DCIT 14(2)(2), Mumbai V. M/S MODY CHEMI PHARMA PVT LTD., Mumbai

ITA 4704/MUM/2019

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 6697 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-01-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 12-07-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANJAY J SETHI
• Keywords: Bogus purchase; Accommodation entries; Reassessment proceedings
• Section: 143(1); 22; 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (VIRTUAL COURT) SMC BENCH, MUMBAI BEFORE SHRI C.N. PRASAD, HON'BLE JUDICIAL MEMBER ITA NO. 4704 /MUM/201 9 ( A.Y. 2009 - 10) DCIT 14 ( 2 )( 2 ) ROOM NO. 461, 4 TH FLOOR AAYAKAR BHAVAN, M.K. ROAD MUMBAI 400 020 V. M/S. MODY CHEMI PHARMA PVT. LTD., UNIT NO . 407/408/409 SWASTIK DISA PARK KOHINOOR PRINTING WORKS L.B.S. MARG, GHATKOPAR (W) MUMBAI - 400086 PAN: AADCM1808L ( A PPELLANT) (RESPONDENT) ASSESSEE BY : NONE DEPARTMENT BY SHRI SANJAY J. SETHI DATE OF HEARING : 21 .01.2021 DATE OF PRONOUNCEMENT : 21 .01.2021 O R D E R PER C.N. PRASAD (JM) 1. THIS APPEAL IS FILED BY THE REVENUE AGAINST ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) 22 , MUMBAI [HEREINAFTER IN SHORT LD.CIT(A)] DATED 30.04.2019 FOR THE A.Y. 2009 - 10 IN RESTRICTING THE ADDITION TO 12.5% AS AGAINST THE ENTIRE BOGUS PURCHASES DISALLOWED BY THE ASSESSING OFFICER. 2 ITA NO. 4704/MUM/2019 (A.Y. 2009 - 10) M/S. MODY CHEMI PHARMA PVT. LTD., 2. BRIEFLY STATED THE FACTS ARE THAT, ASSESSEE ENGAGED IN THE BUSINESS OF MANUFACTURING AND TRADING CHEMICALS, FILED RETURN OF INCOME ON 29.09.2009 DECLARING INCOME OF . 39,15,350 / - FOR THE A.Y . 2009 - 10 AND THE RETURN WAS PROCESSED U/S. 143(1) OF THE ACT. SUBSEQUENTLY, ASSESSING OFFICER RECEIVED INFORMATION FROM THE SALES TAX DEPARTMENT, MUMBAI ABOUT THE ACCOMMODATION ENTRIES PROVIDED BY VARIOUS DEALERS AND ASSESSEE WAS ALSO ONE OF THE BENEFICIARY FROM THOSE DEALERS. THE ASSESSMENT WAS REOPENED U/S. 147 OF THE ACT BASED ON THE INFORMATION RECEIVED FROM SALES TAX DEPARTMENT, MUMBAI, THAT THE ASSESSEE HAS AVAILED ACCOMMODATION ENTRIES FROM VARIOUS DEALERS WHO ARE SAID TO BE PROVIDING ACCOMMODATION ENTRIES WITHOUT THERE BEING TRANSPORTATION OF ANY GOODS. IN THE REASSESSMENT PROCEEDINGS, THE ASSESSEE WAS REQUIRED TO PROVE THE GENUINENESS OF THE PURCHASES MADE FROM M/S. SURAT TUBE CORPORATION. IN RESPONSE A SSESSEE VIDE LETTER DATED 18.02.2015 FURNISHED COPY OF PURCHASE INVOICE S, PURCHASE AND EXPENSES REGISTER, LEDGER ACCOUNT AND COPIES OF BANK STATEMENTS AND SUBMITTED THAT THE PURCHASES MADE ARE GENUINE. ASSESSEE FURTHER SUBMITTED THAT THE PAYMENTS ARE MADE THROUGH ACCOUNT PAYEE CHEQUES AS SUCH CONTENDED THAT ALL THE PURCHASE S ARE GENUINE. HOWEVER, PARTY WAS NOT PRODUCED BEFORE THE ASSESSING OFFICER . 3 ITA NO. 4704/MUM/2019 (A.Y. 2009 - 10) M/S. MODY CHEMI PHARMA PVT. LTD., 3. NOT CONVINCED WITH THE SUBMISSIONS OF THE ASSESSEE THE ASSESSING OFFICER TREATED THE PURCHASES AS NON - GENUINE AND HE WAS OF THE OPINION THAT ASSESSEE HAD OBTAINED ONLY ACCOMMODATI ON ENTRIES WITHOUT THERE BEING ANY TRANSPORTATION OF MATERIALS AND THE ASSESSEE MIGHT HAVE MADE PURCHASES IN THE GRAY MARKET. IT IS THE FINDING OF THE ASSESSING OFFICER THAT ASSESSEE FAILED TO PROVE THE PURCHASES MADE ARE ACTUALLY DELIVERED TO IT AND CONS UMPTION OF THE SAME IN THE PRODUCTION OF FINISHED GOODS, NO QUANTITATIVE DETAILS OF PURCHASES MADE LINKED UP WITH THE QUANTITY OF CONSUMPTION IN FINISHED GOODS AND SEMI - FINISHED GOODS. THEREFORE, ASSESSING OFFICER TREATED PURCHASES OF . 59,467 / - AS NON - GENUINE AND BOGUS . ON APPEAL THE LD.CIT(A) CONSIDERING THE EVIDENCES AND VARIOUS SUBMISSIONS OF THE ASSESSEE RESTRICTED THE ADDITION TO 12.5% OF THE ALLEGED BOGUS PURCHASES. 4. ASSESSEE THROUGH ITS AUTHORIZED REPRESENTATIVE FILED A LETTER DATED 20.01.202 1 AND SUBMITTED THAT IMPUGNED PURCHASE WAS NOT A PURCHASE OF RAW MATERIAL OF CONSUMABLE AND THE PURCHASE WAS AN ITEM DEBITED TO PLANT AND MACHINERY ACCOUNT. THUS, THE AMOUNT IS NOT CLAIMED A DEDUCTION FROM TAXABLE INCOME AND REQUESTED TO UPHOLD THE ORDER OF THE LD.CIT(A). 4 ITA NO. 4704/MUM/2019 (A.Y. 2009 - 10) M/S. MODY CHEMI PHARMA PVT. LTD., 5. LD. DR VEHEMENTLY SUPPORTED THE O RDERS OF THE ASSESSING OFFICER. ON A PERUSAL OF THE ORDER OF THE LD.CIT(A), I FIND THAT THE LD.CIT(A) CONSIDERED THIS ASPECT OF THE MATTER ELABORATELY WITH REFERENCE TO THE SUBMISSIONS OF THE ASSESSEE AND THE AVERMENTS IN THE ASSESSMENT ORDER AND FOLLOWING THE DECISION OF THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT V. SIMIT P. SHETH [356 ITR 451] R ESTRICTED THE ADDITION TO 12.5% OF THE ALLEGED BOGUS PURCHASES . WHILE HOLDING SO, THE LD.CIT(A) OBSERVED AS UNDER: - 5.8 I HAVE CONSIDERED THE FACTS OF THE CASE AND SUBMISSIONS MADE BY THE APPELLANT. THE FACTS OF THE CASE ARE THAT, THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND TRADING CHEMICALS. THE L D. ASSESSING OFFICER RECEIVED INFORMATION THAT A SCAM WAS UNEARTHED BY THE SALES TAX DEPARTMENT WITH RESPECT TO DEALERS WHO ARE PROVIDING ACCOMMODATION ENTRIES IN THE FORM OF BOGUS BILLS WITHOUT EFFECTING THE ACTUALLY DELIVERY OF GOODS. THE SAID INFORMATIO N WAS BASED UPON CERTAIN STATEMENTS/DEPOSITION/AFFIDAVITS FILED BEFORE THE SALES TAX AUTHORITIES. THE LIST OF THE CONCERNED PARTIES WAS FORWARDED TO THE LD. ASSESSING OFFICER BY THE INVESTIGATION WING AND THE ASSESSEE WAS FOUND ONE OF THE BENEFICIARY OF SU CH