HOMA ENGINEERING WORKS, MUMBAI V. DCIT 13(1), MUMBAI

ITA 1533/MUM/2017

• Counselvise Citation: [2018] 123 COUNSELVISE.COM (IT) 0894 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-10-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: H
• Assessment Year: 2009-2010
• Appeal Filed On: 06-03-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MANOJ KUMAR SINGH LD
• Assessee Lawyers: KISHOR PATEL; MANALI MADHWANI LD ARS
• Keywords: Reopening of assessment; Bogus purchase; Additional evidence; Reason to believe; Reassessment proceedings
• Section: 143(3); 133(6); 147; 131; 148

Judgement Text

ITA.NOS.1533 & 1534/MUM/2017 HOMA ENGINEERING WORKS ASSESSMENT YEAR-2009-10 & 2011-12 IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI , , BEFORE SHRI MANOJ KUMAR AGGARWAL, AM AND SHRI RAVISH SOOD, JM I.T.A. NO.1533/MUM/2017 ( ASSESSMENT YEAR: 2009-10) HOMA ENGINEERING WORKS OFFICE NO.1 & 2, GROUND FLOOR COTTON PRESS BUILDING 1 ST MAGZINE STREET DARUKHANA, MAZGAON MUMBAI-400 010 VS. DEPUTY COMMISSIONER OF INCOME TAX-13(1) ROOM NO.117, 1 ST FLOOR AAYKAR BHAVAN MUMBAI-400 020 PAN/GIR NO. AAAFH-0860-K ( APPELLANT ) : ( !' RESPONDENT ) & I.T.A. NO.1534/MUM/2017 ( ASSESSMENT YEAR: 2011-12) HOMA ENGINEERING WORKS OFFICE NO.1 & 2, GROUND FLOOR COTTON PRESS BUILDING 1 ST MAGZINE STREET DARUKHANA, MAZGAON MUMBAI-400 010 VS. DEPUTY COMMISSIONER OF INCOME TAX-13(1) ROOM NO.117, 1 ST FLOOR AAYKAR BHAVAN MUMBAI-400 020 PAN/GIR NO. AAAFH-0860-K ( APPELLANT ) : ( !' RESPONDENT ) ASSESSEE BY : KISHOR PATEL & MANALI MADHWANI, LD. ARS REVENUE BY : MANOJ KUMAR SINGH, LD. SR. DR # $ DATE OF HEARING : 18/09/2018 %&' $ / DATE OF PRONOUNCEMENT : 05/10/2018 ITA.NOS.1533 & 1534/MUM/2017 HOMA ENGINEERING WORKS ASSESSMENT YEAR-2009-10 & 2011-12 2 O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. THE AFORESAID APPEALS BY ASSESSEE FOR ASSESSMENT YEARS [AY] 2009-10 & 2011-12 CONTEST SEPARATE ORDER OF FIRST A PPELLATE AUTHORITY. SINCE COMMON ISSUES ARE INVOLVED IN BOTH THE APPEAL S, WE DISPOSE-OFF THE SAME BY WAY OF THIS COMMON ORDER FOR THE SAKE O F CONVENIENCE AND BREVITY. FIRST WE TAKE UP ITA.NO.1533/MUM/2017 FOR AY 2009-10 WHICH CONTEST THE ORDER OF LD. COMMISSIONER OF INCOME-TAX (APPEALS)-28 [CIT(A)], MUMBAI, APPEAL NO.CIT(A)-28/IT-661/ITO-17(1)(5)/2014-15 DATED 09/12/2016 BY RAISING FOLLOWING GROUNDS OF AP PEAL: 1) REOPENING OF ASSESSMENT BAD IN LAW: A) THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) [CIT(A)] ERRED IN CONFIRMING THE ACTION OF THE DEPUTY COMMISSIONER OF INCOME TAX 13(1), MUMBAI (AO) IN REOPENING THE ASSESSMENT U/S 148 OF THE I NCOME-TAX ACT, 1961. B) AS THERE WAS NO REASON TO BELIEVE THAT THE INCOM E CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT, THE REOPENING IS WITHOUT JURISD ICTION C) ON THE BASIS OF THE FACTS AND IN THE CIRCUMSTANC ES OF THE CASE AND IN LAW, THE REOPENING IS INVALID, BAD IN LAW AND OUGHT TO BE QU ASHED. 2) ADDITION ON ACCOUNT OF ALLEGED BOGUS PURCHASES R S.65,99,994/-:- A) THE LEARNED CIT(A) ERRED IN CONFIRMING THE ACTIO N OF THE AO IN DISALLOWING, ON THE BASIS OF INFORMATION RECEIVED FROM THE SALES TA X DEPARTMENT, PURCHASE OF RS.65,99,994/- ALLEGED TO BE BOGUS WITHOUT APPRECIA TING THE DOCUMENTARY EVIDENCE PLACED BEFORE HIM IN SUPPORT OF THE SAID P URCHASES WHICH ESTABLISHED THE IDENTITY OF THE PARTIES AND THE GEN UINENESS OF THE PURCHASES MADE. B) ON THE BASIS OF THE FACTS AND IN THE CIRCUMSTANC ES OF THE CASE AND IN LAW, THE ACTION BY THE AO AND CONFIRMED BY THE CIT(A) MAY PL EASE BE DELETED. C) WITHOUT PREJUDICE TO THE ABOVE, THE LEARNED CIT( A) FAILED TO APPRECIATE THAT THE CORRESPONDING INCOME BY WAY OF SALES &SERVICES HAVING BEEN ACCEPTED, AS A NATURAL COROLLARY, NOT THE ENTIRE PURCHASES BU T THE PROFIT ELEMENT EMBEDDED THEREIN WOULD BE SUBJECT TO TAX, WHICH IN APPELLANTS CASE ONLY 19.43% (GROSS PROFIT ) OF THE PURCHASES OF RS.65,99 ,994/- OUGHT TO HAVE BEEN SUBJECTED TO TAX. ITA.NOS.1533 & 1534/MUM/2017 HOMA ENGINEERING WORKS ASSESSMENT YEAR-2009-10 & 2011-12 3 THE ASSESSMENT FOR IMPUGNED AY WAS FRAMED BY LD. DEPUTY COMMISSIONER OF INCOME TAX, RANGE-13(1), MUMBAI [AO ] U/S 143(3) READ WITH SECTION 147 VIDE ORDER DATED 26/03/2014. 2.1 DURING IMPUGNED AY, THE ASSESSEE BEING RESIDENT FIRM WAS STATED TO BE ENGAGED AS ENGINEERS, SHIP REPAIRERS, MARINE CONTRACTORS. THE INCOME OF THE ASSESSEE HAS BEEN DETERMINED AT RS.11 7.49 LACS AFTER ADDITIONS OF ALLEGED BOGUS PURCHASES FOR RS.65.99 LACS AS AGAINST RETURNED INCOME OF RS.51.49 LACS E-FILED BY THE ASSESSEE ON 30/09/2009 WHICH WAS ASSESSED U/S 143(3) ON 30/11/2011 AT RS.6 5.77 LACS. 2.2 THE REASSESSMENT PROCEEDINGS WERE INITIATED VID E NOTICE U/S 148 DATED 13/03/2013 PURSUANT TO RECEIPT OF CERTAIN INF ORMATION FROM THE SALES TAX DEPARTMENT, MAHARASHTRA WHEREIN IT WAS FOUND THAT THE ASSESSEE STOOD BENEFITTED OF ALLEGED BOGUS PURCHASES AGGREGATING TO RS.65.99 LACS FROM TEN PARTIES, THE DETAILS OF WHIC H HAVE ALREADY BEEN EXTRACTED AT PARA-4.1 OF THE QUANTUM ASSESSMENT ORDER. THE PARTNER OF THE ASSESSEE FIRM, VIDE SUMMONS DATED 07/03/2013 U/ S 131, WAS ASKED TO PRODUCE THE PURCHASE REGISTER, PURCHASE BILLS, TRANSPORTATION DOCUMENTS AND MANNER OF UTILIZATION OF MATERIAL. THE STATEMENT OF THE PARTNER WAS ALSO RECORDED ON OATH U/S 131 ON 14/03/ 2013 BEFORE THE LOWER AUTHORITIES. HOWEVER, THE ASSESSEE CONCLUSIVE LY FAILED TO SUBSTANTIATE THE PURCHASE TRANSACTIONS AND EXPRESSE D INABILITY TO PRODUCE ANY OF THE PARTIES FOR CONFIRMATION OF TRAN SACTIONS. NO TRANSPORTATION OR QUANTITATIVE DETAILS WERE FILED. THE ASSESSEE DEFENDED THE PURCHASE TRANSACTIONS VIDE REPLY DATED 28/03/20 14. HOWEVER, NOT CONVINCED LD. AO, FOR MULTIPLE REASONS AS STATED AT PARA-4.7 , DISALLOWED THE PURCHASES AND ADDED THE SAME TO THE INCOME OF T HE ASSESSEE. ITA.NOS.1533 & 1534/MUM/2017 HOMA ENGINEERING WORKS ASSESSMENT YEAR-2009-10 & 2011-12 4 3. AGGRIEVED, THE ASSESSEE CONTESTED THE REASSESSME NT PROCEEDINGS ON LEGAL GROUNDS AS WELL AS ON MERITS BEFORE LD. CI T(A) WITHOUT ANY SUCCESS VIDE IMPUGNED ORDER DATED 09/12/2016 WHEREI N THE STAND OF LD. AO GOT CONFIRMED. AGGRIEVED, THE ASSESSEE IS IN FUR THER APPEAL BEFORE US. 4. THE LD. AUTHORIZED REPRESENTATIVE [AR] FOR THE ASSESSEE, SHRI KISHORE PATEL, DRAWING OUR ATTENTION TO THE DOCUMENTS PLACED IN T HE PAPER BOOK , AGITATED THE ADDITIONS AS CONFIRMED BY LD. FIRST APPELLATE AUTHORITY. THE LD. AR ALSO DREW OUR ATTENTION TO TH E ORDER OF LD. FIRST APPELLATE AUTHORITY FOR AY 2010-11 TO SUBMIT THAT A DDITIONS, UNDER SIMILAR CIRCUMSTANCES, HAVE BEEN RESTRICTED TO GROSS PROFIT RATE DECLARED BY THE ASSESSEE. NO SERIOUS ARGUMENTS HAVE BEEN ADDUCED TO ASSAIL THE REASSESSMENT PROCEEDINGS AND THEREFORE, THE GROUNDS RAISED IN THAT REGARD ARE TAKEN TO BE NOT PRESSED. PER CONTRA, LD. DEPARTMENTAL REPRESENTATIVE [DR], SHRI MANOJ KUMAR SINGH , SUPPORTED THE STAND OF LOWER AUTHORITIES. 5. WE HAVE CAREFULLY HEARD THE RIVAL CONTENTIONS AN D PERUSED THE RELEVANT MATERIAL ON RECORD INCLUDING DOCUMENTS PLA CED IN THE PAPER BOOK AND JUDICIAL PRONOUNCEMENTS AS CITED BEFORE US . WE ARE OF THE CONSIDERED OPINION THAT THERE COULD BE NO SALE WITH OUT ACTUAL PURCHASE OF MATERIAL SINCE THE ASSESSEE WAS ENGAGED IN CONTRACT WORK. THE SALES TURNOVER ACHIEVED BY THE ASSESSEE HAS NOT BEEN DISP UTED BY THE REVENUE AND THE PAYMENTS WERE THROUGH BANKING CHANN ELS. THE ASSESSEE WAS IN POSSESSION OF PRIMARY PURCHASES DOC UMENTS. AT THE SAME TIME, THE ASSESSEE COULD NOT CONCLUSIVELY SUBS TANTIATE THE PURCHASES MADE BY HIM AND FAILED TO PRODUCE ANY OF THE PARTY TO CONFIRM ITA.NOS.1533 & 1534/MUM/2017 HOMA ENGINEERING WORKS ASSESSMENT YEAR-2009-10 & 2011-12 5 THE TRANSACTIONS. THE DELIVERY OF THE MATERIAL COU LD NOT BE SUBSTANTIATED AND EVEN THE QUANTITATIVE DETAILS COULD NOT BE PROV IDED BY THE ASSESSEE. ALL THESE FACTORS CAST A SERIOUS DOUBT ON ASSESSEE S CLAIM. THEREFORE, IN SUCH A SITUATION, THE ADDITION, WHICH COULD BE MADE , WAS TO ACCOUNT FOR PROFIT ELEMENT EMBEDDED IN THESE PURCHASE TRANSACTI ONS TO FACTORIZE FOR PROFIT EARNED BY ASSESSEE AGAINST POSSIBLE PURCHASE OF MATERIAL IN THE GREY MARKET AND UNDUE BENEFIT OF VAT AGAINST SUCH BOGUS PURCHA SES. THEREFORE, WE ESTIMATE THE SAME @12.5% OF ALLEGED BOGUS PURCHASES OF RS.65.99 LACS WHICH COMES TO RS.8.25 LACS. THE B ALANCE ADDITIONS STAND DELETED. THE GROUNDS AND THE APPEAL STAND PAR TLY ALLOWED. ITA NO.1534/MUM/2017 6. THIS APPEAL BY ASSESSEE CONTESTS CONFIRMATION OF FOLLOWING ADDITIONS:- NO. NATURE OF ADDITION AMOUNT (RS.) 1. COMMISSION EXPENDITURE 5,84,331 / - 2. DISALLOWANCE U/S 28(IV) 23,29,801/- TOTAL 29,14,132/ - 7.1 BRIEF FACTS QUA THE ADDITION OF COMMISSION EXPENDITURE OF RS.5.84 LACS ARE THAT THE ASSESSEE CLAIMED THE AFORESAID EX PENDITURE AS COMMISSION PAYMENT TO AN ENTITY NAMELY CORPORATE ALLIANCES. IT WAS STATED THAT THE SERVICES OF SAID ENTITY WAS AVAILED TO LIAISE WITH THE AUTHORITIES AT REGULAR INTERVAL AND WAS AKIN TO PROFESSIONAL FEES. HOWEVER, RELYING UPON ORDERS FOR AY 2009-10 & 2010- 11, LD. AO OPINED THAT THERE WAS NO POSSIBILITY OF ANY COMMISSION PAY MENTS KEEPING IN VIEW THE FACT THAT THE ASSESSEE WAS DEALING ONLY WI TH THE GOVERNMENT AUTHORITIES AND THEREFORE, THE EXPENDITURE WAS NOT ALLOWABLE TO THE ITA.NOS.1533 & 1534/MUM/2017 HOMA ENGINEERING WORKS ASSESSMENT YEAR-2009-10 & 2011-12 6 ASSESSEE. THE SAME, UPON CONFIRMATION BY LD. CIT(A) , IS UNDER APPEAL BEFORE US. 7.2 THE SECOND ADDITION STEM FROM THE FACT THAT TO CONFIRM THE CLOSING BALANCES REFLECTED BY THE ASSESSEE AGAINST FOUR SUN DRY CREDITORS, NOTICES U/S 133(6) WERE SENT. HOWEVER, IN RESPONSE TO THE SAME, ALL THE PARTIES DENIED HAVING ANY BUSINESS ACTIVITY WITH TH E ASSESSEE. THE RELEVANT DETAILS OF THESE PARTIES AND RESULT OF NOT ICE U/S 133(6) AND THE ASSESSEES SUBMISSIONS AGAINST THE SAME HAS ALREADY BEEN EXTRACTED AT PARA-4 OF THE QUANTUM ASSESSMENT ORDER. THE LD. AO, APPLYI NG THE PROVISIONS OF SECTION 28(IV), ADDED THE SAME TO THE INCOME OF THE ASSESSEE. THE SAME, UPON CONFIRMATION BY LD. CIT(A) , ARE UNDER APPEAL BEFORE US. 8. THE LD. AR HAS AGITATED BOTH THE ADDITIONS WHICH HAS BEEN CONTROVERTED BY LD. DR. 9. WE HAVE CAREFULLY HEARD THE SAME AND GONE THROUG H THE DOCUMENTS. SO FAR AS THE COMMISSION EXPENDITURE IS CONCERNED, LD. AR HAS SUBMITTED THAT THE COMMISSION HAS BEEN PAID AGA INST INDEPENDENT PROFESSIONAL SERVICES RENDERED BY THE SAID ENTITY TO THE ASSESSEE AND THE SAME WAS NOT MERELY IN THE NATURE OF LIASIONING SERVICES. OUR ATTENTION HAS BEEN DRAWN TO THE PROFILE OF THE SAID ENTITY TO SUBMIT THAT IT WAS INDEPENDENT PROFESSIONAL ENTITY AND WAS NOT MERELY ACTING AS AN AGENT OF THE ASSESSEE. THE SUPPORTING DOCUMENTS IN THE SH APE OF INVOICES, AGREEMENT, ENGAGEMENT LETTER ETC. HAVE BEEN PLACED ON RECORD. IT IS ALSO NOTED THAT SIMILAR ADDITIONS MADE BY LD. AO IN AY 2 009-10 HAS BEEN DELETED BY LD. FIRST APPELLATE AUTHORITY, FINDING S UBSTANCE IN ASSESSEES CLAIM. THEREFORE FINDING STRENGTH IN THE ARGUMENTS OF LD. AR, THE ISSUE ITA.NOS.1533 & 1534/MUM/2017 HOMA ENGINEERING WORKS ASSESSMENT YEAR-2009-10 & 2011-12 7 STAND REMITTED BACK TO THE FILE OF LD. AO FOR RE-AD JUDICATION AS PER LAW IN THE LIGHT OF SUBMISSIONS MADE BY LD. AR. THE ASSESS EE, IN TURN, IS DIRECTED TO SUBSTANTIATE HIS CLAIM, FAILING WHICH L D. AO SHALL BE AT LIBERTY TO ADJUDICATE ON THE BASIS OF MATERIAL AVAILABLE ON RECORD. THE GROUND STAND ALLOWED FOR STATISTICAL PURPOSES. 10. SO FAR AS THE ADDITION U/S 28(IV) IS CONCERNED, LD. AR HAS PLEADED TO ADMISSION OF ADDITIONAL EVIDENCES IN TERMS OF RU LE 29 OF THE INCOME TAX TRIBUNAL RULES, 1963 VIDE APPLICATION DATED 18/ 09/2018. THESE EVIDENCES ARE IN THE SHAPE OF LEDGER ACCOUNTS OF TH E FOUR SUNDRY CREDITORS TO DEMONSTRATE THAT THE LIABILITIES HAVE SUBSEQUENTLY BEEN DISCHARGED BY THE ASSESSEE BY WAY OF BANK PAYMENTS. THESE EVIDENCES, IF FOUND AUTHENTICATED AND ADMISSIBLE, W OULD RUN CONTRARY TO THE FINDINGS OF LD. AO. THEREFORE, WHILE ADMITTING THE SAME, THIS ISSUE IS ALSO RESTORED TO THE FILE OF LD. AO FOR ADJUDICATIO N IN THE LIGHT OF ADDITIONAL EVIDENCES SUBMITTED BEFORE US. THE REQUISITE INFORM ATION / EXPLANATION /OTHER EVIDENCES, IN THIS REGARD, SHALL BE ADDUCED BY THE ASSESSEE BEFORE LD. AO. THE GROUND AS WELL AS THE APPEAL STA ND ALLOWED FOR STATISTICAL PURPOSES. CONCLUSION 11. THE APPEAL FOR AY 2009-10 STANDS PARTLY ALLOWED WHEREAS THE APPEAL FOR AY 2011-12 STANDS ALLOWED FOR STATISTICA L PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 05 TH OCTOBER, 2018. SD/- SD/- (RAVISH SOOD) (MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED 05.10.2018 SR.PS:-THIRUMALESH ITA.NOS.1533 & 1534/MUM/2017 HOMA ENGINEERING WORKS ASSESSMENT YEAR-2009-10 & 2011-12 8 COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. / THE CIT(A) 4. / CIT CONCERNED 5. !'#$% &$%' / DR, ITAT, MUMBAI 6. #()* GUARD FILE / BY ORDER, (DY./ASSTT.REGISTRAR) !'#$ / ITAT, MUMBAI