ACIT- CIRCLE 15 (1)(2), MUMBAI V. G-3 MOTORS LIMITED, NAVI MUMBAI

ITA 6518/MUM/2018

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 2085 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-12-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 14-11-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KUMAR PADMAPANI BORA
• Keywords: Bogus purchase; Cost of acquisition; Accommodation entries; Tax effect
• Section: 143(3); 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC, BENCH MUMBAI BEFORE SHRI R.C.SHARMA, ACCOUNTANT MEMBER ITA NO. 6518/MUM/2018 ( ASSESSMENT YEAR: 2011-12) A.C.I.T. CIRCLE-15(1)(2), MUMBAI. VS. M/S G-3 MOTORS LIMITED, PLOT NO. D-175, TTC INDUSTRIAL AREA, MIDC SHIRAVANE, NERUL, NAVI MUMBAI- 400705. PAN/GIR NO.AACCG 8148 E (APPELLANT ) .. (RESPONDENT ) REVENUE BY SHRI KUMAR PADMAPANI BORA (SR.DR) ASSESSEE BY NONE DATE OF HEARING 05/12/2019 DATE OF PRONOUNCEMENT 06/12/2019 / O R D E R PER: R.C. SHARMA, A.M. THIS IS THE APPEAL FILED BY THE REVENUE AGAINST TH E ORDER OF THE LD. CIT(A)-24, MUMBAI DATED 29/08/2018 FOR THE A.Y. 2011-12 IN THE MATTER OF ORDER PASSED U/S 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT, THE ACT). 2. NO BODY APPEARED ON BEHALF OF THE ASSESSEE IN SP ITE OF SERVICE OF NOTICE, THEREFORE, THE BENCH DECIDED TO DISPOSE OFF THE APPEAL AFTER HEARING THE LD. DR AND CONSIDERING THE MATERIAL PLA CED ON RECORD. 3. I HAVE GONE THROUGH THE ORDERS OF THE AUTHORITIE S BELOW AND FOUND THAT THE TAX EFFECT INVOLVED IN THE APPEAL FI LED BY THE REVENUE IS LESS THAN RS. 50.00 LACS, THEREFORE, IN VIEW OF THE CBDT CIRCULAR NO. 17 ITA NO. 6518/MUM/2018 ACIT VS M/S G-3, MOTORS LTD. 2 OF 2019 DATED 08.08.2019, THE APPEAL OF THE REVENUE DESERVES TO BE DISMISSED. 4. ON MERITS, I FOUND THAT THE ADDITION MADE BY THE A.O. ON ACCOUNT OF BOGUS PURCHASES WAS DELETED BY THE LD. CIT(A) BY ESTIMATING PROFIT @ 12.5% OF THE ALLEGED BOGUS PURCHASES. THE PRECISE FINDING OF THE LD. CIT(A) WAS AS UNDER: 2.4 I HAVE GIVEN MY CAREFUL CONSIDERATION TO THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED THE FACTUAL MATRIX OF THE CASE AS ALSO THE APPLICABLE LEGAL POSITION. 2.4.1 THE ONLY EFFECTIVE GROUND IS IN RESPECT OF THE ACTION OF THE LD. AO IN NOT ACCEPTING THE PURCHASES OF RS.4,60,404/- AS GENUINE PURCHASES BASED ON THE INFORMATION RECEIVED FROM INCOME TAX A UTHORITIES. BRIEFLY STATED, THE APPELLANT IS A COMPANY ENGAGED IN THE B USINESS OF TRADING. LD. AO MADE THE ADDITION ON THE BASIS OF INFORMATIO N RECEIVED FROM THE INVESTIGATION WING OF INCOME TAX DEPARTMENT, MUMBAI THAT THE SALES TAX DEPARTMENT HAD RECORDED THE STATEMENTS OF CERTA IN HAWALA OPERATORS WHO HAD CONFIRMED TO HAVE GIVEN BOGUS BIL L TO CERTAIN ASSESSEE INCLUDING THE APPELLANT COMPANY. THE BOGUS BILL WAS IN RESPECT OF 16 PARTIES. THE APPELLANT COMPANY WAS ASKED TO S UBMIT THE DETAILS OF PURPORTED PURCHASES MADE AND TO SHOW CAUSE WHY THE SAME SHOULD NOT BE DISALLOWED AS BOGUS PURCHASES. THE APPELLANT FIL ED THEIR REPLY STATING THAT PURCHASES WERE MADE FROM REGULAR PARTIES SUPPO RTED BY PROPER BILLS AND THE ACCOUNTING ENTRIES AND THE PAYMENTS W ERE MADE BY ACCOUNT PAYEE CHEQUES. THE LD.AO WAS NOT IN AGREEME NT WITH THE SUBMISSIONS OF THE APPELLANT AND OBSERVED THAT THE APPELLANT FAILED TO FURNISH THE SUPPORTING DOCUMENTARY EVIDENCE TO ESTA BLISH THAT THE PURCHASE WAS ACTUALLY MADE BY THEM FROM THESE PARTI ES SUCH AS TRANSPORTATION DOCUMENTS, INWARD REGISTER ETC. THE INVESTIGATION ITA NO. 6518/MUM/2018 ACIT VS M/S G-3, MOTORS LTD. 3 WING OF MUMBAI HAD PROVIDED A LIST OF HAWALA BILL R ACKETEERS WHO WERE INVOLVED IN ISSUING BILLS AND ALSO THE LIST OF BENEFICIARIES. THE SALES TAX DEPARTMENT OF MUMBAI HAD INVESTIGATED ALL THESE CASES THOROUGHLY AND PREPARED A LIST OF SUCH HAWALA OPERA TORS AND THEIR BENEFICIARIES WHICH HAVE BEEN UPLOADED IN THEIR WEBSITE. THE LD.AO OBSERVED THAT THESE HAWALA OPERA TORS WERE PROVIDING ONLY ACCOMMODATION ENTRIES AND THE APPELL ANT WAS ALSO IN THE LIST BENEFICIARIES. ACCORDINGLY, THE LD. AO TREATED THE AMOUNT OF RS.4,60,4041- AS BOGUS PURCHASE AND ADDED THE SAME TO THE TOTAL INCOME OF THE APPELLANT. UNDER SIMILAR CIRCUMSTANCE S THE HONBLE HIGH COURT OF GUJARAT IN THE CASE OF SIMIT P SETH, 2013 (356 ITR 451) HAD ON OCCASION TO DELIVER ITS JUDGMENT BY CONFIRMING THE DECISION OF THE ITAT WHICH HAS ESTIMATED THE DISALLOWANCE AT 12.5% OF THE DISPUTED BOGUS PURCHASES TO MEET THE END OF JUSTICE. THE HEAD- NOT E OF THE DECISION IS REPRODUCED AS UNDER- 'SECTION 145 OF THE INCOME-TAX ACT, 1961- METHOD OF ACCOUNTING- ESTIMATION OF PROFITS [ BOGUS PURCHASE] ASSESSMENT YEAR 2006-07 ASSESSEE WAS ENGAGED IN BUS INESS OF TRADING IN STEEL ON WHOLESALE BASIS. ASSESSING OFFI CER HAVING FOUND THAT SOME ALLEGED SUPPLIERS OF STEEL TO ASSESSEE HA D NOT SUPPLIED STEEL TO ASSESSEE BUT HAD ONLY PROVIDED SALE BILLS, HELD THAT PURCHASES MADE FROM SAID PARTIES WERE BOGUS HE ACCORDINGLY, ADDED ENTIRE AMOUNT PURCHASES TO GROSS PROFIT OF ASSESSEE - COMMISSIONER (APPEALS) ) HAVING FOUND TH AT ASSESSEE HAD INDEED MADE PURCHASES THOUGH NOT FROM NAMED PAR TIES BUT OTHER PARTIES FROM GREY MARKET, SUSTAINED ADDIT ION TO EXTENT OF 30% OF PURCHASE COST AS PROBABLE PROFIT O F ASSESSEE- TRIBUNAL HOWEVER, SUSTAINED ADDITION TO EXTENT OF 1 2.5%- WHETHER SINCE PURCHASES WERE NOT BOGUS BUT WERE MADE FROM P ARTIES OTHER THAN THOSE MENTIONED IN BOOKS OF ACCOUNT, ONLY PROF IT ELEMENT EMBEDDED IN SUCH PURCHASES COULD BE ADDED TO ASSESS EE'S INCOME- HELD, YES WHETHER HENCE, ORDER OF TRIBUNAL NEEDED NO INTERFERENCE- HELD, YES [PARAS 6,7 & 9][ IN FAVOUR OF ASSESSEE]'. [EMPHASIS SUPPLIED] ITA NO. 6518/MUM/2018 ACIT VS M/S G-3, MOTORS LTD. 4 BASED ON THE EVIDENCE IN HAND IN THE FORM OF A REPO RT FROM DIT (INV), MUMBAI THE AO HAS ASKED THE ASSESSEE TO PRODUCE THE PARTIES ALONG WITH EVIDENCE IN ORDER TO VERIFY THE GENUINENESS OF PURC HASE TRANSACTIONS. THE ASSESSEE INSTEAD SUBMITTED THE LE DGER ACCOUNTS OF THE ABOVE PARTIES AND BANK STATEMENTS EXTRACTS E VIDENCING THE PAYMENTS THROUGH BANK CHEQUE. IN THIS CASE, THE ONU S LIES ON THE ASSESSEE TO PROVE THE GENUINENESS OF THE PURCHASES AND THE ASSESSEE HAD TO PROVE THAT THE SUPPLIERS WERE GENUI NELY EXISTING. THE ASSESSEE HAS NOT MADE ANY EFFORTS TO DISCHARGE THE ONUS AND FAILED TO PRODUCE ANY OF THE PARTIES, IN SPITE OF THE OPPORTU NITIES GIVEN BY THE LD.AO. THE ASSESSEE COULD NOT SATISFACTORILY SUBSTA NTIATE AND ESTABLISH THE FACT THAT THERE WERE GENUINE PURCHASES FROM THE SE PARTIES. THERE WAS A REPORT FROM SIT(INV) STATING THAT ALL THE SELLER PARTIES AS PER THE LIST SUPPLIED BY THEM ARE BOGUS INCLUDING THE PARTIES AP PEARING IN THE BOOKS OF THE APPELLANT COMPANY AND AS STATED ABOVE, THE ASSESSEE HAS NOT MADE COUNTER SUBMISSION TO SHOW TH AT THOSE PARTIES ARE REALLY EXISTING. THE AO HAS BROUG HT TO TAX THE BOGUS PURCHASES BY ADOPTING THE METHOD @ 100% OF SUCH PURCHASES KEEPING IN VIEW THE GAIN MADE BY THE APPELLANT DUE TO PURCHASES OF MATERIAL IN GREY MARKET WITHOUT BIL LS AND ADJUSTING THE PURCHASES WITH THE INVOICES TAKEN FRO M THE HAWALA TRADERS UNDER DISCUSSIONS. UNDER THESE CIRCUMSTANCE S THE AD CANNOT BE FOUND FAULT ON THIS COUNT. EVEN THOUGH THE AD CO ULD NOT PROVE SUBSTANTIVELY THAT THE AMOUNTS GIVEN TO THE SELLERS IN CHEQUE FROM HAVE CAME BACK TO THE APPELLANT, THE ACTIVITIE S OF ACCOMMODATION ENTRIES IN THE TRADING COMMUNITY IS N OT UNHEARED OF. FURTHER, THE INVESTIGATIONS CARRIED OUT BY THE SALE S TAX DEPARTMENT, ANOTHER GOVERNMENT AGENCY, WITH REGARD TO VAT VIOLATION CANNOT BE LOST SIGHT OF. FURTHER, AS SOME OF THE NAMES OF THE SO-CALLED BOGU S SELLERS OUT OF THE LIST SUPPLIED BY THE SALES TAX DEPARTMENT ARE APPEA RING IN THE ITA NO. 6518/MUM/2018 ACIT VS M/S G-3, MOTORS LTD. 5 BOOKS OF THE APPELLANT COMPANY, THE LINK OF INVOLVE MENT OF APPELLANT COMPANY GETTING BOGUS BILLS IS ESTABLISHE D. EVEN THOUGH THERE ARE CATENA OF CASES DECIDED BY THE JURISDICTI ONAL ITAT WHISH HAVE DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE, T HEY ARE NOT UNIFORM IN ALL THE CASES AS THEY WERE DECIDED AS PE R FACTS AND CIRCUMSTANCES OF THAT PARTICULAR CASE BEFORE THEM. I AM OF THE OPINION THAT THE FACTS AND CIRCUMSTANCE S OF THE PRESENT CASE ARE MORE AKIN TO THE CASE DECIDED BY THE HONBLE GU JARAT HIGH COURT IN THE CASE OF SIMIT P SETH (SUPRA). THEREFORE, I HERE BY CONFIRM THE DISALLOWANCE TO THE EXTENT RATIO 12.5% AMOUNTING TO RS. 57,550/-. THE APPELLANT SUCCEEDS PARTIALLY AND THIS GROUND IS PAR TLY ALLOWED. 5. IT IS CLEAR FROM THE ORDER OF THE LD. CIT(A) THA T HE HAS CONSIDERED VARIOUS JUDICIAL PRONOUNCEMENTS AND AFTER CONSIDERI NG THE TOTALITY OF FACTS AND CIRCUMSTANCES OF THE CASE, REACHED TO THE CONCLUSION THAT THE DISALLOWANCE SHOULD BE CONFINED TO 12.5% OF THE ALL EGED BOGUS PURCHASES RATHER THAN 100%, THEREFORE, I DO NOT FIN D ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A) IN RESTRICTING THE ADDI TION TO THE EXTENT OF 12.5%. I UPHOLD THE SAME. 6. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 06 TH DECEMBER, 2019. SD/- (R.C.SHARMA) ACCOUNTANT MEMBER MUMBAI; DATED 06/12/2019 *RANJAN ITA NO. 6518/MUM/2018 ACIT VS M/S G-3, MOTORS LTD. 6 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//