ECKHARDT STEEL AND ALLOYS, MUMBAI V. ITO WD 19(1)(3), MUMBAI

ITA 584/MUM/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 0067 (ITAT-MUMBAI)
• Duration Of Justice: 6 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-08-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 25-01-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: N HEMALATHA
• Assessee Lawyers: B N RAO
• Keywords: Bogus purchase
• Section: 147

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI B.R. BASKARAN (AM) I.T.A. NO. 584 /MUM/ 2 017 (ASSESSMENT YEAR 20 09 - 10 ) M/S. ECKHARDT STEEL AND ALLOYS 12A, GROUND FLOOR D WING, SHREEPATHI CASTLE KHETWADI LANE MUMBAI - 400 004. VS. ITO WA RD 19(1)(3) MUMBAI. ( APPELLANT ) ( RESPONDENT ) PAN NO . AABFE8334N ASSESSEE BY SHRI B. N. RAO DEPARTMENT BY MS. N. HEMALATHA DATE OF HEARING 2 2 . 8 . 201 7 DATE OF PRONOUNCEMENT 22 . 8 . 201 7 O R D E R THE APPEAL FILED BY THE ASSESSEE IS DIREC TED AGAINST THE ORDER DATED 21.11.2006 PASSED BY THE LEARNED CIT(A) - 30, MUMBAI AND IT RELATES TO A.Y. 2009 - 10. THE ASSESSEE IS AGGRIEVED BY THE DECISION OF THE LEARNED CIT(A) IN PARTIALLY CONFIRMING THE ADDITION RELATING TO BOGUS PURCHASES. 2. THE ASSESSE E IS ENGAGED IN THE BUSINESS OF TRADING IN FERROUS AND NON - FERROUS METAL. THE REVENUE RECEIVED INFORMATION FROM THE MAHARASHTR A SALES TAX DEPARTMENT THAT SOME OF THE TRADERS REGISTERED WITH IT ARE INDULGING IN ISSUING ACCOMMODATION BILLS WITHOUT ACTUALLY S UPPLYING THE MATERIALS. SALES TAX DEPARTMENT HAS ALSO PUBLISHED THE LIST OF HAWALA DEALERS. IT WAS NOTICED FROM THE LIST SUPPLIED BY THE SALES TAX DEPARTMENT THAT THE ASSESSEE HAS PURCHASED GOODS AGGREGATING TO ` 226. 48 LAKHS FROM 9 DEALERS WHO HAVE BEEN CATEGORIZED AS HAWALA DEALERS. ACCORDINGLY, THE ASSESSING OFFICER REOPENED THE ASSESSMENT BY ISSUING NOTICE U/S. 147 OF THE ACT. THE ASSESSING OFFICER ASKED THE ASSESSEE TO FURNISH ALL THE RELEVANT DETAILS TO PROVE THE GENUINENESS OF THE PURCHASE S AND ALSO TO SHOW WHETHER THE GOODS HAVE BEEN SOLD BY THE ASSESSEE. M/S. ECKHARDT STEEL AND ALLOYS 2 THE ASSESSEE COULD RECONCILE THE PURCHASE AND SALES. HOWEVER, IT COULD NOT FILE DOCUMENTS SUCH AS DELIVERY CHALLAN S , TRANSPORT RECEIPTS, STOCK RECORD F OR RECEIPT OF GOODS MAINTAINED AT GODOWN ETC. ACCORDINGLY, THE ASSESSING OFFICER TOOK THE VIEW THAT THE P U R CHASES ARE NOT GENUINE. HOWEVER, THE ASSESSING OFFICER OBSERVED THAT IT WOULD BE JUST AND FAIR IF THE PROFIT ELEMENT EM BEDDED IN SUCH PURCHASE S IS ASSESS ABLE TO TAX. ACCORDINGLY, THE ASSESSING O FFICER ASSESSED 12.5% OF ALLEGED BOGUS PURCHASES WHICH WORKED OUT TO ` 28.31 LAKHS. 3. BEFORE THE LEARNED CIT(A), THE ASSESSEE SUBMITTED THAT ESTIMATION OF PROFIT AT 12.5% IS ON THE HIGHER SIDE . IT WAS SUBMITTED THAT THE ASSESSING OFFICER HAS DETERMINED THE RATE OF 12.5% ON THE BASIS OF DECISION RENDERED BY HON'BLE HIGH COURT OF GUJARAT IN THE CASE OF CIT VS. SIMIT SHETH (38 TAXMANN. COM 385). IT WAS SUBMITTED THAT VAT RATE APPLICABLE IN THE CASE OF SIMIT SHETH WAS 12.5% AND HON'BLE HIGH COURT SUSTAINED ADDITION TO THE EXTENT OF 12.5% OF THE PURCHASES. THE ASSESSEE SUBMITTED BEFORE THE LEARNED CIT(A) THAT VAT RATE APPLICABLE TO THE ASSESSEE IS ONLY 4%. THE LEARNED CIT(A) WAS CONVINCED WITH THE EXPLANATION S OF THE ASSESSEE. HE TOOK THE VIEW THAT APART FRO M THE VAT RATE, AN ADDITION SHOULD BE MADE TOWARDS MARGIN AVAILABLE IN THAT TRADE. THE LEARNED CIT(A) ESTIMATED MARGIN AT 2.5% AND ACCORDINGLY TOOK THE VIEW THAT THE ADDITION SHOULD BE RESTRICTED TO 6.50% OF THE VALUE OF BOGUS PURCHASES. ACCORDINGLY, HE D IRECTED THE ASSESSING OFFICER TO RESTRICT THE ADDITION TO 6.50% OF THE VALUE OF BOGUS PURCHASE. STILL AGGRIEVED, THE ASSESSEE HAS FILED THIS APPEAL BEFORE THE TRIBUNAL. 4. LEARNED AR SUBMITTED THAT DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAS DECL ARED GROSS PROFIT @ 4.98%. HE SUBMITTED THAT THE ASSESSEE HAS ULTIMATELY PAID VAT APPLICABLE ON THE IMPUGNED PURCHASES DURING THE FINANCIAL YEAR 2012 - 13. HE SUBMITTED THAT THE ASSESSEE HAS MADE ONE TO ONE RECONCILIATION OF PURCHASE S AND SALE S . ACCORDINGLY, HE SUBMITTED THAT ESTIMATE OF 6.5% SUSTAINED BY THE LEARNED CIT(A) OVER AND ABOVE GP RATE 4.98% DECLARED BY ASSESSEE IS ON THE HIGHER SIDE. M/S. ECKHARDT STEEL AND ALLOYS 3 5. ON THE CONTRARY, LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE ASSESSEE HAS MADE PURCHASES FROM HAWALA DEALERS AND BEFORE THE LEARNED CIT(A) THE ASSESSEE DID NOT FURNISH DOCUMENTS LIKE DELIVERY CHALLANS, TRANSPORT RECEIPTS, GOODS INWARD REGISTER MAINTAINED AT GODOWN ETC. SINCE THE ASSESSEE HAS MADE ONE TO ONE RECONCILIATION OF PURCHASE S AND SALES, THE LEAR NED CIT(A) HAS SUSTAINED THE ADDITION TO THE EXTENT OF 6.5% WHICH IS VERY MUCH REASONABLE. 6. I HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. I NOTICED THAT THE ASSESSEE HAS NOT FURNISHED DOCUMENTS LIKE DELIVERY CHALLANS, TRANSPORT RECEIPTS, S TOCK REGISTER ETC. TO PROVE THE TRANSPORTATION OF MATERIAL FROM THE PLACE OF THE IMPUGNED SUPPLIERS TO THE PLACE OF ASSESSEE. I NOTICED THAT THE ASSESSEE HAS ALSO FAILED TO FURNI S H CONFIRMATION LETTERS OBTAINED FROM THE SUPPLIERS IN ORDER TO PROVE THE GENU INENESS OF THE PURCHASES. SINCE THE ASSESSEE HAS RECONCILED THE PURCHASE S WITH SALE S , TAX AUTHORITIES HAVE PRESUMED THAT THE ASSESSEE WOULD HAVE SOURCE D MATERIAL FROM SOME OTHER SOURCE AND HAVE ACCORDINGLY ESTIMATED THE PROFIT ELEMENT EMBEDDED THEREIN. THE ASSESSING OFFICER HAD ESTIMATED THE PROFIT AT 12.5% WHICH WAS REDUCED TO 6.5% BY THE LEARNED CIT(A). IN THE FACTS AND CIRCUMSTANCES OF THE CASE, I AM OF THE VIEW THAT ESTIMATE OF 6.5% OF THE VALUE OF ALLEGED BOGUS PURCHASES IS REASONABLE AND HENCE DECISIO N RENDERED BY LD CIT(A) DOES NOT CALL FOR ANY INTERFERENCE. ACCORDINGLY, I UPHOLD THE ORDER OF THE LEARNED CIT(A). 7. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER HAS BE EN PRONOUNCED IN THE COURT ON 2 2 . 8 . 201 7. SD/ - (B.R.BASKARAN) ACCOUNTANT MEMBER MUMBAI ; DATED : 2 2 / 8 / 20 1 7 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT M/S. ECKHARDT STEEL AND ALLOYS 4 3. THE CIT(A) 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// ( DY./ASSTT. REGISTRAR) PS ITAT, MUMBAI