ASST CIT 15(3)(1), MUMBAI V. SAVAIR ENERGY LTD, NAVI MUMBAI

ITA 4215/MUM/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 0223 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-08-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2010-2011
• Appeal Filed On: 20-06-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJESH KUMAR YADAV
• Assessee Lawyers: DR P DANIEL
• Keywords: Bogus purchase

Judgement Text

ITA NO. 4215/M/2016 SAVAIR ENERGY LTD. 1 IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBA I BEFORE SHRI D.T. GARASIA, JM AND G. MANJUNATHA, AM ITA NO.4215/MUM/2016 A.Y. 2010-11 ASST CIT 15(3)(1) R. NO. 451, 4 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 400020 VS. SAVAIR ENERGY LTD. A-564, TTC INDL AREA MIDC, MHAPE, NAVI MUMBAI 400079 PAN NO. AA ACE8939M (APPELLANT) : (RESPONDENT) ASSESSEE BY : MR. RAJESH KUMAR YADAV ( D R) RESPONDENT BY : DR. P. DANIEL (AR) DATE OF HEARING : 03 .0 8 .2017 DATE OF PRONOUNCEMENT : 18.08.2017 O R D E R PER D.T. GARASIA, JUDICIAL MEMBER : THE ABOVE APPEAL RELATE TO ASSESSMENT YEAR 2010-11. THIS APPEAL ARISE OUT OF THE ORDER DATED 31.03.2016 OF THE COMM ISSIONER OF INCOME TAX (APPEALS) 24 [HEREINAFTER REFERRED TO AS THE CIT( A)] RELEVANT TO ASSESSMENT YEAR 2010-11. THE EFFECTIVE GROUNDS OF THE APPEAL: WHETHERON THE FACTS AND CIRCUMSTANCES OF THE CASE, AND IN LAW, THE LD. CIT(A) HAS ERRED IN ESTIMATING THE PROFIT TO TH E EXTENT OF 10% OF THE PURCHASE OF RS. 1,65,15,836/- AS THE PROFIT ELE MENT EMBEDDED IN SUCH PURCHASES IN ADDITION TO THE REGULAR PROFIT WI THOUT GIVING ANY FINDINGS AS TO HOW 10% GP CAN BE TAKEN SINCE THE CO RRESPONDING EXPENDITURE HAVE ALREADY BEEN CLAIMED IN P & L A/C AND FURTHER ERRED IN IGNORING THE ASSESSEES ABJECT FAILURE TO PROVE THE PURCHASES WHEN THE ONUS WAS CAST UPON HIS BY THE STATUTE. 2. THE SHORT FACTS OF THE CASE ARE AS UNDER: ITA NO. 4215/M/2016 SAVAIR ENERGY LTD. 2 I) THE APPELLANT IS ENGAGED IN THE BUSINESS OF EN GINEERING PROCUREMENT CONSTRUCTION (EPC), PROVIDING TURNKEY S OLUTION IN COMPRESSED AIR, FIRE FITTING SYSTEMS, OIL & GAS STO RAGE & DISTRIBUTION SYSTEM, PACKAGING OF ROTARY EQUIPMENT HVAC SOLUTION S. II) DURING THE COURSE OF APPELLATE PROCEEDINGS, L D. AO FOUND FROM THE INFORMATION FURNISHED BY THE APPELLANT THAT IT HAD OBTAINED BOGUS PURCHASE BILLS AMOUNTING TO RS. 1,25,92,144/- FROM M/S. MANISH INDUSTRIAL CORPORATION, M/S. ASHTAVINAYAK SALES AGE NCY AND M/S. ADVANCE STEELAGEAMOUNT TO RS. 10,39,958/-, RS. 48,9 38 AND RS. 1,15,03,248/- RESPECTIVELY. III) LD. AO OBSERVED THAT THE SALES TAX AUTHORITI ES OF MUMBAI HAD CARRIED OUT AN INVESTIGATION IN THOSE CASES WHERE T HERE WERE DEFAULTS OF VAT SET OFF CREDITS. ON THE BASIS OF INFORMATIO N RECEIVED FROM THE INVESTIGATION WING OF INCOME TAX DEPARTMENT, MUMBAI , IT WAS FOUND THAT THE APPELLANT HAD OBTAINED BOGUS PURCHASE BILL S TOTAL AMOUNTING TO RS. 1,25,92,144/- FROM THREE COMPANIES WHICH WER E STATED TO BE HAWALA OPERATORS. THE INVESTIGATION WING OF MUMBAI HAD PROVIDED A LIST OF HAWALA BILL RACKETEERS WHO WERE INVOLVED IN ISSUING BILLS ON DEMAND OF THE CUSTOMERS. THE INFORMATION ALSO CONT AINED THE LIST OF BENEFICIARIES I.E. WHO HAD APPROACHED THESE DEALERS FOR OBTAINING