KAUSHIK S. VAKHARIA, MUMBAI V. ITO 25(3)(2), MUMBAI

ITA 3175/MUM/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1458 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-04-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 22-08-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 26-05-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Gross profit estimation; Accommodation entries
• Section: 133(6)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUM BAI , , , , ' BEFORE SHRI C.N.PRASAD, JM AND SHRI RAJESH KUMAR, AM / I.T.A. NO. 3175 /MUM/2015 ( # $# / ASSESSMENT YEAR: 2010-11) SHRI KAUSHIK KUMAR S VAKHARIA B/42, DEV NAGAR, NEAR BHATIA SCHOOL, SAIBABA NAGAR, KANDIVLI(WEST), MUMBAI - 400067 / VS. INCOME TAX OFFICER 25(3)(2) MUMBAI ./ ./PAN/GIR NO. : AANPV7006Q ( /APPELLANT ) .. ( / RESPONDENT ) / DATE OF HEARING: 05.01.2017 /DATE OF PRONOUNCEMENT: 04.04.2017 / O R D E R PER C.N.PRASAD, JM: THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE OR DER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-45, MUMBAI [HE REINAFTER REFERRED TO AS THE CIT(A)] DATED 27.02.2015 FOR THE A.Y.20 10-11. ASSESSEE BY: SHRI N. M .PORWAL REVENUE BY: MISS. ANUPAMA SINGLA ITA NO.3175/M/201 5 A.Y.2010-11 2 2. THE FIRST ISSUE IN THE APPEAL OF THE ASSESSEE IS THAT THE ASSESSEE IS CHALLENGING THE ORDER OF THE CIT(A) IN ESTIMATING T HE GROSS PROFIT OF THE ASSESSEE AT 4% AS AGAINST 2.77% DECLARED BY THE ASS ESSEE ON ITS TURNOVER. 3. BRIEFLY STATED THE FACTS ARE THAT THE ASSESSING OFFICER WHILE COMPLETING THE ASSESSMENT NOTICED THAT ASSESSEE HAS REPORTED LOW GROSS PROFIT FROM THE TRADING BUSINESS OF ASSESSEE IN NON -FERROUS METALS. THE ASSESSING OFFICER ALSO NOTICED THAT ASSESSEE MADE P URCHASES FROM FOUR PARTIES REFERRED TO IN THE ASSESSMENT ORDER WHO HAV E PROVIDED ACCOMMODATION ENTRIES TO VARIOUS PARTIES AS PER THE INFORMATION RECEIVED FROM THE SALES TAX DEPARTMENT. THE ASSESSING OFFIC ER NOTICED THAT THE ASSESSEE HAS CLAIMED TO HAVE MADE PURCHASED OF RS.8 .21 CRORES OF MATERIALS FROM THE FOUR PARTIES AND TIN NUMBER PROVIDED BY TH E ASSESSE IN THE ABOVE MENTIONED CASES ARE EXACTLY SAME AS IN THE INFORMAT ION AVAILABLE WITH THE ASSESSING OFFICER. THE ASSESSING OFFICER NOTICED T HAT THE SALES TAX DEPARTMENT HAS CONDUCTED INDEPENDENT ENQUIRIES IN E ACH OF THE HAWALA PARTIES AND CONCLUSIVELY PROVED THAT THESE PARTIES ARE ENGAGED IN THE BUSINESS OF PROVIDING ACCOMMODATION ENTRIES ONLY. STATEMENTS RECORDED FROM THE PROPRIETORS / OPERATORS OF THE ABOVE SAID FOUR CONCERNS ALONG WITH AFFIDAVITS GIVEN BY THEM WERE PROVIDED TO THE ASSES SEE AND THE ASSESSING OFFICER BASED ON THE ABOVE DOCUMENTS CONCLUDED THAT BEYOND DOUBT THESE FOUR PARTIES DID NOT SUPPLY ANY GOODS TO THE ASSESS EE AND THEY HAVE ISSUED ONLY ACCOMMODATION BILLS. SHOW CAUSE NOTICE WAS IS SUED TO THE ASSESSEE ALONG WITH THE SAID DOCUMENTS. ASSESSEE SEEMS TO H AVE GIVEN REPLY ON 20.02.2013 STATING THAT ALL THE SUSPICIOUS DEALERS AS PER SHOW CAUSE LIST HAVE PAID VAT AND COPY OF TAX PAID CHALLANS WERE ALREADY SUBMITTED. NOT ITA NO.3175/M/201 5 A.Y.2010-11 3 CONVINCED WITH THE REPLY FURNISHED BY THE ASSESSEE THE ASSESSING OFFICER REJECTED THE BOOKS OF ACCOUNT AND ESTIMATED THE GRO SS PROFIT OF THE ASSESSEE AT 6% OF THE TURNOVER OBSERVING THAT THE CASE RECOR DS OF THE OTHER ASSESSEES OF A SIMILAR BUSINESS I.E. TRADING IN FERROUS AND N ON-FERROUS METALS IS IN THE RANGE OF 4 TO 6%. SINCE THE ASSESSEE IS A TRADER, ASSESSING OFFICER ESTIMATED THE GROSS PROFIT AT 6% AS AGAINST 2.77% S HOWN BY THE ASSESSEE. THE DIFFERENCE IN GROSS PROFIT WAS ADDED AS INCOME OF THE ASSESSEE WHICH RESULTED INTO THE ADDITION OF RS.28,30,574/-. THE CIT(A) REDUCED THE ESTIMATION OF GROSS PROFIT TO 4% CONSIDERING THE SU BMISSIONS OF THE ASSESSEE. 4. THE LEARNED COUNSEL FOR THE ASSESSEE BEFORE US R ETREATED THE SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES AND T HE LEARNED DR SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW. THE ASSESSING OFFICER ESTIMATED THE GROSS PROFIT FROM THE TRADING BUSINESS OF THE ASSESSEE IN RESPECT OF NON-FERROUS METALS, REJECTING THE BOOKS OF ACCOUNTS FOR THE REASON THAT ASSESSEE HAS CLAIMED TO HAVE MADE PURCHASES FROM CERTAIN PARTIES WHO HAVE P ROVIDED ONLY ACCOMMODATION ENTRIES. THE ASSESSING OFFICER CONFR ONTED WITH THE ASSESSEE WITH THE EVIDENCES OBTAINED BY HIM FROM TH E SALES TAX DEPARTMENT I.E. THE STATEMENTS AND AFFIDAVITS GIVEN BY THE SUPPLIERS STATING THAT THEY HAVE PROVIDED ONLY ACCOMMODATION ENTRIES. IT APPEARS THAT THE ASSESSEE EXPLAINED THAT THE PURCHASES MADE FROM THE ABOVE PARTIES WERE SUPPORTED BY ALL DOCUMENTARY EVIDENCES, THE PAYMENT S WERE MADE THROUGH ACCOUNT PAYEE CHEQUES. THEY HAVE EXPLAINED THE COR RESPONDING SALES FROM ITA NO.3175/M/201 5 A.Y.2010-11 4 THE PURCHASES MADE. IT WAS ALSO CONTENDED THAT THE BOOKS OF ACCOUNTS WERE PRODUCED INCLUDING THE STOCK REGISTER. BOOKS WERE AUDITED. AUDITORS HAVE NOT POINTED OUT ANY DEFECTS IN THE BOOKS OF ACCOUNT S. IT WAS ALSO CONTENDED THAT THE ASSESSEE HAS PRODUCED STOCK REGISTER ENTER ING DAY TO DAY MOVEMENTS OF STOCK. THEREFORE, IT WAS CONTENDED THAT NONE OF THE PURCHASES ARE BOGUS. THE CIT(A) CONSIDERED THE SUB MISSIONS OF THE ASSESSEE AND RESTRICTED THE GROSS PROFIT ON TRADING TO 4% OBSERVING AS UNDER:- I HAVE GONE THE FINDINGS OF THE A.O., THE SUBMISSI ONS OF THE APPELLANT AND THE VARIOUS JUDICIAL DECISIONS IN THI S REGARD. THE ASSESSEE IS A TRADER IN IRON AND STEEL PLATES. THE AO HAS GONE INTO THE ISSUE OF SUSPECTED BOGUS P URCHASES BY SENDING 133(6) NOTICES AND MAKING FIELD ENQUIRIES, BUT HAS NOT FOUND ANY CONCRETE EVIDENCE TO DOUBT THE GENUINENES S OF THE PAYMENTS BEING SHOWN BY THE APPELLANT THROUGH THE B ANK ACCOUNT. THE AO HAS ALSO DEFINITELY NOT BEEN ABLE TO QUESTIO N THE AVAILABILITY OF THE INVENTORY THAT HAS BEEN SUBSEQU ENTLY USED. TO THAT EXTENT, THE EXAMINATION OF THAT ASPECT HAS NOT CREATED ANY DOUBT IN TERMS OF THE PURCHASES. HOWEVER, AS FAR A S THE EVIDENCE SUBMITTED BY THE APPELLANT IS ALSO CONCERNED, THE A PPELLANT HAS FILED HIS OWN BOOKS, LEDGER ACCOUNTS AND ITS OWN BA NK STATEMENT TO FURTHER HIS ARGUMENT. THE FACT THAT THE PAYMENTS A RE BEING MADE THOROUGH CHEQUES IS NOT SOMETHING THAT IS BEING DOU BTED. IN FACT, THAT IS THE CONTENTIOUS ISSUE, THAT THESE PARTIES W HICH ARE INDICATED BY THE SALES TAX DEPARTMENT THROUGH A PROCEDURE WHI CH APPEARS TO BE TECHNICALLY CORRECT ON PAPER, ARE IN FACT ENG AGED IN FALSE BILLING FOR A FEE / COMMISSION. THE ONUS OF PROVIN G THE ENTIRE TRANSACTIONS TO BE GENUINE IS DEFINITELY ON THE TAX PAYER, WHEN HE IS MAKING THE CLAIM OF PURCHASE AND ESPECIALLY IN LIGH T OF THE DOUBT THAT HAS BEEN RAISED BY THE ENQUIRIES CONDUCTED BY THE SALES TAX DEPARTMENT, THE ONUS IS EVEN MORE ON THE TAX PAYER TO SHOWN THAT AS FAR AS HE IS CONCERNED, HE HAS DISCHARGED HIS TA X RELATED LIABILITIES IN AN ACCURATE MANNER. SO THEREFORE, W HILE ON ONE HAND THE AO MAY NOT HAVE HAD A CLINCHING PROOF BUT THE P RIMARY RESPONSIBILITY WHICH IS ENSUED ON THE TAX PAYER HAS ALSO NOT BEEN ITA NO.3175/M/201 5 A.Y.2010-11 5 DISCHARGED IN TERMS OF ESTABLISHING THE GENUINENESS OF THE TRANSACTION. MERELY FILING COPIES OF HIS OWN LEDGE R ACCOUNTS AND BANK ACCOUNTS DOES IN NO WAY ESTABLISH THAT THE PAR TIES ACTUALLY EXISTED, BUT THEN CONSIDERING THAT THE BOOKS OF ACC OUNTS HAVE NOT BEEN DISPUTED, SALES HAVE NOT BEEN DISPUTED AND NEI THER CHEQUES HAVE BEEN SHOWN TO BE RECEIVED BACK AS CASH BY THE APPELLANT, I AM OF THE CONSIDERED VIEW THAT IN THE CONTEXT OF TH E SITUATION WHERE THE AO HAS HIMSELF SAID THAT WHAT IS BEING DOUBTED IS NOT THE QUANTITY OF PURCHASES PER SE, WHICH HAS ENTERED INT O THE BOOKS OF THE APPELLANT, BUT THAT THE PURCHASES WERE BILLED T HROUGH BOGUS PARTIES, THEN THE CAUSE OF JUSTICE WOULD BE SERVED BY LOOKING AT THE GROSS PROFIT MARGINS BEING DECLARED BY THE APPELLAN T. IN THE PRESENT CASE IT IS SEEN THAT THE A.O. HAS HIMSELF H ELD THAT PERSONS IN SIMILAR TRADE HAVE GROSS PROFIT MARGINS OF 4% TO 6% INSTEAD OF 2.77% ADOPTED BY THE ASSESSEE. LOOKING AT THE DISC USSION ABOVE IN THE PRESENT CASE IT IS HELD THAT BRINGING TO TAX 4% OF TURNOVER AS G.P. WOULD BE REASONABLE. THIS WOULD BRING THE GR OSS PROFIT TO RS.51,57,907/-. THE ASSESSEE HAS ALREADY OFFERED G .P. AT RS.24,32,596/-. THE BALANCE G.P. WOULD BE RS.27,25 ,311/-. THE RELIEF OF RS.1,05,263/-. IN THE RESULT APPEAL IS P ARTLY ALLOWED. 6. ON GOING THROUGH THE FINDING OF THE CIT(A) WE DO NOT FIND ANY VALID REASON TO INTERFERE WITH THE DECISION OF THE CIT(A) IN ESTIMATING THE GROSS PROFIT FOR REJECTING THE BOOKS OF ACCOUNT . AT THE SAME TIME TAKING THE TOTALITY OF FACTS AND CIRCUMSTANCES INTO THE CONSIDERATION WE ARE OF THE VIEW THAT THE GROSS PROFIT IF ESTIMATED @ 3.25% WOULD BE REASONABLE AS THE LOWER AUTHORITIES HAVE NOT BROUGH T ON RECORD ANY SPECIFIC JUSTICE WHERE THE GROSS PROFIT RATE RANGIN G BETWEEN 4 TO 6%. THIS GROUND IS ADMITTED ACCORDINGLY. 7. THE NEXT ISSUE IN THE APPEAL OF THE ASSESSEE IS REGARDING CONFIRMATION OF ADDITION OF RS.1,15,000/- ON ACCOUN T OF DISALLOWANCE OF DEDUCTION UNDER CHAPTER VI-A OF THE INCOME TAX ACT, 1961 ( IN SHORT ITA NO.3175/M/201 5 A.Y.2010-11 6 THE ACT). THE ASSESSING OFFICER WHILE COMPLETING THE ASSESSMENT DISALLOWED THE SAID AMOUNT FOR WANT OF DETAILS IN R ESPECT OF DEDUCTIONS CLAIMED UNDER CHAPTER VI OF THE ACT ALONG WITH DOCU MENTARY EVIDENCES. IT IS THE FINDING OF THE ASSESSING OFFICER THAT THE AS SESSEE HAS NOT FILED ANY DOCUMENTARY EVIDENCE IN SUPPORT OF SAID CLAIM. THE CIT(A) DID NOT ADJUDICATE ON THIS ISSUE THOUGH A GROUND WAS RAISED BEFORE HIM. EVEN BEFORE US THE LEARNED COUNSEL DID NOT AGITATE THIS GROUND. NOTHING HAS BEEN SUBMITTED BEFORE US AND NO ARGUMENTS WERE ADVANCED ON THIS GROUND. THUS THIS GROUND IS DISMISSED AS NOT ARGUED. 8. THE LAST GROUND IS REGARDING CHARGING OF INTERES T U/S.234B, 234C AND 234D OF THE ACT. SINCE THIS GROUND IS ONLY CONSEQU ENTIAL THE SAME IS DISMISSED. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS HEREBY PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 4 TH APRIL, 2017 . SD/- SD/- (RAJESH KUMAR) (C.N.PRASAD) / ACCOUNTANT MEMBER /JUDICIAL MEMBER MUMBAI; DATED : 4 TH (& , 2017 MP ITA NO.3175/M/201 5 A.Y.2010-11 7 % &$% / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. - ( ) / THE CIT(A)- 4. - / CIT 5. 0 , 0 , / DR, ITAT, MUMBAI 6. / 12 / GUARD FILE. / BY ORDER, & & //TRUE COPY// / /(DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI