DCIT CIR 3, THANE V. NEOGEN CHEMICALS LTD, THANE

ITA 54/MUM/2017

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 9322 (ITAT-MUMBAI)
• Duration Of Justice: 8 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-09-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2010-2011
• Appeal Filed On: 04-01-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SAURABH DESH
• Assessee Lawyers: MAYUR J GOS RANI
• Keywords: Bogus purchase

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH A, MUMBAI BEFORE D.T. GARASIA, JUDICIAL MEMBER AND SHRI MANOJ KUMAR AGGARWAL, ACCOUNTANT MEMBER ITA NO.54/M/2017 ASSESSMENT YEAR: 2010-11 DY. COMMISSIONER OF INCOME TAX, CIRCLE-3, ROOM NO.02, 6 TH FLOOR, ASHAR IT PARK, B-WING, WAGLE INDL. ESTATE, THANE (W)-400 604 VS. M/S. NEOGEN CHEMICALS LIMITED, 115, VARDHAMAN INDUSTRIAL COMPLEX, OLD AGRA ROAD, GOKUL ROAD, THANE (W) 400 601 PAN: AAACN5836E (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI MAYUR J. GOSRANI, A.R. REVENUE BY : SHRI SAURABH DESHPANDE, D.R. DATE OF HEARING : 21.08.2017 DATE OF PRONOUNCEMENT : 20.09.2017 O R D E R PER D.T. GARASIA , JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE REVEN UE AGAINST THE ORDER DATED 28.10.2016 OF THE COMMISSIONER OF I NCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS THE CIT(A)] R ELEVANT TO ASSESSMENT YEAR 2010-11. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS ENGAGED IN BUSINESS OF MANUFACTURING AND TRADING IN ORGANIC AN D INORGANIC CHEMICALS. DURING THE YEAR THE ASSESSING OFFICER ( HEREINAFTER ITA NO.54/M/2017 M/S. NEOGEN CHEMICALS LIMITED 2 REFERRED TO AS THE AO) FOUND THAT ASSESSEE HAD MADE BOGUS PURCHASES FROM FOLLOWING PARTIES: SR. NO. NAME OF THE PARTY AMOUNT OF PURCHASE (RS) 1. HARIOM TRADERS 18,52,050 2. DARSHAN ENTERPRISES 9,89,400 3. SHEETAL TRADING CO. 16,58,904 4. SM TRADING CO. 20,00,034 5. APPLAUSE CHEMICALS PVT. LTD. 5,00,000 TOTAL 70,00,388 3. THE ASSESSEE WAS ASKED TO PRODUCE THE ABOVE PART IES FOR VERIFICATION. THERE WAS NO COMPLIANCE OF NOTICE UND ER SECTION 133(6). THEREFORE, THE AO HAS MADE THE ADDITION ON ACCOUNT OF BOGUS PURCHASES OF RS.17,50,098/- I.E. 25% OF HAWAL A PURCHASES. 4. MATTER CARRIED TO THE LD. CIT(A) AND THE LD. CIT (A) HAS PARTLY ALLOWED THE CLAIM BY OBSERVING AS UNDER: 6.13 IN THIS CASE THE APPELLANT HAS SUPPRESSED ITS NP BY 0.49%, AS COMPARED TO AYR 2012-13. THE QUANTUM OF SUPPRESSED NP IS WORKED OUT AT RS.17,20,618/- (35,07,92,826 X 0.49/1 00). CONSIDERING THE FACTS/DEFECTS IN ENTIRETY AND RELYI NG ON THE DECISIONS OF THE VARIOUS COURTS, AS QUOTED ABOVE, I N MY CONSIDERED VIEW, THE DISALLOWANCE OF RS.17,50,098/- (70,00,388 X 25/100), I.E. @25% OUTO F HAWALA PURCHASES, WHICH IS ALMOST EQUAL TO THE QUANTUM OF SUPPRESSED NP OF RS.17,20,618/- WILL BE REASONABLE. ACCORDINGLY, THE DISALLOWANCE OF RS.17,50,098/-, I. E. 25% OF HAWALA PURCHASES IS HEREBY SUSTAINED AND THE BALANC E DISALLOWANCE OF RS.52,50,290/- (70,00,388/- LESS RS .17,50,098/-) IS DELETED. ALL THE GROUNDS OF APPEAL, RAISED ABOVE, ARE DECIDED ACCORDINGLY. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. ITA NO.54/M/2017 M/S. NEOGEN CHEMICALS LIMITED 3 5. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE P ARTIES. LD. D.R. RELIED UPON THE DECISION OF THE TRIBUNAL, AHME DABAD BENCH IN THE CASES OF SHWETAMBAR STEELS VS. ITO AHMEDABAD AN D GANESH RICE MILLS VS. CIT (294 ITR 316). THE FACTS IN THE PRESENT CASE SHOW THAT ASSESSEE COULD NOT PRODUCE THE PARTIES FR OM WHOM GOODS ARE STATED TO HAVE BEEN PURCHASED. THE SUPPLIERS WE RE FOUND TO BE ENGAGED IN PROVIDING BOGUS BILL WITHOUT ACTUAL DEAL ING OF GOODS. IN THIS REGARD, THE ASSESSEE HAS STATED THAT THEY HAD SUBMITTED QUANTITATIVE DETAILS OF STOCK WITH RESPECT OF THE S ALES WITH PURCHASES FROM THE PARTIES DURING THE ASSESSMENT PROCEEDINGS. THE ASSESSEE HAS SUBMITTED THE DETAIL OF CORRESPONDING SALES IN RESP ECT OF THE PURCHASE FROM THE SAID PARTIES. AS MENTIONED ABOVE THE AO HA S NEVER DISPUTED OR EXAMINED THE ASPECT OF SALES RECEIPTS. SINCE THE SALES MADE BY THE ASSESSEE WAS NOT DOUBTED OR DISPUTED BY THE AO AND HE HAS ACCEPTED THE SALES RECEIPTS OF THE ASSESSEE AS IT IS, THEREF ORE, THE AO CANNOT DENY THAT PURCHASES WERE NOT MADE BY THE ASSESSEE A ND THE MATERIAL WAS NOT USED FOR ITS SALES. WHAT IS UNDER DISPUTE I S THE PURCHASES FROM THE PARTIES FROM WHOM BILLS HAVE BEEN TAKEN AN D CHEQUES HAVE BEEN ISSUED TO THEM. PURCHASES ARE NOT IN DISPUTE B UT THE PARTIES FROM WHOM PURCHASE ARE SHOWN TO HAVE BEEN MADE ARE DISPU TED AND SUSPICIOUS. THE AO HAD MADE THE ADDITION AS SOME O F THE SUPPLIERS WERE DECLARED HAWALA DEALERS BY THE VAT DEPARTMENT. THIS MAY BE A GOOD REASON FOR MAKING FURTHER INVESTIGATION BUT THE AO DID NOT MAKE ANY FURTHER INVESTIGATION AND MERELY COMPLETED THE ASSESSMENT ON SUSPICION. ONCE THE ASSESSEE HAS BROUGHT ON RECO RD THE DETAILS OF PAYMENTS BY ACCOUNT PAYEE CHEQUE, IT WAS INCUMBENT ON THE AO TO ITA NO.54/M/2017 M/S. NEOGEN CHEMICALS LIMITED 4 HAVE VERIFIED THE PAYMENT DETAILS FROM THE BANK OF THE ASSESSEE AND ALSO FROM THE BANK OF THE SUPPLIERS TO VERIFY WHETH ER THERE WAS ANY IMMEDIATE CASH WITHDRAWAL FROM THEIR ACCOUNT. NO SU CH EXERCISE HAS BEEN DONE OR FINDINGS RECORDED, THERE WAS NO DETAIL ED INVESTIGATION MADE BY THE AO HIMSELF. IT IS ALSO FOUND THAT THE P AYMENTS HAVE BEEN MADE BY ACCOUNT PAYEE CHEQUE WHICH ARE DULY RE FLECTED IN THE BANK STATEMENT OF THE ASSESSEE. THERE IS NO EVIDENC E TO SHOW THAT THE ASSESSEE HAS RECEIVED CASH BACK FROM THE SUPPLIERS. MERELY BECAUSE THE SUPPLIERS DID NOT APPEAR BEFORE THE AO OR SOME CONFIRMATION LETTERS WERE NOT FURNISHED, ONE CANNOT CONCLUDE THA T THE PURCHASES WERE NOT MADE BY THE ASSESSEE. THIS VIEW IS SUPPORT ED BY THE DECISION OF NIKUNJ EXIMP ENTERPRISES VS. CIT 216 TA XMAN 171 (BOM). TO THIS EXTENT, WE ARE OF THE VIEW THAT IF T HE ASSESSEE HAS FULFILLED ITS ONUS OF MAKING THE PAYMENT BY CHEQUE AND HAS SUPPLIED THE ADDRESSES OF THE SELLERS THEN IT CANNOT BE PRES UMED THAT SUPPLIER WERE BOGUS SIMPLY BECAUSE THE SELLERS WERE NOT FOUN D AT THE GIVEN ADDRESS. THERE IS A CONSIDERABLE TIME GAP BETWEEN T HE PERIOD OF PURCHASE TRANSACTION AND PERIOD OF SCRUTINY PROCEED INGS. THE AO HAS NOT BROUGHT ANY MATERIAL ON RECORD TO SHOW THAT THE RE IS SUPPRESSION OF SALES. IT IS BASIC RULE OF ACCOUNTANCY AS WELL A S OF TAXATION LAWS THAT PROFIT FROM BUSINESS CANNOT BE ASCERTAINED WIT HOUT DEDUCTING COST OF PURCHASE FROM SALES. IN THIS APPEAL, THE LD . CIT(A) HAS ESTIMATED 25% OF HAWALA PURCHASE IS SUSTAINED. THE REFORE, WE DO NOT FIND ANY JUSTIFICATION TO INTERFERE IN THE ORDE R OF LD. CIT(A). ITA NO.54/M/2017 M/S. NEOGEN CHEMICALS LIMITED 5 6. IN THE RESULT, DEPARTMENTAL APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 20.09.2017. SD/- SD/- (MANOJ KUMAR AGGARWAL) (D.T. GARASIA) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 20.09.2017. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.