APEX SOFTCEL (INDIA) P. LTD, MUMBAI V. DCIT 2(1), MUMBAI

ITA 5837/MUM/2015

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 0257 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-02-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2009-2010
• Appeal Filed On: 29-12-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAJESH KUMAR YADAV
• Keywords: Bogus purchase
• Section: 131

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH A, MUMBAI BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA NOS.5837 & 5838/M/2015 ASSESSMENT YEARS: 2009-10 & 2010-11 M/S. APEX SOFTCEL (INDIA) PVT. LTD., GALA NO.G-2/3, MATHARU ARCADE, 32, SUBHASH ROAD, VILE PARLE (E), MUMBAI 400 057 PAN: AACCA4461E VS. DCIT, AAYAKAR BHAVAN, MUMBAI - 400020 (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI BHUPENDRA SHAH, A.R. REVENUE BY : SHRI RAJESH KUMAR YADAV, D.R. DATE OF HEARING : 11.01.2018 DATE OF PRONOUNCEMENT : 14.02.2018 O R D E R PER D.T. GARASIA , JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSES SEE AGAINST THE ORDER DATED 07.09.2015 OF THE COMMISSIONER OF I NCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS THE CIT(A)] R ELEVANT TO ASSESSMENT YEAR 2009-10. ITA NO.5837/M/2015 FOR A.Y. 2009-10 2. THE SHORT FACTS OF THE CASE ARE THAT ASSESSEE HA S MADE PURCHASE OF RS.78,55,051/- FROM SIX PARTIES NAMELY, (I) M/S. PUSHTI IMPEX, (II) ITA NO.5837/M/2015 M/S. APEX SOFTCEL (INDIA) PVT. LTD. 2 M/S.TRADELINK DISTRIBUTORS PVT. LTD., (III) VIDHI A ND VRUSHTI TRADE PVT. LTD., (IV) M/S.BHARAT ENTERPRISES, (V) M/S.PAR AS (INDIA), AND (VI) M/S.PY DISTRIBUTORS PVT. LTD. THE ASSESSEE WAS ASK ED TO PRODUCE THE PARTIES BUT ASSESSEE DID NOT PRODUCE THESE PARTIES. THE ASSESSING OFFICER (HEREINAFTER REFERRED TO AS THE AO) ALSO IS SUED SUMMONS U/S 131 BUT THE SUMMONS WERE RETURNED BACK WITH POSTAL REMARK UNKNOWN. ASSESSEE WAS ASKED TO PRODUCE THESE PAR TIES AND ASSESSEE WAS GIVEN SHOW CAUSE NOTICE BUT ASSESSEE D ID NOT PRODUCE THESE PARTIES. THEREFORE, AO HAS TREATED THESE PUR CHASES AS BOGUS BILLS FROM SIX PARTIES AND MADE THE ADDITION OF RS. 78,55,051/-. 3. MATTER CARRIED TO THE LD. CIT(A) AND THE LD. CIT (A) DISMISSED THE APPEAL OF THE ASSESSEE. 4. DURING THE COURSE OF HEARING, THE LD. A.R. SUBMI TTED THAT SIMILAR ISSUE HAD COME UP BEFORE THE TRIBUNAL AND T HE TRIBUNAL HAS ALLOWED SUCH CLAIM, THEREFORE, THIS CLAIM SHOULD BE ALLOWED. HE RELIED UPON THE FOLLOWING DECISIONS: 1. RAJEEV M KALATHIL IN ITA NO.6727/M/2012 2. PARESH GANDHI IN ITA NO.5706/M/2013 3. HEERALAL CHUNILAL JAIN IN ITA NO.4547/M/2014 4. IMPERIAL IMP. & EXP. IN ITA NO.5427/M/2015 5. ON THE OTHER HAND, THE LD. D.R. RELIED UPON THE ORDER OF THE LD. CIT(A). 6. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE P ARTIES. LD. D.R. RELIED UPON THE DECISION OF THE TRIBUNAL, AHME DABAD BENCH IN ITA NO.5837/M/2015 M/S. APEX SOFTCEL (INDIA) PVT. LTD. 3 THE CASES OF SHWETAMBAR STEELS VS. ITO AHMEDABAD AN D GANESH RICE MILLS VS. CIT (294 ITR 316). THE FACTS IN THE PRESENT CASE SHOW THAT ASSESSEE COULD NOT PRODUCE THE PARTIES FR OM WHOM GOODS ARE STATED TO HAVE BEEN PURCHASED. THE SUPPLIERS WE RE FOUND TO BE ENGAGED IN PROVIDING BOGUS BILL WITHOUT ACTUAL DEAL ING OF GOODS. IN THIS REGARD, THE ASSESSEE HAS STATED THAT THEY HAD SUBMITTED QUANTITATIVE DETAILS OF STOCK WITH RESPECT OF THE S ALES WITH PURCHASES FROM THE PARTIES DURING THE ASSESSMENT PROCEEDINGS. THE ASSESSEE HAS SUBMITTED THE DETAIL OF CORRESPONDING SALES IN RESP ECT OF THE PURCHASE FROM THE SAID PARTIES. AS MENTIONED ABOVE THE AO HA S NEVER DISPUTED OR EXAMINED THE ASPECT OF SALES RECEIPTS. SINCE THE SALES MADE BY THE ASSESSEE WAS NOT DOUBTED OR DISPUTED BY THE AO AND HE HAS ACCEPTED THE SALES RECEIPTS OF THE ASSESSEE AS IT IS, THEREF ORE, THE AO CANNOT DENY THAT PURCHASES WERE NOT MADE BY THE ASSESSEE A ND THE MATERIAL WAS NOT USED FOR ITS SALES. WHAT IS UNDER DISPUTE I S THE PURCHASES FROM THE PARTIES FROM WHOM BILLS HAVE BEEN TAKEN AN D CHEQUES HAVE BEEN ISSUED TO THEM. PURCHASES ARE NOT IN DISPUTE B UT THE PARTIES FROM WHOM PURCHASE ARE SHOWN TO HAVE BEEN MADE ARE DISPU TED AND SUSPICIOUS. THE AO HAD MADE THE ADDITION AS SOME O F THE SUPPLIERS WERE DECLARED HAWALA DEALERS BY THE VAT DEPARTMENT. THIS MAY BE A GOOD REASON FOR MAKING FURTHER INVESTIGATION BUT THE AO DID NOT MAKE ANY FURTHER INVESTIGATION AND MERELY COMPLETED THE ASSESSMENT ON SUSPICION. ONCE THE ASSESSEE HAS BROUGHT ON RECO RD THE DETAILS OF PAYMENTS BY ACCOUNT PAYEE CHEQUE, IT WAS INCUMBENT ON THE AO TO HAVE VERIFIED THE PAYMENT DETAILS FROM THE BANK OF THE ASSESSEE AND ALSO FROM THE BANK OF THE SUPPLIERS TO VERIFY WHETH ER THERE WAS ANY ITA NO.5837/M/2015 M/S. APEX SOFTCEL (INDIA) PVT. LTD. 4 IMMEDIATE CASH WITHDRAWAL FROM THEIR ACCOUNT. NO SU CH EXERCISE HAS BEEN DONE OR FINDINGS RECORDED. THERE WAS NO DETAIL ED INVESTIGATION MADE BY THE AO HIMSELF. IT IS ALSO FOUND THAT THE P AYMENTS HAVE BEEN MADE BY ACCOUNT PAYEE CHEQUE WHICH ARE DULY RE FLECTED IN THE BANK STATEMENT OF THE ASSESSEE. THERE IS NO EVIDENC E TO SHOW THAT THE ASSESSEE HAS RECEIVED CASH BACK FROM THE SUPPLIERS. MERELY BECAUSE THE SUPPLIERS DID NOT APPEAR BEFORE THE AO OR SOME CONFIRMATION LETTERS WERE NOT FURNISHED, ONE CANNOT CONCLUDE THA T THE PURCHASES WERE NOT MADE BY THE ASSESSEE. THIS VIEW IS SUPPORT ED BY THE DECISION OF NIKUNJ EXIMP ENTERPRISES VS. CIT 216 TA XMAN 171 (BOM). TO THIS EXTENT, WE ARE OF THE VIEW THAT IF T HE ASSESSEE HAS FULFILLED ITS ONUS OF MAKING THE PAYMENT BY CHEQUE AND HAS SUPPLIED THE ADDRESSES OF THE SELLERS THEN IT CANNOT BE PRES UMED THAT SUPPLIER WERE BOGUS SIMPLY BECAUSE THE SELLERS WERE NOT FOUN D AT THE GIVEN ADDRESS. THERE IS A CONSIDERABLE TIME GAP BETWEEN T HE PERIOD OF PURCHASE TRANSACTION AND PERIOD OF SCRUTINY PROCEED INGS. THE AO HAS NOT BROUGHT ANY MATERIAL ON RECORD TO SHOW THAT THE RE IS SUPPRESSION OF SALES. IT IS BASIC RULE OF ACCOUNTANCY AS WELL A S OF TAXATION LAWS THAT PROFIT FROM BUSINESS CANNOT BE ASCERTAINED WIT HOUT DEDUCTING COST OF PURCHASE FROM SALES. ESTIMATION OF PROFIT R ANGING FROM 12.5% TO 15% HAS BEEN UPHELD BY THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS SIMIT P SHETH 356 ITR 451 (GUJ.). W E FIND THAT MUMBAI TRIBUNAL, IN THE CASE OF MADHUKANT B GANDHI IN ITA NO.1950/M/09, CONSIDERING THE VARIOUS JUDGMENTS OF VARIOUS HIGH COURTS HAS HELD THAT IN VIEW OF THE FACT THAT IT HA S BEEN AMPLY ESTABLISHED THAT PURCHASE RECORDS IN BOOKS OF ACCOU NT FROM THESE ITA NO.5837/M/2015 M/S. APEX SOFTCEL (INDIA) PVT. LTD. 5 PARTIES WERE BOGUS WHICH SUPPRESS TO THE PROFIT NOW NEED TO ZERO IN CORRECT RATE OF NET PROFIT SHOULD BE APPLIED UNDER THESE CIRCUMSTANCES. THE TRIBUNAL IN THIS CASE HAS APPLI ED 5% GP BUT IN THE INSTANT CASE LOOKING TO THE FACTS AND CIRCUMSTA NCES OF THE CASE, WE APPLY 8% GP ON THE ABOVE BOGUS PURCHASES WHICH C OMES TO RS.6,28,404/-. 7. IN THE RESULT, THIS APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ITA NO.5838/M/2015 FOR A.Y. 2010-11 8. THE SHORT FACTS OF THE CASE ARE THAT ASSESSEE HA S MADE PURCHASES OF RS.61,80,503/- FROM FOUR PARTIES NAMELY, (I) M/S . SNIPHER INFOCOM PVT. LTD., (II) M/S. SHRADHA TRADING COMPANY, (III) VIDHI AND VRUSHTI TRADE PVT. LTD., (IV) M/S.BHARAT ENTERPRISES, (V) M /S. SUN ENTERPRISES AND (VI) M/S. AJAY STONE. THE ASSESSEE WAS ASKED T O PRODUCE THE PARTIES BUT ASSESSEE DID NOT PRODUCE THESE PARTIES. THE ASSESSING OFFICER (HEREINAFTER REFERRED TO AS THE AO) ALSO IS SUED SUMMONS U/S 131 BUT THE SUMMONS WERE RETURNED BACK WITH POSTAL REMARK UNKNOWN. ASSESSEE WAS ASKED TO PRODUCE THESE PAR TIES AND ASSESSEE WAS GIVEN SHOW CAUSE NOTICE BUT ASSESSEE D ID NOT PRODUCE THESE PARTIES. THEREFORE, AO HAS TREATED THESE PUR CHASES AS BOGUS BILLS FROM SIX PARTIES AND MADE THE ADDITION OF RS. 61,80,503/-. 9. MATTER CARRIED TO THE LD. CIT(A) AND THE LD. CIT (A) DISMISSED THE APPEAL OF THE ASSESSEE. ITA NO.5837/M/2015 M/S. APEX SOFTCEL (INDIA) PVT. LTD. 6 10. WE FIND THAT THE FACTS INVOLVED IN THIS APPEAL A RE IDENTICAL TO THE APPEAL FILED BY THE REVENUE IN ITA NO.5837/M/20 15 FOR A.Y. 2009-10 WHICH HAS ALREADY BEEN DECIDED ABOVE. HENC E, FOLLOWING THE RATIO APPLIED IN ITA NO.5837/M/2015 FOR A.Y. 20 09-10, WE DECIDE THIS APPEAL ALSO. ACCORDINGLY, IN THIS CASE ALSO, WE APPLY 8% GP ON THE ABOVE BOGUS PURCHASES WHICH COMES TO RS.4 ,94,440/-. 11. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 14.02.2018. SD/- SD/- (RAJESH KUMAR) (D.T. GARASIA) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 14.02.2018. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.