MONTEX GLASS FIBRE INDUSTRIES P.LTD, MUMBAI V. DCIT 2(2), MUMBAI

ITA 1520/MUM/2017

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 9978 (ITAT-MUMBAI)
• Duration Of Justice: 5 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-09-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 03-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V JENARDHANAN
• Assessee Lawyers: S M BANDI
• Keywords: Bogus purchase; Unexplained expenditure; Principle of natural justice; Peak credit; Accommodation entries; Onus to prove
• Section: 69C; 143(3); 133(6); 131; 148

Judgement Text

K IN THE INCOME TAX APPELLATE TRIBUNAL K BENCH, MUMBAI BEFORE SHRI C.N. PRASAD, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER ./ I.T.A. NO. 1520/ MUM/2017 ( / ASSESSMENT YEAR : 2011-12) MONTEX GLASS FIBRE INDUSTRIES PVT. LTD., BOMBAY MUTUAL ANNEXE, 2/19-20, RUSTOM SIDHWA MARG, FORT, MUMBAI 400 001. / V. DY. COMMISSIONER OF INCOME TAX 2(2), MUMBAI. ./ PAN : AABCM9322K ( / APPELLANT ) .. ( / RESPONDENT ) ASSESSEE BY : SHRI S.M. BANDI REVENUE BY : SHRI V. JENARDHANAN, D.R. / DATE OF HEARING : 23.08.2017 / DATE OF PRONOUNCEMENT : 01-09-2017 / O R D E R PER RAMIT KOCHAR, ACCOUNTANT MEMBER THIS APPEAL, FILED BY THE ASSESSEE, BEING ITA NO. 1520/MUM/2017, IS DIRECTED AGAINST THE APPELLATE ORDER DATED 18.01.20 17 PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)- 5, MUMBAI (HE REINAFTER CALLED THE CIT(A)), FOR ASSESSMENT YEAR 2011-12, APPELLATE PR OCEEDINGS BEFORE LEARNED CIT(A) HAS ARISEN FROM THE ASSESSMENT ORDER DATED 2 8.03.2014 PASSED BY LEARNED ASSESSING OFFICER U/S 143(3) R.W.S. 147 OF THE INCOME-TAX ACT, 1961 (HEREINAFTER CALLED THE ACT) . ITA 1520/MUM/2017 2 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE IN THE MEMO OF APPEAL FILED WITH THE INCOME-TAX APPELLATE TRIBUNAL, MUMBA I (HEREINAFTER CALLED THE TRIBUNAL) READ AS UNDER:- (1) THE LD. CIT(A) HAS GROSSLY ERRED IN LAW AS WE LL AS ON FACTS IN DISALLOWING THE ADDITION OF RS.4,92,975/- BY EST IMATING 12.5% AS PROFIT ELEMENT ON THE ALLEGED BOGUS PURCHASE FRO M TWO PARTIES AMOUNTING TO RS. 39,43,800/- . (2) THE APPELLANT HUMBLY PRAYS THAT THE ADDITION MA DE BY THE LD. A.O. & PARTLY CONFIRMED BY LD. CIT(A) MAY PLEAS E BE DELETED AND RELIEF BE GRANTED. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS MANUFACTURER OF WEAVING QUALITY GLASS FIBRE YARN. THE ASSESSEE FILE D ITS RETURN OF INCOME U/S 139(1) ON 24 TH SEPTEMBER, 2011 WHICH WAS PROCESSED BY REVENUE U/S 143(1) OF THE ACT ON 07 TH MARCH 2013. THE ASSESSEES CASE WAS REOPENED BY T HE AO U/S 147 OF THE ACT BY ISSUANCE OF NOTICE DATED 22-0 3-2013 ISSUED BY THE AO U/S 148 OF THE ACT FOR THE FOLLOWING REASONS:- INFORMATION RECEIVED FROM DGIT (LNV.) THAT THE ASS ESSEE IS INVOLVED IN BOOKING OF BOGUS PURCHASE FOR FY 2010-1 1 FROM THE FOLLOWING HAWALA OPERATORS. THE LIST OF HAVALA OPERATORS (BOGUS BILLS ISSUERS) WAS IDENTIFIED BY SALES TAX DEPARTMENT, STATEMENTS OF THE HAWALA OPER ATORS HAVE ALSO BEEN RECORDED BY THE SALES TAX DEPARTMENT AND THE INFORMATION HAS BEEN SHARED WITH THE OFFICE OF THE DGIT (INV.) MUMBAI. THE OFFICE OF DGIT (INV.) HAS INTIMATED THA T THE ASSESSEE M/S MONTEX GLASS FIBER INDUSTRIES LTD. HAS INDEED B OOKED BOGUS PURCHASE FROM THESE HAWALA OPERATORS AS FOLLOWS: VAT NO. NAME OF THE HAWALA OPERATOR PERIOD (FY) BILL AMT (RS.) 27030119581V VIRAJ ENTERPRISES 2010-11 27,51,000/- 27870165388V S M TRADING CO. 2010-11 11,92,800/- ITA 1520/MUM/2017 3 39,43,800/ - IN VIEW OF THE ABOVE, I HAVE REASONS TO BELIEVE THA T THE INCOME OF RS. 39,43,800/- FOR THE A.Y. 2011-12 HAS ESCAPED AS SESSMENT WITHIN THE MEANING OF SECTION 147 OF THE I.T. ACT. THUS, IT IS UNDISPUTED THAT THE CASE OF THE ASSESSE E WAS REOPENED WITHIN FOUR YEARS FROM THE END OF ASSESSMENT YEAR AND NO SCRUTI NY ASSESSMENT WAS ORIGINALLY FRAMED BY REVENUE U/S 143(3) R.W.S. 143( 2) OF THE ACT. THE A.O. RECEIVED INFORMATION FROM DGIT (INV.), MUMBAI THAT THE ASSESSEE HAD OBTAINED ACCOMMODATION BILLS FROM THE AFORE-STATED HAWALA OPERATORS WHO HAD STATED BEFORE THE MAHARASHTRA SALES TAX AUTHOR ITIES THAT THEY HAD ISSUED BOGUS ACCOMMODATION BILLS WITHOUT ANY ACTUAL DELIVERY OF GOODS. THE NAME OF THESE HAWALA PARTIES ALSO APPEARED IN THE WEB SITE OF MAHARASHTRA VAT AUTHORITIES AS HAWALA DEALERS. THE A.O. ASKED T HE ASSESSEE TO PRODUCE THE FOLLOWING DOCUMENTS IN SUPPORT OF ITS TRANSACTI ONS WITH THESE PARTIES:- BILLS, VOUCHERS/INVOICES, BANK STATEMENT, STOCK RE GISTER INDICATING RECEIPT OF GOODS, LORRY RECORDS INDICATI NG TRANSPORTATION OF GOODS AND ANY OTHER DETAILS/DOCUM ENTS (ALONGWITH CERTIFIED PHOTOCOPIES) TO ESTABLISH THE GENUINENESS OF TRANSACTION WITH THESE PARTIES. ALSO PRODUCE THE PR OP/DIRECTOR OF THOSE PARTIES WITH COPY OF BANK ACCOUNT FOR VERIFIC ATION AND GIVING EVIDENCES IN THIS MATTER.' THE COPIES OF STATEMENT RECORDED BY THE SALES TAX A UTHORITIES WITH RESPECT TO THE BOGUS HAWALA PARTIES WERE ENCLOSED BY THE AO WI TH THE ASSESSMENT ORDER AS AN ANNEXURES. IT WAS OBSERVED BY THE A.O. THAT THE ASSESSEE HAS N OT PRODUCED THE ABOVE PARTIES, DESPITE BEING REPEATEDLY ASKED BY THE AO. THE AO OBSERVED THAT THE ASSESSEE HAD ONLY PRODUCED VARIOUS DETAILS PERTAINI NG TO THE ABOVE PARTIES ITA 1520/MUM/2017 4 SUCH AS INVOICE DETAIL, DETAILS OF EXCISE PAID, COP Y OF BANK STATEMENT, DETAILS OF PURCHASE AND DISPATCH TO SHOWROOMS, SAMPLE CHALL ANS ETC. . THE ASSESSEE EXPRESSED ITS INABILITY TO PRODUCE THESE PARTIES AN D EXPLAINED THAT THESE PURCHASES WERE MADE THROUGH BROKERS WHO IN TURN SUP PLY MATERIAL AFTER SOURCING THE SAME FROM VARIOUS SUPPLIERS. IT WAS EX PLAINED THAT THE BILLS AND OTHER SUPPORTING DOCUMENTS WERE OF THIRD PARTIES AN D THE PAYMENTS WERE MADE TO THE PARTIES WHOSE BILLS WERE SUBMITTED BY T HE BROKERS . THE ASSESSEE SUBMITTED THAT IT WAS NOT AWARE OF THE GENUINENESS OF THE BILL ISSUING PARTIES. THE ASSESSEE FURTHER SUBMITTED THAT NON-PAYMENT OF SALES TAX BY THESE VENDORS WHICH LED TO THESE VENDORS BEING DECLARED A S HAWALA DEALERS BY MAHARASHTRA VAT AUTHORITIES DOES NOT MAKE THE PURCH ASES NON-GENUINE. IT WAS ALSO SUBMITTED THAT JUST BECAUSE THE PARTIES AR E NOT TRACEABLE WILL NOT MAKE PURCHASE AS BOGUS PURCHASES. THE A.O., HOWEVER, REJECTED THE CONTENTIONS OF THE ASSESSEE. THE A.O. OBSERVED THAT THESE PARTIES HAVE DEPOSED BEFORE THE SALES TAX AUTHORITIES ON OATH THAT THEY WERE ENGAGED IN HAWALA OPERATIONS AN D ONLY ISSUING BILLS WITHOUT ANY ACTUAL SUPPLY OF GOODS. THE AO OBSERVE D THAT THE ASSESSEE COULD NOT PRODUCE BROKERS BEFORE THE AO NOR THEIR NAME, PAN, ADDRESS ETC. WERE SUBMITTED. IT WAS OBSERVED BY THE AO THAT NO COMMIS SION PAYMENTS WERE MADE BY ASSESSEE TO THESE BROKERS FOR ARRANGING THE PURCHASES. IT WAS ALSO OBSERVED BY THE AO THAT THE ASSESSEE HAS AGREED TO PURCHASE MATERIAL FROM SOME OTHER PARTIES BUT IT HAS FAILED TO IDENTIFY OR GIVE DETAILS OF OR PRODUCE SUCH PARTIES FROM WHOM MATERIAL WAS ACTUALLY PURCHA SED. THE AO OBSERVED THAT UNDER THESE CIRCUMSTANCES THE GENUINENESS OF T HE PURCHASES CANNOT BE ACCEPTED. THE AO OBSERVED THAT THE ASSESSEE HAS ISS UED CHEQUES IN FAVOUR OF BOGUS BILLERS AND HAS ALSO SUBMITTED VARIOUS DETAIL S SUCH AS BILLS, PROOF OF DELIVERY, RECONCILIATION OF THE STOCK ETC. . THE AO REJECTED THE CONTENTIONS OF THE ASSESSEE ALSO BECAUSE THESE PARTIES WERE NOT PR ODUCED BEFORE THE AO AND ALSO THE SELLING PARTIES HAVE ON OATH ADMITTED BEFO RE SALES TAX AUTHORITIES ITA 1520/MUM/2017 5 THAT THEY HAVE ONLY ISSUED BOGUS BILLS WITHOUT SUPP LYING MATERIAL. THE A.O., HOWEVER, HAD NOT SUSPECTED THE SALES MADE BY THE AS SESSEE AND THEREFORE OBSERVED THAT THERE MUST HAVE BEEN SOME PURCHASES C ORRESPONDING TO THE SALES MADE BY THE ASSESSEE, THEREFORE THE AO CONCLU DED THAT THE ASSESSEE HAD MADE THESE PURCHASES IN CASH FROM UNDISCLOSED PARTI ES AND THEREAFTER HAS OBTAINED BILLS FROM HAWALA OPERATORS. THE AO CONCLU DED THAT THE ASSESSEE HAD MADE PAYMENTS BY CHEQUES AGAINST SUCH BOGUS PUR CHASE BILLS TO THESE HAWALA OPERATORS, AND THEREAFTER RECEIVED AN EQUIVA LENT AMOUNT OF CASH BACK FROM THEM, WHILE THE ACTUAL MATERIAL IS PHYSICALLY BOUGHT IN CASH FROM GREY MARKET FROM SOME UNDISCLOSED PARTIES FOR WHICH SOUR CES OF PAYMENT OF CASH REMAINED UNEXPLAINED. THUS, THE A.O. ADDED TO THE I NCOME OF THE ASSESSEE DISALLOWANCE OF AN AMOUNT OF RUPEES 9,03,420/- BY W ORKING AS PEAK CREDIT U/S 69C OF THE ACT AS AN UNEXPLAINED EXPENDITURE AS AGAINST THE TOTAL TRANSACTION VALUE OF BOGUS PURCHASES TO THE TUNE OF RS. 39,43,800/- FROM THESE TWO ALLEGED HAWALA OPERATORS , VIDE ASSESSMEN T ORDER DATED 28-03-2014 PASSED BY THE AO US 143(3) R.W.S. 147 OF THE 1961 A CT. 4. AGGRIEVED BY THE ASSESSMENT ORDER DATED 28-03-20 14 PASSED BY THE A.O. U/S 143(3) R.W.S. 147 OF THE 1961 ACT, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A). THE ASSESSEE CONTENDE D BEFORE LEARNED CIT(A) THAT IT HAS FILED LEDGER ACCOUNTS, COPIES OF BANK STATEMENTS HIGHLIGHTING THE PAYMENTS, INVENTORY REGISTER, DOCKET CONSISTING OF INVOICES, GOODS RECEIPT NOTES (GRNS) , DELIVERY CHALLANS DULY RECEIPTED AT THE FACTORY GATES, LORRY RECEIPTS AND COPIES OF PURCHASE ORDERS IN RESPECT O F BOTH THE PARTIES. IT WAS ALSO THE CONTENTION OF THE ASSESSEE THAT CROSS EXAM INATION OF THESE PARTIES WERE NOT PROVIDED BY THE AO TO THE ASSESSEE AND PRI NCIPLES OF NATURAL JUSTICE ARE VITIATED. IT WAS ALSO THE CONTENTION OF LEARNED COUNSEL FOR THE ASSESSEE THAT SINCE NO NOTICE U/S 133(6) OR SUMMONS U/S 131 WERE SERVED ON THESE HAWALA DEALERS , THE PURCHASES CANNOT BE TREATED AS NON GENUINE . THE LEARNED CIT(A) PARTLY ALLOWED THE APPEAL OF THE ASS ESSEE WHEREBY AN ADDITION ITA 1520/MUM/2017 6 OF 12.5% OF THE AMOUNT OF THE ALLEGED BOGUS PURCHAS ES WAS SUSTAINED BY THE LEARNED CIT(A) , WHEREBY AN AMOUNT OF RS. 4,92,975 /- WAS ADDED TO THE INCOME ON ACCOUNT OF BOGUS PURCHASES AND BALANCE AM OUNT OF RS. 5,10,455/- WAS DELETED BY LEARNED CIT(A) , VIDE APPELLATE ORDE R DATED 18-01-2017. WHILE PASSING AN APPELLATE ORDER DATED 18-01-2017 , THE L EARNED CIT(A) RELIED UPON THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE C ASE OF CIT V SIMIT P SHAH 38 TAXMANN.COM 385(GUJ HC) WHEREIN PART RELIEF WAS GRANTED TO THE ASSESSEE. 5. AGGRIEVED BY THE APPELLATE ORDER DATED 18-01-201 7 PASSED BY THE LD. CIT(A), THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUN AL. 6. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT THE ASSESSEE IS MANUFACTURER OF WEAVING QUALITY GLASS FIBRE YARN. I T IS SUBMITTED BY LD. COUNSEL THAT ADDITIONS HAVE BEEN MADE ON ALLEGATION OF ASSESSEE MAKING BOGUS PURCHASES FROM ALLEGED ACCOMMODATION ENTRY PR OVIDERS WHO ARE LISTED AS SUSPICIOUS DEALERS BY MAHARASHTRA VAT AUTHORITIE S BEING ENGAGED IN ONLY PROVIDING BOGUS BILLS WITHOUT SUPPLYING ANY MATERIA L. THE LD. COUNSEL FOR THE ASSESSEE, AT THE OUTSET SUBMITTED THAT THE A.O. HAS NOT MADE ANY ENQUIRY WITH RESPECT TO THESE ALLEGED HAWALA PARTIES. IT I S SUBMITTED THAT THE A.O. HAS NOT ISSUED SUMMONS U/S 131 NOR ANY NOTICE 133(6) OF THE ACT WERE ISSUED BY THE AO TO THESE ALLEGED HAWALA PARTIES . IT WAS CON TENDED THAT ONLY RELIANCE HAS BEEN PLACED BY THE AO ON THE INFORMATION RECEIV ED FROM MAHARASHTRA SALES TAX DEPARTMENT THAT THESE PARTIES ARE LISTED AS SUSPICIOUS PARTIES BY MAHARASHTRA VAT AUTHORITIES AND THAT THESE PARTIES HAVE DEPOSED BEFORE MAHARASHTRA VAT AUTHORITIES THAT THEY ARE ISSUING O NLY BOGUS BILLS WITHOUT SUPPLYING ANY MATERIAL. IT IS STATED THAT COMPLETE DETAILS AS TO THE PURCHASE OF SAID MATERIAL ALONG WITH CONSUMPTION/UTILIZATION DETAILS OF THE SAID MATERIAL WERE SUBMITTED BEFORE AUTHORITIES BELOW AN D NO FAULT HAS BEEN FOUND BY THE AUTHORITIES BELOW. IT IS SUBMITTED BY LD. CO UNSEL FOR THE ASSESSEE THAT MATERIAL WAS PURCHASED THROUGH BROKERS AND NOW IT I S NOT POSSIBLE TO ITA 1520/MUM/2017 7 PRODUCE THESE PARTIES. IT IS SUBMITTED THAT ONLY ON THE BASIS OF STATEMENT OF THESE SELLING PARTIES, THE A.O. HAD MADE ADDITION T O THE TUNE OF RS. 9,03,420/- BEING PEAK CREDIT ON ACCOUNT OF ALLEGED BOGUS PURCHASES, WHICH WAS REDUCED TO RS. 4,92,975/- BY THE LD. CIT(A) BY ESTIMATING PROFIT EMBEDDED @12.5% ON THESE ALLEGED BOGUS PURCHASES OF RS. 39,43,800/- FROM THE ALLEGED BOGUS DEALERS . IT IS VEHEMENTLY ARGUE D THAT ALL DETAILS WERE SUBMITTED BEFORE THE A.O. BY THE ASSESSEE. IT IS S UBMITTED THAT LARGE NUMBER OF EVIDENCES WERE SUBMITTED BEFORE THE AUTHORITIES BELOW TO PROVE THAT THESE ARE GENUINE PURCHASES. IT WAS SUBMITTED THAT SAID E VIDENCES ALONG WITH WRITTEN SUBMISSIONS WHICH WAS SUBMITTED BEFORE AO V IDE LETTER DATED 04-02- 2014 , RUNNING INTO 92 PAGES ARE PLACED IN PAPER BO OK FILED WITH THE TRIBUNAL WHICH IS PLACED ON RECORD. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT WRITTEN SUBMISSIONS DATED 04-02-2014 WERE FILED BE FORE THE A.O. WHICH ALSO CONTAINED VARIOUS ANNEXURE OF DOCUMENTS/EVIDENCES , LIKE LEDGER ACCOUNT OF THESE PARTIES, BANK STATEMENT HIGHLIGHTING PAYMENTS MADE THROUGH BANK TO THESE PARTIES, INVENTORY REGISTER SHOWING INWARD AN D OUTWARD QUANTITIES, DOCKETS CONSISTING OF INVOICE FOR PURCHASES, GOODS RECEIPT NOTES(GRN) , DELIVERY CHALLANS DULY ENDORSED AT FACTORY GATES , LORRY RECEIPTS , PURCHASE ORDERS , REGISTER MAINTAINED AT FACTORY GATE WHEREI N DETAILS OF ALL MATERIAL RECEIVED, INVENTORY OF MATERIAL PRODUCED BY THE ASS ESSEE ALONG WITH PRODUCTION DETAILS SHOWING CONSUMPTION OF MATERIAL WAS PRODUCED BY THE ASSESSEE BEFORE THE AO DURING THE COURSE OF RE-ASSE SSMENT PROCEEDINGS. IT WAS ALSO SUBMITTED THAT PAYMENTS FOR THESE PURCHASE S WERE ALL MADE THROUGH BANKING CHANNELS. THUS, IT WAS SUBMITTED THAT THE ASSESSEE HAD DULY DISCHARGED ITS ONUS TO PROVE THE GENUINENESS OF THE PURCHASES AND THERE IS NO ADVERSE REMARK BY THE AUTHORITIES BELOW SO FAR AS T HESE EVIDENCES ARE CONCERNED EXCEPT THAT THESE PARTIES WERE NOT PRODUC ED. FURTHER, THE LD. COUNSEL SUBMITTED THAT CROSS EXAMINATION WAS SOUGHT OF THE SAID PARTIES FROM THE AO WHICH WAS NOT ALLOWED TO THE ASSESSEE. IT W AS SUBMITTED THAT THE A.O. ONLY RELIED UPON THE MAHARASHTRA VAT AUTHORITIES IN FORMATION WHICH IS NOT ITA 1520/MUM/2017 8 SUFFICIENT TO MAKE DISALLOWANCE AND FASTENING OF L IABILITY ON THE ASSESSEE ON MERE SUSPICION THAT THE ASSESSEE HAS PURCHASED THE MATERIAL IN CASH FROM GREY MARKET WHILE INVOICES WERE OBTAINED THROUGH TH ESE ALLEGED HAWALA DEALERS AT INFLATED PRICE. IT IS SUBMITTED THAT THE RE IS NO EVIDENCE ON RECORD TO PROVE THAT THE ASSESSEE PURCHASED THESE MATERIAL FR OM GREY MARKET. IT IS STATED BEFORE THE TRIBUNAL THAT THE ASSESSEE IS SUB JECTED TO EXCISE DUTY AND THESE MATERIAL SO PURCHASED FROM THESE ALLEGED HAWA LA DEALERS WERE ENTERED IN THE STOCK RECORDS MAINTAINED UNDER EXCISE LAWS WHICH IS ALSO SUBJECT TO EXCISE AUDIT AND THE SAID MATERIAL WAS CONSUMED FOR MANUFACTURING OF FINISHED GOODS. IT WAS SUBMITTED THAT NO ENQUIRY WH ATSOEVER WAS MADE BY AUTHORITIES BELOW U/S 133(6)/131 OF THE 1961 ACT NO R THESE PARTIES WERE PRODUCED BEFORE THE ASSESSEE FOR CROSS EXAMINATION. 7. THE LD. D.R., ON THE OTHER HAND, RELIED ON THE O RDER OF THE LD. CIT(A) AND SUBMITTED THAT THE PARTY FROM WHOM THE ASSESSEE MAD E THE ADDITIONS WERE BOGUS PARTIES WHO HAD DEPOSED BEFORE THE MAHARASHTR A VAT AUTHORITIES THAT THEY WERE ENGAGED IN HAWALA ENTRIES WHEREIN ONLY BO GUS BILLS WERE ISSUED WITHOUT SUPPLYING ANY MATERIAL. IT WAS SUBMITTED TH AT AFFIDAVITS WERE GIVEN BY THESE PARTIES BEFORE MAHARASHTRA VAT AUTHORITIES OF WHICH COPIES WERE GIVEN TO THE ASSESSEE ENCLOSING THE SAME AS ANNEXURE WITH ASSESSMENT ORDER. 8. WE HAVE CONSIDERED RIVAL CONTENTIONS AND ALSO PE RUSED THE MATERIAL AVAILABLE ON RECORD. WE HAVE OBSERVED THAT THE ASSE SSEE IS MANUFACTURER OF WEAVING QUALITY GLASS FIBRE YARN. WE HAVE OBSERVED THAT THE ASSESSEE HAD MADE PURCHASES FROM THE FOLLOWING PARTIES:- VAT NO. NAME OF THE HAWALA OPERATOR PERIOD (FY) BILL AMT (RS.) 27030119581V VIRAJ ENTERPRISES 2010-11 27,51,000/- 27870165388V S M TRADING CO. 2010-11 11,92,800/- 39,43,800/ - ITA 1520/MUM/2017 9 WE HAVE OBSERVED THAT INFORMATION FROM DGIT (INV.), MUMBAI WAS RECEIVED BY THE A.O. WHEREIN IT WAS OBSERVED THAT THE ASSESSEE HAD OBTAINED ACCOMMODATION BILLS FROM THE ABOVE HAWALA OPERATORS WHO HAD DEPOSED BEFORE THE MAHARASHTRA SALES TAX AUTHORITIES THAT T HEY HAD ISSUED BOGUS ACCOMMODATION BILLS WITHOUT ANY ACTUAL DELIVERY OF GOODS AND THE ASSESSEE IS BENEFICIARY OF SAID BOGUS ACCOMMODATION ENTRIES. TH E REVENUE HAS NOT FRAMED ANY ASSESSMENT ORIGINALLY U/S 143(3) OF THE 1961 ACT AND RETURN OF INCOME WAS ORIGINALLY PROCESSED BY REVENUE U/S 143( 1) OF THE 1961 ACT. THE A.O. REOPENED THE CONCLUDED ASSESSMENT U/S 147 AND NOTICE DATED 22-03- 2013 U/S 148 OF THE ACT WAS ISSUED TO THE ASSESSEE FOR REOPENING OF THE CONCLUDED ASSESSMENT WITHIN FOUR YEARS FROM THE END OF ASSESSMENT YEAR. THE ASSESSEE HAS NOT CHALLENGED THE REOPENING OF TH E CONCLUDED ASSESSMENT BEFORE THE TRIBUNAL AS NO GROUND CHALLENGING LEGALI TY AND VALIDITY OF REOPENING IS RAISED BEFORE THE TRIBUNAL. IT IS ALSO NOT BROUG HT ON RECORD BY LEARNED DR THAT REVENUE HAS FILED ANY CROSS APPEAL CHALLENGING THE RELIEF GRANTED BY LEARNED CIT(A). AS COULD BE OBSERVED FROM THE RECOR DS PRODUCED BEFORE THE TRIBUNAL, THE ASSESSEE HAD ON ITS PART PRODUCED DET AILS BEFORE THE AUTHORITIES BELOW W.R.T. THESE PARTIES LIKE PURCHASE INVOICE, P URCHASE ORDERS, DELIVERY CHALLANS, COPY OF REGISTER MAINTAINED AT FACTORY GA TE, UTILIZATION/CONSUMPTION DETAIL, DOCKET SHOWING RECEIPT OF MATERIAL AND DETA ILS OF PURCHASES AND PRODUCTION DETAILS OF RAW MATERIAL TO FINISHED GOOD S . THE ASSESSEE HAS ALSO PRODUCED DETAILS OF EXPORT OF MATERIAL AND FACTORY GATE REGISTER BEFORE THE AUTHORITIES BELOW . IN OUR CONSIDERED VIEW, THE ASS ESSEE HAS DISCHARGED BURDEN CAST ON IT BY BRINGING ON RECORD ALL DETAILS RELATING TO THE SAID PURCHASES AND ITS CONSUMPTION /UTILIZATION FOR PROD UCTION OF FINISHED GOODS. THE ASSESSEE HAS ALSO STATED THAT IT IS SUBJECT TO EXCISE DUTY LEVIED BY THE GOVERNMENT OF INDIA AND THESE PURCHASES ARE DULY IN CLUDED IN EXCISE RECORDS. THERE IS NO WHISPER BY REVENUE CHALLENGING , DISPUT ING AND CONTROVERTING THESE DETAILS AND EVIDENCES PUT FORWARD BY THE ASSE SSEE IN ITS REPLY FILED WITH REVENUE VIDE LETTER DATED 04-02-2014 (PB/PAGE 1-92) AND EVEN BEFORE US ITA 1520/MUM/2017 10 LEARNED DR COULD NOT CHALLENGE AND DISPROVE THE CLA IM OF THE ASSESEE. ON THE OTHER HAND , IT IS WRIT LARGE FROM THE ORDERS OF AU THORITIES BELOW THAT NO EFFORT HAS BEEN MADE BY AUTHORITIES BELOW TO MAKE ANY ENQU IRIES WITH THESE SELLING DEALERS WHO ARE ALLEGED TO BE BOGUS HAWALA DEALERS AS THE AO/CIT(A) DID NOT ISSUE ANY NOTICE U/S 133(6) OF THE ACT TO THE PARTI ES NOR ANY SUMMONS WERE ISSUED TO THE SAID ALLEGED HAWALA DEALERS U/S 131 . THE AO/CIT(A) ALSO DID NOT DEPUTED ANY INSPECTOR TO MAKE FIELD VISITS TO E NQUIRE ABOUT THE WHEREABOUTS OF THESE PARTIES AND TO VERIFY THE GENU INENESS OF THE PURCHASE TRANSACTIONS. THUS, IN NUT-SHELL EXCEPT ON RELYING ON THE STATEMENT RECORDED BY MAHARASHTRA VAT AUTHORITIES OF THESE ALLEGED HAW ALA DEALERS INCRIMINATING ASSESSEE WHICH STATEMENTS WERE RECOR DED AT THE BACK OF THE ASSESSEE, THE AUTHORITIES BELOW DID NOT MADE ANY EF FORT WHATSOEVER TO LOCATE THESE PARTIES. EVEN LEARNED CIT(A) DID NOT DEEM IT FIT TO MAKE ANY ENQUIRIES BY ISSUING NOTICES U/S 133(6) OR SUMMONS U/S 131, AS H IS POWERS ARE CO- TERMINUS WITH POWERS OF THE AO. THE SAID SELLING PA RTIES INCRIMINATING ASSESSEE AT THE BACK OF THE ASSESSEE ARE NOW WITNES SES OF REVENUE , AND IF THE REVENUE WANT TO PREJUDICE THE ASSESSEE BY SOLELY RE LYING ON THE STATEMENT GIVEN BY THESE SELLING PARTIES RECORDED AT THE BACK OF THE ASSESSEE, THE SAID PARTIES ARE TO BE OFFERED BY REVENUE FOR CROSS EXAM INATION BY THE ASSESSEE AS THESE PARTIES ARE WITNESSES OF REVENUE. THE ASSESSE E SPECIFICALLY ASKED THE AO FOR PRODUCING THE SAID PARTIES FOR THEIR CROSS E XAMINATION BEFORE THE ASSESSEE BUT THE REVENUE DID NOT PRODUCE THESE PART IES BEFORE THE ASSESSEE. THE ASSESSEE ON ITS PART HAD NO DOUBT EXPRESSED ITS INABILITY TO PRODUCE THE SAID PARTIES AND THE SAID PURCHASES ARE APPEARING I N BOOKS OF THE ASSESSEE BUT IT COULD BE SEEN THAT THE A.O. HAS SOLELY RELIE D ON THESE INCRIMINATING STATEMENTS OF THESE ALLEGED HAWALA DEALERS RECORDED BY MAHARASHTRA SALES TAX DEPARTMENT WHEREIN THESE SELLING DEALERS HAVE DEPOSED THAT THEY ARE ISSUING BOGUS BILLS WITHOUT SUPPLYING ANY MATERIAL . THE AUTHORITIES BELOW HAVE NOT EVEN CONSIDERED APPROPRIATE TO CALL THESE PARTIES AND RECORD THEIR STATEMENTS U/S 131 OF THE 1961 ACT OR TO SEEK INCRI MINATING EVIDENCES FROM ITA 1520/MUM/2017 11 THESE PARTIES TO FASTEN TAX-LIABILITY ON THE ASSESS EE EVER SINCE THE INCRIMINATING INFORMATION WAS RECEIVED BY DGIT(INV. ) FROM MAHARASHTRA VAT AUTHORITIES. NO SUCH DETAILS OF ANY INCRIMINATING I NFORMATION/EVIDENCES / STATEMENTS RECORDED/COLLECTED BY DGIT(INV), AO OR C IT(A) IS ON RECORD. THE REVENUE CANNOT BE ALLOWED TO PLAY ANOTHER INNINGS M ORE-SO IN THE MIDST OF LARGE VOLUME OF UNCONTROVERTED EVIDENCES BROUGHT ON RECORD BY THE ASSESSEE. THE AO MADE ADDITION TOWARDS PEAK AMOUNT OF THESE B OGUS PURCHASES WHILE LEARNED CIT(A) HAS REDUCED IT TO 12.5% OF ALLEGED B OGUS PURCHASES ON THE GROUNDS THAT THE PROFIT EMBEDDED ON THESE PURCHASES NEED TO BE BROUGHT TO TAX BY RELYING ON DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT V SIMIT P SHAH 38 TAXMANN.COM 385(GUJ HC). IT IS ALSO NOT BROUGHT ON RECORD BY LEARNED DR THAT THE REVENUE HAS COME IN APPEAL B EFORE THE TRIBUNAL AGAINST RELIEF GRANTED BY THE LEARNED CIT(A) . THE ASSESSMENT ORDER OF THE AO HAS NOW MERGED WITH APPELLATE ORDER OF LEARNED CIT( A) KEEPING IN VIEW DOCTRINE OF MERGER. THE ADDITION IS NOW EXISTING KE EPING IN VIEW RATIO OF DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT V SIMIT P SHAH 38 TAXMANN.COM 385(GUJ HC) WHEREIN PROFIT EMBEDDED IN THESE PURCHASES IS SOUGHT TO BE BROUGHT TO TAX INSTEAD OF PEAK CREDIT AS WAS DONE BY THE AO. IT IS THE AVERMENTS OF THE REVENUE THAT THE ASSESSEE HAS PURCHASED MATERIAL FROM GREY MARKET IN CASH WHILE BILLS ARE ORGANIZED FROM THESE BOGUS HAWALA DEALERS. NO SUCH DETAILS OF GREY MATERIAL SUPPLIERS ARE BROUGHT ON RECORD FROM WHOM THE ASSESSEE HAS ALLEGEDLY PURCHASED MATERIAL IN CASH AND ALSO NO TRAIL OF MONEY TO EVIDENCE FLOW OF CASH IS BROUGHT ON REC ORD BY AUTHORITIES BELOW AND THESE ARE ALL IN THE REALM OF SUSPICION WHICH I S NOT PERMISSIBLE. THE ASSESSEE HAD SOUGHT CROSS EXAMINATION OF THESE HAWA LA PARTIES WHO HAVE GIVEN INCRIMINATING STATEMENTS BEFORE MAHARASHTRA V AT AUTHORITIES BUT THE CROSS EXAMINATION WAS NOT GRANTED TO THE ASSESSEE B Y THE A.O./CIT(A). THE ASSESSEE HAS DISCHARGED ITS PRIMARY BURDEN BY BRING ING ON RECORD ALL DETAILS W.R.T. PURCHASE AND UTILIZATION/CONSUMPTION OF MATE RIAL COVERED UNDER THESE PURCHASES AND THERE IS NO ADVERSE COMMENTS OF THE A UTHORITIES BELOW AS TO ITA 1520/MUM/2017 12 THE SAME AND THE ASSESSEE IS SOUGHT TO BE PREJUDICE D BY REVENUE SOLELY BASED ON STATEMENT OF THIRD PARTIES I.E. SELLING DEALERS WHICH INCRIMINATING STATEMENT WAS RECORDED BY MAHARASHTRA VAT AUTHORITI ES AT THE BACK OF THE ASSESSEE , WHILE NO STATEMENT HAS BEEN RECORDED BY THE REVENUE NOR ANY ENQUIRY WHATSOEVER U/S 133(6)/131 WAS CONDUCTED BY REVENUE ITSELF, UNDER THESE FACTUAL MATRIX OF THE CASE , THE RIGHT OF CRO SS EXAMINATION OF THE ASSESSEE HAS BECOME ABSOLUTE AND NO PREJUDICE CAN B E DONE TO THE ASSESSEE IN THESE CIRCUMSTANCES TILL THE SAID PARTIES ARE OF FERED BY REVENUE FOR CROSS EXAMINATION BEFORE THE ASSESSEE , WHICH DESPITE SP ECIFICALLY BEING ASKED BY THE ASSESSEE, THE REVENUE DID NOT ALLOW ASSESSEE TO CROSS EXAMINE THESE HAWALA PARTIES. UNDER THESE CIRCUMSTANCES KEEPING IN VIEW ENTIRE FACTUAL MATRIX OF THE CASE, IN OUR CONSIDERED VIEW, THE AD DITIONS AS WERE UPHELD BY LEARNED CIT(A) CANNOT BE SUSTAINED IN THE EYES OF L AW AND IS HEREBY ORDERED TO BE DELETED . REFERENCE IS DRAWN TO THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF ANDAMAN TIMBER INDUSTRIES V. COMMISSION ER OF CENTRAL EXCISE IN CIVIL APPEAL NO. 4228 OF 2006 DATED 02-09-2015. THE ASSESSEE SUCCEEDS IN THIS APPEAL. WE ORDER ACCORDINGLY. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IN ITA NO. 1520/MUM/2017 FOR ASSESSMENT YEAR 2011-12 IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON IST SEPTEMBER , 2017. # $% &' 01-09-2017 ( ) SD/- SD/- (C.N. PRASAD) (RAMIT KOCHAR) JUDICIAL MEMBER ACCOUNTANT MEMBER $ MUMBAI ; & DATED 01-09-17 ITA 1520/MUM/2017 13 .9../ R.K. R.K. R.K. R.K. , EX. SR. PS !'#$%&%# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. : ( ) / THE CIT(A)- CONCERNED, MUMBAI 4. : / CIT- CONCERNED, MUMBAI 5. =>( 99?@ , ?@ , $ / DR, ITAT, MUMBAI K BENCH 6. (BC D / GUARD FILE. / BY ORDER, = 9 //TRUE COPY// / ( DY./ASSTT. REGISTRAR) , $ / ITAT, MUMBAI