ITO 15(3)(1), MUMBAI V. ROSSARI BIOTECH .LTD, MUMBAI

ITA 3211/MUM/2016

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 9544 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-09-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2010-2011
• Appeal Filed On: 06-05-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJESH KUMAR YADAV
• Keywords: Bogus purchase
• Section: 143(3); 27

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH A, MUMBAI BEFORE D.T. GARASIA, JUDICIAL MEMBER AND SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ITA NO.3211/M/2016 ASSESSMENT YEAR: 2010-11 ITO 15(3)-1, ROOM NO.456, 4 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400 020 VS. M/S. ROSSARI BIOTECH PVT. LTD., 201-A & B, ACKRUTI CORPORATE PARK, LBS MARG, NEXT TO GE GARDENS, KANJURMARG (WEST), MUMBAI 400 078 PAN: AAECR 4325G (APPELLANT) (RESPONDENT) CO NO.181/M/2017 (ARISING OUT OF ITA NO.3211/M/2016) ASSESSMENT YEAR: 2010-11 M/S. ROSSARI BIOTECH LTD., 201-A & B, ACKRUTI CORPORATE PARK, LBS MARG, NEXT TO GE GARDENS, KANJURMARG (WEST), MUMBAI 400 078 PAN: AAECR 4325G VS. ITO 15(3)-1, ROOM NO.456, 4 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400 020 (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI J.P. BAIRAGRA, A.R. REVENUE BY : SHRI RAJESH KUMAR YADAV, D.R. DATE OF HEARING : 02.08.2017 DATE OF PRONOUNCEMENT : 15.09.2017 O R D E R PER D.T. GARASIA , JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE REVEN UE AGAINST THE ORDER DATED 12.02.2016 OF THE COMMISSIONER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS THE CIT(A)] RELEVANT TO ASSESSMENT Y EAR 2010-11. ITA NO.3211/M/2016 & CO NO.181/M/2017 M/S. ROSSARI BIOTECH PVT. LTD. 2 2. THE SHORT FACTS OF THE CASE ARE THAT THE ASSESSE E HAS FILED THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION ON 09.10.20 10 DECLARING TOTAL LOSS OF RS.4,18,391/-. ASSESSMENT U/S. 143(3) WAS COMPLETE D BY THE ASSESSING OFFICER (HEREINAFTER REFERRED TO AS THE AO) ON 26.03.2013 D ETERMINING INCOME AT RS.2,38,28,759/-. DURING THE COURSE OF ASSESSMENT P ROCEEDINGS, THE AO OBSERVED THAT THE ASSESSEE HAD DEBITED PURCHASES OF RS.2,50,66,604/- FROM M/S. ORIZON PHARMA PVT. LTD. WHOSE TIN MATCHED WITH THE INFORMATION RECEIVED FROM THE SALES TAX DEPARTMENT REGARDING BOGUS PARTI ES WITH WHOM THE ASSESSEE HAD MADE PURCHASES. ON THE BASIS OF INFORM ATION RECEIVED FROM THE INVESTIGATION WING OF INCOME TAX DEPARTMENT, MUMBAI , IT WAS FOUND THAT THE ASSESSEE HAD OBTAINED BOGUS PURCHASE BILLS TOTAL AM OUNTING TO RS.2,50,66,604/- FROM M/S ORIZON PHARMA PVT. LTD. WHICH WAS STATED T O BE A HAWALA OPERATOR. THE AO, ON GOING THROUGH THE SUBMISSIONS AND CONTEN TIONS OF THE ASSESSEE, CONCLUDED THAT THE ASSESSEE FAILED TO PROVE WITH SU PPORTING DOCUMENTARY EVIDENCES THAT THE MATERIAL WAS ACTUALLY DELIVERED IN ITS PREMISES AND ALSO FAILED TO TILE EVIDENCES OF DELIVERIES TO ESTABLISH THAT THE MATERIAL WAS CONSUMED FOR BUSINESS ACTIVITIES. ALSO THE ASSESSEE FAILED TO FURNISH THE CONFIRMATION FROM THE PARTY THAT IT HAD ACTUALLY SO LD AND DELIVERED MATERIAL TO THE ASSESSEE COMPANY AND HENCE, THE SUM IN RESPECT OF INVESTMENT MADE OUT OF UNACCOUNTED MONEY BY THE ASSESSEE FOR PURCHASE OF M ATERIALS FROM THE PARTY OF RS.2,50,66,604/- WAS TREATED AS BOGUS PURCHASES AND ADDED TO THE RETURNED INCOME OF THE ASSESSEE. PENALTY PROCEEDINGS U/S. 27 1(1)(C) OF THE ACT WAS INITIATED FOR CONCEALING AND FURNISHING INACCURATE PARTICULARS OF INCOME. 3. MATTER CARRIED TO THE LD. CIT(A) AND THE LD. CIT (A) HAS ALLOWED THE CLAIM BY OBSERVING AS UNDER: 2.4.31 AS NARRATED EARLIER, THE LD. A.O. IN THIS C ASE HAS HELD THAT THE PARTY FROM WHOM THE PURCHASES WERE MADE BY THE APPELLANT WERE FOUND TO BE BOGUS AND THAT IS THE REASON FOR WHICH IT WAS NOT PRODUCED DURING THE ASSESSMENT PROCEEDINGS. NOT HAVING DOUBTED THE CONSUMPTION/SALES, THE MOTIVE BE HIND OBTAINING BOGUS BILLS THUS, APPEARS TO BE INFLATION OF PURCHASE PRICE SO AS TO SUPPRESS TRUE PROFITS. CONSIDERING ITA NO.3211/M/2016 & CO NO.181/M/2017 M/S. ROSSARI BIOTECH PVT. LTD. 3 THE FACTS OF THE CASE AS WELL AS THE VARIOUS CASE L AWS CITED (SUPRA) ESPECIALLY IN THE CASES OF CIT VS. SIMIT P. SHETH, BHOLANATH POLY FAB AND SANKET STEEL TRADERS (SUPRA), I ESTIMATE THE PROFIT TO THE EXTENT OF 12. 5% OF THE PURCHASES MADE FROM THE BOGUS ENTITY, AS THE SUPPRESSED PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES. THIS ESTIMATION IS IN ADDITION TO THE GP SHOWN BY T HE APPELLANT. ACCORDINGLY, THIS GROUND IS PARTLY ALLOWED. 2.5. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. 4. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES. LD. D.R. RELIED UPON THE DECISION OF THE TRIBUNAL, AHMEDABAD BENCH IN THE CASES OF SHWETAMBAR STEELS VS. ITO AHMEDABAD AND GANESH RICE MILLS VS. CIT (294 ITR 316). THE FACTS IN THE PRESENT CASE SHOWS THAT ASSESSEE COULD NOT PRODUCE THE PARTIES FROM WHOM GOODS ARE STATED TO HAVE BEEN PURCHASED. THE SUPPLIERS WERE FOUND TO BE ENGAGED IN PROVIDING BOGUS BILL WI THOUT ACTUAL DEALING OF GOODS. IN THIS REGARD, THE ASSESSEE HAS STATED THAT THEY HAD SUBMITTED QUANTITATIVE DETAILS OF STOCK WITH RESPECT OF THE S ALES WITH PURCHASES FROM THE PARTIES DURING THE ASSESSMENT PROCEEDINGS. THE ASSE SSEE HAS SUBMITTED THE DETAIL OF CORRESPONDING SALES IN RESPECT OF THE PUR CHASE FROM THE SAID PARTIES. AS MENTIONED ABOVE THE AO HAS NEVER DISPUTED OR EXA MINED THE ASPECT OF SALES RECEIPTS. SINCE THE SALES MADE BY THE ASSESSEE WAS NOT DOUBTED OR DISPUTED BY THE AO AND HE HAS ACCEPTED THE SALES RECEIPTS OF TH E ASSESSEE AS IT IS, THEREFORE, THE AO CANNOT DENY THAT PURCHASES WERE NOT MADE BY THE ASSESSEE AND THE MATERIAL WAS NOT USED FOR ITS SALES. WHAT IS UNDER DISPUTE IS THE PURCHASES FROM THE PARTIES FROM WHOM BILLS HAVE BEEN TAKEN AND CHE QUES HAVE BEEN ISSUED TO THEM. PURCHASES ARE NOT IN DISPUTE BUT THE PARTIES FROM WHOM PURCHASE ARE SHOWN TO HAVE BEEN MADE ARE DISPUTED AND SUSPICIOUS . THE AO HAD MADE THE ADDITION AS SOME OF THE SUPPLIERS WERE DECLARED HAW ALA DEALERS BY THE VAT DEPARTMENT. THIS MAY BE A GOOD REASON FOR MAKING FU RTHER INVESTIGATION BUT THE AO DID NOT MAKE ANY FURTHER INVESTIGATION AND M ERELY COMPLETED THE ASSESSMENT ON SUSPICION. ONCE THE ASSESSEE HAS BROU GHT ON RECORD THE DETAILS OF PAYMENTS BY ACCOUNT PAYEE CHEQUE, IT WAS INCUMBENT ON THE AO TO HAVE ITA NO.3211/M/2016 & CO NO.181/M/2017 M/S. ROSSARI BIOTECH PVT. LTD. 4 VERIFIED THE PAYMENT DETAILS FROM THE BANK OF THE A SSESSEE AND ALSO FROM THE BANK OF THE SUPPLIERS TO VERIFY WHETHER THERE WAS A NY IMMEDIATE CASH WITHDRAWAL FROM THEIR ACCOUNT. NO SUCH EXERCISE HAS BEEN DONE OR FINDINGS RECORDED, THERE WAS NO DETAILED INVESTIGATION MADE BY THE AO HIMSELF. IT IS ALSO FOUND THAT THE PAYMENTS HAVE BEEN MADE BY ACCO UNT PAYEE CHEQUE WHICH ARE DULY REFLECTED IN THE BANK STATEMENT OF THE ASS ESSEE. THERE IS NO EVIDENCE TO SHOW THAT THE ASSESSEE HAS RECEIVED CASH BOOK FROM THE SUPPLIERS. MERELY BECAUSE THE SUPPLIERS DID NOT APPEAR BEFORE THE AO OR SOME CONFIRMATION LETTERS WERE NOT FURNISHED, ONE CANNOT CONCLUDE THA T THE PURCHASES WERE NOT MADE BY THE ASSESSEE. THIS VIEW IS SUPPORTED BY THE DECISION OF NIKUNJ EXIMP ENTERPRISES VS. CIT 216 TAXMAN 171 (BOM). TO THIS E XTENT I AM IN VIEW WITH THE ASSESSEE, IF ASSESSEE HAS FULFILLED ITS ONUS MA KING THE PAYMENT BY CHEQUE AND HAS SUPPLIED THE ADDRESSES OF THE SELLERS THEN IT CANNOT BE PRESUMED THAT SUPPLIER WERE BOGUS SIMPLY BECAUSE THE SELLERS WERE NOT FOUND AT THE GIVEN ADDRESS. THERE IS A CONSIDERABLE TIME GAP BETWEEN T HE PERIOD OF PURCHASE TRANSACTION AND PERIOD OF SCRUTINY PROCEEDINGS. THE AO HAS NOT BROUGHT ANY MATERIAL ON RECORD TO SHOW THAT THERE IS SUPPRESSIO N OF SALES. IT IS BASIC RULE OF ACCOUNTANCY AS WELL AS OF TAXATION LAWS THAT PROFIT FROM BUSINESS CANNOT BE ASCERTAINED WITHOUT DEDUCTING COST OF PURCHASE FROM SALES. ESTIMATION OF PROFIT RANGING FROM 12.5% TO 15% HAS BEEN UPHELD BY THE HO N'BLE GUJARAT HIGH COURT IN THE CASE OF IT VS SIMIT P SHETH 356 ITR 45 1 (GUJ.). RESPECTFULLY FOLLOWING THE DECISION OF HONBLE GUJARAT HIGH COUR T IN THE CASE OF CIT VS. SIMIT P. SHETH 38 TAXMAN 385 (GUJ), WE DISMISS THE DEPARTMENTAL APPEAL. 5. IN THE RESULT, DEPARTMENTAL APPEAL IS DISMISSED. CO NO.181/M/2017 (REVENUES ASSESSEE) 6. DURING THE COURSE OF HEARING, THE ASSESSEE HAS N OT PRESSED FOR THE CROSS OBJECTION AS THE APPEAL OF THE REVENUE HAS ALREADY BEEN DISMISSED. THEREFORE, WE DISMISS THE CROSS OBJECTION OF THE ASSESSEE. ITA NO.3211/M/2016 & CO NO.181/M/2017 M/S. ROSSARI BIOTECH PVT. LTD. 5 7. IN THE RESULT, ASSESSEES CROSS OBJECTION AS WEL L AS THE DEPARTMENTAL APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 15.09.2017. SD/- SD/- (G. MANJUNATHA) (D.T. GARASIA) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 15.09.2017. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.