NISHOTECH SYSTEM PRIVATE LIMITED, MUMBAI V. DCIT 10 (3), MUMBAI

ITA 2074/MUM/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 0437 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-08-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2010-2011
• Appeal Filed On: 31-03-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: V JENARDHANAN
• Assessee Lawyers: MARGAV SHUKLAAMAR SANGHAVI
• Keywords: Bogus purchase
• Section: 69

Judgement Text

, INCOME-TAX APPELLATE TRIBUNAL -KBENCH MUMBAI , , , BEFORE S/SHRI RAJENDRA,ACCOUNTANT MEMBER AND RAM LAL NEGI,JUDICIAL MEMBER ./I.T.A./2074/MUM/2016, /ASSESSMENT YEAR: 2010-11 M/S. NISHOTECH SYSTEMS PRIVATE LIMITED C/O., JAYESH SANGHRAJKA & CO. LLP CHARTERED ACCOUNTANTS UNIT NO.405-408, HIND RAJASTHAN CENTRE D.S. PHALKE ROAD, DADAR (E) MUMBAI-400 014. PAN:AAACN 2768 D VS. DCIT 10-(3) AAYAKAR BHAVAN, M.K. ROAD MUMBAI-400 020. ( /APPELLANT ) ( / RESPONDENT ) REVENUE BY: SHRI V. JENARDHANAN- DR ASSESSEE BY: S/SHRI MARGAV SHUKLA/AMAR SANGHAVI / DATE OF HEARING: 14.08.2017 / DATE OF PRONOUNCEMENT: 14.08.2017 ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA, AM - CHALLENGING THE ORDER,DATED 26/02/2016,OF THE CIT(A )-24, MUMBAI THE ASSESSEE HAS FILED THE PRESENT APPEAL.ASSESSEE-COMPANY,ENGAGED IN THE BUSI NESS OF MANUFACTURING OF FILTERATION SYSTEM,FILED ITS RETURN OF INCOME ON 28/09/2010 DEC LARING TOTAL INCOME AT RS.43.58 LAKHS. THE ASSESSING OFFICER(AO)COMPLETED ITS ASSESSMENT ON 11 /3/2013,U/S. 143(3)OF THE ACT, DETERMIN -ING ITS INCOME AT RS.83.69 LAKHS. 2. FIRST GROUND OF APPEAL IS ABOUT ESTIMATING THE PROF IT TO THE EXTENT OF 12.5% OF PURCHASES MADE FROM TWO SUPPLIERS.DURING THE ASSESSMENT PROCE EDINGS,THE AO FOUND THAT THE SALES TAX DEPARTMENT HAD INFORMED THE INVESTIGATION WING THAT THE ASSESSEE HAD MADE BOGUS PURCHASES FROM NB ENTERPRISES (NBE) AND BLUE NILE ENTERPRISES (BNE) TO THE TUNE OF RS.2.16 LAKHS FOR THE YEAR UNDER CONSIDERATION. HE DIRECTED THE ASSES SEE TO EXPLAIN AS TO WHY SAID PURCHASES SHOULD NOT BE DISALLOWED ON ACCOUNT OF BEING BOGUS PURCHASES. IN RESPONSE TO THE NOTICE ,THE ASSESSEE STATED THAT IT HAD NOT PURCHASED ANYTHING FROM THOSE TWO PARTIES FOR THE YEAR UNDER APPEAL,THAT THE ALLEGED BOGUS PURCHASES COULD NOT B E ADDED TO ITS INCOME AS IT HAD NOT CLAIMED ANY EXPENDITURE IN THAT REGARD. HOWEVER, THE AO STA TED THAT SUBMISSION OF THE ASSESSEE WERE NOT TENABLE.HE MENTIONED THE MODUS OPERANDI OF THE HAWALA OPERATORS AND HELD THAT IN THE LIST ISSUED BY SALES TAX DEPARTMENT THE NAMES OF SU PPLIERS AND ASSESSEE WERE APPEARING, THAT IT HAD MADE CASH PURCHASES FROM UNDISCLOSED PARTIES AN D HAD MADE CASH SALES,THAT BOTH THE TRANSACTIONS WERE NOT RECORDED IN THE BOOKS OF ACCO UNT, THAT THE SOURCE OF CASH PAYMENT MADE 2074/M/16-(10-11) NISHOTECH SYSTEM PVT.LTD. 2 BY ASSESSEE REMAINED UNEXPLAINED WITHIN THE MEANIN G OF SECTION 69 C OF THE ACT TO THE TUNE OF RS.2.16 LAKHS. 2.1. AGGRIEVED BY THE ORDER OF THE AO,THE ASSESSEE PREFE RRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY(FAA)AND MADE SUBMISSION. AFTER CONSIDERING THE AVAILABLE MATERIAL,HE HELD THAT THE ASSESSEE HAD NOT PRODUCED THE PARTIES BEFORE THE AO, THAT IT HAD NOT DISCHARGED THE ONUS CAST UPON IT.HE RELIED UPON CERTAIN CASE L AWS AND STATED THAT INFORMATION WAS RECEIVED FROM THE SALES TAX AUTHORITIES, THAT THERE WAS NO PROOF OF TRANSPORTATION OF THE GOODS, THAT THE AO HAD NOT PROVED THAT THE SUPPLIERS WERE NON-EXISTENT PARTIES AND ASSESSEE WAS NOT ABLE TO DISPROVE THE FINDING OF THE AO. HE ESTIMATE D THE PROFIT TO THE EXTENT OF 12.5% OF THE PURCHASES FROM THE BOGUS ENTITIES AS SUPPRESSED PRO FIT ELEMENTS EMBEDDED IN THE PURCHASES AND HELD THAT THE ESTIMATION WAS IN ADDITION TO THE GP SHOWN BY THE ASSESSEE. 2.2. BEFORE US,THE AUTHORISED REPRESENTATIVE (AR) STATED THAT ASSESSEE HAD NOT MADE ANY PURCHASES FROM THE ALLEGED SUPPLIERS,THAT IT HAD FI LED AN AFFIDAVIT IN THAT REGARD (PG-22 AND 23 OF PB),THAT THE FAA HAD CUT AND PASTED THE ORDER OF SOME OTHER PARTY,THAT THE FACTS MENTIONED BY HIM WERE NOT ARISING OUT OF THE ORDER OF THE AO. THE DEPARTMENTAL REPRESENTATIVE (DR) LEFT THE ISSUE TO THE DISCRETION OF THE BENCH. 2.3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT THE AO HAD RECEIVED INFORMATION FROM THE SALES TAX DEPA RTMENT WHEREIN IT WAS STATED THAT THE ASSESSEE HAD MADE BOGUS PURCHASES FROM MATERIAL TO THE TUNE OF RS. 2.16 LAKHS FROM NBE AND BNE,THAT THE ASSESSEE HAD SPECIFICALLY MENTIONED TH AT IT HAD NOT PURCHASED ANY GOODS FROM BOTH THE SUPPLIERS DURING THE YEAR UNDER CONSIDERAT ION,THAT IT HAD ALSO FILED AN AFFIDAVIT IN THAT REGARD,THAT THE AO DID NOT MAKE ANY ENQUIRY IN THA T MATTER AND SIMPLY ADDED THE DISPUTED AMOUNT TO THE INCOME OF THE ASSESSEE,THAT HE MENTIO NED THAT ASSESSEE HAD MADE CASH PURCHASES FROM UNDISCLOSED PARTIES AND HAD MADE CAS H SALES AND THAT BOTH THE ENTRIES WERE NOT RECORD IN THE BOOKS OF ACCOUNTS,THAT IN THE APP ELLATE PROCEEDINGS, THE FAA UPHELD THE ORDER OF THE AO. 2.4.1. IN OUR OPINION,BOTH THE AUTHORITIES HAVE PASSED THE ORDER IN A VERY ROUTINE MANNER WITHOUT UNDERSTANDING AND ANALYSINING THE FACTS.ONC E THE ASSESSEE HAD MADE A SPECIFIC ARGUMENT THAT THAT IT HAD NOT PURCHASED ANY GOODS F ROM NBE OR BNE IT WAS THEIR DUTY TO PROVE THAT ACTUALLY THE ASSESSEE HAD MADE PAYMENTS TO ABOVE REFERRED TWO PARTIES FOR THE ALLEGED PURCHASES.THE LEDGER OF THE ASSESSEE AND TH E BANK ACCOUNTS COULD HAVE PROVED THE FACT OF PURCHASE OF GOODS.IT WAS NOT A CASE WHERE T HE ASSESSEE WAS CLAIMING THAT IT HAD PURCHASED GOODS AND HAD MADE PAYMENTS THROUGH BANKI NG CHANNELS.THERE IS DIFFERENCE 2074/M/16-(10-11) NISHOTECH SYSTEM PVT.LTD. 3 BETWEEN DOUBTING THE GENUINENESS OF A TRANSACTION A ND ABSENCE OF SUCH TRANSACTION.THE FAA SHOULD HAVE CONSIDERED THE SUBMISSIONS BEFORE PARTL Y CONFIRMING THE ORDER OF THE AO.IF THE AO/FAA WERE ALLEGING THAT GOODS WERE PURCHASED FROM NBE AND BNE,IT WAS THEIR DUTY TO PROVE THE TRANSACTION.IN OUR OPINION,MATTER NEEDS F URTHER VERY -FICATION.SO,IN THE INTEREST OF JUSTICE,WE ARE REMITTING BACK THE ISSUE TO THE FILE OF THE FAA,TO DECIDE THE ISSUE AFRESH AFTER CONSIDERING THE AFFIDAVIT OF THE ASSESSEE AND AFTER AFFORDING A REASON -ABLE OPPORTUNITY OF HEARING TO IT.FIRST GROUND OF APPEAL IS DECIDED IN FAVOUR OF THE ASSESSEE,IN PART. 3. SECOND GROUND OF APPEAL IS ABOUT PAYMENT MADE IN R ELATION TO EMPLOYEES CONTRIBUTION TO PROVIDENT FUND.DURING THE ASSESSMENT PROCEEDINGS,TH E AO FOUND THAT THE EMPLOYEES CONTRIBUTION OF RS.1.72 LAKHS FOR THE MONTH OF JULY ,2009 WAS PAID ON 25.08.2009 I.E. AFTER THE PRESCRIBED DUE DATE OF PAYMENT.HE HELD THAT THE DISPUTED SUM WAS TO BE DISALLOWED U/S. 36(1)(VA) R.W.S. 2(24)(X) OF THE ACT AND ADDED THE SAID AMOUNT TO THE TOTAL INCOME OF THE ASSESSEE. IN THE APPELLATE PROCEEDINGS THE ASSESSEE MADE SUBM ISSIONS BEFORE THE FAA.AFTER CONSIDERING THE SAME, AND REFERRING TO THE CASE OF GUJARAT STATE ROAD TRANSPORT CORPORATION (ITAPPEAL NO. 637 OF 2013) UPHELD THE DISALLOWANCE MADE BY THE AO. 3.1. BEFORE US,THE AR REFERRED TO THE CASE OF HINDUSTAN ORGANICS LTD. (INCOME TAX APPEAL NO.399 OF 2012 DATED 11/7/2014)AND STATED THAT ADDI TION MADE BY THE AO AND CONFIRMATION OF THE ORDER BY THE FAA WAS AGAINST THE PROVISIONS OF THE ACT. WE FIND THAT THE ASSESSEE HAD PAID THE AMOUNT IN QU ESTION WELL BEFORE THE DUE DATE OF FILING THE RETURN.THEREFORE, RESPECTFULLY FOLLOWING THE JU DGMENT OF HONBLE BOMBAY HIGH COURT,IN THE CASE OF HINDUSTAN ORGANICS & CHEMICALS LTD. (SU PRA),WE HOLD THAT THE ORDER PASSED BY THE FAA CANNOT BE ENDORSED.SO, REVERSING HIS ORDER, WE DECIDE THE SECOND GROUND OF APPEAL IN FAVOUR OF THE ASSESSEE AS A RESULT APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN C OURT ON 14 TH ,AUGUST, 2017. , 2017 SD/- SD /- ( / RAM LAL NEGI ) ( / RAJENDRA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; /DATED : 14.08 .2017. JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 2074/M/16-(10-11) NISHOTECH SYSTEM PVT.LTD. 4 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR K BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.