PENTAGON SYSTEM AND SERVICES P.LTD, MUMBAI V. DCIT (OSD) CIR 2(3), MUMBAI

ITA 4804/MUM/2015

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 8968 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-10-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2009-2010
• Appeal Filed On: 24-08-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAJAT MITTAL
• Keywords: Bogus purchase; Peak credit

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C , BENCH MUMBAI BEFORE SHRI R.C.SHARMA, AM & SHRI RAVISH SOOD , JM ITA NO. 4804 / MUM/20 1 5 ( ASSESSMENT YEAR : 2009 - 10 ) M/S. PENTAGON SYSTEM AND SERVICES PVT. LTD., PRAMUKH PLAZA, CARDINAL GRACIA ROAD, OPP. P & G PLAZA, CHAKALA ANDHERI (E), MUMBAI - 400099 VS. DCIT (OSD) CIR 2(3) R.NO.552, 5 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 400020 PAN/GIR NO. AAACP0547J APPELLANT ) .. RESPONDENT ) ITA NO. 5318/ MUM/20 15 ( ASSESSMENT YEAR : 2009 - 10 ) DCIT ( CIR 2(2)(2) R.NO.549, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400020 VS. M/S. PENTAGON SYSTEM AND SERVICES PVT. LTD., PRAMUKH PLAZA, CARDINAL GRACIA ROAD, OPP. P & G PLAZA, CHAKALA ANDHERI (E), MUMBAI - 400099 PAN/GIR NO. AAACP05 47J APPELLANT ) .. RESPONDENT ) REVENUE BY SHRI RAJAT MITTAL ASSESSEE BY SHRI SHASHANK DUNDU AND MS. NEELAM JADHAV DATE OF HEARING 12 / 09 /201 7 DATE OF PRONOUNCEME NT 26 / 10 /201 7 / O R D E R PER R.C.SHARMA (A.M) : THESE ARE THE CROSS APPEALS FILED BY ASSESSEE AND REVENUE AGAINST THE ORDER OF CIT(A) - 5, MUMBAI FOR A.Y. 2009 - 10 DATED 08/08/2015 IN THE MATTER OF ORDER PASSED U/S.143(3) R.W.S. 147 OF THE IT ACT. 2. THE FOLLOWING GROUNDS HAVE BEEN TAKEN BY THE ASSESSEE: - ITA NO. 4804/MUM/2015 & 5318/MUM/2015 PENTAGON SYSTEM AND SERVICES PVT. LTD., 2 GROUND NO. 1 IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE ID. CIT(A) HAS ERRED IN NOT HOLDING THAT THE REOPENING U/S 147 IS UNJUSTIFIED, UNWARRANTED, ILLEGITIMATE AND HENCE, BAD IN LAW. GROUND NO. 2 THE ID. CIT(A) HAS ERRED IN MAKING AND CONFIRMING THE ADDITION OF RS. 39,78,000 THEREBY HOLDING THE SAME TO BE THE PEAK CREDIT. THE ID. CIT(A) HAS FAILED TO CONSIDER THAT: 1. THERE ARE NO BOGUS PURCHASES. 2. THE ASSESSEE HAS PROVIDED AND FURNI SHED ALL THE DOCUMENTS NECESSARY FOR THE PURPOSE OF PROVING THAT ITS PURCHASES ARE GENUINE. 3. THE ONUS IS ON THE REVENUE TO PROVE THAT THE PURCHASES ARE BOGUS. 4. THE FACT THAT THE PURCHASES ARE BOGUS MUST BE PROVED BY WAY OF CORROBORATIVE EVIDENCE. 5 . ASSUMPTIONS AND PRESUMPTIONS CANNOT TAKE THE PLACE OF EVIDENCE. GROUND NO.3 THE ASSESSEE CRAVES LEAVE TO ADD, ALTER OR AMEND THE EXISTING GROUNDS OF APPEAL ON OR BEFORE THE DATE OF HEARING. 3. THE FOLLOWING GROUNDS HAVE BEEN TAKEN BY THE REVENUE: - 1. THE ORDER OF THE CIT(A) IS OPPOSED TO LAW AND FACTS OF THE CASE. 2. ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN RESTRICTING THE ADDITION ON ACCOUNT OF BOGUS PURCHASES TO THE ELEMENT OF PROFIT EMBEDDED IN THE PURCH ASE, WHEN THE WHOLE OF THE TRANSACTION WAS BOGUS AND THE AO HAD TAXED THE SAME BY TAKING THE PEAK CREDIT OF SUCH PURCHASES. 4. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. 5. FACTS IN BRIEF ARE THAT THE A SSESSEE IS ENGAGED IN THE BUSINESS OF TRA DING OF COMPUTER HARDWA RE, SOFTWARE AND SERVICES. BASED ON THE INFORMATION RECEIVE D FROM THE SALES TAX DEPARTMENT REGARDING BOGUS SUPPLIES, THE AO ISSUED 148 NOTICE DT. 15/02/2013. ITA NO. 4804/MUM/2015 & 5318/MUM/2015 PENTAGON SYSTEM AND SERVICES PVT. LTD., 3 6. DURING THE REA SSESSMENT PROCEEDINGS, THE ASSESSEE HAD FILED A LETTER DT. 06/03/2014 AND SUBMITTED LEDGER ACCOUNT, TAX INVOICE, BANK STATEMENTS AND UTILISATION OF GOODS SUPPLIED . HOWEVER, THE AO DID NOT SATISFY WITH THE ASSESSEES CONTENTION AND ADDED THE AMOUNT OF PEAK CREDIT IN RESPECT OF ALLEGED BOGUS PURCHASES IN ASSESSEES INCOME. 7. BY THE IMPUGNED ORDER CIT(A) RESTRICTED THE ADDITION TO THE EXTENT OF 12.5% AGAINST WHICH BOTH ASSESSEE AND REVENUE ARE IN FURTHER APPEAL BEFORE US. 8.WE HAVE CONSIDERED RIVAL CONTENTIONS AND CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. 9. IT WAS ARGUED BY LEARNED AR THAT ORIGINAL ASSESSMENT PROCEEDINGS WAS COMPLETED U/S.143(3) WHEREIN ALL THE DETAILS OF PURCHASES AS CALLED BY THE AO WAS FURNISHED AND AO WAS SATISFIED WITH THE GENUINENESS OF PURCHASES. THEREFORE, REOPENING WAS NOT JUSTIFIED. ON MERITS OF THE ADDITION HE RELIED ON THE ORDER OF THE CO - ORDINATE BENCH IN CASE OF STEEL LINE (INDIA) ORDER DATED 29/08/2017 IN ITA NO.1321/MUM/2016, 1322/MUM/2016 AND 1323/MUM/2016 WHEREIN TRIBUNAL HAS OBSERVED AS UNDER: - WE HAVE CONSIDERED RIVAL CONTENTIONS AND CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND ALSO DELIBERATED ON THE JUDICIAL PRONOUNCEMENTS REFERRED BY LOWER AUTHORITIES IN THEIR RESPECTIVE ORDERS AS WELL AS CITED BY LEARNED AR AND DR DURING THE COURSE OF HEARIN G BEFORE US IN THE CONTEXT OF FACTUAL MATRIX OF THE CASE. FROM THE RECORD, WE FOUND THAT AO HAS MADE ADDITION IN RESPECT OF PURCHASES FOUND TO BE BOGUS AS PER THE INFORMATION FROM SALES TAX DEPARTMENT. IN THE APPELLATE PROCEEDINGS, THE CIT(A) RECORDED A FI NDING TO THE FACT THAT AO HAS NOT DISPUTED THE QUANTITATIVE DETAILS AND ALSO DAY TO DAY STOCK REGISTER MAINTAINED BY THE ASSESSEE. ASSESSEE COMPANY BEING A TRADER OF GOODS, AO NOT ITA NO. 4804/MUM/2015 & 5318/MUM/2015 PENTAGON SYSTEM AND SERVICES PVT. LTD., 4 HAVING DOUBTED THE GENUINENESS OF SALES, COULD NOT HAVE GONE AHEAD AND MADE ADDITION IN RESPECT OF PEAK BALANCE ON SUCH PURCHASES. ACCORDINGLY, CIT(A) CONCLUDED THAT ISSUE BOIL DOWN TO FIND OUT THE ELEMENT OF PROFIT EMBEDDED IN BOGUS PURCHASES WHICH THE ASSESSEE WOULD HAVE MADE. WHEN THE CORRESPONDING SALES HAVE NOT BEEN DOUBTED AND THE QUANTITATIVE DETAILS OF PURCHASES AND SALES VIS - A - VIS STOCK WAS AVAILABLE, WE DEEM IT APPROPRIATE CONSIDERING THE ENTIRETY OF FACTS AND CIRCUMSTANCES OF THE CASE TO RESTRICT THE ADDITION TO THE EXTENT OF 2% OF SUCH BOGUS PURCHASE. ACCORDINGLY, THE ORDER OF BOTH THE LOWER AUTHORITIES ARE MODIFIED AND AO IS DIRECTED TO RESTRICT THE ADDITION TO THE EXTENT OF 2% ON SUCH PURCHASES. 10. WE HAVE CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND FOUND THAT AO HAS MADE ADDITION OF PEAK CREDIT IN RESPECT OF PURCHASES MADE THROUGH SUPPLIERS AS PER INFORMATION OF SALES TAX DEPARTMENT. T HE AO HAS ACCEPTED THE CORRESPONDING SALES MADE BY THE ASSESSEE. BOOKS OF ACCOUNTS WERE NOT REJECTED. HOWEVER, HE HAS ADDED THE PEAK CREDIT IN RESPECT OF SUCH PURCH ASES IN ASSESSEES INCOME. BY OBSERVING THAT ONLY PROFIT ELEMENT EMBEDDED IN BOGUS PURCHASE WHICH THE ASSESSEE WOULD HAVE MADE, SHOULD BE ADDED IN THE ASSESSEES INCOME, T HE CIT(A) HAS RESTRICTED THE ADDITION TO 12.5% OF SUCH PURCHASES . SO FAR AS REOPENING IS CONCERNED, WE FOUND THAT SUFFICIENT REASONS WERE RECORDED BY AO AND HE WAS JUSTIFIED IN REOPENING THE ASSESSMENT. 11.FROM THE RECORD, WE FOUND THAT DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAD OFFERED HIGHER GP. GP OF LAST TWO YEA RS OF THE ASSE SSEE WAS AT 8.39% AND 8.36%. DURING THE YEAR UNDER CONSIDERATION GP SHOWN BY THE ASSESSEE WAS 8.83%. THUS, THE GP RATIO OF ASSESSEE IS NOT ONLY CONSISTENT AS COMPARED TO THE EARLIER YEARS BUT EVEN HIGHER. WE ALSO FOUND THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE ITA NO. 4804/MUM/2015 & 5318/MUM/2015 PENTAGON SYSTEM AND SERVICES PVT. LTD., 5 HAD SUBMITTED THE LEDGER ACCOUNT, TAX INVOICE, BANK STATEMENTS AND UTILIZATION OF GOODS SUPPLIED. STATEMENT OF RECONCILIATION OF PURCHASES AND SALES WAS ALSO FILED BEFORE THE LOWER AUTHORITIES. KEEPING IN VIEW THE NATURE OF TRADE ASSESSEE WAS CARRYING ON VIS - - VIS HIGHER G.P. DECLARED DURING THE YEAR AND ALSO TOTALITY OF FACTS AND CIRCUMSTANCES OF THE CASE, WE MODIFY THE ORDER OF BOTH THE LOWER AUTHORITIES AND UPHELD THE ADDITION TO THE EXTENT OF 2% OF THE BOGUS PURCHASES. WE DIREC T ACCORDINGLY. 12 . IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED WHERE AS APPEAL OF ASSESSEE IS ALLOWED IN PART. O RDER PRONOUNCED IN THE OPEN COURT ON THIS 26 / 10 /2017 SD/ - ( RAVISH SOOD ) SD/ - ( R.C.SHARMA ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 26 / 10 /201 7 KARUNA SR. PS COPY OF THE ORDER FORWARDED TO : BY ORDER, ( ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//