SHA TARACHAND FOJMAL & CO., MUMBAI V. ITO WD 17(3)(3), MUMBAI

ITA 2930/MUM/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 1471 (ITAT-MUMBAI)
• Duration Of Justice: 8 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-12-2016
• Appeal Filed By: Assessee
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 21-04-2016
• Court: TRIBUNAL
• Department Lawyers: M C OMI NINGSHEN
• Assessee Lawyers: M K PATEL; K S CHOKSHI
• Keywords: Bogus purchase
• Section: 143(3)

Judgement Text

IN THE INCO ME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI BEFORE SHRI B.R. BASKARAN, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA , JUDICIAL MEMBER I.T.A. NO. 29 30/M/2016 (ASSESSMENT YEAR: 2010 - 2011 ) I.T.A. NO.29 31/M/2016 (ASSESSMENT YEAR: 2009 - 2010 ) SHA TARACHAND FOJMAL & CO, 17/19, SAQLANINIA TOWER, KHADAK STREET, MUMBAI - 009. / VS. INCOME TAX OFFICER, WARD - 17(3)(3 ), R.NO.123, AAYAKAR BHAWAN, M.K. ROAD, MUMBAI - 20. ./ PAN : AANFS1045C ( / APPELLANT) .. ( / RESPONDENT ) / APPELLANT BY : SHRI K.S. CHOKSHI & SMT. M.K. PATEL / REVENUE BY : SHRI M.C. OMI NINGSHEN, DR / DATE OF HEARING : 07.12 .2016 / DATE OF PRONOUNCEMENT : 23 .12.2016 / O R D E R PER AMIT SHUKLA, JM: THE AFORESAID APPEALS HAVE BEEN FILED BY THE ASSESSEE AGAINST SEPARATE IMPUGNED ORDERS OF EVEN DATE , 5.2.2016 , PASSED BY LD CIT (A) - 28, MUMBAI FOR THE QUANTUM OF ASSESSMENT PASSED U/S 143(3) R.W.S 147 OF THE ACT FOR THE AYS 2009 - 2010 AND 2010 - 2011. SINCE, THE COMMON ISSUES ARE INVOLVED IN BOTH THE APPEALS THEREFORE, SAME WERE HEARD TOGETHER AND ARE BEING DISPOSED OFF BY WAY OF THIS CONSOLIDATED ORD ER. 2. THE COMMON ISSUES RAISED IN BOTH THE APPEALS RELATE TO ADDITION ON ACCOUNT OF GROSS PROFIT (GP) RATIOS OF 5.09% AND 3.64% ON TOTAL ALLEGED BOGUS PURCHASES MADE FROM TWO PARTIES . THE ADDITIONS WHICH HAVE BEEN CHALLENGED BY THE ASSESSEE ARE (I) RS. 10,99,538/ - FOR THE AY 2009 - 2010 BY APPLYING GP RATE OF 5.09% ; AND (II) RS.8,21,577/ - FOR THE AY 2010 - 2011 BY APPLYING GP RATE OF 3.64%. 3. THE FACTS IN BRIEF ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF TRADING IN ALUMINUM AND ALUMINUM PRODUCTS AND ALL TYPES OF FERROUS AND NON - FERROUS 2 METALS. AN INFORMATION WAS RECEIVED FROM THE INVESTIGATION WING OF THE DEPARTMENT THAT ASSESSEE HAD ENTERED INTO BOGUS PURCHASE TRANSACTIONS WITH CERTAIN PARTIES WHO HAVE BEEN LISTED BY THE SALES TAX DEPARTMENT IN THEIR WEBSITE IE WWW.MAHAVAT.GOV.IN AS HAWALA DEALERS IN PROVIDING BOGUS BILLS. IN THE AYS 2009 - 2010 AND 2010 - 2011 ASSESSEE HAD MADE ALLEGED BOGUS PURCHASES FROM THE FOLLOWING PARTIES: SL.NO. NAMES OF THE PARTIES PURCHASES IN AY 2009 - 10 (AMOUNT IN RS.) PURCHASES IN AY 2009 - 10 (AMOUNT IN RS.) 1. R.R. ENTERPRISES 75,09,064/ - 89,68,665/ - 2. JAGDISH METAL DEPOT 1,40,92,862/ - 1,36,02,137/ - 4. IN RESPONSE TO THE QUERY RAISED BY THE AO TO PROVE THE GENUINENESS OF THE PURCHASES , ASSESSEE FURNISHED COPY OF LEDGER ACCOUNT, COPY OF BILLS, PAYMENT DETAILS FROM BANK STATEMENTS ETC. HOWEVER, ASSESSEE COULD NOT PRODUCE THE PURCHASE PARTIES AS REQUIRED BY THE AO. AO FURTHER OBSERVED THAT THE A SSESSEE COULD NOT FURNISH VITAL DOCUMENTS SUCH AS DELIVERY CHALLANS, TRANSPORT RECEIPTS, OCTROI RECEIPT FOR PAYMENT OF OCTROI DUTY, RECEIPT OF WEIGHBRIDGE FOR WEIGHTMENT OF GOODS, EXCISE GATE PASS, GOODS INWARD REGISTERED MAINTAINED AT GODOWN/WAREHOUSE/STO RAGE HOUSE. AFTER DETAILED DISCUSSION, AO DETERMINED THE INCOME FROM ALLEGED BOGUS PURCHASES BY APPLYING ESTIMATED GP RATE OF 12.5% FOLLOWING THE JUDGMENT OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. SIMIT P. SHETH (2013) 356 ITR 451 (GUJ.) . AGGRIEVED BY THE ASSESSMENT ORDER , ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. 5. DURING THE APPELLATE PROCEEDINGS BEFORE THE FAA, AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, LD CIT (A) RESTRICTED THE ADDITION BY APPL YING THE GP RATE AS DISCLOSED BY THE ASSESSEE IN RELATION TO OTHER PURCHASES MADE BY THE ASSESSEE WHICH WAS 3.64% IN THE AY 2010 - 2011 AND 5.09% IN THE AY 2009 - 2010. THE RELEVANT OBSERVATION AS GIVEN BY THE CIT (A) IN THE AY 2009 - 2010 READS AS UNDER: - 5.1 0. IN THE INSTANT CASE, THE APPELLANT IS NOT IN A POSITION TO PROVE THE EXISTENCE OF THE SUPPLIERS. THERE IS ENOUGH CIRCUMSTANTIAL EVIDENCE CASTING A DOUBT ON THE NATURE OF THE TRANSACTION. I AM OF THE FIRM BELIEF THAT THE APPELLANT HAD MADE CASH PURCHAS ES FROM OTHER PARTIES WHICH WERE NOT RECORDED IN THE BOOKS. THE APPELLANT 3 TOOK ONLY BILLS FROM THESE 2 PARTIES AS ACCOMMODATION TO EXPLAIN THE PURCHASES. HOWEVER, THE ENTIRE PURCHASE FROM THESE 2 PARTIES CANNOT BE ADDED AS BOGUS AND WHAT NEEDS TO BE TAXE D IS THE PROFIT ELEMENT EMBEDDED IN SUCH TRANSACTION. THE AO HAS DISALLOWED 12.5% OF THESE BOGUS PURCHASES. I FIND THAT THE APPELLANT IN HIS GROUNDS OF APPEAL IN GROUND NO.5 HAS HIMSELF REQUESTED FOR A RESTRICTION OF THE DISALLOWANCE TO 5.09% BEING THE G P DURING THE YEAR. ON A CONSPECTUS OF FACTS, I AM OF THE OPINION THAT THE DISALLOWANCE MADE BY THE AO SHOULD BE REASONABLY RESTRICTED TO THE GP RATE OF THE APPELLANT DURING THE YEAR WHICH IS 5.09%. I THEREFORE DIRECT THE AO TO ESTIMATE THE DISALLOWANCE B Y ADOPTING 5.09% OF RS. 2,16,01,926/ - . THE DISALLOWANCE MADE BY THE AO IS RESTRICTED TO A SUM OF RS. 10,99,538/ - . GROUND NO.3, 4 & 5 ARE PARTLY ALLOWED. 6. BEFORE US, LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAD PRODUCED ENTIRE PURCHASE BI LLS, DETAILS OF PAYMENTS MADE THROUGH ACCOUNT PAYEE CHEQUES, COPY OF BANK STATEMENT HIGHLIGHTING THE PAYMENT MADE TO THE SAID PARTIES ETC. ONCE THE SOURCE OF PURCHASES ARE PROVED FROM THE BOOKS, WHICH ARE BACKED BY INVOICES AND PAYMENTS ARE BY ACCOUNT PAYEE CHEQUES, THEN NO FURTHER ADDITION SHOULD BE MADE. IN SUPPORT OF THE SAME, LD COUNSEL FOR THE ASSESSEE SUBMITTED THE COPY OF THE LEDGER ACCOUNTS, COPIES OF THE BANK STATEMENTS E TC WHICH ARE AVAILABLE IN THE PAPER BOOK. HE ALSO RELIED UPON CERTAIN DECISIONS, THE COPIES OF WHICH ARE ALSO AVAILABLE IN THE PAPER BOOK FILED BEFORE US. 7. ON THE OTHER HAND, LD DR STRONGLY RELIED UPON THE ORDER OF THE CIT (A) AND SUBMITTED THAT ONCE TH E PARTIES HAVE NOT BEEN PRODUCED AND THEY ARE FOUND TO BE ENGAGED IN THE PROVIDING ACCOMMODATION BILLS, THEN, GENUINENESS OF THE PURCHASES CANNOT BE ACCEPTED. IN ANY CASE, IT IS A CASE OF ISSUANCE OF ACCOMMODATION BILLS THEREFORE, THE LD CIT (A) HAS RIGHT LY APPLIED THE GP RATIO ON SUCH PURCHASES WHICH HAS A HIGHLY REASONABLE BASIS. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL PLACED ON RECORD. IT IS AN UNDISPUTED FACT THAT THE PURCHASES MADE FROM THE SAID TWO PARTIES , VIZ . , (I) R.R. ENTERPRISES ; AND (II) JAGDISH METAL DEPOT , WERE FOUND TO BE INVOLVED IN ISSUING BOGUS SALE BILLS. ONCE THAT IS SO, THEN ASSESSEE CAN REBUT SUCH MATERIAL EITHER BY PRODUCING THE SAID PARTIES OR BY GIVING EVIDENCES REGARDING DELIVERY OF GOODS PUR CHASED FROM THE SAID PARTIES. AS NOTED BY THE AO, THE ASSESSEE COULD NOT PRODUCE ANY OF THE VITAL DOCUMENTS TO MAKE THE CASE IN ITS FAVOUR BY PROVING THAT ACTUAL GOODS WHICH HAVE BEEN PURC HASED FROM THESE PARTIES HAD BEEN DELIVERED TO THE ASS ESSEE. IN SU CH A CASE, THE PRE PONDERANCE OF PROBABILITY IS THAT , 4 ASSESSEE MUST HAVE ISSUED THE CHEQUE S FOR PURCHASE OF GOODS FROM THESE PARTIES AND IN TURN THE ASSESSEE MUST HAVE RECEIVED CASH FROM THEM FOR MAKING PURCHASES FROM DIFFERENT PARTIES IN THE GREY MARKET. IN SUCH CASES , THERE IS ALWAYS A CHANCE OF INFLATION OF PURCHASES IN THE BOOKS OF ACCOUNT WHICH CAN BE FACTORED BY APPLYING GP RATE IN THE CASE OF THE TRADER. THE LD CIT (A) HAS BEEN VERY REASONABLE BY APPLYING THE ACTUAL GP RATIO EARNED BY THE ASSESSEE ON OTHER PURCHASES / TRADING DURING THE YEAR. THEREFORE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT (A) AND THE SAME IS AFFIRMED. 9. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 2 3 R D DECEMBER, 2016. S D / - S D / - ( B.R. BASKARAN ) (AMIT SHUKLA) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; 23 .12.2016 . . ./ OKK , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI