ACIT CIR 11(3)(1), MUMBAI V. TAPRATH POLYMERS P.LTD, MUMBAI

ITA 2996/MUM/2017

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 9554 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-09-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2009-2010
• Appeal Filed On: 26-04-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M V RAJGURU
• Keywords: Bogus purchase; Accommodation entries
• Section: 143(3); 133(6); 147

Judgement Text

P A G E | 1 ITA NO. 2996/MUM/2017 ACIT VS. M/S. TAPRATH POLYMERS IN THE INCOME TAX APPELLATE TRIBUNAL L BENCH, MUMBAI BEFORE SHRI RAJENDRA , AM AND SHRI RAVISH SOOD, JM ./ I.T.A. NO.2996 /MUM/2017 ( / ASSESSMENT YEAR: 2009 - 1 0 ) ACIT CIRCLE 11(3)(1), R. NO. 204, AAYAKAR BHAVAN 2 ND FLOOR, M.K. MARG, MUMBAI - 400 020 / VS. M/S. TAPRATH POLYMERS PVT. LTD. 305/306, BELSCOT TOWER, LINK ROAD, LOKHANDWALA COMPLEX, ANDHERI (W), MUMBAI - 400053 ./ ./ PAN/GIR NO. AABCT7989D ( / REVENUE ) : ( / ASSESSEE ) / REVENUE BY : SHRI M.V. RAJGURU, SR. D.R / ASSESSEE BY : NONE / DATE OF HEARING : 05/09/2017 / DATE OF PRONOUNCEMENT : 13 /09/2017 / O R D E R PER RAVISH SOOD, JUDICIAL MEMBER: THE PRESENT APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST T HE ORDER PASSED BY THE CIT(A) - 18 , MUMBAI, DATED 05.01.2017, WHICH IN ITSELF ARISES FROM THE ASSESSMENT ORDER PASSED BY THE A.O U/S. 143(3) R.W.S.147 OF THE INCOME TAX ACT, 1961, (FOR SHORT ACT), DATED P A G E | 2 ITA NO. 2996/MUM/2017 ACIT VS. M/S. TAPRATH POLYMERS 27.02.2015 . THE REVENUE ASSAILING THE ORDER OF THE CIT(A) HAD RAISED THE FOLLOWING GROU NDS OF APPEAL BEFORE US: - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) ERRED IN RESTRICTING THE DISALLOWANCE OF THE ALLEGED PURCHASES OF RS.34,81,845/ - CLAIMED TO HAVE BEEN MADE FROM THE ALLEGED HAWALA PARTIES TO 12.5% I. E. RS.4,35,231/ - THEREBY GRANTING A RELIEF OF RS.30,46,614/ - BY IGNORING THE FACT THAT NEITHER THE PARTIES NOR THE CONFIRMATION LETTERS WAS PRODUCED EITHER DURING THE COURSE OF ASSESSMENT PROCEEDINGS OR DURING THE APPELLATE PROCEEDINGS WHICH WOULD PROVE TH AT THE PURCHASES ALLEGED TO HAVE BEEN MADE WERE GENUINE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) ERRED IN RESTRICTING THE DISALLOWANCE OF THE PURCHASES MADE FROM THE VARIOUS PARTIES WHO WERE PROVEN ACCOMMODATION ENTRY PROVIDERS AS PER THE FINDING MADE BY THE SALES TAX AUTHORITIES IN CONSEQUENCE TO THE INVESTIGATION CARRIED OUT. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) ERRED IN IGNORING THE DECISION BY THE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF J.R. SOLVENT INDUSTRIES (PVT.) LTD. (2012) (22 TAXMANN,COM 115) WHEREIN IT WAS HELD THAT WHERE PURCHASES WERE MADE FROM A NON - EXISTING SELLER, SAME WOULD BE HELD TO BE BOGUS EVEN IF COMPLETE QUANTITATIVE DETAILS OF PURCHASE WERE AVAILABLE IN THE ASSESSEE'S BOOKS OF ACCOUNT 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) ERRED IN FOLLOWING THE JUDICIAL PRONOUNCEMENTS OF M/S. SIMIT P. SHETH (2013) 18 TAXMANN.COM 385 (GUJ), M/S. BHOLANATH POLYFAB PVT.LTD. 335 ITR 290 (GUJ) AND M/S. SANKET STEEL TRADERS ITA NO.2801/AHD/2008 DATED 20/05/2011 WHICH WERE RENDERED IN CASES WHERE THE ASSESSEES WERE TRADERS WHEREAS IN THE INSTANT CASE THE ASSESSEE IS A MANUFACTURING COMPANY AND AS SUCH THOSE DECISIONS WERE NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. 5. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT (A) ON THE ABOVE GROUNDS BE SET ASIDE AN D THAT OF THE A.O. BE RESTORED. 6. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUNDS OR ADD A NEW GROUND WHICH MAY BE NECESSARY 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY WH ICH IS ENGAGED IN THE BUSINESS OF MANUFACTURING, IMPORT A N D EXPORT OF S YNTHETIC R UBBER SBR AND S YNTHETIC RUBBER NGSR HAD FILED ITS RETURN OF INCOME F OR A.Y 2009 - 10 ON 14.09.2009, DECLARING P A G E | 3 ITA NO. 2996/MUM/2017 ACIT VS. M/S. TAPRATH POLYMERS TOTAL INCOME AT RS.1,32,24,350/ - , WHICH WAS ACCEPTED AS SUCH U/S. 143(1) OF THE ACT . THE A.O ON THE BASIS OF INFORMATION RECEIVED FROM THE SALES T AX DEPARTMENT THAT THE ASSESSEE HAD DURING THE YEAR UNDER CONSIDERATION MADE BOGUS PURCHASES FROM THE FOLLOW ING PARTIES: NAME OF THE PARTIES AMOUNT DEEPALI ENTERPRISES RS.9,54,452/ - M.R. CORPORATION RS.12,58,875/ SMEETA IMPEX PVT. LTD. RS.3,79,350/ - ENGINEERING SERVICE CENTER RS.8,89,168/ - TOTAL RS.34,81,845/ - , THUS REOPENED THE CASE OF THE ASSESSEE U/S 147 OF THE ACT . THAT DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS THE A.O ISSUED N OTICE S U/S. 133(6) TO ALL THE FOUR PARTIES, WHICH H OWEVE R WERE RETURNED BY THE POSTAL AUTHORITIE S WITH THE REMARKS AS UNDER: SR. NO. NAME OF THE PARTY REMARKS 1. DEEPALI ENTERPRISES LEFT 2. M.R. CORPORATION LEFT 3. SMEETA IMPEX PVT. LTD. ACKNOWLEDGMENT NOT RECEIVED 4. ENGINEERING SERVICE CENTER INTIMATION POSTED THAT IN THE BACKDROP OF THE AFORESAID FACTUAL MATRIX THE A.O DIRECTED THE ASSESSEE TO PRODUCE THE RESPECTIVE PARTIES , AS WELL AS PLACE ON RECORD THE DETAILS IN RESPECT OF THE PURCHASE TRANSACTION S CLAIMED TO HAVE BEEN MADE FROM THEM. THOUGH THE A.O HAD SPECIFICALLY ASKED THE ASSE SSEE TO SUBMIT PROOF OF DELIVERY OF GOODS, LEDGER ACCOUNTS OF PARTIES, BANK STATEMENT FOR THE ENTIRE YEAR HIGHL IGHTING THE PAYMENTS MADE TO THESE PARTIES, COPIES OF BILLS I SSUED BY THE AFORESAID PARTIES ALONG WITH THE COPY OF LEDGER ACCOUNT AND BANK STATEMENT, THE P A G E | 4 ITA NO. 2996/MUM/2017 ACIT VS. M/S. TAPRATH POLYMERS ASSESSEE HOWEVER FAILED TO COMPLY WITH THE DIRECT IONS AND DID NOT FURNISH THE COMPLETE DETAILS . THAT THOUGH THE A.O HAD CALLED UPON THE ASSESSEE TO ESTABLISH THE C HAIN OF THE ITEMS WHICH WERE PURCHASED FROM THE AFORE SAID PARTIES AND DEMONSTRATE AS TO HOW THE SAME HAD BEEN UTILIZED IN THE MANUFACTURING PROCESS , HOWEVER , THE ASSESSEE EXPRESS ED ITS INABILITY TO PRODUCE ANY OF THE PARTIES AND SUBMITTED THAT IT WAS NOT P OSSIBLE TO CORRELATE EACH ITEM PURCHASE D FROM THE AFOREMENTIONED PARTIES WITH ITS UTILIZATION IN ITS MANUFACTURING BUSINESS . THE ASSESSEE IN ITS ATTEMPT TO PROVE THE GENUINENESS OF THE PURCHASE TRANSACTIONS MADE FROM THE ABOVE MENTIONED PARTIES, THEREIN ST RESSED ON THE FACT THAT THE PAYMENTS TOWARDS THE PURCHASE CONSIDERATION WERE MADE TO THE M THROUGH BANKING CHANNEL. THE A.O HOWEVER NOT FINDING FAVOUR WITH THE SUBMISSIONS OF THE ASSESSEE , THEREIN H ELD A CONVICTION THAT THE ASSESSEE HAD AS A MATTER OF FACT NO T MADE ANY GENUINE PURCHASE S FROM THE AFOREMENTIONED PARTIES, BUT HAD ONLY OBTAINED ACCOMMODATION ENTRIES FROM THEM IN THE GARB OF PURCHASES. THE A.O THUS BEING OF THE VIEW THAT IN THE BACKDROP OF THE INFORMATION RECEIVED FROM THE SALES TAX DEPARTMENT , A VERY HEAVY ONUS WAS C A ST UPON THE ASSESSEE TO DISPROVE THE ALLEGATION THAT IT HAD MERELY TAKEN ACCOMMODATION ENTRIES FROM THE AFORESAID PARTIES AND RATHER TO THE CONTRARY PROVE THE GENUINE NESS AND VERACITY OF THE PURCHASE TRANSACTIONS TO THE HILT , HAD HOWEVER FAILED TO DISCHARGE THE ONUS SO CAST UPON IT . THE A.O THUS HOLDING A CONVICTION THAT THE ASSESSEE HAD NOT MADE ANY GENUINE PURCHASE S FROM THE AFOREMENTIONED PARTIES , BUT HAD MERELY TAKEN ACCOMMODATION ENTRIES FROM THEM DURING THE YEAR UNDER CONSIDE RATION, THEREFORE , MADE AN ADDITION OF THE ENTIRE AMOUNT OF THE BOGUS PURCHASES AGGREGATING TO THE RS.34,81,845/ - IN THE HANDS OF THE ASSESSEE. P A G E | 5 ITA NO. 2996/MUM/2017 ACIT VS. M/S. TAPRATH POLYMERS 3. THE ASSESSEE BEING AGGRIEVE D WITH THE ORDER PASSED BY THE A.O CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A) . THE CIT(A) AGREED WITH THE OBSERVATIONS OF THE A.O THAT THE ASSESSEE HAD FAILED TO SUBSTANTIATE THE GENUINENESS AND VERACITY OF THE PURCHASE TRANSACTIONS. HOWEVER, THE CIT(A) AFTER DELIBERATING ON THE CONTENTIONS OF THE ASSESSEE IN THE BACKDROP OF THE FA CTS OF THE CASE , THEREIN OBSERVED THAT AS THE A.O HAD NOT GIVEN ANY ADVERSE FINDING IN RESPECT OF THE CONSUMPTION/SALES OF THE GOODS UNDER CONSIDERATION, THEREFORE, CONCLUDED THAT THE GENUINENESS OF THE SALES WERE NOT IN DOUBT . THE CIT(A) THUS ON THE BASIS OF THE AFORESAID FACTS CONCLUDED THAT NOW WHEN THE GENUINENESS OF THE SALES HAD NOT BEEN DOUBTED BY THE A.O , THEREFORE, IT WAS NOT PERMISSIBLE ON HIS PART TO HAVE MADE ADDITION IN RESPECT OF THE AGGREGATE VALUE OF THE PURCHASE S CLAIMED BY THE ASSESSEE TO HAVE BEEN MADE FROM THE AFORESAID PARTIES, AS THE SAME WOULD LEAD TO ABSURD PROFIT. THE CIT(A) THUS IN THE BACKDROP OF HIS AFORESAID OBSERVATIONS CONCLUDED THAT IN THE TOTALITY OF THE FACT S INVOLVED IN THE CASE OF THE PRESENT ASSESSEE, THE ADDITION WAS LIA BLE TO BE RESTRICTED ONLY TO THE EXTENT OF THE PROFIT ELEMENT EMBEDDED IN THE AFORESAID PURCHASES , WHICH COULD SAFELY BE HELD TO HAVE BEEN MADE BY THE ASSESSEE F ROM THE OPEN/GREY MARKET. THE CIT(A) THEREAFTER RELYING ON THE JUDGMENT OF THE HONBLE HIGH COU RT OF GUJ A RAT IN THE CASE OF CIT VS. SIMIT P. SHETH (2013) (38 TAXAMAN.COM 385) (GUJ), AND THE ORDER OF THE ITAT, AH EMADABAD BENCH, IN THE CASE OF THE VIJAY PROTIENS (58 ITD 428), THEREIN CONCLUDED THAT THE ADDITION IN THE HANDS OF THE ASSESSEE WAS LIABLE TO BE RESTRICTED TO THE EXTENT OF THE PROFIT ELEMENT EMBEDDED IN MAKING THE PURCHASES FROM THE OPEN/GREY MARKET , WHICH COULD FAIRLY BE TAKEN AT 12.5% OF THE AGGREGATE VALUE OF THE BOGUS PURCHASES OF RS. 34,81,845/ - . THE CIT(A) THUS ON THE BASIS OF HIS AFOR ESAID OBSERVATIONS RESTRICTED THE ADDITION IN THE HANDS OF P A G E | 6 ITA NO. 2996/MUM/2017 ACIT VS. M/S. TAPRATH POLYMERS THE ASSESSEE TO 12.5% OF THE AGGREGATE VALUE OF THE PURCHASE S MADE BY THE ASSESSEE FROM THE AFOREMENTIONED PARTIES. 4. THE DEPARTMENT BEING AGGRIEVED WITH THE ORDER OF THE CIT(A) HAD CARRIED THE MATTER IN APPEAL BEFORE US. THAT THE ASSESSEE RESPONDENT DESPITE BEING PUT TO NOTICE AS REGARDS THE HEARING OF THE APPEAL HAD HOWEVER FAILED TO PUT AN APPEARANCE BEFORE US. WE THUS BEING LEFT WITH NO OTHER ALTERNATIVE THEREIN PROCEED WITH THE HEARING OF TH E APPEAL , AND AS PER RULE 25 DISPOSE OF THE SAME AFTER HEARING THE APPELLANT REVENUE. THE LD. DEPARTMENTAL REPRESENTATIVE (FOR SHORT D.R) RELIED ON THE ORDER OF THE A.O AND SUBMITTED THAT IN THE TOTALITY OF THE FACT S INVOLVED IN THE CASE , THE ADDITION OF THE ENTIRE VALUE OF THE BOGUS PURCHASES WAS RIGHTLY MADE IN THE HANDS OF THE ASSESSEE. IT WAS THUS AVERRED BY THE LD. D.R THAT THE CIT(A) HAD ERRED IN RESTRICTING THE ADDITION TO 12.5% OF THE AGGREGATE VALUE OF THE BOGUS PURCHASE S CLAIMED BY THE ASSESSEE TO HAVE BEEN MADE FROM THE AFOREMENTIONED PARTIES . THE LD. D.R THUS SUBMITTED THAT THE ORDER OF THE CIT(A) MAY BE SET ASIDE AND THAT OF THE A.O BE RESTORED. 5. WE HAVE HEARD THE LD. DEPARTMENTAL REPRESENTATIVE, PERUSED THE ORDERS OF THE LOWER AUTHORITIES A ND THE MATERIAL AVAILABLE ON RECORD. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE FACTS OF THE CASE AND FIND OURSELVES TO BE IN AGREEMENT WITH THE VIEW TAKEN BY THE A.O THAT THE ASSESSEE HAD ABSOLUTELY FAILED TO SUBSTANTIATE THE GENUINENESS AND VERACITY OF THE PURCHASE TRANSACTIONS CLAIMED BY IT TO HAVE BEEN MADE FROM THE AFOREMENTIONED PARTIES. WE ARE HOWEVER UNABLE TO PERSUADE OURSELVES TO BE IN AGREEMENT WITH THE A.O THAT THE AGGREGATE VALUE OF THE BOGUS PURCHASES OF RS. 34,81,845/ - (SUPRA) WAS LIABLE TO BE ADDED TO THE INCOME OF THE ASSESSEE. WE ARE OF THE CONSIDERED VIEW THAT NOW WHEN IT REMAINS AS A MATTER OF FACT THAT THE CONSUMPTION /SALES OF THE GOODS UNDER CONSIDERATION HAD NOT BEEN DOUBTED BY THE P A G E | 7 ITA NO. 2996/MUM/2017 ACIT VS. M/S. TAPRATH POLYMERS A.O , THEREFORE, IN THE BACKDROP OF THE SAID FACT U AL POSITION , THERE WAS NO JUSTIFICATION ON HIS PART IN MAKING THE ADDITION OF THE ENTIRE VALUE OF THE BOGUS PURCHASES IN THE HANDS OF THE ASSESSEE. WE ARE OF THE CONSIDERED VIEW THAT NOW WHEN THE SALES OF THE GOODS ARE NOT DOUBTED , THE REFORE , THE ADDITION IN THE HANDS OF THE ASSESSEE WAS LIABLE TO BE RESTRICTED ONLY TO THE EXTENT OF THE PROFIT ELEMENT INVOLVED IN MAKING THE PURCHASE S OF THE GOODS UNDER CONSIDERATION FROM THE OPEN/GREY MARKET. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE ISSUE BEFORE US AND ARE OF THE CONSIDERED VIEW THAT THE CIT(A) AFTER DULY DELIBERATING ON THE FACTS OF THE CASE HAD RIGHTLY CONCLUDED THAT THE ADDITIONS IN THE HANDS OF THE ASSESSEE WAS LIABLE TO BE RESTRICTED TO THE PROFIT MARGIN INVOLVED IN MAKING THE PURCHASES FROM THE UNKNOWN SUPPLIERS OPERATING IN THE OPEN/GREY MARKET. WE FURTHER FIND THAT THE PROFIT MARGIN SO ARRIVED AT BY THE CIT(A) AT 12.5% OF THE VALUE OF THE AGGREGATE PURCHASES CLAIMED BY THE ASSESSEE TO HAVE BEEN MADE FROM THE AFOREMENTIONED PARTIES , ALSO DOES N OT SUFFER FROM ANY INFIRMITY . WE THUS BEING OF THE VIEW THAT THE ORDER PASSED BY THE CIT(A) IS A WELL REASONED ORDER WHICH CANNOT BE FAULTED WITH, THEREFORE, FIND NO REASON TO TAKE A DEPARTURE FROM THE VIEW ARRIVED AT BY HIM, AND THUS UPHOLD HIS ORDER. 6. THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 13 .09.2017 SD/ - SD/ - ( RAJENDRA) (RAVISH SOOD) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; 13 .09.2017 PS. ROHIT KUMAR P A G E | 8 ITA NO. 2996/MUM/2017 ACIT VS. M/S. TAPRATH POLYMERS / 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