ITO WD 3(5), THANE V. SOMIT FORGINGS, THANE

ITA 257/MUM/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 0444 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-08-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2009-2010
• Appeal Filed On: 15-01-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V JENARDHANAN
• Keywords: Bogus purchase
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH K MUMBAI BEFORE SHRI MAHAVIR SINGH (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 257/MUM/2016 ASSESSMENT YEAR: 2009 - 10 & ITA NO. 255/MUM/2016 ASSESSMENT YEAR: 2010 - 11 & ITA NO. 256/MUM/2016 ASSESSMENT YEAR: 2011 - 12 ITO - 3(5), THANE ASHAR I.T. PARK, 6 TH FLOOR, B - WING, ROOM NO. - 5, ROAD NO. 16 - Z, WAGLE INDUSTRIAL ESTATE, THANE (W) - 400604 VS. M/S SOMIT FORGINGS FLAT NO. 22, VISHRAMGRIHA, U - 1, PLOT NO. 430, SECTOR 6, SHREE NAGAR, THANE (W) - 400604. PAN NO. AARFS6960N APPELLANT RESPONDENT REVENUE BY : SHRI V. JENARDHANAN, D R ASSESSEE BY : SHRI DEEPAK P. TIKEKAR& SHRIKANTH KULKARNI, A R DATE OF HEARING : 07/08 /2017 DATE OF PRONOUNCEMENT : 07/08/2017 ORDER PER N.K. PRADHAN, A.M THE CAPTIONED APPEALS FILED BY THE REVENUE ARE DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) - 2 , THANE AND ITA NO. 255, 256 & 257/MUM/2016 2 ARISE OUT OF THE ASSESSMENT COMPLETED U/S 143(3) R.W.S. 147 FOR AY 2009 - 10, AY 2010 - 11 & 2011 - 12 OF THE INCOME TAX ACT 1961 (THE ACT). AS COMMON ISSUES ARE INVOLVED, WE ARE PROCEEDING TO DISPOSE THEM OFF THROUGH A CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 2. THE GROUNDS OF APPEAL FILED BY THE REVENUE READ AS UNDER: - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, AND IN LAW, THE HON'BLE CI T(A) ERRED IN NOT FOLLOWING THE ORDER OF ITAT, PUNE IN ITA NO. 1411 - 1415 DATED 20.02.2015 IN THE CASE OF M/S. KOLTE PATIL DEVELOPERS LTD. WHEREIN 100% ADDITION OF BOGUS PURCHASES WAS CONFIRMED. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN N OT RELYING ON THE DECISION OF ALLAHABAD HIGH COURT IN THE CASE OF SRI GANESH RICE MILLS VS. CIT 294 ITR 316 (ALL) WHEREIN THE ENTIRE AMOUNT OF BOGUS PURCHASES WAS DISALLOWED AND UPHELD. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN GIVING RELIEF TO THE ASSESSEE TO THE EXTENT OF SUPPRESSED G.P. OUT OF TOTAL BOGUS PURCHASES EVEN THOUGH - I. THE ASSESSEE COULD NOT PRODUCE PRIMARY EVIDENCES LIKE OCTROI RECEIPTS, DELIVERY CHALLAN ETC. EVIDENCE TO PROVE THE GENUINENESS OF THE PURCHASE S BEFORE THE AO AND BEFORE CIT(A). II. THE AFFIDAVITS FILED BY THE ENTRY PROVIDERS BEFORE SALES TAX AUTHORITIES CANNOT BE IGNORED HAVING EVIDENTIARY VALUE. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER (AO) ON THE BASIS OF INFORMATIO N RECEIVED FROM THE SALES TAX DEPARTMENT, MAHARASHTRA FOUND THAT THE NAME OF THE ASSESSEE APPEARED IN THE LIST OF PERSONS WHO HAD OBTAINED BOGUS PURCHASE BILLS FROM THE ENTRY PROVIDERS. AS PER THE AO, THE BOGUS PURCHASE BILLS TAKEN BY THE ITA NO. 255, 256 & 257/MUM/2016 3 ASSESSEE AMOUNTED TO RS. 69,32,678 / - FOR AY 2009 - 10; RS.69,93,755/ - FOR AY 2010 - 11 AND RS.90,41,709/ - FOR AY 2011 - 12 . DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO ISSUED NOTICES TO THE CONCERNED SUPPLIERS. HOWEVER, HE DID NOT GET ANY REPLY FROM THEM. THEN HE ISSUED A SHOW CAUSE NOTICE TO THE ASSESSEE TO EXPLAIN WHY THE TRANSACTIONS WITH THE SAID PARTIES SHOULD NOT BE TREATED AS BOGUS. IN RESPONSE TO IT, THE ASSESSEE FILED A REPLY BEFORE THE AO STATING INTER ALIA THAT THE BANK ACCOUNT OF THE ASSESSEE BE VERIFIED TO K NOW THE MOVEMENT OF CHEQUES. 3.1 HOWEVER, THE AO WAS NOT CONVINCED WITH THE EXPLANATION OF T HE ASSESSEE FOR THE REASON THAT THE HAWALA OPERATORS HAVE SUBMITTED AFFIDAVITS TO THE SALES TAX AUTHORITIES STATING THAT THE PURCHASES WERE NOT GENUINE AND MATERIAL S WERE NOT ACTUALLY SUPPLIED. THEREFORE, THE AO MADE AN ADDITION OF RS.69,32,678/ - IN AY 2009 - 10; RS.69,93,755/ - IN AY 2010 - 11 AND RS.90,41,709/ - IN AY 2011 - 12. 4. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) OBSERVED THAT DURING THE COURSE OF APPELLATE PROCEEDINGS, THE LD. AR OF THE ASSESSEE EXPRESSED HIS INABILITY TO FILE THE COPIES OF CONFIRM ED LEDGER ACCOUNTS, CURRENT MAILING ADDRESS OF THE SAID PARTIES. HE ALSO EXPRESSED HIS INABILITY TO PRODUCE THE SAID PARTIES FOR EXAMINATION IN PERSON. IN VIEW OF THE ABOVE THE LD. CIT(A) HELD AS UNDER: AY 2009 - 10 DURING THE YEAR, THE APPELLANT HAD MADE THE TOTAL SALE OF RS.1,33,83,378/ - AGAINST THE TOTAL PURCHASES OF RS.1,18,06,965/ - . ITA NO. 255, 256 & 257/MUM/2016 4 OUT OF TOTAL PURCHASES O F RS.1,18,06,965/ - , THE HAWALA PURCHASES WERE O F RS.69,32,678/ - WHICH ACCOUNTS FOR 59% OF TOTAL PURCHASES. FROM THESE FACTS IT IS PROVED THAT FROM 41% OF THE ABOVE PURCHASES, THE ABOVE TURNOVER IS NOT POSSIBLE. KEEPING IN VIEW THESE FACTS, IN MY CONSIDERED OPINION, THE DISALLOWANCE OF 25% OF HAWALA PURCHASES I.E. RS.17,33,170/ - (25/100 X RS.69,32,678/ - ) WOULD BE REASONABLE AND WILL MEET END OF THE JUSTICE. IN THIS REGARD THE RELIANCE IS PLACED ON THE RATIOS LAID DOWN IN THE CASE OF VIJAY PROTEINS LTD. VS. A CIT 58 ITD 428 (A HD ), SANJAY OIL CAKE INDUSTRIES VS. CIT (2008) 316 ITR 274 (GUJ) ETC. AS ABOVE. ACCORDINGLY , THE DISALLOWANCE OF RS.17,33,170/ - OUT OF HAWALA PURCHASES OF RS.69,32,678/ - IS SUSTAINED AND REMAINING AMOUNT OF RS.51,99,508/ - IS HEREBY, DELETE D. THIS GROUND OF APPEAL IS DECIDED ACCORDINGLY. AY 2010 - 11 DURING THE YEAR, THE APPELLANT HAD MADE THE TOTAL SALE OF RS.1,35,25,279/ - AGAINST THE TOTAL PURCHASES OF RS.1,20,28,720/ - . OUT OF TOTAL PURCHASES OF RS.1,20,28,720/ - , THE HAWALA PURCHASES WERE OF RS.69,93,755/ - WHICH ACCOUNTS FOR 58% OF TOTAL PURCHASES. FROM THESE FACTS IT IS PROVED THAT FROM 42% OF THE ABOVE PURCHASES, THE ABOVE TURNOVER IS NOT POSSIBLE. KEEPING IN VIEW THESE FACTS, IN MY CONSIDERED OPINION, THE DISALLOWANCE OF 25% OF HAWALA PU RCHASES I.E. RS.17,48,440/ - (25/100 X RS.69,93,755/ - ) WOULD BE REASONABLE AND WILL MEET END OF THE JUSTICE. IN THIS REGARD THE RELIANCE IS PLACED ON THE RATIOS LAID DOWN IN THE CASE OF VIJAY PROTEINS LTD. VS. ACIT 58 ITD 428 (AHD), SANJAY OIL CAKE INDUSTRI ES VS. CIT (2008) 316 ITR 274 (GUJ) ETC. AS ABOVE. ACCORDINGLY , THE DISALLOWANCE OF RS.17,48,440/ - OUT OF HAWALA PURCHASES OF RS.69,93,755/ - IS SUSTAINED AND REMAINING AMOUNT OF RS.52,45,315/ - IS HEREBY, ITA NO. 255, 256 & 257/MUM/2016 5 DELETED. THIS GROUND OF APPEAL IS DECIDED ACCORDINGL Y. AY 2011 - 12 DURING THE YEAR, THE APPELLANT HAD MADE THE TOTAL SALE OF RS.3,24,01,224/ - AGAINST THE TOTAL PURCHASES OF RS.2,92,22,857/ - . OUT OF TOTAL PURCHASES OF RS.2,92,22,857/ - , THE HAWALA PURCHASES WERE OF RS.90,41,709/ - WHICH ACCOUNTS FOR 31% OF TO TAL PURCHASES. FROM THES E FACTS IT IS PROVED THAT FROM 69 % OF THE ABOVE PURCHASES, THE ABOVE TURNOVER IS NOT POSSIBLE. KEEPING IN VIEW THESE FACTS, IN MY CONSIDERED OPINION, THE DISALLOWANCE OF 25% OF HAWALA PURCHASES I.E. RS. 22,60,427 / - (25/100 X RS. 90,41 ,709 / - ) WOULD BE REASONABLE AND WILL MEET END OF THE JUSTICE. IN THIS REGARD THE RELIANCE IS PLACED ON THE RATIOS LAID DOWN IN THE CASE OF VIJAY PROTEINS LTD. VS. ACIT 58 ITD 428 (AHD), SANJAY OIL CAKE INDUSTRIES VS. CIT (2008) 316 ITR 274 (GUJ) ETC. AS AB OVE. ACCORDINGLY , THE DISALLOWANCE OF RS. 22,60,427 / - OUT OF HAWALA PURCHASES OF RS. 90,41,709 / - IS SUSTAINED AND REMAINING AMOUNT OF RS. 67,81,280 / - IS HEREBY, DELETED. THIS GROUND OF APPEAL IS DECIDED ACCORDINGLY. 5. BEFORE US, THE LD. DR SUBMITS THAT THE LD. CIT(A) SHOULD NOT HAVE RESTRICTED THE DISALLOWANCE TO 25% OF THE TOTAL PURCHASES BECAUSE THE ASSESSEE FAILED TO DISCHARGE THE ONUS OF PROVING THE GENUINENESS OF SUCH TRANSACTIONS. THE LD. DR THUS SUPPORTS THE ORDE R PASSED BY THE AO. 6. ON THE OTHER HAND, THE LD. COUNSEL OF THE ASSESSEE SUPPORTS THE ORDER PASSED BY THE LD. CIT(A). 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIALS ON RECORD. IN THE CASE OF CIT VS. SIMIT P. SHETH (2013) 38 ITA NO. 255, 256 & 257/MUM/2016 6 TA XMANN.COM (GUJ), THE HONBLE GUJARAT HIGH COURT HAS HELD THAT WHERE PURCHASES WERE NOT BOGUS BUT WERE MADE FROM PARTIES OTHER THAN THOSE MENTIONED IN THE BOOKS OF ACCOUNT, NOT ENTIRE PURCHASE PRICE BUT ONLY PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES CAN BE ADDED TO INCOME OF THE ASSESSEE. THE HONBLE HIGH COURT REFERRED TO A SIMILAR VIEW TAKEN IN THE CASE OF CIT VS. VIJAY M. MISTRY CONSTRUCTION LTD. [2013] 355 ITR 498 (GUJ) AND CIT VS. BHOLANATH POLY FAB (P) LTD. [2013] 355 ITR 290 (GUJ). WE FIND THAT THE LD . CIT(A) HAS RIGHTLY ESTIMATED THE PROFIT FOR THE IMPUGNED ASSESSMENT YEARS AS DELINEATED AT PARA 4 HERE - IN - ABOVE. 8. IN THE RESULT, THE APPEAL S ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 07/08/2017 SD/ - SD/ - (MAHAVIR SINGH) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED: 07/08/2017 RAHUL SHARMA, SR. P.S. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE . BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI