Contact us   Feedback   Annual Subscription   New User   Login      
Tax Management India .com
TMI - Tax Management India. Com
Extracts
Home List
← Previous Next →

2016 (2) TMI 888 - ITAT MUMBAI

2016 (2) TMI 888 - ITAT MUMBAI - TMI - Bogus purchase - addition as assessees income - Held that:- AO was not justified in holding that the entire bogus purchases by the assessee from the aforesaid two parties in the assessee’s undisclosed income.

The assessee had earned commission @ 5% for clandestinely facilitating the bogus transactions of the parties to purchases and sales. - ITA No. 6457/MUM/2012, ITA No. 6611/MUM/2012 - Dated:- 17-2-2016 - Shri Jason P. Boaz Accountant Member An .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ment year 2007-08 on 29/10/2007 declaring NIL income. A revised return was filed on 1/9/2008 declaring total income of ₹ 5,91,912/-. The return was processed under section 143(1) of the Income Tax Act, 1961 ( in short the Act ) and the case was subsequently taken up for scrutiny. 2.2 A survey under section 133A of the Act was conducted in this case by the ADIT (Inv), Unit IV(i), Mumbai on 12/12/2007 on the basis of information/verification of bank data under the Banking Cash Transaction Ac .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

worth ₹ 2,27,60,254/- from M/s. Shraddha Saburi Merchants Ltd. and ₹ 1,55,09,505/- from M/s. Sai Kripa Metallic Tradecom Ltd., for which payments made by the assessee were credited in the aforesaid two parties bank accounts and the same was withdrawn in cash on the very next dates after its deposits; the assessee being the main beneficiary of these activities. The survey action revealed that the assessee had taken accommodation bills showing bogus purchase during the period relevant .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

Pravin T. Agarwal, which he did not avail. 2.3 In the light of the above material on record, the Assessing Officer afforded the assessee an opportunity of being heard in the matter to explain the purchase transactions carried out with these parties in the relevant period (supra). In this regard, the statement of Shri Prakash J. Shah, partner of the assessee firm was recorded on 12/12/2007 wherein, inter-alia, he has stated that he is only acting as an indenting agent wherein the materials purcha .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

rchases and sales being the G.P, only this amount should be considered as its income. The Assessing Officer did not accept the explanations put forth by the assessee observing that except for making the aforesaid claims, the assessee could not furnish material to prove the mode of delivery of goods purchased/sold, names and addresses and other related particulars and details of the parties to whom goods were allegedly sold, or to explain with documentary evidence the transactions entered into fo .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ium and M/s. D.C. Metals (sale parties) were only accommodation entries rendered by Shri Pravin T. Agarwal and accepted by Shri Prakash J. Shah of the assessee firm and not real sale/purchase transactions as presently claimed by the assessee. In this view of the matter, the Assessing Officer at para 10 to 12 of the order of assessment held that since the assessee could not substantiate the purchases made from the aforesaid two concerns, the entire alleged purchases of ₹ 3,82,69,759/- shown .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

mbai. The CIT(Appeals) disposed off the assessee s appeal vide the impugned order dated 17/8/2012 allowing the assessee partial relief. In the course of appellate proceedings, the CIT(Appeals) remanded to the file of the Assessing Officer for enquiries to be made for the purpose of corroborating the Assessing Officer s finding that the entire investment in purchases by the assessee from M/s. Shraddha Saburi Merchants Ltd. and M/s. Sai Kripa Metallic Tradecom Ltd. amounting to ₹ 3,82,69,759 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ttals put forth by the assessee. Report in the matter was also called for from the DDIT (Inv) Unit IV(i), Mumbai. 3.2 After taking into account all the facts before him, the CIT(Appeals) observed that the assessee had only facilitated the concerned purchase and sale parties, as an indenting agent for commission, in their transactions of bogus sale and purchases. The CIT(Appeals) observed that no evidence was brought on record by the Assessing Officer /DDIT to establish that the assessee purchase .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the assessee facilitated these bogus transactions for the pecuniary benefit of commission. The CIT(Appeals) was of the view that since the entire transaction was clandestine, the assessee would have earned more than the 0.17% commission declared by it; (which was the difference between the concerned sales and purchase transactions) or which is normally declared in this business at 1 to 2% according to the assessee. Following the ratio of the decision of the ITAT, Ahmedabad bench, in the case of .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

.The Commissioner of Income Tax ("CIT(A)") erred in making confirming addition of ₹ 18,48,429/-, being estimating the additional commission income on the accommodation bills of bogus purchases made from M/s. Sai Kripa Mettalic Tradecom Pvt. Ltd., and M/s Shardhha Saburi Merchants Ltd @ 5% of the total purchase amount from the above two parties, after deducting the net commission income of ₹ 65,0591- shown in the books of account. 2. The learned CIT(A) was already satisfied .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

denting agent and accordingly, earned the commission income as shown in the form of profit which is in the nature of commission and shown in the Profit & Loss Account. Hence no addition is called for. 3. The appellant prays that the addition of ₹ 18,48,429/- be deleted as unwarranted and unjustified. 4. Without prejudice to the above the appellant prays that the addition be reduced to reasonable appropriate rate depending upon the circumstances of the Appellant s case. II. 1. The appel .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

raised in Revenue s appeal are as under:- 1. The Learned CIT(A) has erred on facts and circumstances of the case and in law in directing AO to delete ₹ 3,64,21,330/- held as bogus purchases by the Assessing Officer. 2. The Learned CIT(A) has erred on the facts and circumstances of the case and in law in assuming the assessee as merely an agent receiving prefixed commission in respect of the transaction of alleged bogus purchases. 3. The appellant prays that the order of the CIT (Appeals) .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

,82,69,759/- from these two parties. 5.2 In Grounds No.1 to 4 of Revenue s appeal, it is contended that CIT(Appeals) erred in directing the Assessing Officer to delete the addition of ₹ 3,82,89,579/- held by the Assessing Officer as income of the assessee arising out of bogus purchases from the aforesaid two parties and in assuming that the assessee has merely earned commission in respect of the aforesaid purchases. 5.3 The assessee s Grounds I(1) and Revenue s Grounds (1 to 4)(supra) bein .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

re being considered and disposed off together hereunder. 5.4.1 The Ld. Representative for the assessee , on the issue raised in Revenue s appeal, vehemently supported the impugned order of the CIT(Appeals) in respect of its finding holding that the Assessing Officer was not justified in holding that the entire purchases of ₹ 3,82,69,759/- made by the assessee from the two purchase parties i.e. M/s. Shraddha Saburi Merchants Ltd. and M/s. Sai Kripa Metallic Tradecom Ltd. was the assessee s .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

se s appeal, the Ld. Representative for the assessee contended that the CIT(Appeals), after observing that the assessee was only an indenting agent or facilitator for the aforesaid sellers and purchasers in their transactions of bogus sales and purchases in return for remuneration of commission, erred in not accepting the commission of 0.17% as admitted by the assessee. It is contended that the estimation of commission income earned by the assessee on the aforesaid transactions as a facilitator .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

addition made by the Assessing Officer on account of bogus purchases from the aforesaid two parties; i.e. M/s. Shraddha Saburi Merchants Ltd. and M/s. Sai Kripa Metallic Tradecom Ltd.. It was prayed that the finding in the Assessing Officer s order be restored. 5.5.2 In respect of the averments of the Ld. Representative for the assessee on the assessee s grounds claiming that the assessee s income from commission @ 0.17% of purchases should be accepted as such and not at 5% determined by the CI .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ances, since the averments of the assessee are bereft of any corroborative material evidence, the assessee s appeal ought to be dismissed. 5.6.1 We have heard the rival contentions, in respect of both the assessee s as well as Revenue s cross appeals, and perused and carefully considered the material on record. The facts of the matter, from the assessment to the first appellate proceedings, leading to the present appeal have been briefly narrated at para 2.1 to 3.2 of this order (supra). On a pe .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

essing Officer /DDIT (Inv) to establish that the assessee purchased the goods from third parties in cash, as all the transactions of the assessee with both the sale and purchase parties were through banking channels. The CIT(Appeals) noticed from the material before him, that the assessee had only facilitated the concerned purchase and sale parties in their transactions of bogus sales and purchases as an indenting agent for commission. It was in this factual matrix that the CIT(Appeals) held tha .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

these bogus transactions of sale and purchase for the aforesaid sale and purchase parties as an indenting agent and received commission thereon. We find that CIT(Appeals) was of the opinion that since the aforesaid bogus transactions of sales and purchases were clandestinely carried out, the assessee would have certainly earned more than the 0.17% declared by the assessee or 1 to 2% earned in such type of business as admitted by the Ld. Representative for the assessee. The CIT(Appeals) following .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

have also gone through the various remand reports and its rebuttals including the various details filed by the AR and the report of DDIT(Inv)Unit-V, Mumbai as discussed above. I have also gone through the various statements recorded by the AO during the remand proceedings i.e. statements of Shri Prakash J. Shah dated 21.07.2011 and statements of Shri Raju Bhansali & Shri Chanduprakash Bhansali dated 19.07.2011 and the affidavit of Shri Prakash J. Shah dated 06.01.2012 as well as the affidavi .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

On perusal thereof I find the appellant has shown purchases of alluminium and copper rods of ₹ 3,82,69,759/- from M/s Shraddha Saburi Merchants Ltd and M/s Sai Kripa Metallic Tradecom Limited and its corresponding sales to M/s D.C. Metals and M/s Rajasthan Aluminum during the relevant accounting year. However, based on the various enquiries made and evidences gathered in the case of the appellant by the ADIT (Inv.), Unit - IV (1), Mumbai it was found that no such goods were purchased from .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

or unexplained purchases and accordingly the same was added to its total income. However, the appellant has submitted that it is only engaged in the indenting agency business; whereby, the gods purchased were directly dispatched by M/s. Shraddha Saburi Merchants Ltd and M/s. Sai Kripa Metallic Tradecom Ltd. to the godowns of M/s. D.C.Metal and M/s. Rajasthan Alluminium without any involvement of the appellant. It was further submitted that the appellant for its indenting agency services was duly .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

Pravin T. Agarwal as discussed in the assessment order is false and incorrect. Accordingly, the appellant has filed an affidavit dated 19.05.2010 of Shri Pravin T. Agarwal; wherein, he has admitted having made sale of material as per the sale bills issued to the appellant. The AR has also filed corresponding affidavits dated 14.05.2010 of Shri Raju Bhansali partner of M/s Rajasthan Alluminium and Shri Chandra Prakash Bhansali partner of M/s D.C. Metals confirming the contention of the appellant, .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ecom Ltd are to be considered as its unaccounted or unexplained income. The AO herself vide para-4 of her remand report dated 19.09.2011 has confirmed the submissions of the appellant that the source of payments made to M/s Shraddha Saburi Merchants Ltd and M/s Sai Kripa Metallic Tradecom Ltd through banking channels are originating out of the payments received from M/s D.C. Metal and M/s Rajasthan Aluminum by the appellant. From the same as well as from the details and evidences brought on reco .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

D.C. Metal and M/s. Rajasthan Aluminum against the receipt of similar bogus or accommodation sale bills issued by M/s.Shraddha Saburi Merchants Ltd and M/s.Sai Kripa Metallic Tradecom Ltd. Or in other words, it has acted merely as an indenting agent or as an facilitator to legalise such bogus transactions; whereas, the real beneficiaries of these bogus transactions are M/s. D.C. Metal and M/s Rajasthan Aluminum, as no evidences except for the movement of funds no other corresponding or corrobora .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

decom Ltd or by the Appellant or by the M/s D.C. Metal and M/s Rajasthan Aluminum; except for the issue of bogus sales bills by M/s. Shraddha Saburi Merchants Ltd and M/s. Sai Kripa Metallic Tradecom Ltd and by the appellant which as discussed above are already confirmed to be bogus bills without sale of actual material by M/s. Shraddha Saburi Merchants Ltd. and M/s. Kripa Metallic Tradecom Ltd. (statement of Shri Pravin T. Agarwal dated 24.03.2008) and by the appellant (affidavit of Shri Prakas .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

(in remand) even though statements of Sri Prakash J. Shah and Shri Raju Bhansali & Shri Chanduprakash Bhansali were recorded during remand proceedings. It is not proved that the cash withdrawn from the bank accounts of M/s.Shraddha Saburi Merchants Ltd and M/s Sai Kripa Metallic Tradecom Ltd were given to the appellant. Therefore, it is seen that no such material is sold by the appellant to M/s. D.C. Metals and M/s Rajasthan Aluminum except for the issue of bogus bills in consonance with the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

t was also stated that these suppliers I manufacturers are having their godowns situated outside Mumbai, Check Naka, where M/s D C Metals and Rajasthan Alluminium are also having their godowns I warehouses. On account of these facts and evidences placed on record, I find sufficient merits in the submissions of the AR that the appellant has only facilitated the concerned purchase and sale parties, being a conduit in the process of legalization of the transaction of bogus purchases and sales again .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

of M/s Shraddha Saburi Merchants Ltd and M/s. Sai Kripa Metallic Tradecom Ltd through the bank accounts of the appellant. Thereafter, the same are withdrawn in cash from the bank accounts of M/s. Shraddha Saburi Merchants Ltd and M/s. Sai Kripa Metallic Tradecom Ltd but ultimately to whom the same is paid is not investigated either by the AO or by the ADIT/DDIT either during the course of the assessment order or during the remand proceedings. Both these authorities as discussed above have faile .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

orded by the AO during the remand proceedings on 19.07.2011. On account of these facts brought on record, I find sufficient merits in the submissions of the AR that the statements recorded by the AO at the back of the appellant cannot be considered as valid piece of evidence. 2.4.1. Besides, it may be noticed that in spite of granting sufficient opportunity by way of remanding the proceedings to the AO as well as referring the matter to the DDIT (Inv), as discussed above, they have failed to sub .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

brought on record, to my considered opinion, it is unjustified on the part of the AO to hold that the entire purchases shown by the appellant are to be considered as its unexplained income. It is patently incorrect conclusion on the part of the AO that the purchases are not genuine but at the same time the corresponding sales shown are genuine sales. If the purchases are bogus without proving that the appellant has purchased the same items in grey market in cash it cannot be held that the corre .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

, its movement or transportation to the godown of M/s. D C Metals and M/s. Rajasthan Alluminium is brought on record by the AO or by the DDIT(Inv), in spite of conducting survey u/s 133A of the Act. Further, there is no evidence to prove that the cash withdrawn by Shri Pravin T Agarwal is returned to the appellant and not to M/s. D C Metals or M/s. Rajasthan Alluminium, particularly considering to the contents of the affidavit of Shri Prakash J Shah, partner of the appellant firm dated 06.01.201 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ellant through banking channels is out of the payments received from M/s. D C Metals and M/s. Rajasthan Alluminium. This proves that no unaccounted investment is made by the appellant for this purpose during the relevant accounting year. 2.4.2 Besides, Shri Prakash J Shah in his statement dated 06.01.2012 has sated the detailed modus-operandi of the entire transactions arranged by the appellant, which proves that the appellant has merely rendered or facilitated these two parties i.e. M/s. Shradd .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

r Bank) in which, the bank accounts of M/s. D C Metals and M/s. Rajasthan Alluminium were maintained and the new account opening form of the appellant is introduced by the director/partner of M/s.D C Metals and M/s Rajasthan Alluminium. Secondly, it is also noticed a the appellant has never dealt in the business of alluminium sheets and rods, which are found mentioned in these accommodation bills issued. Further, the appellant has no facility or warehousing to store the material purchased, which .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

s paid by M/s DC Metals / M/s. Rajasthan Alluminium. 2.4.3. Therefore, on account of these facts available in the case of the appellant, as discussed above and further in the absence of any new facts and evidences brought on record by the AO as well as in the absence of any corroborative evidences placed on record in spite of remanding the matter on various occasions, I find it cannot be held that the entire purchases made by the appellant are out of Its unaccounted sources or the same is to be .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ills against the payment of pre-fixed commission as discussed above. However, since the entire transaction is carried out in a clandestine manner, it cannot be held that the rate of commission is as per the normal practice followed in this line of business. Naturally, it has to be more than the normal rate of commission paid in this line of business. In the case of Vijay Proteins Ltd vs. ACIT reported in 15 ITD 428, the Hon'ble ITAT Ahmedabad "C" Bench under similar circumstances, .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ned in the Act. It has been held by the Hon'ble Tribunal that in such circumstances, a certain percentage of expenditure has to be disallowed on account of inflation of purchase price. The ITAT has held that if purchases are made from the open market without insisting for the genuine bills, the suppliers may be willing to sell those products at a much lower rate compared to the rate at which they may charge in case the dealer has to give a genuine sale invoice in respect of that sale and sup .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

d by them. This may also be one of the factors due to which the seller may be willing to charge lower rates for unaccounted goods as compared to accounted for goods. The AR has not filed the details of commission earned on this bogus transaction separately. However, from the P&L account it is seen that it has shown total commission of ₹ 85,948.70 on total purchases of ₹ 5,0l,02,850/- which is inclusive of the bogus sales made to M/s. Rajasthan Alluminium and M/s. D.C. Metals. The .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the clandestine nature of business carried out by the appellant. And also considering to the fact that the appellant itself has shown such commission of 0.17%( as discussed above) which is much lesser than the rate of commission admitted by the AR in the similar line of business or practice. Therefore, on account of the same, I find it would meet the end of justice, in case, the rate of commission charged by the appellant is taken @ 5% of the total purchase value of the appellant during the rel .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 



|| Home || Acts and Rules || Notifications || Circulars || Schedules || Tariff || Forms || Case Laws || Manuals ||

|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version