ITO 24(3)(2), MUMBAI V. PANKAJ BHASKAR TIKE, MUMBAI

ITA 5204/MUM/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 3903 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-08-2016
• Appeal Filed By: Department
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 14-08-2014
• Court: TRIBUNAL
• Department Lawyers: PRADEEP KUMAR SINGH
• Assessee Lawyers: HITESH M SHAH
• Keywords: Bogus purchase
• Section: 145

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C , BENCH MUMBAI BEFORE SHRI R.C.SHARMA, AM & SHRI PAWAN SINGH , JM ./ ITA NO. 5204 / MUM/20 1 4 ( / ASSESSMENT YEAR : 20 10 - 20 11 ) ITO - 24( 3)(2), MUMBAI VS. SHRI PANKAJ BHASKAR TIKE, 21/671,WEST VIEW CHS, SHASTRI NAGAR, GOREGAON(W), MUMBAI - 400062 ./ ./ PAN/GIR NO. : A A EPT 2598 Q ( / APPELLANT ) .. ( / RESPONDENT ) /REVENUE BY : SHRI PR ADEEP KUMAR SINGH /AS SESSEE BY : SH RI HITESH M. SHAH / DATE OF HEARING : 0 8 /0 8 /2016 / DATE OF PRONOUNCEMENT 0 8 / 0 8 /201 6 / O R D E R PER R.C.SHARMA (A.M) : TH IS IS AN APPEAL FILED BY THE RE VENUE AGAINST THE ORDER OF CIT(A), MUMBAI, FOR THE ASSESSMENT YEAR 20 10 - 20 11. 2. IN THIS APPEAL, THE REVENUE IS AGGRIEVED BY THE ORDER OF CIT(A) FOR DELETING 9 5 % OF THE ADDITION MADE ON ACCOUNT OF G.P. ON BOGUS PURCHASES. 3. WE HAVE CONSIDERED RIVAL CONTENTIONS AN D FOUND THAT CIT(A) HAS UPHELD THE ADDITION OF 5% OF GP IN RESPECT OF BOGUS PURCHASES AFTER HAVING THE FOLLOWING OBSERVATIONS : - 3.3. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS MADE BY THE APPELLANT AND THE IMPUGNED ASSESSMENT ORDER ON THIS ISSUE. THE APP ELLANT'S AUTHORIZED REPRESENTATIVE HAS CLAIMED THAT HE COULD NOT PRODUCE THE PARTIES IN PERSON FOR THE REASON THAT THEY HAVE DISCONTINUED THE . BUSINESS WITH THEM FOR THE PAST TWO YEARS THEN. ITA NO. 5204 /1 4 2 HOWEVER IN ALMOST ALL THE CASES,' THE APPELLANT HAS PRODUCED AND SUBMITTED THE CONFIRMATION OF ACCOUNTS ALONG WITH PAN NO AND ACTIVE STATUS OF TIN NO CERTIFICATE AT THE TIME OF TRANSACTIONS, COPY OF INVOICES, COPY OF .DELIVERY CHALLANS AND THE PROOF OF PAYMENTS MADE THROUGH AN ACCOUNT PAYEE CHEQUES SUCH AS BANK STATEME NTS, ALL OF WHICH HAS GONE IN' PROVING' THE GENUINENE.SS OF THE PURCHASES BEYOND DOUBT. MOREOVER THE APPELLANT HAS' FURNISHED AN AUDITED BALANCE SHEET, PROFIT & LOSS ACCOUNT ALONG WITH TAX AUDIT REPORT U/S. 44AB OF THE I T ACT FOR THE YEAR ENDED 31.03.201 0 AND THE A.O HAS NOT REJECTED THE BOOKS OF ACCOUNT U/S 145 OF THE IT ACT. FURTHER, THE SALES ON THE OTHER HAND HAS NOT BEEN DOUBTED AND/OR PROVED NON - GENUINE BY THE ASSESSING OFFICER. IF THE SALES HAS TAKEN PLACE THEN IT IS BUT OBVIOUS THAT THE PURCHASES HAVE BEEN MADE. ALTERNATIVELY IN ABSENCE OF PURCHASE, SALES CAN NOT BE EFFECTED. DURING THE COURSE OF APPELLATE PROCEEDINGS, THE APPELLANT HAS FURNISHED ANNUAL ACCOUNTS FOR THE YEAR ENDED 31.3.2010 ALONG WITH TAX AUDIT REPORT AND DETAILS OF PURCHASES MADE FROM THE 8 PURCHASE' PARTIES AS MENTIONED IN. THE ASSESSMENT ORDER I.E .. ABHILASHA SALES P. LTD., MIHIR SALES P.LTD., MOTION TRADERS P.LTD., SMARTLINK TRADEX P.LTD., ARIHANT CORPORATION, JAIN CORPORATION, LAXM.AN SALES PVT.LTD., NAVKAR CORPORATION AND COP Y OF THE BANK STATEMENT FOR EVIDENCING THE PAYMENTS. THE APPELLANT HAS RELIED ON THE HONOURABLE MUMBAI HIGH COURT DECISION IN THE CASE OF NIKUNJ EXIMP ENTERPRISES PVT. LTD. ITA NO. 5604 OF 2010 DATED 17 /12/20F2 WHICH SUPPORTS THE CASE OF THE APPELLANT WHE REIN IT HAS BEEN HELD .THAT WHAT IF THE SALES HAS BEEN ACCEPTED THE PURCHASES CAN NOT BE TREATED AS NON GENUINE IN THOSE CASES WHERE APPELLANT HAS SUBMITTED ALL DETAILS OF PURCHASES AND SALES AND PAYMENTS' FOR PURCHASES HAS BEEN MADE THROUGH CHEQUE AND ALS O. HELD THAT THE INCOME TAX DEPARTMENT JUST ON THE BASIS OF INFORMATION 'FROM THIRD PARTY (IN THIS CASE THE' SALES TAX DEPARTMENT) CAN NOT DISALLOW THE PURCHASES. IT IS ALSO HELD THAT IN CASE THE SALE MADE BY THE PARTY ARE NOT DOUBTED OR THE BOOKS OF ACCOU NTS ARE NOT REJECTED PURCHASES CAN NOT BE DISALLOWED ALSO. IT MAY ALSO BE NOTED THAT IF PURCHASES WERE BOGUS, WE WOULD NOT HAVE BEEN IN A POSITION TO SELL THE GOODS TO THE THIRD PARTIES. THE APPELLANT ALSO. RELIED ON THE FOLLOWING CASE LAWS: - 1. THE CIT VS. LADERS VALVES (P) LTD. (HIGH COURT OF PUNJAB & HAR.) (285 ITR 435) 2. THE CIT VS. M' K BROTHERS (163 IT~ 249) (GUJARAT HIGH COURT) 3. THE CI.T VS. ORISSA CORPORATION (P) LTD. (159 ITR 78) (SC) 4. BALA]I TEXTILE INDUSTRIES (P) LTD. VS. I.T.O. (49 ITO 177) BOMBAY 5. GUJRAT HIGH COURT DECISION 'IN THE CASE OF CIT VS. SIMIT P .SHETH(2013) 356 ITR 451. I HAVE CONSIDERED THE CASE' LAWS AND APPELLANT'S REQUEST TO ADOPT G~P. AND HOLD THAT SINCE THE ASSESSING OFFICER ALSO HAD ACCEPTED THE SALES CORRESPONDI NG TO THE BOGUS PURCHASES INTRODUCED, THE ASSESSING OFFICER IS DIRECTED TO ACCEPT THE G.P. @ 5% AS THE INCOME ESCAPED TAX AND DELETE THE BALANCE ADDITION. THIS OF GROUND OF APPEAL :IS PARTLY ALLOWED. ITA NO. 5204 /1 4 3 4. AGAINST THE ABOVE ORDER OF CIT(A), THE ASSESSEE IS NOT IN FURTHER APPEAL BEFORE US, HOWEVER, THE REVENUE HAS FILED THE PRESENT APPEAL FOR DELETING THE ADDITION OF 9 5 %. 5. AT THE OUTSET, LD. AR PLACED ON RECORD ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2009 - 2010, DATED 5 - 7 - 2016, WHEREIN THE TRIBUNAL UPHELD THE ADDITION OF 10% OF GP ON BOGUS PURCHASES AFTER HAVING THE FOLLOWING OBSERVATION : - 4. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. THE ID. COUNSEL FOR THE ASSESSEE ALSO FILED SOME DETAILS BEFORE THE B ENCH WHICH WAS AVAILABLE BEFORE THE A.O. AND BEFORE THE CIT (A). DURING THE COURSE OF HEARING, THE QUERY WAS PUT TO THE ASSESSEE WHETHER THESE PARTIES EXIST OR NOT. IN REPLY, HE STATED THAT EVEN IF THESE PARTIES DOES NOT EXIST, THE ASSESSEE MIGHT HAVE MADE PURCHASES FROM ONE SOURCE OR THE OTHER AND EFFECTED SALES ACCORDINGLY. ACCORDING TO HIM ONCE THE SALES ARE EFFECTED AND NOT DOUBTED BY THE A.O., THE CIT(A) HAS RIGHTLY DELETED THE ADDITION OF BOGUS PURCHASES. WHEN THE ID. COUNSEL WAS FURTHER ASKED THAT ON CE THE PURCHASES ARE BOGUS AND THE PURCHASES ARE MADE FROM ONE OR THE OTHER PARTY, THE ASSESSEE MIGHT HAVE EVADED SALES TAX AND OTHER LOCAL TAXES. IN REPLY, HE CONCEDED THE POSITION AND STATED THAT IN CASE THE PURCHASES ARE MADE FROM UNKNOWN SOURCE, HE REQ UESTED THE BENCH TO ESTIMATE THE REASONABLE PROFIT IN LIEU OF THE EVASION OF TAX. IN TERMS OF THE ABOVE EXPLANATION GIVEN BY THE ASSESSEE, WE ARE OF THE VIEW THAT THESE ARE BOGUS PURCHASES, BUT ONCE THE SALES ARE AFFECTED AND NOT DOUBTED BY THE REVENUE, AT THE BEST A REASONABLE PROFIT ON THESE SALES CAN BE ESTIMATED. HENCE, WE ESTIMATE THE PROFIT RATE ON THE BOGUS PURCHASES FROM THESE TWO PARTIES AT 10% INSTEAD OF 5% DECLARED BY THE ASSESSEE. THE A.O. IS DIRECTED TO BRING BALANCE 5% PROFIT IN TAX NET AND AS SESS ACCORDINGLY. 6. WE HAVE GONE THROUGH THE ORDER OF THE TRIBUNAL. AS THE FACTS AND CIRCUMSTANCES DURING THE YEAR UNDER CONSIDERATION ARE SAME, RESPECTFULLY FOLLOWING THE SAME, WE DIRECT THE AO TO ESTIMATE PROFIT ON BOGUS PURCHASES AT 10% INSTEAD OF 5% DIRECTED BY CIT(A) . THE AO IS ACCORDINGLY DIRECTED TO BRING BALANCE 5% PROFIT TAX NET AND ASSESS ACCORDINGLY. ITA NO. 5204 /1 4 4 7 . IN THE RESULT, APPEAL OF THE REVENUE IS ALLOWED IN PART . O RDER PRONOUNCED IN THE OPEN COURT ON THIS 08 /08 / 201 6 . SD/ - ( PAWAN SIN GH ) SD/ - ( R.C.SHARMA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED 08 /08 /201 6 . . /PKM , . / PS / 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//