RISHABH METAL & CHEMICALS P.LTD, MUMBAI V. DCIT 1(3), MUMBAI

ITA 1536/MUM/2016

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 8192 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-11-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2010-2011
• Appeal Filed On: 18-03-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Unexplained expenditure; Principle of natural justice
• Section: 69C; 143(3); 234B; 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES D, MUMBAI BEFORE SHRI P K BANSAL, VICE PRESIDENT & SHRI AMARJIT SINGH, JUDICIAL MEMBER ITA NO.1536/MUM/2016 ASSESSMENT YEAR : 2010-11 RISHABH METAL & CHEMICALS P LTD., 4 TH FLOOR, EROS THEATRE BLDG., J T ROAD, CHURCHGATE, MUMBAI 400 020 PAN AAACR2214E VS. DCIT 1(3) MUMBAI (APPELLANT) (RESPONDENT) APPELLANT BY : MS. NEHA PARANJPE RESPONDENT BY : SHRI PURUSHOTTAM KUMAR DATE OF HEARING : 13. 11 .2017 DATE OF PRONOUNCEMENT : 27 . 11 .2017 O R D E R PER P K BANSAL, VICE-PRESIDENT: THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT(A)-3, MUMBAI, DATED 08.01.2016, FOR A.Y. 2010-1 1, BY TAKING THE FOLLOWING EFFECTIVE GROUNDS OF APPEAL: I. LEGAL; REOPENING UNDER SECTION 147 IS BAD IN LAW 1. THE LD, COMMISSIONER OF INCOME TAX (APPEAL S) - 3, MUMBAI, [HEREINAFTER REFERRED TO AS THE LD. CIT (A)] ERRED IN CONFIRMING THE ACTION OF THE LD. A.O. IN REOPENING THE ASSESSMENT BY ISSUANCE OF THE NOTICE DATED 18.03.2013 UNDER SECTION 148 OF TH E ACT WITHOUT APPRECIATING THE FACT THAT THE APPELLANT WAS NOT PR OVIDED WITH THE REASONS RECORDED PRIOR TO THE ISSUANCE OF NOTICE UN DER SECTION 148. HENCE, THE NOTICE UNDER SECTION 148 AND THE SUBSEQU ENT RE- ASSESSMENT ORDER PASSED UNDER SECTION 143(3) R.W.S 147 IS AGAINST ITA NO.1536/MUM/2016 RISHABH METAL & CHEMICALS P LTD. 2 THE PRINCIPLE OF NATURAL JUSTICE AND THUS THE SAME MAY BE QUASHED AND SET ASIDE. 2. THE LD. CIT(A) FAILED TO APPRECIATE THAT THE APP ELLANT'S ASSESSMENT HAS REOPENED ON THE BASIS OF STATEMENT R ECORDED BY THE SALES TAX DEPARTMENT WITHOUT APPLICATION OF MIN D AND SHOWING THAT ANY INCOME CHARGEABLE TAX HAS ESCAPED ASSESSME NT. THUS, THE RE-OPENING IS MERELY ON THE BASIS OF SUSPICION WHIC H IS UNJUSTIFIED. HENCE, THE RE-ASSESSMENT ORDER PASSED UNDER SECTION 143(3) R.W.S 147 IS BAD IN LAW AND THE SAME MAY BE QUASHED AND S ET ASIDE. II. MERITS 3. THE LD. CIT(A) ERRED IN CONFIRMING THE ADDIT ION OF RS.57,378/- BEING 12.5% ON THE TOTAL PURCHASES MADE FROM M/S. D EV ENTERPRISES AMOUNTING TO RS.4,59,030/- TREATING THE SAME AS UNEXPLAINED EXPENDITURE WITHOUT APPRECIATING THE FA CT THAT THE EXPENDITURE INCURRED ON PURCHASES ARE DULY RECORDED IN THE BOOKS OF THE APPELLANT AND THE SAME ARE SUPPORTED WITH TH E PROPER DOCUMENTARY EVIDENCES. HENCE, THE ADDITION OF RS.57 ,378/- UNDER SECTION 69C IS UNJUSTIFIED AND THE SAME MAY BE DELE TED. 4. THE LD. CIT(A) ERRED IN CONFIRMING THE ACT ION OF THE LD. A.O. IN MAKING ADDITION OF RS.4,387/- BEING PURCHASES MA DE FROM M/S. ATLANTIC TRADERS TREATING THE SAME AS UNEXPLAINED E XPENDITURE UNDER SECTION 69C OF THE ACT WITHOUT APPRECIATING T HE FACT THAT EXPENDITURE INCURRED ON PURCHASES ARE DULY RECORDED IN THE BOOKS OF THE APPELLANT AND THE SAME ARE SUPPORTED WITH PR OPER DOCUMENTARY EVIDENCES. HENCE, THE ADDITION OF RS.4, 387/- UNDER SECTION 69C IS UNJUSTIFIED AND THE SAME MAY BE DELE TED. 5. THE LD. CIT(A) ERRED IN CONFIRMING THE ACT ION OF THE LD. A.O. IN LEVYING INTEREST UNDER SECTION 234A, 234B AND 23 4C OF THE ACT WITHOUT APPRECIATING THAT THE APPELLANT DENIES HIS LIABILITY TO THE SAME. 2. GROUND NOS. 1 & 2 WERE NOT PRESSED AT THE TIME O F HEARING HENCE, THE SAME ARE DISMISSED AS NOT PRESSED. 3. GROUND NO.3 RELATES TO THE SUSTENANCE OF ADDITIO N MADE BY CIT(A) AMOUNTING TO ` 57,378/- BEING OF THE TOTAL PURCHASES MADE BY THE ASSESSEE ITA NO.1536/MUM/2016 RISHABH METAL & CHEMICALS P LTD. 3 FROM M/S. DEV ENTERPRISES AMOUNTING TO ` 4,59,030/-. THE FACTS RELATING TO THIS GROUND ARE THE ASSESSING OFFICER NOTED THAT TH E ASSESSEE HAD MADE PURCHASES FROM M/S. DEV ENTERPRISES AMOUNTING TO ` 4,59,030/-, WHICH HAS BEEN DECLARED AS A HAWALA DEALER BY THE SALES TAX D EPARTMENT. HE, THEREFORE, INITIATED PROCEEDINGS U/S. 147 AND AFTER AFFORDING OPPORTUNITY TO THE ASSESSEE TO PROVE THE GENUINENESS OF THE PURCHA SES, WITH WHICH THE ASSESSING OFFICER WAS NOT SATISFIED, MADE ADDITION @25% OF THE ` 4,59,030/- TO THE INCOME OF THE ASSESSEE. SIMILARLY, HE ALSO NOTED THAT THE ASSESSEE HAS SHOWN THE PURCHASE OF STORES AND SPARES AMOUNTING T O ` 4,387, WHICH WAS ALSO TREATED TO BE BOGUS AND ADDED IN THE INCOME OF THE ASSESSEE. THUS, THE TOTAL ADDITION MADE WAS ` 1,19,144/- THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(A). THE CIT(A) AFTER CONSIDERING THE SUBMISSIO NS OF THE ASSESSEE AND FOLLOWING THE DECISIONS OF HONBLE GUJARAT HIGH COU RT IN THE CASE OF CIT VS. SIMIT SHETH (2013) 38 TAXMANN.COM 385 (GUJ), BHOLA NATH POLYFAB PVT. LTD. 355 ITR 290 (GUJ) AND FURTHER THE ORDER OF THE AHME DABAD BENCHES OF TRIBUNAL, DATED 20.05.2011, IN THE CASE OF SANKET S TEEL TRADERS VS. ITO (ITA NO. 2801 & 2937/AHD/2005 RESTRICTED THE ADDITION TO 12.5% OF THE PURCHASES FROM DEV ENTERPRISES. 4. BEFORE US, THE LEARNED AR VEHEMENTLY CONTENDED A ND RELIED ON HER SUBMISSIONS MADE BEFORE THE CIT(A). BUT WE NOTED TH AT SHE COULD NOT CONVINCE US THAT THE NAME OF M/S. DEV ENTERPRISES I S NOT INCLUDED IN THE LIST ITA NO.1536/MUM/2016 RISHABH METAL & CHEMICALS P LTD. 4 OF PARTIES DECLARED AS BOGUS BY THE SALES TAX DEPAR TMENT. WE DO AGREE THAT THE ASSESSEE CANNOT MAKE SALES WITHOUT MAKING PURCH ASES. IT IS A CASE WHERE THE ASSESSEE WOULD HAVE MADE PURCHASES NOT FR OM GENUINE DEALER BUT FROM GREY MARKET SO AS TO SAVE VAT, WHICH WAS CHARG EABLE IN THE CASE OF THE ASSESSEE @12.5%. THEREFORE, WE DO NOT FIND ANY ILL EGALITY OR INFIRMITY IN THE ORDER OF THE CIT(A) SUSTAINING THE ADDITION @12% ON THE PURCHASES MADE FROM DEV ENTERPRISES. THUS, GROUND NO.3 STANDS DIS MISSED. 5. GROUND NO.4 RELATES TO THE SUSTENANCE OF ADDITIO N AMOUNTING TO ` 4,387/- IN RESPECT OF PURCHASES MADE FROM ATLANTIC TRADERS. AFTER HEARING THE RIVAL SUBMISSIONS AND GOING THROUGH THE ORDERS OF THE TAX AUTHORITIES BELOW, WE NOTED THAT THE ASSESSEE HAS ALSO MADE PUR CHASES FROM ATLANTIC TRADERS IN RESPECT OF STORES AND SPARES. WE FURTHER NOTED THAT ATLANTIC TRADERS WAS LISTED AMONGST BOGUS DEALERS BY THE SAL ES TAX DEPARTMENT. THE ASSESSING OFFICER MADE THE 100% ADDITION IN THIS RE SPECT. ON APPEAL, THE CIT(A) CONFIRMED THE ORDER OF THE ASSESSING OFFICER . THE PURCHASES MADE BY THE ASSESSEE FROM DEV ENTERPRISES AND ATLANTIC TRAD ERS, IN OUR OPINION, ARE ON THE SAME FOOTING AND SINCE WE HAVE RESTRICTED TH E ADDITION TO 12.5% ON THE PURCHASES MADE FROM DEV ENTERPRISES, ON THE SAM E ANALOGY THE ASSESSING OFFICER IS DIRECTED TO RESTRICT THE ADDIT ION TO 12.5% OF ` 4,387/-. THIS GROUND IS PARTLY ALLOWED. ITA NO.1536/MUM/2016 RISHABH METAL & CHEMICALS P LTD. 5 6. GROUND NO.5 PERTAINS TO LEVY OF INTEREST U/S. 23 4A, 234B & 234C OF THE INCOME TAX ACT. THIS BEING CONSEQUENTIAL IN NATURE , THE ASSESSING OFFICER IS DIRECTED TO CALCULATE THE SAME AFTER GIVING EFFECT TO THIS ORDER. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 27 TH DAY OF NOVEMBER, 2017. SD/- SD/- (AMARJIT SINGH) (P K BANSAL) JUDICIAL MEMBER VICE-PRESIDENT MUMBAI; DATED: 27 TH NOVEMBER, 2017 SA COPY OF THE ORDER FORWARDED TO : 1. THE APP ELL ANT. 2. THE RESPONDENT. 3. T HE CIT(A), MUMBAI 4. THE CIT 5. DR, D BENCH, ITAT, MUMBAI BY ORDER, #TRUE COPY # ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI