KARSAM TELE TRADING P. LTD, MUMBAI V. ACIT CEN CIR 3(2), MUMBAI

ITA 1914/MUM/2017

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0016 (ITAT-MUMBAI)
• Duration Of Justice: 3 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 05-06-2017
• Assessment Year: 2007-2008
• Appeal Filed On: 17-03-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Bogus purchase; Accommodation entries
• Section: 143(3); 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SRI MAHAVIR SINGH, JM ITA NO. 1914 /MUM/ 2017 (A.Y: 2007 - 08 ) KARSAM TELE TRADING P. LTD 605, BUSINESS CLASSIC, CHINCHOLI BUNDER RD, MALAD (W) MUMBAI - 400 064 PAN NO. AABCK6468Q VS. ASST . COMMI SSIONER OF INCOME TAX CEN CIR 3(2) MUMBAI - APPELLANT .. RESPONDENT ASSESSEE BY .. NONE REVENUE BY .. SHRI RAKESH RANJAN, DR DATE OF HEARING .. 05 - 06 - 2017 DATE OF PRONOUNCEMENT .. 30 - 0 6 - 2017 O R D E R PER MAHAVIR SINGH , JM : TH IS APPEAL BY THE ASSESSEE IS ARISING OUT OF THE ORDER OF CIT(A) - 51 MUMBAI, IN APPEAL NO. CIT(A) - 51/IT 80/2015 - 16 DATED 15 - 12 - 2016 . THE ASSESSMENT WAS FRAMED BY ACIT CENTRE CIRCLE 3(2), MUMBAI FOR THE A . Y . 2007 - 08 VIDE ORDER DATED 13 - 03 - 2015 UNDER SECTION 143(3) READ WI TH SECTION 147 OF THE INCOME TAX ACT, 1961 (HEREINAFTER THE ACT). 2. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE IS IN THE BUSINESS OF TRADING IN FABRICS. THE AO RECEIVED INFORMATION FROM DGIT (INVESTIGATION) MUMBAI, WHO IN TURN RECEIVED INFORMATION FROM SAL ES TAX DEPARTMENT OF MAHARASHTRA THAT THERE ARE BOGUS ENTRY PROVIDERS OF PURCHASE BILLS / HAWALA ENTRY OPERATORS AND ASSESSEE IS ONE OF THE BENEFICIARY OF THE TRANSACTIONS WITH HAWALA DEALERS BY MAKING PURCHASES FOR AN AMOUNT OF RS. 35.70 LACS I.E. TWO TRA NSACTIONS WITH ONE CONCERN M/S KUNAL GEMS CONTROL BY ONE SHRI PRAVEN KUMAR JAIN AND THE TRANSACTIONS OF RS. 14 ,00,000/ - ON 22 - 03 - 2017 AND ANOTHER TRANSACTION OF RS. 21,70,000/ - LACS ON 24 - 03 - 2017 . 3. ACCORDING TO INFORMATION RECEIVED THE NAME OF THIS PARTY WA S APPEARING IN THE LIST OF HAWALA ENTRY OPERATORS AS SUPPLIED BY SALES TAX ITA NO.1914/MUM/2017 KARSAM TELE TRADING P. LTD (A.Y:2007 - 08) PAGE 2 OF 5 DEPARTMENT OF MAHARASHTRA. THE HAWALA TRADERS ADMITTING BEFORE THE SALES TAX AUTHORITIES IN THEIR DEPOSITION THAT THEY WERE PROVIDING ONLY ACCOMMODATION PURCHASE BILLS ON COMMISSION BASIS WITHOUT BEING ACTUAL PURCHASE/ SALE OF GOODS. THE AO DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS REQUIRED THE ASSESSEE TO FILE THE DETAILS OF PURCHASE. THE ASSESSEE FILED COPIES OF PURCHASE BILLS FROM THE ABOVE SAID PARTIES, COPIES OF LEDGE R EXTRACT AND COPIES OF BANK STATEMENTS TO PROVE THE PAYMENTS BY CHEQUE. THE AO REQUIRED THE ASSESSEE TO PRODUCE THESE PARTIES FOR VERIFICATION BUT ASSESSEE EXPRESSED HIS INABILITY TO DO SO. ACCORDING TO THE AO, THE ASSESSEE FAILED TO ESTABLISH THE GENUINE NESS OF THE PURCHASE AND ACCORDINGLY, HE MADE ADDITION OF RS. 37.50 LACS OF UNPROVED PURCHASES BY TREATING THE SAME AS ACCOMMODATION ENTRIES. AGGRIEVED, ASSESSEE PREFERRED THE APPEAL BEFORE CIT(A). 4. THE CIT(A) AFTER GOING THROUGH THE FACTS OF THE CASE AND S UBMISSIONS OF THE ASSESSEE PARTLY CONFIRMED THE ACTION OF THE AO APPLYING PROFIT RATE @ 25% OF THE BOGUS PURCHASES BY OBSERVING IN PARA 15 AS UNDER: - 15. FROM THE PERUSAL OF THE ACCOUNTS OF THE ASSESSEE, IT IS GATHERED THAT THEY HAVE MADE A TURNOVER OF A ROUND RS. 27.26 CR. HOWEVER, INCOME SHOWN IS ONLY RS. 3,82,488/ - WHICH GIVES A PROFIT RATE OF 1.2% AND IS VERY LOW SEEING THE NATURE OF BUSINESS OF THE ASSESSEE. THE LCL.AR WAS ACCORDINGLY ASKED FOR THE REASONS FOR SUCH LOW PROFIT AND WHAT CONNECTION DID I T HAVE BY ISSUING BOGUS ACCOMMODATION BILLS TO KUNAL GEMS ETC. HOWEVER, THE LD.AR FAILED TO GIVE ANY SATISFACTORY REPLY. THEREAFTER, THE LCL.AR WAS ASKED AS TO WHAT IS THE PROFIT RATE IN SALE TRANSACTIONS TO KUNAL GEMS AND MOHIT ITA NO.1914/MUM/2017 KARSAM TELE TRADING P. LTD (A.Y:2007 - 08) PAGE 3 OF 5 INTERNATIONAL VIDE INVOICES DATED 20/02/2007 AND 22/02/2007 AND AT WHAT RATES THE CORRESPONDING PURCHASES WERE MADE. THE ID. AR WAS ALSO ASKED AS TO WHAT WERE THE SALE RATES IN RESPECT OF OTHER SIMILAR TRANSACTIONS OF SALES CARRIED OUT BY THE ASSESSEE DURING THE YEAR. BUT ONCE AGAIN , THE ASSESSEE FAILED TO FURNISH ANY DETAILS OR EXPLANATION IN THIS REGARD. FROM THE COPY OF ACCOUNT ISSUED BY KUNAL GEMS AND MOHIT INTERNATIONAL, I T IS GATHERED THAT ASSESSEE HAS RECEIVED THE PAYMENTS IN LIEU OF THE ACCOMMODATION SALES VIDE CHEQUE DATED 2 0/03/2007. HOWEVER, THE ASSESSEE HAS NOT FURNISHED HIS BANK STATEMENT TO SEE WHETHER ANY AMOUNT WAS WITHDRAWN TO SETTLE THIS ACCOUNT. THERE IS NO CONCRETE EVIDENCE AGAINST THE ASSESSEE IN THIS REGARD. IN ABSENCE OF COMPLETE DETAILS FROM THE ASSESSEE, IN TH IS REGARD, IT IS NOT POSSIBLE TO WORK OUT THE EXACT INCOME OF THE ASSESSEE FROM THE SALE TRANSACTION. THEREFORE, CONSIDERING THE OVERALL FACTS OF THE CASE AND LOW G.P. RATE DISCLOSED BY THE ASSESSEE, FROM THE OVERALL TRADING TRANSACTIONS, IT WILL BE FAIR A ND REASONABLE IF THE INCOME OF THE ASSESSEE FROM SUCH BOGUS SALE TRANSACTION IS ESTIMATED AT 25%. THEREFORE, OUT OF THE ADDITION OF RS. 35,70,000/ - MADE BY THE AO, ADDITION TO THE EXTENT OF 251/0' WHICH WORKS OUT. TO RS. 8 , 92,500/ - IS CONFIRMED AND BALANCE AMOUNT OF RS. 26 , 77 , 500/ - IS DIRECTED TO BE DELETED. AGGRIEVED, NOW ASSESSEE IS IN SECOND APPEAL BEFORE TRIBUNAL. ITA NO.1914/MUM/2017 KARSAM TELE TRADING P. LTD (A.Y:2007 - 08) PAGE 4 OF 5 5. I HAVE HEARD THE RIVAL CONTENTIONS AND GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. NOW, BEFORE ME, ASSESSEE CONTENDED THAT PROFI T ELEMENT APPLIED BY THE CIT(A) IS ON HIGHER SIDE AND HE REQUESTED FOR REDUCTION IN PROFIT RATE. I FIND THAT THE ASSESSEE IS IN THE BUSINESS OF TRADING IN FABRICS AND GROSS PROFIT DECLARED BY ASSESSEE IN NORMAL COURSE OF BUSINESS HAS ALREADY BEEN DECLARED BY ASSESSEE IN ITS BOOKS OF ACCOUNTS. ACCORDINGLY, THE PROFIT DECLARED ON BOGUS PURCHASES CANNOT BE ESTIMATED AGAIN. I HAVE CONSIDERED THE ISSUE AND FIND THAT THE PURCHASES MADE FROM THESE HAWALA PARTIES ARE NOT PROVED BY THE ASSESSEE AND HE ADMITTED. IN S UCH SITUATION THE ASSESSEE MIGHT HAVE MADE PURCHASES FROM GREY MARKET AND OBTAINED THESE BOGUS BILLS FROM HAWALA PARTIES BY PAYING SOME COMMISSION. IN THESE CIRCUMSTANCES THE ASSESSEE MIGHT HAVE SAVED VAT AND ALSO PURCHASED MATERIAL FROM GREY MARKET AT A L OWER PRICE. FOR THAT THE CIT(A) HAS ESTIMATED PROFIT RATE OF 25% AND ACCORDING TO ME THIS IS QUITE HIGH AND ACCORDINGLY A REASONABLE PROFIT RATE IS TO BE ESTIMATED. I FIND THAT THE IN THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. SM ITH P SETH 365 ITR 451(GUJ), WHEREIN THE PROFIT RATE IS ESTIMATED AT 12.5%. ACCORDINGLY, I AM OF THE VIEW THAT PROFIT RATE AT THE RATE OF 12.5% WILL MEET THE END OF JUSTICE ONLY QUA THE BOGUS PURCHASE. THE ASSESSEE HAS ALSO DISCLOSED GP ON BOGUS PURCHASES AND TO GIVE CREDIT FOR THE SAME, THE ESTIMATION OF PROFIT @ 12.5% WILL BE SUFFICIENT. I DIRECT THE AO ACCORDINGLY. THE APPEAL OF ASSESSEE IS PARTLY ALLOWED. 6. IN THE RESULT, THE APPEAL OF ASSESSEE IS PARTLY ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 30 - 0 6 - 2017. SD/ - (MAHAVIR SINGH) JUDICIAL MEMBER MUMBAI, DATED: 30 - 0 6 - 2017 SUDIP SARKAR /SR.PS ITA NO.1914/MUM/2017 KARSAM TELE TRADING P. LTD (A.Y:2007 - 08) PAGE 5 OF 5 COPY OF THE ORDER FORWARDED TO : / /TRUE COPY// BY ORDER , ASSISTANT REGISTRAR ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT (A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE.