MBM TUBES PVT LTD.,MUMBAI vs. ITO 5(2)(3), MUMBAI

Aforesaid appeals are recalled matter since the appeals were earlier disposed-off by the Tribunal vide common order dated 24/07/2018. However, the aforesaid two appeals were recalled vide MA No.601 & 611 / Mum/2018 order dated 19/03/2019. Accordingly, these appeals have come up for fresh hearing before the bench.

Both appeals pertain to AY 2010-11. ITA No. 5938/Mum/2014 contest addition arising out of assessment framed u/s 143(3) on 29/03/2013 whereas ITA No. 3027/Mum/2016 arises out of assessment framed u/s 143(3) r.w.s 147 on 11/03/2015. Nevertheless, both the appeals contest the order of lower authorities in sustaining additions on account of alleged bogus purchases.

We have heard the rival submissions and perused relevant material on record and deliberated on judicial pronouncements as cited before us. The only arguments advanced by Ld. Authorised Representative for Assessee [AR] are that estimations made by lower authorities on account of alleged bogus purchases were on the higher side.

Facts as emanating from assessment framed u/s 143(3) on 29/03/2013 are that the assessee being resident corporate assessee is stated to be engaged in the business of manufacturing of ferrous and non-ferrous metals. Pursuant to receipt of certain information from investigation wing of the department, it transpired that the assessee obtained hawala purchase entries aggregating to Rs.116.37 Lacs from 7 entities, the details of which have already been extracted in para-5 of the M/s. MBM Tubes Private Limited Assessment Year :2010-11 assessment order. Although, the assessee defended the purchases by submitting ledger extracts, however, notices sent u/s 133(6) to all the entities were returned back unserved in most of the cases. The factual matrix led the Ld. AO to disbelieve the stated purchase transactions and accordingly, the same were added back to the income of the assessee while framing the assessment. Upon further appeal, Ld. first appellate authority restricted the addition to Rs.55.80 Lacs, being peak credit. Aggrieved, the assessee is under appeal before us which is subject matter of ITA No.5938/Mum/2014. 5. Subsequently, the said assessment was reopened, as per due process of law, vide notice u/s 148 dated 30/03/2014 on the ground that the assessee indulged in hawala transactions aggregating to Rs.47.97 Lacs from two entities, the details of which have already been extracted on para 4.1 of assessment order framed u/s 143(3) r.w.s. 147 dated 11/03/2015. Since notices issued u/s133(6) were returned back in similar manner and the assessee failed to substantiate the purchases, Ld. AO added an amount of Rs.17.50 Lacs, being peak credit of the said purchases, to the income of the assessee. The same, upon confirmation by Ld. first appellate authority, is under challenge before us vide ITA No.3027/Mum/2016. 6. We are of the considered opinion that there could be no sale without actual purchase of material keeping in view the assessee’s nature of business activities. The assessee was in possession of primary purchase documents and the payments to the suppliers were through banking channels. At the same time, notices issued u/s 133(6) to confirm M/s. MBM Tubes Private Limited Assessment Year :2010-11 the transactions did no elicit any satisfactory response from any of the suppliers and the assessee failed to produce even a single supplier to confirm the purchase transactions. The delivery of material remained unsubstantiated. 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 earned by assessee against possible purchase of material in the grey market and undue benefit of VAT against such bogus purchases, which lower authorities has rightly done. However, the estimation based on peak credit, in our opinion, is on the higher side keeping in view the nature of assessee’s business. Therefore, we estimate the same @12.5% of alleged bogus purchases. The same would work out to be Rs.14,54,704/- against purchases made from 7 suppliers and which are subject matter of ITA No. 5938/Mum/2014. The same would work out to be Rs.5,99,630/- against purchases made from 2 suppliers and which are subject matter of ITA No.3027/Mum/2016. The balance addition, in this respect, shall stand deleted.

In result, both the appeals stand partly allowed in terms of our above order. Order pronounced in the open court on 30th July,2019. (Mahavir Singh) (Manoj Kumar Aggarwal) "ाियक सद" / Judicial Member लेखा सद" / Accountant Member मुंबई Mumbai; िदनांक Dated : 30/07/2019 Sr.PS, Jaisy Varghese M/s. MBM Tubes Private Limited Assessment Year :2010-11 आदेशकी"ितिलिपअ"ेिषत/Copy of the Order forwarded to : अपीलाथ"/ The Appellant