Income tax Officer, V. M/s. Trinity Steel Profiles Pvt. Ltd, Nashik

ITA 2984/PUN/2016

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 5859 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 1 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 29-12-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SABHANA PARVEEN
• Keywords: Bogus purchase

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE . , , BEFORE SHRI D.KARUNAKARA RAO, AM AND SHRI VIKAS AWASTHY, JM . / ITA NOS.2983 & 2984/PUN/2016 / ASSESSMENT YEARS : 2009-10 & 2010-11 ITO, WARD-1(4), NASHIK . /APPELLANT VS. M/S. TRINITY STEEL PROFILES PVT. LTD., PLOT NO.G-32, MIDC, AMBAD, NASHIK 422 010 PAN : AABCT8213G . / RESPONDENT C.O. NOS.06 & 07/PUN/2017 ARISING OUT OF ITA NOS.2983 & 2984/PUN/2016 / ASSESSMENT YEARS : 2009-10 & 2010-11 M/S. TRINITY STEEL PROFILES PVT. LTD., PLOT NO.G-32, MIDC, AMBAD, NASHIK 422 010 PAN : AABCT8213G . CROSS OBJECTOR VS. ITO, WARD-1(4), NASHIK . APPELLANT IN THE APPEAL ASSESSEE BY : SHRI SANKET JOSHI REVENUE BY : MS. SABHANA PARVEEN / DATE OF HEARING : 31.01.2019 / DATE OF PRONOUNCEMENT: 31.01.2019 / ORDER PER D. KARUNAKARA RAO, AM : THERE ARE TWO SETS OF CROSS APPEALS. ITA NOS. 2983 & 2984/PUN/2016 ARE FILED BY THE REVENUE AND CO NOS.06 & 07/PUN/2017 ARE FILED BY THE ASSESSEE IN RELATION TO THE ASSESSMENT YEARS 2009-10 & 2010-11. SINCE COMMON ISSUES ARE INVO LVED IN THESE 2 APPEALS, THESE APPEALS ARE BEING ADJUDICATED IN THIS COMP OSITE ORDER FOR THE SAKE OF CONVENIENCE. 2. WE SHALL FIRST TAKE UP THE APPEALS PERTAINING TO A.Y. 2009 -10. THE GROUNDS RAISED BY THE REVENUE AS WELL AS CROSS OBJ ECTION BY THE ASSESSEE FOR THE A.Y. 2009-10 ARE EXTRACTED HERE AS UNDER : GROUNDS BY REVENUE : 1.1 WHETHER ON THE FACTS AND IN CIRCUMSTANCES OF T HE CASE AND IN LAW, THE CIT(A)-1, NASHIK WAS JUSTIFIED IN NOT CONFIRMIN G THE ENTIRE ADDITION OF RS.81,48,113/- ON ACCOUNT OF ALLEGED BOGUS PURCHASE S FROM HAWALA DEALERS/PARTIES. 1.2. WHETHER ON THE FACTS AND IN CIRCUMSTANCES OF T HE CASE AND IN LAW, THE CIT(A)-1, NASHIK WAS JUSTIFIED IN NOT CONFIRMIN G THE ENTIRE ADDITION EVEN WHEN THE ASSESSEE HAS FAILED TO DISCHARGE ITS ONUS OF GIVING EVIDENCE FOR PROVING THE PURCHASES. 1.3 WHETHER ON THE FACTS AND IN CIRCUMSTANCES OF TH E CASE AND IN LAW, THE CIT(A)-1, NASHIK WAS JUSTIFIED IN NOT CONFIRMIN G THE ENTIRE ADDITION EVEN WHEN IN PARA 6.1 SHE HAS ADMITTED THAT THE ASS ESSEE DID NOT PRODUCE THE PARTIES FROM WHOM PURCHASES WERE MADE E ITHER BEFORE AO OR CIT(A). 2. THE ORDER OF THE CIT(A) MAY BE VACATED AND THAT OF THE ASSESSING OFFICER MAY BE RESTORED. 3. THE ASSESSEE CRAVE LEAVE TO ADD, AMEND, ALTER OR DELETE ANY GROUND OF APPEAL. CROSS OBJECTIONS BY ASSESSEE : T H E FO LLO W IN G G ROUNDS ARE TAK E N WITHOUT PR E JU D ICE TO EA CH OTH E R - ON FACTS AND I N LAW , 1. THE LEA R NED CIT(A) ERRED IN PA R TLY CON F IRMING THE ADDITION MADE BY THE A.O. TOWARDS PURCHASES MADE FROM ALLEGED HAW ALA P A RTIES ON THE BASIS OF INFORMATION RECEIVED FROM SALES TAX DEPT. W I THOUT APP RE CIATING THAT NO ADDITION WAS WARRANTED ON F ACTS OF TH E CASE. 2. TH E L E A R NED CIT(A) ERRED IN HOLDING TH A T THE PROFIT ON PURCHASES MADE FROM THREE ALLEGED HAWALA PARTIE S SHOULD BE ESTIMATED @ 15% OF SUCH PURCHASES FOR THE REASON THAT THE PROBABILITY THAT TH E IMPUGNED PURCHASES COULD HAVE BEEN MADE F ROM ANOTHER PARTY COULD NOT BE DENIED AND THUS, THE I NVOICE S ISSUED BY ALLEG E D HAWALA P A RTIES COULD B E OVER-PRICED/ INFLATED . 3. T HE LE A RN E D CIT(A) FAILED TO APPRECIATE T HAT THE A SSESSEE HAD DULY DEMONSTRATED T H AT THE PURCHASES MADE FROM THE ALLEGED HAW A LA PARTIES WERE IN FACT AT A RATE LOWER THAN OR EQUA L TO THE PURCHASES MADE F R OM OTH E R PARTIES WHICH WERE TREA TE D AS GENUINE 3 BY THE A.O . AND HENCE, THERE WAS NO REASON TO HOLD THAT THE IMPUGNED PURCHASES COULD HAVE BEEN INFLATED AND THUS, TH E ADDITION SUSTAINED IS WITHOUT ANY COGENT BASIS . 4. T HE LEARNED CI T (A) FAILED TO APPRECIATE T H AT- A. THE PURCH A S E S MADE BY TH E ASSESSEE FR OM THE ABOVE P A R T Y W E R E SUPPORTED BY TAX INVOICES AND OTHER D O CUMENTARY E V IDENCES AND HENCE, THERE WAS NO REASON TO DOUBT T H E GENUINENESS OF THE SAID PURCHASES MERELY ON THE BASIS OF UN C ORROBORATED STATEMENT OF SUCH SUPPLIE R . B. T H E PAYME N TS TO THE SAID PARTY WERE MADE THROUGH B A NKING CHANN E L AND THE A.O. HAD NOT BROUGHT ANY EVIDENCE ON RECORD TO SHOW THAT THE PAYMENTS MADE BY THE ASS ESSEE TO THE SAID PARTY WAS WITHDRA W N BY IT AND RETURNED TO THE ASSESSEE IN CASH AND HENCE, IN THE ABSENCE OF ANY C ONTRARY EVIDENCE, THERE WAS NO REASON TO DOUBT THE GENUINENE SS OF THE PAYMENTS MADE TO THE SAID PARTY. 5. THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED THAT A. T H E COPIES OF STATEMENTS OF THE ALLEG E D HAWALA PARTIES RECO R DED BY THE SALES TAX DEPT. WERE NOT CON F RONTED TO THE ' ASSESSEE AND HEN CE, THE ADDITION MADE IN THE CASE O F THE ASSESSEE O N TH E BASIS OF THE SAID STATEMENTS WAS NOT JUSTIFIED IN LAW. B. THE A.O. HAD HIMSELF ADMITTED IN TH E ASST. ORDER THAT HE WAS NOT ABLE TO LOC A TE THE ABOVE ALLEGED HAW A LA PARTY AND THUS, THE A.O. WAS IN NO POSITION TO GRANT THE OPPORTUNIT Y OF CROSS EXAMINATION OF THIS PARTY TO THE ASSESSEE AND HEN C E, IN VIEW OF THE RATIO LAID DOWN BY HON'BLE SUPREME COU RT IN THE CASE OF ANDAMAN TIMBER INDUSTRIES V. CCE [CIVIL AP PEAL NO.4228/2006 DATED 02.09.2015], THE ADDITION MADE SOLE L Y ON THE BASIS OF STATEMENT OF SUCH SUPPLIER RECORDED A T THE BA C K OF THE ASSESSEE WAS NOT JUSTIFIED AT ALL. . C. AFTER CONSIDERING THE SAME STATEM E NT OF THE ALLEGED HAWALA SUPPLIER, THE SALES TAX DEPT. HAD NOT DISPUTED TH E FACT THAT THERE HAS BEEN ACTUAL TRANSFER OF GOODS BE T WEEN THE ASSESSEE AND THE SUPPLIER AND HENCE, THE ASSESSEE HAS BEEN MADE LIABLE TO PAY VAT ON SUCH TRANSFER OF GOODS WHIC H HAS NOT BEEN DEPOS I TED BY THE SUPPLIER AND THEREFORE, THE INCOME TAX DEPT. IS NOT JUSTIFIED IN RAISING ADDITIONAL INC OME TAX LIABILITY ON THE ASSESSEE IN RESPECT OF THESE PURCHASE S BY ADOPTING A CONTRARY INTERPRETATION OF THE SAME STATE MENT TO THE EFFECT THAT THERE HAS BEEN NO ACTUAL TRANSFER OF GOOD S. 5. WITHOUT PREJUDICE, THE ASSESSEE SUBMITS THAT THE AD DITION MADE BY ESTIMATING PROFIT ON ALLEGED HAWALA PURCHASES @ 15% IS VERY HIGH AND THE SAME MAY BE RESTRICTED TO A REASO NABLE 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. 4 3. BRIEFLY STATED, RELEVANT FACTS ARE THAT, THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF IRON AND STEEL. ASSESSEE FILED THE RETURN OF INCOME DECLARING TOTAL INCOME OF RS.2,03,540/-. ASSESSING OFFICE R RECEIVED INFORMATION FROM THE SALES TAX DEPARTMENT, MAHARA SHTRA THAT THE ASSESSEE MADE PURCHASES TO THE TUNE OF RS.81,48,113 /- FROM THE HAWALA PARTIES NAMELY; (1) SIMANDHAR TRADING CORPORATION; (2) ADIGIN ENTERPRISES; AND (3) HITESH ENTERPRISES. THE ASSESSEE FAILED TO PRODUCE THE PARTIES BEFORE THE AO FOR EXAMINATION. EVENTUALLY, THE AO TAXED THE SAID SUM AS BOGUS PURCHASES. THE CIT(A) IN HIS CONSOLIDATED ORDER FOR A.YRS. 2009-10 TO 2011-12 HELD THAT THE PROFIT SHOULD BE ESTIMATED AT 15%OF THE TURNOVER IN ALL THE THREE YEARS. CONTENTS OF P ARA NO.6.1 OF THE ORDER OF CIT(A) ARE RELEVANT. 4. AGGRIEVED WITH THE PART RELIEF GIVEN BY THE CIT(A), THE R EVENUE AS WELL AS THE ASSESSEE ARE IN APPEAL BEFORE US WITH THE AFOR EMENTIONED GROUNDS. 5. BEFORE US, AT THE OUTSET, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THIS ISSUE WAS THE SUBJECT MATTER BEFORE THE TRIBU NAL FOR THE A.Y 2011-12 IN THE ASSESSEES OWN CASE. THE TRIBUNAL IN ITA NO.2985/PUN/2016 AND CO NO.08/PUN/2017, DATED 25-05-20 18 DIRECTED THE AO TO MAKE ADDITION IN THE HANDS OF ASSESSE E BY ADOPTING GP RATE AT 10% OF BOGUS PURCHASES ONLY MADE BY THE A SSESSEE. SINCE THE FACTS OF THE PRESENT A.Y. 2009-10 ARE SIMILAR TO THAT OF A.Y. 2011-12 DECIDED BY THE TRIBUNAL, LD. COUNSEL PRAYED FOR APPLYING THE SAME RATIO TO THE A.YRS.2009-10 AND 2010-11. 6. ON THE OTHER HAND, LD. DR FOR THE REVENUE RELIED ON T HE ORDERS OF THE AO. 5 7. WE HEARD BOTH THE SIDES AND PERUSED THE ORDERS OF THE REVENUE. ON PERUSING THE ORDER OF TRIBUNAL IN THE ASSESSEES OWN CASE FOR THE A.Y. 2011-12, WE FIND THERE IS NO CHANGE IN FACTS. WE FIND TH E TRIBUNAL HELD AS UNDER : 8. I HEARD BOTH THE SIDES AND PERUSED THE ORDERS O F THE REVENUE AND THE DECISIONS RELIED ON BY THE LD. COUNSEL FOR THE ASSESSEE. THIS IS A CASE WHERE ASSESSEE IS ALLEGED TO HAVE RESORTED TO BOGUS PURCHASES AMOUNTING TO RS.25,73,189/- INVOLVING TWO SUPPLIERS . THE AO MADE ADDITION OF ENTIRE SUCH PURCHASES AS PER THE DISCUS SION GIVEN IN PARA IN PARA NO.4.4 OF THE ASSESSMENT ORDER. AT THE END OF THE FIRST APPELLATE PROCEEDINGS, THE CIT(A) ADOPTED 15% OF THE NET PROF IT ON THE TURNOVER AND PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. THE CIT(A) IN THE LAST LINE OF PARA NO.6.1 OF HIS ORDER HAS ERRONEOUSLY HE LD THAT PROFIT SHOULD BE ESTIMATED AT 15% OF THE TURNOVER OF THE ASSESSEE FOR THE YEAR. IN OTHER WORDS, CIT(A) TREATED THE ENTIRE TURNOVER AS BOGUS AND IN EFFECT, CIT(A) REJECTED THE BOOK RESULTS. THIS DEC ISION OF CIT(A) HAS THE EFFECT OF ENHANCEMENT OF THE ASSESSMENT. CIT(A) SH OULD DO THE SAME ONLY AFTER ISSUING SHOW CAUSE NOTICE, WHICH WAS NOT ISSUED AT ALL. THEREFORE, THE LANGUAGE USED IN THE ORDER OF CIT(A) IS ERRONEOUS AND THE SAME NEEDS TO UNDERSTOOD TO RESTRICT TO THE ALLEGED BOGUS PURCHASE OF RS.25,73,189/- ONLY. THEREFORE, IN THE CROSS OBJEC TION, FILED BY THE ASSESSEE, IN GROUND NO.2, ASSESSEE MADE CORRECTIONS TO THE CONCLUSION OF THE CIT(A) ON THIS ISSUE AND SUBMITTED THAT PROF IT RATE OF 15% ON THE BOGUS PURCHASES IS ON THE HIGHER SIDE. IN ANY CASE, APPLYING NET PROFIT RATE OF 15% TO THE ENTIRE TURNOVER WHICH INCLUDES THE ACCOUNTED TURNOVER IS UNSUSTAINABLE, I N PRINCIPLE. THEREFORE, ON THE AMENDED CONCLUSION OF RESTRICTING THE ADDITION TO 15% OF SUCH BOGUS PURCHASES ONLY, I PROCEED TO ADJUDICA TE THE ISSUE. AS SUCH, MAKING ENTIRE ADDITION OF RS.25,73,189/- IS N OT APPROVED AT ALL BY THE PUNE BENCH OF THE TRIBUNAL IN VARIOUS CASES WHE RE THE ASSESSEE IS NOT FOUND FAULT WITH THE MATTERS RELATING TO TRAIL OF GOODS, BANK PAYMENTS, ETC. IN THIS CASE, THE ASSESSEE FURNISHE D ALL THE DOCUMENTS REQUIRED FOR EVIDENCING THE PURCHASES, PAYMENTS FOR PURCHASE OF THE GOODS, ETC. OF COURSE, IT IS TRUE THAT THE SAID D OCUMENTS WERE SUSPECTED BY THE AUTHORITIES. CONSIDERING THE SAME , I AM OF THE OPINION THAT THE NET PROFIT RATE OF 15% ADOPTED BY THE CIT( A) AS CONTESTED BY THE ASSESSEE IS ON HIGHER SIDE. 9. FURTHER, I FIND THAT SIMILAR ISSUE OF BOGUS PURC HASES HAS BEEN DECIDED BY THE TRIBUNAL IN SERIES OF DECISIONS. I FIND THE COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF MR. KHAN AFZAL HUSSAIN MOHD. SAIE VS. DCIT ITA NOS. 2708 AND 2709/PUN/2016, DATED 2 3-03-2018 CONFIRMING THE ADDITION TO ONLY 10% OF SUCH ALLEGE D BOGUS PURCHASES APPLY TO THE FACTS OF THIS CASE. I THEREFORE, FIND IT TO RELEVANT TO EXTRACT THE FINDINGS GIVEN BY THE TRIBUNAL IN PARA NO.11 OF ORDER OF TRIBUNAL HERE AS UNDER : 6 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 WI TH LEAD ORDER IN M/S. CHHABI ELECTRICALS PVT. LTD. VS. DCIT IN ITA NO.795/PUN/2014, RELATING TO ASSESSMENT YEAR 2010-1 1, ORDER DATED 28.04.2017. THE ASSESSEE IN THE FIRST YEAR I .E. ASSESSMENT YEAR 2009-10 HAS MAINTAINED QUANTITATIVE DETAILS. IN OTHER WORDS, IT HAS THE EVIDENCE OF PURCHASING GOODS AND ITS SAL ES. IN SUCH CIRCUMSTANCES, AT BEST, HIGHER GROSS PROFIT RATE CA N BE APPLIED. FOLLOWING OUR DECISION IN EARLIER ORDERS, WE HOLD THAT GP RATE OF 10% OVER AND ABOVE GP DECLARED BY THE ASSESSEE IN I TS 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. CONSIDERING THE SAME, I DIRECT THE ASSESSING OFFICER TO MAKE ADDITION IN THE HANDS OF ASSESSEE BY ADOPTING GP RA TE AT 10% OF BOGUS PURCHASES ONLY MADE BY THE ASSESSEE. CONSEQUENTLY, REST OF THE GROUNDS/ARGUMENTS RAISED BY THE ASSESSEE IN THE CROSS OBJECTION ARE DISMISSED. ACCORDINGLY, THE GROUNDS RAISED BY THE ASSESSEE ARE PARTLY ALLOWED. 8. FROM THE ABOVE, IT IS EVIDENT THAT THE ASSESSEE IS E NGAGED IN THE PURCHASES FROM THE SUPPLIERS LIKE IN A.Y. 2011-12. ON SIMILAR FACTS, THE TRIBUNAL HELD THAT CONFIRMATION OF ADDITION ONLY AT 10% OF SUCH ALLEGED BOGUS PURCHASES MEETS THE ENDS OF JUSTICE. RELEVANT PAR AS FROM THE ORDER OF TRIBUNAL FOR A.Y. 2011-12 ARE EXTRACTED ABOVE. THUS, THE LD. DR COULD NOT MAKE OUT ANY REASON WHY WE SHOULD NOT FOLLO W OUR DECISION GIVEN IN A.Y. 2011-12 IN THE ASSESSEES OWN CASE. HENCE, WE ARE OF THE OPINION THAT, WITH SIMILAR FINDING IN ITS FAVOUR OF AD OPTING GP RATE OF 10% OF THE BOGUS PURCHASES, SHOULD MEET BOTH E NDS OF JUSTICE. CONSEQUENTLY, THE GROUNDS RAISED BY THE REVENUE ARE D ISMISSED AND THAT OF CROSS OBJECTIONS RAISED BY THE ASSESSEE ARE PARTLY ALLOWE D. 9. IN THE RESULT, THE APPEAL OF REVENUE IS DISMISSED AND THE CROSS OBJECTION OF THE ASSESSEE IS PARTLY ALLOWED. 7 ITA NO.2984/PUN/2016 (BY REVENUE) AND CO NO.07/PUN/2 017 (BY ASSESSEE) - A.Y. 2010-11 10. FACTS FOR THE A.Y. 2010-11 ARE ADMITTEDLY MUTATIS MUTANDIS SIMILAR TO THOSE FOR THE ASSESSMENT YEAR 2009-10. FOLLOW ING THE VIEW TAKEN HEREINABOVE, WE ORDER TO ADOPT GP RATE AT 10% O F BOGUS PURCHASES MADE BY THE ASSESSEE. 11. IN THE RESULT, THE APPEAL OF REVENUE IS DISMISSED AND THE CROSS OBJECTION OF THE ASSESSEE IS PARTLY ALLOWED. 12. TO SUM UP, BOTH THE APPEALS OF THE REVENUE ARE DISM ISSED AND THAT OF CROSS OBJECTIONS OF THE ASSESSEE ARE PARTLY ALLOWED. ORDER PRONOUNCED ON THIS 31 ST DAY OF JANUARY, 2019. SD/- SD/- (VIKAS AWASTHY) (D. KARUNAKARA RAO) /JUDICIAL MEMBER / ACCOUNTANT MEMBER PUNE; DATED 31 ST JANUARY, 2019 / COPY OF THE ORDER FORWARDED TO : / BY ORDER, //TRUE COPY// SENIOR PRIVA TE SECRETARY , / ITAT, PUNE 1. / THE APPELLANT 2. / THE RESPONDENT 3. THE CIT(A)-I, NASHIK 4. THE PR.CIT-I, NASHIK 5. , , A BENCH PUNE; 6. / GUARD FILE. 8 DATE 1. DRAFT DICTATED ON 31-01-2019 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 31-01-2019 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS 7. DATE OF UPLOADING ORDER SR.PS 8. FILE SENT TO THE BENCH CLERK SR.PS 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK 10. DATE ON WHICH FILE GOES TO THE A.R. 11. DATE OF DISPATCH OF ORDER.