DOMBIVLI PAPAER MFG. P.LTD, THANE V. ASST CIT CIR 1, THANE

ITA 3571/MUM/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 0235 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-08-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2009-2010
• Appeal Filed On: 23-05-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ARJU GARODIA
• Assessee Lawyers: SUBODH RATNAPARKHI
• Keywords: Reopening of assessment; Bogus purchase
• Section: 147; 131; 148

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL J , BENCH, MUMBAI , , , BEFORE SHRI RAJENDRA, AM AND SHRI RAM LAL NEGI, JM ./ ITA NO. 3571 / MUM/ 201 6 ( / ASSESSMENT YEAR: 2009 - 10 ) M/S DOMBIVLI PAPER MFG. CO. PVT. LTD., B - 42, PHASE - I, MIDC, GOLAVALI VILLAGE, DOMBIVLI (E), DISTT. THANE - 421203 VS. THE ASST. COMMISSIONER OF INCOME TAX, CIRCLE - 1, KALYAN, 1 ST FLOOR, MOHAN PLAZA, WYALE NAGAR, KHADAKPADA, KALYAN (W), DISTT - THANE ./ ./ PAN/GIR NO. : AAACD 5897 M ( / APPELLANT ) .. ( / RESPO NDENT ) & ./ ITA NO. 3572 / MUM/ 201 6 ( / ASSESSMENT YEAR: 20 10 - 11 ) M/S DOMBIVLI PAPER MFG. CO. PVT. LTD., B - 42, PHASE - I, MIDC, GOLAVALI VILLAGE, DOMBIVLI (E), DISTT. THANE - 421203 VS. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE - 1 , KALYAN, 1 ST FLOOR, MOHAN PLAZA, WYALE NAGAR, KHADAKPADA, KALYAN (W), DISTT - THANE ./ ./ PAN/GIR NO. : AAACD 5897 M ( / APPELLANT ) .. ( / RESPONDENT ) /ASSESSEE BY : SHRI SUBODH RATNAP ARKHI (AR) /REVENUE BY : MS. ARJU GARODIA (DR) / DATE OF HEARING : 02/08 /2017 / DATE OF PRONOUNCEMENT : 18 /08 /2017 / O R D E R PER RAM LAL NEGI, JM THESE APPEALS HAVE BEEN FILED BY THE ASSESSEE AGAINST THE COMMON ORDER DATED 28/03/2016 PASSED BY THE LD. CIT (A) - 2 , THANE, PERTAI NING TO THE 2 ITA NO S . 3571 & 3572/MUM/2016 ASSESSMENT YEAR S : 2009 - 10 & 2010 - 2011 ASSESSMENT YEAR S 2009 - 10 & 2010 - 11 , WHEREBY THE LD. CI T (A) HAS DISMISSED BOTH THE APPEAL S FILED BY THE ASSESSEE AGAINST ASSESSMENT ORDER PASSED U/ S 143 (3 ) R /W SECTION 147 OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT) . 2. SINCE, BOTH THE APPEALS PERTAIN TO THE SAME ASSESSEE FOR DIFFERENT ASSESSMENT YEAR S AND THE FACTS AND ISSUES INVOLVED ARE IDENTICAL, THESE APPEALS WERE CLUBBED, HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. ITA NO. 3571 / MUM/201 6 ( ASSESSMENT YEAR: 2009 - 10 ) 3. BRIEF FACTS OF THE CASE ARE TH AT THE ASSESSEE , A PRIVATE LIMITED COMPANY ENGAGED IN TH E BUSINESS OF MANUFACTURING OF K RAFT PAPER FILED ITS RETURN OF INCOME FOR THE RELEVANT ASSESSMENT YEAR DECLARING THE TOTAL INCOME OF RS . 75,93,843/ - . THE RETURN WAS PROCESSED U/S 143 OF THE ACT. 4. IN FORMATION WAS RECEIVED FROM SALES TAX DEPARTMENT THROUGH DGIT (INV.) THAT CERTAIN PERSONS PROVIDED BOGUS BILLS OF PURCHASES TO A LARGE NUMBERS OF TAX PAYERS INCLUDING THE ASSESSEE IN THIS CASE. SINCE, THE ASSESSEE HA D DEBITED NON - GENUINE PURCHASE S I N RESPECT OF M/S CHANDRANAND TRADING PVT. LTD. AND M/S AMBESHWAR TRADING PVT. LTD. AMOUNTING TO RS. 1,09,200/ - AND RS. 1,24,800/ - RESPECTIVELY, NOTICE U/S 148 OF THE ACT WAS ISSUED . I N RESPONSE THEREOF THE ASSESSEE FILED ITS SUBMISSIONS. THE REASONS RECORD ED FOR THE REOPENING OF ASSESSMENT WERE ALSO MADE AVAILABLE TO THE ASSESSEE. DURING VERIFICATION, IT WAS NOTICED THAT PURCHASES REFLECTED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE COMPANY FROM THE AFORESAID TWO PARTIES WERE NOT SUPPORTED WITH THE DOCUMENTS S UCH AS TRANSPORTATION BILLS, DELIVERY CHALLANS, GOODS RECEIVING NOTES, OCTROI RECEIPTS ETC. ACCORDINGLY, SUMMONS U/S 131 OF THE ACT WAS ISSUED TO THE DIRECTOR OF THE ASSESSEE COMPANY AND ASKED TO SUBSTANTIATE THE 3 ITA NO S . 3571 & 3572/MUM/2016 ASSESSMENT YEAR S : 2009 - 10 & 2010 - 2011 PURCHASES FROM THE SAID PARTIES . THE DIRECT OR OF THE ASSESSEE COMPANY SUBMITTED THAT THE MAIN RAW MATERIAL USED IS WASTER PAPER, WHICH IS SUPPLIED BY THE SUPPLIERS AT THE FACTORY . I N RESPECT OF OTHER RAW MATERIAL S ORDER AS PER THE REQUIREMENTS ARE PLACED AND W HEN THE MATERIAL S ARE RECEIVED , IT IS E NTERED IN THE INWARD REGISTER AND INVOICES ARE SIGNED BY THE RECEIVER AND COPY OF INVOICE AND DELIVERY CHALLAN S ARE RETAINED BY THE COMPANY. THE COMPANY IS OUTSIDE OCTROI LIMIT THEREFORE , NO OCTROI IS REQUIRED TO BE PAID. IT WAS FURTHER SUBMITTED THAT ALL THE PAYMENTS ARE MADE THROUGH BANKING CHANNELS. HOWEVER, THE ASSESSEE FAILED TO PRODUCE THE PARTIES DURING THE ASSESSMENT PROCEEDINGS. 5. THE AO REJECTING THE CONTENTIONS OF THE ASSESSEE HELD THE ENTIRE PURCHASES MADE BY THE ASSESSEE FROM THE SAID PARTIE S AS BOGUS AND ADDED THE AMOUNT OF RS. 2,34,000/ - IN QUESTION TO THE INCOME OF THE ASSESSEE AND DETERMINED THE TOTAL INCOME OF THE ASSESSEE AT RS. 78,27,840/ - . 6. IN THE FIRST APPEAL, THE LD CIT(A) DISMISSED THE APPEAL FILED BY THE ASSESSEE AND AFFIRMED THE ACTION OF THE AO RELYING ON THE VARIOUS DECISION INCLUDING THE DECISION OF THE HON BLE ALLAHABAD HIGH COURT RENDERED IN SRI GANESH RICE MILLS VS. CIT 294 ITR 316(ALL) AND SUSTAINED THE DISALLOWANCE MADE BY THE AO. 7. AGGRIEVED BY THE IMPUGNED ORDER P ASSED BY THE LD. CIT(A), T HE ASSESSEE HAS PREFERRED THE PRESENT APPEAL BY RAISING THE FOLLOWING EFFECTIVE GROUNDS: - ON THE FACTS AND IN LAW, 1. THE HON. CIT (A) ERRED IN NOT APPRECIATING THAT THE RE - OPENING OF ASSESSMENT U/S 147 OF THE I. TAX ACT 1961, BY ISSUE OF THE NOTICE U/S 148 ON 20.06.2013, WAS WITHOUT ANY INDEPENDENT AND VALID BELIEF HELD BY THE LD. AO THAT ANY INCOME CHARGEABLE TO TAX HAD ESCAPED 4 ITA NO S . 