Income Tax Appellate Tribunal - Mumbai
Shri Hasmukh J. Ruparelia,, Mumbai vs Ito Ward-22(1)(5),, Mumbai on 1 June, 2020
आयकर अपीलीय अधिकरण "SMC-II "न्यायपीठ मुंबई में । IN THE INCOME TAX APPELLATE TRIBUNAL "SMC -II" BENCH, MUMBAI श्री महावीर स हिं , उपाध्यक्ष एविं के मक्ष । BEFORE SRI MAHAVIR SINGH, VICE PRESIDENT आयकर अपील .िं / ITA No.1854/Mum/2019 ( निर्ाा र ण वर्ा / Assessme nt Years 2010-11) आयकर अपील .िं / ITA No.1855/Mum/2019 ( निर्ाा र ण वर्ा / Assessment Years 2011-12) Shri Hasmukh J. Ruparelia The Income-tax Officer, Ward 13, Hari Vallabh Co. Op Society, J.K. 22(1)(5), Piramal Chambers, Mehta Road, Green Street, बिाम/ Lalbaug, Parel, SAntacruz (West), Mumbai-400 054 Vs. Mumbai-400 012 (अपीलार्थी / Appellant) (प्रत्यर्थी/ Respondent) स्र्थायी लेखा िं./PAN No. AACPR1816P आयकर अपील .िं / ITA No.1856/Mum/2019 ( निर्ाा र ण वर्ा / Assessment Years 2010-11) Shri Kumar Hasmukh Ruparelia The Income-tax Officer, Ward 13, Harivallabh CHSL, J.K. Mehta 22(1)(5), Piramal Chambers, road, Santacruz (West), Mumbai-
बिाम/ Lalbaug, Parel,
400 054 Vs. Mumbai-400 012
(अपीलार्थी / Appellant) (प्रत्यर्थी/ Respondent)
स्र्थायी लेखा िं./PAN No. AACPR2188N
अपीलार्थी की ओर े/ Appellant by : None
प्रत्यर्थी की ओर े/ Respondent by : Shri Akhtar H. Ansari, DR
ुिवाई की तारीख / Date of hearing:
15. 06 .20 20
घोर्णा की तारीख / Date of pronouncement: 15. 06 .20 20 ITA Nos. 1854-1856/Mum/2019 Page | 2 आदे श / O R D E R महावीर स हिं , उपाध्यक्ष / PER MAHAVIR SINGH, VP:
These appeals of assessee are arising out of the order of Commissioner of Income Tax (Appeals)- 34, Mumbai in Appeal No. CIT(A)- CIT(A)-34/ITO-22(1)(5)/IT-367,369 & 368/2015-16 dated 11.12.2018. The Assessments were framed by the Income Tax Officer, Ward-22(1)(5), 22(2)(1) Mumbai (in short ITO/ AO) for AYs 2010-11 & 2011-12 vide even date 26.03.2015 & 23.03.2015, under section 143(3) r.w.s 147 of the Income-tax Act, 1961 (hereinafter 'the Act').
2. The only common issue in these three appeals of assessee is as regards to the order of CIT(A) confirming the disallowance of purchases from alleged suspicious dealers by estimating the profit rate of 12.5% on the bogus purchases. For this, the assessee has raised the identical worded grounds in all the years except quantum and the facts and circumstances of the case are also identical. Hence, I will take the facts from Assessment Year 2010-11 in ITA No. 1854/Mum/2019. The relevant ground in Assessment Year 2010-11 read as under: -
"1. On the facts and in the circumstances of the case, the Commissioner of Income-tax (Appeals), hereinafter referred to as the "CIT (A)", has erred in confirming the disallowance on account of purchases from alleged suspicious dealers to the extent of Rs.
ITA Nos. 1854-1856/Mum/2019 Page | 3 8,09,948/-, being 12.5% if the purchases made from the said dealers.
2. The CIT (A) has failed to appreciate that the impugned disallowance is not justified for various reasons and the purchases are duly supported by various details furnished by the appellant including the stock records and corresponding sales reflected in the books of accounts of the appellant.
3. The CIT (A) has failed to appreciate that the impugned disallowance is in violation of principle of natural justice since the appellant has not been provided with the material used against him and also cross examination of the alleged suspicious dealers.
4. Without prejudice to the above, the CIT (A) has erred in estimating the profit margin at 12.5% and thereby confirming the disallowance to that extent in the case of the appellant.
5. In view of the above, the appellant prays that the impugned disallowance shall be deleted / reduced to a reasonable level considering the facts and circumstances of the case."
3. I have heard the learned Departmental Representative and gone through the facts and circumstances of the case. Briefly ITA Nos. 1854-1856/Mum/2019 Page | 4 stated facts are that the assessee is engaged in the business of supplying of construction material. The Assessing Officer during the course of assessment proceedings received information from sale tax department Govt. of Maharashtra that the assessee has made purchases from the following parties who indulge in issuing bogus bills without supply of any goods or materials for commission. The following are the parties and the total amount amounting to Rs. 64,79,583/-:-
Sl NO. Name of the purchase party Amount of purchase
1. Liberty Trading Company 7,50,249
2. Global Trade Impex 12,43,643
3. Atlas International (I) 9,02,272
4. Seemant Trading Co. 10,40,336
5. Premier Enterprise 12,33,187
6. Nirmal Metal Enterprise 7,99,404
7. Aarco Enterprises 5,10,492 Total 64,79,583
4. The Assessing Officer noted that the sale Tax Department carried out a detailed inquiry in respect of the above parties and is of the view that these concerns are engaged in providing bogus bills accommodation entries and assessee is one of the beneficiaries who has made above purchase of `64,79,583/-. The assessee submitted the complete details and furnished all relevant evidences to establish that goods have actually been delivered / supplied and also furnished the books of account, the stock register and evidence regarding payment made through account payee cheque like bank statement etc. but according to Assessing Officer, the assessee could not produce the details of transportation like transportation receipts delivery challans or lorry receipts. Accordingly, The Assessing Officer ITA Nos. 1854-1856/Mum/2019 Page | 5 was of the view that these purchases are not genuine purchases but the assessee's sales are not doubted. Hence, he estimated the profit by applying profit rate at the rate of 12.5% in view of the decision of Hon'ble Gujarat High Court in the case of the case of CIT vs. Smith P. Seth (2013) 356 ITR 451 (Guj). Aggrieved, assessee preferred the appeal before CIT(A), who confirmed the order of Assessing Officer except restricting the profit rate at the rate of 12.5% in the case of M/s Maulik Steel Corporation wherein the Assessing Officer has made addition of entire purchases of `27,98,636/-. The relevant finding of the CIT(A) in Para 5.6 read as under:-
"5.6. In view of the above, it is an admitted fact that Sales Tax Department has conducted search and seizure operation and has established large number of companies/ firms/partnership concerns as hawala dealers who are engaged in accommodation entries without actually supplying the goods. The appellant is one of the beneficiary and has received such accommodation bills from one of the hawala operators totaling to Rs. 33,82,929/-. The A.O. attempted to verify such parties by making independent enquiries u/s. 133(6) of the I.T. Act, 1961. However, no reply was received from them. The appellant filed certain details such as purchase bills, ledger account, bank statement etc. However, some of the specific details required to establish the genuineness ITA Nos. 1854-1856/Mum/2019 Page | 6 of purchase such as evidence of transportation of goods, entry of goods in the stock register, one to one consumption pattern of alleged purchase items, confirmation from the parties concerned etc could not be submitted before the A.O. Nor the Principle Officers of these concerns were produced before the A.O. for examination. However, it is also a fact that the A.O. has not questioned the total sale component and if there is a sale, there should be purchase. The appellant being a trading concern has indulged in using such accommodation entry. As evident from catena of judgments on bgus purchases, only the benefit derived by using such accommodation entries has to be brought to tax. The advantages from using such bogus bills are in the form of saving VAT, saving of transportation charges and various taxes etc. The A.O. has rightly disallowed part of the purchases claimed such hawala dealers relying on the the ratio of the judgement of Hon'ble Gujarat High Court in the case of Simit P. Seth 356 ITR 461 (Guj.) which is applicable to the facts and circumstances of the appellant's case. Thus, the disallowance made by the A.O. is upheld in principle. However, in the case of purchase from M/s.Maulik Steel Corporation, the A.O has added the entire purchases of Rs.29,98,636/-. The 'ame is restricted to ITA Nos. 1854-1856/Mum/2019 Page | 7 12.5%. Accordingly, the entire disallowance made by the AO of Rs.33,82,929/- is restricted to Rs.7,59,122/- Thus, the ground of appeal raised is partly allowed."
Aggrieved, now assessee is in appeal before Tribunal.
5. I have gone through the facts and circumstances of the case. I noted that assessee has filed detailed evidences such as purchase bills, books of account, bank statement proving that the purchases are made through account payee cheques but the assessee could not produce genuiness of purchase as he was not having any evidence like transportation of goods, entry of goods in the stock register as one to one consumption pattern of alleged purchases item wise and confirmation from the parties/ concerns etc. I noted that in view of the above, the CIT(A) has rightly estimated the profit rate of alleged bogus purchase. But, I am of the view that the profit rate can be estimated on some basis as in the state of Gujart VAT is at 8%, whereas in Maharashtra it is 4 to 6% varies from item to item. Going by the fact that this material might have been purchased by assessee from grey market at a lower purchase price some element of profit is earned. Hence, a reasonable estimate can be made. Hence, I estimate the profit rate at the rate of 8% of the bogus purchases and direct the Assessing Officer to recompute the income accordingly.
6. Similarly, in ITA NOs. 1855 & 1856/Mum/2019 for Assessment Year 2011-12 & 2010-11 respectively, wherein the facts and circumstances are exactly identical and hence, taking ITA Nos. 1854-1856/Mum/2019 Page | 8 a consistent view in these two appeals also, I estimate the profit rate at the rate of 8% and Assessing Officer is directed accordingly. The appeals of assessee are partly allowed as indicated above.
7. In the result, all the three appeals are partly allowed.
Order pronounced in the open court on 15.06.2020 Sd/-
(महावीर स ह िं /MAHAVIR SINGH) (उपाध्यक्ष / VICE PRESIDENT) मिंबई, दििािंक/ Mumbai, Dated:15.06.2020 ि ु ीप रकार, व. निजी चिव/ Sudip Sarkar, Sr.PS आदे श की प्रतिललपप अग्रेपिि/Copy of the Order forwarded to :
1. अपीलार्थी / The Appellant
2. प्रत्यर्थी / The Respondent.
3. आयकर आयुक्त(अपील) / The CIT(A)
4. आयकर आयक् ु त / CIT
5. ववभागीय प्रनतनिचर्, आयकर अपीलीय अचर्करण, मुिंबई / DR, ITAT, Mumbai
6. गार्ा फाईल / Guard file.
आदे शानसार/ BY ORDER, त्यावपत प्रनत //True Copy// उप/सहायक पुंजीकार (Asstt. Registrar) आयकर अपीलीय अधिकरण, मुिंबई / ITAT, Mumbai