FDC LTD, MUMBAI V. DCIT CIR 9(3)(2), MUMBAI

ITA 2060/MUM/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 0363 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-09-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: F
• Assessment Year: 2009-2010
• Appeal Filed On: 23-03-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAJEEV GUBGOTRA
• Assessee Lawyers: AJAY R SINGH
• Keywords: Bogus purchase; Principle of natural justice; Tangible material; Difference of opinion; Accommodation entries; Change of opinion
• Section: 143(3); 133(6); 147; 131; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES F, MUMBAI BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER & SHRI MANOJ KUMAR AGGARWAL, ACCOUNTANT MEMBER ITA NO.2060/MUM/2017 ASSESSMENT YEAR : 2009-10 FDC LTD., 142-148 S.V.ROAD, JOGESHWARI (W), MUMBAI 400 102 PAN AAACF0253H VS. D CIT CIR 9(3)(2) , MUMBAI (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI AJAY R SINGH & SHRI RAVINDRA POO JARY RESPONDENT BY : SHRI RAJEEV GUBGOTRA DATE OF HEARING : 31 .0 7 .201 8 DATE OF PRONOUNCEMENT : 12 .0 9 .201 8 O R D E R PER SAKTIJIT DEY, JUDICIAL MEMBER THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDE R DATED 09.01.2017, OF LEARNED CIT(A)-16, MUMBAI, FOR THE ASSESSMENT YE AR 2009-10. 2. IN GROUND NO.1 ASSESSEE HAS CHALLENGED VALIDITY OF RE-OPENING OF ASSESSMENT U/S. 147 OF THE ACT. BRIEFLY, THE FACTS ARE ASSESSEE - A COMPANY, IS ENGAGED IN MANUFACTURE OF DRUGS. FOR THE ASSESS MENT YEAR UNDER DISPUTE ASSESSEE FILED ITS RETURN OF INCOME ON 29.09.2009, DECLARING TOTAL INCOME OF ` 40,73,78,660/-. ASSESSMENT IN THIS CASE WAS COMPL ETED U/S. 143(3) OF THE ACT, ON 16.03.2011, DETERMINING TOTAL INCOME AT ` 45,01,57,500/- AFTER COMPLETION OF THE ASSESSMENT AS AFORESAID, THE ASSE SSING OFFICER RECEIVED ITA NO.2060/MUM/2017 FDC LTD. 2 INFORMATION FROM THE DGIT (INV), MUMBAI, VIDE LETTE R DATED 26.12.2013, WHEREIN, IT WAS INFORMED THAT IN COURSE OF SEARCH P ROCEEDINGS CONDUCTED IN CASE OF CERTAIN PARTIES. IT WAS FOUND THAT THEY WE RE PROVIDING ACCOMMODATION ENTRIES ONLY WITHOUT ACTUAL SALE/PURC HASE TRANSACTIONS. FROM THE INCRIMINATING MATERIAL FOUND DURING THE SEARCH OPERATION, IT WAS REVEALED THAT ONE SUCH HAWALA ENTRY PROVIDER VIZ. M/S. SRISH TI MERCANTILE PVT. LTD. HAS SOLD GOODS TO THE ASSESSEE TO THE TUNE OF ` 37,20,244/- DURING THE FINANCIAL YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER DISPUTE. IN THE SAID REPORT IT WAS ALSO MENTIONED THAT THE SAID PARTY ALSO APPEARS IN THE LIST OF BOGUS ENTRY PROVIDERS PUBLISHED BY THE SALES TAX AUTHORITIES AN D THE TIN OF THE CONCERNED PARTY HAS ALSO BEEN CANCELLED BY SALES TA X AUTHORITIES. ON THE BASIS OF THE AFORESAID INFORMATION, THE ASSESSING O FFICER FORMED A BELIEF THAT BY VIRTUE OF SUCH BOGUS PURCHASES SHOWN BY THE ASSE SSEE, INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. ACCORDINGLY, HE RE -OPENED ASSESSMENT U/S. 147 OF THE ACT BY ISSUING NOTICE U/S. 148 OF THE AC T. IN COURSE OF THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER CALLE D UPON THE ASSESSEE TO PROVE THE GENUINENESS OF THE PURCHASES MADE FROM M/ S. SRISHTI MERCANTILE PVT. LTD., BY FURNISHING DOCUMENTARY EVIDENCES INCL UDING DOCUMENTS SHOWING TRANSPORTATION AND PHYSICAL DELIVERY OF GOODS AT TH E PREMISES OF THE ASSESSEE. AS OBSERVED BY THE ASSESSING OFFICER, IN RESPONSE T O THE QUERY RAISED BY HIM, THE ASSESSEE FURNISHED COPIES OF PURCHASE INVOICES, DELIVERY CHALLANS AND PAYMENT DETAILS. HOWEVER, ASSESSEE FAILED TO FURNI SH ANY EVIDENCE WITH ITA NO.2060/MUM/2017 FDC LTD. 3 REGARD TO TRANSPORTATION AND DELIVERY OF GOODS IN T HE PREMISES OF THE ASSESSEE. HE OBSERVED, DELIVERY CHALLANS ARE SELF GENERATED, HENCE, NOT AUTHENTIC. FURTHER, HE MENTIONED THAT IN THE DELIV ERY CHALLANS MODE OF TRANSPORT OR LORRY NUMBERS HAVE NOT BEEN MENTIONED TO PROVE THE ACTUAL TRANSPORTATION AND DELIVERY OF GOODS. NO WEIGHMENT SLIP COULD BE PRODUCED BY THE ASSESSEE TO PROVE THE MOVEMENT OF GOODS. TH E ASSESSING OFFICER ALSO OBSERVED THAT IN COURSE OF SURVEY OPERATIONS CONDUC TED IN THE BUSINESS PREMISES OF THE ASSESSEE ON 17.10.2013, IT WAS FOUN D THAT ASSESSEE HAD MADE PURCHASES FROM SIX HAWALA OPERATORS INCLUDING M/S. SRISHTI MERCANTILE PVT. LTD. THE ASSESSING OFFICER OBSERVED, THOUGH N OTICES U/S. 133(6) WERE ISSUED TO THE CONCERNED PARTIES, ALL SUCH NOTICES R ETURNED UNSERVED BY THE POSTAL AUTHORITIES ON ACCOUNT OF UNAVAILABILITY OF CONCERNED PERSONS IN THE GIVEN ADDRESS. HE ALSO NOTED THAT AN EXHAUSTIVE IN QUIRY WAS CONDUCTED IN COURSE OF ASSESSMENT PROCEEDINGS FOR A.Y. 2010-11 A ND IT WAS FOUND THAT PURCHASES MADE FROM THE CONCERNED PARTIES ARE BOGUS . THE ASSESSING OFFICER OBSERVED, THE NOTICES ISSUED BY HIM U/S. 13 3(6) TO THE CONCERNED PARTIES ON 27.01.2015 ALSO RETURNED UNSERVED BY THE POSTAL AUTHORITIES. SINCE, THE ASSESSEE FAILED TO CONCLUSIVELY PROVE TH E GENUINENESS OF THE PURCHASES MADE FROM M/S. SRISHTI MERCANTILE PVT. LT D., THE ASSESSING OFFICER DISALLOWED SAID PURCHASES AND ADDED TO THE INCOME O F THE ASSESSEE WHILE COMPLETING THE ASSESSMENT. BEING AGGRIEVED OF THE ASSESSMENT ORDER SO PASSED, ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A) CHALLENGING THE ITA NO.2060/MUM/2017 FDC LTD. 4 ASSESSMENT ORDER BOTH ON THE LEGAL ISSUE OF VALIDIT Y OF PROCEEDINGS U/S. 147 OF THE ACT AS WELL AS ON MERIT. HOWEVER, LEARNED C IT(A) DID NOT FIND MERIT IN ANY OF THE SUBMISSIONS OF THE ASSESSEE AND UPHELD T HE ADDITION MADE BY THE ASSESSING OFFICER. 