ESHITA RUBBER PVT. LTD., THANE V. ITO -WD 1 (2), THANE

ITA 5393/MUM/2018

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 7840 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-10-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 18-09-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K JOTHILAKSHMI NAYAKLD
• Assessee Lawyers: DHARAN V GANDHILD
• Keywords: Bogus purchase
• Section: 143(3); 142(1); 143(2); 148

Judgement Text

1 ITA NO.5393-94/MUM/2018 ESHITA RUBBER PRIVATE LIMITED ASSESSMENT YEARS - 2010-11 & 2011-12 - IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI , , BEFORE HONBLE SHRI SAKTIJIT DEY, JM AND HONBLE SHRI MANOJ KUMAR AGGARWAL, AM ./ I.T.A. NO.5393/MUM/2018 ( / ASSESSMENT YEAR:2010-11) & ./ I.T.A. NO.5394/MUM/2018 ( / ASSESSMENT YEAR:2011-12) ESHITA RUBBER PRIVATE LIMITED C-8, SUNITA VARSHA CHS LBS MARG, NAUPADA THANE (W)-400 602. / VS. I TO - WARD 1(2 ), THANE ROOM NO.29, A-WING, 6 TH FLOOR ASHAR I.T. PARK, ROAD NO.16-Z WAGLE INDL. ESTATE, THANE-400 604. !'# ./ ./PAN/GIR NO. AACCE-0057-A ( !' /APPELLANT ) : ( #$!' / RESPONDENT ) !'% / APPELLANT BY : SHRI DHARAN V. GANDHI-LD. AR #$!'% / RESPONDENT BY : MS. K.JOTHILAKSHMI NAYAK- LD. DR / DATE OF HEARING : 09/10/2019 / DATE OF PRONOUNCEMENT : 14/10/2019 / O R D E R MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER): - 1. AFORESAID APPEALS BY ASSESSEE FOR ASSESSMENT YEA RS [AY] 2010-11 AND 2011-12 CONTEST COMMON ORDER OF LD. COMMISSIONE R OF INCOME-TAX (APPEALS)-1, THANE, [IN SHORT REFERRED TO AS CIT(A )], APPEAL NOS. ITA 859- 2 ITA NO.5393-94/MUM/2018 ESHITA RUBBER PRIVATE LIMITED ASSESSMENT YEARS - 2010-11 & 2011-12 860/14-15 DATED 20/07/2018 ON CERTAIN COMMON GROUND S OF APPEAL. THE GROUNDS FOR AY 2010-11 READ AS UNDER: - 1. ON THE FACTS & CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) ERRED IN SUSTAINING THE ENTIRE DISALLOWANCE OF PURCHASE OF RS. 8,20,070/- F OR A.Y. 2010-11 WHICH WAS CONSIDERED AS ALLEGED BOGUS PURCHASE BY THE LD. ITO. 2. ON THE FACTS & CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) ERRED IN ADOPTING GP OF A.Y. 2012-13 AND THEREAFTER ERRED IN CALCULATING GP FOR A.Y. 2010-11. 3. ON THE FACTS & CIRCUMSTANCES OF THE CASE THE LD. CIT (A) ERRED IN NOT CONSIDERING THE FACT THAT ALL PURCHASE BILLS, BANK STATEMENTS REFLECTING PAYMENTS TO THE CREDITORS WERE DULY SUBMITTED TO PROVE THE GENUINENESS OF THE PURCHASE TRANSACTIONS. 4. ON THE FACTS & CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) ERRED IN NOT CONSIDERING THE FACT THAT THE APPELLANT COMPANY HAD PURCHASED MATER IALS IN GOOD FAITH AND IT IS NOT THE APPELLANT COMPANY'S CONTROL WHETHER SELLING PARTY HAS FILED S ALES TAX RETURNS OR NOT AND THEREFORE ONE BEING DECLARED A SUSPICIOUS DEALER, OUR PURCHASE WH ICH ARE OTHERWISE GENUINE AS GOODS HAVE BEEN RECEIVED AND USED IN FACTORY CANNOT BE DISALLO WED. 5. ON THE FACTS & CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) ERRED IN NOT CONSIDERING THE FACT THE LD. ITO HAS ACCEPTED THE SALES CORRESPONDI NG TO THE ALLEGED BOGUS PURCHASES AND THEREFORE ENTIRE PURCHASES COULD NOT BE TREATED AS BOGUS. RELIANCE CAN BE PLACED ON [2017] 83 TAXMANN.COM 63 (MUMBAI - TRIB) ITO VS. DEEPAK KHUSA LDAS MEHTA AND [2017] 84 TAXMANN.COM 259 (GUJARAT HC) PRINCIPAL COMMISSIONER OF GUJARAT VS. JAGDISH H. PATEL. THE LD. CIT (A) ALSO IGNORED THE FACT THAT EVEN THO UGH THE ASSESSEE WAS NOT ABLE TO PROVE ACTUAL DELIVERY OF GOODS WITH TRANSPORTATION RECEIP TS, STOCK INWARD REGISTER ETC. FULL AMOUNT OF PURCHASES CANNOT BE ADDED BACK WHEN SALE CORRESPOND ING TO THE PURCHASE WAS CONFIRMED BY LD. ITO. RELIANCE CAN BE PLACED ON [2017] 88 TAXMAN N.COM 858 (MUMBAI - TRIB) IN CASE OF TOSCANO INFRASTRUCTURE PVT. LTD. VS. DEPUTY COMMISS IONER OF INCOME TAX. WE HAVE HEARD AND CONSIDERED THE ARGUMENTS ADVANCED BY BOTH THE REPRESENTATIVES AND DELIBERATED ON JUDICIAL PRONOUN CEMENTS AS CITED BEFORE US. THE ASSESSEE HAS ALSO FILED WRITTEN SUBMISSIONS IN SUPPORT OF HIS ARGUMENTS ON 14/10/2019, WHICH WE HAVE CONSIDERED. 2.1 FACTS FROM RECORDS OF AY 2010-11 WOULD REVEAL T HAT THE ASSESSEE BEING RESIDENT CORPORATE ASSESSEE STATED TO BE ENGA GED IN MANUFACTURING OF RUBBER, WAS ASSESSED FOR IMPUGNED AY U/S. 143(3) R.W.S. 147 ON 10/11/2014 WHEREIN THE INCOME OF THE ASSESSEE WAS D ETERMINED AT RS.10.38 LACS, AFTER SOLE ADDITION OF ALLEGED BOGUS PURCHASES FOR RS.8.20 3 ITA NO.5393-94/MUM/2018 ESHITA RUBBER PRIVATE LIMITED ASSESSMENT YEARS - 2010-11 & 2011-12 LACS AS AGAINST RETURNED INCOME OF RS.2.18 LACS FIL ED BY THE ASSESSEE ON 23/09/2010 WHICH WAS INITIALLY PROCESSED U/S.143(1) . DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE REFLECTED NET PROFIT RA TE OF 0.91% ON TURNOVER OF RS.83.87 LACS. 2.2 PURSUANT TO RECEIPT OF CERTAIN INFORMATION FROM SALES TAX DEPARTMENT, GOVT. OF MAHARASHTRA, IT TRANSPIRED THAT THE ASSESS EE OBTAINED BOGUS PURCHASES OF RS.8.20 LACS FROM 2 ENTITIES VIZ. M/S K.C. ENTERPRISES & M/S SHREE ENTERPRISES. ACCORDINGLY, THE CASE WAS REOPE NED AS PER DUE PROCESS OF LAW VIDE ISSUANCE OF NOTICE U/S 148 ON 0 7/05/2013 WHICH WAS FOLLOWED BY STATUTORY NOTICES U/S 143(2) & 142(1) W HEREIN THE ASSESSEE WAS DIRECTED TO SUBSTANTIATE THE PURCHASE TRANSACTIONS. 2.3 ALTHOUGH THE ASSESSEE, IN DEFENSE, SUBMITTED BA NK STATEMENTS, COPIES OF RETURN OF INCOME ALONG WITH TAX AUDIT REP ORT, PARTY-WISE SALES / PURCHASE DETAILS ETC., HOWEVER, NOTICE ISSUED U/S 1 33(6) TO M/S SHREE ENTERPRISES, TO CONFIRM THE TRANSACTIONS, WAS RETUR NED BACK UNSERVED WHILE THE OTHER SUPPLIER DENIED HAVING CARRIED OUT ANY TR ANSACTION WITH THE ASSESSEE. THE ASSESSEE FAILED TO PRODUCE ANY OF THE SUPPLIERS TO CONFIRM THE TRANSACTIONS AND ALSO COULD NOT SUBSTANTIATE TH E DELIVERY OF MATERIAL. THE ASSESSEE REITERATED THAT THE PURCHASES WERE GEN UINE AND MADE IN GOOD FAITH AND THE MATERIAL WAS USED IN MANUFACTURI NG, SOME PART OF WHICH WAS LYING IN CLOSING STOCK. IT WAS SUBMITTED THAT T HE PAYMENTS WERE THROUGH BANKING CHANNELS AGAINST PURCHASE INVOICES. HOWEVER , NOT SATISFIED, THE STATED PURCHASES WERE TREATED AS NON-GENUINE AND AD DED TO THE INCOME OF THE ASSESSEE. 4 ITA NO.5393-94/MUM/2018 ESHITA RUBBER PRIVATE LIMITED ASSESSMENT YEARS - 2010-11 & 2011-12 3.1 BEFORE FIRST APPELLATE AUTHORITY, THE ASSESSEE REITERATED THAT THE PURCHASES WERE GENUINE AND THE MATERIAL WAS USED FO R MANUFACTURING OF GOODS. RELIANCE WAS PLACED ON VARIOUS JUDICIAL PRON OUNCEMENTS TO SUPPORT THE SUBMISSIONS THAT ADDITIONS WERE NOT JUSTIFIED. 3.2 THE LD. CIT(A), IN TERMS OF DECISION OF HONBLE DELHI HIGH COURT RENDERED IN CIT V/S JANSAMPARK ADVERTISING & MARKETING PVT. LTD . [2015 56 TAXMANN.COM 286], THOUGH IT FIT TO AFFORD FRESH OPPORTUNITY TO THE ASSESSEE TO SUBSTANTIATE THE PURCHASES TRANSACTIONS BY FILING THE REQUISITE INFORMATION / DOCUMENTARY EVIDENCES. HOWEVER, THE A SSESSEE AGAIN FAILED TO FURNISH THE REQUIRED DETAILS I.E. QUALITATIVE / QUANTITATIVE DETAILS, ITEM-WISE / PARTY-WISE, MATERIAL PURCHASED ETC. AS CALLED FOR BY LD. CIT(A). 3.3 THE LD. FIRST APPELLATE AUTHORITY AFTER CONSIDE RING FACTUAL MATRIX IN THE LIGHT OF VARIOUS JUDICIAL PRONOUNCEMENTS, AS ENUMER ATED IN THE IMPUGNED ORDER, REJECTED ASSESSEES BOOKS OF ACCOUNTS U/S 14 5(3) AND NOTICED THE GROSS PROFIT RATES OF VARIOUS YEARS, WHICH COULD BE TABULATED IN THE FOLLOWING MANNER: - YEAR SALES (RS.) G P RATE (%) N P RATE (%) 2009-10 RS.8.64 LACS 13.38% 2.79% 2010-11 RS.83.87 LACS 26.93% 2.24% 2011-12 RS. 76.27 LACS 27.52% 1.02% 2012-13 RS.9172 LACS 37.03% 4.76% 2013-14 RS.92.51 LACS 28.77% 2.05% APPLYING THE GP RATE OF 2012-13 I.E. NON-HAWALA YEA R TO THE TURNOVER OF YEAR UNDER CONSIDERATION, LD. CIT(A) WORKED OUT SUP PRESSED GROSS PROFIT (GP) OF RS.8.47 LACS WHICH WAS MORE THAN ALLEGED BO GUS PURCHASES UNDER CONSIDERATION AND THEREFORE, CONFIRMED THE STAND OF LD. AO IN MAKING THE 5 ITA NO.5393-94/MUM/2018 ESHITA RUBBER PRIVATE LIMITED ASSESSMENT YEARS - 2010-11 & 2011-12 IMPUGNED ADDITIONS. THE SAME HAS GIVEN RISE TO PRES ENT APPEAL BY ASSESSEE BEFORE US. 4. AFTER CAREFUL CONSIDERATION OF ORDERS OF LOWER A UTHORITIES AND AFTER APPRECIATING THE ARGUMENTS ADVANCED BY RESPECTIVE R EPRESENTATIVES, WE ARE OF THE CONSIDERED OPINION THERE COULD BE NO SALE WI THOUT ACTUAL PURCHASE OF MATERIAL KEEPING IN VIEW THE ASSESSEES NATURE OF B USINESS I.E. MANUFACTURING. UNDISPUTEDLY THE ASSESSEE WAS IN POS SESSION OF PRIMARY PURCHASE DOCUMENTS AND THE PAYMENTS TO THE SUPPLIER WAS THROUGH BANKING CHANNELS. HOWEVER, AT THE SAME TIME, THE ASSESSEE M ISERABLY FAILED TO SUBSTANTIATE THE DELIVERY OF MATERIAL DURING ASSESS MENT AS WELL AS APPELLATE PROCEEDINGS. THE ASSESSEE FAILED TO PRODUCE ANY OF THE SUPPLIERS TO CONFIRM THE TRANSACTIONS AND THE ONUS CASTED UPON ASSESSEE, IN THIS REGARD, REMAINED UNDISCHARGED. UNDER SUCH CIRCUMSTANCES, TH E ADDITIONS WHICH COULD BE SUSTAINED, WAS TO ACCOUNT FOR PROFIT ELEME NT EMBEDDED IN THESE PURCHASE TRANSACTIONS TO FACTORIZE FOR PROFIT EARNE D BY ASSESSEE AGAINST POSSIBLE PURCHASE OF MATERIAL IN THE GREY MARKET AN D UNDUE BENEFIT OF VAT AGAINST SUCH BOGUS PURCHASES. THE LEARNED FIRST APP ELLATE AUTHORITY JUSTIFIED THE ADDITIONS IN THE LIGHT OF GROSS PROFIT REFLECTE D BY THE ASSESSEE IN AY 2012-13 IGNORING THE FACT THAT THE RATE OF GROSS PR OFIT IN IMMEDIATELY SUCCEEDING AY I.E. AY 2013-14 WAS COMMENSURATE WITH GROSS PROFIT RATE REFLECTED BY THE ASSESSEE IN THE YEAR UNDER CONSIDE RATION. THEREFORE, THE SAID APPROACH, IN OUR OPINION, WOULD NOT BE A CORRE CT APPROACH IN THE FACTS AND CIRCUMSTANCES OF THE CASE RATHER THE ALTERNATIV E ESTIMATION OF 25% AS COMPUTED BY LEARNED FIRST APPELLATE AUTHORITY, IN T HE IMPUGNED ORDER, WOULD 6 ITA NO.5393-94/MUM/2018 ESHITA RUBBER PRIVATE LIMITED ASSESSMENT YEARS - 2010-11 & 2011-12 BE QUITE FAIR & REASONABLE AND WOULD MEET THE END O F JUSTICE. THEREFORE, WE RESTRICT THE IMPUGNED ADDITIONS TO 25% OF DISPUTED PURCHASES OF RS.8,20,070/- WHICH COMES TO RS.2,05,018/-. THE BAL ANCE ADDITION WOULD STAND DELETED. THE APPEAL STANDS PARTLY ALLOWED. 5. FACTS ARE PARI-MATERIA THE SAME IN AY 2011-12 AND THE IMPUGNED ORDER IS COMMON FOR BOTH THE YEARS AND THEREFORE, O UR OBSERVATION AS WELL AS ADJUDICATION AS FOR AY 2010-11 SHALL, MUTATIS-MUTANDIS, APPLY TO THIS YEAR ALSO. CONSEQUENTLY, THE IMPUGNED ADDITIONS OF RS.3,62,683/- WOULD STAND RESTRICTED TO RS.90,671/-. THE BALANCE ADDITI ON STANDS DELETED. THE APPEAL STANDS PARTLY ALLOWED. 6. BOTH THE APPEALS STAND PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 14 TH OCTOBER, 2019. SD/- SD/- (SAKTIJIT DEY) (MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 14/10/2019 SR.PS:-JAISY VARGHESE '( )( / COPY OF THE ORDER FORWARDED TO : 1. !' / THE APPELLANT 7 ITA NO.5393-94/MUM/2018 ESHITA RUBBER PRIVATE LIMITED ASSESSMENT YEARS - 2010-11 & 2011-12 2. #$!' / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT CONCERNED 5. + ,# - , - , / DR, ITAT, MUMBAI 6. , ./0 / GUARD FILE / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI.