AAS MOHAMMED KHAN (PROP.PERFECT STEEL CORPORATION), MUMBAI V. ASSISTANT COMMISSIONER OF INCOME TAX 26(1)(1), MUMBAI

ITA 5034/MUM/2017

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 8394 (ITAT-MUMBAI)
• Duration Of Justice: 3 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-11-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 24-07-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: N HEMALATHA
• Assessee Lawyers: AAS MOHEMMED KHAN
• Keywords: Bogus purchase

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH SMC, MUMBAI BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER ITA NOS.5033 & 5034/M/2017 ASSESSMENT YEARS: 2010-11 & 2011-12 SHRI AAS MOHAMMED KHAN (PROP. PERFECT STEEL CORPORATION), GALA NO.503, GULAB SHAH ESTATE, 2 ND GALI, NEAR KURLA BUS DEPOT, L.B.S. MARG, KURLA (WEST) MUMBAI-400 070 PAN: AAAPM7494C VS. INCOME TAX OFFICER-26(1)(1), C-11, ROOM NO.703, 7 TH FLOOR, PRATYAKSHAKAR BHAVAN, BKC, BANDRA (E), MUMBAI 400 051 (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI AAS MOHEMMED KHAN, A.R. REVENUE BY : SHRI N. HEMALATHA, D.R. DATE OF HEARING : 06.11.2017 DATE OF PRONOUNCEMENT : 23.11.2017 O R D E R PER D.T. GARASIA, JUDICIAL MEMBER: THE ABOVE TITLED APPEALS HAVE BEEN PREFERRED BY TH E ASSESSEE AGAINST THE COMMON ORDER DATED 24.04.2017 OF THE CO MMISSIONER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS TH E CIT(A)] RELEVANT TO ASSESSMENT YEARS 2010-11 & 2011-12. ITA NO.5033/M/2017 FOR A.Y. 2010-11 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS AN INDIVIDUAL ENGAGED IN BUSINESS OF RESELLING OF FERROUS AND NON FERROUS METAL. DURING THE YEAR THE ASSESSING OFFICER (HEREINAFTER REFERRED TO AS THE ITA NOS.5033 & 5034/M/2017 SHRI AAS MOHAMMED KHAN 2 AO) FOUND THAT ASSESSEE HAD MADE BOGUS PURCHASES FR OM FOLLOWING PARTIES: SR. NO. NAME OF THE PARTY AMOUNT OF PURCHASE (RS) 1. PADMALAXMI STEEL & ALLOYS PVT. LTD. 5,79,097/- 2. MACOS IRON & STEEL PVT. LTD. 9,78,271/- 3. CEEPORT IRON & STEEL 16,62,170/- TOTAL 32,19,538/- 3. THE ASSESSEE WAS ASKED TO PRODUCE THE ABOVE PART IES FOR VERIFICATION. THERE WAS NO COMPLIANCE OF NOTICE UND ER SECTION 133(6). THEREFORE, THE AO HAS MADE THE ADDITION ON ACCOUNT OF BOGUS PURCHASES OF RS.32,19,538/-/-. 4. MATTER CARRIED TO THE LD. CIT(A) AND THE LD. CIT (A) HAS PARTLY ALLOWED THE CLAIM OF THE ASSESSEE BY OBSERVING AS U NDER: 4.1.16 THE AO HAS ONLY ADDED THE PROFIT ELEMENT EMBEDDED I N THE AFORESAID BOGUS PURCHASES @ 12.5% WHICH SEEMS TO BE JUSTIFIED IN VIEW OF THE NATURE OF THE BUSINESS OF THE APPELLANT. IN VIE W OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND DISCUSSION HEREIN ABO VE, THE CONTENTIONS AND SUBMISSIONS OF THE ASSESSEE ARE NOT FOUND TO BE ACC EPTABLE AND ARE THEREFORE REJECTED. HOWEVER, SINCE THE AO HAS WRONGLY CONSIDERED THE AL LEGED PURCHASES AT RS.32,98,538/-, INSTEAD OF ACTUAL ALLEGED PURCHASES AT RS.32,19,538/-, THE ADDITION MADE BY THE AO AT RS.4,12,317/- IS RESTRIC TED TO RS 4,02,442. 4.1.17 THEREFORE, THE FIRST GROUND OF APPEAL RAISED BY THE APPELLANT IS PARTLY ALLOWED. 5. I HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE P ARTIES. LD. D.R. RELIED UPON THE DECISION OF THE TRIBUNAL, AHMEDABAD BENCH IN THE CASES OF SHWETAMBAR STEELS VS. ITO AHMEDABAD AND GA NESH RICE MILLS VS. CIT (294 ITR 316). THE FACTS IN THE PRES ENT CASE SHOW THAT ASSESSEE COULD NOT PRODUCE THE PARTIES FROM WHOM GO ODS ARE STATED TO HAVE BEEN PURCHASED. THE SUPPLIERS WERE FOUND TO BE ENGAGED IN ITA NOS.5033 & 5034/M/2017 SHRI AAS MOHAMMED KHAN 3 PROVIDING BOGUS BILL WITHOUT ACTUAL DEALING OF GOOD S. IN THIS REGARD, THE ASSESSEE HAS STATED THAT THEY HAD SUBMITTED QUA NTITATIVE DETAILS OF STOCK WITH RESPECT OF THE SALES WITH PURCHASES FROM THE PARTIES DURING THE ASSESSMENT PROCEEDINGS. THE ASSESSEE HAS SUBMIT TED THE DETAIL OF CORRESPONDING SALES IN RESPECT OF THE PURCHASE FROM THE SAID PARTIES. AS MENTIONED ABOVE THE AO HAS NEVER DISPUTED OR EXA MINED THE ASPECT OF SALES RECEIPTS. SINCE THE SALES MADE BY T HE ASSESSEE WAS NOT DOUBTED OR DISPUTED BY THE AO AND HE HAS ACCEPTED T HE SALES RECEIPTS OF THE ASSESSEE AS IT IS, THEREFORE, THE AO CANNOT DENY THAT PURCHASES WERE NOT MADE BY THE ASSESSEE AND THE MATERIAL WAS NOT USED FOR ITS SALES. WHAT IS UNDER DISPUTE IS THE PURCHASES FROM T HE PARTIES FROM WHOM BILLS HAVE BEEN TAKEN AND CHEQUES HAVE BEEN IS SUED TO THEM. PURCHASES ARE NOT IN DISPUTE BUT THE PARTIES FROM W HOM PURCHASE ARE SHOWN TO HAVE BEEN MADE ARE DISPUTED AND SUSPICIOUS . THE AO HAD MADE THE ADDITION AS SOME OF THE SUPPLIERS WERE DEC LARED HAWALA DEALERS BY THE VAT DEPARTMENT. THIS MAY BE A GOOD R EASON FOR MAKING FURTHER INVESTIGATION BUT THE AO DID NOT MAK E ANY FURTHER INVESTIGATION AND MERELY COMPLETED THE ASSESSMENT O N SUSPICION. ONCE THE ASSESSEE HAS BROUGHT ON RECORD THE DETAILS OF PAYMENTS BY ACCOUNT PAYEE CHEQUE, IT WAS INCUMBENT ON THE AO TO HAVE VERIFIED THE PAYMENT DETAILS FROM THE BANK OF THE ASSESSEE A ND ALSO FROM THE BANK OF THE SUPPLIERS TO VERIFY WHETHER THERE WAS A NY IMMEDIATE CASH WITHDRAWAL FROM THEIR ACCOUNT. NO SUCH EXERCISE HAS BEEN DONE OR FINDINGS RECORDED. THERE WAS NO DETAILED INVESTIGAT ION MADE BY THE AO HIMSELF. IT IS ALSO FOUND THAT THE PAYMENTS HAVE BEEN MADE BY ACCOUNT PAYEE CHEQUE WHICH ARE DULY REFLECTED IN TH E BANK STATEMENT ITA NOS.5033 & 5034/M/2017 SHRI AAS MOHAMMED KHAN 4 OF THE ASSESSEE. THERE IS NO EVIDENCE TO SHOW THAT THE ASSESSEE HAS RECEIVED CASH BACK FROM THE SUPPLIERS. MERELY BECAU SE THE SUPPLIERS DID NOT APPEAR BEFORE THE AO OR SOME CONFIRMATION L ETTERS WERE NOT FURNISHED, ONE CANNOT CONCLUDE THAT THE PURCHASES W ERE NOT MADE BY THE ASSESSEE. THIS VIEW IS SUPPORTED BY THE DECISIO N OF NIKUNJ EXIMP ENTERPRISES VS. CIT 216 TAXMAN 171 (BOM). TO THIS E XTENT, I AM OF THE VIEW THAT IF THE ASSESSEE HAS FULFILLED ITS ONU S OF MAKING THE PAYMENT BY CHEQUE AND HAS SUPPLIED THE ADDRESSES OF THE SELLERS THEN IT CANNOT BE PRESUMED THAT SUPPLIER WERE BOGUS SIMP LY BECAUSE THE SELLERS WERE NOT FOUND AT THE GIVEN ADDRESS. THERE IS A CONSIDERABLE TIME GAP BETWEEN THE PERIOD OF PURCHASE TRANSACTION AND PERIOD OF SCRUTINY PROCEEDINGS. THE AO HAS NOT BROUGHT ANY MA TERIAL ON RECORD TO SHOW THAT THERE IS SUPPRESSION OF SALES. IT IS B ASIC RULE OF ACCOUNTANCY AS WELL AS OF TAXATION LAWS THAT PROFIT FROM BUSINESS CANNOT BE ASCERTAINED WITHOUT DEDUCTING COST OF PUR CHASE FROM SALES. ESTIMATION OF PROFIT RANGING FROM 12.5% TO 15% HAS BEEN UPHELD BY THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT V S SIMIT P SHETH 356 ITR 451 (GUJ.). THE BOMBAY BENCHES OF THE TRIB UNAL HAS TAKEN A CONSISTENT VIEW THAT IF THE ASSESSEE IS DOING IRO N AND STEEL BUSINESS THEN ASSESSEE MIGHT HAVE SAVED THE VAT I.E. UP TO 4 TO 6 %. THEREFORE TO LINK UP THE DEFECT, I DIRECT THE AO TO TAKE THE GP @ 8% OF THE TOTAL BOGUS PURCHASES WHICH COMES TO RS.2,57 ,563/-. 6. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOW ED. ITA NOS.5033 & 5034/M/2017 SHRI AAS MOHAMMED KHAN 5 ITA NO.5034/M/2017 FOR A.Y. 2011-12 7. IN THIS APPEAL, DURING THE YEAR, THE AO FOUND TH AT ASSESSEE HAD MADE PURCHASES FROM FOLLOWING PARTIES: SR. NO. NAME OF THE PARTY AMOUNT OF PURCHASE (RS) 1. MACOS IRON & STEEL PVT. LTD. 33,47,269/- 2. CEEPORT IRON & STEEL PVT. LTD. 32,75,042/- TOTAL 66,22,311/- 8. I FIND THAT THE ASSESSEE HAS TAKEN THE IDENTICAL GROUNDS IN ITA NO.5033/M/2017 FOR A.Y. 2010-11 AND THE SAME HAVE A LREADY BEEN DECIDED AS ABOVE. HENCE, RESPECTFULLY FOLLOWING TH E SAME RATIO, I DIRECT THE AO TO TAKE THE GP @ 8% OF THE TOTAL BOGU S PURCHASES WHICH COMES TO RS.5,29,785/-. 9. IN THE RESULT, BOTH THE APPEALS OF ASSESSEE ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 23.11.2017. SD/- (D.T. GARASIA) JUDICIAL MEMB ER MUMBAI, DATED: 23.11.2017. * 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.