RAJEN NANALAL SHANGHVI, MUMBAI V. ITO - 25(3)(3), MUMBAI

ITA 703/MUM/2017

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1118 (ITAT-MUMBAI)
• Duration Of Justice: 3 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-05-2017
• Appeal Filed By: Assessee
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 01-02-2017
• Court: TRIBUNAL
• Department Lawyers: BHARTI SINGH
• Assessee Lawyers: DINESH R SHAH
• Keywords: Bogus purchase; Gift

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI B.R. BASKARAN (AM) I.T.A. NO. 703 /MUM/ 201 7 (ASSESSMENT YEAR 20 09 - 1 0 ) RAJEN NANALAL SHANGHVI B - 701, SWAPNALOK DIXIT ROAD VILE PARLE EAST MUMBAI - 400 057. VS. ITO 25(3)(3) ROOM NO. 608 C - 1 0, PRATYAKSH KAR BHAVAN BKC, BANDRA EAST MUMBAI - 400 051. ( APPELLANT ) ( RESPONDENT ) PAN NO . AAEPS4098N ASSESSEE BY SHRI DINESH R. SHAH DEPARTMENT BY M ISS BHARTI SINGH DATE OF HEARING 4 . 5. 201 7 DATE OF PRONOUNCEMENT 4 .5 . 201 7 O R D E R T HE ASSESSEE HAS FILED THIS APPEAL CHALLENGING THE ORDER DATED 08 - 11 - 2016 PASSED BY LD CIT(A) - 39, MUMBAI AND IT RELATES TO THE ASSESSMENT YEAR 2009 - 10. THE ASSESSEE IS AGGRIEVED BY THE DECISION OF LD CIT(A) IN CONFIRMING THE ADDITION OF RS.5,39,915/ - RELAT ING TO PROFIT ESTIMATED ON ALLEGED BOGUS PURCHASES. 2. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF TRADING IN GIFT ARTICLES. THE REVENUE RECEIVED THE INFORMATION FROM SALES TAX DEPARTMENT THAT CERTAIN DEALERS HAVE PROVIDED ACCOMMODATION BILLS WITHOUT ACTUALLY SUPPLYING GOODS. ON FURTHER EXAMINATION, THE REVENUE NOTICED THAT THE ASSESSEE HEREIN HAS PURCHASED GOODS FROM A PERSON NAMED M/S NEPTUNE CORPORATION, WHO WAS LISTED AS A HAWALA DEALER BY THE SALES TAX DEPARTMENT, FOR A SUM OF RS.35,99,43 8/ - . THE ASSESSEE FURNISHED THE COPIES OF BILLS, QUANTITATIVE DETAILS, STOCK REGISTER, RECONCILIATION OF PURCHASES AND SALES AND PAYMENT DETAILS TO THE RAJEN NANALAL SHANGHVI 2 AO. HOWEVER, THE AO OBSERVED THAT THE SUPPLIER M/S NEPTUNE CORPORATION HAS ACCEPTED BEFORE THE SALES TA X AUTHORITIES THAT HE HAS PROVIDED ONLY ACCOMMODATION BILLS AND HENCE THE ASSESSEE COULD HAVE OBTAINED ONLY ACCOMMODATION BILLS. SINCE THE ASSESSEE HAS RECONCILED THE PURCHASES AND SALES, THE AO TOOK THE VIEW THAT THE ASSESSEE COULD HAVE PURCHASED GOODS F ROM GREY MARKET, I.E., THE ASSESSEE PURCHASED GOODS FROM GREY MARKET WITHOUT BILLS AND MADE GOOD THE SAME BY PROCURING ACCOMMODATION BILLS FROM ALLEGED HAWALA TRADERS. ACCORDINGLY THE AO, BY PLACING RELIANCE ON THE DECISION RENDERED BY HONBLE GUJARAT HIG H COURT IN THE CASE OF SMIT P SHAH (ITA NO.553 OF 2012), TOOK THE VIEW THAT THE PROFIT ELEMENT FROM THE PURCHASES SHOULD BE ESTIMATED. ACCORDINGLY HE COMPLETED THE ASSESSMENT BY ADDING 15% OF THE PURCHASE VALUE OF RS.35,99,438/ - REFERRED ABOVE. THE LD CI T(A) CONFIRMED THE ADDITION MADE BY THE AO AND HENCE THE ASSESSEE HAS FILED THIS APPEAL. 3. I HEARD THE PARTIES AND PERUSED THE RECORD. I NOTICE THAT THE ASSESSEE HAS PURCHASED 8012 PIECES OF A GIFT ARTICLE (POPCORN MAKER) FROM M/S NEPTUNE CORPORATION. OUT OF THE SAME, 7412 PIECES HAVE BEEN SOLD TO M/S SUN PHARMA LTD AND 600 PIECES HAVE BEEN SOLD TO M/S RANBAXY LTD. THE ASSESSEE HAS FURNISHED COPIES OF PURCHASE INVOIES, SALES INVOICES, COPIES OF ORDERS PLACED BY M/S SUN PHARMA AND M/S RANBAXY LTD. THE AO HAS ALSO STATED THAT THE ASSESSEE HAS MAINTAINED STOCK REGISTER AND ALSO RECONCILED THE PURCHASE AND SALES. SINCE THE SALES HAVE BEEN PROVED, THE AO HAS TAKEN THE VIEW THAT THE ASSESSEE COULD HAVE PURCHASED GOODS FROM GREY MARKET AND ACCORDINGLY ESTIM ATED THE PROFIT THAT COULD HAVE BEEN MADE OUT OF PURCHASES. THE LD CIT(A) HAS ALSO OBSERVED THAT THE PURCHASE OF GOODS ARE NOT BEING DOUBTED, BUT THE SOURCE OF PURCHASE IS BEING DOUBTED. 4. THE LD A.R SUBMITTED THAT THE GROSS PROFIT RATE HAS GONE UP D URING THE YEAR UNDER CONSIDERATION AS COMPARED EARLIER YEARS AND SUBSEQUENT YEARS. HE RAJEN NANALAL SHANGHVI 3 SUBMITTED THAT THE ASSESSEE DECLARED G.P RATE AT 9.14% DURING THE INSTANT YEAR AS COMPARED TO 8.80% AND 7.60% IN THE IMMEDIATELY PRECEDING YEAR. IN THE SUCCEEDING YEAR, THE G.P RATE WAS DECLARED AT 4.91%. ACCORDINGLY THE LD A,R SUBMITTED THAT THE QUESTION OF SUPPRESSION OF PROFITS BY PURCHASING GOODS AT A LOWER RATE FROM GREY MARKET DOES NOT ARISE. 5. ON THE CONTRARY, THE LD D.R SUBMITTED THAT THE INFORMATION RECE IVED FROM SALES TAX DEPARTMENT PROVE THAT THE ASSESSEE HAS RECEIVED ONLY ACCOMMODATION BILLS. THE ASSESSEE HAS NOT PRODUCED THE SUPPLIER NOR ANY CONFIRMATION LETTER FILED. THE ASSESSEE HAS ALSO NOT PROVED THE TRANSPORTATION OF MATERIALS FROM THE SUPPLIER TO THE ASSESSEE. ACCORDINGLY SHE SUBMITTED THAT THE LD CIT(A) WAS JUSTIFIED IN UPHOLDING THE VIEW OF THE AO THAT THE ASSESSEE COULD HAVE PURCHASED GOODS FROM GREY MARKET. 6. I NOTICE THAT THE AO HAS NOT DOUBTED THE SALE OF GIFT ARTICLES AND DOUBTS TH E SOURCE OF PURCHASE ONLY. THOUGH THE ASSESSEE HAS PRODUCED PURCHASE AND SALES BILLS, YET THE ASSESSEE HAS NOT FURNISHED DETAILS OF TRANSPORTATION OF GOODS. THE PURCHASE BILLS STATE THAT THE GOODS DELIVERED AT BHIWANDI GODOWN ON YOUR BEHALF. THE ASSES SEE HAS NOT EXPLAINED THE MEANING OF THIS STATEMENT NOR DID HE EXPLAIN THE MODE OF TRANSPORTATION. HENCE I AM OF THE VIEW THAT THE TAX AUTHORITIES ARE JUSTIFIED IN DOUBTING THE SOURCE OF PURCHASES. HOWEVER, SINCE THE ASSESSEE HAS SHOWN HIGHER G.P RATE DU RING THE YEAR UNDER CONSIDERATION, THE RATE OF PROFIT ESTIMATED BY THE AO APPEARS TO BE ON THE HIGHER SIDE. ACCORDINGLY I AM OF THE VIEW THAT ADDITION MAY BE RESTRICTED TO 5% OF THE PURCHASES IN ORDER TO TAKE CARE OF THE PROFIT, IF ANY, EARNED FROM PURCHA SES MADE FROM OTHER SOURCES. ACCORDINGLY I MODIFY THE ORDER PASSED BY LD CIT(A) AND DIRECT THE AO TO MAKE ADDITION AT 5% OF THE PURCHASES MADE FROM M/S NEPTUNE CORPORATION. RAJEN NANALAL SHANGHVI 4 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER HAS BE EN PRONOUNCED IN THE COURT ON 4 . 5 . 201 7. SD/ - (B.R.BASKARAN) ACCOUNTANT MEMBER MUMBAI ; DATED : 4 / 5 / 20 1 7 COPY OF THE ORDER FORW ARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// ( DY./ASSTT. REGISTRAR) PS ITAT, MUMBAI