M/S JYOTI METAL CORPORATION , Mumbai V. ITO WARD 19 (2)(1), Mumbai

ITA 1727/MUM/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 8163 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-06-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 25-03-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AKHTAR HUSSAIN ANSARI
• Keywords: Reopening of assessment; Bogus purchase; Reasonable cause; Tangible material; Accommodation entries; Condonation of delay
• Section: 133(6); 143(1); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC, BENCH M UMBAI BEFORE HONBLE SHRI MAHAVIR SINGH, VICE PRESIDENT & HON BLE SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ITA NO.1727/MUM/2019, ITA NO. 1728/MUM/2019 AND ITA NO. 1729/MUM/2019 ( ASSESSMENT YEAR: 2009-10, 2010-11 AND 2011-12 ) M/S JYOTI METAL CORPORATION OFFICE NO. 12, 1ST FLOOR, 89/92, LUCKY MANSION, DURGADEVI STREET, MUMBAI-400 004 VS. INCOME TAX OFFICER, WARD 19(2)(1) MUMBAI-400 007 PAN/GIR NO. A AFFJ4868E ( APPELLANT ) .. RESPONDENT ) ASSESSEE BY NONE REVENUE BY SHRI. AKHTAR HUSSAIN ANSARI JCIT, SR. DR DATE OF HEARING 17 /0 6 /2020 DATE OF PRONOUNCEME NT 17 / 0 6 /20 20 / O R D E R PER BENCH : THESE ARE THREE APPEALS FILED BY THE ASSESSEE ARE DIRECTED AGAINST, SEPARATE BUT IDENTICAL ORDERS OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-6, MUMBAI, ALL EVEN DATED 11/05/2018 AND 27/07/2018 AND THEY PERTAINS TO AY 2 009-10, 2010- 11 AND 2011-12. SINCE, FACTS AND ISSUES INVOLVED IN THESE APPEALS FILED BY THE ASSESEE ARE IDENTICAL, FOR THE SAKE OF CONVENIENCE, THESE APPEALS WERE HEARD TOGETHER AND ARE DISPOSED-OFF BY THIS CONSOLIDATED ORDER. 2. AT THE OUTSET, WE FIND THAT THERE IS A DELAY OF MORE THAN 200 DAYS IN FILING THESE APPEALS, FOR WHICH NECESSARY P ETITION FOR JYOTI METAL CORPORATION 2 CONDONATION OF DELAY HAS BEEN FILED EXPLAINING THE REASONS FOR DELAY IN FILING THE APPEAL. AFTER HEARING, THE LD. COUNSE L FOR THE REVENUE AND CONSIDERED AFFIDAVIT FILED BY THE ASSESSEE, WE FIND THAT REASONS GIVEN BY THE ASSESSEE FOR NOT FILING APPEAL WITHIN THE TIME ALLOWED UNDER THE ACT, COMES UNDER REASONABLE CAUSE FOR CON DONATION OF DELAY AND HENCE, WE CONDONED DELAY IN FILING APPEAL S FOR ALL ASSESSMENT YEARS. 3. THE ASSESSEE HAS, MORE OR LESS RAISED COMMON GRO UNDS OF APPEAL FOR ALL ASSESSMENT YEARS. THEREFORE, FOR THE SAKE OF CONVENIENCE, GROUNDS OF APPEALS FILED FOR THE ASST. YEAR 2009-10 ARE REPRODUCED AS UNDER: 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LEARNED CIT (A) ERRED IN CONSIDERING THE FACT THAT NOTICE U/S 1 47 R.W.S 148 OF THE INCOME TAX ACT, 1961 IS VALID. 2. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LEARNED CIT (A) ERRED IN CONFIRMING THE VALIDITY OF REOPENING O F ASSESSMENT BY AO U/S. 147 R.W.S 148 OF THE INCOME TAX ACT, 1961. WHI CH IS BAD IN LAW AND THE SAME NEEDS TO BE QUASHED. 3. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LEARNED CIT(A) ERRED IN CONFIRMING THE ADDITION MADE BY THE AO OF RS.6,11,377/- BEING 12.5% OF THE ALLEGED NON - GENUINE PURCHASES OF RS. 48,91,014/-. 4. THE ASSESSEE CRAVES FOR LEAVES TO ADD, AMEND, A LTER, MODIFY OR OMIT ANY OF THE AFORESAID GROUNDS OF APPEAL AS OCCASION MAY ARISE OR DEMAND. 4. THE BRIEF FACTS OF THE CASE AS CULLED OUT FROM A SST. YEAR 2009- 10 ARE THAT THE ASSESSEE IS A PARTNERSHIP FIRM, WHI CH IS ENGAGED IN THE BUSINESS OF TRADING IN FERROUS AND NON- FERROUS METALS FILED ITS RETURN OF INCOME FOR AY 2009-10 ON 25/09/2009, DECL ARING TOTAL INCOME AT RS. 24,560/- AND SAID RETURN WAS PROCESSE D U/S 143(1) OF THE INCOME TAX ACT, 1961. THE CASE HAS BEEN, SUBSEQ UENTLY REOPENED U/S 147 OF THE ACT, ON THE BASIS OF INFORM ATION RECEIVED JYOTI METAL CORPORATION 3 FROM DGIT, INVESTIGATION, MUMBAI, AS PER WHICH, SAL ES TAX AUTHORITIES OF GOVERNMENT OF MAHARASHTRA HAD TAKEN ACTIONS AGAINST NUMBER OF HAWALA DEALERS, WHO HAD ISSUED BOGUS PURC HASE BILLS TO VARIOUS PARTIES IN MUMBAI AND OTHER PLACES. AS PER LIST OF BENEFICIARIES, THE ASSESSEE IS ONE OF THE BENEFICIA RY, WHO HAD TAKEN ACCOMMODATION BILLS OF BOGUS PURCHASES FROM VARIOUS PARTIES AS LISTED BY THE AO IN PARA. 5 OF HIS ASSESSMENT ORDE R AMOUNTING TO RS. 48,91,014/-. THE CASE WAS SELECTED FOR SCRUTINY AND THE ASSESSMENT HAS BEEN COMPLETED U/S. 143(3).R.W.S. 14 7 OF THE I.T.ACT, 1961 ON 25/03/2015 AND DETERMINED TOTAL IN COME OF RS. 6,35,940/-, AFTER MAKING ADDITIONS OF 12.50% GROSS PROFIT ON ALLEGED BOGUS PURCHASE FROM THOSE PARTIES AND MADE ADDITION S OF RS. 6,11,377/-. 5. BEING AGGRIEVED BY THE ASSESSMENT ORDER, THE ASS ESEE PREFERRED AN APPEAL BEFORE THE LD.CIT(A). BEFORE TH E LD.CIT(A), THE ASSESSEE HAS FILED ELABORATE WRITTEN SUBMISSIONS WH ICH HAS BEEN REPRODUCED AT PARA 7.2 ON PAGES 10 TO 14 OF THE LD. CIT(A) ORDER. THE SUM AND SUBSTANCE OF ARGUMENTS OF THE ASSESSEE BEFORE THE LD.CIT(A) ARE THAT PURCHASE FROM THE ABOVE PARTY IS GENUINE, WHICH IS SUPPORTED BY NECESSARY EVIDENCES. THEREFORE, NO ADDITIONS COULD BE MADE ON THE BASIS OF INFORMATION RECEIVED FROM T HIRD PARTY. THE LD.CIT(A), AFTER CONSIDERING RELEVANT SUBMISSION OF THE ASSESSEE AND ALSO, BY FOLLOWING THE DECISION OF HONBLE GUJA RAT HIGH COURT, IN THE CASE OF CIT VS. SIMITH P. SHETH (356 ITR 451) H AS UPHELD ADDITION MADE BY THE LD. AO TOWARDS ALLEGED BOGUS P URCHASES TO 12.50% GROSS PROFIT ON TOTAL PURCHASES FROM THOSE P ARTIES. 6. NONE APPEARED FOR THE ASSESSEE. WE HAVE HEARD TH E LD. DR, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE T HROUGH ORDERS OF JYOTI METAL CORPORATION 4 THE AUTHORITIES BELOW ALONG WITH CASE LAWS CITED BY BOTH PARTIES. AS REGARDS, REOPENING OF ASSESSMENT, WE FIND THAT THE LD. AO HAS FORMED REASONABLE BELIEF OF ESCAPEMENT OF INCOME ON THE BASIS OF REPORT OF INVESTIGATION WING, WHICH IS FURTHER SUPP ORTED BY THE REPORT OF SALES TAX DEPARTMENT, GOVT. OF MAHARASHTRA. FURT HER, IN OUR CONSIDERED VIEW, INFORMATION RELIED UPON BY THE LD. AO CONSTITUTES A FRESH TANGIBLE MATERIAL WHICH IS SUFFICIENT TO REOP EN THE ASSESSMENT. WE, THEREFORE, ARE OF THE OPINION THAT THERE IS NO MERIT IN GROUNDS TAKEN BY THE ASSESSEE CHALLENGING REOPENING OF ASSE SSMENT AND HENCE, WE REJECT GROUNDS RAISED BY THE ASSESSEE, CH ALLENGING OF REOPENING ASSESSMENT. 7. AS REGARDS, ADDITION MADE BY THE LD. AO TOWARDS 12.50% GROSS PROFIT ON ALLEGED BOGUS PURCHASES, WE FIND THAT THE LD. AO HAS MADE ADDITION OF 12.50% PROFIT ON ALLEGED BOGUS PURCHASE S ON THE GROUND THAT THE ASSESSEE IS ONE OF THE BENEFICIARY OF ACCO MMODATION ENTRIES OF BOGUS PURCHASE BILLS ISSUED BY HAWALA DEALERS. A CCORDING TO THE LD. AO, ALTHOUGH ASSESEE HAS FILED CERTAIN BASIC EV IDENCES, BUT FAILED TO FILE FURTHER EVIDENCE IN THE BACKDROP OF CLEAR FINDING BY THE SALES TAX DEPARTMENT, MAHARASHTRA THAT THOSE PARTIE S ARE INVOLVED IN PROVIDING ACCOMMODATION ENTRIES WITHOUT ACTUAL D ELIVERY OF GOODS. THE LD. AO HAD ALSO TAKEN SUPPORT FROM THE INVESTIG ATION CONDUCTED DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AS PER WHICH NOTICE ISSUED U/S 133(6) TO THE PARTIES WERE RETURNED UN-S ERVED BY THE POSTAL AUTHORITIES. THEREFORE, HE CAME TO THE CONCL USION THAT PURCHASES FROM THE SAID PARTIES ARE BOGUS IN NATURE . IT IS THE CONTENTIONS OF THE ASSESSEE BEFORE THE LOWER AUTHOR ITIES THAT PURCHASES FROM THE ABOVE PARTY ARE SUPPORTED BY NEC ESSARY EVIDENCES. IT HAS FURNISHED ALL POSSIBLE EVIDENCES, INCLUDING BOOKS OF ACCOUNTS; STOCK DETAILS AND BANK STATEMENT TO PROVE THAT PAYMENT JYOTI METAL CORPORATION 5 AGAINST SAID PURCHASES HAVE BEEN MADE THROUGH PROPE R BANKING CHANNELS. 8. HAVING CONSIDERED ARGUMENTS OF LD. DR AND ALSO, CONSIDERING MATERIAL AVAILABLE ON RECORD, WE FIND THAT BOTH THE SIDES HAVE FAILED TO PROVE THE CASE IN THEIR FAVOUR WITH NECESSARY EV IDENCES. ALTHOUGH, ASSESSEE HAS FILED CERTAIN BASIC EVIDENCES, BUT FAI LED TO FILE FURTHER EVIDENCES TO CONCLUSIVELY PROVE PURCHASES TO THE SA TISFACTIONS OF THE LD.AO. FURTHER, MERE PAYMENT BY CHEQUE DOES NOT PRO VE THE GENUINENESS OF PURCHASE, MORE PARTICULARLY WHEN OTH ER CIRCUMSTANTIAL EVIDENCE SAYS OTHERWISE. AT THE SAME TIME, THE LD. AO HAD ALSO FAILED TO TAKE THE INVESTIGATION TO A L OGICAL CONCLUSION BY CARRYING OUT NECESSARY ENQUIRES, BUT HE SOLELY RELI ED UPON INFORMATION RECEIVED FROM INVESTIGATION WING, WHICH WAS FURTHER SUPPORTED BY INFORMATION RECEIVED FROM MAHARASHTRA SALES TAX DEPARTMENT. THE AO NEITHER POINTED OUT ANY DISCREPA NCIES IN BOOKS OF ACCOUNTS NOR MADE OUT A CASE OF SALES OUTSIDE BO OKS OF ACCOUNTS. IN FACT, THE AO DID NOT DISPUTED SALES DECLARED FOR THE YEAR. UNDER THESE CIRCUMSTANCES, IT IS DIFFICULT FOR US TO ACCE PT ARGUMENTS OF BOTH THE SIDES. FURTHER, IN A CASE WHERE PURCHASES ARE C ONSIDERED TO BE PURCHASED FROM SUSPICIOUS/HAWALA DEALERS, VARIOUS H IGH COURTS AND TRIBUNALS HAD CONSIDERED AN IDENTICAL ISSUE IN LIGH T OF INVESTIGATION CARRIED OUT BY THE SALES TAX DEPARTMENT AND HELD TH AT IN CASE OF PURCHASES CLAIMS TO HAVE MADE FROM ALLEGED HAWALA D EALERS, ONLY PROFIT ELEMENT EMBEDDED IN THOSE PURCHASES NEEDS TO BE TAXED, BUT NOT TOTAL PURCHASE FROM THOSE PARTIES. THE HONBLE GUJARAT HIGH COURT, IN THE CASE OF CIT VS SIMITH P.SHETH 356 ITR 451 HAD CONSIDERED A SIMILAR ISSUE AND HELD THAT AT THE TIM E OF ESTIMATION OF PROFIT FROM ALLEGED BOGUS PURCHASES NO UNIFORM YARD STICKS COULD BE ADOPTED, BUT IT DEPENDS UPON FACTS OF EACH CASE. TH E ITAT, MUMBAI, JYOTI METAL CORPORATION 6 IN NUMBER OF CASES HAD CONSIDERED AN IDENTICAL ISSU E AND DEPENDING UPON FACTS OF EACH CASE, DIRECTED THE LD.AO TO ESTI MATE GROSS PROFIT OF 10% TO 15% ON TOTAL ALLEGED BOGUS PURCHASES. IN THIS CASE, CONSIDERING THE NATURE OF BUSINESS OF THE ASSESSEE THE LD. AO HAS MADE 12.50% PROFIT ADDITIONS, WHICH HAS BEEN UPHELD BY THE LD. LD.CIT(A). ALTHOUGH, BOTH AUTHORITIES HAVE TAKEN 12 .50% RATE OF PROFIT FOR ESTIMATION OF INCOME FROM ALLEGED BOGUS PURCHASE, BUT NO ONE COULD SUPPORT SAID RATE OF GROSS PROFIT WITH NE CESSARY EVIDENCES OR ANY COMPARABLE CASES, BUT IT IS SUPPORTED BY VAR IOUS DECISIONS OF HIGH COURTS AND TRIBUNALS. IN THIS CASE, THE ASSESS EE IS INVOLVED IN THE BUSINESS OF TRADING IN FERROUS AND NON-FERROUS METALS. THE RATE OF VAT IS 4% ON FERROUS AND NON-FERROUS METALS IN THE STATE OF MAHARASHTRA. FURTHER, THE ASSESSEE MIGHT HAVE SAVED 2% TO 3% BY TAKING ACCOMMODATION BILLS. THEREFORE, CONSIDERING FACTS AND CIRCUMSTANCES OF THIS CASE AND CONSISTENT WITH VIEW TAKEN BY THE CO- ORDINATE BENCH IN NUMBER OF CASES, WE ARE OF THE CO NSIDERED OPINION THAT PROFIT RATE ADOPTED BY BOTH AUTHORITIES APPEAR S TO BE ON HIGHER SIDE AND ACCORDINGLY, WE DIRECT THE LD. AO TO ESTIM ATE 6.5% GROSS PROFIT ON TOTAL ALLEGED BOGUS PURCHASES. 9. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS P ARTLY ALLOWED. ITA NO. 1728/MUM/2019 AND ITA NO. 1729/MUM/2019 10. THE FACTS AND ISSUE INVOLVED IN THESE TWO APPE ALS ARE IDENTICAL TO FACTS AND ISSUES WHICH WE HAD CONSIDER ED IN ITA NO. 1727/MUM/2019 FOR ASST. YEAR 2009-10. THE REASONS G IVEN BY US IN PRECEDING PARAGRAPHS SHALL MUTATIS AND MUTANDIS APP LY TO THESE APPEALS, AS WELL. WE, THEREFORE, FOR DETAILED REASO NS GIVEN IN PREVIOUS PARAGRAPHS, IN ITA NO. 1727/MUM/2019, DIRE CT THE AO TO JYOTI METAL CORPORATION 7 ESTIMATE 6.5% PROFIT ON ALLEGED BOGUS PURCHASES FOR ASST. YEARS 2010-11 AND 2011-12. 11. IN THE RESULT, APPEALS FILED BY THE ASSESSEE FO R ASST. YEARS 2010-11 AND 2011-12 ARE PARTLY ALLOWED. 12. AS A RESULT, APPEALS FILED BY THE ASSESSEE FOR ASST. YEARS 2009- 10, 2010-11 AND 2011-12 ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS: 17/0620 20 SD/- (MAHAVIR SINGH) SD/- (G. MANJUNATHA) VICE PRESIDENT ACCOUNTANT MEMBER MUMBAI ; DATED:17/06/2020 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, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//