ACIT 14(2)(2), MUMBAI V. PREMIER INDUSTRIAL CORPORATION LTD, MUMBAI

ITA 2110/MUM/2015

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 9462 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 5 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-09-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 10-04-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ARJU GARODIA
• Keywords: Bogus purchase; Question of law; Accommodation entries
• Section: 143(3); 142(1)

Judgement Text

, / IN THE INCOME TAX APPELLATE TRIBUNAL J / B BENCH, MUMBAI . . , , BEFORE SHRI C.N. PRASAD , JM AND SHRI RAJESH KUMAR, AM ITA NO. 2110 / M UM/ 20 1 5 ( / ASSESSMENT YEAR: 2 0 1 1 - 12 ) ASSTT.COMMISSIONER OF INCOME TAX - 1 4 (2)(2), ROOM NO. 432 AAYAKAR BHAVAN, M K ROAD, MUMBAI - 400020 / VS. M/S PREMIER INDUSTRIAL CORPORATION LTD., C - 501/506, KAILASH CORPORATE LOUNGE, GODREJ HIRANAND ANI LINK ROAD, VIKHROLI (W), MUMBAI - 400079. ( / APPELLANT) : ( / RESPONDENT ) ITA NO. 2 2 0 1/ MUM/ 2015 ( / ASSESSMENT YEAR: 2 011 - 12 ) M/S PREMIER INDUSTRIAL CORPORATION LTD., C - 501/506, KAILASH CORPORATE LOUNGE, GODREJ H IRANANDANI LINK ROAD, VIKHROLI (W), MUMBAI - 400079. / VS. ADDL.COMMISSIONER OF INCOME TAX - O/O ACIT - 14(2)(2) (ERSTWHILE CHARGE OF DCIT10(2), ROOM NO. 433, 4 TH FLOOR, AAYAKAR BHAVAN, M K ROAD, MUMBAI - 400020 ( / APPELLANT) : ( / RES PONDENT ) ./ PAN : AAECP3518M ( / APPELLANT) : ( / RESPONDENT ) / REVENUE BY : SHRI ARJU GARODIA / ASSESSEE BY : SHRI AJAY SINGH / DATE OF HEARING : 2 7 .9. 2017 / DATE OF PRONOUNCEMENT : 29. 9 . 201 7 2 ITA NO. 2201/MUM/2015 AND 2110/M/2015 / O R D E R PER RAJESH KUMAR, A. M: THE SE ARE CROSS - APPEAL S PERTAINING TO ASSESSMENT YEAR 201 1 - 12 AND ARE DIRECTED AGAINST THE ORDER OF THE CIT(A) - 22, MUMBAI , DATED 23.1.2015 WHICH IN TURN HAS ARISEN FROM AN ORDER PASSED BY THE ASSESSING OFFICER DATED 19.3. 201 4 UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961. ITA NO.2201/MUM/2015 2. THE SOLE ISSUE RAISED BY THE ASSESSEE IS AGAINST THE CONFIRMATION OF ADDITION TO THE EXTENT OF 25% OF ALL EGED PURCHASES BY THE LD. CIT(A) BY IGNORING THE FACTS THAT THE ASSESSEE HAS DECLARED THE PROFIT OF 3% DURING THE YEAR AS AGAINST THE ADDITION OF 100% OF THE PURCHASES BY THE AO . 3. FACTS OF THE CASE ARE THE ASSESSEE FILED RETURN OF INCOME ON 30.9.2011 DE CLARING TOTAL INCOME OF RS.7,28,99,590/ - . THE RETURN WAS PROCESSED U/S 143(1) OF THE ACT. THEREAFTER TH E CASE WAS SELECTED FOR SCRUTINY AND THE STATUTORY NOTICES U/S 143(2) AND 142(1) WERE ISSUED AND SERVED UPON THE ASSESSEE. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND PROCESSING OF FERRO AND METAL ALLOYS AND MANUFACTURING NICKEL ALLOYS AND STAINLESS STEEL WIRES. THE AO RECEIV ED THE INFORMATION FROM THE DGIT(INV), SALES TAX DEPARTMENT, GOVERNMENT OF MAHARASHTRA THAT THE ASSESSEE HAS OBTAINED ACCOMMODATION ENTRIES FOR 3 ITA NO. 2201/MUM/2015 AND 2110/M/2015 PURCHASE THROUGH THE PARTIES DECLARED AS HAWALA OPERATORS WITHOUT TAKING PHYSICAL DELIVERY OF THE MATERIALS AND THE DETAILS OF PARTIES FROM WHOM THE ASSESSEE PURCHASE GOODS ARE AS UNDER : S.NO. HAWALA NAME FY AMOUNT (IN RS.) 1 SURAJ STEEL INDIA 2010 - 11 1 , 3 8 , 4 9 , 500 2 POOJA METAL AND ALLOYS 2010 - 11 1 , 52 , 98 , 500 TOTAL 2,91,48,000 THE AO ISSUED A SHOW CAUSE NOTICE TO THE ASSESSEE DATED 21.1.2014 CALLING FOR VARIOUS DETAILS AND PROOF S TO PROVE THE GENUINE NESS OF PURCHASES WHICH WAS REPLIED BY THE ASSESSEE VIDE LETTER DATED 26.2.2014 SUBMITTING THE DETAILS OF PURCHASES, COPIES OF LEDGER ACCOUNT S AND BANK STATEMENT S , BILLS AND VOUCHERS AND TRANSPORT RECEIPT AND DELIVERY CHALLANS ETC . THE AO , AFTER CONSID ERING THE REPLY FILED BY THE ASSESSEE, WAS OF THE OPINION THAT THE ASSESSEE COULD NOT PROVE THE GENUINENESS OF THE PURCHASES AND EVIDENCE S OF CONSUMPTION OF MATERIALS IN THE MANUFACTURING OF GOODS . THE CONFIRMATION OF THESE PARTIES WERE ALSO NOT FILED AND ACCORDINGLY THE AO ADDED THE ENTIRE PURCHASES TO THE TOTAL INCOME OF THE ASSESSEE AND ASSESSED THE INCOME OF THE ASSESSEE VIDE ASSESSMENT ORDER DATED 19.3.2014 ASSESSING THE TOTAL INCOME AT RS.10,20,47,590/ - . 4 ITA NO. 2201/MUM/2015 AND 2110/M/2015 4. IN THE APPELLATE PROCEEDINGS, THE FAA P ARTLY ALLOWED THE APPEAL OF THE ASSESSEE AFTER CONSIDERING THE VARIOUS SUBMISSIONS AND CONTENTIONS AS RAISED BY THE ASSESSEE DURING THE HEARING BEFORE HIM AND UPHELD THE ADDITION TO THE EXTENT OF 25% OF THE PURCHASES BY OBSERVING AND HOLDING AS UNDER : 3 .3 I HAVE CONSIDERED THE FACTS AND CIRCUMSTANCES OF THE CASE. THE APPELLANT HAD PURCHASED GOODS FROM M/S SURAJ STEEL INDIA FOR RS. 1,38,49,500/ - AND M/S POOJA AND ALLOYS FOR RS.1,52,98,500/ - TOTALING TO RS.2,91,48,000/ - . THE AO TREATED THE ABOVE PURCH ASE AS BOGUS IN NATURE AS AO HAD RECEIVED INFORMATION FROM INVESTIGATION WING. BUT THE PURCHASER. THE APPELLANT IN ITS SUBMISSIONS STATES THAT AO HAD FAILED TO APPRECIATE THE DOCUMENTS FROM THE PARTIES LEDGER ACCOUNTS, BANK STATEMENTS, DETAILS OF BILLS, ET C COPIES OF INVOICE AGAINST THE TRANSPORT BILLS AND DELIVERY CHALLANS TO PROVE THE GENUINENESS OF THE PURCHASES WITH REGARD TO THOSE TWO PARTIES. THE APPELLANT FURTHER STATES THAT ONLY AO HAD GOT INFORMATION FROM SALES TAX AUTHORITIES AND WITHOUT CONSIDERI NG AY DOCUMENTARY EVIDENCES SUBMITTED BY THEM. THE AO MADE DISALLOWANCE. HERE WHEN WE CONSIDER THE ABOVE, APPELLANT IS A MANUFACTURER. THIS TYPE OF CASE HAS ARISEN IN THE CASE OF MANUFACTURERS AND SIMILAR TYPE OF CASES IN GUJARAT HC IN CIT V/S GUJARAT AMB UIA EXPORT LIMITED [20 14) 14 TAXMANN. COM. 22 (GUJARAT) WHEREIN IT IS HELD AS UNDER: 'THE ENTIRE ISSUE IS BASED ON MATERIALS ON RECORD. THE TRIBUNAL DID NOT ACCEPT THE REVENUE'S STAND THAT THE PURCHASES WERE BOGUS. THE TRIBUNAL COMMITTED NO ERROR SO AS TO GIVE RISE TO ANY QUESTION OF LAW. THE TRIBUNAL LOOKING TO THE MATERIAL RETAINED 5% OF THE PURCHASE BY GIVING COGENT REASONS. IN THE INSTANT CASE, THOUGH IT MAY APPEAR THAT THE PURCHASES HAVE BEEN SHOWN TO HAVE BEEN MADE THROUGH' 'V' BUT SUPPLIED BY SO ME OTHER AGENCY, IN ABSENCE OF OTHER ADDL FACTS NOTED BY THIS COURT GROSS ADHOC ADDN OF 25% MAY NOT BE JUSTIFIED. IN THE INSTANT CASE THE ASSESSEE COULD PRODUCE 5 ITA NO. 2201/MUM/2015 AND 2110/M/2015 BEFORE THE AUTHORITIES THE PRECISE RATE AT WHICH THE PURCHASES WERE MADE FROM 'V' AND OTHER SUP PLIERS TO DEMONSTRATE THAT THE PURCHASES MADE ON THE SAME DAY CARRIED THE SAME PRICE. THIS WOULD SUBSTANTIALLY ELIMINATE THE ANGLE OF THE PURCHASE PRICE BEING ARTIFICIALLY INFLATED. ADDITIONALLY, THE TRIBUNAL ALSO NOTED OTHER PARAMETERS SUCH AS HIGHER NET AND GROSS PROFIT RATES OF THE PRESENT YEAR COMPARED TO THE EARLIER YEARS OF THE RECENT PAST. UNDER THE CIRCUMSTANCES NO QUESTION OF LAW ARISES. 3.4 WHEN WE EXAMINED THE ABOVE CASE LAW OF THE GUJARA T HC WHO HAD UPHELD HE TAXATION OF 25% OF THE AMOUNT OF BOGUS PURCHASE AS TAXABLE INCOME. HERE THE APPELLANT DECLARED THE NET PROFIT @3%, SO 22% OF BOGUS PURCHASE MAY BE TREATED AS DISALLOWABLE AMOUNT. HENCE, AO MAY DISALLOWED 22% OF BOGUS PURCHASE AMOUNT AS TAXABLE PROFIT. HENCE GROUND OF APPEAL IS PAR TLY ALLOWED. 5 . WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL PLACED BEFORE US INCLUDING THE CASE LAW RELIED UPON BY THE ASSESSEE. THE UNDISPUTED FACTS ARE THAT THE ASSESSEE HAD TAKEN BOGUS BILLS FROM TWO PARTIES AGGREGATING TO RS. 2,91, 48,000 / - WITHOUT TAKING DELIVERY OF MATERIALS . THE AO ADDED THE ENTIRE PURCHASES TO THE TOTAL INCOME OF THE ASSESSEE ON THE GROUND THAT THE ASSESSEE COULD NOT PROVE THE PHYSICAL DELIVERY HAVING BEEN TAKEN AND CONSUM PTION THEREOF IN THE MANUFACTURING OF FINISHED GOODS AND ALSO NOT FILED CONFIRM ATIONS FROM THE SE TWO PARTIES. WHEREAS THE LD.CIT(A) , AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE OBSERVED THAT THE ASSESSEE HAS ALREADY SHOWN N P OF 3% AND RESTRICTED THE ADDITION TO 25% OF THE TOTAL PURCH ASES AND AFTER ALLOWING CRDIT OF GP 6 ITA NO. 2201/MUM/2015 AND 2110/M/2015 ALREADY DECLARED THE NET ADDITION TO THE TUNE OF 22% WAS SUSTAINED. HAVI NG GONE THROUGH THE FACTS ON RECORD AND THE ORDERS OF LOWER AUTHORITIES , WE FIND THAT THE ASSESSEE HAS AVAILED HAWAL A S ENTRIES IN RESPECT OF PU RCHASE S TO THE TUNE OF RS.2,91,48,000/ - . BUT IN SUCH TYPE OF CASES, THE ASSESSEE PURCHASES GOOD FROM GRAY MARKET AT CHEAPER RATES THUS GET S ADDITIONAL BENEFIT BY AVOIDING VAT, AND OTHER IN LEVIES . THE A SSESSEE HAS ALREADY DECLARED GP 18.21% DURING THE YEAR . UNDER THESE CIRCUMSTANCES WE ARE OF THE CONSIDERED OPINION THAT THE ADDITION SUSTAINED AT THE RATE OF 2 2 % OF THE TOTAL PURCHASES IS EXCESSIVE AND UNREASONABLE AND KEEPING IN NATURE OF BUSINESS OF THE ASSESSEE AND GP DECLARED BY THE ASSE SSEE DURING THE YEAR AND ALSO THE DECISIONS OF THE CO - ORDINATE BENCH ES WHEREIN THE ADDITION S ARE SUSTAINED TO THE TUNE OF 5% TO 12.5% THERE SHOULD BE SOME REASONABLE DISALLOWANCE . TO MAINTAIN THE CONSISTENCY WITH THE ORDERS PASSED BY THE TRIBUNAL EARLIE R, WE ARE INCLINED TO SUSTAIN 12.5% OF THE TOTAL PURCHASES. THE ASSESSEE GETS RELIEF OF 12 .5 %. THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. REVENUE APPEAL : 6 . SINCE WE HAVE DECIDED THE ISSUE RAISED BY THE ASSESSEE AGAINST THE DECISION OF THE FAA AND PARTLY ALLOWED THE APPEAL, THE GROUND RAISED BY THE REVENUE BECOMES INFRUCTUOUS AND HENCE DISMISSED. 7 ITA NO. 2201/MUM/2015 AND 2110/M/2015 7 . RESULTANTLY, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED AND THAT OF REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 29TH SEPT , 2017. S D SD (C.N. PRASAD) (RAJESH KUMAR) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED : 29TH SEPT .2017 SRL,SR.PS / COPY OF THE ORDER FORWARDED TO : 1. / THE A PPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F ILE / BY ORDER, T RUE COPY / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI