PCK METALS P.LTD, MUMBAI V. DCIT CEN CIR 13, MUMBAI

ITA 259/MUM/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 9110 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-01-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 09-01-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ANUKRISHAN AGGARWAL
• Keywords: Bogus purchase; Onus to prove
• Section: 143(3); 68

Judgement Text

, TS TSTS TS INCOME TAX APPELLATE TRIBUNAL,MUMBAI - J BENCH , IOU IOUIOU IOU , BEFORE S/SH. RAJENDRA, ACCOUNTANT MEMBER & PAWAN SINGH, JUDICIAL MEMBER /.ITA NO.259/MUM/2015, /ASSESSMENT YEAR-2010-11 M/S. PCK METALS PVT. LTD. SHOP NO.1, KUSHAL BHAVAN, 65, 5 TH KUMBHARWADA, MUMBAI-400004 PAN: AADCP8553Q VS. DCIT, CC-13, MUMBAI. ( / APPELLANT) ( / RESPONDENT) ! / ASSESSEE BY : SHRI NARESH KUMAR / REVENUE BY : MS. ANUKRISHAN AGGARWAL ' / DATE OF HEARING : 02 -01-2017 ! '( / DATE OF PRONOUNCEMENT : 06 -01-2017 , 1961 ' 254(1) #$ ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER PAWAN SINGH, J.M. IOU IOUIOU IOU : 1. THE PRESENT APPEAL IS FILED BY ASSESSEE U/S 53 OF T HE INCOME-TAX ACT AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME-TAX (APPEALS)-37, MUMBAI (FO R SHORT THE CIT(A) DATED 03.11.2014 FOR ASSESSMENT YEAR(AY) 2010-11. THE ASSESSEE HAS R AISED THE FOLLOWING GROUNDS OF APPEAL: 1. THE HON'BLE COMMISSIONER OF INCOME TAX (APPEAL) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF RS.24,27,251/ - MADE BY THE LEARNED ASSESSING OFFICER OF TREATING PURCHASES MADE BY THE APPELLANT COMPANY AS BOGUS PU RCHASES WITHOUT CONSIDERING THE FACTS OF THE CASE. IT IS SUBMITTED THAT A. O. HAS MADE SUCH DISALLOWAN CE ON THE BASIS OF SUSPICIOUS LIST ISSUED BY THE SALES TAX DEPARTMENT OF THE ENTITIES WHO ARE ENGAGED IN PROVIDING BOGUS ENTRIES OR HAWALA ENTRIES AND NOT BASED ON ANY INDE PENDENT ENQUIRIES. IT IS SUBMITTED THAT SINCE CONFIRMATIONS WITH PAN NO. ETC. HAVE BEE N SUBMITTED HENCE, IN ABSENCE OF ANY INDEPENDENT ENQUIRY, THE SAME CANNOT BE TREATED AS NON-GENUINE. WITHOUT PREJUDICE , WE WOULD LIKE TO STATE THAT APPELLANT IS TRADING IN GOODS AND IN VIEW OF THE SAME, IF SUCH PURCHASES ARE TREATED AS NON-GENUINE THEN THE CORRESPONDING SALES SHOULD ALSO BE CONSIDERED AS NON-GENUINE IN C ASE OF GOODS ARE SOLD AND IN CASE OF GOODS LYING IN STOCK, CLOSING STOCK SHOULD ALSO BE REDUCED TO THE SAID EXTENT. IN VIEW OF THE ABOVE, IT IS PRAYED THAT NECESSARY DIRECTION SHOULD BE GIVEN IN THIS REGARD. 2. THE HON'BLE COMMISSIONER OF INCOME TAX (APPEAL) HAS ERRED IN CONFIRMING THE ADDITION MADE BY LEARNED ASSESSING OFFICER ON ACCOU NT OF ADVANCES RECEIVED FROM THE PARTIES BY INVOKING SECTION 68 OF THE INCOME TAX AC T, 1961 OF RS.8,60,000/-. FURTHER THE LEARNED ASSESSING OFFICER HAS FAILED TO PROVE THAT THE SAID ADVANCES RECEIVED TRANSACTIONS ARE NOT GENUINE IN THE ASSESS MENT ORDER PASSED U/ S. 143(3) OF THE INCOME TAX ACT, 1961 AND ALSO HAS NOT PROVIDED ANY PROPER FACTS ON WHICH THE SAME ARE ADDED TO THE INCOME OF THE APPELLANT COMPA NY. THE LEARNED ASSESSING OFFICER HAS MADE SUCH ADDITION ON THE BASIS OF THE PRE DETE RMINED MIND RATHER THAN MAKING 2 ITA NO. 259/M/2015 M/S PCK METALS PVT. LTD. INDEPENDENT ENQUIRY FOR THE FACTS OF THE CASE. THER EFORE, THE SAID ORDER SHOULD BE SQUASHED AND ADDITION MADE OF RS.8,60,000/ - SHOULD BE DELETED. ACCORDINGLY, THE NECESSARY DIRECTION SHOULD BE GIVEN IN THIS REGARD. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE-C OMPANY FILED ITS RETURN OF INCOME FOR RELEVANT AY ON 26.09.2010 DECLARING TOTAL INCOME AT RS. 3,33,982/-. THE ASSESSMENT WAS COMPLETED ON 26.03.2013 U/S 143(3) OF THE INCOME T AX ACT, 1962 (FOR SHORT THE ACT). IN THE ORDER OF ASSESSMENT, THE ASSESSING OFFICER (AO) MADE THE DISALLOWANCE OF RS. 24,72,251/- ON ACCOUNT OF BOGUS PURCHASES AND FURTH ER MADE AN ADDITION OF RS. 8,60,000/- U/S 68 OF THE ACT. ON APPEAL BEFORE THE LD. CIT(A) BOTH THE ADDITION/DISALLOWANCE WAS CONFIRMED. THUS, FURTHER AGGRIEVED BY THE ORDER OF LD. CIT(A), THE ASSESSEE HAS FILED THE PRESENT APPEAL BEFORE US. 3. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVE (AR ) OF ASSESSEE AND LD. DEPARTMENTAL REPRESENTATIVE (DR) FOR REVENUE AND PERUSED THE MAT ERIAL AVAILABLE ON RECORD. FIRST GROUND OF APPEAL RELATES TO THE DISALLOWANCE ON ACCOUNT OF ALLEGED BOGUS PURCHASES. THE LD. AR OF THE ASSESSEE ARGUED THAT THE AO WITHOUT APPRECIATIN G THE FACT MADE AN ADDITION OF AGGREGATE AMOUNT OF PURCHASES FROM THREE PARTIES I.E. (1) SHA KTI STEEL CORPORATION OF RS. 5,44,516/- (2) KONIKA STEEL INDIA OF RS. 13,12,635/- AND (3) H ARSH METAL CORPORATION OF RS. 5,69,100/- . THE AO CALLED THE DETAILS OF THOSE PARTIES ONLY O N 30.03.2013 WHICH WAS MUCH CLOSED TO THE TIME LIMIT FOR COMPLETING THE ASSESSMENT FOR AY 2010-11. IT WAS FURTHER ARGUED THAT THE ASSESSEE MADE THE GENUINE PURCHASE AND COPY OF CONF IRMATION ALONG WITH ADDRESS, PAN NUMBER AND PURCHASE BILL WERE FURNISHED TO THE AO. THE AO RELIED UPON THE INFORMATION OF SALE TAX DEPARTMENT, WHEREIN THE LOSS OF CERTAIN HA WALA DEALERS WAS APPEARED. THE AO HAS NOT MADE ANY INVESTIGATION WITH REGARD TO THE PURCH ASE FROM THE SAID PARTIES BEFORE TREATING THE SAME AS BOGUS PURCHASE. THE LD. AR OF THE ASSES SEE FURTHER RELIED UPON THE DECISION OF HONBLE BOMBAY HIGH COURT IN CASE OF CIT VS. NIKUNJ EXIMP (372 ITR 619 (BOM), DECISIONS OF BOMBAY TRIBUNAL IN CASE OF DCIT VS. SI VSHANKAR R. SHARMA IN ITA NO. 5149/MUM/2014 DATED 16.09.2016, IN M/S VISION VS. A CIT IN ITA NO. 8501/MUM/2010 DATED 13.04.2016, SHRI ASHWIN PURSHOTAM BAJAJ VS. I TO IN ITA NO. 4736/MUM/2014. ON THE OTHER HAND, LD. DR FOR THE REVENUE SUPPORTED TH E ORDER OF AUTHORITIES BELOW. 4. WE HAVE CONSIDERED THE RIVAL CONTENTION OF THE PART IES AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW, THE AO DURING THE ASSESSMENT PRO CEEDING OBSERVED THAT ASSESSEE MADE THE PURCHASES FROM M/S SHAKTI STEEL CORPORATION, MA NISH STEEL CORPORATION, KONIKA STEEL INDIA AND HARSH METAL CORPORATION. THE AO ISSUED NO TICE TO ALL PARTIES U/S 136(6) OF THE ACT. THE NOTICE SENT TO THE PARTIES WAS RETURNED BA CK. THE ASSESSEE WAS ASKED TO PRODUCE THE 3 ITA NO. 259/M/2015 M/S PCK METALS PVT. LTD. PARTIES FOR VERIFICATION. THE ASSESSEE INSTEAD OF P RODUCING THE PARTIES FILED THE CONFIRMATION, PURCHASE INVOICE AND CORRESPONDING SALES INVOICE IN RESPECT OF M/S SHAKTI STEEL CORPORATION, MANISH STEEL CORPORATION, KONIKA STEEL INDIA. NO CONFIRMATION WAS FILED IN RESPECT OF PURCHASES FROM HARSH METAL CORPORATION. THE ASSESSEE WAS ASKED TO PRODUCE COPY OF INWARD REGISTER AND OUTWARD REGISTER, DELIV ERY CHALLAN, GODOWN DETAILS AND COPY OF LORRY RECEIPT, THEIR LEDGER ACCOUNT, AND STOCK MOVE MENT REGISTER TO WHOM THE STOCK HAS BEEN SOLD. THE ASSESSEE HAS NOT BEEN ABLE TO SUBMIT THE DETAILS CALLED FOR AND NOT SUBMITTED ANY EXPLANATION FOR NON-SUBMISSION OF THE DETAILS OF TH E PARTIES FROM WHOM THE ASSESSEE HAS MADE THE PURCHASES ARE MENTIONED IN THE LIST OF HAW ALA OPERATORS, WHO ARE ENGAGED IN PROVIDING BOOKS ENTRIES IN THE RECORD OF SALE TAX D EPARTMENT, GOVERNMENT OF MAHARASHTRA. THUS, THE PURCHASES MADE FROM THESE PARTIES ARE NOT GENUINE. THE AO FURTHER HELD THAT THE ASSESSEES FIRM IS CLEARLY COVERED BY THE PROVISION S OF SECTION 145(3) AND REJECTED THE BOOKS OF ACCOUNT, THE ASSESSEE-FIRM WAS ESTIMATED AT RS. 6.21% AND DISALLOWED A BOGUS PURCHASES OF RS. 24,27,251/- (WHICH THE AGGREGATE AMOUNT OF P URCHASES OF THREE PARTIES I.E. SHAKTI STEEL CORPORATION, MANISH STEEL CORPORATION, KONIKA STEEL INDIA). THE LD. CIT(A) CONFIRMED THE ADDITION HOLDING THAT IN ABSENCE OF A DEQUATE DETAILS, IT CANNOT BE ACCEPTED THAT THE SALE EFFECT IS THE SAME AS THE ALLEGED ITEM COV ERED BY BOGUS PURCHASES AND CONFIRMED THE ADDITION ON ACCOUNT OF BOGUS PURCHASES HOLDING THAT TURNOVER OF RS. 9,70,000/-, THE GROSS PROFIT(GP) IS ONLY 6.21% AND THE NET PROFIT (NP) IS 2.89% WHICH IS REASONABLE IN THE LINE OF BUSINESS OF ASSESSEE. 5. WE HAVE NOTED THAT LD. CIT(A) HAS VIRTUALLY CONFIRM ED THE ENTIRE ALLEGED BOGUS PURCHASES FROM THREE PARTIES INSTEAD OF EXAMINING THE ESTIMAT ED GP OF ASSESSEES FIRM. THE AO MADE THE ADDITION ON THE BASIS OF INFORMATION OF THREE P ARTIES WITHOUT BRINGING ON RECORD ANY COGENT MATERIAL AGAINST THE ASSESSEE, NO FINDING WA S GIVEN ON THE DOCUMENTARY EVIDENCE FURNISHED BY ASSESSEE IN RESPECT OF M/S SHAKTI STEE L CORPORATION, MANISH STEEL CORPORATION, KONIKA STEEL INDIA. WE ARE OF THE CONSIDERED OPINIO N THAT UNDER INCOME TAX ACT ONLY REAL INCOME CAN BE TAXED BY THE REVENUE. WE MAY FURTHER CONCLUDE THAT EVEN IF THE TRANSACTION IS NOT VERIFIABLE, THE ONLY TAXABLE IS THE TAXABLE INCOME COMPONENT AND NOT THE ENTIRE TRANSACTION. THUS, AFTER CONSIDERING THE FACTS OF T HE CASE AND THE RIVAL CONTENTIONS OF THE PARTIES WE ARE OF THE OPINION THAT IN ORDER TO FULF ILL THE GAP OF REVENUE LEAKAGE THE DISALLOWANCE OF REASONABLE PERCENTAGE OF SUCH PURCH ASES WOULD MEET THE END OF JUSTICE. HENCE, WE DIRECT THE AO TO RESTRICT THE ADDITIONS T O 12% OF THE TOTAL IMPUGNED (DISPUTED) PURCHASES. WITH THESE OBSERVATIONS, THIS GROUND OF APPEAL IS PARTLY ALLOWED. 6. GROUND NO.2 RELATES TO THE ADDITION OF RS. 8,60,000 /- U/S 68 OF THE ACT. THE LD. AR OF THE 4 ITA NO. 259/M/2015 M/S PCK METALS PVT. LTD. ASSESSEE ARGUED THAT THE AO MADE THE ADDITION WITHO UT MAKING INDEPENDENT ENQUIRY, THE AO CALLED THE DETAILS FROM THE PARTIES AT THE TIME WHI CH WAS MUCH CLOSED TO THE TIME BARRING LIMIT OF SCRUTINY ASSESSMENT. THE ASSESSEE FURNISHE D THE DETAILS ON 21.03.2013 AND SUPPLIED THE NAME AND ADDRESS OF THE PARTIES AND ASKED TO SE ND THE NOTICE TO THE PARTIES FOR THEIR CONFIRMATION, THE AO NOT ISSUED ANY NOTICE TO THE P ARTIES. THE ADDITION WAS MADE ON THE BASIS OF PRE-DETERMINED MIND. THE LD. AR OF THE ASS ESSEE RELIED UPON THE DECISION OF HONBLE APEX COURT IN CIT VS. ORISSA CORPORATION PV T. LTD. (159 ITR 78 (SC) AND FURTHER ON THE DECISION OF GUJARAT HIGH COURT IN DCIT VS. R OHINI BUILDERS (256 ITR 0360). ON THE OTHER HAND, LD. DR FOR THE REVENUE SUPPORTED THE OR DER OF AUTHORITIES BELOW. 7. WE HAVE CONSIDERED THE RIVAL CONTENTION OF THE PART IES AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THE AO WHILE FRAMING THE ASSESSM ENT OBSERVED THAT ASSESSEE RECEIVED ADVANCE FROM CUSTOMER NAMELY M/S SIDDHESH ENTERPRIS ES OF RS. 2,00,000/- AND M/S S.J. ENTERPRISES OF RS. 6,60,000/-. THE ASSESSEE WAS AS KED TO FURNISH DOCUMENT IN SUPPORT OF THE IDENTITY OF CREDITOR, CREDITWORTHINESS AND GENUINEN ESS OF TRANSACTION. THE ASSESSEE FURNISHED ITS REPLY DATED 31.03.2012 AND FURNISHED THE PAN NU MBER OF BOTH THE PARTIES FOR THEIR CONFIRMATION. THE AO NOT ACCEPTED THE CONTENTION OF THE ASSESSEE HOLDING THAT ASSESSEE HAS NOT FURNISHED THE CONFIRMATION IN RESPECT OF BOTH T HE PARTIES HOLDING THAT ONUS IS ON THE ASSESSEE TO PROVE THE ADVANCES RECEIVED ARE GENUINE IN NATURE AND CONCLUDED THAT THE ASSESSEE HAS FAILED TO DISCHARGE THE ONUS TO PROVE THE GENUINENESS OF TRANSACTION AND MADE ADDITION U/S 68 OF THE ACT. OF RS. 8,60,000/-. IN A PPEAL BEFORE LD CIT(A) IT WAS SUBMITTED THAT AO HAS FAILED TO PROVE THAT THE CREDIT OF THOS E TWO PARTIES ARE NOT GENUINE. THE LD. CIT(A) WHILE CONSIDERING THE SUBMISSION CONFIRMED T HE ADDITION HOLDING THAT THE ONUS WAS ON THE ASSESSEE AND THE ASSESSEE NOT DISCHARGED HIS ONUS. WE HAVE SEEN THAT THE ASSESSEE HAS NOT FILED ANY DOCUMENTARY EVIDENCES EVEN BEFORE US TO SUBSTANTIATE ITS CONTENTION, EXCEPT ARGUING THAT THE NAME, ADDRESS AND PAN WAS P ROVIDED TO THE AO. CONSIDERING THE FACT AND CONTENTION OF THE LD AR OF THE ASSESSEE THIS GROUND OF APPEAL IS RESTORED TO THE FILE OF AO TO CONSIDER IT AFRESH AND PASS APPROPRIATE I N ACCORDANCE WITH LAW. NEEDLESS, TO SAY THAT THE AO SHALL PROVIDE ADEQUATE OPPORTUNITY TO T HE ASSESSEE BEFORE PASSING THE ORDER. THUS THIS GROUND OF APPEAL IS ALLOWED FOR STATICAL PURPOSE. AS A RESULT, APPEAL FILED BY THE ASSESSEE IS P ARTLY ALLOWED. *'+ ,-' . / ! 01 VAKR% 2 ! ' 3 . ORDER PRONOUNCED IN THE OPEN COURT ON 6 TH JANUARY,2017. 5 ! 6 7 6 ( , 201 7 ! 01 ; 5 ITA NO. 259/M/2015 M/S PCK METALS PVT. LTD. SD/- SD/- ( / RAJENDRA ( IOU IOUIOU IOU / PAWAN SINGH)) ( / ACCOUNTANT MEMBER # ( / JUDICIAL MEMBER 1 /MUMBAI, 7 /DATE: 06.01.2017 SK ' )*+ ,+ / COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ ., ( <' , 4. THE CONCERNED CIT / ., <' 5. DR J BENCH, ITAT, MUMBAI / =>0 '?, TS TSTS TS , . . . 1 6. GUARD FILE/ 0 *1 =' ' //TRUE COPY// 5 / BY ORDER, / DY./ASST. REGISTRAR ( ?, , 1 /ITAT, MUMBAI