ITO WD- 1 (2), THANE V. MACHINE & CONTROLS, MUMBAI

ITA 5415/MUM/2018

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 6288 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-10-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 21-09-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bogus purchase
• Section: 143(3); 142(1); 133(6); 143(2); 148

Judgement Text

1 ITA NO.5415/MUM/2018 MACHINE & CONTROLS ASSESSMENT YEAR-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.5415/MUM/2018 ( / ASSESSMENT YEAR:2011-12) IT O - WARD 1(2), THANE ROOM NO.23, B WING, 6 TH FLOOR ASHAR IT PARK, ROAD NO. 16Z WAGLE INDUSTRIAL ESTATE THANE (W) 400 604 / VS. M/ S M ACHINE & CONT ROLS PLOT NO. A/546, TTC IND. AREA MAHAPE, MIDC NAVI MUMBAI 400 710 !'# ./ ./PAN/GIR NO. AAMFM-5708-M ( !' /APPELLANT ) : ( #$!' / RESPONDENT ) !' / APPELLANT BY : MS. JOTHILAKSHMI NAYAK-LD. DR # $ !' / RESPONDENT BY : NONE / DATE OF HEARING : 10/10/2019 / DATE OF PRONOUNCEMENT : 10/10/2019 / O R D E R MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER): - 1. AFORESAID APPEAL BY REVENUE FOR ASSESSMENT YEAR [IN SHORT REFERRED TO AS AY] 2011-12 CONTEST THE ORDER OF LD. COMMISSIO NER OF INCOME-TAX (APPEALS)-3, THANE [IN SHORT REFERRED TO AS CIT(A) ], APPEAL NO.724/17- 18/NSK DATED 10/07/2018 ON FOLLOWING GROUNDS OF APPEAL: - 2 ITA NO.5415/MUM/2018 MACHINE & CONTROLS ASSESSMENT YEAR-2011-12 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD.CIT(A) WAS JUSTIFIED IN NOT APPRECIATING THE LAW CORRECTLY THA T ONCE THE PURCHASES ARE UNVERIFIABLE / NOT GENUINE / BOGUS, THE SAME SHOULD HAVE BEEN DISA LLOWED IN ENTIRETY. 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD.CIT(A) HAS ERRED IN LAW BY NOT APPRECIATING THE FACT THAT THE ASSESS EE COULD NOT ESTABLISH THE GENUINENESS OF THE PURCHASES FROM NON-EXISTENT VEND ORS. 3. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD.CIT(A) HAS ERRED IN LAW BY NOT APPRECIATING THE FACT THAT THE ONUS T O JUSTIFY THE CLAIM OF EXPENSES IS ON THE ASSESSEE AND THE SAME HAS FAILED TO DISCHARGE IT IN RELATION TO THE PURCHASES MADE FROM THE NON-EXISTENT VENDORS. 4. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD.CIT(A) HAS ERRED IN LAW BY IGNORING THE FACT THAT THE ASSESSEE COULD NOT SUBSTANTIATE ITS CLAIM OF PURCHASES FROM NON-EXISTENT VENDORS BY MEANS OF REL EVANT SUPPORTING DOCUMENTS RELATED TO MOVEMENT AND DELIVERY OF GOODS, STOCK RE GISTER ETC. TO ARRIVE AT DISALLOWANCE AT 20% OF THE PURCHASES FROM THE NON-EXISTENT VENDO RS. 5. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD.CIT(A) WAS JUSTIFIED IN NOT APPRECIATING THE LAW CORRECTLY THA T ONCE THE PURCHASES ARE UNVERIFIABLE / NOT GENUINE / BOGUS, THE SAME SHOULD HAVE BEEN DISA LLOWED IN ENTIRETY PARTICULARLY IN VIEW OF THE RATIO OF DECISION OF THE HONBLE GUJAR AT HIGH COURT IN TAX APPEAL NO. 242 OF 2003 DATED 20/06/2016 IN THE CASE OF N.K.PROTEINS L TD. AGAINST WHICH THE SLP WAS DISMISSED BY HONBLE APEX COURT. NONE HAS APPEARED FOR ASSESSEE AND NO VALID ADJOURN MENT APPLICATION IS ON RECORD. LEFT WITH NO OPTION, WE PROCEED WITH THE MATTER EX-PARTE QUA THE ASSESSEE AFTER PERUSAL OF MATERIAL ON RECORD AND AF TER HEARING THE REVENUE. 2.1 FACTS ON RECORD WOULD REVEAL THAT THE ASSESSEE BEING RESIDENT FIRM STATED TO BE ENGAGED IN MANUFACTURING OF ELECTRICAL CABLE MACHINES, WAS ASSESSED FOR IMPUGNED AY U/S. 143(3) R.W.S. 147 ON 14/08/2014 WHEREIN THE INCOME OF THE ASSESSEE WAS DETERMINED AT RS.16. 15 LACS, AFTER SOLE ADDITION OF ALLEGED BOGUS PURCHASES FOR RS.2.74 LACS AS AGAINST RETURNED INCOME OF RS.13.40 LACS FILED BY THE ASSESSEE ON 28 /09/2011 WHICH WAS PROCESSED U/S.143(1). 3 ITA NO.5415/MUM/2018 MACHINE & CONTROLS ASSESSMENT YEAR-2011-12 2.2 PURSUANT TO RECEIPT OF CERTAIN INFORMATION FROM SALES TAX DEPARTMENT, GOVT. OF MAHARASHTRA, IT TRANSPIRED THAT THE ASSESS EE OBTAINED BOGUS PURCHASES BILLS AMOUNTING TO RS.2.74 LACS FROM 4 EN TITIES, THE DETAILS OF WHICH HAVE ALREADY BEEN EXTRACTED AT PARA-2 OF THE QUANTUM ASSESSMENT ORDER. ACCORDINGLY, THE CASE WAS REOPENED AS PER DU E PROCESS OF LAW VIDE ISSUANCE OF NOTICE U/S 148 ON 10/05/2013 WHICH WAS FOLLOWED BY STATUTORY NOTICES U/S 143(2) AND 142(1) WHEREIN THE ASSESSEE WAS DIRECTED TO SUBSTANTIATE THE PURCHASE TRANSACTIONS. 2.3 THE ASSESSEE DEFENDED THE PURCHASES BY FURNISHI NG VARIOUS DETAILS VIZ. BANK STATEMENTS EVIDENCING PAYMENT THROUGH BAN KING CHANNELS, TAX AUDIT REPORT, TRENDS OF GP/NP RATES ETC. HOWEVER, N OTICES ISSUED U/S 133(6) TO ALL THE SUPPLIERS REMAINED UN-RESPONDED T O. THE ASSESSEE SUBMITTED THAT PURCHASES WERE GENUINE. HOWEVER, NOT CONVINCED, THE SAID PURCHASES WERE DISALLOWED AND ADDED TO THE INCOME O F THE ASSESSEE. 3. BEFORE LEARNED FIRST APPELLATE AUTHORITY, THE AS SESSEE PLEADED FOR REASONABLE ESTIMATION. THE LD. CIT(A), AFTER CONSID ERING THE FACTUAL MATRIX AND INTER-ALIA, RELYING UPON THE DECISION OF HONBLE GUJARAT HIGH C OURT RENDERED IN CIT V/S SANJAY OIL CAKE 316 ITR 274, CIT V/S BHOLAN ATH POLY FAB PVT LTD. 355 ITR 290 AND CIT V/S SIMIT P. SHETH 356 ITR 451 RESTRICTED THE ADDITIONS TO 20% OF DISPUTED PURCHAS ES. AGGRIEVED, THE REVENUE IS IN FURTHER APPEAL BEFORE US. 4. AFTER CAREFUL CONSIDERATION, WE ARE OF THE CONSI DERED OPINION THERE COULD BE NO SALE WITHOUT ACTUAL PURCHASE OF MATERIA L KEEPING IN VIEW THE ASSESSEES NATURE OF BUSINESS. UNDISPUTEDLY THE ASS ESSEE WAS IN 4 ITA NO.5415/MUM/2018 MACHINE & CONTROLS ASSESSMENT YEAR-2011-12 POSSESSION OF PRIMARY PURCHASE DOCUMENTS AND THE PA YMENTS TO THE SUPPLIERS WERE THROUGH BANKING CHANNELS. THE SALES TURNOVER ACHIEVED BY THE ASSESSEE HAS NOT BEEN DISPUTED BY THE REVENUE. HOWEVER, AT THE SAME TIME, THE ASSESSEE MISERABLY FAILED TO SUBSTANTIATE THE DELIVERY OF MATERIAL DURING ASSESSMENT AS WELL AS APPELLATE PROCEEDINGS. THE ASSESSEE FAILED TO PRODUCE ANY OF THE SUPPLIERS TO CONFIRM THE TRAN SACTIONS AND THE ONUS CASTED UPON ASSESSEE, IN THIS REGARD, REMAINED UNDI SCHARGED. THEREFORE, ON THE GIVEN FACTS AND CIRCUMSTANCES, DISALLOWANCE OF ENTIRE PURCHASES, IN OUR OPINION, WOULD NOT BE JUSTIFIED RATHER THE ADDI TIONS WHICH COULD BE SUSTAINED, WOULD BE TO ACCOUNT FOR PROFIT ELEMENT E MBEDDED 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, WHICH LEARNED FIRST A PPELLATE AUTHORITY HAS RIGHTLY DONE SO. THEREFORE, FINDING THE ESTIMATION OF 20% TO BE QUITE FAIR AND REASONABLE, WE DISMISS THE APPEAL. 5. SO FAR AS THE DECISION OF HONBLE GUJARAT HIGH C OURT RENDERED IN N.K. INDUSTRIES LTD. VS DCIT [72 TAXMANN.COM 289] IS CONCERNED, WE FIND THAT THE FACTS OF THAT CASE HAS ALREADY BEEN DISTIN GUISHED BY HONBLE BOMBAY HIGH COURT IN PR.CIT VS. M/S MOHOMMAD HAJI ADAM & CO. [ITA NO.1004 & OTHERS OF 2016, DATED 11/02/2019] WHEREIN HONBLE COURT HAS APPROVED THE ESTIMATION, ON SIMILAR FACTUAL MATRIX, BASED ON GROSS PROFIT RATE. THEREFORE, CONCURRING WITH THE APPROACH OF LD . CIT(A), WE DISMISS THE APPEAL. 5 ITA NO.5415/MUM/2018 MACHINE & CONTROLS ASSESSMENT YEAR-2011-12 6. FINALLY, THE APPEAL STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 10 TH OCTOBER, 2019. SD/- SD/- (SAKTIJIT DEY) (MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 10/10/2019 SR.PS:-JAISY VARGHESE '( )( / COPY OF THE ORDER FORWARDED TO : 1. !' / THE APPELLANT 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.