Appeal details
Counselvise Citation
[2018] 119 COUNSELVISE.COM (IT) 4211 (ITAT-MUMBAI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
6 month(s) 19 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
31-10-2018
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
D
Assessment Year
2011-2012
Appeal Filed On
11-04-2018
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY, JM AND SHRI N.K.PRADHAN , AM ./ I.T.A. NO. 2273/MUM/2018 ( / ASSESSMENT YEAR S : 2011 - 12 ) RAJAL ENTERPRI SES 201, RUSHABH, B. R. ROAD, KALP NAGARI, MULUND WEST, MUMBAI 400080 / VS. PR. COMMISSIONER OF INCOME TAX 29 ROOM NO.C 10, 3 RD FLOOR, PRATYAKSHAKAR BHAVAN, BANDRA KURLA COMPLEX, BANDRA (EAST) MUMBAI 400051 ./ ./ PAN/GIR NO. AAJFR5374H ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI HITESH SHAH / RESPONDENT BY : SHRI MANISH K. SINGH / DATE OF HEARING : 08.10 .2018 / DATE OF PRONOUNCEMENT : 31.10 .2018 / O R D E R PER SA KTIJIT DEY , J . M.: TH E AFORESAID APPEAL HAS BEEN FILED BY THE ASSESSEE CHALLENGING THE ORDER DATED 28.03.201 6 PASSED BY THE LEARNED PRINCIPAL COMMISSIONER OF INCOME TAX 29 , MUMBAI UNDER SECTION 263 O F THE INCOME TAX 1961 FOR THE ASSESSMENT YEAR 2011 - 12 . 2 ITA NO. 2273/MUM/2018 RAJAL ENTERPRISES 2. BRIEFLY, THE FACTS OF THE CASE ARE THE ASSESSEE , A PARTNERSHIP FIRM , IS ENGAGED IN THE BUSINESS OF EX E CUTING CIVIL CONTRACT WORK. FOR THE ASSESSMENT YEAR UNDER DISPUTE THE ASSESSEE HAD FILED ITS RETURN OF INCOME ON 29.09 . 2011 DECLARING TOTAL INCOME OF ` .13,76 , 240/ . THE RETURN OF INCOME FILED BY THE ASSESSEE WAS INITIALLY PROCESSED UNDER SECTION 143(1) OF THE ACT. SUBSEQUENTLY , ON THE BASIS OF INFORMATION RECEIVED FROM DGIT (INVESTIGATION), MUMBA I AND THE SALES TAX DEPARTMENT , GOVERNMENT OF MAHARASHTRA THAT THE ASSESSEE IS ONE OF THE BENEFICIARY OF THE ACCOMMODATION ENTRIES PROVIDED BY WAY OF BOGUS PURCHASE BILL ISSUED BY M/S.DAKSHA ENTERPRISES , AN ENTITY IDENTIFIED AS A HAWALA OPERATOR BY THE SAL ES TAX DEPARTMENT , REOPENED THE ASSESSMENT UNDER SECTION 147 OF THE ACT. DURING THE RE ASSESSMENT PROCEEDING THE ASSESSING OFFICER CALLED UPON THE ASSESSEE TO PROVE THE GENUINENESS OF PURCHASES OF ` .51,36,299/ CLAIMED TO HAVE BEEN MADE FROM M/S. DAKSHA E NTERPRISES. THAT BESIDES , TO ASCERTAIN THE GENUIN E NESS OF PURCHASE MADE THE ASSESSING OFFICER CONDUCTED INDEPENDENT INQUIRY BY ISSUING NOTICE UNDER SECTION 133(6) OF THE ACT. THE AFORESAID NOTICE ISSUED BY THE ASSESSING OFFICER WAS RETURN ED BACK UNSERVED BY THE POSTAL AUTHORITY. THEREFORE, THE ASSESSING OFFICER CALLED UPON THE ASSESSEE TO PRODUCE THE CONCERNED PARTY TO PROVE THE GENUIN E NESS OF PURCHASES. AS OBSERVED BY THE ASSESSING OFFICER , THE AS S ESSEE EXPRESSED ITS INABILITY TO PRODUCE THE CONCERNED PART Y. H OWEVER THE AS S ESSEE FILED S O ME DOCUMENTARY EVIDENCES LIKE COPIES OF PURCHASE BILL S , BANK ACCOUNT COPY SHOWING PAYMENT MADE TO THE PARTY, COPIES OF THE LEDGER ACCOUNT, COP I ES OF PURCHASE BILLS AND SUBSEQUENT SALE OF GOODS PURCHASED FROM THE SAID PAR TY, 3 ITA NO. 2273/MUM/2018 RAJAL ENTERPRISES COPIES OF CHALLAN SHOWING PAYMENT OF VAT ETC . AFTER EXAMIN I NG THE EVIDENCES SUBMITTED BY THE ASSESSEE THE ASSESSING OFFICER WA S OF THE VIEW THAT THE ASSESSEE WAS UNABLE TO PROVE THE GENUINENESS OF PURCHASES MADE FROM THE CONCERNED PARTY. HOWEVER, HE OBSERVE D THAT THE PURCHASES AND CORRESPO N DING SALES MADE BY THE ASSESSEE HAVE BEEN RECORDED IN THE BOOKS OF ACCOUNTS. THEREFORE, RELYING UPON THE DECISION OF HON'BLE GUJARAT HIGH COURT IN CASE OF CIT V/S. SIMIT P. SETH 356 ITR 451 AND THE DECISION OF THE SAME HIGH COURT IN CASE OF CIT V/S. BHOLANATH POLYFAB PVT. LTD. ESTIMATED THE PROFIT @ 10% OF THE ALLEGED BOGUS PURCHASES AND MADE AN ADDITION OF ` .5,13,630/ . AFTER COMPLETION OF ASSESSMENT AS A FORE SAID , LEARNED PCIT IN EX ER CISE OF POWER CONFERRED UNDER SECTION 263 OF THE ACT CALLED FOR AND EXAMINE D THE ASSESSMENT RECORD S OF THE ASSESSEE . A FTER EXAMINING THE ASSESSMENT RECORD LEARNED PCIT WAS OF THE VIEW THAT THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER IS ERRONEOUS AND PR EJUDICIAL TO THE INTEREST OF REVENUE , AS , WHILE RESTRICTING THE ADDITION TO 10% OF THE BOGUS PURCHASES T HE ASSESSING OFFICER HAS NOT CONSIDER ED THE DECISION OF THE HON'BLE SUPREME COURT IN CASE OF N.K.PROT E IN LTD. V/S. DCIT [ 2017 ] 84 TAXMAN.COM 195. ACCORDINGLY, H E SET ASIDE THE ASSESSMENT ORDER PASSED WITH A DIRECTION TO THE ASSESSING OFFICER TO PASS A FRESH ORDER K EEPING IN VIEW THE OBSERVATIONS MADE BY HIM IN THE REVISION ORDER. 3. THE LEARNED AUTHO R I S ED REPRESENTATIVE SUBMITTED , THE EXERCISE OF JURISD IC TION UNDER SECTION 263 OF THE ACT BY THE PCIT IS ILLEGAL AND WITHOUT JURISDICTION AS THE CONDITIONS OF SECTION 263 OF THE ACT ARE NOT SATISFIED. HE SUBMITTED , THE ASSESSING 4 ITA NO. 2273/MUM/2018 RAJAL ENTERPRISES OFFICER AFTER REOPENING THE ASSESSMENT ON THE BASIS OF INFORM A TION AVAIL A BLE WITH HIM H AS COMPLETED IT AFTER CON DUCTING NECESSARY ENQUIRY. THEREFORE , IT CANNOT BE SAID THAT T HE ASSESSING OFFICER HA S NOT MADE ANY INQUIRY WITH REGARD TO PURCHASES MADE BY THE ASSES S EE. HE SUBMITTED , THE ALLEGATION MADE BY THE PCIT THAT THE ASSESSING OFFICER HAS N OT CONSIDE RED THE DECISION OF HON'BLE S UPREME C OURT IN CASE OF N.K. PROTIEN (SUPRA) IS TOTALLY MISCONCE IVED, S INCE, THE SAID DECISION OF THE HON'BLE SUPREME COURT WAS NOT AVAILABLE AT THE TIME OF COMPLETION OF ASSESSMENT. FURTHER , T HE LEARNE D AUTHORISED REPRESENTAT IVE SUBMITTED , CONSIDERING THE FACT THAT THE PURCHASES AND CORRESPONDING SALES WERE RECORDED IN THE BOOKS OF ACCOUNT THE ASSESSING OFFICER MADE ADDITION BY APPLYING THE GROSS PROFIT RATE OF 10%. H E SUBMITTED , THE A FORE SAID DECISION OF ASSESSING OFFICER IS IN CONSONANCE WITH THE DECISIONS OF THE HON'BLE GUJARAT HIGH COURT AS WELL AS THE DECISIONS OF THE MUMBAI BENCHES O F THE TRIBUNAL IN SIMILAR ISSUE OF BOGUS PURCHA S ES. THUS, HE SUBMITTED , THE ORDER PASSED UNDER SECTION.263 OF THE ACT NEEDS TO BE QUAS HED . 4. THE LEARNED D EPARTMENTAL R EPRESENTATIVE, THOUGH , AGREED THAT THE DECISION OF THE HON'BLE APEX COURT IN CASE OF N.K. PR OTEIN ( SUPRA ) WAS DELIVE RE D AFTER THE ASSESSMENT ORDER WAS PASSED BY THE ASSESSING OFFICER , HOWEVER, HE JUSTIFIED THE EXER C ISE OF POWER UNDER SECTION.263 OF THE ACT BY THE PCIT 5. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED MATERIAL ON RECORD. FACTUAL MATRIX OF THE CASE REVEALS THAT ON THE BASIS OF SPECIFIC INFORMATION RECEIVED INDICATING THAT THE PURCHASES MADE BY THE ASSE SSEE ARE BOGUS , THE ASSESSING OFFICER REOPENED THE 5 ITA NO. 2273/MUM/2018 RAJAL ENTERPRISES ASSESSMENT UNDER SECTION 147 OF THE ACT. IT IS ALSO EVIDENT , IN COURSE OF AS S ESSM E NT PROCEEDING THE ASSESSING OFFICER HAS CONDUCTED NECESSARY INQUIRY BY CALLING FOR VARI O US INFORMATION FROM THE ASSESSEE A S WELL AS INDEPEND ENT LY TO ASCERTAIN THE GENUIN E NES S OF T HE PURCHASES MADE BY THE ASSESSEE . AFTER EXAMINING THE MATERIAL AVAILABLE ON RECORD THE ASSESSING OFFICER , THOUGH , WAS OF THE VIEW THAT THE ASSESSEE HAS FAIL ED TO PROVE T H E GENU I NENESS OF PURCH A SES MADE, HOWEVER, HE FOUND THAT NOT ONLY THE ASSESSEE HAS SH O WN THE PURCH A SES MADE IN THE BOOKS OF ACCOUNT BUT HAS ALSO RECORDED THE CORRESPONDING SALES EFFECT ED . THUS, HE PROCEEDED TO MAKE ADDITION OF THE PROF I T EL E MENT E M BED D E D IN THE BOGUS PURCHASES BY ES TIMATING THE SAME A T 10%. THUS, A READING OF THE ASSESSM E NT ORDER MAKES IT CLEAR , THE ASSESSING OFFICER NOT ONLY HAS CONDUCTED DUE INQUIRY TO ASCERTAIN THE GENUINE NE SS OF THE PURCHA S ES MADE BY THE ASSESSEE BUT HAS MADE ADDITION ON ACCOUNT OF BOGUS PURCHAS ES IN TERMS WITH THE PRINCIPLE LAID DOWN IN VARIOUS JUDICIAL PRECEDENTS . IT IS OBSERVED , LEARNED PCIT HAS HELD THE AS S ESSM E NT ORDER TO BE ERR O NEOUS AND PREJUDIC IAL TO THE INTER E ST OF REVENUE PRIMARILY FOR TWO REASON S . FIRSTLY , DUE TO NON - CONSIDERATION OF THE DECISION OF HONBLE SUPREME COURT IN CASE OF N. K. PROT E I N (SUPRA) AND SECONDLY , DUE TO LACK OF PROPER INQUIRY. AS REGARD S THE SECOND ALLEGATION OF THE PCIT , WE ARE U NABLE TO AGREE WITH THE SAME. THE ASSESSMENT ORDER CLEARLY REVEALS THAT THE ASSESSIN G OFFICER MADE NECESSARY INQUIRY TO FIND OUT GENUINE NE SS OF PURCHASES. AS REGARDS THE ALLEGATION OF NON - CONSIDERATION OF THE DECISION IN CASE OF N.K. PR OTEIN (SUPRA), IT IS RELEVANT TO NOTE , THE SAID DECISION WAS RENDERED BY THE HONBLE APEX COURT ON 16. 01.2017 WHICH IS MUCH 6 ITA NO. 2273/MUM/2018 RAJAL ENTERPRISES AFTER THE COMPLETION OF ASSESSMENT ON 02.03.2016. THEREFORE, THERE IS NO OCCASION ON THE PART OF THE ASSESSING OFFICER TO CONSI D ER THE SAID DEC I S I ON . THAT BEING THE CASE , THE EXERCISE OF POWER UNDER SECTION 263 OF THE ACT FOR NON - CO NSIDERATION OF THE AFORESAID DECISION OF THE HONBLE APEX COURT IS WHOLLY MISCONCEIVED. IN ANY CASE OF TH E MATTER , THE ADDITION TO BE MADE ON THE BASIS OF BOGUS PURCHASE IS A PURELY FACTUAL ISSUE AND VARIES FROM CASE TO CASE D EPENDING UPON THE FACTS OF EA CH CASE. IN CASE OF N.K. PROTEIN (SUPRA) THE FACTS INVOLVED CLEARLY REVEAL THAT THERE WAS A SEARCH AND SEIZURE ACT I ON CARRIED OUT IN CASE OF N.K. PROTEIN DURING WHICH VARIOUS INCRIMINATING MATERIAL INCLUD ING BLANK CHEQUE BOOK S IN THE NAME O F DIFFERENT ENT ITIES WERE FOUND WHICH CONCLUSIVELY PROVED THAT THE ASSESSEE HAD NOT MADE ANY PURCHASES. THUS, IN THE CONTEXT OF THOSE FACTS 100% ADDIT I ON ON ACCOUNT OF BOGUS PURCHASES W AS UPHELD. WHEREAS , IN THE CASE OF THE PRESENT ASSESSEE NO SUCH FACT S A RE INVOLVED. IN ANY CASE OF THE MATTER , WHEN THE ASSESSEE WAS ABLE TO LINK THE PURCHASES WITH CORRESPONDING SALES , THE LOG ICAL CONCLUSION WHICH ONE CAN ARRIVED AT IS , THE ASSESSEE MIGHT NOT HAVE PURCH A SE D GOODS FROM THE DECLARED S OURCE BUT FROM SOME OTHER PARTIES. IN THAT EVEN T, ONLY THE PROF I T ELEMENT EMBEDDED IN THE BOGUS PURCHASES CAN BE CONSIDER ED FOR ADD I TION. T H EREFORE , THE DECISION OF THE ASSESSING OFFICER TO RESTRIC T THE ADD ITION TO 10% OF THE BOGUS PURCHASE S IS IN TUNE WITH THE CONSISTENT VIEW OF THE TRIBUNA L AND DIFFERENT HIGH COURTS IN SIMILAR NATURE OF CASES. THAT BEING THE CASE , IN OUR VIEW , THE EXERCISE OF POWER UNDER SECTION.263 OF THE ACT IN THE FACTS OF THE PRESENT CASE IS INVALID. ACCORDINGLY, THE IMPUG N ED ORDER PASSED BY THE LEANED PCIT UNDER SECT ION 7 ITA NO. 2273/MUM/2018 RAJAL ENTERPRISES 263 OF THE ACT DESERVE S TO BE QUAS HED . ACCORDINGLY , WE DO SO. CONSEQUENTLY , THE ORDER PASSED BY THE ASSESSING OFFICER IS RESTORE D . 6 . IN THE RESULT , ASSESSEES APPEAL IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 31.10.2018. SD/ SD/ ( N.K.PRADHAN ) (S A KTIJIT DEY ) / A CCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI ; DATED : 31.10.2018 MP / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / TH E RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F ILE / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI
