JAYPRKASH BARBHAYA, MUMBAI V. ITO 23(2)(3), MUMBAI

ITA 4485/MUM/2016

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 8267 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-11-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2009-2010
• Appeal Filed On: 29-06-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: T A KHAN
• Assessee Lawyers: BHADRESH JOSHI
• Keywords: Bogus purchase

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH F, MUMBAI BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA NO.3606/M/2016 ASSESSMENT YEAR: 2009-10 ITA NO.3607/M/2016 ASSESSMENT YEAR: 2010-11 INCOME TAX OFFICER 29(1)(5), ROOM NO.107, 1 ST FLOOR, C-10 BLDG., PRATYAKSHAKAR BHAVAN, BANDRA KURLA COMPLEX, BANDRA (E), MUMBAI - 400051 VS. SHRI JAYPRAKASH D. BARBHAYA, 301, 302, MAHAVIR APARTMENT, SARVODAYA NAGAR, MULUND (W), MUMBAI 400 080 PAN: AGPPB9599J (APPELLANT) (RESPONDENT) ITA NO.4485/M/2016 ASSESSMENT YEAR: 2009-10 ITA NO.4486/M/2016 ASSESSMENT YEAR: 2010-11 SHRI JAYPRAKASH D. BARBHAYA, 301, MAHAVIR APARTMENT, SARVODAYA NAGAR, MULUND (WEST), MUMBAI 400 080 PAN: AGPPB9599J VS. INCOME TAX OFFICER 23(2)(3), MUMBAI (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI BHADRESH JOSHI, A.R. REVENUE BY : SHRI T.A. KHAN, D.R. DATE OF HEARING : 05.09.2017 DATE OF PRONOUNCEMENT : 24.11.2017 ITA NO.3606/M/2016 & ORS SHRI JAYPRAKASH D. BARBHAYA 2 O R D E R PER D.T. GARASIA , JUDICIAL MEMBER: THE ABOVE TITLED APPEALS TWO BY THE REVENUE AND TW O BY THE ASSESSEE HAVE BEEN PREFERRED AGAINST THE COMMON ORD ER DATED 01.03.2016 OF THE COMMISSIONER OF INCOME TAX (APPEA LS) [HEREINAFTER REFERRED TO AS THE CIT(A)] RELEVANT TO ASSESSMENT YEARS 2009-10 & 2010-11. ITA NO.3606/M/2016 FOR A.Y. 2009-10 (REVENUES APPEA L) 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS PROPRIETOR OF M/S. ANIL ALLUMINIUM, WHICH IS ENGAGED IN THE BUSIN ESS AS A RESELLER IN ALUMINIUM EXTRUSION. DURING THE YEAR THE ASSESSI NG OFFICER (HEREINAFTER REFERRED TO AS THE AO) FOUND THAT ASSE SSEE HAD MADE BOGUS PURCHASES FROM FOLLOWING PARTIES: SR. NO. NAME OF THE PARTY AMOUNT OF PURCHASE (RS) 1. NAGESHWAR ENTERPRISES 44,42,629 2. NIKHIL ENTERPRISE 2,05,000 3. PARSNATH ENTERPRISE 16,85,300 4. SAILEELA TRADING PVT. LTD. 75,33,330 5. SHARIKA INCORPORATION 1,45,000 6. ANMOL INDUSTRIES 12,44,832 7. UNIVERSAL TRADING CO. 98,09,428 8. KAMESHWAR TRADING PVT. LTD. 3,44,000 9. VICTOR INTERTRADE PVT. LTD. 25,192 10. AAAYUSHI ENTERPRISES 26,24,961 11. DISHA ENTERPRISES 44,63,000 12. POONAM ALLUMINUIM 57,80,939 13. SHREE GANESH TRADING CO. 1,01,30,267 TOTAL 4,84,33,878 ITA NO.3606/M/2016 & ORS SHRI JAYPRAKASH D. BARBHAYA 3 3. THE ASSESSEE WAS ASKED TO PRODUCE THE ABOVE PART IES FOR VERIFICATION. THERE WAS NO COMPLIANCE OF NOTICE UND ER SECTION 133(6). THEREFORE, THE AO HAS MADE THE ADDITION ON ACCOUNT OF BOGUS PURCHASES OF RS.4,84,33,878/-. 4. MATTER CARRIED TO THE LD. CIT(A) AND THE LD. CIT (A) HAS PARTLY ALLOWED THE CLAIM BY OBSERVING AS UNDER: 7.31. AS NARRATED EARLIER, THE LD. A.O. IN THIS CA SE HAS HELD THAT THE PARTIES FROM WHOM THE PURCHASES WERE MADE BY THE APPELLANT WERE FOUND TO BE BOGUS AND THAT IS THE REASON FOR WHICH IT WAS NOT PRODUCED DURING THE ASSESSMENT PROCEEDINGS. NOT HAVING DOUBTED THE CONSUMPTION/SAL ES, THE MOTIVE BEHIND OBTAINING BOGUS BILLS THUS, APPEARS TO BE INFLATION OF PURCHASE PRICE SO AS TO SUPPRESS TRUE PROFITS. AS MENTIONED ABOVE, THE AU H AD NEVER DISPUTED OR EXAMINED THE SALES. ONCE SALES ARE ACCEPTED, CORRES PONDING PURCHASES HAVE TO BE CONSIDERED AND CANNOT BE DISREGARDED IN TOTALITY. LOOKING TO THE MARKET TREND, THE APPELLANT MAY HAVE MADE PURCHASES FROM OTHER PARTIES WHICH WERE NOT RECORDED IN THE BOOKS, AND TOOK ONLY BILLS FROM THESE PARTIES AS ACCOMMODATION, TO EXPLAIN THE PURCHASES. THE PURCHA SES THEMSELVES ARE NOT BOGUS BUT THE PURCHASE PARTIES SHOWN IN BOOKS ARE. THEREFORE, THE ENTIRE PURCHASE FROM THESE PARTIES CANNOT BE ADDED AS BOGUS AND WHA T NEEDS TO BE TAXED IS THE PROFIT ELEMENT EMBEDDED IN SUCH TRANSACTIONS. ESTIM ATIONS, RANGING FROM 12.5% TO 25% HAVE BEEN UPHELD BY THE HON'BLE GUJARAT HIGH COURT, DEPENDING UPON THE NATURE OF THE BUSINESS. AS HELD IN THE CASE OF SIMI T P. SHETH (SUPRA), NO UNIFORM YARDSTICK COULD BE APPLIED TO ESTIMATE THE RATE OF PROFIT AND IT VARIES WITH THE NATURE OF BUSINESS. TAKING ALL FACTS INTO CONSIDERA TION AS ALSO THE FINDINGS OF THE HON'BLE COURTS ON THIS ISSUE AND THE FACT THAT DIRE CT ONE TO ONE RELATIONSHIP BETWEEN PURCHASES AND SALES HAVE NOT BEEN ESTABLISH ED, I AM OF THE VIEW THAT ESTIMATION OF 20% AS PROFIT EMBEDDED IN IMPUGNED PU RCHASES SHOWN FROM THESE TAINTED PARTIES AND ADDING THE SAME TO THE TOTAL IN COME RETURNED, WOULD MEET THE ENDS OF JUSTICE. THEREFORE, I DIRECT THE AO TO EST IMATE PROFIT OF 20% IN THE ALLEGED BOGUS PURCHASES, WHICH WORKS OUT TO RS. 96,86,776/- (20% OF RS. 4,84,33,878/-) AND RESTRICT THE ADDITION TO RS. 96,86,776,!-. THE APPE LLANT GET THE RELIEF FOR THE BALANCE RS.3,87,47,102/-. GROUNDS OF APPEAL, ARE PARTLY ALL OWED TO THIS EXTENT. 8. IN RESULT, THE APPEAL IS PARTLY ALLOWED. 5. I HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE P ARTIES. LD. D.R. RELIED UPON THE DECISION OF THE TRIBUNAL, AHMEDABAD BENCH IN THE CASES OF SHWETAMBAR STEELS VS. ITO AHMEDABAD AND GA NESH RICE ITA NO.3606/M/2016 & ORS SHRI JAYPRAKASH D. BARBHAYA 4 MILLS VS. CIT (294 ITR 316). THE FACTS IN THE PRES ENT CASE SHOW THAT ASSESSEE COULD NOT PRODUCE THE PARTIES FROM WHOM GO ODS ARE STATED TO HAVE BEEN PURCHASED. THE SUPPLIERS WERE FOUND TO BE ENGAGED IN PROVIDING BOGUS BILL WITHOUT ACTUAL DEALING OF GOOD S. IN THIS REGARD, THE ASSESSEE HAS STATED THAT THEY HAD SUBMITTED QUA NTITATIVE DETAILS OF STOCK WITH RESPECT OF THE SALES WITH PURCHASES FROM THE PARTIES DURING THE ASSESSMENT PROCEEDINGS. THE ASSESSEE HAS SUBMIT TED THE DETAIL OF CORRESPONDING SALES IN RESPECT OF THE PURCHASE FROM THE SAID PARTIES. AS MENTIONED ABOVE THE AO HAS NEVER DISPUTED OR EXA MINED THE ASPECT OF SALES RECEIPTS. SINCE THE SALES MADE BY T HE ASSESSEE WAS NOT DOUBTED OR DISPUTED BY THE AO AND HE HAS ACCEPTED T HE SALES RECEIPTS OF THE ASSESSEE AS IT IS, THEREFORE, THE AO CANNOT DENY THAT PURCHASES WERE NOT MADE BY THE ASSESSEE AND THE MATERIAL WAS NOT USED FOR ITS SALES. WHAT IS UNDER DISPUTE IS THE PURCHASES FROM T HE PARTIES FROM WHOM BILLS HAVE BEEN TAKEN AND CHEQUES HAVE BEEN IS SUED TO THEM. PURCHASES ARE NOT IN DISPUTE BUT THE PARTIES FROM W HOM PURCHASE ARE SHOWN TO HAVE BEEN MADE ARE DISPUTED AND SUSPICIOUS . THE AO HAD MADE THE ADDITION AS SOME OF THE SUPPLIERS WERE DEC LARED HAWALA DEALERS BY THE VAT DEPARTMENT. THIS MAY BE A GOOD R EASON FOR MAKING FURTHER INVESTIGATION BUT THE AO DID NOT MAK E ANY FURTHER INVESTIGATION AND MERELY COMPLETED THE ASSESSMENT O N SUSPICION. ONCE THE ASSESSEE HAS BROUGHT ON RECORD THE DETAILS OF PAYMENTS BY ACCOUNT PAYEE CHEQUE, IT WAS INCUMBENT ON THE AO TO HAVE VERIFIED THE PAYMENT DETAILS FROM THE BANK OF THE ASSESSEE A ND ALSO FROM THE BANK OF THE SUPPLIERS TO VERIFY WHETHER THERE WAS A NY IMMEDIATE CASH ITA NO.3606/M/2016 & ORS SHRI JAYPRAKASH D. BARBHAYA 5 WITHDRAWAL FROM THEIR ACCOUNT. NO SUCH EXERCISE HAS BEEN DONE OR FINDINGS RECORDED. THERE WAS NO DETAILED INVESTIGAT ION MADE BY THE AO HIMSELF. IT IS ALSO FOUND THAT THE PAYMENTS HAVE BEEN MADE BY ACCOUNT PAYEE CHEQUE WHICH ARE DULY REFLECTED IN TH E BANK STATEMENT OF THE ASSESSEE. THERE IS NO EVIDENCE TO SHOW THAT THE ASSESSEE HAS RECEIVED CASH BACK FROM THE SUPPLIERS. MERELY BECAU SE THE SUPPLIERS DID NOT APPEAR BEFORE THE AO OR SOME CONFIRMATION L ETTERS WERE NOT FURNISHED, ONE CANNOT CONCLUDE THAT THE PURCHASES W ERE NOT MADE BY THE ASSESSEE. THIS VIEW IS SUPPORTED BY THE DECISIO N OF NIKUNJ EXIMP ENTERPRISES VS. CIT 216 TAXMAN 171 (BOM). TO THIS E XTENT, I AM OF THE VIEW THAT IF THE ASSESSEE HAS FULFILLED ITS ONU S OF MAKING THE PAYMENT BY CHEQUE AND HAS SUPPLIED THE ADDRESSES OF THE SELLERS THEN IT CANNOT BE PRESUMED THAT SUPPLIER WERE BOGUS SIMP LY BECAUSE THE SELLERS WERE NOT FOUND AT THE GIVEN ADDRESS. THERE IS A CONSIDERABLE TIME GAP BETWEEN THE PERIOD OF PURCHASE TRANSACTION AND PERIOD OF SCRUTINY PROCEEDINGS. THE AO HAS NOT BROUGHT ANY MA TERIAL ON RECORD TO SHOW THAT THERE IS SUPPRESSION OF SALES. IT IS B ASIC RULE OF ACCOUNTANCY AS WELL AS OF TAXATION LAWS THAT PROFIT FROM BUSINESS CANNOT BE ASCERTAINED WITHOUT DEDUCTING COST OF PUR CHASE FROM SALES. ESTIMATION OF PROFIT RANGING FROM 12.5% TO 15% HAS BEEN UPHELD BY THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT V S SIMIT P SHETH 356 ITR 451 (GUJ.). RESPECTFULLY FOLLOWING THE DEC ISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. SIMIT P. SHETH 38 TAXMAN 385 (GUJ), I DIRECT THE AO TO ESTIMATE THE GP @ 12. 5% OF THE TOTAL PURCHASES WHICH COMES TO RS.60,54,235/- FOR A.Y. 20 09-10. ITA NO.3606/M/2016 & ORS SHRI JAYPRAKASH D. BARBHAYA 6 6. IN THE RESULT, THE DEPARTMENTAL APPEAL IS DISMIS SED. ITA NO.3607/M/2016 FOR A.Y. 2010-11 (REVENUES APPEA L) 7. IN THIS APPEAL, DURING THE YEAR, THE AO FOUND TH AT ASSESSEE HAD MADE PURCHASES FROM FOLLOWING PARTIES: SR. NO. NAME OF THE PARTY AMOUNT OF PURCHASE (RS) 1. DHRUV SALES CORPORATION 4,09,003 2. DONEAR TRADING PVT. LTD. 5,55,170 3. NB ENTERPRISES 9,55,000 4. HANS TRADING CO. 12,63,230 5. NIKHIL ENTERPRISE 40,92,188 6. PARSNATH ENTERPRISE 6228583 7. UNIVERSAL TRADING CO. 1716647 8. GLOBAL TRADE IMPEX 307500 9. PK TRADING CO. 316735 10. JAY TRADERS 517100 11. SHREYAS MARKETING AGENCY 209099 12. SHREE GANESH TRADING CO. 3742482 13. RAJRATAN METAL INDUSTRIES 4334007 24646744 8. WE FIND THAT THE REVENUE HAS TAKEN THE IDENTICAL GROUNDS IN ITA NO.3606/M/2016 FOR A.Y. 2009-10 AND THE SAME HA S ALREADY BEEN DECIDED AS ABOVE. FOLLOWING THE SAME RATIO AP PLIED IN ITA NO.3606/M/2016 FOR A.Y. 2009-10, I DECIDE THIS APPE AL ALSO. ACCORDINGLY, I DIRECT THE AO TO ESTIMATE THE GP @ 1 2.5% OF THE TOTAL PURCHASES WHICH COMES TO RS.30,80,843/- FOR A.Y. 20 10-11. 9. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ITA NO.3606/M/2016 & ORS SHRI JAYPRAKASH D. BARBHAYA 7 ITA NO.4485 & 4486/M/2016 (ASSESSEES APPEALS) 10. WHILE DISPOSING OF THE REVENUES APPEALS THE OR DER HAS ALREADY BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY DIRECTING THE AO TO ESTIMATE THE GP @ 12.5% OF TOTAL PURCHASES IN THE B OTH THE YEARS, AS ABOVE. 11. IN THE RESULT ASSESSEES APPEALS ARE PARTLY ALL OWED AND THE REVENUES APPEALS ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 24.11.2017. SD/- SD/- (RAJESH KUMAR) (D.T. GARASIA) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 24.11.2017. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.