KOLSHET ISPAT UDYOG LIMITED, MUMBAI V. DCIT. CIRCLE- 1 , THANE

ITA 5102/MUM/2018

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 1484 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-10-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 04-09-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R BHOOPATHI
• Keywords: Reopening of assessment; Bogus purchase; Set aside
• Section: 143(1); 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH SMC, MUMBAI BEFORE SHRI VIKAS AWASTHY, JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA NO.5102/M/2018 ASSESSMENT YEAR: 2009-10 M/S. KOLSHET ISPAT UDYOG LTD., D-1003, LAKE CASTLE, HIRANANDANI GARDENS, POWAI, MUMBAI 400 071 PAN: AABCK2831B VS. DCIT, CIRCLE -1, ASHAR I.T. PARK, 6 TH FLOOR, B WING, ROOM NO.22, ROAD NO.16Z, WAGLE INDUSTRIAL ESTATE, THANE (W) 400 604 (APPELLANT) (RE SPONDENT) PRESENT FOR: ASSESSEE BY : SHRI VIMAL PUNMIYA, A.R. REVENUE BY : SHRI R. BHOOPATHI, D.R. DATE OF HEARING : 18.09.2019 DATE OF PRONOUNCEMENT : 22.10.2019 O R D E R PER RAJESH KUMAR, ACCOUNTANT MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSES SEE AGAINST THE ORDER DATED 26.03.2015 OF THE COMMISSIO NER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS TH E CIT(A)] RELEVANT TO ASSESSMENT YEAR 2009-10. 2. THE ASSESSEE HAS RAISED TWO ISSUES IN VARIOUS GR OUNDS OF APPEAL, ONE IS AGAINST THE REOPENING OF ASSESSMENT UNDER SECTION 147 AND THE SECOND IS ON MERIT AGAINST THE CONFIRMING RS.17,37,717/- BEING 12.5% OF THE BOGUS PURCHASES T O THE INCOME OF THE ASSESSEE BY LD. CIT(A). 3. AT THE TIME OF HEARING, THE LD. A.R. DID NOT PRE SS THE LEGAL ISSUE AND THE SAME IS DISMISSED AS NOT PRESSED. TH EREFORE, WE ARE DECIDING THE ISSUE ON MERIT. ITA NO.5102/M/2018 M/S. KOLSHET ISPAT UDYOG LTD. 2 4. THE FACTS IN BRIEF ARE THAT ASSESSEE FILED RETUR N OF INCOME ON 27.09.2009 DECLARING INCOME AT NIL WHICH WAS PRO CESSED UNDER SECTION 143(1) OF THE ACT. SUBSEQUENTLY, THE AO RECEIVED INFORMATION FROM SALES TAX DEPARTMENT THAT ASSESSEE IS A BENEFICIARY OF HAWALA PURCHASE ENTRIES TO THE TUNE OF RS.1,39,01,739/- FROM M/S. S.V. METAL CORPORATION AN D ACCORDINGLY THE CASE OF THE ASSESSEE WAS REOPENED B Y ISSUING NOTICE UNDER SECTION 148. DURING THE ASSESSMENT PR OCEEDINGS, THE AO CALLED UPON THE ASSESSEE TO FILE EVIDENCES T O PROVE THE GENUINENESS OF THE PURCHASES. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE FILED BILLS, VOUCHERS, ST OCK STATEMENTS AND PROOF OF PAYMENTS THROUGH BANKING CHANNEL BEFOR E THE AO. HOWEVER, THE AO NOT FINDING THE CONTENTIONS OF THE ASSESSEE AS TENABLE ESTIMATED THE INCOME ON BOGUS PURCHASES AT RS.17,37,717/- BEING 12.5% OF BOGUS PURCHASES AND A DDED THE SAME TO THE INCOME OF THE ASSESSEE BY FOLLOWING THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF SIMIT P S ETH 38 TAXMAN 385 (GUJ) . 5. IN THE APPELLATE PROCEEDINGS, THE LD. CIT(A) AFF IRMED THE ORDER OF THE AO BY FOLLOWING THE DECISION OF HONBL E GUJARAT HIGH COURT IN THE CASE OF CIT VS. SIMIT P. SHETH 38 TAXM AN 385 (GUJ) AND ACCORDINGLY AFFIRMED THE DECISION OF THE AO. 6. AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATERIAL ON RECORD, WE OBSERVE THAT THE ASSESSEE IS UNDOUBTEDLY THE BENEFICIARY OF HAWALA PURCHASE ENTRIES TO THE TUNE OF RS.1,39,01,739/- FROM SB METAL CORPORATION WHICH CA ME TO THE NOTICE OF THE AO AFTER THE SALES TAX DEPARTMENT, GO VERNMENT OF MAHARASHTRA BROUGHT THE FACT TO THE NOTICE OF THE A O. ITA NO.5102/M/2018 M/S. KOLSHET ISPAT UDYOG LTD. 3 ACCORDINGLY, THE CASE OF THE ASSESSEE WAS REOPENED. THE AO NOT SATISFIED WITH THE CONTENTIONS OF THE ASSESSEE , AS SESSED THE PROFIT TO TAX ON THE SAID BOGUS PURCHASES @ 12.5% A ND THE LD. CIT(A) AFFIRMED THE ORDER OF AO BY FOLLOWING THE DE CISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. S IMIT P. SHETH 38 TAXMAN 385 (GUJ). 7. UNDISPUTEDLY, THE ASSESSEE IS ENGAGED IN THE BUS INESS OF TRADING IN IRON AND STEEL GOODS AND THE GP IN THE S AID INDUSTRY RANGES BETWEEN 2% TO 4%. WE OBSERVE THAT IN THE CA SE OF THE ASSESSEE DURING THE YEAR, THE GP RATE WAS 1.27% VIS --VIS 1.07% IN THE IMMEDIATELY PRECEDING PREVIOUS YEAR AND THE APPLICABLE VAT RATE WAS 4%. IN VIEW OF THESE FACTS, WE ARE OF THE CONSIDERED VIEW THAT THE GP AS APPLIED BY THE AO ON THE BOGUS PURCHASES @ 12.5% IS QUITE HIGH AND UNREALISTIC IN THE STEEL INDUSTRY. THEREFORE, IT WOULD BE REASONABLE AND FA IR, IF A GP RATE OF 4% IS APPLIED ON THE BOGUS PURCHASES TO BRING TH E PROFITS EMBEDDED THEREIN TO TAX. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD. CIT(A) AND DIRECT THE AO TO APPLY A GP OF 4% ON THE BOGUS PURCHASES OVER AND ABOVE THE DECLARED GROSS PROFIT. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 22.10.2019. SD/- SD/- (VIKAS AWASTHY) (RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 22.10.2019. * KISHORE, SR. P.S. ITA NO.5102/M/2018 M/S. KOLSHET ISPAT UDYOG LTD. 4 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.