ASHWINI SAKET TUNGA JV, MUMBAI V. ASST CIT CIR RG 25(2), MUMBAI

ITA 3503/MUM/2017

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 9876 (ITAT-MUMBAI)
• Duration Of Justice: 3 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-09-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Assessment Year: 2010-2011
• Appeal Filed On: 12-05-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: V JENARDHANAN
• Assessee Lawyers: C S BIRADAR
• Keywords: Bogus purchase; Opportunity of being heard; Principle of natural justice; Additional evidence
• Section: 143(3); 133(6); 148; 37

Judgement Text

K IN THE INCOME TAX APPELLATE TRIBUNAL K BENCH, MUMBAI BEFORE SHRI C.N. PRASAD, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER ./ I.T.A. NO. 3503/ MUM/2017 ( / ASSESSMENT YEAR : 2010-11) ASHWINI SAKET TUNGA JV 5, NISHIL APARTMENT,NARIMAN ROAD,VILE PARLE(E), MUMBAI 400057 / V. ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE/RANGE 25(2), 5 TH FLOOR, C-10, PRATYAKSHKAR BHAWAN, BANDRA KURLA COMPLEX, BANDRA(E), MUMBAI ./ PAN : AABAA2717J ( / APPELLANT ) .. ( / RESPONDENT ) ./ I.T.A. NO. 3126/ MUM/2017 ( / ASSESSMENT YEAR : 2010-11) ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE/RANGE 25(2), 5 TH FLOOR, C-10, PRATYAKSHKAR BHAWAN, BANDRA KURLA COMPLEX, BANDRA(E), MUMBAI-400057 / V. ASHWINI SAKET TUNGA JV 5, NISHIL APARTMENT, NARIMAN ROAD, VILE PARLE(E), MUMBAI 400057 ./ PAN : AABAA2717J ( / APPELLANT ) .. ( / RESPONDENT ) REVENUE BY : SHRI V. JENARDHANAN , D.R. ASSESSEE BY : SH C S BIRADAR / DATE OF HEARING :06.09.2017 / DATE OF PRONOUNCEMENT : 06-09-2017 ITA 3503& 3126/MUM/2017 2 / O R D E R PER RAMIT KOCHAR, ACCOUNTANT MEMBER THESE CROSS APPEALS ARE FILED BY BOTH ASSESSEE AND REVENUE CHALLENGING THE APPELLATE ORDERS OF LEARNED COMMISSIONER OF INC OME-TAX(APPEALS)-37, MUMBAI (HEREINAFTER CALLED THE CIT(A)) DATED 28- 02-2017 WHEREIN LEARNED CIT(A) HAS PARTLY ALLOWED THE APPEAL OF THE ASSESSE E, WHICH APPEAL BEFORE LEARNED CIT(A) HAD ARISEN FROM THE ASSESSMENT ORDER DATED 09-02-2016 PASSED BY LD ASSESSING OFFICER(HEREINAFTER CALLED THE AO) U/S 143(3) R.W.S. 147 OF THE INCOME-TAX ACT,1961(HEREINAFTER CALLED THE ACT) . 2. THE DISPUTE BETWEEN RIVAL PARTIES ARE WITHIN A V ERY NARROW COMPASS AND REVOLVES AROUND ALLEGED BOGUS PURCHASES MADE BY THE ASSESSEE FROM SIX ALLEGED BOGUS DEALERS TO THE TUNE OF RS. 1,87,71,60 0/- . THE ASSESSEE BEING IN THE BUSINESS OF CIVIL CONSTRUCTION WORK HAS FILED R ETURN OF INCOME ON 27-09- 2010 U/S 139(1) OF THE 1961 ACT WHICH WAS PROCESSED BY REVENUE U/S 143(1) AND NO SCRUTINY ASSESSMENT WAS ORIGINALLY FRAMED BY THE AO U/S 143(2) R.W.S. 143(3). THE GENESIS OF THE CONTROVERSY HAS BEEN AN INTIMATION RECEIVED BY THE AO FROM DGIT(INV.), MUMBAI THAT THE ASSESSEE HAD EN TERED INTO HAWALA TRANSACTIONS FOR PURCHASES TO THE TUNE OF RS.1,87,7 1,600/- FROM FOLLOWING PARTIES:- S.NO. NAME OF THE SUPPLIER TIN AMOUNT(IN RS.) 1. VITARAG TRADING CO. 27830385697V 35,65,411/- 2. PRAYAN TRADING CO. 27740535951V 35,38,828/- 3. SAMPARK STEELS 27170360840V 35,70,653/- 4. BALAJI TRADERS 27070669840V 18,60,952/- 5. JAIN CORPORATION 27550632037V 24,06,607/- 6. KRASNA ENTERPRISES 27550630194V 38,29,149/- ITA 3503& 3126/MUM/2017 3 TOTAL 1,87,71,600/- THIS INFORMATION LED TO ISSUANCE OF REOPENING OF CO NCLUDED ASSESSMENT U/S 147 WHEREIN NOTICE DATED 24-02-2015 U/S 148 WAS ISS UED BY THE AO. THE ASSESSEE VIDE LETTER DATED 12-03-2015 REQUESTED THE AO TO ACCEPT THE ORIGINAL RETURN OF INCOME IN RESPONSE TO NOTICE U/S 148. THE ASSESSEE ASKED FOR REASONS FOR REOPENING WHICH WERE SUPPLIED BY THE AO TO THE ASSESSEE. THE AO OBSERVED THAT THESE PARTIES HAVE DEPOSED ON OATH BE FORE SALES TAX AUTHORITIES THAT THERE WERE ENGAGED IN PROVIDING BOGUS ACCOMMOD ATION ENTRIES WITHOUT SUPPLYING ANY MATERIAL AND NO ACTUAL SALE AND PURCH ASE OF MATERIAL TOOK PLACE. THE AO ISSUED NOTICES U/S 133(6) TO THESE SI X PARTIES ASKING FOR DETAILS OF DEALINGS OF SALE OF MATERIAL WITH THE ASSESSEE T O VERIFY GENUINENESS OF PURCHASES BUT THE SAID NOTICES RETURNED UN-SERVED. THE SAID PARTIES DID NOT APPEARED BEFORE THE AO NOR FILED ANY EVIDENCES TO P ROVE GENUINENESS OF PURCHASES. THE ASSESSEE IN RESPONSE TO THE EXPLANATION SOUGHT BY THE AO EXPRESSED ITS INABILITY TO FURNISH ANY EXPLANATION AND AGREED FOR ADDITIONS. THE AO , THUS , MADE THE ADDITIONS TO THE TUNE OF RS.1,87,71,600/- ON ACCOUNT OF DISALLOWANCE OF BOGU S PURCHASES MADE BY THE ASSESSEE FROM THESE BOGUS DEALERS U/S 37 AND ON THE ALLEGATION THAT BTHE ASSESSEE HAVING ACCOUNTED THE SAID AMOUNT IN BOOKS OF ACCOUNTS THROUGH FICTITIOUS INVOICES IN THE NAME OF THESE BOGUS PART IES , VIDE ASSESSMENT ORDER DATED 09-02-2016 PASSED BY THE AO U/S 143(3) R.W.S. 147 OF THE 1961 ACT. 2. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE LEARNED CIT(A) AND SUBMITTED BEFORE LD CIT(A) THAT THESE ARE BUILDING MATERIAL PURCHASED BY THE ASSESSEE FROM THESE SIX PARTIES WHO ARE REGISTERED DEALER WITH MAHARASHTRA VAT DEPARTMENT AND THEY FILED THEIR SALES TAX RETUR NS TILL FINANCIAL YEAR 2011- 12. IT WAS SUBMITTED THAT PAYMENT TO THESE DEALERS WERE MADE BY CHEQUE. IT WAS SUBMITTED THAT THESE PARTIES ARE WITNESSES OF T HE AO AND THE ONUS IS NOT ON THE ASSESSEE TO PRODUCE THESE PARTIES. THE ASSES SEE ALSO DISPUTED THE ITA 3503& 3126/MUM/2017 4 CONTENTION OF THE AO THAT THE ASSESSEE AGREED FOR A DDITIONS. THE ASSESSEE SUBMITTED THAT THE AO NEVER INTIMATED TO THE ASSESS EE THAT THE NOTICES U/S 133(6) WERE SENT TO THESE PARTIES WHICH REMAINED UN -COMPLIED WITH. THE LD. CIT(A) OBSERVED THAT THE ASSESSEE HAS SUBMITTED COP IES OF INVOICES AS WELL PAYMENTS WERE MADE BY CHEQUE THROUGH BANKS. IT WAS HELD THAT IT IS NOT POSSIBLE TO PRODUCE MATERIAL WITHOUT PURCHASE OF MA TERIAL AND THE AO HAS NOT DOUBTED SALES MADE BY THE ASSESSEE AND HENCE IT CAN NOT BE DOUBTED THAT THE ASSESSEE HAS NOT USED MATERIAL FOR CONTRACT WORK. I T WAS ALSO OBSERVED BY LEARNED CIT(A) THAT NO FURTHER INVESTIGATIONS WERE MADE BY THE AO AND THERE ARE NO EVIDENCES ON RECORD THAT THE ASSESSEE RECEIV ED BACK CASH AGAINST THESE BOGUS PURCHASES. THE LEARNED CIT(A) RELIED UPON DEC ISIONS OF HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT V. SIMIT P SHETH 356 ITR(GUJ.) AND ESTIMATED PROFIT @12.5% ON TOTAL BOGUS PURCHASES TO THE TUNE OF RS.1,87,71,600/- WHICH LED TO UPHOLDING OF ADDITIONS TO THE TUNE OF RS.23,46,450/- VIDE APPELLATE ORDER DATED 28-02-2017. 3. BOTH THE ASSESSEE AND REVENUE IS IN APPEAL BEFOR E THE TRIBUNAL AGAINST THE APPELLATE ORDER DATED 28-02-2017 PASSED BY LEARNED CIT(A). THE ASSESSEE IS AGGRIEVED BY UPHOLDING OF THE ADDITIONS TO THE TUNE OF 12.5% OF THE BOGUS PURCHASED BY ESTIMATING PROFITS EMBEDDED IN THE SAI D PURCHASES , WHILE REVENUE IS AGGRIEVED BY THE PART RELIEF GRANTED BY LEARNED CIT(A) AGAINST THE ADDITIONS TO THE TUNE OF 100% MADE BY THE AO TOWARD S THESE BOGUS PURCHASES FROM THESE SIX PARTIES TO THE TUNE OF RS. 1,87,71,600/-, BY UPHOLDING ADDITIONS TO THE TUNE OF 12.5% OF BOGUS P URCHASES AS AGAINST ADDITIONS OF 100% OF BOGUS PURCHASES MADE BY THE AO . ON BEING ASKED BY THE BENCH TO RECONCILE BETWEEN THE CONTRARY FINDING S OF FACTS RECORDED BY THE AO AND LEARNED CIT(A) , IT IS FAIRLY SUBMITTED BY L D COUNSEL FOR THE ASSESSEE THAT LARGE NUMBER OF ADDITIONAL EVIDENCES WERE SUBM ITTED BEFORE LEARNED CIT(A) TO PROVE UTILIZATION/CONSUMPTION OF MATERIAL FOR BUSINESS ALONG WITH STOCK RECORDS AS WELL OTHER DETAILS/EXPLANATIONS WH ICH WERE NOT EARLIER ITA 3503& 3126/MUM/2017 5 SUBMITTED BEFORE THE AO DURING REASSESSMENT PROCEED INGS AND THE LEARNED CIT(A) DID NOT FORWARDED THOSE ADDITIONAL EVIDENCES TO THE AO FOR HIS VERIFICATION/EXAMINATION AS IS CONTEMPLATED U/R 46A OF THE INCOME-TAX RULES, 1962 AND NO REMAND REPORT WAS SOUGHT BY THE LEARNED CIT(A) FROM THE AO. THE LEARNED COUNSEL FAIRLY CONCEDED THAT THE LEARNE D CIT(A) ALLOWED THE RELIEF WITHOUT SEEKING ANY REMAND REPORT AND THE MATTER MA Y BE RESTORED TO THE FILE OF THE AO FOR DE-NOVO ADJUDICATION ON MERITS OF THE ISSUE OF THESE BOGUS PURCHASES AFTER CONSIDERING AND EXAMINING THE ADDIT IONAL EVIDENCES FILED BY THE ASSESSEE. THE LEARNED DR ALSO FAIRLY AGREED THA T IN SUCH A SITUATION THE MATTER SHOULD BE RESTORED TO THE FILE OF THE AO FOR DENOVO ADJUDICATION ON MERITS. THUS, AFTER HEARING BOTH THE PARTIES AS DETAILED AB OVE AND PERUSING THE MATERIAL ON RECORD,WE ARE OF THE CONSIDERED VIEW TH AT THE ISSUE NEED TO BE RESTORED TO THE FILE OF THE AO FOR DENOVO ADJUDICAT ION OF THE ISSUE ON MERITS IN ACCORDANCE WITH LAW AFTER CONSIDERING THE EVIDENCES FILED BY THE ASSESSEE. WE HAVE OBSERVED THAT LEARNED CIT(A) HAS NOT SPECIFIED THE REASONS/JUSTIFICATION FOR ADMITTING THESE ADDITIONAL EVIDENCES AS IS CONT EMPLATED BY RULE 46A OF THE INCOME-TAX RULES, 1962. WE HAVE OBSERVED THAT T HE LD. CIT(A) HAS NOT CALLED FOR ANY REMAND REPORT FROM THE A.O. NOR ADDI TIONAL EVIDENCES FILED BY THE ASSESSEE BEFORE LEARNED CIT(A) FOR THE FIRST TI ME WERE FORWARDED BY LEARNED CIT(A) TO THE AO FOR NECESSARY VERIFICATION/EXAMINA TION BY THE AO . THUS, THE LEARNED CIT(A) DID NOT FOLLOW THE MANDATE OF RULE 4 6A OF THE INCOME-TAX RULES, 1962 . RULE 46A OF THE 1962 RULES IS NOT AN EMPTY FORMALITY AS IT CONTEMPLATE THE LEARNED CIT(A) TO RECORD REASONS FO R ADMITTING ADDITIONAL EVIDENCES FILED BY THE ASSESSEE AND THEN IT ALSO CO NTEMPLATE FORWARDING OF THESE ADDITIONAL EVIDENCES BY LEARNED CIT(A) TO THE AO FOR HIS NECESSARY VERIFICATIONS/EXAMINATION. THUS, WE ARE OF THE CONS IDERED VIEW THAT THE APPELLATE ORDER OF LD. CIT(A) CANNOT BE SUSTAINED, HENCE, WE SET ASIDE THIS MATTER BACK TO THE FILE OF THE A.O. FOR DE-NOVO DET ERMINATION OF THE ISSUE ON ITA 3503& 3126/MUM/2017 6 MERITS IN ACCORDANCE WITH LAW . THE A.O. SHALL VERI FY/ EXAMINE THE EXPLANATIONS/EVIDENCES FILED BY THE ASSESSEE FOR DE NOVO DETERMINATION OF THE ISSUE AFRESH ON MERITS . THE ASSESSEE IS DIRECTED TO PRODUCE FULL DETAILS/DOCUMENTARY EVIDENCES WITH RESPECT TO THE S TOCK RECORDS, STOCK RECONCILIATION ,CONSUMPTION/UTILIZATION OF THE MATE RIAL FOR BUSINESS DEALT WITHIN BY THE ASSESSEE AND ALSO TO PROVE GENUINENES S OF THESE PURCHASES . NEEDLESS TO SAY THAT THE AO SHALL PROVIDE PROPER AN D ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE IN ACCORDANCE WITH PRIN CIPLES OF NATURAL JUSTICE IN ACCORDANCE WITH LAW IN SET ASIDE PROCEEDINGS. WE OR DER ACCORDINGLY. 4. IN THE RESULT, BOTH THE APPEALS FILED BY THE ASS ESSEE IN ITA NO. 3503/MUM/2017 AND REVENUES APPEAL IN ITA NO. 3126/ MUM/2017 FOR A.Y. 2010-11 ARE ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 6 TH SEPTEMBER, 2017. # $% &' 06-09-2017 ( ) SD/- SD/- (C.N. PRASAD) (RAMIT KOCHAR) JUDICIAL MEMBER ACCOUNTANT MEMBER $ MUMBAI ; & DATED 06-09-2017 [ ITA 3503& 3126/MUM/2017 7 .9../ R.K. R.K. R.K. R.K. , EX. SR. PS !'#$%&%# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. : ( ) / THE CIT(A)- CONCERNED, MUMBAI 4. : / CIT- CONCERNED, MUMBAI 5. =>( 99?@ , ?@ , $ / DR, ITAT, MUMBAI K BENCH 6. (BC D / GUARD FILE. / BY ORDER, = 9 //TRUE COPY// / ( DY./ASSTT. REGISTRAR) , $ / ITAT, MUMBAI