M/S.METAL TRADING CORPORATION, MUMBAI V. INCOME TAX OFFICER-19(2)(3), MUMBAI

ITA 2601/MUM/2018

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 1498 (ITAT-MUMBAI)
• Duration Of Justice: 7 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-11-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Appeal Filed On: 26-04-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAJESH KUMAR YADAV
• Assessee Lawyers: CHANDRA N PACH A URI
• Keywords: Bogus purchase; Question of law; Accommodation entries
• Section: 143(3); 133(6); 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES A, MUMBAI BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER AND SHRI MANOJ KUMAR AGGARWAL, ACCOUNTANT MEMBER ITA NOS.2600 & 2601/MUM/2018 ASSESSMENT YEARS : 2009-10 & 2012-13 M/S. METAL TRADING CORPORATION, OFFICE NO. 8, 1 ST FLOOR, 102 NARAYAN BUILDING, ARDESHIR DADY STREET, C TANK, MUMBAI [PAN : AAEFM 6045 K] VS. INCOME TAX OFFICER - 19(2)(3), MUMBAI ( APPELLANT ) (RESPONDENT) APPELLANT BY : SHRI CHANDRA N. PACH A URI, A R RESPONDENT BY : SHRI R AJESH KUMAR YAD A V , D R DATE OF HEARING : 2 6 - 11 - 201 8 DATE OF PRONOUNCEMENT : - 27 - 11 - 201 8 O R D E R PER MAHAVIR SINGH, JUDICIAL MEMBER: THESE TWO APPEALS WERE FILED BY THE ASSESSEE. THE APPEAL FOR THE AY 2009-10 IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-30, MUMBAI, IN APPEAL NO. CIT(A)-30/19(2)(3)/1066/2015-16, DATED 21-03-20 18. THE ASSESSMENT WAS FRAMED BY THE ITO-19(2)(3), MUMBAI U /S. 143(3) ITA NOS.2600 &2601/MUM/2018 2 READ WITH SECTION 147 OF THE INCOME TAX ACT, 1961 [ HEREIN AFTER REFERRED TO AS ACT] VIDE HIS ORDER DATED 27-03-20 15. THE APPEAL FOR THE AY 2012-13 IS DIRECTED AGAINST T HE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-6, MUMB AI, IN APPEAL NO. CIT(A)-6/IT-135/1067/2017-18, DATED 28-0 2-2018. THE ASSESSMENT WAS FRAMED BY THE ITO-19(2)(3), MUMB AI U/S. 143(3) OF THE ACT, VIDE HIS ORDER DATED 27-03-2015. 2. THE ONLY COMMON ISSUE IN THESE APPEALS OF ASSESS EE IS AS REGARDS TO THE ORDERS OF THE CIT(A), CONFIRMING THE ADDITION OF BOGUS PURCHASES IN THE AY 2009-10 AMOUNTING TO 16,68,409/- OUT OF TOTAL PURCHASES MADE BY ASSESSEE AMOUNTING T O 22,01,504/- AND IN AY 2012-13, CONFIRMING THE DISA LLOWANCE OF BOGUS PURCHASES BY APPLYING NET PROFIT RATE @12.5%. IN BOTH THE YEARS, THE FACTS AND CIRCUMSTANCES ARE EXACTLY IDEN TICAL AND HENCE, WE TAKE THE FACTS FROM AY 2009-10 AND DECIDE THE ISSUE. 3. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE-FIRM ENGAGED IN THE BUSINESS OF TRADING, IMPORTING, EXPORTING AND M ANUFACTURING IN FERROUS AND NON-FERROUS METAL. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO RECEIVED INFORMATION FROM DGIT (INV.), MUMBAI, WHO IN TURN RECEIVED INFORMATION FR OM SALES TAX ITA NOS.2600 &2601/MUM/2018 3 DEPARTMENT OF MAHARASHTRA GOVERNMENT ABOUT SOME OF THE DEALERS PROVIDING ACCOMMODATION ENTRIES BY ISSUING BOGUS SALE BILLS, WITHOUT SUPPLYING ANY GOODS. THE SALES TAX DEPARTMENT OF MAHARASHTRA GOVERNMENT HAS DISPLAYED A LIST OF SUCH DEALERS ON ITS WEBSITE AND ASSESSEE BEING ONE OF THE BENEFICIA RIES OF SUCH BOGUS BILLS FOR AY 2009-10 AMOUNTING TO 22,01,504/- AND FOR AY 2012-13 AMOUNTING TO 10,30,763/-. THE AO IN ORDER TO ASCERTAIN THE GENUINENESS OF PURCHASES SHOWN IN THE ACCOUNTS OF THE ASSESSEE, ISSUED NOTICES U/S. 133(6) OF THE ACT TO THE PARTIES BY REGISTERED POST BUT THE NOTICES RETURNED UN-SERV ED BY POSTAL AUTHORITIES WITH A REMARK LEFT OR NOT AVAILABLE ON THIS ADDRESS . ASSESSEE FAILED TO FILE THE VITAL DOCUMENTS SUCH AS DELIVERY CHALLANS, TRANSPORT RECEIPTS AND OCTOROI RECEIPTS E TC., AND ACCORDINGLY AO HELD THAT THE ASSESSEE IS UNABLE TO ESTABLISH THE GENUINENESS OF THE PURCHASES MADE. ACCORDINGLY, AO WAS OF THE VIEW THAT IN VIEW OF THE INFORMATION RECEIVED FROM DGIT(INV.), MUMBAI, WHO IN TURN RECEIVED INFORMATION FROM SALES TAX DEPARTMENT OF MAHARASHTRA GOVERNMENT THAT ASSESSEE BEING ONE OF THE BENEFICIARIES OF THE ACCOMMODATION ENTRIES P ROVIDED BY SOME OF THE MVAT DEALERS, WHO ARE INDULGING IN ISSU ING BOGUS BILLS/PURCHASE BILLS, THE AO ADDED THE ENTIRE BOGUS PURCHASES. ITA NOS.2600 &2601/MUM/2018 4 IN THE ASSESSMENT YEAR UNDER CONSIDERATION I.E., AY 2009-10, AO ADDED A SUM OF 16,68,409/- OUT OF THE TOTAL BOGUS PURCHASES OF 22,01,504/-. 3.1. BUT IN THE AY 2012-13, THE CIT(A) DIRECTED THE AO TO RESTRICT THE DISALLOWANCE @ 12.5% OF THE BOGUS PURC HASES. THE CIT(A) IN HIS ORDER VIDE PARA NOS. 12 AND 13 FOR TH E AY 2012-13, DIRECTED THE AO AS UNDER: 6.28 AS NARRATED EARLIER, THE AO IN THIS CASE HAS HELD THAT THE ALLEGED NON-GENUINE PARTIES FROM WHOM THE ASSESSEE HAS CLAI MED TO HAVE MADE PURCHASES, HAVE NOT SUPPLIED ANY MATERIAL TO T HE ASSESSEE. HOWEVER IT FS NOT THE CASE OF THE AO THAT THERE WAS NO PURCHASES MADE AL ALL AS IT HAS BEEN OBSERVED AND NOTED BY THE AO IN ME ASSESSMENT ORDER AT PARA 4.5 THAT THE ASSESSEE HAS SUBMITTED C HART SHOWING THE DETAILS OF PURCHASES OF THE ALLEGED PARTIES, QUANTI TATIVE TALLY IN RESPECT OF THE ENTIRE PURCHASES FROM SUCH PARTIES AND CORRE SPONDING SALES. UNDER SUCH CIRCUMSTANCES, IT IS CASE THAT THE ASSES SES INDULGED IN NON- GENUINE TRANSACTION AND INTENTION OF INDULGING IN S UCH ACTIVITY IS TO SUPPRESS THE TRUE PROFITS AND TO REDUCE THE TAX LIA BILITY. THEREFORE, AN ADDITION ON ACCOUNT OF A HIGHER MARGIN OF PROFIT IS FAIR AND EQUITABLE. IN THE DECISION OF HON'BLE GUJARAT HIGH COURT IN THE C ASE OF CIT VS. SIMIT SHETH 356 1TR 451 (GUJ) WHEREIN ALSO IT IS FOUND TH AT SOME OR THE ALLEGED SUPPLIERS OF STEEL TO THE ASSESSEE HAD NOT SUPPLIED ANY GOODS BUT HAD ONLY PROVIDED SALE BILLS AND HENCE, PURCHAS ES FROM THE SAID PARTIES WERE HELD TO BE BOGUS. THE AO IN THAT CASE ADDED THE ENTIRE AMOUNT OF PURCHASES TO GROSS PROFIT OF THE ASSESSEE . LD. CIT(A) HAVING FOUND THAT THE ASSESSEE HAD INDEED PURCHASED THOUGH NOT FROM NAMED PARTIES BUT OTHER PARTIES FROM GREY MARKET, PARTIAL LY SUSTAINED THE ADDITION AS PROBABLE PROFIT OF THE ASSESSEE. THE TR IBUNAL HOWEVER, SUSTAINED THE ADDITION TO THE EXTENT OF 12.5%. TAKI NG INTO ACCOUNT THE ABOVE FACTS, THE HON'BLE GUJARAT HIGH COURT HELD TH AT SINCE THE PURCHASES WERE NOT BOGUS, OUT WERE MADE FROM PARTIE S OTHER THAN THOSE MENTIONED IN BOOKS OF ACCOUNTS, ONLY THE PROF IT ELEMENT EMBEDDED IN SUCH PURCHASES COULD BE ADDED TO THE ASSESSEE'S INCOME AND CONCLUDED THAT NO QUESTION OF LAW AROSE IN SUCH EST IMATION. THE FACTS OF THE PRESENT CASE ARE EXACTLY SIMILAR TO THE ABOVE C ASE. THE APPELLANT MADE PURCHASES FROM THREE PARTIES WHO ARE SAID TO B E HAWALA ITA NOS.2600 &2601/MUM/2018 5 OPERATORS, WHO ARE INDULGED IN PROVIDING BOGUS BILL S WITHOUT SUPPLY OF ANY MATERIAL, HOWEVER ASSESSEE HAS SUBMITTED TO AO QUANTITATIVE DETAILS OF QUESTIONED PURCHASES AND LES, WHICH HAS NOT BEEN DISPUTED BY THE AO. UNDER THESE CIRCUMSTANCES, AS THE APPELL ANT COULD NOT PROVE HIS CLAIM OF PURCHASES DEBITED TO THE PROFIT & LOSS ACCOUNT, HERE IS NO OTHER WAY, BUT TO ESTIMATE THE PROFIT ELEMENT EMBED DED ON SUCH PURCHASES. UNDER SUCH FACTS AND CIRCUMSTANCES ADDI TION OF 100% OF SUCH BOGUS PURCHASES AS DONE BY THE AO IS NOT FOUND TO BE SUSTAINABLE AND AS THE FACTS OF THE PRESENT CASE ARE EXACTLY SI MILAR TO THE CITED CASE AND RESPECTFULLY FOLLOWING THE ABOVE CITED DECISION , THE PROFIT ELEMENT IS ESTIMATED @12.5% ON THE TOTAL BOGUS PURCHASES FROM THE THREE PARTIES AS MENTIONED IN THE ASSESSMENT ORDER. ACCORDINGLY, GROUND NO. 1 & 2 OF THE APPEAR ARE TREATED AS PARTLY ALLOWED. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A). 4. WE HAVE HEARD RIVAL CONTENTIONS AND GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. BEFORE US, LD. COUN SEL FOR THE ASSESSEE STATED THAT ASSESSEE HAS FILED DETAILS OF PURCHASES, SALES OF GOODS PROCURED FROM THE ABOVE PARTIES, INCLUDING COPIES OF INVOICES, ACCOUNTS OF THE RESPECTIVE SUPPLIERS EXPL AINING ALL THE PAYMENTS MADE TO THEM BY ACCOUNT PAYEE CHEQUES, QUA NTITATIVE RECORDS AND RELEVANT BANK STATEMENTS BEFORE THE AO AS WELL AS THE BEFORE THE CIT(A). ASSESSEE EXPLAINED WITH STO CK RECORDS THAT QUANTITATIVE PURCHASE FROM ALLEGED SUPPLIERS WERE S OLD TO VARIOUS PARTIES AND SALE PROCEEDS THEREAFTER WERE DULY ACCO UNTED FOR IN THE BOOKS OF ACCOUNT OF ASSESSEE. WE HAVE NOTICED THAT ASSESSEE IS UNABLE TO FILE THE VITAL DOCUMENTS SUCH AS DELIV ERY CHALLANS, TRANSPORT RECEIPTS AND OCTOROI RECEIPTS ETC. HENCE , WE ARE OF THE ITA NOS.2600 &2601/MUM/2018 6 VIEW THAT ASSESSEE MIGHT BE PURCHASED THE MATERIAL FROM GRAY MARKET AND PROCURED BILLS FOR THE SAME. ASSESSEE H AS PROCURED THE BILLS FROM HAWALA PARTIES AND SAVED VAT AND ALS O MADE PURCHASES AT A LOWER RATE. HENCE FOR THIS, SOME PR OFIT ELEMENT IS TO BE ATTRIBUTED. WE HAVE SEEN THAT IN SIMILAR CASE S, THE TRIBUNAL CONSISTENTLY TAKING THE VIEW AND HENCE WE ESTIMATE THE PROFIT RATE IN BOTH THE YEARS @8% OF THE BOGUS PURCHASES A ND DIRECT THE AO TO RE-COMPUTE THE INCOME ACCORDINGLY. 5. IN THE RESULT, BOTH THE APPEALS OF ASSESSEE ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 27 TH DAY OF NOVEMBER, 2018 SD/- SD/- (MANOJ KUMAR AGGARWAL) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI; DATED: 27 TH NOVEMBER, 2018 TNMM ITA NOS.2600 &2601/MUM/2018 7 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A),MUMBAI 4. THE CIT 5. DR, BENCH, ITAT, MUMBAI BY ORDER, #TRUE COPY # ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI