PRISTINE ENGINEERING SERVICES, MUMBAI V. DCIT - 20(2), MUMBAI

ITA 5879/MUM/2016

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 8722 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-10-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2010-2011
• Appeal Filed On: 04-10-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SUMAN KUMAR
• Assessee Lawyers: N R AGRAWAL
• Keywords: Bogus purchase

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH B, MUMBAI BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER AND SHRI MANOJ KUMAR AGGARWAL, ACCOUNTANT MEMBER ITA NO.5879/M/2016 ASSESSMENT YEAR: 2010-11 ITA NO.5880/M/2016 ASSESSMENT YEAR: 2011-12 M/S. PRISTINE ENGINEERING SERVICES, B-34, NAND BHUVAN INDUSTRIAL ESTATE, MAHAKALI CAVES ROAD, ANDHERI (E), MUMBAI 400 093 PAN: AAAFP1771B VS. ACIT, WARD 20(2)/CIT CITY 20, PIRAMAL CHAMBERS, LALBAUG, MUMBAI (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI N.R. AGRAWAL, A.R. REVENUE BY : SHRI SUMAN KUMAR, D.R. DATE OF HEARING : 16.08.2017 DATE OF PRONOUNCEMENT : 25.10.2017 O R D E R PER D.T. GARASIA , JUDICIAL MEMBER: THE ABOVE TITLED APPEALS HAVE BEEN PREFERRED BY TH E ASSESSEE AGAINST THE COMMON ORDER DATED 08.08.2016 OF THE CO MMISSIONER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS TH E CIT(A)] RELEVANT TO ASSESSMENT YEARS 2010-11 & 2011-12. ITA NO.5879/M/2016 & ITA NO.5880/M/2016 M/S. PRISTINE ENGINEERING SERVICES 2 ITA NO.5879/M/2016 (FOR A.Y. 2010-11) 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E PURCHASED SOME GOODS AND RESOLD THE SAME. DURING THE YEAR THE ASS ESSING OFFICER (HEREINAFTER REFERRED TO AS THE AO) FOUND THAT ASSE SSEE HAD MADE BOGUS PURCHASES FROM FOLLOWING PARTIES: SR. NO. NAME OF THE PARTY AMOUNT OF PURCHASE (RS) 1. RAMESH STEEL INDUSTRIES 31,832/- 2. SHUBHAM ENTERPRISES 1,39,404/- 3. SATYAM TRADING COMPANY 8,168/ - 4. YESHUDHASAN ENTERPRISES 7,11,513/- TOTAL 8,90,917/- 3. THE ASSESSEE WAS ASKED TO PRODUCE THE ABOVE PART IES FOR VERIFICATION. THERE WAS NO COMPLIANCE OF NOTICE UND ER SECTION 133(6). THEREFORE, THE AO HAS MADE THE ADDITION ON ACCOUNT OF BOGUS PURCHASES OF RS.8,90,917/-/-. 4. MATTER CARRIED TO THE LD. CIT(A) AND THE LD. CIT (A) HAS PARTLY ALLOWED THE CLAIM BY OBSERVING AS UNDER: 5.3. REMAND REPORT WAS CALLED FOR FROM THE AO. IT W AS REPORTED BY THE AO THAT PAYMENT HAS BEEN MADE BY CHEQUE AND THERE IS N O MATERIAL ON RECORD THAT THE PAYMENTS HAVE BEEN TRANSFERRED BACK TO APP ELLANT' ACCOUNT. DESPITE OF THIS THE APPELLANT STILL FAILS TO PROVE THAT HE IS NOT BENEFICIARY ON ACCOUNT OF TAKING BOGUS BILLS WITHOUT DELIVERY OF GOODS FROM T HE ABOVE 4 PARTIES AND FAILED TO PRODUCE PARTIES FOR VERIFICATION AND EVEN PARTIES COULD NOT BE LOCATED WHEN INSPECTOR WAS DEPUTED BY THE AO DURING ASSESSMENT PROCEEDINGS. KEEPING IN MIND THE TOTALITY OF CIRCUM STANCES AS DISCUSSED ABOVE AND THE SIMILAR ISSUE AS IS DECIDED BY THE UN DERSIGNED IN THE APPEAL NO. CIT(A)-31/IT-93/ACIT-20(2)/14-15 FOR AY 2009-10 DATED 30.06.16, IT WOULD BE ADEQUATE TO MEET THE ENDS OF JUSTICE, IF T HE PROFIT ELEMENT OF THE ALLEGED BOGUS PURCHASES IS TAXED INSTEAD OF THE WHOLE OF TH E AMOUNT. ACCORDINGLY, THE DISALLOWANCE IS RESTRICTED TO 24.85% (I.E. GP F OR A.Y.2010-11) OF THE BOGUS PURCHASES OF RS.8,90,917/WHICH AMOUNTS TO RS. 2,21,393/-. THE AO IS, THEREFORE, DIRECTED TO RESTRICT THE DISALLOWANC E AS ABOVE. THE APPELLANT, THEREFORE OBTAINS A RELIEF OF RS.6,69,5241-. THIS E NSURES THAT ONLY THE REAL ITA NO.5879/M/2016 & ITA NO.5880/M/2016 M/S. PRISTINE ENGINEERING SERVICES 3 INCOME GETS SUBJECTED TO TAX AND NOT A NOTIONAL INC OME OR AN EXAGGERATED AMOUNT DETERMINED IN AN ARBITRARY MANNER. THE GROUN D OF APPEAL IS PARTLY ALLOWED. 5. 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 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 ITA NO.5879/M/2016 & ITA NO.5880/M/2016 M/S. PRISTINE ENGINEERING SERVICES 4 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 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% ITA NO.5879/M/2016 & ITA NO.5880/M/2016 M/S. PRISTINE ENGINEERING SERVICES 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.). R ESPECTFULLY FOLLOWING THE DECISION OF HONBLE GUJARAT HIGH COUR T IN THE CASE OF CIT VS. SIMIT P. SHETH 38 TAXMAN 385 (GUJ), WE DIRE CT THE AO TO ESTIMATE THE GP @ 12.5% OF ALLEGED BOGUS PURCHASES OF RS.8,90,917/- WHICH COMES TO RS.1,11,364/-. HENCE, THIS APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ITA NO.5880/M/2016 (FOR A.Y. 2011-12) 6. THE ASSESSEE HAS SIMILARLY SUFFERED DISALLOWANCE OF RS.5,45,965/- IN A.Y. 2011-12. SINCE THE ASSESSEE S APPEAL FOR A.Y. 2010-11 WITH THE IDENTICAL FACTS HAS ALREADY BEEN D ECIDED AS ABOVE, WE ALLOW THIS APPEAL ALSO BY DIRECTING THE AO TO ES TIMATE THE GP @ 12.5% OF ALLEGED BOGUS PURCHASES. 7. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 25.10.2017. SD/- SD/- (MANOJ KUMAR AGGARWAL) (D.T. GARASIA) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 25.10.2017. * 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// [ ITA NO.5879/M/2016 & ITA NO.5880/M/2016 M/S. PRISTINE ENGINEERING SERVICES 6 BY ORD ER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.