MIRAJ ELECTRICAL & MECHANICAL CO. P LTD, MUMBAI V. DCIT 10(2)(2), MUMBAI

ITA 3611/MUM/2017

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 9373 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-09-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 17-05-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Bogus purchase; Accommodation entries; Reassessment proceedings
• Section: 143(3); 133(6)

Judgement Text

, , , , , ,, , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH C, MUMBAI . . , , , BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA NO.3611/MUM/2017 (A.Y. 2009-10) ITA NO.3612/MUM/2017 (A.Y. 2010-11) M/S. MIRAJ ELECTRICAL & MECHANICAL CO.PVT. LTD. 1 & 2, ANSA INDUSTRIAL ESTATE, SAKI VIHAR ROAD, MUMBAI-400 072. / VS. DCIT-10(2)(2) C-10, 5 TH FLOOR PRATYAKSHAKAR BHAVAN, BKC , MUMBAI-400 051. ( / APPELLANT) ( /RESPONDENT) P.A. NO.AAACM 8022 D /APPELLANT BY : SHRI VIMAL PUNAMIYA /RESPONDENT BY : SHRI PURUSHOTTAM KUMAR / DATE OF HEARING : 07.09.2017 / DATE OF PRONOUNCEMENT : 27.09.2017 / O R D E R PER RAJESH KUMAR (AM) : THESE APPEALS ARE DIRECTED AGAINST THE ORDERS DATED 27/02/2017 OF THE CIT (A)-17, MUMBAI. SINCE BOTH THE APPEALS RELATE TO THE SAME ASSESSEE WITH COMMON ISSUE INVOLVED , THE SAME ARE CLUBBED TOGETHER , HEARD TOGETHER AND ARE BEING DISPOSED OFF BY THIS C OMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. ASSESSEE-COMPANY IS ENGAGED IN THE BUSINESS OF M ANUFACTURING OF WELDING MACHINES AND EQUIPMENTS AND FILED ITS RETURN OF INCOME ON 30/09/ 2009 DECLARING TOTAL INCOME AT RS.2,22,39,880/- SUBSEQUENTLY CASE WAS SELECTED FOR SCRUTINY AND ASS ESSMENT WAS COMPLETED U/S. 143(3) OF THE ACT ON 02/08/2011 ASSESSING TOTAL INCOME AT RS.2,22,49,950 /-. THEREAFTER THE AO RECEIVED INFORMATION THE ASSESSEE HAS AVAILED THE HAWALA PURCHASE ENTRIES FR OM THE VARIOUS PARTIES TO THE TUNE OF RS. 2,72,13,601/- AND THE CASE OF THE ASSESSEE WAS RE-O PENED U/W 147 R.W.S. 148 OF THE ACT BY ISSUING NOTICE U/S. 148 ON 22.03.2014.THE ASSESSING OFFICER (AO)COMPLETED THE RE-ASSESSMENT U/S.143(3) R.W.S. 147 OF THE ACT ON 28/01/2015 DETERMINING ITS INCOME AT RS.3,08,24,230/- BY MAKING ADDITION OF RS. 2,72,13,601/- TOWARDS THE BOGUS PURCHASES BESIDE OT HER ADDITIONS WHICH ARE NOT CHALLENGED BEFORE US. ITA NO.3611 & 12/M/2017 MIRAJ ELECTRICAL & MECHANICAL CO.PVT.LTD. 2 3. GROUND NO.1-4 ARE NOT PRESSED AND THEREFORE, DISMIS SED AS NOT PRESSED. 4. GROUND NO. 6,7, AND 8 ARE CONSEQUENTIAL AND GENERAL IN NATURE, THEREFORE DISMISSED. 5. THE ONLY EFFECTIVE GROUND IS GROUND NO.5 WHICH IS W ITH REGARD TO UPHOLDING THE ADDITION OF RS.68,03,400/- BY CIT(A) BEING 25% OF TOTAL BOGUS PURCHASESAS AGAINST BY ASSESSING OFFICER OF RS.2,72,13,601/- ON ACCOUNT OF NON-GENUINE BOGUS PU RCHASES. 5.1. DURING THE REASSESSMENT PROCEEDINGS THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS MADE PURCHASES FROM 10 PARTIES TO THE TUNE OF RS.2,72,13 ,601/-. THE DETAILS THEREOF IS GIVEN IN PARA 4.1.1 OF ASSESSMENT ORDER :- SL.NO. VAT-TIN NO. NAME OF THE ENTITY AMOUNT (RS.) 1. 27080537284V UNIVERSAL TRADING CO. 50,39,144/- 2. 273540548975V BLUE NILE ENTERPRISES 13,92,196/- 3. 27740523050V SURAJ STEEL INDIA 12,98,752/- 4. 27980662404V SHALAKA INTERNATIONAL 23,56,987/- 5. 27490290339V COSMOS ENTERPRISES 22,64,062/- 6. 27350391684V SUPER SALES 47,295/- 7. 27080521085V BASE INDIA 10,15,308/- 8. 27120359558V SUNNY INTERNATIONAL 32,14,900/- 9. 27940665724V OSIAN STEEL IMPEX 43,42,163/- 10. 27310687071V RATNAKAR TRADERS 62,42,794/- TOTAL 2,72,13,601/- 5.2. THE SAID PARTIES WERE DECLARED AS HAWALA PARTIES B Y THE SALES TAX DEPARTMENT, GOVT. OF MAHARASHTRA. ACCORDINGLY, THE AO CALLED FOR BILLS, VOUCHERS, PAY MENT DETAILS, DELIVERY CHALLANS AND OTHER DOCUMENTARY EVIDENCES TO PROVE GENUINENESS OF PURCH ASES. SIMULTANEOUSLY ASSESSING OFFICER CONDUCTED PHYSICAL ENQUIRES AND THESE PARTIES WERE NOT FOUND AT THE ADDRESSES GIVEN BY THE ASSESSEE. THE ASSESSEE REPLIED TO VARIOUS ENQUIRIES AS CALLED FOR AND SUBMITTED THEREIN THAT ALL THE PURCHASES O F HAWALA DEALERS WERE GENUINE AND THAT ASSESSEE HAS B EEN MAINTAINING QUANTITATIVE DETAILS OF PURCHASES, GOODS MANUFACTURED AND SOLD TO VARIOUS PARTIES. THE ASSESSEE ALSO SUBMITTED THAT WHEN THE SALES WERE ACCEPTED AS GENUINE, THEN HOW CORRESPONDING PURCHAS ES WERE NOT GENUINE. THE NOTICE UNDER SECTION 133(6) BY AO WERE ISSUED TO 10 PARTIES OUT OF WH ICH THE PARTIES MENTIONED AT S.NO.1-6 AND 8 DID NO T REPLY WHEREAS PARTIES AT SL.NO.7,9,8 AND 10 THE NOT ICE WERE RETURNED UNSERVED. THE FACT WAS BROUGHT TO ITA NO.3611 & 12/M/2017 MIRAJ ELECTRICAL & MECHANICAL CO.PVT.LTD. 3 THE NOTICE OF THE ASSESSEE AND HE WAS ASKED TO PRO DUCE PARTIES FOR CROSS VERIFICATION. HOWEVER, WHEN THE ASSESSEE FAILED TO PRODUCE THESE PARTIES BEFOR E AO HE ADDED ENTIRE AMOUNT OF BOGUS PURCHASES OF RS.2,72,13,601/- BY FRAMING ASSESSMENT UNDER SECTIO N. 143(3) R.W.S.147 OF THE ACT VIDE ORDER DATED 28/01/2015. 5.3. IN THE APPELLATE PROCEEDINGS THE LD. CIT(A) PARTLY ALLOWED THE APPEAL OF THE ASSESSEE BY SUSTAINING THE ADDITION TO THE EXTENT OF 25% ON BOGUS PURCHASE S AFTER CONSIDERING VARIOUS CONTENTIONS AND SUBMISSIONS OF THE ASSESSEE AND BY OBSERVING AS UND ER :- 10. IN VIEW OF THE ABOVE DISCUSSION IT IS SEEN TH AT THE ASSESSEE IS UNABLE TO SUBSTANTIATE ITS PURCH ASES FROM THE CLAIM SUPPLIERS WHO HAD ALREADY ESTABLISHE D HAWALA DEALERS BY THE SALES TAX DEPARTMENT (GOVERNMENT OF MAHARASHTRA) AND INVESTIGATION WING OF THE INCOME TAX DEPARTMENT. THE SUPPLIERS WERE NEITHER PRODUCED DURING ASSESSMENT PROCEEDINGS NOR DURING APPELLATE PROCEEDINGS WHEN OPPORTUNITY WAS SO PROVIDED. WHAT IS IMPORTANT TO F IND OUT IS THE ENTIRE BENEFIT DERIVED BY THE AA COMPANY USING SUCH ACCOMMODATION ENTRIES AND ACTUAL LY USING THE GOODS FROM THE GREY MARKET. IN THIS CASE, THE BOOK VALUE SHOWN BY THE ASSESSEE COMPANY CANNOT BE RELIED AND DESERVES TO BE REJECTED AND REASONABLE PROFIT OUT OF SUCH PURCHASES NEEDS TO BE ESTIMATED. THEREFORE IT IS HELD THAT THE ASSESSEE HAS INFLATED ITS EXPENSES BY TAKING BOGUS BILLS OF PURC HASES FROM HAWALA DEALERS. GOING BY THE RATIO OF VARIOUS CASE LAWS PARTICULARLY THE DISCUSSION AND F INDING OF HONBLE GUJARAT HIGH COURT IN CASE OF VIJAY PROTEIN (SUPRA) 25% OF THE PURCHASES CLAIMED FROM HAWALA DEALERS I.E. 25% OF 2,72,13,601/- IS DISALLOWED. THE ASSESSING OFFICER IS DIRECTED TO RE STRICT THE DISALLOWANCE ACCORDINGLY. AS FAR THE ISSUES OF VAT AND COMMISSION PAID FOR PU RCHASES ARE CONCERNED, THE ABOVE ESTIMATION OF 25% OF PROFIT OUT OF BOGUS PURCHASES WILL COVER ALL SUCH RELATED DISALLOWANCE/ADDITIONS. CHARGING OF THE INTEREST U/S.234B, 234C AND 234D OF THE INCOME TAX ACT, 1961 ARE CONCERNED, THESE ARE MANDATORY AND AUTOMATIC IN NATURE, HENCE GROUND ON THESE ISSUES ARE DISMISSED. 5.4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT IN THE PRESENT CASE THE ASSESSEE HAS AVAILED BOGUS BILLS OF PURC HASES FROM 10 PARTIES AMOUNTING TO RS.2,72,13,601/- . DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSEE PRO DUCED BEFORE THE ASSESSING OFFICER THE BILLS, VOUCHERS, DELIVERY CHALLANS, BANK STATEMENTS, QUANT ITATIVE DETAIL OF PURCHASES, GOODS MANUFACTURED AND SOLD. HOWEVER, ASSESSEE COULD NOT PRODUCE PARTIES B EFORE THE ASSESSING OFFICER FOR CROSS VERIFICATION. THE NOTICE ISSUED TO THESE PARTIES WERE EITHER NOT SERVED OR WERE NOT REPLIED TO AND HENCE, THE ASSESS ING OFFICER ADDED 100% OF THE BOGUS PURCHASES TO THE IN COME OF THE ASSESSEE. THE LD.CIT(A) REDUCED THE ADDITION TO 25% OF THE BOGUS PURCHASES BY OBSERVING THAT IN CASE OF HAWALA PURCHASES WHERE BILLS A RE OBTAINED FROM HAWALA TRADERS AND SIMULTANEOUSLY TH E GOODS ARE PURCHASED FROM THE GREY MARKET THEREBY SAVING VAT AND OTHER INCIDENTAL CHARGES. WE ALSO OBSERVED THAT THE ASSESSING OFFICER HAS NOT DOUBTED THE SALES OF THE ASSESSEE. DURING THE COURS E OF HEARING THE LD.AR BROUGHT TO THE NOTICE OF THE ITA NO.3611 & 12/M/2017 MIRAJ ELECTRICAL & MECHANICAL CO.PVT.LTD. 4 BENCH THAT IN THE AY 2009-10, THE ASSESSEE HAD MAD E PAYMENT OF RS.24,61,874/- TOWARDS VAT ON THE PURCHASES FROM HAWALA DEALERS AND SALES TAX DEPARTM ENT HAS DISALLOWED VAT CREDIT FROM THE HAWALA PARTIES TO THE TUNE OF RS.24,61,874/-. THE LD. COUN SEL FOR THE ASSESSEE ALSO SUBMITTED THAT DISALLOWAN CE MADE BY ASSESSING OFFICER IS INCLUSIVE OF VAT AND F URTHER THE CREDIT OF VAT WAS DENIED BY THE SALES TAX DEPARTMENT AND RAISED A DEMAND WHICH WAS RECOVE RED FROM THE ASSESSEE. WE FIND MERIT IN THE SUBMISSION OF THE LD.AR THAT THE SUSTENANCE OF 25% OF BOGUS PURCHASES IS EXCESSIVE AND UNREASONABLE PARTICULARLY WHEN THE VAT CREDIT WAS NOT ALLOWED TO THE ASSESSEE BY THE SALES TAX DEPARTMENT AND DEMAND OF VAT ON BEHALF OF HAWALA SUPPLIERS WAS REA LIZED FROM THE ASSESSEE. IF WE LOOK AT THE GROSS PROFIT DISCLOSED BY THE ASSESSEE, IT IS 16.78 % WHI CH IS MUCH MORE THAN THE DISALLOWANCE @ 11.50% WHICH IS NORMALLY MADE BY THE COORDINATE BENCHES IN THE CASE OF HAWALA PURCHASES. BUT TO DISCOURAGE THE PRACTICE OF BOGUS TRADING SOME DETERRENT HAS TO BE THERE. IN THE PRESENT CIRCUMSTANCES WE ARE OF T HE CONSIDERED VIEW THAT ENDS OF JUSTICE WOULD BE MET I F THE ADDITION IS SUSTAINED EQUAL TO AN AMOUNT ARRIVED AT BY CALCULATING 11.50% OF BOGUS PURCHASE S MINUS THE VAT CREDIT DENIED TO THE ASSESSEE BY THE SALES TAX DEPTT WHICH COMES TO RS. 6,66,690/- ( RS.31,29,564 MINUS 24,62,874). ACCORDINGLY THE AO IS DIRECTED TO DELETE THE ADDITIONS OF RS. 61,36 ,710/-. APPEAL IS PARTLY ALLOWED. ITA NO.3612/MUM/2017 6. FACTS OF THIS APPEAL ARE IDENTICAL TO THE ONE AS DE CIDED IN THE ITA NO.3611/MUM/2017. THEREFORE, OUR DECISION IN ITA NO.3611/MUM/2017 WOULD MUTATIS MUTANDIS APPLY TO THIS APPEAL AS WELL. IN THIS APPEAL THE ASSESSEE HAS SHOWN GROSS PROFIT RATE OF 17.80% BESIDES THE VAT PAYMENT RAISED BY THE SALES TAX DEPARTMENT BY NOT ALLOWING THE VAT CREDIT OF RS.21, 87,497/-.DURING THE YEAR THE AMOUNT OF ALLEGED BOGUS PURCHASES ARE RS.2,21,56,874/-.ACCORDINGLY AS SESSEE IS ALLOWED RELIEF OF RS.51,78,676/- AFTER SUSTAINING ADDITION OF RS.3,60,543/-. APPEAL IS PAR TLY ALLOWED. IN THE RESULT BOTH THE APPEALS FILED BY THE ASSESSE E ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 27 TH SEPTEMBER, 2017. 27 , 2017 SD/- SD/- /- (D.T. GARASIA) (RAJESH KUMAR) ITA NO.3611 & 12/M/2017 MIRAJ ELECTRICAL & MECHANICAL CO.PVT.LTD. 5 / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI; DATED : 27 TH SEPTEMBER, 2017. JV.SR.PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT, MUMBAI. 4. / CIT(A)-13, MUMBAI 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. / BY ORDER, //TRUE COPY// / // / (DY./ASSTT. REGISTRAR) , , , , / ITAT, MUMBAI