DCIT CIRCLE - 3, THANE, THANE V. SHIVRAM NARAYAN KELKAR, THANE

ITA 5917/MUM/2016

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 9067 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-10-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2010-2011
• Appeal Filed On: 05-10-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUMAN KUMAR
• 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.5917/M/2016 ASSESSMENT YEAR: 2010-11 DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-3, ROOM NO.02, 6 TH FLOOR, ASHAR IT PARK, B-WING, WAGLE INDL. ESTATE, THANE (W)-400 604 VS. SHRI SHIVRAM NARAYAN KELKAR, PROP. OF M/S. OMEGA LAB CHEMICAL, 1 ST FLOOR, SANYOG, GHANTALI TEMPLE, THANE (W) 400 602 PAN: ABCPK 1719R (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : NONE REVENUE BY : SHRI SUMAN KUMAR, D.R. DATE OF HEARING :16.08.2017 DATE OF PRONOUNCEMENT :13.10.2017 O R D E R PER D.T. GARASIA , JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE REVEN UE AGAINST THE ORDER DATED 14.07.2016 OF THE COMMISSIONER OF I NCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS THE CIT(A)] R ELEVANT TO ASSESSMENT YEAR 2010-11. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A PROPRIETOR OF M/S. OMEGA LAB CHEMICAL AND ENGAGED IN BUSINESS OF MANUFACTURING OF CHEMICALS. DURING THE YEAR THE AS SESSING OFFICER ITA NO.5917/M/2016 SHRI SHIVRAM NARAYAN KELKAR 2 (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 BILL (A.Y. 2009- 10) AMOUNT OF BILL (A.Y. 2010- 11) 1. M/S. RAJ TOOL CORPORATION - RS.7,57,161 2. M/S. D.M. ENTERPRISE - RS.13,15,460 3. M/S. MAHI ENTERPRISES - RS.6,33,,455 4. M/S. TISA ENTERPRISE RS.9,13,010/- RS.7,00,253 5. M/S. RAKESH ENTERPRISES RS.7,25,301/ - RS.10,12,478 6. M/S. SURAT TUBE CORPORATION RS.3,12,562/- - 7. M/S. AVINASH TRADING COMPANY - RS.7,10,788 8. M/S. SHREEJI ENTERPRISE RS.6,56,307/- RS.11,63,596/- 9. M/S. MITAL ENTERPRISE - RS.12,22,000 10. M/S. MADHAV TRADING CO. - RS.11,10,720 11. M/S. D.N. ENTERPRISES - RS.15,37,160 12. M/S. MALIK TRADING CO. - RS.10,89,184 TOTAL RS.26,07,180 RS.1,12,52,235 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.26,07,180/- AND RS.1,12,52,23 5/- FOR A.Y. 2009-10 AND FOR A.Y. 2010-11 RESPECTIVELY. 4. MATTER CARRIED TO THE LD. CIT(A) AND THE LD. CIT (A) HAS PARTLY ALLOWED THE CLAIM BY OBSERVING AS UNDER: 6.13 FROM THE ABOVE CHART, IT IS NOTICED THAT THE GROSS PROFIT/NP RATE, IN A.Y.10-11, IS NOT AN ISSUE, HOWEVER, THE APPELLANT COULD NOT SUBSTANTIATE THE ALLEGED BOGUS PURCHASES OF RS.1,12,52,235/-, MA DE FROM THE HAWALA PARTIES, AS PER THE REQUIREMENT OF THE PROVISIONS OF SE C.37 OF THE ACT, WITH CREDIBLE DOCUMENTS. CONSIDERING THE FACTS/DEFECTS IN ENTIRETY AND RELYING ON THE DECISIONS OF THE VARIOUS COURTS, AS QUOTED ABOV E, IN MY CONSIDERED OPINION, THE DISALLOWANCE @25% OUT OF HAWALA PURCHAS ES, WILL BE REASONABLE, IN THE CASE OF THE APPELLANTS BUSINESS, B EING MANUFACTURER OF LABORATORY CHEMICALS. IN THIS REGARD THE RELIANCE IS PLACED ON THE RATIO, LAID DOWN IN THE CASE OF VIJAY PROTEINS LTD VS ACIT 58 ITD 428 (ABAD), SANJAY OIL ITA NO.5917/M/2016 SHRI SHIVRAM NARAYAN KELKAR 3 CAKE INDUSTRIES VS CIT (2008) 316 ITR 274 (GUJ) ETC. AS ABOVE. ACCORDINGLY, THE DISALLOWANCE OF RS.28,13,059/- (25% OF RS.1,12, 52,235/-), OUT OF HAWALA PURCHASES OF RS.1,12,52,235/-, IS SUSTAINED AND BALANCE AMOUNT OF RS.84,39,176/-, IS HEREBY DELETED. ALL THE GROUNDS OF APPEAL ARE DISPOSED OFF ACCORDINGLY. 5. NO ONE HAS APPEARED ON BEHALF OF THE ASSESSEE. LD. D.R. RELIED UPON THE DECISION OF THE TRIBUNAL, AHMEDABAD BENCH IN THE CASES OF SHWETAMBAR STEELS VS. ITO AHMEDABAD AND GANESH RICE MILLS VS. CIT (294 ITR 316). THE FACTS IN THE PRESENT CASE S HOW THAT ASSESSEE COULD NOT PRODUCE THE PARTIES FROM WHOM GOODS ARE S TATED TO HAVE BEEN PURCHASED. THE SUPPLIERS WERE FOUND TO BE ENGA GED IN PROVIDING BOGUS BILL WITHOUT ACTUAL DEALING OF GOOD S. IN THIS REGARD, THE ASSESSEE HAS STATED THAT THEY HAD SUBMITTED QUA NTITATIVE DETAILS OF STOCK WITH RESPECT OF THE SALES WITH PURCHASES FROM THE PARTIES DURING THE ASSESSMENT PROCEEDINGS. THE ASSESSEE HAS SUBMIT TED THE DETAIL OF CORRESPONDING SALES IN RESPECT OF THE PURCHASE FROM THE SAID PARTIES. AS MENTIONED ABOVE THE AO HAS NEVER DISPUTED OR EXA MINED THE ASPECT OF SALES RECEIPTS. SINCE THE SALES MADE BY T HE ASSESSEE WAS NOT DOUBTED OR DISPUTED BY THE AO AND HE HAS ACCEPTED T HE SALES RECEIPTS OF THE ASSESSEE AS IT IS, THEREFORE, THE AO CANNOT DENY THAT PURCHASES WERE NOT MADE BY THE ASSESSEE AND THE MATERIAL WAS NOT USED FOR ITS SALES. WHAT IS UNDER DISPUTE IS THE PURCHASES FROM T HE PARTIES FROM WHOM BILLS HAVE BEEN TAKEN AND CHEQUES HAVE BEEN IS SUED TO THEM. PURCHASES ARE NOT IN DISPUTE BUT THE PARTIES FROM W HOM PURCHASE ARE SHOWN TO HAVE BEEN MADE ARE DISPUTED AND SUSPICIOUS . THE AO HAD MADE THE ADDITION AS SOME OF THE SUPPLIERS WERE DEC LARED HAWALA DEALERS BY THE VAT DEPARTMENT. THIS MAY BE A GOOD R EASON FOR ITA NO.5917/M/2016 SHRI SHIVRAM NARAYAN KELKAR 4 MAKING FURTHER INVESTIGATION BUT THE AO DID NOT MAK E ANY FURTHER INVESTIGATION AND MERELY COMPLETED THE ASSESSMENT O N SUSPICION. ONCE THE ASSESSEE HAS BROUGHT ON RECORD 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 A ND ALSO FROM THE BANK OF THE SUPPLIERS TO VERIFY WHETHER THERE WAS A NY IMMEDIATE CASH WITHDRAWAL FROM THEIR ACCOUNT. NO SUCH EXERCISE HAS BEEN DONE OR FINDINGS RECORDED. THERE WAS NO DETAILED INVESTIGAT ION MADE BY THE AO HIMSELF. IT IS ALSO FOUND THAT THE PAYMENTS HAVE BEEN MADE BY ACCOUNT PAYEE CHEQUE WHICH ARE DULY REFLECTED IN TH E BANK STATEMENT OF THE ASSESSEE. THERE IS NO EVIDENCE TO SHOW THAT THE ASSESSEE HAS RECEIVED CASH BACK FROM THE SUPPLIERS. MERELY BECAU SE THE SUPPLIERS DID NOT APPEAR BEFORE THE AO OR SOME CONFIRMATION L ETTERS WERE NOT FURNISHED, ONE CANNOT CONCLUDE THAT THE PURCHASES W ERE NOT MADE BY THE ASSESSEE. THIS VIEW IS SUPPORTED BY THE DECISIO N OF NIKUNJ EXIMP ENTERPRISES VS. CIT 216 TAXMAN 171 (BOM). TO THIS E XTENT, WE ARE OF THE VIEW THAT IF THE ASSESSEE HAS FULFILLED ITS ONUS OF MAKING THE PAYMENT BY CHEQUE AND HAS SUPPLIED THE ADDRESSES OF THE SELLERS THEN IT CANNOT BE PRESUMED THAT SUPPLIER WERE BOGUS SIMP LY BECAUSE THE SELLERS WERE NOT FOUND AT THE GIVEN ADDRESS. THERE IS A CONSIDERABLE TIME GAP BETWEEN THE PERIOD OF PURCHASE TRANSACTION AND PERIOD OF SCRUTINY PROCEEDINGS. THE AO HAS NOT BROUGHT ANY MA TERIAL ON RECORD TO SHOW THAT THERE IS SUPPRESSION OF SALES. IT IS B ASIC RULE OF ACCOUNTANCY AS WELL AS OF TAXATION LAWS THAT PROFIT FROM BUSINESS CANNOT BE ASCERTAINED WITHOUT DEDUCTING COST OF PUR CHASE FROM SALES. ITA NO.5917/M/2016 SHRI SHIVRAM NARAYAN KELKAR 5 ESTIMATION OF PROFIT RANGING FROM 12.5% TO 15% HAS BEEN UPHELD BY THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT V S SIMIT P SHETH 356 ITR 451 (GUJ.). RESPECTFULLY FOLLOWING THE DEC ISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. SIMIT P. SHETH 38 TAXMAN 385 (GUJ), WE DISMISS THE DEPARTMENTAL APPEAL. 6. IN THE RESULT, DEPARTMENTAL APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 13.10.2017. SD/- SD/- (MANOJ KUMAR AGGARWAL) (D.T. GARASIA) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 13.10.2017. * 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// [ BY ORD ER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.