TaxTMI 
TaxTMI 
2016 (7) TMI 1223
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....e only appellate order passed by learned CIT(A) , which was confirmed by ld DR vide letter of the ITO 4(3)(2), Mumbai dated 15.06.2015 filed with the Bench during the course of hearing on 17-06-2015 which is placed in the file and also recording to that effect is made in order sheet entry dated 17-06-2015. 2. The grounds of appeal raised by the assessee company in the memo of appeal filed with the Income Tax Appellate Tribunal, Mumbai (hereinafter called "the Tribunal") read as under:- "I. 1) The learned Commissioner of Income Tax (" the CIT (A) ") erred in making order dismissing the appellant's appeal without hearing the appellant and not giving adequate opportunity of being heard. 2. He failed to appreciate and ought to have held that the appellant was seeking adjournment for valid reasons beyond their control, particularly the facts that in respect of the similar issue, the for the sister concern, the matter was being heard by the other CIT(A)and all the details are submitted to him and his order is expected soon and accordingly, adjournment should have been given. 3. He further erred in not giving final notice to the Appellant stating that "If not attended to it, the o....
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....and conductors of ferrous and nonferrous metals & trading of ferrous and non-ferrous metals cables & conductors. There was a survey action conducted by the investigation Wing of the Revenue u/s 133A of the Act on 12th December, 2007 at the premises of the assessee company. During the course of survey, statement of the Director Shri Prakash Jayantilal Shah was recorded. As per answer to Q. No. 5, it was stated that the assessee company had purchased aluminium items from M/s Shradha Saburi Merchants Ltd. of Rs. 66,12,630/-. The question and answer to question No. 6 & 7 are reproduced hereunder:- "Q.6 Please produce the documentary evidence of delivery of goods from M/s. Shradha Saburi Merchants Limited and Sai Kripa Metalic Tradecom Ltd. Ans. In respect of our trading activities with M/s.Shradha Saburi Merchants Limited and Sai Kripa Metalic Tradecom. Ltd. We are mainly acting as an indenting agents, where the material is directly dispatched from the parties from whom the material is purchased to the customer. Q.7. I am. showing you the self declared statement dated 02-112007 of Shri Pravin T. Agarwal Proprietor/partner of Sai Kripa Metalic Tradecom Ltd. and Shradha Saburi Merchan....
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....s not available on the address and hence notice was served through affixture. Thereafter, summons u/s 131 of the Act were issued to Shri Pravin T. Agarwal, the proprietor/partner of the said firm M/s Shradha Saburi Merchants Ltd. which was again served through affixture, but neither information was received nor Shri Pravin T. Agarwal appeared before the Revenue authorities. The C.A. of the assessee company was confronted to give his submissions on the statement of Sh. Pravin T. Agarwal of Shradha Saburi Merchants Limited wherein he has stated that he is not doing any real business from the parties however, he is providing vouchers for the purchase bills and sale bills , against which query raised by the AO no compliance was made by the assessee company to prove the genuineness of the purchase from M/s Shradha Saburi Merchants Limited and since the assessment was getting barred by limitation on 31-12-2009, the A.O. passed the order based on the facts available on record. The A.O. observed that as per the statement of Shri Vasant and Shri Dilipkumar Bansal it was proved that the goods purchased by them from M/s Reliance Cable and Conductors P. Ltd. were not received through M/s Shra....
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....12th December, 2007 and the Tribunal on similar facts and circumstances decided the issue in ITA No. 6457/Mum/2012 and ITA No. 6611/Mum/2012 for the assessment year 2007-08 vide order dated 17th February, 2016 had held that end of justice will be met if commission @ 5% for clandestinely facilitating the bogus transaction of the parties to the purchases and sales will be brought to tax as commission income, which the learned counsel submitted is accepted by the said M/s Prakash Metals to end litigation and It was submitted that the said sister concern has also got material from M/s Shradha Saburi Merchants Ltd. and the said material was sold to the same D.C. Metals and to one other concern M/s. Rajasthan Aluminium and prayed that similar direction may be given in this case also which is conceded by the learned counsel for the assessee company to be acceptable and will also meet the end of the justice and shall be consistent with the stand of the Tribunal in its afore-stated orders in the case of sister concern of the assessee company namely Prakash Metals which is concededly accepted by the said party M/s Prakash Metals to end litigation with the Revenue. 9. The ld DR on the other ....
