MUHTA MARKFIN (P) LIMITED, MUMBAI V. ITO-5(2)(3), MUMBAI

ITA 6555/MUM/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 0591 (ITAT-MUMBAI)
• Duration Of Justice: 2 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-02-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 09-11-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: N HEMLATA
• Assessee Lawyers: S SRIRAM
• Keywords: Bogus purchase; Accommodation entries
• Section: 143(3)

Judgement Text

P A G E | 1 ITA NO. 6555/MUM/2017 AY: 2009 - 10 M/S MUHTA MARKFIN (P) LIMITED VS. ITO - 5(2)(3) IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, M UMBAI BEFORE SHRI G.S.PANNU, AM AND SHRI RAVISH SOOD, JM ITA NO. 6555/MUM/2017 ( / ASSESSMENT YEAR:2009 - 10 ) M/S MUHTA MARKFIN (P.) LIMITED 59/61, 4 TH FLOOR, KUMBHARWAEDA, PRABHU RAM MANDIR MARG, MUMBAI - 400004 / VS. I.T.O - 5(2)(3 ), AAYAKAR BHAVAN, 5 TH FLOOR R. NO. 566, MUMBAI - 20 . ./ ./ PAN NO. AABCM0146P ( / APPELLANT) : ( / RESPONDENT ) / APPELLANT BY : SHRI S. SRIRAM , A.R / RESPONDENT BY : MS. N. HEMLATA, SR. D.R / DATE OF HEARING : 01.02 .2018 / DATE OF PRONOUNCEMENT : 07 .02.2018 / O R D E R PER RAVISH SOOD, JUDICIAL MEMBER: THE PRESENT APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A) - 10, MUMBAI, FOR AY 2009 - 10, WHICH IN ITSELF ARISES FROM THE ORDER PASSED BY THE A.O UNDER SEC. 143(3) R.W.S. 147 OF THE INCOME TAX ACT, 1961 (FOR SHORT ACT), DATED 18.03.2015. THE ASSESSEE ASSAILING THE ORDER OF THE CIT(A) HAD RAISED BEFORE US THE FOLLOWING GROUNDS OF APPEAL: - P A G E | 2 ITA NO. 6555/MUM/2017 AY: 2009 - 10 M/S MUHTA MARKFIN (P) LIMITED VS. ITO - 5(2)(3) 1. THE LEARNED CIT(A) - 10 HAS ERRED IN DISMISSING THE GROUNDS OF APPEALS WITHOUT CONSIDERING THE SUBMISSION MADE BY APPELLANT AND UPHELD THE ADDITION OF RS.27,6,854/ - MADE BY THE INCOME TAX OFFICER. 2. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER OR DELETE THE SAID GROUND OF APPEAL. 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY WHICH IS ENGAGED IN THE BUSINESS OF DEALING IN S TAINLESS STEEL ITEMS HAD FILED ITS RETURN OF INCOME FOR AY 2009 - 10 ON 17.09.2009, DECLARING TOTAL INCOME AT RS.21,682/ - . THE RETURN OF INCOME FILED BY THE ASSESSEE WAS PROCESSED AS SUCH UNDER SEC. 143(1) OF THE ACT. THAT INFORMATION SHARED BY THE DGIT (INV ESTIGATION), MUMBAI WITH THE A.O AS REGARDS C ERTAIN PARTIES WHICH WERE FOUND BY THE SALES TAX DEPARTMENT TO BE ISSUING BOGUS PURCHASE BILLS WITHOUT ACTUAL DELIVERY OF GOODS AND MATERIALS, REVEALED THAT THE ASSESSEE AS A BENEFICIARY IN RESPECT OF THE SAID HAWALA TRANSACTIONS HAD DURING THE YEAR UNDER CONSIDERATION, VIZ. AY: 2009 - 10 TAKEN BOGUS PURCHASE BILLS FROM THE FOLLOWING PARTIES: SR. NO. NAME OF THE PARTY TRANSACTION AMOUNT (RS.) 1. M/S VIDHI METAL INDUSTRIES 14,51,995/ - 2. M/S BHAVAIMAA IMPEX 7,62,840/ - TOTAL 22,14,835/ - THE A.O ON THE BASIS OF THE AFORESAID INFORMATION REOPENED THE CASE OF THE ASSESSEE UNDER SEC. 147 OF THE ACT. 3. THAT DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS THE A.O CALLED UPON THE ASSESSEE TO SUBSTANTIATE THE GENUINENESS AND VERACITY OF THE PURCHASE TRANSACTIONS ON THE BASIS OF DOCUMENTARY EVIDENCE , AS WELL AS DIRECTED IT TO PRODUCE THE PARTIES FOR NECESSARY EXAMINATION BE FORE HIM. THE ASSESSEE IN COMPLIANCE TO THE DIRECTIONS OF THE A.O P A G E | 3 ITA NO. 6555/MUM/2017 AY: 2009 - 10 M/S MUHTA MARKFIN (P) LIMITED VS. ITO - 5(2)(3) PLACED ON RECORD CERTAIN DETAILS WITH THE A.O. THE A.O AFTER DELIBERATING ON THE REPLY OF THE ASSESSEE WAS HOWEVER NOT PERSUADED TO ACCEPT THE GENUINENESS AND VERACITY OF THE PURCHASE TRANSACTIONS FOR CERTAIN REASONS, VIZ. (I) THAT THE COMPUTER GENERATED BILLS DID NOT INSPIRE ANY CONFIDENCE AS REGARDS THE AUTHENTICITY AND GENUINENESS OF THE SAME ; (II) THE ADDRESSES SHOWN ON THE BILLS WERE FOUND TO BE THE RESIDENTIAL ADDRESSES OF THE PARTIES ; AND (III) THAT THOUGH SOME OF THE PARTIES WER E FOUND TO BE LOCATED NEAR THE PREMISES OF THE ASSESSEE COMPANY, BUT HOWEVER, THE ASSESSEE DESPITE THE SAID FACT HAD FAILED TO PRODUCE THEM FOR EXAMINATION BEFORE THE A.O . THE A.O ON THE BASIS OF HIS AFORESAID OBSERVATIONS HELD A CONVICTION THAT THE ASSESS EE BY FAILING TO PROVE THE AUTHENTICITY OF THE PURCHASE TRANSACTIONS UNDER CONSIDERATION HAD FAILED TO DISCHARGE THE ONUS AS WAS SO CAST UPON IT. HOWEVER, THE A.O OBSERVED THAT AS THERE WERE SALES CORRESPONDING TO THE PURCHASES UNDER CONSIDERATION, THEREFO R E, IT COULD SAFELY BE CONCLUDED THAT THOUGH THE ASSESSEE HAD PURCHASE D THE GOODS UNDER CONSIDERATION, BUT HOWEVER, THE SOURCE OF THE SAID PURCHASES COULD NOT BE VERIFIED. THE A.O IN THE BACKDROP OF THE INFORMATION SHARED BY THE SALE TAX AUTHORITIES THAT T HE ASSESSEE AS A BENEFICIA RY HAD TAKEN ACCOMMODATION ENTRIES , THEREFORE, CONCLUDED THAT THE ASSESSEE HAD DEFINITELY INFLATED THE PURCHASE PRICE ON THE BASIS OF FICTITIOUS INVOICES OBTAINED FROM THE AFOREMENTIONED BOGUS PARTIES. THE A.O BEING OF THE VIEW TH AT THE ASSESSEE HAD BENEFITED BY PURCHASING THE GOODS FROM CERTAIN UNIDENTIFIED PARTIES AT A RATE LOWER THAN THAT AT WHICH THE SAME WAS BOOKED IN ITS BOOKS OF ACCOUNTS, RELIED ON THE JUDGMENT OF THE HONBLE HIGH COURT OF GUJARAT IN THE CASE OF CIT VS. SIMI T P. SHETH (2013) 356 ITR 451 (GUJ) AND QUANTIFIED SUCH BENEFIT/PROFIT @ 12.5% OF THE BOGUS PURCHASES OF RS.22,14,835/ - AND MADE A CONSEQUENTIAL ADDITION OF RS.2,76,854/ - IN THE HANDS OF THE ASSESSEE. P A G E | 4 ITA NO. 6555/MUM/2017 AY: 2009 - 10 M/S MUHTA MARKFIN (P) LIMITED VS. ITO - 5(2)(3) 4. AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). THE ASSESSEE SUBMITTED BEFORE THE CIT(A) THAT AS IT HAD PRODUCED ALL THE DETAILS BEFORE THE A.O IN SUPPORT OF THE GENUINENESS OF THE PURCHASE TRANSACTIONS UNDER CONSIDERATION, THEREFOR E, BY PROVING THE IDENTIFY OF THE PARTIES AND THE AUTHENTICITY OF THE TRANSACTION S THE PRIMARY ONUS AS WAS SO CAST UPON IT WAS DULY DISCHARGED. THE CIT(A) IN ORDER TO VERIFY THE GENUINE NESS OF THE PURCHASE TRANSACTIONS DIRECTED THE ASSESSEE TO PLACE ON REC ORD THE PURCHASE ORDER S , PURCHASE INVOICES, DELIVERY CHALLANS, BILLS FOR TRANSPORT AND QUANTITATIVE RECONCILIATION OF TOTAL PURCHASES AND SALES AND THE DETAILS OF PAYMENTS MADE TO THE AFORESAID PARTIES. THE ASSESSEE IN COMPLIANCE TO THE DIRECTIONS OF THE C IT(A) THOUGH FURNISHED WITH HIM THE TAX INVOICES FOR PURCHASE AND SALE OF THE MATERIAL ALONG WITH THE COPY OF THE STOCK REGISTER, BUT HOWEVER , FAILED TO PRODUCE THE DELIVERY CHALLANS FOR THE REASON THAT THE SAME ON RECEIPT OF GOODS WERE RETURNED TO THE SEL LER AND NO COPY OF THE SAME WAS RETAINED. THE CIT(A) AFTER DELIBERATING ON THE EXPLANATION OF THE ASSESSEE WAS HOWEVER NOT IMPRESSED BY THE SAME. THE CIT(A) OBSERVED THAT NOT ONLY THE AFORESAID SUPPLIER PARTIES WERE FOUND TO BE NON - EXISTENT , BUT RATHER, TH E ASSESSEE DESPITE SPECIFIC DIRECTIONS BY THE A.O HAD NEITHER PRODUCED THEM FOR EXAMINATION, NOR PLACED THEIR CONFIRMATIONS ON RECORD . THE CIT(A) FURTHER OBSERVED THAT THE ASSESSEE HAD ALSO FAILED TO PLACE ON RECORD THE DELIVERY CHALLANS, T RANSPORT BILLS/RECEIPTS, CONFIRMATIONS FROM TRANSPORT OPERATOR S , ASSESSMENT UNDER STATE VAT LAW OF SELF AND SUPPLYING DEALERS OR ANY OTHER STATUTORY RECORD WHICH COULD GO TO IRREFUTABLY PROVE TO THE HILT THE GENUINENESS AND VERACITY OF THE PURCHASE TRANSACTIONS UN DER CONSIDERATION. THE CIT(A) BEING OF THE VIEW THAT AS THE ASSESSEE HAD FAILED TO PROVE THAT IT HAD RECEIVED THE GOODS FROM THE AFOREMENTIONED PARTIES, THEREFORE, OBSERVED THAT THE A.O HAD RIGHTLY CHARACTERISED THE P A G E | 5 ITA NO. 6555/MUM/2017 AY: 2009 - 10 M/S MUHTA MARKFIN (P) LIMITED VS. ITO - 5(2)(3) PURCHASE TRANSACTIONS UNDER CONSIDERATIO N AS BOGUS. THE CIT(A) WAS ALSO NOT PERSUADED TO BE IN AGREEMENT WITH THE ASSESSEE THAT THE AUTHENTICITY OF THE PURCHASE TRANSACTIONS UNDER CONSIDERATION COULD BE GATHERED FROM THE FACT THAT THE PAYMENT OF THE PURCHASE CONSIDERATIO N TO THE AFOREMENTIONED P ARTIES WAS MADE BY CHEQUES. THE CIT(A) OBSERVED THAT THE FACT THAT THERE WAS A SUBSTANTIAL TIME GAP BETWEEN THE PURCHASE TRANSACTIONS AND THE PAYMENTS MAD E TO THE AFOREMENTIONED PARTIES AND A SUBSTANTIAL AMOUNT OF THE PURCHASE CONSIDERATION REMAINED PAYABLE TO THE AFORE SAID RESPECTIVE PARTIES ON 31 ST DAY OF MARCH, 2009 , THUS , DID NOT INSPIRE MUCH OF CONFIDENCE AS REGARDS THE AFORE SAID CLAIM OF THE ASSESSEE . THE CIT(A) FURTHER OBSERVED THAT M ERELY BECAUSE THE PAYMENTS WERE MADE BY THE ASSESSEE TO THE AFOREMENTIONED PARTIES BY CHEQUES WOULD NOT CONCLUSIVELY PROVE THE GENUINENESS AND VERACITY OF THE PURCHASE TRANSACTIONS UNDER CONSIDERATION. THE CIT(A) AFTER DELIBERATING ON THE FACTS AVAILABLE ON RECORD CONCLUDED THAT THE ASSESSEE HAD PURCHASED THE GOODS UNDER CONSIDERATION, THOUGH NOT FROM THE AFOREMENTIONED HAWALA PARTIES, BUT FROM THE OPEN/GREY MARKET. THE CIT(A) FURTHER OBSERVED THAT NOW WHEN THE ASSESSEE HAD PURCHASED THE GOODS UNDER CONSID ERATION FROM THE OPEN/GREY MARKET, THEREFORE, IT WOULD HAVE BENEFI TED FROM MAKING OF THESE PURCHASES BY SAVING ON ACCOUNT OF SALE TAX AND OTHER TAXES AND DUTIES, WHICH OTHERWISE WOULD BE LEVIABLE IN CASE IF THE PURCHASES WOULD HAVE BEEN MA DE FROM THE REGUL AR MARKET. THE CIT(A) WHILE DELIBERATING ON THE ISSUE AS REGARDS THE QUANTIFICATION OF THE PROFIT ELEMENT INVOLVED IN MAKING OF THE BOGUS PURCHASES, OBSERVED THAT THE SAME WOULD VARY FROM BUSINESS TO BUSINESS AND NO UNIFORM YARDSTICK COULD BE ADOPTED. THE CIT(A) BY PLACING RELIANCE ON THE ORDER S PASSED BY THE ITAT, MUMBAI, IN THE CASE OF RATNAGIRI STAINLESS PVT. LTD. VS. ITO, ( ITA NO. 4463/MUM/2016 ) , AS WELL AS IN THE CASE OF ITO - 5(3)(1) VS. M/S RBS P A G E | 6 ITA NO. 6555/MUM/2017 AY: 2009 - 10 M/S MUHTA MARKFIN (P) LIMITED VS. ITO - 5(2)(3) COPPER PRODUCTS PVT. LTD. ( ITA NOS. 1057 & 1058 DATED 07.0 3.2017 ) UPHELD THE DISALLOWANCE MADE BY THE A.O @ 12.5% OF THE BOGUS PURCHASES UNDER CONSIDERATION. 5. THE ASSESSEE BEING AGGRIEVED WITH THE ORDER OF THE CIT(A) HAD CARRIED THE MATTER IN APPEAL BEFORE US. THE LD. AUTHORIZED REPRESENTATIVE (FOR SHORT A.R ) AT THE VERY OUTSET SUBMITTED THAT THE LOWER AU THORITIES HAD ERRED IN MAKING A DISALLOWANCE/ADDITION @ 12.5% OF THE BOGUS PURCHASE S , WITHOUT TAKING COGNIZANCE OF THE GROSS PROFIT RATE THAT WAS A LREADY ACCOUNTED FOR BY THE ASSESSEE IN ITS BOOKS OF ACCOUNTS . PER CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE (FOR SHORT D.R) RELIED ON THE ORDERS OF THE LOWER AUTHORITIES. 6. WE HAVE HEARD THE AUTHORIZED REPRESENTATIVES FOR BOTH THE PARTIES, PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL AVAILABLE ON RECORD. WE HAVE DELIBERATED AT LENGTH ON THE ORDERS OF THE LOWER AUTHORITIES AND ARE OF THE CONSIDERED VIEW THAT TH E ASSESSEE HAD ABSOLUTELY FAILED TO PLACE ON RECORD DOCUMENTARY EVIDENCE WHICH WOULD HAVE IRREFUTABLY SUBSTANTIATE D TO THE HILT THE GENUINENESS AND VERACITY OF THE PURCHASE S CLAIMED BY THE ASSESSEE TO HAVE BEEN MADE FROM THE AFOREMENTIONED PARTIES, VIZ. (I ) M/S VIDHI METAL INDUSTRIES; AND (II) M/S BHAWAIMA IMPEX . WE ARE OF THE CONSIDERED VIEW THAT AS THE ASSESSEE HAD FAILED TO DISCHARGE THE ONUS AS STOOD CAST UPON IT TO PROVE THE AUTHENTICITY OF THE PURCHASE TRANSACTIONS UNDER CO NSIDERATION, THEREFORE, THE A.O HAD RIGHTLY CHARACTERIZED THE SAID PURCHASE TRANSACTIONS AS BOGUS. WE ARE OF THE VIEW THAT AS THE FACTUM OF PURCHASE OF THE GOODS UNDER CONSIDERATION WAS NOT DOUBTED BY THE LOWER AUTHORITIES, THEREFORE, THEY HAD RIGHTLY RESTRICTED THE ADDITION IN THE H ANDS OF THE ASSESSEE TO THE EXTENT OF THE MONETARY BENEFIT WHICH THE ASSESSEE WOULD HAD GENERATED BY MAKING THE PURCHASES FROM THE P A G E | 7 ITA NO. 6555/MUM/2017 AY: 2009 - 10 M/S MUHTA MARKFIN (P) LIMITED VS. ITO - 5(2)(3) OPEN/GREY MARKET . WE FIND THAT THE HONBLE HIGH COURT OF GUJARAT IN THE CASE OF CIT VS. SIMIT P. SHETH (2013) 356 ITR 451 ( GUJ) HAD HELD THAT THE PROFIT ELEMENT INVOLVED IN MAKING OF BOGUS PURCHASES COULD FAIRLY BE TAKEN @ 12.5% OF ITS VALUE. WE FIND THAT THE JUDGMENT OF THE HONBLE HIGH COURT HAD CONSISTENTLY BEEN FOLLOWED BY THE COORDINATE BENCH ES OF THE TRIBUNAL FOR THE PUR POSE OF QUANTIFICATION OF THE PROFIT ELEMENT INVOLVED IN BOGUS PURCHASES . WE HAVE DELIBERATED AT LENGTH ON THE ORDERS OF THE LOWER AUTHORITIES AND ARE OF THE CONSIDERED VIEW THAT NO INFIRMITY EMERGES FROM THE ORDER OF THE CIT(A) WHO HAD RIGHTLY SUSTAINED T HE ADDITION/DISALLOWANCE MADE BY THE A.O @ 12.5% OF THE VALUE OF THE BOGUS PURCHASES. BEFORE PARTING , WE MAY HEREIN OBSERVE THAT THE LD. A.R HAD AVERRED BEFORE US THAT THE LOWER AUTHORITIES HAD ERRED IN NO T REDUCING/SCALING DOWN THE ESTIMATED MONETARY BENEFIT OF 12.5% BY THE GROSS PROFIT RATE AS HAD ALREADY BEEN ACCOUNTED FOR BY THE ASSESSEE IN ITS BOOKS OF ACCOUNTS IN RESPECT OF THE SALE OF THE GOODS UNDER CONSIDERATION . WE ARE UNABLE TO PERSUADE OURSELVES TO ACCEPT THE AFORESAID CONTENTION OF THE ASSE SSEE. WE ARE OF THE CONSIDERED VIEW THAT AS THE PROFIT ELEMENT ACCOUNTED FOR BY THE ASSESSEE IN ITS REGULAR BOOKS OF ACCOUNTS PERTAINS TO THE PROFIT WHICH IT WOULD HAVE MADE FROM SELLING THE GOODS UNDER CONSIDERATION , THEREFORE, THE SAME WOULD HAVE NO BEAR ING ON THE QUANTIFICATION OF THE MONETARY BENEFIT INVOLVED IN MAKING OF PURCHASES BY THE ASSESSEE AT A LOWER PRICE FROM THE OPEN/GREY MARKET , AS IN COMPARISON TO PURCHASES MADE FROM A REGISTERED DEALER . WE ARE OF THE CONSIDERED VIEW THAT THE ADDITION/DISAL LOWANCE MADE BY THE LOWER AUTHORITIES @ 12.5% IS IN RESPECT OF THE MONETARY BENEFIT WHICH THE ASSESSEE WOULD HAVE GENERATED FROM MAKING OF THE PURCHASES FROM THE OPEN/GREY MARKET . WE THUS IN TERMS OF OUR AFORESAID OBSERVATIONS ARE OF THE CONSIDERED VIEW TH AT THE ADDITION/DISALLOWANCE @ 12.5% OF THE VALUE OF THE BOGUS PURCHASES SO MADE BY THE A.O HAD RIGHTLY BEEN UPHELD BY THE CIT(A). P A G E | 8 ITA NO. 6555/MUM/2017 AY: 2009 - 10 M/S MUHTA MARKFIN (P) LIMITED VS. ITO - 5(2)(3) WE THUS IN TERMS OF OUR AFORESAID OBSERVATIONS UPHOLD THE ORDER OF THE CIT(A). 7. THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER PRO NOUNCED IN THE OPEN COURT ON 07 . 02.2018 SD/ - SD/ - (G.S. PANNU ) ( RAVISH SOOD ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; 07 .02 .2018 PS. ROHIT KUMAR / 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 . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI P A G E | 9 ITA NO. 6555/MUM/2017 AY: 2009 - 10 M/S MUHTA MARKFIN (P) LIMITED VS. ITO - 5(2)(3)