M/s. EDAC Engineering Ltd., CHENNAI V. DCIT, CHENNAI

ITA 2402/CHNY/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 7688 (ITAT-CHENNAI)
• Duration Of Justice: 6 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2017
• Appeal Filed By: Assessee
• Bench Allotted: C
• Next Hearing Date: 14-02-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 19-08-2016
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTH
• Assessee Lawyers: S SRIDHAR
• Keywords: Reopening of assessment
• Section: 143(3); 148; 63

Judgement Text

, , IN THE INCOME - TAX APPELLATE TRIBUNAL C BENCH, CHENNAI . , . , BEFORE SHRI M. BALAGANESH , ACCOUNTANT MEMBER & SHRI DUVVURU RL REDDY, J UDICIAL MEMBER ./ I.T.A.NO. 2 4 02/MDS/2016 / ASSESSMENT YEAR :20 11 - 12 M/S. EDAC ENGINEERING LTD., SPIC BUILDING, NO. 88, MOUNT ROAD, GUINDY , CHENNAI 600 0 32 . [PAN: AABC S0321G ] VS. THE DEPUTY COMMISSIONER OF INCOME TAX, CO RPORATE CIRCLE 2 ( 1 ), CHENNAI . ( / APPELLANT ) ( / RESPONDENT ) / APPELLANT BY : SHRI S. SRIDHAR , ADVOCATE / RESPONDENT BY : SHRI A.V. SREEKANTH, JCIT / DATE OF HEARING : 14 . 02 .201 7 / DATE OF P RONOUNCEMENT : 28 . 02 .201 7 / O R D E R PER DUVVURU RL REDDY , JUDICIAL MEMBER : TH IS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) 6 , C HENNAI , DATED 21 . 0 7 .201 6 RELEVANT TO THE ASSESSMENT YEAR 20 11 - 12 CHALLENGING THE VALIDITY OF REOPENING OF ASSESSMENT UNDER SECTION 143(3) R.W.S.147 OF THE INCOME TAX ACT, 1961 [ ACT IN SHORT] AND SECONDLY, CONFIRMATION OF DISALLOWANCE OF PURCHASES AMOUNT TO .12,83,84, 294/ - . I.T.A . NO . 2402 /M/ 1 6 2 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN ENGINEERING, PROCUREMENT AND CONSTRUCTION ACTIVITIES. IT HAS FILED THE ORIGINAL RETURN OF INCOME ON 30.11.2011 ADMITTING TOTAL INCOME OF .27,07,22,880/ - . THE ASSESSING OFFICER ISSUED NOTICE UNDER SECTION 148 OF THE ACT. IN RESPONSE THERETO, THE ASSESSEE, VIDE IS LETTER DATED 18.12.2014 STATED THAT THE ORIGINAL RETURN OF INCOME MAY BE TAKEN AS ONE FILED IN RESPONSE TO THE NOTICE UNDER SECTION 148 OF THE ACT. THEREAFTER, NOTICE UNDER SE CTION 143(2) OF THE ACT WAS ISSUED AND SERVED ON THE ASSESSEE ON 18.12.2014. THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) R.W.S. 147 OF THE ACT DETERMINING TAXABLE INCOME OF THE ASSESSEE AT .39,91,07,174/ - BY MAKING DISALLOWANCE OF .12,83,84,294/ - ON ACCOUNT OF FICTITIOUS PURCHASES. 3. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A) AND CHALLENGED THE VALIDITY OF REOPENING OF ASSESSMENT AS WELL AS DISALLOWANCE OF EXPENDIT URE ON ACCOUNT OF PURCHASE. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, FACTS OF THE CASE, THE LD. CIT(A) DISMISSED THE APPEAL FILED BY THE ASSESSEE. 4. ON BEING AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL CHALLENGING BOTH THE GROUND S AS RAISED BEFORE THE LD. CIT(A). 5. AT THE TIME OF HEARING, THE LD. COUNSEL FOR THE ASSESSEE HAS NOT PRESSED THE FIRST GROUND OF APPEAL WITH REGARDING REOPENING OF ASSESSMENT I.T.A . NO . 2402 /M/ 1 6 3 UNDER SECTION 147 OF THE ACT. ACCORDINGLY, THE GROUND RAISED BY THE ASSESSEE IS DISMISSED AS NOT PRESSED. 6. WITH REGARD TO THE DISALLOWANCE TOWARDS EXPENDITURE ON PURCHASES MADE BY THE ASSESSEE, THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE LD. CIT(A) HAS GIVEN ANY VALID REASON FOR SUSTAINING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER AND THEREFORE, HE PRAYED THAT THE DISALLOWANCE MADE BY THE ASSESSING OFFICER SHOULD BE DELETED. 7. ON THE OTHER HAND, THE LD. DR STRONGLY SUPPORTED THE ORDERS OF AUTHORITIES BELOW. 8. WE HAVE HEARD BOTH SIDES, PERUSED THE MATER IALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. WE HAVE ALSO PERUSED THE PAPER BOOK FILED BY THE ASSESSEE. I N THE ASSESSMENT ORDER, THE ASSESSING OFFICER HAS OBSERVED THAT AS PER THE INFORMATION RECEIVED FROM SALES TAX DEPARTMENT MAHARASHTRA AND THE DIRECTORATE OF INCOME - TAX(INV.), MUMBAI, THE ASSESSEE COMPANY HA S OBTAINED FICTITIOUS PURCHASE BILLS THROUGH HAWALA BILL OPERATORS AS BELOW: (I) SHRI SAI SALES CORPORATION (II) MANIBHUDRA TRADING CO. (III) SHUBHUM ENTERPRISES (IV) VANI ENTERPRISES (V) AUTHENTIC ENTERPRISES PRIVATE LIMITED. I.T.A . NO . 2402 /M/ 1 6 4 THE TOTAL VALUE OF THE TRANSACTIONS WITH THESE H AWALA BILL OPERATIONS WA S .12,83,84 ,294/ - FOR THE ASSESSMENT YEAR 20 11 - 12 AND THE ABOVE INFORMATION WAS S HARED BY T HE SALES - TAX DEPARTMENT , MA HARASHTRA ON THEIR WEBSITE ALSO. IN VIEW OF THE ABOVE, DU RING THE ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS REQUIRED TO FURNISH EVIDENCE OF THE IMPUGNED PURCHASES. O N VERIFICATION OF THE DETAILS FILED BY THE ASSESSEE, THE ASSESSING OFFICER HAS OBSERVED THAT THE ASS E SSEE HAS FILED ONLY INVOICES WITH DOCUMENTARY SUPPORT OF BANK ACCOUNT STATEMENT, E TC . , ALONG WITH C ERTIFIED LEDGER COPIES OF THE PARTIES AS APPEARING IN THE A S S ESSEE S BOOKS. HOWEVER, T HE A SSESSING O FFICER HAS NOTED THAT THE MATERIAL RECEIPT CUM I NSPECTION REPORT DID NOT HAVE THE TRANSPORT A TION DETAILS , EVEN THOUGH THERE IS A COLUMN TO THAT EFFECT . BEFORE THE ASSESSING OFFICER, THE ASSESSEE HAS NOT FILED DETAILS WITH REGARD TO THE TRANSPORTATION, SUCH AS MODE OF TRANSPORT, REGISTRATION NUMBER OF TH E VEHICLES AND CORRESPONDING DETAILS. THEREFORE, THE ASSESSING OFFICER CONCLUDED THAT ASSESSMENT UNDER SECTION 143(3) R.W.S. 147 OF THE ACT ASSESSING TOTAL INCOME OF THE ASSESSEE AT .39,91,07,174/ - BY TREATING THE PURCHASE TRANSACTION AS NON - GENUINE. 8.1 ON APPEAL, THE SUBMISSIONS OF THE ASSESSEE AND OBSERVATIONS OF THE LD. CIT(A) ARE AS UNDER: 6.3 IN THE WRITTEN SUBMISSION FILED, THE APPELLANT HAS REITERATED THE ARGUMENTS MADE BEFORE THE ASSESSING OFFICER. COPIES OF PURCHASE ORDER PLACED ON THE PARTIES FOR THE SUPPLY OF WELDING ELECTRODES, BEARINGS, I.T.A . NO . 2402 /M/ 1 6 5 CABLE TRAYS AND MS FLAT, ETC. HAVE BEEN FURNISHED. IN THE BACKGROUND OF THE INVESTIGATION MADE BY THE MAHARASHTRA SALES TAX DEPARTM ENT AS WELL AS THE DIRECTOR OF INCOME - TAX (LNV.), MUMBAI, THE APPELLANT COMPANY WAS GIVEN AN OPPORTUNITY IN THE HEARING TO PRODUCE ADDITIONAL CONNECTED EVIDENCES WITH REGARD TO THE PURCHASES. THE AR WAS REQUESTED TO FURNISH DETAILS, SERIAL AND MODEL NUMBE R OF MACHINERY EQUIPMENTS PURCHASED, EVIDENCE REGARDING THE ANNUAL MAINTENANCE CONTRACT OF THE MACHINERY SO PURCHASED, TRANSPORTATION DETAILS OF THE PROCUREMENTS/INSPECTION REPORTS, ETC. HOWEVER, NO SUCH EVIDENCES WERE FORTHCOMING. IT WAS SUBMITTED THAT AL L PROCUREMENTS WERE OF CONSUMABLES, NUTS AND BOLTS, WASHERS, BEARINGS, ETC. WHERE THERE IS NO PROOF, ETC. AND NO EVIDENCE CAN BE FURNISHED. THE AUTHORISED REPRESENTATIVE FURTHER REITERATED THAT THE ASSESSING OFFICER HAS NOT EXAMINED THE ALLEGED DEFAULTING DEALERS. THE AUTHORISED REPRESENTATIVE ALSO PLACED STRONG RELIANCE ON THE FACT THAT PAYMENTS HAVE BEEN MADE THROUGH BANK ACCOUNTS. IT WAS ALSO SUBMITTED THAT THE INVENTORY HAS BEEN PROPERLY ACCOUNTED IN THE BOOKS OF THE APPELLANT COMPANY. 6.4 THE MATTER IS CONSIDERED. THE INVESTIGATION BY THE SALES TAX DEPARTMENT MAHARASHTRA AND DIRECTOR OF INCOME - TAX (LNV.), MUMBAI HAS CONCLUSIVELY ESTABLISHED THAT THE TRANSACTION ENTERED WITH DUBIOUS OPERATORS. IT WOULD BE INCONCEIVABLE, GIVEN THE VOLUME OF PURCHASES MA DE THAT THE APPELLANT COMPANY IS NOT ABLE TO PRODUCE A SINGLE SHRED OF EVIDENCE AND JUSTIFY ITS CONTENTION. IN THE ABSENCE OF THE SAME, I AM CONVINCED THAT THE ASSESSING OFFICER HAS TAKEN THE CORRECT DECISION IN TREATING THESE PURCHASES AS FICTITIOUS AND B RINGING THE SAME TO TAX. NO INTERFERENCE IN THE ORDER OF THE ASSESSING OFFICER IS THEREFORE CALLED FOR. THE GROUNDS OF APPEAL FAIL. 8.2 WE HAVE GONE THROUGH THE PAPER BOOK CONSISTING 140 PAGES, WHICH INCLUDES COPIES OF PURCHASE INVOICES FROM DIFFERENT PA RTIES. IN NONE OF THE INVOICES, NEITHER THE MODE OF TRANSPORTATION OF THE MATERIALS STATED TO HAVE PURCHASED HAVE BEEN GIVEN NOR THE ASSESSEE HAS FURNISHED ANY DETAILS WITH REGARD TO THE TRANSPORTATION OF THE ABOVE GOODS OR ANY STOCK DETAILS. MOREOVER, THE GOODS STATED TO HAVE BEEN PROCURED WAS FROM MUMBAI AND THE ASSESSEE IS STATED TO HAVE PROCURED THE ELECTRODES IN LARGE QUANTITIES, I.T.A . NO . 