FGB MANUFACTURING CO. , MUMBAI V. ITO 27 (1)(4), MUMBAI

ITA 4994/MUM/2018

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 8723 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-09-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 28-08-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ASHUTOSH RAJHANSLD
• Assessee Lawyers: RAJESH SHAHLD
• Keywords: Bogus purchase
• Section: 143(3); 142(1); 133(6); 143(2); 148

Judgement Text

1 ITA NO.4994/MUM/2018 A.Y. 2010-11 FGB MANUFACTURING CO. - IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI , , BEFORE HONBLE SHRI MAHAVIR SINGH, JM AND HONBLE SHRI MANOJ KUMAR AGGARWAL, AM ./ I.T.A. NO.4994/MUM/2018 ( / ASSESSMENT YEAR:2010-11 ) FGB MANUFACTURING CO. 209-C, GHATKOPAR INDL. ESTATE AMRUT NAGAR, LBS MARG GHATKOPAR (WEST) MUMBAI-400 086. / VS. INCOME TAX OFFICER - WAR D 2 7(1)(4) TOWER NO.6, 412 VASHI RAILWAY STATION COMPLEX VASHI NAVI MUMBAI-400 703. '# ./ ./PAN/GIR NO. AAAFF-5076-D ( #% /APPELLANT ) : ( &'#% / RESPONDENT ) REVENUE BY : SHRI ASHUTOSH RAJHANS-LD.DR ASSESSEE BY : SHRI RAJESH SHAH-LD. AR / DATE OF HEARING : 11/09/2019 / DATE OF PRONOUNCEMENT : 11/09/2019 / O R D E R PER BENCH: - 1. AFORESAID APPEAL BY ASSESSEE FOR ASSESSMENT YEAR [AY] 2010-11 CONTEST THE ORDER OF LD. COMMISSIONER OF INCOME-TAX (APPEALS)-24, MUMBAI, [IN SHORT REFERRED TO AS CIT(A)], APPEAL NO.CIT(A)-24/IT- 2 ITA NO.4994/MUM/2018 A.Y. 2010-11 FGB MANUFACTURING CO. 4/847/ITO-27(1)(4)/2018-19 DATED 12/07/2018 ON FOLLOWING GROUNDS OF APPEAL: - BEING AGGRIEVED AGAINST THE ORDER OF COMMISSIONER O F INCOME TAX (APPEALS) 24, THIS APPEAL PETITION IS BEING FILED TO CONSIDER THE FOLLOWING GROUNDS OF AP PEALS, WHICH ARE INDEPENDENT OF AND WITHOUT PREJUDI CE TO EACH OTHER: 1) ON THE FACTS AND THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE ADDITION MADE BY A.O. AMOUNTING TO RS.3,14,335/- ON ACCOUNT OF BOGUS PURCHASES. 2) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW, THE LEARNED CIT(A) ERRED IN CONFIRMING TH E ADDITION THOUGH THE APPELLANT PROVIDED ALL THE SUPP ORTING TO PROVE GENUINENESS OF THE PURCHASES AND TRANSACTIONS. 3) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW, THE LEARNED CIT(A) ERRED IN CONFIRMING TH E ADDITION THOUGH THE FULL PARTICULARS WERE FILED THE ASSESSMENT PROCEEDINGS AND PAN NO. OF THE SAID PARTIES ARE AVAILABLE ON RECORD. 4) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW, THE ASSESSING OFFICER OUGHT TO HAVE GONE THROUGH THE RECORD OF THE PARTIES WHOSE PAN NUMBERS WERE AVAILABLE ON RECORD AND SOME OF THE PARTIES ARE REGISTERED WITH MCA. 5) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW, THE APPELLANT HAVE ALREADY DECLARED GROSS PROFIT OF 27.32%, AGAIN ADDING THE SAME PERCENTAGE, THE GP WILL GO UP TO 54.64% WHICH AMOUNTS TO DOUBLE ADDITION AND HENCE THE ADDITION IS UN CALLED FOR. 2.1 FACTS ON RECORD WOULD REVEAL THAT THE ASSESSEE BEING RESIDENT FIRM STATED TO BE ENGAGED IN MANUFACTURING OF PRESSURE G AUGES, WAS ASSESSED FOR IMPUGNED AY U/S. 143(3) R.W.S. 147 WHEREIN THE INCOME OF THE ASSESSEE WAS DETERMINED AT RS.13.65 LACS AFTER SOLE ADDITION OF ALLEGED BOGUS PURCHASES FOR RS.11.50 LACS AS AGAINST RETURNED INCOME OF RS .2.14 LACS FILED BY THE ASSESSEE ON 06/07/2010 WHICH WAS PROCE SSED U/S.143(1). 2.2 PURSUANT TO RECEIPT OF CERTAIN INFORMATION FROM INVESTIGATION WING / SALES TAX DEPARTMENT, GOVT. OF MAHARASHTRA, IT TRAN SPIRED THAT THE ASSESSEE STOOD BENEFICIARY OF ALLEGED BOGUS PURCHASES TO THE TUNE OF RS.11.50 LACS FROM 11 PARTIES, THE DETAILS OF WHICH HAS ALREADY B EEN EXTRACTED AT PARA-5.1 OF THE QUANTUM ASSESSMENT ORDER. ACCORDINGLY, AS PE R DUE PROCESS OF LAW, RE-ASSESSMENT PROCEEDINGS WERE INITIATED AGAINST TH E ASSESSEE U/S 147 BY 3 ITA NO.4994/MUM/2018 A.Y. 2010-11 FGB MANUFACTURING CO. ISSUANCE OF NOTICE U/S 148 ON 19/03/2015. THE STATU TORY NOTICES U/S 143(2) & 142(1) WERE ISSUED IN DUE COURSE OF ASSESSMENT PR OCEEDINGS WHEREIN THE ASSESSEE WAS DIRECTED TO SUBSTANTIATE THE PURCH ASE TRANSACTIONS. 2.3 TO CONFIRM THE PURCHASES TRANSACTIONS, NOTICES U/S 133(6) WERE ISSUED TO ALL PARTIES, HOWEVER THE SAME WERE RETURNED BACK UNSERVED BY POSTAL AUTHORITIES WITH THE REMARKS LEFT. THE ASSESSEE S UBMITTED THAT THE PURCHASES WERE GENUINE AND THE MATERIAL WAS USED IN THE MANUFACTURING PROCESS. THE ATTENTION WAS DRAWN TO THE FACT THAT T HE PAYMENTS WERE MADE THROUGH BANKING CHANNELS. HOWEVER, NOT SATISFIED, T HE STATED PURCHASES WERE DISALLOWED AND ADDED TO THE INCOME OF THE ASSE SSEE. THE LEARNED FIRST APPELLATE AUTHORITY, INTER-ALIA, RELYING UPON THE DECISION OF HONBLE GUJARAT HIGH COURT RENDERED IN CIT V/S SIMIT P. SHETH [356 ITR 451] RESTRICTED THE ADDITION TO 27.32%, BEING GROSS PROFIT RATE REFLECT ED BY THE ASSESSEE. AGGRIEVED, THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. IT APPEARS THAT THE REVENUE IS NOT IN FURTHER APPEAL. 3. WE HAVE HEARD AND CONSIDERED THE ARGUMENTS OF RE SPECTIVE REPRESENTATIVES. 4. WE ARE OF THE CONSIDERED OPINION THERE COULD BE NO SALE WITHOUT ACTUAL PURCHASE OF MATERIAL KEEPING IN VIEW THE ASS ESSEES NATURE OF BUSINESS. AS NOTED BY LOWER AUTHORITIES, THE ASSESS EE WAS IN POSSESSION OF PRIMARY PURCHASE DOCUMENTS AND THE PAYMENTS TO SUPP LIERS WERE THROUGH BANKING CHANNELS. THE SALES TURNOVER REFLECTED BY T HE ASSESSEE HAS NOT BEEN DISTURBED / DISPUTED BY LD. AO. HOWEVER, AT TH E SAME TIME, THE ASSESSEE MISERABLY FAILED TO SUBSTANTIATE THE PURCH ASES DURING ASSESSMENT 4 ITA NO.4994/MUM/2018 A.Y. 2010-11 FGB MANUFACTURING CO. PROCEEDINGS AND COULD NOT PRODUCE ANY OF THE SUPPLI ERS TO CONFIRM THE TRANSACTIONS. UNDER SUCH CIRCUMSTANCES, THE ADDITIO NS WHICH COULD BE SUSTAINED, WAS TO ACCOUNT FOR PROFIT ELEMENT EMBEDD ED IN THESE PURCHASE TRANSACTIONS TO FACTORIZE FOR PROFIT EARNED BY ASSE SSEE AGAINST POSSIBLE PURCHASE OF MATERIAL IN THE GREY MARKET AND UNDUE B ENEFIT OF VAT AGAINST SUCH BOGUS PURCHASES, WHICH LD. FIRST APPELLATE AUT HORITY HAS RIGHTLY DONE. HOWEVER, FINDING THE ESTIMATED RATE TO BE ON THE HI GHER SIDER, WE REDUCE THE SAME TO 12.5% OF ALLEGED BOGUS PURCHASES. THE S AME COMES TO RS.1,43,821/-. THE BALANCE ADDITION STANDS DELETED. THE IMPUGNED ORDER STAND MODIFIED TO THAT EXTENT. 5. IN RESULT, THE APPEAL STANDS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 11 TH SEPTEMBER, 2019. SD/- SD/- (MAHAVIR SINGH) (MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 11/09/2019 SR.PS:-JAISY VARGHESE #$ %$ / COPY OF THE ORDER FORWARDED TO : 1. #% / THE APPELLANT 2. &'#% / THE RESPONDENT 3. . ( ) / THE CIT(A) 4. . / CIT CONCERNED 5. /0 &)1 , 1 , / DR, ITAT, MUMBAI 6. 0234 / GUARD FILE 5 ITA NO.4994/MUM/2018 A.Y. 2010-11 FGB MANUFACTURING CO. / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI.