ASST CIT 31(1), MUMBAI V. AMRISH RUBBER PRODUCTS, MUMBAI

ITA 2089/MUM/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 0109 (ITAT-MUMBAI)
• Duration Of Justice: 5 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-08-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2009-2010
• Appeal Filed On: 24-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ARJU GARODIA
• Keywords: Bogus purchase; Accommodation entries

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL J , BENCH MUMBAI BEFORE SHRI R.C.SHARMA, AM & SHRI SANDEEP GOSAIN , JM ITA NO. 2089 / MUM/20 1 7 ( ASSESSMENT YEAR : 2009 - 10 ) ASST. CIT 31(1) R.NO.111, 1 ST FLOOR C - 13, BKC, MUMBAI VS. M/S. AMRISH RUBBER PRODUCTS 18 , KOTHARI INDUSTRIAL ESTATE I.B. PATEL ROAD, GOREGAON EAST MUMBAI 400 063 PAN/GIR NO. AAAFA2976M APPELLANT ) .. RESPONDENT ) CO NO. 209/ MUM/20 17 ( ASSESSMENT YEAR : 2009 - 10 ) M/S. AMRISH RUBBER PRODUCTS 18, KOTHARI INDUSTRIAL ESTATE I .B. PATEL ROAD, GOREGAON EAST MUMBAI 400 063 VS. ASST. CIT 31(1) R.NO.111, 1 ST FLOOR C - 13, BKC, MUMBAI PAN/GIR NO. AAAFA2976M AAAFA2976M APPELLANT ) .. RESPONDENT ) REVENUE BY MS. ARJU GARODIA ASSESSEE BY SHRI ASHWIN KASHINATH DA TE OF HEARING 24 / 08 /201 7 DATE OF PRONOUNCEME NT 31 / 08 /201 7 / O R D E R PER R.C.SHARMA (A.M) : THIS IS AN APPEAL FILED BY THE REVENUE AND CROSS OBJECTION BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) - 42, MUMBAI DATED 30/11/2016 FOR THE A.Y. 2009 - 10 IN THE MATTER OF ORDER PASSED U/S.143(3) R.W.S. 147 OF THE IT ACT. ITA NO. ITA NO.2089/MUM/2017 & CO.NO.209/MUM/2017 M/S. AMRISH RUBBER PRODUCTS 2 2. THE FOLLOWING GROUNDS HAVE BEEN TAKEN BY THE REVENUE: - 1) 'WHETHER ON THE FACT AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW. LD. CIT(A) ERRED IN DIRECTING TO MAKE A DISALLOWANCE @12.5% OF THE IMPUGNED PURCHASES IGNORING THE FACT THAT THE ASSESS EE IS A MANUFACTURER. 2) WHETHER ON THE FACT AND CIRCUMSTANCES OF THE CASE AND IN LAW, LD. CIT(A) ERRED IN IGNORING THE FACT THAT ALLEGED HAWALA PARTY HAD ADMITTED THAT THEY HAD ONLY PROVIDED ACCOMMODATION ENTRY & HAD NO GOODS TO SUPPLY. 3} WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN IGNORING THE FACT THAT THE ASSESSEE FAILED TO PROVE CONSUMPTION AND SALE OF THE MATERIAL THAT THE MATERIAL USED WAS SOURCED FROM ALLEGED HAWALA PARTY AND ALSO NOT RESPONDED TO THE SHOW CAUSE LETTER ISSUED BY THE AO.' 3. IN THE GROUNDS OF CROSS OBJECTION, ASSESSEE IS AGGRIEVED BY THE ADDITION OF 12.5% UPHELD BY CIT(A). 4 . RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. 5 . FACTS IN BRIEF ARE THAT T HE ASSESSEE IS A FIRM E NGAGED IN THE BUSINESS OF MANUFACTURING OF UN - VULCANISED RUBBER COMPOUNDS AND ALSO DEALS IN PROCESSED RUBBER COMPOUNDS. THE ASSESSEE HAD FILED ITS RETURN OF INCOME FOR A.Y. 2009 - 10 ON 21.09.2009 DECLARING A TOTAL INCOME OF RS. 41,75,140/ - . THE RETURN OF IN COME WAS MERELY PROCESSED UNDER SECTION 143 (1) OF THE ACT. SUBSEQUENTLY THE AO RECEIVED INFORMATION FROM THE OFFICE OF THE DGIT(INV), MUMBAI AND ALSO FROM THE SALES TAX DEPARTMENT THAT THE ASSESSEE IS A BENEFICIARY OF ACCOMMODATION BILLS OF PURCHASES FROM A BOGUS HAWALA DEALER. THE INFORMATION WAS THAT THE CONCERNED DEALER HAD NOT SOLD ANY ACTUAL GOODS BUT HAD GIVEN ACCOMMODATION ENTRIES OF SALES TO THE ASSESSEE. ACCORDINGLY, AO MADE ADDITION OF RS.79.08 LAKHS IN RESPECT OF THE PURCHASES MADE FROM M/S. KRI SH RUBBER TRADERS. 6 . BY THE IMPUGNED ORDER, CIT(A) RESTRICTED THE ADDITION TO THE EXTENT OF 12.5% AFTER HAVING THE FOLLOWING OBSERVATION: - ITA NO. ITA NO.2089/MUM/2017 & CO.NO.209/MUM/2017 M/S. AMRISH RUBBER PRODUCTS 3 THE NET CONCLUSION THAT CAN BE ARRIVED AT FROM THE ABOVE DISCUSSION IS THAT WHERE THE SALES AND PURCHASES ARE VERIFI ABLE AND PROVEN E.G. TO OR FROM GOVERNMENT BODIES OR AGENCIES ETC NO ADDITION MAY BE MADE. IF HOWEVER, THE PURCHASES ARE BOGUS BUT THE DIRECT SALES ARE PROVED, THE ASSUMPTIONS ARE THAT THE PURCHASES WERE MADE FROM UNKNOWN PARTIES AND THE AO CAN APPLY A PRO FIT RATE TO DETERMINE THE LIABILITY OF THE ASSESSEE. IT IS ALSO SEEN THAT PUTTING AN ONUS ON THE AO TO TRACE THE MONEY TRAIL OR VERIFY THE WITHDRAWALS FROM THE BANKS ETC MAY GIVE MORE POINTERS BUT IT IS NOT SUFFICIENT BY ITSELF AND THE ITAT HAS NOT ACCEPTE D SUCH AN ARGUMENT IN THE CASE OF SHRI GANPATRAJ A SANGHAVI (SUPRA). IF THE BOGUS PURCHASES ARE UNPROVED AND ARE DECLARED CONSUMED BY ASSESSEE ITSELF IN ITS TRADING, MANUFACTURING OR NON - TRADING ACTIVITIES, THE ENTIRE ADDITION CAN BE MADE AS IT ONLY GOES T O INFLATE THE EXPENSES OF THE ASSESSEE. IT IS TO BE SEEN THAT THE DECISION IN THE CASE OF NIKUNJ EXIMP ENTERPRISES PRIVATE LIMITED (SUPRA) CANNOT BE INVOKED IN THE CASE OF THE ASSESSEE BECAUSE THE SALES HAVE NOT BEEN MADE TO GOVERNMENT BODY, THAT IS NO CON FIRMATION OF THE SUPPLIER AS IN THE CASE OF NIKUNJ EXIMP AND THERE IS NO CONFIRMATION FROM THE TRANSPORTERS ETC AS IN THAT CASE. 13. IN VIEW OF THE ABOVE DISCUSSION IT IS SEEN THAT WHILE THE ASSESSEE IS UNABLE TO SUBSTANTIATE HIS PURCHASES FROM THE HAWALA DEALER THE ASSESSEE WAS ABLE TO PROVE CONSUMPTION AND SALE OF THE MATERIAL. HOWEVER THE FACT REMAINS THAT THE HAWALA DEALERS HAVE ADMITTED BEFORE THE AO AND THE SALES TAX AUTHORITIES THAT THEY ONLY PROVIDED THE ACCOMMODATION BILLS OF PURCHASE AND THEY HAD NO GOODS TO SUPPLY. THE ASSESSEE IS ALSO UNABLE TO PRODUCE ANY CONFIRMATION FROM THE HAWALA DEALER AND CANNOT PRODUCE THE PARTY ALSO IN ITS SUPPORT. IN VIEW OF THE ABOVE IT IS TO BE HELD THAT THE PURCHASES OF THE ASSESSEE HAVE BEEN MADE FROM SOME OTHER SOU RCE BECAUSE THE HAWALA DEALER WAS NOT A GENUINE TRADER AT ALL. THEREFORE IT IS REASONABLE TO COME TO A CONCLUSION THAT THE ASSESSEE HAD SOURCED ITS MATERIALS FROM SOME OTHER SOURCE OR FROM THE GREY MARKET AND THE ONLY ISSUE LEFT WAS TO DECIDE THE QUANTUM O F ADDITION. IT IS HELD THAT THE ADDITION OF 12.5% OF THE BOGUS PURCHASES OF RS. 79,08,732/ - IS SUFFICIENT TO TAKE CARE OF THE EMBEDDED PROFIT EARNED BY MAKING THE ACTUAL PURCHASES FROM THE GREY MARKET WHERE THE DEALERS HAVE NO OVERHEAD COSTS AND THEY DON'T PAY ANY TAXES ALSO. AS A RESULT THE ADDITION OF RS.79,08,732/ - IS REDUCED TO RS.9,88,591/ - AND THE ASSESSEE GETS A RELIEF OF RS.69,20,141/ - . THE GROUND OF APPEAL OF THE ASSESSEE IS PARTLY ALLOWED AS ABOVE. 7 . AGAINST THE ABOVE ORDER OF CIT(A) , BOTH ASSES SEE AND REVENUE ARE IN FURTHER APPEAL BEFORE US. 8 . WE HAVE CONSIDERED RIVAL CONTENTIONS AND CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE HAD ALSO DELIBERATED ON THE JUDICIAL PRONOUNCEMENTS REFERRED BY LOWER AUTHORITIES IN THEIR RESPECTIV E ORDERS AS WELL AS CITED BY LEARNED AR AND DR DURING THE COURSE OF HEARING BEFORE US. FROM THE RECORD, WE FOUND THAT ON THE BASIS OF INFORMATION FROM SALES ITA NO. ITA NO.2089/MUM/2017 & CO.NO.209/MUM/2017 M/S. AMRISH RUBBER PRODUCTS 4 TAX AUTHORITIES, THE AO ADDED BOGUS PURCHASE OF RS. 79.08 LAKHS IN ASSESSEES INCOME. IN AN APPEAL F ILED BEFORE THE CIT(A), THE CIT(A) RECORDED A FINDING TO THE EFFE CT THAT ASSESSEE HAD SOURCED ITS MATERIAL FROM OTHER SOURCES OR FROM THE GREY MARKET. THE CIT(A) ALSO FOUND THAT BOTH SAL ES AND PURCHASES ARE VERIFIABLE, U NDER THESE CIRCUMSTANCES, ONLY ASSUM PTION IS THAT PURCHASES WERE MADE FROM UNKNOWN PARTIES AND THE AO CAN ONLY APPLY THE PROFIT RATE TO DETERMINE THE LIABILITY OF THE ASSESSEE. AFTER RECORDING DETAILED FINDING AND APPLYING THE PROPOSITION OF LAW DISCUSSED IN THE ORDER, THE CIT(A) CONCLUDED T HAT ADDITION TO THE EXTENT OF 12.5% OF BOGUS PURCHASES WILL TAKE CARE OF PROFIT EMBEDDED THEREIN. THE FINDING SO RECORDED BY CIT(A) COULD NOT BE CONTROVERTED EITHER BY LEARNED AR AND DR. ACCORDINGLY, WE DO NOT FIND ANY REASON TO INTERFERE IN THE FINDING SO RECORDED. 9. IN THE RESULT, APPEAL OF THE REVENUE AND CROSS OBJECTION OF ASSESSEE ARE DISMISSED. O RDER PRONOUNCED IN THE OPEN COURT ON THIS 31 / 08 /2017 S D/ - ( SANDEEP GOSAIN ) S D/ - ( R.C.SHARMA ) JUDICIAL ME MBER ACCOUNTANT MEMBER MUMBAI ; DATED 31 / 08 /201 7 KARUNA SR. PS ITA NO. ITA NO.2089/MUM/2017 & CO.NO.209/MUM/2017 M/S. AMRISH RUBBER PRODUCTS 5 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 FIL E. //TRUE COPY//