INTERGRATED ENGINEERS AND CONSULTANTS P.LTD, NAVI MUMBAI V. ACIT 15(2(1), MUMBAI

ITA 976/MUM/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 0155 (ITAT-MUMBAI)
• Duration Of Justice: 6 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-08-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2010-2011
• Appeal Filed On: 10-02-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: V JENARDHANAN
• Keywords: Reopening of assessment; Bogus purchase; Initiation of penalty proceedings; Accommodation entries
• Section: 143(3); 133(6); 145; 148; 144; 2

Judgement Text

K IN THE INCOME TAX APPELLATE TRIBUNAL K BENCH, MUMBAI BEFORE SHRI C.N. PRASAD, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER ./ I.T.A. NO. 976/ MUM/2017 ( / ASSESSMENT YEAR : 2010-11) M/S INTEGRATED ENGINEERS AND CONSULTANTS PVT. LTD. R-534, TTC INDUSTRIAL ESTATE, MIDC, RABALE, NAVI MUMBAI 400 701. / V. ACIT 15(2)(1), 4 TH FLOOR, AAYAKAR BHAVAN, MUMBAI 400 020. ./ PAN : AAAC17974C ( / APPELLANT ) .. ( / RESPONDENT ) ASSESSEE BY : SHRI SUBHASH S. SHETTY REVENUE BY : SHRI V. JENARDHANAN / DATE OF HEARING : 22.08.2017 / DATE OF PRONOUNCEMENT : 29.08.2017 / O R D E R PER RAMIT KOCHAR, ACCOUNTANT MEMBER THIS APPEAL, FILED BY THE ASSESSEE, BEING ITA NO. 976/MUM/2017, IS DIRECTED AGAINST THE APPELLATE ORDER DATED 30.11.20 16 PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)- 24, MUMBAI (H EREINAFTER CALLED THE CIT(A)), FOR ASSESSMENT YEAR 2010-11, APPELLATE PR OCEEDINGS BEFORE LEARNED CIT(A) HAS ARISEN BEFORE LEARNED CIT(A) FROM THE A SSESSMENT ORDER DATED 9 TH JANUARY, 2016 PASSED BY THE LEARNED ASSESSING OFFIC ER(HEREINAFTER CALLED THE ITA 976/MUM/2017 2 AO) U/S 143(3) R.W.S. 147 OF THE INCOME-TAX ACT, 1961 (HEREINAFTER CALLED THE ACT) . 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE IN THE MEMO OF APPEAL FILED WITH THE INCOME-TAX APPELLATE TRIBUNAL, MUMBA I (HEREINAFTER CALLED THE TRIBUNAL) READ AS UNDER:- I. THE LEARNED CIT (A) HAS ERRED IN PASSING THE OR DER DATED 09/01/2016, DISPOSING OF ASSESSEE'S OBJECTIONS AGAI NST NOTICE U/S 148 OF THE I.T ACT, 1961 WITHOUT ANY BASIS OR J USTIFICATION. 2. THE LEARNED CIT (A) HAS ERRED IN UPHOLDING THE A O'S ACTION OF REJECTING THE BOOKS OF ACCOUNTS OF THE APPELLANT U/S 145 OF THE INCOME TAX ACT, 1961 WITHOUT APPRECIATING THE FACT THAT THE BOOKS OF ACCOUNTS WERE MAINTAINED DURING THE COURSE OF TH E BUSINESS, WERE AUDITED UNDER THE COMPANIES ACT AS WELL AS INC OME TAX ACT. 3. THE LEARNED CIT (A) HAS ERRED IN CONCLUDING THAT THE APPELLANT'S PURCHASES ARE QUESTIONABLE AND ARE ACCO UNTED TO BRING DOWN THE PROFITABILITY THERE BY AVOIDING THE PAYMENT OF TAXES WHEN THE APPELLANT'S GP AND NP RATIOS HAVE GO NE UP AS COMPARED TO THE PREVIOUS YEARS. 4. THE LEARNED CIT (A) HAS ERRED IN ACCEPTING THE A O'S CONCLUSION THAT THE PURCHASES MADE FROM THE TWO PAR TIES I.E. RAJESHWARI METAL INDUSTRIES AND AMAR TRADING CORPOR ATION ARE FICTITIOUS WITHOUT VERIFYING THE CONSUMPTION STATEM ENT FILED AND WITHOUT APPRECIATING THE FACT THAT THE APPELLANT CO ULD NOT HAVE EXECUTED THE ORDERS FROM TATA POWER LTD AND BARC, T ROMBAY. 5. THE LEARNED CIT (A) HAS ERRED IN UPHOLDING THE A DDITION OF RS 15,08,045/- (24.71% OF RS 61,02,974/-) ON ACCOUN T OF BOGUS PURCHASES WITHOUT ANY BASIS OR JUSTIFICATION WHEN T HE NET PROFIT OF THE APPELLANT HAS MORE THAN DOUBLED FROM RS26.32 LAKHS TO RS 60.77 LAKHS ON AN INCREASE IN TURNOVER OF ONLY A BOUT 10% AND GP/NP RATIOS HAVE GONE UP FROM 22.47% TO 22.71 % AN D 7.24% TO 15.4% IN A/Y 2009-2010 TO A/Y 2010-2011 RESPECTI VELY. 6. THE LEARNED CIT (A) HAS ERRED IN DISMISSING THE GROUND REGARDING INITIATION OF PENALTY PROCEEDINGS UNDER S ECTION 271(1)(C) ITA 976/MUM/2017 3 WITHOUT APPRECIATING THE FACT THE APPELLANT HAS NEI THER CONCEALED ANY INCOME NOR FURNISHED ANY INACCURATE PARTICULARS OF INCOME. 7. THE APPELLANT PRAYS THAT: A. THE APPELLATE ORDER DATED 30/11/2016 PASSED BY T HE CIT(A)24 CONFIRMING THE ASSESSMENT ORDER DATED 09/0 1/20 16 PASSED BY THE ACIT 15(2)(1) MAKING ADDITION OF R S. 15,08,045/- TO THE APPELLANT INCOME BE DELETED, ANN ULLED, SQUASHED AND SET ASIDE. 8. THE AFORESAID GROUNDS OF APPEAL ARE INDEPENDENT, ALTERNATIVE AND WITHOUT PREJUDICE TO ONE ANOTHER. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E COMPANY IS ENGAGED IN THE BUSINESS OF SALE OF ENGINEERING GOODS, LABOUR C HARGES, ERECTION AND COMMISSIONING AND FABRICATION. THE ASSESSEE FILED I TS RETURN OF INCOME U/S 139(1) ON 12.10.2010 WHICH WAS PROCESSED BY REVENUE U/S 143(1) OF THE ACT. THUS, NO SCRUTINY ASSESSMENT U/S 143(3) R.W.S. 143( 2) WAS ORIGINALLY FRAMED BY REVENUE . SUBSEQUENTLY INFORMATION WAS RECEIVED BY AO THAT THE ASSESSEE HAS INFLATED PURCHASES THROUGH HAWALA PARTIES. THE ASSESSMENT WAS REOPENED U/S 147 BY ISSUANCE OF NOTICE DATED 20-03-2015 U/S 148, WHICH WAS WITHIN FOUR YEARS FROM THE END OF ASSESSMENT YEAR. THE ASS ESSEE FILED LETTER DATED 24-03-2015 REQUESTING THE AO TO ACCEPT ORIGINAL RET URN OF INCOME FILED U/S 139(1) TO BE RETURN OF INCOME IN PURSUANCE TO NOTIC E U/S 148. THE ASSESSEE ASKED FOR REASONS FOR REOPENING OF THE ASSESSMENT U /S 147 WHICH WERE PROVIDED BY THE AO TO THE ASSESSEE. NOTICES U/S 142 (1) AND 143(2) WERE ISSUED AND THE ASSESSEE SUBMITTED ANOTHER RETURN OF INCOME ON 18-11-2015 DECLARING THE SAME INCOME. THE GENESIS OF REOPENING IS THE LETTER DATED 04-02- 2014 RECEIVED BY THE AO FROM DGIT (INV.),MUMBAI THAT THE ASSESSEE HAD ENTER ED INTO HAWALA ITA 976/MUM/2017 4 TRANSACTIONS FOR PURCHASES , AMOUNTING TO RS. 61,02 ,974/- FROM THE FOLLOWING PARTIES:- SR NO. NAME OF THE SUPPLIER TIN AMOUNT 1 RAJESHWARI METAL INDUSTRIES 27140353242V 20,83,200 2 AMAR TRADING CORPORATION 27790199673V 40,19,774 TOTAL 61,02,974 THE A.O. OBSERVED THAT THE TIN STATUS WITH MVAT AUT HORITIES OF THE ABOVE PARTIES WAS FOUND TO BE CANCELLED AND THESE PARTIES WERE ENGAGED IN THE PRACTICE OF ONLY GIVING ACCOMMODATION ENTRIES ON FI XED COMMISSION INCOME BASIS AND NO REAL TRANSACTIONS WERE INVOLVED AS NO MATERIAL/GOODS WERE SUPPLIED BY THESE PARTIES AGAINST THE BILLING DONE BY THESE BOGUS DEALERS, WHICH CONCLUSIONS WERE THE RESULT OF INVESTIGATIONS CARRIED OUT BY BOTH MVAT AUTHORITIES AND INCOME-TAX DEPARTMENT . THE AO ALS O OBSERVED THAT THE MAHARASHTRA VAT AUTHORITIES HAVE ALSO RECORDED THE STATEMENT OF THESE PARTIES U/S 14 OF THE MAHARASHTRA VALUE ADDED TAX A CT, 2002 , WHEREBY THESE PARTIES HAVE CONFESSED THAT THEY WERE ONLY IS SUING BOGUS BILLS WITHOUT SUPPLYING ANY MATERIAL. IN ORDER TO VERIFY GENUINEN ESS OF THESE PURCHASES, NOTICES U/S 133(6) OF THE ACT WERE ISSUED BY THE A. O. TO ALL THESE PARTIES . HOWEVER, THESE NOTICES U/S 133(6) WERE RETURNED UN- SERVED. THE ASSESSEE WAS SHOW CAUSED AS TO WHY THE ALLEGED PURCHASES MAD E FROM THE HAWALA PARTIES SHOULD NOT BE DISALLOWED AND ADDED TO THE I NCOME OF THE ASSESSEE. IN RESPONSE, THE ASSESSEE HAD SHOWN ITS INABILITY TO F URNISH THE EXPLANATION AND THE ASSESSEE AGREED FOR THE ADDITION. THE A.O. OBS ERVED THAT THE BURDEN LIES ON THE ASSESSEE TO PROVE THAT THE PURCHASES MADE WE RE GENUINE WHICH HAS NOT BEEN DISCHARGED BY THE ASSESSEE. ENQUIRIES WER E ALSO MADE THROUGH INSPECTORS OF THE INCOME TAX DEPARTMENT WHICH REVEA LED THAT THE CLAIM OF EXPENSES ON ACCOUNT OF PURCHASES FROM VARIOUS PARTI ES AS WAS SET OUT BY THE ASSESSEE WAS NOT A GENUINE TRANSACTIONS. THE ASSESS EE ALSO FAILED TO PRODUCE ITA 976/MUM/2017 5 THESE PARTIES BEFORE THE A.O. DESPITE BEING ASKED B Y THE AO. THE ASSESSEE WAS ASKED TO PRODUCE THE PAYMENT PROOF(BANK STATEMENT, PAYMENT VOUCHERS) , PROOF OF DELIVERY ETC. , WHICH ASSESSEE SUBMITTED B EFORE THE AO. THE A.O. RELIED UPON THE DECISION IN THE CASE OF CIT V. PREC ISION FINANCE PVT. LTD., 208 ITR 465 TO OBSERVE THAT PAYMENT BY CHEQUE IS NOT SU FFICIENT TO CONCLUDE THAT PURCHASES ARE GENUINE . THE AO ALSO RELIED UPON DE CISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF SIMIT P. SHETH, 356 ITR 4 51 AND OBSERVED THAT THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE DO NOT REFLECT TRUE AND GENUINE PICTURE OF THE FINANCIAL STATUS OF THE ASSESSEE . I T WAS OBSERVED BY THE AO THAT BOOKS OF ACCOUNTS DO NOT EXHIBIT CORRECT OR COMPLET E FINANCIAL STATUS OF THE ASSESSEE , WHICH WERE REJECTED BY THE AO U/S 145 OF THE ACT AND IT WAS CONCLUDED BY THE AO THAT THESE PURCHASES WERE MADE TO REDUCE PROFITS AND CONSEQUENTLY TAXES. THE ASSESSEE WAS ASKED TO SHOW CAUSE AS TO WHY ADDITION OF 24.71% OF BOGUS PURCHASE AMOUNT SHOULD NOT BE ADDED TO THE INCOME OF THE ASSESSEE BUT THE ASSESSEE COULD NOT F URNISH ANY SATISFACTORY REPLY. THUS, THE A.O. CAME TO THE CONCLUSION THAT THE AMOUNT OF RS. 61,02,974/- WAS ACCOUNTED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE AS FICTITIOUS INVOICES IN THE NAME OF ABOVE BOGUS PAR TIES AND ACCORDINGLY THE AO DISALLOWED AN AMOUNT OF RS. 15,08,045/- BEING 24.71 % OF RS. 61,02,974/- AND ADDED THE SAME TO THE INCOME OF THE ASSESSEE, V IDE ASSESSMENT ORDER DATED 09-01-2016 PASSED BY THE AO U/S 143(3) R.W.S. 147 OF THE 1961 ACT. 4. AGGRIEVED BY THE ASSESSMENT ORDER DATED 09-01-20 16 PASSED BY THE A.O. U/S 143(3) R.W.S. 147 , THE ASSESSEE CARRIED THE MA TTER IN APPEAL BEFORE THE LD. CIT(A) WHO CONFIRMED THE ADDITIONS MADE BY THE AO I N THE ASSESSMENT ORDER DATED 09-01-2016 , VIDE APPELLATE ORDER DATED 30-11 -2016. THE ASSESSEE SUBMITTED BEFORE THE LEARNED CIT(A) THAT THE PURCHA SES WHICH WERE MADE FROM THE AFORESAID PARTIES WERE S S PLATES AND SHEE TS WHICH WERE CONSUMED IN FABRICATION AT THE ASSESSEES FACTORY LOCATED AT R-534, TTC , INDUSTRIAL ESTATE , MIDC , RABALE, THANE-400701. THE ASSESSEE SUBMITTED BEFORE ITA 976/MUM/2017 6 LEARNED CIT(A) THAT DETAILS OF RAW MATERIAL CONSUME D AND CLOSING STOCK WERE DULY FILED BEFORE AO. THE ASSESSEE ALSO SUBMITTED T HAT COPIES OF INVOICE, DELIVERY CHALLANS, LEDGER ACCOUNTS CONFIRMATION FRO M PARTIES, COPIES OF PAN STATUS OF THESE PARTIES FROM WEBSITE OF I T DEPARTM ENT, COPIES OF BANK STATEMENTS WITH PAYMENT PROOF AND DELIVERY PROOF WE RE ALL SUBMITTED BEFORE THE AO. IT WAS SUBMITTED THAT PAYMENTS WERE MADE TH ROUGH CROSSED ACCOUNT PAYEE CHEQUES, PROOF OF DELIVERY BY TEMPO/LORRY WIT H DELIVERY CHALLANS WERE SUBMITTED AND THE MATERIAL WAS CONSUMED IN THE MANU FACTURE OF GOODS DURING THE COURSE OF BUSINESS OF THE ASSESSEE. IT W AS SUBMITTED THAT THE PARTIES WERE EXISTING AT THE TIME WHEN THE PURCHASE S WERE MADE AND THE ASSESSEE DID NOT HAD ANY DOUBT THAT THESE PARTIES T IN WERE CANCELLED. IT WAS SUBMITTED THAT FABRICATION AND SUPPLIES TO TATA POW ER COULD NOT HAVE BEEN MADE WITHOUT THE MATERIAL PURCHASED FROM THE PARTIE S REFERRED TO ABOVE. IT WAS SUBMITTED THAT PARTIES WERE PUT ON THE LIST OF HAWALA DEALERS BY MVAT AUTHORITIES MERELY BECAUSE THEY DID NOT DEPOSIT VAT WITH SALES TAX AUTHORITIES FOR WHICH THE ASSESSEE CANNOT BE PENALI ZED. IT WAS SUBMITTED THAT THE BOOKS OF ACCOUNTS OF THE ASSESSEE ARE DULY AUDI TED U/S 44AB AS WELL UNDER THE COMPANIES ACT, 1956. IT WAS ALSO SUBMITTE D THAT THE GP RATIO FOR THE SUBJECT ASSESSMENT YEAR 2010-11 IMPROVED TO 24. 71% AS AGAINST GP RATIO OF 22.47% IN THE IMMEDIATELY PRECEDING ASSESSMENT Y EAR 2009-10. SIMILARLY, IT WAS SUBMITTED THAT NET PROFIT RATIO ALSO IMPROVE D DURING THIS PERIOD FROM 7.24% TO 15.40%. IT WAS ALSO SUBMITTED THAT STATEME NT RECORDED OF THE PARTY AT THE BACK OF THE ASSESSEE CANNOT BE USED AGAINST THE ASSESSEE WITHOUT ALLOWING CROSS EXAMINATION OF THE SAID PARTY. THUS IT WAS PRAYED THAT THE ADDITIONS MADE BY THE AO BE DELETED. THE LD. CIT(A) OBSERVED THAT THE ASSESSEE HAD NOT MADE ANY EFFORT TO DISCHARGE THE O NUS AND IT HAS FAILED TO PRODUCE ANY OF THE AFORESAID PARTIES BEFORE THE AO . THE LEARNED CIT(A) OBSERVED THAT THE ASSESSEE COULD NOT SATISFACTORILY SUBSTANTIATE AND ESTABLISH THAT THESE WERE GENUINE PURCHASES MADE FROM THESE P ARTIES, HENCE THE ITA 976/MUM/2017 7 LEARNED CIT(A) CONFIRMED THE ADDITIONS AS WERE MADE IN THE ASSESSMENT ORDER PASSED BY THE AO , VIDE APPELLATE ORDERS DATED 30-1 1-2016. 5. AGGRIEVED BY THE APPELLATE ORDER DATED 30-11-201 6 PASSED BY THE LD. CIT(A), THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 6. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE IS NOT CHALLENGING THE REOPENING OF THE ASSESSMENT BY REVE NUE AND THE GROUND NO 1 CHALLENGING THE LEGALITY AND VALIDITY OF REOPENING U/S 147/148 IS NOT PRESSED AND THE SAME MAY BE DISMISSED. HOWEVER, IT WAS PLE ADED THAT EXCESSIVE ADDITIONS TO THE TUNE OF 24.71% OF ALLEGED BOGUS PU RCHASES HAVE BEEN MADE BY THE AUTHORITIES BELOW AND SUBMITTED THAT A FAIR ESTIMATION OF PROFITS EMBEDDED IN THE SAID ALLEGED BOGUS PURCHASES SHOULD BE MADE. IT IS SUBMITTED THAT THE ASSESSEE IS ENGAGED IN THE BUSIN ESS OF ERECTION, COMMISSIONING AND FABRICATION AND MAINLY SUPPLYING MATERIAL TO GOVERNMENT AGENCIES , BARC AND TATA POWER AND THE MATERIAL WAS CONSUMED FOR MANUFACTURING OF GOODS PRODUCED BY THE ASSESSEE. 7. THE LD. D.R., ON THE OTHER HAND, RELIED UPON THE APPELLATE ORDER OF THE LD. CIT(A) AND SUBMITTED THAT THE ADDITIONS AS WERE MADE/UPHELD BY LOWER AUTHORITIES BE CONFIRMED/UPHELD. THE LEARNED DR DID NOT OBJECT TO THE DISMISSAL OF GROUND NO 1 RAISED BY THE ASSESSEE CHA LLENGING LEGALITY AND VALIDITY OF REOPENING OF ASSESSMENT U/S 147/148 OF THE 1961 ACT AS NOT BEING PRESSED. 8. WE HAVE CONSIDERED RIVAL CONTENTIONS AND ALSO PE RUSED THE MATERIAL AVAILABLE ON RECORD. WE HAVE OBSERVED THAT THE ASSE SSEE COMPANY IS ENGAGED IN THE BUSINESS OF SALE OF ENGINEERING GOODS, LABOU R CHARGES, ERECTION AND COMMISSIONING AND FABRICATION. THE ASSESSEE HAD FIL ED ITS RETURN OF INCOME U/S 139(1) OF 12-10-2010 , WHICH WAS PROCESSED U/S 143(1) OF THE ACT. ITA 976/MUM/2017 8 SUBSEQUENTLY, INFORMATION WAS RECEIVED BY THE AO FR OM DGIT(INV) THAT THE ASSESSEE HAD MADE PURCHASES FROM THE ALLEGED HAWALA DEALERS WHEREBY THESE HAWALA PARTIES WERE ONLY ENGAGED IN ISSUING BOGUS B ILLS WITHOUT SUPPLYING ANY MATERIAL. THE DETAILS OF THE PARTIES ARE AS UN DER:- SR NO. NAME OF THE SUPPLIER TIN AMOUNT 1 RAJESHWARI METAL INDUSTRIES 27140353242V 20,83,200 2 AMAR TRADING CORPORATION 27790199673V 40,19,774 TOTAL 61,02,974 NOTICES U/S 133(6) OF THE ACT WERE ISSUED BY THE AO TO ALL THE AFORESAID PARTIES WHO HAVE ALLEGEDLY ISSUED BOGUS PURCHASE BI LLS TO THE ASSESSEE , BUT THE SAID NOTICES U/S 133(6) WERE RETURNED UN-SERVED . THE ASSESSEE ALSO COULD NOT PRODUCE THESE PARTIES BEFORE THE AUTHORITIES BE LOW AND HAD EXPRESSED INABILITY TO PRODUCE THESE PARTIES. THESE PARTIES H AD CONFESSED BEFORE THE MVAT AUTHORITIES THAT THEY WERE NOT SUPPLYING ANY MATERIAL BUT WERE ISSUING ONLY BOGUS BILLS IN LIEU OF COMMISSION INCOME . TH E STATEMENTS RECORDED BY MVAT AUTHORITIES OF THESE ALLEGED BOGUS DEALERS WHI CH WERE RECORDED BY MVAT AUTHORITIES AT THE BACK OF THE ASSESSEE WERE N OT PROVIDED TO THE ASSESSEE BY REVENUE AND CROSS EXAMINATION OF SAID P ARTIES WERE ALSO NOT ALLOWED TO THE ASSESSEE. SALES WERE NOT DOUBTED BY THE A.O. . THE ITEM-WISE DETAILS OF RAW MATERIAL PURCHASED AND ITS CONSUMPTI ON/UTILIZATION FOR MANUFACTURING OF FINISHED GOODS DEALT WITHIN BY THE ASSESSEE WERE FURNISHED BY THE ASSESSEE BEFORE THE AUTHORITIES BELOW ALONG WITH COPIES OF INVOICES, PAN , DELIVERY NOTES, DETAILS OF LORRY RECEIPTS, BA NK STATEMENTS ETC. WERE ALSO PRODUCED BY THE ASSESSEE BEFORE THE AUTHORITIES BEL OW. IT WAS DEMONSTRATED THAT THE PAYMENTS FOR THE SAID ALLEGED BOGUS PURCHA SES WERE MADE THROUGH ACCOUNT PAYEE CHEQUES. THE ASSESSEE ALSO DEMONSTRA TED THAT THERE HAS BEEN AN INCREASE OF GP AND NP RATIO DURING THE SUBJECT A SSESSMENT VIS--VIS ITA 976/MUM/2017 9 PRECEDING YEAR. THE AUTHORITIES BELOW HAVE CONCLUDE D THAT THERE WAS A SUPPRESSION OF PROFIT TO THE TUNE OF 24.71% OF THE ALLEGED BOGUS PURCHASES WITH THE CONTENTION AND KEEPING IN VIEW CURRENT GP RATIO OF THE ASSESSEE , THAT THE ASSESSEE HAD ALLEGED TO HAVE BOUGHT MATE RIAL FROM ELSE WHERE AND INVOICES AT AN INFLATED PRICE HAS BEEN OBTAINED FRO M THESE ALLEGED BOGUS DEALERS. THE ASSESSEE ON ITS PART HAS ALSO EXPRESSE D ITS INABILITY TO PRODUCE THE SAID PARTIES . THE PURCHASES ARE APPEARING IN T HE BOOKS OF THE ASSESSEE WHICH ARE CLAIMED AS AN EXPENDITURE, THE PRIMARY ON US WHICH STOOD ON THE ASSESSEES SHOULDER , THUS, DID NOT STOOD DISCHARGE D AS NO EFFECTIVE ENQUIRY BY REVENUE COULD TAKE PLACE IN THE ABSENCE OF AVAILABI LITY OF THESE PARTIES. FURTHER, THESE PARTIES HAVE ALSO STATED BEFORE MVAT AUTHORITIES THAT THEY HAVE ISSUED BOGUS BILLS WITHOUT SUPPLYING ANY MATER IAL. THE ASSESSEE ALSO AGREED FOR ADDITIONS AS IS EMANATING FROM THE ORDER S OF AUTHORITIES BELOW. EVEN BEFORE US, THE ASSESSEE AGREED FOR ADDITION BU T REQUESTED FOR A FAIR AND REASONABLE ESTIMATE OF PROFITS EMBEDDED IN THESE PU RCHASES WHICH CAN MEET THE END OF JUSTICE TO BOTH THE PARTIES KEEPING IN V IEW ENTIRE FACTUAL MATRIX OF THE CASE. THE QUESTION BOILS DOWN TO THE FAIR AND REASONABLE ESTIMATE OF ADDITIONS WHICH COULD SERVE AND MEET THE END OF JUS TICE TO BOTH THE PARTIES. REFERENCE IS DRAWN TO DECISION OF HON'BLE SUPREME C OURT IN THE CASE OF KACHWALA GEMS V. JT. CIT [2007] 288 ITR 10/158 TAXMAN 71 (SC) , WHEREIN HON'BLE LORDSHIPS HELD AS UNDER : '4. THE FACTS OF THE CASE ARE IN A SHORT COMPASS. T HE APPELLANT- ASSESSEE DEALS IN PRECIOUS AND SEMI- PRECIOUS STONES. IN THE COURSE OF ASSESSMENT, THE ASSE SSING OFFICER NOTICED THE FOLLOWING DEFECTS IN THE BOOKS OF ACCOUNT OF THE ASSESSEE : '1. THE ASSESSEE HAS NOT MAINTAINED AND KEPT ANY QU ANTITATIVE DETAILS/STOCK REGISTER FOR THE GOODS TRADED IN BY THE ASSESSEE. 2. THERE IS NO EVIDENCE ON RECORD OR DOCUMENT TO VE RIFY THE BASIS OF THE VALUATION OF THE CLOSING STOCK SHOWN BY THE ASSESSE E. THE ASSESSEE IS NOT ABLE TO PREPARE SUCH DETAILS EVEN WITH THE HELP OF BOOKS OF ACCOUNT MAINTAINED, PURCHASE BILLS & SALE INVOICES. ITA 976/MUM/2017 10 3. PROVISIONS OF SECTION 145(3) ARE CLEARLY ATTRACT ED IN THIS CASE. 4. THE GENUINENESS OF PURCHASES TO THE EXTENT OF RS . 42 LAKHS (APPROX.) IS NOT PROVED WITHOUT ANY DOUBT. 5. THE GP RATE DECLARED BY THE ASSESSEE AT 13.49 PER CENT DURING THE ASSESSMENT YEAR IS NOT A MATCH TO THE RESULT DECLAR ED BY THE ITSELF IN THE PREVIOUS ASSESSMENT YEARS. 6. M/S. GEM PLAZA, ENGAGED IN LOCAL SALES OF SIMILA R GOODS DECLARED VOLUNTARILY RATE OF 35 PER CENT IN ITS ASSESSMENT FOR THE ASSESSMENT YEAR 1997-98. 7. M/S. DHADDA EXPORTS, ANOTHER ASSESSEE DEALING IN SAME ITEMS, BUT DOING EXPORT BUSINESS DECLARED GP RATE OF 43.8 PER CENT ( EVEN WITHOUT CONSIDERING THE VALUE OF EXPORT INCENTIVES) IN ASSESSMENT YEAR 1997-98.' 5. T HEREAFTER, THE BOOKS OF ACCOUNT OF THE ASSESSEE WER E REJECTED BY THE ASSESSING OFFICER AND HE RESORTED TO BEST JUDGMENT ASSESSMENT UNDER SECTION 144 OF THE INCOME- TAX ACT. THE ASSESSING OFFICER IN THE ASSESSMENT OR DER MENTIONED SOME COMPARABLE CASES AND WA S OF THE VIEW THAT THE CASE OF THE ASSESSEE IS MORE OR LESS HAVING SIMILAR FACTS AS TH AT OF M/S. GEM PLAZA WHERE THE GROSS PROFIT HAS BEEN TAKEN AS 35.48 PER CENT. THE ASSESSING OFFICER ESTIMATED THE GROSS PROFIT OF THE ASSESSEE AS 40 PE R CENT. 6. THE ASSESSING OFFICER FURTHER HELD THAT THE ASSE SSEE HAS SHOWN BOGUS PURCHASES IN ORDER TO REDUCE THE GROSS PROFITS. 7. IN APPEAL, THE COMMISSIONER OF INCOME- TAX (APPEALS) UPHELD MOST OF THE FINDINGS OF THE ASSESSING OFFICER, BUT REDUCED THE GROSS P ROFIT FROM 40 PER CENT TO 35 PER CENT. 8. IN FURTHER APPEAL, THE TRIBUNAL HAD GIVEN FURTHE R RELIEF TO THE ASSESSEE AND REDUCED THE GROSS PROFIT RATE TO 30 PER CENT. 9. THE COUNSEL FOR THE ASSESSEE HAS SUBMITTED BEFOR E US THAT THE INCOME- TAX AUTHORITIES WRONGLY HELD THAT APPELLANT HAS SHOWN B OGUS PURCHASES, AND THE BOOKS OF ACCOUNT WERE WRONGLY REJECTED. 10. IN OUR OPINION, WHETHER THERE WERE BOGUS PURCHA SES OR NOT, IS A FINDING OF FACT, AND WE CANNOT INTERFERE WITH THE SAME IN THIS APPEAL. AS R EGARDS THE REJECTION OF THE BOOKS OF ACCOUNT, COGENT REASONS H AVE BEEN GIVEN BY THE INCOME- TAX AUTHORITIES FOR DOING SO, AND WE SEE NO REASON TO TAKE A DIFFERENT VIEW. 11. IT IS WELL- SETTLED THAT IN A BEST JUDGMENT ASSESSMENT, THERE I S ALWAYS A CERTAIN DEGREE OF GUESS WORK. NO DOUBT THE AUTHORIT IES CONCERNED SHOULD TRY TO ITA 976/MUM/2017 11 MAKE AN HONEST AND FAIR ESTIMATE OF THE INCOME EVEN IN A BEST JUDGMENT ASSESSMENT, AND SHOULD NOT AC T TOTALLY ARBITRARILY, BUT THERE IS NECESSARILY SOME AMOUNT OF GUESS WORK INVOLVED IN A BEST JUDGME NT ASSESSMENT, AND IT IS THE ASSESSEE HIMSELF WHO IS TO BLAME AS HE DID NOT SUBMIT PROPER ACCOUNTS. IN OUR OPINION, THERE WAS NO ARBITRARINESS IN THE PRES ENT CASE ON THE PART OF THE INCOME- TAX AUTHORITIES. THUS, THERE IS NO FORCE IN THIS AP PEAL, AND IT IS DISMISSED ACCORDINGLY. NO COSTS.' IN OUR CONSIDERED VIEW KEEPING IN VIEW FACTUAL MAT RIX OF THE CASE AND IN THE INTEREST OF JUSTICE AND FAIR PLAY, IT WILL BE QUITE REASONABLE AND FAIR IF ADDITION TO THE TUNE OF 12.5% OF THE ALLEGED PURCHASES ARE U PHELD TOWARDS PROFIT EMBEDDED IN THESE PURCHASES WHEREIN MATERIAL WAS PR OCURED FROM GREY MARKET AT LOWER PRICE WHILE INVOICES AT INFLATED PR ICE WAS OBTAINED FROM THESE ALLEGED BOGUS DEALERS, INSTEAD OF 24.71% AS WAS UPH ELD/SUSTAINED BY LOWER AUTHORITIES. IN ANY CASE , GP OF 24.71% IS ALREAD Y DECLARED BY THE ASSESSEE WHICH ALSO INCLUDED PURCHASES FROM THESE ALLEGED PA RTIES, WHICH ALREADY SUFFERED ADDITIONS. THIS FURTHER ADDITION OF 12.5% ON ALLEGED BOGUS PURCHASES OVER AND ABOVE DECLARED GP, AS UPHELD/SUSTAINED BY US IN THIS ORDER IS TOWARDS THE SAVINGS MADE BY THE ASSESSEE IN PROCURI NG MATERIAL FROM GREY MARKET TOWARDS VAT, OTHER TAXES ETC. . WE DIRECT T HE A.O. TO WORK OUT THE ADDITIONS TO THE INCOME OF THE ASSESSEE AT THE RATE OF 12.5% OF THE ALLEGED BOGUS PURCHASES OVER AND ABOVE DECLARED INCOME , WH ICH IN OUR CONSIDERED VIEW IS QUITE FAIR AND REASONABLE AND WILL MEET THE END OF JUSTICE. THE ASSESSEE HAS SPECIFICALLY STATED THAT IT DOES NOT W ANT TO CHALLENGE THE LEGALITY AND VALIDITY OF REOPENING OF ASSESSMENT U/S 147/148 OF THE 1961 ACT AND HENCE GROUND NO. 1 STOOD DISMISSED AS NOT BEING PRE SSED. ON MERITS , WE HAVE ALREADY ADJUDICATED THE ISSUE AS DETAILED ABOV E. THE ASSESSEE GETS PART RELIEF AS DETAILED ABOVE. WE ORDER ACCORDINGLY. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IN ITA NO. 976/MUM/2017 FOR ASSESSMENT YEAR 2010-11 IS PARTLY ALLOWED AS INDICA TED ABOVE. ITA 976/MUM/2017 12 ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH AUGUST 2017. # $% &' 29.08.2017 ( ) SD/- SD/- (C.N. PRASAD) (RAMIT KOCHAR) JUDICIAL MEMBER ACCOUNTANT MEMBER $ MUMBAI ; & DATED 29.08.2017 [ .9../ R.K. R.K. R.K. R.K. , EX. SR. PS !'#$%&%# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. : ( ) / THE CIT(A)- CONCERNED, MUMBAI 4. : / CIT- CONCERNED, MUMBAI 5. =>( 99?@ , ?@ , $ / DR, ITAT, MUMBAI K BENCH 6. (BC D / GUARD FILE. / BY ORDER, = 9 //TRUE COPY// / ( DY./ASSTT. REGISTRAR) , $ / ITAT, MUMBAI