ASST CIT 8(2)(2), MUMBAI V. SURAJ INFRASTRUCTURE P. LTD, MUMBAI

ITA 2245/MUM/2017

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 9252 (ITAT-MUMBAI)
• Duration Of Justice: 5 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-09-2017
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 01-06-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 30-03-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: V JUSTIN
• Keywords: Bogus purchase
• Section: 143(3); 142(1); 133(6); 148

Judgement Text

1 ITA NO.2245/MUM/2017 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH E, MUMBAI BEFORE SHRI JOGINDER SINGH(JUDICIAL MEMBER) AND SHRI G MANJUNATHA (ACCOUNTANT MEMBER) I.T.A NO.2245/MUM/2017 (ASSESSMENT YEAR 2009-10) ACIT-8(2)(2), MUMBAI VS M/S SURAJ INFRASTRUCTURES PVT LTD FLAT NO.C-301, SHIR SHANKAR CO- OPERATIVE HOUSING SOCIETY, K.D. ROAD AGAR BAZAR, DADAR, MUMBAI-28 PAN : AACCM4467A APPELLANT RESPONDENT APPELLANT BY SHRI V JUSTIN RESPONDENT BY SHRI KIRAN MEHTA DATE OF HEARING 14-09-2017 DATE OF PRONOUNCEMENT 25-09-2017 O R D E R PER G MANJUNATHA, AM : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGA INST THE ORDER OF THE CIT(A)-14, MUMBAI DATED 22-09-2015 AND IT PERTAINS TO AY 2009-10. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE C OMPANY ENGAGED IN THE BUSINESS OF CIVIL CONSTRUCTION, SUPPLY OF BUILDING MATERIALS AND SITE MAINTENANCE, FILED ITS RETURN OF INCOME FOR A.Y. 20 09-10 ON 30-09-2010 DECLARING NIL INCOME. THE ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT, ON 25-03-2011 ACCEPTING THE INCOME RETURNED BY THE ASS ESSEE. SUBSEQUENTLY, THE ASSESSMENT WAS REOPENED BY ISSUE OF NOTICE U/S 148 OF THE INCOME-TAX ACT, 2 ITA NO.2245/MUM/2017 1961 FOR THE REASONS RECORDED WHICH STATES THAT INF ORMATION GATHERED / AVAILABLE IN THE OFFICE REVEALED THAT THE ASSESSEE HAS OBTAINED BOGUS BILLS OF RS.3,59,37,837 FROM ENTITIES, WHO WERE LISTED IN TH E SALES-TAX DEPARTMENT WEBSITE DECLARING THEM AS HAWALA DEALERS BY THE SAL ES-TAX DEPARTMENT, MUMBAI THEREBY INFLATING THE EXPENSES AND SUPPRESSI NG THE PROFITS. IN RESPONSE TO NOTICE THE ASSESSEE, VIDE LETTER DATED 05-08-2014 SUBMITTED THAT RETURN FILED ON 30-09-2009 MAY BE TREATED AS COMPLI ANCE TO THE NOTICE U/S 148. THE CASE HAS BEEN SELECTED OR SCRUTINY. NOTICES U/ S 143(2) AND 142(1) OF THE ACT WERE ISSUED. 3. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO ASKED THE ASSESSEE AS TO WHY THE TAX BILLS OBTAINED FROM THE ENTITIES LISTED ON THE WEBSITE OF MAHARASHTRA SALES-TAX DEPARTMENT SHOULD NOT BE DISA LLOWED AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. IN RESPONSE TO NOTIC E, THE ASSESSEE SUBMITTED THAT PURCHASES FROM THE PARTIES LISTED ON THE WEBSI TE OF MAHARASHTRA SALES-TAX DEPARTMENT ARE GENUINE PURCHASES, WHICH ARE SUPPORT ED BY PROPER PURCHASE BILLS AND PAYMENT FOR SUCH PURCHASES HAS BEEN MADE THROUGH PROPER BANKING CHANNELS. IN ORDER TO VERIFY THE CONTENTION OF THE ASSESSEE, NOTICE CALLING FOR INFORMATION U/S 133(6) OF THE ACT, WAS ISSUED TO TH E PARTIES DIRECTING THEM TO PRODUCE NECESSARY EVIDENCES IN SUPPORT OF PURCHASES CLAIMS TO HAVE BEEN MADE FROM THEM. THE NOTICE SENT U/S 133(6) WERE RE TURNED UNSERVED AND 3 ITA NO.2245/MUM/2017 NONE APPEARED BEFORE THE AO. BASED ON THE INFORMAT ION RECEIVED FROM THE INVESTIGATION WING COUPLED WITH FURTHER ENQUIRIES C ONDUCTED DURING THE ASSESSMENT PROCEEDINGS, THE AO CAME TO THE CONCLUSI ON THAT PURCHASES FROM THE PARTIES LISTED ON THE WEBSITE OF MAHARASHTRA SA LES-TAX DEPARTMENT ARE BOGUS AND HENCE, BY RELYING UPON THE DECISION OF HO NBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS SMIT P SHETH ITA NO.553 OF 2012 AND CIT VS BHOLANATH POLY FAB (P) LTD ITA NO.63 OF 2012 ESTIMATED GROSS PROFI T AT 30.12% ON TOTAL ALLEGED BOGUS PURCHASES FROM THE PARTIES AND ADDED BACK THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. 4. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE PRE FERRED APPEAL BEFORE CIT(A) AND SUBMITTED THAT THE AO WAS ERRED IN ESTIM ATING GROSS PROFIT OF 30.12% ON ALLEGED BOGUS PURCHASE MERELY ON THE BASI S OF LIST PREPARED BY MAHARASHTRA SALES-TAX DEPARTMENT, DESPITE FURNISHIN G OF EVIDENCES TO PROVE THE PURCHASES AS GENUINE. THE ASSESSEE FURTHER SUB MITTED THAT IT HAD FURNISHED NECESSARY EVIDENCES IN THE FORM OF PURCHA SE BILLS AND PAYMENT PROOF FOR HAVING PAID THE AMOUNT BY CHEQUE. THE AO IN TH E ABSENCE OF ANY EVIDENCE OF MONIES HAVING FLOWN BACK FROM THE SAID PARTIES, MERELY ON THE BASIS OF SUSPICIONS AND SURMISES ESTIMATED GROSS PROFIT OF 3 0.12% ON THE ALLEGED HAWALA PURCHASES. THE ASSESSEE FURTHER SUBMITTED T HAT IT HAS ALREADY REPORTED A GROSS PROFIT OF 30.12% IN THE RELEVANT F INANCIAL YEAR WHICH IS QUITE 4 ITA NO.2245/MUM/2017 HIGH WHEN COMPARED TO SIMILAR NATURE OF BUSINESS. THEREFORE, FURTHER ADDITION OF 30.12% WOULD MEAN THAT THE ASSESSEE HAS EARNED G ROSS PROFIT OF 60.24% WHICH IS NOT AT ALL TENABLE. THE CIT(A), AFTER CON SIDERING THE SUBMISSIONS OF THE ASSESSEE AND ALSO RELYING UPON CERTAIN JUDICIAL PRE CEDENTS OBSERVED THAT THE AO MADE ADDITIONS ONLY BECAUSE THE NAME OF THE PART IES APPEARED IN THE LIST OF SALES-TAX DEPARTMENT AND THE PARTIES WERE NOT PRODU CED BEFORE THE AO. FURTHER, THE AO HIMSELF CONTENDED THAT IN THE PRESE NT CASE ASSESSEE HAS ALREADY DISCLOSED GROSS PROFIT OF 30.12% WHICH IS M UCH MORE THAN THE PROFIT ESTIMATED IN THE DECISIONS RELIED UPON BY THE AO. THEREFORE, LOOKING INTO THE ENTIRE FACTS OF THE CASE AND RELYING UPON THE DECIS IONS RELIED UPON, IN HIS OPINION, NO ADDITION WAS WARRANTED TOWARDS ALLEGED PURCHASES; THEREFORE, THE ADDITION MADE BY THE AO WAS DELETED. AGGRIEVED BY THE ORDER OF CIT(A), REVENUE IS IN APPEAL BEFORE US. 5. THE LD.DR SUBMITTED THAT THE LD.CIT(A) HAS ERRED IN DELETING THE ADDITION MADE BY THE AO TOWARDS GROSS PROFIT ON ALLEGED BOGU S PURCHASES. THE LD.CIT(A) FAILED TO APPRECIATE THE FACT THAT THE BU RDEN OF PROOF CAST ON THE ASSESSEE WAS OF VERY HIGH DEGREE AND THE ASSESSEE F AILED TO DISCHARGE THE BURDEN BY PRODUCING THE PARTIES IN PERSON BEFORE TH E AO FOR CROSS EXAMINATION. THE FACTS GATHERED BY THE AO DURING T HE COURSE OF ASSESSMENT PROCEEDINGS AND THE INFORMATION RECEIVED FROM THE I NVESTIGATION WING CLEARLY 5 ITA NO.2245/MUM/2017 ESTABLISHES THAT THE ASSESSEE IS THE BENEFICIARY OF BOGUS PURCHASE BILLS TAKEN FROM HAWALA OPERATORS. THEREFORE, THE AO HAS RIGHT LY MADE ADDITIONS TOWARDS GROSS PROFIT ON ALLEGED BOGUS PURCHASES AND HIS ORD ER SHOULD BE UPHELD. 6. THE LD.AR FOR THE ASSESSEE, ON THE OTHER HAND, SUBM ITTED THAT THE AO HAS MADE ADDITIONS TOWARDS GROSS PROFIT ON ALLEGED BOGU S PURCHASES MERELY ON THE BASIS OF INFORMATION RECEIVED FROM SALES-TAX DEPART MENT DESPITE FURNISHING OF EVIDENCES TO PROVE THE PURCHASE. THE ASSESSEE HAS FILED NECESSARY EVIDENCES TO JUSTIFY THE PURCHASES. HOWEVER, THE AO HAS IGNO RED ALL THE EVIDENCES TO MAKE ADDITIONS PURELY ON SUSPICION AND SURMISES ONL Y ON THE GROUND THAT THE PARTIES WERE NOT APPEARED BEFORE THE AO. THE FACTS REMAIN THAT THE ASSESSEE HAS SUBMITTED THE DETAILS ABOUT PURCHASES FROM THOS E PARTIES AND PAYMENTS HAVE BEEN MADE THROUGH BANKING CHANNELS, WHICH HAVE NOT BEEN DISPUTED. THE ASSESSEE HAS DECLARED MORE THAN 30% GROSS PROFI T FOR THE RELEVANT FINANCIAL YEAR WHICH FACT HAS BEEN IGNORED BY THE AO, THOUGH THE GP DECLARED BY THE ASSESEE IS MUCH HIGHER THAN THE GROSS PROFIT IN SIM ILAR LINE OF BUSINESS. THE LD.AR FURTHER SUBMITTED THAT THE AO HAS TAKEN PURCH ASES FROM GANESH TRADING CO TWICE, EVEN THOUGH THE REASONS RECORDED FOR REOP ENING OF THE ASSESSMENT SHOWS ONE PURCHASE FROM GANESH TRADING CO. THEREFO RE, HE REQUESTED TO EXCLUDE GANESH TRADING CO FROM THE SECOND LIST OF E NTITIES TAKEN FOR ESTIMATION OF GROSS PROFIT. 6 ITA NO.2245/MUM/2017 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATE RIALS AVAILABLE ON RECORD. THE AO MADE ADDITIONS TOWARDS GROSS PROFIT ON ALLEGED BOGUS PURCHASES BASED ON THE INFORMATION RECEIVED FROM IN VESTIGATION WING WHICH STATES THAT THE ASSESSEE IS ONE OF THE BENEFICIARIE S OF BOGUS PURCHASE BILLS OBTAINED THROUGH HAWALA OPERATORS. THE AO FURTHER WAS OF THE OPINION THAT THOUGH ASSESSEE HAS FURNISHED CERTAIN DOCUMENTS TO JUSTIFY PURCHASES, FAILED TO PRODUCE PARTIES IN PERSON. IT IS THE CONTENTION OF THE ASSESSEE THAT MERELY BECAUSE PARTIES WERE NOT APPEARED BEFORE THE AO, GE NUINENESS OF THE PURCHASES CANNOT BE DOUBTED WHEN THE ASSESSEE HAS F URNISHED ALL DETAILS TO JUSTIFY PURCHASES FROM THE PARTIES. THE ASSESSEE F URTHER CONTENDED THAT THE AO HAS NOT ONLY IGNORED THE GROSS PROFIT DECLARED B Y THE ASSESSEE WHICH IS HIGHER THAN THE GROSS PROFIT DECLARED IN SIMILAR LI NE OF BUSINESS, MADE FURTHER ADDITION OF 30.12% ON ALLEGED BOGUS PURCHASES WOULD CERTAINLY AMOUNT TO ESTIMATING GROSS PROFIT AT 60.24% WHICH IS QUITE AR BITRARY AND ON HIGHER SIDE. 8. THE AO HAS MADE ADDITION TOWARDS BOGUS PURCHASES WH ICH IS SUPPORTED BY THE LIST PREPARED BY SALES-TAX DEPARTMENT AND IN FORMATION GATHERED DURING THE COURSE OF ASSESSMENT PROCEEDINGS WHICH CLEARLY ESTABLISHES THAT THE PARTIES ARE HAWALA OPERATORS INVOLVED IN PROVIDING ACCOMMOD ATION ENTRIES WITHOUT ACTUAL DELIVERY OF GOODS. THEREFORE, THERE IS NO M ERIT IN THE ARGUMENTS OF THE ASSESSEE THAT PURCHASES FROM THE SO-CALLED PARTIES ARE GENUINE IN NATURE. 7 ITA NO.2245/MUM/2017 HAVING SAID SO, LET US EXAMINE WHETHER IN CASE OF B OGUS PURCHASES ADDITION CAN BE MADE FOR THE ENTIRE PURCHASES OR THE ADDITI ON CAN BE MADE ONLY OF THE PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES. THE HON BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS VIJAY PROTEINS LTD HAS CONSI DERED SIMILAR ISSUE AND AFTER ANALYZING THE ISSUE OF BOGUS PURCHASES, HAS UPHELD ESTIMATION OF GROSS PROFIT AT 12.5% ON ALLEGED BOGUS PURCHASES. THE HONBLE GUJA RAT HIGH COURT IN THE CASE OF CIT VS SMIT P SHETH HAS ALSO CONSIDERED A SIMILA R ISSUE OF BOGUS PURCHASES AND AFTER CONSIDERING THE FACTS OBSERVED THAT NO UN IFORM YARDSTICK CAN BE APPLIED FOR ESTIMATING GROSS PROFIT ON BOGUS PURCHA SES WHICH IS DEPENDENT UPON THE FACTS OF DIFFERENT CASES. THE CO-ORDINATE BENCH OF ITAT, IN A NUMBER OF CASES HAS TAKEN A CONSISTENT VIEW AND DIRECTED T HE AO TO ESTIMATE GROSS PROFIT OF 12.5% ON ALLEGED BOGUS PURCHASES. KEEPIN G IN VIEW ALL THE FACTS AND CIRCUMSTANCES OF THE CASE AND ALSO FOLLOWING THE RA TIOS OF THE CASE LAWS DISCUSSED ABOVE, WE ARE OF THE CONSIDERED VIEW THAT ESTIMATION OF GROSS PROFIT AT 12.5% ON TOTAL ALLEGED BOGUS PURCHASES WOULD MEE T THE ENDS OF JUSTICE. THEREFORE, WE DIRECT THE AO TO ESTIMATE GROSS PROFI T AT 12.5% ON THE ALLEGED BOGUS PURCHASES. 9. COMING TO THE ARGUMENT OF THE LD.AR THAT WHILE ESTI MATING GROSS PROFIT ON ALLEGED BOGUS PURCHASES, THE AO HAS TAKEN TWO AMOUN TS FROM SHREE GANESH TRADING CO EVEN THOUGH REASONS RECORDED FOR REOPENI NG OF ASSESSMENT SHOWS 8 ITA NO.2245/MUM/2017 PURCHASES FROM SHREE GANESH TRADING CO. THE LD.AR FOR THE ASSESSEE SUBMITTED THAT THIS HAS BEEN DISCUSSED BY THE CIT(A ) IN HIS ORDER AT PARA 5 AND GAVE A CATEGORICAL FINDING THAT IN CASE OF SHREE GA NESH TRADING CO, THE ACTUAL TRANSACTION AS PER THE LEDGER ACCOUNT FILED BEFORE THE AO HAS TO BE TAKEN. WE FIND FORCE IN THE ARGUMENT OF THE ASSESSEE FOR THE REASON THAT THE AO HAS TAKEN TWO LISTS OF PARTIES FOR THE PURPOSE OF ESTIMATION OF GROSS PROFIT ON BOGUS PURCHASES. THE NAME OF SHREE GANESH TRADING CO HAS APPEARED IN BOTH THE LISTS. BUT FOR THE REASONS RECORDED FOR REOPENING OF THE ASSESSMENT, TOTAL PURCHASE FROM SHREE GANESH TRADING CO IS RS.1,62,66 ,830, HOWEVER, THE AO HAS TAKEN TWO PURCHASES FROM SHREE GANESH TRADING C O. THE ASSESSEE CLAIMS THAT HE HAD FURNISHED LEDGER EXTRACT OF SHREE GANES H TRADING CO, AS PER WHICH TOTAL PURCHASES FROM THE PARTY AT RS. 1,62,66,830. THIS FACT HAS BEEN ACCEPTED BY THE LD.CIT(A). THEREFORE, WE ARE OF THE VIEW TH AT THE ISSUE NEEDS TO BE RE- EXAMINED BY THE AO IN THE LIGHT OF THE CLAIM OF THE ASSESSEE THAT THE PURCHASES FROM SHREE GANESH TRADING CO HAS BEEN TAKEN TWICE F OR THE PURPOSE OF ESTIMATION OF GROSS PROFIT. IF THE CLAIM OF THE AS SESSEE IS FOUND TO BE CORRECT, THEN THE AO IS DIRECTED TO EXCLUDE THE NAME OF SHRE E GANESH TRADING CO FROM THE SECOND LIST OF ENTITIES CONSIDERED FOR ESTIMATI ON OF GROSS PROFIT ON ALLEGED BOGUS PURCHASES. HENCE, WE SET ASIDE THE ISSUE FOR THE LIMITED PURPOSE OF VERIFICATION OF PURCHASES FROM SHREE GANESH TRADING CO AND DIRECT THE AO TO 9 ITA NO.2245/MUM/2017 CONSIDER THE ISSUE IN THE LIGHT OF EXPLANATION OF T HE ASSESSEE BEFORE ESTIMATING THE GROSS PROFIT ON ALLEGED BOGUS PURCHASES. 10. IN THE RESULT, APPEAL FILED BY THE REVENUE IS PARTL Y ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 25 TH SEPTEMBER, 2017. SD/- SD/- (JOGINDER SINGH) (G MANJUNATHA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DT : 25 TH SEPTEMBER, 2017 PK/- COPY TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR /TRUE COPY/ BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI