SECURE INDUSTRIES P.LTD, NAVI MUMBAI V. ITO WD 15(3)(3), MUMBAI

ITA 839/MUM/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 0143 (ITAT-MUMBAI)
• Duration Of Justice: 6 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-08-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 09-05-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 06-02-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: N HEMALATHA
• Assessee Lawyers: SUNIL R TALREJA
• Keywords: Bogus purchase
• Section: 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH SMC, MUMBAI BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER ITA NO.839/M/2017 ASSESSMENT YEAR: 2009-10 M/S. SECURE INDUSTRIES PVT. LTD., C-33/34, PURVANCHAL CHSL, PLOT NO.1E, SECTOR 1, AIROLI, NAVI MUMBAI 400 706 PAN: AABCP7593D VS. INCOME TAX OFFICER, WARD 15(3)(3), R.NO.452, AAYAKAR BHAWAN, MARINE LINES, MUMBAI 20 (APPELLANT) (RESPONDENT) ITA NO.1338/M/2017 ASSESSMENT YEAR: 2009-10 INCOME TAX OF FICER, WARD 15(3)(3), ROOM NO.452, 4 TH FLOOR, AAYAKAR BHAVAN, MAHARSHI KARVE ROAD, MUMBAI 400 020 VS. M/S. SECURE INDUSTRIES PVT. LTD., C-33/34, PURVANCHAL CO. OP. HOUSING SOCIETY LTD., PLOT NO.1E, SECTOR 1, AIROLI, NAVI MUMBAI 400 706 PAN: AABCP7593D (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI SURESH OTWANI, A.R. & SHRI SUNIL R. TALREJA, A.R. REVENUE BY : MISS N. HEMALATHA, D.R. DATE OF HEARING : 31.07.2017 DATE OF PRONOUNCEMENT : 29.08.2017 O R D E R PER D.T. GARASIA, JUDICIAL MEMBER: THE ABOVE TITLED APPEALS ONE BY THE ASSESSEE AND T HE OTHER BY THE REVENUE HAVE BEEN PREFERRED AGAINST THE ORDER DATED 30.11.2016 OF THE COMMISSIONER OF INCOME TAX (APPEALS) [HEREINAFTER R EFERRED TO AS THE CIT(A)] RELEVANT TO ASSESSMENT YEAR 2009-10. ITA NO.839/M/2017 & ITA NO.1338/M/2017 M/S. SECURE INDUSTRIES PVT. LTD. 2 ITA NO.839/M/2017 (ASSESSEES APPEAL) 2. THE SHORT FACTS OF THE CASE ARE THAT THE ASSESSE E IS A PRIVATE LIMITED COMPANY ENGAGED IN MANUFACTURE OF PP CAPS. THE RETU RN OF INCOME WAS FILED ON 29-09-2009 DECLARING TOTAL INCOME OF RS.3,00,800 /-. THE CASE OF THE ASSESSEE HAS BEEN RE-OPENED U/S 147 AS THE ASSESSIN G OFFICER (HEREINAFTER REFERRED TO AS THE AO) HAS RECEIVED INFORMATION THA T THE ASSESSEE HAS TAKEN BOGUS PURCHASE BILLS FROM THE FOLLOWING PARTIES TO SUPPRESS PROFITS: DURING RE-ASSESSMENT PROCEEDINGS THE AO ASKED TO FU RNISH COMPLETE DETAILS OF PURCHASES MADE FROM THE ABOVE PARTIES. A SHOW CAUSE NOTICE WA S ALSO ISSUED TO EXPLAIN AS TO WHY PURCHASES FROM ABO VE PARTIES SHOULD NOT BE DISALLOWED. IN RESPONSE TO SAME ALL THE DETAILS VIZ . BILLS, LEDGER EXTRACT, COPY OF BANK STATEMENT CALLED FOR BY THE AO WERE SUBMITTED. HOWEVER, THE REASSESSMENT HAS BEEN COMPLETED BY THE AO DISALLOWI NG THE PURCHASES OF RS.45,05,608 FROM THE ABOVE PARTIES TREATING THE SA ME AS 'BOGUS PURCHASES' ON VARIOUS GROUNDS. 3. MATTER CARRIED TO THE LD. CIT(A) AND THE LD. CIT (A) HAS PARTLY SR. NO. NAME OF THE HAWALA PARTY HAWALA PAN HAWALA TIN AMOUNT 1. CRYSTAL COMMERCIAL CO. AETPPI 119A 27200506372V RS. 1,57,092 2. STARWOOD MER. CO P. LTD. AAKCS9393K 27920625577V RS.4,00,092 3. PADMAVATI TRADING CO AQIPR7316G 27130550109V RS. 4,02,584 4. BHARAT INDUSTRIAL CORPN ADWP03658F 27420502953V RS. 4,07,290 5. BRIGHT CORPORATION AKWPM59I3C 27490198480V RS. 10,30,198 6. PRAVESH ENTERPRISES ACLPM6643L 27660153427V RS. 10,97,905 7. MARUTI SALES CORPN - 27200635382V RS. 4,92,007 8. SAMBHAV TRADERS AAEPS5747E 27300618061C RS. 5,18,44 0 TOTAL RS. 45,05,608 ITA NO.839/M/2017 & ITA NO.1338/M/2017 M/S. SECURE INDUSTRIES PVT. LTD. 3 ALLOWED THE APPEAL BY OBSERVING AS UNDER: 2.4.31 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 PRODUCE D DURING THE ASSESSMENT PROCEEDINGS. NOT HAVING DOUBTED THE CONS UMPTION/SALES, THE MOTIVE BEHIND OBTAINING BOGUS BILLS THUS, APPEARS TO BE IN FLATION OF PURCHASE PRICE SO AS TO SUPPRESS TRUE PROFITS. CONSIDERING THE FAC TS OF THE CASE AS WELL AS THE VARIOUS CASE LAWS CITED (SUPRA) ESPECIALLY IN THE C ASES OF CIT VS. SIMIT P. SHETH, BHOLANATH POLY FAB AND SANKET STEEL TRADERS (SUPRA) AND AFTER CONSIDERING THE GROSS PROFIT OF 25.03% AS MENTIONED BY THE APPELLAN T IN FORM NO.3CD, I ESTIMATE THE PROFIT TO THE EXTENT OF 25.03% OF THE PURCHASES MADE FROM THE BOGUS ENTITIES AS THE SUPPRESSED PROFIT ELEMENT EMBEDDED IN SUCH PURC HASES. THIS ESTIMATION IS IN ADDITION TO THE REGULAR OVERALL PROFIT SHOWN BY THE APPELLANT. ACCORDINGLY, THIS GROUND OF APPEAL IS PARTLY ALLOWED. 4. THE ASSESSEE IS IN APPEAL AGAINST THE ADDITION A ND DEPARTMENT IS IN APPEAL AGAINST GIVING THE RELIEF TO THE ASSESSEE. 5. I HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE P ARTIES. LD. D.R. RELIED UPON THE DECISION OF THE TRIBUNAL, AHMEDABAD BENCH IN THE CASES OF SHWETAMBAR STEELS VS. ITO AHMEDABAD AND GANESH RICE MILLS VS. CIT (294 ITR 316). THE FACTS IN THE PRESENT CASE SHOW THAT ASSESSEE COULD NOT PRODUCE THE PARTIES FROM WHOM GOODS ARE STATED TO HAVE BEEN PURCHASED. THE SUPPLIERS WERE FOUND TO BE ENGAGED IN PROVIDING BOGUS BILL WI THOUT ACTUAL DEALING OF GOODS. IN THIS REGARD, THE ASSESSEE HAS STATED THAT THEY HAD SUBMITTED QUANTITATIVE DETAILS OF STOCK WITH RESPECT OF THE S ALES WITH PURCHASES FROM THE PARTIES DURING THE ASSESSMENT PROCEEDINGS. THE ASSE SSEE HAS SUBMITTED THE DETAIL OF CORRESPONDING SALES IN RESPECT OF THE PUR CHASE FROM THE SAID PARTIES. AS MENTIONED ABOVE THE AO HAS NEVER DISPUTED OR EXA MINED THE ASPECT OF SALES RECEIPTS. SINCE THE SALES MADE BY THE ASSESSEE WAS NOT DOUBTED OR DISPUTED BY THE AO AND HE HAS ACCEPTED THE SALES RECEIPTS OF TH E ASSESSEE AS IT IS, THEREFORE, THE AO CANNOT DENY THAT PURCHASES WERE NOT MADE BY THE ASSESSEE AND THE MATERIAL WAS NOT USED FOR ITS SALES. WHAT IS UNDER DISPUTE IS THE PURCHASES FROM THE PARTIES FROM WHOM BILLS HAVE BEEN TAKEN AND CHE QUES HAVE BEEN ISSUED TO THEM. PURCHASES ARE NOT IN DISPUTE BUT THE PARTIES FROM WHOM PURCHASE ARE SHOWN TO HAVE BEEN MADE ARE DISPUTED AND SUSPICIOUS . THE AO HAD MADE THE ITA NO.839/M/2017 & ITA NO.1338/M/2017 M/S. SECURE INDUSTRIES PVT. LTD. 4 ADDITION AS SOME OF THE SUPPLIERS WERE DECLARED HAW ALA DEALERS BY THE VAT DEPARTMENT. THIS MAY BE A GOOD REASON FOR MAKING FU RTHER INVESTIGATION BUT THE AO DID NOT MAKE ANY FURTHER INVESTIGATION AND M ERELY COMPLETED THE ASSESSMENT ON SUSPICION. ONCE THE ASSESSEE HAS BROU GHT ON RECORD THE DETAILS OF PAYMENTS BY ACCOUNT PAYEE CHEQUE, IT WAS INCUMBENT ON THE AO TO HAVE VERIFIED THE PAYMENT DETAILS FROM THE BANK OF THE A SSESSEE AND ALSO FROM THE BANK OF THE SUPPLIERS TO VERIFY WHETHER THERE WAS A NY IMMEDIATE CASH WITHDRAWAL FROM THEIR ACCOUNT. NO SUCH EXERCISE HAS BEEN DONE OR FINDINGS RECORDED, THERE WAS NO DETAILED INVESTIGATION MADE BY THE AO HIMSELF. IT IS ALSO FOUND THAT THE PAYMENTS HAVE BEEN MADE BY ACCO UNT PAYEE CHEQUE WHICH ARE DULY REFLECTED IN THE BANK STATEMENT OF THE ASS ESSEE. THERE IS NO EVIDENCE TO SHOW THAT THE ASSESSEE HAS RECEIVED CASH BOOK FROM THE SUPPLIERS. MERELY BECAUSE THE SUPPLIERS DID NOT APPEAR BEFORE THE AO OR SOME CONFIRMATION LETTERS WERE NOT FURNISHED, ONE CANNOT CONCLUDE THA T THE PURCHASES WERE NOT MADE BY THE ASSESSEE. THIS VIEW IS SUPPORTED BY THE DECISION OF NIKUNJ EXIMP ENTERPRISES VS. CIT 216 TAXMAN 171 (BOM). TO THIS E XTENT, I AM OF THE VIEW THAT IF THE ASSESSEE HAS FULFILLED ITS ONUS OF MAKI NG THE PAYMENT BY CHEQUE AND HAS SUPPLIED THE ADDRESSES OF THE SELLERS THEN IT C ANNOT BE PRESUMED THAT SUPPLIER WERE BOGUS SIMPLY BECAUSE THE SELLERS WERE NOT FOUND AT THE GIVEN ADDRESS. THERE IS A CONSIDERABLE TIME GAP BETWEEN T HE PERIOD OF PURCHASE TRANSACTION AND PERIOD OF SCRUTINY PROCEEDINGS. THE AO HAS NOT BROUGHT ANY MATERIAL ON RECORD TO SHOW THAT THERE IS SUPPRESSIO N OF SALES. IT IS BASIC RULE OF ACCOUNTANCY AS WELL AS OF TAXATION LAWS THAT PROFIT FROM BUSINESS CANNOT BE ASCERTAINED WITHOUT DEDUCTING COST OF PURCHASE FROM SALES. ESTIMATION OF PROFIT RANGING FROM 12.5% TO 15% HAS BEEN UPHELD BY THE HO N'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS SIMIT P SHETH 356 ITR 4 51 (GUJ.). RESPECTFULLY FOLLOWING THE DECISION OF HONBLE GUJARAT HIGH COUR T IN THE CASE OF CIT VS. SIMIT P. SHETH 38 TAXMAN 385 (GUJ), I DIRECT THE AO TO ESTIMATE THE PROFIT AT 12.5% OF BOGUS PURCHASES OF RS.45,05,608/-. ITA NO.839/M/2017 & ITA NO.1338/M/2017 M/S. SECURE INDUSTRIES PVT. LTD. 5 6. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOW ED. ITA NO.1338/M/2017 (REVENUES APPEAL) 7. SINCE THE ISSUE IN CONTROVERSY IS ALREADY COVERE D BY THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. S IMIT P. SHETH 38 TAXMAN 385 (GUJ), FOLLOWING THE SAME, I DISMISS THE DEPART MENTAL APPEAL. 8. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOW ED AND THE APPEAL OF REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 29.08.2017. SD/- (D.T. GARASIA) JUDICIAL MEMB ER MUMBAI, DATED: 29.08.2017. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.