DCIT 3(2)(2), MUMBAI V. NITIN CASTINGS LTD, MUMBAI

ITA 352/MUM/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 5380 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 6 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-07-2018
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 22-01-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SUMAN KUMAR
• Keywords: Bogus purchase; Onus to prove
• Section: 143(3); 131

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL ' B ' BENCH, MUMBAI BEFORE SHRI R.C. SHARMA, ACCOUNTANT MEMBER AND SHRI AMARJIT SINGH , JUDICIAL MEMBER ITA NO. 352 /MUM/ 2016 (ASSESSMENT YEAR: 2011 - 12 ) D C I T - 3(2)(2) ROOM NO. 674, 6TH FLOOR AAYAKAR BHAVAN, M.K. ROAD MUMBAI 400020 VS. M/S. NITIN CASTING LTD. A - 232, BUILDING NO. 3 RAHUL MITTAL INDL. ESTATE M.V. ROAD, ANDHERI (E) MUMBAI 400059 PAN AAACN1219K APPELLANT RESPONDENT APPELLANT BY: SHRI SUMAN KUMAR RESPONDENT BY: SHRI SATISH R. MODY DATE OF HEARING: 05 .07.2018 DATE OF PRONOUNCEMENT: 30 . 07.2018 O R D E R PER R.C. SHARMA, AM THIS APPEAL HAS BEEN FILED BY REVENUE AGAINST THE ORDER OF THE CIT(A) - 8 , MUMBAI DATED 30 . 11 .201 5 FOR A.Y. 20 11 - 12 IN THE MATTER OF ORDER PASSED UNDER SECTION 143(3) OF THE INCOME TAX ACT (HEREINAFTER THE ACT). 2. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. ON THE BASIS OF INFORMATION FROM SALES TAX DEPARTMENT THAT ASSESSEE HAS UNDERTAKEN BOGUS PURCHASES FROM M/S. KUMAR ENTERPRISES THE AO DISALLOWED 100% OF SUCH PURCHASES AND ADDED THE SAME IN THE ASSESSEES INCOME. BY THE IMPUGNED ORDER CIT(A) DELETED THE ENTIRE ADDITION AFTER HAVING THE FOLLOWING OBSERVATION: - 5. I HAVE CAREFULLY CONSIDERED THE FACTS OF TH E CASE MENTIONED IN THE ASSESSMENT ORDER AND THE CONTENTIONS OF THE APPELLANT AS SUMMARISED ABOVE. 5.1 AS PER PARA 5.2 OF THE ASSESSMENT ORDER, IT IS NOT DISPUTED THAT THE INVOICES SHOWED THE BALL BEARINGS WERE PURCHAS ED FROM M/S KUMAR ENTERPRISES. THE AO HAS NOT DISPUTED THE COPIES OF BILLS, LORRY RECEIPTS, OCTROI RECEIPTS AND GOODS RECEIPT NOTES OR THEIR VALIDITY OR ITA NO. 352 /MUM/ 2016 M/S. NITIN CASTING LTD. 2 DISPROVED DELIVERY. FURTHER, THE A.O. HAS NOT DISPUTED THE FACT THAT THE PAYMENTS IN RESPECT OF THE SAID GOODS HAVE BEEN MADE TO M/S. KUMAR ENTERPRISES BY ACCOUNT PAYEE CHEQUES, AS IS EVIDENCED BY, AND REFLECTED IN THE BANK STATEMENTS AND THE STATEMENT OF ACCOUNT FURNISHED BY THE APPELLANT TO THE A.O. 5.2 THE A.O. MERELY RELIED ON THE INFORMATION RECEIVED FROM SALES - TAX DEPARTMENT AND TH E INSPECTOR'S REPORT BEFORE ARRIVING AT THE CONCLUSION THAT M/S KUMAR ENTERPRISES IS NOT A GENUINE PARTY AND THE PURCHASES MADE BY THE APPELLANT FROM M/S KUMAR ENTERPRISES IS BOGUS. 5.3 THE CONTENTION OF THE APPELLANT ON EACH ASPECT OF THE REASONING OF THE AO HAS MERITS. MOREOVER, AS DISCUSSED ABOVE, THE REASONING OF THE AO IN TREATING T HE PURCHASE OF BALL BEARINGS ARE BOGUS ONE IS DEVOID OF FINDINGS OF FACTS AND IS IN THE NATURE OF SURMISES. 5.4 IN REACHING A DECISION, RELIANCE IS PLACED ON DECISION OF HON 'BLE ITAT MUMBAI IN RAMESH KUMAR & CO VS. ACIT (ITAT MUMBAI), I.T.A. NO.2959/MUM/2014. IN THAT CASE, THE BRIEF FACTS AS GIVEN IN THE SAID ORDER ARE THAT THE ASSESSEE IS A PARTNERSHIP FIRM CARRYING OUT TH E BUSINESS OF CIVIL CONTRACTS, CIVIL INFRASTRUCTURE, SUCH AS DRAINAGE AND ROAD REPAIRS & MAINTENANCE MAINLY WITH MUNICIPAL CORPORATION OF GREATER MUMBAI. THE RETURN FOR THE YEAR WAS FILED ON 28.9.2010 DECLARING TOTAL INCOME OF RS.2,99,79,680/ - .THE RETURN WAS SELECTED FOR SCRUTINY ASSESSMENT. DURING THE COURS E OF THE ASSESSMENT PROCEEDINGS, THE ASSE SSING OFFICER OBSERVED THAT THE ASSESSEE HAS SHOWN CONTRACT RECEIPTS AT RS, CRORES AGAINST WHICH TOTAL PURCHASES AND DIRECT EXPENSES WERE SHOWN AT RS.27.5CRORES. THE DETAILS OF PURCHASES WERE FILED WITH FULL ADDRESS OF THE PARTIES AND THE AMOUNT OF PURCHASE MADE FROM THEM DURING THE YEAR UNDER CONSIDERATION. WHILE GOING THROUGH THE LIST OF PURCHASES, THE AO OBSERVED THAT MANY OF THE PARTIES WERE BLACKLISTED BY SALES TAX DEPARTMENT OF MAHARASHTRA GOVT. AND THE MAHARAS HTRA SALES TAX DEPARTMENT HAD CANCELLED THEIR TIN NUMBERS. THE ASSESSEE WAS ASKED TO SHOW CAUSE WHY THE TRANSACTIONS WITH THESE PARTIES SHOULD NOT BE CONSIDERED AS NON - GENUINE AND THE WHOLE AMOUNT CLAIMED AS PURCHASE FROM THESE P ARTIES SHOULD NOT BE DISALL OWED . ON RECEIVING NO PLAUSIBLE REPLY TO THE SHOW CAUSE NOTICE, THE AO PROCEEDED BY TREATING THE PURCHASES OF RS.4,98,80,8927 / - AS BOGUS PURCHASES AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. 5.5 AS OBSERVED IN THE ORDER OF THE HON'BLE ITAT, 'A LL THE PURCHASE INVOICES WERE SUBMITTED BEFORE THE AO AND THE AO HAS NOT POINTED OUT ANY DEFECT I N THE PURCHASE INVOICE. THE LD. COUNSEL FURTHER STATED THAT THE PURCHASES WERE DULY PAID BY ACCOUNT PAYEE CHEQUE. AND THE PAYMENT IS REFLECTED IN THEIR RESPECT IVE COPIES OF LEDGER ACCOUNT. THE PAYMENTS ARE ALSO REFLECTED IN THE BANK STATEMENTS OF THE ASSESSEE THEREFORE IT CANNOT BE SAID THAT PURCHASES ARE BOGUS.' ITA NO. 352 /MUM/ 2016 M/S. NITIN CASTING LTD. 3 5.6 IN CONCLUSION, THE HON BLE ITAT OBSERVED, 'THE ADDITIONS HAVE BEEN MADE MERELY ON THE REPORT OF THE SALES TAX DEPARTMENT BUT AT THE SAME TI ME IT CANNOT B E SAID THAT PURCHASES ARE BOGUS.' 5.7 SIMILARLY, WHILE DELETING ADDITION MADE ON SIMILAR GROUND IN SHRI RAJEEV G. KALATHIL VS. DCIT (ITAT MUMBAI), ITA NO.6727/MUM/2012 THE HON'BLE I TAT OBSERVED AS BELOW: 'WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US. WE FIND THAT AO HAD MADE THE ADDITION AS ONE OF THE SUPPLIER WAS DECLARED A HAWALA DEALER BY THE VAT DEPARTMENT. WE AGREE THAT IT WAS A GOOD STARTING POINT FOR MAKING FURTHER I NVESTIGATION AND TAKE TO LOGICAL END. BUT HE LEFT THE JOB AT INITIAL POINT ITSELF. SUSPICION OF HIGHEST DEGREE CANNOT TAKE PLACE OF EVIDENCE. HE COULD HAVE CALLED FOR THE DETAILS OF THE BANK ACCOUNTS OF THE SUPPLIERS TO FIND OUT AS WHETHER THERE WAS ANY IM MEDIATE CASH WITHDRAWAL FROM THEIR ACCOUNT. WE FIND THAT NO SUCH EXERCISE WAS DONE.' 5.8 IN VIEW OF THE DISCUSSION ABOVE AND RESPECTFULLY FOLLOWING THE VARIOUS ORDERS OF JURISDICTIONAL BENCH OF ITAT QUOTED SUPRA, THESE GROUNDS OF APPEAL IS ALLOWED IN FAVOUR OF THE APPELLANT AND ADDITION OF A SUM OF RS. 32,80,200/ - BEIN G PURCHASES MADE FROM THE M/S . KUMAR ENTERPRISES AS BOGUS PURCHASES IS DELETED. AGAINST THE ABOVE ORDER OF THE CIT(A) REVENUE IS IN FURTHER APPEAL BEFORE US. 3. IT WAS ARGUED BY LEARNED D R THAT THE CIT(A) HAS WRONGLY DELETED THE ADDITION OF RS.32,80,200/ - RELYING UPON INCOMPLETE EVIDENCES FILED BY THE ASSESSEE IN SCRUTINY PROCEEDINGS AND HOLDING THAT THE AO HAS NOT REFUTED THE EVIDENCE FILED BY THE ASSESSEE WITHOUT APPRECIATING THE FACT TH AT THE ASSESSEE FAILED TO DISCHARGE ITS ONUS TO PROVE THESE TRANSACTIONS AS GENUINE BEYOND DOUBT WITH CORROBORATING EVIDENCES. 4. ON THE OTHER HAND, LEARNED AR RELIED ON THE ORDER OF THE CIT(A). 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND FOUND THAT AFTER RECEIPT OF INFORMATION FROM THE SALES TAX DEPARTMENT REGARDING BOGUS PURCHASES THE AO HAS ISSUED SUMMON TO M/S. KUMAR ENTERPRISES UNDER SECTION 131 OF THE ACT. HOWEVER, THE ASSESSEE FAILED TO PRODUCE M/S. KUMAR ENTERPRISES. 6. T HE INSPECTOR OF INCOME - TAX IN HER REPORT DATED 29.01.2014 MENTIONED THE FOLLOWING: - ITA NO. 352 /MUM/ 2016 M/S. NITIN CASTING LTD. 4 'AS DIRECTED BY THE ADDL.CIT, RG.3(2), MUMBAI, I VISITED THE PREMISES OF M/S. KUMAR ENT ERPRISES BEARING ADDRESS SUMAN III , 'B' WING, ROOM NO. 124, NEAR DESAI HOSPITAL, AGASHI ROAD, VIRAR (W), THANE 401 303 FOR SERVICING OF SUMMONS U/S.131 OF THE I.T. ACT IN THE CASE OF M/S. NITIN CASTINGS LTD. FOR A.Y. 2011 - 12. THE SAID PREMISES WAS A RESIDENTIAL PREMISES IN WHICH TWO LADIES AND TWO KIDS WERE PRESENT AT THE TIME OF SERVICE OF NOTICE. OU T OF THE TWO LADIES, ONE MRS. SHWETA SHAH, RECEIVED THE SUMMONS, WHO CLAIMED TO BE THE SISTER - IN - LAW OF MR. KUMAR SHAH, PROPRIETOR OF M/S. KUMAR ENTERPRISES. THE ISSUE WAS DISCUSSED WITH MRS. SHWETA S HAH AND SHE HAS INFORMED THAT NO BUSINESS HAS EVER BEEN CARRIED OUT FROM THIS PREMISES AND M/S. KUMAR ENTERPRISES IS NOTHING BUT A PAPER FIRM. NO REAL BUSINESS HAS BEEN CARRIED OUT BY THIS FIRM IN THE PAST AND EVEN IN THE PRESENT THE FIRM IS NOT IN OPERATION. THE LOCAL ENQUIRIES WERE ALSO CONDUCTED FROM THE PEOPLE IN THE NEIGHBORHOOD AND THEY HAVE ALSO INFORMED THAT NO BUSINESS IS EVER BEEN CARRIED OUT FROM THIS ADDRESS AND THIS IS ONLY A RESIDENTIAL PREMISES. ACCORDINGLY, I HAVE SERVED THE SUMMONS U/S. 131 OF THE I.T. ACT. A COPY OF ACKNOWLEDGEMENT OF SERVIC E OF SUMMONS IS PLACED ON RECORD . 7. THUS, AS PER THE ENQUIRY CONDUCTED BY THE AO THE PURCHASES REMAINED UNSUBSTANTIATED. MERELY BY OBSERVING THAT THERE ARE VARIOUS JUDICIAL PRONOUNCEMENTS OF THE TRIBUNAL WHERE ADDITION MADE ON ENTIRE PURCHASES WERE DELETED , THE CIT(A) HAS DELETED THE ADDITION IN THIS CASE WITHOUT COMPARING THE FACTS OF THE INSTANT CASE VIS - A - VIS FACTS DISCUSSED BY THE TRIBUNAL IN THE RESPECTIVE ORDERS. KEEPING IN VIEW THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE VIS - A - VIS NATURE OF BUSINESS OF THE ASSESSEE AND GROSS PROFIT DECLARED BY THE ASSESSEE, WE THINK IT APPROPRIATE TO RESTRICT THE DISALLOWANCE TO THE EXTENT OF 1 0% OF THE SAID BOGUS PURCHASE. WE DIRECT ACCORDINGLY. 8. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS ALLOWED IN PART. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH JULY, 2018 . SD/ - SD/ - ( AMARJIT SINGH ) ( R.C. SHARMA ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 30 TH JULY, 2018 ITA NO. 352 /MUM/ 2016 M/S. NITIN CASTING LTD. 5 2 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) - 8 , MUMBAI 4. THE PR. CIT - 3 , MUMBAI 5. THE DR, B BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.