ITO 14(1)(3), MUMBAI V. DIGITRON COMPUTERS P.LTD, MUMBAI

ITA 160/MUM/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 9112 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-01-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: I
• Next Hearing Date: 25-10-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 08-01-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K BIPARIDR
• Keywords: Bogus purchase; Unexplained expenditure; Principle of natural justice; Additional evidence
• Section: 69C; 69; 6

Judgement Text

, INCOME-TAX APPELLATE TRIBUNAL -IBENCH MUMBAI , . . , BEFORE S/SHRI RAJENDRA,ACCOUNTANT MEMBER AND C. N. PRASAD,JUDICIAL MEMBER ./ITA/160/MUM/2015, /ASSESSMENT YEARS: 2010-11 INCOME TAX OFFICER-14(1)(3) ROOM NO.458, 4 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI-400020. VS. M/S. DIGITRON COMPUTERS PVT. LTD. UNIT NO.2, SWASTIK MILL COMPOUND, SION-TROMBAY ROAD, CHEMBUR MUMBAI-400 071. PAN:AAACD 1619 H ( /APPELLANT ) ( / RESPONDENT) ./ITA/1406/MUM/2015, /ASSESSMENT YEARS: 2010-11 M/S. DIGITRON COMPUTERS PVT. LTD. MUMBAI-400 071. VS. INCOME TAX OFFICER-14(1)(3) MUMBAI-400 020. ( /APPELLANT ) ( / RESPONDENT) ./ITA/1407/MUM/2015, /ASSESSMENT YEARS: 2011-12 M/S. DIGITRON COMPUTERS PVT. LTD. MUMBAI-400 071. VS. INCOME TAX OFFICER-14(1)(3) MUMBAI-400 020. ( /APPELLANT ) ( / RESPONDENT) REVENUE BY: SHRI S.K. BIPARI-DR ASSESSEE BY: SHRI SANJAY PARIKH / DATE OF HEARING: 01.11.2016 / DATE OF PRONOUNCEMENT:06/01/2017 ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA, AM - CHALLENGING THE ORDERS DT.17.11.14 OF THE CIT(A-21, MUMBAI THE ASSESSING OFFICER (A.O.) AND ASSESSEE HAVE FILED THE APPEALS FOR THE ABOVE M ENTIONED AY.S .THE ASSESSEE IS ENGAGED IN THE BUSINESS OF TRADING IN COMPUTERS AND RENDERI NG TECHNICAL SERVICES.THE DETAILS OF DATES OF FILING OF RETURNS,RETURNED INCOME, DATES OF ASSE SSMENT ETC. CAN BE SUMMARISED AS UNDER :- A.Y. ROI FILED ON RETURNED INCOME(RS.) ASSESSMENT DT. ASSESSED INCOME(RS.) DT. OF ORDERS OF CIT(A) 2010-11 24.09.2010 26,84,750/- 25.03.2013 66,14,720 /- 17.11.2014 2011-12 24.09.2011 5,71,400/- 04.02.2014 16,42,560/ - 17.11.2014 ITA/160/MUM/2015(2010-11)(BY REVENUE ): 2. FIRST GROUND OF APPEAL RAISED BY THE AO IS ABOUT PA RTIAL RELIEF GIVEN WITH REGARD TO BOGUS PURCHASES. DURING THE ASSESSMENT PROCEEDINGS THE AO OBSERVED THAT HE HAD RECEIVED INFORMATION FROM INVESTIGATION WING THAT THE ASSESS EE HAD OBTAINED BOGUS PURCHASE BILLS AMOUNTING TO RS.39.17 LAKHS FROM HAWALA OPERATORS ( RS.14.92 LAKHS-ARYAN SALES CORPN., RS.11.17LAKHS-M/S. OM CORPN. AND RS.13.07 LAKHS FRO M M/S. SAVITHA INTERNATIONAL).HE ASKED THE ASSESSEE TO EXPLAIN AS TO WHY THE PURCHASE MADE FROM THE ABOVE MENTIONED THREE PARTIES 160/M/15,1406/M/15& 1407/M/15,DIGITRON COMPUTERS PVT.LTD. 2 SHOULD NOT BE TREATED AS BOGUS PURCHASES AND ADDED TO ITS INCOME. AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE HE HELD THAT THE SALES T AX AUTHORITIES OF MUMBAI HAD CARRIED OUT INVESTIGATION IN THE CASES WHERE THERE WERE DEFAULT S OF VAT SET OFF CREDITS, THAT IT WAS FOUND THAT THERE WERE CERTAIN PARTIES WHO WERE ENGAGED IN THE BUSINESS OF ISSUING BILLS AS PER THE REQUIREMENT OF THE CUSTOMER, THAT SALES TAX AUTHORI TIES HAD RECORDED THE STATEMENTS OF SUCH PARTIES, THAT THE PERSONS HAD AGREED BEFORE THE SAL ES TAX AUTHORITIES THAT THEY HAD NOT SUPPLIED ANY MATERIAL TO THE CUSTOMERS, THAT ASSESSEE HAD NO T PRODUCED THE DELIVERY CHALLANS, PURCHASE ORDERS, THAT IT HAD ONLY ENCLOSED TAX INVOICES AND LEDGER ACCOUNT OF THE PARTIES, THAT THE ONUS WAS ON THE ASSESSEE TO PROVE GENUINENESS OF THE TRA NSACTION, THAT THE PRODUCTION OF INVOICE ETC. WAS OF NO HELP TO THE ASSESSEE.INVOKING THE PR OVISIONS OF SECTION 69C OF THE ACT, THE AO ADDED AN AMOUNT OF RS.39.17 LAKHS TO THE TOTAL INCO ME OF THE ASSESSEE. 3. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE PREF ERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY(FAA).BEFORE HIM, IT WAS ARGUED THAT PURCHASES MADE BY IT FROM THE ABOVE MENTIONED THREE PARTIES WERE GENUINE, THAT IT HAD PURCHASED TONERS, MAINTENANCE KITS AND STATIONARY FROM THE PARTY, THAT IT REQUIRED TON ERS ON A REGULAR BASIS, THAT WITHOUT TONERS PRINTING COULD NOT BE CARRIED OUT , THAT IT HAD SPE NT AN AMOUNT OF RS.29.19 LAKHS FOR PURCHASING THE TONERS ONLY, THE ASSESSEE HAD RECEIV ED PRINTING CHARGES FROM ITS CUSTOMERS, THAT THE ASSESSEE HAD REQUESTED THE AO TO PROVIDE IT AN OPPORTUNITY TO CROSS EXAMINE THE PARTIES,THAT HE DID NOT AFFORD ANY OPPORTUNITY TO I T, COPIES OF THE BANK STATEMENT OF THE PERSONS WERE ALSO NOT PROVIDED TO THE ASSESSEE, THOUGH THE AO HAD RELIED UPON THE SAME EVIDENCE FOR MAKING THE ADDITION, THAT IT HAD FURNISHED COPIES O F LEDGER ACCOUNT DURING THE ASSESSMENT PROCEEDINGS, THAT PAYMENT WAS MADE THROUGH ACCOUNT PAYEE CHEQUES,THAT COPIES OF BANK STATEMENT WERE ALSO FILED BEFORE AO, THAT THE ASSES SEE HAD USED THE GOODS PURCHASED BY IT FOR ITS BUSINESS, THAT THE AO WAS NOT DOUBTING THE FACT THAT GOODS HAD BEEN PURCHASED, THAT HE HAD INVOKED THE PROVISIONS OF SECTION 69C, THAT THE AO HAD NOT OBJECTED TO THE FACT THAT GOODS HAD BEEN RECEIVED BY THE ASSESSEE, THAT THE EXPENDITURE WAS MADE THROUGH BANKING CHANNELS, THAT NO ADDITION COULD BE MADE U/S. 69C. 4. AFTER CONSIDERING THE ASSESSMENT ORDER AND THE SUBM ISSION OF THE ASSESSEE, THE FAA HELD THAT IT HAD PURCHASED THE TONERS FROM THE ABOVE MEN TIONED THREE COMPANIES.REFERRING TO THE CASE OF SIMIT P.SHETH (356ITR451) OF THE HON'BLE GU JARAT HIGH COURT AND BHOLANATH POLY 160/M/15,1406/M/15& 1407/M/15,DIGITRON COMPUTERS PVT.LTD. 3 FAB P. LTD.(355ITR290),HE DIRECTED THE AO TO RESTRI CT THE DISALLOWANCE TO THE TUNE OF 12% OF THE NON-GENUINE PURCHASES. 5. DURING THE COURSE OF HEARING BEFORE US THE DEPARTME NTAL REPRESENTATIVE (DR) SUPPORTED THE ORDER OF THE AO. THE AUTHORISED REPRESENTATIVE (A R) STATED THAT PURCHASES MADE BY THE ASSESSEE WERE GENUINE, THAT PROVISIONS OF SECTION 6 9 WERE NOT APPLICABLE TO THE FACTS OF THE CASE, THAT THE AO HAD NOT GIVEN ANY OPPORTUNITY TO THE ASSESSEE TO CROSS EXAMINE THE PERSONS THAT HAD BEEN RELIED UPON BY HIM I.E. AO.HE RELIED UPON THE CASES OF 1. NIKUNJ EXIMP ENTERPRISES PVT. LTD.(372ITR619); 2. SHRI DEEPAK POPATLAL GALA (ITA/5920/MUM/2013,DATED 27.03.2015, AY:2010-11); 3. RAMESH KUMAR & CO. (ITA NO.2959/MUM/2014, DATED 28 .11.2014,AY 2010-11) AND 4. SHRI RAJEEV G. KALATHIL (ITA NO.6727/MUM/2012, DATE D 20.08.2014,AY 2009-10) 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US. WE FIND THAT THE ASSESSEE HAD PURCHASED GOODS FROM THREE PARTIES THA T THE SALES TAX AUTHORITIES HAD MADE A REFERENCE TO THE INVESTIGATING WING OF THE DEPARTM ENT, THE AO HAD INVOKED THE PROVISIONS OF SECTION 69C OF THE ACT AND HAD MADE AN ADDITION OF RS.39.17 LAKHS TO THE TOTAL INCOME OF THE ASSESSEE. WE FIND THAT THE ASSESSEE HAD MADE A REQU EST TO THE AO TO AFFORD AN OPPORTUNITY TO CROSS EXAMINE THE PERSONS WHOSE STATEMENTS HAD BEE N RELIED UPON TO MAKE THE ADDITION. NOT GIVING A CHANCE OF CROSS EXAMINING THE WITNESSES WA S VIOLATION OF PRINCIPLES OF NATURAL JUSTICE. ADDITION MADE BY THE AO COULD BE DELETED O NLY ON THAT ACCOUNT. HOWEVER EVEN ON MERITS, ADDITIONS MADE IS NOT SUSTAINABLE.HE HAD IN VOKED THE PROVISIONS OF SECTION 69C AND THE SAID SECTION DEALS WITH UNEXPLAINED EXPENDITURE .IN OUR OPINION, THE FAA HAD RIGHTLY HELD THAT SECTION 69C COULD NOT BE USED FOR MAKING ADDIT IONS FOR UNACCOUNTED PURCHASES AS ALLEGED BY THE AO.THE CASE LAWS RELIED UPON BY THE ASSESSEE SUPPORT THE VIEW TAKEN BY THE FAA. THEREFORE, WE ARE OF THE OPINION THAT THE ORDER OF THE FAA DOES NOT SUFFER FROM ANY LEGAL OR FACTUAL INFIRMITY.THEREFORE, CONFIRMING THE SAME WE DECIDE FIRST GROUND OF APPEAL AGAINST THE AO. 7. GROUND NO.2 & 3 DEAL WITH ADMISSION OF ADDITIONAL E VIDENCES BY THE FAA DURING THE APPELLATE PROCEEDINGS. DURING THE COURSE OF HEARING BEFORE US THE DR COULD NOT POINT OUT AS TO HOW GROUNDS WERE EMANATING FROM THE ORDER OF THE FAA, AS HE HAD NOT ADMITTED ADDITIONAL EVIDENCES, SO GROUND NO.2 & 3 ARE DISMISSED. ITA 1406/MUM/15-AY.2010-11: 160/M/15,1406/M/15& 1407/M/15,DIGITRON COMPUTERS PVT.LTD. 4 8. THE EFFECTIVE GROUND OF APPEAL RAISED BY THE ASSESS EE IS ABOUT SUSTAINING THE ADDITION OF RS.4.70 LAKHS U/S. 69C OF THE ACT. AS STATED IN THE EARLIER PARA OF THE ORDER, THE FAA HAD DIRECTED THE AO TO ADD 12% OF THE BOGUS PURCHASES O F RS.39.17 LAKHS FOR THE YEAR UNDER CONSIDERATION. 9. BEFORE US, THE AR ARGUED THAT PROVISIONS OF SECTION 69C WERE NOT APPLICABLE, THAT THERE WAS NO JUSTIFICATION FOR ANY ADDITION, NO RELEVANT DOCU MENTS WERE MADE AVAILABLE TO AO,THE DR LEFT THE ISSUE TO THE DISCRETION OF THE BENCH. 10. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT THE FAA HAD,WHILE ADJUDICATING THE APPEAL,PARTLY SUSTAI NED THE ADDITION WITHOUT ASSIGNING ANY REASON.AS WE HAVE ALREADY HELD THAT THE PROVISIONS OF SECTION 69C WILL NOT BE APPLICABLE TO THE FACTS OF THE CASE,SO,REVERSING THE ORDER OF THE FAA,WE DECIDE THE EFFECTIVE GROUND OF APPEAL IN FAVOUR OF THE ASSESSEE. ITA /1407/MUM/15,AY.2011-12 : 11. THE FACTS AND CIRCUMSTANCES OF THE CASE FOR THE YEA R UNDER APPEAL ARE IDENTICAL TO THE FACTS OF THE EARLIER YEAR-EXCEPT FOR THE AMOUNT OF ADDITI ON SUSTAINED BY THE FAA.SO,FOLLOWING OUR ORDER FOR THE PREVIOUS YEAR,EFFECTIVE GROUND IS DEC IDED IN FAVOUR OF THE ASSESSEE. AS A RESULT,APPEAL FILED BY THE AO IS DISMISSED AND THE APPEALS OF THE ASSESSEE ARE ALLOWED. ORDER PRONOUN CED IN THE OPEN COURT ON 06 TH JANUARY,2017. 06 , 2016 SD/- SD/- ( / CN PRASAD ) ( / RAJENDRA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 06 .01.2017. JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.