ITO 12(3)(3), MUMBAI V. LAB DEVICES INDIA P.LTD, MUMBAI

ITA 3646/MUM/2017

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 8178 (ITAT-MUMBAI)
• Duration Of Justice: 6 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-12-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 19-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJESH S KOTHARI
• Assessee Lawyers: V JUSTIN
• Keywords: Bogus purchase

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL E, BENCH MUMBAI BEFORE SHRI R.C.SHARMA, HONBLE ACCOUNTANT MEMBER & SHRI SANDEEP GOSAIN, HONBLE JUDICIAL MEMBER ITA NO. 3646 / MUM /20 17 ( ASSESSMENT YEAR : 2010 - 11) INCOME TAX OFFICER 12(3)(3) ROOM NO. 224, 2 ND FLOOR , AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400 020 VS. M/S. LAB DEVICE INDIA PVT. LTD., 112, ATLANTA ESTATE, OPP. W.E. HIGHWAY, NEAR VIRWWANI INDUSTRIAL ESTATE, GOREGAON (EAST) MUMBAI 400 063 PAN/GIR NO: AAABCL 0636 K APPELLANT .. RESPONDENT ASSESSEE BY SHRI V. JUSTIN REVENUE BY SHRI RAJESH S. KOTHARI DATE OF HEARING 07 / 09 /201 7 DATE OF PRONOUNCEME NT 07 / 11 /201 7 / O R D E R PER R.C.SHARMA (A.M) : 1. THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A ) - 20 , MUMBAI DATED 28.02.2017 FOR A.Y. 2010 - 11, IN THE MATTER OF ORDER PASSED U/S.143(3) R.W.S. 147 OF THE I . T ACT. 2. IN THIS APPEAL REVENUE IS AGGRIEVED FOR CONFIRMING THE ADDITION BY LD. CIT(A) AT 6% ON THE BOGUS PURCHASES. 3. RIVAL CONTENTIONS H AVE BEEN HEARD AND RECORD PERUSED. ITA NO.3646/MUM/2017 ( A Y: 2010 - 11) LAB DEVICES INDIA P. LTD. 2 4. FACTS IN BRIEF ARE THAT , T HE ASSESSEE I S ENGAGED IN THE BUSINESS OF LABORATORY INSTRUMENTATION . THE ASSESSING OFFICER RECEIVED INFORMATION FROM THE SALES TAX (VAT) DEPARTMENT THAT THE ASSESSEE HAD INDULGED IN THE PRACTI CE OF PROVIDING BOGUS PURCHASE BILLS AND ROUTING IT THROUGH THE BOOKS OF ACCOUNT. FROM THE DETAILS SO RECEIVED IT WAS PERUSED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAD MADE BOGUS PURCHASES F R OM NINE PARTIES. THE AMOUNT INVOLVED IN SUCH BOGUS PURCHASE S WAS RS.54,33,026/ - WHICH WAS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. DURING THE ASSESSMENT PROCEEDINGS THOUGH THE ASSESSEE HAD PRODUCED RELEVANT DOCUMENTS AND COPY OF LEDGER ACCOUNT CORRESPONDING TO SUCH PURCHASES BUT IT HAD FAILED TO PRODUCE THE PAR TIES FOR CONFRONTATION. AN INDEPENDENT ENQUIRY CONDUCTED AND EFFORTS MADE BY THE A.O. ALSO REVEALED THAT THE PARTIES WERE NON - EXISTENT. THE ASSESSING OFFICER THUS MADE AN ADDITION OF RS. 54,33,026/ - TREATING THE SAME AS BOGUS PURCHASES . 5. BY THE IMPUGNED ORDER , LD. CIT(A) CONFIRMED ADDITION TO THE EXTENT OF 6% OF THE GROSS PROFIT AFTER OBSERVING AS UNDER: - 6.3. I HAVE GONE THROUGH THE ASSESSMENT ORDER AND SUBMISSIONS MADE IN THIS REGARD. IT IS NOTED THAT THE A.O. HAD MADE ADDITION OUT OF PURCHASE MADE BY THE ASSESSEE TO THE TUNE OF RS. 54,33,026/ - ON THE BASIS OF THE INFORMATION RECEIVED FROM THE VAST AUTHORITIES. THE A/R OF THE ASSESSEE HAS VEHEMENTLY OPPOSED THE ADDITIONS AND SUBMITTED THAT THE PURCHASES WERE GENUINE. IT WAS ALSO SUBMITTED THAT PAYMENT WA S ALL MADE THROUGH BANKING CHANNEL AND THE DELIVERY OF MATERIALS WAS SUPPORTED BY DELIVERY CHALLANS. IT IS STATED THAT THE A.O . HAD MADE ADDITION ON THE BASIS OF INFORMATION RECEIVED FROM VAT AUTHORITIES WITHOUT AFFORDING OPPORTUNITY OF CROSS EXAMINATI ON THE ASSESSEE. IT IS NOTED THAT THE ENTIRE MATTER ITA NO.3646/MUM/2017 ( A Y: 2010 - 11) LAB DEVICES INDIA P. LTD. 3 PERTAINS TO HAWALA PURCHASES FROM SO CALLED SUSPICIOUS DEALERS AS PER THE INFORMATION OF VAT AUTHORITIES. T HE A.O . HAS DISALLOWED THE SE PURCHASES AS THE ASSESSEE COULD NOT PRODUCE THESE PARTIES FOR VERI FICATION. IT IS NOTED THAT PRIMARY ONUS TO ESTABLISH THAT THE PURCHASES WERE GENUINE WAS ON THE ASSESSEE. THE ASSESSEE IS ONLY PARTLY ABLE TO DISCHARGE THE COMPLETE ONUS. IT IS ALSO NOTED THAT A.P. HAS SIMPLY MADE ADDITION ON THE BASIS OF STATEMENT WITH OUT MUCH ENQUIRY INTO T HE FACTS OF THE CASE. ON THE O THER HAND ASSESSEE HAS FILED COPIES OF BILLS, BANK STATEMENT ETC. TO ESTABLISH THAT PURCHASES WERE GENUINE. ON THE FACE OF THESE EVIDENCES THE ENTIRE PURCHASES CANNOT BE HELD TO BE BOGUS MERELY ON THE BASIS OF A STATE MENT OF SELLER WHO WAS NEVER CRO SS EXAMINED BY THE ASSESSEE. IT IS ALSO NOTED THAT THE ITEMS PURCHASED WERE USED AS INPUT INTO ASSESSEES PRODUCT FOR SALES WHICH HAVE B EEN ACCEPTED BY THE DEPARTMENT. 6.4 IT IS NOTED THAT ONLY PROFIT ELEME NT IS LIABLE TO TAX IN SUCH CASE AS WAS HELD IN THE CASE OF: 1. CIT V. BHOLANATH POLY FAB LTD. (2013) 355 ITR 290 (GUJ). (HC). 2. CIT V. SIMIT P. SHETH (2013) 356 ITR 451 (GU J) (HC) 3. CIT V. SANJAY OIL CAKE INDUSTRIES (2009) 316 ITR 274 (GUJ ) (HC) 4. ITO V. PERMANA ND (2007) 107 TTJ 395 (JD)(TRIB) 5. SHRI MADHUKANT B. GANDHI V. ITO ITA NO . 1950/M/2009 BENCH B DT. 23 .02.20100 (AY 2005 - 06)(MUM.) (TR IB.) 6. SANJEEV WOOLEN MILLS V. CIT (2005) 279 ITR 434 (SC) 6.5 IN VIEW OF TH E ABOVE DISCUSSION IT IS SEEN T HAT THE ADDITION MADE BY THE A.O ON ACCOUNT OF ALLEGED BOGUS PURCHASES CANNOT BE SUSTAINED FULLY IN APPEAL. HAVING REGARDS TO FACTS OF THE CASE IT WOULD BE FAIR AND REASONABLE IF THE ADDITION MADE IS RESTRICTED TO G.P. ADDITION OF 6% ON THE ALLEGED BOGUS PURCHASE OF RS. 54,33 ,026/ - WHICH COMES TO RS.3,25, 982/ - . ACCORDINGLY THESE GROUNDS OF APPEAL ARE PARTLY ALLOWED. 6. AGAINST THE ABOVE ORDER OF THE LD. CIT(A), REVENUE I S IN FURTHER APPEAL BEFORE US. ITA NO.3646/MUM/2017 ( A Y: 2010 - 11) LAB DEVICES INDIA P. LTD. 4 7. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. FROM THE RECORD , WE FOUND THAT THE ASSESSI N G OFFICER HAS MADE ADDITION ON THE BASIS OF INFORMATION FROM THE SALES TAX DEPARTMENT IN RESPECT OF BOGUS SUPPLIERS. AFTER APPRECIATING TH E EVIDENCE FILED BEFORE THE LD.CIT(A), L D. CIT(A) CONCLUDED THAT THE ENTIRE PURCHASES CANNOT BE HELD TO BE BOGUS MERELY ON THE BASES OF THE STATEMENT OF THE SELLER, WHO WAS NEVER CROSS EXAMINED BY THE ASSESSEE. IT WAS ALSO OBSERVED THAT CORRESPONDING SALES/ CONSUMPTION SHOWN BY THE ASSESSEE ACCE PTED BY THE DEPARTMENT. AFTER APPLYING VARIOUS JUDICIAL PRONOUNCEMENT S THE LD . CIT(A) RESTRICTED THE ADDITION TO THE EX TENT OF 6% ON THE ALLEGED BOGUS PURCHASES. NOTHING WAS BROUGHT TO OUR NOTICE BY LD. DR TO PERSUADE US TO DEVIATED FROM THE FINDI NG RECO RDED BY THE LD.CIT(A) RESTRICTING THE ADDITION TO THE EXTENT OF 6%. ACCORDINGLY WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF THE LD. CIT(A) . 8. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. 9. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 07 / 11 /2017 SD/ - SD/ - (SANDEEP GOSA IN) JUDICIAL MEMBER ( R.C.SHARMA ) ACCOUNTANT MEMBER MUMBAI ; DATED 07 / 11 /201 7 GIRIDHAR SR. PS ITA NO.3646/MUM/2017 ( A Y: 2010 - 11) LAB DEVICES INDIA P. LTD. 5 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT , MUMBAI 6. GUARD FILE. //TRUE COPY// BY ORDER, ( ASSTT. REGISTRAR) I TAT, MUMBAI