ITO - 27 (1)(4), MUMBAI V. DEEPAK ENTERPRISES, MUMBAI

ITA 5720/MUM/2018

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 6290 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-10-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 05-10-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANJAY MEHTALD
• Keywords: Bogus purchase; Peak credit
• Section: 143(3); 142(1); 133(6); 143(2); 148

Judgement Text

1 ITA NOS.5720-21/MUM/2018 DEEPAK ENTERPRISES ASSESSMENT YEARS - 2009-10 & 2010-11 - 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.5720/MUM/2018 ( / ASSESSMENT YEAR:2009-10) & ./ I.T.A. NO.5721/MUM/2018 ( / ASSESSMENT YEAR:2010-11) I TO - WARD 2 7 ( 1 ) ( 4 ) ROOM NO. 409, 4 TH FLOOR TOWER NO.6, VASHI RLY. STN. COMPLEX, VASHI, NAVI MUMBAI / VS. DEEPAK ENTERPRISES 16, GANESH KRUPA HINGWALA LANE, GHATKOPAR (E) MUMBAI 400 71 !'# ./ ./PAN/GIR NO. AADFD-1969-Q ( !' /APPELLANT ) : ( #$!' / RESPONDENT ) !'% / APPELLANT BY : SHRI SANJAY MEHTA-LD. AR #$!'% / RESPONDENT BY : MS. JOTHILAKSHMI NAYAK- LD. DR / DATE OF HEARING : 10/10/2019 / DATE OF PRONOUNCEMENT : 10/10/2019 / O R D E R MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER):- 1. AFORESAID APPEALS BY REVENUE FOR ASSESSMENT YEAR S [AY] 2009-10 AND 2010-11 CONTEST SEPARATE ORDERS OF LD. COMMISSI ONER OF INCOME-TAX (APPEALS)-24, MUMBAI [IN SHORT REFERRED TO AS CIT( A)] BOTH DATED 2 ITA NOS.5720-21/MUM/2018 DEEPAK ENTERPRISES ASSESSMENT YEARS - 2009-10 & 2010-11 21/06/2018 ON CERTAIN COMMON GROUNDS OF APPEAL. SIN CE THE ISSUES ARE IDENTICAL, THE APPEALS ARE BEING DISPOSED-OFF BY WA Y OF THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE & BREVITY. THE GR OUNDS FOR AY 2009-10 READ AS UNDER: - 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) ERRED IN DELETING THE ADDITION OF RS.2,74,221/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF BOGUS PURCHASES, WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAD FAILED TO PRODUCE BILLS, VOUCHERS AND OTHER DOCUMENTARY EVIDE NCES IN SUPPORT OF HIS CLAIM AND WITHOUT CONSIDERING THE LATEST APEX COURT DECISION IN THE CASE OF N.K.PROTEINS LTD. WHEREIN IT IS HELD THAT ONCE IT IS PROVED THAT THE PURCHASES ARE BOGUS THEN ADDITIONS SHOULD BE MADE ON ENTIRE PURCHASES AND NOT ON PROFI T ELEMENT EMBEDDED IN SUCH PURCHASES. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) ERRED IN ESTIMATING THE PROFIT FROM HAWALA PURCHASES BY DISA LLOWING ONLY RS.1,91,025/- BEING 12.5% OF THE BOGUS PURCHASES AS EVEN THE BASIC ONUS OF PRODUCING DELIVERY CHALLANS, TRANSPORT BILLS ETC. WERE NOT FULFILLED B Y THE ASSESSEE. WE HAVE HEARD AND CONSIDERED THE ARGUMENTS ADVANCED BY BOTH THE REPRESENTATIVES AND DELIBERATED ON JUDICIAL PRONOUN CEMENTS AS CITED BEFORE US. 2.1 FACTS FROM RECORDS OF AY 2009-10 WOULD REVEAL T HAT THE ASSESSEE BEING RESIDENT FIRM STATED TO BE ENGAGED IN TRADING OF SURGICAL ITEMS AND CHEMICALS, WAS ASSESSED FOR IMPUGNED AY U/S. 143(3) R.W.S. 147 ON 30/03/2015 WHEREIN THE INCOME OF THE ASSESSEE WAS D ETERMINED AT RS.6.24 LACS, AFTER SOLE ADDITION OF ALLEGED BOGUS PURCHASES FOR RS.4.65 LACS AS AGAINST RETURNED INCOME OF RS.1.58 LACS E-FILED BY THE ASSESSEE ON 26/09/2009 WHICH WAS INITIALLY PROCESSED U/S.143(1) . 2.2 PURSUANT TO RECEIPT OF CERTAIN INFORMATION FROM SALES TAX DEPARTMENT, GOVT. OF MAHARASHTRA, IT TRANSPIRED THAT THE ASSESS EE OBTAINED BOGUS 3 ITA NOS.5720-21/MUM/2018 DEEPAK ENTERPRISES ASSESSMENT YEARS - 2009-10 & 2010-11 PURCHASES BILLS AMOUNTING TO RS.15.28 LACS FROM 10 ENTITIES, THE DETAILS OF WHICH HAS ALREADY BEEN EXTRACTED AT PARA 5.1 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 31/03/2014 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 DETAILS OF PURCHASES AND CORRESPONDING SALES, HOWEVER, NOTICES ISSUED U/S 133(6) TO ALL THE SUPPLIERS REMAINED UN-RESPONDED TO. ONE ENT ITY DENIED HAVING CARRIED OUT ANY TRANSACTION WITH THE ASSESSEE. THE ASSESSEE FAILED TO PRODUCE ANY OF THE PARTIES FOR CONFIRMATION OF ACCO UNTS. THE ASSESSEE ALSO FAILED TO SUBSTANTIATE THE DELIVERY OF MATERIAL. TH E FACTUAL MATRIX LED THE LD. AO TO FORM AN OPINION THAT THE PURCHASES WERE NOT G ENUINE. IN THE SAID BACKGROUND, LD. AO WORKED OUT PEAK CREDIT OF RS.3.9 2 LACS IN RESPECT TO 9 ENTITIES AND ADDED THE SAME TO THE INCOME OF THE AS SESSEE WHEREAS FULL DISALLOWANCE OF RS.0.72 LACS WAS MADE WITH RESPECT TO PURCHASES MADE FROM ONE ENTITY, WHO DENIED HAVING CARRIED OUT ANY TRANSACTION WITH THE ASSESSEE. THUS, TOTAL DISALLOWANCE WORKED OUT TO BE RS.4.65 LACS AS AGAINST DISPUTED PURCHASES OF RS.15.28 LACS WHICH T RANSLATED INTO DISALLOWANCE OF PURCHASES TO THE EXTENT OF 30.43% A PPROX. 3. THE LEARNED FIRST APPELLATE AUTHORITY, INTER-ALIA, RELYING UPON THE DECISION OF HONBLE GUJARAT HIGH COURT RENDERED IN CIT V/S SIMIT P.SHETH 356 ITR 451 RESTRICTED THE ADDITIONS TO 12.5% OF DISPUTED PURCH ASES AS 4 ITA NOS.5720-21/MUM/2018 DEEPAK ENTERPRISES ASSESSMENT YEARS - 2009-10 & 2010-11 AGAINST 30.43% ESTIMATED BY LD. AO. 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 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 / DISTURBED BY T HE 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 TRANSACTIONS AND THE ONUS CASTED UPON ASSESSEE, IN THIS REGARD, REMAINED UNDISCHARGED. THEREFORE, ON THE GIVEN FACTS AND CIR CUMSTANCES, THE ADDITIONS WHICH COULD BE SUSTAINED, WOULD BE TO ACC OUNT FOR PROFIT ELEMENT EMBEDDED IN THESE PURCHASE TRANSACTIONS TO FACTORIZ E FOR PROFIT EARNED BY ASSESSEE AGAINST POSSIBLE PURCHASE OF MATERIAL IN T HE GREY MARKET AND UNDUE BENEFIT OF VAT AGAINST SUCH BOGUS PURCHASES, WHICH LEARNED FIRST APPELLATE AUTHORITY HAS RIGHTLY DONE SO. THEREFORE, FINDING ESTIMATION OF 12.5% TO BE QUITE FAIR AND REASONABLE, WE DISMISS T HE 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 5 ITA NOS.5720-21/MUM/2018 DEEPAK ENTERPRISES ASSESSMENT YEARS - 2009-10 & 2010-11 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. 6. FACTS ARE PARI-MATERIA THE SAME IN AY 2010-11 W HEREIN THE ASSESSEE HAS BEEN SADDLED WITH ADDITION OF RS.7.29 LACS. THE LEARNED CIT(A) RESTRICTED THE SAME, IN SIMILAR MANNER, TO 12.5% OF DISPUTED PURCHASES. AGGRIEVED THE REVENUE IS IN FURTHER APPEAL BEFORE U S. FACTS AS WELL AS ISSUE BEING IDENTICAL, OUR OBSERVATION AS WELL AS ADJUDIC ATION AS FOR AY 2009-10 SHALL MUTATIS-MUTANDIS APPLY TO THIS YEAR ALSO. CON SEQUENTLY, THE APPEAL STANDS DISMISSED. 7. BOTH THE APPEALS STAND 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 6 ITA NOS.5720-21/MUM/2018 DEEPAK ENTERPRISES ASSESSMENT YEARS - 2009-10 & 2010-11 '( )( / 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.