Zenith Construction Co., Panvel V. Deputy Commissioner of Income-tax,

ITA 2289/PUN/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 4315 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 10 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-08-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 30-09-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MUKESH JHA
• Keywords: Bogus purchase; Unexplained expenditure; Accommodation entries

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, PUN E . , , , ' BEFORE SHRI D. KARUNAKARA RAO, AM AND SHRI VIKAS AW ASTHY, JM . / ITA NO. 2289/PUN/2016 $ $ / ASSESSMENT YEAR : 2011-12 ZENITH CONSTRUCTION COMPANY, C/O. V.Y. MHATRE & CO., 103 & 104, SHAH PLAZA, PRABHU ALI, NEAR ADARSH LODGE, PANVEL 410 206 PAN : AAAFZ2770N ...... / APPELLANT / V/S. DCIT, PANVEL CIRCLE, PANVEL / RESPONDENT APPELLANT BY : NONE RESPONDENT BY : SHRI MUKESH JHA / DATE OF HEARING : 26.07.2018 / DATE OF PRONOUNCEMENT : 03.08.2018 / ORDER PER D. KARUNAKARA RAO, AM THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A)-2, THANE, DATED 14-07-2016 FOR THE A.Y. 2011-12. 2. BACKGROUND FACTS OF THE CASE INCLUDE THAT THE ASSESS EE IS A CIVIL CONTRACTOR AND ALSO ENGAGED IN TRANSPORT ACTIVITIES. ASSES SEE FILED THE RETURN OF INCOME DECLARING TOTAL INCOME OF RS.36,89,270/-. DURING THE ASSESSMENT PROCEEDINGS, THE AO NOTICED THAT ASSESSEE PURCHASED GO ODS FROM 3 SUPPLIERS WHOSE NAMES ARE LISTED BY THE SALES TAX DEPARTMENT OF M AHARASHTRA GOVT. 2 ITA NO.2289/PUN/2016 ZENITH CONSTRUCTION COMPANY AS ENGAGED IN PROVIDING ACCOMMODATION ENTRIES. AO ADDED THE ENTIRE AMOUNT OF RS.20,07,566/- AS UNEXPLAINED EXPENDITURE FOR VAR IOUS REASONS LISTED OUT IN PARA NO.4.5 OF HIS ORDER. IN THE FIRST APPELLAT E PROCEEDINGS, THE CIT(A) CONFIRMED THE SAME AND DISMISSED THE APPEAL OF THE ASSESSEE. 3. AGGRIEVED WITH THE SAME, THE ASSESSEE FILED AN APPEAL BEFORE US RAISING COUPLE OF ISSUES (1) VALIDITY OF THE RE-ASSESSMENT PROCEEDING S U/S.148 OF THE ACT AND (2) SUSTAINING OF ADDITIONS OF RS.20,07,566/- AND NOT RESTRICTING THE DISALLOWANCE TO GP RATE AS DONE IN THE CASE OF THE ASSESSEE FOR THE A.Y. 2 008- 09. 4. BEFORE US, THERE IS NONE TO REPRESENT THE ASSESSEE DESPITE ISSUE OF NOTICE AND SERVICE OF THE SAME ON THE ASSESSEE. COPY O F THE ACKNOWLEDGEMENT IS PLACED ON RECORD EVIDENCING THE SERVIC E OF NOTICE. ON PERUSING THE FACTS OF THE CASE AND CONSIDERING THE AVAILA BILITY OF LD. DR FOR THE REVENUE, WE ARE OF THE OPINION THAT THE APPEAL CAN B E ADJUDICATED ON THE BASIS OF MATERIAL AVAILABLE ON RECORD. 5. AFTER HEARING THE LD. DR FOR THE REVENUE AND PERUSING THE MATERIAL AVAILABLE ON RECORD, WE FIND THIS IS A CASE WHERE THE ASSES SEE MADE PURCHASES FROM THE THREE SUPPLIERS WHOSE NAMES ARE IN T HE LIST OF SUSPECTED SUPPLIERS BY THE SALES TAX DEPARTMENT. AO/CIT(A) ADDED THE ENTIRE SUM AS UNEXPLAINED EXPENDITURE. 6. REGARDING THE RE-OPENING OF THE ASSESSMENT, WE FIND TH IS IS A CASE WHERE AO HAS VOLUMINOUS INCRIMINATING MATERIAL REFLECTING THE BOGUS NATURE OF THE PURCHASES. THE STATEMENTS OF THE PARTIES TAKEN O N OATH ARE AVAILABLE WITH THE REVENUE. THE DETAILS OF PURCHASES WERE ALSO AVA ILABLE WITH THE AO. IT IS ALSO NOTICED THAT THE ASSESSEE NEVER REQUESTED T HE CROSS EXAMINATION OF THE PARTIES DURING THE RE-ASSESSMENT PROCEEDINGS. THER EFORE, WE ARE OF THE 3 ITA NO.2289/PUN/2016 ZENITH CONSTRUCTION COMPANY OPINION THAT THE NOTICE ISSUED U/S.148 OF THE ACT IS VALID. THUS, GROUND NO.1 RAISED BY THE ASSESSEE STANDS DISMISSED. 7. REGARDING THE MERITS OF ADDITION OF RS.20,07,566/- WE ARE OF THE OPINION THAT THE MATTER SHOULD BE REMANDED TO THE FILE OF CIT(A) FOR DECIDING THE ISSUE IN THE LIGHT OF CLASSIFICATION OF VARIOUS GROUPS OF S UPPLIERS AS DONE BY THE TRIBUNAL WHILE ADJUDICATING THE APPEAL IN THE CASE O F M/S. CHHABI ELECTRICALS PVT. LTD. AND OTHERS VS. DCIT IN ITA NO.795/PUN /2014, RELATING TO ASSESSMENT YEAR 2010-11, DECIDED ON 28-04-2017. IN THIS CASE, THE TRIBUNAL ANALYSED VARIOUS BENEFICIARIES OF SUCH BOGUS ENTRY OPERATORS AND DEPENDING ON THE SUBMISSION OF THE EVIDENCES WITH REGARD TO THE TRAIL OF GOODS, PAYMENT ETC. THE TRIBUNAL IDENTIFIED 4 TYPES OF CATE GORIES. FOR THE SAKE OF COMPLETENESS, WE PROCEED TO EXTRACT THE SAID PA RAGRAPHS FROM THE ORDER OF THE TRIBUNAL (SUPRA) AND THE SAME READ AS UNDER : 40. IN VIEW OF THE ABOVE SAID RATIOS, THE PRESENT ISSUE OF BOGUS PURCHASES IS TO BE DECIDED ON THE BASIS OF FACTS OF EACH CASE. THE FIRST ASPECT IS THE INFORMATION RECEIVED BY THE ASSESSING OFFICER FROM THE SALES TAX DEPARTMENT IN RESPECT OF ALLEGED HAWALA DEALERS. IN MANY CASES, THE ASSESSING OFFICER HAS NOT EVEN RECEIVED THE COPY OF STATEMENT RECORDED OR ANY OTHER EVIDENCE FROM THE SALES TAX DEPARTMENT, EXCEPT THE LIST OF HAWALA DEA LERS AND ON THE BASIS OF THE SAID LIST, THE ASSESSMENT PROCEEDINGS HAVE BEEN COM PLETED IN THE HANDS OF ASSESSEE, WHO HAD MADE THE PURCHASES FROM THE SAID PARTIES. IN CASE, NO SUCH EVIDENCE HAS BEEN RECEIVED BY THE ASSESSING OFFICER BEFORE MAKING ADDITION, THEN THERE IS NO WARRANT IN MAKING AFORESAID ADDITI ON IN THE HANDS OF ASSESSEE MERELY ON THE BASIS OF SO CALLED LIST OF HAWALA DEA LERS. THERE ARE OTHER CASES, WHERE THE ASSESSING OFFICER HAD RECEIVED THE STATEM ENT OF THE PERSONS WHO WERE HAWALA DEALERS AND WHO HAD ADMITTED TO HAVE JUST IS SUED BILLS OF SALE WITHOUT DELIVERY OF GOODS. IN SUCH CIRCUMSTANCES, THERE IS EVIDENCE AGAINST THE RESPECTIVE ASSESSEE THAT WHERE THE SELLER OF THE GOODS, HAS AD MITTED NOT TO HAVE ENTERED INTO REAL TRANSACTION OF SALE OF GOODS. AGAINST SU CH NON-TRANSACTION, THERE CAN BE NO DELIVERY OF GOODS, THEN IT IS CASE OF PASSING OF BILLS OF SALE AND PURCHASES, AGAINST WHICH NO VAT HAS BEEN PAID. SUCH BOGUS PUR CHASES ARE THEN TO BE ADDED IN THE HANDS OF ASSESSEE. WHERE THE ASSESSIN G OFFICER HAD CONFRONTED THE ASSESSEE WITH THE INFORMATION RECEIVED, SUPPLIED CO PIES OF STATEMENTS AND WHERE THE PERSONS HAVE NOT BEEN TRACED AND NO CONFIRMATIO N HAS BEEN FILED BY THE ASSESSEE IN THIS REGARD, THEN THE ADDITION IS TO BE MADE IN THE HANDS OF ASSESSEE ON ACCOUNT OF SUCH BOGUS PURCHASES. IN THE FACTS A ND CIRCUMSTANCES OF SOME CASES, THE GOODS HAVE BEEN TRANSFERRED BY SUCH HAWA LA DEALERS TO THE RESPECTIVE PURCHASERS, AGAINST WHICH THE ASSESSEE HAS TO DISCH ARGE ONUS OF ESTABLISHING THE TRAIL OF GOODS WHICH ARE TRANSFERRED AND FURTHE R SOLD BY THEM. WHERE THE ASSESSEE IS ABLE TO PRODUCE EVIDENCE OF PURCHASE OF GOODS BY WAY OF WEIGHMENT BRIDGE RECEIPTS, TRANSPORTATION DOCUMENTS, PAYMENT OF OCTROI AND SUBSEQUENT SALE OF GOODS TO THE RESPECTIVE PARTIES AND / OR WHERE T HE ASSESSEE HAS MAINTAINED COMPLETE QUANTITATIVE DETAILS OF PURCHASE AND SALE OF GOODS, THEN TOTAL BOGUS 4 ITA NO.2289/PUN/2016 ZENITH CONSTRUCTION COMPANY PURCHASES CANNOT BE ADDED IN THE HANDS OF ASSESSEE, BUT GP RATE OF 10% IS TO BE APPLIED ON BOGUS PURCHASES. WHERE THE ASSESSEE DOE S NOT ESTABLISH ITS CASE, THEN THE COMPLETE BOGUS PURCHASES ARE TO BE ADDED A S HAWALA PURCHASES. FURTHER, IN CASES, WHERE THE STATEMENTS ARE RECORDE D AND COPIES OF WHICH HAVE BEEN SUPPLIED TO THE ASSESSEE AND ASSESSEE ESTABLIS HED THE CASE OF RECEIPT OF GOODS AND ITS ONWARD TRANSMISSION BY WAY OF SALE BI LLS, THEN THE FACTUM OF PURCHASES BY THE ASSESSEE STANDS ESTABLISHED IN SUC H CIRCUMSTANCES. HOWEVER, THE BENEFIT OF PURCHASES BEING MADE FROM GREY MARKE T, NEEDS ESTIMATION IN THE HANDS OF ASSESSEE. THE TRIBUNAL HAS ALREADY HELD T HAT THE ADDITION BE MADE BY ESTIMATING THE SAME @ 10% OF THE ALLEGED HAWALA PUR CHASES. ACCORDINGLY, IT IS SO HELD. IN VIEW THEREOF, THE ISSUES WHICH EMERGE ARE AS UNDER:- I. IN CASE NO INFORMATION IS RECEIVED BY THE ASSESSING OFFICER FROM THE SALE TAX DEPARTMENT AND NO COPY OF STATEMENT RECORDED OR ANY OTHER EVIDENCE IS RECEIVED FROM THE SALES TAX DEPARTMENT, THEN NO ADD ITION IS TO BE MADE ON THE BASIS OF NAME OF HAWALA DEALER IN THE LIST PREP ARED BY THE SALES TAX DEPARTMENT, WHERE THE ASSESSEE HAD ASKED FOR THE SA ID INFORMATION DURING ASSESSMENT PROCEEDINGS. II. WHERE THE ASSESSING OFFICER HAD RECEIVED THE STATEM ENTS OF PERSONS WHO HAD ADMITTED TO HAVE JUST ISSUED BILLS OF SALE WITHOUT ANY DELIVERY OF GOODS. IN VIEW OF SUCH EVIDENCE, WHERE THE ASSESSEE HAD NOT E NTERED INTO REAL TRANSACTION OF PURCHASE OF GOODS AND IN THE ABSENCE OF ANY DELIVERY OF GOODS, THE SALES ARE BOGUS AND THE ENTIRE SALES ARE TO BE ADDED IN THE HANDS OF ASSESSEE. ADMITTEDLY, THE DEALER HAD NOT EVEN PAID VAT AGAINST SUCH PASSING OF GOODS. III. THE CASE WHERE THE ASSESSING OFFICER HAD CONFRONTED THE INFORMATION RECEIVED FROM THE SALES TAX DEPARTMENT AND HAD SUPPLIED COPI ES OF STATEMENTS RECORDED AND HAD ALSO ISSUED NOTICE UNDER SECTION 1 33(6) OF THE ACT, WHERE HAWALA DEALER WAS NOT TRACEABLE AND IN THE ABSENCE OF THE ASSESSEE FAILING TO FILE ANY DOCUMENTARY EVIDENCE OF DELIVERY OF GOODS, ADDITION IS TO BE UPHELD IN THE HANDS OF ASSESSEE ON ACCOUNT OF SUCH BOGUS PURC HASES. IV. THE NEXT INSTANCE IS THE CASE OF GOODS WHICH HAVE B EEN ADMITTEDLY SOLD BY THE HAWALA DEALER AND HAS BEEN RECEIVED BY THE ASSESSEE, WHO IN TURN HAD MAINTAINED QUANTITATIVE DETAILS AND ALS O EVIDENCE OF ITS MOVEMENT I.E. TRANSPORTATION DETAILS AND QUALITY CO NTROL DETAILS OF CONSUMPTION OF THE SAID MATERIAL OR EXACT DETAILS O F SALE OF THE SAME CONSIGNMENT THROUGH SAME TRANSPORTER DIRECTLY TO TH E PARTY, THEN THE TOTAL PURCHASES CANNOT BE ADDED IN THE HANDS OF ASS ESSEE. HOWEVER, SINCE THE PURCHASES ARE MADE FROM THE GREY MARKET, SOME ESTIMATION NEEDS TO BE MADE IN THE HANDS OF ASSESSEE. THE TRI BUNAL IN M/S. CHETAN ENTERPRISES VS. ACIT (SUPRA) HAS ALREADY HEL D THAT THE ADDITION BE MADE BY ESTIMATING THE SAME @ 10% OF THE ALLEGED HAWALA PURCHASES, OVER AND ABOVE THE GP SHOWN BY TH E RESPECTIVE ASSESSEE. V. ANOTHER SET OF CASES WHERE THE STATEMENTS RECORDED BY THE SALES TAX DEPARTMENT HAVE BEEN HANDED OVER TO THE ASSESSEE AN D THE COPIES OF SAME HAVE BEEN SUPPLIED TO THE ASSESSEE, THEN WHERE THE ASSESSEE ESTABLISHED THE CASE OF RECEIPT OF GOODS AND ITS ONWARD TRANSMISSIO N, THEN THE FACTUM OF PURCHASES BY THE ASSESSEE STANDS ESTABLISHED IN SUC H CIRCUMSTANCES. HOWEVER, ESTIMATION IS TO BE MADE IN THE HANDS OF A SSESSEE BECAUSE OF PURCHASES FROM THE GREY MARKET AND FOLLOWING THE AB OVE SAID RATIO, ADDITION IS TO BE MADE BY ESTIMATING THE SAME @ 10% OF THE A LLEGED HAWALA PURCHASES, OVER AND ABOVE THE NET PROFIT SHOWN BY T HE ASSESSEE. 5 ITA NO.2289/PUN/2016 ZENITH CONSTRUCTION COMPANY 41. NOW, COMING TO THE FACTUAL ASPECTS OF EACH OF T HE APPEAL, WHICH HAVE ALREADY BEEN REFERRED TO BY THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE AND ALSO REFER TO THE ORDERS OF AUTHORITIE S BELOW, WHERE NONE HAS APPEARED ON BEHALF OF THE ASSESSEE. 42. THE LEAD CASE IS IN THE CASE OF M/S. CHHABI ELE CTRICALS PVT. LTD., WHERE THE GRIEVANCE OF THE ASSESSEE IS THAT THE ASSESSING OFFICER BEFORE MAKING THE ADDITION HAS NOT EVEN SUPPLIED THE COPY OF STATEMEN T OR ANY OTHER EVIDENCE RECORDED BY THE SALES TAX DEPARTMENT TO ESTABLISH T HAT THE PURCHASES MADE BY THE ASSESSEE WERE BOGUS. I HAVE ALREADY DECIDED TH IS ISSUE IN M/S. CHETAN ENTERPRISES VS. ACIT (SUPRA) AND HELD THAT IN CASES WHERE THE ASSESSING OFFICER HAS FAILED TO SUPPLY SUCH STATEMENT RECORDED BY THE SALES TAX DEPARTMENT OR ANY OTHER EVIDENCE JUSTIFYING THE ADDITION, NO ADDI TION IS TO BE MADE IN THE HANDS OF ASSESSEE. THE GROUNDS OF APPEAL RAISED BY THE A SSESSEE ARE THUS, ALLOWED. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSES SEE HAS FURTHER REFERRED TO VARIOUS DOCUMENTS I.E. GATE PASS, GRN AND ISSUE PAS S ESTABLISH ITS CASE OF DELIVERY OF GOODS I.E. PURCHASE FROM HAWALA DEALER AND ITS ONWARDS CONSUMPTION IN THE MANUFACTURING PROCESS OF THE ASSESSEE. IN S UCH CIRCUMSTANCES, WHERE THE ASSESSEE HAS ESTABLISHED THE TRAIL OF GOODS PURCHAS ED TO THE FINAL CONSUMPTION, THEN THERE IS NO MERIT IN THE ADDITION MADE BY THE ASSESSING OFFICER. THUS, THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE ALLOWE D AND APPEAL OF THE ASSESSEE IS ALLOWED. 8. FURTHER, WE FIND THE SAID DECISION OF THE TRIBUNAL IS NOT AVAILABLE AT THE TIME OF PASSING OF ORDER BY THE CIT(A) ON 14-07-2016 . IN ALL FAIRNESS, WE ARE OF THE OPINION THAT THE MATTER SHOULD BE REMANDED T O THE FILE OF CIT(A) FOR CONSIDERING THE ABOVE DECISION OF THE TRIBUNAL AND APPLY THE RATIO LAID DOWN TO THE FACTS OF THE PRESENT CASE. ACCORDINGLY, THE GRO UNDS RAISED BY THE ASSESSEE ON MERITS ARE ALLOWED FOR STATISTICAL PURPOSES. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY A LLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON IN THE OPEN COURT ON 03 RD DAY OF AUGUST, 2018. SD/- SD/- ( /VIKAS AWASTHY) ( . /D. KARUNAKARA RAO) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / PUNE; / DATED : 03 RD AUGUST, 2018. SATISH 6 ITA NO.2289/PUN/2016 ZENITH CONSTRUCTION COMPANY ' ) / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. THE CIT (APPEALS)-2, THANE 4. THE PR.CIT-2, THANE 5. , , ' , / DR, ITAT, B BENCH, PUNE. 6. % / GUARD FILE. / BY ORDER, // TRUE COPY // SENIOR PRIVATE SECRETARY , / ITAT, PUNE.