M/s. S V S Chemical Corporation, Pune V. Deputy Commissioner of Income-tax,

ITA 640/PUN/2016

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 4041 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 6 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-11-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 09-10-2018
• Assessment Year: 2009-2010
• Appeal Filed On: 11-04-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SANJEEV GHAI
• Keywords: Rule of consistency; Accommodation entries

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, PUN E . , , , BEFORE SHRI D. KARUNAKARA RAO, AM AND SHRI VIKAS AWASTHY, JM . / ITA NOS.640 & 641/PUN/2016 / ASSESSMENT YEARS : 2009-10 & 2010-11 M/S. SVS CHEMICAL CORPORATION, 520 NEW RASTA PETH, 1 ST FLOOR, MAHAVIR PALACE, PUNE-411 011 PAN : AAEFS2500H ....... / APPELLANT / V/S. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-6, PUNE / RESPONDENT . / ITA NOS.1479 & 1496/PUN/2016 / ASSESSMENT YEARS : 2009-10 & 2010-11 THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-6, PUNE ....... / APPELLANT / V/S. M/S. SVS CHEMICAL CORPORATION, 520 NEW RASTA PETH, 1 ST FLOOR, MAHAVIR PALACE, PUNE-411 011 PAN : AAEFS2500H / RESPONDENT ASSESSEE BY : SHRI PRAYAG JHA & SHRI PRATEEK JHA REVENUE BY : SHRI SANJEEV GHAI / DATE OF HEARING : 09.10.2018 / DATE OF PRONOUNCEMENT : 02.11.2018 / ORDER PER D. KARUNAKARA RAO, AM THERE ARE TWO SETS OF CROSS APPEALS. ITA NOS. 640 & 641/PUN/2016 ARE FILED BY THE ASSESSEE AND ITA NOS. 1479 AND 1496/P UN/2016 ARE FILED 2 M/S. SVS CHEMICAL CORPORATION BY THE REVENUE AGAINST SEPARATE ORDERS OF CIT(A)-2, PUN E, COMMONLY DATED 01-02-2016 FOR THE A.YRS. 2009-10 AND 2010-11 RE SPECTIVELY. IDENTICAL GROUNDS HAVE BEEN RAISED BY THE ASSESSEE AND REVENUE IN THESE APPEALS. THEREFORE, THESE APPEALS WERE CLUBBED TOGETHER AND ARE BEING ADJUDICATED IN THIS COMPOSITE ORDER. CROSS APPEALS FOR THE A.Y. 2009-10 2. WE SHALL FIRST TAKE UP THE APPEAL OF THE ASSESSEE ITA NO.640/PUN/2016 FOR THE A.Y. 2009-10 AS THE STANDARD ONE. 3. BRIEFLY STATED, RELEVANT FACTS OF THE CASE INCLUDE THAT THE ASSESSEE IS A COMPANY AND IS ENGAGED IN THE BUSINESS OF DEALING IN IN DUSTRIAL AND LABORATORY CHEMICALS, SOLVENTS, ACIDS AND GENERAL MERCHANTS AND COMMISSION AGENTS. ASSESSEE FILED THE RETURN OF INCOME ON 29-09-209 DECLARING TOTAL INCOME OF RS.1,14,27,750/-. ASSESSEES CASE WAS REOPENED U/S.147 OF THE ACT. DURING THE A.Y. 2009-10, THE AO, BASE D ON THE INFORMATION GIVEN BY SALES TAX DEPARTMENT OF MAHARASHTRA STATE, NOTICED THAT ASSESSEE MADE PURCHASES FROM CERTAIN DEALERS WHOS E NAMES ARE IN THE SUSPECTED LIST OF SUPPLIERS. EVENTUALLY, AT THE END OF THE ASSESSMENT, THE AO DISALLOWED AN AMOUNT OF RS.1,43,21,511/-. 4. IN THE FIRST APPELLATE PROCEEDINGS, THE CIT(A) RELYING O N THE JUDGMENT OF GUJARAT HIGH COURT IN THE CASE OF CIT VS. BH ONALATH POLY FAB P. LTD. 355 ITR 290, HELD THAT GROSS PROFIT @15% OF THE A LLEGED PURCHASES WOULD MEET THE ENDS OF JUSTICE. THUS, THE CIT(A) CONFIRMED THE ADDITION TO THE EXTENT OF RS.14,80,110/- AND GAVE RELIEF OF RS.1,28,41,4 01/-. CONTENTS OF OPERATIONAL PARA NO.5.3.5 OF THE ORDER OF CIT(A) ARE RELEVANT . 5. AGGRIEVED WITH THE ORDER OF CIT(A) CONFIRMING THE PART A DDITION, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. FURTHER, AGGRIE VED WITH THE RELIEF GIVEN BY THE CIT(A), THE REVENUE IS IN APPEAL BEFORE T HE TRIBUNAL. 3 M/S. SVS CHEMICAL CORPORATION THE FOLLOWING ARE GROUNDS RAISED BY BOTH ASSESSEE & REVE NUE IN THEIR RESPECTIVE APPEALS : GROUNDS BY ASSESSEE : ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW- 1. THE LEARNED CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE ADDITION OF RS.14,80,110/- ON ACCOUNT OF GROSS PROFIT ON PURCHA SES OF RS.98,67,398/- WITHOUT APPRECIATING THAT THE ASSESS EE HAD FURNISHED ALL THE PARTICULARS OF PURCHASES AND SALES ALONG WI TH DETAILS OF QUANTITY AND THE ASSESSEE HAD NOT EARNED ANY PROFIT ON THESE PURCHASES WHICH WAS NOT RECORDED IN THE BOOKS OF ACCOUNT. 2. THE LEARNED CIT(A) WAS NOT JUSTIFIED IN SUSTAINING ADDITION OF RS.14,80,110/- ONLY ON THE BASIS OF PRESUMPTION AND SURMISES AND WITHOUT HAVING ANY MATERIAL TO SUPPORT HIS CONCLUSI ON. 3. THE ABOVE GROUNDS OF APPEAL ARE WITHOUT PREJUDICE T O ONE ANOTHER. 4. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY OF THE ABOVE GROUNDS OR TO ADD NEW GROUNDS DURING THE COURSE OF APPEAL P ROCEEDINGS . GROUNDS BY REVENUE: 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) IS JUSTIFIED IN DELETING THE ADDITION S OF RS.41,31,123/- (RS.1,44,612/- & RS.39,86,511/-) ON ACCOUNT OF NON GENUINE PURCHASES MADE BY THE ASSESSEE . 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) IS JUSTIFIED IN HOLDING THAT ONLY PROFIT MARGIN IS EMBEDDED IN RESPECT OF OTHER STATES PURCHASES OF RS.98,67,398/- AND THEREBY ESTIMATING SUCH PROFIT @5% AND RESTRICTING THE ADDITION TO THE EXTENT OF RS.14,80,110/- AS AGAINST THE TOTAL DISALLOWANCE OF PURCHASE OF R S.98,67,398/- WITHOUT ANY JUSTIFICATION . 3. FOR THESE AND SUCH OTHER REASONS AS MAY BE URGED AT THE TIME OF HEARING, THE ORDER OF THE CIT(A) MAY BE VACATED AND THAT OF THE ASSESSING OFFICER BE RESTORED. 4. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER OR DELETE ANY OF THE ABOVE GROUNDS OF APPEAL DURING THE COURSE OF APPELL ATE PROCEEDINGS BEFORE THE HON'BLE TRIBUNAL . 6. WE HEARD BOTH THE SIDES AND PERUSED THE ORDERS OF T HE REVENUE AND THE DECISIONS RELIED ON BY BOTH THE SIDES. ON PERUSIN G THE ORDER OF CIT(A), WE PROCEED TO EXTRACT THE FINDING GIVEN BY THE TRIB UNAL AND THE SAME READS AS UNDER: 5.3.5 IN THE LIGHT OF FACTS AVAILABLE IN THE CASE OF THE APPELLANT, I FEEL THAT THE RATIO OF THE DECISION OF HONBLE GUJARAT HIGH C OURT APPLIES TO THE PRESENT 4 M/S. SVS CHEMICAL CORPORATION CASE AS WELL. IN THE CASE OF THE APPELLANT AS WELL , IT HAS BEEN ABLE TO FILE EVIDENCES REFLECTING THAT PURCHASES WERE THERE ALTH OUGH FROM SOME OTHER PARTIES AND NOT FROM THE PARTIES AS SHOWN IN THE BO OKS OF ACCOUNT, FROM WHOM JUST BILLS OBTAINED. THERE ARE CORRESPONDING SALES ALSO. ACCORDINGLY FOLLOWING THE RATIO OF THIS DECISION, IT CANNOT BE SAID THAT ENTIRE PURCHASES OF RS.98,67,398/- IS DISALLOWABLE. I ACCORDINGLY HOLD THAT THE APPELLANT IS TAXABLE ON THE AMOUNT OF GROSS PROFIT WHICH HAS ARI SEN OUT OF SUCH PURCHASES FOR WHICH BILLS HAVE BEEN PROCURED FROM LOCAL PART IES. THE AVERAGE RATE OF G.P. SHOWN BY THE APPELLANT DURING THE PRECEDING YEARS IS BETWEEN 10% TO 11%. CONSIDERING THE ADDITIONAL BEN EFIT ON ACCOUNT OF VAT CREDIT ON THESE PURCHASES A FACT WHICH HAS BEEN AD MITTED BY THE APPELLANT), I CONSIDER IT FAIR AND REASONABLE TO ESTIMATE GROSS PROFIT AT THE RATE OF 15% ON THE AMOUNT OF PURCHASES OF RS.98, 67,398/-, FOR WHICH ADMITTEDLY BILLS HAVE BEEN PROCURED BY THE AP PELLANT FORM NON- GENUINE PARTIES. THUS, THE AMOUNT OF GROSS PROFIT IS COMPUTED AT RS.14,80,110/- BEING 15% OF RS.98,67,398/-. THE AD DITION TO THE EXTENT OF RS.14,80,110/- IS ACCORDINGLY CONFIRMED. 5.3.6 THUS, OUT OF TOTAL ADDITION OF RS.1,43,21,511 /-, THE APPELLANT GETS RESULTANT RELIEF OF RS.1,28,41,401/- (1,43,21,511 14,80,110). 6.1 WE FIND SIMILAR VIEW HAS BEEN APPROVED BY THE COORDINAT E BENCH OF THE TRIBUNAL IN THE CASE OF DCIT VS. M/S. RANG RASAYAN AN D VICE VERSA IN ITA NO.1495 AND 639/PUN/2016, ORDER DATED 20-07-2018 FOR THE A.Y. 2009-10. THE FINDING GIVEN BY THE TRIBUNAL READS AS UNDER : 13. AFTER HEARING BOTH THE PARTIES ON THIS SOLITA RY ISSUE AND ON PERUSAL OF THE ORDERS OF THE REVENUE AUTHORITIES, WE FIND IT R ELEVANT TO REPRODUCE THE FINDING GIVEN BY THE CIT(A) IN PARA NO.5.3.3 OF HIS ORDER AND THE SAME READS AS UNDER : 5.3.3 IN THE LIGHT OF THE FACTS AVAILABLE IN THE CASE OF THE APPELLANT, I FEEL THAT THE RATIO OF THE DECISION OF HONBLE GUJARAT HIGH COURT APPLIES TO THE PRESENT CASE AS WELL. IN THE CASE OF THE APPELLANT AS WELL, IT HAS BEEN ABLE TO FILE EVIDENCES REFLECTING THAT PURCHASES WERE THERE ALTHOUGH FROM SOME OTHER PARTI ES AND NOT FROM THE PARTIES FROM WHOM JUST BILLS WERE OBTA INED. THERE ARE CORRESPONDING SALES ALSO. ACCORDINGLY, F OLLOWING THE RATIO OF THIS DECISION, IT CANNOT BE SAID THAT ENTIRE PUR CHASES OF RS.50,43,126/- IS DISALLOWABLE. I ACCORDINGLY HOLD THAT THE APPELLANT IS TAXABLE ON THE AMOUNT OF GROSS PROFIT WHICH HAS ARISEN OUT OF SUCH PURCHASES FOR WHICH BILLS HAVE BEEN PROCURED FROM L OCAL PARTIES. THE AVERAGE RATE OF G.P. SHOWN BY THE APPELLANT DURING THE PRECEDING YEARS IS BETWEEN 10% TO 12%. CONSIDERING THE ADDITIONAL BENEFIT ON ACCOUNT OF VAT CREDIT ON THESE PURCHASES (A FACT WHICH HAS BEEN ADMITTED BY THE APPELLANT), I CONSID ER IT FAIR AND REASONABLE TO ESTIMATE GROSS PROFIT AT THE RATE OF 15% ON THE AMOUNT OF PURCHASES OF RS.50,43,126/-, FOR WHIC H ADMITTEDLY BILLS HAVE BEEN PROCURED BY THE APPELLAN T FROM NON-GENUINE PARTIES. THUS, THE AMOUNT OF GROSS PROFIT IS COMPUTED AT RS.7,56,469/- BEING 15% OF RS.50,43,126/-. THE ADDITION TO THE EXTENT OF RS.7,56,469/- IS ACCORDINGLY CONFIRMED. 5 M/S. SVS CHEMICAL CORPORATION 14. FROM THE ABOVE, IT IS EVIDENT THAT ASSESSEE FUR NISHED THE PURCHASE BILLS AND THE EVIDENCES FOR PAYMENT TO THE SUPPLIER S THROUGH BANKING CHANNELS. COPIES OF THE BANK STATEMENTS ARE EVIDEN T IN THE RECORDS. NOWHERE IT IS MENTIONED THAT THE ASSESSEE FAILED TO PROVE THE TRAIL OF GOODS TO THE PREMISES OF THE ASSESSEE. FURTHER, IT IS NO T THE CASE OF MERE BUYING THE ACCOMMODATION ENTRIES THROUGH THE ENTRY OPERATO RS BUT THERE IS AN UNDISPUTED FACT OF BUYING THE EQUIVALENT PURCHASES FROM THE GREY MARKET. THEREFORE, IT IS A CASE OF NOT OFFERING THE RELEVAN T PROFITS PROPERLY IN THE RETURN OF INCOME. THEREFORE, THE CIT(A)S DECISION IN RESTRICTING THE DISALLOWANCE TO 15% ON ACCOUNT OF SUCH PURCHASES, DE SPITE THE BOOKS RESULTS ARE ALREADY OFFERED BY THE ASSESSEE, IS FAIR AND REASONABLE. ACCORDINGLY, THE GROUNDS RAISED BY THE ASSESSEE A RE DISMISSED. 6.2 FROM THE ABOVE, WE FIND THE FACTS OF THE PRESENT CASE ARE IDENT ICAL TO THE FACTS IN THE CASE OF DCIT VS. M/S. RANG RASAYAN (SUP RA). THEREFORE, CONSIDERING THE RULE OF CONSISTENCY, WE APPROVE THE VIEW T AKEN BY THE LD.CIT(A) ADOPTING GROSS PROFIT @5% OF THE PURCHASES AND D ISMISS THE GROUNDS RAISED BY THE ASSESSEE. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISMISSED. CROSS APPEAL BY REVENUE - ITA NO.1479/PUN/2016 A.Y. 2009-10 8. SINCE WE HAVE APPROVED THE VIEW TAKEN BY THE LD.CIT (A) DISMISSING THE GROUNDS RAISED BY THE ASSESSEE, WE FIND ADJUDICATION OF GROUNDS RAISED BY THE REVENUE BECOMES AN ACADEMIC EXERCISE. TH US, THE GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 9. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. ITA NO.641/PUN/2016 BY ASSESSEE ITA NO.1496/PUN/2016 BY REVENUE A.Y. 2010-11 10. THE GROUNDS RAISED IN THE CROSS APPEALS, THE FACTS/ISS UES, DECISION OF AO/CIT(A), ARGUMENTS OF THE PARTIES ARE SIMILAR TO THAT O F A.Y. 2009-10. THEREFORE, FOLLOWING THE PARITY OF REASONING GIVEN IN A.Y. 2009- 10, WE 6 M/S. SVS CHEMICAL CORPORATION DISMISS THE GROUNDS RAISED BY BOTH THE ASSESSEE AS WELL AS THE REVENUE IN THEIR RESPECTIVE APPEALS. 11. IN THE RESULT, THE APPEALS OF THE ASSESSEE AS WELL AS THE REVENUE ARE DISMISSED. 12. TO SUM UP, BOTH THE APPEALS OF THE ASSESSEE AS WELL A S THE APPEALS OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED ON 02 ND DAY OF NOVEMBER, 2018. SD/- SD/- ( /VIKAS AWASTHY) ( . /D. KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER / PUNE; / DATED : 02 ND NOVEMBER, 2018. SATISH # # # # / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. THE CIT(APPEALS)-2, PUNE. 4. THE PR. CIT-3, PUNE. , , , / DR, ITAT, A BENCH, PUNE. 6. / GUARD FILE. / BY ORDER, // TRUE COPY // SENIOR PRIVATE SECRETARY , / ITAT, PUNE.