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Income Tax Appellate Tribunal, MUMBAI BENCHES “SMC”, MUMBAI
Before: SHRI G.S. PANNU (AM) & SHRI RAM LAL NEGI (JM)
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES “SMC”, MUMBAI BEFORE SHRI G.S. PANNU (AM) AND SHRI RAM LAL NEGI (JM) Assessment Year: 2009-10 Assessment Year: 2010-11 & Assessment Year: 2011-12 Sh. Sivram B. Shukla, The ITO 26(3)(2), (Proprietor of Sharp Rubber), Room No. 508, 5th Floor, 1, Lal Mohammed Compound, C-11, Pratyakshkar Bhavan, Khairani Road, Andheri (East), Vs. B.K.C., Bandra (W), Mumbai - 400072 Mumbai - 400051 PAN: AMMPS1931Q (Appellant) (Respondent) Assessee by : Shri Manish J Sheth (AR) Revenue by : Ms. N. Hemalatha (DR) Date of Hearing: 11/04/2018 Date of Pronouncement: 18/04/2018
O R D E R PER RAM LAL NEGI, JM These appeals have been filed by the assessee against the two orders dated 13.10.2017 and one order dated 17.05.2017 passed by the Ld. Commissioner of Income Tax (Appeals)-38, Mumbai, pertaining to the assessment year 2009-10, 2010-11 and 2011-12, respectively, whereby the Ld. CIT (A) has dismissed the appeals filed by the assessee against assessment orders passed u/s 143 (3) read with section 147 of the Income Tax Act, 1961 (for short ‘the Act’). Since, these appeals pertain to the same assessee and the issues involved are identical, the same were clubbed, heard together and are Assessment Years: 2009-10, 2010-11 & 2011-12
being disposed of by this common and consolidated order for the sake of convenience. 2. Brief facts of the case are that the assessee, proprietor of M/s Sharp Rubber Products, engaged in the business of manufacturing of rubber rolls, filed its return of income for the A.Y. under consideration declaring the total income of Rs. 4,76,210/-. The return was processed u/s 143 (1) of the Act. Subsequently, the case was reopened u/s 147 on the basis of information received from the Sales Tax Department, Maharashtra, to the effect that assessee had obtained accommodation bills from some bogus dealers. Accordingly, notice u/s 148 of the Act was issued and in response thereof the authorized representative of the assessee submitted that the original return filed by the assessee may be treated as return filed in response to the notice u/s 148 of the Act.
In response to the notices u/s 143 (2) and 142 (1), the authorized representative submitted the details called for by the AO. It was noticed that the assessee has made purchased of Rs. 53,63,834/- during the previous year. As asked by the AO, the assessee furnished the details of purchase made during the relevant year. On going through the details, it was further noticed that the assessee had shown purchases from four parties mentioned in the assessment order, whose name were there in the list of bogus parties, made available on the official website of the Sales Tax Department. It was further seen that the assessee had claimed total purchases of Rs. 21,82,586/- from the above bogus parties. Accordingly, notice u/s 133 (6) of the Act was issued to the said parties, however, two notices were returned back by the postal authorities with the remarks that the party has left and no response received in respect of two notices. Accordingly, the assessee was given an opportunity to substantiate the purchases in question made from the said four parties by Assessment Years: 2009-10, 2010-11 & 2011-12
producing the parties along with their books of account, sale invoices their bank statement quantity of goods, delivery challan, mode of transportation etc. for verification. The assessee was further asked to produce documentary evidence to establish the genuineness of the purchases in question. Since, no response was received, the AO asked the assessee to explain as to why the purchases made from the said parties should not be treated as bogus purchases and the amount should not be added back to its income. In response thereof the authorized representative filed the bank statements along with copy of invoices and ledger extracts of the parties. Since, the assessee failed to adduce any cogent evidence to prove that the questioned purchases were made from the aforesaid parties, made addition of 25% of the total amount of bogus purchases holding that the assessee had purchased the material from the parties other than the parties mentioned in the books of account. The addition was made by the AO by following the decision of the ITAT, Ahmadabad Bench rendered in the case of Vijay Proteins Ltd. vs. ACIT, 58 ITD 428 ITAT (Ahd). 4. In the first appeal, the Ld. CIT (A) after hearing the assessee in the light of the evidence on record dismissed inter alia this ground of appeal and confirmed the addition of 25% of the total amount of bogus purchases holding the same to be justified in view of the nature of the business of the appellant.
Aggrieved by the impugned order passed by the Ld. CIT (Appeals), the assessee has preferred this appeal before the Tribunal on the following effective grounds:-
“On the facts and in the circumstances of the case and in law, the Ld. CIT (A) erred in confirming with AO’s treatment of making addition of purchases from the following parties as bogus and made addition of Rs. 5,45,395/- being 25% of total purchase of Rs. 21,81,586/-. Assessment Years: 2009-10, 2010-11 & 2011-12
SI Name of the TIN Amount No. party (Rs.) 1. Asian Steel 27860346638V 25,69,384/- 2. Chanchal 2746035549IV 2,94,783 Tube Corporation 3. Siddhivinayak 27050389521V 6,83,264/- Steels 4. Suraj Tube 27550304371V 5,84,282/- Corporation Total 21,81,586/-
On the facts and in the circumstances of the case and in law, the Ld. CIT (A) erred in considering the fact that during the assessment proceedings, the assessee produced before the AO the documentary evidences in support of his claim about genuine purchases. The assessee produced parties ledger accounts, bank statements showing payments made to the suppliers and details of the sale. Without considering the above and straight away disallowed the 25% of total purchases of Rs. 21,81,586/- and added back Rs. 5,45,395/- to his income.
On the facts and in the circumstances of the case and in law, the Ld. Assessing Officer ought to have considered that all the four so called bogus parties have filed their periodical Vat returns up to FY 2011-12. Further those four parties have not cancelled their VAT/CST number on their own but VAT department themselves cancelled the same with retrospective date of 01/04/2006. Relief claimed in appeal before Hon’ble ITAT:- 1. To delete the addition of Rs. 5,45,395/- made on account of bogus purchases. 2. To grant the relief as per the other grounds of appeal.
There is a delay of 153 days in filing of the present appeal. Since, the assessee has filed an application for condonation of delay supported with Assessment Years: 2009-10, 2010-11 & 2011-12
an affidavit, the Ld. counsel for the assessee at the outset submitted that the assessee could not file the appeal pertaining to the A.Y. 2009-10 within the limitation period due to the reason that when the assessee received the order pertaining to the A.Y. 2009-10, hearing of the appeals pertaining to the assessment year 2010-11 and 2011-12 was pending on the identical issue and the assessee was expecting relief with less percentage of addition on account of bogus purchases. Hence, the assessee did not file the present appeal till disposal of the pending appeals pertaining to the A.Y. 2010-11 and 2011-12. Since, the Ld. CIT(A) dismissed both the appeals of the assessee, the assessee decided to file appeal against the orders passed in all the three assessment years together. The Ld. counsel further submitted that since, the delay is unintentional, the application may be allowed and delay may be condoned in the interest of justice. 7. On the other hand, the Ld. Departmental Representative (DR) opposed the application for condonation of delay on the ground that the reason mentioned in the application is not sufficient to condone the delay in the present case. 8. In the light of the rival submissions, we have perused the material on record. We notice that when the impugned order was passed on 17.05.2017 the remaining two appeals were pending before the Ld. CIT (A). The assessee instead of filing the appeal against the order for the A.Y. 2009-10 waited for the orders in two pending appeals. From the facts and circumstances, it cannot be inferred that the inaction on the part of the assessee was negligent or willful or motivated by some extraneous reasons. 9. Sub-section 5 of section 253 of the Income Tax Act provides that the Tribunal may admit appeal or permit filing of memorandum of cross- objection of respondent after expiry of relevant period of limitation referred to in sub- Assessment Years: 2009-10, 2010-11 & 2011-12
section 3 and 4 section 253, if it is satisfied that there was sufficient cause for not presenting it within that period. The expression “sufficient cause” in this section has also been used in section 5 of Indian Limitation Act, 1961. This expression has come for consideration before the Hon’ble High Courts as well as before the Hon’ble Supreme Court, and the Hon’ble Courts are unanimous in observing that the expression “sufficient cause” is to be considered with justice oriented approach. The Hon’ble Supreme Court in the case of Collector Land Acquisition vs. Mst. Katiji & Others, 1987 AIR 1353 has observed as under: “1. Ordinarily a litigant does not stand to benefit by lodging an appeal late. 2. Refusing to condone delay can result in a meritorious matter being thrown out at the very threshold and cause of justice being defeated. As against this when delay is condoned the highest that can happen is that a cause would be decided on merits after hearing the parties. 3. "Every day's delay must be explained" does not mean that a pedantic approach should be made. Why not every hour's delay, every second's delay? The doctrine must be applied in a rational common sense pragmatic manner. 4. When substantial justice and technical considerations are pitted against each other, cause of substantial justice deserves to be preferred for the other side cannot claim to have vested right in injustice being done because of a non-deliberate delay. 5. There is no presumption that delay is occasioned deliberately, or on account of culpable negligence, or on account of mala fides. A litigant does not stand to benefit by resorting to delay. In fact he runs a serious risk. 6. It must be grasped that judiciary is respected not on account of its power to legalize injustice on technical grounds but because it is capable of removing injustice and is expected to do so.” Assessment Years: 2009-10, 2010-11 & 2011-12
So, in view of the judgment of the Hon’ble Supreme Court aforesaid we allow the application and condoned the delay in filing the present appeal and allowed the Ld. counsel for the assessee to argue the case on merit.
Before us, the Ld. counsel for the assessee submitted that the Ld. CIT (A) has wrongly confirmed the addition made by the AO without considering the fact that the assessee has produced the bank statements to prove that the purchases were made through banking channel. The Ld. counsel further pointed out that all the four parties have filed their VAT returns up to the F.Y. 2011-12 and they have not cancelled their VAT/CST No. but the VAT Department has cancelled the same with retrospective effect. Since, the AO has not disputed the sale, the Ld. CIT (A) has wrongly confirmed the addition as there cannot be any sale without purchase.
On the other hand, the Ld. Departmental Representative (DR) relying on the concurrent findings of the authorities below submitted that since the assessee has failed to prove the genuineness of the transaction, the Ld. CIT (A) has rightly confirmed the addition made by the AO. Therefore, there is no infirmity in the impugned order to interfere with the same.
We have heard the rival submissions and gone through the material on record. The only grievance of the assessee is that the Ld. CIT (A) has wrongly confirmed the addition of Rs. 21,81,586/- i.e. 25% of the total amount of bogus purchases determined by the AO. Though, the assessee has contended before the authorities below as well as before us that the purchases are genuine. However, we do not find any merit in the contention of the assessee as in our considered view the evidence on record is not sufficient to prove the genuineness of the purchases. On the other hand, since, the AO has not Assessment Years: 2009-10, 2010-11 & 2011-12
rejected the sale, it can be inferred that the assessee had made purchases from grey market and evaded the VAT and other taxes applicable during the relevant period. Since, it has been established that the assessee has not purchased the material from the parties as reflected in the books of account, the assessee is liable to pay the tax on the profit embedded in the purchases in question. However, in view of the nature of the business of the assessee, we are of the opinion that the addition of 25% of the total bogus purchases is on the higher side. 14. The Hon’ble Gujrat High Court in CIT vs. Simit P. Seth 356 ITR 451(Guj) has upheld the decision of the ITAT and sustained the addition 12.5% of the total amount of bogus purchases holding that only profit element embedded in such purchases can be added to income of the assessee. Hence, in the light of the aforesaid decision of the Hon’ble Gujarat High Court in the aforesaid case, we modify the order of the Ld.CIT (A) and restrict the addition to 12.5% of the total amount of bogus purchases. The AO is directed to make addition of 12.5% of the total amount of bogus purchases to the income of the assessee. 15. The facts of the present case and the grounds of appeal raised in this case are identical to the facts of the case and grounds of the appeal of the assessee’s appeal for the A.Y. 2009-10 aforesaid except the amount of bogus purchases determined by the AO and the consequential addition confirmed by the Ld. CIT (A). Hence, we do not consider it necessary to reproduce the facts of this case in order to avoid repetition.
16 Since, we have restricted the addition to 12.5% against the addition of 25% confirmed by the Ld. CIT (A), in the assessee’s appeal for the A.Y. 2009-10 aforesaid, consistent with our findings, we partly allow the sole ground of the appeal of the assessee and restrict the addition to 12.5% of the total amount of Assessment Years: 2009-10, 2010-11 & 2011-12
bogus purchases in this case for the same reasons and partly allow the sole ground of the appeal of the assessee. 17. The facts of the present case and the grounds of appeal raised in this case are also identical to the facts of the case and grounds of the appeal of the assessee’s appeal for the A.Y. 2009-10 and 2010-11 aforesaid except the amount of bogus purchases determined by the AO and the consequential additions confirmed by the Ld. CIT (A). Hence, we do not consider it necessary to reproduce the facts of this case.
Since, we have restricted the addition to 12.5% against the addition of 25% confirmed by the Ld. CIT (A), in the assessee’s appeal for the A.Y. 2009-10 and 2010-11 aforesaid, consistent with our findings, we restrict the addition to 12.5% of the total amount of bogus purchases in this case for the same reasons and partly allow the sole ground of the appeal of the assessee. In the result, appeals filed by the assessee for assessment year 2009- 2010, 2010-11 and 2011-12 are partly allowed.
Order pronounced in the open court on 18th April, 2018. (G.S. PANNU) (RAM LAL NEGI) ACCOUNTANT MEMBER JUDICIAL MEMBER म ुंबई Mumbai; दिन ुंक Dated: 18/04/2018
Alindra, PS Assessment Years: 2009-10, 2010-11 & 2011-12
आदेश प्रतितिति अग्रेतिि/Copy of the Order forwarded to : 1. अपील र्थी / The Appellant 2. प्रत्यर्थी / The Respondent. 3. आयकर आय क्त(अपील) / The CIT(A)- 4. आयकर आय क्त / CIT 5. दिभ गीय प्रदिदनदि, आयकर अपीलीय अदिकरण, म ुंबई / DR, ITAT, Mumbai 6. ग र्ड फ ईल / Guard file.
आदेशानुसार/ BY ORDER, सत्य दपि प्रदि //// उि/सहायक िंजीकार (Dy./Asstt.