M/S.NELCO STEEL INDIA, MUMBAI V. INCOME TAX OFFICER 19(3)(4), MUMBAI

ITA 4499/MUM/2018

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 0282 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-12-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 16-07-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KAVITA P KAUSHIK
• Keywords: Bogus purchase; Set aside
• Section: 143(1); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH B, MUMBAI BEFORE SHRI C.N. PRASAD, JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA NO.4499/M/2018 ASSESSMENT YEAR: 2009-10 M/S. NELCO STEEL INDIA, SHRI SURESH AMARLAL MEHTA PROP. M/S. NELCO STEEL INDIA, 29, 2 ND FLOOR, HABIB BLDG, 2 ND PARJRAPOLE LANE, C.P. TANK, MUMBAI- 400004 PAN: ADBPM7463M VS. INCOME TAX OFFICER 19(3)(4), AAYAKAR BHAVAN, MUMBAI (APPELLANT) (RE SPONDENT) PRESENT FOR: ASSESSEE BY : NONE REVENUE BY : MS. KAVITA P. KAUSHIK, D.R. DATE OF HEARING : 16.10.2019 DATE OF PRONOUNCEMENT : 17.12.2019 O R D E R PER RAJESH KUMAR, ACCOUNTANT MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE REVEN UE AGAINST THE ORDER DATED 16.04.2010 OF THE COMMISSIO NER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS TH E CIT(A)] RELEVANT TO ASSESSMENT YEAR 2009-10. 2. AT THE TIME OF HEARING, NEITHER THE ASSESSEE NOR HIS AUTHORISED REPRESENTATIVE WAS PRESENT TO ATTEND THE HEARING. WE ARE THEREFORE DECIDING THE APPEAL OF THE ASSESSEE A FTER HEARING THE LD. D.R. AND CONSIDERING THE MERITS OF THE CASE . ITA NO.4499/M/2018 M/S. NELCO STEEL INDIA 2 3. THE ONLY ISSUE RAISED BY THE ASSESSEE IS AGAINST THE CONFIRMATION OF ORDER OF AO BY LD. CIT(A) UPHOLDING THE ADDITION MADE OF RS.11,13,225/- ON ACCOUNT OF BOGUS PURCHASE S. 4. THE FACTS IN BRIEF ARE THAT THE ASSESSEE FILED R ETURN OF INCOME ON 29.07.2009 DECLARING INCOME OF RS.7,61,27 0/- WHICH WAS PROCESSED UNDER SECTION 143(1) OF THE ACT. THE REAFTER, THE ASSESSMENT WAS FRAMED VIDE ORDER DATED 26.12.2011 DETERMINING THE INCOME OF RS.8,22,030/-. THEREAFTE R, THE CASE OF THE ASSESSEE WAS REOPENED UNDER SECTION 147 OF T HE ACT BY ISSUING NOTICE UNDER SECTION 148 AFTER THE AO RECEI VED INFORMATION FROM DGIT THAT ASSESSEE HAS MADE BOGUS PURCHASES FROM THREE PARTIES AGGREGATING TO RS.89,05,804/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS REQUIRED BY THE AO TO FILE VARIOUS EVIDENCES TO PROVE THE GENUI NENESS OF THE PURCHASES. THE ASSESSEE FILED COPIES OF LEDGER ACC OUNTS, BILLS, VOUCHERS, PAYMENT DETAILS, HOWEVER FAILED TO FILE T HE DOCUMENTS SUCH AS DELIVERY CHALLAN, LORRY RECEIPT, TRANSPORTA TION DETAILS ETC. FINALLY, THE AO TREATED THE PURCHASES AS BOGUS AND APPLIED A RATE OF 12.5% TO TAX THE PROFITS ON THE SAID BOGUS PURCHASES BY FOLLOWING THE DECISION OF HONBLE GUJARAT HIGH COUR T IN THE CASE OF CIT VS. SIMIT P. SHETH 356 ITR 451 AND THUS MADE AN ADDITION OF RS.11,13,225/-. IT IS PERTINENT TO STA TE THAT ASSESSEE IS DEALING IN FERROUS AND NON FERROUS METAL. 5. IN THE APPELLATE PROCEEDINGS, THE LD. CIT(A) DIS MISSED THE APPEAL OF THE ASSESSEE BY HOLDING THAT WHERE THE SA LES WERE NOT DISPUTED THEN COURSE AVAILABLE BEFORE AO IS TO APP LY GP RATE IN ORDER TO TAX THE SAVINGS MADE BY THE ASSESSEE BY PU RCHASING THE GOODS FROM THE GREY MARKET AND ACCORDINGLY JUSTIFIE D THE ORDER OF ITA NO.4499/M/2018 M/S. NELCO STEEL INDIA 3 AO IN THE LIGHT OF HONBLE GUJARAT HIGH COURT DECIS ION IN THE CASE OF CIT VS. SIMIT P. SHETH (SUPRA). 6. AFTER HEARING THE LD. D.R. AND PERUSING THE MATE RIAL ON RECORD, WE OBSERVE THAT THE ASSESSEE IS UNDOUBTEDLY A DEALER IN FERROUS AND NON FERROUS METALS. THERE IS NO DISP UTE THAT THE INCOME OF THE ASSESSEE IS TO BE ASSESSED ON PERCEN TAGE BASIS SO FAR AS THE BOGUS PURCHASES ARE CONCERNED. NOW THE ONLY DISPUTE BEFORE US IS WHETHER THE 12.5% AS UPHELD BY LD. CIT (A) IS CORRECT OR NOT. IN THE CASE OF FERROUS AND NON FER ROUS ITEMS, THE GP RATE RANGES FROM 2% TO 4% AND VAT RATE IS 4%. T HEREFORE, ESTIMATING THE INCOME ON THE BOGUS PURCHASES BY APP LYING 12.5% ON THE BOGUS PURCHASES IS EXCESSIVE AND UNREA SONABLE. IN OUR OPINION, THE GP RATE HAS TO BE APPLIED HAVIN G REGARD TO THE GP RATE IN THE TRADE OF THE ASSESSEE AND THE LI KELY SAVINGS WHICH THE ASSESSEE MAY HAVE MADE BY PURCHASING THE GOODS FROM THE GREY MARKET. ACCORDINGLY, IN THE PRESENT FACTS AND CIRCUMSTANCES IT WOULD BE REASONABLE IF A RATE OF 4 % IS APPLIED TO ESTIMATE THE PROFIT ON BOGUS PURCHASES. ACCORDI NGLY, WE SET ASIDE THE ORDER OF LD. CIT(A) AND DIRECT THE AO TO APPLY A RATE OF 4% OF BOGUS PURCHASES. 7. IN RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 17.12.2019. SD/- SD/- (C.N. PRASAD) (RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 17.12.2019. * KISHORE, SR. P.S. ITA NO.4499/M/2018 M/S. NELCO STEEL INDIA 4 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.