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Income Tax Appellate Tribunal, MUMBAI BENCH “F” MUMBAI
Before: SHRI C.N. PRASAD & SHRI N.K. PRADHAN
ORDER
PER N.K. PRADHAN, AM
This is an appeal filed by the assessee. The relevant assessment year is 2010-11. The appeal is directed against the order of the Commissioner of Income Tax (Appeals)-29, Mumbai [ in short ‘CIT(A)’]and arises out of the assessment completed u/s 143 r.w.s. 147 of the Income Tax Act 1961, (the ‘Act’).
The 1st & 2nd grounds raised
by the assessee in this appeal are against the order of the Ld. CIT(A) confirming the initiation of re- assessment proceedings u/s 147 of the Act.
3. Broadly stated, the facts of the case are that the assessee filed its return of income for the AY 2010-11 on 14.08.2010 declaring total income at Rs. Nil. It is a reseller of non-ferrous metals. The said return M/s Vijay Metal Corporation 143(1). Subsequently, the Assessing Officer (AO) received information from the Director General of Income Tax (Inv.) that as per the information from Sales Tax Department, Government of Maharashtra, the assessee had taken accommodation entries of bogus purchases from the following parties: Sr. No. Name of the Party Amount in Rs.
1. Mico Steel 578451 2. R J Metal Industries 13805547 3. R K Metal 624019
4. Sunico Traders Pvt. Ltd. 266154 Total 15274171 Because of the above facts, the AO issued notice u/s 148 to the assessee on 19.09.2014.
4. In the present case, the return of income filed by the assessee was processed u/s 143(1). In the case of ACIT v. Rajesh Jhaveri Stock Brokers P. Ltd. 291 ITR 500 (SC), it has been held that intimation u/s 143(1)(a) is not an assessment and a notice u/s 148 issued was valid. In Kone Elevator India P. Ltd. v. ITO (Mad) 340 ITR 454, CIT v. Ideal Garden Complex P. Ltd. (Mad) 340 ITR 609 and ACIT v. Maersk Global ServicesCentre (India) (P) Ltd. (ITAT, Mum) 66 DTR 90, it has been held that in case of return of income processed u/s 143(1), the only condition to be satisfied for reopening is taxable income has escaped assessment and the assessee’s plea that no fresh material was there before the AO warranting re-opening, is not relevant. In view of the above position of law, we uphold the re-opening made by the AO by issuing notice u/s 148 of the Act. Thus the 1st and 2nd ground of appeal are dismissed.
M/s Vijay Metal Corporation
The 3rd, 4th and 5th ground of appeal
s are against the order of the Ld. CIT(A) confirming the order of the AO estimating the profit @ 12.5% on total purchases of Rs.1,52,74,171/-.
6. During the course of re-assessment proceedings, the AO issued notice u/s 133(6) by speed post to the above parties in order to verify the genuineness of purchases. However, the said notices were returned back by the postal authorities as unserved. Therefore, the AO asked the assessee to produce the above parties before him to examine the genuineness of purchases. In response to it the assessee filed a submission, but failed to produce even a single party. The AO further noted that barring the ledger account, bills and cheque payment, no other document such as delivery challans, lorry receipts, transportation details etc. were produced during the course of assessment proceedings. In view of the above facts, the AO asked the assessee vide order sheet noting dated 03.02.2016 to explain as to why the purchases made by the assessee from the alleged hawala dealers should not be treated as non-genuine and why the profit element embedded in such suspicious purchases should not be added back to the total income. In reply, the AR of the assessee stated that a reasonable addition on that account be made. The AO then, relying on the decision in CIT v. Simit P. Sheth 356 ITR 451 (Guj) and M/s Bholenath Poly Fab (P) Ltd. 355 ITR 290, estimated the profit @ 12.5% on the purchases of Rs.1,52,74,171/- and thus made an addition of Rs.19,09,271/-.
7. Aggrieved by the order of the AO, the assessee filed an appeal before the Ld. CIT(A). The Ld. CIT(A) has noted that there was no M/s Vijay Metal Corporation Date of hearing Reasons submitted by the appellant for Next adjournment adjournment 23.01.2017 Not attended 16.03.2017 16.03.2017 Accountant out of Mumbai 17.04.2017 17.04.2017 Not attended 15.06.2017 15.06.2017 Note attended 09.08.2017 09.08.2017 Not attended -- Then the Ld. CIT(A), on facts agreed with the reasons given by the AO and confirmed the addition of Rs.19,09,271/-.
8. Before us, The Ld. counsel of the assessee files a Paper Book (P/B) containing (i) copy of Income tax acknowledgement and computation of income, (ii) Tax Audit Report 3CD and 3CB, (iii) Copy of Balance Sheet and Profit & Loss account and annexure, (iv) copy of purchases bills with delivery challans, (v) copy of bank statement highlighting payment, (vi) copy of stock register, (vii) Vat Audit Report, (viii) copy of statement of sundry creditors party wise, (ix) copy of G.P. Ratio, (x) statement of co-relation between purchases & sales (Party wise) and (xi) assessment order of Sales Tax Department dated 24.02.2014. Also the Ld. counsel filed an unsigned written submission.
9. On the other hand, the Ld. DR relies on the order of the Ld. CIT(A).
10. We have heard the rival submissions and perused the relevant materials on record. The reasons for our decisions are given below.
M/s Vijay Metal Corporation In the instant case, the notices issued by the AO u/s 133(6) to the four parties were returned back by the postal authorities as ‘unserved’. The AO had issued those notices in the address given to him by the assessee. There is no denying the fact that the confirmation from the said parties in response to the notices u/s 133(6) could have resolved the issue. But it has not happened so in the present case. Further, the assessee failed to file before the AO documents like delivery challans, lorry receipts, transportation details etc. Also the assessee failed to appear before the Ld. CIT(A) though adequate opportunity was given by him. In the case of Simit P. Sheth (supra), the Hon’ble Gujarat High Court has held that where purchases were not bogus but were made from parties other than those mentioned in the books of account, not entire purchase price but only profit element embedded in such purchases can be added to income of the assessee. That being the position, not the entire purchase price but only the profit element embedded in such purchases can be added to the income of the assessee. The Hon’ble High Court referred to a similar view taken in the case of CIT vs. Vijay M. Mistry Construction Ltd. [2013] 355 ITR 498 (Guj) and CIT vs. Bholanath Poly Fab (P) Ltd. [2013] 355 ITR 290 (Guj). We have gone through the GP ratio and turnover filed by the Ld. counsel from AY 2007-08 to AY 2012-13. Having regard to the facts of the case and the decisions referred hereinbefore, it would be reasonable to estimate the profit @ 10% in place of 12.5% on the alleged bogus purchases. Accordingly, we direct the AO to estimate the profit @ 10% on the purchases of Rs.1,52,74,171/-. Thus the 3rd, 4th and 5th grounds of appeal are partly allowed.
M/s Vijay Metal Corporation