DCIT CEN CIR 1(4), MUMBAI V. NT RECYCLING P.LTD, MUMBAI

ITA 3982/MUM/2016

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 7953 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-12-2017
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2008-2009
• Appeal Filed On: 10-06-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: B JAYA KUMAR LD
• Assessee Lawyers: RAKESH JOSHI LD
• Keywords: Bogus purchase; Peak credit; Accommodation entries
• Section: 143(3); 153A; 14A

Judgement Text

ITA.NO.3982/MUM/2016 NT RECYCLING PRIVATE LIMITED ASSESSMENT YEAR-2008-09 IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI . . , , BEFORE SHRI D.T. GARASIA, JM AND SHRI MANOJ KUMAR AGGARWAL, AM ./I.T.A. NO.3982/MUM/2016 ( / ASSESSMENT YEAR: 2008-09) DEPUTY COMMISSIONER OF INCOME TAX CENTRAL CIRCLE 1(4) R.NO.902,9 TH FLOOR OLD CGO BUILDING M.K.ROAD,CHURCHGATE MUMBAI-400 020 / VS. NT RECYCLING PRIVATE LIMITED 43,RAMWADI KALBADEVI ROAD MUMBAI-400 002 ! ./ ./PAN/GIR NO. AABCN-8799-F ( !# /APPELLANT ) : ( $%!# / RESPONDENT ) A SSESSEE BY : RAKESH JOSHI ,LD.AR RE VENUE BY : B.JAYA KUMAR , LD. CIT DR / DATE OF HEARING : 26/10/2017 / DATE OF PRONOUNCEMENT : 13/12 /2017 / O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. THE CAPTIONED APPEAL BY REVENUE FOR ASSESSMENT Y EAR [AY] 2008- 09 ASSAILS THE ORDER OF THE LD. COMMISSIONER OF INC OME-TAX (APPEALS)- 47 [CIT(A)], MUMBAI, APPEAL NO.CIT(A)-36/AP.103/14-15 DATED 29/03/2016. THE ASSESSMENT FOR IMPUGNED AY WAS FRAMED BY LD. ITA.NO.3982/MUM/2016 NT RECYCLING PRIVATE LIMITED ASSESSMENT YEAR-2008-09 2 DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-6 , MUMBAI [AO] U/S 143(3) READ WITH SECTION 153A OF THE INCOME TAX ACT , 1961 ON 27/3/2014. THE REVENUE HAS RAISED THE FOLLOWING EFF ECTIVE GROUNDS OF APPEAL:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) ERRED IN RESTRICTING THE ADDITION TO THE EXTENT OF AVERAGE G.P. OF THREE PREVIOUS YEARS AS AGAINST THE ADDITION OF RS.3,89,77,422/- M ADE BY THE ASSESSING OFFICER ON ACCOUNT OF PEAK CREDIT OF BOGUS PURCHASES IGNORI NG THE FACT AND WORKING THAT IN THE PROCESS OF PURCHASES FROM THE OPEN MARKET FR OM ONE DEALER AND OBTAINING BILLS FROM THE OTHER, THE DEPLOYMENT OF U NACCOUNTED MONEY IS INVOLVED WHICH WAS QUANTIFIED BY THE ASSESSING OFFICER TAKIN G THE PEAK CREDIT INTO ACCOUNT WHICH HAS BEEN HISTORICALLY CONSIDERED MOST APPROPRIATE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING ADDITION OF RS.3,89,774/- BEING C OMMISSION @1% ON TOTAL BOGUS PURCHASES AMOUNTING TO RS.3,89,77,422/- IGNOR ING THE FACT THAT FOR AVAILING BOGUS BILLS, THE ASSESSE WOULD HAVE INCURR ED COMMISSION AND THE SAME WAS CONFIRMED BY THE STATEMENTS OF VARIOUS PAR TIES RECORDED DURING THE SEARCH. 3. (A)WHETHER ON FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED CIT(A) ERRED IN DELETING THE DISALLOWANCE OF RS.78, 407/- UNDER SECTION 14A OF THE INCOME TAX ACT,1961 ON THE GROUND THAT THERE WA S NO INCRIMINATING MATERIAL FOUND DURING THE SEARCH AND, THEREFORE, DISALLOWANC E U/S.14A OF THE ACT COULD NOT BE MADE. (B)WHETHER ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN NOT APPRECIATING THE FACT THAT HON BLE S.C.HAS SUBMITTED SLP IN THE CASE OF CONTINENTAL WAREHOUSING CORPORATION (NH AVA SHEVA) LIMITED. (64 TAXMANN.COM.34) ON THE ISSUE WHETHER ADDITIONS CAN BE MADE IN SEARCH ASSESSMENTS WHERE NO INCRIMINATING MATERIAL WAS FOU ND AND REGULAR ASSESSMENT HAD BEEN MADE BEFORE SEARCH 2.1 FACTS LEADING TO THE SAME ARE THAT THE ASSESSEE BEING RESIDENT CORPORATE ASSESSEE ENGAGED IN METAL TRADING, SHIP BREAKING AND TRADING IN SHARES/ SECURITIES WAS ASSESSED FOR IMPUGNED AY U/S 143(3) READ WITH SECTION 153A OF THE INCOME TAX ACT, 1961 ON 27/03/2 014 AT RS.4,39,48,982/- AFTER CERTAIN ADDITIONS ON ACCOUNT OF CERTAIN ALLEGED BOGUS PURCHASES AND DISALLOWANCE U/S 14A. BOTH THESE ADDITIONS ARE THE SUBJECT MATTER OF THIS APPEAL. 2.2 CONSEQUENT TO SEARCH OPERATION U/S 132(1) ON ARYA GROUP OF COMPANIES ON 29/04/2011, THE ASSESSEE BEING ONE OF THE MAIN ITA.NO.3982/MUM/2016 NT RECYCLING PRIVATE LIMITED ASSESSMENT YEAR-2008-09 3 CONCERNS FLOATED BY COMMON KEY MANAGEMENT PERSONNEL / DIRECTORS, WAS ALSO COVERED IN THE SAME. THE GROUP REPORTEDLY MADE A DISCLOSURE OF UNDISCLOSED INCOME AGGREGATING TO MORE THAN 20.2 3 CRORES DURING SEARCH OPERATIONS. 2.3 THE ASSESSEE, IN RESPONSE TO NOTICE U/S 153A DA TED 02/05/2012, FILED RETURN OF INCOME AT RS.45,03,379/-. THE SEARC H OPERATIONS WERE TRIGGERED BY NOTICING THAT THE ASSESSEE STOOD BENEF ICIARY OF BOGUS BILLS FROM FOLLOWING PARTIES:- THE ASSESSEE CONTENDED THAT THE MATERIAL PROCURED F ROM THE ABOVE SUPPLIERS, CORRESPONDING SALES & RECEIPT/PAYMENT TH EREOF WAS DULY RECORDED IN THE BOOKS OF ACCOUNTS AND THERE COULD B E NO SALE WITHOUT PURCHASE OF MATERIAL AND HENCE, ADDITION THEREOF WA S NOT JUSTIFIED. RELIANCE WAS PLACED ON SEVERAL JUDICIAL PRONOUNCEME NTS. HOWEVER, LD. AO NOTED THAT THE ALLEGED BOGUS SUPPLIERS, UNDER STATEMENT ON OATH U/S 131, CLEARLY ADMITTED TO HAVE PROVIDED BILLS TO THE SAID GROUP AGAINST COMMISSION WITHOUT ACTUAL DELIVERY OF MATERIAL. RES ULTANTLY, THE LD. AO CONCLUDED THAT THE