PCK METALS P.LTD, MUMBAI V. DCIT 5(2)(1), MUMBAI

ITA 2226/MUM/2017

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 2018 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 7 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-11-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2009-2010
• Appeal Filed On: 30-03-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Reopening of assessment; Bogus purchase; Accommodation entries
• Section: 143(3); 69

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH C , MUMBAI , ! ,'# '$ BEFORE SHRI VIKAS AWASTHY, JUDICIAL MEMBER & SHRI N.K.PRADHAN, ACCOUNTANT MEMBER . 2226 / /201 7 (. . 2009-10 ) ITA NO.2226/MUM/2017(A.Y.2009-10) M/S. PCK METALS PVT. LTD., SHOP NO.1, KUSHAL BHAVAN65, 5 TH KUMBHARWADA, MUMBAI 400 004. PAN: AADCP88653Q ...... , / APPELLANT VS. THE DCIT -15(2)(2), MUMBAI ..... !-/ RESPONDENT ,./ APPELLANT BY : NONE !-./ RESPONDENT BY : SHRI V.SREEKAR /- / DATE OF HEARING : 29/10/2020 012 /- / DATE OF PRONOUNCEMENT : 12/11/2020 '/ ORDER PER VIKAS AWASTHY, JM : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-10, MUMBAI ( IN SHORT THE CIT (A)) DATED 20/12/2016 FOR THE ASSESSMENT YEAR 2009-10. 2. THE BRIEF FACTS OF THE CASE AS EMANATING FROM RE CORDS ARE : THE ASSESSEE IS A TRADER IN FERROUS AND NON-FERROUS METALS. THE ASSESSMENT FOR ASSESSMENT YEAR 2009-10 IN THE CASE 2 ITA NO.2226/MUM/2017(A.Y.2009-10) OF ASSESSEE WAS REOPENED ON THE BASIS OF INFORMATIO N RECEIVED FROM CIT (CENTRAL)-1, MUMBAI THAT THE ASSESSEE HAS INDULGED IN AVAILING ACCOMMODATION ENTRIES TO THE TUNE OF RS.1,32,32,807/- FROM HAWALA TRADERS. IN ASSESSMEN T PROCEEDINGS THE ASSESSING OFFICER AFTER RECORDING THAT THE ASSESSEE HAS FAILED TO PR ODUCE THE PARTIES FROM WHOM ALLEGED PURCHASES WERE MADE AND ASSESSEES FAILURE TO PRODU CE VITAL DOCUMENTS VIZ. STOCK REGISTER AND BOOKS OF ACCOUNT LEADES TO THE FACT THAT PURCHA SES WERE NOT GENUINE. THUS, THE ASSESSING OFFICER MADE ADDITION OF THE ENTIRE ALLEG ED BOGUS PURCHASES UNDER SECTION 69 OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). THE ASSESSING OFFICER FURTHER MADE DISALLOWANCE OF INTEREST AMOUNTING TO RS.12,79,434/- ON THE GROUND THAT THE ASSESSEE HAD ADVANCED INTEREST BEARING FUNDS TO ITS SISTER CONCERN M/S. PRAKASH STAINLESS STEEL PVT. LT D. WITHOUT CHARGING ANY INTEREST. 3. AGGRIEVED BY THE ASSESSMENT ORDER DATED 30/03/20 15 PASSED UNDER SECTION 143(3) R.W.S. 147 OF THE ACT, THE ASSESSEE FILED APPEAL B EFORE THE CIT(A). IN FIRST APPELLATE PROCEEDINGS, THE CIT(A) IN PRINCIPLE ACCEPTED THE F INDINGS OF ASSESSING OFFICER IN HOLDING THAT THE ASSESSEE HAS INDULGED IN OBTAINING BOGUS PURCHA SE BILLS FROM HAWALA DEALERS. HOWEVER, CIT(A) RESTRICTED THE DISALLOWANCE BY ESTIMATING GP @ 12.5% ON BOGUS PURCHASES. AS REGARDS DISALLOWANCE OF INTEREST, THE CIT(A) UPHELD THE FINDINGS OF ASSESSING OFFICER IN THE ABSENCE OF ANY CONTRARY MATERIAL. 4. NOW THE ASSESSEE IS IN APPEAL AGAINST THE ORDER OF CIT(A) ASSAILING THE ADDITIONS ON MERITS AS WELL AS CHALLENGING THE VALIDITY OF REOPE NING. 5. SHRI V.SREEKAR, REPRESENTING THE DEPARTMENT VEHE MENTLY DEFENDED THE IMPUGNED ORDER AND PRAYED FOR DISMISSING THE APPEAL OF ASSES SEE. THE LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE ASSESSEE HAS FAIL ED TO PROVE GENUINENESS OF THE PURCHASES. THE CIT(A) HAS GRANTED RELIEF TO THE AS SESSEE BY ESTIMATING G.P @ 12.5% ON BOGUS PURCHASES. THE ESTIMATION OF G.P BY CIT(A) I S FAIR AND REASONABLE. AS REGARDS DISALLOWANCE OF INTEREST EXPENDITURE, THE LD. DEPAR TMENTAL REPRESENTATIVE SUBMITTED THAT THE ASSESSEE HAS FAILED TO SUBSTANTIATE THAT THE FU NDS ADVANCED TO SISTER CONCERN WERE FOR BUSINESS PURPOSE. FURTHER, THE ASSESSEE FAILED TO SHOW THAT THE LOAN TO SISTER CONCERN WAS ADVANCED FROM OWN NON-INTEREST BEARING FUNDS. 3 ITA NO.2226/MUM/2017(A.Y.2009-10) 6. WE HAVE HEARD THE SUBMISSIONS MADE BY THE LD. DE PARTMENTAL REPRESENTATIVE AND HAVE EXAMINED THE ORDERS OF AUTHORITIES BELOW. IN G ROUND NO.1 OF THE APPEAL THE ASSESSEE HAS ASSAILED REOPENING OF ASSESSMENT. THE ASSESSEE HAS ASSAILED THE REOPENING BEFORE THE CIT(A). NO CONTRARY MATERIAL IS AVAILABLE ON RECOR D TO REBUT THE FINDINGS OF CIT(A). WE FIND NO REASON TO INTERFERE WITH THE ORDER OF CIT(A) ON THIS ISSUES. ACCORDINGLY, GROUND NO.1 OF THE APPEAL IS DISMISSED BEING DEVOID OF ANY MERIT. 7. IN GROUND NO.2 OF THE APPEAL, THE ASSESSEE HAS A SSAILED DISALLOWANCE MADE ON BOGUS PURCHASES BY ESTIMATING GP AT 12.5%. AS PER THE CO NTENTIONS OF THE ASSESSEE, THE ASSESSEE HAD FURNISHED CONFIRMATIONS WITH PAN OF THE ALLEGED HAWALA OPERATORS. IT IS CONTENDED THAT NO INDEPENDENT ENQUIRY WAS MADE BY THE ASSESSING OF FICER . IN THE ABSENCE OF PROPER VERIFICATION, THE PURCHASES CANNOT BE TREATED AS NO N-GENUINE. THOUGH PAYMENT FOR THE GOODS PURCHASED WERE MADE T HROUGH BANKING CHANNELS, BUT MERE MAKING PAYMENT THROUGH CHEQUE DOES NOT CON CLUSIVELY PROVE GENUINENESS OF THE TRANSACTION. THE ASSESSEE HAS FAILED TO PRODUCE PA RTIES FROM WHOM PURCHASES WERE MADE. FURTHER THE ASSESSEE FAILED TO PRODUCE THE DOCUMENT S VIZ. LORRY RECEIPTS, OCTROI RECEIPTS, ETC. TO PROVE TRAIL OF GOODS. IN SHORT, THE ASSESSEE COULD NOT PROVE GENUINENESS OF THE PURCHASES. AT THE SAME TIME WE OBSERVE THAT THE SALES AND THE STOCK DECLARED BY THE ASSESSEE WERE ACCEPTED BY THE ASSESSING OFFICER. W ITHOUT PURCHASES THERE CANNOT BE SALES. THE CIT(A) IN THE IMPUGNED ORDER HAS OBSERVED THAT UNDER SUCH LIKE TRANSACTIONS THE ASSUMPTION IS THAT ASSESSEE MIGHT HAVE PURCHASED T HE MATERIAL FROM GREY MARKET AND HAD OBTAINED BOGUS PURCHASE BILLS FROM ENTRY PROVIDERS. IT IS ONLY THE PROFIT ELEMENT EMBEDDED IN SUCH LIKE BOGUS TRANSACTION THAT HAS TO BE BR OUGHT TO TAX. THE CIT(A) HAS ESTIMATED GP @ 12.5% ON BOGUS PURCHASES. THE ASSESSEE IS IN THE BUSINESS OF TRADING OF FERROUS AND NON- FERROUS METALS. THE ESTIMATION OF GP BY CIT(A) IS ON THE HIGHER SIDE. THE GP IN THE TRADE OF FERROUS AND NON-FERROUS METALS IS GENERALLY AROUND 4% TO 6%. IN OUR CONSIDERED VIEW THE ENDS OF JUSTICE WOULD MEET IF THE GP ON BOGUS PURCH ASES BE ESTIMATED AT 6%. WE HOLD AND DIRECT ACCORDINGLY. THE GROUND NO.2 OF THE APPEAL IS PARTLY ALLOWED IN THE TERMS AFORESAID. 4 ITA NO.2226/MUM/2017(A.Y.2009-10) 8. IN GROUND NO.3 OF THE APPEAL, THE ASSESSEE HAS A SSAILED DISALLOWANCE ON INTEREST UNDER SECTION 36(1) (III) OF THE ACT. THE ASSESSEE HAS ALLEGEDLY ADVANCED INTEREST BEARING FUNDS TO ITS SISTER CONCERN M/S. PRAKASH STAINLESS STEEL PVT. LTD. WITHOUT CHARGING ANY INTEREST. IT IS NOT EMANATING FROM RECORDS WHE THER THE ASSESSEE WAS HAVING OWN SUFFICIENT FUNDS FOR ADVANCING OF LOANS TO ITS SISTER CONCERN. THE ASSESSEE HAS SUBMITTED THAT THE ADVANCES HAVE BEEN GIVEN IN CONNECTION WITH BUSINES S. HOWEVER, WE FIND THAT THERE IS NO REFERENCE TO THE MATERIAL BY AUTHORITIES BELOW THAT HAVE BEEN PLACED ON RECORD BY THE ASSESSEE TO SUBSTANTIATE THAT THE ADVANCES WERE IN RESPECT OF BUSINESS TRANSACTIONS. IN THE ABSENCE OF COMPLETE FACTS AND REFERENCE TO MATERIA L BROUGHT ON RECORD BY ASSESSEE, WE DEEM IT APPROPRIATE TO RESTORE THIS ISSUE BACK TO T HE FILE OF ASSESSING OFFICER FOR FRESH ADJUDICATION. WHILE DECIDING THIS ISSUE, THE ASSES SING OFFICER SHALL ALSO CONSIDER THE APPLICABILITY OF DECISION RENDERED IN THE CASE OF C IT VS. RELIANCE UTILITY POWER LTD. REPORTED AS 313 ITR 340(BOM). 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED IN THE TERMS AFORESAID. ORDER PRONOUNCED IN OPEN COURT ON THURSDAY THE 12TH DAY OF NOVEMBER, 2020. SD/- SD/- (N.K.PRADHAN) (VIKAS AWAS THY) '# / ACCOUNTANT MEMBER / JUDICIAL MEMBER / MUMBAI, 4/ DATED 12 /11/2020 VM , SR. PS (O/S) 5 ITA NO.2226/MUM/2017(A.Y.2009-10) COPY OF THE ORDER FORWARDED TO : 1. , / THE APPELLANT , 2. !- / THE RESPONDENT. 3. 5- ( )/ THE CIT(A)- 4. 5- CIT 5. 67!- , . . . , / DR, ITAT, MUMBAI 6. 789:; / GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI