M/S UNITED STEELS, MUMBAI V. ITO 20 (3) (5), MUMBAI

ITA 2747/MUM/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 5780 (ITAT-MUMBAI)
• Duration Of Justice: 8 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-01-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 03-05-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S K MITRA
• Assessee Lawyers: VIJAY GAJARIA
• Keywords: Corroborative evidences
• Section: 133(6); 143(1); 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY , JUDICIAL MEMBER ITA NO. 2747 / MUM . /2018 ( ASSESSMENT YEAR : 20 09 10 ) UNITED STEELS VASANT CHAMBERS 4 TH FLOOR, KIND CIRCLE MUMBAI 400 037 PAN AAAFU0444J . APPELLANT V/S INCOME TAX OFFICER WARD 2 0(3) ( 5 ), MUMBAI . RESPONDENT ITA NO. 2748 /MUM. /2018 ( ASSESSMENT YEAR : 20 10 11 ) UNITED STEELS VASANT CHAMBERS 4 TH FLOOR, KIND CIRCLE MUMBAI 400 037 PAN AAAFU0444J . APPELLANT V/S INCOME TAX OFFICER WARD 20(3) ( 5 ), MUMBAI . RESPONDENT 2 UNITED STEELS ITA NO. 2749 /MUM. /2018 ( ASSESSMENT YEAR : 20 11 12 ) UNITED STEELS VASANT CHAMBERS 4 TH FLOOR, KIND CIRCLE MUMBAI 400 037 PAN AAAFU0444J . APPELLANT V/S INCOME TAX OFFICER WARD 20(3) ( 5 ), MUMBAI . RESPONDENT ASSESSEEBY : SHRI VIJAY GAJARIA REVENUE BY : SHRI S.K. MITRA DATE OF HEARING 11 . 1 2 .201 8 DATE OF ORDER 30.01.2019 O R D E R THE AFORESAID APPEALS BY THE SAME ASSESSEE ARE AGAINST THREE SEPARATE ORDERS , ALL DATED 25 TH JANUARY 2018, PASSED BY THE LEARNED COMMISSIONER (APPEALS) 32, MUMBAI, PERTAINING TO THE ASSESSMENT YEARS 2009 10, 2010 11 AND 2011 12. 2 . THE FIRST COMMON ISSUE ARISING IN ALL THESE APPEALS RELATES TO ADDITION MADE ON ACCOUNT OF NON GENUINE PURCHASES. 3 . BRIEF FACTS ARE, THE ASSESSEE , A PARTNERSHIP FIRM , IS ENGAGED IN MANUFACTURING AND SALE OF IRON AND STEEL GOODS SUCH AS M.S. AND S.S. FORGED IVR AND NON IVR FLANGES AND SITE GLOW INDICATOR. FOR THE ASSESSMENT YEARS UNDER DISPUTE THE ASSESSEE HAD FILED ITS RETURN OF 3 UNITED STEELS INCOME IN REGULAR COURSE UNDER SECTION 139(1) OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT ). THE RETURNS OF INCOME SO FILED WER E ALSO PROCESSED UNDER SECTION 143(1) OF THE ACT. SUBSEQUENTLY, ON THE BASIS OF INFORMATION RECEIVED FROM DGIT (INV.), MUMBAI AND THE SALES TAX DEPARTMENT THAT CERTAIN PURCHASES SHOWN BY THE ASSESSEE IN THE RELEVANT FINANCIAL YEARS ARE NOT GENUINE , SINCE , THE PARTIES FROM WH OM THE ASSESSEE CLAIMED TO HAVE MADE SUCH PURCHASES HAVE BEEN IDENTIFIED AS ACCOMMODATION BILL PROVIDER, THE ASSESSING OFFICER RE OPENED THE ASSESSMENT UNDER SECTION 147 OF THE ACT. IN THE RE ASSESSMENT PROCEEDINGS , THE ASSESSING OFFICER CALLED UPON THE ASSESSEE TO PROVE THE GENUINENESS OF PURCHASES BY FURNISHING DOCUMENTARY EVIDENCES. FURTHER, TO VERIFY THE GENUINENESS OF PURCHASES CLAIMED TO HAVE BEEN MADE BY THE ASSESSEE , THE ASSESSING OFFICER ISSUED NOTICES UNDER SECTION 133(6) OF THE ACT TO THE CONCERNED PARTIES CALLING FOR VARIOUS INFORMATION. AS OBSERVED BY THE ASSESSING OFFICER , THE NOTICES ISSUED UNDER SECTION 133(6) OF THE ACT RETURNED BACK UN SERVED. THEREFORE, THE ASSESSING OFFICER CALLED UPON THE ASSESSEE TO PRODUCE THE CONCERNED PARTIES. HOWEVER, EXCEPT FURNISHING PURCHASE BILLS THE ASSESSEE WAS UNABLE TO FURNISH ANY OTHER EVIDENCE TO PROVE THE GENUINENESS OF PURCHASES .E VEN , THE ASSESSEE WAS UNABLE TO PRODUCE THE CONCERNED PARTIES .T HEREFORE, THE ASSESSING OFFICER CONCLUD ED THAT PURCHASES IN DIFFERENT ASSESSMENT YEARS , AS DETAILED BELOW , ARE NOT GENUINE. 4 UNITED STEELS A.Y. 2009 10 ` 21,10,917 A.Y. 2010 11 ` 19,01,999 A.Y. 2011 12 ` 13,28,727 4 . HOWEVER, CONSIDERING THE FACT THAT THE ASSESSEE HAS FURNISHED THE DETAILS OF ALLOCATION OF R AW MATERIALS TO MANUFACTURE OF GOODS AND SALES OF FINISHED PRODUCTS, THE ASSESSING OFFICER HELD THAT ONLY THE PROFIT ELEMENT EMBEDDED IN THE NON GENUINE PURCHASES HAS TO BE DISALLOWED .E STIMATING THE PROFIT ELEMENT AT 12.5% HE MADE THE FOLLOWING DISALLOWANC E S IN THE DIFFERENT ASSESSMENT YEARS. A.Y. 2009 10 ` 2,63,865 A.Y. 2010 11 ` 2,37,750 A.Y. 2011 12 ` 1,66,090 5 . THOUGH, THE ASSESSEE CHALLENGED THE AFORESAID DISALLOWANCES BY FILING APPEALS BEFORE THE LEARNED COMMISSIONER (APPEALS), HOWEVER, IT WAS UNSUCCESSFUL. 6 . THE LEARNED AUTHORISED REPRESENTATIVE RELYING UPON CERTAIN JUDICIAL PRECEDENTS SUBMITTED THAT DURING THE ASSESSMENT PROCEEDINGS THE ASSESSEE HAS PRODUCED SUPPORTING EVIDENCES TO PROVE THE GENUINENESS OF THE PURCHASES. HE SUBMITTED , NOT ONLY THE PURCHASE BILLS WERE PRODUCED BUT DETAILS OF PAYMENT MADE THROUGH BANKING CHANNEL W AS ALSO FURNISHED. THEREFORE, HE SUBMITTED , THE PURCHASES 5 UNITED STEELS CANNOT BE CONSIDERED AS NON GENUINE. IN SUPPORT OF SUCH CONTENTION, HE RELIED UPON THE DECISION OF THE TRIBUNAL, MUMBAI BENCH, IN ACIT V/S PINAKI D. PANANI, [2018] 61 ITR (PRIV.) 7 (MUM.). 7 . THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED UPON THE OBSERVATIONS OF THE LEARNED COMMISSIONER (APPEALS) AND THE ASSESSING OFFICER. 8 . WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PE RUSED MATERIAL ON RECORD. THOUGH, THE ASSESSEE HAS RAISED GROUNDS CHALLENGING THE RE OPENING OF ASSESSMENT, HOWEVER, NO SPECIFIC SUBMISSION WAS ADVANCED IN THIS REGARD BY THE LEARNED AUTHORISED REPRESENTATIVE IN THE COURSE OF HEARING OF APPEAL BEFORE US. B E THAT AS IT MAY, FACTS ON RECORD REVEAL THAT THE RETURNS OF INCOME FILED BY THE ASSESSEE WERE PROCESSED UNDER SECTION 143(1) OF THE ACT. NO SCRUTINY ASSESSMENT WAS MADE EARLIER IN ANY OF THE SE ASSESSMENT YEAR S . IT IS ALSO A FACT THAT THE ASSESSING OFFICER RECEIVED SPECIFIC INFORMATION FROM THE OFFICE OF THE DGIT (INV.), MUMBAI, AND THE SALES TAX DEPARTMENT REVEALING THAT CERTAIN PURCHASE MADE BY THE ASSESSEE IN THE AFORESAID ASSESSMENT YEAR SARE NOT GENUINE. ACCORDINGLY, ON THE BASIS OF SUCH INFORMATION HE RE OPENED THE ASSESSMENT S . THUS, FROM THE AFORESAID FACTS, IT IS VERY MUCH CLEAR THAT RE OPENING OF ASSESSMENT S BY THE ASSESSING OFFICER WAS ON THE BASIS OF SPECIFIC INFORMATION / MATERIAL AVAILABLE ON RECORD REVEALING ESCAPEMENT OF INCOME. THAT BEING THE CASE, VALIDITY OF RE 6 UNITED STEELS OPENING OF ASSESSMENT UNDER SECTION 147 OF THE ACT CANNOT BE CHALLENGED. 9 . AS REGARDS THE MERITS OF THE ADDITION S MADE, FACTS ON RECORD INDICATE THAT THE ASSESSEE WAS UNABLE TO CONCLUSIVELY PROVE THROUGH PROPER DOCUMENTARY EVIDENCES THA T THE PURCHASES WERE MADE FROM THE DECLARED SOURCE. EXCEPT PURCHASE BILL S AND PAYMENT DETAILS , THE ASSESSEE COULD NOT FURNISH ANY OTHER EVIDENCE LIKE TRANSPOR T ATION DETAILS, DELIVERY CHALLANS, ETC., TO DEMONSTRATE THAT GOODS WERE PURCHASED FROM THE DECLARE D SOURCE .E VEN , THE NOTICES ISSUED UNDER SECTION 133(6) OF THE ACT TO THE SELLING DEALERS RETURNED BACK UN SERVED . T HE ASSESSEE WAS UNABLE TO PRODUCE THE CONCERNED PARTIES OR ANY CONFIRMATION FR O M THEM. IN THE AFORESAID CIRCUMSTANCES, IT CANNOT BE SAID THAT THE ASSESSEE WAS ABLE TO ESTABLISH THE GENUINENESS OF PURCHASES. THEREFORE, IN OUR VIEW, THE DEPARTMENTAL AUTHORITIES WERE JUSTIFIED IN HOLDING THE PURCHASES TO BE NON GENUINE. HOWEVER, IT IS A FACT ON RECORD THAT THE ASSESSEE HAS FURNISHED THE QUANTITATI VE DETAILS OF PURCHASES MADE AND UTILIZATION OF RAW MATERIALS IN MANUFACTURING AND SALE OF FINISHED PRODUCTS. THIS FACT PROVES THAT THE ASSESSEE MUST HAVE PURCHASED THE GOODS FROM OTHER SOURCES. FOR THAT REASON ALONE, THE ASSESSING OFFICER HAS ADDED THE PR OFIT ELEMENT EMBEDDED IN THE NON GENUINE PURCHASES BY ESTIMATING IT AT 12.5%. CONSIDERING THE FACTS OF THE PRESENT APPEALS AS WELL AS THE NATURE OF BUSINESS CARRIED ON BY THE ASSESSEE, IN MY VIEW, ESTIMATION OF PROFIT @ 5% WOULD BE 7 UNITED STEELS REASONABLE. ACCORDINGLY, THE ASSESSING OFFICER IS DIRECTED TO RESTRICT THE ADDITION TO 5% OF NO N GENUINE PURCHASES IN THE ALL THE YEARS UNDER APPEAL. 10 . THE NEXT COMMON ISSUE WHICH ARISES IN ASSESSMENT YEAR 2010 11 AND 2011 12 IS WITH REGARD TO AD HOC DISALLOWANCE MADE OUT OF CERTAIN EXPENDITURES CLAIMED BY THE ASSESSEE. 11 . DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICING THAT THE ASSESSEE HAS CLAIMED EXPENDITURE OF ` 3,19,126, IN ASSESSMENT YEAR 2010 11 AND ` 6,95,217 IN ASSESSMENT YEAR 2011 12 TOWARDS TELEPHONE, CONVEYANCE, STAFF WELFARE, TRAVELLING, ETC., CALLED FOR NECESSARY DETAILS AND AFTER VERIFYING THEM OBSERVED THAT PART OF THE EXPENSES W AS MADE IN CASH THROUGH SELF MADE VOUCHERS. ACCORDINGLY, HE DISALLOWED 15% OF THE EXPENDITURE CLAIMED IN BOTH THE ASSESS MENT YEAR S . 12 . THE LEARNED COMMISSIONER (APPEALS) ALSO SUSTAINED SUCH DISALLOWANCE. 13 . WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED MATERIAL ON RECORD. AS COULD BE SEEN, PART DISALLOWANCE OF EXPENDITURE CLAIMED BY THE ASSESSEE WAS MADE ON THE GROUND THAT THEY WERE INCURRED IN CASH THROUGH SELF MADE VOUCHERS. HOWEVER, CONSIDERING THE NATURE OF 8 UNITED STEELS EXPENSES I AM OF THE VIEW THAT DISALLOWANCE OF EXPENDITURE @ 15% IS ON A HIGHER SIDE, HENCE, SHOULD BE RESTRICTED TO 10%. 14 . IN THE RESULT, APPEALS ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 30.01.2019 SD/ SAKTIJIT DEY JUDICIAL MEMBER MUMBAI, DATED: 30.01.2019 COPY OF THE ORDER FORWARDED TO : ( 1 ) THE ASSESSEE; ( 2 ) THE REVENUE; ( 3 ) THE CIT(A); ( 4 ) THE CIT, MUMBAI CITY CONCERNED; ( 5 ) THE DR, ITAT, MUMBAI; ( 6 ) GUARD FILE . TRUE COPY BY ORDER PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY (SR. PRIVATE SECRETARY) ITAT, MUMBAI