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....iod relevant to assessment year 2006-07 and 2007-08 from M/s. Shraddha Saburi Merchants Ltd., and M/s. Sai Kripa Metallic Tradecom Ltd. The above modus operandi and the fact that the assessee was a beneficiary of such activities was confirmed by Shri Pravin T. Agarwal in a statement filed before ADIT (Inv), Unit IV(i), Mumbai on 2/11/2007. The ADIT (Inv) also reportedly informed the Assessing Officer that the partner of the assessee firm Shri Prakash J. Shah was afforded an opportunity to cross-examine Shri 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 purchased by it is directly dispatched through the parties from whom the material was purchased to the customers to whom it is sold i.e. M/s. Rajasthan Aluminium & M/s. D.C.Metals, payments/re....
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.... 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 Rs. 3,82,69,759/- constituted unaccounted income of the assessee. In this context the Assessing Officer was also required to make available to the assessee copies of statements of Shri Pravin T. Agarwal dated 12/12/2007, primarily relied on by the Assessing Officer to make the addition of undisclosed income of Rs. 3,82,69,759/- and to afford the assessee opportunity of cross examination of Shri Pravin T. Agarwal. The matter was remanded to the Assessing Officer on more than one occasion to address the rebuttals 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 co....
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....nsactions proved the modus operendi of direct purchases and sales by the parties where your appellant was only delcreder agent supported by various documentary confirmations under the circumstances. 4. The learned CIT(A) failed to appreciate that the Appellant had acted as an indenting 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 Rs. 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 appellant craves leave to add to , amend and/or alter the above grounds of appeal." 4.1.2 At the outset, the Ld. Representative for the assessee for the assessee submitted that in its appeal, the assessee will be pressing only Ground No.I (supra) and that all other grounds I (2 to 4) and (2 to 4) as well as II(1) are not being pressed. Since the grounds at S.Nos.I (2 to 4) and (2 to4) and II(1) are not pressed in this appeal,....
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.... of Rs. 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 undisclosed income; particularly when there were immediate and identical quantities sold to M/s.D.C.Metals and M/s. Rajasthan Aluminium through banking channels. It is submitted that the CIT(Appeals) had, after due consideration of the factual material on record, found that the assessee had only facilitated the concerned purchase and sale parties as an indenting agent for remuneration in commission in their transaction of bogus sales and purchases. 5.4.2 In respect of Ground No.I(1) in the assesse'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 @5% thereon was too high....
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....ppeals) observed that no material evidence was brought on record by the Assessing 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 that the Assessing Officer was not justified in holding that the entire purchases by the assessee from M/s. Shraddha Saburi Merchants Ltd. and M/s. Sai Kripa Metallic Tradecom Ltd. are the assessee's undisclosed income and that only the corresponding sales to M/s. Rajasthan Aluminium and M/s. D.C Metals are genuine, particularly when the items/quantity purchased and sold are identical. 5.6.2 It is seen that the CIT(Appeals) from the material on record, was of the view that the assessee facilitated these bogus transactions of sale and purchase for the aforesaid sale and purchase parties as an indenting agent and received....
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....d and M/s Sai Kripa Metallic Tradecom Ltd inasmuch as these sales bills issued by M/s Shraddha Saburi Merchants Ltd. and M/s. Sai Kripa Metallic Tradecom Ltd. were bogus accommodation bills issued without supply of actual material as disclosed therein. Or in other words, the appellant has not made any such purchases from M/s. Shraddha Saburi Merchants Ltd. and M/s. Sai Kripa Metallic Tradecom Ltd. and therefore, the entire purchases shown was considered as bogus 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 compensated by way of commission which is the difference between the sale price and the purchase price as shown in its books of account. At the same time the AR has vehemently argued that neither a copy of the statement recorded of ....
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....chants 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 corroborative evidences to establish the actual purchase and sale of goods mentioned in these sale /purchase bills are produced neither by M/s Shraddha Saburi Merchants and M/s Sai Kripa Metallic Tradecom Ltd, nor by the appellant or by M/s D.C. Metal and M/s. Rajasthan Aluminium. Nothing is brought on record to prove the movement, transportation as well as the names and particulars of the parties from whom these goods were either purchased M/s Shraddha Saburi Merchants Ltd and M/s Sai Kripa Metallic Tradecom 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. Shraddh....
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.... Prakash Bansali and Shri Raju Bhansali, partners of M/s. D C Metals and M/s. Rajasthan Alluminium respectively. The AO has confirmed that the funds originating from M/s. D.e. Metals and M/s. Rajasthan Aluminum are immediately transferred to the bank accounts 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 failed to examine Shri Pravin T. Agarwal on this issue nor they could succeed in recording the statement of Shri Pravin #T. Agarwal and further to be cross examined by the appellant as discussed above. The AO as well as the DDIT have expressed their in this regard. Similarly, no cross examination of Shri Chandra Prakash Bhansali and Shri Raju Bhansali is granted to the appellant in spite of the contents of their affidavits dated 14.05.2010 as....
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....als or M/s. Rajasthan Alluminium, particularly considering to the contents of the affidavit of Shri Prakash J Shah, partner of the appellant firm dated 06.01.2012. Therefore, it is seen that in spite of remanding the matter on several occasions, no new facts and evidences are brought on record by the AO or by the DDIT(Inv), so as to justify the bogus purchases made by the appellant out of its unaccounted income. On the other hand, as discussed above, the AO herself has admitted on verification of the relevant bank accounts that the source of the entire payments made to M/s Shraddha Saburi Merchants Ltd and M/s. Sai Kripa Metallic Tradecom Ltd by the appellant 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. Shraddha Saburi Merchants Ltd. and M/s. Sai....
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....cumstances the appellant has merely issued accommodation sales bills 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, where the AO disallowed the entire expenditure on account of purchases made from certain parties trating the same as bogus, has held that "it is an elementary rule of accountancy as well as of taxation laws that profit from business cannot ascertained without deducting cost of purchase from sales/ otherwise It could amount to levy of income tax on gross receipts or on sales. Such recourse is not permissible unless it is specifically authorized to do so under any particular provisions contained 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 a....
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....2,69,759/- works out to Rs. 19,13,488/-for the relevant assessment year. Since, the appellant has shown net difference between the sale and purchase of Rs. 85,948.70 in its trading account pertaining to the bogus purchases as well as genuine . trading carried out, therefore, the proportionate profit or commission pertaining to bogus transaction is worked out at Rs. 65,059/-(i.e. 0.17% of Rs. 3,82,69,759/-) which is already assessed to tax, therefore, considering to the same, the balance amount of Rs. 18,48,429/- (i.e. Rs. 19,13,488/- (-) Rs. 65,059/-) of addition made on this account is sustained and the remaining addition made is directed to be deleted. This ground raised by the appellant is therefore partly allowed." 5.6.4 Before us, both revenue and the assessee have merely reiterated their respective claims (i) of revenue that the entire purchase to M/s. Shraddha Saburi Merchants Ltd. and M/s. Sai Kripa Metallic Tradecom Ltd. amounting to Rs. 3,82,69,759/- be brought to tax as the assessee's income and; (ii) of the assessee that the commission income be assessed at 0.17% as purchases as declared by it. We find that apart from putting forth these averments, both parties have fa....