ITO 20(2)(4), MUMBAI V. LIFETCHNIQUES, MUMBAI

ITA 306/MUM/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 1690 (ITAT-MUMBAI)
• Duration Of Justice: 10 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 19-01-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bogus purchase; Opportunity of being heard; Accommodation entries
• Section: 142(1)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL I BENCH, MUMBAI , , , , BEFORE SHRI RAJENDRA, AM AND SHRI AMARJIT SINGH, JM / I.T.A. NO.306/MUM/2016 ( / ASSESSMENT YEAR: 2011-12) INCOME TAX OFFICER, WARD 20(2)(4) ROOM NO.212, PIRAMAL CHAMBER, LALBAUG, MUMBAI - 400012 / VS. M/S. LIFTECHNIQUES MINERVA INDUSTRIAL ESTATE OPP.ACME INDL.ESTATE, BUNDER ROAD, SEWARI(EAST) MUMBAI - 400015 ./ ./PAN/GIR NO. : AAAFL8801C ( /APPELLANT ) .. ( / RESPONDENT ) / DATE OF HEARING: 08.11.2016 /DATE OF PRONOUNCEMENT: 30.11.2016 / O R D E R PER AMARJIT SINGH, JM: THE REVENUE HAS FILED THE PRESENT APPEAL AGAINST THE ORDER DATED 23.10.2015 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) 32, MUMBAI [HEREINAFTER REFERRED TO AS THE CIT(A)] RELEVANT TO THE A.Y.2011-12. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS:- REVENUE BY: SHRI G. K. MISHRA ASSESSEE BY: NONE ITA NO.306/M/2016 A.Y. 2011-12 2 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN GRANTING RELIEF OF RS.32,91,552/- BY RESTRICTING THE ADDITION @10.91 (GP DECLARED BY THE ASSESSEE) OF TOTAL PURCHASE FROM HAWALA PARTIES WITHOUT ANY ACTUAL PURCHASE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN IGNORING THE FACT THAT THE ASSESSE FAILED TO DISCHARGE ITS BURDEN THAT ALLEGED BOGUS PARTIES INVOLVED WERE EXISTENT AND GENUINE. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN FINDING THAT CORRESPONDING SALES SHOWN OUT OF MATERIAL INVOLVED IN BOGUS PURCHASE WITHOUT MENTIONING HOW THIS AND WITH WHAT EVIDENCE BEFORE HIM SUCH FINDING WAS ARRIVED AT. IF SUCH EVIDENCE WAS GIVEN (AS CORRESPONDING SALES) THE SAME SHOULD HAVE BEEN REMANDED TO THE A.O. FOR HIS EXAMINATION AND COMMENTS. 4. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) ON THE ABOVE GROUNDS BE REVERSED AND THAT OF THE ASSESSING OFFICER BE RESTORED. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE A.Y.2011-12 ON 21.09.2011 DECLARING TOTAL INCOME TO THE TUNE OF RS.10,88,655/-. THE RETURN OF INCOME WAS PROCESSED U/S.143(1) OF THE INCOME TAX ACT, 1961 ( IN SHORT THE ACT). THE CASE WAS REOPENED BY ISSUE OF NOTICE U/S.148 OF THE ACT DATED 25.02.2013 ON THE BASIS OF INFORMATION RECEIVED FROM SALES TAX DEPARTMENT THAT THE ASSESSEE HAD TAKEN ACCOMMODATION ENTRIES TO THE TUNE OF RS.43,67,390/-. THEREAFTER, THE NOTICE U/S.143(2) AND 142(1) OF THE ACT WERE ISSUED AND SERVED UPON HE ASSESSEE. THE ASSESSEE IS A FIRM AND ENGAGED IN THE BUSINESS OF TRADING AND IMPORTING OF SHIP CHANDLERS AND LIFTING ITEMS. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS DERIVED INCOME FROM BUSINESS. THE LETTER WAS RECEIVED FROM THE SALES TAX DEPARTMENT REGARDING THE BOGUS PURCHASE ITA NO.306/M/2016 A.Y. 2011-12 3 TO THE TUNE OF RS.43,67,390/- FROM THE THREE DIFFERENT PARTIES I.E.SIDHIVINAYAK STEELS, NEWSPARK TRADING CO. PVT. LTD. AND NEPTUNE CORPORATION. THE DETAILS OF WHICH HAS BEEN REPRODUCED BELOW FOR READY REFERENCE:- SR. NO. NAME TIN PAN AMOUNT (RS.) 1 SIDHIVINAYAK STEELS 27050389521V AGVPS7889Q 2,49,356 2 NEWSPARK TRADING CO. PVT. LTD. 27530399248V AACCM1443M 4,49,955 3 NEPTUNE CORPORATION 27870354344V ABHPM6418L 36,68,079 TOTAL 43,67,390 THEREAFTER, THE ASSESSING OFFICER BY GIVING AN OPPORTUNITY OF BEING HEARD TO THE ASSESSEE AND FINDING NO NON-GENUINENESS OF THE PURCHASES ADDED THE PEAK AMOUNT OF PURCHASES OR 25% OF SUCH PURCHASE IN VIEW OF THE CASE OF M/S. VIJAY PROTEINS LTD. (1996 58 ITD 428 AHD) TO THE TUNE OF RS.37,68,034/- TO THE INCOME OF THE ASSESSEE. THEREAFTER, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A) WHO CONSIDERED THE 10.91% OF THE PROFIT ON THE TOTAL ALLEGED BOGUS PURCHASE OF RS.43,67,390/- I.E. TO THE TUNE OF ITA NO.306/M/2016 A.Y. 2011-12 4 RS.4,76,482/-. FEELING AGGRIEVED, THE REVENUE HAS FILED THE PRESENT APPEAL BEFORE US. ISSUE NO.1 TO 4:- 4. UNDER THESE ISSUES IN FACT THE REVENUE HAS CHALLENGED THE DELETION OF THE ADDITION MADE BY THE ASSESSING OFFICER TO THE TUNE OF RS. 32,91,552/- ON ACCOUNT OF BOGUS PURCHASES. THE LEARNED REPRESENTATIVE OF THE DEPARTMENT HAS ARGUED THAT THE ASSESSING OFFICER HAS DECIDED THIS ISSUE CORRECTLY ON THE BASIS OF THE FINDING IN THE CASE OF M/S VIJAY PROTEINS LTD. (SUPRA) AND THE PEAK PURCHASES OR 25% OF THE BOGUS PURCHASES WHICHEVER IS HIGHER IS LIABLE TO BE ADDED TO THE TOTAL INCOME OF THE ASSESSEE U/S.69C OF THE ACT. NO DOUBT AFTER THE RECEIPT OF THE LETTER FROM THE SALES TAX DEPARTMENT AN OPPORTUNITY OF BEING HEARD WAS GIVEN TO THE ASSESSEE BUT THE GENUINENESS OF THE CASE HAS NOT BEEN PROVED BY ASSESSEE, THEREFORE, THE ASSESSING OFFICER HAS ADDED THE PEAK TRANSACTION OF THE PURCHASE OF RS.37,68,034/- INTO THE INCOME OF THE ASSESSEE U/S.69C OF THE ACT IN VIEW OF THE ABOVE SAID LAW I.E. M/S. VIJAY PROTEINS LTD. (SUPRA). ON APPEAL THE CIT(A) HAS DECIDED THE MATTER OF CONTROVERSY ON THE BASIS OF THE DECISION OF THE INCOME TAX APPELLATE TRIBUNAL IN THE CASE OF ACIT VS. KISHANLAL JEWELS (P) LTD. (2012) 147 ITR 308 ITAT (DELHI) WHEREIN THE PROFIT MARGIN WAS DIRECTED TO BE TAXED AND IN THE CASE OF MADHUKANT B. GANDHI VS. ITO ITA NO.1950/MUM/2009, ITAT MUMBAI B BENCH DATED 23.12.2010 WHEREIN THE SIMILAR VIEW WAS TAKEN. THE FINDING OF THE CIT(A) IS HEREBY REPRODUCED BELOW:- ITA NO.306/M/2016 A.Y. 2011-12 5 7.8 IN THE INSTANT CASE, THE APPELLANT IS NOT IN A POSITION TO PROVE THE EXISTENCE OF THE