PR CIT-9, Mumbai V. M/S CAPCO WATER SOLUTIONS PVT LTD., Mumbai

ITA 2318/MUM/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 6842 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-09-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2011-2012
• Appeal Filed On: 12-04-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AMIT PRATAP SINGH
• Keywords: Bogus purchase; Onus to prove
• Section: 201; 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (V I RTUAL COURT) , C BENCH MUMBAI BEFORE SHRI M.BALAGANESH, AM & SHRI PA V AN KUMAR GADALE , JM ITA NO. 2318 /MUM/ 20 19 ( ASSESSMENT YEAR : 201 1 - 1 2 ) PR.CIT - 9, ROOM NO.259A, 2 ND FLOOR, AYAKAR BHAVAN C HURCHGATE MUMBAI VS. M/S. CAPCO WATER SOLUTIONS PVT. LTD., 15A J LAXMI INDUSTRIAL ESTATE, LINK ROAD ANDHERI (W) MUMBAI 400 053 PAN/GIR NO. AABCC1253B (APPELLANT ) .. (RESPONDENT ) REVENUE BY SHRI AMIT PRATAP SINGH ASSESSEE BY NONE DATE OF HEARI NG 07 / 09 /2020 DATE OF PRONOUNCEMENT 10 / 09 /2020 / O R D E R PER M. BALAGANESH (A.M) : THIS APPEAL IN ITA NO. 2318/MUM/2019 FOR A.Y. 2011 - 12 ARISES OUT OF THE ORDER BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - 16, MUMBAI IN APPEA L NO. CIT(A) - 16/IT - 10548/ITO - 9(2)(2)/2016 - 17 DATED 23/04/2016 (LD. CIT(A) IN SHORT) AGAINST THE ORDER OF ASSESSMENT PASSED U/S.143(3) RWS 147 OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO ITA NO . 2318/MUM/2019 M/S. CAPCO WATER SOLUTIONS PVT. LTD., 2 AS ACT) DATED 16/03/2016 BY THE LD. INCOME TAX OFFICER 9(2)(2) , MUMBAI (HEREINAFTER REFERRED TO AS LD. AO). 2. THE ONLY ISSUE TO BE DECIDED IN THIS APPEAL IS AS TO WHETHER THE LD. CIT(A) WAS JUSTIFIED IN DIRECTING THE LD. AO TO TAX ONLY THE PROFIT ELEMENT EMBEDDED IN THE BOGUS PURCHASES @12.5% IN THE FACTS AND CIRCU MSTANCES OF THE INSTANT CASE. 3. WE HAVE HEARD THE LD. DR. NONE APPEARED ON BEHALF OF THE ASSESSEE. WE FIND THAT ASSESSEE IS ENGAGED IN THE BUSINESS OF SUPPLY OF CHLORINATION EQUIPMENTS AND CHLORINATION PLANTS AND HAD FILED ITS INCOME TAX RETURN FOR THE A.Y.2011 - 12 ON 16/09/2011 DECLARING TOTAL INCOME OF RS.1,33,16,244/ - . BASED ON THE INFORMATION RECEIVED FROM THE SALES TAX DEPARTMENT OF THE GOVERNMENT OF MAHARAHTRA AND THE INCOME TAX INVESTIGATION WING THAT THE ASSESSEE HAD MADE CERTAIN PURCHASES FROM TH E FOLLOWING PARTIES WHOSE NAMES APPEARED IN THE TAINTED LIST OF HA W ALA DEALERS IN THE WEBSITE OF SALES TAX DEPARTMENT OF GOVERNMENT OF MAHARASHTRA, THE ASSESSMENT OF THE ASSESSEE WAS REOPENED U/S.147 OF THE ACT : - NAME OF HAWALA OPERATOR PAN AMOUNT OF PURCH ASE BILL - RS. HARSHIL FERROMET P. LTD., AACH0658L 113,52,474 SIDDHIVINAYAK CORPORATION 11,130 PADDMAVATI METAL INDU AMTPR5976K 25,70,738 SUBHAM STEEL IMPEX ABKFS9679N 57,86,288 TOTAL 1,97,20,630 3.1. WE FIND THAT THE ASSESSEE HAD GIVEN THE FOLLOWI NG EXPLANATION BEFORE THE LOWER AUTHORITIES: - ITA NO . 2318/MUM/2019 M/S. CAPCO WATER SOLUTIONS PVT. LTD., 3 THE ASSESSEE HAD GIVEN AN ORDER TO AN AGENT FOR CERTAIN PURCHASES & THE ASSESSEE HAS RECEIVED THE GOODS & THE BILL FROM AN AGENT. ASSESSEE HAS PURCHASED REQUIRED GOODS FROM THE AGENTS IN MANY CASES WHERE THE G OODS ARE NOT EASILY AVAILABLE IN THE MARKET SO, THAT THERE ARE SOME AGENTS WHO TAKE ORDERS FOR SOME SPECIFIC I TEMS FROM THE ASSESSEE'S, HENCE AGENT IS RESPONSIBLE FOR THE QUALITY & TIMELY DELIVERY OF SUCH GOODS & IN TURN RECEIVES COMMISSION FOR THE SERVICE S FROM SUPPLIERS. IN SOME CASES WHAT HAS HAPPENED IS, THAT THE AGENT ALREADY HAS THE GOODS WITH HIM & DOES NOT HAVE PROPER INVOICE OR BILL FOR THE SAME. SO HE TAKES THE FAKE BILLS FROM SUCH HAWALA PARTIES & SENDS HIS GOODS ALONG WITH THE FAKE BILL TO THE A SSESSEE WHO HAS ORDERED THE GOODS. T H E ASSESSEE HAS NO KNOWLEDGE OF SUCH FACTS AND IS UNDER THE BELIEF THAT HE HAS RECEIVED THE GOODS ORDERED BY HIM ALONG WITH A GENUINE BILL FOR THE SAME. ASSESSEE HAS SUBMITTED ALL THE INVOICES IN CONNECTION WITH ABOVE SA ID PARTIES AND BANK STATEMENT SHOWING PAYMENT TO SUCH PARTIES VIA ACCOUNT PAYEE CHEQUES AND DETAILED EXPLANATION STATING THAT SAID MATERIALS WERE USED IN THE MANUFACTURING AND CONSUMED AND SUBSEQUENTLY INVOICE HAS BEEN RAISED SUPPLYING MANUFACTURED GOODS A S PER THE ORDER OF THE CUSTOMER. NOW ASSESSEE / BROKER IS NOT AWARE ABOUT THE LATEST WHEREABOUT S OF THE SUPPLIERS AND THEY ARE NO MORE OUR SUPPLIER NOW SO UNDER SUCH CIRCUMSTANCES ASSESSEE IS NOT ABLE TO PRODUCE T HAT PARTY AND WHATEVER PURCHASES ARE MADE S HOULD BE TREATED AS GENUINE AND USED IN THE MANUFACTURING PROCESS AND SHOULD NOT BE DISALLOWED. 3. 2 . WE FIND THAT THE LD. AO OBSERVED IN HIS ASSESSMENT ORDER THAT - (A) THE ASSESSEE HAS NOT PRODUCED ANY DOCUMENTARY EVIDENCES TO PROVE THE IDENTITY OF THE S UPPLIERS. (B) THE ASSESSEE HAD PRODUCED ONLY THE PURCHASE BILLS WAS NOT ABLE TO ESTABLISH THE GENUINENESS OF THESE PURCHASES. ITA NO . 2318/MUM/2019 M/S. CAPCO WATER SOLUTIONS PVT. LTD., 4 (C) THE ASSESSEE WAS NOT ABLE TO PRODUCE THE DELIVERY CHALLANS, OCTROI RECEIPTS ETC. (D) THE ASSESSEE WAS UNABLE TO PRODUCE THE P URCHASE PARTIES FOR VERIFICATION. 3. 3 . WE FIND THAT THE LD. AO HAD FURTHER OBSERVED THAT S INCE THE PURCHASES BOOKED BY THE ASSESSEE ARE NOT VERIFIABLE, THE BOOKS OF ACCOUNTS OF THE ASSESSEE ARE NOT RELIABLE AND ACCORDINGLY, BOOK RESULTS WERE REJECTED BY T HE LD. AO TO THE EXTENT OF ERRONEOUS PURCHASES U/S.145 OF THE ACT. 3. 4 . WE FIND THAT THE LD. AO HAD OBSERVED IN THIS ORDER THAT THE ASSESSEE COULD HAVE BOUGHT GOODS IN THE INSTANT CASE FROM THE GREY MARKET AND OBTAIN ED BOGUS BILLS OF OTHER PARTIES TO SUPP ORT THE GREY PURCHASES. WE OBSERVE THAT THE AFORESAID SUPPLIERS HAD ACTED AS A CONDUIT BETWEEN THE ASSESSEE FIRM AND THE SELLER OF THE GOODS. ACCORDINGLY, HE ESTIMATED THE ADDITION @36.5% OF THE GROSS PROFIT AND ARRIVED AT THE ADDITION FIGURE OF RS.68,55,2 65/ - IN THE ASSESSMENT. 3. 5 . WE FIND THAT THE LD. CIT(A) HAD OBSERVED THAT THE ASSESSEE HAD PRODUCED NECESSARY EVIDENCE TO PROVE THE FACT THAT PAYMENTS WERE MADE BY CHEQUE TO THOSE PARTIES, EVIDENCES REGARDING THE CONSUMPTION OF MATERIALS PURCHASE BUT THE ASSESSEE WAS NOT ABLE TO PRODUCE THE PARTIES FOR VERIFICATION ABOUT THE GENUINENESS OF THE PURCHASES MADE. TO THIS EXTENT, THE LD. CIT(A) OBSERVED THAT THE ASSESSEE HAD NOT DISCHARGED THE BURDEN OF PROOF THAT CAST ON HIM. WE FIND THAT THE LD. CIT(A) OBSER VED THAT THE PARTIES IN QUESTION WERE NON - EXISTENT WHICH FACT HAD NOT BEEN ABLE TO BE DISAPPROVED BY THE ASSESSEE. THE LD. CIT(A) ALSO OBSERVED THAT THE LD. AO WAS NOT ABLE TO GIVE ANY ADVERSE FINDING TO THE FACT THAT ITA NO . 2318/MUM/2019 M/S. CAPCO WATER SOLUTIONS PVT. LTD., 5 ASSESSEE HAD NOT SHOWN CONSUMPTION / S ALES OF THE GOODS IN RESPECT OF PURCHASES MADE FROM THE AFORESAID PARTIES. SINCE, THE FACT OF CONSUMPTION / SALES HAD NOT BEEN DOUBTED BY THE LD. AO IN THE INSTANT CASE, THE LD. CIT(A) RESORTED TO ESTIMATE THE PROFIT @12.5% AS AGAINST 36.5% MADE BY THE LD. AO. 4. AGGRIEVED BY THIS FINDING, ONLY THE REVENUE IS IN APPEAL BEFORE US. 5. WE FIND THAT THE FACT OF CONSUMPTION OF MATERIALS ARE NOT DISPUTED BY THE REVENUE. WE FIND THAT THE LD. CIT(A) HAD CATEGORICALLY RECORDED A FINDING THAT THE ASSESSEE COULD HA VE MADE ONLY PURCHASES FROM THE GREY MARKET BY WAY OF INFLATION OF SOME PURCHASE PRICE SO AS TO SUPPRESS THE TRUE PROFITS. BY THIS PROCESS, THE PROFIT EMBEDDED THEREOF IN THE ENTIRE TRANSACTION WAS ASSUMED TO BE 12.5% BY THE LD. CIT(A). WE ALSO FIND THAT T HIS TRIBUNAL IN SERIES OF DECISIONS HAD HELD THAT PROFIT PERCENTAGE OF 12.5% WOULD MEET THE ENDS OF JUSTICE ON THE ALLEGED BOGUS PURCHASES IN THE SIMILAR INDUSTRIES IN WHICH ASSESSEE IS ENGAGED INTO. ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE ORDER O F THE LD. CIT(A) GRANTING RELIEF TO THE ASSESSEE. ACCORDINGLY, THE GROUND RAISED BY THE REVENUE IS DISMISSED. 6. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED ON 10 / 09 /2020 BY WAY OF PROPER MENTIONING IN THE NOTICE BOARD. SD/ - ( PA V AN KUMAR GADALE ) SD/ - (M.BALAGANESH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 10 / 09 / 2020 KARUNA , SR.PS ITA NO . 2318/MUM/2019 M/S. CAPCO WATER SOLUTIONS PVT. LTD., 6 COPY OF THE ORDER FORWARDED TO : BY ORDER, ( ASSTT. REGISTRAR) ITAT, MUM BAI 1. THE APPELLANT 2. THE RESP ONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//