NELCO STEEL (PROP NEMICHAND KALUCHANJI SHAH), MUMBAI V. CIT, APPEAL-52, MUMBAI

ITA 176/MUM/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 9927 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-06-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 14-01-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AKHTAR HANSARI
• Keywords: Bogus purchase; Accommodation entries
• Section: 143(3); 147

Judgement Text

SMC IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI , BEFORE SRI MAHAVIR SINGH, VICE PRESIDENT ./ ITA NO. 176/ MUM/ 2019 ( / ASSESSMENT YEA R S 2010 - 11) NELCO STEEL (PROP. NEMICHAND KALUCHANDJI SHAH) , 56/64, 1 ST FLOOR, ROOM NO.2, NAGINBHAI GELABHAI JAIN TRUST BLDG., NANUBHAI DESAI ROAD, MUMBAI / VS. INCOME TAX OFFICE R , MATRU MANDIR, BLDG, NANA CHOWK, MUMBAI - 400 007 ( / APPELLAN T) ( / RESPONDENT) . / PAN NO. AAPPS2838H / APPELLANT BY : NONE / RESPONDENT BY : SHRI AKHTAR H. ANSARI , DR / DATE OF HEARING : 15.06. 2020 / DATE OF PRONOUNCEM ENT : 15.06. 2020 / O R D E R , / PER MAHAVIR SINGH, VP : THIS APPEAL OF ASSESSEE IS ARISING OUT OF THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)] - 52 , MUMBAI , [ IN SHORT CIT(A) ] , IN ITA NO/ NO S . CIT(A) - 52/IT - 228/ITO - 19(2)(4)/17 - 18 DATED 31.10.2018. THE ASSESSMENT WAS FRAMED BY THE INCOME ITA NO. 176/ MUM/ 2019 NELCO STEEL PAGE | 2 TAX OFFICER, WARD 19(2)( 4) (IN SHORT ACIT / ITO/ AO) FOR THE A.Y. 2010 - 11 V IDE ORDER DATED 29.01.2016 UNDER SECTION 143(3) READ WITH SEC. 147 OF THE INCOME - TAX ACT, 1961 (HEREINAFTER THE ACT). 2 . THE ONLY ISSUE IN THIS APPEAL OF ASSESSES IS AGAINST THE ORDER OF CIT(A) CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN APPLYING THE PROFIT RATE AT THE RATE OF 12% MINUS GROSS PROFIT ALREADY DECLARED BY THE ASSESSEE A T THE RATE OF 3.15 % OF THE BOGUS PURCHASES. FOR THIS ASSESSEE HAS RAISED THE FOLLOWING GROUND NO. 1: - 1. (A) ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, LD. CIT(A) ERRED IN PARTLY ALLOWING THE APPEAL FILED AND REDUCING ONLY THE GROSS PROFIT ALREAD Y DECLARED BY THE APPELLANT WITHOUT APPRECIATING THE FACTS THAT THE OPINION OF THE ASSESSING OFFICER IS BASED ON MERELY PRESUMPTIONS AND SUB CONJECTURES AND NOT ON ANY MATERIAL EVIDENCES CORROBORATING THE PURCHASES WHEN IT IS AN ACCEPTED FACT THAT MATERIAL EVIDENCES SUPER CEDES ALL PRESUMPTIONS. (B) THE CIT(A) ERRED IN PARTLY CONFIRMING THE ADDITION WITHOUT APPRECIATING THE UNDERSTAND VITAL FACTS THAT THE PURCHASES ITA NO. 176/ MUM/ 2019 NELCO STEEL PAGE | 3 ARE DULY SUPPORTED WITH NECESSARY DOCUMENTARY EVIDENCES INCLUDING QUANTITATIVE TALLY OF PURCH ASES AND SALES AND THERE APPEARS NO SIGN OF IT BEING BOGUS AND THE LEARNED OFFICER ACCEPTED THE BOOKS OF ACCOUNTS. (C) THE CIT(A) ERRED IN PARTLY CONFIRMING THE ADDITION WITHOUT ANY EVIDENCE FOUND WHICH SHOWS ANY CASH ACTIVITY UNDERGONE BY THE APPELLANT. ( D) THE LD. CIT(A) HAS ERRED IN HOLDING THE IMPUGNED PURCHASES TO BE BOGUS, IN SPITE OF VOLUMINOUS EVIDENCES ON RECORD SIMPLY ON THE BASIS THAT THE CURRENT ADDRESSES OF VENDORS WERE NOT PROVIDED AND THE VENDORS WERE NOT PRODUCED BEFORE THE RESPONDENT. (E) T HE APPELLANT PRAYS THAT THE ADDITION/ DISALLOWANCE MADE IN RESPECT OF ALLEGED PURCHASES BE DELETED. 3 . BRIEF FACTS ARE THAT THE ASSESSEE IS AN INDIVIDUAL ENGAGED IN THE BUSINESS OF TRADING IN FERROUS AND NON - FERROUS METALS AND RUNS THE PROPRIETOR CONCERN UND ER THE NAME AND STYLE OF NELCO STEEL FOR PAS T MANY YEARS . THE ORIGINAL ASSESSMENT WAS ITA NO. 176/ MUM/ 2019 NELCO STEEL PAGE | 4 COMPLETED BY THE ASSESSING OFFICER UNDER SECTION 143(3) READ WITH SECTION 147 OF THE ACT FOR THE ASSESSMENT YEAR 2010 - 11 VIDE HIS ORDER DATED 29.01.2016. THE ASSESSING OF FICER RECEIVED THE INFORMATION FROM DGIT(INV.) MUMBAI, WHO IN TURN RECEIVED INFORMATION FROM SALES TAX AUTHORITIES OF MAHARASHTRA THAT THE FOLLOWING PARTIES ARE ENGAGED IN ISSUING HAWALA BILLS/ BOGUS BILLS FOR PURCHASE TO VARIOUS PARTIES. AS PER THE LIST O F PARTIES FORWARDED BY THE DGIT (INV.) MUMBAI, THE ASSESSEE IS ALSO ONE OF THE BENEFICIARIES OF THE BOGUS BILLS. THE DETAILS OF ACCOMMODATION ENTRIES FILED BY THE ASSESSEE DURING THE YEAR ARE AS UNDER : - SL NO. NAME OF THE PARTIES AMOUNT 1 ) N B ENTERPRISES 14,49,112 2 ) RAJDEEP METALS & TUBES 9,00,101 3 ) DEEPLOK METAL ALLOYS PVT. LTD. 34,08,436 4 ) MASTER TRADING CO. 86,302 5 ) NIMESH STEELS PVT. LTD. 3,92,839 6 ) RIDHI SALES CORPORATION 17,02,663 7 ) PARAS ENTERPRISES 1,71,765 TOTAL 81,11,218 4 . THE ASSESSING OFFICER REQUIRED THE ASSESSEE TO EXPLAIN THE PURCHASE MADE FROM THE ABOVE PARTIES AND ASSESSEE IN TURN FILED THE COPIES OF LEDGER ACCOUNT ALONG WITH COPIES OF PURCHASES INVOICES OF SPECIFIED PARTIES, COPIES OF BANK STATEMENTS, EVIDENCES IN PAYMENTS MADE THROUGH B ANKING CHANNELS BY ISSUING ACCOUNT PAYEE CHEQUES IN RESPECT ALL THE PA R TIES, CHART SHOWING THE DETAILS OF PURCHASE FROM THE ABOVE ALLEGED PARTIES. ITA NO. 176/ MUM/ 2019 NELCO STEEL PAGE | 5 THE ASSESSEE ALSO SUBMITTED THE DETAILS OF PURCHASES MADE FROM THE ABOVE PARTIES AND CORRESPOND ING SALES BUT THE ASSESSING OFFICER REQUIRED THE ASSESSEE TO FILE DELIVERY CHALLANS, TRANSPORT RECEIPTS, OCTROI RECEIPT FOR PAYMENT OF OCTROI DUTY, RECEIPT OF W EIGHBRIDGE FOR WEIGHING OF GOODS , EXCISE G AT E PASS, GOODS INWARD REGISTER MAINTAINED AT GODOWN BUT THE ASSESSE E COULD NOT FILE ANY OF THE ABOVE MENTIONED DOCUMENTS AND HENCE, THE ASSESSEE WAS UNABLE TO FILE EVIDENCES TO PROVE THAT THE PURCHASES ARE GENUINE. ACCORDINGLY, THE ASSESSING OFFICER TREATED THESE PURCHASES AS BOGUS BUT NOTED THAT SINCE THE CORRESPONDING S ALES ARE MADE AND THE GOODS ARE RECORDED IN STOCK REGISTER. HE NOTED THAT ONLY THE ASSESSEE OBTAINED THE BILLS FROM THE ABOVE PARTIES BUT PURCHASED MATERIALS FROM GREY MARKET ON A LOWER PRICE. THEREFORE, APPLYING THE RATIO OF HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. SMITH P. SETH (2013) 356 ITR 451 (GUJ) APPLIED THE PROFIT RATE AT THE RATE OF 12.5% OF THE TOTAL NON - GENUINE PURCHASES AMOUNTING TO ` 81,11,218/ - . THEREBY, THE ASSESSING OFFICER ESTIMATED THE PROFIT AND MADE ADDITION ON NON - GENUINE PURCH ASES AT ` 10,13,902/ - . AGGRIEVED, ASSESSEE PREFERRED THE APPEAL BEFORE CIT(A), WHO ONLY ALLOWED ONE RELIEF BY DIRECTING THE ASSESSING OFFICER TO REDUCE ALREADY DECLARED GP I.E. 3.15% FROM THE PROFIT RATE APPLIED BY ASSESSING OFFICER AT 12.5%. FOR THIS, THE CIT(A) DECIDED THE ISSUE IN PARA 6.7 AS UNDER : - 6.7 FROM THE AFORESAID CITED DECISION OF GUJARAT HIGH COURT IN THE CASE OF SIMIT P. ITA NO. 176/ MUM/ 2019 NELCO STEEL PAGE | 6 SHETH (SUPRA), IT CAN BE OBSERVED THAT THE APPROPRIATE GP PERCENTAGE FOR COMPUTING THE UNACCOUNTED PROFITS FROM THE PURCHA SES FROM THE ALLEGED HAWALA/ BOGUS SUPPLIERS SHOULD FACTOR THE SAVINGS OF TAXES ETC DUE TO THE UNACCOUNTED SALES AND THE GP ALREADY SHOWN IN THE REGULAR BOOKS. IT IS OBSERVED THAT THE RATO OF THE DECISION OF THE GUJARAT HIGH COURT IN THE CASE OF SIMIT P. S HETH (SUPRA) CANNOT BE SQUARELY APPLIED TO THE FACTS OF THE CASE OF OUR ASSESSEE SINCE THE SALES TAX RATE PREVALENT IN GUJARAT WAS 10% AS AGAINST ONLY 4% APPLICABLE IN MAHARASHTRA FOR THE RELEVANT PERIOD. HOWEVER, THE FACTS OF THE CASE OF THE ASSESSEE AR S OME WHAT SIMILAR TO THAT OF RATNAGIRI STEELS (SUPRA). IN THE CASE OF RATNAGIRI STEELS (SUPRA), THE HONBLE ITAT AFTER CONSIDERING THE HEALTHY GP SHOWN OF 5.45%, DIRECTED TO ASSESSING OFFICER TO ALLOW SET OFF OF THE BOOK GP AGAINST THE SAID RATE OF 12.5% WH ILE COMPUTING THE ADDITIONAL PROFITS FROM THE PURCHASES FROM THE ALLEGED HAWALA/ BOGUS SUPPLIERS. IN THE INSTANT CASE, IT IS OBSERVED THAT THE ASSESSEE HAS SHOWN A GP OF 3.15%. THEREFORE, AS WAS DONE BY ITA NO. 176/ MUM/ 2019 NELCO STEEL PAGE | 7 THE HONBLE ITAT, MUMBAI IN THE CASE OF RATNAGIRI STE EL (SPRA), IT WILL BE APPROPRIATE IF RATE OF 12.5% IS APPLIED FOR COMPUTING THE UNACCOUNTED PROFITS RELATED TO PURCHASE FROM THE HAWALA/ BOGUS SUPPLIERS AND AGAINST THIS SET OFF OF THE GP SHOWN IN THE REGULAR BOOKS IN RESPECT OF THE PURCHASES FROM THE HAWA LA / BOGUS SUPPLIERS IS ALLOWED. ACCORDINGLY . THE ASSESSING OFFICER IS DIRECTED TO THE ADDITIONAL PROFITS IN RESPECT OF THE PURCHASES FROM THE ALLEGED HAWALA/ BOGUS SUPPLIERS BY ADOPTING RATE OF 12.5%. HOWEVER, THE ASSESSING OFFICER WILL ALLOW A SET OFF OF THE GP ALREADY SHOWN BY THE ASSESSEE IN REGULAR BOOKS IN RESPECT OF THE PURCHASES FROM THE SAID ALLEGED HAWALA/ BOGUS SUPPLIERS. ACCORDINGLY, GROUND NOS.3 TO 6 OF THE APPEAL ARE PARTLY ALLOWED. AGGRIEVED, ASSESSEE CAME IN APPEAL BEFORE TRIBUNAL. 5 . AT THE O UTSET, IT IS TO BE NOTED THAT THIS APPEAL WAS FIXED FOR HEARING FOR THE FIRST TIME ON 14.01.2020 BUT NONE WAS PRESENT FROM ASSESSEES SIDE . NOW, THIS APPEAL WAS FIXED FOR HEARING FOR VIRTUAL COURT HEARING THROUGH THE WEBSITE OF ITA NO. 176/ MUM/ 2019 NELCO STEEL PAGE | 8 HTTPS://ITAT.WEBEX.COM/WEBAPPNG/SITES/ ITAT/DASHBOARD BY PUTTING A NOTICE AT ITATS WEBSITE NOTICE BOARD BUT DESPITE THAT NONE IS PRESENT FROM THE ASSESSEES SIDE. HENCE, I HEARD THIS APPEAL AS EX - PARTE AND WILL DE CIDE THIS APPEAL . 6 . I HAVE HEARD THE LEARNED SR. DEPARTMENTAL REPRESENTATIVE WHO SUPPORTED THE ORDERS OF LOWER AUTHORITIES AND INCLUDING CIT(A), HE STATED THAT THE PURCHASES MADE ARE NON - GENUINE AND THE ASSESSING OFFICER HAS RIGHTLY APPLIED THE PROFIT RATE AT THE RATE OF 12.5% AND HE FURTHER, REDUCED GROSS PROFIT DECLARED BY ASSESSEE AT 3.15% AND ACCORDING TO HIM, THE ASSESSEE IS NOT ENTITLED FOR ANY FURTHER RELIEF IN VIEW OF THE DECISION O F HONBLE GUJARAT HIGH COURT IN THE CASE OF SMITH P. SETH (SUPRA). I HAVE HEARD THE ARGUMENTS OF THE LEARNED SR. DEPARTMENTAL REPRESENTATIVE AND NOTED THAT THE ASSESSEE COULD PRODUCE THE LEDGER ACCOUNT ALONG WITH COPIES OF PURCHASE INVOICES OF THE SPECIFIED PARTIES, CONFIRMATIONS, BANK STATEMENT, EVIDENCE OF PAYMENT MADE B Y ASSESSEE TO ONE OF THESE PARTIES BY ACCOUNT PAYEE CHEQUES, DETAILS OF THE PURCHASE AND CORRESPONDING SALES. BUT THE ASSESSEE COULD NOT PRODUCE THE DELIVERY CHALLANS TRANSPORTATION RECEIPTS, OCTROI RECEIPTS FOR PAYMENT OF OCTTOI DUTY RECEIPT OF WEIGHBRIDG E FOR WEIGH OF GOODS, EXCISE GATE PASS GOODS IN - WARD REGISTER MAINTAINED AT GODOWN ETC. IN THE PRESENCE OF THESE VITAL DETAILS IT CANNOT BE HELD THAT THE PURCHASES MADE ARE GENUINE. BUT ONCE IT IS ESTABLISHED THAT THE ASSESSEE HAS MADE SALES OUT OF THESE P URCHASE, IT IS TO BE PRESUMED THAT ASSESSEE MIGHT HAVE MADE PURCHASES FROM GREY ITA NO. 176/ MUM/ 2019 NELCO STEEL PAGE | 9 MARKET FOR WHICH THE CORRESPONDING SALES IS MADE. FOR THIS, I AM OF THE VIEW THAT THE ASSESSEE MIGHT HAVE SAVED THE VAT PLUS SOME PROFIT ELEMENT IN THESE BOGUS PURCHASES. HENCE , THIS BEING A FERROUS AND NON - FERROUS TRADING SALES, I DIRECT THE ASSESSING OFFICER TO RESTRICT THE PROFIT RATE AT 5% NET INSTEAD CONFIRMED BY CIT(A) AT 12.5% MINUS 3.15% AS PAID BY THE ASSESSEE. I ORDER ACCORDINGLY. 7 . IN THE RESULT, THE APPEAL ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 15.06. 2020 SD/ - ( /MAHAVIR SINGH) ( / VICE PRESIDENT ) , / MUMBAI, DATED: 15.06. 2020 , . / SUDIP SARKAR, SR.PS / COP Y OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. / BY ORDER, //TRUE COPY// / (ASSTT. REGISTRAR) , / ITAT, MUMBAI