U. B. STEEL, MUMBAI V. ITO 17(3)(5), MUMBAI

ITA 295/MUM/2017

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0223 (ITAT-MUMBAI)
• Duration Of Justice: 5 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-06-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2009-2010
• Appeal Filed On: 13-01-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: B S BIST
• Keywords: Reopening of assessment; Bogus purchase; Accommodation entries; Borrowed satisfaction
• Section: 143(3); 142(1); 133(6); 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH F MUMBAI BEFORE SHRI MAHAVIR SINGH (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 295 / MUM/20 17 ASSESSMENT YEAR: 2009 - 10 M/S. U.B. STEEL VS. INCOME TAX OFFICER 17(3)(5) 7 TH FLOOR, INDIAN GLOBE CHAMBER MUMBAI 142 W.H. MARG, FORT MUMBAI 400001 PAN NO. AAAFU0313Q (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI BHUPENDRA SHAH, AR REVENUE BY: SH RI B.S. BIST, DR DATE OF HEARING : 06/04 /2017 DATE OF PRONOUNCEMENT: 22/06/2017 ORDER PER N.K. PRADHAN, AM THIS IS AN APPEAL FILED BY THE ASSESSEE . THE RELEVANT ASSESSMENT YEAR IS 2009 - 10 . THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER (APPEALS) 28, MUMBAI AND ARISES OUT OF ORDER U/S 143(3) R.W.S. 147 OF THE INCOME TAX ACT, 1961 (THE ACT). 2. THE EFFECTIVE GROUNDS OF APPEAL FILED BY THE ASSESSEE READ AS UNDER : 1. IN THE FACTS AND THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED A.O . ERRED IN PASSING THE ORDER U/S 143(3) R.W.S. 147 AND THEREFORE, RENDERING THE WHOLE RE - ASSESSMENT BAD IN LAW ON THE BASIS OF BORROWED SATISFACTION, PRESUMPTION AND SURMISES. ITA NO. 29 5 /MUM/201 7 2 2. IN THE FACTS AND THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED ASSESS ING OFFICER ERRED IN ADDITION OF RS. 18,76,086/ - BEING 12.5% OUT OF TOTAL PURCHASES OF RS. 1,50,08,688/ - MADE FROM 4 SUPPLIERS A) WITHOUT OBTAINING THE SANCTION OF THE HIGHER AUTHORITIES BEFORE ISSUING NOTICE U/S 148. B) ONLY ON THE BASIS OF INFORMATION RECEIVE D FROM THE MVAT DEPARTMENT. C) BY OVERLOOKING THE CONFORMATIONS OF THE SUPPLIER FILED BY THE APPELLANT. D) BY NOT GRANTING OPPORTUNITY OF CROSS - EXAMINATION. E) BY OVERLOOKING THE FACT THAT ALL THE PAYMENTS WERE MADE BY A/C PAYEE CHEQUES. F) BY REJECTING THE BOOKS U/S 145(3) WITHOUT PROVIDING ANY COMPARABLE INSTANCES. 3. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (A) ERRED IN CONFIRMING ALL THE ABOVE GROUNDS. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE AY 2009 - 10 ON 24.09.2009 DECLARING TOTAL INCOME AT RS.9,87,837/ - . THE RETURN OF INCOME WAS PROCESSED U/S 143(1). THE ASSESSING OFFICER (AO) RECEIVED INFOR MATION FROM DGIT (INVESTIGATION), MUMBAI ABOUT SOME DEALER UNDER THE MAHARASHTRA VAT ACT, 2002 INDULGING IN THE PRACTICE OF PROVIDING ACCOMMODATION ENTRIES IN THE FORM OF ISSUING BOGUS SALE BILLS / TAX INVOICES AND ALSO A LIST OF BENEFICIARIES. THE ASSESSEE WAS ONE BENEFICIARY OF SUCH TRANSACTION. THE AO RE - OPENED THE A SSESSMENT AFTER RECORDING THE REASONS AND THEN ISSUED NOTICE U/S 148 TO THE ASSESSEE. ITA NO. 29 5 /MUM/201 7 3 THE AO THEN, ASKED THE ASSESSEE TO FURNISH THE SPECIFIC DETAILS OF BOGUS PURCHASES BY WAY OF A QUESTIONNAIRE ANNEXED TO NOTICE U/S 142(1) DATED 05.05.2014. IN RESPONSE T O IT, THE ASSESSEE FILED BEFORE THE AO (I) DETAILS OF PURCHASES OF AFORESAID PARTIES, (II) DETAILS OF TRANSPORTATION, (III) COPY OF BANK STATEMENT, (IV) DETAILS OF 43B, (V) LEDGER OF LOADING & UNLOADING AND (VI) LEDGER OF TRANSPORTATION WITH COPY OF INVOIC ES. SUBSEQUENTLY, THE AO ISSUED NOTICES U/S 133(6) TO THE CONCERNED PARTIES TO VERIFY THE GENUINENESS OF TRANSACTIONS. THE AO NOTED THAT NOTICE U/S 133(6) HA D BEEN RETURNED UNSERVED BY POSTAL AUTHORITIES IN CASE OF M/S N.B. ENTERPRISES & JINDAL STEE L COR PORATION. IN THE CASES OF M/S REVIKA TRADE IMPEX PVT. LTD. AND J.B. INTERLINK, NO REPLY WAS RECEIV ED. IN VIEW OF THE ABOVE THE AO ASKED THE ASSESSEE TO PRODUCE THE SAID PARTIES BEFORE HIM FOR EXAMINATION AND THEREAFTER, CROSS - EXAMINATION BY THE ASSESSEE. THE ASSESSEE FAILED TO DO SO. THE AO ALSO NOTED THAT THE ASSESSEE FAILED TO FILE VITAL DOCU MENTS SUCH AS DELIVERY CHALLANS, TRA NSPORT RECEIPTS, OCTROI RECEIPT FOR PAYMENT OF OCTROI DUTY, RECEIPT OF WEIGHBRIDGE FOR WEIGHTMENT OF GOODS, EXCISE GATE PASS, GO ODS INWARD REGISTER MAINTAINED AT GODOWN/WAREHOUSE/STORAGE HOUSE WHIC H OTHERWISE WOULD HAVE GONE TO MAKE THE CASES IN THEIR FAVOUR. THE AO THEN RELIED ON THE ORDER OF THE HONBLE ITAT JAIPUR BENCH IN THE CASE OF SHRI KISHAN MALPANI IN ITA NO. 1045/JP/1997 AND THE JUDGMENT OF THE HONBLE SU PREME COURT IN M/S KANCHWALA GEM S AND INVOKED THE PROVISIONS OF SECTION 145(3) OF THE ACT. RELYING ON THE JUDGMENT OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF SIMIT P. SHETH (2013) 356 ITR 451 (GUJ) HE ESTIMATED THE PROFIT @ 12.5% ON THE UNACCOUNTED PURCHASES OF RS.1,50,08,688/ - AND IT COMES TO ITA NO. 29 5 /MUM/201 7 4 RS.18,76,086/ - . THUS THE AO MADE AN ADDITION OF RS.18,76,086/ - TO THE INCOME SHOWN BY THE ASSESSEE. 4. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE FILED AN AP PEAL BEFORE THE LD. CIT(A). WE FIND THAT AS THE RETURN OF INCOME WAS PROCESSED U/S 143(1) OF THE ACT, THE LD. CIT(A) FOLLOWED THE JUDGMENT OF THE HONBLE SUPREME COURT IN RAJESH JHAVERI 291 ITR 500 AND DISMISSED THE APPEAL FILED BY THE ASSESSEE AGAINST THE REOPENING OF ASSESSMENT . 4.1. THE LD. CIT(A) OBSERVED THAT THE ASSESSEE FAILED TO PRODUCE BEFORE THE AO IMPORTANT DOCUMENTS SUCH AS DELIVERY CHALLANS, TRANSPORT RECEIPTS, OCTROI RECEIPTS FOR PAYMENT OF OCTROI DUTY, RECEIPT OF WEIGHBRIDGE FOR WEIGHMENT OF GOODS, EXCISE GATE PASS, GOODS INVOICE REGISTER MAINTAINED AT GODOWN/WAREHOUSE /STORAGE WHICH OTHERWISE, WOULD HAVE GONE TO MAKE THE CASE IN THEIR FAVOUR. THE ASSESSEE FAILED TO CONTROVERT THE FINDINGS RECORDED BY THE SALES TAX AUTHORITIES FOLLOWED BY THE INVESTIGATION BY THE INCOME TAX DEPARTMENT. IN VIEW OF THE ABOVE THE LD. CIT(A) AGREED WITH THE ESTIMATION @ 12.5% MADE BY THE AO ON ACCOUNTED PURCHASES AND DISMISSED THE APPEAL FILED BY THE ASSESSEE. 5. BEFORE US, THE LD. COUNSEL OF THE ASSESSEE FILES A PAPER BOOK INCORPORATING (1) N OTICE U/S 148, (2) N OTICE U/S 142(1) ALONG WITH ENCLOSURES, (3) R EASONS RECORDED FOR REOPENING BY THE ASSESSING OFFICER, (4) O BJECTION U/S 292BB DATED 08.07.2014, (5) R EPLY NOTICE U/S 142(1), (6) C OMPUTATION OF INCOME, (7) AUD ITED FINANCIAL ACCOUNTS, (8) TAX AUDIT REPORT, (9) Q UANTITATIVE DETAILS (OP. STOCK, P URCHASES, S ALES AND CL. STOCK), (10) D ETAILS OF PURCHASES ALONG WITH NAME ADDRESS AND TOTAL AMOUNT OF PAYMENTS MADE TO THE PARTIES, (11) D ETAILS OF SALES ALONG THE NAME, A DDRESS AND TOTAL AMOUNT OF ITA NO. 29 5 /MUM/201 7 5 PAYMENTS RECEIVED FROM THE PARTIES OUT OF THE ABOVE PURCHASES, (12) D ETAILS OF PURCHASES AND RESPECTIVE SALES OF 4 SUPPLIERS, (13) B ILLS OF PURCHASES, (14) C ONFIRMATIONS OF THE SUPPLIERS, (15) D ETAILS OF TRANSPORTATION, (16) D ETAILS OF BROKERS NAMES AND ADDRESSES, (17) B ANK STATEMENTS SHOWING PAYMENTS MADE, (18) GP RATIO OF LAST THREE YEARS AND NEXT THREE YEARS AND (19) W RITTEN SUBMISSIONS MADE BEFORE LD. CIT(A). 6. ON THE OTHER HAND, THE LD. DR RELIES ON THE ORDER PASSED BY T HE LD. CIT(A). HE SUBMITS THAT THE AO FOLLOWING THE JUDGMENT IN SIMIT P. SHETH (SUPRA) HAS RIGHTLY ESTIMATED THE PROFIT @ 12.5% ON THE BOGUS PURCHASES. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED T HE RELEVANT MATERIAL ON RECORD. WE BEGIN WITH THE 1 ST GROUND OF APPEAL. IN ACIT VS. RAJESH JHAVERI STOCK BROKERS (P) LTD . (SC) 291 ITR 500 IT HAS BEEN HELD THAT INTIMATION U/S 143(1) (A) IS NOT AN ASSESSMENT. IN THE INSTANT APPEAL THE RETURN OF INCOME OF THE ASSESSEE WAS PROCESSED U/S 143(1). THE AO RECEIVE D INFORMATION FROM DGIT (INV.), MUMBAI THAT THE ASSESSEE WAS A BENEFICIARY OF TRANSACTIONS CONCERNING HAWALA DEALERS. THEN THE AO RECORDED REASONS AND ISSUED NOTICE U/S 148. WE FOLLOW THE RATIO LAID DOWN IN RAJESH JHAVERI STOCK BROKERS (P) LTD. (SUPRA) AND DISMISS THE 1 ST GROUND OF APPEAL. 7.1 WE NOW COME TO 2 ND & 3 RD GROUND OF APPEAL. THE FACT REMAINS THAT THE NOTICE U/S 133(6) ISSUED BY THE AO TO M/S NB ENTERPRISES AND JINDAL STEEL CORPORATION WERE RETURNED AS UNSERVED BY THE POSTAL AUTHORITIES. THE AO DID NOT GET ANY RESPONSE FROM M/S REVIKA TRADE IMPEX PVT. LTD. AND J.B. ENTER LINK. IT IS NOTICED THAT THE ASSESSEE FAILED TO FACILITATE THE REQUEST OF THE AO TO PRODUCE THE ABOVE PARTIES FOR EXAMINATION AND THEREAFTER CROSS - EXAMINATION BY THE ASSESSEE. IN ITA NO. 29 5 /MUM/201 7 6 VIEW OF THE ABOVE THE AO HAS RIGHTLY REJ ECTED THE BOOK RESULT. HOWEVER, THE ESTIMATION PROFIT BY THE AO @ 12.5% ON UNVERIFIABLE PURCHASES FOLLOWING SIMIT P. SHETH (SUPRA) MAY NOT BE A CORRECT ONE. THEREIN THE ASSESSEE WAS TRADING IN STEEL ON WHOLESALE BASI S. IN THE INSTANT CASE, THE ASSESSEE IS AN EXPORTER, COMMISSION AND INDENTING AGENT. IT ALSO TRADES IN STEEL. IN SIMIT P. SHETH (SUPRA) , IT HAS BEEN HELD THAT THE ESTIMATION OF RATE OF PROFIT MUST NECESSARILY VARY WITH THE NATURE OF BUSINESS AND NO UNIFORM YARDSTICK CAN BE ADOPTED. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE, WE DIRECT THE AO TO RESTRICT THE ADDITION TO 7.5% OF THE UNVERIFIABLE PURCHASES IN PLACE OF 12.5% DONE BY HIM. 8. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. ORDER PRO NOUNCED IN THE OPEN COURT ON 22/06/2017. SD/ - SD/ - ( MAHAVIR SINGH) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI : DATED: 22/06/2017 RAHUL SHARMA SR . P.S. 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, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI