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

ITA 2939/MUM/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 8397 (ITAT-MUMBAI)
• Duration Of Justice: 9 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-02-2017
• Appeal Filed By: Assessee
• Bench Allotted: H
• Next Hearing Date: 24-01-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 21-04-2016
• Court: TRIBUNAL
• Department Lawyers: M C OMI NINGSHEN
• Assessee Lawyers: RAHUL K HAKANI
• Keywords: Bogus purchase
• Section: 143(3); 145; 6

Judgement Text

INCOME TAX APPELLATE TRIBUNAL,MUMBAI - H BENCH BEFORE S/SH RI . D.T. GARASIA, JUDICIAL MEMBER & ASHWANI TANEJA, ACCOUNTANT MEMBER ITA NO. 2939/MUM/2016 ASSESSMENT YEAR 2009 10 M/S SAI SARNAM ENGINE ERS FLAT NO. 1105 - 1106, PLEASANT PARK YOGI HILLS, MULUND WEST MUMBAI 400 080 PAN NO. AAEFS 0726 K V. INCOME TAX OFFICER, 2 ND FLOOR, WARD 2(4) KALYAN, MOHAN PLAZA, WAYALE NAGAR, KHADAKPADA, KALYAN WEST 421 301 (APPELLANT ) (RESPONDENT) APPE LLANT BY SHRI RAHUL K. HAKANI & SHRI SASHANK DUNDU RESPONDENT BY SHRI M.C. OMI NINGSHEN DATE OF HEARING : 2 4 .01.2017 DATE OF PRONOUNCEMENT : 17 . 02 .2017 O R D E R PER D.T. GARASIA, JUDICIAL MEMBER : 1. THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) DATED 04.01.2016 FOR THE ASSESSMENT YEAR 200 9 10. 2. FOLLOWING GROUNDS ARE RAISED IN THE APPEAL WHICH READ AS UNDER: - I. THE LD. COM MISSIONER OF INCOME TAX (APPEALS) III, THANE ERRED IN PASSING THE ORDER DATED 04 - 01 - 2016 DISALLOWANCES @ 25% OF RS.26,3 8 , 470/ - WORKS OUT @ RS.6,59,617/ - ARE RETAINED & RELIEF IS PARTLY GIVEN @ RS.19 , 78 , 853/ - IN PLACE OF FULL RS . 26 , 38 , 470/ - . THE APPE LLANT PRAYS THAT ADDITION OF RS.26 , 38 , 470/ - MADE U/S 69 OF THE I.T. ACT BY I.T.O. WARD 2(4) AT KALYAN ON A/C OF SO CALLED HAWALA PURCHASES BE DELETED. II. AD DITIONS MADE BY I.T.O @ RS.26,3 8 , 470/ - & LD.CIT(A) III AT THANE RETAINED ADDITION @ 25% @ RS.6 , 59 , 6 17/ - ARE UNJUSTIFIED, MAY KINDLY BE DELETED. ITA.NO. 2 939/MUM/2016 M/S. SAI SARNAM ENGINEERS 2 3. THE SHORT FACTS OF THE CASE ARE AS UNDER . THE ASSESSEE HAS FILED THE RETURN DECLARING INCOME OF R S .2 , 77 , 139/ - AND WAS FILED ON 24.09.2009. THE ASSESSEE IS IN BUSINESS OF MANUFACTURING OF ENGINEERING GOODS. THE RETURN WAS ACCEPTED U/S. 143(3) ON 12.11.2010. SUBSEQUENTLY THE INFORMATION WAS RECEIVED FROM SALES TAX DEPARTMENT , MAHARASHTRA GIVING NAMES AND ADDRESS AND OTHER DETAILS OF CERTAIN PERSONS WHO HAVE PROVIDED ENTRIES FOR BOGUS PURCHASE BILLS TO A LARGE NUMBER OF TAX PAYERS. THE PERSONS WHO HAVE PROVIDED THE ENTRIES TO VARIOUS BENEFICIARIES HAVE F ILED THE AFFIDAVIT BEFORE THE SALES TAX DEPARTMENT STATING THEREIN THAT THEY HAVE MERELY PROVIDED ENTRIES TO TH E SE BENEFICIARIES AND NO GOODS AS MENTIONED IN T HE PURCHASE BILL ISSUED BY THEM WER E INFACT DELIVERED BY THEM TO THOSE BENEFICIARIES. THE NAME OF THE ASSESSEE APPEARS IN THE LIST OF PERSONS WHO OBTAINED THE BOGUS PURCHASE BILLS FROM THE ENTRY PROVIDER . THE ASSESSEE HAS TAKEN FOLLOWING PURCHASE BILLS F ROM THE VARIOUS PARITIES WHICH READ AS UNDER: - NO NAME OF THE ENTRY PROVIDER AMOUNT IN THE BILLS TAKEN BY THE ASSESSEE IN (1) S S ENTERPRISES RS. 5,65,449/ - (2) NATIONAL TRADING CO. RS.6,02,339/ - (3) SHRADHHA TRADING CO. RS.2,56,501/ - (4) SKAND INDUSTRIS RS .2,38,913/ - (5) CENTURINA SALES CORPORATION RS.4,61,534/ - (6) VICTOR TRADERS RS.2,59,081/ - (7) NAVKAR CORPORATION RS.2,03,589/ - (8) V 3 ENTERPRISES RS.51,064/ - TOTAL RS.26,38,470/ - 4. THE ASSESSING OFFICER HAS GIVEN SHOW CAUSE NOTICE AND HELD THAT ASSESSEE WA S ASKED TO PROVE THE PURCHASE FROM THE SELLER TO PROVE THE GENUINENESS OF THE PURCHASE FROM THE ABOVE HAWALA DEALERS. HOWEVER ASSESSEE FAILED TO PROVE THE SAME. THEREFORE ASSESSING OFFICER HAS REJECTED THE BOOK RESULT U/S 145 OF THE I.T. ACT AND DISALLO WED THE DETAILS OF PURCHASE FROM THE ABOVE PARTIES AMOUNT TO RS.26 , 38 , 470/ - . (XI) CONSIDERING THE TOTALITY OF THE FACTS OF THE CASE , I AM OF THE CONSIDERED OPINIO N TO DISALLOW 25% AS INFLATED PURCHASES ON THE TOTAL PURCHASES MADE FROM ITA.NO. 2 939/MUM/2016 M/S. SAI SARNAM ENGINEERS 3 UNVERIFIABLE / HAWA LA D EALERS. THE DISALLOWANCE @ 25 % OUT OF UNVERIFIABLE PURCHASES FROM HAWALA DEALERS HAD BEEN UPHELD IN THE FOLLOWING CASES: (1) SANJAY OIL CAKE INDUSTRIES VS. CIT ( 2008) 316 ITR 274 (GUJ) (2) VIJAY PROTEIN LTD VS. ACIT 58 ITD 428 (ABD) (3) M/S NAND KISHORE MEGHR AJ JEWELLERS, JAIPUR CO.NO.105/JP/09 ARISING OUT OF ITA NO.433/JP/2009 BY ITAT JAIPUR (4) M/S. TRIDENT JEWELLERS ITAT JAIPUR ITA NO. 552/JP/2013. IN VIEW OF THE ABOVE STATED FACTS, THE DISALLOWANCE @ 25 % OF RS.26,38,470/ - WORKS OUT TO RS.6,59,617/ - IS SUSTAI NED AND THE SAME IS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. THE APPELLANT GET RELIEF OR (RS.26,38,470 - 6,59,617/ - ) = RS.19,78,853 5. THE LD. DR SUBMITTED BEFORE US THAT THE ASSESSEE WAS ASKE D TO PRODUCE THE HAWALA DEALERS, THE NOTICE U/S .133 ( 6 ) WAS RE TURNED BACK WITH THE REMARK UNKNOWN / UNCLAIM ED / REFUSED . THEREFORE WHATEVER PURCHASES MADE BY THE ASSESSEE IS NOT GENUINE. THEREFORE WHEN THE ASSESSEE DID NOT PROVIDE ANY INFORMATION BEFORE THE ASSESSING OFFICER THE ASSESSING OFFICER WAS JUSTIFIED AND THE CIT(A) IS NOT JUSTIFIED IN DE LETING THE ADDITION AND MOREOVER THE ASSESSING THE CIT(A) IS WRONGLY APPLIED TO THE DECISION OF THE SA NJAY OIL CAKE INDUSTRIES 316 ITR 27 4 (GUJ) . 6. ON THE OTHER HAND LD.AR SUBMITTED THAT ALL THE PAYMENTS MADE TO THE SUPPLIER S BY ACCOUNT PAY CHEQUE SUPPORTING BY ENTRIES IN BANK STATEMENTS OF THE ASSESSEE. IT IS ALSO NOT PROVED THAT THE ASSESSEE HAS RECEIVED BACK THIS AMOUNT THE ASSESSEE HAS MADE THE SALES. THEREFORE WHEN PURCHASE D SALES CANNOT BE MADE , THE ASSESSEE DID NOT P RODUCE THE HAWALA DEALERS BEFORE ASSESSING OFFICER FOR CROSS VERIFICATION. THE LD .AR SUBMITTED THAT THE ABOVE HAWAL A DEALERS HAVE FILED AFFIDAVIT, M OREOVER THE GROSS PROFIT IS ABOUT 18.26%. THEREFORE THE CIT(A) IS RIGHTLY DISALLOWED 25% OF THE PURCHASE. L D . A R HAS SUBMITTED THAT CIT(A) HAS WRONGLY APPLIED BUT IN THIS CASE THE GROSS PROFIT ADDITIONS SHOULD HAVE BEEN MADE. THE LD.A R SUBMITTED THAT ASSESSEE HAS ASKED FOR THE CROSS EXAMINATION OF THE PERSONS WHO HAVE FILED THE AFFIDAVIT BUT CROSS EXAMINATION WAS NOT GIVE. THE LD .A R RELIED UPON THE DECISION OF HONBLE GUJARAT HIGH COURT AS HELD THA T THE ONLY PROFIT ELEMENT SHOULD BE ADDED TO THE TOTAL INCOME OF THE ASSESSEE. THE LD .AR SUBMITTED THAT ASSESSEE HAS RECEIVE D THE GOODS OTHER THAN ITA.NO. 2 939/MUM/2016 M/S. SAI SARNAM ENGINEERS 4 THE PERSONS WHO HAVE ISSUED THE BILL OF SUCH GOODS. THEREFORE ONLY PROFIT ELEMENT CAN BE ADDED. 7. WE HAVE HEARD THE RIVAL CONTENTION OF BOTH THE PARITIES. LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE WE FIND THAT IN THIS CASE THE CIT(A) HAS HELD THAT ASSESSEE HAS R ECEIVED THE GOODS FROM THE PARTIES OTHER THAN THE PERSONS WHO HAVE ISSUED THE BILLS OF SUCH GOODS. THOUGH THE PURCHASE S WERE SHOWN HAVE BEEN MAD E BY MAKING PAYMENTS TO HAWALA DEALERS BUT THE GOODS MUST HAVE COME FROM GRAY MARKET. THEREFORE SUCH CIRCUMSTA NCES CHANGES OF PURCHASE D COSTS BEING INCURRED CANNOT BE RULED OUT. WE HAVE ALSO GONE THROUGH THE ORDER OF THE ASSESSING OFFICER WHEREIN ASSESSEE HAS TRIED TO DEMONSTRATE THAT ASSESSEE HAS MADE PURCHASE FROM H IS SUPPL IERS WHO ARE REGISTER ED BY PURCHASE B ILLS AND CHALLANS AND THE CONCERNED BILLS WERE SUBMITTED WITH ITO. ALL THE PAYMENTS WERE MADE BY THE CROSS PAY CHEQUES. THE COPY OF THE BANK STATEMENT WAS SUBM ITTED. THEREFORE IT WAS PROVED BEYOND DOUBT THAT ASSESSEE HAS MADE PURCHASE ON MATERIAL AND AS SESSEE HAS ALSO AFFECTED THE SALES. IT IS NOT THE CASE OF THE ASSESSING OFFICER THAT ASSESSEE HAS MADE PAYMENT OF BOGUS PURCHASE AND THE CHEQUE AMOUNT WAS RECEIVED BACK BY THE ASSESSEE. THE ONLY DISPUTE IN THIS CASE THAT ASSESSEE COULD NOT PRODUCE THE SO CALLED HAWALA DEALERS WHO HAVE GIVEN THE BILL. THEREFORE WE ARE OF THE VIEW THAT AS PER THE JUDGMENT OF VARIOUS HIGH COURT S AND TH E TRIBUNAL WE ARE OF THE V IEW THAT IN SUCH BOGUS PURCHASES WHAT CAN BE ADDED IS ONLY THE PROFIT ELEMENT IS TO BE ADDED. WE FIND THAT IN THE CASE OF BHOLANATH POLY FAB PVT. LTD. 355 ITR 290 (GUJ) WHEREIN THE FACTS WERE THAT THE PURCHASES WERE MADE FROM THE BOGUS PARTIES SINCE THE NOTICE ISSUED BY AO TO THESE PARTIES WERE RETURNED OR UNSERVED AND THE ASSESSEE WAS UNABLE TO PROD UCE THE CONFIRMATION FROM THE SE PART IES . THE TRIBUNAL HAS HELD THAT THOUGH PURCHASE S WERE MADE FROM BOGUS PARTIES , NE VERTHELESS THE PURCHASES THEMSELVES WERE NOT BOGUS AS THE ENTIRE QUA NTITY OF OPENING STOCK , PURCHASE S AND SALES WERE TALLYING . HENCE ONL Y THE PROFIT MARGIN EMBEDDED IN SUCH AMOUNT WOULD BE SUBJECTED TO TAX. WE SIMILARLY FIND IN THIS CASE THAT ASSESSEE HAS NOT PRODUCED THE PARTIES BUT ASSESSEE DID PRODUCE ALL THE BILLS AND VOUCHERS BEFORE THE ASSESSING OFFICER AND WHICH WERE SUBJECT TO AUD IT. THE ASSESSEE HAS PRODUCED THE EVIDE NCE TO SHOW THAT ALL THE PAYMENTS WERE MADE BY CROSS PAY CHEQUES AND COPY OF THE BANK STATEMENTS WAS ALSO SUBMITTED. THE ASSESSEE HAS ALSO MADE PURCHASE OF MATERIALS AND AFFECTED THE SALES WHICH WERE REFLECTED IN FI NAL STATE ME NT OF THE ASSESSEE . TREATING ACCOUN T BALANCE SHEET WERE SUBMITTED , THEREFORE WE ARE OF THE VIEW THAT ENTIRE PURCHASE CANN OT BE SUBJECTED TO TAX ONLY PROFIT ELEMENT EMBEDDED THEREIN IS TO BE TAXED. WE ALSO FIND IN CASE OF CIT V. S IMT SHETH (201 3) 38 TAXMANN.COM 385 (GUJ) WHEREIN IT WAS HELD THAT SOME OF THE ITA.NO. 2 939/MUM/2016 M/S. SAI SARNAM ENGINEERS 5 SUPPLIER OF THE STEEL HAD NOT SUPPLIED ANY GOOD S BUT ONLY PROVIDED SALES BILLS AND H ENCE THE PURCHASE FROM THE SAID PARTY WAS HELD TO BE BOGUS. THE CIT(A) IN THAT CASE HAS FOUND THAT THE PURC HASE WERE NOT MADE FROM THE NAMED PARTIES BUT THE OTHER PARTIES. THEREFORE THE TRIBUNAL HAS SUSTAINED THE ADDITION TO THE EXTENT OF 12.5%. WE FIND THAT IN THIS CASE CONSIDERING THE FACTS OF THIS CASE THE ASSESSEE HAS SHOWN THE GROSS PROFIT AT 18% BUT AFT ER CIT(A) ORDER THE GROSS PROFI T IS 22.83% WHICH IS VERY HIGHER. THEREFORE THE INTEREST OF JUSTICE WE SUSTAIN THE ADDITION TO THE EXTENT OF 20% OF THE GROSS PROFIT . THEREFORE CONSIDERING THE FACTS OF THIS CASE WE ARE OF THE VIEW THAT GROSS PROFIT AT 20% IS REASONABLE AND WE MODIFY THE ORDER OF CIT(A) ACCORDINGLY. 8. IN THE RESULT THE APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 17.02.2017 SD/ - SD/ - ( ASHWANI TANEJA ) ( D.T. GARASIA ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI , DATED : 17 .0 2 .2017 . VSSGB, 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 . BY ORDER, (DY./ASSTT. REGISTRAR) ITAT, MUMBAI