ITO, 19(2)(3), MUMBAI V. MANAV STEEL & ENGG. CO., MUMBAI

ITA 729/MUM/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 6722 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-02-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 08-02-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R K GUBGOTRA J
• Keywords: Bogus purchase; Rule of consistency
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC, BENCH MUMBAI BEFORE SHRI R.C.SHARMA, ACCOUNTANT MEMBER ITA NO. 728 & 729/MUM/2019 ( ASSESSMENT YEAR: 2011-12 & 2010-11) I.T.O.-19(2)(3), ROOM NO. 218, 2 ND FLOOR, MATRU MANDIR, TARDEO, MUMBAI-400007. VS. MANAV STEEL & ENGG. CO., 95/2, PARMAR HOUSE, MARUTI MANDIR MARG, 5 TH KUMBHARWADA, MUMBAI- 400004. PAN/GIR NO. AAGFM 0979 F (APPELLANT ) .. (RESPONDENT ) REVENUE BY SHRI R.K. GUBGOTRA (JCIT-DR) ASSESSEE BY NONE DATE OF HEARING 04/02/2020 DATE OF PRONOUNCEMENT 06/02/2020 / O R D E R PER: R.C. SHARMA, A.M. THESE ARE THE APPEALS FILED BY THE REVENUE AGAINST THE SEPARATE ORDERS OF THE LD. CIT(A)-07, MUMBAI DATED 28/11/201 8 FOR THE A.Y. 2011-12 AND 2010-11 IN THE MATTER OF ORDER PASSED U /S 143(3) R.W.S. 147 OF THE INCOME TAX ACT, 1961 (IN SHORT, THE ACT) . 2. IN BOTH THESE APPEALS, THE REVENUE IS AGGRIEVED BY THE ORDER OF THE LD. CIT(A) FOR REDUCING ADDITION TO THE EXTENT OF 6.5% OF ALLEGED BOGUS PURCHASES, WHICH WAS MADE BY THE A.O. @ 12.5% . 3. I HAVE GONE THROUGH THE ORDERS OF THE AUTHORITIE S BELOW AND FOUND THAT THE ASSESSEE IS ENGAGED IN THE TRADING O F FERROUS AND NON- ITA NO. 728 & 729/MUM/2019 ITO VS MANAV STEEL & ENGG. CO. 2 FERROUS METAL. ON GETTING INFORMATION REGARDING BOG US PURCHASES, THE A.O. REOPENED THE ASSESSMENT AND THEREAFTER ESTIMAT ED ADDITIONAL INCOME @ 12.5% ON ALLEGED BOGUS PURCHASES AND ADDED THE SAME IN ASSESSEES INCOME. 4. BY THE IMPUGNED ORDER, THE LD. CIT(A) HAS REDUCE D THE ADDITION TO THE EXTENT OF 6.5% AFTER OBSERVING AS UNDER: 7.4 IT IS THE CONTENTION OF THE ASSESSEE THAT THE CIT(A)-30, MUMBAI VIDE HIS ORDER NO. CIT(A)-30/19(1)(3)/11110/201 5-1 6 DATED 15-01- 2018 FOR A.Y. 2009-10 IN THE ASSESSEE'S OWN CASE HA S SUSTAINED THE ADDITION MADE BY THE AO UP TO 6.5% OF THE ALLEG ED BOGUS PURCHASES. WHILE DECIDING SO, THE LEARNED CIT(A) IN HIS AFORESAID ORDER NO. CIT(A)-30/19(1)(3)/11110/2015-16 DATED 15 -01-2018 HAS HELD AS UNDER: 'THE APPELLANT MADE PURCHASES FROM FIFTEEN PARTIES WHO ARE SAID TO BE HAWALA OPERATORS, WHO IS INDULGED IN PROVIDIN G BOGUS BILL WITHOUT SUPPLY OF ANY MATERIAL. INDEPENDENT INQUIRI ES CONDUCTED REVEALED THAT NO SUCH PARTIES ARE EXISTING IN THE G IVEN ADDRESS. WHEN ASKED TO PRODUCE THE PARTY DURING THE ASSESSME NT PROCEEDINGS BY THE AO, APPELLANT EXPRESSED HIS INAB ILITY TO DO SO. IN THE PRESENT CASE, A.O. ESTIMATED THE PROFIT PERC ENTAGE ON BOGUS PURCHASES AS 12.5%. THE SIMPLE ISSUE TO BE DE TECTED IS WHETHER THE PERCENTAGE ADOPTED BY THE AO IS CORRECT IN THE LINE OF BUSINESS I.E. TRADING IN FERROUS AND NON -FERROUS M ETALS. AS NOTICED ABOVE, IN THE SIMILAR CIRCUMSTANCES OF BOGUS PURCHA SES, HON'BLE GUJARAT HIGH COURT ESTIMATED THE ADDITIONAL ADVANTA GE TOWARDS TAX BENEFIT (10% AND THE PROFIT MARGIN (2.5%) TOTAL ING TO 12.5%. IN THE PRESENT CASE ON PERUSAL OF COPIES OF THE INV OICES FURNISHED BY THE APPELLANT IN THE BILL THE PERCENTAGE OF VAT LEVIED IS @4%. APPLYING THE SAME LOGIC, THE PROFIT MARGIN SHOULD B E ADOPTED @ 2.5%. IN VIEW OF THE ABOVE, IN MY CONSIDERED OPINIO N, APPLYING THE LOGIC OF THE ABOVE SAID CASE THE PROFIT PERCENTAGE EMBEDDED ON SUCH PURCHASES IS RESTRICTED TO 6.5 % (I.E. 4% OF V AT LEVIED + 2.5% ITA NO. 728 & 729/MUM/2019 ITO VS MANAV STEEL & ENGG. CO. 3 TOWARDS PROFIT MARGIN), THAT WILL MEET THE ENDS OF THE JUSTICE. TAKING ALL THE FACTS INTO CONSIDERATION AND APPLYIN G THE LOGIC OF SIMIT P. SHETH CASE, THE A.O. IS DIRECTED TO RESTRI CT THE ESTIMATION @ 6.5% ON THE NON GENUINE OF RS. 3,76,35,965/-. APP EAL OF GROUND NO. 2, 3 AND 4 ARE TREATED AS 'PARTLY ALLOWE D'. 7.4.1 THE APPELLANT DURING THE APPELLATE PROCEEDING S HAS RELIED ON A NUMBER OF CASE LAWS INCLUDING THE DECISION OF THE H ON'BLE ITAT, MUMBAI IN ITA NO. 4408, 4337 & 4409/MUM/2018 DATED 05.10.2 018 IN THE CASE OF M/S. BHANSALI METAL & ALLOYS VS. THE I.T.O. -19(1)(2), MUMBAI WHEREIN THE HON'BLE ITAT HAS RESTRICTED THE ADDITIO N IN RESPECT OF BOGUS PURCHASES MADE ON ESTIMATION BASIS AND HELD T HAT THE PRINCIPLE OF CONSISTENCY TO BE FOLLOWED BY THE REVENUE WHILE OBSERVING AS UNDER: '14. HOWEVER, WE NOTE THAT THIS IS NOT AN APPEAL BY THE REVENUE. HENCE, IT WILL NOT BE APPROPRIATE TO CONSIDER AND T AKE AWAY THE RELIEF ALREADY GRANTED Y THE ID. CIT(A) TO THE ASSE SSEE. FURTHER, WE ALSO NOTE THAT THE REVENUE CANNOT TAKE DIFFERENT VI EW FOR SAME ASSESSEE ON SAME FACTS FOR DIFFERENT YEAR. MOREOVER , IT IS SETTLED LAW THAT IF TWO VIEWS ARE POSSIBLE, ONE IN FAVOUR OF THE ASSESSEE HAS TO BE ADOPTED. HENCE, WE UPHOLD THE VIEW OF THE LD. CIT(A) FOR A.Y. 2010-11 TO BE APPLICABLE IN ASSESSEE'S CAS E FOR OTHER YEAR ALSO. HENCE, WE DIRECT THAT ADDITION BE MADE @ 6.5% OF BOGUS PURCHASE FOR ALL THE YEARS. WE FURTHER NOTE T HAT THE ASSESSEE HAS REFERRED TO VARIOUS CASE LAWS, HOWEVER IN VIEW OF THE HON'BLE APEX COURT AND HON'BLE HIGH COURT DECIS ION REFERRED BY US, THESE ARE NOT DISCUSSED HERE. MOREOVER, THE LD. COUNSEL OF THE ASSESSEE FAIRLY ADMITTED THAT 6.5% DISALLOWANCE WOULD MEET THE END OF JUSTICE.'(EMPHASIS SUPPLIED) 7.5 IN VIEW OF THE ABOVE DISCUSSED FACTUAL MATRIC AND BINDING PRECEDENTS AND ALSO FOLLOWING THE PRINCIPLE OF CONSISTENCY, TH E CIT(A) IN ASSESSEE'S OWN CASE FOR A.Y. 2009-10 HAVING SUSTAINED ADDITION UPTO 6.5% OF THE BOGUS PURCHASES, I AM OF THE VIEW THAT ESTIMATION O F 6.5% ( 4% OF VAT LEVIED + 2.5% TOWARDS PROFIT MARGIN) AS PROFIT EMBE DDED IN IMPUGNED PURCHASES SHOWN FROM THE ALLEGED HAWALA PARTIES AND ADDING THE SAME TO THE TOTAL INCOME RETURNED, WOULD MEET THE E NDS OF JUSTICE. THEREFORE, I DIRECT THE AO TO ESTIMATE PROFIT @ 6.5 % OF THE ALLEGED ITA NO. 728 & 729/MUM/2019 ITO VS MANAV STEEL & ENGG. CO. 4 BOGUS PURCHASES, WHICH WORKS OUT TO RS.6,56,180/- ( 06.5% OF RS. 1,00,95,071/-) AND RESTRICT THE ADDITION TO RS.6,56 ,180/- THE APPELLANT GETS A RELIEF FOR THE BALANCE AMOUNT OF RS. 6,05,70 4/-. 5. FROM THE RECORD I FOUND THAT AFTER CONSIDERING V ARIOUS DOCUMENTS FILED BEFORE THE A.O., THE LD. CIT(A) AFTER CONSIDE RING VARIOUS JUDICIAL PRONOUNCEMENTS AND KEEPING IN VIEW THE G.P. RATE DE CLARED BY THE ASSESSEE, THE LD. CIT(A) HAS RESTRICTED THE ADDITIO N TO THE EXTENT OF 6.5%. THE DETAILED FINDING SO RECORDED BY THE LD. C IT(A) HAS NOT BEEN CONTROVERTED BY THE LD DR. ACCORDINGLY, I DO NOT FI ND ANY REASON TO INTERFERE IN THE ORDER OF THE LD. CIT(A) IN RESTRIC TING THE ADDITION TO THE EXTENT OF 6/5% OF ALLEGED BOGUS PURCHASES, BEING PR OFIT ELEMENT IN SUCH BOGUS PURCHASES. 6. SINCE THE FACTS AND CIRCUMSTANCES OF BOTH THE YE ARS ARE SAME, THEREFORE, BY FOLLOWING THE REASONING GIVEN IN THE APPEAL FOR THE A.Y. 2011-12, I ALSO UPHOLD THE ACTION OF THE LD. CIT(A) FOR THE A.Y. 2010- 11. 7. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE A RE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 06 TH FEBRUARY, 2020. SD/- (R.C.SHARMA) ACCOUNTANT MEMBER MUMBAI; DATED 06/02/2020 *RANJAN ITA NO. 728 & 729/MUM/2019 ITO VS MANAV STEEL & ENGG. CO. 5 COPY OF THE ORDER FORWARDED TO : BY ORDER, (ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//