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Income Tax Appellate Tribunal, “SMC”, BENCH MUMBAI
Before: HON’BLE SHRI MAHAVIR SINGH & HON’ BLE SHRI G. MANJUNATHA
PAN/GIR No.AAFFJ4868E (Appellant) .. Respondent) Assessee by None Revenue by Shri. Akhtar Hussain Ansari – JCIT, Sr. DR Date of Hearing 17/06/2020 Date of Pronouncement 17/06/2020 आदेश आदेश / O R D E R आदेश आदेश PER BENCH:
These are three appeals filed by the assessee are directed against, separate but identical orders of the Ld. Commissioner of Income tax (Appeals)-6, Mumbai, all even dated 11/05/2018 and 27/07/2018 and they pertains to AY 2009-10, 2010- 11 and 2011-12. Since, facts and issues involved in these appeals filed by the assesee are identical, for the sake of convenience, these appeals were heard together and are disposed-off by this consolidated order.
At the outset, we find that there is a delay of more than 200 days in filing these appeals, for which necessary petition for 2 Jyoti Metal Corporation condonation of delay has been filed explaining the reasons for delay in filing the appeal. After hearing, the ld. Counsel for the Revenue and considered affidavit filed by the assessee, we find that reasons given by the assessee for not filing appeal within the time allowed under the Act, comes under reasonable cause for condonation of delay and hence, we condoned delay in filing appeals for all assessment years.
The assessee has, more or less raised common grounds of appeal for all assessment years. Therefore, for the sake of convenience, grounds of appeals filed for the Asst. year 2009-10 are reproduced as under:
1. In the facts and circumstances of the case and in law, the learned CIT (A) erred in considering the fact that Notice u/s 147 r.w.s 148 of the Income Tax Act, 1961 is valid.
2. In the facts and circumstances of the case and in law, the learned CIT (A) erred in confirming the Validity of reopening of assessment by AO U/s. 147 r.w.s 148 of the Income Tax Act, 1961. Which is bad in law and the same needs to be quashed. 3. In the facts and circumstances of the case and in law, the learned CIT(A) erred in confirming the addition made by the AO of Rs.6,11,377/- being 12.5% of the alleged non - genuine purchases of Rs. 48,91,014/-. 4. The assessee craves for leaves to add, amend, alter, modify or omit any of the aforesaid Grounds of Appeal as occasion may arise or demand.
The brief facts of the case as culled out from Asst. Year 2009- 10 are that the assessee is a Partnership Firm, which is engaged in the business of Trading in Ferrous and Non- Ferrous metals filed its return of income for AY 2009-10 on 25/09/2009, declaring total income at Rs. 24,560/- and said return was processed u/s 143(1) of the Income Tax Act, 1961. The case has been, subsequently reopened u/s 147 of the Act, on the basis of information received
3 Jyoti Metal Corporation from DGIT, investigation, Mumbai, as per which, Sales Tax Authorities of Government of Maharashtra had taken actions against number of Hawala dealers, who had issued bogus purchase bills to various parties in Mumbai and other places. As per list of beneficiaries, the assessee is one of the beneficiary, who had taken accommodation bills of bogus purchases from various parties as listed by the AO in para. 5 of his assessment order amounting to Rs. 48,91,014/-. The case was selected for scrutiny and the assessment has been completed u/s. 143(3).r.w.s. 147 of the I.T.Act, 1961 on 25/03/2015 and determined total income of Rs. 6,35,940/-, after making additions of 12.50% gross profit on alleged bogus purchase from those parties and made additions of Rs. 6,11,377/-.
Being aggrieved by the assessment order, the assesee preferred an appeal before the Ld.CIT(A). Before the Ld.CIT(A), the assessee has filed elaborate written submissions which has been reproduced at para 7.2 on pages 10 to 14 of the ld. CIT(A) order. The sum and substance of arguments of the assessee before the Ld.CIT(A) are that purchase from the above party is genuine, which is supported by necessary evidences. Therefore, no additions could be made on the basis of information received from third party. The Ld.CIT(A), after considering relevant submission of the assessee and also, by following the decision of Hon’ble Gujarat High Court, in the case of CIT vs. Simith P. Sheth (356 ITR 451) has upheld addition made by the ld. AO towards alleged bogus purchases to 12.50% gross profit on total purchases from those parties.
None appeared for the assessee. We have heard the Ld. DR, perused the material available on record and gone through orders of 4 Jyoti Metal Corporation the authorities below along with case laws cited by both parties. As regards, reopening of assessment, we find that the ld. AO has formed reasonable belief of escapement of income on the basis of report of Investigation Wing, which is further supported by the report of Sales Tax Department, Govt. of Maharashtra. Further, in our considered view, information relied upon by the ld. AO constitutes a fresh tangible material which is sufficient to reopen the assessment. We, therefore, are of the opinion that there is no merit in grounds taken by the assessee challenging reopening of assessment and hence, we reject grounds raised by the assessee, challenging of reopening assessment.
As regards, addition made by the ld. AO towards 12.50% gross profit on alleged bogus purchases, we find that the Ld. AO has made addition of 12.50% profit on alleged bogus purchases on the ground that the assessee is one of the beneficiary of accommodation entries of bogus purchase bills issued by Hawala dealers. According to the Ld. AO, although assesee has filed certain basic evidences, but failed to file further evidence in the backdrop of clear finding by the Sales Tax Department, Maharashtra that those parties are involved in providing accommodation entries without actual delivery of goods. The Ld. AO had also taken support from the investigation conducted during the course of assessment proceedings, as per which notice issued u/s 133(6) to the parties were returned un-served by the postal authorities. Therefore, he came to the conclusion that purchases from the said parties are bogus in nature. It is the contentions of the assessee before the lower authorities that purchases from the above party are supported by necessary evidences. It has furnished all possible evidences, including books of accounts; stock details and bank statement to prove that payment
5 Jyoti Metal Corporation against said purchases have been made through proper banking channels.
Having considered arguments of ld. DR and also, considering material available on record, we find that both the sides have failed to prove the case in their favour with necessary evidences. Although, assessee has filed certain basic evidences, but failed to file further evidences to conclusively prove purchases to the satisfactions of the Ld.AO. Further, mere payment by cheque does not prove the genuineness of purchase, more particularly when other circumstantial evidence says otherwise. At the same time, the Ld. AO had also failed to take the investigation to a logical conclusion by carrying out necessary enquires, but he solely relied upon information received from investigation wing, which was further supported by information received from Maharashtra Sales Tax Department. The AO neither pointed out any discrepancies in books of accounts nor made out a case of sales outside books of accounts. In fact, the AO did not disputed sales declared for the year. Under these circumstances, it is difficult for us to accept arguments of both the sides. Further, in a case where purchases are considered to be purchased from suspicious/hawala dealers, various High Courts and Tribunals had considered an identical issue in light of investigation carried out by the Sales Tax Department and held that in case of purchases claims to have made from alleged hawala dealers, only profit element embedded in those purchases needs to be taxed, but not total purchase from those parties. The Hon’ble Gujarat High Court, in the case of CIT vs Simith P.Sheth 356 ITR 451 had considered a similar issue and held that at the time of estimation of profit from alleged bogus purchases no uniform yardsticks could be adopted, but it depends upon facts of each case. The ITAT, Mumbai,
6 Jyoti Metal Corporation in number of cases had considered an identical issue and depending upon facts of each case, directed the Ld.AO to estimate gross profit of 10% to 15% on total alleged bogus purchases. In this case, considering the nature of business of the assessee the Ld. AO has made 12.50% profit additions, which has been upheld by the ld. Ld.CIT(A). Although, both authorities have taken 12.50% rate of profit for estimation of income from alleged bogus purchase, but no one could support said rate of gross profit with necessary evidences or any comparable cases, but it is supported by various decisions of High Courts and Tribunals. In this case, the assessee is involved in the business of trading in ferrous and non-ferrous metals. The rate of VAT is 4% on ferrous and non-ferrous metals in the State of Maharashtra. Further, the assessee might have saved 2% to 3% by taking accommodation bills. Therefore, considering facts and circumstances of this case and consistent with view taken by the Co- ordinate Bench in number of cases, we are of the considered opinion that profit rate adopted by both authorities appears to be on higher side and accordingly, we direct the ld. AO to estimate 6.5% gross profit on total alleged bogus purchases.
In the result, appeal filed by the assessee is partly allowed. and ITA No. 1729/Mum/2019
The facts and issue involved in these two appeals are identical to facts and issues which we had considered in Asst. year 2009-10. The reasons given by us in preceding paragraphs shall mutatis and mutandis apply to these appeals, as well. We, therefore, for detailed reasons given in previous paragraphs, in direct the AO to 7 Jyoti Metal Corporation estimate 6.5% profit on alleged bogus purchases for Asst. years 2010-11 and 2011-12.
In the result, appeals filed by the assessee for Asst. years 2010-11 and 2011-12 are partly allowed.
As a result, appeals filed by the assessee for Asst. years 2009- 10, 2010-11 and 2011-12 are partly allowed.
Order pronounced in the open court on this: 17/062020