SHRENIK STEEL CO., MUMBAI V. ITO ,WD- 31(3)(4), MUMBAI

ITA 3604/MUM/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 3363 (ITAT-MUMBAI)
• Duration Of Justice: 10 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-04-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 25-05-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: CHAITNYA ANJARIA
• Assessee Lawyers: D B SANGHVI
• Keywords: Bogus purchase; Unexplained expenditure; Corroborative evidences
• Section: 69C; 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES SMC, MUMBAI BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER AND SHRI RAVISH SOOD, JUDICIAL MEMBER AND ITA NO.3604 & 3605/MUM/2018 ASSESSMENT YEAR-2009-10 & 2010-11 SHRENIK STEEL CO. BRIJWASI INDUSTRIAL ESTATE, I.B. PATEL ROAD, GOREGAON (E), MUMBAI-400062 / VS. ITO - 31(3)(4), 408, C-13, 4 TH FLOOR, PRATYAKASHA KAR BHAVAN, BANDRA KURLA COMPLEX, BANDRA (EAST), MUMBAI-400051 PAN NO. AAMFS3437K ( / ASSESSEE) ( / REVENUE) / ASSESSEE BY SHRI D. B. SANGHVI / REVENUE BY SHRI CHAITNYA ANJARIA / DATE OF HEARING : 22/04/2019 / DATE OF ORDER: 23/04/2019 / O R D E R PER SHAMIM YAHYA (ACCOUNTANT MEMBER) THESE APPEALS BY THE ASSESSEE ARE DIRECTED AGAINST ORDER OF THE LD. CIT(A)-42, MUMBAI, DATED 02/02/2018 AND PERTAINS TO ASSESSMENT YEARS 2009-10 AND 2010-11, O N THE GROUND THAT THE LD. CIT HAS ERRED IN SUSTAINING 12. 5% DISALLOWANCE ON ACCOUNT OF BOGUS PURCHASES OF RS.14 ,09,620 FOR AY 2009-10 AND RS.7,58,190/- FOR AY 2010-11. ITA NO.3604 & 3605/MUM/2018, SHRENIK STEEL CO. 2 2. THE ASSESSING OFFICER IN THIS CASE HAS MADE 12.5 % ADDITION ON ACCOUNT OF BOGUS PURCHASE. UPON ASSESSE S APPEAL, THE LD. CIT(A) CONFIRMED THE SAME. 3. THE BRIEF FINDINGS OF THE AO ON FACTS ARE AS UND ER:- THE ASSESSMENT WAS REOPENED UPON INFORMATION FROM DGIT REGARDING ASSESSEE ENGAGING IN BOGUS PURCHASES. THE AO OBSERVED THAT ON GOING THROUGH THE DETAILS FILED DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND NO VERIFICATION OF THE TIN OF THIS PARTIES, IT WAS ALSO FOUND/NOTICED THAT THE ABOVE MENTIONED PURCHASE PARTIES WERE APPEARING IN THE LISTS OF THE SUSPICIOUS DEALERS WHO INDULGE IN ISSU ING BOGUS BILLS WITHOUT ANY GOODS OR MATERIAL BUT FOR A COMMISSION, AS PER THE OFFICIAL WEBSITE OF THE SALE S TAX DEPARTMENT, GOVERNMENT OF MAHARASHTRA. WWW.MAHAVAT.GOV.IN . CONSIDERING THIS FACT AND THE PARTIES REFLECTING AS SUSPICIOUS DEALERS PUBLISHED BY THE SALES TAX DEPARTMENT, THE ASSESSEE WAS GIVEN AN OPPORTUNITY TO EXPLAIN WHY PURCHASES FROM THE ABOVE PARTIES SHOULD NOT BE ADDED TO THE TOTAL INCOME AS UNEXPLAINED EXPENDITURE U/S 69C OF THE I.T. ACT, 1961. THE ASSESSEE DID NOT SUBMIT ANYTHING SPECIFIC IN THIS REGARD. ASSESSEE HAS SUBMITTED BANK STATEMENTS, PARTY WISE PURCHASE INVOICES, LEDGERS & DELIVERY CHALLANS. HOWEVER, ASSESSEE HAS NOT FURNISHED ANY SUPPORTING EVIDENCES LIKE SPECIFIC ITA NO.3604 & 3605/MUM/2018, SHRENIK STEEL CO. 3 TRANSACTION DETAILS, IDENTITY PROOF, L/R OR OCTROI RECEIPTS ETC . 4. AGAINST ABOVE ORDER ASSESSEE IS IN APPEAL BEFORE THE ITAT. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED TH E RECORDS. UP ON CAREFUL CONSIDERATION, WE FIND THAT ASSESSEE HAS PROVIDED THE DOCUMENTARY EVIDENCE FOR THE PURCH ASE. ADVERSE INFERENCES HAVE BEEN DRAWN DUE TO THE INABI LITY OF THE ASSESSEE TO PRODUCE THE SUPPLIERS. WE FIND THAT IN THIS CASE THE SALES HAVE NOT BEEN DOUBTED. IT IS SETTLED LAW THAT WHEN SALES ARE NOT DOUBTED, HUNDRED PERCENT DISALLO WANCE FOR BOGUS PURCHASE CANNOT BE DONE. THE RATIONALE BE ING NO SALES IS POSSIBLE WITHOUT ACTUAL PURCHASES. THIS PR OPOSITION IS SUPPORTED FROM HONOURABLE JURISDICTIONAL HIGH CO URT DECISION IN THE CASE OF NIKUNJ EXIMP ENTERPRISES (I N WRIT PETITION NO 2860, ORDER DT 18.6.2014). IN THIS CASE THE HONOURABLE HIGH COURT HAS UPHELD HUNDRED PERCENT ALLOWANCE FOR THE PURCHASES SAID TO BE BOGUS WHEN S ALES ARE NOT DOUBTED. HOWEVER IN THAT CASE ALL THE SUPPLIES WERE TO GOVERNMENT AGENCY. 5. IN THIS REGARD WE ALSO NOTE THE DECISION OF HONO URABLE GUJARAT HIGH COURT IN THE CASE OF PR CIT VS T R KAP ADIA IN ITA NO.3604 & 3605/MUM/2018, SHRENIK STEEL CO. 4 TAX APPEAL NO 691 OF 2017. IN THIS CASE THE HONOURA BLE HIGH COURT HAS CONFIRMED THE DELETION OF DISALLOWANCE ON ACCOUNT OF ALLEGED BOGUS PURCHASE AS NECESSARY DOCUMENTARY EVIDENCE FOR THE PURCHASE WERE ON RECORD. THE SPECI AL LEAVE PETITION AGAINST THIS ORDER HAS BEEN DISMISSED BY T HE HONOURABLE SUPREME COURT IN ITS DECISION DATED 04/0 5/2018 SLP CIVIL DIARY NO 12670/2018. 6. IN THE PRESENT CASE THE FACTS OF THE CASE INDICA TE THAT ASSESSEE HAS MADE PURCHASE FROM THE GREY MARKET. MA KING PURCHASES THROUGH THE GREY MARKET GIVES THE ASSESSE E SAVINGS ON ACCOUNT OF NON-PAYMENT OF TAX AND OTHERS AT THE EXPENSE OF THE EXCHEQUER. IN SUCH SITUATION IN OUR CONSIDERED OPINION ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE 12.5% DISALLOWANCE OUT OF THE BOGUS PURCHASES MEETS THE E ND OF JUSTICE. HOWEVER IN THIS REGARD LEARNED COUNSEL OF THE ASSESSEE HAS PRAYED THAT WHEN ONLY THE PROFITS EARN ED BY THE ASSESSEE ON THESE BOGUS PURCHASE TRANSACTION IS TO BE TAXED THE GROSS PROFIT ALREADY SHOWN BY THE ASSESSEE AND OFFERED TO TAX SHOULD BE REDUCED FROM THE STANDARD 12.5% BEING DIRECTED TO BE DISALLOWED ON ACCOUNT OF BOGUS PURCH ASE. UP ON CAREFUL CONSIDERATION, WE FIND CONSIDERABLE COGE NCY IN THE ITA NO.3604 & 3605/MUM/2018, SHRENIK STEEL CO. 5 SUBMISSION OF THE LEARNED COUNSEL OF THE ASSESSEE, AS OTHERWISE IT WILL BE DOUBLE JEOPARDY TO THE ASSESSE E. ACCORDINGLY, WE MODIFY THE ORDER OF LEARNED CIT-A A ND DIRECT THAT THE DISALLOWANCE IN THIS CASE BE RESTRICTED TO 12.5% OF THE BOGUS PURCHASES AS REDUCED BY THE GROSS PROFIT RATE ALREADY DECLARED BY THE ASSESSEE ON THESE TRANSACTI ONS. LD COUNSEL OF THE ASSESSEE FAIRLY ACCEPTED THIS PROPOS ITION. 7. ANOTHER PROPOSITION CANVASSED BY THE LEARNED COU NSEL OF THE ASSESSEE IS THAT FOR ASSESSMENT YEAR 2009-10, T HERE IS NO PURCHASE FROM UNIVERSAL TRADING, WHICH FIGURE HAS B EEN TAKEN AS RS.15.99 LAKHS. THIS, THE LEARNED COUNSEL PLEADED IS ARISING FROM THE REMAND REPORT OBTAINED BY THE L EARNED COMMISSIONER OF INCOME TAX FROM THE ASSESSING OFFIC E. HENCE LEARNED COUNSEL PLEADED THAT NO DISALLOWANCE SHOULD BE MADE ON ACCOUNT OF THESE PURCHASES LISTED AS BOGUS PURCH ASES. 8. UP ON CAREFUL CONSIDERATION WE DEEM IT APPROPRIA TE TO REMIT THIS ISSUE ALSO TO THE FILES OF THE ASSESSING OFFICER. THE ASSESSING OFFICER SHALL MAKE THE FACTUAL VERIFICATI ON OF THE ASSESSEE SUBMISSION AND THEREAFTER DECIDE AS PER LA W. ITA NO.3604 & 3605/MUM/2018, SHRENIK STEEL CO. 6 9. ONE GROUND RAISED BY THE ASSESSEE RELATES TO INT EREST UNDER SECTION 234B OF THE ACT. ON THIS ISSUE LEARN ED COUNSEL OF THE ASSESSEE HAS PLACED RELIANCE UPON FOLLOWING CASE LAWS: I. VIJAY KUMAR SABOO VS ACIT (340 ITR 382)(KARNATAKA) II. CIT VS B. LAKSHMIKANTHAN (2011)(198 TAXMAN 485)(KERALA) 10. FOR THE PROPOSITION THAT INTEREST U/S 234B IS N OT CALCULATED IN ACCORDANCE WITH THE EXTANT PROVISION OF SECTION 234B(1) AND 234B(3) OF THE ACT. 11. UP ON CAREFUL CONSIDERATION WE ARE OF THE OPINI ON THAT INTEREST UNDER SECTION 234B IS CONSEQUENTIAL IN NAT URE AS HELD BY THE LEARNED CIT(A). THE SUBMISSION OF THE ASSESSEES COUNSEL AND THE CASE LAWS REFERRED MAY BE CONSIDER ED BY THE ASSESSING OFFICER IN MAKING THE LEVY OF INTEREST IN THIS REGARD. 12. IN THE RESULT, THESE APPEALS FILED BY THE ASSES SEE ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 23/04/2019 SD/- S D/- (RAVISH SOOD) (SHAMIM YAHYA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 23/04/2019 F{X~{T? P.S/. .. ITA NO.3604 & 3605/MUM/2018, SHRENIK STEEL CO. 7 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT (RESPECTIVE ASSESSEE) 2. !'# / THE RESPONDENT. 3. $# $# % ( ) / THE CIT, MUMBAI. 4. $# $# % / CIT(A)- , MUMBAI, 5. ( )*# !+ , $# # +- , / DR, ITAT, MUMBAI 6. *. / / GUARD FILE. / BY ORDER, '#( ! //TRUE COPY// / (DY./ASSTT. REGISTRAR) $%&', / ITAT, MUMBAI