PRAVIN B. KANUNGO, MUMBAI V. ITO 19(2)(5), MUMBAI

ITA 2449/MUM/2017

• Counselvise Citation: [2018] 123 COUNSELVISE.COM (IT) 0717 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-10-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 06-04-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Bogus purchase; Accommodation entries

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C , BENCH MUMBAI BEFORE SHRI R.C.SHARMA, AM & SHRI SANDEEP GOSAIN , JM ITA NO. 2449 / MUM/20 17 ( ASSESSMENT YEAR : 2011 - 12 ) SHRI PRAVIN B. KANUNGO METAL CHEM INDIA C/O. SHOP NO.1, GROUND FLOOR, 10, SHIVKUTIR 8 TH KHETWADI BACK ROAD MUMBAI - 4 VS. ITO 19(2)(5), MATRU MANDIR MUMBAI PAN/GIR NO. AAYPK4480G ( APPELLANT ) .. ( RESPONDENT ) ASSESSEE BY NONE REVENUE BY SHRI ABI RAMA KARTHIKEYAN DATE OF HEARING 03 / 10 /201 8 DATE OF PRONOUNCEMENT 03 / 10 /201 8 / O R D E R PER R.C.SHARMA (A.M) : THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) - 29, MUMBAI DATED 19/01/2017 FOR A.Y.2011 - 12 IN THE MATTER OF ORDER PASSED U/S.143(3) R.W.S. 147 OF THE IT ACT. 2. NOBODY APPEARED ON B EHALF OF THE ASSESSEE INSPITE OF GIVING OPPORTUNITY, NOR ANY ADJOURNMENT PETITION WAS FILED, THEREFORE, BENCH DECIDED TO DISPOSE OFF THE APPEAL AFTER CONSIDERING THE MATERIAL PLACED ON RECORD AND CONTENTIONS OF LEARNED DR. ITA NO. 2449/MUM/2017 SHRI PRAVIN B KANUNGO 2 3. WE HAVE GONE THROUGH THE ORDER S OF THE AUTHORITIES BELOW AND FOUND THAT ASSESSMENT WAS REOPENED ON THE BASIS OF INFORMATION RECEIVED FROM THE DGIT(INV.), MUMBAI WHO IN TURN HAD RECEIVED INFORMATION FROM THE SALES - TAX DEPARTMENT ABOUT SOME BOGUS HAWALA ENTRY PROVIDERS AS PER WHICH THE A SSESSEE WAS INVOLVED IN TAKING ENTRIES OF NON GENUINE PURCHASES FROM THE SEVEN PARTIES AMOUNTING TO RS.4,94,81,389/ - . 4. THE AO OBSERVED IN THE ASSESSMENT ORDER THAT THE ASSESSEE HAS SHOWN PURCHASES TO THE TUNE OF RS.4,94,81,389/ - FROM SEVEN PARTIES. IN ORDER TO VERIFY THE GENUINENESS OF THESE PURCHASES, THE AO REQUIRED THE ASSESSEE TO FURNISH VARIOUS DETAILS. ACCORDING TO HIM, BARRING THE LEDGER ACCOUNT AND CHEQUE PAYMENT DETAILS, NO OTHER DOCUMENTS LIKE DELIVERY CHALLANS, LORRY RECEIPTS, TRANSPORTATION DETAILS ETC WERE PRODUCED BY THE ASSESSEE DURING THE ASSESSMENT PROCEEDINGS. HE PLACED RELIANCE ON THE ADMISSION MADE BY THE ALLEGED PARTIES BEFORE THE SALES TAX DEPARTMENT THAT THEY HAVE NOT MADE ANY SALE OR PURCHASE TRANSACTION. HOWEVER, AS THE ASSESSEE HAD DECLARED CORRESPONDING SALES, THE AO HELD THAT THE ASSESSEE WAS ACTUALLY IN POSSESSION OF THE GOODS. HE PRESUMED THAT THE ASSESSEE WOULD BE PURCHASING GOODS FROM OTHER SUPPLIERS WITHOUT BILLS AND MUST HAVE BENEFITED FROM THE MARGINS RESULTING FROM THE GREY MARKET PUR CHASES. THEREFORE, AFTER REJECTING THE BOOKS OF ACCOUNT U/S.145(3), HE ESTIMATED THE ADDITIONAL GP @12.5% OF THE ALLEGED BOGUS PURCHASES. WHILE DOING SO, HE PLACED HIS RELIANCE ON THE JUDGEMENT OF CIT VS. SIMIT P. SHETH 356 ITR 451 AND M/S. BHOLENATH POLY FAB P.LTD. 355 ITR 290. ITA NO. 2449/MUM/2017 SHRI PRAVIN B KANUNGO 3 5. BY THE IMPUGNED ORDER CIT(A) CONFIRMED THE ADDITION TO THE EXTENT OF 5% AFTER OBSERVING AS UNDER: - 3.3.6. IT IS SEEN THAT THE TOTAL PURCHASES OF THE APPELLANT DURING THE YEAR ARE TO THE TUNE OF RS.4,97,90,088/ - AN D THE SALES ARE TO THE TUNE OF RS.5,11,65,890/ - . THE PURCHASES WHICH WERE TREATED AS BOGUS ARE TO THE TUNE OF RS,4,94,81,389/ - WHICH IS ALMOST 99% OF THE TOTAL PURCHASES. IT APPEARS ABSURD THAT THE APPELLANT WOULD TAKE ACCOMMODATION ENTRIES FOR ALMOST 99% O F HIS PURCHASES. BE THAT AS IT MAY, THE AO'S ESTIMATE OF 12.5% AS ADDITIONAL GP ON THESE PURCHASES IS VERY HIGH. THE APPELLANT, AS ALREADY STATED, IS IN THE BUSINESS OF TRADING IN FERROUS AND NON FERROUS METALS. THE GP IN THIS LINE OF BUSINESS NORMA LLY RANGES FROM 2 TO 5%. THE APPELLANT HAS ALREADY SHOWN A GP OF 2.92%. WITH THE ESTIMATE OF THE AO, THE GP SHOOTS UPTO 15.4% WHICH IS VERY HIGH, PRESUMING THAT THE APPELLANT HAS MADE THE PURCHASES FROM THE GREY MARKET, THE BENEFIT THAT THE APPELLANT WOUL D HAVE OBTAINED IS THE VAT AMOUNT WHICH IS 4%.* THEREFORE, IN ORDER TO MEET THE ENDS OF JUSTICE AND TO HAVE A REALISTIC PICTURE OF PROFIT, I FEEL, THE ADDITIONAL GP TO BE ESTIMATED SHOULD BE RESTRICTED TO 5% OF SUCH ALLEGED PURCHASES. THIS WOULD COVER UP E VASION ON ACCOUNT OF VAT AND ALSO ANY OTHER LEAKAGES TO REVENUE. THE APPELLANT GETS RELIEF OF THE BALANCE AMOUNT. 6. AGAINST THE ABOVE ORDER OF CIT(A), ASSESSEE IS IN FURTHER APPEAL BEFORE US. 7. WE HAVE GONE THROUGH THE FINDINGS GIVEN BY CIT(A) VIS - - VI S BY THE AO WITH REGARD TO THE PROFIT ESTIMATED ON THE BOGUS PURCHASES. THE AO HAS ESTIMATED THE SAME AT 12.5% AND THE CIT(A) AFTER CONSIDERING THE GP DECLARED BY THE ASSESSEE RESTRICTED THE SAME TO THE EXTENT OF 5%. NOTHING WAS PLACED ON RECORD SO AS TO P ERSUADE US TO DEVIATE FROM THE FINDINGS OF THE CIT(A). ACCORDINGLY, WE CONFIRM THE ACTION OF THE CIT(A). 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 03 / 10 /201 8 SD/ - ( SANDEEP GOS AIN ) SD/ - (R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 03 / 10 /201 8 KARUNA SR. PS ITA NO. 2449/MUM/2017 SHRI PRAVIN B KANUNGO 4 COPY OF THE ORDER FORWARDED TO : BY ORDER, ( ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MU MBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//