2402 /M/ 1 6 6 WHICH CANNOT BE CARRIED IN A BAG OR SO. FROM SHUBHAM ENTERPRISES, THE ITEM MENTIONED WAS 42 MT OF MS PLAT E 25MM THK, 72 MT MS FLAT 50 X 10 MM THK 4 TO 6 MTRS LONG, 53.508 MT OF MS FLAT 75 X 6MM THK 4 TO 6 MTRS LONG , ETC. THESE MATERIALS ALSO CANNOT BE CARRIED IN A BAG. IF THE ASSESSEE PURCHASED THE MATERIALS, IT IS BOUND TO FURNISH NOT ONLY THE DETAILS OF I TS TRANSPORT FROM SELLER, BUT ACTUALLY, WHERE IT WAS SUPPLIED, ON WHAT BASIS IT WAS PURCHASED AND SUPPLIED. THROUGH UNSIGNED WRITTEN SUBMISSIONS BEFORE THE LD. CIT(A), PAGE NO. 132 OF PAPER BOOK, THE ASSESSEE CLAIMS THAT JSW HAS GIVEN A PROJECT COMPLETION CERTIFICATE VIDE ITS LETTER 01.07.2013 CERTIFYING THAT THE ASSESSEE HAVE SUCCESSFULLY COMPLETED THE SCOPE OF WORK FOR ALL THE 4 X 2300MW COAL BASED JSW ENERGY THERMAL POWER PLANTS AND SUCCESSFULLY COMMISSIONED BY THE ASSESSEES. IF IT IS SO, THE ASSESSEE WO ULD HAVE DEFINITELY TRANSPORTED THE GOODS PURCHASED FOR THE PURPOSE OF COMMISSIONING THE POWER PLANT AT JAIGAD, RATNAGIRI, MAHARASHTRA. TO ADMIT THE CLAIM OF PURCHASE, THE ASSESSEE WAS DIRECTED TO FURNISH COMPLETE PARTICULARS WITH REGARD TO DETAILS OF TRAN SPORT OF GOODS PURCHASED BY IT, AS WAS DIRECTED BY THE LD. CIT(A) DURING THE COURSE OF APPELLATE PROCEEDINGS. HOWEVER, THE ASSESSEE HAS NOT FURNISHED THE DETAILS AS CALLED FOR AND THEREFORE, THE LD. CIT(A) SUSTAINED THE DISALLOWANCE MADE BY THE ASSESSING O FFICER. UNDER THE ABOVE FACTS AND CIRCUMSTANCES, WE ARE OF THE CONSIDERED OPINION THAT THE ASSESSEE SHOULD BE GIVEN ONE MORE OPPORTUNITY TO FURNISH ALL THE DETAILS AS REQUIRED BY THE AUTHORITIES BELOW. IF THE ASSESSEE FAILS TO I.T.A . NO . 2402 /M/ 1 6 7 FURNISH THE DETAILS AS CALLE D FOR, THE DISALLOWANCE MADE BY THE ASSESSING OFFICER AND CONFIRMED BY THE LD. CIT(A) STANDS SUSTAINED. THUS, THE ASSESSING OFFICER IS DIRECTED TO GIVE THE ASSESSEE ONE MORE OPPORTUNITY TO FURNISH THE DETAILS AS REQUIRED IN THIS CASE AND DECIDE THE ISSUE A S DIRECTED ABOVE AS WELL AS IN ACCORDANCE WITH LAW. 9 . IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES . ORDER PRONOUNCED ON THE 28 TH FEBRUARY , 201 7 AT CHENNAI. SD/ - SD/ - ( M. BALAGANESH ) ACCOUNTANT MEMBER ( DUVVURU RL REDDY ) JUDICIAL MEMBER CHENNAI, DATED, THE 28 . 02 .201 7 VM/ - / COPY TO: 1. / APPELLANT , 2. / RESPONDENT , 3. ( ) / CIT(A) , 4. / CIT , 5. / DR & 6. / GF.