ASHOK KUMAR G. ARNAIYA, MUMBAI V. ITO 19(1)(2), MUMBAI

ITA 1606/MUM/2017

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 8660 (ITAT-MUMBAI)
• Duration Of Justice: 8 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-11-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 23-05-2017
• Assessment Year: 2007-2008
• Appeal Filed On: 08-03-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S K MITRA
• Assessee Lawyers: DEVENDRA H JAIN
• Keywords: Bogus purchase; Rejection of books of accounts; Opportunity of cross examination; Corroborative evidences; Accommodation entries; Reassessment proceedings
• Section: 143(3); 142(1); 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC , BENCH MUMBAI BEFORE SHRI R.C.SHARMA, AM ITA NO. 1606 / MUM/20 17 ( ASSESSMENT YEAR : 2007 - 08 ) ASHOK KUMAR G. ARNAIYA 32/34, 2 ND FLOOR KESHAV BHAVAN 1 ST CARPENTER STREET MUMBAI - 400 004 VS. ITO 19 (1)(2), MUMBAI PAN/GIR NO. ADFPA0906R APPELLANT ) .. RESPONDENT ) ASSESSEE BY SHRI DEVENDRA H JAIN REVENUE BY SHRI S.K.MITRA DATE OF HEARING 07 / 09 /201 7 DATE OF PRONOUNCEME NT 21 / 11 /201 7 / O R D E R PER R.C.SHARMA (A.M) : THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A ) - 30, MUMBAI DATED 15/12/2016 FOR A.Y.2007 - 08 IN THE MATTER OF ORDER PASSED U/S.143(3) R.W.S. 147 OF THE IT ACT. 2. THE FOLLOWING GROUNDS HAVE BEE N TAKEN BY THE ASSESSEE: - 1. IN FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) - 30, MUMBAI HAS ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN NOT FOLLOWING THE PROCEDURE LAID DOWN BY THE SUPREME COURT IN RESPECT OF T HE REASSESSMENT PROCEEDINGS U/S 147 BY NOT PROVIDING THE COPY OF REASONS RECORDED U/S 148. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) - 30, MUMBAI HAS ERRED IN CONFIRMING THE ACTION OF THE AO OF ISSUING NOTICE U/S, 148 WITHOUT PROPER SANCTION U/S 151 AND NOT PROVIDING THE SATISFACTION NOTE RECORDED BY THE ADDITIONAL CIT - 15(2) AND THUS VIOLATING THE LAW LAID DOWN BY HONORABLE SUPREME COURT. ITA NO. 1606/MUM/2017 ASHOK KUMAR G, ARNAIYA 2 3. IN FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED C IT(A) - 30, MUMBAI HAS ERRED IN CONFIRMING THE ACTION OF THE AO OF ISSUING NOTICE U/S. 148 WITHOUT INDEPENDENT ENQUIRIES AND APPLICATION OF MIND AND MERELY ON THE BASIS OF INFORMATION RECEIVED FROM THIRD PARTY. 4. IN FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) - 30, MUMBAI HAS ERRED IN CONFIRMING THE ACTION OF THE AO OF COMPLETING THE ASSESSMENT U/S 143(3) WITHOUT PROVIDING ANY OPPORTUNITY OF CROSS EXAMINATION OF THE WITNESSES OR DOCUMENTS RELIED UPON BY THE AO. 5. IN FACTS A ND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) - 30, MUMBAI HAS ERRED IN SUSTAINING ADDITION OF RS. 29,75,571/ - BEING 12.5% OF RS. 2,38,04,569/ - I.E. ALLEGED BOGUS PURCHASES, MERELY ON SURMISES AND CONJECTURES. 2. RIVAL CONTENTIONS HAV E BEEN HEARD AND RECORD PERUSED. 3. FACTS IN BRIEF ARE THAT T HE ASSESSEE I S AN INDIVIDUAL. THE ASSESSEE IS ENGAG ED IN THE BUSINESS OF 'TRADING I N FERROUS AND NON FERROUS METALS UNDER THE PROPRIETARY CONCERN BY NAME, M/S KALPATARU METAL & STEEL CORPORATI ON. THE RETURN OF INCOME FOR THE YEAR UNDER APPEAL WAS FILED ON 25 - 10 - 2007 DECLARING TOTAL INCOME OF RS.5,07,477/ - . THE CASE WAS REOPENED U/S 147, BY ISSUING NOTICE U/S 148 OF THE ACT ON 03 - 03 - 2014, BASED ON THE INFORMATION RECEIVED FROM THE DGIT (INV.), M UMBAI, THAT THE ASSESSEE IS ONE OF THE BENEFICIARIES OF THE ACCOMMODATION ENTRIES PROVIDED BY TWENTY FOUR MVAT DEALERS WHO WERE INDULGING IN ISSUING BOGUS SALE/PURCHASE BILLS, WHICH WAS INVESTIGATED AND KEPT ON THE PUBLIC DOMAIN BY THE SALES TAX DEPA RTME NT . ASSESSMENT U/S. 143(3) R.W.S, 147 OF THE IT, ACT, 1961 WAS COMPLETED BY THE LD, AO, ON 27 - 03 - 2015 DETERMINING THE TOTAL INCOME AT RS.34,83,050/ - . ITA NO. 1606/MUM/2017 ASHOK KUMAR G, ARNAIYA 3 5. DURING THE COURSE O F ASSESSMENT PROCEEDINGS, TO ASCERTAIN THE GENUINENESS OF PURCHASES SHOWN IN THE ACCO UNTS, NOTICES/ INDEPENDENT ENQUIRIES/INVESTIGATIONS HAVE BEEN CARRIED OUT BY THE AO. AO ASKED TO PROVE THE GENUINENESS OF THE SAID PARTIES AND THE PURCHASES MADE FROM THEM WITH ADEQUATE SUPPORTING EVIDENCES AND ALSO TO PRODUCE THE PARTIES FOR VERIFICATION. HOWEVER THE ASSESSEE FAILED TO FILE THE VITA L DOCUMENTS SUCH AS DELIVERY CHALLANS, TRANSPORT RECEIPTS, OCTROI RECEIPTS FOR PAYMENT OF OCTROI DUTY, RECEIPT OF WEIGHBRIDGE FOR WEIGHING OF GOODS, EXCISE GATE PASS, GOODS INWARD REGISTER MAINLINED AT GOD O WN / WAREHOUSE / STORAGE HOUSE ETC ., AND ONLY FURNISHED SOME DETAI L S. AO, ONGOING THROUGH THE SUBMISSIONS AND CONTENTIONS OF THE ASSESSEE AT LENGTH, CONCLUDED THAT THE ASSESSEE DID NOT PURCHASE ANY GOODS FROM THE ABOVE PARTIES AND ONLY INDULGED IN SUCH ACTIVITY OF NON GENUINE TRANSACTIONS TO SUPPRESS THE TRUE PROFITS AND TO REDUCE THE TAX LIABILITY. THUS THE AO REJECTED THE BOOKS OF ACCOUNTS BY INVOKING PROVISIONS OF SEC. 145(3) OF THE ACT. THE PROFIT EARN ED FROM THE PURCHASES SHOWN TO HAVE BEEN MADE FROM THE T WENTY FOUR PARTIES WHICH IS ESTIMATED @12. 5 % ON THE TOTAL NON GENUINE PURCHASES OF RS.2,38,04,569/ - , WHICH WORKS OUT TO RS.29,75,571/ - , AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE . 6. BY THE IMPUGNED ORDER CIT(A) CONFIRMED THE ACTION OF THE AO BY OBSERV ING THAT ASSESSEE HAS NOT RECONCILED THE PURCHASES WITH THE ITEMS SOLD AND FAILED TO RECONCILE 1:1 OF THE ITEMS PURCHASED AND SOLD. ONUS IS ALWAYS ON THE ASSESSEE TO PROVE AS TO HOW THE MATERIAL PURCHASED WAS FIRSTLY OBTAINED. I RECORD A FINDING OF FACT HERE THAT THE ASSESSEE FAILED TO ITA NO. 1606/MUM/2017 ASHOK KUMAR G, ARNAIYA 4 FURNISH CRUCIAL EVIDENCES LIKE PROOF OF DELIVERY OF PURCHASES, TRANSPORT CHALLANS AND GOODS INWARD REGISTER AT GODOWN ETC., EITHER BEFORE THE LD, AO OR BEFORE ME. THUS, IT CAN BE SAFELY PRESUMED THAT EITHER THEY ARE NON - EXI STENT OR EVEN IF THEY DID EXIST, THEY WERE NOT BACKED BY SUFFICIENT EVIDENCE TO UNDERGO THE TEST OF SCRUTINY? 7. WITH REGARD TO THE REOPENING, THE CIT(A) UPHELD THE SAME AFTER OBSERVING AS UNDER: - 7.1 IN VIEW OF THE ISSUE RAISED IN THE GROUND AND THE WR ITTEN SUBMISSIONS OF THE APPELLANT WHICH ARE REPRODUCED IN PAR - 4 ON THE ISSUE, I HAVE CAREFULLY CONSIDERED MATERIAL AVAILABLE ON RECORDS. IN THE CASE, AO AFTER RECORDING THE REASONS, ISSUED NOTICE U/S 148 OF THE ACT ON 03 - 03 - 2014, WHICH WAS DULY SERVED ON THE APPELLANT. IN RESPONSE TO THE SAID NOTICE, THE APPELLANT FIFED A LETTER, DATED 15 - 04 - 2014, TO TREAT THE RETURN FILED ORIGINALLY ON 29 - 10 - 2007 AS THE RETURN FILED IN RESPONSE TO THE NOTICE ISSUED U/S 148 OF THE ACT. SUBSEQUENTLY, NOTICE U/S 142(1) WAS I SSUED ON 21 - 04 - 2014 BY ERSTWHILE I.T.O. 15(2)(2), MUMBAI. IN VIEW OF THE CHANGE IN JURISDICTION, NOTICES U/S 142(1) & 143(2) WERE ISSUED AFRESH ON 02 - 12 - 2Q14. IN RESPONSE TO THE SAID NOTICES SHRI S.M. BOHRA, C.A., THE AUTHORISED REPRESENTATIVE ATTENDED FRO M TIME TO TIME AND FILED THE DETAILS. FROM THE ABOVE, IT IS NOTICED THAT REOPENING OF THE ASSESSMENT UNDER SECTION 147 OF THE ACT WAS DONE PROPERLY FOLLOWING THE DUE PROCEDURES LAID DOWN BY THE LAW AND THERE IS NO INFIRMITY OR ILLEGALITY IN REOPENING THE A SSESSMENT AND THE NOTICE ISSUED U/S.148 OF THE ACT, FOR THE YEAR UNDER CONSIDERATION IS PERFECTLY LEGAL AND VALID. 8. AGAINST THE ABOVE ORDER OF CIT(A) , ASSESS EE IS IN FURTHER APPEAL BEFORE ME . 9. IT WAS CONTENDED BY LEARNED AR THAT AO HAS NOT SUPPLIE D REASONS FOR REOPENING. INSPITE OF REQUEST GIVEN TO THE CIT(A), THE SAME WERE NOT SUPPLIED TO THE ASSESSEE. 10. IN RESPECT OF MERIT, LEARNED AR CONTENDED THAT ADDITION SHOULD BE RESTRICTED TO THE GP DECLARED WITH RESPECT TO THE OTHER SALES MADE BY THE AS SESSEE. ITA NO. 1606/MUM/2017 ASHOK KUMAR G, ARNAIYA 5 11. I HAVE CONSIDERED RIVAL CONTENTIONS AND CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WITH REGARD TO THE MERIT OF THE ADDITION, I FOUND THAT BOTH AO AND CIT(A) HAS GIVEN COGENT REASONS FOR ESTIMATING PROFIT AT 12.5% OF THE BOG US PURCHASES. HOWEVER, WITH REGARD TO THE LEGAL GROUND FOR REOPENING, I FOUND THAT ASSESSEE HAS NOT SUPPLIED REASONS FOR REOPENING THE ASSESSMENT. I ALSO FOUND THAT THIS GROUND HAD NOT BEEN ADJUDICATED BY THE CIT(A). IN THE INTEREST OF JUSTICE, I RESTORE T HE MATTER BACK TO THE FILE OF THE CIT(A) WITH A LIMITED ISSUE OF DECIDING LEGAL GROUND RAISED BY THE ASSESSEE FOR NOT SUPPLYING REASONS FOR REOPENING AND NOT ADJUDICATING THE SAME. CIT(A) IS ACCORDINGLY DIRECTED TO DECIDE THE LEGAL ISSUE IN THE LIGHT OF DECISION OF SUPREME COURT IN THE CASE OF GKN DRIVESHAFT. I DIRECT ACCORDINGLY . 12. IN THE RESULT, APPEAL IS ALLOWED IN PART FOR STATISTICAL PURPOSES. O RDER PRONOUNCED IN THE OPEN COURT ON THIS 21 / 11 /2017 S D / - ( R.C.SHARMA ) ACCOUNTANT MEMBER MUMBAI ; DATED 21 / 11 /201 7 KARUNA SR. PS COPY OF THE ORDER FORWARDED TO : BY ORDER, ( ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//