QUALITY HEIGHTCON PVT. LTD., MUMBAI V. DCIT CIRCLE 9(3), MUMBAI

ITA 2236/MUM/2016

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 7997 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-12-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 06-04-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: M C OMI NINGSHEN
• Assessee Lawyers: GAYANESHWAR KATARAM
• Keywords: Bogus purchase; Principle of natural justice
• Section: 143(3); 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH H MUMBAI BEFORE SHRI SAKTIJIT DEY (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 2236/MUM/2016 ASSESSMENT YEAR: 2011 - 12 M/S QUALITY HEIGHTCON PVT. LTD. 612, TOWER A - KOHINOOR CITY, MALL, KOHINOOR CITY, KIROL ROAD, OFF L.B.S., KURLA (W), MUMBAI - 400070 VS. DCIT - 9(3) MUMBAI PAN NO. AAA CQ1997R APPELLANT RESPONDENT ASSESSEE BY : MR. GAYANESHWAR KATARAM , AR REVENUE BY : MR. M.C. OMI NINGSHEN , DR DATE OF HEARING : 12/12 /2017 DATE OF PRONOUNCEMENT : 20/12/2017 ORDER PER N.K. PRADHAN, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE. THE RELEVANT ASSESSMENT YEAR IS 2011 - 12 . THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE COMMISS IONER OF INCOME TAX (APPEALS) - 21 , MUMBAI AND ARISES OUT OF THE ASSESSMENT ORDER U/S 143(3) OF THE INCOME TAX ACT 1961, (THE ACT). 2. THE 1 ST GROUND RAISED BY THE ASSESSEE IN THIS APPEAL IS AGAINST THE ORDER OF THE LD. CIT(A) UPHOLDING THE DISALLOWANCE OF RS.14,86,255/ - I.E. @ 12.5% ON PURCHASES OF RS.1,18,90,046/ - , EVEN THOUGH THE ASSESSEE HAD SUBMITTED DOCUMENTARY EVIDENCE AND THE DEPART MENT NOT CONTROVERTING THE SAME. M/S QUALITY HEIGHTCON PVT. LTD. ITA NO. 2236/MUM/2016 2 2.1 BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER (AO) RECEIVED INFORMATION FROM THE INVESTIGATION WING OF INCOME TAX DEPARTMENT, MUMBAI THAT THE ASSESSEE IS ONE OF THE BENEFICIARIES OF HAWALA TRANSACTIONS ROUTED THROUGH HAWALA OPERATORS AS INFORMED BY THE SALES TAX DEPARTMENT, GOVERNMENT OF MAHAR ASHTRA. AS PER THE SAID INFORMATION THE ASSESSEE IS ONE OF THE BENEFICIARIES OF THE BOGUS PURCHASES FROM THE FOLLOWING PARTIES: S NO. NAME OF THE PARTY AMOUNT (RS.) 1. SURAT TUBE CORPORATION 1,31,040 2. ADINATH TRADING CO. 92,56,441 3. MILLENIUM MINERALS 24,28,360 4. RAKESH ENTERPRISES 14,301 5. R B ENTERPRISES 59,904 TOTAL 1,18,90,046 IN ORDER TO VERIFY THE GENUINENESS OF TRANSACTION, THE AO ISSUED NOTICE U/S 133(6) TO THE ABOVEMENTIONED PARTIES. THE SAID NOTICES WERE RETURNED BACK BY THE POSTAL AUTHORITIES AS UNSERVED EXCEPT IN THE CASE OF MILLENIUM MINERALS AND SURAT TUBE CORPORATIO N. THE AO OBSERVED THAT EVEN MILLENIUM MINERALS AND SURAT TUBE CORPORATION DID NOT RESPOND TO THE SAID NOTICES. THE AO FURTHER OBSERVED THAT THE AFORESAID PARTIES WERE NOT PRODUCED FOR EXAMINATION AND CROSS VERIFICATION OF TRANSACTIONS EVEN THOUGH THE AS SESSEE - COMPANY WAS GIVEN OPPORTUNITY TO DO SO. IN VIEW OF THE ABOVE, THE AO MADE AN ADDITION OF RS.1,18,90,046/ - TO THE INCOME SHOWN BY THE ASSESSEE. 4. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT(A). WE FIND THAT T HE LD. CIT(A) FOLLOWING THE M/S QUALITY HEIGHTCON PVT. LTD. ITA NO. 2236/MUM/2016 3 JUDGMENT OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. SIMIT P. SHETH (2013) 38 TAXMANN.COM (GUJ) RESTRICTED THE DISALLOWANCE TO RS.14,86,255/ - (12.5% OF RS.1,18,90,046/ - ). THUS HE DELETED THE BALANCE ADDITION OF RS.1 ,04,03,791/ - . 5. BEFORE US, THE LD. COUNSEL OF THE ASSESSEE FILES A COPY OF THE CONFIRMATION OF ACCOUNTS FOR THE PERIOD 01.04.2010 TO 31.03.2011. IT IS ALSO STATED BY HIM THAT THE AO FAILED TO COMPLY WITH THE RULES OF NATURAL JUSTICE BY NOT CONFRONTING TH E ASSESSEE WITH THE SO CALLED INFORMATION RECEIVED FROM THE SALES TAX DEPAR TMENT OR THE INVESTIGATION WING. IT IS ALSO STATED BY HIM THAT THE AO SHOULD HAVE CONFRONTED THE ASSESSEE WITH THE EVIDENCE WHICH HE DESIRES TO RELY UPON BEFORE TAKING ANY ADVERSE A CTION. FURTHER IT IS STATED THAT THE ASSESSEE SHOULD HAVE BEEN GIVEN OPPORTUNITY TO CROSS EXAMINE THE PARTIES. 6. ON THE OTHER HAND, THE LD. DR SUPPORTS THE ORDER PASSED BY THE LD. CIT(A). HE FILES A COPY OF THE ORDER OF THE ITAT D BENCH IN THE CASE OF T HE ASSESSEE FOR THE AY 2012 - 13 (ITA NO. 4825/MUM/2016) WHEREIN THE DISALLOWANCE RESTRICTED BY THE LD. CIT(A) TO 12.5% OF THE BOGUS PURCHASES HAS BEEN SUSTAINED BY THE TRIBUNAL. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIALS ON R ECORD. THE FACT REMAINS THAT THE AO ISSUED NOTICES TO THE FIVE PARTIES IN THE ADDRESS GIVEN BY THE ASSESSEE. IN THE CASE OF THREE PARTIES, THE NOTICES COULD NOT BE SERVED BY THE POSTAL AUTHORITIES. IN THE CASE OF THE OTHER TWO PARTIES, NOTICES COULD BE SER VED BUT THERE WAS NO RESPONSE. ALSO THE ASSESSEE FAILED TO PRODUCE THE ABOVE PARTIES BEFORE THE AO FOR EXAMINATION AND CROSS VERIFICATION OF THE TRANSACTIONS. M/S QUALITY HEIGHTCON PVT. LTD. ITA NO. 2236/MUM/2016 4 IN THE CASE OF SIMIT P. SHETH (SUPRA) , THE HONBLE GUJARAT HIGH COURT HAS HELD THAT WHERE PURCHASES WERE NOT BOGUS BUT WERE MADE FROM PARTIES OTHER THAN THOSE MENTIONED IN THE BOOKS OF ACCOUNT, NOT ENTIRE PURCHASE PRICE BUT ONLY PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES CAN BE ADDED TO INCOME OF THE ASSESSEE. THAT BEING THE POSITION, NOT THE ENTIRE PURCHASE PRICE BUT ONLY THE PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES CAN BE ADDED TO THE INCOME OF THE ASSESSEE. THE HONBLE HIGH COURT REFERRED TO A SIMILAR VIEW TAKEN IN THE CASE OF CIT VS. VIJAY M. MISTRY CONSTRUCTION LTD. [2013] 355 ITR 498 (GUJ) AND CIT VS. BHOLANATH POLY FAB (P) LTD. [2013] 355 ITR 290 (GUJ). ALSO THE CO - ORDINATE BENCH IN THE CASE OF THE ASSESSEE FOR THE AY 2012 - 13 (ITA NO. 4825/MUM/2016) HAS CONFIRMED THE DISALLOWANCE @ 12.5 % MADE BY THE LD. CIT(A) ON THE BOGUS PURCHASES. THE ASSESSEE IS A CIVIL CONTRACTOR. 7.1 IN VIEW OF THE ABOVE, WE UPHOLD THE DISALLOWANCE OF RS.14,86,255/ - MADE BY THE LD. CIT(A). THUS THE 1 ST GROUND OF APPEAL IS DISMISSED. 8. THE 2 ND GROUND OF APPEAL REL ATES TO NON - GRANTING OF TDS CREDIT OF RS.16,07,005/ - . WE FIND THAT THE LD. CIT(A) HAS DIRECTED THE AO TO VERIFY THE TDS CREDIT AVAILABLE ON THE ITD SYSTEM AND AS APPEARING IN THE 26 AS STATEMENT. THE LD. CIT(A) HAS SPECIFICALLY MENTIONED AFTER PROVIDING O PPORTUNITY TO THE APPELLANT, CREDIT FOR TDS MUST BE GIVEN AS DUE AND CREDIT NOT GRANTED SHOULD BE CLEARLY SPELT OUT BY WAY OF SPEAKING ORDER. WE DIRECT THE AO TO FOLLOW THE ABOVE DIRECTION OF THE LD. CIT(A) WITHOUT FURTHER DELAY. M/S QUALITY HEIGHTCON PVT. LTD. ITA NO. 2236/MUM/2016 5 9. IN THE RESULT, THE A PPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 20/12/2017. SD/ - SD/ - ( SA K TIJIT DEY ) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED: 20/12/2017 RAHUL SHARMA, SR. P.S. 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