ACIT CC 25, MUMBAI V. SUPREME INFRASTRUCTURE INDIA LTD, MUMBAI

ITA 3690/MUM/2013

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1235 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 11 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-04-2017
• Appeal Filed By: Department
• Bench Allotted: E
• Next Hearing Date: 19-02-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 09-05-2013
• Court: TRIBUNAL
• Department Lawyers: K KRISHNA MURTHY
• Assessee Lawyers: RISHABH S HAH
• Keywords: Bogus purchase; Opportunity of being heard; Principle of natural justice; Additional evidence; Accommodation entries
• Section: 143(3); 153A; 37(1); 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI SANDEEP GOSAIN, JUDICIAL MEMBER ITA NO.3690/M/2013 (2009 - 2010) ITA NO.3691/M/2013 (2010 - 2011) DCIT, CC - 24 AND 26, R.NO. 404, 4 TH FLOOR, AAYAKAR BHAVAN, MUMBAI - 400 020. / VS. M/S. SUPREME INFRASTRUCTURE INDIA LTD., 8, BHAWANI SERVICES INDUSTRIAL ESTATE, 3 RD FLOOR, OPP. I IT MAIN GATE, POWAI, MUMBAI 400 076. ./ PAN : AAACS7320J ( / APPELLANT) .. ( / RESPONDENT ) / APPELLANT BY : SHRI K. KRISHNA MURTHY, CIT - DR / RESPONDENT BY : SHRI RISHABH SHAH / DATE OF HEARING : 09 .03.2017 / DATE OF PRONOUNCEMENT : 12 .04.2017 / O R D E R PER D. KARUNAKARA RAO, AM: THERE ARE TWO APPEALS UNDER CONSIDERATION AND THEY ARE FILED BY THE REVENUE FOR THE ASSESSMENT YEARS 2009 - 2010 AND 2010 - 2011. SINCE, THE ISSUES RAISED IN BOTH THE APPEALS ARE IDEN TICAL / INTER - CONNECTED, THEREFORE, FOR THE SAKE OF CONVENIENCE, THEY ARE CLUBBED, HEARD COMBINEDLY AND DISPOSED OF IN THIS CONSOLIDATED ORDER. APPEAL WISE ADJUDICATION IS GIVEN IN THE FOLLOWING PARAS OF THIS ORDER. 2. SINCE, THE GROUNDS RAISED BY THE RE VENUE IN BOTH THE APPEALS ARE IDENTICAL, THEREFORE, FOR THE SAKE OF REFERENCE AND ADJUDICATION PURPOSE, THE GROUNDS RAISED IN THE APPEAL ITA NO.3690/M/2013 FOR THE AY 2009 - 2010 ARE EXTRACTED AS UNDER: - 1. THAT THE LD CIT (A) ERRED IN LAW AND THE FACTS AND CIRCUMSTANCES OF THE CASE IN ALLOWING THE APPEAL OF THE ASSESSEE WITHOUT APPRECIATING THAT THE ASSESSING OFFICER HAD RIGHTLY ADDED BACK THE SUM OF RS. 36,22,86,395/ - AS BOGUS EXPENSES CLAIMED AS DEDUCTION U/S 37(1) IN THE STATEMENT OF COMPUTATION OF TOTAL INCOME WHILE GIVING EFFECT TO THE ORDER DATED 22.6.2012 OF HER PREDECESSOR CIT (A) IN APPEAL AGAINST THE ORDER OF THE ASSESSMENT PASSED U/S 143(3) ON 29.12.2011. 2 (I) THAT THE LD CIT (A) ERRED IN DELETING THE ADDITION OF THE ABOVE SUM OF RS. 36,22,86,395/ - WITHOUT APPRECIATING THAT THE SUM HAD BEEN CLAIMED AS DEDUCTION IN THE STATEMENT OF COMPUTATION OF TOTAL INCOME AND NOT ON ACCOUNT OF DEBIT TO THE P & L ACCOUNT ON THE ASSUMPTION THAT IF THE SAID SUM HAD NOT BEEN DEBITED TO P & L ACCOUNT IT CANNOT BE ADDED BACK TO INCOME OF THE ASSESSEE WITHOUT APPRECIATING THAT THE SAID SUM HAD BEEN CLAIMED AS DEDUCTION IN THE STATEMENT OF COMPUTATION OF TOTAL INCOME ONLY WHEN IT HAD NOT BEEN & COULD NOT HAVE BEEN DEBITED TO THE P & L ACCOUNT. (II) THAT THE LD CIT (A) ERRED IN DELETING THE ADDITION OF RS. 36,22,86,395/ - MADE ON ACCOUNT OF DISALLOWANCE OF DEDUCTION U/S 37(1) OF THE ACT INSPITE OF HER PREDECESSOR HOLDING VIDE ORDER DATED 22.06.2012 THAT THE SAID SUM REPRESENTED BOGUS EXPENSES RECORDED IN THE BOOKS OF ACCOUNTS OF T HE ASSESSEE AND IT CANNOT BE ALLOWED AS DEDUCTION UNDER ANY HEAD OF INCOME FOR ANY ASSESSMENT YEARS. 3. BRIEFLY STATED RELEVANT FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF INFRASTRUCTURE PRODUCTS SUCH AS ROAD, BRIDGE, AIRPORT, I NLAND RAIL SYSTEM ETC. THERE WAS AN ACTION U/S 132 OF THE ACT ON SUPREME GROUP OF COMPANIES ON 24.09.2009. ASSESSEE FILED THE RETURN OF INCOME DECLARING THE TOTAL INCOME OF RS. 23.50 CRS (ROUNDED OF). ASSESSEE REITERATED THE SAME IN RESPONSE TO THE NOTI CE U/S 153A OF THE ACT. ASSESSMENT WAS COMPLETED U/S 143(3) R.W.S 153A OF THE ACT AND THE ASSESSED INCOME WAS DETERMINED AT RS. 67.07 CRS (ROUNDED OF). IN THE ASSESSMENT, AO MADE ADDITION OF RS. 36,22,86,395/ - ON ACCOUNT OF AMOUNT NOT CLAIMED AS REVENUE EXPENSES CAPITALISED. AO ALSO MADE OTHER ADDITIONS TOO. IN CONNECTION WITH THE SAID ADDITION OF RS. 36.22 CRS (ROUNDED OF), RELEVANT FACTS ARE THAT THE ASSESSEE OWNS LAND WHICH WAS DEVELOPED FOR VARIOUS PURPOSES. ASSESSEE CONSTRUCTED A FENCE, RETAININ G WALL, BARRICADES, WATER RESERVOIR, READY MIX CONCRETE PLANT, FOUNDATION AND LAND ENFORCEMENT FOR THE PURPOSE OF ASPHALT PLANT ETC. ASSESSEE WAS FOUND ENGAGED IN QUARRYING ACTIVITIES ALSO. DURING THE SEARCH ACTION, THE CLAIM OF EXPENSES AMOUNTING TO RS. 162.51 CRS (PAGE 5 OF THE ASSESSMENT ORDER) WAS THE SUBJECT MATTER OF INVESTIGATION. IT INVOLVES 38 SUPPLIERS, THE LIST OF WHICH ARE GIVEN IN PARA 1 OF THE ORDER OF THE AO. THE PURCHASES AMOUNTING TO RS. 60.25 CRS WAS PUT TO SCRUTINY BY THE INVESTIGATIO N WING THAT SPREAD OVER FY 2208 - 09 TO 2009 - 10. DURING THE PROCEEDINGS U/S 132(4) OF THE ACT, ON 25.9.2009, ASSESSEE MADE DISCLOSURE ON OATH AS CONFIRMED BY THE DIRECTORS OF THE COMPANY VIZ SHRI VIKRAM SHARMA, MR. BHAVANISHANKAR SHARMA AND MR. VIKAS SHARMA . IN RESPONSE TO Q.NO.17, THE ASSESSEE CONFESSED THAT FEW OF THE PARTIES ARE NOT AVAILABLE AT THE GIVEN ADDRESSES IE THEY ARE NON - GENUINE PURCHASES. THE TOTAL OF SUCH PURCHASES FOR THE AY 2009 - 2010 AND 2010 - 11 WORKS OUT TO RS. 60.25 CRS. THEY FURTHER WEN T ON TO 3 SAY THAT I AM VOLUNTARILY OFFERING THESE EXPENSES OF RS. 60.25 CRS AS ADDITIONAL INCOME FOR THE VARIOUS PROJECTS BEING UNDER TAKEN BY THE COMPANY M/S. SUPREME INFRASTRUCTURE INDIA LTD. I AGREE TO PAY THE TAXES ON THE BASIS OF METHOD OF ACCOUNTING BEING FOLLOWED BY OUR COMPANY. THE AMOUNTS STANDING TO THE CREDIT OF THESE PARTIES SHALL BE WRITTEN BACK BY US IN THE CURRENT YEAR AND IN THE YEAR ENDED 31.3.2009. INVENTORIES FOR THE SITES SHALL STAND REVISED TO THE EXTENT FOR THE YEAR ENDED 31.3.2009 AND THE CURRENT YEAR ENDED 31.3.2010 . EVENTUALLY, AO EXTRACTED VARIOUS SUPPLEMENTARY EVIDENCES GATHERED DURING THE ACTION U/S 132 OF THE ACT AND STATEMENT OF OTHER SUPPLIERS AND RELIED ON VARIOUS PAPERS ( PARA 4 OF THE ASSESSMENT ORDER) AND FOR CEMENTING THE ABOVE SAID DISCLOSED AMOUNT OF RS. 60.52 CRS FOR TWO ASSESSMENT YEARS. ON FINDING THAT THE ASSESSEE DEBITED THE SAID EXPENSES TO THE P & L ACCOUNT AND FOUND MANIPULATED THE DISCLOSURE THROUGH THE COMPUTATION OF INCOME TO THE EXTENT OF RS. 36.23 CRS ( ROUNDED OF), AO PROCEEDED TO MAKE ADDITION OF THE SAID A MOUNT FOR THE AY 2009 - 2010. A SUM OF RS. 10.67 CRS WAS THE ADDITION FOR THE AY 2010 - 11. COMING TO THE COMPUTATION OF INCOME, ASSESSEE ADDED RS. 49.57 CRS (ROUNDED OF) TO THE PROFITS AS PER THE P & L ACCOUNT AND THEN SUBTRACTED RS. 36.23 CRS ON ACCOUNT OF AMOUNT NOT CLAIMED AS CAPITALIZATION OF EXPENSES . THEREBY ASSESSEE EFFECTIVELY OFFERED A SUM OF RS. 13 .37 CRS (RS. 49.57 CRS RS. 36.23 CRS) OF THE ABO V E RS. 60.52 CRS IN THIS YEAR . CONSIDERIN G THE ASSESSEES CONFESSION AND OFFER OF THE ADDITIONAL INCOME AS WELL AS BOGUS NATURE OF THE EXPENSES, ASSESSING OFFICER REJECTED THE SAID COMPUTATION OF INCOME, WHICH HAS THE EFFECT OF THE BENEFIT OF DEDUCTION OF RS. 36.23 CRS AND ADDED THE SAME IN THE ASSESSMENT S . IN EFFECT, AS PER THE AO, ASSESSEE DID NOT COMPLY WITH THE DISCLOSURE GIVEN U/S 132(4) OF THE ACT. AO TOOK OBJECTION TO THE WAY CERTAIN BOGUS EXPENSES WHICH WERE OFFERED U/S 132(4), WERE CAPITALIZED INSTEAD OF COMPLETE WRITE OFF IN THE INVENTORIES ENTIRELY. EFFECT OF CAPITALIZATION IS NOT SIMILAR TO THE WRITE OFF IN THE INVENTORIES. THE PARTY ACCOUNTS SHALL NOT BE WRITTEN OFF BY HIS METHODS. BY INFERENCE, THE BOGUS EXPENSES / PURCHASES MEANS, THEY WERE NEVER PURCHASED, MATERIALS WERE NEVER DELIVERED TO THE ASSESSEE, NO DELIVERY CHALLANS, PAYMENTS MADE ARE NON - GENUINE AND THEY ARE MERE CASE OF ACCOMMODATION ENTRIES ETC. 4 3. PER CONTRA, CIT (A) GRANTED RELIEF TO THE ASSESSEE IN BOTH THE YEARS AS PER THE DISCUSSION GIVEN IN PARA 6 O F HER ORDER. REPEATEDLY IT IS THE REASONING OF THE CIT (A) THAT SO LONG AS EXPENSES ARE DEBITED TO THE P&L ACCOUNT, THE DISALLOWANCES CANNOT BE MADE. IN THE PROCESS, THE CIT (A) DENIED THE AOS REASONING THAT THE SAID AMOUNT OF RS. 60.25 CRS WAS REQUIRED TO BE WRITTEN OF COMPLETELY IN THE BOOKS OF ACCOUNT OF THE ASSESSEE BY PASSING JOURNAL ENTRIES. SUCH A WRITE OF IS REQUIRED FOR COMPLYING WITH CONTENTS OF THE STATEMENT U/S 132(4) OF THE ACT RELATING TO THE CLAIM OF BOGUS PURCHASES. AGGRIEVED WITH THE S AME IN BOTH THE YEARS, REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. A SUM OF RS. 36.23 CRS AND A SUM OF RS. 10.63 CRS (ROUNDED OF) ARE THE CENTRAL ISSUES IN BOTH THE AYS 2009 - 10 AND 2010 - 11 RESPECTIVELY. 4. TO START WITH, LD DR FOR THE REVENUE EXPLAINED TH E ABOVE FACTS OF THE CASE AND SUBMITTED THAT THE ASSESSEE DID NOT COMPLY WITH THE DISCLOSURE MADE BY THE DIRECTORS OF THE COMPANY ON 25.9.2009. A SUM OF RS. 60.25 CRS WAS REQUIRED TO BE OFFERED TO TAX IN THE AY S 2009 - 2010 AND 2010 - 11 AND THE SAME WAS NOT DONE. THE AMOUNT OFFERED FOR THE AY 2009 - 10 IS ONLY RS. 13.37 CRS AND FOR THE LATER YEAR , THE AMOUNT OFFERED IS NIL. T O THAT EXTENT, THE DISCLOSURE WAS DOWN SIZED USING THE ROUTE INVOLVING THE COMPUTATION OF INCOME. THERE ARE NO WRITE OFF IN THE INVENTORIES. CAPITALIZATION WAS NEWLY INVENTED PROCESS FOR THE ASSESSEE AND THEREBY, THE STATEMENT U/S 132(4) IS VITIATED. ASSESSEE IS UNDER OBLIGATION TO WRITE BACK THE AMOUNT STANDING TO THE CREDIT OF THE SUSPECTING PART IES, WHO ACCOMMODATED THE BOGUS PURCHASES AMOUNTING TO THE SAID SUM OF RS. 60.25 CRS. ASSESSEE HAS NOT DONE THE SAME IN TRUE SPIRIT. ASSESSEE IS ALSO UNDER OBLIGATION TO REVISE THE INVENTORIES FOR SITES AND THE SAME WAS NOT DEMONSTRATED. LD DR BROUGHT O UR ATTENTION TO VARIOUS SEIZED PAPERS CITED IN PARA 4 OF THE ASSESSMENT ORDER TO DEMONSTRATE THE ABOVE . LD DR ALSO BROUGHT OUR ATTENTION TO THE STATEMENTS GIVEN BY THE SUPPLIERS WHO CONSTITUTES BOGUS / NON - GENUINE . THEREFORE, LD DR SUBMITTED THAT THE ORD ER OF THE CIT (A) DOES NOT CONSTITUTE SPEAKING ORDER. CIT (A) MERELY RELIED ON THE NON - DEBITING OF THE EXPENDITURE TO THE P & L ACCOUNT AND HAS NOT SPOKEN A WORD ABOUT THE STATEMENT GIVEN ON OATH BY THE DIRECTORS OF THE COMPANY AS WELL AS THE OTHER SUPP LIERS REGARDING THE BOGUS PURCHASES. 5 5. IN REPLY, LD COUNSEL FOR THE ASSESSEE HEAVILY RELIED ON THE ORDER OF THE CIT (A) AND THE SUBMISSIONS MADE BY THE ASSESSEE BEFORE THE LOWER AUTHORITIES. 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS THE RELEVANT MATERIAL PLACED BEFORE US FOR BOTH THE ASSESSMENT YEARS. ON HEARING BOTH THE PARTIES, WE FIND, THERE IS NO DISPUTE ON FACTS OF THE CASE. THE UNDISPUTED FACTS INCLUDE THAT THE ASSESSEE ADJUSTED THE DISCLOSED AMO UNT THROUGH THE COMPUTATION OF INCOME IN BOTH THE YEARS. FOR THE AY 2009 - 10 ASSESSEE ADDED RS. 49.57 CRS AND REDUCED THE ABOVE BY RS. 36.23 CRS, THEREBY THE OFFER OF ADDITIONAL INCOME FOR THIS YEAR IS ONLY 13.37 CRS. FOR THE AY 2010 - 11, ASSESSEE ADDED RS. 10.63 CRS IN THE COMPUTATION OF INCOME AND REDUCED THE SAID FIGURE BEFORE ARRIVING AT A TAXABLE INCOME THEREBY ASSESSEE OFFERED NIL FOR THE AY 2010 - 11. PRIMA FACIE , IN OUR VIEW, THIS IS NOT IN TUNE WITH THE OFFER OF ADDITIONAL INCOME OF RS. 60.25 CRS MADE BY THE DIRECTORS OF COMPANY ON 25.9.2009. FURTHER , THERE IS NO CLARITY ON WHETHER THE SAID BOGUS EXPENSES / PURCHASES FROM THE BOGUS SUPPLIERS ARE WRITTEN OFF IN THE PARTY ACCOUNT AND THE RELEVANT INVENTORIES WERE WRITTEN OFF AS PROMISED BY THE ASSESSEE DURING THE PROCEEDINGS U/S 132 OF THE ACT. UNFORTUNATELY, LD CIT (A) DID NOT EXAMINE THE ABOVE ISSUES. SHE MERELY IGNORED THE MANIPULATIONS DONE BY THE ASSESSEE IN THE COMPUTATION OF INCOME. THE FACT THE ASSESSEE WAS UNDER OB LIGATION TO WRITE OFF IN THE SUPPLIES ACCOUNT / INVENTORIES WERE COMPLETELY IGNORED. THE FACT THE ASSESSEE FAILED TO COMPLY WITH THE TERMS AND MANNER OF DISCLOSURE IGNORED BY THE CIT (A). CONSIDERING THE SAME, WE ARE OF THE OPINION THAT THE RELIEF GRANTED BY THE CIT (A) TO THE ASSESSEE IN BOTH THE APPEALS CONSTITUTES PREMATURE ONE AND THE ORDERS OF THE CIT (A) CANNOT CONSTITUTE SPEAKING ORDER. THEREFORE, WE ARE OF THE CONSIDERED OPINION THAT THE MATTER IS REQUIRED TO BE REMANDED TO THE FILE OF THE CIT ( A) FOR FRESH ADJUDICATION AND FOR WANT OF SPEAKING ORDER AS PER THE PROVISIONS OF SECTION 250(6) OF THE ACT. THE CIT (A) OUGHT NOT TO BE CONTENT WITH NON - DEBITING OF THE SAID RS. 60.25 CRS AND IT SHOULD BE ENSURED THAT THE NEWLY FOUND WAY OF CAPITALIZAT ION IS NOT PERMITTED FOR FUTURE BENEFITS, IF ANY. ALL THE BOGUS SUPPLIES ACCOUNTS SHOULD BE COMPLETELY SQUIRRE D UP /CLOSED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE. CIT (A) SHALL GRANT A REASONABLE OPPORTUNITY OF BEING HEARD TO THE 6 ASSESSEE AS PER THE SE T PRINCIPLES OF NATURAL JUSTICE. THUS, THE GROUNDS RAISED BY THE REVENUE IN BOTH THE APPEALS ARE ALLOWED FOR STATISTICAL PURPOSES. 7. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT O N 1 2 T H APRIL, 2017. S D / - S D / - ( SANDEEP GOSAIN) (D. KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; 12.04.2017 . . ./ OKK , SR. PS / 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 . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI