NIRMITEE CONSTRUCTIONS & DESIGN PVT. LTD., THANE V. ACIT-CIR-3, THANE

ITA 2654/MUM/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 9775 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-07-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2011-2012
• Appeal Filed On: 11-04-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAJAT MITTAL
• Keywords: Bogus purchase; Reasonable cause
• Section: 143(3); 133(6); 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH C MUMBAI BEFORE SHRI JOGINDER SINGH (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO.2653/MUM/2016 ASSESSMENT YEAR: 2010 - 11 & ITA NO.2654/MUM/2016 ASSESSMENT YEAR: 2011 - 12 NIRMITEE CONSTRUCTIONS & DESIGNS PVT. LTD. B - 1, NEW DEV ASHISH SOCIETY, TEEN HATH NAKA, MARATHON CIRCLE, E. E. HIGHWAY THANE - 400604. VS. ACIT - 3 6 TH FLOOR, ASHAR I.T. PARK, WAGLE ESTATE, THANE - 400604. APPELLANT RESPONDENT PAN NO. AACCN5408N ASSESSEE BY : SHRI JAYANT BHATT , AR REVENUE BY: SHRI RAJAT MITTAL, DR DATE OF HEARING : 04/05/2017 DATE OF PRONOUNCEMENT : 28/07/2017 ORDER PER N.K. PRADHAN, A.M . THE CAPTIONED APPEALS FILED BY THE ASSESSEE FOR THE AY 2010 - 11 & 2011 - 12 ARE DIRECTED AGAINST THE ORDER OF THE COMMISS IONER OF INCOME TAX (APPEALS) - 2 , THANE AND ARISE OUT OF THE ASSESSMENT COMPLETED U/S 143(3) R.W.S 147 OF THE INCOME TAX ACT 1961, (THE ACT). AS COMMON ITA NO. 2653 & 2654/MUM/2016 2 ISSUES ARE INVOLVED, WE ARE PROCEEDING TO DISPOSE THEM OF F BY A CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 2. THERE HAS BEEN A DELAY OF 2 DAYS IN FILING THE APPEAL. HAVING GONE THROUGH THE AFFIDAVIT FILED, WE FIND THAT THERE WAS REASONABLE CAUSE IN DELAY IN FILING THE APPEAL. THE DELAY IN FILING THE APPEAL IS THEREFORE CONDONED . 3 . THE GROUNDS OF APPEAL FOR THE AY 2010 - 11 & AY 2011 - 12 ARE SAME . ONLY THE ADDITION MADE BY THE ASSESSING OFFICER ( AO ) TOWARDS THE ALLEGED BOGUS PURCHASES DIFFER S . THE AMOUNT IS RS.19,88,227/ - FOR AY 2010 - 11 AND RS.21,18,170/ - FOR AY 2011 - 12. WE TAKE UP T HE GROUNDS OF APPEAL FILED BY THE ASSESSEE FOR THE AY 2010 - 11 WHICH READ AS UNDER: - 1. THE COMMISSIONER OF INCOME TAX, APPEALS 2, THANE HAD ERRED IN CONFIRMING THE REOPENING OF THE ASSESSMENT U/148 AND REJECTING TH E LEGAL POINT RAISED BY THE APPELLANT WITH REGARD TO ISSUANCE OF NOTICE U/S 148 AND REASONS FOR THE SAME. 2. THE COMMISSIONER OF INCOME TAX, APPEALS 2, THANE HAS ERRED IN CONFIRMING THE ORDER OF ACIT, CIRCLE 3, THANE ON ACCOUNT OF ADDITION TOWARDS ALLEGED BOG US PURCHASES AMOUNTING TO RS21,18,170/ - DISREGARDING THE VARIOUS JUDGMENTS OF JURISDICTIONAL TRIBUNAL AND OTHER HIGH COURTS JUDGMENTS. 3. THE COMMISSIONER OF INCOME TAX, APPEALS 2, THANE HAS ERRED IN CONFIRMING THE ADDITION TO THE EXTENT OF 5% OF DISALLOWANCE OF 20% OF REGULAR PURCHASES DESPITE OF HAVING FULL DETAILS ON RECORD. 4. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE - COMPANY M/S NIRMITTEE CONSTRUCTION & DESIGN PVT. LTD. (NCDPL) FILED ITS RETURN OF INCOME FOR AY 2010 - 11 ON 24.09.2010 DEC LARING TOTAL INCOME OF ITA NO. 2653 & 2654/MUM/2016 3 RS.20,18,650/ - . THE AO ON RECEIPT OF INFORMATION FROM THE SALES TAX DEPARTMENT, MUMBAI NOTICED THAT THE FOLLOWING ENTITIES HAD PROVIDED BOGUS SALE BILLS TO THE ASSESSEE DURING THE FY 2009 - 10 RELEVANT TO THE AY 2010 - 11 : SL NO. NAME OF THE ENTRY PROVIDER MAHARASHTRA VAT NO. AY AMOUNT OF BILL TAKEN BY THE ASSESSEE (RS.) 1. M/S JAINAM TRADE CORP. 27070656939V 2010 - 11 621549 2. M/S PARASNATH ENTERPRISES 27160660721V 2010 - 11 893488 3. M/S JAIN TRADING CORPORATION 27210156439V 2010 - 11 252179 4. M/S NIKHIL ENTERPRISES 27450374751V 2010 - 11 107488 5. M/S N B ENTERPRISES 274903 39033V 2010 - 11 113523 TOTAL 1988227 THE ASSESSEE REQUESTED THE AO TO PROVIDE A COPY OF THE SATISFACTION FOR RE - OPENING OF ASSESSMENT. THE AO SEN T A REPLY TO THE ASSESSEE ALONG WITH THE DOCUMENTARY EVIDENCE SUPPLIED BY THE SALES TAX DEPARTMENT . IN ORDER TO ASCERTAIN THE GENUINENESS OF THE ABOVE PURCHASES, THE AO CALLED FOR INFORMATION U/S 133(6) FROM THE ABOVE PARTIES. THE LETTERS ISSUED BY HIM WERE RETURNED BACK BY THE POSTAL AUTHORITIES UNSERVED WITH THE REMARKS NOT KNOWN. THE ASSESSEE WAS THEN SPECIFICALLY ASKED TO PRODUCE THESE PARTIES FOR EXAMINATION IN PERSON TO ESTABLISH THEIR IDENTITY AND SUBSTANTIATE THE CLAIM OF PURCHASES FROM THOSE PARTI ES. THE ASSESSEE, HOWEVER, FAILED TO PRODUCE THE ABOVE PARTIES FOR EXAMINATION IN PERSON. ITA NO. 2653 & 2654/MUM/2016 4 THE AO HAS NOTED THAT BARRING THE LEDGER ACCOUNT AND CHEQUE PAYMENTS, NO OTHER DOCUMENTS SUCH AS OCTROI RECEIPTS, TRANSPORTATION DETAILS WERE PRODUCED BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THE ASSESSEE ALSO FAILED TO PRODUCE BEFORE THE AO STOCK REGISTER IN RESPECT OF CONSUMPTION AND PRODUCTION OF MATERIAL. AS PER THE AO , THE ACCOMMODATION BILLS WERE OBTAINED FOR INTRODUCING UNACCOUNTED GO ODS INTO THE ACCOUNTED STREAM. THEREFORE, HE DISALLOWED (I) PURCHASES/EXPENSES AMOUNTING TO RS.19,88,227/ - AND (II) 20% OF REMAINING PURCHASES OF RS.1,40,39,386/ - WHICH COMES TO RS .28,07,877/ - . THUS THE TOTAL DISALLOWANCE MADE BY THE AO COMES TO RS.47,96,1 04/ - . 5 . A GGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT(A). WE FIND THAT THE LD. CIT(A) HAS HELD THAT THE AO HA D SUFFICIENT MATERIAL ON RECORD TO BELIEVE THAT TAXABLE INCOME HAS ESCAPED ASSESSMENT WITHIN THE MEANING OF SE CTION 147 OF THE ACT AND THEREFORE, HE HAS RIGHTLY RE - OPENED THE ASSESSMENT. 5 .1 THE LD. CIT(A) AGREED WITH THE FINDINGS OF THE AO AND UPHELD THE DISALLOWANCE OF HAWALA PURCHASES OF RS.19,88,227/ - . HOWEVER, REGARDING THE FURTHER DISALLOWANCE OF RS.28,07,8 77/ - , THE LD. CIT(A) AFTER VERIFICATION OBSERVED THAT EXCEPT PETTY EXPENSES, THE ASSESSEE HAD MAINTAINED VERIFIABLE VOUCHERS AND PAYMENT HAD BEEN MADE THROUGH BANKING CHANNELS. THEREFORE, HE RESTRICTED THE DISALLOWANCE TO 5% WHICH COMES TO RS.1,40,395/ - . 6 . BEFORE US, THE LD. COUNSEL OF THE ASSESSEE FILES A PAPER BOOK (P/B) CONTAINING (I) AUTHORITY LETTER, (II) APPLICATION FOR CONDONATION OF DELAY, ITA NO. 2653 & 2654/MUM/2016 5 (III) COPY OF AUDITED BALANCE SHEET, (IV) COPY OF TAX AUDIT REPORT, (V) LEDGER EXTRACTS OF ALLEGED HAWALA PAR TIES, (VI) COPIES OF BILLS OF ALLEGED HAWALA PARTIES ALONG WITH DELIVERY CHALLAN OF THE PARTY AND OF THE APPELLANT AND (VII) BANK STATEMENTS INDICATING PAYMENTS TO ALLEGED HAWALA PARTIES. 6 .1 ALSO ANOTHER P/B WAS FILED BY THE LD. COUNSEL CONTAINING THE DO CUMENTS RECEIVED FROM THE SALES TAX DEPARTMENT BY THE AO. THE P/B CONTAINS (I) APPLICATION, (II) JAINAM TRADERS CORPORATION; SUMMONS WITNESS - NARENDRA SHETH; DEPOSIT ION, AFFIDAVIT NARENDRA SHETH; SUMMON S WITNESS PRAVIN RAJWAT; DEPOSITION; AFFIDAVIT PRAVIN RAJWAT; FORM 103; (III) PARASNATH ENTERPRISES; SUMMONS WITNESS; DEPOSITION; SUMMO NS WITNESS CROWN STEEL TRADES; CANCELATION CERTIFICATE APPLICATIO N MA CHAMUNDA SALES PVT. LTD.; (IV) JAIN TRADI NG CORPORATION; SUMMONS WITNESS - ASHWIN SHETH; DEPOS ITION SHETH; (V) NIKHIL ENTERPRISES; ONE PAGE NOTE; SUMMON WITNESS; (VI) N B ENTERPRISES; NB ENTERPRISES BANK STATEMENT. 7 . PER CONTRA THE LD. DR RELIES ON THE ORDER OF THE LD. CIT(A). HE MAKES A SPECIFIC REFERENCE TO PARA 6.14, 6.15, 6.16 AND 6.17 OF THE APPELLATE ORDER. 8 . WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL S ON RECORD. IT HAS BEEN HELD BY THE HONBLE SUPREME COURT IN ACIT VS. RAJESH JHAVERI STOCK BROKERS P. LTD. 291 ITR 500 (SC) THAT INTIMATION U/S 143(1) (A) IS N OT AN ASSESSMENT AND THEREFORE, THE NOTICE ISSUED U/S 148 IS VALID. ALSO IN THE CASE OF KONE ELEVATOR INDIA P. LTD. VS. ITA NO. 2653 & 2654/MUM/2016 6 ITO (MAD) 340 ITR 454, CIT VS. IDEAL GARDEN COMPLEX P. LTD . (MAD) 340 ITR 609 AND ACIT VS. MAERSK GLOBAL SERVICE CENTRE (INDIA) (P) LTD. (ITAT, MUM) 66 DTR 90, IT HAS BEEN HELD THAT IF THE RETURN IS PROCESSED U/S 143(1), THE ONLY CONDITION TO BE SATISFIED FOR REOPENING IS TAXABLE INCOME HAS ESCAPED ASSESSMENT AND THE ASSESSEES PLEA THAT NO FRESH MATERIAL BEFORE THE AO WARRANTING REOPENING IS NOT RELEVANT. IN THE INSTANT CASE THERE WAS SPECIFIC INFORMATION BEFORE THE AO FROM THE SALES TAX DEPARTMENT, MAHARASHTRA ABOUT THE ASSESSEE WHO OBTAINED BOGUS PURCHASE BILLS FROM THE ACCOMMODATION ENTRY PROVIDERS. THEREFORE, THE AO HAS RIGHTLY REOPENED THE ASSESSMENT B Y ISSUING NOTICE U/S 148 OF THE ACT. IN VIEW OF THE ABOVE, THE 1 ST GROUND OF APPEAL IS DISMISSED. 8 .1 NOW WE TURN TO THE 2 ND GROUND OF APPEAL. WE FIND THAT TO ASCERTA IN THE GENUINENESS OF THE UNVERIFIABLE PURCHASES, THE AO CALLED FOR INFORMATION U/S 133(6 ) FROM THE FIVE PARTIES. THE LETTERS WERE RETURNED BACK BY THE POSTAL AUTHORITIES UNSERVED WITH THE REMARKS NOT KNOWN. THE AO THEN ASKED THE ASSESSEE TO PRODUCE THE ABOVE PARTIES FOR EXAMINATION IN PERSON TO ESTABLISH THEIR IDENTITY AND SUBSTANTIATE THE CLAIM OF PURCHASES FROM THOSE PARTIES. THE ASSESSEE HOWEVER, FAILED TO PRODUCE THOSE PARTIES FOR EXAMINATION IN PERSON. ALSO WE FIND THAT BARRING THE LEDGER ACCOUNT AND CHEQUE PAYMENTS, NO OTHER DOCUMENTS SUCH AS OCTROI RECEIPTS, TRANSPORT BILLS WERE PRODU CED BEFORE THE AO BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS. IN THE CASE OF CIT VS. SIMIT P. SHETH (2013) 38 TAXMANN.COM (GUJ), THE HONBLE GUJARAT HIGH COURT HAS HELD THAT WHERE PURCHASES WERE NOT BOGUS BUT WERE ITA NO. 2653 & 2654/MUM/2016 7 MADE FROM PARTIES OTHER T HAN THOSE MENTIONED IN THE BOOKS OF ACCOUNT, NOT ENTIRE PURCHASE PRICE BUT ONLY PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES CAN BE ADDED TO THE INCOME OF THE ASSESSEE. THAT BEING THE POSITION, NOT THE ENTIRE PURCHASE PRICE BUT ONLY THE PROFIT ELEMENT EMBEDDE D 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). IN VIEW OF THE ABOVE WE ESTIMATE @ 12.5% THE PROFIT EMBEDDED IN THE SAID BOGUS PURCHASES. THE PROFIT ELEMENT COMES TO RS.2,48,528/ - FOR THE AY 2010 - 11 AND RS.2,64,771/ - FOR AY 2011 - 12. THE AO IS DIRECTED TO MAKE AN ADDITION OF RS .2,48,528/ - IN PLACE OF RS.19,88,227/ - IN AY 2010 - 11 AND RS.2,64,771/ - IN PLACE OF RS.21,18,170/ - IN AY 2011 - 12. 8 .2 WE NOW COME TO THE 3 RD GROUND OF APPEAL. WE FIND THAT THE LD. CIT(A) HAS RESTRICTED THE DISALLOWANCE OF THE OTHER EXPENSES TO 5% ON THE RE ASON THAT THE APPELLANT HAD MAINTAINED THE VERIFIABLE VOUCHERS AND PAYMENT HAD BEEN MADE THROUGH BANKING CHANNELS IN MAJORITY O F CASES, EXCEPT PETTY EXPENSES. WE FIND THAT THE ABOVE ESTIMATED DISALLOWANCE IS NOT SUPPORTED BY THE MATERIAL ON RECORD. THEREFO RE, THE DISALLOWANCE OF RS.1,40,395/ - FOR THE AY 2010 - 11 AND RS.2,00,162/ - FOR AY 2011 - 12 ARRIVED AT BY THE LD. CIT(A) ARE DELETED. ITA NO. 2653 & 2654/MUM/2016 8 9. IN THE RESULT, THE APPEALS ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN C OURT ON 28/07/2017. SD/ - SD/ - (JOGINDER SINGH) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED: 28/07/2017 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