AEROFLEX INDUSTRIES LTD, MUMBAI V. DCIT 5(1), MUMBAI

CO 87/MUM/2015

• Counselvise Citation: [2016] 123 COUNSELVISE.COM (IT) 2209 (ITAT-MUMBAI)
• Duration Of Justice: 8 month(s) 24 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 09-03-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2010-2011
• Appeal Filed On: 15-06-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bogus purchase; Capital asset; Depreciation; Accommodation entries

Judgement Text

, INCOME-TAX APPELLATE TRIBUNAL -ABENCH MUMBAI BEFORE S/SH.RAJENDRA,ACCOUNTANT MEMBER AND AMIT SHUKLA,JUDICIAL MEMBER . / I.T.A. NO.1261/MUM/2014 / ASSESSMENT YEAR: 2010-11 DY. CIT-5(1) ROOM NO.568, 5 TH FLOOR AAYAKAR BHAVAN, MK ROAD MUMBAI-400 020. VS. M/S. AEROFLEX INDUSTRIES LTD. 508 A, BYCULLA SERVICE INDS. CHS SUSSEX ROAD,BYCULLA EAST,MUMBAI-400 027. PAN:AACCA 6767 D ( /APPELLANT ) ( / RESPONDENT ) . / C.O. NO.87/MUM/2015 ARISING OUT OF ./ I.T.A. NO.1261/MUM/2014 / ASSESSMENT YEAR: 2010-11 M/S. AEROFLEX INDUSTRIES LTD. MUMBAI-400 027. VS. DY. CIT -5(1) MUMBAI-400 020. ( / CROSS OBJECTOR) ( / RESPONDENT) REVENUE BY: SHRI M. MURLI A SSESSEE BY: SHRI SHAILESH N. DOSHI / DATE OF HEARING:03.03.2016 / DATE OF PRONOUNCEMENT:09.03.2016 ,1961 254(1) ! ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) $'% &' PER RAJENDRA, AM - CHALLENGING THE ORDER DTD.03.12.2013 OF CIT(A)- 9 ,MUMBAI,THE ASSESSING OFFICER(AO) AND THE ASSESSEE HAVE FILED APPEAL/CROSS OBJECTION(CO). ASSESSEE-COMPANY ENGAGED IN THE BUSINESS OF MANUFAC TURING OF STAINLESS STEEL FLEXIBLE HOSE,FILED ITS RETURN OF INCOME ON 14.10.2014,DECLA RING LOSS OF RS.54,26,98,108/-.THE AO COMPLETED THE ASSESSMENT ON 31.01.2013,U/S.143(3)OF THE ACT,DETERMINING THE INCOME OF THE ASSESSEEAT RS.2.97 CRORES. ITA/1261/MUM/2014: 2. FIRST GROUND IS ABOUT RESTRICTING THE ADDITION ON A CCOUNT OF PURCHASE TO THE EXTENT OF RS. 21.49LAKHS.DURING THE ASSESSMENT PROCEEDINGS,THE AO FOUND THAT OFFICE OF THE DGIT (INV.), MUMBAI HAD SUPPLIED CERTAIN INFORMATION ABOUT THE A SSESSEE, THAT AS PER THE INFORMATION THE ASSESSEE HAD TAKEN HAWALA/ACCOMMODATION ENTRIES FOR PURCHASE TWO PARTIES AMOUNTING TO RS. 2.97CRORES,THAT THE TRANSACTION ENTERED INTO WITH L INUX SALES AGENCY PVT.LTD.(LSAPL) AND DONEAR TRADING PVT. LTD.(DTPL)WERE NOT GENUINE.THE AO DIRECTED THE ASSESSEE TO FILE COPY OF INVOICE,LEDGER ACCOUNT ALONG WITH AN EXPLANATION ABOUT THE PURCHASES MADE.THE ASSESSEE , VIDE ITS LETTER DATED 23.01.2013,SUBMITTED THAT IT WAS CARRYING ON MANUFACTURING ACTIVITIES WITH THE HELP OF THE MACHINERY PURCHASED FROM LSAPL AND DTPL,THAT THE PURCHASES MADE FROM THOSE PARTIES WERE GENUINE,THAT IT HAD CLAIMED DEPRECIATION OF RS.21.49 LAKHS FOR THE SAID MACHINERY. THE ASSESSEE SUBMITTED THE PHOTOGRA PHS OF THE MACHINERY AND REFERRED TO THE LETTER OF 16.01.2013. THE AO,AFTER CONSIDERING THE MATERIAL ON RECORD,HEL D THAT EXPLANATION FILED BY THE ASSESSEE WAS NOT ACCEPTABLE,THAT THE ASSESSEE HAD INFLATED T HE PURCHASES TO THE TUNE OF RS.2.97 CRORES, THAT THE DETAILS INVOLVING THE COPY OF THE STATEMEN TS OF HAWALA DEALERS ESTABLISHED THAT THE ASSESSEE WAS A BENEFICIARY OF HAWALA TRANSACTION.FI NALLY,HE MADE AN ADDITION OF RS.2,97,99, 1261/M/14-AEROFLEX INDUSTRIES LTD. 2 295/-TO THE TOTAL INCOME OF THE ASSESSEE U/S.69C OF THE ACT.WHILE FINALISING THE ASSESSMENT THE AO DID NOT ALLOW SETTING OFF OF BUSINESS LOSS FOR THE YEAR UNDER CONSIDERATION. 3. AGGRIEVED BY THE ORDER OF THE AO,THE ASSESSEE PREFE RRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY(FAA).BEFORE HIM ELABORATE SUBMI SSION WERE MADE THAT DEALT WITH THE LEGAL ASPECTS AND THE MERITS OF THE CASE.HE HELD TH AT EXPENDITURE INCURRED BY THE ASSESSEE PERTAINED TO CAPITAL ASSET, THAT IT HAD NOT CLAIMED THE EXPENDITURE IN THE P&L A/C,THAT IT HAD CLAIMED DEPRECIATION ON IT, THAT THE ASSESSEE WAS J USTIFIED IN ASSERTING THAT NO ADDITION COULD BE MADE U/S.69C OF THE ACT,THAT ADDITION UNDER THE SAID SECTION COULD BE MADE ONLY WHEN THERE WAS AN ACTUAL EXPENDITURE,THAT THE ASSESSEE H AD TAKEN ONLY PAPER ENTRIES IN RESPECT OF CAPITAL GOODS,THAT THE ASSESSEE HAD NOT REBUTTED FI NDING OF THE INVESTIGATION WING THAT IT WAS ONE OF THE BENEFICIARIES OF HAWALA TRANSACTIONS, TH AT DISALLOWANCE IN RESPECT OF BOGUS PURCHASES HAD TO BE RESTRICTED TO THE AMOUNT OF DEP RECIATION ONLY. 4. DURING THE COURSE OF HEARING BEFORE US,THE DEPARTME NTAL REPRESENTATIVE (DR) ARGUED THAT FAA HAD DELETED THE ADDITION AMOUNTING TO RS.2.69 C RORES,THAT THE ASSESSEE HAD OBTAINED BOGUS BILLS,THAT THE ASSESSEE HAD NOT FILED ANY EX PLANATION BEFORE THE AO/FAA WITH REGARD TO PURCHASE OF PLANT AND MACHINERY.THE AUTHORISED R EPRESENTATIVE(AR)ARGUED THAT THE ASSESSEE HAD SUPPLIED THE PHOTOS OF THE MACHINERY INSTALLED IN THE FACTORY CAMPUS, THAT THE FAA HAD NOT TAKEN NOTICE OF THE ABOVE FACT,THAT ST ATEMENT OF THE SO CALLED HAWALA DEALERS WERE NOT SUPPLIED TO THE ASSESSEE,THAT IN THE REMAN D REPORT DT.25.7.2013,THE AO HAD INFORMED THE FAA THAT INFORMATION WAS RECEIVED FROM THE OFFI CE OF THE DGIT(INV.) MUMBAI, IN THE FORM OF A CD, THAT THE PRINTOUT OF THE CD WERE TAKE N BY THE AO, THAT THE ASSESSEE HAD FILED COUNTER ARGUMENTS TO THE REMAND REPORT BEFORE THE F AA VIDE ITS LETTER DATED 26.11.2013.HE REFERRED TO PAGE NOS.40 TO 46 OF THE PAPER BOOK. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT THE INVESTIGATION WING HAD SUPPLIED INFORMATION TO THE AO ABOUT SOME HAWALA TRANSACTIONS, THAT THE AO HAD NOT DISCUSSED ANYTHING ABOUT THE STATEME NTS OF THE HAWALA-DEALERS IMPLICATING THE ASSESSEE ,THAT THE ASSESSEE HAD CLAIMED THAT MACHI NERY WAS INSTALLED IN THE FACTORY PREMISES, THAT AO HAD NOT MADE ANY ENQUIRY IN THAT REGARD, TH AT HE HAD NOT MADE FURTHER ENQUIRIES WITH THE SUPPLIERS OF THE GOODS OR FROM THE BANKS, THAT THE FAA HAD CALLED FOR A REMAND REPORT, THAT THE ASSESSEE HAD FILED SUBMISSIONS IN RESPONSE TO THE REMAND REPORT,THAT THE FAA IS SILENT ABOUT BOTH THE DOCUMENTS. CONSIDERING THESE FACTS W E ARE OF THE OPINION THAT THE MATTER NEEDS FURTHER INVESTIGATION, THEREFORE, IN THE INTEREST OF JUSTICE, WE ARE REMITTING BACK THE MATTER TO THE FILE OF THE AO FOR FRESH ADJUDICATION.HE IS DIR ECTED TO AFFORD A REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE AND DECIDE THE MATTER AFTE R MAKING PROPER ENQUIRIES. CO NO.87/MUM/2015 6. IN ITS CROSS OBJECTION THE ASSESSEE HAS RAISED THR EE GROUNDS. THE FIRST GROUND DEALS WITH ADDITION OF RS.2.79 CRORES U/S.69C OF THE ACT.THE S ECOND GROUND IS ABOUT DISALLOWANCE OF 24.49 LAKHS UNDER THE HEAD DEPRECIATION AND THE LAS T GROUND IS ABOUT SETTING OFF OF LOSS . 7. WHILE DECIDING THE APPEAL OF THE AO , WE HAVE RESTO RED BACK THE ISSUE TO HIS FILE FOR FRESH ADJUDICATION.AS STATED EARLIER, WE HOLD THAT THE MA TTER NEEDS FRESH INVESTIGATION AT THE LEVEL OF THE AO.HE IS DIRECTED TO DECIDE ALL THE ISSUES AGAI N AFTER HEARING THE ASSESSEE . AS A RESULT, APPEAL FILE BY THE AO AND C.O. FILED B Y THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. 1261/M/14-AEROFLEX INDUSTRIES LTD. 3 ! '#$% ! '# $ &'#( )*'+' ,-./ .. ORDER PRONOUNCED IN THE OPEN COURT ON 9 TH MARCH, 2016. 09 , 2016 SD/- SD/- ( - 34 / AMIT SHUKLA ) ( .'5 / RAJENDRA ) 6 '7 / JUDICIAL MEMBER '7 / ACCOUNTANT MEMBER MUMBAI, ' DATE: 09.03.2016 . . . .. . JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR D BENCH, ITAT, MUMBAI / , A , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.