BOGUS PURCHASE BILLS TO REDUCE THE INCOME AND CONSE QUENTLY EVADE TAXES. LD. AO, ON-GOING THROUGH THE SUBMISSIONS AN D CONTENTIONS OF THE APPELLANT, CONCLUDED THAT THE APPELLANT FAILED TO PROVE WITH SUPPORTING DOCUMENTARY EVIDENCES THAT THE MATERIAL WAS ACTUALLY DELIVERED IN ITS PREMISES AND ALSO FAILED TO FILE E VIDENCES OF DELIVERIES TO ESTABLISH THAT THE MATERIAL WAS CONSUMED FOR BUS INESS ACTIVITIES. ITA NO. 4215/M/2016 SAVAIR ENERGY LTD. 3 ALSO THE APPELLANT FAILED TO FURNISH THE CONFIRMATI ON FROM THE PARTY THAT IT HAD ACTUALLY SOLD AND DELIVERED MATERIAL TO THE APPELLANT COMPANY AND HENCE, THE SUM IN RESPECT OF INVESTMENT MADE OUT OF UNACCOUNTED MONEY BY THE APPELLANT FOR PURCHASE OF MATERIALS FROM THE PARTIES OF RS. 1,25,92,144/- WAS TREATED AS BOG US PURCHASES AND ADDED TO THE RETURNED INCOME OF THE APPELLANT. 3. MATTER CARRIED TO CIT(A) AND CIT(A) HAS ALLOWE D APPEAL BY OBSERVING AS UNDER: AS NARRATED EARLIER, THE LD. A.O. IN THIS CASE HAS HELD THAT THE PARTIES FROM WHOM THE PURCHASES WERE MADE BY THE AP PELLANT WERE FOUND TO BE BOGUS AND THAT IS THE REASON FOR W HICH IT WAS NOT PRODUCED DURING THE ASSESSMENT PROCEEDINGS. NOT HA VING DOUBTED THE CONSUMPTION / SALES, THE MOTIVE BEHIND OBTAININ G BOGUS BILLS THUS, APPEARS TO BE INFLATION OF PURCHASE PRICE SO AS TO SUPPRESS TRUE PROFITS. CONSIDERING THE FACTS OF THE CASE AS WE LL AS THE VARIOUS CASE LAWS CITED (SUPRA) ESPECIALLY IN THE CASES OF CIT VS. SIMIT P. SHETH, BHOLANATH POLY FAB AND SANKET STEEL TRADERS (SUPRA) AND AFTER CONSIDERING THE OVERALL NET PROFIT OF 6.93%, I ESTIMATE THE PROFIT TO THE EXTENT OF 10% OF THE PURCHASES MADE F ROM THE BOGUS ENTITIES AS THE SUPPRESSED PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES. THIS ESTIMATION IS IN ADDITION TO THE R EGULAR OVERALL PROFIT SHOWN BY THE APPELLANT. ACCORDINGLY, THIS G ROUND OF APPEAL IS PARTLY ALLOWED. 4. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. WE ARE CONVINCED WITH THE ARGU MENTS OF THE REVENUE THAT THE ASSESSEE HAS FAILED TO DISCHARGE T HE PRIMARY ONUS OF PROVING THE PURCHASES AND IT COULD NOT PRODUCE EVID ENCES TO SHOW ACTUAL DELIVERY OF MATERIAL AND ALSO COULD NOT PRODUCE CON FIRMATORY LETTERS FROM THE ALLEGED BOGUS SUPPLIERS. HOWEVER, WE ALSO FIND THAT THE ASSESSEE IS IN POSSESSION OF PURCHASES INVOICES AND THE PAYMENTS ARE THROUGH BANKING CHANNELS. THEREFORE, EVEN IF ALL THE PURCHASES ARE FOUND ITA NO. 4215/M/2016 SAVAIR ENERGY LTD. 4 TO BE BOGUS, WE NOTE THAT SALES TURNOVER HAS NOT BE EN DISPUTED BY THE REVENUE. THEREFORE, IN SUCH A SITUATION, THE ADDIT ION, WHICH COULD BE MADE, WAS TO ACCOUNT FOR PROFIT ELEMENT EMBEDDED IN THESE PURCHASE TRANSACTIONS TO FACTORIZE PROFIT EARNED BY ASSESSEE AGAINST PURCHASE OF MATERIAL IN THE GREY MARKET AND UNDUE BENEFIT OF VA T AGAINST BOGUS PURCHASES WHICH CIT(A) HAS RIGHTLY DONE. THEREFORE , WE CONFIRMED THE ORDER OF CIT(A). IN THE RESULT,DEPARTMENTALAPPEAL IS DISMISSED. JUDGEMENT PRONOUNCED IN THE OPEN COURT ON 18 TH AUGUST, 2017. SD/- SD/- G. MANGUNATHA (ACCOUNTANT MEMBER) D.T. GARASIA (JUDICIAL MEMBER) MUMBAI, DATED: 18.08.2017 RAHUL DHOKE / P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH BY ORDER DY /ASSTT.REGISTRAR, ITAT, MUMBAI.