DCIT CIR 4, THANE V. KUNDAN INDUSTRIES LTD, THANE

ITA 187/MUM/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 0783 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-01-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2010-2011
• Appeal Filed On: 13-01-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJESH KUMAR YADAV
• Assessee Lawyers: JITENDRA SINGH
• Keywords: Bogus purchase; Cost of acquisition
• Section: 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES A , MUMBAI BEFORE S HRI G.S. PANNU (AM) AND SHRI RAM LAL NEGI (JM) ITA NO. 187 /MUM/20 1 6 ASSESSMENT YEAR: 2010 - 11 THE DY. COMMISSIONER OF INCOME TAX , CIRCLE - 4 ROOM NO. 2 , A WING, 6 TH FLOOR, ASHAR IT PARK, ROAD NO. 16Z, WAGLE INDL. ESTATE, THANE (WEST) - 400602 VS. M/S KUNDAN INDUSTRIES LTD., KUNDAN HOUSE, HARISIDDHI INDL. ESTATE, GORAIPADA, VILLAGE VASAI EAST, THANE - 401208 PAN: AAACK6811G (APPELLANT) (RESPONDENT) REVENUE BY : SHRI R AJESH KUMAR YADAV (DR) ASSESSEE BY : SHRI JITENDRA SINGH & MS. NEHA PARANJPE (AR) DATE OF HEARING: 26 /10 /201 7 DATE OF PRONOUNCEMENT: 19 / 01 /201 8 O R D E R PER RAM LAL NEGI, JM THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST ORDER DATED 19/10/2015 PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - 3 , THANE , FOR THE A S S ESSMENT YEAR 2010 - 11 , WHEREBY THE LD. CIT (A) HAS PARTLY ALLOWED THE APPEAL FILED BY THE ASSESSEE AGAINST ASSESSMENT O RDER PASSED U/S 143 (3 ) OF THE INCOME TAX ACT, 1961 (FOR SHORT THE A CT). 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE ENGAGED IN THE BUSINESS OF MANUFACTURING OF STEEL NUTS BOLTS, PLATES ETC., FILE D ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION DECLARING THE TOTAL INCOME OF RS. 3,73,87,220/ - . THE CASE WAS SELECTED FOR SCRUTINY AND NOTICES U/S 143 (2 ) AND 142 (1) WERE ISSUED. IN RESPONSE THEREOF THE AUTHORIZED REPRESENTATIVE APPEARED 2 ITA NO. 187 / MUM/2016 ASSESSMENT YEAR: 2010 - 11 BEFORE THE AO AND ALSO FILED HARD COPY OF RETURN OF INCOME, FORM - 3CA/3CD, TAX AUDIT REPORT, COPY OF ANNUAL ACCOUNTS INCLUDING BALANCE SHEET, P&L ACCOUNT AND BANK STATEMENTS ETC. THE AO INTER ALIA MADE DISALLOWANCE OF RS. 2,96,38,387/ - ON ACCOUNT OF BOGUS PURCHASES HOLDING THAT THE ASSESSEE HAS FAILED TO ESTABLISH THE GENUINENESS OF PURCHASE OF CONSUMABLES/STORES AND DETERMINED THE TOTAL INCOME OF THE ASSESSEE AT RS. 7,43,90,010/ - . 3. THE ASSESSEE CHALLENGED THE ASSESSMENT ORDER INTER ALIA ON THE GROUND THAT THE AO HAS WRONGLY MADE ADDITION OF RS. 2,96,38 ,387/ - WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAS SUBMITTED BILLS ISSUED BY THE PARTIES, CONFIRMATION OF ACCOUNTS, BANK STATEMENTS, EVIDENCE OF RECEIPT OF MATERIAL AT FACTORY PREMISES, INSPECTION - CUM - RECEIPT REPORT ETC. IN ORDER TO ESTABLISH THE GENUINENESS OF THE TRANSACTION. THE LD. CIT (A) AFTER HEARING THE ASSESSEE IN THE LIGHT OF THE DOCUMENTS ON RECORD RESTRICTED THE DISALLOWANCE @ 15% OF THE TOTAL AMOUNT OF BOGUS PURCHASES WORKED OUT BY THE AO. THE REVENUE IS IN APPEAL AGAINST THE AFORESAID FINDINGS OF THE LD. CIT (A). 4 . T HE REVENUE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL ON THE FOLLOWING EFFECTIVE GROUND S : - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) - 3, THANE ERRED IN DELETING THE ADDITION OF RS . 2,39,92,057/ - OUT OF THE TOTAL ADDITION OF RS. 2,96,38,387/ - MADE ON ACCOUNT OF BOGUS PURCHASES, DESPITE HOLDING THAT THE PURCHASES WERE NOT GENUINE AND THE ASSESSEE FAILED TO PROVE GENUINENESS OF THE TRANSACTIONS. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, LD. CIT (A) - 3, THANE ERRED IN DELETING THE ABOVE ADDITION DESPITE THE FACT THAT THE ASSESSEE FAILED TO DISCHARGE HIS ONUS PROVING THE PURCHASES. 5. BEFORE US, THE LD. DEPARTMENTAL REPRESENTATIVE (DR) SUBMITTED THAT SINCE THE ASSES SEE HAS FAILED TO PROVE THE GENUINENESS OF THE TRANSACTIONS, THE 3 ITA NO. 187 / MUM/2016 ASSESSMENT YEAR: 2010 - 11 LD. CIT (A) HAS WRONGLY RESTRICTED THE ADDITION TO 15% OF THE TOTAL AMOUNT OF BOGUS PURCHASES MADE BY THE ASSESSEE. 6. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT SINCE , THE LD. CIT(A) HAS SUSTAINED THE ADDITION KEEPING IN VIEW THE ELEMENT OF PROFIT EMBEDDED IN THE QUESTIONED PURCHASES IN ACCORDANCE WITH THE LAW LAID DOWN BY THE HIGH COURTS AND THE TRIBUNALS, THERE IS NO INFIRMITY IN THE ORDER OF THE LD. CIT (A). 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND ALSO GONE THROUGH THE ORDERS PASSED BY THE AUTHORITIES BELOW. THE LD. CIT (A) HAS RESTRICTED THE ADDITION TO 15% HOLDING AS UNDER: - (V) THERE ARE VARIOUS REASONS AS TO WHY THE HAWALA DEALERS WERE ABSCONDING AND ALSO NOT APPEARED BEFORE THE ASSESSING OFFICER FOR CROSS EXAMINATION DURING ASSESSMENT PROCEEDINGS, WHEREAS IN OTHER PURCHASES NO SUCH ANOMALY HAVE BEEN FOUND BY THE ASSESSING OFFICER. AT LEAST, THE APPELLANT COULD HAVE PRODUCED COPY OF RETURN FILED ALONG WITH P & L A/C AND B/S OF HAWALA DEALER BEFORE ASSESSING OFFICER BUT FAILED TO DO SO. (VI) FROM THE ABOVE DISCUSSION, IT CAN BE CONCLUDED THAT, IT IS CASE WHERE THE GOODS WERE RECEIVED FROM THE PARTIES OTHER THAN THE PERSONS WHO HAD ISSUED THE BILLS OF SUCH GOODS. THOUGH THE PURCHASES WERE SHOWN TO HAVE BEEN MADE BY MAKING PAYMENT TO HAWALA DEALERS BUT GOODS MUST HAVE COME FROM GREY MARKET, THEREFORE, SUCH CIRCUMSTANCES, THE CHANCES OF PURCHASE COST BEING INFLATED COULD NOT BE RULED OUT. (VII) CONSIDERIN G THE TOTALITY OF THE FACTS OF THE CASE AND ALSO VARIOUS COURTS HAVE UP HELD THE DISALLOWANCE ON SUCH PURCHASES FROM 12.5% TO 25%, THEREFORE, I AM OF THE CONSIDERED OPINION TO DISALLOW 15% AS INFLATED PURCHASES ON THE TOTAL PURCHASES MADE FROM UNVERIFIABLE PARTIES. THE PURCHASES MADE FROM M/S AMI TRADERS OF RS. 14,12,438/ - IS ADDED AS BOGUS PURCHASES BECAUSE THEY HAVE DENIED HAVING ANY TRANSACTION WITH THE ASSESSEE IN REPLY TO NOTICE ISSUED U/S 133(6) OF THE ACT. THEREFORE, THE DISALLOWANCE @ 15% WILL BE ON RS. (2,96, 387 - 14,12,438)= 2,82,25,949/ - . 8. FROM THE EVIDENCE ON RECORD WE CAN SAFELY CONCLUDE THAT THE ASSESSEE HAD MADE THE QUESTIONED PURCHASES FROM THE PARTIES OTHER THAN THE PARTIES 4 ITA NO. 187 / MUM/2016 ASSESSMENT YEAR: 2010 - 11 MENTIONED IN ITS BOOKS OF ACCOUNT. WE NOTICE THAT THE AO HAS NO T REJECTED THE BOOKS OF ACCOUNT AND ACCEPTED THE SALES SHOWN BY THE ASSESSEE. UNDER THESE CIRCUMSTANCES, WE FIND MERIT IN THE CONTENTION OF THE ASSESSEE THAT FOR EVERY SALE THERE HAS TO BE CORRESPONDING PURCHASES. IF SALES BILLS ARE BEING ACCEPTED THEN THE TOTAL PURCHASES AMOUNT SHOULD BE ACCEPTED. 9. T HE HONBLE BOMBAY HIGH COURT IN CIT VS. NIKUNJ EXIMP ENTERPRISES PVT. LTD. 372 ITR 619 (BOM) HAS HELD THAT MERELY BECAUSE THE SUPPLIERS HAD NOT APPEARED BEFORE THE ASSESSING OFFICER OR THE CIT (A) ONE COULD NOT CONCLUDE THAT THE PURCHASES WERE NOT MADE BY THE RESPONDENT/ASSESSEE. THE HONBLE GUJRAT HIGH COURT IN CIT VS. SIMIT P. SETH 356 ITR 451(GUJ) UPHELD THE DECISION OF THE TRIBUNAL AND SUSTAINED THE ADDITION 12.5% OF THE TOTAL BOGUS PURCHASES HOLDING THA T ONLY PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES CAN BE ADDED TO INCOME OF THE ASSESSEE. HENCE, IN OUR CONSIDERED VIEW, THE ORDER PASSED BY THE LD. CIT(A) IS BASED ON THE PRINCIPLES OF LAW DOWN BY THE HONBLE SUPREME COURT AND VARIOUS HIGH COURTS. IN OUR C ONSIDERED VIEW, THE ORDER PASSED BY THE LD. CIT(A) IS BASED ON THE LAW LAID DOWN BY THE HONBLE BOMBAY HIGH COURT AND THE HONBLE GUJARAT HIGH COURT . HENCE , WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT (A) TO INTERFERE WITH. WE THEREFORE, UPHOL D THE ORDER OF THE LD. CIT (A) AND DISMISS BOTH THE GROUND S OF THE APPEAL FILED BY THE REVENUE. IN THE RESULT, APPEAL FILED BY THE REVENUE FOR A SSESSMENT YEAR 2010 - 2011 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 19 TH JANUARY, 2018 . SD/ - SD/ - ( G.S. PANNU ) ( RAM LAL NEGI ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; DATED: 19 / 01/2018 ALINDRA, PS 5 ITA NO. 187 / MUM/2016 ASSESSMENT YEAR: 2010 - 11 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . / BY ORDER, //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI