SHREE RUBBER WORKS, MUMBAI V. ASSISTANT COMMISSIONER OF INCOME TAX - CIRCLE 3, MUMBAI

ITA 934/MUM/2018

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 0210 (ITAT-MUMBAI)
• Duration Of Justice: 7 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-09-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 16-02-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S K BEPARI
• Keywords: Bogus purchase
• Section: 69C; 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY , JUDICIAL MEMBER ITA NO. 934 / MUM . /2018 ( ASSESSMENT YEAR : 20 1 1 1 2 ) SHREE RUBBER WORKS PLOT NO.R 454, TTC INDL. AREA MIDC, RABALE, NAVI MUMBAI 400 701 PAN AAMFS2747Q . APPELLANT V/S ASSTT. COMMISSIONER OF INCOME TAX CIRCLE 3, THANE . RESPONDENT ASSESSEE BY : SHRI RAJESH S. SHAH REVENUE BY : SHRI S.K. BEPARI DATE OF HEARING 1 0 .09.2018 DATE OF ORDER 19.09.2018 O R D E R A FORESAID APPEAL HA S BEEN FILED BY THE ASSESSEE CHALLENGING THE ORDER DATED 20 TH DECEMBER 2017 , PASSED BY THE LEARNED COMMISSIONER (APPEALS) 2 , MUMBAI, FOR THE ASSESSMENT YEAR 20 11 12 . 2 . THE DISPUTE IN THE PRESENT APPEAL IS CONFINED TO THE ADDITION OF AN AMOUNT OF ` 5,04,000 ON ACCOUNT OF BOGUS PURCHASES. 3 . BRIEF FACTS ARE, THE ASSESSEE , A PARTNERSHIP FIRM , IS ENGAGED IN THE BUSINESS OF MANUFACTURING RUBBER PRODUCTS. FOR THE ASSESSMENT YEAR UNDER DISPUTE, THE ASSESSEE FILED ITS RETURN OF INCOME ON 25 TH SEPTEMBER 2011, DECLARING TOTAL INCOME OF ` 37,74,530. SUBSEQUENTLY, 2 SHREE RUBBER WORKS ON THE BASIS OF INFORMATION RECEIVED FROM THE SALES TAX DEPARTMENT, GOVERNMENT OF MAHARASHTRA, THAT THE PURCHASES OF ` 5,04 ,000 MADE FROM M/S. L.P. TRADERS, ARE NOT GENUINE , SINCE , THE SAID PARTY HAS BEEN IDENTIFIED AS A HAWALA OPERATOR PROVIDING ACCOMMODATION BILLS TO LARGE NUMBER OF PARTIES, THE ASSESSING OFFICER RE OPENED THE ASSESSMENT UNDER SECTION 147 OF THE ACT. DURING THE ASSESSMENT PROCEEDINGS, WHEN THE ASSESSEE WAS CALLED UPON TO PROVE THE GENUINENESS OF PURCHASES MADE FROM THE AFORESAID PARTY, THE ASSESSEE FILED ITS EXPLANATION STATING THAT THE PURCHASES MADE ARE GENUINE. THE ASSESSING OFFICER, HOWEVER, DID NOT FIND MERIT IN THE SUBMISSIONS OF THE ASSESSEE AND TREATED THE PURCHASES MADE OF ` 5,04,000, AS NON GENUINE AND ACCORDINGLY ADDED BACK TO THE INCOME OF THE ASSESSEE UNDER SECTION 69C OF THE ACT. THOUGH, THE ASSESSEE CHALLENGED THE AFORESAID ADDITION BEFORE THE L EARNED COMMISSIONER (APPEALS), IT WAS UNSUCCESSFUL. 4 . THE LEARNED AUTHORISED REPRESENTATIVE REITERATING THE STAND TAKEN BEFORE THE DEPARTMENTAL AUTHORITIES SUBMITTED THAT THE ASSESSEE IN FACT HAS EFFECTED THE PURCHASES FROM THE CONCERNED PARTY. HE SUBMITTED , THE GENUINENESS OF PURCHASE IS PROVED FROM THE FACT THAT THERE IS NOT MUCH DIFFERENCE BETWEEN THE PRICE PAID BY THE ASSESSEE FOR PURCHASING SIMILAR TYPE OF ITEM FROM M/S. L.P. TRADERS AS WELL AS OTHER PARTIES. HE SUBMITTED , THE ASSESSEE HAS SHOW N A HEALT H Y GROSS 3 SHREE RUBBER WORKS PROFIT RATE OF 21.20% IN THE IMPUGNED ASSESSMENT YEAR. THEREFORE, NO ADDITION SHOULD HAVE BE EN MADE ON ACCOUNT OF BOGUS PURCHASES. HOWEVER, ULTIMATELY, HE SUBMITTED THAT 100% OF THE PURCHASES CANNOT BE TREATED AS INCOME OF THE ASSESSEE BU T ONLY THE PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES CAN BE TREATED AS INCOME OF THE ASSESSEE. 5 . THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED UPON THE OBSERVATIONS OF THE LEARNED COMMISSIONER (APPEALS). 6 . I HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED MA TERIAL ON RECORD. IT IS EVIDENT FROM THE FACTS ON RECORD THAT THE ASSESSING OFFICER HAD SPECIFIC INFORMATION IN HIS POSSESSION TO INDICATE THAT PURCHASES MADE BY THE ASSESSEE FROM M/S. L.P. TRADERS, IS NOT GENUINE AS THE SAID PARTY WAS FOUND TO BE A HAWALA OPERATOR PROVIDING ACCOMMODATION BILLS ONLY. THE ASSESSEE HAS NOT FURNISHED ANY CONCLUSIVE EVIDENCE TO PROVE THE PURCHASE OF GOODS FROM M/S. L.P. TRADERS. THAT BEING THE CASE, THE PURCHASES MADE BY THE ASSESSEE FROM THE CONCERNED PARTY CANNOT BE TREATED A S GENUINE. HOWEVER, IT APPEARS THAT THE DEPARTMENTAL AUTHORITIES HAVE NOT DISPUTED ASSESSEES SALES FIGURES. THEREFORE, WITHOUT SUCH PURCHASES BEING MADE, THE ASSESSEE COULD NOT HAVE EFFECTED THE SALES. IN SUCH CIRCUMSTANCES, THE PRESUMPTION WOULD BE , THE ASSESSEE MIGHT HAVE PURCHASED THE GOODS FROM GREY MARKET BY PAYMENT OF CASH TO AVOID 4 SHREE RUBBER WORKS LEVY OF VAT AND OTHER TAXES AND T O REGULARIZE SUCH PURCHASES, THE ASSESSEE MIGHT HAVE OBTAINED THE ACCOMMODATION BILLS BY MAKING PAYMENT THROUGH BANKING CHA NNEL . IN THESE CIRCUMSTANCES, ONLY THE PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES CAN BE TREATED AS THE INCOME OF THE ASSESSEE. THUS, CONSIDERING THE OVERALL FACTS AND CIRCUMSTANCES OF THE CASE AND KEEPING I N VIEW THE DECISION TAKEN BY THE TRIBUNAL IN SUCH TYPE OF CASES , I DIRECT THE ASSESSING OFFICER TO SUSTAIN ADDITION @ 12.5% OF THE BOGUS PURCHASES OF ` 5,04,000. GROUNDS ARE PARTLY ALLOWED. 7 . IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 19. 09.2018 SD/ - SAKTIJIT DEY JUDICIAL MEMBER MUMBAI, DATED: 21.09.2018 COPY OF THE ORDER FORWARDED TO : ( 1 ) THE ASSESSEE; ( 2 ) THE REVENUE; ( 3 ) THE CIT(A); ( 4 ) THE CIT, MUMBAI CITY CONCERNED; ( 5 ) THE DR, ITAT, MUMBAI; ( 6 ) GUARD FILE . TRUE COPY BY ORDER PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY (SR. PRIVATE SECRETARY) ITAT, MUMBAI