PREMIER CORE INDUSTRIES, THANE V. DCIT CIR 3, THANE

ITA 1747/MUM/2017

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 9060 (ITAT-MUMBAI)
• Duration Of Justice: 6 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-10-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2009-2010
• Appeal Filed On: 14-03-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: T A KHAN
• Keywords: Bogus purchase; Unexplained expenditure; Accommodation entries
• Section: 143(3); 133(6); 148

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL BENCH F MUMBAI BEFORE SHRI MAHAVIR SINGH , JM AND SHRI RAJESH KUMAR, AM , , ITA NO. 1747 / MUM / 20 1 7 ( / ASSESSMENT YEAR: 2 0 09 - 10 ) M/S PREMIER CORE INDUSTRIES C - 43/A - 5, FERRODIA INDUSTRIAL CO - OPERATIVE SOCIETY, ROAD NO.22, WAGALE INDUSTRIAL ESTATE, THANE (W) - 400604 / VS. DY. COMMISSIONER OF INCOME TAX, CIRCLE 3 , THANE ( / APPELLANT) : ( / RESPONDENT ) ./ PAN : AA JFP4152H ( / APPELLANT) : ( / RESPONDENT ) / ASSESSEE BY : NONE / REVENUE BY : SHRI T A KHAN / DATE OF HEA RING : 24.8. 2017 / DATE OF PRONOUNCEMENT : 11. 10. 201 7 / O R D E R PER RAJESH KUMAR, A. M: THE CAPTIONED IS APPEAL BY THE ASSESSEE PERTAINING TO ASSESSMENT YEAR S 20 0 9 - 10 . THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE CIT(A) - 2 AURANGABAD DATED 19.1.2016 WHICH IN TURN HAS ARISEN FROM AN ORDER 2 ITA NO. 1747 /MUM/201 7 PASSED BY THE ASSESSING OFFICER DATED 4.3.2014 UNDER SECTION 143(3) R.W.S.147 OF THE INCOME TAX ACT, 1961. ACT. AT THE OUTSET, WE WOULD LIKE TO MENTION HERE THAT NEITHER THE ASSESSEE O R HIS AUTHORIZED REPRESENTATIVE APPEARED BEFORE THIS TRIBUNAL WHEN THE APPEAL WAS CALLED FOR HEARING NOR WAS ANY APPLICATION SEEKING ADJOURNMENT OF THE HEARING RECEIVED IN THE OFFICE OF THE TRIBUNAL DESPITE SERVICE OF NOTICE THROUGH RPAD . THEREFORE, WE PRO CEED TO DISPOSE OF THE APPEAL OF THE ASSESSEE EX - PARTE AFTER HEARING THE LD.DR. 2. ONLY ISSUE RAISED IN THIS APPEAL IS AGAINST THE PART CONFIRMATION OF ADDITION OF RS.3,89,126/ - BEING 1 5 % OF THE ALLEGED BOGUS PURCHASE S OF RS.25,94,174/ - BY THE LD.CIT(A) AS AGAINST THE ADDITION EQUAL HAS BEEN MADE BY THE AO . 3. FACTS OF THE CASE ARE THAT THE AO RECEIV ED INFORMATION FROM THE DGIT(INV), SALES TAX DEPARTMENT, GOVERNMENT OF MAHARASHTRA THAT THE ASSESSEE WAS ONE OF THE BENEFICIARIES OF THE BOGUS PURCHASE B ILLS RACKET OPERATING IN THE STATE. THE AO THEREAFTER ISSUED NOTICE U/S 148 OF THE ACT ON 25.3.2013 WHICH WAS REPLIED BY THE ASSESSEE ON 18.4.2013. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO FOUND THAT THE ASSESSEE HAS AVAILED BOGUS PURCHASE BI LLS FROM TWO PARTIES I.E RAJENDRA IMPEX INDIA 3 ITA NO. 1747 /MUM/201 7 RS.19,16,510/ - AND TARA ENTERPRISES RS.6,77,664/ - AGGREGATING TO RS.25,94,174/ - . TO VERIFY THE GENUINENESS OF THE PURCHASES , THE AO ISSUED NOTICE U/S 133(6) OF THE ACT TO THE THESE HAWALA PARTIES WHICH W ERE RETURNED UNSERVED . THEREAFTER, THE INSPECTOR WAS DEPUTED TO VERIFY THE ADDRESSES OF THE PARTIES , H OWEVER , NONE OF THEM WERE FOUND ON THE ADDRESSES SUBMITTED BY T HE ASSESSEE. ACCORDINGLY, THE AO , AFTER CONSIDERING THE REPLY OF THE ASSESSEE , CAME TO THE CONCLUSION THAT THE ASSESSEE HAS TAKEN HAWALA ENTRIES AMOUNTING TO RS.25,94,174/ - WHICH WAS TREATED AS UNEXPLAINED EXPENDITURE AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE WHILE FRAMING ASSESSMENT U/S 143(3) VIDE ORDER DATED 4.3.2014 THE ASSESSING THE INCOME AT RS.73,37,256/ - . THE MATTER CARRIED TO THE FIRST APPELLATE AUTHORITY, WHO VIDE PARA 16 OF THE APPELLATE ORDER CONSIDERED THE SUBMISSIONS AND CONTENTIONS OF THE ASSESSEEE AND CAME TO THE CONCLUSION AS UNDER : 16. IN VIEW OF THE FOREGOING D ISCUSSIONS, THE PERCENTAGE OF DISALLOWANCE OF BOGUS PURCHASE HAS TO BE ASSESSED ON THE FACTS OF EACH CASE HENCE THE SAME CANNOT BE REPRESENTED IN EVERY CASE. THE DIRECTIONS SUBMITTED IN THE CASES OF SANJAY OIL CAKE INDUSTRIES (SUPRA) AND VIJAY PROTEI N LTD (SUPRA) ARE HOWEVER DISTINGUISHABLE ON FACTS SINCE IN CASE OF SANJAY OIL CAKE INDUSTRIES, A SPECIFIC FINDING WAS GIVEN BY THE ASSESSING OFFICER THAT THE PURCHASES WERE MADE FROM THE ALLEGED BOGUS SUPPLIERS AT HIGHER RATE AS COMPARED TO THE OTHER PA RTIES. IN THE CASE OF VIJAY PROTEINS LTD., AFTER EXAMINING THE BANK ACCOUNT, IT WAS ESTABLISHED THAT CHEQUES ISSUED TO VARIOUS PARTIES WERE DEPOSITED IN ONE OF THE ACCOUNT; WHICH WERE FOUND TO BE OWNED BY THE ASSESSEE HIMSELF BUT THERE ARE NO SUCH 4 ITA NO. 1747 /MUM/201 7 CIRCUMST ANCES IN THE PRESENT CASE. MOREOVER THE QUESTION WHETHER ENTIRE PURCHASE SHOULD BE DISALLOWED OR ADDITION SHOULD BE RESTRICTED TO THE PROFIT EMBODIED ON SALE PROCEEDS AS ANSWERED BY HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT V/S. PRESIDENT INDUSTRIES (258 LTR 654) AN D THE HONBLE MADHYA PRADESH HIGH COURT IN THE CASE OF CIT V/S BALCHAND AJIT KUMAR (263 ITR 610) CONSIDERING HE ABOVE DECISION S, IT IS CLAR THAT ONLY THE PROFIT EMBODIES ON SALE PROCEEDS SHOULD BE TAXED INSTEAD OF ADDITION ON ACCOUNT OF E NTIRE PURCHASES. LOOKING TO THE CIRCUMSTANTIAL EVIDENCE IN THE PRESENT CASE, IT IS EVIDENT THAT IMPUGNED PURCHASE FROM THE ALLEGED SUPPLIER WAS NOT GENUINE AND SUCH PURCHASES WERE ACTUALLY MADE FROM OPEN MARKET. ONE HAS TO CONSIDER THE TOTALITY OF FACTS, S URROUNDING CIRCUMSTANCES AND HUMAN PROBABILITY FOR ARRIVING AT SUCH A CONCLUSION. IN THE PRESENT CASE, THE ASSESSEE IS NOT WILLING TO COME CLEAN AND HENCE ONE WILL HAVE TO TAKE RESOURCE TO MATERIAL ON RECORD FOR ARRIVING (IT ANY CONCLUSION. THE ASSESSEE HA S FAILED TO PRODUCE THE SUPPLIERS AND WA S ALSO UNABLE TO PROVE THAT THE GOODS IN QUESTION WERE ACTUALLY SENT BY THE ALLEGED SUPPLIER. IN VIEW OF FACTS AND CIRCUMSTANCES IN THE PRESENT CASE , I ACCORDINGLY HOLD THAT THE APPELLANT HAS FAILED TO PROVE THE GENU INENESS OF PURCHASES MADE FROM THE SAID SUPPLIERS. HOWEVER, THE ACTION OF THE AO TO DISALLOW 100% OF THE UNVERIFIABLE PURCHASE CANNOT BE UPHELD AND CONSEQUENTLY IMPUGNED ADDITIONS CAN NOT BE SUSTAINED. THE ASSESSING OFFICER HAS .DEDUCTION AND WERE NO T ALTERED ON THE ASSESSEE. APPELLANT HAD ACTUALLY PURCHASED THE MATERIALS IN CASES FROM THE OPEN MARKET AND ONLY BILL WAS TAKEN FROM THE SAID SUPPLIERS. IT IS ALSO NOT IN DISPUTE THAT THE PURCHASE AMOUNT H AD BEEN PAID TO THE ALLEGED SUPPLIER TH ROUGH BANKING CHANNEL, WHAT THE APPELLANT HAD ACTUALLY EARNED IN HAWALA TRANSACTIONS COULD NOT HAVE EXCEEDED 15% INCLUSIVE OF VARIOUS TAXES AND PROFITS ON CASH TRANSACTION . IN VIEW OF THESE FACTS, THIS IS NOT A CASE WHERE THE ENTIRE CASH HAS BEEN SIPHONE D OFF BY DEBITING THE BOGUS PURCHASES. THIS IS A CASE WHERE AT THE MOST, THE PURCHASES/EXPENSES MIGHT HAVE BEEN INFLATED . THE ASSESSEE HAS SUBMITTED A GROSS PROFIT ANALYSIS AND HAS SHOWN THAT THE AVERAGE OF GROSS PROFIT BETWEEN ASSESSMENT YEARS 2008 - 09 TO 2012 - 13 IS 13.5%. THE HIGHEST GROSS PROFIT IS ACHIEVED IN THE AY 2011 - 12 WHEN IT WAS 15.75% AND THE LOWEST GROSS PROFIT IS AT 10.61% IN AY 2009 - 10 I.E. THE YEAR WHEN PURCHASE WERE MADE FROM HAWALA DEALERS. OBVIOUSLY, THIS IS DUE TO THE FACT THAT PURC HASES HAVE BEEN INFLATED . THEREFORE, RELYING UPON THE DECISION OF HONBLE GUJARAT 5 ITA NO. 1747 /MUM/201 7 HIGH COURT IN THE CASE OF SIMIT P SETH (365 ITR 451) I DIRECT THE ASSESSING OFFICER TO RESTRICT THE ADDITION TO RS.3,89,126(15% OF RS.25,94,174)/ - INSTEAD OF RS.25,9 4,174/ - MADE BY HIM. THE APPELLANT GETS RELIEF OF RS.22,05,048 / - . THIS GROUND OF APPEAL IS PARTLY ALLOWED. 4. WE HAVE CAREFULLY CONSIDERED THE CONTENTIONS OF THE LD DR AND PERUSED THE MATERIAL PLACED BEFORE US INCLUDING THE ORDERS OF AUTHORITIES BELOW. THE UNDISPUTED FACTS ARE THAT THE ASSESSEE WAS FOUND TO HAVE AVAILED ACCOMMODATION ENTRIES OF BOGUS PURCHASE S FROM 2 PARTIES AS HAS BEEN STATED HEREINABOVE WHICH COULD NOT BE VERIFIED BY THE AO EVEN AFTER ISSUING THE NOTICE U/S 133(6) OF THE ACT WHICH WER E TURNED UNSERVED. E VEN THE INSPECTOR WAS DEPUTED TO VERIFY THESE PARTIES REPORTED THAT NONE EXISTED ON THE GIVEN ADDRESSES . THE LD.CIT(A) PARTLY ALLOWED THE APPEAL OF THE ASSESSEE BY SUSTAINING 15% ADDITION AFTER CONSIDERING VARIOUS CONTENTIONS AND SUBMI SSIONS MADE BY THE ASSESSEE THEREBY DELETING 85% . IN THE SIMILAR FACTS AND CIRCUMSTANCES OF THE CO - ORDINATE BENCH ES HAVE TAKEN A CONSISTENT VIEW THAT SOME ADDITION COVERING THE VARIOUS TYPES OF SAVING WHICH THE ASSESSEE HAS MADE BY PURCHASING THE GOODS FROM THE GREY MARKET SHOULD BE MADE. IN THE INSTANT CASE , IT WOULD BE FAIR AND REASONABLE TO SUSTAIN THE ADDITION AT THE RATE OF 12.5% OF BOGUS PURCHASES TO COVER THE LEAKAGES OF THE REVENUE AND THE SAVINGS MADE BY THE ASSESSEE BY WAY OF VAT AND OTHER I NCIDENTAL CHARGES. THUS T AKING A 6 ITA NO. 1747 /MUM/201 7 CONSISTENT VIEW WITH COORDINATE BENCHES OF THE TRIBUNAL EARLIER, WE SET ASIDE THE ORDER OF THE LD.CIT(A) AND DIRECT THE AO TO ACCEPT 12.5% OF THE PURCHASES MADE BY THE ASSESSEE. 5. IN THE RESULT, THE APPEAL OF THE ASSESS EE STANDS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 11TH OCT , 2017. S D SD ( / MAHAVIR SINGH ) ( / RAJESH KUMAR) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED : 11TH OCT .2017 SRL,SR.PS / 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 F ILE / BY ORDER, T RUE COPY / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI