M/s. Neminath Electricals, Pune V. Income tax Officer,

ITA 79/PUN/2017

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 7596 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 4 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-05-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 10-01-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SHRI
• Assessee Lawyers: NIKHIL PATHAK SHRI SUHAS BORA
• Keywords: Bogus purchase; Income from undisclosed sources

Judgement Text

SMC IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, PUNE . , BEFORE SHRI D. KARUNAKARA RAO, AM . / ITA NO.79/PUN/2017 / ASSESSMENT YEAR : 2009-10 M/S. NEMINATH ELECTRICALS, 510, BUDHWAR PETH, 14/B, J.K. MARKET, TAPKIR GALLI, PUNE 411 002 PAN : AAEFN8069Q . /APPELLANT VS. ITO, WARD-7(1), PUNE . / RESPONDENT / APPELLANT BY : SHRI NIKHIL PATHAK/SHRI SUHAS BO RA / RESPONDENT BY : SHRI PANKAJ GARG / DATE OF HEARING : 16.05.2018 / DATE OF PRONOUNCEMENT: 17.05.2018 / ORDER PER D. KARUNAKARA RAO, AM : THIS IS THE APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF CIT(A)-5, PUNE, DATED 28-09-2016 FOR THE ASSESSMENT YEAR 2009 -10. 2. GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER : THE FOLLOWING GROUNDS ARE TAKEN WITHOUT PREJUDICE T O EACH OTHER ON FACTS AND IN LAW, 1. THE LEARNED CIT (A) ERRED IN CONFIRMING THE ADDI TIONS OF RS. 26,07,413/- ON ACCOUNT OF NON GENUINE PURCHASES ON THE GROUND T HAT PAYMENTS MADE TO PARTIES DID NOT MATCH WITH REFERENCE TO THE BANK ST ATEMENT, THE PURCHASES MADE AGAINST THE PAYMENTS TO TWO PARTIES NAMELY SAI CIN MERCANTILE (PRIVATE) LIMITED AND ACCURE IMPEX (PRIVATE) LIMITED HAVE NOT BEEN PROVED AND ALSO DEMAND DRAFT PAYMENT ARE NOT REFLECTED IN THE BANK STATEMENT. THE SALE PRICE BEING LOWER THAN THE PURCHASE PRICE AND THE PURCHAS E RATES BEING HIGH IS AGAINST THE NORMAL BUSINESS PRACTICE. THE OTHER PUR CHASES ARE HELD AS CLOSING STOCK TILL A RESPECTABLE PROFIT COULD BE EARNED ON THEIR SALE DISREGARDING THE SUBMISSIONS AND EVIDENCES GIVEN BY THE APPELLANT. ITA NO.79/PUN/2017 M/S. NEMINATH ELECTRICALS 2 2. THE LEARNED CIT (A) ERRED IN CONFIRMING THE ADDI TIONS AS NON GENUINE PURCHASES ONLY ON PRESUMPTION AND SURMISES WITHOUT EXAMINING THE GRAVITY OF SUCH ALLEGATIONS AND WITHOUT SATISFYING THE BASIC I NGREDIENTS AND REQUIREMENTS OF SUCH TRANSACTIONS. 3. THE LEARNED CIT (A) WHILE CONFIRMING THE ADDITIO N FAILED TO APPRECIATE THE FOLLOWING IMPORTANT FACTS THAT: A. THE PURCHASES WERE SUPPORTED BY PROPER INVOICE. B. THE PAYMENTS WERE MADE BY A/C. PAYEE CHEQUES, C. ALL THE PARTIES FROM WHOM THE PURCHASES WERE MADE A RE DULY REGISTERED UNDER THE STATE AND CENTRAL SALES TAX ACT AT THE TI ME WHEN PURCHASES WERE EFFECTED. D. THE APPELLANT IS ALSO A REGISTERED DEALER UNDER THE MVAT ACT 2002 AND CST ACT AND THEIR REGISTRATION WERE VALID WHEN THE APPELLANT HAD ENTERED INTO THE TRANSACTION . E. THE APPELLANT HAS MAINTAINED ALL THE QUANTITATIV E DETAILS OF PURCHASES AND SALES AND THE SAME MATCHES WITH THE BOOKS OF AC COUNTS. F. THE BOOKS OF ACCOUNTS OF THE APPELLANT WERE AUDI TED UNDER INCOME TAX ACT, 1961 AND ALSO UNDER MAHARASHTRA VALUE ADDED TA X ACT, 2002. G. THE SALES EFFECTED BY THE APPELLANT OUT OF THESE PURCHASES HAVE BEEN ACCEPTED. H. THE RECONCILIATION OF SALES AND PURCHASE WITH QU ANTITATIVE TALLY HAD BEEN FURNISHED BY THE APPELLANT. 4. THE ID CIT(A) FURTHER ERRED IN DRAWING CONCLUSIO N THAT THE APPELLANT HAD SOLD THE MATERIAL OUT OF THESE PURCHASES AT LESS TH AN COST PRICE AND INCURRED LOS S I N THE TRANSACTION . 5. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND OR DELETE ANY OF THE ABOVE GROUNDS OF APPEAL. 3. BRIEFLY STATED RELEVANT FACTS ARE THAT ASSESSEE IS A FIRM AND IS ENGAGED IN THE BUSINESS OF TRADING IN ELECTRICAL GOODS. ASSES SEE FILED THE RETURN OF INCOME ON 25-09-2009 DECLARING TOTAL INCOME OF RS.6,04,946 /- FOR THE ASSESSMENT YEAR UNDER CONSIDERATION. ON THE BASIS OF INFORMATION R ECEIVED FROM THE INVESTIGATION WING OF SALES TAX DEPARTMENT, AO ISSU ED NOTICE U/S.148 OF THE ACT TO THE ASSESSEE. AO FOUND THAT ASSESSEE MADE P URCHASES FROM SIX SUPPLIERS NAMELY, (1) PADMAVATI TRADING COMPANY (2) MANI BHAD RA SALES PVT. LTD. (3) VARAH LAXMI SALES AGENCY (4) SAICAN MERVANTILE PVT. LTD., (5) ACCURE IMPEX ITA NO.79/PUN/2017 M/S. NEMINATH ELECTRICALS 3 PVT. LTD., (6) PAWAN ENTERPRISES TOTALLING TO RS.26 ,07,413/-. AO HELD THAT EITHER THE AMOUNT DID NOT MATCH OR WAS NOT REFLECTED IN TH E BANK ACCOUNT AS AND WHEN THE PAYMENTS WERE MADE AND THEREFORE, PROOF OF PAYMENT COULD NOT BE ESTABLISHED. EVENTUALLY, AO CAME TO THE CONCLUSION THAT THE PURCHASES MADE BY THE ASSESSEE ARE UNPROVED AND MADE ADDITION OF ENTI RE SUM OF RS.26,07,413/- AS INCOME FROM UNDISCLOSED SOURCES. THUS, THE AO DE TERMINED THE ASSESSED INCOME AT RS.32,12,360/-. 4. DURING THE FIRST APPELLATE PROCEEDINGS, ASSESSEE MADE ELABORATE SUBMISSIONS RELYING ON VARIOUS DECISIONS/JUDGMENTS WHICH WERE INCORPORATED IN PARA NO.6.2 OF THE ORDER OF CIT(A). HOWEVER, THE CIT(A) SUSTAINED THE ADDITION MADE BY THE AO CONSIDERING THE FACT THAT T HE ASSESSEE DID NOT FURNISH ANY EVIDENCE OF THE DELIVERY OF THE GOODS BY WAY OF TRANSPORT RECEIPT, DELIVERY CHALLAN, OCTROI RECEIPTS, STOCK REGISTER SHOWING MO VEMENT OF GOODS AND PROOF OF PAYMENT MADE TO THE PARTIES MENTIONED ABOVE. CONTE NTS OF PARA NO.6.3 OF THE ORDER OF CIT(A) ARE RELEVANT. 5. AGGRIEVED WITH SUCH ORDER OF THE CIT(A), ASSESSE E FILED THE PRESENT APPEAL BEFORE THE TRIBUNAL WITH THE GROUNDS EXTRACT ED ABOVE. 6. AT THE OUTSET, LD. COUNSEL FOR THE ASSESSEE SUBM ITTED THAT CONFIRMING THE ENTIRE PURCHASES MADE BY THE ASSESSEE FOR THE ASSES SMENT YEARS UNDER CONSIDERATION IS UNSUSTAINABLE WHEN THE BOOKS OF AC COUNTS ARE NOT FORMALLY REJECTED U/S.145(3) OF THE ACT. LD. COUNSEL SUBMIT TED THAT WHEN THE ASSESSEE IS IN POSSESSION OF THE EVIDENCES BY WAY OF INVOICE S, PAYMENTS BY ACCOUNT PAYEE CHEQUES, QUANTITATIVE DETAILS OF PURCHASES, R EGISTRATION OF THE ASSESSEE/PARTIES UNDER STATE AND CENTRAL SALES TAX ACT ETC., ADDING THE ENTIRE PURCHASES AS BOGUS PURPOSES, IS NOT TENABLE. FURTH ER, LD. COUNSEL SUBMITTED THAT IN VIEW OF THE PLETHORA OF DECISIONS OF THE PU NE BENCH OF THE TRIBUNAL, THE ITA NO.79/PUN/2017 M/S. NEMINATH ELECTRICALS 4 ADDITION MAY BE RESTRICTED TO 10% OF THE BOGUS PURC HASES. LD. COUNSEL FOR THE ASSESSEE HAS PLACED RELIANCE ON THE RATIO LAID DOWN BY THE PUNE BENCH OF TRIBUNAL IN BUNCH OF APPEALS WITH LEAD ORDER IN M/S . CHHABI ELECTRICALS PVT. LTD. VS. DCIT IN ITA NO.795/PUN/2014, RELATING TO ASSESS MENT YEAR 2010-11, ORDER DATED 28-04-2017 AND POINTED OUT THAT AT BEST 10% O F GP RATE MAY BE APPLIED ON ALLEGED BOGUS PURCHASES. 7. LD. DR FOR THE REVENUE RELIED ON THE ORDERS OF A O/CIT(A). 8. I HEARD BOTH THE SIDES ON THE SOLITARY ISSUE OF CONFIRMING OF ENTIRE ADDITION OF BOGUS PURCHASES BY THE CIT(A) AND PERUS ED THE ORDERS OF THE REVENUE AND THE DECISIONS RELIED ON BY THE LD. COUN SEL FOR THE ASSESSEE. I FIND THAT SIMILAR ISSUE OF BOGUS PURCHASES HAS BEEN DECI DED BY THE TRIBUNAL IN SERIES OF DECISIONS. FURTHER, IT IS NOT THE CASE OF THE R EVENUE THAT SOMETHING IS WRONG WITH THE INVOICES, PAYMENTS, TRAIL OF GOODS PURCHAS ED ETC. I FIND THE COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF MR. KHAN AFZAL HUSSAIN MOHD. SAIE VS. DCIT ITA NOS. 2708 AND 2709/PUN/2016, DATED 23-03-2018 CONFIRMING THE ADDITION TO ONLY 10% OF SUCH ALLEGED BOGUS PURCHAS ES APPLY TO THE FACTS OF THIS CASE. I THEREFORE FIND IT TO RELEVANT TO EXTRACT T HE FINDINGS GIVEN BY THE TRIBUNAL IN PARA NO.11 OF ORDER OF TRIBUNAL HERE AS UNDER : 11. NOW, COMING TO THE MERITS OF ADDITION. THE IS SUE RAISED IN THE PRESENT APPEAL IS AGAINST BOGUS PURCHASES. WE HAVE ALREADY ADJUDICATED SIMILAR ISSUE IN SERIES OF DECISIONS WITH LEAD ORDER IN M/S. CHHA BI ELECTRICALS PVT. LTD. VS. DCIT IN ITA NO.795/PUN/2014, RELATING TO ASSESSMENT YEAR 2010-11, ORDER DATED 28.04.2017. THE ASSESSEE IN THE FIRST YEAR I .E. ASSESSMENT YEAR 2009-10 HAS MAINTAINED QUANTITATIVE DETAILS. IN OTHER WORD S, IT HAS THE EVIDENCE OF PURCHASING GOODS AND ITS SALES. IN SUCH CIRCUMSTAN CES, AT BEST, HIGHER GROSS PROFIT RATE CAN BE APPLIED. FOLLOWING OUR DECISION IN EARLIER ORDERS, WE HOLD THAT GP RATE OF 10% OVER AND ABOVE GP DECLARED BY T HE ASSESSEE IN ITS BOOKS OF ACCOUNT, BE APPLIED TO WORK OUT THE ADDITI ONAL INCOME IN THE HANDS OF ASSESSEE. THE GROUND OF APPEAL NO.3 RAISED BY THE ASSESSEE IS THUS, PARTLY ALLOWED. ITA NO.79/PUN/2017 M/S. NEMINATH ELECTRICALS 5 CONSIDERING THE SAME, I DIRECT THE ASSESSING OFFICE R TO MAKE ADDITION IN THE HANDS OF ASSESSEE BY ADOPTING GP RATE AT 10% OF BOGUS PURCHASES DECLARED BY THE ASSESSEE. ACCORDINGLY, THE GROUNDS RAISED BY THE ASSESSEE ARE PARTLY ALLOWED. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON THIS 17 TH DAY OF MAY, 2018. SD/- (D.KARUNAKARA RAO) / ACCOUNTANT MEMBER / PUNE; DATED : 17 TH MAY, 2018. SATISH / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT; 2. / THE RESPONDENT; 3. ( ) / THE CIT(A) - 5 , PUNE 4. / THE CIT - 5 , PUNE 5. , , SMC / DR SMC, ITAT, PUNE; 6. / GUARD FILE. / BY ORDER, //TRUE COPY// SENIOR PRIVATE SECRETARY , / ITAT, PUNE