Dwarkadhish Sakhar Karkhana Ltd, Nashik V. Deputy Commissioner of Income tax,

ITA 2813/PUN/2016

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 6438 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 9 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-09-2020
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 21-09-2020
• Assessment Year: 2010-2011
• Appeal Filed On: 13-12-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Bogus purchase; Capital asset; Depreciation; Condonation of delay; Reassessment proceedings
• Section: 143(3); 142(1); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE VIRTUAL COURT BEFORE SHRI R.S. SYAL, VICE PRESIDENT AND SHRI S.S. VISWANETHRA RAVI, JUDICIAL MEMBER ITA NO.2813/PUN/2016 / ASSESSMENT YEAR : 2010-11 DWARKADHISH SAKHAR KARKHANA LTD., 19, GARDEN HOMES SOCIETY, LOKMANYA NAGAR, GANGAPUR ROAD, NASHIK - 422 002 PAN : AABCD0742N VS. DCIT, CIRCLE-1, NASHIK APPELLANT RESPONDENT / ORDER PER R.S.SYAL, VP : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DA TED 01-09-2016 PASSED BY THE COMMISSIONER OF INCOME-TAX (AP PEALS)- 1, NASHIK IN RELATION TO THE ASSESSMENT YEAR 2010-11. 2. THE APPEAL IS TIME BARRED BY FOUR DAYS. THE ASSESSEE HAS FILED AN APPLICATION FOR CONDONATION OF DELAY CITING REASONS FO R THE DELAY. WE ARE SATISFIED WITH THE SAME. THE DELAY IS CONDON ED AND THE APPEAL IS ADMITTED FOR HEARING ON MERITS. ASSESSEE BY SHRI PRAMOD SHINGTE REVENUE BY SHRI MADHAN THIRMANPALLI DATE OF HEARING 21-09-2020 DATE OF PRONOUNCEMENT 21-09-2020 ITA NO.2813/PUN/2016 DWARKADHISH SAKHAR KARKHANA LTD., 3. THE FIRST ISSUE RAISED IN THIS APPEAL IS AGAINST INITIATION OF REASSESSMENT PROCEEDINGS BY MEANS OF NOTICE U/S 148 OF TH E INCOME-TAX ACT, 1961 (HEREINAFTER CALLED `THE ACT). 4. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ORIGINAL RETUR N WAS FILED BY THE ASSESSEE ON 01-10-2010. INVESTIGATION W AS CONDUCTED BY THE MAHARASHTRA SALES TAX DEPARTMENT REGARD ING TRANSACTIONS WHERE VAT WAS NOT REMITTED TO THE GOVERNMENT ACCOUNT. SUCH INVESTIGATION DISCLOSED THE ISSUANCE OF BOGUS B ILLS BY CERTAIN PARTIES. STATEMENTS OF VARIOUS PARTIES RECORDED BY THE DEPARTMENT TRANSPIRED NAMES OF BENEFICIARIES OF SUCH BOG US BILLS. THE ASSESSEES NAME WAS ALSO INDICATED IN THE LIST OF BENEFIC IARIES WHO HAD ALLEGEDLY OBTAINED BOGUS PURCHASES TO THE TUNE OF RS.55,86,348/-. THE ASSESSING OFFICER (AO) ISSUED NOT ICE U/S.148 AND THEREAFTER COMPLETED THE ASSESSMENT ADDING FULL AMOUNT OF BOGUS PURCHASES AT RS.55,86,348/-. THE ASSESSEE REM AINED UNSUCCESSFUL BEFORE THE LD. CIT(A) QUA THE CHALLENGE TO THE INITIATION OF REASSESSMENT PROCEEDINGS. AGGRIEVED THEREBY, THE ASSESSEE HAS COME UP IN APPEAL BEFORE THE TRIBUNAL. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS THROUGH VIRTUAL COURT AND GONE THROUGH THE RELEVANT MATERIAL ON RECORD. PAGE 2 5 OF THE ITA NO.2813/PUN/2016 DWARKADHISH SAKHAR KARKHANA LTD., PAPER BOOK IS A COPY OF NOTICE DATED 03-10-2013 ISSUED U /S.148 OF THE ACT. THE ASSESSEE RESPONDED TO SUCH NOTICE VIDE ITS LE TTER DATED 21-10-2013 REQUESTING THE AO TO SUPPLY COPY OF REASONS. COPY OF SUCH LETTER IS AVAILABLE AT PAGE 26 OF THE PAPER BOOK. TH E AO SUPPLIED THE REASONS VIDE HIS LETTER DATED 03-03-2014, WHOS E COPY IS ALSO AVAILABLE AT PAGE 27 OF THE PAPER BOOK. THEREAFTER , NOTICE U/S. 142(1) OF THE ACT DATED 10-04-2014 WAS ISSUED COMME NCING THE ASSESSMENT PROCEEDINGS REQUIRING THE ASSESSEE TO PRESE NT ITSELF FOR HEARING ON 21-04-2014. ALONG WITH SUCH NOTICE DATED 1 0-04- 2014, THE AO ISSUED QUESTIONNAIRE CONCERNING VARIOUS ASPEC TS OF THE ASSESSMENT, WHOSE COPY IS AVAILABLE AT PAGES 47 TO 50 OF THE PAPER BOOK. THE ASSESSEE SUBMITTED ITSELF TO THE JURISDICTION OF THE AO TO MAKE THE ASSESSMENT BY RESPONDING TO THE NOTICE ON THE SCHEDULED DATE OF HEARING ON 21-04-2014 SUBMITTING PART DETA ILS AS REQUIRED BY THE AO AND ALSO SIMULTANEOUSLY RAISED OBJECTIONS AGAINST THE INITIATION OF REASSESSMENT PROCEEDINGS. THE AO P ASSED THE ASSESSMENT ORDER U/S 143(3) READ WITH SECTION 147 OF TH E ACT. THE ASSESSEE ARGUED BEFORE THE LD. CIT(A) THAT THE AO DID NOT DISPOSE OF THE ASSESSEES OBJECTION BEFORE TAKING UP THE ASSESSMENT. A REMAND REPORT WAS CALLED FOR FROM THE AO. COPY OF SUCH A REMAND REPORT IS AVAILABLE AT PAGE 7 OF THE PAPER BOOK. ITA NO.2813/PUN/2016 DWARKADHISH SAKHAR KARKHANA LTD., FROM SUCH A REMAND REPORT, IT IS DISCERNIBLE THAT THE AO ENUMERATED TRAIL OF EVENTS AND ALSO POINTED OUT THAT NOTICE U/S.142(1) WAS ISSUED ON 10-02-2014, IN RESPONSE TO W HICH THE ASSESSEE FILED A LETTER DATED 21-04-2014 ALONG WITH CERTAIN D ETAILS AS CALLED FOR AND IN THE SAME LETTER, CERTAIN OBJECTIONS WERE ALSO RAISED. FROM THE ABOVE NARRATION OF EVENTS, IT IS CLEAR THAT THE ASSESSEE DID RAISE OBJECTIONS. BUT THE MERE FACT THAT THE OBJEC TIONS ARE RAISED DOES NOT PER SE CLOTHE THE ASSESSEE WITH THE ENTITLEMENT TO THE DISPOSAL OF OBJECTIONS AT THE HANDS OF THE AO. EVERY C ASE NEEDS TO BE LOOKED AT IN THE BACKGROUND OF ITS OWN FACTS. 6. THERE IS A SET PROCEDURE WHICH HAS TO BE ADHERED TO IN THE LIGHT OF G.K.N. DRIVESHAFTS (INDIA) LTD. VS. ITO & ANR. (2003) 259 ITR 19 (SC) . ONCE NOTICE U/S 148 IS ISSUED, THE ASSESSEE NEEDS TO FILE RETURN OF INCOME AND THEN APPLY FOR REASONS FOR REAS SESSMENT. ON RECEIPT OF SUCH REASONS, THE ASSESSEE CAN RAISE OBJE CTIONS, IF HE SO DESIRES. IN CASE NO OBJECTIONS ARE RAISED, THE AO IS S UPPOSED TO GO AHEAD WITH THE ASSESSMENT U/S 147. IN CASE THE ASSESS EE RAISES OBJECTIONS, THE PASSING OF THE ASSESSMENT ORDER IS KEPT IN A BEYANCE. THE OBJECTIONS HAVE TO BE FIRST DISPOSED OFF BY THE AO BY A SEPARATE ORDER. AFTER GIVING A REASONABLE TIME TO THE ASSES SEE FOR CHALLENGING THE ORDER DISPOSING OF OBJECTIONS, THE AO CONCLU DES ITA NO.2813/PUN/2016 DWARKADHISH SAKHAR KARKHANA LTD., THE ASSESSMENT. IN THE ENTIRE PROCESS, THE ASSESSEE IS SU PPOSED TO REMAIN VIGILANT. IN CASE, THE ASSESSEE DOES NOT REQUEST FOR SUPPLY OF REASONS, THERE IS NO OBLIGATION ON THE PART OF THE AO TO SUO MOTU SUPPLY SUCH REASONS. SIMILARLY, THE ASSESSEE HAS TO RAIS E OBJECTIONS, IF ANY, AGAINST THE REASONS WITHIN A REASONABLE TIME SO AS TO ENABLE THE AO TO FIRST DISPOSE OF THE OBJECTIONS AND THEN CONCLUDE T HE ASSESSMENT THEREAFTER. ONCE THE REASONS ARE SUPPLIED AND THE ASSESSEE FAILS TO RAISE ANY OBJECTION WITHIN A REASONABLE TIME, NO FAULT CAN BE FOUND WITH THE AO IN DIRECTLY TAKING UP THE ASSESSMENT, WHEN THE ASSESSEE AT THE LATE STAGE OF RESPON DING TO THE QUESTIONNAIRE, ALSO RAISES OBJECTION AGAINST THE INITIATION OF REASSESSMENT. 7. ADVERTING TO THE FACTS OF THE EXTANT CASE, WE FIND THAT THE ASSESSEE WAS SUPPLIED REASONS ON 03-03-2014. THE ASS ESSMENT PROCEEDINGS WERE TAKEN UP BY MEANS OF A NOTICE DATED 10- 04-2014 ISSUED U/S 142(1) OF THE ACT ISSUING DETAILED QUESTIONNAIRE, F IXING 21.04.2014 AS THE DATE OF HEARING. THE ASSESSEE DID NO T RAISE ANY OBJECTION AGAINST THE INITIATION OF REASSESSMENT PROCEEDINGS THROUGHOUT THIS PERIOD. IT WAS ONLY ON THE SCHEDULED DATE O F HEARING FIXED ON 21-04-2014, THAT THE ASSESSEE ANSWERED PART OF THE ITA NO.2813/PUN/2016 DWARKADHISH SAKHAR KARKHANA LTD., QUESTIONNAIRE FURNISHING CERTAIN DETAILS AND ALSO RAISED OBJEC TIONS. THAT WAS TOO LATE IN THE DAY TO COME OUT WITH OBJECTIONS. ONCE TH E ASSESSMENT PROCEEDINGS HAD ALREADY COMMENCED AFTER ALLOWIN G A REASONABLE TIME FROM THE DATE OF SUPPLY OF REASONS, THER E COULD HAVE BEEN NO CAUSE WITH THE AO TO PUT THE ASSESSMENT PROCE EDINGS IN ABEYANCE AND FIRST DEAL WITH OBJECTIONS OF THE ASSESSEE. A MPLE TIME WAS AVAILABLE WITH THE ASSESSEE FOR FILING OBJECTIONS FROM 03-03-2014 ONWARDS BUT THE ASSESSEE CHOSE NOT TO SWING IN TO ACTION. IT WAS ONLY IN PURSUANCE OF NOTICE DATED 10-04-201 4 REQUIRING THE ASSESSEE TO PARTICIPATE IN ASSESSMENT PROCEEDING S ON 21-04-2014 THAT THE ASSESSEE NOT ONLY DID PARTICIPATE IN THE ASSESSMENT PROCEEDINGS BY FILING CERTAIN DETAILS BUT ALSO RAISE D OBJECTIONS. AS THE REASONABLE TIME FOR RAISING OBJECTIONS HA D LAPSED BY THEN, THERE COULD HAVE BEEN NO OCCASION ON THE PART OF THE AO TO KEEP THE ASSESSMENT PROCEEDINGS IN ABEYANCE AND FIRST DEAL WITH THE OBJECTIONS. RATIO IN THE CASE OF G.K.N. DRIVESHAFTS (SUPRA) DOES NOT COME TO THE RESCUE OF THE ASSESSEE IN THE BACKGROUND OF THE FACTS AS ARE OBTAINING IN THE EXTANT C ASE. THIS GROUND IS, THEREFORE, DISMISSED. 8. ON MERITS, IT IS OBSERVED THAT THE AO MADE ADDITION @100% OF THE BOGUS PURCHASES. WHEN THE ASSESSEE CHALLENGED TH E SAME ITA NO.2813/PUN/2016 DWARKADHISH SAKHAR KARKHANA LTD., BEFORE THE LD. CIT(A), THE LD. FIRST APPELLATE AUTHORITY NOTICED THAT THE ASSESSEE MADE PURCHASES THROUGH HAWALA PARTIES TOWAR DS CAPITAL ITEMS. A CHART HAS BEEN MADE AT PAGE 12 PARA 8.2 OF THE IMPUGNED ORDER GIVING LIST OF ITEMS PURCHASED THROUGH BOGUS PURCHASES, NAMELY, ELECTRIC MOTOR, BEARINGS AND DIESEL GE NERATING SET. THE LD. CIT(A), THEREFORE, HELD THAT THE COST OF THESE ASSETS PURCHASED SHOULD BE REDUCED BY 75% OF THE PURCHASE A MOUNT AND DEPRECIATION MAY ACCORDINGLY BE DISALLOWED. THEREAFTER, IN CORRIGENDUM, WHOSE COPY HAS BEEN GIVEN AT PAGE 1 OF THE PAPER BOOK, THE LD. CIT(A) CLARIFIED THAT THE FINDING GIVEN IN PARA 8 .2 OF THE IMPUGNED ORDER ABOUT THE COST OF THESE ASSETS PURC HASED SHOULD BE REDUCED BY 75% OF THE PURCHASE AMOUNT AND DEPRECIATION MAY ACCORDINGLY BE DISALLOWED SHOULD BE READ AS THE COST OF THESE ASSETS PURCHASED SHOULD BE REDUCED BY 2 5% OF THE PURCHASE AMOUNT AND DEPRECIATION MAY ACCORDINGLY BE DISALLOWED . THE ASSESSEE IS AGGRIEVED BY SUCH A DIRECTION. 9. HAVING HEARD BOTH THE SIDES AND GONE THROUGH THE RELEVANT MATERIAL ON RECORD, IT IS OBSERVED THAT THE ASSESSEES NAME WAS THERE IN THE LIST OF BENEFICIARIES OF HAWALA PURCHASES. THE ASSESSEE MADE PURCHASES IN RESPECT OF CAPITAL ASSETS THROUGH THE HA WALA RACKET. THE LD. CIT(A) HAS ESTIMATED 25% OF PURCHASE PRICE AS ITA NO.2813/PUN/2016 DWARKADHISH SAKHAR KARKHANA LTD., RECORDED IN BOGUS BILLS AS INFLATION, WHICH DEMONSTRATES THAT THE FACT OF ASSESSEE HAVING ACTUALLY PURCHASED SUCH FIXED ASS ETS HAS BEEN ACCEPTED. THE COLOUR GIVEN TO THE TRANSACTION IS THAT THE ASSESSEE ACTUALLY PURCHASED SUCH FIXED ASSETS FROM OTHER PARTIES AT A REDUCED RATE, BUT PROCURED INFLATED BOGUS BILLS WITH THE OBJE CT OF AVAILING DEPRECIATION ON THE INFLATED COST. THE LD. CIT(A) HAS ESTIMATED INFLATION IN THE PURCHASE PRICE BY 25%, WHICH IN TH E GIVEN FACTS AND CIRCUMSTANCES OF THE INSTANT CASE, IS JUST AND REASONABLE. WE HOLD THAT THE LD. CIT(A) HAS TAKEN AN UNEXCEPTIONABLE VIEW, WHICH DOES NOT WARRANT ANY INTERFEREN CE. 10. IN THE RESULT, THE APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST SEPTEMBER, 2020. SD/- SD/- (S.S. VISWANETHRA RAVI) (R.S.SY AL) JUDICIAL MEMBER VIC E PRESIDENT PUNE; DATED : 21 ST SEPTEMBER, 2020 SATISH ITA NO.2813/PUN/2016 DWARKADHISH SAKHAR KARKHANA LTD., / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT; 2. / THE RESPONDENT; 3. THE CIT(A)-1, NASHIK 4. 5. THE PR.CIT-1, NASHIK , , / DR B, ITAT, PUNE 6. / GUARD FILE / BY ORDER, // TRUE COPY // SENIOR P RIVATE SECRETARY , / ITAT, PUNE DATE 1. DRAFT DICTATED ON 21-09-2020 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 21-09-2020 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS 7. DATE OF UPLOADING ORDER SR.PS 8. FILE SENT TO THE BENCH CLERK SR.PS 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK 10. DATE ON WHICH FILE GOES TO THE A.R. 11. DATE OF DISPATCH OF ORDER. *