SUPER FORGE PRIVATE LIMITED, MUMBAI V. ITO WARD 14(3)(4), MUMBAI

ITA 6719/MUM/2018

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 8368 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-05-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 28-11-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: PRAVIN N SHAH
• Keywords: Bogus purchase; Onus to prove
• Section: 143(1); 22

Judgement Text

IN THE INC OME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI C. N. PRASAD, JM & SHRI S . RIFAUR RAHMAN, AM ./ I.T.A. NO . 6719 / MUM/ 2018 ( / ASSESSMENT YEAR: 2010 - 11 ) SUPER FORGE PVT. LTD. 3/C - 16, TAXIMAN SOCIETY, L.B.S. MARG, KURLA(WEST(, MUMBAI - 400 070 / VS. ITO WARD - 14(3)(4 ), 4 TH FLOOR, AAYAKAR BHAVN, M. K. ROAD, MUMBAI - 400 020 . ./ ./ PAN NO. AA KCS 3468 H ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI PRAVIN N. SHAH, AR / RESPONDENTBY : SHRI KIRAN UNAVEKAR, DR / DATE OF HEARING : 24 .02.2020 / DATE OF PRONOUNCEMENT : 20.05.2020 / O R D E R PER S. RIFAUR RAHMAN, ACCOUNTANT MEMBER : THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. COMMIS S IONER OF INCOME TAX (APPEALS) - 22 IN SHORT REFERRED AS LD. CIT(A) , MUMBAI, DATED 11.09 .18 FOR A SSESSMENT YEAR (IN SHORT A Y ) 2010 - 11 . 2 I.T.A. NO. 6719 /MUM/201 8 SUPER FORGE PVT. LTD. 2. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE FILED ITS RETURN OF INCOME ON 14.10.2010 DECLARING TOTAL INCOME OF RS. 3,86,900 / - . THE RETURN WAS PROCESSED U/S 143(1) OF THE ACT. SUBSEQUENTLY, I NFORMATION WAS RECEIVED FROM THE SALES TAX D EPARTMENT THAT ASSESSEE HAS IN DULGED IN BOGUS PURCHASES. THE ASSESSMENT WAS ACCORDINGLY REOPENED. THE ASSESSING OFF ICER IN THIS CASE HAS MADE ADDITION @ 16 % ON ACCOUNT OF B OGUS PURCHASE AMOUNTING TO RS.12,43,645 / - . 3. AGGRIEVED BY THE ABOVE ORDER OF AO, ASSESSEE PREFERRED APPEAL BEFORE LD. CIT(A) AND LD. CIT(A) CONFIRMED THE ADDITION MADE BY AO AND DISMISSED THE APPEAL OF THE ASSESSEE. 4. AGGRIEVED WITH THE ABOVE ORDER, ASSESSEE IS PREFERRED THE APPEAL BEFORE US. 5 . LD. AR SUBMITTED THAT LD. CIT(A) HAS SUSTAINED THE ADDITION MAD E BY THE AO ON ESTIMATING @ 16 % OF THE ALLEGED BOGUS PURCHASES OVERLOOKING THAT ASSESSEE HAS ALREADY DECLARED GP RATIO . A CC ORDINGLY, HE SUBMITTED THAT 16 % ESTIMATED BY LD. CIT(A) IS TOO HIGH AND HE RELIED UPON THE VARIOUS JUDGMENTS 3 I.T.A. NO. 6719 /MUM/201 8 SUPER FORGE PVT. LTD. PASSED BY THE COORDINATE BENCH OF ITAT, WHEREIN THE BENC H HAS ESTIMATED @ 3% OF THE ALLEGED BOGUS PURCHASES. 6. ON THE OTHER HAND, LD. DR RELIED UPON THE ORDERS PASSED BY REVENUE AUTHORITIES AND SUBMITTED THAT ESTIMATION MADE BY LD. CIT(A) SHOULD BE SUSTAINED. 7. CONSIDERING THE RIVAL CONTENTIONS AND MATERIAL PLACED ON RECORD, WE NOTICE THAT ITAT MUMBAI BENCH IN THE CASE OF HEERAMANECK & SON VRS. ACIT PASSED IN ITA NO. 1862/MUM/2017, WHEREIN IT WAS HELD AS UNDER: - 5. SO FAR AS THE QUANTUM OF ADDITIONS ARE CONCERNED , WE ARE OF THE CONSIDERED OPINION THAT THE ASSESSEE WAS ENGAGED IN TRADING ACTIVITIES, WHICH COULD NOT BE CARRIED OUT WITHOUT ACTUAL PURCHASE OF MATERIAL. THE TURNOVER ACHIEVED BY THE ASSESSEE HAS NOT BEEN DISPUTED OR DISTURBED BY THE REVENUE AND THE PAYM ENTS WERE THROUGH BANKING CHANNELS. THE ASSESSEE WAS IN POSSESSION OF PRIMARY PURCHASE DOCUMENTS AND WAS ABLE TO RECONCILE THE QUANTITATIVE DETAILS. HOWEVER, AT THE SAME TIME, THE STATED PURCHASES WERE UNDER GRAVE DOUBT SINCE THE ASSESSEE COULD NOT PRODUCE ANY OF THE PARTY TO CONFIRM THE TRANSACTIONS AND THE INFORMATION RECEIVED FROM INVESTIGATION WING REVEALED THAT ALL THE SUPPLIERS WERE ENGAGED IN CARRYING OUT ONLY PAPER TRANSACTIONS WITHOUT 4 I.T.A. NO. 6719 /MUM/201 8 SUPER FORGE PVT. LTD. ACTUAL DELIVERY OF MATERIAL. THE COMPLETE ONUS TO PROVE THE PURC HASES CONCLUSIVELY WAS ON ASSESSEE, WHICH HAS REMAINED UN - DISCHARGED. IN SUCH A SCENARIO, THE ADDITION, WHICH COULD BE MADE, WAS TO ACCOUNT FOR PROFIT ELEMENT EMBEDDED IN THESE PURCHASE TRANSACTIONS TO FACTORIZE FOR PROFIT ELEMENT EARNED BY ASSESSEE AGAINS T POSSIBLE PURCHASE OF MATERIAL IN THE GREY MARKET AND UNDUE BENEFIT OF VAT AGAINST ALLEGED BOGUS PURCHASES, WHICH LOWER AUTHORITIES HAVE RIGHTLY DONE. HOWEVER, CONSIDERING GP RATE OF 10.59% ALREADY REFLECTED BY THE ASSESSEE AS WELL AS VAT RATE APPLICABLE TO THE GOODS BEING DEALT WITH BY THE ASSESSEE, WE FIND THE ESTIMATION TO BE ON THE HIGHER SIDE AND THEREFORE, WE RESTRICT THE SAME TO 3% OF ALLEGED BOGUS PURCHASES OF RS.1,87,08,961/ - . THE SAME COMES TO RS.5,61,269/ - . THE ORDER OF LD. AO STANDS MODIFIED TO THAT EXTENT. THE LD. AO IS DIRECTED TO RE - COMPUTE THE INCOME OF THE ASSESSEE IN TERMS OF OUR ABOVE ORDER. 8 . THEREFORE, RESPECTFULLY FOLLOWING THE AFORESAID DECISION, WE NOTICE THAT ASSESSEE HAS ALREADY DECLARED GP RATIO FROM THE PURCHASES MADE FROM OM CORPORATION AND OTHERS RESPECTIVELY. WE NOTICE FROM THE FINANCIAL STATEMENT THAT ASSESSEE HAS DECLARED GP OF 15.60% AND WE DO NOT KNOW HOW MUCH GP, ASSESSEE HAS EARNED OUT OF THE DISPUTED PURCHASES. THEREFORE, WE ARE INCLINED 5 I.T.A. NO. 6719 /MUM/201 8 SUPER FORGE PVT. LTD. TO DIRECT THE AO TO ESTIMAT E THE INCOME @ 3 % OF THE ALLEGED PURCHASES. ACCORDINGLY, WE DIRECT THE AO TO ESTIMA TE THE INCOME OF THE ASSE S SEE @ 3 % OF THE ALLEGED PURCHASES. 9 . IN THE NET RESULT, THE APPEAL FILED BY THE ASSESSEE STA NDS PARTLY ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 20 TH MAY 2020 . SD/ - SD/ - ( C. N. PRASAD ) (S. RIFAUR RAHMAN ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED : 20 . 05 .2020 SR.PS . DHANANJAY / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F I LE / BY ORDER, . / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI