SHREE SAI KRUPA ISPAT P.LTD, MUMBAI V. ITO 7(2)(3) (OLD WD) & ITO 8(2)(1) ( NEW WD), MUMBAI

ITA 380/MUM/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 1901 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-11-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Next Hearing Date: 17-11-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 14-01-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SRIKANT NAMDEO
• Assessee Lawyers: M SUBRAMANIAN
• Keywords: Bogus purchase; Depreciation; Onus to prove
• Section: 133(6); 69

Judgement Text

IN THE INC OME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI , , BEFORE SHRI SAKTIJIT DEY , JM AND SHRI MANOJ KUMAR AGGARWAL , AM ./ I.T.A. NO. 380 /MUM/2015 ( / ASSESSMENT YEAR : 2011 - 12 ) SHREE SAI K RUPA ISPAT P VT . LTD. PLOT NO.9 , NEW DARUKHANA SONAPUR ROAD, REAY ROAD MUMBAI 400 0 10 / VS. INCOME TAX OFFICER OLD WARD 1 7(2)(3) NEW WARD - 8(2)(1) MUMBAI ./ ./ PAN/GIR NO. AA JC S 2681 M ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI M. SUBRAMANIAN, AR / RESPONDENT BY : SHRI SRIKANT NAMDEO, DR / DATE OF HEA RING : 17 /11 /2016 / DATE OF PRONOUNCEMENT : 23 /1 1 /2016 / O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. THE CAPTIONED APPEAL BY THE ASSESSEE FOR A SSESSMENT Y EAR [AY] 2011 - 12 ASSAILS THE ORDER OF THE COMMISSIONER OF INC OME TAX (APPEALS) - 14 [CIT(A)], MUMBAI DATED 26/11/2014 2 ITA NO. 380 /MUM / 2015 SHREE SAI K RUPA ISPAT PVT. LTD. ASSESSMENT YEAR 2011 - 12 QU A CONFIRMATION OF ADDITION OF BOGUS PURCHASES OF MACHINERY FOR RS.28,57, 5 00/ - AND CONSEQUENT DISALLOWANCE OF DEPRECIATION THEREUPON FOR RS.4,28,625/ - . 2 . FACTS QU A THE DISPUTE ARE THAT THE ASSESSE E WAS ENGAGED IN THE BUSINESS OF STEE L R E - ROLLING MILLS AND FILED ITS RETURN OF INCOME DECLARIN G TOTAL TAXABLE INCOME OF RS.17,73, 556/ - . THE SAME WAS SELECTED FOR SCRUTINY ASSESSMENT U/S 143(3 ) OF THE INCOME TAX ACT, 1961 [THE ACT] WHEREIN TOTAL INCOME WAS DETERMINED AT RS.50,59,681/ - AFTER MAKING CERTAIN DISALLOWANCES AND ADJUSTMENTS VIDE ASSESSING OFFICER [AO] ORDER DATED 27/02/2014. THE ASSESSEE SUFFERED ADDITION OF RS.28,57,500/ - AGAINST PURCHASE OF ONE WIRE DRAWING MACHINERY ALONG WITH ALL ITS ACCESSOR IES INCLUDING ELECTRIC MOTOR & SWITCHES FROM M/S JAI KRISHNA ENTERPRISES WHOSE NAME APPEARED IN THE LIST OF HAWALA ENTRY PROVIDERS PUBLISHED IN THE OFFICIAL WEBSITE OF MAHARASHTRA SALES TAX DEPARTMENT. IN SUPPORT, THE ASSESSEE PRODUCED COPY OF RELEVANT B ILL, CONFIRMATION OF ACCOUNT, DETAILS OF BANK PAYMENT, FINANCIAL STATEMENT OF THE SUPPLIER AND THEIR INCOME TAX RETURN ETC. THE AO CONCLUDED THAT ASSESSEE FAILED TO CONCLUSIVELY ESTABLISH THE PHYSICAL DELIVERY OF MACHINERY AND HENCE ADDED THE SAME TO THE I NCOME OF THE ASSESSEE U/S 69 AS UNPROVED PURCHASES. CONSEQUENTLY, DEPRECIATION ON MACHINERY AMOUNTING TO RS.4,28,625/ - AS CLAIMED BY THE ASSESSEE WAS ALSO DISALLOWED. AGGRIEVED, THE ASSESSEE PREFERRED APPEAL BEFORE FIRST APPELLATE AUTHORITY BUT WAS UNSUCCE SSFUL VIDE CIT(A) ORDER DATED 26/11/2014. THE ASSESSEE CONTENDED THAT INITIAL ONUS WAS DULY DISCHARGED BY HIM BY SUPPLY OF RELEVANT DOCUMENTS BUT AO FAILED TO MAKE INDEPENDENT INQUIRIES TO FIND OUT GENUINENESS OF THE TRANSACTION AND MERELY RELIED UPON WEBS ITE INFORMATION OF SALES TAX DEPARTMENT . THE ADDITION HAS BEEN MADE MERELY ON THE BASIS OF DOUBT. THE ASSESSEE P URCHASE D MACHINERY AS PART OF ITS EXPANSION PROGRAMMES AND VARIOUS OTHER MACHINERIES WERE PURCHASED BY HIM DURING TH E YEAR WHI CH HAS BEEN ACCEPT ED BY AO. FURTHER, IMPUGNED ADDITIONS CANNOT BE MADE U/S 69 AS MACHINERY HAS DULY BEEN RECORDED IN THE BOOKS OF ACCOUNT. RELIANCE WAS PLACED ON VARIOUS JUDICIAL PRONOUNCEMENTS. PER C ONTRA CIT(A) OBSERVED THAT THE ASSESSEE FAILED TO PROVIDE TRANSPORT DETAIL S OF THE MACHINERY AND ALSO COULD NOT PROCURE CONFIRMATION LETTER S FROM THE SUPPLIER. VAT ON PURCHASE OF MACHINERY WAS DULY DEPOSITED BY THE ASSESSEE AND ASSESSEE DID NOT SEEK CROSS EXAMINATION OF THE SUPPLIER 3 ITA NO. 380 /MUM / 2015 SHREE SAI K RUPA ISPAT PVT. LTD. ASSESSMENT YEAR 2011 - 12 BEFORE SALES TAX AUTHORITIES. FINALLY, CIT(A) SUSTAINED THE IMPUGNED ADDITIONS ALBEIT OBSERV ING THAT SECTION 69 DO NOT APPLY TO SUCH CASE BUT NEVERTHELESS, THE PURCHASE, BEING BOGUS, RIGHTLY BEEN ADDED TO THE INCOME OF THE ASSESSEE. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 3. THE LD. COUNSEL FO R ASSESSEE [AR] HAS CONTENDED THAT SECTION 69 HAS NO APPLICABILITY AS MACHINERY HAS DULY BEEN RECORDED IN THE BOOKS OF ACCOUNTS AND NOWHERE DEBITED TO PROFIT & LOSS ACCOUNT. CIT(A) ALSO OBSERVED THE SAME BUT STILL AFFIRMED THE ADDITIONS. THE INITIAL ONUS T O PROVE THE PURCHASE OF MACHINERY WAS ON THE ASSESSEE WHICH HE HAS DULY FULFILLED BY SUPPLYING REQUISITE DOCUMENTS. THE VAT PAYMENT HAS BEEN MADE BY THE ASSESSEE UNDER THRE AT BY SALES TAX DEPARTMENT. THE ADDITION WAS MADE MERELY ON THE BASIS OF WEBSITE IN F ORMATION WITHOUT CONFIRMING THE SAME FROM THE SUPPLIER. THE LD. DR, ON THE OTHER HAND, CONTENDED THAT ASSESSEE BEING CORPORATE ASSESSEE WAS REQUIRED TO MAINTAIN FIXED ASSET REGISTER AS PER THE PROVISIONS OF THE COMPANIES ACT BUT FAILED TO PRODUCE THE SAME BEFORE ANY LOWER AUTHORITIES. MERE PAYMENT BY BANKING CHANNEL DOES NOT VALIDATE THE PURCHASES. 4. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL PLACED BEFORE US INCLUDING THE PAPER BOOK. WE NOTICE THAT AO HAS PROCEEDED TO MAKE THE ADDITIONS ON THE BASIS OF SUSPICION THAT THE PURCHASES HAVE BEEN MADE FROM HAWALA ENTRY OPERATORS LISTED ON THE WEBSITE OF SALES TAX DEPARTMENT BUT STRANGELY, NO INDEPENDE NT INQUIRY TO CORROBORATE THE TRANSACTION HAS BEEN MADE BY THE AO. THE FULL INFORMATION IN THE SHAPE OF INVOICE COPY, CONFIRMATION ETC. WAS AVAILABLE BEFORE AO YET NO NOTICE U/S 133(6) WAS ISSUED TO THE SUPPLIER. THE ASSESSEE ALSO PLACED THE PHOTOGRAPHS OF MACHINERY IN SUPPORT OF PHYSICAL DELIVERY AND INSTALLATION AT THE PREMISES OF THE ASSESSEE , B UT THE SAME WERE NOT VERIFIED BY THE LOWER AUTHORITIES . ON THESE FACTS, THE ASSESSEE HAD DULY DISCHARGED ITS INITIAL ONUS TO PROVE THE PURCHASES AND ONUS WAS ON REVENUE TO CONFRONT THE SAME. CI T(A) AFFIR MED THE SAME BY NOTICING TH AT THE SALES TAX PAYMENT H AS BEEN DISCHARGED BY THE ASSESSEE WITHOUT SEEKING CROSS EXAMINATION OF THE SUPPLIER BEFORE SALES TAX DEPARTMENT. BUT THE PROCEEDINGS BEFORE SALES TAX DEPARTMENT ALONE COULD NOT BE THE SOLE BASIS OF ADDITION IN THE HANDS OF ASSESSEE BEFORE INCOME TAX AUTHO RITIES. FURTHER, AS RIGHTLY OBSERVED BY LD. CIT(A), SECTION 69 HAD NO 4 ITA NO. 380 /MUM / 2015 SHREE SAI K RUPA ISPAT PVT. LTD. ASSESSMENT YEAR 2011 - 12 APPLICABILITY IN THE CASE OF THE ASSESSEE AS THE MACHINERY WAS DULY RECORDED IN THE BOOKS OF ACCOUNT. IN VIEW OF THE PECULIAR FACTS AND CIRCUMSTANCES OF THE CASE , WE ARE INCLINED TO ALLO W THE APPEAL OF THE ASSESSEE AND DELETE BOTH THE IMPUGNED ADDITION OF RS.28,57,500/ - & RS. 4,28,625/ - MADE BY THE AO. 5 . IN NUTSHELL, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD NOVEMBER , 201 6 SD/ - SD/ - ( SAKTIJIT DEY ) ( MANOJ KUMAR AGGARWAL ) / J UDICIAL MEMBER / A CCOUNTANT MEMBER MUMBAI ; DATED 23 .1 1 .201 6 LAXMIKANT DEKA, SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F ILE / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI SR. NO. DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATION SHEE TS ARE ATTACHED 18 .11.16 SR.PS/PS 2 DRAFT DICTATED ON 18 .11.16 SR.PS/PS 3 DRAFT PLACED BEFORE AUTHOR 2 1.11.16 SR.PS/PS 4 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 5 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 6 APPROVED DRA FT COMES TO THE SR.PS/PS 22.11.16 SR.PS/PS 7 ORDER PRONOUNCEMENT ON 23.11.16 SR.PS/PS 8 FILE SENT TO THE BENCH CLERK 23.11.16 SR.PS/PS 9 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 10 DATE ON WHICH FILE GOES TO THE AR 11 DATE OF DISPATCH OF ORDER