Mohemadmustafa A. Khan, Nashik V. Income tax Officer,

ITA 2970/PUN/2016

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 3032 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 4 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-05-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 17-05-2018
• Assessment Year: 2011-2012
• Appeal Filed On: 29-12-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SHRI
• Keywords: Bogus purchase

Judgement Text

SMC IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, PUNE . , BEFORE SHRI D. KARUNAKARA RAO, AM . / ITA NO.2970/PUN/2016 / ASSESSMENT YEAR : 2011-12 MOHEMADMUSTAFA A. KHAN, PROP. S.K. ELECTRICAL STAMPING, BHARAT ELECTRICAL STAMPING, PLOT NO.12, GAT NO.20, ABDUL HAMID NAGAR, NEAR NOOR MASJID, AMBAD, SATPUR LINK ROAD, NASHIK 422 010 PAN : AHBPK7647M . /APPELLANT VS. ITO, WARD-1(3), NASHIK . / RESPONDENT / APPELLANT BY : SHRI SANKET JOSHI / RESPONDENT BY : SHRI PANKAJ GARG / DATE OF HEARING : 17.05.2018 / DATE OF PRONOUNCEMENT: 25.05.2018 / ORDER PER D. KARUNAKARA RAO, AM : THIS IS THE APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF CIT(A)-1, NASHIK, DATED 22.09.2016 FOR THE ASSESSMENT YEAR 20 11-12. 2. GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER: THE FOLLOWING GROUNDS ARE TAKEN WITHOUT PREJUDICE TO EACH OTHER - ON FACTS AND IN LAW, 1] THE LEARNED CIT(A) ERRED IN CONFIRMING THE DI SALLOWANCE OF RS.4,60,581/- OUT OF THE TOTAL DISALLOWANCE OF RS.1 8,42,323/- MADE BY THE A.O. IN RESPECT OF PURCHASES MADE FROM ALLEGED HAWALA PARTIES ON THE BASIS OF INFORMATION OBTAINED FROM MAHARASHTRA SALES TAX DEPT. 2] THE LEARNED CIT(A) ERRED IN HOLDING THAT 25% OF THE PURCHASES MADE FROM THE ALLEGED HAWALA PARTIES WERE TO BE DIS ALLOWED BY PRESUMING THAT THE ASSESSEE MAY HAVE MADE THE IMPUG NED PURCHASES OF GOODS FROM CERTAIN OTHER PARTIES AT A LOWER COST AN D HENCE, THE PURCHASES SHOWN FROM THE ABOVE PARTIES AS RECORDED IN THE BOOKS OF ACCOUNTS ARE INFLATED. ITA NO.2970/PUN/2016 MOHEMADMUSTAFA A. KHAN 2 3] THE LEARNED CIT(A) FAILED TO APPRECIATE THAT- A. THE PURCHASES MADE BY THE ASSESSEE FROM THE ABOVE P ARTY WERE SUPPORTED BY TAX INVOICES AND THE ASSESSEE HAS ALSO MAINTAINED QUANTITATIVE STOCK RECORD IN RESPECT OF THE SAID PU RCHASES AND HENCE, THERE WAS NO REASON TO DOUBT THE GENUINENESS OF THE SAID PURCHASES MERELY ON THE BASIS OF UNCORROBORATED STATEMENT OF S UCH SUPPLIER. B. THE PAYMENTS TO THE SAID PARTY WERE MADE THROUGH BA NKING CHANNEL AND THE A.O. HAD NOT BROUGHT ANY EVIDENCE ON RECORD TO SHOW THAT THE PAYMENTS MADE BY THE ASSESSEE TO THE SAID PARTY WAS WITHDRAWN BY IT AND RETURNED TO THE ASSESSEE IN CASH AND HENCE, IN THE ABSENCE OF ANY CONTRARY EVIDENCE, THERE WAS NO REASON TO DOUBT THE GENUINENESS OF THE PAYMENTS MADE TO THE SAID PARTY. C. THE ASSESSEE HAD PROVIDED DETAILS REGARDING THE IMP UGNED SUPPLIERS FROM THE SITE OF SALES TAX DEPT. AND MINISTRY OF CO RPORATE AFFAIRS TO PROVE THAT THE SAID PARTIES WERE EXISTING AT THE TI ME OF MAKING PURCHASES FROM THEM AND THE SAID PARTIES WERE DULY REGISTERED WITH THE SALES TAX DEPT. AND THE ASSESSEE HAD ALSO PRODU CED CERTIFICATE FROM HIS BANK TO PROVE THAT THE PAYMENTS WERE CREDI TED TO THE BANK ACCOUNT OF THESE SUPPLIERS AND HENCE, IN VIEW OF TH E ABOVE EVIDENCES WHEN THE PARTIES HAD ISSUED PROPER TAX INVOICES IN RESPECT OF THE SAID PURCHASES, THERE WAS NO REASON TO DOUBT THE GENUINE NESS OF SUCH PURCHASES MERELY ON THE BASIS OF UNCORROBORATED STA TEMENTS OF THESE PARTIES. 4] THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED TH AT - A. THE IMPUGNED SUPPLIERS HAD EVADED VAT AND HENCE, IT MAY HAVE DENIED ANY ACTUAL SALES BEFORE THE SALES TAX DEPT. SOLELY TO ABSOLVE ITSELF FROM VAT LIABILITY, HOWEVER, THERE WAS NO CO RROBORATIVE EVIDENCE WHATSOEVER ON RECORD TO SUPPORT ITS STATEMENT AND H ENCE, SUCH UNSUBSTANTIATED STATEMENT COULD NOT BE RELIED UPON BY IGNORING THE DOCUMENTARY EVIDENCES FURNISHED BY THE ASSESSEE. B. AFTER CONSIDERING THE SAME STATEMENT OF THE ALLEGED HAWALA SUPPLIER, THE SALES TAX DEPT. HAD NOT DISPUTED THE FACT THAT THERE HAS BEEN ACTUAL TRANSFER OF GOODS BETWEEN THE ASSESSEE AND T HE SUPPLIER AND HENCE, THE ASSESSEE HAS BEEN MADE LIABLE TO PAY VAT ON SUCH TRANSFER OF GOODS WHICH HAS NOT BEEN DEPOSITED BY T HE SUPPLIER AND THEREFORE, THE INCOME TAX DEPT. IS NOT JUSTIFIED IN RAISING ADDITIONAL INCOME TAX LIABILITY ON THE ASSESSEE IN RESPECT OF THESE PURCHASES BY ADOPTING A CONTRARY INTERPRETATION OF THE SAME STATE MENT TO THE EFFECT THAT THERE HAS BEEN NO ACTUAL TRANSFER OF GOODS. C. THE A.O. HAD HIMSELF ADMITTED IN THE ASST. ORDER TH AT HE WAS NOT ABLE TO LOCATE THE ABOVE ALLEGED HAWALA PARTIES AND THUS , THE A.O. WAS IN NO POSITION TO GRANT THE OPPORTUNITY OF CROSS EXAMI NATION OF THIS PARTY TO THE ASSESSEE AND HENCE, IN VIEW OF THE RATIO LAI D DOWN BY HON'BLE SUPREME COURT IN THE CASE OF ANDAMAN TIMBER INDUSTR IES V. CCE [CIVIL APPEAL NO.4228/2006 DATED 02.09.2015], THE A DDITION MADE SOLELY ON THE BASIS OF STATEMENT OF SUCH SUPPLIER R ECORDED AT THE BACK OF THE ASSESSEE WAS NOT JUSTIFIED AT ALL. 5] WITHOUT PREJUDICE, THE ASSESSEE SUBMITS THAT THE DISALLOWANCE MADE @ 25% OF THE AMOUNT OF PURCHASES IS VERY HIGH A ND THE SAME MAY BE RESTRICTED TO A REASONABLE LEVEL CONSIDERING THE FACTS OF THE CASE. 6] THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND OR DELETE ANY OF THE ABOVE GROUNDS OF APPEAL. ITA NO.2970/PUN/2016 MOHEMADMUSTAFA A. KHAN 3 3. BRIEFLY STATED RELEVANT FACTS ARE THAT ASSESSEE IS AN INDIVIDUAL AND IS ENGAGED IN THE BUSINESS OF MANUFACTURING/TRADING OF TRANSFORMER COMPONENTS, PARTS AND RESELLER OF SCRAP ETC. ASSESSEE FILED TH E RETURN OF INCOME ON 13-08-2011 DECLARING TOTAL INCOME OF RS.5,68,600/- FOR THE ASSESSMENT YEAR UNDER CONSIDERATION. ON THE BASIS OF INFORMATION R ECEIVED FROM THE INVESTIGATION WING OF SALES TAX DEPARTMENT, AO ISSU ED NOTICE U/S.148 OF THE ACT TO THE ASSESSEE. AO FOUND THAT ASSESSEE MADE P URCHASES FROM FOUR SUPPLIERS NAMELY, (1) KRIPA MULTITRADE PRIVATE LTD. (2) GLOBE IMPEX INDIA (3) MERIDIAN TRADING COMPANY AND (4) WAKSONS ENTERPRISE S TOTALLING TO RS.18,42,323/-. EVENTUALLY, AT THE END OF ASSESSMEN T PROCEEDINGS U/S.143(3) R.W.S. 147 OF THE ACT, THE AO MADE ADDITION OF ENTI RE SUM OF RS.18,43,323/- AND HELD THAT THE ASSESSEE HAS FAILED TO PROVE THE GENU INENESS OF THE PURCHASES MADE FROM THE ABOVE PARTIES. AS SUCH, THERE IS NO R EQUEST BY THE ASSESSEE FOR CROSS EXAMINATION OF THE SUPPLIERS AND ASSESSEE FUR NISHED REQUISITE DOCUMENTATION IN SUPPORT OF TRAIL OF GOODS PURCHASE D BY THE ASSESSEE. 4. IN THE FIRST APPELLATE PROCEEDINGS, THE CIT(A) RESTRICTED THE ADDITION MADE BY THE AO TO 25% OF THE PURCHASES AS PER THE D ISCUSSION GIVEN IN PARA NO.6.13 OF HIS ORDER AND THE SAME READS AS UNDER : 6.13 THUS, IN MY OPINION THE FACTS ON RECORD DEMON STRATE THAT THIS IS NOT A CASE OF BOGUS PURCHASE BUT A CASE OF INFLATED PURCH ASES AND AT BEST FROM BOGUS PARTIES. THE APPELLANT HAS PURCHASED GOODS O F RS.2,17,199/- AND RS.18,42,323/- FOR A.YRS. 2009-10 AND 2010-11 RESPEC TIVELY. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE, THE AO IS DIRE CTED TO RESTRICT THE DISALLOWANCE TO 25% OF PURCHASES, I.E. RS.54,300/- AND RS.4,60,581/- FOR A.YRS. 2010-11 AND 2011-12 RESPECTIVELY. 5. AGGRIEVED WITH THE PART RELIEF GIVEN BY THE CIT( A), ASSESSEE PREFERRED THE PRESENT APPEAL BEFORE THE TRIBUNAL WITH THE GRO UNDS EXTRACTED ABOVE. 6. AT THE OUTSET, REFERRING TO GROUND NO.5 OF THE A PPEAL, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT CONFIRMING 25% OF THE PURCH ASES FOR THE ASSESSMENT ITA NO.2970/PUN/2016 MOHEMADMUSTAFA A. KHAN 4 YEAR UNDER CONSIDERATION IS ON HIGHER SIDE AND UNSU STAINABLE, WHEN THE ASSESSEE HAS ESTABLISHED THE TRAIL OF GOODS AND THE PAYMENTS ARE MADE THROUGH BANKING CHANNELS. FURTHER, LD. COUNSEL SUBMITTED T HAT IN VIEW OF THE PLETHORA OF DECISIONS OF THE PUNE BENCH OF THE TRIBUNAL, THE ADDITION MAY BE RESTRICTED TO 10% OF THE BOGUS PURCHASES. IN SUPPORT OF THE S AME, LD. COUNSEL FOR THE ASSESSEE ALSO FILED A COPY OF THE ORDER OF TRIBUNAL IN ITA NO.1732/PUN/2015 AND CO NO.46/PUN/2017, DATED 13-10-2017 WHERE THE T RIBUNAL RESTRICTED THE DISALLOWANCE TO THE GROSS PROFIT RATE OF 5% OF BOGU S PURCHASE. 7. LD. DR FOR THE REVENUE RELIED ON THE ORDER OF CI T(A). 8. I HEARD BOTH THE SIDES ON THE SOLITARY ISSUE OF CONFIRMING 25% OF THE PURCHASES BY THE CIT(A) AND PERUSED THE ORDERS OF T HE REVENUE AND THE DECISIONS RELIED ON BY THE LD. COUNSEL FOR THE ASSE SSEE. I FIND THAT SIMILAR ISSUE OF BOGUS PURCHASES HAS BEEN DECIDED BY THE TRIBUNAL IN SERIES OF DECISIONS. FURTHER, IT IS NOT THE CASE OF THE REVENUE THAT SOM ETHING IS WRONG WITH THE INVOICES, PAYMENTS, TRAIL OF GOODS PURCHASED ETC. I FIND THE COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF MR. KHAN AFZALHUSSAI N MOHD. SAIE VS. DCIT ITA NOS. 2708 AND 2709/PUN/2016, DATED 23-03-2018 CONFI RMING THE ADDITION TO ONLY 10% OF SUCH ALLEGED BOGUS PURCHASES APPLY TO T HE FACTS OF THIS CASE. I THEREFORE FIND IT TO RELEVANT TO EXTRACT THE FINDIN GS GIVEN BY THE TRIBUNAL IN PARA NO.11 OF ORDER OF TRIBUNAL HERE AS UNDER : 11. NOW, COMING TO THE MERITS OF ADDITION. THE IS SUE RAISED IN THE PRESENT APPEAL IS AGAINST BOGUS PURCHASES. WE HAVE ALREADY ADJUDICATED SIMILAR ISSUE IN SERIES OF DECISIONS WITH LEAD ORDER IN M/S. CHHA BI ELECTRICALS PVT. LTD. VS. DCIT IN ITA NO.795/PUN/2014, RELATING TO ASSESSMENT YEAR 2010-11, ORDER DATED 28.04.2017. THE ASSESSEE IN THE FIRST YEAR I .E. ASSESSMENT YEAR 2009-10 HAS MAINTAINED QUANTITATIVE DETAILS. IN OTHER WORD S, IT HAS THE EVIDENCE OF PURCHASING GOODS AND ITS SALES. IN SUCH CIRCUMSTAN CES, AT BEST, HIGHER GROSS PROFIT RATE CAN BE APPLIED. FOLLOWING OUR DECISION IN EARLIER ORDERS, WE HOLD THAT GP RATE OF 10% OVER AND ABOVE GP DECLARED BY T HE ASSESSEE IN ITS BOOKS OF ACCOUNT, BE APPLIED TO WORK OUT THE ADDITI ONAL INCOME IN THE HANDS OF ASSESSEE. THE GROUND OF APPEAL NO.3 RAISED BY THE ASSESSEE IS THUS, PARTLY ALLOWED. ITA NO.2970/PUN/2016 MOHEMADMUSTAFA A. KHAN 5 ON PERUSAL OF THE RELEVANT FACT, I FIND THE ASSESSE E SUCCESSFULLY FURNISHED THE REQUISITE DOCUMENTATION RELATING TO PURCHASE OF GOODS AND THE PAYMENT DETAILS TOO. CONSIDERING THE SAME, I DIRECT THE AS SESSING OFFICER TO MAKE ADDITION IN THE HANDS OF ASSESSEE BY ADOPTING GP RA TE AT 10% OF BOGUS PURCHASES MADE BY THE ASSESSEE. THE ARGUMENT RELAT ING TO FAILURE IN MATTER OF CROSS EXAMINATION, I FIND THERE IS NO SPECIFIC REQU EST FOR THE SAME FROM THE ASSESSEE. HENCE, THE RATIO OF JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF ANDAMAN TIMBER INDUSTRIES VS. CIT - CIVIL APPEAL NO. 4228/2006, DATED 02-09-2015 HAS NO APPLICATION. ACCORDINGLY, THE GR OUNDS RAISED BY THE ASSESSEE ARE PARTLY ALLOWED. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON THIS 25 TH DAY OF MAY, 2018. SD/- (D.KARUNAKARA RAO) / ACCOUNTANT MEMBER / PUNE; DATED : 25 TH MAY, 2018. SATISH / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT; 2. / THE RESPONDENT; 3. ( ) / THE CIT(A) - 1, NASHIK 4. / THE CIT - 1, NASHIK 5. , , SMC / DR SMC, ITAT, PUNE; 6. / GUARD FILE. / BY ORDER, //TRUE COPY// SENIOR PRIVATE SECRETARY , / ITAT, PUNE