ANKUR EXTRUSION P.LTD, MUMBAI V. ITO 12(1)(2), MUMBAI

ITA 1947/MUM/2017

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0015 (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
• Assessment Year: 2009-2010
• Appeal Filed On: 20-03-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Bogus purchase; Opportunity of cross examination
• 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 7 /MUM/ 2017 (A.Y: 2009 - 10 ) ANKUR EXTRUSION P. LTD. 2206 RASHMI HEIGHTS, HAJI BAPU RD, MALAD(E) MUMBAI - 400 097 PAN NO. AAECA3887G VS. INCOME TAX OFFICER 12(1) (2) AAYAKAR BHAVAN, M.K. RD MUMBAI - 400 020 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) - 20, MUMBAI IN APPEAL NO. CIT(A) - 20/ITO.12(1)(2)/IT - 415/2015 - 16 DATED 04 - 11 - 2016 . THE ASSESSMENT WAS FRAMED BY ITO - 12(1)(2), MUMBAI FOR THE A . Y . 20 0 9 - 10 VIDE ORDER DATED 19 - 03 - 2015 UNDER SECTION 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 JURISDICTION FOR RE - O PENING 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 MANUFACTURE OF EXTRUSION ITEMS . THE AO RECEIVED IN FORMATION 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.1947/MUM/2017 ANKUR EXTRUSION P. LTD. (A.Y:2009 - 10) PAGE 2 OF 5 BENEFICIARY OF THE TRANSACTIONS WITH HAWALA DEALERS BY MAKING PURCHASES FOR AN AMOUNT OF RS. 6,16,926 / - THE DETAILS OF WHICH READS AS UNDER: - SR. NO NAME OF THE PARTLY AMOUNT 1. NR TRADERS PVT. LTD 6,16,926/ - TOTAL 6,16,926/ - 4. ACCORDING TO INFORMATION RECEIVED THE NAME OF THESE PART IES WERE APPEARING IN THE LIST OF HAWALA ENTRY OPERATORS AS SUPPLIED BY SALES TAX DEPARTMENT OF MAHARASHTRA. THE HAWALA TRADERS ADMITTING BEFORE THE SALES TAX AUTHORITIES IN THEIR DEPOSITION THAT THEY WERE PROVIDING ONLY ACCOMMODATION PURCHASE BILLS ON COM MISSION 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 O F LEDGER 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 GENUINENESS OF THE PURCHASE AND ACCORDINGLY, HE MADE ADDITION OF UNPROVED PURCHASE AT RS. 6,16,926 / - 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 SUBMI SSIONS OF THE ASSESSEE CONFIRMED THE ACTION OF THE AO MAKING ADDITION OF THE BOGUS PURCHASES BY OBSERVING AS UNDER: - 6.3 I HAVE GONE THROUGH THE ASSESSMENT ORDER AND SUBMISSIONS MADE IN THIS REGARD. IT IS NOTED THAT THE A.O. HAD MADE ADDITION OUT OF PURC HASE MADE BY THE ASSESSEE TO THE TUNE OF 6,16,926/ - ON THE BASIS OF THE INFORMATION RECEIVED FROM THE VAT AUTHORITIES THAT THE SUPPLIER MIS N.R. TRADERS PVT. LTD. WAS A HAWALA PARTY WHICH USED TO ISSUE BOGUS ITA NO.1947/MUM/2017 ANKUR EXTRUSION P. LTD. (A.Y:2009 - 10) PAGE 3 OF 5 BILLS. THE AIR OF THE ASSESSEE HAS VEHEMENTLY OP POSED THE ADDITIONS AND SUBMITTED THAT THE PURCHASES WERE GENUINE. IT WAS ALSO SUBMITTED THAT PAYMENT WAS ALL MADE THROUGH BANKING CHANNEL. IT IS STATED THAT THE AC. HAD MADE ADDITION ON THE BASIS OF INFORMATION RECEIVED FROM VAT AUTHORITIES WITHOUT AFFORD ING OPPORTUNITY OF CROSS EXAMINATION TO THE ASSESSEE. THE ENTIRE MATTER PERTAINS TO HAWALA PURCHASES FROM SO CALLED SUSPICIOUS DEALERS AS PER THE INFORMATION OF VAT AUTHORITIES. THE A.O. HAS DISALLOWED THESE PURCHASES AS THE ASSESSEE COULD NOT PRODUCE THIS PARTY FOR VERIFICATION. IT IS SEEN THAT PRIMARY ONUS TO ESTABLISH THAT THE PURCHASES WERE GENUINE WAS ON THE ASSESSEE. THE ASSESSEE IS ONLY PARTLY ABLE TO DISCHARGE THE COMPLETE ONUS. IT IS ALSO NOTED THAT A.C. HAS MADE ADDITION ON THE BASIS OF STATEMENT OF SUPPLIERS AND AFTER MAKING ENQUIRY INTO THE FACTS OF THE CASE. ON THE OTHER HAND ASSESSEE HAS FILED COPIES OF BILLS, BANK STATEMENT ETC. TO ESTABLISH THAT PURCHASES WERE GENUINE. IT IS NOTED THAT ASSESSEE HAD FAILED TO FURNISH EVIDENCES SUCH AS CONFIRMA TIONS FROM SUPPLIERS TO SUPPORT THE CLAIM OF PURCHASES. NO RECORDS OF RECEIPT OF GOODS CLAIMED TO BE PURCHASED FROM N.R. TRADERS PVT. LTD. WAS FILED BEFORE THE A.O. OR IN APPEAL PROCEEDINGS. THE ASSESSEE HAS ALSO NOT MAINTAINED ANY INWARD / OUTWARD REGISTE R OR STOCK REGISTER WITH REGARD TO PURCHASES MADE FROM THIS PARTY. THE ASSESSEE HAS FAILED TO ESTABLISH THROUGH MATERIAL EVIDENCE THAT THE RECEIPT AND CONSUMPTION OF ITEMS PURCHASED FROM N.R TRADERS PVT. LTD, WERE GENUINE. IT IS ALSO NOTED THAT THE ALLEGED SUPPLIER HAD GIVEN AFFIDAVIT BEFORE VAT AUTHORITIES DENYING THE SUPPLY OF GOODS AND ADMITTING THAT THE ENTIRE RECORD OF TRANSACTIONS WERE CREATED BY ISSUING NON GENUINE BILLS WITH A VIEW TO EARN COMMISSION INCOME. FROM THE FACTS OF THE CASE ITA NO.1947/MUM/2017 ANKUR EXTRUSION P. LTD. (A.Y:2009 - 10) PAGE 4 OF 5 IT IS VERY CLE AR THAT ASSESSEE HAS NOT BEEN ABLE TO ESTABLISH THAT THE CLAIMED PURCHASES FROM M/S N.R. TRADERS PVT. LTD. WERE GENUINE. IN VIEW OF THIS DISCUSSION IT IS CONCLUDED THAT THE GENUINENESS OF PURCHASES OF RS.6,16,926/ - CLAIMED TO BE MADE BY THE ASSESSEE IS NOT ESTABLISHED. HAVING REGARD TO FULL FACTS OF THE CASE THE ADDITION MADE BY THE A.O. OF RS.6,16,926/ - ON ACCOUNT OF HAWALA PURCHASES IS UPHELD. ACCORDINGLY, THESE GROUNDS OF APPEAL ARE DISMISSED. AGGRIEVED, NOW ASSESSEE IS IN SECOND APPEAL BEFORE TRIBUNAL . 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 BUSINESS OF MANUFACTURE OF EXTRUSION ITEMS 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 SUCH SITUATION THE ASSESSEE MIGHT HAVE MADE PURCHASES FROM GREY MARKET AND OBTAINED THESE BOGUS BI LLS 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 LOWER PRICE. FOR THAT THE CIT(A) HAS ADDED THE ENTIRE BOGUS PURCHASES AND ACCORDING TO ME THIS IS UNREASONABLE 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 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 ITA NO.1947/MUM/2017 ANKUR EXTRUSION P. LTD. (A.Y:2009 - 10) PAGE 5 OF 5 SAME, THE ESTIMATION OF PROFIT @ 12.5 % WILL BE SUFFICIENT. I DIR ECT THE AO ACCORDINGLY. THE APPEAL OF ASSESSEE IS PARTLY ALLOWED. 7. THE NEXT ISSUE IN THIS APPEAL OF ASSESSEE IS AS REGARDS TO THE ORDER OF CIT(A) CONFIRMING THE ACTION OF THE AO IN NOT ALLOWING SET OFF OF CURRENT YEAR BUSINESS LOSS. 8. AT THE OUTSET, IT IS NOT ICED THAT NEITHER THE AO NOR THE CIT(A) HAS ADJUDICATED THIS ISSUE AND FACTS ARE NOT AVAILABLE. ACCORDINGLY, I RESTORE THIS ISSUE TO THE FILE OF THE AO FOR FRESH ADJUDICATION. 9. IN THE RESULT, THE APPEAL OF ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES . 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 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.