VIREN R. SHAH, MUMBAI V. ASST CIT (OSD) CIR 3(2), MUMBAI

ITA 1161/MUM/2017

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 8779 (ITAT-MUMBAI)
• Duration Of Justice: 8 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2009-2010
• Appeal Filed On: 20-02-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: MAYUR R MAKADIA
• Keywords: Bogus purchase; Opportunity of being heard; Principle of natural justice; Accommodation entries; Reassessment proceedings
• Section: 143(3); 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH I MUMBAI BEFORE SHRI D.T. GARASIA (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 1161/MUM/2017 ASSESSMENT YEAR: 2009 - 10 VIREN R. SHAH C/O ROOPAM, 218/219 CARNAC ROAD, CRAWFORD MARKET MUMBAI - 400002 VS. ACIT - 3(2) R.NO. 1923, 19 TH FLOOR, AIR INDIA BUILDING, NARIMAN POINT MUMBAI - 400021. PAN NO. AAIPS7452E APPELLANT RESPONDENT ASSESSEE BY : SHRI MAYUR R. MAKADIA, AR REVENUE BY : SHRI SAURABH KUMAR RAI , DR DATE OF HEARING : 14/09/2017 DATE OF PRONOUNCEMENT : 31/10/2017 ORDER PER N.K. PRADHAN, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE . THE RELEVANT ASSESSMENT YEAR IS 2009 - 10 . THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) - 5 1 , MUMBAI AND ARISES OUT OF THE ASSESSMENT COMPLETED U/S 143(3) R.W.S 147 OF THE INCOME TAX ACT 1961, (THE ACT). VIREN R. SHAH ITA NO. 1161/MUM/2017 2 2. THE G ROUNDS OF APPEAL FILED BY THE ASSESSEE READ AS UNDER: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT (A) ERRED IN CONFIRMING THE ADDITION OF RS.11,28,149/ - ON ACCOUNT OF ALLEGED BOGUS PURCHASE TRANSACTION. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT (A) ERRED IN IGNORING THE FACT THAT REOPENING MADE BY LD . A.O IN THE PRESENT CASE U/S 147 IS MERELY ON THE BASIS OF THE STATEMENT OF CERTAIN PARTIES MADE BEFORE THE SALES - TAX AUTHORITIES. THE LD. OUGHT TO HAVE FORMED AN INDEPENDENT BELIEF THAT THERE IS AN ESCAPEMENT OF INCOME R ATHER THAN MERELY RELYING ON THE INFORMATION FORWARDED BY THE SALES TAX AUTHORITIES AND THE INVESTIGATION WING OF THE INCOME TAX DEPARTMENT. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT (A) ERRED IN SUSTAINING THE ADDITION MADE BY THE LD . A.O WITHOUT APPRECIATING THE FACT THAT THE APPELLANT HAS NOT BEEN SPECIFICALLY NAMED IN THE CONFESSION OR ALSO THE OPPORTUNITY TO THE APPELLANT HAS NOT BEEN GIVEN FOR CROSS - EXAMINATION OF THE STATEMENT / CONFESSION OF THE ALLEGED PARTIES WHICH WOULD HA VE BEEN RECORDED BY THE SALES TAX D E PAR TMENT DURING THE COURSE OF INVESTIGATION. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT (A) ERRED IN NOT CONSIDERING THE SUBMISSIONS OF THE APPELLANT THAT THE PURCHASES ARE GENUINE PURCHASES FOR WHICH THE APPELLANT HAD DULY FURNISHED THE INVOICES, COPIES OF BANK STATEMENT SUPPORTING THE PAYMENT MADE THROUGH BANKING CHANNEL I.E. BY ACCOUNT PAYEE CHEQUE ONLY AND THEREBY DISCHARGED THE ONUS REGARDING PURCHASES MADE BY APPELLANT. 5. ON THE FACTS AND CIRC UMSTANCES OF THE CASE AND IN LAW THE LD. CIT (A)ERRED IN APPRECIATING THAT THE LD . A.O . HAS NOT DOUBTED THE SUBSEQUENT SALE OF SUCH GOODS, THE PURCHASES OF WHICH HAS BEEN ALLEGED TO BE BOGUS. THEREFORE , THE SUSTAINED ADDITION OF BOGUS PURCHASES WOULD TANTA MOUNT TO A DUAL ADDITION WHICH IS NOT PERMISSIBLE. VIREN R. SHAH ITA NO. 1161/MUM/2017 3 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE FILED HIS RETURN OF INCOME FOR THE AY 2009 - 10 ON 23.09.2009 DECLARING TOTAL INCOME AT RS.48,80,750/ - . THE AO COMPLETED THE ASSESSMENT U/S 143 (3) ON 27.12.2011 ASSESSING THE TOTAL INCOME AT RS.53,67,706/ - . THE AO THEN RECEIVED INFORMATION FROM THE DIRECTOR GENERAL OF INCOME TAX (INV.), MUMBAI THAT THE ASSESSEE HAD AVAILED BOGUS PURCHASES AMOUNTING TO RS.11,28,429/ - FROM NINE HAWALA DEALERS. ON T HE BASIS OF THE ABOVE INFORMATION, THE AO REOPENED THE EARLIER ASSESSMENT BY ISSUING NOTICE U/S 148. IN THE REASSESSMENT PROCEEDINGS, THE AO ISSUED NOTICE U/S 133(6) TO THE SAID PARTIES TO VERIFY THE GENUINENESS OF TRANSACTIONS. HOWEVER, THE SAID NOTICES W ERE RETURNED UNSERVED BY THE POSTAL AUTHORITIES. THE AO THEN REQUESTED THE ASSESSEE TO PRODUCE THE ABOVE PARTIES FOR VERIFICATION. HOWEVER, THE ASSESSEE FAILED TO DO SO. THE AO OBSERVED THAT THE ASSESSEE FAILED TO PRODUCE BEFORE HIM ANY STOCK REGISTER. IN VIEW OF THE ABOVE, THE AO MADE AN ADDITION OF RS.11,28,429/ - ON ACCOUNT OF ACCOMMODATION ENTRIES. 4. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT(A). WE FIND THAT THE LD. CIT(A) HAS AGREED WITH THE REASONS GIVEN BY THE AO AND DISMISSED THE APPEAL FILED BY THE ASSESSEE. 5. BEFORE US, THE LD. COUNSEL OF THE ASSESSEE FILES COPY OF THE LEDGER ACCOUNT OF THE SAID PARTIES, CHART OF PURCHASES AND CORRESPONDING PAYMENT, SAMPLE COPY OF INVOICES, BANK STATEMENT. IT IS SUBMITTED BY HIM THAT THE ASSESSEE SHOULD HAVE BEEN GIVEN OPPORTUNITY TO CROSS - EXAMINE THE SAID PARTIES. VIREN R. SHAH ITA NO. 1161/MUM/2017 4 6. ON THE OTHER HAND, THE LD. DR SUBMITS THAT AS THE ASSESSEE FAILED TO PRODUCE THE SAID PARTIES FOR EXAMINATION AND AS NO STOCK REGISTER WAS MAINTAINED, THE AO HAS RIGHTLY MADE AN ADDITION OF RS.11,28,429/ - ON ACCOUNT OF ACCOMMODATION ENTRIES. HE SUPPORTS THE ORDER PASSED BY THE LD. CIT(A). 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIALS ON RECOR D. WE BEGIN WITH THE 2 ND GROUND OF APPEAL. WE FIND THAT THE AO HAD RECEIVED SPECIFIC INFORMATION THAT THE ASSESSEE HAD OBTAINED BOGUS PURCHASES TO THE EXTENT OF RS.11,28,429/ - FROM NINE HAWALA TRADERS, DETECTED BY THE SALES TAX DEPARTMENT, GOVERNMENT OF MA HARASHTRA. THEREFORE, THE AO HAS RIGHTLY REOPENED THE ASSESSMENT MADE EARLIER BY ISSUING NOTICE U/S 148. IN VIEW OF THE ABOVE, WE DISMISS THE 2 ND GROUND OF APPEAL. 7.1 NOW WE DEAL WITH THE 1 ST , 3 RD , 4 TH AND 5 TH GROUND OF APPEAL TOGETHER AS THEY ADDRESS A COMMON ISSUE. THE FACT REMAINS THAT AFTER THE NOTICE U/S 133(6) ISSUED BY THE AO CAME BACK UNSERVED BY THE POSTAL AUTHORITIES, HE HAD REQUESTED THE ASSESSEE TO PRODUCE THE ABOVE PARTIES FOR EXAMINATION. THE ASSESSEE FAILED TO PRODUCE THE ABOVE PARTIES BEFO RE THE AO. WE ARE OF THE CONSIDERED VIEW THAT THE CONTENTIOUS ISSUES IN THE INSTANT CASE COULD BE RESOLVED BY EXAMINING THE ABOVE PARTIES. IT IS THE DUTY OF THE AO TO ENFORCE ATTENDANCE OF A WITNESS IF HIS EVIDENCE IS MATERIAL. AT THE SAME TIME THE ASSESS EE MUST FURNISH THE COMPLETE ADDRESS OF SUCH PERSON. VIREN R. SHAH ITA NO. 1161/MUM/2017 5 A PROPER HEARING MUST ALWAYS INCLUDE A FAIR OPPORTUNITY TO THOSE WHO ARE PARTIES IN THE CONTROVERSY FOR CORRECTING OR CONTRADICTING ANYTHING PREJUDICIAL TO THEIR VIEW. CROSS - EXAMINATION IS ALLOWED BY PR OCEDURAL RULES AND EVIDENTLY ALSO BY THE RULES OF NATURAL JUSTICE. ANY WITNESS WHO HAS BEEN SWORN ON BEHALF OF ANY PARTY IS LIABLE TO BE CROSS - EXAMINED ON BEHALF OF THE OTHER PARTY TO THE PROCEEDINGS. THE HON'BLE SUPREME COURT IN STATE OF KERALA VS. K.T. S HADULI GROCERY DEALER AIR 1977 SC 1627, RECOGNISED THE IMPORTANCE OF ORAL EVIDENCE BY HOLDING THAT THE OPPORTUNITY TO PROVE THE CORRECTNESS OR COMPLETENESS OF THE RETURN NECESSARILY CARRY WITH IT THE RIGHT TO EXAMINE WITNESSES AND THAT INCLUDES EQUALLY THE RIGHT TO CROSS - EXAMINE WITNESSES. IN ITO VS. M. PIRAI CHOODI (2012) 20 TAXMANN.COM 733 (SC), THE HON'BLE SUPREME COURT HAS HELD THAT ORDER OF ASSESSMENT PASSED WITHOUT GRANTING AN OPPORTUNITY TO ASSESSEE TO CROSS - EXAMINE, SHOULD NOT HAVE BEEN SET ASIDE B Y HIGH COURT; AT MOST, HIGH COURT SHOULD HAVE DIRECTED ASSESSING OFFICER TO GRANT AN OPPORTUNITY TO ASSESSEE TO CROSS - EXAMINE CONCERNED WITNESS. THE IMPORTANCE OF CROSS - EXAMINATION HAS BEEN EMPHASIZED BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF OM VI NYLS P. LTD. VS. ITO [WP(L) NO. 3114 OF 2014]. IN VIEW OF THE ABOVE, WE SET ASIDE THE ORDER OF THE LD. CIT(A) AND RESTORE THE MATTER TO THE FILE OF THE AO TO MAKE A FRESH ASSESSMENT IN THE LIGHT OF OUR OBSERVATION HEREINBEFORE AFTER GIVING OPPORTUNITY TO THE VIREN R. SHAH ITA NO. 1161/MUM/2017 6 ASSESSEE TO CROSS - EXAMINE THE SAID PARTIES. WE ALSO DIRECT THE ASSESSEE TO FILE THE RELEVANT DOCUMENTS/EVIDENCE BEFORE THE AO. NEEDLESS TO SAY THE AO WOULD GIVE REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE BEFORE FINALIZING THE ASSESSMENT ORDE R. THUS THE 1 ST , 3 RD , 4 TH AND 5 TH GROUNDS OF APPEAL ARE ALLOWED FOR STATISTICAL PURPOSES. 8. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 31/10/2017. SD/ - SD/ - ( D.T. GARASIA ) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED: 31/10/2017 RAHUL SHARMA, SR. P.S. 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