BOGUS BILLS FROM M/S SURAT TUBE CORPORAT ION OF RS. 59,467/ - . THE LD. ASSESSING OFFICER OBSERVED THAT THERE IS SUPPRESSION OF PRIMARY FACTS IN THE RETURN OF THE ASSESSEE AND THE INCOME WAS FOUND NOT TO BE CORRECTLY COMPUTED. ONE UNDISPUTED FACT THAT IS O OZING OUT IS THAT THE ASSESSEE COULD NOT SUBSTANTIATE THE GENUINENESS OF THE PURCHASES MADE FROM HAWALA PARTIES IN THE FORM OF ACCOMMODATION ENTRIES OUT OF THESE NON - GENUINE TRANSACTIONS. EVEN VIDE ORDER SHEET ENTRY DATED 13/02/2015, THE ASSESSEE WAS ASKE D TO ESTABLISH THE GENUINENESS OF THE PARTIES AND THE PURCHASES MADE FROM THEM. THE ASSESSEE WAS PROVIDED OPPORTUNITY BY THE A.O. TO PRODUCE THE PARTIES ALONG WITH BOOKS OF ACCOUNTS AS THESE PARTIES WERE FOUND NON - EXISTENCE (PARA - 4.4 OF THE ASSESSMENT ORDE R). THE ASSESSEE WAS FOUND INDULGED IN NONGENUINE TRANSACTION WITH THE INTENSION TO SUPPRESS THE T R UE PROFIT AND TO REDUCE THE TAX LIABILITY. THE L D. ASSESSING OFFICER DISALLOWED THE BOGUS PURCHASES OF RS. 59,467/ - . IT IS NOTED THAT IT IS A FACT THAT THE ASSESSEE COULD NOT PROVE THE GENUINENESS OF THE PURCHASES AND EVEN THE CONCERNED PARTIES WERE NOT FOUND EXISTENCE AT THE GIVEN ADDRESSES. EVEN ON ASKING THE BY THE LD. ASSESSING OFFICER, THE 5 ITA NO. 4704/MUM/2019 (A.Y. 2009 - 10) M/S. MODY CHEMI PHARMA PVT. LTD., ASSESSEE COULD NOT PRODUCE SUCH PARTIES OR THEIR CONFIRMATIONS ON RECORD. IT IS NOTED THAT THE ADDITION HAS BEEN MADE BY THE LD. ASSESSING OFFICER ON THE BASIS OF INFORMATION FROM THE SALES TAX DEPARTMENT ABOUT BOGUS BILLERS. THE LD. ASSESSING OFFICER ASKED THE ASSESSEE TO FILE EVIDENCE FOR DELIVERY OF GOODS SUCH AS TRA NSPORTER'S BILLS, DELIVERY CHALLANS, LORRY NO., WEIGHMENT SLIPS, OCTROI RECEIPT, CONFIRMATION OF PURCHASE ETC TO ESTABLISH THAT THE MATERIAL CLAIMED TO BE PURCHASED FORM THE ABOVE PARTY WAS ACTUALLY PURCHASED AND DELIVERED TO ASSESSEE. THE ASSESSEE HAD FAI LED TO ESTABLISH THAT THE PURCHASE WAS GENUINE. EVIDENTLY, THE ASSESSEE HAS ADOPTED A MODUS - OPERANDI TO REDUCE THE TRUE PROFIT BY INFLATING EXPENSES INCLUDING PURCHASES EXPENSES BY TAKEN ACCOMMODATION ENTRIES FROM SUCH BOGUS PARTIES. IT IS ALSO OBSERVED TH AT THE ONUS CAST UPON THE ASSESSEE WAS NEVER DISCHARGED. EVEN ON ASKING BY THE LD. ASSESSING OFFICER TO FILE CONFIRMATION OF THE HAWALA DEALER, THE ASSESSEE FAILED TO DO SO AND THUS THE PURCHASES REMAINED UNVERIFIABLE. THE ASSESSEE COULD NOT FILE THE VITAL DOCUMENTS SUCH AS DELIVERY CHALLANS, TRANSPORT RECEIPTS, OCTROI RECEIPT FOR PAYMENT OCTROI DUTY,. RECEIPT OF WEIGHBRIDGE FOR WEIGHING THE GOODS, EXCISE GATE PASS, GOODS INWARD REGISTER, MAINTAINED AT GODOWN/WAREHOUSE/STORAGE PLACE ETC. EVEN THE SALES TAX DEPARTMENT CERTIFIES THAT THE CONCERNED PARTY WAS A HAWALA OPERATOR. IT IS EVIDENTLY CLEAR THAT THE ASSESSEE DID NOT MAKE ANY EFFORT TO CONTROVERT THE FINDING OF THE INVESTIGATION WING AND FURTHER TO PRODUCE THE SELLER PARTY. IT IS CLEAR THAT THE APPELLANT HAS NOT PLACED ANY EVIDENCE ON RECORD THAT THE GOODS WERE PURCHASED FROM THE ABOVE PARTIES AT ARMS' LENGTH PRICE, THIS WOULD INDICATE THAT THE PURCHASES WERE MADE FROM THE OPEN MARKET WITHOUT INSISTING FOR GENUINE BILLS AND IN SUCH CASES THE SUPPLIERS WOU LD BE WILLING TO SELL AT A MUCH LESS RATE AS COMPARED TO THE RATE THAT THEY WOULD HAVE CHARGED OTHERWISE, CERTAINLY GOODS MUST HAVE BEEN PURCHASED FROM THE GREY MARKET THEREFORE THE PROFIT MADE BY THE ASSESSEE WOULD BE EQUAL TO THE DIFFERENCE IN PRICE OF B OGUS PURCHASES AND THE RATE AT WHICH GOODS ARE OBTAINED FROM THE GREY MARKETS. IN THIS CONTEXT, THE HON'B LE HIGH COURT OF GUJARAT WHILE DECIDING A SIMILAR ISSUE IN THE CASE OF C1T VS SIMIT P SHETH 356 ITR 0451 HELD THE FOLLOWING: 'ONCE THE SALE IS ACCEPTED BY THE A. 0., THE VERY BASIS OF PURCHASES COULD NOT BE QUESTIONED. NOT THE ENTIRE PURCHASE PRICE COULD BE DISALLOWED BUT ONLY THE PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES COULD BE ADDED TO THE INCOME OF THE ASSESSEE. THE ESTIMATION VARIES WITH THE NATURE OF BUSINESS AND NO UNIFORM YARDSTICK COULD BE ADOPTED. THE HON'BLE COURT FINALLY CONFIRMED THE ACTION OF ITAT IN DETERMINING 12.5% OF THE BOGUS PURCHASES AS THE PROFIT EMBEDDED IN SUCH TRANSACTION.' CONSIDERING THE TOTALITY OF FACTS AS WELL AS THE JUDICIA L OPINION AVAILABLE, T HE ADDITION @ 100% OF PURCHASE AMOUNT IS CONSIDERED EXCESSIVE AND I DEEM IT APPROPRIATE TO BRING TO TAX A GROSS PROFIT @12.5% OF SUCH BOGUS 6 ITA NO. 4704/MUM/2019 (A.Y. 2009 - 10) M/S. MODY CHEMI PHARMA PVT. LTD., PURCHASES AS WHICH COMES TO RS. 7,433/ - AS AGAINST DISALLOWANCE OF RS. 59,467/ - MADE BY THE LD. ASSESSING OFFICER. THUS, THE A.O. IS DIRECTED TO RESTRICT THE ADDITION TO 12.5% OF THE ALLEGED BOGUS PURCHASE AMOUNT. THIS GROUND OF APPEAL IS THEREFORE PARTLY ALLOWED. 6. ON A CAREFUL PERUSAL OF THE ORDER OF THE LD.CIT(A) AND THE REASONS GIVEN THEREIN, I DO NOT FIND ANY INFIRMITY IN THE ORDER PASSED BY THE LD.CIT(A) IN RESTRICTING THE ADDITION TO 12.5% AS AGAINST THE ENTIRE BOGUS PURCHASES DISALLOWED BY THE ASSESSING OFFICER . GROUNDS RAISED BY THE REVENUE ARE DISMISSED . 7. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONO UNCED IN THE VIRTUAL COURT ON 21 .01.2020. SD/ - (C.N. PRASAD) JUDICIAL MEMBER MUMBAI / DATED 21 / 01/2021 GIRIDHAR, SR.PS COPY OF THE ORDER FORWARDED TO : 1. THE ASSESSEE 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY// BY ORDER (ASSTT. REGISTRAR) ITAT, MUM