ARIHANT ENTERPRISES, MUMBAI V. ACIT 25(3), MUMBAI

CO 272/MUM/2014

• Counselvise Citation: [2018] 123 COUNSELVISE.COM (IT) 3996 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 6 month(s) 13 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 11-07-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Next Hearing Date: 23-02-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 29-12-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: RAJESH KUMAR YADAVLD
• Assessee Lawyers: HITESH P SHAH LD
• Keywords: Bogus purchase; Opportunity of cross examination
• Section: 143(3); 133(6)

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI . , , BEFORE SHRI C.N. PRASAD, JM AND SHRI MANOJ KUMAR AGGARWAL, AM ./I.T.A. NO.5899/MUM/2013 ( / ASSESSMENT YEAR: 2010-11) ASSISTANT COMMISSIONER OF INCOME TAX-25(3 ) ROOM NO. 308, C-11 BANDRA KURLA COMPLEX, BANDRA(E) MUMBAI 400 051 / VS. ARIHANT ENTERPRISES C-6, HASMUKH CHS LTD. NEAR MANDAPESHWAR INDUSTRIAL ESTATE MCF, UDAY MARG, BORIVALI(W) MUMBAI 400 092 ./ ./ PAN/GIR NO.AAHFA-0915-F ( !' /APPELLANT ) : ( #!' / RESPONDENT ) & CO. NO.272/MUM/2014 ( / ASSESSMENT YEAR: 2010-11) ARIHANT ENTERPRISES C-6, HASMUKH CHS LTD. NEAR MANDAPESHWAR INDUSTRIAL ESTATE MCF, UDAY MARG, BORIVALI(W) MUMBAI 400 092 / VS. ASSISTANT COMMISSIONER OF INCOME TAX-25(3 ) ROOM NO. 308, C-11 BANDRA KURLA COMPLEX, BANDRA(E) MUMBAI 400 051 ./ ./ PAN/GIR NO.AAHFA-0915-F ( !' /APPELLANT ) : ( #!' / RESPONDENT ) REVENUEBY : RAJESH KUMAR YADAV, LD. DR ASSESSEE BY : HITESH P.SHAH, LD. AR / DATE OF HEARING : 04/07/2018 / DATE OF PRONOUNCEMENT : 11/07/2018 2 / O R D E R PER BENCH 1. THESE ARE CROSS APPEALS FOR ASSESSMENT YEAR [AY] 2010-11 WHICH CONTEST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-35 [CIT(A)], MUMBAI, APPEAL NO.CIT(A)- 35 / JT.CIT.25(3) / ITA.167/12-13 DATED 29/07/2013. THE ASSESSMENT FOR IMPUGNED AY WA S FRAMED BY LD. JOINT COMMISSIONER OF INCOME TAX, RANGE 25(3), MU MBAI [AO] U/S 143(3) OF THE INCOME TAX ACT, 1961 ON 28/12/2012 WHEREIN THE INCOME OF THE ASSESSEE WAS DETERMINED AT RS.313.77 LACS AF TER CERTAIN ADDITION AS AGAINST RETURNED INCOME OF RS.278.22 LACS FILED BY THE ASSESSEE ON 25/09/2010. THE ASSESSEE IS A RESIDENT FIRM AND WAS ENGAGED AS BUILDERS & DEVELOPERS IN THE IMPUGNED AY. 2. DURING ASSESSMENT PROCEEDINGS, UPON RECEIPT OF C ERTAIN INFORMATION FROM SALES TAX DEPARTMENT, MAHARASHTRA REGARDING SUSPICIOUS DEALERS INDULGING IN BOGUS PURCHASE BILLS WITHOUT DELIVERIN G ANY MATERIAL, IT WAS NOTED THAT THE ASSESSEE MADE AGGREGATE PURCHASE OF RS.35,54,956/- FROM FOUR SUCH DEALERS, THE DETAILS OF WHICH HAVE BEEN E XTRACTED IN PARA-3.1 OF THE QUANTUM ASSESSMENT ORDER. THE COPIES OF THE MAT ERIAL AVAILABLE WITH THE DEPARTMENT, IN THIS REGARD, WERE CONFRONTED TO THE ASSESSEE. FURTHER, NOTICES U/S 133(6) SENT TO ALL SUCH SUPPLIERS TO CO NFIRM THE TRANSACTIONS ELICITED NO SATISFACTORY RESPONSE. THE ASSESSEE DEF ENDED THE PURCHASES AND SUBMITTED THAT THE IMPUGNED PURCHASES WERE MADE THROUGH BROKERS AND PAYMENT OF THE MATERIAL WAS THROUGH BANKING CHA NNELS AND THEREFORE, THE PURCHASES WERE GENUINE. HOWEVER, NOT CONVINCED WITH ASSESSEES 3 SUBMISSIONS, LD. AO NOTED THAT THE ASSESSEE FAILED TO SUBSTANTIATE THE DELIVERY OF MATERIAL AND THEREFORE, ADDED THE SAME TO THE INCOME OF THE ASSESSEE. 3. AGGRIEVED, THE ASSESSEE CONTESTED THE SAME WITH SUCCESS BEFORE LD. CIT(A) VIDE IMPUGNED ORDER DATED 29/07/2013, WHEREI N THE ASSESSEE, INTER- ALIA, CONTENDED THAT THE MATERIAL WAS USED IN SPECIFIED C ONSTRUCTION AND THEREFORE, THE ADDITIONS WERE NOT JUSTIFIED. FINALL Y, THE MATTER WAS CONCLUDED IN ASSESSEES FAVOR BY MAKING FOLLOWING OBSERVATION S:- DECISION: 5A. I HAVE CONSIDERED THE STAND OF THE A.O. AS WELL AS THE SUBMISSIONS OF THE APPELLANT. IT IS A FACT THAT THE PURCHASES HAVE BEEN MADE THRO UGH ACCOUNT PAYEE CHEQUES WHICH ARE DULY REFLECTED IN THE BANK STATEMENT OF THE APP ELLANT. THE MATERIALS PROCURED HAVE BEEN UTILIZED IN THE CONSTRUCTION OF THE PROJECT AT KNOX PLAZA AND THE SAME IS DULY CERTIFIED BY THE LICENSED SURVEYOR. THE LABOUR CHAR GES PAID FOR ESTABLISHING THE FACT THAT ACTUAL WORK HAS BEEN DONE HAVE ALSO BEEN PRODUCED B Y THE APPELLANT. THE A.O. HAS AT NO STAGE COUNTERED THE EVIDENCES PRODUCED BY THE AP PELLANT. THE A.O. HAS ALSO NOT CONDUCTED ANY INDEPENDENT ENQUIRIES TO ESTABLISH HI S CONTENTION THAT THE SAID PURCHASES MAY BE TREATED AS BOGUS. ONLY THE FACT TH AT DELIVERY CHALLANS HAVE NOT BEEN PRODUCED OR STATEMENT OF THE SELLER THAT NO SALE HA S BEEN MADE IS NOT SUFFICIENT TO PROVE THAT THE PURCHASES AT THE END OF THE APPELLANT WERE BOGUS. THE SAME POSITION IS SUPPORTED BY A NUMBER OF JUDGMENTS. THE MOST SIGNIF ICANT JUDGMENT IN THIS REGARD IS HILUX AUTOMOTIVE PVT.LTD. VS. ITO (2007) 163 TAXMAN 90 (DELHI) WHEREIN IT HAS BEEN HELD THAT WHERE THE ASSESSEE ESTABLISHED ITS CLAIM BY FURNISHING RELEVANT BILLS, BANK STATEMENTS AND CONSIDERING THE FACT THAT WITHOUT PU RCHASE OF RAW MATERIAL AND JOB WORK CHARGES INCURRED, MANUFACTURE COULD NOT HAVE BEEN P OSSIBLE, ADDITION WAS NOT JUSTIFIED AND WAS REQUIRED TO BE DELETED. THE CASE OF THE APP ELLANT IS ALSO SUPPORTED BY THE JUDGMENT IN THE CASE OF JAGDAMBA TRADING CO. VS. IT O (2007) 107 TTJ 398 (JODHPUR) WHEREIN IT WAS HELD THAT SINCE THERE IS NO EVIDENCE OF THE ASSESSEE RECEIVING ANY MONEY BACK, THE PURCHASE IN QUESTION COULD NOT BE H ELD TO BE BOGUS. IN THE CASE OF ITO VS. PARMANAND (2008) 25 SOT 11 (JODHPUR) IT HAS BEE N VERY CATEGORICALLY HELD THAT WHERE THE AO HAS MADE ADDITION MERELY ON THE BASIS OF OBSERVATIONS MADE BY THE SALES TAX DEPT AND HAS NOT CONDUCTED ANY INDEPENDEN T ENQUIRIES FOR MAKING THE ADDITION BY THE SALES TAX DEPT AND HAS NOT CONDUCTE D ANY INDEPENDENT ENQUIRIES FOR MAKING THE ADDITION ESPECIALLY IN A CASE WHERE THE ASSESSEE HAS DISCHARGED ITS PRIMARY ONUS OF SHOWING BOOKS OF ACCOUNT, PAYMENT BY WAY OF ACCOUNT PAYEE CHEQUE AND PRODUCING VOUCHERS OF SALE OF GOODS, SUCH AN ADDITI ON COULD NOT BE SUSTAINED. THE SAME POSITION HAS BEEN TAKEN IN THE CASE OF G.G.DIA MOND INTERNATIONAL VS. DCIT (2006) 104 TTJ 809 (MUMBAI). I ALSO FIND MERIT IN T HE CONTENTION OF THE APPELLANT THAT NO OPPORTUNITY FOR CROSS EXAMINATION OF THE SAID FOUR SELLERS HAS BEEN PROVIDED TO THE 4 APPELLANT DESPITE SPECIFICALLY ASKING FOR THE SAME. THE APPELLANT IS VALID IN RAISING THE ISSUE THAT IN A SCENARIO WHERE NO CROSS EXAMINATION HAS BEEN ALLOWED, THE AFFIDAVITS COULD VERY WELL BE ONLY SELF-SERVING DOCUMENTS. IN THIS REGARD THE JUDGMENT OF THE HONBLE APEX COURT IN THE CASE OF STANDARD CHARTERE D BANK VS. ANDHRA BANK FINANCIAL SERVICES LTD. (2006) 6 SCC 94 (SC) COMES TO THE SUP PORT OF THE APPELLANTS ARGUMENT. SAME DECISION HAS BEEN HELD IN NUMBER OF OTHER JUDG MENTS OF THE HONBLE SUPREME COURT AS WELL AS HIGH COURTS. IN THE RESULT, THE ADDITION OF RS.35, 54,956/- IS H EREBY DELETED . AGGRIEVED, THE REVENUE IS IN FURTHER APPEAL BEFORE US. THE ASSESSEES CROSS-OBJECTIONS CONTEST THE ASSESSMENT PROCEEDINGS ON LEGAL GROUNDS. HOWEVER, THE SAME HAS NOT BEEN PRESSED BEFORE US BY LD. AUTHORIZED REPRESENTATIVE FOR ASSESSEE [AR], SHRI. HITESH P. SHAH AND THEREFORE, DISMISSED IN LIMINE. 4. THE LD. DEPARTMENTAL REPRESENTATIVE [DR], SHRI RAJESH KUMAR YADAV, SUBMITTED THAT THE ASSESSEE MISERABLY FAILED TO SUB STANTIATE THE PURCHASES MADE DURING IMPUGNED AY AND THEREFORE, TH E STAND OF LD. CIT(A) WAS NOT JUSTIFIED. THE SAME HAS BEEN CONTROV ERTED BY LD. AR BY SUBMITTING THAT NO OPPORTUNITY OF CROSS EXAMINATION WAS PROVIDED TO THE ASSESSEE AND THEREFORE, THE STAND OF LD. CIT(A) WAS REASONABLE UNDER THE CIRCUMSTANCES. 5. WE HAVE CAREFULLY HEARD THE RIVAL CONTENTIONS AN D PERUSED RELEVANT MATERIAL ON RECORD. UPON DUE CONSIDERATION OF FACTU AL MATRIX, WE FIND THAT THE ASSESSEE, DURING IMPUGNED AY, WAS ENGAGED IN CO NSTRUCTION ACTIVITIES, WHICH COULD NOT BE CARRIED OUT WITHOUT ACTUAL CONSUMPTION / PURCHASE OF MATERIAL. THE SALES TURNOVER ACHIEVED B Y THE ASSESSEE HAS NOT BEEN DISPUTED BY THE REVENUE AND THE PAYMENTS W ERE THROUGH BANKING CHANNELS. THE ASSESSEE WAS IN POSSESSION OF PRIMARY PURCHASES DOCUMENTS. AT THE SAME TIME, THE ASSESSEE COULD NOT 5 CONCLUSIVELY SUBSTANTIATE THE PURCHASES MADE BY HIM AND FAILED TO PRODUCE ANY OF THE PARTY TO CONFIRM THE TRANSACTION S. NOTICES ISSUED U/S 133(6) ELICITED NO SATISFACTORY RESPONSE. IT IS ALS O NOTED THAT THE ASSESSEE WAS CONFRONTED WITH THE ADVERSE MATERIAL D URING ASSESSMENT PROCEEDINGS. THE DELIVERY OF MATERIAL COULD NOT BE SUBSTANTIATED BY THE ASSESSEE. ALL THESE FACTORS, IN OUR OPINION, CAST A SERIOUS DOUBT ON ASSESSEES CLAIM. THE LD. CIT(A) ERRED IN GIVING FU LL RELIEF TO THE ASSESSEE BY OBSERVING THAT THE CROSS EXAMINATION WA S NOT PROVIDED TO THE ASSESSEE WHEREAS THE ASSESSEE COULD NOT DISCHAR GE THE PRIMARY ONUS OF PROVING THE TRANSACTIONS BEYOND DOUBT. THE ADVERSE MATERIAL, AS AVAILABLE ON RECORD WAS DULY CONFRONTED TO THE ASSE SSEE WHEREAS THE ASSESSEE COULD NOT SUBSTANTIATE DELIVERY OF MATERIA L AND ALSO COULD NOT PRODUCE ANY OF THE FOUR PARTIES TO CONFIRM THE TRAN SACTIONS. 6. IN THE GIVEN FACTUAL MATRIX, THE ADDITION, IN OU R OPINION, WHICH COULD BE MADE, WAS TO ACCOUNT FOR PROFIT ELEMENT EMBEDDED IN THESE PURCHASE TRANSACTIONS TO FACTORIZE FOR PROFIT EARNED BY ASSE SSEE AGAINST POSSIBLE PURCHASE OF MATERIAL IN THE GREY MARKET AND UNDUE BENEFIT OF VAT AGAINST SUCH BOGUS PURCHASES. WE ESTIMATE THE SAME @12.5% OF ALLEGED BOGUS PURCHASES OF RS.35,54,956/- WHICH COMES TO RS.4,44,370/-. THE ADDITION TO THAT EXTENT STAND CO NFIRMED BY US. THE REVENUES APPEAL STAND PARTLY ALLOWED. 7. RESULTANTLY, THE REVENUES APPEAL STAND PARTLY A LLOWED WHEREAS THE ASSESSEES CROSS OBJECTION STAND DISMISSED IN LIMINE IN TERMS OF OUR ABOVE ORDER . 6 ORDER PRONOUNCED IN THE OPEN COU RT ON 11 TH JULY,2018 SD/- SD/- (C.N.PRASAD) (MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 11.07.2018 SR.PS:-THIRUMALESH / COPY OF THE ORDER FORWARDED TO : 1. 456 / THE APPELLANT 2. :;6 / THE RESPONDENT 3. ?@ ) 45 ( / THE CIT(A) 4. ?@ / CIT CONCERNED 5. IJKL:M@MNO , 45Q4NOR , / DR, ITAT, MUMBAI 6. LTUV / GUARD FILE / BY ORDER, / (DY./ASSTT.REGISTRAR) ./01 , / ITAT, MUMBAI