ASSISTANT COMMISSIONER OF INCOME TAX-17(3), MUMBAI V. SAIF MARINE, MUMBAI

ITA 4996/MUM/2017

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 0217 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-12-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2006-2007
• Appeal Filed On: 21-07-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: CHAUDHARY ARUN KUMAR SINGH
• Assessee Lawyers: CHETAN A KARIA
• Keywords: Bogus purchase

Judgement Text

, G , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES G, MUMBAI BEFORE SHRI B.R.BASKARAN, AM AND SHRI AMARJIT SINGH , JM ITA NO.4996/MUM/2017 : ASST.YEAR 2006-2007 ITA NO.4999/MUM/2017 : ASST.YEAR 2009-2010 ITA NO.5000/MUM/2017 : ASST.YEAR 2010-2011 ITA NO.5001/MUM/2017 : ASST.YEAR 2011-2012 THE ASST.COMMISSIONER OF INCOME-TAX CIRCLE 17(3) MUMBAI. / VS. M/S.SAIF MARINE 220, 2 ND FLOOR, VYAPAR BHAVAN 49, P.DMELLOW ROAD MASJID BUNDER MUMBAI 400 009. PAN : AAPFS3198E. ( / APPELLANT) ( / RESPONDENT) /APPELLANT BY : SHRI CHAUDHARY ARUNKUMAR SINGH /RESPONDENT BY : SHRI CHETAN A.KARIA / DATE OF HEARING : 05.12.2018 / DATE OF PRONOUNCEMENT : 05.12.2018 / O R D E R PER BENCH : ALL THESE FOUR APPEALS FILED BY THE REVENUE ARE DI RECTED AGAINST THE COMMON ORDER PASSED BY THE LEARNED CIT(A)-28, MUMBA I AND THEY RELATE TO THE ASSESSMENT YEARS 2006-2007, 2009-2010 TO 2011-2 012. SINCE THE ISSUE RAISED IN THESE APPEALS IS IDENTICAL IN NATURE, THE Y WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER, FOR THE SAKE OF CONVENIENCE. ITA NO.4996/MUM/2017 & ORS. M/S.SAIF MARINE. 2 2. THE REVENUE IS AGGRIEVED BY THE DECISION OF THE LEARNED CIT(A) IN ALL THESE YEARS IN RESTRICTING THE ADDITION RELATING TO BOGUS PURCHASES TO 3% OF THE VALUE OF PURCHASES AS AGAINST 10% ESTIMATED BY THE ASSESSING OFFICER. 3. THE FACTS RELATING TO THE ISSUE ARE STATED IN BR IEF. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF SUPPLYING MATERIAL REQUI RED FOR SHIPS. THE MAIN CUSTOMER OF THE ASSESSEE IS A GOVERNMENT COMPANY, N AMED SHIPPING CORPORATION OF INDIA LIMITED. THE REVENUE RECEIVED INFORMATION FROM SALES TAX DEPARTMENT OF MAHARASHTRA THAT CERTAIN DEALERS ARE PROVIDING ONLY ACCOMMODATION BILLS WITHOUT ACTUALLY SUPPLYING MATE RIAL. FROM THE DETAILS RECEIVED FROM THE SALES-TAX DEPARTMENT, IT WAS NOTI CED THAT THE ASSESSEE HAS PURCHASED MATERIALS FROM SOME OF SUCH DEALERS A S DETAILED BELOW:- ASST.YEAR AMOUNT 2006-2007 RS. 35,87,634 2009-2010 RS.5,58,01,078 2010-2011 RS.8,09,15,181 2011-2012 RS.3,75,13,935 HENCE, THE ASSESSING OFFICER REOPENED THE ASSESSMEN TS OF ASST.YEARS 2006-2007 TO 2010-2011. THE ASSESSMENT YEAR PERTAIN ING TO ASST.YEAR 2011-2012 WAS TAKEN UP FOR SCRUTINY. DURING THE COU RSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS ASKED TO PROVE THE GE NUINENESS OF THE PURCHASES. THE ASSESSEE COULD NOT FURNISH DOCUMENTA RY EVIDENCES LIKE DELIVERY CHALLANS, TRANSPORT DETAILS, PURCHASE ORDE RS ETC. THE ASSESSEE ALSO ADMITTED THAT IT DID NOT HAVE THOSE DOCUMENTS. HOWE VER, THE ASSESSEE COULD RECONCILE THE PURCHASES WITH THE SALES, EVEN THOUGH IT DID NOT MAINTAIN STOCK REGISTER. HENCE, THE ASSESSING OFFICER TOOK THE VIE W THAT THE PROFIT ELEMENT ITA NO.4996/MUM/2017 & ORS. M/S.SAIF MARINE. 3 EMBEDDED IN THE PURCHASES SHOULD BE ASSESSED TO TAX . ACCORDINGLY HE ESTIMATED THE PROFIT ELEMENT AT 10% OF THE VALUE OF BOGUS PURCHASES. ACCORDINGLY, HE ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE IN ALL THE YEARS UNDER CONSIDERATION. IN THE APPELLATE PROCEED INGS, THE LEARNED CIT(A) REDUCED THE PROFIT ELEMENT TO 3% AND ACCORDINGLY PA RTIALLY ALLOWED THE APPEALS OF THE ASSESSEE. THE REVENUE IS AGGRIEVED B Y THE DECISION OF THE LEARNED CIT(A) RENDERED IN ALL THE YEARS UNDER CONS IDERATION. 4. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTE D THAT THE HONBLE DELHI HIGH COURT HELD IN THE CASE OF CIT V. LA MEDI CA [117 TAXMAN 628] THAT THE ENTIRE AMOUNT OF PURCHASE SHOULD BE DISALLOWED, WHEN SUPPLIERS WERE FOUND TO BE BOGUS PARTIES. HE SUBMITTED THAT THE AS SESSING OFFICER WAS REASONABLE ENOUGH TO ESTIMATE 10% OF THE VALUE OF B OGUS PURCHASES AS INCOME OF THE ASSESSEE. ACCORDINGLY, HE SUBMITTED T HAT THE LEARNED CIT(A) WAS NOT JUSTIFIED IN REDUCING THE PROFIT ELEMENT TO 3%. 5. ON THE CONTRARY, THE LEARNED AR SUBMITTED THAT T HE ASSESSEE HAS SUPPLIED MATERIALS TO A GOVERNMENT COMPANY, NAMED, SHIPPING CORPORATION OF INDIA LIMITED. IT IS ALSO NOT DISPUTED THAT THE ASSESSEE RECONCILED THE PURCHASES WITH THE SALES. ACCORDINGLY, THE LEARNED AR SUBMITTED THAT THE ASSESSEE COULD NOT HAVE SOLD THE GOODS WITHOUT ACTU ALLY PURCHASING THEM. HE FURTHER SUBMITTED THAT THE SHIPPING CORPORATION OF INDIA LIMITED FLOATED TENDERS FOR PURCHASING THE MATERIAL AND THE ASSESSE E HAS SUPPLIED THE MATERIAL AFTER SUCCEEDING IN THE BID. THE ASSESSEE COULD SUCCEED IN THE TENDER BECAUSE OF THE LOW MARGIN QUOTED BY IT. HE F URTHER SUBMITTED THAT THE ASSESSEE HAS SHOWN REASONABLE GROSS PROFIT IN THE R ANGE OF 9% TO 15% OVER THE YEARS. ACCORDINGLY, THE LEARNED CIT(A) WAS SATI SFIED WITH THE WORKING ITA NO.4996/MUM/2017 & ORS. M/S.SAIF MARINE. 4 RESULTS REPORTED BY THE ASSESSEE. THE LEARNED AR SU BMITTED THAT THE LEARNED CIT(A) HAS TAKEN SUPPORT OF THE DECISION OF THE CO- ORDINATE BENCH IN THE CASE OF M/S.MERCURY INTERNATIONAL (ITA NOS.7584 TO 7588/MUM/2014 DATED 24.08.2016) IN ORDER TO GIVE PARTIAL RELIEF TO THE ASSESSEE. HE SUBMITTED THAT THE ASSESSEE IN THE CASE OF M/S.MERCURY INTERNATION AL (SUPRA) WAS ALSO SUPPLYING MATERIALS TO THE GOVERNMENT ENTITIES AT A LOW MARGIN AND HENCE THE TRIBUNAL HAS DETERMINED THE PROFIT ELEMENT AT 3 %. ACCORDINGLY, THE LEARNED AR SUBMITTED THAT THE ORDER PASSED BY THE L EARNED CIT(A) DOES NOT CALL FOR ANY INTERFERENCE. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL. WE NOTICED THAT THE ASSESSING OFFICER HAS ACCEPTED THE RECONCILIATION OF PURCHASES WITH THE SALES AND HENCE HE HAS ESTIMATED THE PROFIT ELEMENT EMBEDDED IN THE PURCHASE AT 10%. IT IS THE CONTENTI ON OF THE ASSESSEE THAT THE ASSESSEE HAS SUPPLIED ITS MATERIAL TO A GOVERNM ENT COMPANY AFTER GETTING THE TENDER IN THE BIDDING PROCESS. BECAUSE OF THAT THE ASSESSEE WAS CONSTRAINED TO SUPPLY MATERIAL AT A LOW MARGIN. DUE TO VOLUME THE ASSESSEE COULD DECLARE REASONABLE GROSS PROFIT IN THE RANGE OF 9% TO 15%. WE NOTICED THAT AN IDENTICAL ISSUE SO CONSIDERED BY THE CO-ORD INATE BENCH IN THE CASE OF M/S.MERCURY INTERNATIONAL (SUPRA) WHEREIN ALSO THE ASSESSEE WAS SUPPLYING MATERIAL TO GOVERNMENT ENTITY. THAT THE CO-ORDINATE BENCH HAS TAKEN THE VIEW THAT THE PROFIT ELEMENT EMBEDDED IN SUCH PURCH ASES MAY BE DETERMINED AT 3%. WE NOTICED THAT THE LEARNED CIT(A) HAS FOLLO WED THE SAID DECISION RENDERED BY THE TRIBUNAL. THOUGH THE LD D.R SUPPOR TED THE ORDER PASSED BY THE AO, YET HE COULD NOT PLACE ANY MATERIAL BEFORE US TO SHOW THAT THE ESTIMATE OF 3% WAS NOT CORRECT. UNDER THE SET OF F ACTS, WE ARE OF THE VIEW ITA NO.4996/MUM/2017 & ORS. M/S.SAIF MARINE. 5 THAT THE ORDER PASSED BY THE LEARNED CIT(A) IN ALL THE YEARS UNDER CONSIDERATION DO NOT CALL FOR ANY REFERENCE. ACCORD INGLY, WE UPHOLD THE ORDER PASSED BY THE LEARNED CIT(A). 7. IN THE RESULT, ALL THE APPEALS OF THE REVEN UE ARE DISMISSED. ORDER HAS BEEN PRONOUNCED IN THE COURT ON 05.12. 2018 SD/- SD/- (AMARJIT SINGH) (B.R.BASKARAN) ! / JUDICIAL MEMBER ! / ACCOUNTANT MEMBER MUMBAI; DATED : 05 TH DECEMBER, 2018. DEVDAS* # $%&'&($ / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ! ! ' ( ) / THE CIT, MUMBAI. 4. ! ! ' / CIT(A)-28, MUMBAI 5. %&' (()* , ! )* , / DR, ITAT, MUMBAI 6. ',-. / GUARD FILE. / BY ORDER, %( //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI