M/s. Joto Abrasives Pvt.Ltd, Nashik V. Deputy Commissioner of Income tax,

ITA 2902/PUN/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 9029 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 3 month(s) 8 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: 2009-2010
• Appeal Filed On: 20-12-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DR VIVEK AGGARWAL
• Keywords: Reopening of assessment; Bogus purchase; Opportunity of cross examination
• Section: 133(6); 145; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, PUNE , . , BEFORE MS. SUSHMA CHOWLA, JM AND SHRI D. KARUNAKAR A RAO, AM . / ITA NO.2902/PUN/2016 / ASSESSMENT YEAR : 2009-10 M/S. JOTO ABRASIVES PVT. LTD., G-35, MIDC, AMBAD, NASHIK 422007 PAN : AAACJ5827D . /APPELLANT VS. DCIT, CIRCLE-1, NASHIK . / RESPONDENT / APPELLANT BY : SHRI SANKET JOSHI / RESPONDENT BY : DR. VIVEK AGGARWAL / DATE OF HEARING : 21.03.2018 / DATE OF PRONOUNCEMENT: 28.03.2018 / ORDER PER D. KARUNAKARA RAO, AM : THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A)-1, NASHIK, DATED 17-08-2016 FOR THE ASSESSMENT YEAR 2009-10. 2. GROUNDS RAISED BY THE ASSESSEE READ AS UNDER : THE FOLLOWING GROUNDS ARE TAKEN WITHOUT PREJUDICE T O EACH OTHER - ON FACTS AND IN LAW, 1] THE LEARNED CIT(A) ERRED IN CONFIRMING THE DISA LLOWANCE OF RS.3,21,360/- OUT OF THE TOTAL DISALLOWANCE OF RS.12,85,440/- MAD E BY THE A.O. IN RESPECT OF PURCHASES MADE FROM ALLEGED HAWALA PARTY ON THE BAS IS OF INFORMATION OBTAINED FROM MAHARASHTRA SALES TAX DEPT. 2] THE LEARNED CIT(A) ERRED IN HOLDING THAT 25% OF THE PURCHASES MADE FROM M/S. CRYSTAL COMMERCIAL CO. WERE TO BE DISALLOWED B Y PRESUMING THAT THE ASSESSEE MAY HAVE MADE THE IMPUGNED PURCHASES OF GO ODS FROM CERTAIN OTHER PARTIES AT A LOWER COST AND HENCE, THE PURCHASES SH OWN FROM THE ABOVE PARTIES AS RECORDED IN THE BOOKS OF ACCOUNTS ARE INFLATED. 2 3] THE LEARNED CIT(A) FAILED TO APPRECIATE THAT- A. THE PURCHASES MADE BY THE ASSESSEE FROM THE ABOV E PARTY WERE SUPPORTED BY TAX INVOICES AND TRANSPORTATION RECEIPTS AND HEN CE, THERE WAS NO REASON TO DOUBT THE GENUINENESS OF THE SAID PURCHASES MERELY ON THE BASIS OF UNCORROBORATED STATEMENT OF SUCH SUPPLIER. B. THE PAYMENTS TO THE SAID PARTY WERE MADE THROUGH BANKING CHANNEL AND THE A.O. HAD NOT BROUGHT ANY EVIDENCE ON RECORD TO SHOW THAT THE PAYMENTS MADE BY THE ASSESSEE TO THE SAID PARTY WAS WITHDRAWN BY IT AND RETURNED TO THE ASSESSEE IN CASH AND HENCE, IN THE ABSENCE OF ANY C ONTRARY EVIDENCE, THERE WAS NO REASON TO DOUBT THE GENUINENESS OF THE PAYMENTS MADE TO THE SAID PARTY. 4] THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED TH AT- A. THE ABOVE SUPPLIER HAD EVADED VAT AND HENCE, IT MAY HAVE DENIED ANY ACTUAL SALES BEFORE THE SALES TAX DEPT. SOLELY TO ABSOLVE ITSELF FROM VAT LIABILITY, HOWEVER, THERE WAS NO CORROBORATIVE EVIDENCE WHATSOEVER ON RECORD TO SUPPORT ITS STATEMENT AND HENCE, SUCH UNSUBSTANT IATED STATEMENT COULD NOT BE RELIED UPON BY IGNORING THE DOCUMENTARY EVIDENCES F URNISHED BY THE ASSESSEE. B. AFTER CONSIDERING THE SAME STATEMENT OF THE ALLE GED HAWALA SUPPLIER, THE SALES TAX DEPT. HAD NOT DISPUTED THE FACT THAT THER E HAS BEEN ACTUAL TRANSFER OF GOODS BETWEEN THE ASSESSEE AND THE SUPPLIER AND HEN CE, THE ASSESSEE HAS BEEN MADE LIABLE TO PAY VAT ON SUCH TRANSFER OF GOODS WH ICH HAS NOT BEEN DEPOSITED BY THE SUPPLIER AND THEREFORE, THE INCOME TAX DEPT. IS NOT JUSTIFIED IN RAISING ADDITIONAL INCOME TAX LIABILITY ON THE ASSESSEE IN RESPECT OF THESE PURCHASES BY ADOPTING A CONTRARY INTERPRETATION OF THE SAME STAT EMENT TO THE EFFECT THAT THERE HAS BEEN NO ACTUAL TRANSFER OF GOODS. C. THE A.O. HAD HIMSELF ADMITTED IN THE ASST. ORDER THAT HE WAS NOT ABLE TO LOCATE THE ABOVE ALLEGED HAWALA PARTY AND THUS, THE A.O. WAS IN NO POSITION TO GRANT THE OPPORTUNITY OF CROSS EXAMINATION OF THIS PARTY TO THE ASSESSEE AND HENCE, IN VIEW OF THE RATIO LAID DOWN BY HON'BL E SUPREME COURT IN THE CASE OF ANDAMAN TIMBER INDUSTRIES V. CCE [CIVIL APP EAL NO.4228/2006 DATED 02.09.2015], THE ADDITION MADE SOLELY ON THE BASIS OF STATEMENT OF SUCH SUPPLIER RECORDED AT THE BACK OF THE ASSESSEE WAS N OT JUSTIFIED AT ALL. 5] THE ASSESSEE SUBMITS THAT THE PRESUMPTION DRAWN BY THE CIT(A) THAT THE IMPUGNED PURCHASES WERE INFLATED AND THAT THE SAME MAY HAVE BEEN MADE FROM OTHER PARTIES IS SOLELY BASED UPON THE UNCORROBORAT ED STATEMENT OF THE ALLEGED HAWALA PARTY WHICH CANNOT BE RELIED UPON IN THE FAC TS OF THE CASE AND HENCE, THE DISALLOWANCE SUSTAINED BY THE CIT(A) @ 25% OF THE P URCHASES MADE FROM THE ABOVE PARTY IS NOT JUSTIFIED AT ALL. 6] WITHOUT PREJUDICE, THE ASSESSEE SUBMITS THAT TH E DISALLOWANCE MADE @ 25% OF THE AMOUNT OF PURCHASES IS VERY HIGH AND THE SAM E MAY BE RESTRICTED TO A REASONABLE LEVEL CONSIDERING THE FACTS OF THE CASE. 7] THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND OR DELETE ANY OF THE ABOVE GROUNDS OF APPEAL. FROM THE ABOVE, IT IS EVIDENT THAT THE CORE ISSUE RAISED BY THE ASSESSEE REVOLVES AROUND THE ISSUE OF CONFIRMATION OF 25% OF ALLEGED BOGUS PURCHA SES. 3 3. BRIEFLY STATED RELEVANT FACTS OF THE CASE ARE THAT THE ASSESSEE IS A COMPANY AND IS ENGAGED IN THE BUSINESS OF MANUFACTURER AND EXPOR TER OF GRINDING WHEELS. ASSESSEE FILED THE RETURN OF INCOME ON 21-08-2 009 DECLARING TOTAL INCOME OF RS.23,71,990/-. DURING THE COURSE OF ASSESSMEN T PROCEEDINGS, AO NOTICED THAT THE ASSESSEE MADE PURCHASES OF RS.12,85,440 /- FROM M/S. CRYSTAL COMMERCIAL COMPANY WHOSE NAME IS LISTED IN THE LIST OF BOG US DEALERS BY THE SALES TAX DEPARTMENT OF MAHARASHTRA GOVERNMENT. EVENT UALLY, THE AO VIDE ORDER U/S.147 R.W.S. 144 OF THE ACT, MADE THE ENTIRE AD DITION OF BOGUS PURCHASES AMOUNTING TO RS.12,85,440/- TO THE TOTAL INCOM E OF THE ASSESSEE AND DETERMINED THE INCOME AT RS.36,57,430/-. IN THE FIRST APPE LLATE PROCEEDINGS, CIT(A) RESTRICTED THE DISALLOWANCE TO 25% OF THE PURCHASES FOR THE YEAR UNDER CONSIDERATION WHICH WORKS OUT TO RS.3,21,360/-. CIT(A) AFTER ELABORATELY DISCUSSING JUDGMENTS/DECISIONS OF VARIOUS SUPREME COURT/ HIGH COURTS/TRIBUNAL HAS COME TO CONCLUSION THAT THIS IS NOT A CASE OF BOGUS PURCHASES BUT A CASE OF INFLATED PURCHASES. EVENTUALLY, T HE CIT(A) RESTRICTED THE ADDITION TO RS.3,21,360/- 4. AGGRIEVED WITH THE ORDER OF CIT(A), THE ASSESSEE IS IN A PPEAL BEFORE US WITH THE GROUNDS EXTRACTED ABOVE. 5. BEFORE US, DEVIATING FROM THE GROUNDS, LD. COUNSEL FOR THE ASSESSEE BROUGHT OUR ATTENTION TO GROUND NO.3(C) AND SUBMITTED THAT IN THIS CASE ASSESSEE ASKED FOR GRANTING AN OPPORTUNITY OF CROSS EXA MINATION OF THE PARTY AND THE SAME WAS DENIED. FURTHER, HE SUBMITTED THAT THE ADDITION MADE BY AO IN THE RE-ASSESSMENT WILL NOT SURVIVE AS THE SAME IS MAD E AT THE BACK OF THE ASSESSEE. RELYING ON THE DECISION OF SUPREME COURT IN THE CASE OF M/S. ANDAMAN TIMBER INDUSTRIES VS. CIT, CIVIL APPEAL NO. 4228/20 06, DATED 02.09.2015 (SUPREME COURT), LD. COUNSEL SUBMITTED THAT MAKIN G ADDITION AT THE BACK OF THE ASSESSEE WITHOUT GRANTING CROSS EXAMIN ATION OF THE WITNESSES IS NOT JUSTIFIED. ON MERIT, LD. COUNSEL SUBMITTED THAT IN THIS CA SE WHERE THE 4 ASSESSEE HAS SUCCESSFULLY ESTABLISHED THE TRAIL OF GOODS, THEREFORE, INVOKING PROVISIONS OF 145 (3) OF THE ACT ARE NOT SUSTAINABLE. 6. LD. DR FOR THE REVENUE RELIED ON THE ORDER OF CIT(A) DUTIFULLY. 7. WE HEARD BOTH THE SIDES ON THE LEGAL ASPECT OF THE IS SUE RELATING TO CORRECTNESS OF MAKING ADDITIONS AT THE BACK OF THE ASSE SSEE BY THE ASSESSING OFFICER WITHOUT GRANTING BENEFIT OF CROSS EXAMINATION OF THE A SSESSEE. IN OUR VIEW, THIS ISSUE IS COVERED IN FAVOUR OF ASSESSEE BY VIRTUE OF DECISION OF PUNE BENCH OF THE TRIBUNAL IN THE CASE OF ANITA SANJAY AGRAWAL VS. ITO AND OTHERS IN ITA NOS.2622 TO 2624/PUN/2016. FOR THE SAKE OF COMPLETE NESS, 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 IN M/S. ANDAMAN TIMBER INDUSTRIES VS. COMMISSIONER OF CENTRAL EXCISE (SUPRA) AND APPL YING THE SAID PRINCIPLE / RATIO TO THE FACTS OF THE PRESENT CASE, WE HOLD THAT WHER E THE ASSESSEE HAD SOUGHT CROSS-EXAMINATION OF THE WITNESSES AT THE EARLIEST STAGE I.E. WHILE OBJECTING TO THE REASONS RECORDED FOR REOPENING THE ASSESSMENT, WHIC H DULY HAS BEEN ACKNOWLEDGED BY THE ASSESSING OFFICER IN HIS ORDER DISPOSING OF OBJECTIONS 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 IN THE HANDS OF ASSESSEE ON THE BASIS OF AFORESAID STATEMENTS RECORDED BY THE SALES TAX DEPARTMENT, WE HOLD THAT NO ADDITION ON ACCOUNT OF BOGUS PURCHASES CAN BE MADE IN THE HANDS OF ASSESSEE. THE ASSESSEE HAD ALSO ESTABLISHED FACTUM OF TRAIL OF GOODS. ACCORDINGLY, WE DELETE THE ADDITION MADE ON ACCOUNT OF BOGUS PURCHASES. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE THUS, ALLOWED. CONSIDERING THE ABOVE, WE ARE OF THE OPINION THAT THE FACTS ARE COMPARABLE AND THUS THE DECISION OF THE TRIBUNAL APPLY TO THE LEGAL ISSUE RAISED BY THE ASSESSEE IN GROUND NO.3(C) OF THE APPEAL. ON FACTS, IT IS EV IDENT THAT THE BENEFIT OF CROSS EXAMINATION WAS NOT GRANTED TO THE ASSESSEE B EFORE MAKING ADDITION. FURTHER, THE ORDER OF THE AO/CIT(A) DO NOT INDICATE FURNISH ING THE COPIES OF THE STATEMENTS OF THE SUPPLIERS TO THE ASSESSEE BEFORE MAKIN G ASSESSMENT. 5 NEVERTHELESS, THE ASSESSEE FURNISHED EVIDENCES BY WAY O F PURCHASE BILLS, LAB TEST REPORTS SHOWING THE FACT RELATING TO MANUFACTURE OF GOODS . THEREFORE, THE ADDITION MADE BY AO WITHOUT GRANTING CROSS EXAMINATION IS UNSUSTAINABLE. RELIANCE IS PLACED ON THE RATIO OF HON'BLE APEX COURT IN T HE CASE OF M/S. ANDAMAN TIMBER INDUSTRIES VS. CIT (SUPRA) AND THE DECISIO N OF THE TRIBUNAL IN THE CASE OF ANITA SANJAY AGRAWAL VS. ITO (SUPRA). ACCORD INGLY, THE GROUND NO.3(C) RAISED BY THE ASSESSEE IS ALLOWED. CONSIDERING OUR DECISION ABOVE, THE REMAINING GROUNDS RAISE D BY THE ASSESSEE ON MERITS ARE DISMISSED AS BEING ACADEMIC. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON THIS 28 TH DAY OF MARCH, 2018. SD/- SD/- (SUSHMA CHOWLA) (D.KARUNAKAR A RAO) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / PUNE; DATED : 28 TH MARCH, 2018. SATISH / 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. , , / DR SMC, ITAT, PUNE; 6. / GUARD FILE. / BY ORDER, //TRUE COPY// SENIOR PRIVATE SECRETARY , / ITAT, PUNE