YOGI DYE CHEM INDUSTRIES, MUMBAI V. ITO 17(3)(5), MUMBAI

ITA 2626/MUM/2017

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 8375 (ITAT-MUMBAI)
• Duration Of Justice: 7 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-12-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2009-2010
• Appeal Filed On: 11-04-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: V JUSTIN
• Keywords: Bogus purchase; Opportunity of cross examination; Accommodation entries; Reassessment proceedings
• Section: 143(3); 133(6); 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E , MUMBAI BEFORE SHRI R C SHARMA , ACCOUNTANT MEMBER & SHRI SANDEEP GOSAIN , J UDICIAL M EMBER IT A NO. 2 626 / MUM/ 20 1 7 ASSESSMENT YEAR : 20 09 - 1 0 M/S. YOGI DYE CHEM INDUSTRIES C - 13, GROUND FLOOR, SATYAM COMPLEX, M G ROAD, GHATKOPAR (E) MUMBAI 400 077 PAN AAAFY2138H VS. ITO 17(3)(5) MUMBAI ( APPELLANT ) (RESPONDENT) ITA NO.2 5 26/MUM/2017 ASSESSMENT YEAR : 2009 - 10 ITO 27(3)(5) MUMBAI VS. M/S. YOGI DYE CHEM INDUSTRIES MUMBAI 400 077 PAN AAAFY2138H ( APPELLANT ) (RESPONDENT) APPELLANT BY : S HRI DEVENDRA JAIN RESPONDENT BY : SHRI V JUSTIN DATE OF HEARING : 07.09 .2017 DATE OF PRONOUNCEMENT : 06 . 1 2 .2017 O R D E R PER R C SHARMA, ACCOUNTANT MEMBER : TH E S E ARE CROSS - APPEAL S FILED BY R EVENUE AND THE ASSESSEE AGAINST THE ORDER OF CIT(A) - 25 , MUMBAI , DATED 24. 09 . 2015 , FOR A.Y.20 09 - 1 0 , IN THE MATTER OF ORDER PASSED U/S. 143(3) R.W.S 147 OF THE IT ACT. ITA NO . 2626 & 2526 /MUM/201 7 YOGI DYE CHEM INDUSTRIES 2 2. THE ASSESSEE HAS TAKEN FOLLOWING GROUNDS OF APPEAL : - 1.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER OF COMPLETING THE ASSESSMENT U/S. 143(3) WITHOUT PROVIDING ANY OPPORTUNITY OF CROSS EXAMINATION OF THE WITNESSES OR DOCUMENTS RELIED UPON B Y THE ASSESSING OFFICER AND THUS VIOLATING THE LAW LAID DOWN BY HONORABLE SUPREME COURT IN THE CASE OF KISHANCHAND CHELLARAM V. CIT (1980) 125 ITR 713 AND ANDAMAN TIMBER INDUSTRIES V. COMMISSIONER OF CENTRAL EXCISE (CIVIL APPEAL NO. 4228 OF2006.) 2. WITHO UT PREJUDICE TO THE ABOVE, IN THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN UPHOLDING THE REASSESSMENT PROCEEDINGS INITIATED U/S 147 ON VAGUE REASONS AND WITHOUT INDEPENDENT APPLICATION OF MIND ON THE INFORMATION RE CEIVED FROM DGIT(INVT). 3. WITHOUT PREJUDICE TO THE ABOVE, IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) - 25, MUMBAI HAS ERRED IN CONFIRMING THE SECOND REASSESSMENT PROCEEDING INITIATED BY ASSESSING OFFICER BY NOTICE U/S 148 DAT ED 28.03.2014 FOR THE SAME REASONS FOR WHICH THE ASSESSING OFFICER HAD ALREADY MADE FIRST REASSESSMENT U/S 147 BY ORDER DATED 11.03.2014 IN WHICH THE AMOUNT ALLEGED IN THE SECOND REASSESSMENT PROCEEDINGS HAS ALREADY BEEN ADDED BY HIM. 4. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT (A) ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER OF REJECTING BOOKS OF ACCOUNTS DULY AUDITED UNDER LAW, U/S 145(3) OF THE ACT ON WRONG FINDING OF FACT THAT THE APPELLANT HAS NOT MAINTAINED S TOCK REGISTER. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN CONFIRMING ADDITION AT THE RATE OF 25% OF THE ALLEGED PURCHASES BY WRONGLY RELYING ON THE DECISION OF GUJARAT HIGH COURT DISREGARDING THE FACT THAT IN THOSE CASES THERE WERE WITHDRAWALS BY BEARER CHEQUE FROM THE ACCOUNTS OF THE CREDITORS WHEREAS THERE IS NO SUCH FINDING IN THE APPELLANT'S CASE. 6. WITHOUT PREJUDICE TO THE ABOVE, IN THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE L EARNED CIT(A) HAS ERRED ITA NO . 2626 & 2526 /MUM/201 7 YOGI DYE CHEM INDUSTRIES 3 IN SUSTAINING ADDITION OF RS. 90,49,7121 - AT THE RATE OF 25% OF THE ALLEGED PURCHASES OF RS.3,61,98,712/ - MERELY ON SURMISES AND CONJECTURES RELYING UPON NON JURISDICTIONAL HIGH COURT DECISIONS AND DISREGARDING THE HONOURABLE JURISDI CTIONAL HIGH COURT DECISIONS IN THE CASE OF BABULAL C. BORANA V. THIRD ITO (2006) 282 ITR 251 (BOM) AND CIT V. NIKUNJ EXIMP ENTERPRISES (P) LTD., (2013) 216 TAXMAN 171 (BOM. AND VARIOUS OTHER MUMBAI TRIBUNAL DECISIONS. 3. THE REVENUE HAS RAISED THE FOLLO WING GROUNDS OF APPEAL: - 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) ERRED IN DIRECTING TO RESTRICT THE ADDITION OF RS. 36198849/ - MADE ON ACCOUNT OF ACCOMMODATION ENTRY TO 25% I.E. RS. 9049712/ - (RS . 36198849/ - X 25%) WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAD MERELY INFLATED THE PURCHASES BY OBTAINING ACCOMMODATION ENTRIES IN SHAPE OF PURCHASES AS BORNE OUT BY THE AO IN THE ORDER U/S 143 R.W.S. 147 DATED 23.03.2015. 2. THE APPELLANT PRAYS T HAT THE ORDER OF THE CIT (A) ON THE ABOVE GROUNDS BE REVERSED AND THAT OF THE ASSESSING OFFICER BE RESTORED. 3. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUNDS OR ADD A NEW GROUND WHICH MAY BE NECESSARY 4. WE HAVE HEARD THE RIVAL CONTENTIONS AND HAVE PERUSED THE RECORD ALONG WITH THE ORDERS OF THE AUTHORITIES BELOW. BRIEF FACTS OF THE ISSUE UNDER CONSIDERATION ARE THAT DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSEE FURNISHED THE DETAILS OF THE PURCHASES MADE DURING THE YEAR UNDER CONSI DERATION. IN ORDER TO VERIFY THE GENUINENESS OF THE PURCHASES MADE, THE NOTICES U/S 133(6) OF THE I. T. ACT WERE ISSUED TO FOLLOWING PARTIES, CALLING FOR INFORMATION SPECIFIED THEREIN. ITA NO . 2626 & 2526 /MUM/201 7 YOGI DYE CHEM INDUSTRIES 4 SR. NO. NAME OF THE SUPPLIERS AMOUNT (RS.) 1. J B INTERLINK 12,22,608 2. REVIKA TRADE IMPEX P LTD. 66,11,820 3. UNIVERSAL TRADING COMPANY 97,67,137 4 ANKIT ENTERPRISES 64,480 5. MINDTREE MERCANTILE CO. P LTD. 11,59,831 6 TRUEGOLD MECANTILE CO. P LTD. 23,22,315 7 P K TRADING CO. 76,950 8 SHRAVAN IMPEX P LTD. 43,836 9 SHREYAS MARKETING AGENCY 4,26,067 10 KRISHNA CHEMICAL WORKS 4,38,333 11 SHREE GANESH TRADING CO. 9,89,231 12 L P TRADERS 10,11,632 13 YASH ENTERPRISE 52,61,317 14 S P CORPORATION 68,03,292 TOTAL 3,61,98,849 HOWEVER, THE NOTICES HAVE BEEN RETURNED UNSERVED. THEREAFTER, THE ASSESSEE WAS ASKED TO PRODUCE THE PARTIES ALONG WITH THE COPIES OF LEDGER ACCOUNT OF THE ASSESSEE IN THEIR BOOKS, NATURE OF GOODS SOLD ALONG WITH SAMPLE COPIES OF BILLS ISSUED, COPY OF DELIVERY CHALLANS FOR GOODS DISPATCHED ALONG WITH TRANS PORT BILLS, COPY OF BANK STATEMENT SHOWING THE RELEVANT RECEIPTS AND ITA NO . 2626 & 2526 /MUM/201 7 YOGI DYE CHEM INDUSTRIES 5 PAYMENT OF OUTSTANDING RECEIVED AFTER THE END OF THE YEAR. THE ASSESSEE WAS ASKED TO SHOW CAUSE AS TO WHY PURCHASES MADE FROM THE ABOVE PARTIES AMOUNTING TO ` 3,61,98,849/ - SHOULD NOT BE TREATED AS BOGUS PURCHASE IN CASE SINCE HE IS NOT ABLE TO PRODUCE THE PARTIES FOR VERIFICATION. IN RESPONSE, THE ASSESSEE FURNISHED LEDGER EXTRACTS OF ALL THE PARTIES THEREBY STATING THAT THE PAYMENTS TO THESE PARTIES HAVE BEEN MADE THROUGH ACCOUNT PAYEE C HEQUES ONLY. COPIES OF BILLS ETC. WERE ALSO FILED, HOWEVER, THE ASSESSEE DID NOT PRODUCE THE ABOVE SAID PARTIES TO ESTABLISH THEIR VERACITY. IN VIEW OF THE SE DISCUSSION S THE ASSESSING OFFICER ADDED ENTIRE AMOUNT OF PURCHASES TO ASSESSEES INCOME. 5. BY THE IMPUGNED ORDER, THE CIT(A) RESTRICTED THE ADDITION TO THE EXTENT OF 25% OF THE SAID PURCHASES AFTER OBSERVING AS UNDER: G. IN VIEW OF THE FACTS AND CIRCUMSTANCES AND THE JUDICIAL PRONOUNCEMENTS CITED AB OVE, WHAT CAN BE DISALLOWED OR TAXED IN THE INSTANT CASE, IS THE EXCESS PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES SHOWN TO HAVE BEEN MADE FROM THE FOURTEEN PARTIES MENTIONED ABOVE. IN THIS REGARD, THE YARDSTICK LAID DOWN BY THE HON'BLE AHMADABAD TRIBUNAL IN THE CASE OF M/S VIJAY PROTEIN PVT. LTD. (SUPRA), A S APPROVED BY THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF SIMIT P. SHETH (SUPRA) BY DISALLOWING 25% OF PURCHASES AS THE BENEFIT GARNERED IN SUCH UNVERIFIABLE PURCHASES WHERE SALES ARE NOT DISAPPROVED, IS A SOUND BENCHMARK THAT IS BEING ADOPTED IN THE PRE SENT CASE TOO. H. THEREFORE IN THE INSTANT CASE, IT IS FOUND THAT ALL THE FACTS AND CIRCUMSTANCES OUTLINED ABOVE LEAD TO THE CONCLUSION THAT ALTHOUGH THE PURCHASES MADE BY THE APPELLANT FROM THE PARTIES MENTIONED ABOVE DURING THE YEAR UNDER CONSIDERATION CANNOT BE ITA NO . 2626 & 2526 /MUM/201 7 YOGI DYE CHEM INDUSTRIES 6 SUMMARILY REJECTED BUT AT THE SAME TIME IT IS DIFFICULT TO ACCEPT THAT THE PURCHASES SHOWN ON THE INVOICES/BILLS ISSUED BY THESE PARTIES ARE AS PER THE PREVAILING MARKET PRICE OF THOSE MATERIALS OR ACTUALLY BEEN MADE FROM SUCH PARTIES AND MIGHT H AVE BEEN PURCHASED IN THE GREY MARKET. THE APPELLANT HAS NOT PLACED ANY EVIDENCE ON RECORD THAT THE GOODS WERE PURCHASED FROM THE ABOVE PARTIES AT ARMS' LENGTH PRICE. THE APPELLANT HAS ALSO NOT PLACED ON RECORD ANY COMPARABLE BILLS/INVOICES FOR PURCHASES O F SIMILAR ITEMS MADE FROM OTHER PARTIES TO ESTABLISH THAT THE PURCHASES FROM THE ABOVE PARTIES IN QUESTION WERE AT PAR WITH THE PURCHASES MADE FROM OTHER PARTIES DURING THE PERIOD UNDER CONSIDERATION. THE POSSIBILITY OF SUCH PURCHASES FROM UNREGISTERED DEA LERS WITHOUT INVOICES CANNOT BE RULED OUT. IN VIEW OF THE ABOVE, THE CORRECTNESS OF THE PURCHASE PRICES MENTIONED ON SUCH BILLS/INVOICES ISSUED BY THE ABOVE PARTIES IN QUESTION CANNOT BE ACCEPTED AND SOME ADDITIONAL PROFIT NEEDS TO BE ESTIMATED ON SUCH PUR CHASES MADE FROM THE ABOVE FOURTEEN PARTIES IN QUESTION. AS STATED ABOVE, FOLLOWING THE GUIDELINES LAID DOWN IN THE CASE OF VIJAY PROTEIN P. LTD.(SUPRA), DISALLOWANCE OF 25% ON SUCH ALLEGED BOGUS PURCHASES OF RS. 3,61,98,849/ - | I.E. RS. 90,49,712/ - IS]CONFI RMED. WHICH NEEDS TO BE ADDED TO THE TOTAL INCOME OF THE ASSESSEE ON ACCOUNT OF ALLEGED BOGUS PURCHASES A/TA THE BALANCE ADDITION OF RS. 2,71,49,137/ - IS HEREBY DELETED. HENCE, THIS GROUND OF APPEAL IS PARTLY ALLOWED. 6. AGAINST THE ABOVE ORDER OF THE CIT( A), BOTH THE ASSESSEE AND THE REVENUE ARE IN FURTHER APPEAL BEFORE US. 7. RIVAL CONTENTIONS HAVE BEEN CONSIDERED AND RECORD PERUSED. IT WAS ARGUED BY THE LEARNED AR THAT ASSESSEE HAS DULY MAINTAINED STOCK REGISTER AND HAD SHOWN BETTER GROSS PROFIT OF 8. 18% AS COMPARED TO THE G.P. RATE IN EARLIER YEAR WHICH WAS 8%. ACCORDINGLY, IT WAS CONTENDED THAT ESTIMATION OF EXTRA PROFIT @25% WAS NOT REASONABLE. ON THE OTHER HAND, THE CONTENTION OF THE LEARNED DR WAS THAT ASSESSEE COULD NOT PRODUCE SUPPLIERS WHICH CLEARLY ESTABLISH ES THAT HE HAS MADE BOGUS PURCHASES TO REDUCE THE PROFIT, ITA NO . 2626 & 2526 /MUM/201 7 YOGI DYE CHEM INDUSTRIES 7 ACCORDINGLY, IT WAS PRAYED THAT ENTIRE PURCHASES SHOULD BE ADDED IN THE ASSESSEES INCOME. 8. WE HAVE GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND FOUND THAT AFTER CONSIDERING VARIOUS EVID ENCE PLACED ON RECORD, THE CIT(A) HAS UPHELD THE ADDITION TO THE EXTENT OF 25% OF BOGUS PURCHASES. THE CIT(A) HAS ALSO RELIED ON CERTAIN JUDICIAL PRONOUNCEMENTS. CONSIDERING THE FACT THAT DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAS DECLARED BETT ER PROFIT @8.18%, WHICH IS BETTER THAN THE PROFIT DECLARED IN THE EARLIER YEAR WHEN THERE WERE NO BOGUS PURCHASES, WE DEEM IT APPROPRIATE TO MODIFY BOTH THE ORDERS OF THE AUTHORITIES BELOW. ACCORDINGLY, KEEPING IN VIEW THE TOTALITY OF FACTS AND CIRCUMSTAN CES OF THE CASE, WE DIRECT THE ASSESSING OFFICER TO UPHOLD THE ADDITION TO THE EXTENT OF 12.5% OF THE BOGUS PURCHASES. WE DIRECT ACCORDINGLY. 9. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED AND THAT OF THE ASSESSEE IS ALLOWED IN PART. ORDER P RONOUNCED IN THE OPEN COURT ON D AY OF 6 TH DECEMB ER , 2017 . SD/ - SD/ - ( SANDEEP GOSAIN ) ( R C SHARMA ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI; DATED: 6 TH DECEMB ER , 2017 SA ITA NO . 2626 & 2526 /MUM/201 7 YOGI DYE CHEM INDUSTRIES 8 COPY OF THE ORDER FORWARDED TO : 1. THE APP ELL ANT. 2. THE RESPONDENT. 3. T HE CIT(A), MUMBAI 4. THE CIT 5. DR, E BENCH, ITAT, MUMBAI BY ORDER, #TRUE COPY # ASSISTANT REGISTRAR I NCOME T AX A PPELLATE T RIBUNAL , MUMBAI