PUSHPAK AUXICHEM P. LTD, THANE V. ITO WD 1(3), KALYAN

ITA 3344/MUM/2017

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 9200 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-10-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 18-07-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 08-05-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAM TIWARI
• Keywords: Bogus purchase; Gift; Principle of natural justice; Accommodation entries
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC , BENCH MUMBAI BEFORE SHRI R.C.SHARMA, AM ITA NO. 3344 / MUM/20 17 ( ASSESSMENT YEAR 2010 - 11 : ) M/S. PUSHPAK AUXICHEM PVT. LTD., 241, B - 2, KASTURI PLAZA 2 ND FLOOR, MANPADA ROAD DOMBIVLI THANE - 421201 VS. ITO WD 1(3) 1 ST FLOOR, MOHAN PLAZA WAYALE NAGAR KHADAKPADA KALYAN (W) - 421 301 PAN/GIR NO. AABCP0099E APPELLANT ) .. RESPONDENT ) ASSESSEE BY NONE REVENUE BY SHRI RAM TIWARI DATE OF HEARING 27 / 09 /201 7 DATE OF PRONOUNCEME NT 04 / 10 /201 7 / O R D E R PER R.C.SHARMA (A.M) : THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) - 1, AURANGABAD 1 DATED 02/12/2016 FOR A.Y.2010 - 11 IN THE MATTER OF ORDER PASSED U/S.143(3) R.W.S. 147 OF THE IT ACT. 2. NOBOD Y APPEARED ON BEHALF OF ASSESSEE INSPITE OF GIVING OPPORTUNITY. EVEN ON EARLIER OCCASION DATED 30/08/2017, CASE WAS FIXED FOR HEARING BUT NO ONE APPEARED, THEREFORE, IT WAS ADJOURNED TO 27/09/2017. NOBODY WAS PRESENT IN THE COURT NOR ANY ADJOURNMENT PETITI ON WAS FILED, THEREFORE, BENCH DECIDED TO DISPOSE THE APPEAL AFTER HEARING LEARNED DR AND CONSIDERING THE MATERIAL PLACED ON RECORD. IN THIS APPEAL, ASSESSEE IS AGGRIEVED FOR ADDITION OF 20% OF BOGUS PURCHASES AS UPHELD BY CIT(A). 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. ITA NO. 3344/MUM/2017 M/S. PUSHPAK AUXICHEM PVT. LTD., 2 4. THE ADDITION MADE BY AO ON ACCOUNT OF BOGUS PURCHASES AFTER MAKING DUE ENQUIRY HAS BEEN REDUCED BY CIT(A) BY ESTIMATING PROFIT OF 20% OF SUCH BOGUS PURCHASES. THE PRECISE OBSERVATION OF CIT(A) WAS AS UNDER: - 5 .3 IN VIEW O F THE FOREGOING DISCUSSION, THE PERCENTAGE OF DISALLOWANCE OF BOGUS PURCHASES, HAS TO BE BASED ON THE FACTS OF EACH CASE, HENCE THE SAME CANNOT BE GENERALIZED IN EVERY CASE. THE DECISIONS RENDERED IN THE CASES OF SANJAY OIL CAKE INDUSTRIES (SUPRA) AND VIJ AY PROTEIN LTD. (SUPRA) ARE DISTINGUISHABLE SINCE IN CASE OF SANJAY OIL CAKE INDUSTRIES, A SPECIFIC FINDING WAS GIVEN BY THE ASSESSING OFFICER THAT PURCHASES WERE MADE FROM THE ALLEGED BOGUS SUPPLIERS AT HIGHER RATE AS COMPARED TO THE OTHER PARTIES. IN THE CASE OF VIJAY PROTEINS LTD., AFTER EXAMINING THE BANK ACCOUNT, IT WAS ESTABLISHED THAT CHEQUES ISSUED TO VARIOUS PARTIES WERE DEPOSITED IN ONE OF THE ACCOUNT, WHICH WERE FOUND TO BE OWNED BY THE ASSESSEE HIMSELF BUT THERE ARE NO SUCH CIRCUMSTANCES IN THE PRESENT CASE. THE COUNSEL OF APPELLANT HAS PLACED RELIANCE ON THE DECISION OF HON'BLE MUMBAI TRIBUNAL IN THE CASE OF DCIT VS. SHRI RAJEEV G. KALATHIL (ITA NO.6727/MUM/2012 DATED 20.08.2014} BUT THE FACTS OF SAID CASE WERE DISTINGUISHABLE. IN THE CITED CASE , COPIES OF CONSIGNMENT BILLS SHOWED THAT THE MATERIAL SO PURCHASED WAS TRANSPORTED BY GOVERNMENT APPROVED TRANSPORT CONTRACTORS WHO HAD DELIVERED THE MATERIAL AT THE SITE. SIMILARLY IN THE CASE OF NIKUNJ EXIMP ENTERPRISES PVT. LTD., THERE WAS A CATEGORICA L FINDING THAT THE MOVEMENT OF GOODS WAS NOT IN DOUBT. IN THE PRESENT CASE, THE GOODS HAVE NOT BEEN TRANSPORTED BY THE GOVERNMENT APPROVED TRANSPORT CONTRACTORS. THE LORRY RECEIPTS/TRUCK NUMBERS HAVE NOT BEEN FURNISHED THEREFORE THE MOVEMENT OF GOODS IS IN DOUBT. THEREFORE THE APPELLANT HAS MISERABLY FAILED TO BRING ON RECORD ANY EVIDENCE TO PROVE THAT THE MATERIAL IN QUESTION WAS ACTUALLY TRANSPORTED. IN THE CASE OF CIT VS. NANGALIA FABRICS (P) LTD., THE ASSESSEE HAD FURNISHED QUANTITATIVE DETAILS AND COPI ES OF BILLS/OTHER DOCUMENTS. THE GUJARAT HIGH COURT THAT ADDITION U/S 68 COULD NOT HAVE BEEN MADE IN RESPECT OF PURCHASES. IN THE PRESENT CASE, THE ASSESSEE HAS FAILED TO FURNISH DOCUMENTARY EVIDENCES FOR TRANSPORTATION OF GOODS PURCHASED FROM THE HAWALA D EALERS. THEREFORE THE SAID DECISION IS OF NO USE TO THE APPELLANT. FURTHER THE APPELLANT HAS ALLEGED THAT IT WAS NOT ALLOWED TO CROSS EXAMINE THE SAID SUPPLIERS ALLEGED TO BE HAWALA DEALER AND THEREFORE IT VIOLATED PRINCIPLES OF NATURAL JUSTICE. IT MUST BE APPRECIATED HERE THAT IT WAS NOT THE INCOME TAX DEPARTMENT WHICH HAD RECORDED THE STATEMENTS OF THE ALLEGED SUPPLIERS OR HAD IN ITS POSSESSION AFFIDAVITS OF THE ALLEGED HAWALA DEALERS. THE APPELLANT CAN'T DENY THAT HE HAD NOT BEEN CONFRONTED WITH THESE EV IDENCES AS THE SALES TAX DEPARTMENT HAD ISSUED SHOW CAUSE NOTICES TO ALL THE BENEFICIARIES INCLUDING THE APPELLANT COMPANY AND IN MAJORITY OF CASES. VAT HAD ALSO BEEN COLLECTED FROM THE BENEFICIARIES INCLUDING APPELLANT. IN THE CASE OF SMT KUSUM LATA THUKR AL (327 ITR 424) THE HONOURABLE PUNJAB & HARYANA HIGH COURT HAD AN OCCASION TO DEAL WITH THE SAME ISSUE. IN THE CITED CASE, THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE HAD SOUGHT ANNULMENT OF THE ORDER ON THE GROUND THAT THE ASSESSES WAS NOT ALLO WED TO CROSS EXAMINE THE DONORS. THE HONOURABLE HIGH COURT DISAGREED WITH THIS PREPOSITION. WHATEVER MATERIAL THE ASSESSING OFFICER HAD GATHERED WAS PUT TO THE ; ASSESSEE TO COMMENT. THEREFORE, THE STATEMENTS OF THE DONORS WHO HAD DENIED TO HAVE MADE ANY G IFT, HAD NOT BEEN UTILIZED AGAINST THE ASSESSEE WITHOUT AFFORDING THE OPPORTUNITY OF ITA NO. 3344/MUM/2017 M/S. PUSHPAK AUXICHEM PVT. LTD., 3 THE ASSESSEE. THE ASSESSEE HAD NOT DISCHARGED THE INITIAL ONUS TO PRODUCE THE NECESSARY EVIDENCE TO SUPPORT THE GENUINENESS OF THE TRANSACTIONS. THE DONORS IN THEIR STATEM ENTS HAD DENIED TO HAVE GIVEN ANY GIFTS TO SMT. KUSUM LATA THUKRAL, THE ASSESSEE. THEY HAD DENIED EVEN THE ACQUAINTANCE WITH THE ASSESSEE. THEY HAD ALSO DENIED TO HAVE MADE THE DEPOSIT OF CASH IN THEIR ACCOUNTS AND ISSUE OF DRAFTS FOR THE PURPOSE OF GIFTS. WHEN THE DONORS HAD DENIED TO HAVE GIVEN ANY GIFTS IT HAD TO BE LOGICALLY CONCLUDED THAT IT WAS THE ASSESSEE'S OWN MONEY, WHICH WAS ROUTED THROUGH THE MODE OF ALLEGED GIFTS THROUGH THE ACCOUNTS OF THE PERSONS, WHO WERE NOT AWARE ABOUT THE DEPOSIT OF MONEY IN THEIR ACCOUNTS AND PURCHASE OF BANK DRAFTS IN FAVOUR OF THE ASSESSEE. IT WAS HELD BY THE HON'BLE PUNJAB & HARYANA HIGH COURT THAT THE QUESTION WHETHER DENIAL OF OPPORTUNITY OF CROSS - EXAMINATION RESULTED IN I VIOLATION OF NATURAL JUSTICE DEPENDED UPON T HE FACTS OF EACH CASE. THE OBJECT OF ' CROSS - EXAMINATION WAS TO TEST THE VERACITY OF THE VERSION GIVEN IN EXAMINATION - IN CHIEF. IT WAS HELD THAT EVEN IF CROSS - EXAMINATION WAS ALLOWED AND THE DONORS WHO HAD DISOWNED THE MAKING OF GIFTS, WERE CONFRONTED AND SHOWN TO BE FACTUALLY WRONG, THE SAME WOULD HAVE MADE NO DIFFERENCE, AS THERE WAS NO NATURAL LOVE AND AFFECTION AND IN ITS ABSENCE, THE GIFTS WERE NOT GENUINE. THE APPEAL OF THE ASSESSEE WAS ACCORDINGLY DISMISSED. REVERTING BACK TO THE PRESENT CASE, IT WOU LD HAVE MADE NO DIFFERENCE EVEN IF THE APPELLANT COMPANY HAD BEEN ALLOWED AN OPPORTUNITY TO CROSS - EXAMINE THE ALLEGED SUPPLIERS AS THEY HAD CATEGORICALLY ADMITTED TO BE INVOLVED IN GIVING ONLY ACCOMMODATION ENTRIES. IT IS AN ARGUMENT JUST FOR THE SAKE OF THE ARGUMENT; MERE DENIAL BY THE APPELLANT COMPANY IS NOT SUFFICIENT TO REBUT THE DIRECT AS WELL AS ' CIRCUMSTANTIAL EVIDENCE WHICH IS IN THE POSSESSION OF THE DEPARTMENT. THE APPELLANT HAS MISERABLY FAILED TO SHOW MOVEMENT OF THE GOODS. THE APPELLANT HAS NOT DISCHARGED ITS ONUS OF PROVING THE GENUINENESS OF THE IMPUGNED PURCHASES YET IT HAS BLAMED THE AO FOR NOT CONDUCTING ENQUIRIES. LOOKING TO THE DOCUMENTARY EVIDENCE IN THE PRESENT CASE, IT IS EVIDENT THAT IMPUGNED PURCHASES FROM THE ALLEGED SUPPLIERS NA MELY M/S. UMIYA SALES AGENCY PVT. LTD, & M/S. RAMANAND SALES PVT. LTD. WERE NOT GENUINE. ONE HAS TO CONSIDER THE TOTALITY OF FACTS, SURROUNDING CIRCUMSTANCES AND HUMAN PROBABILITY FOR ARRIVING AT SUCH A CONCLUSION. THE APPELLANT IS NOT WILLING TO COME CLEA N AND HENCE ONE WILL HAVE TO TAKE RESOURCE FOR ARRIVING AT A CONCLUSION ON THE BASIS OF MATERIAL ON RECORD. THE APPELLANT HAS FAILED TO PRODUCE THE CONFIRMATIONS FROM THE ALLEGED SUPPLIER & DOCUMENTARY EVIDENCES IN SUPPORT OF ALLEGED PURCHASES. THE APPELLA NT HAS FAILED TO PRODUCE THE QUANTITATIVE DETAILS, ST OCK REGISTER, TRANSPORT BILLS, W EIGHMENT SLIPS, DELIVERY CHALLANS ETC. IN VIEW OF FACTS AND CIRCUMSTANCES IN THE PRESENT CASE, I ACCORDINGLY HOLD THAT THE APPELLANT HAS FAILED TO PROVE THE GENUINENESS OF PURCHASES MADE FROM M/S. UMIYA SALES AGENCY PVT. LTD. & M/S. RAMANAND SALES PVT, LTD. ACCORDINGLY THE BOOKS OF ACCOUNT OF THE APPELLANT ARE THEREFORE REJECTED U/S 145(3) OF THE ACT AS THESE DO NOT DISCLOSE TRUE STATE OF AFFAIRS. IT WAS HELD BY THE HONOUR ABLE ALLAHABAD TRIBUNAL IN THE CASE OF ISHRAWATI DEVI VS ITO (298 ITR. AT 393) THAT THE COMMISSIONER (APPEALS) HAS POWERS CONTERMINOUS WITH THOSE OF THE ASSESSING OFFICER. THE COMMISSIONER (APPEALS) CAN DIRECT THE ASSESSING OFFICER TO DO WHAT THE LATTER FA ILED TO DO. UNLESS THERE ARE SPECIFIC FETTERS PLACED UPON THE POWERS OF THE COMMISSIONER (APPEALS) BY EXPRESS WORDS, HE EXERCISES THE SAME POWERS AS DOES THE ORIGINAL COURT OR AUTHORITY. IN FACT, THE ENTIRE ASSESSMENT IS THROWN OPEN BEFORE HIM. HE CAN TRAV EL OUTSIDE THE RECORD, I.E, THE RETURN MADE BY THE ASSESSEE AND ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER. HE IS COMPETENT TO CONDUCT A DETAILED EXAMINATION OF ANY ASPECT DEALT WITH SUMMARILY OR BRIEFLY BY THE ASSESSING ITA NO. 3344/MUM/2017 M/S. PUSHPAK AUXICHEM PVT. LTD., 4 OFFICER. THOUGH THE AO HAD NO T REJECTED THE BOOKS OF ACCOUNT IN THE PRESENT CASE, YET THE SAME HAVE BEEN REJECTED BY THE UNDERSIGNED IN LIGHT OF FINDINGS RENDERED IN EARLIER PARAGRAPHS. HOWEVER THE ACTION OF THE AO TO DISALLOW 100% OF THE UNVERIFIABLE PURCHASES CANNOT BE UPHELD AS THE RE ARE CORRESPONDING DIRECT SALES OF MATERIAL SO PURCHASED FROM HAWALA DEALERS. THE FACT OF SALE OF ANILINE, NITRO BENZENE OR PHENOL ETC. BEING RECORDED IN THE BOOKS OF ACCOUNT, HAS NOT BEEN REPUDIATED BY THE AO ALSO. IT WOULD THEREFORE IMPLY THAT THE APPE LLANT WOULD HAVE ACTUALLY PURCHASED THE MATERIAL IN CASH FROM THE OPEN MARKET AND ONLY BILLS WERE TAKEN FROM M/S. UMIYA SALES AGENCY PVT. LTD. & M/S. RAMANAND SALES PVT. LTD. THE APPELLANT IS NOT THE END USER OF MATERIAL SO PURCHASED BUT A TRADER. IN VIEW OF THESE FACTS, THIS IS NOT A CASE WHERE THE ENTIRE CASH HAS BEEN SIPHONED OFF BY DEBITING THE BOGUS PURCHASES. THIS IS A CASE, WHERE AT THE MOST, THE PURCHASE AMOUNT WOULD HAVE BEEN INFLATED. THE APPELLANT HAS ALREADY DECLARED GP OF 13.02% IN ITS BOOKS OF ACCOUNT. THEREFORE, FOLLOWING THE PRINCIPLE LAID DOWN IN THE DECISION OF HON'BLE GUJARAT HIGH COURT, IN THE CASE OF SIMIT P SETH (356 ITR 451), I ACCORDINGLY DIRECT THE AO TO RESTRICT THE ADDITION TO RS.6,46,080/ - (20% OF RS.32,30,396/ - ) INSTEAD OF RS.32, 30,396/ - MADE BY HIM. THE APPELLANT GETS RELIEF OF RS.25,84,316/ - . THESE GROUNDS OF APPEAL ARE ACCORDINGLY PARTLY ALLOWED. 5. IT IS CLEAR FROM THE ORDER OF CIT(A) THAT HE HAS DEALT WITH THE ISSUE THREADBARE AND ESTIMATED EXTRA PROFIT AT 20% IN ADDITION TO NORMAL PROFIT RATE SHOWN BY ASSESSEE . I FOUND THAT ASSESSEE HAS ALREADY DECLARED GP AT 13.02%, THEREFORE, KEEPING IN VIEW OF TOTALITY OF FACT S AND CIRCUMSTANCES OF THE CASE VIS - - VIS NATURE OF ASSESSEES BUSINESS. I MODIFY BOTH THE ORDERS OF THE LOWER AUT HORITIES AND DIRECT AO TO REST RICT ADDITION TO THE EXTENT OF 1 0% FOR THE BOGUS PURCHASES. I DIRECT ACCORDINGLY. 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED IN PART. O RDER PRONOUNCED IN THE OPEN COURT ON THIS 04 / 10 /2017 S D/ - ( R.C.SHARMA ) ACCOUNTANT MEMBER MUMBAI ; DATED 04 / 10 /201 7 KARUNA SR. PS ITA NO. 3344/MUM/2017 M/S. PUSHPAK AUXICHEM PVT. LTD., 5 COPY OF THE ORDER FORWARDED TO : BY ORDER, ( ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. G UARD FILE. //TRUE COPY//