ESSEL MARKETING & PROMOTIONS PVT. LTD., MUMBAI V. ACIT - 9(2)(2), MUMBAI

ITA 2760/MUM/2016

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 8814 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-10-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 23-08-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 15-04-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SAURABH DESH
• Keywords: Bogus purchase

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH A, MUMBAI BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER AND SHRI MANOJ KUMAR AGGARWAL, ACCOUNTANT MEMBER ITA NOS.2760 & 2761/M/2016 ASSESSMENT YEARS: 2010-11 & 2011-12 M/S. ESSEL MARKETING & PROMOTIONS PVT. LTD., C-4109/10-C WING, OBEROI GARDEN ESTATE, CHANDIVALI SAKINAKA, ANDHERI (E), MUMBAI- 400 072 PAN: AABCE 6463B VS. THE ASSISTANT COMMISSIONER OF INCOME TAX 9(2)(2), AAYAKAR BHAVAN, MUMBAI - 400021 (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : NONE REVENUE BY : SHRI SAURABH DESHPANDE, D.R. DATE OF HEARING : 23.08.2017 DATE OF PRONOUNCEMENT : 18.10.2017 O R D E R PER D.T. GARASIA , JUDICIAL MEMBER: THE ABOVE TITLED APPEALS HAVE BEEN PREFERRED BY TH E ASSESSEE AGAINST THE ORDERS DATED 21.01.2016 AND 27.01.2016 OF THE COMMISSIONER OF INCOME TAX (APPEALS) [HEREINAFTER R EFERRED TO AS THE CIT(A)] RELEVANT TO ASSESSMENT YEARS 2010-11 & 2011-12. ITA NO.2760/M/2016 FOR A.Y. 2010-11 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS ENGAGED IN BUSINESS OF TRADING AND MANUFACTURING SALES PROMOTI ONAL ITEMS AND ITA NOS.2760 & 2761/M/2016 M/S. ESSEL MARKETING & PROMOTIONS PVT. LTD. 2 SUPPLIES MATERIAL TO FMCG COMPANIES. DURING THE YE AR THE ASSESSING OFFICER (HEREINAFTER REFERRED TO AS THE A O) FOUND THAT ASSESSEE HAD MADE BOGUS PURCHASES FROM FOLLOWING PA RTY: SR. NO. NAME OF THE PARTY AMOUNT OF PURCHASE (RS) 1. K. KUNDAN CARGO TRADING PVT. LTD. 4,54,105/- TOTAL 4,54,105/- 3. THE ASSESSEE WAS ASKED TO PRODUCE THE ABOVE PART IES FOR VERIFICATION. THERE WAS NO COMPLIANCE OF NOTICE UND ER SECTION 133(6). THEREFORE, THE AO HAS MADE THE ADDITION ON ACCOUNT OF BOGUS PURCHASES OF RS.4,54,105/-. 4. MATTER CARRIED TO THE LD. CIT(A) AND THE LD. CIT (A) HAS PARTLY ALLOWED THE CLAIM BY OBSERVING AS UNDER: 6.3.31 AS NARRATED EARLIER, THE LD. A.O. IN THIS C ASE HAS HELD THAT THE PARTIES FROM WHOM THE PURCHASES WERE MADE BY THE APPELLANT WERE FOUND TO BE BOGUS AND THAT IS THE REASON FOR WHICH IT WAS NOT PRODUCE D DURING THE ASSESSMENT PROCEEDINGS. NOT HAVING DOUBTED THE CONSUMPTION/ SA LES, THE MOTIVE BEHIND OBTAINING BOGUS BILLS THUS, APPEARS TO BE INFLATION OF PURCHASE PRICE SO AS TO SUPPRESS TRUE PROFITS. CONSIDERING THE FACTS OF THE CASE AS WELL AS THE VARIOUS CASE LAWS CITED (SUPRA) ESPECIALLY IN THE CASES OF CIT VS. SIMIT F. SHETH, BHOLANATH POLY FAB AND SANKET STEEL TRADERS (SUPRA) , I ESTIMATE THE SUPPRESSED PROFIT TO THE EXTENT OF 12.5% OF THE PURCHASES MADE FROM THE BOGUS ENTITY, AS THE SUPPRESSED PROFIT ELEMENT EMBEDDED I N SUCH PURCHASES. THIS ESTIMATION IS IN ADDITION TO THE GP SHOWN BY THE AP PELLANT. ACCORDINGLY, THIS GROUND OF APPEAL IS PARTLY ALLOWED. 5. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE P ARTIES. LD. D.R. RELIED UPON THE DECISION OF THE TRIBUNAL, AHME DABAD BENCH IN THE CASES OF SHWETAMBAR STEELS VS. ITO AHMEDABAD AN D GANESH RICE MILLS VS. CIT (294 ITR 316). THE FACTS IN THE PRESENT CASE SHOW THAT ASSESSEE COULD NOT PRODUCE THE PARTIES FR OM WHOM GOODS ITA NOS.2760 & 2761/M/2016 M/S. ESSEL MARKETING & PROMOTIONS PVT. LTD. 3 ARE STATED TO HAVE BEEN PURCHASED. THE SUPPLIERS WE RE FOUND TO BE ENGAGED IN PROVIDING BOGUS BILL WITHOUT ACTUAL DEAL ING OF GOODS. IN THIS REGARD, THE ASSESSEE HAS STATED THAT THEY HAD SUBMITTED QUANTITATIVE DETAILS OF STOCK WITH RESPECT OF THE S ALES WITH PURCHASES FROM THE PARTIES DURING THE ASSESSMENT PROCEEDINGS. THE ASSESSEE HAS SUBMITTED THE DETAIL OF CORRESPONDING SALES IN RESP ECT OF THE PURCHASE FROM THE SAID PARTIES. AS MENTIONED ABOVE THE AO HA S NEVER DISPUTED OR EXAMINED THE ASPECT OF SALES RECEIPTS. SINCE THE SALES MADE BY THE ASSESSEE WAS NOT DOUBTED OR DISPUTED BY THE AO AND HE HAS ACCEPTED THE SALES RECEIPTS OF THE ASSESSEE AS IT IS, THEREF ORE, THE AO CANNOT DENY THAT PURCHASES WERE NOT MADE BY THE ASSESSEE A ND THE MATERIAL WAS NOT USED FOR ITS SALES. WHAT IS UNDER DISPUTE I S THE PURCHASES FROM THE PARTIES FROM WHOM BILLS HAVE BEEN TAKEN AN D CHEQUES HAVE BEEN ISSUED TO THEM. PURCHASES ARE NOT IN DISPUTE B UT THE PARTIES FROM WHOM PURCHASE ARE SHOWN TO HAVE BEEN MADE ARE DISPU TED AND SUSPICIOUS. THE AO HAD MADE THE ADDITION AS SOME O F THE SUPPLIERS WERE DECLARED HAWALA DEALERS BY THE VAT DEPARTMENT. THIS MAY BE A GOOD REASON FOR MAKING FURTHER INVESTIGATION BUT THE AO DID NOT MAKE ANY FURTHER INVESTIGATION AND MERELY COMPLETED THE ASSESSMENT ON SUSPICION. ONCE THE ASSESSEE HAS BROUGHT ON RECO RD THE DETAILS OF PAYMENTS BY ACCOUNT PAYEE CHEQUE, IT WAS INCUMBENT ON THE AO TO HAVE VERIFIED THE PAYMENT DETAILS FROM THE BANK OF THE ASSESSEE AND ALSO FROM THE BANK OF THE SUPPLIERS TO VERIFY WHETH ER THERE WAS ANY IMMEDIATE CASH WITHDRAWAL FROM THEIR ACCOUNT. NO SU CH EXERCISE HAS BEEN DONE OR FINDINGS RECORDED. THERE WAS NO DETAIL ED INVESTIGATION MADE BY THE AO HIMSELF. IT IS ALSO FOUND THAT THE P AYMENTS HAVE ITA NOS.2760 & 2761/M/2016 M/S. ESSEL MARKETING & PROMOTIONS PVT. LTD. 4 BEEN MADE BY ACCOUNT PAYEE CHEQUE WHICH ARE DULY RE FLECTED IN THE BANK STATEMENT OF THE ASSESSEE. THERE IS NO EVIDENC E TO SHOW THAT THE ASSESSEE HAS RECEIVED CASH BACK FROM THE SUPPLIERS. MERELY BECAUSE THE SUPPLIERS DID NOT APPEAR BEFORE THE AO OR SOME CONFIRMATION LETTERS WERE NOT FURNISHED, ONE CANNOT CONCLUDE THA T THE PURCHASES WERE NOT MADE BY THE ASSESSEE. THIS VIEW IS SUPPORT ED BY THE DECISION OF NIKUNJ EXIMP ENTERPRISES VS. CIT 216 TA XMAN 171 (BOM). TO THIS EXTENT, WE ARE OF THE VIEW THAT IF T HE ASSESSEE HAS FULFILLED ITS ONUS OF MAKING THE PAYMENT BY CHEQUE AND HAS SUPPLIED THE ADDRESSES OF THE SELLERS THEN IT CANNOT BE PRES UMED THAT SUPPLIER WERE BOGUS SIMPLY BECAUSE THE SELLERS WERE NOT FOUN D AT THE GIVEN ADDRESS. THERE IS A CONSIDERABLE TIME GAP BETWEEN T HE PERIOD OF PURCHASE TRANSACTION AND PERIOD OF SCRUTINY PROCEED INGS. THE AO HAS NOT BROUGHT ANY MATERIAL ON RECORD TO SHOW THAT THE RE IS SUPPRESSION OF SALES. IT IS BASIC RULE OF ACCOUNTANCY AS WELL A S OF TAXATION LAWS THAT PROFIT FROM BUSINESS CANNOT BE ASCERTAINED WIT HOUT DEDUCTING COST OF PURCHASE FROM SALES. ESTIMATION OF PROFIT R ANGING FROM 12.5% TO 15% HAS BEEN UPHELD BY THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS SIMIT P SHETH 356 ITR 451 (GUJ.). R ESPECTFULLY FOLLOWING THE DECISION OF HONBLE GUJARAT HIGH COUR T IN THE CASE OF CIT VS. SIMIT P. SHETH 38 TAXMAN 385 (GUJ), WE DO N OT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A). HENCE, W E CONFIRM THE ORDER OF THE LD. CIT(A). 6. IN THE RESULT, ASSESSEES APPEAL IS DISMISSED. ITA NOS.2760 & 2761/M/2016 M/S. ESSEL MARKETING & PROMOTIONS PVT. LTD. 5 ITA NO.2761/M/2016 FOR A.Y. 2011-12 7. IN THIS APPEAL, THE AO FOUND THAT ASSESSEE HAD M ADE BOGUS PURCHASES FROM FOLLOWING PARTIES: SR. NO. NAME OF THE PARTY AMOUNT OF PURCHASE (RS) 1. NB ENTERPRISES 39,005/- 2. LIBERTY TRADING CORPORATION 36,563/- TOTAL 75,568/- 8. THE ASSESSEE WAS ASKED TO PRODUCE THE ABOVE PART IES FOR VERIFICATION. THERE WAS NO COMPLIANCE OF NOTICE UND ER SECTION 133(6). THEREFORE, THE AO HAS MADE THE ADDITION ON ACCOUNT OF BOGUS PURCHASES OF RS.75,568/- FROM ABOVE PARTIES. 9. MATTER CARRIED TO THE LD. CIT(A) AND THE LD. CIT (A) HAS PARTLY ALLOWED THE CLAIM BY OBSERVING AS UNDER: 4.3.36 AS NARRATED EARLIER, THE LD. A.O. IN THIS C ASE HAS HELD THAT THE PARTIES FROM WHOM THE PURCHASES WERE MADE BY THE APPELLANT WERE FOUND TO BE BOGUS AND THAT IS THE REASON FOR WHICH IT WAS NOT PRODUCE D DURING THE ASSESSMENT PROCEEDINGS. NOT HAVING DOUBTED THE CONSUMPTION/ SA LES, THE MOTIVE BEHIND OBTAINING BOGUS BILLS THUS, APPEARS TO BE INFLATION OF PURCHASE PRICE SO AS TO SUPPRESS TRUE PROFITS. CONSIDERING THE FACTS OF THE CASE AS WELL AS THE VARIOUS CASE LAWS CITED (SUPRA) ESPECIALLY IN THE CASES OF CIT VS. SIMIT F. SHETH, BHOLANATH POLY FAB AND SANKET STEEL TRADERS (SUPRA) , I ESTIMATE THE SUPPRESSED PROFIT TO THE EXTENT OF 12.5% OF THE PURCHASES MADE FROM THE BOGUS ENTITY VIZ. B.B. ENTERPRISES AND LIBERTY TRADING CORPORATI ON TOTALING TO RS.75,568/-, AS THE SUPPRESSED PROFIT ELEMENT EMBED DED IN SUCH PARTIES. 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. 10. SINCE THIS APPEAL IS IDENTICAL TO THE FACTS OF THE ASSESSEES OWN CASE FOR A.Y. 2010-11 AND THE SAME HAS ALREADY BEEN DISMISSED AS ABOVE, FOLLOWING THE SAME RATIO, WE DO NOT FIND ANY INFIRMITY IN THE ITA NOS.2760 & 2761/M/2016 M/S. ESSEL MARKETING & PROMOTIONS PVT. LTD. 6 ORDER OF THE LD. CIT(A). HENCE, WE CONFIRM THE ORD ER OF THE LD. CIT(A). ACCORDINGLY, THIS APPEAL OF THE ASSESSEE I S DISMISSED. 11. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 18.10.2017. SD/- SD/- (MANOJ KUMAR AGGARWAL) (D.T. GARASIA) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 18.10.2017. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.