ROOPLAXMI STEEL, MUMBAI V. ITO 19(3)(1), MUMBAI

ITA 2151/MUM/2017

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0041 (ITAT-MUMBAI)
• Duration Of Justice: 3 month(s) 3 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: 27-03-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Bogus purchase
• Section: 143(3); 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SRI MAHAVIR SINGH, JM ITA NO. 2151 /MUM/ 2017 (A.Y: 2009 - 10 ) ROOPLAXMI STEEL 26 DURGADEVI STREET, MUMBAI - 04 PAN NO. AAFFR8021D VS. INCOME TAX OFFICER 19(3)(1) MUMBAI APPELLANT .. RESPONDE NT ASSESSEE BY .. SHRI VIMAL PUNMIYA, 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 , JM : TH IS APPEAL BY THE ASSESSEE IS ARISING OUT OF THE ORDER OF CIT(A) - 30 , MUMBAI IN APPEAL NO. CIT(A) - 30/19(3)(1)/470/2015 - 16 DATED 23 - 12 - 2016 . THE ASSESSMENT WAS FRAMED BY ITO - 1 9 ( 3 )( 1 ), MUMBAI FOR THE A . Y . 20 0 9 - 10 VIDE ORDER DATED 20 - 03 - 2015 UNDER SECTION 143(3) READ WITH SECTION 147 OF THE INCOME TAX ACT, 1961 ( HEREINAFTER THE ACT). 2. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE IS IN THE BUSINESS OF DEALING IN STEEL. THE AO RECEIVED INFORMATION FROM DGIT (INVESTIGATION) MUMBAI, WHO IN TURN RECEIVED INFORMATION FROM SALES TAX DEPARTMENT OF MAHARASHTRA THAT THERE AR E BOGUS ENTRY PROVIDERS OF PURCHASE BILLS / HAWALA ENTRY OPERATORS AND ASSESSEE IS ONE OF THE BENEFICIARY OF THE TRANSACTIONS WITH HAWALA DEALERS BY MAKING PURCHASES FOR AN AMOUNT OF RS. 90,38,650/ - THE DETAILS OF WHICH READS AS UNDER: - ITA NO. 2151/MUM/2017 ROOPLAXMI STE EL AY:09 - 10 PAGE 2 OF 5 3. ACCORDING TO INF ORMATION 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 ADMITTING 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 THE ASSESSEE TO FILE THE DETAILS OF PURCHASE. THE ASSESSEE FILED COPIES OF PURCHASE BIL LS 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 PARTIES FOR VERIFICATION BUT ASSESSEE EXPRESSED HIS INABILITY TO DO SO. ACCORDING TO THE A O, THE ASSESSEE FAILED TO ESTABLISH THE GENUINENESS OF THE PURCHASE AND ACCORDINGLY, HE MADE ADDITION OF PROFIT RATE OF UNPROVED PURCHASE OF RS. 90,38,650 / - AND ESTIMATED THE PROFIT BY APPLYING 25% AT 22,59,663/ - TO THE RETURN INCOME OF THE ASSESSEE. AGGRIE VED, ASSESSEE PREFERRED THE APPEAL BEFORE CIT(A). 4. THE CIT(A) AFTER GOING THROUGH THE FACTS OF THE CASE AND SUBMISSIONS OF THE ASSESSEE RESTRICTED THE ADDITION OF PROFIT RATE @ 12.5% AS AGAINST THE PROFIT ESTIMATED BY AO OF 25% OF THE BOGUS PURCHASES BY OBS ERVING AS UNDER: - ITA NO. 2151/MUM/2017 ROOPLAXMI STE EL AY:09 - 10 PAGE 3 OF 5 6.13 THE MOTIVE BEHIND OBTAINING BOGUS BILLS THUS, APPEARS TO BE INFLATION OF PURCHASE PRICE SO AS TO SUPPRESS TRUE PROFITS. CONSIDERING THE FACTS OF THE CASE AS WELL AS THE VARIOUS CASE LAWS CITED (SUPRA) ESPECIALLY IN THE CASE OF CIT VS. SIMIT P. SHETH (SUPR3),AND ALSO CONSIDERING THE FACT THAT THE APPELLANT HIMSELF MADE THE ALTERNATIVE PLEA IN THE SUBMISSIONS TO CONSIDER THE CASE AND ADJUDICATE ON JUST AND FAIR BASIS CONSIDERING 12.5% ADDITION ON PURCHASES AS THE PROFIT ELEMENT EMBEDD ED ON SUCH PURCHASES SHOULD BE CONSIDERED FOR ADDITION INSTEAD OF ADDING 25% OF TOTAL AMOUNT OF PURCHASES, I FEEL THAT IF 12.5% OF THE TOTAL PURCHASES ARE ADDED AS THE PROFIT ELEMENT EMBEDDED ON SUCH PURCHASES TO THE TOTAL INCOME, THAT WILL MEET THE ENDS O F JUSTICE. 6.14 IN VIEW OF THE ABOVE, AND ALSO CONSIDERING THE FACTS OF THE PRESENT CASE WHICH IS SIMILAR TO THE FACTS OF THE CASE OF CIT VS. SIMIT P. SHETH (SUPRA), RESPECTFULLY FOLLOWING THE DECISION IN THAT CASE WITH REGARD TO THE ESTIMATION OF PROFIT, AO IS DIRECTED TO RESTRICT THE ADDITION TO 12.5% OF THE NON - GENUINE PURCHASES OF RS. 90,38,650/ - , MADE FROM THE TWELVE PARTIES. ACCORDINGLY, GROUND NO. 1 TO 8RAISED ON THE ISSUE OF BOGUS PURCHASES IS TREATED AS 'PARTLY ALLOWED'. AGGRIEVED, NOW ASSESSEE IS IN SECOND APPEAL BEFORE TRIBUNAL. 5. I HAVE HEARD THE RIVAL CONTENTIONS AND GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. NOW, BEFORE ME, ASSESSEE CONTENDED THAT ITA NO. 2151/MUM/2017 ROOPLAXMI STE EL AY:09 - 10 PAGE 4 OF 5 FIRST PROFIT ELEMENT APPLIED BY THE CIT(A) IS ON HIGHER SIDE AND HE REQUESTED FOR RED UCTION IN PROFIT RATE. I FIND THAT THE ASSESSEE IS IN THE BUSINESS OF DEALING IN STEEL 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 BO GUS 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 OB TAINED THESE BOGUS BILLS 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 ACC ORDING 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 1 2.5%. ACCORDINGLY, I AM OF THE VIEW THAT PROFIT RATE AT THE RATE APPLIED BY CIT(A) AT 12.5% IS ON HIGHER SIDE FOR THE REASON THAT THE ASSESSEE IS ENGAGED IN DEALING IN STEEL WHERE MARGIN OF PROFIT IS VERY LESS I.E. GP OF 10.75% AND NP AT 0.90%. ACCORDING T O ME, THE PROFIT RATE IN THIS CASE SHOULD BE APPLIED @ OF 6% WHICH 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 @ 6 % WILL BE SUFFIC IENT. I CONFIRM THE ORDER OF CIT(A). THE APPEAL OF ASSESSEE IS PARTLY ALLOWED . 6. 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. 2151/MUM/2017 ROOPLAXMI STE EL AY:09 - 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.