SAI SARNAM ENGINEERS, MUMBAI V. ITO 2(4), KALYAN

ITA 285/MUM/2017

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1108 (ITAT-MUMBAI)
• Duration Of Justice: 3 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-05-2017
• Appeal Filed By: Assessee
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 13-01-2017
• Court: TRIBUNAL
• Department Lawyers: BEENA SANTOSH
• Keywords: Bogus purchase

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI B.R. BASKARAN (AM) I.T.A. NO. 285 /MUM/ 201 7 (ASSESSMENT YEAR 20 1 0 - 1 1 ) M/S. SAI SARNAM ENGINEERS FLAT NO. 1105, PLEASANT PARK SOCIETY YOGI HILLS, MULUND W MUMBAI - 400 080 . VS. ITO WARD 2 (4) 2 ND FLOOR MOHAN PLAZA WAYALE NAGAR KHADKPADA KALYAN WEST PIN - 421 301. ( APPELLANT ) ( RESPONDENT ) PAN NO . AAEFS0726K ASSESSEE BY MISS NEHA PARANJPE DEPARTMENT BY MS. BEENA SANTOSH DATE OF HEARING 2 . 5. 201 7 DATE OF PRONOUNCEMENT 2 .5 . 201 7 O R D E R BOTH THE APPEALS OF THE ASSESSEE ARE DIRECTED AGAINST THE ORDERS PASSED BY LD CIT(A) - 3, THANE AND THEY RELATE TO THE ASSESSMENT YEAR 2010 - 11 AND 2011 - 12. THE ASSESSEE IS AGGRIEVED BY THE DECISION OF LD CIT(A) IN PARTIALLY CONFIRMING THE ADD ITION MADE ON ACCOUNT OF BOGUS PURCHASES IN BOTH THE YEARS. 2. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING ENGINEERING GOODS. THE REVENUE GOT INFORMATION FROM THE SALES TAX DEPARTMENT THAT CERTAIN DEALERS ARE PROVIDING ONLY ACCOMMODATION B ILLS WITHOUT ACTUALLY SUPPLYING THE MATERIALS. THE INFORMATION SUPPLIED BY THE SALES TAX DEPARTMENT ALSO PROVIDED THE DETAILS OF BENEFICIARIES. THE ASSESSEE WAS NAMED AS ONE OF THE BENEFICIARIES IN RESPECT OF BILLS GIVEN BY CERTAIN DEALERS LISTED OUT IN THE ASSESSMENT ORDER. DURING THE YEAR RELEVANT TO AY 2010 - 11, THE ASSESSEE HAS PURCHASED MATERIALS WORTH RS.10,52,204/ - FROM FOUR DEALERS LISTED OUT BY THE SALES TAX DEPARTMENT. 2 IN THE YEAR RELEVANT TO AY 2011 - 12, THE PURCHASES WERE MADE FROM FIVE DEALER S AGGREGATING TO RS.12,48,397/ - . SINCE THE ASSESSEE DID NOT PRODUCE THE DEALERS, THE AO ADDED THE ABOVE SAID AMOUNT TO THE TOTAL INCOME OF THE ASSESSEE BY DISALLOWING THE PURCHASES. THE LD CIT(A) GAVE PARTIAL RELIEF BY CONFIRMING THE ADDITION TO THE EXTE NT OF 25% OF THE VALUE OF PURCHASES REFERRED ABOVE. STILL AGGRIEVED, THE ASSESSEE HAS FILED THIS APPEAL. 3. AT THE TIME OF HEARING, THE LD A.R SUBMITTED THAT THE ASSESSEE HAS PURCHASED IRON AND STEEL ITEM LIKE MS, NUTS, BOLTS ETC. FROM THE ABOVE SAID CONCERN FOR MANUFACTURING ENGINEERING GOODS. SHE SUBMITTED THAT THE MATERIALS WERE SUPPLIED TO THE ASSESSEES PLACE AND THE PAYMENTS HAVE BEEN MADE BY THE ASSESSEE BY WAY OF CHEQUE. SHE SUBMITTED THAT THERE IS NO EVIDENCE TO SHOW THAT THE MONEY HAS FLOWN BACK TO THE ASSESSEE. SHE SUBMITTED THAT THE GROSS PROFIT RATIO DECLARED BY THE ASSESSEE WAS 20.37% AND 22.95% RESPECTIVELY IN AY 2010 - 11 AND 2011 - 12 AND THE SAME IS COMPARABLE TO 18.26% AND 16.68% DECLARED BY THE ASSESSEE IN THE PRECEDING TWO YEARS. SH E FURTHER SUBMITTED THAT THE ASSESSEE COULD NOT HAVE PRODUCED THE GOODS WITHOUT PURCHASING THE MATERIALS. SHE SUBMITTED THAT THE CONCERNED DEALER MIGHT HAVE GIVEN SUCH TYPE OF STATEMENT TO SUIT HIS OWN CONVENIENCE AND HENCE THE SAME SHOULD NOT HAVE BEEN R ELIED UPON BY THE TAX AUTHORITIES. ACCORDINGLY SHE SUBMITTED THAT THERE IS NO JUSTIFICATION ON THE PART OF THE AO IN TREATING THE ENTIRE AMOUNT OF PURCHASES AS BOGUS MERELY BY PLACING RELIANCE ON THE GENERAL INFORMATION PROVIDED BY THE SALES TAX DEPARTMEN T. SHE CONTENDED THAT THE LD CIT(A) SHOULD HAVE FULLY DELETED THE ADDITION. 4. ON THE CONTRARY, THE LD D.R SUBMITTED THAT THE ASSESSEE DID NOT MAINTAIN STOCK REGISTER AND DID NOT PROVE TRANSPORT OF MATERIALS, PAYMENT OF TAXES ETC. SHE FURTHER SUBMITT ED THAT THE ABOVE SAID SUPPLIER HAS CONFESSED BEFORE THE SALES TAX DEPARTMENT THAT IT HAS GIVEN ONLY ACCOMMODATION BILLS. ACCORDINGLY 3 SHE SUBMITTED THAT THE LD CIT(A) WAS JUSTIFIED IN PARTIALLY CONFIRMING THE DISALLOWANCE MADE BY THE AO. 5. I HEARD T HE PARTIES AND PERUSED THE RECORD. I NOTICE THAT THE ASSESSING OFFICER HAS MAINLY PLACED RELIANCE ON THE INFORMATION RECEIVED FROM THE SALES TAX DEPARTMENT TO TAKE ADVERSE DECISION AGAINST THE ASSESSEE. THE LD A.R SUBMITTED THAT THE GROSS PROFIT RATIO DE CLARED BY THE ASSESSEE WAS COMPARABLE WITH THE PRECEDING YEARS. ACCORDINGLY THE LD A.R SUBMITTED THAT THE ADDITION MADE BY THE AO WOULD INCREASE THE G.P RATIO ABNORMALLY. I FIND MERIT IN THE SAID CONTENTIONS. HOWEVER, I NOTICE THAT THE ASSESSEE HAS NOT MAINTAINED STOCK REGISTER NOR DID IT HAVE PROOF FOR TRANSPORTATION OF MATERIALS. THE ASSESSEE ALSO COULD NOT GET ANY CONFIRMATION LETTER FROM THE SUPPLIER NOR DID HE FURNISH ALL THE INFORMATION CALLED FOR BY THE AO. HENCE, I AM OF THE VIEW THAT THE ASSES SEE HAS NOT CONCLUSIVELY PROVED THE GENUINENESS OF THE PURCHASES. AT THE SAME TIME, THERE IS MERIT IN THE CONTENTIONS OF THE ASSESSEE THAT THE ASSESSEE COULD NOT HAVE PRODUCED THE GOODS WITHOUT USING THE MATERIALS. ONE POSSIBILITY, AS CONCLUDED BY LD CIT (A) IS THAT THE ASSESSEE COULD HAVE PURCHASED THE GOODS FROM GREY MARKET AT A LOWER RATE. UNDER THESE SET OF FACTS, I AM OF THE VIEW THAT THE LD CIT(A) WAS JUSTIFIED IN SETTLING THE ISSUE BY ESTIMATING THE PROFIT, WHICH THE ASSESSEE COULD HAVE MADE FROM SU CH KIND OF PURCHASES. HOWEVER, THE ESTIMATE OF PROFIT @ 25% APPEARS TO BE ON THE HIGHER SIDE. ACCORDINGLY I MODIFY THE ORDER PASSED BY LD CIT(A) AND DIRECT THE AO TO RESTRICT THE ADDITION TO 12.5% OF THE IMPUGNED PURCHASE AMOUNT IN ORDER TO TAKE CARE OF DEFICIENCIES, IF ANY. IN MY VIEW, THE SAME WOULD PUT THIS ISSUE AT REST. I ORDER ACCORDINGLY. 4 6. IN THE RESULT, THE APPEALS FILED BY THE ASSESSEE ARE PARTLY ALLOWED. ORDER HAS BE EN PRONOUNCED IN THE COURT ON 2 . 5 . 201 7. SD/ - (B.R.BASKAR AN) ACCOUNTANT MEMBER MUMBAI ; DATED : 2 / 5 / 20 1 7 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT 5. DR, ITAT, M UMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// ( DY./ASSTT. REGISTRAR) PS ITAT, MUMBAI