R.R. ENTERPRISES, MUMBAI V. ACIT 13(2), MUMBAI

ITA 4761/MUM/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0217 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-06-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2011-2012
• Appeal Filed On: 21-08-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: DHARMIL A JHAVERI
• Keywords: Bogus purchase; Income from undisclosed sources; Search and seizure
• Section: 132; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH D, MUMBAI BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER AND SHRI G MANJUNATHA, ACCOUNTANT MEMBER ITA NO.4761/M/2015 ASSESSMENT YEAR: 2011-12 M/S. R.R. ENTERPRISES, B-9/10, KANMOOR HOUSE, 281/287, NARSHI NATHA STREET, MUMBAI 400 009 PAN: AAAFR3906N VS. CIT(A)-46/ACIT-13(2)/675/13- 14, MUMBAI (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI DHARMIL A JHAVERI, A.R. REVENUE BY : SHRI PURUSHOTTAM KUMAR, D.R. DATE OF HEARING : 15.05.2017 DATE OF PRONOUNCEMENT : 29.06.2017 O R D E R PER D.T. GARASIA, JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSES SEE AGAINST THE ORDER DATED 01.06.2015 OF THE COMMISSIONER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS THE CIT(A)] RELEVANT TO ASSESSMENT Y EAR 2011-12. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E FIRM FILED RETURN ON 29.09.2011 SHOWING TOTAL INCOME OF RS.3,11,70,050/- . A SEARCH AND SEIZURE ACTION U/S 132 WAS CONDUCTED IN THE CASE OF THE ASS ESSEE DURING THE COURSE OF WHICH UNACCOUNTED STOCK/PURCHASES, INVESTMENTS AND VARIOUS INCRIMINATING DOCUMENTS WERE FOUND, IN RESPECT OF WHICH THE FIRM DISCLOSED UNACCOUNTED INCOME OF RS.80 LAKHS. DURING ASSESSMENT PROCEEDING S, THE ASSESSING OFFICER (HEREINAFTER REFERRED TO AS THE AO) NOTED THAT DISC LOSURE OF RS.80 LAKHS HAS BEEN INCORPORATED IN THE RETURN FILED AND TAXES HAV E BEEN PAID BY THE ASSESSEE. BESIDES THE ISSUES COVERED ABOVE, IN RESPECT OF PUR CHASES FROM THREE PARTIES ITA NO.4761/M/2015 M/S. R.R. ENTERPRISES 2 AGGREGATING TO RS.39,71,226/-, THE ASSESSEE WAS ASK ED TO SUBSTANTIATE THE GENUINENESS OF THESE PURCHASES THROUGH PURCHASE BIL LS, STOCK REGISTER ETC. THE AO NOTED THAT BESIDES THE INVOICES AND ENTRY IN STO CK REGISTER, THERE WAS NO OTHER DOCUMENT TO PROVE THE GENUINENESS OF THE PURC HASES. THERE WERE NO LORRY RECEIPTS OR WEIGHBRIDGE RECEIPTS. THE DELIVERY CHAL LANS PURCHASED WERE NOT SIGNED. THE ASSESSEE WAS ASKED TO PRODUCE THESE PAR TIES, IN WHICH THE ASSESSEE FAILED. THE AO ALSO CONDUCTED ENQUIRIES AND FOUND T HAT THESE THREE PARTIES WERE NOT AVAILABLE AT THE STATED ADDRESSES, WHICH F ACT WAS ALSO ACCEPTED BY THE ASSESSEE. THE AO THEREFORE HELD THAT THE ONUS CAST ON THE ASSESSEE TO PROVE THE GENUINENESS OF THE PURCHASES HAS NOT BEEN DISCHARGE D. THE AO CONCLUDED THAT THE ASSESSEE WAS A BENEFICIARY OF ACCOMMODATION BIL LS ISSUED BY THESE PARTIES, WITHOUT ACTUAL DELIVERY OF GOODS FROM THESE PARTIES . THE PURCHASE REGISTER SUBMITTED WAS FOUND TO BE INCOMPLETE AND INCORRECT AND ACCORDINGLY THE BOOKS OF ACCOUNTS WERE REJECTED AS PER PROVISIONS OF SECT ION 145(3) AND THE ASSESSMENT WAS COMPLETED U/S 144 OF THE 1. T. ACT. FOLLOWING THE DECISIONS OF COURTS IN THE CASES OF BENEFICIARIES OF HAWALA BILL S LIKE SANJAY OILCAKE INDUSTRIES V. CIT 316 ITR 274 (GUJ.), THE AO HELD T HAT THE PURCHASES TO THE EXTENT OF 25% WERE INFLATED AND ADDED SUM OF RS.9,9 2,806/- TO THE TOTAL INCOME OF THE ASSESSEE ON THIS ACCOUNT. THE AO FURT HER ADDED A SUM OF RS.1,35,441/- AS THE G.P. OF 3.43% ON THESE PURCHAS ES, WHICH WAS THE G.P. DECLARED BY THE ASSESSEE FOR THE YEAR UNDER CONSIDE RATION. 3. MATTER CARRIED TO LD. CIT(A) AND THE LD. CIT(A) HAS PARTLY ALLOWED THE CLAIM BY OBSERVING AS UNDER: 5.5 THE FACTS IN THE PRESENT CASE SHOW THAT THE APPELLA NT WAS NOT IN A POSITION TO PROVE THE EXISTENCE OF THE SUPPLIERS. O N CAREFUL ANALYSIS OF THE DECISIONS OF THE HON'BLE HIGH COURT OF GUJARAT AND ITAT IN THE ABOVE MENTIONED CASES, I AM ALSO OF THE VIEW THAT WITHOUT PURCHASES OF MATERIAL, IT IS NOT POSSIBLE TO CARRY ON THE TRADING BUSINESS UNDER TAKEN BY THE ASSESSEE DURING THE YEAR. EVEN THE AO IS OF THIS OPINION AND HAS ON LY DISALLOWED 25% OF THE PURCHASES. LOOKING TO THE MARKET TREND, THE APPELLA NT MAY HAVE MADE PURCHASES FROM OTHER PARTIES WHICH WERE NOT RECORDE D IN THE BOOKS AND TOOK ONLY BILLS FROM THESE THREE PARTIES AS ACCOMMODATIO N, TO EXPLAIN THE PURCHASES. THUS THE PURCHASES THEMSELVES HAVE NOT BEEN PROVED TO BE BOGUS BUT THE ITA NO.4761/M/2015 M/S. R.R. ENTERPRISES 3 PURCHASE PARTIES SHOWN IN THE BOOKS ARE. ESTIMATION S RANGING FROM 12.5% TO 25% HAVE BEEN UPHELD BY HON'BLE GUJARAT HIGH COURT, DEP ENDING 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. THE NATURE OF BUSINESS OF THE ASSESSEE IS TRADING IN CHEMICALS & SOLVENTS WHERE THERE IS ONE-TO-ONE RELA TIONSHIP BETWEEN PURCHASES AND SALES. CONSIDERING ALL THESE ASPECTS AS ALSO THE RATIO OF HONBLE HIGH COURT JUDGMENTS, I AM OF THE VIEW THAT ESTIMATION OF 20% AS PROFIT EMBEDDED IN THE IMPUGNED PURCHASES AND ADDING THE S AME TO THE TOTAL INCOME RETURNED, WOULD MEET THE ENDS OF JUSTICE. THEREFORE , I DIRECT THE AO TO ESTIMATE PROFIT OF 20% THE ALLEGED PURCHASES, WHICH WORKS OU T TO RS.7,94,245/- AND RESTRICT THE ADDITION TO THIS AMOUNT. THE APPELLANT GETS RELIEF FOR THE BALANCE AMOUNT OF RS.1,98,561/-. GROUNDS OF APPEAL NO.4 IS THEREFORE PARTLY ALLOWED TO THE ABOVE EXTENT. 4. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES. LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT I SSUE IN CONTROVERSY IS COVERED BY THE DECISION OF HONBLE GUJARAT HIGH COU RT IN THE CASE OF CIT VS. SIMIT P. SHETH 356 ITR 451 (GUJ) WHEREIN IT IS HELD THAT NO UNIFORM YARDSTICK TO BE APPLIED TO ESTIMATE THE NET PROFIT AND IT VAR IES WITH THE NATURE OF BUSINESS. THE BUSINESS OF THE ASSESSEE IS TRADING IN CHEMICAL S AND SOLVENT WHERE THERE IS ONE-TO-ONE RELATIONSHIP BETWEEN PURCHASES AND SALES . LOOKING INTO THE MARKET TREND, ASSESSEE MAY HAVE PURCHASED FROM OTHER PARTI ES WHICH WERE NOT RECORDED IN THE BOOKS AND TAKEN ONLY THE BILLS FROM THESE PARTIES TO EXPLAIN THE PURCHASE. WE FIND THAT ONE HAS TO ESTIMATE THE PRO FIT EMBEDDED IN THE IMPUGNED PURCHASE. WE FIND THAT LD. CIT(A) HAS EST IMATED PROFIT OF 20% ON ALLEGED PURCHASES WHICH IS ON HIGHER SIDE. ACCORDI NGLY, WE DIRECT THE AO TO ESTIMATE PROFIT @ 12.5% OF ALLEGED PURCHASES. 5. DURING THE COURSE OF HEARING, THE LD. D.R. RELIE D UPON THE ORDER OF HONBLE GUJARAT HIGH COURT IN THE CASE OF N.K. INDU STRIES LTD. VS. DCIT IN TAX APPEAL NOS.240, 241, 242, 260 & 261 OF 2003 WHEREIN HONBLE GUJARAT HIGH COURT HAS CONFIRMED THE ADDITION AT THE RATE OF 25% OF ALL THE BOGUS PURCHASES AND THE JUDGMENT WAS CONFIRMED BY THE HONBLE SUPRE ME COURT. BUT THIS CASE RELATES TO THE MANUFACTURING UNIT AND NOT THE TRADI NG UNIT. THEREFORE, THIS CASE LAW SUBMITTED BY THE LD. D.R. WILL NOT APPLY TO THE FACTS OF THE PRESENT CASE. ITA NO.4761/M/2015 M/S. R.R. ENTERPRISES 4 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 29.06.2017. SD/- SD/- (G MANJUNATHA) (D.T. GARASIA) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 29.06.2017. * 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.