M/S A B CORPORATION, MUMBAI V. ITO-20(1)(1), MUMBAI

ITA 5311/MUM/2019

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 1921 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-07-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 14-08-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ANOOP
• Keywords: Bogus purchase; Accommodation entries
• Section: 13; 148

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI SHRI SHAMIM YAHYA (AM) & SHRI AMARJIT SINGH (JM) I.T.A. NO. 5311/MUM/2019 (ASSESSMENT YEAR 2010-11) A B CORPORATION 203C WING, POONAM ESTATE CLUSTER III, SHISTI OPP.SURYA SHOPPING COMPLEX, SHRUTI GARDEN MIRA ROAD (EAST) MUMBAI-401 107 PAN : AAMFA4306K VS. ITO - 20(1)(1) PIRAMAL CHAMBER MUMBAI-400 012 ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY NONE DEPARTMENT BY SHRI ANOOP DATE OF HEARING 19 .05 .2021 DATE OF PRONOUNCEMENT 01. 0 7 .2021 O R D E R PER SHAMIM YAHYA (AM) :- THIS IS AN APPEAL BY THE ASSESSEE WHEREIN THE ASSES SEE IS AGGRIEVED THAT THE LD.CIT(A) HAS ERRED IN SUSTAINING 12.5% DISALLOWANC E ON ACCOUNT OF BOGUS PURCHASES VIDE ORDER DATED.14.06.2019. 2. BRIEF FACTS OF THE CASE ARE THAT ASSESSEE IS E NGAGED IN THE BUSINESS OF TRADE IN JEWELLERY TOOLS. AOS ACTION IN THIS CASE IS UNDER : 4.1 ON THE BASIS OF INFORMATION RECEIVED FROM THE DGIT(INV.), MUMBAI THAT THE SALES TAX DEPARTMENT HAD CARRIED OUT INVESTIGATION ON VARIOUS HAWALA OPERATORS WHO WERE KNOWN TO BE ISSUING ACCOMMODATION ENTRIES BILLS TO VARIOUS PART IES AND THE APPELLANT IS ONE OF THE BENEFICIARY WHO HAVE TAKEN ACCOMMODATION ENTRY, PUR CHASE BILLS WITHOUT PHYSICAL DELIVERY OF THE GOODS OR BY MANIPULATING DOCUMENTS FOR SUCH PURCHASES, THE CASE WAS REOPENED BY ISSUED OF NOTICE U/S. 148 ON 03.03.2015. THE ASSESS EE HAS ENTERED INTO HAWALA TRANSACTIONS AGGREGATING TO RS. 30,22,397/- FROM FOLLOWING PARTI ES. ITA NO.5311/MUM/2019 2 SR. NO. NAME OF THE CONCERNS AMOUNT(RS.) 1. M/S. SAILEELA TRADING P. LTD., 77,940 2. M/S. STHAPNA TRADE IMPEX P. LTD. 1,42,758 3. M/S. LAXMAN SALES P. LTD., 46,451 4. M/S. MIHIR SALES P. LTD., 1,09,368 5. M/S. SMARTLINK TRADERS 34,484 6. M/S. K.C. ENTERPRISES 47,587 7. _ , M/S. MOTION TRADERS P.LTD., 2,01,811 8 M/S. SHREE SARSAWATI P. LTD., 2,28,917 9 M/S. SNEHLA ENTERPRISES 88,446 , 10 M/S. EVEREADY MARKETING P. LTD., 3,80,893 11 M/S. SEVA ENTERPRISES 4,64,870 12 M/S. ABHILASHA SALES PVT. LTD., 6,99,084 13 M/S. KALPATARU TRADING CO. 2,83,139 14 , M/S. MERIDIAN SALES AGENCY P. LTD. 51,630 15 M/S. ASHLEY TRADERS P, LTD., 1,65,119 TOTAL 30,22,397 NOTICE U/S. ]33(6) DATED 18.12.2015 WERE ISSUED TO THE ABOVE PARTIES, BUT THE NOTICES WERE RETURNED BACK BY THE POSTAL AUTHORITY WITH THE REMA RK 'NOT KNOWN', 'NO SUCH ADDRESS', 'LEFT' ETC. THE A.O ON PERUSAL OF THE INFORMATION A VAILABLE ON RECORD AND THE INQUIRIES CARRIED OUT, CONSIDERED THAT THE HAWALA PARTIES HAV E NOT CARRIED OUT ANY LEGITIMATE BUSINESS FROM THE PREMISES AS SUPRA AND THAT SUCH P ARTIES HAVE NOT DELIVERED ANY MATERIAL TO THE ASSESSEE AND THAT SUCH PARTIES HAD ONLY GIVE N ACCOMMODATION ENTRIES TO THE ASSESSEE TO CONCEAL THE PARTICULARS OF INCOME TO EV ADE THE PAYMENT OF TAXES. DURING THE COURSE ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS ASKED TO PRODUCE THE SUPPORTING DOCUMENTS BEING COPY OF LEDGER ACCOUNT, COPY OF INV OICES, COPY OF DELIVERY CHALLAN, COPY OF LORRY RECEIPTS, COPY OF BANK STATEMEN TS, COPY OF OCTROI RECEIPTS AND COPY OF GOODS RECEIPTS GOODS INWARD AND OUTWARD DETAILS. FU RTHER, THE ASSESSEE WAS ALSO ASKED ITA NO.5311/MUM/2019 3 THE PRODUCE THE PARTIES ON OR BEFORE 03.02.2016 TO PROVE THE GENUINENESS OF PURCHASE FROM THE ABOVE SAID PARTIES. THE ASSESSEE FAILED TO PRODUCE THE SAID PARTIES. THE A.O HAS OBSERVED THAT THE ASSESSEE HAS TAKEN ACC OMMODATION BILLS TO ACCOUNT FOR THE PURCHASES FROM THE GREY MARKET AND IN THE PROCESS H AS BENEFITED BY WAY OF INFLATION IN PURCHASES AS PER THE BILLS. THE AO HAS RELIED ON THE DECISION IN THE CASE OF CIT VS. SIMIT P. SHETH 38 TAXMAN.COM 385 (GUJ.) IN WHICH CA SE IT WAS HELD BY THE HON'BLE ITAT AHMEDABAD BENCH THAT THE MALPRACTICE OF BOGUS PURCH ASE WAS MAINLY TO SAVE THE SALES TAX AND THE PROFIT MARGIN. THE A.O HAS ESTIMATED THE ELEMENT OF PROFIT MARGIN IN RESPECT OF NON GENUINE PURCHASE @12.5% AND MADE A N ADDITION OF RS. 377,800/- TO THE TOTAL INCOME OF THE APPELLANT. 3. BEFORE THE LD.CIT(A) THAT ASSESSEE INTER ALIA SUBMITTED AS UNDER: 5) THE GP RATE FOR THE YEAR UNDER APPEAL IS 16.61 % WHEREAS GP RATE FOR THE PREVIOUS THREE YEARS ARE MUCH LOWER AS UNDER:- A.Y. 2007-08 A.Y. 2008-09 12.88% A.Y. 2009-10 12.64% 4. HOWEVER,, LD.CIT(A) WAS NOT CONVINCED. HE HELD AS UNDER:- 4.3.2 CONSIDERING THAT THE APPELLANT WAS ABLE TO C ORRELATE THE PURCHASES OF MATERIALS WITH THEIR SALE, THE AO HAS RIGHTLY HELD THAT THE APPELL ANT MUST HAVE PURCHASED THE MATERIAL FROM GREY MARKET AND THE ACTUAL PURCHASE BILLS, IN THE NATURE OF ACCOMMODATION BILLS WOULD HAVE BEEN INFLATED, SINCE THE APPELLANT WOULD HAVE HAD SAVINGS FROM SUCH PURCHASES ON ACCOUNT OF VAT, CASH DISCOUNT AND LOWE R RATES. THE AO HAS MADE AN ADDITION IN RESPECT OF PROFIT ELEMENT ON SUC H PURCHASES @ 12.5%, WHICH APPEARS TO BE REASONABLE AND FAIR CONSIDERING T HAT THE VAT RATE ON ITEMS OF THE PURCHASE OF JEWELLERY' TOOLS, AS STATED BY THE AR O F THE APPELLANT, IS 12.5%. IN MY CONSIDERED OPINION, NO INTERFERENCE IS CALLED FOR I N RESPECT OF THE ADDITION MADE. ACCORDINGLY, THE ADDITION MADE BY THE A.O OF RS. 3,77,800/~ IS UPHELD. THE GROUNDS TAKEN BY THE APPELLANT ARE DISMISSED. 5. UPON CAREFUL CONSIDERATION, WE FIND THAT THE AS SESSEE HAS PROVIDED THE DOCUMENTARY EVIDENCE FOR THE PURCHASE. ADVERSE INFE RENCE HAVE BEEN DRAWN DUE TO THE INABILITY OF THE ASSESSEE TO PRODUCE THE SUPPLI ERS. WE FIND THAT IN THIS CASE, THE SALES HAVE NOT BEEN DOUBTED. IT IS SETTLED LAW THAT WHEN SALES ARE NOT DOUBTED, 100% DISALLOWANCE FOR BOGUS PURCHASE CANNOT BE DONE. THE RATIONALE BEING NO SALES IS POSSIBLE WITHOUT ACTUAL PURCHASES. THIS PROPOSITION IS SUPPORTED FROM HONBLE JURISDICTIONAL HIGH COURT DECISION IN THE CASE OF N IKUNJ EXIMP ENTERPRISES (IN WRIT ITA NO.5311/MUM/2019 4 PETITION NO.2860, ORDER DATED 18.06.2014). IN THIS CASE, THE HONBLE HIGH COURT HAS UPHELD 100% ALLOWANCE FOR THE PURCHASES SAID TO BE BOGUS, WHEN SALES ARE NOT DOUBTED. HOWEVER, IN THAT CASE ALL THE SUPPLIES WER E TO GOVERNMENT AGENCY. IN THE PRESENT CASE, THE FACTS OF THE CASE INDICATE THAT A SSESSEE HAS MADE PURCHASE FROM THE GREY MARKET. MAKING PURCHASES THROUGH THE GREY MARK ET GIVES THE ASSESSEE SAVINGS ON ACCOUNT OF NON-PAYMENT OF TAX AND OTHERS AT THE EXP ENSE OF THE EXCHEQUER. IN SUCH SITUATION IN OUR CONSIDERED OPINION ON THE FACTS AN D CIRCUMSTANCES OF THE CASE, THE 12.5% DISALLOWANCE OUT OF THE BOGUS PURCHASES MEETS THE END OF JUSTICE. HOWEVER, IN THIS REGARD, WE NOTE THAT THE ASSESSEE HAS PRAYED BEFORE LD.CIT(A) THAT THE GROSS PROFIT ALREADY SHOWN BY THE ASSESSE AND OFFERED TO TAX IS MORE THAN 12.5%. 6. UPON CAREFUL CONSIDERATION, WE FIND THAT 12.5% ADDITION HAS BEEN SUSTAINED FOR THE PURPOSE OF THE TAXING THE PROFIT ON THESE PURCH ASES. WHEN ASSESSEE HAS ALREADY SHOWN GROSS PROFIT AT MORE THAN AGAIN ADDING 12.5% TAXING FURTHER 12.5% WILL BE DOUBLE JEOPARDY TO THE ASSESEE. ACCORDINGLY, WE MOD IFY THE ORDER OF LD.CIT(A) AND DIRECT THAT THE DISALLOWANCE IN THIS CASE BE RESTRI CTED TO 12.5% OF THE BOGUS PURCHASES AS REDUCED BY THE GROSS PROFIT RATE ALREADY DECLARE D BY THE ASSESSEE ON THESE TRANSACTIONS. 7. IN THE RESULT, THIS APPEAL FILED BY THE ASSESS EE STANDS PARTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON 01 .07.2021 SD/- SD/- ( AMARJIT SINGH) (SHAMIM YAHYA) JUDICIAL MEMBER ACCOUNTAN T MEMBER MUMBAI; DATED : 01 /07/2021 SR.PS. THIRUMALESH COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) ITA NO.5311/MUM/2019 5 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// ( ASSISTANT REGISTRAR) ITAT, MUMBAI