ELCON PIPE AND FITTING P.LTD, BHIWANDI V. ITO WD 1(1), THANE

ITA 5692/MUM/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 0245 (ITAT-MUMBAI)
• Duration Of Justice: 10 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-08-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 21-09-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: POOJA SWAROOP
• Keywords: Bogus purchase

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA , ACCOUNTANT MEMBER AND SHRI SANDEEP GOSAIN , JUDICIAL MEMBER ITA NO.5355/MUM/2016 & 5357/MUM/2016 (ASSESSMENT YEAR: 2009 - 10 & 2011 - 12 ) ITO WARD 1(1), KALYAN 1 ST FLOOR, MOHAN PLAZA WAYALE NAGAR, KHADAKPADA, KALYAN (W) . APPELLANT V/S M/S. ELCON PIPES & FITTINGS PVT LTD., BUILDING NO.8/8, PRITHVI COMPLEX PHASE - II, GODOWN NO.07 NEAR KALHER PIPELINE BHIWANDI 421 302 PAN NO: AABCE9399J . RESPONDENT ITA NO. 5689/MUM/2016 & 5692/MUM/2016 (ASSESSMENT YEAR: 2009 - 10 & 2011 - 12 ) M/S. ELCON PIPES & FITTINGS PVT LTD., BUILDING NO.8/8, PRITHVI COMPLEX PHASE - II, GODOWN NO.07 NEAR KALHER PIPELINE BHIWANDI 421 302 PAN NO: AABCE9399J . APPELLANT V/S ITO WARD 1(1), KALYAN 1 ST FLOOR, MOHAN PLAZA WAYALE NAGAR, KHADAKPADA, KALYAN (W) . RESPONDENT ASSESSEE BY : MS. POOJA SWAROOP REVENUE BY : SHRI. AJAY SINGH DATE OF HEARING 10.08.2017 DATE OF ORDER - 18 .08 .2017 ITA NO.5355 & 5357/MUM/2016 ITA NO.5689 & 5692/MUM/2016 M/S. ELCON PIPE & FITTINGS PVT. LTD., 2 O R D E R PER BENCH: THESE ARE CROSS APPEALS BY ASSESSEE AND REVENUE AGAINST COMMON ORDER OF CIT - A DATED 30/06/2016 FOR THE ABOVE ASSESSMENT YEARS. 2. THESE CASES INVOLVE BOGUS PURCHASES. THE ASSESSING OFFICER HAS MADE ADDITION OF 100% OF THE BOGUS PURCHASES, WHICH RESULTED IN ADDITION OF RS.71,58,777/ - FOR A.Y.2009 - 10 AND RS.81,64,848/ - FOR A.Y.2011 - 12. THE ADDITIONS WERE MADE UPON INFORMATION RECEIVED THAT ASSESSEE WAS OBTAINING BOGUS PURCHASE BILLS. AO HAS MADE HIS OWN ENQUIRIES AS WELL. NO RESPONSE WAS GIVEN TO THE ENQUIRIES. UPON ASSESSEES APPEAL, LEARNED CIT - A CONFIRMED THE FINDING OF THE AO THAT PURCHASES ARE BOGUS, HOWEVER, HE GRANTED SUBSTANTIAL RELIEF BY OBSERVING AS UNDER. FOR A.Y. 2009 - 10, LEARNED CIT - A HAS HELD AS UNDER: - BY BOOKING ALLEGED BOGUS PURCHASES, AS COMPARED TO THE A.Y. 2007 - 08, THE APPELLANT HAS SUPPRESSED ITS PROFIT BY RS 8,10,8347 - ( 87,56,313X 9.26%). IN COMPLIANCE, THE LD. AR COULD NOT OFFER ANY VALID REASONS FOR FALL IN THE GP RATE. CONSIDERING THE FACTS IN ENTIRETY / THE APPELLANT BEING WHOLESALE TRADER AND RELYING ON DECISIONS IN THE CASE OF M/S. KANCHWALA GEMS PVT. LTD. V/S JCIT 288 ITR 10 (SC), SIMIT P SETH, 356 ITR 451, ETC, AS QUOTED ABOVE, IN MY CONSIDERED OPINION, DISALLOWANCE @ 12.5% WILL BE REASONABLE. THE DISALLOWANCE @ 12.5% OF BOGUS PURCHASES IS WORKED OUT AT RS 8,94,847/ - (71,58,777 X 12.5/ 100), WHICH IS SLIGHTLY MORE THAN SUPPRESSED GP OF RS 8,10,834 / - , THEREFOR E, THE DISALLOWANCE TO THE EXTENT OF RS 8,94,847 / - , OUT OF HAWALA PURCHASES OF RS 71,58,777/ - , IS SUSTAINED, AS REQUESTED BY THE LD. AR AND BALANCE AMOUNT OF RS 62,63,930/ - (RS 71,58,777/ - LESS RS 8,94,8477 - ), IS HEREBY DELETED. FOR A.Y.2011 - 12, THE LEARNED CIT - A HAS HELD AS UNDER: - ITA NO.5355 & 5357/MUM/2016 ITA NO.5689 & 5692/MUM/2016 M/S. ELCON PIPE & FITTINGS PVT. LTD., 3 BY BOOKING ALLEGED BOGUS PURCHASES, AS COMPARED TO THE A.Y. 2007 - 08, THE APPELLANT HAS SUPPRESSED ITS PROFIT BY RS 13,49,822/ - ( 1,00,88,359 X 13.38%). IN COMPLIANCE, THE LD. AR COULD NOT OFFER ANY VALID REASONS FO R FALL IN THE GP RATE. CONSIDERING THE FACTS IN ENTIRETY / THE APPELLANT BEING WHOLESALE TRADER AND RELYING ON DECISIONS IN THE CASE OF M/S. KANCHWALA GEMS PVT. LTD. V/S JCIT 288 ITR 10 (SC), ETC, AS QUOTED ABOVE, IN MY CONSIDERED OPINION, THE ESTIMATION OF GP @19.03% WILL BE REASONABLE. THE DISALLOWANCE @ 12.5% OF BOGUS PURCHASES IS WORKED OUT AT R S 10,20,606/ - (81,64,849 X 12.5/ 100), WHICH IS LESS THAN SUPPRESSED GP OF RS 13,49,822 / - , THEREFORE, THE DISALLOWANC E TO THE EXTENT OF RS 13,49,822/ - , OUT OF HA WALA PURCHASES OF RS 81,64,849 / - , IS SUSTAINED AS REQUESTED BY THE LD. AR AND BALANCE AMOUNT OF RS 68,15,027 / - (RS 81,64,849/ - LESS RS 13,49,822/ - ), IS HEREBY DELETED. 3. AGAINST THE ABOVE ORDER OF LEARNED CIT(A) REVENUE AND ASSESSEE ARE IN CROSS APPEAL. 4. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. 5. WE FIND THAT IN THIS CASE OVERWHELMING EVIDENCE HAVE BEEN BROUGHT ON RECORD THAT THE CONCERNED PURCHASE ARE BOGUS. COGENT INFORMATION HAS BEEN RECEIVED FROM THE MAHARASHTRA SALES TAX DEPARTMENT THAT THE SUPPLIERS HAVE ADMITTED THAT THEY WERE SUPPLYING BOGUS BILLS. THE ASSESSING OFFICER ALSO HAS ALSO MADE ENQUIRIES. NO RESPONSE TO HIS NOTICES CAME FROM THE SUPPLIERS, LEARNED CIT - A IN HIS APPELLATE ORDER HAS ALSO FOUND THAT THE PURCHASES ARE BOGUS. 6. UP ON CAREFUL CONSIDERATION OF THE FACTS OF THE CASE, WE FIN D THAT OVERWHELMING EVIDENCE HAVE BEEN REFERRED BY THE AUTHORITIES BELOW THAT THE IMPUGNED PURCHASES ARE BOGUS. THERE IS NO EVIDENCE OF THE ACTUAL MOVEMENT OF THE GOODS UNDER DISPUTE. IN THESE CIRCUMSTANCES LEARNED DEPARTMENTAL REPRESENTATIVE HAS REFERRED TO HONOURABLE GUJARAT HIGH COURT DECISION IN THE ITA NO.5355 & 5357/MUM/2016 ITA NO.5689 & 5692/MUM/2016 M/S. ELCON PIPE & FITTINGS PVT. LTD., 4 CASE OF TAX APPEAL NO 240 OF 2003 IN THE CASE OF N K INDUSTRIES VS DY CIT, ORDER DT 20/06.2016, WHEREIN HUNDRED PERCENT OF THE BOGUS PURCHASES WAS HELD TO BE ADDED IN THE HANDS OF THE ASSESSEE AND TRIBUNAL S RESTRICTION OF THE ADDITION TO 25% OF THE BOGUS PURCHASES WAS SET ASIDE. THE SPECIAL LEAVE PETITION AGAINST THIS ORDER ALONGWITH OTHERS HAS BEEN DISMISSED BY THE HONOURABLE APEX COURT VIDE ORDER DT 16. 1. 2017. 7. HOWEVER , WE NOTE THAT DISMISSAL OF A SPECI AL LEAVE PETITION SIMPLY WITHOUT ANY SPEAKING ORDER, DOES NOT MERGE THE ORDER OF THE HONOURABLE HIGH COURT WITH THAT OF THE HONOURABLE APEX COURT. FURTHERMORE WHEN SALES ARE NOT DOUBTED HUNDRED PERCENT DISALLOWANCE FOR BOGUS PURCHASE IS NOT POSSIBLE. THIS HAS BEEN SO HELD BY HONOURABLE JURISDICTIONAL HIGH COURT IN THE CASE OF NIKUNJ EXIMP ENTERPRISES. HOWEVER WE ALSO NOTE THAT FACTS OF THE CASE BEFORE THE JURISDICTIONAL HIGH COURT WERE DIFFERENT FROM THAT IN THE PRESENT CASE. FACTS OF THE PRESENT CASE CLEAR LY INDICATE THAT ASSESSEE HAS ENGAGED IN TRANSACTION IN THE GREY MARKET. MAKING TRANSACTIONS IN THE GREY MARKET GIVES THE ASSESSEE SAVINGS OF TAXES ETC AT THE EXPENSE OF EXCHEQUER. IN SIMILAR SITUATION FOLLOWING THE HONOURABLE GUJARAT HIGH COURT DECISION I N THE CASE OF SIMIT P SETH DISALLOWANCE OF 12.5% OF THE BOGUS PURCHASE HAS BEEN FOUND TO BE MEETING THE END OF JUSTICE IN A NUMBER OF CASES AT THE MUMBAI TRIBUNAL. 8. ACCORDINGLY, WE MODIFY THE ORDER OF LEARNED CIT - A AND HOLD THAT THE DISALLOWANCE IN THIS CASE SHOULD BE MADE AT THE RATE OF 12.5% OF THE BOGUS PURCHASE. ITA NO.5355 & 5357/MUM/2016 ITA NO.5689 & 5692/MUM/2016 M/S. ELCON PIPE & FITTINGS PVT. LTD., 5 9. LEARNED COUNSEL OF THE ASSESSEE HAS FAIRLY AGREED TO THE ABOVE PROPOSITION. 10. APPEALS (ITA NOS.5355/MUM/2016, 5357/MUM/2016 & ITA NO.5689 /MUM/2016) STAND DISMISSED. ASSESSEE S APPEAL ( ITA NO.5692 /MUM/2016) IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 1 8 .08 .2017 S D / - S D / - SANDEEP GOSAIN SHAMIM YAHYA JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 1 8 .0 8 .2017 COPY OF THE ORDER FORWARDED TO : (1) THE ASSESSEE; (2) THE REVENUE; (3) THE CIT(A); (4) THE CIT, MUMBAI CITY CONCERNED; (5) THE DR, ITAT, MUMBAI; (6) GUARD FILE. BY ORDER KARUNA SR. PRIVATE SECRETARY (DY./ASSTT.REGISTRAR) ITAT, MUMBAI