Dilip Baburao Dalvi, Kolhapur V. Income-tax Officer, Ward - 2 (1), Kolhapur

ITA 1552/PUN/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 9463 (ITAT-PUNE)
• Duration Of Justice: 10 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-08-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 03-10-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bogus purchase; Reason to believe
• Section: 40A(3); 143(3); 143(1); 201; 139(1); 13; 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH SMC , PUNE VIRTUAL COURT BEFORE SHRI R.S. SYAL, VICE PRESIDENT AND SHRI S.S. VISWANETHRA RAVI , JUDICIAL MEMBER I TA NO. 1 55 2 /PUN/201 9 / ASSESSMENT YEAR : 20 09 - 1 0 SHRI DILIP BABURAO DALVI 33, SHIVAJI HOUSING SOCIETY, 12 TH LANE RAJARAMPURI, KOLHAPUR 416008 PAN : A BEPD8027H VS. ITO, WARD 2( 1 ) , KOLHAPUR APPELLANT RESPONDENT / ORDER PER R.S.SYAL, VP : TH IS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 16 - 08 - 2019 PASSED BY THE CIT(A) - 2, KOLHAPUR IN RELATION TO THE ASSESSMENT YEAR 2009 - 10. 2. THE ONLY ISSUE RAISED IN THE APPEAL IS AGAINST THE CONFIRMATION O F ADDITION OF RS.8,34,600 MADE BY THE ASSESSING OFFICER (AO) U/S 40A(3) OF THE INCOME - TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT), PURSUANT TO REOPENING THE ASSESSMENT. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE FILED HIS ORIGI NAL RETURN OF INCOME U/S 139(1) OF THE ACT, WHICH WAS A SSESSEE BY SHRI BHUVANESH KANKANI RE VENUE BY S HRI S.P. WALIMBE DATE OF HEARING 20 - 0 8 - 2020 DATE OF PRONOU NCEMENT 20 - 0 8 - 2020 ITA NO . 1 55 2 /PUN/ 201 9 DILIP B DALVI 2 PROCESSED U/S 143(1) OF THE ACT. THEREAFTER, THE AO RECEIVED CERTAIN INFORMATION FROM DGIT(INV), PUNE ABOUT THE SALES TAX HAWALA RACKET. ON THE BASIS OF SUCH INFORMATION, THE AO RECORDED REASONS ON 19 - 06 - 2013 AND ISSUED NOTICE U/S 148 OF THE ACT. DURING THE COURSE OF PROCEEDINGS U/S 147 R.W.S. 143(3) OF THE ACT, THE ASSESSEE SUBMITTED THE RELEVANT EVIDENCE SHOWING GENUINENESS OF THE TRANSACTIONS OF PURCHASE OF RS.8,34,600, AGAINST WHICH, THE AO HAD RE CORDED REASONS AS BOGUS TRANSACTIONS. THE AO MADE THE DISALLOWANCE U/S 40A(3) OF THE ACT FOR THE EQUAL AMOUNT. THE LD. CIT(A) AFFIRMED THE ADDITION. 4. WE HAVE HEARD RIVAL SUBMISSIONS THROUGH VIRTUAL COURT AND GONE THROUGH THE RELEVANT MATERIAL ON RECORD . THE REASONS RECORDED BY THE AO HAVE BEEN PLACED AT PAGES 2 TO 4 OF PAPER BOOK, WHICH READ AS UNDER: - 19.06.2013 REASONS FOR INIATING PROCEEDINGS UNDER SECTION 147 OF THE I.T. ACT, 1961 AND ISSUE OF NOTICE U/S 148 OF THE I.T. ACT, 1961 1 . AS PER THE INFOR MATION RECEIVED IN RESPECT OF ASSESSEE INVOLVED IN BOGUS HAWALA TRANSACTIONS FROM THE O/O THE DGIT (INV), MUMBAI FORWARDED BY THE DGIT (INV.), PUNE VIDE LETTER NO.PN/DGIT/SALES TAX HAWALA/2012 - 13/1885 DTD. 08.01.2013 ADDRESSED TO THE CHIEF CIT - II, PUNE AND IN TURN, THE CHIEF CIT - II, PUNES CONFIDENTIAL LETTER NO.PN/ CC - II/SAES TAX HAWALA/2012 - 13/969, DTD 17.01.2013 DULY FORWARDED BY THE CIT - I, KOLHAPUR, VIDE CONFIDENTIAL LETTER NO.KOP/CIT - I/ITO(HQ - I)/S TAX HAWALA/2012 - 13/2340, DTD. 22.01.2013 AND, IN TURN BY THE ADDL. CIT, RANGE - 1, KOLHAPUR, VIDE CONFIDENTIAL LETTER NO.KOP/ADDL.CIT, R - 1/ S TAX HAWALA/1226/2012 - 13 DT 24/01/2013 AND SUBSEQUENT LETTERS ON SIMILAR ISSUE FORWARDED BY THE ADDL CIT, RANGE - 1, KOLHAPUR UNDER CONFIDENTIAL REFERENCE UNDER: ( I ) ENDORSEMENT NO.2039 DT. 07/03/2013 TO THE CIT - I, KOLHAPURS LETTER NO.KOP/CIT - I/ITO (HQ.I)/HAWALA/2746/2012 - 13 DT 27/02/2013, FORWARDING CCIT - II, PUNES LETTER NO.2215 DT. 13/02/2013 ALONG WITH A COPY OF THE DGIT (INV), PUNES LETTER NO.2179 DT. 06/02/2013 ITA NO . 1 55 2 /PUN/ 201 9 DILIP B DALVI 3 ( II ) ENDORSEMEN T NO.2131 DT. 28/03/2013 TO THE CIT - I, KOLHAPURS ENDORSEMENT NO.3024 DT. 26/03/2013 FORWARDING CCIT - II, PUNES LETTER NO.8880 DT. 15/03/2013 ALONG WITH A COPY OF THE BOARDS F.NO.414/B/2013 - IT(INV - I), DT. 15/03/2013 ( III ) ENDORSEMENT NO.79 DT. 30/04/2013 TO TH E CIT - I, KOLHAPURS LETTER NO.KOP/CIT - I/ITO(HQ.I)/HAWALA/2013 - 14/186 DT. 30/04/2013 FORWARDING DGIT(INV), PUNES LETTER NO.2648 DT. 22/03/2013 ( IV ) NO.KOP/ADDL.CIT, R - 1&2 / BOG. HAWALA CASE / 96/2013 - 14, DT.02/05/2013 IT IS FOUND THAT SHRI DILIP BABURAO DALAV I, THE ASSESSEE IS A BENEFICIARY OF BOGUS HAWALA TRANSACTIONS IN FY 2008 - 09 RELEVANT TO AY 2009 - 10. IN THE LETTER OF THE DGIT (INV), MUMBAI, IT WAS MENTIONED THAT THE SALES TAX DEPARTMENT OF GOVERNMENT OF MAHARASHTRA HAD CONDUCTED ENQUIRIES IN THE CASES O F A NUMBER OF DEALERS LOCATED ALL ACROSS MAHARASHTRA AND UNEARTHED RACKET INVOLVING MORE THAN 1935 HAWALA DEALERS AND MORE THAN 37,000 B ENEFICIARIES. IN THIS RACKET, HAWALA OPERATOR POSING AS THE SELLER EXISTED ONLY ON PAPER AND HAD ISSUED FAKE BILLS TO A CONCERN AND GOT A CUT - MONEY IN RETURN FOR SUCH FAKE BILLS. THE BENEFICIARIES, IN TURN, HAD GOT THE INPUT TAX CREDIT ON THE MATERIAL WHICH THEY HA D NEVER PURCHASED IN REALITY. SUCH INPUT TAX CREDIT WAS IDENTIFIED AS THE MAIN TARGET OF INVESTIGATION BY THE SAL E S TAX DEPARTMENT WHEREIN SU CH BENEFICIARIES HAD USED FAKE INVOICES TO FRAUDULENTLY CLAIM TAX DEDUCTION ON GOODS P URCHASED. THESE BENEF ICIARIES USED TO INFLATE THEIR EXPENSES TO THE EXTENT OF BILLS ISSUED BY THE HAWA LA DEALERS. THOUGH THE BENEF ICIARIE S HAD SHOWN SUCH ALLEGED PURCHASES I N THEIR BOOKS OF ACCOUNTS, NO MATERIAL AGAINST SUCH PURCHASES IN FACT WERE RECEIVED BY THEM IN REALITY . 2 . THE ASSESSES UNDER CONSIDERATION IS ONE OF SUCH BENEFICIARIES WHO HAD INFLATED PURCHASES ON THE BASIS OF FAKE BI LLS ISSUED BY HAWALA DEALER WHICH, IN TURN, RESULTED INTO CLAIM OF INFLATED EXPENSES BY DEBITING BOGUS PURCHASES TO THE EXTENT OF THE AMOUNT INVOLVED IN SUCH BOGUS HAWALA TRANSACTIONS. THE DETAILS OF SUCH TRANSACTIONS ARE AS UNDER NAME OF THE PARTY/PERS ONS WHO ISSUED FAKE BILLS NAME & ADDRESS OF THE BENEFICIARY (I.E. ASSESSEE) F.Y. A.Y. AMOUNT OF INFLATED PURCHASES PAN OF HAWALA DEALER TIN OF HAWALA DEALER DUSHYANT MANGRU SINGH PROP. ASIAN STEELS PAN:AWZPS2908L TIN 27860346638V DILIP BABURAO DALAVI, PROP. OF AISHWARYA ENTERPRISES & AISHWARYA HI TECH BIO REMEDIES. 2008 - 09 2009 - 10 8,34,600/ - TOTAL -- -- -- RS.8,34,600/ - 2.1 ON VERIFICATION OF THE RECORDS A VAILABLE IN THIS OFFICE , IT IS FOUND THAT THE ASSESSES DILIP BA B URAO DALAVI, PROP . OF AISHWARYA ENTERPRISES & A I S H WARYA HI TECH BIO REMEDIES WHO IS THE BENE FICIARY FROM SUCH BOGUS HAWA L A TRANSACTION, IS ASSESSED TO TAX M THIS WA RD. THE DE TAILS REGARDING THE RETURN OF INCOME FI L ED BY THE ASSESSEE FOR THE AY 2009 - 10 ARE AS UNDER: SR. N O. A.Y. RETURNED INCOME ACK. NO. DATE OF FILING OF RETURN 1 2009 - 10 RS.6,31,870/ - E - FILING 02.08.2009 2.2 AS PER THE INFORMATION RECEIVED IN C.DS FROM DGIT (INV), MUMBAI, IT IS FOUND THAT THE HAWALA PARTIES REFLECTED AT PARA 2 ABOVE, IT IS NOTICED AS UN DER: ITA NO . 1 55 2 /PUN/ 201 9 DILIP B DALVI 4 ( I ) IN THIS RESPECT SHRI DUSHYANT SINGH PROP. OF M/S. ASIAN STEELS (TIN 27860346038) HAS FILED AN AFFIDAVIT CUM DECLARATION DT. 18.04.2011, STATING THAT HE WAS PROP. OF M/S. ASIAN STEELS, (AFFIDAVIT FILED COMMONLY WITH OTHER PERSONS WHO ALSO INVOLVED IN HAWALA). IT WAS STATED THAT INSTEAD OF DOING THE BUSINESS OF SALE AND PURCHASE OF ACTUAL GOODS USED TO ISSUE ONLY TAX INVOICES WITHOUT ANY INVOLVEMENT OF GOODS. IT IS ALSO STATED THAT IN THIS NATURE OF TRANSACTION THE DEALERS WHO NEED SUCH TAX INVOICES (W ITHOUT ACTUAL INVOLVEMENT OF GOODS) APPROACHES HIM AND HE AND OTHER PARTIES PROVIDE THEM INVOICE AS PER THEIR REQUIREMENT AND HE TAKE CONSIDERATION OF THE TAX INVOICE BY WAY OF CHEQUE FROM THE CUSTOMER. THEREAFTER, HE USES TO DEPOSIT THE SAME IN BANK & AF TER CLEARING OF CHEQUE HE WITHDRAWS THE CASH AND RETURN TO THE SAME PARTY. IN TURN HE GETS COMMISSION FROM 0.05 % TO 0.15%.. IT WAS ALSO STATED THAT HE AND OTHER 3 PERSONS HAD ISSUED BOGUS INVOICES IN THE NAME OF OTHER CONCERNS AND THEY HAD USED NAMES OF OTHER CONCERNS. 2.2. HAWALA DEALERS UNDER CONS ID ERATION ARE ONE OUT OF THOSE 1935 BOGUS FIRMS AND HAD ISSUED BOGUS BILLS FOR SALE OF GOODS TO THE ASSESSES ON PAPER ONLY, WITHOUT ACTUALLY DELIVERING T HE GOODS/MATERIAL 2.3. AS PER THE FINDINGS OF THE INVE STIGATION WING AND AS DEPOSED BY THE SELLER BEFORE THE SALES TAX AUTHORITIES THAT SUCH SA L ES MADE TO THE AFORESAID PARTY WERE BOGUS SALES, IT CAN EVIDENTLY BE SAID THAT THE ASSESSES UNDER CONSIDERATION HAD I NFLATED THE PURCHASES, THEREBY OBTAINING BOGUS PU RCHASE BILLS FROM THE SAID PARTY TO THE EXTENT OF RS.8,34, 600. IN OTHER WORDS, THE PURCHASES WERE INFLATED BY T HE ASSESSES TO CLAIM BOGUS EXPENDITURE WHICH RESULTED INTO DECREASE IN PROFIT TO THE EXTENT OF T HE AFORESAID AMOUNT . ACCORDINGLY, THE RETURN AN D ACCOUNTS FILED BY THE ASSESSES FOR THE AY 200 9 - 10, THERE WAS UNDER ASSESSMENT OF INCOME TO THE EXTENT OF THE AFORESAID AMOUNT OF RS.8,34,600/ - HAVING ESCAPED ASSESSMENT WITHIN THE PROVISIONS OF SECTION 147 OF THE INCOME TAX ACT, 1 9 61. IT IS, THEREFORE , A FIT C ASE FOR ISSUE OF NOTICE U/S 148 OF THE I . T . ACT , 1961. 3 . I HAVE, THEREFORE, REASON TO BELIEVE THAT BY NOT DISCLOSING THE TRUE AND CORRECT INCOME BY THE ASSESSE E IN THE RETURN OF INCOME FILED FOR THE AY 2009 - 10, THE INCOME CHARGEABLE TO TAX TO THE E XTENT OF RS .8 ,34 ,6 00/ - H A D ESCAPED ASSESSMENT IN THE SAID YEAR. I, THEREFORE, CONSIDER IT TO BE A FIT CASE FOR INITIATING PROCEEDINGS U/S 147 OF T HE INCOME TAX ACT, 1961, AND, AS SUCH, THE SAID PROCEEDINGS ARE INITIATED . 4. ISSUE NOTICE U/S 148 OF THE I. T. ACT, 1961. 5. IT CAN BE SEEN FROM THE REASONS RECORDED BY THE AO THAT HE INITIATED RE - ASSESSMENT PROCEEDINGS ON THE GROUND THAT THE ASSESSEE HAD RECORDED BOGUS PURCHASES TO THE TUNE OF RS.8,34,600. HOWEVER, THE ADDITION HAS BEEN MADE U/S 40A(3) OF TH E ACT. MAKING OF DISALLOWANCE U/S 40A(3) OF THE ACT PRE - SUPPOSES GENUINENESS OF THE TRANSACTION. THIS SECTION IS INVOKED BECAUSE OF MAKING PAYMENT IN EXCESS OF THE PRESCRIBED LIMIT AGAINST THE ITA NO . 1 55 2 /PUN/ 201 9 DILIP B DALVI 5 GENUINE TRANSACTION OTHERWISE THAN THROUGH ACCOUNT PAYEE CHEQU E ETC. 6. THERE IS NO GAINSAYING THAT RE - ASSESSMENT CAN BE TESTED ON THE BASIS OF REASONS RECORDED AND NOT OTHERWISE. THE HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ INDUSTRIES LIMITED VS. B.S. SINGH, DCIT & ORS. (2015) 377 ITR 1 (BOM) HAS HELD T HAT THE VALIDITY OF REOPENING NOTICE SHALL BE DETERMINED WITH REFERENCE TO REASONS WHICH ARE RECORDED IN SUPPORT THEREOF AND NOTHING ELSE. IT FURTHER HELD THAT IN THE ABSENCE OF REASON TO BELIEVE THAT INCOME CHARGEABLE HAD ESCAPED ASSESSMENT, RE - ASSESSMENT NOTICE SHALL NOT BE SUSTAINABLE. WE ARE CONFRONTED WITH A CASE IN WHICH THE AO INITIATED RE - ASSESSMENT PROCEEDINGS ON THE PREMISE THAT THE ASSESSEE HAD RECORDED BOGUS PURCHASES TO THE TUNE OF RS.8,33,600. HOWEVER, THE ADDITION WAS FINALLY MADE U/S 40A(3 ) OF THE ACT BY IMPLIEDLY ACCEPTING THE GENUINENESS OF THE TRANSACTIONS. THAT BEING THE POSITION, WE ARE OF THE CONSIDERED OPINION THAT THE REASSESSMENT CANNOT BE HELD TO HAVE BEEN VALIDLY INITIATED. 7. IT IS FURTHER WORTHWHILE TO NOTE THAT THE HONBLE BO MBAY HIGH COURT IN THE CASE OF CIT VS. JET AIRWAYS (I) LTD. (2011) 331 ITR 236 (BOM) HAS HELD THAT THE AO CANNOT PROCEED WITH RE - ASSESSMENT IF THE GROUNDS MENTIONED IN RE - ASSESSMENT ARE NON - ITA NO . 1 55 2 /PUN/ 201 9 DILIP B DALVI 6 EXISTENT I.E., IF NO ADDITION IS MADE ON THAT SCORE. WHEN WE EXAM INE THE FACTUAL SCENARIO OBTAINING IN THE INSTANT CASE ON THE TOUCHSTONE OF THE RATIO LAID DOWN BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE ABOVE DECISIONS, THE INESCAPABLE CONCLUSION WHICH CAN BE DRAWN IS THAT THE ONLY ADDITION MADE IN THE RE - ASSESSME NT ON A GROUND DIFFERENT FROM THE ONE FOR WHICH NOTICE U/S 148 OF THE ACT WAS ISSUED, LACKS LEGALITY. THE SAME IS, THEREFORE, DELETED. 8. IN THE RESULT, THE APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE O PEN COURT ON 20 TH AUGUST , 2020 . SD/ - SD/ - (S.S. VISWANETHRA RAVI) (R.S.SYAL) JUDICIAL MEMBER VICE PRESIDENT PUNE ; DATED : 20 TH AUGUST , 2020 GCVSR / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT; 2. / THE RESPONDENT; 3. THE CIT(A) - 2 , KOLHAPUR 4. 5. 6 . THE PR.CIT - 2 , KOLHAPUR , , DR SMC , ITA T, PUNE; / GUARD FILE . / BY ORDER, / / TRUE COPY // SENIOR PRIVATE SECRETARY , / ITAT, PUNE ITA NO . 1 55 2 /PUN/ 201 9 DILIP B DALVI 7 DATE 1. DRAFT DICTATED ON 20 - 0 8 - 2020 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 20 - 0 8 - 2020 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS 7. DATE OF UPLOA DING ORDER SR.PS 8. FILE SENT TO THE BENCH CLERK SR.PS 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK 10. DATE ON WHICH FILE GOES TO THE A.R. 11. DATE OF DISPATCH OF ORDER. *