REGAL SALES CORPORATION , MUMBAI V. INCOME TAX OFFICER 19(3)(1), MUMBAI

ITA 5871/MUM/2018

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 3582 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-10-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 11-10-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAM TIWARI
• Keywords: Bogus purchase; Rejection of books of accounts; Question of law; Accommodation entries
• Section: 133(6); 143(1); 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH SMC , MUMBAI BEFORE SHRI C.N. PRASAD, HON'BLE JUDICIAL MEMBER AND SHRI RAJESH KUMAR, HON'BLE ACCOUNTANT MEMBER ITA NO. 58 71 /MUM/201 8 (A.Y: 20 09 - 10) REGAL SALES CORPORATION 106, PONDA BUILDING AR DESHIR DADY STREET NEAR S.V.P. ROAD MUMBAI 400 004 PAN: AAFFR4347E V. INCOME TAX OFFICER 19(3)(1) MATRU MANDIR, TARDEV ROAD MUMBAI 400 007 (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI NEELKANTH KHANDELWAL DEPARTMENT BY : SHRI RAM TIWARI DATE OF HEARING : 19.09.2019 DATE OF PRONOUNCEMENT : 29 . 10.2019 O R D E R PER C. N. PRASAD (JM) 1. THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LEARNED COMMISSIO NER OF INCOME TAX (APPEALS) 6 , MUMBAI [HEREINAFT ER IN SHORT LD.CIT(A)] DATED 23.05.2018 FOR THE A.Y. 2009 - 10 IN PARTLY SUSTAINING THE ADDITION MADE TOWARDS BOGUS PURCHASES. 2. BRIEFLY STATED THE FACTS ARE THAT, THE ASSESSEE IS ENGAGED IN THE BUSINESS OF T RADING OF FERROUS AND NON - FERROUS METALS AND STEEL FILED RETURN 2 ITA NO. 5871/MUM/2018 (A.Y: 2009 - 10) REGAL SALES CORPORATION OF INCOME ON 25.09.2009 FOR THE A.Y.2009 - 10 DECLARING INCOME OF . 5,93,400 / - AND THE RETURN WAS PROCESSED U/S. 143(1) OF THE ACT. SUBSEQUENTLY, ASSESSING OFFICER RECEIVED INFORMATION FROM THE DGIT(INV.), MUMBAI ABOUT THE ACCOMMODATION ENTRIES PROVIDED BY VARIOUS DEALERS AND ASSESSEE WAS ALSO ONE OF THE BENEFICIARY FROM THOSE DEALERS. THE ASSESSMENT WAS REOPENED U/S. 147 OF THE ACT BASED ON THE INFORMATION RECEIVED FROM DGIT (INV.), MUMBAI, TH AT THE ASSESSEE HAS AVAILED ACCOMMODATION ENTRIES FROM VARIOUS DEALERS WHO ARE ALL PROVIDING ACCOMMODATION ENTRIES WITHOUT THERE BEING TRANSPORTATION OF ANY GOODS. IN THE RE - ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS REQUIRED TO PROVE THE GENUINENESS OF THE PURCHASES MADE FROM VARIOUS PARTIES WHICH WERE REFERRED TO IN THE ASSESSMENT ORDER. THE ASSESSEE PRODUCED COPIES OF BILLS, BANK STATEMENTS, COPIES OF VAT CHALLANS, LEDGER COPIES AND SUBMITTED THAT THE PURCHASES MADE ARE GENUINE. NOT CONVINCED WITH THE S UBMISSIONS OF THE ASSESSEE THE ASSESSING OFFICER TREATED THE PURCHASES OF .1,02,80,707/ - AS NON - GENUINE AND HE WAS OF THE OPINION THAT ASSESSEE HAD OBTAINED ONLY ACCOMMODATION ENTRIES WITHOUT THERE BEING ANY TRANSPORTATION OF MATERIALS AND THE ASSESSEE MI GHT HAVE MADE PURCHASES IN THE GRAY MARKET. IT IS THE FINDING OF THE ASSESSING OFFICER SINCE THE PURCHASES MADE BY THE ASSESSEE AND CLAIMED AS EXPENSES IN HIS PROFIT AND LOSS ACCOUNT ARE NOT GENUINE, THE PURCHASES TO THAT EXTENT REMAINED UNVERIFIABLE AS T HE NOTICES ISSUED U/S. 133(6) OF THE ACT WERE 3 ITA NO. 5871/MUM/2018 (A.Y: 2009 - 10) REGAL SALES CORPORATION RETURNED UNSERVED BY THE POSTAL AUTHORITIES. HE ALSO OBSERVED THAT THE DEALERS FROM WHOM THE ASSESSEE MADE PURCHASES STATED THAT THEY HAVE ISSUED ONLY ACCOMMODATION BILLS. THEREFORE, HE REJECTED THE BOOKS OF ACCOUNTS OF THE ASSESSEE BY INVOKING THE PROVISIONS OF SECTION 145(3) OF THE ACT AND ESTIMATED THE PROFIT ELEMENT AT 15 % FROM SUCH PURCHASES TREATED AS NON - GENUINE AND ADDED TO THE INCOME OF THE ASSESSEE. ON APPEAL THE LD.CIT(A) CONSIDERING THE EVIDENCES AND VARIOUS SUBMISSIONS OF THE ASSESSEE RESTRICTED THE DISALLOWANCE TO THE EXTENT 12.5 % OF THE NON - GENUINE PURCHASES. LD. A R RELIED IN THE CASE OF SHRI PRAVIN D. JAIN V. ITO IN ITA.NOS. 7167, 7168 & 7169/MUM/2016 DATED 15.03.2019. 3. LD. DR VEHEMENTLY SUPPORTED THE ORDER OF THE ASSESSING OFFICER. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE ORDERS OF THE AUTHORITIES BEL OW. ON A PERUSAL OF THE ORDER OF THE LD.CIT(A), WE FIND THAT THE LD.CIT(A) CONSIDERED THIS ASPECT OF THE MATTER ELABORATELY WITH REFERENCE TO THE SUBMISSIONS OF THE ASSESSEE AND THE AVERMENTS IN THE ASSESSMENT ORDER AND FOLLOWING THE DECISION OF THE HON'B LE GUJARAT HIGH COURT IN THE CASE OF CIT V. SIMIT P. SHETH [356 ITR 451] AND VARIOUS OTHER DECISIONS RESTRICTED THE DISALLOWANCE TO 12.5 % OF THE NON - GENUINE PURCHASES, WHILE HOLDING SO, THE LD.CIT(A) OBSERVED AS UNDER: - 8.4.6 IN THE PRESENT CASE, AO CONCLUDED THAT THE ASSESSEE INDULGED IN NON - GENUINE TRANSACTION AND INTENTION OF INDULGING IN SUCH ACTIVITY IS TO SUPPRESS THE TRUE PROFITS AND TO REDUCE THE TAX LIABILITY. 4 ITA NO. 5871/MUM/2018 (A.Y: 2009 - 10) REGAL SALES CORPORATION THEREFORE, AN ADDITION ON ACCOUNT OF A HIGHER MARGIN OF PROFIT IS FAIR AND EQUITABL E. IN THE DECISION OF HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. SIMIT SHETH 356 ITR 451 (GUJ) WHEREIN ALSO IT IS FOUND THAT SOME OF THE ALLEGED SUPPLIERS OF STEEL TO THE ASSESSEE HAD NOT SUPPLIED ANY GOODS BUT HAD ONLY PROVIDED SALE BILLS AND HENCE , PURCHASES FROM THE SAID PARTIES WERE HELD TO BE BOGUS. THE AO IN THAT CASE ADDED THE ENTIRE AMOUNT OF PURCHASES TO GROSS PROFIT OF THE ASSESSEE. LD. CIT(A) HAVING FOUND THAT THE ASSESSEE HAD INDEED PURCHASED THOUGH NOT FROM NAMED PARTIES BUT OTHER PARTIE S FROM GREY MARKET, PARTIALLY SUSTAINED THE ADDITION AS PROBABLE PROFIT OF THE ASSESSEE. THE TRIBUNAL HOWEVER, SUSTAINED THE ADDITION TO THE EXTENT OF 12.5%. TAKING INTO ACCOUNT THE ABOVE FACTS, THE HON'BLE GUJARAT HIGH COURT HELD THAT SINCE THE PURCHASES WERE NOT BOGUS BUT WERE MADE FROM PARTIES OTHER THAN THOSE MENTIONED IN BOOKS OF ACCOUNTS, ONLY THE PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES COULD BE ADDED TO THE ASSESSEE'S INCOME AND CONCLUDED THAT NO QUESTION OF LAW AROSE IN SUCH ESTIMATION. 8.4.7 AS F AR AS ASSESSEE'S RELIANCE ON VARIOUS DECISIONS OF HON'BLE ITAT ARE CONCERNED, IT IS STATED THAT THEY HAVE BEEN DELIVERED IN RESPECT OF THE SPECIFIC OF THOSE CASES AND THUS CANNOT BE GENERALIZED. 8.4.8 THE FACTS OF THE PRESENT CASE ARE EXACTLY SIMILAR TO T HE ABOVE CASE. THE APPELLANT MADE PURCHASES FROM EIGHT PARTIES WHO ARE SAID TO BE HAWALA OPERATORS, WHO ARE INDULGED IN PROVIDING BOGUS BILLS WITHOUT SUPPLY OF ANY MATERIAL. UNDER THESE CIRCUMSTANCES , AS THE APPELLANT COULD NOT PROVE HIS CLAIM OF PURCHASE S DEBITED TO THE PROFIT AND LOSS ACCOUNT THERE IS NO OTHER WAY TO THE AO, BUT TO ESTIMATE THE PROFIT ELEMENT EMBEDDED ON SUCH PURCHASES. AS STATED EARLIER, THE FACTS OF THE PRESENT CASE ARE EXACTLY SIMILAR TO THE CITED CASE AND RESPECTFULLY FOLLOWING THE ABOVE CITED DECISION, THE ACTION OF THE AO IN ESTIMATING THE ADDITION @15% ON THE TOTAL PURCHASES FROM THE EIGHT PARTIES IS RESTRICTED TO 12.5% OF SUCH QUESTIONED PURCHASES. ACCORDINGLY, THESE GROUNDS OF THE APPEAL ARE TREATED AS PARTLY ALLOWED. 5. ON A CAREFUL PERUSAL OF THE ORDER OF THE LD.CIT(A) AND THE REASONS GIVEN THEREIN, WE DO NOT FIND ANY INFIRMITY IN THE ORDER PASSED BY THE LD.CIT(A). NONE OF THE FINDINGS AND OBSERVATIONS OF THE LD.CIT(A) HAVE BEEN REBUTTED WITH EVIDENCES BY THE ASSESSEE A ND THUS WE DO NOT SEE ANY INFIRMITY IN THE ORDER PASSED BY THE LD.CIT(A), EXCEPT IN SUSTAINING THE 5 ITA NO. 5871/MUM/2018 (A.Y: 2009 - 10) REGAL SALES CORPORATION ADDITION/DISALLOWANCE TO THE EXTENT OF 12.5 % OF THE PURCHASES. TAKING THE TOTALITY OF FACTS AND CIRCUMSTANCES INTO CONSIDERATION AND THE NATURE OF BUSINESS CARRIED ON BY THE ASSESSEE WE DIRECT THE ASSESSING OFFICER TO RESTRICT THE DISALLOWANCE/ADDITION TO 6% OF THE BOGUS PURCHASES . 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON THE 29 TH OCTOBER , 2019 SD/ - SD/ - (RAJESH KUMAR) (C.N. PRASAD) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI / DATED 29 / 10 / 2019 GIRIDHAR, SR.PS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY// BY ORDER (ASSTT. REGISTRAR) ITAT, MUM