KAINYA & ASSOCIATES P.LTD, MUMBAI V. ACIT CC 3(3), MUMBAI

ITA 211/MUM/2017

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 8833 (ITAT-MUMBAI)
• Duration Of Justice: 9 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 10-01-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SAURABHKUMAR KUMAR RAJ
• Assessee Lawyers: NEELAM C JADHAV
• Keywords: Bogus purchase; Competent authority

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH I, MUMBAI BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER AND SHRI N.K. PRADHAN, ACCOUNTANT MEMBER ITA NO.211/M/2017 ASSESSMENT YEAR: 2012-13 M/S. KAINYA & ASSOCIATES PVT. LTD., BUSINESS PARK, NEAR BAJAJ HALL, S.V. ROAD, MALAD (WEST), MUMBAI-400 064 PAN: AAACK1478R VS. DY. COMM. OF INCOME TAX, CC-3(3), MUMBAI (APPELLANT) (RESPONDENT) ITA NO.1085/M/2017 ASSESSMENT YEAR: 2012-13 DY. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-3(3), ROOM NO.1923, AIR INDIA BUILDING, 19 TH FLOOR, NARIMAN POINT, MUMBAI-400 021 VS. M/S. KAINYA & ASSOCIATES P. LTD., BUSINESS PARK, NEAR BAJAJ HALL, S.V. ROAD, MALAD (WEST), MUMBAI-400 064 PAN: AAACK1478R (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI NEELAM C. JADHAV, A.R. REVENUE BY : SHRI SAURABHKUMAR KUMAR RAJ, D.R. DATE OF HEARING : 13.09.2017 DATE OF PRONOUNCEMENT : 31.10.2017 O R D E R PER D.T. GARASIA , JUDICIAL MEMBER: THE ABOVE TITLED APPEALS ONE BY THE ASSESSEE AND TH E OTHER BY THE REVENUE HAVE BEEN PREFERRED AGAINST THE ORDER D ATED 24.11.2016 OF THE COMMISSIONER OF INCOME TAX (APPEALS) [HEREIN AFTER REFERRED TO AS THE CIT(A)] RELEVANT TO ASSESSMENT YEAR 2012- 13. ITA NO.211/M/2017 & ITA NO.1085/M/2017 M/S. KAINYA & ASSOCIATES P. LTD. 2 ITA NO.211/M/2017 (ASSESSEES APPEAL) 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS ENGAGED IN BUSINESS OF TRADING IN HARDWARE AND SANITARY MATERI AL. DURING THE YEAR THE ASSESSING OFFICER (HEREINAFTER REFERRED TO AS THE AO) FOUND THAT ASSESSEE HAD MADE BOGUS PURCHASES FROM FOLLOWI NG PARTIES: SR. NO. NAME OF THE PARTY AMOUNT OF PURCHASE (RS) 1. RATAN SALES CORPORATION 37,34,806/- 2. SHREE OMKAR ENTERPRISES 32,88,375/- TOTAL 70,23,181/- 3. THE ASSESSEE WAS ASKED TO PRODUCE THE ABOVE PART IES FOR VERIFICATION. THERE WAS NO COMPLIANCE OF NOTICE UND ER SECTION 133(6). THEREFORE, THE AO HAS MADE THE ADDITION ON ACCOUNT OF BOGUS PURCHASES OF RS.70,23,181/-. 4. MATTER CARRIED TO THE LD. CIT(A) AND THE LD. CIT (A) HAS PARTLY ALLOWED THE CLAIM BY OBSERVING AS UNDER: 11. DURING THE COURSE OF APPELLATE PROCEEDINGS, TH E LD AO ALSO BROUGHT MY ATTENTION TO -THE APPEAL ORDER PASSED BY MY LD PRED ECESSOR IN ASSESSEE'S OWN CASE WHICH HAD BEEN UPHELD BY HON'BLE ITAT, MUMBAI. IN T HIS REGARD, I WOULD LIKE TO RESPECTFULLY STATE THAT THE BOGUS HAWALA PURCHASES INVOLVED IN THE PRESENT YEAR IS DIFFERENT AND THE ASSESSEE HAS COMPLETELY FAILED TO PROVE THAT THE PURCHASES TO THE EXTENT OF RS 37,34,806/- WAS MADE FROM THIS PARTY A LONE. THOUGH QUANTITATIVE DETAILS ARE MAINTAINED BY THE ASSESSEE AND PAYMENTS HAVE BEEN MADE BY CHEQUE BUT THAT ALONE DOESN'T ESTABLISH THE GENUINENESS OF THE TRANSACTIONS. GUJARAT HIGH COURT HAS. ADDRESSED THE IDENTICAL SITUATIONS IN TH E JUDGEMENT IN THE CASE OF SIMIT P SHETH (SUPRA), I FOLLOW THE SAID JUDGEMENT IN DECID ING THIS APPEAL. THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF GUJARAT HIGH COURT IN THE CASE OF SIMIT P SHETH AND BHOLANATH POLYFAB P LTD (SUPRA), THE PROFIT RAT E OF 12.5% IS APPLIED TO THE SUSPECTED BOGUS PURCHASE OF RS 37,34,806/- MADE BY THE ASSESSEE FROM M/S RATAN SALES CORPORATION WHICH WORKS OUT TO RS 4,66,850/- IS ADDED BACK TO THE INCOME OF THE ASSESSEE. 11. GROUND NO 3 IS REGARDING THE INITIATION OF PENA LTY PROCEEDINGS U/S 271(L)(C) OF THE ACT. SINCE THE PENALTY PROCEEDINGS ARE ONLY INI TIATED AND NO PENALTY HAS BEEN ITA NO.211/M/2017 & ITA NO.1085/M/2017 M/S. KAINYA & ASSOCIATES P. LTD. 3 LEVIED, THIS GROUND APPEARS TO BE PREMATURE. THE AS SESSEE IS HOWEVER, FREE TO APPROACH THE COMPETENT AUTHORITY AS AND WHEN ANY PE NALTY IS LEVIED AGAINST HIM. CONSEQUENTLY, THIS GROUND IS REJECTED BEING PREMATU RE. 12. IN THE RESULT, THIS APPEAL IS PARTLY ALLOWED. 5. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE P ARTIES. LD. D.R. RELIED UPON THE DECISION OF THE TRIBUNAL, AHME DABAD BENCH IN THE CASES OF SHWETAMBAR STEELS VS. ITO AHMEDABAD AN D GANESH RICE MILLS VS. CIT (294 ITR 316). THE FACTS IN THE PRESENT CASE SHOW THAT ASSESSEE COULD NOT PRODUCE THE PARTIES FR OM WHOM GOODS ARE STATED TO HAVE BEEN PURCHASED. THE SUPPLIERS WE RE FOUND TO BE ENGAGED IN PROVIDING BOGUS BILL WITHOUT ACTUAL DEAL ING OF GOODS. IN THIS REGARD, THE ASSESSEE HAS STATED THAT THEY HAD SUBMITTED QUANTITATIVE DETAILS OF STOCK WITH RESPECT OF THE S ALES WITH PURCHASES FROM THE PARTIES DURING THE ASSESSMENT PROCEEDINGS. THE ASSESSEE HAS SUBMITTED THE DETAIL OF CORRESPONDING SALES IN RESP ECT OF THE PURCHASE FROM THE SAID PARTIES. AS MENTIONED ABOVE THE AO HA S NEVER DISPUTED OR EXAMINED THE ASPECT OF SALES RECEIPTS. SINCE THE SALES MADE BY THE ASSESSEE WAS NOT DOUBTED OR DISPUTED BY THE AO AND HE HAS ACCEPTED THE SALES RECEIPTS OF THE ASSESSEE AS IT IS, THEREF ORE, THE AO CANNOT DENY THAT PURCHASES WERE NOT MADE BY THE ASSESSEE A ND THE MATERIAL WAS NOT USED FOR ITS SALES. WHAT IS UNDER DISPUTE I S THE PURCHASES FROM THE PARTIES FROM WHOM BILLS HAVE BEEN TAKEN AN D CHEQUES HAVE BEEN ISSUED TO THEM. PURCHASES ARE NOT IN DISPUTE B UT THE PARTIES FROM WHOM PURCHASE ARE SHOWN TO HAVE BEEN MADE ARE DISPU TED AND SUSPICIOUS. THE AO HAD MADE THE ADDITION AS SOME O F THE SUPPLIERS WERE DECLARED HAWALA DEALERS BY THE VAT DEPARTMENT. THIS MAY BE A GOOD REASON FOR MAKING FURTHER INVESTIGATION BUT THE AO DID NOT ITA NO.211/M/2017 & ITA NO.1085/M/2017 M/S. KAINYA & ASSOCIATES P. LTD. 4 MAKE ANY FURTHER INVESTIGATION AND MERELY COMPLETED THE ASSESSMENT ON SUSPICION. ONCE THE ASSESSEE HAS BROUGHT ON RECO RD THE DETAILS OF PAYMENTS BY ACCOUNT PAYEE CHEQUE, IT WAS INCUMBENT ON THE AO TO HAVE VERIFIED THE PAYMENT DETAILS FROM THE BANK OF THE ASSESSEE AND ALSO FROM THE BANK OF THE SUPPLIERS TO VERIFY WHETH ER THERE WAS ANY IMMEDIATE CASH WITHDRAWAL FROM THEIR ACCOUNT. NO SU CH EXERCISE HAS BEEN DONE OR FINDINGS RECORDED. THERE WAS NO DETAIL ED INVESTIGATION MADE BY THE AO HIMSELF. IT IS ALSO FOUND THAT THE P AYMENTS HAVE BEEN MADE BY ACCOUNT PAYEE CHEQUE WHICH ARE DULY RE FLECTED IN THE BANK STATEMENT OF THE ASSESSEE. THERE IS NO EVIDENC E TO SHOW THAT THE ASSESSEE HAS RECEIVED CASH BACK FROM THE SUPPLIERS. MERELY BECAUSE THE SUPPLIERS DID NOT APPEAR BEFORE THE AO OR SOME CONFIRMATION LETTERS WERE NOT FURNISHED, ONE CANNOT CONCLUDE THA T THE PURCHASES WERE NOT MADE BY THE ASSESSEE. THIS VIEW IS SUPPORT ED BY THE DECISION OF NIKUNJ EXIMP ENTERPRISES VS. CIT 216 TA XMAN 171 (BOM). TO THIS EXTENT, WE ARE OF THE VIEW THAT IF T HE ASSESSEE HAS FULFILLED ITS ONUS OF MAKING THE PAYMENT BY CHEQUE AND HAS SUPPLIED THE ADDRESSES OF THE SELLERS THEN IT CANNOT BE PRES UMED THAT SUPPLIER WERE BOGUS SIMPLY BECAUSE THE SELLERS WERE NOT FOUN D AT THE GIVEN ADDRESS. THERE IS A CONSIDERABLE TIME GAP BETWEEN T HE PERIOD OF PURCHASE TRANSACTION AND PERIOD OF SCRUTINY PROCEED INGS. THE AO HAS NOT BROUGHT ANY MATERIAL ON RECORD TO SHOW THAT THE RE IS SUPPRESSION OF SALES. IT IS BASIC RULE OF ACCOUNTANCY AS WELL A S OF TAXATION LAWS THAT PROFIT FROM BUSINESS CANNOT BE ASCERTAINED WIT HOUT DEDUCTING COST OF PURCHASE FROM SALES. ESTIMATION OF PROFIT R ANGING FROM 12.5% TO 15% HAS BEEN UPHELD BY THE HON'BLE GUJARAT HIGH COURT IN THE ITA NO.211/M/2017 & ITA NO.1085/M/2017 M/S. KAINYA & ASSOCIATES P. LTD. 5 CASE OF CIT VS SIMIT P SHETH 356 ITR 451 (GUJ.). R ESPECTFULLY FOLLOWING THE DECISION OF HONBLE GUJARAT HIGH COUR T IN THE CASE OF CIT VS. SIMIT P. SHETH 38 TAXMAN 385 (GUJ), WE FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A). HENCE, WE HAVE NO ALT ERNATIVE EXCEPT TO ENDORSE THE ORDER OF THE LD. CIT(A). ACCORDINGLY, WE DISMISS THE APPEAL OF THE ASSESSEE. 6. IN THE RESULT, ASSESSEES APPEAL IS DISMISSED. ITA NO.1085/M/2017 (REVENUES APPEAL) 7. SINCE THE ASSESSEES APPEAL HAS ALREADY BEEN DIS MISSED, THE REVENUES APPEAL HAS BECOME INFRUCTUOUS. HENCE, TH E APPEAL OF THE REVENUE IS DISMISSED. 8. IN THE RESULT, ASSESSEES APPEAL AS WELL AS REVE NUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 31.10.2017. SD/- SD/- (N.K. PRADHAN) (D.T. GARASIA) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 31.10.2017. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.