TIRUPATI COMMODITIES IMPLEX P.LTD, MUMBAI V. DCIT CC-6, MUMBAI

ITA 4399/MUM/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 0050 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2010-2011
• Appeal Filed On: 24-06-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SAURABH KUMAR RAI LD
• Assessee Lawyers: PRATEEK JAINLD
• Keywords: Bogus purchase; Unexplained investment; Peak credit
• Section: 143(3); 153A

Judgement Text

ITANOS.4399-4400,3940-41/MUM/2016 TIRUPATI COMMODITIES IMPEX PRIVATE LIMITED ASSESSMENT YEARS 2010-11 & 2011-12 IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI , , BEFORE SHRI MAHAVIR SINGH, JM AND SHRI MANOJ KUMAR AGGARWAL, AM ./I.T.A. NOS. 4399-4400/MUM/2016 ( / ASSESSMENT YEARS: 2010-11 & 2011-12) TIRUPATI COMMODITIES IMPEX PRIVATE LIMITED [EARLIER KNOWN AS TIRUPATI IRON AND IMPEX PVT.LTD] OFFICE NO.901,9 TH FLOOR LODHA SUPREMUS SENAPATI BAPAT MARG LOWER PAREL MUMBAI-400 012 / VS. DEPUTY COMMISSIONER OF INCOME-TAX CENTRAL CIRCLE-6 MUMBAI ./ ./PAN/GIR NO. AACCT-3064-G ( /APPELLANT ) : ( !' / RESPONDENT ) & ./I.T.A. NOS. 3940-3941/MUM/2016 ( / ASSESSMENT YEARS: 2010-11 & 2011-12) DEPUTY COMMISSIONER OF INCOME-TAX CENTRAL CIRCLE 1(4) ROOM NO.902, 9 TH FLOOR, OLD CGO BUILDING, M.K.ROAD CHURCHGATE MUMBAI-400 020 / VS. TIRUPATI COMMODITIES IMPEX PRIVATE LIMITED [EARLIER KNOWN AS TIRUPATI IRON AND IMPEX PVT.LTD] OFFICE NO.901,9 TH FLOOR LODHA SUPREMUS SENAPATI BAPAT MARG LOWER PAREL MUMBAI-400 012 ./ ./PAN/GIR NO. AACCT-3064-G ( /APPELLANT ) : ( !' / RESPONDENT ) ASSESSEE BY : PRATEEK JAIN, LD. AR REVEN UE BY : SAURABH KUMAR RAI, LD. DR / DATE OF HEARING : 21/02/2018 / DATE OF PRONOUNCEMENT : 28/02/2018 ITANOS.4399-4400,3940-41/MUM/2016 TIRUPATI COMMODITIES IMPEX PRIVATE LIMITED ASSESSMENT YEARS 2010-11 & 2011-12 2 / O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. THESE ARE CROSS-APPEALS FOR ASSESSMENT YEARS [AY ] 2010-11 & 2011-12 WHICH CONTEST SEPARATE ORDERS OF FIRST APPE LLATE AUTHORITY QUA CONFIRMATION OF CERTAIN ADDITION ON ACCOUNT OF ALLEGED BOGUS PURCHASES. SINCE COMMON ISSUES ARE INVOLVED, WE DISPOSE-OFF TH E SAME BY WAY OF THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE & BRE VITY. FIRST WE TAKE UP ASSESSEES APPEAL ITA NO.4399/MUM/2016 FOR AY 20 10-11 ARISING OUT OF ORDER OF LD. COMMISSIONER OF INCOME TAX (APP EALS)-47, MUMBAI [CIT(A)], APPEAL NO. CIT(A)-47/AP.159/2014-15 DATED 18/03/2016 . THE ASSESSMENT FOR IMPUGNED AY WAS FRAMED BY LD. DEPUTY COMMISSIONER OF INCOME TAX-CENTRAL CIRCLE 6, MUMBAI U/S 143(3) READ WITH SECTION 153A OF THE INCOME TAX ACT, 1961 ON 27/03/2014. 2.1 BRIEFLY STATED THE ASSESSEE BEING RESIDENT CORPORATE ASSESSE ENGAGED IN THE BUSINESS OF TRADING OF STEAL ITEMS WAS ASSESSED FOR IMPUGNED AY U/S 153A PURSUANT TO SEARCH ACTION U/S 132(1) ON TIRUPATI GROUP OF COMPANIES ON 29/04/2011 AND THE ASSESSEE BEING ONE OF THE MAIN CONCERNS FLOATED BY COMMON KEY MANAGEMENT PERS ONNEL / DIRECTORS WAS ALSO COVERED IN THE SAME. THE GROUP O FFERED UNDISCLOSED ADDITIONAL INCOME OF RS. 4 CRORE BEFORE INVESTIGATI ON TEAM AGAINST NON- VERIFIABLE PURCHASES, UNACCOUNTED INVESTMENTS IN IM MOVABLE PROPERTIES & JEWELLERY. THE ASSESSEE OFFERED A SUM OF RS.25 LA CS ON ACCOUNT OF NON-VERIFIABLE EXPENSES AND PURCHASES. PURSUANT TO NOTICE U/S 153A DATED 09/05/2012, THE ASSESSEE FILED RETURN OF INCO ME AT RS.83,59,347/-. ITANOS.4399-4400,3940-41/MUM/2016 TIRUPATI COMMODITIES IMPEX PRIVATE LIMITED ASSESSMENT YEARS 2010-11 & 2011-12 3 2.2 DURING ASSESSMENT PROCEEDINGS IT WAS NOTED THA T THE ASSESSEE DEALT IN TRADING OF MS STEEL PIPES, MS JOINTS, RSJ POLLS ANG LES, CHANNELS AND TMT BARS AND ITS MAIN CUSTOMERS WERE FROM TELECOM INFRA AND POWER TRANSMISSIONS SECTORS. IT WAS NOTED THAT THE ASSESSEE OBTAINED BOGUS PURCHASE BILLS FROM A PERSON NAMELY PRAMOD KUMAR SINGH AND HIS VARIOUS CONCERNS WITHOUT ACTUALLY BUYING ANY GO ODS. THE ASSESSEE DEFENDED THE PURCHASES MADE BY HIM. HOWEVER, AFTER CONSIDERING THE STATEMENTS OF STATED PERSON, OTHER KEY PERSONS INCL UDING MEDIATOR NAMELY OM PRAKASH SINGH AS RECORDED BY THE REVENUE DURING SEARCH / SURVEY PROCEEDINGS, LD. AO CAME TO THE CONCLUSION T HAT THE ASSESSEE BOOKED BOGUS PURCHASES TO REDUCE THE PROFITS WITH A VIEW TO EVADE THE TAXES. THE AMOUNT OF ALLEGED BOGUS PURCHASES DURING THE IMPUGNED AY WAS RS.11,17,60,349/- AGAINST WHICH LD. AO WORKED O UT PEAK CREDIT BALANCE OF RS.7,33,05,306/-. AFTER ADJUSTING THE ADDITIONA L INCOME OF RS.25 LACS OFFERED BY THE ASSESSEE IN THE RETURN OF INCOME, THE NET ADDITION, THUS MADE, CAME TO RS.7,08,05,306/- . THE LD. AO MADE ANOTHER ADDITION OF 1% OF THESE BOGUS PURCHASES TO ACCOUNT FOR COMMISSION PAID BY THE ASSESSEE TO THE MEDIATORS TO OBTAIN THESE BOGUS BILLS WHICH RESULTED INTO ANOTHER ADDITION OF RS.11,17,60 3/-. 3. AGGRIEVED, THE ASSESSEE CONTESTED THE SAME WITH PARTIAL SUCCESS BEFORE LD. CIT(A) VIDE IMPUGNED ORDER DATED 18/03/2 016, WHERE LD. CIT(A) AFTER CONSIDERING THE FACTUAL MATRIX AND VAR IOUS JUDICIAL PRONOUNCEMENTS RESTRICTED THE ESTIMATED ADDITIONS T O 4.12% OF PEAK PURCHASES AND ALTOGETHER DELETED ESTIMATED ADDITION ON ACCOUNT OF COMMISSION IN THE FOLLOWING MANNER:- ITANOS.4399-4400,3940-41/MUM/2016 TIRUPATI COMMODITIES IMPEX PRIVATE LIMITED ASSESSMENT YEARS 2010-11 & 2011-12 4 5.2.12 IN THE PRESENT CASE, AS DISCUSSED, THE AO H AS ACCEPTED THE SALES MADE BY THE APPELLANT. THE PURCHASE-SALE CORRELATION HAS NO T BEEN CONTROVERTED BY THE AO. NO DISCREPANCY IN STOCK HAS BEEN POINTED OU T. THE FACT THAT PAYMENTS MADE FOR THE PURCHASES ARE ROUTED THROUGH BANKING CHANNELS IS NOT DISPUTED. THE DOCUMENTATION PROVIDED CONTAINS SUFFI CIENT REFERENCE TO THE PARTICULARS OF THE SALE PARTY. DELIVERY CHALLANS AR E PRODUCED. THUS THE PURCHASES IN QUESTION CANNOT BE HELD BOGUS. HOWEVER , AS DISCUSSED EARLIER, IT IS WELL KNOWN THAT THE PRIMARY IMPETUS BEHIND AV AILING OF SUCH BOGUS BILLS WAS TO SAVE ON THE G.P RATE. THE AVERAGE G.P. RATE OF THE APPELLANT FOR THE PAST 3 YEARS IS 4.12%. THUS ON CONSIDERING THE FACT S ON RECORD THE DISALLOWANCE MADE BY THE AO IS UPHELD TO THE EXTENT OF 4.12% OF THE PEAK PURCHASES, AND THE GROUNDS RAISED BY THE PARTY ARE PARTLY-ALLOWED . 5.3 IN GROUND NO.3 , THE APPELLANT HAS CHALLENGED THE ADDITION OF RS.1 1,17,603/- ON ACCOUNT OF COMMISSION EXPENSES. IN THE IMPUGNED ORDER, THE AO NOTED THAT FOR AVAILING SUCH BOGUS BILLS, THE APPELLANT W OULD HAVE INCURRED COMMISSION EXPENSE @1% AND OBSERVED THAT THE FACT T HAT SUCH TRANSACTIONS INVOLVED PAYMENT AND RECEIPT OF COMMISSION WAS CONF IRMED BY THE STATEMENTS OF VARIOUS PARTIES RECORDED DURING THE S EARCH. CONSIDERING THAT THE RATE OF COMMISSION IN THIS TRADE RANGED FROM 0. 5% TO 2.0%, THE AO ESTIMATED COMMISSION @1% ADDED BACK AN AMOUNT OF RS .11,17,603/-. IN APPEAL IT HAS BEEN ARGUED THAT THE SAID ADDITION IS BASED PURELY ON ESTIMATE WITHOUT ANY EVIDENCE OF ANY SUCH EXPENSE HAVING BEE N INCURRED BY THE APPELLANT. I HAVE CONSIDERED THE ISSUE AT HAND. AS IN THE PRECEDING GROUNDS IT HAS BEEN DECIDED THAT THE PURCHASES ARE QUESTION HA VE NOT BEEN SHOWN TO BE BOGUS, THE ADDITION ON ACCOUNT OF ESTIMATED COMM ISSION EXPENSES IS CONSEQUENTLY DELETED. ACCORDINGLY, THE ADDITIONS ON ACCOUNT OF COMMISSION EXPENSES IS DELETED AND THE GROUND RAISED BY THE AP PELLANT IS ALLOWED. AGGRIEVED AFORESAID, THE ASSESSEE AS WELL AS THE RE VENUE IS IN FURTHER APPEAL BEFORE US. 4. THE LD. AUTHORISED REPRESENTATIVE FOR ASSESSEE [ AR] PLEADED FOR FURTHER RELIEF IN THE MATTER WHEREAS LD. DEPARTMENT AL REPRESENTATIVE [DR] POINTED OUT THAT THE FACTUAL MATRIX DEMANDS HI GHER ADDITIONS. 