AVINASH S SADAMATE ACIT CIRCLE 3 3 1, MUMBAI V. VIJAY SECURITY SYSTEMS PRIVATE LIMITED, MUMBAI

ITA 1208/MUM/2025

AI Insights

The case involves an appeal by the revenue against the order of the Ld. CIT(A) which quashed the assessment made under section 144 of the Income Tax Act. The assessee, Vijay Security Systems Private Limited, was accused of making bogus purchases from entities identified as accommodation entry providers by the Sales Tax Department. The AO initially completed the assessment ex-parte under section 144 due to non-submission of details by the assessee. However, upon appeal, the Ld. CIT(A) found that the assessee had indeed submitted detailed evidence which was overlooked by the AO. The tribunal upheld the Ld. CIT(A)'s decision, emphasizing that the assessee had complied with all procedural requirements and substantiated the genuineness of the transactions.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 314085 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-05-2025
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Other Referred Cases: PCIT V. Kanak Impex (India) Ltd., PCIT V. Vaman International Pvt. Ltd.
• Laws Referred To: Income Tax Act
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: PRADNYA GHOLAP
• Assessee Lawyers: SANDEEP CHATURVEDI
• Keywords: Additional evidence; Bogus purchase; Reason to believe; Bogus
• Section: 148; 144; 133(6); 69C

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL, ‘SMC’ BENCH MUMBAI BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER ITA No. 1208/MUM/2025(AY: 2009–10) (Physical hearing) ACIT Circle-(3)(3)(1) Room No. 552, Aayakar Bhavan, M.K. Road, Churchgate, Mumbai-400020. Vs. Vijay Security Systems Private Limited, 35 Chandivali Village Off Saki Vihar Road, Andheri (East), Mumbai-400072. PAN: AAACV1363L (Appellant) .. (Respondent) Assessee by Shri. Sandeep Chaturvedi CA Revenue by Ms. Pradnya Gholap, Sr. DR Date of Hearing 17/04/2025 Date of Pronouncement 05/05/2025 Order under section 254(1) of Income Tax Act PER PAWAN SINGH, JUDICIAL MEMBER: 1. This appeal by revenue / Assessing Officer is directed against the order of Learned Commissioner of Income Tax (Ld. CIT(A)) dated 24.01.2025 for A.Y. 2009-10. The assessee has raised the following grounds of appeal: “ (1) \"Whether on the facts and in the circumstances of the case and in law, the Ld.CIT(A) has justified in treating the assessment completed Ex-parte u/s.144 of the Act disregarding the fact that desired details called for were not submitted before the AO i.e. ITO-11(3)(3) having jurisdiction over the case?\" (ii) \"Whether on the facts and in the circumstances of the case and in law, the Ld.CIT(A) has justified in not deciding the appeal on merit of the additions made by AO and in fact, not considering the fact that the information of obtaining accommodation bills towards alleged bogus purchases was received from the Sales Department?\" (iii) \"Whether on the facts and in the circumstances of the case and in law, the Ld.CIT(A) has rightly dismissed the appeal without considering the fact that the genuineness of the details submitted by the assessee during remand proceedings by the assessee officer could not be ascertained in the absence of parties involved and the same was not questioned as well by the Ld.CIT(A)?\" ITA no. 1208/MUM/2025 (AY 2009-10) ACIT Vs Vijay Security Services 2 (iv) \"The appellant craves leave to add, amend and/or vary grounds of appeal before or during the course of hearing.” 2. The brief facts of the case are that assessee is a company engaged in the business of Design, Engineering, Supply & installation of access control, CCTV and Fire alarm systems. The assessee filed its return of income for A.Y. 2009- 10 on 27.09.2009 declaring income of Rs. 7,02,577/-. Initially, the case of assessee was proceeded under section 143(3). Later on, the case was reopened on the basis of information that assessee has obtained accommodation entry aggregating of Rs. 9,00,025/- from entities engaged in providing accommodation bills as informed by Sale tax Department. As per information the assessee has shown purchase from Riya Enterprises and Divine Packaging, which were identified by Sales tax Department as entry provider. On the basis of such information, the Assessing Officer (AO) has a reason to believe that income of assessee has escaped assessment within meaning of 147. Notice under section 148 dated 14.03.2014 was served upon the assessee. In response to notice under section 148, the assessee filed reply dated 20.04.2014, stating that return of income filed on 27.09.2009 may be treated as return in response to notice under section 148. The AO after serving reasons recorded proceeded for reassessment. The AO in para 4 of the assessment order recorded that Chartered Accountant (CA) of assessee attended only once on 19.01.2015 and filed copy of audit report and bank account. No other detail was furnished. The AO proceeded under section 144. The AO in absence of any detail treated the purchases shown from Riya Enterprises and Divine Packaging of Rs. 4,00,025/- and 5,00,000/- ITA no. 1208/MUM/2025 (AY 2009-10) ACIT Vs Vijay Security Services 3 respectively as accommodation entry and added under section 69C in the assessment order dated 09.03.2015. Aggrieved by the additions in the assessment order, the assessee filed appeal before Ld. CIT(A). Before Ld. CIT(A) the assessee filed detailed written submissions. The submissions of assessee are recorded in para 4.2 of the impugned order. The assessee against the purchases from Divine Packaging submitted that they purchased pipes from said party which was utilized in providing Fire Fighting system to DLF Akruti Info Park, Pune. The goods were received by the assessee which was used/consumed. The payments were made through account pay cheque. The assessee furnished copy of purchase order, copy of invoice bill dated 01.07.2008 containing quantity of 8700 feet, copy of inward note dated 01.07.2008 about of receipt of goods, copy of delivery challan issued by Seller party, copy of receipt issued by ATR Cross Courier & Cargo services and copy of bank account with bank of Bahrain and Kuwait, BSC Mumbai, and ledger account in the books of assessee. Against the goods purchases from Riya Enterprises, the assessee stated that goods purchased from Riya enterprises were also purchased for providing Fire Fighting System. The assessee furnished purchased order, invoice dated 15.07.2008 for purchase of 320 pieces of pipe having total invoice value of including packaging and forwarding and taxes of Rs. 4,00,000/-. Copy of good inward note, delivery challan, lorry receipt of Surbhi Road Lines dated 15.07.2008 through which goods are supplied, copy of bank account with Bahrain and Kuwait, BSC Mumbai from were payments were made. The assessee further submitted that all the details were submitted to AO/ACIT 11(3)(2) vide letter dated ITA no. 1208/MUM/2025 (AY 2009-10) ACIT Vs Vijay Security Services 4 11.03.2015 with relevant documentary evidence in compliance with notice dated 10.03.2015. The AO completed assessment under section 144. The assessee again furnished such document as Additional Evidence. The submissions of assessee and all the documents were referred to the AO for his remand report. The AO furnished remand report with his letter dated 04.07.2018. Contents of remand report is recorded in para 4.2.4 of impugned order. In the remand report the AO mentioned that during remand proceeding the assessee produced copy of bills voucher, ledger account delivery challan, lorry receipt with detail of payment. The AO recorded those evidences furnished by the assessee has been verified and found to be correct. However, as per the information received and the website of sale tax department, the assessee obtained accommodation bill from Riya enterprises and Divine Packaging. Notice under section 133(6) were issued to both the parties which was returned back with the remark “left”. Current address was not provided by assessee. In response to remand report, the assessee filed his rejoinder. In the rejoinder/objection, the assessee stated that AO has found the evidence correct but relied on the information received from sale tax department. The assessee further stated that they have regularly assessed to income tax. Purchases were properly reflected in the books of account; payments were made through account pay cheques. The assessee maintains stock register, quantitative details and also furnished that they have declared gross profit of 53.93% and net profit at 2.76%. Such purchase cannot be treated as bogus and the addition under section 69C deserved to ITA no. 1208/MUM/2025 (AY 2009-10) ACIT Vs Vijay Security Services 5 be deleted. The assessee also relied upon various case laws as recorded in para 4.2.7 of impugned order. 3. The Ld. CIT(A) on considering the submission of assessee noted that AO had information that assessee obtained accommodation entry from Riya Enterprises and Divine Packaging. Assessment was reopened and notice under section 148 was issued on 14.03.2014. The case was transferred from DCIT, Circle 8(3)(2) to ITO Ward 11(3)(3) who has again issued notice of hearing. As per AO, the authorized representative (Ld. AR) of the assessee appeared only once, so AO has no option but to complete the assessment order under section 144. However, the case of assessee is that notices issued by DCIT, Circle 8(3) were duly complied and the assessee furnished all details and documents required in the notice under section 142 (1) with regard to purchase of goods from both the parties. The Ld. CIT(A) on considering the material available on record noted that assessee filed document before DCIT/AO with letter dated 20.04.2014. The assessee filed voluminous document. Thereafter, case was transferred to present AO/ITO. The Ld. CIT(A) observed that it is apparently seems that the details and document filed before DCIT either not forwarded to ITO/AO or if forward it, were overlooked by ITO/AO that is why it is mentioned that no details and documents were furnished and has not taken cognizance of these details and documents. However, without prejudice contention the Ld. CIT(A) recorded that though these documents were not examined by AO at the time of assessment, however these documents were remanded as per Rule 46A(i) for fresh examination. The AO filed his remand report. The contents of remand ITA no. 1208/MUM/2025 (AY 2009-10) ACIT Vs Vijay Security Services 6 report is reproduced in para 5.3 of impugned order. The ld. CIT(A) extracted the contents of remand report, wherein the AO accepted that the detail furnished by the assessee have been verified and found to be correct. The Ld. CIT(A) on considering such report recorded that in the remand report the document submitted by the assessee were accepted as genuine. Thus, the AO was not justified in completing the assessment ex-parte and to the bank statement under section 144 as the assessee is duly complied with hearing notice and submitted the required details asked for. It is not the assessee’s fault that such document was filed before one officer but assessment was completed by another officer without examining such document. Therefore, assessment order passed under section 144 is invalid and bad in law. Aggrieved by the order of Ld. CIT(A), the revenue has filed present appeal before Tribunal. 4. I have heard the submission of learned senior departmental representative (Ld. DR) for the revenue and the ld. AR for the assessee. The Ld. DR for the revenue submits that assessee is a beneficiary of bogus purchases shown from the entities whose name were published by Sales Tax Department. The Sales Tax Department carried out full-fledged investigation and declared that certain parties as merely a Havala party who were involved in providing bogus accommodation without actual delivery of goods. The assessee is one of the beneficiaries who has shown purchases from such hawala parties. The Ld. CIT(A) allow the appeal of the assessee without appreciating the fact that purchases shown from such party was bogus. The assessee failed to prove the genuiness of such purchases. The notices under section 133(6) was ITA no. 1208/MUM/2025 (AY 2009-10) ACIT Vs Vijay Security Services 7 issued during remand proceedings were returned back by the postal authority by the remark “left”. The assessee failed to produce the parties for verification. The Ld. DR prayed to restore the order of AO by setting aside order of Ld. CIT(A). In support of submission the ld. DR for the revenue relied upon the latest decision Hon’ble High Court in PCIT V. Kanak Impex (India) Ltd. in ITA No. 791 of 2021 dated 03.03.2025. 5. On the other hand, the Ld. AR of the assessee supported the order of Ld. CIT(A). The Ld. AR of the assessee submits that assessing officer (AO) passed assessment order under section 144 despite the fact that complete evidence in response to various show cause notice were filed before him. The AO simply concluded that no details were furnished. Though, the assessee furnished complete details before AO. The jurisdiction of AO was changed and the assessment was completed in ITO Ward 11(3)(3), Mumbai who has not considered the voluminous documents filed by the assessee. Before Ld. CIT(A), the assessee again filed all the documents to prove the genuiness of purchases. The assessee proved the genuiness of purchases beyond doubt. In the remand report, the AO accepted such fact wherein the AO clearly mentioned “the same has been verified and found to be correct”. Once the documents were verified and found to be correct, the AO has no right to file appeal against his own finding. The Ld. CIT(A) on appreciation of evidence held that AO has accepted the evidence still ex-parte assessment was completed. Thus, the ld. CIT(A) rightly quashed the assessment order. The Ld. AR of the assessee submit that ratio of decision in PCIT V. Kanak Impex (India) Ltd. is not applicable on the fact of this case. In PCIT V. Kanak Impex ITA no. 1208/MUM/2025 (AY 2009-10) ACIT Vs Vijay Security Services 8 (India) Ltd, the said assessee failed to prove the genuiness of purchases and source of purchases. However, assessee has proved the purchases, source of purchase and consumption of goods purchased from both the parties, which has been accepted by AO. In support of the submissions relied upon the decision of PCIT V. Vaman International Pvt. Ltd. 6. I have considered the rival submissions of both the parties and have gone through the orders of lower authorities carefully. I have also deliberately on case laws relied by both the parties. I have also perused the copy of remand report furnished by the AO to the ld CIT(A) during the first appellate stage. I find that the AO made addition of aggregate of purchases of Rs. 9,00,025/- shown by the assessee from both the parties that is Riya Enterprises and Divine Packaging filed by assessee. The AO made addition by disallowing the expenses of purchases from both the parties in assessment order passed under section 144, by taking view that the assessee failed to produce copy of bills with delivery challan and transportation details in support of purchase transaction. I find that before ld CIT(A), the assessee filed detailed written submissions and various evidences to substantiate the purchases from both the parties. The assessee also filed application for admission of additional evidence under Rule 46A of Income Tax Rules. The ld CIT(A) remanded all the evidence to the AO for his remand report. The AO furnished his remand report vide his report with his letter dated 04.07.2018. In the remand report the AO reported that during remand proceeding the assessee produced copy of bills voucher, ledger account delivery challan, lorry receipt with detail of payment. The AO in his remand report accepted that evidences furnished by ITA no. 1208/MUM/2025 (AY 2009-10) ACIT Vs Vijay Security Services 9 the assessee has been verified and found to be correct. The AO also reported that notice under section 133(6) was issued to both the parties which was returned back with the remark “left”. Current address was not provided by assessee. I find that in response to remand report of AO, the assessee filed his rejoinder and submitted evidences furnished by assessee are accepted by AO as correct but relied on the information received from sale tax department. The assessee further stated that they have regularly assessed to income tax. Purchases were properly reflected in the books of account; payments were made through account pay cheques. The goods were duly received and consumed / utilized in the manufacturing for providing Fire Fighting system to DLF Akruti Info Park. The assessee also provided source of expenses from Bank of Bahrain and Kuwait BSC Mumbai. No further adverse evidence was brought against such facts. 7. I further find that the ld CIT(A) while quashing the assessment order also held that AO had information that assessee obtained accommodation entry from Riya Enterprises and Divine Packaging. Assessment was reopened and notice under section 148 was issued on 14.03.2014. The case was transferred from DCIT, Circle 8(3)(2) to ITO Ward 11(3)(3) who has again issued notice of hearing. As per AO, the assessee appeared only once, so AO has no option but to complete the assessment order under section 144. But the assessee took his stand that notices issued by DCIT, Circle 8(3) were duly complied and the assessee furnished all details and documents required in the notice under section 142 (1) with regard to purchase of goods from both the parties. The Ld. CIT(A) on considering the material available on ITA no. 1208/MUM/2025 (AY 2009-10) ACIT Vs Vijay Security Services 10 record noted that assessee filed document before DCIT/AO with letter dated 20.04.2014. it was held that the assessee filed voluminous document. The case was transferred from DCIT to present AO/ITO. The Ld. CIT(A) held that the details and document filed before DCIT either not forwarded to ITO/AO or if forward it, were overlooked by ITO/AO that is why it is mentioned that no details and documents were furnished and has not taken cognizance of these details and documents. Thus, the AO was not justified in completing the assessment ex-parte and to the bank statement under section 144 as the assessee is duly complied with hearing notice and submitted the required details asked for. It was held it is not the assessee’s fault that such document was filed before one officer but assessment was completed by another officer without examining such document. Therefore, assessment order passed under section 144 is invalid and bad in law. 8. Before me, the ld Sr DR of the revenue failed to controvert the finding of ld CIT(A) as to how the same is not sustainable. Once, the AO has accepted all the evidence no space is left for sustain the addition on account of disallowance of purchases. No iota of adverse evidence is brought by AO against the evidence of purchases furnished by the assessee. I find that the assessee has not only proved the source of purchases, delivery of goods, consumption and end use of it. Thus, I do not find any reasons to interfere with the finding of ld CIT(A), which is upheld with my aforesaid additional observation. 9. So far as reliance by ld Sr DR for the revenue on the case law in PCIT Vs Kanak Impex (India) Ltd (supra) is concerned, I find that the facts of the said ITA no. 1208/MUM/2025 (AY 2009-10) ACIT Vs Vijay Security Services 11 case are at variance. In the said case, the assessee failed to prove the genuineness and sources of purchases. However, in the present case the assessee has proved the purchases as has been accepted by the AO in his remand report. Thus, the ratio of the decision of Hon’ble jurisdictional High Court is not applicable on the peculiar facts of the present case. In the result, the grounds of appeal raised by the revenue are dismissed. 10. In the result, the appeal of the revenue is dismissed. Order pronounced in open court on 05.05.2025. Sd/- (PAWAN SINGH) JUDICIAL MEMBER Mumbai; Dated 05/05/2025 Anandi Nambi, Steno Copy of the Order forwarded to: BY ORDER, (Asstt. Registrar) ITAT, Mumbai 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. "