NAKODA METAL INDUSTRIES, MUMBAI V. ITO - 19(2)(4), MUMBAI

ITA 4958/MUM/2018

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 1213 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-11-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 27-08-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: AKTHAR H ANSARI
• Assessee Lawyers: PRAFUL L VORA
• Keywords: Reopening of assessment; Bogus purchase; Principle of natural justice; Corroborative evidences; Accommodation entries; Reassessment proceedings
• Section: 143(3); 133(6); 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC , BENCH MUMBAI BEFORE SHRI R.C.SHARMA, AM ITA NO. 4958 /MUM/ 2018 ( ASSESSMENT YEAR: 2009 - 10 ) M/S. NAKODA METAL INDUSTRIES ROOM NO.101, 1 ST FLOOR LOKDAWALA SAPHIRE CENTRE 4 TH KUMBHARWADA LANE MUMBAI 400 004 VS. INCO ME TAX OFFICER 19(2)(4) ROOM NO.119, MATRU MANDIR, 1 ST FLOOR TARDEO, MUMBAI 400 007 PAN/GIR NO. (APPELLANT ) .. (RESPONDENT ) ASSESSEE BY SHRI PRAFUL L VORA REVENUE BY SHRI AKTHAR H ANSARI DATE OF HEARING 07 / 11 / 2019 DATE OF PRONOUNCEMENT 28 / 11 /2019 / O R D E R PER: R.C. SHARMA, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) - 30, MUMBAI DATED 05/02/2018 FOR A.Y.2010 - 11 IN THE MATTER OF ORDER PASSED U/S.143(3) R.W.S. 147 OF THE INCOME TAX ACT, 1961. 2. IN THIS APPEAL ASSESSEE HAS CHALLENGED THE VALIDITY OF REOPENING AS WELL AS MERIT OF THE ADDITION UPHELD BY CIT(A) IN RESPECT OF ALLEGED BOGUS PURCHASES SO FOUND BY AO. 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. FACTS IN BRIEF ARE THAT T HE ASSESSEE IS A F IRM. THE ASSESSEE IS ENGAGED IN THE 2 ITA NO. 4958/MUM/2018 M/S. NAKODA METAL INDUSTRIES BUSINESS OF DEALI NG IN FERROUS AND NON FERROUS METALS. THE RETURN OF INCOME FOR THE YEAR UNDER APPEAL WAS FILED ON 25 / 08 / 2009 DECLARING TOTAL INCOME OF RS. 4,51,770/ - . THE CASE WAS REOPENED U/S 147, BY IS SUING NOTICE U/S 148 OF THE ACT ON 08/ 03 / 2014, BASED ON THE I N FORMATION RECEIVED FROM THE DGIT (INV.), MUMBAI, THAT THE ASSESSEE IS ONE OF THE BENEFICIARIES OF THE ACCOMMODATION ENTRIES PROVIDED BY SOME OF THE MVAT DEALERS WHO WERE INDULGING IN ISSUING BOG US SAL E/PURCHASE BILLS, WHICH WAS INV ESTIGATED AND KEPT ON THE PUBLIC DOMAIN BY THE SALES TAX DEPARTMENT. ASSESSMENT U/S. 143(3) R.W.S. 147 OF THE IT. ACT, 1961 WA S COMPLETED BY THE LD. AO ON 05/ 03 / 2015 DETERMINING THE TOTAL INCOME AT RS. 34,12,080/ - . DURI NG THE COURSE OF REASSESSMENT PROCEEDINGS, AO NOTICED THAT THE ASSESSEE HAS TAKEN ACCOMMODATION ENTRIES FROM TWENTY PARTIES TO THE TUNE OF RS.2 , 36,82,462/ - . TO ASCERTAIN THE GENUINENESS OF PURCHASES SHOWN IN THE ACCOUNTS, NOTICES U/S 133(6) OF THE ACT WERE ISSUED TO ALL THE 20 PARTIES BY T HE AO, WHICH WERE RETURNED UNSERV ED. THE ASSESSEE WAS ASKED TO PROVE THE GENUINENESS OF THE SAID PARTIES AND THE PURCHASES MADE FROM THEM WITH ADEQUATE SUPPORTING EVIDENCES AND ALSO TO PRODUCE THE PARTIES FOR VERIFICATION. HOWEVER THE ASSESSEE FAILED TO DO SO AND ONLY FURNISHED THE DETAILS AND ON GOING THROUGH THE SUBMISSIONS AND CONTENTIONS OF THE ASSESSEE AT LENGTH, CONCLUDED THAT THE ASSESSEE DID NOT PURCHASE ANY GOODS FROM 3 ITA NO. 4958/MUM/2018 M/S. NAKODA METAL INDUSTRIES THE ABOVE PARTIES AND ONLY INDULGED IN SUCH ACT IVITY OF NON - GENUINE TRANSACTIONS TO SUPPRESS THE TRUE PROFITS AND TO REDUCE THE TAX LIABILITY. AFTER REJECTING THE BOOKS OF ACCOUNTS U/S 145(3) OF THE ACT, THE PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES IS TAKEN AS THE PROFIT EARNED FROM PURCHASES SHOWN TO HAVE BEEN MADE FROM THE 20 PARTIES AND ESTIMATED THE PROFIT @12.5% OF THE TOTAL NON GENUINE PURCHASES OF RS. 2,36,82,462/ - , WHICH WORKED OUT TO RS.29,60,308/ - AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 4. BY THE IMPUGNED ORDER CIT(A) UPHELD REOPENING AS WELL AS RESTRICTED ADDITION TO THE EXTENT OF 6.5% ON NON - GENUINE PURCHASES AFTER HAVING THE FOLLOWING OBSERVATION: - 7.13 . THE APPELLANT MADE PURCHASES FROM TWENTY PARTIES WHO ARE SAID TO BE HAWALA OPERATORS, WHO IS INDULGED IN PROVIDING BOGUS BILLS WIT HOUT SUPPLY OF ANY MATERIAL. INDEPENDENT INQUIRIES CONDUCTED REVEALED THAT NO SUCH PARTIES ARE EXISTING IN THE GIVEN ADDRESS. WHEN ASKED TO PRODUCE THE PARTIES DURING THE ASSESSMENT PROCEEDINGS BY THE AO, APPELLANT EXPRESSED HIS INABILITY TO DO SO. IN THE PRESENT CASE, A.O. ESTIMATED THE PROFIT PERCENTAGE ON BOGUS PURCHASES AS 12.5%. THE SIMPLE ISSUE TO BE DECIDED IS WHETHER THE PERCENTAGE ADOPTED BY THE AO IS CORRECT IN THE LINE OF BUSINESS I.E. DEALER IN FERROUS AND NON - FERROUS METALS. AS NOTICED ABO VE, IN THE SIMILAR CIRCUMSTANCES OF BOGUS PURCHASES, HON'BLE GUJARAT HIGH COURT ESTIMATED THE ADDITIONAL ADVANTAGE TOWARDS TAX BENEFIT (10% AND THE PROFIT MARGIN (2.5%) TOTALING TO 12.5%. IN THE PRESENT CASE ON PERUSAL OF COPIES OF THE INVOICES FURNISHED B Y THE APPELLANT IN THE BILL THE PERCENTAGE OF VAT LEVIED IS @ 4%. APPLYING THE SAME LOGIC, THE PROFIT MARGIN SHOULD BE ADOPTED @ 2,5%. IN VIEW OF THE ABOVE, IN MY CONSIDERED OPINION, APPLYING THE LOGIC OF THE. ABOVE SAID CASE THE PROFIT PERCENTAGE EMBED DED ON SUCH PURCHASES IS RESTRICTED TO 6.5% (I.E. 4% OF VAT LEVIED + 2.5% TOWARDS PROFIT MARGIN), THAT WILL MEET THE ENDS OF THE JUSTICE. TAKING ALL THE FACTS INTO CONSIDERATION AND APPLYING THE LOGIC OF 4 ITA NO. 4958/MUM/2018 M/S. NAKODA METAL INDUSTRIES SIMIT P. SHETH CASE, THE A.O. IS DIRECTED TO RESTRIC T THE ESTIMATION @ 6.5% ON THE NON GENUINE PURCHASES OF RS. 2,36,82,462/ - . APPEAL ON GROUND NO. 4 IS TREATED AS 'PARTLY ALLOWED. 5. ASSESSEE IS IN FURTHER APPEAL BEFORE US. 6. IT WAS ARGUED BY LD. AR THAT SUFFICIENT OPPORTUNITY WAS NOT GIVEN TO THE ASS ESSEE BY THE CIT(A), SO THAT MATTER SHOULD BE RESTORED BACK TO THE FILE OF THE CIT(A). HE FURTHER CONTENDED THAT COPIES OF INFORMATION RECEIVED FROM OTHER SOURCES, INVESTIGATION REPORTS, STATEMENTS OF VENDORS WITH SUPPORTING COGENT, CONCRETE AND CORROBORAT IVE EVIDENCES, DOCUMENTS, MATERIALS ARE NOT AVAILABLE ON RECORD WHICH ARE USED FOR ISSUING OF NOTICE U/S. 148 OF THE ACT AND USED AGAINST THE ASSESSEE ARE NOT AVAILABLE ON RECORD OF THE LOWER AUTHORITIES AND IF AVAILABLE, THE SAME ARE NOT FURNISHED TO THE ASSESSEE BY A.O. FOR REBUTTAL AS REQUIRED UNDER RULES OF NATURAL JUSTICE AND WELL SETTLED LAW, ORDER PASSED BY A.O. IS LIABLE TO BE ANNULLED ON THIS GROUND ALSO AS HELD IN CASE OF M/S. DEVICHAND KOTHARI (HUF) V. ITO (2015V230 TAXMEN.COM - 301 (KERALA) THAT ' THE REASSESSMENT WAS INITIATED ON THE BASIS OF SWON STATEMENT OF PERSON REGARDING PROVIDING ACCOMMODATION ENTRIES FOR SALE TRANSACTIONS AND SINE COPY OF THE STATEMENT HAS NOT BEEN FURNISHED TO THE ASSESSEE, REASSESSMENT U/S. 148 WAS NOT JUSTIFIED. 'THESE A RE PRINCIPLES WAS LAID DOWN BY APEX COURT IN CASE OF KISHANCHAND CHALLARAM V. CIT - 125 ITR - 713 (SC) HELD THAT 'IN C ASE OF VIOLENCE OF 5 ITA NO. 4958/MUM/2018 M/S. NAKODA METAL INDUSTRIES RULES OF NATURAL JUSTICE ADDITIONS CANNOT BE SUSTAINED IN THIS JUDGMENT IS HAVING DIRECT NEXUS TO THE FACTS OF THE PRESENT CASE UNDER CONSIDERATION . 7. THE LD. AR ALSO RELIED ON VARIOUS JUDICIAL PRONOUNCEMENTS IN SUPPORT OF THE CONTENTION THAT ADDITION UPHELD BY CIT(A) WAS VERY HIGH AND THAT SHOULD BE DELETED. 8. ON THE OTHER HAND, LD. DR RELIED ON THE ORDER OF THE LOWER AUTH ORITIES AND CONTENDED THAT CIT(A) IS VERY REASONABLY FURTHER REDUCED THE ADDITION ON ACCOUNT OF BOGUS PURCHASES TO THE EXTENT OF 6.5% OF NON - GENUINE PURCHASES. 9. I HAVE CONSIDERED RIVAL CONTENTIONS AND CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND FROM THE RECORD THAT AFTER RECORDING SUFFICIENT REASONS, THE AO REACHED TO THE CONCLUSION THAT THERE WAS ESCAPEMENT OF INCOME TO THE TUNE OF ALLEGED BOGUS PURCHASES, ACCORDINGLY, I UPHO LD THE REOPENING OF ASSESSMENT BY AO U/S.147 OF THE I.T. ACT. T O FIND OUT THE GENUINENESS OF PURCHASES, AO HAD ISSUED NOTICE U/S.133(6) OF THE 20 PARTIES WHICH WERE RE TURNED UNSERVED. ASSESSEE WAS PERSONALLY ASKED TO PROVE THE GENUINENESS OF THE SAID PARTIES AND THE PURCHASES MADE FROM THEM WITH ADEQUA TE SUPPORTING EVIDENCE AND ALSO TO PRODUCE THE PARTIES FOR VERIFICATION. HOWEVER, THE ASSESSEE FAILED 6 ITA NO. 4958/MUM/2018 M/S. NAKODA METAL INDUSTRIES TO DO SO. UNDER THESE FACTS AND CIRCUMSTANCES, AO HAS ESTIMATED PROFIT ELEMENT OF 12.5% ON SUCH ALLEGED BOGUS PURCHASES. DURING APPELLATE PROCEEDINGS, THE CIT(A) AFTER RELYING ON THE DECISION OF GUJARAT HIGH COURT IN THE CASE OF SIMIT P SHETH HAD FURTHER DIRECTED THE AO TO RESTRICT ADDITION TO THE EXTENT OF 6.5% OF NON - GENUINE PURCHASES. NOTHING WAS PRODUCED BY LD. AR SO AS TO PERSUADE ME TO DEVIATE FROM TH E FINDINGS RECORDED BY CIT(A). I ALSO FOUND THAT SUFFICIENT OPPORTUNITY WAS GIVEN BOTH BY AO AND CIT(A) TO THE ASSESSEE TO PROVE THE GENUINENESS, HOWEVER, ASSESSEE FAILED TO DO THE SAME. UNDER THESE FACTS AND CIRCUMSTANCES, THERE IS NO REASON TO RESTORE TH E MATTER BACK TO THE FILE OF CIT(A). ACCORDINGLY, I UPHOLD THE ORDER PASSED BY CIT(A). 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 28 / 11 / 2019. SD/ - (R.C.SHARMA) AC COUNTANT MEMBER MUMBAI; DATED 28 / 11 /2019 KARUNA, SR. PS 7 ITA NO. 4958/MUM/2018 M/S. NAKODA METAL INDUSTRIES 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//