M/s. N.B. Bhondve Developers, Pune V. Income-tax Officer, Ward - 9(3), Pune

ITA 2069/PUN/2017

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 8801 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 10 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-07-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 01-09-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHIVANAND H KALALKERI
• Keywords: Reopening of assessment; Bogus purchase; Principle of natural justice; Reason to believe
• Section: 69C; 143(3); 133A; 133(6); 143(1); 251; 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, PUNE (THROUGH VIRTUAL COURT) BEFORE SHRI R. S. SYAL, VP AND SHRI PARTHA SARATHI CHAUDHURY, JM . / ITA NO.2069/PUN/2017 / ASSESSMENT YEAR : 2009-10 M/S. N. B. BHONDVE DEVELOPERS, S.NO.49/5, N.B. ARCADE, PRADHIKARAN ROAD, AKURDI, PUNE-411035. PAN: AAPFM1172Q .. /APPLICANT / V/S. ITO, WARD-9(3), PUNE. .. / RESPONDENT ASSESSEE BY : SHRI KISHOR PHADKE REVENUE BY : SHRI SHIVANAND H. KALALKERI / DATE OF HEARING : 07.07.2020 / DATE OF PRONOUNCEMENT : 24.07.2020 / ORDER PER PARTHA SARATHI CHAUDHURY, JM: THIS APPEAL PREFERRED BY THE ASSESSEE EMANATES FROM THE ORDER OF THE LD. CIT(APPEAL)-9, PUNE DATED 21.06.2017 FOR THE ASSESSMENT YEAR 2009-10 AS PER THE FOLLOWING GROUNDS OF APPEAL ON RECORD: 1. THE LEARNED CIT(A)-9, PUNE ERRED IN LAW AND ON FACTS IN CONFIRMING THE ASSUMPTION OF JURISDICTION BY THE LEARNED AO U/S 147 OF THE ITA, 1961 FOR ESCAPEMENT OF INCOME ON ACCOUNT OF ALLEGED HAWALA PURCHASES FROM M/S K.R.C. TRADING COMPANY. THE LEARNED CIT(A) AS WELL AS THE LEARNED AO OUGHT TO HAVE APPRECIATED THAT THE APPELLANT HAS NOT MADE ANY PURCHASE FROM M/S K.R.C. TRADING COMPANY IN A.Y. 2009-10. 2 ITA NO.2069/PUN/2017 2. THE LEARNED CIT(A)-9 ERRED IN LAW AND ON FACTS BY NOT APPRECIATING THAT, THE LEARNED AO HAS NOT EXTENDED COPIES OF THE FOLLOWING PAPERS TO THE APPELLANT, DESPITE SPECIFIC REQUESTS- A) PAPERS / INCRIMINATING MATERIAL IMPOUNDED DURING THE SURVEY AT M/S JAPTECCH INDUSTRY B) STATEMENT OF MR. MUKESH MITTAL C) OTHER RELATED / CONNECTED PAPERS, ETC. 3. THE LEARNED CIT(A)-9 ERRED IN LAW AND ON FACTS BY CONFIRMING THE ADDITION MADE BY THE LEARNED AO WITHOUT PROVIDING OPPORTUNITY TO CROSS EXAMINE VARIOUS INTERROGATED PERSONS DURING THE COURSE OF SURVEY IN M/S JAPTECH INDUSTRY'S CASE. 4. THE LEARNED CIT(A)-9, PUNE ERRED IN LAW AND ON FACTS BY CONFIRMING THE ADDITION MADE BY THE LEARNED AO ON ACCOUNT OF DISALLOWANCE OF GENUINE PURCHASES OF RS.1,09,79,556/- ON MERE CONJECTURES / ASSUMPTIONS AS TO HAWALA / BOGUS PURCHASES. 5. THE LEARNED CIT(A)-9 ERRED IN LAW AND ON FACTS IN SUSTAINING THE ADDITION MADE BY THE LEARNED AO WITHOUT CONSIDERING LEDGER EXTRACTS OF M/S SHRUTI TRADING CORPORATION, WEIGH BRIDGE RECEIPTS, BANK STATEMENTS REFLECTING THE PAYMENTS MADE TO M/S SHRUTI TRADING CORPORATION BY ACCOUNT PAYEE CHEQUES ETC.; WHICH SUBSTANTIATE THAT SAID ALLEGED HAWALA PURCHASES ARE IN FACT, GENUINE AND BONAFIDE. 6. THE LEARNED CIT(A)-9, PUNE ERRED IN LAW AND ON FACTS IN ENHANCING THE ADDITION ALREADY MADE BY THE LEARNED AO, BY RS. 43,73,026/- WITHOUT ISSUING A PROPER SHOW CAUSE NOTICE AS PRESCRIBED U/S 251 OF THE ITA, 1961 AND THEREBY PASSED AN ORDER IN VIOLATION TO THE PRINCIPLE OF NATURAL JUSTICE . 7. THE APPELLANT CRAVES LEAVE TO ADD / MODIFY / DELETE / AMEND ALL / ANY OF THE GROUNDS OF APPEAL. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A FIRM AND FILED THE RETURN OF INCOME DECLARING RS.NIL INCOME. THE RETURN WAS PROCESSED U/S 143(1) OF THE ACT. A SURVEY ACTION U/S 133A OF THE ACT IN THE CASE OF M/S. JAPTECH INDUSTRIES BHOSARI, PUNE WAS CARRIED OUT ON 26.11.2012. DURING THE COURSE OF SURVEY ACTION, IT WAS FOUND THAT THE ASSESSEE MADE PURCHASES FROM M/S. SHRUTI TRADING CORPORATION. A NOTICE U/S 148 OF THE ACT WAS ISSUED ON 01.04.2013 AND SERVED ON THE ASSESSEE. THE ASSESSEE FILED A LETTER DATED 16.04.2013 STATING THAT RETURN OF INCOME FILED ON 26.04.2013 MAY BE TREATED AS RETURN IN RESPONSE TO NOTICE U/S 148 OF THE ACT. THE ASSESSEE FURTHER ASKED FOR REASONS RECORDED U/S 147 OF THE ACT AND THE SAME HAS BEEN PROVIDED TO THE ASSESSEE VIDE LETTER DATED 17.04.2013. THE ASSESSEE VIDE LETTER DATED 25.04.2013 RAISED OBJECTION FOR ISSUE OF NOTICE U/S 148 OF THE ACT ON 27.03.2013. THE OBJECTION OF THE ASSESSEE WAS DISPOSED OF BY PASSING A 3 ITA NO.2069/PUN/2017 SPEAKING ORDER DATED 20.06.2013. THEREAFTER, NOTICE U/S 143(2)/142(1) OF THE ACT ALONGWITH QUESTIONNAIRE WAS ISSUED ON 24.06.2013. SUBSEQUENTLY, THE ASSESSING OFFICER COMPLETED THE ASSESSMENT U/S 143(3) R.W.S. 147 OF THE ACT AND ASSESSED THE TOTAL INCOME OF RS.66,06,530/- BY MAKING ADDITION OF RS.66,06,534/- DISALLOWANCE ON ACCOUNT OF SECTION 69C OF THE ACT. 3. DURING FIRST APPELLATE PROCEEDINGS, THE LD. CIT(APPEAL), AS PER DISCUSSION GIVEN IN PARA 7 ONWARDS OF HIS ORDER, ENHANCED THE ADDITION TO RS.1,09,79,556/- INSTEAD OF RS.66,06,530/- AS MADE BY THE ASSESSING OFFICER U/S 69C OF THE ACT AGAINST WHICH THE ASSESSEE IS IN APPEAL BEFORE US. 4. AT THE VERY OUTSET, THE LD. COUNSEL FOR THE ASSESSEE THROUGH VIDEO CONFERENCE SUBMITTED THAT THIS ISSUE IS COVERED BY THE DECISION OF THE CO- ORDINATE BENCH OF THE TRIBUNAL, PUNE FOR THE ASSESSMENT YEAR 2009-10 IN THE CASE OF M/S. N. D. CONSTRUCTIONS VS. ITO IN ITA NO.2068/PUN/2017 DATED 06.02.2019. THE LD. COUNSEL FOR THE ASSESSEE BROUGHT OUR ATTENTION TO PARAS 9 ONWARDS OF THE SAID ORDER OF THE TRIBUNAL (SUPRA) WHICH WAS NOT IN EXISTENCE BEFORE THE LD. CIT(APPEALS) AT THE TIME OF PASSING APPELLATE ORDER DATED 21.06.2017. 5. ON THE OTHER HAND, THE LD. DR HAS PLACED STRONG RELIANCE ON THE ORDER OF THE LD. CIT(APPEAL). 6. WE HAVE PERUSED THE CASE RECORDS AND HEARD THE RIVAL CONTENTIONS, ANALYZED THE FACTS AND CIRCUMSTANCES OF THIS CASE AND CONSIDERED THE JUDICIAL PRONOUNCEMENTS PLACED ON RECORD BEFORE US. THOUGH, THE ASSESSEE HAS PREFERRED MULTIPLE GROUNDS OF APPEAL FOR THE CORRECTNESS OF GRIEVANCE OF THE ASSESSEE IS WITH REGARD TO REOPENING OF ASSESSMENT U/S 147/148 OF THE ACT 4 ITA NO.2069/PUN/2017 WITHOUT RECORDING PROPER SATISFACTION BY THE ASSESSING OFFICER AS ALLEGED BY THE ASSESSEE. FORWARDING THE ARGUMENT, LD. AR FOR THE ASSESSEE TOOK US THROUGH THE REASONS RECORDED IN THE PAPER BOOK AND ALSO THE ORDER OF THE ASSESSING OFFICER DISPOSING OF THE OBJECTION FOR ISSUANCE OF NOTICE U/S 148 OF THE ACT. THE ASSESSEE HAS CHALLENGED THE ADDITIONS BY PRIMARILY CHALLENGING THE RECORDING OF REASONS. IT IS STATED THAT, IN THE SAID REASON, ASSESSEE HAS STATED TO HAVE MADE HAWALA PURCHASES FROM M/S KRC TRADING COMPANY, WHEREAS, IN THE ASSESSMENT ORDER, DISALLOWANCE IS MADE ON ACCOUNT OF ALLEGED HAWALA PURCHASES FROM M/S. SHRUTI TRADING CORPORATION. THE ASSESSEE ATTEMPTED TO JUSTIFY THAT THE ALLEGED HAWALA PURCHASES ARE ACTUALLY GENUINE AND BONA-FIDE BY SUBMITTING VARIOUS DOCUMENTARY EVIDENCES. THE CIT(A) WAS OF THE OPINION THAT THE ASSESSING OFFICER HAS RELIED ON THE INFORMATION RECEIVED FROM INVESTIGATION WING OF THE DEPARTMENT WITH RESPECT TO THE SURVEY ACTION CARRIED OUT IN THE CASE OF M/S. JAPTECH INDUSTRIES. AS DISCUSSED IN PARA 4 OF THE ASSESSMENT ORDER, THE ASSESSING OFFICER HAD ISSUED NOTICE U/S 133(6) OF THE ACT TO M/S. SHRUTI TRADING CORPORATION AND M/S. SHRUTI TRADING HAS FILED LEDGER EXTRACT OF THE ACCOUNT IN WHICH SALES SHOWN TO THE ASSESSEE WAS AT RS.66,22,988/-. THIS IS A FACT THAT A SURVEY ACTION WAS CARRIED OUT IN JAPTECH GROUP. THE LD. CIT(A) FURTHER OPINED THAT IT TRANSPIRES FROM THE STATEMENT OF SHRI MUKESH MITTAL THAT M/S. SHRUTI TRADING CORPORATION DID NOT HAVE ANY DOCUMENTARY EVIDENCE TO PROVE THAT THE MATERIAL WAS RECEIVED BY M/S STC FROM M/S KRC. THE LD. CIT(A) CULLING OUT THE FACTS AS APPEARING IN HIS ORDER HELD THAT THE CONTENTION OF THE ASSESSEE THAT THE ASSESSING OFFICER HAS NOT CARRIED OUT ANY ADDITIONAL/INDEPENDENT ENQUIRY IN THE MATTER IN ORDER TO ASCERTAINING BOGUS OR NON-GENUINE PURCHASE IS NOT CORRECT SINCE THE INVESTIGATION WING OF THE DEPARTMENT HAD MADE THOROUGH INVESTIGATION AND PROVED THAT NO 5 ITA NO.2069/PUN/2017 PURCHASES WERE MADE BY M/S STC FROM M/S KRC TRADING COMPANY AND LD. CIT(A) CONFIRMED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. 7. AT THE VERY OUTSET, LD. AR FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE SUB-ORDINATE AUTHORITIES AND TOOK US THROUGH THE DECISION IN THE CASE OF M/S. N. D. CONSTRUCTIONS VS. ITO IN ITA NO.2068/PUN/2017 DATED 06.02.2019 , WHERE THE FACTS ARE SIMILAR AND RELIEF HAS BEEN GIVEN TO THE ASSESSEE IN THAT CASE. THE LD. AR FOR THE ASSESSEE PLACED STRONG RELIANCE ON THIS CASE AND PRAYED FOR RELIEF FOR THE ASSESSEE. WE HAVE GIVEN CONSIDERABLE THOUGHT TO THE AFORESAID DECISION AND THE RELEVANT PARAS OF THE SAID ORDER OF THE TRIBUNAL IN THE CASE OF M/S. N. D. CONSTRUCTIONS (SUPRA) ARE EXTRACTED HEREUNDER :- 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE PRELIMINARY ISSUE ARISING IN THE PRESENT APPEAL IS AGAINST REOPENING OF ASSESSMENT UNDER SECTION 147 / 148 OF THE ACT. THE ASSESSEE WAS BUILDER AND DEVELOPER AND WAS ENGAGED IN CONSTRUCTION OF ONGOING PROJECT. THE ASSESSEE HAD FURNISHED RETURN OF INCOME DECLARING NIL INCOME DURING THE YEAR UNDER CONSIDERATION ON 29.10.2009. SURVEY ACTION UNDER SECTION 133A OF THE ACT WAS CONDUCTED ON THE PREMISES OF M/S. JAPTECH INDUSTRIES. STATEMENT OF SHRI MUKESH MITTAL, PROPRIETOR OF M/S. JAPTECH INDUSTRIES WAS RECORDED. HE ALSO MADE CERTAIN STATEMENTS IN RESPECT OF SOLE PROPRIETARY OF HIS WIFE I.E. SMT. POONAM MUKESH MITTAL. IT WAS NOTED THAT STC HAS MADE CERTAIN PURCHASES FROM KRC WHICH WAS DECLARED TO BE HAWALA DEALER IN VIEW OF INVESTIGATION BY THE SALES TAX DEPARTMENT. THE ASSESSING OFFICER RECEIVED INFORMATION FROM INVESTIGATION WING AND HE RECORDED REASONS FOR REOPENING THE ASSESSMENT. THE COPY OF REASONS ARE PLACED AT PAGE 3 OF PAPER BOOK AND READ AS UNDER:- ORDER SHEET DATE: 01.04.2013 THE ASSESSEE FIRM IS BUILDER & DEVELOPERS. A SURVEY ACTION U/S 133A IN THE CASE OF JAPTECH INDUSTRIES, BHOSARI, PUNE WAS CARRIED OUT ON 26.11.2012 BY THE DDIT(INV) UNIT-1(3), PUNE. IT WAS SEEN DURING THE COURSE OF SURVEY ACTION THAT M/S. N.D. CONSTRUCTIONS MADE HAWALA PURCHASES OF RS.42,19,816/- FROM M/S. K.R.C. TRADING COMPANY. THE DDIT(INV) UNIT-1(3), PUNE VIDE CONFIDENTIAL LETTER NO.PN/DDIT(INV)U-1(3).SURVEYJAPTECH/INTIMATION/885/12-13 DATED 07.02.2013 ALONG WITH COPIES OF STATEMENT RECORDED ON 26.11.2012 OF SHRI MUKESH MITTAL AND LEDGER EXTRACTS. ON GOING THROUGH THE DETAILS FORWARDED BY THE DDIT IT IS SEEN THAT THE ASSESSEE HAS MADE HAWALA TRANSACTION IN RESPECT OF PURCHASE OF RAW MATERIAL AMOUNTING TO RS.42,19,816/-. THEREFORE, I HAVE REASONS TO BELIEVE THAT INCOME CHARGEABLE TO TAX AMOUNTING TO RS.42,19,816/- HAS ESCAPED ASSESSMENT WITHIN THE MEANING OF 147 OF THE I.T. ACT, 1961. ISSUE NOTICE U/S. 148. SD/- INCOME TAX OFFICER. 6 ITA NO.2069/PUN/2017 10. THE PERUSAL OF SAID REASONS RECORDED FOR REOPENING THE ASSESSMENT UNDER SECTION 147 / 148 OF THE ACT SHOW THAT THE ASSESSING OFFICER HAD REASON TO BELIEVE THAT M/S. N.D. CONSTRUCTIONS I.E. ASSESSEE BEFORE US HAD MADE HAWALA PURCHASES OF 42,19,816/- FROM KRC AND HENCE, THE CASE OF ESCAPEMENT OF INCOME. THE ASSESSEE FILED OBJECTIONS TO THE SAID REASONS RECORDED, WHICH ARE PLACED AT PAGES 41 AND 42 OF PAPER BOOK AND IN THAT IT CLEARLY POINTED OUT THAT IT HAD MADE NO TRANSACTIONS WITH KRC OR JAPTECH INDUSTRIES. THE ASSESSING OFFICER VIDE ORDER DISPOSING OF OBJECTIONS FOR ISSUANCE OF NOTICE UNDER SECTION 148 OF THE ACT HAS ENLARGED THE SCOPE OF REASONS RECORDED FOR REOPENING THE ASSESSMENT AND HAS POINTED OUT THAT PURCHASE BILLS SUPPLIED BY KRC TO STC FOR VARIOUS YEARS WERE BARE BILLS WITHOUT ANY GOODS RECEIVED NOTE (GRN), ETC. THE PURCHASES SHOWN BY STC IN THE NAME OF KRC ARE BOGUS PURCHASES. M/S. N.B. BHONDVE DEVELOPERS IS ONE OF THE PURCHASERS FROM M/S. STC. DURING THE YEAR UNDER CONSIDERATION, M/S. N.B. BHONDVE DEVELOPERS HAS MADE PURCHASES OF 42,19,816/- FROM STC. 11. THE ANALYSIS OF ABOVE SAID CLEARLY REFLECTS THAT AS AGAINST ORIGINAL REASONS RECORDED FOR REOPENING THE ASSESSMENT, WHEREIN THE ASSESSEE WAS HELD TO HAVE MADE HAWALA PURCHASES OF 42,19,816/- FROM KRC. THE ADDITION HAS BEEN MADE BY THE ASSESSING OFFICER ON ACCOUNT OF PURCHASES FROM STC, WHO IN TURN, HAD PURCHASED FROM KRC. ANOTHER POINT TO BE NOTED IS THAT FIGURE OF BOGUS PURCHASES TO BE 42,19,816/- AS AGAINST TOTAL PURCHASES MADE BY ASSESSEE FROM STC OF 64,05,286/-. 12. THE ISSUE WHICH ARISES IS WHETHER IN VIEW OF SUCH DISCREPANCY IN THE REASONS RECORDED FOR REOPENING THE ASSESSMENT, CAN THE CONSEQUENT ORDER PASSED BY ASSESSING OFFICER BE HELD TO BE WITHIN FRAMEWORK OF LAW. KEEPING IN MIND THE TOTAL FACTS AND CIRCUMSTANCES, IT IS CASE OF MAKING ALLEGED HAWALA PURCHASES FROM KRC AS RECORDED IN THE REASONS FOR REOPENING THE ASSESSMENT, IS COMPLETELY DIFFERENT PROPOSITION THAN HOLDING THE ASSESSEE TO HAVE MADE THE AFORESAID HAWALA PURCHASES FROM STC. WHERE THE ISSUE MENTIONED IN THE REASONS RECORDED FOR REOPENING THE ASSESSMENT IS AT VARIANCE WITH THE ADDITION MADE IN THE HANDS OF ASSESSEE, THEN IT CANNOT BE SAID TO BE CASE OF MERE DISCREPANCY IN THE NAME. 13. ANOTHER ASPECT OF THE ISSUE IS THAT FIGURE OF PURCHASES WHICH ALSO VARY AS IN THE REASONS RECORDED AS AGAINST ACTUAL PURCHASES MADE BY ASSESSEE FROM STC. THE CIT(A) HAS ENHANCED THE INCOME IN THE HANDS OF ASSESSEE ON TOTAL PURCHASES MADE DURING THE YEAR. IT IS ANOTHER ASPECT THAT THE CIT(A) BEFORE MAKING ENHANCEMENT HAS NOT GIVEN PROPER ENHANCEMENT NOTICE TO THE ASSESSEE UNDER SECTION 251 OF THE ACT. 14. THE HONBLE BOMBAY HIGH COURT IN HINDUSTAN LEVER LTD. VS. R.B. WADKAR (SUPRA) HAD HELD THAT FOR THE PURPOSE OF EXAMINING THE JURISDICTION TO REOPEN A COMPLETED ASSESSMENT ONE IS ONLY CONCERNED WITH THE REASONS RECORDED AT THE TIME OF ISSUING NOTICE UNDER SECTION 148 OF THE ACT. THESE REASONS CANNOT BE SUPPLEMENTED / IMPROVED UPON LATER. THE SAID PROPOSITION HAS BEEN APPLIED BY JURISDICTIONAL HIGH COURT IN THE CASE OF NDT SYSTEMS VS. ITO REPORTED IN 363 ITR 603 (BOM) AND RE-ASSESSMENT HAS BEEN HELD TO BE INVALID. FOLLOWING THE SAME PARITY OF REASONING, I HOLD THAT RE-ASSESSMENT PROCEEDINGS INITIATED IN THE CASE OF ASSESSEE SUFFERS FROM INFIRMITY FOR NOT RECORDING CORRECT REASONS FOR REOPENING THE ASSESSMENT AND HENCE, RE-ASSESSMENT ORDER PASSED UNDER SECTION 147/148 OF THE ACT DOES NOT STAND IN LAW. THE GROUNDS OF APPEAL RAISED BY ASSESSEE ARE THUS, ALLOWED. 8. ON PERUSING THE FACTS ON RECORD AND THE AFORESAID DECISION OF THE TRIBUNAL (SUPRA), WE FIND THERE IS NO NEED FOR ANY DEVIATION FROM THE ABOVE- 7 ITA NO.2069/PUN/2017 STATED FINDINGS IN THE PRESENT MATTER. HENCE, WE ALLOW THE APPEAL OF THE ASSESSEE SETTING ASIDE THE ORDER OF THE LD. CIT(APPEAL). 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON 24 TH DAY OF JULY, 2020. SD/- SD/- ( R. S. SYAL ) ( PARTHA SARATHI CHAUDHURY ) VICE PRESIDENT JUDICIAL MEMBER / PUNE; / DATED : 24 TH JULY, 2020 SUJEET / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. THE CIT(A)-9, PUNE. 4. THE PR. CIT-5, PUNE. 5. , , , / DR, ITAT, A BENCH, PUNE. 6. / GUARD FILE. / BY ORDER, // TRUE COPY // SENIOR PRIVATE SECRETARY , / ITAT, PUNE.