V.R.ENTERPRISES, MUMBAI V. ITO WARD 17(3)(5), MUMBAI

ITA 4650/MUM/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 5395 (ITAT-MUMBAI)
• Duration Of Justice: 9 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-05-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 30-07-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: CHAUDHARY ARUN KUMAR SINGH LD
• Assessee Lawyers: RAHUL HAKANI LD
• Keywords: Bogus purchase; Question of law; Accommodation entries; Reassessment proceedings
• Section: 143(3); 142(1); 147; 148

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUMBAI , , BEFORE SHRI SAKTIJIT DEY, JM AND SHRI MANOJ KUMAR AGGARWAL, AM ./ I.T.A. NO.4650/MUM/2018 ( / ASSESSMENT YEAR: 2009-10) V.R.ENTERPRISES 204, GUPTA BHAVAN AHMEDABAD STREET MASJID (EAST), MUMBAI 400 009 / VS. ITO - 1 7 (3)( 5 ) R.NO.137, AAYKAR BHAVAN M.K.ROAD MUMBAI 400 021 ! ./ ./PAN/GIR NO. AAGFV-3063-N ( /APPELLANT ) : ( / RESPONDENT ) ASSESSEE BY : SHRI RAHUL HAKANI LD. AR DEPARTMENT BY : CHAUDHARY ARUN KUMAR SINGH-LD.DR / DATE OF HEARING : 16/05/2019 / DATE OF PRONOUNCEMENT : 16/05/2019 / O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER):- 1. AFORESAID APPEAL BY ASSESSEE FOR ASSESSMENT YEAR [IN SHORT REFERRED TO AS AY] 2009-10 CONTEST THE ORDER OF LD. COMMIS SIONER OF INCOME-TAX (APPEALS)-28, MUMBAI, [IN SHORT REFERRED TO AS CIT (A)], APPEAL NO. CIT(A)- 28/IT-488/ITO-17(3)(5)/2015-16 DATED 29/06/2018 QUA ENHANCEMENT OF CERTAIN ADDITIONS ON ACCOUNT OF ALLEGED BOGUS PURCHASES. ALTHOUGH, THE ADDITIONAL GROUNDS HAVE BEEN FILED, HOWEVER, THE SA ME HAS NOT BEEN 2 PRESSED DURING HEARING BEFORE US AND THEREFORE, NOT CONSIDERED WHILE ADJUDICATING THE APPEAL. 2.1 FACTS IN BRIEF ARE THAT THE ASSESSEE BEING RESIDENT FIRM STATED TO BE ENGAGED IN TRADING OF IRON & STEEL WAS ASSESSED U/S 143(3) R.W.S.147 FOR IMPUGNED AY ON 23/03/2015 WHEREIN THE ASSESSEE WAS SADDLED WITH ADDITION OF RS.10.41 LACS ON ACCOUNT OF ALLEGED BOGUS PURCHASES THE ORIGINAL RETURN OF INCOME FILED BY THE ASSESSEE WAS PROCESSED U/S 143(1). 2.2 THE REASSESSMENT PROCEEDINGS GOT TRIGGERED PURS UANT TO RECEIPT OF CERTAIN INFORMATION FROM SALES TAX DEPARTMENT, MAHARASHTRA WHEREIN IT TRANSPIRED THAT THE ASSESSEE STOOD BENEFICIARY OF A CCOMMODATION PURCHASE BILLS AGGREGATING TO RS.83.35 LACS FROM 2 SUSPICIOU S ENTITIES, THE DETAILS OF WHICH HAVE ALREADY BEEN EXTRACTED IN PARA 4.1 OF THE QUANTUM ASSESSMENT ORDER. ACCORDINGLY, THE CASE WAS REOPENED U/S 147 B Y ISSUANCE OF NOTICE U/S 148 ON 27/03/2014 WHICH WAS FOLLOWED BY STATUTO RY NOTICES U/S 143(2) & 142(1) WHEREIN THE ASSESSEE WAS DIRECTED TO SUBSTAN TIATE THE AFORESAID PURCHASES. 2.3 ALTHOUGH THE ASSESSEE DEFENDED THE PURCHASES MA DE BY HIM, HOWEVER, THE SAME WERE NOT ACCEPTED BY LD. AO FOR V ARIOUS REASONS AS SUMMARIZED IN PARA 4.5 OF THE QUANTUM ASSESSMENT ORDER. ONE OF THE REASONS WAS THAT THE ASSESSEE DID NOT MAKE AVAILABL E THE DETAILS OF TRANSPORTATION OF THE MATERIAL PURPORTED TO HAVE BE EN PURCHASED FROM THE AFORESAID HAWALA DEALERS AND COULD NOT PROVIDE ANY TRANSPORTATION RECEIPTS, DELIVERY CHALLANS ETC. IN THE AFFIDAVITS FILED BEFO RE SALES TAX AUTHORITIES, THE STATED DEALER ADMITTED TO HAVE INDULGED IN PROVIDIN G ACCOMMODATION ENTRIES 3 WITHOUT CARRYING OUT ANY ACTUAL BUSINESS ACTIVITIES . THE ASSESSEE COULD NOT PRODUCE ANY OF THE SUPPLIER TO CONFIRM THE TRANSACT IONS. 2.4 THE FACTUAL MATRIX LED THE LD. AO TO BELIEVE TH AT THE SAID PURCHASES WERE NON-GENUINE AND ACCORDINGLY, THE ADDITIONS AGA INST THESE PURCHASES WERE ESTIMATED @12.5% WHICH RESULTED INTO AN ADDITI ON OF RS.10,41,892/- IN THE HANDS OF THE ASSESSEE. 3. AGGRIEVED, THE ASSESSEE PREFERRED APPEAL AGAINST THE SAME BEFORE LD. CIT(A). THE LD. FIRST APPELLATE AUTHORITY, AFTE R CONSIDERING ASSESSEES SUBMISSIONS AND MATERIAL ON RECORD CAME TO A CONCLU SION THAT THE CIRCUMSTANCES CALLED FOR FULL ADDITIONS AS AGAINST 12.5% ESTIMATED BY LD. AO. ACCORDINGLY, ENHANCEMENT NOTICE WAS ISSUED TO T HE ASSESSEE ON 01/06/2018 WHEREIN THE ASSESSEE WAS SHOW-CAUSED AS TO WHY THE WHOLE AMOUNT OF BOGUS PURCHASES MAY NOT BE ADDED TO THE INCOME OF THE ASSESSEE. THE ASSESSEE REFUTED THE SAME BY SUBMITTI NG THAT PURCHASE BILLS WERE PRODUCED, CORRESPONDING SALES WERE MADE AND TH E PAYMENTS TO THE SUPPLIERS WAS THROUGH BANKING CHANNELS. THE ATTENTI ON WAS DRAWN TO THE FACT THAT VAT WAS PAID TWICE. HOWEVER, NOT CONVINCE D, THE ADDITIONS WERE ENHANCED TO 100% IN THE BACKGROUND OF SEVERAL JUDIC IAL PRONOUNCEMENTS, WHICH HAVE ALREADY BEEN ENUMERATED IN THE IMPUGNED ORDER AND NOT REPEATED HERE FOR THE SAKE OF BREVITY. AGGRIEVED, T HE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 4. THE LD. AUTHORIZED REPRESENTATIVE FOR ASSESSEE [ AR], SHRI RAHUL HAKANI, VEHEMENTLY CONTESTED THE ENHANCEMENT MADE B Y LD. FIRST APPELLATE AUTHORITY WHEREAS LD. DR SUPPORTED THE STAND IN IMP UGNED ORDER BY PLACING 4 RELIANCE ON THE DECISION OF HONBLE GUJARAT HIGH CO URT RENDERED IN N.K.PROTEINS LTD. VS. CIT [2016-TIOL-3165-HC-AHM-IT ] . 5. WE HAVE CAREFULLY HEARD THE RIVAL SUBMISSIONS AN D PERUSED RELEVANT MATERIAL ON RECORD AND DELIBERATED ON JUDICIAL ANNO UNCEMENTS CITED BEFORE US. WE FIND THAT ASSESSEE WAS IN POSSESSION OF PRIM ARY PURCHASE DOCUMENTS AND THE PAYMENTS TO THE SUPPLIERS WAS THR OUGH BANKING CHANNELS. THE ASSESSEE HAD ESTABLISHED CORRESPONDIN G SALES BEFORE LD. AO. THE BOOKS OF ACCOUNTS WERE AUDITED WHEREIN QUAN TITATIVE DETAILS OF STOCK WAS PROVIDED. WE ARE OF THE CONSIDERED OPINIO N THAT THERE COULD BE NO SALE WITHOUT ACTUAL PURCHASE OF MATERIAL KEEPING IN VIEW THE FACT THAT THE ASSESSEE WAS ENGAGED IN TRADING ACTIVITIES. AT THE SAME TIME, THE ASSESSEE FAILED TO PRODUCE EVEN A SINGLE SUPPLIER TO CONFIRM THE PURCHASE TRANSACTIONS. THE DELIVERY OF MATERIAL COULD NOT BE SUBSTANTIATED. THEREFORE, IN SUCH A SITUATION, THE ADDITION, WHICH COULD BE M ADE, WAS TO ACCOUNT FOR PROFIT ELEMENT EMBEDDED IN THESE PURCHASE TRANSACTI ONS TO FACTORIZE FOR PROFIT EARNED BY ASSESSEE AGAINST POSSIBLE PURCHASE OF MATERIAL IN THE GREY MARKET AND UNDUE BENEFIT OF VAT AGAINST SUCH BOGUS PURCHASES. THE LD. AO, IN OUR OPINION, HAD CLINCHED THE ISSUE IN THE R IGHT PERSPECTIVE AND WAS FAIR ENOUGH TO ESTIMATE THE ADDITIONS @12.5%. THERE FORE, CONCURRING WITH THE STAND OF LD. AO, WE RESTORE THE ORDER OF LD. AO . ACCORDINGLY, THE ENHANCEMENT OF RS.72.93 LACS AS MADE BY LD. FIRST A PPELLATE AUTHORITY STANDS DELETED. 6. OUR AFORESAID VIEW IS IN LINE WITH THE RECENT DE CISION OF HONBLE BOMBAY HIGH COURT RENDERED IN BUNCH OF APPEALS TITL ED AS PR.CIT VS. M/S MOHOMMAD HAJI ADAM & CO. [ITA NO.1004 & OTHERS OF 2 016, DATED 5 11/02/2019] WHEREIN HONBLE COURT DISTINGUISHING THE CITED CASE LAW OF HONBLE GUJARAT HIGH COURT RENDERED IN N.K. INDUSTRIES LTD. VS DY. C.I.T. IN TAX APPEAL NO. 240 OF 2003 AND CONNECTED APPEALS DECIDED ON 20TH JUNE, 2016 OBSERVED AS UNDER: - 8. IN THE PRESENT CASE, AS NOTED ABOVE, THE ASSESSE E WAS A TRADER OF FABRICS. THE A.O. FOUND THREE ENTITIES WHO WERE INDULGING IN BOGUS BI LLING ACTIVITIES. A.O. FOUND THAT THE PURCHASES MADE BY THE ASSESSEE FROM THESE ENTITIES WERE BOGUS. THIS BEING A FINDING OF FACT, WE HAVE PROCEEDED ON SUCH BASIS. DESPITE THIS, THE QUESTION ARISES WHETHER THE REVENUE IS CORRECT IN CONTENDING THAT THE ENTIRE PU RCHASE AMOUNT SHOULD BE ADDED BY WAY OF ASSESSEE'S ADDITIONAL INCOME OR THE ASSESSEE IS CORRECT IN CONTENDING THAT SUCH LOGIC CANNOT BE APPLIED. THE FINDING OF THE CIT(A) AND THE TRIBUNAL WOULD SUGGEST THAT THE DEPARTMENT HAD NOT DISPUTED THE ASSESSEE'S SALE S. THERE WAS NO DISCREPANCY BETWEEN THE PURCHASES SHOWN BY THE ASSESSEE AND THE SALES DECLARED. THAT BEING THE POSITION, THE TRIBUNAL WAS CORRECT IN COMING TO THE CONCLUSION THAT THE PURCHASES CANNOT BE REJECTED WITHOUT DISTURBING THE SALES IN CASE OF A TRADER. THE TRIBUNAL, THEREFORE, CORRECTLY RESTRICTED THE ADDITIONS LIMITED TO THE E XTENT OF BRINGING THE G.P. RATE ON PURCHASES AT THE SAME RATE OF OTHER GENUINE PURCHAS ES. THE DECISION OF THE GUJARAT HIGH COURT IN THE CASE OF N.K. INDUSTRIES LTD. (SUPRA) CANNOT BE APPLIED WITHOUT REFERENCE TO THE FACTS. IN FACT IN PARAGRAPH 8 OF THE SAME JUDGMENT THE COURT HELD AND OBSERVED AS UNDER- SO FAR AS THE QUESTION REGARDING ADDITION OF RS.3 ,70,78,125/- AS GROSS PROFIT ON SALES OF RS.37.08 CRORES MADE BY THE ASSESSING OFFICER DESPI TE THE FACT THAT THE SAID SALES HAD ADMITTEDLY BEEN RECORDED IN THE REGULAR BOOKS DURIN G FINANCIAL YEAR 1997-98 IS CONCERNED, WE ARE OF THE VIEW THAT THE ASSESSEE CANNOT BE PUNISHE D SINCE SALE PRICE IS ACCEPTED BY THE REVENUE. THEREFORE, EVEN IF 6 % GROSS PROFIT IS TAK EN INTO ACCOUNT, THE CORRESPONDING COST PRICE IS REQUIRED TO BE DEDUCTED AND TAX CANNOT BE LEVIED ON THE SAME PRICE. WE HAVE TO REDUCE THE SELLING PRICE ACCORDINGLY AS A RESULT OF WHICH PROF IT COMES TO 5.66%. THEREFORE, CONSIDERING 5.66% OF RS.3,70,78,125/- WHICH COMES TO RS.20,98,621.88 WE THINK IT FIT TO DIRECT THE REVENUE TO ADD RS.20,98,621.88 AS GROSS PROFIT AND MAKE NECESSARY DEDUCTIONS ACCORDINGLY. ACCORDINGLY, THE SAID QUESTION IS ANSWERED PARTIALLY IN FAVOR OF THE ASSESSEE AND PARTIALLY IN FAVOR OF THE REVENUE. 9 IN THESE CIRCUMSTANCES, NO QUESTION OF LAW, THERE FORE, ARISES. ALL INCOME TAX APPEALS ARE DISMISSED, ACCORDINGLY. NO ORDER AS TO COSTS. 7. RESULTANTLY, THE APPEAL STANDS ALLOWED IN TERMS OF OUR ABOVE ORDER. ORDER PRONOUNCED IN THE OPEN COURT ON16/05/2019. SD/- SD/- (SAKTIJIT DEY) (MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 16/05/2019 SR.PS:-JAISY VARGHESE 6 ! '! / 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