D & D METALLOYS CORPORATION, THANE V. ITO 24(1)(5), MUMBAI

ITA 3528/MUM/2017

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 8667 (ITAT-MUMBAI)
• Duration Of Justice: 5 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-11-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2008-2009
• Appeal Filed On: 15-05-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: N HEMALATHA
• Keywords: Bogus purchase; Onus to prove
• Section: 143(3); 142(1); 133(6); 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC , BENCH MUMBAI BEFORE SHRI R.C.SHARMA, AM ITA NO. 3528 / MUM/20 17 & 3529/MUM/2017 ( ASSESSMENT YEAR : 2008 - 09 & 2010 - 11 ) D & D METALLOYS CORPORATION 01, GANESH PARSADA, VASAI ROAD, SAMBHAJI NAGAR VASAI 401 202 VS. ITO 24(1) (5), MUMBAI 400 012 PAN/GIR NO. AAAFD0959P APPELLANT ) .. RESPONDENT ) ASSESSEE BY NONE REVENUE BY MS. N. HEMALATHA DATE OF HEARING 26 / 10/ 201 7 DATE OF PRONOUNCEME NT 13 / 11 /201 7 / O R D E R PER R.C.SHARMA (A.M) : THESE ARE THE APPEALS FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) - 36, MUMBAI DATED19/01/2017 FOR A.Y.2008 - 09 & 2010 - 11 IN THE MATTER OF ORDER PASSED U/S.143(3) R.W.S. 147 OF THE IT ACT. 2. IN THIS APPEAL AS SESSEE IS AGGRIEVED FOR UPHOLDING ADDITION OF 12.5% IN RESPECT OF BOGUS PURCHASES. 3. NOBODY APPEARED ON BEHALF OF THE ASSESSEE INSPITE OF GIVING OPPORTUNITY. EVEN ON EARLIER OCCASION DATED 28/09/2017 , THE CASE WAS FIXED FOR HEARING AT THE REQUEST OF THE ASSESSEE, HOWEVER, NOBODY APPEARED ON THAT OCCASION ALSO. THE BENCH, THEREFORE, DECIDED TO DISPOSE THE APPEAL AFTER HEARING LEARNED DR AND CONSIDERING THE MATERIAL PLACED ON RECORD. ITA NO. 3528/MUM/2017 & 3529/MUM/2017 D & D METALLOYS CORPORATION, THANE 2 4.I HAVE CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND FO UND THAT THE RETURN OF INCOME FOR A.Y.2008 - 09 WAS FILED ON 29.07.2008 BY DECLARING TOTAL INCOME AT RS.24,170/ - . LN THE CASE OF THE ASSESSEE , ASSESSMENT ORDER U/S 143(3) R.W.S. 147 OF THE ACT FOR A.Y. 2009 - 10 WAS COMPLETED ON 05.03.2015. DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR ASSESSMENT YEAR 2009 - 10, IT WAS FOUND FROM THE LEDGER VERIFICATION OF PURCHASE PARTIES THAT THE APPELLAN T HAS OBTAINED BOGUS BILLS FROM FEW OF THE PARTIES LISTED IN SALES TAX WEBSITE AND DECLARED AS HAWALA DEALERS DURING THE P ERIOD UNDER CONSIDERATION I.E. IN F.YR. 2007 - 08 RELATED TO A.YR. 2008 - 09, THEREBY INFLATING ITS EXPENSES AND SUPPRESSING THE PROFITS FOR A.Y. 2008 - 09. THE A SSESSEE HAS OBTAINED BOGUS BILLS FROM THE FOLLOWING PARTIES AND THE AMOUNT OF OPENING BALANCE SHOWN IN THE LEDGER OF THE FOLLOWING PARTIES FOR A.YR. 2009 - 10 WAS ASUNDER: - SR. NO. NAME F.Y. AMOUNT (RS.) 1 MANAV IMPEX 2008 - 09 17,87,214/ - 2. GREAT INTERNATIONAL 2008 - 09 8,85,072/ - TOTAL 26,69,286 / - 5. . THE LIST OF SUSPICIOUS DEALERS WH O INDULGE IN ISSUING ONLY BILLS WITHOUT DELIVERING ANY GOODS OR MATERIALS IS GIVEN ON THE OFFICIAL WEBSITE OF THE SALES TAX DEPARTMENT, GOVERNMENT OF MAHARASHTRA. AS PER STATE SALES TAX DEPARTMENT THE MODUS OPERANDI OF THESE DEALERS IS TO SELL BILLS ON COM MISSION BASIS. THEY ISSUE BILLS AND TAKE A COMMIS SION OUT OF PAYMENT MADE TO THEM AND RETURNED THE REMAINING AMOUNT. THE SALES TAX DEPARTMENT HAD TAKEN STATEMENTS, DEPOSITIONS AND AFFIDAVITS OF HUNDREDS OF PERSONS WHO WERE RUNNING ENTITIES WHOSE NAMES WERE APPEARING IN THE LIST OF PARTIES, WHICH GAVE BOGUS ITA NO. 3528/MUM/2017 & 3529/MUM/2017 D & D METALLOYS CORPORATION, THANE 3 BILLS, IN THE WEBSITE WWW.MAHAVAT.GOV.IN. ALL SUCH STATEMENTS ETC. WERE PROVIDED TO THE INCOME TAX DEPARTMENT ALSO. A PERUSAL OF THE MATERIAL PROVIDED BY THE SALES TAX DEPARTMENT SHOWED THAT THERE ARE MAN Y DOCUMENTS WHICH RELATE TO ABOVE MENTIONED PARTIES FROM WHOM APPELLANT MADE PURCHASES. THE CASE OF THE APPELLANT WAS REOPENED BY ISSUANCE OF NOTICE U/S 148 OF THE ACT ON 26.03.2015 AND THE ASSESSMENT ORDER U/S 143(3) R.W.S. 147 OF THE ACT WAS PASSED ON 08 .01.2016 BY DETERMINING TOTAL INCOME AT RS.4,89,7207 - .ON VERIFICATION OF THE DETAILS FURNISHED DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS FOUND THAT THE AMOUNT OF PURCHASES MADE BY APPELLANT FROM THE PARTIES LISTED IN SALES TAX WEBSITE AND DECLARE D AS HAWALA DEALER DURING THE PERIOD UNDER CONSIDERATION IS AS UNDER: - NAME OF THE HAWAL A PARTIES AY AMOUNT OF OPENING BALANCE IN RS. MANAVLMPEX 2008 - 09 22,11,462 SREAT INTERNATIONAL 2 008 - 09 15.12.888 TOTAL RS.37,24,350 6. IN ORDER TO VERIF Y THE GENUINENESS OF THE PURCHASE, NOTICES U/S. 133(6) OF THE ACT WERE ISSUED TO THE ABOVE PARTIES. HOWEVER, NONE OF THE NOTICES GET SERVED AND THE SAME HAVE BEEN RETURNED UNSERVED BY THE 'POSTAL AUTHORITIES'. IN RESPONSE TO NOTICE U/S 142(1) ISSUED ON VAR IOUS DATES, THE APPELLANT'S AR VIDE L ETTER DATED 13.07.2015 FILED ON 13.07.2015 SUBMITTED AS FOLLOWS: - TAX AUDIT REPORT, PROFIT &LOSS ALE AND BALANCE SHEET, PURCHASE REGISTER AND SALES REGISTER FOR YEAR UNDER CONSIDERATION, PURCHASE BILLS OF MANAV IMPEX & G REAT INTERNATIONAL ALONG WITH LEDGER OF SAID HAWALA PARTY, CORRESPONDING SALES BILLS OUT OF PURCHASES MADE FROM HAWALA PURCHASES, AND BANK STATEMENT SHOWING ITA NO. 3528/MUM/2017 & 3529/MUM/2017 D & D METALLOYS CORPORATION, THANE 4 PAYMENT MADE TO HAWALA PARTIES. FURTHER, THE AR OF THE APPELLANT VIDE ORDER SHEET NOTING DATED 18/1 2/2015 WAS ASKED BY THE AO TO PRODUCE THE ABOVE HAWALA PARTIES PERSONALLY ALONG WITH THE FOLLOWING DOCUMENTS IN ORDER TO PROVE THE GENUINENESS OF THE .TRANSACTIONS WITH THE PARTIES MENTIONED ABOVE: - 1) CONFIRMATION LETTER FROM THE ABOVE PARTIES THAT THEY H AVE SOLD AND DELIVERED GOODS TO THE APPELLANT, 2) DETAI/S OF GOODS WHICH RESOFD TO THE APPELLANT ALONG WITH DELIVERY DETAILS RECEIPTS AND LORRY RECEIPTS/TRANSPORTATION BILLS, 3)LEDGER ACCOUNT OF APPELLANT IN THEIR BOOKS OF ACCOUNTS, 4) BANK STATEMENT OF TH E PARTIES REFLECTING THE PAYMENT RECEIVED FOR THE GOODS SOLD TO THE APPELLANT, 5) STATEMENT OF CORRESPONDING SALES/CONSUMPTION, 6)COPY OF BILLS/ INVOICES IN RESPECT OF PURCHASE PARTIES IN QUESTION ALONG WITH BANK STATEMENT SHOWING PAYMENT TO THE ABOVEMENTI ONED PARTIES. IN RESPONSE THE AR OF THE APPELLANT FURNISHED STATEMENT SHOWING DETAILS OF PURCHASE MADE FROM ABOVE PARTIES ALONG WITH DETAILS CORDONING SALES MADE OUT OF SUCH PURCHASES AND BANK STATEMENT SHOWING PAYMENTS MADE TO THE ABOVE PARTIES. FURTHER, THE APPELLANT SUBMITTED AS FOILOWS: - 'PURCHASES WERE ON DOOR TO DOOR BASIS SO NO LORRY RECEIPT, PARTY IS NOT TRACEABLE AND HENCE LEDGER OF APPELLANT IN THE BOOKS OF APPELLANT, ALONG WITH CONFIRMATION OF HAWALA PARTY COULD NOT BE PRODUCED, PARTY IS NOT TRACE ABLE AND HENCE BANK STATEMENT OF HAWALA PARTY COULD NOTBE PRODUCED, AND PARTY IS NOT TRACEABLE AND HENCE PARTY COULD NOT BE PRODUCED. THE SUBMISSION OF THE APPELLANT WAS CONSIDERED THOROUGHLY BUT NOT FOUND ACCEPTABLE BY AO. THE CONTENTION THAT THE PAYMENT WAS MADE BY ACCOUNT PAYEE CHEQUE IS NOT A FULL - FLEDGED - SAFE METHOD OF SUBSTANTIATING THE APPELLANT'S CLAIM AS IT IS ALREADY ACCEPTED BY THE PERSONS, WHOSE STATEMENT, DEPOSITION OR AFFIDAVIT WAS RECORDED BY THE SALES TAX DEPARTMENT OF ITA NO. 3528/MUM/2017 & 3529/MUM/2017 D & D METALLOYS CORPORATION, THANE 5 MAHARASTRA AS DISCUSSE D ABOVE, THAT CASH IS RETURNED AFTER DEDUCTING COMMISSION/ BROKERAGE ONCE CHEQUE IS REALIZED. THE APPELLANT COULD NOT PRODUCE ANY DELIVERY CHALLAN, LORRY RECEIPT, THE MODE OF TRANSPORT OF GOODS, STORE ISSUE VOUCHERS, GATE PASS OF TRUCK / LORRY ETC. FROM TH E ALLEGED SUPPLIERS IN SUPPORT OF ITS CLAIM THAT PURCHASES WERE GENUINELY MADE FROM THE PARTY. IT WAS CLAIMED BY THE APPELLANT THAT THE PURCHASES FROM AFORE - MENTIONED PARTIES WERE GENUINE, HOWEVER THE, APPELLANT FAILED TO PRODUCE THE PA RTIES OR FURNISH ANY ADDRESS WHE RE A NOTICE COULD BE SERVED ON THE SAID PARTIES. THE NOTICES ISSUED WERE NOT DELIVERED AND INQUIRIES CONDUCTED BY WARD INSPECTOR ESTABLISHED THAT THE PARTY DOES NOT EXIST ON THE ADDRESS MENTIONED IN THE BILLS FURNISHED BY THE APPELLANT AO RELIE D ON SECTION 101 OF THE INDIAN EVIDENCE ACT 1872 STATES THAT WHOEVER DESIRES ANY COURT TO GIVE JUDGMENT AS TO ANY LEGAL RIGHT OR LIABILITY DEPENDENT ON THE EXISTENCE OF FACT EXITS. WHEN A PERSON IS BOUND TO PROVE THE EXISTENCE OF ANY FACT, IT IS SAID THAT THE BURDEN OF PROOF LIES ON THAT PERSON. ACCORDING TO SECTION 103 OF THE INDIAN EVIDENCE ACT 1872, THE BURDEN OF PROOF AS TO ANY PARTICULAR FACT LIES ON THAT PERSON WHO WISHES THE COURT TO BELIEVE IN ITS EXISTENCE. SECTION 106 OF INDIAN EVIDENCE ACT 1872 S AYS THAT WHEN ANY FACT IS ESPECIALLY WITHIN THE KNOWLEDGE OF ANY PERSON, THEN BURDEN OF PROVING THAT FACT IS UPON IT.AII THE ABOVE PROVISIONS ARE APPLICABLE IN THE INSTANT CASE. IN THIS CASE, APPELLANT CLAIMS THE PURCHASES MADE FROM VARIOUS PARTIES. THEREF ORE, BURDEN LIES ON THE APPELLANT TO PROVE THAT THE SAID FACTS (SECTION 101 AND 103 OF INDIAN EVIDENCE ACT 1872). SECONDLY, THE PAYMENT MADE TO THE PURCHASE PARTIES ARE WITHIN THE KNOWLEDGE OF THE APPELLANT. THEREFORE, THE BURDEN IS ON IT TO ESTABLISH THAT FACT. HOWEVER THE BURDEN HAS NOT BEEN DISCHARGED BY THE ITA NO. 3528/MUM/2017 & 3529/MUM/2017 D & D METALLOYS CORPORATION, THANE 6 APPELLANT. FURTHER, APPELLANT DOES NOT MAINTAIN STOCK REGISTER AND COULD NOT PRODUCE LORRY RECEIPTS AND CORROBORATING EVIDENCES TO SUBSTANTIATE HIS CLAIM.LT IS PERTINENT TO NOTE HERE THAT WITHOUT REC EIVING THE MATERIAL THE CORRESPONDING PRODUCTION/SALES WOULD HOT HAVE BEEN POSSIBLE I.E., THE MATERIAL HAS BEEN RECEIVED BY THE APPELLANT FROM THE SOURCES BEST KNOWN TO HIM. AT THE SAME TIME, IT IS ALSO POSSIBLE THAT APPELLANT PURCHASED GOODS FROM SOME OTH ER SUPPLIERS AND RECEIVED BILL FROM SOMEONE ELSE WHICH IS COMMONLY KNOWN AS GREY MARKET AND THIS IS SO; THE APPELLANT HAS BEEN BENEFITED BY PROVIDING MARGIN OF GREY MARKETS. SUCH PURCHASES IN THIS LINE OF BUSINESS CANNOT BE DENIED AS PER THE PREVAILING PRA CTICE OF THE MARKET. BY RECORDING THE BOGUS PURCHASE AT A HIGHER LEVEL, THE APPELLANT MANAGED TO SIPHON OFF THE PROFIT TO THE EXTENT OF DIFFERENCE BETWEEN THE ACTUAL PURCHASES AND BOGUS PURCHASES. ANY PERSON INDULGING IN THE PRACTICE OF PURCHASING THE GOOD S FROM THE, GREY MARKET AND OBTAINING BOGUS BILLS OF SOME OF THE PARTIES WOULD DO SO FOR GETTING SOME BENEFITS. THE APPELLANT DID NOT MAKE ANY EFFORTS TO CONTROVERT THE FINDING RECORDED BY SALES TAX AUTHORITIES FOLLOWED BY INVESTIGATION WING OF INCOME - TAX DEPARTMENT. THE SAID DEALERS/SELLERS HAD ALREADY ACCEPTED BEFORE THE SALES TAX AUTHORITIES ABOUT THEIR MODUS OPERAND! OF PROVIDING ACCOMMODATION ENTRY ON COMMISSION BASIS. AO RELIED ON THE CASE OF GIMIT P SHETH L/R OF SH. PANKAJ J SHETH V /S ITO (ITA NO. 3 28 AND 32937 AND/2009), THE HON'BLE ITAT, AHMADABAD BENCH, HAS HELD THAT MALPRACTICE OF BOGUS PURCHASE IS MAINLY TO SAVE 10% SALES TAX. THE HON'BLE ITAT HAS CONSIDERED THE PROFIT MARGIN IN THE CASE OF THE INDUSTRY IN WHICH THE APPELLANT WAS DOI N G BUSINESS IS RS. 2.5% A ND ACCORDINGLY 12.5% OF THE PUR CHASE HELD TO BE BOGUS. THE ORDER OF THE ITAT HAS BEEN UPHELD BY THE HON'BLE GUJRAT HIGH COURT (ITXA NO. 553 OF 2012). AO AFTER ELUCIDATION OF THE FACTS OF THE CASE AND DISCUSSION AS ABOVE AO'S OPINION THAT THE AGGREGATE OF THE SALES TAX AND PROFIT ITA NO. 3528/MUM/2017 & 3529/MUM/2017 D & D METALLOYS CORPORATION, THANE 7 MARGIN OF THIS INDUSTRY COMES AROUND 12.5%. HENCE 12.5% OF TOTAL AMOUNT OF RS.37,24,350/ - WHICH COMES TO RS.4,65,544/ - WAS TAKEN AS NON - GENUINE PURCHASE AND ACCORDINGLY ADDED TO THE TOTAL INCOME OF THE APPELLANT. 7. I HAVE CONSIDERED RIVAL CONTENTIONS OF LEARNED DR AND FOUND THAT ASSESSEE IS ENGAGED IN THE BUSINESS OF TRADING IN FERRO ALLOYS METALS AND CHEMICALS. BOGUS PURCHASES WERE FOUND DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THE AO MADE INDEPENDENT ENQUIRY AND FOUND THAT SUPPLIERS WERE NOT EXISTING. HOWEVER, ON THE PLEA THAT CORRESPONDING SALES W ERE THERE, HE ESTIMATED PROFIT AT 12.5 % IN RESPECT OF BOGUS PURCHASES, A CCORDINGLY, MADE AN ADDITION OF 12.5% OF SUCH PURCHASES. NOTHING WAS PLACED BEFORE AO NOR BEFORE CIT(A) SO AS TO ALLEGE THAT ESTIMAT ION OF PROFIT AT 12.5% ON SUCH PURCHASES WAS EXC ES SIVE . ACCORDINGLY, I DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF LOWER AUTHORITIES. 8. THE FACTS AND CIRCUMSTANCES DURING THE YEAR 2010 - 11 ARE SAME, FOLLOWING T HE REASONING GIVEN HEREINABOVE, I CONFIRM THE ACTION OF THE LOWER AUTHORITIES. 9.IN THE RESULT, APPEALS OF THE ASSESSEE IN BOTH THE YEARS ARE DISMISSED. O RDER PRONOUNCED IN THE OPEN COURT ON THIS 13 / 11 /2017 S D/ - ( R.C.SHARMA ) ACCOUNTANT MEMBER MUMBAI ; DATED 13 / 11 /201 7 KARUNA SR. PS 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//