Versatile Chemicals Ltd., Dhule V. Deputy Commissioner of Income-tax,

ITA 1528/PUN/2016

• Counselvise Citation: [2018] 112 COUNSELVISE.COM (IT) 5822 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 4 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-12-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 12-07-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: MAHADEV NANDGAONKAR
• Keywords: Reopening of assessment; Bogus purchase; Unexplained cash credit; Competent authority; Reassessment proceedings
• Section: 143(3); 201; 68; 148

Judgement Text

- IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, PUNE , BEFORE SHRI VIKAS AWASTHY, JM . / ITA NO S.1527 & 1528 /P U N/201 6 / ASSESSMENT YEAR S : 20 07 - 08 & 2009 - 10 VERSATILE CHEMICALS LTD., D - 151 & 152, ADDL. INDUSTRIAL AREA, AWDHAN, MIDC, DHULE 424006 PAN : AACCV6380M ....... / APPELLANT / V/S. DEPUTY COMMISSIONER OF INCOME TAX, DHULE / RESPONDENT ASSESSEE BY : SHRI MAHADEV NANDGAONKAR REVENUE BY : SHRI SUDHENDU DAS / DATE OF HEARING : 1 9 - 09 - 201 8 / DATE OF PRONOUNCEMENT : 05 - 1 2 - 201 8 / ORDER PER VIKAS AWASTHY, JM : ITA NO. 1527/PUN/2016 IS DIRECTED AGAINST THE ORDER OF COMMI SSIONER OF INCOME TAX (APPEALS) - 1 , NASHIK DATED 23 - 05 - 2016 FOR THE ASSESSMENT YEAR 2007 - 08. IN ITA NO. 1528/PUN/2016 THE ASSESSEE HAS ASSAILED THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) DATED 23 - 05 - 2016 FOR ASSESSMENT YEAR 2009 - 10. 2 ITA NO S.1527 & 1528/PUN/2016, A.YS. 2007 - 08 & 2009 - 10 ITA NO. 1527/PUN/2016 ( A.Y. 2007 - 08) 2. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS/ADDITIONAL GROUND S IN THE APPEAL : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE & IN LAW THE LEARNED ASSESSING OFFICER HAS ERRED IN TREATING AND THE LEARNED CIT(A) - 1, NASIK HAS ERRED IN C ONFIRMING THAT THE CONTRIBUTION OF RS.9.00 LAC RECEIVED TOWARD SHARE CAPITAL FROM ONE SHARE HOLDER WAS AN UNEXPLAINED CASH CREDIT CHARGEABLE TO TAX U/S. 68 OF THE ACT. 2. THE APPELLANT CRAVES LEAVE TO ADD, TO ALTER, DELETE CHANGE OR SUBSTITUTE ANY OF THE ABOVE GROUNDS OF APPEAL . ADDITIONAL GROUND S 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE NOTICE U/S. 148 DATED 31.03.2014 FOR AY 200 7 - 08 ISSUED TO THE APPELLANT IS AB INITIO VIDE AND BAD IN LAD. 2. ON THE FACTS AND IN THE CI RCUMSTANCES OF THE CASE AND IN LAW THE LEARNED AO HAS ERRED IN FRAMING THE ASSESSMENT U/S. 143(3) R.W.S. 147 ON THE APPELLANT FOR AY 2007 - 08 AND ADDING RS.9.00 LAC TO THE INCOME OF THE APPELLANT WHICH IS NOT WITHIN THE PROVISIONS OF SECTION 147 OF THE ACT. 3. SHRI MAHADEV NANDGAONKAR APPEARING ON BEHALF OF THE ASSESSEE SUBMITTED THAT REASSESSMENT FOR ASSESSMENT YEARS 2007 - 08 AND 2009 - 10 WERE REOPENED FOR MAKING ADDITIONS ON ACCOUNT OF BOGUS PURCHASES. 3.1 THE LD. AR SUBMITTED THAT IN ASSESSMENT YEAR 2007 - 08 THE ASSESSEE HAS RAISED ADDITIONAL GROUNDS OF APPEAL CHALLENGING VALIDITY OF NOTICE ISSUED U/S. 148 O F THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT ). THE LD. AR POINTED THAT THE REASSESSMENT PROCEEDINGS WERE INITIATED AFTER MORE THAN 4 YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR . THE ASSESSING OFFICER HAS NOT TAKEN APPROVAL FROM THE COMPETENT AUTHORITY AS SPECIFIED IN SECTION 151 OF THE ACT FOR INITIATING PROCEEDINGS U/S. 147 FOR 3 ITA NO S.1527 & 1528/PUN/2016, A.YS. 2007 - 08 & 2009 - 10 ASSESSMENT YEAR 2007 - 08. THE LD. AR R EFERRED TO THE LETTER FROM ASSESSING OFFICER DATED 31 - 03 - 2014 ADDRESS ED TO COMMISSIONER OF INCOME TAX - I, NASHIK SEEKING APPROVAL. THE LD. AR POINTED THAT THE SAID COMMUNICATION SPECIFICALLY STATES THAT : (I) LIMITATION EXPIRES ON 31 - 03 - 2014; AND (II) TH E CASE RECORD ACCOMPANIE D IN THREE VOLUMES. THE LD. AR THEREAFTER REFERRED TO PERMISSION GRANTED BY THE ADDITIONAL COMMISSIONER OF INCOME TAX FOR REOPENING U/S. 147 AND FOR ISSUANCE OF NOTICE U/S. 148 OF THE ACT. THE LD. AR SUBMITTED THAT AS PER THE PROV ISIONS OF THE ACT THE ASSESSING OFFICER WAS REQUIRED TO OBTAIN PERMISSION FROM THE COMMISSIONER OF INCOME TAX. HOWEVER, THE PERMISSION IN THIS CASE WAS OBTAINED FROM THE ADDITIONAL COMMISSIONER OF INCOME TAX. THEREFORE, THE NOTICE ISSUED U/S. 148 FOR REO PENING IS ITSELF INVALID AS IT WAS NOT ISSUED AFTER SEEKING APPROVAL FROM COMPETENT AUTHORITY . THE LD. AR FURTHER POINTED THAT THE ASSESSING OFFICER SENT THE COMMUNICATION FOR SEEKING APPROVAL ON 31 - 03 - 2014 ALONG WITH THE THREE VOLUMES OF RECORD AND THE LIMITATION FOR ISSUING NOTICE U/S. 148 WAS EXPIRING ON 31 - 03 - 2014 I.E. THE SAME DAY OF SEEKING APPROVAL. THE ADDITIONAL COMMISSIONER OF INCOME TAX GRANTED APPROVAL ON 31 - 03 - 2014 ITSELF HURRIEDLY IN A MECHANICAL MANNER WITHOUT EVEN APPLYING HIS MIND. IT I S HIGHLY IMPROBABLE THAT THE APPROVING AUTHORITY EXAMINED ALL THE THREE VOLUMES OF RECORD ON THE SAME DAY AND GRANTED APPROVAL AFTER PROPER APPLICATION OF MIND. 4. SHRI SUDHENDU DAS REPRESENTING THE DEPARTMENT VEHEMENTLY DEFENDED THE IMPUGNED ORDER AN D PRAYED FOR DISMISSING THE APPEAL OF ASSESSEE ON LEGAL GROUND. 4 ITA NO S.1527 & 1528/PUN/2016, A.YS. 2007 - 08 & 2009 - 10 5. BOTH SIDES HEARD. ORDERS OF THE AUTHORITIES BELOW PERUSED. THE ASSESSEE IN APPEAL HAS ASSAILED REOPENING OF ASSESSMENT ON THE LEGAL ISSUE THAT THE APPROVAL FOR REOPENING HAS NOT B EEN GRANTED BY THE COMPETENT AUTHORITY. AS PER THE PROVISIONS OF SECTION 151 , AFTER EXPIRY OF PERIOD OF 4 YEARS FROM THE END OF RELEVANT ASSESSMENT YEAR , NO NOTICE U/S. 148 OF THE ACT CAN BE ISSUED UNLESS THE PR. COMMISSIONER OF INCOME TAX OR CHIEF COMMISSIONER OR PR. COMMISSIONER OF INCOME TAX OR COMMISSIONER IS SATISFIED ON THE REASONS RECORDED BY THE ASSESSING OFFICER THAT IT IS A FIT CASE FOR THE ISSUE OF SUCH NOTICE. IN THE PRESENT CASE, THE ASSESSING OFFICER VIDE COMMUNICATION DATED 31 - 03 - 2014 ADDRESS ED TO THE COMMISSIONER OF INCOME TAX - 1, NASHIK REQUESTED FOR APPROVAL FOR INITIATING PROCEEDINGS U/S. 147 AGAINST THE ASSESSEE FOR ASSESSMENT YEAR 2007 - 08. HOWEVER, THE APPROVAL WAS ACCORDED FOR INITIATING REOPENING U/S. 147 AND ISSUANCE OF NOTICE U/S. 148 OF THE ACT BY ADDITIONAL COMMISSIONER OF INCOME TAX - 3, DHULE. THE DEPARTMENT HAS FAILED TO PRODUCE SANCTION/APPROVAL LETTER FROM COMPETENT AUTHORITY/ COMMISSIONER OF INCOME TAX - I, NASHIK GRANTING APPROVAL FOR ISSUANCE OF NOTICE U/S. 148 OF THE ACT. THEREFORE, THE DOCUMENTS PLACED ON RECORD BY ASSESSEE WITH RESPECT TO GRANT OF APPROVAL FOR ISSUING NOTICE U/S. 148 ARE UNREBUTTED. SINCE, THE APPROVAL FOR INITIATING REASSESSMENT PROCEEDINGS U/S. 147 AND FOR ISSUANCE OF NOTICE U/S. 148 HAS BEEN GRANTED BY INCOMPETENT AUTHORITY , THE NOTICE ISSUED U/S. 148 IS BAD IN LAW . CONSEQUENTLY, THE SUBSEQUENT PROCEEDINGS ARISING THERE FROM ARE VITIATED. IN VIEW OF IN VALID NOTICE U/S. 148 , THE REASSESSMENT PROCEEDINGS ARE QUASHED AND THE ADDITIONAL GROUNDS RAISED IN THE APPEAL BY THE ASSESSEE ARE ALLOWED. 5 ITA NO S.1527 & 1528/PUN/2016, A.YS. 2007 - 08 & 2009 - 10 6. SINCE, THE ASSESSMENT ORDER HAS BEEN HELD TO BE INVALID THE GROUND NO. 1 RAISED IN THE APPEAL ON MERITS HAS BEC OME ACADEMIC. HENCE, THE SAME IS NOT DELIBERATE D UPON. 7. IN THE RESULT, THE APPEAL OF ASSESSEE FOR ASSESSMENT YEAR 2007 - 08 IS ALLOWED. ITA NO. 152 8 /PUN/2016 (A.Y. 200 9 - 10 ) 8 . THE ASSESSEE HAS RAISED FOLLOWING GROUNDS/ADDITIONAL GROUND OF THE APPEAL AGAINST THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE & IN LAW THE LEARNED ASSESSING OFFICER HAS ERRED IN HOLDING THAT THE APPELLANT HAD MADE ALLEGED BOGUS PURCHASE AMOUNTING TO RS. 19,03 ,228/ - IN FY 2008 - 09 AND THE LEARNED CIT(A) - 1, NASIK HAS ERRED IN RESTRICTING THE DEDUCTION FOR THE COST OF PURCHASES TO RS.14,27,341/ - BEING 75% OF THE VALUE OF THE ALLEGED BOGUS PURCHASES. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE & IN LAW THE LEARNED CIT(A) - I, NASIK HAS ERRED IN DISALLOWING 25% OF THE ALLEGED BOGUS PURCHASES AND RETAINING THE ADDITION TO THE SAID EXTENT AMOUNTING TO RS.4 , 75 , 887/ - OUT OF THE ADDITION MADE BY THE AO ON ACCOUNT OF ALLEGED BOGUS PURCHASES. 3. THE APPELLANT CRAVES LEAVE TO ADD, TO ALTER, DELETE CHANGE OR SUBSTITUTE ANY OF THE ABOVE GROUNDS OF APPEAL . ADDITIONAL GROUND 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE NOTICE U/S. 148 DATED 25.03.2014 FOR AY 200 9 - 10 ISSUED TO THE APPELLANT IS AB INITIO VIDE AND BAD IN LAD. 9 . THE LD. AR SUBMITTED THAT THE DEPARTMENT ON THE BASIS OF INFORMATION RECEIVED FROM MAHARASHTRA SALES TAX DEPARTMENT HAS REOPENED THE ASSESSMENT RAIS ING DOUBT OVER THE PURCHASES AMOUNTING TO RS.19,03,228/ - MADE BY THE ASSESSEE FROM SHREEJI COMMERCIAL 6 ITA NO S.1527 & 1528/PUN/2016, A.YS. 2007 - 08 & 2009 - 10 CORPORATION. THE ASSESSING OFFICER HELD THE PURCHASES MADE BY ASSESSEE FROM SHREEJI COMMERCIAL CORPORATION AS BOGUS AND MADE ADDITION OF THE ENTIRE PURCHASES FROM THE SAID PARTY. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS). THE FIRST APPELLATE AUTHORITY RESTRICTED THE DISALLOWANCE TO 25% OF THE ALLEGED BOGUS PURCHASES I.E. RS.4,75,887/ - . THE LD. AR SUBMITTED THAT THE ASSESSEE HAD PRODUCED VARIOUS DOCUMENTS TO SHOW THE GENUINENESS OF THE AFORESAID PURCHASES . HOWEVER, THE COMMISSIONER OF INCOME TAX (APPEALS) STILL CONFIRMED PART OF THE PURCHASES HOLDING THE SAME TO BE INFLATED PURCHASES. THE LD. AR PLACED RELIANCE ON THE DECISION OF PUNE BENCH OF THE TRIBUNAL IN THE CASE OF M/S. CHHABI ELECTRICALS PVT. LTD. VS. DY. COMMISSIONER OF INCOME TAX IN ITA NO. 795/PUN/2014 FOR ASSESSMENT YEAR 2010 - 11 DECIDED ON 28 - 04 - 2017 AND PRAYED FOR RESTRICT ING THE ADDITION TO 10% OF THE ALLEGED BOGUS PURCHASES. 10 . ON THE OTHER HAND LD. DR VEHEMENTLY DEFENDED THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS). THE LD. DR SUBMITTED THAT THE ASSESSEE HAS INDULGED IN BOGUS PURCHASES FROM HAWALA DEALERS NOTIFIED BY THE MAHARASHTRA SALES TAX DEPARTMENT. THE ASSESSEE HAS FAILED TO SU BSTANTIATE GENUINE NESS OF THE PURCHASES MADE FROM SUSPICIOUS DEALER. THE COMMISSIONER OF INCOME TAX (APPEALS) WAS QUITE GENEROUS IN RESTRICTING THE ADDITION TO 25% OF THE TOTAL BOGUS PURCHASES MADE BY THE ASSESSEE. 1 1 . BOTH SIDES HEARD. ORDERS OF THE AUTHORITIES BELOW PERUSED. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND SALE OF CHEMICALS USED IN PHARMACEUTICALS AND AGRO CHEMICAL INDUSTRIES. THE 7 ITA NO S.1527 & 1528/PUN/2016, A.YS. 2007 - 08 & 2009 - 10 SOLITARY ISSUE RAISED IN APPEAL IS AGAINST THE ADDITION CONFIRMED BY THE COMMISSIONER OF I NCOME TAX (APPEALS) ON ACCOUNT OF BOGUS PURCHASES. THE ASSESSEE HAS MADE PURCHASES TO THE TUNE OF RS.19,03,228/ - FROM THE SHREEJI COMMERCIAL CORPORATION , STATED TO BE HAWALA OPERATOR. THE ASSESSING OFFICER MADE ADDITION OF THE ENTIRE SAID PURCHASES. HOW EVER, THE COMMISSIONER OF INCOME TAX (APPEALS) RESTRICTED THE ADDITION TO 25% OF THE ALLEGED BOGUS PURCHASES. THE COMMISSIONER OF INCOME TAX (APPEALS) WHILE RESTRICTING THE ADDITION HAS OBSERVED THAT NO PROOF OF DELIVERY OF GOODS IS AVAILABLE DUE TO FIRE. THE ASSESSING OFFICER HAS ALSO NOT CONDUCTED ANY ENQUIRIES EXCEPT FOR RELYING ON THE INFORMATION RECEIVED FROM SALES TAX DEPARTMENT. THUS, THERE ARE LAXITY ON BOTH THE SIDES. TAKING CUE FROM THE DECISION OF PUNE BENCH OF THE TRIBUNAL IN THE CASE OF M/S . CHHABI ELECTRICALS PVT. LTD. VS. DY. COMMISSIONER OF INCOME TAX (SUPRA) WHEREIN ADDITIONS ON ACCOUNT OF BOGUS PURCHASES WERE NOT FULLY PROVED , THE ADDITIONS WERE RESTRICTED TO 10% OF THE BOGUS PURCHASES OVER AND ABOVE THE GP DECLARED BY THE ASSESSEE . TH E ASSESSING OFFICER IS DIRECTED TO RESTRICT THE ADDITION TO THE EXTENT OF 10% OF ALLEGED BOGUS PURCHASES OVER AND ABOVE THE GP RATIO DECLARED BY THE ASSESS EE. THE GROUND NOS. 1 AND 2 RAISED BY THE ASSESSEE IN APPEAL ARE PARTLY ALLOWED IN THE TERMS AFORESA ID. 1 2 . THE ASSESSEE HAS RAISED ADDITIONAL GROUND OF APPEAL CHALLENGING VALIDITY OF REOPENING . HOWEVER, NO MEANINGFUL ARGUMENT S WERE MADE BY THE LD. A R ON ADDITIONAL GROUND RAISED IN ASSESSMENT YEAR 2009 - 10. ACCORDINGLY, THE ADDITIONAL GROUND RAISED I N THE APPEAL BY THE ASSESSEE IS DISMISSED. 8 ITA NO S.1527 & 1528/PUN/2016, A.YS. 2007 - 08 & 2009 - 10 1 3 . IN THE RESULT, THE APPEAL OF ASSESSEE FOR ASSESSMENT YEAR 2009 - 10 IS PARTLY ALLOWED. 1 4 . TO SUM UP, THE APPEAL OF ASSESSEE FOR ASSESSMENT YEAR 2007 - 08 IS ALLOWED AND THE APPEAL OF ASSESSEE FOR ASSESSMENT YEAR 2009 - 10 IS PARTLY ALLOWED. ORDER PRONOUNCED ON WEDNESDAY, THE 05 TH DAY OF DECEMBER, 201 8 . SD/ - ( / VIKAS AWASTHY) / JUDICIAL MEMBER / PUNE; / DATED : 05 TH DECEMBER, 2018 RK / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 1, NASHIK 4. THE PR. COMMISSIONER OF INCOME TAX - 1, NASHIK 5. , , - , / DR, ITAT, SMC BENCH, PUNE. 6. / GUARD FILE. / / // TRUE COPY// / BY ORDER, / PRIVATE SECRETARY, , / ITAT, PUNE