MR. BHAGWAN PUNDALIK MHATRE, MUMBAI V. INCOME TAX OFFICER WARD-5, PANVEL

ITA 1450/MUM/2018

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 6820 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 08-03-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S K MITRA
• Assessee Lawyers: V D PARMAR
• Keywords: Bogus purchase; Opportunity of being heard; Opportunity of cross examination; Additional evidence; Reassessment proceedings; Set aside
• Section: 142(1); 143(1); 143(2); 147; 148; 144; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH SMC MUMBAI BEFORE SHRI SAKTIJIT DEY (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 1450/MUM/2018 ASSESSMENT YEAR: 2011 - 12 MR. BHAGWAN PUNDALIK MHATRE C/O M/S R.J. STEEL PVT. LTD. PLOT NO. 4 SECTOR - 5, KAMOTHE, DIST. RAIGAD - 410209 VS. ITO WARD 5, PANVEL MUMBAI. PAN NO. BHEPM9124R APPELLANT RESPONDENT ASSESSEE BY : MR. V.D. PARMAR , AR REVENUE BY : MR. S.K. MITRA , DR DATE OF HEARING : 13/12 /2018 DATE OF PRONOUNCEMENT: 28/02/2019 ORDER PER N.K. PRADHAN, AM THIS IS AN APPEAL FILED BY THE ASSESSEE. THE RELEVANT ASSESSMENT YEAR IS 2011 - 1 2 . THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE COMMISS IONER OF INCOME TAX (APPEALS) - 2 , THANE [IN SHORT CIT(A)] AND ARISES OUT OF TH E ASSESSMENT COMPLETED U/S 144 R.W.S. 147 OF THE INCOME TAX ACT 1961, (THE ACT). MR. BHAGWAN ITA NO. 1450/MUM/2018 2 2 . THE GROUNDS OF APPEAL FILED BY THE ASSESSEE READ AS UNDER: 1. (I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN HOLDING THAT THE CASE IS RIGHTLY REOPENED U/S 147 OF THE IT ACT, 1961. (II) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW LD. CIT(A) ERRED IN HOLDING THAT THE CASE IS RIGHTLY REOPENED U/S 147 OF THE I.T. ACT WITHO UT APPRECIATING THE FACT THAT COPY OF REASONS RECORDED WERE NOT PROVIDED EVEN WHEN SUCH SPECIFIC REQUEST WAS MADE FIRST TIME BEFORE LD. CIT(A) DURING APPELLATE PROCEEDINGS. THUS REOPENING IS UPHELD BY LD. CIT(A) WITHOUT GIVING PROPER OPPORTUNITY OF BEING HEARD TO THE APPELLANT. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE AO ERRED IN PASSING ORDER U/S 144 OF THE ACT, WITHOUT GIVING PROPER OPPORTUNITY OF BEING HEARD AND WITHOUT ISSUING MANDATORY NOTICE U/S 144 OF THE ACT 3. (I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW LD. CIT(A) ERRED IN RESTRICTING DISALLOWANCE OUT OF ALLEGED BOGUS PURCHASES TO RS.1,27,575/ - BEING @ 12.5% OF ALLEGED BOGUS PURCHASES OF RS.10,20,596/ - . (II) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW LD. CIT(A) ERRED IN RESTRICTING DISALLOWANCE OUT OF ALLEGED BOGUS PURCHASES TO RS.1,27,575/ - WITHOUT APPRECIATING THE FACT THAT NO OPPORTUNITY OF CROSS EXAMINATION OF PARTIES WHO HAVE ALLEGED THAT THEY HAVE PROVIDED BOGUS PURCHASE HAWALA ENTRIES TO THE APPELLANT. (III) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW LD. CIT(A) ERRED IN RESTRICTING DISALLOWANCE OUT OF ALLEGED BOGUS PURCHASES TO RS.1,27,575/ - WITHOUT APPRECIATING THE FACT THAT APPELLANT IS TRADER IN CEMENT AND IS SUBJECTED T O TAX AUDIT U/S 44AB OF THE IT ACT 1961 AND THERE IS NO ADVERSE REMARK OF AUDITOR IN HIS REPORT. THERE IS COMPLETE TALLY OF STOCK QUANTITATIVELY AND QUANTITATIVELY. ALL PURCHASES ARE SUPPORTED BY PROPER BILLS AND DELIVERY CHALLANS AND PAYMENTS TO MR. BHAGWAN ITA NO. 1450/MUM/2018 3 SUPPLIERS ARE MADE BY ACCOUNT PAYEE CHEQUES AND ARE REFLECTED IN BANK STATEMENTS. THE LD. CIT(A) HAS RESTRICTED ADDITION @ 12.5% OF ALLEGED BOGUS PURCHASES ON ASSUMPTION AND PRESUMPTION BASIS AND HAS NO MERIT. 4. (I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW LD. CIT(A) ERRED IN CONFIRMING LOANS OF RS.8,35,800/ - OF THE IT ACT 1961. (II) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW LD. CIT(A) ERRED IN CONFIRMING LOANS OF RS.8,35,800/ - U/S 68 OF THE IT ACT 1961 WITHOUT APPRECIATING THE FACT THAT AL L SUCH LOAN S WERE TAKEN BY ACCOUNT PAYEE CHEQUES AND LOAN CONFIRMATION LETTERS WERE FILED BEFORE LD. CIT(A) THANE DURING APPELLATE PROCEEDINGS BUT SAME HAS NOT BEEN CONSIDERED AT ALL WHILE DECIDING THE ISSUE ON 30.11.2017. 3. BRIEFLY STATED, THE FACTS ARE THAT THE ASSESSEE FILED HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR (AY) 2011 - 12 ON 29.09.2011 DECLARING TOTAL INCOME OF RS.2,40,820/ - . THE RETURN OF INCOME WAS PROCESSED U/S 143(1) OF THE ACT. SUBSEQUENTLY, THE ASSESSING OFFICER (AO) REOPENED THE ASSESSM ENT BY ISSUING NOTICE U/S 148 ON 24.07.2013 ON THE GROUND THAT THE ASSESSEE HAD MADE THE FOLLOWING BOGUS PURCHASES S. NO. NAME OF THE ENTRY PROVIDER MAHARASHTRA VAT NO. F.Y. AMOUNT OF BILL TAKEN BY THE ASSESSEE 1. SHARDA TRADING CO. 27460624763V 2010 - 11 4,60,014/ - 2. SAJ ENTERPRISES 27960705192V 2010 - 11 5,60,582/ - TOTAL 10,20,596/ - DURING THE COURSE OF REASSESSMENT PROCEEDINGS, THE AO ISSUED NOTICE U/S 143(2) AND 142(1) CALLING FOR CERTAIN INFORMATION. HOWEVER, THE ASSESSEE FAILED TO FILE THOSE DETAILS. PRECISELY FOR THIS REASON, THE AO MADE THE ASSESSMENT U/S 144 OF THE ACT ON THE BASIS OF THE INFORMATION MR. BHAGWAN ITA NO. 1450/MUM/2018 4 RECEIVED FROM THE SALES TAX DEPARTMENT, GOVERNMENT OF MAHARASHTRA. BESIDES MAKING AN ADDITION OF RS.10,20,596/ - , THE AO MADE A FURTHER A DDITION OF RS.8,35,800/ - IN RESPECT OF UNSECURED LOANS ON THE REASON THAT THE ASSESSEE FAILED TO FILE DETAILS WHICH COULD ESTABLISH THE IDENTITY OF THE LOAN CREDITORS, THEIR CREDITWORTHINESS AND GENUINENESS OF TRANSACTION. 4. IN APPEAL, THE LD. CIT(A) DISMISSED THE GROUND RAISED BY THE ASSESSEE AGAINST REOPENING AND ALSO ESTIMATED THE PROFIT @ 12.5% ON THE ALLEGED BOGUS PURCHASES OF RS.10,20,596/ - WHICH COMES TO RS.1,27,575/ - . THE BASIS OF ESTIMATING THE PROFIT WAS THAT THE PROFIT ELEMENT EMBEDDED IN TH E ALLEGED PURCHASES IS TO BE BROUGHT TO TAX. DURING THE COURSE OF HEARING BEFORE THE LD. CIT(A), THE ASSESSEE FILED A WRITTEN SUBMISSION DATED 24.03.2017 STATING THAT HE IS IN THE PROCESS OF OBTAINING LOAN CONFIRMATION FROM CERTAIN PARTIES AND ACCORDINGLY REQUESTED FOR SOMETIME TO FILE THE SAME. IT IS OBSERVED BY THE LD. CIT(A) THAT DURING THE COURSE OF APPELLATE PROCEEDINGS, IN SPITE OF BEING GIVEN SEVERAL OPPORTUNITIES OF BEING HEARD, THE ASSESSEE COULD NOT FURNISH CONFIRMATION OF LEDGER ACCOUNTS OF CRED ITORS, THEIR BANK STATEMENTS HIGHLIGHTING THE RELEVANT ENTRIES, SOURCES OF LOANS, COPIES OF ITRS TO ESTABLISH THEIR CREDITWORTHINESS, ADDRESS/PAN TO ESTABLISH THEIR IDENTITY, DETAILS OF REPAYMENT OF LOANS ETC. THEREFORE, THE LD. CIT(A) CONFIRMED THE ADDITI ON OF RS.8,35,800/ - MADE BY THE ASSESSEE U/S 68 OF THE ACT. 5. BEFORE US, THE LD. COUNSEL OF THE ASSESSEE FILES A PAPER BOOK (P/B) CONTAINING (I) SUBMISSION FILED BEFORE CIT(A) - II ON 24 TH MARCH 2017, (II) MR. BHAGWAN ITA NO. 1450/MUM/2018 5 PAPER BOOK CONVERING LETTER FILED BEFORE CIT(A), ( III) REQUEST MADE BEFORE CIT(A) FOR ADMISSION OF ADDITIONAL EVIDENCE, (IV) ACKNOWLEDGEMENT OF ORIGINAL RETURN FOR AY 2011 - 12, (V) TAX AUDIT REPORT, (VI) COMPUTATION OF INCOME, (VII) PROFIT AND LOSS AC COUNT, BALANCE SHEET OF RAM ENTERPRISES , PROPRIETARY CON CERN OF ASSESSEE, (VIII) PURCHASE AND SALE DETAILS OF ALLEGED HAWALA PARTIES , QUANTITY WISE AND VALUE WISE, (IX) QUANTITY AND VALUE WISE DETAILS OF PURCHASE AND SALE, (X) QUANTITY AND VALUE WISE AND PARTY WISE DETAILS OF PURCHASE SALES, (XI) LEDGER AND PUR CHASE BILLS OF SHRADDHA TRADING CO., (XII) LEDGER AND PURCHASE BILLS OF SAJ ENTERPRISES, (XIII) DHANLAXMI BANK LTD. BANK STATEMENT, (XIV) LEDGER AC OF RADHAKRISHNA TRADERS, SAUBHAGYA TRADERS, (XV) SALE BILLS OF RAM ENTERPRISES, (XVI) CONFIRMATION LETTER OF BALAJI TRADING CO., (XVII) CONFIRMATION LETTER OF BAJARA ENTERPRISE, (XVIII) CONFIRMATION OF ROYAL TRADING CORPORATION. IT IS CERTIFIED BY THE LD. COUNSEL THAT THE DOCUMENTS AT SR. NO. 1 WERE FILED BEFORE THE CIT(A), WHEREAS DOCUMENTS AT SR. NO. 2 TO 19 , WHICH WERE TO BE FILED BEFORE CIT(A) BUT COULD NOT BE FILED AS HEARING WAS CONCLUDED BY CIT(A) AND ORDER WAS PASSED. IT IS FURTHER STATED THAT THE DOCUMENTS AT SR. NO. 2 TO 20 ARE FILED FOR THE FIRST TIME BEFORE THE ITAT FOR ADMISSION, OUT OF THESE DOCUM ENTS AT SR. NO. 4 TO 7 ARE DOCUMENTS OF RETURN OF INCOME ONLY. IT IS FURTHER STATED THAT DOCUMENTS AT SR. NO. 8 TO 20 ARE IN THE NATURE OF ADDITIONAL EVIDENCE, FILED FOR THE FIRST TIME BEFORE THE TRIBUNAL AND THUS REQUESTED THAT THE SAME BE ADMITTED AS THE SE ARE VITAL TO DECIDE THE ISSUES IN APPEAL. MR. BHAGWAN ITA NO. 1450/MUM/2018 6 THE LD. COUNSEL FURTHER SUBMITS THAT IN VIEW OF THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF K. VENKATA RAMAIAH V. A. SITARAMA REDDY AIR 1963 SC 1526, AN APPELLATE COURT HAS POWER TO ALLOW ADDITION AL EVIDENCE NOT ONLY IF IT REQUIRES SUCH EVIDENCE TO ENABLE IT TO PRONOUNCE JUDGMENTS BUT ALSO FOR ANY OTHER SUBSTANTIAL CAUSE. THUS IT IS STATED THAT THESE DOCUMENTS MAY BE ADMITTED AS ADDITIONAL EVIDENCE UNDER RULE 29 OF THE ITAT RULES. THE LD. COUNS EL FURTHER RELIES ON THE DECISION OF THE ITAT F BENCH, MUMBAI IN M/S GEOLIFE ORGANICS V. ACIT (ITA NO. 3699/MUM/2016 FOR AY 2009 - 10) & ORS. 6. ON THE OTHER HAND, THE LD. DR SUPPORTS THE ORDER PASSED BY THE CIT(A) ON THE GROUND THAT THE AO HAS RIGHTLY RE OPENED THE ASSESSMENT PROCEEDINGS, AFTER RECORDING PROPER/VALID REASONS. IT IS FURTHER SUBMITTED BY HIM THAT CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS RESTRICTED THE DISALLOWANC E TO 12.5% OF HAWALA PURCHASES OF RS.8,93,021/ - W HICH IS QUITE REASONABLE. FURTHER, THE LD. COUNSEL SUBMITS THAT IN SPITE OF BEING GIVEN REASONABLE OPPORTUNITIES OF BEING HEARD, THE ASSESSEE COULD NOT FURNISH CONFIRMATION OF LEDGER ACCOUNTS OF CREDITORS, THEIR BANK STATEMENTS HIGHLIGHTING THE RELEVANT ENTRIES, SOURCES OF LOANS, COPIES OF ITRS TO ESTABLISH THEIR CREDITWORTHINESS, ADDRESS/PAN TO ESTABLISH THEIR IDENTITY, DETAILS OF REPAYMENT OF LOANS ETC. THUS IT IS STATED THAT THE LD. CIT(A) HAS RIGHTLY CONFIRMED THE ADDITION OF RS.8,35,800/ - MADE BY THE AO U/S 68 OF THE ACT. MR. BHAGWAN ITA NO. 1450/MUM/2018 7 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIALS ON RECORD. WE BEGIN WITH THE 1 ST GROUND OF APPEAL. IN THE INSTANT CASE THE RETURN OF INCOME FOR THE AY 2011 - 12 WAS FILED ON 29.09.2011 DECLARING TOTAL INCOME AT RS.2,40,820/ - . THE SAID RETURN OF INCOME WAS PROCESSED U/S 143(1). THEREAFTER, THE AO ISSUED NOTICE U/S 148 DATED 24.07.2013 ON THE BASIS OF THE INFORMATION THAT THE ASSESSEE HAD OBTAINED BOGUS PURCHASES AMOUNTING TO RS.10,20,596/ - . IN THE CASE OF RAJE SH JHAVERI STOCK BROKERS (P) LTD . 291 ITR 500 (SC) , THE HONBLE SUPREME COURT HELD THAT INTIMATION U/S 143(1)(A) IS NOT AN ASSESSMENT AND HELD VALID THE NOTICE ISSUED U/S 148. IN THE CASE OF KONE ELEVATOR INDIA P. LTD. V. ITO 340 ITR 454 (MAD), CIT V. IDEAL GARDEN COMPLEX P. LTD . 340 ITR 609 (MAD), IT IS HELD THAT IN THE CASE OF RETURN OF INCOME PROCESSED U/S 143(1), THE ONLY CONDITION TO BE SATISFIED FOR REOPENING IS TAXABLE INCOME HAS ESCAPED ASSESSMENT AND THE ASSESSEES PLEA THAT NO FRESH MATERIAL B EFORE THE AO WARRANTING REOPENING, IS NOT RELE VANT. IN VIEW OF THE ABOVE POSITION OF LAW, THE LD. CIT(A) HAS RIGHTLY CONFIRMED THE REOPENING DONE BY THE AO BY ISSUING NOTICE U/S 148 OF THE ACT. THUS THE 1 ST GROUND OF APPEAL IS DISMISSED. DURING THE COURSE OF HEARING THE LD. COUNSEL SUBMITS THAT THE ASSESSEE WOULD NOT LIKE TO PRESS THE 2 ND GROUND OF APPEAL. WE NOW TURN TO THE 3 RD GROUND OF APPEAL. THE HON'BLE SUPREME COURT IN STATE OF KERALA VS. K.T. SHADULI GROCERY DEALER AIR 1977 SC 1627, RECOGNISED THE IMPORTANCE OF ORAL MR. BHAGWAN ITA NO. 1450/MUM/2018 8 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. IT MAY MENTIONED HER E THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE FAILED TO FURNISH THE REQUIRED DETAILS CALLED FOR BY THE AO LIKE DELIVERY SLIPS, TRANSPORT RECEIPTS, OCTROI RECEIPTS ETC. IN THE GROUNDS OF APPEAL FILED BEFORE THE TRIBUNAL, THE ASSESSEE HAS RAISED THE ISSUE THAT HE WAS NOT GIVEN OPPORTUNITY TO CROSS EXAMINE THE PARTIES. WE ARE OF THE CONSIDERED VIEW THAT THE DETAILS REGARDING THE CONCERNED PURCHASES ARE TO BE VERIFIED AT THE LEVEL OF AO. THAT WOULD CLARIFY WHETHER THESE WERE IN FACT BOGUS PUR CHASES OR NOT. THEREFORE, WE SET ASIDE THE ORDER OF THE LD. CIT(A) AND RESTORE THE MATTER TO THE FILE OF THE AO TO MAKE A DE NOVO ORDER, AFTER GIVING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE AND ALLOWING THE ASSESSEE TO CROSS - EXAMINE THE CONCE RNED PARTIES . THE AO WOULD FURNISH A COPY OF THE REASONS FOR REOPENING TO THE ASSESSEE. WE DIRECT THE ASSESSEE TO FILE THE RELEVANT DOCUMENTS/EVIDENCE BEFORE THE AO. THUS THE 3 RD GROUND OF APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. FINALLY, WE TURN TO THE 4 TH GROUND OF APPEAL. IT IS WELL SETTLED THAT IN ORDER TO DISCHARGE THE ONUS U/S 68 OF THE ACT, THE ASSESSEE MUST PROVE (I) THE IDENTITY OF THE CREDITOR, (II) THE CAPACITY OF THE CREDITOR TO ADVANCE MONEY; AND (III) THE GENUINENESS OF THE TRANSACTION. IN THE INSTANT CASE, THE A SSESSEE FAILED TO FILE BEFORE THE AO AS WELL AS LD. CIT(A) THE DOCUMENTS/EVIDENCE ON THE ABOVE. IT IS THE CONTENTION OF THE ASSESSEE MR. BHAGWAN ITA NO. 1450/MUM/2018 9 THAT THOSE DETAILS COULD NOT BE FILED BEFORE THE LD. CIT(A), AS THE HEARING WAS CONCLUDED AND THE ORDER WAS PASSED ON 30.11 .2017. HAVING DELINEATED THE ABOVE FACTS, WE ARE OF THE CONSIDERED VIEW THAT THE MATTER BE EXAMINED BY THE AO TO FIND OUT WHETHER THE ABOVE ISSUE FALLS IN THE AMBIT OF SECTION 68 OR NOT. THEREFORE, WE SET ASIDE THE ORDER OF THE LD. CIT(A) ON THE ABOVE ISS UE AND RESTORE THE MATTER TO THE FILE OF THE AO TO MAKE AN ORDER AFRESH, AFTER GIVING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. WE ALSO DIRECT THE ASSESSEE TO FILE THE RELEVANT DOCUMENTS/EVIDENCE BEFORE THE AO. THUS THE 4 TH GROUND OF APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. 8. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 28/02/2019. SD/ - SD/ - ( SAKTIJIT DEY ) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED: 28/02/2019 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// (SR. PRIVATE SECRETARY) ITAT, MUMBAI