ACIT CIRCLE, 17(2), Mumbai V. M/S PARESH CHEMICAL CORPORATION, Mumbai

ITA 581/MUM/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 1482 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-12-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 04-02-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bogus purchase; Accommodation entries; Set aside
• Section: 143(3); 143(1)

Judgement Text

ITA NO. 581/MUM/2019 A.Y.2010 - 11 ACIT, CIRCLE 17(2) VS. M/S PARESH CHEMICAL CORPORATION 1 IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI BEFORE SHRI M. BALAGANESH, ACCOUNTANT MEMBER AND SHRI RAVISH SOOD, JUDICIAL MEMBER ITA NO.581/MUM/2019 (ASSESSMENT YEARS: 2010 - 11) ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE 17(2), ROOM NO. 123A, 1 ST FLOOR, AAYAKAR BHAVAN, CHURCHGATE, MUMBAI 400 020 VS. M/S PARESH CHEMICAL CORPORATION 1/1 STEEL YARD HOUSE, 67 - F SANT TUKARAM ROAD, IRON MARKET, MASJID BUNDE, MUMBAI 400 009 PAN AAAFP7975R (APPELLANT) (RESPONDENT) APPELLANT BY: MS. SHREEKALA PARDE SH I , D.R RESPONDENT BY: NONE DATE OF HEARING: 08.12 .2020 DATE OF PRONOUNCEMENT: 09 .12.2020 O R D E R PER RAVISH SOOD, JM THE PRESENT APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A) - 58, MUMBAI, DATED 29.11.2018 WHICH IN TURN ARISES FROM THE ORDER PASSED BY THE A.O UNDER SEC. 143(3) R.W.S 147 OF THE INCOME TAX ACT, 1961 (FOR SHORT ACT) DATED 27 .08.2015 FOR A.Y. 2010 - 11. THE REVENUE HAS ASSAILED THE IMPUGNED ORDER ON THE FOLLOWING GROUNDS OF APPEAL BEFORE US : ' 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) JUSTIFIED IN RESTRICTING THE ADDITION MADE B Y THE A.O. TO 5% OF RS.18,97,853/ - AGAINST THE ADDITION MADE AT 12.5% OF THE BOGUS PURCHASES, IGNORING THAT THE ASSESSEE WAS UNABLE TO PROVE THE GENUINENESS OF THE PURCHASES EITHER BY PRODUCING THE SUPPLIER FOR EXAMINATION OR BY FURNISHING OTHER SUBSTANTIATING DOCUMENTS WHICH WERE REQ UIRED BY THE ASSESSING OFFICER. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) ERRED IN OVERLOOKING THE FACT THAT THE ADDITION MADE BY THE A.O. WAS BASED ON THE DETAILS OF THE SCAM UNEARTHED BY ITA NO. 581/MUM/2019 A.Y.2010 - 11 ACIT, CIRCLE 17(2) VS. M/S PARESH CHEMICAL CORPORATION 2 THE SALES TAX DEPARTMENT, WHEREIN IT WAS ESTABLISHED THAT THE ASSESSEE HAS TAKEN MERE ACCOMMODATION ENTRIES/BOGUS BILLS FROM THE SUPPLIERS WITHOUT ACTU ALLY MAKING PURCHASE FROM THEM? (THIS CASE FALLS UNDER THE EXCEPTION 10(E) OF THE CIRC ULAR NO.03/2018 DATED 11.0 7.2018 AS AMENDED ON 20.08.2018) 3. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD A NE W GROUND WHICH MAY BE NECESSARY. 2. BRIEFLY STATED, THE ASSESSEE WHICH IS ENGAGED IN THE BUSINESS OF TRADING IN DYES AND CHEMICALS ETC. HAD FILED ITS RETURN OF INCOME FOR A.Y. 2010 - 11 ON 24.09.2010, DECLARING ITS TOTAL INCOME AT RS.65,00,770. THE RETURN OF INCOME FILED BY THE ASSESSEE FIRM W AS PROCESSED AS SUCH UNDER SEC. 143(1) OF THE ACT. SUBSEQUENTLY, ON THE BASIS OF INFORMATION RECEIVED FROM THE OFFICE OF THE DGIT(INV.), MUMBAI, THAT THE ASSESSEE HAD BOOKED BOGUS PURCHASES OF RS .18,97,853/ - ITS CASE WAS REOPENED UNDER SEC. 147 OF THE ACT. 3. DURING THE COURS E OF THE ASSESSMENT PROCEEDINGS IT WAS OBSERVED BY THE A.O THAT THE ASSESSEE HAD CLAIMED TO HAVE MADE PURCHASES OF RS.18,97,853 / - , AS UNDER : SR. NO. HAWALA TIN NAME AMOUNT (RS.) 1. 27300371972V INTERNATIONAL TRADE AGENCY RS.18,97,853/ - IN ORDER TO VERI FY THE GENUINENESS AND VERACITY OF THE AFORESAID PURCHASES THE A.O CALLED UPON THE ASSESSEE TO FURNISH SUPPORTING DOCUMENTARY EVIDENCE. ALSO, THE ASSESSEE WAS CALLED UPON TO PLACE ON RECORD THE DETAILS OF THE BROKERS/AGENTS THROUGH WHOM THE AFORESAID IMPUGNED PURCHASES WERE CLAIMED TO HAVE BEEN MADE. I N REPLY, THOUGH THE ASSESSEE PLACED ON RECORD CERTAIN DOCUMENTARY EVIDENCE IN SUPPORT OF ITS CLAIM OF HAVING MADE GENUINE PURCHASES FROM THE AFOREMENTIONED PARTY VIZ. (I) LEDGER ACCOUNT OF THE AFORESAID SUPPLIER PARTY; (II) PURCHASE BILLS; AND (III) DETAILS AS REGARDS THE PAYMENTS MADE TO THE AFOREMENTIONED PARTY, BUT FAILED TO PLACE ON RECORD THE REQUISITE DETAILS AS REGARDS THE BROKERS/AGENTS THROUGH WHOM THE IMPUGNED PURCHASES WERE CARRIED OUT. OBSERVING, THAT THE ASSESSEE HAD FAILED TO SUBSTANTIATE THE GENUINENESS AND VERACITY OF THE PURCHASE TRANSACTIONS UNDER ITA NO. 581/MUM/2019 A.Y.2010 - 11 ACIT, CIRCLE 17(2) VS. M/S PARESH CHEMICAL CORPORATION 3 CONSIDERATION THE A.O HELD A CONVICTION THAT THE ASSESSEE HAD BOOKED BOGUS PURCHASES AND MERELY OBTAINED ACCOMMODATION ENTRIES FROM THE AFOREMENTIONED PARTY WITH AN INTENT TO SUPPRESS ITS PROFIT. AS THE ASSESSEE HAD SOLD THE GOODS WHICH WER E CLAIMED TO HAVE BEEN PURCHASE FROM THE AFOR EMENTIONED PARTY, THERE FORE, THE A.O RESTRICTED THE ADDITION IN RESPECT OF THE IMPUGNED PURCHASES TO THE EXTENT THE ASSESSEE WOULD HAD GAINED BY PROCURING THE GOODS FROM THE OPEN/GREY MARKET. ACCORDINGLY, THE A.O WORKED OUT THE PROFIT ELEMENT INVOLVED IN M AKING OF SUCH BOGUS PURCHASES @ 12.5% OF THE IMPUGNED PURCHASES OF RS.18,97,853/ - AND MADE AN ADDITION OF RS.2,37,232/ - IN THE HANDS OF THE ASSESSEE. 4. AGGRIEVED, THE ASSESSEE ASSAILED THE ASSESSMENT ORDER BEFORE THE CIT(A). O BSERVING, THAT THE AVERAGE GR OSS PROFIT RATE OF THE ASSESSEE FOR 3 YEARS WAS 7.01% THE CIT(A) RESTRICTED THE ADDITION TO THE EXTENT OF 5% OF THE AGGREGATE VALUE OF THE IMPUGNED PURCHASES UNDER CONSIDERATION. 5. THE REVENUE BEING AGGRIEVED WITH THE ORDER OF THE CIT(A) HAS CARRIED THE MATTER IN APPEAL BEFORE US. WE FIND THAT THE ASSESSEE RESPONDENT DESPITE HAVING BEEN PUT TO NOTICE ABOUT THE HEARING OF THE APPEAL HAS HOWEVER FAILED TO PUT UP AN APPEARANCE BEFORE US. ACCORDINGLY, WE ARE CONSTRAINED TO PROCEED WITH THE HEARING OF THE APPEAL AS PER RULE 25 OF THE APPELLATE TRIBUNAL RULES, 1963 AFTER HEARING THE APPELLANT REVENUE AND PERUSING THE ORDERS OF THE LOWER AUTHORITIES. T HE LD. DEPARTMENTAL REPRESENTATIVE (FOR SHORT D.R) RELIED ON THE ASSESSMENT ORDER. IT WAS AVERRED BY THE LD. D.R THAT THE CIT(A) HAD WITHOU T ANY JUSTIFIABLE REASON SCALED DOWN THE ADDITION MADE BY THE A.O TO 5% OF THE AGGREGATE VALUE OF THE IMPUGNED PURC HASES. ACCORDINGLY, IT WAS SUBMITTED BY THE LD. D.R THAT THE ORDER OF THE A.O MAY BE RESTORED AND THAT OF THE CIT(A) BE SET ASIDE. 6. WE HAVE HEARD THE LD. D.R AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AS WELL AS THE MATERIAL AVAILABLE ON RECORD. AD MITTEDLY, THE ASSESSEE HAD FAILED TO SUBSTANTIATE THE AUTHENTICITY OF THE IMPUGNED PURCHASES CLAIMED TO HAVE BEEN MADE FROM THE AFOREMENTIONED PARTY I.E M/S ITA NO. 581/MUM/2019 A.Y.2010 - 11 ACIT, CIRCLE 17(2) VS. M/S PARESH CHEMICAL CORPORATION 4 INTERNATIONAL TRADING AGENCY. ISSUE BEFORE US IS CONFINED TO THE ASPECT OF QUANTIFICATION OF THE PR OFIT WHICH THE ASSESSEE WOULD HAVE MADE BY CARRYING OUT THE PURCHASES FROM THE OPEN/GREY MARKET, AS AGAINST THOSE BOOKED BY HIM IN HIS BOOKS OF ACCOUNTS. AS OBSERVED BY US HEREINABOVE, THE A.O ON AN ADHOC BASIS HAD ESTIMATED THE PROFIT ELEMENT INVOLVED IN THE IMPUGNED PURCHASES @ 12.5% OF THE PURCHASES UNDER CONSIDERATION. ON THE CONTRARY, THE CIT(A) AFTER TAKING COGNIZANCE OF THE GROSS PROFIT RATES OF THE ASSESSEE FOR 3 YEARS HAD THEREIN OBSERVED THAT THE AVERAGE THEREIN WORKED OUT AT 7.01%. AS SUCH, ADOPT ING THE AFORESAID AVERAGE GROSS PROFIT RATE AS A YARDSTICK THE CIT(A) ON THE BASIS OF A LOGICAL REASONING HAD IN ALL FAIRNESS RESTRICTED THE DISALLOWANCE TO 5% OF THE AGGREGATE VALUE OF THE IMPUGNED PURCHASES. IN OUR CONSIDERED VIEW THE VERY BASIS ADOPTED BY THE CIT(A) FOR SCAL ING DOWN THE ADDITION/DISALLOWANCE IN RESPECT OF THE IMPUGNED PURCHASES TO 5% OF THEIR AGGREGATE VALUE DOES NOT SMACK OF ANY INFIRMITY. ACCORDINGLY, FINDING NO REASON TO DISLODGE THE VIEW TAKEN BY THE CIT(A) WE UPHOLD HIS ORDER. 7. RE SULTANTLY, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRO NOUNCED IN THE OPEN COURT ON 09. 12.2020 SD/ - SD/ - M.BALAGANESH RAVISH SOOD ( ACCOUNTANT MEMBER ) ( JUDICIAL MEMBER) MUMBAI, DATE: 09 .12 .2020 PS: ROHIT COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. DR K BENCH, ITAT, MUMBAI 6. GUARD FILE BY ORDER, DY./ASST. REGISTRAR ITAT, MUMBAI