PAWAN JYOTI STEELS P.LTD, MUMBAI V. DCIT CEN CIR 10, MUMBAI

ITA 7698/MUM/2014

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 3327 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-01-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 19-11-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 26-12-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PRATAP SINGH
• Keywords: Business income; Search and seizure; Principle of natural justice; Accommodation entries; Revised return
• Section: 133A; 153A; 131; 145; 132

Judgement Text

, - , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES SMC, MUMBAI , ! ' , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, ITA NO.7698/MUM/2014 ASSESSMENT YEAR: 2005-06 M/S PAWAN JYOTI STEELS PVT. LTD. 2-A, ASHIRWAD BUILDING, AHMEDABAD STREET, MASJID (E), MUMBAI-400009 / VS. DCIT, CENTRAL CIRCLE-10, ROOM NO.1001, 10 TH FLOOR, OLD C.G.O. BUILDING, M.K. ROAD, MUMBAI-400020 / ASSESSEE / REVENUE P.A. NO.AABCP4763D ITA NOS.7705 AND 7706/MUM/2014 ASSESSMENT YEARS: 2005-06 AND 2006-07 M/S PRIDE STEELS PVT. LTD. FLAT NO.109, ASHIRWAD BUILDING, AHMEDABAD STREET, MASJID (E), MUMBAI-400009 / VS. DCIT, CENTRAL CIRCLE-10, ROOM NO.1001, 10 TH FLOOR, OLD C.G.O. BUILDING, M.K. ROAD, MUMBAI-400020 / ASSESSEE / REVENUE P.A. NO. AAACP2140B ITA NOS.7698, 7706, 7713 TO 7716/MUM/2014 2 ITA NOS.7713 TO 7716/MUM/2014 ASSESSMENT YEARS: 2007-08 TO 2008-09 AND 2010-11 TO 2011-12 SHRI GOVARDHAN P SHAH, A-301, YOGI AVENUE, YOGI NAGAR, BORIVALI (W), MUMBAI-400091 / VS. DCIT, CENTRAL CIRCLE-10, ROOM NO.1001, 10 TH FLOOR, OLD C.G. O. BUILDING, M.K. ROAD, MUMBAI-400020 / ASSESSEE / REVENUE P.A. NO. BCCPS0554E $ % & / ASSESSEE BY NONE $ % & / REVENUE BY SHRI PRATAP SINGH CIT-DR / DATE OF HEARING 20/01/2016 & / DATE OF ORDER: 20/01/2016 & / O R D E R THIS BUNCH OF SEVEN APPEALS IS BY DIFFERENT ASSESS EES, AGGRIEVED BY THE IMPUGNED ORDERS ALL DATED 16/10/20 14 OF THE LD. FIRST APPELLATE AUTHORITY, MUMBAI, ON IDENT ICAL GROUNDS, WHICH ARE REPRODUCED HEREUNDER:- IN THE CASE OF M/S PRIDE STEELS PVT. LTD., CONFIRMI NG THE SALES TRANSACTIONS AS NON GENUINE, TREATING THAT ACCOMMODATION ENTRIES AND ESTIMATING THE INCOME TO THE EXTENT OF 2.5% OVER AND ABOVE THE RETURNED INCOME A ND CONSEQUENT ADDITION TO THE TUNE OF RS.13,87,470/- ( A.Y. 2005-06), RS.13,77,563/- (A.Y. 2006-07), HAS BEEN CHALLENGED. ITA NOS.7698, 7706, 7713 TO 7716/MUM/2014 3 IN THE CASE OF SHRI GOVARDHAN P. SHAH, IDENTICALLY THE ADDITION OF RS.9,67,405/- (A.Y.2007-08), RS.5,67,08 1/- (A.Y.2008-09), RS.9,43,700/- (A.Y. 2010-11) AND RS.6,78,604/-(A.Y.2011-12) HAS BEEN CHALLENGED. IN THE CASE OF M/S PAWAN JYOTI STEEL PVT. LTD. THE ADDITION OF RS8,45,252/- HAS BEEN CHALLENGED AS ACCOMMODATION ENTRY. 2. (A). DURING HEARING OF THESE APPEALS, NOBODY WAS PRESENT FOR THE ASSESSEE, IN SPITE OF THE FACT THAT REGISTERED AD NOTICES WERE ISSUED TO M/S PRIDE STEEL PVT. LTD. ON 07/08/2015, 22/10/2015 AND 31/12/2015. 2. (B). IN THE CASE OF SHRI GOVARDHAN P. SHAH REGISTERED NOTICES WERE ISSUED ON 01/08/2015, 14/10/2015, 07/12/2015 AND 31/12/2015 AT THE ADDRES S PROVIDED IN FORM NO.36 BY THE ASSESSEE. IT IS NOTI CED THAT THE REGISTERED NOTICE ISSUED TO THE ASSESSEE WAS DU LY RECEIVED ON 08/12/2015 AS IS EVIDENT FROM ACKNOWLED GMENT RETURNED BY THE POSTAL DEPARTMENT. THE ASSESSEE NEI THER APPEARED BEFORE THIS TRIBUNAL NOR MOVED ANY ADJOURN MENT PETITION. 2.(C). IN THE CASE OF M/S PAWAN JYOTI STEELS PVT. LTD., IDENTICALLY, REGISTERED AD NOTICES WERE ISSUED TO T HE ASSESSEE ON 07/08/2015, 22/10/2015 AND 31/12/2015 A T THE ADDRESS PROVIDED IN COLUMN NO. 10 OF FORM NO.36 DULY FILED AND SIGNED BY THE ASSESSEE ITSELF. ITA NOS.7698, 7706, 7713 TO 7716/MUM/2014 4 2.(D). IT IS ALSO NOTICED THAT THESE APPEALS WER E HEARD ON 08/10/2015 BUT ON 09/10/2015, THESE WERE RELEASED F OR CLARIFICATION AS IS EVIDENT FROM IDENTICAL ORDER SH EET ENTRIES (ITA NO.7706/MUM/2014) ON 19/11/2015 AND 23/12/2015 ALSO, IN SPITE OF ISSUANCE OF REGISTERED AD NOTICE, THE ASSESSES NEITHER APPEARED NOR MOVED ANY ADJOURNMENT PETITION. IT SEEMS THAT THE ASSESSEES ARE NOT INTER ESTED TO PURSUE THEIR APPEAL, THEREFORE, THESE CANNOT BE KEP T PENDING INDEFINITELY, CONSEQUENTLY, I HAVE NO OPTION BUT TO PROCEED EX-PARTE, QUA THESE ASSESSEES, AND TEND TO PROCEED TO DISPOSE OF THESE APPEALS ON THE BASIS OF MATERIAL A VAILABLE ON RECORD. 3. THE LD. CIT-DR, SHRI PRATAP SINGH, STRONGLY DEFENDED THE CONCLUSION ARRIVED AT IN THESE APPEALS BY EXPLAINING THAT IDENTICAL FACTS ARE INVOLVED IN THE SE APPEALS, THEREFORE, THESE CAN BE HEARD TOGETHER. IT WAS EXPL AINED THAT A SEARCH AND SEIZURE ACTION U/S 132 OF THE INCOME T AX ACT, 1961 (HEREINAFTER THE ACT) WAS CONDUCTED IN THE CAS E OF RUSTOMJEE-EVERSHINE GROUP ON 20/10/2010, WHEREIN, CERTAIN DOCUMENTS AND DATA WAS SEIZED, WHICH BELONG S TO THE ASSESSEES. NOTICES U/S 153A R.W.S 153C OF THE A CT WERE ISSUED TO WHICH INCOME SHOWING 26,090/- WAS FILED O N 31/01/2013 (M/S PRIDE STEELS PVT. LTD.) FOR A.Y. 20 06-07 AND IDENTICALLY FOR A.Y. 2005-06. THE CRUX OF THE A RGUMENT IS THAT THE ASSESSEES ARE PROVIDING ACCOMMODATION E NTRIES AND ONE MR. GOVARDHAN SHAH, WHILE TENDERING THE STATEMENT ON OATH STATED THAT HE PROVIDED ACCOMMODA TION ITA NOS.7698, 7706, 7713 TO 7716/MUM/2014 5 ENTRIES WORTH CRORES OF RUPEES TO M/S PRIDE STEELS LTD., WHEREAS, MR. DHIMANTH CHOKSI, PURCHASE HEAD OF THE PRIDE GROUP TENDERED THAT NO PURCHASES HAVE BEEN MADE BY HIM FROM THESE COMPANIES. THE ASSESSING OFFICER ASKED H IM THEN WHY PAYMENTS WERE MADE TO THEM. NOT SATISFACTORY RE PLY OR EXPLANATION WAS ADDUCED. 3.1. THE LD. CIT-DR, FURTHER ASSERTED THAT SHRI GOVARDHAN SHAH, IN HIS STATEMENT STATED THAT HIS MA RGIN FROM THESE ACCOMMODATION ENTRIES IS ONLY 2%, WHEREA S, THE LD. ASSESSING OFFICER CONSIDERING THE FACTS ADDED T HE COMMISSION AT THE RATE OF 2.5% ON THE DISCLOSED SAL ES. 3.2. FOR A.Y. 2011-12, IT WAS EXPLAINED THAT, SHRI GOVARDHAN SHAH, CLAIMED THAT NO TRANSACTION WAS MAD E, HOWEVER, THE LD. ASSESSING OFFICER TOOK THE AVERAGE OF EARLIER THREE YEARS AND MADE THE ADDITION OF RS.2,71,44,156 /-, WHICH WAS REDUCED TO RS.85.89 LAKHS BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS). THE LD. CIT-D R FURTHER CONTENDED THAT THE MAHARASHTRA STATE SALES TAX DEPARTMENT ALSO RAIDED VARIOUS PARTIES, WHEREIN, SH RI PRAVIN KUMAR JAIN AND SHRI KETAN SHAH, WHO RELATES TO THESE FIRMS ALSO STATED THAT THEY PROVIDED ACCOMMOD ATION ENTRIES TO M/S NOBLE ENTERPRISES. THUS, THE CRUX OF THE ARGUMENT BY THE LD. CIT-DR IS THAT THE ADDITION WAS RIGHTLY MADE AS IT IS A CLEAR CUT CASE OF ACCOMMODATION ENT RIES. 3.3. I HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. BEFORE CO MING TO ITA NOS.7698, 7706, 7713 TO 7716/MUM/2014 6 ANY CONCLUSION, IT IS MY BOUNDED DUTY TO NARRATE TH E FACTS. IN THE CASE OF M/S PAWAN JYOTI STEELS PVT. LTD., TH E ASSESSEE IS INVOLVED IN TRADING IN IRON AND STEELS AND STEEL S PRODUCTS, DECLARED INCOME OF RS.67,011/- IN ITS ORIGINAL RETU RN FILED ON 31/01/2013. A SURVEY ACTION U/S 133A OF THE ACT WAS CARRIED OUT ON 05/12/2012 BY THE INVESTIGATION WING , WHEREIN, CERTAIN DOCUMENTS INCLUDING PURCHASE AND S ALES BILLS WERE TAKEN INTO CUSTODY. NOTICE U/S 153A R.W. S 153C OF THE ACT WERE ISSUED TO THE ASSESSEE ON 26/12/2012 T O WHICH THE ASSESSEE FILED REVISED RETURN ON 31/01/2013, DE CLARING THE SAME INCOME, AS WAS DECLARED IN THE ORIGINAL RE TURN. THE ASSESSEE IN RESPOND TO THE NOTICES ALSO EXPLAINED T HAT THE ASSESSEE EFFECTED PURCHASES ABOVE RS.25 LAKH BY FUR THER EXPLAINING THAT THE COPIES OF THE INVOICES WERE TAK EN INTO CUSTODY BY THE SALES TAX DEPARTMENT, THEREFORE, THE SAME CANNOT BE FURNISHED. STATEMENT OF RUSTOMJEE GROUP A ND DIRECTOR OF M/S PRIDE STEELS PVT. LTD. WAS RECORDED . IN THE SEARCH PROCEEDINGS AT RUSTOMJEE GROUP, IT WAS FOUND THAT ACCOMMODATION SALES BILLS WERE ISSUED BY THE COMPAN Y ALONG WITH SISTER CONCERN M/S PAWAN JYOTI STEELS PV T. LTD. IT WAS FOUND THAT THE INVOICES SO FOUND WERE NOT SIGNE D AND THE DELIVERY CHALLANS, TRANSPORT BILLS WERE ALSO NO T SUPPORTED IN RELATION TO SALE OF GOODS. STATEMENT FROM SHRI D HIMANT CHOKSHI, HEAD OF RUSTOMJEE GROUP WAS RECORDED, WHER EIN, IT WAS STATED THAT THESE COMPANIES ARE NOT APPEARING I N THE VENDOR LIST OF SALES, THEREFORE, THESE ARE NOT GENU INE SALES. IN REPLY TO SUMMONS U/S 131 OF THE ACT, MR. GOVARDHAN SHAH, DIRECTOR OF PRIDE STEELS PVT. LTD. TENDERED IN HIS STATEMENT ITA NOS.7698, 7706, 7713 TO 7716/MUM/2014 7 THAT THE ASSESSEE COMPANY ALONG WITH SISTER CONCERN , M/S PRIDE STEELS PVT. LTD., HEAD PROVIDED ACCOMMODATION ENTRY TO RUSTOMJEE GROUP TO THE TUNE OF RS.1,92 CRORES (R S.83 LAKH BY ASSESSEE COMPANY AND RS.1,09,01,724/- BY M/ S PAWAN JYOTI PVT. LTD.). WHILE RECORDING THE STATEME NT OF DIRECTOR OF M/S PRIDE STEELS PVT. LTD., I WAS STATE D THAT SALES MADE TO RUSTOMJEE GROUP WERE NOT GENUINE SALES AND SOME OTHER SALES WERE GENUINE. HOWEVER, IN A.YS. FROM 20 08-09 TO 2010-11, IT WAS OBSERVED THAT THE ASSESSEE COMPANIE S ALSO PROVIDED ACCOMMODATION ENTRIES TO VARIOUS OTHER CON CERNS OTHER THAN M/S RUSTOMJEE GROUP FOR WHICH NO PROPER DETAILS WERE FURNISHED. THE LD. ASSESSING OFFICER R EJECTED THE BOOKS OF THE ACCOUNTS U/S 145 OF THE ACT. IT WAS FO UND BY THE ASSESSING OFFICER THAT THE ASSESSEE IN ITS PROF IT AND LOSS ACCOUNT DECLARED SALES TO THE TUNE OF RS.3,64,90,50 9/-, THEREFORE, THE LD. ASSESSING OFFICER ESTIMATED AVER AGE RATE OF 2.5% OF THE SALES (2% COMMISSION ON ACCOMMODATION S ALES AND 3% OF ESTIMATED RATE TAKEN FOR OTHER SALES IN A .Y. 2008- 09 TO 2010-11) WHICH WAS CONSIDERED AS NET TAXABLE INCOME, THUS, THE ESTIMATED INCOME ARRIVED AT RS.9,12,263/- . SINCE THE ASSESSEE HAS DECLARED RS.67,011/- IN ITS RETURN , THE BALANCE AMOUNT OF RS.8,45,252/- WAS ADDED AS BUSINE SS INCOME. 3.4. ON APPEAL, BEFORE THE LD. COMMISSIONER OF INC OME TAX (APPEALS), THE LD. ADVOCATE ALONG WITH MS. ARCH ANA BHATIA, DIRECTOR OF THE ASSESSEE FIRM APPEARED AND MADE DETAILED SUBMISSION. FINALLY, IT WAS NOTICED BY THE LD. FIRST ITA NOS.7698, 7706, 7713 TO 7716/MUM/2014 8 APPELLATE AUTHORITY THAT THE ASSESSEE USED TO GIVE HAWALA BILLS WITHOUT ANY GENUINE TRANSACTION AND SINCE THE ASSESSEE HAS NOT PROVIDED A PLAUSIBLE EXPLANATION, THE STAND TAKEN IN THE ASSESSMENT ORDER WAS AFFIRMED. 3.5. THE ASSESSEE/ASSESSEES IS/ARE IN FURTHER APPE AL BEFORE THIS TRIBUNAL. IF THE OBSERVATION MADE IN T HE ASSESSMENT ORDER, LEADING TO ADDITION MADE TO THE T OTAL INCOME, CONCLUSION DRAWN IN THE IMPUGNED ORDER, MAT ERIAL AVAILABLE ON RECORD, ASSERTIONS MADE BY THE LD. RES PECTIVE COUNSEL, IF KEPT IN JUXTAPOSITION AND ANALYZED, THE POSITION EMERGING FROM THE PROFIT & LOSS ACCOUNT IS REPRODUC ED HEREUNDER:- PARTICULARS ASSESSMENT YEARS 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 201 1-12 SALES 36490590 74977140 105984815 148818327 147009240 757 67223 6941130 OTHER INCOME ---- ------ --- ----- 17440 ---- 460133 PURCHASES/ COGS 35527258 73555584 101510372 144110654 143517698 720 18492 6138291 GROSS PROFIT 963251 1421556 4474443 4707673 3491542 3748731 8028 39 GP % OF SALES 2.64 1.90 4.22 3.16 2.38 4.95 11.57 NET PROFIT 67011 215854 258531 302998 221002 110230 (94432) NP % OF SALES 0.18 0.29 0.24 0.20 0.15 0.15 1.36 ENHANCEM ENT AS PER ASSESSING OFFICER 845252 1716075 2391089 2935532 3523318 1753646 2784 43 NET PROFIT AS PER ASSESSING OFFICER 912263 1931929 2649620 3238530 3744320 1863876 1840 11 NP AS % OF SALES AS PER ASSESSING OFFICER 2.50 2.58 2.50 2.18 2.55 2.45 2.65 IF THE TOTALITY OF FACTS ARE ANALYZED, ONE FACT IS CLEARLY OOZING OUT THAT THE LD. ASSESSING OFFICER HAS CLEARLY IDEN TIFIED THE ITA NOS.7698, 7706, 7713 TO 7716/MUM/2014 9 PARTIES, WHO HAVE GIVEN THE HAWALA BILLS WITHOUT AN Y GENUINE TRANSACTION. THE ASSESSEE HAS SHOWN PURCHAS ES FROM THESE PARTIES ISSUING HAWALA BILLS AND THE TOT AL PURCHASES FROM THESE PARTIES EXCEEDS THE TRANSACTIO NS WITH RUSHTOMJEE GROUP. RIGHT FROM ASSESSMENT STAGE, TILL THIS TRIBUNAL, NO EVIDENCE HAS BEEN PRODUCED ESTABLISHIN G THE GENUINENESS OF THESE TRANSACTIONS AND ONLY PLEA WAS TAKEN THAT THE SALES TAX AUTHORITIES HAS TAKEN AWAY THE B OOKS OF ACCOUNTS. IT IS NOTED THAT EVEN BEFORE THE LD. CIT( A) NEITHER ANY EVIDENCE WAS PRODUCED BY THE ASSESSEE PROVING T HE GENUINENESS OF THE TRANSACTION NOR ANY CONFIRMATION WAS FURNISHED FROM THE PARTIES, THUS, THE STAND OF THE LD. CIT(A) IS HAVING MERIT. IT IS ALSO NOTED THAT THE LD. ASSE SSING OFFICER HAS ALSO REFERRED TO AN AFFIDAVIT-CUM-DECLARATION O F MR. PRAVIN KUMAR JAIN, PROPRIETOR OF M/S PAWAN STEEL TR ADERS AND M/S ANURADHA TRADERS, MR. KETAN SHAH, PROPRIETO R OF M/S M.S. TRADING, WHO GAVE BOGUS BILLS TO THE APPEL LANT GROUP. ALL THE INFORMATION, WERE CONFRONTED TO THE ASSESSEE. THE PURCHASES MADE THROUGH ENTRY PROVIDERS ONLY. TH E ASSESSING OFFICER COMPUTED THE COMMISSION IN RESPEC T OF ACCOMMODATION SALES AT THE AVERAGE RATE OF 2.5%. I T IS FURTHER NOTED THAT IN A.Y. 2005-06 (PAWAN JYOTI STE ELS PVT. LTD.), THE TOTAL SALES AS PER PROFIT & LOSS ACCOUNT WAS SHOWN AT RS.3,64,90,509/- ON WHICH THE NET PROFIT WAS EST IMATED AT 2.5%, WHICH COMES TO RS.9,12,263/- CONSIDERING T HAT THE ASSESSEE HAS SHOWN PROFIT AS PER RETURN OF INCOME O F RS.67,011/-. ON THE BASIS OF THIS PERCENTAGE, REMAI NING ADDITIONS WERE MADE. HOWEVER, KEEPING IN VIEW, TH E TOTALITY ITA NOS.7698, 7706, 7713 TO 7716/MUM/2014 10 OF FACTS AND THE CIRCUMSTANCES AVAILABLE ON RECORD AND BY CONSIDERING THE CONTENTION OF THE LD. CIT-DR, CONSI DERING THE PRINCIPLE OF NATURAL JUSTICE AND PUT AN END TO THE LITIGATION, IT WILL MEET THE ENDS OF JUSTICE, THE A DDITION IS REDUCED TO 2% IN PLACE OF 2.5% ON THE ESTIMATED INC OME BY THE LD. ASSESSING OFFICER, THUS, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 4. SINCE, IDENTICAL ISSUES/FACTS ARE INVOLVED IN ALL THE APPEALS, MODUS OPERANDI IS SAME OF TAKING THE BOGUS ACCOMMODATION ENTRIES, NO PLAUSIBLE EXPLANATION WAS ADDUCED BY THESE ASSESSEES RIGHT FROM ASSESSMENT ST AGE AND TILL BEFORE THIS TRIBUNAL, THEREFORE, MY ABOVE VIEW WILL BE APPLICABLE TO REMAINING APPEALS ALSO, MORE SPECIFIC ALLY WHEN ONE OF THE ASSESSEE, SHRI GOVARDHAN SHAH, TENDERED IN HIS STATEMENT THAT HIS MARGIN IS 2%. THE LD. ASSESSING OFFICER ESTIMATED THE INCOME AT THE RATE OF 2.5% OF THE SAL ES, THUS, CONSIDERING THE STATEMENT AND OTHER ATTENDANT MATER IAL AVAILABLE ON RECORD, THE COMMISSION AT THE RATE OF 2% WILL MEET THE ENDS OF JUSTICE. FINALLY, ALL THE APPEALS ARE PARTLY ALLOWED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. DR AT THE CONCLUSION OF THE HEARING ON 20/01/2016. SD/- (JOGINDER SINGH) ! ' / JUDICIAL MEMBER MUMBAI; DATED : 20/01/2016 ITA NOS.7698, 7706, 7713 TO 7716/MUM/2014 11 F{X~{T? P.S / ! & $ )!*+ ,&+-* / COPY OF THE ORDER FORWARDED TO : 1. '#$%& / THE APPELLANT 2. '(%& / THE RESPONDENT. 3. ) ) * ( '#$ ) / THE CIT, MUMBAI. 4. ) ) * / CIT(A)- , MUMBAI 5. -./ ' , ) '#$ ' 1 , / DR, ITAT, MUMBAI 6. /2 3$ / GUARD FILE. & / BY ORDER, (-# ' //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI