ITO, New Delhi V. M/s Bansal Strips Pvt. Ltd., New Delhi

ITA 3673/DEL/2015

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 2517 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 9 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-03-2019
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 05-06-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ASHIMA NEB
• Assessee Lawyers: P K MISHRA
• Keywords: Bogus purchase; Accommodation entries

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL , DELHI BENCH B , NEW DELHI BEFORE S H RI N. K. BILLAIYA , ACCOUNTANT MEMBER , AND MS . SUCHITRA KAMBLE , JUDICIAL MEMBER ITA NO. 3673 /DEL/201 5 ASSESSMENT YEAR: 20 0 6 - 0 7 THE I . T .O VS. WARD 4 ( 2 ), NEW DELHI M/S BANSAL STRIPS PVT LTD A - 45, GROUND FLOOR, GROUP WAZIRPUR INDUSTRIAL AREA, NEW DELHI PAN NO. AACCB 6104 D (APPELLANT) (RESPONDENT) APPELLANT BY : MS. ASHIMA NEB, SR. DR RESPONDE NT BY : SHRI P.K. MISHRA , CA DATE OF HEARING: 28 / 0 2 /2 0 1 9 DATE OF PRONOUNCEMENT: 11 / 0 3 /201 9 ORDER PER N. K. BILLAIYA, A CCOUNTANT M EMBER : TH IS APPEAL BY THE REVENUE IS PREFERRED A GAINST THE ORDER OF THE LD. CIT(A) 2 , NEW DELHI DATED 27 . 02 .20 1 5 PERTAINING TO A.Y 20 0 6 - 0 7 . 2 2. THE SUBSTAN TIVE GRIEVANCE S OF THE REVENUE READ AS UNDER : I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN RESTRICTING THE ADDITION TO RS. 6,43,466/ - OUT OF THE TOTAL ADDITION OF RS. 71,95,000/ - ON ACCOUNT OF BOGUS PURCHASES. II) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD .CIT(A) ERRED IN IGNOR ING THE FACTUM OF BOGUS PURCHASES OF RS. 1,45,23,400/ - FROM M/S RAJASTHAN METALS WHICH WAS SPECIFIED IN THE REMAND REPORT SUBMITTED BY THE ASSESSING OFFICER BEFORE THE LD. CIT(A). 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT AS PER INFORMATION, A SEARCH ACTION WAS CARRIED OUT IN THE CASE OF SHRI NAVNEET KUMAR J AIN AND HIS SON, SHRI VAIBHAV JAIN ALONGWITH JAGUAR GROUP ON 26.04.2010 FROM WHICH IT CAME TO THE NOTICE OF THE DEPARTMENT THAT THESE PERSONS WERE ENGAGED IN PROVIDING ACCOMMODATION ENTRIES IN THE FORM OF BOGUS SALES BILLS. THESE ENTRIES WERE PROVIDED DIR ECTED OR THROUGH AGENTS. 4. IT CAME TO THE NOTICE OF THE ASSESSING OFFICER THAT M/S BANSAL STRIPS PVT. LTD WAS FOUND TO BE DEALING WITH CONCERNS OF SHRI NAVNEET KUMAR JAIN AND HIS SON VAIBHAV JAIN. THE ASSESSING OF FICER FOUND THAT THE FOLLOWING ENTRIES A MOUNTING TO RS. 71.95 LAKHS WERE PROVIDED BY 3 THE UNDER MENTIONED FIRMS FROM WHOM THE ASSESSEE HAS MADE PURCHASES: NAME OF THE OPERATOR BENEFICIARY COMPANY A/C NO. OF THE OPERATOR THROUGH WHICH TRANSACTION HAS BEEN OPERATED. CHEQUE NO. AND DATE ISSUED BY T HE BENEFICIARY AMOUNT INVOLVED RAJASTHAN METAL BANSAL STRIPS PVT LTD 13290 374759 03.10.2005 1000000 ESS MART ENTERPRISES 14821 461887 11.01.2006 1000000 RAMJI TRADERS PVT LTD 752468 1000000 11.01.2006 RAJASTHAN METALS 13290 788804 06.02.2006 900000 RAMJI TRADERS 461888 11.02.2006 800000 RAJASTHAN METALS 13290 374774 04.03.2006 600000 SHREE BALAJI TRADING CO 12877 461891 11.03.2006 795000 RAMJI TRADERS -- 461890 11 .03.2006 800000 RAMJI TRADERS 752469 11.03.2006 300000 71,95,000 5. THE ASSESSEE WAS ASKED TO EXPLAIN THE TRANSACTION TO ESTABLISH THE GENUINENESS OF THE PURCHASES BY FURNISHING COPY OF ACCOUNTS OF THE AFOREMENTIONED PARTIES WITH RESPECT TO CON FIRMATIONS. 4 6. IN SPITE OF THE SPECIFIC REQUISITION, THE ASSESSEE DID NOT FILE THE REQUISITE DETAILS. THE ASSESSING OFFICER WAS OF THE OPINION THAT THE ASSESSEE HAS NOTHING TO SAY AND TREATED THE TRANSACTION OF PURCHASES OF RS. 71.95 LAKHS AS BOGUS AND AD DED BACK THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. 7. THE ASSESSEE STRONGLY AGITATED THE MATTER BEFORE THE LD. CIT(A) AND POINTED OUT THAT THE PURCHASES MADE FROM RAJASTHAN METALS WERE TO THE TUNE OF RS. 1.45 CRORES AND THE ASSESSING OFFICER HAS DOUB TED ONLY PURCHASES TO THE EXTENT OF RS. 71.95 LAKHS WHICH MEANS THAT THE ASSESSING OFFICER HAS ACCEPTED THE GENUINENESS OF THE PURCHASES FROM THE SAME SUPPLIER FOR THE BALANCE AMOUNT. IT WAS FURTHER CONTENDED THAT DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS MADE PAYMENT OF ONLY RS. 10 LAKHS AND BALANCE OF RS. 61.95 LAKHS PERTAINED TO SUBSEQUENT YEARS. IT WAS BROUGHT TO THE NOTICE OF THE LD. CIT(A) THAT DURING THE YEAR, THE ASSESSEE HAS EFFECTED SALES OF RS. 5.54 CRORES AND WITHOUT THERE BEING AN Y PURCHASES, SALES COULD NOT HAVE BEEN EFFECTED. 5 8. AFTER CONSIDERING THE FACTS AND SUBMISSIONS AND ALSO THE REMAND REPORT CALLED FOR DURING THE APPELLATE PROCEEDINGS, THE LD. CIT(A) HELD AS UNDER: AFTER GOING THROUGH THE RECORDS AND THE EVIDENCES ADDUC ED BY THE APPELLANT, COPIES OF LAVE ALSO BEEN PLACED BEFORE ME, I AM OF THE OPINION THAT SIN CE E - THE AO HAS NOT BEEN ABLE TO PIN POINT ANY ADVERSITY IN THE BOOKS OF ACCOUNT AND OTHER DETAILS ( INCLUDING DETAILS) IN RESPECT OF SALES EFFECTED BY THE APPELLANT WHICH HAVE BEEN ACCEPTED BY HIM. AS THE TURNOVER AND THE QUANTITATIVE DETAILS THEREOF HAVE NOT BEEN CONTROVERTED BY THE AO. THEREFORE. , I FIND FORCE IN THE ARGUMENTS OF THE APPELLANT THAT WITHOUT PURCHASES THERE CAN BE NO SALES THE APPELLANT HAS EFFECTED SALES WHICH HAVE BEEN ACCEPTED IN THE ASSESSMENT AND THE PURCHASES FROM M/S RAJASTHAN METAL ARE NOTHING BUT ACCOMMODATION ENTRIES. HOWEVER, IF THE TOTAL PURCHASES OF RS. 1.45,23,400/ - (WHICH AMOUNT TO APP. 26% OF TURNOVER OF RS.5,54,49,023/ - ) ARE TREATED A S BOGUS PURCHASES AND ADDED TO THE INCOME OF THE APPELLANT IT WILL RESULT INTO AN EXORBITANT GROSS PROFIT RATE OF 29% WHICH IS NOT HEARD OF IN THE LINE OF TRADE OF THE APPELLANT. THEREFORE IN MY CONSIDERED VIEW ADDITION OF RS. 1,45,23,400/ - AS PROPOSED BY THE AO IN THE REMAND REPORT CANNOT BE MADE IN ITS ENTIRETY SINCE THE SALES COULD NOT BE MADE WITHOUT MAKING PURCHASES. AT THE SAME TIME, IT CANNOT BE DENIED THAT THERE COULD HAVE BEEN LEAKAGES IN THIS PROCESS AND THEREFORE IT WOULD BE IN THE FITNESS OF THI NGS TO ESTIMATE THE INCOME OF THE APPELLANT HAVING REGARD TO THE INDUSTRYS BAROMETERS 6 AND THE TRADING RESULTS IN THE CASE OF THE APPELLANT IN THE SUBSEQUENT YEARS. IN ORDER TO ARRIVE AT A FAIR ESTIMATE OF INCOME FURTHER INQUIRIES WERE MADE AND FOLLOWING I NFORMATION WAS CALLED FROM THE APPELLANT IN TERMS OF PROVISIONS CONTAINED IN SECTION 250(4) OF THE ACT: I ) G.P RATE OFFERED BY THE APPELLANT FOR THE YEAR UNDER CONSIDERATION AND NEXT TWO YEARS. II ) COPY OF ACCOUNT OF M/S RAJASTHAN METAL FOR THE NEXT TWO YEARS D ULY SHOWING THE PURCHASES AND PAYMENTS MADE TO THEM AND PROOF OF IDENTITY. III ) COMPARABLE GROSS PROFIT RATE IN THE TRADE OF THE ASSESSEE. 6.5.5 THE APPELLANT VIDE ITS REPLY DATED 23.02.2015 HAS SUBMITTED THE REQUIRED INFORMATION. FROM PERUSAL OF THE SAME IT IS SEEN THAT THE APPELLANTS G.P RATE FOR THE THREE YEARS IS AS UNDER: - ASSTT YEAR 2006 - 07 3.83% ASSTT YEAR 2007 - 08 1.37% ASSTT YEAR 200 8 - - 09 2.84% 6 .5.6 IT IS ALSO SEEN THAT THE APPELLANT HAS MADE PURCHASES FROM M/S. RAJASTHAN ME TAL AND M A DE PAYMENTS TO THEM AS UNDER: - ASSTT. YEAR PURCHASES PAYMENTS MADE 2006 - 07 RS. 1,45,23,400/ - RS. 10,00,000/ - 2007 - 08 NIL RS. 1,35,23,400/ - 2008 - 09 NIL NIL 6.5.7 THE APPELLANT HAS FURNISHED A LETTER FROM DELHI STAINLESS RE - ROLLING ASSOCIATION (REGD), A REPRESENTATIVE BODY OF THE 7 MANUFACTURERS AND TRADERS IN THE LINE OF TRADE OF THE APPELLANT, OF WHICH IT IS A MEMBER, AND IT HAS BEEN MENTIONED THEREIN THAT G.P. RATE RANGES BETWEEN 4% TO 5%. 6.5.8 . I FIND THAT THE G.P RATE DECLARED BY THE APPELLANT IS HIGHLY VARIABLE AND NOT COMPARABLE TO THE G.P RATE PREVAILING IN THE TRADE, THUS THE TRADIN G RESULTS DECLARED BY THE APPELLANT CANNOT BE ACCEPTED. THEREFORE AFTER PERUSAL OF THE MATERIAL AVAILABLE BEFORE ME I AM OF THE CONSIDERED VIEW THAT TO MEET THE ENDS OF JUSTICE IT WOULD BE FAIR TO APPLY G.P RATE OF 5% ON THE TURNOVER DECLARED BY THE APPELL ANT AND AN ADDITION TO THE EXTENT OF RS. 6,43,466/ - IS UPHELD AS CALCULATED BELOW: - 6.5.9 HENCE THE ADDITION ON ACCOUNT OF ACCOMMODATION ENTRIES IN THE FORM OF BOGUS PURCHASES WILL BE RESTRICTED TO RS. 6,43,466/ - AS AGAINST RS. 71,95,000/ - MADE BY THE AO AND THE AO IS DIRECTED ACCORDINGLY TO RESTRICT THE ADDITION TO RS. 6, 43,466/ - AN D THE APPELLANT GETS RELIEF OF RS. 65,51,534/ - . THIS GROUND OF APPEAL IS PARTLY ALLOWED. 9. AGGRIEVED BY THIS, THE REVENUE IS BEFORE US. SALES (ACCEPTED BY AO) RS 5,54,49,0 23 23/ GROSS PROFIT (ESTIMATED @ 5%) RS. 27,72,451 / - LESS: GROSS PROFIT DECLARED (@ 3. 83%) RS. 21,28,985 / DIFFERENCE TO BE TAXED RS. 6,43,466 - 8 10. T HE LD. DR STRONGLY SUPPORTED THE FINDINGS OF THE ASSESSING OFFICER . 1 1 . PER CONTRA, THE LD. COUNSEL FOR THE ASSESSEE RELIED UPON THE ORDERS OF THE FIRST APPELLATE AUTHORITY. 1 2 . WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE GIVEN THOUGHTFUL CONSIDERATION TO THE ORDERS OF THE AUTHORITIES BELOW. AT THE VERY OUTSET, WE HAVE TO STATE THAT DURING THE YEAR UN DER CONSIDERATION, THE PAYMENT FOR PURCHASES IS ONLY FOR RS. 10 LAKHS. THE SAME CAN BE SEEN FROM THE FOLLOWING CHART: S:NO. NAME OF OPERATOR CHEQUE NO. ACTUAL DATE OF PAYMENT AMOUNT F.Y. INVOLVED ASSTT YEAR INVOLVED 1. RAJASTHAN METALS 374759 10.03.2006 10,00,000/ - 2005 - 06 2006 - 07 2. ESS MART ENTERPRISES 461887 02.11.2006 10,00,000/ - 2006 - 07 2007 - 08 3. RAMJI TRADERS 752468 01.11.2006 10,00,000/ - 2006 - 07 2007 - 08 4. RAJASTHAN METALS 788804 03.06.2006 9,00,000/ - 2006 - 07 2007 - 08 5. RAMJI TRADERS 461888 03 .11.2006 8,00,000/ - 2006 - 07 2007 - 08 6. RAJASTHAN METALS 374774 03.04.2006 6,00,000/ - 2006 - 07 2007 - 08 7. SHREE BALAJI TRADING CO. 461891 04.11.2006 7,95,000/ - 2006 - 07 2007 - 08 9 8. RAMJI TRADERS 461890 04.11.2006 8,00,000/ - 2006 - 07 2007 - 08 9. RAMJI TRADERS 752469 04.11.2006 3,00,000/ - 2006 - 07 2007 - 08 TOTAL 71,95,000/ - 13. IT IS A FACT THAT DURING THE YEAR, THE ASSESSEE HAS MADE TOTAL PURCHASES FROM RAJASTHAN METAL TO THE TUNE OF RS. 1.45 CRORES WHICH IS ABOUT 26% OF THE TOTAL TURNOVER OF RS. 5.54 CRORES, T HOUGH , IN HIS REMAND REPORT, THE ASSESSING OFFICER HAD REQUESTED THE LD. CIT(A) TO ENHANCE THE ADDITIONS TO RS. 1.54 CRORES. ASSUMING THAT THE ENTIRE PURCHASES FROM RAJA S THAN METALS WAS BOGUS, THEN IT WOULD BE COMMERCIALLY IMPOSSIBLE FOR THE ASSE SSEE TO SELL RS. 5.54 CRORES OF GOODS. MOREOVER, SALES EFFECTED BY THE ASSESSEE HA S BEEN ACCEPTED BY THE SALES TAX DEPARTMENT. 14. FURTHER, WE FIND THAT THE ASSESSEE HAS GIVEN COMPLETE QUANTITATIVE DETAILS IN THE FORM OF STOCK REGISTER OF RAW MATERIAL A S S.S. PATTI WHICH IS EXHIBITED AT PAGE E - 3/81 TO E - 3/109 OF THE PAPER BOOK. A PERUSAL OF THE SAME CLEARLY REVEALS THAT THE RAW MATERIALS, IN FACT, ENTERED THE BUSINESS OF THE ASSESSEE WHICH WERE USED FOR MAKING FINAL PRODUCT AND ACCORDINGLY, SALES WERE E XECUTED BY THE ASSESSEE. 10 15. IN OUR UNDERSTANDING OF THE FACTS, IT APPEARS THAT THE ASSESSEE MUST HAVE PURCHASED THE RAW MATERIAL FROM THE GREY MARKET AND MUST HAVE TAKEN SUPPORTING PURCHASE BILLS FROM THE ACCOMMODATION ENTRY PROVIDER WHICH MEANS THAT RAW MATERIAL WERE, IN FACT, PURCHASED AND THERE WAS MOVEMENT OF THE SAME WHICH ENABLES THE ASSESSEE TO PRODUCE ITS FINAL PRODUCT. IN OUR CONSIDERED OPINION, OVER AND ABOVE THE ADDITIONS SUSTAINED BY THE LD. CIT(A), THE ASSESSEE MUST HAVE INCURRED SOME EXPEND ITURE IN PROCURING ACCOMMODATION BILLS WHICH WE ESTIMATE AT 5% OF THE TOTAL PURCHASES FROM RAJASTHAN METALS WHICH IS RS. 1.45 CRORES WHICH MEANS THAT THE ASSESSEE MUST HAVE INCURRED EXPENDITURE OF RS. 7 LAKHS FOR PROCURING ACCOMMODATION BILLS. MODIFYING T HE FINDINGS OF THE LD. CIT(A), WE DIRECT THE ASSESSING OFFICER TO RESTRICT THE ADDITION TO RS. 13.43 LAKHS. 16. IN THE RESULT, THE APPEAL OF THE REVENUE IN ITA NO. 3673 /DEL/201 5 IS PARTLY ALLOWED . ORDER PRONOU NCED IN THE OPEN COURT ON 11 .0 3 .2019. SD/ - SD/ - ( SUCHITRA KAMBLE ) ( N. K. BILLAIYA ) JUDICIAL MEMBER A CCOUNTANT M EMBER DATE: 11 TH MARCH, 201 9 . 11 VL COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT 4 . CIT(APPEALS) 5 . DR, ITAT ASSISTANT REGISTRAR ITAT , NEW DELHI DATE OF DICTATION DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DR AFT COMES TO THE SR.PS/PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/ PS DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT DATE ON WHICH THE FILE GOES TO THE BENCH CLERK DATE ON WHICH FILE GOES TO THE HEAD CLERK. THE DATE ON WHICH FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER