Income Tax Appellate Tribunal - Mumbai
Dcit Cen Cir 1(4), Mumbai vs Nt Recycling P.Ltd, Mumbai on 13 December, 2017
ITA.No.3982/Mum/2016 NT Recycling Private Limited Assessment Year-2008-09 आयकर अपीलीय अिधकरण "बी"
ायपीठ मुं बई म ।
IN THE INCOME TAX APPELLATE TRIBUNAL "B" BENCH, MUMBAI ी डी.टी. गरािसया, ाियक सद एवं ी मनोज कुमार अ वाल, लेखा सद के सम । BEFORE SHRI D.T. GARASIA, JM AND SHRI MANOJ KUMAR AGGARWAL, AM आयकर अपील सं./I.T.A. No.3982/Mum/2016 (िनधा रण वष / Assessment Year: 2008-09) Deputy Commissioner Of NT Recycling Private Limited Income Tax 43,Ramwadi Central Circle 1(4) Kalbadevi Road बनाम/ R.No.902,9 t h Floor Mumbai-400 002 Old CGO Building Vs. M.K.Road,Churchgate Mumbai-400 020 थायी ले खा सं . /जीआइआर सं ./PAN/GIR No. AABCN-8799-F (अ पीलाथ# /Appellant) : ($%थ# / Respondent) Assessee by : Rakesh Joshi ,Ld.AR Revenue by : B.Jaya Kumar , Ld. CIT DR सुनवाई की तारीख / : 26/10/2017 Date of Hearing घोषणा की तारीख / : 13/12 /2017 Date of Pronouncement आदे श / O R D E R Per Manoj Kumar Aggarwal (Accountant Member)
1. The captioned appeal by revenue for Assessment Year [AY] 2008- 09 assails the order of the Ld. Commissioner of Income-Tax (Appeals)- 47 [CIT(A)], Mumbai, Appeal No.CIT(A)-36/AP.103/14-15 dated 29/03/2016. The assessment for impugned AY was framed by Ld. 2 ITA.No.3982/Mum/2016 NT Recycling Private Limited Assessment Year-2008-09 Deputy Commissioner of Income Tax, Central Circle-6, Mumbai [AO] u/s 143(3) read with Section 153A of the Income Tax Act, 1961 on 27/3/2014. The revenue has raised the following effective grounds of appeal:-
1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in restricting the addition to the extent of average G.P. of three previous years as against the addition of Rs.3,89,77,422/- made by the Assessing Officer on account of peak credit of bogus purchases ignoring the fact and working that in the process of purchases from the open market from one dealer and obtaining bills from the other, the deployment of unaccounted money is involved which was quantified by the Assessing Officer taking the peak credit into account which has been historically considered most appropriate."
2. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting addition of Rs.3,89,774/- being commission @1% on total bogus purchases amounting to Rs.3,89,77,422/- ignoring the fact that for availing bogus bills, the assesse would have incurred commission and the same was confirmed by the statements of various parties recorded during the search."
3. (a)"Whether on facts and circumstances of the case and in law, the learned CIT(A) erred in deleting the disallowance of Rs.78,407/- under section 14A of the Income tax act,1961 on the ground that there was no incriminating material found during the search and, therefore, disallowance u/s.14A of the Act could not be made."
(b)"Whether on facts and circumstances of the case and in law, the learned CIT(A) erred in not appreciating the fact that Hon'ble S.C.has submitted SLP in the case of Continental Warehousing Corporation (Nhava Sheva) Limited. (64 taxmann.Com.34) on the issue whether additions can be made in search assessments where no incriminating material was found and regular assessment had been made before search"
2.1 Facts leading to the same are that the assessee being resident corporate assessee engaged in metal trading, ship breaking and trading in shares/ securities was assessed for impugned AY u/s 143(3) read with Section 153A of the Income Tax Act, 1961 on 27/03/2014 at Rs.4,39,48,982/- after certain additions on account of certain alleged bogus purchases and disallowance u/s 14A. Both these additions are the subject matter of this appeal.
2.2 Consequent to search operation u/s 132(1) on Arya Group of Companies on 29/04/2011, the assessee being one of the main 3 ITA.No.3982/Mum/2016 NT Recycling Private Limited Assessment Year-2008-09 concerns floated by common Key Management Personnel / directors, was also covered in the same. The group reportedly made a disclosure of undisclosed income aggregating to more than 20.23 crores during search operations.
2.3 The assessee, in response to notice u/s 153A dated 02/05/2012, filed return of income at Rs.45,03,379/-. The search operations were triggered by noticing that the assessee stood beneficiary of bogus bills from following parties:-
No. Name of the Supplier Amount (Rs.)
1. Asian Steel 97,74,278/-
2. Siddhi Vinayak Steel 1,00,08,983/-
3. Shiv Industries 93,31,559/-
4. Maruti Steel Traders 98,62,601/-
3,89,77,421/-
The assessee contended that the material procured from the above suppliers, corresponding sales & receipt/payment thereof was duly recorded in the books of accounts and there could be no sale without purchase of material and hence, addition thereof was not justified. Reliance was placed on several judicial pronouncements. However, Ld. AO noted that the alleged bogus suppliers, under statement on oath u/s 131, clearly admitted to have provided bills to the said group against commission without actual delivery of material. Resultantly, the Ld. AO concluded that the assessee failed to discharge the onus casted upon him to prove the purchases transactions and therefore, treated the same as bogus purchases and added the same to the income of the assessee. The Ld. AO, further noted that the assessee paid commission to the alleged bogus suppliers for providing bogus bills and estimated the same 4 ITA.No.3982/Mum/2016 NT Recycling Private Limited Assessment Year-2008-09 @1% which resulted into further addition of Rs.3,89,774/-. The Ld. AO made another disallowance u/s 14A amounting to Rs.78,407/- u/r 8D(2)(iii) @0.5% of average investments.
3. Aggrieved, the assessee contested the same with partial success before Ld.CIT(A) vide impugned order dated 29/03/2016 where the assessee reiterated the said contentions and drew attention to the fact that complete quantitative details of sale & purchase was reconciled by the assessee. The Ld. CIT(A) after considering assessee's submissions and relying upon several judicial pronouncements, restricted the impugned additions to 4.5% of the alleged bogus purchases and deleted estimated addition of commission @1% as estimated by Ld. AO. The estimation of 4.5% was arrived at after averaging the Gross Profit Rate of the impugned AY and rate reflected in the immediately preceding year. The disallowance u/s 14A was deleted by noticing that no incriminating material qua the same was found during search operations and the assessment for the impugned AY had not abated. Aggrieved, the revenue is in further appeal before us.
4. The Ld. Departmental Representative [DR] contended that substantial relief was provided by Ld. CIT(A) without any cogent material and also deleted estimated addition for commission paid by the assessee whereas the suppliers in question clearly admitted to have entered into accommodation entries against commission without doing any actual business. Per Contra, Ld. Counsel for Assessee [AR] supported the stand taken by first appellate authority on the premises that the same was quite fair and reasonable.
5 ITA.No.3982/Mum/2016NT Recycling Private Limited Assessment Year-2008-09
5. We have heard the rival contentions and perused relevant material on record. So far as the disallowance u/s 14A is concerned, the stand of Ld. CIT(A) do not require any interference since it is admitted fact that the assessment for concerned year had not abated and no incriminating material qua the same was found during the search operations. Resultantly, this ground of revenue's appeal stands dismissed.
6. Qua estimation against alleged bogus purchases, we find the matter to be factual one. We are of the considered opinion that there could be no sale without purchase /consumption of material since the assessee was engaged in material intensive business. The sales turnover achieved by the assessee has not been disputed by the revenue and the payments were through banking channels. The purchases were backed by invoices. At the same time, the assessee could not produce any confirmation from any of the impugned supplier and the alleged bogus suppliers, during search operations admitted to be indulging in providing accommodation bills against commission without doing any actual business, which cast serious doubt on assessee's claim. On the given facts, purchase of material by the assessee, in the open market, cannot be ruled out. Therefore, in such a situation, the addition, which could be made, was to account for profit element embedded in these purchase transactions to factorize for profit element earned by assessee against possible purchase of material in the grey market and undue benefit of VAT against such bogus purchases, which Ld. CIT(A) has rightly done. However, we find the same to be on lower side keeping in view the assessee's nature of business and on totality of facts and circumstances. Moreover, it was noted that the assessee had 6 ITA.No.3982/Mum/2016 NT Recycling Private Limited Assessment Year-2008-09 paid certain commission to procure the accommodation bills. Therefore, we enhance to same to 8% of alleged bogus purchases of Rs.3,89,77,422/- which comes to Rs.31,18,194/-. The same shall take care of all undue benefits obtained by the assessee including payment of commission and therefore, separate addition for commission is not warranted for in the circumstances. Resultantly, Ground No.1 of revenue's appeal stands partly allowed whereas Ground No.2 stands dismissed.
7. Finally, the revenue's appeal stands partly allowed.
Order pronounced in the open court on 13th December, 2017.
Sd/- Sd/-
(D.T. Garasia) (Manoj Kumar Aggarwal)
ाियक सद / Judicial Member लेखा सद / Accountant Member
मुंबई Mumbai; िदनां क Dated : 13.12.2017
Sr.PS:- Thirumalesh
आदे श की ितिलिप अ !े िषत/Copy of the Order forwarded to :
1. अपीलाथ# / The Appellant
2. $%थ# / The Respondent
3. आयकर आयु+(अपील) / The CIT(A)
4. आयकर आयु+ / CIT - concerned
5. िवभागीय $ितिनिध, आयकर अपीलीय अिधकरण, मुंबई / DR, ITAT, Mumbai
6. गाड. फाईल / Guard File आदे शानुसार/ BY ORDER, उप/सहायक पं जीकार (Dy./Asstt. Registrar) आयकर अपीलीय अिधकरण, मुंबई / ITAT, Mumbai