Income Tax Appellate Tribunal - Mumbai
Acit Cent. Cir. - 3, Thane, Thane vs Rajesh Vasantrai Doshi, Mumbai on 10 November, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL,
MUMBAI BENCH "B", MUMBAI
BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER AND
SHRI MANOJ KUMAR AGGARWAL, ACCOUNTANT MEMBER
ITA No.5899/M/2016
Assessment Year: 2009-10
ITA No.5900/M/2016
Assessment Year: 2010-11
ITA No.5901/M/2016
Assessment Year: 2011-12
Shri Rajesh Vasantrai Doshi, ACIT, Cen. Cir. 3,
301/A, Aditya Tower, Thane
Chandavarkar Road,
Vs.
Near Om Shanti Chowk,
Boriwali (W),
Mumbai-400 092
PAN: AEGPD4152C
(Appellant) (Respondent)
ITA No.5906/M/2016
Assessment Year: 2009-10
ITA No.5907/M/2016
Assessment Year: 2010-11
ITA No.5908/M/2016
Assessment Year: 2011-12
Asstt. Commissioner of Shri Rajesh Vasantrai Doshi,
Income-tax, 301/A, Aditya Tower,
Central Circle-3, Chandavarkar Road,
Vs.
Thane Near Om Shanti Chowk,
Boriwali (W),
Mumbai-400 092
PAN: AEGPD4152C
(Appellant) (Respondent)
Present for:
Assessee by : Shri Shailesh Parmar, A.R.
Revenue by : Shri Ranjit Singh Arneja, D.R.
Shri Suman Kumar, Sr. A.R.
Date of Hearing : 16.08.2017
Date of Pronouncement : 10.11.2017
2 ITA No.5899/M/2016& ors.
Shri Rajesh Vasantrai Doshi
ORDER
Per D.T. GARASIA, Judicial Member:
The above titled appeals, three by the assessee and the other three by the Revenue, have been preferred against the common order dated 21.07.2016 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to assessment years 2009-10, 2010-11 & 2011-12.
2. The short facts of the case are that a search action u/s 132(l) was conducted on 12/09/2012 based on a Suspicious Transaction Reference (SIR) received from Financial Intelligence Unit India (FIU-IND). Enquiries in respect of the SIR had revealed that Shri Rajesh Vasantrai Doshi, Prop. of M/s Hindustan Laboratories had obtained accommodation entries from a hawala entry provider. These entries were for purchase of raw material which indicated that purchases were being inflated so as to reduce profit. During the course of search it was found that no bills/vouchers/ books of accounts or any financial document was available for the period before March 2011. As per the Investigation Wing there was fire on 17.02.2011 and the copy of FIR was placed on record. As per the report of investigation wing, bogus bill for purchase of raw materials/packing material totaling Rs.46,30,86,636/- were found for the period from F.Y. 2008-09 to F.Y. 2010-11. In all the bogus bills obtained from 15 parties appearing in the list of hawala operators prepared by the Maharashtra Sales Tax Department are found in the case of assessee in various periods. On the basis of discrepancies 3 ITA No.5899/M/2016& ors. Shri Rajesh Vasantrai Doshi found during the search the assessee was asked to furnish the information regarding the bogus purchases made from 15 parties. The assessee was asked to give quantitative and qualitative details of purchases along with name of commodity made during the year under consideration along with supporting evidence from the following parties:
Sr. TIN Name of the Party F.Y. 08-09
No.
1. 270305407V Nageshwar Ent 30192752
2 27070530257V Prajit Industries 3409635
3 27070656939V Jainam Trade Cor 23302103
4 27120511239V Ajanta Enterprises 96341
5 2716066072V Parasnath Ent. 28131357
6 27210286613V Gracis Pharma 80496
7 27310540795 Om Corporation 37709850
8 27340548975V Blue Nile Ent 57809432
9 27450374751V Nikhil Enterprises 13894847
10 27100207711V Symphony Metal 502142200
11 27750403201V Shah Industries 35322948
12 27220690273V Ysh Chem 0
13 27680504653V Great International 47097846
14 27830258239V P.K. Trading Co. 56418772
15 27320257792V R.K. Enterprises 3141374
Total 38,71,24,854/-
3. In response to this, the assessee replied as under:
9.1.4) In short, from the above, the assessee's say is high-lighted as under:
a) "My major supply of products was to the Government Departments".
b) "I have to undergo the process of tendering".
c) "Include time period within which the supply is to be made specification of the goods/products, payment terms, quality assurance etc."
d) "If goods supplied are not according to the specification that also becomes a reason for blacklisting. A party once blacklisted is debarred from getting any tender for any other supply of any other Government department or schemes of government".
e) "The root cause of approaching vendors other than the regular vendors was that I had no choice as the supply time was fixed'.
f) "All the parties which you have referred to were the regular market parties and made genuine supply of the material".
g) "l reiterate that I had purchased the goods genuinely from these parties 4 ITA No.5899/M/2016& ors. Shri Rajesh Vasantrai Doshi referred to in your show cause notice without which the manufacturing and supply made by me to various government departments-would not have been possible".
h) "My sales are genuine".
i) "Without purchases sales is impossible".
j) "The parties are genuine parties and were registered with the sales tax
department having issued sales tax number",
k) "The parties collected sales tax i.e., VAT but did not pay or partially-
paid".
l) "To escape their liability they came out with a well designed, concocted story by saying that they had not made genuine supply of the goods",
m) "But nowhere any noting or entry was found regarding the receipt of any amount in cash from any of the above parties",
n) "The allegation of five above parties fluil they had returned the cash back against the cheques issued to them".
o) "I strongly object to your proposal of making any addition oil of purchases made by me from these parties during the financial years 2008- 09, 2009-10 and 2010-I I".
p) "No such evidence of any cash payment for purchasing the goods was found"
q) "Statements of these parties have no evidentiary value and cannot be relied upon".
4. After considering the reply, AO made the addition in A.Y. 2009-10 of Rs.38,71,24,854/-. In respect of assessment year 2010-11 and 2011-12 the facts are identical except the amount of disallowance. The amount of disallowance was of Rs.2,92,87,304/- in A.Y. 2010-11 and Rs.4,66,74,478/- in A.Y. 2011-12.
5. Matter carried to the Ld. CIT(A) and the Ld. CIT(A) has partly allowed the appeal by observing as under:
"18. To conclude I confirm 25% of the disallowance made by the AO in the asst. order on account of impugned hawala purchases. The confirmed disallowance works out as under in different asst years:
Asst Year Disallowance by the AO Disallowance confirmed @ 25% 2009-10 38,71,24,854/- 9,67,81,213 2010-11 2,92,87,304/- 73,21,026/-
2011-12 4,66,74,478/- 1,16,68,620/-
All the three appeals are allowed partly as indicated above."5 ITA No.5899/M/2016& ors.
Shri Rajesh Vasantrai Doshi
6. The department is in appeal against relief provided whereas assessee is in appeal against additions @25%.
7. The Ld. A.R. of the assessee submitted that the purchases were genuine since quantitative details were filed with supporting evidence from the parties. Our attention is drawn to the fact that the assessee was engaged in business of manufacturing of various pharmaceutical products and it is admitted fact on record that their major supply was to the government departments and various schemes run by government. Whenever there was a purchase requirement from government department, assessee called various parties to supply the goods with specification. The assessee has made supply to the government and purchased the raw material and hence additions were not justified. Further, the payments were through banking channels. The Ld. A.R. further submitted that the assessee could not locate the supplier since considerable time had elapsed. Reliance was placed upon the decision of various decision of Hon'ble Bombay High Court and tribunal. It was also submitted that the impugned additions of Rs.38.71 crores in AY 2009-10 would translate into Gross Profit rate of 85.76% which was not possible. In the alternative, Ld. AR pleaded for reasonable estimation of the income.
8. Per Contra, Ld. DR submitted that the assessee could not prove delivery of material and evidences to substantiate the purchases and therefore, Ld. CIT erred in giving relief to the assessee.
6 ITA No.5899/M/2016& ors.Shri Rajesh Vasantrai Doshi
9. We have heard the rival contentions of both the parties. Looking to the facts and circumstances of the case, we find that in all these group cases it is a fact on record that assessee is engaged in business of supply of medicines and pharmaceutical products to various government organizations as well as others. A search and seizure action under section 132 of the Income Tax Act was conducted on 12.09.12 in the case of assessee along with members of Doshi group. The assessee had made purchases from 15 parties. The assessee could not produce the parties and assessee was unable to produce the records including the vouchers, books of accounts from F.Y. 2010-11 and earlier years. There was fire which took place in the assessee's factory premises on 17.02.11 and hence, no records were available. The assessee has filed the FIR regarding occurrence of fire in his factory premises. Therefore, assessee was not able to produce any record. In this situation, assessee's GP is the only factor for determining the gross profit on account of bogus purchases. We find that the Ld. CIT(A) considered the GP from A.Y. 2007-08 to A.Y. 2013-14 which are as under:
Asst. Sales Amount (Rs.) Amt of gross % GP on Amount of Total gross GP percentage year profit (Rs.) sales addition profit after after considering the considering the amount of amount of addition (Rs.) addition 2007-08 29,84,18,626.00 7,95,28,531.23 26.65 7,95,28,531.23 2008-09 1,00,34,35,257.00 17,28,72,530.69 17.23 17,28,72,530.69 2009-10 60,32,19,886.00 13,01,91,591.00 21.58 38,71,24,854 51,73,16,445.00 85.76 2010-11 1,03,05,96,073.00 22,60,80,433.00 21.94 2,92,87,304 25,53,67,737.00 24.78 2011-12 61,67,41,799.00 16,92,95,433.00 27.45 4,66,74,478 21,59,69,911.00 35.02 2012-13 94,06,53,739.00 26,75,20,522.00 28.44 26,75,20,522.00 2013-14 84,98,92,309.00 14,45,97,406.00 17.01 14,45,97,406.00 Total 5,34,29,57,689.00 1,19,00,86,446.92 22.2739 for all (average years GP%) 7 ITA No.5899/M/2016& ors. Shri Rajesh Vasantrai Doshi The profit shown by the peer was as follows:-
Asst. year Cipla Abott IPCA Relish Aurobindo % GP % GP % GP % GP % GP 2007-08 24.27 16.22 18.2 5.33 14.46 2008-09 17.16 9.95 15.96 0.95 10.87 2009-10 20.88 10.77 17.36 0.74 15.54 2010-11 21.68 5.66 18.1 6.82 20.35 2011-12 16.94 8.79 17.19 8.01 20.4 2012-13 18.62 11.03 19.28 -2.51 11.17 2013-14 22.14 0 17.06 -4.95 14.5
10. We find that gross profit shoots upto 85.76% in A.Y. 2009-10, 24.78% in AY is 85.76%, in A.Y. 2010-11 the gross profit will be 24.78% 2010-11 and 35.2% in AY 2011-12 which would be an absurd in any kind of business of manufacturing. The Ld. CIT(A) has restricted the impugned additions to 25%, which is still on the higher side. Therefore, we estimate the same @7% of impugned purchases which comes to Rs.2,70,98,740/- for AY 2009-10, Rs.20,50,111/- for AY 2010-11 & Rs.32,67,213/- for AY 2011-12.
11. In the result, Departmental appeals are dismissed and the assessee's appeals are partly allowed.
Order pronounced in the open court on 10.11. 2017.
Sd/- Sd/-
(Manoj Kumar Aggarwal) (D.T. Garasia)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Mumbai, Dated: 10.11.2017.
* Kishore, Sr. P.S.
Copy to: The Appellant
The Respondent
The CIT, Concerned, Mumbai
8 ITA No.5899/M/2016& ors.
Shri Rajesh Vasantrai Doshi
The CIT (A) Concerned, Mumbai
The DR Concerned Bench
//True Copy// [
By Order
Dy/Asstt. Registrar, ITAT, Mumbai.