M/S DHANLAXMI STEEL DISTRIBUTORS, Mumbai V. ITO 19(1)(4), Mumbai

ITA 4539/MUM/2019

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 6791 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-01-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 04-07-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SANJAY SETHI
• Keywords: Bogus purchase; Accommodation entries; Onus to prove
• Section: 143(3); 143(1); 147; 148

Judgement Text

IN THE INC OME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI VIKAS AWASTHY , JM & SHRI S . RIFAUR RAHMAN, AM ./ I.T.A. NO . 4539 /MUM/2019 ( / ASSESSMENT YEAR: 20 09 - 10 ) M/S DHANLAXMI STEEL DISTRIBUTORS, 38 - A, KRISHNA BAUG, GR. FLOOR, 2 ND PARSIWADA LANE, V. P. ROAD, MUMBAI - 400 004 / VS. ITO - 1 9(1)(4 ), MATRU MANDIR, NANA CHOWK , MUMBAI - 400 007 ./ ./ PAN NO. A A DFD4807D ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : NONE / RESPONDENTBY : SHRI SANJAY SETHI, DR / DATE OF HEARING : 11.01 .202 1 / DATE OF PRONOUNCEMENT : 25.01.2021 / O R D E R PER S. RIFAUR RAHMAN, ACCOUNTANT MEMBER : THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. COMMIS S IONER OF INCOME TAX (APPEALS) - 5 IN SHORT REFERRED AS LD. CIT(A) , MUMBAI, DATED 24.04 .2019 FOR A SSESSMENT YEAR (IN SHORT A Y ) 20 09 - 10 . 2 I.T.A. NO. 4539 /MUM/201 9 M/S DHANLAXMI STEEL DISTRIBUTORS 2. AT THE OUTSET, IT IS NOTICED THAT NO NE HAS APPEARED ON BEHALF OF ASSESSEE IN SPITE OF CALLS AND EVEN NO APPLICATION FOR ADJOURNMENT WAS MOVED. ON THE OTHER HAND, L D. DR IS PRESENT IN THE COURT AND IS READY WITH ARGUMENTS. THEREFORE , WE HAVE DECIDED TO PROCEED WITH THE HEARING OF THE CASE EX - PA RTE WITH THE ASSISTANCE OF THE L D. DR AND THE MATERIAL PLACED ON RECORD. 3. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE FILED ITS RETURN OF INCOME ON 22.08.2009 DECLARING TOTAL INCOME OF RS. 6 5, 080 / - . THE RETURN WAS PROCESSED U/S 143(1) OF THE ACT. SUBSEQUENTLY, I NFORMATION WAS RECEIVED FROM THE SALES TAX D EPARTMENT THAT ASSESSEE IS IN DULGED IN BOGUS PURCHASES. ON VERIFICATION, THE DETAILS OF ACCOMMODATION ENTRIES AVAILED BY THE ASSESSEE IS GIVEN BELOW: - HAWALA PARTIES AMOUNT IN RS. NEWZONE MULTI TRADE PVT. LTD. 9,53,457 / - RAJENDRA IMP EX INDIA 29,31,709/ - TOTAL 38,85,166/ - ACCORDINGLY, TH E ASSESSMENT WAS REOPENED U/S 147 OF THE ACT BY ISSUING NOTICE U/S 148 OF THE ACT AND THEREAFTER, THE ASSESSMENT WAS COMPLETED U/S 143(3) R.W.S. 147 OF THE ACT DETERM INING THE TOTAL INCOME AT RS. 5,50,730 / - AFTER MAKING ADDITION OF RS. 3 I.T.A. NO. 4539 /MUM/201 9 M/S DHANLAXMI STEEL DISTRIBUTORS 4,85,646 / - BEING 12.5% ON ACCOUNT OF TOTAL NON - GENUINE PURCHASES OF RS. 38,85,166 / - . 4 . AGGRIEVED BY THE ABOVE ORDER OF AO, ASSESSEE PREFERRED APPEAL BEFORE LD. CIT(A) AND LD. CIT(A) AFTER CONSIDERING THE SUBMISSION OF ASSESSE E AND BY RELYING ON THE JUDICIAL PRONOUNCEMENTS, SUSTAINED THE ADDITION @ 12.5% MADE BY AO AND DISMISSED THE APPEAL OF THE ASSESSEE. 5 . AGGRIEVED WITH THE ABOVE ORDER, ASSESSEE IS PREFERRED THE APPEAL BEFORE US. 6 . CONSIDE RED THE SUBMISSION OF LD. DR AND MATERIAL PLACED ON RECORD, WE NOTICE THAT ITAT MUMBAI BENCH IN THE CASE OF HEERAMANECK & SON VRS. ACIT PASSED IN ITA NO. 1862/MUM/2017, WHEREIN IT WAS HELD AS UNDER: - 5. SO FAR AS THE QUANTUM OF ADDITIONS ARE CONCERNED, WE ARE OF THE CONSIDERED OPINION THAT THE ASSESSEE WAS ENGAGED IN TRADING ACTIVITIES, WHICH COULD NOT BE CARRIED OUT WITHOUT ACTUAL PURCHASE OF MATERIAL. THE TURNOVER ACHIEVED BY THE ASSESSEE HAS NOT BEEN DISPUTED OR DISTURBED BY THE REVENUE AND THE PAYMENTS WERE THROUGH BANKING CHANNELS. THE ASSESSEE WAS IN POSSESSION OF PRIMARY PURCHASE DOCUMENTS AND WAS ABLE TO RECONCILE 4 I.T.A. NO. 4539 /MUM/201 9 M/S DHANLAXMI STEEL DISTRIBUTORS THE QUANTITATIVE DETAILS. HOWEVER, AT THE SAME TIME, THE STATED PURCHASES WERE UNDER GRAVE DOUBT SINCE THE ASSESSEE COULD NOT PRODUCE ANY OF THE PARTY TO CONFIRM THE TRANSACTIONS AND THE INFORMATION RECEIVED FROM INVESTIGATION WING REVEALED THAT ALL THE SUPPLIERS WERE ENGAGED IN CARRYING OUT ONLY PAPER TRANSACTIONS WITHOUT ACTUAL DELIVERY OF MATERIAL. THE COMPLETE ONUS TO PROVE THE PURCHASES CONCLUSIVELY WAS ON ASSESSEE, WHICH HAS REMAINED UN - DISCHARGED. IN SUCH A SCENARIO, THE ADDITION, WHICH COULD BE MADE, WAS TO ACCOUNT FOR PROFIT ELEMENT EMBEDDED IN THESE PURCHASE TRANSACTIONS TO FACTORIZE FOR PROFIT ELEMENT EARNED BY ASSESSEE AGAINST POS SIBLE PURCHASE OF MATERIAL IN THE GREY MARKET AND UNDUE BENEFIT OF VAT AGAINST ALLEGED BOGUS PURCHASES, WHICH LOWER AUTHORITIES HAVE RIGHTLY DONE. HOWEVER, CONSIDERING GP RATE OF 10.59% ALREADY REFLECTED BY THE ASSESSEE AS WELL AS VAT RATE APPLICABLE TO TH E GOODS BEING DEALT WITH BY THE ASSESSEE, WE FIND THE ESTIMATION TO BE ON THE HIGHER SIDE AND THEREFORE, WE RESTRICT THE SAME TO 3% OF ALLEGED BOGUS PURCHASES OF RS.1,87,08,961/ - . THE SAME COMES TO RS.5,61,269/ - . THE ORDER OF LD. AO STANDS MODIFIED TO THAT EXTENT. THE LD. AO IS DIRECTED TO RE - COMPUTE THE INCOME OF THE ASSESSEE IN TERMS OF OUR ABOVE ORDER. 7 . THEREFORE, RESPECTFULLY FOLLOWING THE AFORESAID DECISION, WE NOTICE THAT ASSESSEE HAS ALREADY DECLARED GP RATIO @ 4.89 % 5 I.T.A. NO. 4539 /MUM/201 9 M/S DHANLAXMI STEEL DISTRIBUTORS FROM THE PURCHASES MADE FROM PR AKASH STEEL & ALLIES AND OTHERS RESPECTIVELY. WE NOTICE FROM THE RECORD THAT LD. CIT(A) HAS SUSTAINED THE ADDITION MADE BY THE AO ON ESTIMATING @ 12.5% OF THE ALLEGED BOGUS PURCHASES OVERLOOKING THAT ASSESSEE HAS ALREADY DECLARED GP RATIO @ 4.89 % AS SUBMITTED BY ASSESSEE . AS PER THE DECISION COORDINATE BENCH OF ITAT AND THE DECISION OF HONBLE GUJRAT HIGH COURT IN THE CASE OF CIT VRS. SMITH P. SETH (2013) 356 ITR 451 (GUJ) , WE ARE INCLINED TO DIRECT THE AO TO ESTIMATE THE INCOME @ 7.61% (12.5% - 4 .89 %) OF THE ALLEGED PURCHASES. ACCORDINGLY, THE GROUND NO. 1 RAISED BY THE ASSESSEE ARE PARTLY ALLOWED. 8. WITH REGARD TO OTHER GROUNDS OF APPEAL, WE NOTICE THAT ASSESSEE HAS RAISED EFFECTIVELY 5 GROUNDS AND WE HAVE ALREADY ADJUDICATED GROUND NO. 1. WITH REGARD TO GROUND NO. 2, WE NOTICE THAT LD. CIT(A) HAS DEALT WITH THE ISSUE, THEREFORE WE DO NOT SEE ANY REASON TO INTERFERE . ACCORDINGLY GROUND NO. 2 IS DISMISSED. 9. WITH REGARD TO GROUND NO. 3 & 4 RELATING TO JURISDICTIONAL ISSUE WHICH WAS NOT RAISED BEFORE FIRST APPELLATE A UTHORITY. I T CAN ONLY BE TREATED AS ADDITIONAL GROUND. THE ASSESSEE SHOULD HAVE MOVED SEPARATE PETITION FOR ADMISSION. THEREFORE, THESE GROUNDS 6 I.T.A. NO. 4539 /MUM/201 9 M/S DHANLAXMI STEEL DISTRIBUTORS ARE DISMISSED. WITH REGARD TO GROUND NO. 5, IT IS CONSEQUENTIAL IN NATURE, THUS REQUIRES NO SPECIFIC ADJUDICATION. 10 . IN THE NET RESULT, THE APPEAL FILED BY THE ASSESSEE STA NDS PARTLY ALLOWED . ORDER S PRONOUNCED IN THE OPEN COURT ON 2 5.01. 2021. SD/ - SD/ - ( VIKAS AWASTHY ) (S. RIFAUR RAHMAN ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED : 25/01 /2021 SR.PS . DHANANJAY / 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 F I LE / BY ORDER, . / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI