JYOTI ARCHITECTURAL PRODUCTS PVT. LTD., MUMBAI V. DCIT- RG- 4(2)(2), MUMBAI

ITA 2804/MUM/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 5709 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-05-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: F
• Assessment Year: 2009-2010
• Appeal Filed On: 04-05-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: CHOUDHARY ARUN KUMAR SINGH LD
• Assessee Lawyers: ANIL THAKRAR LD
• Keywords: Bogus purchase; Question of law; Reassessment proceedings
• Section: 143(3); 133(6); 148

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY, JM AND SHRI MANOJ KUMAR AGGARWAL, AM ./ I.T.A. NO.2804/MUM/2018 ( / ASSESSMENT YEAR: 2009-10) M/S. JYOTI ARCHITECTURAL PRODUCTS P. LTD. A-111, SAGAR TECH PLAZA ANDHERI KURLA ROAD, SAKINAKA ANDHERI EAST, MUMBAI-400 072. / VS. D CIT - RANGE 4(2)(2) MUMBAI. ! ./ ./PAN/GIR NO. AABCJ-5792-J ( /APPELLANT ) : ( / RESPONDENT ) ASSESSEE BY : SHRI ANIL THAKRAR-LD. AR DEPARTMENT BY : CHOUDHARY ARUN KUMAR SINGH -LD.DR / DATE OF HEARING : 08/05/2019 / DATE OF PRONOUNCEMENT : 14/05/2019 / O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER): - 1. AFORESAID APPEAL BY ASSESSEE FOR ASSESSMENT YEA R [IN SHORT REFERRED TO AS AY] 2009-10 CONTEST THE ORDER OF LD. COMMIS SIONER OF INCOME-TAX (APPEALS)-9, MUMBAI, [IN SHORT REFERRED TO AS CIT( A)], APPEAL NO. CIT(A)- 9/CIR.4/188/2015-16 DATED 27/03/2018. THE ONLY ISSUE UNDER APPEAL IS ADDITION OF RS.14,33,564/- ON ACCOUNT OF ALLEGED BOGUS PURCHASES FOR WHICH THE ASSESSEE HAS RAISED FOLLOWING GROUND OF APPEAL: - 2 THE LD. CIT (A) IS ERRED IN CONFIRMING A SUM OF RS. 14,33,564/- AS INCOME OF THE APPELLANT AS ALLEGED INFLATED PURCHASES AS PER INFORMATION RECEI VED FROM SALES TAX AUTHORITIES THROUGH DGIT (INVESTIGATION), MUMBAI. THE APPELLANT REQUESTS TO DELETE THE ADDITION CONFIRMED BY THE LD. CIT (A). 2.1 FACTS ON RECORD REVEAL THAT THE ASSESSEE HAS BE EN SUBJECTED TO AN ASSESSMENT U/S 143(3) R.W.S. 147 ON 26/03/2015 WHER EIN THE INCOME OF THE ASSESSEE HAS BEEN DETERMINED AT RS.62.94 LACS AS AG AINST RETURNED INCOME OF RS.45.63 LACS FILED BY THE ASSESSEE ON 17 /09/2009 WHICH WAS PROCESSED U/S 143(1). 2.2 THE REASSESSMENT PROCEEDINGS WERE TRIGGERED UPO N RECEIPT OF CERTAIN INFORMATION FROM SALES TAX DEPARTMENT, MAHARASHTRA THAT THE ASSESSEE STOOD BENEFICIARY OF ALLEGED BOGUS PURCHASES AGGREGATING TO RS.14.33 LACS STATED TO BE MADE FROM 3 PARTIES AS PER DETAILS GIV EN IN PARA 2 OF THE QUANTUM ASSESSMENT ORDER. ACCORDINGLY, NOTICE U/S 1 48 WAS ISSUED ON 20/03/2014 WHICH WAS FOLLOWED BY STATUTORY NOTICE U /S 143(2) WHEREIN THE ASSESSEE WAS, INTER-ALIA, DIRECTED TO PRODUCE THE STATED PARTIES. 2.3 IN RESPONSE, THE ASSESSEE SUBMITTED LEDGER EXTRACTS, STOCK DETAILS ETC. AND SUBMITTED THAT THE PAYMENTS TO SUPPLIERS WERE T HROUGH BANKING CHANNELS. HOWEVER, NOTICES SENT U/S 133(6) WERE RET URNED BACK UNSERVED BY THE POSTAL AUTHORITIES AND THE ASSESSEE FAILED T O SUBSTANTIATE THE DELIVERY OF MATERIAL. THE FACTUAL MATRIX LED THE LD. AO TO B ELIEVE THAT THE ASSESSEE INFLATED ITS PURCHASES TO REDUCE THE TAX LIABILITY. ACCORDINGLY, THE PURCHASE OF RS.14.33 LACS WERE TREATED AS BOGUS PURCHASES AND ADDED TO THE INCOME OF THE ASSESSEE. THE STAND OF LD. AO, UPON CONFIRMA TION BY FIRST APPELLATE AUTHORITY, IS UNDER CHALLENGE BEFORE US. 3 3. THE LD. AUTHORIZED REPRESENTATIVE FOR ASSESSEE [ AR], ON THE STRENGTH OF DOCUMENTS PLACED IN THE PAPER-BOOK, DREW OUR ATTENTION TO THE GROSS PROFIT RATE / NET PROFIT RATE REFLECTED BY THE ASSE SSEE DURING IMPUGNED AY AND CONTESTED THE IMPUGNED ADDITIONS. THE LD. DR JU STIFIED FULL ADDITION IN VIEW OF THE JUDGMENT OF HONBLE SUPREME COURT RENDE RED IN N.K.PROTEINS LTD. VS. CIT [2017-TIOL-23-SC-IT]. 4. WE HAVE CAREFULLY HEARD THE RIVAL SUBMISSIONS AN D PERUSED RELEVANT MATERIAL ON RECORD. WE ARE OF THE CONSIDERED OPINIO N THAT THERE COULD BE NO SALE WITHOUT ACTUAL PURCHASE OF MATERIAL KEEPING IN VIEW THE NATURE OF BUSINESS ACTIVITIES BEING CARRIED OUT BY THE ASSESS EE. THE ASSESSEE WAS IN POSSESSION OF PRIMARY PURCHASE DOCUMENTS AND THE AC COUNTS WERE SUBJECTED TO AUDIT. THE PAYMENTS TO THE SUPPLIERS W ERE THROUGH BANKING CHANNELS. THE SALES TURNOVER HAS NOT BEEN DISPUTED BY THE REVENUE. THE GROSS PROFIT RATE / NET PROFIT RATE DURING IMPUGNED AY WERE COMMENSURATE WITH EARLIER YEARS. THE QUANTITATIVE D ETAILS WERE PLACED ON RECORD. AT THE SAME TIME, THE ASSESSEE FAILED TO CO NCLUSIVELY SUBSTANTIATE THE DELIVERY OF MATERIAL. NOTICES ISSUED U/S 133(6) TO THE SUPPLIERS DID NOT ELICIT SATISFACTORY RESPONSE AND THE ASSESSEE FAILE D TO PRODUCE ANY OF THE SUPPLIER BEFORE LOWER AUTHORITIES. THEREFORE, IN SU CH A SITUATION, THE ADDITION, WHICH COULD BE MADE, WAS TO ACCOUNT FOR P ROFIT ELEMENT EMBEDDED IN THESE PURCHASE TRANSACTIONS TO FACTORIZE FOR PRO FIT EARNED BY ASSESSEE AGAINST POSSIBLE PURCHASE OF MATERIAL IN THE GREY M ARKET AND UNDUE BENEFIT OF VAT AGAINST SUCH BOGUS PURCHASES. KEEPING IN VIE W THE SAME, WE RESTRICT THE IMPUGNED ADDITIONS TO 12.5% OF ALLEGED BOGUS PURCHASES OF 4 RS.14,33,564/- WHICH COMES TO RS.1,79,196/-. THE BA LANCE ADDITIONS STAND DELETED. 5. OUR DECISION IS IN LINE WITH THE RECENT DECISION OF HONBLE BOMBAY HIGH COURT RENDERED IN BUNCH OF APPEALS TITLED AS PR.CIT VS. M/S MOHOMMAD HAJI ADAM & CO. [ITA NO.1004 & OTHERS OF 2 016, DATED 11/02/2019] WHEREIN HONBLE COURT DISTINGUISHING THE CITED CASE LAW OF HONBLE GUJARAT HIGH COURT RENDERED IN N.K. INDUSTRIES LTD. VS DY. C.I.T. IN TAX APPEAL NO. 240 OF 2003 AND CONNECTED APPEALS DECIDED ON 20TH JUNE, 2016 OBSERVED AS UNDER: - 8. IN THE PRESENT CASE, AS NOTED ABOVE, THE ASSESSE E WAS A TRADER OF FABRICS. THE A.O. FOUND THREE ENTITIES WHO WERE INDULGING IN BOGUS BI LLING ACTIVITIES. A.O. FOUND THAT THE PURCHASES MADE BY THE ASSESSEE FROM THESE ENTITIES WERE BOGUS. THIS BEING A FINDING OF FACT, WE HAVE PROCEEDED ON SUCH BASIS. DESPITE THIS, THE QUESTION ARISES WHETHER THE REVENUE IS CORRECT IN CONTENDING THAT THE ENTIRE PU RCHASE AMOUNT SHOULD BE ADDED BY WAY OF ASSESSEE'S ADDITIONAL INCOME OR THE ASSESSEE IS CORRECT IN CONTENDING THAT SUCH LOGIC CANNOT BE APPLIED. THE FINDING OF THE CIT(A) AND THE TRIBUNAL WOULD SUGGEST THAT THE DEPARTMENT HAD NOT DISPUTED THE ASSESSEE'S SALE S. THERE WAS NO DISCREPANCY BETWEEN THE PURCHASES SHOWN BY THE ASSESSEE AND THE SALES DECLARED. THAT BEING THE POSITION, THE TRIBUNAL WAS CORRECT IN COMING TO THE CONCLUSION THAT THE PURCHASES CANNOT BE REJECTED WITHOUT DISTURBING THE SALES IN CASE OF A TRADER. THE TRIBUNAL, THEREFORE, CORRECTLY RESTRICTED THE ADDITIONS LIMITED TO THE E XTENT OF BRINGING THE G.P. RATE ON PURCHASES AT THE SAME RATE OF OTHER GENUINE PURCHAS ES. THE DECISION OF THE GUJARAT HIGH COURT IN THE CASE OF N.K. INDUSTRIES LTD. (SUPRA) CANNOT BE APPLIED WITHOUT REFERENCE TO THE FACTS. IN FACT IN PARAGRAPH 8 OF THE SAME JUDGMENT THE COURT HELD AND OBSERVED AS UNDER- SO FAR AS THE QUESTION REGARDING ADDITION OF RS.3 ,70,78,125/- AS GROSS PROFIT ON SALES OF RS.37.08 CRORES MADE BY THE ASSESSING OFFICER DESPI TE THE FACT THAT THE SAID SALES HAD ADMITTEDLY BEEN RECORDED IN THE REGULAR BOOKS DURIN G FINANCIAL YEAR 1997-98 IS CONCERNED, WE ARE OF THE VIEW THAT THE ASSESSEE CANNOT BE PUNISHE D SINCE SALE PRICE IS ACCEPTED BY THE REVENUE. THEREFORE, EVEN IF 6 % GROSS PROFIT IS TAK EN INTO ACCOUNT, THE CORRESPONDING COST PRICE IS REQUIRED TO BE DEDUCTED AND TAX CANNOT BE LEVIED ON THE SAME PRICE. WE HAVE TO REDUCE THE SELLING PRICE ACCORDINGLY AS A RESULT OF WHICH PROF IT COMES TO 5.66%. THEREFORE, CONSIDERING 5.66% OF RS.3,70,78,125/- WHICH COMES TO RS.20,98,621.88 WE THINK IT FIT TO DIRECT THE REVENUE TO ADD RS.20,98,621.88 AS GROSS PROFIT AND MAKE NECESSARY DEDUCTIONS ACCORDINGLY. ACCORDINGLY, THE SAID QUESTION IS ANSWERED PARTIALLY IN FAVOR OF THE ASSESSEE AND PARTIALLY IN FAVOR OF THE REVENUE. 9 IN THESE CIRCUMSTANCES, NO QUESTION OF LAW, THERE FORE, ARISES. ALL INCOME TAX APPEALS ARE DISMISSED, ACCORDINGLY. NO ORDER AS TO COSTS. 5 6. RESULTANTLY, THE APPEAL STANDS PARTLY ALLOWED IN TERMS OF OUR ABOVE ORDER. ORDER PRONOUNCED IN THE OPEN COURT ON 14 TH JUNE, 2019. SD/- SD/- (SAKTIJIT DEY) (MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 14/05/2019 SR.PS, JAISY VARGHESE ! / COPY OF THE ORDER FORWARDED TO : 1. !% / THE APPELLANT 2. &'!% / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT CONCERNED 5. ( )& * , * , / DR, ITAT, MUMBAI 6. ) ,-. / GUARD FILE / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI.