ACIT CIR6(1), MUMBAI V. AMITY INTERLINK STEELS P.LTD, MUMBAI

ITA 3243/MUM/2012

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 0518 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 8 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-01-2018
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 07-12-2015
• Assessment Year: 2004-2005
• Appeal Filed On: 10-05-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAJESH KUMAR YADAV
• Keywords: Reopening of assessment; Bogus purchase; Accommodation entries; Assessment record; Reassessment proceedings
• Section: 143(3); 133(6); 131; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'A' BENCH, MUMBAI BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA NOS. 3243, 3244, 4195, 4161, 3058 & 4162/MUM/20 12 (ASSESSMENT YEARS: 2004-05 TO 2009-10) ACIT, CIRCLE - 6(1) ROOM NO. 506, 5TH FLOOR AAYAKAR BHAVAN, M.K. ROAD MUMBAI 400020 VS. M/S. AMITY INTERLINKS STEELS PVT. LTD. 37, LLYOED HOUSE, BARODA STREET CARMAC BUNDER, MUMBAI 400009 PAN AEBCA1796K APPELLANT RESPONDENT APPELLANT BY: SHRI RAJESH KUMAR YADAV RESPONDENT BY: SHRI PRAKASH JOTWANI DATE OF HEARING: 03.01.2018 DATE OF PRONOUNCEMENT: 30.01.2018 O R D E R PER RAJESH KUMAR, AM THESE APPEALS HAVE BEEN FILED BY THE REVENUE AGAINS T THE ORDER OF THE CIT(A)-14, MUMBAI DATED 27.02.2012/20.03/2012 FOR A SSESSMENT YEARS 2004-05 TO 2009-10. ITA NO. 3243/M UM/2012: A.Y. - 2004-05 2. THE ONLY ISSUE RAISED BY THE REVENUE IN THIS APPEAL IS AGAINST THE DELETION OF ADDITION BY LD CIT(A) OF ` 1,77,41,902/- AS MADE BY THE AO MADE ON ACCOUNT OF BOGUS PURCHASES FROM M/S. KINJAL INDUSTRIAL CORPORATION. 3. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSMENT UND ER SECTION 143(3) R.W.S. 147 OF THE INCOME TAX ACT, 1961 (HEREINAFTER THE ACT) WAS COMPLETED ON 26.12.2011 ASSESSING TOTAL INCOME AT ` 2,75,32,370/-. THEREAFTER REASSESSMENT PROCEEDINGS WERE INITIATED BY ISSUING NOTICE UNDER SECTION 148 OF THE ACT DATED 28 TH MARCH, 2011 AFTER THE AO RECEIVED AN INFORMATION FROM THE OFFICE OF THE ACIT (INV), MUMB AI THAT THE ASSESSEE IS A ITA NO. 3243+/MUM/2012 M/S. AMITY INTERLINKS STEELS PVT. LTD. 2 BENEFICIARY OF BOGUS PURCHASE BILLS FROM VARIOUS CO NCERNS WHICH ARE BEING OPERATED BY SHRI PRAKASH KEDAR PATEL. IN COMPLIANCE WITH NOTICE UNDER SECTION 148 DATED 28.03.2011, THE ASSESSEE SUBMITTE D A LETTER DATED 12.07.2011 STATING THAT THE RETURN FILED ON 30.09.2 004 BE TREATED AS RETURN FILED IN RESPONSE TO NOTICE UNDER SECTION 148 OF TH E ACT AND FURTHER REQUESTED VIDE LETTER DATED 28.07.2011 TO PROVIDE R EASONS FOR REOPENING OF ASSESSMENT WHICH WERE PROVIDED VIDE LETTER DATED 01 .08.2011 BY THE AO. THE ASSESSEE IS A DEALER IN IRON AND STEEL ITEMS. D URING THE COURSE OF ASSESSMENT PROCEEDINGS ASSESSEE SUBMITTED VARIOUS D ETAILS AS CALLED FOR BY THE AO. IT WAS SUBMITTED BY THE ASSESSEE BEFORE THE AO VIDE LETTER DATED 18.08.2011 THAT IT HAS PURCHASED GOODS WORTH ` 1,77,41,902/- FROM M/S. KINJAL INDUSTRIAL CORPORATION AND ALSO SUBMITTED N ECESSARY BILLS, VOUCHERS, COPY OF ACCOUNTS AND BANK STATEMENTS TO T HE AO. IT WAS STATED BEFORE THE AO THAT THE PURCHASES WERE MADE FROM THI S PARTY AND CORRESPONDING SALES WERE ALSO MADE DURING THE YEAR OR IN THE SUBSEQUENT YEAR WHICH WERE DULY RECORDED AND SHOWN IN THE BOOK S OF ACCOUNTS. HOWEVER THE REPLY OF THE ASSESSEE DID NOT FIND FAVO UR WITH THE AO WHO ADDED THE ENTIRE PURCHASES FROM M/S. KINJAL INDUSTR IAL CORPORATION TO THE TUNE OF ` 1,77,41,902/- TO THE INCOME OF THE ASSESSEE ON THE GROUND THAT THE PRINCIPAL OFFICER OF M/S. KINJAL INDUSTRIAL COR PORATION ADMITTED IN HIS STATEMENT RECORDED UNDER SECTION 131 OF THE ACT THA T THE SAID CONCERN WAS INVOLVED IN PROVIDING ACCOMMODATION BILLS TO VARIOU S PARTIES WITHOUT DELIVERING ANY GOODS PHYSICALLY IN CONSIDERATION OF CERTAIN COMMISSION. FINALLY THE ASSESSMENT WAS FRAMED UNDER SECTION 143 (3) R.W.S. 147 OF THE ACT VIDE ORDER DATED 26.08.2011 ASSESSING THE INCOM E OF THE ASSESSEE AT ` 4,52,74,270/- . 4. IN THE APPELLATE PROCEEDINGS , THE LEARNED CIT(A) A LLOWED THE APPEAL OF THE ASSESSEE BY HOLDING AND OBSERVING AS UNDER: - 4.10 IT IS SEEN THAT THE APPELLANT HAD SUBMITTED A LL THE NECESSARY DETAILS TO PROVE THE GENUINENESS OF THE PURCHASES A ND TO ENABLE THE AO TO CONDUCT INDEPENDENT ENQUIRY WITH THE SAID PAR TY FROM WHOM PURCHASE WERE MADE. SIMILARLY, THE DETAILS OF THE P ARTIES TO WHOM THE VERY SAME GOODS WERE SOLD WERE ALSO FURNISHED BY TH E APPELLANT. STILL ITA NO. 3243+/MUM/2012 M/S. AMITY INTERLINKS STEELS PVT. LTD. 3 THE AO DID NOT MAKE ANY INDEPENDENT ENQUIRY TO PROV E THAT THE TRANSACTIONS WITH THE TWO PARTIES FROM WHOM PURCHAS ES WERE MADE WERE BOGUS. NEITHER ANY ENQUIRY WAS MADE FROM THE P ARTIES TO WHOM THESE GOODS WERE SOLD. IN THESE CIRCUMSTANCES, THE ADDITION MADE BY THE AO MERELY ON THE BASIS OF THE REPORT OF THE ACI T (INV), UNIT-II(3), MUMBAI CANNOT BE SUSTAINED. THE APPELLANT FROM ITS SIDE HAS FULLY SUBSTANTIATED ITS CLAIM REGARDING THE GENUINENESS O F THE TRANSACTIONS. THEREFORE THE ADDITION MADE ON ACCOUNT OF BOGUS PUR CHASES TO THE EXTENT OF RS.1,77,41,902/- IS DELETED. THE AO IS DI RECTED ACCORDINGLY . 5. THE LEARNED D.R. SUBMITTED BEFORE THE BENCH THAT T HE FIRST APPELLATE AUTHORITY HAS GROSSLY ERRED ON FACTS AND LAW IN DELETING THE ENTIRE ADDITION ON ACCOUNT OF BOGUS PURCHASES AS MA DE BY THE AO BY IGNORING THE FACT THAT THE PRINCIPAL OFFICER OF M/S . KINJAL INDUSTRIAL CORPORATION ADMITTED WHILE RECORDING THE STATEMENT UNDER SECTION 131 OF THE ACT THAT THE SAID CONCERN WAS ENGAGED IN THE BU SINESS OF PROVIDING ACCOMMODATION ENTRIES OF PURCHASES FOR WHICH COMMIS SION WAS CHARGED WITHOUT SUPPLYING ANY MATERIAL PHYSICALLY. THE LEAR NED D.R. ALSO SUBMITTED THAT THE ASSESSEE HAS FAILED TO PRODUCE T HE PARTIES BEFORE THE AO AND THEREFORE THE SAID PURCHASES COULD NOT BE CONFI RMED. THE LEARNED D.R. CONTENDED THAT THE ORDER OF THE CIT(A) BEING INCORR ECT AND AGAINST THE FACTS ON RECORD SHOULD BE REVERSED AND THAT OF THE AO BE UPHELD. 6. PER CONTRA THE LEARNED A.R. RELIED HEAVILY ON THE O RDER OF THE CIT(A) BY SUBMITTING THAT THE ASSESSEE HAS PLACED ALL THE NECESSARY RECORDS AVAILABLE WITH IT REGARDING THE PURCHASES COMPRISIN G BILLS, VOUCHERS, COPY OF LEDGER ACCOUNTS, EVIDENCE OF PAYMENT, BANK STATE MENT AND EVIDENCE OF SALES IN THE BOOKS OF THE ASSESSEE. HAVING FILED AL L THESE EVIDENCES WITH THE AO, THE AO IS NOT EVEN BOTHERED TO DO ANY VERIFICAT ION OF THE SAID RECORD OR EVEN ISSUED NOTICE UNDER SECTION 133(6) OF THE ACT TO THE PARTY BUT MERELY RELIED ON THE STATEMENT OF THE PRINCIPAL OFFICER OF M/S. KINJAL INDUSTRIAL CORPORATION AND THE REPORT OF THE ACIT (INV), UNIT- II(3), MUMBAI. THE LEARNED A.R. PRAYED THAT ON THE SAID FAILURE ON THE PART OF THE AO TO CARRY OUT INVESTIGATION, THE REVENUE HAS NO CASE. THE LEA RNED AR CONTENDED THAT THE ASSESSEE HAS DISCHARGED ITS ONUS BY FILING THE NECESSARY EVIDENCES BEFORE THE AO AND IT THE AO WHO HAS FAILED TO BRING ANY MATERIALS ON RECORD TO PROVE THE PURCHASES TO BE NON-GENUINE. TH EREFORE, THE ORDER OF ITA NO. 3243+/MUM/2012 M/S. AMITY INTERLINKS STEELS PVT. LTD. 4 THE CIT(A) DESERVED TO BE UPHELD. THE LEARNED AR RE LIED UPON A SERIES OF DECISIONS OF THE COORDINATE BENCHES. IN THE ALTERNA TIVE, THE LEARNED A.R. PRAYED BEFORE THE BENCH THAT AN ADDITION OF 1% MAY KINDLY BE MADE TO THE INCOME OF THE ASSESSEE. 7. WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MAT ERIAL ON RECORD. THE UNDISPUTED FACTS ARE THAT THE ASSESSEE RECEIVED ACCOMMODATION ENTRIES, AS PER THE REPORT OF THE ACIT, INVESTIGATI ON WING, FROM M/S. KINJAL INDUSTRIAL CORPORATION TO THE TUNE OF ` 1,77,41,902/-. THE PRINCIPAL OFFICER OF M/S. KINJAL INDUSTRIAL CORPORATION CONFIRMED TO HAVE ENGAGED IN THE BUSINESS OF SUPPLYING ACCOMMODATION ENTRIES AND PUR CHASE BILLS ON COMMISSION BASIS WITHOUT DELIVERING ANY ACTUAL MATE RIALS/GOODS. DURING THE YEAR THE TURNOVER THE ASSESSEE WAS ` 93.48 CRORES WHEREAS THE PURCHASES WERE TO THE TUNE OF ` 90 CRORES AND THE G.P. DECLARED WAS 3.05%. UPON BEING CALLED UPON, THE ASSESSEE FILED ALL THE DETAILS COMPRISING BILLS, VOUCHERS, COPY OF LEDGER ACCOUNTS, EVIDENCE OF PAYM ENT, BANK STATEMENT AND EVIDENCE OF SALES IN THE BOOKS OF THE ASSESSEE BEFORE THE AO BUT AO SIMPLY RELIED ON THE STATEMENT OF THE PRINCIPAL OFF ICER AND DID NOT CARRY OUT ANY FURTHER VERIFICATION AND THUS NOT DISCHARGING T HE ONUS UPON HIM. THUS, IT IS CORRECT THAT THE AO HAS NOT CARRIED OUT ANY FURTHER INVESTIGATION TO BRING OUT THE TRUTH AND ALSO NOT DISPUTED THE SA LES BY THE ASSESSEE OUT OF SAID PURCHASES. THE LEARNED CIT(A) HAS DELETED T HE ADDITION ON THE BASIS THAT THE AO HAS NOT CARRIED OUT ANY INVESTIGATION A ND THE ASSESSEE HAS FULLY DISCHARGED THE ONUS BY FILING THE NECESSARY P ROOF WITH THE AO. WE OBSERVED FROM THE ASSESSMENT RECORDS THAT THE AO HA S FAILED TO BRING ON RECORD ANY EVIDENCE TO JUSTIFY THE ADDITION WHEREAS THE CIT(A) HAS TAKEN A REASONABLE VIEW OF THE MATTER. BUT WHEN THE ISSUE O F BOGUS PURCHASES IS INVOLVED SOME ADDITION HAS TO BE MADE THEREBY ACCEP TING THE ALTERNATIVE PRAYER OF THE LD AR. IN THE PRESENT CASE THE AO HAS COMPLETELY FAILED IN CARRYING OUT ANY INVESTIGATION AND THEREFORE ONLY A DDITION BASED UPON SOME SMALL PERCENTAGE WOULD BE JUSTIFIED. CONSIDERI NG THE FACTS OF THE CASE IN TOTALITY, WE ARE OF THE OPINION THAT IT WOULD BE REASONABLE AND FAIR TO MAKE AN ADDITION OF 2.5% OF THE BOGUS PURCHASES TO THE INCOME OF THE ITA NO. 3243+/MUM/2012 M/S. AMITY INTERLINKS STEELS PVT. LTD. 5 ASSESSEE. ACCORDINGLY WE DIRECT THE AO TO ADD 2.5% OF THE BOGUS PURCHASES BY SETTING ASIDE THE ORDER OF THE CIT(A). 8. IN THE RESULT APPEAL IS PARTLY ALLOWED. ITA NOS. 3244, 4195, 4161, 3058 & 4162/MUM/2012 9. IN ALL THESE APPEALS REVENUE HAS RAISED IDENTICAL I SSUES AS RAISED IN ITA NO. 3243/MUM/2012 EXCEPT VARIATION IN AMOUNTS. THEREFORE OUR OBSERVATIONS AND DECISION GIVEN IN THE ABOVE MENTIO NED APPEAL IS MUTATIS MUTANDIS APPLICABLE TO ALL THESE APPEALS. 10. IN THE RESULT, ALL THE APPEALS FILED BY THE REVENUE ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH JANUARY, 2018. SD/ - SD/ - (D.T. GARASIA) (RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 30 TH JANUARY, 2018 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) -14, MUMBAI 4. THE CIT - VI, MUMBAI 5. THE DR, A BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.