3. THE LEARNED AR CHALLENGING THE VALIDITY OF ASSES SMENT PROCEEDINGS SUBMITTED THAT SIMPLY ON THE BASIS OF INFORMATION R ECEIVED FROM THE DGIT (INV), MUMBAI, THE ASSESSING OFFICER HAS RE-OPENED ASSESSMENT, WHICH WAS COMPLETED EARLIER U/S. 143(3) OF THE ACT. HE SUBMI TTED, EXCEPT THE REPORT OF DGIT (INV), THERE WAS NO OTHER TANGIBLE MATERIAL AV AILABLE WITH THE ASSESSING OFFICER TO FORM A BELIEF THAT INCOME HAS ESCAPED AS SESSMENT. THEREFORE, THE ASSESSMENT IN CASE OF THE ASSESSEE HAVING ALREADY B EEN COMPLETED U/S. 143(3) OF THE ACT, RE-OPENING OF ASSESSMENT U/S. 14 7 OF THE ACT CANNOT BE DONE ON A MERE CHANGE OF OPINION. 4. THE LEARNED DR RELIED ON THE OBSERVATIONS OF THE CIT(A) ON THE ISSUE. 5. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED MATERIAL ON RECORD. THOUGH, IT IS A FACT THAT ASSESSMENT IN CASE OF THE ASSESSEE WAS ORIGINALLY COMPLETED U/S. 143(3) OF THE ACT, HOWEVER, IT IS EV IDENT FROM THE FACTS ON RECORD THAT SPECIFIC INFORMATION CAME TO THE POSSES SION OF THE ASSESSING OFFICER AFTER COMPLETION OF THE ORIGINAL ASSESSMENT REVEALING THAT CERTAIN PURCHASES MADE BY THE ASSESSEE WAS NOT GENUINE. TH EREFORE, IT CANNOT BE SAID THAT THERE WAS NO TANGIBLE MATERIAL IN THE POS SESSION OF THE ASSESSING ITA NO.2060/MUM/2017 FDC LTD. 5 OFFICER AFTER COMPLETION OF THE ORIGINAL ASSESSMENT . AT THE TIME OF RE- OPENING OF ASSESSMENT U/S. 147 OF THE ACT, THE ASSE SSING OFFICER HAS TO FORM A PRIMA FACIE BELIEF THAT INCOME HAS ESCAPED ASSESS MENT. THE BELIEF TO BE FORMED BY THE ASSESSING OFFICER MUST HAVE A RATIONA L NEXUS WITH THE INFORMATION AVAILABLE ON RECORD. IN THE PRESENT CA SE, THE ASSESSING OFFICER HAD IN HIS POSSESSION SPECIFIC INFORMATION/MATERIAL INDICATING ESCAPEMENT OF INCOME WHICH CAME TO HIS POSSESSION AFTER COMPLETIO N OF THE ORIGINAL ASSESSMENT. THAT BEING THE CASE, IN OUR CONSIDERED OPINION, THERE IS NO DEFICIENCY IN THE PROCEEDINGS INITIATED U/S. 147 OF THE ACT. ACCORDINGLY, WE DISMISS THE GROUND RAISED BY THE ASSESSEE. 6. IN GROUND NO. II. (2 & 3), ASSESSEE HAS CHALLENG ED ADDITION OF ` 37,20,244/- ON ACCOUNT OF BOGUS PURCHASES. SINCE WE HAVE ALREADY DISCUSSED THE FACTS RELATING TO THIS ISSUE EARLIER, THERE IS NO NEED TO REPEAT THEM AGAIN. SUFFICE TO SAY, THE ASSESSING OFFICER ADDED THE AMOUNT OF ` 37,20,244/- BY TREATING THE PURCHASES FROM M/S. SR ISHTI MERCANTILE PVT. LTD. TO BE BOGUS. THE LEARNED AR REITERATING THE STAND TAKEN BEFORE THE DEPARTMENTAL AUTHORITIES, SUBMITTED THAT ASSESSEE H AS PRODUCED ALL EVIDENCES SUCH AS PURCHASE INVOICE, DELIVERY CHALLANS, PAYMEN T MADE TO SUPPLIER THROUGH BANKING CHANNEL, CONSUMPTION OF GOODS, GOOD S OUTWARD REGISTER SHOWING DISPATCH OF GOODS FROM WAREHOUSE ETC. HE S UBMITTED, INSPITE OF PRODUCTION OF SUCH EVIDENCES; THE DEPARTMENTAL AUTH ORITIES HAVE MADE THE ADDITION IN AN ARBITRARY MANNER. IN THIS CONTEXT, THE LEARNED AR DREW OUR ITA NO.2060/MUM/2017 FDC LTD. 6 ATTENTION TO THE DOCUMENTARY EVIDENCE SUBMITTED BEF ORE THE ASSESSING OFFICER AS PLACED IN THE PAPER-BOOK. THE LEARNED AR SUBMIT TED, THE ASSESSEE HAS SHOWN A VERY HEALTHY GROSS PROFIT RATE FOR THE IMPU GNED ASSESSMENT YEAR, THEREFORE, ANY FURTHER ADDITION ON ACCOUNT OF BOGUS PURCHASE WOULD BE IMPROPER. THE LEARNED DR RELIED ON THE OBSERVATION S OF THE ASSESSING OFFICER AND LEARNED CIT(A). 7. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED MATERIAL ON RECORD. THE BASIC ISSUE ARISING FOR CONSIDERATION IS, WHETH ER THE ASSESSEE HAS PROVED THE PURCHASES MADE FROM M/S. SRISHTI MERCANTILE PVT . LTD. AS GENUINE? AS COULD BE SEEN FROM THE FACTS ON RECORD, IN COURSE O F ASSESSMENT PROCEEDINGS FOR THE IMPUGNED ASSESSMENT YEAR, THE ASSESSING OFF ICER APART FROM CALLING UPON THE ASSESSEE TO PROVE THE GENUINENESS OF PURCH ASES MADE, HAS ALSO CONDUCTED ENQUIRY INDEPENDENTLY BY ISSUING NOTICE U /S. 133(6) TO THE CONCERNED PARTY. AS OBSERVED BY THE ASSESSING OFFI CER, THE NOTICE RETURNED UNSERVED DUE TO NON-AVAILABILITY OF THE CONCERNED P ARTY IN THE GIVEN ADDRESS. NOTABLY, THE LEARNED CIT(A) HAS ALSO OBSERVED THAT SUMMONS ISSUED U/S. 131 OF THE ACT ALSO RETURNED UNSERVED. FURTHER, IN COU RSE OF APPELLATE PROCEEDINGS, THE ASSESSEE WAS CALLED UPON TO PRODUC E THE CONCERNED PARTY AND ALSO FURNISH DETAILS OF THE CONSUMPTION OF MATE RIALS PURCHASED. HOWEVER, AS PER THE CATEGORICAL FINDING OF THE LEARNED CIT(A ), VIDE ORDER SHEET ENTRY DATED 06.01.2017, THE AR OF THE ASSESSEE EXPRESSED HIS INABILITY TO FILE THE DETAILS INCLUDING THE CONSUMPTION OF MATERIALS PURC HASED. EVEN, THE ASSESSEE ITA NO.2060/MUM/2017 FDC LTD. 7 COULD NOT GIVE NAMES AND ADDRESSES OF THE PERSONS T O WHOM THE MATERIAL PURCHASED WAS DISTRIBUTED. THUS, FROM THE AFORESAI D FACTS, IT IS CLEAR THAT THE ASSESSEES CLAIM OF PURCHASES TO BE GENUINE WAS NOT FOUND TO BE CORRECT THROUGH THE INQUIRY CONDUCTED, BOTH AT THE LEVEL OF THE ASSESSING OFFICER AS WELL AS THE CIT(A). SINCE, THE ASSESSEE FAILED TO CONCLUSIVELY PROVE THE FACT THAT PURCHASES MADE FROM THE CONCERNED PARTY WAS GE NUINE COUPLED WITH THE FACT THAT THERE WAS SPECIFIC INFORMATION FROM DGIT (INV) AS WELL AS SALES TAX DEPARTMENT THAT THE CONCERNED PARTY IS A HAWALA OPE RATOR, IT HAS TO BE BELIEVED THAT THE PURCHASES CLAIMED TO HAVE BEEN MA DE FROM THE CONCERNED PARTY IS NOT GENUINE. HOWEVER, IT IS A FACT ON REC ORD THAT THE ASSESSING OFFICER HAS NOT DISPUTED OR DISTURBED THE SALES EFF ECTED BY THE ASSESSEE. THEREFORE, THERE IS A POSSIBILITY THAT THE ASSESSEE HAS PURCHASED GOODS FROM SOURCES OTHER THAN THE DECLARED SOURCE TO AVOID PAY MENT OF VAT/OTHER TAXES. IN VIEW OF THE AFORESAID, IT WILL BE APPROPRIATE TO TAX THE PROFIT ELEMENT EMBEDDED IN SUCH BOGUS PURCHASES. ON CONSIDERING T HE OVERALL FACTS AND CIRCUMSTANCES OF THE CASE AND THE PREVALENT VAT RAT E, WE ARE OF THE VIEW THAT THE ADDITION ON ACCOUNT OF BOGUS PURCHASES SHO ULD BE RESTRICTED TO 12.5% OF ` 37,20,244/-, THE ASSESSEE GETS RELIEF TO THAT EXT ENT. THIS GROUND IS PARTLY ALLOWED. 8. IN GROUND NO.4, ASSESSEE HAS RAISED THE ISSUE OF VIOLATION OF RULES OF NATURAL JUSTICE. HOWEVER, THERE IS NO SPECIFIC ARG UMENT BY THE LEARNED AR ON THIS ISSUE. EVEN OTHERWISE ALSO, ON ANALYSING THE FACTUAL MATRIX OF THE CASE, ITA NO.2060/MUM/2017 FDC LTD. 8 WE ARE OF THE VIEW THAT FULL OPPORTUNITY WAS GIVEN TO THE ASSESSEE TO PROVE THE GENUINENESS OF PURCHASES MADE, BOTH BY THE ASSE SSING OFFICER AS WELL AS BY THE CIT(A). THAT BEING THE CASE, THE PLEA OF TH E ASSESSEE THAT IT WAS NOT PROVIDED PROPER OPPORTUNITY IS UNACCEPTABLE. FACT REMAINS THAT IT IS THE ASSESSEE WHO HAS SHOWN PURCHASES FROM A PARTY, IDEN TIFIED AS HAWALA OPERATOR. THEREFORE, THE ONUS IS ENTIRELY ON THE AS SESSEE TO PROVE THE GENUINENESS OF THE PURCHASES BY EITHER PRODUCING TH E CONCERNED PARTY OR OBTAINING CONFIRMATIONS FROM HIM. THE ASSESSEE HAS FAILED TO DO ANY SUCH THING. MOREOVER, NOTICES/SUMMONS ISSUED BY THE AO TO THE CONCERNED PARTY IN THE GIVEN ADDRESS HAVE RETURNED UNSERVED. IN TH ESE CIRCUMSTANCES, THE ASSESSEE CANNOT COME FORWARD WITH A PLEA THAT PRINC IPLE OF NATURAL JUSTICE IS VIOLATED. THEREFORE, THERE BEING NO MERIT IN THIS GROUND, IT IS DISMISSED. 9. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 1 2 TH SEPTEMBER 2018. SD/- SD/- (MANOJ KUMAR AGGARWAL) (SAKTIJIT DEY) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED : 12 TH SEPTEMBER, 2018. SA ITA NO.2060/MUM/2017 FDC LTD. 9 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE C I T(A), MUMBAI. 4. THE C I T 5. THE DR, F BENCH, ITAT, MUMBAI BY ORDER, //TRUE COPY// (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, MUMBAI