S. LAL ENTERPRISES, MUMBAI V. ITO 14(2)(3), MUMBAI

CO 65/MUM/2015

• Counselvise Citation: [2017] 112 COUNSELVISE.COM (IT) 4538 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 4 month(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 18-08-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2004-2005
• Appeal Filed On: 17-04-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: DR A K NAYAK
• Assessee Lawyers: SNEHAL J SHAH
• Keywords: Bogus purchase; Unexplained investment; Period of limitation; Tax effect; Condonation of delay
• Section: 143(3); 133A; 143(1); 147; 69; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUM BAI BEFORE SHRI G. S. PANNU, AM AND SHRI PAWAN SINGH, J M CROSS OBJECTION NO. 65/MUM/2015 (ARISING OUT OF ITA NO.7408/M/2013) ( / ASSESSMENT YEAR: 2004-05) ITO 14(2)-3, ROOM NO. 306, EARNEST HOUSE, NARIMAN POINT, MUMBAI-400 021 / VS. M/S. S LAL ENTERPRISES 286, KALBADEVI ROAD, MUMBAI-400 002 ./ ./PAN/GIR NO. ( /APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI SNEHAL J. SHAH / RESPONDENT BY : DR. A. K. NAYAK / DATE OF HEARING : 21.06.2017 / DATE OF PRONOUNCEMENT : 18.08.2017 / O R D E R PER PAWAN SINGH, JM: 1. THIS CROSS OBJECTION(CO) WAS FILED BY THE ASSESSEE IN ITA NO. 7408/M 2013, APPEAL FILED BY REVENUE. THE APPEAL OF THE REVENUE HAS ALR EADY BEEN DISPOSED OF BY THIS BENCH VIDE ORDER DATED 1 ST JUNE 2016 AS THE TAX EFFECT IN THE SAID APPEAL WA S BELOW THE MONETARY LIMIT OF RS. 10 LACKS AS PRESCRIBED BY CB DT IN CIRCULAR NO. 21 /2015 DATED 10 DECEMBER 2015. 2 ITA NO. /MUM/ 2. WE HAVE NOTED THAT THE CO IS FILED AFTER 59 DAYS O F PRESCRIBED PERIOD OF LIMITATION. IN SUPPORT OF APPLICATION FOR CONDONATION OF DELAY THE ASSESSEE HAS FILED AFFIDAVIT OF SMT. CHANDA S. TALREJA, PROPRIETOR THE ASSESSEE FIRM. IN THE AFFIDAVIT THE ASSESSEE HAS CONTENDED THAT SHE HANDED OVER THE DOCUMENTS/ APPEA L MEMO OF REVENUES APPEAL TO SHRI D.M. NEGANDHI CA FOR FILING CROSS OBJECTION IN THE APPEAL OF REVENUE. HOWEVER, BEFORE THE CROSS OBJECTION COULD BE FILED SH NEGAND HI CA DIED. THE ASSESSEE HAS FILED THE COPY OF THE DEATH CERTIFICATE OF SH NE GANDHI CA WITH THE AFFIDAVIT. THE LEARNED DR FOR THE REVENUE NOT OBJECTED THE APPLICA TION FOR CONDONATION OF DELAY. CONSIDERING THE CONTENTION OF ASSESSEE AND THE CIRC UMSTANCES EXPLAINED IN THE AFFIDAVIT FILED ON BEHALF OF ASSESSEE, THE DELAY IN FILING FOR CROSS OBJECTIONS IS CONDONED. 3. IN CROSS OBJECTIONS THE ASSESSEE HAS RAISED FOLLOWI NG GROUNDS OF APPEAL: (I) THE ITO ERRED IN REOPENING ASSESSMENT UNDER SECTION 147 WITHOUT ANY BASIS OR REASONS TO BELIEVE THAT INCOME HAD ESC APE ASSESSMENT AND / OR THE ASSESSMENT WAS REOPENED WITHOUT JURISD ICTION, THUS THE ORDER PASSED BY THE ASSESSING OFFICER IS VOID AB IN ITIO, ILLEGAL AND BAD IN LAW. (II) THE LEARNED CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS.2,05,379 /-UNDER SECTION 69 OF THE ACT. 4. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED RETURN OF INCOME FOR THE RELEVANT ASSESSMENT YEAR ON 1 ST NOV, 2004 DECLARING TOTAL INCOME OF RS.3,61,908/-. THE RETURN WAS PROCESSED UNDER SECTION 143(1) OF THE ACT. SUBS EQUENTLY, THE RETURN OF INCOME WAS REOPENED U/S. 147. NOTICE U/S. 148 DATED 28.03 .2011 WAS ISSUED AND SERVED UPON THE ASSESSEE. THE ASSESSMENT WAS REOPENED THAT A SU RVEY ACTION U/S. 133A OF THE ACT 3 ITA NO. /MUM/ WAS CONDUCTED BY ITO-14(3)(2), MUMBAI ON 13.02.2009 ON THE PREMISES OF SHRI RAKESH KUMAR M. GUPTA, SMT. HEMA R. GUPTA AND SHRI MOHIT R. GUPTA, WHO ARE ENGAGED IN THE ACTIVITY OF ISSUING ACCOMMODATION BI LLS FROM THE PREMISES OF SHOP NO. 4, RAM GALLY, PANKAJ MARKET, CHAMPA X-LANE, KALBADE VI, MUMBAI-400 002. THE ASSESSEE FILED ITS REPLY IN RESPONSE TO NOTICE U/S. 148 VIDE REPLY DATED 01.12.2011 AND 09.12.2011. THE ASSESSEE OBJECTED ABOUT THE REOPENI NG OF THE ASSESSMENT. THE OBJECTION OF THE ASSESSEE WAS NOT ACCEPTED BY THE A .O. THE A.O. PROCEEDED TO THE ASSESSMENT PROCEEDING. THE ASSESSMENT COMPLETED U/S . 143(3) R/W S. 147 ON 16.12.2011. THE A.O. WHILE PASSING THE ASSESSMENT O RDER MADE THE ADDITION ON ACCOUNT OF BOGUS PURCHASES OF RS.20,53,789/-. 5. ON APPEAL BEFORE THE LD. CIT(A), THE ADDITION/DISAL LOWANCE WAS RESTRICTED TO 10% OF THE IMPUGNED BOGUS PURCHASES. AGGRIEVED BY THE ORDE R OF THE LD. CIT(A), THE REVENUE FILED AN APPEAL BEFORE THE TRIBUNAL WHICH WAS DISPO SED OF VIDE ORDER DATED 01.06.2016. THE ASSESSEE FILED THE PRESENT OBJECTION. 6. WE HAVE HEARD THE LD. AR OF THE ASSESSEE AND THE LD . DR FOR THE REVENUE. THE FIRST GROUND OF CROSS OBJECTION RELATES TO REOPENING OF A SSESSMENT PROCEEDING AS INVALID. THE LD. AR OF THE ASSESSEE ARGUED THAT THE A.O. REO PENED THE ASSESSMENT WITHOUT ANY VALID REASON. THE A.O. HAS NO SUFFICIENT MATERIAL B EFORE HIM FOR MAKING THE REOPENING OF THE CONCLUDED ASSESSMENT. ON THE OTHER HAND, THE LD. DR FOR THE REVENUE SUPPORTS THE ORDER OF THE A.O. 4 ITA NO. /MUM/ 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF THE PA RTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE A.O. REOPENED THE ASSESSME NT ON THE BASIS OF REPORT OF ITO- 14(3)(2) WHO CONDUCTED SURVEY AT THE PREMISES OF SH RI RAKESH KUMAR M. GUPTA, SMT. HEMA R. GUPTA AND SHRI MOHIT R. GUPTA, WHO ARE RUNN ING THEIR PROPRIETARY CONCERN IN THE NAME OF M/S. MANOJ MILLS, M/S. SHREE RAM SAL ES & SYNTHETICS AND M/S. ASTHA SILK INDUSTRIES, RESPECTIVELY. ALL THREE PERSONS WE RE RELATIVE AND WERE RUNNING THEIR CONCERN FROM SHOP NO. 4, RAM GALLY, PANKAJ MARKET, CHAMPA X-LANE, KALBADEVI, MUMBAI-400 002. IN THE SURVEY, IT WAS FURTHER REVEA LED THAT ALL THE THREE PERSONS WERE INVOLVED IN ISSUING ACCOMMODATION BILL TO VARIOUS P ARTIES IN MUMBAI AS WELL AS OUTSIDE MUMBAI WITHOUT ANY TRADE ACTIVITIES. IN OUR CONSIDERED VIEW, THIS INFORMATION WAS SUFFICIENT FOR A.O. TO MAKE BELIEF THAT THE IN COME CHARGEABLE TO TAX HAS ESCAPE ASSESSMENT. THUS, WE DO NOT FIND ANY MERIT IN THE G ROUND OF OBJECTION RAISED BY THE ASSESSEE. 8. THE SECOND GROUND OF THE C.O. RELATES TO THE CONFI RMATION OF ADDITION OF RS.2,05,379/- U/S. 69 OF THE ACT. THE LD. AR OF THE ASSESSEE ARGUED THAT THE ASSESSEE HAS FILED SUFFICIENT EVIDENCE BEFORE THE A.O. TO PR OVE THE GENUINENESS OF THE PURCHASES. IT WAS FURTHER ARGUED THAT THE PURCHASES FROM THE SAID BOGUS PARTIES ARE ON 3.96% OF THE TOTAL PURCHASES. THE ASSESSEE HAS SOLD THE GOODS, PURCHASED FROM THESE PARTIES AND THE SALES ARE PROPERLY RECORDED IN THE BOOKS OF ACCOUNT. MONTH-WISE DETAILS OF PURCHASE AND SALES (QUANTITY AND VALUE) ARE ALSO RECORDED IN THE CLOSING STOCK BOOK. THE ASSESSEE HAS CONTENDED BEFORE THE A.O. THAT THE RE WAS NO PROOF THAT THE ASSESSEE 5 ITA NO. /MUM/ RECEIVED THE CASH FROM THE BOGUS PARTIES. THE A.O. HAS MADE THE ADDITION ONLY ON THE BASIS OF SUSPICION AND WITHOUT ANY MAKING INDEPENDE NT ENQUIRY. ON THE OTHER HAND, THE LD. DR FOR THE REVENUE SUPPORTS THE ORDER OF TH E AUTHORITIES BELOW. IT WAS ARGUED THAT THE LD. CIT(A) HAS ALREADY BEEN SUBSTANTIATED TO THE ASSESSEE BY SUSTAINING THE IMPUGNED PURCHASE @ 10% WHICH IS QUITE REASONABLE T O COVER THE DIFFERENCE OF GP. 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF THE LD. AR OF THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THE A.O. MADE THE ADDITION ON T HE BASIS OF INFORMATION RECEIVED FROM ITO-14(3)(2) THAT IN THE SURVEY ON 13.03.2009 IT WAS REVEALED THAT M/S. MANOJ MILLS, M/S. SHREE RAM SALES & SYNTHETICS AND M/S. A STHA SILK INDUSTRIES ARE INDULGED IN PROVIDING THE ACCOMMODATION ENTRY. M/S. MANOJ MI LLS, M/S. SHREE RAM SALES & SYNTHETICS AND M/S. ASTHA SILK INDUSTRIES GROUP ARE INDULGING IN PROVIDING ACCOMMODATION ENTRY WITHOUT DELIVERY OF GOODS. THE A.O. DURING THE ASSESSMENT PROCEEDINGS ASKED THE ASSESSEE TO SUBSTANTIATE THE PURCHASES. THE AR OF ASSESSEE INSTEAD OF FILING ANY DOCUMENTS TO SUBSTANTIATE ITS CLAIM CONTENDED THAT THERE IS PROBLEM IN LOCATING THE DOCUMENTS. IT WAS FURTHER C ONTENDED THAT THE ASSESSEE PURCHASES FROM THE SAID BOGUS PARTIES ARE ON 3.96% OF THE TOTAL PURCHASES. THE CONTENTION OF THE ASSESSEE WAS NOT ACCEPTED BY AO C ONCLUDED THAT THE ASSESSEE OBTAINED THE BOGUS BILLS TO INFLATE ITS PURCHASES. THE AO FURTHER CONCLUDED THAT THE ASSESSEE FAILED TO PRODUCE THE PURCHASE ORDER, DELI VERY CHALLAN AND TRANSPORTATION DETAILS AND DISALLOWED THE ENTIRE PURCHASES FROM TH ESES THREE PARTIES AS UNEXPLAINED INVESTMENT AS PER SECTION 69 OF THE ACT. THE LD. CI T(A) ON THE BASIS OF LAST TWO 6 ITA NO. /MUM/ ASSESSMENT YEAR AND CONSIDERING THE FACT THAT THE P URCHASES FROM THESE THREE PARTIES ARE 3.9% OF TOTAL PURCHASES OF THE ASSESSEE. THE LD . CIT(A) FURTHER OBSERVED THAT THE A.O. HAS NOT DENIED THE POSSIBILITY WHO INFLATE THE PURCHASE/ACCOMMODATE THE PURCHASES MADE OUT OF THE BOOKS. ON THE ABOVE OBSER VATION, THE LD. CIT(A) IN ORDER TO FILL UP THE REVENUE LEAKAGE RESTRICTED THE ADDITIO NS @ 10% OF THE DISPUTED PURCHASE AND GRANTED RELIEF TO THE ASSESSEE. WE ARE ALSO OF THE CONSIDERED VIEW THAT EVEN IF THE TRANSACTION IS NOT VERIFIABLE DUE TO ANY REASON, TH E ONLY TAXABLE IS THE TAXABLE INCOME AND NOT THE ENTIRE TRANSACTION. THE REVENUE IS NOT ENTITLED TO BRING THE ENTIRE CONSIDERATION OF PURCHASES BUT ALL THE PROFIT ATTRI BUTABLE ON SUCH UNRECORDED OR UNPROVED EXPENSES CAN BE SUBJECT MATTER TO INCOME T AX. THE HONBLE BOMBAY HIGH COURT IN CASE OF CIT VS. HARIRAM BHAMBHANI IN ITA 313 OF 2013 DATED 04.02.2015 HELD THAT THE REVENUE IS NOT ENTITLED TO BRING THE ENTIRE SALE CONSIDERATION TO TAX BUT ONLY PROFIT ATTRIBUTABLE TO SUCH UNRECORDED SALE CO NSIDERATION ARE SUBJECT TO INCOME TAX. THUS, CONSIDERING THE FACTS OF THE PRESENT CAS E, WE DO NOT FIND ANY INFIRMITY IN THE ORDER PASSED BY THE LD. CIT(A), HENCE THE CROSS OBJ ECTION FILED BY THE ASSESSEE IS DISMISSED. 10. IN THE RESULT, THE ASSESSEES CROSS OBJECTION IS D ISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON AUGUST 18, 20 17 SD/- SD/- (G. S. PANNU) (PAWAN SINGH) / ACCOUNTANT MEMBER #$ / JUDICIAL MEMBER MUMBAI; ' DATED :18/08/2017 7 ITA NO. /MUM/ . $ . ./ROSHANI , SR. PS !'# $#! / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ( ) / THE CIT(A) 4. ( / CIT - CONCERNED 5. )*+ $$,- , ,- , / DR, ITAT, MUMBAI 6. +./ / GUARD FILE / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI