ROCHEME SEPARATION SYSTEMS (I) P.LTD, MUMBAI V. ACIT 10, MUMBAI

ITA 1182/MUM/2013

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 0263 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 5 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-08-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 12-05-2017
• Assessment Year: 2006-2007
• Appeal Filed On: 11-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O P MEENA
• Assessee Lawyers: GOURAV BANSAL
• Keywords: Bogus purchase; Unexplained cash credit; Unexplained investment; Income from undisclosed sources; Tangible material; Wrong claim; Difference of opinion; Accommodation entries; Change of opinion; Reassessment proceedings
• Section: 143(3); 153A; 32; 148; 132; 2

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. 1182 / MUM/20 13 ASSESSMENT YEAR: 2006 - 07 M/S. ROCHEME SEPARATION SYSTEMS VS. A CIT - 10 INDIA PVT. LTD. AAYAKAR BHAVAN, 503, DALAMAL CHAMBERS, 29 NEW M LINES M.K. MARG, MUMBAI 400020 MUMBAI - 400020 PAN NO. AABCR1955P (APPELLANT) (RESPONDENT) ITA NO. 1204/MUM/2013 ASSESSMENT YEAR: 2006 - 07 ACIT CEN CIR 10 VS. M/S. ROCHEM SEPERATION INDIA P. LTD. 8 TH FLOOR, R. NO. 802 101, HDIL TOWER, ANANT KANEKAR OLD CGO BLDG. M.K. ROAD MARG, BANDRA (EAST) MUMBAI 400020 MUMBAI - 400051 PAN NO. AABCR1955P (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI GOURAV BANSAL, AR REVENUE BY: SH RI O.P. MEENA, DR DATE OF HEARING : 12/05 /2017 DATE OF PRONOUNCEMENT: 09/08/2017 ORDER PER N.K. PRADHAN, AM . THE CAPTIONED APPEALS - ONE BY THE ASSESSEE AND THE OTHER BY THE REVENUE - FOR THE AY 2006 - 07 ARE DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) 37, MUMBAI AND ARISE OUT OF ITA NO. 1182 & 1204 /MUM/201 3 2 ORDER U/S 143(3) R.W.S. 147 OF THE IN COME TAX ACT, 1961 (THE ACT). AS SOME COMMON ISSUES ARE INVOLVED, WE ARE PROCEEDING TO DISPOSE THEM O F F BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 2. WE BEGIN WITH THE APPEAL FILED BY THE ASSESSEE. IT READS AS UNDER: 1. THE LD. CIT(A) ERRED IN LAW AND FACTS IN CONFIRMING THE REOPENING OF AS SESSMENT U/S 147 OF THE INCOME T AX ACT FOR THE IMPUGNED ASSESSMENT YEAR ON THE BASIS OF REASONS RECORDED BY ASSESSING OFFICER WHICH HAVE ALREADY BEEN CONSIDERED DURING THE ORIGINAL ASSESSMENT PROCEE DINGS U/S 143(3) OF THE INCOME T AX ACT BY WAY OF ACCEPTING THE AVAILABILITY AND UTILIZATION OF THE LIQUID CASH AGAINST BOGUS PURCHASES SURRENDERED DURING THE SEARCH PROCEEDINGS. THUS THE REASSESSMENT PROCEEDINGS INITIATED MERELY ON CHANGE OF OPINION IS VOID AB INITIO AND SHO ULD BE ANNULLED. 2. THE LD. CIT(A) ERRED IN LAW AND FACTS IN CONFIRMING A DOUBLE ADDITION M ADE BY ASSESSING OFFICER OF RS. 11,94,500/ - WHICH IS A LREADY INCLUDED IN A SUM OF RS. 1,23,62,078/ - AND ADDITION FOR THE SAID AMOUNT O F RS. 1,23,62,078/ - IS ALREADY ALLOW ED BY CIT(A). 3. WE COME TO THE 1 ST GROUND OF APPEAL. BEFORE US, THE LD. COUNSEL OF THE ASSESSEE SUBMITS THAT IN THE ORIGINAL ASSESSMENT PROCEEDINGS U/S 143(3) THE ASSESSING OFFICER (AO) HAD ACCEPTED THE AVAILABILITY AND UTILIZATION OF LIQUID CASH AGAINST BOGUS PURCHASES SURRENDERED DURING T HE SEARCH PROCEEDINGS. THEREFORE, THERE WAS NO BASIS FOR RE - OPENING THE ASSESSMENT BY ISSUING NOTICE U/S 148. ON THE OTHER HAND, THE LD. DR SUPPORTS THE ORDER OF THE LD. CIT(A) CONFIRMING THE ISSUE OF NOTICE U/S 148 BY THE AO. 4. WE HAVE HEARD THE RIVAL S UBMISSIONS AND PERUSED THE RELEVANT MATERIALS ON RECORD. LET US GO BACK TO THE FACTS OF THE CASE. A SEARCH AND SEIZER ACTION U/S 132 OF THE ACT WAS CARRIED OUT ON 10.08.2005 AT ITA NO. 1182 & 1204 /MUM/201 3 3 THE PREMISES OF VARIOUS COMPANIES OF ROCHEME GROUP. THE ASSESSEE - COMPANY M/S RO CHEME SEPARATION SYSTEMS (I) PVT. LTD. (RSSIPL) ADMITTED UNDISCLOSED INCOME OF RS.699.56 LAKHS U/S 132(4) BEING THE INCOME EARNED BY WAY OF BOGUS PURCHASES. LATER DURING THE COURSE OF ASSESSMENT PROCEEDINGS BEFORE THE AO FOR THE PERIOD FROM AY 2000 - 01 TO 2 006 - 07, THE ASSESSEE FILED A CHART OF THE APPLICATION OF THE UNDISCLOSED INCOME OF RS.699.56 LAKHS WHICH WAS EARLIER ADMITTED BY HIM U/S 132(4). THE DETAILS ARE AS UNDER: SL. NO. PARTICULARS AMOUNT ( RS. ) UNDISCLOSED INCOME ACCOUNTED FOR IN THE F.Y. 1. PAYMENT OF CASH TOWARDS CIVIL AND OTHER INTERIOR WORK CARRIED OUT AT OFFICE PREMISES 1,66,40,000 2006 - 07 2. PAYMENT OF CASH TOWARDS 40% SHARE IN RESIDENTIAL FLAT 46,00,000 2006 - 07 3. CASH DEPOSITED 55,99,717 2006 - 07 4. PURCHASE OF 12.8 KG GOLD BAR 1,24,50,500 2006 - 07 5. PURCHASES 91,10,564 2005 - 06 6. CASH DEPOSITED IN BANK 11,84,500 2005 - 06 7. CASH SEIZED AND DEPOSITED TOWARDS SAT 95,91,000 2005 - 06 8. RECEIVABLE FROM VENDOR 20,67,014 2005 - 06 9. CASH EXPENDITURE INCURRED 87,12,863 2004 - 05 10. TOTAL 6,99,56,158 THE LD. COUNSEL SUBMITS THAT I N THE RETURN OF INCOME FILED FOR THE AY 1999 - 2000 TO 2006 - 07, RSSIPL DECLARED THE FOLLOWING AMOUNT AS BOGUS PURCHASES: ITA NO. 1182 & 1204 /MUM/201 3 4 SR. NO. ASSESSMENT YEAR AMOUNT (RS.) 1. 1999 - 2000 57,76,288/ - 2. 2000 - 2001 54,08,048/ - 3. 2001 - 2002 87,24,864/ - 4. 2002 - 2003 39,80,750/ - 5. 2003 - 2004 40,51,667/ - 6. 2004 - 2005 76,10,963/ - 7. 2005 - 2006 3,19,89,381/ - 8. 2006 - 2007 24,14,197/ - TOTAL 6,99,56,158/ - RSSIPL FILED ITS RETURN OF INCOME FOR THE AY 2006 - 07 U/S 153A ON 23.11.2006 DECLARING TOTAL INCOME OF RS.9,05,53,041/ - . WE FIND THAT THE AO HAD ISSUED A DETAILED LETTER NUMBERING 7 PAGES TO THE ASSESSEE ON 19.10.2007 TO FILE THE DETAILS AN D ALSO EXPLANATION ON ISSUES REGARDING (I) COMMISSION PAYMENTS (II) BOGUS PURCHASES, (III) UNACCOUNTED CASH AND (IV) INVESTMENT IN IMMOVABLE ASSETS PERTAINING TO AY 2000 - 01 TO AY 2006 - 07. THE ASSESSING OFFICER (AO) COMPLETED THE ASSESSMENT U/S 143(3) ON 31.12.2007 COMPUTING THE TOTAL INCOME OF RSSIPL AS UNDER: PARTICULARS RS. 1. INCOME FROM HOUSE PROPERTY 47,250 2. (A) INCOME FROM BUSINESS OR PROFESSION 90,500,217 DISALLOWANCE: (I) BOGUS P URCHASES AS DISCUSSED IN PARA - 6. 2 5,89,201 (II) BOGUS PURCHASES AS DISCUSSED IN PARA 6.12 87,28,986 (III) COMMISSION PAYMENTS AS DISCUSSED IN PARA 7.5.2 1,17,832 (IV) COMMISSION PAYMENTS AS DISCUSSED IN PARA 7.6 9,92,133 ITA NO. 1182 & 1204 /MUM/201 3 5 (V) FOREIGN TRAVEL EXP. AS DISCUSSED IN PARA 10 2 ,23,759 10,11,52,128 10,11,99,378 3. CAPITAL GAINS (A) SHORT - TERM (UNDER SECTION 111A) 5,574 (B) SHORT - TERM (OTHERS) NIL (C) TOTAL SHORT - TERM 5,574 (D) LONG - TERM NIL (E) TOTAL CAPITAL GAINS 5,574 4. INCOME FROM OTHER SOURCES NIL 5. GROSS TOTAL INCOME 10,12,04,952 6. DEDUCTION UNDER CHAPTER VI - A NIL 7. TOTAL INCOME 10,12,04,952 R/OFF 10,12,04,950 THUS THE AO HAS MADE ADDITIONS INTER ALIA OF (I) BOGUS PURCHASES AMOUNTING TO RS.5,89,201/ - & RS.87,28,986/ - , (II) COMMISSION PAYMENTS OF RS.1,17,832/ - & RS.9,92,133/ - . THESE ADDITIONS ARE BASED ON THE MATERIALS SEIZED DURING THE COURSE OF SEARCH. ALSO THE AO HAS MENTIONED THAT PAGE NO. 2 TO 31 OF THE IMPUGNED ASSESSMENT YEAR ARE SAME AS IN THE ASSESSMENT ORDER FOR THE AY 2000 - 01. 4.1 SUBSEQUENTLY, THE AO RE - OPENED THE ABOVE ASSESSMENT BY ISSUING NOTICE U/S 148 ON 09.11 .2010. THE ASSESSEE REQUESTED THE AO FOR A COPY OF THE REASON FOR ISSUING NOTICE U/S 148. THE AO PROVIDED THE ASSESSEE THE REASON FOR RE - OPENING VIDE LETTER DATED 05.05.2011. IN THE RE - ASSESSMENT, THE AO HAS MADE ADDITION ON ACCOUNT OF (I) DEPOSIT OF RS.11 ,94,500/ - IN THE BANK ACCOUNT AS UNEXPLAINED CREDIT, (II) AMOUNT RECEIVABLE OF RS.20,67,014/ - AS UNEXPLAINED INVESTMENT, ITA NO. 1182 & 1204 /MUM/201 3 6 (III) BOGUS CLAIM OF RS.1,23,62,078/ - AND (IV) ADDITION OF RS.3,09,72,784/ - U/S 40(A). 4.2 IT IS PERTINENT TO MENTION HERE THAT APPEAL AGAINST THE COMMON ORDER PASSED BY THE LD. CIT(A) - CENTRAL - II, MUMBAI DATED 16.09.2008 WAS FILED BEFORE THE ITAT BY BOTH THE ASSESSEE AND THE REVENUE. THE ASSESSMENT YEARS WERE 200 0 - 0 1 TO 2006 - 07. IN THE CONCERNED APPEAL (ITA NO. 6932/MUM/2008 TO 6938/MUM /2008 FOR THE AY 2000 - 01 TO 2006 - 07 & ITA NO. 6593/MUM/2008 TO 6598/MUM/2008 FOR AY 2000 - 01 TO 2006 - 07), THE TRIBUNAL IN ITS ORDER DATED 16.05.2011 HAS MENTIONED AT PAGE 20 THAT THE ASSESSEE ALSO PRODUCED THE CONCERNED PARTIES BEFORE THE AO FOR EXAMINATION , HOWEVER, RELYING ON THE STATEMENTS TAKEN BY THE INVESTIGATION WING, THE AO IGNORED THE FINDINGS PLACED ON RECORD BY THE ASSESSEE AND TREATED THE PURCHASES AS BOGUS AND MADE THE DISALLOWANCE OF THE FOLLOWING AMOUNTS IN THE RESPECTIVE ASSESSMENT YEARS: SR. NO. NAME OF THE PURCHASES 2000 - 01 AY 2001 - 02 AY 2002 - 03 AY 2003 - 04 AY 2004 - 05 AY 2005 - 06 AY 2006 - 07 AY 1. PARMOD MENTAL CORPORATION -- 3,48,314 2,23,272 6,21,597 26,08,847 -- -- 2. SHREE GANESH METALS -- -- -- -- -- 1,12,17,480 87,28,986 4.3 THUS WE FIND THAT THERE WAS NO TANGIBLE MATERIAL BEFORE THE AO FOR ISSUING NOTICE U/S 148 OF THE ACT. IT IS HELD BY THE HONBLE BOMBAY HIGH COURT IN DIRECT INFORMATION PVT. LTD. VS. ITO (2011) 203 TAXMAN 70 (BOM) THAT UNLESS THE ASSESSING OFFICE R HAS TANGIBLE MATERIAL BEFORE HIM ON THE BASIS OF WHICH HE COMES TO CONCLUSION THAT INCOME HAS ESCAPED ASSESSMENT, RE - OPENING OF AN ASSESSMENT CANNOT BE PERMITTED MERELY ON GROUND THAT THERE IS A CHANGE IN VIEW OF THE ITA NO. 1182 & 1204 /MUM/201 3 7 ASSESSING OFFICER AND HE SUBSEQUENTLY BELIEVES THAT EARLIER VIEW WAS INCORRECT. 4.4 THE SEIZED MATERIALS WERE AVAILABLE TO THE AO. AS MENTIONED EARLIER THE AO MADE THE ASSESSMENT U/S 143(3) ON 31.12.2007 R ELYING ON THE SEIZED MATERIALS. THE TOTAL INCOME ARRIVED AT BY THE AO AT RS.10,12,04,95 0/ - HAS BEEN MENTIONED AT PARA 3.1 HERE - IN - ABOVE. IN CALCUTTA DISCOUNT CO. LTD. VS. ITO (1961) 41 ITR 191 (SC) , THE HONBLE SUPREME COURT HAS HELD THAT THE ASSESSEE HAS RESPONSIBILITY OF DISCLOSING ALL PRIMARY FACTS, BUT ONCE HE HAS DISCLOSED ALL PRIMARY F ACTS, HIS DUTY ENDS AND IT IS FOR THE ASSESSING AUTHORITY TO DRAW THE PROPER CONCLUSION FROM IT. IF THE WRONG CONCLUSION WAS DRAWN, THEN IT IS NO GROUND FOR RE - OPENING AN ASSESSMENT. ALSO IN CIT VS. BHANJI LA VJI (1971) 79 ITR 582, 588 (SC) , THE HONBLE SUPREME COURT HELD THAT WHEN THE PRIMARY FACTS NECESSARY FOR ASSESSMENT ARE FULLY AND TRULY DISCLOSED TO THE ASSESSING OFFICER AT THE STAGE OF ORIGINAL ASSESSMENT PROCEEDINGS, HE IS NOT ENTITLED, ON A CHANGE OF OPINION, TO COMMENCE PROCEEDING S U/S 147. RE - OPENING OF A CONCLUDED ASSESSMENT IS NOT PERMISSIBLE SIMPLY ON THE GROUND THAT A NEW VIEW MAY BE ENTERTAINED ON THE SAME FACTS. THIS IS SO BECAUSE IF IT IS PERMITTED, LITIGATION WILL HAVE NO END EXCEPT WHEN LEGAL INGENUITY IS EXHAUSTED. IT HAS BEEN HELD SO IN SIRPUR PAPER MILLS VS. ITO (1978) 114 ITR 404 (AP) , AFFIRMED IN, ITO VS. SIRPUR PAPER MILLS LTD. (1978) 113 ITR 393 (AP) . 4.5 AS THERE HAS BEEN A CHANGE OF OPINION IN THE INSTANT CASE, WE FOLLOW THE RATIO OF THE DECISIONS DELINEATED AT PARA 4.3 AND 4.4 HERE - IN - ABOVE AND ANNUL THE ORDER U/S 143(3) R.W.S 147 PASSED BY THE AO. 5 . IN THE RESULT, THE APPEAL FILE D BY THE ASSESSEE IS ALLOWED. ITA NO. 1182 & 1204 /MUM/201 3 8 6 . IN THE CROSS APPEAL, THE GROUNDS FILED BY THE R EVENUE READ AS UNDER: I. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) ERRED IN DELETING THE ADDITION ON ACCOUNT OF CASH PURCHASES, CASH DEPOSITS WITH BANK AND RECEIVABLE FROM VENDORS FOR TOTAL AMOUNT OF RS. 1,23,62,708/ - WITHOUT CONSIDERING THE FACT THAT THE ASSESSEE NEVER CLAIMED THAT ANY AMOUNT WAS RECEIVABLE FROM ANY OF THE BOGUS BILLERS, AND THE ONUS WAS ON THE ASSESSEE TO ESTABLISH THE CLAIM. II. ON TH E FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) FAILED TO APPRECIATE THAT HAVING ADMITTED THE FACTS DURING THE SEARCH ACTION ITSELF THAT IT HAD ISSUED CHEQUES AGAINST ITS BOGUS PURCHASES AND AFTER ACTING UPON THE STATEMENT GIVEN IN THIS REGARD BY THE DIRECTOR OF THE COMPANY, THERE WAS NO NEED TO RECEIVE THE AMOUNT IN CASH EVEN IF ANY PART OF THE SAME WAS RECEIVABLE FROM SUCH BOGUS BILLERS AND ACCORDINGLY, MERELY ON THE BASIS OF THIS EVIDENT FACT, THE PLEA OF THE ASSESSEE COMPANY WAS LIABLE TO GET REJECTED. III. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) FAILED TO APPRECIATE THAT THE LD. CIT(A) CLEARLY FAILED TO APPRECIATE THAT THE ONUS WAS ON THE ASSESSEE COMPANY TO ESTABLISH ITS CLAIM BEYOND ANY REA SONABLE DOUBT BY PROVIDING CREDIBLE DOCUMENTARY EVIDENCES, WHICH THE ASSESSEE COMPANY MISERABLY FAILED IN THE INSTANT CASE. IV. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) FAILED TO APPRECIATE THAT IT IS A USUAL TRADE PRAC TICE THAT IF AN ASSESSEE TAKES ACCOMMODATION ENTRIES OF PURCHASE TO INFLATE ITS EXPENSES, IT IN TURN RECEIVES BLACK MONEY IN CASH BUT WHEN THE REALITY OF SUCH BOGUS PURCHASE TRANSACTION BECAME EVIDENT AND THE FACTS IN THIS REGARD WERE ADMITTED BY BOTH THE ASSESSEE AS WELL AS THE BOGUS BILLERS; THE BALANCE AMOUNT, IF ANY, WAS RECEIVABLE AS ON DATE OF SEARCH, THE ASSESSEE SHOULD HAVE TAKEN THE SAME THROUGH BANKING CHANNEL STRICTLY. ITA NO. 1182 & 1204 /MUM/201 3 9 V. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) CLEARLY FAILED IN HOLDING THAT THE UNACCOUNTED INCOME BROUGHT TO THE BOOK OF THE ASSESSEE DURING PREVIOUS YEAR RELEVANT TO A.Y. 2006 - 07 ON ACCOUNT OF CASH PURCHASES, CASH DEPOSITS WITH BANK AND RECEIVABLE FROM VENDORS WAS APPLICATION OF THE SAME INCOME EARNED BY IT THROUGH ITS BOGUS PURCHASES. VI. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) FAILED TO APPRECIATE THAT IT WAS THE DUTY OF THE ASSESSEE TO PROVE ITS CLAIM WITH COGENT EVIDENCE PRODUCED IN ITS SUPPORT AND ALSO I T WAS REQUIRED TO JUSTIFY SUCH CLAIM WHEN PUT TO TEST ON HUMAN PROBABILITY WHICH IN THE INSTANT CASE THE ASSESSEE HAS MISERABLY FAILED. 7 . AS THE ASSESSMENT ORDER PASSED BY THE AO FOR THE IMPUGNED ASSESSMENT YEAR U/S 143(3) R.W.S 147 HAS BEEN ANNULLED, THE CROSS APPEAL FILED BY THE REVENUE DOES NOT SURVIVE. 8 . IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. 9 . TO SUM UP, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED WHEREAS THE CROSS APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN C OURT ON 09.08.2017. SD/ - SD/ - ( SAKTIJIT DEY ) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED: 09.08.2017 RAHUL SHARAM , 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 . ITA NO. 1182 & 1204 /MUM/201 3 10 BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI