NAVRATNA METAL CORPORATION , , MUMBAI V. INCOME TAX OFFICER WARD 19(2)(4), MUMBAI

ITA 5517/MUM/2018

• Counselvise Citation: [2019] 111 COUNSELVISE.COM (IT) 9492 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-11-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 28-09-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: AKHTAR HANSARI
• Assessee Lawyers: MILAPCHAND M KANUNGO
• Keywords: Bogus purchase
• Section: 142(1); 201; 143(2); 139(1); 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES SMC , MUMBAI BEFORE S HRI S. RIFAUR RAHMAN (AM ) AND SHRI RAM LAL NEGI (JM) ITA NO. 5517 /MUM/2018 ASSESSMENT Y EAR: 2010 - 11 NAVRATNA METAL CORPORATION, 79, NANUBHAI DESAI ROAD, PREMBAI BHAWAN, SHOP NO. - 2 , GR. FLOOR , MUMBAI 400004 PAN : AAAFN3133H VS. THE INCOME TAX OFFICER - WD 19(2)(4), MATRU MANDIR, I. TAX OFFICES, ROOM NO. 217, OPP. BHATIA HOSPITAL, MUMBAI - 400007 (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI MILAPCHAND M. KANUNGO (A R) REVEN UE BY : SHRI AKHTAR H. ANSARI (DR) DATE OF HEARING: 11 /11 /201 9 DATE OF PRONOUNCEMENT: 29 / 11 /201 9 O R D E R PER RAM LAL NEGI, JM T HE ASSESSEE HAS FILED THE PRESENT APPEAL AGAINST THE ORDER DATED 13.08.2018 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) - 29 (FOR SHORT THE CIT(A) , MUMBAI , WHICH PERTAINS TO THE ASSESSMENT YEAR 2010 - 11 , WHEREBY THE LD. CIT(A) HAS DISMISSED T HE APPEAL FILED BY THE ASSESSEE AGAINST THE ASSESSMENT ORDER PASSED U/S 143 (3) R.W.S. 147 OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT). 2. THE ASSESSEE PROPRIETOR OF M/S NAVRATNA METAL CORPORATION , ENGAGED IN THE BUSINESS OF TRADING IN FERROUS AND NON - FERROUS METALS , FILED ITS RETURN OF INCOME FOR THE ASSESSMENT Y EAR UNDER CONSIDERATION DECLARING THE TOTAL INCOME OF RS. 38,043 / - . SUBSEQUENTLY, IT CAME TO THE NOTICE OF THE AO THAT THE ASSESSEE HAD SHOWN PURCHASES AMOUNTING TO RS. 5,35,334 / - FROM NEELAM INDUSTRIES , A BOGUS ENTITIES DECLARED BY THE SALES TAX DEPARTMEN T, MAHARASHTRA WHO USED TO PROVIDE ACCOMMODATION BILLS WITHOUT SUPPLYING ANY 2 ITA NO. 5517 / MUM/2018 ASSESSMENT YEAR: 2010 - 1 1 GOODS. ACCORDINGLY, THE AO ISSUED NOTICE U/S 148 OF THE ACT. THE ASSESSEE SUBMITTED THAT THE ORIGINAL RETURN SUBMITTED U/S 139(1) OF THE ACT BE TREATED AS THE RETURN FILED IN RESP ONSE TO THE NOTICE U/S 148 OF THE ACT. THEREAFTER THE AO ISSUED NOTICES U/S 143(2) AND 142(1) OF THE ACT. IN RESPONSE THEREOF, THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE APPEARED AND FILED THE DETAILS. THE ASSESSEE CONTENDED THAT THE PURCHASES WERE GENU INELY MADE FROM THE AFORESAID ENTITY , HOWEVER THE AO REJECTING THE CONTENTION , TREATED THE QUESTIONED PURCHASES AS BOGUS TRANSACTION AND MADE ADDITION OF 12.5% OF THE SAID AMOUNT TO THE INCOME OF THE ASSESSEE AND DETERMINED THE TOTAL INCOME OF THE ASSESSEE AT RS. 1,04,960 / - THE ASSESSEE CHALLENGED THE ASSESSMENT ORDER BEFORE THE LD. CIT (A). THE LD. CIT (A) AFTER HEARING THE ASSESSEE DISMISSED THE ASSESSEES APPEAL AND CONFIRMED THE ADDITION OF 12.5% OF THE TOTAL AMOUNT OF BOGUS PURCHASES DETERMINED BY THE AO . AGAINST THE SAID FINDINGS, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 3. THE ASSESSEE HAS CHALLENGED THE IMPUGNED ORDER PASSED BY THE LD. CIT (A) ON THE FOLLOWING GROUNDS : - 1. 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - 29, MUMBAI [TH E LD. CIT (A)] ERRED IN CONFIRMING THE ESTIMATION OF ADDITIONAL INCOME MADE BY THE ASSESSING OFFICER IN THE CASE OF THE APPELLANT BEING, ALLEGED PROFIT AT THE RATE OF 12.5% EARNED ON PURCHASES MADE BY THE APPELLANT IN THE COURSE OF ITS BUSINESS. 1.2. THE LD. CIT () FAILED TO APPRECIATE THAT: (A) THE PURCHASES WERE MADE IN REGULAR/NORMAL COURSE OF ITS BUSINESS, (B) THE PURCHASE CONSIDERATION WAS PAID TO THE PURCHASERS THROUGH ACCOUNT PAYEE CHEQUES THROUGH PROPER BANKING CHANNEL (C) PROPER BILLS/CHALLANS, ST OCK DETAILS AND OTHER NECESSARY RECORDS WERE MAINTAINED BY THE APPELLANT WITH RESPECT TO THE ABOVE PURCHASES. (D) THERE WAS CORRESPONDING SALES OF THE GOODS PURCHASED FROM THE SAID PARTIES. 1.3. WHILE DOING SO, THE CIT (A) FAILED TO APPRECIATE THAT THE ASS ESSING OFFICER HAD NOT PROVIDED THE MATERIAL/DOCUMENTS TO THE APPELLANT ON THE BASIS OF 3 ITA NO. 5517 / MUM/2018 ASSESSMENT YEAR: 2010 - 1 1 WHICH, HE DISALLOWED THE PURCHASES MADE BY THE APPELLANT. 1.4 IT IS SUBMITTED THAT IN THE FACTS AND THE CIRCUMSTANCES OF THE CASE, AND IN LAW, NO SUCH ESTIMATION OF INC OME WAS CALLED FOR. 2. WITHOUT PREJUDICE TO THE ABOVE, THE ESTIMATION OF PROFIT ON ALLEGED BOGUS PURCHASE AT THE RATE OF 12.5% WAS ON A VERY HIGHER SIDE AND THE SAME NEEDS TO BE SCALED DOWN. 4. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT SINCE THE ASSESSEE HAS DISCHARGED THE PRIMARY ONUS OF ESTABLISHING GENUINENESS OF THE PURCHASES BY SUBMITTING THE DOCUMENTARY EVIDENCE, THE LD. CIT(A) OUGHT TO HAVE DELETED THE ADDITION OF 12.5% OF THE ALLEGED BOGUS PURCHASES DETERMINED BY THE AO. PLACING RELIANCE ON THE JUDGMENT OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. NIKUNJ EXIMP ENTERPRISES PVT. LTD , THE LD. COUNSEL SUBMITTED THAT MERELY BECAUSE THE ASSESSEE COULD NOT PRODUCE THE PARTIES BEFORE THE AUTHORITIES BELOW, IT COULD NOT BE CONC LUDED THAT THE GOODS WERE NOT PURCHASED. 5. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESENTATIVE (DR) RELYING ON THE FINDINGS OF THE AUTHORITIES BELOW SUBMITTED THAT SINCE THE ASSESSEE HAS FAILED TO PROVE THE GENUINENESS OF THE TRANSACTION OF PURCHASE B Y ADDUCING COGENT AND CONVINCING EVIDENCE, THE LD. CIT (A) HAS RIGHTLY CONFIRMED THE ADDITION OF 12.5% OF THE TOTAL AMOUNT OF BOGUS PURCHASES IN THE LIGHT OF THE RATIO LAID DOWN BY THE HONBLE GUJARAT HIGH IN THE CASE OF SIMIT P . SHETH , 356 ITR 451(GUJ) . 6 . WE HAVE CAREFULLY GONE THROUGH THE RELEVANT RECORD INCLUDING THE CASES RELIED UPON BY THE AUTHORITIES BELOW. WE ARE CONVINCED FROM THE MATERIAL ON RECORD THAT THE ASSESSEE HAS FAILED TO ESTABLISH THE GENUINENESS OF THE PURCHASES IN QUESTION BY ADDUCING COGENT AND CONVINCING EVIDENCE. THE NOTICES ISSUED BY THE AO TO THE HAWALA ENTITY WAS RECEIVED BACK UN - SERVED. THE ASSESSEE ALSO FAILED TO PRODUCE THEM BEFORE THE AO FOR VERIFICATION. HENCE, IN OUR CONSIDERED VIEW, THE AO HAS RIGHTLY CONCLUDED THAT THE ASS ESSEE HAS NOT MADE THE QUESTIONED PURCHASES FROM THE PARTIES MENTIONED IN THE BOOKS OF 4 ITA NO. 5517 / MUM/2018 ASSESSMENT YEAR: 2010 - 1 1 ACCOUNT. WE FURTHER NOTICE THAT, THE AO HAS NOT REJECTED THE SALE OF THE GOODS SO PURCHASED. THE ABOVE - MENTIONED FACTS GIVE RISE TO THE CONCLUSION THAT THE ASSESSEE HAD PURCHASED THE GOODS IN QUESTION FROM GREY MARKET AND EVADED THE TAX APPLICABLE DURING THE RELEVANT PERIOD. UNDER THESE CIRCUMSTANCES, THE AO HAD NO OPTION BUT TO MAKE AN ADDITION ON ESTIMATION BASIS CONSIDERING THE APPLICABLE RATE OF VAT OR OTHER TAXES AND THE ELEMENT OF PROFIT EMBEDDED IN THE SAID TRANSACTION. THE LD. CIT(A) HAS SUSTAINED THE ADDITION OF 12.5%, HOLDING THAT THE ESTIMATE REACHED AT BY THE AO IS JUST AND REASONABLE. 7 . THE LD CIT(A) HAS SUSTAINED ADDITION TO 12.5%, BY FOLLOWING THE RATIO LA ID DOWN BY THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. SIMIT P. SETH 356 ITR 451(GUJ) , IN WHICH THE HONBLE HIGH COURT HAS UPHELD THE DECISION OF THE TRIBUNAL AND SUSTAINED THE ADDITION 12.5% OF THE TOTAL AMOUNT OF BOGUS PURCHASES DETERMINED BY THE TRIBUNAL, HOLDING THAT ONLY PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES CAN BE ADDED TO INCOME OF THE ASSESSEE. HENCE, IN OUR CONSIDERED VIEW, THE ORDER PASSED BY THE LD. CIT(A) IS BASED ON THE PRINCIPLES OF LAW LAID DOWN BY THE HONBLE GUJARAT HIGH COU RT IN THE SAID CASE. HENCE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT (A) TO INTERFERE WITH THE SAME . ACCORDINGLY, WE UPHOLD THE ORDER OF THE LD. CIT (A) AND DISMISS THE ASSESSEES APPEAL AND DIRECT THE AO TO MAKE ADDITION OF 12.5% OF THE TO TAL AMOUNT OF QUESTIONED PURCHASES. IN THE RESULT, APPEAL FILED BY THE ASSESSEE FOR ASSESSMENT YEAR 2010 - 2 011 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH NOVEMBER , 2019 . SD/ - SD/ - ( S. RIFAUR RAHMA N ) ( RAM LAL NEGI ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; DATED: 29 / 11 / 201 9 ALINDRA, PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 5 ITA NO. 5517 / MUM/2018 ASSESSMENT YEAR: 2010 - 1 1 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . / BY ORDER, //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI