AAREY DRUGS & PHARMACEUTICALS LTD., MUMBAI V. DCIT- CC -2 (3), MUMBAI

MA 79/MUM/2021

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 3380 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 13 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 28-07-2022
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 28-07-2022
• Assessment Year: 2008-2009
• Appeal Filed On: 16-03-2021
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: AMIT JHAVERI
• Keywords: Bogus purchase; Depreciation; Corroborative evidences; Set aside
• Section: 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “A” MUMBAI BEFORE SHRI OM PRAKASH KANT (ACCOUNTANT MEMBER) AND SHRI PAVAN KUMAR GADALE (JUDICIAL MEMBER) MA No. 79/MUM/2021 (ITA No. 2819/MUM/2018) Assessment Year: 2008-09 & MA No. 80/MUM/2021 (ITA No. 2820/MUM/2018) Assessment Year: 2009-10 Aarey Drugs & Pharmaceuticals Ltd., B/1504, Highland Park, Lokhandwala, New Link Road, Andheri (W), Mumbai-400053. Vs. DCIT-CC-2(3), Room No. 803, 8 th floor, Old CGO Bldg. M.K. Road, Mumbai-400020. PAN No. AAACA 5253 A Appellant Respondent Assessee by : Mr. Amit Jhaveri, AR Revenue by : Ms. Samruddhi Hande, DR Date of Hearing : 29/07/2022 Date of pronouncement : 29/07/2022 ORDER PER OM PRAKASH KANT, AM By way of the captioned Miscellaneous Applications, the appellant M/s Aarey Drugs & Pharmaceuticals Ltd. is seeking recall for the orders dated 05.05.2020 2819/M/2018 & 2820/M/2018 for assessment years 2008 2009-10 respectively. 2. Firstly, the Ld. Counsel of the assessee referred to the Miscellaneous Application for assessment year 2008 submitted that Tribunal has not considered the gross profit rate of more than 17% already declared in respect of bogus transactions and directed to in respect of those bogus transactions. The Ld. Counsel submitted that Tribunal has not considered the fact that assessee produced nexus between each purchase and sales as well as declared gross profit rate in such trading activity which was much more than 12.5% and therefore no separate addition was required in the case of the assessee. MA Nos. 79 & 80/M/2021 Aarey Drugs & Pharmaceuticals Ltd. dated 05.05.2020 of the Tribunal passed in ITA Nos. 2819/M/2018 & 2820/M/2018 for assessment years 2008 10 respectively. Firstly, the Ld. Counsel of the assessee referred to the Miscellaneous Application for assessment year 2008 submitted that Tribunal has not considered the gross profit rate of more than 17% already declared in respect of bogus and directed to further apply gross profit rate of 12.5% in respect of those bogus transactions. The Ld. Counsel submitted that Tribunal has not considered the fact that assessee produced nexus between each purchase and sales as well as declared gross it rate in such trading activity which was much more than 12.5% and therefore no separate addition was required in the case MA Nos. 79 & 80/M/2021 Aarey Drugs & Pharmaceuticals Ltd. 2 of the Tribunal passed in ITA Nos. 2819/M/2018 & 2820/M/2018 for assessment years 2008-09 & Firstly, the Ld. Counsel of the assessee referred to the Miscellaneous Application for assessment year 2008-09 and submitted that Tribunal has not considered the gross profit rate of more than 17% already declared in respect of bogus purchase apply gross profit rate of 12.5% in respect of those bogus transactions. The Ld. Counsel submitted that Tribunal has not considered the fact that assessee produced nexus between each purchase and sales as well as declared gross it rate in such trading activity which was much more than 12.5% and therefore no separate addition was required in the case 3. On the contrary, the Ld. Departmental Representative (DR) submitted that there is no mistake apparent in the or Tribunal for assessment year 2008 4. We have heard the rival submissions of the parties on the issue-in-dispute and perused the relevant material on record. We find that in the case of the assessee Income-tax Act, 1961 (in short ‘the Act’) basis of the inquiries and observation during the survey Assessing Officer concluded bogus purchase expenses by way of getting accommodation entry bills from various parties. The Ld. Assessing Officer also noted that assessee failed to produce any gate pass, material/good receipt note, lorry receipt, weighment bridge slip in respect of relevant accommodation entry bills. Accord Assessing Officer made an addition of also upheld the said disallowance MA Nos. 79 & 80/M/2021 Aarey Drugs & Pharmaceuticals Ltd. On the contrary, the Ld. Departmental Representative (DR) submitted that there is no mistake apparent in the or Tribunal for assessment year 2008-09. We have heard the rival submissions of the parties on the dispute and perused the relevant material on record. We find that in the case of the assessee, a survey u/s 133A of the 1961 (in short ‘the Act’) was carried out. On the basis of the inquiries and observation during the survey concluded that assessee was engaged in claiming bogus purchase expenses by way of getting accommodation entry arious parties. The Ld. Assessing Officer also noted that assessee failed to produce any gate pass, material/good receipt note, lorry receipt, weighment bridge slip, toll receipt, octroi receipt etc. in respect of relevant accommodation entry bills. Accord Assessing Officer made an addition of ₹4,59,94,260/- the said disallowance. The Tribunal (supra) MA Nos. 79 & 80/M/2021 Aarey Drugs & Pharmaceuticals Ltd. 3 On the contrary, the Ld. Departmental Representative (DR) submitted that there is no mistake apparent in the order of the We have heard the rival submissions of the parties on the dispute and perused the relevant material on record. We a survey u/s 133A of the was carried out. On the basis of the inquiries and observation during the survey, the Ld. that assessee was engaged in claiming bogus purchase expenses by way of getting accommodation entry arious parties. The Ld. Assessing Officer also noted that assessee failed to produce any gate pass, material/good receipt note, , toll receipt, octroi receipt etc. in respect of relevant accommodation entry bills. Accordingly, the -. The Ld. CIT(A) (supra) was also of the opinion that the purchases are in the nature of bogus purchases and bills were obtained however, the Tribunal held it reasonable to assess 15% gross profit on those accommodation entry truncations. The Tribunal observed the gross profit rate of the assessee @ 3.31% and therefore, directed the Assessing Officer to apply the alleged bogus purchases. The relevant finding of the Tribunal is reproduced as under : “8. After hearing both the parties and perusing the material available on record, we observe that the case of assessee was reopened after found that assessee has indulged in making huge bogus from the non-existent parties which were declared to hawala dealers by the Sales Tax Department of also note that d the assessee company, could not queries and it was even found Boiser Plant and the we find that assessee could not file any corroborative evidences either before, the AO or before the CIT(A). Under this circumstances, we are of the view that these purchases were rightly treated as bogus by the AO however, on the issue of taxability, as to how MA Nos. 79 & 80/M/2021 Aarey Drugs & Pharmaceuticals Ltd. the opinion that the purchases are in the nature of bogus purchases obtained from accommodation entry provider, however, the Tribunal held it reasonable to assess 15% gross profit on those accommodation entry truncations. The Tribunal observed the gross profit rate of the assessee @ 3.31% and therefore, directed the Assessing Officer to apply the gross profit rate of 12.5% on alleged bogus purchases. The relevant finding of the Tribunal is reproduced as under : After hearing both the parties and perusing the material available on record, we observe that the case of assessee was reopened after survey was conducted on the assessee and it found that assessee has indulged in making huge bogus existent parties which were declared to be bogus and hawala dealers by the Sales Tax Department of Maharashtra. We also note that during the course of survey Mihir R Ghatalia, MD of the assessee company, could not satisfactorily answer any of the queries and it was even found that no activity was carried in the Boiser Plant and the machinery was also not functional. However, assessee could not file any corroborative evidences fore, the AO or before the CIT(A). Under this circumstances, are of the view that these purchases were rightly treated as by the AO however, on the issue of taxability, as to how MA Nos. 79 & 80/M/2021 Aarey Drugs & Pharmaceuticals Ltd. 4 the opinion that the purchases are in the nature of bogus purchases on entry provider, however, the Tribunal held it reasonable to assess 15% gross profit on those accommodation entry truncations. The Tribunal observed the gross profit rate of the assessee @ 3.31% and therefore, directed gross profit rate of 12.5% on alleged bogus purchases. The relevant finding of the Tribunal is After hearing both the parties and perusing the material available on record, we observe that the case of assessee was survey was conducted on the assessee and it was purchases be bogus and Maharashtra. We Mihir R Ghatalia, MD of satisfactorily answer any of the that no activity was carried in the hinery was also not functional. However, assessee could not file any corroborative evidences fore, the AO or before the CIT(A). Under this circumstances, are of the view that these purchases were rightly treated as by the AO however, on the issue of taxability, as to how these transactions should be assessed to tax, we are of the view profit rate should be applied in the present case. The Tribunal assessee is having GP rate of 3.31% but certainly these purchases cannot be assessed at the GP rate. The addition wh sought to be made in the hands of the assessee is to be made keeping in view various factors such VAT rate, G.P. rate and other savings made by the assessee. Under these circumstances, we are of the view that it would be most reasonable if bogus pur brought to tax @ 15%. Accordingly, we are inclined to set aside the order of the CIT(A) and direct the AO to apply gross profit rate of 12.50% on the total alleged bogus purchases. The appeal of the assessee is partly allowed. 4.1 We find that the Tribunal after considering the gross profit rate declared by the assessee @ 3.31% apply the gross profit @ 12.5%. From the submissions filed by assessee before the Tribunal find any information in respect of gross profit separately computed in respect of alleged bogus purchases and therefore, now the contention by the Ld. Counsel that gross profit rate declared in those bogus transactions is more than 12.5% Taking into consideration such submission during the hearing of MA Nos. 79 & 80/M/2021 Aarey Drugs & Pharmaceuticals Ltd. transactions should be assessed to tax, we are of the view profit rate should be applied in the present case. The assessee is having GP rate of 3.31% but certainly these purchases cannot be assessed at the GP rate. The addition wh sought to be made in the hands of the assessee is to be made keeping in view various factors such VAT rate, G.P. rate and other savings made by the assessee. Under these circumstances, we are of the view that it would be most reasonable if bogus purchases are brought to tax @ 15%. Accordingly, we are inclined to set aside the order of the CIT(A) and direct the AO to apply gross profit rate of 12.50% on the total alleged bogus purchases. The appeal of the assessee is partly allowed.” the Tribunal after considering the gross profit rate declared by the assessee @ 3.31%, directed the Assessing Officer to apply the gross profit @ 12.5%. From the submissions filed by before the Tribunal in appellate proceedings information in respect of gross profit separately computed in respect of alleged bogus purchases and therefore, now the contention by the Ld. Counsel that gross profit rate declared in those bogus transactions is more than 12.5% cannot be considered ng into consideration such submission during the hearing of MA Nos. 79 & 80/M/2021 Aarey Drugs & Pharmaceuticals Ltd. 5 transactions should be assessed to tax, we are of the view that a profit rate should be applied in the present case. The Para 8 assessee is having GP rate of 3.31% but certainly these purchases cannot be assessed at the GP rate. The addition which is sought to be made in the hands of the assessee is to be made keeping in view various factors such VAT rate, G.P. rate and other savings made by the assessee. Under these circumstances, we are of chases are brought to tax @ 15%. Accordingly, we are inclined to set aside the order of the CIT(A) and direct the AO to apply gross profit rate of 12.50% on the total alleged bogus purchases. The appeal of the the Tribunal after considering the gross profit rate directed the Assessing Officer to apply the gross profit @ 12.5%. From the submissions filed by in appellate proceedings, we do not information in respect of gross profit separately computed in respect of alleged bogus purchases and therefore, now the contention by the Ld. Counsel that gross profit rate declared in those cannot be considered. ng into consideration such submission during the hearing of Miscellaneous Application will amount to review of the order of the Tribunal, for which we are not authorized in law. In our opinion, there is no mistake much less, the apparent mistake in the ord the Tribunal and therefore, we reject the contention of the Ld. Counsel of the assessee. 4.2 Secondly, for AY 2009 recall, is direction by the Tribunal for assessing gross profit bogus purchases @ 12.5%. This in Miscellaneous Application for AY 2008 ground of the Miscellaneous Application is rejected. 4.3 In the assessment year 2009 more ground for recalling the appeal Counsel has submitted that to be heard and therefore, order of the Tribunal need to be recalled. The Ld. DR also fairly accepted that ground No. 3 of the appeal not being adjudicated by t MA Nos. 79 & 80/M/2021 Aarey Drugs & Pharmaceuticals Ltd. Miscellaneous Application will amount to review of the order of the which we are not authorized in law. In our opinion, there is no mistake much less, the apparent mistake in the ord the Tribunal and therefore, we reject the contention of the Ld. Counsel of the assessee. Secondly, for AY 2009-10 also one of the ground seeking for is direction by the Tribunal for assessing gross profit bogus purchases @ 12.5%. This issue is identical to the issue raised in Miscellaneous Application for AY 2008-09, accordingly, t ground of the Miscellaneous Application is rejected. In the assessment year 2009-10, the assessee has made one more ground for recalling the appeal of the Tribunal. The Ld. has submitted that ground No. 3 of the appeal has remained to be heard and therefore, order of the Tribunal need to be recalled. The Ld. DR also fairly accepted that ground No. 3 of the appeal not being adjudicated by the by the Tribunal. MA Nos. 79 & 80/M/2021 Aarey Drugs & Pharmaceuticals Ltd. 6 Miscellaneous Application will amount to review of the order of the which we are not authorized in law. In our opinion, there is no mistake much less, the apparent mistake in the order of the Tribunal and therefore, we reject the contention of the Ld. 10 also one of the ground seeking for is direction by the Tribunal for assessing gross profit on identical to the issue raised , accordingly, this 10, the assessee has made one of the Tribunal. The Ld. ground No. 3 of the appeal has remained to be heard and therefore, order of the Tribunal need to be recalled. The Ld. DR also fairly accepted that ground No. 3 of the appeal has 5. We have heard rival submission of the parties relevant material on record. On perusal of the appeal in ITA No. 2820/M/2018 for assessment year 2009 grounds were raised: 1. The Ld. CIT(A) has neither given proper opportunity of hearing to the appellant before dismissal of appeal in its entirety. 2. The Ld. CIT(A) is not justified in confirming the peak addition of purchases effected from the suspicious hawala dealer. 3. The Ld. C Machinery and adding to the extent of peak amount. Again on the said amount 15% depreciation disallowed fully. It means that there is double addition for the same amount in concerned year. 5.1 On perusal of the order of the Tribunal, we find that in respect of assessment year 2009 following observation: “9. The issues raised In ground No.1 & 2 is identical to one as decided by us in ITA No. 2819/Mum/2018, as decided Hence, our decision therein would apply mutatis mutandis to this assessment year also ground no.2 is partly allowed.” MA Nos. 79 & 80/M/2021 Aarey Drugs & Pharmaceuticals Ltd. We have heard rival submission of the parties and perused the relevant material on record. On perusal of the appeal in ITA No. 2820/M/2018 for assessment year 2009-10, we find that following raised: The Ld. CIT(A) has neither given proper opportunity of hearing to the appellant before dismissal of appeal in its entirety. The Ld. CIT(A) is not justified in confirming the peak addition of purchases effected from the suspicious hawala dealer. The Ld. CIT(A) not justified in disallowing the cost of Plant & Machinery and adding to the extent of peak amount. Again on the said amount 15% depreciation disallowed fully. It means that there is double addition for the same amount in concerned year. sal of the order of the Tribunal, we find that in respect of assessment year 2009-10, the appeal has been decided with following observation: The issues raised In ground No.1 & 2 is identical to one as decided by us in ITA No. 2819/Mum/2018, as decided by us supra. Hence, our decision therein would apply mutatis mutandis to this assessment year also. Accordingly ground no. is dismissed and ground no.2 is partly allowed.” MA Nos. 79 & 80/M/2021 Aarey Drugs & Pharmaceuticals Ltd. 7 and perused the relevant material on record. On perusal of the appeal in ITA No. 10, we find that following The Ld. CIT(A) has neither given proper opportunity of hearing to the appellant before dismissal of appeal in its The Ld. CIT(A) is not justified in confirming the peak addition of purchases effected from the suspicious hawala dealer. IT(A) not justified in disallowing the cost of Plant & Machinery and adding to the extent of peak amount. Again on the said amount 15% depreciation disallowed fully. It means that there is double addition for the same amount in sal of the order of the Tribunal, we find that in respect 10, the appeal has been decided with The issues raised In ground No.1 & 2 is identical to one as by us supra. Hence, our decision therein would apply mutatis mutandis to this . Accordingly ground no. is dismissed and 5.2 Thus, it is evident that Ground No. 3 of the appeal has not been adjudicated by the Tribunal and therefore, there is a mistake apparent from the record to that extent. Accordingly, we recall the order of the Tribunal in ITA No. 2820/M/2018 for assessment year 2009-10 to the extent of ground No. 3 of the appeal. Both the parties were informed the date of hearing for the appeal As the date has been informed in the open Court no separate notice shall be issued to the parties. 6. In the result, the Miscellaneous Application for AY 2008 dismissed whereas Miscellane partly allowed. Order pronounced in the Court on Sd/- (PAVAN KUMAR GADALE JUDICIAL MEMBER Mumbai; Dated: 29/07/2022 Rahul Sharma, Sr. P.S. MA Nos. 79 & 80/M/2021 Aarey Drugs & Pharmaceuticals Ltd. Thus, it is evident that Ground No. 3 of the appeal has not been the Tribunal and therefore, there is a mistake apparent from the record to that extent. Accordingly, we recall the order of the Tribunal in ITA No. 2820/M/2018 for assessment year 10 to the extent of ground No. 3 of the appeal. Both the parties informed the date of hearing for the appeal as As the date has been informed in the open Court no separate notice shall be issued to the parties. In the result, the Miscellaneous Application for AY 2008 dismissed whereas Miscellaneous Application for AY 2009 ounced in the Court on 29/07/2022. Sd/- PAVAN KUMAR GADALE) (OM PRAKASH KANT JUDICIAL MEMBER ACCOUNTANT MA Nos. 79 & 80/M/2021 Aarey Drugs & Pharmaceuticals Ltd. 8 Thus, it is evident that Ground No. 3 of the appeal has not been the Tribunal and therefore, there is a mistake apparent from the record to that extent. Accordingly, we recall the order of the Tribunal in ITA No. 2820/M/2018 for assessment year 10 to the extent of ground No. 3 of the appeal. Both the parties as on 12.09.2022. As the date has been informed in the open Court no separate notice In the result, the Miscellaneous Application for AY 2008-09 is ous Application for AY 2009-10 is OM PRAKASH KANT) MEMBER Copy of the Order forwarded to 1. The Appellant 2. The Respondent. 3. The CIT(A)- 4. CIT 5. DR, ITAT, Mumbai 6. Guard file. //True Copy// MA Nos. 79 & 80/M/2021 Aarey Drugs & Pharmaceuticals Ltd. forwarded to : BY ORDER, (Sr. Private Secretary ITAT, Mumbai MA Nos. 79 & 80/M/2021 Aarey Drugs & Pharmaceuticals Ltd. 9 Sr. Private Secretary) ITAT, Mumbai