THE ASSESSEE. 4. AGGRIEVED BY THIS ORDER O F THE LD. CIT(A), REVENUE IS IN APPEAL BEFORE US. 5. WE FIND THAT ASSESSEE HAS NOT PREFERRED ANY APPEAL BEFORE US AGAINST THE ORDER OF THE LD. CIT(A) AS SUBMITTED BY THE LD. DR. IT IS NOT IN DISPUTE THAT THE ASSESSEE COULD NOT PROVE THE GENUINENESS OF THE PURCHASES MADE FROM FIVE PARTIES BEYOND DOUBT. AT THE SAME TIME, THE SALES MADE BY THE ASSESSEE OUT OF DISPUTED PURCHASES HAVE BEEN ACCEPTED AND NOT DOUBTED BY THE REVENUE. HENCE, IT WOULD BE JUST AND FAIR TO TAX ONLY THE PROFIT ELEMENT EMBEDDED IN SUCH D ISPUTED TRANSACTION. IN THIS SCENARIO, IT COULD BE SAFELY CONCLUDED THAT ASSESSEE SHOULD HAVE MADE PURCHASES ONLY IN THE GR E Y MARKET IN ORDER TO HAVE SAVING IN SOME INDIRECT TAXES AND THE INCIDENTAL PROFITS EMBEDDED THEREON. THIS TRIBUNAL IN SERIES OF DECI SIONS WITH REGARD TO OTHER ASSESSEES ENGAGED IN SIMILAR LINE OF INDUSTRY IN WHICH ASSESSEE IS ENGAGED IN, HAD ESTIMATED THE REASONABLE PROFIT PERCENTAGE ON DISPUTED PURCHASES TO BE AT 12.5%. FOR THE SAKE OF BREVITY , THOSE SERIES OF TRIBUNAL DECISIONS ARE N OT REITERATED HEREIN. HENCE, KEEPING IN VIEW THE JUDICIAL PRECEDENTS BEFORE US, WE HOLD THAT THE LD. CIT(A) HAD REASONABLY ESTIMATED THE PROFIT PERCENTAGE AT 12.5% OF NON - GENUINE PURCHASES WHICH WOULD MEET THE ENDS OF JUSTICE AND DOES NOT WARRANT ANY INTER FERENCE. ACCORDINGLY, THE GROUND RAISED BY THE REVENUE IS DISMISSED. ITA NO . 1566/MU M/2019 M/S. NEW AGE FIRE PROTECTION ENGINEERING PVT. LTD., 4 6. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED ON 04 / 12 /2020 BY WAY OF PROPER MENTIONING IN THE NOTICE BOARD. SD/ - ( AMARJIT SINGH ) SD/ - (M.BALAGANESH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 04 / 12 / 2020 KARUNA , SR.PS 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, ITA T, MUMBAI 6. GUARD FILE. //TRUE COPY//