MAHAVIR METAL, MUMBAI V. ACIT , CIRCLE - 19 (3), MUMBAI

ITA 6102/MUM/2018

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 0333 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-12-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2008-2009
• Appeal Filed On: 25-10-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: JOTHI LAKSHMI NAYAK SR
• Keywords: Bogus purchase; Principle of natural justice; Accommodation entries
• Section: 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D, BENCH MUMBAI BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBE R & SHRI G. MANJUNATHA, ACCOUNTANT MEMBE R ITA NO.6102/MUM/2018 ( ASSESSMENT YEAR :2008-09 ) MAHAVIR METAL 6 TH JAIKUNWAR BHAVAN KHETWADI, 8 TH LANE MUMBAI-400 004 VS. ACIT,CIRCLE-19(3) MATRUMANDIR, TARDEO ROAD MUMBAI-400 007 PAN/GIR NO. AA IFS6733N APPELLANT ) .. RESPONDENT ) REVENUE BY SMT. JOTHILAKSHMI NAYAK, SR.AR (DR) ASSESSEE BY SHRI. SATISH MODI, AR DATE OF HEARING 02/12 /2019 DATE OF PRONOUNCEMENT 02/12/2019 / O R D E R PER G.MANJUNATHA : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST, THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS)7, MUMBAI, DATED 11/09/2018 AND IT PERTAINS TO ASSESSMENT YEAR 2008- 09. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1) THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ADDITION MADE BY THE ASSESSING OFFICER OF RS. 15,54,324/- ON ACCOUNT OF 'BOGUS PURCHASES'. 2) THE LEARNED CIT(A) HAS FURTHER ERRED IN ENHANC ING THE ADDITION MADE BY THE ASSESSING OFFICER FROM RS. 15,54,324/- TO RS . 2505,467/- 3) THE LEARNED CIT(A) HAS FURTHER ERRED IN TWISTI NG THE SUBMISSIONS MADE BY THE ASSESSEE AT THE TIME OF HEARING OF THE APPEAL- 4) THE LEARNED CIT (A) HAS ERRED IN NOT GIVING A NOTICE TO THE ASSESSEE FOR ENHANCEMENT OF ASSESSABLE INCOME TO THE ASSESSM ENT ORDER. 5) THE ORDER APPEALED AGAINST IS BAD IN LAW AND I S AGAINST THE PRINCIPLE OF NATURAL JUSTICE. ITA NO.6102/MUM/2018 MAHAVIR METAL 2 6) THE ORDER APPEALED AGAINST IS BASED ON SURMISE S AND CONJECTURES. 7) YOUR PETITIONER RESERVES THE RIGHT TO ADD, TO DELETE AND/OR AMEND ANY OF THE FOREGOING GROUNDS. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF DEALIN G IN FERROUS AND NON FERROUS METAL, FILED ITS RETURN OF INCOME FOR A Y 2008-09 ON 19/09/2008, DECLARING TOTAL INCOME OF RS. 39,89,840 /-. THEREAFTER, THE CASE HAS BEEN REOPENED U/S 147, ON THE BASIS OF INFORMATION RECEIVED FROM DGIT, INVESTIGATION, MUMBAI, AS PER W HICH, SALES TAX AUTHORITIES OF GOVERNMENT OF MAHARASHTRA HAD TAKEN ACTIONS AGAINST NUMBER OF HAWALA DEALERS, WHO HAD ISSUED BOGUS PURC HASE BILLS TO VARIOUS PARTIES. AS PER LIST OF BENEFICIARIES, THE ASSESSEE IS ONE OF THE BENEFICIARY, WHO HAD TAKEN ACCOMMODATION BILLS OF BOGUS PURCHASES BILLS FROM VARIOUS PARTIES AS LISTED BY T HE AO IN HIS ASSESSMENT ORDER AMOUNTING TO RS. 1,24,34,599/-. TH E CASE WAS SELECTED FOR SCRUTINY AND THE ASSESSMENT HAS BEEN C OMPLETED U/S. 143(3).R.W.S. 147 OF THE I.T.ACT, 1961 ON 17/02/201 6 AND DETERMINED TOTAL INCOME OF RS. 55,44,164/-, AFTER MAKING ADDIT ION OF 12.50% PROFIT ON ALLEGED BOGUS PURCHASE FROM THOSE PARTIES AND MADE ADDITIONS OF RS. 15,54,324/-. 4. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESEE P REFERRED AN APPEAL BEFORE THE LD.CIT(A). BEFORE THE LD.CIT(A), THE ASSESSE HAS FILED ELABORATED WRITTEN SUBMISSIONS, ON THE ISSUE , WHICH HAS BEEN REPRODUCED AT PARA 3 ON PAGES 2TO 4 OF LD. CIT(A) O RDER. FURTHER, THE ASSESSEE HAD FILED COMPLETE DETAILS OF PURCHASE FRO M BOTH PARIES AS PER WHICH THE AMOUNT OF PURCHASE FROM METALEX TUBE INDUSTRIES WAS ADMITTED AT R.S 1,23,23,876, AS AGAINST TOTAL AMOUN T CONSIDERED BY THE AO FOR RS. 47,14,736/-. THE SUM AND SUBSTANCE O F THE ARGUMENTS OF THE ASSESSEE BEFORE THE LD.CIT(A) ARE THAT PURCHASE ITA NO.6102/MUM/2018 MAHAVIR METAL 3 FROM THE ABOVE PARTY IS GENUINE, WHICH IS SUPPORTED BY NECESSARY EVIDENCES. THEREFORE, NO ADDITIONS COULD BE MADE ON THE BASIS OF INFORMATION RECEIVED FROM THIRD PARTY. THE LD.CIT(A ), AFTER CONSIDERING RELEVANT SUBMISSION OF THE ASSESSEE AND ALSO, BY FOLLOWING THE DECISION OF HONBLE GUJARAT HIGH COUR T, IN THE CASE OF CIT VS. SIMITH P. SHETH (356 ITR 451) CONFIRMED 12. 50% PROFIT RATE ADOPTED BY THE AO, BUT IN RESPECT OF TOTAL PURCHASE S, HE HAD ADOPTED AN AMOUNT OF RS. 2,00,43,739/- AND ON WHICH APPLIED 12.50% PROFIT, WHICH RESULATED IN ENHANCEMENT OF TO TAL ADDITION TOWARDS ALLEGED BOGUS PURCHASES TO RS. 25,05,467/-. THE RELEVANT FINDINGS OF THE LD.CIT(A) ARE AS UNDER:- 4.3.5 IN VIEW OF THE FACTS AND CIRCUMSTANCES OF T HE CASE AND THE JUDICIAL PRONOUNCEMENTS CITED ABOVE, WHAT CAN BE DISALLOWED OR TAXED IN THE INSTANT CASE, IS THE EXCESS PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES SHOWN TO HAVE BEEN MADE FROM AFORESAID PARTIES. AS NARRATED EARLIER, THE AO IN THIS CASE HAS HELD THAT THE PARTIES FROM WHOM THE PURCHASES WERE MADE BY THE APPELLANT WERE FOUND TO BE BOGUS, ESTIM ATIONS RANGING FROM 12.5% TO 25% HAVE BEEN UPHELD BY THE HONBLE GUJARA T HIGH COURT, DEPENDING UPON THE NATURE OF THE BUSINESS. 4.3.6 IN A NUMBER/SERIES OF RECENT CASES INVOLVING THE SCAM UNEARTHED BY THE SALES TAX DEPT OF MAHARASHTRA WHEREBY THE HAWAL A DEALERS WERE FOUND TO BE ISSUING BOGUS PURCHASE BILLS WITHOUT DE LIVERY OF GOODS, THE HON'BLE MUMBAI TRIBUNAL HAS ESTIMATED THE G.P ADDIT ION ON ACCOUNT OF SUCH BOGUS PURCHASES AS 12.5% SOME OF WHICH ARE LIS TED BELOW: I) SMT. KIRARTNAVINDOSHI IN ITA NO. 2601/MUM/2016 DATED 18.01.2017. II) ASHWINPURSHOTAM BAJAJ -&ANR. VS ITO &ANR.IN ITA NO.4736/MUM/2014,5207/MUM/2014,DATED:L4-12-20L6. III) ITO &ANR. VS. MANISH KANJI PATE L &ANR., IN ITA NO. 7299/MUM/2014, 7154/MUM/2012 & 7 300/MUM/2014, 7627/MUM/2014, DATED: 18-05-2017. IV) METROPOLITAN EXIMCHEM LTD., ITA NO. 2935/MU M/2015, DATED':29- 03-2017.; RONAK METAL INDUSTRIES VS. ITO, ITA N O. 722/MUM.2017 DID. 04,09.2017; V) ITO VS. JUGRAJ R. JAIN, ITA NO, 2571 /MUM/2016 & 2572/M/2016 DTD. 02.08.2017; VII) B. J. EXPORTS VS. ASSTT. COMMISSIONER OF I NCOME TAX, ITA NO. 5442- 5444/MU M/2016 DATED 13.09.2017; VIII) BATLIBOI ENVIRONMENTAL ENGINEERING LTD, VS. DEPUTY COMMISSIONER ITA NO.6102/MUM/2018 MAHAVIR METAL 4 OF INCOME-TAX, ITA NO, 2840 & 3482/M/2015 DATED 15. 03.2017; IX) DEPUTY COMMISSIONER OF INCOME-TAX &ANR. VS . REMI PROCESS PLANT & MACHINERY LTD. &ANR., ITA NO, 1723/M/2015, 1317/M/2015 DATED - 21.03.2017. X) SMT. USHA B. AGARWAL VS. ITO, TTA NO. 7 034/MUM/2016, DATED 01.09.2017. IN VIEW OF THE ABOVE DISCUSSED FACTUAL MATRIC AND P RECEDENTS, I AM OF THE VIEW THAT THE AO IS JUSTIFIED IN ESTIMATING THE PRO FIT ELEMENT CALCULATED @ 12.5% EMBEDDED IN IMPUGNED PURCHASES SHOWN FROM THE ALLEGED HAWALA PARTIES AND ADDING THE SAME TO THE TOTAL INCOME RET URNED. HOWEVER, AS POINTED OUT IN PARA 4.1.4 ABOVE THE FIGURE OF PURCH ASES FROM METALEX TUBE INDUSTRIES IS TO BE TAKEN AS RS. 1,23,23,876/- INSTEAD OF RS. 47,14,736/- WRONGLY TAKEN BY THE AO. THUS THE BOGUS PURCHASES FOR THE PAYMENT OF DISALLOWANCE WOULD BE AS FOLLOWS : SR. NO. NAME OF THE PARTY AMOUNT IN RS. 1 SHREE SUNDHA STEELS PVT LTD. 77,19,8637- 2 METALEX TUBE INDUSTRIES 1.23,238767- TOTAL 2,00,43,7397- THIS MISTAKE IN THE ORDER OF THE AO IS APPARENT FRO M RECORD AND SAME IS ACCORDINGLY RECTIFIED HERE. AS THE MISTAKE HAS BEEN BROUGHT TO MY NOTICE BY THE ASSESSES HIMSELF AND THEREFORE, IN MY VIEW NO FRESH NOTICE NEEDS TO BE GIVEN TO THE ASSESSEE IN THIS RE GARD. THE ASSESSMENT ORDER OF THE AO IS A WELL-REASONED A ND A SPEAKING ORDER ; GIVING IN DETAIL THE REASONS FOR HIS FAIR ESTIMATIO N AND THEREFORE, I DO NOT SEE ANY REASON TO TAKE A VIEW IN THE MATTER DIFFERENT FROM THE ONE TAKEN BY THE AO. THE ACTION OF THE AO IN ESTIMATION OF 12.5% GP IS SUSTAINED AND ADDITION IS ACCORDINGLY ENHANCED AT 1 2.5% OF RS. 2,00,43.739/- AT. RS. 25,05,467/-. THUS, GROUND OF APPEAL IS DISMISSED AND INCOME ENHA NCED. 5. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATE RIAL AVAILABLE ON RECORD AND GONE THROUGH ORDERS OF THE AUTHORITIE S BELOW. WE FIND THAT THE LD. AO HAS MADE ADDITION OF 12.50% PROFIT TOWARDS ALLEGED BOGUS PURCHASES, ON THE GROUND THAT THE ASSESSEE ON E OF THE BENEFICIARY OF ACCOMMODATION ENTRIES OF BOGUS PURCH ASE BILLS ISSUED BY HAWALA DEALERS. ACCORDING TO THE LD. AO, ALTHOUG H ASSESEE HAS FILED CERTAIN BASIC EVIDENCES, BUT FAILED TO FILE F URTHER EVIDENCE IN THE ITA NO.6102/MUM/2018 MAHAVIR METAL 5 BACKDROP OF CLEAR FINDING BY THE SALES TAX DEPARTME NT, MAHARASHTRA THAT THOSE PARTIES ARE INVOLVED IN PROVIDING ACCOMM ODATION ENTRIES WITHOUT ACTUAL DELIVERY OF GOODS. THE LD. AO HAD AL SO TAKEN SUPPORT FROM THE INVESTIGATION CONDUCTED DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AS PER WHICH NOTICE ISSUED U/S 133(6) TO THE PARTY WERE RETURNED UN-SERVED BY THE POSTAL AUTHORITIES. THERE FORE, HE CAME TO THE CONCLUSION THAT PURCHASE FROM THE SAID PARTY IS BOGUS IN NATURE. IT IS THE CONTENTIONS OF THE ASSESSEE BEFORE THE LO WER AUTHORITIES THAT A PURCHASE FROM THE ABOVE PARTY IS SUPPORTED BY NEC ESSARY EVIDENCES. IT HAS FURNISHED ALL POSSIBLE EVIDENCES, INCLUDING BOOKS OF ACCOUNTS; STOCK DETAILS AND BANK STATEMENT TO PROVE THAT PAYMENT AGAINST SAID PURCHASES HAVE BEEN MADE THROUGH PROPE R BANKING CHANNELS. 6 HAVING CONSIDERED ARGUMENTS OF BOTH PARTIES AND A LSO, CONSIDERED MATERIALS AVAILABLE ON RECORD, WE FIND T HAT BOTH THE SIDES FAILED TO PROVE THE CASE IN THEIR FAVOUR WITH NECES SARY EVIDENCES. ALTHOUGH, ASSESSEE HAS FILED CERTAIN BASIC EVIDENCE S, BUT FAILED TO FILE FURTHER EVIDENCES TO CONCLUSIVELY PROVE PURCHA SES TO SATISFACTIONS OF THE LD.AO. AT THE SAME TIME, THE LD. AO HAD ALSO FAILED TO TAKE THE INVESTIGATION TO A LOGICAL CONCL USION BY CARRY OUT NECESSARY ENQUIRES, BUT HE SOLELY RELIED UPON INFO RMATION RECEIVED FROM INVESTIGATION WING, WHICH WAS FURTHER SUPPORTE D BY INFORMATION RECEIVED FROM MAHARASHTRA SALES TAX DEPARTMENT. UN DER THESE CIRCUMSTANCES, IT IS DIFFICULT TO ACCEPT ARGUMENTS OF BOTH THE SIDES. FURTHER, IN CASES INVLOVED ALLEGED BOGUS PURCHASES, VARIOUS HIGH COURTS AND TRIBUNALS HAD CONSIDERED AN IDENTICAL IS SUE IN LIGHT OF INVESTIGATION CARRIED OUT BY THE SALES TAX DEPARTME NT AND HELD THAT IN CASE PURCHASES CLAIMS TO HAVE MADE FROM ALLEGED HAWALA DEALERS ITA NO.6102/MUM/2018 MAHAVIR METAL 6 , ONLY PROFIT ELEMENT EMBEDDED IN THOSE PURCHASES N EEDS TO BE TAXED, BUT NOT TOTAL PURCHASE FROM THOSE PARTIES. T HE HONBLE GUJARAT HIGH COURT, IN THE CASE OF CIT VS SIMITH P.SHETH 35 6 ITR 451 HAD CONSIDERED A SIMILAR ISSUE AND HELD THAT AT THE TIM E OF ESTIMATION OF PROFIT FROM ALLEGED BOGUS PURCHASES NO UNIFORM YARD STICKS COULD BE ADOPTED, BUT IT DEPENDS UPON FACTS OF EACH CASE. TH E ITAT, MUMBAI, IN NUMBER OF CASES HAD CONSIDERED AN IDENTICAL ISSU E AND DEPENDING UPON FACTS OF EACH CASE, DIRECTED THE LD.AO TO ESTI MATE PROFIT OF 10 TO 15% ON TOTAL ALLEGED BOGUS PURCHASES. IN THIS CA SE, CONSIDERING THE NATURE OF BUSINESS OF THE ASSESSEE THE LD. AO H AS ESTIMATED 12.50% PROFIT, AND THE LD.CIT(A) HAS AFFIRMED FINDI NGS OF THE AO INSOFAR AS PROFIT RATE OF 12.50% ON TOTAL ALLEGED B OGUS PURCHASE, BUT ADOPTED TOTAL PURCHASE AMOUNT AT R.S. 2,00,43,739/- . ALTHOUGH, BOTH AUTHORITIES HAVE TAKEN UNIFORM RATE OF 12.50% PROFI T FOR ESTIMATION OF INCOME FROM ALLEGED BOGUS PURCHASE, BUT NO ONE COUL D SUPPORT SAID RATE OF GROSS PROFIT WITH NECESSARY EVIDENCES OR AN Y COMPARABLE CASES. FURTHER, THE ITAT, SMC BENCH MUMBAI, IN AS SESSEE OWN CASE FOR ASST. YEAR 2010-11 HAD CONSIDERED IDENTICA L ISSUE AND AFTER CONSIDERING FACTS HAS ADOPTED 12.50% PROFIT ON ALLE GED BOGUS PURCHASE, BUT ALLOWED FURTHER DEDUCTION TOWARDS GRO SS PROFIT ALREADY OFFERED BY THE ASSESSEE. THEREFORE, CONSIDERING FAC TS AND CIRCUMSTANCES OF THIS CASE AND CONSISTENT WITH VIEW TAKEN BY THE CO- ORDINATE BENCH IN NUMBER OF CASES, INCLUDING IN ASS ESSEE OWN CASE, WE DIRECT THE AO TO ADOPT 12.50% PROFIT ON ALLEGED BOGUS PURCHASES AMOUNTING TO RS. 2,00,43,739/- FROM THOSE TWO PARTI ES AND REDUCE GROSS PROFIT DECLARED BY THE ASSESSEE FOR THE YEAR. 7. IN THE RESULT, APPEAL FILED BY THE ASSESSE IS PA RTLY ALLOWED. ITA NO.6102/MUM/2018 MAHAVIR METAL 7 ORDER PRONOUNCED IN THE OPEN COURT ON THIS 02 /1 2/2019 SD/- (SAKTIJIT DEY) SD/- (G. MANJUNATHA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED :02/12/2019 THIRUMALESH SR.PS COPY OF THE ORDER FORWARDED TO : BY ORDER, (ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//