ASSESSEE FAILED TO DISCHARGE THE ONUS CASTED UPON HIM TO PROVE THE PURCHASES TRANSACTIONS AND THEREFO RE, TREATED THE SAME AS BOGUS PURCHASES AND ADDED THE SAME TO THE INCOME OF THE ASSESSEE. THE LD. AO, FURTHER NOTED THAT THE ASSESSEE PAID CO MMISSION TO THE ALLEGED BOGUS SUPPLIERS FOR PROVIDING BOGUS BILLS A ND ESTIMATED THE SAME NO. NAME OF THE SUPPLIER AMOUNT (RS.) 1. ASIAN STEEL 97,74,278/- 2. SIDDHI VINAYAK STEEL 1,00,08,983/- 3. SHIV INDUSTRIES 93,31,559/- 4. MARUTI STEEL TRADERS 98,62,601/- 3,89,77,421/- ITA.NO.3982/MUM/2016 NT RECYCLING PRIVATE LIMITED ASSESSMENT YEAR-2008-09 4 @1% WHICH RESULTED INTO FURTHER ADDITION OF RS.3,89 ,774/-. THE LD. AO MADE ANOTHER DISALLOWANCE U/S 14A AMOUNTING TO RS.7 8,407/- U/R 8D(2)(III) @0.5% OF AVERAGE INVESTMENTS. 3. AGGRIEVED, THE ASSESSEE CONTESTED THE SAME WITH PARTIAL SUCCESS BEFORE LD.CIT(A) VIDE IMPUGNED ORDER DATED 29/03/20 16 WHERE THE ASSESSEE REITERATED THE SAID CONTENTIONS AND DREW A TTENTION TO THE FACT THAT COMPLETE QUANTITATIVE DETAILS OF SALE & PURCHA SE WAS RECONCILED BY THE ASSESSEE. THE LD. CIT(A) AFTER CONSIDERING ASSE SSEES SUBMISSIONS AND RELYING UPON SEVERAL JUDICIAL PRONOUNCEMENTS, R ESTRICTED THE IMPUGNED ADDITIONS TO 4.5% OF THE ALLEGED BOGUS PURCHASES AND DELETED ESTIMATED ADDITION OF COMMISSION @1% AS ESTIMATED B Y LD. AO. THE ESTIMATION OF 4.5% WAS ARRIVED AT AFTER AVERAGING T HE GROSS PROFIT RATE OF THE IMPUGNED AY AND RATE REFLECTED IN THE IMMEDI ATELY PRECEDING YEAR. THE DISALLOWANCE U/S 14A WAS DELETED BY NOTIC ING THAT NO INCRIMINATING MATERIAL QUA THE SAME WAS FOUND DURING SEARCH OPERATIONS AND THE ASSESSMENT FOR THE IMPUGNED AY HAD NOT ABAT ED. AGGRIEVED, THE REVENUE IS IN FURTHER APPEAL BEFORE US. 4. THE LD. DEPARTMENTAL REPRESENTATIVE [DR] CONTEND ED THAT SUBSTANTIAL RELIEF WAS PROVIDED BY LD. CIT(A) WITHO UT ANY COGENT MATERIAL AND ALSO DELETED ESTIMATED ADDITION FOR COMMISSION PAID BY THE ASSESSEE WHEREAS THE SUPPLIERS IN QUESTION CLEARLY ADMITTED TO HAVE ENTERED INTO ACCOMMODATION ENTRIES AGAINST COMMISSI ON WITHOUT DOING ANY ACTUAL BUSINESS. PER CONTRA , LD. COUNSEL FOR ASSESSEE [AR] SUPPORTED THE STAND TAKEN BY FIRST APPELLATE AUTHOR ITY ON THE PREMISES THAT THE SAME WAS QUITE FAIR AND REASONABLE. ITA.NO.3982/MUM/2016 NT RECYCLING PRIVATE LIMITED ASSESSMENT YEAR-2008-09 5 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED RELEVANT MATERIAL ON RECORD. SO FAR AS THE DISALLOWANCE U/S 14A IS CO NCERNED, THE STAND OF LD. CIT(A) DO NOT REQUIRE ANY INTERFERENCE SINCE IT IS ADMITTED FACT THAT THE ASSESSMENT FOR CONCERNED YEAR HAD NOT ABATED AN D NO INCRIMINATING MATERIAL QUA THE SAME WAS FOUND DURING THE SEARCH OPERATIONS. RESULTANTLY, THIS GROUND OF REVENUES APPEAL STANDS DISMISSED. 6. QUA ESTIMATION AGAINST ALLEGED BOGUS PURCHASES, WE FIND THE MATTER TO BE FACTUAL ONE. WE ARE OF THE CONSIDERED OPINION THAT THERE COULD BE NO SALE WITHOUT PURCHASE /CONSUMPTION OF M ATERIAL SINCE THE ASSESSEE WAS ENGAGED IN MATERIAL INTENSIVE BUSINESS . THE SALES TURNOVER ACHIEVED BY THE ASSESSEE HAS NOT BEEN DISP UTED BY THE REVENUE AND THE PAYMENTS WERE THROUGH BANKING CHANN ELS. THE PURCHASES WERE BACKED BY INVOICES. AT THE SAME TIME , THE ASSESSEE COULD NOT PRODUCE ANY CONFIRMATION FROM ANY OF THE IMPUGNED SUPPLIER AND THE ALLEGED BOGUS SUPPLIERS, DURING SEARCH OPERATIONS ADMITTED TO BE INDULGING IN PROVIDING ACCOMMODATION BILLS AGAINST COMMISSION WITHOUT DOING ANY ACTUAL BUSINESS, WHICH CAST SERIOUS DOUBT ON ASSESSEES CLAIM. ON THE GIVEN FACTS, PURCHASE OF MATERIAL BY THE ASSESSEE, IN THE OPEN MARKET, CANNOT BE RULED OUT. THEREFORE, IN SUC H A SITUATION, THE ADDITION, WHICH COULD BE MADE, WAS TO ACCOUNT FOR P ROFIT ELEMENT EMBEDDED IN THESE PURCHASE TRANSACTIONS TO FACTORIZ E FOR PROFIT ELEMENT EARNED BY ASSESSEE AGAINST POSSIBLE PURCHASE OF MAT ERIAL IN THE GREY MARKET AND UNDUE BENEFIT OF VAT AGAINST SUCH BOGUS PURCHASES, WHICH LD. CIT(A) HAS RIGHTLY DONE. HOWEVER, WE FIND THE S AME TO BE ON LOWER SIDE KEEPING IN VIEW THE ASSESSEES NATURE OF BUSIN ESS AND ON TOTALITY OF FACTS AND CIRCUMSTANCES. MOREOVER, IT WAS NOTED THA T THE ASSESSEE HAD ITA.NO.3982/MUM/2016 NT RECYCLING PRIVATE LIMITED ASSESSMENT YEAR-2008-09 6 PAID CERTAIN COMMISSION TO PROCURE THE ACCOMMODATIO N BILLS. THEREFORE, WE ENHANCE TO SAME TO 8% OF ALLEGED BOGUS PURCHASES OF RS.3,89,77,422/- WHICH COMES TO RS.31,18,194/-. THE SAME SHALL TAKE CARE OF ALL UNDUE BENEFITS OBTAINED BY THE ASSESSEE INCLUDING PAYMENT OF COMMISSION AND THEREFORE, SEPARATE ADDITION FOR COM MISSION IS NOT WARRANTED FOR IN THE CIRCUMSTANCES. RESULTANTLY, GR OUND NO.1 OF REVENUES APPEAL STANDS PARTLY ALLOWED WHEREAS GROU ND NO.2 STANDS DISMISSED. 7. FINALLY, THE REVENUES APPEAL STANDS PARTLY ALLO WED. ORDER PRONOUNCED IN THE OPEN COURT ON 13 TH DECEMBER, 2017. SD/- SD/- (D.T. GARASIA) (MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 13.12.2017 SR.PS:- THIRUMALESH ! / COPY OF THE ORDER FORWARDED TO : 1. !# / THE APPELLANT 2. $%!# / THE RESPONDENT 3. + ( ) / THE CIT(A) 4. + / CIT CONCERNED 5. $'- , - , / DR, ITAT, MUMBAI 6. . / GUARD FILE / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI