DCIT CEN CIR 4(2) CEN RG 4(2), MUMBAI V. PRATEEK VIJAY GUPTA, MUMBAI

ITA 3663/MUM/2015

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 8776 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 4 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-10-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: J
• Next Hearing Date: 08-05-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 15-06-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ARJU GARODIA
• Keywords: Bogus purchase; Question of law

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL J , BENCH MUMBAI BEFORE SHRI R.C.SHARMA, AM & SHRI SANDEEP GOSAIN , JM ITA NO. 3663 / MUM/20 1 5 ( ASSESSMENT YEAR : 2010 - 11 ) DCIT CEN CIR 4(2) CEN. RG. 4, R.NO.411, 4 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD CHURCHG ATE, MUMBAI 400 020 VS. SHRI PRATEEK VIJAY GUPTA NEW HARILEELA HOUSE, 6 TH FLOOR, MINT ROAD, FORT, MUMBAI 400 001 PAN/GIR NO. AASPG9494L APPELLANT ) .. RESPONDENT ) ITA NO.3673/MUM/2015 ( ASSESSMENT YEAR : 2010 - 11 ) SHRI PRATEEK VIJ AY GUPTA NEW HARILEELA HOUSE, 6 TH FLOOR, MINT ROAD, FORT, MUMBAI 400 001 VS. ACIT RG 12(1) NOW TRANSFERRED TO ACIT CEN CIR 4 (2) AAYAKAR BHAVAN MUMBAI 400 020 PAN/GIR NO. AASPG9494L APPELLANT ) .. RESPONDENT ) REVENUE BY MS. ARJU GARODIA ASSESSEE BY SHRI BHUPENDRA KARKHANIS DATE OF HEARING 23 / 08 /201 7 DATE OF PRONOUNCEME NT 24 / 10 /201 7 / O R D E R PER R.C.SHARMA (A.M) : TH ESE ARE THE CROSS APPEAL S FILED BY THE ASSESSEE AND REVENUE AGAINST THE ORDER OF CIT(A) - 31, MUMBAI DATED 04/03/2015 FOR THE A.Y. 2010 - 11 IN THE MATTER OF ORDER PASSED U/S.143(3) OF THE IT ACT. 2. THE FOLLOWING G ROUNDS HAVE BEEN TAKEN BY THE REVENUE: - ITA NO. 3663/MUM/2015 & 3673/MUM/2015 SHRI PRATEEK VIJAY GUPTA 2 1. 'WHETHER, ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A), WAS JUSTIFIED IN DIRECTING THE AO TO RESTRICT THE ADDITION TO 12.5% OF F 9,37,11,967 WHEREAS THE ASSESSING OFFICER MADE AN ADDITION OF R 9,37,11,967 ON ACCOUNT OF BOGUS PURCHASE WHICH REMAINED UNEXPLAINED BY THE ASSESSEE DURING THE ASSESSMENT PROCEEDING AS WELL AS DURING THE APPELLATE PROCEEDING.' 2. 'WHETHER, ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A), WAS JUSTIFIED IN DIRECTING THE AO TO RESTRICT THE ADDITION TO 12.5% OF RS. 9,37,11,967 WHEREAS THE ADDITION OF RS. 9,37,11,967 WAS MADE ON ACCOUNT OF BOGUS PURCHASES BASED ON THE INFORMATION RECEIVED FROM THE SALES TAX DEPARTMENT AND THE PURCH ASE PARTY WAS NOT EVEN TRACEABLE AS WELL. 3. 'THE APPELLANT CRAVES, LEAVE TO ADD, TO AMEND AND / OR TO ALTER ANY OF THE GROUNDS OF APPEAL, IF NEED BE . 3. THE GROUNDS TAKEN BY ASSESSEE ARE AS UNDER: - 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(A) ERRED IN SUSTAINING THE ADDITION TO THE EXTENT OF 12.5% (I.E. RS. 1,17,13,995/ - ) OF THE ALLEGED BOGUS PURCHASES MADE OF RS. 9,37,11,967/ - AS THE PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES AND ALSO ERRED IN STATING THAT THE MOTI VE BEHIND OBTAINING BOGUS BILLS APPEARS TO BE INFLATION OF THE PURCHASE PRICE SO AS TO SUPPRESS TRUE PROFITS. 2. THE APPELLANT CRAVES LEAVE TO ADD, TO AMEND, ALTER/DELETE AND/OR MODIFY THE ABOVE GROUNDS OF APPEAL ON OR BEFORE THE FINAL HEARING. 4. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. FACTS IN BRIEF ARE THAT AO MADE ADDITION ON THE BASIS OF INFORMATION RECEIVED FROM SALES TAX DEPARTMENT REGARDING BOGUS SUPPLIERS. AFTER CONSIDERING ASSESSEES CONTENTION, AO ADDED ENTIRE AMOUNT U/S.69C. 5. BY THE IMPUGNED ORDER CIT(A) RESTRICTED THE ADDITION TO THE EXTENT OF 12.5% AFTER HAVING THE FOLLOWING OBSERVATION: - 2.4.28 THE FACTS IN THE PRESENT CASE ARE SIMILAR TO THE FACTS IN THE ABOVE MENTIONED CASE. IN THE PRESENT CASE, THE LD. AO HAS SHOWN THAT T HE PARTY IN QUESTION WAS NON - EXISTENT. THE APPELLANT HAS NOT BEEN ABLE TO DISPROVE THE FINDINGS OF THE LD. AO REGARDING THE NON - EXISTENCE OF THE PARTY. LD. AO HAS, AFTER EXAMINING THE EVIDENCES, FOUND THAT THE APPELLANT DID PURCHASE THE GOODS, ALTHOUGH NOT FROM THE PARTY IN QUESTION AND HE HAD ITA NO. 3663/MUM/2015 & 3673/MUM/2015 SHRI PRATEEK VIJAY GUPTA 3 ALSO SHOWN SALES OF THE GOODS AND HAD OFFERED THE INCOME ON SUCH SALE OF GOODS. IN THIS CASE, I ALSO FIND THAT QUANTITATIVE DETAILS WERE MAINTAINED AND THE APPELLANT BEING A TRADER OF GOODS, LD. A.O. NOT HAVING DOUBTE D THE GENUINENESS OF SALES, COULD NOT HAVE GONE AHEAD AND MADE ADDITION IN RESPECT OF MAXIMUM CREDIT BALANCE OF PURCHASES ESPECIALLY WHEN HE HIMSELF RECORDED A FINDING THAT THE APPELLANT MADE THE PURCHASES FROM SOME OTHER PARTY. THUS, THE ISSUE WOULD BOIL DOWN TO FINDING OUT THE ELEMENT OF PROFIT EMBEDDED IN BOGUS PURCHASES WHICH THE APPELLANT WOULD HAVE MADE FROM SOME UNKNOWN ENTITIES. HENCE, FOLLOWING THE DECISION OF THE HON'BLE GUJARAT HIGH COURT IN BHOLANATH POLYFAB PVT. LTD. (SUPRA), THE PROFIT MARGIN EMBEDDED IN SUCH AMOUNTS OF PURCHASES COULD ONLY BE DISALLOWED 2.4.29 SIMILARLY, IN YET ANOTHER DECISION OF HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. SIMIT SHETH (2013) 38 TAXMANN.COM 385 (GUJ), HON'BLE COURT WAS SEIZED WITH A SIMILAR ISSUE WHERE THE A.O. HAD FOUND THAT SOME OF THE ALLEGED SUPPLIERS OF STEEL TO THE ASSESSEE HAD NOT SUPPLIED ANY GOODS BUT HAD ONLY PROVIDED SALE BILLS AND HENCE, PURCHASES FROM THE SAID PARTIES WERE HELD TO BE BOGUS. THE A.O. IN THAT CASE ADDED THE ENTIRE AMOUNT OF P URCHASES TO GROSS PROFIT OF THE ASSESSEE. LD. CIT(A) HAVING FOUND THAT THE ASSESSEE HAD INDEED PURCHASED THOUGH NOT FROM NAMED PARTIES BUT OTHER PARTIES FROM GREY MARKET, PARTIALLY SUSTAINED THE ADDITION AS PROBABLE PROFIT OF THE ASSESSEE. THE TRIBUNAL HOW EVER, SUSTAINED THE ADDITION TO THE EXTENT OF 12.5%. TAKING INTO ACCOUNT THE ABOVE FACTS, THE HON'BLE GUJARAT HIGH COURT HELD THAT SINCE THE PURCHASES WERE NOT BOGUS, BUT WERE MADE FROM PARTIES OTHER THAN THOSE MENTIONED IN BOOKS OF ACCOUNTS, ONLY THE PROF IT ELEMENT EMBEDDED IN SUCH PURCHASES COULD BE ADDED TO THE ASSESSEE'S INCOME AND AS SUCH NO QUESTION OF LAW AROSE IN SUCH ESTIMATION. WHILE ARRIVING AT THE ABOVE CONCLUSION, THE HON'BLE COURT ALSO RELIED ON THE DECISION IN THE CASE OF VIJAY M. MISTRY CONS TRUCTION LTD. 355 ITR 498 (GUJ) AND FURTHER APPROVED THE DECISION OF AHMEDABAD BENCH, ITAT IN THE CASE OF VIJAY PROTEINS 58 IT.D 428. 2.4.30 . IN THE CASE OF VIJAY PROTEINS (SUPRA), THE HON'BLE ITAT WAS SEIZED WITH A CASE OF BOGUS SUPPLIERS OF OIL CAKES W HERE 33 PARTIES WERE FOUND TO BE BOGUS BY THE DEPARTMENTAL AUTHORITIES EVEN THOUGH PAYMENTS WERE MADE TO THE SAID PARTIES BY CROSS CHEQUES AND IN FACT THE A.O. IN THAT CASE HAD BROUGHT ADEQUATE MATERIAL ON RECORD TO PROVE THAT THE CROSS CHEQUES HAD NOT BEE N GIVEN TO PARTIES FROM WHOM SUPPLIES WERE ALLEGEDLY PROCURED BUT THESE WERE ENCASHED FROM A BANK ACCOUNT IN THE NAME OF ANOTHER ENTITY, POSSIBLY HAWALA DEALER. SUBSEQUENTLY, THE MONEY DEPOSITED IN THAT ACCOUNT WAS WITHDRAWN IN CASH ALMOST ON THE SAME DAY. THE TRIBUNAL HOWEVER, HELD THAT IF THE PURCHASES WERE MADE FROM OPEN MARKET WITHOUT INSISTING FOR GENUINE BILLS, THE SUPPLIERS MAY BE WILLING TO SELL THE PRODUCT AT A MUCH LESS RATE AS COMPARED TO A RATE WHICH THEY MAY CHARGE IN WHICH THE DEALER HAS TO GI VE GENUINE SALE INVOICE IN RESPECT OF THAT SALE. KEEPING ALL SUCH FACTORS IN MIND, THE TRIBUNAL ESTIMATED AN ELEMENT OF PROFIT PERCENTAGE OF THE OVERALL PURCHASE PRICE ACCOUNTED FOR IN THE BOOKS OF ACCOUNTS THROUGH FICTITIOUS INVOICES. ITA NO. 3663/MUM/2015 & 3673/MUM/2015 SHRI PRATEEK VIJAY GUPTA 4 2.4.3 1 FURTHER, IN THE CASE OF M/S. SANKET STEEL TRADERS (ITA NO. 2801/AHD/2008 DATED 20 - 05 - 2011 IT WAS, INTER - ALIA, STATED AS UNDER: - '3. AT THE TIME OF HEARING BEFORE US, IT IS SUBMITTED BY THE LEARNED COUNSEL THAT THE ADDITION SUSTAINED IS EXCESSIVE. IN SUPPORT OF THIS C ONTENTION HE REFERRED TO THE DECISION OF THE TRIBUNAL IN THE CASE OF ITO VS. SUN STEEL 92 TTJ (AHD) 1126 WHEREIN THE TRIBUNAL HAS SUSTAINED THE ADDITION OF RS. 50,000/ - ON ACCOUNT OF BOGUS PURCHASES. HOWEVER, WE FIND THAT THE FACTS IN THE ABOVE CASE WERE DI FFERENT IN THE ABOVE CASE, THE ASSESSEE HAS SHOWN PURCHASES OF RS.27,39,410/ - , SALE OF RS.28,17,207/ - AND GROSS PROFIT AT RS.94,740/ - . THE ASSESSING OFFICER MADE THE ADDITION OF F 27,39,407/ - FOR BOGUS PURCHASES. IF THE ABOVE SUM IS ADDED TO THE GROSS PROF IT, THE GROSS PROFIT WORKS OUT RS.2,83,41,247/ - WHICH WAS MORE THAN THE SALE ITSELF. THE TRIBUNAL HELD THAT IT IS IMPOSSIBLE THAT THE GROSS PROFIT IS MORE THAN THE SALE ITSELF. THE TRIBUNAL ALSO FOUND THAT THE ASSESSEE HAS MAINTAINED THE QUANTITATIVE DETAI LS IN RESPECT OF MATERIALS PURCHASED AND SOLD. CONSIDERING PECULIAR FACTS OF THAT CASE, THE TRIBUNAL ARRIVED AT THE CONCLUSION THAT IT WOULD BE FAIR AND REASONABLE TO ESTIMATE THE ADDITION AT RS. 50,000/ - AS AGAINST THE ADDITION OF RS. 27,39,407/ - MADE BY TH E ASSESSING OFFICER. HOWEVER, THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) CONSIDERING THE FACTS OF THE ASSESSEE'S: CASE, HAS SUSTAINED THE ADDITION AT 12.5%. WHILE DOING SO, HE HAS ALSO RELIED UPON THE DECISION OF THE TRIBUNAL IN THE CASE OF M/S. VIJA Y PROTEINS LTD. 55 TTJ (AHD) 76. IN THE CASE OF M/S. VIJAY PROTEINS LTD. THE TRIBUNAL HAS SUSTAINED THE ADDITION OF 25% OF THE BOGUS PURCHASES. HOWEVER, CONSIDERING THE FACTS OF THE ASSESSEE'S CASE THE CIT(A) RESTRICTED THE DISALLOWANCE TO 12.5% AS AGAINST 25% MADE IN THE CASE OF M/S. VIJAY PROTEINS LTD. FROM THESE FACTS IT IS EVIDENT THAT THE CIT(A) HAS SUSTAINED THE ADDITION AT 12.5% OF THE NON - GENUINE PURCHASES CONSIDERING THE FACTS OF THE ASSESSEE'S CASE. WE, THEREFORE, DO NOT FIND ANY JUSTIFICATION TO INTERFERE WITH THE ORDER OF THE CIT(A) IN THIS REGARD. THE SAME IS SUSTAINED.' AFTER CONSIDERING THE FACTS AND THE ARGUMENTS OF BOTH THE SIDES, WE ARE OF THE OPINION THAT IT WOULD MEET ENDS OF JUSTICE, IF THE DISALLOWANCE IS SUSTAINED AT 12,5% OF THE PURCH ASE FROM THESE TWO PARTIES. THE ASSESSING OFFICER IS DIRECTED TO WORK OU T THE DISALLOWANCE ACCORDINGLY. SINCE THE FACTS OF THE ASSESSEE'S CASE ARE IDENTICAL, WE RESPECTFULLY FOLLOWING THE ABOVE DECISION OF THE /TAT, DIRECT THE ASSESSING OFFICER TO DISALLO W 12.5% OF THE PURCHASES MADE DURING THE YEAR UNDER CONSIDERATION . 2.4.32 AS NARRATED EARLIER, THE LD. A.O. IN THIS CASE HAS HIMSELF HELD THAT THE PURCHASES WERE NOT BOGUS THOUGH THE PARTY FROM WHOM THE PURCHASES WERE MADE BY THE APPELLANT WAS FOUND TO B E BOGUS AND THAT IS THE REASON FOR WHICH IT WAS NOT PRODUCED DURING THE ASSESSMENT PROCEEDINGS. THE MOTIVE BEHIND OBTAINING BOGUS BILLS THUS, APPEARS TO BE INFLATION OF PURCHASE PRICE S O AS TO SUPPRESS TRUE PROFITS, CONSID ERING THE FACTS OF THE CASE AS WEL L AS THE VARIOUS CASE LAWS CITED (SUPRA) ESPECIALLY IN THE CASE OF CIT VS. SIMIT P. SHETH AND M/S. SANKET STEEL TRADERS (SUPRA) I SUSTAIN AN ADDITION TO THE EXTENT OF 12.5% OF THE PURCHASES MADE AS THE PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES. ACCORDINGLY, GROUNDS RAISED ARE PARTLY ALLOWED. ITA NO. 3663/MUM/2015 & 3673/MUM/2015 SHRI PRATEEK VIJAY GUPTA 5 6. AGAINST THE ABOVE ORDER OF CIT(A) , BOTH ASSESSEE AND REVENUE ARE IN APPEAL BEFORE US. 7. WE HAVE CONSIDERED RIVAL CONTENTIONS AND CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE HAD ALSO DELIBERATED ON THE JUDICIAL PRONOUNCEMENTS REFERRED BY LOWER AUTHORITIES IN THEIR RESPECTIVE ORDERS AS WELL AS CITED BY LEARNED AR AND DR DURING THE COURSE OF HEARING BEFORE US IN THE CONTEXT OF FACTUAL MATRIX OF THE CASE. WE FOUND THAT CIT(A) AFTER RECORDING DETAILED F INDING WITH REGARD TO THE ACTUAL PURCHASES MADE BY THE ASSESSEE AND AFTER APPLYING VARIOUS JUDICIAL PRONOUNCEMENTS OF HONBLE HIGH COURT AND CO - ORDINATE BENCH REACHED TO THE CONCLUSION THAT ADDITION TO THE EXTENT OF 12.5% WILL SERVE THE PURPOSE OF JUSTICE IN SO FAR AS PURCHASES WERE NOT BOGUS THOUGH THE PARTIES FROM WHOM PURCHASES WERE MADE BY THE ASSESSEE WERE FOUND TO BE BOGUS. THE CIT(A) ALSO FOUND THAT MOTIVE BEHIND OBTAINING BOGUS BILLS WA S TO INFLATE THE PURCHASES SO AS TO SUPPRESS TRUE PROFITS. THE D ETAILED FINDING SO RECORDED BY CIT(A) HAS NOT BEEN CONTROVERTED EITHER BY LEARNED AR OR LEARNED DR, ACCORDINGLY, WE DO NOT FIND ANY REASON TO INTERFERE IN THE FINDINGS RECORDED BY CIT(A) RESULTING INTO RESTRICTING THE ADDITION TO THE EXTENT OF 12.5%. 8. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE AND REVENUE ARE DISMISSED. O RDER PRONOUNCED IN THE OPEN COURT ON THIS 24 / 10 /2017 S D/ - ( SANDEEP GOSAIN ) S D/ - ( R.C.SHARMA ) JUDICIAL MEMBER A CCOUNTANT MEMBER MUMBAI ; DATED 24 / 10 /201 7 KARUNA SR. PS ITA NO. 3663/MUM/2015 & 3673/MUM/2015 SHRI PRATEEK VIJAY GUPTA 6 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//