INCOACH BUILDERS, MUMBAI V. ACIT 23(1), MUMBAI

ITA 2883/MUM/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 8554 (ITAT-MUMBAI)
• Duration Of Justice: 9 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-02-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 20-04-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: BEENA SANTOSH
• Keywords: Bogus purchase
• Section: 147; 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES SMC, MUMBAI BEFORE SHRI R P TOLANI, JUDICIAL MEMBER ITA NO.2883/MUM/2016 ASSESSMENT YEAR : 2009-10 INCOACH BUILDERS, PLOT NO.1, LBS MARG, VIKHROLI(W) MUMBAI- 400 083 PAN AAAFO5110R VS. ACIT 23(1), MUMBAI (APPELLANT) RESPONDENT) APPELLANTS BY : SHRI KIRIT SANGHAVI RESPONDENT BY : MS. BEENA SANTOSH DATE OF HEARING :30.01.2017 DATE OF PRONOUNCEMENT : 03.02.2017 O R D E R PER R P TOLANI, JUDICIAL MEMBER THIS IS ASSESSEES APPEAL. THE FIRST GROUND ABOU T CHALLENGING THE VALIDITY OF INVOKING SECTION 147 IS NOT PRESSED AND IS DISMISSE D. APROPOS THE REMAINING GROUNDS OF APPEAL, READ AS UNDER: 2. UNLAWFUL ESTIMATION OF PROFIT MARGIN THE LEARNED CIT(A) ERRED IN LAW AND ON FACTS AND CI RCUMSTANCES OF THE CASE IN CONFIRMING THE ADDITIONS OF RS.98,10 3/- AND RS.8,20,300/- BEING 20% OF VARIOUS ALLEGEDLY BOGUS PURCHASES REFERRED TO IN THE ASSESSMENT ORDER. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E DEALS IN BODY BUILDING OF VEHICLES. ON THE INFORMATION OF DIG (INVESTIGATIO N) AND MAHARASHTRA VAT AUTHORITIES, THE AO FOUND THAT THE ASSESSEE WAS IND ULGING IN ACCOMMODATION PURCHASES. THE ASSESSMENT WAS REOPENED BY ISSUE OF NOTICE U/S. 148. THE LEARNED ITA NO.2883/MUM/2016 INCOACH BUILDERS 2 AO FOUND THAT THE ASSESSEE HAS PURCHASED MS SHEETS FROM GANESH TRADING CO. AT RS.4,90,516/- AND OTHER PARTIES OF RS.25,89,359/- A ND RS.15,12,394/-. THESE PARTIES WERE FOUND TO BE NON-EXISTING. THE AO WAS O F THE VIEW THAT MATCHING THE MANUFACTURING AND PROCESSING, THE ASSESSEE HAS PURC HASED M S SHEETS BUT THE BILLS/DETAILS PRODUCED WERE FOUND TO BE BOGUS AND O N ESTIMATE BASIS 20% OF ELEMENT THEREON WAS DISALLOWED U/S. 69 AMOUNTING TO RS.98,103/-. AGGRIEVED, THE ASSESSEE PREFERRED FIRST APPEAL AND LEARNED CIT(A) UPHELD THE ORDER OF THE AO BY FOLLOWING OBSERVATION: AS NARRATED EARLIER, THE LD. A.O. IN THIS CASE 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 P RODUCED DURING THE ASSESSMENT PROCEEDINGS. NOT HAVING DOUBTED THE CON SUMPTION/SALES, THE MOTIVE BEHIND OBTAINING BOGUS BILLS THUS, APPEARS T O BE INFLATION OF PURCHASE PRICE SO AS TO SUPPRESS TRUE PROFITS. AS MENTIONED ABOVE, THE AO HAD NEVER DISPUTED OR EXAMINED THE SALES. ONCE SALES ARE ACCEPTED, CORRESPONDING PURCHASES HAVE TO BE CONSIDERED AND C ANNOT BE DISREGARDED IN TOTALITY. LOOKING TO THE MARKET TRE ND, THE APPELLANT MAY HAVE MADE PURCHASES FROM OTHER PARTIES WHICH WERE N OT RECORDED IN THE BOOKS, AND TOOK ONLY BILLS FROM THESE PARTIES AS AC COMMODATION, TO EXPLAIN PURCHASES. THE PURCHASES THEMSELVES ARE NO T BOGUS BUT THE PURCHASES PARTIES SHOWN IN BOOKS ARE. THEREFORE, T HE ENTIRE PURCHASE FROM THESE PARTIES CANNOT BE ADDED AS BOGUS AND WHA T NEEDS TO BE TAXED IS THE PROFIT ELEMENT EMBEDDED IN SUCH TRANSA CTIONS. ESTIMATIONS RANGING FROM 12.5% TO 25% HAVE BEEN UPHELD BY THE H ONBLE GUJARAT HIGH COURT, DEPENDING UPON THE NATURE OF THE BUSINE SS. AS HELD IN THE CASE OF SIMIT P SHETH (SUPRA), NO UNIFORM YARDSTICK COULD BE APPLIED TO ESTIMATE THE RATE OF PROFIT AND IT VARIES WITH THE NATURE OF BUSINESS. TAKING ALL FACTS INTO CONSIDERATION AS ALSO THE FIN DINGS OF THE HONBLE COURTS ON THIS ISSUE AND THE FACT THAT DIRECT ONE T O ONE RELATIONSHIP BETWEEN PURCHASES AND SALES HAVE NOT BEEN ESTABLISH ED, I AM OF THE VIEW THAT THE LD. AO WAS JUSTIFIED IN ESTIMATING 20 % AS THE PROFIT EMBEDDED IN IMPUGNED PURCHASES SHOWN FROM THESE TAI NTED PARTIES. THEREFORE, I FIND NO INFIRMITY IN THE ORDER OF THE LD. AO, AND THEREFORE ADDITION MADE BY THE LD. AO IS CONFIRMED, AND GROUN D NO.2 OF THE APPELLANT ARE DISMISSED. 3. AGGRIEVED, THE ASSESSEE IS IN APPEAL. THE LEARN ED COUNSEL FOR THE ASSESSEE CONTENDED THAT : ITA NO.2883/MUM/2016 INCOACH BUILDERS 3 I) THE DISALLOWANCE HAS BEEN MADE ONLY ON PRESUMPTION, THEREFORE SAME DESERVES TO BE DELETED. II) ONLY 5% VAT IS LEVIABLE ON MS SHEETS IN MAHARASHTRA , WHICH IS CLEAR FROM THE COPIES OF INVOICES OF GANESH TRADING CO. III) THE LEARNED CIT(A) HAS INDICATED THAT ESTIMATION OF SUCH PROFITS RANGES FROM 12.5% TO 25% HOWEVER, IN THIS CASE THE VAT ELEMENT CHARGED BEING 5% DISALLOWANCE IS EXCESSIVE, IT MAY BE SUITABLY REDUCED. 4. THE LEARNED DR ON THE OTHER HAND, CONTENDS THAT: I) THE DISALLOWANCE HAS NOT BEEN MADE ON PRESUMPTION B UT ON FINDING THAT THE ASSESSEE WAS PROCURING BOGUS BILLS AS THE SELLE RS MENTIONED IN THE INVOICES WERE NON-EXISTENT. II) THE BILLS OF GANESH TRADING CO. ITSELF IS BOGUS, TH EREFORE, MENTIONING OF VAT @5% DOES NOT INSPIRE ANY CONFIDENCE. III) THE ESTIMATION IS JUSTIFIED AND REASONABLE. 5. I HAVE HEARD THE PARTIES AND HAVE GONE THROUGH T HE MATERIAL AVAILABLE ON RECORD. IN MY CONSIDERED VIEW THE DISALLOWANCE IN QUESTION HAS BEEN MADE BASED ON APPROPRIATE INFORMATION FROM DG (INVESTIGATION) AND MAHARASHTRA VAT AUTHORITIES. THEREFORE, THERE IS NO MERIT IN THE P LEA THAT THE DISALLOWANCE IS BASED ONLY ON PRESUMPTION. I AM OF THE OPINION THAT INTE REST OF JUSTICE WOULD BE SERVED IF DISALLOWANCE OF 20% IS REDUCED TO 15%. THUS, THE A SSESSEE GETS PART RELIED. ITA NO.2883/MUM/2016 INCOACH BUILDERS 4 6. IN THE RESULT, THE ASSESSEES APPEAL IS PARTLY A LLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 3 RD FEBRUARY, 2017. SD/- (R P TOLANI) J UDICIAL MEMBER MUMBAI, DATED : 3 RD FEBRUARY, 2017. SA COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE C I T(A), MUMBAI. 4. THE C I T 5. THE DR, SMC BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, MUMBAI