FLAMEPROOF EQUIPMENTS P.LTD, MUMBAI V. DCIT 9(3)(2), MUMBAI

ITA 6956/MUM/2016

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 8132 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-12-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2009-2010
• Appeal Filed On: 28-11-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S PADMAJA
• Assessee Lawyers: SHAILESH N DOSHI
• Keywords: Bogus purchase

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUMBAI BEFORE S/ SHRI B.R. BASKARAN (AM) & RAMLAL NEGI (JM) I.T.A. NO. 6956 /MUM/20 16 (ASSESSMENT YEAR 20 09 - 10 ) M/S. FLAMEPROOF EQUIPMENTS PVT. LTD. PLOT NO. B - 39, NEAR MONGINIS CAKE, NEW LINK ROAD ANDHERI WEST MUMBAI - 400 053. PAN : AAACF3983C VS. DCIT - 9(3)(2) AAYAKAR BHAVAN M.K. ROAD MUMBAI - 400 020. ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY SHRI SHAILESH N. DOSHI DEPARTMENT BY MS. S. PADMAJA DATE OF HEARING 12 . 1 2 . 201 7 DATE OF PRONOUNCEMENT 15 . 12 . 201 7 O R D E R PER B.R. BASKARAN (AM) : - THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 30.9.2016 PASSED BY THE LEARNED CIT(A) - 16, MUMBAI AND IT RELATES TO A.Y. 2009 - 10. THE ASSESSEE IS AGGRIEVED BY THE DECISION OF THE LE ARNED CIT(A) IN CONFIRMING THE ADDITION OF ` 108.63 LAKHS RELATING TO BOGUS PURCHASE. 2. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURE OF ELECTRICAL EQUIPMENTS. THE REVENUE RECEIVED INFORMATION FROM THE SALES TAX DEPARTMENT OF MAHARASHTRA THAT C ERTAIN DEALERS WERE INDULGING IN ISSUING ONLY ACCOMMODATION BILLS WITHOUT ACTUALLY SUPPLYING MATERIALS. IT WAS NOTICED THAT THE ASSESSEE HEREIN HAS PURCHASED MATERIAL TO THE TUNE OF ` 108.63 LAKHS FROM SOME OF SUCH DEALERS DURING THE YEAR UNDER CONSIDERATI ON . HENCE, THE ASSESSING OFFICER REOPENED THE ASSESSMENT OF YEAR UNDER CONSIDERATION. IN THE REOPENED ASSESSMENT , THE ASSESSING OFFICER ASKED THE ASSESSEE TO PROVE THE RECEIPT AND CONSUMPTION OF MATERIAL S . IT WAS NOTICED THAT THE ASSESSEE DID NOT MAINTAIN STOCK REGISTER IN ORDER TO PROVE CONSUMPTION. IT COULD NOT ALSO PROVE PHYSICAL TRANSPORTATION AND DELIVERY OF GOODS . H ENCE, THE ASSESSING OFFICER M/S. FLAMEPROOF EQU IPMENTS PVT. LTD . 2 DISALLOWED THE ENTIRE AMOUNT OF ` 108.63 LAKHS AND THE LEARNED CIT(A) ALSO CONFIRMED THE SAME. AGGRIEVED THE ASSESSEE HAS FILED THIS APPEAL BEFORE THE TRIBUNAL. 3. LEARNED AR SUBMITTED THAT BOOKS OF ACCOUNT OF THE ASSESSEE ARE AUDITED AND SALES REPORTED BY THE ASSESSEE HAVE BEEN ACCEPTED BY THE ASSESSING OFFICER. HE SUBMITTED THAT THE ASSESSEE DID NOT MAINTAIN STOCK REGISTER AND HENCE CONSUMPTION OF MATERIAL HAS BEEN DISBELIEVED. HE SUBMITTED THAT THE MATERIALS WERE DELIVERED AT THE DOORSTEP OF THE ASSESSEE AND HENCE THE ASSESSEE DID NOT POSSESS ANY EVIDENCE REGARDING TRANSPORTATION OF MATERIAL S . LEARNED AR FUR THER SUBMITTED THAT THE ASSESSEE HAS BEEN DECLARING GROSS PROFIT RATE AT 19.36%, 18.34% AND 20.72% DURING THE A.YS. 2007 - 08, 2008 - 09 & 2009 - 10 RESPECTIVELY. HE SUBMITTED THAT THE GROSS PROFIT RATE DECLARED DURING THE YEAR UNDER CONSIDERATION IS HIGHEST OF THE THREE YEARS. HE FURTHER SUBMITTED THAT THE NET PROFIT RATE DECLARED IN THE YEAR UNDER CONSIDERATION WAS 8.17% WAS ALSO HIGHEST DURING THE YEAR UNDER CONSIDERATION, WHEN COMPARE D TO 7.98% AND 6.16% DECLARE D IN THE IMMEDIATELY PRECEDING YEAR S . HE SUBMIT TED THAT THE GROSS PROFIT RATE WOULD HAVE GONE DOWN , IF IMPUGNED PURCHASES WERE BOGUS IN NATURE. HE FURTHER SUBMITTED THAT THE ADDITION MADE BY THE ASSESSING OFFICER WOULD RESULT IN ABNORMAL GROSS PROFIT RATE WHICH IS NOT AVAILABLE IN THE INDUSTRY. ACCORDI NGLY, HE SUBMITTED THAT THE IMPUGNED ADDITION SHOULD BE DELETED. 4. ON THE CONTRARY, LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE SUPPLIERS HAVE ADMITTED BEFORE THE SALES TAX AUTHORIT IES THAT THEY DID NOT SUPPLY GOODS. THE ASSESSEE ALSO COULD NO T PROVE THE TRANSPORTATION OF MATERIAL S AND ALSO CONSUMPTION OF MATERIAL S . ACCORDINGLY HE SUBMITTED THAT THE ASSESSEE HAS FAILED TO PROVE GENUINENESS OF PURCHASE S AND HENCE THE LEARNED CIT(A) WAS JUSTIFIED IN CONFIRMING THE ADDITION RELATING TO BOGUS PURCH ASE S . M/S. FLAMEPROOF EQU IPMENTS PVT. LTD . 3 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. ADMITTEDLY, THE ASSESSEE COULD NOT PROVE TRANSPORTATION OF MATERIAL S AND ALSO CONSUMPTION OF MATERIAL S . IN THE ABSENCE OF EVIDENCE RELATING TO THE TRANSPORTATION AND ALSO IN THE ABSENCE OF STOCK REGISTER, WE ARE OF THE VIEW THAT THERE IS MERIT IN THE CONTENTION OF THE ASSESSEE THAT GROSS PROFIT RATE DECLARED BY THE ASSESSEE CAN BE TAKEN AS AN ALTERNATIVE MEASURE TO JUSTIFY THE EXPENDITURE BOOKED BY IT. THE GROSS PROFIT RATE DECLARED BY TH E ASSESSEE IN THE PAST YEARS WOULD SHOW THAT THE GROSS PROFIT RATE IS HIGHER DURING THE YEAR UNDER CONSIDERATION . HENCE THERE IS POSSIBILITY THAT THE ENTIRE AMOUNT OF PURCHASE S CANNOT BE BOGUS IN NATURE. SINCE SUPPLIERS HAVE ADMITTED THAT THEY DID NOT SU PPLY MATERIAL S AND SINCE THE ASSESSEE COULD NOT REBUT THE SAID ADMISSION BY OBTAINING CONFIRMATION FROM SUCH SUPPLIERS REGARDING SUPPLY OF MATERIAL S , THE POSSIBILITY COULD BE THAT THE ASSESSEE COULD HAVE PROCURED MATERIAL S FROM THE GREY MARKET AND COULD HA VE OBTAINED BILLS FROM THE SUSPICIOUS DE A L E RS. IN THAT CASE, THE ASSESSEE WOULD HAVE MADE SAVINGS TOWARDS TAXES AND ALSO BY WAY OF REDUCED PRICE S . IN THAT CASE, IT MAY BE PROPER TO ASSESS THE PROFIT SO MADE BY HIM IN THE IMPUGNED PURCHASES, WHICH REQUIRES TO BE ESTIMATED IN THE ABSENCE OF CONCRETE PROOFS. ACCORDINGLY, W E ESTIMATE THE PROFIT SO MADE BY THE ASSESSEE AT 20% OF THE VALUE OF ALLEGED BOGUS PURCHASES AND IN OUR VIEW, THE SAME WOULD PUT THIS ISSUE AT REST. A CCORDINGLY WE DIRECT THE ASSESSING OF FICER TO RESTRICT THE ADDITION TO 20% OF THE VALUE OF BOGUS PURCHASES. THE O RDER PASSED BY THE LEARNED CIT(A) STANDS MODIFIED ACCORDINGLY. 6. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER HAS BE EN PRONOUNCED IN THE CO URT ON 15 . 1 2 .201 7. SD/ - SD/ - (RAMLAL NEGI ) (B.R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 15 / 1 2 / 20 1 7 COPY OF THE ORDER FORWARD ED TO : 1. THE APPELLANT M/S. FLAMEPROOF EQU IPMENTS PVT. LTD . 4 2. THE RESPONDENT 3. THE CIT(A) 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// ( ASSTT. REGISTRAR /SENIOR PS ) PS ITAT, MUMBAI