ITO 9(2)(1), MUMBAI V. INDEPESCA OVERSEAS P. LTD, MUMBAI

ITA 1711/MUM/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 4248 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-02-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: I
• Next Hearing Date: 14-12-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 12-03-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B C S NAIKDR
• Keywords: Bogus purchase; Rejection of books of accounts; Assessment record
• Section: 133(6)

Judgement Text

, INCOME TAX APPELLATE TRIBUNAL,MUMBAI I BENCH BEFORE S/SH. RAJENDRA,ACCOUNTANT MEMBER & RAM LAL NEGI,JUDICIAL MEMBER /.ITA NO.1711/MUM/2014, /ASSESSMENT YEAR-2010-11 INCOME TAX OFFICER-9(2)-1, 2ND FLOOR, ROOM NO.225, AAYAKAR BHAVAN, M.K. ROAD MUMBAI-400 020. VS M/S. INDEPESCA OVERSEAS PVT. LTD. 9,PRASHANT, 5B, NARGIS DUTT ROAD BANDRA(W),MUMBAI-400 050. PAN:AAICS 1304 G ( / APPELLANT) ( / RESPONDENT) /ASSESSEE BY: S/SHRI VINAY DESHMANE/PAWAN SHARMA/PRAKASH PATODIA / REVENUE BY : SHRI B.C.S. NAIK-DR / DATE OF HEARING : 18.01.2016 / DATE OF PRONOUNCEMENT : .02.2016 , 1961 1961 1961 1961 2 22 254 5454 54( (( (1 11 1) )) ) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA, AM - CHALLENGING THE ORDER,DATED 02.12.2013,OF CIT(A)-20 ,MUMBAI,THE ASSESSING OFFICER(AO)HAS FILED THE PRESENT APPEAL.ASSESSEE-COMPANY, ENGAGED IN THE BUSINESS OF TRADING AND PROCESSING OF RAW FISH AND EXPORT OF SEA FOOD,FILED ITS RETURN OF INCOME ON 13.10.2010. THE AO COMPLETED THE ASSESSMENT,U/S.143(3),OF THE ACT ON 15.3.2013 DETER MINING THE INCOME OF THE ASSESSEE AT RS. 28. 20 CRORES. 2. FIRST GROUND OF APPEAL IS ABOUT DELETING THE ADDITI ON MADE ON ACCOUNT OF UNCONFIRMED PURCHASES,AMOUNTING TO RS.16,37,87,197/-.DURING THE ASSESSMENT PROCEEDINGS THE AO FOUND THAT THE ASSESSEE HAD SHOWN SUNDRY CREDITORS OF RS.10.15 CRORES.TO VERIFY THE GENUINENESS AND CREDIT -WORTHINESS OF THE CREDITORS, HE CALLED FOR INFORMA TION U/S. 133(6) FROM SOME OF THE PARTIES,ON TEST CHECK BASIS,FROM WHOM THE ASSESSEE HAD MADE PURCHAS ES.HE FOUND THAT IN MOST OF THE CASES NOTICES WERE SERVED BUT THE PARTIES HAD NOT FILED ANY DETAILS.THE AO WAS OF THE OPINION THAT PURCHASES TO THE EXTENT OF RS.17.38 CRORES,IN RESPE CT OF 16 PARTIES,HAD NOT BEEN PROVED.HE ISSUED A SHOW CAUSE NOTICE U/S.142(1)OF THE ACT.AFTER CONS IDERING THE SUBMISSIONS OF THE ASSESSEE DT . 22.01.2013,30.01.2013 AND 27.02.2013,THE AO HELD TH AT IN MAJORITY OF CASES NOTICE ISSUED U/S. 133(6)WERE EITHER RETURNED UNSERVED/NOT REPLIED,THA T THE RESPECTIVE PARTIES HAD FURNISHED INCOMPLETE DETAILS,THAT THE ASSESSEE HAD NOT FURNI SHED EVIDENCE OF TOTAL PURCHASE IN RESPECT OF 9 CASES, THAT PROPER ADDRESSES WERE NOT MADE AVAILABL E, THAT MERE FILING OF EXPLANATION WITHOUT SUPPORTING DOCUMENTS DID NOT AUTHENTICATE THE GENUI NENESS OF PURCHASES, THAT THE PAYMENTS HAD BEEN MADE THROUGH BANKING CHANNELS,THAT THE ASSESSE E HAD NOT BROUGHT ALL BILLS AND INVOICES OF SUCH PURCHASES,THAT THE CONFIRMATION LETTERS FILED BY THE ASSESSEE DID NOT PROVE THE NATURE OF TRANSACTION,THAT THERE WERE INCOMPLETE DETAILS, THA T THE ASSESSEE HAD BOOKED FICTITIOUS PURCHASES TO INFLATE THE EXPENDITURE AND TO REDUCE THE PROFIT .FINALLY,HE MADE A DISALLOWANCE OF RS.17,38, 01,213/-. 3. AGGRIEVED BY THE ORDER OF THE AO THE ASSESSEE PREFE RRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY(FAA).BEFORE HIM,IT WAS SUBMITTED THAT ALL THE DETAILS, CONFIRMATIONS FROM THE SUPPLIERS,LEDGER ACCOUNTS, BANK ACCOUNTS, BANK STAT EMENT OF THE SUPPLIER, COPY OF ACKNOWLEDGE - ITA/1711/M/14,AY.10-11-INDEPESCA 2 MENT OF FILING OF RETURN OF INCOME OF THE SUPPLIERS WERE FILED BY THE ASSESSEE, THAT THE LEDGER ACCOUNT OF THE ASSESSEE IN THE BOOKS OF THE SUPPLIE R PARTIES ALONG WITH THEIR CONFIRMATIONS WERE FURNISHED DURING THE ASSESSMENT PROCEEDINGS,THAT MO ST OF THE SUPPLIERS WERE ILLITERATE OR NOT CONVERSANT WITH PERFECT ACCOUNT SYSTEM, THAT OUT OF THE 16 SUPPLIERS 11 PARTIES WERE FISH SUPPLIERS,THAT AS PER THE SET PROCEDURE MATERIAL AR RIVAL REPORT WAS PREPARED AT THE FACTORY SITE,THAT IN THE MATERIAL ARRIVAL REPORT DETAILS LIKE VARIETI ES, ACCOUNTS, WEIGHT AGREED AND TOTAL VALUE OF THE GOODS WAS MENTIONED,THAT THE REPORT WAS COUNTERSIGN ED BY BOTH THE PARTIES,THAT FINAL MATERIAL ARRIVAL REPORT WAS BEING MAINTAINED BY THE ASSESSEE ,THAT THE AO HAD WRONGLY DISALLOWED THE GENUINE PURCHASES AND HAD BRUSHED ASIDE THE RELIABL E EVIDENCES, THAT BY LETTER DT.27.2.2013 THE AO WAS MADE AWARE OF THE SUBMISSION OF THE CONFIRMA TIONS,THAT IN RESPECT OF DIFFERENCES IN CLOSING BALANCE RECONCILIATION STATEMENT HAD BEEN F ILED. THE FAA,VIDE HIS LETTER,DT.7.10.2013,FORWARDED THE MATERIAL TO THE AO AND TO OFFER HIS COMMENTS.THE AO MADE HIS SUBMISSIONS ABOUT THE MATE RIAL SENT BY THE FAA BY HIS LETTER,DT. 13. 11.2013.IN HIS REMAND REPORT,THE AO STATED THAT THE ASSESSEE HAD MADE AN APPLICATION FOR RECTIFICATION U/S.154 OF THE ACT,THAT IT WAS FOUND THAT THERE WAS A MISTAKE IN ADDITION OF RS.1, 00, 14,017/-,THAT THE PURCHASES TO THE TUNE OF RS.16,37 ,87,197/- WERE NOT GENUINE, THAT THE DOCUMENTS SUBMITTED BY THE ASSESSEE WERE INCOMPLETE OR WERE NOT FILED AT ALL, THAT THE ASSESSEE EXCEPT FOR SUBMITTING LEDGER ACCOUNT HAD NOT FURNISHED ANY SUB STANTIVE EVIDENCE, THAT THE BANK STATEMENT WERE FILED ONLY IN ONE CASE, THAT NO BANK DETAILS W ERE FILED IN RESPECT OF 12 PARTIES, THAT IT HAD NOT FILED INVOICES FOR PURCHASE IN 10 CASES, THAT THE S TOCK REGISTER WAS NOT SUBMITTED , THAT THE CLAIM OF EXPENSES MADE BY THE ASSESSEE REMAINED UNPROVED. IN RESPONSE TO THE OBSERVATIONS OF THE AO THE ASSESSEE CONTENDED BEFORE THE FAA THAT IT HAD F ILED COPY OF LEDGER ACCOUNTS OF ALL THE 16 SUPPLYING PARTIES, COPY OF LEDGER ACCOUNT OF THE AS SESSEE IN SUPPLIERS BOOKS/CONFIRMATION DULY SIGNED BY ALL THE 16 PARTIES, COPY OF RELEVANT EXTR ACT OF BANK STATEMENTS, COPIES OF INVOICES OF SIX SUPPLIERS,THAT RECONCILIATION STATEMENT WAS ALSO FU RNISHED, THAT OUT OF 16- SIX SUPPLIERS HAD NOT SUPPLIED FISH,THAT THERE WAS NO QUESTION OF SUBMITT ING RAW MATERIAL FOR SUCH SUPPLIES,THAT ASSESSEE HAD SUBMITTED COPY OF INVOICES DURING THE COURSE OF SCRUTINY ASSESSMENT, THAT VIDE LETTER DT.30.1.13 THE ASSESSEE HAD FURNISHED COPIE S OF RAW MATERIAL REPORTS ALONG WITH SAMPLE COPIES OF INVOICES,THAT THE AO HAD NOT ASKED TO SUB MIT THE STOCK REGISTER. AFTER CONSIDERING THE SUBMISSIONS OF THE AO AND THE ASSESSEE,THE FAA HELD THAT THE AO HAD DISALLOWED PURCHASES OF RS.17.38 CRORES WITHOUT ANY VALID REASON AND WITHOUT REJECTING THE GENUINENESS OF THE PURCHASES,THAT THE AO HAD NOT ES TABLISHED THE FACTS THAT THE PURCHASES MADE BY THE ASSESSEE WERE BOGUS,THE ASSESSEE HAD BEEN AB LE TO REFUTE EACH AND EVERY ARGUMENT WITH NECESSARY EVIDENCE,THAT THE AO VIDE ITS ORDER 27.9. 13 HAD RECTIFIED THE MISTAKES U/S.154 OF THE ACT,THAT THE AO HAD REDUCED ADDITION OF RS.7.54 C R. (RS.1.00CR +6.54CR),THAT THE ASSESSEE HAD SUBMITTED COPY OF LEDGER ACCOUNT OF ALL 16 SUPPLIER S ALONG WITH THE CONFIRMATION,THAT THE ASSESSEE HAD FILED COPIES OF RELEVANT EXTRACT OF RESPECTIVE BANK ACCOUNT OF THE SUPPLIERS,THAT THE BASIC EVIDENCES WERE PROVIDED TO THE AO, THAT THE ASSESSE E HAD FILED RECONCILLIATION STATEMENT VIDE ITS LETTER DT.27.2.13, THAT ASSESSEE HAD SUBMITTED COPI ES OF ACKNOWLEDGEMENT OF RETURN OF INCOME OF THE SUPPLIERS.HE FURTHER HELD THAT IF THE EVIDENCES PRODUCED BY THE ASSESSEE WERE NOT GENUINE AND THE PAYMENTS MADE THROUGH BANKING CHANNELS WERE NOT SATISFACTORY IT WAS THE LEGAL RESPONSIBILITY OF THE AO TO MAKE FURTHER INVESTIGATION AND TO ESTA BLISH THE CONTRARY FACTS, THAT THE ASSESSEE HAD DISCHARGED ITS ONUS.WITH REGARD TO THE LETTER DT.13 .11.2013 OF THE AO, THE FAA OBSERVED THAT SUBMISSIONS MADE BY THE AO WERE FULL OF INCORRECT N ARRATION AND UNTRUE STATEMENT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS,THE ASSESSEE HAD PRODUCED ALL THE BOOKS OF ACCOUNT, THAT THE ITA/1711/M/14,AY.10-11-INDEPESCA 3 AO WHILE PASSING THE ORDER HAD NEVER ASKED FOR PROD UCING XEROX COPIES OF ALL DOCUMENTS, THAT THE SUCCEEDING AO COULD NOT CONTEND THAT ASSESSEE HAD NOT FILED COMPLETE DOCUMENTS, THAT THE AO IN ITS LETTER 13.11.2013 HAD MADE CERTAIN FACTUA LLY INCORRECT OBSERVATIONS, THAT THE LETTER OF THE ASSESSEE DATED .27.2.13 AND 23.9.2013 CLEARLY PROV ED THAT CONFIRMATION OF 16 SUPPLIERS, COPIES OF RELEVANT EXTRACT OF BANK STATEMENT AND COPIES OF RE CONCILIATION STATEMENT WERE FILED BY THE ASSESSEE,THAT SIX OF THE CREDITORS WERE NOT FISH SU PPLIERS,THAT QUESTION OF SUBMITTING OF RAW MATERIAL REPORT IN SUCH CASES DID NOT ARISE, THAT T HE ASSESSEE HAD SUBMITTED COPIES OF INVOICES DURING ASSESSMENT PROCEEDINGS AND AO HAD ACCEPTED T HE FACTUAL POSITIONS,THAT THE SUCCEEDING AO HAD MADE INCORRECT OBSERVATION ABOUT INVOICES FO R PURCHASES, THAT THE AO HAD NOT CALLED FOR THE STOCK REGISTER,THAT THERE WAS DIFFERENCE OF RS .9,154/- WITH REGARD TO PURCHASE EXPENDITURE , THAT THE RECONCILIATION ABOUT SAID TRANSACTION WAS FILED. THE FAA FURTHER HELD THAT AO HAD NOT REJECTED THE VERACITY OF BOOKS OF ACCOUNT NOR HAD M ADE ANY OBSERVATION OF INCORRECTNESS OR INCOMPLETENESS OF BOOKS OF ACCOUNT U/S. 145(3) OF T HE ACT.THE FAA REFERRED TO THE CASE SANCHITA MARINE PRODUCTS PVT. LTD.(15 SOT 280) AND HI LUX AU TOMATIC (P.)LTD. (ITAPPEAL NO.A33 OF 2007 OF HONBLE DELHI HIGH COURT DT.23.3.2009.HE AL SO REFERRED TO THE CASE OF NIKUNJ EXIM ENTERPRISES PVT. LTD. OF THE HONBLE JURISDICTIONAL HUGH COURT. FINALLY, THE FAA DIRECTED THE AO TO DELETE THE ENTIRE DISALLOWANCE MADE UNDER THE HE AD PURCHASE EXPENSES. 4. BEFORE US,THE DEPARTMENTAL REPRESENTATIVE(DR)SUPPOR TED THE ORDER THE AO AND STATED THAT NECESSARY DOCUMENTS WERE NOT PRODUCED BEFORE THE AO .HIS ATTENTION WAS DRAWN TO THE OBSERVA - TIONS OF THE FAA ABOUT FILING OF DOCUMENTS AND MISR EPORTING OF FACTS BY THE SUCCEEDING AO.HE WAS DIRECTED TO PRODUCE THE ORIGINAL ASSESSMENT REC ORDS OF THE AO AND TO VERIFY THE VERACITY OF THE CLAIM MADE BY THE AO IN HIS LETTER DATED 13.11. 2013.AFTER TWO WEEKS PERIOD THE DR ADMITTED THAT THE ASSESSEE HAD PRODUCED THE DOCUMENTS AS MEN TIONED BY THE FAA.THE AUTHORISED REPRESENTATIVE(AR)SUPPORTED ORDER OF THE FAA AND MA DE THE SAME SUBMISSION THAT WERE MADE BEFORE THE FAA. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT INITIALLY THE AO HAD DISALLOWED AN AMOUNT OF RS.17.38 CRORES UNDER THE HEAD UNPROVED PURCHASES,THAT IN THE RECTIFICATION PROCEEDINGS CARRIED OUT ON TWO OC CASIONS HE REDUCED IT TO RS.7.54 CRORES,THAT HE HAD ISSUED NOTICES U/S.133(6)OF THE ACT ON TEST CHE CK BASIS,THAT DURING THE APPELLATE PROCEEDINGS THE FAA HAD FORWARDED CERTAIN DOCUMENTS TO THE AO A ND HAD CALLED FOR HIS COMMENTS,THAT THE SUCCESSOR AO ALLEGED MANY AN IRREGULARITIES IN THE ACCOUNTS MAINTAINED BY THE ASSESSEE,THAT THE FAA HAS GIVEN CATEGORICAL FINDING OF FACT ABOUT FIL ING OF CONFIRMATION LETTERS OF SUPPLIERS OF FISH ALONG WITH DETAILS OF THEIR BANK STATEMENT,COPIES O F ACKNOWLEDGMENT OF INCOME TAX RETURNS AND RECONCILIATION STATEMENT.HE SPECIFICALLY MENTIONED THAT VIDE LETTERS DATED 27.2.13 AND 23.9.2013 THE AO HAD FURNISHED ALL THE NECESSARY DETAILS.BEFO RE US,THE DR ON THE BASIS OF THE ASSESSMENT RECORDS,ADMITTED THAT BOTH THE LETTERS AND THE ANNE XTURES TO THE LETTERS WERE AVAILABLE ON THE FILE OF THE AO.IN THSES CIRCUMSTANCES,WE ARE OF THE OPIN ION THAT THE FINDINGS OF FACTS RECORDED BY THE FAA WITH REGARD TO THE PURCHASES IN QUESTION PRESEN T THE TRUE PICTURE AND THE COMMENTS OF THE AO MADE IN HIS LETTER 13.11.2013 WERE FACTUALLY INC ORRECT.IT IS ALSO A FACT THAT THE AO HAD NOT REJECTED THE BOOKS OF ACCOUNTS MAINTAINED BY THE AS SESSEE,NOR HAS DOUBTED THE GENUINENESS OF THE SALES MADE BY IT.IN THE MATTER OF NIKUNJ EXIM ENTER PRISES PVT. LTD.(INCOME TAX APPEAL NO.5640 OF 2010),THE HONBLE BOMBAY HIGH COURT HAS SPECIFIC ALLY HELD THAT IN A CASE WHERE SALES ARE CONSIDERED GENUINE,NO ADDITION,ON ACCOUNT OF BOGUS PURCHASES,CAN BE MADE.CONSIDERING THE ITA/1711/M/14,AY.10-11-INDEPESCA 4 FACTS THAT ALL THE DETAILS WERE FURNISHED BEFORE TH E AO AND THAT SAME WERE NOT CONSIDERED BY HIM AND RESPECTFULLY FOLLOWING THE JUDGMENT OF NIKUNJ E XIM ENTERPRISES PVT. LTD.(SUPRA),WE DECIDE THE EFFECTIVE GROUND OF APPEAL AGAINST THE AO. AS A RESULT,APPEAL FILED BY THE AO STANDS DISM ISSED. . ORDER PRONOUNCED IN THE OPEN COURT ON 10 TH FEBRUARY,2016. 10 ,2016 SD/- SD/- ( /RAM LAL NEGI) ( / RAJENDRA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER /MUMBAI, /DATE: 10.02.2016 . . . .. . JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR A BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.