MICROPLUS POLYMES P.LTD, MUMBAI V. DCIT CIR 2(2), MUMBAI

ITA 2825/MUM/2017

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 9299 (ITAT-MUMBAI)
• Duration Of Justice: 5 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-09-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 20-04-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S K MITRA
• Assessee Lawyers: MATHURIA
• Keywords: Bogus purchase

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC , BENCH MUMBAI BEFORE SHRI R.C.SHARMA, AM ITA NO. 2825 / MUM/20 1 7 ( ASSESSMENT YEAR : 2009 - 10 ) M/S. MICROPLUS POLYMERS PVT. LTD., 40/42, MODISTREET R.NO.316, FORT, MUMBAI 400 001 VS. DCIT CIR 2(2), R.NO.54 5, AAYAKAR BHAVAN M.K.ROAD, MUMBAI 400 020 PAN/GIR NO. AAECM3574E APPELLANT ) .. RESPONDENT ) ITA NO. 2857/ MUM/20 17 ( ASSESSMENT YEAR : 2009 - 10 ) THE ASST. COMMISSIONER OF INCOME TAX, CIRCLE - 2(2)(2), ROOM NO.545, 5 TH FLOOR, AAYAKAR BHAVAN, M.K.ROAD CHURCHGATE, MUMBAI 400 020 VS. M/S. MICROPLUS POLYMERS PVT. LTD., 40/42, MODISTREET R.NO.316, FORT, MUMBAI 400 001 PAN/GIR NO. AAECM3574E APPELLANT ) .. RESPONDENT ) ITA NO. 3374/ MUM/20 17 ( ASSESSMENT YEAR : 2 010 - 11 ) INCOME TAX OFFICER 2(2)(3), AAYAKAR BHAVAN, R.NO.542, M.K.ROAD, MUMBAI VS. M/S. MICROPLUS POLYMERS PVT. LTD., 40/42, MODISTREET R.NO.316, FORT, MUMBAI 400 001 PAN/GIR NO. AAECM3574E APPELLANT ) .. RESPONDENT ) ITA NO. 3202/ MUM/20 17 ( ASSESSMENT YEAR : 2010 - 11 ) M/S. MICROPLUS POLYMERS PVT. LTD., 40/42, MODISTREET R.NO.316, FORT, MUMBAI 400 001 VS. INCOME TAX OFFICER 2(2)(3), AAYAKAR BHAVAN, R.NO.542, M.K.ROAD, MUMBAI PAN/GIR NO. AAECM3574E APPELLANT ) .. RESPONDENT ) ITA NO. 2825/MUM/2017, 2857/MUM/2017 ITA NO.3 374/MUM/2017 & 3202/MUM/2017 M/S. MICROPLUS POLYMERS PVT. LTD., 2 ASSESSEE BY SHRI M.S.MATHURIA REVENUE BY SHRI S.K. MITRA DATE OF HEARING 07 / 09 /201 7 DATE OF PRONOUNCEME NT 20 / 09 /201 7 / O R D E R PER R.C.SHARMA (A.M) : THESE ARE THE CROSS APPEALS FILED BY THE ASSESSEE AND REVENUE AGAINST THE ORDER OF CIT(A) - MUMBAI FOR THE A.Y.2009 - 10 AND 2010 - 11 IN THE MATTER OF ORDER PASSED U/S.143(3) R.W.S.147 OF THE IT ACT. 2. THE FOLLOWING G ROUNDS HAVE BEEN TAKEN BY THE ASSESSEE: - 2009 - 10 1. ON THE FACTS AND IN LAW, LEARNED CIT(APPEALS) HAS ERRED IN SUSTENANCE OF ADDITION TO THE EXTENT OF RS.4,40,725/ - U/S.69C OF THE INCOME TAX ACT, 1961. 2010 - 11 [1] ON THE FACTS AND IN LAW, LEARNED CIT (APPEALS) HAS ERRED IN SUSTENANCE OF ADDITION TO THE EXTENT OF RS.17,75,174/ - U/S.69 C OF THE INCOME TAX ACT, 1961 [2] ALLEGED INFORMATION RECEIVED FROM DGIT (INV.) / SALES TAX DEPARTMENT OF MAHARASHTRA IS USED AGAINST THE APPELLANT WITHOUT PROVIDING COPIES THEREOF TO THE APPELLANT AND WITHOUT PROVIDING DUE OPPORTUNITIES TO THE APPELLANT OF REBUTTAL / FILING OBJECTIONS AND / OR CROSS EXAMINATIONS OF ALLEGED SUSPICIOUS SUPPLIERS, AS THE CASE MAYBE. [ 3] THE APPELLANT CRAVE LEAVE TO ADD, TO ALTER AND / OR AMEND THE FOREGOING GROUND AND TO MAKE NEW OR ADDITIONAL SUBMISSIONS AT THE HEARING OF THE APPEAL AS WELL AS TO SUBMIT FRESH DOCUMENTS AND INFORMATION AS ADVISED. 3.THE GROUNDS TAKEN BY REVENUE ARE AS UNDER: - ITA NO. 2825/MUM/2017, 2857/MUM/2017 ITA NO.3 374/MUM/2017 & 3202/MUM/2017 M/S. MICROPLUS POLYMERS PVT. LTD., 3 2009 - 10 I) ' WHETHER ON THE FACTS AN D THE CIRCUMSTANCE OF THE CASE AND IN LAW ID. CIT(A) WAS RIGHT IN RESTRICTING THE DISALLOWANCE MADE ON ACCOUNT OF BOGUS PURCHASE MADE BY THE ASSESSEE TO 12.5% OF THE TOTAL PURCHASES MADE WITHOUT APPRECIATING THE FACT THAT IT IS AN ESTABLISHED FACT THAT THE PARTIES FROM WHOM THE PURCHASES SHOWN TO HAVE BEEN MADE ARE BOGUS PARTIES WHO ARE ENGAGED IN ISSUE OF ACCOMMODATION BILLS WITHOUT ACTUAL SUPPLY OF MATERIAL.' II) ' WHETHER ON THE FACTS AND CIRCUMSTANCE OF THE CASE AND IN LAW LD. CIT(A) WAS RIGHT IN RESTRICTI NG THE DISALLOWANCE MADE ON ACCOUNT OF BOGUS PURCHASE MADE BY THE ASSESSEE TO 12.5% OF FIE TOTAL PURCHASES MADE WITHOUT APPRECIATING THE FACT THAT IN CASES WHERE SALES ARE NOT DOUBTED THE ONUS LIES ON THE ASSESSEE TO SHOW THAT THE CORRESPONDING PURCHASE MA DE ARE NOT BY PAYING CASH FROM THE OPEN MARKET SINCE SUPPLIER DENYING DELIVERY OF MATERIAL AGAINST PURCHASE BILLS ISSUED.' III) ' WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WAS RIGHT IN ACCEPTING THE PURCHASE FROM BOGU S VENDORS AS GENUINE LEADING TO ASSESSMENT OF PROFIT ELEMENT ONLY WHEN THE ONUS TO ESTABLISH THE GENUINENESS OF SUCH PURCHASES WERE NOT ESTABLISHED AS PER LAW.' ( IV ) FOR THESE AND ETHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING, THE DECISION OF THE CIT(A) M AY BE SET ASIDE AND THAT OF THE AO BE RESTORED. 2010 - 11 1) 'WHETHER ON THE FACTS AND THE CIRCUMSTANCE OF THE CASE AND IN LAW LD. CIT(A) WAS RIGHT IN RESTRICTING THE DISALLOWANCE MADE ON ACCOUNT OF BOGUS PURCHASE MADE BY THE ASSESSEE TO 1 2.5% OF THE TOTAL PURCHASES MADE WITHOUT CONSIDERING THE FINDING GIVEN BY THE A.O. IN THE ASSESSMENT ORDER THAT THE ASSESSEE FAILED TO DISCHARGE THE PRIMARY ONUS CASTE UPON IT TO ESTABLISH THE GENUINENESS OF PURCHASE MADE WITH SUPPORT OF AUTHENTIC THIRD PA RTY DOCUMENTARY EVIDENCES LIKE COPY OF DELIVERY CHALLAN TRANSPORTATION RECEIPT/LORRY RECORDS, RELEVANT ENTRY IN THE STOCK REGISTER ETC., ESPECIALLY CONSIDERING THE FACT THAT THE SUPPLIERS HAVE ADMITTED BEFORE THE AUTHORITIES THAT THEY HAVE ISSUED ACCOMMODA TION ENTRIES WITHOUT ACTUAL SUPPLY OF MATERIAL.' 2) 'WHETHER ON THE FACTS AND CIRCUMSTANCE OF THE CASE AND IN LAW LD. CIT(A) WAS RIGHT IN RESTRICTING THE DISALLOWANCE MADE ON ACCOUNT OF BOGUS PURCHASE MADE BY THE ASSESSEE TO 12.5% OF THE TOTAL PURCH ASES MADE WITHOUT APPRECIATING THE FINDING GIVEN BY THE A.O. IN THE ASSESSMENT ORDER THAT PRESENTLY THE SUPPLIERS ARE NOT AVAILABLE AT THE GIVEN ADDRESSES ITA NO. 2825/MUM/2017, 2857/MUM/2017 ITA NO.3 374/MUM/2017 & 3202/MUM/2017 M/S. MICROPLUS POLYMERS PVT. LTD., 4 AS ALSO THE ASSESSEE FAILED TO PRODUCE THESE SUPPLIERS BEFORE THE A.O. FOR VERIFICATION.' 3. 'WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW LD. CIT(A) WAS RIGHT I RESTRICTING THE DISALLOWANCE MADE ON ACCOUNT OF BOGUS PURCHASE MADE BY THE ASSESSEE TO 12.5% OF THE TOTAL PURCHASES MADE WITHOUT TAKING INTO CONSIDERATION THE HONBLE SUP REME COURT DECISION IN THE CASE OF M/S. N.K. PROPERTIES LTD. VS DCIT WHEREIN IT IS HELD THAT ENTIRE BOGUS PURCHASE SHOULD BE ADDED TO THE TOTAL INCOME.' 4. THE APPELLANT PRAYS THAT THE ORDER OF THE LD. CIT(A) BE SET ASIDE ON THE ABOVE GROUNDS AND THA T OF THE ASSESSING OFFICER BE RESTORED. 5. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY. 4. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. THE FACTS IN BRIEF ARE THAT T HE ASSESSEES ARE CAR RYING ON BUSINESS OF MANUFACTURER / DEALER IN POLYMERS / POLYPLAST / COMPUTER MATERIALS. ASSESSEE HAD MAINTAINED R EGULAR BOOKS OF ACCOUNTS AND SAID BOOKS OF ACCOUNTS WERE DULY AUDITED UNDER THE INCOME TAX ACT, 1961 AND UNDER THE MAHARASHTRA VAT ACT, 2002. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE A O RELIED ON ALLEGED INFORMATION RECEIVED FROM THE WEBSITE OF THE MAHARASHTRA SALES TAX DEPARTMENT. / DGIT (INV) WITH REGARD TO BOGUS SUPPLIERS. AO ADDED 100% OF SUCH PURCHASES IN ASSESSEES INCOME. 5. BY TH E IMPUGNED ORDER, CIT(A) RESTRICTED THE ADDITION TO THE EXTENT OF 12.5% OF BOGUS PURCHASES BY OBSERVING THAT AO HAS NOT DECLINED THE CORRESPONDING SALES MADE BY THE ASSESSEE IN RESPECT OF ALLEGED BOGUS PURCHASES. AGAINST THE ABOVE ORDER OF CIT(A) BOTH ASSE SSEE AND REVENUE ARE IN FURTHER APPEAL BEFORE US. 6. IT WAS ARGUED BY LEARNED AR THAT THE AO DID NOT FIND ANY INFLATION IN PURCHASE PRICE OR INFLATION IN CONSUMPTION OR SUPPRESSION OF THE PRODUCTION. PAYMENT FOR PURCHASES WAS MADE TO THE SUPPLIERS THROUGH ACCOUNT PAYEE CHEQUES AND THERE IS NO CASH PAYMENT TO SUPPLIERS. PRICE QUOTED BY THE SUPPLIERS IS ON THE BASIS OF FACTORY DELIVERY OF THE ASSESSEES - GOODS WERE DIRECTLY DELIVERED BY THE ITA NO. 2825/MUM/2017, 2857/MUM/2017 ITA NO.3 374/MUM/2017 & 3202/MUM/2017 M/S. MICROPLUS POLYMERS PVT. LTD., 5 REPRESENTATIVE OF THE SUPPLIERS AT THE FACTORY OF THE ASSESSEES. FUR THERMORE, N O OCTROI PAYABLE AS GOODS ARE DELIVERED WITHIN LIMITS OF MUMBAI MUNICIPALITY. 7 . OUR ATTENTION WAS INVITED TO THE GROSS PROFIT SHOWN AT 25.18% IN THE A.Y.20 10 - 1 1 AND 23.36% IN THE A.Y. 2009 - 10 . AS PER LEARNED AR ASSESSEE HAS ALREADY SHOWN HIGHER GROSS PROFIT ON THE SALES WHICH IS BETTER THAN THE GROSS PROFIT SHOWN BY THE ASSESSEE HAVING SIMILAR NATURE OF BUSINESS. 8 . ON THE OTHER HAND, LEARNED DR RELIED ON THE ORDER PASSED BY THE AO. 9 . WE HAVE CONSIDERED RIVAL CONTENTIONS AND CAREFULLY GONE THRO UGH THE ORDERS OF THE AUTHORITIES BELOW AND FIND FROM RECORD THAT AO HAS MADE ADDITION ON THE BASIS OF INFORMATION RECEIVED FROM SALES TAX DEPARTMENT REGARDING SUSPICIOUS SUPPLIERS. AO ADDED 100% OF SUCH SUPPLIES IN ASSESSEES INCOME. BY THE IMPUGNED ORDER CIT(A) RESTRICTED THE ADDITION BY ESTIMATING PROFIT TO THE EXTENT OF 12% ON SUCH PURCHASES AFTER OBSERVING THAT CORRESPONDING SALES EFFECTED BY ASSESSEE HAS NOT BEEN DOUB TED BY THE AO. FROM THE RECORD I FOUND THAT AO DID NOT FIND ANY INFLATION IN PURCHASE PRICE OR INFLATION IN CONSUMPTION OR SUPPRESSION OF PRODUCTION. THE GOODS SO PURCHASED FROM THESE SUPPLIERS WERE DIRECTLY DELIVERED BY THE REPRESENTATIVE OF THE SUPPLIERS AT THE FACTORY ITSELF. NO OCTROI WAS PAYABLE AS GOODS WERE DELIVERED WITHIN THE LIMI TS OF MUMBAI MUNICIPALITY. I ALSO FOUND THAT ASSESSEE HAS SHOWN VERY GOOD GP RATE ON THE SALES AFFECTED BY IT DURING THE YEAR AT 25.18% IN THE A.Y.2010 - 11 AND 23.26% IN THE A.Y.2009 - 10. KEEPING IN VIEW TOTALITY OF FACTS AND CIRCUMSTANCES OF THE CASE, I MOD IFY BOTH THE ORDERS OF THE LOWER AUTHORITIES AND DIRECT AO TO RESTRICT THE ADDITION TO THE EXTENT OF 10% OF SUCH BOGUS PURCHASES. WE DIRECT ACCORDINGLY. ITA NO. 2825/MUM/2017, 2857/MUM/2017 ITA NO.3 374/MUM/2017 & 3202/MUM/2017 M/S. MICROPLUS POLYMERS PVT. LTD., 6 10 . IN THE RESULT, APPEALS OF REVENUE ARE DISMISSED WHEREAS APPEALS OF THE ASSESSEE ARE ALLOWED IN PA RT. O RDER PRONOUNCED IN THE OPEN COURT ON THIS 20 / 09 /2017 \ SD/ - ( R.C.SHARMA ) ACCOUNTANT MEMBER MUMBAI ; DATED 20 / 09 /201 7 KARUNA SR. PS COPY OF THE ORDER FORWARDED TO : BY ORDER, ( ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//