TEKNIC INDUSTRIES, MUMBAI V. ASST CIT 21(3), MUMBAI

CO 9/MUM/2017

• Counselvise Citation: [2017] 123 COUNSELVISE.COM (IT) 2988 (ITAT-MUMBAI)
• Duration Of Justice: 3 month(s) 15 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 28-04-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2010-2011
• Appeal Filed On: 13-01-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: RODNEY LOUIS
• Keywords: Bogus purchase; Principle of natural justice
• Section: 69C; 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH D MUMBAI BEFORE SHRI SAKTIJIT DEY (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 3477/MUM/2015 ASSESSMENT YEAR: 2010-11 ASST CIT 21(3) VS. M/S. TEKNIC INDUSTRIES 2 ND FLOOR, PIRAMAL 116, HAMMERSIMTH INDL ESTATE CHAMBERS, LALBUAG SITALADEVI TEMPLE RD. MAHIM (W ) MUMBAI MUMBAI - 400016 PAN NO. AABFT6094J C.O. NO. 09/MUM/2017 ASSESSMENT YEAR: 2010-11 M/S. TEKNIC INDUSTRIES VS. ASST CIT 21(3) 116, HAMMERSIMTH INDL ESTATE 2 ND FLOOR, PIRAMAL SITALADEVI TEMPLE RD. MAHIM (W) CHAMBERS, LALBUAG MUMBAI 400016 MUMBAI PAN NO. AABFT6094J (APPELLANT) (RESPONDENT) REVENUE BY : MR. PURUSHOTTAM KUMAR,DR ASSESSEE BY: MR. RODNEY LOUIS, AR DATE OF HEARING : 09/02 /2017 DATE OF PRONOUNCEMENT: 28/04/2017 ORDER PER N.K. PRADHAN, AM THE APPEAL BY THE REVENUE AND THE CROSS OBJECTION B Y THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF THE COMM ISSIONER OF INCOME TAX (APPEALS) 33, MUMBAI AND ARISES OUT O F ORDER U/S 143(3) OF THE INCOME TAX ACT, 1961 (THE ACT). AS COMMON ISSUES ARE ITA NO. 3477/MUM/2015 2 INVOLVED, WE ARE PROCEEDING TO DISPOSE THEM OFF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 2. THE GROUNDS RAISED BY THE REVENUE IN THIS APPEAL AS SUMMARISED ARE THAT (I) THE LEARNED CIT(A) ERRED IN GIVING RELIEF OF RS. 36,49,424/- ON ACCOUNT OF BOGUS PURCHASE WITHOUT AP PRECIATING THE FACT THAT THE PARTIES FROM WHOM THE PURCHASES WERE MADE WERE INVOLVED IN ISSUING BOGUS BILLS, (II) THE LEARNED C IT(A) HAS ERRED IN CONCLUDING WITHOUT ANY EVIDENCE THAT THE ASSESSEE H AD PURCHASED MATERIAL BUT OBTAINED THE BILLS IN SOME OTHER PARTY S NAME, AND (III) THE LEARNED CIT(A) HAS ERRED IN GIVING RELIEF OF RS . 36,49,424/- ON ACCOUNT OF BOGUS PURCHASE WHEN THE ASSESSEE HAS NOT BEEN ABLE TO CONFIRM THE VALIDITY OF PURCHASES AND HAS NOT GIVEN ANY EVIDENCE OF CORRESPONDING SALES HAVING TAKEN PLACE. 3. THE CROSS OBJECTION FILED BY THE ASSESSEE AS SUM MARISED ARE THAT (I) THE APPELLANT ERRED IN NOT GIVING AN OPPOR TUNITY TO THE RESPONDENT TO CROSS EXAMINE THOSE SUPPLIES FROM WHO M THE ALLEGED BOGUS PURCHASES WERE MADE, THEREBY DENYING THE INTE RROGATION OF THE SUPPLIERS BY THE RESPONDENT, (II) THE RESPONDENT CA TEGORICALLY ASSERTS THAT THE ENTIRE TRANSACTION WERE GENUINE, (III) THE APPELLANT HAD ERRED IN IGNORING THE PRINCIPLES OF NATURAL JUSTICE BY RE LYING ON DETAILS COLLECTED BY HIM BEHIND THE BACK OF THE RESPONDENT AND NOT GIVING THE COPIES OF STATEMENT AND EVIDENCE TO THE RESPONDENTS AND THEREBY DENYING THE RESPONDENT OPPORTUNITY TO CROSS EXAMINE THE SUPPLIERS, (IV) THE APPELLANT HAD ERRED IN LAW AND IN FACTS IN ALLEGING THAT THE DEFAULTS ON THE PART OF THE SUPPLIERS UNDER THE PRO VISION OF MVAT ACT WOULD BE SUFFICIENT TO HOLD THE RESPONDENTS PURCHA SES AS NON- GENUINE AND (V) THE APPELLANT HAD ERRED IN LAW AND IN FACTS IN ALLEGING THAT THE RESPONDENT HAD RECEIVED BACK CASH FROM THE SUPPLIERS PURELY ITA NO. 3477/MUM/2015 3 ON THE BASIS OF SURMISES AND CONJECTURES WITHOUT AD DUCING ANY EVIDENCE ON RECORD IN SUPPORT OF THE SAME. 4. THE ASSESSEE TEKNIC INDUSTRIES (TI) FILED ITS RE TURN OF INCOME FOR THE A.Y. 2010-11ON 27.09.2010 DECLARING A TOTAL INCOME OF RS. 50,76,909/-. THE ASSESSEE WAS ENGAGED IN MANUFACTUR ING OF PLASTIC COMPONENTS, MOULDS AND DYES. THE ASSESSING OFFICER (A.O.) RECEIVED DURING THE COURSE OF ASSESSMENT PROCEEDINGS, INFORM ATION IN RESPECT OF BOGUS SALE BILLS FROM THE SALES TAX DEPARTMENT O F MAHARASHTRA THROUGH THE OFFICE OF DGIT (INV). THE A.O. FOUND TH AT THE ASSESSEE WAS ONE OF THE BENEFICIARY GETTING ACCOMMODATION ENTRIE S DURING THE F.Y. 2009-10 RELEVANT TO A.Y. 2010-11. THE DETAILS ARE A S UNDER: BENEFICIARY TIN BENEFICIARY NAME HAW ALA TIN HAWALA OPERATORS NAME HAWALA PAN F.Y. AMOUNT (RS.) 27850009520V TEKNIC INDUSTRIES 27280662401V AMI TRADERS AGJPJ4579N 2009 - 10 5,47,561 27850009520V TEKNIC INDUSTRIES 27950 562074V S.S. ENTERPRISES ABGFS2578E 2009 - 10 3,31,871 27850009520V TEKNIC INDUSTRIES 27930669561V RAMDEV TRADING AKBFC2808H 2009 - 10 6,41,100 27850009520V TEKNIC INDUSTRIES 27770666157V SHUBHAM ENTERPRISES AYVPS0870R 2009 - 10 99,661 27850009520V TEKNIC INDUSTRIES 27770524440V AMAR ENTERPRISES AIRPB6559J 2009 - 10 3,52,055 27850009520V TEKNIC INDUSTRIES 2766066 SHREE SAI TRADING CO ATQPP8547E 2009 - 10 78,587 27850009520V TEKNIC INDUSTRIES 27610669252V SWASTIK ENTERPRISES BANPK9786M 2009 - 10 1,42,387 27850009520V TEKNIC INDUSTRIES 27600606547V OMKAR TRADING CO AMDPM6129K 2009 - 10 2,56,393 27850009520V TEKNIC INDUSTRIES 27260671239V YESHUDHASAN ENTERPRISE AGIPN8180C 2009 - 10 4,07,384 27850009520V TEKNIC INDUSTRIES 27240608588V HARSH CORPORATION ADKPN3382R 2009 - 10 3,14,894 27850009520V TEKNIC INDUSTRIES 27230614753V LEO IMPEX AOXPK1521G 2009 - 10 3,21,833 27850009520V TEKNIC INDUSTRIES 27210561220V NATIONAL TRADING CO AAGFN0083N 2009 - 10 2,83,518 27850009520V TEKNIC INDUSTRIES 27030540755V NAGESHWAR ENTERPRISES ANMPP9773E 2009 - 10 2,08,942 27850009520V TEKNIC INDUSTRIES 27560694451V SAMARTH ENTERPRISES APBPS3000G 2009 - 10 1,84, 584 TOTAL CONSIDERATION 41,70,770 IN ALL THESE CASES, THE HAWALA OPERATORS CONFESSED BEFORE THE SALES TAX AUTHORITY THAT THEY WERE ISSUING BOGUS / HAWALA ACC OMMODATION BILLS I.E. MERELY ISSUING BILLS WITHOUT ACTUAL DELIVERY O F GOODS. THE A.O. MADE AVAILABLE TO THE ASSESSEE THE STATEMENTS OF TH E ABOVE OPERATORS BEFORE THE SALES TAX AUTHORITY. HE ALSO GAVE THE AS SESSEE A QUESTIONNAIRE DATED 05.03.2013 FOR COMPLIANCE. IN R ESPONSE TO IT, THE ASSESSEE FILED A REPLY WHICH THE A.O. CONSIDERED AS REPETITIVE AND ITA NO. 3477/MUM/2015 4 WITHOUT SUBSTANCE. THE A.O. OBSERVED THAT THIS WAS A CASE WHERE PURCHASES WERE QUESTIONABLE BUT SALES WERE NOT. THE ASSESSEE WAS CHANGING THE CONSTITUTION OF THE ITEM AND SELLING T HEM TO A THIRD PARTY. IN VIEW OF THE ABOVE, THE A.O. MADE AN ADDIT ION OF RS. 41,70,770/- U/S 69C OF THE ACT. 5. AGGRIEVED BY THE ORDER OF THE A.O. THE ASSESSEE FILED AN APPEAL BEFORE THE LEARNED CIT(A). THE LEARNED CIT(A) HELD AS UNDER: 33. IN THE INSTANT CASE, ALL THE FACTS AND CIRCUMS TANCES OUTLINED ABOVE LEADS TO THE CONCLUSION THAT ALTHOUGH THE PURCHASES MADE BY THE APPELLANT FROM THE 14 PARTIES MENTIONED ABOVE DURIN G THE YEAR UNDER CONSIDERATION ARE NOT IN DOUBT BUT AT THE SAME TIME IT DIFFICULT TO ACCEPT THAT THE PURCHASE PRICE SHOWN ON THE INVOICES/BILLS ISSUED BY THESE PARTIES IS AS PER THE PREVAILING MARKET PRICE OF TH OSE MATERIALS. THE APPELLANT HAS NOT PLACED ANY EVIDENCE ON RECORD THA T THE GOODS WERE PURCHASED FROM THE ABOVE PARTIES AT ARMS LENGTH PRI CE. THE APPELLANT HAS ALSO NOT PLACED ON RECORD ANY COMPARABLE BILLS/ INVOICES FOR PURCHASES OF SIMILAR ITEMS MADE FROM OTHER PARTIES TO ESTABLISH THAT THE PURCHASES FROM THE 14 PARTIES IN QUESTION WERE AT P AR WITH THE PURCHASES MADE FROM OTHER PARTIES DURING THE PERIOD UNDER CONSIDERATION. IN THE ABSENCE OF ANY SUCH EVIDENCE PLACED ON RECORD, THE CORRECTNESS OF THE PURCHASE PRICE MENTIONED ON SUCH BILLS/INVOICES ISSUED BY THE PARTY IN QUESTION CANNOT BE ACCEPTED AND SOME ADDITIONAL GROSS PROFIT NEED TO BE ESTIMATED ON THE PURCHASES MADE FROM THE ABOVE PARTIES IN QUESTION. 34 THE APPELLANT HAS SHOWN GROSS PROFIT OF 1,37,93, 406.44 DURING THE YEAR UNDER CONSIDERATION. AS THE PURCHASES INVOICES ISSUED AGAINST THE ALLEGED BOGUS PURCHASES ARE UNVERIFIABLE, AND PART OF THE PROFIT ELEMENT ON THE PURCHASES MADE FROM THE ABOVE MENTIONED 14 P ARTIES IS ALREADY INCLUDED IN THE ABOVE GROSS PROFIT RATE SHOWN FOR T HE YEAR UNDER CONSIDERATION, IT WOULD BE FAIR AND JUST, IF THE AD DITIONAL GROSS PROFIT @ 12.5% IS APPLIED ON SUCH TOTAL ALLEGED BOGUS PURCHA SES AMOUNTING TO RS. 41,70,770/-, THE GROSS PROFIT ON SUCH PURCHASES WOULD COME TO RS. 5,21,346/- WHICH NEED TO BE ADDED TO THE INCOME OF THE ASSESSEE ON ACCOUNT OF ALLEGED BOGUS PURCHASES FOR THE YEAR UN DER CONSIDERATION AND THE BALANCE ADDITION MADE AMOUNTING TO RS. 36,4 9,424/- IS HEREBY DELETED. THE ASSESSING OFFICER IS DIRECTED ACCORDIN GLY. ITA NO. 3477/MUM/2015 5 6. BEFORE US THE LEARNED DR RELIES ON THE ORDER OF THE A.O. HE SUBMITS THAT THE LEARNED CIT(A) HAS NOT TAKEN INTO ACCOUNT THE PECULIARITIES OF THE PRESENT CASE AND HE HAS PASSED THE ORDER IN A MECHANICAL MANNER. ALSO IT IS STATED BY HIM THAT TH E LEARNED CIT(A) HAS MENTIONED AT PARA 23 OF THE ORDER THAT THE ASSE SSEE PRODUCED EVIDENCE SUCH AS BILLS, INVOICES ETC. WHICH IS INCO RRECT IN AS MUCH AS THE ASSESSEE BEFORE THE A.O. HAD STATED THAT THE PU RCHASES AND SALES INVOICES WERE MOSTLY LOST IN A FIRE IN OFFICE. 7. THE LEARNED COUNSEL OF THE ASSESSEE RELIES ON TH E ORDER BY (I) ITAT, MUMBAI D BENCH IN ITA NO. 5246/MUM/2013, AS SESSMENT YEAR : 2010-11 IN ACIT 25(2), MUMBAI VS. SHRI RAMILA PRAVIN SHAH , (II) ITAT, MUMBAI D BENCH IN ITA NO. 2959/MUM/2014, AS SESSMENT YEAR : 2010-11 IN RAMESH KUMAR & CO. VS. ACIT 21(1), MUMBAI , (III) ITAT, MUMBAI G BENCH IN ITA NO. 2826/MUM/2013, AS SESSMENT YEAR : 2009-10 IN SHRI GANPATRAJ A SANGHAVI VS. ACIT 15(3), MUMBAI, (IV) ITAT, MUMBAI D BENCH IN ITA NO. 6727/MUM/201 2, ASSESSMENT YEAR : 2009-10 IN SHRI RAJIV G. KALATHIL VS. DDIT 25(3), MUMBAI . 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. AS MENTIONED HERE-IN-ABOVE, THE ASSESSEE FAILED TO FILE BEFORE THE A.O. THE PURCHASE AND SALE INVOI CES. IN THE CROSS OBJECTION FILED, THE ASSESSEE HAS STATED THAT IT HA S BEEN DENIED THE OPPORTUNITY TO CROSS EXAMINE THE SUPPLIERS. THE HON BLE SUPREME COURT IN STATE OF KERALA VS. K.T. SHADULI GROCERY DEALER AIR 1977 SC 1627, RECOGNISED THE IMPORTANCE OF ORAL EVIDENCE BY HOLDING THAT THE OPPORTUNITY TO PROVE THE CORRECTNESS OR COMPLETENES S OF THE RETURN NECESSARILY CARRY WITH IT THE RIGHT TO EXAMINE WITN ESSES AND THAT INCLUDES EQUALLY THE RIGHT TO CROSS-EXAMINE WITNESS ES. ITA NO. 3477/MUM/2015 6 IN ITO VS. M. PIRAI CHOODI [2012] 20 TAXMANN.COM 733 (SC), THE HON'BLE SUPREME COURT HELD:- IN THIS CASE, THE HIGH COURT HAS SET ASIDE THE ORD ER OF ASSESSMENT ON THE GROUND THAT NO OPPORTUNITY TO CROSS-EXAMINE WAS GRA NTED, AS SOUGHT BY THE ASSESSEE. WE ARE OF THE VIEW THAT THE HIGH COURT SH OULD NOT HAVE SET ASIDE THE ENTIRE ASSESSMENT ORDER. AT THE HIGHEST, THE HI GH COURT SHOULD HAVE DIRECTED THE ASSESSING OFFICER TO GRANT AN OPPORTUN ITY TO THE ASSESSEE TO CROSS-EXAMINE THE CONCERNED WITNESS. 8.1 CROSS-EXAMINATION IS ALLOWED BY PROCEDURAL RULE S AND EVIDENTLY ALSO BY THE RULES OF NATURAL JUSTICE. IN VIEW OF TH E ABOVE, THE ORDER OF THE LD. CIT(A) IS SET ASIDE AND THE AO IS DIRECTED TO PASS AN ORDER AFRESH AS PER THE PROVISIONS OF THE ACT, AFTER GIVI NG OPPORTUNITY (I) OF BEING HEARD TO THE ASSESSEE AND (II) TO CROSS-EXAMI NE THE CONCERNED PARTIES AS MENTIONED AT PARA 4 HERE-IN-ABOVE. THE A SSESSEE IS DIRECTED TO FILE BEFORE THE AO THE RELEVANT DETAILS . AS THE ORDER OF THE LEARNED CIT(A) IS SET ASIDE, W E ARE NOT ADVERTING TO THE DECISIONS MENTIONED AT PARA 7 HERE -IN-ABOVE. 9. IN THE RESULT, THE APPEAL AS WELL AS THE CROSS O BJECTION ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 28/04/2017 SD/- SD/- (SAKTIJIT DEY) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBE R MUMBAI: DATED: 28/04/2017 BISWAJIT, SR. P.S. ITA NO. 3477/MUM/2015 7 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE . BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI