Magic Software Enterprises India Pvt.Ltd, Pune V. Income-tax Officer, Ward - 14(4), Pune

ITA 273/PUN/2018

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 1452 (ITAT-PUNE)
• Duration Of Justice: 9 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-11-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 02-02-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M K VERMA
• Assessee Lawyers: R D ONKAR
• Keywords: Bogus purchase; Transfer pricing; International transaction; Additional evidence; Wrong claim; Reassessment proceedings
• Section: 143(3)

Judgement Text

- IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, PUNE , BEFORE SHRI VIKAS AWASTHY, JM . / ITA NO . 273 /P U N/201 8 / ASSESSMENT YEAR : 20 09 - 10 MAGIC SOFTWARE ENTERPRISES INDIA PVT. LTD., 912, TARA ICON, MUMBAI PUNE ROAD, WAKADEWADI, PUNE 411003 PAN : AABCM2443B ....... / APPELLANT / V/S. THE INCOME TAX OFFICER, WARD 14(4), PUNE / RESPONDENT ASSESSEE BY : SHRI R.D. ONKAR REVENUE BY : SHRI M.K. VERMA / DATE OF HEARING : 2 2 - 11 - 201 8 / DATE OF PRONOUNCEMENT : 26 - 1 1 - 201 8 / ORDER PER VIKAS AWASTHY, JM : TH IS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF COMMI SSIONER OF INCOME TAX (APPEALS) - 7, PUNE DATED 10 - 11 - 2017 FOR THE ASSESSMENT YEAR 2009 - 10. 2. SHRI R.D. ONKAR APPEARING ON BEHALF OF THE ASSESSEE SUBMITTED THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF PROVIDING SOFTWARE DEVELOPMENT 2 ITA NO . 273/PUN/2018, A.Y. 2009 - 10 SERVICES TO ITS ASSOCIATED ENT ERPRISES (AES). THE ASSESSMENT OF THE ASSESSEE FOR ASSESSMENT YEAR 2009 - 10 WAS REOPENED ON THE BASIS OF INFORMATION RECEIVED FROM MAHARASHTRA SALES TAX DEPARTMENT REGARDING BOGUS CLAIM OF TAX CREDIT BY VARIOUS PARTIES ON PURCHASES MADE FROM ALLEGED HAWALA DEALERS. THE LD. AR SUBMITTED THAT THE ASSESSEE COMPANY HAD MAINTAINED BOOKS OF ACCOUNT FOR ITS BUSINESS ACTIVITIES WHICH ARE DULY AUDITED AS PER THE PROVISIONS OF SECTION 44AB O F THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT ). DURING T HE PERIOD RELEVANT TO ASSESSMENT YEAR UNDER APPEAL THE ASSESSEE HAD PURCHASED 78 HAVERSACKS (BAGS) FOR DISTRIBUTION AMONGST THE EMPLOYEES TO FACILITATE THEM TO CARRY LAPTOPS. THE HAVERSACKS WERE PURCHASED FROM M/S. MODERN TRADES FOR A TOTAL CONSIDERATION OF RS.62,203/ - . ON THE BASIS OF EXT RANEOUS I NFORMATION FROM MAHARASHTRA SALES TAX DEPARTMENT WHEREIN M/S. MODERN TRADES WAS HELD TO BE HAWALA OPERATOR , T HE PURCHASES MADE BY THE ASSESSEE FROM THE AFORESAID SUSPICIOUS DEALER WERE DISALLOWED HOL D ING THEM TO BE BOGUS. THE ASSESSEE HAD PRODUCED DETAILS OF PURCHASES, COPIES OF BILLS, LEDGER ACCOUNT EXTRACT AND BANK STATEMENT SUBSTANTIATING PAYMENT TO THE PARTY . H OWEVER, THE ASSESSEE COULD NOT OBTAIN CONFIRMATION OF SUCH PURCHASES FROM THE DEALER IN THE COURSE OF REASSESSMENT PROCEEDINGS. THE ASSESSING OFFICER DISALLOWED THE PURCHASES PRIMARILY ON THE GROUND THAT THE ASSESSEE COULD NOT PROVIDE CONFIRMATION FROM M/S. MODERN TRADES AND HENCE RAISED DOUBT OVER THE GENUINENESS OF THE PURCHASES. THUS, THE ASSESSIN G OFFICER MADE ADDITION OF RS.62,203/ - VIDE ORDER DATED 11 - 03 - 2016 PASSED U/S. 143(3) R.W.S. 147 R.W.S. 92CA OF THE ACT. AGGRIEVED AGAINST THE ASSESSMENT ORDER, THE ASSESSEE FILED APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS). BEFORE THE FIRST APPELLATE AUTHORITY THE ASSESSEE FURTHER PRODUCED INWARD REGISTER AND THE CONFIRMATION OF THE RECEIPT OF HAVERSACKS FROM 20 EMPLOYEES WHO WERE 3 ITA NO . 273/PUN/2018, A.Y. 2009 - 10 WORKING A T THE RELEVANT TIME AND WERE AMONGST THE RECIPIENTS OF THE BAGS. THE ASSESSEE MADE REQUEST BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS) FOR ADMITTING ADDITIONAL EVIDENCE. HOWEVER, THE REQUEST OF THE ASSESSEE WAS REJECTED AND THE ADDITION MADE BY THE ASSESSING OFFICER WAS CONFIRMED. 2.1 THE LD. AR SUBMITTED THAT THE ADDITIONAL DOCUMENTS FURNISHED BY THE ASSESSEE BEFORE COMMISSIONER OF INCOME TAX (APPEALS) WERE NECESSARY TO SUPPORT THE CLAIM OF PURCHASES AND FACILITATE PROPER ADJUDICATION OF THE ISSUE. MERELY FOR THE REASON THAT THE ASSESSEE COULD NOT OBTAIN CONFIRMATION FROM THE SUPPLIER THE REVENUE AUTHORITIES PRESUMED THAT THE PURCHASES MADE FROM M/S. MODERN TRADES WERE BOGUS. THE DOCUMENTS ON RECORD CLEARLY ESTABLISHED GENUINENESS OF THE PURCHASES. TO SUPPORT HIS SUBMISSIONS THE LD. AR PLACED RELIANCE ON THE FOLLOWING DECISIONS : I . SMT. PRABHAVATI S. SHAH VS. COMMISSIONER OF INCOME TAX, 231 ITR 1 (BOMBAY); II . COMMISSIONER OF INCOME TAX VS. NIKUNJ EXIMP ENTERPRISES PVT. LTD., 372 ITR 619 (BOMBAY). 2. 2 THE LD. AR CHALLENGING THE VALIDITY OF REOPENING SUBMITTED THAT THE ASSESSMENT HAS BEEN REOPENED U/S. 147 ON THE BASIS OF INFORMATION RECEIVED BY THE DEPARTMENT FROM MAHARASHTRA SALES TAX DEPARTMENT. AS PER THE PROVISIONS OF SECTION 147 ASSESSMENT CAN BE REOPENED ONLY WHERE THE ASSESSING OFFICER HAS BELIEF THAT THE INCOME CHARGEABLE TO TAX HAS ESCAPED ASS ESSMENT. IN THE PRESENT CASE THERE WAS PRIMA - FACIE NO BELIEF OF THE ASSESSING OFFICER . ASSESSMENT WAS REOPENED SOLELY ON THE BASIS OF BORROWED INFORMATION . TO BUTTRESS HIS SUBMISSIONS THE LD. AR PLACED RELIANCE ON THE DECISION OF HONBLE GUJARAT HIGH CO URT IN THE CASE OF 4 ITA NO . 273/PUN/2018, A.Y. 2009 - 10 VARSHABEN SANATBHAI PATEL VS. INCOME TAX OFFICER REPORTED AS 28 2 CTR 75. 3 . ON THE OTHER HAND SHRI M.K. VERMA REPRESENTING THE DEPARTMENT VEHEMENTLY SUPPORTED THE IMPUGNED ORDER AND PRAYED FOR DISMISSING THE APPEAL OF ASSESSEE. THE LD. DR SUBMITTED THAT THE ASSESSEE HAS INDULGED IN BOGUS PURCHASES FROM DECLARED HAWALA DEALER M/S. MODERN TRADES. 4. BOTH SIDES HEARD. ORDERS OF THE AUTHORITIES BELOW PERUSED. THE SOLITARY ISSUE RAISED IN THE APPEAL IS AGAINST THE ADDITION OF RS.62,2 03/ - MADE IN ASSESSMENT PROCEEDINGS U/S. 147 IN RESPECT OF ALLEGED BOGUS PURCHASES OF HAVERSACKS FOR RS.62,203/ - . 5. THE ASSESSEE PURCHASED HAVERSACKS FOR DISTRIBUTING THE SAME AMONGST ITS EMPLOYEES ON THE OCCASION OF DIWALI FESTIVALS. THE ASSESSEE IN ORDER TO SUBSTANTIATE GENUINENESS OF PURCHASES PRODUCED COPIES OF THE BILLS, LEDGER ACCOUNT EXTRACT AND BANK STATEMENT INDICATING PAYMENT FOR THE PURCHASE OF HAVERSACKS. THE HAVERSACKS WERE NEITHER PURCHASED BY THE ASSESSEE AS INPUT FOR FURTHER PROCESSING NOR FOR TRADING. DURING FIRST APPELLATE PROCEEDINGS THE ASSESSEE HAD FILED CONFIRMATIONS FROM 20 EMPLOYEES AFFIRMING THE RECEIPT OF HAVERSACKS. UNDISPUTEDLY, THE ASSESSEE IS ENGAGED IN THE BUSINESS OF SOFTWARE DEVELOPMENT FOR HEALTHCARE INDUSTRY. THE A SSESSEE HAD ENTERED INTO INTERNATIONAL TRANSACTIONS TO THE TUNE OF RS. 56,25,305/ - WITH ITS AES DURING THE PERIOD RELEVANT TO ASSESSMENT YEAR UNDER APPEAL. THE ALLEGED BOGUS PURCHASES IS APPROX 1% OF THE TOTAL INTERNATIONAL TRANSACTIONS ENTERED INTO BY THE ASSESSEE AND WOULD NOT MATERIALLY IMPACT PROFITABILITY OF THE ASSESSEE COMPANY. TAKING INTO CONSIDERATION THE NATURE OF ACTIVITY CARRIED OUT BY THE ASSESSEE AND THE DOCUMENTS PRODUCED BY THE ASSESSEE BEFORE THE AUTHORITIES BELOW TO 5 ITA NO . 273/PUN/2018, A.Y. 2009 - 10 SUPPORT THE PURCHASE O F HAVERSACKS, I DO NOT FIND ANY MERIT IN THE ADDITION MADE BY THE AUTHORITIES BELOW. MERELY FOR THE REASON THAT VAT CHARGES HA VE BEEN PAID BY THE ASSESSEE FOR THE PURCHASES MADE CANNOT BE REASON FOR MAKING THE ADDITION IN THE PECULIAR FACTS OF THE INSTANT CASE. ACCORDINGLY, THE IMPUGNED ORDER IS SET ASIDE AND THE APPEAL OF ASSESSEE IS ALLOWED. 6. IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON MONDAY, THE 26 TH DAY OF NOVEMBER, 201 8 . SD/ - ( / VIKAS AWASTHY) / JUDICIAL MEMBER / PUNE; / DATED : 26 TH NOVEMBER, 2018 RK / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 7, PUNE 4. THE PR. COMMISSIONER OF INCOME TAX - 6, PUNE 5. , , - , / DR, ITAT, SMC BENCH, PUNE. 6. / GUARD FILE. / / // TRUE COPY// / BY ORDER, / PRIVATE SECRETARY, , / ITAT, PUNE