3571 & 3572/MUM/2016 ASSESSMENT YEAR S : 2009 - 10 & 2010 - 2011 ASSESSMENT, THEREBY MAKING THE RE - OPENING BAD IN - LAW MERITING THE ASSESSMENT ORDER FLOWING THEREFROM T O BE QUASHED. 2. THE HON. CIT (A) ERRED IN UPHOLDING THE ADDITION OF RS. 2,34,000/ - MADE ON ACCOUNT OF ALLEGED NON - GENUINE PURCHASES DEBITED TO THE PROFIT AND LOSS ACCOUNT, NOT APPRECIATING THAT THE SAID PURCHASES WERE GENUINE PURCHASES DULY SUPPORTED BY SUB STANTIAL EVIDENCES. 3. THE HON. CIT (A) ERRED IN UPHOLDING THE ADDITION OF RS. 2,34,000/ - WITHOUT GRANTING THE APPELLANT THE OPPORTUNITY TO CROSS EXAMINE THE PERSONS GIVING ADVERSE INFORMATION IN SPITE OF SPECIFIC REQUEST FOR THE SAME. 8. BEFORE US, THE L D. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE AMOUNT OF DISPUTED PURCHASE S IS RS. 2,34,000/ - OUT OF THE TOTAL PURCHASES OF RS. 12,27,52,061/ - . THE EXTENT OF TURNOVER, RETURNED INCOME AND THE SMALL QUANTUM OF DISPUTED PURCHASES, SUPPORT THE CLAIM OF THE APP ELLANT THAT THE DISPUTED PURCHASES ARE GENUINE AND NO DISALLOWANCE IS CALLED FOR. THE ASSESSEE HAS SUBMITTED PURCHASE BILLS FROM THE ABOVE PARTIES ALONG WITH DELIVERY CHALLAN S , INWARD REGISTER AND BANK STATEMENTS AND IN SOME CASES TRANSPORT PAYMENT VOUCHER S ETC. TO ESTABLISH THE GENUINENESS OF THE TRANSACTION. THE LD. C OUNSEL FURTHER SUBMITTED THAT SINCE HE FACTS OF THE CASES RELIED UPON BY THE LD. CIT(A) INCLUDING THE FACTS OF THE CASE OF SRI GANESH RICE MILLS VS. CIT 294 ITR 316(ALL) (SUPRA) ARE DISTINGUI SHABLE, THE SAME ARE NOT APPLICABLE TO THE PRESENT CASE. THE LD. COUNSEL FURTHER SUBMITTED THAT THE LD. CIT(A) OUGHT TO HAVE HELD THE REOPENING AS WITHOUT JURISDICTION AND BAD IN LAW AS THE AO HAD NO INDEPENDENT AND VALID REASONS TO EXERCISE POWERS U/S 147 OF THE ACT. RELYING ON THE LAW LAID DOWN BY THE HONBLE BOMBAI HIGH COURT IN CIT VS. NIKUNJ EXIMP ENTERPRISES PVT. LTD. 372 ITR 619 (BOM) TH E LD. COUNSEL ARGUED THAT FOR EVERY SALE THERE HAS TO BE CORRESPONDING PURCHASES. IF SALES BILLS ARE BEING ACCEPTED THEN THE TOTAL PURCHASES AMOUNT SHOULD BE ACCEPTED. THE LD. COUNSEL FURTHER SUBMITTED IN VIEW OF THE FACTS OF THE CASE AND THE LAW LAID DOWN 5 ITA NO S . 3571 & 3572/MUM/2016 ASSESSMENT YEAR S : 2009 - 10 & 2010 - 2011 BY THE JURISDICTIONAL HIGH COURT, THE IMPUGNED ORDER IS ERRONEOUS AND LIABLE TO BE SET ASIDE. 9. PER CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE (DR) SUBMITTED THAT THE ASSESSMENT WAS RE - OPENED ON THE BASIS OF INFORMATION RECEIVED FROM INVESTIGATION WING OF INCOME TAX DEPARTMENT THAT THE APPELLANT/ASSESSEE HAD OBTAINED BOGUS BILLS IN ORDER TO SHOW PURCHASES AMOUNTING TO RS. 2,34,000 / - FROM THE AFORESAID TWO PARTIES DURING THE FINANCIAL YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION . FURTHER, T HE ASSESSEE WAS GIVEN SUFFICIENT OPPORTUNITY TO PROVE THE GENUINENESS OF THE PURCHASES IN QUESTION, HOWEVER, THE ASSES SEE FAILED TO PROVE THE SAME. HENCE, T HE CONTENTIONS THE ASSESSE E WERE RIGHTLY REJECTED BY THE AUTHORITIES BELOW. MOREOVER, THE INVESTIGATION CARRIED OUT BY THE SALES TAX DEPARTMENT HAS ESTABLISHED THAT THE SAID PARTIES USED TO ISSUE BOGUS BILLS TO THE DIF FERENT COMPANIES INCLUDING THE ASSESSEE IN THE PRESENT APPEAL. THE LD. DR RELYING ON THE VARIOUS DECISIONS INCLUDING THE DECISION OF HONBLE HIGH COURT OF GUJARAT RENDERED IN N.K. PROTEIN LTD. VS. DCIT IN TAX APPEAL NO. 240, 241 261, 242 AND 260 OF 2003 , U PHELD BY THE HON B LE SUPREME COURT , KACHWALA GEMS 288 ITR 10 (SC) SREELEKHA BANERJEE 49 ITR 112 (SC), SUMATI DAYAL 214 ITR 801 (SUPREME COURT), LA MEDICA 250 ITR 575 (DELHI) AND THE DECISIONS RENDERED BY THE VARIOUS BENCHES OF THE TRIBUNALS , SUBMITTED THAT IF PURCHASES ARE NOT PROVED TO THE GENUINE THEN THE ENTIRE PURCHASE NEEDS TO BE TAKEN AS INCOME OF THE ASSESSEE . 10. WE NOTICE THAT THE AO HAS NOT REJECTED THE BOOKS OF ACCOUNT AND ACCEPTED THE SALES SHOWN BY THE ASSESSEE. WE FURTHER NOTICE THAT THE ASSE SSEE HAS CONTENDED BEFORE THE AO AS WELL AS BEFORE THE LD. CIT (A) THAT THE PARTIES HAVE GIVEN SOME SORT OF AFFIDAVIT AND THEIR NAMES ARE APPEARING ON THE WEBSITE, THEREFORE IT CANNOT BE CONCLUDED THAT THE PARTIES WERE NONEXISTENT. THE ENTRIES 6 ITA NO S . 3571 & 3572/MUM/2016 ASSESSMENT YEAR S : 2009 - 10 & 2010 - 2011 REGARDING T HE PURCHASES IN QUESTION ARE MADE IN THE BOOKS OF ACCOUNT AND IF THE SAID PARTIES HAD NOT PAID THE SALES TAX, THE ASSESSEES PURCHASES CANNOT BE TREATED AS BOGUS. PLACING RELIANCE ON THE DECISION OF HONBLE SUPREME COURT RENDERED IN CIT VS. ORISSA CORPORA TION PVT. LTD. 159 ITR 78 (SC) HONBLE BOMB AI HIGH COURT IN CIT VS. NIKUNJ EXIMP ENTERPRISES PVT. LTD. 372 ITR 619 (BOM) AND CIT VS. U M SHAH 90 ITR 396 (BOMB.) AND JODHPUR BENCH OF THE TRIBUNAL IN JAGDAMBA TRADING COMPANY VS. ITO (2007) 16 SOT 66 JODHPUR, THE LD. COUNSEL CONTENDED THAT FOR EVERY SALE THERE HAS TO BE CORRESPONDING PURCHASES. IF SALES BILLS ARE BEING ACCEPTED THEN THE TOTAL PURCHASES AMOUNT SHOULD BE ACCEPTED IN THE LIGHT OF THE RATIO OF LAW LAID DOWN IN THE CASES REFERRED ABOVE . 11 . WHILE UPHOLDING THE DECISION OF MUMBAI TRIBUNAL THE HONBLE BOMBAY HIGH COURT IN CIT VS. NIKUNJ EXIMP ENTERPRISES PVT. LTD. (SUPRA) , HAS HELD THAT MERELY BECAUSE THE SUPPLIERS HAD NOT APPEARED BEFORE THE ASSESSING OFFICER OR THE CIT (A) , ONE COULD NOT CONCLUDE THAT THE PURCHASES WERE NOT MADE BY THE RESPONDENT/ASSESSEE. THE HONBLE GUJRAT HIGH COURT IN CIT VS. SIMIT P. SETH 356 ITR 451(GUJ) HAS UPHELD THE DECISION OF THE TRIBUNAL AND SUSTAINED THE ADDITION 12.5% OF THE TOTAL BOGUS PURCHASES HOLDING THAT ONLY PRO FIT ELEMENT EMBEDDED IN SUCH PURCHASES CAN BE ADDED TO INCOME OF THE ASSESSEE. HENCE, IN OUR CONSIDERED VIEW, THE ORDER PASSED BY THE LD. CIT(A) IS NOT BASED ON THE PRINCIPLES OF LAW DOWN BY THE HONBLE HIGH COURTS IN THE AFORESAID CASES . ON THE OTHER HAND THE LAW RELIED UPON BY THE LD. D R ARE DISTINGUISHABLE ON FACTS. HENCE, WE SET ASIDE THE ORDER OF THE LD. CIT (A) AND FOLLOWING THE RATIO LAID DOWN IN CIT VS. NIKUNJ EXIMP ENTERPRISES PVT. LTD . AND CIT VS. SIMIT P. SETH 356 ITR 451(GUJ) THE RESTRICT THE ADDITION TO 12.5% OF THE TOTAL AMOUNT OF BOGUS PURCHASE AND DIRECT THE AO TO COMPUTE THE DISALLOWANCE IN TERMS OF THIS ORDER. ITA NO. 3572/MUM/2016 (ASSESSMENT YEAR: 2010 - 11 ) 7 ITA NO S . 3571 & 3572/MUM/2016 ASSESSMENT YEAR S : 2009 - 10 & 2010 - 2011 SINCE, T HE FACTS AND THE ISSUES INVOLVED IN THE PRESENT CASE ARE IDENTICAL TO THE FACTS AND ISSUES INVOLVE IN THE ASSESSEES OWN CASE FOR THE A.Y. 2009 - 10, EXCEPT THE AMOUNT OF BOGUS PURCHASE S INVOLVED , WE DO NOT CONSIDER IT NECESSARY TO REPEAT THE SAME FACTS HERE. 2 . THE ASSESSEE HAS CHALLENGED THE IMPUGNED ORDER BY RAISED THE FOL LOWING EFFECTIVE GROUNDS OF APPEAL: - ON THE FACTS AND IN LAW, 1. THE HON. CIT (A) ERRED IN UPHOLDING THE ADDITION OF RS. 6,11,364/ - MADE ON ACCOUNT OF ALLEGED NON - GENUINE PURCHASES DEBITED TO THE PROFIT AND LOSS ACCOUNT, NOT APPRECIATING THAT THE SAID PURC HASES WERE GENUINE PURCHASES DULY SUPPORTED BY SUBSTANTIAL EVIDENCES. 2. THE HON. CIT (A) ERRED IN UPHOLDING THE ADDITION OF RS. 6,11,364/ - WITHOUT GRANTING THE APPELLANT THE OPPORTUNITY TO CROSS EXAMINE THE PERSONS GIVING ADVERSE INFORMATION INSPITE OF SPEC IFIC REQUEST FOR THE SAME. 3 . SINCE, WE HAVE PARTLY ALLOWED THE APPEAL OF THE ASSESSEE FOR THE A.Y. 2009 - 10 AND SINCE THERE IS NO CHANGE IN THE FACTS OR ISSUES INVOLVED IN THIS CASE, WE SET ASIDE THE IMPUGNED ORDER PASSED BY THE LD. CIT(A) AND RESTRICT TH E ADDITION TO 12. 5% OF THE TOTAL B OGUS PURCHASES AND PARTLY ALLOW THE APPEAL OF THE ASSESSEE FOR THE SAME REASONS. IN THE RESULT, APPEAL S FILED BY THE ASSESSEE FOR ASSESSMENT YEAR S 2009 - 10 & 2010 - 11 ARE PARTLY ALLOWED. ORDER PRONOUNCED IN TH E OPEN COURT ON 18 TH AUGUST , 2017 . SD/ - SD/ - ( RAJENDRA ) ( RAM LAL NEGI ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; DATED: 18 / 8 / 2017 ALINDRA, PS 8 ITA NO S . 3571 & 3572/MUM/2016 ASSESSMENT YEAR S : 2009 - 10 & 2010 - 2011 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . / BY ORDER, //TRUE COPY// / (DY./ ASSTT. REGISTRAR) , / ITAT, MU MBAI