DCIT CC 5(1), MUMBAI V. VERITAS INDIA LTD, MUMBAI

ITA 6383/MUM/2016

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 1269 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-11-2018
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 28-10-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAJEEV GUBGOTRA
• Keywords: Bogus purchase; Business income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH F, MUMBAI BEFORE SHRI RAJESH KUMAR, ACCOUNTANT MEMBER AND SHRI AMARJEET SINGH, JUDICIAL MEMBER ITA NO.6383/M/2016 ASSESSMENT YEAR: 2011-12 DCIT, CENT. CIR. 5(1), R NO.1928, 19 TH FLOOR, AIR INDIA BUILDING, NARIMAN POINT, MUMBAI - 400021 VS. M/S. VERITAS INDIA LTD., 701, EMBASSY CENTRE, NARIMAN POINT, MUMBAI 400 021 PAN: AAACD 1654J (APPELLANT) (R ESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI VIJAY MEHTA, A.R. REVENUE BY : SHRI RAJEEV GUBGOTRA, D.R. DATE OF HEARING : 26.09.2018 DATE OF PRONOUNCEMENT : 28.11.2018 O R D E R PER RAJESH KUMAR, ACCOUNTANT MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE REVEN UE AGAINST THE ORDER DATED 20.07.2016 OF THE COMMISSIO NER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS TH E CIT(A)] RELEVANT TO ASSESSMENT YEAR 2011-12. 2. THE ONLY ISSUE RAISED BY THE REVENUE IS AGAINST THE DELETION OF ADDITION MADE IN RELATION TO EXPENDITURE CLAIMED AGAINST THE BOGUS PURCHASES FROM M/S BOSTAM ENTERPRISES A SUSP ECT ENTITY AFTER HOLDING THE PURCHASES FROM THE SAID PARTY AS GENUINE BY IGNORING THE FACT THAT THE ASSESSEE COULD NOT PRODU CE THE DOCUMENTS SUCH AS DELIVERY CHALLANS, MODE OF TRANSP ORT OF GOODS ETC. ITA NO.6383/M/2016 M/S. VERITAS INDIA LTD. 2 3. THE FACTS IN BRIEF ARE THAT THE ASSESSEE IS ENG AGED IN THE BUSINESS OF TRADING IN GAS CYLINDERS, METALS & MACH INERY, CHEMICALS, RUBBER AND GENERATION OF ELECTRICITY ETC . DURING THE COURSE OF ASSESSMENT PROCEEDINGS AO OBSERVED THAT A SSESSEE HAS SHOWN PURCHASES OF RS.204.86 CRORE IN THE PROFI T & LOSS ACCOUNT OUT OF WHICH RS.8.64 CRORE WERE MADE FROM M /S. BOSTAM ENTERPRISES WHICH WAS DECLARED A BOGUS SUPPL IER BY THE SALES TAX DEPARTMENT HAVING BEEN ENGAGED IN ISSUIN G BOGUS BILLS WITHOUT SUPPLY OF ANY ACTUAL MATERIALS/GOODS. THE PROPRIETOR OF THE SAID CONCERN MR. SACHIN YASHWANT YADAV, HAS GIVEN AFFIDAVIT BEFORE SALES TAX DEPARTMENT ON 11. 09.2012 WHEREIN HE CONFESSED THAT HE HAS NEITHER PURCHASED NOR SOLD ANY MATERIAL/GOODS OF ANY KIND WHATSOEVER. HE FURT HER STATED THAT SHRI PREM CHAND HAS MISUSED HIS PROPRIETORY CO NCERN M/S. BOSTAM ENTERPRISES FOR ISSUING SALE BILLS. AC CORDINGLY, THE ASSESSEE WAS ASKED BY THE AO TO FURNISH THE NECESSA RY DETAILS OF PURCHASE BILLS, VOUCHERS AND EVIDENCES ETC. THE AS SESSEE FILED A COPY OF LEDGER ACCOUNT, AUDIT REPORT, SALES BILLS A ND FURTHER SALE OF THE SAID MATERIALS TO THE THIRD PARTY , BANK ST ATEMENTS EVIDENCING THE TRANSFER OF FUNDS ETC. THE SAID M/S . BOSTAM ENTERPRISESS TOTAL SALES DURING THE YEAR WERE RS.1 2.12 CRORE WHICH INCLUDED SALE MADE TO THE ASSESSEE TO THE TUN E OF RS.9.07 CRORE INCLUDING VAT OF RS.0.43 CRORES AND HAS SHOWN AS GP OF RS.0.27% WHEREAS THE ASSESSEE HAS SOLD THE SAME TO VARIOUS ENTITIES AT A GP OF RS.0.25%. ACCORDING TO THE AO, THE ASSESSEE HAS SOLD THE MATERIAL ALLEGEDLY PURCHASED THROUGH T HE BOGUS BILLS AT A MARGIN OF 0.25% WHICH IS LOWER THAN THE OVERALL GP DECLARED BY THE ASSESSEE OF 4.28% AS PER TAX AUDIT REPORT SUBMITTED BY THE ASSESSEE AND THEREFORE THE INCOME OF THE ITA NO.6383/M/2016 M/S. VERITAS INDIA LTD. 3 ASSESSEE IS NOT CORRECT. FINALLY NOT SATISFIED WIT H THE EXPLANATIONS OF THE ASSESSEE, THE AO ADDED THE ENTI RE AMOUNT OF PURCHASES OF RS.8.64 CRORES TO THE INCOME OF THE AS SESSEE. 4. IN THE APPELLATE PROCEEDINGS, THE LD. CIT(A) DEL ETED THE ADDITION IN TOTO BY PASSING A VERY DETAILED ORDER F ROM PARA NO.3 AT PAGE NO.30 TO PARA 3.10 AT PAGE NO.45. THE LD. CIT(A) DELETED THE ADDITION MAINLY ON THE GROUND THAT ASSESSEE HAS FILED ALL THE NECESSARY EVIDENCES BEFORE THE AO AND AO HAS NOT DO UBTED THE SALES OF MATERIAL FURTHER BY THE ASSESSEE ON WHICH THE ASSESSEE MADE A GP OF 0.27&. THE LD. CIT(A) WHILE DELETING THE ADDITION RELIED ON THE DECISION IN THE CASE OF CIT VS. NIKUN J EXIMP ENTERPRISES (P) LTD. (2012) 35 TAXMANN.COM 384 (BOM .) AND VARIOUS OTHER DECISIONS. 5. AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATERIAL ON RECORD, THE UNDISPUTED FACTS ARE THAT THE ASSESSEE HAS AVAILED BOGUS BILLS FROM M/S. BOSTAM ENTERPRISES TO THE EXT ENT OF RS.8,63,66,200/- QUA WHICH THE ASSESSEE HAS FILED V ARIOUS EVIDENCES BEFORE THE AO SUCH AS PURCHASE AND SALE BILLS, BANK STATEMENT ETC. THE AOS MAIN PLEA TO MAKE THE ENTI RE ADDITION WAS THAT AN AFFIDAVIT TO THE SALES TAX DEPARTMENT BWAS GIVEN BY SHRI SHRI SACHIN YASHWANT YADAV THAT HE WAS NOT ENG AGED IN THE BUSINESS OF PURCHASE AND SALE OF GOODS OR MATER IAL BUT ONLY HAS ISSUED BILLS WHICH WERE MANIPULATED BY THE OTH ER PERSONS. SO THIS IS QUITE CLEAR THAT THE ASSESSEE IN THE PRE SENT CASE HAS IN FACT RECORDED THE PURCHASE AND SALES OF GOODS MEANI NG THEREBY THAT THE GOODS HAVE BEEN PURCHASED FROM THE GREY MA RKET AND THEN WERE FURTHER SOLD TO VARIOUS PARTIES. A FINDI NG OF FACT HAS BEEN RECORDED BY THE AO IN HIS ASSESSMENT ORDER IN PARA 2 AT ITA NO.6383/M/2016 M/S. VERITAS INDIA LTD. 4 PAGE 8 WHEREIN IT HAS BEEN STATED BY THE AO THAT TH E SAID SUPPLIES WERE MADE AT A MARGIN OF 0.25% WHEREAS THE OVERALL GP MARGIN WAS 4.82%. IN OUR OPINION, THE ORDER OF LD. CIT(A) DELETING THE ENTIRE ADDITION IS NOT CORRECT AND CAN NOT BE SUSTAINED UNDER THE PRESENT CIRCUMSTANCES AND SOME DISALLOWANCE HAS TO BE MADE TOWARDS THE SAVINGS IN FORM OF NON PAYMENT OF VAT AND OTHER INCIDENTAL EXPENSES WHICH T HE ASSESSEE MAY HAVE MADE BY PURCHASING THE GOODS FROM GREY MARKET SO TAKING A VERY REASONABLE VIEW OF THE MATT ER, WE ARE OF THE VIEW THAT IT WOULD BE QUITE REASONABLE IF A GP OF 2% IS DIRECTED TO BE ADDED IN VIEW OF THE FACT THAT THOUG H THE ASSESSEE HAS SUO-MOTO HAS SHOWN A GP OF 0.25% ON THE SALES M ADE OUT OF THE SAID PURCHASES BUT THE OTHER SAVINGS IN THE FOR M OF NON PAYMENT OF VAT AND OTHER EXPENSES HAS TO BE TAXED. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD. CIT(A) A ND DIRECT THE AO TO MAKE THE ADDITION @ 2%. 6. IN THE RESULT, APPEAL OF THE REVENUE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 28.11.2018. SD/- SD/- ( AMARJEET SINGH) (RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 28.11.2018. * 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.6383/M/2016 M/S. VERITAS INDIA LTD. 5 [ BY ORDER DY/ASS TT. REGISTRAR, ITAT, MUMBAI.