SUPPLIERS. THE PAYMENT SCHEDULE TO THE ALLEGED SUPPLIERS WHOM THE APPELLANT ADMITTEDLY DOES NOT KNOW. THIS CIRCUMSTANTIAL EVIDENCE CASTS A STRONG DOUBT ON THE NATURE OF THE TRANSACTION. THE APPELLANT HIMSELF HAS ADMITTED BEFORE ME THROUGH WRITTEN SUBMISSIONS THAT PURCHASES HAVE BEEN MADE FROM PARTIES OTHER THAN THOSE STATED IN THE BOOKS OF ACCOUNT. I AM OF THE FIRM BELIEF THAT THE APPELLANT HAD MADE CASH PURCHASES FROM OTHER PARTIES WHICH WERE NOT RECORDED IN THE BOOKS. THE APPELLANT TOOK ONLY BILLS FROM THESE 3 PARTIES AS ACCOMMODATION TO EXPLAIN THE PURCHASES. THEREFORE THE ENTIRE PURCHASE FROM THESE 3 PARTIES CANNOT BE ADDED AS BOGUS AND WHAT NEEDS TO BE TAXED IS THE PROFIT ELEMENT EMBEDDED IN SUCH TRANSACTION. I THEREFORE HOLD THAT IT WOULD BE FAIR TO THE APPELLANT THAT THE DISALLOWANCE ON THE ISSUE OF BOGUS PURCHASE BE RESTRICTED TO THE GP RECORDED BY THE APPELLANT IN HIS BOOKS FOR THE YEAR WHICH IS 10.91%. THEREFORE, I DIRECT THE AO TO ESTIMATE PROFIT OF 10.91% ON THE TOTAL ALLEGED BOGUS PURCHASE OF RS.43,67,390/- WHICH WORKS OUT TO RS.4,76,482/-. THE AMOUNT OF RS.4,76,482/- IS SUSTAINED OUT OF THE ADDITION OF RS.37,68,034/- MADE BY THE A.O. THE APPELLANT GETS A RELIEF OF THE BALANCE RS.32,91,552. GROUNDS 1 & 2 ARE PARTLY ALLOWED. 5. ON APPRAISAL OF THE FINDING OF THE CIT(A) IN QUESTION AS WELL AS LAW RELIED BY THE CIT(A) IN CASE OF ACIT VS. KISHANLAL JEWELS (P) LTD., (2012) ITA NO.306/M/2016 A.Y. 2011-12 6 147 ITR 308 ITAT (DEL) AND MADHUKANT B. GANDHI VS. ITO, ITA NO.1950/MUM/2009 ITAT MUMBAI B BENCH DATED 23.12.2010, THE PROFIT ELEMENT WAS TAKEN INTO CONSIDERATION FOR TAX WHICH SEEMS QUITE JUSTIFIABLE. MOREOVER, THE CIT(A) HAS ALSO RELIED UPON THE LAW CITED AS COMMISSIONER OF INCOME TAX VS. SIMIT P. SHETH 356 ITR 451 (GUJ.) WHEREIN THE VIEW OF THE ITAT REGARDING THE TAX UPON THE BOGUS PURCHASES, THE PROFIT ELEMENT WAS TAKEN INTO CONSIDERATION. THERE IS NO DISPUTE THAT THE ASSESSING OFFICER DECIDED THIS ISSUE ON THE BASIS OF LAW SETTLED IN M/S. VIJAY PROTEINS LTD. (SUPRA). WHAT SHOULD BE THE REASONABLE IT IS A MATTER OF CONSIDERATION. TAKING INTO ACCOUNT OF THE FACTS AND CIRCUMSTANCES OF THE CASE WE ARE OF THE VIEW THAT THE CIT(A) HAS CONSIDERED THE ABOVE MENTIONED LAW FINDING JUSTIFIABLE IN ACCORDANCE WITH LAW. IN VIEW OF THE SAID CIRCUMSTANCES WE ARE OF THE VIEW THAT THE CIT(A) HAS DECIDED THE MATTER JUDICIOUSLY AND CORRECTLY AND IN ACCORDANCE WITH LAW WHICH IS NOT REQUIRED TO BE INTERFERE WITH AT THIS APPELLATE STAGE. 6. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS HEREBY ORDERED TO BE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH NOVEMBER , 2016. SD/- SD/- (RAJENDRA) (AMARJIT SINGH) / ACCOUNTANT MEMBER /JUDICIAL MEMBER MUMBAI; DATED :30 , 2016 , MP ITA NO.306/M/2016 A.Y. 2011-12 7 / 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