RAJENDRA PRASAD MOURYA, MUMBAI V. ITO WD 26(3)(1), MUMBAI

ITA 1944/MUM/2017

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0019 (ITAT-MUMBAI)
• Duration Of Justice: 3 month(s) 10 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: 2009-2010
• Appeal Filed On: 20-03-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: KALPESH TURALKAR
• Keywords: Bogus purchase
• Section: 143(3); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SRI MAHAVIR SINGH, JM ITA NO. 19 4 4 /MUM/ 2017 (A.Y: 2009 - 10 ) RAJENDRA PRASAD MOURYA GAFUR KHAN ESTATE, NEAR GHAMELA CO. LBS MARG, OPP BEST DEPOT KURLA (W) MUMBAI - 400 070 PAN NO.AACPM4614L VS . INCOME TAX OFFICER 26(3)(1) MUMBAI APPELLANT .. RESPONDENT ASSESSEE BY .. SHRI KALPESH TURALKAR, AR 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 , J M : TH IS APPEAL BY THE ASSESSEE IS ARISING OUT OF THE ORDER OF CIT(A) - 38 MUMBAI, IN APPEAL NO. CIT(A) - 38/IT.85/ITO - 26(3)(1)/2015 - 16 DATED 25 - 01 - 2017 . THE ASSESSMENT WAS FRAMED BY IT O - 26(3)(1) , MUMBAI FOR THE A . Y . 20 0 9 - 10 VIDE ORDER DATED 24 - 03 - 2015 UNDER S ECTION 143(3) READ WITH SECTION 147 OF THE INCOME TAX ACT, 1961 (HEREINAFTER THE ACT). 2. AT THE OUTSET, THE LEARNED COUNSEL FOR THE ASSESSEE STATED THAT HE HAS INSTRUCTIONS FROM THE ASSESSEE NOT TO PRESS THE FIRST GROUND REGARDING THE ASSUMPTION OF JURISDI CTION FOR RE - OPENING OF ASSESSMENT U/S 148 OF THE ACT. AS THE LEARNED COUNSEL FOR THE ASSESSEE CONCEDED THIS ISSUE, THE SAME IS DISMISSED AS NOT PRESSED. 3. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE IS IN THE BUSINESS OF MANUFACTURING OF WASHERS. THE AO REC EIVED INFORMATION FROM DGIT (INVESTIGATION) MUMBAI, WHO IN TURN RECEIVED INFORMATION FROM SALES TAX DEPARTMENT OF MAHARASHTRA THAT THERE ARE BOGUS ENTRY PROVIDERS OF PURCHASE BILLS / HAWALA ENTRY OPERATORS AND ASSESSEE IS ONE OF THE ITA NO.1944/MUM/2017 RAJENDRA PRASAD MOURYA (A.Y:2009 - 10) PAGE 2 OF 5 BENEFICIARY OF THE TRAN SACTIONS WITH HAWALA DEALERS BY MAKING PURCHASES FOR AN AMOUNT OF RS. 56,93,838 / - THE DETAILS OF WHICH READS AS UNDER: - SR. NO NAME OF THE PARTLY AMOUNT 1. AJANKYA MULTI TRADE PVT. LTD 5,99,333/ - 2. TATA ENTERPRISES 10,69,712/ - 3. UNIVERSAL ENTERPRISE S 20,95,848/ - 4. SHRITI ENTERPRISES 19,28,945/ - TOTAL 56,93,838/ - 4. ACCORDING TO INFORMATION RECEIVED THE NAME OF THESE PARTIES WERE APPEARING IN THE LIST OF HAWALA ENTRY OPERATORS AS SUPPLIED BY SALES TAX DEPARTMENT OF MAHARASHTRA. THE HAWALA TRADERS AD MITTING 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 T HE ASSESSEE TO FILE THE DETAILS OF PURCHASE. THE ASSESSEE FILED COPIES OF PURCHASE BILLS FROM THE ABOVE SAID PARTIES, COPIES OF LEDGER EXTRACT AND COPIES OF BANK STATEMENTS TO PROVE THE PAYMENTS BY CHEQUE. THE AO REQUIRED THE ASSESSEE TO PRODUCE THESE PART IES FOR VERIFICATION BUT ASSESSEE EXPRESSED HIS INABILITY TO DO SO. ACCORDING TO THE AO, THE ASSESSEE FAILED TO ESTABLISH THE GENUINENESS OF THE PURCHASE AND ACCORDINGLY, HE MADE ADDITION OF GP @ 25% OF THE UNPROVED PURCHASE OF RS. 56,93,838 / - AND ADDED A S UM OF RS.14,23,467/ - TO THE RETURN INCOME OF THE ASSESSEE. AGGRIEVED, ASSESSEE PREFERRED THE APPEAL BEFORE CIT(A). 5. THE CIT(A) AFTER GOING THROUGH THE FACTS OF THE CASE AND SUBMISSIONS OF THE ASSESSEE CONFIRMED THE ACTION OF THE AO APPLYING PROFIT RATE @ 25 % OF THE BOGUS PURCHASES BY OBSERVING AS UNDER: - ITA NO.1944/MUM/2017 RAJENDRA PRASAD MOURYA (A.Y:2009 - 10) PAGE 3 OF 5 4.2.12 THUS IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE AND THE RECENT JUDGEMENTS QUOTED AS ABOVE, IT IS OBSERVED THAT THE LIKELIHOOD OF THE PURCHASE PRICE BEING INFLATED CANNOT BE RULED OUT A ND THEREFORE IN VIEW OF THE ABOVE, THE AO HAS NOT TREATED THE ENTIRE PURCHASE FROM THE AFORESAID PARTIES TO BE BOGUS BUT HELD TO HAVE BEEN MADE FROM THE PARTIES OTHER THAN THOSE MENTIONED IN THE BOOKS OF ACCOUNTS AND THAT BEING THE POSITION, NOT THE ENTIRE PURCHASE PRICE BUT ONLY THE PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES HAS BEEN TAXED BY THE AO @25%. 4.2.13 THEREFORE THE POSSIBLE. PROFIT OUT OF PURCHASES MADE THROUGH NON GENUINEPARTY HAS BEEN ESTIMATE(BY THE AC) WHICH IS COMMENSURATE WITH THE JUDGMENT IN THECASE OF CIT VS. SANJAY OIL CAKES (2009) 316 ITR 274 OF HON'BLE GUJRAT HIGH COURTWHEREIN DISALLOWANCE ON ACCOUNT OF BOGUS PURCHASES IN THE CASE OF MANUFACTURERS WAS SUSTAINED AT 25% OF THE ALLEGED BOGUS PURCHASES. 4.2.15. THE AO HAS ONLY ADDED THE PRO FIT CLEMENT EMBEDDED IN THE AFORESAID BOGUSPURCHASES, 25% WHICH SEEMS TO BE JUSTIFIED IN VIEW OF THE NATURE OF THE BUSINESS CTHE APPELLANT. IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND DISCUSSION HEREIN ABOVE, THE CONTENTIONS AND SUBMISSIONS OFTH E ASSESSEE ARE NOT FOUND TO BE ACCEPTABLE AND ARE THEREFORE REJECTED AND THE ADDITION MADE BY THE AD OF RS. 14,23,467/ - FOUNDTO BE JUSTIFIABLE AND IS ACCORDINGLY UPHELD. AGGRIEVED, NOW ASSESSEE IS IN SECOND APPEAL BEFORE TRIBUNAL. ITA NO.1944/MUM/2017 RAJENDRA PRASAD MOURYA (A.Y:2009 - 10) PAGE 4 OF 5 6. I HAVE HEARD THE RIVAL CONTENTIONS AND GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. NOW, BEFORE ME, ASSESSEE CONTENDED THAT FIRST PROFIT 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 BU SINESS OF MANUFACTURING OF WASHERS 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 CONS IDERED THE ISSUE AND FIND THAT THE PURCHASES MADE FROM THESE HAWALA PARTIES ARE NOT PROVED BY THE ASSESSEE AND HE ADMITTED. IN SUCH SITUATION THE ASSESSEE MIGHT HAVE MADE PURCHASES FROM GREY MARKET AND OBTAINED THESE BOGUS BILLS FROM HAWALA PARTIES BY PAYI NG SOME COMMISSION. IN THESE CIRCUMSTANCES THE ASSESSEE MIGHT HAVE SAVED VAT AND ALSO PURCHASED MATERIAL FROM GREY MARKET AT A LOWER PRICE. FOR THAT THE CIT(A) HAS CONFIRMED THE ACTION OF THE AO ESTIMAT ING PROFIT RATE OF @ 25% AND ACCORDING TO ME THIS IS Q UITE 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. SMITH 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 10% 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 @ 10% WILL BE SUFFICIENT. I DIRECT THE AO ACCORDINGLY. THE APPEAL OF ASSESSEE IS PARTLY ALLOWED. 7. 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.1944/MUM/2017 RAJENDRA PRASAD MOURYA (A.Y:2009 - 10) 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.