M/S. MAC DYECHEM INDUSTRIES, MUMBAI V. INCOME TAX OFFICER, WARD-28(2)(2), MUMBAI

ITA 5279/MUM/2019

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 7725 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-08-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: misc
• Appeal Filed On: 13-08-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SANJAY J SETHI
• Keywords: Bogus purchase; Cost of acquisition
• Section: 143(3); 147

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH SMC, MUMBAI BEFORE SHRI VIKAS AWASTHY, JUDICIAL MEMBER & SHRI MANOJ KUMAR AGGARWAL, ACCOUNTANT MEMBER . 5279 / / 20 19 (. . 2009-10 ) ITA NO.5279/MUM/2019 (A.Y.2009-10) M/S MAC DYECHEM INDUSTRIES, PLOT NO.D/24/7, MIDC TTC INDUSTRIAL AREA, OPP. BALMER LAWRIE, TURBHE, NAVI MUMBAI-400705. PAN: AAEFM6471D ...... / APPELLANT VS. ITO-28(2)(2), ROOM NO. 311, 3 RD FLOOR, 6 TH TOWER, VASHI RAILWAY STATION COMPLEX, VASHI-400703. ..... / RESPONDENT . 5744 / / 20 19 (. . 2009-10 ) ITA NO.5744/MUM/2019 (A.Y.2009-10) ITO-28(2)(2), ROOM NO. 311, 3 RD FLOOR, 6 TH TOWER, VASHI RAILWAY STATION COMPLEX, VASHI-400703. ...... / APPELLANT VS. M/S MAC DYECHEM INDUSTRIES, PLOT NO.D/24/7, MIDC TTC INDUSTRIAL AREA, OPP. BALMER LAWRIE, TURBHE, NAVI MUMBAI-400705. PAN: AAEFM6471D ..... / RESPONDENT 2 . 5244 & 5279 / /20 19 (. .2009-10 ) ITA NO.5244 & 5279/MUM/2019 (A.Y.2009-10) / DEPARTMENT BY : SH. SANJAY J. SETHI [ / ASSESSEE BY : MS. HIRAL SEJPAL / DATE OF HEARING : 14/06/2021 / DATE OF PRONOUNCEMENT : 24/08/2021 / ORDER PER VIKAS AWASTHY, J.M: THESE CROSS APPEALS BY THE ASSESSEE AND THE REVENUE ARE DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-26 MUMBAI [HEREINAFTER REFERRED TO AS THE CIT(A)] DATED 12.06.2019 FOR THE ASSESSMENT YEAR (AY) 2009-10. 2. MS. HIRAL SEJPAL APPEARING ON BEHALF OF THE ASSESSEE SUBMITTED THAT ASSESSEE IS ENGAGED IN MANUFACTURING AND TRADING OF DYES AND CHEMICALS. THE ASSESSMENT IN THE CASE OF ASSESSEE FOR AY 2009-10 WAS RE-OPENED FOR THE REASON THAT THE ASSESSEE HAS ALLEGEDLY OBTAINED BOGUS PURCHASE BILLS AMOUNTING TO RS. 1,52,31,031/- DURING THE PERIOD RELEVANT TO THE AY UNDER APPEAL. THE ASSESSEE IN ORDER TO PROVE GENUINENESS OF THE PURCHASES HAD FURNISHED COPIES OF LEDGER ACCOUNTS OF ALL THE PARTIES, BANK STATEMENTS, ETC. THE ASSESSING OFFICER ACCEPTED THE SALES TURNOVER DECLARED BY THE ASSESSEE AND THEREAFTER ESTIMATED GROSS PROFIT (GP) @ 12.5% ON ALLEGED HAWALA PURCHASES AND MADE ADDITION OF RS. 19,03,878/-. AGGRIEVED BY THE ASSESSMENT ORDER DATED 13.03.2015 PASSED UNDER SECTION 143(3) READ WITH SECTION 147 OF THE INCOME TAX ACT, 1961 [HEREINAFTER REFERRED TO AS THE ACT], THE ASSESSEE FILED APPEAL BEFORE THE CIT(A). BEFORE THE FIRST APPELLATE AUTHORITY, THE ASSESSEE FURNISHED VAT AUDIT REPORT. AS PER THE SAID REPORT, THE ASSESSEE HAD MADE PURCHASES FROM ALLEGED HAWALA DEALERS 3 . 5244 & 5279 / /20 19 (. .2009-10 ) ITA NO.5244 & 5279/MUM/2019 (A.Y.2009-10) ONLY TO THE EXTENT OF RS. 76,78,960/-. THE CIT(A) MODIFIED THE ASSESSMENT ORDER ONLY TO THE EXTENT OF TOTAL ALLEGED HAWALA PURCHASES AS PER VAT AUDIT REPORT AND RETAINED ADHOC GP ADDITION @ 12.5%. THE LD. AUTHORIZED REPRESENTATIVE (AR) SUBMITTED THAT THE ASSESSEE HAS DECLARED GP OF 9.42% DURING THE FINANCIAL YEAR (FY) 2008-09. THE INDUSTRY GP IS 9.12%. THE GP DECLARED BY THE ASSESSEE IS MORE THAN INDUSTRY GP. THE LD. AR SUBMITTED THAT IN LIGHT OF DOCUMENTARY EVIDENCE FURNISHED BY THE ASSESSEE THE ENTIRE ADDITION IN RESPECT OF BOGUS PURCHASES BE DELETED. THE LD. AR FURTHER SUBMITTED THAT WITHOUT PREJUDICE TO PRIMARY PRAYER THE ADDITION MAY BE RESTRICTED TO THE EXTENT OF DIFFERENCE BETWEEN THE GP ESTIMATED BY THE AO AND THE GP DECLARED BY THE ASSESSEE. TO SUPPORT HER SUBMISSIONS, THE LD. AR PLACED RELIANCE ON THE DECISION OF TRIBUNAL IN THE CASE OF ITO VS. AMI RIDDHI CHEM PVT. LTD. IN ITA NO. 5897 & 5898/MUM/2017 FOR THE AY 2011-12 & 2012-13 DECIDED ON 01.01.2019. 3. ON THE OTHER HAND, SH. SANJAY J. SETHI REPRESENTING THE DEPARTMENT VEHEMENTLY DEFENDING THE ASSESSMENT ORDER SUBMITTED THAT THE VAT AUDIT REPORT ON THE BASIS OF WHICH THE CIT(A) HAS REDUCED THE AMOUNT OF BOGUS PURCHASES FROM RS. 1,52,31,031/- TO 76,78,960/- WAS NEVER BROUGHT TO THE NOTICE OF AO. THE CIT(A) HAS FAILED TO APPRECIATE THE FACT THAT PARTIES FROM WHOM ASSESSEE HAS MADE UNAPPROVED PURCHASES ARE DECLARED HAWALA OPERATORS. THE LD. DR SUBMITTED THAT THE ASSESSEE HAS FAILED TO DISCHARGE ITS ONUS IN PROVING GENUINENESS OF THE DEALERS AND THE PURCHASES MADE FROM THEM. THE LD. DR PRAYED FOR RESTORING THE ADDITION MADE AS PER ASSESSMENT ORDER. 4 . 5244 & 5279 / /20 19 (. .2009-10 ) ITA NO.5244 & 5279/MUM/2019 (A.Y.2009-10) 4. BOTH SIDES HEARD, ORDERS OF AUTHORITIES BELOW EXAMINED. THE ASSESSEE IN APPEAL HAS ASSAILED ADHOC GP RATE ADOPTED BY THE AO AND SUBSEQUENTLY CONFIRMED BY THE CIT(A) FOR MAKING ADDITION ON UNPROVED PURCHASES ALLEGEDLY MADE FROM SUSPICIOUS DEALERS. ON THE OTHER HAND, THE REVENUE IN APPEAL HAS ASSAILED THE ACTION OF CIT(A) IN REDUCING THE QUANTUM OF BOGUS PURCHASES IN THE LIGHT OF VAT AUDIT REPORT. 5. UNDISPUTEDLY, THE ASSESSEE FAILED TO DISCHARGE ITS ONUS IN PROVING GENUINENESS OF ALLEGED SUSPICIOUS DEALERS AND THE PURCHASES MADE FROM THEM. THE AO ESTIMATED GP ON BOGUS PURCHASES @ 12.5%. THE AO COMPUTED TOTAL AMOUNT OF BOGUS PURCHASES FROM HAWALA OPERATORS AT RS. 1,52,41,031/-. IN FIRST APPELLATE PROCEEDINGS, THE CIT(A) UPHELD THE FINDINGS OF AO TO THE EXTENT OF ASSESSEES INVOLVEMENT IN OBTAINING BOGUS BILLS AND THE RATE OF GP ESTIMATED ON SUCH BOGUS PURCHASES. HOWEVER, ON THE BASIS OF VAT AUDIT REPORT, THE CIT(A) REDUCED QUANTUM OF BOGUS PURCHASES TO RS. 76,78,960/-. WE OBSERVE THAT THE ASSESSEE HAS DECLARED GP OF 9.42% ON REGULAR TRANSACTIONS. THIS GP HAS NOT BEEN DISTURBED BY THE AO. IN BOGUS PURCHASE TRANSACTIONS, THE MODUS OPERANDAI IS THAT THE PURCHASES ARE MADE FROM GREY MARKET TO SAVE VAT AND MARGINAL PURCHASE COST AND MATCHING BOGUS BILLS ARE OBTAINED FROM ACCOMMODATION ENTRY PROVIDERS. TAKING INTO CONSIDERATION ENTIRETY OF FACTS, WE ARE OF CONSIDERED VIEW THAT THE ENDS OF JUSTICE WOULD BE MET, IF SUPPRESSED PROFIT MARGIN ON BOGUS PURCHASES AMOUNTING TO RS. 76,78,960/- IS ESTIMATED AT 5%. WE HOLD AND DIRECT ACCORDINGLY. 5 . 5244 & 5279 / /20 19 (. .2009-10 ) ITA NO.5244 & 5279/MUM/2019 (A.Y.2009-10) 6. IN VIEW OF OUR ABOVE FINDINGS, THE APPEAL OF ASSESSEE IS PARTLY ALLOWED AND APPEAL BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON TUESDAY , THE 24 TH DAY OF AUGUST, 2021. SD/- SD/- (MANOJ KUMAR AGGARWAL) (VIKAS AWASTHY) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / MUMBAI, / DATED: 24/08/2021 SK, PS COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT , 2. / THE RESPONDENT. 3. ( )/ THE CIT(A)- 4. CIT 5. , . . . , / DR, ITAT, MUMBAI 6. [ / GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI