Sanjay Shrawan Agrawal, Nashik V. Income-tax Officer ,

ITA 2621/PUN/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 9043 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 4 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-03-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 17-11-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Reopening of assessment; Bogus purchase; Opportunity of cross examination; Tangible material; Reassessment proceedings
• Section: 133(6); 147; 145

Judgement Text

SMC IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, PUNE . , BEFORE SHRI D. KARUNAKARA RAO, AM . / ITA NOS.2619 TO 2621/PUN/2016 / ASSESSMENT YEARS: 2009-10 TO 2011-12 SANJAY SHRAWAN AGRAWAL, PROP. M/S. SHRI KRISHNA INDUSTRIES, 28, SHARDA NAGAR, NEAR SAVARKAR NAGAR, NASHIK 422 013 PAN : ADDPA4712H . /APPELLANT VS. ITO, WARD-1(1), NASHIK . / RESPONDENT . / ITA NO.2618/PUN/2016 / ASSESSMENT YEAR : 2011-12 VIVEK SHRAWAN AGRAWAL, PROP. M/S. FOUR SEASONS/VIVEK INDUSTRIES, 28, SHARDA NAGAR, NEAR SAVARKAR NAGAR, NASHIK 422 013 PAN : ADAPA0731D . /APPELLANT VS. ITO, WARD-1(1), NASHIK . / RESPONDENT / APPELLANT BY : SHRI PRAMOD SHINGTE / RESPONDENT BY : SHRI AJAY MODI, JCIT / DATE OF HEARING : 13.03.2018 / DATE OF PRONOUNCEMENT: 28.03.2018 / ORDER PER D. KARUNAKARA RAO, AM : THERE ARE 4 APPEALS FILED BY 2 DIFFERENT ASSESSEES UNDER CONSIDERATION. OUT OF WHICH ITA NOS. 2619 TO 2621/PUN/20 16 ARE FILED BY SHRI SANJAY SHRAWAN AGRAWAL AGAINST THE COMMON ORDE R OF CIT(A)-1, 2 NASHIK, DATED 07-09-2016 FOR THE A.YRS. 2009-10 TO 2011- 12 AND THE APPEAL ITA NO. 2618/PUN/2016 IS FILED BY SHRI VIVEK SHRAWAN AGRAWAL FOR THE A.Y. 2011-12. THE GROUNDS BY THE TWO ASSESSEE IN THESE APPEALS ARE COMMON, THEREFORE, THEY ARE BEING TAKEN UP TOGETHER FOR ADJUDICATION IN THIS COMPOSITE ORDER. I SHALL FIRST TAKE UP THE APPEALS PERTAINING TO SHRI SANJA Y SHRAWAN AGRAWAL. ITA NO.2619 TO 2621/PUN/2016-SHRI SANJAY SHRAWAN AG RAWAL A.YRS. 2009-10 TO 2011-12 2. SINCE THE GROUNDS RAISED BY THE ASSESSEE ARE IDENTIC AL FOR ALL THE ASSESSMENT YEARS THE GROUNDS RAISED BY THE ASSESSEE FOR A.Y. 2009-10 ARE EXTRACTED AS UNDER : 1. ON THE BASIS OF FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND AS PER LAW, THE COMMISSIONER OF INCOME TAX, (APPEALS)-I, NA SHIK, IS NOT JUSTIFIED IN CONFIRMING VALIDITY OF NOTICE ISSUED U/S.148 PARTICULARLY WHEN AO HAS ISSUED THE SAID NOTICE ON THE BASIS OF INFORMAT ION RECEIVED FROM THIRD PARTY AND WITHOUT APPLICATION OF MIND. 2. ON THE BASIS OF FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND AS PER LAW, THE COMMISSIONER OF INCOME TAX, (APPEALS)-I, NA SHIK, IS NOT JUSTIFIED IN UPHOLDING THE ORDER PASSED BY THE AO U/S. 147 OF TH E ACT AS THE AO HAS NOT SUMMARILY REJECTED THE OBJECTIONS RAISED AGAINST REASONS RECORDED FOR THE NOTICE ISSUED U/S.148 OF THE ACT, BY WAY OF SPEAKING ORDER. 3. ON THE BASIS OF FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND AS PER LAW, THE COMMISSIONER OF INCOME TAX, (APPEALS)-I, NA SHIK, IS NOT JUSTIFIED IN CONFIRMING THE DISALLOWANCE OF PURCHASES TO THE EXTENT OF 25%, PARTICULARLY WHEN THE AO HAS NOT ALLOWED THE APPELLANT THE CROSS - EXAMINATION OF THE WITNESS OF THE REVENUE I.E. PARTIES FROM WHOM THE PURCHASES WERE MADE AS WELL AS THE COMPETENT SALES TAX AUTHORITY ON THE BASIS OF WHOSE INFORMATION THE NOTICE U/S.148 OF THE ACT WAS ISSUED BY THE AO. 4. ON THE BASIS OF FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND AS PER LAW, THE COMMISSIONER OF INCOME TAX, (APPEALS)-I, NA SHIK, IS NOT JUSTIFIED IN CONFIRMING THE DISALLOWANCE TO THE EXTENT OF 25% I.E. RS.2,81,530/- OF THE PURCHASES MADE FROM PARTIES CALLED AS SUSPICIOU S PARTIES. 5. ON THE BASIS OF FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND AS PER LAW, THE COMMISSIONER OF INCOME TAX, (APPEALS)-I, NA SHIK, IS NOT JUSTIFIED IN CONFIRMING THE DISALLOWANCE TO THE EXTENT OF 25% I.E. RS.2,81,530/- OF THE PURCHASES MADE FROM PARTIES CALLED AS SUSPICIOU S PARTIES BY HOLDING THAT THE SAID PURCHASES ARE INFLATED PARTICULARLY W HEN THE APPELLANT HAS MADE THE SAID PURCHASES AT PREVAILING MARKET RATE O NLY. 3 6. THE APPELLANT CRAVES FOR ADDITION TO, DELETION, ALTERATION, MODIFICATION, CHANGE ANY OF THE GROUNDS. FROM THE ABOVE, IT IS EVIDENT THAT WHOLE GROUND NOS. 1 TO 3 DEALS WITH A LEGAL ISSUE QUA THE INFORMATION SOURCE; SUMMARILY REFU SING THE OBJECTION OF THE ASSESSEE AND THE FAILURE TO GRANT CROSS EXAMINATION AND THE GROUND NOS. 4 AND 5 ARE ON FACTS. 3. BRIEFLY STATED RELEVANT FACTS ARE THAT ASSESSEE IS AN INDIVIDUAL AND IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF ELECTRICAL TES TERS UNDER THE NAME AND STYLE OF M/S. SHRI KRISHNA INDUSTRIES. ASS ESSEE FILED THE RETURNS OF INCOME FOR THE A.YRS. 2009-10 TO 2011-12 DECLARING TOTAL INCOME OF RS.9,83,810/-, RS.10,44,390/- AND RS.13,36,110/- RESPECTIVELY. ON THE BASIS OF INFORMATION RECEIVED FROM TH E SALES TAX DEPARTMENT, AO ISSUED NOTICES U/S.148 OF THE ACT TO THE ASSESSEE. FOR THE A.Y. 2009-10, AO FOUND THAT ASSESSEE MADE PURCHASES FROM M/S. MASCOT ENTERPRISES, MUMBAI AMOUNTING TO RS.11,26,125/-. FO R THE YEAR, 2010-11, ASSESSEE MADE PURCHASES FROM 3 SUPPLIERS AMOUNTING TO RS.16,64,335/- AND FOR THE A.Y. 2011-12 THE ASSESSEE MADE PURCHASES FROM 4 SUPPLIERS AMOUNTING TO RS.16,20,958/-. EVENTUALLY, TH E AO CAME TO THE CONCLUSION THAT THE PURCHASES MADE BY THE ASSESSEE ARE BOGUS PURCHASES OR THE ASSESSEE MIGHT HAVE INFLATED THE PURCHASES. AND ADDED 100% OF THE PURCHASES FOR THE YEARS UNDER C ONSIDERATION TO THE TOTAL INCOME OF THE ASSESSEE. 4. IN THE FIRST APPELLATE PROCEEDINGS, THE ASSESSEE QUES TIONED THE ADDITION OF ENTIRE BOGUS PURCHASES MADE BY THE ASSESSEE FOR THE ASSESSMENT YEARS UNDER CONSIDERATION. ASSESSEE ALSO RA ISED THE ISSUE RELATING TO VALIDITY OF THE REASSESSMENT U/S.147 OF THE ACT QUA THE AVAILABILITY OF TANGIBLE MATERIAL FOR INVOKING THE SAID PROVISIONS. CIT(A) DISMISSED THE VALIDITY OF THE RE-ASSESSMENT PROCEEDINGS LIN KED 4 OBJECTIONS RAISED BY THE ASSESSEE AND RELIED HEAVILY ON THE JUDGMENT ACIT VS. RAJESH JHAVERI STOCK BROKERS PVT. LTD. REPORTED IN 291 ITR 500. CONTENTS OF PARA NO.4.5 TO 4.12 OF THE ORDER OF CIT(A) CONTAINS THE DISCUSSION OF CIT(A) IN HOLDING THE REASSESSMENT PROCEEDINGS AS VALID. CIT(A) RELIED ON THE INFORMATION GATHERED FROM THE SALES TAX DEPARTMENT IN THIS REGARD. ON MERITS, CIT(A) AFTER CONSIDER ING SERIES OF DECISIONS EVENTUALLY RESTRICTED THE ADDITION TO 25% OF THE PURCHASES MADE BY THE ASSESSEE BY OBSERVING AS UNDER : 6.89 THUS, IN MY OPINION THE FACTS ON RECORD DEMO NSTRATE THAT THIS IS NOT A CASE OF BOGUS PURCHASES BUT A CASE OF INFLATED PURCHASES AND AT BEST FROM BOGUS PARTIES. CONSIDERING THE FA CTS AND CIRCUMSTANCES OF THE CASE, TO MEET THE ENDS OF JUSTICE, THE AO IS DIRECTED TO RESTRICT THE DISALLOWANCE OF PURCHASES TO 25% OF PURCHASES, I.E. RS.2,81,530/-, RS.4,16,080/- AND RS.4,05,239/- FOR A.YRS. 2009-10, 2010-11 AND 2011- 12 RESPECTIVELY. ASSESSEE REQUESTED FOR GRANT OF CROSS EXAMINATION OF TH E WITNESSES OF THE REVENUE AND THE SAME WAS NOT SUCCESS FULLY GIVEN FOR THE ASSESSEE. 5. AGGRIEVED WITH THE PART RELIEF GIVEN BY THE CIT(A), THE ASSESSEE FILED THE PRESENT APPEALS BEFORE THE TRIBUNAL WITH THE GROU NDS EXTRACTED ABOVE. 6. BEFORE US, DEVIATING FROM THE GROUNDS, LD. COUNSEL FOR THE ASSESSEE BROUGHT OUR ATTENTION TO GROUND NO.3 IN ALL TH E APPEALS AND SUBMITTED THAT IN THIS CASE ASSESSEE ASKED TO GRANT AN OPPORTUNITY OF CROSS EXAMINATION OF THE PARTIES AND THE SAME WAS DENIED. FURTHER, HE SUBMITTED THAT THE ADDITION MADE BY AO IN THE RE-ASS ESSMENT WILL NOT SURVIVE AS THE SAME ARE MADE AT THE BACK OF THE A SSESSEE. RELYING ON THE DECISION OF SUPREME COURT IN THE CASE OF M/S. ANDA MAN TIMBER INDUSTRIES VS. CIT, CIVIL APPEAL NO. 4228/2006, DATED 02.09.20 15 (SUPREME COURT), LD. COUNSEL SUBMITTED THAT MAKING ADDITION AT THE 5 BACK OF THE ASSESSEE IS NOT JUSTIFIED. ON MERIT, LD. COUNSEL SUBMITTED THAT IN THIS CASE WHERE THE ASSESSEE HAS SUCCESSFULLY E STABLISHED THE TRAIL OF GOODS, THEREFORE, INVOKING THE PROVISIONS OF 145 (3) O F THE ACT ARE NOT SUSTAINABLE. HOWEVER, HE SUBMITTED THAT THE TRIBUNAL IS CEASED UP WITH THE SIMILAR ISSUE IN MANY CASES AND ON THE APPLICABILITY OF THE JUDGMENT OF SUPREME COURT IN THE CASE OF M/S. ANDAMAN TIMBER INDUSTRIES (SUPRA). THE OUTCOME OF THE SAID DECISIONS AS P ER THE TRIBUNAL MAY BE ADOPTED FOR ADJUDICATION OF THESE APPEALS ON THE ISSUE RELATING TO MAKING ADDITION WITHOUT GRANTING THE BENEFIT OF CROSS EXAMINATION. 7. LD. DR FOR THE REVENUE RELIED ON THE ORDER OF CIT(A) DUTIFULLY. 8. I HEARD BOTH THE SIDES ON THE LEGAL ASPECT OF THE ISSU E RELATING TO CORRECTNESS OF MAKING ADDITIONS AT THE BACK OF THE ASSE SSEE BY THE ASSESSING OFFICER WITHOUT GRANTING BENEFIT OF CROSS EXAMINAT ION OF THE ASSESSEE. IN MY VIEW, THIS ISSUE IS COVERED IN FAVOUR OF ASS ESSEE BY VIRTUE OF DECISION OF TRIBUNAL IN THE CASE OF ANITA SANJAY A GRAWAL VS. ITO AND OTHERS IN ITA NOS.2622 TO 2624/PUN/2016. FOR T HE SAKE OF COMPLETENESS, RELEVANT PARA IS EXTRACTED HEREIN BELOW: 25. THE FACTS AND ISSUES ARISING BEFORE US ARE SQU ARELY COVERED BY THE FACTS AND ISSUES BEFORE THE HON'BLE SUPREME COURT I N M/S. ANDAMAN TIMBER INDUSTRIES VS. COMMISSIONER OF CENTRAL EXCIS E (SUPRA) AND APPLYING THE SAID PRINCIPLE / RATIO TO THE FACTS OF THE PRESENT CASE, WE HOLD THAT WHERE THE ASSESSEE HAD SOUGHT CROSS-EXAMI NATION OF THE WITNESSES AT THE EARLIEST STAGE I.E. WHILE OBJECTIN G TO THE REASONS RECORDED FOR REOPENING THE ASSESSMENT, WHICH DULY HAS BEEN A CKNOWLEDGED BY THE ASSESSING OFFICER IN HIS ORDER DISPOSING OF OBJECTI ONS RAISED BY THE ASSESSEE AGAINST REOPENING OF ASSESSMENT. BUT THE ASSESSING OFFICER THOUGH ASKED THE ASSESSEE TO COLLECT THE STATEMENT BUT FAILED TO ALLOW CROSS-EXAMINATION THOUGH HE ADMITTED THAT THE SAME WOULD BE ALLOWED IN DUE COURSE OF TIME. ON A LATER DATE, THE ASSESSING OFFICER CONCLUDES THAT THE LETTERS SENT UNDER SECTION 133(6) OF THE ACT TO THE DEALER WERE RETURNED BACK. BUT THE SAME CANNOT BE REASON FOR DENYING CR OSS-EXAMINATION. IN THE ABSENCE OF ALLOWING CROSS-EXAMINATION OF WITNES SES USED AGAINST THE ASSESSEE, WHERE THE ADDITION WAS MADE I N THE HANDS OF ASSESSEE ON THE BASIS OF AFORESAID STATEMENTS RE CORDED BY THE SALES TAX DEPARTMENT, WE HOLD THAT NO ADDITION ON A CCOUNT OF BOGUS PURCHASES CAN BE MADE IN THE HANDS OF ASSESSE E. THE ASSESSEE HAD ALSO ESTABLISHED FACTUM OF TRAIL OF GO ODS. ACCORDINGLY, WE 6 DELETE THE ADDITION MADE ON ACCOUNT OF BOGUS PURCHA SES. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE THUS, ALLOWED. CONSIDERING THE ABOVE, I AM OF THE OPINION THAT THE DECIS ION OF THE TRIBUNAL IS SELF EXPLANATORY AND THE ADDITION MADE BY AO W ITHOUT GRANTING CROSS EXAMINATION IS UNSUSTAINABLE. RELIANCE IS PLACE D ON THE RATIO OF HON'BLE APEX COURT IN THE CASE OF M/S. ANDAMAN T IMBER INDUSTRIES VS. CIT (SUPRA). ACCORDINGLY, GROUND NO.3 RAISED BY THE ASSESSEE IN ALL THREE APPEALS IS ALLOWED. CONSIDERING MY DECISION AB OVE, THE REMAINING GROUNDS RAISED BY THE ASSESSEE ON MERITS ARE DISMISSED AS BEING ACADEMIC. 9. IN THE RESULT, ALL THREE APPEALS OF THE ASSESSEE ARE PARTLY A LLOWED. NOW I SHALL NOW TAKE UP THE APPEAL OF SHRI VIVEK SHRAWAN AGRAWAL. ITA NO.2618/PUN/2016 SHRI VIVEK SHRAWAN AGRAWAL ASSESSMENT YEAR : 2011-12 10. GROUNDS RAISED BY THE ASSESSEE READ AS UNDER : 1. ON THE BASIS OF FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND AS PER LAW, THE COMMISSIONER OF INCOME TAX, (APPEALS)-I, NA SHIK, IS NOT JUSTIFIED IN CONFIRMING VALIDITY OF NOTICE ISSUED U/S.148 PARTICULARLY WHEN AO HAS ISSUED THE SAID NOTICE ON THE BASIS OF INFORMAT ION RECEIVED FROM THIRD PARTY AND WITHOUT APPLICATION OF MIND. 2. ON THE BASIS OF FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND AS PER LAW, THE COMMISSIONER OF INCOME TAX, (APPEALS)-I, NA SHIK, IS NOT JUSTIFIED IN UPHOLDING THE ORDER PASSED BY THE AO U/S. 147 OF TH E ACT AS THE AO HAS NOT SUMMARILY REJECTED THE OBJECTIONS RAISED AGAINST REASONS RECORDED FOR THE NOTICE ISSUED U/S.148 OF THE ACT, BY WAY OF SPEAKING ORDER. 3. ON THE BASIS OF FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND AS PER LAW, THE COMMISSIONER OF INCOME TAX, (APPEALS)-I, NA SHIK, IS NOT JUSTIFIED IN CONFIRMING THE DISALLOWANCE OF PURCHASES TO THE EXTENT OF 25%, PARTICULARLY WHEN THE AO HAS NOT ALLOWED THE APPELLANT THE CROSS- EXAMINATION OF THE WITNESS OF THE REVENUE I.E. PARTIES FROM WHOM THE PURCHASES WERE MADE AS WELL AS THE COMPETENT SALES TAX AUTHORITY ON THE BASIS OF WHOSE INFORMATION THE NOTICE U/S.148 O F THE ACT WAS ISSUED BY THE AO. 7 4. ON THE BASIS OF FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND AS PER LAW, THE COMMISSIONER OF INCOME TAX, (APPEALS)-I, NA SHIK, IS NOT JUSTIFIED IN CONFIRMING THE DISALLOWANCE TO THE EXTENT OF 25% I.E. RS.4,83,105/- OF THE PURCHASES MADE FROM PARTIES CALLED AS SUSPICIOU S PARTIES. 5. ON THE BASIS OF FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND AS PER LAW, THE COMMISSIONER OF INCOME TAX, (APPEALS)-I, NA SHIK, IS NOT JUSTIFIED IN CONFIRMING THE DISALLOWANCE TO THE EXTENT OF 25% I.E. RS.4,83,105/- OF THE PURCHASES MADE FROM PARTIES CALLED AS SUSPICIOU S PARTIES BY HOLDING THAT THE SAID PURCHASES ARE INFLATED PARTICULARLY W HEN THE APPELLANT HAS MADE THE SAID PURCHASES AT PREVAILING MARKET RATE O NLY. 6. THE APPELLANT CRAVES FOR ADDITION TO, DELETION, ALTERATION, MODIFICATION, CHANGE ANY OF THE GROUNDS. 11. FROM THE ABOVE, I FIND THE GROUNDS RAISED BY THE AS SESSEE ON BOTH THE ISSUES, I.E. (1) VALIDITY OF REASSESSMENT PROCEEDINGS U/S.14 7 OF THE ACT AND (2) NOT ALLOWING THE CROSS EXAMINATION OF THE WITNE SSES BY THE AO, AND (3) RESTRICTING THE ADDITION TO 25% OF THE PURCHAS ES, ARE IDENTICAL TO THE GROUNDS RAISED BY FOR THE A.Y. 2009-10. BOTH THE PARTIES ALSO INFORMED THAT THEIR ARGUMENTS ON THE ISSUES SHALL REMAIN SAME IN THIS APPEAL ALSO. FOLLOWING THE SAME PARITY OF REASO NING GIVEN BY ME IN PARA NO.8 OF THIS ORDER WHILE DECIDING THE APPEA L OF SHRI SANJAY SHRAWAN AGRAWAL FOR A.Y. 2009-10, I ALLOW THE LEGAL G ROUND NO.3 RELATING TO ALLOWING OF CROSS EXAMINATION IN FAVOUR OF THE ASS ESSEE. ALL THE REMAINING GROUNDS/ISSUES RAISED BY THE ASSESSEE DISC USSED ABOVE ARE THUS DISMISSED AS BEING ACADEMIC. ACCORDINGLY, THE GR OUNDS RAISED BY THE ASSESSEE ARE PARTLY ALLOWED. 12. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 13. TO SUM UP, THE APPEALS FILED BY BOTH THE ASSESSEES A RE PARTLY ALLOWED. ORDER PRONOUNCED ON THIS 28 TH DAY OF MARCH, 2018. SD/- (D.KARUNAKARA RAO) / ACCOUNTANT MEMBER / PUNE; DATED : 28 TH MARCH, 2018. SATISH 8 / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT; 2. / THE RESPONDENT; 3. ( ) / THE CIT(A)-1, NASHIK 4. / THE CIT-1, NASHIK 5. , , SMC / DR SMC, ITAT, PUNE; 6. / GUARD FILE. / BY ORDER, //TRUE COPY// //TRUE COPY// SENIOR PRI VATE SECRETARY , / ITAT, PUNE