Income Tax Appellate Tribunal - Mumbai
Apolloa Heat Exchangers Pvt. Ltd., ... vs Acit, Circle - 4, Thane on 17 August, 2017
आयकर अपील
य अ धकरण "G" यायपीठ मंब
ु ई म ।
IN THE INCOME TAX APPELLATE TRIBUNAL "G" BENCH, MUMBAI
BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER
AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER
आयकर अपील सं./I.T.A. No. 586 4-5865/Mum/2016
( नधा रण वष / Assessment Year : 2011-12 and 2012-13)
Apollo Heat Exchangers बनाम/ Assistant Commissioner of
Private Limited, P lot No. 109, Income -tax, Circle -4,
v.
Indo Ind ustrial Estate No. 2, A Wing, 6 t h Floor, Ashar
Navghar Village , Vasai IT Park, Road No. 16-Z,
Road (E), Palghar-401 210 Wagle Industrial Estate,
Thane-400604
थायी ले खा सं . /P AN : AA ACA359 7D
(अपीलाथ /Appellant) .. ( यथ / Respondent)
Assessee by : None
Revenue by : Sh. V Vidhyadhar
ु वाई क तार ख / Date of Hearing
सन : 17.08.2017
घोषणा क तार ख /Date of Pronouncement : 17-08-2017
आदे श / O R D E R
PER RAMIT KOCHAR, Accountant Member
These two appeal, filed by the assessee , being ITA No. 5864- 5865/Mum/2016, are directed against two separate appellate orders both dated 16th June, 2016 passed by learned Commissioner of Income Tax (Appeals)- 3, Mumbai (hereinafter called "the CIT(A)"), for assessment year 2011-12 and 2012-13 respectively, appellate proceedings before learned CIT(A) arising from separate assessment orders dated 05-03-2015 and 24-03- 201 passed by learned Assessing Officer (hereinafter called "the AO") u/s 144 r.w.s. 147 of the Income-tax Act, 1961 (hereinafter called "the Act").
2 ITA 5864 and 5865/Mum/2016
2. These two appeals involve common issue of disallowance of purchases on the allegation of the assessee having made alleged purchases from accommodation entry providers i.e. hawala dealers who have issued bogus bills without supplying any material physically to the assessee. First we shall take up appeal for assessment year 2011-12.
3. The brief facts of the case are that assessee company is manufacturer of heat exchangers. The assessee filed return of income u/s 139(1) on 28-09- 2011. The assessee has shown sales of Rs. 5.26 crores and gross profits of Rs. 1.68 crores which work out to GP of 31.91%. The AO received information from Sales Tax Department that the assessee has made purchases from 'Nutan Metals' to the tune of Rs. 56,55,569/- who is engaged in providing accommodation hawala entries wherein only bogus bills are issued without supplying any material and the assessee is one of the beneficiary of such accommodation entry. The case was reopened by the AO u/s 147 of the 1961 Act by the AO by issuance of notice dated 23-04-2013 u/s 148 of the 1961 Act, which was issued within four years from the end of the assessment year. The reasons for reopening of the assessment was supplied by the AO to the assessee and in response to notice u/s 148, the assessee submitted that the return of income filed by the assessee u/s 139(1) of the 1961 Act may be treated as return of income filed in response to notice u/s 148 of the 1961 Act. The AO issued notice to said Nutan Metals u/s 133(6) of the 1961 Act which was not replied by said party.
The assessee on being show caused by the AO submitted ledger copies , purchase bills along with delivery challans , stock records etc. and also submitted that payments to Nutan Metals were made by account payee cheque. The assessee claimed that purchases were genuine. The details of purchases, utilization of material and manufacturing process were all 3 ITA 5864 and 5865/Mum/2016 explained by the assessee before the AO. There is no adverse comments about the same by the AO so far as proving the utilization and consumption of material so purchased for manufacturing finished goods. It was explained by the assessee that the goods have been entered into stock and the bin card summary of purchases and sale of the party was enclosed . However, the assessee despite being asked to produce the said party did not produce the said party before the AO nor said party 'Nutan Metals' replied to notice u/s 133(6) issued by the AO.
The AO observed that the said party ' Nutan Metals' has admitted before the Sales Tax Department that they have not made any sale or purchase transaction but rather only bogus invoices were issued , which proves that purchases shown to be made from Nutan Metals is bogus. It was observed by the AO that keeping in view factual matrix of the case, it is clear that the assessee made purchases from grey market to tally stock as the assessee was in possession of stock while bogus bills were obtained from Nutan Metals. Thus, the assessee benefited by way of margin of grey market. The books of accounts were rejected and the AO estimated GP of 31.91% on these alleged bogus purchases to the tune of Rs. 56,55,569/- from Nutan Metal and income of Rs.18,04,692/- was brought to tax by the AO vide assessment order dated 05-03-2015 passed by the AO u/s 144 r.w.s. 147 of the 1961 Act.
4. Aggrieved by the assessment order dated 05-3-2015 passed by the AO u/s 144 r.w.s. 147 of the 1961 Act, the assessee filed first appeal with learned CIT(A) who dismissed the appeal of the assessee by confirming the assessment order dated 05-03-2015 passed by the AO u/s 144 r.w.s. 147 of the 1961 Act., vide appellate order dated 16-06-2016.
5. The assessee has come in appeal before the tribunal . The learned DR would rely on the appellate order of the learned CIT(A) to contend that the 4 ITA 5864 and 5865/Mum/2016 same may be confirmed while none appeared for assessee despite notice being served on the assessee.
6. We have heard contentions of learned DR and also perused the material available on record. The brief facts of the case are that assessee company is manufacturer of heat exchangers. The assessee filed return of income u/s 139(1) on 28-09-2011. The assessee has shown sales of Rs. 5.26 crores and gross profits of Rs. 1.68 crores which work out to GP of 31.91%. The AO received information from Sales Tax Department that the assessee has made purchases from Nutan Metals to the tune of Rs. 56,55,569/- who is engaged in providing accommodation hawala entries wherein only bogus bills are issued by Nutan Metals without supplying any material and the assessee is one of the beneficiary of such accommodation entry. The case was reopened u/s 147 of the 1961 Act by the AO by issuance of notice dated 23- 04-2013 u/s 148 of the 1961 Act, which was issued within four years from the end of the assessment year. The reasons for reopening was supplied by the AO to the assessee and in response to notice u/s 148, the assessee submitted that the return of income filed by the assessee u/s 139(1) of the 1961 Act may be treated as return filed in response to notice u/s 148 of the 1961 Act. The AO issued notice to said Nutan Metals u/s 133(6) of the 1961 Act which was not replied by said party.
The assessee on being show caused by the AO submitted ledger copies , purchase bills along with delivery challans , stock records etc. and also submitted that payments to Nutan Metals were made by account payee cheque. The assessee claimed that purchases were genuine. The details of purchases, utilization of material and manufacturing process were all explained by the assessee before the AO. It was explained by the assessee that the goods have been entered into stock and the bin card summary of purchases and sale of the party was enclosed . Thus, utilization and 5 ITA 5864 and 5865/Mum/2016 consumption of the material so reflected in alleged purchases from Nutan Metals for manufacturing of finished goods stood proved which is not controverted by Revenue. However, the assessee despite being asked to produce the said party Nutan Metals did not produce the said party before the AO nor notices u/s 133(6) of the 1961 Act was complied with.
The AO observed that the said party has admitted before the Sales Tax Department that they have not made any sale or purchase transaction which proves that purchases shown to be made from Nutan Metals is bogus. It was observed by the AO that keeping in view factual matrix of the case, it is clear that the assessee made purchases from grey market to tally stock as the assessee was in possession of stock while bogus bills were obtained from Nutan Metals. Thus, the assessee benefited by way of margin of grey market. The books of accounts were rejected u/s 145(3) and the AO estimated GP of 31.91% on these alleged bogus purchases from Nutan Metal to the tune of Rs. 56,55,569/- and income of Rs.18,04,692/- was brought to tax by the AO vide assessment order dated 05-03-2015 passed by the AO u/s 144 r.w.s. 147 of the 1961 Act which was confirmed by learned CIT(A).
Reference is drawn to decision of Hon'ble Supreme Court in the case of Kachwala Gems v. Jt. CIT [2007] 288 ITR 10/158 Taxman 71 (SC), wherein Hon'ble Lordships held as under :
"4. The facts of the case are in a short compass. The appellant-assessee deals in precious and semi-precious stones. In the course of assessment, the Assessing Officer noticed the following defects in the books of account of the assessee :
'1. The assessee has not maintained and kept any quantitative details/stock register for the goods traded in by the assessee.
2. There is no evidence on record or document to verify the basis of the valuation of the closing stock shown by the assessee. The assessee is not able to prepare such details even with the help of books of account maintained, purchase bills & Sale Invoices.
6 ITA 5864 and 5865/Mum/2016
3. Provisions of section 145(3) are clearly attracted in this case.
4. The genuineness of purchases to the extent of Rs. 42 lakhs (approx.) is not proved without any doubt.
5. The GP rate declared by the assessee at 13.49 per cent during the assessment year is not a match to the result declared by the itself in the previous assessment years.
6. M/s. Gem Plaza, engaged in local sales of similar goods declared voluntarily rate of 35 per cent in its assessment for the assessment year 1997-98.
7. M/s. Dhadda Exports, another assessee dealing in same items, but doing export business declared GP rate of 43.8 per cent (even without considering the value of export incentives) in assessment year 1997-98.'
5. Thereafter, the books of account of the assessee were rejected by the Assessing Officer and he resorted to best judgment assessment under section 144 of the Income-tax Act. The Assessing Officer in the assessment order mentioned some comparable cases and was of the view that the case of the assessee is more or less having similar facts as that of M/s. Gem Plaza where the Gross Profit has been taken as 35.48 per cent. The Assessing Officer estimated the Gross Profit of the assessee as 40 per cent.
6. The Assessing Officer further held that the assessee has shown bogus purchases in order to reduce the Gross Profits.
7. In appeal, the Commissioner of Income-tax (Appeals) upheld most of the findings of the Assessing Officer, but reduced the Gross Profit from 40 per cent to 35 per cent.
8. In further appeal, the Tribunal had given further relief to the assessee and reduced the Gross Profit rate to 30 per cent.
9. The counsel for the assessee has submitted before us that the income- tax authorities wrongly held that appellant has shown bogus purchases, and the books of account were wrongly rejected.
10. In our opinion, whether there were bogus purchases or not, is a finding of fact, and we cannot interfere with the same in this appeal. As regards the rejection of the books of account, cogent reasons have been given by the income-tax authorities for doing so, and we see no reason to take a different view.
11. It is well-settled that in a best judgment assessment, there is always a certain degree of guess work. No doubt the authorities concerned should try to make an honest and fair estimate of the income even in a best judgment assessment, and should not act totally arbitrarily, but there is necessarily some amount of guess work involved in a best judgment assessment, and it is the assessee himself who is to blame as he did not submit proper accounts. In our opinion, there was no arbitrariness in the present case on the part of the income-tax authorities. Thus, there is no force in this appeal, and it is dismissed accordingly. No costs."
7 ITA 5864 and 5865/Mum/2016 Thus , as can be seen that the assessee has duly proved that the said material was duly recorded in stock records and utilization/consumption of the said material for manufacturing finished goods stood proved which remained uncontroverted by Revenue even by learned DR before us. But on the other side , the said party Nutan Metals has confessed before sales tax authorities that they are engaged in providing accommodation entries without supplying any material physically wherein only bogus bills are issued . The said party has allegedly issued bills to the tune of Rs. 56,55,569/- to the assessee. The said information was received by Revenue from Sales Tax Department wherein the assessee is stated to be beneficiary of the accommodation entry provided by Nutan Metals. Notices u/s 133(6) by the AO to the said party remained uncomplied with by Nutan Metals and the assessee could not produce the said party before the authorities below. The assessee is not able to discharge the onus lay on it under provisions of the 1961 Act in this case. The conclusion of the cumulative factual matrix of the case is that the assessee has obtained actual material from grey market at lower price and to save on VAT , grey market profits etc. has obtained bogus invoices from the said party namely Nutan Metals. The consumption/utilization of the material reflected by the said bogus invoices stood proved while the GP already declared is 31.91% which included these alleged purchases , which has already suffered tax. End of justice in this case will be best served in this if addition is sustained to the tune of 6% of the purchases to the tune of Rs. 56,55,569 so made from Nutan Metals, which will lead to confirmation/upholding of addition to the tune of Rs.3,39,334/-. We order accordingly.
7. In the result, appeal of the assessee in ITA No. 5864/Mum/2016 for A.Y. 2011-12 is partly allowed .
8 ITA 5864 and 5865/Mum/2016
8. Our decision in ITA no. 5864/Mum/2016 for assessment year 2011-12 shall apply mutatis mutandis to the appeal of the assessee in ITA No. 5865/Mum/2016 for assessment year 2012-13 as the facts are similar. We order accordingly.
9. In the result, appeal of the assessee in ITA No. 5865/Mum/2016 for A.Y. 2012-13 is partly allowed .
10. In the result, appeal of the assessee in ITA No. 5864/Mum/2016 for A.Y. 2011-12 and ITA no. 5865/Mum/2016 for A.Y. 2012-13 are partly allowed .
Order pronounced in the open court on 17th August 2017. आदे श क घोषणा खुले #यायालय म% &दनांकः 17-08-2017 को क गई ।
Sd/- sd/-
(JOGINDER SINGH) (RAMIT KOCHAR)
JUDICIAL MEMBER ACCOUNTANT MEMBER
मुंबई Mumbai; &दनांक Dated 17-08.2017
[
आदे श क! " त$ल%प अ&े%षत/Copy of the Order forwarded to :
1. अपीलाथ / The Appellant
2. यथ / The Respondent.
3. आयकर आयु9त(अपील) / The CIT(A)- concerned, Mumbai
4. आयकर आयु9त / CIT- Concerned, Mumbai
5. <वभागीय >त>न?ध, आयकर अपील य अ?धकरण, मुंबई / DR, ITAT, Mumbai "E" Bench
6. गाडC फाईल / Guard file.
आदे शानुसार/ BY ORDER, स या<पत >त //True Copy// उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपील य अ धकरण, मंब ु ई / ITAT, Mumbai