THE PRESSCOPPER INDUSTRIES, MUMBAI v. INCOME TAX OFFICER WARD 19(3)(5), MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH SMC MUMBAI BEFORE SHRI SHAMIM YAHYA ACCOUNTANT MEMBER & SHRI PAWAN SINGH JUDICIAL MEMBER ITA NO. 5315 & 5316/MUM/2018(AYS: 2010-11 & 2011-12 ) THE PRESSCOPPER INDUSTRIES 175 KIKA STREET GULALWADI MUMBAI-400 004 PAN : AAFT0901B VS ITO WD.19(3)(5) MUMBAI APPELLANT RESPONDEDNT A PP ELLANT BY SHRI RAJESH CHAMARIA - AR RESPONDENT BY SHRI AKHTAR H ANSARI SR DR DATE OF HEARING 03-10-2019 DATE OF PRONOUNCEMENT 01-11-2019 O R D E R PER PAWAN SINGH JUDICIAL MEMEBR : 1. THESE TWO APPEALS BY ASSESSEE ARE DIRECTED AGAINST THE SEPARATE ORDERS OF LD. CIT(A)-29 MUMBAI BOTH DATED 04.06.2018 FOR ASSESSMENT YEARS (AY) 2010-11 AND 2011-12. IN BOTH THE APPEALS THE ASSESSEE HAS RAISED IDENTICAL GROUNDS OF APPEAL EXCEPT VARIATION OF FIGURE. FACTS FOR BOTH THE ASSESSMENT YEARS ARE IDENTICAL EXCEPT VARI ATION OF ALLEGED BOGUS PURCHASES AND DISALLOWANCES THEREOF @ 12.5% O F SUCH PURCHASES. THEREFORE BOTH THE APPEALS WERE CLUBBED HEARD TOGETHER AND ARE DECIDED BY COMMON ORDER. FOR APPRECIATION O F FACTS APPEAL FOR ASSESSMENT YEAR 2010-11 WAS TREATED AS LEAD CASE. I N APPEAL FOR ASSESSMENT YEAR 2010-11 THE ASSESSEE HAS RAISED TH E FOLLOWING GROUNDS OF APPEAL: 2 ITAS 5315 5316/MUM/2018 THE PRESSCOPPER INDUSTRIES BEING AGGRIEVED OF AN ORDER PASSED BY THE LD. COMM ISSIONER OF INCOME TAX (APPEALS) - 29 MUMBAI (HEREAFTER REFERRED AS THE ' LD. CIT (A)') APPELLANT PREFERS THIS APPEAL ON ONE OR MORE OF THE GROUNDS W HICH ARE INDEPENDENT AND WITHOUT PREJUDICE TO EACH OTHER. (1) ON THE FACTS AND IN LAW THE LD. CIT (A) ER RED IN CONFIRMING ADDITIONS MADE SOLELY ON THE BASIS OF LIST OF 'SUSPICIOUS DEA LERS' UPLOADED ON WEBSITE OF SALES TAX DEPT. WITHOUT PROVING THAT ALLEGED BOGUS PARTIES HAVE ACTUALLY PROVIDED ACCOMMODATION ENTRIES TO APPELLANT. (2) ON THE FACTS AND IN LAW THE LD. CIT (A) ER RED IN UPHOLDING PURCHASES MADE FROM ALLEGED BOGUS PARTIES AS ACCOMMODATION EN TRIES IGNORING THE FACT THAT APPELLANT IS A TRADER AND THERE ARE DOCUMENTAR Y EVIDENCES AVAILABLE TO SUBSTANTIATE PURCHASES I.E. PAYMENTS WERE MADE BY A CCOUNT PAYEE CHEQUES QUANTITATIVE RECORDS ARE MAINTAINED AND FOR EVERY P URCHASE THERE WAS CORRESPONDING SALES WHICH HAS BEEN ACCEPTED BY AO. (3) ON THE FACTS AND IN LAW THE LD. CIT (A) ER RED IN SUSTAINING AN ADDITION TO THE EXTENT OF 12.5% OF THE PURCHASES BEING THE PROFIT ELEMENT EMBEDDED IN PURCHASES FROM THE ALLEGED BOGUS PARTIES ON THE GRO UND THAT THE MOTIVE OF OBTAINING THE BOGUS BILLS WAS INFLATION OF PURCHASE PRICE SO AS TO SUPPRESS TRUE PROFIT. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN TRADING IN FERROUS AND NON FERROUS METAL FILED ITS RETURN OF INCOME FOR AY 2010-11 ON 15-09-2010 DECLARING TOTAL INCOME AT NIL. THE RETURN OF INCOME WAS PROCESSED UNDER SECTION 14 3(1). THE ASSESSMENT WAS RE-OPENED UNDER SECTION 147 ON THE B ASIS OF INFORMATION RECEIVED FROM SALE TAX DEPARTMENT GOVE RNMENT OF MAHARASHTRA THAT CERTAIN HAWALA OPERATORS WERE INDU LGING IN PROVIDING ACCOMMODATION BILLS WITHOUT ACTUAL DELIVERY OF GOOD S. THE SALE TAX 3 ITAS 5315 5316/MUM/2018 THE PRESSCOPPER INDUSTRIES DEPARTMENT GOVERNMENT OF MAHARASHTRA REFERRED THE LIST OF SUCH HAWALA DEALERS AND THE BENEFICIARY TO THE DGIT (INV ESTIGATION) MUMBAI. THE NAME OF ASSESSEE APPEARED IN THE LIST O F BENEFICIARIES. THE ASSESSEE ALLEGEDLY MADE THE PURCHASES OF RS. 14 68 973/- FROM SUCH HAWALA DEALERS. ON THE BASIS OF INFORMATION T HE ASSESSING OFFICER MADE A BELIEF THAT THE INCOME OF THE ASSESSEE ESCAP ED ASSESSMENT THEREFORE RE-OPENED THE ASSESSMENT UNDER SECTION 1 47. NOTICE UNDER SECTION 148 DATED 31-10-2014 WAS ISSUED AND SERVED UPON THE ASSESSEE. REASONS RECORDED WERE SUPPLIED TO THE ASSESSEE. IN REPLY THE ASSESSEE VIDE LETTER DATED 11-04-2015 STATED THAT THE RETURN ALREADY FILED MAY BE TREATED AS RETURN FILED IN RESPONSE TO NOTICE ISSUE D U/S 148. THE ASSESSING OFFICER AFTER SERVING NOTICE UNDER SECTIO N 143(2) DATED 09.07.2015 PRECEDED FOR RE-ASSESSMENT. DURING THE A SSESSMENT THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS SHOWN PURCHASES FROM THE FOLLOWING PARTIES WHICH WAS DECLARED AS HAWALA DEALERS BY THE SALE TAX DEPARTMENT GOVERNMENT OF MAHARASHTRA. NAME OF THE PARTIES BILL AMOUNT (RS.) 1 M/S SIVAMANI TRADERS PVT LTD 14 68 973/- TOTAL 14 68 973/- 3. THE ASSESSING OFFICER ISSUED NOTICE UNDER SECTION 1 33(6) TO THE PARTY FROM WHICH THE ASSESSEE SHOWN THE IMPUGNED PURCHASE S. THE NOTICE 4 ITAS 5315 5316/MUM/2018 THE PRESSCOPPER INDUSTRIES WAS RETURN BACK UNSERVED BY THE POSTAL AUTHORITIES. DURING THE ASSESSMENT THE ASSESSEE WAS ASKED TO SUBSTANTIATE T HE PURCHASES AND ISSUED SHOW-CAUSE NOTICE AS TO WHY THE AFORESAID TR ANSACTION SHOULD NOT BE TREATED AS NON-GENUINE. THE ASSESSEE FILED I TS EXPLANATION AND FURNISHED THE COPY OF LEDGER ACCOUNT AND PROOF OF P AYMENT THROUGH CHEQUES. THE ASSESSING OFFICER NOT ACCEPTED THE EXP LANATION FURNISHED BY ASSESSEE AND NOTED THAT THE ASSESSEE HAS NOT PRO DUCED DELIVERY CHALLANS LORRY RECEIPT TRANSPORTATION DETAILS ETC . THE ASSESSING OFFICER AFTER CONSIDERING THE MATERIAL AVAILABLE BE FORE HIM AND THE SUBMISSION MADE BY ASSESSEE CONCLUDED THAT THE ASSE SSEE WAS IN POSSESSION OF GOODS AND HAS SHOWN THE SALES AGAINST THE PURCHASES. THE SALE IS NOT POSSIBLE WITHOUT PURCHASES. THE ASSESSI NG OFFICER CONCLUDED THAT THE ASSESSEE MAY HAVE PURCHASED GOOD S FROM OTHER SUPPLIERS WITHOUT BILLS WHICH IS COMMONLY KNOWN AS GREY MARKET AND THE ASSESSEE IS BENEFICIARY OF MARGIN OF GREY MARKE T. THE ASSESSING OFFICER ON HIS ABOVE SAID OBSERVATION DISALLOWED 12 .5% OF THE AGGREGATE OF TOTAL OF NON-GENUINE/ALLEGED HAWALA PU RCHASES. THE ASSESSING OFFICER WORKED OUT THE DISALLOWANCE OF RS .1 83 621/- IN ASSESSMENT ORDER DATED 28.11.2015 PASSED UNDER SECT ION 143(3) R.W.S 147 OF THE I.T. ACT 1961. 5 ITAS 5315 5316/MUM/2018 THE PRESSCOPPER INDUSTRIES 4. ON APPEAL BEFORE THE LD. CIT(A) THE ACTION OF ASSE SSING OFFICER WAS SUSTAINED. FURTHER AGGRIEVED BY THE ORDER OF LD. C IT(A) THE ASSESSEE HAS FILED THE PRESENT APPEAL BEFORE US. 5. WE HAVE HEARD THE SUBMISSION OF LD. AUTHORIZED REPR ESENTATIVE (AR) OF THE ASSESSEE AND LD. DEPARTMENTAL REPRESENTATIVE (DR) FOR THE REVENUE AND PERUSED THE MATERIAL AVAILABLE ON RECOR D. THE LD. AR OF THE ASSESSEE SUBMITS THAT THE ASSESSEE FURNISHED CO MPLETE DETAILS OF PURCHASES AND THE SALES MADE AGAINST THE ALLEGED BO GUS PURCHASES. THE ASSESSING OFFICER HAS REJECTED THE BOOKS OF ACCOUNT WITHOUT MENTIONING SPECIFIC REASONS. THE ASSESSING OFFICER MADE THE DISALLOWANCE OF 12.5% OF THE ALLEGED BOGUS PURCHASE S. THE LD. AR OF THE ASSESSEE FURTHER SUBMITS THAT ASSESSEE HAS ALRE ADY SHOWN GROSS PROFIT (GP) AT 4.42%. THE ADDITION SUSTAINED ON ACCOUNT OF ALLEGED BOGUS PURCHASES IS ON HIGHER SIDE. THE LD. AR OF THE ASSE SSEE FURTHER SUBMITS THAT AFTER ADDITION SUSTAINED BY LD. CIT(A) THE GP OF ASSESSEE WOULD RISE SUBSTANTIALLY WHICH IS NOT POSSIBLE IN THE T RADE OF ASSESSEE. 6. THE LD. AR OF THE ASSESSEE FURTHER SUBMITS THAT THE HONBLE BOMBAY HIGH COURT IN A RECENT DECISION ON SIMILAR SET OF F ACT IN PCIT VS. M HAJI ADAM & CO. IN ITA NO. 1004 OF 2016 DATED 11.02 .2019 HELD THAT ADDITION IN RESPECT OF BOGUS PURCHASES IS TO BE LIM ITED TO THE EXTENT OF BRINGING THE GP RATE ON SUCH PURCHASE AT THE SAME R ATE AS ON OTHER 6 ITAS 5315 5316/MUM/2018 THE PRESSCOPPER INDUSTRIES GENUINE PURCHASES. THE LD. AR OF THE ASSESSEE SUBMI TS THAT THE DISALLOWANCE OF ALLEGED BOGUS PURCHASE MAY BE RESTR ICTED IN ACCORDANCE WITH THE DECISION OF HONBLE JURISDICTIO NAL HIGH COURT IN PCIT VS. M HAJI ADAM & CO. (SUPRA). 7. ON THE OTHER HAND THE LD. DEPARTMENTAL REPRESENTAT IVE (DR) FOR THE REVENUE SUPPORTED THE ORDER OF LOWER AUTHORITIES. T HE LD. DR FURTHER SUBMITS THAT INVESTIGATION WING OF INCOME-TAX DEPAR TMENT HAS MADE FULL-FLEDGED INVESTIGATION IN RESPECT OF HAWALA TRA DERS. THE HAWALA TRADERS WERE/ARE ENGAGED IN PROVIDING BOGUS BILL WI THOUT ACTUAL DELIVERY OF GOODS. THE ASSESSEE HAS SHOWN BOGUS PUR CHASES ONLY TO INFLATE THE PROFIT. THE LD. DR FOR THE REVENUE SUBM ITS THAT THE ASSESSING OFFICER HAS GIVEN SUFFICIENT RELIEF. THE ASSESSING OFFICER HAS REASONABLY ESTIMATED THE DISALLOWANCES. THE ASSESSE E IS NOT ENTITLED FOR ANY FURTHER RELIEF. 8. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE REPR ESENTATIVES AND PERUSED THE RECORD. A SHORT ISSUE FOR OUR ADJUDICAT ION IS WHETHER THE DISALLOWANCE OF ALLEGED BOGUS PURCHASE @ 12.5% IS R EASONABLE OR NOT. THE LD. AR OF THE ASSESSEE HAS VEHEMENTLY RELIED UP ON THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN M HAJI ADAM & CO.(SUPRA). WE HAVE NOTED THAT ON SIMILAR SET OF FACT THE HONBLE BOMBAY HIGH COURT IN PCIT VS. M HAJI ADAM & CO. (SUPRA) HELD THAT ADD ITION IN RESPECT OF 7 ITAS 5315 5316/MUM/2018 THE PRESSCOPPER INDUSTRIES BOGUS PURCHASE BE LIMITED TO THE EXTENT OF BRINGING THE GP RATE ON BOGUS PURCHASE AT THE SAME RATE AS OTHER GENUINE PU RCHASES. WE HAVE FURTHER NOTED THAT THE ASSESSEE HAS SHOWN GP OF 4.4 2%. IT WAS ARGUED THAT THE GP PERCENTAGE AFTER ADDITION WOULD RISE SU BSTANTIALLY WHICH IS NOT POSSIBLE IN THE TRADE OF ASSESSEE. THEREFORE CONSIDERING THE FACT OF THE PRESENT CASE AND THE NATURE OF BUSINESS ACTIVIT IES OF THE ASSESSEE AND BY FOLLOWING THE DECISION OF HONBLE BOMBAY HIG H COURT WE DIRECT THE ASSESSING OFFICER TO RESTRICT THE ADDITI ON WITH REGARD TO BOGUS PURCHASES BY BRINING THE GP RATE ON SUCH PURC HASES AT THE SAME RATE AS THAT OF OTHER GENUINE PURCHASES. NEEDLES TO ORDER THAT BEFORE MAKING ADDITION THE ASSESSING OFFICER SHALL GRANT OPPORTUNITY TO THE ASSESSEE BEFORE PASSING THE ORDER IN ACCORDANCE WIT H LAW. 9. IN THE RESULT APPEAL OF THE ASSESSEE IS PARTLY ALL OWED. ITA NO. 5316/MUM/2018 A.Y. 2011-12 10. AS WE HAVE NOTED ABOVE THE ASSESSEE HAS RAISED THE IDENTICAL GROUNDS OF APPEAL AS RAISED IN APPEAL FOR ASSESSMENT YEAR 2 011-12 THE FACTS FOR THE YEAR UNDER CONSIDERATION IS ALSO SIMILAR. T HE DISALLOWANCES MADE BY ASSESSING OFFICER ON ACCOUNT OF ALLEGED BOG US PURCHASES ARE ALSO SIMILAR EXCEPT THE FACT THAT PARTIES/ALLEGED H AWALA DEALERS ARE DIFFERENT. CONSIDERING OUR ORDER FOR ASSESSMENT YEA R 2010-11 ON 8 ITAS 5315 5316/MUM/2018 THE PRESSCOPPER INDUSTRIES SIMILAR GROUND THE APPEAL FOR THE YEAR UNDER CONSI DERATION IS ALSO ALLOWED WITH SIMILAR DIRECTION. 11. IN THE RESULT APPEAL OF THE ASSESSEE IS PARTLY ALL OWED. 12. AS A RESULT BOTH THE APPEALS OF THE ASSESSEE ARE P ARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 01-11-2019. SD/- SD/- (SHAMIM YAHYA) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIALMEMBER MUMBAI DT : 01 NOVEMBER 2019 PK/- COPY TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR /TRUE COPY/ BY ORDER ASSTT. REGISTRAR ITAT MUMBAI