DCIT 15(2)(1), MUMBAI V. MAGOXY INFRASTRUCTURE P. LTD, MUMBAI

ITA 3447/MUM/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 8582 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-02-2017
• Appeal Filed By: Department
• Bench Allotted: Not Allotted
• Assessment Year: 2009-2010
• Appeal Filed On: 05-06-2015
• Court: TRIBUNAL
• Department Lawyers: POOJA SWAROOP
• Assessee Lawyers: RISHABH S HAH
• Keywords: Bogus purchase; Maximum Marginal Rate

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL F , BENCH MUMBAI BEFORE SHRI R.C.SHARMA, AM & SHRI SANDEEP GOSAIN , JM ITA NO. 3447 / MUM/20 1 5 ( ASSESSMENT YEAR : 2009 - 10 ) DCIT 15(2)(1), MUMBAI 400 020 VS. MAGOXY INFRASTRUCTURE PVT. LTD., 105, SAGAR PAALAZ IO, SAKINAKA, MUMBAI 400 072 PAN/GIR NO. AAECM7914L APPELLANT ) .. RESPONDENT ) REVENUE BY MS. POOJA SWAROOP ASSESSEE BY SHRI RISHABH SHAH DATE OF HEARING 08 / 02 /201 7 DATE OF PRONOUNCEME NT 08 / 02 /201 7 / O R D E R PER R.C.SHARMA (A.M) : THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A) - 24, MUMBAI DATED 24/03/2016 FOR THE A.Y.2009 - 10 IN THE MATTER OF ORDER PASSED U/S.143(3) R.W.S. 147 OF THE IT ACT. 2. THE FOLLOWING GROUNDS HAVE B EEN TAKEN BY THE REVENUE: - 1. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN DIRECTING THE ASSESSING OFFICER TO ESTIMATE PROFIT OF 15% ON THE TOTAL ALLEGED PURCHASE WITHOUT APPRECIATION THE FACTS THAT THE SAID SE LLER PARTIES WERE FOUND TO BE HAWALA OPERATORS / BOGUS BILLERS'. 2. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN DELETING THE ADDITION MADE BY THE AO ON ACCOUNT OF DIESEL EXPENSES AMOUNTI N G TO RS. 76,04,403/ - WITHOUT APPRECIATING THE FACTS THAT IT WAS THE .ONUS OF THE ASSESSEE TO PROVE THAT THE DIESEL EXPENSES WERE INCURRED FOR BUSINESS PURPOSE WHICH THE ASSESSEE FAILED TO PROVE'. ITA NO. 3447/MUM/2015 MAGOXY INFRASTRUCTURE PVT. LTD., 2 3. THE APPELLANT PRAYS THAT THE ORDER OF CIT(A) ON THE ABOVE GROUND BE SET ASI DE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 4. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUNDS OR ADD A NEW GROUND WHICH MAY BE NECESSARY. 2. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. 3. IN GROUND NO.1, REVENUE IS AGGRIEVED FO R UPHOLDING ADDITION O F ONLY 15% OF THE BOGUS PURCHASES. WE HAVE HEARD RIVAL CONTENTIONS. THE AO HAS DISCUSSED THE ISSUE IN PART.13 TO 8.3 OF THE ASSESSMENT ORDER AND OBSERVED THAT I NFORMATION WAS RECEIVED FROM SALES TAX DEPARTMENT THAT 2 CONCERNS VIZ. M/ S. CHEMI AGE ENTERPRISE AND B IO AGE ENTERPRISES HAD ISSUED BOGUS BILLS AS THEY WERE FOUND TO BE HAWALA OPERATORS ISSUING BILLS WITHOUT SUPPLY OF GOODS. IN FACT THIS IS THE REASON WHY THE CASE WA S REOPENED. THE AR F ILE D VARIOUS DETAILS WITH DOCUMENTARY EVID ENCES TO PROVE THAT THE SUPPLIES MADE BY THE ABOVE TWO PARTIES AR E GENUINE. T H E AO DID NOT A CCEPT THE S UBMIS SIONS MADE BY THE ASSESSEE. THEREFORE, THE ENTIRE AMOUNT OF PURCHASES OF RS.16,90,367/ - WAS ADDED. 4. BY THE IMPUGNED ORDER CIT(A) RESTRICTED THE AD DITION TO THE EXTENT OF 15% OF SUCH PURCHASES AFTER HAVING THE FOLLOWING OBSERVATION: - ON CAREFUL ANALYSIS OF THE FINDING OF HON'BLE HIGH COURT OF GUJARAT IN THE ABOVE CASES, I AM OF THE FIRM VIEW THAT WITHO U T PURCHASE O F MATERIALS IT WAS NOT POSSIBLE FOR THE APPELLANT TO EITHER SELL THE ITEMS OR COMPLETE, THE ' CONTRACT. AS MENTIONED ABOVE THE AO HAD NEVER DISPUTED OR EXAMINED THE ASPECT OF SALES, HENCE I AM OF THE FIRM BELIEF THAT THE APPELLANT HAD MADE CASH PURCHASES FROM OTHER PARTIES, WHICH WERE NOT RE CORDED IN THE BOOKS. THE APPELLANT TOOK ONL Y BILLS FROM THESE 2 PARTIES AS ACCOMMODATION TO EXPLAIN THE PURCHASES. THEREFORE - THE ENTIRE PURCHASE FROM THESE 2 PARTIES CANNOT BE ADDED AS BOGUS AND ITA NO. 3447/MUM/2015 MAGOXY INFRASTRUCTURE PVT. LTD., 3 WHAT NEED S TO BE TAXED IS THE PROFIT ELEMENT EMBEDDED IN SUCH TRANSACTION. PROFIT ESTIMATES RAN GING FROM 12.5% TO 25% HAS BEEN UPHELD BY THE HON'BLE GUJARAT HIGH COURT DEPENDING UPON THE NATURE OF THE BUSINESS. AS HELD IN THE CASE OF SIMIT P. SHETH (SUPRA) NO UNIFORM YARDSTICKS COULD BE APPLIED TO ESTIMA TE THE RATE OF PROFIT AND IT VARY WITH THE NATURE OF BUSINESS, TAKING ALL THE FACTS INTO CONS IDERATION AND THE FINDINGS OF TH E HON'BLE COURT S ON THIS ISSUE, I AM OF THE VIEW THAT ESTIMATION OF 15% OF PROFIT WOUL9 MEET THE ENDS OF JUSTICE. IN VIEW OF THE DETAILED DISCU SSION ABOVE, I DIRECT THE AO TO ESTIMATE PROFIT OF 15% ON THE TOTAL ALLEGED BOGUS PURCHASE MADE RS.16,90,367/ WH ICH WORKS OUT TO RS.2,53,555/ - . THEREFORE ADDITION MADE BY THE AO I S S USTAINED TO T H E EXTENT OF RS.2,53,555/ - AND THE APPELLANT GETS, RELIEF OF THE BALANCE RS.14,36,812/ - , THIS GROUND OF APPEAL IS PARTLY ALLOWED. 5. WE HAVE CONSIDERED RIVAL CONTENTIONS AND IN VIEW OF THE FINDINGS GIVEN BY CIT(A), WE DO NOT FIND ANY INFIRMITY IN HIS ORDER FOR RESTRICTING THE ADDITION ON ACCOUNT OF BOGUS PURCHASE S TO THE EXTENT OF 15%. 6. AO HAS ALSO DISALLOWED THE DIESEL EXPENSES AMOUNTING TO RS. 7 6,04,403/ - WHICH WAS DELETED BY CIT(A) AFTER HAVING THE FOLLOWING OBSERVATION: - 5.4 I HAVE CAREFULLY CONSIDERED THE SUBMISSION OF THE APPELLANT AND THE IMPUGNED ORDER. F ROM THE SUBMISSION MADE BY THE APPELLANT IT COULD BE ASCERTAINED THAT M/S. S.K. ENTERPRISES ON A TOTAL SALE OF RS'.4.96 CRORES (RS.1.57+RS.3.39) HAD DEBITED RS.71.26 LACS ON ACCOUNT OF DIESEL EXPENDITURE THAT WORKS OUT TO 14.34%. THE DETAILS OF MONTH WISE BREAKUP WITH REGARD TO THE SALES WAS FURNISHED AIONGWITH THE SUBMISSION WHICH REVEALED THAT THE MATERIAL SOLD WAS RS.1,57,32,482/ - AND THE INCOME ON ACCOUNT OF EXCAVATION/ HIRING/ TRANSPORTATION WAS RS.3,39,57,946/ - AND THIS CONCERN HAS TAKEN UP THE PROJEC T EXCLUSIVELY FOR GODREJ & BOYCE, VIKHROLI. THE DETAIL FILED IS ENCLOSED AS ANNEXURE - 1 TO THE ORDER. 5.5 SIMILAR DETAILS FURNISHED IN RESPECT OF THE APPELLANT INDICATED THAT ON A TOTAL SALE OF 15.66 CRORES AN AMOUNT OF ~S.1.27 CRORES WAS CLAIMED TOWARDS DIESEL REGARD TO THE SALES WAS FURNISHED ALONG WITH T HE SUBMISSION WHICH REVEALED THAT THE FLOORING / MISE. WORK CARRIED OUT WAS RS.1,73,48,182/ - , RECEIPT ON ACCOUNT OF PROJECT WORK IN RESPECT OF CONCERNS SUCH AS GODREJ B0YCE, L& T, BG SHIRKE WAS IN THE OR DER OF RS.8,48,00,114/ - AND THE INC O ME ON ACCOUNT OF EXCAVATION/HIRING/TRANSPORTATION WAS RS.5,45,34,774/ - AND THIS CONCERN HAS TAKEN UP THIS WORK NOT ONLY FOR GODREJ & SOYCE, VIKHROLI BUT ALSO ITA NO. 3447/MUM/2015 MAGOXY INFRASTRUCTURE PVT. LTD., 4 TO AHURA CONSTRUCTION':'C O :, SG SHIRKE ETC. THE DETAIL FILED I S ENCLOSED AS ANNEXURE - 2 TO THE ORDER. 5,6 THE AR OF THE APPELLANT HAD ALSO FILED THE P&L ACCOUNT AND LEDGER EXTRACT OF M/S. S.K. ENTERPRISES. THE PERUSAL REVEALED, THAT DIESEL EXPENSE OF RS.71.26 LACS WAS CLAIMED. THE LEDGER EXTRACT REVEALED THAT - OUT OF TOTAL DIESEL EXPENSE INCURRED RS.1,47,04,471/ - , THE APPELLANT WAS ALLOCATED RS.75,77,694/ - BY PASSING A JOURNAL ENTRY ON 31.3.,3009. THIS CLEARLY SHOWS THAT TH.E APPELLANT DID NOT CLAIM ANY EXPENSE THAT BELONGED TO THE SISTER CONCERN. CONSIDERING THE QU ANTUM OF SALES TURNOVER OF BOTH THE APPELLANT AND IT'S SISTER CONCERN, I FIND THE CLAIM OF DIESEL EXPENSE AT 8.16% BY THE APPELLANT APPEARS TO BE REASONABLE AS;AGAINST14.34% CLAIMED IN THE CASE OF S.K ENTERPRISE. WHEN BOTH THE CONCERNS ARE LIABLE FOR TAX A T MAXIMUM MARGINAL RATE THERE IS NO NEED FOR THE APPELLANT TO SHIFT THE EXPENDITURE AS CONCLUDED BY THE A.O. THEREFORE, THE ADDITION MADE BY THE AO ONLY ON THE BASIS OF PRESUMPTION IS HEREBY DELETED. THIS GROUND OF APPEAL IS ALLOWED. 7. WE HAVE CONSIDERED RIVAL CONTENTIONS AND FOUND THAT DETAILED FINDING HAS BEEN RECORDED BY CIT(A) AT PARA 5.4 TO 5.6 FOR ARRIVING AT CONCLUSION THAT ASSESSEES CLAIM OF DIESEL EXPENSES AT 8.16% WAS REASONABLE AS COMPARED TO 14.34% CLAIMED IN CASE OF S.K. ENTERPRISES AS ALLEG ED BY THE AO. THE DETAILED FINDING SO RECORDED BY CIT(A) HAD NOT BEEN CONTROVERED BY DR BY BRINGING ANY POSITIVE MATERIAL ON RECORD. ACCORDINGLY, WE DO NOT FIND ANY REASON TO INTERFERE IN THE FINDING SO RECORDED BY CIT(A). 8. IN THE RESULT, APPEAL OF THE R EVENUE IS DISMISSED. O RDER PRONOUNCED IN THE OPEN COURT ON THIS 08 / 02 /2017 S D/ - ( SANDEEP GOSAIN ) S D/ - ( R.C.SHARMA ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 0 5 / 05 /201 7 KARUNA SR. PS ITA NO. 3447/MUM/2015 MAGOXY INFRASTRUCTURE PVT. LTD., 5 COPY OF THE ORDER FORWARDED TO : BY ORDER, ( ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//