DCIT, 10(2)(1), MUMBAI V. JAYSHREE POWERVOLT PVT LTD, MUMBAI

ITA 528/MUM/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 6657 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-02-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 01-02-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R K GUBGOTRA
• Keywords: Bogus purchase; Reassessment proceedings
• Section: 201

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC, BENCH MUMBAI BEFORE SHRI R.C.SHARMA, ACCOUNTANT MEMBER ITA NO. 528/MUM/2019 ( ASSESSMENT YEAR: 2011-12) D.C.I.T.-10(2)(1), 5 TH FLOOR, ROOM NO. 509, AAYKAR BHAWAN, CHURCHGATE, MUMBAI- 400020. VS. M/S JAYSHREE POWERVOLT PVT. LTD., JAYSHREE SADAN, OLD NAGARDAS ROAD, MUMBAI- 400069. PAN/GIR NO.AAACJ 1459 M (APPELLANT ) .. (RESPONDENT ) REVENUE BY SHRI R.K. GUBGOTRA (DR) ASSESSEE BY NONE DATE OF HEARING 03/02/2020 DATE OF PRONOUNCEMENT 04/02/2020 / O R D E R PER: R.C. SHARMA, A.M. THIS IS THE APPEAL FILED BY THE REVENUE AGAINST TH E ORDER OF THE LD. CIT(A)-17, MUMBAI DATED 28/11/2018 FOR THE A.Y. 201 1-12 IN THE MATTER OF ORDER PASSED U/S 143(3)/154 OF THE INCOME TAX AC T, 1961 (IN SHORT, THE ACT). 2. I HAVE GONE THROUGH THE ORDERS OF THE AUTHORITIE S BELOW AND FOUND THAT THE ASSESSEE IS A PRIVATE LIMITED COMPANY AND ENGAGED IN THE MANUFACTURE OF ELECTRICAL TRANSFORMERS. THE A.O. RE OPENED THE ASSESSMENT ON GETTING INFORMATION FROM THE SALES TA X DEPARTMENT. DURING THE REASSESSMENT PROCEEDINGS, THE A.O. ADDED 100% OF SUCH ITA NO. 528/MUM/2019 DCIT VS M/S JAYSHREE POWERVOLT PVT. LTD. 2 PURCHASES IN ASSESSEES INCOME. BY THE IMPUGNED ORD ER, THE LD. CIT(A) HAS RESTRICTED THE ADDITION TO THE EXTENT OF 25% AF TER HAVING THE FOLLOWING OBSERVATION: 6.5 THE NET CONCLUSION THAT CAN BE ARRIVED AT FROM THE ABOVE DISCUSSION IS THAT WHERE THE SALES AND PURCHASES ARE VERIFIABLE A ND PROVEN E.G. TO OR FROM GOVERNMENT BODIES OR AGENCIES ETC NO ADDITION MAY BE MADE. IF HOWEVER, THE PURCHASES ARE BOGUS BUT THE DIRECT SAL ES ARE PROVED, THE ASSUMPTIONS ARE THAT THE PURCHASES WERE MADE FROM U NKNOWN PARTIES AND THE AO CAN APPLY A PROFIT RATE TO DETERMINE THE LIABILITY OF THE ASSESSEE. IT IS ALSO SEEN THAT PUTTING AN ONUS ON T HE AO TO TRACE THE MONEY TRAIL OR VERIFY THE WITHDRAWALS FROM THE BANK S ETC MAY GIVE MORE POINTERS BUT IT IS NOT SUFFICIENT BY ITSELF AND THE ITAT HAS NOT ACCEPTED SUCH AN ARGUMENT IN THE CASE OF SHRI GANPATRAJ A. S ANGHAVI (SUPRA). IF THE BOGUS PURCHASES ARE UNPROVED AND ARE DECLARED C ONSUMED BY ASSESSEE ITSELF IN ITS TRADING, MANUFACTURING OR NO N-TRADING ACTIVITIES, THE ENTIRE ADDITION CAN BE MADE AS IT ONLY GOES TO INFLATE THE EXPENSES OF THE ASSESSEE. (REFER M/S. SHORELINE HOTEL PVT. L TD VS. CIT CENTRAL-I IN ITA NO.964/M/2015 DATED 19.06.2015). 6.6 IN VIEW OF THE ABOVE DISCUSSION, IT IS SEEN THA T THE ASSESSEE IS UNABLE TO SUBSTANTIATE ITS PURCHASES FROM THE HAWALA DEALERS AND ALSO UNABLE TO PROVE CONSUMPTION OF MATERIAL. IN THIS CASE, THE BO OKS OF ACCOUNTS HAVE NOT BEEN REJECTED BY THE AO. THUS, IT WOULD BE A CA SE OF PURCHASES MADE FROM THE BOGUS PARTIES, RATHER THAN A CASE OF BOGUS PURCHASES. THERE IS NOTHING TO SHOW WITHOUT MAKING PURCHASES, IT WAS POSSIBLE FOR THE ASSESSEE TO QUOTE THE SALES DECLARED WHICH HAVE NOT BEEN DISCUSSED BY THE AO. ON THE OTHER HAND, THE APPELLANT HAD FAI LED TO ESTABLISH THE GENUINENESS OF THE PURCHASES MADE FROM THE PARTIES CLAIMED. THIS WOULD INDICATE THAT THE PURCHASES WERE MADE FROM THE OPEN MARKET WITHOUT INSISTING FOR GENUINE BILLS AND IN SUCH CASES, THE SUPPLIERS WOULD BE WILLING TO SELL AT A MUCH LESS RATE THAT THEY WOULD HAVE CHARG ED OTHERWISE. RESULTANTLY, THE GROSS PROFIT DECLARED BY THE APPELLANT CANNOT B E RELIED UPON CONSIDERING ITA NO. 528/MUM/2019 DCIT VS M/S JAYSHREE POWERVOLT PVT. LTD. 3 THE NUMEROUS DEFECTS OWING TO ACCOUNTING OF PURCHAS ES FROM HAWALA DEALERS, RELATED EXPENSES, NON PRODUCTION OF PRIMAR Y DOCUMENTS BEFORE THE AO OR DURING THE APPELLATE PROCEEDINGS THE BOOKS OF ACCOUNT OF THE ASSESSEE IS NOT RELIABLE AND DEEMS TO BE REJECTED A ND GROSS PROFIT NEEDS TO BE ESTIMATED. CONSIDERING THE RATIO GIVEN IN VARIOUS CASES LAWS D ISCUSSED IN EARLIER PARAGRAPH, THE ESTIMATION OF GROSS PROFIT VARIES WI TH THE NATURE OF BUSINESS AND NO UNIFORM YARDSTICK COULD BE ADOPTED. UNDER TH E FACTS AND CIRCUMSTANCES OF THE INSTANT CASE, IT IS REASONABLE TO ESTIMATE THE GROSS PROFIT ON ALLEGED BOGUS PURCHASES @ 25% AS THE NATU RE OF THE BUSINESS OF THE APPELLANT IS MANUFACTURING. THE RATIO OF VIJAY PROTEINS (SUPRA) IS APPLICABLE. THUS, DISALLOWANCE OF PURCHASES ON ACCO UNT OF BOGUS PURCHASE FROM SUSPICIOUS DEALER IS CONFIRMED IN PRINCIPLE; H OWEVER, IT IS REDUCED TO 25% OF RS. 11,42,475/- OF THE ALLEGED PURCHASES FROM SUCH SUSPICIOUS DEALERS. THE DETAILED FINDING SO RECORDED BY THE LD. CIT(A) FOR RESTRICTING THE ADDITION TO THE EXTENT OF 25% HAS NOT BEEN CONTROVE RTED BY THE LD. DR BY BRINGING ANY POSITIVE MATERIAL ON RECORD. IN VIE W OF THE ABOVE FACTS AND CIRCUMSTANCES, I DO NOT FIND ANY REASON TO INTE RFERE IN THE ORDER OF THE LD. CIT(A) AND I UPHOLD THE SAME. 3. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 04 TH FEBRUARY, 2020. SD/- (R.C.SHARMA) ACCOUNTANT MEMBER MUMBAI; DATED 04/02/2020 *RANJAN ITA NO. 528/MUM/2019 DCIT VS M/S JAYSHREE POWERVOLT PVT. LTD. 4 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//