GOVARDHAN P. SHAH,MUMBAI vs. DCIT CEN CIR 10, MUMBAI

आदेश / O R D E R

In the case of M/s Pride Steels Pvt. Ltd., confirming the sales transactions as non genuine, treating that accommodation entries and estimating the income to the extent of 2.5% over and above the returned income and consequent addition to the tune of Rs.13,87,470/- (A.Y. 2005-06), Rs.13,77,563/- (A.Y. 2006-07), has been challenged.

In the case of Shri Govardhan P. Shah, identically the addition of Rs.9,67,405/- (A.Y.2007-08), Rs.5,67,081/- (A.Y.2008-09), Rs.9,43,700/- (A.Y. 2010-11) and Rs.6,78,604/-(A.Y.2011-12) has been challenged.

In the case of M/s Pawan Jyoti Steel Pvt. Ltd. the addition of Rs8,45,252/- has been challenged as accommodation entry.

2. (a). During hearing of these appeals, nobody was present for the assessee, in spite of the fact that registered AD notices were issued to M/s Pride Steel Pvt. Ltd. on 07/08/2015, 22/10/2015 and 31/12/2015.

2.(c). In the case of M/s Pawan Jyoti Steels Pvt. Ltd., identically, registered AD notices were issued to the assessee on 07/08/2015, 22/10/2015 and 31/12/2015 at the address provided in column no. 10 of form no.36 duly filed and signed by the assessee itself.

2.(d). It is also noticed that these appeals were heard on 08/10/2015 but on 09/10/2015, these were released for clarification as is evident from identical order sheet entries (ITA No.7706/Mum/2014) on 19/11/2015 and 23/12/2015 also, in spite of issuance of registered AD Notice, the assesses neither appeared nor moved any adjournment petition. It seems that the assessees are not interested to pursue their appeal, therefore, these cannot be kept pending indefinitely, consequently, I have no option but to proceed ex-parte, qua these assessees, and tend to proceed to dispose of these appeals on the basis of material available on record.

3.1. The ld. CIT-DR, further asserted that Shri Govardhan Shah, in his statement stated that his margin from these accommodation entries is only 2%, whereas, the ld. Assessing Officer considering the facts added the commission at the rate of 2.5% on the disclosed sales.

3.2. For A.Y. 2011-12, it was explained that, Shri Govardhan Shah, claimed that no transaction was made, however, the ld. Assessing Officer took the average of earlier three years and made the addition of Rs.2,71,44,156/-, which was reduced to Rs.85.89 lakhs by the ld. Commissioner of Income Tax (Appeals). The Ld. CIT-DR further contended that the Maharashtra State Sales Tax Department also raided various parties, wherein, Shri Pravin Kumar Jain and Shri Ketan Shah, who relates to these firms also stated that they provided accommodation entries to M/s Noble Enterprises. Thus, the crux of the argument by the ld. CIT-DR is that the addition was rightly made as it is a clear cut case of accommodation entries.

3.3. I have considered the rival submissions and perused the material available on record. Before coming to any conclusion, it is my bounded duty to narrate the facts. In the case of M/s Pawan Jyoti Steels Pvt. Ltd., the assessee is involved in trading in iron and steels and steels products, declared income of Rs.67,011/- in its original return filed on 31/01/2013. A survey action u/s 133A of the Act was carried out on 05/12/2012 by the investigation wing, wherein, certain documents including purchase and sales bills were taken into custody. Notice u/s 153A r.w.s 153C of the Act were issued to the assessee on 26/12/2012 to which the assessee filed revised return on 31/01/2013, declaring the same income, as was declared in the original return. The assessee in respond to the notices also explained that the assessee effected purchases above Rs.25 lakh by further explaining that the copies of the invoices were taken into custody by the Sales Tax Department, therefore, the same cannot be furnished. Statement of Rustomjee Group and Director of M/s Pride Steels Pvt. ltd. was recorded. In the search proceedings at Rustomjee Group, it was found that accommodation sales bills were issued by the Company along with sister concern M/s Pawan Jyoti Steels Pvt. ltd. It was found that the invoices so found were not signed and the delivery challans, transport bills were also not supported in relation to sale of goods. Statement from Shri Dhimant Chokshi, head of Rustomjee Group was recorded, wherein, it was stated that these companies are not appearing in the vendor list of sales, therefore, these are not genuine sales. In reply to summons u/s 131 of the Act, Mr. Govardhan Shah, Director of Pride Steels Pvt. Ltd. tendered in his statement that the assessee company along with sister concern, M/s Pride Steels Pvt. Ltd., head provided accommodation entry to Rustomjee Group to the tune of Rs.1,92 crores (Rs.83 Lakh by assessee company and Rs.1,09,01,724/- by M/s Pawan Jyoti Pvt. Ltd.). While recording the statement of Director of M/s Pride Steels Pvt. Ltd., I was stated that sales made to Rustomjee group were not genuine sales and some other sales were genuine. However, in A.Ys. from 2008-09 to 2010-11, it was observed that the assessee companies also provided accommodation entries to various other concerns other than M/s Rustomjee Group for which no proper details were furnished. The ld. Assessing Officer rejected the books of the accounts u/s 145 of the Act. It was found by the Assessing Officer that the assessee in its profit and loss account declared sales to the tune of Rs.3,64,90,509/-, therefore, the ld. Assessing Officer estimated average rate of 2.5% of the sales (2% commission on accommodation sales and 3% of estimated rate taken for other sales in A.Y. 2008- 09 to 2010-11) which was considered as net taxable income, thus, the estimated income arrived at Rs.9,12,263/-. Since the assessee has declared Rs.67,011/- in its return, the balance amount of Rs.8,45,252/- was added as business income.

3.4. On appeal, before the ld. Commissioner of Income Tax (Appeals), the ld. advocate along with Ms. Archana Bhatia, Director of the assessee firm appeared and made detailed submission. Finally, it was noticed by the ld. First Appellate Authority that the assessee used to give Hawala bills without any genuine transaction and since the assessee has not provided a plausible explanation, the stand taken in the assessment order was affirmed.

3.5. The assessee/assessees is/are in further appeal before this Tribunal. If the observation made in the assessment order, leading to addition made to the total income, conclusion drawn in the impugned order, material available on record, assertions made by the ld. respective counsel, if kept in juxtaposition and analyzed, the position emerging from the profit & loss account is reproduced hereunder:-

Particulars Assessment Years 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 Sales 36490590 74977140 105984815 148818327 147009240 75767223 6941130 Other ---- ------ --- ----- 17440 ---- 460133 income Purchases/ 35527258 73555584 101510372 144110654 143517698 72018492 6138291 COGS Gross 963251 1421556 4474443 4707673 3491542 3748731 802839 Profit GP % of 2.64 1.90 4.22 3.16 2.38 4.95 11.57 sales Net profit 67011 215854 258531 302998 221002 110230 (94432) NP % of 0.18 0.29 0.24 0.20 0.15 0.15 1.36 Sales Enhancem 845252 1716075 2391089 2935532 3523318 1753646 278443 ent as per Assessing Officer Net profit 912263 1931929 2649620 3238530 3744320 1863876 184011 as per Assessing Officer NP as % of 2.50 2.58 2.50 2.18 2.55 2.45 2.65 sales as per Assessing Officer If the totality of facts are analyzed, one fact is clearly oozing out that the ld. Assessing Officer has clearly identified the parties, who have given the hawala bills without any genuine transaction. The assessee has shown purchases from these parties issuing hawala bills and the total purchases from these parties exceeds the transactions with Rushtomjee Group. Right from assessment stage, till this Tribunal, no evidence has been produced establishing the genuineness of these transactions and only plea was taken that the sales tax authorities has taken away the books of accounts. It is noted that even before the ld. CIT(A) neither any evidence was produced by the assessee proving the genuineness of the transaction nor any confirmation was furnished from the parties, thus, the stand of the ld. CIT(A) is having merit. It is also noted that the ld. Assessing Officer has also referred to an affidavit-cum-declaration of Mr. Pravin Kumar Jain, proprietor of M/s Pawan Steel Traders and M/s Anuradha Traders, Mr. Ketan Shah, proprietor of M/s M.S. Trading, who gave bogus bills to the appellant group. All the information, were confronted to the assessee. The purchases made through entry providers only. The Assessing Officer computed the commission in respect of accommodation sales at the average rate of 2.5%. It is further noted that in A.Y. 2005-06 (Pawan Jyoti Steels Pvt. Ltd.), the total sales as per profit & loss account was shown at Rs.3,64,90,509/- on which the net profit was estimated at 2.5%, which comes to Rs.9,12,263/- considering that the assessee has shown profit as per return of income of Rs.67,011/-. On the basis of this percentage, remaining additions were made. However, keeping in view, the totality of facts and the circumstances available on record and by considering the contention of the ld. CIT-DR, considering the principle of natural justice and put an end to the litigation, it will meet the ends of justice, the addition is reduced to 2% in place of 2.5% on the estimated income by the ld. Assessing Officer, thus, the appeal of the assessee is partly allowed.