DEPUTY COSIONER OF ICOME TAX 9(1)(1), MUMBAI V. M/S.ABHISHEK MILLENNIUM CONTRACTS PRIVATE LIMITED, MUMBAI

ITA 7197/MUM/2017

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 4542 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-03-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 20-12-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SATISH CHANDRA RAJORE
• Assessee Lawyers: RAVINDRA POOJARI
• Keywords: Bogus purchase; Question of law; Set aside
• Section: 260A; 143(1)

Judgement Text

IN THE INC OME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI BEFORE HONBLE SH. SANDEEP GOSAIN , JM & HONBLE SH. G. MANJUNATHA , A M ./ I.T.A. NO . 7197 /MUM/2017 ( / ASSESSMENT YEAR: 2010 - 11 ) DCIT 9(1 ) (1), R. NO. 260A , 2 ND FLOOR, AAYAKAR BHAVAN, MUMBAI - 400 020 / VS. M/S ABHISHEK MELLENNIUM CONTRACTS PVT. LTD. A - 206, OBEROI CHAMBERS, OPP - SAB TV OFF, NEW LINK ROAD, ANDHERI WEST, MUMBAI - 400 005 ./ ./ PAN NO. AA ECA7004P ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI SATISHCHANDRA RAJORE , DR / RESPONDENTBY : SHR I RAVINDRA POOJARI , AR / DATE OF HEARING : 22.01 .201 9 / DATE OF PRONOUNCEMENT : 20.03.2019 / O R D E R PER SANDEEP GOSAIN, J UDICIAL MEMBER : THE PRESENT APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE ORDER OF COMMIS S IONER OF INCOME TAX (APPEALS) - 16 , MUMBAI, DATED 15.09.17 FOR AY 2010 - 11 ON THE GROUNDS MENTIONED HEREIN BELOW: - 2 I.T.A. NO. 7197 /MUM/201 7 M/S ABHISHEK MELLENNIUM CONTRACTS PVT. LTD. 1. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE ID.CIT(A) ERRED IN RESTRICTING THE ADDITION AT RS. 9,85,338/ - WHICH IS @12.5% OF DISPUTED PURCHASE OF RS. 78,82,704/ - AND GIVING RELIEF AMOUNTING TO RS. 68,97,366/ - TO THE ASSESSEE? 2. WH ETHER IN THE ID. CIT (A) HAS FAILED APP RECIATE THE JUDGEMENT OF THE HON BLE APEX COURT IN THE CASE OF N.K. PROTEINS VS. DCIT SLP NOS. 769 OF 2017 DATED 16.01.2017 WHEREIN THE ADDITION ON ACCOUNT OF BOGUS PURCHASE HAS BEEN ENHANCED TO 25% ? THE APPELLANT PR AYS THAT THE ORDER OF THE CIT(A) ON THE ABOVE GROUND ABOVE SET ASIDE AND THAT OF THE A.O. BE RESTORED. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUNDS OR ADD A NEW GROUND WHICH MAY BE NECESSARY. 2 . AS PER THE FACTS OF THE PRESENT CASE, THE ASSESSEE HAS FILED HIS RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION ON 26.09.10 DECLARING TOTAL INCOME AT RS. 2,91,85,113 / - . THE RETURN WAS PROCESSED U/S 143(1) OF THE ACT. THEREAFTER, ON THE BASIS OF INFORMATION RECEIVED FROM SALES TAX (VAT) DEPARTM ENT, STATE OF MAHARASHTRA THE CASE WAS RE OPENED U/S.147 OF THE I.T. ACT, 1961 3 I.T.A. NO. 7197 /MUM/201 7 M/S ABHISHEK MELLENNIUM CONTRACTS PVT. LTD. AND AN ORDER U/S. 1 43(3) R.W.S.147 OF THE INCOME TAX ACT, 1961 WAS PASSED ON 30.03.2015 ASSESSING T HE TOTAL INCOME OF THE ASSESSEE AT RS. 3,70,67,8207 - WHEREBY THE PURCHASES FOR AN AMOUNT OF RS.78,82,704/ - WERE DISALLOWED BY THE A.O. BY TREATING THEM AS BOGUS PURCHASES. 3. AGGRIEVED BY THE ORDER OF AO, ASSESSEE PREFERRED APPEAL BEFORE LD. CIT(A) AND LD. CIT(A) AFTER CONSIDERING THE CASE OF BOTH THE PARTIES PARTLY ALLOWED THE APP EAL OF THE ASSESSEE. 4. AGGRIEVED BY THE ORDER OF LD. CIT(A), REVENUE HAS FILED THE PRESENT APPEAL BEFORE US ON THE GROUNDS MENTIONED HEREIN ABOVE. 5. THE SOLITARY GROUND RAISED BY THE REVENUE RELATES TO CHAL LENGING THE ORDER OF LD. CIT(A) IN RESTRICTING THE ADDITION AT RS. 9,85,338/ - WHICH IS @12.5% OF DISPUTED PURCHASE OF RS. 78,82,704/ - AND GIVING RELIEF AMOUNTING TO RS. 68,97,366/ - TO THE ASSESSEE . 4 I.T.A. NO. 7197 /MUM/201 7 M/S ABHISHEK MELLENNIUM CONTRACTS PVT. LTD. 6. WE HAVE HEARD THE COUNSELS FOR BOTH THE PARTIES AT LENGTH AND WE HAVE ALSO PERUSED THE MATERIAL PLACED ON RECORD, JUDGMENT CITED BY THE PARTIES AS WELL AS THE ORDERS PASSED BY REVENUE AUTHORITIES. BEFORE WE DECIDE THE MERITS OF THE CASE, IT IS NECESSARY TO EVALUATE THE OR DERS PASSED BY LD. CIT(A). THE LD. CIT(A) HAS DEALT WITH THE ABOVE GROUNDS RAISED BY THE REVENUE IN PARA NO. 6 .1 TO 6.31 OF ITS ORDER. THE OPERATIVE PORTION OF THE ORDER OF LD. CIT(A) IS CONTAI NED IN PARA NO. 6.28 TO 6.31 OF ITS ORDER AND THE SAME IS REPRO DUCED BELOW: - 6.28 THE FACTS IN THE PRESENT CASE ARE SIMILAR TO THE FACTS IN THE ABOVE MENTIONED CASE. IN THE PRESENT CASE, THE LD. AO HAS SHOWN THAT THE PARTY IN QUESTION WAS NON EXISTENT. THE APPELLANT HAS NOT BEEN ABLE TO DISPROVE THE FINDINGS OF THE LD . AO REGARDING THE NON - EXISTENCE OF THE PARTY. HOWEVER, LD. AO AFTER EXAMINING THE EVIDENCES DID NOT GIVE ANY ADVERSE FINDING THAT THE APPELLANT HAD NOT SHOWN CONSUMPTION/SALES OF THE GOODS AND THAT IT HAD NOT OFFERED THE INCOME ON SUCH SALE OF GOODS. IN T HIS CASE, LD. A.O. NOT HAVING DOUBTED THE GENUINENESS OF SALES 5 I.T.A. NO. 7197 /MUM/201 7 M/S ABHISHEK MELLENNIUM CONTRACTS PVT. LTD. COULD NOT HAVE GONE AHEAD AND MADE ADDITION IN RESPECT OF THE ENTIRE PURCHASES AS IT WOULD LEAD TO ABSURD PROFITS. THUS, THE ISSUE WOULD BOIL DOWN TO FINDING OUT THE ELEMENT OF SUPPRESSED PROFI T EMBEDDED IN PURCHASES WHICH THE APPELLANT WOULD HAVE MADE FROM SOME UNKNOWN OR BOGUS ENTITIES. HENCE, FOLLOWING THE DECISION OF THE HON'BLE GUJARAT HIGH COURT IN BHOLANATH POLYFAB PVT. LTD. (SUPRA), THE ESTIMATED SUPPRESSED PROFIT MARGIN EMBEDDED IN SUCH AMOUNTS OF PURCHASES COULD ONLY BE DISALLOWED AND SUBJECTED TO TAX. 6.29 SIMILARLY, IN YET ANOTHER DECISION OF HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. SIMIT SHETH (2013) 38 TAXMANN.COM 385 (GUJ), HON'BLE COURT WAS SEIZED WITH A SIMILAR ISSUE WHERE THE A.O. HAD FOUND THAT SOME OF THE ALLEGED SUPPLIERS OF STEEL TO THE ASSESSEE HAD NOT SUPPLIED ANY GOODS BUT HAD ONLY PROVIDED SALE BILLS AND HENCE, PURCHASES FROM THE SAID PARTIES WERE HELD TO BE BOGUS. THE A. O. IN THAT CASE ADDED THE ENTIRE AMOUNT OF PURCHASES TO GROSS PROFIT OF THE ASSESSEE. LD. CIT(A) HAVING FOUND THAT THE ASSESSEE HAD INDEED PURCHASED THOUGH NOT FROM NAMED PARTIES BUT OTHER PARTIES FROM GREY MARKET, PARTIALLY SUSTAINED THE ADDITION AS PROBA BLE PROFIT OF THE ASSESSEE. THE TRIBUNAL HOWEVER, PARTLY SUSTAINED THE ADDITION. TAKING INTO ACCOUNT THE ABOVE FACTS, THE HON'BLE 6 I.T.A. NO. 7197 /MUM/201 7 M/S ABHISHEK MELLENNIUM CONTRACTS PVT. LTD. GUJARAT HIGH COURT HELD THAT SINCE THE PURCHASES WERE NOT BOGUS, BUT WERE MADE FROM PARTIES OTHER THAN THOSE MENTIONED IN BOOK S OF ACCOUNTS, ONLY THE PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES COULD BE ADDED TO THE ASSESSEE'S INCOME AND AS SUCH NO QUESTION OF LAW AROSE IN SUCH ESTIMATION. WHILE ARRIVING AT THE ABOVE CONCLUSION, THE HONBLE COURT ALSO RELIED ON THE DECISION IN THE CASE OF VIJAY M. MISTRY CONSTRUCTION LTD. 355 ITR 498 (GUJ) AND FURTHER APPROVED THE DECISION OF AHMEDABAD BENCH, IT AT IN THE CASE OF VIJAY PROTEINS 58 ITD 428. 6.30 IN THE CASE OF VIJAY PROTEINS (SUPRA), THE HON'BLE ITAT WAS SEIZED WITH A CASE OF BOGUS S UPPLIERS OF OIL CAKES WHERE 33 PARTIES WERE FOUND TO BE BOGUS BY THE DEPARTMENTAL AUTHORITIES EVEN THOUGH PAYMENTS WERE MADE TO THE SAID PARTIES BY CROSS CHEQUES AND IN FACT THE A.O, IN THAT CASE HAD BROUGHT ADEQUATE MATERIAL ON RECORD TO PROVE THAT THE CR OSS CHEQUES HAD NOT BEEN GIVEN TO PARTIES FROM WHOM SUPPLIES WERE ALLEGEDLY PROCURED BUT THESE WERE ENCASHED FROM A BANK ACCOUNT IN THE NAME OF ANOTHER ENTITY, POSSIBLY HAWALA DEALER. SUBSEQUENTLY, THE MONEY DEPOSITED IN THAT ACCOUNT WAS WITHDRAWN IN CASH ALMOST ON THE SAME DAY. THE TRIBUNAL HOWEVER, HELD THAT IF THE PURCHASES WERE MADE FROM OPEN MARKET WITHOUT INSISTING FOR GENUINE BILLS, THE SUPPLIERS MAY BE WILLING TO SELL THE PRODUCT AT 7 I.T.A. NO. 7197 /MUM/201 7 M/S ABHISHEK MELLENNIUM CONTRACTS PVT. LTD. A MUCH LESS RATE AS COMPARED TO A RATE WHICH THEY MAY CHARGE IN WHI CH THE DEALER HAS TO GIVE GENUINE SALE INVOICE IN RESPECT OF THAT SALE. KEEPING ALL SUCH FACTORS IN MIND, THE TRIBUNAL ESTIMATED AN ELEMENT OF PROFIT PERCENTAGE OF THE OVERALL PURCHASE PRICE ACCOUNTED FOR IN THE BOOKS OF ACCOUNTS THROUGH FICTITIOUS INVOICE S, 6.31 AS NARRATED EARLIER, THE LD. A.O. IN THIS CASE HAS HELD THAT THE PARTIES FROM WHOM THE PURCHASES WERE MADE BY THE APPELLANT WERE FOUND TO BE BOGUS AND THAT IS THE REASON FOR WHICH IT WAS NOT PRODUCED DURING THE ASSESSMENT PROCEEDINGS. NOT HAVING DO UBTED THE CONSUMPTION/SALES, THE MOTIVE BEHIND OBTAINING BOGUS BILLS THUS, APPEARS TO BE INFLATION OF PURCHASE PRICE SO AS TO SUPPRESS TRUE PROFITS. CONSIDERING THE FACTS OF THE CASE AS WELL AS THE VARIOUS CASE LAWS CITED (SUPRA), I ESTIMATE THE SUPPRESSED PROFIT TO THE EXTENT OF 12,5% OF THE PURCHASES MADE FROM THE BOGUS ENTITIES, AS THE SUPPRESSED PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES. THIS ESTIMATION IS IN ADDITION TO THE GP SHOWN BY THE APPELLANT. ACCORDINGLY, THIS GROUND OF APPEAL IS PARTLY ALLOWED . 7. AFTER HAVING GONE THROUGH THE FACTS OF THE PRESENT CASE AND HEARING THE PARTIES AT LENGTH, WE FIND THAT ALTHOUGH THE LD. CIT(A) HAD CONSIDERED ALL THE JUDGMENTS REFERRED BY BOTH THE 8 I.T.A. NO. 7197 /MUM/201 7 M/S ABHISHEK MELLENNIUM CONTRACTS PVT. LTD. PARTIES, BUT AS PER THE FACTS OF THE PRESENT CASE, THE AO HAD SHOWN THE PARTIES FROM WHOM THE ASSESSEE HAD PURCHASED MATERIAL AS NON - EXISTENCE. AT THE SAME TIME, THE AO AFTER EXAMINING THE EVIDENCES PRODUCED BY THE ASSESSEE COULD NOT GIVE ANY ADVERSE FINDING THAT THE ASSESSEE HAD NOT SHOWN CONSUMPTION/SALES OF THE GOODS AND THAT IT HAD NOT OFFERED THE INCOME ON SUCH SALE OF GOODS. 8. IN OUR VIEW, ONCE THE AO HAD NOT DOUBTED THE GENUINENESS OF SALES , THEN IN THAT EVENTUALITY, AO COULD NOT HAVE GONE AHEAD AND MADE ADDITION IN RESPECT OF THE ENTIRE PURCHASES AS IT WOULD LE AD TO ABSURD PROFITS. LD. DR ALTHOUGH HAD SPECIFICALLY ARGUED THAT LD. CIT(A) HAD FAILED TO APPRECIATE THE JUDGMENT OF HONBLE APEX COURT IN THE CASE OF N. K. PROTEINS VRS. DCIT, WHEREIN ADDITION ON ACCOUNT OF BOGUS PURCHASE HAS BEEN ENHANCED TO 25%. BUT A T THE SAME TIME, AFTER CONSIDERING THE FACTS OF THE PRESENT CASE, WE FIND THAT LD. CIT(A) HAD DISCUSSED AND RELIED UPON ALL THE JUDGMENTS WHICH ARE ON THE IDENTICAL GROUNDS CONTAINING SIMILAR CIRCUMSTANCES. SINCE IN THE PRESENT CASE, LD. CIT(A) HAD HELD TH AT SINCE THE PURCHASES WERE MADE FROM THE 9 I.T.A. NO. 7197 /MUM/201 7 M/S ABHISHEK MELLENNIUM CONTRACTS PVT. LTD. PARTIES OTHER THAN THOSE MENTIONED IN BOOKS OF ACCOUNTS, THEREFORE IN SUCH CIRCUMSTANCES, ONLY THE PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES COULD BE ADDED TO THE ASSESSEE'S INCOME. ON THIS PROPOSITION, WE DRAW STRENGTH FROM THE JUDGMENT IN THE CASE OF CIT VRS. SIMIT SHET (2013) 38 TAXMANN.COM 385 (GUJ) . WE HAVE ALSO CONSIDERED THE JUDGMENT OF HONBLE APEX COURT IN THE CASE OF N. K. PROTEINS VRS. DCIT , BUT THE FACTS OF THAT CASE WAS ALTOGETHER DIFFERENT. WE HAVE ALSO CONSIDERED THE JUDGMENT IN THE CASE OF VIJAY M. MISTRY CONSTRUCTION LTD. 355 ITR 498 (GUJ) AND IN THAT CASE ALSO, THE FACTS OF THE CASE ARE DIFFERENT FROM THE FACTS OF THE PRESENT CASE. IN THAT CASE, A.O HAD BROUGHT ADEQUATE MATERIAL ON RECORD TO PROVE THAT THE CROSS CHEQUES HAD NOT BEEN GIVEN TO PARTIES FROM WHOM SUPPLIES WERE ALLEGEDLY PROCURED BUT THESE WERE ENCASHED FROM A BANK ACCOUNT IN THE NAME OF ANOTHER ENTITY, POSSIBLY HAWALA DEALER. FURTHER, AS PER THE FACTS OF THAT CASE, THE MONEY DEPOSITED IN THAT ACCOUNT WAS WITHDRAWN IN CASH ALMOST ON THE SAME DAY. THEREFORE, IN THE SAID CASE, IT WAS HELD THAT IF THE PURCHASES WERE MADE FROM OPEN MARKET WITHOUT INSISTING FOR GENUINE BILLS, THE SUPPLIERS MAY BE WILLING TO SELL THE PRODUCT AT A MUCH LESS RATE AS COMPARED TO A 10 I.T.A. NO. 7197 /MUM/201 7 M/S ABHISHEK MELLENNIUM CONTRACTS PVT. LTD. RATE WHICH THEY MAY CHARGE IN WHICH THE DEALER HAS TO GIVE GENUINE SALE INVOICE IN RESPECT OF THAT SALE. HENCE KEEPING ALL THESE FACTORS IN MIND, THE COURT ESTIMATED AN ELEMENT OF PROFIT P ERCENTAGE OF THE OVERALL PURCHASE PRICE ACCOUNTED FOR IN THE BOOKS OF ACCOUNTS THROUGH FICTITIOUS INVOICES, THEREFORE ALL THE FACTS IN THAT CASE ARE ALSO DISTINGUISHABLE. 9. THE AO IN THIS CASE HAD HELD THAT THE PARTIES FROM WHOM THE PURC HASES WERE MADE BY THE ASSESSEE WERE FOUND TO BE BOGUS, BUT AT THE SAME TIME THE AO HAD NOT DOUB TED THE CONSUMPTION/SALES. T HE REFORE UNDER SUCH CIRCUMSTANCES, LD. CIT(A) HAD RIGHTLY CONCLUDED THAT MOTIVE BEHIND OBTAINING BOGUS BILLS THUS, APPEARS TO BE INF LATION OF PURCHASE PRICE SO AS TO SUPPRESS TRUE PROFITS. HENCE LD. CIT(A) HAD RIGHTLY ESTIMATE D THE SUPPRESSED PROFIT TO THE EXTENT OF 12 . 5% OF THE PURCHASES MADE FROM THE BOGUS ENTITIES, AS THE SUPPRESSED PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES. 10. M OREOVER, N O NEW FACTS OR CONTRARY JUDGMENTS HAVE BEEN BROUGHT ON RECORD BEFORE US I N ORDER TO CONTROVERT OR REBUT THE 11 I.T.A. NO. 7197 /MUM/201 7 M/S ABHISHEK MELLENNIUM CONTRACTS PVT. LTD. FINDINGS SO RECORDED BY LD CIT (A) . THEREFORE, THERE ARE NO REASON S FOR US TO INTERFERE INTO OR DEVIATE FROM THE FINDINGS RECORDED BY THE LD. CIT (A). HENCE , WE ARE OF THE CONSIDERED VIEW THAT THE FINDINGS SO RECORDED BY THE LD. CIT (A) ARE JUDICIOUS AND ARE WE LL REASONED. RESULTANTLY, THIS GROUND RAISED BY THE REVENUE STANDS DISMISSED . 1 1 . IN THE NET RESULT, THE APPEAL FILED BY THE REVENUE STA NDS DISMISSED WITH NO ORDER AS TO COST. ORDER PRONOUNCED IN THE OPEN COURT ON 20 TH MARCH 20 19 . SD/ - SD/ - ( G. MANJUNATHA ) (SANDEEP GOSAIN) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI ; DATED : 20 . 03 .201 9 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, MUMBA I