RECHNER AUTOMATION SYSTEMS P.LTD, MUMBAI V. DCIT 7(2), MUMBAI

ITA 1032/MUM/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 0572 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-02-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2007-2008
• Appeal Filed On: 01-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAM TIWARI
• Assessee Lawyers: AMIT C JHAVERI
• Keywords: Bogus purchase; Opportunity of being heard; Principle of natural justice
• Section: 40A(3); 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH D , MUMBAI BEFORE SHRI C.N. PRASAD, HON'BLE JUDICIAL MEMBER AND SHRI N.K. PRADHAN , HON'BLE ACCOUNTANT MEMBER ITA NO . 1032 /MUM/2016 (A.Y : 2007 - 08 ) M/S. RECH NER AUTOMATION SYSTEMS PVT. LTD., 214/8, J OGANI INDUSTRIAL ESTATE, V.N. PU RAV MARG, CHUNABHATTI (E), SION, MUMBAI 400 022 PAN NO : AAACR 3466 J V . DEPUTY COMMISSIONER OF INCOME TAX RANGE 7(2) MUMBAI (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI AMIT C. JHAVERI DEPARTMENT BY : SHRI RAM TIWARI DATE OF HEARING : 05.02.2018 DATE OF PRONOUNCEMENT : 07 .02.2018 O R D E R PER C.N. PRASAD 1. THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LD.CIT(A) - 14, MUMBAI DATED 31.12.2015 FOR THE ASSESSMENT YEAR 2007 - 08 IN SUSTAIN ING THE PENALTY LEVIED U/S. 271(1)(C) OF THE ACT. 2. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT , QUANTUM APPEAL IN THIS CASE HAS BEEN RESTORED BACK TO THE FILE OF THE LD.CIT(A) BY THE COORDINATE BENCH IN ITA.NO.4350 & 4858 / MUM/ 2011 BY ORDER DATED 28.07.2016. 2 ITA NO.1032/MUM/2016 (A.Y: 2007 - 08) M/S. RECHNER AUTOMATION SYSTEMS PVT. LTD. 3. LD.DR SUBMITTED THAT SINCE THE QUANTUM APPEAL HAS BEEN RESTORED TO THE FILE OF THE LD.CIT(A) THE PENALTY APPEAL MAY ALSO BE RESTORED TO THE FILE OF THE LD.CIT(A) FOR ADJUDICATION ALONG WITH THE QUANTUM APPEAL. LD. COUNSEL FOR THE ASSESSE E HAS NO SERIOUS OBJECTION IN RESTORING THE PENALTY APPEAL TO THE FILE OF THE LD.CIT(A). 4. ON HEARING BOTH SIDES AND PERUSING THE ORDER OF THE COORDINATE BENCH IN QUANTUM PROCEEDINGS , WE FIND THAT THE COORDINATE BENCH RESTORED ALL THE ISSUES TO THE FILE OF THE LD.CIT(A) FOR DENOVO DETERMINING ON MERITS OBSERVING AS UNDER: - 11. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. WE HAVE OBSERVED THAT THE A.O . HAS MADE THE ADDITION BASED UPON THE TOTAL PURCHASES BY TREATING THEM AS BOGUS PURCHASES AMOUNTING TO RS. 19,60,83,997/ - WHICH WAS ADDED TO THE INCOME OF THE ASSESSEE COMPANY. THE A.O. IN ALTERNATIVE, WITHOUT PREJUDICE, HELD THAT IN CASE THE ABOVE ADDITION IS NOT UPHELD AT THE APPELLATE STAGE, IN ALTERNATIVE, CASH PURCHASES U/S 40A(3) OF THE ACT TO THE TUNE OF 20% OF THE CASH PURCHASES WOULD STOOD DISALLOWED TO THE TUNE OF .3,92,16,799/ - AND ADDED TO THE INCOME OF THE ASSESSEE COMPANY. THE ASSESSEE COMPANY HAS MADE PAYMENT BY CHEQUE FOR THE SAID ALLEGED BOGUS PURCHASES AND CASH HAS BEEN ALLEGEDLY RECEIVED AGAINST THE SAID PURCHASES AND TO COVER UP THE SOURCE THE ASSESSEE COMPANY HAS MADE PURCHASES OTHER THAN THOSE REFLECTED IN THE BOOKS AND MADE PAYMENT IN CASH AS PER ALLEGATIONS OF THE REVENUE. IT WAS HELD BY THE A.O THAT EVEN IF THE ABOVE ADDITIONS ARE NOT UPHELD, THEN THE CASH PURCHASES MADE BY THE ASSESSEE COMPANY OF RAW MATERIAL FROM THE MARKET TO THE TUNE OF RS.3,57,68,684/ SHALL BE ADDED TO THE INCOME OF THE ASSESSEE COMPANY U/S 40A(3) OF THE ACT ALONG WITH NET PROFIT OF RS. 1,84,68,455/ - BE ADDED IN THE INCOME OF THE ASSESSEE COMPANY WHICH WILL MAKE TOTAL ADDITION OF .5,42,37,139/ - TO THE INCOME OF THE ASSESSEE COMPANY. HOWEVER, WE: HAVE OBSERVED THA T THE LD.CIT(A) HAS CONFIRMED/SUSTAINED THE ADDITION ON BOTH THE GROUNDS I.E. U/S 40A(3) OF THE ACT OF 20%. OF CASH PURCHASES OF RS. 19,60,83, 997/ - AMOUNTING TO .3,92,16,799/ - AS WELL AS GP OF 15% WAS UPHELD AMOUNTING TO .1,84,68,455/ - LEADING TO THE TOTAL ADDITION OF .5,76,85,254/ - WHICH WAS CONFIRMED/SUSTAINED BY THE LEARNED 3 ITA NO.1032/MUM/2016 (A.Y: 2007 - 08) M/S. RECHNER AUTOMATION SYSTEMS PVT. LTD. CIT(A) WHICH LED TO THE ENHANCEMENT OF THE ASSESSMENT THE LD. CIT(A) WAS REQUIRED TO GIVE NOTICE TO THE ASSESSEE COMPANY BEFORE MAKING THE ENHANCEMENT TO THE ASSESSED INCOME TH E LD CIT(A) CONFIRMED /SUSTAINED THE OTHER ADDITIONS OF RS. 59,29,235/ - AND RS. 10,43,648/ - BASED ON IMPOUNDED LOOSE DOCUMENTS/DIARIES DURING SURVEY OPERATIONS AS WERE MADE BY THE AO IN THE ASSESSMENT ORDER DATED 30 - 12 - 2009 PASSED BY THE AO U/S 143(3) OF T HE ACT. IN OUR CONSIDERED VIEW AND IN THE INTEREST OF JUSTICE, THE ORDER OF THE LEARNED CIT(A) NEEDS TO BE SET ASIDE AND ALL THE MATTERS/ISSUES IN THE INSTANT CROSS APPEALS RAISED BY THE ASSESSEE COMPANY AS WELL BY THE REVENUE ARE SET ASIDE/ RESTORED TO F ILE OF THE LD. CIT(A) FOR DE - NOVO DETERMINATION ON MERITS OF ALL THE ISSUES IN THESE CROSS APPEALS AFTER CONSIDERING THE RELEVANT EVIDENCES AND THE EXPLANATIONS SUBMITTED BY THE ASSESSEE COMPANY ON MERIT NEEDLESS TO SAY PROPER AND SUFFICIENT OPPORTUNITY OF BEING HEARD SHALL BE PROVIDED BY THE LD. CIT(A) TO THE ASSESSEE COMPANY AND THE ASSESSEE COMPANY WILL BE ALLOWED TO PRODUCE THE NECESSARY EVIDENCE AND EXPLANATIONS IN SUPPORT OF ITS CLAIMS AND CONTENTIONS IN ACCORDANCE WITH PRINCIPLES OF NATURAL JUSTICE I N ACCORDANCE WITH LAW. WE ORDER ACCORDINGLY. 5. AS THE ISSUES IN QUANTUM APPEAL HAVE BEEN RESTORED BACK TO THE FILE OF THE LD.CIT(A) FOR DENOVO DETERMINATION ON MERITS, W E RESTORE THIS PENALTY APPEAL ALSO TO THE FILE OF THE LD.CIT(A) WHO SHALL DEICIDE ALONG WITH THE QUANTUM APPEAL. THUS, WE RESTORE THIS APPEAL TO THE FILE OF THE LD.CIT(A) FOR FRESH ADJUDICATION IN ACCORDANCE WITH LAW AFTER PROVIDING ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE . 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON THE 0 7 TH FEBRUARY , 2018 . SD/ - SD/ - ( N. K. PRADHAN ) (C.N. PRASAD) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI / DATED 07 / 02 / 201 8 GIRIDHAR , SPS 4 ITA NO.1032/MUM/2016 (A.Y: 2007 - 08) M/S. RECHNER AUTOMATION SYSTEMS PVT. LTD. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY// BY ORDER, (ASSTT. REGISTRAR) ITAT, MUM