ASST CIT PALGHAR CIR PALGHAR, PALGHAR V. PARVEZ MUSA KHAN, MUMBAI

ITA 5599/MUM/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 3098 (ITAT-MUMBAI)
• Duration Of Justice: 9 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-09-2016
• Appeal Filed By: Department
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 11-12-2015
• Court: TRIBUNAL
• Department Lawyers: R M MADHAVI
• Keywords: Bogus purchase; Accommodation entries

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI RAVISH SOOD, JUDICIAL MEMBER I.T.A. NO. 5599/M/2015 (ASSESSMENT YEAR: 2009 - 2010 ) ACIT, PALGHAR CIRCLE, PALGHAR, AAYAKAR BHAVAN, INCOME TAX OFFICE, BIDCO ROAD, PALGHAR DIST, PALGHAR 401404. / VS. SHRI PARVEZ MUSA KHAN, PROP. OF M/S. AMAN STEEL, SURVEY NO.116/1, SHAKTI UDYOG NAGAR, MANOR ROAD, OPP. JUNGLE RESORT, PALGHAR (E), TAL. DIST, PALGHAR 401404. ./ PAN : AFMPK0603G ( / APPELLANT) .. ( / RESPONDENT ) C.O.NO.127/M/2016 (ARISING OUT OF I.T.A. NO.5599/M/2015) (ASSESSMENT YEAR: 2009 - 2010 ) SHRI PARVEZ MUSA KHAN, PROP. OF M/S. AMAN STEEL, SURVEY NO.116/1, SHAKTI UDYOG NAGAR, MANOR ROAD, OPP. JUNGLE RESORT, PALGHAR (E), TAL. DIST, PALGHAR 401404. / VS. ACIT, PALGHAR CIRCLE, PALGHAR, AAYAKAR BHAVAN, INCOME TAX OFFICE, BIDCO ROAD, PALGHAR DIST, PALGHAR 401404. ./ PAN : AFMPK0603G ( / APPELLANT) .. ( / RESPONDENT ) / ASSESSEE BY : SHRI ANIL SATHE / REVENUE BY : SMT. R. M. MADHAVI, DR / DATE OF HEARING : 22.09.2016 / DATE OF PRONOUNCEMENT : 22 .09.2016 / O R D E R PER D. KARUNAKARA RAO, AM: THE CAPTIONED APPEAL IS FILED BY THE REVENUE ON 11.12.2015 AND CROSS OBJECTION NO.127/M/2016 IS FILED BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2009 - 2010. SINCE, THE ISSUES RAISED IN THESE APPEALS ARE INTER CONNECTED, THEREFORE, FOR THE SAKE OF CONVENIENCE, THEY ARE CLUBBED, HEARD COMBINEDLY AND DISPOSED OF IN THIS CONSOLIDATED ORDER. APPEAL WISE ADJUDICATION IS GIVEN IN THE FOLLOWING PARAS OF THIS ORDER. 2 2. FIRSTLY, WE SHALL TAKE UP THE REVENUES APPEAL ITA NO.5599/M/2015, WHICH IS FILED AGAINST THE ORDER OF THE CIT (A) - 3, THANE DATED 11.9.2015 FOR THE ASSESSMENT YEAR 2009 - 2010. IN THIS APPEAL, REVENUE RAISED THE FOLLOWING GROUNDS WHICH READ AS UNDER: - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT (A) - 3, THANE ERRED IN DELETING THE ADDITION OF RS. 26,78,418/ - OUT OF THE TOTAL ADDITION OF RS. 35,71,228/ - MADE ON ACCOUNT OF BOGUS PURCHASES, DESPITE HOLDING THAT THE PURCHASES WERE NOT GENUINE AND THE ASSESSEE FAILED TO PROVE GENUINENESS OF THE TRANSACTIONS. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, LD CIT (A) ERRED IN DELETING THE ABOVE ADDITION DESPITE THE FACT THAT THE ASSESSEE FAILED TO DISCHARGE HIS ONUS OF PROVING THE PURCHASES. 3. AT THE OU TSET, NARRATING THE BRIEF FACTS OF THE CASE, LD DR FOR THE REVENUE SUBMITTED THAT SUSPECTING THE GENUINENESS OF SOME OF THE PURCHASES, AO MADE ADDITION OF RS. 35,71,228/ - IN THE ASSESSMENT. THE PURCHASES MADE FROM FOUR CONCERNS, VIZ (I) M/S. SIDHIVINAYAK STEELS; (II) M/S. ASIAN STEEL; (III) M/S. CHANCHAL TUBE CORPORATION AND (IV) SURAT TUBE CORPORATION, WERE SUSPECTED TO BE BOGUS. THESE PARTIES WERE LISTED IN THEIR WEBSITE BY THE SALES TAX DEPARTMENT AS THE ONES ENGAGED IN THE BUSINESS OF GIVING ACCOMMODATION ENTRIES WITHOUT DELIVERING ANY GOODS. AO PROCEEDED TO MAKE ADDITION ON THIS ACCOUNT AMOUNTING TO RS. 35,71,228/ - . AGGRIEVED, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. 4. DURING THE PROCEEDINGS BEFORE THE FIR ST APPELLATE AUTHORITY, ASSESSEE SUBMITTED THAT THE GROSS PROFIT (GP) FOR THE PERIOD UNDER CONSIDERATION WORKS OUT TO 6.6%, WHICH IS THE MARKET GP OF THE INDUSTRY OF STEAL TRADERS. IGNORING THE FACT THAT THE WITH SAID ADDITION OF RS. 35,71,228/ - , THE GP O F THE ASSESSEE WENT UP TO A FIGURE, WHICH DOES NOT EXIST IN THIS LINE OF BUSINESS OF STEEL TRADE, CIT (A) DISCUSSED THE ABOVE AND REMOVED THE ABSURDITY BY RESTRING THE DISALLOWANCE TO 25% OF THE SAID SUSPECTED STEEL PURCHASES OF RS. 35,71,228/ - . THUS, THE EFFECTIVE ADDITION CONFIRMED BY THE CIT (A) WORKS OUT TO RS. 8,92,810/ - . AGGRIEVED WITH THE SAID ADDITION OF RS. 8,92,810/ - , ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. FURTHER, AGGRIEVED WITH THE RELIEF GRANTED BY THE CIT (A) TO THE EXTENT OF RS. 26,78, 418/ - REVENUE IS IN APPEAL WITH THE ABOVE MENTIONED GROUNDS. 5. DURING THE PROCEEDINGS BEFORE US, IN CONNECTION WITH THE REVENUES APPEAL, LD DR RELIED ON THE ORDER OF THE AO AND PRAYED FOR CONFIRMING THE ENTIRE SUSPECTED PURCHASES OF RS. 35,71,228/ - . 3 6. PER CONTRA , LD COUNSEL FOR THE ASSESSEE NOT ONLY ARGUED FOR DELETING THE ENTIRE ADDITION BUT ALSO DELETING THE ADDITION CONFIRMED BY THE CIT (A) TO THE EXTENT OF RS. 8,92,810/ - . FURTHER, LD COUNSEL FOR THE ASSESSEE REASONED THAT , WITH THE CONFIRMING OF 2 5% OF THE SAID PURCHASES, THE GP OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION HAS GONE UP TO A PHENOMENAL HIGH FIGURE . AS PER THE LD AR, THE INDUSTRYS GP IS SOMEWHERE AROUND 6.6.%, WHICH IS ALREADY OFFERED BY THE ASSESSEE IN THE BOOKS OF ACCOUNT. TH EREFORE, IT IS THE OPINION OF THE LD COUNSEL FOR THE ASSESSEE THAT THERE IS NO NEED FOR FURTHER ADDITION OF RS. 8,92,810/ - . WITHOUT PREJUDICE TO THE ABOVE, LD COUNSEL FOR THE ASSESSEE ARGUED THAT THE GP ADDITION ON THE SAID PURCHASES MAY BE REDUCED TO A F IGURE REASONABLE TO THE BENCH. 7. AFTER HEARING BOTH THE PARTIES AND ON PERUSAL OF THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS THE RELEVANT MATERIAL PLACED BEFORE US, WE FIND, IN PRINCIPLE, WITH THE CONFIRMATION OF ADDITION OF RS. 8,92,810/ - , THE GP R ATE HAS GONE MUCH HIGHER THAN THE INDUSTRYS GP. IN OUR VIEW, RESTRICTING THE ADDITION TO 6.6% OF THE SUSPECTED PURCHASES OF RS. 35,71,228/ - SHOULD MEET THE ENDS OF JUSTICE. WE ORDER ACCORDINGLY AND DIRECT THE AO TO RESTRICT THE ADDITION TO 6.6 % OF SUSPECTED PURCHASES OF RS.35,71,228/ - . FOR THIS, WE RELY ON THE JUDGMENT OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. SIMIT P. SHETH , ITA NO. 553 OF 2012, DATED 16.1.2013 WHICH IS RELEVANT FOR THE PROPOSITION THAT ONLY PROFIT ELEMENT EMBE DDED IN SUCH PURCHASES CAN BE ADDED TO THE INCOME OF THE ASSESSEE. THUS, WE UPHELD THE ORDER OF THE CIT (A) IN DELETING THE ENTIRE ADDITION ON ACCOUNT OF BOGUS PURCHASES CONSIDERING THE FACT THAT THE REVENUE DID NOT DISTURB THE SALES OF THE ASSESSEE AND A LSO IN VIEW OF THE FACT THAT CIT (A) RELIED ON THE JUDGMENT OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF NICKUNJ EXIMP ENTERPRISES PVT. LTD VS. ACIT VIDE WRIT P ETITION NO.2860 OF 2012, DATED 18 TH JUNE, 2014 . CONSIDERING THE ABOVE, THE GROUNDS RAISED IN THE REVENUES APPEAL ARE DISMISSED AND THE GROUNDS RAISED BY THE ASSESSEE IN ITS CO ARE PARTLY ALLOWED. 8. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED AND THE CO RAISED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOU NCED IN THE OPEN COURT ON 2 2 N D S EPTEMBER, 2016. S D / - S D / - ( RAVISH SOOD ) (D. KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; 27 .09.2016 4 . . ./ OKK , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI