ASIAN CHEMTECH PRIVATE LIMITED, MUMBAI V. ITO 9(1)(4), MUMBAI

ITA 283/MUM/2019

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 8422 (ITAT-MUMBAI)
• Duration Of Justice: 2 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-04-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 21-01-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SOMNATH WAJALELD
• Assessee Lawyers: VIMAL PUNMIYA LD
• Keywords: Bogus purchase; Reassessment proceedings
• Section: 143(3); 142(1); 133(6); 147; 148

Judgement Text

1 ITA NO.283/MUM/2019 ASIAN CHEMTECH PVT.LTD. ASSESSMENT YEAR-2011-12 IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY, JM AND SHRI MANOJ KUMAR AGGARWAL, AM ./ I.T.A. NO.283/MUM/2019 ( / ASSESSMENT YEAR: 2011-12) ASIAN CHEMTECH PVT.LTD. 701, SYMPHONY, NEHRU ROAD VILE PARLE (EAST) MUMBAI-400 057. / VS. INCOME TAX OFFICER - 9(1)(4) ROOM NO.226, 2 ND FLOOR AAYKAR BHAVAN, M.K. ROAD MUMBAI-400 020. ! ./ ./PAN/GIR NO. AAICA-1856-B ( /APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : VIMAL PUNMIYA LD. AR / RESPONDENT BY : SOMNATH WAJALE-LD. DR / DATE OF HEARING : 09/04/2019 / DATE OF PRONOUNCEMENT : 12/04/2019 / O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER):- 1. AFORESAID APPEAL BY ASSESSEE FOR ASSESSMENT YEAR [AY] 2011-12 CONTEST THE ORDER OF LD. COMMISSIONER OF INCOME-TAX (APPEALS)-16, MUMBAI, [CIT(A)], APPEAL NO. CIT(A)-16/ ITO-9(1)(4)/IT-10126/2016-17 2 ITA NO.283/MUM/2019 ASIAN CHEMTECH PVT.LTD. ASSESSMENT YEAR-2011-12 DATED 30/11/2018 QUA CONFIRMATION OF CERTAIN ADDITIONS ON ACCOUNT OF ALLEGED BOGUS PURCHASES. ALTHOUGH THE ASSESSEE, IN ITS GROUNDS OF APPEAL, HAS ALSO CHALLENGED THE VALIDITY OF REASSESSMENT PR OCEEDINGS U/S 147, HOWEVER, THESE GROUNDS HAVE NOT BEEN PRESSED DURING HEARING BEFORE US. THEREFORE, THE SAME ARE NOT CONSIDERED WHILE ADJUDI CATING THE APPEAL. 2.1 THE ASSESSMENT FOR IMPUGNED AY WAS FRAMED BY LD . INCOME TAX OFFICER-9(1)(4), MUMBAI [AO] U/S 143(3) READ WITH SECTION 147 OF THE ACT ON 23/03/2016 WHEREIN THE INCOME OF THE ASSESSEE WAS D ETERMINED AT RS.114.92 LACS AFTER CERTAIN ADDITIONS AS AGAINST R ETURNED INCOME OF RS.42.87 LACS E-FILED BY THE ASSESSEE ON 30/09/2011 WHICH WAS PROCESSED U/S 143(1). THE ESTIMATED ADDITION OF RS.72.03 LACS ON ACCOUNT OF ALLEGED BOGUS PURCHASES IS THE SOLE SUBJECT MATTER OF PRESENT APPEAL BEFORE US. THE ASSESSEE BEING RESIDENT CORPORATE ASSESSEE WAS STATED TO BE ENGAGED IN TRADING OF FERROUS AND NON-FERROUS METAL PRODUCTS DURING IMPUGNED AY. 2.2 THE REASSESSMENT PROCEEDINGS GOT TRIGGERED BY I SSUANCE OF NOTICE U/S 148 DATED 30/03/2015 PURSUANT TO RECEIPT OF CERTAIN INFORMATION FROM SALES TAX AUTHORITIES THAT THE ASSESSEE STOOD BENEFICIARY OF ALLEGED BOGUS PURCHASES AGGREGATING TO RS.393.92 LACS FROM 4 PARTIES, THE D ETAILS OF WHICH HAVE ALREADY BEEN EXTRACTED IN THE REASONS RE CORDED FOR REOPENING. ONE MORE SUPPLIER NAMELY AADESHWAR TRADING CO. WAS LATER ON ADDED TO THE SAID LIST DURING THE COURSE OF HEARING TAKING T HE AGGREGATE ALLEGED BOGUS PURCHASES TO RS.576.31 LACS. 2.3 DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ST ATUTORY NOTICES WERE ISSUED U/S 142(1) AS WELL AS U/S 143(2) WHEREIN THE ASSESSEE WAS DIRECTED 3 ITA NO.283/MUM/2019 ASIAN CHEMTECH PVT.LTD. ASSESSMENT YEAR-2011-12 TO SUBSTANTIATE THE PURCHASE TRANSACTIONS WITH DOCU MENTARY EVIDENCES. IN SUPPORT, THE ASSESSEE FILED COPIES OF SALE / PURCHA SE INVOICES AND SUBMITTED THAT ADEQUATE STOCK DETAILS WERE MAINTAIN ED AND FURTHER, THE PAYMENTS TO THE SUPPLIERS WERE THOUGH BANKING CHANN ELS AND THEREFORE, THE PURCHASES COULD NOT BE TREATED AS BOGUS PURCHASES. HOWEVER, DISCREPANCIES WERE FOUND IN THE DETAILS SUBMITTED B Y THE ASSESSEE. NOTICES SENT U/S 133(6) TO THE SUPPLIERS ELICITED NO SATISF ACTORY RESPONSE AND THE SAME WERE RETURNED BACK BY POSTAL AUTHORITIES WITH REMARKS NOT KNOWN. ALTHOUGH THE ASSESSEE DEFENDED ITS STAND VIDE REPLI ES DATED 24/02/2016 & 22/03/2016, HOWEVER, THE SAME COULD NOT FIND FAVOR WITH LD. AO WHO ESTIMATED THE ADDITIONS AGAINST THESE PURCHASES @12 .5% IN TERMS OF THE JUDGMENT OF HONBLE GUJARAT HIGH RENDERED IN CIT VS. SIMIT P.SHETH [356 ITR 451] . THE SAME RESULTED INTO IMPUGNED ADDITION OF RS.72 .03 LACS IN THE HANDS OF THE ASSESSEE. 3. THE ASSESSEE AGITATED THE REASSESSMENT PROCEEDIN GS ON LEGAL GROUNDS AS WELL AS QUANTUM ADDITIONS ON MERITS, HOW EVER WITHOUT ANY SUCCESS, BEFORE LD. FIRST APPELLATE AUTHORITY VIDE IMPUGNED ORDER DATED 30/11/2018 WHEREIN THE STAND OF LD. AO WAS CONFIRME D. AGGRIEVED, THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 4. THE LD. AUTHORIZED REPRESENTATIVE FOR ASSESSEE [ AR], SHRI VIMAL PUNMIYA, DRAWING OUR ATTENTION TO THE DOCUMENTS PLACED IN TH E PAPER-BOOK SUBMITTED THAT THE ASSESSEE WAS ENGAGED IN TRADING ACTIVITIES AND ADEQUATE STOCK DETAILS WERE BEING MAINTAINED AND THEREFORE, THE ADDITIONS WERE NOT JUSTIFIED. OUR ATTENTION HAS BEEN DRAWN TO THE FACT THAT THE ASSESSEE WAS 4 ITA NO.283/MUM/2019 ASIAN CHEMTECH PVT.LTD. ASSESSMENT YEAR-2011-12 DEALING IN LOW MARGIN ITEM LIKE METAL AND THE ASSESSEE HAS ALREADY DECLARED GROSS PROFIT OF RS.3.84% IN THE IMPUGNED AY. RELIANCE HAS BEEN PLACED ON VARIOUS DECISION OF TRIBUNAL TO SUBMIT TH AT ADDITIONS WERE ON HIGHER SIDE KEEPING IN VIEW THE ASSESSEES NATURE O F BUSINESS. PER CONTRA, LD. DR SUBMITTED THAT THE ESTIMATE MADE BY LOWER AU THORITIES WAS QUITE REASONABLE AND WOULD REQUIRE NO INTERFERENCE KEEPIN G IN VIEW THE FACTUAL MATRIX. 5. WE HAVE CAREFULLY HEARD THE RIVAL SUBMISSIONS A ND PERUSED RELEVANT MATERIAL ON RECORD INCLUDING JUDICIAL PRONOUNCEMENT S CITED BEFORE US. WE ARE OF THE CONSIDERED OPINION THAT THERE COULD BE N O SALE WITHOUT ACTUAL PURCHASE OF MATERIAL KEEPING IN VIEW THE FACT THAT THE ASSESSEE WAS ENGAGED IN TRADING ACTIVITIES. THE ASSESSEE WAS IN POSSESSION OF PRIMARY PURCHASE DOCUMENTS AND MAINTAINED ADEQUATE STOCK RE CORDS TO RECONCILE THE QUANTITATIVE DETAILS. THE PAYMENTS TO THE SUPPL IERS WERE THROUGH BANKING CHANNELS. THE BOOKS OF ACCOUNTS WERE DULY A UDITED. THE SALES TURNOVER HAS NOT BEEN DISPUTED BY THE REVENUE. AT T HE SAME TIME, THE ASSESSEE FAILED TO CONCLUSIVELY SUBSTANTIATE THE DE LIVERY OF MATERIAL. NOTICES ISSUED U/S 133(6) TO ALL THE SUPPLIERS DID NOT ELIC IT SATISFACTORY RESPONSE. THEREFORE, IN SUCH A SITUATION, THE ADDITION, WHICH COULD BE MADE, WAS TO ACCOUNT FOR PROFIT ELEMENT EMBEDDED IN THESE PURCHA SE TRANSACTIONS TO FACTORIZE FOR PROFIT EARNED BY ASSESSEE AGAINST POS SIBLE PURCHASE OF MATERIAL IN THE GREY MARKET AND UNDUE BENEFIT OF VA T AGAINST SUCH BOGUS PURCHASES, WHICH LOWER AUTHORITIES HAVE RIGHTLY DON E. HOWEVER, IT IS NOTICED THAT THE ASSESSEE IS DEALING IN A LOW MARGIN ITEM L IKE METALS WHICH IS 5 ITA NO.283/MUM/2019 ASIAN CHEMTECH PVT.LTD. ASSESSMENT YEAR-2011-12 SUBJECTED TO LOWER VAT RATE. ANOTHER FACTOR TO BE N OTED IS THAT THE ASSESSEE HAS REFLECTED A GROSS PROFIT RATE OF 3.84% IN THE IMPUGNED AY. THEREFORE, KEEPING IN VIEW THE TOTALITY OF FACTS AN D CIRCUMSTANCES, WE REDUCE THE ESTIMATED ADDITIONS TO 2% OF ALLEGED BOGUS PURCHASES OF RS.5,76,31,450/- WHICH COMES TO RS.11,52,629/-. THE BALANCE ADDITION STANDS DELETED. THE IMPUGNED ORDER STAND MODIFIED T O THAT EXTENT. 6. THE APPEAL STANDS PARTLY ALLOWED IN TERMS OF OU R ABOVE ORDER. ORDER PRONOUNCED IN THE OPEN COURT ON 12 TH APRIL, 2019. SD/- SD/- (SAKTIJIT DEY) (MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 12/04/2019 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