Appeal details
Counselvise Citation
[2017] 127 COUNSELVISE.COM (IT) 9860 (ITAT-MUMBAI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
1 year(s) 5 month(s) 3 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
12-07-2017
Appeal Filed By
Assessee
Order Result
Partly Allowed
Bench Allotted
Not Allotted
Assessment Year
2010-2011
Appeal Filed On
08-02-2016
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE SHRI R.C. SHARMA , AM AND SHRI AMARJIT SINGH , JM / I .T.A. NO. 630 / M/ 20 1 6 ( / ASSESSMENT YEAR: 20 10 - 11 ) GUMPRO DRILLING FLUIDS P.LTD. HAZRAT COMPOUND, LBS MARG, VIKHROLI (W) MUMBAI - 400020 / VS. DCIT 10(3)R. NO. 452, AAYAKAR BHAVAN, M.K. MARG , MUMBAI - 400020 ./ ./ PAN/GIR NO. : AADCG 2319 N ( / APPELLANT ) .. ( / RESPONDENT ) / DATE OF HEARING : 04 .0 7 .2017 / DATE OF PRONOUNCEMENT : 12 . 07 .2017 / O R D E R PER AMARJIT SINGH, JM: THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER DATED 27.11.2015 PASSED BY THE COMMIS SIONER OF INCOME TAX (APPEALS) - 24 , MUMBAI [HEREINAFTER REFERRED TO AS THE CIT(A)] RELEVANT TO THE ASSESSMENT YEAR 20 10 - 11 . 2 . THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: - GROUNDS OF APPEAL BEING AGGRIEVED AND DISSATISFIED WITH THE ORDER OF THE LEARNED CIT (APPEALS) - 24, MUMBAI, IN APPEAL NO. CIT (A) - 22 I DCIT - 10(3) / IT - 175 /14 - 15 DATED 27 - 11 - 15 RECEIVED BY THE APPELLANT ON 23 - 12 - 15 (HEREINAFTER REFERRED TO AS THE LEARNED CIT (A) - MU MBAI), THE ASSESSEE BY: SHRI ASHOK PATIL DEPARTMENT BY: SHRI RAM TIWARI, DR GUMPRO DRILLING FLUIDS 2 APPELLANT HAS PREFERRED THIS APPEAL UNDER THE PROVISIONS OF SECTION 253 OF THE INCOME TAX ACT AND RULES MADE THERE UNDER ON THE FOLLOWING GROUNDS. THE GROUNDS STATED HEREINAFTER ARE INDEPENDENT OF ONE ANOTHER. GROUNDS ITEM NO.1: RE - OPENING OF AS SESSMENT U/S 147 & ISSUANCE OF NOTICE U/S. 148 ARE WITHOUT JURISDICTION. 1.1 THE LEARNED CIT(A) HAS GROSSLY ERRED IN LAW AND ON FACTS BY HOLDING THAT REOPENING IS VALID. THE LEARNED CIT(A) HAS FAILED TO APPRECIATE THAT APPELLANT HAS DISCLOSED FULLY AND TR ULY MATERIAL FACTS AND INFORMATION AND NO INCOME HAS ESCAPED ASSESSMENT. HE HAS FURTHER FAILED TO APPRECIATE THAT REOPENING HAS BEEN MADE BECAUSE OF HIS CHANGE OF OPINION THAT NO DISALLOWANCE WAS MADE TOWARDS PURCHASE EXPENSE. 1.2 THE APPELLANT HUMBLY SUB MITS THAT THE REASONS RECORDED FOR RE - OPENING OF THE ASSESSMENT BY LEARNED A.O. U/S. 147 ARE UNJUSTIFIED AND THE ISSUE OF NOTICE U/S. 148 IS NOT MADE IN ACCORDANCE WITH THE LAW AND HENCE THE APPELLANT'S CONTENTION THAT RE - ASSESSMENT PROCEEDINGS ARE WITHOUT ANY BASE AND JURISDICTION MAY KINDLY BE ACCEPTED. ITEM NO.11: ADDITION ON ACCOUNT OF BOGUS PURCHASE OF RS. 6,66,0161 - (ADDITION MADE AS PER ASSESSMENT ORDER RS. 26,64,064/ - LESS: RELIEF ALLOWED AS PER ORDER OF CIT (A) RS.1 998,048/ - ): 2.1 THE LEARNED CIT (A) HAS GROSSLY ERRED IN FACTS AND CIRCUMSTANCES IN PARTLY CONFIRMING THE ADDITION ON ACCOUNT OF BOGUS PURCHASE RS. 6,66,016/ - (ADDITION MADE AS PER ASSESSMENT ORDER RS. 26,64,064/ - LESS: RELIEF ALLOWED AS PER ORDER OF CIT(A) RS. 19,98,048/ - ) BY PRESUMING THAT APPELLANT HAD MADE CASH PURCHASES FROM OTHER PARTIES AND TOOK ONLY BILLS FROM 6 PARTIES AS ACCOMMODATION TO EXPLAIN THE PURCHASE. 21 THE LEARNED CIT(A) HAS GROSSLY ERRED IN PRESUMING THAT ESTIMATED PROFIT ELEMENT EMBEDDED IN SUCH TRANSACTION IS 25% ON THE TOTAL ALLEGED PURCHASES BY RELYING ON THE DECISION OF GUJARAT HIGH COURT IN THE CASE OF SANJAY OILCAKE INDUSTRIES VS. CIT (316 ITR 274). 2.3 THE LEARNED CIT(A) HAS GROSSLY ERRED IN LAW AND ON FACTS BY CONSIDERING GENUINE PURCHASES AS BOGUS PURCHASES. THE LEARNED CIT(A) HAS FAILED TO APPRECIATE THAT THE APPELLANT SUBMITTED PROOFS OF COPY OF INVOICES AND OTHER NECESSARY DOCUMENTS TO PROVE THE GENUINENESS OF THE TRANSACTIONS. GUMPRO DRILLING FLUIDS 3 24 THE LEARNED CIT(A) HAS GROSSLY ERRED IN LAW AND ON FACTS BY NOT APPRECIATING THAT THE APPELLANT HAS MADE ALL THE PAYMENTS FOR PURCHASES BY ACCOUNT PAYEE CHEQUES ONLY. 2.5 THE LEARNED CIT(A) ALSO FAILED TO APPRECIATE THE FACT THAT NAVI MUMBAI MUNICIPAL CORPORATION - NMCC CESS ON THE SAID PURCHASES HAVE ALREADY BEEN PAID AND THE APPE LLANT HAS RECEIVED THE ASSESSMENT ORDER FROM NMCC AS WELL. 2.6 THE LEARNED CIT(A) HAS GROSSLY ERRED IN RELYING ON THE FOLLOWING DECISIONS FOR CONFIRMING THE ADDITION ON ACCOUNT OF BOGUS PURCHASE. A. COMMISSIONER OF INCOME - TAX V. BOLANATH POLY FAB PVT. LTD. 355 ITR 290 (GUJ) B. MIS. SANJAY OFICAKE INDUSTRIES V. COMMISSIONER OF INCOME - TAX 316 ITR 274(GUJ) C. COMMISSIONER OF INCOME - TAX V. SIMIT P. SHETH 356 ITR 451 (GUJ) 2.7 THE APPELLANT HUMBLY SUBMITS THAT THE ADDITION ON ACCOUNT OF BOGUS PURCHASE MAY KINDLY BE DELETED IN VIEW OF THE FOLLOWING DECISIONS. HON'BLE MUMBAI ITAT IN THE CASE OF M/S. PRAMIT TEXTILES VS. ITO IN ITA NO. 3948 TO 3953 / MUM 2012 AND ITA NO. 4012 TO 4015 AND 4020 TO 4021 DATED 01 - 10 - 2013 B. HON'BLE MUMBAI ITAT IN THE CASE OF M/S. C. CHO TALAL & CO. VS. ITO IN ITA NO. 3960 TO 3967 / MUM 2012 AND ITA NO. 4022 TO 4024 / MUM 2012, 4025 / MUM 12012, 3944, 3995 AND 5065 I MUM / 2012 DATED 01 - 10 - 2013 C. HON'BLE MUMBAL ITAT IN THE CASE OF M/S. JITENDRA HARSHDKUMAR TEXTILES VS. ITO IN ITA NO. 771 /MUM 2011 AND ITA NO. 2211 /MUM /20LLDATED 21 - 11 - 2012 D. HON'BLE MUMBAI ITAT IN THE CASE OF ACIT VS. M/S. NEW MEENA BAZAR IN ITA NO. 888 HYD 12012 DATED 11 - 01 - 2013 E. HON'BLE MUMBAI ITAT IN THE CASE OF DCIT VS. RAJEEV G. KALATHIL, IN ITA NO.. 6727 I MUFF / 2012 DATED 20 - 08 - 2014 WHEREIN IT WAS HELD THAT PURCHASES CANNOT BE DISALLOWED MERELY BECAUSE THE SUPPLIER IS TREATED AS A HAVALA DEALER BY VAT AUTHORITIES, IF RECEIPT O MATERIAL IS SUBSTANTIATED BY DELIVERY CHALLAN AND OTHER EVIDENCES AND PAYMENT IS B' AC COUNT PAYEE CHEQUE. 2.8 THE APPELLANT HUMBLY REQUEST THAT ADDITION ON ACCOUNT OF BOGUS PURCHASE OF RS. 6,66,016 (ADDITION MADE AS PER ASSESSMENT ORDER GUMPRO DRILLING FLUIDS 4 RS. 26,64,0641 - LESS: RELIEF ALLOWED AS PER ORDE OF CIT(A) RS. 19,98,048/ - ) MAY KINDLY BE DELETED. ITEM N O. ILL: LEVY OF INTEREST U/S. 234B OF THE ACT: 3.1 THE LEARNED CIT (A) MUMBAI HAS GROSSLY ERRED IN LAW AND ON FACTS IN PARTLY UPHOLDING THE DECISION OF THE LEARNED A.O. TO LEVY INTEREST U/S. 234B OF THE ACT. 3.2 THE APPELLANT STATES THAT THE LEVY OF INTERE ST IS WHOLLY UNJUSTIFIED AND THE SAME MAY KINDLY BE DELETED. ITEM NO. IV: INITIATION OF PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT: 4.1 THE LEARNED CIT(A) HAS GROSSLY ERRED IN LAW AND ON FACTS IN NOT DECIDING THE ISSUE BY STATING THAT THE 'THE SAME BEING PREMATURE HAS TO BE DISMISSED AT THIS STAGE' 4.2 THE APPELLANT STATES THAT THE INITIATION OF PENALTY PROCEEDINGS IS CLEARLY CONTRARY TO LAW AND THE SAME MAY KINDLY BE DELETED. 5. THE APPELLANT RESERVES ITS RIGHT TO ADD, AMEND, ALTER, SUBSTITUTE OR MODIFY ALL OR ANY OF THE GROUNDS STATED HEREINABOVE AS THE FACTS AND CIRCUMSTANCES OF THE CASE MAY JUSTIFY. 3. THE BRIEF FACTS OF THE CASE ARE THAT T HE ASSESSEE FILED ITS RETUR N OF INCOME ON 1 1 .1 0 .20 12 DECLARING TOTAL INCOME TO THE TUNE OF RS. 2,79,18,848/ - . THE ASSESSMENT U/S 143(3) OF THE ACT WAS COMPLETED ON 20.12.2012 ASSESSING TOTAL INCOME TO THE TUNE OF RS. 2,80,79,730/ - . THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING & EXPORTING OF DRILLING FLUIDS AND PROVIDING SERVICES IN OFF SHORE DRI LLING SERVICES. DURI NG THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS SHOWN INCOME FROM SALES AND SERVICE CHARGES TO THE TUNE OF RS. 2,25,73,096/ - AND OTHER INCOME TO THE TUNE OF RS. 2,23,25,848/ - AND NET PROFIT HAS BEEN COMPUTED TO THE TUNE OF RS.3,55,92,423/ - (BEFORE TAX) AND RS.2,44,38,514/ - (AFTER TAX) . THE ASSESSEE HAS ALSO DECLARED INCOME THE INCOME FROM OTHER SOURCES TO THE TUNE OF RS.14,04,729/ - . GUMPRO DRILLING FLUIDS 5 AN INFORMATION WAS RECEIVED FROM THE SALES TAX DEPARTMENT IN CONNECTION WITH THE BOGUS PURCHA SES OF THE RAW MATERIAL TO THE TUNE OF RS. 26,64,064/ - . T HE NOTICE WAS GIVEN . A FTER GETTING THE REPLY , AN AMOUNT OF RS. 26,64,064/ - WAS ADDED TO THE INCOME OF THE ASSESSEE. TOTAL INCOME WAS ASSESSED TO THE TUNE OF RS.3,00,55,920/ - . FEELING AGGRIEVED , THE ASS ESSEE FILED AN APPEAL BEFORE THE CIT(A) WHO PARTLY ALLOWED THE APPEAL AND RESTRICTED THE ADDITION TO THE EXTENT OF 25% ON THE TOTAL BOGUS PURCHASES TO THE TUNE OF RS. 26,64,064/ - I.E., TO THE TUNE OF RS.6,66,016/ - . FEELING AGGRIEVED THE ASSESSEE HAS FILED T HE PRESENT APPEAL BEFORE US. ISSUE NO.1 A : - 4 . AT THE TIME OF ARGUMENTS THE ASSESSEE DID NOT PRESS THE ISSUE NO.1, THEREFORE , THE ISSUE NO.1 HEREBY IS DISMISSED BEING NOT PRESSED. I SSUE NO.2 : - 5 . UNDER THIS ISSUE THE ASSESSEE HAS CHALLENGED THE ADDITION @ OF 25% OF THE BOGUS PURCHASE TO THE TUNE OF RS.26,64, 064/ - I.E., TO THE TUNE OF RS.6,66,016/ - . THE LD. REPRESENTATIVE OF THE ASSESSEE HAS ARGUED THAT TAKING THE RATIO @ OF 25% OF THE BOGUS PURCHASE IS VERY MUCH HIGHER SIDE THEREFORE, THE SAME IS NOT LIA BLE TO BE SUSTAINABLE IN THE EYE OF LAW. BEFORE GOING FURTHER , IT IS NECESSARY TO THE ADVERT FINDING OF THE CIT(A) ON RECORD. : - GUMPRO DRILLING FLUIDS 6 GROUND NO.2 IS AGAINS T THE MERITS OF THE ADDITION. AT THE OUTSET IT HAS BEEN FAIRLY STATED BY LD. AR THAT SIMILAR ISSUE WAS D ECIDED BY THE THEN LD. CIT(A) - 22 MUMBAI IN APPELLANTS OWN CASE FOR A.Y. 2011 - 12 IN APPEAL NO. CIT(A) - 22/DCIT - 10(3)/IT - 256/2013 - 12 DATED 20.04.2015, WHERE IT HAS BEEN INTER - ALIA HELD AS UNDER. THE FACTS IN THE PRESENT CASE INDICATE THAT THE APPELLANT WAS NOT IN A POSITION TO PROVE THE EXISTENCE OF THE SUPPLIERS. THE SUPPLIER WAS ENGAGED IN PROVIDING BOGUS BILLS WITHOUT ACTUAL DELIVERY OF GOODS. MOREOVER, THIS SUPPLIER IS NOT A REGULAR PARTY AND IT WAS FOUND TO HAVE SUPPLIED MATERIAL ONLY DURING THE YEAR A ND THERE WERE NO SUPPLY EITHER IN THE EARLIER YEAR OR IN THE SUBSEQUENT YEAR. AS DISCUSSED ABOVE THIS CIRCUMSTANTIAL EVIDENCE PROVE THE BOGUS NATURE OF THE TRANSACTION. ON CAREFUL ANALYSIS OF THE FINDING OF HONBLE HIGH COURT OF GUJRAT IN THE ABOVE MENTIO NED CASES. I AM OF THE FIRM VIEW THAT WITHOUT PURCHASE OF MATERIALS IT WAS NOT POSSIBLE FOR THE APPELLANT TO EITHER SELL THE ITEMS OR COMPLETE THE CONTRACT. AS MENTIONED ABOVE THE AO HAD NEVER DISPUTED OR EXAMINED THE ASPECT OF SALES. HENCE I AM OF THE FI RM BELIEF THAT THE APPELLANT HAD MADE CASH PURCHASES FROM OTHER PARTIES, WHICH WERE NOT RECORDED IN THE BOOKS. THE APPELLANT TOOK ONLY BILLS FROM THESE 3 PARTIES AS CANNOT BE ADDED AS BOGUS AND WHAT NEEDS TO BE TAXED IS THE PROFIT ELEMENT EMBEDDED IN SUCH TRANSACTION. PROFIT ESTIMATES RANGING FROM 12.5% TO 25% HAS BEEN UPBHELD BY THE HONBLE GUJARAT HIGH COURT DEPENDING UPON THE NATURE OF THE BUSINESS. AS HELD IN THE CASE OF SIMIT P, SHETH (SUPRA) NO UNIFORM YARDISTIC COULD BE APPLIED TO ESTIMATE THE RATE O F PROFIT AND IT VARY WITH THE NATURE OF BUSINESS. TAKING ALL THEFACTS INTO CONSIDERATION AND THE FINDING OF THE HONBLE COURTS ON THIS ISSUE, I AM OF THE VIEW THAT ESTIMATION OF 25% OF PROFIT WOULD MEET THE ENDS OF JUSTICE. THEREFORE, I DIRECT THE AO TO ES TIMATE PROFIT OF 25% OF THE TOTAL ALLEGED BOGUS PURCHASE RS. 9,83,684/ - WHICH WORKS OUT TO RS.2,45,921/ - . THE APPELLANT GETS RELIEF OF THE BALANCE RS.7,37,763/ - . THIS GROUND OF APPEAL IS PARTLY ALLOWED. I FIND THAT THE FACTS OBTAINING IN THE PRESENT YEAR ARE SIMILAR TO THE FACTS IN THE EARLIER YEARS AND LD. CIT(A) - 22, MUMBAI HAS BASED HIS FINDING ON THE FACGTS OF THE CASE AND AFTER CONSIDERING THE FOLLOWING CASE LAWS AND HENCE, RESPECTFULLY FOLLOWING THE SAME, LD. AO IS DIRECTED TO ESTIMATE THE SUPPRESSED EMBEDDED PROFIT @ 25% ON THE TOTAL PURCHASES OF RS.26,64,064/ - WHICH WOR KS OUT TO RS.6,66,016/. GUMPRO DRILLING FLUIDS 7 6 . ON APPRAISAL OF THE ABOVE MENTIONED ORDER , WE NOTICE THAT THE CASE OF THE ASSESSEE HAS BEEN DECIDED BY THE CIT(A) ON THE BASIS OF THE DECISION OF THE CIT(A) IN THE ASSESSEES OWN CASE FOR THE A.Y. 2011 - 12 . T HE FINDING HAS BEEN REPRODUCED WHILE PASSING THE ORDER (ABOVE). HOWEVER , THE CIT(A) ESTIMATED THE EMBEDDED PROFIT @ OF 25% ON THE TOTAL BOGUS PURCHASES TO THE TUNE OF RS. 26,64,064/ - . THE LAW RELIED BY THE CIT(A) SPEAKS ABOUT PROFIT ESTIMATE @ 12.5% OF THE BOGUS PURCHASES. ASSESSING THE PROFIT @ 25% IS HIGHER SIDE , THEREFORE, CONSIDERING THE LAW SETTLED IN CIT VS. |S IMIT P. SHETH 356 ITR 451 (GUJ) WE RESTRICTED THE EMBEDDED PROFIT @ 12.5% ON THE TOTA L BOGUS PURCHASES TO THE TUNE OF RS .26,64,064/ - TO MEET THE END OF JUSTICE. ACCORDINGLY, WE DIRECT THE AO TO COMPUTE THE SAME. ACCORDINGLY, THIS ISSUE IS HEREBY DECIDED IN FAVOUR OF THE ASSESSEE. ISSUE NO.3 : - 7 . ISSUE NO. 3 IS CONSEQUENTIALLY IN NATURE AND NOWHERE REQUIRE ANY ADJUDICATION. ISSUE NO.4: - 8 . ISSUE NO. 4 IS PREMATURE THEREFORE IS HEREBY ORDER TO BE DISMISSED. 9 . IN RESULT, OF THE ASSESSEE IS HEREBY PARTLY ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 12.07. 2017 GUMPRO DRILLING FLUIDS 8 SD/ - SD/ - ( R.C. SHARMA ) (AMARJIT SINGH) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI; DATED : 12.07. 201 7 V.P SINGH / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. / BY ORDER, //TRUE COPY// / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI
Mehul