5. WE HAVE CAREFULLY HEARD THE RIVAL CONTENTIONS AN D PERUSED RELEVANT MATERIAL ON RECORD. WE ARE OF THE CONSIDERED OPINIO N THAT THERE COULD BE NO SALE WITHOUT PURCHASE OF MATERIAL SINCE THE ASSE SSEE WAS A TRADING CONCERN. THE ASSESSEE WAS IN POSSESSION OF PRIMARY PURCHASE DOCUMENTS AND THE PAYMENTS WERE THROUGH BANKING CHA NNELS. AT THE SAME TIME, THE ASSESSEE COULD NOT PRODUCE ANY OF TH E SUPPLIERS BEFORE LOWER AUTHORITIES AND SUBSTANTIATE THE DELIVERY OF MATERIAL WITH COGENT ITANOS.4399-4400,3940-41/MUM/2016 TIRUPATI COMMODITIES IMPEX PRIVATE LIMITED ASSESSMENT YEARS 2010-11 & 2011-12 5 EVIDENCES. FURTHER, THE ASSESSEE REFLECTED PURCHASE S FROM THESE ENTITIES, ALL OF WHICH WERE CONTROLLED BY THE SAME GROUP AND THE SEARCH / SURVEY ACTION CLEARLY REVEALED THAT THE SAID GROUP WAS ENGAGED IN PROVIDING ACCOMMODATION BILLS TO THE INTERESTED PER SON. ALL THESE FACTORS CAST A SERIOUS DOUBT ON ASSESSEES CLAIM. THEREFORE , IN SUCH A SITUATION, THE ADDITION, WHICH COULD BE MADE, WAS TO ACCOUNT F OR PROFIT 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 ALLEGED BOGUS PURCHASES, WHICH LD. CIT(A) HAS RIGHTLY DONE. HOWEVER, WE FIND THAT THE ASSESSEE HAD MADE GROSS PURCHASES OF RS.11,17,60,349/- FROM ALLEGED BOGUS SUPPLIERS. THE LD. AO HAS WORKED OUT PEAK CREDIT BALANCE OF RS.7,33,05,306/- AGAINST THE SAME. THE LD. FIRST AP PELLATE AUTHORITY HAS RESTRICTED THE ADDITION TO 4.12%, BEING AVERAGE GROSS PROFIT RATE [GP RATE] OF PAST THREE YEARS. THIS RATE, IN OUR OPINION, HAS TO BE APPLIED ON GROSS PURCHASES AND NOT ON PEAK PURCHASES. FURTHER, CONSIDERING THE FACT THAT THE ASSESSEE PROCURED BILLS FROM CERTAIN MEDIATORS AND LD. CIT(A) HAS DELETED THE ADDITION ON ACCOUNT OF ESTIM ATED COMMISSION BEING PAID BY THE ASSESSEE, THE NORMAL GP RATE OF P AST THREE YEARS COULD NOT BE APPLIED AS SUCH TO THE FACTS OF THE CA SE. THEREFORE, AFTER CONSIDERING TOTALITY OF FACTS & NATURE OF ASSESSEE S BUSINESS, WHILE CONFIRMING THE REASONING OF LD. CIT(A), WE MODIFY T HE SAME BY ESTIMATING THE ADDITIONS @5% OF ALLEGED BOGUS PURCHASES OF RS.11,17,60,349/- WHICH COMES TO RS.55,88,017/-. AF TER ADJUSTING THE ADDITIONAL INCOME OF RS.25 LACS OFFERED BY THE ASSE SSEE IN THE RETURN OF INCOME, THE NET ADDITIONS AS SUSTAINED BY US COMES TO RS.30,88,017/-. ITANOS.4399-4400,3940-41/MUM/2016 TIRUPATI COMMODITIES IMPEX PRIVATE LIMITED ASSESSMENT YEARS 2010-11 & 2011-12 6 THE LD. CIT(A) HAS ALREADY DELETED ESTIMATED ADDITI ON ON ACCOUNT OF COMMISSION WHICH STANDS CONFIRMED BY US. 6. RESULTANTLY, THE ASSESSEES APPEAL STANDS DISMIS SED WHEREAS REVENUES APPEAL STANDS PARTLY ALLOWED IN TERMS OF OUR ABOVE ORDER. CROSS APPEALS FOR ASSESSMENT YEAR 2011-12 7. THE ASSESSEE, IN AY 2011-12, BROADLY ON SIMILAR FACTS, HAS REFLECTED INCOME OF RS.1,56,68,990/- IN RETURN OF I NCOME PURSUANT TO NOTICE U/S 153A. THE LD. AO, AFTER DUE INQUIRY, NOT ED THAT THE ASSESSEE, IN THIS YEAR, MADE BOGUS PURCHASES AS WELL AS BOGUS SALES AMOUNTING TO RS.22,51,72,903/- & RS.22,56,75,225/- RESPECTIVELY AND REFLECTED MEAGER GROSS PROFIT OF RS.5,02,322/- AGAINST THE SA ME. THE LD. AO ESTIMATED THE ADDITION ON THESE TRANSACTIONS @6% OF ALLEGED BOGUS PURCHASES WHICH CAME TO RS.1,35,10,374/-. SINCE, TH E ASSESSEE HAD ALREADY OFFERED ADDITIONAL INCOME OF RS.1.15 CRORES IN THE RETURN OF INCOME, THE NET ADDITION, THUS MADE, CAME TO RS.20, 10,274/-. THE LD. AO HAS MADE ANOTHER ADDITION OF 4% TO ACCOUNT FOR W RONG VAT CREDIT CLAIMED ON THE ALLEGED BOGUS PURCHASES WHICH CAME TO RS.90,06,916/-. THE LD. CIT(A) HAS CONFIRMED THE ADDITION OF RS.20, 10,274/- BUT DELETED ESTIMATED ADDITION OF RS.90,06,916/- ON ACCOUNT OF WRONG VAT CREDIT. AGGRIEVED, THE ASSESSEE AS WELL AS REVENUE IS IN FU RTHER APPEAL BEFORE US WITH SIMILAR ARGUMENTS. SINCE THE BROAD FACTS AN D CIRCUMSTANCES ARE SIMILAR EXCEPT FOR MINOR VARIATIONS, TAKING THE SAM E STAND AND KEEPING IN VIEW THE MEAGER PROFIT REFLECTED BY THE ASSESSEE AG AINST ALLEGED BOGUS PURCHASE / SALE TRANSACTIONS, WE CONFIRM THE STAND OF LD. CIT(A) FI NDING THE SAME TO BE FAIR & REASONABLE. ITANOS.4399-4400,3940-41/MUM/2016 TIRUPATI COMMODITIES IMPEX PRIVATE LIMITED ASSESSMENT YEARS 2010-11 & 2011-12 7 8. RESULTANTLY, THE ASSESSEES APPEAL AS WELL AS RE VENUES APPEAL STANDS DISMISSED. CONCLUSION 9. THE REVENUES APPEAL ITA NO.3940/MUM/2016 STANDS PARTLY ALLOWED WHEREAS ALL THE OTHER THREE APPEALS STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH FEBRUARY, 2018 SD/- SD/- (MAHAVIR SINGH) ( MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 28. 02.2018 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