POONA GALVANIZERS P .LTD, MUMBAI V. DCIT OSD RG 8(1), MUMBAI

ITA 3644/MUM/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 3641 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-08-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 12-06-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: R S CHOKSHI SMT M K PATEL ARS
• Keywords: Bogus purchase; Rejection of books of accounts; Peak credit
• Section: 69C; 143(3); 131; 69; 10; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH , MUMBAI BEFORE SRI MAHAVIR SINGH, J UDICIAL MEMBER ITA NO . 3644 /MUM/201 5 (ASSESSMENT YEAR: 2010 - 11) POONA GALVANIZERS PVT. LTD., 117, MORYA ESTATE, ANDHERI LINK ROAD, ANDHERI (WEST), MUMBAI 400 053 VS. TH E DY. COMMISSIONER OF INCOME TAX - OSD RANGE 8(1), AAYAKAR BHAVAN, 2 ND FLOOR, ROOM NO.209, M. K. ROAD, MUMBAI 400 020. PAN:AADCP 2111 R APPELLANT .. RESPONDENT APPELLANT BY .. SHRI R. S. CHOKSHI SMT. M. K. PATEL, ARS RESPONDENT BY .. SHRI DURGA DUTT, S R. DR DATE OF HEARING .. 16 - 08 - 2016 DATE OF PRONOUNCEMENT 16 - 0 8 - 2016 O R D E R PER MAHAVIR SINGH , JM : THIS APPEAL BY THE ASSESSEE IS ARISING OUT OF ORDER OF CIT ( A) - 17 , MUMBAI IN APPEAL NO. CIT ( A) - 17 / IT - 161/ 20 13 - 14 DATED 23 - 03 - 2015 . ASSESSMENT WA S FRAMED BY DCIT ( OSD) RANGE - 8(1), MUMBAI FO R THE ASSESSMENT YEAR 20 1 0 - 11 U/S 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER THE ACT) VIDE HIS ORDER DATED 26 - 03 - 2013. 2. THE TWO INTERCONNECTED ISSUES I N THIS APPEAL OF THE ASSESSEE ARE AGAINST THE OR DER OF THE CIT (A) IN CONFIRMING THE ACTION OF THE AO: - (I) REJECTING THE BOOKS AND ESTIMATING THE GROSS PROFIT IN RESPECT OF BOGUS PURCHASES AT 41.23% AGAINST DECLARED BY THE ASSESSEE AT 37 . 23% AND ALSO MAKING ADDITION OF 1% OF TOTAL BOGUS PURCHASES AS C OMMISSION; (II) MAKING ADDITION ON ACCOUNT OF UNDISCLOSED PURCHASES U/S 69 OF THE ACT BEING UNDISCLOSED INVESTMENT AT RS.25,97,262/ - . ITA NO. 3644 /MUM/20 1 5 2 3 . I HAVE HEARD THE RIVAL CONTENTIONS AND GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. THE B RIEF FACTS LEADING T O THE ABOVE ISSUE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINE SS OF FABRICATION AND GALVANIZING JOB WORK AT PUNE. THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOTICED THAT THE ASSESSEE HAS INDULGED I N BOGUS PURCHASES AS UNDER: - SR. NO. NAME OF PA RTY TYPE OF PURCHASES AS PER ASSESSEE PURCHASES MADE (IN RS.) 1 M/S. K. C. ENTERPRISES PURCHASE OF FUEL (FURNACE OIL) 51,64,259 2 M/S. HITEN ENTERPRISES PURCHASE OF PACKING MATERIAL (MS WIRE) 19,07,670 3 M/S. SUBHAM ENTERPRISES PURCHASE OF CHEMICAL S 32,45,188 TOTAL 1,03,17,117 ACCORDING TO THE AO, SUMMONS ISSUED TO M/S. HITEN ENTERPRISES COULD NOT BE SERVED AND FURTHER, IN RESPONSE TO SUMMONS U/S 131 OF THE ACT M/S. K. C. ENTERPRISES VIDE LET T ER INFORMED THAT THE PARTY HAS NO KNOWLEDGE FOR S UPPLY OF GOODS TO THE ASSESSEE OR OF ANY FINANCIAL TRANSACTIONS. ACCORDING TO THE AO, THE ASSESSEE COULD NOT PRODUCE TRANSPORT CHALLANS AND BILTIES AND HENCE, HE TREATED THE ENTIRE PURCHASES FROM THE ABOVE THREE PARTIES AS UNDISCLOSED PURCHASES AND ADDED T O THE RETURNED INCOME OF THE ASSESSEE AT RS.1,03,17,17/ - . AGGRIEVED, THE ASSESSEE PREFERRED APPEAL BEFORE THE CIT (A), WHO CONFIRMED THE ACTION OF THE AO IN REGARD TO REJECTION OF BOOKS OF ACCOUNTS. THE CIT (A) FIRST OF ALL TAKEN PEAK CREDIT OF THE BOGUS P URCHASES BY TREATING THE SALES AS GENUINE AT RS.25,97,262/ - AND CONFIRMED THE ADDITION U/S 69C OF THE ACT. THE CIT (A) ALSO INCREASED THE GROSS PROFIT IN RESPECT TO BOGUS PURCHASES AT 43.23% AS AGAINST DECLARED BY THE ASSESSEE AT 37.23%. THE CIT (A) ALSO M ADE ADDITION OF BOGUS PURCHASES, COMMISSION @ 1% PAID BY IT. AGGRIEVED, THE ASSESSEE CAME IN SECOND APPEAL BEFORE THE TRIBUNAL. 4 . BEFORE ME, THE LEARNED COUNSEL FOR THE ASSESSEE STATED THAT THE ENTIRE PURCHASES ARE ACCOUNTED FOR IN THE BOOKS OF ACCOUNTS AND COMPLETE BILLS AND VOUCHERS IN RESPECT OF SALES AND PURCHASES WERE PRODUCED BEFORE THE AO AS WELL AS BE FORE THE CIT (A), HE ALSO DREW MY ATTENTION TO THE ASSESSEES PAPER BOOK ITA NO. 3644 /MUM/20 1 5 3 CONSISTING OF 529 PAGES. ACCORDING TO HIM, COMPLETE DETAILS OF VOUCHERS IN RESPECT OF THE PURCHASES AND SALES AND EXPENSES ARE ENCLOSED. HE ALSO STATED THAT THE ENTIRE PURCHASES ARE THROUGH ACCOUNT PAYEE CHEQUES AND PAYMENTS HAVE BEEN GONE TO THE PARTIES IN RESPECT OF THE ALLEGED BOGUS PURCHASES. THE LEARNED COUNSEL FOR THE ASSES SEE ALSO STATED THAT IN THE LINE OF FABRICATION BUSINESS AND GALVANIZING JOB WORK, ASSESSEES GROSS PROFIT IS HIGHEST I.E. 37 .23% AND IN THIS BUSINESS ASSESSEES MAXIMUM PROFIT HAS BEEN SHOWN WHICH IS COMPARATIVELY HIGHER THAN THE OTHER COMPETITORS. 5 . I HAVE GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE AND NOTICED THAT THE PURCHASE PARTIES DO NOT EXIST OR ARE NOT AVAILABLE. EVEN THE PAYMENTS THROUGH RTGS OR CH EQUES WERE ENCASHED EITHER BY T HE SELLER PARTY OR BY UNKNOWN PERSONS THROUGH ANOTHER BAN K ACCOUNT AT VILLE PARLE BRANCH INSTEAD OF THE REAL BANK ON WHICH THE CHEQUES WERE DRAWN. EVEN, THE ASSESSEE HAS NOT PRODUCED THE TRANSPORTATION BILLS/LORRY RECEIPTS FOR MOVEMENT OF THE GOODS TO PROVE THAT PURCHASES ARE GENUINE, BUT, ONE FACT IS THAT THE R EVENUE HAS ACCEPTED THE SALES AND EVEN THE STOCK REGISTER S MAINTAINED ARE NOT DISTURBED. THE AO COULD NOT POINT OUT ANY SPECIFIC DEFECT IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE, DESPITE THE COMPLETE BOOKS OF ACCOUNTS WERE PRODUCED BEFORE THE AO. ON QUERY FROM THE BENCH, THE LEARNED COUNSEL FOR THE ASSESSEE FAIRLY AGREED THAT HE IS NOT INTERESTED IN ACCEPTANCE OF BOOK RESULT BUT HE STATED THAT A FAIR ESTIMATION OF GROSS PROFIT CAN BE ADDED IN CASE THE PURCHASES ARE NOT ACCEPTED. I AM IN AGREEMENT WITH THE A RGUMENTS OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT EVEN IF THE PURCHASES ARE BOGUS, THE ASSESSEE MIGHT HAVE MADE SOME PURCHASES FROM THE GREY MARKET, FOR THAT THE ASSESSEE MIGHT HAVE EVADED TAX. HENCE, I AM IN AGREEMENT WITH THE LOWER AUTHORITIES THAT T HE BOOKS OF ACCOUNT HAS RIGHTLY BEEN REJECTED, BUT ADDITION ON ACCOUNT OF UNDISCLOSED INVESTMENT QUA THE PURCHASES SUSTAINED BY THE CIT (A) AT RS.25,97,262/ - IS WITHOUT ANY BASIS. AT THE BEST, THE GROSS PROFIT RATE AS ENHANCED BY THE CIT (A) AT 41.23% WOUL D MEET THE JUSTICE. ACCORDINGLY, I ESTIMATE THE GROSS PROFIT RATE AT 41.23% AS AGAINST DECLARED BY THE ASSESSEE AT 37.23%. THIS ADDITION WILL FURTHER BE ENHANCED BY 1% OF BOGUS PURCHASES AS COMMISSION HAS BEEN PAID BY THE ASSESSEE ON THIS. IN NET EFFECT, 5 % OF BOGUS ITA NO. 3644 /MUM/20 1 5 4 PURCHASES HAVE TO BE ADDED BY THE AO. THE BALANCE ADDITION ON ACCOUNT OF PEAK OF BOGUS PURCHASES CONFIRMED BY THE CIT (A) CANNOT BE SUSTAINED BECAUSE THE REVENUE HAS ACCEPTED THE SALES IN ENTIRETY. ONCE SALES ARE ACCEPTED THE ASSESSEE EVEN THOUG H MADE PURCHASES FROM GREY MARKET, THE SAME ARE ROUTED THROUGH BOOKS OF ACCOUNTS AND PAYMENT IS MADE THROUGH BOOKS OF ACCOUNTS. ONCE, THE PAYMENT MADE IS ACCEPTED AS GENUINE, THE PEAK ADDITION ON ACCOUNT OF BOGUS PURCHASES CANNOT BE ACCEPTED. ACCORDINGLY, I DELETE THE ADDITION OF PEAK OF BOGUS PURCHASES AT RS.25,97.262/ - . I DIRECT ACCORDINGLY. ASSESSEES APPEAL STANDS PARTLY ALLOWED. 6 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 16 - 08 - 201 6 COPY OF THE ORDER FORWARDED TO : BY ORDER, ASSISTANT REGISTRAR ITAT, MUMBAI SR.NO. PARTICULAR S DATE INITIALS PERSON CONCERNED 1 DICTATION GIVEN ON 16 /8/16 LK DEKA 2 DRAFT PLACED BEFORE AUTHOR 16 /8/16 3 DRAFT PROPOSED/PLACED BEFORE THE SECOND MEMBER 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER 5 APPROVED DRAFT COMES TO THE SR.PS 6 KEPT FOR PRONOUNCEMENT ON 7 FILE SENT TO THE BENCH CLERK 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER - MUMBAI, DATED: 16 - 08 - 2016 LAKSHMIKANTA DEKA/SR.PS SD/ - MAHAVIR SINGH JUDICIAL MEMBER 1. THE APPEL LANT 2. THE RESPONDENT. 3. THE CIT (A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY// ITA NO. 3644 /MUM/20 1 5 5