DCIT CEN CIR 2(3), MUMBAI V. SLS STAINLESS P.LTD, MUMBAI

ITA 3376/MUM/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 0615 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-02-2018
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 13-05-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: V JENANDHANAN
• Assessee Lawyers: RAVIKANT S PATH AK
• Keywords: Bogus purchase; Unexplained expenditure; Opportunity of being heard; Corroborative evidences; Assessment record
• Section: 69C; 142(1); 133(6); 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL K BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER AND SHRI MANOJ KUMAR AGGARWAL , ACCOUNTANT MEMBER ITA NO. 3376/MUM./2016 ( ASSESSMENT YEAR : 20 11 1 2 ) DY. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE 2(3), MUMBAI . APPELLANT V/S M/S. SLS STAINLESS PVT. LTD. SLS HOUSE, 43, 1 ST CARPENTER STREET C.P. TANK, MUMBAI 400 004 PAN AADCS1273P . RESPONDENT ITA NO. 3477/MUM./2016 ( ASSESSMENT YEAR : 20 1 1 1 2 ) M/S. HELLIOS TUBEALLOYS PVT. LTD. (EARLIER KNOWN AS SLS TUBES PVT. LTD. ) SLS HOUSE, 43, 1 ST CARPENTER STREET C.P. TANK, MUMBAI 400 004 PAN AALCS1837M . APPELLANT V/S DY. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE 14, MUMBAI . RESPONDENT REVENUE BY : SHRI V. JENANDHANAN ASSESSEE BY : SHRI RAVIKANT S. PATHAK DATE OF HEARING 31 .0 1.2018 DATE OF ORDER 02.02.2018 O R D E R PER SAKTIJIT DEY, J.M. AFORESAID APPEALS ONE BY THE REVENUE AND THE OTHER BY THE ASSESSEE ARE AGAINST TWO SEPARATE ORDERS PASSED BY THE LEARNED 2 SLS STAINLESS PVT. LTD. AND HELLIOS TUBEALLOYS PVT. LTD. COMMISSIONER (APPEALS) 48, MUMBAI, IN RESPECT OF TWO DIFFERENT ASSESSEES FOR THE ASSESSMENT YEAR 2011 12. ITA NO. 3376/MUM./2016 REVENUES APPEAL 2 . THE ONLY EFFECTIVE GROUND RAISED BY THE REVENUE IS IN RELATION TO THE DECISION OF THE LEARNED COMMISSIONER (APPEALS) IN RESTRICTING THE DISALLOWANCE / ADDITION UNDER SECTION 69C OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT ) TO 12.5% OF THE ALLEGED BOGUS PURCHASES. 3 . BRIEF FACTS ARE, THE ASSESSEE A CO MPANY IS ENGAGED IN MANUFACTURE AND TRADING OF FERROUS AND NON FERROUS METALS. FOR THE ASSESSMENT YEAR UNDER DISPUTE, ASSESSEE FILED ITS RETURN OF INCOME ON 1 ST FEBRUARY 2012, DECLARING TOTAL INCOME OF ` 1,98,54,230. DURING THE ASSESSMENT PROCEEDINGS THE A SSESSING OFFICER ON THE BASIS OF INFORMATION OBTAINED FROM THE SALES TAX DEPARTMENT, GOVERNMENT OF MAHARASHTRA, FOUND THAT PURCHASES TO THE TUNE OF ` 5,72,52,238, MADE FROM FIVE PARTIES WERE NOT GENUINE AS THE CONCERNED PARTIES HAVE BEEN IDENTIFIED AS HAWALA OPERATORS PROVIDING ACCOMMODATION BILLS ONLY. AFTER CONFRONTING THE AFORESAID INFORMATION OBTAINED FROM THE SALES TAX DEPARTMENT TO THE ASSESSEE THE ASSESSING OFFICER CALLED UPON THE ASSESSEE TO PROVE THE GENUINENESS OF THE PURCHASES. FURTHER, TO VERIFY THE GENUINENESS OF PURCHASES, THE ASSESSING OFFICER ISSUED NOTICES UNDER SECTION 133(6) OF THE ACT TO THE CONCERNED PARTIES, AGAINST 3 SLS STAINLESS PVT. LTD. AND HELLIOS TUBEALLOYS PVT. LTD. WHICH , AS ALLEGED BY THE ASS ESSING OFFICER , NO REPLY WAS RECEIVED. AS OBSERVED BY THE ASSESSING OFFICER THE ASSESSEE WAS NEITHER ABLE TO PRODUCE THE CONCERNED PARTIES NOR COULD PROVE THE GENUINENESS OF THE PURCHASES WITH SUPPORTING EVIDENCE. THEREFORE, THE ASSESSING OFFICER TREATED T HE PURCHASES OF ` 5,72,52,238 AS UNEXPLAINED EXPENDITURE UNDER SECTION 69C OF THE ACT AND ADDED TO THE INCOME OF THE ASSESSEE. ASSESSEE CHALLENGED THE ADDITION BEFORE THE FIRST APPELLATE AUTHORITY. 4 . THE LEARNED COMMISSIONER (APPEALS) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE IN THE CONTEXT OF FACTS AND MATERIALS ON RECORD RESTRICTED THE ADDITION TO 12.5% OF THE ALLEGED BOGUS PURCHASES WHICH WORKED OUT TO ` 71,56,530. 5 . WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. AT THE OU TSET, LEARNED AUTHORIZED REPRESENTATIVE SUBMITTED BEFORE US THAT WHILE CONSIDERING ASSESSEES APPEAL ON IDENTICAL ISSUE OF ESTIMATION OF PROFIT ON ALLEGED BOGUS PURCHASES FOR THE VERY SAME ASSESSMENT YEAR THE TRIBUNAL IN ITA NO.3189/MUM./2016, THOUGH , UPHE LD THE ESTIMATION OF PROFIT ON ALLEGED BOGUS PURCHASES @ 12.5%, HOWEVER, DIRECTED THE ASSESSING OFFICER TO REDUCE THE GROSS PROFIT ALREADY DECLARED BY THE ASSESSEE FROM THE PROFIT TO BE ESTIMATED AT 12.5% OF THE BOGUS PURCHASES. THE LEARNED DEPARTMENTAL RE PRESENTATIVE ALSO AGREED WITH THE AFORESAID SUBMISSIONS OF THE 4 SLS STAINLESS PVT. LTD. AND HELLIOS TUBEALLOYS PVT. LTD. ASSESSEE. AS COULD BE SEEN FROM THE MATERIAL ON RECORD , WHILE DECIDING ASSESSEES APPEAL ARISING OUT OF THE IMPUGNED ORDER OF THE LEARNED COMMISSIONER (APPEALS) THE TRIBUNAL HAS DIRECTED THE AS SESSING OFFICER TO ADOPT THE PROFIT RATE ON ALLEGED BOGUS PURCHASES @ 12.5% AND THEREAFTER REDUCE THE GROSS PROFIT ALREADY DECLARED BY THE ASSESSEE TO QUANTIFY THE DISALLOWANCE ON ACCOUNT OF ALLEGED BOGUS PURCHASES . IN VIEW OF THE AFORESAID DECISION OF THE CO ORDINATE BENCH ON IDENTICAL ISSUE, WE DO NOT FIND ANY REASON TO DEVIATE FROM THE VIEW TAKEN THEREIN. ACCORDINGLY, GROUND RAISED BY THE REVENUE IS DISMISSED. 6 . IN THE RESULT, REVENUES APPEAL IS DISMISSED. ITA NO. 3477/MUM./2016 ASSESSEES APPEAL 7 . IN THIS APPEAL, THE ASSESSEE HAS RAISED THREE GROUNDS. 8 . GROUNDS NO.1 AND 3(A) ARE NOT PRESSED , HENCE , DISMISSED. 9 . IN GROUND NO.2, ASSESSEE HAS CHALLENGED ADDITION OF ` 68,17,605, ON ACCOUNT OF DIFFERENCE IN CLOSING AND OPENING STOCK. 10 . BRIEF FACTS ARE, THE ASS ESSEE A COMPANY IS STATED TO BE A MANUFACTURER AND TRADER IN FERROUS AND NON FERROUS GOODS . FOR THE ASSESSMENT YEAR UNDER DISPUTE, ASSESSEE FILED ITS RETURN OF INCOME ON 27 TH MARCH 2012, DECLARING TOTAL INCOME OF ` 2,38,98,180. AS ALLEGED 5 SLS STAINLESS PVT. LTD. AND HELLIOS TUBEALLOYS PVT. LTD. BY THE ASSESSING OFFICER , EVEN AFTER REPEATEDLY ISSUING NOTICES UNDER SECTION 142(1) AND 143(2) THE ASSESSEE NEITHER APPEARED NOR COMPLIED TO THE NOTICES ISS UED. THEREFORE , THE ASSESSING OFFICER PROCEEDED TO COMPLETE THE ASSESSMENT EX PARTE TO THE BEST OF HIS JUDGMENT UNDE R SECTION 144 OF THE ACT. DURING THE ASSESSMENT PROCEEDINGS ON VERIFYING THE RETURN OF INCOME FILED BY THE ASSESSEE HE FOUND THAT THE ASSESSEE HAD SHOWN OPENING STOCK OF ` 5,32,34,252 FOR THE PREVIOUS YEAR 2010 11. HOWEVER, FROM THE ASSESSMENT RECORD OF A SSESSMENT YEAR 2010 11, HE FOUND THAT AS PER TAX AUDIT REPORT, THE VALUE OF CLOSING STOCK SHOWN BY THE ASSESSEE WAS ` 4,64,16,647. SINCE , THE ASSESSEE FAILED TO RECONCILE THE DIFFERENCE IN CLOSING AND OPENING STOCK , HE TREATED THE DIFFERENTIAL AMOUNT OF ` 68,17,605 AS UNDISCLOSED OPENING STOCK AND ADDED TO THE INCOME OF THE ASSESSEE. 11 . THE ASSESSEE CHALLENGED THE ADDITION IN AN APPEAL PREFERRED BEFOR E THE FIRST APPELLATE AUTHORITY. H OWEVER, SINCE THE ASSESSEE DID NOT APPEAR IN THE APPEAL PROCEEDINGS AND FAI LED TO RECONCILE THE DIFFERENCE IN CLOSING AND OPENING STOCK WITH SUPPORTING EVIDENCE, THE LEARNED COMMISSIONER (APPEALS) SUSTAINED THE ADDITION. 12 . THE LEARNED AUTHORIZED REPRESENTATIVE SUBMITTED THAT DUE TO NON COMMUNICATION OF STATUTORY NOTICES AND OTHER UNAVOIDABLE CIRCUMSTANCES ASSESSEE WAS UNABLE TO APPEAR BEFORE THE DEPARTMENTAL 6 SLS STAINLESS PVT. LTD. AND HELLIOS TUBEALLOYS PVT. LTD. AUTHORITIES AND THEREBY FAILED TO RECONCILE THE DIFFERENCE IN CLOSING AND OPENING STOCK. HE SUBMITTED, GIVEN AN OPPORTUNITY, ASSESSEE WILL RECONCILE THE DIFFERENCE BEFORE THE A SSESSING OFFICER 13 . THE LEARNED DEPARTMENTAL REPRESENTATIVE DOESNT HAVE ANY OBJECTION IF THE ISSUE IS RESTORED BACK TO THE FILE OF THE ASSESSING OFFICER FOR DE NOVO ADJUDICATION. 14 . HAVING CONSIDERED THE SUBMISSIONS OF THE PARTIES AND PERUSED MATERIAL ON REC ORD, WE FIND THAT NEITHER BEFORE THE ASSESSING OFFICER NOR BEFORE THE FIRST APPELLATE AUTHORITY THE ASSESSEE APPEARED AND RECONCILED THE DIFFERENCE IN CLOSING AND OPENING ST OCK WITH SUPPORTING EVIDENCE. T HEREFORE, THERE WERE NO OTHER OPTION S BEFORE THE DEPARTMENTAL AUTHORITIES BUT TO TREAT THE DIFFERENCE BETWEEN THE CLOSING AND OPENING STOCK AS INCOME OF THE ASSESSEE. HOWEVER, CONSIDERING THE SUBMISSIONS OF THE LEARNED AUTHORIZED REPRESENTATIVE THAT GIVEN AN OPPORTUNITY THE ASSESSEE WILL BE A BLE TO RECONCILE THE DIFFERENCE IN CLOSING A N D OPENING STOCK WITH SUPPORTING EVIDENCE, WE ARE INCLINED TO RESTORE THE ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR DE NOVO ADJUDICATION AFTER PROVIDING DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THIS G ROUND IS ALLOWED FOR STATISTICAL PURPOSES. 15 . IN GROUND NO.3(B), ASSESSEE HAS CHALLENGED THE A D DITION OF ` 1,10,27,763 MADE ON ACCOUNT OF ALLEGED BOGUS PURCHASES. 7 SLS STAINLESS PVT. LTD. AND HELLIOS TUBEALLOYS PVT. LTD. 16 . BRIEF FACTS ARE, DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER ON THE BASIS OF INFORMATION OBTAINED FROM SALES TAX DEPARTMENT, GOVERNMENT OF MAHARASHTRA, FOUND THAT PURCHASES WORTH ` 1,10,27,763 CLAIMED TO HAVE BEEN MADE BY THE ASSESSEE FROM SUN ICO TRADERS PVT. LTD. WERE NOT GENUINE AS THE SAID PARTY HAS PROVIDED ACCOMMODATION BILLS WITHOUT ACTUAL DELIVERY OF GOOD S. T HOUGH , THE ASSESSING OFFICER CALLED UPON THE ASSESSEE TO PROVE THE GENUINENESS OF PURCHASES, HOWEVER, SINCE THE ASSESSEE NEITHER AP PEARED BEFORE THE ASSESSING OFFICER NOR COMPLIED TO THE QUERIES RAISED BY HIM, THE ASSESSIN G OFFICER PROCEEDED TO REJECT THE BOOKS OF ACCOUNT AND TREATING THE PURCHASES MADE OF ` 1,10, 27 ,763 AS BOGUS ADDED TO THE INCOME OF THE ASSESSEE. 17 . THE ASSESSEE CHALL ENGED THE ADDITION BEFORE THE FIRST APPELLATE AUTHORITY. HOWEVER, SINCE BEFORE THE FIRST APPELLATE AUTHORITY ALSO NEITHER THE ASSESSEE APPEARED NOR PRODUCED ANY EVIDENCE TO PROVE THE GENUINENESS OF PURCHASES MADE , THE LEARNED COMMISSIONER (APPEALS) CONFIRM ED THE ADDITION. 18 . THE LEARNED AUTHORIZED REPRESENTATIVE SUBMITTED, DUE TO NON COMMUNICATION OF STATUTORY NOTICES AND OTHER UNAVOIDABLE CIRCUMSTANCES, THE ASSESSEE WAS UNABLE TO APPEAR BEFORE THE DEPARTMENTAL AUTHORITIES AND PRODUCE EVIDENCE TO PROVE THE 8 SLS STAINLESS PVT. LTD. AND HELLIOS TUBEALLOYS PVT. LTD. GE NUINENESS OF THE PURCHASES. HE SUBMITTED, UNDER IDENTICAL CIRCUMSTANCES IN ASSESSEES OWN CASE FOR THE PRECEDING ASSESSMENT YEAR I.E., ASSESSMENT YEAR 20 10 11, THE TRIBUNAL HAS DIRECTED THE ASSESSING OFFICER TO RESTRICT THE ADDITION TO THE EXTENT OF 10% OF THE BOGUS PURCHASES. HE SUBMITTED, SIMILAR DIRECTION MAY BE GIVEN IN THE IMPUGNED ASSESSMENT YEAR AS WELL. 19 . THE LEARNED DEPARTMENTAL REPRESENTATIVE, THOUGH, JUSTIFIED THE ADDITION MADE BY THE ASSESSING OFFICER, HOWEVER, HE SUBMITTED THAT THE ISSUE MAY BE RESTORED BACK TO THE ASSESSING OFFICER TO PROVIDE AN OPPORTUNITY TO THE ASSESSEE TO PROVE THE GENUINENESS OF PURCHASES. 20 . WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED MATERIAL ON RECORD. IT IS EVIDENT, ON THE BASIS OF INFORMATION OBTAINED FROM THE SALES TAX DEPARTMENT, THE ASSESSING OFFICER DOUBTED THE PURCHASES OF ` 1,10,27,763 FROM M/S. SUNICO TRADERS PVT. LTD. , AND CALLED UPON THE ASSESSEE TO PROVE THE GENUINENESS OF PURCHASES WITH SUPPORTING EVIDENCE. HOWEVER, THE ASSESSEE NEITHER APPEARED NOR PRODUC ED ANY SUPPORTING EVIDENCE BEFORE THE ASSESSING OFFICER TO PROVE THE GENUINENESS OF PURCHASES MADE. EVEN , BEFORE THE FIRST APPELLATE AUTHORITY ALSO THE ASSESSEE NEITHER APPEARED NOR PRODUCED ANY SUPPORTING EVIDENCE TO PROVE THE GENUINENESS OF PURCHASES. TH EREFORE, IN THE GIVEN CIRCUMSTANCES, THE DEPARTMENTAL AUTHORITIES HAD NO OTHER 9 SLS STAINLESS PVT. LTD. AND HELLIOS TUBEALLOYS PVT. LTD. OPTION BUT TO TREAT THE ENTIRE PURCHASES AS BOGUS. THOUGH, THE LEARNED AUTHORIZED REPRESENTATIVE HAS PLACED RELIANCE UPON THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2010 11 IN ITA NO.2791/MUM./2017 AND C.O. NO.146/MUM./2017 DATED 9 TH OCTOBER 2017, HOWEVER, ON CAREFUL PERUSAL OF THE SAID ORDER OF THE TRIBUNAL, IT IS OBSERVED THAT IN THE SAID CASE THE ASSESSEE HAD APPEARED BEFORE THE DEPARTMENTAL AUTHOR ITIES AND PARTICULARLY BEFORE THE LEARNED COMMISSIONER (APPEALS) THE ASSESSEE HAD FURNISHED SUPPORTING DOCUMENTARY EVIDENCES LIKE COPIES OF BILLS, DELIVERY CHALLAN S , LEDGER ACCOUNTS, STOCK REGISTER CUM DETAILS, QUANTITY WISE DETAILS, COPY OF BANK STATEMENT SHOWING PAYMENTS THROUGH CHEQUES, CONFIRMATION FROM THE PARTIES FROM WHOM PURCHASES WERE MADE . C ONSIDERING THE DOCUMENTARY EVIDENCES FILED BY THE ASSESSEE LEARNED COMMISSIONER (APPEALS) HAD ESTIMATE PROFIT @ 12.5% O F THE BOGUS PURCHASES WHICH WAS REDUCED TO 10% BY THE TRIBUNAL. HOWEVER, FACTS OF THE PRESENT APPEAL ARE COMPLETELY DIFFERENT. IN THE PRESENT CASE, THE ASSESSEE HAS NOT APPEARED AT ANY STAGE OF THE PROCEEDINGS BEFORE THE DEPARTMENTAL AUTHORITIES . U NLESS THE ASSESSEE APPEARS AND PRODUCES SUPPORTI NG EVIDENCES SUCH AS INVOICES , BILLS , DELIVERY CHALLANS, STOCK REGISTER, CONSUMPTION AND SALE OF MATERIAL WITH QUANTITATIVE DETAILS TO CO RELATE THE PURCHASES WITH SALES IT CANNOT BE SAID THAT THE ASSESSEE HAD EFFECTED THE PURCHASES EVEN IF NOT FROM THE DE CLARED SOURCE BUT SOME 10 SLS STAINLESS PVT. LTD. AND HELLIOS TUBEALLOYS PVT. LTD. OTHER SOURCES, IN WHICH EVENT, ESTIMATION OF PROFIT EITHER AT 12.5% OR EVEN AT 10% WOULD BE JUSTIFIED KEEPING IN VIEW THE GROSS PROFIT RATE ALREADY DECLARE D BY THE ASSESSEE. SINCE , THE ASSESSEE HAS NOT FURNISHED ANY EVIDENCE TO PROVE THE GENUINENESS OF THE PURCHASES , AND ALSO CONSIDERING THE FACT THAT BOTH THE ASSESSMENT ORDER AND FIRST APPELLATE ORDER WERE PASSED EX PARTE IN THE ABSENCE OF THE ASSESSEE, TO PROVIDE AN OPPORTUNITY TO THE ASSESSEE TO PROVE THE PURCHASES WE ARE INCLINED TO RESTORE THE ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR DE NOVO ADJUDICATION AFTER DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE . FURTHER, WE MAKE IT CLEAR, IN CASE THE ASSESSEE DOESNT APPEAR AND FAILS TO COOPERATE WITH THE ASSESSING OFFI CER IN FINALIZING THE PROCEEDINGS, THE ASSESSING OFFICER IS AT LIBERTY TO DECIDE THE ISSUE ON THE BASIS OF MATERIALS ON RECORD AND IN ACCORDANCE WITH LAW. THIS GROUND IS ALLOWED FOR STATISTICAL PURPOSES. 21 . IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. 22 . TO SUM UP, REVENUES APPEAL IS DISMISSED AND ASSESSEES APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 02.02.2018 SD/ - MANOJ KUMAR AGGARWAL ACCOUNTANT MEMBER SD/ - SAKTIJIT DEY JUDICIAL MEMBER MUMBAI, DATED: 02.02.2018 11 SLS STAINLESS PVT. LTD. AND HELLIOS TUBEALLOYS PVT. LTD. COPY OF THE ORDER FORWARDED TO : ( 1 ) THE ASSESSEE; ( 2 ) THE REVENUE; ( 3 ) THE CIT(A); ( 4 ) THE CIT, MUMBAI CITY CONCERNED; ( 5 ) THE DR, ITAT, MUMBAI; ( 6 ) GUARD FILE . TRUE COPY BY ORDER PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY (ASSTT. REGISTRAR /SR.P.S ) ITAT, MUMBAI