MIRAGE CREATIONS, MUMBAI V. DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL RANGE 3(1), MUMBAI

ITA 1901/MUM/2018

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 6012 (ITAT-MUMBAI)
• Duration Of Justice: 3 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-07-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 26-03-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: N HEMALATHA
• Assessee Lawyers: N R AGARWAL
• Keywords: Bogus purchase; Accommodation entries
• Section: 147; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC , BENCH MUMBAI BEFORE SHRI R.C.SHARMA, AM & SHRI AMARJIT SINGH , JM ITA NO. 1901 / MUM/20 18 ( ASSESSMENT YEAR : 2009 - 10 ) M/S. MIRAGE CREATIONS 1, SUNVILE PAPER MILL LANE LAMINGTON ROAD MUMBAI 400 004 VS. DC IT CENTRAL RANGE 3(1) 19 TH FLOOR, AIR INDIA BUILDING, NARIMAN POINT MUMBAI 400 021 PAN/GIR NO. AALFM5935H APPELLANT ) .. RESPONDENT ) ASSESSEE BY SHRI N.R. AGARWAL REVENUE BY MS. N. HEMALATHA DATE OF HEARING 10 / 07 /201 8 DATE OF PRONOUNCEMENT 12 / 07 /201 8 / O R D E R PER R.C.SHARMA (A.M) : THIS IS AN APPEAL FILED BY ASSESSEE AGAINST THE ORDER OF CIT(A) - 51, MUMBAI DATED 13/02/2018 FOR A.Y.2009 - 10 IN THE MATTER OF ORDER PASSED U/S.143(3) R.W.S.147 OF THE IT A CT. 2. THE FOLLOWING GROUNDS HAVE BEEN TAKEN BY THE ASSESSEE: - GROUND NO.1 THE LEARNED CIT (APPEALS) ERRED IN CONFIRMING THE ADDITION MADE @ 15% AMOUNTING TO RS. 1,24,07,221/ - BY THE LEARNED AO ON ACCOUNT OF BOGUS GROUND NO. 2 THE LEARNED CIT (APPEALS) ERRED IN CONFIRMING THE REOPENING U/S 147 EVEN THOUGH ORIGINAL ASSESSMENT WAS DONE U/S 143(3). ITA NO. 1901/MUM/2018 M /S. MIRAGE CREATIONS 2 THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER, MODIFY OR DELETE THE ABOVE GROUND OF APPEAL. 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. 4. BRI EFLY STATED, THE FACTS OF THE CA SE ARE THAT THE ASSESSEE FILED I TS RETURN OF INCOME ON 21 / 09 / 2009 DECLARING A TOTAL INCOME OF RS NIL. A SEARCH ACTION U/S 132 OF THE I T ACT WAS CARRIED OUT ON SUR GEMS GROUP ON 18/ 11 / 2015. SINCE THE ASSESSEE IS ALSO AN ENTIT Y OF SUR GEMS GROUP, IT WAS ALSO COVERED IN THE SAID SEARCH ACTION. THIS SEARCH ACTION ON SUR GEMS GROUP WAS CONDUCTED PURSUANT TO SEARCH ACTION IN THE CASE OF BHANWARILAL JAIN ON 03.10.2013 WHEREIN IT WAS REVEALED THAT HE WAS IN THE BUSINESS OF GIVING ACC OMMODATION ENTRIES THROUGH CONCERNS DIRECTLY/INDIRECTLY CONTROLLED BY HIM AND THE ENTITLES OF SUR GEMS GROUP INCLUDING OUR ASSESSEE WERE THE BE NEFICIARIES. THE SUBSEQUENT SEARCH ACTION ON SUR GEMS G ROUP CONFIRMED THIS FACT THA T THE ASSESSEE AS WET! AS OTHE R ENTITIES OF SUR GAMS GROUP HAVE AVAILED OF ACCOMMODATION ENTRIES FROM VARIOUS CONCERNS OF BHANWARLAL JAIN. THE NAMES OF THESE TWO CONCERNS ALSO FIGURED IN THE LIST OF SUSPICIOUS DEALERS DETECTED BY MAHARASHTRA SALES TAX AUTHORITY WHICH WAS UPLOADED ON 25 .03.2014. FOR THE YEAR UNDER CONSIDERATION, THE ASSESSES HAS AVAILED OF ACCOMMODATION ENTRIES FOR PURCHASES FROM M/S MEENAKSHI EXPORTS ( RS 77, 13 , 000/ - ) AND M/S PUSHPAK GEMS (RS 46 , 94,221/ - ) TOTALLY AGGREGATING TO RS 1,2 4,07,221 ON THE BASIS OF THE FINDING S OF THE SEARCH ACTION, THE A O COMPLETED THE ASSESSMENT VIDE ORDER DATED 30.12.2016 IN WHICH HE ADDED A SUM OF RS ITA NO. 1901/MUM/2018 M /S. MIRAGE CREATIONS 3 18,61,083/ - BEING THE UNDISCLOSED PROFIT @ 15% ON THE ALLEGED AGGREGATE BOGUS PURCHASES OF RS. 1,24,07,221/ - . 5. BY THE IMPUGNED ORDER, CIT(A) AFTER CONSIDERING VARIOUS JUDICIAL PRONOUNCEMENTS CITED BEFORE US CONFIRMING ADDITION TO THE EXTENT OF GP RATE OF 15% AND THE CIT(A) HAS ALSO GIVEN FURTHER RELIEF WITH RESPECT TO THE GP MARGIN SHOWN BY THE ASSESSEE IN RESPECT OF ALLEGED BOGUS PURCHASES AF TER HAVING THE FOLLOWING OBSERVATION: - 5.8 THERE IS NO DISPUTE THAT FN RESPECT OF THE SAID ALLEGED BOGUS PURCHASE THERE ARE CORRESPONDING SA LE S ALSO, TH IS FACT IS ALSO CONFIRMED BY THE TAX AUDIT REPORT WHERE THE AUDITORS HAVE FURNISHED THE QUANTITATIV E TALLY OF THE PURCHASES AND SALES, NOW THE ISSUE TO BE ADJUDICATED I$ WHAT IS THE REASONABLE PROFIT PERCENTAGE TO BE ADOPTED FOR COMPUTING THE PROFITS ARISING FROM THE ALLEGED BOGUS PURCHASES. FOR THIS PURPOSE THE FINANCIAL STATEMENTS, RETURNS FILED, ASSE SSMENTS MADE IF ANY, ETC OF THE ASSESSES FOR THE PRECEDING THREE YEARS I.E. AYS 2006 - 07 TO 2008 - 09 WERE EXAMINED, IT IS OBSERVED THAT FOR AYS 2008 - 07 AND 2008 - 09, THERE ARE NO ALLEGATIONS AGAINST THE A SSESSE E OF HAVING INDULGED IN BOGUS PURCHASE TRANSACTIO NS. THE GP MARGIN SHOWN BY THE ASSESSES FOR THE SAID TWO NON - TAINTED AYS IS OF 3.61% AND 19.69% RESPECTIVELY. THUS, THE AVERAGE GP MARGIN FOR THESE TWO NON - TAINTED YEARS WORKS OUT TO 11.6%. HOWEVER, THIS AVERAGE GP MARGIN OF 11,8% IS WHEN THE ASSESSEE DOES NOT INDULGE IN B OGUS PURCHASES THROUGH UNREGISTERED DEALERS, IN TRANSACTIONS WHEREIN B OGUS PURCHASES ARE INVOLVED, THE GP MARGINS ARE MUCH HIGHER AS THE RAT E OF PURCHASES MADE FROM THE GREY MARKET IS ALWAYS MUCH LESS AS COMPAR ED TO PURCHASES FROM REGISTER ED SUPPLIERS DUE TO THE VARIOUS SAVINGS ON ACCOUNT OF EVASION OF GOVERNMENT DUES/TAXES. THEREFORE, AS SUCH NO INFIRMITY IS FOUND IN THE ACTION OF THE AO OF ADOPTING GP MARGIN OF 15% WHI L E COMPUTING THE PROFITS IN RESPECT OF THE BOGUS PURCHASES. HOWEVER, AG AINST THIS GP MARGIN OF 15% THE AO IS DIRECTED TO AL L OW A SET OFF OF THE GP MARGIN ALREADY DISCLOSED BY ERSE ASS E SSE E IN THE BOOK S IN RESPECT OF THE ALLEGED BOGUS PURCHASES FROM M/S MEENAKSHI EXPORTS (RS 7 7 , 13 , 000/ - } AND M/S PUSHPAK GEMS (RS. 4 6 ,94,221 / - ) TO RS 1,24,07,221 . ACCORDINGLY, GROUND NOS. 2 TO 4 OF THE APPEAL ARE PARTLY ALLOWED . ITA NO. 1901/MUM/2018 M /S. MIRAGE CREATIONS 4 6. WE HAVE HEARD RIVAL CONTENTIONS AND CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND FOUND FROM RECORD THAT BOGUS PURCH ASES SO MADE BY THE ASSESSEE WER E ESTABLISHED AND THE AO HAS ALSO MADE DETAILED ENQUIRY. AFTER CONSIDERING THE ASSESSEES CONTENTION REGARDING CORRESPONDING SALES, THE CIT(A) HAS ALSO GIVEN FURTHER RELIEF BY DIRECTING THE AO TO REDUCE GP EARNED ON SUCH BOGUS PURCHASES FROM THE ESTIMATED PROFIT OF 15% ON THE ALLEGED BOGUS PURCHASES. THE DETAILED FINDING SO RECORDED BY CIT(A) AFTER CONSIDERING VARIOUS JUDICIAL PRONOUNCEMENTS ARE AS PER MATERIAL ON RECORD AND DO NOT REQUIRE ANY FURTHER INTERFERENCE ON OUR PART. 7. IN THE RESULT, APPEAL OF TH E ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 12 / 07 /201 8 SD/ - ( AMARJIT SINGH) SD/ - (R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 12 / 07/ 201 8 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, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//