MANISH FLOUR MILLS P.LTD, MUMBAI V. DCIT 5(2)(2), MUMBAI

ITA 1030/MUM/2018

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 8780 (ITAT-MUMBAI)
• Duration Of Justice: 10 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-12-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 22-02-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AJAY KUMAR OJHA
• Keywords: Bogus purchase; Principle of natural justice; Opportunity of cross examination; Accommodation entries
• Section: 143(3); 133(6); 143(1); 147; 131; 68; 148

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL SMC, BENCH MUMBAI BEFORE SHRI R.C. SHARMA, AM & SHRI AMARJIT SINGH, JM ./ ITA NO.1030/MUM/2018 ( [ [ / ASSESSMENT YEAR :2009-10) MANISH FLOUR MILLS PVT LTD., 310 PANCHARATNA OPERA HOUSE, MUMBAI - 400004 VS. DCIT 5(2)(2) MUMBAI. ./ ./ PAN/GIR NO. : AAFCM2674N ( / APPELLANT ) .. ( / RESPONDENT ) /ASSESSEE BY : SHRI SUCHEK ANCHALIYA [ /REVENUE BY : SHRI AJAY KUMAR OJHA. / DATE OF HEARING : 13.11.2018 / DATE OF PRONOUNCEMENT: 27.12.2018 / O R D E R PER R.C.SHARMA (A.M) : THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A)- 10 MUMBAI, DATED 21.09.2017, FOR THE ASSESSMENT YEAR 2009-10, IN THE MATTER OF ORDER PASSED U/S.143(3) OF THE I.T. ACT. 2. THE GRIEVANCE OF THE ASSESSEE RELATES TO VALIDITY OF REOPENING OF THE ASSESSMENT U/S 147 OF THE ACT AND ALSO MERIT OF THE ADDITION OF RS. 7,92,000/- UPHELD BY THE CIT(A) BY ESTIMATING PROFIT @ 8% OF ALLEGED BOGUS PURCHASES. MANISH FLOUR MILLS PVT LTD., MUMBAI ITA NO. 1030/MUM/2018 2 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND WE HAVE PERUSED. THE FACTS IN BRIEF ARE THAT THE ASSESSEE IS ENGAGED IN THE MANUFACTURING OF FLOUR AND OTHER WHEAT PRODUCTS. THE RETURN OF INCOME FILED AT RS. 13,992/- ON 19.19.2009 WAS PROCESSED U/S 143(1) OF THE ACT, THEREAFTER IT WAS REOPENED BY ISSUE OF NOTICES U/S 148 OF THE ACT ON THE PLEA THAT THERE WAS INFORMATION RECEIVED FROM DGIT (INV) TO THE EFFECT THAT ASSESSEE HAS TAKEN ACCOMMODATION ENTRIES OF BOGUS PURCHASES. DURING THE COURSE OF ASSESSMENT U/S 143(3) R.W.S 147 OF THE ACT THE A.O STATED THAT THE ASSESSEE HAS OBTAINED BOGUS BILLS FROM M/S MEENAXI DIAMONDS P. LTD., AMOUNTING TO RS. 99,06,600/-. THE A.O ESTIMATED PROFIT @ 9% ON SUCH PURCHASES, WHICH WAS REDUCED BY CIT(A) TO 8%, AGAINST WHICH ASSESSEE IS IN FURTHER APPEAL BEFORE US. 4. LD. AR MR. SUCHEK ANCHALIYA, CA APPEARING ON BEHALF OF THE ASSESSEE VEHEMENTLY ARGUED THAT THE A.O WAS NOT JUSTIFIED IN TREATING THE PURCHASE OF RS. 99,06,600/- FROM M/S MEENAXI DIAMOND P. LTD., AS NON- GENUINE WITHOUT APPRECIATING THE FACT THAT THE PARTY HAS FURNISHED CONFIRMATION OF SUPPLY OF GOODS AND PAYMENTS WERE MADE THROUGH ACCOUNT PAYEE CHEQUE AND THERE IS NO CORROBORATIVE EVIDENCE OF PAYMENT OF PURCHASE OTHERWISE THAN BY CROSS ACCOUNT PAYEE CHEQUE OR BANKING CHANNEL. HE FURTHER CONTENDED THAT THE LD. A.O ERRED IN MAKING THE ADDITION OF GENUINE PURCHASE SOLELY ON THE BASIS OF STATEMENT OF THIRD PARTY MANISH FLOUR MILLS PVT LTD., MUMBAI ITA NO. 1030/MUM/2018 3 GIVEN BEFORE INVESTIGATION WING, MUMBAI WITHOUT PROVIDING COPY OF STATEMENT AND CROSS EXAMINATION TO THE ASSESSEE. 5. THE LD. AR ALSO PLACED RELIANCE ON THE ORDER OF THIS TRIBUNAL IN ASSESSEES OWN CASE FOR THE A.Y 2012-13 DATED 24.10.2018, WHERE IN THE TRIBUNAL HAS HELD THAT M/S MEENAXI DIAMOND P. LTD IS A GENUINE PARTY AND ADDITION MADE U/S 68 OF THE ACT WAS DELETED BY THE ITAT. THE LD. AR ALSO INVITED OUR ATTENTION TO THE COPIES OF INVOICES, PURCHASE ORDER, BANK ADVICE FOR HAVING PAYMENT MADE AGAINST THESE PURCHASES, CONFIRMATION FROM PURCHASE PARTY ETC, WHICH WERE PLACED BEFORE THE A.O. AS PER THE LD. AR THE ASSESSEE HAS ALSO SUBMITTED BEFORE THE A.O THE DOCUMENTS RELATED TO SALES EFFECTED AGAINST THE PURCHASES MADE FROM THE ABOVE PARTIES. THE LD. AR FURTHER STATED THAT IN THE STATEMENT GIVEN BY BHANWARLAL JAIN THE NAME OF ASSESSEE COMPANY DOES NOT APPEARS. THE ASSESSEE FURTHER RELIED ON THE FACT THAT, THE PARTIES ARE IDENTIFIABLE, AMOUNTS WERE RECEIVED THROUGH BANKING CHANNELS, THE PARTIES ARE CREDIT WORTHY TO SUPPLY GOODS TO THE ASSESSEE COMPANY AND SUBMITTED THAT THE TRANSACTIONS ARE GENUINE. THE LD. AR ALSO PLACED ON RECORD VARIOUS JUDICIAL PRONOUNCEMENTS, WHEREIN IT WAS HELD THAT NO ADDITION CAN BE MADE MERELY ON BASIS OF THE STATEMENT WITHOUT PROVIDING OPPORTUNITY TO CROSS EXAMINATION OF THE PERSON ON WHOSE STATEMENT OF ADDITION HAS BEEN MADE. 6. ON THE OTHER HAND, THE LD. DR RELIED ON THE ORDER OF THE LD. CIT(A) AND CONTENDED THAT IN RESPECT OF BOGUS PURCHASES THE CIT(A) REASONABLY MANISH FLOUR MILLS PVT LTD., MUMBAI ITA NO. 1030/MUM/2018 4 ESTIMATED PROFIT AT 8% IN ADDITION TO THE NORMAL PROFIT DECLARED BY THE ASSESSEE. ACCORDINGLY IT WAS ARGUED THAT ADDITION SO UPHELD BY THE CIT(A) SHOULD BE SUSTAINED. 7. WE HAVE CONSIDERED RIVAL CONTENTIONS AND CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE HAVE ALSO DELIBERATED ON THE JUDICIAL PRONOUNCEMENTS REFERRED BY THE LOWER AUTHORITIES IN RESPECTIVE OF ORDERS AS WELL AS CITED BY LD. AR AND LD. DR DURING THE COURSE OF HEARING BEFORE US, IN THE CONTEXT OF FACTUAL MATRIX OF THE CASE. FROM THE RECORD WE FIND THAT IN THE CASE OF THE ASSESSEE, THE PURCHASES MADE FORM M/S MEENAXI DIAMOND P LTD., AMOUNTING TO RS. 99,06,600/- WAS TAKEN AS BOGUS PURCHASE. THE ASSESSEE HAD MAINTAINED QUANTITATIVE DETAILS AS REGARDS THE PURCHASES MADE AND THE SALES EXECUTED. THE QUANTITATIVE DETAILS ALONG WITH CORRESPONDING SALES BILL HAVE BEEN PROVIDED TO THE LD. AO DURING THE COURSE OF ASSESSMENT PROCEEDING. WE ALSO FOUND THAT BOTH BEFORE THE A.O AND CIT(A) THE ASSESSEE HAS ASKED FOR COPIES OF STATEMENTS ON THE BASIS OF WHICH THE ADDITION WAS MADE AS WELL AS REQUEST FOR PROVIDING OPPORTUNITY OF CROSS EXAMINATION. WE FOUND THAT A.O HAS NOT MADE ANY INDEPENDENT ENQUIRY BY ISSUE OF NOTICE U/S 131 OR 133(6) OF THE ACT NOR ALLEGED PARTY WAS STATED BY THE BHANWARLAL JAIN IN HIS STATEMENT. WE ALSO FOUND THAT DURING THE COURSE OF REASSESSMENT PROCEEDING, THE ASSESSEE HAS SUBMITTED THE REQUISITE DETAILS SUCH AS LEDGER ACCOUNT OF PURCHASE PARTIES IN THE BOOKS OF THE ASSESSEE, ACCOUNT CONFIRMATION, PURCHASE BILLS, SALES MANISH FLOUR MILLS PVT LTD., MUMBAI ITA NO. 1030/MUM/2018 5 BILL, AFFIDAVIT, MATCHING OF PURCHASE WITH SALES, ITR ACKNOWLEDGMENT, AUDIT REPORT ETC TO PROVE THE GENUINENESS OF PURCHASES FROM M/S MEENAXI GEMS PRIVATE LTD. WE HAVE ALSO CAREFULLY GONE THROUGH THE ORDER OF THE TRIBUNAL IN THE ASSESSEES OWN CASE IN ITA NO. 6729 FOR THE A.Y 2012-13 ORDER DATED 24.10.2018, WHEREIN M/S MEENAXI DIAMOND P. LTD WAS ACCEPTED BY THE TRIBUNAL AS GENUINE PARTY. 8. THE HONBLE BOMBAY HIGH COURT IN THE CASE OF NIKUNJ EXIMP ENTERPRISES (P) LTD., (2013) 35 TAXMANN.COM 384 HAVE OBSERVED THAT THE ADDITION MADE BY RELYING ON SOME STATEMENT OR DOCUMENT WITHOUT GIVING OPPORTUNITY TO THE ASSESSEE TO CROSS EXAMINE, THE PARTIES ON WHOSE STATEMENT ADDITION HAS BEEN MADE IS NOT SUSTAINABLE IN LAW. HONBLE SUPREME COURT IN THE CASE OF ANDAMAN TIMBER INDUSTRIES 281 CTR 241 HAS HELD THAT NOT ALLOWING ASSESSEE TO CROSS-EXAMINE WITNESSES BY ADJUDICATING AUTHORITY THOUGH STATEMENTS OF THOSE WITNESSES WERE MADE AS BASIS OF IMPUGNED ORDER, AMOUNTED IN SERIOUS FLAW WHICH MADE IMPUGNED ORDER NULLITY AS IT AMOUNTED TO VIOLATION OF PRINCIPLES OF NATURAL JUSTICE. THE PRECISE OBSERVATION OF THE HONBLE SUPREME COURT WAS AS UNDER:- NOT ALLOWING THE ASSESSEE TO CROSS-EXAMINE THE WITNESSES BY THE ADJUDICATING AUTHORITY THOUGH THE STATEMENTS OF THOSE WITNESSES WERE MADE THE BASIS OF THE IMPUGNED ORDER IS A SERIOUS FLAW WHICH MAKES THE ORDER NULLITY INASMUCH AS IT AMOUNTED TO VIOLATION OF PRINCIPLES OF NATURAL JUSTICE BECAUSE OF WHICH THE ASSESSEE WAS ADVERSELY AFFECTED. MANISH FLOUR MILLS PVT LTD., MUMBAI ITA NO. 1030/MUM/2018 6 IT IS TO BE BORNE IN MIND THAT THE ORDER OF THE COMMISSIONER WAS BASED UPON THE STATEMENTS GIVEN BY THE AFORESAID TWO WITNESSES. EVEN WHEN THE ASSESSEE DISPUTED THE CORRECTNESS OF THE STATEMENTS AND WANTED TO CROSS-EXAMINE, THE ADJUDICATING AUTHORITY DID NOT GRANT THIS OPPORTUNITY TO THE ASSESSEE. IT WOULD BE PERTINENT TO NOTE THAT IN THE IMPUGNED ORDER PASSED BY THE ADJUDICATING AUTHORITY HE HAS SPECIFICALLY MENTIONED THAT SUCH AN OPPORTUNITY WAS SOUGHT BY THE ASSESSEE. HOWEVER, NO SUCH OPPORTUNITY WAS GRANTED AND THE AFORESAID PLEA IS NOT EVEN DEALT WITH BY THE ADJUDICATING AUTHORITY. APPELLANT HAD CONTESTED THE TRUTHFULNESS OF THE STATEMENTS OF THESE TWO WITNESSES AND WANTED TO DISCREDIT THEIR TESTIMONY FOR WHICH PURPOSE IT WANTED TO AVAIL THE OPPORTUNITY OF CROSS-EXAMINATION. THAT APART, THE ADJUDICATING AUTHORITY SIMPLY RELIED UPON THE PRICE LIST AS MAINTAINED AT THE DEPOT TO DETERMINE THE PRICE FOR THE PURPOSE OF LEVY OF EXCISE DUTY. WHETHER THE GOODS WERE, IN FACT, SOLD TO THE SAID DEALERS/WITNESSES AT THE PRICE WHICH IS MENTIONED IN THE PRICE LIST ITSELF COULD BE THE SUBJECT MATTER OF CROSS-EXAMINATION. THEREFORE, IT WAS NOT FOR THE ADJUDICATING AUTHORITY TO PRESUPPOSE AS TO WHAT COULD BE THE SUBJECT MATTER OF THE CROSS-EXAMINATION AND MAKE THE REMARKS AS MENTIONED ABOVE. 9. SIMILAR VIEW HAS BEEN TAKEN BY THE JURISDICTIONAL HIGH COURT IN THE CASE OF H.R.MEHTA IN ITS ORDER DATED 07/07/2016. THE HONBLE HIGH COURT HELD AS UNDER:- THE ASSESSEE IS BOUND TO BE PROVIDED WITH THE MATERIAL USED AGAINST HIM APART FROM BEING PERMITTED TO CROSS EXAMINE THE DEPONENTS. THE DENIAL OF SUCH OPPORTUNITY GOES TO ROOT OF THE MATTER AND STRIKES AT THE VERY FOUNDATION OF THE ASSESSMENT ORDER AND RENDERS IT VULNERABLE. 10. IN VIEW OF THE ABOVE DISCUSSION WE ARE INCLINED TO AGREE WITH THE LD. AR MR. SUCHEK ANCHALIYA THAT WITHOUT PROVIDING A COPY OF THE STATEMENT AND OPPORTUNITY TO CROSS EXAMINE, NO ADDITION IS WARRANTED. UNDER THESE FACTS AND CIRCUMSTANCES, WE RESPECTFULLY FOLLOW THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE WHEREIN M/S MEENAXI DIAMOND P. LTD., WAS FOUND MANISH FLOUR MILLS PVT LTD., MUMBAI ITA NO. 1030/MUM/2018 7 TO BE GENUINE PARTY THEREFORE NO ADDITION IS WARRANTED IN RESPECT OF SALES CONFIRMED BY IT. 11. IN THE RESULT, APPEAL FILED BY THE ASSESSEE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 27.12.2018 SD/- SD/- (AMARJIT SINGH) (R.C. SHARMA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED 27.12.2018 K RAVI KUMAR ( P.S.) / COPY OF THE ORDER FORWARDED TO : / BY ORDER, / ( ASSTT.REGISTRAR) , / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A), MUMBAI. 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. [ / GUARD FILE. //TRUE COPY//