MBM TUBES PVT LTD., MUMBAI V. ITO 5(2)(3), MUMBAI

ITA 3027/MUM/2016

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 6674 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 3 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-07-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 01-03-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 26-04-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: POOJA SWAROOP LD
• Assessee Lawyers: SANJAY KAPADIA LD
• Keywords: Bogus purchase; Peak credit
• Section: 143(3); 133(6); 148

Judgement Text

ITA NO.5938/MUM/2014 ITA NO.3027/MUM/2016 M/S. MBM TUBES PRIVATE LIMITED ASSESSMENT YEAR :2010-11 1 IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI , , BEFORE HONBLE SHRI MAHAVIR SINGH, JM AND HONBLE SHRI MANOJ KUMAR AGGARWAL, AM ./ I.T.A. NO.5938/MUM/2014 ( / ASSESSMENT YEAR:2010-11) M/S. MBM TUBES PVT. LTD. C/O MOHANLAL JAIN & CO. (CA) OFF. NO.10, CHARTERED HOUSE, GF, DR. C.H. STREET MARINE LINES, MUMBAI-02. / VS. INCOME TAX OFFIC ER - 5(2)(3) MUMBAI. ! ./ ! ./PAN/GIR NO. AAFCM-4177-L ( ;< /APPELLANT ) : ( =>;< / RESPONDENT ) & ./ I.T.A. NO.3027/MUM/2016 ( / ASSESSMENT YEAR:2010-11) M/S. MBM TUBES PVT. LTD. C/O MOHANLAL JAIN & CO. (CA) OFF. NO.10, CHARTERED HOUSE, GF, DR. C.H. STREET MARINE LINES, MUMBAI-02. / VS. INCOME TAX OFFICER - 5(2)(3) MUMBAI. ! ./ ! ./PAN/GIR NO. AAFCM-4177-L ( ;< /APPELLANT ) : ( =>;< / RESPONDENT ) A PPELLANT BY : SHRI SANJAY KAPADIA- LD. AR R ESPONDENT BY : MS. POOJA SWAROOP - LD.DR / DATE OF HEARING : 30/07/2019 / DATE OF PRONOUNCEMENT : 30/07/2019 ITA NO.5938/MUM/2014 ITA NO.3027/MUM/2016 M/S. MBM TUBES PRIVATE LIMITED ASSESSMENT YEAR :2010-11 2 / O R D E R MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER): - 1. AFORESAID APPEALS ARE RECALLED MATTER SINCE THE APPEALS WERE EARLIER DISPOSED-OFF BY THE TRIBUNAL VIDE COMMON OR DER DATED 24/07/2018. HOWEVER, THE AFORESAID TWO APPEALS WERE RECALLED VIDE MA NO.601 & 611 / MUM/2018 ORDER DATED 19/03/2019. ACC ORDINGLY, THESE APPEALS HAVE COME UP FOR FRESH HEARING BEFORE THE B ENCH. 2. BOTH APPEALS PERTAIN TO AY 2010-11. ITA NO. 5938 /MUM/2014 CONTEST ADDITION ARISING OUT OF ASSESSMENT FRAMED U /S 143(3) ON 29/03/2013 WHEREAS ITA NO. 3027/MUM/2016 ARISES OUT OF ASSESSMENT FRAMED U/S 143(3) R.W.S 147 ON 11/03/2015. NEVERTHE LESS, BOTH THE APPEALS CONTEST THE ORDER OF LOWER AUTHORITIES IN S USTAINING ADDITIONS ON ACCOUNT OF ALLEGED BOGUS PURCHASES. 3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED RELEVANT MATERIAL ON RECORD AND DELIBERATED ON JUDICIAL PRONOUNCEMENT S AS CITED BEFORE US. THE ONLY ARGUMENTS ADVANCED BY LD. AUTHORISED REPRE SENTATIVE FOR ASSESSEE [AR] ARE THAT ESTIMATIONS MADE BY LOWER AU THORITIES ON ACCOUNT OF ALLEGED BOGUS PURCHASES WERE ON THE HIGHER SIDE. 4. FACTS AS EMANATING FROM ASSESSMENT FRAMED U/S 14 3(3) ON 29/03/2013 ARE THAT THE ASSESSEE BEING RESIDENT COR PORATE ASSESSEE IS STATED TO BE ENGAGED IN THE BUSINESS OF MANUFACTURI NG OF FERROUS AND NON-FERROUS METALS. PURSUANT TO RECEIPT OF CERTAIN INFORMATION FROM INVESTIGATION WING OF THE DEPARTMENT, IT TRANSPIRED THAT THE ASSESSEE OBTAINED HAWALA PURCHASE ENTRIES AGGREGATING TO RS.116.37 LACS FROM 7 ENTITIES, THE DETAILS OF WHICH HAVE ALREADY BEEN EX TRACTED IN PARA-5 OF THE ITA NO.5938/MUM/2014 ITA NO.3027/MUM/2016 M/S. MBM TUBES PRIVATE LIMITED ASSESSMENT YEAR :2010-11 3 ASSESSMENT ORDER. ALTHOUGH, THE ASSESSEE DEFENDED T HE PURCHASES BY SUBMITTING LEDGER EXTRACTS, HOWEVER, NOTICES SENT U /S 133(6) TO ALL THE ENTITIES WERE RETURNED BACK UNSERVED IN MOST OF THE CASES. THE FACTUAL MATRIX LED THE LD. AO TO DISBELIEVE THE STATED PURC HASE TRANSACTIONS AND ACCORDINGLY, THE SAME WERE ADDED BACK TO THE INCOME OF THE ASSESSEE WHILE FRAMING THE ASSESSMENT. UPON FURTHER APPEAL, LD. FIRST APPELLATE AUTHORITY RESTRICTED THE ADDITION TO RS.55.80 LACS, BEING PEAK CREDIT. AGGRIEVED, THE ASSESSEE IS UNDER APPEAL BEFORE US W HICH IS SUBJECT MATTER OF ITA NO.5938/MUM/2014. 5. SUBSEQUENTLY, THE SAID ASSESSMENT WAS REOPENED, AS PER DUE PROCESS OF LAW, VIDE NOTICE U/S 148 DATED 30/03/201 4 ON THE GROUND THAT THE ASSESSEE INDULGED IN HAWALA TRANSACTIONS AGGREGATING TO RS.47.97 LACS FROM TWO ENTITIES, THE DETAILS OF WHICH HAVE A LREADY BEEN EXTRACTED ON PARA 4.1 OF ASSESSMENT ORDER FRAMED U/S 143(3) R.W.S. 147 DA TED 11/03/2015. SINCE NOTICES ISSUED U/S133(6) WERE RET URNED BACK IN SIMILAR MANNER AND THE ASSESSEE FAILED TO SUBSTANTIATE THE PURCHASES, LD. AO ADDED AN AMOUNT OF RS.17.50 LACS, BEING PEAK CREDIT OF THE SAID PURCHASES, TO THE INCOME OF THE ASSESSEE. THE SAME, UPON CONFIRMATION BY LD. FIRST APPELLATE AUTHORITY, IS UNDER CHALLENG E BEFORE US VIDE ITA NO.3027/MUM/2016. 6. WE ARE OF THE CONSIDERED OPINION THAT THERE COUL D BE NO SALE WITHOUT ACTUAL PURCHASE OF MATERIAL KEEPING IN VIEW THE ASSESSEES NATURE OF BUSINESS ACTIVITIES. THE ASSESSEE WAS IN POSSESSION OF PRIMARY PURCHASE DOCUMENTS AND THE PAYMENTS TO THE SUPPLIER S WERE THROUGH BANKING CHANNELS. AT THE SAME TIME, NOTICES ISSUED U/S 133(6) TO CONFIRM ITA NO.5938/MUM/2014 ITA NO.3027/MUM/2016 M/S. MBM TUBES PRIVATE LIMITED ASSESSMENT YEAR :2010-11 4 THE TRANSACTIONS DID NO ELICIT ANY SATISFACTORY RES PONSE FROM ANY OF THE SUPPLIERS AND THE ASSESSEE FAILED TO PRODUCE EVEN A SINGLE SUPPLIER TO CONFIRM THE PURCHASE TRANSACTIONS. THE DELIVERY OF MATERIAL REMAINED UNSUBSTANTIATED. THEREFORE, IN SUCH A SITUATION, TH E ADDITION, WHICH COULD BE MADE, WAS TO ACCOUNT FOR PROFIT ELEMENT EMBEDDED IN THESE PURCHASE TRANSACTIONS TO FACTORIZE FOR PROFIT EARNED BY ASSE SSEE AGAINST POSSIBLE PURCHASE OF MATERIAL IN THE GREY MARKET AND UNDUE B ENEFIT OF VAT AGAINST SUCH BOGUS PURCHASES, WHICH LOWER AUTHORITI ES HAS RIGHTLY DONE. HOWEVER, THE ESTIMATION BASED ON PEAK CREDIT, IN OU R OPINION, IS ON THE HIGHER SIDE KEEPING IN VIEW THE NATURE OF ASSESSEE S BUSINESS. THEREFORE, WE ESTIMATE THE SAME @12.5% OF ALLEGED BOGUS PURCHASES. THE SAME WOULD WORK OUT TO BE RS.14,54,704/- AGAINS T PURCHASES MADE FROM 7 SUPPLIERS AND WHICH ARE SUBJECT MATTER OF IT A NO. 5938/MUM/2014. THE SAME WOULD WORK OUT TO BE RS.5,9 9,630/- AGAINST PURCHASES MADE FROM 2 SUPPLIERS AND WHICH ARE SUBJE CT MATTER OF ITA NO.3027/MUM/2016. THE BALANCE ADDITION, IN THIS RES PECT, SHALL STAND DELETED. 7. IN RESULT, BOTH THE APPEALS STAND PARTLY ALLOWED IN TERMS OF OUR ABOVE ORDER. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH JULY,2019. SD/- SD/- (MAHAVIR SINGH) (MA NOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 30/07/2019 SR.PS, JAISY VARGHESE ITA NO.5938/MUM/2014 ITA NO.3027/MUM/2016 M/S. MBM TUBES PRIVATE LIMITED ASSESSMENT YEAR :2010-11 5 $%&'(' / COPY OF THE ORDER FORWARDED TO : 1. ;< / THE APPELLANT 2. =>;< / THE RESPONDENT 3. G ( ) / THE CIT(A) 4. G / CIT CONCERNED 5. HI=BJ , J , / DR, ITAT, MUMBAI 6. IKLM / GUARD FILE / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI.