NGL FINE CHEM LTD., MUMBAI V. ACIT -10(3)(1), MUMBAI

ITA 4089/MUM/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 5397 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-07-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 05-06-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SUMAN KUMAR
• Assessee Lawyers: REEPAL G TRALSHAWALA
• Keywords: Bogus purchase; Accommodation entries
• Section: 69C; 142(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B , BENCH MUMBAI BEFORE SHRI R.C.SHARMA, AM & SHRI AMARJIT SINGH , JM ITA NO. 4089 / MUM/20 17 & 4090/MUM/2017 ( ASSESSMENT YEAR : 2009 - 10 & 2010 - 11 ) M/S. NGL FINE CHEM LTD., 301, E SQUARE, SUBHASH ROAD VILE PARLE (E) MUMBAI 400 057 V S. ACIT 10(3)(1) ROOM NO.212, 2 ND FLOOR AAYAKAR BHAVAN M.K.ROAD MUMBAI - 400 020 PAN/GIR NO. AAACN4805H APPELLANT ) .. RESPONDENT ) ITA NO. 4170 /MUM/20 17 & 4171/MUM/2017 ( ASSESSMENT YEAR : 2009 - 10 & 2010 - 11 ) AC IT 10(3)(1) ROOM NO.212, 2 ND FLOOR AAYAKAR BHAVAN M.K.ROAD MUMBAI - 400 020 V S. M/S. NGL FINE CHEM LTD., 301, E SQUARE, SUBHASH ROAD VILE PARLE (E) MUMBAI 400 057 PAN/GIR NO. AAACN4805H APPELLANT ) .. RESPONDENT ) ASSESSEE BY SHRI REEPAL G. TRALSHAWALA REVENUE BY SHRI SUMAN KUMAR DATE OF HEARING 12 / 07/ 201 8 DATE OF PRONOUNCEMENT 30 / 07 /201 8 / O R D E R PER R.C.SHARMA (A.M) : THESE ARE CROSS APPEALS FILED BY ASSESSEE AND REVENUE AGAINST THE ORDER OF CIT(A) - 17, MUMBAI DATED 20 TH MARCH 2017 FOR A.Y.2009 - 10 & 2010 - 11 IN THE MATTER OF ORDER PASSED U/S.143(3) R.W.S. 147 OF THE IT ACT. 2. RI VAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. ITA NO. 4089/MUM/2017 AND OTHER APPEALS M/S. NGL FINE CHEM L TD., 2 3. FACTS IN BRIEF ARE THAT T HE ASSESSEE COMPANY IS A PUBLIC LIMITED COMPANY LISTED ON BSE AND IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND TRADING OF PHARMACEUTICAL BULK DRUGS. THE ASSESSEE HAD FILED I TS RETURN OF INCOME FOR AY 2009 - 10 ON 19.09.2009 DECLARING TOTAL INCOME OF RS.3,21,85,983/ - . THE INCOME WAS ASSESSED U/S - .143(L) OF THE ACT. SUBSEQUENTLY, THE AO, RECEIVED INFORMATION FROM SALES TAX DEPARTMENT AND ALSO FROM THE OFFICE OF DGIT (INV), MUMBAI THAT THE ASSESSEE IS A BENEFICIARY OF ACCOMMODATION BILLS OF PURCHASES FROM CERTAIN BOGUS HAWALA DEALERS. AS PER THE INFORMATION, THE CONCERNED HAWALA DEALERS HAD NOT SOLD ANY ACTUAL GOODS, BUT HAD GIVEN ACCOMMODATION ENTRIES OF SALES TO THE ASSESSEE COMP ANY. AS PER THE ASSESSMENT ORDER, THE DETAILS OF BOGUS PURCHASES FROM THE SUPPLIERS AS CLAIMED BY THE ASSESSEE ARE AS UNDER: - SR. NO. VAT/T I NNO. NAME OF THE ENTITY AMOUNT (RS.) 1. 27680584387V BHAKTI ENTERPRISE 17,04,6287 - 2. . 27380604146V PUR AB ENTERPRISE 18,68,1727 - 3 2756054895IV APPLAUSE CHEMICALS PVT LTD 77,76,6237 - TOTAL: 1,13,49,4237 - 4. ACCORDINGLY THE AO RECORDED HIS REASONS TO BELIEVE AND ISSUED NOTICE U/S 148. NOTICE U/S 143(2) AND 142(1) OF THE ACT WAS ISSUED AND DULY SE RVED ON THE ASSESSEE. DURING THE COURSE OF RE - ASSESSMENT PROCEEDINGS, THE AO OBSERVED THAT THE MAHARASHTRA SALES TAX ITA NO. 4089/MUM/2017 AND OTHER APPEALS M/S. NGL FINE CHEM L TD., 3 DEPARTMENT HAD PUBLISHED A 'LIST OF SUSPICIOUS DEALERS ON ITS OFFICIAL WEBSITE 'MAIMVAT' {WWW.MAHAVAT.GOVT.IN}. THESE DEALERS HAD ISSUED FA LSE BILLS, WITHOUT DELIVERY OF GOODS, TO INTERESTED BUSINESSMEN WHO WISHED TO PROCURE BOGUS BILLS OF PURCHASE TO REDUCE THEIR TAXABLE INCOMES. SUCH DEALERS ARE COMMONLY REFERRED IN REGULAR PARLANCE AS 'HAWALA DEALERS'. BASED ON THE INFORMATION OBTAINED FRO M THE SALES TAX DEPARTMENT, THE INCOME TAX DEPARTMENT HAS ALSO CARRIED OUT ENQUIRIES IN THE MATTER AND THIS INFORMATION ABOUT THE SALES TAX DEPARTMENT AND THE RESULT OF THE ENQUIRIES BY THE OFFICE OF THE DGIT (INVESTIGATION) WAS AVAILABLE TO THE AO WHO ACC ORDINGLY NOTED THAT SINCE THE ASSESSEE HAS ALSO ALLEGEDLY PROCURED MATERIAL FROM THE PERSONS ON THE LIST OF SUSPECTED DEALERS AND PROCEEDED PURCHASED GOODS FROM SUCH HAWALA DEALERS. GENERALLY THE INFORMATION WITH THE AO IN SUCH CASES IS THE NAMES OF THE SU SPICIOUS DEALERS PUBLISHED ON THE MAHAVAT SITE, INFORMATION REGARDING PURCHASES FROM THESE SUSPICIOUS DEALERS AND IN MANY CASES THE VAT DEPARTMENT HAD RECORDED STATEMENTS OF THESE DEALERS WHEREIN THEY CONFESS THAT THEY HAVE NOT DONE ANY ACTUAL BUSINESS AND THE INVOICES ISSUED BY THEM ARE ONLY ACCOMMODATION BILLS. THE STATEMENT GIVEN BY THE DEALER TO THE VAT DEPARTMENT IS IN MANY CASES SUPPORTED BY AN AFFIDAVIT AVERRING THE CONFESSI ON. IN VIEW OF ABOVE OBSERVATION AO ADDED ENTIRE SUCH PURCHASES IN ASSESSEES INCOME. 5. BY THE IMPUGNED ORDER CIT(A) RESTRICTED THE ADDITION TO THE EXTENT OF 25% BY OBSERVING AS UNDER: - ITA NO. 4089/MUM/2017 AND OTHER APPEALS M/S. NGL FINE CHEM L TD., 4 IN VIEW OF THE ABOVE DISCUSSION IT IS SEEN THAT THE ASSESSEE IS UNABLE TO SUBSTANTIATE HIS PURCHASES FROM THE CLAIMED SUPPLIERS WHO HAS ALREADY B EEN ESTABLISHED AS HAWALA DEALERS BY THE SALES TAX DEPARTMENT (GOVERNMENT OF MAHARASHTRA) AND INVESTIGATION WING OF THE INCOME TAX DEPARTMENT. THE SUPPLIERS WERE NEITHER PRODUCED DURING THE ASSESSMENT PROCEEDINGS NOR DURING APPELLATE PROCEEDINGS WHEN OPPOR TUNITY WAS SO PROVIDED. THE CONFIRMATION FROM THE SUPPLIERS HAS NOT BEEN FILED. NO ONE TO ONE NEXUS BETWEEN ALLEGED PURCHASE AND SELL HAS BEEN ESTABLISHED, ONLY QUANTITATIVE DETAIL IN A CHART HAS BEEN SUBMITTED. ONCE CREDITS OF ALLEGED PURCHASES ARE APPEAR ING IN BOOKS OF ACCOUNT OF THE APPELLANT, THEN THE APPELLANT HAS TO DISCHARGE THE PRIMARY ONUS AS TO GENUINE AND BONA FIDE OF THE TRANSACTION OF PURCHASE OF GOODS. HOWEVER, AS HELD IN VARIOUS CASE LAWS DISCUSSED ABOVE, THE ADDITION OF ENTIRE PURCHASES AS U NEXPLAINED PURCHASE U/S. 69C IS NOT JUSTIFIED. WHAT IS IMPORTANT TO FIND OUT THE PROFIT ELEMENT EMBEDDED THEREIN BY USING SUCH ACCOMMODATION ENTRIES AND ACTUALLY USING THE GOODS FROM GREY/ OPEN MARKET. IN THIS CASE, THE BOOK VALUE SHOWN BY THE ASSESSEE COM PANY 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 PURCHASES FROM THE HAWALA DEALERS. THE APPELLA NT IS NOT A PURE TRADING CONCERN BUT A MANUFACTURING OF CONCERN. GOING BY THE RATIO OF VARIOUS CASE LAWS PARTICULARLY THE DISCUSSION AND FINDING OF HON'BLE GUJARAT HIGH COURT IN CASE OF VIJAY PROTEIN (SUPRA) AND VIJAY TRADING (SUPRA) 25% OF THE PURCHASES CLAIMED FROM HAWALA DEALERS I.E. 25% OF RS. 1,13,49,423 / - IS DISALLOWED. THE AO IS DIRECTED TO RESTRICT THE DISALLOWANCE ACCORDINGLY. 6. AGAINST THE ABOVE ORDER OF CIT(A), ASSESSEE AND REVENUE ARE IN FURTHER APPEAL BEFORE US. 7. WE HAVE CONSID ERED 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 O F HEARING BEFORE US. FROM THE RECORD WE FOUND THAT ASSESSEE IS A DEALER AS WELL AS MANUFACTURER OF PHARMACEUTICAL PRODUCTS. AO HAS MADE ADDITION IN RESPECT OF BOGUS PURCHASES ALLEGED TO BE MADE BY THE ASSESSEE ON THE ITA NO. 4089/MUM/2017 AND OTHER APPEALS M/S. NGL FINE CHEM L TD., 5 PLEA THAT THESE ARE JUST ACCOMMODATION ENTRIES. IT WAS CONTEN TION OF LEARNED AR THAT THE ASSESSEE HAS PURCHASED MATERIAL FROM GENUINE PARTIES AND THE MATERIAL WAS ALSO RECEIVED, WHICH WAS FURTHER SOLD TO VARIOUS PARTIES. HENCE, THE ASSESSEE HAS NOT TAKEN ANY ACCOMMODATION BILLS AND THE ALLEGATI ON IS BASELESS. HE FURTHER CONTENDED THAT MERELY BECAUSE A DEALER DOES NOT PAY VAT AFTER COLLECTING TAX THAT DOES NOT MEAN THAT IT WAS NOT IN EXISTENCE OR IT HAS NOT AFFECTED THE SALE OR WAS NOT CARRYING ON THE BUSINESS ACTIVITIES. HE FURTHER SUBMITTED THA T THE ALLEGED PARTIES WERE GRANTED REGISTRATION BY VAT AUTHORITIES WHO GRANT THE SAME AFTER VISITING THE DEALER AND AFTER VERIFYING HIS ADDRESS, CREDENTIALS, ETC. HENCE, MERELY BECAUSE THE PARTIES HAVE DEFAULTED IN THE PAYMENT OF VAT, IT CANNOT BE SAID THA T THE ASSESSEE HAS TAKEN ACCOMMODATION BILLS OF PURCHASE. 8. LEARNED AR ALSO DRAWN OUR ATTENTION TO THE GROSS PROFIT AND NET PROFIT SHOWN BY THE ASSESSEE DURING THE YEARS UNDER CONSIDERATION. GP RATE WAS 35.53% AND 42.03% IN THE A.Y.2009 - 10 AND 2010 - 11 RES PECTIVELY. SIMILARLY, THE N.P. RATE WAS 12.74% AND 13.97% IN THE A.Y.2009 - 10 AND 2010 - 11 RESPECTIVELY. CONSIDERING THE TOTALITY OF FACTS AND CIRCUMSTANCES OF THE CASE, VIS - - VIS NATURE OF ACTIVITY THE ASSESSEE WAS ENGAGED, WE DIRECT THE AO TO RESTRICT THE ADDITION TO THE EXTENT OF 12.5% OF ALLEGED BOGUS PURCHASES. WE DIRECT ACCORDINGLY. ITA NO. 4089/MUM/2017 AND OTHER APPEALS M/S. NGL FINE CHEM L TD., 6 9. IN THE RESULT, APPEALS OF THE REVENUE ARE DISMISSED WHEREAS APPEALS OF THE ASSESSEE ARE ALLOWED IN PART IN TERMS INDICATED HEREINABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 30 / 07 /201 8 SD/ - ( AMARJIT SINGH ) SD/ - (R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 30 / 07 / 201 8 KARUNA SR. PS COPY OF THE ORDER FORWARDED TO : BY ORDER, ( ASSTT. R EGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//