GALAXY SURFACTANTS LTD, NAVI MUMBAI V. DCIT CIR 10(3), MUMBAI

ITA 1986/MUM/2015

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 9009 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 6 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-10-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 07-04-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 07-04-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V VIDHAYADHAR
• Assessee Lawyers: DR C P RAMASWAMI
• Keywords: Bogus purchase
• Section: 143(3); 133(6); 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI BEFORE S/ SHRI B.R. BASKARAN (AM) & AMARJIT SINGH (JM) I.T.A. NO. 1986 /MUM/20 15 (ASSESSMENT YEAR 20 09 - 10 ) GALAXY SURFACTANTS LTD. C - 49, TTC INDUSTRIAL AREA PAWNE, NAVI MUMBAI 400 703. PAN : AAACG153 9F VS. DCIT CIRCLE 10(3) AAYAKAR BHAVAN M.K. ROAD MUMBAI - 400 020. ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY DR. C.P. RAMASWAMI DEPARTMENT BY S HRI V. VIDHAYADHAR DATE OF HEARING 11 . 10 . 201 7 DATE OF PRONOUNCEMENT 1 1 . 10 . 201 7 O R D E R PER B .R. BASKARAN (AM) : - THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 0 2. 0 1.2015 PASSED BY THE LEARNED CIT(A) - 24, MUMBAI A ND IT RELATES TO A.Y. 2009 - 10. THE ASSESSEE IS AGGRIEVED BY THE DECISION OF THE LEARNED CIT(A) IN CONFIRMING THE ADDITION OF ` 7.37 LAKHS RELATING TO ALLEGED BOGUS PURCHASES. 2. WE HEARD THE PARTIES AND PERUSED THE RECORD. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURE AND SALE OF FERTILIZERS , CHEMICALS AND PAINTS. THE ORIGINAL A SSESSMENT FOR THE YEAR UNDE R CONSIDERATION WAS COMPLETED U/ S . 143(3) OF THE ACT DETERMINING TOTAL INCOME OF ` 2246.02 LAKHS AS AGAINST THE RETURNED INCOME OF ` 1300.56 LAKHS. SUBSEQUENTLY, THE REVENUE RECEIVED INFORMATION FROM THE SALES TAX DEPARTMENT THAT CERTAIN DEALERS ARE ENGAGE D IN THE ACTIVITY OF PROVIDING ACCOMMODATION BILLS WITHOUT ACTUALLY SUPPLYING THE MATERIALS. IT WAS NOTICED THAT THE ASSESSEE HAS PURCHASED GOODS TO THE TUNE OF ` 7, 37,081/ - FROM ONE OF SUCH DEALERS NAMED M/S. SAGAR ENTERPRISES . H ENCE THE ASSESSING OFFICE R REOPENED THE ASSESSMENT BY ISSUING NOTICE U/S. 148 OF THE ACT. IT WAS NOTICED THAT THE ASSESSEE HAS PURCHASED DEPB LICEN C E FOR A SUM OF ` 7,37,081/ - . THE ASSESSING OFFICER ISSUED NOTICE U/S. 133(6) OF THE ACT GALAXY SURFACTANTS LTD 2 TO THE CUSTOM HOUSE , BUT IT HE DID NOT RECEI VE ANY REPLY. SINCE THE CUSTOM AUTHORITIES HAVE NOT CONFIRMED THE TRANSACTION, THE ASSESSING OFFICER TREATED T HE PURCHASE VALUE OF DEPB LICENC E AS BOGUS IN NATURE AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. T HE LEARNED CIT(A) ALSO CONFIRMED THE SAME AND HENCE THE ASSESSEE HAS FILED THIS APPEAL BEFORE US. 3. LEARNED AR SUBMITTED THAT DEPB IS AN EXPORT INCENTIVE SCHEME FRAMED BY THE GOVERNMENT OF INDIA IN ORDER TO PROMOTE EXPORTS. CREDIT EARNED BY THE EXPORTER OF THE GOODS UNDER DEPB SCHEME IS GI VEN BY THE DIRECTOR GENERAL OF FOREIGN TRADE IN THE FORM OF DEPB LICE N C E . THIS LICENSE ALLOWS IMPORT OF ANY ITEM S EXCEPT THOSE SPECIFICALLY SPECIFIED. EXPORTERS WHO WIS H NOT TO IMPORT, MAY SALE LICENC E TO OTHER IMPORTERS. H E SUBMITTED THAT THE DEPB LICENC E MAY BE SOLD AT A PREMIUM OR AT A DISCOUNT DEPENDING UPON THE MARKET CONDITIONS. THE LEARNED AR SUBMITTED THAT T HE ASSESSEE HAS PURCHASED LICENC E AT DISCOUNT. HE SUBMITTED THAT THE DEPB LICENC E WAS ORIGINALLY GRANTED TO A CONCERN NAMED M/S. KOGTA IMPORT E XPORT PVT. LTD. BY GOVERNMENT OF INDIA AND THE ASSESSEE HAS PURCHASED THE SAME THROUGH THE DEALER NAMED M/S. SAGAR ENTERPRISE S , WHO WAS FOUND TO BE SUSPICIOUS DEALER . THE LEARNED AR SUBMITTED THAT DEPB LICEN C E WAS NOT GRANTED TO M/S SAGAR ENTERPRISES AS PR ESUMED BY THE AO AND IT HAS ACTED AS A MIDDLE MAN ONLY IN THIS MATTER . FURTHER, THE ASSESSEE HAS USED SAID DEPB LICEN C E FOR IMPORTING MATERIAL S AND THE ASSESSING OFFICER HAS NOT DOUBTED THE TRANSACTION S OF IMPORT. THE LEARNED AR , ACCORDINGLY, SUBMITTED T HAT THE PURCHASE OF LICEN C E , WHICH WAS GRANTED BY THE GOVERNMENT OF INDIA , CANNOT BE DOUBTED WITH. FURTHER, THERE IS NO MATERIAL ON RECORD TO SHOW THAT THE SAID LICEN C E WAS BOGUS IN NATURE. ACCORDINGLY, HE SUBMITTED THAT , MERELY BECAUSE M/S. SAGAR ENTERPR ISE S WAS FOUND TO BE A SUSPICIOUS DEALER, AUTHENTICITY OF DEPB LICEN C E CANNOT BE DOUBTED WITH. HE ALSO SUBMITTED THAT THE AS SESSEE HAS PURCHASED DEPB LICENC E AT LESS THAN THE PAR VALUE . A CCORDINGLY HE SUBMITTED THAT THE IMPUGNED ADDITION MADE BY THE ASSES SING OFFICER AND CONFIRMED BY THE LEARNED CIT(A) WAS NOT JUSTIFIED. GALAXY SURFACTANTS LTD 3 4. ON THE CONTRARY, LEARNED DEPARTMENTAL REPRESENTATIVE STRONGLY PLACED RELIANCE ON THE ORDER PASSED BY THE LEARNED CIT(A). 5. HAVING HEARD THE RIVAL SUBMISSIONS, WE ARE OF T HE VIEW THAT THERE IS MERIT IN THE CONTENTIONS OF LD A.R. WE NOTICE THAT M/S SAGAR ENTERPRISES HAS ACTED AS A MIDDLE MAN IN THE TRANSACTION OF SALE OF DEPB LICENCE TO THE ASSESSEE. THE DOCUMENTS RELATING TO THE LICENSE WOULD SHOW THAT THE DEPB LICENSE WA S GRANTED TO M/S KOGTA IMPORT AND EXPORT P LTD BY DIRECTORATE GENERAL OF FOREIGN TRADE. HENCE THE EXISTENCE OF DEPB LICEN C E CANNOT BE DOUBTED WITH. THE ASSESSEE HAS USED THE SAID LICENCE TO IMPORT THE MATERIALS AND THE SAID FACT ALSO FURTHER VALIDATES TH E GENUINENESS OF THE DEPB LICENCE. WE NOTICE THAT THE AO HAS MADE THE IMPUGNED ADDITION MAINLY ON THE REASONING THAT M/S SAGAR ENTERPRISES WAS A SUSPICIOUS DEALER AND FURTHER THE CUSTOM AUTHORITIES DID NOT CONFIRM THE TRANSACTION. THE LD CIT(A) HAS CONFI RMED THE ADDITION ON THE REASONING THAT THIS TRANSACTION WAS AN ISOLATED TRANSACTION AND FURTHER THE ASSESSEE DID NOT FURNISH CONFIRMATION LETTER OBTAINED FROM M/S SAGAR ENTERPRISES. HOWEVER, IN OUR VIEW, THE FACTS AND EVIDENCES AVAILABLE ON RECORD ESTABL ISH THE GENUINENESS OF THE PURCHASES AND HENCE THE REASONING CITED BY BOTH THE TAX AUTHORITIES IS NOT JUSTIFIED. WHEN THE GOODS UNDER CONSIDERATION IS DEPB LICENCE, WHICH IS ISSUED BY THE GOVERNMENT OF INDIA AND WHEN THERE IS NO MATERIAL TO SUGGEST TH AT THE IMPUGNED DEPB LICENCE IS A BOGUS ONE, IN OUR VIEW, THERE IS NO REASON TO SUSPECT ITS GENUINENESS. FURTHER THE ASSESSEE HAS USED THE SAME FOR MAKING IMPORTS AND THE VERY FACT THAT THE GOVERNMENT OF INDIA HAS ALLOWED THE ASSESSEE TO USE THE SAID LI CENCE ALSO ESTABLISHES THE GENUINENESS OF THE DEPB LICENCE. THE ASSESSEE HAS STATED THAT THE DEPB LICENSE WAS PURCHASED AT A DISCOUNT AND HENCE THE QUESTION OF INFLATING ITS PURCHASE VALUE ALSO DOES NOT ARISE. IN VIEW OF THE ABOVE, WE ARE OF THE VIEW TH A T THERE IS NO REASON TO SUSPECT THE GENUINENESS OF PURCHASE OF IMPUGNED DEPB LICENCE. ACCORDINGLY WE SET ASIDE THE ORDER PASSED BY LD CIT(A) AND DIRECT THE AO TO DELETE THE ADDITION RELATING THERETO. GALAXY SURFACTANTS LTD 4 6. IN THE RESULT, THE APPEAL FILED BY THE ASSESS EE IS ALLOWED. ORDER HAS BE EN PRONOUNCED IN THE COURT ON 1 1 . 10 .201 7. SD/ - SD/ - (AMRAJIT SINGH ) (B.R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 1 1 / 10 / 20 1 7 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) PS ITAT, MUMBAI